Schultz: Impact of Citizens United might not be as predicted

Speculation surrounds the probable impact of the Supreme Court’s Citizens United v. Federal Election Commission decision enabling corporations to spend money on express advocacy. Will it naturally favor Republicans? Will it mean more money in politics and therefore costlier campaigns? Perhaps, but other scenarios are also possible.

Citizens United initially challenged a section of the McCain-Feingold law that prevented corporations from engaging in electioneering communications (express advocacy) within 30/60 days of a primary/general election. But the Supreme Court asked the parties to brief whether the ban on corporate express advocacy (endorsing or opposing candidates) was unconstitutional. This question challenged a 1990 decision, Austin v. Michigan Chamber of Commerce, in which the court upheld a Michigan law banning direct expenditures from corporate treasuries.

In Citizens United, the court struck down the contested provision in McCain-Feingold and overturned Austin. The court ruled that the First Amendment protects the rights of corporations to make independent expenditures for express advocacy purposes. The court also stated that the government may “control corporate political speech through disclaimer and disclosure requirements.” The decision no doubt frees unions to engage in express advocacy.

What Can Corporations Do Now?

The simple answer is: Anything, except make direct political contributions to candidates. Under federal law and prior to Citizens United, corporate officers, shareholders and employees could raise and spend money for political purposes. Corporations could spend unlimited amounts of money for lobbying — and, under First National Bank v. Bellotti, the Supreme Court ruled that they could spend unlimited resources for issue advocacy. Corporations could also form, fund and maintain PACs.

In Minnesota, corporations were prohibited from making direct political contributions to candidates, political parties, and other political organizations and funds. They could not engage in express advocacy, nor create or fund PACs, but could make unlimited lobbyist expenditures and engage in issue advocacy. Corporate officers, shareholders and employees could make political contributions and expenditures, engage in issue and express advocacy, and form and maintain conduit funds.

At the federal level, the Citizens United decision allows corporate and union express advocacy in races for the president, the Senate, and the House of Representatives. For Minnesota, while the state ban on direct corporate contributions to candidates is still valid, restrictions on corporate express advocacy and formation of PACs are unconstitutional.

Received wisdom is that this Supreme Court decision favors Republicans and means more costly campaigns. Perhaps this is true, but the real impact is hard to gauge and may be felt in places less expected.

First, it is not necessarily the case that the decision will favor Republicans. This claim assumes corporations will spend along ideological lines. But entities seeking to use money for political purposes engage in a portfolio analysis, directing their spending in ways that maximizes influence and impact. Sometimes that means more money spent on lobbying versus contributions, or more on issue versus express advocacy. This analysis applies to corporations.

Corporations are self-interested. They will spend to maximize results, giving to members of both parties, incumbents and challengers. In 1980, corporate leaders gave ideologically to Ronald Reagan and Republicans. In 2006 and 2008, they favored Democrats. Barack Obama received more money from Wall Street than any other presidential candidate in history. As Democrats have become more a corporate party, they have received their fair share of business money and Citizens United will not change that.

Second, if using money for political purposes is a portfolio decision, corporations may not increase their overall spending. They may shift some money away from lobbying or issue advocacy and put it into express advocacy.

Third, corporations may shy away from directly expending money from their treasuries because of fear of consumer retaliation. Being identified with the wrong candidate–especially the loser or an unpopular one–is sure to elicit reaction from consumers in a politically charged world. A more likely scenario is that corporations may, especially in Minnesota, create PACs with innocuous sounding names to hide their identities.

Fourth, corporations will not necessarily increase spending in all races. They will pick which ones to enter. A corporation unsuccessfully lobbying for changes in pollution laws need only enter one race and use it as a way to defeat an opponent and scare other elected officials.

But Citizens United may also lead to corporate activity in unexpected areas. Besides making it possible for corporations to make unlimited express advocacy expenditures in races for governor, the other constitutional offices, and for the state Legislature, they will be free to do the same for local races such as city council and mayoral races. A corporation seeking a zoning variance in St. Paul might find it worthwhile to get involved in local city council races.

Finally, the decision allows corporations to engage in express advocacy in judicial elections. This gives those fearful of the 2002 Republican Party of Minnesota v. White decision more reason to oppose judicial elections. But one alternative–merit selection and retention elections–may not be any better. There is no reason why a corporation could not drop a ton of money just days or weeks before a retention election, leaving a judicial candidate unprepared and underfunded to respond.

Overall, Citizens United does change the rules of campaigns, but perhaps not in the ways many think.

David Schultz is Hamline University School of Business professor. He teaches classes on government ethics, politics, and election law.