January 23, 2010

On Citizens United v. FEC Supreme Court Decision: Reflections from April 30, 2005 on Correcting the Bizarre Incentives Created by Campaign Finance Reform Laws

Donald B. Hawthorne

A nearly five year old blog post, reposted here in response to this week's Supreme Court decision about free speech:

Andrew has a terrific, focused posting entitled First They Came for the Radio Talk Show Hosts... that gets to the heart of the latest fallout from campaign finance reform here in Rhode Island. Once again, we have an example of how legislation has unintended consequences that, in this case, affect our freedom of speech.

Dating back to the post-Watergate reforms in the 1970's, I continue to be amazed at how people think it is possible to construct ways to limit the flow of money into politics. And so we have concepts such as hard money, soft money, donation limits by individuals, donation limits by corporate entities, political action committees, 527's, etc.

Like water flowing downhill, money simply finds new ways to flow into politics after each such "reform." Does any rational person really think all these limitations have reduced the influence of money on politics? Surely not. Have all these limitations changed behavioral incentives for people or organizations with money? Quite clearly, as the 527's showed in the 2004 elections. But all we have done is made the flow of money more convoluted and frequently more difficult to trace. Are we better off for all the changes? Hardly. And, the adverse and unintended consequences will only continue into the future.

What can we do differently? Here is an alternative, and arguably more straightforward, view of the world:

1. Government has become a huge business, which means there is a lot of money for various interest groups - of all political persuasions - to grab, some for legitimate reasons and much in the form of pork. Money flows into politics to buy influence because so much is at stake financially. While no one wants to talk about it openly, the flow of large sums of money into politics is yet another unfortunate price we pay for allowing government to become such a pervasive part of our lives. If we truly had limited government, the pressure to buy influence would be much reduced. It is nothing but foolish ignorance to seek limits on the flow of money without first reducing the structural incentives that currently give people an economic reason to buy influence.

2. Since money is going to flow into politics, one way or another, then we should stop setting up barriers to free speech like Morse notes have come out of the latest campaign finance reform law. Rather, why not take all limits off political contributions in America in exchange for requiring ALL details about such contributions be posted in a standardized report format on the Internet within 24 hours of receipt by either an individual politician or by a political party? Total transparency and accountability, unlike today. If a George Soros or a Richard Scaiffe contributes vast monies, anyone paying attention will see it and the public scrutiny will be immediate. No more PAC's, no more 527's, no more hard versus soft money distinctions, etc. Eliminate the incentives to play fundraising games like the alleged misdeeds by Hillary Clinton's Senate campaign.

Such reform even has the potential to weaken the power of incumbents in both parties and create real competition in our political races. Think about Eugene McCarthy in 1968 and Ronald Reagan's various campaigns where each challenged the status quo and all of which were the result of having committed financial sponsors. Today many candidates have to be wealthy so they can spend their own money. Limiting the pool of candidates does not result in a better pool of candidates.

Total transparency and accountability in politics, with the potential for greater competition. Should not those be the policy objectives underlying our campaign finance laws? And, if successfully implemented, wouldn't that be a novel concept?

Of course, it is sadly ironic that achieving such transparency, accountability and competition will only happen if our incumbent politicians vote for new laws. Yet, given their own self-interest, our politicians have no incentive to support such changes and that lessens our freedom as American citizens. Yet another price we pay for big government.

Numerous links to commentaries about the Supreme Court decision can be found in the Extended Entry. If you do nothing else, listen to the Cato Institute video.

Other blog posts:

September 17, 2006: George Will on Upholding the Idea of Liberty

...There is no greater threat to liberty in this country than the fourth kind of politics, the politics of speech rationing. It is commonly called campaign finance reform, but it's nothing of the sort. It is simply the assertion of the government of a new, audacious right: the right to determine the timing, content, and amount of political advocacy about the government. It is the most astonishing slow-motion -- although it is gaining speed -- repeal of the First Amendment anyone could imagine...

May 15, 2006: The Hypocritical Straight Talk Express Man: The Ongoing Problem With John McCain

...Unfortunately, none of this surprises people anymore because it is now clear that the only right to free speech Senator McCain believes in is his own...

Important posts about or related to the current Supreme Court decision:

Rubin: Supreme Court vindicates political speech, pulverizes McCain-Feingold

In a landmark 5-to-4 ruling, the Supreme Court today in Citizens United v. FEC struck down major portions of the McCain-Feingold campaign-finance law. The Court left in place the disclosure requirement for corporations and the disclaimer requirement that identifies whether an ad is not paid for by the campaign. But little else remains…

…It will certainly increase the amount of speech…

…Republicans may see some tactical advantage here, as corporations wary of the Obama regime may now help fund Republican Senate and House candidates seeking to block the Obama anti-business agenda. But it would be a mistake to assume that corporations that seem to have perfected the art of feeding at the government trough and which are vulnerable to the ever-increasing reach of the Obama administration won’t cover their bets by giving to both sides. Moreover, this is a victory plain and simple for the Constitution and for the essential notion that if there is a “problem” with certain types of speech, the solution is more speech, not the heavy hand of government censors.

Ira Stoll: A Big Victory for Free Speech

…The case also highlighted the way both Republican and Democratic politicians trample the Constitution, at least as defined by today's Supreme Court majority…

"The Government may regulate corporate political speech through disclaimer and disclosure requirements, but it may not suppress that speech altogether," the majority opinion by Justice Kennedy said. "As additional rules are created for regulating political speech, any speech arguably within their reach is chilled."

The majority said that "Campaign finance regulations now impose 'unique and complex rules' on '71 distinct entities.' These entities are subject to separate rules for 33 different types of political speech. The FEC has adopted 568 pages of regulations, 1,278 pages of explanations and justifications for those regulations, and 1,771 advisory opinions since 1975. In fact, after this Court in WRTL adopted an objective 'appeal to vote' test for determining whether a communication was the functional equivalent of express advocacy, the FEC adopted a two-part, 11-factor balancing test to implement WRTL's ruling."

The majority said all these rules amount to an unconsitutional restraint on free speech…

Said the majority: "the FEC has created a regime that allows it to select what political speech is safe for public consumption by applying ambiguous tests. If parties want to avoid litigation and the possibility of civil and criminal penalties, they must either refrain from speaking or ask the FEC to issue an advisory opinion approving of the political speech in question. Government officials pore over each word of a text to see if, in their judgment, it accords with the 11 factor test they have promulgated. This is an unprecedented governmental intervention into the realm of speech."

The opinion went on: "The law before us is an outright ban, backed by criminal sanctions. Section 441b makes it a felony for all corporations—including nonprofit advocacy corporations—either to expressly advocate the election or defeat of candidates or to broadcast electioneering communications within 30days of a primary election and 60 days of a general election. Thus, the following acts would all be felonies under §441b: The Sierra Club runs an ad, within the crucial phase of 60 days before the general election, that exhorts the public to disapprove of a Congressman who favors logging in national forests; the National Rifle Association publishes a book urging the public to vote for the challenger because the incumbent U. S. Senator supports a handgun ban; and the American Civil Liberties Union creates a Web site telling the public to vote for a Presidential candidate in light of that candidate's defense of free speech. These prohibitions are classic examples of censorship.

The court noted that independent election expenditures weren't banned by Congress until 1947, which, in so doing, overrode the veto of President Truman, who warned that the expenditure ban was a "dangerous intrusion on free speech."

It also complained of differing treatment under the law of businesses that one news organizations and those that don't. "This differential treatment cannot be squared with the First Amendment," the opinion said.

Chief Justice Roberts stressed the essential point in his concurring opinion: "Congress violates the First Amendment when it decrees that some speakers may not engage in political speech at election time, when it matters most."…

All the justices except for Justice Thomas agreed that the requirements of disclosure of the identities of donors or of who had paid for an ad did not amount to an abridgement of free speech; Justice Thomas, dwelling on the consequences for those whose opposition to gay marriage in California had been disclosed, dissented from that portion of the majority opinion…

Want to know what campaign finance reform is really about? Watch this Cato Institute video

The Freeman: Campaign Finance is The Symptom, Not the Problem

...In essence, the cause of large political contributions and spending is the government’s possession of the power to redistribute wealth. Originally, the U.S. Constitution properly and powerfully limited that power. Governments could not take private property without compensation, and then only for "public use"; governments could not interfere in private contracts; state governments could not interfere in interstate trade. On the civil side, governments could not interfere with freedom of speech, religion, and association. But over the last century, the constitutional prohibitions against the major means of redistributing wealth have been greatly eroded, opening the door to the offensive and defensive purchase of this power through political contributions.

The superficial response is to simply outlaw those contributions. But this does not get at the cause of the problem. As long as the supply and demand exist, such prohibitions will be largely ineffective...If there is supply and demand, there will be exchange, regardless of what the law says.

It is the same with campaign finance. The only real solution is to deal with the root cause: the supply and demand for the redistribution of wealth. And the way to do that is to return to the constitutional prohibitions against it. Then there would be nothing to buy.

Tobin: Free speech, not the GOP, is the winner in court campaign-finance ruling

…McCain-Feingold allowed the Federal Election Commission to stop the showing of the film because a corporation produced it, even though the corporation in question was a nonprofit. This case aptly illustrated the way this law did not so much protect the electoral process from the corrupting influence of money as it protected politicians from the effects of political speech that they did not like. Far from bolstering the democratic process, McCain-Feingold suppressed it. Like just about every other campaign-finance law that has been passed since the 1970s, when the Watergate scandal gave impetus to a drive to “reform” election spending, this law did not eliminate the influence of money on politics, but it did play favorites as to which sort of speech may or may not be legal. While efforts to bring transparency into campaign finance remain laudable, the process by which money began to be shunted first into political action committees and then, in the wake of McCain-Feingold, into new classes of unaccountable groups did nothing to make the system fairer or cleaner. Instead, it granted a government agency the power to regulate or suppress the one kind of speech that the founders of our republic would have agreed was inviolate: political speech…

Taranto: Censorship Inc - A division of the New York Times Co. wants free speech all to itself

"The majority is deeply wrong on the law," according to a critic of yesterday's U.S. Supreme Court ruling in Citizens United v. FEC . "Most wrongheaded of all is its insistence that corporations are just like people and entitled to the same First Amendment rights. It is an odd claim since companies are creations of the state that exist to make money."

Whose opinion is this? We don't know exactly, because it is not attributed to any individual. It is an unsigned editorial in the New York Times. That is to say, it reflects the collective opinion of the Times editorial board, a division of the New York Times Co., a corporation that exists to make money.

It's lucky for the New York Times Co. that the Supreme Court upheld its First Amendment rights. Otherwise, it could not have exercised its First Amendment right to denounce the court for upholding its First Amendment rights. Right?

Not quite. As Justice Anthony Kennedy noted in his opinion, the McCain-Feingold "campaign finance" law--which until yesterday's ruling made it a felony for corporations to engage in certain political speech--exempted "media companies" like the New York Times Co. (and News Corp., publisher of The Wall Street Journal and this Web site) from this restriction.

McCain-Feingold, in other words, granted a small group of companies, including the New York Times Co., the privilege to speak freely about politics, while denying it to all other corporations--not only "companies . . . that exist to make money," but also taxable nonprofits that exist to represent a point of view, including the advocacy arms of the Sierra Club, the American Civil Liberties Union and the National Rifle Association.

The editorial published by the New York Times Co. includes no mention of the special privilege the New York Times Co. enjoyed under McCain-Feingold--a privilege that creates at least the appearance of a journalistic conflict of interest. Is not the failure to disclose the New York Times Co.'s interest in McCain-Feingold a serious violation of journalistic ethics?

The Times's opinion is wrongheaded as well. Under the paper's cramped view of the First Amendment, the privilege the New York Times Co. enjoyed under McCain-Feingold was just that: a privilege, not a right. The First Amendment does not say "Congress shall make no law abridging the freedom of speech of media corporations." If the Constitution doesn't protect corporations, it doesn't protect the New York Times Co. And if Congress had the power to grant an exemption to media companies, it also had the power to take it away...

WSJ: A Free Speech Landmark - Campaign-finance reform meets the Constitution

…The 2002 Bipartisan Campaign Finance Act, aka McCain-Feingold, banned corporations and unions from "electioneering communications" within 30 days of a primary or 60 days of a general election. Yesterday, the Justices rejected that limit on corporate spending as unconstitutional. Corporations are entitled to the same right that individuals have to spend money on political speech for or against a candidate.

Justice Kennedy emphasized that laws designed to control money in politics often bleed into censorship, and that this violates core First Amendment principles. "Because speech is an essential mechanism of democracy—it is the means to hold officials accountable to the people—political speech must prevail against laws that would suppress it by design or inadvertence," he wrote. The ban on corporate expenditures had a "substantial, nationwide chilling effect" on political speech, he added.

In last year's oral argument for Citizen's United, the Court got a preview of how far a ban on corporate-funded speech could reach. Deputy Solicitor General Malcolm Stewart explained that, under McCain-Feingold, the government had the authority to "prohibit the publication" of corporate-funded books that called for the election or defeat of a candidate.

That was a shock and awe moment at the Court, as it also should have been to a Washington press corps that has too often been a cheerleader for campaign-spending limits. Mr. Stewart was telling a truth already familiar to campaign-finance lawyers and the speech police at the Federal Election Commission. Former FEC Commissioner Hans von Spakovsky recalled yesterday that in 2004 the agency investigated whether a book written by George Soros critical of George W. Bush violated campaign laws. Liberals as much as conservatives should worry about laws that allow such investigations.

The Court's opinion is especially effective in dismantling McCain-Feingold's arbitrary exemption for media corporations. Thus a corporation that owns a newspaper—News Corp. or the New York Times—retains its First Amendment right to speak freely. "At the same time, some other corporation, with an identical business interest but no media outlet in its ownership structure, would be forbidden to speak or inform the public about the same issue," wrote Justice Kennedy. "This differential treatment cannot be squared with the First Amendment."…

Matt Welch of Reason magazine: Government can't squelch free speech (via Marc's earlier post)

Free speech really does mean free speech, and the laws that the "Citizens" ruling overturned directly and heinously restricted the stuff. Forget for the moment the broad characterization of the ruling -- such as The New York Times claim that it "sweep[s] aside a century-old understanding" -- and drill down to the individual case in question.

Citizens United, a conservative 501(c)(4) nonprofit that has funded a dozen political documentaries over the years, produced a critical documentary about Hillary Clinton in 2008 entitled "Hillary: The Movie." By a decision of the federal government, which was enforcing the Bipartisan Campaign Reform Act (known more broadly as McCain-Feingold), this piece of political speech was banned from television.

Let's boil it down to the essential words: Political documentary, banned, government.

You don't have to be a First Amendment purist to intuit that political speech was, if anything, the most urgent subcategory covered by the First Amendment's "Congress shall pass no law" restrictions. And you don't have to be a Hillary-hater to imagine the shoe on the other foot. What if MoveOn.org's 501(c)(4), Campaign to Defend America, had been blocked by George W. Bush's Federal Elections Commission from broadcasting "McCain: The Movie"? Wouldn't that stink, too?

Ilya Somin: Corporate Rights and Property Rights are Human Rights - Why it’s a Mistake to Conflate a Right with the Means Used to Exercise it

...When I criticize decisions like Kelo v. City of New London, the objection is not that government has violated the rights of land or buildings, but those of the people who own them.

This rhetorical tactic is most often used by liberals and leftists to criticize rights advocated by conservatives and libertarians. However, it’s important to understand that the same ploy can easily be turned on rights favored by the political left. Consider, for instance, the right to use contraceptives upheld by the Supreme Court in Griswold v. Connecticut. Contraceptives, after all, have no rights. They are inanimate physical objects, like any other property. Under the Connecticut law banning their use, women were still free to avoid pregnancy (e.g. — by abstaining from sex, or by using the rhythm method). They just couldn’t use this particular type of property to do it. It’s easy to see that any such critique of Griswold would be specious. After all, contraceptives are just a means that women use to exercise their rights to reproductive choice, albeit a particularly effective one.

The same point applies to corporate speech and property rights. When corporations "speak," they are just a means that individuals use to exercise their rights of free speech — often a more effective means than the available alternatives. And just as the right protected in Griswold actually was a human right rather than a right belonging to the contraceptives, property rights are rights of human owners, not rights belonging to tracts of land or objects.

Rubin: Left's meltdown over Supreme Court decision

...So why is the Left in a frenzy over this? Well, let’s face it: they will need an excuse for the 2010 elections. Better to say they were "swamped by corporate interests" than to say their agenda was rejected. And this is frankly something else for them to talk about in a week when they lost the Massachusetts senate seat and ObamaCare is going down the drain. It is also the ever-so-helpful Obama echo chamber at work. Obama is going nasty-populist so the liberal-media cheerleaders are following suit.

Now, part of what is going on here is the Left’s exaggerated sense of the boldness and deviousness of corporate America. Unlike the caricature painted by the Left and amplified by popular culture, most corporate executives are cautious, controversy-shy and ever aware of the long arm of the government to tax, regulate, and generally make their lives miserable. So I wouldn’t be so sure that corporate America is going to plunge into the political-ad business overnight. For one thing, business isn’t doing so well right now and there is not a lot of cash sitting around. And for another thing, given the political environment, businesses may not need to spend all that much to knock out Obama-philes in Congress. It seems as though ordinary citizens, thinking for themselves, organizing and turning out to vote, are able to do that on their own.

National Review editors: Free to Speak

...The Founders wrote the First Amendment specifically to protect free speech for the purposes of political advocacy and criticism. The Constitution provides that “Congress shall make no law” abridging that right. But that is precisely what Congress did by restricting the right of Citizens United, a nonprofit corporation, to release a documentary film critical of Hillary Clinton while she was a candidate for president. Fortunately, the Court held that the government does not have the right to distinguish between different classes of speakers and to disfavor some of them, such as corporations. The provisions of the law acted as an outright ban on some kinds of speech, and they set up a complex regulatory framework for others, limiting them in a way the Supreme Court found equivalent to a prior restraint on communication. The law also gave the FEC the power to decide what political speech was allowed and to punish those who violated the law with severe civil and criminal penalties.

The idea that the government ought to be empowered to punish any party for engaging in political speech is not only a violation of the First Amendment, it is a fundamental affront to the founding principles of our republic. As Justice Kennedy wrote, speech is an essential mechanism in a democracy, helping to hold public officials accountable to the people. For that reason, the right of free political speech must prevail against laws that suppress it or impose such a burden on it that criticism, advocacy, and debate are stifled.

It speaks volumes about the so-called campaign-finance reformers, and their attitudes toward our constitutional rights, that they are positively apoplectic over this decision. Rep. Alan Grayson (D., Fla.), the Left’s epitome of decorum and nuanced thinking, calls Citizens United v. FEC “the worst Supreme Court decision since the Dred Scott case.” Senator Feingold is demanding new campaign-finance legislation, while Senator Schumer wants congressional hearings on the possibility of limiting the decision’s application. Representative Grayson’s comment, and the fevered reaction among his fellow Democrats, suggests a thin commitment to the Bill of Rights and our most basic freedoms.

It is worth noting that the four liberal members of the Supreme Court, led by Justice Stevens, were so willing to give a free hand to government censors that they wrote a 90-page dissent in which they attempt to justify allowing the government to decide who has the right to engage in political speech and on what terms...

Ponnuru: The Supreme Court got it right

Instapundit: Comments by Clarence Thomas and Barack Obama about decision

...Meanwhile, an interesting passage from Clarence Thomas’s partial dissent, regarding disclosure requirements for donors:
The success of such intimidation tactics has apparently spawned a cottage industry that uses forcibly disclosed donor information to pre-empt citizens’ exercise of their First Amendment rights…..

I cannot endorse a view of the First Amendment that subjects citizens of this Nation to death threats, ruined careers, damaged or defaced property, or pre-emptive and threatening warning letters as the price for engaging in "core political speech, the ‘primary object of First Amendment protection.’"

Rubin: Obama demagogues the Supreme Court ruling

The president issued a written statement yesterday on the Supreme Court’s ruling striking down most of the McCain-Feingold campaign statute. It read:
With its ruling today, the Supreme Court has given a green light to a new stampede of special interest money in our politics. It is a major victory for big oil, Wall Street banks, health insurance companies and the other powerful interests that marshal their power every day in Washington to drown out the voices of everyday Americans. This ruling gives the special interests and their lobbyists even more power in Washington–while undermining the influence of average Americans who make small contributions to support their preferred candidates. That’s why I am instructing my Administration to get to work immediately with Congress on this issue. We are going to talk with bipartisan Congressional leaders to develop a forceful response to this decision. The public interest requires nothing less.

This is as noxious a statement concerning the Supreme Court that has, in my memory, ever been issued by the White House. Let’s count the ways. First, the president — who tells us he is a serious constitutional scholar – offers not a single word of substantive criticism about the Court’s analysis. He treats the Court — as most liberals do, frankly — as a policymaking body. In this case, he doesn’t like the outcome and blasts away at the result, transparently using the Court to regain his populist footing with the public.

Second, what in the world is a bipartisan response to a First Amendment ruling? He’s going to amend the Constitution? He’s going to pack the Court? The lack of acknowledgment that this is a principle of constitutional law, one at the foundation of our democracy, is jaw-dropping. You’ll notice what is not in the president’s statement — "First Amendment" or "Constitution." There isn’t a legislative "fix" to the First Amendment.

And finally, let’s just remember that liberals for years inveighed against any public figure who dared criticize a court ruling. They were doing damage to the political system, lessening respect for the rule of law and even encouraging violence against judges, they finger-wagged. Well, it seems the rules have changed. And from a law professor yet.