Campaign finance laws regulate the amounts of contributions politicians receive from individuals and organizations. The U.S. government has established these regulations in order to preserve the integrity of federal elections by limiting the influence of moneyed interests on politics. Nevertheless, those opposed argue that donation limits and disclosure requirements infringe on privacy and free speech rights. Others contend that more stringent laws need to be enacted in order to stop the powerful and wealthy from rigging elections.
DID YOU KNOW?
According to a 2014 Washington Post report, the better-financed candidate wins 91% of elections.
In this article, the Zero Theft Movement (ZTM) will document the history of campaign finance laws and inform you how current elections could be heavily influenced by big money.
The Beginning of Campaign Finance Laws: The ‘Trust Buster’ and the Tillman Act of 1907
Electing the 26th President of the U.S.
Theodore Roosevelt circa. 1904
When Theodore Roosevelt seized the mantle as the 26th President of the U.S., the Progressive Era came into full force. Roosevelt knew that big money equals big influence, and he feared the greed for green had started to poison the roots of the country. The democracy but a front for plutocrats and a potentially budding corporatocracy of the Gilded Age.
Roosevelt famously targeted Standard Oil, a major company founded by magnate John D. Rockefeller. The President sued the corporation for monopolizing the oil industry, and the Court dissolved the corporation. Restoring free-market competition and ridding moneyed interests in politics was a key focus for the famed ‘Trust Buster.’
“All contributions by corporations to any political committee or for any political purpose should be forbidden by law; directors should not be permitted to use stockholders’ money for such purposes; and, moreover, a prohibition of this kind would be, as far as it went, an effective method of stopping the evils aimed at in corrupt practices acts. Not only should both the National and the several State Legislatures forbid any officer of a corporation from using the money of the corporation in or about any election, but they should also forbid such use of money in connection with any legislation save by the employment of counsel in public manner for distinctly legal services.”
From President Theodore Roosevelt’s 1905 State of the Union Address
Tightening Campaign Finance Laws with The Tillman Act of 1907
Roused by Roosevelt’s efforts, South Carolina Senator Benjamin Tillman sponsored the first major campaign finance law in U.S. history: the Tillman Act of 1907. The legislation prohibited corporations and national banks from financially contributing to federal election campaigns. Before the President signed off on the bill, amendments were made, adding a minimum fine provision and a possibility of prison terms for offenders.
Benjamin Tillman circa. 1908
The Tillman Act proved an important first step in regulating campaign financing, but its flaws and limitations quickly got exposed. The bill outlined penalties, yet provided no method and/or governing body to enforce the enacted regulations. Furthermore, the Tillman Act had no contribution disclosure requirements, creating a total lack of transparency and hard evidence (issues that admittedly persist to this day).
In 1910, Congress passed the Federal Corruptions Practice Act, which required candidates to disclose contributions and established campaign spending limits. Over a sixty-year period, the bill went through revisions (most notably in 1925), remaining in place until major campaign finance reform occurred in 1971.
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Campaign Finance Laws Leading up to 1971: The Hatch Act & the Taft-Hartley Act
The years leading up to 1971 brought further restrictions with two more campaign finance laws: the Hatch Act of 1939 and the Taft-Hartley Act of 1947.
The Hatch Act of 1939 prohibited federal employees in the executive branch (excluding the Vice President and the President) from participating in political activities. Essentially, the hope was to bar government workers from exchanging favors (e.g. a job, promotion, and money) for political support. This outmoded and dubious practice was, perhaps, the lasting vestiges of the governmental cronyism, also known as the spoils system. As it pertains to campaign finance laws, The Hatch Act introduced restrictions to congressional campaign contributions and expenditures.
The Taft-Hartley Act of 1947 prohibited labor unions and corporations from making contributions in Federal elections. The legislation came in response to the Post-World War II strike wave of 1945-1946, where more than five million American workers protested the dip in wages. While the Taft-Hartley Act established new restrictions on labor strikes, it also put in place campaign finance laws that barred corporations and labor unions from contributing to federal political campaigns.
According to the FEC’s brief account of campaign finance laws, the lack of an institution or entity to enforce any of these provisions meant that very few actually followed them.
“The campaign finance provisions of all of these laws were largely ignored, however, because none provided an institutional framework to administer their provisions effectively. The laws had other flaws as well. For example, spending limits applied only to committees active in two or more States. Further, candidates could avoid the spending limit and disclosure requirements altogether because a candidate who claimed to have no knowledge of spending on his behalf was not liable under the 1925 Act.”
The Federal Election Campaign Act of 1971
The Federal Election Campaign Act of 1971 (FECA) brought about major changes in campaign finance laws, doing much to improve transparency and oversight in election processes. The bill required federal candidates to file quarterly reports of their contributions and expenditures. New limits to campaign spending (donors and candidates alike) created further provisions against big money in politics.
However, it wasn’t until a 1974 amendment to the FECA that the government truly addressed the enforcement/oversight issue that had rendered past legislations ineffective. The FECA called for the formation of the FEC, an independent campaign finance regulatory agency that has remained in operation to this day.
FECA also led to the emergence and proliferation of PACs (political action committees). Unions and corporations, although barred from directly donating to a candidate, now could avail themselves of an exception. They were free to use treasury funds to establish, operate, and request voluntary contributions for separate funds (i.e. PACs). This separate or segregated pool of money could go to a federal candidate without any violations of law. PACs, today, have become a source of heated debate, but more on this topic later.
Buckley v. Valeo (1976)
The 1974 amendments to FECA provoked immediate legal action from Senators James L. Buckley and Eugene McCarthy against the Secretary of State, Francis R. Valeo. Buckley and McCarthey denounced the amendments as unconstitutional.
The Supreme Court ruled that limits on candidate self-financing and spending violated the First Amendment—in particular, free speech. The Court, however, permitted the restrictions on spending in presidential campaigns to stand, because they believed such restrictions protected the integrity of elections. Also, the Court upheld the limits on contributions from individuals and PACs.
From 1971-2002, individuals and groups could contribute no more than $1,000 to a candidate, and up to $25,000 in total. PACs could not contribute more than $5,000 to a candidate.
Loopholes in FECA: Hard vs. Soft Money & Political Advertisements
By the 1990s, political parties, corporations, and unions had started to find and exploit loopholes in FECA. These entities managed to circumvent the provisions by creating distinctions in donations, ‘soft money’ vs. ‘hard money.’
DEFINITION
Soft money comes from contributions to a political party or PAC with little regulations, including no donation cap/limit. The funds can come from any source (e.g. individuals, PACs, corporations, etc.)
Hard money comes from a direct contribution to a political candidate from an individual or PAC. The FEC has established strict laws regulating hard money donations.
Political parties solicited soft money donations for ‘party-building’ activities that indirectly support elections, from corporations, labour unions, and wealthy individuals. Furthermore, several seemingly independent advocacy organizations eluded FECA regulations by paying for political advertising for specific candidates while strictly adhering to the language in the bill. They simply avoided any expressions that “expressly advocated” for the defeat or election of a candidate was prohibited—such as “support” and “oppose.”
Soft Money Donations between 1993-2001
| Party | 1993-1994 | 1995-1996 | 1997-1998 | 1999-2000 | 2000-2001 |
|---|---|---|---|---|---|
| Democrats | $45.6 million | $122.3 million | $92.8 million | $243 million | $199.6 million |
| Republican | $59.5 million | $141.2 million | $131.6 million | $244.4 million | $221.7 million |
| Total | $105.1 million | $263.5 million | $224.4 million | $487.4 million | $421.3 million |
From American Government and Politics Today, 2009-2010
The Congressional Research Service recounts the issues that arose in the 90s:
“Soft money came principally in the form of large contributions from otherwise prohibited sources, and went to party committees for “party building” activities that indirectly supported elections. Similarly, issue advocacy [issue advertising] traditionally fell outside FECA regulation because these advertisements praised or criticized a federal candidate— often by urging voters to contact the candidate—but did not explicitly call for election or defeat of the candidate (which would be express advocacy).”
Bipartisan Campaign Reform Act, or McCain-Feingold Act
By the late 90s, a movement to curtail these practices, led by Senators John McCain and Russell D. Feingold, had started to brew within the government. In 2002, Congress passed the Bipartisan Campaign Reform Act (BCRA) in an attempt to close the loopholes in campaign finance laws.
The BCRA barred national political parties, federal candidates, and officeholders from utilizing and soliciting soft money contributions in all federal election activities. Furthermore, corporations and unions could no longer use their treasury funds to finance electioneering communications, which are defined by the FEC as “any broadcast, cable or satellite communication that refers to a clearly identified federal candidate, is publicly distributed within 30 days of a primary or 60 days of a general election and is targeted to the relevant electorate.”
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A Loosening of Campaign Finance Laws: Citizens United v. Federal Election Commission
Leading up to the 2008 Democratic primary elections, a conservative nonprofit organization Citizens United tried to air an advertisement criticizing Democratic presidential candidate Hilary Clinton. Citizens United would have violated the 30 day cutoff date for electioneering communications established by the BCRA. The organization challenged the provision, arguing that its restrictions on political advertising were unconstitutional.
The Supreme Court ruled in the Citizens United v FEC case that corporations should receive the same rights to free speech under the First Amendment. The government, therefore, could not lawfully regulate political advertising as they had been since the passing of the BCRA. Supreme Court Justice Anthony Kennedy composed the majority opinion, writing:
“Although the First Amendment provides that ‘Congress shall make no law … abridging the freedom of speech,’ §441b’s prohibition on corporate independent expenditures is an outright ban on speech, backed by criminal sanctions. It is a ban notwithstanding the fact that a PAC created by a corporation can still speak, for a PAC is a separate association from the corporation. Because speech is an essential mechanism of democracy—it is the means to hold officials accountable to the people—political speech must prevail against laws that would suppress it by design or inadvertence.”
The Court upheld the provision against for-profit and nonprofit corporations and unions contributing hard money donations, as well as the transparency mandates (disclaimers and disclosures) for political advertising.
FURTHER READING
The Court’s decision sparked a powerful movement to sever the connections between big money and politics. Follow the link below to read all about this ongoing anti-corruption organization:
McCutcheon v. FEC
Prior to McCutcheon v. FEC, the FECA had established a biennial aggregate contribution limit of $123,000 for individuals. This provision put a cap on an individual’s total donations in a two-year election cycle, not just to a single candidate. Shaun McCutcheon, along with his fellow plaintiffs, argued that such restrictions infringed upon the citizenry’s First Amendment rights to free speech.
In a 5-4 decision, the Court ruled the provision was unconstitutional and eliminated the limit. Chief Justice John Roberts noted that the federal government can only restrict contributions to prevent ‘quid pro quo’ corruption. Writing for the Court majority, he stated:
“Spending large sums of money in connection with elections, but not in connection with an effort to control the exercise of an officeholder’s official duties, does not give rise to quid pro quo corruption; nor does the possibility that an individual who spends large sums may garner influence over or access to elected officials or political parties.”
Current Campaign Finance Laws: 2019-2020 Campaign Contribution Limits
Under FECA, money, goods and services, and loans provided to a federal candidate counts as a contribution. These limits apply to any single election; thus, if a candidate participates in a primary and general election, the donor can contribute the maximum amount to the same candidate twice.
2019-2020 Contribution Limits
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Potential Risks/Loopholes of Current Campaign Finance Laws
‘Satellite/Independent’ Spending
Satellite or independent spending refer to any political expenditures made by an individual or organization that are not directly affiliated with or managed by a candidate or their campaign team. Organizations such as political party committees (PPCs), super PACs, trade associations, and 501(c)(4) nonprofit groups can all spend as much as they desire on political activities. In some cases, they do not have to disclose their donors.
Source: Center for Responsive Politics
Due to the landmark ruling in the Citizens United case, satellite spending (predominantly on political advertisements for TV) experienced a sudden huge boost from 2010 to 2012 (the first presidential election cycle since the 2010 decision). In the past three cycles (2016, 2018, and 2020), as depicted in the Center for Responsive Politics table above, total expenditures, even in a midterm election period, exceeded a billion dollars.
When you consider that these figures do not (and cannot) account for undisclosed contributions, one can only imagine how much organizations spend on endorsing their ideal candidate and denouncing the opposition. Whoever can win the battle of advertisements definitely improves their chances of winning an election.
According to a study conducted by Northwestern’s Kellogg School of Management, political TV advertisements from opposing candidates tend to neutralize their mobilizing and demobilizing effects. Nevertheless, the study suggests each candidate’s vote share increases by getting the ‘right’ set of voters to the polls.
“The findings…have potentially important implications for public policy, especially for campaign-finance regulation in the post-Citizens United era. Ever since the Supreme Court’s landmark decision [Citizens United], so-called Super PACs may accept unlimited donations from individuals, corporations, and unions in order to overtly advocate for or against particular candidates. As much of Super PACs’ spending directly relates to campaign advertising, our results reinforce existing concerns about the ability of deep-pocketed donors to in uence democratic outcomes”
‘Dark Money’
Dark money refers to campaign spending by certain non-profit organizations (e.g. social welfare organizations/501(c)(4)) where the donor’s identity does not need to be disclosed. Mirroring the larger debate around campaign finance laws, dark money arguments pit those claiming violations of privacy and free speech against those claiming they want as much transparency as possible in politics.
Preserving the anonymity of donors becomes a concern, especially when they can contribute unlimited amounts of dark money to social welfare organizations. Kleptocrats from foreign countries even can send their donations through shell companies to influence our elections. This at least raises questions about the extent of influence big donors have on who these specific non-profit organizations endorse.
ProPublica performed a deep investigation into the matter, alleging numerous instances where the non-profit organizations, exempt from the disclosure provision, funded political ads:
“One group, the Center for Individual Freedom, told election officials that it spent $2.5 million on ads in 2010, when it paid for commercials criticizing Democrats in 10 districts. But it reported to the IRS that it spent nothing to directly or indirectly influence elections, calling those same ads ‘education’ or ‘legislative activities.’
“…almost 70 percent of America’s Families First’s 2010 expenditures went to grants to five social welfare nonprofits. Four spent money on ads supporting Democrats or criticizing Republicans, including one group that put almost half of its expenditures into political ads.”
“…the two leading conservative 501(c)(4)s, Crossroads GPS and Americans for Prosperity, founded by conservative billionaire brothers David and Charles Koch, had spent about $60 million.”
H.R.1 – For the People Act was introduced into Congress in 2019. It includes a provision to end dark money, making donor disclosure a legal requirement. As of October 2020, the bill has passed the House.
Campaign Finance Laws: For and Against
| FOR | AGAINST |
|---|---|
| Campaign finance reform would make elections more fair and competitive . Great candidates with small coffers have not been able to compete with their opposition due to a lack of resources. Limiting contribution amounts for each candidate reduces the effects of money on the outcome of the election and highlights their individual platforms. | Reformation, conservative or radical, would close existing loopholes, but others will simply emerge. Clearly, individuals and organizations have found ways to avoid campaign finance reform laws throughout history. There will always be ways to get around the law—unethically, legally, and otherwise. |
| Campaign finance reform promotes free speech and amplifies diverse voices and ideas across the community. Minor party candidates cannot compete with the well-funded campaign operations, discouraging potential leaders from even running. | Campaign finance laws violate First Amendment free speech rights. By setting limits on how much a candidate can spend, they do not have the freedom to express themselves to the extent they might wish to. Furthermore, while campaign finance reform might result in greater diversity in ideas and candidates, every person running will have their speech restricted. |
| Campaign finance reform empowers individual donors . Special interest groups, PACs, labor unions, etc. can solicit and donate unlimited amounts of money to endorse a candidate. Many individuals, however, cannot even afford to pay the max contribution amount ($2,800). By restricting the contribution amounts of organizations, listening to and advocating for individuals becomes all the more important for candidates. This could encourage voter participation and activism | Organizations have a right to free speech, too. These organizations receive donations from individuals who trust that their money will go to promoting their interests. What makes an individual donation any more of a significant act of speech than an organization’s donation (accumulation of individual donations)? |
| Campaign finance reform mitigates corruption in government by discouraging candidates from selling out to the highest bidder. Winning won’t be so inextricably tied to how much money you can raise. Candidates will also act under fewer influences when they are not beholden to those financing their campaign. | The influence of others will always affect elections . Pressure from the community, special interests (even without the contributions, and within the party can all influence candidates. Strategically speaking, candidates will try to win the favor of voters, even if that goes against the former’s true beliefs. |
Do Campaign Finance Laws need Reform?
With the billions of dollars spent on political advertisements alone, it at least raises concerns about how much money (known and unknown) is being used to protect those with money. A debate about transparency and spending as free speech definitely deserves to be had, but we must recognize the effects of big money on the outcomes of elections.
Big money equals big power. Crony capitalists and corrupt officials have protected and promoted the rigged layer of the economy for fifty years. This has led to half a century of wage stagnation while productivity has steadily increased, anticompetitive markets that have artificially hiked up the prices for old goods (even old antibiotics), and created a revolving door where regulators/legislators exchange places with lobbyists.
We live in a corporatocracy, not a democracy.
View how much is being STOLEN, according to the public
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Beyond Campaign Finance Laws
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Standard Disclaimer
The Zero Theft Movement does not have any interest in partisan politics/competition or attacking/defending one side. We seek to eradicate theft from the U.S economy. In other words, how the wealthy and powerful rig the system to steal money from us, the everyday citizen. We need to collectively fight against crony capitalism in order for us to all profit from an ethical economy.
Terms like ‘steal,’ ‘theft,’ and ‘crime’ will frequently appear throughout the article. Zero Theft will NOT adhere strictly to the legal definitions of these terms (since congress sells out). We have broadly and openly defined terms like ‘steal’ and ‘theft’ to refer to the rigged economy and other debated unethical acts that can cause citizens to lose out on money they deserve to keep.