Q: I'm assuming this all got rolling, this idea of putting some kind of limit on contributions, during Watergate.
Alexander: The limits go back to 1940. They have been in federal law since then. But under the federal election campaign amendments of 1974, they were enacted with real teeth. There was a federal election commission to enforce the law, and there were other kinds of cultures which came into play in the 1970s, which had not existed prior.
Q: So, when Congress was reacting to something, what were they reacting to in '74?
Alexander: In part, to Watergate, although the Federal Election Campaign Act of 1971 predated Watergate.
[Some Nixon supporters] used corporate funds which were prohibited, and filtered them out into political contributions. In one very famous case, George Steinbrenner, who was chief executive officer of American Shipbuilding Company in Cleveland, paid extra money to employees to cover their political contributions. And not only $2,500 contributions that were received in extra pay, but $2,500 extra to cover the taxes that were involved on these individual salaries.
Q: Let me try to understand this. He said, I want everybody in this company to give to Richard Nixon's candidacy, give x amount of dollars, and I'll pay you back and I'll pay your taxes on it?
Alexander: That's right...When Congress looks at a scene like that, or looks at a scene where people, that was money in bags or something, or briefcases, some of it was in cash, and there's no certainty about the source of the money, but it's understood that some of the money came from corporate funds, and therefore was illegal. Because since 1907 there has been a federal prohibition of corporate contributions.
Q: So, one thing that came out of that was, 'Let's limit the amount of money that anybody can give to a Presidential campaign, or make it $1,000 tops.' Is that number still in place?
Alexander: That number is still in place.
Q: And it's never been adjusted for inflation?
Alexander: It has not been indexed, and it should have been. The reason is that if one counts a thousand dollar contribution today, considering the value of the dollar as of January 1, 1975, when that law went into effect, a $1,000 contribution today is worth about $300. And that accounts for some of the excess activity by candidates, the amounts of time that they spend. Because, in order to get $1,000 value, they have to raise three times as many contributions today as they did back in 1975 or '76.
Q: So, putting a thousand dollars as a cap, which made perfect sense in 1974, at this point means you turn these people who want to be in public office into scurrying rabbits.
Alexander: One of the things that the contribution limits have done, they have exchanged the big giver for the big solicitor. And prior to that introduction of contribution limits which were enforceable -- of course, an individual could give 25, 50 and $100,000 and that would be ample. Today there are networks of people who are able to raise contributions up to the maximum, in amounts of $1,000. Some people can have a fund-raiser at their home, and not everybody who comes will give $1,000 because they like the candidate. They may want to see the home, it may be a fabulous home to visit.
But the point is, there are networks of people, and what the contribution limits have done has put a premium on networking on lists. And the lists, of course, apply not just to individuals that meet fund-raisers, but also to direct mail specialists, also to political action committee managers, because they have lists of employees in the company who are in the union.
Q: So, the valuable fellow says, 'You need money and I've got 5,000 people that I know will give you $100?'
Alexander: Well, I at least know 5,000 people to whom I can ask for money. Maybe not all will give.
Q: So, the paladin of the Rolodex, he who has the Rolodex is more valuable now?
Alexander: Yes, he who has the Rolodex and has the network of friends is most able to raise big money in thousand dollar amounts.
But the same thing applies to selling tickets to a fundraising event, a thousand dollar-a-plate dinner, five hundred dollar-a-plate dinner, whatever the event. The point is, that the people who you will note who are the sponsors are the people that may have some business connections that may be helpful as well. They may not have 5,000 friends. But they may go to their creditors, they may go to their purchasers and others, suppliers and others.
Q: What has happened to the life of the candidate that needs a thousand dollars?
Alexander: The candidate today tends to spend a great deal of time raising money.
Q: Would that have been in 1945?
Alexander: Well, just because of the erosion of the value of the dollar that I mentioned, I think that maybe they're spending three times as much as they were twenty years ago, raising money.
But that's not the whole story, because in these twenty years there's also been an escalation of costs, political costs have risen. And so in that circumstance it's not just a question of raising maybe a million dollars, but maybe today two or three million dollars.
Q: So you know you've got to pay those TV people and those radio people to get heard, and you've got to get a lot of air time to get really heard, and you still have this thousand dollars. I mean, you are like a hamster running around, raising and raising, it seems like. Is that right?
Alexander: Well, there is a whole list of stories and some horror stories that can be told about the extent to which fundraising takes place, particularly within the Washington, DC area, what's called the Beltway, but elsewhere around the country as well.
And in Presidential campaigns, of course, this system is widely used to enable candidates to raise enough money in order to contest effectively. The important thing for candidates, from their point of view, is to have sufficient funds to tell their story. And, it's worth stating that commercials on television, for example, have to compete with all other kinds of advertising on television, and the purpose is to gain the viewer's attention. And sometimes in only thirty seconds, sometimes even fifteen seconds.
Q: But meanwhile you're stuck with these $1,000 limits.
Alexander: Today a campaign headquarters is a lot different than it was 30 or 50 years ago. The proverbial people, we used to say housewives, who went to the campaign headquarters to lick envelopes aren't needed anymore. Because today so much of the political campaigning for a major office is parceled out. A professional campaign manager is hired, professional pollsters are used, advertising people who know the ways in which to gain attention.
So there are a number of skills, computer experts, and with the complexity of the laws, now political lawyers and political accountants. And so all these skills are necessary in a major campaign. And in fact, in order for a campaign to be considered serious, there has to be sufficient money up front to hire some of these experts.
Q: Let's pretend that I'm a serious candidate for President and I want to be taken seriously. I'm going to appoint you as my fund-raiser. How much money would I need to get a serious shot at a nomination of a major political party? Just front money.
Alexander: I would say 15 to $20 million, plus matching funds.
Q: If I only could raise $3 million, would I just not be noticeable?
Alexander: Well, that's not the case. In 1991 and 1992, for example, Pat Buchanan spent about 5 or 6 million, but was certainly noticed as a contestant against the incumbent president, George Bush.
But you see, some campaigns, such as Buchanan, and maybe now Forbes, are utilized as crusading on issues and not necessarily with a view to getting nominated. And so one has to recognize that not all candidates necessarily deceive themselves into thinking that they're going to be the chosen one at the Democratic or Republican Convention.
Q: The original limits were $1,000 for individuals, and then there was another limit for political action committees, $5,000. Does this mean that if I'm a candidate I should concentrate more on the PAC money than on the individual money because I get a five-fold yield from the PAC money?
Alexander: In the case of Presidential campaigns, PACs are not big players. PACs are much larger players with respect to campaigns for Senate and House.
Q: In addition to making the candidate have to work harder for the dough, doesn't this system where they have to ask make them seem like they're offering something for money? It's just an undignified way to do it, it would seem to me.
Alexander: Well, it may be undignified, and some candidates berate the system and say that they need to spend too much time raising money and they don't like to ask for money.
But on the other hand, the United States has a tradition of volunteerism, in charities as well as in politics. Most of the money does come from the private sector, and so there are long histories of the ability of charities and politicians to raise money from the private sector. Money, in the political sense, is a scarce resource. It's hard to raise, but nevertheless is essential in order to enable campaigns to do the things that they think necessary in order to gain attention.
Q: Does it diminish the dignity of government? If I look at the US Senate, I see all these guys have traded their time and money for something, so I don't trust the whole lot of them.
Alexander: Well, for example, from 1972 until 1986, it was possible, if I made a political contribution, that I could take a tax credit for that. In other words, this was an example of the tax system being utilized on behalf of politics. But it was also dignifying the process of contributing in small amounts, by saying that giving to politics is somewhat similar to giving to a charity, and I can take a deduction or a credit for it.
But that law was repealed in 1986 and has not been on the books since. And so there is less government involvement in dignifying the act of contributing. But that was a conscious effort back in the seventies and eighties, to get people to contribute small amounts and get a tax benefit from it.
Q: Well, that's a technical answer to my question. I'm just asking for the gross standpoint. If you look at the US Senate, there are a hundred guys, and they've got a trillion dollars they got from somebody and you trust them to govern you honestly?
Alexander: The gross answer is that a lot of people perceive that the system is gross, if not corrupt. And therefore, it is true that a lot of these candidates are out there scrounging for dollars. Part of the reason is that money is a scarce resource, it's hard to raise, and therefore they need to spend more and more time raising it as costs escalate.
Q: Now, we have a whole other section of activity that seems unlimited. How come there aren't any limits in that zone, the so-called soft money zone?
Alexander: If you're referring to soft money, I don't call it a loophole, it was a conscious effort on the part of Congress to enable the political parties to participate in presidential campaigns. Soft money is now used for other purposes as well, but the initial purpose in the 1979 amendments, the Federal Election Campaign Act, were to give the parties a major role in the presidential campaign. Because after the Federal Election Campaign Act of 1974 --
Q: No limits at all?
Alexander: No limits at all. And in fact, until 1991, there was not even disclosure, there was some voluntary disclosure of the soft money that was raised by political parties. But until the Federal Election Committee in 1991 initiated the system of disclosure, we didn't even know for sure how much money was being raised and spent in this regard.
Q: Let's suppose, knowing that I can only raise $1,000 per person and $5,000 for the pack, let's suppose, instead of a dinner for me, Bob Dole, I have an inner core, the 'Republican National Get Out the Vote Committee' and I invite everybody I know to a $200,000-a-plate dinner. Can I do that?
Alexander: You can do that.
Alexander: You can do that.
Q: A million dollars a plate?
Alexander: No limit. But the purposes for which the money is being used ostensibly are good reasons. In other words, the purposes are to enable the parties to help register voters, to get out the vote on Election Day.
Q: Wait, what happened to the original purpose, which was we don't want people to give $500,000 to a campaign? And now, under this -- may I call it a ruse? -- under this I've got the $500,000 magically freed up for me.
Alexander: If that's the case, but the money is being used for purposes that are considered in some cases non-partisan, because they're used for registration, get out the vote activities. The money cannot be spent directly to say, Vote for Dole, Vote for Clinton. And the result is that money is filtered through the state party committees for purpose of registration, get out the vote primarily. And for those circumstances it is considered to be a good function of the party.
Now whether it's good for contributions to be made in such large sums is another question, and in that regard I would say that it's unfortunate that the parties have come to rely on such large contributions for these good purposes that they use the money.
Q: What proportion of a Presidential campaign is now in this sort of unlimited category?
Alexander: First of all, it's not in the pre-nomination period in which this soft money is used, but it's in the general election period, from the time the candidates are nominated in July and August, through November.
In 1992 the federal law set limits on the amounts that candidates could spend, roughly $55 million, and all that was taxpayer dollars in the public funding. Another $10 million that the national parties could spend on their behalf in coordinated expenditures. And then, from the time the candidates were known, that is when it was known that Bush would be re-nominated, it was known that Clinton would be nominated, both the major parties raised and spent something on the order of $20 million each.
So, out of $65 million you had another $20 million in soft money. And that may vary. In some years it may be $20 million, in some years it may be 30. It's about a quarter as much, again.
Q: So, a fourth of the money comes in without limit?
Alexander: Yes. And the bulk of the rest of the money comes from public money.
Q: Now, let me just give you a couple of other for instances. We've already had my dinner with the million, trillion dollars. Suppose I have a charity that I'm very interested in and people give money to my charity, perhaps only to get my attention and my favor later. Is that without limit?
Alexander: Absolutely. And Senator Dole has had a charity through the years for disabled people, and he himself is disabled, as you know. So this is one of his interests. And he has raised many millions of dollars over the years for that purpose.
But to throw that in with political contributions, either hard or soft money seems to me an exaggeration. And there are studies which begin to put together apples and oranges and bananas.
Q: I'm just asking as a matter of fact. Suppose I'm fascinated by economics, like Bill Clinton was just before he was inaugurated. So I hold a big conference called the Economic Summit. If someone contributes to that conference, can they contribute without campaign limit?
Alexander: That was during the transition period in 1992, and yes, unlimited contributions could have been made. But I think the Clinton people put limits on the amounts that any corporation could give. However, some of the people who were invited to attend that Summit were people who had contributed either directly to the Clinton campaign, or soft money for the Democratic National Committee.