Simone Lawson
Political campaigns are costly affairs, with spending rising steadily since 1990. In the US, campaign spending is financed through contributions from individuals, corporations, political action committees (PACs), and sometimes the government. PACs, which can represent various interest groups, have become increasingly influential, with spending increasing eightfold from 2008 to 2020. Candidates and parties must submit financial returns detailing their campaign expenditures, which are monitored by the FEC, which enforces restrictions on spending. The sources and amounts of funding vary, with some candidates relying on personal funds, public funding, or donations from individuals and organisations. The eligibility for public funding and the limits on spending and donations are subject to regulations and legal rulings.
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What You'll Learn
Public funding of presidential elections
Political parties in the US spend billions on campaigns. For instance, between January 1, 2023, and May 9, 2024, just under $3.9 billion in funding went to campaign-related expenditures. By the end of the 2020 election cycle, expenditures topped $15.4 billion, or $18.2 billion when adjusted for inflation.
Public funding for presidential elections comes from the Presidential Election Campaign Fund, which is a fund on the books of the US Treasury. The amount of money in the fund is determined by taxpayers who can choose to allocate $3 of their taxes to the fund. The Federal Election Commission (FEC) administers the public funding program by determining which candidates are eligible to receive the funds. The Secretary of the Treasury then makes the payments.
To be eligible for public funding, candidates must show broad-based public support by raising more than $5,000 in matchable contributions from individuals in each of 20 different states (a minimum of 20 contributors in each state). Candidates must also agree to:
- Limit their campaign spending to a specified amount, which increases every cycle due to inflation. The national spending limit for 2024 is $61.79 million.
- Abide by spending limits in each state, which is the greater amount of either $200,000 plus the difference in the price index or 65.4 cents per person of voting age in a state ($817,800).
- Only use public funds for legitimate campaign-related expenses.
- Keep detailed records of their financial activities, which will be audited by the FEC after the elections.
Eligible candidates may receive public funds equaling up to half of the national spending limit for the primary campaign. The government will match up to $250 of an individual's total contributions to an eligible candidate. In 2024, the general election grant is $123.5 million.
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Campaign finance reform
The first federal campaign finance law was passed in 1867, prohibiting officers and government employees from soliciting contributions from Navy yard workers. The Pendleton Civil Service Reform Act of 1883 extended these protections to all federal civil service workers but also increased the pressure on parties to seek funding from corporations and wealthy individuals. In 1905, President Theodore Roosevelt proposed banning contributions from corporations to any political committee or for any political purpose, although this did not restrict private individuals who owned and ran corporations. The Tillman Act of 1907 prohibited corporations and nationally chartered banks from making direct monetary contributions to federal candidates, but it was ineffective due to weak enforcement mechanisms.
Over the years, various reforms have been proposed and enacted to address the influence of money in politics. The Federal Corrupt Practices Act (1925) established general contribution limits, and an amendment to the Hatch Act of 1939 set an annual ceiling of $3 million for political parties' campaign expenditures and $5,000 for individual campaign contributions. The Political Reform Act (1974) in California aimed to increase transparency and minimize corruption in campaign financing. However, the Supreme Court's Buckley v. Valeo (1976) decision ruled that limiting expenditures for political campaigns and their committees was unconstitutional, except for presidential candidates.
More recently, the Citizens United v. FEC (2010) Supreme Court decision sparked controversy by ruling that independent expenditures by unions and corporations are protected by the First Amendment, allowing the very wealthy to spend unlimited amounts. This decision led to concerns about the political process being unfairly influenced by large donors. In response, reformers have advocated for small donor public financing, where public funds match and multiply small donations, incentivizing candidates to seek a broader base of supporters.
The Federal Election Commission (FEC) enforces restrictions on campaign spending and requires all expenses to be reported through a monitored bank account. The FEC also differentiates between traditional PACs, which have donation and spending limits, and Super PACs, which can make unlimited independent expenditures without coordinating directly with candidates or parties. While some have proposed constitutional amendments to limit the influence of money in politics, others argue that such restrictions would violate citizens' freedom of speech and association.
The movement for campaign finance reform continues, with organizations like the ACLU advocating for a comprehensive system of public financing, reasonable limits on campaign contributions, and stricter enforcement of bans on coordination between candidates and Super PACs. The complexity of campaign finance and the ongoing debates surrounding it highlight the need for continued scrutiny and efforts to ensure a fair and transparent political process.
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Political action committees (PACs)
PACs have been in existence since 1944, when the Congress of Industrial Organizations (CIO) formed the first one to raise money for the re-election of President Franklin D. Roosevelt. The legal term PAC was created in pursuit of campaign finance reform in the United States. Democracies of other countries use different terms for the units of campaign spending or spending on political competition.
Federal law formally allows for two types of PACs: connected and non-connected. Judicial decisions added a third classification, independent expenditure-only committees, which are colloquially known as "super PACs". Most of the 4,600 active, registered PACs, named "connected PACs", are established by businesses, non-profits, labour unions, trade groups, or health organisations. These PACs receive and raise money from a "restricted class", generally consisting of managers and shareholders in the case of a corporation or members in the case of a non-profit organisation, labour union or other interest group. As of January 2009, there were 1,598 registered corporate PACs, 272 related to labour unions and 995 to trade organisations. Groups with an ideological mission, single-issue groups, and members of Congress and other political leaders may form "non-connected PACs".
Super PACs, officially known as ""independent expenditure-only political action committees",", are unlike traditional PACs in that they may raise unlimited amounts from individuals, corporations, unions, and other groups to spend on, for example, ads overtly advocating for or against political candidates. However, they are not allowed to either coordinate with or contribute directly to candidate campaigns or political parties. Super PACs are subject to the same organisational, reporting, and public disclosure requirements as traditional PACs. A hybrid PAC (sometimes called a Carey Committee) is similar to a super PAC, but can give limited amounts of money directly to campaigns and committees, while still making independent expenditures in unlimited amounts.
PACs may receive up to $5,000 from any one individual, PAC or party committee per calendar year. They can give $5,000 to a candidate committee per election (primary, general or special) and up to $15,000 annually to any national party committee, and $5,000 annually to any other PAC. A PAC must register with the FEC within 10 days of its formation, providing the name and address for the PAC, its treasurer and any connected organisations.
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Spending limits and restrictions
FECA limits the amount of money individuals and political organizations can donate to a candidate running for federal office, such as the President, Senate, or House of Representatives. These contribution limits vary depending on the type of donor and the recipient, with separate limits for individuals, political action committees (PACs), and party committees. Notably, candidates are prohibited from retaining contributions that exceed these limits and must follow specific procedures for handling excessive funds.
The FEC also enforces restrictions on money spent by political campaigns, covering a wide range of activities. For instance, campaigns are prohibited from using funds for personal use. Additionally, candidates running in a primary election must adopt an accounting system to distinguish between contributions for the primary and general elections. If a candidate loses the primary, any general election contributions received must be refunded or redesignated within 60 days and cannot be used to repay primary election debt.
While traditional PACs are subject to donation and spending limits, independent-expenditure-only political committees, or Super PACs, can accept unlimited contributions from individuals, corporations, and labor organizations. However, Super PACs are not allowed to directly coordinate with candidates or parties. The development of Super PACs has significantly impacted the political landscape, with spending by political action committees increasing more than eightfold from 2008 to 2020.
Furthermore, the FEC provides public funding for presidential elections, with eligibility requirements and spending limits in place. For instance, a presidential candidate must raise more than $5,000 in each of at least 20 states to qualify for primary matching funds. Eligible candidates may receive public funds of up to half of the national spending limit for the primary campaign, which was $61.79 million for 2024. Major party presidential nominees can receive a grant of $20 million, but they must agree to limit their spending to this amount and cannot accept private contributions.
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Reporting and disclosure requirements
Campaign finance laws dictate who can contribute to a campaign, how much they can contribute, and how those contributions must be reported. These laws vary at the state and federal levels. In general, campaigns may raise funds from individuals, political party committees, and political action committees (PACs). Federal law puts limits on campaign contributions to candidates for president and Congress. The Federal Election Campaign Act of 1971 (FECA) limits the amount of money individuals and political organizations can give to a candidate running for federal office. Candidates can spend their own personal funds on their campaign without limits, but they must report the amount they spend to the Federal Election Commission (FEC).
FECA requires candidates for president, Senate, and the House of Representatives to report the names of individuals and political organizations contributing to their campaigns and the amounts, as well as how the candidates spend the money they receive. The FEC maintains a database of this information and publishes it on its website. Similar reporting requirements exist in many states for state and local candidates, as well as for PACs and party committees.
There are extensive loopholes in campaign finance disclosure rules, including "dark money," where the recipient knows the identity of those giving them money, but the public does not. In the 2020 election, more than $1 billion in "dark money" was spent at the federal level, with $660 million coming from "opaque political nonprofits and shell companies." Another loophole is "soft money," which refers to political spending that is exempt from federal limits, such as donations for stickers, posters, and television and radio spots supporting a particular party platform or idea but not a concrete candidate.
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Frequently asked questions
The amount of money spent on political campaigns in the US has been rising steadily since at least 1990. In 2020, nearly $14 billion was spent on federal election campaigns, making it the most expensive campaign in US history.
Political campaigns are funded by contributions from individuals, corporations, political action committees (PACs), and sometimes the government.
Campaign funding is a highly regulated area. The Federal Election Commission (FEC) enforces restrictions on money spent on political campaigns, and all expenses must be reported through a monitored bank account.
PACs, or political action committees, are private interest groups that raise and spend money to support candidates and influence elections. They can represent industry groups, labor unions, or individual companies.
Candidates may spend an additional $50,000 of their own money, which does not count against the expenditure limit. However, using campaign funds for personal use is prohibited by the FEC.
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