Money in Politics

Money in Politics – A History

Money in Politics: A fascinating history of the influence of money on candidates and elections from 1789 to 2017, this article originally appeared as “Money-in-Politics Timeline” on the OpenSecrets Website, created by a group devoted to following the money in politics:


“Fundraising” a foreign idea to Founding Fathers

The idea of candidates asking for contributions to fund their campaigns was completely foreign to George Washington. George and friends probably would have been averse to political ads, directly soliciting donations from constituents, or accepting large sums of money from business PACs. In 18th- and early 19th-century America, openly stating that you were running for office appeared ambitious — an unseemly trait. Wealthy, well-connected candidates financed their own campaigns, and were often themselves the gift-givers. In fact, Washington, among many others, offered free whiskey to encourage votes — something that would be illegal today.
More on the early days of presidential campaigns here, from this 2007 OpenSecrets Blog piece.


Andrew Jackson’s presidential campaign actually campaigns

Fundraising and campaigning as we know it may have begun with Andrew Jackson, the first candidate for president without a prestigious family background, extensive education, or much personal wealth. When Jackson made his bid for the White House in 1828, he also became the first organized campaigner, harnessing the power of the media and forming an early grassroots movement to win the presidency.
Jackson had earned a devoted following in Tennessee, having been a prosecutor, judge, congressman, senator, and general in the War of 1812. After losing to John Quincy Adams in the confused, 4-candidate 1824 presidential election, Jackson ran again four years later, enlisting local support like no candidate ever had. His staff maintained a whopping two campaign offices, and his powerful political friends distributed pro-Jackson pamphlets. Jackson still did not seek financial support on his own behalf — though he was an early practitioner of rewarding political loyalists with federal positions.


First federal campaign finance law

In the decades that followed the Jackson presidency, elections increasingly were financed by the people — and often, those in power solicited contributions with a heavy hand. In 1867, Congress enacted legislation that attempted to prevent such abuses. The Naval Appropriations Bill prohibited officers and employees of the federal government from soliciting money for political campaigns from naval yard workers.


Further restrictions on soliciting campaign donations with the Civil Service Reform Act

The political patronage system, in which favors and federal jobs were promised in exchange for donations, remained alive and well during much of the 19th century, having originally taken root in the Jackson era. New government appointees were often large campaign contributors and financiers; in effect, government was for sale.
Pressure to change the system reached a tipping point after Charles Guiteau, a prospective government administrator who was denied a position, assassinated President Garfield in 1881. In 1883, the Civil Service Act (or the Civil Service Reform Act, as it’s more commonly known today), overhauled the government’s party composition by prohibiting positions from being filled by employees who had specific political ties or party affiliations, and mandated that jobs had to be given based on merit. It also created the Civil Service Commission to enforce the new law; the commission existed until 1978, when it was split into the Office of Personnel Management and the Merit Systems Protection Board.
That said, ambassadorships are often given to major bundlers and presidential supporters: See the contribution records for Obama administration appointees. Ambassadors are exempt from the Civil Service Act, and it’s a time-honored tradition for presidents to reward their biggest backers with these plum positions.


Public begins to call for campaign finance restrictions

William McKinley received more than $16 million in contributions for his 1896 campaign — an exorbitant sum for the time. Additionally, the campaigns of both McKinley and his opponent, William Jennings Bryan, were plagued with accusations of bribery and unethical behavior. McKinley’s chief fundraiser Mark Hanna, in particular, courted corporations with promises of a big-business-friendly agenda and raised more than $6 million. When discussing American politics, Hanna is famously quoted as saying, “There are two things that are important in politics. The first is money and I can’t remember what the second one is.” Campaign finance became a hot topic as the public learned of these practices, and began to call for more regulation.


Corporate contributions banned

In the wake of a corporate fundraising scandal around his own successful campaign in 1904, President Theodore Roosevelt called for a ban on all such contributions in his 1905 address to Congress. Populist Sen. Benjamin Tillman of South Carolina introduced a bill to that effect the next year; it moved quickly through Congress and was signed by Roosevelt on Jan. 26, 1907. The Tillman Act explicitly prohibited corporations and national banks from contributing money to federal campaigns.


Congress passes, and amends, the Publicity Act (aka Federal Corrupt Practices Act)

Enacted while William Howard Taft was president, this was the first law to require public disclosure on paper of all money spent on elections by political parties in House general elections. The following year it was amended to apply to Senate and primary elections as well, and required candidates to disclose their own spending. The amendments even set limits on contributions to candidates ($5,000 to a House candidate, $10,000 to a Senate candidate, or the amount set by state law – whichever was less), as well as on the amount a campaign could spend. The limits didn’t apply to spending by voluntary associations supporting specific candidates. Still, it was a real move to rein in some of the perceived excesses.


SCOTUS holds that Congress can’t regulate primary elections

Truman Handy Newberry, a businessman and former Navy Secretary, beat automaker Henry Ford in a Senate primary in Michigan in 1918 — spending, it was rumored, more than $100,000 in the process. Ford pulled strings to have an investigation done, and in 1921 Newberry was convicted for violating federal campaign finance law under the Publicity (Federal Corrupt Practices) Act. But Newberry appealed to the Supreme Court, which held in Newberry v. United States that Congress lacked the authority under the Constitution to regulate spending and other aspects of party primaries or conventions designed to nominate a candidate. Newberry’s conviction under the Federal Corrupt Practices Act was reversed.


Congress amends the Federal Corrupt Practices Act — again

The stage was set for the Teapot Dome Scandal when President Warren G. Harding transferred control of federal oil reserves from the Navy to the Interior Department. Secretary of Interior Albert Bacon Fall secretly granted exclusive rights to the Teapot Dome, Wyo. reserves to Harry F. Sinclair of the Mammoth Oil Company, receiving hefty paybacks in the form of cash gifts and “no-interest” loans.
The Supreme Court declared the leases invalid and fraudulent, and when Calvin Coolidge took office in 1925, Congress quickly passed an amendment to the Federal Corrupt Practices Act. It was the first federal legislation to require quarterly financial disclosure reports from all entities that made political contributions to any elected official. It also required that contributions of more than $100 be reported. Enforcement mechanisms were lacking, though, and timely reporting of political contributions was spotty.


Contributions from public utilities banned

Public utility companies grew increasingly powerful and wielded unprecedented influence over public policy under President Franklin Delano Roosevelt. In 1935, Congress banned them from making political contributions with the Public Utilities Holding Act; there was very little resistance.


Birth of the political action committee (PAC)

The changing economy after the Great Depression brought some major changes in the political process. For more than a century, most campaign activity was centered around political parties; much depended on their ability to organize and mobilize loyal party members to vote. Money, while important, went to help local party operatives deliver the vote. But as party loyalty declined (though not partisanship) and political communications became more critical to the campaign process, candidates depended more on skilled technicians and the media resources they could muster to persuade more independent voters to vote their way.
Organizations known as political action committees (PACs) were formed after legislation added labor unions to the earlier, 1907 prohibition on corporate contributions to federal campaigns. When unions, trade organizations, and other special interests could no longer contribute directly to parties and campaigns, they created voluntary associations (PACs) that raised funds from individual members specifically for candidates.


High Court allows Congress to regulate primaries

In the early 20th century, racial discrimination at the polls was rampant in some states and districts. In particular, the Texas Democratic party banned black Americans from voting in U.S. House and Senate primary elections. The Supreme Court ruled this manner of racial discrimination unconstitutional in 1944’s Smith v. Allwright. The decision also stated that these primaries are an element of federal elections, and thus could be regulated by the federal government — therefore reopening the door for the regulation of campaign finance practices in primary elections.


Congress passes Federal Election Campaign Act (FECA) and Revenue Act

In 1971, Congress passed FECA, which largely replaced the Federal Corrupt Practices Act in regulating federal campaign finance. The bill called for more comprehensive and frequent reports of receipts and expenditures, and extended the disclosure system to include primary elections. It also imposed limits on how much candidates and others could spend on broadcast and some other types of advertising.
FECA allowed corporations and unions to use their own treasury funds to establish, operate and solicit voluntary contributions for PACs.
The legislation did not establish a monitoring organization for the new provisions, though. Instead the Secretary of the Senate, the Clerk of the House, and the Comptroller General of the United States General Accounting Office oversaw its implementation, and the Justice Department was tasked with prosecuting violations. After the 1972 elections, 7,000 cases were delivered to the Justice Department by congressional officials, and 100 cases from the comptroller’s office. In the end, very few were litigated, which raised concern over abuse of the law.


U.S. rocked by Watergate, FEC established

In 1972, several burglars were caught inside the offices of the Democratic National Committee in the Watergate building in Washington, D.C. President Nixon went to great lengths to cover up the fact that the burglars had been hired by his re-election committee to wiretap phones and steal secret documents. He raised “hush money” for the hired burglars, destroyed evidence and fired staff members who strayed from his game plan. Nixon finally resigned the presidency in August 1974 as the cover-up unraveled.
Revelations of campaign finance abuses in the 1972 election were an important part of the subtext of the Watergate scandal, spurring what was effectively a rewrite of FECA in 1974. The new law created the Federal Election Commission, a governing body with six voting members, of which no more than three may be of the same party, and tasked with receiving candidates’ campaign finance disclosure reports and enforcing the law. The rewritten FECA also set contribution and spending limits for all federal campaigns, and implemented the tax check-off program designed to provide public funds for presidential campaigns, as outlined in the 1971 law.


Buckley v. Valeo changes everything – again

Some of the reforms instigated by FECA and the brand-new FEC didn’t last long. The new law was challenged in court, and the 1976 Buckley decision shook up the structure of campaign finance regulation once again. Sen. James Buckley of New York led a coalition that filed a lawsuit challenging the constitutionality of the 1974 FECA revision. The defendants included Francis Valeo, Secretary of the U.S. Senate and a member of the newly-formed FEC. The Court ruled that, while contributions could be limited in order to avoid corruption, or the appearance of corruption, spending by individuals or groups or by candidates themselves (from their own personal resources) could not corrupt elections and should not be limited under the First Amendment. This distinction between contributions and spending remains a linchpin of campaign finance law.


Enter “Soft Money”

In 1979, as a result of amendments to FECA and actions by the FEC, national, state and local parties began directly funding “party-building” expenses that weren’t, at first, tied to a particular campaign. At the federal level, unlimited donations from corporations and unions — sources of funding that were otherwise prohibited — began to flow in.


An exception for nonprofits

In 1986, the FEC sued a 501(c)(4) political nonprofit called Massachusetts Citizens for Life, challenging its publication of a voter’s guide, distributed to a mass audience, that prominently featured a number of pro-life candidates. The suit contended that MCFL used its general treasury funds for explicit campaign activities, violating federal laws. The Supreme Court found that although MCFL was clearly engaged in express advocacy, the law in question was unconstitutional as applied to MCFL because the organization was created in order to disseminate political ideas, wasn’t a for-profit corporation and didn’t accept contributions from for-profit corporations. With FEC v. Massachusetts Citizens for Life, Inc., the court carved out a narrowly defined exception to the prohibition of corporations using general treasury funds to pay for express advocacy, available to nonprofit corporations that do not accept business corporation funding.


Rules against corporations upheld

The Michigan Chamber of Commerce sued to knock down a statute prohibiting it from using general treasury funds to pay for an ad supporting a state candidate. The MCOC argued that because it is a nonprofit corporation, the regulation violated its free speech rights. The Supreme Court disagreed, because MCOC was different from the type of group involved in FEC v. Massachusetts Citizens for Life, Inc. The Chamber’s treasury is funded by business corporation members’ dues; they, much like shareholders, have a financial incentive to remain in the organization even if they disagree with its political activity. Austin v. Michigan Chamber of Commerce, was overturned in 2010 by Citizens United v. FEC.


Soft money rules stretched, campaign practices cause scandal

The Democratic and Republican parties took the raising and spending of “soft money” to new levels, soliciting donations from corporations, unions and individuals that were supposed to be used for generic party-building activity. That became particularly pronounced in President Clinton’s re-election effort, with big donors being given overnight stays in the Lincoln bedroom and other favors. Prosecutions and congressional investigations ensued — but no change in law.


527s: Another way around the law?

Over the years, some political groups have tried to circumvent the requirement to register with the FEC as PACs, thereby avoiding the contribution limits, disclosure requirements and other restrictions of FECA. These groups argued that as long as they didn’t contribute directly to candidates, and didn’t use messages that specifically urged a vote one way or another, they could use fully unrestricted funds for their political activities, such as running “issue ads.” The organizations — “issue groups” that do not file reports with the FEC — came to be called “527s,” after a section of the tax code enacted in 1975 (even though in reality, almost all political committees are 527s). In 2000, Congress modified the tax law to require public disclosure of donors to these groups.


Bipartisan Campaign Reform Act (McCain-Feingold)

In 2002, after decades of effort by groups that wanted to rein in campaign donations and spending, President Bush signed the Bipartisan Campaign Reform Act (also known as BCRA, or the McCain-Feingold Act for its sponsors), which explicitly prohibited party soft money, tied contribution limits to inflation, and imposed disclosure requirements and some funding restrictions on “electioneering communications” (broadcast ads naming candidates, but not containing express advocacy, just before an election). It also included the “Stand By Your Ad” clause that requires candidates to state their approval at either the beginning or end of each of their ads (which is why nearly all political ads include something like “I’m_____, and I approve this message”).


McCain-Feingold challenged, largely upheld by SCOTUS

A set of strange bedfellows — including Sen. Mitch McConnell (R-Ky.), the California Democratic Party, the ACLU, the AFL-CIO, and the NRA — immediately challenged the constitutionality of the McCain-Feingold Act in McConnell v. FEC. To the surprise of many experts, the law was largely upheld by the Supreme Court (although some portions, such as a ban on minors contributing to elections, were deemed unconstitutional).


Whittling the law away

In 2007, an important court decision paved the way for corporate and union money in elections. Wisconsin Right to Life v. FEC held that groups could use corporate or union money to run ads just prior to elections so long as they didn’t contain the “functional equivalent” of explicit advocacy for a particular party or candidate. This brought a surge in these “electioneering communications” ads during the 2008 campaign, and paved the way for new, relatively unregulated so-called “issue ads.”


Millionaire’s Amendment struck down

Between runs for office in 2006 and 2008, House candidate Jack Davis filed suit claiming the Millionaire’s Amendment in McCain-Feingold was unconstitutional. This amendment allowed candidates to raise money under increased contribution limits if they were running against candidates who funded their own campaigns at a level of more than $350,000 in House races; the amount varied in Senate races. The Court agreed that the provision was in fact a violation of the First Amendment, emphasizing that a candidate has the right to spend unlimited money advocating his or her own election and that the Millionaire’s Amendment burdened that right. Extending the reasoning of Davis, similar “trigger provisions” in state public financing systems were later invalidated by the Supreme Court in Arizona Free Enterprise Club v. Bennett.


EMILY’s List v. FEC

Soft money made a bit of a comeback when an appellate court ruled in EMILY’S List v. FEC that groups involved in federal, state or local elections could use unrestricted funds (soft money) to pay for overhead expenses and for some generic political activities.


Citizens United lifts limits on corporate independent expenditures; corporations are “people”

In a major upheaval in the terrain of money in politics, the Supreme Court ruled 5-4 that corporations (and, by extension, unions and other groups) may make unlimited expenditures on messages encouraging votes for or against specific candidates, so long as they’re not coordinated with candidates or parties. The decision nullified some of the restrictions on direct corporate involvement that had stood since 1907. The Court’s majority maintained that donor disclosure would bring transparency to any resulting river of cash. However, combined with decisions in other litigation (especially the ruling that same year in SpeechNow v. FEC) the Citizens United ruling helped usher in the era of the super PAC, as well as an explosion in political spending by 501(c) nonprofits that do not disclose their donors (“dark money”)… Some experts believe that the Supreme Court did not realize that lax interpretation of the laws governing independent expenditures by the FEC and political activity of tax-exempt organizations by the IRS meant that transparency would not be guaranteed.


Arizona Free Enterprise Club v. Bennett

Following the overturning of the McCain-Feingold Act’s Millionaire’s Amendment in 2008, the Supreme Court voted 5-4 to revoke the “trigger fund” public financing provision of Arizona’s campaign finance laws. Accordingly, this decision invalidated trigger fund options in all public campaign financing programs. However, the Court still maintained the constitutionality of such programs without trigger fund provisions.


A state tries to split off…from the laws in effect post-Citizens United

The Montana Supreme Court upheld the state’s 1912 ban on the use of corporate, union and other special interest treasury funds to influence political campaigns via independent expenditures — going against the U.S. Supreme Court’s decision in Citizens United. The state court said that Montana’s special history of corruption — dating back to a time when copper barons paid off politicians — justified the prohibition.


Citizens United decision firmly established as the law of the land

The Montana Supreme Court decision was short-lived. In American Tradition Partnership, Inc. v. Bullock, the U.S. Supreme Court reversed the state court, knocking out the state’s ban on corporate funding to influence elections and firmly establishing the Citizens United decision as the law in both federal and state elections.


Most expensive elections in history

More money was spent in the 2012 election than any other in U.S. history. The final cost of this presidential-year election totaled more than $6 billion — including more than $300 million in dark money spent by politically active 501(c) groups that don’t disclose their donors.


Bye-bye to overall limits (McCutcheon v FEC)

After learning he was unable to give $1,776 dollars to as many candidates as he liked in 2012, Alabama businessman and budding mega-donor Shaun McCutcheon, along with the Republican National Committee, challenged the legal biennial limit ($123,000 in 2013) on the total amount of money an individual could contribute to all candidates, PACs and parties combined. His case was argued before the Supreme Court in October 2013 after failing in lower court.
In April, the Court sided with McCutcheon and the RNC, eliminating the overall limit. Close to 650 people hit the contribution cap in the 2012 elections. With the cap gone, more people are expected to spend more money on contributions. The Court’s reasoning was that the limits did little to prevent corruption or the appearance of corruption while significantly restricting participation in the democratic process, and thus were invalid under the First Amendment. See our post on the decision and its potential consequences.


Presidential candidates defy the norm
Republican presidential candidate Donald Trump and his anti-establishment counterpart from the Democratic Party, Vermont Sen. Bernie Sanders, achieved electoral success by bucking the big-donor trend. Trump, who went on to win the 2016 election, spent $66.1 million of his own money for a campaign that was nearly 20 percent self-funded. Meanwhile, Sanders funded his campaign mostly through small individual contributions.


Special elections set records
Special elections are usually drowsy affairs – but not in 2017, when a surge of spending for open House seats caught national attention. The race for Georgia’s 6th District turned into the most expensive House race in history, exceeding $50 million. In Montana, total spending for another seat surpassed $17 million, a record for a state congressional district. Much of the funding for Democratic challengers in Republican-controlled districts was credited to anti-Trump sentiment. Still, none of the House seats changed party hands.


Fights over money in politics brought to the states
States moved toward changing restrictions on campaign finance in 2017, sparking debate in some state congressional committees and triggering ongoing court battles in others. Some states introduced legislation to require more stringent disclosure; others are changing contribution limits. New Mexico’s secretary of state, for instance, may enact new campaign finance rules vetoed by the governor just months before that would increase donor disclosure, while in South Dakota, the governor repealed an initiative to limit PAC contributions and increase reporting requirements.

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