Lecture 10: Money in Politics


– So, today we’re gonna talk
about money in politics. – [Obama] Last week the Supreme Court reversed a century of law that I believe will open the floodgates for special interests, including foreign corporations, to spend without limit in our elections. (audience applauds) Including foreign corporations,
to spend without limits. I don’t think American
elections should be bankrolled by America’s most powerful interests. Or worse, by foreign entities. They should be decided
by the American people. And I’d urge Democrats and Republicans to pass a bill that helps
correct some of these problems. – So that was Barack Obama’s
2010 “State of the Union” in late January of 2010, a couple of weeks after the Supreme Court had handed down its
Citizens United decision. And the clip went viral
because of that playback of Associate Justice Samuel Alito who lip readers were debating whether he was saying,
“You lie,” or, “Not true,” in the middle of Obama’s speech. It was an unusual speech because normally presidents do not criticize the Court during something like a
“State of the Union” speech and nor do members of the Court respond to what the president says. And so it became a sort of emblematic of the tussles between
the Obama administration and the much more conservative judiciary. Many people thought and think that Citizens United
was a horrific decision that, as Obama said, opened the floodgates to corporate money in politics, making even more problematic
the sort of things identified in the book about dark money which I’ve put on the syllabus for today. I’m gonna give you a
somewhat different argument. I think that Citizens United is a symptom of a much different and
a much bigger problem, and so that reversing Citizens United would really be sort of taking a bandaid to a much bigger problem. So our agenda is we’re gonna start off by noticing that there’s a difference between the supply of money in politics and the demand for money. Almost everything you read
about money in politics is about the supply. It’s about the lobbyists,
it’s about the fat cats, it’s about the people who spend money in order to work their way in politics, and that’s why they’re supplying it. Almost nobody talks about the demand side. Why is there so much desire
for money in American politics? Much more in American politics
than in many other systems. And so in the last part of the lecture I’m gonna come to the demand side. For most of the lecture I’m
gonna focus on the supply side, as almost everybody does, but we should remember that it’s only one piece of the equation. I’m gonna begin by talking
before I get into the guts of the money in politics subject I’m gonna talk more generally about courts in American politics and separate out some
myths from realities. Many people think that they
idea of an independent judiciary with powers to review the
constitutionality of legislation that comes out of the political
branches is a great thing. If you look at the third and fourth waves of democracy around the world, which I’m gonna be
talking about on Thursday, the idea of a separation of
powers is a big American export. It’s often the feature
of the US Constitution that is most often copied in
constitutions around the world. So I’m gonna start out
by spending some time on myths and realities
about the role of courts in American politics and more generally. Then we’ll go into the
history of the First Amendment since the 1970s sixth
decision, Buckley v. Valeo, where the modern world of money and speech really gets started. I’ll pay some attention to
the changing media context that all of this is going
on in as we’ve evolved from the world I was
describing in the last lecture, the world in which everybody watched the same evening news at 6:30 to the world of Twitter and blogging and people getting most of their news from places like Facebook. And then we will conclude by
attending to the demand side, the much-neglected demand side, which will become an important
feature of my argument later in the course. So let’s talk about courts
in American politics, as my subtitle here is
“Myths and Realities.” This is a picture of the Warren Court. And I put the Warren Court up there for a very particular reason, which is that the Warren Court was a massive outlier in American history. It was a massive outlier because it was an extremely progressive, to use the term that liberalism
has been reinvented as in the last decade or so. Possibly the most progressive
Court in American history. And it was remarkable, first and foremost, because Earl Warren, who was appointed by President Eisenhower in 1953, Eisenhower called it “the worst damned-fool
mistake I ever made.” He had been a conservative governor, a Republican governor of California. He had been responsible for the internment of Japanese prisoners during World War II. He didn’t have any signs that he was gonna be a
much different person than he turned out to be on the Court, and so he presided over this
era known as the Warren Court. And as you can see, actually, interesting, if you go down to
the bottom of the slide there you can see another one that Eisenhower pretty much got wrong. The Eisenhower appointees
are in blue there. William Brennan also turned out
to be a very liberal justice and didn’t make Eisenhower very happy. But you can see that there
were four holdovers in beige appointed by FDR, and so it turned out to be the case that for much of this period the Court was extremely liberal. And it’s also the case, and maybe not so surprising
when I make this point, that if you look at the academics who are champions of judicial review, the Laurence Tribe’s,
the Ronald Dworkin’s, the Owen Fiss’s of this world, they are people who came of
age during the Warren Court. And many people thought that this was a sort
of secular development that the Court, which had struck down, this Warren Court which had
struck down a lot of racist, racist legislation and
legislation that had been harmful to poor people, was sort of a new normal, a wave of the future, if you’d like. And after Warren was
replaced by Warren Burger and we started to get more
conservative drifts of the Court, you could often read, for instance, in “The New York Review of Books,” you could read articles
by people like Dworkin attacking what was happening to the Court as though they were
undoing the new normal, and that this is a terrible thing and we just needed to get over this and things would snap back. So there was in what retrospect
is quite a lot of denial about what was actually happening. But just to give a sense of how liberal the Warren Court was, this is the Court that was responsible for the decisions in Brown
v. Board of Education, 1954 and then the follow-up
decision the following year that said separate but equal cannot stand. This is the Court that
in Baker v. Carr in 1962 and a subsequent case two years later said the Court can get involved
in redistricting cases, that this is not a political question that they have to keep out of. And then they ruled that districts have to be more or less equal
in size, population size, which was a way of limiting
the disenfranchisement of urban voters. This is the Court which in Mapp v. Ohio said that unreasonable
searches and seizures would produce evidence
that wouldn’t be able to be used in court. This is the Court that in
1963, Gideon v. Wainwright, said that indigent defendants would have a right to an attorney appointed by the government if they couldn’t pay for one themselves. This is the Court that in
New York Times v. Sullivan said that if a public figure wants
to accuse you of defamation there’s a very high standard. They have to find actual
malice on your part. It’s an extremely difficult thing to prove so it was seen as a huge boon
for the freedom of the press to act as the fourth branch
of government, if you’d like, in criticizing public officials. This is the Court that in 1965 adopted Griswold v. Connecticut, a decision that said that outlawing contraception in the State
of Connecticut was illegal and would become very important later because it became the
building blog for Roe v. Wade, that was actually at the
beginning of the Burger Court. But the logic came from
Griswold v. Connecticut, which was the idea there
was a concept of privacy that the Court affirmed in Griswold that would become the basis
of the decision in Roe v. Wade in the following decade. This is the Court that
adopted Miranda v. Arizona. You’ve all heard about Miranda warnings. You have a right to remain silent. You have a right to have an attorney. And if the police violate
those Miranda warnings, convictions will not stand. This is the Court that
adopted Loving v. Virginia, which outlawed anti-miscegenation laws, laws against interracial marriage, many that had then
prevailed in many states. So this is by no means an exhaustive list. Just to give you a flavor of the Court. It was really seen as the vanguard of progressive change by many liberals and led, as I said, to that generation of legal and constitutional
theorists to think that courts were tremendously important
engines of social change. But it was an outlier. Typically, presidents don’t make the kind of damned-fool mistake that Eisenhower accused
himself of having made with the appointment of Earl Warren. Typically, presidents get pretty much the courts that they want. And typically, judges are
fairly conservative figures that don’t wanna rock the boat, that tend to affirm the status quo. And so the Court that
we’ve actually had since the Warren Court, first the Burger Court, then the Rehnquist Court,
and then the Roberts Court, those courts are much more typical of how courts have behaved
throughout American history. So if we go back and just,
again, just to give you a flavor of how courts have tended to behave through most of American
history, not the Warren era, Dred Scott v. Stanford
was the case in which the Court held that
blacks were not citizens within the meaning of the Constitution, they’re not being contemplated
to include them as citizens and so a fugitive slave
did not have standing to go to court to get protection. This is the Slaughter-House Cases in 1873. This was in the aftermath. This is the years when the Reconstruction was beginning to fail and the Court did its bit to make sure that it would be reigned in. The Slaughter-House Cases
limited the application of the Fourteenth Amendment’s Privileges and Immunities
Clause to the federal government and refused to apply it to the states. The case of United States v. Reese in 1876 said that the Fifteenth Amendment, which said that the
franchised could no be denied on the basis of race, only
denied it on the basis of race. It didn’t deny it on the basis of what came to be used
for proxies of race, like poll, taxes, or
literacy requirements, or the other instruments
that were there wheeled out across the American South
to disenfranchise blacks. The same year, they
adopted US v. Cruikshank, which said that the Bill of Rights does not apply to private
actors or state governments. Again, limiting the Civil War amendments in their range and force. The Civil Rights Cases
the following decade said that the Thirteenth
and Fourteenth Amendments didn’t apply to private individuals. Lochner v. New York in the
early part of this century became emblematic of the
Court that would strike down much new deal legislation
in subsequent decades, eventually leading to FDR’s
attempt to pack the Court, which blew up in his face as they were striking down
so much new deal legislation. But in fact the Court, even though FDR, which he had threatened to
appoint five new justices and produced a lot of opposition, but after that the Court
did back down somewhat. This is the Court that, this Court in 1944 adopted Korematsu v. the United States which allowed for the internship of Japanese-Americans during the war. 2013, Shelby County v. Holder. This was a decision that cut back on really important parts
of the Voting Rights Act which had required states with a history of suppressing votes
or making it difficult for African-Americans to get to vote to have pre-clearance from
the Justice Department that there was no longer a problem. And as I think it was Justice
Ginsburg said in her dissent, it was a bit like saying,
“We no longer need, “we can throw away our umbrella “even though the reason we’re dry “is that we’re holding it up.” So big, big reductions
on the Voting Rights Act. And then of course the Court that the topics we’re
gonna be talking about in more depth today, the
courts about money and speech, from Buckley to Citizens
United and subsequently. So again, this is just a flavor as well, but the big point there is
that these kinds of decisions are much more typical of
how constitutional courts have behaved across the
range of American history. And so we need to come to terms with that, that the Warren Court
was a remarkable outlier and it should give us pause in thinking about how important it
is to empower courts to behave in the ways that
they typically have done. There’s a lot of
scholarship on this subject. I wanna just alert you to some of it. Perhaps the most famous article is one piece by Robert
Dahl published in 1957. He was a longtime professor at Yale and this is a landmark paper in which he shows quantitatively that if you look at the data there’s no evidence that
Supreme Court decisions or judiciary review has
actually contributed anything more to the protection
of minorities’ rights or vulnerable people’s rights than not having the Court there. This is a book by a professor now at the University of Toronto, Ran Hirschl, it was a dissertation in this department, where he looks at countries that have gone from not having judiciary
review to having it, countries like New Zealand,
Israel, and elsewhere, and shows you can’t see
any significant difference in the protection of individual rights when they go from not having to having it. Mark Tushnet, a legal scholar
now I believe at Harvard, has written an important
book arguing about why giving more and more control
over the Constitution is not a good idea from the point of view of protecting the sorts of rights we want protected in a democracy. His Australian counterpart,
another legal scholar, Jeremy Waldron, his famous article here in the “Yale Law Journal”
is part of an ongoing debate between him and Ronald Dworkin. Dworkin was advocating a
Bill of Rights for Britain, and Waldron was saying
don’t export this aspect of the American system. And finally, another important book that started out as a
PhD dissertation at Yale by Gerald Rosenberg, a
professor at Chicago, about Brown v. Board of Education
and subsequent decisions which says that if you
look at the real progress that has actually been made
in school disaggregation, where it’s been made, has come from legislatures and not courts. So all of this is just a salutary reminder that we should think
about the reality that is not only in American history but if you look comparatively the most important variable
from the standpoint of protecting individual rights
and vulnerable minorities is getting democracy, about
which I’ll have more to say in coming lectures, and adding judiciary review on top of that doesn’t do very much, if anything at all. And indeed, sometimes it’s inimical to the functioning of democracy and the decisions that are made
by democratic legislatures. So, all of that is byway
of throat clearing preamble to our subject for today. And this exhibit A, if you’d like. This is the main message of this lecture. It’s exhibit A in observing
that relying on courts as ways of protecting
democratic institutions might not be such a great idea. So. Where we have to start, because we have a written Constitution and a constitutional system, is with the First Amendment, and particularly the Speech
Clause of the First Amendment which says that “Congress
shall make no law “abridging freedom of
speech, or of the press; “or the right of people
peaceable to assemble, “and to petition the government “for a redress of grievances.” This is the text which
we’re all working from. And what I’m going to do
now is take you through basically the 40-year history
since Buckley v. Valeo of how the Court has interpreted the Speech Clause of the First Amendment as it pertains to money in politics. So the background to this is in 1974, when Congress had enacted
very radical changes to the Federal Election Campaign of 1971. They did this over Gerald Ford’s veto and it was the first comprehensive effort by the federal government to regulate campaign contributions and spending. Money was starting to become a really important issue
in American politics and they felt the need
to do something about it. I would just note and
pick up this point later, this is the period at which
American political parties were starting to become weaker. And I think there’s an
important connection between weak parties and the need on the part
of politicians for money that I’m going to spend
more time on later. So the key provisions of
the 1974 legislation were to limit contributions to
candidates for federal office, limit how much can be given to campaigns. It required the disclosure
of political contributions, no secret contributions. It limited expenditures by candidates and associated committees,
what we today would call PACs. And it limits independent
expenditures to $1,000. And then finally it put limits on what candidates could spend from their own personal funds
in order to get elected. So the goal was really to
rein in the use of money. And you’ll see two terms there that the distinction between
which becomes important. The two terms: contributions
and expenditures. And they make a distinction between contributions and expenditures which drives a lot of
what they were doing. They also provided for public financing of presidential elections. Two years later, we got Buckley v. Valeo. And Buckley struck down
most of that legislation as unconstitutional violation
of the Speech Clause of the First Amendment. It held the following. It said it’s all right for Congress to limit contributions to campaigns, and the argument there was because there’s a risk of corruption. If you have people making contributions, they can get a quid pro
quo, and that’s not cool. But it’s not okay to limit expenditures. Here the First Amendment rules. So the idea of an expenditure is if I wanna go out and spend money saying I think that Cristina
should be president, I’m just spending money,
I’m not giving her money. I’m expressing my First Amendment views. And that is not legitimate for Congress to limit expenditures. It’s also not legitimate to stop Cristina from using her personal
funds to get elected because there’s no risk of
corruption there either. We saw Donald Trump making this argument in the 2016 campaign, saying, “I don’t need money
from special interests.” So there’s no risk of a quid
pro quo, so the argument went. And most important they said the idea of leveling the
playing field in elections, it might be a desirable
thing for governments to do but it’s not that important
that it should rise to the level of interfering with the First Amendment. Because the First Amendment protects what the Court in its
interpretative dicta calls a fundamental right. And a fundamental right stands unless there’s a compelling
government interest, that they subject possible violations of fundamental rights to the highest or the most stringent
levels of judicial scrutiny. And they said it’d be nice
to level the playing field but there’s no constitutional requirement of a leveled playing field in elections. There’s a constitutional
protection of free speech. And so the opinion said
that the First Amendment “simply cannot tolerate” any interference with a candidate’s freedom “to speak “without legislative limit on
behalf of his own candidacy.” This was the phrase about
self-funded elections. And then more generally,
this is a nice metaphor. This is actually in a
footnote to the decision where the Court says,
“Being free to engage “in unlimited political expression “subject to a ceiling on expenditures “is like being free to drive an automobile “as far and as often as one desires “on a single tank of gasoline.” Who is the government to tell me how much gasoline I can put in my car? They might wanna level some playing field but this is about a constitutional right protected by the First Amendment. So, that was the decision. There’s some important
assumptions I want to just flag. One is that money is speech. In a dissent, Byron White said, “Money isn’t speech, money is money.” And he might have also said, “Money is a megaphone for speech.” So the second is the one
I’ve already mentioned, that the government interest in leveling the playing should say
field is not compelling and so it must give way
to fundamental rights protected by the Constitution. And the third is that the only corruption worth worrying about is
quid pro quo corruption. Of course we’re hearing a lot
about quid pro quo corruption at the moment, and unless you can actually show the smoking gun of quid
pro quo corruption, I give you something and
get something in return, then you can’t show, there’s
nothing to worry about from the standpoint of the
corruption of the system. So that was what was launched
in 1976 by the Court. Now, this is vastly more
important than Citizens United in the sense that, once
this decision was made, the changes that have led
us down this 40-year path to Citizens United are more or less, nothing’s inevitable in politics, but exceedingly likely to follow. I’ll just mention a few other
decisions that the Court made. So in 1990, when the drift
to the right on the Court was not as far as it
has subsequently gone, the Court did say that corporations didn’t have the same
First Amendment rights as individuals. So it was okay for the
Michigan legislature to stop corporations from
making independent expenditures to support candidates on the grounds that “corporate wealth can
unduly influence elections.” So they were saying corporations are not protected in the same way at least as individuals by the Speech
Clause of the First Amendment. They don’t have the same
First Amendment rights. And then, in that case,
the government interest in the conduct of elections and not in leveling the
playing field, if you’d like, not having undo corporate interest trumps. The reason I’m putting
the Michigan case there is because that was what
was overruled in 2010 in Citizens United. Citizens United was
founded by Floyd Brown, a DC political consultant, in 1988. And it was an organization, you
can see here its big motive. It’s “an organization dedicated “to restoring our government
to citizens’ control. “Through a combination of education, “advocacy, and grassroots organization, “Citizens United seeks to reassert “the traditional American
values of limited government, “freedom of enterprise, strong families, “and national sovereignty and security. “Citizens United’s goal is to restore “the Founding Fathers’
vision of a free nation “guided by the honesty, common sense, “and good will of its citizens.” So American as apple pie. So what was at issue in this case is that they have planned
to advertise a film that was essentially an anti
Hilary Clinton commercial shortly before the 2008
Democratic primaries when she was still running
for the nomination. And at that time, federal law
had prohibited corporations and unions from making what they called “electioneering communications” 30 days prior to an election, the primary, or 60 days prior to an election, or it’s making any expenditures
advocating the election or defeat of a candidate at any time. So there was some limit on the content and some limit on the timing, and the argument had been that under the then prevailing Michigan law that these were the kinds of constraints that had been legitimate. And in Citizens United, the Court said no. The Court held instead
that Congress cannot limit corporate expenditures, and so overruled its prior
decision in the Michigan case, and said the First Amendment
rules in the same way with respect to corporate expenditures as it does to individuals. There’s no risk of corruption here so there’s no, again, quid
pro quo is what counts. And the idea that the
Court should be involved in protecting the shareholders
of corporations cannot stand. By that time, it was a long-established, SOM students here will know, a long-established rule called
the business judgment rule which said that while it’s good, perhaps, for corporations to maximize
shareholder returns, there’s no requirement of that. And the business judgment rule says that basically if the
shareholders don’t like the way a corporation
is managing the company, they can either sell their
shares, low-exist cost, or they can get new management. So it was not the business of the Court to protect shareholders from the political uses
of corporate money. So the assumption’s now
that the corporations have the same free speech
rights as individuals, and so any government interested in leveling the playing field isn’t compelling and so must fall. And again, reaffirming this idea that the only corruption
worth worrying about is quid pro quo. Getting something in return for giving a politician some money. Now, there’s a subsequent
couple of decisions that are less often talked
about than Citizens United that I just wanna mention. So the first one was the same year. SpeechNow v. the Federal
Election Commission by the DC Circuit Court of Appeals. This is in the wake of Citizens United. Where they said contribution limits, whether to independent advocacy groups cannot be, to whether to individuals advocacy groups or other organizations cannot be limited. So the idea here is that
you can make a contribution to another organization
and that can’t be limited. There’s no risk of corruption
in the First Amendment rule. They said, though, that
Congress can require disclosure. So if I’m gonna give money to
a political action committee or something like that, I might be, it’s reasonable for Congress
to require at least disclosure that people will know
where the money came from. The public has an interest in knowing who’s speaking about a candidate while making an argument in politics. Again, they’re affirming this
idea, now become a mantra, that the only corruption
worth worrying about is quid pro quo. But the second assumption they made is that this idea of shining
light through publicity would be enforceable, that it would be possible to say that corporations could give money to political action committees and, as long as they disclosed it, there was no risk, if you’d
like, to the political system. It was certainly not a serious enough risk to justify interfering with
the First Amendment rights to make political
expenditures as they chose. As I say, good luck with that. – Here to help me make my move
to secrecy and obfuscation completely transparent, please welcome former general
counsel to the McCain campaign and my personal lawyer, Mr. Trevor Potter. Trevor, nice to see you.
(audience cheers) Do you want some? Can I carve you some? Do you want some Ham Rove? – I’ll wait ’til later. – Yeah, well, he’s not kosher. (audience laughs)
All right. Now, Trevor, I’ve got all these people down at the bottom of the screen who’ve been giving me
money, individual Americans, but I haven’t gotten any
of the big corporate money, that’s why I have a Super PAC. Why wouldn’t a corporation give money? – Well, they’d been nervous about giving in a way that their name
is publicly disclosed. People might object to what they’ve done. Their shareholders, their customers. – Okay, so that’s where a c4 comes in. A corporation or an
individual can give to a c4 and nobody gets to know that they did it, right?
– That’s right. – Okay, so, how do I get one? – And that money can be used for politics. – Oh great, that’s good, too. – So we need to get you one. – As long as it goes through me, it can go to anything it wants. (audience laughs) So how do I gets me one, Trevor? (audience laughs)
– Well. Lawyers often form Delaware corporations, which we call shell corporations, that just sit there until they’re needed. – So just some anonymous
shell corporation? – Right, and I happen to have
one here in my briefcase. – Let’s see it. Okay, what’s it called? – It’s called Anonymous Shell Corporation. (audience laughs) – That’s got a real ring to it, Trev. – Registered in Delaware. – Now, I don’t have to
go to Delaware, do I? – [Trevor] No, it’s
already been done for you. – (whistles) Okay. (audience laughs) Okay, (mumbles) Anonymous
Shell Corporation filed in Delaware, I’ve got this. So now I have a c4? – Now we need to turn it
into your shell corporation, your anonymous one, and we
do that by having normally a board of directors meeting. – And who’s on the board of directors? – Well, just you. – Sounds like a nice group of people. (audience laughs)
All right, let’s do it. Let’s call, (gavel thuds) okay. (Trevor and audience laugh) (gavel thuds) And I’ve shattered my champaign glass. (audience laughs) I hope there’s no sensitive
electronic equipment down there. All right, (gavel thuds) call
to order, let’s do this thing. – All right, so. This says that you are the sole
director of the corporation. – [Stephen] I am. – And that you are now electing yourself president, secretary, and treasurer. – It sounds like a great board. (audience laughs)
– And you are authorizing the corporation to file the papers with
the IRS in May 2013. – So I could get money for my c4, use that for political purposes, and nobody knows anything about it ’til six months after the election? – That’s right. And even then, they wouldn’t
know who your donors are. – That’s my kind of campaign
finance registration. (audience laughs) Okay, okay, so now I’ve signed it. I have a c4? – You have a c4, it’s up and going. – So without this, I am transparent. With this, I am opaque. (audience laughs)
– That’s it. – Without it, you get to know. With it, you go to hell. (Trevor and audience laugh) Without it, here’s who gave me my money. With it, you know what? Your mother gave me my money. (Trevor and audience laugh) Well, I like that, Trev. (audience cheers)
(audience applauds) Okay. Okay, so now I can get
corporate, individual donations of unlimited amount for my c4. What can I do with that money? – Well, that c4 could
take out political ads and attack candidates or
promote your favorite ones, as long as it’s not the principle purpose for spending its money. – No, my principle purpose
is an educational entity. – There you go. – I wanna educate public that
gay people cause earthquakes. (audience laughs) – There are probably some c4s doing that. – Can I take this c4 money and then donate it to my Super PAC? – You can. (audience exclaims) (audience laughs) – But wait, wait. Super PACs are transparent. – Right–
– And the c4 is secret. So I can take secret donations off my c4 and give it to my supposedly
transparent Super PAC. – And it’ll say, “Given by your c4.” – What is the difference between
that and money laundering? (audience laughs) – It’s hard to say. (audience laughs) – Well, Trevor, thank you
so much for setting me up (audience cheers)
(audience applauds) in this brave new world. (gavel thuds) Dismissed. Trevor Potter, everybody. – So, he called it right. What we see after SpeechNow
is enter the Super PAC, and you have political action committees that can raise and spend
unlimited amounts of money from corporations, unions,
individuals, and associations, that is, from anyone. And so just people who are interested in the details of this, Super PACs can choose either to be what had been known as a
527 or a 501c4 organization. So the 527s, these had
been created by the IRS to allow organizations and committees to raise and spend money
specifically to influence politics, but they had to report
donors and contributions. So they accepted donor
lists would be made public in exchange for greater freedom to directly influence election
initiatives, if you’d like. The 501c4, as you saw, that’s what was being
described in the video, works a little differently. It’s a nonprofit. It’s just a little different from a 501c3, which is what Yale University is. It was created in 1913 with the intention of
creating tax exemptions for civic and commercial organizations that focus exclusively on social welfare. And it can also collect unlimited funds, and here’s what they were keying off of, it’s 501c4s do not have to
disclose their donor lists. Basically, they forfeit their ability to engage in politics
as a primary function but they gain the ability to keep the sources of
their funding anonymous. Somewhere along the line, however, the interpretation of the 501c4
statute started to evolve. First of all, the word
exclusively educational came to mean primarily educational. And, of course, once you
have a word like primarily, you need lawyers to interpret
what does primarily mean. And somewhere along the
line, it seems, in the 1960s, the agencies started to
interpret primarily to mean 51%. It’s not clear why, I’ve
done some digging into this. Perhaps there’s a lobbying
story there, I don’t know. But so what it basically means is that you’ve got to spend 51% on
your social welfare purpose, that gay people cause earthquakes, and you can then spend 49%
directly on political activity. And this is what gave rise
to the Lois Lerner scandal in the Obama administration, which some of you might remember. She was a mid-level operative in the IRS. They were getting floods and
floods of these new 501c4s. This was in the wake of
the Tea Party movement. And so she was tasked, or tasked herself, with investigating whether
they were doing the 49% or not. And she then got accused of
disproportionately investigating conservative 501c4s, and that blew up into
something of a scandal that went viral. Well, that was all generated by this law. So, in effect, what it’s done is it’s said that you can engage in
unlimited expenditures without disclosure, the
slide is misleading, I will fix it before I post it, while optional disclosure, I
guess is sufficient to say, without disclosure for 51%. Essentially paying a 51% quasi-tax. It’s not really even a tax because you can define
your social welfare purpose to suit yourself. And so if you wanna see
what effect this had, this is Super PAC spending by disclosure. You can see that in the
2010 election cycle, before all of this became operative, most of the money was going
to companies that, whoops, to 527s that were disclosing and not very much was going to others. But after 2012, you can
see a lot more money started to go to the new 501c4 Super PACs, at least half of the spending
in that election cycle. So we’ve seen this is a
move into more dark money than we had had before
operating in politics. The upshot is that contributions
to candidates or campaigns can still be limited by
the federal government, but independent expenditures
can’t be limited and contributions to organizations that engage in expenditures. So contributions to
candidates can be limited but contributions to organizations that engage in expenditures
cannot be limited, and reporting rules would require a massive overhaul to be meaningful. So that has been the story
of campaign finance reform in the American courts through 2010. I should mention one additional decision, and this is 2014 McCutcheon v. the Federal
Election Commission. This is the only subsequent time the Court has revisited campaign finance. And there, there had been a law which had limited the number of candidates that you could give money to. I think it was to five candidates in any given election cycle, and the amount you could give to a party was also limited. And so that meant the
total amount you could give in any two-year election
cycle came up to $117,200. You couldn’t give more than that. And the Court said no,
why should you be limited to only giving to five candidates? The justification for
this combined restriction was unwarranted. It’s not tailored to
any particular purpose that the government is
entitled to engage in. Even though, actually, Buckley had upheld aggregation limits, they said, again, there’s no quid pro quo here, you’re not giving money
to get anything in return. What’s the difference between giving money to five candidates and giving money to 30 or 40 candidates? Again, assuming quid pro
quo is the only corruption worth worrying about. And a massive increase in inequality of contributing power now. Instead of 117,200, you
could give 3.5 million in contributions in any election cycle. So, again, much more
inequality of influence in the world of contributions. Now some people say this isn’t so terrible because it may attract more money into contributions to candidates and less money into dark money. Rick Pildes at the NYU
Law School, for example, has made this argument. So the idea is that if you can give more money to the candidates, you won’t spend it on dark money, and so we might actually
get less darkness. At this point, I think that’s speculative. The jury is out. So that is the jot and tittle
of the Court’s involvement in campaign finance reform efforts. Before I turn to the demand side, I just wanted to say something about the changing media
context of all of this because we’re living in
a very different world from the world that existed in 1976. Apart from what we make of this equation of money with speech that Byron White and many others have
subsequently criticized. In 1976 there were
basically three TV channels. And because of the
scarcity of TV channels, the federal government came up with, this was not done through the
courts or even by Congress, it was actually done in
the executive branch, they came up with, the FEC
came up with something, it wasn’t the SEC but it was,
I forget exactly which agency, but they came up with this, Federal Communications
Commission, the FCC, came up with something
called the fairness doctrine. And the notion there was that because there’s a limited number of channels, that if a TV channel puts
on one point of view, they must put on a competing point of view from the other side. So there was this notion of achieving some kinds of political balance. And this was never actually
challenged in the courts so the Court never ruled on it, and we had the fairness
doctrine until the 1980s during the Reagan administration. And during the Reagan administration, we also had the advent
of cable television. And the FCC said, well, now there’s an unlimited number of channels, so there’s no reason to
have the fairness doctrine. And then we got satellite, so
instead of 80 or 90 channels we have hundreds of channels. So there’s no reason to
have the fairness doctrine because the logic for
the fairness doctrine was the scarcity of channels. Now, there’s no scarcity. In fact, more or less
unlimited number of channels. And so the Reagan administration abandoned the fairness doctrine and that started us on
the political consequences of increasingly segmented media markets. The world that we moved
to being a world in which liberals get their news from MSNBC, conservatives from Fox News or Breitbart, and then of course onto
the world of social media, the world of people getting
news from Facebook and so on. And so we’re now in a world in which it’s almost impossible
to have any requirement that different points of
view confront one another in the sense that, say, John Stuart Mill talked about in the competition for ideas, the idea that if you think about prime minister’s questions
in the UK Parliament where the prime minister
has to stand there and be questioned and defend his or her
views to the opposition. We saw earlier Margaret
Thatcher defending her views against her Labour critics
when she was leaving office. We never have that now. Political speech is not about institutionalized argument over policies, it’s rather about mobilizing
your own supporters. It’s about you speak to the people who already agree with you. We know from Kahneman
and Sunstein’s research that I referred to last time, that tends to make people more extreme. And so political speech is
really about mobilization, mobilization of people within your world of like-minded people, and not about argument over policy. And that is a development
that is underpinned by other changes in the political system that I’m going to get to briefly today but more fully later on. So let’s look for the last few
minutes at the demand side. We’ve been talking this entire lecture about the supply side. We’ve been talking about why people wanna spend money on politics and what kind of influence
they think they can get from spending money on politics. Whether it corrupts the system or not and what sort of definition
of corruption we should have. But why is it that politicians want money? Why do they need so much money? We spend much more money
in politics in this country than in almost any other country. Why do politicians need money, yeah? – [Man] They attempt to
put out their message. They attempt to buy advertisement
from one side (mumbles). – Okay, so they want to
put out their message. But British and German and
Dutch and Australian politicians wanna put out their messages too and they don’t have so much
need for money in politics. So any, why? Who else, okay, yeah? – [Man] There are no primaries in the UK and the election cycle
takes exactly six weeks. – So frequent elections
and a staggered cycle, as well as primaries. So we have essentially
permanent campaigning and campaigns are much longer. In most parliamentary systems, you call an election three or four weeks before the election. There’s a very short election
cycle, so that’s one reason. And of course, if you have primaries, you need money for the primaries. So those are among the reasons
people need so much money. Any other reasons? Yeah? – [Man] It’s seen as a measure
of support for the candidate. – Seen as a measure of
support for a candidate. So we see how do you
get to be on the stage in the current democratic debates? You’ve got to not only show that you’ve risen to a
certain level in the polls, but you’ve also gotta
have raised enough money from some specified number
of independent contributors. So it’s a way of demonstrating
that you can get support. Again, it’s not obvious
why that differentiates American politics from other countries. Yeah? – [Woman] Well, for
presidential elections, this is a huge country
and people need to have teams all over the place. And unlike a parliamentary system where the local elections then govern who comes in power and so forth, here, you need to have a
completely national campaign, which becomes very, very expensive. – Well, I mean, you certainly, in many countries you have
to have national campaigns, and first and foremost, you
have to win in your district, you need the money to win
in your district here. But I think you’re onto
something nonetheless about thinking about the difference between national campaigning
and local campaigning. There’s a hand over here. – [Woman] I’m thinking about investments. So, like the stock market. Almost like maybe they’ll
take in the finances and then invest in bigger corporations and look for those corporations
to put their name back out. It’s almost like a partnership. – Well, I think focusing
on people investing is also part of it, and
political investing. Here’s a way to think about it, that we have very weak
parties in the United States, and I’ll say more about what
makes a party a weak party. Part of it is primaries. But a weak party is a party that is very decentralized in its control. So in a country with
stronger political parties, such as Britain, the party has a big say in who
the candidates are gonna be. They don’t have primaries,
as somebody pointed out, we have primaries. So another way of putting it is, in our system all
campaigning has to be retail. And retail campaigning
is much more expensive than wholesale campaigning because every person
is running on their own for their own seat, and they need a lot of money to do that, and they can be threaded in
their own individual seat. Some of you probably heard
on the news this morning reports that there’s some
35 Republicans in the Senate who privately would support convicting Donald Trump if the impeachment resolution
goes through the House, but publicly will not. And the reason, and people
come out and say it, they say, “If you did,
you would immediately face “a primary challenge in your district.” And so everybody has to, if you’d like, in retail campaigning, it’s every person for themself. In wholesale campaigning,
you’re part of a team that is trying to win as a team. And so in our system, politicians
need vast amounts of money because they have to get elected retail. All politics is local. It’s a famous American aphorism, but that means all politics is retail. So there might be benefits
of politics being local but the cost is that
politics is very expensive. And of course once you have
a lot of retail campaigning, it also turns raising money into something like an arms race, because if you don’t raise
as much as your opponent, you’re not gonna be able, you’re not gonna be able
to have enough money perhaps to get on the debate stage or to get enough media
time in order to prevail. And so this is why public funding limits are so inadequate, because what happens is, no
matter where they’re set, people soon discover that
they can raise more money if they don’t take the public funding. The idea is if you take the public funds, then you’ve gotta limit your fundraising. But the last time the capital
was increased was before 2008 and President Obama,
who was the first person to use crowdsource fundraising, realized very quickly that he
could raise a lot more money than the limit. I forgot what it was then, it was several hundred million dollars, but his was the first million-dollar
presidential campaign. So public funding limits don’t work in a world in which people can raise as much
private money as possible and in a world in which you’re basically trying to communicate
with your base voters, you’re trying to communicate to the people who mostly agree with you. And so that’s one of the reasons why we find it so difficult to limit the role of money in politics. Some other reasons why there’s so much
demand for money is that, I said to you earlier
when I was talking about the resurgent right and
the anti-tax movement that a lot of those
bodies invested heavily in think tanks because they
thought the universities were dominated by the left and it’d be much efficient
to spend the money in places like Heritage, the
American Enterprise Institute, the Cato Institute, and so on. Now, a lot of money,
particularly in response to these recent Court decisions, is moving from the think tanks. The think tank gap between Republicans and Democratic think
tanks has closed somewhat and the money it seems is
going into these 501c4s, and that, again, means, from the point of view of
the arms race of politics, that your opponents are gonna
have more money spent on them and so you therefore need
to get it spent on yourself. And so, again, we find that the remedies sometimes make the problem worse. Another point just about the arms race. I think that this is an area that’s actually right for reform because politicians hate it. They hate, if you do any
interviewing of candidates, you’ll see this, politicians hate it because they have to spend
all their time raising money and because they’re then controlled by the people who give them the money, and they don’t like it. And the structure of an
arms race is you can’t stop. Underneath it is something
called the prisoner’s dilemma. Even though it would be in the interest of both of you to stop raising money, if you could agree to do that, the logic of the situation
keeps driving people to raise more and more and more money. And so actually politicians, the vast majority of them would like to get something to stop the arms race, which is why they passed
the campaign bill in 1974 that we began with over
Gerald Ford’s veto. And the reason is that they were trying to put a constraint on the arms race so that they wouldn’t
have to raise this money. So but for the Court, this
problem wouldn’t exist. And I think it’s, as I
said, a salutary reminder of the cost of having
independent judiciaries. One final point is that
there’s been a lot of talk about crowdsource funding. Maybe this is the antidote, this is the antidote to
big money in politics. You know, lots of millions and millions of little contributions, isn’t that great? It’s like democracy is in the streets. People can give one or $2 and, as I said, actually Barack Obama was the first person to use crowdsource funding in a big way. Bernie Sanders is very effective
at crowdsource funding. And so a lot of people have said, well, maybe there’ll be a technical fix here that we will get to counterweight
the role of big money. But what the research shows is that even people who give small amounts tend to not be representatives
of their districts. They tend to be activists
on the fringes of parties, they tend to be people funding
groups like the Tea Party or groups on the far left
of the Democratic Party. So the idea that you’re gonna
get less extreme views funded, particularly people who give any money outside of their own district tend to have very extreme views. Almost nobody gives money
outside their own district who doesn’t have, is not on
extremes of their parties. So the idea that this is gonna
be a way to sort of restore the influence of the
median voter in politics is not something we should
get too excited about. On Thursday we’re gonna turn
to part two of the course and we’ll look at democracy’s
fourth wave, question mark, as it emerged in the wake of the Cold War. (gentle music)

Maurice Vega

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