Reduce Federal Contribution Limits

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Good morning and thank you for inviting me to testify today. My name is Derek Cressman, and I am a campaign finance analyst for the U.S. Public Interest Research Group, which is the national advocacy office for state PIRGs across the country. The PIRGs are nonprofit, nonpartisan grassroots citizen organizations that conduct research, educate the public, and advocate for public policy that we feel benefits the public interest.

The PIRGs have worked on the issue of campaign finance reform for the past twenty years. We see campaign finance as one of the core issues on which we work, and among the most important, if not the most important, issue determining our future as a democratic country.

I am here to address the question of whether the current federal contribution limits on hard money are too low, too high, or just right. This is an important issue for the Congress to consider, and it is PIRG's contention that the current limits are too high and that they should certainly not be increased as called for in legislation pending before the committee.

Problem: Wealthy Interests Unduly Influence the Federal Elections Process

First, let me address what PIRG sees as the problem with our current campaign finance system and how that relates to the hard money contribution limits. My first point is that money is a significant factor in determining who runs for office and who wins elections.

In today's world of media-centered, high-priced campaigns, money has become the cornerstone of a successful race. Fundraising potential not only influences a prospective candidate's decision to run for office, but is also an indicator of their political viability. In all congressional primaries so far this year, 95% of all candidates who had raised the most money twelve days before the primary won their parties nomination. Similarly in the last election cycle, candidates who spent the most won 94% of general election Senate races and 95% of House races. Finally, in every presidential primary since 1976, the candidate who has raised the most money in the year prior to the election has won the primary. While presidential candidate Steve Forbes' campaign and other examples have shown that money alone does not guarantee success, the lack of big money almost always precludes success.

The American people understand that money significantly impacts election outcomes. A Wall Street Journal poll in 1997 found that 68% of respondents think that the American political system was more influenced by special interest money than it was twenty years ago. I suspect that most members of Congress would agree that money heavily influences elections as well. After all, why else would candidates bother to raise funds? However, I would welcome any member of Congress to disprove this conclusion by vowing to raise less money than your challenger in the next election.

There is less agreement on whether or not it is a bad thing that money plays such a heavy role in election outcomes. If campaign contributions were coming from a representative cross section of America, money raised would be a good barometer of a candidate's public support. We would then find that the candidates who have the most public support raise the most money and win the election. We might then conclude that there is not a serious problem with money in politics.

Campaigns are Predominately Funded by Wealthy Donors

But campaign contributions do not come from a broad cross section of America. Most candidates for federal office depend upon the support of a few individuals who can afford to give substantially to their campaign. In this year's presidential primary race, the two major party candidates Al Gore and George W. Bush raised three-quarters of their total campaign money in 1999 from maximum $1000 donors. Contributions under $200 accounted for less than 10% of the total funds raised. Similarly in every congressional primary so far this year, nearly half of all individual funds raised are from maximum $1000 donors.

Most citizens do not give large political contributions. Fewer than one out of every thousand American citizens gave a contribution of more than $200 to a presidential candidate in 1999. This number would be somewhat less troubling if large donors were representative of the majority of the population. Instead, most large donors are older white males with vast financial resources. According to a national survey conducted by four political scientists⁽¹⁾ during the 1996 congressional elections, of those who gave contributions over $200, 95% were white, 80% were male, 50% were over 60 years of age, and 81% had annual incomes greater than $100,000. These numbers are very different from the population of the United States at that time: 17% were non-white, 51% were women, 12.8% were over 60, and only 4.6% declared an income of more than $100,000 on their tax returns. More so than the public at large, these donors tended to have conservative views, especially on economic issues. However, one-third of the large donors identified themselves as liberal, compared to one-fifth of the general public, so it is primarily the middle of the political spectrum that is underrepresented among large donors.

Because large individual donors determine who can run for office and who wins elections, potential candidates who don't appeal to and solicit money from these wealthy donors rarely survive the primaries. This wholesale corruption of the political process breeds apathy among the public and reduces the average American's ability to influence which candidates make it to the ballot. Moreover, our current system presents a very natural tendency for Congress to hear more directly from their large contributors who put them in office than from the majority of citizens they represent.

Solution: Low Contribution Limits

The solution is to set contribution limits that are within striking distance of what most Americans can afford to donate. Candidates would then raise their funds from ordinary citizens, and the candidates who raised the most money truly would be the candidates who had the most public support. Low contribution limits are favored by the public, are accepted by the courts, and they are sound public policy.

The Public Supports Low Contribution Limits

A 1994 poll by the Mellman group found that 77% of the public supported reducing individual contribution limits. The public has demonstrated their support for contribution limits much lower than the current federal limits at polling booths on election day as well. Over the past six years, at least eleven states, Arizona, Alaska, Arkansas, California, Colorado, Maine, Massachusetts, Missouri, Montana, Oregon, and Vermont, have moved to lower their contribution limits, with all but three of those states doing so through a direct vote of the citizens - not incumbent politicians. Most of those initiatives passed by overwhelming margins, often two or three to one. Many of these initiatives called for contribution limits as low as $100 for most races.

These citizen efforts to lower contribution limits initially met resistance from the lower courts. But recently, the U.S. Supreme Court issued a ruling that clears the way for states and Congress to continue lowering contribution limits.

The U.S. Supreme Court Allows Low Contribution Limits

On January 24, 2000, the U.S. Supreme Court issued a ruling in the case Nixon v. Shrink Missouri Government PAC. In that ruling, the Court specifically upheld contribution limits of $275 for state legislative races and $1075 for statewide races. More generally, the Court said that the states and Congress could set contribution limits as low as they saw fit, so long as the limits are not "so radical in effect as to render political association ineffective, drive the sound of a candidate's voice below the level of notice, and render contributions pointless."

The Court also explicitly rejected the argument that inflation had eroded the meaning of the original $1000 federal contribution limit, and held that the $1000 limit upheld in Buckley v. Valeo was not a constitutional minimum.

Federal candidates are clearly able to raise sufficient funds to campaign under the current federal hard money limits. In fact, congressional candidate fundraising has gone up at a rate 50% greater than the rate of inflation since 1974, and 2.3 times the rate of increase in the wages of ordinary Americans. On average, candidates have never raised more money than they are raising today.

Citizens are still making contributions and obviously are doing so because they feel they are having an effect. However, the vast majority of citizens make no contribution at all, perhaps because they consider the amount that they could afford to give to be inconsequential given today's high contribution levels. In the last congressional election, only six one hundredths of one percent (0.06%) of Americans made a contribution of $1000. This number is miniscule compared to the number of citizens who could be encouraged to make a contribution if limits were lowered to amounts that made small contributions more meaningful. Thus, there is no current constitutional reason to raise contribution limits but there is considerable constitutional leeway to lower them if Congress sees fit.

Are Current Limits Good Policy?

If the public supports low contribution limits and courts allow low limits, it then remains for the U.S. Congress to debate contribution limits on their merits as public policy, and the hearings today are a fitting opportunity for Congress to reexamine the question of contribution levels.

The policy discussion should be about what is appropriate today, not about how to adjust a figure that was not by itself adequate in 1974. When Congress enacted the $1000 individual contribution limits in 1974, few people thought that they would have much impact. The limits only affected about 6% of the donors at the time, meaning most donors were giving amounts well under the maximum $1000 limits. The real impact of the 1974 FECA Amendments was intended to come from the mandatory spending limits that were struck down by the Supreme Court. Were those spending limits in place today and indexed for inflation, House candidates could have spent no more than $203,000 on their campaigns in 1998. Instead, the average winning candidate spent $650,000. So to look only at the $1000 contribution limit and conclude that a limit that was designed to have little impact in 1974 should now be raised so that it again has little impact grossly ignores the intent of Congress in 1974 and misconstrues the real question about contribution limits.

The correct policy question is whether or not contribution limits are set at levels that are affordable to average Americans. If they are not, then the small group of wealthy donors capable of giving more than ordinary Americans will inevitably have a much greater impact on the elections process - a wholesale corruption that distorts democracy. A $1000 contribution is no more affordable to average Americans today than it was in 1974; hence the limit should be lowered, not increased.

When low contribution limits were in place in the District of Columbia for the 1994 City Council elections, there was a 60% increase in the number of major candidates compared to elections that took place prior to the limits. ⁽²⁾ While contribution limits had been lowered by 90% compared to previous levels, candidates reached out to many more donors so total candidate fundraising dropped by only 23%. Thus, the lower limits encouraged greater participation in the process both by candidates and donors.

In Oregon, when low contribution limits went into effect for the 1996 election, the number of candidates was comparable to previous elections. A report prepared by the Oregon Secretary of State found that "candidates were able to raise significant contributions under the $100 limit." While contributions from all sources, including corporations and labor unions declined, in the 1996 Oregon general elections individual Oregonians contributed $1,383,972 to legislative candidates, nearly double the $723,325 contributed in 1992. The report concluded that "it is likely that more Oregonians made contributions to legislative candidates than at any previous election."⁽³⁾ Legislative candidate Bob Shook raised $3,539 in the campaign, but still found that adequate to get out his message. "I can run a very aggressive grassroots campaign and do three or four mailings," Shook told the Oregonian newspaper. "It forces me to go to 9 million soccer games on Saturday mornings. … You need to knock on doors, be visible in the community, rather that sitting back raising money."⁽⁴⁾

In Colorado, when low contribution limits went into effect for the 1998 election, research by the Colorado Springs Gazette Telegraph found that more citizens contributed to statewide campaigns than had done so in the 1994 elections, while the average contribution fell from $343 in 1994 to $172 in 1998.⁽⁵⁾ Legislative candidates from the two counties studied by the Gazette received contributions from about 2,700 citizens in 1994, but candidates broadened citizen involvement and received 3,400 contributions in 1998. While candidates in some statewide primary races raised fewer total dollars than their predecessors in 1994, candidates for Lt. Governor, Attorney General, Treasurer, and University Regent raised more total dollars in small contributions than candidates had in 1994. Dick Williams, who was the campaign manager for Governor Owens said that the limits encouraged them to broaden their base, saying "the fact is you're getting more people involved in running campaigns." Senate Minority Leader Mike Feeley acknowledged that the new law had prompted him to visit small towns in his district to do grassroots fundraisers. "Rather than pick up the phone and ask for a $20,000 contribution from an individual, it has forced me to go out and speak to 50 to 100 individuals to raise that same amount of money," Feeley told the Denver Post.

Senators, raising contribution limits in the name of reform is like throwing gasoline on a fire. Rather than helping put it out, it will make the situation dangerously worse. Candidates will raise more money from fewer citizens, further reducing the role of average Americans in the political process.

Lower Limits Allow Candidates to Spend Less Time with Individual Donors

Recently, there has been support for higher contribution limits because some candidates feel they could then spend less time raising funds. I would suggest that the exact opposite is true. The larger the amount an individual can contribute, the fewer the number of individuals who will be able to make a contribution of that size. Thus, the more special attention a donor will expect to receive for their contribution. If I'm going to give $50 to a candidate for the U.S. Senate, I don't expect them to call me on the phone. I'm happy to respond to a surrogate for the candidate, or perhaps a direct mail solicitation. But if I'm going to give $1000, I expect a personal call. If I could give $3000, my expectations would be even higher, knowing that I deserve to be treated much differently than my neighbor who can only contribute $50. If contribution limits were to rise, candidates will have greater incentive to spend their time soliciting the highest donors because those donors will be worth even more to a campaign. Under the current high contribution limits of $1000, presidential candidate George W. Bush is one of the few exceptional politicians who have found it possible to raise enormous sums of money by spending relatively little candidate time calling individual donors and instead using his network of "pioneers." Presidential candidate John McCain raised significant funds through small contributions over the Internet, which also did not require the candidate to spend time with individual donors. If the contribution limit were lowered, more Senate and House candidates would be able to raise funds in the ways that Bush and McCain have and there would be less pressure for candidates to spend time calling donors one on one. Rather, they could spend more time at $25 a plate spaghetti dinners or hot dog cookouts, talking to many donors at once - since each donor would have lower expectations for personal attention from the candidate. If the limit is raised, candidates will be able to raise the same total amount that they do now through making fewer phone calls, but the fact that their opponent will also be raising greater sums of money will mean that the total amount that must be raised for a typical Senate campaign will escalate dramatically and candidates will soon be back on the phone scraping for every large contribution they can get.

Lower Limits Benefit Candidates Who Compete in the Marketplace of Ideas

No campaign finance system is neutral. Any system will tend to advantage certain kinds of candidates, both challengers and incumbents, and comparatively disadvantage others. The best policy would be a system that lets the marketplace of ideas determine elections, not the financial marketplace.

Setting limits above the level that ordinary Americans can afford will advantage candidates backed by big donors and disadvantage those who rely on small contributions. Our current system grossly distorts the marketplace of ideas, to the point where Congress is no longer representative of the American public. A recent study by two political scientists documented the growing gap between what the public wants Congress to do and what Congress really does. Professors Lawrence R. Jacobs of the University of Minnesota and Robert Shapiro of Columbia found that twenty years ago, lawmakers did what a majority of Americans wanted about two-thirds of the time. Today, Congress follows the wishes of the majority only 40 % of the time. The professors concluded that lawmakers answer to "the extreme ideological elements of their parties, to their contributors, and to special interests."⁽⁶⁾

The result is a shocking lack of respect and trust in the institution of Congress. In 1999, only 29 % of Americans trusted the government in Washington to do the right thing, according to a poll by the Council for Excellence in Government. The same survey found that 63% of respondents feel that government serves the special interests, while only 25% said it serves the public interest. Just 39% said that they believed that our current government meets Abraham Lincoln's goal of government of, by, and for the people, while 54% said that we do not have a government of, by, and for the people.

Cognizant of the growing wholesale corruption of our political system, citizens are losing faith in the integrity of our elections process. A Campaign For America poll found in 1995 that 86% of the public believes that special interest contributors influence policy decisions. To allow wealthy donors to give even more to candidates would only deepen this crisis in our democracy.

Congress Should Change the Rules

Because members of Congress recognize that no campaign finance system is neutral, there understandably tends to be a certain amount of concern about whether changes in our campaign finance system will advantage one party over another, or incumbents as a group over challengers. While U.S. PIRG is not in the business of giving advice to any political party, let me suggest to both parties present on the Rules Committee that from a public policy viewpoint these concerns are minimal, and even from a partisan viewpoint they are overblown. Candidates of all stripes will simply adapt to whatever system is put in place, and both the Republican and Democratic parties will quickly adjust to be competitive under any set of rules.

Since we are in the final days of March madness, perhaps I can illustrate my point with a basketball analogy. The current set of NCAA rules reward players of incredible athletic ability, smarts, and discipline to practice. It is also the case that they reward players who are tall, in part because they can slam-dunk the basketball in the hoop. If the NCAA were to change the height of the basketball hoop, it would alter which type of players would be advantaged relative to others. If it were raised just a few inches, then only the tallest players would have the advantage of the slam-dunk. But if it were raised several feet to where no player could slam-dunk, then it would advantage players with accurate outside shooting ability, and height would matter less. Likewise, changes in the three-point line, or the number of fouls it takes to get thrown out of the game might advantage or disadvantage certain types of play, and hence certain types of players. But under any scenario, games would remain competitive, as all players would adapt to play under the new rules. All teams would seek players who excelled under those rules, and any temporary advantages that one team might have over another when the rules were changed would quickly be erased.

Likewise with federal election campaigns, the current rules favor a certain type of candidate. Candidates who are millionaires and can spend their personal money to win election clearly have an advantage, as do those candidates capable of raising large sums of money from a small group of wealthy donors. Candidates who are skilled at raising moderate sums of money from a large group of small donors occasionally can get in the game, but they rarely win and in any case have a distinct disadvantage. Raising the individual contribution limit would tend to increase the advantage of candidates who can raise large sums of money from a small group of wealthy donors and lowering it would tend to advantage candidates who can raise money in smaller amounts from ordinary Americans.

If Congress were to raise contribution limits, both the Republican Party and Democratic Party would adjust to recruit candidates who took positions that were favorable to the fewer than 1% of Americans who could give contributions more than $1000. I have no doubt that there are talented politicians in both parties who would find ways to be competitive with this constituency through making compromises on some issues, and pushing the envelope on others in order to hold their party's coalition of donors together and fracture the support for the other party. But likewise, I have no doubt that both the Republican and Democratic Parties would be able to compete aggressively under different rules that required candidates to seek small contributions from ordinary Americans. Parties would take positions that appealed to ordinary Americans, would recruit candidates who had broad appeal, and would battle with one another for the political center of the electorate. In state elections where low contribution limits have been in effect, we have not seen evidence of significant changes in the success rates of one party versus the other, or of challengers compared to incumbents.

I realize that I am testifying for the equivalent of the Olympic Dream Team in basketball. The members of the Senate Rules Committee are here in part because you have mastered the rules of the current game. You are to be commended for that, and it is understandable why current champions would hesitate to change the rules of the game. But I would encourage you to think about the game that you would rather play. Would you rather spend time seeking support from your constituents, or raising money from a small group of wealthy donors? Would you rather compete in the marketplace of ideas, or in the financial marketplace? Think also about the game that the American people want to see played. While it may well be that the current members of the Senate could all be re-elected under the current rules of the game, there is a danger that the American people will tire of a game that is no longer being played for their benefit. If Congress's ratings continue to slip, you risk not only damaging the standing of both major teams, but of the institution of Congress itself.

^1. Survey conducted by John Green, University of Akron, Paul Herrnson, University of Maryland, Lynda Powell, University of Rochester, and Clyde Wilcox, Georgetown University. Released on June 9, 1998.

^2. In 1990, there were 24 candidates who were able to raise at least $1000, in 1994, 40 candidates did.

^3. The Effect of 1994 Ballot Measure 9 On Legislative Elections in Oregon, Oregon Secretary of State, April 8, 1997.

^4. The Oregonian, December 11, 1996.

^5. Gazette Telegraph, November 22, 1998.

^6. From Politicians Don't Pander, by Lawrence R Jacobs and Robert Y Shapiro, as reported in the Washington Post, March 19, 2000.