Campaign Financing and Resources

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CAMPAIGN FINANCING AND RESOURCES. Candidates were spending money in elections as early as the seventeenth century, long before anything resembling the modern campaign first made its appearance. There always has been money in elections, but it has not played the same role in every era.

The Colonial Period: Deferential Politics

Government and politics in colonial America were dominated by merchant and landed elites, so candidates for elective office usually were wealthy men who paid their own campaign expenses. The purpose of those expenses was less to attract the attention of voters than a form of noblesse oblige that reinforced the deferential relation-ship between voters and candidates. Treating—buying food and alcohol—was common, especially in the southern colonies. Northern merchants standing for election might make it a point to give more than the usual business to local artisans by ordering new barrels, or furniture, or repairs to their buildings and ships.

Candidates had other political resources as well. Although there were no formal methods for nominating candidates, aspiring politicians usually made sure that they had the support of influential members of their class. This kind of support attained some of the same ends that would later be achieved with large sums of money: discouraging rivals from entering a race and enlisting the support of those who are indebted to, or do not want to offend, a candidate's powerful backers.

The Early Nineteenth Century: The Spoils System and Business Contributions

This deferential style of politics gradually gave way to mass democracy and the spoils system. At a time when politicians were less likely than before to be wealthy, the spoils system became a form of government subsidy for emerging political parties. Although this system began under Andrew Jackson, executive patronage had long been a valuable political resource. George Washington, for example, while appointing to federal office men from the same elites that had dominated colonial politics, also made sure that these appointees shared his political views. To do otherwise, he wrote, "would be a sort of political suicide." Thomas Jefferson and his successors followed Washington's example, and also began the practice of dismissing office holders to make room for appointees who were more reliable politically.

Jackson, however, was not satisfied with using government office as a reward for campaign work. He expected his appointees to continue their campaign activity while in office. By using the patronage power to staff and finance the fledgling Democratic Party, Jackson nationalized the spoils system that already had appeared in the state politics of Pennsylvania and New York. Jackson introduced another innovation: raising campaign funds by assessing appointees a percentage of their salaries. Political assessments were first made public in 1839 during an investigation by the House of Representatives of the U.S. customshouse in New York. Another House investigation in 1860 revealed that the practice had become well entrenched.

Business interests also began contributing in these years, although this source of funds is very poorly documented. Martin Van Buren attributed Democratic losses in the 1838 congressional elections in New York State to the "enormous sum of money" raised by "Whig merchants, manufacturers and … banks." In 1861, New York Republican boss Thurlow Weed confirmed that he had raised money for Abraham Lincoln's 1860 presidential campaign by engineering the passage of railroad bills in return for "legislative grants" from railroad companies.

The Late Nineteenth Century: Assessments, Reformers, and Corporate Contributions

Business corporations became a far more important source of campaign funds in the decades after the Civil War. But that did not happen until after assessments had become perhaps the largest source of campaign funds. The Republican Party's unbroken control of the White House in the twenty years after the end of the Civil War gave it almost exclusive access to civil service assessments. According to an 1880 Senate report, Republicans had levied a 2 percent assessment on federal civil servants in 1876, and had raised 88 percent of their 1878 campaign funds from 1 percent assessments on those same employees. Democrats may not have controlled federal government patronage, but they levied assessments on state government employees wherever they could.

These assessments became the target of a growing reform movement. Although campaign finance was only one concern of civil service reform, fear of losing assessment money was a powerful reason for members of Congress to resist the movement. Two factors permitted reformers to break down that resistance. One was the assassination of President James A. Garfield in 1881 by a man described as a disappointed office seeker, which energized the reform movement. The other was the large business corporations that grew up after the Civil War, which had begun to provide an alternative source of campaign funds.

The Early Twentieth Century: The Response to Corporate Funding

Business has been the largest source of campaign funds since the last years of the nineteenth century. This development was initially associated in the popular mind with one man: Marcus A. Hanna, the wealthy industrialist who managed William McKinley's 1896 presidential campaign. During that campaign, Hanna sought to institutionalize business support for the Republican Party by levying a new kind of assessment: banks and businesses were asked to contribute sums equal to one-quarter of 1 percent of their capital.

Reaction against this new source of political money came almost at once. In 1897, four states prohibited corporations from contributing to election campaigns. In 1905, the revelation that Theodore Roosevelt's 1904 presidential campaign had been largely underwritten by big corporations caused a nationwide scandal, attracting critical editorials even from Republican newspapers. In 1907, Congress responded by passing the first federal campaign finance law, a ban on political contributions by corporations.

Business showed a preference for the GOP from the start, but this preference became much more marked during the New Deal years. Democrats received 45 percent of business money in 1932, but by 1940 were receiving only 21 percent. At the same time, organized labor began to make its first substantial contributions to Democrats.

The Late Twentieth Century: Public Financing, Soft Money, and PACs

This New Deal pattern was still in evidence when the Watergate scandal erupted out of the 1972 presidential election campaign. Watergate was only partly a campaign finance scandal, but those elements of it—individual contributions, illegal corporate and foreign money, and evasion of New disclosure laws—prompted Congress to pass the most comprehensive set of campaign finance regulations in history. Post-Watergate legislation introduced public financing for presidential elections. The presidential campaign fund was a new source of political funds and the only one to be created by legislation.

Public financing had a rocky history after the first bill for establishing it was unsuccessfully introduced in 1904. Congress passed a public funding law in 1966, financed by an income tax checkoff, but repealed it the next year. Congress reinstated the checkoff in the 1971 Federal Election Campaign Act, but postponed its implementation to meet criticisms from President Richard Nixon, congressional Republicans, and key southern Democrats. Watergate then renewed congressional and public support for public financing. Although most Republicans still opposed it, enough of them switched positions to ensure passage.

Under the law, candidates who accept public funding agree not to raise or spend private money. But Ronald Reagan's 1980 presidential campaign, realizing that private money could be raised and spent under more lenient state laws, introduced what has come to be called "soft money," that is, money raised outside the limits of federal law. What began as backdoor private financing for publicly funded presidential campaigns eventually became a means of evading federal law in congressional campaigns as well. During this same period, taxpayer participation in the income tax checkoff began to decline, suggesting weakening popular support for the program.

Soft money and political action committees (PACs) attracted a great deal of attention in the decades after Watergate. Neither, however, introduced new sources of campaign finance. Rather, they were artifacts of federal law, legal innovations devised to get around restrictions on sources and amounts of campaign contributions. PACs were created by labor unions in the 1940s to evade Republican and southern Democratic attempts to prevent them from making political contributions. The explosive growth of business PACs in the late 1970s and early 1980s was a reaction to post-Watergate restrictions on the individual contributions that had long been the preferred vehicle for getting business money into campaigns. PACs made business and labor contributions far more visible. This increased visibility revealed what looked like a return to New Deal patterns of partisan support. As late as 1972, incumbent House Democrats, despite having been the majority party since 1955, still were receiving three times as much money from labor as from business PACs ($1.5 million from labor, $500,000 from business). But by 2000, when Democrats had been in the minority for five years, their House incumbents were getting half again as much money from business as from labor PACs ($41.7 million from business, $26.9 million from labor).

Partisan funding patterns may shift over time, but the sources of party and candidate funds has changed little. Even with the increase of small individual donations and the big jump in labor union giving in the 1990s, the great majority of campaign money, soft and hard, still came from corporations and wealthy individuals.


Heard, Alexander. The Costs of Democracy. Chapel Hill: University of North Carolina, 1960.

Mutch, Robert E. Campaigns, Congress, and Courts: The Making of Federal Campaign Finance Law. New York: Praeger, 1988.

Overacker, Louise. Money in Elections. New York: Macmillan, 1932.

Pollock, James K. Party Campaign Funds. New York: Knopf, 1926.

Sikes, Earl R. State and Federal Corrupt-Practices Legislation. Durham, N.C.: Duke University Press, 1928.

Robert E.Mutch

See alsoPatronage, Political ; Political Action Committees ; Soft Money ; Spoils System .

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Campaign Financing and Resources

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