Follow the Money (Part 1: How We Got Here)

Campaign finance is forever changed. Ever since an underdog candidate from Vermont turned his back on big donors who wouldn’t have supported him anyway and proved you could raise even more in small donations from random citizens.

Though he didn’t get the nomination, within two years, he was the beacon Democrats followed while winning back the House in a resounding midterm victory. As you suspected, we’re talking about Howard Dean.

It looks like we’re most of the way through a transition from campaign finance that traditionally relied on larger donors and/or public funding to a model that uses big money donors as an accessory, not a measure of viability, while completely eschewing the public option. Here’s how we got here:

1972: Richard Nixon raises a ton of money for his re-election campaign. Much of it legally, often using now outlawed methods. Some a bit shadily. There were no limits on individual or corporate contributions. The campaign found ways to keep many of these donations private.

Then Watergate happened. During the course of investigations, many of those funding machinations were uncovered. It wasn’t a good look. Aggrieved Democrats and Republicans looking for cleansing acted quickly. Back in 1971, Congress passed a Trojan Horse. The Federal Election Campaign Act.

Originally intended mostly for transparency, it was quickly amended in 1974 to include individual contribution limits and strict disclosure requirements. A mechanism for public funding of general elections and matching funds for primaries was created, to take effect in 1976.

The short-term impact was to greatly level the playing field. Something Jimmy Carter would take immediate advantage of.

1976: With higher profile candidates still learning the new rules and dealing with the constraints, Carter was able to build an underdog campaign that ultimately captured the presidency.

Originated by conservative activist Richard Viguerie in the early 1960s, political direct mail made a big impact in the 1972 Democratic contest, propelling George McGovern past higher-profile favorites. He’d spent the previous couple years building his list. At the time, that was revolutionary.

In 1976 it worked for Ronald Reagan. He used direct mail and the newly available federal matching funds to keep his primary challenge to President Ford airborne. True, his plane was once grounded on the tarmac as he awaited funds to clear the bank, but he took the contest all the way to the convention, despite Ford having the establishment donors locked up.

1980: John Connally spends $11 million (a ton of money at the time) to win a single GOP primary delegate. This was the first big dollar primary candidate implosion. He’d even out-raised front-runner Ronald Reagan. Candidates like the 1980 version of Reagan who combine some big donors with more broad-based contributions have consistently defeated those with profiles like Connally ever since.

1984-1996: Candidates regularly worked within the matching funds for primaries, public funding of general elections framework. PACs helped, but total amount of money spent in primary contests was limited by current standards.

Money still mattered. Candidates still dialed for dollars. Dinners with costly per plate fees were held. But Connally’s defeat was still a recent memory. Candidates realized it was more important to win early primaries than win the pre-primary funding contest.

In 1996, Senator Phil Gramm, like Connally a Texan, provided a bookend reminder. Despite raising the most money in 1995, he collected a mere 9% of Iowa Caucus votes, and exited the campaign two days later.

2000: The beginning of more expensive campaigns. George W. Bush leaned heavily into the decades of connections his family had built. He raised enough money to shut down all of his mainstream Republican competitors except John McCain. The third Texan since 1980 to win the money war. The first to translate it into electoral success.

Al Gore was able to do similarly on the Democratic side, using the fundraising architecture built during the Clinton years. Both candidates took heavy advantage of PACs/Super PACs.

They were able to ignore the spending restrictions for primary season matching funds, but did take public money for their fall campaigns. The Republican and Democratic parties were able to add significantly to general election spending.

This increase, combined with consistently more expensive congressional and gubernatorial campaigns, led to the next round of legislation. In 2002, McCain-Feingold passed, which put limits on how outside funds could be used.

The genie was already out of the bottle. The barn door was closed after the horse was a mile down the road. Spending was on the way up. It hasn’t abated since. Not every presidential campaign sets a record, but overall political spending, even adjusted for inflation, is much higher than it was in 2000.

2004: Veteran political consultant Joe Trippi and candidate Howard Dean decide to attempt raising money on the internet. In 2000, voters were still getting used to using their credit card on the World Wide Web to buy books. By the spring of 2003, the technology, and more importantly comfort level, was in place.

It’s not like he was the first to inspire small donors. His trail leads back through Reagan, McGovern, and originally Barry Goldwater, as he took an outside approach to the 1964 GOP nomination. The immediacy of the internet had an exponential effect.

Dean could receive the money quicker, and track it better, using a smaller team. Direct mail was always expensive. By the 2000s it was much less effective. Over-saturation. Internet fundraising was fresh. He couldn’t use Facebook for outreach—it didn’t exist yet—but the novelty, combined with Dean’s strong opposition to an Iraq War that was proving more troublesome than advertised, brought dollars in quickly.

After his campaign imploded, Dean won the DNC Chair position as a consolation prize. Using the techniques he’d pioneered in 2003, and pursuing a 50 state strategy to win the House, Democrats took control of both branches of Congress in 2006.

Though the Trump campaign used Facebook and other social media more effectively than any previous campaign (whether or not you count Russian assistance), the Democrats are still more effective overall at raising money online.

Part of this is having younger voters. Most of this is having multiple generations of campaign operatives who are schooled in the most effective methods. It all traces back to Dean and Trippi.

2008: While Hillary Clinton concentrates on larger donors, Barack Obama repeats Dean’s ability to raise money from random individuals online. However, Obama also competed with Clinton for the large donors and bundlers.

As the campaign progressed into primary season, Clinton’s lack of small contributors limited her ability to keep up with Obama. Her supporters were maxed out, while his intake increased with each electoral success.

Hillary would learn to budget her resources more carefully next time, and at least make an attempt to appeal to smaller donors. Obama’s success made the Dean approach a standard part of a successful candidate’s tool box.

Meanwhile, on the Republican side, John McCain became the first candidate in the modern era to go broke and still get nominated. As the presumptive front-runner, his campaign strategists planned a large, expensive effort. By summer 2007, the well ran dry.

He quickly pivoted to an updated version of his 2000 campaign, focused on New Hampshire, spent very little money, and climbed back in to contention. As he began winning in 2008, more money arrived. However, McCain never developed the powerful funding operation Obama had.

For the fall campaign, Obama became the first candidate to opt out of the public funding option, as he knew he could raise and spend far more than the federal grant would allow. McCain is the last major party nominee to accept the grant.

2012: Between Dean and Sanders, another candidate appeared out of the mist, riding a wave of small contributions. Ron Paul. First in 2008 and again in 2012, he managed to bring in more money than all but the leading contenders. This allowed him to stay in the primary campaigns after it became obvious he wouldn’t win the nomination. Sanders will have this capability in 2020 if he so chooses.

For the other Republicans, the Citizens United case, decided by the Supreme Court in 2010, gave them an opening to rely more heavily on outside money. Many candidates were limited in their ability to raise small donor funds like Dean, Obama, and Paul had.

As an example, a PAC supporting Newt Gingrich received $10 million between Sheldon Adelson and his wife in the first week of 2012. These funds were immediately used to buy advertising for the South Carolina primary, which he won. For all of 2011, Gingrich received about $13 million in regular campaign financing.

If you’d asked an observer 7 years ago, they’d have told you outside money was the future of presidential politics, with small direct donors only meaningful for extreme outsiders and generational candidates like Obama. Even he raised more from outside sources than smaller individuals in his 2012 re-election campaign.

2016: Eight years prior, Obama relied on a combination of direct small contributions and larger donors to match and then surpass Clinton’s fundraising capabilities. This time, Bernie Sanders matched her while relying only on small donors.

Not all candidates are capable of getting millions of voters to open their wallets. But he proved it’s possible to compete while completely ignoring traditional funding sources. No bundlers, no large donors, no PACs.

Despite his self-professed wealth, Donald Trump spent comparatively little money to secure the GOP nomination. Mitt Romney gave his campaign $35 million in 2008. Trump did not contribute close to this amount. Eventually, he began receiving large amounts of individual donations, and got Super PAC money from a few very prominent donors.

Most of that money didn’t show up until he started winning primaries in 2016. For the first several months of his campaign, Trump sustained a leading position based almost entirely on free media. He regularly grabbed more screen time, particularly on the major cable news networks, than his competitors combined.

Elizabeth Warren is showing Sanders’ approach is replicable by some. Trump’s is likely sui generis. Even if others can’t follow him, he still upended the old rules. Jeb Bush raised almost $150 million between campaign and PAC money. It was a pebble in the ocean compared to the estimated $2 billion in free media Trump got.

Bush finished behind the more modestly funded John Kasich, Marco Rubio, and Ted Cruz as well. He faced many issues as a candidate beyond the nature of his funding. But being PAC-heavy, individual contributor-light, hurt his flexibility. PACs are best used to buy TV time, and those ads are far less effective than they were a few years ago.

The eventual volume of small individual contributions given to Trump, despite his billionaire status, showed which candidate had real grass roots support. The last several general elections have been won by the candidate who is receiving a larger share of their funding from small donors.

For 2020, no candidate will overlook the importance of small individual donors. While many Democrats are still up for using bundlers to harness maximum level donations, and some are still taking PAC money, the ground has shifted. Bernie Sanders is the model, not Hillary Clinton. Those who are using more traditional methods are doing so because they have to, not because they think it’s preferable.

Now that we’re up to date, when this series about money continues, we’ll look at how 2020 is already a departure from what we saw in 2016 and before. With debate requirements based on number of contributors, the size of the field, and the heavily front-loaded primary schedule, candidates are facing a unique series of obstacles. Who’s doing best? Who has room for improvement? Who needs to worry? We’ll find out soon.

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