A Deeper Dive: Citizens United, Super PACs, and Dark Money
In our introduction to federal campaign finance, we discussed the landmark Supreme Court case Citizens United v. FEC, which caused substantial waves in the world of campaign finance. Though it has now been more than 13 years since this case was decided, it is important to understand how this decision has influenced the topics and issues at play today.
What was the case actually about?
Citizens United is the name of a nonprofit organization that created a political documentary called “Hillary: The Movie.” This film was designed to criticize presidential candidate and then-Senator Hillary Clinton. It was scheduled to be released right before the Democratic primary elections in January 2008, and Citizens United wanted to advertise it. However, under a 2002 law called the Bipartisan Campaign Reform Act (BCRA), it was illegal for nonprofits, corporations, or labor unions to engage in “electioneering communication” for a specific time period before an election (30 days before primaries or 60 days before general elections).
“Electioneering communication” was defined as a broadcast, cable, or satellite communication that “referred to a clearly identified federal candidate” and was targeted to the relevant voters. This law also made it illegal for these groups to spend money on political advertising at any time that expressly supported or opposed a candidate (called “express advocacy“).
The problem with “Hillary: The Movie” is that it was scheduled to be advertised during the 30-day prohibited timeframe and was clearly made to oppose Clinton as a federal candidate. As such, the Federal Election Commission (FEC) — the federal agency responsible for enforcing campaign finance laws — tried to classify the film’s advertisement as “electioneering communication” and regulate it as they would any other campaign ad (i.e., prohibit it).
In response, Citizens United sued, saying their First Amendment rights of freedom of speech were violated. The three-judge district court that first heard the case determined that Citizens United was wrong. They agreed with the FEC, concluding that there is “no other interpretation [of “Hillary: The Movie”] than to inform the electorate that . . . viewers should vote against her” (p. 8). Consequently, this court decided it was legal under BCRA to ban the film’s promotion during the special time period preceding an election.
Citizens United appealed this decision in 2009, and the case went directly to the Supreme Court. In a 5-4 decision in January 2010, the Supreme Court reversed the decision and agreed with Citizens United that the BCRA limits were unconstitutional because they violated freedom of speech.
What were the implications of this decision?
The Citizens United ruling overturned the BCRA ban on “electioneering communications” by corporations, nonprofits, and unions and invalidated the prohibition on express advocacy by these same groups, as long as their political spending is not formally coordinated with a candidate’s campaign. (Remember our discussion of independent spending?) Let’s explore a few common questions that stem from Citizens United.
Does political spending constitute freedom of speech?
The short answer is: Yes. The long answer is that this point is still hotly debated. The Citizens United ruling was significant, as it found that corporate and union political spending is protected by the First Amendment. This was a controversial case, with some groups praising it for recognizing that corporations are simply a collection of individuals who do indeed have free speech rights and other groups criticizing it for (falsely, in their opinion) equating corporate spending with political speech and granting corporations the same rights as human beings.
Freedom of speech may seem like a straightforward concept at first glance. Yet, questions about the extent of the First Amendment and how the right to free speech interacts with other rights can be surprisingly complex. To a certain extent, it is undeniable that spending money is a way someone exercises their freedom of speech (such as by choosing what types of books to buy or paying to print and distribute flyers). But at the same time, without any limits on political spending, wealthy individuals who have more money to spend inevitably have a greater ability to exercise their free speech and influence others.
Most Americans reject the notion that wealth should buy political influence. Yet, in some respects, we must balance the competing American values of the right to free speech and an equitable opportunity to engage in the democratic process. There is no easy answer. The Citizens United decision prioritized First Amendment rights in a manner that ended up promoting the ability of wealthy Americans to influence the political arena. (It is also important to point out that the Citizens United decision did not come out of the blue; there were other significant lawsuits recognizing money as speech prior to 2010, such as Buckley v. Valeo in 1976).
Can political spending cause corruption? Is there sufficient transparency?
In the Citizens United majority opinion written by Justice Kennedy, the Court argued that independent expenditures “do not give rise to corruption or the appearance of corruption.” Remember our discussion about independent groups? “Independent expenditures” means money spent by these groups or by individuals to advocate for or against a candidate, but without coordinating that spending with the candidate’s campaign. The justices concluded in the majority opinion that disclosure requirements would provide enough transparency to allow the voting public to “make informed decisions and give proper weight to different speakers and messages.” Unfortunately, this level of transparency is simply not the reality (especially because of dark money, which is explained below).
After Citizens United, the U.S. District Court for the District of Columbia ruled on a related case: SpeechNow.Org vs FEC. That court ruled that the FEC could not enforce federal contribution limits to independent groups (i.e., the maximum amount of money an individual can donate to a group that spends money on elections) because such limits also violate freedom of speech. This court determined that because of the Supreme Court’s reasoning in Citizens United, they must necessarily conclude: “[T]he government has no anti-corruption interest in limiting contributions to an independent expenditure group.”
Ironically, transparency was further undermined by the Citizens United and SpeechNow.Org decisions, because the rise of super PACs made it easier for wealthy donors to obscure the sources of their donations through nonprofits. Many undisclosed political donations occur through 501(c) organizations, where legal requirements allow donors greater anonymity, since nonprofit organizations are permitted to spend a significant portion of funds on political activities while not disclosing their donors.
Political donations are also not truly independent or transparent if there is any sort of quid pro quo arrangement. This can look like the candidate doing a favor for a donor who contributes generously to the super PAC that supports their candidacy, such as a real estate deal or a personal conversation with the candidate. Examples of such behaviors are discussed here.
The rise of Super PACs? Yes. The rise of corporate spending? Maybe not.
As a result of both the Citizens United decision on expenditure limits and the SpeechNow.Org decision on contribution limits, independent PACs can now accept and spend money from individuals or corporations that are no longer subject to federal limits (in order words, they can engage in unlimited fundraising). Consequently, these became known as “super PACs” — independent expenditure-only political committees.
Many commentators at the time of the Citizens United decision believed for-profit corporations would start spending enormous amounts of money in elections. Evidence suggests this has not actually happened (though it is also clear that corporations prefer to spend their money on political lobbying rather than on direct election spending).
The rise of super PACs is perhaps the most impactful result of the Citizens United case, because it has led to substantial increases in the amount of outside spending in elections. Since 2010, wealthy individuals prefer to use super PACs for political spending, as they enable them to retain greater control over their donations and avoid some disclosure requirements. Between 2010 and 2020, super PACs spent almost $3 billion on federal elections. A large portion of super PAC spending comes from a relatively small group of wealthy “mega-donors.” The rise of super PACs has also contributed to favoring the influence of men in political spending relative to the influence of women.
What is illegal coordination? Is it a problem?
It is illegal for super PACs to coordinate their spending with the official campaign of a candidate. In order to be legal, spending by super PACs and other outside groups must be independent from candidates and their campaigns. While the FEC has developed a three-prong test to identify “coordination,” what constitutes coordination is still not always clear. More pressingly, there has been very little investigation or enforcement of the prohibition against coordination. Campaigns and independent groups are developing new and creative ways to skirt the law and coordinate their efforts. (Check out redboxing if you’re curious!)
Unfortunately, there is substantial evidence of illegal coordination continuing to occur. What does this look like? If a super PAC that supports Candidate X and the official campaign of Candidate X both use the same third-party advertising agency to run their ads, this third-party can coordinate the ads based on desired information from both the super PAC and campaign. Unfortunately, this is not just a theoretical example; this situation has occurred on a number of occasions, with entities on both sides of the political spectrum.
What is dark money?
“Dark money” is a term used to refer to political money that originates from undisclosed sources. Estimates suggest that for every dollar of dark money spent in the decade prior to Citizens United, there were at least $10 spent in the decade after. “Gray money” refers to partially disclosed money that cannot be fully traced back to its original source. Gray money usually comes from super PACs, which are legally required to disclose their donors; however, those disclosed donors may be the names of nonprofits or shell companies that have not, in turn, disclosed the original donor of the money.
Shell companies are companies where ownership is intentionally obscured through the use of multiple ownership levels though limited liability companies. The use of such shell companies is also concerning because it makes it possible for illegal funds from foreign countries to be used in American political campaigns — with no transparency or accountability. These are often called straw donors. Is this a partisan issue? Not at all! Both conservative and liberal outside groups have poured shocking amounts of dark money into influencing elections. It’s a problem no matter where it occurs on the political spectrum.
What can be done?
This may seem overwhelming. However, good policy reform can help create a campaign finance system that is more transparent and accountable to voters. Possible solutions include passing laws that more clearly define and prohibit illegal coordination between super PACs and political campaigns, as well as improving the functioning and authority of the FEC to enforce these laws. Congress could also pass legislation to strengthen disclosure requirements in order to decrease the role of dark money in elections. Finally, a constitutional amendment could potentially be the most effective (though many argue improbable) way to reduce the role of money in our elections, by explicitly authorizing federal and state governments to limit political spending. These potential reforms — and their respective pros and cons — will be considered in a future MWEG article.
Part 1: “An Introduction to Federal Campaign Finance”
Part 2: “A Deeper Dive: Citizens United, Super PACs, and Dark Money”
Part 3: “Navigating Political Ads: How to Be an Informed Citizen When Lying Is Legal”
Part 4: “A Brief Exploration of Potential Campaign Finance Reforms”
