Campaign Finance Reform Propsals and the First Amendment TESTIMONY OF BRADLEY A. SMITH ASSOCIATE PROFESSOR OF LAW CAPITAL UNIVERSITY LAW SCHOOL ADJUNCT SCHOLAR CATO INSTITUTE COMMITTEE ON THE JUDICIARY SUBCOMMITTEE ON THE CONSTITUTION UNITED STATES HOUSE OF REPRESENTATIVES FEBRUARY 27, 1997 -------------------------------------------------------------------------------- Thank you Mr. Chairman and Members of the Committee for inviting me to testify before you today. By way of introduction, I am an Associate Professor of Law at Capital University Law School in Columbus, Ohio, where I teach, among other subjects, Election Law. Though I appear today on my own behalf, I am also an Adjunct Scholar of the Cato Institute. I have researched and written extensively, in both academic and popular journals, on the subject of campaign finance. First, let me say that I appreciate the decision of this Committee to hold hearings on campaign finance reform. Before Congress now are bills to reform campaign finance by placing new limits on speech - the so called "McCain-Feingold" bill in the Senate (S25) and "Shays-Meehan" bill in the House (H493). Numerous lending constitutional scholars and campaign finance experts have called these bills unconstitutional. Yet one of the name sponsors of the bill on the Senate side just this month derided these concerns on national radio, saying "When [my opponent] starts relying on those Constitutional arguments, I know he doesn’t have much else in his arsenal." On another occasion, on national television, this senator stated cavalierly that his opponents "may be right that that particular provision [of the bill] is unconstitutional. And that’s why we have a back-up provision." Meanwhile, the minority leader here in the House was quoted in a national news magazine earlier this month, saying that "freedom of speech" and "a healthy democracy" are "in direct conflict." When a member of Congress so casually treats his oath to uphold the constitution; and when the House minority leader suggests that the First Amendment must itself be amended because free speech "is in direct conflict" with democracy, it is both timely and appropriate for this committee to hold hearings. Before congress attempts to solve the problems of campaign finance with more regulations burdening free speech rights, we should take stock of the fact that the current regulatory system is responsible for many of the evils we see in campaign finance. We do not need to plug "loopholes" in the system. Rather, we should scrap most all of the present system of campaign finance regulation, remembering the admonition of the First Amendment to the Constitution, that Congress shall make no law abridging the rights of free speech. Before discussing the details of campaign finance, I think it is important to briefly remind ourselves that, for most of this country's history, the funding of political campaigns has been totally or largely unregulated. During our nation's first century, the era which produced as presidents Abraham Lincoln, George Washington, Thomas Jefferson, Grover Cleveland, James Knox Polk, and Andrew Jackson, and which saw giants such as Daniel Webster, Henry Clay, John Quincy Adams, and John C. Calhoun serve in Congress, there were literally no laws regulating campaign finance. And today, we often look back on that century as a golden age of politics -- one in which memorable debates over such monumental issues as slavery and western expansion were discussed in serious campaigns, one in which people talked and debated these issues, one in which politics was marked by mass rallies and torchlight parades, and one in which voter turnout was considerably higher than it is today. The federal government did not become involved in campaign finance until this century. If we look back, we find that the arguments made in favor of regulation a century ago were the same that we hear today: that the American people believed Congress to be made up of the "instrumentalities and agents of corporations;" that "corruption" was the norm; that new advertising techniques and technologies—in those days mass newspapers, recordings, train travel—had created an insatiable demand for political spending that could only be curbed by spending limits; and that we faced a "crisis" of democracy. In response to such complaints, the federal government passed its first campaign finance law in 1907, banning direct corporate contributions to candidates. In 1943, this ban was extended to labor unions. Additionally, congress passed greater disclosure requirements in 1925. However, these disclosure measures were so toothless as to be meaningless. For example, from its enactment in 1925 until its repeal in 1971, there was not a single prosecution under the Federal Corrupt Practices Act. Yet democracy survived, and this period of minimal regulation gave us Presidents Theodore and Franklin Roosevelt, Calvin Coolidge, Harry Truman, and Dwight Eisenhower, Congressional leaders such as Robert Taft, Hubert Humphrey, and Everett Dirksen, and serious debates over such issues as civil rights. For nearly two centuries, our democracy flourished despite, or perhaps even because of, the absence of any meaningful campaign finance regulation. Not until the 1974 Amendments to the Federal Elections Campaign Act (FECA) did the federal government pass a campaign finance law with any serious enforcement mechanism. And it was also this law which, for the first time, gave us both contribution limits and, as a necessary accessory to those limits, the strange doctrines of independent expenditures and express advocacy. The 1974 Amendments threw of web of regulation, with an accompanying enforcement bureaucracy, the FEC, over American politics. The stated goals of the 1974 FECA Amendments were to lower the cost of campaigning, reduce the influence of so-called "special interests," open up the political system to change, and "restore confidence in government." So what has actually happened in the twenty years since the 1974 Amendments took effect? Well, campaign spending has increased by more than 350 percent; PAC contributions have increased by more than 800 percent; House incumbents, who had previously outspent challengers by approximately 1.5 to 1, now outspend challengers by nearly 4 to 1; incumbent reelection rates have risen to record high levels, spurring the demand for term limits; and public confidence in government has fallen to record lows. Clearly, the 1974 FECA Amendments have been a dismal failure. Yet the response of the reformers -- notably Common Cause, the interest group most responsible for the 1974 Amendments, and today the number one cheerleader behind the Shays-Meehan bill -- is to argue that we need more regulation, more limits, and more bureaucracy. Indeed, some now claim that because earlier regulation has failed, we not only need still more regulation, but we need to amend the First Amendment to allow government to regulate political speech and activity in ways the Founders never dreamed of. I would suggest, however, that when an approach has failed so clearly, so dismally, with such negative consequences, over a period of twenty years, it is time to consider a whole new approach. It is time not for more regulation, nor for more efforts at "loophole" plugging, which is the approach taken by Shays-Meehan. Rather, it is time to deregulate American politics. In my opinion large parts of Shays-Meehan and its Senate counterpart, McCain-Feingold, are unconstitutional. The so-called "voluntary" spending limits of the bills are in fact punitive and coercive, and amount to an unconstitutional condition leveled on the Constitutional right to free speech. That portion of McCain-Feingold abolishing PACs is unconstitutional, as even its supporters seem to recognize. If one person can spend $1000 on bumper stickers, it is inconceivable that two people cannot join together to spend $1,000 on bumper stickers. The Senate bill’s limitations on out-of-district contributions are probably unconstitutional. There is no reason why an out-of-district contribution is more "corrupting" than an in-district contribution. Thus, there is no compelling government interest to justify the ban on speech. Overall, Shays-Meehan and McCain-Feingold mark the most serious legislative assault on free speech in over two decades—since the 1974 Amendments to FECA. Many of those 1974 reforms were eventually held unconstitutional. The others have stifled free speech and contributed to the current problems. We should not go down that road again. But where Shays-Meehan and McCain-Feingold are most at odds with the Constitution and sound policy is in their efforts to silence political groups engaged in issue advocacy. Indeed, this question of "issue advocacy" versus "express advocacy," which has aroused the ire of those who would regulate political speech, is a prime example of the danger of the FECA's attempt to regulate politics to produce a desired result. Congressional Quarterly has noted that in recent years, litigation has become a major campaign tactic. Thus we have Republicans filing complaints against the AFL-CIO, and the Democrats filing complaints against the Christian Coalition, U.S. Term Limits, Americans for Tax Reform, and the Christian Action Network, to name just a few recent complaints. In each case, the complaints amount to a blatant effort to silence political advocacy by these groups. In each of these incidents, the groups involved were not engaged in any nefarious activities such as vote fraud or bribery. Rather, their alleged infractions amounted to what might be called the crime of "committing politics." That is to say, the groups involved were trying to persuade the American people that either their positions were right, or someone else's were wrong. It is true that incumbent officeholders do not like being attacked for their stands on issues; particularly when they view those attacks as shameless demogogery. However, the robust discussion of issues is wholly in line with both the First Amendment and the American tradition of political participation. That opposing political interests can invoke the powers of a government bureaucracy in an effort to silence these voices is, I suggest, a much more serious blight on our system than the alleged effects of campaign contributions. The reasons that these complaints are even treated seriously is because of the doctrine of "express advocacy." This doctrine itself a bizarre outgrowth of efforts by supporters of campaign finance "reform" to limit campaign contributions. These "reformers" seek to prevent individuals and groups from participating in politics through contributions of money. However, under the Supreme Court's ruling in Buckley v. Valeo, Congress may not, constitutionally, restrict individual or group expenditures that do not "include explicit words of advocacy of election or defeat of a candidate...." Thus, political speech is free from FEC regulation if it does not expressly advocate the defeat or election of a clearly identified candidate, but is subject to FEC regulation if it crosses that line. The response of Shays-Meehan to this type of political activity, is to define "express advocacy" more broadly, by looking at such factors as timing and context. In fact, however, it is hard to see how these factors make any serious difference. For example, would last year’s AFL-CIO ads have been any more or any less "express advocacy" if aired three months or fifteen months before an election? Would it really matter if the group sponsoring the ads had public positions on some of the issues addressed? Clearly not. The ads would be no more nor less aimed at shaping public opinion, regardless of the added factors that Shays-Meehan seeks to consider. Thus, the long and short of an expanded definition of "express advocacy" would be a sharp reduction in political speech, which is precisely what the Supreme Court's decision in Buckley, protecting issue advocacy, is intended to guard against. Of course, the FEC's concern over "express advocacy" and independent expenditures is all part of a larger effort to plug "loopholes" in the disastrous system of contribution and spending limits enacted in 1974. The only reason anyone cares about "express advocacy" is the fear that, absent such a regulation, groups will spend money to try to affect federal elections, and in doing so will exceed the contribution limits of the FECA. I have written and commented at length on the undemocratic and deleterious effects that these limits have had on American politics. See e.g. Bradley A. Smith, Faulty Assumptions and Undemocratic Consequences of Campaign Finance Reform, 105 Yale Law Journal 1049 (1996); Bradley A. Smith, Testimony before Committee on Rules and Administration, United States Senate, February 1, 1996; Bradley A. Smith, Campaign Finance -- Deformed, Wall Street Journal, Oct. 6, 1995 (copy attached). In short, these limits have entrenched incumbents; burdened grassroots political activity; limited the number and type of candidates; had the perverse effect of increasing the incentives both for campaign contributors to seek influence, rather than electoral success, and for office holders to reward financial patrons; and increased the power of unelected elites, most notably the media. The efforts to drive money from politics have grotesquely distorted our political system. The reason is simple and obvious: efforts to limit political participation not only run afoul of the Constitution, but they are like efforts to stop the flow of a river -- one way or another, the water will pass, diverting course as necessary to do so. So long as the federal government spends over $1 trillion each year and regulates virtually every phase of the economy, not to mention many non-economic activities, the American people will seek to persuade Americans to elect their favored candidates. In modern society, this political communication and participation requires the expenditure of money. Fortunately, past efforts to limit political discourse have consistently been struck down by the courts as unconstitutional. Nevertheless, these attempts to stop this legitimate political advocacy by placing a heavy bureaucracy over political campaigns have had, as I mentioned, a variety of negative consequences. Not the least of these is the way in which such regulation stifles true grassroots democracy. For example, a 1991 study by the Los Angeles Times found that among the most common violators of FECA were "elderly persons... with little grasp of the federal campaign laws." Even well-funded and well-organized groups can find their efforts at grassroots advocacy smothered. In one ill-founded effort to prevent political advocacy in violation of campaign finance laws, the FEC passed a rule that would have prevented the United States Chamber of Commerce from communicating political endorsements to more than 220,000 of its dues paying members, mainly small businesses whose owners and managers have little time to follow politics and rely on the Chamber of Commerce precisely for such information. Similarly, the regulation in question would have made more than two-thirds of the National Rifle Association's members ineligible to receive the group's endorsements, as well as over 44,000 dues paying members of the American Medical Association. This regulation was, fortunately, found unconstitutional by the U.S. Court of Appeals for the D.C. Circuit, but only after these groups had had their speech chilled in the 1994 election. Chamber of Commerce v. FEC, 1995 U.S. App. LEXIS 31925 (D.C. Cir. Nov. 14, 1995). Another recent FEC rule attempted to prevent corporations and other groups from actively engaging in issue-oriented advertising during a campaign, on the theory that such advertising would implicate federal elections. Again, this effort to limit the flow of political information had to be struck down by a federal court. Maine Right to Life Committee, Inc. v. FEC (D. Me., Feb. 13, 1996). Simply putting similar measures into a statute will not make them constitutional. Limitations on "express advocacy" call for precisely the type of judgments that benefit large organizations with the ability to hire a battery of lawyers to advise them through the regulatory process. Efforts to broaden the concept to include advocacy beyond such express words as "elect" or "defeat" would truly burden free speech, especially for smaller, local groups. Political participation, by definition, seeks to influence voter preferences on both issues and candidacies. Any broadening of the term would lead to a murky standard that would significantly burden most all political speech. Nevertheless, in addition to the unconstitutional provisions of Shays-Meehan, we now find offered up a Constitutional Amendment which would authorize Congress to adopt "reasonable regulations," so long as they do not "interfere with the right of the people to fully debate issues." This is classic double speak. Our Founding Fathers recognized that government could not be trusted to make such distinctions: The incentives to crush the opposition would be too great. Thus they wisely passed the First Amendment. Historically, debates on the First Amendment have concerned the extent to which it covers pornography, or hate speech, or commercial speech, or "fighting words," or treasonous speech. What has always been accepted, across the political spectrum, is that it covers political speech. So let’s be honest about it: what the Amenders really seek is a clause reading "the First Amendment to this Constitution is hereby repealed." Efforts to limit "express advocacy," like, indeed, the rest of the FECA regulatory scheme, are based on the belief that Americans ought not participate in politics. However, it is not a bad thing for Americans to participate in politics -- it is a good thing. It is constitutionally protected. And the fact of the matter is that, more than ever in American society, communicating in the political realm requires the expenditure of money. Money is not an evil in politics -- it is a source of information to voters. Efforts to regulate the flow of money in politics over the past 20 years have done much more than money ever did to distort the political system and create a public distrust of government. It is now time to try a new approach -- that is, it is time to deregulate politics. There is simply no a priori method to say what is fair or not fair -- how much groups should be able to spend, or what kind of advocacy they can spend it on. The bureaucracy that has been established to regulate politics is stifling grassroots advocacy and political communication. After twenty years of campaign finance regulation, it should by now be clear that independent electoral advocacy by citizen groups lies at the core of the First Amendment, and that such advocacy ought to be beyond the permissible scope of government regulation. Political battles should be fought out in forums of public persuasion. It is poor policy to divert such debates to federal courtrooms, with each side attempting to silence its opponents through such arcane concepts as "express advocacy" and "coordinated" or "uncoordinated" expenditures. Deregulation of campaign finance, not added regulation, is the proper course of action. The FECA $1000 limit on individual campaign contributions should be abolished entirely, or at least raised to a realistic figure, in order to reduce the need for candidates to rely on independent expenditures. (The $1000 limit, in existence since 1974, has never been adjusted for inflation. Had it been, it would be approximately $3500 today. This is the minimum to which the contribution limit should be raised: $5000, $10,000, or complete removal of the cap would be preferable.) All caps on political party giving should be removed. Donations from a party to its own candidates are not "corrupting." Moreover, since last year’s Supreme Court decision in Colorado Republican Federal Campaign Committee v. Federal Election Commission, 1996 WL 345766 (U.S. 1996), parties may spend unlimited amounts in support of their candidates, but only independently of the candidate’s campaign. Driving a wedge between parties and candidates is poor public policy. Disclosure of political expenditures meets any public need to know the source of financing. However, even here I must counsel caution. Disclosure rules can have a chilling effect on speech and may be constitutionally limited. McIntyre v. Ohio Board of Elections, 1995 WL 227810 (U.S.)(1995). Disclosure rules governing independent expenditures should be limited, therefore, to groups which engage in substantial activity, spending over $50,000 in an election cycle. Electronic filing and mandatory FEC posting of reports on the Internet would help to insure an informed public. These are the type of sensible, constitutional reforms congress should consider—not the unconstitutional Shays-Meehan bill or the foolish drive to repeal the First Amendment. In recent years, it has become increasingly difficult to discuss meaningful campaign finance reform. This is because both public and congressional opinion has become trapped in a box. This box is the conscious creation of groups such as Common Cause, which for 25 years have worked tirelessly to convince the American public that the members of this Committee, and indeed all of Congress, are corrupt bribe-takers, and that the public itself consists of innocent dupes incapable of making intelligent voting decisions based on the information presented to them. By constantly drawing simplistic correlations to financial support and voting records, and through the conflation of the issue of campaign finance reform with other issues of voter concern, such as lobby reform, negative campaigning, and legislative gridlock, these groups have purposely attempted to create a climate of public opinion in which certain core assumptions are not to be challenged. These core assumptions are that political advocacy must be heavily regulated; political contributions and, ultimately, political spending limited; and all possible "loopholes" plugged. However, the heavy regulatory regime which these "reformers" have placed over campaign activity is, in fact, a major contributing factor to the very problems that have created such public disgust with the campaign finance system and, indeed, Congress in general. Now is the time to get out of the box. We must not plunge ahead, sacrificing our First Amendment Freedoms. Congress must realize that Shays-Meehan style "reforms," based, as they are, on the erroneous assumption that Americans should not spend money on political affairs, cut off grassroots involvement and decrease the flow of information to voters. The regulatory approach enacted in 1974 has had unintended, negative consequences that have only increased voter cynicism. The House should reject simplistic proposals such as Shays-Meehan, or efforts to amend the Constitution to destroy the right to free political speech, and move generally to deregulate political speech. It ought not be a crime to "commit politics" in America. Thank you.