A Sisyphean History of Campaign Finance Reform

A look at how we ended up back where we began.

In 1907 Congress banned corporate contributions to political campaigns; on June 25, 2007, in a 5-4 decision, the U.S. Supreme Court gave a green light to such contributions. "After today," Justice David Souter wrote in his dissent to last week’s decision, Federal Election Commission v. Wisconsin Right to Life, "the ban on contributions by corporations and unions and the limitation on their corrosive spending when they enter the political arena are open to easy circumvention." A century of reform aimed at mitigating what a 1986 Court ruling called the "distortive effects of immense aggregations of wealth" on politics may be unraveling.

From Atlantic Unbound:

Interviews: "The Dark Side of the Gilded Age" (June 12, 2007)
Jack Beatty, the author of Age of Betrayal, talks about the poverty, inequality, and corrupt politics that marred America's past and set us on a course toward today.

How did we end where we began? Souter’s dissent furnishes a roadmap to futility. The story begins in the Gilded Age, when the political parties funded campaigns by assessing the salaries of government employees like Deputy Inspector No. 75 of the United States Custom Service on Manhattan’s Hudson River Piers—Herman Melville. For 20 years Melville, who had so fallen from the favor of the reading public that he seriously considered publishing under another name, remitted 2 percent of his $4-a-day salary to the New York Republican Party. And for a stretch in the 1880s, the same cut went to the national Republican Party. Passage of the Pendleton Civil Service Act in 1883 ended the jobs-for-kickbacks system of campaign finance. "Not unnaturally, corporations filled the vacuum," Souter dryly notes. In the 1896 presidential election, direct contributions from corporate treasuries helped swell William McKinley’s Republican campaign fund to $16 million against the $600,000 raised by the Democrat-Populist William Jennings Bryan. "All questions in a democracy [are] questions of money," said McKinley’s campaign manager, Mark Hanna, prophet.

From the archives:

"Political Assessments in the Coming Campaign" (July 1892)
An argument for campaign-finance reform. By Theodore Roosevelt

Public recoil against the corruption of politics by business led McKinley’s successor, Theodore Roosevelt, to act. In his 1905 message to Congress, Roosevelt condemned the perception that the dollar speaks louder than the vote. "No enemy of free government [is] more dangerous,” he stated, “and none so insidious." Roosevelt called for a ban on "all contributions by corporations to any political committee or for any political purpose." In 1907, Congress obliged, passing the Tillman Act. Its sponsor found it a "sad thought that the Senate is discredited by the people of the United States as being a body more or less corruptible or corrupted." Forty years later, in the Taft-Hartley Act, Congress extended the ban on corporate donations to labor unions, leaving open, in Souter’s words, the "right of a union to spend money on electioneering from a segregated fund raised specifically for that purpose from members, but not drawn from the general treasury." This so-called PAC (Political Action Committee) exception for both corporate and union electioneering was formalized in the Federal Election Campaign Act of 1971.

A controversial court decision, Buckley v. Valeo (1976), cracked opened the door to direct corporate contributions, holding that the congressional ban applied only to "communications [radio and television ads] that in express terms advocate the election or defeat of a clearly identified candidate for federal office." The test for "express terms" was the use of so-called "magic words"—"vote for," "elect," "defeat," "reject." Corporations and unions could pay for "issue advocacy" ads out of their treasuries so long as they eschewed the "magic words."

The magic words test opened a massive regulatory gap. By the 1996 election cycle, corporations and unions were spending between $135 and $150 million on "issue" ads like this one, from a 1996 Montana Congressional election pitting Republican Rick Hill against Democrat Bill Yellowtail:

Who is Bill Yellowtail? He preaches family values but took a swing at his wife. And Yellowtail’s response? He only slapped her. But “her nose was not broken.” He talks law and order…but is himself a convicted felon. And though he talks about protecting children, Yellowtail failed to make his own child support payments—then voted against child support enforcement. Call Bill Yellowtail. Tell him to support family values.

No magic words—yet, quoting Souter, "no one could deny with a straight face that the message called for defeating Yellowtail."

In the McCain Feingold Act of 2002, Congress moved to restrict "sham" issue ads like that. The next year, in McConnell v. Federal Election Commission, the Court ruled that McCain-Feingold’s ban on running such ads within 30 days of a primary or 60 days of a general election was a constitutionally permissible limitation on the First Amendments rights of corporations and unions. McConnell scrapped the "magic words" test, finding "little difference between an ad that urged voters to ‘vote against Jane Doe’ and one that condemned Jane Doe’s record on a particular issue before exhorting viewers to ‘call Jane Doe and tell her what you think.’"

In 2004, backed by $315,000 in corporate contributions, Wisconsin Right to Life, a nonprofit, ran ads all but identical to the Jane Doe formula the Court banned in McConnell against Russ Feingold, then running for re-election. Yet, in last week’s decision, Federal Election Commission v. Wisconsin Right to Life, the Court’s new conservative majority rejected the Jane Doe test of issue ads that are the "functional equivalent" of advocacy ads. Only ads "susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate" can be banned, Chief Justice John Roberts wrote. Thus the Chief Justice has effectively overruled McConnell and reinstated the "magic words" test that, in Souter’s words, "led Congress to enact [McCain-Feingold] in the first place."

Looking back on the Sisyphean history of campaign reform, Souter observes that neither Congress nor the Court "have understood the corrupting influence of money in politics as being limited to outright bribery or discrete quid pro quo; campaign 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 institutions." The Court has now given concentrated wealth a clear field in federal elections, and Teddy Roosevelt must be turning over in his grave.