Democracy at Stake: Political Equality in the Super PAC Era

Vol. 39 No. 1

By.

David Gregory of NBC’s Meet the Press recently asked Newt Gingrich if he had any advice for a future presidential candidate. Without missing a beat, the former Speaker of the House answered in five words: “Raise a lot of money.”

Although Gingrich likely lost the Republican presidential primary for myriad other reasons, he could be forgiven for concluding that money was all that mattered in the end. His campaign was on its last legs and mired in debt when one wealthy donor extended him a critical lifeline. Casino magnate Sheldon Adelson pumped $5 million into a pro-Gingrich Super PAC called Winning Our Future, single-handedly keeping Gingrich competitive. Adelson and his wife would ultimately contribute $20 million to help Gingrich before finally pulling the plug. But even this generosity couldn’t keep pace with Mitt Romney’s prodigious fund-raising. Romney’s campaign and pro-Romney Super PAC raised a combined $154 million through April 2012, overwhelming the competition with a constant barrage of ads.

It’s no secret that money has dominated American politics for decades or more—and that its grip on our democratic process has never been tighter. In the article below, we discuss why the above story is so troubling, the extent of the problem, how we got here (from a legal perspective), and what we can do to create a democracy in which the strength of a citizen’s voice does not depend on the size of her wallet.

What’s at Stake?

As a threshold matter, why should lawyers and citizens generally care about the role of money in American politics? The role of money matters because it determines how we balance two core political and constitutional values—liberty and equality—and how we negotiate the boundaries between two critical spheres of our lives—political and economic.

Liberty, specifically protecting individuals from an oppressive state, was a central concern of the founders, ensconced most concretely in the Bill of Rights. Equality makes an initial appearance in the Declaration of Independence, but our modern understanding of the concept was not a parallel concern for the Founders. Their declaration that “all men are created equal” was progressive for its age, but only included white men with property. But American history changed both our written Constitution and our collective political values.

Many of the seventeen constitutional amendments following the Bill of Rights furthered political equality by expanding the franchise; this value was expressed most directly through the Reconstruction Amendments and the Supreme Court’s one-person, one-vote, poll tax, property requirement, and candidate filing fee cases. The initial restrictions on political participation based on wealth and other factors have proven incompatible with our democratic ideals; they have given way to a widespread understanding that a true representative democracy requires all citizens to have a substantially equal voice in making the decisions that govern their lives.

Liberty and political equality are not zero-sum concepts—but they are in tension at the intersection of money and politics, requiring a careful balance. And the only way to maintain this balance is to make sure that democracy writes the rules for capitalism, not the other way around.

In the United States, we’ve chosen representative democracy as our political system and (moderated) capitalism as our economic system. Critically, we hold different values dear in each of these two arenas. In the political sphere, equality is a paramount value, on par with liberty as discussed above. Regardless of our partisan affiliations, we all subscribe to the concept of one person, one vote, a vision in which we come to the political table as equals.

Not so in the economic sphere. We disagree over how to divide the economic pie, but few (if any) prominent voices argue for complete equality. We have decided to accept a certain amount of economic inequality in service of competing values such as efficiency and proper incentives.

In sum, our twin commitments to democracy and capitalism leave most of us with the general sense that every citizen has an equal right to participate in political life, but not necessarily the right to possess an equal number of widgets or dollars. But to maintain equality in the political arena, we cannot allow that space to be defined by economic arrangements.

Without proper protections, economic power can be translated directly into political power and government can be largely (or completely) captured by powerful economic interests. Ultimately, the popular democracy the Founders fought to create degenerates into plutocracy, where the privileged use their power to entrench their status and government serves the already powerful instead of serving as a tool for collective action on behalf of the public.

This is why for-profit corporations should not be permitted to spend money earned by making widgets or selling financial services to influence political outcomes. And it’s why individuals who were successful (through industry) or lucky (through inheritance) economically should not have untrammeled ability to translate that economic power into a stronger political voice.

Allowing corporations or wealthy individuals to purchase political outcomes makes a mockery of the principle behind one person, one vote. And it sets off a vicious cycle that undermines the moral legitimacy of both politics and economics in our society. Giving the wealthy a greater voice than average citizens corrupts the process of political decision making. This, in turn, calls into question the legitimacy of our economic arrangements, because economic conditions are set or sanctioned in the political arena (where we decide tax policy, regulations, and so forth). This, finally, makes the influence of economics on politics all the worse—completing the cycle.

The bottom line is that laws that regulate the role of money in politics are the firewalls that prevent the perhaps warranted inequalities in the economic sphere from becoming unwarranted disparities in the political arena. They are our strongest tool for protecting democratic political equality in a capitalist society and maintaining the critical balance between the fundamental values of liberty and equality.

Big Money’s Grip on American Politics

How well are we striking this balance in the United States in 2012? As the introductory story implies, not very well at all. Recent Supreme Court decisions have made a bad situation worse.

People often express shock at the sheer (and escalating) amount of money spent on elections year after year. Candidates, parties, and outside groups spent $5.3 billion in 2008. That looks quaint this year, as the presidential candidates seek to approach $1 billion each, outside groups step up their fund-raising, and congressional candidates build bigger war chests to ward off outside attacks. Super PACs are political committees, created in 2010 in the wake of Citizens United and a lower-court ruling, that are permitted to raise unlimited funds from virtually any source because they do not contribute to candidates or parties, but rather spend money “independently.” These groups—including both issue-based organizations and those supporting President Barack Obama, the cluster of Republican presidential primary candidates, and various congressional candidates—raised a combined $200 million through the first quarter of 2012. Just one cluster of outside groups—led by former Bush aide Karl Rove—announced plans to spend roughly $1 billion on November’s elections.

The most important problem is not the total amount of money spent to influence elections and policy, but rather its sources.

The vast majority of the money flowing to candidates, parties, Super PACs, and other outside groups is coming from a tiny number of wealthy donors. This has long been the case, and Super PACs—with no contribution limits—have made a bad problem worse. In 2011, 93 percent of Super PAC funds raised from individuals came in contributions of at least $10,000—from just 726 Americans. Fifteen donors, each giving at least $1 million, accounted for more than a third of the money.

In addition to wealthy individuals, for-profit businesses are increasingly “investing” in control over our democracy. Seventeen percent of 2011 Super PAC money came from business interests. This doesn’t sound like much, but the figure greatly underestimates the amount of business money in politics now and in future election cycles. Super PACs are required to disclose all of their direct donors, so most public companies with reputations to protect and an aversion to such disclosure are choosing to give in other ways.

And, in fact, much of the money streaming into the political process is flowing through 501(c)(4) nonprofit organizations or 501(c)(6) trade associations that are not required to disclose their donors. Section 501(c)(4) nonprofits alone outspent Super PACs in the 2010 cycle, and much of the billions of dollars in outside funds spent in 2012 will flow through these two types of organizations. The Chamber of Commerce, for example, changed its spending patterns specifically to avoid newly enforced disclosure requirements. These companies seek to influence voters—and ultimately the composition of our government—yet avoid democratic accountability by keeping their political spending in the dark.

This big-money system skews public policy on issues that affect our lives. Candidates who raise or spend the most money (or have the most raised or spent on their behalf) win the vast majority of the time. Winning candidates are accountable to the small minority of wealthy contributors who finance their campaigns (a 2005 study by a Princeton political scientist determined, for example, that low-income constituents have zero impact on U.S. senators’ voting records). And a growing body of research shows that these big donors look different (more white and male) and have different priorities and opinions (care more about the deficit than unemployment, for example) than average-earning citizens. It’s getting harder for the working and middle class to get ahead because our national priorities are being set by and for the 1 percent, a direct result of economic power being translated into political power.

How Did We Get Here?

The single biggest reason for big money’s current stranglehold on U.S. elections is that the Supreme Court has severely constrained possible solutions to the difficult problem of balancing liberty and equality.

The modern era in campaign finance regulation began in the wake of the Watergate scandals. The Federal Election Campaign Act (FECA) established a comprehensive set of rules for the use of money in politics, with contribution and spending limits for campaigns. This regulatory framework, however, was hobbled right out of the gate by the Supreme Court’s 1976 Buckley v. Valeo decision (424 U.S. 1 (1976)).

The Buckley Court held that spending money on politics was a form of speech and therefore subject to strict scrutiny. While recognizing that the government had a compelling interest in regulating money in politics to prevent government corruption or the appearance of corruption, the Court specifically rejected promoting political equality as a justification for campaign finance rules. Based on this framework, the Court upheld limits on the size of contributions (attenuated speech, which presents the risk of corruption) but struck down similar limits on expenditures (direct speech, which does not).

This seminal case created a suspect divide between contributions and expenditures, and it opened the door for wealthy candidates and donors to dominate the political process. Buckley is what allowed Michael Bloomberg to spend as much of his billions as he desired to become mayor of New York city. Buckley is what protects Adelson’s “right” to spend unlimited sums on “independent expenditures” (though before Super PACs he would have had to spend his money directly). Buckley is what prevents Congress and the states from limiting total campaign spending and, in more recent applications, from enforcing contribution limits set at levels that average Americans can afford to give.

But the case left Congress, states, and future justices with some flexibility to regulate the role and impact of money in politics. The Buckley decision embraced rules on disclosure; left undisturbed the longstanding ban on corporate treasury spending in elections; did not definitively close the door on rationales other than corruption; did not conclusively shut down the notion that so-called independent spending could lead to corruption or its appearance; and did not impose a final and narrow definition of corruption.

Congress embraced this flexibility in passing the Bipartisan Campaign Reform Act of 2002, known as McCain-Feingold, and the Supreme Court upheld its major provisions—including its ban on a particular type of electoral spending by corporations—in McConnell v. FEC (540 U.S. 93 (2003)).

Critically, the McConnell Court took a broad view of corruption, writing that it is “not confined to bribery of public officials but extend[s] to the broader threat from politicians too compliant with the wishes of large contributors”; the possibility that legislators will “decide issues not on the merits of the desires of their constituencies, but according to the wishes of those who have made large financial contributions valued by the officeholder” is a more subtle but “equally disturbing” form of corruption than straight quid pro quo; preventing the appearance of corruption is “of almost equal concern” and is “critical . . . if confidence in the system of representative [g]overnment is not to be eroded to a disastrous extent”; and government must be empowered to regulate money in politics or else “the cynical assumption that large donors call the tune could jeopardize the willingness of voters to take part in democratic governance.”

The Roberts Court, however, has replaced the flawed but flexible Buckley regime with a rigid anti-regulatory orthodoxy. In 2007’s FEC v. Wisconsin Right to Life (546 U.S. 410 (2007)), and again in 2008’s Davis v. FEC (554 U.S. 724 (2008)), the Court overruled parts of McConnell and overturned parts of McCain-Feingold, second-guessing Congress’s considered judgment and constraining its ability to legislate in this complex field. Then, on January 21, 2010 (barely six years after McConnell), the Roberts Court issued the infamous Citizens United v. FEC ruling (558 U.S. 50 (2010)).

Citizens United explicitly rejected virtually every conceivable rationale for limiting the role of money in politics other than fighting corruption or its appearance. It explicitly overruled an important 1990 case, Austin v. Michigan Chamber of Commerce (494 U.S. 652 (1990)), that sanctioned limits on corporate independent expenditures due to the government’s compelling interest in protecting our democracy from “the corrosive and distorting effects of immense aggregations of wealth that are accumulated with the help of the corporate form and that have little or no correlation to the public’s support for the corporation’s political ideas.”

Next, it defined corruption in an extremely limited and unrealistic way, taking the teeth out of the surviving state interest. “The fact that speakers may have influence over or access to elected officials does not mean that these officials are corrupt,” Justice Kennedy wrote for the majority. “Ingratiation and access, in any event, are not corruption.” Justice Anthony Kennedy continued with an unsubstantiated factual assertion: “[t]he appearance of influence or access, furthermore, will not cause the electorate to lose faith in democracy.”

The Citizens United Court then took aim at a sixty-three-year-old law prohibiting corporations and unions from spending Treasury money directly on elections, overturning McConnell in the process. Many people are familiar with the Court’s infamous conclusion that corporations have essentially the same political speech rights as natural persons. Not everyone understands the Court’s formalistic logic. Continuing with the theme of turning unsupported empirical claims into immutable statements of law, Justice Kennedy wrote that “independent expenditures, including those made by corporations, do not give rise to corruption, or the appearance of corruption.” In other words, spending conducted without consulting a candidate can’t corrupt that candidate—and so it doesn’t matter who/what does the spending. This logic both sanctioned unlimited corporate political spending and opened the door to Super PACs.

Citizens United, though, was built upon a foundation of false assumptions.

Polling has consistently shown that that big money in elections reduces Americans’ trust in government. Sixty-eight percent of respondents agreed that a company that spent $100,000 to help elect a member of Congress would be able to later influence that member to change a vote; and more than a quarter of eligible Americans say they are less likely to vote because big money has a greater influence on elected representatives than average Americans. This “independent” spending is at minimum creating an appearance of corruption that is leading to voter disengagement.

Next, the Court assumed that “independent expenditures” would be truly independent—not coordinated in any way with candidates or parties. But weak regulations allow candidates to raise money for supportive Super PACs, which are usually run by longtime employees or associates. It stretches credulity to say that Restore Our Future is truly independent from Mitt Romney and that a gift to the former generates no appreciation from the latter.

In addition, the Court counted on full disclosure of contributions and spending to “permit[ ] citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.” But, as discussed above, a significant amount of campaign money cannot be traced to its original source.

Finally, the Court thought that procedures of shareholder democracy would prevent corporate managers from squandering shareholder money on questionable political expenditures. Instead, shareholders rarely know what a corporation is spending in politics and lack the right to vote to approve or disapprove of such spending.

Solutions

How do we create the kind of balance that respects liberty while safeguarding political equality?

Ultimately, the simplistic (and hence impoverished) anti-regulatory view of the Constitution embodied in Buckley and Citizens United must give way to a holistic vision that recognizes the competing values at stake at the intersection of money and politics. There has been a lot of talk lately about overturning Citizens United, rolling back the notions that corporations have free speech rights and that independent expenditures (as a matter of law) cannot corrupt democratic government. This is necessary, but not sufficient. It returns us to the halcyon days of 2009, which is to say, it won’t solve the whole problem. It’s easy to forget that Sheldon Adelson could have spent every dime of the
$20 million he shelled out for Newt Gingrich pre-Citizens United. He just would have had to cut his checks directly to consultants or TV stations rather than filtering them through a Super PAC.

This is because Buckley explicitly rejected political equality as a legitimate rationale for regulating money in politics. To restore balance we must move beyond the corruption rationale and elevate political equality to its proper place in our constitutional tradition.

There are two ways to do this. First, we can select a new generation of justices and judges who understand that liberty and equality must be constantly balanced and who view the First Amendment as most Americans do—as an essential safeguard to promote political accountability and robust democratic participation, not a tool for wealthy individuals and institutions to use to dominate the political process. The replacement of just one justice in the Citizens United majority could result in that decision being overturned. It might take a few more replacements to reach back to correct Buckley and firmly establish that Congress and the states may control the role of money in politics to protect political equality and strengthen their democratic governments.

The other way to take back control of our Constitution is to explicitly amend it. This, of course, is difficult—requiring two-thirds of each house of Congress to refer an amendment that must then be ratified by three-quarters of the states (in absence of a convention). At least twelve such amendments have been introduced in Congress, and there is a growing citizen movement to demand action.

Short of constitutional change, there are several ways that Congress, federal agencies, and state legislatures can act to restore balance.

First, Congress and state legislatures can provide public funding for candidates to help ordinary citizens run competitive campaigns without depending on well-heeled donors. One popular way to do this is to match small contributions from individuals. New York City’s system, for example, provides a six-to-one match (turning a $20 check into $140), which has proven to engage more small donors, diversify the donor pool, and make candidates less dependent on a narrow slice of wealthy donors. Another strategy that has been used in the states (and at the federal level in the past) is to provide vouchers, refunds, or tax credits for small political contributions.

Next, Congress and states should protect shareholders whose funds may currently be used for political purposes without their knowledge or approval. Congress and state legislatures should require for-profit corporations to obtain the approval of their shareholders before making any electoral expenditures and to publicly disclose any contributions to groups that make political contributions or expenditures. In the 1988 case Communications Workers v. Beck (487 U.S. 735 (1988)), the Supreme Court proclaimed that union members have the right to a refund for that portion of their dues used for political advocacy. Congress and states should provide shareholders with the same right.

The Securities and Exchange Commission (SEC) has the authority to require all publicly traded companies to disclose their political spending. There is currently a petition before the agency to do just that—and this petition broke the SEC record for public comments this spring, with more than 250,000 Americans urging the Commission to improve disclosure of corporate political spending.

Congress, the states, and the Federal Election Commission (FEC) also should improve disclosure by closing loopholes that currently allow 501(c)(4) nonprofit organizations and 501(c)(6) trade associations to make political expenditures or contributions without disclosing their donors. Also, the Internal Revenue Service should enforce its rules to stop clearly political groups from abusing their status as nonprofit 501(c)(4) social welfare organizations.

Finally, Congress and states should tighten rules on coordination between candidates and outside groups such as Super PACs that are permitted to raise unlimited funds because their political activity is supposed to be “independent” of candidate campaigns. Current rules are riddled with loopholes—allowing candidates to raise money for Super PACs and appear in their ads, for example. The FEC can tighten coordination rules without congressional action.

Conclusion

Abraham Lincoln recognized the American democratic experiment as preserving government “of the people, by the people, for the people.” Super PACs, and the big-money system they represent, are the latest threat to that experiment.

But these dark clouds hovering over our democracy may have a silver lining. The manifest disregard for basic principles of political equality inherent in the explosion of Super PAC spending makes perfectly clear what has long been true: Largely because of misguided rulings by the Supreme Court, we currently live in a country where the strength of a citizen’s voice depends on the size of her wallet.

Now, thanks to widespread reporting, sublimely absurd exchanges about Super PACs in the Republican primary debates, and Stephen Colbert’s spot-on satire, the rules governing money in politics have become a national joke.

Yet, we can seize this moment to transform this farce by putting real solutions onto our national agenda. Now is the time to push our leaders to enact the range of solutions listed above.

The good news is that people are mobilizing across the country to fight back against our money-driven system. There are opportunities for action at the national, state, and local levels, and perhaps more energy directed to fixing our democracy than at any time since the aftermath of Watergate, when Congress passed the campaign finance law that the Supreme Court gutted in Buckley.

The rise of Super PACs and the dark money pouring into our elections have laid bare the broken, unfair system the Supreme Court has left us. Now is our best chance in more than a generation to lift the dark clouds and secure a brighter future for American democracy by empowering ordinary citizens and truly honoring the principle of political equality.

Adam Lioz is counsel at Demos, a national nonpartisan research and advocacy organization, where he conducts litigation and policy analysis.

Liz Kennedy is also counsel at Demos and focuses on money in politics to increase transparency and accountability and to fight corruption of democratic government.

 

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