RENEE MONTAGNE, host:
This is MORNING EDITION from NPR News. I'm Renee Montagne. Early in 2010, the Supreme Court is expected to redefine how far corporations can go in spending money on federal elections. The case is a milestone in the world of money and politics. It's a place where, as NPR's Peter Overby explains, there's been a lot of upheaval over the past decade.
PETER OVERBY: Let's look at three flash points. First, the money that's needed to run for president. Back in 2000, the public financing system was a fixture of American politics. It helped to underwrite candidates from Gerald Ford to Bill Clinton. But then campaign budgets exploded, fundraising went up 99 percent in the decade, and the public financing system couldn't keep up.
Then-Texas Governor George W. Bush took the first step. He rejected public funds in the primaries, saying the system was old and underfinanced. Last year, then-Senator Barack Obama took the final step. He became the first candidate to turn down public funds for the fall campaign.
Former Federal Election Commission Chairman Bradley Smith says that's it for public financing.
Mr. BRADLEY SMITH (Former Chairman, Federal Election Commission): Participating in the public financing system is now considered the mark of an unserious candidate.
OVERBY: Now a second flashpoint: corporate money. It's illegal in federal elections, but the two major parties were hooked on it. In 1999 and 2000, they raised nearly half a billion dollars from corporations, unions and rich people. So-called soft money.
Among the companies supplying soft money to the parties was Enron. One thing Enron lobbied for and got was financial deregulation. Two senators, Republican John McCain and Democrat Russell Feingold, had a bill to ban soft money. And when Enron collapsed in scandal in 2001, McCain and Feingold had enough support to make the bill law.
Feingold addressed the Senate just before the vote on final passage.
Senator RUSSELL FEINGOLD (Democrat, Wisconsin): In this moment, we can show the American people that we are the Senate that they want us to be.
OVERBY: When the McCain-Feingold law pushed soft money out of the national parties, a lot of it landed in new bank accounts at small nonprofit groups, groups who couldn't coordinate with candidates or party committees but who share the same partisan agenda.
In 2004, Swift Boat Veterans for Truth crippled the campaign of Democratic presidential nominee John Kerry. And in 2008, groups challenged the integrity of both presidential contenders and plenty of congressional candidates. The attacks are meaner, but these groups � unlike the political parties � aren't accountable to anyone. Larry Noble is a former FEC counsel.
Mr. LARRY NOBLE (Former Counsel, Federal Election Commission): Candidates and especially incumbents are very nervous about an independent group coming in and spending a lot of money against them. And they're very fearful of that. At the end of the day, they want to get re-elected.
OVERBY: And that brings us to flashpoint number three: congressional earmarks. Just one example: Last June, when the House passed a spending bill, it included money for airplanes the Air Force hadn't asked for. Here's Republican Congressman Jeff Flake...
Representative JEFF FLAKE (Republican, Arizona): The House just awarded hundreds of millions of dollars in the form of no-bid contracts to companies whose executives and their lobbyists turned around and contributed tens of thousands of dollars to members of Congress who secured those no-bid contracts.
OVERBY: Congress has rules about earmarking. And there are laws too. But some congressional staffers pleaded guilty to trading favors for earmarks in the scandal surrounding Republican lobbyist Jack Abramoff. And Republican Congressman Randy Duke Cunningham is in prison after selling earmarks for huge bribes.
It's a bipartisan problem. The Justice Department is investigating Democratic Congressman Peter Visclosky and may be looking into some other Democratic earmarkers.
Rick Hasen teaches campaign finance and ethics at Loyola Law School in Los Angeles. He says things are marginally better because Congress has tightened up the laws. But then, he points out, there's that Supreme Court decision coming up. The question is whether corporate money can be used to promote or attack candidates. The answer could come as early as mid-January. Hasen says it could change everything.
Professor RICK HASEN (Loyola Law School): The way that the Supreme Court has been interpreting campaign finance law could well lead us into a spiral where we end up with a deregulated campaign finance system.
OVERBY: That would be a political system unlike any we've seen before.
Peter Overby, NPR News, Washington.