Introduction to US Campaign Finance

The financing of national and state elections has been a political topic in the US since the early nineteenth century. In 1828, then-candidate for the US presidency Andrew Jackson was one of the first politicians to create a campaign committee to help him raise money, secure votes, organize rallies and spread his message to the public. One of the results of Jackson's organizing was that voter turnout nearly doubled in the presidential election of 1828 (in which he was victorious). However, Jackson's innovation also served to dramatically increase the cost of running a national political campaign. The rising price of campaigning led to the "spoils system," in which government jobs were given by victorious political parties in return for financial support from wealthy citizens. As a presidential candidate only 20 years later, Abraham Lincoln paid for his campaign out of his own pocket, which, even with the support of donations from wealthy individuals, nearly bankrupted him. Following the US Civil War, it became clear that politicians would need wealthy families and individuals to help bankroll their campaigns. In exchange, these wealthy groups expected politicians to support their specific interests, such as supporting legislation in certain areas or fighting against proposed legislation in other areas. In 1872, the Republican Party and Ulysses S. Grant received significant support from a relatively small group of individuals; for example, nearly a quarter of the Republicans' campaign expenses were paid for by railroad tycoon Jay Cooke.

The first campaign finance law passed by the US Congress was the Navy Appropriations Bill in 1867. This bill prohibited government employees from soliciting contributions from yard workers at Navy shipyards and piers. In 1905, US President Theodore Roosevelt proposed to Congress that all corporate contributions should be outlawed. According to Roosevelt, hostility towards government officials that resulted from contentious contributions was weakening the infrastructure of the government. Roosevelt thought that campaign finance reform would make the elections more fair and transparent. An additional regulation in his proposal would have required that candidates who took public funds limit the donation amount and disclose their receipts. The Tillman Act followed this proposal by prohibiting corporations and nationally chartered banks from making direct financial contributions to campaigns for the presidency or in connection with any election for Congress. However, a significant loophole in the Tillman Act allowed businesses and corporations to give their employees additional bonuses that they were then directed to use as individual campaign contributions, thereby circumventing the restrictions of the Tillman Act.

Congress attempted to close some of these loopholes by enacting the Publicity Act (also known as the Federal Corrupt Practices Act) of 1910. The purpose behind the Publicity Act was to force public disclosure of the uses of campaign money, which would dissuade political corruption in the form of bribes. This act remained in place until the Teapot Dome Scandal occurred in the early 1920s. The scandal involved bribery by which companies were granted leases to emergency US Navy oil reserves in exchange for payoffs given to several federal officials. The scandal resulted in the conviction of US Secretary of the Interior Albert Fall and led to the passage of the Federal Corrupt Practices Act of 1925. In 1943, political action committees (PACs) were first formed as a result of Congress expanding the Tillman Act's ban on direct corporate campaign contributions to include labor unions. The primary purpose of PACs is to raise money in order for the PACs to make campaign contributions to candidates' committees. However, in 1966, US President Lyndon B. Johnson pointed out that this initiative actually created more loopholes in the finance laws than it closed.

 

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