The first presidential election since the so called "Citizens United" decision lived up to its hype, with unprecedented outside spending from new sources making headlines.

Demos and U.S. Public Interest Research Group Education Fund analysis of reports from campaigns, parties, and outside spenders to the Federal Election Commission found that our big money system distorts democracy and creates clear winners and losers.

Executive Summary: Wealthy Donors Over Average Citizens
Newly minted Super PACs dominated outside spending reported to the FEC, aggregating huge sums from millionaires and billionaires.

•    The top 32 Super PAC donors, giving an average of $9.9 million each, matched the $313.0 million that President Obama and Mitt Romney raised from all of their small donors combined—that’s at least 3.7 million people giving less than $200.

•     Nearly 60% of Super PAC funding came from just 159 donors contributing at least $1 million. More than 93% of the money Super PACs raised came in contributions of at least $10,000—from just 3,318 donors, or the equivalent of 0.0011% of the U.S. population.

•    It would take 322,000 average-earning American families giving an equivalent share of their net worth to match the Adelsons’ $91.8 million in Super PAC contributions.

•     Super PACs accounted for more than 60% of outside spending reported to the FEC.

•   For the 2012 cycle, Super PACs received more than 70% of their funds from individuals, and a significant percentage (12%) from for-profit businesses.

Fundraising for candidate campaigns was also dominated by an elite donor class and special interests.

•    Candidates for both House and Senate raised the majority of their funds from gifts of $1,000 or more; and 40% of all contributions to Senate candidates came from donors giving at least $2,500, from just 0.02% of the American population.

•  In the 2012 election cycle, 83.9% of House candidates and 66.7% of Senate candidates who outspent their general election opponents won their elections.

•   Winning House candidates outraised major opponents by 108%, winning Senate candidates by 35%.

Special Interests Over the Public Interest: Super PACs raised a significant portion of their funds from business interests.

•   For-profits corporations were the second largest donors to Super PACs accounting for 12% of all contributions.

•   Businesses provided a significant portion of the funds for some of the most active super PACs, including 18.0% of Restore Our Future’s funds and 52.7% of Freedomworks for America’s funds.

Candidates, and especially winning candidates, raised a significant portion of their funds from political action committees (PACs).

•   Winners of federal House races raised on average 40% of their funds from PACs versus 19.9% raised by major opponents.

•    Winners of Senate races raised on average 15.9% of their funds from PACs versus 8.3% for losers.

Incumbents Over Challengers & Grassroots Candidates

•   In 2012 95.2% of incumbent senators and 91.2% of incumbent representatives who ran for office won re-election.

•   In the 2012 cycle, incumbent representatives outraised major challengers $1,732,000 to $319,000, for an incredible 443% advantage. Senate incumbents outraised major challengers $7.02 million to $1.69 million, for a slightly smaller 316% advantage.

•   Challengers depended upon self-financing for more than 20% of their funds, showing that it’s important to be wealthy to run against an incumbent in our big-money system.

Secret Spenders Over Voters Seeking Accountability

•    Non-profit groups, which before 2010 were not allowed to directly spend on elections, spent big while hiding the identity of their donors.

•   Of outside spending reported to the FEC, 31% was “secret spending,” coming from organizations that are not required to disclose the original sources of their funds.

•   Much of the spending by these non-profit groups went unreported as it fell outside a certain window of time before the elections. Further analysis shows that dark money groups accounted 58% of funds spent by outside groups on presidential television ads.

The first presidential campaign cycle since the Supreme Court’s Citizens United ruling lived up to its hype, breaking previous records for total spending and exaggerating the undue electoral power of wealthy individuals and special interests to the point of awakening unprecedented public focus on the failings of our campaign finance system.

This report offers a comprehensive analysis of the fundraising and spending in federal races in the 2012 elections. The primary goal is to provide a quantitative analysis to describe tangibly what the vast majority of Americans already understand: political power in America is concentrated in the hands of an elite fraction of the populace—threatening the very concept of government of, by, and for the people.

While thankfully the amount of money raised and spent is not a perfect predictor of victory in our elections, it is undeniably a key to every step of the process of running for office—from deciding whether to put one’s hat into the ring to qualifying for the ballot to securing a major party nomination and amplifying a message during a general election campaign. The rising cost of elections makes it increasingly difficult to raise the threshold amount of money necessary to compete at each stage of a campaign. Thus as the cost of elections soars our candidate pool shrinks, cutting off opportunities to serve for average Americans and narrowing the spectrum of views and perspectives offered to the public at the polls.

But, more important than the total amount spent in any election is where all this money comes from. If candidates for federal office were mostly raising money in small contributions from average citizens, and if outside spending groups were organizing these average citizens to give them a louder voice in the political process, the sheer volume of money raised and spent might not present such a troubling problem.

Unfortunately, if unsurprisingly, this is not the case. Spending on modern U.S. elections is dominated by a small minority of special interests and wealthy donors who use their economic clout to amplify their preferred messages and drown out the voices of ordinary citizens in the public square.

The wealthy translate their greater electoral role into increased influence over public policy in two basic ways: by helping elect candidates who share their values, and by limiting the range of acceptable policy positions that candidates may take if they want to remain competitive—effectively shaping the agenda in Washington and state capitals across the country.

This outsized role of wealthy individuals and special interests in U.S. elections is inherently unfair. One can view American history as a long and arduous struggle to fulfill the promise of true political equality. From the Declaration of Independence through the Reconstruction Amendments and the Supreme Court’s one-person, one-vote, poll tax, property requirement, and candidate filing fee cases, we’ve struggled to push past restrictions on participation based upon race, gender, and wealth. The continued disproportionate influence of the wealthy violates the basic principle of political equality and shows we have not yet completed our journey.

But the problems with big money dominance go beyond the theoretical.

New research shows that because the wealthy hold different policy priorities than does the general public, their dominance of elections actually skews public policy. Those who aspire to win or keep public office are caught in a never-ending arms race, forced to spend precious time dialing for dollars, raising more and more money to keep up with both opposing candidates and a potential onslaught of outside spending fueled by any special interest they may have offended by word or deed.

And, our analysis shows that incumbents fare quite well in the current big-money system. Meanwhile, non-wealthy Americans, grassroots candidates, and public faith in democracy fare significantly less well.

These problems came into stark relief during the Republican presidential primaries, when huge gifts to Super PACs shifted the dynamics of the entire campaign and Stephen Colbert provided a satirical lesson in modern civics to an outraged cadre of late-night viewers.

But, we didn’t get here overnight. Our current problems stem from a lack of Congressional initiative combined with more than 40 years of misguided jurisprudence, which has tied the hands of citizens, advocates, and elected officials.

It doesn’t have to be this way. A campaign finance system that empowers average citizens—by providing incentives for small contributions and strictly limiting both contributions to candidates and outside spending, for example—can promote political equality, enable candidates and elected officials to spend more time reaching out to a broad range of constituents, and better align policy outcomes with public preferences. We conclude our analysis by offering concrete policy recommendations to help create a “small donor democracy.”

These solutions won’t be easy to enact. But, the good news is that the American public is squarely on the side of reform.

And, thanks to the conspicuously undemocratic role of money in the 2012 elections, there is more attention to the problems with our democracy, and energy behind fixing them, now than perhaps at any time since the aftermath of Watergate in the mid-seventies.

Now is the time to finally build a democracy in which the size if a citizen’s wallet does not determine the strength of her voice.

The full report is at <<>>

January 17, 2013