Mo’ Money, Mo’ Problems: How Big Money Undermines American Democracy

(Photo: Udo Keppler & J. Ottmann Lith, Co.)

by Kevin Nugent/Love and Rage

“Even if all the [campaign] dollars were honestly contributed and honestly spent, they would still have a corrupting influence on our politics. For the vast sums now required for political campaigns raise the unholy specter that politics in the future will be an enterprise for rich people only, for rich candidates, or at the very least, candidates backed by rich contributors.”

-Senator Adlai Stevenson, 1973

On September 9th, Harvard Law School professor and Mayday PAC founder Lawrence Lessig stood on a stage in Claremont, New Hampshire and announced his candidacy for President of the United States of America. Lessig is not a typical candidate, nor is he running on a typical platform. He is running a single issue campaign aimed at stripping the corrosive influence of big money from American politics.

“Here is the fact about America today,” Lessig began. “There is no connection between what the average voter wants and what our government actually does.” Lessig continued, “There is, however, a strong connection…between what the economic elite want, and what our government does.” Herein lies the problem of money in politics; political corruption and disproportionate representation in Washington driven by the political donations of a handful of contributors.

Campaign finance reform has been a contentious issue in the United States for over a century. On one side are the wealthy and special interest groups seeking to modify public policy to their benefit, and on the other are citizens, activists and a small number of elected officials who seek to reduce the overwhelming influence of the business class in politics. The fundamental question at the heart of campaign finance reform is this; does political spending by a small minority of wealthy individuals weaken our democracy and contribute to political corruption? All signs point to ‘yes.’

1896-2012: The Growth of Money in Politics

Money is the lifeblood of politics, and it has been this way for over a century. As early as the 1890s, the wealthy, special interest groups and the business class have spent huge sums of cash in order to buy political power and influence.

The first election in which money had a major impact was the 1896 election between Republican William McKinley and Democrat William Jennings Bryan. McKinley portrayed himself as pro-business, and as a result received a great deal of corporate contributions. McKinley received one donation from Standard Oil to the tune of $250,000, which was almost as much as Bryan’s entire war chest. Bryan, however, was not entirely devoid of corporate contributions. He proposed moving the United States from the gold standard to one based on silver, and received significant donations from silver mining companies in the western territories as a result. So much money was spent in the election of 1896, that it wouldn’t be topped until the 1964 election.

Beginning in the 1950s, the price of political campaigns exploded. Emerging campaign strategies like television advertising and direct mailers created a massive escalation in the price of politicking. In 1960, the major parties spent $10 million each during the presidential election. Just eight years later, that figure would more than double to $25 million per party, and showed no signs of slowing. President Nixon spent $61 million alone on his bid for reelection in 1972, demonstrating an increase in campaign spending of more than six fold in just 12 years.

In recent years, politicians have been under increasing pressure to have slick, highly managed, and expensive campaigns, contributing to the exponential increase in the cost of said campaigns. In 1999, George W. Bush raised a record breaking $200 million in order to run for president. By 2008, the money spent in federal campaigns had seen an incredible jump, totaling over a billion dollars between the two major candidates combined. Democrat Barack Obama raised approximately $750 million, nearly double that of his opponent, Republican John McCain. In the most recent election, the candidates spent close to one billion dollars each on their perspective shots at the winning or keeping the White House.

A Healthcare Case Study: Does Money Distort the Political Process?

One of the biggest political fights during President Obama’s first two years in office was the battle over healthcare reform. The private health insurance industry injects millions of dollars into campaigns and is a major political player nationally. According to the Federal Elections Commission, healthcare related industries donated about $42 million dollars to various candidates during the 2008 election cycle. Democrats received these donations at a 2-to-1 ratio relative to Republican, and were also tasked with leading the discussion around healthcare reform. Even the most diehard liberal partisans would likely admit this is a significant conflict of interest.

President Obama ran on a public option health insurance plan, in which the uninsured would be able to purchase an affordable healthcare plan directly from the government. The insurance industry, wary of the possibility of having to compete with a not-for-profit government health insurance plan, fought the public option bill ferociously. During the negotiation process, the public option was dropped relatively quickly and replaced with a mandate for individuals to buy a private health insurance plan or face a penalty. This new bill was a major victory for the health insurance industry, as it guaranteed them millions of new customers. Many of the Affordable Car Act’s critics cried foul, as candidate Obama had received hundreds of thousands of dollars from the private health insurance industry during the 2008 campaign. He had received over $200,000 from donors associated with Blue Cross Blue Shield alone.

Opponents of the public option healthcare bill also had significant ties to the health insurance industry. Republican Senator Chuck Grassley was a vocal opponent of the public option bill, saying it would “pull the plug on grandma.” Grassley’s single largest campaign contributor in 2008 was Blue Cross Blue Shield, from whom he received approximately $42,000. Senator Joe Liebermann broke from the Democratic establishment and threatened to join a Republican filibuster of the public option bill; this is not particularly surprising, as his state of Connecticut is home to many major private health insurance companies, which had donated over $2 million to Sen. Liebermann over the course of his career.

It is impossible to truly know how much of an impact the political donations had on the final version of the Affordable Care and Patient Protection Act of 2010. However, it would not be naïve to believe that the money had at least some affect. After all, these companies are in the business of making money, and it is unlikely that they would donate to political campaigns if they did not believe they would receive a return on their investment.

Democracy vs. Capitalism

The United States has a history of rigid support for idealist interpretations of freedom, democracy and capitalism. For this reason, many Americans object to governmental attempts to halt politically motivated expenditures by wealthy individuals or corporations, as they view this as a reduction in freedom of the individual and a trespass against the free market. On a theoretically level, capitalism and democracy seem to fit together quite nicely, since they are both based on choices made by individual participants within the system. One is built on the freedom of the market, and the other is built upon the market of ideas and candidates. So then, why would intervention even be necessary?

Unfortunately, capitalism and democracy may not fit together as well as some assume. There is a stark contrast between capitalism and democracy when it comes to the fundamental idea of equality. Capitalism is not at all concerned with the equality of the participants involved, and in fact relies on the idea that some people in a capitalist system will and should have more power than others. Under capitalism, certain rights and privileges are reserved for a small, select group of wealthy, successful individuals. Democracy, on the other hand, is built upon the idea that each and every participant is equal, with no one person having more or less influence than any other, regardless of their social or economic standing. In a democratic system, each person has one vote and one voice; no more, and no less. In this sense, democracy and capitalism are fundamentally quite incompatible.

Under a capitalist system, the powerful use their status to perpetuate their privilege. The campaign finance system is the most obvious manifestation of the capitalist class attempting to perpetuate their privilege not only in the economic realm, but also in the political realm. In a capitalist system, power is directly related to the amount of capital one can accumulate, and it would be a monumental mistake to apply this measure of power to our system of democracy as well.

Since we have allowed the capitalist power structure to invade our democratic one, we should not be surprised that the social inequalities present in the economic system are also present in the political system. Women and minorities are under-represented in positions of power in the capitalist system, as well as positions of power in our political system. According to the United States Census Bureau, African Americans, Hispanics and women earn below the median national income. African Americans earn approximately $7,000 less per year than their white counterparts. Women typically earn about $15,000 less per year than males. Similarly, women and minorities are vastly under-represented in the U.S. government. Only 6% of our sitting U.S. Senators are racial minorities and only 20% are women. The House of Representatives displays similar disparities; only 17% of House members are racial minorities and 17% are women. By contrast, racial minorities represent about 38% of the overall population and women represent approximately half. This suggests that economic power has infested the democratic process and allowed a single group, specifically wealthy white males, to preserve and protect their elevated status in all aspects of society.

The History of Campaign Finance Reform Legislation:

In response to the growing power of organized money in politics, Congress began to limit political contributions or make them more transparent via disclosure requirements around 1907. The first major campaign finance law, called the Tillman Act, banned direct corporate donations to candidates at the federal level. Unfortunately, Tillman lacked a serious enforcement mechanism and largely went unenforced. In 1910, the Publicity Act was passed, which required public disclosure of donations over $100, and installed limitations on donations to Congressional candidates; $10,000 in Senate races and $5,000 in House races.

The next major piece of campaign finance reform came in 1947. The Taft-Hartley Act banned labor unions and corporations from engaging in internal political communication and closed some of the loopholes that existed in previous bills. Taft-Hartley also banned corporations from engaging in direct political advocacy. Again, Taft-Hartley fell victim to the same problems as is forbearers. Clever political actors found ways to sidestep the law, and the laws themselves still lacked a serious enforcement mechanism.

Campaign finance reform advocates scored a series of major victories in the early 1970s. In 1971, Congress passed the Revenue Act and the Federal Election Campaign Act. These bills expanded disclosure requirements, strengthened limited on campaign expenditures, imposed limits on how much candidates could donate to their own campaigns, and set up a public financing system for presidential candidates. In 1974, the Federal Election Campaign Act was amended to add the long absent and sorely needed enforcement mechanism to actually implement campaign finance reform laws. The new regulatory agency, called the Federal Elections Commission (FEC), was created to monitor political donations, collect disclosure information, and impose punishments for lawbreaking. In addition, the 1974 amendments tightened legal campaign contribution limits and included a ceiling on the amount that candidates were allowed to spend on their own campaigns, set at $70,000 per candidate.

Some felt that the campaign finance laws had gone too far and restricted people from exercising their right to freedom of speech. In 1976, a bipartisan coalition sued the federal government under the leadership of conservative Republican James Buckley. The case made its way through the courts, and in Buckley v. Valeo, the Supreme Court found the limitations on individual campaign donations, disclosure requirements, and the public financing mechanism to be constitutionally sound. However, the SCOTUS did find the ceiling on political expenditures imposed on the candidates themselves to be unconstitutional, as this type of spending was considered political speech protected by the first amendment.

Following the Buckley case, there was very little action on campaign finance for nearly thirty years, despite the exponential growth of campaign spending over that period. In 2002, the next major campaign finance law was signed by President Bush. The bill was titled the Bipartisan Campaign Finance Reform Act of 2002, or ‘McCain-Feingold’ for short, referencing the bill’s authors, Republican John McCain and Democrat Russ Feingold. McCain-Feingold banned non-regulated ‘soft money’ transactions between political actors, while at the same time imposing restrictions on the political advocacy of interest groups, corporations and labor unions.

Republican Senator Mitch McConnell followed James Buckley’s lead and sued the federal government over the restrictions outlined in McCain-Feingold. The lawsuit was supported by variety of groups on both sides of the isle, including the American Civil Liberties Union, the National Rifle Association, The AFL-CIO, the libertarian Cato Institute, and the Democratic and Republican parties of several states. In McConnell v. FEC, the Supreme Court upheld the vast majority of McCain-Feingold, with the only exceptions involving minor restrictions on certain types of interactions between candidates and parties. McCain-Feingold had survived, but its victory would be short lived.

In 2008, a conservative advocacy organization called ‘Citizens United’ released a documentary called ‘Hillary: the Movie.’ The group sought to distribute and advertise their documentary within the federal election window, which violated the “electioneering” restrictions laid out by McCain-Feingold. Citizens United sued the federal government over these restrictions, stating that the group’s freedom of speech had been violated. In a 5-4 decision, the Supreme Court struck down vast swaths of campaign finance law that had been built up over the last century. The court found that corporations, non-profits and labor unions could not be denied their freedom of speech based on their “corporate identity.” The decision essentially overturned Austin v. Michigan Chamber of Commerce, which had set the precedent that corporations were not people and thus were not protected by the first amendment. Based on the Supreme Court’s Citizen United decision, corporations are now free to spend money on campaigns and engage in political advocacy.

“Speech restrictions based on the identity of the speaker are all too often simply a means to control content…Government may not suppress political speech on the basis of the speaker’s corporate identity. No sufficient government interest justified limits on the political speech of nonprofit and for-profit corporations.”

-Supreme Court Justice Kennedy, 2010

Campaign finance laws were dealt another significant blow in April 2014. In McCutcheon v. Federal Election Commission, the Supreme Court stated that the established aggregate limit on an individual’s campaign contributions, previously set at $123,000 per election, did not help prevent political corruption and was therefore illegal. The court also stated that an individual’s campaign expenditures are considered speech, further cementing the notion that spending money in politics is protected by the first amendment’s guarantee to freedom of speech.

What can be done to solve the problem?

There are a variety of solutions that have been proposed to correct the problem of money in politics. Most run-of-the-mill solutions involve tightening campaign donation limits, imposing a progressive taxation system on political donations, or increasing disclosure and transparency requirements on political donations. One of the most popular solutions involves the application of the presidential public financing system across the board. Campaign finance reform activists argue that the public financing system available to presidential candidates should be expanded to include any and all candidates running for office at the federal level. Under this system, candidates are given a specific amount of government money to operate their campaigns, freeing them from the dangerous relationships that result from “wooing” big money donors.

One unique idea drafted in response to this problem is a “cap and trade” system of campaign finance. Under this system, candidate may accept donations up to a specific ceiling. Once the ceiling is reached, candidates would have to buy expensive donation “permits” from the government if they wish to accept additional donations. The money generated by the permit system would then be given to candidates who weren’t able to raise as much money. This would still allow people to donate to their preferred candidates and thus protect political speech, while also helping to ensure candidates without ties to wealthy donors are able to have enough cash to compete.

Another interesting idea for campaign finance reform involves a system of ‘opponent-tied’ contributions. Under this system, candidates are free to accept an unlimited number of political donations. However, candidates would be forced to provide half of everything they receive to their opponent. Again, this system would preserve the donors’ freedom of speech, while at the same time ensuring an equitable distribution of political capital.

In Conclusion

The issue of campaign finance reform is becoming less and less an issue of left vs. right or Republican vs Democrat, and more and more an issue of the political and economic elite vs. everyone else. The problem of money in politics knows no ideological bounds, as politicians on both sides of the isle have accepted mountains of cash, leading to corruption and disproportionate representation in government. People are growing ever more aware that their ability to participate in the democratic process is being undermined, and it is only a matter of time before they organize to take their power back.


Kevin Nugent is an Oriskany, NY native who is currently teaching English with his wife in South Korea. Kevin previously sat on the Board of Directors for Central New York Citizens in Action, Inc. and taught as an adjunct lecturer of Government and Politics at Utica College.

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