Campaign Finance Frenzy Post-Citizens United

This article is the first in a two–part series exploring the effect of Citizens United in the 2012 election cycle.

By Sarah Kellogg

It has been more than two years since the U.S. Supreme Court issued its controversial decision in Citizens United v. Federal Election Commission. And while the constitutional right of corporations, unions, and individuals to give money to influence elections may be settled law, speculation about the long–term effect of the ruling is as fresh today as it was the day the High Court handed down its 5–4 decision.

In the last two years Citizens United has become a political shorthand of sorts. For conservatives, the decision was an injection of constitutional sanity into an unpredictable and biased campaign funding system; for progressives, it triggered a campaign spending “arms race” that could bring democracy to its knees by handing control of elections to corporations and the wealthy. The vast middle ground is rarely visited territory, although some commentators and legal scholars see Citizens United as an evolutionary rather than a revolutionary decision.

There is no disagreement, however, on the ferocity of the reaction to the opinion. It unleashed a wave of vehement attacks on the Court’s majority that continues to this day and that has been magnified, in part, by the cash deluge in this year’s presidential campaign. Campaign finance reformers remain especially critical of the Court’s decision to award “personhood” to corporations to solidify their free speech rights, and they wait for the proverbial other shoe to drop on corporate personhood.

What the Supreme Court did in Citizens United was block congressional efforts to limit the contributions of individuals, labor unions, and corporations to outside interest groups. These independent expenditures were deemed expressions of free speech and not political donations to be regulated by the Federal Election Commission (FEC) because these outside interest groups were not affiliated with candidates or political parties. The opinion crystallized the Court’s thinking on campaign finance law and drew a bright yellow line in the sand for Congress: Trespass beyond this line at your own risk.

Since the Court acted, some of the critics’ dire predictions have come true (record–breaking amounts of money have been dumped into the presidential campaign in 2012) while others have not materialized (corporate America secretly hijacking elections). Some say it’s too soon to see the horizon on Citizens United, others say the nation has slammed head first into the reality of the decision. Of course, the challenge in weighing the impact of Citizens United, even at this stage, is that the two sides are so far apart on how they view the ruling.

“I think the situation is far worse than people could have anticipated,” says Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington (CREW), a nonprofit government watchdog organization. “There’s way more money coming in and more secret money coming in. Plus, I think there’s a lot more coordination going on than anybody knows between these groups and the candidates, and it’s been made worse because of the lax enforcement by the FEC. It is an absolute mess.”

Others see it very differently, of course. “This is the most competitive, turbulent, vibrant, speech–oriented election that we’ve had in this country since before the Federal Election Campaign Act in the 1970s,” said Robert Kelner, a partner at Covington & Burling LLP, during a briefing on Citizens United hosted by the think tank Bipartisan Policy Center in late July. “There is a tremendous increase in the competitiveness of this election, both in primaries and now even in the general election, a much greater pluralism of speech and activism, and that is a positive development.”

Given these competing views, it is no wonder that Citizens United remains a Rorschach test for U.S. political and legal experts who are still trying to tease out its potential impact two years after the decision came out.

Ultimately, Citizens United may not go down in history as the Supreme Court’s most important decision on campaign finance, but it will certainly be viewed as one that established a new era in campaign finance jurisprudence and policy, both in terms of the role of campaign contributions in American politics and the authority of Congress to regulate them.

Campaign Finance Overhaul
The Citizens United ruling dates back to 2010, but its seeds can be traced to 2002 and the congressional debates around—and the ultimate passage of—the Bipartisan Campaign Reform Act (BCRA), also known as the McCain–Feingold law for its main cosponsors, Sen. John McCain of Arizona and former Sen. Russ Feingold of Wisconsin. Talk to any campaign finance expert, and they will say the story of Citizens United really started there.

“The reality is that although there have been some changes in the legal landscape in the last few years, by far the most dramatic change in the campaign finance system was the McCain–Feingold law,” Kelner said. “It fundamentally changed the way our campaign finance system worked.”

A favorite among reformers, the BCRA was the solution to a problem that had surfaced in the 1990s as the use of “soft money” by political parties became near epidemic. While donations to candidates and political action committees (PACs) were considered “hard money” and were strictly regulated and capped, soft money contributions had no limits, could come from unions and corporations as well as individuals, and were used for party building and outreach activities. The contributions could not, however, be spent directly on candidates for federal office.

To combat soft money flooding the system, the BCRA banned the contributions completely. Donations to national parties and candidates would have to come in the form of hard money and would be subject to strict contribution limits, effectively tying the hands of political parties and candidates and giving outside interest groups a clear path ahead. The campaign finance race was on again.

As Congress approved the BCRA, there were already concerns about its constitutionality. Even as President George W. Bush signed the bill into law, he questioned whether it could withstand judicial scrutiny. Despite those concerns, the bill became law and the court challenges soon followed.

“What’s really happened is that Congress overreached in McCain–Feingold and they got away with it for a while, and then the courts finally stepped in,” says Cleta Mitchell, a partner at Foley & Lardner LLP. “The reformers are responsible for what we’re seeing now.”

In the years since its passage, however, the BCRA has become the Jenga of campaign finance. The courts have slowly pulled away at its bones, questioning the constitutionality of its provisions and discarding them as they saw fit. Aided by a phalanx of conservative attorneys and right-wing groups, the courts have invalidated much of the law. Its disclosure requirements, endorsed by Citizens United, remain intact for so–called super PACs, political parties, and candidates, although there are pending efforts to overturn them as well.

While the BCRA may have played a central role in campaign finance policy in the last decade, that does not diminish the importance of Citizens United, say observers. “There have been but few decisions in the history of the Supreme Court that have excited as much outrage and sustained fury from citizens across the political spectrum as has Citizens United,” said Lawrence Lessig, a professor at Harvard Law School, in his testimony before the Senate Judiciary Subcommittee on the Constitution, Civil Rights and Human Rights during a hearing in July on Citizens United and the rise of super PACs. “[People] have lost the faith that their government is responsive to them, because they have become convinced that their government is more responsive to those who fund your campaigns.”

Legal Challenges
Experts say the most profound reverberations from Citizens United have been in the transformative effect of its precedent. Already the lower courts have reviewed cases in light of Citizens United, building out on the original decision and giving activists new avenues to challenge. All this activity is making campaign reformers even more fearful of the final shape of campaign finance law in the United States.

“I view this as a moment of high danger for democracy,” says Jamin Raskin, a professor of constitutional law at American University Washington College of Law and a Maryland state senator.

One of the widely reviled byproducts of Citizens United are the super PACs, independent committees that can raise and spend money to support or oppose political candidates, as long as they don’t coordinate their activities with the candidate. The controversial super PAC was borne out of a critical lower court decision in SpeechNow.org v. Federal Election Commission.

SpeechNow.org challenged federal regulations imposing contribution limits, disclosure requirements, and the registration of political committees, noting that the law restricting contributions was stifling its right to political speech. The group also said that the reporting requirements were too burdensome.

On March 26, 2010, the U.S. Court of Appeals for the District of Columbia Circuit struck down limits on contributions based on its reading of Citizens United.

“[B]ecause Citizens United holds that independent expenditures do not corrupt or give the appearance of corruption as a matter of law, then the government can have no anti-corruption interest in limiting contributions to independent expenditure-only organizations,” the appeals court wrote. “No matter which standard of review governs contribution limits, the limits on contributions to SpeechNow cannot stand.”

The appeals court rejected SpeechNow.org’s challenge to the disclosure requirement, however. “But the public has an interest in knowing who is speaking about a candidate and who is funding that speech, no matter whether the contributions were made towards administrative expenses or independent expenditures,” wrote the court. “Further, requiring disclosure of such information deters and helps expose violations of other campaign finance restrictions, such as those barring contributions from foreign corporations or individuals.”

The result of the decision was that SpeechNow.org, which was organized as a 527 organization, could receive unlimited contributions, although it will have to register as a political committee and disclose financial information to the FEC. Before the decision, 527 organizations were limited to $5,000 in individual donations.

Where SpeechNow.org expanded the fundraising clout of independent groups, American Tradition Partnership, Inc. v. Bullock extended Citizens United’s landscape from federal elections to state and local ones. It also showed a clear schism between the Supreme Court and some state courts, many of which had upheld limits on state campaign spending through the years.

Such was the case in Montana. With the Citizens United decision looming over, the Montana Supreme Court ignored the justices’ opinion and demonstrated in a detailed opinion that the state’s 1912 law, setting limits on spending by corporations in state political campaigns, was needed to battle the corrupting influence of money in politics.

“With the infusion of unlimited corporate money in support of or opposition to a targeted candidate, the average citizen candidate would be unable to compete against the corporate-sponsored candidate, and Montana citizens, who for over 100 years have made their modest election contributions meaningfully count would be effectively shut out of the process,” wrote Chief Justice Mike McGrath in the court’s 5–2 decision on December 30, 2011.

As the case made its way to the High Court, progressives, including several sitting justices, hoped that the Court would use it as a vehicle to reverse Citizens United in full or in part. They believed that a properly chagrined Supreme Court, having watched money flood into state and national political campaigns in 2010 and 2012, would revisit Citizens United with new eyes.

Instead the majority decided to stand firm. It squashed the Montana Supreme Court ruling and struck down the state’s century–old law, issuing a per curiam opinion without a full briefing or oral argument. “The question presented in this case is whether the holding of Citizens United applies to the Montana state law. There can be no serious doubt that it does,” wrote the majority. “Montana’s arguments in support of the judgment below either were already rejected in Citizens United, or fail to meaningfully distinguish that case.”

The liberal members of the Supreme Court responded forcefully and left little doubt of their opinion of Citizens United. “[E]ven if I were to accept Citizens United, this Court’s legal conclusion should not bar the Montana Supreme Court’s finding, made on the record before it, that independent expenditures by corporations did in fact lead to corruption or the appearance of corruption in Montana,” wrote Justice Stephen Breyer. “Given the history and political landscape in Montana, that court concluded that the State had a compelling interest in limiting independent expenditures by corporations. Thus, Montana’s experience, like considerable experience elsewhere since the Court’s decision in Citizens United, casts grave doubt on the Court’s supposition that independent expenditures do not corrupt or appear to do so.”

The judicial community continues to be divided on the ruling. In an April 2012 blog post, Judge Richard Posner, a conservative on the U.S. Court of Appeals for the Seventh Circuit in Chicago, questioned the justices’ reasoning in Citizens United, focusing on the proposition that the risk of the corrupting influence of campaign donations would be less if the money were given to independent groups like super PACs rather than to the individual candidate.

Posner noted that super PACs that favor a candidate are particularly effective at carrying the candidate’s “negative” message forward and disparaging an opponent, although most super PACs stay away from the more difficult messaging around positive ads, which would require more coordination with the candidate that is taboo in this new legal construction.

“It thus is difficult to see what practical difference there is between super PAC donations and direct campaign donations, from a corruption standpoint,” Posner wrote. “A super PAC is a valuable weapon for a campaign, as the heavy expenditures of Restore Our Future, the large super PAC that supports [Mitt] Romney and has attacked his opponents, proves; the donors to it are known; and it is unclear why they should expect less quid pro quo from their favored candidate if he’s successful than a direct donor to the candidate’s campaign would be.”

Rise of the Super PACs
The influential role of super PACs is on display in the 2012 presidential contest, the first test of the post–Citizens United campaign finance regime on a national campaign. Republican presidential candidates have benefited the most from the new rules, watching an avalanche of money enter the process.

Awe inspiring as it was, the wave of new money in the GOP primary was not determinative. No single candidate was able to rely on outside groups to “buy” the Republican nomination. In reality, the new money empowered even the weakest of the backbenchers to extend their candidacies. Armed with vast sums of money from super PACs, even former House Speaker Newt Gingrich and former Pennsylvania Sen. Rick Santorum, the first among the obvious underdogs, were able to sustain their challenges to Romney deep into the primary race despite the former Massachusetts governor’s sizeable financial and organizational advantage.

“Gingrich lasted a lot longer in the Republican primary than he would have but for the very significant contribution of the super PACs that allowed him to stay alive,” says Floyd Abrams, a partner at Cahill Gordon & Reindel LLP.  “In my point of view, it allowed the public to have more choices for a longer period of time. That’s a good thing, not a bad thing.”

The super PACs have certainly made their mark in 2012. The campaign watchdog Center for Responsive Politics (CRP) reported that as of August 29, there were 812 super PACs nationally in this election cycle, up from 83 in 2010, and that these groups had raised some $350 million in contributions. Restore Our Future, a super PAC supporting Romney, was the most moneyed of the group, raising $89.6 million so far this cycle. Priorities USA Action, the Obama-oriented super PAC, was No. 2 on the list with $25.5 million, and Winning Our Future, the super PAC favoring Gingrich, was third with $23.9 million in contributions.

Overall contributions to the presidential race totaled $696.8 million as of late August. Democrats raised $356.7 million and Republicans pulled in $337.3 million, according to the CRP.  The U.S. Senate races raised $444 million, while contributions to the U.S. House of Representatives contests reached $782.5 million as of August 29.

Campaign ad spending in the presidential race hit a record-breaking level by mid-August. An NBC News/Smart Media Group Delta analysis showed that by August 16 total campaign spending had surpassed the $500 million mark, about the same amount of money spent on advertising in the entire 2008 general election. Nearly half of the spending—some $238 million—was done by outside groups, such as super PACs, and the vast majority of that money ($205 million) went to support Romney or to attack President Obama. Ad spending by outside groups that support Obama reached $33 million, accounting for just 14 percent of the total ad spending made on behalf of the president.

As of mid–August, the top five entities in ad spending in this general election were the Obama campaign, $207 million; Crossroads groups (pro-Republican), $105 million; the Romney campaign, $67 million; Americans for Prosperity (conservative-leaning group), $42 million; and Restore Our Future, $29 million. While the Obama campaign may be the biggest spender, Romney’s allies, combined with his own campaign, spent a total of $273 million, whereas Obama and his supporters spent $239 million in advertising efforts.

While campaign finance activists decry the money race, conservatives belittle the notion that spending $1 billion or more on a presidential campaign is something to fear. “We spend more money advertising potato chips in this country than on the presidential race,” says Mitchell, the campaign and election expert at Foley.

Names Behind the Numbers
The money men behind the presidential candidates have both been cheered and derided for the influence they wield on the presidential contest. Most intriguing of the group has been billionaire casino magnate Sheldon Adelson, who gave more than $20 million to a Gingrich-focused super PAC. As Gingrich’s campaign failed, Adelson was able to jump horses and join the Romney camp. The move was a super PAC–fueled version of musical chairs.

“The question isn’t whether Gingrich succeeds, the question is whether Sheldon Adelson succeeds,” says Raskin, the constitutional law professor at American University. “He’s been handed off from one candidate to the next. He’s already promised to spend $100 million to elect Mitt Romney. Does anyone think that his independent spending won’t influence the Romney campaign?”

Adelson has become the left’s bogeyman of campaign finance for a reason. Along with the money to support Gingrich, the casino mogul has given another $10 million to the pro-Romney super PAC Restore Our Future. Adelson has committed to spend as much as $100 million to defeat the president.

As to Romney’s fealty to Adelson, the question goes unanswered for now, although the Romney campaign did have U.S. Rep. Paul Ryan, its freshly minted vice presidential candidate, make a pilgrimage to Las Vegas in August to visit Adelson and other donors four days after being announced as Romney’s running mate.

“I don’t think it helped the Republicans to show Congressman Ryan flying out to kiss Adelson’s ring,” says Abrams, the First Amendment lawyer at Cahill Gordon. “The other reality is, in a presidential race, including this one, I don’t think there is any doubt that both parties will have plenty of money to get their messages out.”

Conservatives find the criticism of Adelson and his club of GOP high rollers especially galling. Democrats have for years had their own “sugar daddies,” among them investor George Soros, insurance executive Peter Lewis, and mortgage lenders Herb and Marion Sandler, who all wrote large checks and helped finance the campaigns of various presidential candidates such as U.S. Sen. John Kerry of Massachusetts in 2004 and a little–known senator from Illinois, Barack Obama, in 2008.

This year top Democratic donors such as DreamWorks Animation chief executive officer Jeffrey Katzenberg ($2.1 million) and Chicago media mogul Fred Eychaner ($3.2 million) have given millions of dollars to outside groups to support the Obama campaign, although Soros has given only $1.1 million.

“The Democrats can’t stand the idea that conservatives might want to fight back and have the resources to do it,” says Mitchell. “That’s why they’re so focused on Sheldon Adelson and other Republican contributors, but they weren’t making the same complaints when George Soros or Peter Lewis were writing big checks to Democratic candidates. What Citizens United has done is really level the playing field, and they don’t like it.”

The Making of a Corporate State?
The Democrats’ objections to Citizens United have resulted in a slew of legislative proposals at the federal, state, and local levels to reverse the Supreme Court’s decision, either through statute or constitutional amendment. Local and state lawmakers in 40 states have introduced or approved resolutions asking Congress to overturn the decision. Seven state legislatures—California, Hawaii, Maryland, Massachusetts, New Mexico, Rhode Island, and Vermont—have officially called on Congress to act.

“I think the change will have to come from the bottom up, rather than the top down,” says Sloan of the government accountability watchdog CREW on reversing Citizens United. “At the local and state level, they have reacted to this, but I’m not sure we’ll see anything happen in Washington without pressure from below.”

In these resolutions the critiques focus on everything from the corporate “personhood” determination to concerns that money coming into the elections will have a corrupting influence. Ultimately, the underlying concern is that the voice of the individual citizen will be drowned out by the rich and powerful.

“Since the Supreme Court’s decision on Citizens United, we have seen the rapid rise of super PACs and unprecedented influence buying by wealthy individuals seeking to advance their agendas,” U.S. Sen. Richard Durbin (D–Ill.) said at the July Senate Judiciary subcommittee hearing. “This year, election spending by outside groups will likely shatter previous records.”

Durbin believes that congressional measures such as the Fair Elections Now Act, which would replace campaign fundraising with various public funding mechanisms, and the DISCLOSE Act, which would establish a more vigorous reporting regime, are both admirable, but they won’t have as much success in trimming back the decision as his proposed constitutional amendment. Nearly two million people nationwide have signed a petition calling for a constitutional amendment to enshrine campaign finance protections.

The prospects for the DISCLOSE Act ever finding its way to the president’s desk are unlikely. The bill would require corporations, unions, and other groups to report campaign contributions of more than $10,000 to the FEC. It failed to gain the support of the full Senate twice in July as Republicans blocked its advance. Senate Majority Leader Harry Reid, during the debate on the Senate floor, accused the GOP of protecting their rich cronies.

“[T]here is nothing free about an election purchased by a handful of billionaires,” said Reid, a Nevada Democrat. “It is obvious Republicans’ priority is to protect a handful of anonymous billionaires … willing to contribute hundreds of millions of dollars to change the outcome of a close presidential contest. But today they’ll have an opportunity to reconsider that backwards priority and stand up for the average voter instead. I hope they join Democrats as we work to ensure all Americans—not just the wealthy few—have an equal voice in the political process.”

Critics of Citizens United still maintain that the justices have been naive at best and brazenly and unforgivably political at worst, unleashing a torrent of corrupting cash and elevating corporations to a powerful constitutional status that will be hard to curb in the future. While campaign donations in 2012 are getting all the attention, experts fear that the long-term impact will be felt most around the protections handed to corporate America.

“The majority said that speech is protected and not the speaker, as if the speech exists metaphysically outside the material and social context of the speaker,” says Raskin. “That just can’t be right. I feel we’re headed into a kind of political regime that looks like a corporate state, and it begs the question: Who is best served by this decision?”

A number of constitutional amendments have been introduced to counter Citizens United. One sponsored by U.S. Sen. Bernie Sanders (I–Vt.) and U.S. Rep. Ted Deutch (D–Fla.) would deal emphatically with the corporation question. It would exclude for-profit corporations, limited liability companies, and other private entities established for business purposes from the rights given to natural persons in the U.S. Constitution.

“[T]he democratic foundations of our country are now facing the most severe attack, both economically and politically, that we have seen in the modern history of our country,” said Sanders at the Senate Judiciary subcommittee hearing. “Tragically, we are well on our way to where America is moving toward an oligarchic form of government—where virtually all economic and political power rest with a handful of very wealthy families. This is a trend we must reverse.”

Conservatives say complaints about corporate spending will eventually be proved to be little more than partisan grandstanding and fear mongering. “It will be viewed for what it is, a political effort to profit by raising a nonexistent issue,” says Abrams. “That’s not limited to the Democrats, by the way.”

Restoring Public Faith
The chronic resistance to the ruling often stems from the justices’ contention that corporate money does not have a corrupting influence, and that appearances of influence don’t affect public attitudes about their elected officials. In Citizens United, Justice Anthony Kennedy wrote for the majority: “[I]ndependent expenditures, including those made by corporations, do not give rise to corruption or the appearance of corruption. . . . And the appearance of influence or access will not cause the electorate to lose faith in this democracy.”

Critics of the decision have long belittled this notion, suggesting that the justices live in a fairytale land not inhabited by real people and rough politics—and the public would likely agree with the critics.

Survey after survey shows that the American public has lost confidence in the government, so the battle over Citizens United may seem like an effort to fix the door after the horse has bolted the barn. Part of that public cynicism reflects government’s frequently ineffectual and partisan behavior. It also indicates voters’ keen understanding of the connection between campaigns, contributions, and constituency. They know that the Jeffrey Katzenbergs and Sheldon Adelsons of Corporate America are giving generously to candidates, and not necessarily to build a better democracy.

“On January 20, 2010, the day before Citizens United was decided, our democracy was already broken,” said Lessig, the director of the Edmond J. Safra Center for Ethics at Harvard, when he testified before the Senate Judiciary subcommittee in July. “Citizens United may have shot the body, but the body was already cold. . . . We must find a way to restore a government ‘dependent upon the People alone’ so that we give ‘the People’ reason again to have confidence in their government.”

Two years after Citizens United, the rhetoric hasn’t cooled, the wounds are still raw, and the long-term constitutional effects remain uncertain. Despite all the debate, and after living, albeit briefly, under the Citizens United regime, the jury is still out on the lasting impact of the ruling on the nation’s elections, office holders, and, most important, citizens.

Sarah Kellogg is a frequent contributor to Washington Lawyer.