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Campaign Finance Showdown

Wednesday’s Supreme Court hearing will determine how much corporations can spend on political campaigns.

by Brian Wingfield | Forbes

WASHINGTON - Wednesday, the Supreme Court will hear a rare, out-of-term rehearing of a case justices set aside from last term that could flip campaign finance law on its head.

Citizens United v. Federal Election Commission will determine how much influence corporations can exert in political campaigns. If the justices ultimately decide to rule against precedent, says Rick Hasen, an election law expert at Loyola Law School Los Angeles, it will “open up the floodgates of money in federal elections.” No surprise, then, that the business community, labor unions, numerous advocacy groups, 26 states and the District of Columbia, several congressmen and two U.S. senators have all weighed in.

Corporations and labor unions are allowed to contribute to political action committees, but for more than a century, Uncle Sam has curbed their direct spending to influence elections. In 2002, Congress passed the landmark McCain-Feingold campaign finance law, banning certain corporately funded broadcasts just before an election and requiring disclosure of most corporate funding for ads. In a decision the next year, the court bolstered the law and upheld a 1990 decision limiting corporate influence.

But the justices may be about to change course, due to the debate surrounding the 2008 documentary film Hillary: the Movie, an unflattering portrayal of Hillary Clinton, then a presidential candidate.

In simplified terms, Citizens United, a nonprofit corporation, produced the movie and wanted to offer it as a video on demand, in addition to its appearances in theaters. It also wanted to run ads promoting the film. A federal district court determined that federal regulators couldn’t ban the ads (as long as they adhered to disclosure requirements), but they could ban the film. If that’s the case, argued Citizens United, it’s an intrusion on the right to free speech.

The case has created an unlikely group of allies and adversaries. The U.S. Chamber of Commerce, the business community’s lobby in Washington, says the law’s disclosure requirements have a “suppressive effect” on First Amendment expression. The AFL-CIO argues that the court’s previous decisions on the matter have created an “unworkable censorship regime” that can be remedied only by reversing parts of the 2003 decision.

Others, like the American Independent Business Alliance, argue that business and individuals are inherently different and that corporations don’t enjoy the same interpretation of free expression under the First Amendment that people do.

Since the court rarely hears a case unless it wants to clarify a confusing aspect of law or overturn a previous decision, the John Roberts court may be poised to overturn several aspects of its 2003 decision and perhaps the 1990 decision as well, some analysts have argued.

If that happens, the justices would be making a legal statement at an awkward time politically. For the past year, lawmakers have excoriated regulators for allowing companies like Citigroup, American International Group and Bank of America for getting too big to fail. Handing companies more power to influence the political process would be unpopular, to say the least.

Corporations already play a prominent role in campaign funding. According to the Center for Responsive Politics, Goldman Sachs, Microsoft and Citigroup were among the top donors to Democrat Barack Obama’s successful bid for the presidency last year. Republican candidate John McCain’s top three contributors were Merrill Lynch (now owned by Bank of America), Citi and Morgan Stanley.

If after hearing Citizens United v. FEC, the court reverses previous decisions, Hasen predicts it’s unlikely that businesses will directly support one candidate or another.

“That could be bad for the corporate image,” he says. Instead, contributions will likely get funneled through organizations like the U.S. Chamber, which can direct it to any number of purposes. But it’s also likely that parties and candidates will hit up companies for political donations more frequently.

“The question is more about extortion than bribery,” jokes Hasen.