By Jennifer Nicoll Victor, Ph.D., George Mason University
Federal campaigns require a large amount of money. However, the problem with campaign finance is that it is incredibly imbalanced. The unequal distribution of money across candidates and donors reflects an unequal distribution of power in American society.
Money and Politics
Any society that uses elections to make political decisions, and which values free speech, naturally entwines money in its political processes. But, money is often demonized and misunderstood in politics.
It is not that the money is bad or corrupt, or that candidates should be faulted for seeking it. However, only a fraction of the people are providing the money, and power tends to gravitate toward the people who provide the funding.
Financial Campaigning in the Early Days
In the early days of the republic, soliciting money to run for office was unheard of. The only people who ran for office were wealthy elites and they tended to finance their campaigns from their own assets.
Campaigns themselves were run in a secretive manner, with many backroom discussions. This was because publicly announcing one’s ambitions for public office was seen as brash and tasteless. In fact, it was more common for candidates to give things to voters, than the other way around. For instance, George Washington was apparently known to offer whiskey to his supporters, a practice that would be considered illegal today.
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The First Real Political Campaigns
The first real political campaigns began around the 1820s, around the time that formal parties formed. Presidential candidate Andrew Jackson was the first candidate to use campaign staff, grassroots mobilization, and campaign messaging. Jackson, however, never solicited funds himself. He left that to his campaign staff.
Throughout the 1800s, presidential candidates routinely offered well-paying federal government jobs in exchange for political support. But, in 1881, President James Garfield was assassinated by a man who believed he was owed a diplomatic post for his campaign work. After this incident, Congress passed the Pendleton Civil Service Act, which mandated that federal government jobs be distributed based on merit rather than political loyalty. A notable exception to this rule remains with respect to foreign ambassadors, many of which are still handed to a president’s big-money donors.
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Direct Corporate Donations Banned and First PAC Formed
Another longstanding restriction that remains in place even today is a federal ban on direct corporate donations to campaigns. After a campaign finance scandal during the election of 1904, Congress passed the Tillman Act in 1907, which banned corporations and banks from making donations to federal candidates.
Through the early 1900s, Congress made several attempts at requiring financial disclosure of campaign funding and limits on campaign donations, but enforcement mechanisms were lacking.
In 1944, the largest labor union in the US—the Congress of Industrial Organization or CIO—formed a political action committee, or a PAC. The purpose of a PAC was to raise and distribute money to give to federal candidates. After Congress banned direct contributions from unions to candidates in 1947 with the Taft-Hartley Act, PACs became the preferred means of getting around the restriction.
Changes in the Legal Landscape of Campaign Finance
In 1971, Congress passed the Federal Election Campaign Act, or FECA, which required candidates to report money raised and spent, provided a legal framework for PACs, and attempted to limit how much could be spent on campaigns, though these restrictions were later lifted. The legalization of PACs was the most important part of this act.
Then, in 1972, the Supreme Court issued a ruling in a case known as Pipefitters Local Union No. 562 v. the United States. The Court ruled that PACs were only legal entities if their funds were separate and segregated from their parent organization, with contributions made voluntarily. Unions could no longer require members to contribute to the union PAC, and PAC funds had to be managed entirely separately from the union dues. PACs now became the legal and preferred way for unions and corporations to participate in campaign politics.
And, in 1974, Congress amended FECA in several important ways. First, it set strict limits on how much money individuals and groups could donate to candidates: no more than $1,000 from individuals and $5,000 from PACs. Second, it established the Federal Election Commission to act as the principal enforcer of campaign finance laws. As long as the FEC was a well-functioning body, it would be much harder to engage in corrupt campaign finance practices.
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Connected and Non-Connected PACs
In 1975, the FEC ruled in what is known as the Sun Oil case that corporate PACs could use corporate funds to help run the PAC, including the ability to solicit PAC contributions. This ruling set up a bifurcated system of PACs of ‘connected PACs’ and ‘non-connected PACs’.
A connected PAC has a corporate parent organization associated with it that can use profits to fund the overhead and logistical expenses of the PAC. Every dollar donated to the PAC can be money funneled to candidates. A non-connected PAC does not have a parent organization. Non-connected PACs may be associated with non-profit organizations or social activist groups, such as an animal rights organization, civil rights organization, or a group that promotes civil liberties. For these groups, they must raise money to run the PAC as well as raise the money given to the candidates.
The Sun Oil ruling gave connected PACs a huge advantage in the world of campaign finance, and it contributed to the proliferation of corporate PACs through the 1980s and 1990s.
Common Questions about the History of Financing of Federal Campaigns in the US
In the early days of the republic, financial campaigns were run in a secretive manner was because publicly announcing one’s ambitions for public office was seen as brash and tasteless.
The purpose of a PAC is to raise and distribute money to give to federal candidates.
In 1971, Congress passed the Federal Election Campaign Act or FECA, which required candidates to report money raised and spent, provided a legal framework for PACs, and attempted to limit how much could be spent on campaigns.