Caps on Campaign Spending Firmly Entrench Incumbents

Do publicly financed campaigns help challengers against well-know incumbents?

Democrats have claimed so, but the main Democratic presidential candidates are running, not walking, away from public financing. Howard Dean, John Kerry, and Wesley Clark look certain to opt out of the system.

Their competitiveness against President Bush depends upon it.

Under the current rules presidential candidates who accept federal funds will be limited to spending $45 million in the 2004 primaries and $70 million in the general-election campaign. Federal matching funds were offered to presidential candidates in exchange for them accepting these spending limits.

Democratic candidates, who must fight each other for their party's nomination, will likely reach their primary spending limit by March. Candidates take public financing will then be banned from spending any more money on their campaigns until the August nominating convention.

Bush, who faces no opposition, can then use his "primary campaign" funds against whoever wins the Democrat nomination. Thus from March to August he can attack an opponent who has little or no money left to pay for a response. Elaine Kamarck, an advisor to both the previous Gore and Clinton campaigns, said that the Democratic nominee would be “insane to stay in the system.”

Democrats argue they are being forced to opt out of the public financing system because George Bush has opted out. Yet, even if Bush were to stay in the system, he would still have a big advantage. Most of the $45 million he would have been able to spend in the primary could be spent against the Democratic nominee once the Democrat had hit his primary spending limits. Republicans learned this the hard way in 1996, when Bill Clinton had this same advantage over Bob Dole, and Clinton had not opted out of the system.

The regulations entrench incumbents in other ways. For example, incumbents typically have a list of regular donors from many previous elections, and they can thus more easily raise small amounts from a large number donors.

Spending limits for a given election also help incumbents because their political positions are already well known (thanks in part to past campaign spending). A less-known challenger needs to spend a large amount simply to make up for that "name recognition" advantage -- so a "fair" limit on total spending actually helps the incumbent.

Think about it: Suppose it takes the unknown candidate $1 million simply to tell the voters his political views. In other words, if candidate spending is limited to $2 million, the better know candidate will effectively outspend him by two to one. In contrast, if the two candidates could each spend $5 million, the gap would be much narrower.

Yet, in one sense having so many candidates opt out of public financing probably couldn’t have come at a better time. The system is nearly bankrupt. Taxpayers have been refusing to check off the three dollar donation on their tax forms even though the donation costs them nothing.

In fact, popular tax programs such as Turbo Tax set the defaults in their programs to “no” simply because of overwhelming requests by their customers.

Supporters of public financing propose tinkering with the current spending limits and offering possibly three-for-one matching funds for small donations instead of current two-for-one ratio.

But the proposals do nothing to address the underlying problems and many would actually further entrench incumbents. For example, incumbents generally have a much easier time than challengers raising small donation from many donors.

The irony is that Democrats have taken so long to publicly acknowledge, if only implicitly, how campaign finance entrenches incumbents. Take Eugene McCarthy’s 1968 insurgent campaign that forced President Lyndon Johnson to drop his re-election bid. Few donors were willing to incur Johnson’s wrath and just five millionaires financed McCarthy’s campaign.

Similarly, George McGovern’s 1972 campaign would never have survived the primaries against better-known opponents without the large donations from Stuart Mott. Neither campaign would have been possible under the current rules.

Democrats may find it hard to square their rhetoric extolling public financing of campaigns with their actions. But actions speak louder than words and survival has a marvelous way of making the drawbacks of public financing clear.

One hopes that the Supreme Court, which is currently deciding the constitutionality of campaign finance laws, is watching.

*Lott, a resident scholar at the American Enterprise Institute, is the author of The Bias Against Guns (Regnery 2003).