by Ted Cruz
It was an interesting conversation—to say the least—going to Heidi, in the last week of the primary, and asking her to agree to liquidate all of our savings to put into the campaign. Not many candidates or candidates’ spouses are willing to consider that. (That’s one of the reasons so many candidates are massively wealthy.) And it’s a testament to what an amazing person Heidi is—my best friend and partner in every aspect of life—that she said yes immediately, without hesitation.
To put that money into the campaign, we sold all the stocks and bonds we had that didn’t have significant appreciation. And, rather than sell the remaining investments (which would have taken us to zero but would have unnecessarily incurred a big capital gains tax bill), I took out two loans for the equivalent amount. One was a line of credit through Citibank, which all the partners at my law firm had access to on identical terms. The other was a margin loan from Goldman Sachs, where we kept our investments. The margin loan was available on identical terms to everyone who held investments at Goldman—just like the margin loans offered by most other brokerages—and it was directly secured by those investments (you could automatically borrow up to 50 percent of their market value). Both loans were fully paid off after the primary, when the campaign paid me back much of my loan to it. (Under a particularly burdensome—and unconstitutional—federal election rule, we were prohibited from paying ourselves back all of our loan; so we had to make, in effect, a $550,000 forced “gift” from our life savings to the campaign.)
In the 2016 presidential campaign, the New York Times breathlessly broke the news of these 2012 bank loans as front-page news and treated it as somehow scandalous because I had not filed the correct paperwork with the FEC. The whole thing was quite silly, because I had publicly disclosed both loans at the time on my Senate Ethics financial disclosure—which was contemporaneous and fully available to the public. But, our campaign’s lawyer hadn’t filed the correct form (with the identical information) also with the FEC, so it was technically a violation.
In addition to all the money we raised and spent on the campaign, we also had outside help. Spending significant money in support of my Senate race was the Club for Growth, a fiscally conservative political-advocacy organization that spent several million dollars speaking out in favor of my conservative record. If the Democrats had had their way, the Club for Growth—and any other citizen-advocacy organization—would have been silenced. And it would likely have proven impossible to defeat an incumbent statewide official with a massive personal fortune and statewide name recognition.
Pause to think about how many elected officials today are multi-millionaires with personal fortunes in the hundreds of millions of dollars and the ability simply to swamp anyone on the other side. If citizens were silenced, we’d get even more billionaires trying to buy elections.
Pause also to consider just how much more the proverbial deck would be stacked in favor of incumbents if we tried to silence all of America’s great civic organizations—society’s intermediating institutions about which Alexis de Tocqueville famously waxed poetic—and prevented them from donating to or advocating on behalf of challengers to incumbent politicians. Such a vision of our politics would have been anathema to the Framers of our Constitution.
Our current campaign system is, frankly, stupid. It makes no sense. Because, in the wake of Citizens United, when Congress lacked the authority to prohibit citizen groups from speaking, the Federal Election Commission nonetheless enforced regulations that prohibited candidates from conferring with those citizen groups. And so today, in a significant number of federal elections, the biggest speakers, in terms of dollars spent, are outside groups—or “super PACs”—with whom the ostensible candidate is legally prohibited from communicating on strategy, messaging, or substance.
That makes no sense from anybody’s perspective. These super PACs are now typically run by political consultants who profit obscenely and make millions of dollars precisely because no candidate is able to oversee what the consultants are doing. And the messaging is often only tangentially related to the core of what the candidate wishes to say. This serves no one’s interests (other than the greedy consultants and K Street–lobbyist fat cats).
Each year that I’ve been in the Senate, I’ve introduced legislation called the “Super PAC Elimination Act.” The Super PAC Elimination Act would not prohibit super PACs, or any other citizen groups, from speaking. Rather, it would make two very simple changes. One, it would allow unlimited individual donations directly to a political candidate’s campaign. No corporate donations, and no union donations, just individuals. And two, it would require immediate, twenty-four-hour disclosure of any such donations.
Sunlight is the best disinfectant, and political speech is no different. As Chief Justice Roberts said in the campaign finance case of McCutcheon v. Federal Election Commission, “Disclosure of contributions minimizes the potential for abuse of the campaign finance system.”
As a practical matter, passing the Super PAC Elimination Act would functionally eliminate super PACs because every candidate would much rather control his or her own message—what he or she is saying. And with immediate disclosure, if a particular donor wrote a massive check to a particular candidate—for example, the tens of millions of dollars spent every cycle by Democratic super-donors like George Soros and Mike Bloomberg and Tom Steyer—then those donations would be disclosed immediately and could be the subject of public debate, with the electorate deciding whether the acceptance of those contributions affected their votes at the ballot box.
The system I proposed is, in fact, very similar to the system that operates in the State of Texas for state elections. Candidates for state elections in Texas can accept unlimited donations from individuals but cannot accept any donations from corporations or from labor unions. And those contributions are all exposed for public scrutiny.
Although I had never been elected to office before the Senate, for about a year, I did run as a state candidate in Texas for attorney general. In 2009, then-U.S. Senator Kay Bailey Hutchison had announced she was going to resign from the Senate in order to run for governor of Texas against the incumbent, Governor Rick Perry. As a result, Texas Lieutenant Governor David Dewhurst was expected to run for Senate, and Texas Attorney General Greg Abbott was expected to run for lieutenant governor. So I decided to launch my own run to replace my old boss as Texas attorney general.
I spent most of 2009 campaigning for AG, against four other Republicans who were expected to run: two elected State Supreme Court justices (both Abbott and his predecessor as AG, John Cornyn, had previously been elected Supreme Court justices), a state representative who was supported by many of the wealthiest business owners in Dallas, and a member of Congress who was personally worth several hundred million dollars). In contrast, I’d been SG—an appointed position—but had never run for anything.
All that year, I crisscrossed the state working to earn the support of conservative leaders, Republican women, and grassroots activists across Texas. I didn’t come from money and didn’t have massive personal money to put in the race. But, because Texas allowed unlimited individual donations, I was able to raise much more than anyone expected. When we filed our first campaign finance disclosure, our AG campaign had raised over $1 million—a sum that sent shock waves through the political world. Unknown, non-elected, non-wealthy candidates simply weren’t supposed to be able to do that.
My biggest donor for the AG race was Peter Thiel—the billionaire former CEO of PayPal who had been the first major outside investor in Facebook. Peter and I had been friends since long before he had money. We met in the mid-90s, when I was clerking for the Court and he was a young lawyer practicing corporate law. Peter is brilliant, eccentric, and one of the most innovative thinkers in the country. He’s also gay and very libertarian politically.
Peter gave $250,000 to my AG campaign; without that contribution, we never would have crossed the $1 million threshold on the first filing. And raising $1 mil
lion had real significance; I joked that $1 million in politics is ten times greater than $900,000—the “-illion” just captures people’s attention (think Dr. Evil in Austin Powers with his pinkie to his cheek, saying “one meee-lion dollars). It drives credibility and press coverage.
All of that together—the fundraising, conservative leaders uniting, the overwhelming grassroots support—convinced all four of my potential opponents not to run. Each made that announcement, and suddenly, we had gone from nothing to effectively clearing the Republican field, which at the time meant we had basically won the AG race in Texas.
And then it disappeared. In the fall of 2009, Senator Hutchison changed her mind and announced she was not going to resign her Senate seat after all. Unable to run for Senate, David Dewhurst promptly announced he was running for re-election as lieutenant governor, and that left Greg Abbott with no place to go but to announce he was running for re-election as attorney general. Within hours, I suspended my campaign for AG. I was never going to run against my friend and former boss; the plan had always been to succeed him.
At the time, I was unbelievably frustrated with Kay. When she changed her mind on resigning, it made all the work we had done for the past year disappear. But then she lost badly to Rick Perry in the gubernatorial primary and announced she was not going to run for re-election to Senate two years later.
And so we contemplated an even more audacious move. In considering whether to run for Senate, the biggest initial barrier was fundraising. To run a campaign that had even a chance to be heard statewide in Texas, I assessed that we’d need a minimum of $5 million. If we couldn’t raise that, we’d lose. Period. If we could raise closer to $10 million, we would have enough to really communicate effectively, and I believed we’d win.
Here’s where the federal limits come into play. At the time, the maximum a person could give to the primary was $2500. That means you need 400 people to max out to get to $1 million, and you need 4000 people to max out to get to $10 million. That, frankly, is really, really hard.
If you’re an incumbent, it’s not all that difficult. You have an existing infrastructure, you have “bundlers” in place (people who work to get lots of others to max out), you have name ID. “The rich get richer” is certainly how the political racket usually operates. I was trying to break that cycle.
The only reason I had a prayer of raising what we needed was that I had spent the past year running for AG. We had built at least some of the infrastructure; without it, I would have had zero chance of winning.
Texas’s no-limits system is what had let an unknown candidate without personal wealth start from nothing and succeed. That’s the counter-intuitive part: the campaign-finance limits help incumbents and substantially hurt unknown challengers. That’s exactly what they’re designed to do.
Many people misunderstand the role campaign funding typically plays. In the 1990s, Eddie Murphy starred in a light comedy called The Distinguished Gentleman, where he played a shady local con man who managed to get elected to Congress. He was thoroughly corrupt and simply wanted to raise as much money as possible. In the movie, Murphy has the following conversation with a leading D.C. lobbyist:
Lobbyist: “I’d like to do more money for you. But first I’ve got to get your positions on a few issues. Where are you on sugar price supports?”
New Congressman (looking quizzical): “Sugar price supports… where should I be, Terry?”
Lobbyist: “… Makes no difference to me. If you’re for ‘em, I got money for you from my sugar producers in Louisiana and Hawaii; if you against ‘em, I got money for you from the candy manufacturers.”
New Congressman (grinning): “You pick.”
Although somewhat exaggerated, that comedy exchange is basically right. Most people in Congress pick their positions on a given issue and then raise money from those who already support that issue. Whether sugar subsidies (I’m against) or Second Amendment rights (I’m for), there are donors who care about those issues and support candidates who do too. But, if I were on the other side of those issues (or a thousand more), there are donors on the other side who will happily support campaigns as well.
What the Washington Swamp is biased towards is the status quo. Incumbents. Established power players (on both sides). That’s why massive new spending bills are typically a bipartisan extravaganza. And strict individual limits favor—and are designed to favor—those with institutional power.
Take an issue like an Internet sales tax—something I’m passionately against. The Swamp is overwhelmingly for it because the large brick-and-mortar retailers are for it, and the large Internet retailers are as well (because it hammers their rivals). The only losers are the small online retailers, the mom-and-pop internet sellers. And they don’t have lobbyists. That’s why 70–80 percent of the Senate, from both parties, support creating on online sales tax—because it’s an issue that unites all the D.C. lobbyists. For eight years, I’ve led the opposition because it’s terrible policy, especially for the little guy.
Let’s look more closely at my races. My AG race was viable because we raised enough to be taken seriously; Peter Thiel’s $250,000 was essential for that. When I ran for Senate, the rules were more complicated. Federal candidates are not allowed to solicit more than the federal limits (then $2500). But, the rules say, you are allowed to introduce a donor to a super PAC, so long as you don’t make any requests for money yourself and you don’t discuss non-public campaign strategy.
So I introduced Peter to the Club for Growth. I followed the rules meticulously, so I didn’t ask him anything, I just told him that the Club was really good and effective. Peter wanted to have an impact on the race, so he gave the Club for Growth $1 million.
Then, the Dewhurst campaign did something stupid. They planted a nasty article entitled “Cruz Mega-Donor is Gay, Pro-Pot Billionaire.” The article highlighted Peter’s libertarian positions and slammed Peter directly, with on-the-record quotes from Dewhurst’s campaign. I was embarrassed that my friend was being made a political target. I called Peter to tell him about the article. He read it and was, understandably, pissed. So he promptly gave the Club for Growth another $1 million.
Over the years, my campaigns have received millions of individual contributions. In the presidential race alone, we had a total of 1.8 million contributions. And, with almost all of them, they’ve never asked me for anything. Most of our supporters have not been D.C.-lobbyist types, but individuals and small business owners. They just want someone to keep his word and defend the Constitution.
Peter, for all his generous support, has never asked me for anything. I presume from the press coverage that we disagree on gay marriage, but we’ve never discussed it. We may also disagree on marijuana legalization (I’d leave it to each state to decide), but I don’t know because we haven’t discussed that either.
When we do talk, it’s mostly two old friends hanging out. Many of our conversations concern Big Tech censorship, and what can be done about it. Peter’s on the board of Facebook, and he knows Silicon Valley and the tech world extremely well. And he’s one of the few people in that world really concerned about tech’s growing power and aggressive censorship, so his insight and advice on those issues is helpful.
He was able to support my Senate campaign, but only through the ridiculous means of a super PAC. That meant I had no input on how the money was spent, no role in selecting the messages. All told, the Club for Growth raised and spent about $6 million on my Senate campaign, which, when added to the $9.5 million we raised directly for the primary campaign, is the only way we were able to win (and win decisively, winning the primary by 14 points and then the general by 16 points). But I literally had to wait and see each week what ads the Club was going to run, whenever they actually went on air, and hope whatever they were saying was somehow related to what we wanted to say in the election.
What an asinine way to run elections. It would have been far better—simpler, fairer—if he could have contributed
directly to the campaign, subject to immediate disclosure. Then, we could have spent the money to convey the message we wanted, without enriching a bunch of campaign consultants at the same time.
That’s how the Texas state system works. A total of eleven states right now (Alabama, Indiana, Iowa, Mississippi, Nebraska, North Dakota, Oregon, Pennsylvania, Texas, Utah, and Virginia) have no limits on individual contributions. And that system works well.
The current federal system benefits incumbents and people with vast personal fortunes. The president is a billionaire. Two of the top Democratic contenders for president were billionaires. Right now, the Democratic governor of Illinois is a billionaire, the Republican governor of Tennessee is a billionaire, the Democratic governor of Minnesota is a billionaire, and the Republican governor of West Virginia is a billionaire. And the following current office-holders are centi-millionaires (personally worth at least $100 million): governor of Colorado (a Democrat), governor of Connecticut (a Democrat), a senator from Georgia (a Republican), a senator from Florida (a Republican), a senator from Utah (a Republican), a senator from Virginia (a Democrat), and Speaker of the House Nancy Pelosi (a Democrat).
That’s no way to run a democracy.
Instead we need more freedom and more transparency. That, in turn, results in more speech. Which is a much better way for our elections to operate.