Is the Arizona Campaign Finance Case the Death of Public Financing?

So says my friend Rick Hasen.  But I'm not so sure.  The Supreme  Court recently agreed to hear a case from Arizona that challenges that state's public financing scheme, McComish v. Bennett.  Oversimplifying slightly, Arizona's public finance scheme attempts to provide enough public money  to candidates who agree to forgo private money so that they can compete against privately financed candidates and independent groups.

Arizona provides an initial lump sum payment to candidates (we'll call them the public candidates) who choose to forgo financing their campaigns with private sums.  If the candidates' opponents  (we'll call them the private candidates) spend more than the public candidates received in the initial lump sum payment, the public candidates are entitled to more public money to match the excess amount spent by the private candidates.  Arizona also takes into account the amount of money spent by independent groups against the public candidate.  The public candidate is entitled to more public money to match the combined spending of independent groups and the private candidate if the combined spending of the private candidate and the independent group exceeds the initial lump sum provided to the public candidate.  Lastly, there is a cap to the amount of public money that the public candidate can receive; the public candidate cannot receive more than three times the amount of the initial lump sum.  Thus, the private candidate, if they're a good fundraiser, always has the potential of out-funding the public candidate.

So who is complaining about this scheme?  Private candidates who maintain that they've refrained from spending money or raising money in their campaigns because they did not want to trigger the matching funds that their public candidate opponents would receive.  They argued that the availability of matching funds to their opponents puts them at a competitive disadvantage.  Some of them argued that the availability of matching funds forced them to self-censor because they did not want to trigger matching funds.

Rick is a more perceptive watcher of the Court than I am.  I don't know why the Court takes certain cases and except in the most obvious cases I'm often less sure how they'll decide the ones that they take.  And Rick's assertion that there is no other reason for the Court to take the case other than to reverse the Ninth Circuit is facially plausible. For the reasons I lay out below however, I'm less sure of Rick's claim that this case will be the death knell for public financing.  This is not an easy case for the Court to overturn.  If he's right, campaign finance reform advocates are truly doomed. But here are some hurdles that the Court would have to overcome.

First, it is not clear that the plaintiffs' First Amendment rights are burdened in any way.  The plaintiffs' central argument is that they will refrain from campaign spending  so as not to trigger matching funds.  This is not a case of the government limiting the plaintiffs' spending or punishing them for spending.  Consider this scenario, suppose the State of Arizona had said to public candidates, if you opt into our public finance system, we will give you public funds to match your opponent's spending dollar for dollar.  Would such a scheme be a burden on the free speech rights of the private candidates,the ones who opt-out of public financing?  Is this any different from the state providing funds to a public school to compete with a private school?  To have the devastating impact that Rick is predicting, the Court would have to find that the availability of public funds is itself a burden on the speech rights of a privately-funded candidate.  Indeed, to the extent that there is a good argument here, the better argument is that the availability of public funds itself, as opposed to matching, is the burden.  While the public candidate can focus on campaigning the private candidate has to raise money.  If the Court did that, Rick would surely be right.  But such a move would be truly unprecedented.

Second, even if the Court concludes that the public financing scheme burdens the plaintiffs' speech rights, the Court would have to find that the burden is substantial.  Some of the plaintiffs' in this case are individuals who were successful officeholders even after triggering matching funds for their opponents.  Assuming that that they did self-censor and this self-censoring constitutes a cognizable burden, the significance of this burden is not very clear.  To be actionable the burden must be substantial. Even if one is charitable to the plaintiffs' claim, I cannot see how the burden is substantial.  Moreover, it is quite clear that by publicly financing candidates the state satisfies directly its concern to limit corruption in campaign financing.

Third, if the Court is inclined to overturn the Court of Appeals, the most vulnerable part of Arizona's scheme is the part that grants the public candidate matching funds to counteract independent expenditures against the public candidate.  I can't fathom a constitutionally cognizable justification, state interest, for granting matching funds to counteract independent expenditures.  There, I think the private candidate has an equality claim.  Moreover, that equality claim may be exacerbated if the state does not take into account independent expenditures in favor of the public candidate.  As I understand Arizona's scheme, it is not clear that the State takes into account independent expenditures in support of the public candidate to offset the grant.  If you're a private candidate you do have a basis to complain where the state is providing funds to your opponent for independent expenditures that are, by definition, outside of your control when the state does not provide you funds to counteract independent expenditures deployed against you.  This comes closer to the scheme the Court struck down in Davis v. FEC.

But if the Court went down this route, it would largely leave the public financing scheme intact.  The opinion would be narrow and would only communicate that the Court is serious that campaign finance regulations must hew closely to judicially-recognized legitimate state interests.  I can easily see the Roberts Court taking this approach.

If the Court overcomes these hurdles and goes down the road that Rick predicts, McComish will not only signal the death-knell of public finance, it will signal the death-knell of all campaign finance reform.

Giving is not as Good as Receiving: Statutory Interpretation and Campaign Finance

Suppose that I give a friend of mine, we'll call him Amigo, $100 and he gives the money to someone else, let's call her Ami, who "gave" the money to Ami, me or Amigo?  When is it sensible to say that I gave the money to Ami and when is it sensible to say that even though the money came from me, Amigo gave the money to Ami? These are the questions that are at issue in the campaign finance case of U.S. v. O'Donnell.

The United States prosecuted Mr. Pierce O'Donnell for violation of 2 U.S.C. section 441f.  This section provides:

No person shall make a contribution in the name of another person
or knowingly permit his name to be used to effect such a
contribution, and no person shall knowingly accept a contribution
made by one person in the name of another person.

Mr. Pierce supposedly directed 13 of his friends and family members to make contributions to the John Edwards campaign in their own names.  They contributed a total of $26,000.  Mr. Pierce allegedly advanced some of them the money and others he promised to reimburse.  Mr. Pierce moved to dismiss the indictment on the ground that he did not "make a contribution in the name of another person" as required by the statute.  The contribution was made by the other people in their own name, though the funds either came from him or would ultimately come from him. The District Court agreed with Mr. Pierce, but a panel from the United States Court of Appeals for the Ninth Circuit unanimously overturned the district court's decision.

This is an interesting case for someone who just this past term taught both campaign finance and statutory interpretation.  I think this question is harder than the Court of Appeals thought that it was. Don't be surprised if the Supreme Court takes this up and reverses.

From "Deem and Pass" to Citizens United

The debate over health care reform is now in its final stage. The Democratic House leadership is considering use of a self-executing rule known as the "deem and pass," which Republicans criticize as ultimately unconstitutional.

This is the latest example of everything that is wrong with American politics.

It also exemplifies why campaign finance in general, and Citizens United in particular, troubles me as much as it does.

Go back to the last time Republicans held a majority in Congress, from 2005 to 2006. During that time, the Republican leadership used the same self-executing rules they now deride no less than 35 times, and even defended them in court. Needless to say, Democrats criticized them then, yet defend them now.

Similarly, yesterday's Washington Post published an editorial by Tom Scully, former administrator of the Centers for Medicare & Medicaid Services from 2001 to 2004, that criticized the price tag on Obama's health care plan:

If we want health coverage for all Americans, it has to be paid for. The tough choices needed to reduce this massive gap: Cut spending and/or raise taxes. Raise the Medicare retirement age as we did with Social Security. This year's $1.6 trillion deficit is approaching 11 percent of GDP. That's unsustainable. We can't expand health subsidies until we get the deficit under control.

In case the reader missed it, this is the same Tom Scully who, according to Bruce Bartlett, former Deputy Assistant Secretary for economic policy at the U.S. Treasury Department, "was responsible for one of the most reprehensible episodes in recent American political history." This was the passage of the "totally unfunded Medicare Part D program that will cost taxpayers roughly $1 trillion over the next decade--that's $1 trillion more than Obama's plan, which is fully paid for according to the Congressional Budget Office." According to Bartlett, Scully was critical to the passage of Medicare D, "because he personally hid from Congress critical details about its cost that would have torpedoed the legislation had those facts been known prior to the congressional vote in 2003."

Taken together, these episodes led Andrew Leonard to write that "healthcare reform hypocrisy goes supernova." Norm Ornstein similarly asks, "is there no shame anymore?"

Note the problem: politicians can say whatever they want, whenever they want to say it, yet voters rarely hold them accountable for it. How could the same practice be used by congressional leaders one term yet criticized by the same leadership in subsequent years? One view clearly points to the hypocrisy that inheres to the politics of the day. Fair enough. But a view just as strong points to the American voter and how little interest s/he pays to what happens in the world of politics. The voter does not care, a fact that politicians of all stripes know full well.

The implications are dire. The argument for competitive elections, for example, hinges on a view of voters as political animals, engaged in the politics of the day and aware of the debates around them. To have a choice, in other words, demands a reasoned choice, a rational choice among competing alternatives.

This is why the campaign finance debate should give us pause. A view of the First Amendment as expressed by the majority in Citizens United places heavy demands on the citizenry. To say that the cure for speech must be more speech implies that the listener can discern fact from fiction, right from wrong. At the very least, it implies that there is somebody at the other end of the speech paying attention.

But the health care debate teaches us exactly the opposite. The public is hardly paying attention, and sophistry is the order of the day.

This is depressing indeed.

Earmarks in the House

On Wednesday, House Democratic leaders banned budget earmarks awarded to for-profit industries. Looking for the moral higher ground, House Republicans pushed to extend the ban across the board, to for-profits and non-profit institutions alike. The Senate is yet to come along and, according to Senator Daniel K. Inouye, chairman of the Senate Appropriations Committee, is unlikely to do so.

This is one of those puzzles of American Democracy that never ceases to amaze me.

Consider, first, the reasons that led to the ban on earmarks. The practice is rife with corruption and has led to political embarrassments in many instances, sometimes to criminal investigations and ethics inquiries. This is the classic congressional pork; in the last fiscal year alone, Congress doled out $16 billion dollars in this awards.

These facts alone would seem to indicate that members of Congress would use earmarks at their peril. After all, should not the electoral process take care of this problem, assuming it is a problem in the first place? Take the case of Peter J. Visclosky, an Indiana Democrat presently under investigation by the FBI. Could the voters in Indiana's first congressional district possibly vote for him ever again? And if so, wouldn't that be the clearest indication that they approve of his work and the earmarks he has directed to their district?

One answer is that it should not take a federal investigation, much less an indictment, to stop this corrupt practice. I get that. But this answer actually reinforces the puzzle to which I alluded earlier. Short of an indictment, is the point that constituents do not mind earmarks at all, and in fact welcome them?

This puzzle comes up in election law debates often. My favorite one is the almost universal call for courts to put a stop to the odious gerrymandering of state and congressional districts, where candidates win without much of a fight. The argument is that constituents have no real choice. In the end, this argument gives voters very little credit. After all, elections must still take place, and votes must be counted. A majority within the district must choose the winning candidate.

I know that constituents love their representatives yet Congress as a whole gets low approval ratings. This is one of those cases when that axiom is clearest. When members of Congress direct money to their districts, constituents rejoice in the fact that their elected representatives are doing a good job. This is why earmarks are to Congress what alcohol is to an alcoholic.

But make no mistake, to the untrained eye, this is Democracy at its finest. In fact, if you asked the conservative majority on the Supreme Court, this might be the price we must pay for our First Amendment.

So maybe it is the Senate, that most undemocratic of institutions, that finds itself on the right side of Democracy on this one.

Should we Expect More From the Congressional Black Caucus?

In a previous post, Luis referred to this excellent article from the NY Times by Eric Lipton and Eric Lichtblau. In his post, Luis raises a very important question: whether we should expect more from the Congressional Black Caucus. In my view is the answer is a clear yes.

Luis's important question is whether we expect more from our black leaders than white leaders. The article leaves one with the very clear impression that CBC members have accepted contributions from corporations in exchange for access and votes. Luis's question is whether this makes CBC members any different from any other politicians. Should we expect more of black congressional leaders?

My view is a definitive yes. The black community overall is in such dire straits we can't have the CBC selling out the interests of their constituencies to support lavish parties. Moreover, the CBC has long served as the conscience of the nation. An important part of the CBC's influence (and that of other civil rights group) is their moral authority. What makes this story interesting and what makes it news is the fact that the institution that served as the conscience of the nation is engaged in influence peddling. (By the way, if you don't believe me about the moral authority of CBC members, recall that in Georgia v. Ashcroft, the Supreme Court largely accepted the legitimacy of a redistricting plan because John Lewis supported the plan.)

The fact that all of Washington may also be up for sale, is of no moment. As we all tell our kids, it does not matter if everybody else is doing it. So, yes we should expect more of our black leaders, not least because the black community needs all of its leaders working together in the community's best interest.

What the NY Times article describes is deplorable. The CBC has set-up a number of non-profit entities but the money is not being used primarily to support the non-profit purposes but mainly to support parties and pet projects. Take for example the CBC's Political Education and Leadership Institute. The mission of the Institute is:

is to provide political education and training to the next generation of African American leadership. The Institute provides a vehicle for those who seek to support the charge of establishing positive role models in all walks of life, particularly public service - the noble role of putting service above self. The Institute also performs critical research of political issues that affect the African American community.

When I visited the Institute's website, I saw one conference a year dedicated to providing leadership. I did not see a single report on issues critical to the Black community. The website gives credence to the implication of the NY Times story that these entities are largely shells. They have a nice facade and do some substantive work, but that is not their primary purpose.

We need to hold our leadership to the highest standard. The CBC has done great work over the years. But the facts described in the Article calls for accountability.

In Defense of the Congressional Black Caucus?

An article in today's New York Times depicts the Congressional Black Caucus as a "fund-raising powerhouse." I first saw the headline last night, when it appeared on the Times' website sometime in the evening. My initial reaction was puzzlement, yet also curiosity. How could this possibly be news?

My second reaction to all of this, to the lavish and opulent parties on the Potomac, large money contributions, and trips to a Mississippi Casino resort?

Long live the First Amendment.

That, of course, is a reference to the recent Citizens United case. The example of the CBC shows us democracy at its worst, with major corporations contributing inordinate amounts of money supporting their candidates of choice.

Here's the puzzlement: why is it news, and big news at that, for a caucus to receive contributions from major corporations? According to the headline, the corporations are seeking to buy influence, and the article describes instances when such influence leads to changes in policy on the part of caucus members. Thusly put, it sounds bad, slimy, even immoral. It might even run counter to our intuitions about how our democracy ought to work. But that cannot possibly be news. I would have thought this is true of Congress as a whole, which led to the passage of our campaign finance laws in the first place. So why the article?

One answer may be that we expect more form our black legislators, most of whom are elected from majority black districts. Under federal law, black voters must have the same opportunity as other voters to elect their candidates of choice, an opportunity that is largely afforded by these majority black districts. How to defend the creation of these districts if representatives elected from them are no different from members of Congress as a whole? Worse yet, voters within these districts often have no other choice than the incumbent representative.

In response, members of the Caucus say all the right things. "We're unbossed and unbought," says Rep. Barbara Lee, the chairwoman of the Caucus. Elsie Scott, chief executive of the CBC Foundation, acknowledges that the companies "are trying to get the attention of the C.B.C. members," yet she doesn't "think there is anything wrong with that." These companies simply want to deal with people in positions of influence. This is not to say that the caucus would turn on its constituents.

I was unmoved about all of this until I came to the last part of the article, which described the success of the rent-to-own industry within the caucus. According to the article, "few of these alliances have paid off like the caucus' connection to rent-to-own stores." The industry acknowledges as much. In an industry newsletter, the president of the rent-to-own association wrote that “[w]ithout the support of the C.B.C. . . . our mission in Washington would fail.”

This took me back to my first year of law school, when we were discussing the unconscionability doctrine and the Williams v. Walker-Thomas case. This was a case brought by a plaintiff against the Walker-Thomas Furniture Company for its predatory rent-to-own practices. The facts were pretty onerous. Plaintiff Williams had made purchases through the years totaling $1,800, and had made payments totaling $1400. She then defaulted on the contract, and the furniture store sought to repossess every item purchased by Ms. Williams, irrespective of how much money she had already paid. This was, according to the D.C. Circuit, unconscionable.

The day we discussed this case in law school remains clear on my mind. Some students argued the law, and how the economics of renting to own in poor and minority communities necessitates the Walker-Thomas repossession policy. It was either this policy, or else these poor and minority communities could not rent to own at all, because nobody would want to do business with them.

Some students, mostly students of color, responded just as vehemently against the policy. This is the part that sticks in my mind. One student in particular argued that this was outrageous and businesses would never get away with this outside minority communities. This was predatory, plain and simple. We were young and naive, to be sure, but we knew right from wrong.

Apparently, and shamefully, the CBC does not.