Is the Small-Donor Revolution All It’s Made Out to Be?

Cross-posted from a Roll Call editorial. 

For the first time ever, presidential candidates have managed to turn small donors into their greatest funding source, sending signals that the small-donor revolution — a mere experiment by Howard Dean just four years ago — has officially arrived. In February 2008, according to a Campaign Finance Institute analysis of the latest official campaign receipts, Sen. Barack Obama (D-Ill.) raised 56 percent of his contributions in increments of $200 or less, while Sen. Hillary Rodham Clinton (D-N.Y.) raised 52 percent in similar amounts.

But this February was the first time the much-celebrated small donors of these campaigns exceeded the halfway mark in overall receipts. And looking further down the ballot, there is little sign that the small-donor revolution is taking root. In Congressional politics, the world of small donors is decidedly smaller.

February’s presidential numbers reveal some key, unrevolutionary trends. First, the gains were notably lopsided between the parties. While both Democrats in February raised a total of $30.5 million from these small donors, Republican candidates, overall, collected only $5.1 million from the same group. Arizona Sen. John McCain brought in a mere 20 percent from donors who gave $200 or less.

Second, large donors are still a significant part of the overall take. Even in February, CFI reported that donations of $1,000 or more were 22 percent, 25 percent and 67 percent of the Obama, Clinton and McCain campaigns’ contributions, respectively.

It also is too early to say whether the small-donor welcome mat will stay out very long. In January, CFI research shows that 46 percent of Obama’s $36 million and 35 percent of Clinton’s nearly $20 million came from contributors donating $200 or less. McCain raised 24 percent of his contributions ($2.6 million) from these small donors. Who’s to say February’s numbers weren’t just a spike in the enthusiasm surrounding Super Tuesday?

More critical, however, is whether this small-donor frenzy spills over into the hundreds of far less visible Congressional campaigns that lack the fanfare of national change. CFI reports that Democratic and Republican Senatorial candidates are collecting just 6 percent to 22 percent of their funds from small donors. In total, in 2007, donations of $200 or less were a mere 17 percent of all Senate contributions and 27 percent of House-raised funds.

Congressional incumbents, predictably, have the highest reliance on deep-pocketed donors. Pre- election-year fundraising comparisons reveal that incumbents in 2007 took in six to seven times more money from large donors (giving $1,000 or more) than from contributors in the $200 or less category.

And Congress is where concerns about the influence of money on politics should be most acute. Last session, Congressional ethics scandals sent two Members of Congress to jail for influence-peddling, and there have been three additional indictments of lawmakers thus far, as well as five Members who reportedly are still being investigated by law enforcement. In Alaska, state-level scandals made one of the most senior Members of the Senate, Ted Stevens (R), the target of a federal investigation. And it may not be over yet. Notorious super-lobbyist Jack Abramoff is, according to the latest press reports, still cooperating with investigators.

So, despite the rise of a small-donor democracy, contribution limits still very much matter and are likely to matter for some time to come. The soft-money ban in the Bipartisan Campaign Reform Act of 2002 deserves much of the credit: By prohibiting corporate and union contributions to political parties, BCRA pushed candidates to reach out more broadly for individual support.

Looking forward, both meaningful limits and transparency rules are important for the health of an exciting new wave of reforms — public funding systems — because they keep overall costs reasonable and inform the public about all of the players seeking to influence the outcome of elections.

Indeed, without a system of limits in place, it will be hard for publicly funded candidates to keep up with the spending of privately financed competitors. And a robust system of disclosure of independent expenditures enables public funding systems to release more public money when warranted by an influx of outsider money into a race. Limits and disclosure are critical complements to the public funding systems that have succeeded in Arizona and Maine.

Limits can be tailored to specifically value the significance of small donors by allowing innovative vehicles like small-donor political action committees. These special PACs collect contributions in more limited amounts from individual donors than PACs generally can, but they also can give more total money to each candidate than other types of PACs. In this way, small donors make a big splash without rules that could elevate the influence of the wealthy above other voters.

Future proposals will no doubt evolve in appreciation of the burgeoning growth and power of small donations. Certainly, the landscape of money in politics is being transformed in encouraging ways. The influx of small money is a great sign that politics is engaging voters, and it does improve the health of our democracy. But in all the thrill and excitement, we should not forget that contribution limits are playing an important role in making this revolution possible — and ensuring the voices of small donors aren’t drowned out by big money and special interests.