Hard Money vs. Soft Money: An Overview
There are many different interpretations that can be applied to the terms “hard money” and “soft money.” The context you take into account will determine how you define them.
When referring to distinct forms of currency in the field of economics, the terms “hard money” and “soft money” are often simplified to their most basic forms. Coins are referred to as “hard money,” whereas paper cash is referred to as “soft money.”
A client’s method of payment to their broker or financial services provider can alternatively be referred to as hard money or soft money. In this context, “hard money” refers to payments made directly for services rendered, such as brokerage commissions, whereas “soft money” refers to payments made for “indirect items,” such as the settlement of an expensive error by providing free research. Hard money is contrasted with “soft money,” which refers to “payments for direct items.” It is widespread practice in the financial sector to engage in soft money agreements, although this fact is typically kept secret from stakeholders and authorities.
However, the terminologies also play an important part in politics. In the United States, they are used to refer to several types of political contributions. The term “hard money” refers to financial support given directly to a particular candidate, whereas the term “soft money” refers to financial support given indirectly to political parties and political action committees. It is critical that the difference between political donations in the form of hard money and contributions in the form of soft money be made clear.
- The term “hard money” refers to financial support given directly to a particular candidate, whereas the term “soft money” refers to financial support given indirectly to political parties and political action committees.
- The two different kinds of contributions are governed by two separate sets of rules.
- A client’s method of payment to their broker or financial services provider can alternatively be referred to as hard money or soft money.
Hard Money
Donors, for instance, are subject to the following limits for the election cycle that will take place in 2019–2020: $5,000 from a nonconnected committee that meets the requirements to qualify as a multicandidate committee, given to each candidate for each election. If you provide more money to a candidate or candidates than the federal limits allow, you could face criminal charges, which could result in penalties and even jail time for breaking the laws governing campaign donations.
Soft Money
The term “soft money” refers to monetary donations made to a political party or political action committee that do not have any restrictions placed on the total amount that can be accepted. When we talk about “hard money,” we’re referring to the donations that come from people and political action committees. However, these monies can also come from any other source, including businesses.
“Hard money” refers to monetary donations that are sent directly to a political candidate. This type of donation is known as “hard money.” These contributions are restricted to being made by individuals or political action committees (PACs), and they are subject to the stringent limits that have been established by the Federal Election Commission (FEC).
According to the interpretation of the legislation offered by the Supreme Court, “soft money” can only be used for “party-building operations,” which includes pushing for the adoption of a law and registering voters, but not for advocating for a specific candidate in an election.
In the case Citizens United v. Federal Election Commission from 2010, the Supreme Court ruled that contributions of “soft money,” also known as “dark money,” can be unlimited because they are considered to be a form of free speech that is safeguarded by the First Amendment. However, this decision has remained controversial.
Political action committees (PACs) that accept unlimited payments in the form of soft money cannot be directly linked to the political candidate or candidates that they support, nor can they be directed by those politicians. A candidate is considered to have direct influence over how the money is used if they are found to be dictating what message or television ad a political action committee (PAC) or super PAC will air. This constitutes a hard money contribution, which is against the law in terms of campaign finance, and PACs and Super PACs are prohibited from doing so.
Hard Money and Soft Money Contribution Rules
Since the regulations that regulate the two different kinds of donations are distinct from one another, it is advisable, prior to making a contribution, to review these regulations in greater depth. On the website of the Federal Election Commission (FEC), you can obtain additional details regarding these regulations.
Learn more: 7 Ways to Make Extra Income Even With a Full-Time Job