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What is Campaign Finance?

By K. Kinsella
Updated Feb 23, 2024
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When politicians and public officials run for office they raise money to pay for their election effort, and the process of raising and spending election funds is known as campaign finance. Individuals and political organizations require money to run for government positions at the local level and on the national stage, and consequently campaign finance is a major issue at all levels of government. In most elections, candidates must pay a filing fee when they register their candidacy and in addition to covering this cost, candidates need money to promote their campaigns.

In many countries, campaign finance centers around funding provided by national or local governments that is made available to candidates regardless of their political ideology. This funding can take the form of direct cash contributions or indirect funding, such as providing access to free air time on national or local television stations. Advocates of public financing believe that it promotes equality and prevents the wealthy from dominating the election process. Critics of public campaign finance believe that existing government entities should not have a role in financing prospective candidates.

Election candidates in many countries rely heavily on private campaign finance. Candidates use telemarketers to solicit donations from sympathetic groups and political party members. Other tools for raising private donations include fundraising letters, emails and the establishment of Internet sites that are equipped to handle donations made with credit or debit cards. Private donations come not only from individuals but also from political organizations, labor unions, and businesses. During election campaigns, prominent election candidates hold fundraising rallies at which corporate donors and private individuals can learn more about the candidate's campaign pledges and make donations.

Laws in some countries enable candidates to accept a mixture of both public and private campaign finance contributions. This assures that small political parties will receive funds to pay for some marketing, advertising, and other basic election related costs. Prominent politicians and major political parties benefit from this system because private donors can freely contribute to the campaigns.

Critics of private donations argue that wealthy individuals and major corporations can unfairly influence elections by donating significant sums of money to particular candidates or individuals. Some people believe that private donations can lead to corruption because the recipient may feel the need to pass legislation favorable to the donor to guarantee the donor's continued support. Campaign finance reform describes the efforts by some individuals and political groups to restrict private donations at all levels of government. In the U.S., the 1971 Fair Election Campaign Act (FECA) required candidates to disclose their donors, and a subsequent amendment in 1974 restricted private donations.

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