1. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Chapter Eleven Business in Politics Part 4

2. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 11-2 Chapter Eleven Learning Objectives Review how the American political system is shaped by the Constitution. Appreciate how business was able to dominate government for the first 100 years and the subsequent changes that evolved. Understand how the diffusion of power in Washington D.C. changed the environment where federal governance takes place. Understand the two areas of corporate political power and how business attempts to control that which affects them. Review the contribution and expenditure limits imposed by the Federal Election Campaign Act (FECA). Learn the terminology used in the political realm for fundraising activities. Review the new legislation that amends FECA.

3. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 11-3 The American Political System Is Shaped By the Constitution Federal System Separation of Powers Judicial Review First Amendment Supremacy Clause Constitution of the United States of America

4. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 11-4 Two Versions of Early America Thomas Jefferson “How necessary was the care of the Creator in making the moral principle so much a part of our constitution as that no errors of reasoning or of speculation might lead us astray from its observance in practice." Alexander Hamilton “In framing a government which is to be administered by men over men the great difficulty lies in this: You must first enable the government to control the governed, and in the next place, oblige it to control itself.”

5. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 11-5 The Nineteenth Century

6. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 11-6 Early Twentieth Century Constitutional Amendments Scandals in the Roaring Twenties World-wide Depression Roosevelt and the New Deal World War II

7. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 11-7 Historical Waves of Government Regulation of Business Figure 9.1 WW I Civil War Volume and Intensity of Government Regulations WW II Korean War Wave 2 Wave 1 Wave 3 Wave 4 1790 1837 1861- 1917- 1933 1942-1950 1960 1980 1990 1865 1919 19451953

8. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 11-8 Diffusion of Power in Government REFORMS IN CONGRESS THE DECLINE OF POLITICAL PARTIES INCREASED COMPLEXITY OF GOVERNMENT

9. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 11-9 Who Represents Business in Washington D.C.? Peak AssociationsPeak Associations –U.S. Chamber of Commerce –National Association of Manufacturers –National Federation of Independent Businesses –The Business Roundtable Trade AssociationsTrade Associations –More than 6000 trade associations represent companies grouped by industry. Large CorporationsLarge Corporations –More than 700 corporations have offices in Washington D.C. CoalitionsCoalitions

10. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 11-10 Two Broad Areas of Business Involvement in Politics LOBBYING ELECTORAL PROCESS

11. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 11-11 CORPORATE The Federal Election Campaign Act: CORPORATE Contribution and Expenditure Limits Prohibited from contributing to federal candidates * from corporate accounts $10,000 to state political party committees where permitted by state law for registering and turning out voters ** May set up and contribute through a “separate, segregated fund” known as a political action committee Figure 11.1 See p. 365 for special character notations.

12. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 11-12 INDIVIDUAL The Federal Election Campaign Act: INDIVIDUAL Contribution and Expenditure Limits $1,000 ($2000) ** per election † to candidates $5,000 per year to political action committees $5,000 ($10,000) per year to state party committees $20,000 ($25,000) per year to national party committees $25,000 per year combined to the four sources above ($37,500 per year to candidates and up to $57,500 including political action committees and state and national party committees) Unlimited expenditures to own campaign if running for office ‡ Unlimited independent expenditures on behalf of or against candidates or causes Figure 11.1 See p. 365 for special character notations.

13. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 11-13 POLITICAL ACTION COMMITTEE The Federal Election Campaign Act: POLITICAL ACTION COMMITTEE Contribution and Expenditure Limits $5,000 per election to candidates and their committees $15,000 per year to national party committees $5,000 per year to other committees Unlimited independent expenditures Figure 11.1

14. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 11-14 The Federal Election Campaign Act: Why Doesn’t It Work? Buckley v. Valeo, Supreme Court 1976 Proliferation of special interest groups Corporations and lobbyists learned how to exploit, avoid and live with the FECA regulations

15. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 11-15 Political Fund-Raising Terminology BROKERING:BROKERING: intermediaries raise funds for candidates BUNDLING:BUNDLING: political action committee contributions are “earmarked” for candidates SOFT MONEY:SOFT MONEY: money given to political parties (unregulated) ISSUE ADVOCACY:ISSUE ADVOCACY: presents a political view or comment on an electoral race EXPRESS ADVOCACY:EXPRESS ADVOCACY: suggests the election or defeat of a candidate INDEPENDENT EXPENDITURES:INDEPENDENT EXPENDITURES: spending in an uncoordinated effort

16. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 11-16 Bipartisan Campaign Reform Act of 2002 John McCain (R-Arizona) Corporations are barred from making soft money contributions, except donations of up to $10,000 to state parties in states that permit soft money. These funds can only be used for voter registration and get-out-the- vote drives. Some individual contribution limits are raised. Contribution limits are raised even higher for a candidate running against a wealthy opponent who is spending large amounts of his or her own money. Advocacy groups are barred from broadcasting ads that advocate the election or defeat of a candidate within 30 days of a primary and 60 days of a general election. Contributions and expenditures must be more promptly and fully disclosed. Penalties for violating the law are increased.