Where Presidential Candidates Get Campaign Funding

By Marc Davis | October 24, 2012 AAA
Where Presidential Candidates Get Campaign Funding

Running for president of the United States is an expensive proposition. In the 2008 presidential campaign, winning candidate Obama spent about $750 million. This year it is estimated by knowledgeable sources that Obama will raise and spend almost $1 billion, although White House officials say that dollar figure is not accurate and the amount spent will be less.

American citizens of every political persuasion may justifiably wonder where all that money comes from and how it's spent.

Fundraising
According to the Federal Election Commission and reports from the candidates and media, the money comes from a variety of sources including large donors, small donors and organizational donations. As of late September, a joint fundraising effort by Mr. Romney and the Republican National Committee has raised about $660 million, with some of that raised by the presidential hopeful himself; Romney's primary Super PAC "Restore Out Future" raised over $111 million. Assuming a maximum donation amount of $2,500, approximately 22% of Romney'sraised fundshave been from small donors, contributing under $200 each.

On the other end of the political aisle, President Barack Obama and the Democratic National Committee reaped over $780 million, less than 30% of which was derived from the DNC's efforts. The Democratic "Priorities USA" has brought in close to $51 million, so far, and about 55% of candidate donations for the POTUS have come from donations under $200, again assuming a maximum candidate donation limit of $2,500.

Super PAC
Although small donations from individuals add up substantially, a major source of campaign financing is the Super PAC, the special political action committees.

A Supreme Court decision in the case of Citizens United v. Federal Election Commission allowed these organizations to spend unlimited amounts of money on their preferred candidate, they are not required to fully disclose the names of their contributors, and they are prohibited by the law from coordinating their political activities with their candidate of choice. The money spent by Super PACs is part of a presidential campaign, although it does not represent money spent by the candidate. In September, the most notable donations to these Super PACs have come from major movers and players in finance. Restore Our Future received a donation of $1 million dollars from Tiger Management founder, Julian Robertson, and another $1 million from hedge fund manager John Kleinheinz, while Priorities USA saw a $1.5 million donation from billionaire mathematician and hedge fund manager, James Simon.

How Its Being Spent
According to OpenSecrets.org, a recent release of data by the Federal Election Commission shows that 48.9% (or $354.8 million) of donations go toward media advertisements, with administrative costs coming in second at 24.6%. Campaign expenses such as consulting, events and surveys make up 12.8 and 11.8% toward fundraising for donations. Less than 2% of expenditures are dedicated to loan payments, contribution refunds, parties and miscellaneous costs. Excluding party committees, the Obama campaign has spent $459 million toward these expenditures, while Romney saw $277 million used to cover these costs.

The Bottom Line
To provide the necessary $1 billion required to run for president, candidates draw funding from donors large and small and rely on Super PACs to join the effort through advertising and other political activities. The bulk of the campaign funds collected are spent on media - print, broadcast and Internet advertising. But having a lot of money is no guarantee of a successful run for the presidency, either in the primary races or after the party candidates have been nominated. Multi-millionaires Steve Forbes, Jon Huntsman, Donald Trump and Ross Perot have all taken a shot at running, some more seriously than others, and none of their efforts were successful.

Detailed monthly data on campaign spending is filed by both candidates with the Federal Election Commission. A comprehensive report on campaign spending, current to October 21, is available online at FEC.

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