The myth of small donor clout

Nick Nyhart

the nation

With few numbers left to crunch, most political dollar tabulators are estimating an overall cost of $4.2 billion for the 2004 election, well above the $3.2 billion for the 2000 cycle. A cursory glance through the analyses of commentators and academics would lead one to believe that a revolution in small-donor fundraising occurred, wresting election funding--and the clout in Washington that goes with it--from the grasp of fat-cat donors. If only that were true. While last year's election saw a notable increase in voter mobilization and turnout, and a rise in participation by small donors, the dirty little secret of American politics in 2004 was the increased importance of big-dollar check writers. Not only did a whopping pile of large "soft money" donations--contributions not regulated by federal law and meant to support general "party building" activities--find its way into the pockets of the 527s (named after a previously obscure crevice of the federal tax code), but the parties and their candidates actually intensified their dependence on the tiny sliver of Americans who wrote them $2,000 checks, the maximum allowed under the new law. Only in Arizona, Maine and North Carolina, where Clean Elections systems offered full public financing to candidates who qualified by raising a large number of $5 contributions, did small donors and average voters really take charge.

This is not to say that there weren't some important developments at the federal level. In 2003-04, the most notable successes in small-donor fundraising were the early Howard Dean campaign and the late John Kerry campaign. Dean's use of the Internet and direct mail to raise money allowed him to establish a base of small donors--people giving $200 or less--and run ahead of the traditionally funded Democratic field for much of 2003. Kerry, on the other hand, led the "big money primary" early. But once he became the presumptive nominee, the small money rolled in. Before March 1, 2004, Kerry raised 18 percent of his funds in small contributions; from March through August (when he formally became the Democratic nominee and ceased direct fundraising) the percentage increased to 40 percent.

Meanwhile, over at the Democratic National Committee, chairman Terry McAuliffe launched an unprecedented drive to win contributions from small donors--the kind the GOP had wooed successfully for years. His efforts caused such contributions to rise to new levels, and Democrats pulled ahead of their counterparts in this regard. But at the same time, McAuliffe deepened the party's dependence on large-dollar contributors. Under his tenure the party's heavy hitters nearly quadrupled their hard-money largesse and the small-donor slice of giving shrank from 53 percent to 46 percent of the total. Here are the hard facts: In 2000 small donors (those giving $200 or less) gave $58.8 million out of a total of $110.8 million raised from individuals by the DNC. In 2004 contributions from small donors amounted to $165.2 million out of $355.6 million. In other words, as the DNC sought to make up for the loss of soft-money giving to the national parties--which the Bipartisan Campaign Reform Act (BCRA) of 2002 banned--it was the larger donors giving as much as $2,000, not the smaller ones, who expanded their relative importance to the party.

While it may appear to some in Washington that a $2,000 check writer is not a "large donor," to the vast majority of Americans--who make less than $50,000 a year and who rarely, if ever, make even a modest campaign contribution--such donations are another confirmation that the US electoral system is dominated by the wealthy, whose interests are protected by elected officials. And unfortunately, McAuliffe's expanded reliance on big-dollar, hard-money contributors is more representative of the political money picture in the 2004 elections than is the grassroots fundraising by both the Dean and Kerry campaigns.

Bundlers' Paradise

Both major presidential candidates smashed existing private fundraising records by relying heavily on sophisticated bundling operations in addition to their activist base. Bush raised $293 million and Kerry $252 million; in 2000 Bush raised $126 million and Gore just $49 million. A relatively small group of money brokers--a thousand or so men and a few women known as Rangers and Pioneers on the Bush team and as vice-chairs and co-chairs on the Kerry team--worked hard to organize givers able to donate at the maximum level of $4,000 per couple. On the Republican side, these mega-donors may have garnered far fewer headlines than the Swift Boat Veterans, but their impact on government policy has been far more significant. For example, Bush's bundlers brought in nearly $25 million from the finance, insurance and real estate sector, which has profited mightily from his tax cuts and stands to make billions more if he succeeds in privatizing Social Security.

And while soft-money giving to the national parties is over, the 527 committees are indeed the new depository for unlimited donations; such groups raised and spent just over $500 million in the last election cycle, according to the Center for Public Integrity. That's almost five times what flowed through 527s in 2000 but about the same amount the soft-money donors gave to the parties in that cycle. While some of those mega-donors dropped out of the campaign finance game in the wake of BCRA's passage, it appears others stepped in to pick up the slack.

The relative unimportance of small contributors in federal campaigns is even more striking in Congressional races. For the first time, the cost of winning a House seat averaged more than a million dollars, while a Senate victory cost more than half again as much as it did in the last comparable cycle (two years previously). Again, the need for new money was met more by an expansion in large checks than by small dollars. For both House and Senate candidates, as well as the four Republican and Democratic party committees that support their campaigns, the share of money represented by donors of less than $200 declined.

At the state level, more records were broken--and not just in big-money bellwether states like California, where the spending on one State Assembly race hit $9.9 million and on another hit $9.5 million. In Indiana two competing gubernatorial candidates together spent more than $28 million. In Missouri three gubernatorial candidates spent a total of nearly $25.5 million, up significantly from the $19 million the governor's race cost four years before. Two candidates for the Indiana Statehouse each spent close to $1 million. As for the role of small contributions, Ed Bender, executive director of the Montana-based Institute on Money in State Politics, says, "With the preliminary data we have now, we're not seeing a surge of small donations in state legislative races compared to 2000."

The bottom line? While it's possible that a few candidates in high-profile national or state races will harness the small-donor potential demonstrated by Dean and Kerry, without more comprehensive reform than we have seen to date, the rising cost of campaigns will continue to insure that many good people avoid running for office, wealthy special interests continue to purchase special influence, many incumbents run essentially unchallenged and the principle of one-person, one-vote is further drained of meaning.

Some in Washington are now focused on trying to craft legislation that would force all spending in federal elections to be paid for with hard money, thus shutting down the unlimited giving to 527s. One problem with this is that there is no easy way to distinguish between legitimate independent political activity by established issue-based organizations (for example, NARAL or the NRA) and that of groups created specifically to influence one campaign (the Swift Boat Veterans or Texans for Truth). As partisans on both sides of the aisle continue to institutionalize their 527 operations, this problem will only worsen.

A Different Path in the States

But even if 527s were reined in, we'd still have an imbalanced system in which meetings in the salons of the rich and powerful matter more than those in the kitchens of average Americans. The good news is that a viable alternative exists: full public financing for candidates who abjure all private contributions apart from a large number of small, qualifying donations from voters in their district, as is the case in Maine, Arizona and North Carolina. Public dollar matches for small givers like the 4-to-1 system of matching contributions in New York City can accomplish many of the same goals.

In Maine a whopping 83 percent of the State Senate and 77 percent of the State House is now made up of legislators who ran "clean." In Arizona a total of forty-six candidates for the state legislature and all four successful candidates for corporation commission--which regulates powerful business interests--were elected running "clean." In both states, the numbers have gone up since 2002. And this past year North Carolina became the first state in the country to offer candidates for top judicial offices (Supreme Court and Court of Appeals) substantial public funding for their races. Both Supreme Court seats and two of the three state Court of Appeals seats up for election were won by candidates who ran with public financing.

The overall number of candidates in Maine's primaries was up 12 percent, giving voters many more choices. "There's a number of people who could not afford to have run had it not been for the Clean Election Act," Republican Robert Haggett, a publicly financed candidate for the State House, told the Maine Sunday Telegram last year. Democrat Richard Rhames said he could have run with private funding, but "whether I could run a so-called credible campaign is another thing, [because] my pocket is not that deep."

In Arizona the availability of Clean Elections funding has expanded opportunities for minority and women candidates, and it has expanded public participation in the funding process itself. An analysis by the Arizona Clean Elections Institute found that the pool of small donors who gave $5 qualifying contributions to gubernatorial candidates running in 2002 was far more diverse geographically, economically and ethnically than was the case for candidates relying on private contributions.

Next Steps

The road ahead for reformers in a conservative-dominated Washington will be difficult. Proposals to revitalize the Federal Election Commission, retool the out-of-date presidential public financing system and regulate 527 soft money will enjoy no easy ride in a Congress dominated by the likes of Bill Frist and Tom DeLay. That's because these party leaders, and their respective party caucuses, have an all-too-cozy arrangement with their many corporate sponsors, and this year they are moving rapidly to deliver on their donors' investments by enacting harsh changes in bankruptcy law, tough restrictions on the rights of injured parties to sue for redress, multibillion-dollar subsidies to the energy sector and a host of other special-interest tax giveaways. If anything, the greatest opportunity for reformers is to highlight the costs of the current system to average Americans rather than to try to pass severely compromised reforms--the most that is likely in this Big Money Congress.

However, state and local-level opportunities to implement new systems of publicly financed elections are increasing. In Portland, Oregon, the City Council recently passed a "clean" system for city offices. In Connecticut, where former Republican governor John Rowland was recently sentenced to jail time for a series of "pay to play" legal violations, a majority of lawmakers support a Clean Elections-style system. The state's new governor, Jodi Rell, eager to make the state's rash of political scandals a thing of the past, has indicated her support for a public financing solution for all state offices. In West Virginia a panel of state legislators recommended adoption of a pilot program of publicly financed elections for future legislative sessions. In Hawaii, Maryland, Minnesota and Montana state reformers are also making significant progress.

In New Jersey a pilot Clean Elections program covering a handful of state legislative districts takes effect this year. In New Mexico candidates for the state Public Regulation Commission will have the option of Clean Money financing for the coming cycle, and reformers there are trying to cover judicial elections next. Grassroots Internet giant and other powerful "e-groups" like Democracy for America have begun to make their presence felt in key public financing battles, and leading constituency organizations, from the Sierra Club to the NAACP to the Service Employees International Union, have backed the policy as well. Reformers are now considering a new possibility: that the larger coalitions forged through victories in smaller states could be duplicated in a larger state with more national impact, such as California or New York.

The problem of big money dominating politics will likely get worse in the next few years. But in the longer term, public financing victories outside the Beltway demonstrate the value and promise of reforms that put ordinary citizens in the driver's seat. While national politicians bid up the cost of winning office and come to depend more on elite dollars for their success, the Clean Elections systems that are spreading offer a sensible alternative and a critical contrast. The road to success in Washington travels through the states.