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Campaign Funds: The Rules of Spending

The rules of campaign spending might surprise you.

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Following their disappointing performances in the Iowa Caucus and New Hampshire Primary, entrepreneur Andrew Yang and Senator Michael Bennet (D-CO) announced the end of their campaigns. Yang received 2.8% of the vote, while Sen. Bennet garnered just 0.3%. Unlike some of his opponents, Yang was candid that he is “not someone who wants to accept donations and support in a race we will not win.” This was an interesting statement because it leads to a question about campaign war chests: Where do all those contributions go after the candidates bow out of electoral contests?

A Few Dollars More

The Federal Election Commission (FEC) has outlined a series of rules pertaining to politicians’ leftover campaign funds.

The main thing politicians are prohibited from doing is using donations for personal expenses. If Jefferson Smith raises $2.3 million in the first quarter and spends $2 million, he cannot use the extra $300,000 to buy himself a BMW. This FEC rule was put in place in 1993 when representatives who took office before 1980 were permitted to keep leftover campaign cash when they retired – one-third would spend millions in donations on clothing, traveling, artwork, and jewelry.

Under FEC guidelines, dropouts can refund money to donors. They also have the option of transferring the remaining funds to other candidates (maximum $2,000), political action committees (PACs), party committees (local, state, or national), or charities.

Any residual dollars and cents can be used to wind down campaign operations, such as moving expenses, staff compensation, paying off debts, and “any other lawful purpose, unless expressly prohibited by the Federal Election Campaign Act.”

The part that may incentivize incumbents to toss their hats in the race for the White House is that leftover cash can be allocated to a different run for federal office. For example, Sen. Bennet could use the $1,857,708 cash on hand for his Senate re-election campaign in a couple of years. Or, Senator Cory Booker (D-NJ) might spend the approximately $75,000 cash on hand for his re-election pursuits.

Or, as MarketWatch noted, other aspirants seeking different federal offices may bide their time, like former Senator Evan Bayh (D-IN): “The Indiana Democrat’s unsuccessful 2016 Senate campaign made use of a $10 million war chest that he had amassed in the prior decade, before his decision not to seek re-election to his then-Senate seat in 2010.”

Didacticism or Vanity?

Why do individuals with little chance of winning an election run in the first place? For federal officeholders, it might be to pad their resumés, generate more publicity, and raise some extra cash. For some, it may be a campaign of an educational nature, like former Representative Ron Paul’s (R-TX) runs in 2008 and 2012 or William F. Buckley’s mayoral efforts in New York City in 1965. For others, bids for high-profile positions could be all about vanity, telling the world that they ran for president or Congress.

Andrew Moran

Economics Correspondent at LibertyNation.com and LNGenZ.com. Andrew has written extensively on economics, business, and political subjects for the last decade. He also writes about economics at Economic Collapse News and commodities at EarnForex.com. He is the author of “The War on Cash.” You can learn more at AndrewMoran.net.

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