Background Knowledge
Rising economic inequality adversely affects our democracy's foundational principles, even at local and national elections. However, America falls behind in recognizing the failings of our economic system, at every level. "For years, American economists had tended to downplay the importance of economic inequality in the country, arguing that its growth was simply the inevitable result of huge and unavoidable shifts in the global economy. Over time, they suggested, extreme inequality would naturally stabilize, and a rising tide would lift all boats."2 Unfortunately, this prediction still has yet to come to fruition, and at the going rate, may never come to pass, as campaign financing demonstrates beautifully.
Ideally, officials in a representative republic like the United States carry out the will of their constituency. Still, elections can prove to be quite expensive, and the success of one's campaign almost always relates to the amount of money spent. For a candidate to build a winning coalition, countless dollars need to be spent on day-to-day operating, legal, advertising, travel, meal, and other expenses. It suffices to say that campaign donations are the keystone to any electoral victory. Those who donate to a campaign can and do hold substantial sway over how a politician behaves in office, and the legislation they support--for better or worse.
Quid Pro Quo
In today’s America, donating near unlimited funds to a campaign is consistently construed as “legal,” provided that it does not obviously violate the “quid pro quo” precedent. Translated from Latin, “quid pro quo” means “something for something,” or, as embodied by a popular English phrase, “You scratch my back, I’ll scratch your back.”
When pressed to provide an example, most people would describe a quid pro quo exchange as something like a crooked corporate crony meeting with a prospective politician in a dark parking garage, each disguised in trench coats and sunglasses, meeting away from the security cameras, so that the corporate crony can hand the would-be senator or representative a briefcase full of money, to secure the politician’s “support” in guiding policies towards the most beneficial ends for the donor corporation. As implicit in this seedy example, most would consider this exchange, between a moneyed entity and a corrupted politician (who is meant to protect constituents over corporations, after all) as corrupt and unlawful.
For the most part, this type of elicit exchange is unlawful. For instance, the Hobbs Act,3 which prohibits extortion and curtails political corruption, or the Travel Act,4 which punishes acts of bribery criminally, are both typically used to litigate against individuals, including politicians, who participate in a quid pro quo exchange implicating their roles as representatives of the people and the U.S. Government.
However, a growing reform movement urges the government to reconsider extending its stance on political corruption beyond the simplistic view of quid pro quo, to extend to more subtle forms of corruption than the classic “briefcase full of money” example. For instance, giving corporations the ability to donate tremendous amounts of money to a political campaign, or independent expenditure committee, may give the moneyed donors an inequitable influence over the decisions of the receiving politician, creating greater loyalty to the donor than to the constituency the politician should represent. The last forty-four years of campaign finance reform litigation and legislation are highlight this conflict.
Federal Election Campaign Act
History presents ample examples of the effect of campaign financing on political policy, and the United States' habit of protecting this legitimized "back-scratching." One infamous case, emerging in the wake of the notorious 1972 Watergate Scandal, concerned the questionable corporate contributions President Nixon received during his reelection campaign, which, much to the horror of the public, resulted in compensatory Presidential policy decisions. In one such case, "a $2 million pledge to Nixon from milk producers [occurred] simultaneous[ly] with the Nixon administration's increase in milk price supports.” 5
To assuage public outrage over such nefarious "back-scratching," Congress passed the Federal Election Campaign Act Amendment of 1974.6 The FECA aimed to impose contribution and expenditure limits in addition to disclosure provisions and public financing of presidential campaigns, and it purported to do so with some rigor.
While many felt the FECA represented a significant step forward in the fight against political corruption, certain politicians reacted with outrage to this attack on their traditions. One representative of the enraged politicians, Senator James L. Buckley of New York, attacked the FECA in 1976, challenging the act as an unconstitutional infringement upon the First Amendment right to freedom of speech, culminating in the 1976 United States Supreme Court case Buckley v. Valeo.7 Ultimately, the decision represented a major win for the politicians who stood to lose the most from the enforcement of the FECA.
"In the Buckley ruling, the Court upheld the act's limitations on contributions as appropriate legislative tools to guard against the reality or appearance of improper influence stemming from candidates' dependence on large campaign contributions. However, Buckley invalidated the act's limitations on independent expenditures, on candidate expenditures from personal funds, and on overall campaign expenditures.”8 As the Court observed in Footnote 18, "being free to engage in unlimited political expression subject to a ceiling on expenditures is like being free to drive an automobile as far and as often as one desires on a single tank of gasoline."9
In the eyes of the Court, an entity using its money to advocate for a particular viewpoint or candidate is not seen as corruption, but an exercise of the entity’s freedom of speech. Where no obvious quid pro quo appeared on the face of a donation, and no reciprocation in the form of favorable action for the donor seemed to be demanded, nothing could be done.
First National Bank of Boston v. Bellotti
If Buckley v. Valeo cracked the defenses raised by the FECA, First National Bank of Boston v. Bellotti10 blew that crack wide open. In this 1978 Supreme Court decision, the Supreme Court struck down a state law that attempted to reinforce and further the purposes of the FECA. Though dissidents of the ruling, like Massachusetts Attorney General Francis Bellotti, would argue: “corporations are creatures of the state and, as such, the state can regulate them however it sees fit,”11 the Court found otherwise.
In this case, the First National Bank of Boston attempted to use its financial influence to oppose a Massachusetts referendum to enact a graduated personal income tax. However, the Massachusetts General Laws of 1976 expanded FECA prohibitions and disallowed corporate funds' use to influence the outcomes of elections, making First National Bank's plan of action criminal. To circumvent the state law, First National sued the Massachusetts Attorney General, claiming that the law unconstitutionally violated its right to free speech by denying it the right to fund political activities. When the Massachusetts Supreme Court ruled against the bank and upheld the Massachusetts law, First National appealed to the Supreme Court. The Supreme Court, led by Chief Justice Warren Burger, reversed the Massachusetts Supreme Court by a narrow 5-4 majority ruling.
The Supreme Court ruled that Massachusetts General Laws violated First National's corporate First Amendment Rights, implicitly permitting First National, and other entities like it, to bankroll political action (or stonewalling) and prohibiting the states from infringing upon that right. By denying states the ability to regulate entity political financing further, this case laid the groundwork for one of the most controversial Supreme Court Rulings more than thirty years later, which most United States citizens know best: Citizens United v. Federal Election Commission.
Citizens United v. F.E.C.
At present, Citizens United v. F.E.C.12 is perhaps the most well-known Supreme Court decision concerning corporate, speech-related spending and currently the “final chapter” on the subject. This 2010 split Supreme Court ruling (a narrow 5-4 decision), “struck down a federal statute limiting independent expenditures by corporations and unions supporting a candidate.”13 Though the decision raised a massive public outcry, even from President Barack Obama, most failed to see that Citizens United merely followed the trend established in the 1970s, favoring corporate political action. The public widely criticized the ruling as opening the floodgates for special interests, though it merely opened the gate another inch wider. Citizens United v. F.E.C. represents the logical conclusion to campaign finance reform as preceded by Buckley v. Valeo and First National Bank of Boston V. Bellotti.
SpeechNow.org v. F.E.C.
Although Citizens United v. F.E.C. is the Supreme Court’s final chapter on corporate speech-related spending (for the time being), SpeechNow.org v. F.E.C.14 represents an interesting footnote to Citizens United, suggesting that the principles set forth in Citizen United and its predecessors may also apply to advocacy group spending, due to the U.S. Supreme Court’s inaction.
SpeechNow was an unincorporated nonprofit association head by David Keating. Their primary mission was the advocacy of the First Amendment and advocating for any federal candidate that shared this viewpoint. SpeechNow intended to operate by contributing to campaign expenditures rather than direct campaign finance. What would lead the case to the D.C. Circuit Court of Appeals occurred on November 19, 2007 when SpeechNow inquired with the FEC as to whether it must register as a political committee and if it qualified for specific contribution limits. In January 2008 the FEC issued an advisory opinion that SpeechNow should register as political committee. SpeechNow countered that, “the Act unconstitutionally restricts the individuals’ freedom of speech by limiting the amount that an individual can contribute to SpeechNow.org and thus the amount the organization may spend."15 On March 26, 2010, just three months shy from the Citizens United v. F.E.C. ruling the D.C. Circuit Court of Appeals extended the precedents first established in Buckley v. Valeo to cover contributions only from corporate interests but also to advocacy groups. Because the U.S. Supreme Court declined to review the decision, the decision was impliedly affirmed by the Supreme Court.
McCutcheon v. F.E.C.
The fight to identify money with free speech rages on even after Citizens United v. F.E.C. or SpeechNow.org vs. F.E.C. One of the latest legal precedents occurred in 2012 when Alabama resident, Shaun McCutcheon, filed suit against the F.E.C., challenging the F.E.C.A.’s biennial limits on an individual’s combined contributions to federal candidates. McCutcheon argued that after donating the base limit of $2,500 to sixteen federal candidates, that he was unable to donate to the twelve other candidates he supported due to the 2011-2012 biennial limits of $46,200. McCutcheon proceeded to sue the F.E.C. arguing such limitations were an infringement on his First Amendment rights. However, the United States District Court for the District of Columbia upheld the biennial limit as a means of preventing corruption or the appearance of corruption. McCutcheon would go on to appeal his case to the Supreme Court on February 19, 2013 in McCutcheon v. F.E.C.16 Following the precedent set by Buckley v. Valeo, the United States Supreme Court struck down this limit on biennial campaign contributions as a direct infringement on the First Amendment in a 5-4 decision. This ruling allowed for individuals to donate the maximum contribution to as many candidates they see fit, all in the name of free speech.
501(c)(4)s and Independent Expenditure-only Political Action Committees or Super P.A.C.s
With Citizens United v. F.E.C. and SpeechNow.org v. F.E.C. in the books, the rise of the dark money interest could now fully take hold in American politics. There are two components which allow for dark money interests to influence political actions and campaigns—501(c)(4)s and Super P.A.C.s.
The Internal Revenue Service (I.R.S.) categorizes a 501(c)(4) as a tax-exempt non-profit social welfare organization. People are concerned that a 501(c)(4) acts as a covert channel through which individuals and organizations may anonymously donate to political organizations with no one the wiser (except perhaps the recipient of these funds). In this way, under the table and off the books, certain political figures and movements enjoy the backing of wealthy patrons, above and beyond what they might otherwise be able to receive under Federal law and within Constitutional bounds.
Secrecy is the main concern when thinking about 501(c)(4) organizations and "Independent Expenditure-only Political Action Committees," better known as Super P.A.C.s. Super P.A.C.s are allowed to take unlimited donations from individuals, corporations, unions, and other similar groups. Super P.A.C.s are also permitted to participate in unlimited campaign spending but are not allowed to coordinate or contribute to a candidate's campaign. Many concerned citizens are critical of the fact that a 501(c)(4) organization can donate to a Super P.A.C. This donation can be made anonymously due to the 501(c)(4)’s status as a non-profit organization. Super P.A.C.s can finance independent expenditures for a candidate or organization. While this does not cross into quid pro quo territory, many people believe contributing in such a manner can discreetly gain political influence and loyalty.
Voting with Dollars
The exploitation of tax code “gray areas” and legal “loop holes” is a concern for many Americans. However, "Patriot dollars" may be the solution to these issues with the current state of campaign finance. In the book Voting with Dollars: A New Paradigm for Campaign Finance, the authors Bruce Ackerman and Ian Ayres propose a solution to such dilemmas. Throughout the book, Ackerman and Ayres propose a government-run system that provides each voter a special credit card account containing fifty "Patriot dollars" for presidential elections. To use this money, citizens go to their local automated teller machine and anonymously send their Patriot dollars to their favorite candidate or political organization.17 To not limit any contributor’s free speech, they propose that additional funds can also be given anonymously through a similar method in the hopes of not buying political influence. If such a method of campaign finance were ever adopted, would ideally renew interest and faith in the democratic process while also not infringing on big-money donor's right to free speech as defined in Buckley v. Valeo.
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