Believe it or not, before some recent Supreme Court decisions the American political system was not always so skewed in favor of the wealthy and powerful. In fact, dating back to the Tillman Act of 1907 and the Taft-Hartley Act of 1947, Congress limited the ability of corporations and labor unions to make contributions or expenditures in connection with political campaigns.
The influx of money from corporations, unions, and ultra-wealthy individuals in recent decades is due largely to a few poorly reasoned Supreme Court decisions. The best way to understand how our campaign finance laws became so horribly dysfunctional is to understand those decisions, which are explained in detail below.
- Buckley v. Valeo (aka The Court’s First Big Mistake) (1976)
- First National Bank of Boston v. Bellotti (aka The Citizens United of the 1970s) (1978)
- Federal Election Commission v. Massachusetts Citizens for Life (aka The Nonprofit Case) (1986)
- Austin v. Michigan Chamber of Commerce (aka The Good One) (1990)
- Citizens United v. FEC (aka The Worst Decision Since Dred Scott) (2010)
- Arizona Free Enterprise Club v. Bennett (aka The Public Financing Case) (2011)
- McCutcheon v. Federal Election Commission (aka The Nightmare Continues) (2014)
Buckley v. Valeo (aka The Court’s First Big Mistake) (1976)
The Federal Election Campaign Act of 1971 was a bold effort to prevent corruption and undue influence in our campaign finance system. The Act placed limits on the amount an individual could contribute to a candidate for elected office, the overall amount any individual could contribute annually, independent expenditures in support of or against a clearly identified candidate, and the amount a candidate could spend on their own campaign. A number of candidates, contributors, and organizations challenged the Act.
The Court’s decision starts on a positive note, acknowledging that there is a compelling interest in preventing corruption or the appearance of corruption caused when individual donors make large financial contributions to candidates, noting that “representative democracy is undermined” by such large contributions. As a result, the Court upheld limits on the amount that an individual could contribute to any given candidate for office as well as the overall limit on an individual’s total contributions during any calendar year.
However, the Court subsequently concluded that while limits on the amount an individual can contribute to a candidate are permissible, limits on the amount an individual or group can spend “relative to a clearly identified candidate” are not. In other words, John Q. Billionaire cannot give $500,000 to a presidential candidate, but he can place $500,000 worth of ads telling you to vote for the very same candidate. In addition, the Court struck down limits on the amount a candidate could spend from their own personal funds and overall limits on the amount a candidate could spend during the course of their campaign. The Court reached its bizarre conclusion by claiming that independent expenditures do not pose a significant risk of real or apparent corruption the same way that direct contributions do.
“But the concept that government may restrict the speech of some elements of our society in order to enhance the relative voice of others is wholly foreign to the First Amendment, which was designed ‘to secure the widest possible dissemination of information from diverse and antagonistic sources.”
Why The Court Was Wrong
It was remarkably naive for the Court to conclude, even in 1976, that independent expenditures did not pose a risk of political corruption. Going back to our John Q. Billionaire example, if a United States Senator is about to vote on impending legislation and she is considering the opinion of one individual who has contributed $250 to her campaign or John Q. Billionaire, who has funded $500,000 worth of television ads supporting her, it’s clear whose opinion will carry more weight with the senator.
For the Court to acknowledge that a direction contribution of $10,000 from John to Jill Senator comes with a risk of corruption but then conclude that a $10,000 ad paid for by John supporting Jill Senator doesn’t share that risk is a false distinction.
In addition, the Court’s decision shows a baffling misunderstanding of how the competitive marketplace of ideas should operate in order to create a thriving democracy. The Horrifying Quote above makes it sound as if limiting the speech of some in order to enhance the speech of others is highly problematic and unusual, but nothing could be further from the truth.
We restrict speech all the time–in newspapers, in Congress, and even in the Supreme Court–because we understand that we learn more through a competitive debate than through one person’s monologue. The fact that it is often beneficial to place limits on how much one person can speak to allow someone else to be heard is so obvious that it should go without saying.
Buckley v. Valeo was the beginning of the Supreme Court’s poorly reasoned modern campaign finance law. So if we want to get money out of politics we have got to do more than just overturn Citizens United; we must take steps to ensure that the Supreme Court cannot so easily strike down our future efforts at campaign finance reform. The Restore Democracy Amendment would remedy this problem by returning power to Congress and state legislatures to decide how best to limit campaign contributions and expenditures.
First National Bank of Boston v. Bellotti (aka The Citizens United of the 1970s) (1978)
In order to protect the integrity of the referendum process from the undue influence of corporations, the Massachusetts legislature passed a law prohibiting corporations from making contributions for the purpose of influencing the vote on any question submitted to the voters. Banking associations and various corporations challenged the statute.
The Court struck down the Massachusetts law designed to protect voters despite two compelling interests offered to justify the prohibition of corporate speech. The first justification offered by the state was to ensure that actual human beings had a meaningful voice in the electoral process.The Court conceded that this interest was indeed of the highest importance, but claimed that there was simply no evidence that corporations threatened to drown out other points of view, undermine the democratic process, or diminish citizens’ confidence in government.
The second potential compelling interest was to protect investors and shareholders from having their funds used to promote political views they don’t necessarily agree with. But, rather than addressing that undeniably compelling interest directly, the Court said that the statute in question was both underinclusive and overinclusive as to that interest, meaning that it was both too narrow and too broad.
Concluding that the law in question did not serve the compelling interests set forth by the state of Massachusetts, the Court struck down the law that would have been protected voters from being drowned out by corporate influence. For a more in depth analysis of the flaws in this reasoning, see Citizens United.
“It is the type of speech indispensable to decisionmaking in a democracy, and this is not less true because the speech comes from a corporation rather than an individual.”
Why The Court Was Wrong
See Citizens United.
Federal Election Commission v. Massachusetts Citizens for Life (aka The Nonprofit Case) (1986)
Section 441b of the Federal Election Campaign Act prohibited corporations from using corporate treasury funds to make any expenditure in connection with any federal election. Expenditures for such purposes had to come from a separate segregated fund financed by voluntary contributions.
Massachusetts Citizens for Life, a nonprofit corporation, distributed a Special Edition of their “newsletter” financed with general treasury funds that told voters with a blaring front page headline, “EVERYTHING YOU NEED TO KNOW TO VOTE PRO-LIFE.” Since MCFL’s newsletter constituted the type of expenditure prohibited by Section 441b, the question before the Court was whether or not Section 441b was constitutional.
The good news is that the Court recognized that corporations may use their vast resources to gain “an unfair advantage in the political marketplace” and acknowledged that “the treasury funds of a business corporation “are not an indication of popular support for the corporation’s political ideas. They reflect instead the economically motivated decisions of investors and customers.”
The bad news is that the Court believed neither of those compelling interests applied to MCFL because it was a non-profit designed to disseminate political ideas rather than a for-profit corporation. As a result, the majority concluded that the MCFL and similar nonprofit organizations don’t pose a threat to the political process despite their underlying corporate form.
“Groups such as MCFL, however, do not pose that danger of corruption.”
Why The Court Was Wrong
At first glance, the Court’s reasoning is appealing. After all, there are differences between a tiny nonprofit group like MCFL and a massive corporation like Pfizer. MCFL’s independent expenditures may not have posed a significant risk to the electoral process. But what about the National Rifle Association and its $54 million of outside spending or Planned Parenthood’s $6 million? Considering that many nonprofits can deploy massive war chests to support their political beliefs, it’s clear that the corporate form poses a danger to our political process even through a nonprofit corporation. The Court’s mistake was failing to acknowledge that reality.
Once again dissenting, Justice Rehnquist correctly points out that though successful corporations wield more influence over the political process than less successful ones, it is the potential for such influence that justifies the regulation of the corporate form in general. Plus, supporters who wanted to back MCFL’s political message could still do so through a separate segregated fund, which would more accurately reflect the amount of support for the ideas MCFL expressed. By underestimating the danger of groups like MCFL and overestimating the differences between MCFL and its for profit brethren, the majority paved the way for huge non-profit corporations to wield undue influence over our legislators, initiatives, and referenda.
The Restore Democracy Amendment would allow legislatures to crack down on spending by corporations, and distinguish between for profit and nonprofit corporations as they see fit.
Austin v. Michigan Chamber of Commerce (aka The Good One) (1990)
The Michigan Campaign Finance Act restricted corporate spending in connection with elections, prohibiting corporations from using treasury funds for independent expenditures in support of or in opposition to any candidate for state office. Such contributions could only be made from a segregated fund used only for political purposes. The Michigan State Chamber of Commerce contested the law. The question before the Court was whether or not Michigan had a compelling state interest for the restriction on corporate spending.
The Court finally gets one right. Justice Thurgood Marshall’s majority opinion recognized a compelling interest in preventing corruption by restricting, “the influence of political war chests funneled through the corporate form.” The Court recognized, “a serious danger that corporate political expenditures will undermine the integrity of the political process.” Even though the Chamber of Commerce was a nonprofit, the Court identified many characteristics that made the Chamber of Commerce threatening to the electoral process. For its reasoning and outcome, Austin stands out as an all too rare moment of sanity in the Court’s campaign finance jurisprudence.
Spot On Quote
“Michigan’s regulation aims at a different type of corruption in the political arena; 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.”
Why The Court Was Right
The Spot On Quote concisely articulates two compelling interests that should be sufficient to justify nearly any restriction on corporate spending in politics. If Jane Doe supports one candidate and John Doe supports an opponent, a truly competitive marketplace would allow both Jane and John to express their support in roughly equivalent amounts. They both should have an equally meaningful opportunity to express their support, whether or not they actually choose to do so in equal measure.
But if Jane Doe is a secretary at Acme, Inc. and John Doe commands a majority of Acme’s board of directors, suddenly John can support his chosen candidate with millions of dollars or even television ads, while Jane’s voice is drowned out. It’s a megaphone versus a whisper and suddenly the electoral marketplace of ideas is no longer a reasonably fair competition between two candidates; John’s candidate dominates the marketplace. That dynamic is, in a nutshell, how massive amounts of wealth can corrode and distort the electoral process.
It’s worth noting that the same logic can justify restrictions on individual contributions as well. If Jane is a thousandaire and John is a billionaire, he can use his resources to disseminate his ideas to millions while Jane may only be able to reach dozens. They may support their candidates with equal fervor or Jane may even be more passionate than John. But money tips the scales so far in John’s favor that Jane’s support for her candidate scarcely matters by comparison.
The Restore Democracy Amendment will allow us to limit the political influence of corporations and unions; it will also pave the way for other reforms to help create the truly competitive marketplace of ideas that we deserve.
Citizens United v. FEC (aka The Worst Decision Since Dred Scott) (2010)
The Bipartisan Campaign Reform Act of 2002 prohibited corporations and labor unions from using their general treasury funds to make independent expenditures expressly advocating for the election of defeat of a candidate. It also prohibited “electioneering communications,” which were essentially broadcast, cable, or satellite communications that referred to a candidate for Federal Office and were made within 30 days before a primary election or 60 days before a general election. Corporations or unions could set up separate segregated fund such as a political action committee to fund such communications. Citizens United was a nonprofit corporation that challenged the law.
In a ruling that directly contradicted previous precedent set in Austin, the Court held that even though corporations are unique entities that receive special benefits, those special benefits do not justify prohibitions on corporate political speech. In other words, after Citizens United corporations and unions were free to spend unlimited amounts of money to influence elections. The Court also went so far as to claim that censoring corporations has “muffled the voice that best represents the most significant segments of the economy” and that by limiting corporate political speech, “the electorate has been deprived of information, knowledge, and opinion vital to its function.”
Ultimately, the Court overruled Austin because “the Government may not suppress political speech on the basis of the speaker’s corporate identify. No sufficient governmental interest justifies limits on the political speech of nonprofit or for-profit corporations.”
“The Court has thus rejected the argument that political speech of corporations or other associations should be treated differently under the First Amendment simply because such associations are not ‘natural persons.’”
“On certain topics corporations may possess valuable expertise, leaving them the best equipped to point our errors or fallacies in speech of all sorts, including the speech of candidates and elected officials.
Spot on Quotes (from the dissenting opinion)
“Although they make enormous contributions to our society, corporations are not actually members of it…Our lawmakers have a compelling constitutional basis, if not also a democratic duty, to take measures designed to guard against the potentially deleterious effects of corporate spending in local and national races.”
“In a functioning democracy the public must have faith that its representatives owe their positions to the people, not to the corporations with the deepest pockets.”
“It might also be added that corporations have no consciences, no beliefs, no feelings, no thoughts, no desires. Corporations help structure and facilitate the activities of human beings, to be sure, and their ‘personhood’ often serves as a useful legal fiction. But they are not themselves members of “We the People” by whom and for our Constitution was established.”
Why The Court Was Wrong
Citizens United will undoubtedly go down in history as one of the worst Supreme Court decisions of all time. The Spot On Quotes and dissenting opinions in both Bellotti and Citizens United do an excellent job of explaining why restrictions on corporate political speech are not only constitutional, but absolutely necessary. The Court’s fundamental mistake was its failure to treat corporate speech any different than an individual’s speech, stating in Bellotti that there was no support, “for the proposition that speech that otherwise would be within the protection of the First Amendment loses that protection simply because its source is a corporation…” It goes without saying that when our Founding Fathers wrote the First Amendment, they were worried about the rights of John Stevens, not the John Stevens Tobacco Company.
Corporations don’t actually have any opinions. Whenever a corporation “speaks,” the reality is that some individual or individuals affiliated with the corporation are doing the speaking. The speech may be a collective decision made by the board of directors or the brainchild of the social media intern, but a corporation can never say anything that the individual members of the corporation cannot say on their own. Corporations can never add a new idea to that marketplace. They can only artificially magnify the ideas of the individuals who control the corporation, giving those ideas more power than they inherently deserve.
Furthermore, corporations pose a unique threat to our democracy because they are given special benefits such as limited liability and perpetual life in order to increase their economic viability and that such benefits have, “placed them in a position to control vast amounts of economic power which may, if not regulated, dominate not only the economy but also the very heart of our democracy, the electoral process.” As a result of this belief, legislatures all over the country for decades have concluded that “restrictions upon political activity of business corporations are both politically desirable and constitutionally permissible.” The Court’s decisions in Belloitti and Citizens United cut against nearly a hundred years of collective wisdom.
Passing the Restore Democracy Amendment is the best way to undo the damage done by Citizens United and to ensure that our democracy is never held hostage by the Supreme Court again. Please consider making a donation to Citizens Take Action so we can continue our work to restore government of, by, and for the people.
Arizona Free Enterprise Club v. Bennett (aka The Public Financing Case) (2011)
In the wake of a political scandal called AzScam, where a number of legislators were caught accepting bribes and embezzling, Arizona voters passed a public financing system for their elections. Candidates who opted into the program could receive initial public funds plus matching funds if an opposing privately financed candidate’s personal expenditures combined with independent groups’ expenditures exceeded the initial allotment, topped out at twice the initial grant. The petitioners challenged the constitutionality of the matching funds, saying it “penalizes their speech and burdens their ability to fully exercise their First Amendment rights.”
The court ruled that the matching funds program creates a substantial burden on political speech and does not withstand First Amendment scrutiny. The majority concluded that the Arizona law burdened privately financed candidates and their supporters because the candidate and outside expenditure groups were potentially forced to choose between unlimited free speech and having their opponent receive additional funding. The Court saw this as a First Amendment violation.
“The separation between candidates and independent expenditure groups negates the possibility that independent expenditures will result in the sort of quid pro quo corruption with which our case law is concerned.”
Why The Court Was Wrong
The Court’s issue with the law lies with the triggering mechanism, not the public funds themselves. The trigger mechanism was designed to make sure that the subsidy is competitive enough to entice participation while not wasting state resources. Where the Court erred was in concluding that giving more money to the publicly financed candidate infringed upon the privately financed candidate’s First Amendment rights. After all, the public financing system may enhance the speech of the publicly financed candidate, but it does not restrict the privately financed candidate’s speech in any way, shape, or form.
More generally, rather than restricting free speech, public financing systems like Arizona’s enhance First Amendment rights by facilitating debate and allowing more candidates to participate in politics. Further, since anyone anywhere on the political spectrum can opt into the program, decades of precedent say that the program does not violate the First Amendment’s limitation on speech subsidies.
By going against previous precedent and finding a bizarre First Amendment violation in a public financing system that did not restrict the speech of a single individual, the Court struck down a law that enhanced political discourse, reduced candidates’ reliance on big money, and gave small donors a greater voice within our political system. The Court’s decision also significantly limited our options for countering the influence of big money, making the Restore Democracy Amendment even more essential.
McCutcheon v. Federal Election Commission (aka The Nightmare Continues) (2014)
McCutcheon concerned the overall amount that an individual can contribute to all political candidates or committees within one year. The appellant, McCutcheon, argued that the limits prevented him from contributing to a number of candidates and committees that he wanted to support.
The Court struck down the limits on aggregate contributions, paving the way for wealthy individuals to gain even more influence over our elections. After Citizens United, nobody should have been surprised that Court ignored precedent from Buckley v. Valeo that stood for almost 40 years but the decision is disheartening nonetheless. The Court’s justification for striking down the limits was primarily that there is only one compelling reason to restrict campaign finances–preventing corruption or the appearance of corruption–and that the aggregate contribution limits did not sufficiently serve that interest.
“In assessing the First Amendment interests at stake, the proper focus is on an individual’s right to engage in political speech, not a collective conception of the public good.”
Why The Court Was Wrong
The Court’s first and biggest mistake was its continued failure to recognize that there are many compelling reasons other than preventing corruption to place limits on campaign contributions or expenditures. One compelling reason might be to maintain a competitive marketplace of ideas in the political arena and ensure that no one idea can drown out others simply because it is supported by powerful moneyed interests. Another compelling reason might be to prevent one individual from gaining too much cumulative influence over legislators through campaign contributions. But by refusing to recognize any such interests as compelling, over the years the Court has created a rubric by which few campaign finance reforms can be upheld.
The Court’s second big mistake, which was nicely articulated through the Horrifying Quote, was that it willfully ignores the impact decisions like McCutcheon have in the real world. Using the Court’s logic, a billionaire could theoretically buy up every second of advertising airtime during an election year because even though that would prevent a competitive election and anger millions of citizens, that billionaire’s rights are more important than the impact that billionaire’s conduct has on the country as a whole. It is this kind of thinking that makes it clear why our campaign finance laws are better decided by We The People than by the Supreme Court. When the Supreme Court is the final arbiter of our campaign finance laws it only takes five judges to undermine the integrity of our democracy. That’s why passing the Restore Democracy Amendment and shifting power back to We The People is so critically important!