Campaign Finance: What the U.S. Can Learn

Isa is a sophomore in Columbia College majoring in economics. She is from Alpharetta, Georgia and serves as a Research Fellow for ColumbiaVotes. Isa loves to write informative and accessible articles about relevant and timely issues including civic engagement and international politics.

Until 1828, no federal candidate had openly campaigned for office in the United States. Andrew Jackson began this now intrinsic part of American democracy when he accused John Quincy Adams of winning the presidency in 1824 by crafting a “corrupt bargain” with House Speaker Henry Clay. Since then, campaigning for office in the U.S. has evolved from catchy slogans and political cartoons to a multi-billion dollar endeavor that can last multiple years. By 1905, Theodore Roosevelt recognized the need for campaign finance reform and called for regulatory legislation, but only largely symbolic and unenforceable statutes were passed by Congress until the establishment of the Federal Election Commission (FEC) in 1974. Since then, the focus on campaign finance in the U.S.has only grown as the amount of money involved in elections has dramatically increased. Just in the twenty-first century, the cost of federal elections (presidential and congressional) skyrocketed from $3.08 billion in 2000 to $14.4 billion in 2020. Comparing U.S. campaign finance regulations with others internationally, namely Germany, raises questions about how valuable campaign finance regulations are to democracy.

As a parliamentary republic, Germany’s elections operate under a two-vote system, meaning that citizens vote once for their chosen representative and again for a political party. Once elected, these representatives make up the Bundestag, Germany’s parliament, the body which then selects the federal chancellor.  When comparing campaign finance systems, one of the most critical factors involved is the time period over which the money is spent, or the campaign cycle. Both the U.S. and Germany have no legal limits on the length of federal campaigns, but Germany’s are typically six weeks with no primaries and are subjected to regulations restricting the time period during which candidates are permitted to run political advertisements. The U.S.’s campaigning cycles have gotten longer in the twenty-first century, with the 2020 presidential campaign officially lasting 597 days. Germany’s campaigns are run by political parties, and their total average expenses over an election season (for all of their candidates) are between €20 million and €30 million (about 24 to 37 million USD). U.S. campaigns, contrarily, are predominantly run by teams assembled by each individual candidate and there is no limit on total expenditures; during the 2020 election cycle, President Biden’s campaign spent over $1 billion and Donald Trump’s campaign spent just over $800 million. Furthermore, the restrictions on German campaigns’ advertising cause an avoidance from negative campaigning, unlike in the U.S. where political ads are notoriously negative and unrestricted. A 1992 Stanford University study concluded that negative campaigning can disenchant voters with the political process and ultimately suppress voter turnout; and in fact, Germany’s 2013 federal election turnout was about 71.5% compared to the U.S.’s 2012 federal election turnout of 57.5%.

So, where does all of the money come from? In Germany, where political parties rather than individual candidates are the main actors behind campaigns, all political parties that receive at least 0.5% of the vote in the latest national election are allocated government funds up to €133 million. Laws concerning private funding are more ambiguous and there is no limit on how much individuals and corporations can contribute, but donations from charitable organizations, trade unions, and other professional organizations are prohibited. Furthermore, individual candidates are technically allowed to receive direct donations, but they are then expected to hand them over to the party.  If a donor provides more than €10,000 in one year, they must be named in the party’s annual financial statement. In the U.S., the FEC has imposed contribution limits for individuals, corporations, and committees that wish to donate to federal candidates. However, Super PACs are a distinctive type of committee that may raise unlimited sums of money from individuals, corporations, unions, or associations, and then spend unlimited amounts to advocate for or against political candidates, but they are not allowed to work directly with those candidates. The rise of Super PACs in the last decade has dramatically increased the amount of money spent in U.S. federal election cycles and has undoubtedly challenged the state of current campaign finance regulation. 

If there were to be more regulation on campaign expenditures, how would that affect the political landscape and process as it stands? A 2017 paper from the National Bureau of Economic Research examines this question in the context of a case study on Brazil. In 2015, the Brazilian Supreme Court banned corporate donations to political campaigns after the “Lava Jato” corruption scandal, which became one of the largest in the world. Congress passed legislation to impose campaign spending limits in municipalities in future local elections and dictated that candidates could only receive contributions from political parties, citizens, or self-financing. Additionally, all candidates must deposit contributions they receive into a single bank account, will all transactions reported to the Electoral Court and then made public record. Upon examining the effects of these reforms, the authors found that those municipalities subjected to lower spending limits have about a 9 percent increase in the size of the candidate pool with an 11% decrease in incumbency reelection rates. and a lower rate of incumbency reelection. 

According to the results of Brazil’s campaign finance regulation reforms, expenditure limits and the required transparency of candidates when it comes to donors serve to promote democratic ideals of more less wealthy candidates running for office, and evens the playing field between those new candidates and incumbents. Would imposing reforms of a similar nature have the same effect in the U.S.? Looking at Germany, where political parties run their candidates’ campaigns and regulate their finances, the answer seems to be yes. Stricter regulations and restrictions on political advertisements encourage a milder political climate and more transparency between candidates and citizens.