McCutcheon vs. Federal Elections Commission- Part 1: The History of Campaign Finance Laws

This is the first of a five part series on campaign finance reform and an upcoming Supreme Court Case.

Perhaps one of the most contentious constitutional issues that separates liberals from conservatives is the concept of campaign finance reform and the effect of money in elections. For every Koch brother out there, there is a union or rich liberal donor, a fact often overlooked or ignored by liberals. Next week, the Supreme Court will (hopefully) hear the case of McCutcheon vs. Federal Elections Commission, a case that challenges campaign donation amounts on a biennial basis. Strictly speaking, this is a facial constitutional challenge to a major part of the McCain-Feingold law which went into effect in 2002. If the 2010 Citizens United decision created a liberal uproar, this case has the potential to do more. Before getting to that case, it is prudent to examine the history of campaign finance reform in the United States. One of the biggest complaints against the Citizens United case, best explained by Obama in that infamous State of the Union address, was that the Court struck down over a century of law. As this article will illustrate, for being an alleged expert in constitutional law, Obama’s assertions are less than accurate.

The story starts at the founding of the United States and the constitutional convention in Philadelphia. While it is certainly true that many of the delegates were rich and privileged, they likewise were somewhat leery of the influence of money in politics. Mainly because of the selection of electors, they believed that the Electoral College placed a buffer between moneyed interests and candidates for President. Before Andrew Jackson, money in politics was not a major problem. The country was small and communication was mainly through newspapers and journals. Candidates did not travel the country, but argued from their home bases and news spread through these papers. Jackson’s opposition to the Second Bank of the United States raised the ire of the banking industry who although they did not “campaign” against his presidency, campaigned against his opposition to the Bank through the newspapers.

However, lower level federal office holders certainly benefited from money at times. Senators, in particular, were not elected by direct citizen vote, but by state legislatures. Thus, there were examples where interests with money sometimes influenced campaigns for state legislatures which then had an effect on the election of United States Senators. Hence, the first “campaign finance” initiatives were at the state level and in response to isolated incidents of influence peddling. There were examples of outright bribery for votes in Colorado, Kansas, Montana, and West Virginia after the Civil War which led to state-level campaign finance laws. However, these laws can more broadly be classified as “anti-bribery” laws rather than campaign finance reform laws.

In the period after the Civil War, political parties rose in stature and importance, as did the need for money to wage campaigns. Both parties turned to wealthy donors like the Astors and the Vanderbilts. Ulysses S. Grant was characterized as the first President beholden to the rich and, in fact, the Grant administration was distracted by any number of scandals. Perhaps the greatest scandals involved those of political patronage, a practice that actually started with a Democrat, Andrew Jackson. In exchange for political jobs, appointees were expected to kick back a portion of their salary to fund political campaigns. However, the creation of the civil service system basically ended that practice.

It was the Progressive movement of the 1890s and early 1900s that led to the first tangential campaign finance laws on a national basis. William McKinley had the first national presidential campaign looking like a modern campaign with buttons, slogans, and posters. Mark Hanna, an industrialist, became head of the RNC in 1896 and made campaign finance systematic by assessing businesses a “tax.” Business leaders were more than willing to donate to McKinley’s campaign against the populist Democrat William Jennings Bryan. Obviously, McKinley won, but was assassinated in 1901 and Teddy Roosevelt took over. He began a program of trust busting and attempting to crackdown on corporate money in elections. However, his words did not match his deeds and he turned to businesses to fund his 1904 presidential campaign. In fact, Roosevelt illustrates the hypocrisy of campaign finance laws in the first place. He was the first president to be implicated in a pay-for-play scheme with the nomination of the wealthy E.H. Harriman for a diplomatic nomination. Embarrassed, Roosevelt then declared that corporate money should be banned from elections, although individual leaders of corporations should not be banned from making donations. Thus, Roosevelt had his cake and he ate it. He looked populist, but in practical terms, there was no change.

The first systematic attempt at campaign finance reform was the Tillman Act of 1907. This law, named for one of the most ardently racist Senators (he called for the “death of 1,000 niggers” to avenge Roosevelt entertaining Booker T. Washington in the White House), prohibited corporate donations to political campaigns. This law is the basis for Obama’s assertion that the Citizens United decision overturned over 100 years of campaign finance law. However, although fines were specified for violations, there was no enforcement mechanism. Campaigns were not required to disclose their donors and the law applied only to general, not primary, elections. Since the Democratic Party had a grip on the South (Tillman was from South Carolina), a primary win was tantamount to a general election win. Thus, especially in the South, the Tillman Act had no effect whatsoever. Further, nothing in the law prohibited individual members or officers of a corporation from making unlimited contributions. Although there may have been a de jure prohibition on corporate donations, there was no real world effect. It looked good, but accomplished nothing,much like modern campaign finance reform laws.

Building upon this law, the Federal Corrupt Practices Act (FCPA) sought to further the Tillman Act. It extended spending limits to House and Senate races and required disclosure of donors, and limited amounts allowed to be donated. Expenditures in primaries came under the law’s purview a year later, but in Newberry vs. United States, the Supreme Court ruled that the power of Congress to regulate elections did not extend to primaries or nominating conventions. In fact, one would be hard-pressed to disagree with that decision since when the Constitution was written, there were no primaries, or political parties for that matter. Amendments to the law in 1925 were designed to strengthen the existing law and to plug loopholes. But, another common feature of campaign finance laws is that as one law is strengthened and the loopholes supposedly plugged, more loopholes emerge. The law was challenged in Burroughs vs. United States in 1934 and the Court, in an 8-1 decision, decided that Congress can pass laws to protect the integrity of federal elections. But like the Tillman Act before, it lacked real enforcement and went largely unenforced.

In 1939, the Hatch Act became law. Although not specifically a campaign finance law, it did set a $3 million limit on national campaign committee expenditures and limited individual campaign contributions at $5,000. During World War II, mainly in response to a coal strike, Congress passed the Smith-Connally Act over Roosevelt’s veto which, among other things, prohibited union donations to political campaigns. Four years later, the Taft-Hartley Act was passed over Truman’s veto. This was the first instance of a law specifically barring independent expenditures in federal political campaigns by unions and corporations. Unlike previous laws, there was an enforcement body- the NLRB- that actually had power by declaring an infraction an unfair labor practice. Ironically, one of the major reasons Truman vetoed the legislation (which Congress later overrode) was his concerns for the First Amendment. Truman, a Democrat, was actually making the same arguments that the Supreme Court ruled in favor of in the Citizens United decision.

Thus, some liberal hypocrisy is revealed over Obama’s “100 years of law” statement regarding Citizens United. The fact is that the first campaign finance laws were passed as feel-good legislation during the Progressive Era in the early part of the 20th century. Although the laws were on the books, they were seldom, if ever, enforced. One reason was that there was no enforcement mechanism. Democrats and liberals became suddenly concerned about First Amendment rights only when union campaign donations were specifically regulated. Prior to that, there is nary a word from the Left about these alleged First Amendment violations. We can also see another commonality among these laws- they are riddled with loopholes through which both unions and corporations slipped through repeatedly.

Democrats and liberals, Obama among them, will point to Supreme Court precedence regarding this ban on union or corporate expenditures in federal campaigns and they will likely first trot out the case of United States vs. Auto Workers decided in 1957. In the 5-3 decision written by Justice Frankfurter, the case DID NOT involve any First Amendment implications as presented before the Court. The lower courts dismissed the indictment against the union based on statutory interpretation. Instead, the Court ruled that the District Court judge erred in his interpretation of the statute and should have deferred to Congressional intent. In fact, Frankfurter specifically states “the Court does not pass upon the constitutional issues” implicated by the First Amendment. It allowed the indictment to stand and the prosecution to proceed, but said NOTHING about Free Speech whatsoever. So, using this case as justification against Citizens United is clearly FALSE.

In 1971, Congress consolidated all the previous campaign finance laws under one umbrella called the Federal Election Campaign Act (FECA) and strengthened disclosure requirements of campaigns. For example, any donor who contributed more than $200 was to be listed along with their address. Although first proposed by Roosevelt in 1907, the now-common $1 check-off for campaign financing on income tax returns became reality. In 1974, largely in response to alleged campaign finance abuses associated with the Watergate affair and the 1972 election, Congress passed amendments which set limits on donations by individuals, political parties and political action committees (PACs). Most importantly, Congress finally created an enforcement mechanism- the Federal Elections Commission- to bring charges against violators. Almost immediately, there were court challenges against the 1971 law and the 1974 amendments in which the Supreme Court, based on First Amendment Free Speech grounds, struck down. In response to these decisions, Congress further amended FECA in 1976 and 1979. Even then, there were 12 major Supreme Court decisions addressing campaign finance, some with major First Amendment implications.

And so it was until 2002. Despite Obama’s false portrayal of “100 years of law and precedent,” the Court had chipped away- often on statutory grounds but also often on First Amendment grounds- at campaign finance regulations. Hence, campaign finance reform, Congress again decided, needed an overhaul. The new law sought to control “soft money,” expenditures by groups and individuals that did not expressly advocate one candidate. Most of this was in response to FEC guidelines which relaxed independent expenditures by corporations, unions and individuals in electioneering efforts. For example, this money could be used for voter registration drives and the like. Political advocacy of a position was allowed provided it did not mention a candidate in a supportive or non-supportive way.

It needs to be noted that in the lead-up to McCain-Feingold in 2002, these interpretations and guidelines by the FEC occurred under a Democratic President- Clinton- and were in response to First Amendment concerns. Thus, we can see that in the period from 1996-1999, the FEC was considering addressing the questions first raised by Harry Truman in 1947. McCain-Feingold was passed to address these FEC decisions, not necessarily to curtail alleged abuses or concrete examples of corruption. In fact, a sober look at the number of FEC cases against specific groups or actions are largely technical in nature. For example, the untimely filing of disclosure reports or the failure to adequately name officers form the bulk of the cases. Outright circumvention such as exceeding campaign contribution limits are a rarity. Also, more than half of the current litigated cases by the FEC involve third-party advocacy groups and even then, they are of a technical nature.

President Bush signed McCain-Feingold into law in 2002 with the caveat that it likely had serious constitutional flaws. He thought it an imperfect law in his signing statement and urged Congress to amend the law, as needed, to rectify these constitutional imperfections. And that is where we will leave the story at this point. Suffice to say, despite the enactment of these laws in knee-jerk fashion in response to some political zeitgeist at the time (Progressive Era reforms) or some perceived wrongs in the system (alleged corporate/union influence) or even involving some tangential relation to an actual scandal (Watergate), there is an underlying large elephant in the room- First Amendment rights, especially in the political speech context. The Progressives passed “feel good” legislation, yet even Teddy Roosevelt and Woodrow Wilson (of all people since he was not a great friend of the Constitution) had reservations. Perhaps that is why there were no early enforcement mechanisms- a wink and a nod attitude where words sounded like reform. Harry Truman expressed constitutional concerns albeit in favor of unions. Even George W. Bush expressed his concern about possible constitutional questions, but he never found a law he could veto. Barack Obama, an alleged constitutional scholar, found no compunctions against campaign finance laws and, as we shall see, his then Solicitor General- Elena Kagan- argued that the law could actually go further to quell constitutionally protected free political speech. A hole had been opened through which the Supreme Court could finally address the First Amendment questions squarely and definitively. The result was not exactly what the liberals wanted.