Soft money and hard money

                The American political system is awash with money, and no understanding of the electoral process would be possible without a detailed examination of campaign finance. When seeking to properly understand campaign finance, it is important to distinguish between soft money and hard money. The distinction rests upon three elements; the purpose of the contribution, the extent of federal regulation involved and how the campaign team uses the money. Soft money consists of campaign finance used to endorse a particular cause. Hard money however is campaign finance used to endorse a particular candidate for office. This distinction matters because hard money is regulated by the Federal Electoral Commission (FEC), an organization that aims to ensure that money raised to fight federal contests (such as the race for the presidency) is subject to federal law passed by Congress. For instance, individuals may contribute a limited amount whereas corporations and unions cannot directly fund a candidate. Contests for non-federal offices are governed by state and local law.

                Candidates running for office have always found ways around campaign finance laws. For example, campaign teams organize what are known as bundlers in order to circumvent the limits placed on individual donations. Campaign teams then seek to coax smaller donations out of a much larger number of donors in a process akin to pyramid selling. Bundlers therefore gather finance from a high number of individual donors (such as the Bush Pioneers during the noughties). In 2008 and 2012, Barack Obama was particularly successful at raising money via this particular route.

Most of the finance raised during a campaign derives from soft money and the overall importance of soft money was exacerbated by the Citizens United ruling in January 2010. Citizens United are an advocacy group that fought against the ban placed on advertising a documentary highlighting the manner in which Hillary Clinton raised funds. The Supreme Court ruled in their favor, claiming that corporations have the same first amendment rights as individuals and are therefore free to use their own money as they see fit. In a subsequent case, the District Court of Appeal in Washington DC ruled that all limits on contributions to Political Action Committees (PACs) should be null and void.

As one might expect, PACs were a major source of finance during the 2012 elections with both presidential candidates gaining significant funds from wealthy backers. On the Republican side alone, the Koch brothers supplied around $270 million to various candidates. It is also worth noting that candidates managed to circumvent tighter regulations stemming from the McCain-Feingold Act (2002) with relative ease. Provided the PAC does not co-ordinate its campaign directly with a particular candidate, it can operate quite effectively without intrusive action from the authorities.

                Whilst money is self-evidently an important feature during a campaign, simply spending more money than your opponent does not guarantee victory. Even in the US, there is no direct relationship between money and electoral victory. This may raise the question ‘can money be at times a hindrance?’ For instance, an excessive level of wealth may actually deter potential voters because said candidate may appear disconnected from the concerns of ordinary voters. For instance, in 2012 Mitt Romney came across as a plutocrat at a time when millions of Americans were experiencing financial worries. The dependent factor here may well be the ability of a candidate to connect and empathize with the average Joe. Although Obama raised a massive amount of money, he appeared more interested in the problems facing ordinary people than his Republican opponent. This was particularly evident during Hurricane Sandy, where his personable character came across quite well.

                The potential downside of raising a great deal of money is probably greater on the Republican side. The GOP is sometimes seen as the ‘party of the rich,’ which may therefore require a candidate that appears ordinary and down-to-earth in the eyes of the electorate in the order to neutralize the negative. In recent years, George W. Bush is a good case in point. His folksy charm and compelling backstory connected with millions of voters. His battle with alcoholism and his commitment to Christianity allowed ordinary people to feel some kind of association with him. Ronald Reagan is another interesting example to consider. The ‘Gipper’ also put forward a compelling narrative, having come from the wrong side of the tracks in order to live out his own version of the American Dream. The ‘great communicator’ used his acting skills to devastating effect. He even managed to reach out towards blue-collar Democrats, thereby securing a landslide re-election victory in 1984. This objective was definitely helped by the Democrats being too closely aligned with vocal minority groups and the liberal intellectual elite.

                Having said all this, the whole messy business of raising campaign finance will always place the Democrats in a difficult position. Central to the party's brand is a concern for the less well-off in society, and yet the brutal reality is that the party needs money in order to beat their Republican opponents. There are however two consequences that stem from this. Firstly, it enables the Republican Party to portray Democrats as hypocritical. Secondly, the source of that money can at times embarrass the Democrats.

                In essence, candidates must raise a significant amount of money whilst appearing unaffected by the potential influence of wealthy donors. Frankly, this is one of the more problematic balancing acts facing any politician. Donors will inevitably seek something for their ‘investment.’ This could cover anything from favorable legislation to close access to important decision-makers. One should also note that there is often a strong correlation between wealthy donors and those appointed as Ambassadors for the US. The consequences of these investments may not necessarily be obvious, but they are surely there. For example, during his 2013 tour of Africa President Obama declared that “America wants to sell i-Pads to middle-class Africans.” It is surely no coincidence that the high-tech company Apple donated a major amount of money to Obama’s re-election campaign. Obama also gave an on-line interview (the first ever by a sitting President) to Google; another major supplier of funds for his campaign. Similarly, wealthy donors have been rewarded by Republican Presidents. For instance, George W. Bush instigated substantial tax cuts for the wealthy during his administration. He also gave seats in his Cabinet to wealthy backers when he first came to office. Frankly, neither party is absolved of blame on this issue. Politicians rarely pick a fight with wealthy figures with the power to publish either, as in the case of Rupert Murdoch and Jeff Bezos (the founder of Amazon and owner of the Washington Post).

                The level of money provided by multi-national companies raises questions concerning tax avoidance and tax evasion. It could be argued that such companies get away with not paying their fair share of taxation due to favorable treatment from policy-makers. Indeed, their donation may well be offset by the level of tax that company can successfully avoid paying. For instance, General Electric donated around $ 500,000 to the Obama campaign in 2008 and managed to avoid paying taxation in the 2010 fiscal year. This is one of many examples that exacerbate the gap between ‘them’ and ‘us’ within American politics. It once again gives substance to the claim that wealthy corporations and individuals (the fabled 1%) have effectively captured the political process. This issue has been raised by pressure groups from both the left and right of the political spectrum.

                Before leaving this section, it is worth noting that the amount of campaign finance raised by candidates from the two main parties serves as a significant barrier towards the progress of minor parties. The US is one of the clearest examples of a two-party system in the world. There is no major third party in the states, and there seems very little chance that any party or candidate will break the duopoly that dominates the political marketplace. There are of course several reasons for the continued dominance of the two main parties, but it must be noted that money is certainly one of them. Donors are highly unlikely to waste their investment on candidates with little or no chance of gaining elected office. Mounting a serious challenge to the ‘Republicrat’ duopoly requires an eye-watering level of personal wealth. Indeed, it seems fitting to note that the last third party candidate to gain any real level of support from the electorate (as distinct from the Electoral College) was the Texan billionaire Ross Perot.