The future of campaign finance

One of the biggest changes that will likely emerge from the 2008 presidential election is an overhaul of campaign finance rules. This election calls into question the continued relevance of both federal matching funds as well as federal limits on individual contributions.

Federal funding for presidential campaigns was instituted in the wake of Watergate as a means to limit the influence of special interest groups. Following the abuses perpetrated in the 1996 and 2000 campaigns, John McCain and Russ Feingold led the charge to add teeth to campaign finance laws. Commentators have already noted with irony that McCain’s demise in the last few weeks of the campaign was hastened by the very legislation that helped build his reputation as a reform-minded maverick.

Spending restrictions associated with federal funding left him unable to match the media blitz orchestrated by the Obama campaign. Buoyed by the sheer volume of money that poured into his campaign coffers, Obama chose the rational path and declined federal funding:

Individual Contributions vs. Federal Funding- 2008/2004 elections

Source: Federal Election Commission

Democrats had been the strongest supporters of campaign finance reform in recent years, having been out-organized and out-spent by Republicans for the better part of 25 years. Now that they have achieved a degree of parity, it remains to be seen who will emerge as the patron saint of federal election funding. If the program is to remain relevant, the government must either dramatically increase the amount of money available or else remove the spending restrictions altogether.

The fundraising success of the Obama campaign may also provide Democrats with a new perspective on federal limits to individual contributions. Obama raised nearly $600M in individual contributions, which comes out to about $9 for each of the 65 million votes he received. Individual contributions are limited by FEC to $2,300 per candidate. Had those limits not been in place, Obama could have conceivably raised close to a billion dollars in individual contributions. These numbers reflect a fundamental shift in how people involve themselves in the democratic process. In today’s world, many voters’ preferred mode of political engagement to sign onto an e-mail list, join a Facebook group and then use PayPal to send their candidate $50. In that context, why should they be limited to $2,300? Why should they be limited at all?

In 1995, Harvard University Professor Robert Putnam wrote a now famous essay entitled Bowling Alone: America’s Declining Social Capital, in which he decried Americans’ increasing disengagement from civic organizations, local bowling leagues being one such example. He argues that national organizations have displaced local ones, dramatically changing the way in which Americans use their social capital:

Perhaps the traditional forms of civic organization whose decay we have been tracing have been replaced by vibrant new organizations. For example, national environmental organizations (like the Sierra Club) and feminist groups (like the National Organization for Women) grew rapidly during the 1970s and 1980s and now count hundreds of thousands of dues-paying members. An even more dramatic example is the American Association of Retired Persons (AARP), which grew exponentially from 400,000 card-carrying members in 1960 to 33 million in 1993, becoming (after the Catholic Church) the largest private organization in the world. The national administrators of these organizations are among the most feared lobbyists in Washington, in large part because of their massive mailing lists of presumably loyal members.

These new mass-membership organizations are plainly of great political importance…For the vast majority of their members, the only act of membership consists in writing a check for dues or perhaps occasionally reading a newsletter. Few ever attend any meetings of such organizations, and most are unlikely ever (knowingly) to encounter any other member. The bond between any two members of the Sierra Club is less like the bond between any two members of a gardening club and more like the bond between any two Red Sox fans (or perhaps any two devoted Honda owners): they root for the same team and they share some of the same interests, but they are unaware of each other's existence. Their ties, in short,are to common symbols, common leaders, and perhaps common ideals, but not to one another.

The 2008 election precisely confirms Putnam's hypothesis. As the last three elections have shown, presidential campaigns have evolved into powerful civic organizations. Campaign visionaries like Karl Rove and David Axelrod recognized the power of creating sustainable organizations in which contributors saw themselves more as members than as donors.