Campaign finance costs associated with running for political office have historically evoked concern. Most political candidates rely heavily on fundraising for travel, public appearances, support staff, and mass media advertising. Unless they have independent wealth, they must raise monies from individual, business, nonprofit, and other organizational sources. Jesse Unruh, speaker of California’s state assembly from 1922 until 1987, said money is “the mother’s milk of politics.” Many would argue today that this has been true since the inception of the U.S. electoral process.
I. Historical Background
II. Recent Years
III. State Reform Efforts
As early as 1905, heavy corporate financing prompted Theodore Roosevelt to propose that candidates for federal office be required to disclose campaign finances and be prohibited from receiving corporate contributions. In 1907, Congress passed the Tillman Act, which prohibited candidates for federal office from receiving corporate contributions; and later, in 1910, Congress passed the Federal Campaign Disclosure Law, which required candidates for federal office to disclose sources of campaign financing (Farrar- Myers and Dwyre 2008, 8).
Owing to embarrassing incidents such as the Teapot Dome scandal and corruption in President Warren G. Harding’s campaign of 1920, Congress passed the Federal Corrupt Practices Act, which required congressional candidates to disclose campaign receipts and expenditures. In 1939 and 1940, the Hatch Acts prohibited political parties from soliciting campaign contributions and other support from federal employees. Because of the Hatch Acts, federal employees, until 1993, could not participate in political fundraising. In 1947, Congress passed the Taft-Hartley Act, which permanently made it illegal for labor unions to financially contribute to federal candidates for office.
Because so many campaign finance laws were ineffective and hard to enforce, Congress passed the Federal Election Campaign Act (FECA) of 1971. Replacing the old Corrupt Practices Act of 1925, the new law set limits on candidates’ spending on communications media, established limits on financial contributions to candidates, and required disclosure of financial contributions made by political committees and individuals greater than $10, as well as disclosure by candidates and contributors and expenditures greater than $100. Revelations made after President Richard M. Nixon’s resignation and funding illegalities in his 1972 reelection campaign catapulted election campaign financing back into the limelight and prompted Congress to amend FECA. In 1974, Congress established spending limits for presidential and congressional candidates and for national political parties in party primaries, general elections, and runoff elections. The new FECA set contribution limits on individuals, political action committees, and political parties and provided for voluntary public financing of presidential elections. FECA of 1974 established the Federal Election Commission to implement campaign finance law provisions (Cooper 2000, 259).
In 1976, the U.S. Supreme Court in Buckley v. Valeo (1976) declared some FECA provisions unconstitutional, primarily those dealing with campaign spending limits. The Court held that limits on campaign expenditures unreasonably restricted the free speech rights of corporations. Buckley v. Valeo allowed limits on campaign contributions on the rationale that this proviso would reduce actual corruption or the appearance of corruption in the electoral process. At the same time, it struck down limits on campaign expenditures saying that free speech permits candidates to spend as much as they choose (Farrar-Myers and Dwyre 2008, 13). After Buckley v. Valeo, an intense debate began over the question: Does money equal speech? Critics of the Buckley ruling say it allows giant corporations and wealthy individuals to overwhelm and drown out the voices of ordinary citizens; corporations, in essence, have a larger voice (or “more speech”) than those who can make only small contributions (Cooper 2000, 260). On the other hand, the Buckley ruling is also criticized by free speech advocates who say that neither contributions nor expenditures should be limited, because this generally limits political discourse. Justices Antony Kennedy and Clarence Thomas have advocated overturning Buckley for these reasons (Farrar-Myers 2005, 48–50).
Congress amended FECA again in 1976 and 1979 to elaborate on “hard money” versus “soft money” and to ease up on contribution and expenditure disclosure requirements. Because candidates and political action committees voiced concerns over FECA’s detailed reporting requirements, calling them burdensome and redundant, Congress sought to streamline and simplify reporting requirements. Voter registration efforts and get-out-the-vote campaigns were exempted from the contribution and expenditure limits applied to hard money contributions to candidates. Although Congress did not create the hard/soft-money distinction, it specified that party committees could use hard dollars only toward contributions to party candidates or coordinated spending ceilings. The eased provisions gave state and local political parties a greater role to play in federal elections, as soft money contributions could be used to fund party activities if not the actual campaigns of candidates for office (Corrado 2005, 28–30).
Triggering events in the 1996 and 2000 presidential elections prepared Congress for another run at campaign finance reform. In 1996, Democratic fundraising practices, such as the “selling” of access to the White House, raised serious questions. In the 2000 election, both parties saw an increase in soft money contributions and the rise of issue-advocacy electioneering in which soft money is used to promote (primarily through media slots) issues that are near and dear to candidates while not endorsing the candidates themselves. The practice made many believe that the current campaign finance regulatory structure was ineffective. U.S. Senator John McCain (R-Arizona), in his run for the presidency in 2000, focused much of his time arguing for campaign finance reform and reducing the role of big money in U.S. politics (Cooper 2000). After dropping out of the 2000 presidential campaign, McCain returned to the U.S. Senate and joined forces with Senator Russ Feingold (D-Wisconsin), Representative Christopher Shays (R-Connecticut), and Representative Marty Meehan (D-Massachusetts) to close loopholes in the campaign finance system. Their efforts culminated in the first major campaign finance reform in over 30 years—the Bipartisan Campaign Reform Act (BCRA). Senator McCain argued that a ban on soft money was necessary to end corruption in U.S. politics.
In 2002, the BCRA became law. The major provisions of this law prohibited national party committees from accepting or spending soft money. This provision, particularly unpopular with the national party elites, sought to exercise control of so-called partybuilding contributions from labor unions, corporations, and individuals that had in fact been used for campaign electioneering purposes. It further limited state and local parties, telling them that they could not spend money in federal electioneering but instead could focus on get-out-the-vote and voter registration drives. National, state, and local parties also could not ask for or contribute money to nonprofit organizations (which in turn engage in advocacy without endorsing any candidate’s election or directly subsidizing federal candidates’ campaigns). The following hard money contribution limits were instated:
• individual contributions for House and Senate campaigns: $2,000, indexed to grow with inflation;
• total aggregate contribution limits for individuals: $95,000, with $37,500 to candidates and $57,500 to political parties and political action committees;
• political action committees: $5,000 per candidate per election with an additional $15,000 to a national party committee and $5,000 combined to state and local party committees.
Moreover, broadcast, cable, or satellite communications that target federal candidates for office or show their likeness in their district or state media outlets (known as electioneering communications) were banned from being issued or shown within 60 days of a general election or 30 days of a primary. In addition, unions and corporations were prohibited from directly contributing to electioneering communications and could only pay for such advertising through hard money or through PACs. Similarly, nonprofit organizations and 527s could only pay for these types of advertisements through PACs (Jost 2002, 974). Also included is a “millionaires’ provision” that permits candidates facing independently wealthy opponents to accept up to $6,000 per election from individual contributors (Jost 2002, 976–977).
The BCRA has sparked not only heated debate and controversy but also a lot of litigation. One controversy—the growth of 527 organizations—put a lot of pressure on the Federal Election Commission (FEC). These 527s are political committees that raised and spent unlimited amounts of money on issue advertisement, polling, and get-out-the-vote drives. They claimed tax-exempt status under section 527 of the Internal Revenue Service Code and did not register as political committees with the FEC. These 527 groups, which existed prior to BCRA, did not have to identify donors, nor did they have to disclose how much they raised or how the money was spent. They grew by leaps and bounds after the BCRA’s passage. Senator McCain and other campaign finance reformers pressured the FEC to do something about these groups. In the 2004 presidential election alone, the 527s spent nearly $400 million. Not only did they spend huge sums of money, but they have paid for attack ads in hundreds of television markets, and no one can pinpoint the sources of the funds due to the loophole that exempted them from the BCRA provisions (Munger 2006).
In addition to the controversy over 527s, many observers questioned whether it was constitutional to ban soft money spending by national political parties and to regulate funds raised by corporations, unions, and advocacy groups for electioneering purposes. Opponents argued that these restrictions violated free speech and limited political discourse. Shortly after BCRA was signed into law, U.S. Senator Mitch McConnell (R-Kentucky), then the Senate majority whip, took the Federal Election Commission to court, claiming that the BCRA unconstitutionally infringed on the free speech rights of advocacy groups such as the National Rifle Association. Initially in 2003, the U.S. Supreme Court in McConnell v. Federal Election Commission upheld the electioneering communications provisions and the soft money regulations (Ciglar 2005, 71). In 2003, the Court favored the BCRA again by upholding the ban on contributions of incorporated nonprofit advocacy groups to federal candidates in Federal Election Committee v. Beaumont. At the same time, the Supreme Court demonstrated some early concerns with the BCRA provisions and struck down the prohibition on minors under the age of 18 from making political contributions and the requirement that political parties in a general election must choose between making independent or coordinated expenditures on a candidate’s behalf (Sherman 2007).
As the Supreme Court’s composition changed in 2005 (new Chief Justice John G. Roberts) and 2006 (new Associate Justice Samuel Alito), so too did its interpretation of the BCRA’s issue-advocacy advertisement restrictions. This electioneering ad provision (i.e., issue-advocacy advertising) was among the most controversial, as illustrated in Federal Election Commission v. Wisconsin Right to Life (2007). More specifically, the Court held that part of the BCRA had been unconstitutionally applied by the FEC to an advertisement that the Wisconsin Right to Life groups sought to air before the 2004 election, and further stated that this advertisement was not an electioneering ad (Utter and Strickland 2008, 204). In this case, the Court’s 5–4 ruling under the new Chief Justice, John G. Roberts, left doubts as to whether any part of the electioneering communications provision would survive given the broad exemption. The Court said that ads that truly engaged in a discussion of the issues could not be construed as urging for the support or defeat of a particular candidate. Another 5–4 U.S. Supreme Court decision in 2008, Davis v. Federal Election Commission, held that the millionaires’ amendment unconstitutionally discriminated against candidates who spent their own money for purposes of getting elected by giving special fund-raising privileges to opponents.
Yet another major challenge to BCRA arose over whether Citizens United, a conservative nonprofit organization, could broadcast a documentary that the group produced in 2008 titled Hillary: The Movie. The Federal Election Commission enforced the BCRA electioneering provisions prohibiting nonprofits, corporations, and labor unions from expressly advocating for the election or defeat of a candidate for federal office (Welch 2010). In response, Citizens United took the FEC to court. In Citizens United v. Federal Election Commission (2010), the Supreme Court struck down a BCRA provision that barred corporations and labor unions from spending general treasury monies to advocate for or against the election of a candidate for federal office. In effect, this decision overturned part of the holding in McConnell v. Federal Election Commission (2003), which had upheld the electioneering provision. Many anticipate that the Citizens United ruling will result in a sharp increase in independent expenditures in future federal election campaigns ( Jost 2010, 460, 463; Potter 2005, 56). Proponents of the electioneering provisions argue that this decision opens the floodgates and will allow corporations to pour money into campaigns, thus undermining the democratic process, while opponents still maintain that some groups that are able to pool resources, including labor unions and advocacy health care reform advocacy groups, should be able to exercise their free speech rights (“High Court Hears” 2009).
New challenges to the BCRA are being led by David Keating, executive director of the Club for Growth—a political organization that promotes economic growth by advocating for limited government and low taxes. Keating has filed suit in federal court on behalf of SpeechNow.org that calls for the elimination of campaign contribution limits as well as reporting requirements for political action committees that make independent expenditures in federal elections. So far the U.S. Court of Appeals for the District of Columbia has struck down the contribution limits while upholding the reporting requirements. Chief Judge David Sentelle, speaking for the Court of Appeals, said that, given the Supreme Court’s ruling in Citizens United v. Federal Election Commission (2010), it appears that the government has no interest in limiting the contributions of an independent expenditure group, because this does not create a risk of corrupting federal candidates for office or officeholders (Jost 2010, 460).
State Reform Efforts
In the post-FECA and post-BCRA eras, state governments have also approved campaign finance initiatives. Trying to reduce the role of money in politics, a number of these initiatives sharply limit the amount of campaign contributions, and some states and localities have adopted public financing of campaign measures, which supporters call Clean Elections, Clean Money. Numerous states have launched and won approval of campaign finance reform initiatives.
All states have reporting requirements, with two states mandating reports from political committees only and the rest requiring candidate and committee reports. The majority of states place candidate contribution limits on individuals (37 states), PACs (36 states), candidates themselves (41 states), candidate families (25 states), political parties (29 states), corporations (44 states), and labor unions (42 states). Half of the states completely prohibit anonymous contributions during legislative sessions. Cash contributions in campaigns are unlimited in 19 states, and other states allow varying amounts of cash donations or prohibit them completely.
From 1972 until 1996, 45 referenda and initiatives dealing with campaign and election reform were placed on state ballots, with 75 percent of these efforts occurring since 1985. During this period, the voters supported 36 reforms. These reforms included contribution limits, spending limits, and public financing measures. Twelve of the 16 public financing measures were approved. From 1998 until 2006, 30 referenda and initiatives dealing with campaign and election reform were placed on state ballots, with 15 proposals securing passage. These reforms included new measures on public financing and campaign contribution limits. As of 2009, five more states passed “clean election laws” that provide public monies to candidates for political office if candidates accept spending limits, and over 20 states had some type of public financing for select offices (Levinson 2009). In a January 2000 U.S. Supreme Court decision, Nixon v. Shrink Missouri Government PAC, the court reaffirmed Buckley, stating that state limits to campaign contributions were legal but limits on campaign spending were not. However, the campaign contribution limit could not be so extreme that it prevented the candidate from being able to gain notice or rendered campaign contributions pointless (“Campaign Finance Reform” 2008). The Court further explained this sentiment in Randall v. Sorrell (2006), when it struck down a Vermont law that placed strict caps on contributions and expenditures.
In the wake of the U.S. Supreme Court’s rejection of campaign expenditure limits in Buckley v. Valeo (1976), many states have enacted public financing mechanisms for state elections. Overall, 15 states publicly finance candidates for various offices. The source of public funds for elective office varies, and some states—including Maine, Minnesota, Kentucky, and Rhode Island—rely on more than one source. Fifteen states use a voluntary tax checkoff, similar to the federal government’s checkoff system, varying from $1 to $5. Ten states rely on a tax add-on, allowing taxpayers to either reduce their tax refund or increase their tax payment to finance campaigns. Seven states furnish direct legislative appropriations to fund public financing provisions. Eleven states allocate their monies to the taxpayer’s designated political party, and three states use a distribution formula to divide the money equitably between the major political parties. The other states allocate money directly to statewide candidates or specify particular types of offices that qualify for public financing (Utter and Strickland 2008, 191–192).
Critics contend that campaign finance reform will never reduce the role of money in politics. They also contend that the BCRA makes it harder to challengers to mount effective campaigns against incumbents, thus dubbing BCRA the “Incumbent Protection Act” (Munger 2006). Public financing provisions enacted at the state level are being challenged in court for placing too many burdens on third-party candidates who try to qualify for public funds ( Jost 2010, 464). Supporters of campaign finance reform argue that campaign finance laws are necessary to protect U.S. democracy from corruption (contribution limits), to provide citizens with information that allows them to make informed choices (reporting and disclosure laws), and to give candidates different paths for financing their election campaigns (public financing) (Wertheimer 2010, 473). Now the stage is set for the Supreme Court to decide whether campaign finance deregulation is necessary to protect free speech or to determine whether it should uphold some parts of the BCRA as a means of limiting the influence of wealthy individuals in U.S politics.
Ruth Ann Strickland
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