Campaign finance in the United States facts for kids

The financing of electoral campaigns in the United States is about how money is raised and spent to help people get elected. This happens at the national, state, and local levels. Money comes from individuals, companies, and special groups called political action committees (PACs). Sometimes, the government also provides funding.

The amount of money spent on campaigns has grown a lot since 1990. For example, in 1990, a winning candidate for the House of Representatives spent about $407,600. By 2022, a winner spent around $2.79 million! For the Senate, winning candidates went from spending about $3.87 million in 1990 to $26.53 million in 2022.

In 2020, nearly $14 billion was spent on federal elections, making it the most expensive election in U.S. history. This was more than double what was spent in 2016. Some people worry that after certain court decisions, especially Citizens United v. FEC in 2010, very wealthy people can spend unlimited amounts of money through groups like "Super PACs." They also worry that voters don't always know who is giving this money, which is called "dark money." Critics say that this means "big money" has too much influence, and the voices of everyday Americans are not heard as much.

Many Americans are concerned about this. A 2018 poll showed that 74% of people thought it was very important that big donors not have more political influence than others. But 72% felt this was not happening. Still, 65% believed that new laws could help reduce the role of money in politics.

Laws about campaign donations and spending are made by the U.S. Congress and enforced by the Federal Election Commission (FEC). Groups like the Center for Responsive Politics also keep track of how money is raised and spent. Most campaign spending comes from private donors. However, candidates for President of the United States can get public funding if they meet certain rules. If they accept public money, they usually have limits on how much they can spend.

Rules for state and local elections are set by each state and city. Some states have strict limits on contributions, while others have no limits at all.

Understanding Campaign Money Terms

It's helpful to know some special words used when talking about campaign money:

• Campaign funds: This is money used to help a candidate win a federal election.
• Dark money: This is money spent to influence elections where the public doesn't know who the original donor is.
• Soft money: This money is not meant to directly support or oppose a specific federal candidate. Instead, it's for general "party-building" activities, like registering voters. There are no federal limits on soft money.
• Hard money: This is money given directly to a federal candidate, political party, or PAC for a federal election. There are rules and limits on how much hard money can be given.

How Much Money is Spent on Campaigns?

The amount of money spent on federal elections has grown quite a bit, even when you account for inflation.

Total Cost of Federal Elections, Congressional and Presidential (1990-2022)

(In billions of dollars, adjusted for inflation. Source: OpenSecrets)

Over many decades, spending has increased much faster. For example, in 1972, a $2 million donation was a huge deal and led to new laws. But by 2016, that amount (adjusted for inflation) was about $11 million, which was much less than what some wealthy groups were spending.

Campaign Spending in 2022

About $16.7 billion was spent on the 2021 and 2022 elections. In the 2022 Congressional races, money came from different places:

How Do Donations Affect Politics?

Impact on Politicians

Studies have shown that politicians are more likely to meet with people they think have donated to their campaigns. Companies that give more money to candidates have also been found to receive more government contracts later on. This suggests that businesses use donations to gain access and favor, hoping it will influence policies. However, some research has found no direct money benefits for companies that donate to winning candidates.

Still, other studies show that spending money on lobbying (trying to influence lawmakers) can lower a company's tax rate. One study found that for every $1 spent on corporate campaign contributions, companies gained about $6.65 in lower state taxes.

Impact on Winning Elections

While some believe that simply spending the most money doesn't guarantee a win, others disagree. For example, Donald Trump won against opponents who spent more money. However, data from OpenSecrets shows that while "money doesn't always equal victory... it usually does."

Percent of Races Won by Top Spending Candidate for U.S. House and Senate

This might be because donors tend to give money to candidates who are already likely to win. But it also shows that money can help less-known candidates succeed.

Where Does Campaign Money Come From?

Money for federal campaigns comes from four main types of sources:

• Small individual contributors: People who give $200 or less.
• Large individual contributors: People who give more than $200.
• Political action committees (PACs): Groups that raise and spend money to elect or defeat candidates.
• Self-financing: The candidate's own money.

Super Wealthy Donors

Very rich people, like Billionaires, give a huge amount of money to campaigns. For example, in the 2016 presidential campaign, fewer than 400 super wealthy families gave almost half of all the publicly known donations. These donors often use "SuperPACs" to give unlimited amounts of money, getting around regular donation limits.

Studies show that only a small number of Americans donate to campaigns, and these donors often have more extreme political views than average voters. Also, industries that aren't very popular might give more money to candidates to make up for losing voter support.

A 2022 study found that billionaires are using their wealth more and more to "drown out regular voters' voices" and elect candidates who will help their financial interests, especially with taxes.

Federal Contribution Limits

Federal law has rules about who can donate and how much. Companies and labor unions cannot give money directly to candidates or national political parties. There are also limits on how much individuals and PACs can contribute to campaigns and parties.

State and Local Rules

Rules for state and local elections are different from federal ones. Many states allow companies and unions to donate, sometimes with limits. Several states, like Alabama and Texas, have no limits at all on contributions.

Bundling Donations

Because there are limits on how much one person can give, campaigns often use "bundlers." These are people who collect donations from many individuals and give the total amount to the campaign. Campaigns might give these bundlers special titles or invite them to exclusive events. This practice became more organized in the 2000s. Sometimes, presidents have been criticized for rewarding bundlers with important government jobs, like ambassador positions.

Advocacy Groups and Independent Spending

Besides direct donations, other groups spend money to influence elections. This is called "independent expenditure" or "soft money." After court decisions in 2010, soft money spending became unlimited. This means groups can spend as much as they want on things like stickers, posters, and TV ads that support a party or idea, as long as they don't directly tell people to "vote for" or "vote against" a specific candidate.

Critics say this is a "loophole" because these groups can work closely with campaigns without being limited. Also, some groups don't have to reveal their donors, leading to "dark money."

Super PACs are a type of independent expenditure committee. They can raise and spend unlimited amounts of money to support or oppose candidates or issues. The key is that they cannot coordinate with the candidate's campaign. While they are supposed to disclose their donors, some Super PACs act like dark money groups because their funding can be hard to trace. Super PACs became common after the 2010 court decisions.

Other types of groups that spend money independently include:

• 501(c) organizations: These are non-profit groups, like social welfare organizations or labor unions. They can get involved in politics as long as their main goal is not political advocacy. They don't have to reveal their donors.
• 527 organizations: These are political groups that don't have limits on contributions or spending, as long as they don't directly tell people to vote for or against a candidate. They must register with the IRS and disclose their donors.

Political Parties

Political parties can give money directly to candidates, within limits. National parties can also spend unlimited amounts of "independent expenditures" to support or oppose federal candidates. However, since 2002, national parties cannot accept unlimited "soft money" funds.

Who Knows Where the Money Comes From?

Federal law requires campaigns, parties, and PACs to report the money they raise and spend. They must identify PACs and parties that donate to them, and list the names, jobs, and addresses of individuals who give more than $200. This information is available to the public through the Federal Election Commission (FEC) website. Many states have similar rules for local elections.

Organizations like OpenSecrets collect this data to help people understand who is influencing politics. There are also apps that let consumers see which companies and their leaders donate to political campaigns.

The "Dark Money" Secret

A big exception to these rules is "dark money." With dark money, the people receiving the money know who gave it, but the public does not. This money is exempt from disclosure rules. In the 2020 election, over $1 billion in dark money was spent at the federal level. This money often comes from non-profit groups and shell companies. For a long time, dark money mostly helped Republicans, but in 2020, it benefited Democrats too.

Dark money has been increasing rapidly in recent elections, reaching hundreds of millions of dollars in U.S. presidential races.

A Brief History of Campaign Finance in the U.S.

Early American politicians, like Andrew Jackson, started using campaign staff and committees to raise money and organize events. In the late 1800s and early 1900s, wealthy people from industries like oil and railroads gave secret donations, leading to scandals.

First Attempts to Control Money in Campaigns

In 1905, Teddy Roosevelt tried to ban all corporate political donations, but he wasn't successful.

Tillman Act of 1907

The Tillman Act of 1907 was the first federal law to try and control campaign money. It stopped companies and national banks from giving money directly to federal candidates. However, it wasn't very effective because it was hard to enforce. Later, laws added rules about disclosing donations and limiting spending for House and Senate candidates.

Federal Election Campaign Act (1971)

In 1971, Congress passed the Federal Election Campaign Act (FECA). This law made federal candidates, parties, and PACs reveal their donations and spending. In 1974, new changes to FECA created the Federal Election Commission (FEC) to enforce these rules. The law also set limits on how much individuals and PACs could donate.

Buckley v. Valeo (1976)

This important Supreme Court case challenged the FECA. The Court decided that limits on donations to candidates were allowed because they helped prevent corruption. However, the Court also ruled that limits on how much campaigns could spend, or how much independent groups could spend, were against the First Amendment (freedom of speech). This meant that while donations could be limited, spending could not.

The "Eight Magic Words"

The Buckley decision also introduced the idea of "express advocacy." This meant that campaign finance laws only applied to speech that used specific words like "vote for," "elect," or "defeat" a candidate. If an ad didn't use these words, it was considered "issue advocacy" and wasn't limited. This idea helped create "dark money" groups later on.

Bipartisan Campaign Reform Act (2002)

Before 2002, political parties could raise unlimited "soft money" for activities that influenced state or local elections, even if those activities also helped federal candidates. This was seen as a way to get around the limits on "hard money."

Soft Money Raised from 1993 to 2002

In 2002, Congress passed the Bipartisan Campaign Reform Act (BCRA), also known as "McCain-Feingold." This law tried to stop national political parties from raising or spending soft money. It also banned companies and unions from using their own money for "electioneering communications" (ads that clearly identify a federal candidate) close to an election. The law also added a "stand by your ad" rule, requiring candidates to say they approve their ads.

The Supreme Court mostly upheld this law. However, it said that non-profit groups focused on political ideas could still run election ads if they didn't take money from corporations or unions. Also, the BCRA didn't regulate "527 organizations," which then took over many of the soft money activities previously done by parties.

Citizens United v. FEC (2010) and SpeechNOW.org v. FEC (2010)

These two court decisions in 2010 changed campaign finance rules a lot.

• Citizens United said that the government could not stop corporations and unions from spending money on independent political ads. The Court said this was part of free speech. This decision overturned an earlier case that had allowed limits on corporate spending.
• SpeechNOW.org built on Citizens United and ruled that there could be no limits on donations to groups that only made independent expenditures (spending not coordinated with a candidate's campaign).

These decisions led to the creation of "Super PACs." Super PACs can raise unlimited money from individuals and companies and spend it on political ads, as long as they don't work directly with a candidate's campaign.

McCutcheon v. Federal Election Commission (2014)

In 2014, the Supreme Court ruled in McCutcheon v. FEC that overall limits on how much an individual could donate to all political parties and federal candidates combined were unconstitutional. This meant that while there are still limits on how much you can give to one candidate, there's no limit on the total amount you can give to many different candidates and parties.

Public Funding for Campaigns

After Citizens United and other court rulings removed limits on some campaign spending, some people started pushing for more public funding for campaigns. The idea is that if public money matches small donations, candidates would try to get many small donors instead of just a few big ones.

For Presidential Campaigns

At the federal level, public funding is only available for presidential campaigns. This includes:

• A matching program for the first $250 of each individual donation during the primary election.
• Funding for the main party candidates in the general election.

To get matching funds in the primary, candidates must raise a certain amount of money from small donations in at least 20 states. If they accept public funding, they agree to limit their spending. However, many candidates now choose not to take public money so they can raise and spend as much as they want. Since 2008, no major party presidential candidate has accepted public funding for the general election.

The money for this public funding comes from a special fund that taxpayers can choose to contribute $3 to on their tax returns. Fewer and fewer taxpayers are choosing to do this, but since fewer candidates are taking the money, the fund usually has enough.

For State and Local Campaigns

A few states and cities have their own public financing programs. One popular method is called "Clean Money, Clean Elections." In this system, candidates who agree to participate receive a fixed amount of public money. To get this money, they must collect a certain number of small donations (often $5). If they take public money, they cannot accept outside donations or use their own money. This system is used in states like Arizona and Maine.

However, some of these programs have faced challenges and have been struck down by courts or repealed by voters. For example, Seattle has a "Democracy voucher" program where residents get four $25 vouchers to donate to participating candidates.

Rules for Spending Campaign Funds

Politicians are supposed to use campaign funds for their campaigns, not for personal expenses. The Federal Election Commission (FEC) has a rule called the "irrespective test." This means that if an expense would exist regardless of the candidate's campaign or their role as an officeholder, it's considered personal use and cannot be paid for with campaign funds. For example, using campaign money for family trips or private school tuition is not allowed.

Images for kids

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  Diagram by the Sunlight Foundation depicting the American campaign finance system

See also

• Buckley v. Valeo
• Campaign finance
• Campaign finance reform in the United States
• DISCLOSE Act
• Eight Magic Words
• FEC v. Wisconsin Right to Life
• Money trail
• No corporate PAC pledge
• Political action committee
• Political corruption in the United States
• Political finance
• Testing the waters