Rules and Laws
excerpted from the book
How big corporate money buys
elections, rams through legislation,
and betrays our democracy
by Mark Green
Regan Books (HarperCollins)
Along with the essential regulations on
contributions, expenditures, and disclosure, the 1974 FECA amendments
included a provision, written by Conservative New York senator
James L. Buckley, that gave private citizens the right to challenge
the constitutionality of the law in court. On January 2, 1975,
the first business day after the 1974 amendments went into effect,
a bizarre coalition of plaintiffs including Buckley, former Senator
Eugene McCarthy, and liberal philanthropist Stewart Mott raced
to the federal courthouse in Washington to file what would be
called Buckley v. Valeo, the decision that defined campaign finance
rules in the last quarter of the twentieth century.
When faced with a decision of such far-reaching consequences,
a court normally engages in an extensive, deliberate process to
gather and assess the relevant facts before rendering its decision.
But in Buckley' with the 1976 campaign season fast approaching,
the judiciary felt pressured to resolve the case as soon as possible.
So the lower courts short-circuited the traditional fact finding
processes; the parties simply made assertions on matters of fact
called "offers of proof," which were then negotiated
out among the parties and adopted by the court.
The Court began its analysis of the law with what proved to b~
decisive presumption: it took as its premise that restricting
the flow of money into campaigns was tantamount to restricting
speech because "virtually every means of communicating ideas
in today's mass society requires the expenditure of money."
The justices rejected out of hand the government's argument that
it had a compelling interest in maintaining parity in the electoral
influence of individuals, asserting that "the concept that
government may restrict the speech of some elements of our society
in order to enhance the relative voice of others is wholly foreign
to the First Amendment." The majority opinion did recognize,
however, a compelling governmental interest in preventing actual
or apparent corruption.
It went on to make a critical distinction
between contributions and expenditures: contributions did not
deserve the same level of constitutional protection as expenditures
because contributions had no direct communicative value beyond
"a general expression of support for the candidate and his
views." Also, contributions created the possibility of quid
pro quo arrangements between donors and candidates, while expenditures
raised no such dangers. Based on these distinctions, the Court
upheld the law's limits on contributions by a 6-2 vote but struck
down the restrictions on campaign expenditures.
The Supreme Court upheld the act's rigorous
disclosure requirements because they deterred corruption and helped
to detect illegal contributions. It also recognized an interest
in informing the electorate about where campaigns received their
money, thereby "help[ing] voters to define more of the candidates'
constituencies"; significantly, the justices ruled that this
informational interest justified the disclosure of independent
expenditures, even though they supposedly raised no danger of
And the Court also sustained FECA's public
financing system for presidential campaigns, finding that the
public subsidies "further[ed] First Amendment values,"
including "eliminating the improper influence of large private
The majority coalition shifted from issue
to issue; only Justices William Brennan, Potter Stewart, and Lewis
Powell agreed with the opinion of the court in its entirety.
The divergent treatment of expenditures
and contributions has turned out to be Buckley's single most important
and most damaging legacy. As Chief Justice Burger warned presciently
in his dissent, striking down the FECA's spending caps while sustaining
the rest of its regime would have devastating effects for our
The Court's piecemeal approach fails to
give adequate consideration to the integrated nature of this legislation.
A serious question is raised, which the Court does not consider:
when central segments, key operative provisions, of this Act are
stricken, can what remains function in anything like the way Congress
intended? The incongruities are obvious.... All candidates can
now spend freely; affluent candidates, after today, can spend
their own money without limit; yet, contributions for the ordinary
candidate are severely restricted in amount.... I cannot believe
that Congress would have enacted a statutory scheme containing
such incongroous and inequitable provisions.
And what about self-financed candidates? Buckley invalidated restrictions
on self-financing as an impermissible limit on expenditures. But
Justice Thurgood Marshall, who at the time accepted the contribution-expenditure
distinction (he later changed his mind), thought that self-financing
should be treated as a contribution to one's own campaign.
History has proven Chief Justice Burger
and Justice Marshall right. Congress never anticipated that the
Court would render a split decision that limited what regular
candidates could raise but not self-financed ones. So, inevitably,
wealthier candidates increasingly ran and won. But if there were
campaign rules that disproportionately excluded, say, women, blacks,
or blue-eyed people from office, people would rebel. How could
we trust a government of only white, brown-eyed men to treat everyone
fairly? Why then is it acceptable that average-income people are
being increasingly pushed out of public office by the wealthy?
By encouraging a tenfold increase in campaign
spending and discouraging qualified, non-multimillionaire candidates,
Buckley has been as disastrous to democratic elections as Dred
Scott was to race relations.
The First Wave After Buckley: PACs and Boren
It was the combination of the 1974 law,
the Buckley decision, and the FEC's Sun Oil decision-which allowed
corporations to solicit Contributions from shareholders and employees-that
launched PACs as the dominant players of campaign finance in the
PACs are voluntary associations of like-minded
people-steel executives, tech executives, dentists, trial lawyers,
environmentalists, Jews for Israel, and so on-who pool their resources
to maximize their political clout. Since 1974, PACs have been
able to give five times as much as individuals, donating up to
$5000 per candidate per election; more important, there is no
legal limit to the total amount of money PACs can contribute.
PACs also serve as a vital conduit for money from corporations
and labor unions; although both are barred from direct contributions
from corporate or union treasuries, the law allows them to make
contributions through "a separate segregated fund to be utilized
for political purposes." A now forgotten amendment to an
otherwise good law created this money source that currently accounts
for a third of all monies raised by members of the House of Representatives.
... it was the Buckley decision that-by blowing the lids off campaign
spending-made PACs a central source of political money. The number
of PACs ballooned from 608 in 1974 to 4009 just ten years later;
PAC contributions to congressional candidates increased from $22.6
million in 1976 to $111.6 million in 1984, accounting for 27 percent
of all campaign receipts.
Family giving represents one variant of the widespread fundraising
tactic known as bundling, "in which people or organizations
collect checks written by others, present them in a 'bundle' to
a candidate, and gain political credit from the candidate for
the full package." For instance, after a corporation determines
which candidates to support, it will make "suggestions"-it
is barred by law from outright coercion-to employees about where
and when to send money. Some corporations also make illegal de
facto contributions by providing strong incentives for their employees
to make political contributions, such as giving bonuses to reimburse
employees for their political contributions and matching employees'
political contributions with donations to the employees' favorite
charities. Under federal law, if bundled money is not coerced
by a superior and actually comes from the employee's bank account,
it's legal; however, the boss may not order or pay for the donation.
Bundling is a preferred method of fund-raising
because like-minded individuals can maximize their political influence:
a candidate might not remember the names of all the people who
give him $ 1000, but he will not soon forget the person who delivers
$25,000 from twenty-five people in his/her law firm or corporation.
The problem is that bundling greatly facilitates special-interest
influence, since candidates understandably regard XYZ Realty Corporation
as a $25,000 donor-or a $100,000 donor-the law's $1000 maximum
Still, bundling is and should be legal.
The essence of private fundraising is when supporters in turn
persuade their friends and colleagues to contribute to their candidate.
It would be neither possible nor desirable to force separate,
solicited donors to each mail in their checks rather than allowing
them to hand them to the person making the (publicly disclosed)
solicitation. Still, bundlers can convey large amounts and get
In the 1994 election cycle, credit card
and banking giant MBNA organized over $900,000 in bundled contributions
to federal candidates; approximately $500,000 of that money went
to four senators, including Alfonse D'Amato, then chair of the
Banking Committee, who wasn't even up for reelection that year.
In the 2000 elections, MBNA bundled $2.3 million in contributions
to candidates and parties, with $240,700 going to George W. Bush.
By giving through bundled donations instead of through a PAC (in
which case it would have been limited to $10,000 per election),
MBNA was able to increase its perceived donation to the Bush campaign
by 2300 percent.
In the 2000 elections, EMILY's List (the
group promotes prochoice women candidates; EMILY is an acronym
for "Early Money Is Like Yeast") topped the list of
PAC bundlers, raising $21 million in lawfully bundled donations
to support female Democratic candidates in the 2000 elections.
Each of the 50,000 members of EMILY's List contributes $100 directly
to the organization and promises to make $100 contributions to
at least two candidates. The success of EMILY's List has inspired
imitators and persuaded candidates to both solicit EMILY's List
and be solicitous of their agenda.
Instead of making monetary contributions
to a candidate's campaign, would-be donors may decide to make
what is commonly called an independent expenditure" for a
candidate. For example, an individual can purchase airtime and
produce a television ad expressly supporting the candidate(s)
of his choosing, so long as he does not coordinate these activities
with the campaign. As far as Buckley is concerned, even unlimited
expenditures of this kind raised no danger of corruption, since
the campaign had no control over them.
This again displays the political naiveté
of the Buckley court, a court where none of the eight ruling justices
had ever run for political office (although Justice Byron White
had experience in the Kennedy presidential campaign-and dissented
from the majority opinion). First of all, an "independent"
spender can read the newspaper and easily spend funds in ways
beneficial to the campaign, or even speak to third parties-without
any fear of detection, since there's no one watching or investigating-who
in turn chat with campaign strategists. Second, the big donor
may-and almost certainly will-discuss his activities with a winning
campaign after the fact in the hopes of winning recognition and
reaping rewards. As a result, what are theoretically independent
expenditures often resemble in-kind contributions in practice.
... given the ban on soft money after November 2002, it's likely
that a river of money will now flow to permissible "independent"
committees instead. Already, economic, ideological, and partisan
groups are organizing to recapture as much as they can of the
$500 million in soft money that went to party committees in 2000.
While there will likely be less such money, the mediating and
moderating influence of a party organization may now be replaced
by groups with specific legislative or ideological objectives.
In order to justify subjecting campaign finance to federal regulation,
Buckley distinguished election-related speech from general political
speech, the latter being constitutionally protected from government
interference. In a famous footnote, the Court suggested that the
distinction could be drawn based on whether the communication
included "magic words" such as "vote for,"
"elect," "support," "cast your ballot
for," "Smith for Congress," "vote against,"
"defeat," or "reject." If those words were
used, the funds used to pay for such electioneering communication
were clearly subject to campaign finance limits; if they were
not, the funds could not be regulated.
Distinguishing between "issue advocacy"
and "express advocacy" makes a good deal of sense in
principle. The paradigmatic case of express advocacy, as one thoughtful
lawyer and scholar has put it, "(1) names one or more individual
candidates for public office, (2) attributes one or more actions
or beliefs to the candidate, (3) appears in close proximity to
an election, and (4) explicitly urges the viewer to vote either
for or against the candidate." Issue advocacy, on the other
hand, "(1) addresses an issue of national or local political
importance, (2) discusses only the issue and not the actions of
particular political actors in regard to that issue, and (3) is
broadcast at a time when legislative or executive action on the
issue may be pending or contemplated, but no election is imminent."
In the 2000 elections, $509 million was spent on purchasing television
and radio spots for so-called issue advocacy. The two major parties
accounted for almost one third ($162 million) of these expenditures.
The top six nonparty spenders accounted for another third of spending,
as given in figure 3.3. All told, nonparty groups purchased 142,421
television advertisements in 2000; in the 1998 elections, non-party
groups purchased only 21,712 advertisements.
An analysis by the Brennan Center for
Justice at the New York University School of Law reveals that
83 percent of the ads aired by these outside players were really
aimed at electing candidates. All of the ads sponsored by political
parties also fell into the category of electioneering issue ads.
In the crucial final sixty days before the 2000 election, a staggering
99.4 percent of the group-sponsored ads were electioneering ads;
only three different ads, airing a total of 331 times (out of
142,421), were genuine issue ads.
If that doesn't prove the Supreme Court
made a monumental mistake in Buckley by allowing such spending
to go unregulated, what would?
Many of these sham issue ads are funded
by nonprofit groups organized under Section 527 of the Internal
Revenue Code. Until recently, these so-called 527s were exempt
from even disclosing contributions or expenditures; their lack
of accountability earned them the nickname "stealth PACs."
On July 1, 2000, President Clinton signed a bill authored by Senators
John McCain and Joseph Lieberman (D-CT) requiring 527s to notify
the FEC of their existence and make regular reports of contributions
Self-Financed Ballot Proposals
In addition to self-financing campaigns
for office ... powerful people are increasingly using their financial
advantage to enact laws by paying for initiatives and referendums.
Now permitted in twenty-four states, initiatives allow citizens
to draft and vote on laws directly by putting them on the ballot,
while referendums give citizens the right to repeal state laws
by popular vote.
Originally seen as a democratizing reform
that would allow citizens to bypass corrupt or paralyzed legislatures,
the initiative today, as Michael Nelson writes in the American
Prospect, "is a device used mostly by a dark trinity of wealthy
individuals, special interests, and professional initiative activists
to force their pet causes to the top of the political agenda."
Here's how it works. First, a well-endowed
interest-sometimes a person, sometimes an industry group-drafts
a ballot question it favors for financial or ideological reasons.
It may involve monetary incentives, like rolling back property
taxes, or social issues, like school vouchers on the ballot. Whatever
the question, the less organized and funded the potential opposition,
the better its chance of passage. Also important to a ballot question's
success, writes George Pillsbury of Dollars and Sense magazine,
is that it "poses an issue on which the public is ambivalent
or lacks basic knowledge." In other words, the less of an
opinion the public already has on the matter, the more easily
influenced by expensive advertising it will be.
Once these conditions are in place, the
self-financier can hire lobbying firms to manage the campaign,
outside companies to gather signatures to get the proposal on
the ballot, polling groups to target voters, high-priced media
gurus to run ad campaigns, and lawyers to defend the question's
The process of citizens bypassing legislatures
and sponsoring laws is growing rapidly. While there were fewer
than 100 ballot questions in the 1960s, there were nearly 250
in the 1980s, around 400 in the 1990s, and 76 in the year 2000
alone. Some of the effects of ballot questions financed by big
interests have been pronounced: landlords and realtors spent $1.5
million to pass (by 54,000 out of 2 million votes) a 1994 initiative
banning rent control in Massachusetts, and the gambling industry
used a 1998 measure to bring riverboat gambling to Missouri.
Wealthy individuals-on the left and the
right-have exerted considerable influence, too. Billionaire cosmetics
heir Ronald Lauder recovered from a landslide defeat for the New
York City mayoralty in 1989 to single-handedly finance a successful
campaign to institute term limits. He spent $2 million for it,
next to nothing was spent against it- and it passed with 59 percent
of the vote. Reed Hastings, a former software executive worth
$750 million, spent more than $4 million in California in 1999
to allow local schools to finance new classrooms with taxes approved
by a majority of voters. Billionaires George Soros, Peter B. Lewis,
and John Sperling sponsored a $2 million 1998 campaign to legalize
medical marijuana in six states and Washington, D.C. Only after
the initiative passed with little opposition in Arizona did Representative
Mike Gardner, a Republican, realize that the measure covered not
just marijuana but 116 other drugs, including LSD, heroin, and
What can be done to curb the influence
of wealthy individuals nearly single-handedly writing our laws?
Author and professor Richard Ellis has voted no on each of the
seventy-four statewide initiatives he's seen in twelve years as
an Oregon resident-out of principle. Arguing that initiatives
eliminate the deliberative process of committee hearings and floor
debates refining legislative language, Ellis suggests that a decent
start would be Illinois's system, in which initiatives amending
the state constitution require three-fifths majorities, or Nevada's
model where initiatives need to be passed in two straight elections.
Ultimately, though, the answer may be
a system of public financing that helps fund underrepresented
viewpoints opposing a torrent of special-interest or individual
treasuries. Now, elected officials who persistently promote unpopular
causes can be voted out of office. But not so self-financiers.
Unless there are either constitutionally permissible spending
limits or public funding to level the playing field, or both,
unaccountable and unelected multimillionaires will be able to
supplant elected legislatures to enact their pet grievances or