arrowSection 3.1 - Campaign Finance

arrowSection 3.1.1 - Federal Law

This topic is monitored by Moritz Law Professor Edward B. Foley

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Kerry's Public Financing Problem

Can Kerry back out of public financing later if Bush declines public funds?

Senator Kerry says he will accept $75 million dollars in public funds once he is the official Democratic nominee after his acceptance speech on Thursday, July 29. This means that for the rest of the campaign, according to federal law, he is not entitled to spend any other money in support of his candidacy. This poses a big problem for Kerry since President Bush's reelection campaign is not similarly constrained until after the Republican convention, which ends on September 2, five weeks after the Democrats finish theirs. If this weren't bad enough, what if President Bush decides to forego public financing, relying on only private dollars for the remainder of the campaign? Would Kerry still be stuck with his original decision, or would he be entitled to renege on his deal? The law is unsettled on this point, and it is unclear whether the issue ultimately would be resolved by legal analysis or, instead, what would be acceptable to public opinion.

The Law

The Presidential Election Campaign Fund Act, adopted by Congress in 1974, provides presidential candidates during both the primary and general election campaigns with public funds in exchange for the obligation to use only those funds during the campaign. This "quid pro quo" was upheld by the U.S. Supreme Court as part of the landmark decision in Buckley v. Valeo, where the Court reasoned that "just as a candidate may voluntarily limit the size of the contributions he chooses to accept, he may decide to forgo private fundraising and accept public funding." 1  So far, all presidential candidates in the general election have accepted public financing under this regime, but both Bush and Kerry rejected public financing during the primaries (Kerry and Howard Dean being the first Democratic candidates ever to do so).

The Act specifically requires that candidates receiving public funds certify "under penalty of perjury" that they will not use any private monies during their campaign and that "no contributions to defray qualified campaign expenses have been or will be accepted by such candidates." 2  The Act also makes it unlawful for a candidate to "knowingly and willfully ... incur qualified campaign expenses in excess of the aggregate payments" or to "knowingly and willfully ... accept any contribution to defray qualified campaign expenses ... ." 3  Moreover, the Act provides that the punishment for such violations shall be a fine of up to $5,000 and imprisonment up to a year. 4 

For the 2004 Presidential election, a candidate that agrees to and qualifies for public financing is entitled to receive 74.62 million dollars. 5  The public funding becomes available to the candidate of a major party "beginning with the first day of September before the election, or, if earlier, with the date on which such major party at its national convention nominated its candidate for election to the office of President." 6 

The Act thus would appear to bar the situation in which a candidate initially accepts public financing but then decides subsequently to opt out of the system. Once having agreed to receive the public funds, it is a crime to knowingly receive any private funds for the campaign, or to spend more than the public funds available. Furthermore, it is plain that the authors of the Act contemplated the situation in which one presidential candidate would be operating within this public financing system, while another voluntarily has chosen to opt out of it. The Act's authors knew also that the candidates themselves would be well aware that their competitors could choose to opt out, even if they themselves opted in. Thus, it would seem difficult for Kerry supporters to suggest that the Act never contemplated the circumstance in which Kerry now finds himself.

Public Opinion

On the other hand, how is this law to be enforced? Suppose that five weeks after Kerry accepts and starts spending public funds, President Bush announces he is opting out of public financing for the general election. Suppose, then, that Kerry announces that he cannot – and will not – compete with one hand tied behind his back. In a major televised speech to the nation, Kerry announces that he "owes it to the American people that he wage a competitive campaign, so that citizens know the clear choice they face in November." He further states that he will pay back every penny that he received in public financing, so that going forward he will act just as if he never accepted public financing in the first place – just like President Bush is acting. "While I would have preferred that both of us play by the rules of public financing, and I initially took every step to do so, President Bush has refused to do so, and I'm not going to let him get away with an unfair advantage." It seems quite unlikely that the American people would tolerate Kerry being labeled a criminal, let alone going to prison for up to a year, for taking such a position.

Kerry's scheme of accepting the public funding and then opting out – even if it is technically against the law – shows the limits of enforcing the law in this context. This situation demonstrates that the presidential public financing program is suffering under severe strains, since its stringent enforcement unlikely would be acceptable to public opinion Ultimately, it appears that there are insufficient public funds available to make public financing attractive to the candidates. But if the public financing program does not provide enough funds to effectively run a presidential campaign, the program must be adjusted to better meet the needs of current candidates and the current political landscape.

Conclusion

President Bush gains a five week fiscal advantage the moment Senator Kerry is nominated by the Democratic Party. Because of the timing of the Democratic Party convention, Senator Kerry is forced to stretch his 75 million dollars five weeks longer than President Bush. In addition, Senator Kerry must attempt to predict whether President Bush will accept public funding. If Senator Kerry knew that the President was planning on opting out of the public funding, it is highly likely that the Senator would follow suit. At best, it seems as if the public financing system operates as a kind of insurance policy: candidates can rely on the receipt of $75 million and agree to limit themselves to this amount if their opponent does the same. But candidates can back out of this limitation when and if their opponents do so, so long as the candidate can raise more than this amount in the private sector. Still, a candidate might be cautious in adopting this "insurance policy" approach, as it is unclear how either the FEC or the public would respond. It is safe to say, however, that right now a candidate who has won either the Democratic or Republican nomination has much more to fear from the public than from the FEC.

Notes

1. Buckley v. Valeo, 424 U.S. 1, 57 (1976).

2. 26 U.S.C. § 9003 (b) (1)-(2) (2004).

3. 26 U.S.C. § 9012 (a)-(b) (2004).

4. Id.

5. Public Funding of Presidential Elections, available at http://www.fec.gov/pages/brochures/pubfund.shtml.

6. 26 U.S.C. § 9002 (12) (A) (2004).