Campaign Finance Laws

Campaign finance laws govern the amounts of money candidates or parties may receive from individuals or organizations and the cumulative amounts that individuals or organizations can donate. These laws also define who is eligible to make political contributions and what sorts of activities constitute in-kind contributions.

There have been three major periods of campaign finance regulation in the past century: the era before the Federal Elections and Campaigns Act (FECA) of 1971 and its subsequent amendments; the era from 1974 to 2002, when FECA regulated campaigns; and the current era, following the enactment of the Bipartisan Campaign Reform Act (BCRA) of 2002.

Before FECA, campaign finance laws were mainly addressed to particular types of contributors. By 1947, federal employees, corporations, and labor unions were barred from making contributions to candidates. Unions and corporations responded by forming political action committees (PACs), which aggregated voluntary contributions by individual members or employees.

The FECA of 1971 established limits on candidate spending; on the contributions of individuals and PACs to candidates, parties, or political committees; and on the amount of money candidates could spend on their own campaigns. FECA also established a public funding system for presidential campaigns, financed through a voluntary income tax checkoff. FECA created the Federal Election Commission (FEC) to enforce and clarify campaign finance laws.

In its 1976 Buckley v. Valeo decision, the Supreme Court ruled that restrictions on candidate spending and candidate self-financing violated the First Amendment. The Court allowed the limits on spending in presidential campaigns to stand because these limits were contingent on receipt of public funds. And the Court upheld the limits on contributions from individuals or PACs; thus, from the passage of FECA in 1971 until 2002, individuals were limited to contributing no more than $1,000 to a candidate, up to a total of $25,000, and PACs were limited to contributing no more than $5,000 to a candidate.

Many have contended that FECA abetted the development of PACs and increased the reliance of congressional candidates on PACs. FECA has also been said, however, to have reduced the reliance of candidates on individual donors or organizations. That is, because of the contribution limits, it is unlikely that any one donor or organization will contribute enough to a candidate to have an influence on that candidate's campaign. At the presidential level, FECA also restrained spending. All major party nominees abided by FECA's spending limits in their primary campaigns from 1976 through 1996, and public funding of general election campaigns ensured that candidates could not outspend each other.

During the 1990s, two major developments took place that, according to many politicians, undermined FECA's restrictions. First, although corporations and [Page 252]labor unions cannot make direct contributions to candidates, FECA did not prohibit them from contributing to political parties as long as this money was used for “party-building” activities. During the 1990s, political parties began to solicit “soft money” donations from corporations, labor unions, and wealthy individuals. Because these funds were not distributed by the parties to candidates or used to advocate the election or defeat of a candidate, they were not subject to contribution limits. Second, recall that FECA limited the ability of individuals and organizations to spend money in a coordinated fashion with a campaign. The FEC has interpreted this as a prohibition on advocacy that explicitly encourages voters to vote for or against a candidate. Yet, during the 1990s, several advocacy organizations began to advertise heavily on television, describing candidates in a manner virtually indistinguishable from a candidate's campaign advertisement but without using “magic words” such as “support” or “oppose.”

...