12/28/2010 12:27 pm ET | Updated May 25, 2011

Campaign Finance Disclosure Sunlight Is Needed

With the 2010 midterm elections over, it is unclear whether the Tea Party will become a serious national political movement or represent a passing populist spasm fueled by the painfully slow economic recovery. There is much that the country needs to learn about who funds the Tea Party, whether it will attract and retain independent voters, and whether it is capable of developing a coherent policy agenda that can be translated into effective governance.

On the surface, the Tea Party seems to be motivated by the failure of various governing elites - by Wall Street and the "big banks" that received taxpayer-funded bailouts, about legislative and regulatory initiatives that have expanded the size, scope, and cost of the federal government, and by the "special interests" whose lobbyists and PAC contributions have supported these developments. One might think that Tea Party activists would seize the banner of campaign finance reform and not hide behind the curtain of anonymous donations that have fueled some of their candidates.

The Supreme Court's Citizens United decision earlier this year overturned decades of precedent and enabled corporations and labor unions to make unlimited expenditures -- in many cases funded by undisclosed contributions -- to advocate the election or defeat of specific candidates. While these expenditures cannot be coordinated with political campaigns, they can be used in both federal election campaigns as well as campaigns for state judgeships in the nearly 40 states where judicial elections are held. Congressional efforts earlier this year to mandate full disclosure of these "independent expenditures" and the contributions funding them narrowly failed in Congress.

My conservative friends who welcomed the Citizens United ruling point to the Supreme Court's majority decision that appears to equate the rights of corporations in our democracy with the rights of individual citizens. If you follow this logic, the marketplace for political candidates is no different than the marketplace for any other commodity: both marketplaces should be free from regulatory constraints, and competition should enable the best candidate, or commodity, to flourish.

There at least two flaws in this reasoning -- and in the Supreme Court's opinion. First, efficient markets require transparency. A political marketplace that lacks disclosure and transparency will be influenced by factors that will distort information that voters require to make informed decisions. We will surely discover soon that the anonymous contributions spent in some campaigns were provided by entities or individuals with axes to grind. Their contributions were neither charitable in nature nor intended to promote the process of transparent, democratic decisionmaking.

Second, our elections are public activities, not private-sector exchanges. Hence, the "political" marketplace analogy breaks down. The American people create the State (which governs them), and the State, in turn, creates corporations. When the Supreme Court equates the entities created by the State with the people who have empowered that State, it makes a major misstep. Companies certainly have interests -- and they should freely be able to hire lobbyists to represent them effectively. But their independent expenditures and even their political action committee contributions (the "bundled" donations of individuals) are nothing more than legalized efforts to buy access to and influence with elected officials.

Although the Supreme Court equated corporations and citizens under the U.S. Constitution, corporations and citizens are, in fact, quite distinct. Corporations do not vote; individual citizens do. Corporations are created by the State and enjoy certain rights (such as limited liability) as well as responsibilities. The earliest corporate charters in the United States made specific reference to the fact that companies, as creations of the State, enjoyed not only rights but very distinct public responsibilities. These public obligations were generated in exchange for their special legal status. More often than not, those public duties were conducted by corporations on behalf of the community in which they existed.

Public funding of public elections makes eminent sense, but that ideal solution will hardly gain traction in today's environment in which virtually everything -- from subprime mortgages to elected officials -- is commoditized. At some point, after embarrassing scandals have changed the public's temperament, a system of smaller private donations matched with public funds might emerge as a serious step towards major reform. In the meantime, Democrats, Republicans, and Tea Party supporters should find common ground on one minimum requirement: full disclosure of all the funds that enter into and influence our public elections.

The Supreme Court has vastly expanded the role of undisclosed private money in the conduct of our public elections -- the most important aspect of our democracy. The American people created our government and elect those who run that government. Individuals are subject to contribution limits when it comes to campaign donations to candidates and parties. Corporations and unions, of course, cannot contribute directly to political campaigns. It makes no sense, therefore, that companies and unions can circumvent these laws by making undisclosed contributions to entities making expenditures to affect the outcome of an election.

As creations of the state, corporations have public responsibilities. At least one of these should be the full disclosure of any contributions and expenditures that they make to influence elections. My preference would be a total ban on all corporate and union political contributions and expenditures. As noted, companies and unions don't vote, individuals do. In the absence of full public funding of our elections, the only money that should be allowed to influence the process should be the regulated and fully disclosed contributions of individual citizens.


Charles Kolb served in the first Bush White House from 1990-1992 and as General Counsel of United Way of America from 1992-1997. He is now President of the Committee for Economic Development in Washington, D.C. The views in this article are solely the author's.