Toward a Small Donor Democracy: The Past and Future of Incentive Programs for Small Political Contributions

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INTRODUCTION

Money is the lifeblood of electoral politics. A political campaign is almost never successful unless its resources are comparable to those of its opponents--and the most important of these resources is money. As Alexander Heard described it, political money "is a universal, transferable unit infinitely more flexible in its uses than the time, or ideas, or talent, or influence, or controlled votes that also constitute contributions to politics." (1)

Money has always been crucial to political success, but for modern campaigns it has taken on a singular, overriding importance. In the 2002 congressional elections, 94% of the candidates who raised the most money won their races. (2) Winners out-raised losers approximately four to one. (3) The overwhelming correlation between fundraising success and electoral victory exists even in primary elections, where the partisan makeup of the district does not give any candidate an inherent advantage. The biggest fundraisers won primary elections in 2002 more than 90% of the time. (4) Incumbency plays an important role in these statistics: 92.7% of House incumbents and 85.7% of Senate incumbents who ran in 2002 won reelection. (5) The high re-election rate of incumbents, however, is due in no small part to their ability to raise large sums of money; in 2002, the average incumbent out-raised his or her opponent by a ratio of 4.5-to-1. (6)

The primacy of television advertising as a modern campaign tactic has increased the importance of money. Federal candidates, parties, and political action committees ("PACs") spent more than $1 billion on television advertising in 2002. (7) More than any other factor, television spending has contributed to an "arms race" mentality within political campaigns, steadily escalating from election cycle to election cycle without regard to the ads' consequences for democracy. (8) Rather than being a testament to the value of free speech, the modern campaign practice of raising millions of dollars in contributions from the privately wealthy and spending most of them on a large number of short, repetitive television advertisements undermines the societal interest in open and informed debate that is protected by the First Amendment. (9)

Voters collectively decide who represents them in elected office. The nature of the voters' decision, however, is determined by innumerable smaller decisions that precede it. These decisions--such as which candidates decide to run in the first place, and which candidates receive the opportunity to communicate their messages effectively to the electorate--are heavily influenced by the flow of political money. (10) By essentially determining which candidates are able to make it onto a given primary or general election ballot, donors help to define the field of possibility in American politics.

Despite the importance of monetary participation to the viability of political campaigns, the current federal system of campaign finance regulation creates huge obstacles to the equal participation of grassroots candidates of all parties and ideologies and the small donors who might otherwise support them. The 2004 presidential campaign showed that, in an election perceived to be of great historical significance, campaigns' growing use of the Internet to reach out to small donors can result in large numbers of small contributions to political campaigns. (11) In most successful political campaigns for federal office, however, small donors play only a marginal role. (12) Although congressional election campaigns reported more than $1 billion in total receipts for the 2002 election cycle, (13) only 24% of the money raised from individuals came in contributions under $200, accounting for less than 14% of candidates' total receipts. (14) By contrast, 55.5% of the money raised from individuals came in contributions of $1000 or more. (15) These large contributions came from only approximately 202,245 donors--less than 0. …