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The Longest Campaign — Part Two

Teapot Dome and other scandals beget big reforms … with, as usual, big loopholes

Henry Ford ushered in not only the age of mass production, but also the age of scandalous excess in political campaigns. World War I riveted his interest in politics, and, in 1918, he ran for the U.S. Senate from Michigan. He lost, surprisingly, to a Republican opponent who ran what was branded a “money barrel” campaign.

Ford’s opponent, Truman H. Newberry, a lawyer, was later convicted of spending about $180,000 on his campaign, nearly a hundred times the state limit. (As it turned out, nearly 90 percent of his campaign money came from his brother and other family members.) Newberry challenged his conviction on the ground that Congress could not regulate state primaries. As the case proceeded, Newberry and 16 of his campaign staffers and supporters were convicted of conspiring to violate the state spending limits, which had been made a federal crime in 1911. The Supreme Court narrowly overturned Newberry’s conviction, holding that Congress had overreached its powers regarding primaries.

But that was just the beginning of the scandals. In the early 1920s there was “Teapot Dome,” which grabbed headlines and gripped the nation’s attention for years. In 1921, President Warren G. Harding’s secretary of interior, Albert B. Fall, had persuaded the ill-informed president to agree to give the Interior Department control over large oil reserves under a rock formation resembling a teapot in Wyoming, and another in California, both previously administered by the Navy Department for use in the event of war. The oil reserves were subsequently leased to two well-connected oilmen, Harry F. Sinclair and Edward L. Doheny, raising suspicions that something might have been amiss. After Harding’s death of a heart attack in 1923, Senate investigations into the deals found that Fall had received more than $400,000 in loans and government bonds from the oilmen.

The investigations also uncovered the fact that Sinclair had made major contributions to the Republican Party, which, in winning the election of 1920 for Harding, had incurred $1.5 million of debt. Because Sinclair had not made the contributions in the election year itself, he had not been required to report them under federal law—a glaring loophole.

The scandals ushered in the Federal Corrupt Practices Act of 1925, which sounded tough but turned out to be as much loophole as law, with creative political operatives quickly devising ways to skirt its provisions. As the decades unfolded, reform after reform met a similar fate, until the most sweeping reform law of all was enacted in 1974 in response to a scandal that dwarfed even Teapot Dome – Watergate.

The 1925 law revised spending limits but applied them only to party committees; campaigns evaded the limits by establishing separate committees for candidates. It established personal contribution limits; donors evaded them by giving more money through family members, and corporations evaded them by providing funds to employees who would then give them to campaigns in their own names. The act also removed the disclosure loophole that Sinclair had exploited—but it didn’t specify enforcement powers or rules for publicizing the contributions.

Laxity continued into the New Deal years of President Franklin D. Roosevelt. As FDR instituted liberal policies and expanded the federal bureaucracy, Republicans and conservative Democrats feared that he was creating a permanent political money machine to fund the campaigns of their opponents. In 1938, House Speaker Alben W. Barkley of Kentucky was said to have financed his reelection by soliciting thousands of relief workers hired under the Works Progress Administration. Reports of Barkley’s excesses led to the enactment in 1939 of the Clean Politics Act, which is more commonly called the Hatch Act after its sponsor, Democratic Senator Carl Hatch of New Mexico. It broadened the prohibitions of the Pendleton Act by barring the solicitation of campaign money from all federal employees and specifically from workers on public works payrolls.

In 1940, the Hatch Act was amended by imposing an annual limit of $5,000 per individual given to a federal candidate or national party committee and a ceiling of $3 million a year on what any party committee operating in two or more states could receive or spend. Federal contractors also were barred from giving to the parties, but again the limits did not apply to money given to multiple-candidate committees or to state or local party committees, thus encouraging the growth of independent entities beyond the reach of the law.

In the New Deal era, organized labor also emerged as a major source of large contributions to the Democratic Party and its national candidates. With the entry of the United States into World War II and the huge growth of the defense work force, politically threatened Republicans and many Southern Democrats joined forces and passed the War Labor Disputes Act of 1943, commonly known as the Smith-Connally Act. Just as the Tillman Act barred corporate contributions, this law prohibited labor unions from making any contributions until six months after the war’s end; Roosevelt vetoed the bill but Congress overrode his veto. In 1946, Republicans gained control of Congress and soon reinstated the ban on donations from union-treasury money as part of the Labor Management Relations Act, better known as the Taft-Hartley Act. President Harry Truman vetoed it, but that veto was also overridden.

The way around the Taft-Hartley restrictions, as it turned out, was the creation of “political action committees.” Because the law barred unions from making contributions directly from their treasuries, which were funded by dues from their members, the unions formed committees to collect voluntary contributions from their members that would pay for all manner of political activity, including voter education, registration, and get-out-the-vote efforts. In 1943, the Congress of Industrial Organizations led the way with the establishment of the CIO-PAC, which raised more than $1.4 million in its first full year. When the CIO merged with the American Federation of Labor, the AFL-CIO Committee on Political Education (COPE) became a powerhouse in American politics. By 1956, there were 17 labor political action committees putting $2.1 million into federal elections, and by 1968 the number had doubled, with 37 such PACs spending about $7.1 million. It was not until the 1960s that business groups began to follow suit, with the American Medical Association forming AMPAC and the National Association of Manufacturers leading in the creation of BIPAC (Business-Industry Political Action Committee).

Throughout this time, lawmakers on Capitol Hill had intermittently been shining a public light on the corrosive influence of money in politics. As an institution of incumbents, however, Congress has at best been ambivalent about campaign-finance reform.

The notion of public financing of campaigns is a case in point. Tammany Hall leader William Cockran had advanced the idea in 1904 and soon after that President Theodore Roosevelt had taken it up, and it continued to draw occasional interest. In 1920, President Woodrow Wilson’s secretary of the treasury, William Gibbs McAdoo, offered public financing as way to clean up politics, remarking that “when men contribute great funds to nominate a man to be president they do not do it unselfishly.” Other prominent figures, including Republican Senator Henry Cabot Lodge of Massachusetts in 1949, Democratic Senator Richard Neuberger of Oregon in 1956, and President John F. Kennedy in 1961, all spoke out for the idea, with Kennedy expressing the hope that “we can work out some system by which the major burdens of presidential campaigns . . . would be sustained by the national government.”

Finally, in 1966, Democratic Senator Russell Long of Louisiana scored a breakthrough with a bill that included limited public financing of presidential elections, through an income-tax checkoff provision. Called the Presidential Campaign Fund Act, it allowed individual taxpayers to designate $1 on their tax returns to help the major parties finance the next campaign. Congress passed the legislation and President Lyndon B. Johnson signed it into law. But the next year it was repealed by an opposing coalition from both parties.

The ambivalence continued. The explosion of spending on television advertising in the 1968 election (the subject, in part, of Joe McGinniss’s best-selling book, The Selling of the President) focused the attention of reformers on that aspect of politics, and in 1970 Congress passed legislation to limit total spending on broadcast ads and requiring that candidates be given the lowest rates offered to commercial advertisers. But President Richard M. Nixon—who had benefited hugely from TV advertising in 1968—vetoed the bill, and its backers in Congress couldn’t muster enough votes to override the veto.

At last, in 1972, Congress passed a new Federal Election Campaign Act, which set limits on the amount of money any candidate could contribute to his or her own campaign and on how much could be spent on advertising. It also established stricter public-disclosure standards for federal candidates and political committees. Presidential and vice-presidential candidates, and their family members, could spend no more than $50,000 of their own money, Senate candidates $35,000, and House candidates $25,000, but these provisions were later declared unconstitutional. Spending on media advertising was capped by a formula based on the size of the voting-age population, and no more than 60 percent of that on radio and television advertising. All contributions of $100 or more had to be reported.

Even with these changes, it seemed that if truly significant campaign-finance reform was to be accomplished, it would take some major political event to jolt Congress out of its indecisiveness.