Blog No. 34 McCutcheon and the Quagmire of Campaign Finance

The recent decision of the Supreme Court in McCutcheon v. Federal Election Commission has once again focused attention – often outrage – on the quagmire of campaign finance law.  In McCutcheon, Chief Justice Roberts observed that many people “would be delighted to see fewer television commercials touting a candidate’s accomplishments or disparaging an opponent’s character.”  I count myself among the people Roberts described. Nevertheless, it can be argued that extravagant political spending is more of an cultural irritant than the fundamental threat to democracy that it is sometimes claimed to be. In any event, it may be helpful to put the McCutcheon case in context and highlight briefly some of the key issues and Supreme Court decisions

The heart of the problem lies in the Chief Justice’s further observation that:

Money in politics may at times seem repugnant to some, but so too does much of what the First Amendment vigorously protects. If the First Amendment protects flag burning, funeral protests, and Nazi parades—despite the profound offense such spectacles cause—it surely protects political campaign speech despite popular opposition.

Some critics argue that money, or spending money, should not be equated with speech, but that position is not realistic.  If freedom of speech is to be meaningful, it must include reasonable means to make one’s speech heard. The right to sound off on a soap box is no substitute for the right to purchase an ad on television or in a newspaper.  While changes in the composition of the Supreme Court at some future point might adjust some of the present rules, the Court will not lightly abandon the protection of spending in aid of a political view.

As most followers of this blog are probably aware, the basic issue before the Court in McCutcheon was the constitutional validity of limits placed on contributions by individual persons to candidates, political parties and PACs.  More specifically, for readers with an eye for detail:

For the 2013–2014 election cycle, the base limits in the Federal Election Campaign Act of 1971, as amended by the Bipartisan Campaign Reform Act of 2002, permit an individual to contribute up to $2,600 per election to a candidate ($5,200 total for the primary and general elections); $32,400 per year to a national party committee, $10,000 per year to a state or local party committee; and $5,000 per year to a political action committee, or “PAC.” A national committee, state or local party committee, or multicandidate PAC may in turn contribute up to $5,000 per election to a candidate.

For the 2013–2014 election cycle, the aggregate limits in BCRA permit an individual to contribute a total of $48,600 to federal candidates and a total of $74,600 to other political committees. Of that $74,600, only $48,600 may be contributed to state or local party committees and PACs, as opposed to national party committees. All told, an individual may contribute up to $123,200 to candidate and noncandidate committees during each two-year election cycle. [McCutcheon v. FEC, citations omitted]

A plurality of the Court upheld the “base limits” to candidates and committees, but struck down the aggregate limits. (Justice Thomas joined the judgment but would have stricken all limits.)

The plurality opinion by Chief Justice Roberts held that, consistent with the seminal case of Buckley v. Valeo decided in 1976, only corruption, or the appearance of corruption, could justify restrictions on freedom of speech. Moreover, he concluded that only quid pro quo corruption, a promise of action in exchange for a political contribution, was relevant:

Spending large sums of money in connection with elections, but not in connection with an effort to control the exercise of an officeholder’s official duties, does not give rise to such quid pro quo corruption. Nor does the possibility that an individual who spends large sums may garner “influence over or access to” elected officials or political parties.

In Buckley, the Court had upheld with little discussion an aggregate limit on contributions, holding that it was necessary to prevent the possibility of contributions to multiple committees being channeled to a single candidate (which held potential for quid pro quo corruption). Here, however, Roberts reasoned that various regulations adopted subsequent to Buckley made such channeling unlikely.

In dissent, Justice Breyer made a strong argument that by excluding influence or access from the equation, the plurality’s definition of corruption was too narrow.  Still, it is not clear that a broader definition would have produced a different result. Would the risk of corruption, even more broadly defined, have been materially increased by allowing contributions to additional candidates or committees? Breyer also argued that the possibilities of manipulating the base limits to channel contributions were greater than the plurality supposed. (In one hypothetical he posited means by which a donor might contrive to give $3.6 million over a two-year period to benefit his party and its candidates.) On the whole, however, that scenario and Breyer’s other hypotheticals will strike many as more clever than compelling.

While one may disagree with the McCutcheon decision, perhaps on the grounds expressed in Justice Breyer’s dissent, some of the outrage at the decision appears to rest on a misunderstanding of the issue before the Court and its previous precedents. For example, The New York Times complained that the McCutcheon decision is “less about free speech than about giving those few people with the most money the loudest voice in politics.”  The latter concern, however, was not what either the decision or Breyer’s dissent were about.

Although campaign finance laws may be intended to avoid “giving those few people with the most money the loudest voice in politics,” that has seldom been accepted by the Court as a justification for limiting free speech (or the right to spend money in expressing such speech). Rather, from the seminal case of Buckley v. Valeo in 1976, the Court has focused primarily on the issue in McCutcheon – whether a law or regulation was deemed necessary to prevent corruption or the appearance of corruption. (That has been consistently true as to contributions by persons, although for a few years a narrow majority of the Court took a broader view with respect to contributions by corporations.)

At this point it is impossible to know the extent, if any, to which McCutcheon will increase the risk of a) corruption or the appearance of corruption or b) simply increasing the influence of wealthy donors. The speculation here is that, in the overall context of campaign finance, the answer will be not much on either count. Notably, McCutcheon did not involve two separate but related issues of greater significance: First, “independent expenditures,” that is, expenditures which advocate the election of a candidate but are made without any consultation with the candidate or his political committee; Second, contributions to entities created under a particular section of the tax code, 501(c) (4), which are not required to be disclosed.

As Buckley explained in striking down a limit on independent expenditures, “[t]he absence of prearrangement and coordination of an expenditure with the candidate or his agent . . . alleviates the danger that expenditures will be given as a quid pro quo for improper commitments from the candidate.” In its decision in Citizens Union, the Supreme Court held that, while corporations and unions might be barred from making contributions to political candidates or their committees (as they had been for decades), they could not be prevented from making independent expenditures on behalf of political candidates. Subsequent to Citizens United, the Circuit Court for the District of Columbia, applied the reasoning of that decision to hold, in SpeechNow v. FEC, that no dollar limitation could be placed on contributions to a committee which would itself make only independent expenditures. That decision was rendered by all eleven judges of the court sitting en banc, and it soon gave rise to the creation of “Super PACs.”  Super PACs are PACs that are registered with the FEC and are subject to its disclosure requirements, but which, because they are organized to make only independent expenditures, may receive contributions unlimited in amount.

Has the impact of campaign spending been exaggerated?  Undoubtedly, and some times hysterically, in the case of the McCutcheon decision. Boston Globe columnist, Jeff Jacoby quoted a few examples that it sparked:

“Make no mistake: This decision is a setback for our freedoms,”lamented Montana Senator Jon Tester. On Twitter, his Vermont colleague Bernie Sanders issued a stream of overwrought comments. “The Supreme Court,” read one, “is paving the way toward an oligarchic form of society in which a handful of billionaires like the Koch brothers and Sheldon Adelson will control our political process.” Common Cause pronounced McCutcheon “A Disaster for Democracy,” and accused the court of putting out “a welcome mat for corruption.”

The rhetorical acme, however, may belong to Katrina vanden Heuvel, writing in The Washington Post, who characterized the Supreme Court as “a blowtorch, searing a hole in the fabric of our fragile democracy.”

Hysteria notwithstanding, the impact of McCutcheon, while presently unknown, is almost certain to be less than the growth of Super PACs, and even the importance of that development appears to have been exaggerated. The Poster Boy for Super PACs is the casino mogul and zealous supporter of Israel, Sheldon Adelson. As widely reported, Mr. Adelson and his wife initially donated $20 million to “Winning Our Future,” the Super PAC supporting Newt Gingrich and, after the Gingrich bid failed, $30 million more to “Restore the Future,” the Super PAC supporting Romney. Although the Adelsons won no prize for their spending spree, their contributions did keep the Gingrich campaign alive for a while. But that is one of the few examples of Super PAC largesse having any observable effect at all.

Thus, although it was widely claimed that Citizens United and SpeechNow had dramatically changed the political landscape, it did not turn out that way in 2012. After the election, The New York Times published an editorial entitled, with evident satisfaction, “A Landslide Loss for Big Money.” As the editorial explained:

The millionaires and billionaires who gave nearly $500 million to independent groups in the race to elect Mitt Romney and other Republicans not only bet on the wrong party, they bet on the wrong tactic. They believed that an endless drumbeat of television advertisements would be enough to drive voters away from President Obama and Democratic policies.

*    *    *    *

Television ads have long played an excessive role in American politics, substituting cheap accusations for discourse, but this was the year they went too far. In state after swing state, voters said they were overwhelmed by the din of ads and tuned it all out.

That meant the biggest-spending conservative groups were trounced. American Crossroads, the super PAC founded by Karl Rove, spent $104 million in the general election, but none of its candidates won. The United States Chamber of Commerce spent $24 million backing Republicans in 15 Senate races; only two of them won. Sheldon Adelson, the casino mogul, spent $53 million on nine Republican candidates, eight of whom lost.

That is not to say that Super PAC spending may never produces results or that the results are entirely benign. For example, it has been reported that Washington lobbyists are making increasing use of Super PACs on behalf of the special interests they represent. In addition, the threat of spending by conservative Super PACs has probably been a factor weighing on Republicans in the House and Senate who fear a primary fight.

Moreover, large donations tend to cast an unseemly pall over the electoral process. A recent column by Tom Friedman in The New York Times recently offered a provocative example:

Adelson gave away some $100 million in the last presidential campaign to fund Republican candidates, with several priorities in mind: that they delegitimize the Palestinians and that they avoid any reference to the West Bank as “occupied territories” and any notion that the U.S. should pressure Israel to trade land for peace there. Both Newt Gingrich and Mitt Romney took the money and played by Sheldon’s rules.

Friedman is not necessarily alleging a quid pro quo arrangement, and any positions taken by Romney and Gingrich may have been arrived at quite independently, but the example is still unsettling.

Another unsettling aspect of current practice is so-called “dark money” raised through anonymous contributions. There is no constitutional barrier to rigorous disclosure requirements. On the contrary, The Supreme Court expressly endorsed such requirements in both Citizens United and McCutcheon. The obstacles are political will and the concern that disclosure may result in retaliation. That is not a frivolous argument and Justice Thomas made it eloquently in his concurring/dissenting opinion in Citizens United.  But while a right to anonymous speech is one that the Supreme Court has recognized under some circumstances, no other Justices share Thomas’s view with respect to political contributions.

Under existing law, anonymous contributions can be made to entities formed under section 501 (c) (4) of the tax code as “social welfare”  organizations. Such organizations may engage in political campaigning so long as it is not their “primary activity” and, unlike Super PACs, they are not required to disclose their contributors. It was reported in the Huffington Post that, along side $100 million in reported contributions to Super PACs, the Adelsons were believed to have given an additional $50 million or more by unreported contributions to such social welfare groups.

While the law permitting anonymous contributions could be changed by Congress, there is not much likelihood that will happen anytime soon. Opposing disclosure on grounds that it may cause retaliation may not carry much constitutional weight, but it remains an effective political argument. Given political stalemate over disclosure, one observer recently came up with an alternative approach. Writing in The Washington Post, Heather K. Gerken, a professor at Yale Law School, proposed a modest but ingenious reform:

Congress should require that any advertisement funded directly or indirectly by a group that does not disclose its donors acknowledge that fact. This “nondisclosure disclosure” would be simple and truthful: “This ad was paid for by ‘X,’ which does not disclose the identity of its donors.” That could help voters figure out how much trust to put in the ad.

There appears to be merit to Professor Gerken’s idea and it deserves consideration by RINOs and others. Nevertheless, it will be surprising if it gains much traction. As a political issue, polls have consistently shown considerable public support for campaign finance reform. Moreover, Republicans are probably regarded as the more frequent beneficiaries of large donations and anonymous donations. Although there is some truth to that perception, the current exploitation of the system is far from one sided.

For example, The New York Times reported on April 9 that:

Two Florida doctors who received the nation’s highest Medicare reimbursements in 2012 are both major contributors to Democratic Party causes, and they have turned to the political system in recent years to defend themselves against suspicions that they may have submitted fraudulent or excessive charges to the federal government .

In any event, it appears that while support for reform is broad, it does not carry a high priority or sense of urgency with the public.  So the greatest hope may lie in a growing realization that, while the Florida doctors may have gotten their money’s worth, at least for a time, the return on investment for the largest donors may not be very favorable.