Corporate Money Stalks Capitol Hill

Senator Edward Kennedy (D-Mass.) recently told Time, "They are multiplying like rabbits and they are doing their best to buy every Senator, every Representative and every issue in sight." He was talking about corporate political action committees (PACs) which, according to the Federal Election Commission (FEC), contributed over $8 million to the 1978 Congressional elections, far more than in 1976. As Fred Wertheimer, senior vice president of Common Cause has warned, "We're headed for a government of, by and for the corporate PACs of America."

The PAC is an important means by which corporate America has an impact on our political system. Literally billions of dollars are spent each year to "lobby" legislators in Washington and to influence public opinion across the nation. The political activities of this wealthy sector of the American community--big business--cannot help but have a distorting effect on our democratic process. As Senator Kennedy has explained:

Representative government on Capitol Hill is in the worst shape I have seen it in my sixteen years in the Senate. The heart of the problem is that the Senate and the House are awash in a sea of special interest campaign contributions and special interest lobbying.

In 1907, Congress outlawed corporate contributions to candidates for federal elective office. It is still illegal for a corporation to make political donations out of its internal funds. But the Federal Eleaction Act of 1971 permitted the use of corporate money for "the establishment, administration and solicitation of contributions to a separate, segregated fund to be utilized for a political purpose." Following clarifying amendments in 1974 and a favorable advisory opinion by the FED in 1975, corporations by the hundreds began forming PACs. Today, over 800 corporate PACs use company funds to solicit "voluntary" contributions from the ranks of management and stockholders. Still more PACs have been formed by business-related trade associations.

It is ironic that in passing the campaign "reform laws of the 1970s, Congress claimed to be cleaning up politics and removing special interest influence. In some ways, the result has been quite the opposite. With political parties becoming less effective fund raising agents for candidates, and with the $1000 limit on individual contributions, corporate PACs have become a major source of funding in Congressional campaigns. And the room for further growth is tremendous. Two thirds of the 500 largest industrial firms have yet to form a PAC. Business is quickly leaving the once dominant labor union PACs far behind in the campaign contribution game.

What are corporations trying to accomplish with their money? No doubt much of corporate PAC money goes to fund candidates who are pro-business. But the trend in corporate giving seems to be one of buying access to legislators. In 1978, corporate PACs gave more than twice as much money to Democratic incumbents as to Republican challengers. Alarmingly large amounts, according to Congressman Abner Mikva (D-Ill.), go to powerful committee chairmen who are in safe districts and don't really need the money. Senator Russell Long (D-La.) has been quoted as saying that "The distinction between a large campaign contribution and a bribe is almost a hairline's difference."

Common Cause, in a recent publication, "How Money Talks in Congress," has analyzed FEC records. Some of its findings would surely cause our Founding Fathers to turn over in their graves. For example, from January 1975 through July 1978, the nineteen members of the House Banking Subcommittee on Financial Institutions received campaign contributions totaling $343,389 from PACs and individuals associated with financial institutions. No one got less than $1,000. Observes Fred Wertheimer, "PAC money is investment money, and you want to make a smart investment."

Lobbying our legislators and rule-making agencies is another effective means of molding public policy. It has been estimated that special interest groups spend $1 billion annually hiring Washington lobbyists, whose job is to influence the Congress and federal agencies. The exact dollar amoung is unclear because the present lobbying disclosure law is, as Common Cause puts it, "more loophole than law."

Business interests account for a huge share of this activity and their tools are among the most sophisticated. The Chamber of Commerce, the National Association of Manufacturers and the Business Roundtable (made up of the chief executive officers of nearly 200 Fortune 500 corporations) are among the most influential of the business lobbies. In addition, more than 500 corporations maintain lobbying staffs in Washington. These corporations can deduct, as business expenses on their tax returns, the costs of direct lobbying legislators. In addition, trade associations can finance their lobbying activities through the tax deductible dues of member businesses. Individual citizens, on the other hand, enjoy no such tax privileges when petitioning their elected representatives.

Business groups are also becoming increasingly more effective in indirect lobbying at the grassroots level. The Chamber of Commerce maintains a network of 1200 local Congressional Action Committees which can generate enormous letter-writing and telegram-sending campaigns. It was just such a business-inspired campaigns that helped defeat the Agency for Consumer Protection in the 95th Congress and led Speaker Tip O'Neill (D-Mass.) to declare that he had "never seen such extensive lobbying" in his political career.

In 1978, the House Government Operations Subcommittee on Commerce, Consumer and Monetary Affaris held hearings on the subject of grassroots lobbying. Congressman Benjamin Rosenthal (D-N.Y.), chairman of the subcommittee, estimated that "substantially more than $1 billion is spent each year by all interest groups on grassroots lobbying." A very high percentage of this is spent by corporations and trade associations. It takes the form of print and electronic media advertisements as well as communications with employees and shareholders. Questions of public policy are discussed, a position is advocated and often letters to Congressmen are urged.

The expenses for such grassroots lobbying are not deductible under the Internal Revenue Service (IRS) tax code. Yet Rosenthal found "widespread misunderstanding of and noncompliance with the grassroots lobbying provision of our tax laws" as well as evidence of lax IRS enforcement. For example, one major insurance company ran an advertisement arguing for limited product liability laws, urging people to "Write a letter to your legislators. Be heard." Such action seems to be grassroots lobbying according to the IRS tax code which prohibits the deduction of expenses "in connection with any attempt to influence the general public...with respect to legislative matters..." In a letter to the subcommittee, however, the company denied conducting grassroots lobbying; it presumably deducted the costs of the advertisement. The American taxpayer thus footed some of the costs of this company's political advocacy.

Such corporate actions only exacerbate the current tremendous imbalance between the political resources of business interests and those of consumer and citizen activists. According to Harvey Shulman, former executive director of Media Access Project, a public interest law firm in Washington:

...great sums of money flow from the industry spigot to persuade the public or legislators to adopt an industry solution to a problem, while in contrast, few dollars ever trickle from the consumers' faucet.

...that issue must somehow be resolved if we are to survive as a democracy which depends on competition in the marketplace of ideas.

The major consumer, environmental and citizens groups in Washington, says Consumers Union, spend approximately $3 million annually on all forms of lobbying, "roughly three-tenths of 1 per cent of what business is spending on grassroots lobbying alone."

Perhaps nowhere is the impact of corporate political power greater than on state-wide initiative campaigns. In 1976, the Massachusetts "bottle bill" initiative was defeated, 51 to 49 per cent. Proponents spent $59,000. Opponents spent over $1.5 million, 99 per cent of which was raised form corporate sources rather than from individuals.

An analysis of 1976 initiative campaigns in eleven states concerning both mandatory deposits on beverage containers and nuclear energy led Dr. John Shockly of Western Illinois University to conclude that "In 1976 a record-breaking amount of corporate spending occurred to defeat various measures, and in general their campaigns againt these propositions were successful."

In April 1978 the Supreme Court paved the way for further advances in corporate political power. The Court, in the case of First National Bank of Boston v. Bellotti, declared unconstitutional a Massachusetts state law prohibiting corporations from spending money to influence state-wide initiataive campaigns when the issue at stake does not materially affect them. (Note that even this powerful law could not and did not prevent soft drink manufacturers from spending money to defeat the bottle bill initiative.) Justice Powell, in writing the majority opinion, stated: "[Free speech] is indispensable to decisionmaking in a democracy, and this is not less true because speech comes from a corporation rather than an individual." The Court argued, rather naively it seems, that "There was no showing that the relative voice of corporations has been overwhelming or even significant in influencing referenda in Massachusetts."

Justice White, in dissenting from the majority opinion, put his finger on the crucial point--that corporations are artificial entities chartered by the state for the purpose of economic profit-making and not for the purpose of furthering political goals. The sate is interested in promoting economic development and thus bestows upon corporations special privileges such as the ability to pool capital, limited liability, and perpetual life. "The special status of corporations," argues Justice White, "has placed them in a position to control vast amounts of economic power which may, if not regulated, dominate not only the economy but also the very heart of our democracy, the electoral process."

Congressman Robert Drinan (D-Mass.) has said he feels uneasy about the Bellotti decision. He expressed his doubts at a Congressional hearing in May 1978:

I think the American people have the right and the duty to say that the corporations have fantastic power that nobody in this country has and that they now dominate the political thought in ways which I do not think the Founding Fathers would want. When they come and say "We have the same rights as natural persons, the first amendment applies to us," and that "we can spend all of this money," then I, as a small citizen, am afraid, I am frightened.

The extent of corporate political power is a serious problem and it must be acknowledged if we are to deal with it effectively. There are, however, no easy solutions. Business does have the right to get its views across. Some first steps that have suggested are federal chartering of corporations, public financing of Congressional elections and strict lobbying disclosure laws. It seems clear that something must be done. We must not allow corporations, by virtue of their special financial status, to dominate access to the media, to the electoral process and to our politicians. We must not allow the voices of ordinary citizens to be drowned out in the name of free speech.

Alan Soudakoff is a junior majoring in economics. Last summer he worked as an intern for Congressman Benjamin Rosenthal [D-N.Y.], researching business influence in politics.