This classification includes membership organizations established to promote the interests of a national, state, or local political party or candidate. Also included are political groups organized to raise funds for a political party or individual candidates. Fund-raising organizations operating on a contract or fee basis are classified in SIC 7389: Business Services, Not Elsewhere Classified.
813940 (Political Organizations)
The most prominent type of political organization is the political action committee, or PAC, which gradually came to replace the smaller localized political parties so prevalent in the nineteenth and early twentieth centuries. PACs are organized to pool the financial resources of a group of individuals or institutions with a common interest in order to disperse those funds toward political activities or candidates deemed by the PACs' organizers as conducive to the ends sought. PACs are usually, but not always, organized by corporations or people within an industry, such as oil companies, dairy farmers, banking institutions, or labor organizations. PACs contribute funds to politicians in hopes of gaining their support for legislation to advance the PACs' interests; some of the larger PACs focus on gun control, equal rights, or abortion rights. Corporate PACs have long been the leading contributors to political campaigns. Election-campaign funding has become a hot political topic in recent years, as many questioned the political influence that PACs and other interests wield in the political process.
A 1974 law passed by Congress fueled a dramatic increase in the formation of PACs. In 1986 there were 608 PACs, but by the end of 2002 the number of PACs had grown to almost 4,600. PACs delivered $282 million in contributions to federal candidates for the 2002 elections, up from $259.8 million in 2000. The majority of these contributions (75 percent) went to candidates for the U.S. House of Representatives. Republican candidates enjoyed $145.3 million in contributions, while Democrats trailed with $136.5 million. PACs raised a total of $685.3 million during the 2001-02 election cycle, a 13 percent increase from 1999-2000.
In recent years ideological or issue-oriented PACs have become popular. In contrast to groups that contribute directly to candidates, these PACs donate funds to organizations aligned with their interests in an effort to sway public opinion. Such organizations typically produce radio and television commercials and direct mail campaigns on controversial issues, including the right to abortion, prayer in schools, and gun control. Unlike corporate and labor union PACs, which may use money from the treasuries of their members, ideological PACs foot their own administrative costs. Because these groups are not contributing directly to candidates, they are not bound by many of the usual limitations on PACs.
PACs fall into five general categories: those formed by unions; trade associations and industry groups; corporations; cooperatives; and ideological PACs, which pursue specific political causes. For the most part, PACs may only solicit their own members for contributions. PACs are heavily regulated by the Federal Election Commission (FEC) and must keep accurate and detailed records of receipts and expenditures. One of the most efficient ways of collecting donations for PACs is through automatic deductions from members' paychecks—the checkoff method. PACs may donate up to $35,000 to a particular candidate in an election season and $15,000 to a national party committee, as well as a maximum of $5,000 to another PAC.
Although some commentators applaud the fact that PACs involve citizens in the political process, others argue that PACs rarely offer opportunities for people to do more than donate money. Most PACs have small boards or committees deciding how the contributions will be spent or which candidates will receive contributions. This structure has caused some to argue that control of PAC contributions is relinquished to just a few people within the organization, which may present opportunities for abuse or misrepresentation. Another common complaint about PACs, especially in recent years, concerns the perception that they often have enjoyed too much influence in America's legislative bodies.
In an attempt to maximize their influence, most PACs channel their energy to the most powerful members of the congressional committees affecting their industry. For example, in 1986 PACs advancing the interests of banks and other financial institutions made contributions totaling more than $3.4 million to members of the House and Senate banking committees. In 1998, the total contribution to the elections of congressional members sympathetic to financial causes was $35.2 million. PACs are also much more likely to donate monies to incumbents, who are historically difficult to unseat. Until 1994, incumbents seeking reelection in the U.S. House of Representatives had a 98 percent victory rate; since then, election results have continued to tilt overwhelmingly in favor of incumbents.
The development of modern campaign financing laws can be traced back to 1896, when scandals began to affect presidential elections. In the 1896 presidential campaign, assessments against corporations imposed by Republican National Chairman Mark Hanna filled William McKinley's campaign coffers. This was followed by the disclosure that McKinley's successor, Theodore Roosevelt, had received a secret $50,000 contribution from a New York insurance company in 1904. This election ignited national headlines and prompted Roosevelt to call for campaign reform, urging public financing of congressional and presidential elections. Congress responded by passing the Tillman Act of 1907, which prohibited business groups from making contributions to candidates for federal office. Campaign reform was broadened with passage of the Federal Corrupt Practices Act of 1925, which placed limits on contributions and required disclosure of receipts and expenditures by federal candidates.
The modern PAC is somewhat of a newcomer to the U.S. political scene. In the 1930s, newly formed labor unions began to see the advantages of becoming involved in politics. In 1936 organized labor contributed $750,000 to Democratic candidates, with most of the funds coming from union dues. But in 1943, Congress passed the Smith-Connally Act, which barred unions from making direct contributions in federal elections from their treasury funds. However, these laws were difficult to enforce. Both labor unions and corporations began to establish separate accounts with which to make political contributions—such activity foreshadowed the rise of the modern PAC.
The first PAC was formed by organized labor in 1943 when the AFL and CIO merged, forming the Committee on Political Education. These labor organizations were able to operate these PACs because they used political funds rather than union dues. This laid the groundwork for other labor PACs, which began to proliferate shortly thereafter. By 1956, 17 labor PACs contributed $2.1 million to political candidates. In 1982, the number had risen to 288 labor PACs, which contributed $20 million to federal candidates. In 1995, there were 332 labor PACs contributing $26 million to federal campaigns.
In the 1960s, corporations began to organize their own PACs. The first major PAC to be organized was the American Medical Political Action Committee (AMPAC), formed in 1961 by the American Medical Association, followed by the Business Industry Political Action Committee (BIPAC), organized in 1963 by the National Association of Manufacturers. Prior to this, most political contributions were made by wealthy individuals. For example, in 1956, 199 executives from 225 corporations contributed more than $1.9 million to federal candidates.
In 1972, Congress enacted the Federal Election Campaign Act, which superseded previous federal campaign regulations and was the catalyst for the tremendous growth of PACs in subsequent decades. The Federal Election Campaign Act (FECA) included the following key features: it limited the total amount a federal candidate could spend on media advertising to $50,000; it required disclosure of all contributions in excess of $100; it required committees and candidates to file reports of contributions and expenditures; and it required television stations to sell candidates time at the lowest unit cost provided to commercial advertising customers.
The most important part of the law for the PACs was the Hansen Amendment, which enabled union and corporate treasury money to be used for overhead in operating PACs. It also provided business and labor organizations with the right to solicit voluntary funds from members, employees, and stockholders. This gave PACs the power to be involved in federal elections and had the effect of institutionalizing the role of PACs within the political process. The Hansen Amendment became the springboard for the proliferation of PACs because it enabled corporate coffers to finance PACs' often considerable administrative expenses. It was estimated that in the 1984 election, some PACs spent $75 million, roughly one-fourth of their expenditures, on administrative expenses. And as television advertisements became the primary medium for articulating their viewpoints, campaign costs rose meteorically.
Concern about large monetary gifts to candidates peaked in the aftermath of the 1972 presidential election, when it was revealed that 124 donors gave $17 million to help reelect Richard Nixon, and several individuals contributed a combined amount of $200,000 to George McGovern's campaign. This resulted in amendments to FECA in 1974 that established new contribution and spending limits. But in 1976, Senator James Buckley, together with Eugene McCarthy and philanthropist Stewart Mott, challenged the law, claiming that limits on campaign contributions were an infringement on the right to free speech. The U.S. Supreme Court agreed and struck down much of the law. Thereafter, groups and individuals could spend as much as they wanted to support or oppose a candidate. Later amendments to the law increased spending limits by candidates who accept public financing and required PACs and candidates to keep accurate records of receipts and expenditures.
A primary reason for the explosion of PACs was skyrocketing campaign costs. In 1974, all of the U.S. House and Senate candidates spent a combined total of $77 million on their campaigns. By 1982, that figure had jumped to $343 million—an increase of nearly 500 percent. And, according to the FEC, Congressional campaign spending climbed to $626.4 million during the 1996 elections.
In 1996, PACs gave $98.3 million to Congressional incumbents but only $12.5 million to challengers. For many years, Democrats enjoyed the majority of PAC contributions, but that trend reversed during the 1995-96 election cycle, when Republicans received $118.6 million compared with the Democrats' $98.85 million. Republicans continued to outpace their Democratic rivals in contributions receipts in 1997-98. This shift is primarily attributable to the enormous Republican gains in the congressional elections of 1994, which gave them a substantial majority in both houses. Because PAC contributions flow disproportionately to incumbents, Republicans were poised to enjoy healthy contributions through the 2000 elections.
Corporate PACs contributed a total of $78 million to candidates during the 1997-98 election cycle, of which 85 percent went to incumbents. Republicans received 68 percent of these donations, whereas Democrats received 32 percent.
Among industry groupings, contributions in 1997-98 were as follows: agribusiness contributed $15.6 million; communications and electronics gave $11.94 million; construction interests donated $8.3 million; PACs representing the defense industry gave $5.8 million; energy and natural resources concerns contributed $14.85 million; finance and real estate bestowed $35.2 million; health PACs supplied candidates with $18.3 million; lawyers and lobbyists allotted $7.7 million; transportation interests contributed $14.4 million; and other business interests gave $17.3 million. With the exception of lawyers and lobbyists, all groups' contributions tilted heavily in favor of Republicans.
Labor PACs maintained a strong presence during 1997-98, contributing a total of $44.6 million. The vast majority of these donations (91 percent) went to Democrats, whereas most of the rest went to Republicans, with only a fraction left over for other candidates. Trade and membership association PACs contributed $62.3 million, of which 81 percent was given to incumbents, 62.3 percent to Republicans, and 37.6 percent to Democrats. Cooperative PACs donated 91 percent of their $2.4 million in total contributions to incumbents. Republicans took in 51 percent of the total, and Democrats received 48 percent. Issue-oriented PACs fortified their growing influence in 1997-98, contributing a total of $28.15 million: 60.4 percent to Republicans and 39 percent to Democrats; 61 percent went to incumbents.
Political organizations have flourished on the World Wide Web, where a series of sites cropped up in the late 1990s devoted to mobilizing political support for issues and candidates. Furthermore, many sites, including Voter.com, Gay.com, Politicallyblack.com, and LatinoVota.com were designed specifically to raise political awareness and enhance voter turnout among specific demographic groups.
PACs increasingly dominate Congressional elections and provide security for incumbents. In 2002, PACs gave $213.4 million to Congressional incumbents but only $28.5 million to challengers. Another $40.2 million in contributions went to open seat elections. However, many legislators, including those who accept PAC contributions, regard PACs as a necessary evil because of the cost of campaigning. PACs, by their very nature, most often represent the interests of the wealthy and staunchly ideological.
Republications continued to enjoy the majority of PAC contributions in the late 1990s and early 2000s, maintaining the leadership position secured by the party in 1995-96. In 1999-2000, Republications received $133.6 million to the Democrats' $123.1 million. In 2001-02, Republicans received $145.3 million to the Democrats' $136.5 million. Of the nearly 4,600 PACs operating in 2001-02, those categorized as corporate PACs were greatest in both number (1,741) and receipts ($191.7 million). Nonconnected PACs were the second largest category, with 1,401 committees and $166.7 million in receipts. Trade/membership/health PACs were the next largest, with 956 committees and $145.8 million, followed by labor PACs (337, $167.8 million). PACs representing corporations without stock and cooperatives rounded out the remaining 159 committees, which accounted for combined receipts of $13.4 million.
With the explosive growth of PACs has come cries for campaign finance reform to prevent special interest money from controlling the electoral process. Critics have called for anti-PAC legislation aimed at curtailing campaign expenditures, worried that the influence of wealth would determine what candidates came to office and what policies they would support once elected. Moreover, critics contend, PAC sponsors enjoy disproportionate access to candidates, further marginalizing the general public from the political process. Opponents of such legislation have raised possible First Amendment concerns, asserting that contributing money to political campaigns amounts to free speech. Therefore, they claim, laws limiting such contributions would effectively infringe on contributors' constitutional rights.
So long as members of Congress benefit from the contributions of PACs, reform will be difficult to achieve. In recent years, many bills designed to curb the influence of political action committees have been introduced in Congress. In March of 2002, one was finally signed into law. Effective on November 6, 2002, the Bipartisan Campaign Reform Act of 2002 (BCRA) resulted in significant changes to federal campaign finance law. BCRA also is known as the McCain-Feingold Bill, because U.S. Senator John McCain (R-Arizona) and U.S. Senator Russell Feingold (D-Wisconsin) were instrumental in developing the legislation. According to a press release issued by his office, upon the bill's passage in the U.S. Senate, McCain touted: "With the stroke of the President's pen, we will eliminate hundreds of millions of dollars of unregulated soft money that has caused Americans to question the integrity of their elected representatives."
Although McCain's words were inspiring to some, who considered the law a victory, others—Democrats and Republicans alike—were critical of BCRA. These opponents filed lawsuits at the federal level, calling the law unconstitutional on First Amendment grounds. As consumer advocacy organization Public Citizen explained: "Within a month of passage of the new campaign finance law, 84 plaintiffs—ranging from Sen. Mitch McConnell (R-KY) to the AFL-CIO to the Republican party—filed 11 different lawsuits challenging every provision of the Act. The U.S. Department of Justice and the Federal Election Commission are the lead defendants in the suits, supported in their defense of BCRA by the principal congressional sponsors of the law, who intervened in the case. All the lawsuits were consolidated into one case, McConnell v. FEC." In May of 2003, the United States District Court for the District of Columbia issued a 1,648-page decision in McConnell v. FEC , and the case was appealed to the U.S. Supreme Court.
PACs continue to influence legislation and elections, and polls show that Americans view PAC lobbying as a significant problem in the current legislative process. Studies by the U.S. Public Interest Research Group show that time and again, those who receive PAC donations from a particular industry are more likely to vote in alliance with that industry. Although the issue of campaign finance reform was discussed during the 1992 Presidential and 1994 Congressional elections, only after the 1996 campaign was it seriously brought before Congress and the public by both President Clinton and Congressional leaders. By 2003, the issue was far from solved.
The largest PACs by the early 2000s included those representing the National Association of Realtors, with contributions of $3.65 million during the 2001-02 election cycle; the Association of Trial Lawyers of America, with $2.81 million; the National Automobile Dealers Association (NADA), with $2.58 million; the American Medical Association, with $2.44 million; the American Federation of State and County Municipal Employees, with $2.42 million; the United Auto Workers, with $2.34 million; Democrat Republican Independent Voter Education, with $2.33 million; Laborers' Political League-Laborers' International Union of NA, with $2.25 million; the International Brotherhood of Electrical Workers, with $2.21 million; and the Machinists Non-partisan Political League, with $2.2 million.
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