Campaign Finance Reform, No. 1021

A California politician once famously observed: ‘‘Money is the Mother’s Milk of Politics.’’ For at least a century, the Congress has tried to legislate against this dictum. Since 1907, with the passage of the Tillman Act, which banned corporations from making direct contributions to political parties, Congress has enacted six major laws designed to regulate the use of money in politics. The Federal Corrupt Practices Act of 1925 provided for disclosure of certain federal campaign receipts and expenditures. The Taft–Hartley Act of 1947 subjected labor unions to the kinds of restrictions on campaign giving and spending that covered corporations. Each of these laws was enacted against a background of claimed corruption of the political process by those groups and individuals who wielded financial power.

It was widely believed, however, that these laws were not effective in achieving their objectives of deterring corruption and undue influence. They were narrowed by judicial interpretation and avoided by clever politicians. Indeed, President Lyndon B. Johnson once observed that federal campaign finance law was ‘‘more loophole than law.’’

The fourth major push for reform began building with the high-spending, media-focused presidential campaigns of the 1960s. A well-known book, The Selling of the President, fueled fears that politicians were being marketed like toothpaste and that democracy was being sold to the highest bidder. These concerns culminated in the next major piece of Campaign Finance Reform legislation, the Federal Election Campaign Act of 1971. Enacted before Watergate, the Act sought to limit the amount of media advertising that federal candidates could do and vastly expand and improve campaign finance reporting and disclosure to close the loopholes that Lyndon Johnson had noted.

But civil liberties problems soon surfaced as the government tried to use these new provisions against nonpartisan criticism of government officials. If campaign finance laws could be used to prevent the publication of advertisements criticizing the government or subject the speakers to intrusive government regulation, that would raise enormous First Amendment problems of freedom of speech and association. Recognizing these problems, some courts gave a narrow scope to the Federal Election Campaign Act provisions, excluding their application to nonpartisan organizations. (United States v. National Committee for Impeachment; American Civil Liberties Union v. Jennings).

That sensible resolution of the clash between free speech and campaign finance regulation might have solved the problem had it not been for the Watergate scandals of the early 1970s, partially involving payments for wrongdoing out of President Nixon’s reelection campaign funds. Congress was stampeded into enacting the Federal Election Campaign Act Amendments of 1974, a wide-ranging statute that imposed new and Draconian restrictions and penalties on campaign finance activity. This was the fifth major campaign finance enactment of the twentieth century.

It must be remembered, of course, that such activity almost invariably involves the exercise of First Amendment rights: speaking, associating, supporting candidates, electioneering, getting out the vote. Nonetheless, Congress decreed limits on how much any candidate could spend on seeking election, on how much candidates could contribute of their own funds to their own campaigns, how much their supporters could contribute to them, and, most alarmingly, severely limiting (to $1,000 per year) how much independent groups and individuals could spend to speak about candidates during a campaign season. That latter provision effectively made it a crime to run more than a minuscule ad in a newspaper criticizing the President of the United States. The amendments also tightened the disclosure requirements, so that as little as a $15 contribution to any political party—even controversial ones—might be reported to the government. The one positive note was that the new law did provide, for the first time, for public financing of primary and general election campaigns at the Presidential level. Placed in charge of these onerous new speech restrictions was a new federal agency that was under the control and domination of the Congress. Substantial criminal penalties were prescribed for violation of these new campaign finance provisions.

There was an immediate challenge to this farreaching new law by a coalition of ‘‘strange bedfellows,’’ including liberal Senator Eugene McCarthy, conservative Senator James Buckley, the American Conservative Union and the New York Civil Liberties Union (Buckley v. Valeo). All these challengers claimed that restrictions on political campaign funding were restrictions on political campaign speech and derogated the First Amendment values of freedom of speech and association. The Court agreed in part. It struck down all limitations on campaign expenditures, reasoning that such restraints cut to the core of First Amendment values while not advancing the valid concerns with political corruption. (The Court also rejected the concept that expenditure limits could be justified on the ground that campaigns had become too ‘‘extravagant’’ or that government could level down the free speech of all citizens.) It also ruled that only those expenditures for activities or advertisements that ‘‘expressly advocated’’ the election or defeat of specified candidates could be subject to any regulation whatsoever. Mere criticism of elected officials, no matter how strong, was immune from regulation.

On the other hand, the Court upheld limitations on contributions to candidates from others (the Court held that candidates could contribute as much as they could to their own campaigns.) The rationale was that large contributions, even though fully disclosed to the public, posed the potential for corruption or the appearance of corruption and could be sharply limited (to $1,000). Likewise, routine disclosure of campaign contributors of as little as $101 could be demanded, though those giving to controversial minor parties might be exempt from such public revelation, a point confirmed in a later case (Brown v. Socialist Workers ‘74 Campaign Committee). The provision of public financing for Presidential candidates was upheld against the challenge that it was incestuous for the government to be subsidizing politics and that the particular scheme enacted favored the two major political parties, the Republicans and the Democrats, to the detriment of new, independent, and third parties and their candidates.

Finally, the appointment of the monitoring agency was found to violate separation of powers principles, because the primary designations were made by the Congress, not the President. (A new and properly constituted Federal Election Commission was installed shortly thereafter).

For the next twenty-five years, the landmark Buckley decision would provide the ground rules for resolving the clash between campaign finance restrictions and First Amendment rights. But two developments of the 1980s and 1990s would set the stage for the sixth major Congressional enactment in this area. They were the raising and spending of ‘‘soft money’’ by political parties for a wide range of electoral activities as long as they did not directly back their chosen candidates and the running of broadcast ads that strongly condemned or praised specific candidates while steering clear of ‘‘expressly advocating’’ any candidate’s election or defeat. Many believed that both developments—soft money and issue advocacy —were end runs around the contribution limitations that the Court had consistently upheld, because they involved large contributions from individuals, unions, and corporations, which would be illegal if given directly to candidates themselves or spent for ‘‘express advocacy.’’

These concerns led to the enactment of The Bipartisan Campaign Reform Act of 2002, widely known as the McCain–Feingold law. That act outlawed ‘‘soft money’’ contributions to political parties and broadcast advertising by corporations or unions that even so much as mentioned the name of a federal candidate. Another coalition of candidates and cause organizations challenged these new restrictions as well, led by Republican Senator Mitch McConnell and including groups as diverse as the American Civil Liberties Union, the National Rifle Association, the AFL-CIO, and the Republican National Committee (McConnell v. Federal Election Commission). In another landmark ruling, a closely divided Supreme Court upheld this major feature of the law. The Court majority believed that the large soft money contributions to political parties were an effort to skirt the restrictions on contributions to candidates and carried the same potential for corruption or the appearance of corruption. The ban on broadcasting was upheld on the ground that the advertisements were really political, despite the lack of ‘‘express advocacy,’’ and could be banned if they were sponsored by corporations or unions or even nonprofit membership organizations like the ACLU.

Thus, the pendulum has swung back to permit a greater regulation of campaign financing and, therefore, a greater regulation of First Amendment rights.

JOEL M. GORA

References and Further Reading

• Association of the Bar of the City of New York. Dollars and Democracy: A Blueprint for Campaign Finance Reform, 2000
• Mutch, Robert E. Campaigns, Congress and the Courts: The Making of Federal Campaign Finance Law, 1988
• Smith, Bradley A. Unfree Speech: The Folly of Campaign Finance Reform, 2000

Cases and Statutes Cited

• Buckley v. Valeo, 424 U.S. 1 (1976) 
• McConnell v. Federal Election Commission, 124 S. Ct. 619 (2003)