To be competitive, today's presidential candidates have to raise more than 100 million dollars. In fact, months before the two major parties select their nominees, together the candidates have already raised more than half a billion dollars. The first student reading below focuses on what has become a very popular fundraising device—"bundling"—and how it encourages favoritism and corruption. The second reading considers the need to reform the presidential public funding system and details one proposal now before Congress. Discussion questions, subjects for inquiry and suggested citizenship activities follow.
Teachers may find some of our other lessons useful in a study of presidential campaign fundraising.
Student Reading 1:
Bundling for money and power
Who was Norman Hsu? Officials in Hillary Clinton's presidential campaign knew little about him, except that he had become a big-time contributor. He had already far passed the threshold needed to become a "HillRaiser"— a contributor who had delivered at least $100,000 to the Clinton campaign. Hsu might have been named an EverestClimber, for he had bundled and delivered from 260 donors $850,000 of the $104,571,958 contributed to Clinton by the end of 2007.
By law, a campaign contribution from an individual cannot exceed $4,600. But an individual can influence, even pressure, any number of other people to deliver checks to a candidate's political campaign. Public Citizen, an organization that supports campaign finance reform, defines the practice of "bundling" as "the activity of fundraisers who pool a large number of campaign contributions from political action committees and individuals." Bundlers "are often corporate CEOs, lobbyists, hedge fund managers or independently wealthy people."
The bundler usually prefers not to hand over the checks personally. "There are disclosure requirements for bundling," says Public Citizen. "Most campaigns get around the disclosure provision by not having the bundler ever touch the checks."
The value of bundlers to presidential campaigns is obvious. One of their rewards is to be named a HillRaiser or, in the case of Senator John McCain's campaign, a member of the McCain 100s or 200s ($100,000 and $200,000). President Bush's 2000 and 2004 campaigns honored its Pioneers ($100,000) and Rangers ($200,000).
What motivates bundlers? According to Public Citizen, "Nearly 20 percent of all Bush bundlers received a government appointment, ranging from ambassadorships to cabinet posts. The electric utility industry, a major source of bundled contributions, was allowed by Bush to avoid upgrading their equipment to meet environmental standards. The pharmaceutical industry, yet another major source of bundling for Bush, received a boon from the 2003 drug prescription drug act that prohibited any price controls on drugs." (www.citizen.org)
But Norman Hsu, unlike almost every other bundler, did not seem to want anything but access to major politicians and officeholders. He wanted to appear in photo ops with Clinton, who was happy to accommodate him. He wanted and got invitations to high-level parties, where he could rub elbows with important people and seem important himself. He hit up friends and associates for money to sponsor a $1 million Clinton party. This ready access to power gave him clout in his business affairs.
The mystery behind Hsu unraveled last year, when some of his non-bundling activities became public. He had, for instance, raised more than $1 million from investors in a latex glove venture in the early 1990s. There was no evidence, though, that he had ever bought or sold latex gloves. Instead, he was running a "Ponzi scheme," a term named for its 1920s creator that involves using money collected from later investors to provide dividends to earlier ones. Hsu's plan was discovered, he was indicted for grand theft, then managed to disappear with much of the money.
Hsu turned up again in 2003 as a bundler for congressional campaigners and in 2004 for John Kerry, without being detected by law officials. His luck ran out last year, when he was finally caught, tried, and sentenced to three years in prison.
Bundlers for Barack Obama, John Edwards, Mitt Romney, and Rudy Giuliani have also been indicted for crimes ranging from mail fraud and federal corruption charges to drug trafficking and money laundering. Bundling and other big-time fundraising practices attract people whose interest in electing a candidate to serve the public good is outstripped by their interest in acquiring money and power to serve their own good.
Among the top fundraising groups are political action groups and "527"groups. 527s are named for the section of the tax code that describes such groups.
Under the circumstances, Hillary Clinton had no choice but to return the $850,000 Hsu had collected to the 260 people who had supplied the money. Her officials now promise criminal background checks on all bundlers. "So this is what presidential politics has come to in the free-wheeling era of the first billion-dollar campaign; the necessity to check whether donors have rap sheets." (Editorial, New York Times, 1/5/08)
Last year, the Obama campaign took in $101,429,497. When Obama's and Clinton's totals are added to those of the other presidential primary candidates, the figure is $504,064,529. Tens of millions more have been collected since the end of 2007. The presidential campaigns of the Republican and Democratic nominees have not even begun and the number of bundlers totals 2,529 already—so it is certain that this will indeed be the first billion-dollar campaign. (www.whitehouseforsale.org)
For discussion
1. What questions do students have about the reading? How might they be answered?
2. What are bundlers? What motivates them to bundle?
3. Is their anything legally, ethically, or morally wrong about bundling? In each case, why or why not?
4. Why do presidential candidates need so much money? If you don't know, how might you find out?
5. Are bundling and other private fundraising strategies harmful to democracy? If so, how? If not, why not?
Student Reading 2:
Fixing the public campaign funding system
The huge sum required for an American presidential campaign keeps rising. One reason is that campaigns are getting longer and longer. Another reason is the rising cost of TV commercials and other campaign expenses. Some argue that the tremendous flow of money into political campaigns is weakening American democracy by subjecting it to influence-peddling; conflicts of interest; favoritism to wealthy individuals and groups; and obvious criminal behavior.
"Corporations think they are getting their money's worth or they wouldn't be writing checks," said Warren Buffet, a billionaire investor and the second wealthiest man in America. The same could be said of unions and other special interest groups.
Without the tens of millions of dollars needed even to mount a primary campaign, a candidate cannot employ essential staff, run campaign events, and get media attention. However worthy the candidate's campaign may be, it will wither and die.
In 1976, lawmakers created a public funding system for presidential candidates. The goal of the legislation was to reduce the private money that was pouring into campaigns from the wealthy and from special interest groups—and to put an end to the corruption associated with this flow of money. To receive public funding, candidates were required to limit their primary election spending to $45 million and their general election spending to $75 million. Money from the federal government matched funds raised by the candidate.
For the next quarter century, this system worked reasonably well. Before the 2000 election only three wealthy candidates did not accept public financing. They had enough money of their own to spend as much as they liked. Since 2000, though, more and more candidates have opted out, because to stay competitive they felt they had to pump much more money into things like TV commercials and travel than the public funding system allowed. Candidates—including Senators McCain, Clinton, and Obama—have demonstrated that they can raise much more money through bundlers and others than they can get from the public system. So they go private.
Recognizing that candidates now need more money and that other changes need to be made in the public funding system, a group of lawmakers are trying to get Congress to pass the Presidential Funding Act of 2007. Its provisions include the following.
1. To qualify for public funds, a candidate must demonstrate public support by raising $25,000 in each of 20 states in amounts of no more than $200 per individual.
2. A candidate must commit to accepting public financing for the general election to receive public funds for the primary.
3. Federal matching funds would be increased to $150 million for primary elections and $100 million for general elections. These amounts would be increased further if a non-participant spent more.
4. The government would provide a 4-to-1 match of public funds for each private contribution of $200 or less—meaning a candidate would receive $1,000 for every $200 gift.
5. National parties would be prohibited from collecting special interest money to pay for their conventions.
6. Each campaign would have to disclose the names of all bundlers and the amounts raised.
7. Funding for the public system, which comes from voluntary check-off contributions individuals can make on their income tax form, would be increased. The amount of the check-off contribution would rise from $3 to $10. (There is no cost to the taxpayer, for the money is deducted from the income tax owed to the government.)
One of the act's supporters, Senator Russ Feingold (D, WI) said, "This legislation is a small but necessary investment to protect our democracy and preserve the integrity of our presidential elections. The American people do not want to see a return to the...days of unlimited spending on presidential elections and candidates entirely beholden to private donors."
For discussion
1. What questions do students have about the reading? How might they be answered?
2. What is the purpose of public financing for presidential campaigns?
3. Explain what Warren Buffet meant by "their money's worth"?
4. Why do reformers think that the system that has been in place since the 1970s need updating?
5. Consider closely each of the proposed changes in the public system. What questions do you have about each of the changes? What is the purpose of each?
6. What criticisms do you have about any of the proposed changes? What improvements can you suggest?
For inquiry
Students can learn a good deal about political campaign finance by investigating such subjects as the following either independently or in a small group. The first step might be tentatively deciding on one subject and then framing a question (to be approved by the teacher ) that can guide an inquiry. See "Thinking Is Questioning" on this website for methods to help students learn to ask good questions.
1. The Supreme Court ruling in Buckley v. Valeo, 1976
2. Requiring TV channels to grant free and low-cost air time to presidential candidates to cut candidates' need for money and to honor the Federal Communications Commission's rule that public airwaves "act in the public interest."
3. Political Action Committees (PACs) and financial support for candidates
4. 527 groups and financial support for candidates
5. Public financing for state elections
6. Public financing for congressional campaigns
7. Your own proposals for public presidential campaign funding
8. Presidential campaign functions and their expenses
For writing and citizenship
1. Have students draft well-developed letters and/or e-mails to their representative and senators on the Presidential Funding Act of 2007. They might express their support, opposition, or suggest amendments.
2. After students complete their drafts, divide them into groups of four to six to discuss each draft in response to such questions as the following: Is the letter clear? If not, how might the writer clarify it? Is the letter sufficiently detailed? If so, why? If not, how might it be developed further? Is the letter convincing? If so, in what ways? If not, how might it be improved? The object of the discussion is to help the writer, not to try to change his or her point of view.
3. Have students then select what it regards as the best letter in their group in terms
of clarity, detail and development, and persuasiveness.
4. These letters can then be read to the group for discussion by the class.
5. Have students prepare final copies of their letters for mailing.
This lesson was written for TeachableMoment.Org, a project of Morningside Center for Teaching Social Responsibility. We welcome your comments. Please email them to: lmcclure@morningsidecenter.org