The Unintended Consequences of Campaign Finance Reform

Posted in: Election Law

There appear to be three major prongs to Donald Trump’s campaign to become our next president. First, he is long on personal attacks—Marco Rubio drinks too much water; Carly Fiorina doesn’t have the face of a president, Ben Carson (the internationally-renowned pediatric neurosurgeon) is only an “OK doctor,” and reminds him of a child molester, any Iowa voters who do not support him are “stupid.” And so it goes, on and on.

The second and third prongs are actually issues. First, he’s against immigration and many of the Mexican immigrants are “rapists.” Last, there is campaign finance.

People should vote for the billionaire because he’s a billionaire, he says repeatedly. “I am self-funding my campaign,” he says, “and therefore I will not be controlled by the donors, special interests, and lobbyists who have corrupted our politics and politicians for far too long.” Like his other signature issues, his assertions are not true.

First, Mr. Trump’s campaign is not self-financing. He is soliciting donors, not just relying on his personal wealth. As of last month, Trump received almost $4 million in what his campaign called “unsolicited donations.” Trump claims he does not solicit donations, but it’s hard to call them “unsolicited” when his campaign website posts a prominent “donate“ button. As the New York Times reported, “[Trump] is no longer self-financing his campaign.”

Perhaps Trump is unaware of what he claims on his own website. That’s possible if you believe Trump’s statement during the CNBC debate, when Becky Quick asked him about his comment that referred to Senator Rubio as Facebook founder Mark Zuckerberg’s “personal senator.” Trump’s response: “I never said that, I never said that.” He doubled down on his denial, “Somebody’s really doing some bad fact-checking,” he claimed. And then he repeated it again. Yet, he prominently says (on his own webpage), that “Mark Zuckerberg’s personal Senator, Marco Rubio, has a bill to triple H-1Bs that would decimate women and minorities.” His assertion is still there and he has not withdrawn his false assertions that Becky Quick has a bad fact-checker.

Perhaps Trump is blissfully ignorant of what he publishes on his campaign website. Or, perhaps Trump is just lying (a trait found in politicians and sharp businessmen). Mr. Trump’s “self-financing” claim is hypocritical—another trait not unusual among politicians and sharp businessmen.

However, there is more to his assertion that he is self-financing his campaign while soliciting donations. If one believes that campaign contributions corrupt, Trump’s method of financing corrupts more (not less), because the campaign contributions to his campaign go directly into his pocket. This problem is not hypocrisy but the specter of actual corruption—he has set up his campaign financing so that donations to his campaign go to him, personally. That’s much more serious. (This problem is in addition to any Super PAC that supports Trump.)

Let me explain. Federal election law allows the candidate to spend as much of his personal money on his own campaign as he wants, the “millionaire’s exception.” The theory of limiting campaign contributions is that the contributor might have special access to the candidate, which leads to the possibility of the appearance of corruption. However, one cannot corrupt himself, so Trump can spend as much as he wants on his campaign. However, Trump is not giving money to his campaign but lending it.

Trump argues that the people should vote for the billionaire because he won’t be beholden to campaign contributors. The Federal Election Commission’s report shows that in the most recent quarter, ending September 30, Trump raised $3.8 million, but spent only about $100,000 of his own money. When his campaign raises money from third parties, it pays off debts. A major creditor of Trump’s campaign is . . . Trump. Money goes from campaign contributors directly to Mr. Trump personally (with a brief visit to the official campaign treasury). I do not claim that Mr. Trump is corrupt, only that if he is correct that a politician accepting donations makes him obligated to the donors, Trump is talking about himself because he is collecting donations so his campaign can pay its debt to Trump.

What does Mr. Trump buy with his campaign funds? For one thing, he flies in his Trump-owned plane, a giant Boing 757, and that cost $100 million (before he remodeled it). He can spend his own money on that plane, but we know he only spent $100,000 of his own money last quarter. The Trump campaign pays Trump’s jet management company for the use of his plane. When the Trump Campaign pays for his airplane costs ($506,000 in the second quarter alone), Trump is, in effect, reimbursing himself for using his own plane. When someone gives money to the Trump Campaign, that money goes to the campaign bank account, where it rests a while, and then moves directly to Mr. Trump’s personal bank account or the bank account of one of his companies, to pay off some of the money that Trump lent to his own campaign.

Mr. Trump could calm concerns if he stopped lending money to his campaign while simultaneously claiming that he’s “self-financing” it. Or, he could refuse donations. After all, he insists that such donations are corrupting. Recall that when Megan Kelly asked him, in the first debate, what he got for his hundreds of thousands of dollars in political donations to Democrats, he said his political contributions made Clintons to go to his most recent wedding. “I’ll tell you what, with Hillary Clinton, I said, ‘Be at my wedding,’ and she came to my wedding. You know why? She had no choice, because I gave.” That’s a very expensive way to corral a wedding guest and it has nothing to do with political corruption. Unwittingly, Trump undercuts his whole theory of campaign funding. That’s what he got for his political contributions to others—he “forced” two people to come to his wedding.

In one of the recent debates, one of the questioners criticized Marco Rubio for cashing in part of his retirement assets in order to pay some bills. Donald Trump has echoed this charge, claiming that Rubio cannot handle his finances. (This argument dovetails nicely with Trump’s claim that the people should vote for him because he’s a billionaire. Rubio, it seems, is too poor to be president.

Actually, Rubio handles his finances the way many people do; he withdraws money from his accounts, pays taxes on the withdrawal, and then pays his expenses. While Trump has never personally declared bankruptcy, his companies have done so four times. That is another way to handle finances, although creditors prefer Rubio’s method, where the creditors get paid in full. Maybe Trump is the one who has trouble controlling his finances. His response is that he is proud of the bankruptcies. ““I used the law four times and made a tremendous thing.”