By the 2000 election, big donors had learned to give large contributions through the “soft money” loophole, which permitted both parties to take donations in unlimited amounts. But in 2002, the Bipartisan Campaign Reform Act, also known as the McCain-Feingold law, banned soft money, blocking the ability of the superwealthy to make unlimited contributions. In the next two presidential election cycles, the percentage of campaign money coming from big donors was cut in half.
Although McCain-Feingold successfully checked the rise of the very biggest donors, it was not designed to boost small donors. On the contrary, it doubled the limits on contributions to candidates, making it easier for affluent donors to give in a middle range. The long-term decline in the share of campaign funding provided by small donors continued after the law went into effect.
But McCain-Feingold’s achievement in reducing the relative power of large donors appears to have been reversed by the Supreme Court’s Citizens United decision in 2010, which held that corporate and union expenditures on elections cannot be limited as long as the spending is independent of candidates. That ruling paved the way for the creation of super PACs, which can accept unlimited contributions for their political spending if money is not contributed to candidates.
Not surprisingly, the next two presidential election cycles saw a huge increase in the share of spending coming from the biggest donors, with a concurrent loss of share from small donors. Midterm elections show a similar pattern. The vast majority of the money from the biggest donors goes into super PACs, while a greater share of the contribution-limited funds raised directly by candidates and parties comes from donors of smaller amounts.
Despite a few highly visible candidates raising much of their money from small donors this year, the footprint of the large donor is getting bigger and bigger, while the share from small donors continues to shrink. Candidates will raise money where they can most easily find it. For the majority of candidates running for federal office, particularly those without access to the free media coverage that presidential candidates receive, that means going to big donors first, even in the internet age.
The biggest problem with big-donor dominance is not necessarily that those donors will choose the winners. Rather, it’s that donors who can provide large contributions are likely to have disproportionate influence over policy, protecting their own interests regardless of what’s good for the public. And candidates’ need to either be rich or attract rich donors acts as a barrier preventing regular people from running for office and representing their communities.
For better or worse, fundraising data from the last two decades show that changing the law can affect donor dynamics. Instituting new restrictions may reduce the influence of the biggest donors. And even more importantly, passing reforms that boost small donors, like public financing, can give candidates greater incentives to focus on fundraising from their non-wealthy constituents. While Congress has done nothing to change candidates’ fundraising incentives since 2002, there has been movement at the state and local level. In New York City, for instance, small donations are matched with public funds, so long as the candidate agrees to strict fundraising limits. The result has been transformative, leading to some of the highest rates of small-donor contributions in the country: Since 2001, small donors, aided by the public match, have provided $6 of every $10 in city council races.