Presidential Campaign Finance
Campaign finance has been
one of the biggest stories of the 1996 presidential race. During the past
month, Republicans and journalists have questioned foreign contributions to the
Democratic Party. Both parties, interest groups, political action committees,
and businesses have spent record sums this year. According to one
campaign-finance watchdog organization, the 1996 presidential contest will cost
$800 million, nearly three times as much as the 1992 race. What are the rules
of campaign finance? What rules, if any, have the campaigns broken?
Under the
1974 Federal Election Campaign Act, foreign nationals cannot make
contributions or expenditures in connection with any U.S. election--federal,
state, or local. Foreign nationals include foreign governments, political
parties, corporations, and citizens. The ban does not apply to foreigners who
are legal residents of the United States. A domestic subsidiary of a foreign
corporation may make political contributions, but only if the foreign parent
plays no part.
The Democratic Party is embroiled in controversy
over contributions from Asians and Asian-Americans . Most of this money
was raised by John Huang , the now-suspended vice chairman of finance for
the Democratic National Committee. The DNC was forced to return $250,000 raised
by Huang after it came out that the donation came from a Korean corporation,
rather than its U.S. subsidiary. The DNC has kept a $450,000 contribution from
an Indonesian couple, Soraya and Arief Wiriadinata . Soraya and Arief are
the daughter and son-in-law of Hashim Ning, co-founder of the Lippo
Group , a $6 billion Indonesian banking conglomerate. The DNC says that the
Wiriadinatas' contribution is valid because they were legal residents of the
United States. (Since the donation, the Wiriadinatas have returned to
Indonesia.) Many have questioned the propriety of the donation, suggesting that
the president has been unduly influenced by a foreign corporation. Bill Clinton
is a friend of James Riady, Lippo's vice president and son of Mochtar Riady,
the firm's honorary chairman. (Clinton met James Riady when he came to Little
Rock to learn American finance.) John Huang once worked for Lippo and is one of
James Riady's closest associates.
Republicans have also benefited from
foreign political contributions. In 1992, James Riady's wife, Aileen, gave
$1,000 to Bob Dole. The Republican Party also has received more than twice as
much money as the Democrats from American subsidiaries of foreign companies.
The vice chairman of Bob Dole's primary election-finance committee was Alfonso
Fanjul, a Cuban-born sugar magnate who carries a Spanish passport but lives
legally in this country. His company, Flo-Sun Sugar, has given $234,000 to the
Republican National Committee this campaign, as well as thousands in direct
donations to candidates.
It is
against the law for corporations and labor unions to contribute money to
candidates for federal office. However, they may sponsor political action
committees which raise money from employees, stockholders, and members, and
contribute the money to candidates. Individuals may give $20,000 per
year to a national party, $5,000 to a PAC, and $2,000 to a candidate ($1,000 in
the primary and $1,000 in the general election)--up to a maximum of $25,000 a
year. No one may donate in another's name, or give more than $100 in
cash . The Democrats may have violated this last restriction. In April,
Al Gore appeared at a Buddhist temple, an event that netted $140,000 for the
party. The DNC gave up $5,000 of that money after a Buddhist nun said someone
gave her $5,000 cash and asked her to write a $5,000 check to the party.
Qualified presidential candidates and political parties
receive money from the federal government for primary- and
general-election expenses, and national-party conventions. For the
general-election campaign, Bill Clinton and Bob Dole will each receive $61.82
million from the fund. Ross Perot will receive $29 million. In exchange, Dole
and Clinton cannot accept private contributions. Perot is permitted to seek
private funds up to the $61.82 million limit. All presidential candidates may
accept private donations during the primary season.
If the two major-party
candidates are restricted to spending $61.82 million each, why the $800 million
price tag for this year's election? The cost of primaries is one reason. But
there are also three major loopholes in the spending-limit rules.
Soft money .
Individuals and groups--including corporations and unions--can contribute
unlimited amounts to the parties for activities such as get-out-the-vote
efforts that do not directly endorse specific candidates. Without violating the
law, this money can be spent on highly partisan messages. In 1992, the
Republicans raised $52 million in soft money and the Democrats raised $37
million. In 1996, just through June, the Republicans collected $83.9 million
and the Democrats collected $70.3 million. Many companies and individuals give
soft money to both parties.
Under the
First Amendment, individuals and organizations can also spend unlimited amounts
on political advocacy , so long as a specific candidate is not endorsed.
A 1976 Supreme Court footnote listed the "magic words" that separate issue
advocacy from campaign advocacy. They include: "vote for" and "vote against."
As long as your ads do not include the magic words, you can spend as much as
you want on them. In 1996, the AFL-CIO plans to spend $35 million attacking the
Republican "Contract With America." Groups such as pro-term-limit organizations
and the Christian Action Network have also raised and spent millions on "issue"
ads, as have the political parties. It is often difficult to distinguish issue
ads from campaign ads.
The Supreme Court has held that the First
Amendment also protects independent expenditures . Individuals and
organizations can spend as much as they want on a candidate's behalf as long as
they don't coordinate their spending with the candidate. In 1992, PACs and
individuals spent more than $11 million on independent expenditures for
presidential and congressional candidates.
Last June, the Supreme Court
ruled that political parties (as well as PACs, interest groups, and
individuals) can make unlimited independent expenditures on behalf of
candidates. This decision produced an explosion of spending by political
parties, although it is not yet clear what constitutes an "independent"
expenditure. According to Common Cause, the political parties are spending
millions of dollars as "independent expenditures" on ads that were designed and
produced by the candidates' own campaign organizations.
Who gives?
Corporations and business PACs gave $242.2 million to candidates and political
parties in 1995 and the first half of 1996. Organized labor gave $35 million
during the same period (in addition to the $35 million spent by the AFL-CIO on
issue advocacy). The largest single contributor to Democrats is the American
Trial Lawyers Association, which gave $1,747,725. The Republican champion is
Philip Morris, which gave $2,131,955.
