Disclosing Campaign Contributions to Reduce Corruption

Public disclosure of campaign contributions to congressional and presidential candidates represents one of the United States’ earliest, most sustainable, and most perennially controversial targeted transparency systems.

 

From the beginning, the primary purpose of campaign finance disclosure was to reduce corruption in government. In Buckley v. Valeo, the 1976 Supreme Court decision that upheld the constitutionality of federal disclosure requirements, the Court concluded that disclosure reduced corruption in three ways. First, it provided the electorate with information about where money came from and how it was spent, in order to aid voters in evaluating those running for office, including alerting voters “to the interests to which a candidate is most likely to be responsive.” Second, disclosure helped to “deter actual corruption and avoid the appearance of corruption by exposing large contributions and expenditures to the light of publicity.” Such exposure “may discourage those who would use money for improper purposes either before or after the election,” because “a public armed with information about a candidate’s most generous supporters is better able to detect any post-election special favors that may be given in return.” Third, the Court said, reporting was “an essential means of gathering data to detect violations of contribution limits.” Disclosure worked in tandem with a rule-based regulatory system that limited amounts and sources of contributions.

 

The use of transparency to reduce campaign finance corruption began early and improved in response to episodes of perceived abuses. The first campaign finance disclosure law, the Publicity Act of 1910, was championed by President Theodore Roosevelt and progressive reformers as an antidote to the influence of big business in politics. Roosevelt pressed for disclosure after his opponent in the 1904 election accused him of accepting corporate gifts intended to buy influence in the administration. Civic organizations such as the National Publicity Law Organization kept pressure on Congress until the law was passed.

 

Today’s national system of campaign finance disclosure dates from the Federal Election Campaign Act (FECA) of 1971, which was enacted in response to the perceived ineffectiveness of earlier laws and the growing influence of money in politics. FECA required candidates for national office to disclose contributions of one hundred dollars or more in quarterly reports. In election years, contributions of five thousand dollars or more had to be reported within forty-eight hours and disclosed to the public forty-eight hours after reporting. The law also limited contributions and media expenditures. Allegations of corruption in the 1972 presidential election, including the Watergate scandal, led Congress to expand disclosure requirements in 1974 and to create an independent bipartisan Federal Election Commission (FEC) that received disclosed information and made it available to the public. Later amendments aimed to broaden disclosure and make it more efficient. Reforms required reporting by “527” nonprofit organizations that promoted candidates but were not campaign committees and focused reporting on committees that raised substantial amounts of funds.

 

In 2002, Congress again tightened spending limits and strengthened disclosure. The main purpose of the McCain-Feingold law (officially, the Bipartisan Campaign Reform Act) was to close loopholes that allowed candidates and their supporters to use “soft money” to circumvent campaign spending limitations. Soft money refers to funds used to finance issue ads that promote particular candidates. As part of the effort to regulate soft money, Congress required organizations that sponsored candidate-specific issue ads to disclose the names of contributors and spending on such ads. Anyone who “knowingly and willfully” violated disclosure provisions could face a maximum penalty of five years in prison. In McConnell v. Federal Election Commission, decided in 2003, the Supreme Court again upheld the constitutionality of disclosure requirements as an important means of informing voters, reducing corruption, and enforcing spending limits. Campaign finance disclosure remains widely supported in concept but perennially debated in its specifics. Over the years, the system has gained diverse users and the support of many candidates. The press, advocacy groups, political consultants, groups concerned with expanding public information, and other intermediaries often repackage the disclosed data and provide their own interpretations for the public. Federal enforcement authorities use the data to ferret out violations of spending limits. Candidates use the data to gather information about their opponents and sometimes have a reputational interest in disclosing campaign finance information beyond what is required by federal law. In the 2000 and 2004 elections presidential candidates disclosed all their contributions on campaign websites.

 

The internet fundamentally changed the dynamics of campaigning and of campaign finance disclosure. By 2006, candidates used the internet to raise money, convene virtual town meetings, collect signatures, reach organizers, and customize email messages to supporters. The campaigns of George W. Bush and John Kerry in 2004 raised $100 million on the internet, mostly in small donations. Howard Dean, former governor of Vermont, built much of his 2004 presidential campaign on the internet. Advocacy groups used the internet to convene online primaries and mobilize supporters and resources. Ordinary citizens used the internet to share facts, express their views about candidates, and provide contributions.

 

In 2006, Congress and regulators were still struggling to integrate into federal campaign laws changes in campaigning brought about by the internet. “The rise of the Internet...changes the fundamentals of political speech,” Trevor Potter and Kirk L. Jowers concluded in an early analysis of election law and the internet. By making it possible to reach large audiences with rich and customized information at little or no cost, the internet challenged the premise of election law that controlling and disclosing funding controlls corruption. “With no cost of communication, current law has nothing to measure...[and] the entire mechanism for disclosing political expenditures...is thrown into question.” The internet also created new ways to spread false or misleading information. Sham websites proliferated during the 2004 campaign, and both Republicans and Democrats routinely set up sites to post negative information about opponents.

 

In the 1990s and early 2000s, new requirements also employed the internet and computer technology to provide more timely campaign finance information. In the 1970s, committees made paper or microfilm filings to the FEC, which could be accessed by the public only at FEC headquarters. In the early years of the internet, the FEC allowed information to be downloaded for a fee. By 2006, most information was required to be filed electronically and was available on the FEC website within forty-eight hours free of charge.

 

More difficult questions concerned whether and how to regulate campaign activities on the internet. In March 2006, the FEC provided some answers by ruling unanimously that most political communication on the internet was not covered by campaign finance laws. Only paid political internet ads were covered by such laws. Exempting most political communication on the internet from regulation was “an important step in protecting grass roots and online politics,” commission chairman Michael E. Toner told the New York Times.

 

Contentious issues continued to surround campaign finance disclosure. A report by the Senate Committee on Government Affairs in 1996 described widespread and systematic evasion of disclosure requirements. The FEC’s restricted budget raised continuing questions about the commission’s capacity to monitor and enforce disclosure requirements. Finally, the growth of the internet raised new issues concerning the appropriate balancing of the public interest in disclosure against the public interest in protecting freedom of expression.

 

This case study is drawn from Full Disclosure, Fung, Graham and Weil, 2007.