Presidential Election 2004:
The Impact of Campaign Spending

by Alan Shapiro

To the Teacher:

Controversy has already erupted over the financing of the 2004 presidential campaign. Campaign financing is, of course, a longstanding issue: the amounts raised and spent are enormous; efforts to curb fundraising and spending have had only limited effects; and serious questions are being asked about money's effects on candidates, presidents, and democracy.

The following materials contain two student readings on these matters and a number of suggestions for the classroom. The teacher may also find useful "Campaign Finance Reform," an activity on this website that deals primarily with the successful legislative effort to curb the raising of soft money (McCain-Feingold).

Student Reading 1:
Money in presidential campaigns: history, regulations and problems

You have decided to run for president of the United States and are full of ideas about what you would like to do for the country. You think of fine people you want to appoint to your cabinet, have ideas to generate more jobs and to provide health care, believe you can strengthen the nation's foreign policy. But you can do none of these things unless you are elected. And you will have no chance of being elected unless you raise an enormous amount of money.

Your campaign for the presidency will cost you:

• $12,000 to $15,000 in salary per month for an experienced campaign manager
• $50,000 for a direct mail fundraising letter to 100,000 people you hope will donate to the campaign
• $525,000 to run a week's worth of TV commercials in New York
• $600,000 to run a telephone bank with operators making two million calls

An average day of campaigning can run to $100,000. (New York Times, 6/29/03, based on interviews with various campaign experts)

As of early November 2003, candidate Howard Dean had raised more money than any of the eight other Democratic candidates--over $25,000,000. But by that time the Bush/Cheney reelection campaign had already collected more than $100,000,000. That's half of the $200,000,000 the Bush/Cheney campaign expects to raise for the primary election season, which begins in January 2004 and ends in August, when the Republicans hold their convention. And yet, the president and vice president face no opposition in any Republican primaries.

For a century reformers have come up with ideas about campaign finance. Below is a timeline of some of the highlights of campaign reform law.

1907: After businessman and U.S. Senator Mark Hanna raised millions from corporations and the rich for President William McKinley (1897-1901), Congress banned all corporate contributions.

1925: Congress approved the Corrupt Practices Act requiring political committees to report all contributions of $100 or more. The law was never enforced.

1940: Congress passed the Hatch Act, which limited individual contributions to $5,000. But rich donors got around the law by giving to state and local party committees.

1947: The Taft-Hartley Act banned unions from using their treasuries to contribute to political candidates.

1974: Congress passed the Federal Election Campaign Act, which was intended to close the loopholes in earlier reforms. It also created the Federal Election Commission to enforce the legislation and gave presidential candidates the option of receiving government subsidies to match private contributions raised by the candidate (up to a certain limit).

1976: The Supreme Court ruled that while Congress can limit most campaign contributions, it cannot limit campaign expenditures, which, it said, are a form of free speech and protected by the First Amendment to the Constitution. This ruling resulted in a loophole that made it possible for candidates to use contributions to buy ads on issues that do not directly support a candidate.

1978: The Federal Election Commission itself opened up a loophole that made it possible for political parties to receive unlimited, so-called "soft money" contributions for "party building." But, in fact, both parties began using soft money to elect candidates. (Note: "Soft money" refers to unregulated contributions from unregulated sources to national political parties to fund grassroots state and local campaigns --even when those efforts also would benefit federal candidates. For more information, please see the classroom activity "Campaign Finance: Soft Money & Hardball Politics" on this website.)

2000: To close the "soft money" loophole, Congress enacted the McCain-Feingold Law. But opponents immediately challenged its constitutionality. They argued that it limits free speech, citing the Supreme Court decision of 1976. But by a 5-4 vote on December 10, 2003 the Court upheld the law, ruling: "In sum, there is substantial evidence to support Congress's determination that large soft-money contributions to
national political parties give rise to corruption and the appearance of corruption."

Other proposals to curb campaign spending include additional public financing of campaigns (14 states have moved in this direction) and requiring radio and TV owners, whose licenses state that they are to operate in "the public interest," to provide some free air time as well as reduced-price air time to candidates. These ideas, however, are unlikely to become national law anytime soon.

Six organizations (Common Cause, Democracy 21, the League of Women Voters, Public Campaign, Public Citizen and United States Public Interest Research Group) united to create the Presidential Public Financing Reform Project "to promote major improvements to the presidential campaign finance system by reducing the role of special interest money in presidential elections, increasing the importance of public financing in the primaries, and making enactment of reforms a priority for the presidential candidates and for Congress." (Common Cause)

The current laws on campaign finance are detailed and complicated but include the following:

Public Financing

Candidates who agree to limit their primary election spending to $45 million can receive public financing (money from the federal government) to match private funds the candidate has raised. The limit for spending on the general election-that is, after each party's nominee is selected at the party convention--is $75 million. (The source of this money is a $3 contribution taxpayers can choose to make on their federal income tax return.) A candidate can choose not to accept public financing, which frees them to raise as much money as they can--but bars them from receiving federal matching funds.

The Bush/Cheney, Howard Dean and John Kerry campaigns have all decided not to accept public financing and its limits for the primary season. A major reason is that, although the $45 million cap on primary campaign spending seems quite high, many people believe that it is not enough to allow a candidate to remain competitive. The Bush/Cheney campaign has already raised more than twice that amount. Note: The Bush/Cheney, Dean and Kerry campaigns have all said they plan to accept public financing for the general election.

Contribution Limits

An individual can give up to:

• $2,000 per election to any candidate or candidate committee
• $25,000 per calendar year to a national party committee
• $10,000 per calendar year to each state or local party committee
• $5,000 per calendar year to a Political Action Committee (PAC), a political group usually representing some issue-oriented organization, business or labor interest
• $95,000 per two-year election cycle to candidates, national party committees and PACs

A multicandidate political committee can give up to:

• $5,000 per election to any candidate or candidate committee
• $15,000 per calendar year to a national party committee
• $5,000 per calendar year to any PAC

Candidate committees, national party committees, multicandidate committees and PACs can and do spend large amounts that don't go directly to the candidates themselves. Corporations and unions can pay for radio and TV commercials that support a candidate and run more than 60 days before a general election. During the 60-day period they can't support a candidate directly. But they can indirectly, for example through commercials on an issue associated with the candidate and important to the group.

Though individuals can give no more than $2,000, they can lead a drive in their place of business, to "bundle" their contribution with those of others. For example, as of September 2003 Merrill Lynch, the financial services company, had contributed $364,000 to President Bush's reelection campaign in donations from employees and their immediate family members. The employees of the law firm, Skadden, Arps, Slate, Meagher & Flom, had bundled $97,500 in contributions for Democratic candidate Senator John Kerry.

Political committees making use of a vague area of campaign finance law have spent more than $430 million in unlimited and unregulated amounts during the past three years to influence elections and policy debates through commercials, voter drives and political research. Both the Republican and Democratic parties work steadily, hard and successfully at finding ways to get around campaign finance regulations.

In short, despite all kinds of rules, regulations and reforms, the American political system is awash in money. And this raises serious questions about the role money plays in determining presidential elections, congressional legislation and presidential action.

Discussion questions for Reading 1

1. What questions do students have about the reading? Can they be answered? If so, how?

2. Why do presidential candidates need so much money?

3. What efforts have been made to curb campaign spending?

4. What is one important Supreme Court ruling on campaign spending?

5. How does the public financing system for the primary campaign work? for the campaign after the party conventions?

6. Why might a candidate refuse public financing?

7. What are major regulations for individual contributions to candidates? for group contributions?

8. What loophole permits individuals to play an important role in contributing more than $2,000?

Student Reading 2:
Who contributes to presidential campaigns? Why?

Jim Smith is a floor manager for a department store in Omaha, Nebraska. His wife Frances works in a beauty parlor. The Smiths voted for George W. Bush in the 2000 presidential election and contributed $100 to his campaign. They support his tax cuts and No Child Left Behind educational program. They admire the president's leadership in protecting the country from terrorists and believe him to be a man of integrity. So this year they will double their contribution to $200.

Who contributes to a presidential campaign? The simple answer is tens of thousands of Americans. Many give relatively small amounts, even less than the Smiths. Why do they contribute to a candidate? The most probable answer is that, like the fictional Smiths, they agree with many of his or her ideas and think this person would make a good president.

The case of Frederick Webber

But there is also a smaller number of very big contributors. One such contributor (and this one is not fictional) is Frederick Webber, the former president of the American Chemical Council. In the 1990s Webber criticized President Clinton for issuing executive orders that required federal agencies to stop buying products containing harmful chemicals. In 2000 Webber supported the Bush presidential campaign and became a Pioneer, the name the Bush campaign gives to people who raise at least $100,000 for Bush. Webber raised or contributed $221,000 for Bush and persuaded more than two dozen chemical industry executives to become fundraisers for the candidate.

In 2002 Webber helped form a coalition of two dozen groups to block a bill that would have required chemical companies either to improve security at plants storing large amounts of chemicals or use less dangerous chemicals to cut down on security threats. An Environmental Protection Agency (EPA) study had determined that worst-case terrorist attacks on chemical plants across the country could injure or kill up to one million people.

The Bush administration also opposed the bill. The American Chemistry Council spent more than $80 million in political contributions and lobbying fees between 1995 and 2002 to fight and ultimately to kill the legislation. The EPA had the authority to require action to improve chemical plant security. But the Bush administration transferred that authority to the Department of Homeland Security. It will not routinely inspect plants but will rely on information chemical manufacturers submit voluntarily. (Source: www.commoncause.org)

Why does Frederick Webber support President Bush with large contributions? Like the Smiths, he may genuinely admire the president's leadership and believe him to be good for the country. But he also may contribute to the president because the president is good for and to Frederick Webber. And why did President Bush oppose the bill to require greater security at chemical plants? On other issues affecting industry, he supports voluntary (rather than mandatory) compliance with federal regulations, so that may be the case here. But does he have a conflict of interest? Like presidents before him, Bush received financial support from members of an industry who stood to lose or gain a lot of money as a result of what he did or did not do.

The case of Kenneth Lay

Kenneth Lay is the former chairman of Enron, an energy company that went bust late in 2001 after its questionable financial and accounting practices became public. But in the 1990s when Enron was the darling of Wall Street, Lay became friendly with George W. Bush and contributed or raised $550,000 for Bush's campaigns for governor of Texas and then president of the United States. After Bush became president Enron officials helped to write his energy policy bill, which benefits energy providers. Lay also influenced the federal decision not to impose price caps on California's electricity market during that state's huge energy crisis of 2000-2001. This decision was worth tens of millions to Enron.

The case of Charles Heimbold

In recent years the hugely profitable pharmaceutical industry gave $42 million to George W. Bush and other Republican candidates. The industry is expected to spend as much as $150 million this year lobbying against any government efforts to lower skyrocketing drug prices or to provide a prescription drug benefit to seniors that would cut back industry profits. At one large drug company, Bristol-Meyers Squibb, executives were warned during the 2000 presidential campaign that they would be reported to the company CEO, Charles A. Heimbold Jr., if they did not make maximum donations to the Bush campaign. After Bush became president, Heimbold was appointed ambassador to Sweden. During the 2000 presidential election period, pharmaceutical companies contributed $27 million. Republicans received 69%, Democrats 31%.

The cases of the three contributors described above raise many questions. Among them:

• Why did Kenneth Lay contribute and raise large sums for Bush?
• Why did the president make the decisions he did about energy policy?
• Why do drug companies spend millions on candidates and on lobbying?

It is common for companies or individuals to make contributions to both major parties. In the 2000 election period oil and gas companies contributed $34 million, 79% of which went to the Republicans, 20% to the Democrats. Tobacco companies contributed $8 million, of which 84% went to the Republicans, 16% to the Democrats.

Insurance companies contributed $42 million--65% to the Democrats and 34% to the Republicans. Lawyers and law firms contributed $112 million, 69% to the Democrats, 30% to the Republicans. TV, movie and music companies contributed $38 million, 64% to the Democrats, 36% to the Republicans. (Where percentages do not add up to 100%, the reason is that a small sum was given to a third party.)

In the current presidential campaign contributing to both candidates has continued. But through January 31, 2004, nearly half of John Kerry's biggest contributors gave more money to George W. Bush than to Kerry himself. For example: Kerry received $79,000 from Citigroup; Bush received $187,000. Kerry received nearly $65,000 from Goldman Sachs; Bush received nearly $283,000. Even Massachusetts Mutual, one of Kerry's biggest donors for the past 15 years, gave Kerry $50,000 but Bush $69,000.

The executives, employees and PACs of the 70 companies that were given contracts for reconstruction work in Iraq or Afghanistan contributed more than $500,000 to Bush's 2000 presidential campaign. Most of these contracts went to companies headed by executives who contributed heavily to both political parties.

In the current presidential campaign, President Bush has raised more money than all of the Democratic candidates combined. However, contributions to Democrats raise the same kinds of questions as do contributions to Bush.

The biggest contributor over the years to Senator John Kerry (who is now almost certain to be the Democratic nominee) is the law firm of Mintz, Levin, Cohn, Ferris, Glovsky & Popeo. Kerry has received $231,000 from lawyers in this firm, where his brother is a telecommunications lawyer. Mintz, Levin's work has included representing such telecommunications corporations as AT&T Wireless, Verizon, and Cellular Telecommunications and Internet Association. This industry is under the oversight of a Senate subcommittee that includes Kerry. He has sponsored or co-sponsored a number of bills favorable to the telecommunications industry.

Another supporter of Kerry's has been the insurance giant American International Group (AIG). When Senate legislation was proposed that would have ended a federal contracting loophole benefiting AIG, Kerry was successful in preserving this loophole. When he began his presidential campaign, AIG donated $30,000. (David Brooks, New York Times, 2/7/04)

Kerry was one of several politicians who took contributions from Johnny Chung, a Taiwanese-American businessman, who was convicted of illegally donating to Bill Clinton and others. And the Washington Post resports that in 1999, Kerry "lobbied the Coast Guard on a rule-making process that benefited a foreign company represented by Cassidy & Associates. Soon after, employees of Cassidy & Associates sent Kerry $7,250 in bundled contributions. Jim Ruggieri, the Coast Guard official who handled the matter, told the paper it was highly unusual for a senator to intervene in such a matter." (Washington Post, 1/31/04)

Despite this record, after his January primary victory in New Hampshire, Kerry said, "I have a message for the influence peddlers, for the polluters, the HMOs, the big drug companies that get in the way, the big oil and the special interests who now call the White House their home. "We're coming, you're going, and don't let the door hit you on the way out."

Charles Lewis, executive director of the Center for Public Integrity, said, "You can't raise millions of dollars for politics without being entangled with lobbyists and special interests." (New York Times, 1/31/04)

"Corporations think they are getting their money's worth or they wouldn't be writing checks," comments Warren Buffett, the second wealthiest man in the U.S. Substitute "unions," "special interest groups," or "individuals" for "corporations" and the same statement can be made. What, exactly, "their money's worth" means is a vital issue for American democracy.

Discussion questions for Reading 2

1. What questions do students have about the reading? Can they be answered? If so, how?

2. What reasons might people have for contributing to a candidate to the presidency?

3. What is a conflict of interest? Are there any specific examples of conflicts of interest described in the reading? If so, what are they and why?

4. Why would a drug company CEO pressure other executives to make "maximum donations" to the Bush campaign? In the 2000 election period, the maximum donation for an individual was $1,000. How do you think you would have responded to this pressure? Why?

5. Why would a company or an individual contribute to both major parties? What do you think would motivate nearly half of Kerry's top donors to give more money to Bush than to Kerry?

6. Unions argue that they are not like a corporation or a "special interest" because they are mass organizations with democratically elected leaders who represent thousands of ordinary people (as opposed to the rich and powerful few). Do you agree or disagree?

7. How would you define a "special interest" or an "influence peddler"? Would they include Mintz, Levin and AIG? Why or why not?

8. What do you think Warren Buffet means by "their money's worth"? Why? Do you agree with him? Why or why not?

Classroom Suggestions

A. Quiz and Class Discussion

After students have read Student Reading 1 and 2, ask them to mark each of the five following statements either T (true) or F (false).

1. A candidate for the presidency pays for his or her expenses primarily with his or her own money.

2. A week's worth of TV commercials in New York costs about $50,000.

3. President Bush expects to raise $1 million for his second presidential campaign.

4. An individual can contribute up to $100,000 to a candidate.

5. It is illegal for an individual to collect money from others to contribute to a candidate.

6. The Supreme Court has ruled that the expenditures of presidential candidates are a form of free speech.

7. Presidential nominees who accept public financing can spend $75 million.

8. It is legal for an individual to contribute to all of the presidential candidates.

Answer each of the following questions in a sentence or two.

1. What are two possible reasons why an individual contributes to a candidate for the presidency?

2. Why might some individuals and groups contribute to both major party candidates for the presidency?

3. What evidence, if any, is there that a president might be influenced in making a decision by the amount of money contributed to him from a certain source?

B. Discuss a Campaign Budget

As of September 30, 2003 President Bush's campaign had spent $14.3 million. Expenses included:

• Printing and mailing--$4,793,064
• Payroll--$1,867,458
• Fundraising events--$1,510,659
• Political consultants, polling and media--$1,161,976
• Other consultants--$499,468
• Travel--$619,608
• Administrative equipment and other operating costs--$3,862,298

(Source: New York Times, 10/22/03, reporting information from the Federal Election Commission)

It has been widely reported that the president's team expects to raise at least $170 million by next year for his reelection campaign.

For discussion: In each category, what specific expenses can students imagine the Bush campaign might have? For example, what campaign positions might a payroll support? Why does the campaign have polling expenses?

C. Campaign Finance Inquiry

Begin by writing the following words on the chalkboard:

"Money for a presidential campaign:
For what?
Where does it come from?
Why?"

Invite student responses and record them without comment. When the students have finished, ask for their sources of information. What, if anything, are do they know for sure? What do they think they know but aren't sure about? What misinformation has gone uncorrected? What questions do they have?

Use student responses as a basis for an inquiry into campaign finance through class readings like the ones provided here and discussions as well as individual and small-group inquiries.

Two activities on this website might be helpful before you begin inquiries with students: "Teaching on Controversial Issues" and "Teaching Critical Thinking."

D. A class survey

According to surveys, most Americans get their news from TV. What, if anything, are most Americans hearing about the money that fuels presidential campaigns?

Assign one or more students to each of the major network news programs--CBS, NBC or ABC (all at 6:30 p.m. EST) --and to cable news programs--FOX, CNN, CNBC, MSNBC (which are aired at varying hours).

For a week have students view the assigned news program to note any references to campaign finance--e.g., fundraising efforts, amounts collected and from whom, references to amounts being spent by candidates. In writing and/or orally, have students report their findings for class discussion.

E. Ideas for Further Inquiry

1. Investigate any of the companies given no-bid contracts for reconstruction work in Afghanistan or Iraq. What is the Bush administration's explanation for the awarding of these contracts? What do critics say? What conclusions do students draw?

2. Study the Supreme Court ruling in Buckley v. Valeo, 1976, which found that political campaign expenditures are a form of free speech. What, exactly, did the Court rule? What was its reasoning? What do critics say? What conclusions do students draw?

3. Investigate complete public financing for presidential campaigns. How would this work? See, for example, the systems Maine and Arizona have approved. What are the pros and cons? What conclusions do students draw?

4. Examine the pros and cons of requiring TV channels to grant low-rate and free air time to presidential candidates. How would this work? Senator John McCain and others have introduced S1497, which would require broadcast media to provide lower rates and some free time to political candidates. Are there any constitutional or other problems standing in the way of implementing such an idea?

SOURCES

The following websites have been important sources for the two student readings. They provide a great deal of information on campaign finance, including its historical background and legislative efforts to curb spending, Supreme Court rulings, arguments pro and con on McCain-Feingold, current regulations, including those for public financing,, PACs, lobbyists, amounts each of the candidates has raised and from what sources and the like.

The Center for Responsive Politics: www.opensecrets.org
Common Cause: www.commoncause.org
Federal Election Commission: www.fec.gov
PBS: www.pbs.org (especially through its link to Now with Bill Moyers)
Project Vote Smart: www.vote-smart.org
Public Citizen: www.citizen.org and www.whitehouseforsale.org

This lesson was written for TeachableMoment.Org, a project of Morningside Center for Teaching Social Responsibility. We welcome your comments. Please email author Alan Shapiro at: ashapiro7@comcast.net.

Back to top