In 2010, the courts reversed decades of legal precedent when they said it was OK for corporations and unions to spend as much as they want to put their favorite candidates in office.
Laws aimed at limiting the corrupting influence of corporate money in elections go back more than a century while restrictions on union spending go back more than 60 years.
So what happened?
The short answer is, the First Amendment happened — or at least a new interpretation of it did.
In a nutshell, corporations and unions now have the same First Amendment right as people do to spend as much money as they want on advertising and other political spending to get candidates elected — as long as they aren’t in cahoots with them.
The government has been consistent, though not always effective, in attempting to insulate elections from the corrupting influence of corporations and labor unions.
Congress first banned corporations from funding federal campaigns in 1907 with the Tillman Act. President Theodore Roosevelt, the great reformer of the Gilded Age, said at the time that such a prohibition would be “an effective method of stopping the evils aimed at in corrupt practices acts.”
(Ironically, it was Roosevelt himself who benefited from those contributions.) In 1947, the Taft-Hartley Act extended the ban to labor unions. The laws were weak and largely unenforceable.
It wasn’t until 1971 that Congress got serious and passed the Federal Election Campaign Act. It required the full reporting of campaign contributions and expenditures. It limited spending on media advertisements. But that law was ruled unconstitutional.
In 1972, burglars broke in to the Democratic National Committee headquarters in the Watergate complex in Washington, D.C. and everything changed.
It turned out that the break-in was funded by the Committee to Re-elect the President. CREEP was a campaign committee to fund Nixon’s 1972 campaign, but was likened to a “slush fund” filled with cash contributions from corporations and various unsavory characters.
Nixon’s subsequent efforts to cover up the administration’s involvement in the break-in led to his resignation in 1974 — and major reforms of campaign finance laws.
In 1974, Congress amended the law to, among other things, create an enforcement body – the Federal Election Commission to enforce limits on both contributions and expenditures. The constitutionality of the new laws was challenged in the 1976 Supreme Court case known as Buckley v. Valeo.
The court upheld limits on contributions to candidates, saying they were “primary weapons against the reality or appearance of improper influence stemming from the dependence of candidates on large campaign contributions.”
But the court rejected limits on expenditures, arguing that such restrictions “limit political expression at the core of our electoral process and of First Amendment freedoms.”
That balancing act — protecting free speech versus keeping government free from corruption — remains at the center of the debate over campaign finance reform.
These “independent expenditures” by individuals are permitted, but the spenders are prohibited from acting in concert with a candidate.
The court ruled the “absence of prearrangement or coordination of the expenditure with the candidate or his agent alleviates the danger that expenditures will be given as a quid pro quo for improper commitments from the candidates.”
Corporations and labor unions were still banned from making those expenditures, or contributing to organizations that made those expenditures.
McCain-Feingold and electioneering
In 2002, Congress updated the campaign finance laws — again. The Bipartisan Campaign Reform Act, also known as McCain-Feingold, identified a new kind of spending, known as an “electioneering communication.”
This is basically a broadcast or cable advertisement that refers to a candidate but doesn’t urge the audience to vote for or against him — though the intent is usually pretty clear. Similar to independent expenditures, electioneering groups were banned from using corporate or union contributions to purchase advertising close to an election.
McCain-Feingold’s primary concern was to close a loophole on that was allowing donations from corporations and unions to the national party committees which had been growing rapidly during the 1990s. These unregulated contributions, often called soft money, poured in from corporations and labor unions and were used to fund campaign-related “issue ads.”
Issue ads were used to help or hurt a candidate’s chances, but were generally unregulated as long as they avoided using certain words like “elect” or “support” or “oppose.”
The Citizens United ruling, released in January, 2010, tossed out the corporate and union ban on making independent expenditures and financing electioneering communications. It gave corporations and unions the green light to spend unlimited sums on ads and other political tools, calling for the election or defeat of individual candidates.
The court said that because these funds were not being spent in coordination with a campaign, they “do not give rise to corruption or the appearance of corruption.”
The court did not, however, strike down disclosure requirements. Organizations that make these types of expenditures are still required to report their expenditures and donors. Unfortunately for advocates of transparency in elections, that disclosure requirement apparently does not apply to nonprofit corporations.
SpeechNow.org raises the stakes
Only a couple of weeks after the Citizens United ruling, a lesser-known case in the District of Columbia Circuit Court of Appeals, upped the ante.
The “SpeechNow.org” case, using the Supreme Court’s reasoning, decided that limits on individual contributions to groups that make independent expenditures are unconstitutional.
These two major court decisions led to the creation of what we now call “super PACs” — political organizations that can receive unlimited corporate, union and individual contributions and make unlimited expenditures to advocate for the election or defeat a federal candidate.
These new super PACs are still required to report their donors. Unfortunately, those disclosure reports will not be made available until after the January contests in Iowa, New Hampshire, South Carolina and Florida.
Of equal or possibly greater concern, in terms of transparency of donors, are nonprofits.
In the past, nonprofits known as “social welfare organizations” were permitted to make independent expenditures and electioneering communications — but only if they did not accept corporate or union contributions. Thanks to Citizens United, that restriction has been removed.
But unlike the Super PACs, the nonprofits do not report who funds them. For example, Crossroads GPS has spent millions of dollars to help elect Republicans to office, but does not report its donors to the Federal Election Commission.
Meanwhile, the FEC — which has three members of each party — has yet to update its rules to reflect the courts’ rulings.