After President Franklin Roosevelt implemented the New Deal programs, many reformers became concerned about the political vulnerability of the enlarged federal workforce. Many federal employees, especially the thousands enrolled in the public works programs, were not covered by the 1883 Pendleton Act and could possibly be subjected to the party system of spoils and assessments. The Hatch Act of 1939 (and subsequent amendments) banned political activity by federal employees not already covered by the civil service law and banned the solicitation of political donations from all government employees. The Act also limited how much an individual employee could contribute to each party committee or federal candidate, and placed an aggregate limit on the amount an individual could give to parties and candidates. Although the individual contribution limit was effective, the aggregate contribution limit was ignored and unenforced.
Another major development at this time was the rising power of labor unions and their growing importance as a source of campaign contributions. Concerns regarding the influence of labor unions' political contributions prompted Congress to extend the ban on corporate giving to labor union treasury funds in the Taft-Hartley Act of 1947. The Act also banned corporate and union expenditures on behalf of federal candidates (e.g., paying for campaign services or buying ads instead of giving funds to a candidate) as a way of keeping unions and businesses from circumventing direct contribution limitations.
In response to the ban on union contributions and expenditures, labor unions began to organize auxiliary committees to support federal candidates, funded by members' contributions apart from their dues. These political action committees (PACs) did not use union treasury funds but operated on voluntary donations pooled from individual union members to fund voter turnout efforts and to make contributions to national parties and federal candidates. Labor unions dominated PAC activity from the late 1940s until the early 1960s, when business interests entered the game and began to form their own PACs.
