Political campaign finance laws in the U.S. are hurting our democracy;  so much so as the US may not be any more democratic than Hong Kong or Iran, according to Harvard Law Professor Larry Lessig.    While this sounds like a radical assessment, Lessig is one of the brighter and moderate academic minds in the country, so his point is worth considering.   He references a recent authoritative study that shows how “organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence”.    His video on this topic is worth watching.

OK, we know.  Campaign finance  is not your typical consumer-blog topic, but bear with us.    The big problem appears to be Citizens United.  You can’t buy, borrow or steal Citizens United because it isn’t a commodity as much as a man-made catastrophe or, more specifically, a court-made catastrophe.     Citizens United is the shorthand name for  Citizens United v. Federal Election Commission, (558 U.S. 310),  a  US constitutional law case, in which the United States Supreme Court held in 2010 that the First Amendment prohibits the government from restricting political independent expenditures by corporations, associations, or labor unions.   It was a controversial 5-4 decision at the time and has been controversial ever since.   But there is a consumer angle — I promise.

The true extent of the costs of this Supreme Court decision has become increasingly evident in the subsequent three years.    The 2012 election cycle expenditures are finally surfacing and the number appears to be close to  $10 billion.   This makes the 2012 election cycle the most expensive one in US history — at least as large as most states’ entire operating budget.   This recent 2014 election cycle demonstrated that in a fairly healthy economy with low gas prices and no “scandals”,   voters were overwhelmingly negative about the country’s condition.    How is this possible?   A book called Dollarocracy examines the impacts of Citizens United upon the political process and it provides strong clues about voter discontent.    It isn’t based upon what’s real, but what voters are being told on a daily basis by very well-funded interests.

Just this month,  some academics attempted to quantify the real cost of Citizens United, i.e. whether Citizens United has affected the democratic process by altering candidates’ incentives to run for office and donors’ incentives to contribute to political campaigns directly.  Their paper is not an easy read but it is an important one for anyone wishing to delve into the details of how the corruption of our political system is costing the nation.    The authors found that find “considerable support for the claim that it was, indeed, the elimination of state independent expenditure bans that caused the post-Citizens United change in election probabilities”.    They also find that Citizens United is associated with an increase of approximately two percentage points in the probability that a Republican candidate is elected in state legislative races.

Another, even more disturbing, academic analysis found that of the $1 billion spent by outside groups in the 2012 election cycle, almost 60% the expenditures could not be traced to the funders.   In comparison, the previous major election cycles tracked over 96% of expenditures.  So the move to “dark money” in campaigns has been breathtakingly quick.

What is particularly notable is that the major infusions of corporate money into the political process doesn’t necessary result in quantifiable benefits for those contributors.   More often, the real benefit is gridlock;   corporate money often seeks to prevent reform that might effect the bottom line of those large corporate interests who are exploiting the status quo.

Interestingly, the public has already figured out the impact of Citizens United.   Demos.org released a report last year establishing strong popular opposition to this controversial decision.    It found that over 80% of respondents believe that money is corrupting the political process.     And the public’s concern translated to consumer action, as documented by Demos.org:

“Seventy nine percent would refuse to buy a company’s products or services to protest a company’s political spending. Seventy five percent would sign a petition to the SEC for corporate disclosure. Two out of three people (65%) would sell stock in the company, and over half (53%) would ask their employer to remove it from their retirement account. Just over half of respondents (52%) would go to a meeting of the company’s shareholders to ask for disclosure; 44 percent would be willing to go to protest.”

The biggest problem with Citizens United is that most of the large donors do not have the disclose their “investments” in the political process.   So there is no company to boycott or protest because there is no transparency in campaign spending thanks to the Supreme Court.    Some organizations have attempted to track the expenditures — and it is not an easy effort.   The largest corporate donor in the 2012 elections was called Specialty Group.   It donated over $10 million to Tea Party PACs, according to USA Today.   But this company was set up merely to funnel money to politicians, having been created by a Tennessee attorney only two months prior to Election Day.  Amongst the top known corporate contributors — according to Opensecrets.org — are:

  • Honeywell International
  • AT&T
  • Perry Homes
  • Northrop Grumman
  • Comcast
  • Home Depot
  • Goldman Sachs
  • Lockheed Martin

According to US News and World Reports,  the largest individual donors were  (by the companies that they own):

  • Las Vegas Sands  (owner of The Venetian in Las Vegas amongst other casino holdings)
  • Perry Homes
  • Contran Corp  (a metal and chemical conglomerate)
  • Ameritrade
  • Newsweb Corp  (a Chicago-based publisher who advocates for liberal causes such as gay rights and the arts.)
  • Paypal  (owner Peter Theil is a well known libertarian)

Forbes magazine adds some additional individuals to the list:

  • Robert Rowling  (oil man who also owns Gold’s Gym and Omni Hotels)
  • Koch Brothers
  • Jerrold Perenchio  (former owner of Univision)
  • Bob Parsons  (Go-Daddy owner)

So if consumers want to express their outage about unfettered political spending,  this is a list of some companies who they may wish to boycott (or support).   But until the voters express their outrage through the ballot box, it is unlikely that Citizens United will be overturned anytime soon.    In fact, there’s a very real possibility that things could get appreciably worse.     In October, less than three years after deciding Citizens United, the Supreme Court heard arguments in McCutcheon v. Federal Election Commission, a case which has the potential to flood millions of dollars more into United States election and this time, directly into the coffers of candidates for elected office.   In April 2014, it decided in favor of the plaintiff, resulting in yet another overturn of campaign finance restrictions.

At issue in McCutcheon were the aggregate limits on contributions to candidates for federal office.  The aggregate limits cap the amount a person can cumulatively contribute to all candidates for federal office and party committees over the course of each two-year election cycle. These limits currently stand at $48,600 per cycle for candidate committees and $74,600 for contributions to non-candidate committees such as party committees, for a total of $123,200. These limits have existed since 1974, when, in the wake of the Watergate scandal, Congress amended the Federal Election Campaign Act of 1971 to limit the amount that can be contributed to individual candidates and the aggregates. The aggregate limitations were upheld by the Supreme Court in its seminal 1976 campaign finance case Buckley v. Valeo, which established a distinction between contributions and expenditures, whereby Congress could regulate the former in order to prevent quid pro quo corruption and its appearance, while expenditures, posing no corruption threat, could not be regulated.

In the Buckley decision, the Supreme Court stressed, however, that preventing corruption and its appearance is the sole constitutionally permissible objective for campaign finance laws, and that any attempt to “level the playing field” between candidates unconstitutionally violates the First Amendment. The McCutcheon case gave this more conservative Supreme Court a second chance to rewrite the decision in Buckley with respect to the constitutionality of the aggregate contribution limits, clarify the Court’s understanding of what constitutes corruption, and the  scope of the government’s interest in preventing it.  With the McCutcheon decision issued and the aggregate limits eliminated,  individuals can to contribute as much as $3.6 million in a single election cycle by contributing the maximum amount under the base limits to a party’s committees and slate of Congressional candidates. McCutcheon,  a wealthy Alabama businessman,   joined by the Republican National Committee and Senate Minority Leader Mitch McConnell have succeeded in further undermining the American electoral system.   As noted by retired Justice John Paul Stevens,  the decision is based upon a distorted view that money  is speech and that out-of-district money has the same First Amendment protection as in-district money.   He believes that it will take a constitutional amendment to fix the problem.  It would have to override the First Amendment and allow Congress and the states to impose “reasonable limits on the amount of money that candidates for public office, or their supporters, may spend in election campaigns.   Unfortunately, the likelihood of such an amendment coming to fruition in the near-term is low, if not improbable.

The on-going assault on campaign finance limits continues to be among the three major issues that plague modern American politics  (the other two being the breakdown and cooption of US media outlets and Congressional redistricting that locks in most all incumbents).   The McCutcheon decision has continued the slide to irreversible dysfunction and the 2014 election results reveal how unfettered campaign spending is impacting our democracy.