The document discusses the history of business involvement in politics in the United States. It covers how businesses have worked to influence legislation and funding through various means such as lobbying and political donations. It also outlines the various attempts at campaign finance reform that have been enacted over time to regulate corporate money in politics, including the Tillman Act, FECA, and the Bipartisan Campaign Reform Act, with the overall goal being to limit corruption while respecting free speech rights.

1. Chapter 9
Business in
Politics
McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Paul Magliocchetti and Associates
o Paul Magliocchetti and Associates Group (PMA
Group) specialized in helping defense contractors get
project funding through insertions in defense
spending bills
o These insertions are called earmarks
o Legislators mostly do earmarks for programs that
create jobs in their districts and states
o Magliocchetti was a pioneer in the art of earmarking
9-2

3. Paul Magliocchetti and Associates
o One day FBI agents surprised him at his home
seeking records of his campaign giving
o Using other people as conduits to exceed contribution
limits is a crime
o In 2010 he was charged with 11 criminal counts of
illegal campaign contributions and false reporting
9-3

4. The Structure of American Government
o Several basic features of the Constitution shape the
political system:
o Sets up a federal system, or a government in which
powers are divided between a national government and
50 state governments
o Establishes a system of separation of powers
o Provides for judicial review
o The First Amendment protects the right of a business
to organize and press its agenda on government
9-4

5. The Structure of American Government
o Federal system: A government in which powers are
divided between a central government and
subdivision governments
o Supremacy clause: A clause in the Constitution,
Article VI, Section 2, setting forth the principle that
when the federal government passes a law within its
powers, the states are bound by that law
9-5

6. The Structure of American Government
o Separation of powers: The constitutional
arrangement that separates the legislative, executive,
and judicial functions of the national government into
three branches, giving each considerable
independence and the power to check and balance the
others
9-6

7. The Structure of American Government
o Judicial review: The power of judges to review
legislative and executive actions and strike down laws
that are unconstitutional or acts of officials that
exceed their authority
9-7

8. A History of Political Dominance by
Business
o The Revolutionary War of 1775-1783 that created the
nation was fought to free colonial business interests
from smothering British mercantile policies
o The noted historian Charles Beard argued that the
Constitution was an “economic document” drawn up
and ratified by propertied interests, for their own
benefit
9-8

9. A History of Political Dominance by
Business
o The record since adoption of the Constitution in 1789
is one of virtually unbroken business ascendancy
9-9

10. Laying the Groundwork
o The economy was 90 percent agricultural, so farmers
and planters were a major part of the political elite
o Under the leadership of Secretary of the Treasury
Alexander Hamilton the new government was soon
turned toward the promotion of industry
o As the young nation’s economy expanded, so did the
political power of business
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11. Ascendance, Corruption, and Reform
o In the period following the Civil War, big business
dominated state governments and the federal
government in a way never seen before or since
o Through ascendancy in the Republican Party,
corporations had a decisive influence over the
nomination and election of a string of pro-business
Republican presidents from Ulysses S. Grant in 1868
to William McKinley in 1900
9-11

12. Ascendance, Corruption, and Reform
o In Congress, senators were suborned by business
money and corruption was rampant
o Late in the century, farmers tried to reassert agrarian
values through the Populist party
9-12

13. Ascendance, Corruption, and Reform
o Business adversaries that emerged:
o The populist movement
o Organized labor
o The Anti-Saloon league
o After 1900, reforms of the progressive movement
curtailed overweening corporate power
9-13

14. Ascendance, Corruption, and Reform
o Big business also fought suffrage for women
o The great political reforms of the Progressive era
were reactions to corruption in a political system
dominated by business
9-14

15. Business Falls Back under the New Deal
o Conservative business executives argued that the
depression would correct itself without government
action
o After the election of Franklin D. Roosevelt in 1932,
corporations fought his efforts to regulate banking
and industry, strengthen labor unions, and enact
Social Security
o Corporate opposition to New Deal measures ran
counter to public sentiment
9-15

16. Business Falls Back under the New Deal
o Roosevelt was hurt by all the hate and felt that
through his major New Deal programs, he had saved
capitalism in spite of the capitalists
o One lasting legacy of the era was the philosophy that
government should be used to correct the flaws of
capitalism and control the economy
9-16

17. Postwar Politics and Winds of Change
o In the 1940s, industry’s patriotic World War II
production record and the subsequent postwar
prosperity quieted lingering public restiveness about
corporate political activity
o During the 1950s, corporations once again
predominated in a very hospitable political
environment
9-17

18. Postwar Politics and Winds of Change
o During the 1960s and 1970s, national politics became
dominated by a liberal reform agenda
9-18

19. The Rise of Antagonistic Groups
o During the late 1960s, the climate of pressure politics
changed with the rise of new groups focused on
consumer, environmental, taxpayer, civil rights, and
other issues
o The rise of groups hostile to business is part of a
broader trend in which new groups of all kinds have
been stimulated by growth of government
9-19

20. Figure 9.1 - Growth of the Federal Budget:
1940–2010
9-20

21. Diffusion of Power in Government
o A second change in the climate of politics, besides
new groups, has been the diffusion and
decentralization of power in Washington, D.C. caused
by:
o Reforms in Congress
o The decline of political parties
o Increased complexity in government
9-21

22. The Universe of Organized Business
Interests
o The most prominent groups are peak associations that
represent many different companies and industries
o Peak association: A group that represents the political
interests of many companies and industries
o The largest and most powerful peak association is the
U.S. Chamber of Commerce, which was founded in
1912
9-22

23. The Universe of Organized Business
Interests
o The National Association of Manufacturers (NAM),
founded in 1895, represents a membership of 10,000
companies and 350 trade associations
o The Business Roundtable is the organization that
speaks for big corporations
o It was founded in 1972 and consists of about 160
CEOs whose companies’ dues support it
9-23

24. The Universe of Organized Business
Interests
o More than 6,000 trade associations represent
companies grouped by industry
o Trade association: A group representing the interests
of an industry or industry segment
o Hundreds of corporations have staffs of government
relations experts in Washington
o Washington office: An office in Washington, D.C., set
up by a corporation and staffed with experts in
advocating the firm’s point of view to lawmakers and
regulators
9-24

25. The Universe of Organized Business
Interests
o Business interests form coalitions to create broader
support
o Coalition: A combination of business interests,
including corporations, trade associations, and peak
associations, united to pursue a political goal
9-25

26. Lobbying
o Lobbying: Advocating a position to government
o Lobbyists articulate diverse interests in the great
sweep of American pluralism
o A lobbyist who lacks integrity loses access to the very
people he or she earns a living trying to influence
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27. Lobbying Methods
o Contact lobbying: Direct interaction with
government officials or staff in meetings, phone calls,
or e-mail
o Background lobbying: Indirect lobbying activity
designed to build friendly relations with lawmakers,
officials, and staff
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28. Lobbying Methods
• Direct interaction with government officials or
Contact lobbying staff in meetings, phone calls, or e-mail
• Indirect lobbying activity designed to build
Background lobbying friendly relations with lawmakers, officials, and
staff
• The technique of generating an expression of
Grassroots lobbying public, or “grassroots,” support for the position
of a company, industry, or any interest
9-28

29. Figure 9.2 - Paths of Pressure
9-29

30. Regulation of Lobbyists
o At the federal level there are three imperfect checks
on lobbyists activities
o Lobbying Disclosure Act
o The House and the Senate have adopted rules to
prevent the appearance of impropriety
o Criminal act for public officials to ask for or receive
any gift or gratuity tied to an official act
o Bribery: An agreement to exchange something of value
for an official act
9-30

31. Efforts to Limit Corporate Influence
o An effort at reform came after the election of 1904,
when Republican Theodore Roosevelt, who
campaigned as a reformer, was embarrassed by his
opponent, Democrat Alton B. Parker, for taking large
cash contributions from corporations
9-31

32. Efforts to Limit Corporate Influence
o In 1907 progressive reformers pass the Tillman Act,
making it a crime for banks and corporations to
directly contribute to candidates in federal elections,
and this is still the law today
o Federal elections: Elections for president, vice
president, senator, and representative
9-32

33. Efforts to Limit Corporate Influence
o After 1907 the spirit of the Tillman Act was quickly
and continuously violated
o Since the Tillman Act did not limit individual
contributions, wealthy donors stepped in
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34. The Federal Election Campaign Act
o In the years following the Tillman Act, Congress
added to the body of election law although none of
these measures limited the influence of what
continued to be the main source of campaign funding
– corporations
o Democrats angry at Nixon passed the Federal
Election Campaign Act (FECA) in 1971 to stiffen
disclosure requirements on campaign contributions
and expenditures
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35. The Federal Election Campaign Act
o In reaction to Watergate, Congress extensively
amended the FECA in 1974
o The intent of the amendments was to limit corporate
influence; however, over the next 30 years it failed to
do so
9-35

36. Political Action Committees
o Political action committee: A political committee
carrying a company’s name formed to make
campaign contributions
o To start a PAC, a corporation must set up an account
for contributions
o Corporate PACs get their funds primarily from
contributions by employees
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37. Political Action Committees
o The money in a PAC is disbursed to candidates based
on decisions made by PAC officers, who must be
corporate employees
o There are no dollar limits on the overall amounts that
PACs may raise and spend
9-37

38. Figure 9.3 - Contributions to Candidates by Corporate
and Labor Political Action Committees in Two-Year
Election Cycles: 1986–2008
9-38

39. Soft Money and Issue Advertising
o Soft money: Money that is unregulated as to source
or amount under federal election law
o Hard money: Money raised and spent under the
strict contribution limits and rules in federal election
law
9-39

40. Soft Money and Issue Advertising
o Although corporations are barred from contributing to
federal campaigns, a series of advisory opinions by
the Federal Election Commission opened the door for
them to give unlimited soft money contributions to
national party committees
o In 1996 the Supreme Court held that soft money
could be used for issue advertising
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41. Figure 9.4 - Soft Money Receipts by Democratic and
Republication National Party Committees: 1992–2002
Election Cycles
9-41

42. Reform Legislation in 2002
o Senators John McCain (R-Arizona) and Russell
Feingold (D-Wisconsin) pushed through a bill that
was enacted as the Bipartisan Campaign Reform Act
of 2002 (BCRA)
o National parties are prohibited from raising or
spending soft money
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43. Reform Legislation in 2002
o Corporations can give unlimited amounts of soft
money to advocacy groups for electioneering activity,
with restrictions during blackout periods
o Contribution limits for individuals are raised
o The main purpose of the new law is to end the use of
corporate soft money for issue ads run just before
elections
9-43

44. Figure 9.5 - Current Contribution and
Expenditure Rules in Federal Elections
9-44

45. Figure 9.6 - The Fundamental Vision of
Election Law
9-45

46. How Business Dollars Enter Elections
o Political action committees
o Individual contributions
o Executive bundlers
o 501(c) groups
o 527 groups
o Independent expenditures
o State and local elections
9-46

47. Figure 9.7 - History of Efforts to Suppress
Corporate Money in Politics
9-47

48. Concluding Observations
o Corporations have a long history of participation in
the nation’s political life
o In each area the rights of corporations are protected
by the First Amendment
9-48

49. Concluding Observations
o Restraints on corporations cannot be absolute
o The challenge is to balance the First Amendment
right of corporations to free political expression
against the societal interest of maintaining corruption-
free elections
9-49