Campaign finance | Political participation | US government and civics | Khan Academy

Let's talk a little bit about money in elections in the United States and the various actors that might be involved. You, of course, at the center of the action, have the various campaigns for the candidates. Then you have the party committees that will try to influence the election; we'll talk about how in a little bit. You have individuals who, besides being voters, can also be donors. And then you have organizations; it could be corporations, it could be interest groups, it could be labor unions.

And then, last but not least, we have these two boxes where you see PAC one and PAC two. So the obvious question is, what is a PAC? Well, it stands for Political Action Committee, and they've been around for decades. A simple way to think about it is it’s a way to pool resources, which then can be donated to other parties to influence an election.

But how can the money actually flow? Well, as you can see, it can flow in many, many different ways. To help us understand this, I’m going to introduce some terminology that you might have heard before. There is hard money, and hard money is money that is actually regulated by the Federal Election Committee. There are caps in terms of how much people can donate to various parties. In general, any donation to a candidate's campaign is considered hard money.

So that would be hard money there coming from individuals. This would be hard money right over here coming from that PAC, which has pooled a bunch of money. This would be hard money right over here coming from that PAC to Donald Trump’s campaign. This would be hard money coming from the Democratic Party to Hillary Clinton’s campaign or from the Republican Party to Donald Trump’s campaign.

If there’s something called hard money, perhaps there’s also something called soft money, and you would be correct. There is something called soft money. A simple definition for soft money is it doesn't have the regulations that hard money does. An example of it would be, let's say, the Democratic Party here—some of the money that they spend.

So I’ll just draw some of the money they spend; this part right over here—or maybe some of the money that the Republican Party spends during the election. It's used for what’s sometimes known as party-building activities to get more people to join their party or to advertise about certain issues. As long as it’s done not in coordination with the candidates' campaigns, this is not going to have any limit.

So some of the money that goes from an individual to a party or some of the money that goes from a PAC to a party can also be considered soft money if, once again, it keeps separate from coordinating with a candidate’s actual campaign and is used for those party-building activities. Now, party building is a pretty broad definition, and soft money has been demonized a lot because people say, well, it’s just a way of getting around campaign finance regulations.

Because even though it might not be directly coordinated with a candidate's campaign, it can influence an election in a pretty significant way. Now, to further understand this diagram, you see these dotted lines between the corporations or the labor unions and these political action committees. What does that mean?

Well, a political action committee can be connected or sponsored by a corporation or a labor union, but it cannot receive funds directly from the treasury of that corporation or labor union. But the corporation can sponsor it; it can say, "Hey, this is associated with us," and if it’s a labor union, it can go to its membership and say, "Hey, I want you to donate to this PAC." If it’s a corporation, it can go to its management team and say, "Hey, let's all donate to this PAC personally," or it could go to its shareholders and say, "Hey, why don’t we all donate to this PAC?"

Because this PAC can donate money to the party or the candidate that might help influence the election in a way that might benefit us or benefit the corporation. Now, an attempt to limit soft money came in 2002 when you had the Bipartisan Campaign Reform Act of 2002, often known as McCain-Feingold, who are the two sponsors in the Senate.

Among other things, it tried to limit this soft money. After this act, even this party spending would have to be hard money; it would have to be subjected to the caps when they are raising that money. It also made clear that corporations and labor unions couldn’t participate in what's called electioneering activities, where they’re spending money on, say, issue-based ads with oftentimes the intent of influencing the election, especially in the run-up to the election.

So this was made explicitly illegal as well. But this gets challenged in 2010, where you have this major case, Citizens United versus the Federal Election Committee. Citizens United was an organization that was releasing a movie called "Hillary: The Movie" during the 2008 election, and this was a movie that was pretty negative on Hillary Clinton.

The argument of the government was that, "Hey, even though this looks like a movie, it’s really political advertising; it’s electioneering as we go into the run-up to an election." So Citizens United, which is a nonprofit corporation, should not be able to do this. But the Supreme Court ruled in Citizens United’s favor; they said as long as they are not coordinating with the actual candidates’ campaigns, they are allowed, based on the notion of free speech, to directly participate in electioneering in the run-up to an election.

To a large degree, the Citizens United ruling from 2010 really gutted the strength of the Bipartisan Campaign Reform Act of 2002. That act was trying to curtail soft money that for the most part was going through parties, but now, post-Citizens United, on both sides, folks started to say, "Gee, I could start an organization that pulls money, let’s call that a PAC, but I’m going to keep it independent; it’s not going to coordinate in any other way with the elections of the individual candidates."

And so this is often referred to technically as an Independent Expenditure PAC. And here, post-Citizens United, I can get unlimited funding from corporations or from individuals; that is not regulated in terms of spending caps. And now I can spend an unlimited amount of money on electioneering to try to influence the campaign.

Because of the power of these types of independent expenditure PACs, they have been termed Super PACs. Now the key difference between a Super PAC and a regular PAC is that the regular PACs that we talked about have limitations in terms of how much money people can donate to them. They actually even can’t take direct money from the treasuries of a corporation or a labor union.

They also had limitations in terms of how much they could donate to an individual campaign, but they could donate to a campaign. A Super PAC, on the other hand, can take unlimited amounts of funds from individuals, from other PACs, and it could actually take money from corporate treasuries themselves. And as long as they are independent of the candidates’ campaigns, they don’t coordinate with them; they can spend as much money as they would like.

So as always, it’s really interesting to think about what is going to be the eventual repercussions of Citizens United vs. FEC. We’ve already seen in the 2016 elections money approaching a billion dollars in terms of Super PAC money. What is the influence that has on democracy? But a lot of folks might immediately demonize the Super PAC and say, "Hey, money was already in politics, and this is just making it worse."

Where now you have corporations that are essentially being able to directly contribute large amounts of money. We’ve always had issues with foreign nationals contributing to our elections; we’ve always tried to prevent that. But a corporation can have ownership from around the world. Even if it’s a United States-based corporation, how do you prevent foreign interest from showing up through this money?

But on the other hand, I encourage you to read the Supreme Court's rulings because they had some very strong arguments in terms of a slippery slope. If you don’t allow Citizens United to publish a movie saying that it’s electioneering, at what point is something a political organization or a media organization?

And the Supreme Court found it very difficult to regulate Citizens United without going down a slippery slope where they would have to regulate a whole set of corporations and media. I’ll let you think about it, but these questions are quite interesting.