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Caps on Total Campaign Giving Voided by U.S. High Court

April 02, 2014

Caps on Total Campaign Giving Struck Down by U.S. Supreme Court

A volunteer prepares a donation box before a campaign stop by Republican presidential candidate, former House Speaker Newt Gingrich, in this Feb. 28, 2012 file photo, in Dalton, Ga. Photographer: Evan Vucci/AP Photo

A divided U.S. Supreme Court struck down decades-old limits on the total amount donors can give to federal candidates and parties, dealing a fresh blow to efforts to curb the role of money in American politics.

Voting 5-4 along ideological lines, the court today said the caps violated the speech rights of Shaun McCutcheon, an Alabama Republican official seeking to give candidates, parties and political committees more than the $123,200 maximum. It was the court’s biggest campaign-finance decision since its 2010 Citizens United ruling allowed unlimited corporate spending.

The overall limits “intrude without justification on a citizen’s ability to exercise the most fundamental First Amendment activities,” Chief Justice John Roberts wrote in the court’s lead opinion.

The court stopped short of undercutting a 1976 ruling that allows caps on contributions to individual candidates. That means donors will still be limited to giving $2,600 to a federal candidate for each election.

The loosening of campaign-finance restrictions has become a hallmark of the Roberts court. The Citizens United ruling helped fuel an explosion of campaign money, with spending from candidates, parties and outside groups topping $6 billion in 2012. Today’s ruling may pump new money into November’s congressional elections, as Republicans seek to take control of the Senate.

Though the ruling isn’t likely to approach the effect of Citizens United, it will give more freedom to wealthy donors looking to use their fortunes to make a political impact.

‘Eviscerates’ Laws

Taken together with Citizens United, the decision “eviscerates our nation’s campaign-finance laws, leaving a remnant incapable of dealing with the grave problems of democratic legitimacy that those laws were intended to resolve,” Justice Stephen Breyer wrote in dissent. He took the unusual step of reading a summary from the bench.

The court’s five Republican appointees constituted the majority, with Justices Samuel Alito, Anthony Kennedy, Clarence Thomas and Antonin Scalia joining Roberts. Thomas said in a separate opinion that he would have gone further and overturned the 1976 ruling.

The four Democratic appointees -- Breyer and Justices Elena Kagan, Ruth Bader Ginsburg and Sonia Sotomayor -- dissented.

Koch Brothers

Today’s ruling enlarges the pipeline for donors who prefer to give their money to candidates and parties. It doesn’t affect pathways that previous Supreme Court rulings have opened for contributors to super-political action committees and politically active nonprofit organizations.

For example, billionaire former hedge-fund manager Tom Steyer has pumped $11 million this year and last into a super-PAC he formed to help Democratic candidates interested in environmental issues. And billionaire energy executives Charles and David Koch invest in Republican-aligned organizations that don’t disclose their donors.

The aggregate limits included a cap of $48,600 to federal candidates and $74,600 to political parties and political action committees during each two-year election cycle.

Those restrictions, which date to laws enacted in the 1970s after the Watergate scandal, were designed to supplement better-known restraints known as base limits. Under those, donors can contribute a maximum of $2,600 to particular candidates per election, $5,000 per year to individual PACs and $32,400 per year to each national party committee. The limits are indexed for inflation and increase every election cycle.

Citizens United

In the last election cycle, 1,323 donors reached what was then a $117,000 limit for contributions to parties and candidates, according to a report by the Sunlight Foundation, a Washington-based non-profit that tracks campaign spending.

The group identified 20 donors who are nearing or have hit this cycle’s $123,200 limit, including Charles Schwab, the chairman of the discount brokerage firm that bears his name; George Krupp, co-founder of Boston-based Berkshire Group, a privately held investment company, and Scott Bommer, president of SAB Capital Management LP, a New York-based hedge fund.

The 2010 Citizens United ruling allowed unlimited corporate and union spending. The latest case focused on contributions, rather than spending. It raised questions about the landmark 1976 ruling, Buckley v. Valeo, which said the government had broad latitude to limit contributions to guard against corruption.

Defending Caps

The Obama administration defended the aggregate caps, which the Supreme Court in Buckley said prevent “evasion” of the base limits. A three-judge panel used similar reasoning to uphold the caps last year.

The administration said that, without the caps, donors might be able to give large sums to a variety of candidates and political committees, anticipating that the money would be spent in support of a single favored candidate. Breyer said a wealthy donor could give $3.6 million to his political party and its candidates over a two-year election cycle.

Roberts dismissed that concern. “Experience suggests that the vast majority of contributions made in excess of the aggregate limits are likely to be retained and spent by their recipients rather than rerouted to candidates,” he wrote.

Roberts said the aggregate limits couldn’t be justified as a means to prevent corruption. Previous Supreme Court rulings have said Congress may target only “quid pro quo” corruption - - that is, donations aimed at extracting specific political favors. “The government may not seek to limit the appearance of mere influence or access,” Roberts wrote.

Administration Disappointed

Josh Earnest, a White House spokesman, told reporters that “Justice Breyer summed up the disappointment” felt by administration officials.

Today’s ruling lets a generous donor blanket all of his or her preferred party’s federal candidates with checks.

For this year’s elections, when 36 Senate seats and all 435 House seats are up, a super-donor could invest $3,643,600 -- almost 30 times the aggregate limit that the court struck down today. That money would fan out to the candidates and to the three national party committees, as well as the federal arms of the party committees in all 50 states.

Political entrepreneurs will quickly set up giant joint-fundraising committees so that donors aren’t saddled with the task of writing hundreds of checks, said Bob Biersack, a senior fellow at the Center for Responsive Politics and a retired Federal Election Commission employee.

Party Voice

These new committees would need to file FEC paperwork -- something Biersack predicted is happening today.

McCutcheon’s most significant effects will be on the parties and on congressional races, which were previously hemmed in by the aggregate limits, Biersack said.

Republican National Committee Chairman Reince Priebus called the ruling “an important first step toward restoring the voice of candidates and party committees and a vindication for all those who support robust, transparent political discourse.” The RNC argued alongside McCutcheon in the case.

A single donor now will be able to contribute the maximum $32,400 per year to each of the three national party committees. That donor also may give $10,000 per year to the federal arms of the 50 state parties. Those state parties can transfer money freely to one another, enabling those with hotly contested races to stockpile funds from less-competitive states.

Had the court gone further and overturned the limits on checks to individual candidates, wealthy donors would have gained even more influence. The current limit of $2,600 to a candidate per election comes even as competitive U.S. House races generate millions of dollars in spending.

Divided Congress

Congressional reaction to the decision broke largely along partisan lines, with Republicans praising it and Democrats calling it potentially destructive.

“Freedom of speech is being upheld,” House Speaker John Boehner, an Ohio Republican, told reporters. “You all have the freedom to write what you want to write, donors ought to have the freedom to give what they want to give.”

Senator Mitch McConnell, a Kentucky Republican and minority leader, said the court “has once again reminded Congress that Americans have a constitutional First Amendment right to speak and associate with political candidates and parties of their choice.” McConnell backed McCutcheon in the case.

Senator John McCain, an Arizona Republican and an advocate for limits on campaign money, said recent court decisions would lead to “scandals involving corrupt public officials and unlimited, anonymous campaign contributions.”

‘Ruination’ Road

Senator Charles Schumer, a New York Democrat, called the decision “another step on the road to ruination.”

“It could lead to interpretations of the law that would result in the end of any fairness in the political system as we know it,” he said in a statement.

McCutcheon, a businessman, contended that the caps violate his free speech rights, limiting his political participation without serving a clear purpose.

He gave a symbolic $1,776 to each of 15 challengers trying to unseat incumbents in the 2012 election. He says he would have given to a dozen more had the aggregate limits not blocked him. He didn’t challenge the base limits.

McCutcheon contended that post-Buckley restrictions on contributions to parties and PACs have made the aggregate limits unnecessary. He also said federal law restricts the ability of donors to earmark their contributions.

The case is McCutcheon v. FEC, 12-536.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net

To contact the editors responsible for this story: Patrick Oster at poster@bloomberg.net Mark McQuillan, Jodi Schneider

A volunteer prepares a donation box before a campaign stop by Republican presidential candidate, former House Speaker Newt Gingrich, in this Feb. 28, 2012 file photo, in Dalton, Ga. Photographer: Evan Vucci/AP Photo April 2 (Bloomberg) –- Bloomberg’s Phil Mattingly reports on the Supreme Court’s campaign finance ruling. He speaks with Erik Schatzker on Bloomberg Television’s “Market Makers.” (Source: Bloomberg)

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