In a story that demonstrates almost everything that is wrong with the breadth and complexity of campaign finance laws in this country, the Washington Public Disclosure Commission has weighed in on an issue that threatens our very democracy to its core: whether the purchase of used campaign signs for $10 each in a race for the Edmonds, WA, city council was a campaign contribution or not. While reformers constantly talk about “plutocrats,” “big-money special interests,” and “sugar daddies,” in reality the burden of campaign finance laws fall heavily on new comers, small campaigns and grassroots organizations, who do not have the lawyers, accountants, and funding necessary to comply with the government’s increasingly incomprehensible but exacting regulations on political speech. Byzantium at its most decrepit could not have conceived of a law as petty and intrusive as this.

The end result, of course, is that these laws drive amateurs and regular citizens from politics and leave the playing field to professionals and large, well-funded interests. In other words, politics becomes the sole preserve of the very “plutocrats” campaign finance reformers claim to abhor. Nonetheless, we can expect reformers to continue to assail “big money” interests while they promote laws that drive “small money” actors from politics altogether.        

As campaign season heats up, we are seeing the inevitable uptick in news stories about campaign finance. The hottest topic this election seems to be the increasing number of “Super PACs” that are forming to support or oppose federal candidates.

“Super PAC” is the term that the media has adopted to describe what the Federal Election Commission calls “independent-expenditure-only committees.” As the FEC’s label suggests, these are groups that raise money for the sole purpose of making “independent expenditures,” which is FEC-speak for ads that support or oppose candidates but are not coordinated or prearranged with those candidates in any way. As of this posting, there are more than 100 active Super PACs registered with the FEC.

Super PACs are a natural outgrowth of the U.S. Supreme Court’s campaign finance decisions. The Supreme Court has held for over 35 years that individuals are allowed to spend unlimited amounts of their own money on political speech, and last year recognized in Citizens United v. FEC that this right also extended to corporations and unions. Shortly thereafter, the Institute for Justice and the Center for Competitive Politics won SpeechNow.org v. FEC, which held that individuals could pool their money to make independent expenditures. Together, Citizens United and SpeechNow.org mean that groups of people—both individuals and associations—have a constitutional right to pool their money to make recommendations directly to the public about who they should vote for.

Unfortunately, given the complexity of campaign finance law, reporters often make mistakes when describing what Super PACs are and what they can do. Here’s a perfect example, from U.S. News & World Report:

[S]uper PACs can . . . pay unlimited amounts for “independent expenditures,” and collect unlimited cash from corporations, nonprofit groups, and labor unions, which would not otherwise be allowed, under the law, to make direct contributions to a campaign.

This description is accurate up until the end, when it says that Super PACs can use “unlimited” corporate and union money to make “direct contributions to a campaign.” In fact, Super PACs can’t make any contributions to campaigns of any money, regardless of the source of that money. That’s why the FEC calls them “independent-expenditure-only committees”—they’re only allowed to make independent expenditures.

“Super PAC” is a convenient shorthand; “independent-expenditure-only committee” is a mouthful. But that shorthand can be misleading. Super PACs are not permitted to do anything that the individuals and groups that give money to them would not be permitted to do if acting alone. Individuals can’t give unlimited amounts of money to candidates, and Super PACs can’t accept unlimited amounts of money to give to candidates. Corporations and unions can’t give money to candidates, and neither can Super PACs.

Super PACs are a super-great thing for free speech and political debate, but they don’t have super powers. They’re just groups that freely raise and spend money on independent political speech—nothing more, nothing less.

Friend of IJ Brad Smith, chairman of the Center for Competitive Politics, has written a thoughtful blog post regarding the strange case of W. Spann, LLC, a corporation that formed earlier this year, gave $1 million to a pro-Romney Super PAC, and then promptly dissolved.  The “reform” lobby is in near hysterics over the fact that no one currently knows where the money came from.  But Smith takes a hard look at whether we should really be concerned about this latest “scandal”:

[T]the donor probably hasn’t done Restore Our Future, let alone good old Mitt Romney, any favors. Restore Our Future appears to have complied with the law, reporting its donors. Romney—well, he has nothing to do with it. The entire concept of a “SuperPAC” such as Restore Our Future is that the candidate has no role in the organization. But you can bet your a-- that Romney is going to take a political hit for this—indeed, he already is. This suggests once again the wisdom of the Supreme Court’s longstanding view that independent expenditures should not be seen as creating a quid pro quo type obligation between spenders and candidates, and indeed that candidates will often be hurt by the actions of independent speakers. Similarly, if the donation by the “shadowy” W. Spann, LLC hurts Romney, as it appears it will, that seems to suggest that the system may be self-policing—take “murky” contributions, and it is likely to hurt your cause. It hardly screams out for a new law.

Be sure to read the whole thing.

Dave Weigel of Slate reports on a newly introduced bill by freshman Rep. Rob Woodall (R-Ga.) called the Competitive Elections Act of 2011.  The bill would prohibit candidates from saving contributions they receive in one election for use in a future election.  The goal of the law is help new candidates compete against incumbents by removing the ability of incumbents to amass “war chests.”

Weigel predicts that the legislation is doomed and we think he’s right about that—incumbent politicians generally aren’t interested in passing laws that eliminate the advantages of incumbency. But the law is also clearly unconstitutional.  First, it imposes a limit on political spending purely for the purpose of leveling the electoral playing field, which the U.S. Supreme Court has repeatedly said is forbidden.  Second, the law has an exemption for candidates who are facing self-funded opponents, just like the Millionaire’s Amendment provision of McCain-Feingold, which the Court held unconstitutional in Davis v. FEC.

But the Competitive Elections Act of 2011 isn’t just politically infeasible and unconstitutional:  It is yet another example of how every campaign finance regulation eventually becomes a justification for more regulation.  The problem the law attempts to solve—the inability of challengers to unseat entrenched incumbents—is itself a symptom of our country’s dysfunctional campaign finance laws.  Upstart candidates rarely have a broad base of electoral support.  By capping the size of contributions they may receive, federal campaign finance law all but ensures that they will not be able to raise the money necessary to effectively compete against incumbent politicians.

The straightforward solution to that problem—and the solution that is consistent with the First Amendment—is to remove the caps, not to add another unnecessary, unworkable, and unconstitutional layer of regulation.

Nothing is too small to escape the attention of the Speech Police. Matthew LaCorte is a recent high school graduate in the Borough of Woodland Park, New Jersey, who is going to college this fall. Matt is a member of Young Americans for Liberty and a Ron Paul supporter. He wanted to show that support by putting up a Ron Paul 2012 sign on his front lawn.

The next thing Matt knows, Borough officials issued him a warning telling him to take down his Ron Paul sign. When Matt refused, the Borough issued him a ticket for violating an ordinance that says that “[p]olitical signs shall not be posted before thirty (30) days prior to the date of the election to which the sign pertains.”

Matthew is fighting the citation, as well he should. The First Amendment is clearly on Matt’s side. The U.S. Supreme Court in City of Ladue v. Gilleo, 512 U.S. 43 (1994); held that municipalities may not single out political signs for special burdens. And numerous courts across the country have held that cities cannot tell citizens that they can only speak during the few weeks immediately around an election. Indeed, two nearby New Jersey towns had to repeal similar durational restrictions from their books after they were subject to legal challenge.

The First Amendment isn’t something that only exists around Election Day; it protects our freedom of speech 24 hours a day, 365 days a year. Woodland Park’s ordinance is blatantly unconstitutional and the Borough should repeal it immediately. After all, it’s relatively easy and cheap for the Borough to take down the law itself. It will be far more expensive for the Borough—both in terms of time and money—to have a court strike down this unconstitutional law.

Readers of Make No Law are used to hearing stories about how the courts can be used to protect First Amendment rights.  Less well known is that courts can be abused to attack First Amendment rights.  That’s what happened in 2008 when a Texas developer named H. Walker Royall brought a defamation lawsuit against journalist Carla Main. 

Main had written a book, Bulldozed: “Kelo,” Eminent Domain, and the American Lust for Land, that told the story of how Royall teamed up with the city of Freeport, Texas, in a project that would displace a long-running family business by using eminent domain for private gain.  Royall didn’t like the way the book portrayed his role in this abuse of government power, so he sued Carla Main and her publisher, Encounter Books, for defamation.  He even sued renowned law professor Richard Epstein for contributing a blurb to the book’s back cover.

The lawsuit was a blatant attempt by Royall to bully his critics into silence.  And yesterday afternoon, a Texas appellate court held that there was no merit to Royall’s charges.

The ruling is great example of judicial engagement.  Royall claimed that 79 separate statements in Main’s book were defamatory.  He also claimed that the overall “gist” of the book was defamatory.  But the court examined the evidence for each of these 79 claims and found that none of them—not one—was supported by the evidence.

The ruling is also a big win for First Amendment rights.  Eminent domain abuse is a matter of public concern—that’s why journalists like Carla Main write books about it.  If Royall had succeeded in silencing Main and her publisher, the chilling effect on speech would have been profound. 

Finally, the ruling will serve as a helpful adjunct to Texas’s newly enacted Citizens Participation Act, which was enacted in part because of Main’s case.  That new law creates a procedure that allows journalists like Main to quickly dismiss abusive defamation cases like Royall’s, which are commonly referred to as “SLAPP suits” (SLAPP is an acronym for “strategic lawsuit against public participation”).  Texas is the 28th state to adopt some form of anti-SLAPP legislation.

Congratulations to Carla Main, Encounter Books, Richard Epstein, and all of my colleagues who had a hand in the victory. 

For more information about Main’s case, visit IJ’s case page for Texas Eminent Domain Censorship.

Motivated by the recent scandals involving Rupert Murdoch’s News Corp., The New Republic has a fascinating short article titled “How Campaign Finance Laws Made the British Press So Powerful.” In a nutshell, the article explains how Britain’s stringent campaign finance laws have pushed political influence to the one outlet that is largely unregulated: newspapers.

The story illustrates the inevitable problem with campaign finance laws: Any scheme that tries to limit political influence by one group is always going to shift political influence to some other group. Somebody has to be the most influential—this isn’t Lake Wobegon and we can’t all have above-average political influence. And, as the story also reveals, this shift almost always leads to calls for even more regulation:

To some, this situation may reveal the problem of campaign finance laws: By trying to prevent parties from spending large sums of money and stopping wealthy independent organizations from dominating the campaign, the relative voice of the newspapers is enhanced. But rather than admit that campaign finance laws are futile, one might also conclude that controls on campaign spending should be complemented by attempts to address media power.

Luckily, as the article’s author notes, “Such measures would be unthinkable under the First Amendment.” That’s a bit of an overstatement—American law professors have thought it, but thankfully there is little chance of such proposals being adopted and even less chance of them surviving judicial scrutiny. That’s good news because, if history is any guide, media censorship wouldn’t be the end of it. Ultimately, there is only one way to achieve the “reformers’” vision of equal political influence: mandating equal silence.

Update, Dec. 19, 2011:  This blog post is now available in Slovenian.

My colleague Paul Sherman has a post on The Hill’s “Congress Blog” discussing the recently reintroduced “Shareholder Protection Act,” which would require corporations to get advance shareholder approval before spending money on political speech. As Paul explains, the Act “has little to do with protecting shareholders and everything to do with silencing corporate speech”:

The goal of the Shareholder Protection Act is obvious. By singling out electoral speech—and only electoral speech—for more burdensome treatment, the Act attempts to do indirectly what the U.S. Supreme Court said in Citizens United v. FEC that Congress may not do directly: prevent corporations from speaking to voters about political candidates. And just like direct attempts to limit corporate speech, this indirect attempt violates the First Amendment. . . .

It is no coincidence that the bills’ 49 co-sponsors are all Democrats, or that the proposed restrictions do not apply to labor unions. Campaign finance laws have long been used as partisan tools to protect incumbent politicians from speech that threatens their reelection. The Shareholder Protection Act is just the latest example of this sort of political self-dealing.

Check out the whole thing.