Political Organizations

SIC 8651

Companies in this industry

Industry report:

This classification includes membership organizations established to promote the interests of a national, state, or local political party or candidate. Also included are political groups organized to raise funds for a political party or individual candidates. Fund-raising organizations operating on a contract or fee basis are classified in SIC 7389: Business Services, Not Elsewhere Classified.

Industry Snapshot

The most prominent type of political organization is the political action committee, or PAC, which gradually came to replace the smaller localized political parties so prevalent in the nineteenth and early twentieth centuries. PACs are organized to pool the financial resources of a group of individuals or institutions with a common interest to disburse those funds to political activities or candidates deemed by the PACs' organizers as conducive to the ends sought. PACs are usually, but not always, organized by corporations or people within an industry, such as oil companies, dairy farmers, banking institutions, or labor organizations. PACs contribute funds to politicians in the hope of gaining their support for legislation to advance the PACs' interests. Corporate PACs have long been the leading contributors to political campaigns. Election campaign funding has become a hot political topic in recent years, as many questioned the political influence that PACs and other interests wield in the political process.

A 1974 law passed by Congress fueled a dramatic increase in the formation of PACs. In 1986, there were 608 PACs, but this number increased dramatically. According to the Federal Election Commission (FEC), the number of PACs in 2011 was more than 5,152.

During the 2000s, PACs began to extend their interest beyond individual candidates to include an ideological or issue-oriented focus. In contrast to groups that contribute directly to candidates, these PACs donate funds to organizations aligned with their interests in an effort to sway public opinion. Such organizations typically produce radio and television commercials and direct mail campaigns on controversial issues, including a woman's right to abortion, prayer in schools, and gun control. Unlike corporate and labor union PACs, which may use money from the treasuries of their members, ideological PACs foot their own administrative costs. Because these groups are not contributing directly to candidates, they are not bound by many of the usual limitations on PACs. These groups, which are known as 527s because of their tax code designation, can stir controversy by airing radio and television ads, which are not directly endorsed by a particular candidate, on hot-topic issues such as abortion and gun control. They are also well-known for their use of "attack ads." The 527s effectively add millions of dollars in "soft money" to the campaigns.

During the 2011-12 election cycle, PACs gave federal candidates $1.2 billion. For the whole of 2011, the FEC reported that total receipts from PACs was $601 million. About 28 percent came from corporate PACs, 27 percent from non-connected PACs, 22 percent from labor PACs, and the remainder came from other PACs such as trade, membership, cooperative, and corporations without stock.

Organization and Structure

PACs fall into five general categories: those formed by unions; trade associations and industry groups; corporations; cooperatives; and ideological PACs, which pursue specific political causes. For the most part, PACs may only solicit their own members for contributions. PACs are heavily regulated by the Federal Election Commission (FEC) and must keep accurate and detailed records of receipts and expenditures. One of the most efficient ways of collecting donations for PACs is through automatic deductions from members' paychecks, which is called the checkoff method. PACs may donate up to $5,000 to a particular candidate in an election season and $15,000 to a national party committee, as well as a maximum of $5,000 to another PAC.

Although some commentators applaud the fact that PACs involve citizens in the political process, others argue that PACs rarely offer opportunities for people to do more than donate money. Most PACs have small boards or committees deciding how the contributions will be spent or which candidates will receive contributions. This structure has caused some to argue that control of PAC contributions is relinquished to just a few people within the organization, which may present opportunities for abuse or misrepresentation. Another common complaint about PACs, especially in recent years, concerns the perception that they often have enjoyed too much influence in America's legislative bodies.

In an attempt to maximize their influence, most PACs channel their energy to the most powerful members of the congressional committees affecting their industry. For example, in 1986, PACs advancing the interests of banks and other financial institutions made contributions totaling more than $3.4 million to members of the House and Senate banking committees. In 1998, the total contribution to the elections of congressional members sympathetic to financial causes was $35.2 million. PACs are also much more likely to donate monies to incumbents, who are historically difficult to unseat. Until 1994, incumbents seeking reelection in the U.S. House of Representatives had a 98 percent victory rate. Since then, election results have continued to tilt overwhelmingly in favor of incumbents.

Background and Development

The development of modern campaign financing laws can be traced back to 1896, when scandals began to affect presidential elections. In the 1896 presidential campaign, assessments against corporations imposed by Republican National Chairman Mark Hanna filled William McKinley's campaign coffers. This was followed by the disclosure that McKinley's successor, Theodore Roosevelt, had received a secret $50,000 contribution from a New York insurance company in 1904. This election ignited national headlines and prompted Roosevelt to call for campaign reform, urging public financing of congressional and presidential elections. Congress responded by passing the Tillman Act of 1907, which prohibited business groups from making contributions to candidates for federal office. Campaign reform was broadened with passage of the Federal Corrupt Practices Act of 1925, which placed limits on contributions and required disclosure of receipts and expenditures by federal candidates.

The modern PAC is somewhat of a newcomer to the U.S. political scene. In the 1930s, newly formed labor unions began to see the advantages of becoming involved in politics. In 1936, organized labor contributed $750,000 to Democratic candidates, with most of the funds coming from union dues. However, in 1943, Congress passed the Smith-Connally Act, which barred unions from making direct contributions in federal elections from their treasury funds. However, these laws were difficult to enforce. Both labor unions and corporations began to establish separate accounts with which to make political contributions, which foreshadowed the rise of the modern PAC.

The first PAC was formed by organized labor in 1943 when the AFL and CIO merged, forming the Committee on Political Education. The AFL-CIO was able to operate these PACs because they used political funds rather than union dues. This laid the groundwork for other labor PACs, which began to proliferate shortly thereafter. By 1956, 17 labor PACs contributed $2.1 million to political candidates. In 1982, the number had risen to 288 labor PACs, which contributed $20 million to federal candidates. In 1995, there were 332 labor PACs contributing $26 million to federal campaigns.

In the 1960s, corporations began to organize their own PACs. The first major PAC to be organized was the American Medical Political Action Committee (AMPAC), formed in 1961 by the American Medical Association. This was followed by the Business Industry Political Action Committee (BIPAC), organized in 1963 by the National Association of Manufacturers. Prior to this, most political contributions were made by wealthy individuals. For example, in 1956, 199 executives from 225 corporations contributed more than $1.9 million to federal candidates.

In 1972, Congress enacted the Federal Election Campaign Act, which superseded previous federal campaign regulations and was the catalyst for the tremendous growth of PACs in subsequent decades. The Federal Election Campaign Act (FECA) included the limitation of the total amount that a federal candidate could spend on media advertising to $50,000; the disclosure of all contributions in excess of $100; the requirement for committees and candidates to file reports of contributions and expenditures; and the requirement for television stations to sell candidates time at the lowest unit cost provided to commercial advertising customers.

The most important part of the law for the PACs was the Hansen Amendment, which enabled union and corporate treasury money to be used for overhead in operating PACs. It also provided business and labor organizations with the right to solicit voluntary funds from members, employees, and stockholders. This gave PACs the power to be involved in federal elections and institutionalized the role of PACs within the political process. The Hansen Amendment became the springboard for the proliferation of PACs because it enabled corporate coffers to finance the often considerable administrative expenses of PACs. It was estimated that in the 1984 election, some PACs spent $75 million, which was roughly one-fourth of their expenditures, on administrative expenses. Additionally, as television advertisements became the primary medium for articulating their viewpoints, campaign costs rose meteorically.

Concern about large monetary gifts to candidates peaked in the aftermath of the 1972 presidential election, when it was revealed that 124 donors gave $17 million to help re-elect Richard Nixon, and several individuals contributed a combined amount of $200,000 to George McGovern's campaign. This resulted in amendments to FECA in 1974 that established new contribution and spending limits. However, in 1976, Senator James Buckley, together with Eugene McCarthy and philanthropist Stewart Mott, challenged the law, claiming that limits on campaign contributions were an infringement on the right to free speech. The U.S. Supreme Court agreed and struck down much of the law. Thereafter, groups and individuals could spend as much as they wanted to support or oppose a candidate. Later amendments to the law increased spending limits by candidates who accept public financing and required PACs and candidates to keep accurate records of receipts and expenditures.

A primary reason for the explosion of PACs was skyrocketing campaign costs. In 1974, candidates for the U.S. House and Senate spent a total of $77 million on their campaigns. By 1982, that figure had jumped to $343 million, which represented an increase of nearly 500 percent. In addition, congressional campaign spending climbed to $626.4 million during the 1996 elections, according to the FEC.

In 1996, PACs gave $98.3 million to congressional incumbents but only $12.5 million to challengers. For many years, Democrats enjoyed the majority of PAC contributions, but that trend reversed during the 1995-96 election cycle, when Republicans received $118.6 million compared with the Democrats' $98.85 million. Republicans continued to outpace their Democratic rivals in contribution receipts in 1997-98. The shift was primarily attributable to the enormous Republican gains in the congressional elections of 1994, which gave them a substantial majority in both houses.

Political organizations flourished on the World Wide Web, where a series of sites cropped up in the late 1990s devoted to mobilizing political support for issues and candidates. Furthermore, many sites, including Voter.com, Gay.com, Politicallyblack.com, and LatinoVota.com, were designed specifically to raise political awareness and enhance voter turnout among specific demographic groups.

With the explosive growth of PACs came cries for campaign finance reform to prevent special interest money from controlling the electoral process. Critics have called for anti-PAC legislation aimed at curtailing campaign expenditures, worried that the influence of wealth would determine which candidates came to office and what policies they would support once elected. Moreover, critics contend that PAC sponsors enjoy disproportionate access to candidates, further marginalizing the general public from the political process.

So long as members of Congress benefit from the contributions of PACs, reform will be difficult to achieve. Many bills designed to curb the influence of political action committees have been introduced in Congress. In 2002, one was finally signed into law. Effective on November 6, 2002, the Bipartisan Campaign Reform Act of 2002 (BCRA) resulted in significant changes to federal campaign finance law. BCRA also is known as the McCain-Feingold Bill, because U.S. Senator John McCain (R-Arizona) and U.S. Senator Russell Feingold (D-Wisconsin) were instrumental in developing the legislation. Upon the bill's passage in the U.S. Senate, McCain's office issued a press release in which the Senator said, "With the stroke of the President's pen, we will eliminate hundreds of millions of dollars of unregulated soft money that has caused Americans to question the integrity of their elected representatives."

Although McCain's words were inspiring to those who considered the law a victory, other Democrats and Republicans were critical of BCRA. These opponents filed lawsuits at the federal level, calling the law unconstitutional based on the First Amendment. As the consumer advocacy organization Public Citizen explained, "Within a month of passage of the new campaign finance law, 84 plaintiffs--ranging from Sen. Mitch McConnell (R-KY) to the AFL-CIO to the Republican party--filed 11 different lawsuits challenging every provision of the Act. The U.S. Department of Justice and the Federal Election Commission are the lead defendants in the suits, supported in their defense of BCRA by the principal congressional sponsors of the law, who intervened in the case. All the lawsuits were consolidated into one case, McConnell v. FEC." In May of 2003, the United States District Court for the District of Columbia issued a 1,648-page decision in McConnell v. FEC, and the case was appealed to the U.S. Supreme Court, which upheld the constitutionality of the BCRA.

PACs continued to influence legislation and elections into the 2000s, and polls showed that Americans viewed PAC lobbying as a significant problem in the legislative process. Studies by the U.S. Public Interest Research Group show that time and again, those who receive PAC donations from a particular industry are more likely to vote in alliance with that industry.

PACs increasingly dominated congressional elections and provided security for incumbents. The FEC reported that during the 2003-04 election cycle, PACs gave $246.8 million to all federal incumbents including the president but only $22.2 million to challengers. Another $41.3 million in contributions went to open seat elections. However, many legislators, including those who accept PAC contributions, regard PACs as a necessary evil because of the cost of campaigning. PACs, by their very nature, most often represent the interests of the wealthy and staunchly ideological. In 2005-06, PACs raised a reported $773.5 million and spent $656.3 million, in addition to the $248.2 million contributed to federal candidates.

Republicans continued to enjoy the majority of PAC contributions in the early and mid-2000s, maintaining the leadership position secured by the party in 1995-96. In 1999-2000, Republicans received $133.6 million in comparison to the Democrats' $123.1 million. In 2003-04, Republicans received $175.9 million while the Democrats' received $134.3 million. This trend continued in 2005-06, when there were an estimated 4,585 PACs. Of the 4,867 PACs operating in 2003-04, those categorized as corporate PACs were greatest in number and had receipts of $238.9 million. Non-connected PACs were the second largest category, but raised the most money, $289.4 million. Trade/membership/health PACs totaled $181.8 million, and labor PACs had $191.6 million in receipts. PACs representing corporations without stock accounted for $9.6 million, and cooperatives had receipts of $4.1 million.

Although the issue of campaign finance reform was discussed during the 1992 presidential and 1994 congressional elections, only after the 1996 campaign was it seriously brought before Congress and the public by both President Clinton and congressional leaders. Similarly, the elections of 2004 were followed by renewed debate over the Bipartisan Campaign Reform Act of 2002 and the influence of PACs. In 2005, a bill was introduced by House Republicans to loosen BCRA restrictions by increasing the amount individuals can contribute during an election cycle. The Senate, meanwhile, was considering increasing PAC fund raising and spending limits. According to a report on the proposed legislation in the Boston Globe, both the Republican and Democratic parties were looking for ways to strengthen their organizations.

A dominant issue in finance reform was the influence of the issue-oriented PACs known as 527s. Leaders from both the Democratic and Republican parties expressed concerns over expensive, controversial television ads placed during the presidential race. The most notorious ad was placed by the Swift Boat Veterans For Truth, which attacked John Kerry's military record in the Vietnam War. However, Fortune reported that more groups and more money were devoted to liberal causes. The work of 527s was denounced as uncontrolled soft money that effectively supplemented the candidates' campaigns. In 2007, the Progress for America Voter Fund was tagged for violation of finance laws because the organization spent over $30 million for pro-Bush advertising for the 2004 presidential election. The group was assessed a penalty of $750,000.

PACs were once again hard at work during the 2008 election cycle in the close race between Republican John McCain and Democrat Barack Obama. In addition, numerous Senate and House seats were hotly contested. In all, PACs contributed more than $412.8 million to federal candidates for the 2007-08 election cycle. According to the Center for Responsible Politics, by industry, labor was the largest contributor, providing $66.37 million in PAC funding. Of these monies, 92 percent was contributed to Democratic candidates and 8 percent to Republican candidates. Ideological or single issue PACs were the second largest industry sector, contributing $59.13 million during the 2008 election cycle. This sector included the pro-choice and environmental lobbies, which contributed primarily to Democrats, and the pro-life and gun rights lobbies, which contributed to Republicans.

However, the bulk of the single issue sector ($39 million) was accounted for by leadership PACs. Leadership PACs, which were becoming increasingly popular during the late 2000s, can be formed by federal politicians to, among other things, raise money to help fund other candidate campaigns. Although FEC rules prohibit leadership PACs from providing funds directly in support of the candidacy of the politician who organized it, the leadership PAC can pay for expenses such as travel, political consulting fees, and polling. For example, Nancy Pelosi's (D-California) leadership PAC is called PAC to the Future, and Eric Cantor (R-Virginia) calls his Every Republican is Crucial PAC. Under FEC rulings, leadership PACs are considered non-connected PACs.

Reflecting the ongoing debate over health care reform during the late 2000s, the health industry-related PACs contributed $49.41 million to federal candidates during the 2008 election cycle, with Democrats receiving about 55 percent and Republicans receiving about 45 percent of funding. Energy and natural resources handed out $26.13 million, with electric utilities ($12.37 million) and oil and gas ($9.06 million) leading the way. Communications and electronics, agribusiness, and transportation PACs contributed $23.05 million, $22.98 million, and $22.98 million, respectively. Lawyers and lobbyists, construction, and defense PACs contributed $16.7 million, $16.19 million, and $11.86 million, respectively. The remainder of PAC monies was donated by miscellaneous businesses and other non-categorized PACs.

The 527s were also active during the 2008 election cycle. According to the Center for Responsive Politics, based on FEC data, 527s spent $490.44 million during the 2008 election. Although an increase from the 2006 (non-presidential) election year expenditures of $429.44 million, this figure represents a significant drop from the previous presidential election in 2004, when 527s doled out $611.72 million to candidates. Many of the 527s that were so actively involved in the 2004 campaign chose to sit out in 2008, citing fear of increased regulation, backlash from contributors for running negative ads, and uncertainty about the presidential outcome.

Although some PACs experienced lags in giving in 2008 and into the 2010 election cycle due to a poor economic environment, congressional members and candidates raised record-breaking amounts of money during the first half of 2009. Candidates for the U.S. Senate and House of Representatives in 2010 reported $250.3 million in fundraising during the period. Of the $93.2 million raised by 70 individual Senate campaign committees, $65 million (70 percent) came from individual donations, and $20.1 million (22 percent) was contributed by PACs. Of the $132 million raised by U.S. House candidates or incumbents, $63.6 million (48 percent) came from individual donations and $64.2 million (47 percent) was contributed by PACs.

Current Conditions

PACs continued to play a major role in the political financing arena into the 2010s, even though, according to the Center for Responsive Politics, they accounted for only about 3 percent of the $460 million raised for presidential candidates (both Democratic and Republican) in 2011-12. Leadership PACs continued to play an important role: For the 2012 election cycle, 342 leadership PACs contributed a total of $16.7 million to federal candidates (60 percent to Republicans and 40 percent to Democrats). The top Republican leadership PACs were Every Republican Is Crucial ($1.2 million) and Freedom Project ($965 million). The top two Democratic leadership PACs were AmeriPac: The Fund for a Greater America ($736 million) and PAC to the Future ($382 million). Of course, these leadership PACs had a name attached to each, even if not explicit in the title of the committee. According to the Center for Responsive Politics, "The limits on how a politician can spend leadership PAC money are not especially strict. Also, lacking a requirement that lawmakers disclose their affiliations with leadership PACs, these committees have been able to slip under the radar for years."

Industry Leaders

According to the Center for Responsive Politics, the top PACs, based on total political contributions between 1989 and 2012, were ActBlue; AT&T; American Federation of State, County, and Municipal Employees; National Association of Realtors; and National Education Association. PACs that give roughly equally to Democrats and Republicans include AT&T and National Association of Realtors.

The top PACs that heavily favor Democratic candidates included ActBlue; American Federation of State, County, and Municipal Workers; National Education Association; Service Employees; and International Brotherhood of Electrical Workers. The top PACs that favor Republican candidates include Altria Group, National Rifle Association, and Union Pacific Corp. Goldman Sachs gives to Democrats at a ratio of about two to one, whereas the American Medical Association gives to Republicans at a ratio of about two to one.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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