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Policy Solution

Empowering Small Donors in Federal Elections

  • Adam Skaggs
  • Fred Wertheimer
Published: August 22, 2012

The break­throughs in small donor fundrais­ing that have occurred in pres­id­en­tial campaigns demon­strate the poten­tial that exists for greatly increas­ing the role of small contri­bu­tions in federal elec­tions by magni­fy­ing their import­ance with multiple match­ing funds. The future of campaign finance reform must include an effort to bolster the power of small donors by ampli­fy­ing their polit­ical voice. Congress can do that by adopt­ing a small donor empower­ment program for federal elec­tions. The report is the first to show how a small donor match­ing fund model — used success­fully in New York City, and else­where — could work for Congres­sional elec­tions.

Exec­ut­ive Summary

Our govern­ment is broken. Partisan grid­lock and armies of special interest lobby­ists prevent Congress from acting to solve the seri­ous prob­lems facing the nation. On the issues that matter most to Amer­ic­ans, Congress often does noth­ing. And when Congress does act, it is all too often on issues that favor narrow interest groups that funnel millions of dollars to elect our repres­ent­at­ives.

The surge of unlim­ited, often secret­ive spend­ing in the wake of Citizens United threatens to make this situ­ation even worse. Our money-drenched campaign finance system prevents Congress from work­ing in the public interest. Moreover, as history has shown, unlim­ited and secret money in polit­ics leads to scan­dal and corrup­tion.

At the same time, recent years have seen the begin­ning of a far more posit­ive trend: break­throughs in the rise of small donors in pres­id­en­tial elec­tions. Begin­ning a dozen years ago, and spurred on by Inter­net tools that make polit­ical giving easier, small donors began to play an import­ant role in some pres­id­en­tial campaigns. Candid­ates from John McCain in 2000 and Howard Dean and John Kerry in 2004 to Ron Paul and Barack Obama in 2008 were lifted by small donors.

But even as Obama raised unpre­ced­en­ted amounts of small dona­tions in 2008, he still was rais­ing substan­tial amounts in large gifts from tradi­tional sources.  And Members of Congress continue to raise funds the tradi­tional way, heav­ily from lobby­ists and PACs.

There can be no doubt that small donors — of both major parties, of all ideo­lo­gies, from all over the coun­try — can play a new, posit­ive role in our polit­ics. Citizens must be engaged as an altern­at­ive source of fund­ing to the role being played by influ­ence-seek­ing donors.

The break­throughs in small donor fundrais­ing that have occurred in pres­id­en­tial campaigns demon­strate the poten­tial that exists for greatly increas­ing the role of small contri­bu­tions in federal elec­tions by magni­fy­ing their import­ance with multiple match­ing funds. The future of campaign finance reform must include an effort to bolster the power of small donors by ampli­fy­ing their polit­ical voice. Congress can do that by adopt­ing a small donor empower­ment program for federal elec­tions.

A system in which small dona­tions to federal candid­ates are matched with public funds at a multiple ratio would increase the import­ance of small dona­tions and increase the incent­ive for a broader base of voters to parti­cip­ate in fund­ing elec­tions. Such a system could trans­form polit­ical candid­ates into agents of civic parti­cip­a­tion who focus on mobil­iz­ing their constitu­ents, instead of lining up special interest fundraisers.  Finan­cial involve­ment in elec­tions, even in small amounts, serves as a “gate­way” to other forms of engage­ment in the polit­ical process — like display­ing lawn signs, volun­teer­ing for campaigns, canvassing voters, and passing out campaign liter­at­ure — and stud­ies show that small donors are more likely to engage in this kind of parti­cip­a­tion.

The system would be strictly volun­tary: candid­ates could opt to parti­cip­ate — and thus to be eligible for public match­ing funds — in exchange for agree­ing to lower contri­bu­tion limits, limits on the use of their personal wealth, and new report­ing require­ments. Other candid­ates could choose to forgo public funds and continue to finance their campaigns in the tradi­tional manner.

The digital age we live in holds great prom­ise for magni­fy­ing the role and import­ance of small donors. Tech­no­lo­gical break­throughs in rais­ing and giving small dona­tions through the Inter­net and social media in combin­a­tion with a system of multiple match­ing funds for small contri­bu­tions could have a revolu­tion­ary impact in the way campaigns are financed in our coun­try.

While the trans­form­at­ive power of a small donor match­ing program would be profound, the design of such a system is compar­at­ively simple. The follow­ing compon­ents are derived from years of exper­i­ence with, and analysis of, public fund­ing systems — includ­ing the highly success­ful program developed in New York City. This proposal contem­plates a small donor match­ing program that would be avail­able for primary and general elec­tion campaigns, and would include the follow­ing elements as the core of a small donor empower­ment program to fix federal elec­tions:

  • A 5-to-1 match on in-state contri­bu­tions up to $250. Donors could give larger contri­bu­tions, but only the first $250 would be matched. A $100 dona­tion would yield an addi­tional $500 in match­ing funds; a $250 dona­tion would yield an addi­tional $1,250 in match­ing funds.
  • Redu­cing contri­bu­tion limits by half for parti­cip­at­ing candid­ates. The exist­ing limit of $2,500 per indi­vidual contrib­utor (per elec­tion) would continue to apply to candid­ates who chose not to parti­cip­ate in the small donor match­ing program. For candid­ates who did parti­cip­ate, the maximum indi­vidual contri­bu­tion would be reduced by 50 percent, to $1,250 per elec­tion.
  • A cap on public funds avail­able per race — $2 million for a House candid­ate and $10 million for a Senate candid­ate — but no expendit­ure limits for candid­ates. Spend­ing limits are not viable in the post Citizens United world of outside spend­ing groups. Subject to the cap, the amount of public funds a candid­ate received would depend on the number of small dona­tions the candid­ate raised. Even after receiv­ing the maximum public funds, candid­ates would be able to raise (and spend) addi­tional funds privately — subject to the contri­bu­tion limits applic­able to parti­cip­at­ing candid­ates.
  • A qual­i­fy­ing threshold to ensure that public funds were not disbursed to uncom­pet­it­ive or marginal candid­ates. Before becom­ing eligible for public funds, House candid­ates would need to raise $40,000 from at least 400 donors, and Senate candid­ates would need to raise the same amounts times the number of congres­sional districts in their states. These contri­bu­tions would need to be in amounts of $250 or less per donor from in-state resid­ents.
  • Unlim­ited coordin­ated party expendit­ures in support of candid­ates, but only from funds the parties raised from contri­bu­tions limited to no more than $1,250 per donor per year. This would strengthen the abil­ity to respond to outside spend­ing groups.
  • Effect­ive disclos­ure and enforce­ment to ensure the program was effect­ively and effi­ciently admin­istered, and to ensure that the program is not defrauded.
  • An adequate and reli­able fund­ing stream to ensure suffi­cient match­ing funds and guar­an­tee that the program remains solvent.