Corporations Unleashed: Landmark supreme court decision to allow unlimited spending in federal elections

Few people would describe large corporations as a sector of society suffering from a deficit of political power. Yet, corporate power increased dramatically on Jan. 21 when the U.S. Supreme Court issued a decision in Citizens United v. FEC that legalized unlimited funding of independent political broadcasts in federal elections by corporations. Like an over-muscled superhero bursting out of an inconvenient business suit, you could almost hear the buttons popping. By all accounts, the decision opens up the prospect of a major power shift in U.S. politics. Some observers even described it as a coup d’etat on behalf of major corporations and the Republican Party.

The Citizens United case originated from the broadcast of an anti-Hillary Clinton documentary produced with the aid of corporate funding by the conservative group Citizens United during the 2008 Presidential primaries. Under the 2002 McCain-Feingold law, the broadcast was illegal because the law prohibits corporate “electioneering” expenditures during the 60-day period leading up to a vote. Justice Anthony Kennedy, who penned the Supreme Court 5-4 majority decision that invalidated the crucial portion of McCain-Feingold, wrote, “We find no basis for the proposition that, in the context of political speech, the Government may impose restrictions on certain disfavored speakers.”

In his dissent to the decision, Justice John Paul Stevens wrote that allowing corporations the unfettered power to pour money into political campaigns “will undoubtedly cripple the ability of ordinary citizens, Congress, and the States to adopt even limited measures to protect against corporate domination of the electoral process.”

To understand the significance and impact of Citizens United, it is worth taking a quick detour back to the decades following the Civil War — a money-crazed period of U.S. politics that Mark Twain dubbed the Gilded Age. During that time, the rise of the first big American industries, including oil, steel and railroads, gave citizens a full taste of how corporate money could distort the political process.

In New York, Tammany Hall’s Boss Tweed led a group of legislators who openly sold their votes for cash. In Ohio, coal and steel tycoon Mark Hannah (the Karl Rove of the Gilded Age) developed a system in which the Republican Party assessed each company with a tax on its assets and revenues. Hannah’s system was so well-oiled that he even returned money to companies that were over-assessed. Corporate money was used to purchase Senate seats, which at the time were filled by appointment by the respective state legislatures rather than by popular vote.

In 1907, in response to such overt corruption, the U.S. Congress passed The Tillman Act, which prohibited corporations from contributing money to federal campaigns. That law has remained on the books ever since, although its ban on corporate political contributions was weakened in 1971 when Congress allowed the creation of political action committees (PACs). These private organizations, which operate under the control of corporate managers, pool money collected from employees of the corporation and then use that money to make contributions to candidates.

The deployment of PACs has given corporate managers a powerful tool for influencing politicians and legislation. But because PACs get their money from employee contributions, the volume of the funding stream has its limits. According to the Center for Responsive Politics (opensecrets.org), a public advocate organization that tracks the influence of money in U.S. politics, 381 PAC s gave $39.9 million dollars to federal candidates in the 2008 election cycle, roughly $19.9 million total to each major party.

While sizable, the tens of millions that corporations make available through the PAC process will soon be dwarfed by the tens of billions that will now be available for campaign expenditures in the wake of Citizens United. According to Michael Waldman of the Brennan Center for Justice, ExxonMobil’s PAC raised about $1 million in 2008 from its officers and employees. But that figure is insignificant compared to the company’s $45 billion in profit that year, all of which could be legally used for campaign advertising purposes under the court’s decision.

Attorney Jeffrey Clements, formerly with the Massachusetts Attorney General’s Office, wrote on the American Constitution Society blog, “If we take only the profit of the largest 100 corporations alone, those corporations would need less than one percent of their $605 billion annual profits to make political expenditures that would double all current political spending by all the parties and federal candidates.”

According to some critics, corporations won’t necessarily have to spend large sums of money — the mere threat of a massive corporate intervention in a politician’s next election will be enough to secure his or her compliance. As Zephyr Teachout of Fordham Law School explains, “It’s a much subtler form of corruption, where your mind shifts to say, ‘Well, do I really want to take on that financial transaction tax if I know that Goldman Sachs is going to do an ad campaign?’”

Campaign finance expert Monica Youn of the Brennan Center agrees. “I think there’s going to be a threat of corporate-funded attack ads against elected officials who dare to stand up to corporate interests,” she said. “Corporations have basically been handed a weapon.”

President Barack Obama himself addressed the magnitude of the power shift at hand, stating in his weekly radio address that, “this ruling strikes at our democracy itself,” and adding, “I can’t think of anything more devastating to the public interest.” In his State of the Union speech, he said, “The Supreme Court reversed a century of law to open the floodgates for special interests. … I don’t think American elections should be bankrolled by America’s most powerful interests, or worse, by foreign entities.”

BIG CHANGES FOR 2010

Citizens United is expected to begin reshaping the political landscape as soon as the upcoming 2010 elections. Republican candidates will clearly benefit, while the effect on Democratic candidates will be to increase the already heavy pressure to toe a procorporate line. To many who have watched the steady rightward march of the Supreme Court over the past several decades, creating a partisan weapon on behalf of Republican candidates was precisely the point. They compare the decision to Bush v. Gore as an example of the Supreme Court putting its thumb on the political scales in favor of Republican candidates.

The two decisions seem to share an affinity, in another respect: Both employ highly dubious rationales to accomplish a rightwing power grab.

Although Citizens United focused specifically on federal elections, its rationale is expected to apply equally to local and state elections, as well as judgeships. In many of those cases, even relatively small infusions of cash to broadcast influential messaging can be expected to have a drastic effect.

DEEPLY ROOTED CONFLICT

Behind the Citizens United ruling lies a deep history of conflict within American society over the dangers of organized money. The Constitution was crafted by a generation that despised and distrusted corporations, particularly because of the American colonies’ experience of bullying by the British East India Company. It was that company’s attempt to exert control over tea sales — and fears that other commodities would subsequently be controlled in like fashion by the British — that led to the outbreak known as the Boston Tea Party.

At the Constitutional Convention in 1789, attempts by some delegates to empower corporations at the federal level were soundly defeated by a majority of the delegates. James Madison expressed the general view that corporations were “a necessary evil” that needed to be controlled via “proper limitations and guards,” rather than empowered. At the time, it was felt that such restrictions would be most effectively implemented as close to the grassroots as possible, i.e., via the chartering process controlled by the individual state legislatures. As a result, the word “corporation” does not appear once in the Constitution.

Anti-corporate sentiments persisted for decades after the Revolution. In 1809, the Virginia Supreme Court ruled that charters of incorporation should not be granted if the applicant’s object “is merely private or selfish; if it is detrimental to, or not promotive of, the public good.”

Expressing similar views, Thomas Jefferson wrote in 1816, “I hope we shall crush in its birth the aristocracy of our monied corporations which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country.”

Harboring a deep wariness toward corporate power, state legislatures prior to the Civil War routinely attached strict conditions to corporate charters. These included requirements that charters state a specific public service foundation, that they be renewed every 20 to 30 years, that ownership of property not directly tied to authorized activities be prohibited and that corporations not be allowed to acquire stock in other corporations. To keep errant corporations in line, state legislatures freely employed charter revocation — the “corporate death penalty.”

LOOSENING THE CORPORATE GRIP

That sort of tight control over corporations began to disappear after the Civil War, as state legislatures dismantled statutory restrictions and the U.S. Supreme Court, dominated by railroad interests, began handing over to corporations a series of newly minted rights not actually found in the Constitution (see timeline below).

The most notorious example of this sort of judicial activity is the Santa Clara decision of 1886, which marks the beginning of a controversial doctrine known as “corporate constitutional personhood.” Prior to Santa Clara, corporations had been afforded a limited status known as “legal personhood,” which merely gave them the legal status to own property, initiate lawsuits and engage in other functional parts of the legal system. As the doctrine of constitutional personhood grew over time, the legal status of corporations eventually included most of the rights designated in the Constitution for human beings. It was not until the arrival of Nixon-appointed Justice Lewis Powell in 1974, however, that the Supreme Court began issuing the First Amendment decisions that gave corporations more public influence, first by declaring that political expenditures were a form of “speech,” and then by ruling that any limits on such “speech” were antithetical to constitutional principles.

Among progressives, alarm over the rise of a corporate Frankenstein has become more widespread in recent years, as has a search for ways to halt the flood of corporate money into the political arena. Some activists have focused on the original Santa Clara “personhood” decision, especially after a 2003 book by radio host Thom Hartmann reported that Santa Clara itself had not actually granted corporations any such status in the first place — the “corporations are persons” formulation was actually written not by the judges but by the court reporter, who placed it in the “headnotes” that summarize the case but are not properly afforded legal status.

In revealing the illegitimacy of the Santa Clara decision, Hartmann had hoped to invalidate the entire edifice of corporate rights. “Boy, was I naïve,” he recently said. Although the case was indeed improperly used as precedent for later decisions, those decisions still stand, as does the “corporations are persons” formulation itself. Making matters worse for those seeking to stop the corporate juggernaut, Supreme Court decisions in recent decades have, in general, taken pains to avoid resting their rationales on the personhood status of the corporation. Rather, justices like Anthony Kennedy have maintained that removal of restrictions on corporate political expenditures interferes with the First Amendment principle that “voters must be free to obtain information from diverse sources in order to determine how to cast their votes.”

Critics have responded that, in reality, overwhelming corporate advertising, rather than supplying the public with useful information, tends to drown out all competing voices by inundating the public. They assert that if corporations can determine the outcome of elections through overwhelming expenditures on advertising, then democracy becomes merely a sham or a formality. In his dissent, Justice Stevens emphasized that point: “A democracy cannot function effectively when its constituent members believe laws are being bought and sold.”

Some legal experts have pointed out that the concept of “free speech” is an oxymoron when applied to corporate expenditures on advertising. According to Hofstra Law School professor Daniel Greenwood, a corporate manager is specifically required by state law to act in the corporate interest, rather than follow his or her own conscience, and so is prohibited from speaking freely.

TAKING ACTION

Progressive activists have been quick to react to the Citizens United decision, announcing two initiatives to bottle up the corporate genie by amending the constitution. The first effort, known as Move to Amend, is sponsored by an alliance of groups that includes Liberty Tree Foundation, Ultimate Civics and Democracy Unlimited. It advocates a multi-part Constitutional amendment that would clarify that political expenditures are not equivalent to speech and that corporations do not have constitutional rights, as well as offering increased protections for voters and local communities.

Riki Ott of Ultimate Civics says that Supreme Court decisions granting constitutional rights to corporations have “allowed a consolidation of wealth and power to the corporations that now threatens to destroy the republic. [Just as we once needed to] separate church and state; we now need to separate corporation and state.”

The other effort, known as Free Speech for People, is sponsored by Public Citizen, Voter Action, the Center for Corporate Policy and the American Independent Business Alliance. It advocates a narrower amendment that would correct the First Amendment claims of corporations and their supporters on the Supreme Court.

Meanwhile, several members of Congress, including Sen. Sherrod Brown (D-OH) and Sen. Charles Schumer (D-NY), have proposed corrective legislation. Proposals include measures to exclude foreign-owned corporations from campaigning privileges, measures to require disclosure of corporate political spending and measures to require that corporate shareholders be consulted prior to the spending of any corporate money on political influence.

Of course, the passage of any corrective measures faces a serious obstacle: the new spending powers of corporations created by the Citizens United decision itself. Given the demonstrated reluctance of most legislators to defy even a single corporate sector, whether that be Big Pharma, military contractors, or Wall Street, how likely is it that those same legislators will have the courage to defy the corporation?

Ted Nace is the author of Gangs of America: The Rise of Corporate Power and the Disabling of Democracy (Berrett-Koehler, 2003, 2005).

CHRONOLOGY OF CORPORATE EMPOWERMENT AND CAMPAIGN FINANCE REFORM

1886

SANTA CLARA DECISION. Commonly cited as the case that established that corporations are “persons” subject to the equal protection clause of the Fourteenth Amendment, which meant a company had equal rights to “free speech.”

1907

TILLMAN ACT. Prohibits corporate campaign spending in federal elections.

1971

FEDERAL ELECTION CAMPAIGN ACT. Creates political action committees (PACs).

1976

BUCKLEY V. VALEO DECISION. Supreme Court overturns limits on how much a candidate can spend on a campaign. Creates the “money = speech” formulation by defining campaign expenditures as a critical component of free expression.

1978

BELLOTTI DECISION. Supreme Court overturns restrictions on corporate spending in state referenda.

1990

AUSTIN DECISION. Supreme Court affirms ban on corporate campaign contributions, but allows PAC spending.

2002

BIPARTISAN CAMPAIGN REFORM ACT (McCAIN-FEINGOLD). Prohibits parties from receiving “soft money.” Prohibits “electioneering communications” by corporations, unions and nonprofits within 60 days of a general election or 30 days of a primary.

2007

WISCONSIN RIGHT-TO-LIFE DECISION. Eases McCain-Feingold ban on “electioneering communications” to allow advertisements that don’t explicitly urge a vote for or against a candidate.

2010

CITIZENS UNITED DECISION. Overturns McCain-Feingold restrictions on preelection “electioneering communications” by corporations. Overturns Austin decision requiring corporate campaign expenditures from general treasury funds.

HOW TO FIX IT

CONSTITUTIONAL AMENDMENTS: Because any constitutional amendment requires approval by two-thirds of the U.S. House and Senate, as well as three-quarters of the state legislatures, such a fix is considered a longshot. Nevertheless, the problem is considered severe enough to warrant such action. Fordham University Professor Zephyr Teachout writes, “I’m usually not one for constitutional amendments, but this opinion [ruling] calls for one. Of course, if corporations can spend unlimited amounts opposing a constitutional amendment, any effort to enact one will make the 1970s campaign for an Equal Rights Amendment look like a stunning success.” So far, there are two amendment proposals. “Move to Amend,” sponsored by Liberty Tree Foundation, Ultimate Civics and Democracy Unlimited, clarifies that money is not equal to speech, and that corporations do not have constitutional rights. “Free Speech for People,” sponsored by Public Citizen and Voter Action, focuses more on allowing Congress to exclude corporate money from political campaigns.

LEGISLATIVE REMEDIES: Although passing bills is easier than approving a constitutional amendment, legislative remedies still face an uphill battle in a Congressional environment where Republicans can be relied on to mount a filibuster, and many Democrats are equally likely to remain quiet in the face of corporate pressure. There are several proposed initiatives worth following. The Fair Elections Now Act (S. 752, H.R. 1826) would provide public financing of elections and is being led by Senators Richard Durbin (D-IL) and Arlen Specter (D-PA) and Representatives John Larson (D-CT) and Walter Jones (R-NC). Sponsored by Rep. Alan Grayson (D-FL) and introduced into the Committee on House Finance Services, H.R. 4487 would require that a majority of a company’s shareholders approve any expenditure to influence public opinion. In order to curb foreign influence in elections, the America is for Americans Act (H.R. 4510) would widen the existing ban on political contributions by foreign nationals to domestic corporations in which foreign principals have an ownership interest.