Citizens United & Money in Politics

From our recent history, it now seems that money now counts for more than votes in our democracy. Corporations and uber-wealthy plutocrats can spend so much money pushing a distorted message that the old adage, “tell a lie often and loud enough and it will be believed”, comes into play and our citizens will vote against their own interests.

While the Supreme Court has opened the floodgates with the Citizens United ruling that money is speech and corporations are people, this is only the culmination of a long running transfer of rights to corporations and removing restrictions on money in politics.

Overturning Citizens United is just one of the challenges we face in restoring democracy.

Let’s discuss how our democracy is being undermined and what we can do about it.

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Information & Resources – See Below
News & Comments – see the Money in Politics Blog

What is “Corporate Personhood” and how does it affect us?
How has the Citizens United vs the FEC case exacerbated those impacts?
How can we turn back the tide of money in politics?

What is the impact of money in politics?

There are actually two questions here. The first is whether the amount of spending in an election campaign influences the outcome of that election. The second, and ultimately the more important, is whether political contributions affect the laws and regulations that our politicians vote for and implement. For the purposes of this discussion, we will ignore straightforward corruption – direct payments for political favors.

Dealing with the first question could be difficult. There are a number of studies prior to Citizens United that show that the level of spending is not determinative in the outcome of elections. Measuring Campaign Spending Effects on U.S. House Elections by Gary C. Jacobson describes these and is a fairly easy read. While the studies have some inconsistencies, they show that incumbents have advantages that money alone cannot overcome. Ultimately, the challenger and his/her campaign are more determinative but a challenger needs enough money to succeed in establishing recognition and communicating the message.

How Much Does Campaign Spending Influence the Election? A Freakonomics Quorum

Jacobson’s paper, however, does not extend beyond the 2002 U.S. House election. The PAC landscape has changed with Citizens United and there doesn’t appear to be similarly scholarly data yet for the post Citizens United political landscape. What is the impact of the large relative and quantitative differences in spending that we are seeing now as the result of Citizens United?

Money in politics. A (partial) review of the literature by Thomas Stratmann does evaluate spending on California ballot measures, which are traditionally impacted by large PAC and corporate spending. The conclusions reached don’t directly apply to candidate races, nor do they address directly the effects of a large imbalance of spending. They do suggest that it takes much less spending supporting a ballot initiative than opposing to have the equivalent effect. This could be significant in candidate races since much of the spending is on negative advertising, suggesting that positive advertising supporting challengers and their positions might somewhat mitigate a discrepancy in spending.

The Wisconsin recall Walker campaign, not fully evaluated and understood at this point, does suggest that big differences in spending can effect an outcome (see
Walker recall comments and stats below). Ultimately, it is hard to completely disregard the instinctive expectation that huge differences in spending will, in fact, significantly influence the outcomes of candidate races.

Now to the arguably more important question of money’s impact on politics: the effect of contributions on policy decisions by elected officials.

Again, the available data is pre Citizens United and probably not an accurate representation of the current political environment. However, the Stratmann article does reference 2002 analysis which “finds that an extra $10,000 in banking contributions increases the likelihood of a House member voting in favor…by approximately eight percentage points”. He also identifies spikes in contributions around legislation related to the contributor’s interests with the interpretation that “contributions and votes are exchanged on a spot market”, a polite way of saying that votes were bought.

Weekly House Votes vs Weekly Contributions

Graph comparing timing of U.S. House votes and contributions received.

An interesting notation in the document is a reference to model by Gordon and Hafer in 2005 which predicts that large contributors are less likely to comply with regulations than smaller ones.

If $10,000 influenced a vote in 2002, the obvious logical extrapolation is that donations in the hundreds of thousands and even millions will buy a vote in 2012. Those same large contributors that are less likely to comply with regulations are, logically, more likely to expect quid pro quo for their contributions in the form of blocking or watering down legislation that affects them, loopholes, tax breaks, etc.

Considering both questions now, our one-person-one-vote democracy may become irrelevant as we, citizens of only modest means, find that our votes count for less than uber-wealthy individuals and corporations that can influence not only elections, but policy.

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What is “Corporate Personhood” and how does it affect us?

The original and basic concept of corporate personhood is to give such organizations the ability to legally operate within an economy and society. It allows them to enter into contracts, sue and be sued, for example. Corporations are the creation of the state and the rights of corporations were initially only those granted by the state for a specific purpose and a limited period of time (the construction of a railway, for example). There are no references in the Constitution to corporations.

However, the Supreme Court has continually “found” corporations in numerous places in the US Constitution over the past 124 years. These “findings” gave rights to corporations, including many of those in the Bill of Rights.

The following summary of rights granted to corporations is from the Program on Corporations, Law & Democracy:

  1. 1st Amendment Free Speech rights. Corporations use these rights, meant to protect human beings from the power of the state, to influence elections through political “contributions” (more like “investments”); to advertise for guns, tobacco and other dangerous products over the objections of communities; to avoid having to label genetically modified foods.
  2. 4th Amendment Search and Seizure rights. Corporations have used these rights to avoid subpoenas for unlawful trade and price fixing, and to prevent citizens, communities and regulatory agencies from stopping corporate pollution and other assaults on people or the commons.
  3. 5th Amendment Takings, Double Jeopardy and Due Process corporate rights. Corporations must be compensated for property value lost (e.g. future profits) when regulations are established to protect homeowners or communities. Corporations cannot be retried after a judgment of acquittal in court. The granting of property to a corporation by a public official cannot be unilaterally revoked by a subsequent public official or Act of Congress.
  4. 14th Amendment Due Process and Equal Protection corporate rights. These rights, originally enacted to free slaves from oppression, were gradually extended to corporations by the courts. Corporations have used these rights to build chain stores and erect cell towers against the will of communities; oppose tax and other public policies favoring local businesses over multinational corporations; and resist democratic efforts to prevent corporate mergers and revoke corporate charters through citizen initiatives.
  5. Commerce Clause-related corporate rights. Corporations have used this section of the Constitution (Art 1, Sec 8), for example, to ship toxic waste from one state to another over the “health, safety, and welfare” objections of communities – claiming the waste isn’t actually “waste” but “commerce.”
  6. Contracts Clause-related corporate rights. The Supreme Court ruled in Dartmouth vs. Woodward (1819) that a corporation is as a party in a private contract based on the Contracts Clause (Art 1, Sec 10) rather than being a creature of public law. Even though the state creates a corporation when it issues a charter, that state is not sovereign over the charter, merely a party to the contract. Thus, corporations became “private contracts” with the state and, therefore, shielded from many forms of control by We the People.

Here is another summary from Move to Amend. The Supreme Court has:

  1. Prohibited routine inspections of corporate property without a warrant or prior permission, even though scheduling such visits may permit a company to hide threats to public health and safety. (Marshall v Barlow’s, 1978)
  2. Struck down state laws requiring companies to disclose product origins (International Dairy v. Amnestoy, [pdf] 1996), thus creating “negative free speech rights” for corporations and preventing us from knowing what’s in our food.
  3. Prohibited citizens wanting to defend their local businesses and community from corporate chains encroachment from enacting progressive taxes on chain stores. (Liggett v. Lee, 1933)
  4. Struck down state laws restricting corporate spending on ballot initiatives and referenda, enabling corporations to block citizen action through what, theoretically, is the purest form of democracy. (First National Bank of Boston v. Bellotti).

This process has been going on for a long time. Since the 1886 case of Santa Clara County v. Southern Pacific Railroad, justices have struck down hundreds of local, state and federal laws enacted to protect people from corporate harm based on this illegitimate premise.

Corporate Personhood Timeline

Given the “rights” granted by corporate personhood, corporations are wielding ever-increasing control over jobs, natural assets, politicians, even judges and the law. Ironically, corporations once operated to benefit their shareholders but, in this age of funds and computerized trading, shareholders wield little power over corporate management. So, there is little to restrain them and, in essence, it is not corporations the court had granted rights to, a small cadre of corporate management who, in essence, have become “super citizens” with rights well beyond the majority of our citizens.

How has the Citizens United vs the FEC case exacerbated those impacts?

In 2010, the Supreme Court ruled, by a 5 to 4 decision, in Citizens United v. Federal Election Commission that companies (and unions) have a free-speech right to donate unlimited amounts for and against candidates. The decision does not affect the federal ban on direct contributions to candidates, but has unleashed an avalanche of spending directed to supposedly independent groups such as PACs, Super PACs, and non-profit trade organizations, much of it from undisclosed sources.

While before Citizens United people could spend unlimited unlimited sums on independent advertising directly supporting or opposing candidates, that money had to be spent by the individual directly. It could not be given to a political action committee, which had an individual contribution cap of $5,000 and could not take corporate or union funding. Wealthy individuals were reluctant to spend their money on advertising which identified them as the advertiser.

After Citizens United, the courts (most importantly in v. FEC) and the FEC provided a green light for super PACs to collect unlimited sums from individuals, labor unions, and corporations for unlimited independent spending. 527’s whose practice of allowing anonymity to donors had been legally questionable now had the court’s blessing after Citizens United.

The Numbers Don’t Lie

The Center for Responsive Politics (CRP) graph below shows the huge acceleration of spending beginning in 2002. The majority of this spending is independent expenditures.

Outside Spending by Cycle

Outside political spending from 1990 through March 8th, 2012

The CRP also reports that the percentage of campaign spending by Super PACs has risen from 1% in 2006 to 47% in 2010.

Undisclosed Campaign Spending

Undisclosed campaign spending has risen from 1% in 2006 to 47% in 2010

This money is primarily going into advertising. Campaign ad spending by interest groups has increased by a factor of about 15 so far between 2008 and 2012.

Advertising spending by interest groups

Advertising spending by interest groups has increased by a factor of 15

Corporate political spending is only one aspect of the trend. We are also the investment of the uber-wealthy in the political process. Yes, as reported in Forbes, it is an investment for them as well: For Billionaires, Politics Is The Cheapest Asset Around These people have no responsibilities to be responsive to shareholders and their personal wealth vastly exceeds any previous political spending

Past spending vs individual wealth

Past spending trivial vs individual wealth that could be spent

One of the ironies of the Citizens United decision is that public employees can end up funding political contributions that are directed against their interest. A significant portion of the money that corporations are spending on politics is financed by equity capital provided by public pension funds — capital contributions that the government requires public employees to finance with their paychecks. The trustees of those pension funds are seldom making contributions that benefit those employees.

Benjamin Sachs,professor at Harvard Law School desribes how public employee pension fund trustees can use the employees’ money to make political donations that conflict with the employees’ interests and desires

In fact, as evidenced in the recent Walker recall campaign in Wisconsin, where donations to Walker were nearly 10 times higher than those to his challenger, Barrett, political spending is frequently specifically anti-public union.

Walker cash advantage & sources

Wisconsin recall Walker campaign – large cash advantage to Walker, 2/3 of which from out of state

The recall Walker campaign is perhaps the most telling example to date of the impact of Citizens United. Total spending was 70% higher than the next most expensive state race. $33.5 million dollars was spent by independent organizations, almost as much as the total in that previous most expensive race. Individual donations in support of Walker were as high as $510,000 while PAC expenditures in support of Walker totaled $18 million with $9 million by the Republican Governors Association Right Direction Wisconsin PAC alone. $15.5 million was spent independently in support of Barrett.

Wisconsin recall Walker stats

Corporate spending, as suggested above, is only part of the problem. Individuals are subject to a $2,500 cap on direct donations to a candidate. However, an individual can donate unlimited amounts to a super PAC (evidence the $10 million given by Sheldon Adelson to Newt Gingrich). If money buys influence, how much does a $100 donation buy when an individual or corporation can contribute millions.

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How can we turn back the tide of money in politics?

There are ways:

  • A constitutional amendment to revoke corporate personhood
  • Public financing of elections
  • A law requiring corporations receive shareholder approval for political contributions
  • Laws requiring disclosure of corporations and individuals making all contributions
  • A tax on political contributions exceeding a specified amount, the revenue of which is used to fund public financing of elections.

Another way to combat the influence of money is to shine a light on who is spending. This can take place at the legislative level and at the shareholder level.

Shareholders are taking disclosure and transparency to heart. Many more corporations are facing shareholder proposals filed for disclosure of the corporations’ political and lobbying spending.

Shareholder proposals for disclosure

Shareholder proposals for disclosure of political and lobbying of Fortune 200 companies.

Unfortunately, aside from raising a public stink, shareholders don’t have much recourse if a company decides not to disclose a political donation. And, of course, disclosure alone does not actually prevent those donations. At this point in time, even though a study by John Coates at the Harvard Law School suggests that “politics may lead firms to pursue value-destroying projects” and may be contrary to shareholder interest, Citizens United has opened the barn door and the realities of who votes corporate proxies means there is little chance of shareholder action stopping or redirecting corporate political expenditures. Disclosure only gives the public the opportunity to “vote with their dollars”.

Can shareholder activism affect corporate political spending?

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