Regulating Campaign Finance

by Chandu Krishnan

The United States Supreme Court's April 2nd decision in McCutcheon v. Federal Election Commission to remove aggregate caps on federal campaign contributions will hurt rather than strengthen American democracy.2

The Court decision "will open a floodgate"3 that threatens to drown the U.S. political system with big money at a time when U.S. politics needs more ideals and less money. It will accelerate the country's transformation into a plutocracy where a wealthy minority has undue influence over who governs the U.S. and how the country is governed.

As a New York Times editorial pointed out last year, "the very wealthiest Americans already have disproportionate influence: in the 2012 election, 1,219 donors reached or nearly reached the overall limit, and together they were responsible for giving $155 million to federal races . . . without the overall limit in place, those donors would have contributed nearly triple that amount—or 50 percent more than President Obama and Mitt Romney received from all small donors combined."4 Such statistics are particularly disturbing because, as Clayton Peoples points out, "the research literature in fact shows quite conclusively that contributions do influence policy."5

Chief Justice John G. Roberts, Jr. was correct in writing in the Supreme Court's controlling opinion that "there is no right in our democracy more basic than the right to participate in electing our political leaders."6 But that "right" should be exercised across a level playing field, which is why Congress capped aggregate contributions many years ago. Exacerbating the damage already caused by the Court's Citizens United decision in 2010, which allowed companies the right to make unlimited campaign expenditures independently, five U.S. Chief Justices have now ensured that the playing field will be even more skewed in favor of those who have more money. In seeking to protect the freedom of speech afforded to U.S. citizens by the First Amendment, these Chief Justices are, perversely, undermining it by allowing a minority of citizens to have even more influence over the electoral process, thus increasing its vulnerability to corrupt practices.

The U.S. is not alone in grappling with the problems of corruption in campaign financing. Nor is it unique in turning into a plutocracy. In Transparency International's 2013 Global Corruption Barometer, it is was one of 51 countries (out of the 107 that were surveyed) where respondents saw political parties as being the most affected by corruption relative to 11 other institutions.7 Although the Barometer did not shed any light on why respondents held such views, it is arguable that a major reason for the poor reputation of political parties (and politicians, by inference) was the prevalence or risk of corruption in funding these organisations and election campaigns.

When it comes to key campaign finance regulations, the U.S. is one of the relatively better performers among this group of 51 countries. It caps donations to both parties and candidates (at levels that are lower than in several other countries). It bans direct corporate donations to parties and candidates. It outlaws donations by government contractors to parties and candidates, and requires statutory public disclosure of party finances. Unfortunately, the Citizens United ruling has had the effect of undermining the caps on donations to parties and candidates by allowing unlimited expenditure by third parties (as long as this is not coordinated with parties and candidates). And the latest Court decision drives a coach and horses through this already weakened barrier against the corrupting influence of big money.

Interesting debates are taking place in other countries (such as the U.K.) on how to curb the influence of big money in politics, and it would be tragic if this most recent Supreme Court decision is cited as justification for weakening, or not introducing (the U.K. has no caps on donations), measures to limit political financing from private sources.

Of course, regulatory measures, such as caps on donations, are not a panacea for eliminating corruption in campaign finance. Imperfections can be found even in countries that tick all the right boxes in terms of regulatory practice. However, effective and properly enforced regulations are better than no regulations, and the U.S. and other democracies may be in a better position to lower corruption risks in political party funding by having:

*  effective regulations (with no loopholes) that encompass: caps on donations and expenditure (by parties, candidates and third parties); prohibitions or limits on corporate and anonymous donations; full public disclosure of the finances of parties and candidates, including listing of all donors; and a degree of public funding acceptable to citizens after public campaigns have increased awareness of the corruption risks associated with large amounts of private financing of political activity;

*  robust systems for monitoring and enforcing regulations with strong sanctions for offences; and

*  a regulatory system that is underpinned by a strong and stable political culture.

The U.S. (and others) cannot afford to disregard or be complacent about corruption in politics. It is much harder to reform systems in which corrupt practices have become deeply embedded and rebuild public trust and confidence in democratic institutions. The Supreme Court's decision will help corruption to grow in the U.S. political system. A Gallup poll conducted in June 2013 found that 8 in ten Americans, if given the opportunity, would vote to limit the amount of money candidates for the Senate and the House of Representatives could raise and spend on their election campaigns.8 The country may pay a high price for the Supreme Court's disregard of public opinion.



1. This blog draws upon a forthcoming working paper by the author on "Tackling Corruption in Political Party Financing: Lessons from Global Regulatory Practices."

2. The Court's decision removes the current cap of US$123,200 on the aggregate contributions an individual may make directly to federal candidates, party committee and political action committees in each two-year election cycle. However, it leaves intact the current cap of $2,600 on individual donations to candidates.

3. Justice Stephen G. Breyer, quoted by Adam Liptak in "Supreme Court Strikes Down Aggregate Limits on Federal Campaign Contributions," New York Times, April 2, 2014.

4. Editorial Board, "Politicians for Sale," New York Times, October 7, 2013.

5. Clayton D. Peoples, "Yes, Contributions Really Matter," Edmond J. Safra Research Lab blog post, February 10, 2014.

6. Quoted in Liptak, "Supreme Court Strikes Down Aggregate Limits on Federal Campaign Contributions."

7. Transparency International, "Corruption Barometer Index 2013," July 19, 2013. The Barometer used public opinion polls to survey perceptions and experiences of corruption among 114,000 people. The other 11 institutions were: police, public officials/civil servants, parliament/legislature, judiciary, business/private sector, medical/health services, education, media, military, NGOs and religious bodies.

8. Megan Thee-Brennan, "Polls Show Broad Support for Campaign Spending Caps," New York Times, April 2, 2014.