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Friday, February 12, 2010

Congressional Reaction to Citizens United

by Gary L. Beaver

Democrats in Congress, led by Senator Chuck Schumer and Representative Chris Van Hollen, are pushing for rapid action to pass legislation intended to create new requirements for corporations spending money on political speech in light of the Citizens United v. FEC decision by the U.S. Supreme Court on January 21, 2010. The Citizens United Court held that there was no distinction between corporations and individuals with respect to political speech and struck down certain statutory limitations placed on corporate political speech. These Congressman believe that the Citizens United decision will open the floodgates to organizations spending money on political speech to influence election outcomes.

If publicized descriptions of the proposed new requirements are accurate, most appear to be reasonable. They would apply to corporations (including S-corporations) and labor unions and would require detailed disclosures to the FEC of who is funding the political speech, including requiring almost contemporaneous posting of information about the spending on the company's website. In addition, companies that are more than 20% owned by foreign interests or whose board of directors is more than half foreigners and companies receiving TARP money would be banned from spending on political speech (reportedly the ban on the TARP recipients would be lifted if the TARP money was already repaid). There is reportedly some language similarly banning political speech by companies receiving money through federal contracts. The scope of that provision will have to be closely examined. There is already a statute barring federal contractors from engaging in political activities (2 U.S.C. Section 441c) so adding this provision must be for some other purpose such as expanding the scope of the prohibitions in the existing statute. Perhaps it is intended to expand the ban from what is currently defined as the federal contractor to other companies that may be parents, subsidiaries, or affiliates of the contractor in order to add restrict additional corporations from political speech as many large corporations have subsidiaries receiving at least a small amount of revenue from federal contracts. In addition, there is one restriction being floated that is plainly biased against corporations. Some representatives, including Barney Frank, are pushing for language requiring publicly traded companies to receive shareholder approval before spending on political speech. That restriction, which apparently does not require unions to obtain member approval, appears to be unduly restrictive as it would be difficult to impossible to timely obtain such approval for political speech that may have to be shaped and aired quickly in the last days of a campaign. Another interesting requirement is for the CEOs of the companies paying for the ads to appear on camera to say that they stand by the ad similar to the "stand by your ad" requirements for politicians in the ads they run. Finally, a controversial provision would require candidates and political parties to be given the lowest unit rate for advertising to counter corporate and union advertising. Giving one speaker a leg up on another does not appear to be required by the First Amendment so the viability of that provision is questionable.

The pols are on the right track with the disclosure requirements and foreign investment restrictions which appear to be reasonable and appropriate. There are rational bases for restricting foreign interests in the amount of influence they can have on American elections and one would hope that the Supreme Court will agree. Likewise, there are good reasons for requiring timely and complete disclosures so that voters know exactly who or what is backing a candidate and those requirements would not restrict political speech but rather would enhance it by providing information about who is making the speech. Such requirements should easily withstand judicial scrutiny. However, I predict political fights over some of the other provisions which appear to place barriers designed to stifle corporate political speech and, if they are enacted, their ultimate demise in the courts for unduly restricting political speech.

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