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Legacy Content / RULES OF THE GAME

Is Now Really The Time To Loosen Corporate Spending?

The Supreme Court Takes An Aggressive Posture On Rethinking Political Finance Limits

July 6, 2009

Of all the puzzling things about the Supreme Court's recent move to rethink corporate political spending limits, the strangest is the timing.

It's odd enough that the high court should postpone a narrow ruling on the case at hand, Citizens United v. Federal Election Commission, and instead set the stage to broadly re-examine whether corporate campaign expenditures may be restricted at all.

The conservative group Citizens United had asked the court to reject restrictions in the 2002 Bipartisan Campaign Reform Act that would have forced it to disclose who paid for its 2008 movie critical of then-presidential candidate Hillary Rodham Clinton. But the court appears poised to go much further.


Having heard oral arguments on March 24, the court has now ordered a second argument for Sept. 9 and has asked for new briefs on whether it should overturn a landmark 1990 ruling that upheld a decades-old ban on independent corporate campaign expenditures, Austin v. Michigan Chamber of Commerce. The BCRA ad disclosure rules will also be on the table.

The Supreme Court is setting out to roll back campaign restrictions on corporations at a time when their outsized political role is under attack.

"They're being very activist in laying down this rehearing and suggesting they might overturn the traditional ban on corporate expenditures," said Trevor Potter, a former FEC chairman and president of the Campaign Legal Center. "It's a very aggressive action."

Also surprising is the court's apparent willingness to reverse its own ruling from just two years ago in Wisconsin Right to Life v. FEC that certain types of limits on corporate advertising close to an election are constitutional. In that case, the court narrowed the BCRA's ad restrictions but upheld the basic principle that corporate-funded ads may be regulated if they are patently campaign messages.

If the court now rejects those BCRA rules, it "will be overturning itself in a case it just decided," said Laura MacCleery, deputy director of the democracy program at New York University Law School's Brennan Center for Justice. "It's bizarre."

Oddest of all, however, is that the Supreme Court should set out to roll back campaign restrictions on corporations at a time when their outsized political role is under attack.

The financial sector invested more than $5 billion in lobbying and campaign contributions over the past decade, according to a March report by the nonpartisan group Wall Street Watch, a project of the Consumer Education Foundation and a Ralph Nader group called Essential Information. These expenditures won "deregulation and other policy decisions that led directly to the current financial collapse," the group charged. The report detailed some $1.7 billion in political contributions and $3.4 billion in lobbying costs from 1998 to 2008 by Wall Street interests.

Even now, some argue, massive corporate lobbying and campaign spending is derailing attempts to forestall another financial catastrophe with new regulations. In the first quarter of this year, according to a recent Wall Street Journal report, 31 financial institutions and trade groups collectively spent $27.6 million on lobbying and lavished $286,000 in campaign contributions on lawmakers overseeing financial rules. These institutions have successfully lobbied Congress to loosen a key accounting regulation, the Journal noted.

The problem is far from new. In fact, the roots of the 1907 Tillman Act, which first banned corporations and national banks from contributing money to federal campaigns, will sound quite familiar to a modern observer. Corporations had spent massively on the 1896 election, in which William McKinley defeated William Jennings Bryan; a business depression and widespread unemployment, triggered in part by the bankruptcy of the Philadelphia and Reading Railroad Co. in the 1890s, had also set the stage for reform.

In 1947 the Taft-Hartley Act also banned independent campaign expenditures by both corporations and unions. It's that ban that Austin upheld in 1990, and that now is at risk. The court on Sept. 9 could also throw out the 2002 BCRA's pre-election advertising restrictions.

If the court reverses itself, "it's going to undo much of what Congress has done over the last at least 40 years in trying to make sure that the vast economic inequalities in this country are not translated into political inequality," said Richard L. Hasen, a professor at Loyola Law School.

The ban on corporate contributions "would not be directly affected" and could continue to stand even if the court struck Austin, Hasen noted, since that case treats independent campaign expenditures, not donations. But if the court begins carving out new protections for corporate political activity, the Tillman Act itself may become vulnerable to future challenge, campaign finance experts say.

Some, such as the pro-First Amendment Center for Competitive Politics, which hailed the court's recent action ordering new briefs in Citizens United as a victory for free speech, would welcome such a shift. Others see it as ominous.

"If they find corporations have a First Amendment right to make independent expenditures... the question arises: What about a right to make contributions?" asked Potter. He added: "If they overturn Austin, they will wreak enormous changes on the American political scene."

The bottom line: Already-influential corporations would win vast new powers -- something that arguably couldn't come at a worse time.

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