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Corporate Campaign Spending: The Bucks Stop Where?

When it comes political advertising, the nation's highest court rules, the sky's the limit

In a game-changing decision handed down on Jan. 22, the U.S. Supreme Court cleared the way for corporations big and small to pump as much money as they want into election advertising that explicitly promotes or attacks individual political candidates and issues.

The ruling — framed in First Amendment terms holding that corporations have the same rights as individuals when it comes to political speech — effectively voids a provision of the 1947 Taft-Hartley Act that has prohibited corporations and labor unions from directly advocating the election or defeat of candidates for federal office.

The court’s 5-4 decision in Citizens United v. Federal Election Commission also dismantles additional restrictions on corporate-funded ads in the weeks before a federal election that were enacted as part of the Bipartisan Campaign Reform Act of 2002, sponsored by Sen. John McCain, R-Ariz., and Sen. Russ Feingold, D-Wis.

At the federal level, corporations and labor unions have until now generally been limited to sponsoring political action committees, or PACs, that raise voluntary contributions from their employees or members and that are subject to various limitations in raising and spending money. Direct corporate spending on advertising has largely been confined to “issue advocacy,” which, by law, has had to steer clear of explicitly advocating the election or defeat of specific candidates.

But now, corporations of all legal varieties — with or without shareholders, taxpaying or tax-exempt, controlled by U.S. citizens or not — may spend whatever they want to influence elections as long as their efforts are not coordinated with candidates.

The new playing field

With the court’s decision barely a week old, all the interests potentially affected by it are scrambling to figure out what shape the new playing field might take. Already, though, certain conclusions seem inescapable:

Republicans stand to benefit most from the new rules. Corporate PACs (which traditionally lean Republican) outspent labor PACs (which traditionally lean Democratic) $323.7 million to $73.1 million in the 2008 elections, according to the Washington-based Center for Responsive Politics, a nonprofit, nonpartisan research organization. Leaders of both parties expect the gap to widen in the wake of the court’s decision and with the high-stakes midterm elections approaching.

Independent expenditures could easily dwarf candidate expenditures. Corporations in the health and insurance sectors spent more than $1.6 billion lobbying Congress in 2007 and 2008, nearly double the amount ($861 million) that all winning Senate and House candidates spent on their campaigns in the same period.

U.S. corporations controlled by foreign interests are no longer prohibited from seeking to influence federal elections. Fred Wertheimer, the president of Democracy 21, a Washington-based nonprofit that pushes for stronger campaign finance laws, says the decision “will allow foreign countries, foreign corporations and foreign individuals to participate in electing and defeating federal officeholders and other candidates.”

The biggest effects could come at the state and local levels. The Supreme Court’s decision isn’t just about congressional and presidential elections; it also effectively overturns laws in some two dozen states that limit or ban corporate spending in local elections. In those states, for example, a utility company could now run ads attacking lawmakers who have voted against its requests for rate increases. Similarly, insurance companies, which are regulated at the state level, could underwrite political advertising campaigns aimed at reshaping the composition of the legislative committees that oversee their activities.

Next: Fast . . . or not so fast? >>

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