Many immediately proclaimed last week’s Citizens United v. FEC Supreme Court decision as a huge win for business “special interests.” But those quick draw reactions are based more on ideology and political rhetoric than hard facts. While this latest change in the campaign finance landscape creates new options for both business and labor, it’s unclear if and how either side will use these new opportunities.
The Citizens United case overturns a variety of campaign finance laws enacted over the past century. For example, it nullifies part of a century-old statute known as the Tillman Act (1907), which barred corporations from using treasury funds to engage in the political process. It also vitiated similar prohibitions imposed on unions after World War II. Moreover, the decision invalidates part of the Bipartisan Campaign Reform Act of 2002 (McCain-Feingold) that prohibited certain types of ads within 60 days of a general election and 30 days from a primary. Bottom line: Both corporations and labor unions may now use their general treasury funds to pay for unlimited independent expenditures, including advertisements, for or against candidates at any time.
Some on the left quickly characterized the decision as a political windfall for corporate America. For example, Ralph Nader gave us this predictable, anti-business take: “Today’s decision…shreds the fabric of our already weakened democracy by allowing corporations to more completely dominate our corrupted electoral process.”
Even President Obama, who now seems as unsurprising as a broken clock when it comes to anti-business rhetoric, joined the chorus: “This ruling opens the floodgates for an unlimited amount of special interest money into our democracy,” he said. “It gives the special interest lobbyists new leverage to spend millions on advertising to persuade elected officials to vote their way — or to punish those who don’t.” He added that the ruling means lawmakers who stand up to Wall Street banks, oil companies, health insurers and other powerful interests could find themselves under attack at election time, according to the Associated Press.
Yet while Nader’s and Obama’s comments accurately represent their anti-business mindset, it’s not clear exactly how (or even if) corporations will use these newfound freedoms. Nor is their effectiveness guaranteed. Consider these real world constraints.
First, corporations will carefully consider the reputational risks associated with electoral endeavors. Because federal disclosure requirements remain in place, many may balk at getting too overtly engaged in the political arena. “Making a campaign contribution is one thing,” a senior official with one of the party committees speculates. “But funding an advertising campaign with a company’s name on it takes you to a whole new level. I’m not sure how many will actually do it.”
A lawyer with campaign finance expertise raises another potential pitfall: “Companies could face the risk of shareholder blowback if they spend their own money to fund political activities and lay off people at the same time. Some might argue, ‘Why aren’t you using the money to save jobs?’”
Second, even if many corporations eventually engage, it may take a while. When the Federal Election Commission issued advisory opinions during the 1970s allowing corporations and unions to use treasury funds to organize PACs, it took nearly a decade before most large companies utilized this campaign finance tool. Like other political tactics, there will be early adopters and then others may or may not follow suit.
Third, many companies may decide to fund the political efforts of other broader entities, like business or industry trade associations – a practice in which unions have engaged for many years. But companies also must guard against running afoul of the strict non-coordination rules that have not changed.
Finally, based on political giving patterns, labor unions are essentially an arm of the Democratic Party. But corporate America is more oriented toward supporting incumbents. As a result, while most businesses spread their political giving around to both parties, the balance tends to go to the majority in Congress. When Republicans controlled the majority in Congress in 2004, corporate giving tilted roughly 60 percent to 40 percent in the GOP direction. But for the last four years, with Republicans in the minority, many businesses reallocated their giving 60 percent to 40 percent in the Democrats’ direction. Other forms of corporate political investments –such as advertising – could also take a pro-incumbent slant.
Many depict last week’s Court decision as a victory for the GOP, but Democratic fears represent more hyperbole and business-bashing rhetoric than real political risk. The only certainty in the United Citizens case is the promise of more uncertainty.