Five reasons why political campaigns go into debt

Post by Mike Klassen in

2 comments

got-debt
Got debt? You might be a political party then

It might seem obvious to some, but let's ask the question. Why do political campaigns go into debt?

In Vancouver, we've discussed how during the past two elections (2005 & 2008) Vision Vancouver have accumulated a combined debt of $439,000. During the 2009 Provincial election both the BC Liberal Party and the BC NDP accumulated large campaign debts. And so did all the major federal parties in the last campaign – with the federal Liberal Party supposedly struggling the most afterward.

After the 2002 civic campaign in Vancouver there was a lot written about how COPE ended the campaign in debt, with Coun. David "Carbon" Cadman holding the bag for a personal loan to that organization for $50,000, which the party reportedly never fully paid back.

It's not bad bookkeeping that allows it to happen, as political campaigns typically have expert help with accounting. Every penny of every campaign I've worked on is carefully counted. I think there would appear to be three main motivators for a political organization to go into debt.

I determine that the reasons are:

  1. The campaign feels if they do not spend the extra cash it could make the difference between winning or losing. Good campaign managers can guess just how many signs, mail drops or ads are enough. But if it appears that your opponent is going to spend more on these items, there is a temptation to spend more also.
  2. The political organization is confident in their funding sources that they can go back to the well again. The big parties have a number of key donors, but frequently they can be "tapped out". As we've seen with the provincial parties and the fed Liberals, replenishing the coffers can be challenging especially during tough economic times.

    The NDP can usually count on labour unions for money, and the provincial Liberals can usually count upon business-friendly sources. However, both are affected by the thrust of the economy, and by polling numbers. In the case of Vision Vancouver, they've received money from sources that raised eyebrows (Vision donor John Lefebvre gave $175,000 and was charged with money laundering thereafter by the FBI; tens of thousands were donated to Gregor Robertson by US citizens), as well as a large dollop of cash from Vancouver's developer community.
  3. They think they're playing within the rules, or think they won't get caught breaking them. Punishment for elections violations are very rare, even when the evidence mounts up that there have been infractions. There are a few recent examples of questionable elections activity where authorities do not seem to be getting involved.

    The Vancouver Sun's Daphne Bramham covered the case of an apparent election violation by members of the city council in Summerland, BC. The issue of a Chinese-language leaflet distributed in Vancouver-Fraserview allegedly by members of Kash Heed's campaign team does not appear to be a threat to the MLA's victory. And in Vancouver, of course we have the case of Vision Vancouver flouting the rules set out by the City's Charter with regards paying off their campaign debt. Something as simple as reporting who is giving you money to pay down your 2008 campaign expenses (and who is holding that debt and collecting interest on it) is contorted by the party into a private matter only divulged when the organization wants to reveal themselves.
  4. The odds are pretty good the gamble will pay off. In elections, you will win, or your opponent will. A 50-50 chance is pretty good odds that most high rollers will take when placing a bet.
  5. Voters don't care if parties rack up debt. Sad but true, but politicians never wear the issue of how much debt their campaigns build up. Staying in the black, as both COPE and the NPA did in 2008, might make their board members sleep better at night, but it doesn't get them any brownie points from the electorate.

Recent rule changes to reform and harmonize the municipal and provincial elections rules will still not prevent civic campaigns from spending more money than they raise of course. The rules haven't prevented the provincial and federal campaigns from racking up debt. But thankfully there is increasing scrutiny from mainstream media and the web in exploring who is bankrolling political campaigns, and which parties are digging themselves a hole trying to get elected.

- post by Mike

2 Comments

Vision Vancouver's blogger/mouthpiece penned a story in the Sun today. It is incomprehensible. Poorly written with terrible sentence structure. Can anyone explain to me what point he was trying to make? If he really is on the VV payroll, they should ask for a refund. I also don't understand why the management team at the Sun feel it is important to put this guy on their oped pages. Sad. So sad.

I forgot to mention an important detail. We might add it as "Number Six".

Someone MUST carry the debt for the political organization. In the case of the Federal and Provincial parties, it's my understanding that banks will keep the money raised in more prosperous ridings "in trust" and use it as collateral against a debt.

So while the central party (BCL or NDP) might have debt, the banks know that some riding associations have money. Therefore they will hold the debt, and collect interest.

However, in the case of Vision Vancouver, someone has "loaned" them a quarter million dollars to cover their debt, and received – according to their own records – $14,000 in interest.

So carried Vision Vancouver's debt, and who has received interest payments from the party for holding that debt? Was it Vancity, or an individual?

Without this ability to carry large debt, political parties may have a harder time running election campaigns.

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