I'm still a little curious why no one in the movie ever wonders why Jefferson, if trying to commit graft, wouldn't be happy to hear about the dam being built instead of the camp, since that would make him just as much money, probably more, but as you say he never has a chance to defend himself. And all the other senators are so sure Paine is trustworthy.
Everything everyone's said here so far appears to be accurate but there's more.
The dam is supposed to look like Sen. Paine is doing his job; serving the people; working in the interest of his state; bringing in government dollars and creating jobs. Naturally, the dam benefits Taylor financially but also in other ways. If the dam bill passes and is funded, the machine can continue fooling the people. Taylor's hand-picked flunkies will remain in office and in power. Missteps could raise questions or cause voters to consider voting them out when they can. New blood, like Smith, threatens the machine's very existence.
Smith is being made to look bad; supporting his bill over the dam he seems to be failing his constituents, harming the state, flouting the public's trust, and abusing his office for personal benefit.
With his bill, Smith may not get a huge payday but he'd gain power, control, influence, status, goodwill, etc.; not only in his home state but nationally as the boys camp idea is supposed to grow and include all boys in the U.S. Those things are worth much more in the long run than money. The money can be deferred for later when it will come many multiple times greater and easier. If Smith was really corrupt, this would be a problem. Big powerful machines can be used for positive or negative purposes but I'd argue either way they're dangerous as power tends to corrupt most people.
In essence, the Taylor machine is accusing Smith of doing exactly what they're doing - manipulating the public for personal gain. The added blow to Smith and what makes it much worse, is he's supposedly willing to use children to do it. Let's not forget, that is how Smith was appointed Senator. He didn't have a machine per se but he did have the support of all those boys who talked him up to their parents, in particular, the Governor. Smith also has a newspaper and an army of boys who will soon grow up ready to support and vote for him.
Others in the state are aware of Taylor's corruption. The Governor's own wife and kids allude to it. Fear and/or the lack of power to confront him keep most people from going after or going up against the corruption. Taylor has people throughout the state in his pocket.
As we see in Smith's case, Taylor can, at a moment's notice, summon his vast network of crooks to do his bidding; whatever he says. He has the newspapers and other media outlets churn out false stories of the Senate proceedings. He starts a letter/telegram writing campaign to slam Smith. He has people take down Smith's paper. He has property records altered. He even goes as far as having people cause vehicle accidents, and otherwise attack and harm kids.
Though Smith has a national platform, he barely survives the attack against him. Imagine how easily Taylor could crush and wipe out most other opponents.
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