Don't Blame Citizens United

The Supreme Court didn't actually do what Democrats like to say it did

Since the Supreme Court issued its Citizens United ruling in January, Democrats have consistently blamed it for allowing secretive, shady, special-interest money to flow unabated into the U.S. political system, corrupting elections at an unprecedented pace.

"This decision...gave the special interests the power to spend without limit - and without public disclosure - to run ads in order to influence elections," President Obama said during a weekly radio address in September.

This is not quite correct. Special interests can do all of those things, but not because of the Supreme Court's January ruling.

To understand how and why, let's take a pleasant stroll through the dark and complicated webs of campaign finance law.

Much of the "shadowy" spending Democrats have cited comes from groups that file under section 5014(c)4 of the U.S. tax code. Commonly known as 501(c)4's in the political world, they're tax-exempt nonprofits that engage in issue advocacy and don't typically disclose their donors. Americans for Prosperity, the Koch-funded conservative organization that's a favorite for Democrats to demonize, has a 501(c)4 arm, for instance. The Karl-Rove-co-founded American Crossroads also includes a 501(c)4 operation.

Citizens United didn't actually change anything about what these groups can do. They could spend unlimited amounts during election season without disclosing their donors before this past January.

What Citizens United did change was where their money can come from.

The Supreme Court ruled in Citizens United that corporations and unions can spend directly on elections. Previously, they were prohibited, and these "shadowy" nonprofits weren't allowed to take corporate money, otherwise they'd have to disclose their donors to the Federal Election Commission. Now, after Citizens United, 501(c)4 groups can take as much corporate and union money as they want, still without disclosing.

But while Democrats have insinuated that Citizens United is preventing these groups from having to disclose their donors, that simply isn't the case. 501(c)4 groups never had to disclose their donors.

"Citizens United did not change the disclosure laws at all. It endorsed the disclosure laws on the books, and the weaknesses that are being blown into huge proportions in this election were on the books before this election," said Tara Malloy, an attorney with the Campaign Legal Center. The Federal Election Commission, meanwhile, has weakened those laws through its interpretations, Malloy said.

In fact, the Supreme Court actually came down in favor of disclosure in one key regard.

There has been a hanging question in campaign finance law for some time over just what constitutes a political communication. For hypothetical instance, an ad is aired in California two weeks before Election Day. In it, a narrator advises viewers, "Sen. Barbara Boxer is so mean to poor children it's shocking. Call Sen. Barbara Boxer and tell her to stop saying mean things to poor children and taking their money to buy extra hot tubs for her diamond-encrusted hover-yacht." Does that count as an "electioneering communication"?

According to some past interpretations of the law, it doesn't, because the ad doesn't expressly advocate for Boxer's election or defeat. The narrator just wants you to call Sen. Boxer and ask her not to be so horrible--he's not telling you to vote against her.

But in Citizens United, the Supreme Court cited and reinforced a more liberal interpretation: that mentioning a candidate by name close enough to Election Day, even without expressly telling viewers how to vote, can count as an electioneering communication and thus require disclosure.

Unsurprisingly, it gets even more complicated.

A group has to tell the FEC that it's airing the ads and how much it's spending, but it still doesn't have to disclose its donors. In order to keep the donors secret, the group simply has to file with the IRS as a tax-exempt nonprofit, claiming that its main function is not politics, instead of openly forming as a political committee.

The potential for gaming the system seems readily apparent, given that enforcement rests on two unconnected agencies, the IRS and the FEC.

It could very well be the case that some 501(c)4 groups are airing such ads and that politics is indeed their main business, and that they should instead claim themselves as political committees, disclosing donors to the FEC and filing with the IRS, for instance, under section 527. Watchdogs and Democratic senators have called on the IRS to investigate whether American Crossroads (part of which files as a 527 and does disclose to the FEC) mainly conducts political business and should forfeit its tax exempt status and instead begin disclosing its donors. But such a challenge seems like it will get sorted out after the midterms, if it gets sorted out at all.

How we got here is a different story. Groups can spend unlimited amounts of money without disclosing donors because of a series of court cases and FEC regulatory decisions that have weakened campaign finance laws, despite Congress's attempt to crack down on campaign finance by passing the McCain/Feingold law in 2002.

"In a sense what you had in early 2010 was a coming together of Citizens United," plus another federal court case and an FEC decision, "plus a climate where corporations feel that they have a lot at stake," said Prof. Richard Briffault, a campaign finance law expert at Columbia University.

None of this is to downplay the effect of Citizens United, or to say that the present state of things is particularly good or bad.

That corporations and unions can directly pour money into 501(c)4 groups is a significant development, to be sure. And it's unclear to what extent this is happening, since no one knows exactly where these groups are getting their money--as Obama and Democrats have repeatedly pointed out.

But Citizens United didn't open the floodgates, on its own, in the way Democrats have insinuated. Before that ruling, CEOs and other, sundry rich guys were able to get involved in elections quite easily through 501(c)4 organizations. Corporations formed their own political groups which, while they could only take in $5,000 per donor under federal law, had no trouble getting donations from high-level company employees.

Briffault and Malloy agree that Citizens United signaled a trend of deregulation that made special interests, big-time donors, and corporations more comfortable with the idea of getting involved in elections, usually through tax-exempt nonprofit groups.

To say, however, that Citizens United is responsible for the deluge of "shadowy" spending we're seeing in 2010 is not exactly true. How we arrived here is much more complicated than that.