Cato Policy Analysis No. c November 1, 1980

Policy Analysis

The Federal Election Commission

by Mary Meehan

Mary Meehan is a free-lance writer based in Washington, D.C.

Executive Summary

Many observers of federal regulatory agencies say that the groups an agency is supposed to regulate often influence the agency so much that it becomes their captive. Generally this process is believed to take place over a period of decades. In the case of the Federal Election Commission (FEC), incumbent officeholders who are supposed to be regulated by the FEC actually created the commission. An incumbent president nominates new members of the FEC when any vacancy occurs, and the six seats are staggered in such a way that a two-term president can fill all of them. Incumbent senators pass on the presidential nominees, and incumbent members of both houses of Congress pass on the FEC budget. Either house may veto any regulation proposed by the commission. Together they may amend the basic law that the FEC administers; and they generally amend it at least once during each election cycle.

The FEC is thus an agency created and controlled directly by many of the persons it is supposed to regulate. Through those persons, it is effectively controlled by the Democratic and Republican parties. Minor-party candidates, independent candidates, and nonincumbent candidates have little or no voice in the FEC. It is as though two television networks had established the Federal Communications Commission and carefully excluded all other networks and all independent stations from any participation in that agency's activities.

The results of incumbent domination and major-party domination of the FEC should not surprise anyone who has studied the gradual takeover of other regulatory agencies by those they were supposedly regulating. The results of discrimination against insurgent candidates are clear: There are fewer alternatives for the voters because some potential candidates do not run and others cannot be heard. Debate on campaign issues is weaker and more superficial than would be the case if genuinely different ideologies were competing. The debate goes from A to C instead of A to Z.

As passed in 1971, the Federal Election Campaign Act provided strict disclosure requirements for congressional and presidential candidates. But Common Cause and some powerful incumbents were not satisfied with the 1971 law. They wanted more stringent regulations, and they also wanted public subsidies for candidates. They used the Watergate revelations to push through the 1974 amendments, which tightened the rules, established the FEC, and provided public subsidies for presidential candidates. Although the 1974 law was passed in the name of "reform," the hearings preceding it indicated that members of Congress had other priorities in mind. And the members clearly dominated the hearings: A Senate subcommittee that took testimony on election reform in the spring of 1973 heard from twenty-six persons; fourteen of them were incumbent U.S. senators. A House subcommittee held similar hearings in the fall, and twenty-eight persons testified or submitted written statements. Of the twenty-eight, fifteen were congressional incumbents.[1]

On the House side, Barber B. Conable, Jr., (R-N.Y.) told a House subcommittee: "I have heard a Congressman say, 'I'll vote for any election reform bill; it" bound to hurt my opponent more than me."'[2] A colleague, David R. Obey (D-Wis.), told the same group: "We should not be in the business of encouraging minority parties. The two-party system has been the basic strength of American democracy."[3]

The law passed by Congress in 1974 placed severe restrictions on nonincumbent candidates, minority parties, and, in fact, on all political activists. The 1974 law limited every individual donation to $1,000 per candidate per primary election and $1,000 per candidate per general election. It also limited each donor to total contributions of $25,000 per calendar year to all federal candidates. And it imposed spending limits on the candidates.4 The Supreme Court later found spending limits unconstitutional, except in the case of candidates who accept them as a condition of obtaining public subsidies.[5]

The law allowed each candidate to receive up to $5,000 per election from a political action committee. Such committees range from the AFL-CIO's Committee on Political Education (COPE) to the Business-Industry Political Action Committee (BIPAC) and to ideological groups such as the Council for a Livable World and the National Conservative Political Action Committee (NCPAC). As indicated below, these committees (generally called PACs) tend to give more heavily to incumbents than to challengers. The law allowed an individual to donate up to $25,000 per year (later reduced to $20,000) to the national committee of a political party. An independent candidate was not allowed to receive a similar sum; nor was the committee of the statewide Liberal party of New York.

While supporters of public funding were unable to obtain subsidies for congressional candidates, they did obtain them for certain presidential candidates. For all practical purposes, the subsidies were limited to major party candidates, although in theory minor-party candidates could qualify under certain conditions. The law established a matching-fund program for presidential primary elections, based on a 20/$250/20 formula: A presidential candidate must find at least twenty people who will contribute at least $250 each to his campaign in each of at least twenty states. When he raises this "threshold" amount, the Federal Election Commission certifies him and the U.S. Treasury begins matching - dollar for dollar - each contribution of $250 or less. The government gave over $30 million in matching funds to Democratic and Republican primary candidates in 1980.[6]

General-election funding is available only to the presidential nominees of the Democratic and Republican parties. By 1980 a cost-of-living escalator clause had raised the grant to $29.4 million for each nominee. Theoretically, the presidential candidate of a minor party could qualify for a smaller sum. But the law defines a minor party as one whose candidate received at least 5 percent of the popular vote in the last election; by this definition, there are no minor parties in the United States. A major party is one whose presidential candidate in the last election received at least 25 percent of the vote. All other parties, including ones that have existed for fifty years or more, are defined as "new" parties; their candidates are not eligible for preelection funding.

The law provides postelection funding for a new-party presidential candidate who receives at least 5 percent of the popular vote. But, as noted above, no new-party candidate has done so since the law was passed. Whether an independent (nonparty) candidate could qualify for public funding was in doubt until September of 1980. At that time, the FEC declared that independent John B. Anderson would receive public funding if he obtained 5 percent of the popular vote in November and if he met the other technical requirements. But the commission based its decision partly on the fact that Anderson had qualified as a party candidate in a few states. One commissioner dissented, saying that the FEC had evaded the basic issue and had forced Anderson "to engage in the same fiction he utilized for ballot access in states where he was denied independent status."[7]

The law also provides public subsidies for the presidential nominating conventions of the two major parties. A cost-of-living escalator had raised the grant to $4.4 million for each convention by 1980. The parties must meet all convention expenses from the grants, except that they may also receive substantial in-kind contributions from the host cities. "Minor parties" would be eligible for smaller subsidies if there were any minor parties. What the law defines as "new parties" are not eligible for convention subsidies even if their presidential candidates should later receive at least 5 percent of the popular vote. Since independent candidates are nominated by petition rather than by convention, they appear to be ineligible for convention subsidies. Some day, however, an independent presidential candidate may stage a nominating convention in order to obtain both media coverage and a public subsidy.

The Federal Election Commission supervises the subsidy awards, as well as the disclosure provisions and contribution limits imposed by the law. In the case of candidates who receive public funding, it also enforces spending limits. The FEC has six voting members and two members ex officio. The latter are the secretary of the Senate and the clerk of the House, who have staff aides designated to act on their behalf. Of the six voting members, no more than three may be members of the same political party. In practice, this means that there are three Democrats and three Republicans.

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