Campaign finance.(CRS Issue Brief for Congress: Received through the CRS Web)

Updated February 8, 2006

 
CONTENTS 
 
SUMMARY 
 
MOST RECENT DEVELOPMENTS 
 
BACKGROUND AND ANALYSIS 
 
Evolution of the Current System 
 
Campaign Finance Practices and Related Issues 
  Enduring Issues: Overall Costs, Funding Sources, and Competition 
    Increased Campaign Costs 
    PACs and Other Sources of Campaign Funds 
    Competitiveness in Elections 
  Today's Paramount Issues: Perceived Loopholes in Current Law 
    Soft Money 
    Independent Expenditures 
    Issue Advocacy 
    527 Political Organizations 
 
Policy Options 
  Proposals on Enduring Issues 
    Campaign Spending Limits and Government Incentives or Benefits 
    Changing the Balance Among Funding Sources 
    Promoting Electoral Competition 
  Congressional Efforts to Close Perceived Loopholes 
    Independent Expenditures 
    Soft Money 
    Issue Advocacy 
    527 Activity 
 
Legislative Action in Congress 
  108th Congress 
  109th Congress 
 
LEGISLATION 
    Broadcast Rates 
    PACs 
    Other FECA provisions 
 
FOR ADDITIONAL READING 

Campaign Finance

SUMMARY

Concerns over financing federal elections have become a seemingly perennial aspect of our political system, long centered on the enduring issues of high campaign costs and reliance on interest groups for needed campaign funds.

Rising election costs had long fostered a sense in some quarters that spending was out of control, with too much time spent raising funds and elections "bought and sold." Debate had also focused on the role of interest groups in campaign funding, especially through political action committees (PAC).

Differences in perceptions of the campaign finance system were compounded by the major parties' different approaches. Democrats tended to favor more regulation, with spending limits and public funding or benefits a part of past proposals. Republicans generally opposed such limits and public funding.

The 1996 elections marked a turning point in the debate's focus, as it shifted from whether to further restrict already regulated spending and funding sources to addressing activities largely or entirely outside federal election law regulation and disclosure requirements. While concerns had long been rising over soft money in federal elections, its widespread and growing use for so-called issue advocacy since 1996 raised questions over the integrity of existing regulations and the feasibility of any limits at all.

Following 1996, reform supporters offered legislation whose primary goals were to prohibit use of soft money in ways that could affect federal elections and to bring election-related issue advocacy communications under federal regulation. In both the 105th and 106th Congresses, the House passed the Shays-Meehan bill, but the Senate failed to invoke cloture to allow a vote on the companion McCain-Feingold bill.

The 106th Congress did, however, agree on an aspect of campaign reform, in passing P.L. 106-230, to require disclosure by certain tax-exempt political organizations organized under section 527 of the Internal Revenue Code. Such groups exist to influence elections, but many had not been required to disclose financial activity (to the FEC or IRS).

In the 107th Congress, the Senate passed McCain-Feingold, as amended, and the House passed the companion Shays-Meehan bill), as amended. The Senate then passed the House bill, which was signed into law by President Bush as the Bipartisan Campaign Reform Act of 2002--BCRA (P.L. 107-155), constituting the first major change to the nation's campaign finance laws since 1979.

The 108th Congress found the political community adjusting to the law that took effect in November 2002 but whose constitutionality was not upheld until the Supreme Court's McConnell v. FEC ruling in December 2003. Supporters vowed to continue their efforts through such initiatives as replacing the FEC with a new enforcement agency, providing candidates and parties with broadcast discounts, and reforming the presidential public funding system.

In the wake of the 2004 elections, when more than $400 million was raised and spent by 527 organizations outside of federal election law regulation, the 109th Congress is examining the role of 527 groups in federal elections, focusing primarily on H.R. 513, H.R. 1316, and S. 1053.

MOST RECENT DEVELOPMENTS

The Senate Indian Affairs Committee held a hearing February 8 to examine rules governing campaign contributions by Indian Tribes, in response to the large amounts of money given in recent elections and concerns over the application of federal campaign finance law thereto.

BACKGROUND AND ANALYSIS

Evolution of the Current System

Today's federal campaign finance law evolved during the 1970s out of five major statutes and a paramount Supreme Court case. That case not only affected earlier statutes, but it has continued to shape the dialogue on campaign finance reform.

The 1971 Federal Election Campaign Act (FECA), as amended in 1974, 1976, and 1979, imposed limits on contributions, required disclosure of campaign receipts and expenditures, and set up the Federal Election Commission (FEC) as a central administrative and enforcement agency. The Revenue Act of 1971 inaugurated public funding of presidential general elections, with funding of primaries and nominating conventions added by the 1974 FECA Amendments. The latter also imposed certain expenditure limits, struck down by the Supreme Court's landmark Buckley v. Valeo ruling [424 U.S. 1 (1976)].

In the Buckley ruling, the Court upheld the act's limitations on contributions as appropriate legislative tools to guard against the reality or appearance of improper influence stemming from candidates' dependence on large campaign contributions. However, Buckley invalidated the act's limitations on independent expenditures, on candidate expenditures from personal funds, and on overall campaign expenditures. These provisions, the Court ruled, placed direct and substantial restrictions on the ability of candidates, citizens, and associations to engage in protected First Amendment free speech rights. The Court saw no danger of corruption arising from large expenditures, as it did from large contributions, and reasoned that corruption alone could justify the First Amendment restrictions involved. Only voluntary limits on expenditures could be sustained, perhaps in exchange for government benefits. Such a plan was specifically upheld in the existing presidential public funding system, as a contractual agreement between the government and the candidate. The Court's dichotomous ruling, allowing limits on contributions but striking down mandatory limits on expenditures, has shaped subsequent campaign finance practices and laws, as well as the debate over campaign finance reforms.

In 2002, Congress enacted the Bipartisan Campaign Reform Act (BCRA) of 2002 (popularly known as McCain-Feingold or Shays-Meehan, for its Senate and House sponsors). This statute made the most significant changes in the FECA since the 1970s, featuring higher contribution limits, a ban on the raising of soft money by political parties and federal candidates, and a restriction on broadcast ads by outside groups in the closing days of an election. BCRA's constitutionality was challenged in court but, in a decision that surprised many observers, was essentially upheld by the Supreme Court in its December 10, 2003 ruling in McConnell v. FEC.

Campaign Finance Practices and Related Issues

Since the mid-1970s, the limits on contributions by individuals, political action committees (PAC), and parties, and an absence of congressional spending limits, have governed the flow of money in congressional elections. Throughout the 1980s and much of the 1990s, the two paramount issues raised by campaign finance practices were the phenomena of, first, rising campaign costs and the large amounts of money needed for elections and, second, the substantial reliance on PACs as a source of funding. Concerns were also voiced, by political scientists and the Republican congressional minority, over a third issue: the level of electoral competition, as affected by finance practices.

After 1996, the debate shifted considerably to a focus on the perceived loopholes in existing law (a source of increasing debate since the mid-1980s). The PAC issue was largely supplanted by more fundamental issues of election regulation, with observers finding new appreciation for the limited, disclosed nature of PAC funds. Concerns over competition have abated since …