Rules and Laws

excerpted from the book

Selling Out

How big corporate money buys elections, rams through legislation,
and betrays our democracy

by Mark Green

Regan Books (HarperCollins) , 2002


Buckley Rules

Along with the essential regulations on contributions, expenditures, and disclosure, the 1974 FECA amendments included a provision, written by Conservative New York senator James L. Buckley, that gave private citizens the right to challenge the constitutionality of the law in court. On January 2, 1975, the first business day after the 1974 amendments went into effect, a bizarre coalition of plaintiffs including Buckley, former Senator Eugene McCarthy, and liberal philanthropist Stewart Mott raced to the federal courthouse in Washington to file what would be called Buckley v. Valeo, the decision that defined campaign finance rules in the last quarter of the twentieth century.

When faced with a decision of such far-reaching consequences, a court normally engages in an extensive, deliberate process to gather and assess the relevant facts before rendering its decision. But in Buckley' with the 1976 campaign season fast approaching, the judiciary felt pressured to resolve the case as soon as possible. So the lower courts short-circuited the traditional fact finding processes; the parties simply made assertions on matters of fact called "offers of proof," which were then negotiated out among the parties and adopted by the court.

The Court began its analysis of the law with what proved to b~ decisive presumption: it took as its premise that restricting the flow of money into campaigns was tantamount to restricting speech because "virtually every means of communicating ideas in today's mass society requires the expenditure of money." The justices rejected out of hand the government's argument that it had a compelling interest in maintaining parity in the electoral influence of individuals, asserting that "the concept that government may restrict the speech of some elements of our society in order to enhance the relative voice of others is wholly foreign to the First Amendment." The majority opinion did recognize, however, a compelling governmental interest in preventing actual or apparent corruption.

It went on to make a critical distinction between contributions and expenditures: contributions did not deserve the same level of constitutional protection as expenditures because contributions had no direct communicative value beyond "a general expression of support for the candidate and his views." Also, contributions created the possibility of quid pro quo arrangements between donors and candidates, while expenditures raised no such dangers. Based on these distinctions, the Court upheld the law's limits on contributions by a 6-2 vote but struck down the restrictions on campaign expenditures.

The Supreme Court upheld the act's rigorous disclosure requirements because they deterred corruption and helped to detect illegal contributions. It also recognized an interest in informing the electorate about where campaigns received their money, thereby "help[ing] voters to define more of the candidates' constituencies"; significantly, the justices ruled that this informational interest justified the disclosure of independent expenditures, even though they supposedly raised no danger of corruption.

And the Court also sustained FECA's public financing system for presidential campaigns, finding that the public subsidies "further[ed] First Amendment values," including "eliminating the improper influence of large private contributions."

The majority coalition shifted from issue to issue; only Justices William Brennan, Potter Stewart, and Lewis Powell agreed with the opinion of the court in its entirety.

The divergent treatment of expenditures and contributions has turned out to be Buckley's single most important and most damaging legacy. As Chief Justice Burger warned presciently in his dissent, striking down the FECA's spending caps while sustaining the rest of its regime would have devastating effects for our democracy:

The Court's piecemeal approach fails to give adequate consideration to the integrated nature of this legislation. A serious question is raised, which the Court does not consider: when central segments, key operative provisions, of this Act are stricken, can what remains function in anything like the way Congress intended? The incongruities are obvious.... All candidates can now spend freely; affluent candidates, after today, can spend their own money without limit; yet, contributions for the ordinary candidate are severely restricted in amount.... I cannot believe that Congress would have enacted a statutory scheme containing such incongroous and inequitable provisions.

And what about self-financed candidates? Buckley invalidated restrictions on self-financing as an impermissible limit on expenditures. But Justice Thurgood Marshall, who at the time accepted the contribution-expenditure distinction (he later changed his mind), thought that self-financing should be treated as a contribution to one's own campaign.

History has proven Chief Justice Burger and Justice Marshall right. Congress never anticipated that the Court would render a split decision that limited what regular candidates could raise but not self-financed ones. So, inevitably, wealthier candidates increasingly ran and won. But if there were campaign rules that disproportionately excluded, say, women, blacks, or blue-eyed people from office, people would rebel. How could we trust a government of only white, brown-eyed men to treat everyone fairly? Why then is it acceptable that average-income people are being increasingly pushed out of public office by the wealthy?

By encouraging a tenfold increase in campaign spending and discouraging qualified, non-multimillionaire candidates, Buckley has been as disastrous to democratic elections as Dred Scott was to race relations.

The First Wave After Buckley: PACs and Boren

It was the combination of the 1974 law, the Buckley decision, and the FEC's Sun Oil decision-which allowed corporations to solicit Contributions from shareholders and employees-that launched PACs as the dominant players of campaign finance in the 1980s.

PACs are voluntary associations of like-minded people-steel executives, tech executives, dentists, trial lawyers, environmentalists, Jews for Israel, and so on-who pool their resources to maximize their political clout. Since 1974, PACs have been able to give five times as much as individuals, donating up to $5000 per candidate per election; more important, there is no legal limit to the total amount of money PACs can contribute. PACs also serve as a vital conduit for money from corporations and labor unions; although both are barred from direct contributions from corporate or union treasuries, the law allows them to make contributions through "a separate segregated fund to be utilized for political purposes." A now forgotten amendment to an otherwise good law created this money source that currently accounts for a third of all monies raised by members of the House of Representatives.

... it was the Buckley decision that-by blowing the lids off campaign spending-made PACs a central source of political money. The number of PACs ballooned from 608 in 1974 to 4009 just ten years later; PAC contributions to congressional candidates increased from $22.6 million in 1976 to $111.6 million in 1984, accounting for 27 percent of all campaign receipts.

Family giving represents one variant of the widespread fundraising tactic known as bundling, "in which people or organizations collect checks written by others, present them in a 'bundle' to a candidate, and gain political credit from the candidate for the full package." For instance, after a corporation determines which candidates to support, it will make "suggestions"-it is barred by law from outright coercion-to employees about where and when to send money. Some corporations also make illegal de facto contributions by providing strong incentives for their employees to make political contributions, such as giving bonuses to reimburse employees for their political contributions and matching employees' political contributions with donations to the employees' favorite charities. Under federal law, if bundled money is not coerced by a superior and actually comes from the employee's bank account, it's legal; however, the boss may not order or pay for the donation.

Bundling is a preferred method of fund-raising because like-minded individuals can maximize their political influence: a candidate might not remember the names of all the people who give him $ 1000, but he will not soon forget the person who delivers $25,000 from twenty-five people in his/her law firm or corporation. The problem is that bundling greatly facilitates special-interest influence, since candidates understandably regard XYZ Realty Corporation as a $25,000 donor-or a $100,000 donor-the law's $1000 maximum notwithstanding.

Still, bundling is and should be legal. The essence of private fundraising is when supporters in turn persuade their friends and colleagues to contribute to their candidate. It would be neither possible nor desirable to force separate, solicited donors to each mail in their checks rather than allowing them to hand them to the person making the (publicly disclosed) solicitation. Still, bundlers can convey large amounts and get large credit.

In the 1994 election cycle, credit card and banking giant MBNA organized over $900,000 in bundled contributions to federal candidates; approximately $500,000 of that money went to four senators, including Alfonse D'Amato, then chair of the Banking Committee, who wasn't even up for reelection that year. In the 2000 elections, MBNA bundled $2.3 million in contributions to candidates and parties, with $240,700 going to George W. Bush. By giving through bundled donations instead of through a PAC (in which case it would have been limited to $10,000 per election), MBNA was able to increase its perceived donation to the Bush campaign by 2300 percent.

In the 2000 elections, EMILY's List (the group promotes prochoice women candidates; EMILY is an acronym for "Early Money Is Like Yeast") topped the list of PAC bundlers, raising $21 million in lawfully bundled donations to support female Democratic candidates in the 2000 elections. Each of the 50,000 members of EMILY's List contributes $100 directly to the organization and promises to make $100 contributions to at least two candidates. The success of EMILY's List has inspired imitators and persuaded candidates to both solicit EMILY's List and be solicitous of their agenda.

Independent Expenditures

Instead of making monetary contributions to a candidate's campaign, would-be donors may decide to make what is commonly called an independent expenditure" for a candidate. For example, an individual can purchase airtime and produce a television ad expressly supporting the candidate(s) of his choosing, so long as he does not coordinate these activities with the campaign. As far as Buckley is concerned, even unlimited expenditures of this kind raised no danger of corruption, since the campaign had no control over them.

This again displays the political naiveté of the Buckley court, a court where none of the eight ruling justices had ever run for political office (although Justice Byron White had experience in the Kennedy presidential campaign-and dissented from the majority opinion). First of all, an "independent" spender can read the newspaper and easily spend funds in ways beneficial to the campaign, or even speak to third parties-without any fear of detection, since there's no one watching or investigating-who in turn chat with campaign strategists. Second, the big donor may-and almost certainly will-discuss his activities with a winning campaign after the fact in the hopes of winning recognition and reaping rewards. As a result, what are theoretically independent expenditures often resemble in-kind contributions in practice.

... given the ban on soft money after November 2002, it's likely that a river of money will now flow to permissible "independent" committees instead. Already, economic, ideological, and partisan groups are organizing to recapture as much as they can of the $500 million in soft money that went to party committees in 2000. While there will likely be less such money, the mediating and moderating influence of a party organization may now be replaced by groups with specific legislative or ideological objectives.

In order to justify subjecting campaign finance to federal regulation, Buckley distinguished election-related speech from general political speech, the latter being constitutionally protected from government interference. In a famous footnote, the Court suggested that the distinction could be drawn based on whether the communication included "magic words" such as "vote for," "elect," "support," "cast your ballot for," "Smith for Congress," "vote against," "defeat," or "reject." If those words were used, the funds used to pay for such electioneering communication were clearly subject to campaign finance limits; if they were not, the funds could not be regulated.

Distinguishing between "issue advocacy" and "express advocacy" makes a good deal of sense in principle. The paradigmatic case of express advocacy, as one thoughtful lawyer and scholar has put it, "(1) names one or more individual candidates for public office, (2) attributes one or more actions or beliefs to the candidate, (3) appears in close proximity to an election, and (4) explicitly urges the viewer to vote either for or against the candidate." Issue advocacy, on the other hand, "(1) addresses an issue of national or local political importance, (2) discusses only the issue and not the actions of particular political actors in regard to that issue, and (3) is broadcast at a time when legislative or executive action on the issue may be pending or contemplated, but no election is imminent."

In the 2000 elections, $509 million was spent on purchasing television and radio spots for so-called issue advocacy. The two major parties accounted for almost one third ($162 million) of these expenditures. The top six nonparty spenders accounted for another third of spending, as given in figure 3.3. All told, nonparty groups purchased 142,421 television advertisements in 2000; in the 1998 elections, non-party groups purchased only 21,712 advertisements.

An analysis by the Brennan Center for Justice at the New York University School of Law reveals that 83 percent of the ads aired by these outside players were really aimed at electing candidates. All of the ads sponsored by political parties also fell into the category of electioneering issue ads. In the crucial final sixty days before the 2000 election, a staggering 99.4 percent of the group-sponsored ads were electioneering ads; only three different ads, airing a total of 331 times (out of 142,421), were genuine issue ads.

If that doesn't prove the Supreme Court made a monumental mistake in Buckley by allowing such spending to go unregulated, what would?

Many of these sham issue ads are funded by nonprofit groups organized under Section 527 of the Internal Revenue Code. Until recently, these so-called 527s were exempt from even disclosing contributions or expenditures; their lack of accountability earned them the nickname "stealth PACs." On July 1, 2000, President Clinton signed a bill authored by Senators John McCain and Joseph Lieberman (D-CT) requiring 527s to notify the FEC of their existence and make regular reports of contributions and expenditures.

Self-Financed Ballot Proposals

In addition to self-financing campaigns for office ... powerful people are increasingly using their financial advantage to enact laws by paying for initiatives and referendums. Now permitted in twenty-four states, initiatives allow citizens to draft and vote on laws directly by putting them on the ballot, while referendums give citizens the right to repeal state laws by popular vote.

Originally seen as a democratizing reform that would allow citizens to bypass corrupt or paralyzed legislatures, the initiative today, as Michael Nelson writes in the American Prospect, "is a device used mostly by a dark trinity of wealthy individuals, special interests, and professional initiative activists to force their pet causes to the top of the political agenda."

Here's how it works. First, a well-endowed interest-sometimes a person, sometimes an industry group-drafts a ballot question it favors for financial or ideological reasons. It may involve monetary incentives, like rolling back property taxes, or social issues, like school vouchers on the ballot. Whatever the question, the less organized and funded the potential opposition, the better its chance of passage. Also important to a ballot question's success, writes George Pillsbury of Dollars and Sense magazine, is that it "poses an issue on which the public is ambivalent or lacks basic knowledge." In other words, the less of an opinion the public already has on the matter, the more easily influenced by expensive advertising it will be.

Once these conditions are in place, the self-financier can hire lobbying firms to manage the campaign, outside companies to gather signatures to get the proposal on the ballot, polling groups to target voters, high-priced media gurus to run ad campaigns, and lawyers to defend the question's legality.

The process of citizens bypassing legislatures and sponsoring laws is growing rapidly. While there were fewer than 100 ballot questions in the 1960s, there were nearly 250 in the 1980s, around 400 in the 1990s, and 76 in the year 2000 alone. Some of the effects of ballot questions financed by big interests have been pronounced: landlords and realtors spent $1.5 million to pass (by 54,000 out of 2 million votes) a 1994 initiative banning rent control in Massachusetts, and the gambling industry used a 1998 measure to bring riverboat gambling to Missouri.

Wealthy individuals-on the left and the right-have exerted considerable influence, too. Billionaire cosmetics heir Ronald Lauder recovered from a landslide defeat for the New York City mayoralty in 1989 to single-handedly finance a successful campaign to institute term limits. He spent $2 million for it, next to nothing was spent against it- and it passed with 59 percent of the vote. Reed Hastings, a former software executive worth $750 million, spent more than $4 million in California in 1999 to allow local schools to finance new classrooms with taxes approved by a majority of voters. Billionaires George Soros, Peter B. Lewis, and John Sperling sponsored a $2 million 1998 campaign to legalize medical marijuana in six states and Washington, D.C. Only after the initiative passed with little opposition in Arizona did Representative Mike Gardner, a Republican, realize that the measure covered not just marijuana but 116 other drugs, including LSD, heroin, and PCP.

What can be done to curb the influence of wealthy individuals nearly single-handedly writing our laws? Author and professor Richard Ellis has voted no on each of the seventy-four statewide initiatives he's seen in twelve years as an Oregon resident-out of principle. Arguing that initiatives eliminate the deliberative process of committee hearings and floor debates refining legislative language, Ellis suggests that a decent start would be Illinois's system, in which initiatives amending the state constitution require three-fifths majorities, or Nevada's model where initiatives need to be passed in two straight elections.

Ultimately, though, the answer may be a system of public financing that helps fund underrepresented viewpoints opposing a torrent of special-interest or individual treasuries. Now, elected officials who persistently promote unpopular causes can be voted out of office. But not so self-financiers. Unless there are either constitutionally permissible spending limits or public funding to level the playing field, or both, unaccountable and unelected multimillionaires will be able to supplant elected legislatures to enact their pet grievances or causes.

Selling Out

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