McCutcheon and the Landscape of Political Expenditures

Last Wednesday's 5-4 Supreme Court ruling in McCutcheon v. Federal Election Commission, as you've no doubt, heard struck down the aggregate limits on campaign contributions imposed by the Bipartisan Campaign Reform Act (2002). What they did uphold was a cap on donations to individual candidates and parties. Under the new, Roberts-approved BCRA, an individual still cannot donate more than $2,600 to any one candidate per election, but the ruling in McCutcheon means that they can give $2,600 to each single candidate. Before, they could only donate a maximum of $123,200 for each election cycle.

Here we could go off on a discussion of the legal arguments at work, whether money has a corrupting influence on politics or how compelling the government's interest in preventing corruption really is: that's all for our partner group, Dartmouth Rootstrikers. We're not going to do that; what we're really interested in here is the empirical effect the ruling in McCutcheon will have on campaign spending this cycle. Numbers, if you will.

Last winter I conducted a study that was basically an overview of the campaign spending situation now and created a model to predict where it would be headed in the future. We found one result particularly interesting:

This graph depicts what could be crudely described as the "competitiveness" of an election--the margin by which the winner defeated the loser. What this demonstrates is a strong (R-squared = 0.6833), statistically significant negative correlation between the competitiveness of an election and the amount of money spent on it. Please note, however, that the study does not infer a specific causal relationship. There are two equally plausible theories for why this correlation should exist:

1. Competitive races attract more money--it's more likely your extra dollar will make a difference when your candidate is trailing by two points as opposed to twenty. You get more "bang for your buck", in essence.
2. The reverse: it's the money that makes a race more competitive. Extra spending by one candidate may put her on better footing with her opponent. 

Unfortunately, none of this tells us in practice what to expect in the future. In 2012 only 644 individuals donated the maximum amount of $123,200 permitted by the aggregate limit that was just struck down. Moreover, the Court maintained the last cap on campaign donations--the individual campaign contribution limit. It's still not legal to donate more than $2,600 to any one campaign or party committee. Although the amended BCRA technically allows an unlimited number of donations, in practice it's impossible simply because you would run out of campaigns to donate to. The individual cap and the fact that campaigns are not in infinite supply mean that there's still an effective cap on aggregate contributions--it's just a lot higher (the number cited most frequently during the oral arguments in McCutcheon was $3.6 million).

In theory, we'd only expect that only those 644 individuals will be impacted by McCutcheon. There are other factors, of course--possibly those who didn't donate $123,200 but something a bit lower might be induced to donate more, now that they know others are donating much more than $123,200. It's worth reminding that we do not believe that McCutcheon will have a negligible effect on campaign finance. In fact, we already have evidence of the power of a Supreme Court ruling to influence spending: outside spending exploded from the 2008 elections to the 2012 elections, held after the Citizens United v. Federal Election Commission (2010) decision that struck down the ban on third-party "electioneering communications" within sixty days of an election.

What we don't know, though, is the magnitude of the impact McCutcheon will have on spending. The last time donors were allowed to give unlimited amounts of money to campaigns was in the 1960s, before the Federal Election Campaign Act (1971) instituted the limits in BCRA. Since then, the nature of political campaigns has changed so dramatically--most notably with the rise of cable news and the Internet--that any data that exists from that period will at best be tangentially applicable to today. There's no data, no precedent, to predict what will happen as a result of McCutcheon. All we can safely say is that spending will go up--but then that's been happening every election.