Funding Liberty! Table of Contents
Funding Liberty!
Appendix B
Are the Numbers Reliable?
The book includes large numbers of financial tables and sets of reduced data. I have tried to be careful to check all results to the extent that this is possible. Despite my precautions, typographic errors undoubtedly remain. The major findings of this book are not based on a single number. While changes in a few numbers might shade differently my conclusions, the conclusions rest on the entire story, not on a few small parts of it.
In most cases, I am dependent on the accuracy of Federal Election Commission disclosure forms for campaign spending and fundraising data. These forms are submitted with penalties of Law for a Treasurer who knowingly submits false or incomplete reports. In one case, we have the public statement of a campaign's accountant that he had been provided with false or misleading information and that without his knowledge his report had been manipulated to be deliberately false and misleading.
What's in an FEC report? You can see one for yourself. Go on the web to www.fec.gov. They are immediately available, not only for Libertarians but for every other American who cared enough about the country to run a serious race for Federal office. The reports I quoted are there, too. The short form answer to "what's in a report?" is
1) Cover Page. Cash on hand, total income and outgo, debts to and by the committee, both for the period and the year.
2) Detailed cash flow statement, including itemized and unitemized donors, expenditures by type (e.g. Transfers to Party committees, loan repayments).
3) Detailed schedules. The most common schedules report.
A) Itemized receipts: Each donor of $200 or more, cumulative for the year, who gave money during the reporting period, including name, address, occupation, employer, and amount.
B) Disbursements: Every person and vendor given money by the campaign, the name, address, reason, date, and amount.
C) Debts and obligations. People to whom the committee owes money, how much, and why.
Several critics have attacked the validity of FEC reports as a source of information on campaign spending. These attacks have cited testimony of Danielle Brian to the Subcommittee on Government Management, Information and Technology of the House Committee on Government Reform and Oversight. Her testimony is in the public record. Her testimony is undoubtedly valid. Attacks on my methodology using her testimony are, however, wrong.
Brian's testimony, based on an extremely extensive examination of the FEC Political Action Committee contribution disclosure system, stated that 'Current FEC data inaccuracies are often very misleading.' However, Brian's 'inaccuracies' have nothing to do with the issues raised in this book. Indeed, her testimony bolsters my claim that FEC reports are highly reliable for the purposes to which they are put here, even though their other aspects have difficulties for other reasons.
What did the testimony discuss? Brian and support group did an enormously systematic study of FEC reports. They found a common set of errors in the forms. None of these types of errors would significantly affect the conclusions here. They also in some cases checked for some errors that would affect my conclusions, if they were being made. Such errors were not very significant.
Some aspects of Brian's testimony may at first appear inscrutable to a libertarian audience. To understand, recall first that FEC reports list major contributors, disbursements, debts, and loans. Many non-libertarian readers are interested only in the contributors, that is, who is supporting a particular candidate. (In some circles, "supporting" is a synonym for "purchasing".) For a candidate, contributions to the candidate appear in the list of contributors. For a PAC that supports candidates, contributions to candidates appear in the list of disbursements. Brian reports on a cross-indexing check, in which lists of disbursements by PACs to candidates were compared with each candidate's list of contributors. In a perfect world, these lists would exactly match: every PAC report of funds transferred to a candidate would be matched by a candidate's report that the funds had been received, and so on for other sorts of transfers.
The world is not perfect. The two sets of reports do not match. However, consider Brian's list of difficulties with the reports:
1) The FEC does not try to force agreement between lists of donations reported by PACs and donations received by candidates. In some cases, there are very large (apparent) discrepancies, so that candidates could be accused of having done something wrong. However, this book is almost entirely concerned with how money was spent, not where it came from. Gifts from PACs, other than the LNC, to candidates are not important here.
2) Dates on which PACs write checks and on which candidates cash those checks are not the same, so there are temporal disconnects in the data. Here, however, we are looking only at how committees spent their money. The date on which vendors or staff cashed their checks from the committees has no effect on our results.
3) In comparing reports, candidates do not always use the exact names of each PAC, so PACs make contributions that are challenging to identify in a candidate's reports. This is only a cross-indexing problem. PAC reports of disbursements—and disbursements are the topic of interest in this book—were apparently accurate.
4) The FEC reports create phantom duplicate entries in lists of contributors. I was able to identify examples of this in some FEC reports. On a given day, the same person made the same large donation repeatedly. Duplicate entries are only seen on contribution reports. The Disbursement reports that I have examined contain no duplicate entries.
5) When candidates return PAC contributions, the PAC does not always report the return. Candidates then appear to have taken PAC money when they did not do so. There could be a corresponding difficulty here, in that a campaign could pay a vendor, and the vendor could then destroy rather than cash the check. Destroying the check might then be an illegally large or illegal corporate campaign donation. However, in such cases the vendor or employee would have done the work for which he was paid. Only the source of the funds, namely the vendor rather than the reported contributors would have been improper. Libertarians are generally not concerned about sources. However, the FEC reports use multiple entry book-keeping. If there is a hidden donation, then there is a matching sum of money that appears to have been spent can be skimmed or spent improperly.
Note also for (4) and (5) that in addition to the records of income and expenditures the campaigns also provide a cash-flow report. If a record of donations or disbursements is wrong, the cash flows will not add up—unless someone has their hand in the till, of course.
6) It is possible for people other than the campaign to perform acts supporting the campaign. These are technically 'in-kind' donations. It is undoubtedly the case that many Libertarians did things to support their candidates, without channeling money through the campaign committee. For example, Harry Browne bumper stickers and yard signs were sold by a commercial firm to private persons. These commercial transactions are a fine example of capitalism at work. The campaign never reports this spending, because the campaign spent no money on it. This book only studies the money that the campaign spent.
7) The FEC did not in the period I am describing substantially penalize non-compliance with FEC regulations. AT least, it did not penalize anyone described here for anything that I have described. Indeed, a major part of our story involves non-compliance with FEC regulations, and the great benefits that can accrue to a campaign that fails to file, and thus can lie about its income and spending.
8,9) Brian notes that only some campaigns do electronic filing. Senate campaign reports reach the FEC on paper. One of my major tasks was printing and analyzing the paper reports of campaigns that file that way. All-electronic filing as available after much of this book was written would certainly have eased the burden on me, as witness my highly popular campaign “Where Your Money Went” in the ezine Let Freedom Ring!, available on the Internet at http://www.cmlc.org/cmlc/pubs.htm
10) There are technical issues related to reporting of PAC donations to multicandidate entities. This book is founded on disbursement reports. With respect to this question Brian found that the PAC reports of their disbursements are accurate.
In summary, none of the inaccuracies that Brian reported to the United States Congress would interfere with the analysis in this book. To the contrary. Difficulties 2, 3, 5, and 10 reflect in part on the accuracy of the disbursement records. The disbursement records were found to be accurate. And it is the disbursement records that I used to write this book.
Well after I started this book, an interesting issue involving campaign spending arose. At the April 2001 Libertarian National Committee meeting, copies were distributed of what was alleged to be an invoice from Perry Willis to Dean, Spear, and Associates. The invoice was for fundraising and other letters said to have been written in 1995-1996. A month later, Perry Willis issued a long public statement agreeing that he had received money in the described time frame for writing the letters in question. Rewriting the book to incorporate this information took more than a year. However, from the FEC reports, Browne 1996 did not pay Willis in the time frame in question; Browne 1996 paid Dean, Spear, & Associates for 'consulting' and other purposes. Dean, Spear in turn paid Willis. The campaign spending process involved in Browne to Dean to Willis here is invisible to an analysis of FEC filings.
There are a number of legitimate reasons for giving money to intermediaries, who then dole the cash out to subcontractors. For example, in running a large petitioning drive, you might well hire a specialist firm, and let the firm worry about hiring and paying the needed warm bodies to do the work. Unfortunately, there are also more interesting reasons for passing money through intermediaries.
That's All, Folks!