Campaign Finance Laws and the Federal Election Commission

1. Campaign Finance Laws and the Federal Election Commission GOVT 2305

2. In this set of slides we touch on the history of US campaign finance laws, as well as the nature of the Federal Election Commission and the current state of campaign finance law in the United States. We will also look at Supreme Court decisions regarding constitutional issues surrounding campaign finance laws, as well as critiques of the effectiveness of these laws.

3. Here are a few sites you might want to visit to get a preliminary look at the subject.

4. From the Washington Post: A Special report on Campaign Finance.

5. Wikipedias: Campaign Finance in the United StatesCampaign Finance Reform in the United States

6. And Some Past Blog Posts on Campaign Finance, Citizens United, Money in Politics, and the Money Primary.

7. It might be helpful to scroll through this: Open Secrets: Glossary of Terms.

8. Notice that this subject will allow us to look at activities of each other three branches of government.Rules regarding campaign finance constantly evolve due to the interrelationship between each branch.

9. A key question that will underlie the bulk of this section is whether campaign funding – especially the fact that funding is unequal – distorts democracy and. Does it cancel out the principle of majority rule and allow the wealthy to dominate the political process?Beyond that, is this a problem that requires a legal solution and if so, what type of solution?

10. But this concern has to be balanced against the claim that campaign finance laws, by placing limits on campaign spending actually limit speech – which is a constitutionally protected right.

11. First Amendment Center: Campaign Spending

12. Campaign Spending, Free Speech, and Disclosure

13. What follows is a walk through legislative, executive and judicial activities regarding campaign finance. It’s a good illustration of the checks and balances.

14. A Walk through the History of Federal Campaign Finance Laws

15. Campaign finance laws have four basic purposes: 1 - Limit contributions to ensure that wealthy individuals and special interest groups did not have a disproportionate influence on Federal elections2 - Prohibit certain sources of funds for Federal campaign purposes3 - Control campaign spending4 - Require public disclosure of campaign finances to deter abuse and to educate the electorate.

16. There were no federal laws related to campaign finance until the late 19th Century. Recall that politics in the early decades of the republic, as well as the colonial era, was explicitly elitist. Limiting suffrage to property owners restricted participation to the wealthy. Political bias towards wealthy property owners was a fact of life.

17. As described elsewhere, campaigns during this period of time were informal and not all that expensive. Campaigning – as we know it - was considered undignified. There was no need to mobilize a large population. Campaigning involved connecting with a small handful of established elites.

18. The need to have campaign laws did not arise until suffrage expanded and campaigns were necessary in order to win office.These needed to be funded.

19. The need to campaign emerged with the rise of mass politics when suffrage was expanded to the non-property owners during the era of Andrew Jackson and the birth of the spoils system.

20. “In the early nineteenth century, the spoils system was instituted, under which election winners rewarded their supporters with lucrative government jobs in return for their support. Government employees were then taxed an "assessment" to fund the political campaigns of the elected leaders and the political party in power. This led to the birth of modern political campaigns, in which politicians travel the state or country attempting to persuade citizens to vote for them. In order to succeed in these larger platforms, such campaigns required additional financial contributions from supporters.The first attempt to regulate campaign finance came in 1837, when Congressman John Bell of Tennessee, a member of the Whig Party, introduced a bill prohibiting assessments. Congress, however, did not vote on it.” – Source.

21. These assessments became part of the glue that bound the various components of the political machines that began to dominate urban politics. Control over the flow of campaign cash allows for control over the political system.

22. Contributions were expected from corporations and government employees, and anyone or anything with interests from the government.Recently, in Texas, this has been referred to as pay-to-play.

23. The first federal campaign finance law, passed in 1867, was a Naval Appropriations Bill which prohibited officers and government employees from soliciting contributions from Navy yard workers.

24. The Pendleton Civil Service Reform Act of 1883.Established the United States Civil Service Commission and mandated that public jobs be awarded on the basis of merit, not political connections. It prohibited firing government employees for political reasons and soliciting campaign donations on federal property.

25. Congress had been resistant to passing the law since they were politically dependent upon patronage. But the law’s passage was pushed following the assassination of James Garfield by an allegedly disgruntled office seeker.

26. By making the agency a commission headed by a three person appointed panel it was hoped that the organization would be semi-independent and be able to make appointments without the control of the president.Note that the commission “was dissolved as part of the Civil Service Reform Act of 1978; the Office of Personnel Management and the Merit Systems Protection Board are the successor agencies.”

27. The Tillman Act of 1907 prohibited monetary contributions to national political campaigns by corporations. It was promoted by Theodore Roosevelt after the 1904 when he was criticized for accepting corporate contributions.

28. Note that TR had been William McKinley’s vice president who was elected president in 1896 and 1900. McKinley’s campaigns were run and funded with the assistance of the industrialist Mark Hanna. The 1896 campaign set records for campaign spending – mostly from businesses and corporations – that would last for 25 years. Click here for a timeline that argues that the election of 1896 was seen by the public as having been corrupt and it set the stage for campaign finance reform.

29. Also note: “The 1896 campaign is often considered to be a realigning election that ended the old Third Party System and began the Fourth Party System.”This marked the rise of the business sector over the agrarian sector.

30. The impact of the law was minimal. There was no enforcement mechanism and it did not apply to primary elections. Corporations found ways around the limits imposed by the law.

31. The Publicity, or Federal Corrupt Practices Act, enacted in 1910 and amended in 1911 and 1925, placed limits on spending on campaigns and required that spending by political parties be disclosed to the public.

32. Hatch Act of 1939Prohibited members of the executive branch – with the exception of the president, vice president and a few other high ranking officials – from partisan political activity.

33. The Hatch Act of 1939 and its 1940 amendments asserted the right of Congress to regulate primary elections and included provisions limiting contributions and expenditures in Congressional elections. – source.

34. In 1936, labor unions began spending union dues to support federal candidates sympathetic to the workers' issues. This practice was prohibited by the Smith-Connally Act of 1943, Pub. L. No. 78-89, 57 Stat. 163 (1943). Thus, labor unions, corporations, and interstate banks were effectively barred from contributing directly to candidates for federal office.

35. Smith-Connally Act (1943) Prohibited unions from making direct contributions in federal elections. They soon found ways to make indirect contributions.

36. In 1944, the Congress of Industrial Organizations (CIO), one of the largest labor interest groups in the nation, found a way to go around the constraints of the Smith-Connally Act by forming the first political action committee, or PAC.

37. The Taft-Hartley Act of 1947 further barred both labor unions and corporations from making direct expenditures and contributions in Federal elections.

38. Labor unions moved to work around these limitations by establishing political action committees, to which members could contribute.PACs grew into major mechanisms for funneling corporate and union funds for campaigns.

39. From Open Secrets: “PACs have been around since 1944, when the Congress of Industrial Organizations (CIO) formed the first one to raise money for the re-election of President Franklin D. Roosevelt. The PAC's money came from voluntary contributions from union members rather than union treasuries, so it did not violate the Smith Connally Act of 1943, which forbade unions from contributing to federal candidates. Although commonly called PACs, federal election law refers to these accounts as "separate segregated funds" because money contributed to a PAC is kept in a bank account separate from the general corporate or union treasury.”

40. When the FEC was created, PACs were required to register with them and report their financial activities including where they received their money and how they spent it.

41. Here’s a definition of a political action committee from the FEC’s website: “The term "political action committee" (PAC) refers to two distinct types of political committees registered with the FEC: separate segregated funds (SSFs) and non-connected committees.  Basically, SSFs are political committees established and administered by corporations, labor unions, membership organizations or trade associations. These committees can only solicit contributions from individuals associated with connected or sponsoring organization.  By contrast, non-connected committees--as their name suggests--are not sponsored by or connected to any of the aforementioned entities and are free to solicit contributions from the general public. For additional information, consult our Separate Segregated Funds and Nonconnected Committees fact sheet.”

42. In addition to connected and non-connected PACs, two types of PACs are worth pointing out: Super PACsLeadership PACs

43. From Open Secrets: “A super PAC, also known as an independent expenditure-only committee, is a type of political action committee that came into existence in 2010 following a federal court decision in SpeechNow.org v. Federal Election Commission. Super PACs may raise and spend unlimited sums of money for the sole purpose of making independent expenditures to support or oppose political candidates. Unlike traditional political action committees, super PACs may not donate money directly to candidates. Super PACs are required to disclose their donors to the Federal Election Commission, although some super PACs get around this requirement by listing 501(c) nonprofit groups as their donors -- these groups are not required to disclose their funders.”

44. From Open Secrets: A leadership PAC is a “A fund-raising committee formed by a politician as a way to help fund other candidates’ campaigns or pay for certain expenses not related to the campaigns. Leadership PACs are often used by politicians who aspire to leadership positions in Congress. By making donations to other candidates, lawmakers hope to gain clout among their colleagues that the lawmaker will utilize in a bid for a leadership post or committee chairmanship. Politicians also use leadership PACs to lay the groundwork for their own campaigns for higher office. In recent years, leadership PACs have become commonplace, even among freshman members of Congress. Leadership PACs are considered separate from a politician’s campaign committee, providing donors with a way around limits on contributions to a candidate’s campaign committee. Individuals can contribute up to $5,000 per year to a member’s leadership PAC, even if they have already donated the maximum to that member’s campaign committee.”

45. In recent elections, SuperPACs have spent more money on campaigns than have candidates.

46. Here is a list of political action committees from WikipediaFor detailed information about PACs, click here for Political MoneyLine.

47. Revenue Act of 1971This law helped establish the system of presidential public funding used in the United States. The Revenue Act also placed limits on campaign spending by Presidential nominees who receive public money and a ban on all private contributions to them. Beginning with the 1973 tax year, individual taxpayers were able to designate $1 to be applied to the Presidential Election Campaign Fund.

48. Controversy: Should elections receive public financing?What is public finance? Overview of state lawsAn Idea Worth SavingBallotpedia

49. Federal Election Campaign Act (1971)Required full reporting of campaign contributions and expenditures, limited spending on media advertising, and allowed for corporations and unions to “use treasury funds to establish, operate and solicit voluntary contributions for the organization's separate segregated fund (i.e., PAC). These voluntary donations could then be used to contribute to Federal races.”

50. It also attempted to establish such a framework, but it was complex, decentralized and ineffective: ”. . . the Clerk of the House, the Secretary of the Senate and the Comptroller General of the United States General Accounting Office (GAO) monitored compliance with the FECA, and the Justice Department was responsible for prosecuting violations of the law referred by the overseeing officials. Following the 1972 elections, although Congressional officials referred about 7,000 cases to the Justice Department, and the Comptroller General referred about 100 cases to Justice,5 few were litigated. – source.”