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The Debate of Hard Money and Soft Money

Neha B Deshpande Oct 21, 2020
Political contributions in the U.S. are of two types: hard money and soft money. Hard money is subject to restrictions by the Federal Election Commission, and can be given to political candidates directly, whereas, soft money can be given for party-building activities, and is not under regulation.

Did You Know?

Super *PACs were born due to the 'Citizens United Vs. Federal Election Commission' case, which gave unrestricted power to the PAC to raise money from individuals, corporations, unions, and lenders. However, they are only allowed to make expenditures, and cannot make direct contributions to candidates.
(1) *PAC (Political Action Committee): It is a committee that pools the political contributions from various individuals and other entities, and gives them to the political parties.
(2) Super PACs are subject to disclosure requirements of the Federal Election Commission (FEC).
Politics has always been a subject of controversies and debates. Moreover, with the advent of fundraising activities of political parties, there came the entry of private money in politics. Nevertheless, private money is always polemic, since there are chances of lobbying that can seep in.
They might try to influence the decisions and mold it as per their desires. Such practices might not lead to a fair political campaign, putting the party having rich contributors on a favorable side.

Hard Money vs. Soft Money: Difference

Hard Money: In the United States, political contributions are usually divided into hard money and soft money. Hard money is the money given by a contributor directly to the presidential candidate, and is limited in amount, since it is governed by the regulations of the Federal Election Commission (FEC).
The FEC stipulates the guidelines as to how one can contribute, in this case. It is given directly to a particular person for his/her election activities.
Soft Money: Soft money is a political contribution that is unregulated. Labor unions and corporations are allowed to give soft money, only to parties, and cannot give them to individual candidates for federal office. This can be used for party-building activities, and cannot be used for a particular candidate.
These funds are mostly used for advertisements and other activities. However, with the rising problems of unfair practices and corruption seeping in due to politics, the FEC sought to regulate soft money too. There are regulations on both hard money and soft money, as of today.

Key Highlights of the Federal Contribution Limits for 2015-16 Election Cycle

Contribution by Individuals

  • USD 2,700 per election to a federal candidate
  • Unlimited contribution to a Super PAC
  • USD 5,000 per year to a Traditional PAC
  • Contribution to National Party Committees: USD 33,400 per calendar year
► Corporation and labor organizations can make unlimited contributions to a Super PAC.

Note: The aforesaid limits is not an exhaustive list. Limits are subject to many other rules and regulations..

Debates Surrounding Hard Money and Soft Money

The government is in constant efforts to eradicate favoritism that can be caused due to soft money; a handful of wealthy corporates getting undue advantage on the strength of their money. However, many are of the opinion that regulations and bans by the government is an encroachment on freedom. Some landmark cases are mentioned here.
McCain-Feingold Law, a.k.a. Bipartisan Campaign Reform Act (2002)
In 2002, there was an increase in soft money contributions, and hence, that called for regulations by the FEC. The aforesaid Act passed in 2002 was one of the first attempts by the FEC to regulate soft money.
It banned national political parties from raising money through soft money. After this Act, restrictions were stipulated on soft money contributions, usage of campaign funds, advertisements for political campaigns, etc. Thus, it primarily aimed at regulating unlimited soft money in the campaigns.
It banned some of the organizations from spending soft money on Ads that were aired within 60 days of a general election, and 30 days of a primary election.
Citizens United v. FEC (2010)
In 2010, the Supreme Court held that the aforesaid ban on using of soft money for airing of advertisements was unconstitutional in nature, and hence lifted the ban. This landmark case also gave rise to Super PACs.
McCutcheon v. FEC (2014)
This case was filed by Shaun McCutcheon, who wished to make political contributions to more than the stipulated number of candidates. However, the current regulations prevented him from doing so. He stated that such a ban was an infringement of his constitutional rights.
Limits: In the 2012 cycle, there was a gross limit on the contribution by an individual; a person could contribute $2,500 per election to federal candidates, and $5,000 to a non-party political committee. Further, there were limits on the aggregate contribution by individuals.
The plaintiff in this case filed a case in 2012 against such caps. The Supreme Court agreed with McCutcheon, and the aggregate limits were removed.
The limits associated with both hard money and soft money is a keen subject of interest for many government and political parties, citizens, as well as the media. The debate regarding whether it is good or bad for political finance will remain. Nevertheless, only a fair election will justify the growth of any economy.