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The "Shadow" Financing of Elections

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Two recent judicial decisions are reshaping campaign financing in the United States. In combination the Supreme Court's Citizens United v. FEC and a recent Court of Appeals decision (SpeechNow.org v. FEC) have created an environment which favors contributions going to "independent" political organizations rather than to the candidates themselves. The result will be that wealthy donors will become more powerful than ever.

In Citizens United v. FEC, the Supreme Court opened the door to unlimited corporate donations to "express advocacy" entities, groups that support individual office-seekers candidates but are not connected to candidates' campaigns. Following the logic of that decision, the Court of Appeals for the District of Columbia ruled that current campaign finance laws limiting the amount such groups can receive were unconstitutional.

Together these decisions mean that a parallel financing system is being created. What is emerging is a "shadow" system in which no regulations are in place. In it individuals and corporations will be free to contribute as much money as they want for partisan purposes to organizations that will be able to spend unlimited amounts of money. Pity the candidate who runs afoul of such entities.

The immediate source of this new development is the Supreme Court's decision that treated corporations as if they were people possessing a constitutional free speech right. But even more fundamentally, its origin lies in the narrow foundation upon which the Court permitted campaign finance law to be constructed. That foundation was articulated in the 1976 Buckley v. Valeo decision that barred restrictions on campaign expenditures, allowing only limitations on political contributions to prevent corruption or the appearance of corruption.

With Citizens United joined to Buckley not only can corporate treasuries be used for political purposes, but there can be no restrictions on such donations. The argument is that money given to an "independent" committee cannot be corrupting. After all, candidates are not the recipients. How could he or she be corrupted? The fiction that corporations possess political rights combined with the Buckley corruption requirement ensures that corporate funds will flow in torrents to political entities serving as surrogate campaign committees.

What makes this truly frightening is that the emergence of an unregulated system of financing bears an eerie resemblance to what happened to the economy when the Glass-Steagall Act was repealed in 1999. With that repeal an unregulated "shadow" financial and banking system emerged, one that stood parallel to the regulated system. We are living with the consequences. Unconstrained financial institutions produced economic calamity.

Something very similar can be expected politically. Just as occurred in the economy, wealthy political contributors can be expected to advance their interests at the expense of the rest of us. The paradox here is that as the political process becomes ever more a plaything of the rich, even the politicians they endorse will be counted among those harmed. The shadow committees can be expected to utilize their wealth to bully office-seekers into positions they otherwise might not adopt. Candidates may well lose control of their own campaign's message.

All of this both complicates and makes the politics of reform more difficult. It is hard to foresee how even a hybrid bill such as the Fair Elections Now Act can provide enough funding to allow candidates to begin to come close to the torrent of dollars that will be let loose by the corporate sector. There will be some office-seekers who, out of principle, will resist the temptation of adjusting their message to corporate dictates. But doing so will involve heroic risks that most will not be willing to take.

For thirty four years we have escaped the full damaging potential of the Buckley decision. But the Roberts Court's decision that corporations are the same as citizens with regard to the political speech privileges has put an end to this period of grace. We need to pass Fair Elections. But also, with the likelihood that in the near future, there will be at least one retirement from the Court and the reform community must press the Obama Administration to nominate a justice who will be willing to reverse the damage to democracy that flows from Buckley and Citizens United. Obama knows that the shadow banking system must be brought under control. The same is true with regard to the shadow political financing system.