Financial History Issue 121 (Spring 2017) | Page 19

In the early 1970s, Congress overhauled
the laws governing campaign finance con-
tributions. The federal government had
regulated campaign giving to various
degrees since the Tillman Act of 1907,
which barred corporations and unions
from donating to political campaigns on
the rather explicit grounds that they were
not humans. Yet both businesses and
unions had found end-runs around the
law, the latter by creating political action
committees (PACs) as early as the 1940s.
Early PACs existed on the margins of
legality, and while organized labor relied
on political clout to avoid trouble, cor-
porations generally did not form them.
Instead, with minor exceptions, business-
people preferred other, less official ways
to skirt the campaign finance laws. Execu-
tives, for example, routinely arranged for
special bonuses to top managers, with
the clear expectation that those managers
would donate their windfall to the candi-
date of the corporation’s choice.
In the 1970s, a coalition of lawmakers
worked to reform the campaign finance
system following the Watergate scandal.
Congress created the Federal Election
Commission (FEC) and a system for public
campaign financing, instituted reporting
requirements and limited expenditures.
In 1975, the FEC clarified that political
action committees were legally legitimate,
and an explosion in corporate-backed polit-
ical action committees followed. Between
1974 and 1979, the number of business
PACs increased ten-fold, from 89 to 950. By
2016, the FEC counted 1,621 political action
committe