How Does Campaign Finance Work? Concept, Benefit, and More

Campaign Finance is the funding of a politician’s campaign for national office and is a common way to make the process of running for political office more affordable. However, the United States’ campaign finance system has been criticized as being corrupt and prone to abuses.

New rules have been implemented in recent years designed to address these criticisms by creating a publicly accessible database of all contributions made by corporations, unions, and individuals limited only by contribution limits set by federal and state law.

How Does Campaign Finance Work?

Campaign Finance works on the principle of PACs (Political Action Committees). PACs are used to raise money to support political candidates.

There are two types of PACs, Super PACs, and Non-Super PACs. Super PAC can accept any sized donation while non-super PACs cannot accept donations over $5000.

Super PAC.

Super PACs are a relatively recent development in the world of political financing. Super PACs came into existence after the Supreme Court’s decision in the wake of Citizens United.

The name “Super PACs” refers to their ability to accept unlimited funds from corporations, unions, and individuals, and spend unlimited sums to influence elections, so long as they do not “coordinate” with any political candidate.

Non-Super PAC.

They have to receive funds from individuals only and cannot receive any funds from corporations or unions. These political action committees can’t accept more than $5000 from a single individual per calendar year, but can’t prove any political messages about a candidate.

However, many Non-Super PACs are set up in a way that they appear to be independent groups of people formed for a common purpose or goal; the rules were meant to prevent this kind of “front” groups.

Individuals, corporations, and unions can make contributions as any political action committee. These contributions are aggregated into the PACs hosted by the politicians, who can then use the PAC’s money to pay for advertising that is directed at a specific candidate, or in the case of Super PACs, is spent on non-candidate related activities, such as lobbying or supporting non-qualified candidates. This type of spending often referred to as “issue ads”, is not allowed for either type of PAC.

The aggregate amounts of money contributed by individuals, corporations, and unions that make up a PAC is recorded in the Federal Election Commission’s database.

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It is this database that is the target of many regulations designed to improve the transparency of campaign finance laws.

Concepts of Campaign Finance.

Campaign Finance is characterized by two main concepts. One is the money funnel structure and the other is the size of the electorate.

Money Flux Structure.

“The money funnel is a term coined by Nathan Muller, David Rolf, and Michael Malbin to describe how money is transferred, or “funneled”, through a political campaign’s fundraising apparatus. Muller et al., argue that political campaigns can be visualized as vertical funnels.

At the top of the funnel, individuals and groups make “bundles” of money available to a candidate. As the campaign moves towards its objective or end-of-funnel, the candidate uses the money to pay for advertising, travel expenses, etc.”

Size of Electorate.

The fixed size of the electorate is also a characteristic feature of campaign finance. It is impossible for a candidate to reach the electorate if he only raises limited amounts of money from individual donors and from corporations.

He needs to increase the amount of money he raises, which requires an increase in contribution or expenditures by other parts of the funnel.

Benefits of Campaign Finance.

Campaign Finance is essential to democracy, especially in the United States. A large amount of money is required, by both candidates and voters, to participate in the democratic process.

Without it, there would be no reason for campaign finance and election campaigns would become more like a social gathering in which everybody participates and chooses their representative after long debates that motivate the people to know about their issues.

The following are some of the benefits of campaign finance:

Prevents corruption.

Campaign Finance would benefit society. It would allow greater participation in the political process and it would encourage greater voter turnout in elections.

Moreover, it would allow non-profit groups to express their viewpoints on public policy decisions by helping to make candidates aware of issues important to them.

In this way, campaign finance will also help prevent corruption that can result from large amounts of money being given directly to a public official.

Promotes Better Governance.

Campaign Finance would lead to better governance. It will allow officials to gain the trust of their constituents by listening to their issues and concerns instead of simply responding with “I am for X-and-do not want to be reminded of what my opponent is doing”.

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Voluntary Participation.

Campaign Finance should promote voluntary participation by allowing voters and candidates to make informed decisions.

Voters are able to participate voluntarily in the political process through such campaign finance mechanisms as direct democracy or ballot initiatives, or through the use of vouchers to redirect taxpayer dollars toward their preferred causes.

Candidates can voluntarily participate in the political process by accepting contributions from a variety of sources, and they are not at a disadvantage because of the size of their contributor base.

Gives all voters equal access.

Campaign Finance allows all voters equal access to the political process. Contributions are limited in amount, and all candidates have equal opportunities to raise funds, including those from small contributors. Suppose a candidate does not raise sufficient funds to be competitive.

In that case, that fact becomes apparent early in the election process and there is no need for expensive advertising on the part of other candidates throughout an entire election season or primary campaign.

Helps preserve Constitutions.

Campaign Finance supports the Constitution by preserving the two-party system. The goals of the candidates must be perfectly clear and their position on a variety of issues is expected to be set forth clearly in a number of debates. Because all voters have access to all candidates, there are no anomalies in the election process.

Increases Public Confidence in Government.

Campaign Finance tends to increase public confidence in government because it encourages public officials to consider issues before making decisions that involve spending taxpayers’ money.

This contribution of greater transparency and disclosure of campaign finance data helps curb corruption in the form of undue influence resulting from conflicts of interest between public officials and their contributors.

Disadvantages of Campaign Finance.

There are a number of disadvantages to campaign finance. Of particular importance is the potential for corporate influence on campaign finance decisions and the potential for politicians to take actions that will benefit donors.

Corporate Influence.

The first potential disadvantage of campaign finance is that groups can contribute large amounts of money in return for access to politicians, especially if corporations or unions have interests in the issue on which they are lobbying.

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Policy Favors.

Campaign finance can give business interests undue influence on policy decisions. This is especially important when individuals or organizations spend money to defeat bills they believe will harm the environment or the economy.

As a result of the high cost of legislative campaigns, it is not uncommon for a member to be elected to office whom an opponent has outspent. This may lead to an initiative process or campaign finance system that favors special interest groups that can afford to write large checks.

Influence on Election Process.

Finally, campaign finance can have a negative impact on the political process by raising the cost of an election and discouraging individuals who cannot afford to spend large amounts of money.

The public ends up with a less dynamic political process that is controlled more by special interest groups and large corporations than by individual citizens.

Uses of funds from Campaign Finance.

Funds from campaign finance can be used in two ways: for personal use or for campaign purposes.

If a politician uses the fund for his personal purpose it will then be considered illegal income and he/she may be charged based on the offense. Some of the common uses of funds from campaign finance are as follows:

Personal Use:

Money can be spent on anything unrelated to the campaign, such as transportation expenses, entertainment, eating out, etc.

Personal expenses are considered illegal because the politician is using money donated by the citizens for his own personal use.

Donations to a candidate are given with the expectation that they will be used to promote issues important to donors and in return, the candidate represents these issues.

Campaign Use:

Campaign funds can only be spent on qualifying campaign expenditures, which are items directly related to promoting the election of a candidate.

Campaign expenses include costs of advertisements and endorsements, campaign workers’ salaries, and any other expense directly related to the promotion of a political campaign.


Campaign Finance is a good system to have because it can help elect a candidate who is more open to the constituents’ needs and not influenced by corporate or special interest groups.

Campaign finance promotes transparency and accountability in government because it allows voters to make informed choices by knowing who is running for office and what they stand for.