Nearly four decades ago, the delivery of a suitcase stuffed with $250,000 in cash to one of then-President Richard Nixon's top aides helped fuel the Watergate scandal and a complete overhaul of the laws regulating campaign finance. Voters in the 2012 election are likely to know less about who is trying to influence their decision than they have at any time since then. And, compared to the amounts of unregulated dollars flowing into campaigns, the stash of cash that former Commerce Secretary Maurice Stans accepted during the 1972 presidential campaign seems like peanuts.
Here's a look at the rise and fall of the system designed to limit the influence of big money in politics. For an interactive version of this timeline, check here.
Congress passes major overhauls to the patchwork of regulations governing campaign finance. The Federal Election Campaign Act established comprehensive rules for political parties, campaign committees of politicians and political action committees. The Federal Election Campaign Act set rules for raising money, and limited the amount that donors could give to campaigns — as well as how much candidates themselves — and their families — could subsidize their races. The act required campaigns, parties and PACs to disclose their donors and their spending. One major weakness was the lack of a centralized agency to handle disclosure and enforcement The Revenue Act enabled taxpayers to voluntarily set aside $1 ($2 for married couples) – on their federal tax returns for the Presidential Election Campaign Fund. The amounts were raised in 1993 to $3 and $6 respectively.
The Watergate scandal erupts, beginning with an investigation of a break-in at Democratic Party headquarters in the Watergate hotel and ending, the following year, with the resignation of President Richard Nixon. One of the associated scandals around Nixon’s Committee to Reelect the President, dubbed CREEP, involved finance chair Maurice Stans, who doubled as Nixon’s commerce secretary and raised $60 million for the boss’ reelection. This infamously included a $250,000 cash contribution—delivered in a bulging briefcase—from financier and fraudster Robert Vesco, who sought to end a Securities and Exchange Commission investigation of his looting of a Geneva-based mutual fund. Some of Vesco’s cash ended up going to the Watergate burglars. Stans delivered $70,000 worth of it, again in a briefcase, to Nixon’s personal lawyer to pass on to them. The reaction to Watergate prompted Congress to adopt more stringent campaign finance regulatons.
Congress passes the post Watergate amendments the Federal Election Campaign Act, limiting the size of individual contributions to candidates; limiting donations for independent expenditures to elect candidates and prohibiting or restating longstanding prohibitions on political contributions and expenditures by corporations and labor unions. The act created the Federal Election Commission as a central point for disclosure and enforcement of campaign finance rules, and required those engaged in election activity to register with the FEC and disclose funding sources and expenditures.
The first presidential election in which public financing is available to candidates is conducted as a major court challenge is mounted to the Federal Election Campaign Act. In Buckley v. Valeo, the Supreme Court first established the notion that the First Amendment bans the government from limiting how much money is spent on campaigns . In the Buckley case, the issue revolved around the self-financing of a campaign: Could an individual use his personal fortune to run for public office? The court ruled that he could. While government can limit size of contributions to candidate, it can’t limit the size of spending by a candidate independently advocating his own election, the high court said. Trevor Potter, a former FEC chairman who has served as GOP presidential candidate John McCain’s 2008 election lawyer now as satirist Stephen Colbert’s super PAC consultant, told a group of Austin lawyers in December that the seeds for super PACs were planted in the Buckley v. Valeo decision.
Public participation in the presidential public financing system reaches an all-time high of nearly 29 percent. As of 2010, the number was just above 7 percent.
The National Security PAC, a traditional political action committee that raised funds in $5,000 increments from individuals, ran television ads that blamed the policies of Democratic candidate Michael Dukakis for convicted felon Willie Horton’s rape of a Maryland woman and assault of her husband while he was on a furlough from prison. Without mentioning Horton, the Republican National Committee also ran ads critical of Dukakis’ “revolving door” prison system. The Dukakis campaign accused the campaign of then Vice President George H.W. Bush of directing the National Security PAC’s advertising campaign, illegally coordinating with the group. The FEC, despite finding evidence of connections between the campaign and the PAC, did not investigate further after the commissioners deadlocked on the matter in 1992 (the vote was 3-3; the Republican commissioners voted against further investigation, while Democratic commissioners supported it).
The Supreme Court upholds, in Austin v. Michigan Chamber of Commerce, bans on corporate spending to influence elections. Because corporations’ perpetual life, limited liability and other legal advantages, give them a special leg up in the political marketplace, rules that prohibit spending from their treasuries to elect candidates do not violate the First Amendment, the justices held.
The reelection campaign of President Bill Clinton sees an explosion of questionable fundraising — from allegations of foreign money being steered to nonprofits for get-out-the-vote efforts to Lincoln Bedroom sleepovers for big donors to Al Gore’s “no controlling legal authority” speech justifying his fundraising at a Buddhist temple in Los Angeles. The Democratic and Republican parties raise $262 million in so-called soft money—contributions made to political parties that are not eramarked for federal election campaigns and can therefore come in unlimited amounts from individuals, corporations and labor unions. The 1996 figure represented a 206 percent increase from the $86 million in soft money raised four years earlier. The soft money was used to run “issue ads,” those that did not expressly advocate the election or defeat of a federal candidate. One example of an “issue ad” from that year: The “DoleGingrich” ads tying the eventual Republican presidential nominee, Sen. Bob Dole, to the much more polarizing House Speaker Newt Gingrich. After the election, the focus of reformers and investigators turned to the role of soft money.
George W. Bush declines public financing for the primary election, becoming the first president elected since 1976 to do so. During the primary, Republicans for Clean Air, a 527 committee (so named for the section of the tax code that political action committees are organized under), runs an advertisement criticizing the environmental record of Bush’s opponent, John McCain. Because Republicans for Clean Air’s ad does not expressly advocate for the defeat of McCain, the committee is able to accept unlimited contributions from any source—in this case, brothers named Charles and Sam Wyly, both big donors to Bush. Just as the political parties did in 1996, the 527s in the 2000 and 2004 campaigns found ways to use unlimited donations, including money from corporations and labor unions, to influence elections.
Congress passes the Bipartisan Campaign Reform Act, also known as McCain-Feingold, banning soft money contributions to political parties–and prohibiting unions and corporations from using treasury funds to advertise for or against federal candidates within 60 days of a general election or 30 days of a primary campaign. The law also bars candidates for federal office and officers of political parties from raising soft money for other organizations, like 527s. Finally, it requires candidates to “stand by their ads” by saying, at the end of radio and television ads, that they approve of or authorized the message.
In a legal challenge to the McCain-Feingold law called McConnell v. the FEC (the named plaintiff was Sen. Mitch McConnell of Kentucky, the current Republican Senate leader), the Supreme Court upheld its 1990 ban on direct corporate donations to candidates. But the margin was a narrow 5-4.
Bush and his Democratic presidential rival, John Kerry, both opt out of the public financing system for the primaries. While a 527 group called Swift Boat Vets, funded by big donors to Bush, runs the most famous ad campaign by an outside group—one that attacked Kerry’s service in Viet Nam—Democratic leaning 527s outraise those backing Republicans by a margin of 14 to 1.
The FEC issues hundreds of thousands of dollars in penalties to three 527 committees—Swift Boat Vets, MoveOn.org and the League of Conservation Voters—for using impermissible contributions on independent expenditures to defeat federal candidates. The groups agree to file their disclosures with the FEC and abide by contribution limits—$5,000 for an individual per year and no money from corporate or union donors.
In the first major campaign finance case decided since the retirement of Justice Sandra O’Connor, who write the majority opinion in the McConnell case upholdng a ban on corporate contributions to candidates, the Supreme Court rules 5-4 in favor of allowing Wisconsin Right to Life, an anti-abortion group incorporated as a nonprofit, to run what the FEC denounced as “sham” issue ads prior to an election. The majority opinion was written by Chief Justice John Roberts, initially appointed as O’Connor’s replacement.
Barack Obama becomes the first presidential candidate to accept no public funds, becoming the first president elected with only private donations since Watergate.
January: In the landmark Citizens United case, the Roberts Supreme Court overturns the Austin decision of 1990 and invalidates a key portion of the McCain-Feingold act, holding that corporations and unions, like individuals, have a First Amendment right to spend funds directly from their treasuries to make independent expenditures—basically, any spending intended to elect or defeat a candidate for federal office. In essence, the activities for which the FEC fined Swift Boat Vets and other groups in 1998 are now legal. Disclosure of campaign contributions and the ban on corporations and labor unions directly to political candidates are unaffected by the ruling.
March: The Citizens United decision has other consequences. A District of Columbia Circuit Court rules in favor of SpeechNow.org, which sued the FEC to allow individuals to contribute more than $5,000 to make independent expenditures. The court ruled that if corporations or unions can spend unlimited amounts on independent expenditures, there's no justification for limiting the amount that can be raised from third parties for those expenditures.
August: In response to the Citizens United and SpeechNow.org decisions, the FEC announced it would accept registrations for a new kind of committee called independent expenditure-only multicandidate non-connected political committees, which National Journal reporter Eliza Carney renamed “super PACs.” Super PACs can raise unlimited funds from any source, including corporations, labor unions and individuals, even from nonprofit organizations that are not required to disclose the source of their funds.
In addition to super PACs, other organizations, including labor unions and nonprofit organizations like the U.S. Chamber of Commerce (a business league organized under section 501(c)6 of the tax code) and social welfare organizations like Ending Spending and Citizens United (both organized under section 501(c)4 of the tax code), are eligible to make independent expenditures without disclosing their donors. To date, most nonprofits have continued to run issue ads—those that mention federal candidates without advocating their election or defeat.
In the 2010 campaign, a super PAC called Citizens for a Working America that ran ads advocating the defeat of Rep. John Spratt, D-S.C. The super PAC disclosed $250,000 in contributions from an organization called New Models, a 501(c)4 organization that does not have to disclose its donors.
In Carey v. FEC, the U.S. District Court rules that "non-connected" PACS—those don’t have ties to corporations or labor unions—can set up separate accounts to accept unlimited contributions to make independent expenditures, creating a class of hybrid super PACs that can both contribute to federal candidates from one account and make independent expenditures from another.
The FEC also rules that candidates and party officials can coordinate fundraising with super PACs, provided that they do not request contributions in amounts or from donors that they cannot solicit for their own committees. In practice, this means that a candidate can steer donors who have given the maximum amount to his campaign to a super PAC that can take unlimited funds from that donor. Super PACs are still barred from coordinating their spending with candidates.
As the contest for the 2012 Republican presidential nomination gets underway, former aides and supporters of the various candidates create super PACs to support those candidates.
In Iowa, super PACs play a major role in the photo finish between Rick Santorum and Mitt Romney. In South Carolina, attacks on Mitt Romney by a super PAC that supports Newt Gingrich contributed to Gingrich’s victory there. Filings with the FEC as of the third week in January showed super PACs had already poured more than $30 million into the 2012 presidential campaign.