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Do We Know the Cost of Campaigns in the US?

Robin Kolodny Department of Political Science

Temple University Philadelphia, PA 19122 rkolodny@temple.edu

DRAFT—PLEASE DO NOT CITE WITHOUT PERMISSION

Paper prepared for presentation at the Annual Meeting of the American Political Science Association, Washington, DC, August 28-31, 2014

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It is common for analysts of American elections to cite figures reported by the Federal

Election Commission (FEC) or by the Center for Responsive Politics (whose numbers depend on

FEC data) about the cost of campaigns in the United States. There is widespread agreement,

especially in the popular press, that campaign costs continue to rise, and that the rise is exorbitant

– higher than the cost of inflation for instance. Further, since political money is thought to

corrupt the political system (Ansolabehere, Gerber, and Snyder Jr. 2001) the increasing amounts

of campaign money raised and spent indicates that corrupt influence by moneyed interests

continues to increase. This project asks whether conventional wisdom about the rising cost of

campaigns is true. The central hypothesis is that the true cost of campaigns either has not risen at

all, or has risen at a much lower rate of increase posited by conventional wisdom. If correct, the

findings would have significant implications for a host of political science research conclusions

that use campaign expenditures as an independent or dependent variable.

The hypothesis is based on a number of problems endemic to the current reporting of

campaign finance figures, especially dating back to 1974. These include:

1. Comparability of numbers presented by the FEC, reported in the media, and used by

scholars. Inflation over time is the first concern. – reported sums (by FEC) are given

in current, not constant dollars.

2. Lack of correction by population changes over time, that is not using per capita

measures to estimate the true escalation (if any) of campaign spending by voting age

population or voting eligible population.

3. Accounting Practices by the FEC – receipts of some funds are double counted,

especially in recent years. Donations to candidates are transferable by the candidate to

party committees, other candidates, and to their own committees for separate

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candidacies. While some transfers are clearly indicated in sub-total lines, the overall

totals of receipts of candidates, expenditures of candidates, receipts of committees

and expenditures of committees result in counting single donations as multiple

receipts.

Perhaps the feeling that campaign spending must be rising is not due to significant

increase in money coming into the political system, but rather a function of superior information

obtained through disclosure and better understanding of how some groups circumvent legal

barriers. However, present understanding does NOT mean that current money flows are higher

than those we understood less well in earlier times. My central concern is that the perception that

campaign costs are rising results in a "conventional wisdom" that overabundant campaign cash is

necessary condition for winning political office – that a cash arms race is the only path to

electoral success. While campaign cash is clearly associated with incumbency, Steen has proven

that self-financed candidates do not succeed in winning elections by spending money in lieu of

political experience (Steen 2006). The purpose of my analysis is to move past the primary

consideration of money as an indicator of candidate viability and return our focus to other

elements of successful candidacies such as an ability to ingratiate themselves with important

networks linked to voters (Cohen et al. 2008).

FEC Data Presentation and the Problem of Inflation

FEC numbers are released in nominal or current dollars without correction for inflation.

Doing so is literally the most accurate way to present the data, especially since the agency is

meant to release this data in a very timely manner. In addition, most consumers of FEC data are

looking for information in the heat of the election cycle, especially journalists and campaign

operatives. The agency is less concerned with the interests of scholars or longitudinal analysis.

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Using current dollars is especially problematic when the FEC releases summary tables

over a variety of cycles. The lay reader usually infers that the amounts from 1978 are “the same”

as those in 2012. Consequently, it is easy to conclude that campaign spending is at the highest

level ever, is soaring out of control, and credible campaigns demand more and more money, and

that statements such as how many millions of dollars it takes to run an "average" campaign give

punch without any historical context. Political scientist Robert Sahr laments, "Many elements of

political history involve dollar figures over time, yet news accounts and even scholarly analyses

often do not take into account the effects of changes in price levels." (Sahr, 2004: 274-5) Worse,

it seems the more citizens follow the [mistaken] journalists, the less informed they are about

campaign finance (Ansolabehere, Snowberg, and Snyder Jr. 2005).

Confusion Caused by Inconsistencies in the Law

While the figures for overall receipts and disbursements are not adjusted for inflation, the

two major campaign finance laws – FECA and BCRA – stipulate that certain limits be adjusted

for inflation. The very fact of even some recognition that costs rise over time in the laws does not

square with the lack of adjustments in reporting. By default, the data issued by the FEC will then

have to result in rising figures over time.

Inflation adjusted limits for campaign expenditures were part of FECA 1974 for political

parties, presidential primary candidates, and presidential general election candidates. The

original limits for congressional spending (struck down in Buckley v. Valeo) were also indexed

this way. Specifically, FECA sets inflation-indexed limits for political party coordinated

expenditures, presidential primary spending (by state and overall), and political party convention

funding, and general election spending for major party presidential candidates using public

money, only by adjusting a baseline figure given in the 1974 legislation pegged to inflation

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measures from 1974 dollars. [cite] BCRA 2002 indexes contribution limits from individuals

based on measures pegged to inflation since 2001 starting for the 2004 election cycle.

COLA: A History

The Cost of Living Adjustment (COLA) was first introduced to campaign finance

regulation with the passing of the 1974 FECA Amendments. In 2002, the BCRA extended

inflation indexing to include contributions from individuals to candidates, individuals to national

party committees, the individual bi-annual contribution limit, and contributions from “certain

political party committees” to U.S. Senate candidates (11 CFR 110.17).

The inflation adjustments are made in “odd numbered years” and take effect the first day

after the general election ends through the date of the next general election. No date is given for

obtaining this figure in the early years though it is stated as July 1 of the prior election year more

recently (that is, CPI for July 1, 2012 was used to calculate the COLA for 2014). The CPI rates

are typically published in the FEC record and cite nebulous sources for the figures such as

"Labor Department." The FEC uses the Consumer Price Index (CPI) to determine the COLA.

The CPI is calculated and published by the Bureau of Labor Statistics on a monthly basis, and is

the most commonly used economic indicator to gauge changes in the national economy and to

determine fiscal and monetary policies(Bureau of Labor Statistics n.d.). The CPI is widely used

to adjust inflation rates by numerous private entities and by various federal agencies to adjust

costs such as Social Security payments (http://www.bls.gov/cpi/cpiovrvw.htm).

The CPI measures the changes in the costs paid by consumers for a “representative

basket of goods” (http://www.bls.gov/cpi/). To calculate the price changes, the BLS has

employees called “economic assistants” visit stores in urban areas on a monthly basis to measure

the change in price of certain goods. CPI uses the costs of goods selected to represent the overall

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variety of choices of goods and services available to the consumer. The BLS publishes two

measurements of the CPI, intended to represent two different population groups. The CPI-U (for

All Urban Consumers) and the CPI-W (for Wage Earners and Clerical Workers).

The FEC uses the CPI-U measurement when adjusting the COLA for both contributions

and expenditures. Neither the legislation for FECA or BCRA specify which CPI measurement

should be used, so the agency uses CPI-U because it is more comprehensive than CPI-W (11

CFR 110.17(d)). The FEC directs staff doing the calculations to round up adjusted figures to the

nearest hundred dollars.

Using COLA to Determine the Costs of Campaigns

Since the FECA acknowledged the likelihood that prices increase over time by indexing

certain limits, let's start using the COLA assumptions. The COLA conversion factor used by the

FEC starts with the base year of 1974 as the legislation did when it set the original limits. Thus,

each conversion factor is a number greater than 1, meant to account for inflation rates compared

with 1974 dollars. Table One lists the COLA for each even numbered year since the 1974 FECA.

For illustrative purposes, column three shows how the COLA works to change the limit for

coordinated expenditure limits made by political parties in US House races. For each cycle, the

number in the third column expresses the amount in that year's dollars required to equal the

buying power of $10,000 in 1974. For 2014, the COLA was 4.725, indicating that inflation

nearly quintupled the limit from 1974 standards. Also, note that while the FEC uses a figure for

COLA reported to three decimal places, it rounds the limit to the nearest hundred as its long-

standing practice.

Thankfully, many political scientists, though hardly all, do consider COLAs when

evaluating the relative contributions and expenditures over time. We normally find that a

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particular year has been selected, generally the most recent one, to convert reported dollar

amounts into comparable units. Therefore, I will start with the question of whether campaign

spending is rising using the FEC's COLAs. To get a sense of how far off the raw numbers are

from the COLA projections, I multiplied the base year adjusted figure by the COLA for each

year to yield an "expected" spending number if only the CPI is considered. The analysis in this

paper is confined to expenditures in the US House of Representatives. The House was selected

because of the national scope of its biennial elections. The figures used here are the ones

obtained from Vital Statistics on Congress (Ornstein et al. 2013) for total spending by all general

election candidates (excluding primary losers) based on FEC figures. Due to problems of both

incomplete reporting for the 1974 cycle and the presumption of expenditure limits in the 1974

cycle, I decided to use the 1976 figure to represent the fullest expression of congressional

campaign spending in that era. I used the overall 1976 figure to compute an adjusted 1974 figure

to use as a baseline. The result is that Figure One compares the actual aggregate expenditures

reported in current dollars with the assumed aggregate expenditures based on COLAs since

1974. The bottom line gives what we would expect campaign spending to be if only COLA was

considered.

[Figures One and Two about here]

The first thing to note about chart one is that the COLA adjusted dollars fails to predict

candidate spending on House races beginning in 1978. Indeed, 1978 spending exceeded COLA

projections by 27%. However, it is not until 1992 that House spending was more than twice the

COLA projections. The typical immediate response to this figure would be that spending has just

gotten out of control and, given inflation predictions, there IS too much money in politics. Figure

Two works from the opposite presumption. Here, current and constant dollars are compared

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using 2012 dollars as the standard and converting earlier amounts. We certainly see steady

increases in aggregate spending in both bar graphs, but the constant dollars clearly shows a

flatter slope than current dollars do.

The Problem with Contributions

The limitations imposed for contributions from all sources were not indexed for inflation

between 1974 and 2002. The limit on individual contributions to House candidates was set at

$1,000 per election, for a theoretical maximum of $2,000 (with primary and general elections

considered). PAC contribution limits were $5,000 per election to House candidates in 1974 and

were unchanged by BCRA, remaining at $5,000 today. The result of this asymmetry – that

expenditures were unlimited for House candidates, indexed for inflation for political parties, and

contributions not changed at all – was that candidates for the US House had to secure an

increasing larger pool of donors even if they were hoping to hold their spending levels relatively

constant. This asymmetry was addressed in BCRA, one of the few instances where there was

bipartisan agreement (Farrar-Myers and Dwyre 2008 : 79-80). The reason why is clear. Figure

Three shows the value of the $1000 limit if indexed for inflation using the FEC's own COLA

numbers. When BCRA came along and doubled the $1000 limit to $2000 per election, the

distance traversed was about half what it should have been according to FEC 1974 standards.

Note also that although the BCRA limits are indexed for inflation, they are pegged to the base

year 2001, not 1974. As a result, the slope is slightly flatter. Also, the FEC now has to deal with

separate COLA schemes, making it more confusing for producer and consumer of the data.

[Figure Three and Four about here]

To make the point a different way, Figure Four compares the legal individual limit with that

same limit's buying power in 1974 dollars over time. It appears that as soon as the 1978 cycle,

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House candidates would need more contributors just to keep up with 1974 spending levels. Even

with today's increased limits, you would need five contributors for every one in 1974.

Population

Despite the allowance for inflation via the CPI, FECA and BCRA make a few, but not

comprehensive, allowances for population growth. The idea of course is that the more citizens

you need to communicate with, the greater the cost. However, most of the FECA limits do not

account for population. For example, political party coordinated expenditure limits for House

candidates do not adjust for population growth, only for inflation since 1974. However, when

using a state as a campaign unit, the law does allow for population consideration. For example,

political party coordinated expenditure limits for Senate races follows the formula of $.02

multiplied by the voting age population (VAP) of the state, multiplied by the biannual COLA.

For the effectively defunct (since 2004) presidential primary matching fund system, FECA sets

the spending limit in each state as "the greater of $200,000 + COLA or $0.16 x state VAP"

(Federal Election Commission 2014). This formula determines the spending limit in individual

states, not for the overall spending limit in the primary seasoni or in presidential general

elections. Because of this limited use of population data, the FEC issues estimates of the VAP in

each state when it reports the COLAs for the following cycle. Note that VAP is the number of

residents 18 years of age or older, and therefore does not indicate the voting eligible population

(Mcdonald 2007), the number of registered voters, or trends in voter turnout. Using this figure

does give us a sense of how the cost of communication will influence House campaigns.

The central point is that most of the assumptions the law has made about the rising cost

of campaigns expects inflation to play a role in escalating costs but no data presented in the first

section considers population growth in the voting age population as a compounding factor. Still,

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the FEC issues numbers for VAP for each state in each electoral cycle (based on US Census

estimates) so they may calculate statewide spending limits for presidential primary races

(matching funds) and political party coordinated expenditure limits for Senate elections. The

total of these state numbers is the VAP for the nation as a whole. This figure should allow us to

can calculate a per capita campaign spending figure in each cycle. Table Two reports the national

VAP as reported by the FEC, total spending in current dollars, campaign spending per capita in

current dollars, total spending based on FECA 1974 COLA projections (spending at 1974/76

levels adjusted for inflation only), and the spending per capita based on these projections. The

early calculations find spending in 1974 at about $0.41 per voting age resident, rising to $1.06 in

the projected scenario and to nearly $4.00 per voting age resident in current dollars. Figure Five

plots these two lines for comparison. Current spending per capita is about 10 times what it was in

the mid -1970s, while the projected COLA estimate predicts a doubling of spending per capita.

In this scenario, spending has clearly risen dramatically.

However, this is perhaps the wrong question to ask. The CPI projection only corrects for

inflation. Dividing it by population does not give us the dynamic change of inflation and

population per year. For that, we need a different approach. Looking at the early amounts of

spending and population, we find the 1976 and 1978 cycles at $0.41 and $0.57 respectively. I

selected the amount of $.50 per person of the VAP to see how 50 cents adjusts using CPI. This

way, we can have an accurate picture of what the spending per potential voter over time might

be. Figure Six compares the CPI adjusted $0.50 estimate with actual per VAP spending. The

surprising result of this calculation is that CPI adjusted per capita spending tracks actual

spending in current dollars almost perfectly until 1994, when current spending outstrips

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predicted adjusted spending by an increasing amount each year. What can explain the divergence

after 1994?

FEC Accounting Practices

The FEC has certainly had a daunting challenge over the years. Very often,

administrative policy changes happen due to new legislation, court cases, or new practices

adopted by some or all of the regulated political actors which makes disclosure more difficult for

the FEC to manage. Understandably, as a federal agency, the FEC adopted sound accounting

practices to handle "quirks" in the system. The result, on occasion, has been the "double

counting" of receipts/expenditures with the result that artificially inflates the amounts campaigns

are believed to "spend." In addition, campaigns sometimes spend their money for purposes that

are not election communication, in fact are quite counter to the idea of campaigning. Five main

categories warrant discussion: administrative fines, charitable contributions, data recording

errors contributions to other federal and state/local candidates, and transfers to political party

committees.

What follows is an analysis of the spending of US House candidates in the 2012 cycle. I

searched every disbursement in the 2012 cycle for the terms "contribution" and "transfer." I was

surprised at the wide expanse of recipients I uncovered. Indeed, the scope of recipients was so

vast that I would argue that we have overplayed the belief that Members of Congress deeply

resent having to raise money constantly and believe it interferes with their lawmaking abilities.

Rather, some members of Congress, as well as some notable non-incumbent candidates, have

sufficient "excess funds" to give to other candidates, party organizations, and groups without

damaging their electoral chances in the slightest. Indeed, since the FEC gives infinite latitude in

the dispensation of campaign funds, one could argue that some candidates deliberately amass

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funds to shore up their political positions locally and to scare off potential competitors by

making their war chests seem unbeatable (Goodliffe 2004, 2005).

There are two broad types of errors in the reconciliation of campaign spending. The first

are expenditures that are at face value, not for campaign purposes. Here, I include administrative

fines imposed by the FEC, return of campaign contributions, and donations to 501c3 charitable

organizations. The latter category is the most ambiguous, because we cannot know the context of

the relationship between the donor campaign and the recipient organization. The second type of

error is the "double counting" error and refers to data recording errors, contributions and

transfers to other candidates for federal or non-federal offices, to party committees at all levels,

or to campaign committees for other offices at the state or local level for the same candidate (that

is, a self-transfer). The double counting problem is that money donated to a US House candidate

is then "sent" to one of the above entities that actually conducts the spending. However,

accounting practices dictate that if a campaign receives a donation, that is a contribution and if

one campaign transfers funds to another, the first campaign has "spent" the money and this

counts as an expenditure. Thus, if an individual donates $1,000 to a US House candidate who

later transfers that money, the $1,000 is considered a receipt for the candidate, a $1,000

disbursement by the candidate, and also a receipt of $1,000 to a party committee, as well as an

eventual disbursement, for a total of $2,000 in receipts and $2,000 in disbursements. While the

FEC usually indicates "transfers" from affiliated committees as a sub-line that could easily be

subtracted from the overall total, the first type of error is never reconciled. Therefore, we have to

wonder if we have an accurate picture of campaign costs when these other expenditures are

lumped in with legitimate campaign spending.

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Category I Errors: Counting Non-Campaign Disbursements

1. Administrative Fines

Fines for non-filing or late filing are paid to the FEC using committee funds and need to be

reported as an expenditure from the campaign (http://www.fec.gov/af/af.shtml). Fines are not

common, but in the post-BCRA era, they can be substantial. Fines were modest in FY 2012

($153,020) and FY 2013 ($179,888)(Federal Election Commission 2013b).

2. Recount Funds: 1974-2004

Recount funds can either be set up as a separate entity from the original campaign committee or

as a different bank account held by the same candidate committee. These amounts must be

reported as "other receipts" and "other disbursements" (Federal Election Commission n.d.). The

FEC no longer reports recount funds as part of the normal receipts and disbursements since 2006

(Federal Election Commission 2007). However, for cycles up to 2004, recount funds are

included in total receipts and disbursements. Yet, is this campaign spending?

3. Refunds of Campaign Contributions

Candidates are required to state specifically the refunds they make to contributors. The

disbursement summary page has a line specifically for that purpose, though sometimes refunds

appear as an "operating expenses" or were on the "other disbursements"line. The purpose codes

contained better information on refunds. Again, with accounting practices in mind, refunded

contributions count as receipts going in and disbursements going out. Instead, they should be

subtracted from receipts, but their treatment on FEC forms artificially inflates both receipts and

disbursements. In 2012, US House candidates refunded about $5.2 million.

4. Charitable Contributions

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House candidates contributed $1.8 million to non-political organizations. The parties were nearly

even in their generosity – Democrats donated $993,000 and Republicans donated $891,000.

While a few of these organizations could be seen as political groups (such as the Congressional

Black Caucus Foundation), many others clearly are not (YMCA, individual high schools, local

boy scout troops, the Muscular Dystrophy Association). There could be direct campaign

spending lurking in this category, but the number is not trivial.

Double Counting

Clearly, the FEC itself is aware of the issues around how transfers result in accounting

problems:

"When using the all candidates summary file you need to be aware of some possible double counting of activity. Some candidates have more then [sic] one committee authorized to raise and spend funds on their behalf. The activity reflected in this file represents the sum of those committees. If they transfer funds back and forth among each other, this activity would be counted twice. Information about “transfers from authorized committees” and “transfers to authorized committees” is included in the file and if there are values in both of these fields it is necessary to subtract these from total receipts and total disbursements to obtain a more accurate value for actual activity" (Federal Election Commission n.d.).

The FEC thus acknowledges that a lot of subtraction must happen to produce anything

approaching accurate spending amounts. However, trying to accomplish this reconciliation is all

the more difficult because of significant discrepancies between summary data and detailed data

files available for download. One watchdog group identified a problem with these files over a

decade ago, yet the problem persists (Project on Government Oversight (POGO) 2001). In the

case of the data used here, the FEC summary report states that the total disbursements in US

House races in 2012 was $1,099,321,596 (Federal Election Commission 2013a). When I total

the column of all disbursement from the detailed FTP file, I find the amount of $1,838,301,722, a

difference of nearly $739 million. Working closely with the files, I found many duplicate entries

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though not a complete duplication. When trying to remove duplicates from the file, I found many

instances of other data that was missing from the scanned reports. For this reason, the amounts

given below can only be conservative estimates at best.

1. In Kind Contributions: Requirements for reporting in-kind contributions may result in a

double counting disbursement problem. The FEC instructs filers to report an in-kind contribution

BOTH as a receipt AND as a disbursement. The reason for this practice is "to avoid

inflating/deflating the cash on hand amount"(Federal Election Commission n.d.).The intent of

the directive is clear. If a campaign were to receive a contribution of, say, a loan of office

furniture, it would distort the reporting of receipts to cite a cash value for the loan of the furniture

and have it considered as it was a liquid asset, which it is not (especially if it is a loan, not a gift).

However, by reporting the identical amount as a disbursement, the directive misses the point of

an in-kind contribution altogether. Let's assume a donor makes an in-kind contribution of a loan

of office furniture which would cost a campaign $1,000 a month for six months for a total of

$6The intent of the in-kind contribution is to free up money that would otherwise be spent to

obtain the in-kind good on real campaign activities such as purchasing radio advertisements – the

argument famously used by Tony Coelho to distinguish between "party building" and

"electioneering" functions at the DCCC(Jackson 1990). The current accounting requires a

declaration of a contribution valued at $6,000 and disbursements valued at $6,000 and separately

whatever other expenditures were made because of the in-kind gifts.

2. Transferring from one candidate committee to another of the same candidate

Redistricting should not affect this, as a candidate can amend a statement of candidacy to reflect

a new district number. However, there is no special provision to account for the transfer of funds

from a federal account of a candidate to a state or local account of the same candidate now

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running for a different office. Such transfers would have to follow state laws and the transaction

is disclosed on both federal a

3. Member Transfers to Help Other House Candidates

We know that since 1994, House members have had every incentive to donate to other House

candidates in hopes of securing a majority. Many scholars have explained the consequences of

this trend for the conduct of business in Congress, along with the use of Leadership PACs set up

by individual members (Cann 2008; Currinder 2009; Heberlig and Larson 2005). While

Leadership PACs are not directly accounted for in this paper, the vast majority of their

"spending" contributes to double counting distortion, as nearly all of their disbursements are

contributions to other members. Donations directly from one candidate's campaign committee to

another are estimated at $8.5 million for both parties.

4.Member Transfers to Federal Political Party Organizations

Much has been written on the recent practice of transferring unlimited sums of money from a

candidate's committee to one of the House party committees – either the Democratic

Congressional Campaign Committee (DCCC) or the National Republican Congressional

Committee (NRCC). With the institution of "dues" from party leaders to members in return for

consideration for leadership and committee positions, this practice has grown (Heberlig and

Larson 2007, 2012; Kolodny 1998; Parker 2008). However, member transfers count as both

funds raised (which it was by a Member of Congress or a non-incumbent candidate) and then

funds "spent" which only happened in the sense that the candidate sent the money to the NRCC

or the DCCC, which in turn spent the money on actual electioneering. The party organization

counts the transfer as funds raised (which they did not) and also funds "spent" (which they did).

While transfers do appear as a line item on many summary numbers issued by the FEC, this

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notation is traditionally disregarded in favor of using aggregate numbers. In 2012, my

examination of the files finds that Republican candidates transferred/contributed $33ii million to

the NRCC while Democratic candidates gave $6.7 million to the DCCC, for a total of about $40

million. The FEC declares this number to be $25.5 million to the DCCC and $44.6 million to the

NRCC for a total of nearly $70 million, but I have been unable to confirm these numbers.

5. Transfers to State and Local Political Parties and Candidates

Just as some candidates find it important to transfer funds to national party organizations, the

same goes for state and local party organizations, mostly in those candidates' home regions.

Republicans transferred or contributed $4.5 million to these organizations in 2012 and

Democrats transferred $3.4 million. Members from the two parties also contributed an additional

$1 million to individual state and local candidates for a total of a little over $9 million.

6. Transfers to Presidential Candidates/National Party Committees

I was surprised to find congressional candidates contributing or transferring campaign funds to

presidential candidates, mostly to Mitt Romney in 2012. Likewise, some money went to the

RNC. We can safely assume that the $340,000 found as transferred was not "spent" by the

congressional races on campaigning.

Summary

As a result of the two major types of errors, counting non-campaign expenditures as spending

and double counting legitimate campaign transfers and contributions, my low-ball estimate is

that at least $64 million dollars (the total is likely closer to $100 million) included in the

campaign disbursement totals is "phantom" money which should not be used to make the case

that campaign spending is rising beyond reasonable expectations (see Table Three).

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Appropriate Index of Campaign Costs

A further methodological concern is whether the CPI is an appropriate benchmark for changes in

campaign communication costs. Using CPI to modify the contribution and expenditure limits

may not be the most appropriate method of adjusting the limits because CPI emphasizes a “cost-

of-living framework.” The Bureau of Labor Statistics (BLS) issues the CPI, which calculates the

changes in the costs of goods and services that consumers commonly purchase, referred to as the

changes in the average prices of items in “a basket of goods.” The CPI market basket groups the

consumer goods and services purchased by urban households into eight major groups:

1. Food and beverages (ham, eggs, carbonated drinks, coffee, meals and snacks); 2. Housing (rent of primary residence, fuel oil, bedroom furniture); 3. Apparel (men’s shirts and sweaters, women’s dresses, jewelry); 4. Transportation (new vehicles, gasoline, tires, airline fares); 5. Medical care (prescription drugs and medical supplies, physicians’ services, eyeglasses

and eye care, hospital services); 6. Recreation (television sets, cable TV, pets and pet products, sports equipment,

admissions); 7. Education and communication (college tuition, postage, telephone services, computer

software and accessories); 8. Other goods and services (tobacco and smoking products, haircuts and other personal

care services, funeral expenses).

Indexes for all of the above categories are published at the U.S. city average level. How do campaigns spend their money on electioneering?

Campaigns are more likely to run similarly to a non-profit organization (or corporation)

and make expenditures as such, not as an average urban consumer on items in the "market

basket" above. Some items campaigns typically spend money on are included in CPI-U (such as

telephone services, computer software, housing, etc) but it’s doubtful that CPI appropriately

measures the amounts that campaigns will spend on these goods. Campaigns may use some

similar items such as telephone and internet services, short-term rent for an office, but the bulk of

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electioneering spending campaigns centers on communication costs -- advertising space on

television, radio, and the internet-- something consumers are unlikely to consume.

Ansolabehere et. al. also argue that CPI “does not reflect the changes in technology and

the wealth that creates” (Ansolabehere, Gerber, and Snyder Jr. 2001). They recommend that

Gross Domestic Product (GDP) be used to account for inflation because they believe that GDP is

a more accurate reflection of both inflationary spending and the size of the population. In their

study, Ansolabehere et. al. find trendless fluctuation in aggregate campaign amounts. Another

potential economic benchmark could be the Personal Consumption Expenditures index (PCE).

The PCE puts more weight on medical care and "other goods and services" and much less weight

on housing and shelter than CPI. The weights used in the CPIU are based on a household survey,

while the weights used in the PCE price index are based on business surveys such as the Census

Bureau’s annual and monthly retail trade surveys, the Service Annual Survey, and the Quarterly

Services Survey. Future research will explore the utility of alternative measures of

communications and business costs that more closely reflect campaign spending.

Conclusion

This paper is an exploration of problems embedded in the campaign finance reporting system

and a misunderstanding of legal campaign maneuvers by journalists and scholars, which lead to

the "certain" conclusion that campaign costs continue to rise. Only spending on US House

elections in 2012 has been scrutinized here. Further research would account for similar

discrepancies in US Senate and presidential spending as well as attempting to get a handle on

"outside spending." Only if we can have a productive discussion about campaign costs can we

examine other barriers to political engagement besides the need for the largest "war chest" ever.

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i The overall campaign spending for all primary elections (the national spending limit) is equivalent to $10 million plus a cost-of-living adjustment (COLA) (Federal Election Commission 2014). ii This number is lower than the estimates given by the FEC, but the raw data shows a large number of duplicate entries. However, I can only substantiate $33 million at this time.

Table 1: FEC COLAs

Year COLA House Coordinated Expenditure Base

1974 1.000 10,000 1976 1.091 10,910 1978 1.229 12,290 1980 1.472 14,720 1982 1.844 18,440 1984 2.020 20,200 1986 2.181 21,810 1988 2.305 23,050 1990 2.514 25,140 1992 2.762 27,620 1994 2.930 29,300 1996 3.091 30,910 1998 3.255 32,550 2000 3.378 33,780 2002 3.591 35,910 2004 3.731 37,310 2006 3.961 39,600 2008 4.205 42,100 2010 4.351 43,500 2012 4.562 45,600 2014 4.725 47,200

Table Three: Estimates of Errors

Fines paid to FEC 179,888

Contribution Refunds 5,217,504

Other Committees 1,884,551

To Democratic Congressional Candidates 6,500,000

To Republican Congressional Candidates 1,722,417

($8.5 million)

To DCCC 6,691,631

To NRCC 33,117,114

($40 million)

To State/Local Rep Parties 4,594,918

To State/Local Rep Candidates 414,660

To State/Local Dem Parties 3,439,793

To state/local dem candidates 632,211

($9 million)

To Presidential candidates 293,569

To RNC 50,150

($340 K)

Total 64,738,406