by Stephanie Miles

The Ins and Outs of Campaign Finance Reform

First Bank of the United States

With the 2012 presidential election just three months away, you’re probably hearing a renewed fervor about campaign finance reform. “Reform” can mean different things to different people, though, and advocates’ definitions range anywhere from “full public financing of elections and absolute fiscal transparency” to “unlimited spending by corporations and unions on political campaigns.” And everywhere in between.

The debate over election spending dates back as far as the 1800s, but current disagreements stem largely from the Bipartisan Campaign Reform Act (PDF) enacted in 2002. The BCRA, better known as the McCain-Feingold Act, created a ban on so-called “soft money.” While the BCRA pushed to limit unregulated contributions being funneled into national political parties, it increased the amount that individuals could contribute to candidates from $1,000 to $2,000 per election. (Today, that amount is $2,500.) It also expanded the role of political action committees, while limiting the influence that unions and corporations could have in primaries and general elections.

These changes came to a head in Citizens United v. Federal Election Commission in 2010, in which the U.S. Supreme Court ruled that government could not restrict independent political donations by corporations and unions. As a result, some of the BCRA’s most powerful restrictions were effectively overturned.

Types of PACs

Political action committees have been playing a role in U.S. political campaigns since 1974, when Congress defined how PACs could operate within the confines of the Federal Election Campaign Act (PDF). However, the role that PACs and super PACs play in federal elections was expanded significantly with Citizens United.

PACs generally fall into one of two categories: connected and non-connected. The Federal Election Commission defines connected PACs as “political committees established and administered by corporations, labor unions, membership organizations or trade associations,” and prohibits these groups from soliciting donations from anyone other than individuals associated with the sponsoring organizations. Meanwhile, non-connected PACs are not connected to corporations, and as such they are free to collect donations from the general public.

Super PACs and Hybrid PACs are relatively new beasts developed in the aftermath of the Citizens United. Although these groups cannot make contributions to individual candidates or political parties, they can spend unlimited amounts independently of political campaigns. Additionally, super PACs are free to collect funds from unions, individuals, and corporations without any limitations, just as long as they register with the FEC within 10 days of raising or spending $1,000.

Corporate Donation Laws

The rise in super PACs has significantly influenced the role that corporations play in U.S. politics. Although corporations could technically give more money to candidates before the creation of PACs, today’s donation regulations give big businesses more “bang for their buck,” so to speak. According to the Center for Responsive Politics, the financial sector alone contributed upwards of $468 million to federal campaigns and individual candidates in the 2008 election cycle. This represented an 80% increase compared to the two years prior.

Meanwhile, reports distributed by the Federal Election Commission show that most super PAC donations in 2011 came from little-known firms, including Contran Corp., Rooney Holdings, and Oxbow Carbon. One pro-Mitt Romney committee known as Restore Our Future raised $17.9 million in the third and fourth quarters of 2011 alone. These groups are free to raise as much money as they wish, just as long as they avoid coordinating with individual campaigns and candidates directly.

The Supreme Court upheld Citizens United when it struck down a Montana ban on corporate spending in June 2012, opening up the door for some conservative lawmakers to push for additional flexibility in corporate campaign fundraising. Conservative foundations across the country are now preparing to fight longstanding disclosure rules, which currently require certain organizations to disclose the sources of their largest contributions.

Campaign finance laws have been the subject of debate in the U.S. for more than 100 years. The main crux of the issue seems to be whether–and to what extent–money spent in support of a candidate or issue equates to constitutionally-enshrined free speech. If just this past decade is any indication, opinions on that can shift wildly, and likely will continue to for many years more.

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