McGehee: Three Scenarios Now Possible on Election Spending

Posted March 15, 2010 at 4:52pm

What will federal elections look like now that the Supreme Court has ruled that corporations (and most likely unions) may use their massive treasury funds to directly affect federal elections?

[IMGCAP(1)]Part of the answer depends on whether legislation that Sen. Charles Schumer (D-N.Y.) and Rep. Chris Van Hollen (D-Md.) are drafting passes Congress in the next few weeks. Their proposals focus heavily on increased disclosure to provide everyone a clearer picture of who is spending what to affect election outcomes. On their merits, these proposals warrant strong bipartisan support.

The rest of the answer requires a fair amount of guesswork. The upcoming midterm elections will most likely be used to “test the waters.” Most corporations will take a wait-and-see approach, watching for significant public backlash to aggressive political activities undertaken by some of their more risk-taking brethren. Unions will likely be less timid about spending treasury funds on elections with less fear of unrest among their membership.

Then, come 2012, all hell will break loose.

So what will this “hell” look like? Past experience, combined with the way the high court’s decision was written, reveals three possible scenarios.

First, corporations (and unions) may use their newly minted right to make independent expenditures on television and radio ads or targeted mailings expressly supporting or opposing a candidate.

The primary benefit here is that the entity running the ad can control the message and receive “credit” from a candidate.

The downside for the entity is that the expenditure would fall within existing reporting requirements, resulting in a possible public or shareholder backlash. Unions, anticipating or responding to such ads, may be even more aggressive.

The mere “threat” to make such expenditures, if a public official doesn’t do what the corporation or union wants, may achieve the desired effects.

The Schumer-Van Hollen proposals include a “Stand By Your Ad” component requiring corporate CEOs to appear in a televised ad to take responsibility.

Best guess is that few corporations will actually run such ads. The downsides are simply too high. However, don’t expect the same degree of reticence from unions.

A more likely second scenario will see corporations funnel money through third-party organizations like the U.S. Chamber of Commerce to support activities to influence the outcome of elections (televised ads, Internet ads, get-out-the-vote operations). Unions may avail themselves of third-party “pass throughs” as well.

Unless new rules are passed, large sums can be spent in this manner without disclosure. Current regulations do not capture contributions to chamber-like organizations unless they are specifically designated for political activity. Even if such a contribution is disclosed, a TV advertisement will likely be made using the chamber’s name, and most viewers will not be aware of who really funded the ad.

The downside of this approach is less control of the message and not as much “credit” from candidates.

Schumer and Van Hollen propose requiring corporations to set up separate accounts to make these expenditures with full disclosure.

Best guess is that this will be the preferred method for both corporations and unions. That is why it is vital to close the loophole in current disclosure laws that do not capture these expenditures.

In the hands of an activist court, a pending case brought by the Republican National Committee could open a third avenue for corporate (and union) treasury funds. The RNC challenges restrictions banning national parties from raising or spending soft money in unlimited amounts and prohibiting state parties from using soft money to affect federal elections. The suit lists nine activities that the RNC claims are not “unambiguously related to the campaign of a particular federal candidate” — and, therefore, should not be subject to the soft money ban — including national party spending relating to state elections, spending on redistricting efforts and litigation, and spending on “grass-roots lobbying.”

If the court ignores precedent, the state and national parties will be back in the soft money business, accepting unlimited funds from corporations and unions for activities that play a significant role in determining the outcome of elections.

Corporations may choose to make soft money donations rather than direct independent expenditures, thereby risking less public exposure.

The bet here is that treasury funds funneled through state and national parties will prove a popular conduit to elect or defeat candidates with far less public exposure than direct independent expenditures.

The downside of this approach is that the corporation has less control and may receive less “credit.”

Best guess is that, if the court backs the RNC, there will be a number of corporations that will use this method to expend their treasury funds more anonymously.

Of course, there are many other scenarios that can be conjured. And notably, more lawsuits are making their way through the courts — including challenges to disclosure and to contribution limits to political committees that only make independent expenditures in federal elections.

Passing the Schumer-Van Hollen proposals is a first step to ensuring that the American people have a more accurate picture of what is going on in federal elections. However, whether unprecedented electoral spending by corporations and unions as a result of the Supreme Court decision will enrage an already angry public is a different question. And the most important question of all is whether our democracy will be able to withstand the unleashing of massive corporate spending, which threatens to distort the outcomes of our elections.

Meredith McGehee is the policy director of the Campaign Legal Center. She also heads McGehee Strategies, a public interest consulting business.