Super PACs: Just the Latest Version of an Old Political Money Game

history of political corruption and financial backingsOver the past few weeks, the final four Republican presidential hopefuls have been eclipsed in the political spotlight by an even more powerful group: their financial backers.

Other than a few big spenders such as George Soros and the Brothers Koch, major political donors have flown under the radar for the last few years. However, the tidal wave of money set off by the Supreme Court'sCitizens United decision has pulled the curtain back from the likes of Sheldon Adelson,Foster Friess, Peter Thiel, Bruce Kovner, and other deep-pocketed donors who may well be choosing our next president.

But while pundits and analysts have been focusing on the growth of super PACs -- and the massive power of the mega-rich men who fund them -- many have ignored the fact that our current big business-sponsored election probably isn't the most egregious example of election-buying in American history. In many ways, in fact, this heavy influence of money on politics is actually a return to normalcy.

Super PACs Are Just the Latest Corruption
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Super PACs: Just the Latest Version of an Old Political Money Game

Historically speaking, American elections have always been about money. In 1758, George Washington spent £39 to buy "A hogshead and a barrel of punch, thirty-five gallons of wine, forty-three gallons of strong cider alcohol" to help convince voters to support his bid for a seat in Virginia's House of Burgesses. A little over a hundred years later, things had gotten far worse, as Mark Twain noted when he proclaimed "I think I can say, and say with pride, that we have some legislatures that bring higher prices than any in the world."

But the most crooked presidential contest -- and the one that began the push for campaign finance reform -- happened in 1896. On one side, Democrat William Jennings Bryan was pushing for a move from a gold-based to a silver-based currency, a switch that could have been good for common voters, but which terrified bankers, financiers and other big money interests. On the other side, Republican William McKinley was close friends with Mark Hanna, a political fixer with a pocket full of big money connections.

Pictured: 1897 illustration shows President William McKinley, standing, leading a toast to a dejected William Jennings Bryan sitting in a chair labeled "Guest of Honor"; seated around the table are, among others, "Teddy" Roosevelt, Mark "Hanna," and Benjamin B. "Odell," Jr.

Faced with the possibility of a frighteningly populist economic policy, big business was eager to get in bed with McKinley, and Hanna was exactly the man to maximize the situation. Putting the squeeze on banks, Hanna told them to kick in a quarter of a percent of their total assets. As for other corporations, he suggested that they donate based on their "stake in the general prosperity of the country."

Hanna's scare tactics worked: All told, he raised between $3.4 and $7 million for McKinley -- the equivalent of up to $3 billion in today's money. But, even with the ability to outspend Bryan by a factor of twelve to one, McKinley won only 51% of the general vote. Still, it was enough to give him the presidency -- and ensure that the gold standard stayed intact.

A few years later, President Theodore Roosevelt was criticized for his fundraising practices. In response, he pushed Congress to outlaw corporate contributions to political campaigns. The Tillman Act, which passed in 1907, did exactly that, but was riddled with loopholes. Over the next few decades, new restrictions on fundraising were met with ever-more-complex tools for circumventing the law. For example, in 1943, Congress made it illegal for unions to directly contribute to political campaigns. In response, the Congress of International Organizations (also known as the CIO, as in AFL-CIO) created the first political action committee, or PAC. Rather than give union funds directly to Franklin Delano Roosevelt's campaign, the CIO simply talked its members into doing so.

By the early 1970's, the various loopholes had, in some ways, turned campaign financing into a huge joke. Richard Nixon made it clear just how far things had progressed when he told an aide that "anybody who wants to be an ambassador must at least give $250,000." He went on to note that big checks were officially going to trump political allegiance: "The contributors have got to be, I mean, a big thing, and I'm not gonna do it for political friends and all that crap." To his credit, however, Nixon offered a money-back guarantee: When it became clear that the Senate wasn't going to confirm the ambassadorial nomination of one of his biggest contributors, Cornelius Vanderbilt Whitney, the president agreed to return his money.

It wasn't long before there was a backlash: in the early 1970's, Congress passed a series of laws that forced candidates to disclose the names of their donors, placed limits on contributions, and established the Federal Election Commission to oversee campaign finances. Even so, it wasn't long before political contributors found new ways to pour money into elections. In 2000, Sam (photo above) and Charles Wyly, a pair of Texas billionaires, tested out a new type of political group -- a "527" organization -- that was tax exempt, and could be used for "issue advocacy" -- pushing position on specific issues -- as long as they didn't endorse individual candidates. The pair backed candidate George W. Bush, and their 527 group, "Republicans for Clean Air," spent $2.5 million to attack Sen. John McCain's environmental record.

Within four years, 527s had become a major force in political campaigning, and the Wylys continued their involvement, contributing to "Swift Boat Veterans for Truth," a 527 that attacked Democratic candidate John Kerry's war record. In addition to bringing national attention to the excesses of 527s, they introduced a new verb -- "swiftboating" -- to describe the process of using false accusations to take down a candidate.

But the impact of the Wylys and the Swift Boaters were soon eclipsed by a Supreme Court decision that fundamentally changed the nature of political campaigns -- and arguably set the campaign finance reform clock back by a century. The 2010 Citizens United v. Federal Election Commission decision made it legal for corporations to donate an effectively unlimited amount of money to independent political action committees. These new groups -- called super PACs -- quickly became the most powerful tool in the political arsenal.

In the process, they have also created a strange double standard. Because there are still strict rules limiting direct political contributions to a candidate, super PACs have to be completely independent from official campaigns: They can't take orders from -- or, in any official way, communicate with -- the candidates that they are supporting. However, because there are no limits on super PAC contributions, these independent groups are often far better funded than the official campaigns they are supposed to be "supporting."

Many critics -- including Stephen Colbert -- have suggested that this theoretical separation will lead to underhanded collusion, as candidates seek to direct their super PACs. However, there is also a chance that the opposite will happen, as the superior economic power of super PACs gives them immense power to dictate a candidate's political agenda. As The New Yorker's Nancy Meyer recently pointed out, Mitt Romney's super PAC, "Restore Our Future" has spent $17 million on attack ads, while his official campaign spent $11 million. Noting the discrepancy between the two groups, she wrote that "The Super PAC is technically fighting a proxy battle on behalf of Romney, but in practice it has become the head warrior."

With that in mind, it's probably a good idea to take a good long look at the big money contributors who are funding super PACs. After all, while the policies proposals of Romney, Gingrich, Santorum, Paul and Obama are compelling, it may end up that people like Frank VanderSloot, Sheldon Adelson, Foster Friess, Peter Thiel and George Soros will be pulling the strings.


Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at, or follow him on Twitter at@bruce1971.

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