The Encyclopedia of Libertarianism

Campaign Finance

Prior to the late 19th century, there were no laws governing campaign financing. Candidates were free to raise and spend any amounts of money from any source. However, over the last 100 years, state and federal regulation of campaign spending and contributions has proliferated. While limited in its effectiveness by the creative talents of political consultants and campaign managers, and checked in scope by the courts on 1st Amendment grounds, and at that only irregularly, these regulations now play a major role in shaping American politics, and campaign finance litigation has become an important campaign strategy.

The earliest campaign finance laws, which banned corporate contributions, were passed in the plains states in the wake of the 1896 presidential election, when corporate support helped fuel William McKinley’s victory over farmstate favorite William Jennings Bryan. Federal regulation began with passage of the Tillman Act in 1907, which prohibited contributions by federally chartered banks and corporations. Congress proceeded to pass legislation closing “loopholes” or otherwise expanding the reach of campaign finance regulation in 1910, 1911, 1925, 1939, 1940, 1943, and again in 1947. Along the way, contributions from general corporate and union treasuries to federal candidates were barred, a prohibition that remains a cornerstone of campaign finance law.

In 1971, Congress completely overhauled the law with the passage of the Federal Elections Campaign Act (FECA), which underwent major changes in 1974. In addition to the ban on direct corporate and union contributions, the 1974 Amendments to the FECA limited individual contributions to candidates to $1,000 per election and limited the contributions of political action committees (PACs) to $5,000 (PACs are a mechanism allowing like-minded citizens to pool their small contributions in order to increase the impact of their efforts). Individuals’ contributions to political parties and PACs also were limited, as was the total amount of contributions one could make to all parties and candidates for federal office. The amendments also put a ceiling on total spending in House and Senate races, to just $75,000 in the case of races for the House and to an amount based on state population in Senate races. Additionally, individuals and groups were prohibited from spending more than $1,000 on any communication “related to” a candidate for federal office. Other provisions required the disclosure by a candidate or political committee of any contribution or expenditure in excess of $100. Finally, the act provided for government financing of presidential campaigns at both the primary and general election stages.

The 1974 amendments to the FECA were immediately challenged in federal court on 1st Amendment grounds by a broad coalition of plaintiffs, including the American Civil Liberties Union, the Libertarian Party, former Democratic Senator Eugene McCarthy, and Conservative-Republican Senator James Buckley. In Buckley v. Valeo, 424 U.S. 1 (1976), the Supreme Court recognized that the limits included in the FECA infringed on 1st Amendment rights of political association and free speech inasmuch as publishing a newspaper or taking out an ad in a newspaper, operating or advertising on a radio station, renting a hall for a speech, and printing leaflets all cost money. Recognizing this infringement of the 1st Amendment, the Court struck down the FECA’s various spending limits, rejecting “the concept that the government may restrict the speech of some elements of our society in order to enhance the relative voice of others,” as “wholly foreign to the First Amendment.” However, the Court concluded that the government did have a compelling interest in “the prevention of corruption and the appearance of corruption spawned by the real or imagined coercive influence of large contributions on candidates’ positions and on their actions.” It then held that this interest was sufficiently compelling to justify limits on campaign contributions, despite the resulting infringements on constitutionally protected liberties.

Significantly, however, the Court interpreted the statutory phrase “related to” a candidate for office to be restricted to “communications that in express terms advocate the election or defeat of a candidate… .” A footnote explained that this category would include only political ads using phrases such as “vote for,” “elect,” “support,” “defeat,” and “vote against.” Any broader interpretation, the Court held, would be so vague as to unduly burden all discussion of political issues. Thanks to this interpretation, political discussion, including the discussion of candidates for office, has remained largely beyond the reach of regulation so long as the speaker avoids such “express advocacy” of the election or defeat of a candidate. Furthermore, the Court held that even expenditures using such terms of express advocacy could not be limited if they were made independent of a candidate’s campaign, on the grounds, first, that truly independent expenditures did not pose a danger of quid pro quo corruption, and, second, that even if they did, the ban would not eliminate that danger because “it would naively underestimate the ingenuity and resourcefulness of persons and groups desiring to buy influence to believe that they would have much difficulty devising expenditures that skirted the restriction on express advocacy of election or defeat but nevertheless benefited the candidate’s campaign.”

Finally, the Court also held that forced disclosure of campaign contributions made for express advocacy and the government funding system for presidential campaigns were constitutional. A substantial majority of states, and many local units of government, have passed legislation similar to the FECA, although usually without providing government funding of campaigns.

Buckley v. Valeo has been widely criticized by both those who think it gave too much protection to campaign giving and spending and those who think it gave too little protection to such political activities. However, the Supreme Court has rejected several opportunities to overrule Buckley and at the same time extended its reasoning to strike down, on 1st Amendment grounds, a number of limitations that had been imposed by various levels of government: limits on corporate contributions and spending in noncandidate races in First National Bank of Boston v. Bellotti, 435 U.S. 765 (1978); limits on contributions to ballot issues and petition drives in Citizens Against Rent Control v. City of Berkeley, 454 U.S. 290 (1981) and Meyer v. Grant, 486 U.S. 414 (1988); limits on spending by nonprofit, “ideological” corporations in Federal Election Commission v. Massachusetts Citizens for Life, 479 U.S. 238 (1986); and bans on independent expenditures by political parties in Colorado Republican Federal Campaign Committee v. Federal Election Commission, 518 U.S. 604 (1996).

Even as the courts adhered to Buckley, political scientists, economists, legal scholars, and activists engaged in a long-running debate over the empirical effects of efforts to control political spending and contributions. Critics of regulation point to a growing body of evidence showing that, whatever their intention, in practice contribution and spending limits favor incumbents over challengers, unduly burden grassroots political activists, and benefit powerful interests that have an institutional presence in the capital over broader, more diffuse interests. Moreover, studies by political scientists and economists indicate that campaign contributions have only minimal effects on legislative behavior, threatening to undercut the anticorruption rationale that justifies such limitations. These studies find that contributors tend to give to candidates who already agree with them, and that ideology, party affiliation, and constituency demands play a far greater role in determining voting patterns than do campaign contributions. Proponents of greater regulation have responded that these studies fail to capture the extent of contribution-related corruption because they focus on measurable activities such as voting records, ignoring less measurable forms of “corruption” such as “the speech not given.” However, others argue that if contributions are corrupting, such corruption should show at the final stage of the process, where the contributor is most interested in the result.

In any case, the changes that occurred in campaigning strategy, many in direct response to contribution limits, have made those limits less and less effective. By the elections of 2000, an increasingly large percentage of total campaign spending took the form of unregulated “issue advocacy” ads paid for by parties and interest groups that praised or criticized candidates, but stopped short of specifically urging the election or defeat of given candidates. By avoiding such “express advocacy,” the ads remained outside the regulatory reach of the FECA or similar state laws. The money expended in this way was dubbed “soft money.” Many critics argued that issue ads funded by soft money were more negative, less informative, and less accountable than traditional campaign ads. But others point out that, in addition to the 1st Amendment issues involved, the growth of such issue ads was the result of limits on direct contributions to candidates and especially the failure to raise such limits to keep pace with inflation and population growth.

In 2002, Congress passed the Bipartisan Campaign Reform Act, more commonly known by the names of its Senate sponsors as the McCain–Feingold Act. The law prohibited political parties from receiving or spending soft money on noncandidate ads and activities. Additionally, it prohibited any corporation, including nonprofit membership corporations, from spending more than $10,000 to air broadcast ads mentioning a candidate within 30 days of a primary or 60 days of a general election. These controversial provisions were upheld by the Supreme Court in McConnell v. Federal Election Commission. These restrictions did little to prevent corruption of the political system, however. Rather, during the first 5 years of the McCain–Feingold regime, the practice of “earmarking”—in which Congress marks spending for specific projects, often to the benefit of narrow special interests—grew rapidly, and Congress was rocked by a series of ethical scandals.

Despite the failure of past “reforms,” many reform advocates continue to urge that the government pay for campaigns with tax dollars, either in addition to or in place of private financing. However, polls have consistently shown that the public is strongly opposed to expanded government financing of political campaigns, and at the federal level, fewer than 10% of taxpayers take advantage of the opportunity, provided on tax forms, to divert $3 of their taxes to the presidential election campaign fund. Further, assuming corruption exists, whether government financing would actually address this alleged corruption is in dispute. Few observers think that government financing has made presidential campaigns and elections superior to privately financed congressional campaigns and elections. Additionally, critics of government financing argue that it is immoral or unconstitutional to require taxpayers to fund political speech with which they may disagree.

Had the Supreme Court, in Buckley and later cases, not ruled as it had, there is little doubt that political speech would be much more heavily regulated than it currently is. Nevertheless, a substantial and well-financed lobby exists that advocates greater regulation, and the news media, which is exempted from most regulatory proposals, remains highly supportive of limits on paid political speech. Thus, until and unless the Supreme Court extends Buckley to protect all political speech and strikes down limits on contributions, campaign finance reform will remain a source of controversy on the national political agenda.

 

Further Readings

Anderson, Annelise G., ed. Political Money: Deregulating American Politics; Selected Writings on Campaign Finance Reform. Stanford, CA: Hoover Institution Press, 2000.

BeVier, Lillian. “Money and Politics: A Perspective on the First Amendment and Campaign Finance Reform.” California Law Review 73 no. 4 (July 1985): 1045–1090.

Corrado, Anthony et al., eds. Campaign Finance Reform: A Sourcebook. Washington, DC: Brookings Institution, 1997.

Malbin, Michael J., and Thomas Gais. The Day after Reform: Sobering Campaign Finance Lessons from the American States. Albany, NY: Rockefeller Institute Press, 1998.

Miller, James C. Monopoly Politics. Stanford, CA: Hoover Institution Press, 1999.

Palda, Filip. How Much Is Your Vote Worth: The Unfairness of Campaign Spending Limits. San Francisco: ICS Press, 1994.

Samples, John. The Fallacy of Campaign Finance Reform. Chicago: University of Chicago Press, 2006.

Smith, Bradley A. Unfree Speech: The Folly of Campaign Finance Regulation. Princeton, NJ: Princeton University Press, 2001.

Originally published .