WEBVTT 00:00:00.000 --> 00:00:02.319 Picture this. You're sitting at your kitchen 00:00:02.319 --> 00:00:04.759 table, right? It's mid -April, and you are just 00:00:04.759 --> 00:00:07.320 absolutely buried in paperwork. Oh, yeah. The 00:00:07.320 --> 00:00:10.619 W -2s, the 1099. Exactly. All those miscellaneous 00:00:10.619 --> 00:00:12.400 receipts you're desperately trying to organize 00:00:12.400 --> 00:00:15.220 into some kind of, you know, coherent narrative 00:00:15.220 --> 00:00:17.640 for the IRS. Right. It is like the universal 00:00:17.640 --> 00:00:20.539 American experience of financial anxiety. Yeah. 00:00:20.640 --> 00:00:22.219 You're just trying to get to the finish line 00:00:22.219 --> 00:00:25.089 without making a massive mistake. Yeah. And you 00:00:25.089 --> 00:00:27.070 finally get there, you've battled your way through 00:00:27.070 --> 00:00:29.050 the standard deductions, you've quadruple checked 00:00:29.050 --> 00:00:31.530 the math, and you're at the very bottom of U 00:00:31.530 --> 00:00:34.070 .S. Form 1040. This finish line. Right. But right 00:00:34.070 --> 00:00:35.950 there, completely out of nowhere, nestled in 00:00:35.950 --> 00:00:40.130 all that dry bureaucratic legalese, is this bizarrely 00:00:40.130 --> 00:00:44.659 casual question. Do you want $3 of your federal 00:00:44.659 --> 00:00:47.280 tax to go to the presidential election campaign 00:00:47.280 --> 00:00:50.299 fund? It genuinely feels like a philosophical 00:00:50.299 --> 00:00:53.219 pop quiz tacked onto the end of a math test. 00:00:53.399 --> 00:00:55.740 It really does. I mean, after hours of calculating 00:00:55.740 --> 00:00:58.579 your exact tax liability down to the penny, the 00:00:58.579 --> 00:01:00.479 government suddenly wants to know your feelings 00:01:00.479 --> 00:01:03.460 on campaign finance. And if you're like most 00:01:03.460 --> 00:01:05.439 people, you probably just stare at it, you freeze 00:01:05.439 --> 00:01:08.340 for a second, panic that checking it might somehow 00:01:08.340 --> 00:01:10.519 trigger an audit, and then you just leave it 00:01:10.519 --> 00:01:13.000 blank. which is what almost everyone does now. 00:01:13.560 --> 00:01:17.140 Well, welcome to today's deep dive. We are thrilled 00:01:17.140 --> 00:01:19.400 to have you with us today, especially if you're 00:01:19.400 --> 00:01:21.879 the kind of person we call the learner, someone 00:01:21.879 --> 00:01:25.040 who loves uncovering the hidden mechanics of 00:01:25.040 --> 00:01:28.180 everyday things. Because today we are focusing 00:01:28.180 --> 00:01:31.980 entirely on the massive hidden machinery behind 00:01:31.980 --> 00:01:34.659 that one tiny little checkbox. Yeah, and we're 00:01:34.659 --> 00:01:37.579 basing our conversation today entirely on a really 00:01:37.579 --> 00:01:40.400 comprehensive Wikipedia article that details 00:01:40.400 --> 00:01:42.980 the history, the mechanics, and the surprising 00:01:42.980 --> 00:01:47.219 evolution of this checkoff. is to demystify this 00:01:47.219 --> 00:01:50.379 specific tax season phenomenon for you. We're 00:01:50.379 --> 00:01:52.840 going to explore what checking that box actually 00:01:52.840 --> 00:01:56.040 does, the incredibly complex web of rules candidates 00:01:56.040 --> 00:01:58.519 have to navigate to even touch that money, and 00:01:58.519 --> 00:02:00.799 why taxpayer participation has just completely 00:02:00.799 --> 00:02:02.700 plummeted over the decades. Okay, let's unpack 00:02:02.700 --> 00:02:04.560 this. Where did this even come from? So to understand 00:02:04.560 --> 00:02:07.260 the box, we have to travel back to 1966. That 00:02:07.260 --> 00:02:09.180 is when this checkoff was first implemented. 00:02:09.370 --> 00:02:12.310 though back then it was only for one single dollar. 00:02:12.550 --> 00:02:14.789 Oh wow, just a dollar. Right, and it was later 00:02:14.789 --> 00:02:18.330 increased to three dollars in 1994. But the original 00:02:18.330 --> 00:02:21.590 goal here was incredibly idealistic. It was intended 00:02:21.590 --> 00:02:23.689 to be the ultimate foundation for the public 00:02:23.689 --> 00:02:26.289 funding of American elections. I mean, the idea 00:02:26.289 --> 00:02:28.169 was to provide public financing for the whole 00:02:28.169 --> 00:02:30.610 spectrum, right? The presidential primary campaigns, 00:02:30.830 --> 00:02:33.789 the general election, and even the massive national 00:02:33.789 --> 00:02:36.530 party conventions. Exactly. The core objective 00:02:36.530 --> 00:02:39.389 was to fundamentally democratize campaign finance. 00:02:39.960 --> 00:02:42.639 The architects of this system, they wanted to 00:02:42.639 --> 00:02:45.780 drastically reduce a candidate's dependence on 00:02:45.780 --> 00:02:49.319 large strings attached contributions from wealthy 00:02:49.319 --> 00:02:51.520 individuals and special interest groups. So they 00:02:51.520 --> 00:02:53.780 wanted candidates answering to the public, not 00:02:53.780 --> 00:02:55.900 to mega donors. Right. And they put the Federal 00:02:55.900 --> 00:02:58.800 Election Commission, the FEC, in charge of administering 00:02:58.800 --> 00:03:01.159 this massive new pool of public money. Which 00:03:01.159 --> 00:03:04.099 brings up, honestly, one of the most misunderstood 00:03:04.099 --> 00:03:06.199 aspects of this entire system. Oh, absolutely. 00:03:06.379 --> 00:03:09.620 The tax liability part. Yes. Checking this box 00:03:09.620 --> 00:03:12.639 does not change the amount of tax you pay. It 00:03:12.639 --> 00:03:16.020 doesn't reduce your refund by $3, and it certainly 00:03:16.020 --> 00:03:18.740 doesn't increase your tax liability by $3. It's 00:03:18.740 --> 00:03:21.039 a total myth that it costs you money. Right. 00:03:21.120 --> 00:03:24.620 If the math says you owe $5 ,000, you pay exactly 00:03:24.620 --> 00:03:27.520 $5 ,000. If you check the box, you still pay 00:03:27.520 --> 00:03:30.020 exactly $5 ,000. It is strictly an allocation. 00:03:30.379 --> 00:03:34.639 You are not paying a $3 fee. You are directing 00:03:34.639 --> 00:03:38.560 how $3 of the tax you already owe is spent by 00:03:38.560 --> 00:03:41.659 the U .S. Treasury. It makes me think of eating 00:03:41.659 --> 00:03:44.060 out at a restaurant. Let's say your final bill 00:03:44.060 --> 00:03:47.360 is exactly $100. The waiter comes over to run 00:03:47.360 --> 00:03:49.840 your card and casually asks, hey, out of that 00:03:49.840 --> 00:03:52.280 $100 you're already paying, do you want $3 to 00:03:52.280 --> 00:03:54.340 go to a local charity instead of the restaurant 00:03:54.340 --> 00:03:56.139 owner's pocket? That's a great way to look at 00:03:56.139 --> 00:03:58.080 it. You're paying $100 either way. Your bank 00:03:58.080 --> 00:04:00.979 account looks identical. But honestly, I don't 00:04:00.979 --> 00:04:04.219 buy the logic here. Well, if this costs the taxpayer 00:04:04.219 --> 00:04:06.759 literally nothing extra and the government's 00:04:06.759 --> 00:04:09.159 grand plan is to create a robust public funding 00:04:09.159 --> 00:04:11.719 system to keep special interests out of elections, 00:04:12.240 --> 00:04:15.020 Why not just automatically fund it? Why make 00:04:15.020 --> 00:04:17.639 it an optional, potentially confusing checkoff 00:04:17.639 --> 00:04:20.800 box on a tax form at all? What's fascinating 00:04:20.800 --> 00:04:24.379 here is how this functions as an exercise in 00:04:24.379 --> 00:04:26.819 direct taxpayer agency. The government didn't 00:04:26.819 --> 00:04:29.560 want to just unilaterally siphon money into a 00:04:29.560 --> 00:04:31.740 political fund. Oh, they wanted buy -in. Exactly. 00:04:31.819 --> 00:04:34.019 They wanted the public to actively validate the 00:04:34.019 --> 00:04:36.639 system. It was designed as a measure of public 00:04:36.639 --> 00:04:39.829 trust. But even more importantly, That money 00:04:39.829 --> 00:04:42.029 wasn't just handed out freely to anyone who asked 00:04:42.029 --> 00:04:45.050 for it. There were, and still are, incredibly 00:04:45.050 --> 00:04:47.250 strict strings attached. So it's not just a slush 00:04:47.250 --> 00:04:49.009 fund. You don't just declare your candidacy, 00:04:49.189 --> 00:04:51.750 file some paperwork, and get a huge check. Far 00:04:51.750 --> 00:04:54.329 from it. To be declared eligible for this public 00:04:54.329 --> 00:04:56.949 funding, candidates have to surrender a massive 00:04:56.949 --> 00:04:59.110 amount of control over their campaigns. Like 00:04:59.110 --> 00:05:01.629 what kind of control? Well, they have to agree 00:05:01.629 --> 00:05:04.209 to a strict overall national spending limit. 00:05:04.300 --> 00:05:07.399 They have to abide by individual spending limits 00:05:07.399 --> 00:05:10.060 in every single state. They can only use the 00:05:10.060 --> 00:05:12.879 public funds for legitimate campaign related 00:05:12.879 --> 00:05:15.699 expenses. Which means meticulous financial records, 00:05:15.720 --> 00:05:18.699 I'm guessing. Oh, extremely meticulous. And they 00:05:18.699 --> 00:05:21.480 have to permit an extensive, invasive audit of 00:05:21.480 --> 00:05:24.920 their campaign by the government. Wow. You essentially 00:05:24.920 --> 00:05:28.990 have to invite the IRS and the FEC to set up 00:05:28.990 --> 00:05:32.089 camp in your campaign headquarters. You're basically 00:05:32.089 --> 00:05:35.310 trading your financial freedom for clean public 00:05:35.310 --> 00:05:38.389 money. Precisely. And the way that money is actually 00:05:38.389 --> 00:05:40.730 distributed changes depending on what phase of 00:05:40.730 --> 00:05:42.709 the election you're in. Right, because primaries 00:05:42.709 --> 00:05:44.810 and general elections are totally different beasts. 00:05:45.209 --> 00:05:48.029 Exactly. During the primary election phase, when 00:05:48.029 --> 00:05:50.069 candidates are just fighting to win their party's 00:05:50.069 --> 00:05:52.610 nomination, the system operates entirely on matching 00:05:52.610 --> 00:05:54.730 funds. OK, so how does the matching work? Do 00:05:54.730 --> 00:05:56.629 they just double whatever you bring in, like 00:05:56.629 --> 00:05:59.370 a dollar for a dollar? Not quite. The federal 00:05:59.370 --> 00:06:02.250 government will match an individual's total contributions 00:06:02.250 --> 00:06:05.449 to an eligible candidate. but only up to $250. 00:06:05.730 --> 00:06:07.829 Oh, I see. So if someone gives your campaign 00:06:07.829 --> 00:06:10.689 $50, the government gives you $50. If someone 00:06:10.689 --> 00:06:13.189 gives you $1 ,000. The government only matches 00:06:13.189 --> 00:06:16.250 the first $250. You got it. And it has to be 00:06:16.250 --> 00:06:19.420 from a real individual person, right? I read 00:06:19.420 --> 00:06:22.699 that contributions from political action committees, 00:06:23.160 --> 00:06:26.019 PACs, are completely ineligible for matching 00:06:26.019 --> 00:06:28.779 funds. Totally ineligible. And you can't use 00:06:28.779 --> 00:06:30.779 cash contributions either because a stack of 00:06:30.779 --> 00:06:33.660 $20 bills can't be reliably tracked back to an 00:06:33.660 --> 00:06:36.920 individual voter. Right. The focus is ruthlessly 00:06:36.920 --> 00:06:40.259 zeroed in on small traceable grassroots donors. 00:06:40.839 --> 00:06:43.560 But the eligibility hurdle to even start getting 00:06:43.560 --> 00:06:46.699 those matches is incredibly steep. They want 00:06:46.699 --> 00:06:49.439 to weed out the people who aren't serious. Exactly. 00:06:50.160 --> 00:06:52.620 You have to prove you aren't just a fringe candidate 00:06:52.620 --> 00:06:55.899 running a vanity campaign. To qualify, a candidate 00:06:55.899 --> 00:06:58.779 has to submit proof to the FEC that they have 00:06:58.779 --> 00:07:02.259 raised at least $5 ,000 in each of at least 20 00:07:02.259 --> 00:07:05.000 different states. OK, 20 states, $5 ,000 each. 00:07:05.339 --> 00:07:07.100 I mean, in the grand scheme of a presidential 00:07:07.100 --> 00:07:09.199 run, $100 ,000 doesn't sound that hard. You just 00:07:09.199 --> 00:07:11.240 call up a few rich friends in different states. 00:07:11.500 --> 00:07:14.920 Right. Well. That's where the trap closes. Remember 00:07:14.920 --> 00:07:18.959 that $250 limit? Oh, oh wait. Yeah, only a maximum 00:07:18.959 --> 00:07:23.000 of $250 per individual applies toward that $5 00:07:23.000 --> 00:07:26.180 ,000 threshold in each state. You can't just 00:07:26.180 --> 00:07:29.740 find one wealthy donor in Wyoming to write a 00:07:29.740 --> 00:07:32.970 $5 ,000 check. You need at least 20 individual 00:07:32.970 --> 00:07:36.209 people in Wyoming giving $250 each. And you have 00:07:36.209 --> 00:07:38.850 to do that in 20 separate states. It's literally 00:07:38.850 --> 00:07:41.769 like unlocking a power up in a video game. You 00:07:41.769 --> 00:07:43.689 can't just buy your way to the boss level. You 00:07:43.689 --> 00:07:45.949 have to grind through the lower levels, proving 00:07:45.949 --> 00:07:49.930 you actually have genuine widespread grassroots 00:07:49.930 --> 00:07:52.149 support across the country. That's a great analogy. 00:07:52.430 --> 00:07:55.230 And only then do you unlock the government multiplier 00:07:55.230 --> 00:07:57.689 that doubles your small donations. But the second 00:07:57.689 --> 00:07:59.930 you unlock that multiplier, you also lock in 00:07:59.930 --> 00:08:02.459 those brutal restrictions we talked about. If 00:08:02.459 --> 00:08:04.519 candidates take the public matching money in 00:08:04.519 --> 00:08:07.319 the primary, they face a national spending limit. 00:08:07.439 --> 00:08:10.019 And what was that limit? Well, it increases every 00:08:10.019 --> 00:08:12.459 election cycle to account for standard inflation. 00:08:13.319 --> 00:08:15.980 For context, in the era highlighted by our sources, 00:08:16.459 --> 00:08:19.420 the FEC estimated limits for a primary election. 00:08:19.550 --> 00:08:23.290 at about $40 .9 million. OK, wait. I'm looking 00:08:23.290 --> 00:08:26.750 at this $40 .9 million national limit and thinking 00:08:26.750 --> 00:08:30.449 about modern campaigns. That is a financial straightjacket. 00:08:30.569 --> 00:08:32.590 It really is. And it's not just a national cap. 00:08:32.690 --> 00:08:35.769 There are state -by -state limits, too. A candidate 00:08:35.769 --> 00:08:37.990 has to limit their spending in a given state 00:08:37.990 --> 00:08:43.309 to $0 .654 per person of voting age, or $817 00:08:43.309 --> 00:08:47.110 ,800, whichever is greater. Imagine being a campaign 00:08:47.110 --> 00:08:49.750 manager trying to navigate that. You aren't just 00:08:49.750 --> 00:08:52.210 managing a $40 million budget. You are managing 00:08:52.210 --> 00:08:54.970 dozens of micro -budgets. Right. You have to 00:08:54.970 --> 00:08:57.389 constantly track exactly how many pennies you 00:08:57.389 --> 00:09:00.429 are spending per voter in New Hampshire versus 00:09:00.429 --> 00:09:03.750 Iowa. Managing that kind of granular state -by 00:09:03.750 --> 00:09:06.289 -state accounting while running a frantic national 00:09:06.289 --> 00:09:08.809 campaign sounds like an absolute nightmare, especially 00:09:08.809 --> 00:09:10.769 with media markets. Oh, the media markets are 00:09:10.769 --> 00:09:13.629 the worst part. Right. What happens if you buy 00:09:13.629 --> 00:09:16.789 television ads in Boston message charts? But 00:09:16.789 --> 00:09:19.769 those ads broadcast into New Hampshire, where 00:09:19.769 --> 00:09:22.830 you have a tiny spending limit. The accounting 00:09:22.830 --> 00:09:26.450 alone must be paralyzing. They do get some exemptions 00:09:26.450 --> 00:09:28.549 to help deal with this, don't they? They do. 00:09:29.049 --> 00:09:31.289 Certain fundraising expenses, up to 20 percent 00:09:31.289 --> 00:09:33.190 of the overall expenditure limit, don't count 00:09:33.190 --> 00:09:36.830 against the cap. OK. And crucially, legal and 00:09:36.830 --> 00:09:39.250 accounting expenses incurred solely to ensure 00:09:39.250 --> 00:09:41.950 the campaign's compliance with these ridiculously 00:09:41.950 --> 00:09:44.570 complex laws are totally exempt. Which makes 00:09:44.570 --> 00:09:46.629 sense because you basically need a law firm just 00:09:46.629 --> 00:09:49.350 to run the spreadsheet. Exactly. Yeah. But even 00:09:49.350 --> 00:09:51.669 with those exemptions, the spending limits became 00:09:51.669 --> 00:09:54.830 a massive structural problem. Eligible candidates 00:09:54.830 --> 00:09:57.070 can receive public funds equaling up to half 00:09:57.070 --> 00:09:58.909 of the national spending limit for the primary. 00:09:59.560 --> 00:10:02.100 However, candidates were also allowed to accept 00:10:02.100 --> 00:10:04.779 private donations up to the legal limit, which 00:10:04.779 --> 00:10:08.000 was $2 ,300 per individual donor at the time. 00:10:08.200 --> 00:10:10.299 And that leads directly to the massive turning 00:10:10.299 --> 00:10:12.799 point for this entire system, the 2008 election. 00:10:13.049 --> 00:10:15.350 The split among the candidates that year paints 00:10:15.350 --> 00:10:17.850 a vivid picture of a system breaking down in 00:10:17.850 --> 00:10:21.629 real time. In 2008, you had candidates like Tom 00:10:21.629 --> 00:10:24.990 Tancredo, John Edwards, Chris Dodd, Joe Biden, 00:10:25.250 --> 00:10:28.509 Dennis Kucinich, and Duncan Hunter, who all qualified 00:10:28.509 --> 00:10:31.029 for and elected to take the public matching funds 00:10:31.029 --> 00:10:33.730 in the primary. A pretty solid mix of candidates 00:10:33.730 --> 00:10:35.929 trying to use the system as intended. Right. 00:10:35.929 --> 00:10:38.230 But then you have John McCain. McCain qualified 00:10:38.230 --> 00:10:40.250 for the public funds, but then actively made 00:10:40.250 --> 00:10:42.690 the decision to reject them, and Barack Obama 00:10:42.690 --> 00:10:45.190 completely declined public funds for both the 00:10:45.190 --> 00:10:47.629 primary and the general election. If we connect 00:10:47.629 --> 00:10:49.710 this to the bigger picture, you're looking at 00:10:49.710 --> 00:10:52.850 the exact moments the dam broke. The public funding 00:10:52.850 --> 00:10:55.309 limits were designed to be adjusted for standard, 00:10:55.649 --> 00:10:57.750 everyday economic inflation. Like the price of 00:10:57.750 --> 00:11:00.580 milk going up. Right. But the actual cost of 00:11:00.580 --> 00:11:02.759 modern campaigning, buying television airtime 00:11:02.759 --> 00:11:05.159 in prime markets, running sophisticated digital 00:11:05.159 --> 00:11:07.860 operations, flying a massive entourage across 00:11:07.860 --> 00:11:11.000 the country, inflated at a rate far, far beyond 00:11:11.000 --> 00:11:13.519 standard economic inflation. So the limits were 00:11:13.519 --> 00:11:17.340 just completely unrealistic. Why would any modern 00:11:17.340 --> 00:11:19.919 frontrunner ever agree to cap their spending 00:11:19.919 --> 00:11:22.580 at $40 million when they know their opponent 00:11:22.580 --> 00:11:24.940 might opt out of the system entirely and raise 00:11:24.940 --> 00:11:28.159 $200 million? Exactly. And the catalyst for that 00:11:28.159 --> 00:11:31.639 realization was the internet. The internet revolutionized 00:11:31.639 --> 00:11:35.039 private fundraising. Oh, of course. Before, getting 00:11:35.039 --> 00:11:37.379 small donations meant sending out millions of 00:11:37.379 --> 00:11:40.259 pieces of direct mail or organizing endless phone 00:11:40.259 --> 00:11:43.320 banks, it was slow and expensive. But suddenly, 00:11:43.940 --> 00:11:45.720 campaigns could harvest millions of small dollar 00:11:45.720 --> 00:11:47.960 donations overnight through a website. Just a 00:11:47.960 --> 00:11:50.639 donate button and an email blast. Exactly. The 00:11:50.639 --> 00:11:52.620 public funding limits simply couldn't keep pace 00:11:52.620 --> 00:11:55.360 with the modern reality of digital private fundraising. 00:11:55.980 --> 00:11:58.120 Taking the public money went from being a helpful 00:11:58.120 --> 00:12:01.500 democratizing boost to being a fatal competitive 00:12:01.500 --> 00:12:04.730 handicap. Wow. So the primary system is this 00:12:04.730 --> 00:12:06.830 grueling matching game with spending caps that 00:12:06.830 --> 00:12:09.149 the top tier candidates eventually just outgrew. 00:12:09.529 --> 00:12:11.950 But once a candidate survives the primary, actually 00:12:11.950 --> 00:12:14.210 wins their party's nomination, and moves to the 00:12:14.210 --> 00:12:16.789 general election, the entire architecture of 00:12:16.789 --> 00:12:20.309 the system changes. It does. In the general election, 00:12:20.570 --> 00:12:23.470 the matching fund concept is abandoned entirely. 00:12:23.929 --> 00:12:26.950 It transforms into a massive, highly restrictive 00:12:26.950 --> 00:12:29.649 block grant. Here's where it gets really interesting. 00:12:29.919 --> 00:12:32.879 Major party nominees, which the system defines 00:12:32.879 --> 00:12:35.919 as those whose party received more than 25 % 00:12:35.919 --> 00:12:37.759 of the vote in the previous election, become 00:12:37.759 --> 00:12:41.840 eligible for one giant lump sum. One big check. 00:12:42.000 --> 00:12:44.600 Right. And to give you an idea of the sheer scale 00:12:44.600 --> 00:12:48.019 of this, if the election were held in 2007, that 00:12:48.019 --> 00:12:52.100 block grant was $81 .78 million. But the catch 00:12:52.100 --> 00:12:54.940 in the general election is absolute. If a nominee 00:12:54.940 --> 00:12:57.799 accepts that $81 million grant from the public 00:12:57.799 --> 00:13:00.679 fund, they cannot accept any private contributions 00:13:00.679 --> 00:13:03.740 for their campaign. Zero. Wow. Cut off completely 00:13:03.740 --> 00:13:06.279 from donors. Entirely. Furthermore, they must 00:13:06.279 --> 00:13:08.480 strictly limit their total spending to the exact 00:13:08.480 --> 00:13:10.899 amount of that grant. They are allowed to spend 00:13:10.899 --> 00:13:14.200 up to $50 ,000 of their own personal funds, which 00:13:14.200 --> 00:13:16.360 doesn't count against the limit, but otherwise, 00:13:16.659 --> 00:13:19.059 they are entirely locked in. It's like a high 00:13:19.059 --> 00:13:21.799 -stakes reality show wager. You know, you were 00:13:21.799 --> 00:13:25.360 standing on stage and the host says, do you want 00:13:25.360 --> 00:13:28.480 to take this suitcase guaranteed to hold 81 million 00:13:28.480 --> 00:13:31.240 dollars but you cannot earn a single penny more? 00:13:31.519 --> 00:13:34.740 Or do you decline the suitcase, walk away with 00:13:34.740 --> 00:13:38.240 absolutely nothing guaranteed, and try to raise 00:13:38.240 --> 00:13:41.100 limitless hundreds of millions on your own out 00:13:41.100 --> 00:13:44.340 in the wild? It is a tremendous gamble. You are 00:13:44.340 --> 00:13:47.019 betting that your private fundraising operation 00:13:47.019 --> 00:13:49.659 is stronger than the $81 million that the government 00:13:49.659 --> 00:13:53.039 is offering. But... As with all complex tax and 00:13:53.039 --> 00:13:55.539 election laws, there is a fascinating loophole 00:13:55.539 --> 00:13:58.559 that campaigns utilize. Oh yes, the GAC loophole. 00:13:58.620 --> 00:14:01.120 Such a classic Washington maneuver. Even if candidates 00:14:01.120 --> 00:14:03.559 take the massive public grant and explicitly 00:14:03.559 --> 00:14:06.440 agree to the no private contributions rule, they 00:14:06.440 --> 00:14:08.120 are still allowed to go out and raise private 00:14:08.120 --> 00:14:10.419 funds for GLACs, which stands for General Election 00:14:10.419 --> 00:14:12.659 Legal and Accounting Compliance funds. Because 00:14:12.659 --> 00:14:15.139 the election laws we are discussing are so intricate, 00:14:15.559 --> 00:14:18.600 so punitive if you mess up, campaigns need an 00:14:18.600 --> 00:14:20.769 absolute army of lawyers and accountants just 00:14:20.769 --> 00:14:22.409 to make sure they aren't accidentally breaking 00:14:22.409 --> 00:14:26.210 the rules. So the FEC allows them to raise unlimited 00:14:26.210 --> 00:14:28.970 private money exclusively to pay for those legal 00:14:28.970 --> 00:14:31.669 and accounting expenses. They can even use these 00:14:31.669 --> 00:14:34.389 privately raised funds to pay for election recounts, 00:14:34.409 --> 00:14:36.350 which is considered an allowable winding down 00:14:36.350 --> 00:14:38.409 expense. Wait a second, though. There is something 00:14:38.409 --> 00:14:40.870 wildly absurd about Glax. I saw in the source 00:14:40.870 --> 00:14:44.490 that in 2007, the FEC actually ruled that up 00:14:44.490 --> 00:14:48.190 to 5 % of a campaign's broadcast television advertising 00:14:48.190 --> 00:14:51.129 could be paid for using these privately raised 00:14:51.129 --> 00:14:54.309 legal and accounting funds. Yes. And the justification 00:14:54.309 --> 00:14:56.970 is amazing. Why? Because under the Bipartisan 00:14:56.970 --> 00:14:59.210 Campaign Reform Act, candidates have to look 00:14:59.210 --> 00:15:01.940 into the camera and include that mandatory legal 00:15:01.940 --> 00:15:04.279 disclaimer, I approve this message. Right, the 00:15:04.279 --> 00:15:07.200 BCRA disclaimer. The FEC determined that saying 00:15:07.200 --> 00:15:09.779 those words takes up about 5 % of a standard 00:15:09.779 --> 00:15:12.320 commercial's running time, so 5 % of every single 00:15:12.320 --> 00:15:14.740 television ad is technically a legal compliance 00:15:14.740 --> 00:15:18.019 cost. It is a brilliant, if utterly ridiculous, 00:15:18.419 --> 00:15:21.100 piece of regulatory interpretation. But doesn't 00:15:21.100 --> 00:15:24.799 this GLAC exemption... basically defeat the entire 00:15:24.799 --> 00:15:27.399 purpose of the no private contributions rule? 00:15:27.980 --> 00:15:29.840 I mean, if the whole point of taking the $81 00:15:29.840 --> 00:15:32.840 million was to free yourself from wealthy donors, 00:15:33.320 --> 00:15:36.000 but you can still go out and raise limitless 00:15:36.000 --> 00:15:38.600 millions in private money to pay your lawyers, 00:15:39.000 --> 00:15:42.299 your accountants, and literally 5 % of your entire 00:15:42.299 --> 00:15:45.360 television advertising budget, aren't you still 00:15:45.360 --> 00:15:49.200 completely dependent on Begging special interests 00:15:49.200 --> 00:15:52.159 for cash? Oh, it absolutely dilutes the purity 00:15:52.159 --> 00:15:54.620 of the public funding ideal. It creates this 00:15:54.620 --> 00:15:57.100 shadow campaign where candidates are constantly 00:15:57.100 --> 00:15:59.799 fundraising just for compliance. So much for 00:15:59.799 --> 00:16:02.480 keeping special interests out. Exactly. But while 00:16:02.480 --> 00:16:04.399 the major parties have the resources to exploit 00:16:04.399 --> 00:16:06.500 these loopholes, we have to look at how this 00:16:06.500 --> 00:16:08.899 system impacts minor parties because the rules 00:16:08.899 --> 00:16:11.919 trap them in an agonizing paradox. Right. Minor 00:16:11.919 --> 00:16:14.159 parties defined as those who got between 5 and 00:16:14.159 --> 00:16:16.179 25 percent of the popular vote in the previous 00:16:16.179 --> 00:16:18.320 election. They don't get the full 81 million 00:16:18.320 --> 00:16:20.769 dollars. Not even close. They get a proportionate 00:16:20.769 --> 00:16:23.090 amount of funding based on their party's past 00:16:23.090 --> 00:16:26.070 performance relative to the major parties. New 00:16:26.070 --> 00:16:28.789 parties can get partial funding, but only after 00:16:28.789 --> 00:16:30.870 the election is over and only if they manage 00:16:30.870 --> 00:16:33.889 to somehow hit that 5 % threshold. And here's 00:16:33.889 --> 00:16:37.549 the paradox. Minor and new party candidates are 00:16:37.549 --> 00:16:39.710 allowed to supplement their partial public funds 00:16:39.710 --> 00:16:43.110 with private contributions. However, if they 00:16:43.110 --> 00:16:45.860 accept any public money at all, They're subjected 00:16:45.860 --> 00:16:49.240 to the exact same overall spending limits that 00:16:49.240 --> 00:16:51.500 apply to the major party candidates. That is 00:16:51.500 --> 00:16:54.159 incredibly punishing. They receive a tiny fraction 00:16:54.159 --> 00:16:55.879 of the public money that the major candidates 00:16:55.879 --> 00:16:59.000 get, yet they have to wear the exact same financial 00:16:59.000 --> 00:17:01.899 straitjacket. If a major candidate opts out and 00:17:01.899 --> 00:17:04.640 spends $500 million, the minor party candidate 00:17:04.640 --> 00:17:07.119 who took a small public grant is still legally 00:17:07.119 --> 00:17:11.019 capped at spending $81 million. It actively suffocates 00:17:11.019 --> 00:17:13.849 their ability to break through. And perhaps it's 00:17:13.849 --> 00:17:17.670 no surprise that a system this burdensome, convoluted, 00:17:17.769 --> 00:17:20.190 and structurally flawed has fallen out of favor 00:17:20.190 --> 00:17:22.109 not just with the candidates trying to use it, 00:17:22.250 --> 00:17:24.069 but with the taxpayers who are supposed to be 00:17:24.069 --> 00:17:26.589 funding it. The participation numbers tell a 00:17:26.589 --> 00:17:29.670 stunning story of systemic collapse. Back in 00:17:29.670 --> 00:17:33.509 1977, about 29 % of American taxpayers checked 00:17:33.509 --> 00:17:36.650 that $3 box on their 1040. Nearly a third of 00:17:36.650 --> 00:17:39.309 the country. Fast forward to 1992 and it had 00:17:39.309 --> 00:17:43.470 dropped to 19%. By the year 2020, participation 00:17:43.470 --> 00:17:46.589 had plummeted to an abysmal 3 .6 percent. It 00:17:46.589 --> 00:17:49.190 was a near total rejection by the public. The 00:17:49.190 --> 00:17:51.430 data points to a few distinct reasons for this 00:17:51.430 --> 00:17:54.410 mass exodus. First, there is a general lack of 00:17:54.410 --> 00:17:56.150 understanding of what the fund actually does. 00:17:56.690 --> 00:17:58.630 Second, the jump from one dollar to three dollars 00:17:58.630 --> 00:18:01.349 in 1994 may have deterred some people who felt 00:18:01.349 --> 00:18:03.470 it was getting too expensive, even though it 00:18:03.470 --> 00:18:05.250 wasn't. Right. The optics of the price hike. 00:18:05.450 --> 00:18:08.049 Third, there is a cited apathy toward the political 00:18:08.049 --> 00:18:11.170 duopoly. Voters are simply unenthusiastic about 00:18:11.170 --> 00:18:13.789 funding the major parties. And finally, there 00:18:13.789 --> 00:18:16.250 is that widespread entirely erroneous belief 00:18:16.250 --> 00:18:19.690 we debunked earlier. Millions of people mistakenly 00:18:19.690 --> 00:18:21.910 thinking that checking the box actually increases 00:18:21.910 --> 00:18:24.329 their personal tax liability. It's a perfect 00:18:24.329 --> 00:18:27.250 storm of bureaucratic confusion and deep political 00:18:27.250 --> 00:18:29.789 disillusionment. So what does this all mean? 00:18:30.119 --> 00:18:32.420 I look at these numbers, and it reminds me of 00:18:32.420 --> 00:18:34.940 a forgotten subscription service that millions 00:18:34.940 --> 00:18:37.359 of Americans just silently opted out of over 00:18:37.359 --> 00:18:39.819 a 40 -year period until almost no one was left. 00:18:39.960 --> 00:18:41.859 Like a gym membership everyone stopped using. 00:18:42.079 --> 00:18:45.019 Yeah, exactly. But the logic of the taxpayers 00:18:45.019 --> 00:18:48.519 here is entirely backward. If people are leaving 00:18:48.519 --> 00:18:51.299 the box blank because they are apathetic toward 00:18:51.299 --> 00:18:53.940 the political duopoly, starving this fund is 00:18:53.940 --> 00:18:56.339 the absolute worst way to protest. Oh, I have 00:18:56.339 --> 00:18:58.059 to move. The major candidates don't care about 00:18:58.059 --> 00:19:00.700 the fund anymore. They abandon— it to raise private 00:19:00.700 --> 00:19:03.400 millions. It's the minor parties who desperately 00:19:03.400 --> 00:19:05.700 rely on this proportional public money just to 00:19:05.700 --> 00:19:09.640 survive and compete. Leaving the box blank accidentally 00:19:09.640 --> 00:19:12.660 crushes the very alternative voices those frustrated 00:19:12.660 --> 00:19:15.710 voters might actually want to hear. This raises 00:19:15.710 --> 00:19:18.049 an important question, and it really highlights 00:19:18.049 --> 00:19:21.029 the deep structural irony of the entire situation. 00:19:21.670 --> 00:19:24.549 You have an American public that is consistently 00:19:24.549 --> 00:19:27.190 frustrated with the outsized influence of big 00:19:27.190 --> 00:19:30.769 money in politics. And yet, largely due to misunderstandings 00:19:30.769 --> 00:19:34.190 of a tax form, that same public accidentally 00:19:34.190 --> 00:19:37.069 defunded the most significant mechanism ever 00:19:37.069 --> 00:19:39.950 created to publicly finance elections. It's almost 00:19:39.950 --> 00:19:42.910 tragic. It is. The system just withered on the 00:19:42.910 --> 00:19:45.640 vine. And that decline led directly to a very 00:19:45.640 --> 00:19:49.339 surprising, brilliant legislative pivot in 2014. 00:19:49.640 --> 00:19:52.579 Ah, the Gabriella Miller Kids First Research 00:19:52.579 --> 00:19:55.539 Act. Exactly. Historically, a significant portion 00:19:55.539 --> 00:19:58.259 of the Chekhov Fund, about 23%, was used to pay 00:19:58.259 --> 00:20:01.220 for the massive televised national party conventions. 00:20:01.420 --> 00:20:04.539 But in 2014, Congress passed this act. which 00:20:04.539 --> 00:20:06.500 legally took the money the presidential election 00:20:06.500 --> 00:20:09.000 campaign fund earmarked for those party conventions 00:20:09.000 --> 00:20:11.779 and diverted it. They redirected it to pay for 00:20:11.779 --> 00:20:13.980 research into pediatric cancer through the National 00:20:13.980 --> 00:20:16.180 Institutes of Health, providing an estimated 00:20:16.180 --> 00:20:20.859 $126 million over 10 years. When you analyze 00:20:20.859 --> 00:20:24.200 the political mechanics of that move, it is staggering. 00:20:24.430 --> 00:20:27.569 The campaign fund was struggling, taxpayer participation 00:20:27.569 --> 00:20:30.190 was at historic lows, and candidates were opting 00:20:30.190 --> 00:20:32.809 out because the limits were too strict. Congress 00:20:32.809 --> 00:20:36.069 took this dying, highly regulated political fund 00:20:36.069 --> 00:20:39.410 and repurposed it into unassailable pediatric 00:20:39.410 --> 00:20:41.710 cancer research. Unassailable is the perfect 00:20:41.710 --> 00:20:44.150 word for it. It was a flawless legislative maneuver 00:20:44.150 --> 00:20:47.180 because Who on earth is going to vote against 00:20:47.180 --> 00:20:49.980 funding pediatric cancer research just to save 00:20:49.980 --> 00:20:52.420 money for political party conventions? Absolutely 00:20:52.420 --> 00:20:55.200 no one. It is the ultimate trump card in any 00:20:55.200 --> 00:20:57.299 legislative debate. You cannot argue against 00:20:57.299 --> 00:20:59.339 those optics. It effectively signaled the end 00:20:59.339 --> 00:21:01.819 of the convention funding era of the Chekhov, 00:21:02.099 --> 00:21:04.920 reflecting just how obsolete the original 1960s 00:21:04.920 --> 00:21:07.119 vision had become. Well, to bring our journey 00:21:07.119 --> 00:21:09.799 full circle, we started with a well -intentioned 00:21:09.799 --> 00:21:14.339 $1 checkoff box in 1966. It was a bold, idealistic 00:21:14.339 --> 00:21:16.720 attempt to combat the influence of special interests 00:21:16.720 --> 00:21:19.420 and provide clean public money for elections. 00:21:19.519 --> 00:21:22.349 A very noble goal. But over the decades, it evolved 00:21:22.349 --> 00:21:25.470 into an agonizingly complex system of state -by 00:21:25.470 --> 00:21:28.549 -state microlimits, accounting loopholes, and 00:21:28.549 --> 00:21:31.809 bizarre television ad exemptions. It became a 00:21:31.809 --> 00:21:33.690 system that top candidates eventually had to 00:21:33.690 --> 00:21:36.230 abandon just to stay competitive against Internet 00:21:36.230 --> 00:21:38.690 fundraising and one that taxpayers ultimately 00:21:38.690 --> 00:21:42.019 ignored due to confusion and apathy. Understanding 00:21:42.019 --> 00:21:44.400 the architecture of this failed system really 00:21:44.400 --> 00:21:46.460 helps us understand why our political landscape 00:21:46.460 --> 00:21:49.319 looks the way it does today. The rules we set 00:21:49.319 --> 00:21:52.119 dictate the game that is played. It's the Wild 00:21:52.119 --> 00:21:54.980 West out there. Is the concept of a publicly 00:21:54.980 --> 00:21:58.480 funded presidential election dead forever? Or 00:21:58.480 --> 00:22:00.220 are we just waiting for someone to figure out 00:22:00.220 --> 00:22:02.559 a modern reboot of the system that actually works 00:22:02.559 --> 00:22:05.319 for the internet age? Think about that the next 00:22:05.319 --> 00:22:07.039 time you're sitting at your kitchen table, buried 00:22:07.039 --> 00:22:10.259 in W -2s, staring down that $3 question at the 00:22:10.259 --> 00:22:11.599 very bottom of Form 1040.