Money And Politics

By Geoffrey Michael AAA

The marriage of money with politics in the U.S. traces back to the colonial days. In 1759, George Washington employed rum punch, money and a fiddler to bolster his election to the House of Burgesses. There was an understanding, in those days, that men of means and education assumed leadership positions in the government. Over time, however, the political process changed and politics became big business. This article covers the progression of events and legislation that shaped and influenced today's political environment.

SEE: Lobbying: K Street's Influence On Wall Street

History
In the early days of the republic, politics as we know it didn't exist. There were no formal campaigns and the process was primitive and relatively inexpensive. The method for federal elections was very different than it is today. For example, senators were chosen by state legislatures up until passage of the Seventeenth Amendment in 1913.

At the presidential level, there was an unwritten rule that campaigning was beneath the dignity of the office. That philosophy worked in the beginning, but quickly changed with the rise of political parties and the start of the Industrial Revolution. As communications and transportation improved, economic and social changes brought more people into the process. Politicians had to make the leap from personal persuasion to convincing large groups to support them at rallies, caucuses and conventions.

In the early 1800s, a Midwest or Mid-Atlantic congressional campaign could cost up to $4,000. The bill was typically less in New England and the South. The big money applied to state-level offices, where five-figure sums were spent on friendly newspaper ads, pamphlets and other campaign items. Floats, slogans, songs, coonskin caps and revival meetings were all used to capture the imaginations of voters.

National political committees were spending up to $100,000 on presidential campaigns by the mid-1800s. As the size and cost of government grew, more businessmen were attracted to it as a means of furthering their business interests. Patronage translated into loyalty and a means of extracting donations in exchange for generous political favors. Regular contributions to those in power were expected if you hoped to hold onto your job.

The assassination of President Garfield in 1881 prompted a major change in the political climate and passage of the Pendleton Civil Service Reform Act, two years later. It required competitive exams for federal government jobs that would be awarded based on merit, not on political affiliation or financial support.

Real-World Politics
As the influence of money took over the political process, the amount required to win an election grew enormously. Some reforms have had unintended side effects. For example, when the primary process was first implemented, it was designed to take power away from political insiders and into the hands of everyday voters. However, the primaries extended the election cycle and significantly increased the need for additional funding.

Reforms have not had the desired effect of reducing the costs of running for office, because candidates devise ways to work around them. Creative accounting and "soft money" have combined to circumvent the national party infrastructure.

Soft money fundraising, unlike its hard money counterpart, is not subject to federal campaign finance laws, because it's not controlled by the candidates or their election committees. That opens the door for contributions from a wide array of entities and anyone who has otherwise been banned from directly funding campaigns. This includes labor unions, corporations and wealthy individuals whose contributions would normally be limited.

Political Action Committees (PAC) represent specific labor, business or ideological interests, and raise money to help elect and defeat targeted candidates. These PACs must register with the Federal Election Commission and can donate $5,000 per individual election. They can also give $15,000 to any national party and receive up to $5,000 from an individual or organization per year.

Political Figures and Scandals
In the post-revolutionary period, "generous gentlemen" were expected to spend their own money to aid their runs for office. James Madison failed in his bid for a seat in the Virginia House of Delegates because he didn't think it proper to combine money with politics.

Abraham Lincoln awarded patronage jobs in exchange for millions of dollars in Civil War contracts for northern businessmen. The businesses were expected to contribute to his campaigns and kick back 5% of officeholders' salaries. During his campaign for a second term, his agents were reportedly "paying out money like water," to sway the vote his way.

During the construction of the transcontinental railway, the Union Pacific Railroad gave discounted stock to influential politicians in exchange for their continued support of additional project funding. Known as the Credit Mobilier scandal of 1872, one of those tainted was Representative James A. Garfield of Ohio, who went on to become president.

Tammany Hall (or the Tammany Society) was a Democratic Party machine that controlled New York politics up to the 1930s. It derived its influence from government contracts, job kickbacks, patronage and the power of corrupt leaders like William "Boss" Tweed.

When Standard Oil pumped $250,000 into William McKinley's campaign coffers, it noted that its contributions were equivalent to "taking out an insurance policy." In one of the most sensational incidents, Secretary of the Interior Albert Fall was convicted of accepting bribes from oil companies, in exchange for low lease rates on the petroleum reserves at Teapot Dome. The scandal damaged the reputation of then-president Warren Harding.

Louisiana was well-known for its corruption under former Governor Huey "Kingfish" Long. His son Russell, a former senator, once said, "The distinction between a large campaign contribution and a bribe is almost a hairline's difference." Scandals such as these continue to this day, upping the ante with more money being tossed into the fold and larger earmarks doled out.

Campaign Finance Legislation
Listed below is a summary of the major laws and court rulings that have dealt with campaign fundraising and financing:

  • 1907 - Tillman Act: Prohibited national banks and corporations from making contributions to any elections for political office.

  • 1910 - Publicity Act: Required national committees and parties to file campaign reports for all receipts and expenses.

  • 1911 - Publicity Act amended: Required reporting by candidates in all federal elections and established spending limits of $5,000 for a house seat and $10,000 for a senate seat.

  • 1921 - Newberry v. United States: The Supreme Court struck down the spending limits set in the Publicity Act, saying that Congressional authority to regulate elections did not extend to nomination exercises and party primaries.

  • 1925 - Federal Corrupt Practices Act: Extended coverage to multi-state parties and election committees, and set up reporting framework for receipts and expenses. Raised the spending limit for senate campaigns to $25,000.

  • 1939 - Hatch Act: Barred federal employees from collecting campaign donations and participating in politics. Set individual contribution limit for a federal campaign at $5,000 and major party spending at $3 million per calendar year.

  • 1943 - Smith-Connally Act: Prohibited labor unions from making contributions to federal campaigns.

  • 1941 - United States v. Classic: The Supreme Court ruled that Congress has the power to regulate and limit spending on primary elections in cases where state law made them a part of the election process and they effectively determined the outcome of the election.

  • 1943 - Tillman Act extended: Prohibited contributions from corporations and unions, leading to the creation of PACs.

  • 1971 - Federal Elections Campaign Act (FECA): Established disclosure requirements for political committees and federal candidates. Set limits on how much a candidate could spend on media and the campaign.

  • 1974 - FECA amended: Set up Federal Election Commission (FEC) and a voluntary public financing system for presidential elections and matching funds for presidential primaries. Replaced media spending limits with total campaign limits for both congressional and presidential elections. Established federal contribution limits for individuals, political committees and national parties.

  • 1975 - FEC permitted corporate PACs to solicit stockholders and employees.

  • 1976 - Buckley v. Valeo: The Supreme Court ruled that money is speech and protected by the First Amendment. Spending limits are therefore unconstitutional. Only ads that advocate a candidate (rather than issues) are subject to regulation. Spending limits can apply to candidates who accept public financing.

  • 2002 - Bipartisan Campaign Reform Act (McCain-Feingold): Increased individual contribution limit from $1,000 to $2,000 with inflation adjustment. Eliminated soft money contributions to national parties and prohibited corporations and unions from paying for federal candidate ads within 30 days of a primary/convention or 60 days from a general election.

  • 2010 - Citizens United v. Federal Election Commission: The Supreme Court ruled that limits on corporate funding of independent political broadcasts in candidate elections, violate the First Amendment.

The Bottom Line
The intersection of money and politics often starts right at the top. In a well-publicized example, the Clintons sold Lincoln bedroom sleepovers starting at $100,000 a night. They also conducted 98 White House gatherings where $50,000 bought you three danish and a cup of coffee.

It's impossible to remove money from politics, especially since it enjoys constitutional protection affirmed by the Supreme Court. Without voluntary limits, the price of a political office will continue to rise. Politics is about power, and money buys power. The reality is that the money has to come from somewhere and most efforts to control it haven't work, haven't been enforced or have been overturned by the Supreme Court.

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