What Happens to the Money Politicians Raise After they Drop Out?

Posted Mar 23, 2020 by Martin Armstrong

QUESTION: What happens to the money politicians raise and then they drop out? Do they keep it?

MH

ANSWER: Actually, they use to pocket it, tax-free of course. Did you ever wonder why CEOs of Goldman Sachs take high ranking positions and then leave? Due to the conflict of interest laws, they must sell their stock to take the job. Because they MUST sell their stock, it is tax-free.

With respect to politicians, they’ll often put their leftover funds toward their next race. If they choose not to run, they have to abide by the same FEC rules. However, prior to 1993, U.S. Representatives who took office before January 8, 1980, were allowed to keep any leftover campaign cash when they retired. Politicians were also spending millions in campaign donations on personal items like clothing, jewelry, artwork, personal travel, and dry cleaning. These corrupt practices of Congress were exposed so they passed a law negating this custom for the House; the Senate already had provisions in place so this wouldn’t happen.

Nevertheless, politicians usually find a way to make that cash still work for themselves often under state laws, which differ significantly from federal rules. For example, Chris Christie won reelection as New Jersey’s governor in 2014. He then used the excess money to cover the legal fees racked up during the Bridgegate scandal.

The FEC guide also tells us the money could be refunded to donors, spent on gifts (or “donations of nominal value”) to non-family members, moving expenses after leaving office, home security for officeholders, and work-related “travel expenses for a federal officeholder and his or her accompanying spouse and children,” although a 2007 law puts some restrictions on that. Interestingly, campaign cash can also be used prior to the election to pay candidates a salary – but not to incumbents, and it’s capped at the lesser of what they made last year or what the office they’re seeking pays.

Politicians routinely break the rules. There are no criminal penalties for that on their part. Obama was fined the most for taking illegal money than any politician in history. As long as they can claim some justification, they can use the money tax-free.

The only way to clean this up is to eliminate donations. The reelection cost should be covered by the government.