George Washington to Citizens United: A History of Campaign Finance Reform

May 21, 2019 by Dan McCue
Theodore Roosevelt speaking to crowd at Sagamore Hill. (Photo courtesy the Library of Congress)

From the very beginning of the Republic, campaign finance has been a hard subject to discuss in polite company.

In a capitalist society, things, including access to whatever serves as the public megaphone of the era, simply cost money.

And in a Democracy where almost everyone, regardless of where they start off economically, is told they too can someday hold public office, the need to communicate one’s attributes to the electorate makes soliciting political contributions an absolute necessity.

Money doesn’t necessarily buy votes, but it does confer a sense of electability. Contributions signal support, and in doing so it attracts more support, becoming self-fulfilling.

Yet, as retired U.S. Supreme Court Justice David Souter once observed, “most people assume — I do, certainly — that someone making an extraordinarily large contribution is going to get some kind of an extraordinary return for it.”

Souter called this assumption “pervasive” and went on to say “there is certainly an appearance of, call it an attenuated corruption, if you will, that large contributors are simply going to get better service, whatever that service may be, from a politician than the average contributor, let alone no contributor.”

That belief has long been at the heart of efforts to change the involvement of money in politics. The money-in-politics regulatory regime isn’t just intended to rein in potentially unscrupulous behavior; it is also intended to level the playing field for candidates and contributors alike.

It is also the reason why, as we stand at the opening of the 2020 presidential contest that nearly every candidate is claiming to be supported by small donors and therefore immune from the ills of big money in politics.

But as the first rounds of campaign finance disclosure statements have made clear, the reality of funding a viable presidential campaign in the 21st century is a lot more nuanced.

While small donors are contributing an unprecedented share of the money raised by candidates, the lifeblood of many campaigns remains infusions of cash from big donors and bundlers who can tap their personal networks of wealthy friends.

That’s largely due to a front-loaded primary schedule that will see the enormously costly Super Tuesday — when voters in 12 states, including California, will decide their preferred candidates — come just a month after the Iowa caucuses.

While there’s nothing wrong with these donations — the identity of anyone donating over $200 is publicly disclosed in Federal Election Commission filings — the demands of the presidential contest, and how the candidates and their supporters respond to them, are sure to reignite concerns over the role money plays in politics.

And as history has shown, while reformers and good government advocates have achieved some significant victories in the area of campaign finance reform over the years, deep-pocketed interests have often found ways to chip away at those gains — sometimes even being aided and abetted by the U.S. Supreme Court.

This was Justice Souter’s constant concern before his retirement from the High Court in June 2009.

He summed up those concerns in his dissent in Federal Election Commission (FEC) v. Wisconsin Right to Life, Inc., a case in which a majority of justices held that so-called “issue ads” that don’t explicitly endorse a particular candidate are not equivalent to contributions under the law.

“Neither Congress’s decisions nor our own have understood the corrupting influence of money in politics as being limited to outright bribery or discrete quid pro quo,” Souter wrote.

“[C]ampaign finance reform has instead consistently focused on the more pervasive distortion of electoral institutions by concentrated wealth, on the special access and guaranteed favor that sap the representative integrity of American government and defy public confidence in its institutions.”

The Early Days

Concerns over the influence of money on politics precede the founding of the Republic. None other than George Washington himself was accused of exploiting his relative personal wealth to secure support for his successful bid for a seat in Virginia’s House of Burgesses in 1757.

Although tales about Washington’s early life often prove apocryphal, legend has it the father of our country plied voters with wine and hard cider and fancy meals to secure their support. Washington won the election, and the House of Burgesses, evidently hearing tales of its newest member’s exploits, almost immediately passed an act prohibiting candidates from exchanging food and drink or other reward for a vote.

Despite longstanding concern about the influence of money on politics, the first federal campaign finance law wasn’t passed by Congress until 1867. The Naval Appropriations Bill adopted that year prohibited Navy officers and government employees from soliciting campaign contributions from Navy yard workers.

Sixteen years later, those protected were extended to all federal civil service workers with the passage of the Pendleton Civil Service Reform Act of 1883.

But campaign finance reform didn’t really take off as an issue until 1904, when President Theodore Roosevelt was confronted with allegations that corporations had bought influence by making contributions to his re-election campaign.

In fact, Roosevelt had successfully raised over $2 million in contributions from bankers and industrialists during the campaign, the old “trust buster” contending it was perfectly okay for a campaign to accept large contributions so long as there was no implied obligation on the part of the candidate.

However, Roosevelt’s position changed profoundly when whispers of a quid pro quo deal threatened to erupt into full-blown scandal. The president stood accused of trading the nomination of E.H. Harriman, a railroad executive, to the French ambassadorship in return for $200,000 in business contributions.

Unable to silence his critics, Roosevelt used his 1905 State of the Union address to propose that Congress outlaw “contributions by corporations to any political committee or for any political purpose.”

Roosevelt declared “the need for collecting large campaign funds would vanish if Congress provided an appropriation ample enough to meet the necessity for thorough organization and machinery, which requires a large expenditure of money.”

He also said that any candidates who accept public funds should be required to limit donation amounts and to publicly disclose what they’ve received.

Instead Congress responded by passing the Tillman Act of 1907, banning corporate gifts to federal candidates.

While Roosevelt signed the bill into law later that year, it was lacking in two respects: it placed no restriction on campaign contributions from the private individuals who owned corporations and it lacked any provisions for enforcement.

In 1910, Congress again turned to campaign finance reform, passing the so-called Publicity Act, which required the treasurer of political committees to reveal the names of all contributors of $100 or more.

In 1925, Congress expanded those disclosure rules further with the Federal Corrupt Practice Act, which required political committees to report total contributions and expenditures, and set spending limits on all congressional candidates. Those spending limits were ultimately struck down by the U.S. Supreme Court in the case Burroughs v. United States, but in the same ruling the justices held that Congress had the prerogative to “pass appropriate legislation to safeguard an election from the improper use of money to influence the result.”

Slowly, the reforms Teddy Roosevelt sought after his own hardships were coming to pass. But it was during and immediately after the administration of his fifth cousin, President Franklin D. Roosevelt, that campaign finance reform efforts took a major turn.

The next changes to campaign finance law rode in on a wave of anti-unionism in the 1930s and early 1940s. The War Labor Disputes Act, legislation passed in 1943, and also known as the Smith-Connally Act, temporarily prohibited unions from making contributions in federal  elections.

In 1947, the Taft-Hartley Act made this wartime measure permanent. However, the law had an unanticipated consequence — it effectively ushered in the era of “soft money.”

Believing their political influence had been compromised by the successive laws, unions and trade associations began creating Political Action Committees.  Because they were technically not labor organizations, these PACs could contribute cash to candidates within existing guidelines.

Significantly, the new political action committees did not have to comply with the spending and advertising laws that already applied to political candidates.

As a result, they could effectively spend whatever they wanted to support their preferred candidates and the issues they cared about. And they could do all of this without contributing anything directly to a political campaign.

The Modern Era

Things got serious again in 1971, when Congress passed the Federal Election Campaign Act, which went into great detail in defining how candidates had to disclose sources of campaign contributions and campaign expenditures. Among the Act’s most notable restrictions was a $50,000 spending cap on television advertising.

Like the Tillman Act, however, the new law failed to include a critical provision on enforcement. Lawmakers returned to FECA in the post-Watergate fall of 1974, creating the Federal Election Commission — the agency that continues to enforce campaign finance law to this day.

But the 1974 amendments went a step further, limiting individual donations to $1,000 and donations by political action committees to $5,000.

Congress didn’t have long to bask in its high-mindedness, however.

In 1976, Senator James Buckley, R-N.Y. challenged the limits on campaign spending, arguing — all the way to the U.S. Supreme Court — that such limits violated his free speech rights.

The Supreme Court agreed, handing down a ruling in Buckley v. Valeo that is now seen as laying the legal foundation for Citizens United v. FEC, a case that would dramatically alter the campaign finance landscape 34 years later.

In their ruling, the majority on the court held that restrictions on campaign spending “limit political expression at the core of our electoral process and of the First Amendment freedoms.”

The ruling also struck down limits on independent spending by PACs and others not coordinated with a candidate’s campaign and on expenditures of candidates’ personal funds.

Congress responded to the ruling in 1976, by establishing new contribution limits and repealing expenditure limits, except in the case of candidates who accept public funding.

These changes have had some interesting consequences. In 1996, for instance, Senator Bob Dole, the eventual Republican nominee accepted federal funds for the primary contest and agreed to abide by contribution limits set by the FEC.

The problem was, the Dole campaign spent liberally during the primary and he ran out of money long before his party’s convention that summer.

Although Dole recovered his funding footing for the general election he eventually lost to incumbent Democratic President Bill Clinton, his experience has informed campaign strategies ever since.

In subsequent races, George W. Bush, John Kerry and Howard Dean all opted out of public funding for their primary bids, and candidate Barack Obama declined all public funding for his successful bid for the presidency in 2008.

In doing so, Obama argued that accepting public money and the contribution limits that come with it would have crippled his ability to respond to attacks from tax-exempt advocacy organizations — known as 527 groups — whom he said were spending tens of millions of dollars to ruin his reputation.

The New Century

Perhaps the biggest, bipartisan effort to level the campaign finance playing field came in 2002, when members on both sides of the aisle in Congress came together to support the appropriately named Bipartisan Campaign Reform Act, more commonly known as the McCain-Feingold Act.

In announcing his sponsorship of the bill, Senator John McCain, R-Ariz., explained that “the people who I serve believe that the means by which I came to office corrupt me.”

“That shames me,” he said. “Their contempt is a stain upon my honor, and I cannot live with it.”

McCain-Feingold sought to restrict the unlimited soft money donations ushered in after the passage of the Taft-Hartley Act and to separate issue advocacy from candidate advocacy.

The Act regulated issue advocacy by creating a new term in federal election law, “electioneering communications”— political advertisements that refer to a clearly identified federal candidate and are broadcast within 30 days of a primary or 60 days of a general election.

The act also prohibited unions and certain corporations from spending treasury funds for such “electioneering communications.”

However, several provision of McCain-Feingold were challenged less than a year after it was enacted, and the Supreme Court struck many of them down.

In FEC v. Wisconsin Right to Life, Inc., a 2007 case, a divided Supreme Court said Congress had gone too far in its restrictions on “electioneering” communications.

The law also said corporate and labor money cannot be used to fund such advertisements.

But in a 5-4 decision, the justices ruled the law was unconstitutional when it came to advertisements that did not expressly advocate for the election or defeat of a candidate.

Citizens United

That ruling opened the door to Citizens United v. FEC, the 2010 case that continues to impact elections and roil discussions of campaign finance reform to this day.

Writing for the majority in the 5-4 decision, Justice Anthony Kennedy wrote that McCain-Feingold’s prohibition of all independent expenditures by corporations and unions violated the First Amendment’s protection of free speech.

“If the First Amendment has any force, it prohibits Congress from fining or jailing citizens, or associations of citizens, for simply engaging in political speech,” Kennedy wrote.

He also noted that since the First Amendment does not distinguish between media and other corporations, the McCain-Feingold restrictions could, in theory, allow Congress to suppress political speech in newspapers, books, television and on the internet.

The court’s ruling freed corporations and unions to spend money both on “electioneering communications” and to directly advocate for the election or defeat of candidates, although it still maintained that such expenditure must be “independent,” and made without coordination with the candidate or his campaign.

The immediate impact of the ruling  — and a related decision in a second case, SpeechNow.org et. al. v. FEC — was that it led to the creation of super PACs, entities that can accept unlimited donations and use the funds mostly on political advertising, and nonprofits that are allowed to spend a portion of their revenue on political engagement but are not required to reveal their donors.

SpeechNow struck down federal contribution limits to independent expenditure committees.

It found that the high court’s analysis in Citizens United required the lower court to conclude that “the government has no anti-corruption interest in limiting contributions to an independent expenditure group.”

Justice John Paul Stevens, who retired shortly after the ruling was handed down, said in a dissent that the high court’s ruling “threatens to undermine the integrity of elected institutions across the nation. The path it has taken to reach its outcome will, I fear, do damage to this institution.”

Senator McCain was more succinct in his response to the ruling.  “Campaign finance reform is dead,” he said.

In the wake of Citizen’s United, Shaun McCutcheon, an Alabama businessman, Republican donor and conservative activist, sued the Federal Elections Commission, challenging “aggregate contribution limits” that had been in place since 1971.

The cap, imposed under the Federal Election Campaign Act, limited the contributions an individual could make over a two-year period to national party and federal candidate committees.

McCutcheon, who had contributed a total of about $33,000 to 16 candidates for federal office in the 2012 election cycle, said he had wanted to give $1,776 each to 12 more but was prevented from doing so by the overall cap for individuals.

He was eventually joined as a plaintiff in the case by the Republican National Committee.

In a 5-4 decision handed down in April 2014, the court’s conservative members largely echoed their positions in Citizens United.

Chief Justice John Roberts, writing for four justices in the controlling opinion, said the overall limits could not survive First Amendment scrutiny. “There is no right in our democracy more basic,” he wrote, “than the right to participate in electing our political leaders.”

In a separate, concurring opinion, Justice Clarence Thomas wrote that all limits on contributions were unconstitutional.

In a dissent from the bench, Justice Stephen Breyer slammed the majority opinion, calling it a disturbing development that raised the overall contribution ceiling to “the number infinity.”

“If the court in Citizens United opened a door … today’s decision may well open a floodgate,” he said.

In a written dissent in which he was joined by Justices Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan, Breyer said in light of the court’s decision in McCutcheon “a single individual” would be allowed “to contribute millions of dollars to a political party or to a candidate’s campaign.”

But in an op-ed that appeared in The New York Times shortly after the ruling, Stanford University law professor Nathaniel Persily said that while he could understand Breyer’s apocalyptic fears, the reality is, “the floodgates were already thrown open by Citizens United and other decisions that allowed for unlimited expenditures by individuals, unions, corporations, super PACs and virtually every other actor in the campaign finance system.”

“While the potential effects of the court’s decision in McCutcheon should not be overstated, the court’s ruling does hold promise to restore the balance between insiders (parties and candidates) and outsiders (corporations, unions, super PACs and other nonparty groups),” Persily wrote.

“Because the court reaffirms the value of forcing disclosure of contributions to candidates and parties, at least with respect to contributors like Mr. McCutcheon, we will know where the money is coming from, where it is going, and how politicians behave once they receive it,” he continued. “The only question now is how to redirect the river of money flowing into politics toward the destinations most beneficial to our democracy.”

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