Citizens United vs Democracy

In late January we witnessed the biggest blow to the United States’ political system in generations. And no, it wasn’t the election of Scott Brown. On January 21^st, the Supreme Court announced their decision on the Citizens United v. Federal Election Commission (FEC) – agreeing (5-4) with Citizens United, that bans on corporate contributions or expenditure to campaigns was unconstitutional because it was a ban on corporate speech, and thus a violation of the first amendment. Liberals and Conservatives alike ought to take immediate action – and ideas to limit the impact of this ruling are needed.

First, some very quick background.

Citizens United created “Hillary: The Movie”, a feature film length attack ad that aimed to convince any who watched it that Hillary Clinton is unfit for office. This was to be aired immediately before the democratic primaries took place. However, §441b of McCain-Feingold (officially called the Bipartisan Campaign Reform Act of 2002) states that “[i]t is unlawful for any national bank, or any corporation organized by authority of any law of Congress, to make a contribution or expenditure in connection with any election to any political office or in connection with any primary election or political convention or caucus held to select candidates for any political office…”

So, placing this movie directly before the democratic primary was illegal. The movie didn’t air, and instead has been working its way up the federal court system, landing on the Supreme Courts’ docket in 2009. The court ruled (5-4) that “Section 441b’s prohibition on corporate independent expenditures is … a ban on speech.” Meaning, §441b violates the first amendment and is therefore unconstitutional. Corporations and unions are now allowed to spend, without limit, money on political ads and campaigns designed to influence the public at any point during an election cycle (previously there was a ban on ads within 30 days of an election). While this ruling applies equally to corporations and unions, the real danger is the corporations – who can drastically outspend Unions.

There is good reason to be concerned about this. The Citizens United ruling elevates the power of lobbyists and special interests in Washington. This ruling comes at a time when it is crystal clear that large corporations have far too much power in Washington already. Up until now, corporations that wanted to get directly involved with campaigning had to create political action committees (PACs). PACs, by law, are funded by individual donations. In corporations, these are usually funded by personal donation made by managers and key stakeholders. However, the Citizens United v. FEC ruling will now allows these interests to contribute corporate profits to campaign efforts. Often these profits are gained by people who do not share the same political opinion as the organization their money is going to. Think of the irony: a health insurance company, making a profit by refusing medical payments to those that they “insure” (pre-existing condition…), uses this profit to lobby against health insurance reform that would allow those they “insure” to get treated for their illness.

Oh right, and there is one more thing: this ruling allows foreign corporations to spend to influence elections as much as it allows US corporations.

It’s time for congress to take direct action. The Senate Rules Committee, chaired by Sen. Charles Schumer (D-N.Y.), has started holding hearings to explore ways of the impact Citizens United v. FEC, and to pass legislation doing so by Election Day 2010 (and Senator Sherrod Brown recently proposed legislation – see below). Some proposed steps, like mandating that campaign ads by corporations or unions disclose who is funding the ads, are a start. But we need to do more than that. Let’s start with a few ideas.

Tax the hell out of them!

Admittedly, this is my favorite idea. Putting a 100-500% or so tax on these types of ads would discourage corporations from using corporate profits. The taxes gained could be used to pay down national debt, or better yet, be part of a clean election fund – directed at giving candidates public financing to help keep those who choose public financing on a relatively level playing field with those who don’t.

There is a problem though … this is unconstitutional. Taxing speech in order to silence speech is certainly unconstitutional. If the Supreme Court ruled that a ban on corporate expenditures to campaigns is a ban on speech, it is reasonable that they would interpret a tax explicitly directed at limiting this activity as a tax directed at limiting speech. So, we need some more ideas.

Corporate Disclosure/Transparency

One of the first ideas I’ve heard is requiring statements in any campaign advertisement to report who paid for it. The simplest version of this would be announcements similar to the “This message brought to you by the Exxon Mobile Corporation”. We could even require CEOs to appear in any corporate financed advertising giving this message, just as we require political candidates to appear in their ads expressing their approval of the ads message. But most CEOs aren’t recognizable by the public, so this would do little in the way of transparency. Personally, I don’t think a message like this – put at either the beginning or the end of a commercial attack ad - will do much to minimize the impact of these campaign advertisements. Most people believe what they hear – especially if it’s said over and over again.

Candidate Disclosure/Transparency

Disclosure shouldn’t be limited to corporations. As mentioned, this ruling not only allows corporations to produce campaign ads using corporate profits at any time during the campaign cycle, but it also allows corporations to donate directly to a candidate’s campaign. Candidates that except corporate money should have to disclose, as clearly as possible, that they have. Whatever a candidate spends these campaign donations on, it should be disclosed that these came from corporate donations that would have previously been banned under the Campaign Reform Act of 2002. If the donations went in to their general campaign fund, this message should be on every ad or document they produce for their campaign.

Shareholder and Consumer Democracy

On Tuesday, the first witnesses testified in front of the Senate rules committee. Two proposals were made (the two that follow), which I think would take us in the right direction.

Heather Gerken, a Yale Law School Professor who specializes in election and constitutional law, points out that “the problem here is not American democracy, but shareholder democracy … Citizen’s united vindicated the right for corporations to speak and share holders are the corporation.” By requiring a majority of the shareholders to sign off on specific political positions, or to require a majority to vote to endorse specific candidates, there would be a genuine procedural roadblock to corporations further influencing our political system.

This is a great start. But I believe it should go a little further. Shareholders make their profits off of the public buying their corporation’s goods or services. I believe that there should be some sort of disclosure to their customers. Corporations should be required to post information about what political ads/campaigns their profits have funded. This will give them some accountability, not only to their shareholders, but to the public. I don’t think this would necessarily have a tremendous effect, but this sort of disclosure to the public would provide a disincentive and would allow those who care to shop with their politics.

Regulating some “speech”

Congress does have the power to prohibit some political spending. They can do this by having certain requirements with industries that they do business with. This wouldn’t be a ban on speech, since corporations are not required to do any business with the US government. This narrow ban, suggested by Edward Foley of Mertz Law School, could include banks which the US government bailed out, corporations contracting with the defense department, any insurance agency the federal government uses (e.g., through employee health insurance), public utility companies, and any corporation considered too big to fail. I would add to this, by suggesting a 10 year ban on a corporation doing business with the government if they used corporate profits to affect a campaign. This would provide a powerful disincentive for any of the larger corporations that does business with, or may ever want to do business with, the federal government. States could implement similar laws for State governments.

As mention, Senator Sherrod Brown introduced the “Citizens Right to Know Act”. This act contains a number of the ideas expressed above, including shareholder approval and corporate transparency. This bill has not been made publically available yet, but I’m afraid it doesn’t go far enough. However, passing this bill would not prevent congress from further legislation down the line. For that, we’ll need more ideas.