Fixing campaign finance rules after Citizens United v. FEC

Recently the Supreme Court decided in Citizens United v. FEC that the government may not ban political spending by corporations on campaigns, based on free speech grounds. Much has been written on it, and will be written on it, by legal scholars. I haven’t read the opinion (or dissent) yet, so I’ll leave the legal analysis to experts, but from a policy point of view there’s a lot to dislike. Supporters of the decision say that corporations have legal and constitutional rights because they are, after all, made up of persons. The shareholders in a company have free speech rights, shouldn’t they be protected? But those persons already had ample means to freely express their political opinions outside of the corporation through individual campaign donations.

We already limit individual campaign contributions, recognizing that speech by wealthy individuals can drown out and dilute the speech of others, creating speech inequalities. For example, individuals were limited to $2,400 per federal candidate per election, and $30,400 per calendar year to a national party committee. In addition, corporations were already able to exercise political speech; they just had to establish Political Action Committees (PACs) to do so. Individuals could donate $5000 to any one PAC, or $69,000 in aggregate for a two-year election cycle. These PACs (like the Swiftboaters) could be created by corporations but had to be funded by individual persons, the rights-bearers we want to protect!

To me, rich individuals can pretty effectively influence political races without being allowed, after this ruling, to use their private corporations (or offices in public corporations) to help or harm political candidates and perhaps make more money. If we were willing to limit the speech of individuals in personal donations, why can’t we limit the donations of individuals in aggregate as corporations? One additional problem is that current campaign finance laws also prohibit donations by foreign nationals. That makes sense; we want Americans controlling American elections, not foreigners that might have ulterior motives. But now it’s feared that the decision could create a loophole, allowing foreign nationals to influence U.S. elections though foreign (or more likely multinational) corporations.

It’s clear, to me, that spending can buy elections–just look at Corzine and Bloomberg, and how presidential candidates in 2008 spent a total of $1.7 billion. A small minority are skeptical that corporate spending will change much. Robin Hanson argues that those who fear corporate spending misunderstand modern media. According to Hanson, “There are hundreds of TV and radio channels, thousands of newspapers, magazines, and journals, and millions of web pages.” Surely corporations can’t blanket them all, and certainly not the un-paid newspapers, journals, and web pages! Unfortunately, only a handful of major media outlets and radio stations actually matter for the vast majority of the American vote. The core demographic is not yet nerdy informed college students who surf around on tiny blogs like Stone Soup for their political content; it’s Joe Sixpacks who will decide based on the subliminal barrage of TV advertisements, mailings, phone calls, and door-to-door chats that money buys. Viewed in that way, particularly in local races, there is a decidedly limited amount of media space and time that can be purchased and we want, ideally, to limit the amount any one individual can directly purchase. Hanson recognizes this mid-post, and then tries to give a solution:

For such shallow folks, money-wise the loud can indeed drown out the less loud. But again, your primary complaint here should be about those shallow voters, not the advertisers.  If you believe that some voters care so little about political outcomes that they are willing to sell their political beliefs to the highest advertising bidder, you should believe that such folks have no business voting!…If there are only a few such shallow voters, we can probably just ignore this problem.  If many voters are shallow about politics, however, it seems wiser to restrict the voting franchise to folks whose beliefs are less easily distorted. The opinions of shallow folks who are easily swayed should have almost no additional information value – why let such them make a mess of how we determine policy?

Right… I’m going to say it’d be easier to limit corporate spending than to start taking away the right to vote from “shallow voters”, which we’ve noted in a previous post as being problematic. Matthew Yglesias has a good post on how corporations don’t even have to necessarily spend; they can just threaten to spend money to knock out a candidate, and the candidates will fall in line. I think it’s important to think about more local elections like Senate, House, or even say Mayoral or city council races where the stakes are still high (in terms of government expenditures/decisions/contracts) but the spending has so far been pretty small (where according to Yglesias total spending in all 2004 Senate races was only ~$400 million).

So given that there’s this Supreme Court ruling, I’d like to ask: What should we do? Assuming Congress has the courage to act, and assuming we’re not going to see any constitutional amendments, how can Congress effectively reverse this decision while staying within the limits of the Constitution? Here are a few ideas I came up with:

–Congress can attach a 30% surcharge to corporate spending on political campaigns. We can call it the ‘political capital gains tax’.

–Naked transparency. Congress can require public corporations to mail every shareholder a description of corporate political contributions made that month, divided by political party, and then itemized by individual candidate. Font-size should at least 13-point.

–Name and shame. Before and after every corporate-paid TV or radio ad (in whole, or in part), the announcer must list the companies that contributed to the advertisement (and maybe name the CEOs), similar to an accounting of adverse side effects for drug ads.

–OK, Corporations can contribute to political campaigns. But they should be limited to $X per candidate, etc. just like regular people are limited.

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5 thoughts on “Fixing campaign finance rules after Citizens United v. FEC

  1. David, your argument is based on the notion of limits on individual contributions to campaigns. However, my understanding – and please correct me if I am wrong – is that an individual can spend as much as he or she would like on advertising that mentions a candidate by name. See here: http://www.opensecrets.org/527s/electioneering.php

    “Q: Can individual funds still be spent on broadcast ads that mention a federal candidate just before an election?

    A: Yes. Individuals can spend as much of their own money as they want, whenever they want, on ads that mention a federal candidate, as long as the individual does not “coordinate” with the candidate’s campaign. (Coordination requires an exchange of information on the “plans, needs or projects” of a campaign, and is considered a contribution to the campaign that cannot exceed legal limits.) In fact, ads paid for by an individual can do more than merely mention a candidate. They can contain words of “express advocacy,” which include “vote for,” “vote against,” “elect,” “defeat,” “support” and “oppose.””

    The issue here was whether a corporation could spend unlimited funds in a similar fashion. Does that change your mind in any way? This ruling treats the corporation as an individual would be treated.

    You can also argue that the link between contributions and corruption is tenuous: (http://www.nytimes.com/2010/01/24/weekinreview/24kirkpatrick.html?ref=weekinreview):

    “Opponents of restrictions, on the other hand, point out that Australia barely regulates political money. Individuals and corporations can give without limit. Parties can spend freely. And there is not much disclosure about who gives what to whom. But political corruption has not threatened a vibrant democracy there.”

    I’m not crazy about how the above argument is phrased, and it misses some things specific to the Australian political system, but the article as a whole speaks to the more important idea that it is hard to prove a link between contributions and corruption. Anyway, I just throw that out there as a different take on the whole issue.

    Another point: by bringing up wealthy individuals like Bloomberg and Corzine, don’t you make the case for less regulation of corporate political expenditures? In a way, it is good that corporations and unions will now be freer to balance against wealthy individuals in a campaign. Big corporate expenditures on behalf of Bloomberg will have less impact/marginal benefit than the same expenditures on behalf of his last opponent, Bill Thompson. Additionally, by signaling a willingness to spent whatever it takes, the Bloombergs/Corzines/Linda McMahons of the world may signal to corporations that their money isn’t needed, whereas their opponents may draw more support from corporations that think their money is better spent helping that candidate.

    Finally, I wonder if your first proposed solution is constitutional. Wouldn’t the court see that as targeting speech and treating corporations differently than individuals, although the former apparently now have the same speech rights?

  2. Those are all pretty good points, Billy. I didn’t know there was no individual limit, though it makes sense now that you mention it. One of my favorite parts about this blog is getting to learn new things from well-informed and opinionated readers.

    So I would say that individuals spending an unlimited amount of money (or time) in the cause of a candidate is pretty different from an individual donating directly to a campaign. They are, for one, limited by how much they can independently contribute, financially, without starting to ask money from other people. The real money and power comes from the large sums and organizational efficiencies that campaigns and PACs can accrue; they are operating on an entirely different scale. This might seem somewhat theoretical, but I think the lack of individual financiers for elections (aside from Corzines and Bloombergs that are also running) supports this. Another major difference is simply that corporations have more time and money than individuals; in fact, they resemble large campaigns with hundreds of workers more than rich individuals. Mike Dorf makes the point that corporate earnings are buoyed by favorable regulations like limited liability, business expense write-offs, and are effectively immortal, allowing corporations to accumulate far greater sums of money compared to individuals. This makes their ability to contribute in an unlimited manner more dangerous than that of any single individual. Apple this past quarter just reported around $3.4 billion in net revenue (about $16 billion gross); no single person can earn that much wealth that fast.

    The real damage of this case, as you point out in your Australia corruption example, may not be an overtly large increase in corporate political spending or any amount of noticeable, measurable, provable corruption (though don’t we sense it, everyday?), but damage to public perception of the political process. The legislation was designed to limit “both the actual corruption threatened by large financial contributions and… the appearance of corruption”. As others have noted, this decision also undermines an image of the Court as balanced arbiters, conservative in their exercise of power, but liberal (and prescient) in their detection of the forces of history and justice. While those two ends seem to conflict, this ruling actually manages to contradict both. The decision sparks fear of a stable conservative majority on the Court that is activist and willing to overturn precedent made just a few years prior that upheld McCain-Feingold (in McConnell, or earlier in Austin). I suspect few Americans will cheer for the free speech rights of corporations, and Congress will bristle at the overruling of bipartisan legislation enacted by a sweeping majority in the House and a supermajority in the Senate.

    As for the proposed solutions… perhaps the first idea would be OK under some broad power to regulate businesses, and at the very least I’d like the see the money spent by corporations be after taxes, like they are for individuals. The best plays might be the latter ones that increase transparency and the deterrent of angering consumers and shareholders.

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