The Effect: The Growth of the Special Interests
North, James
The Effect: The Growth of the Special Interests by James North We used to call them fat cats, and in our stereotyped image there were hardly any more venal figures in politics. They were...
...And for labor there is the final, harsh irony that this is not at all what it expected when its lobbyists began working on campaign laws in the early 1970s...
...And the amount of money contributed will soon reflect that new growth in the number of business PACs...
...Epstein documents what he calls “the PAC phenomenon,” showing where they came from, how they became so popular, and where they could lead us...
...It is a bitter pill for labor to swallow, for the number of labor PACs is not going to increase dramatically-if that were going to happen, it would have happened a long time ago...
...The proliferation of PACs, he points out, has been rather astonishingduring the first four-and-a-half months of 1978, for example, they increased at a rate of six per week...
...Even more troublesome is the way u n i o n s and t h e i r c o r p o r a t e counterparts are flexing their new special interest muscle...
...The reform legislation...
...But others have stronger words...
...A Potent Tool for Labor Although the idea of political action committees had been around for years, business never had much use for them...
...Concludes Epstein: “In furthering its own short-range objectives during the 1970s, labor sowed the seeds which have born the very fruit it sought to prevent-enhanced business clout and effectiveness in the electoral processthrough the use of labor’s favorite mechanism-the political action committee...
...Twice a year, however, both union and corporate PACs are permitted to “cross over” and solicit by mail campaign contributions from employees or stockholders that are otherwise off limits...
...Or so it seemed...
...by March of this year their number had swelled to 595...
...The politics of the 1970s changed all that, of course...
...Corporate managers are whores,” Rep...
...the right to run non-partisan registration drives and get-out-the-vote efforts...
...This article is based on a study by Edwin M. Epstein, a lawyer andpoliticalscientist, who is a professor of Business Administration at the University of California at Berkeley...
...In 1956 labor PACs contributed about $2 million to their favorite candidates, and by 1972 that figure had risen to $7 million...
...In predictable fashion, PAC money has perpetuated a system that already had made it nearly impossible to beat congressional incumbents...
...The 1976 law contained a provision restricting corporate PACs to the solicitation of contributions from their stockholder and management personnelwhile union members continued to be restricted to soliciting union members and their families...
...Far from it...
...By 1976, however, over 300 corporate PACs had been formed...
...and four months later, by July, there were 71 1. Yet, Epstein says, “the astounding thing is not how many company committees exist today but rather howfew there are given the total population of potential corporate PACs...
...During presidential elections the number rises to about 300...
...It is money subcommittee chairmen in particular have come to expect and treasure...
...That’s when the Federal Election Commission made perhaps its most important ruling, one that “provided the liberating imprimatur for the development of political action committees, dramatizing as it did to many companies the exciting political possibilities of PACs,” says Epstein...
...They also raisedagood deal of money...
...As a result, the rules of campaign financing have undergone a complete t r a n s f o r m a t i o n . For presidential elections, this has meant public financing for the first time, and for House and Senate elections, it has meant substantial restrictions on the amount of money individuals can contribute to campaigns...
...The business PACs are a different story entirely...
...Sun Oil Company had asked the FEC to rule on its plan to use general corporate funds to set up and administer its PAC...
...They’re just out to buy you,” adds Dornan...
...They were the wealthy industrialists of the W. Clement Stone mold, right-wing Rzpublicans (tending toward Neanderthal) who could buy their way into the political sysrem by wielding pen and checkbook around election time...
...But PACs got a much betterdealout ofthat lawthanthe general public, and again the reason was primarily the efforts of the labor lobbyists...
...Finally, the law contained a provision that, while allowing an unlimited number of PACs to be established by a company or union, forced all of them to be treated as one PAC where campaign contributions were concerned...
...Dornan, of course, doesn’t have much to worry about...
...You don’t have to agree with Dornan’s politics to see the merit of his complaint...
...But they still kept their much more important right, to solicit people in management-the people who were most Iikely to contribute...
...An increase in PACs has not brought with it an i n c r e a s i n g d i v e r s i f i c a t i o n of contributions...
...Working in conjunction with the local Democratic Party machinery, their functions were much more extensive than simply raising money from union members...
...While the contributions to PACs had to be strictly segregated from union dues and fees, the committees did not have to be independent of union control...
...The Hansen Amendment established the framework for the corporate and union PAC activity that exists today...
...Because the unions were worried that the Court might o u t l a w PACs altogether, labor lobbyists scrambled up to Capitol Hill and got Rep...
...What does it all mean...
...Incumbents play to the needs of these interest groups by the writing of laws and the seeking of special interest amendments...
...In 1974, in the aftermath of Watergate Congress went back to work on election reform, this time intending specifically to reduce the influence of large contribJtors...
...The company could solicit over 150,000 individuals, the union only afraction of that amount...
...for labor, the ratio was three to one...
...The case he makes for the new power of PACs is a convincing one...
...Congress passed a new election law in I97 1 -and amended it in 1974 and 1976, after the post-Watergate morality had firmly taken hold...
...PACs, especially corporate PACs, are the new fat cats...
...As an incumbent-and as a right-wing incumbent-he is in a position to greatly benefit from the proliferation of PACs...
...Within the next six months corporations and business lobbies established 150 new PACs, more than doubling the previous number...
...Around and around it goes, incumbents and PACs, PACs and incumbents...
...Then in 1968, the Justice Department indicted the officers of a local pipefitters union for violating the election laws...
...At fundraisers, even the most liberal Democratic chairman can be assured of dozens of checks from business PACs...
...The story of the new campaign financing is told in astudyentitled “The Rise of Political Action Committees,” written last year by Edwin M. Epstein, a political scientist and former Woodrow Wilson Fellow...
...Whereas business once had no interest in PACs, there were at last count over 700 business PACs...
...With considerable understatement, Epstein says: “It has struck many observers of campaign financing that among the greatest ironies of election reform legislation of the 1970s is the fact that it has greatly expanded the operating freedom of both labor and business in the electoral process...
...Common Cause says that in the 1976 elections business-related PACs favored congressional incumbents by a four-to-one margin...
...At the time, union lobbyists shrugged off the potential problem: “Few union people thought that companies would take much advantage of this right[toestablish PACs1,”writes Epstein, simply because they had never done so before...
...The Commission’s dissenters complained that this destroyed the balance between the unions and the corporationsin the case of Sun Oil, for example, there were 126,555 shareholders and 27,707 employees, of whom only a small percentage were unionized...
...Indeed, the growing trend is toward the establishment of PACs by single-issue lobbies on the right-the gun lobby, the anti-abortion activists, the right-toworkerswho have discovered that they too, can gain an increasingly receptive hearing on Capitol Hill by establishing PACs and making the large contributions forbidden to individuals...
...Since the OS, unions have made sophisticated use of PACs, and in all that time there have never been more than about 300 labor PACs...
...If by this time you are muttering angrily hat this is not what election reform F; as supposed to mean, you are not alone...
...The officers, accused of coercing what were supposed to be voluntary contributions from union members by collecting donations at job sites in amounts based on a pre-arranged formula, were convicted...
...As businesses see the clout unions have gained with sophisticated registration drives and get-out-the-vote campaigns, they will attempt to copy those techniques...
...But the single-issue lobbies still lag far behind both business and labor in the use of PACs, and what we’re left with from them, after the “reform” dust has had time to settle, is another kind of vicious money cycle...
...The right has been especially incensed by industry’s tendency to give money to incumbent Democrats...
...In the old, pre-Watergate days partisan political committees had been a potent tool for labor...
...Yet it has been their political opponents, the business lobbies and corporations, which have been the real beneficiaries...
...All told, PACs of all kinds had raised $54 million for the 1978 election by July-and had spent almost $1 1 million in contributions to House and Senate candidates...
...The first is that when they were first passed, the election laws were hailed as signaling the end to the era of special interest influence in the electoral process...
...the rest of the time, there are usually around 250...
...The Effect: The Growth of the Special Interests by James North We used to call them fat cats, and in our stereotyped image there were hardly any more venal figures in politics...
...In 1971 the Supreme Court agreed to hear the case...
...It was organized labor lobbyists who drafted the amendments concerning PACs and lobbied for their passage...
...A Bitter Pill to Swallow But by then, it was too late to do anything about the proliferation of corporate PACs...
...In the short run, it gave the unions what they wanted: the right to provide members with information about political candidatesand issues...
...There is a two-fold irony in this...
...and the right to solicit voluntary contributions to PACs from their members...
...But outlawing fat cats has not meant that congressional candidates are going broke...
...In the industrialized Northeast especially, labor committees were efficient, organized vehicles for registering voters and get-out-the-vote drives, which could, and often did, make or break candidates...
...But in order to draw the moderate Republican support needed to pass such a measure, the Hansen Amendment also gave the same right to corporations to establish stockholder PACs...
...And with the decline of the parties as fundraisers, PACs will become ever more important to congressional candidates...
...As Epstein makes clear, the growth of PACs has madea mockeryof those claims...
...They don’t care who’s in office, what party or what they stand for...
...But Sun Oil also wanted to be able to solicit its employees as well as its stockholders and to set up a payroll deduction plan so that they could contribute either to the Sun PAC or to their own candidates directly...
...It is one in which two increasingly narrowminded interests-the AFL-CIO reflecting the views of a shrinking number of union members, corporations invariably parroting out-of-date Chamber of Commerce rhetoric-play to the needs of incumbents with hefty contributions...
...Labor also was allowed to use a check-off payroll deduction system for soliciting contributions if a company used that same method or agree4 to it in negotiations...
...And the most available source of money, and the largest contributions, come from PACs, which have fast overtaken the party as the prime dispenser of campaign funds...
...Because there are so many small “locals” affiliated with major unions, labor would have been better off without such a provision...
...of the leading 1,000 industrials, 802 do not have PACs...
...In a four to two decision, the FEC members said yes to all three requests...
...Epstein accurately calls this “risk averting...
...Thus all PACs set up by a single company or a union were limited to an aggregate $5,000 per candidate in an election...
...A candidate in the 1970s must do most of his own fundraising without much help from the local or national party machinery...
...It is not just the far right challengers who are left out of this system, but all challengers...
...The other irony is t h a t the proliferation of corporate PACs, in particular, was neither intended nor expected when the election laws were being written in the early 1970s...
...Quite the opposite: the vast majority of contributions are made to incumbents, usually incumbents sitting on committees handling legislation of interest to the donor...
...has helped to substitute one form of large contributor for another...
...All told, in 1976 incumbents received $13.2 million while the challengers got only $4.2 million...
...In 1978, however, he predicts that business will surpass labor by at least $4 million...
...But it wasn’t until a year and a half later that corporations realized the potential of the new laws...
...The liberalization of PACs, the expanded freedom to solicit contributions from members and make contributions to candidates was firmly seen as benefiting labor, not business...
...the people running the PACs could be union officers...
...A good part of their popularity stems from the decline of political parties as central campaign organizations and political fundraisers...
...In short,” Epstein writes, “the market f o r potential PAC formations is virtually untapped even if we consider only the very largest firms...
...Thus, corporate PACs lost their “Sun Oil right” to solicit general employees as often as they wanted...
...The PAC contribution limit per federal candidate was $5,009 (compared to a $1,000 limit for individual contributions), and there was no combined limit a t all (individuals had a $25,000 total contribution ceiling...
...Epstein points out that in the early 1970s, they never numbered more than 90...
...At its foundation lie the Political Action Committees, the so-called PACs, the political fundraising machines of unions and businesses...
...Of the top 500 industrials (all with sales over$350million), 334donot have PACs, says Epstein...
...The growth of PACs raises the specter of a truly vicious money cycle...
...But it, like the other PAC provisions in previous campaign reform bills, has had the effect of backfiring on labor...
...Orville Hansen to introduce an amendment to the election bill then being debated on the House floor...
...Recouping Labor’s Losses In 1976, when Congress once again took up a campaign finance bill, the labor lobbyists tried to recoup some of their losses in the Sun Oil ruling, and they did achieve some successes...
...As the number of business PACs increases, the unions will try to get their members to make larger contributions...
...Those same reforms have brought with them a new kind of campaign financing, a system that evolved tentatively as the new laws were being written, but has taken firm hold in time for the 1978 elections...
...In the 1976 elections, according to Epstein, the business and labor PACs nearly matched each other in money spent, although labor slightly outspent the business lobbies and individual companies...
...The provision was intended to put an end to the establishment of multiple PACs by corporations seeking to takeadvantage of the Sun Oil ruling...
...And both of them, realizing that keeping the other happy is in their own selfinterest, refuse to extend their loyalties to the public interest because there is no need, in this selfish scheme of things, to do so...
...today the words “fat cat” seem very old-fashioned...
...The labor lobbyists also won an amendment to allow government contractors to establish PACs (government contractors previously had been forbidden to make campaign con t ri bu t i o ns) - another strategic error, since there are far more corporations doing government work than there are unions...
...This payroll deduction idea was something unions had been forbidden from doing under the TaftHartley Act...
...Robert Dornan, a conservative freshman Republican, told Congressional Quarterly recently...
...Because it was introduced so late in the game, it was hardly debated, with no input from the business community, and its passage was entirely the result of labor’s lobbying effort...
...That is why, ironically, labor lobbyists have become ardent supporters of public financing legislation...
Vol. 10 • October 1978 • No. 7
