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The Supreme Court Overturns Campaign-finance Reform

Casting aside sixty years of federal legislation and overturning rulings from 1990 and 2003, the Supreme Court has opened the door to an unregulated flood of corporate political advertising. Last month’s 5–4 ruling in Citizens United v. Federal Election Commission did not surprise students of this conservative-leaning Court. Still, the Court’s privileging of the “rights” of artificial legal entities over the democratic needs of the American public remains indefensible.

In January 2008, the nonprofit corporation Citizens United released a documentary film called Hillary: The Movie. The politically conservative organization wanted to show the film on cable TV during the Democratic primaries, but feared doing so might violate a law that barred corporations from using general treasuries to pay for broadcast ads supporting or opposing candidates for federal office. So Citizens United filed suit in federal court, asking for a declaration protecting the film’s distribution. The District Court did not oblige, ruling that airing the movie would violate 2 U.S.C. §441b, an important part of the 2002 McCain-Feingold campaign-finance reform legislation.

In its Supreme Court appeal, Citizens United did not argue that the statute was unconstitutional on its face. That is, it didn’t ask the Court to overturn existing campaign-finance law. Rather, the group claimed that both it and the film should not be subject to the law’s provision limiting corporate-sponsored political ads. Citizens United was correct on both counts.

The purpose of 441b was to plug a loophole that allowed corporations to evade the goals of campaign-finance reform. Corporations are permitted to use their general treasuries to advocate policies that serve their interests. But if they want to run ads for or against a candidate for federal office, they must use voluntary contributions from employees and shareholders—and segregate that money in a separate account. Of course, corporations have spent millions from their general treasuries to influence elections. But rather than explicitly asking for votes, corporations purported to be speaking about an issue: “Senator X has voted to raise your taxes dozens of times. Now he wants to do it again. Send him a message.” In response to such evasions, Congress barred corporate broadcast ads from mentioning candidates by name during the crucial period just before election day.

Construed literally, the law could apply to films as well as ads. But it was intended to regulate broadcast advertising, not movies. No one believes documentary films threaten the democratic process. Properly interpreted, then, the law simply did not apply to Hillary: The Movie. Even if it did, the film would have been protected under freedom of the press. If the Court had accepted that argument, it wouldn’t have had occasion to address a corporation’s right to produce political ads.

The Court also erred in applying the statute to Citizens United. Except in special cases, the law was designed to cover for-profit businesses, not nonprofit entities. The typical advocacy group receives money because of its political views; the typical business earns money in exchange for its products—not its politics. Under the law, nonprofits that receive much of their funds from for-profit corporations must be treated like business corporations in order to prevent businesses from using nonprofits as fronts for electioneering. Citizens United receives the overwhelming majority of its funds from individual members, not businesses. As the group argued, lower courts have consistently ruled that when advocacy groups receive only a small percentage of contributions from for-profit businesses they should not be treated as business corporations. Again, eager to rule on the broader constitutional question, the Supreme Court set that argument aside.

Having rejected two compelling arguments, the Court walked into outer darkness, declaring that business corporations must be treated like human beings. According to the majority opinion, businesses are just like any other association of people—regardless of tax status. Yet for-profit corporations present special risks to the democratic process. Fortune 500 companies earned $265 billion in profits during the last election cycle. They wield formidable power. More important, as the late First Amendment scholar C. Edwin Baker argued, political positions taken by businesses are dictated by their competitive needs in the market—not by the views of their shareholders, officers, or directors. Indeed, officers and directors are required by law to attempt to maximize shareholder profit—even if they believe such actions will harm their workers and the common good.

The largest source of money for broadcast ads in the United States is now concentrated in entities whose behavior some might consider sociopathic in a human being, because the only responsibility of businesses is to advance their own interests. Yet the Court maintains that corporate-sponsored ads amount to a First Amendment service to citizens. Voters might be forgiven for wondering whether corporations legally bound to serve their own competitive needs are all that interested in serving the common good.

The negative consequences of the Court’s decision are not confined to distorting political debate. The majority turned a blind eye to corruption in the political process itself. According to Congressional testimony in support of McCain-Feingold, when corporations sponsored ads designed to help a particular candidate, they immediately informed the campaign. Those corporations’ lobbyists were then rewarded with privileged access to legislators, who found ways to show their gratitude. Without direct evidence of bribery or quid-pro-quo corruption, the Court sees nothing wrong with this. In the eyes of the Court, there’s nothing corrupt about buying privileged access to members of Congress: “The fact that speakers may have influence over or access to elected officials does not mean that these officials are corrupt,” according to the majority opinion. Moreover, despite evident public concern about the influence of banks and insurance companies, the Court asserts that the public isn’t terribly concerned about legislative corruption: “The appearance of influence or access...will not cause the electorate to lose faith in our democracy.”

Why does the Court insist on direct evidence of quid-pro-quo corruption? Hard proof may be hard to find, but the Court’s decision grants enormous leeway to corporations. It allows them to threaten legislators with electoral retaliation, or to promise support for voting with corporate interests. Who will prove that a legislator’s vote responded to corporate sticks and carrots rather than his conscience? Who, other than the majority justices, would doubt that such incentives have a corrupting effect on the legislative process?

Those who ruefully recall Bush v. Gore might say the Citizens United ruling looks like a gift to the Republican Party just in time for November’s midterm elections. In fact, a 2007 decision by the Roberts Court already made it easy for corporations to dodge the law’s attempts to regulate their political advertising. In FEC v. Wisconsin Right to Life, the majority essentially held that only ads that explicitly supported or opposed a candidate by name could be regulated. In its ruling, the majority darkly warned about a continued chilling effect on corporate speech. Where the Court got that idea is anyone’s guess. But its Citizens United ruling certainly helped remove the chill.

Can Congress address the shortcomings of Citizens United? A couple of ideas have been proposed. First, Congress could end the tax break corporations get for political advertising—deducted as an ordinary and necessary business expense. Second, Congress could require that shareholders approve political advertising and be reimbursed for advertising they disagree with. If businesses are constitutionally permitted to intervene in our democracy as though they were citizens, they should do so without tax subsidies or the funds of disapproving shareholders.

Citizens United was made possible because Justice Sandra Day O’Connor left the Court. Now that it has the votes, a pro-business majority of justices has translated its ideology into constitutional principle. Of course all Supreme Court justices are influenced by personal ideologies when interpreting the Constitution. What distinguishes the majority opinion in Citizens United is that it confuses democracy with plutocracy.

 


Related: Cleaning Up the Supreme Court Mess by E. J. Dionne
Judicial Modesty by Richard W. Garnett

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Abandon all hope. This season's political ads will be ugly, nasty and full of complete misrepresentation. The only possibiity is that various competing corporate interests will constitute a 'circular firing squad.'

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About the Author

Steven H. Shiffrin is the Charles Frank Reavis Sr. Professor of Law at Cornell University. His most recent book is The Religious Left and Church-State Relations (Princeton University Press).