Doing the Math on McCutcheon

In studying the Supreme Court’s decision in McCutcheon v. FEC over the last few days, I found myself struggling to comprehend exactly what it means for our campaign finance system. The basics seemed straightforward at first: no more aggregate limits on donations to candidates and party committees. Before the decision, aggregate donations to candidates were capped at $48,600 per two-year election cycle, and $74,600 to parties and PACs. The limit on donating to an individual candidate is $2,600 per election or primary, or $5,200 per two-year election cycle (assuming the candidate runs in a primary). So a donor wishing to contribute the maximum amount to more than nine candidates could not, because the tenth would make a combined $52,000, which is over the aggregate limit. Now, with the abolition of that limit, such a donor could contribute to every single federal candidate in the nation.

I figured as bad as that sounds, at least the McCutcheon decision leaves the individual limits intact. The amount of money flowing from a donor to a candidate is still capped at $5,200 per two-year election cycle. So the most a winner might feel indebted to one of his direct donors would be a few thousand dollars. Right?

Well, no. Actually, it’s not quite that simple.

In his dissenting opinion, Justice Stephen Breyer describes a scenario in which a donor writes a check for $3.6 million to a joint party committee dedicated to an individual candidate’s campaign (“Smith Victory Committee” for example), which nevertheless includes among its members all the other candidates from the same party. This joint committee distributes the donation to individual candidates and party committees, who then transfer money to candidate Smith. Breyer explains:

“The upshot is that Candidate Smith can receive at least $2.37 million and possibly the full $3.6 million contributed by Rich Donor to the Smith Victory Committee, even though the funds must first be divided up among the constituent units before they can be rerouted to Smith.”

WHAT!? It looked like Breyer just said that one rich guy can give somewhere between $2.37 million and $3.6 million to a single candidate. This really confused me. HOW IS THIS POSSIBLE?! What about the individual donation limits?

Well, I’ve looked into it. It’s basically a two-step shuffle. Here’s how the money flows:

mccutcheon-money-flow-no-blue-exp-1

The Smith Victory Committee collects all the donations the donor can legally make, which add up to $3,628,000, and divides them among party committees and candidates:

  • Up to $32,400 per primary or election for a party’s national committees. Each major party has three, so this adds up to $194,400 in a two-year election cycle.
  • Up to $10,000 per primary or election to each of the 50 state party committees, which equals $1 million.
  • Up to $2,600 per primary or election directly to candidates, or $5,200 per election cycle. There are 435 Representatives and 33-34 Senators running for office each election; assuming 468 elections, this adds up to $2,433,600 per cycle.

Now comes “part deux”, where these entities redirect some or all of this $3.6 million to the Smith campaign. Each party committee, the 50 state and the three national, can give $5,000 to each candidate per primary or election; this adds up to $530,000. In addition, each candidate can transfer up to $2,000 per primary or election to another candidate; with 468 candidates, this adds up to $1,872,000. The joint committee can thus direct at least $2,402,000 per election cycle to candidate Smith. [1]

Combined with this are independent expenditures from the party committees, whose maximum amount ranges from $46,600 to $93,100 for House Representative elections and from $93,100 to $2.68 million for Senate elections, depending on the state. This means at least $2.4 million and perhaps the entire $3.6 million donated by one wealthy donor may find its way to a single candidate. [2]

That’s without even mentioning PAC donations to candidates. A donor may give up to $10,000 to each PAC per two-year election cycle; and each PAC may give the same amount to any given candidate. There is no limit on the number of PACs that can be formed to support a given candidate. (There were 2,757 PACs active in the 2012 election.) Prior to the ruling, PAC donations were subject to the limit of $74,600 on party and committee donations. [3]

And then, we’ve got Super PACs, which allow unlimited anonymous donations to be spent independently of campaigns. That’s another can of worms entirely.

Some, including Chief Justice John Roberts, contend that the practices outlined by Justice Breyer are illegal. But given that campaign finance collectors are both highly motivated and very creative, and that presumably the four Supreme Court justices who joined the dissent consider the actions to be allowable, it’s hard to believe that campaigns won’t make use of such maneuvering. Besides that, can we really depend on the FEC to consistently enforce the law?

It’s also worth noting that everything described above presumes that a donor would give to a single party. But what if he made donations to multiple parties? Corporations have given to both sides, so it’s quite conceivable that a wealthy individual donor might do the same.

It seems clear that with these changes, we’re in a new world of campaign spending. At some point, media markets become saturated and the law of diminishing returns applies. We may soon find that we have reached that point. If so (and maybe even if not), these limits may have been relaxed to such a degree that they’ve lost all value.


Notes:

1. Justice Breyer, in using the figure $2.37 million, appears to have left out $30,000.

2. Breyer says the maximum could be up to $3.6 million. But it seems to me that since each candidate who received $5,200 can only transfer $4,000 to another candidate, about half a million ($1,200 * 468467) has to be channeled to other candidates, so the most that could go to one candidate is just over $3 million. But given such a byzantine system, it would be no surprise if I got it wrong.

3. See http://www.washingtonpost.com/wp-srv/special/politics/overall-contribution-limits/.

 

 

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3 Responses to Doing the Math on McCutcheon

  1. Hamilton Richards says:

    The Court’s decision was a nasty one, and Dan’s excellent explanation (love that diagram!) makes it easy to see just how nasty it is.

    In geometry, two points determine a line. The line determined by McCutcheon and Citizens United points to the abolition of all limits on political contributions. Until the Court’s rightward tilt is corrected, the fight to limit money in politics looks like a lost cause.

    But we mustn’t let that discourage us. Remember that the problem of money in politics is not the amount of money (the US spends as much on potato chips as on elections), it’s the money’s influence—the access that big money buys, and the politicians’ dependence on it to fund their re-election campaigns. If wealthy contributors can’t be restricted, an alternative is to outspend them. If politicians had an alternative source of campaign funds (as they do in Maine and Arizona) they could spend their time in dialog with their constituents (as they do in Maine and Arizona), rather than brown-nosing wealthy patrons.

    A movement to expand public funding of elections is described in Lawrence Lessig’s recent TED talk, which I highly recommend.

  2. Joanne Richards says:

    Republicans didn’t wait long! On April 9, the three national Republican campaign committees registered a new joint fundraising committee – The Republican Victory Fund – with the Federal Elections Committee. I am sure the democrats will be close behind!

  3. Joanne Richards says:

    The first “joint Party Committee” is ow open for business.

    The Republican Victory Fund was registered as a joint fundraising committee with the Federal Election Committee on April 9th by treasurer Keith Davis of the Huckaby Davis Lisker political accounting firm. The filing was made public on Friday.

    The joint fundraising committee participants are the Republican National Committee, the National Republican Senatorial Committee, and the National Republican Congressional Committee.

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