Chapter 9 Lecture: Business in Politics The proposal of any new law or regulation of commerce which comes from [business should be] listened to with great precaution. It comes from [people] who have a general interest to deceive and even oppress the public. - Adam Smith, 1776 [W]e must guard against the acquisition of unwarranted influence by the militaryindustrial complex. Only an alert and knowledgeable citizenry can [ensure a proper] balance in and among national programs. - Dwight D. Eisenhower, 1961 1
Business in American Politics: Dominant From the Start Business has been an important, if not a dominant, influence on U.S. government from the start. Some say the Revolutionary War was fought to free colonial business interests from smothering British mercantile policies! The Founders who drafted the Constitution were an economic elite. 9-4 Business in American Politics: The Civil War (1860-1865) During the Civil War, some corrupt army purchasing agents accepted bribes to purchase shipments of bad meat. When the war ended, the power base of southern agriculture had been decimated, and a major counterweight to the power of northern industry was lost. 9-5 2
President Ulysses S. Grant Grant s first term: 1869-1872: The Whiskey Ring scandals. Second term: 1873-1877: The Credit Mobilier scandal. 9-7 The Populist Movement: 1870-1896 Primarily composed of farmers, who complained that: 1. With falling crop prices, banks were foreclosing on their farms 2. Railroads had monopolies on their routes and were charging exorbitant rates to ship crops 3. The recently revealed corruption in Grant s administration proves that the games of business and politics are rigged. 9-8 The Seventeenth Amendment Passed in 1913, instituted the direct election of U.S. senators Previously, state legislators had chosen senators. Corporations fought the amendment, but their motives were not pure. 9-9 3
Business in American Politics: 1900-1923 The great political reforms of the progressive era (1900 1923) seemed to herald a change from business as usual. But modern scholarship has revealed that the corruption in federal politics continued apace. 9-10 President Warren G. Harding: 1920-1923 The Teapot Dome scandal 9-11 The Great Depression: 1929-1935 9-12 4
9-13 Franklin Delano Roosevelt and the New Deal 9-14 The 1960s and 1970s National politics became dominated by a liberal reform agenda New groups rose to defy corporations Business was saddled with massive new regulatory schemes 5
Two Broad Areas of Business Involvement in Politics ELECTORAL PROCESS LOBBYING Business Lobbying Activities Self-representation More than 700 corporations have staffs of government relations experts in Washington. Private lobbyists 75% of large firms hire private lobbyists Most lobbyists are lawyers Many are former U.S. officials Business Interest Groups Business Interest Groups Peak Associations Half a dozen Business Roundtable Trade Associations Have more influence than the peak associations because the interests of its members are more cohesive Number over 6,000! Often try to avoid publicity 6
Do Lobbyists Lie to Legislators? Probably not If they did, they would have trouble getting access to the legislator in the future Instead they try to be useful Provide technical information about bills Provide politically valuable information about how constituents and special interests stand on a particular issue Mostly argue why it is best for the country or the state Efforts to Limit Corporate Influence The Tillman Act of 1907 Implemented by progressive reformers angry about the role of corporate contributions in the presidential election of 1900 Prohibited banks and corporations from making direct campaign contributions to candidates The Federal Election Campaign Act (FECA) of 1971 Required public disclosure of campaign contributions and expenditures Data for the 1972 Presidential elections brought public attention to the issue Watergate investigations revealed illegal contributions 7
1974 FECA Amendments The limits on campaign expenditures were struck down as unconstitutional in Buckley v. Valeo (1976) The limits on contributions were upheld Why Individual Contribution Limits Don t Work in Theory $2,500 per candidate per election It takes $1.4 million to win a seat on the U.S. House of Representatives 560 people x $2,500 = $1,400,000 560 people is 0.2% of the constituents in the average Congressional district 8
Why Individual Contribution Limits Don t Work in Theory $2,500 per candidate per election It takes $9 million to win a seat in the U.S. Senate 3,600 people x $2,500 = $9,000,000 3,600 people is 0.06% of the constituents in the average state Why Individual Contribution Limits Don t Work in Practice PACs in the U.S. (2008) Type Number Corporate 1,698 Trade Association 925 Labor 273 Other 1,338 Total 4,234 9
How Corporate PACs Work To start a PAC, a corporation must set up an account for contributions. Corporate PACs get their funds primarily from contributions by employees. The money in a PAC is disbursed to candidates based on decisions made by PAC officers, who must be corporate employees. There are no dollar limits on the overall amounts that PACs may raise and spend. Corporate PAC A political committee carrying a company s name formed to make campaign contributions. 9-28 Soft Money There are various definitions of soft money, but the broadest one is money raised or spent for the purpose of winning elections that is exempt from the reporting requirements and contribution limits of FECA. Mostly this means money collected by 501(c) and 527 organizations and SuperPACS and spent directly on TV ads. How Business Dollars Enter Elections Political Action Committees Individual Contributions Hard money to candidates Hard money to PACs Soft money to 501(c) and 527 groups Corporate Soft Money Executive Bundlers of hard money Independent expenditures 10
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