Special Orders  

  Campaign Finance Reform and the Constitution:
What's Hot in the Courts
E. Joshua Rosenkranz
New York University

Campaign finance reform and the Constitution. When I think of those two forces in the same breath, I cannot help but think of the recently released transcript of a radio communication between a U.S. naval ship and Canadian authorities off the coast of Newfoundland. Each insisted that the other "divert your course 15 degrees . . . to avoid a collision." After several exchanges of escalating hostility, with each authority refusing to budge, the American captain warned: "This is the Captain of . . . the aircraft carrier USS Lincoln, the second-largest ship in the U.S. Atlantic fleet. We are accompanied by three destroyers, three cruisers and numerous support vessels. I demand you change your course 15 degrees north, or counter-measures will be undertaken to ensure the safety of this ship." The Canadians responded, "This is a lighthouse. Your call." 

The exchange between campaign finance activists and the courts this decade has often borne an uncanny resemblance to this transcript. Especially early in the decade, reformers forged ahead with damn-the-torpedoes resolve. Armed with the seemingly unstoppable power of public outrage and cynicism, they fashioned reforms that resonated with the average voter, but paid little heed to the First Amendment as interpreted by the Supreme Court. Reformers worked tirelessly to pass their reforms, but no sooner did the victory cry emerge from their lips than they were stopped dead in their tracks with a pronouncement from the proverbial immovable object, "This is a court." 

Battle-scarred, reformers in recent years have become increasingly sensitive to First Amendment concerns. Yet the script remains much the same. Offering little guidance and less predictability, the courts are continuing to scuttle even the most sensitively drawn reforms. Opponents of reform have capitalized on the uncertainty. They greet any reform effort by invoking the First Amendment, as if the very invocation of the clause should stop us cold. Often their First Amendment claims are specious, at best, the logical equivalent of warning, "Better not budge. There's a lighthouse out there . . . somewhere." 

Obviously, neither approach to constitutional analysis - "damn the torpedoes" nor "better not budge" - is particularly productive. My goal here is to sketch current campaign finance doctrine in order to put some of the current legal controversies in context. 

The Buckley Framework

The discussion on campaign finance reform and the Constitution begins, and often ends, with Buckley v. Valeo, the Supreme Court's 1976 opinion that dominates the field. In Buckley, the Supreme Court reviewed the 1974 post-Watergate amendments to the Federal Election Campaign Act. As passed by Congress, FECA was an intricate scheme of four integrated components. 
1.  Contribution caps - limits on how much a variety of political actors could put directly into each other's pockets. 
2.  Mandatory spending limits - separate caps: 
     (a) on how much a candidate could spend of his own personal wealth; 
     (b) on the amount a campaign could spend from funds raised in discrete amounts; and 
     (c) on the amount an individual could spend independently advocating for or against a candidate. 
3.  Public financing (for presidential elections) - conditioned on voluntary spending limits. 
4.  Stringent disclosure and reporting requirements. 

Buckley is most well known for striking mandatory spending limits of all three varieties. But it is just as important to understand that the Court upheld each of the other components of the integrated regulatory scheme. How in the world could the Supreme Court have upheld contribution limits, yet strike spending limits as categorically impermissible? The Court began with the observation that money is the fuel for speech, and, as such, limits on spending or giving money call into play First Amendment concerns. 

Next, Buckley held that contributions and expenditures are different under the First Amendment. As it does in so many areas of constitutional doctrine, the Court in this context balanced the importance of the speech right against the weightiness of the government's reasons for wanting to infringe on speech. 

As to the speech value of these two activities: A contribution, the Court held, has little speech value. It is a mere "signal" of support whose message does not depend very much on the size of the contribution. Spending, the Court believed, has greater speech value. It is much more akin to direct speech, because every dollar spent will actually increase the size of an audience, the number of issues covered, and the depth of their exploration. Or so the Court thought. 

As to the reasons for regulating: The Court concluded that contributions are more corrupting than spending. The Court easily saw that a candidate could be corrupted by large contributions. In contrast, the Court could not see how a candidate could be corrupted by unlimited spending. The Court rejected the notion that a candidate might give special consideration to a supporter who independently spends $1 million on television ads supporting his election rather than writing a much smaller check directly to the campaign. Nor did the Court recognize any danger that the endless money chase might corrupt a candidate's agenda or priorities. 

Finally, Buckley held that preventing corruption (or guarding against the appearance of corruption) is the only rationale that will justify any restrictions on campaign finance. Specifically, the Court rejected any notion that the government might limit the flow of money into elections in the name of equality. The Court famously opined that it is improper to limit the speech of some in order to advance the speech of others. 

The upshot of the Court's analysis is that spending limits of any sort are unconstitutional -- unless they are imposed as a condition of the receipt of public funds, so that candidates remain free to reject them. But contribution limits are constitutional, so long as they are not set so low as to lose the justification of combating corruption. 

I used to say Buckley left us with a world where we are basically playing baseball with a huge oak tree in the middle of the field - and whenever you hit the tree, it's an automatic out. But Buckley left a lot of questions unanswered, and increasingly the lower courts have turned the case into one of those trees in the Wizard of Oz that move freely and snatch balls right out of mid air. To make matters worse, the lower courts are all over the place on many important issues, and the Supreme Court has remained conspicuously silent in the face of the confusion. 

This phenomenon makes it hard to predict how the courts will rule, ultimately, with regard to any particular regulatory device. The best I could hope to do is summarize the most hotly contested legal issues right now in campaign finance law and offer some prognostications of how they are likely to play out when they ultimately wind their way up to the Supreme Court. 

Contribution Limits

Perhaps the area that has gotten the most judicial attention of late has been the evaluation of lower contribution limits. Exploiting the latitude to set contribution limits, reformers over the past decade have taken to racheting down contribution limits across the nation. But recall that Buckley did not say that all contribution limits are constitutional. It held that contribution limits are constitutional as long as they do not go too low. How low is too low? The Court shed no light on this question, except to say that a contribution limit is too low when it becomes "a difference in kind" rather than "a difference in amount" - whatever that means. 

Although the Supreme Court declared that courts should defer to legislative judgments on such line-drawing exercises, the courts have been second-guessing the judgments of legislatures and initiatives. Increasingly, the courts have been striking not just the $100 contribution limits that were in vogue for a time, but any limits that depart from the $1,000 limits sustained by Buckley

Even limits fashioned after those approved in Buckley are now vulnerable. The case to watch is Nixon v. Shrink Missouri Government PAC, which will be argued before the Supreme Court in the fall of 1999. At issue are Missouri's contribution limits, which are currently set at $1,075 for statewide races. Though these contribution limits are higher than the current federal limits, and higher than the very limits the Supreme Court upheld in Buckley, a federal appellate court sitting in St. Louis struck the limits as too low. The rationale? A dollar doesn't buy what it used to. What was acceptable to the Supreme Court in 1976, the appellate court concluded, will no longer do. For the first time in history, a court has concluded that constitutional rights must be adjusted for inflation. 

I predict the Supreme Court will disagree. I doubt the Supreme Court has the appetite to weaken the hand of legislatures that are grappling with how to guard against corruption or the appearance of corruption, nor the appetite to sit as a super-legislature second-guessing exactly where to draw the line for each race.1 

My hope is that the Supreme Court will use this case as a vehicle to resolve several baseline analytical questions that are hopelessly splitting the courts. The courts are not speaking with a single voice on questions as fundamental as whether the state must actually prove that large contributions can corrupt, or appear to corrupt, candidates, and, if so, whether the proof must directly support the threshold level the legislature chooses. Nor are the courts in sync on whether a contribution limit, say $500, is valid or invalid in the abstract, or whether its validity depends upon other factors such as the size of the race. The Supreme Court did accept, quite uncritically, the same contribution limits for congressional races as for presidential races. But there is something a bit odd about applying the same analysis both to a $100 contribution limit in Arkansas legislative races that average $22,000 and to a $100 limit in a statewide or a nationwide race than runs in the millions. 

These and other questions will continue to bedevil the lower courts unless the Supreme Court seizes this opportunity to clarify them. 

Issue Advocacy

The single thorniest legal issue right now involves so-called "issue advocacy." Is it permissible for government to require disclosure or otherwise regulate electioneering ads -- a corporate sponsored ad, for example, that trashes a political candidate by name on the eve of the election -- that are thinly disguised as generic political speech? 

Buckley and later cases have made this much clear: It is permissible to divide the universe of political speech into two categories - electioneering and everything else. Elections are special. Because of the unique role they play in our democracy, the First Amendment will tolerate regulations in this special context that it would never tolerate in other contexts. When it comes to electioneering, we can limit the source of funds, we can limit fundraising (including an outright prohibition on corporate and union funds), and we can require disclosure of amounts raised and spent. 

The question is exactly how we are permitted to define "electioneering" for these purposes. Is it limited to magic words, such as "vote for," "vote against," "elect," or "defeat"? Or may a legislature craft a careful definition that extends beyond those magic words? A lot rides on where exactly the legislature puts the line, and how the courts assess it. If the definition is too narrow, we may as well have no campaign finance laws at all; any sophisticated player could figure out how to craft an electioneering message that would evade election laws. If it is too broad, we risk infringing on speech that should be fully protected - speech for which the special rules governing elections ought not apply. 

Put another way, the question comes down to this: May a legislature treat as campaign ads commercials that look, smell, waddle, and quack like campaign ads? Or are we stuck -- as a matter of inalterable constitutional command - with a mechanical definition of electioneering that looks only for certain magic words? 

Right now, the courts seem to be split, with the weight of authority tilting a bit toward the more restrictive approach. But the lower courts are simply reading tea leaves as to how the Supreme Court will eventually come out. This is a question that only the Supreme Court will be able to answer definitively. My instinct is that when push comes to shove, the Supreme Court will not sanction a rule that says it is permissible to regulate electioneering, but only if we define the concept so narrowly that no regulation could possibly be effective. 

Soft Money

A close cousin of the electioneering question is the debate over regulating soft money, the mega-contributions that political parties raise from wealthy interests, corporations, and unions. Lately, these funds have been funneled into ads - again, they tend to be ads aired on the eve of an election attacking particular candidates - that are unmistakably designed to influence elections. Unlike the question of defining electioneering, however, the question whether the government can limit the size and source of contributions to political parties is as close to a no-brainer as one finds in First Amendment law. 

To see why, let us consider an important case that has, oddly, received little attention. The Republican National Committee (RNC) and the Ohio Democratic Party have challenged the current minimally intrusive restrictions on how soft money is spent, regulations requiring political parties simply to mix a certain amount of hard money into their soft money spending. The attack on these allocation formulas is based on a breathtakingly expansive reading of the First Amendment. In essence, the RNC is arguing that they have the right to raise unlimited amounts from any source, corporate, union, or foreign; rely on candidates to raise it; and even spend it in coordination with candidates - so long as the party does not spend the money on ads that use "magic words" such as "vote for" or "vote against." If this theory is vindicated, we can, of course, forget about McCain-Feingold; its soft money ban is far more onerous than the restrictions now under attack. 

More importantly, if the RNC prevails, we may as well abolish all campaign finance regulation. Contribution limits will be meaningless if a candidate can just set up a segregated account under the party's auspices and raise money that he can then spend on his own campaign as he wishes. Worse yet, if the RNC is right, then there is nothing to stop a candidate from setting up his own issue campaign, raising enormous sums of completely unrestricted contributions for that campaign, and running his entire election campaign out of that fund. All he would be required to do would be to eschew words like "vote for" or "vote against" - words that are rarely found in modern campaigns anyway. 

Seem farfetched? Hardly. At this very moment, presidential aspirants for 2000 are establishing and running issue campaigns. They establish funds in Virginia, which, courtesy of its lax campaign finance rules, has become the Cayman Islands of campaign finance. The candidates are raising money for these issue campaigns in contributions - often in the six figures -- that far exceed the contribution limits imposed by FECA. Many of the gifts are from corporate entities and others who are prohibited from contributing to elections. Since these groups are styled as issue groups, they do not disclose the sources of the money or their expenditures. Yet, for each of them, the "issue" seems to be what a good guy the candidate is and how compelling his ideas are. If this is, indeed, legal, candidates need not set up campaign committees. They can simply run their entire election campaigns through their issue funds. 

Whether or not the current practice is legal - and I firmly believe it is not - there is no question that Congress may act definitively to end both this practice and the raising of soft money by political parties. For this entire century it has been clear that Congress can preclude corporations (and later, unions) from influencing elections by giving money to candidates or to political parties. And for a generation, it has been clear that Congress can limit the size of contributions by very wealthy players to candidates or to parties. Plus, the Supreme Court has made clear that a legislature can impose restrictions that are designed to ensure that other valid regulations are not evaded. These rules converge to mean that a ban on soft money - which is nothing more than a limit on the amount that any individual could give to a political party and a bar to corporate or labor contributions - would be upheld. 

Public Financing

As I noted above, the Supreme Court made it clear in Buckley that a legislature is allowed to entice candidates to cap their own expenditures voluntarily, even though it cannot require them to do it by direct command (or penalize them for not doing it). Because public financing has only recently come into vogue in the states, the courts have yet to resolve numerous constitutional questions that will soon come to the fore. The questions fall into three main categories. 

The first set of questions revolves around the voluntariness of the spending limit. Can a deal be too sweet to be considered voluntary? The deal for the presidential general elections has been so attractive that no major party candidate has ever turned it down. Yet, the Supreme Court upheld it as voluntary. That would suggest that whether a spending limit is voluntary or not should be judged on the basis of whether candidates who opt out are in some way punished, not on the basis of some judgment that the rewards of participating are too good to be true. Also subject to challenge have been various techniques - sometimes derisively called "Scarlet Letters" - for identifying those candidates who opt in or opt out of the spending limits. Over the next few years, we can expect cases to address whether those techniques - designations on the ballot or on campaign literature - amount to impermissible penalties for those who opt out. 

The second set of questions revolves around so-called "trigger provisions," which increase the public financing available to certain candidates depending upon the conduct of others. Is it permissible, for example, for a state to increase the grant to a candidate who accepts spending limits when his opponent crosses a certain spending threshold? How about increasing the public subsidy to a candidate when an independent speaker spends a considerable sum to attack him? Do those extra grants "punish" the speech of candidates who opt out of public financing, or the speech of independent voices? Traditionally, the grant of subsidies to one group has never been thought of as a punishment of the speech of another, but in this context, the grant depends directly on exactly how much speech that other utters. 

The third set of questions concerns the other strings that can be attached to public funding (or other government benefits, such as free television). Can a legislature impose strings that have to do with the content or nature of the political speech rather than with spending? Traditionally, the courts have been hostile to government efforts to influence the content of speech. It seems clear, for example, that a legislature could not condition a grant of funds or resources on a promise to run a positive campaign. But what about a promise to debate? Or format restrictions on length of ads or on the willingness of a candidate to appear in them as a talking head? Such provisions are sure to be tested in the courts. 

* * *

Scores of other legal issues are wending their way through the courts. Reformers are experimenting with state laws at a fevered pace, unprecedented since the post-Watergate era. All along, though, they are haunted by a vague warning bellowing in the mist from the courts: "This is the Constitution. Your call." 

E. Joshua Rosenkranz, executive director of the Brennan Center for Justice at New York University School of Law, is the author of Buckley Stops Here: Loosening the Judicial Stranglehold on Campaign Finance (Twentieth Century Fund, 1998). 


1. I hasten to note, in the interest of full disclosure, that my colleagues at the Brennan Center represent a party to the case before the Supreme Court. 

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