Wednesday’s Supreme Court ruling is a game-changer. One kind of contribution limit was eliminated, another was kept in place. Donors are still limited in how much they can give to any individual candidate, party or committee, but they are no longer bound by an aggregate cap. In other words, now they can max out on as many of those political entities as they please.
It’s a harmful decision that “undermines, perhaps devastates, what remains of campaign finance reform,” Supreme Court Justice Stephen Breyer argued in his dissenting opinion. He also explained how a rich donor and the political parties could game the system. Without further ado, here’s Justice Breyer’s guide, in three examples, to gaming campaign financing.
(The following was edited, mostly to remove footnotes, references and passages irrelevant to this post. We also bolded relevant passages for emphasis.)
Example One: Gifts for the Benefit of the Party
Campaign finance law permits each individual to give $64,800 over two years to a national party committee. The two major political parties each have three national committees. Federal law also entitles an individual to give $20,000 to a state party committee over two years. Each major political party has 50 such committees.
Those individual limits mean that, in the absence of any aggregate limit, an individual could legally give to the Republican Party or to the Democratic Party about $1.2 million over two years. To make it easier for contributors to give gifts of this size, each party could create a “Joint Party Committee,” comprising all of its national and state party committees. The titular heads could be the Speaker of the House of Representatives and the Minority Leader of the House. A contributor could then write a single check to the Joint Party Committee—and its staff would divide the funds so that each constituent unit receives no more than it could obtain from the contributor directly ($64,800 for a national committee over two years, $20,000 for a state committee over the same).
Before today’s decision, the total size of Rich Donor’s check to the Joint Party Committee was capped at $74,600—the aggregate limit for donations to political parties over a 2-year election cycle. After today’s decision, Rich Donor can write a single check to the Joint Party Committee in an amount of about $1.2 million.
Will political parties seek these large checks? Why not? The recipient national and state committees can spend the money to buy generic party advertisements, say television commercials or bumper stickers saying “Support Republicans,” “Support Democrats,” or the like. They also can transfer the money to party committees in battlegroundStates to increase the chances of winning hotly contested seats.
Will party officials and candidates solicit these large contributions from wealthy donors? Absolutely. Such contributions will help increase the party’s power, as well as the candidate’s standing among his colleagues.
Will elected officials be particularly grateful to the large donor, feeling obliged to provide him special access and influence, and perhaps even a quid pro quo legislative favor? That is what we have previously believed. …
Example Two: Donations to Individual Candidates (The $3.6 Million Check)
The first example significantly understates the problem. That is because federal election law also allows a single contributor to give $5,200 to each party candidate over a 2-year election cycle (assuming the candidate is running in both a primary and a general election).
There are 435 party candidates for House seats and 33 party candidates for Senate seats in any given election year. That makes an additional $2.4 million in allowable contributions. Thus, without an aggregate limit, the law will permit a wealthy individual to write a check, over a 2-year election cycle, for $3.6 million—all to benefit his political party and its candidates.
To make it easier for a wealthy donor to make a contribution of this size, the parties can simply enlarge the composition of the Joint Party Committee described in Example One, so that it now includes party candidates. And a party can proliferate such joint entities, perhaps calling the first the “Smith Victory Committee,” the second the “Jones Victory Committee,” and the like.
As I have just said, without any aggregate limit, the law will allow Rich Donor to write a single check to, say, the Smith Victory Committee, for up to $3.6 million. This check represents “the total amount that the contributor could contribute to all of the participants” in the Committee over a 2-year cycle.
So what is wrong with that? The check is considerably larger than Example One’s check. But is there anything else wrong? The answer is yes, absolutely. The law will also permit a party and its candidates to shift most of Rich Donor’s contributions to a single candidate, say Smith. Here is how:
The law permits each candidate and each party committee in the Smith Victory Committee to write Candidate Smith a check directly. For his primary and general elections combined, they can write checks of up to $4,000(from each candidate’s authorized campaign committee)and $10,000 (from each state and national committee). This yields a potential $1,872,000 (from candidates) plus $530,000 (from party committees).
Thus, the law permits the candidates and party entities to redirect $2.37 million of Rich Donor’s $3.6 million check to Candidate Smith. It also permits state and national committees to contribute to Smith’s general election campaign through making coordinated expenditures—in amounts that range from $46,600 to $2.68 million for a general election (depending upon the size of Smith’s State and whether he is running for a House or Senate seat).
The upshot is that Candidate Smith can receive at least $2.37 million and possibly the full $3.6 million contributed by Rich Donor to the Smith Victory Committee, even though the funds must first be divided up among the constituent units before they can be rerouted to Smith. Nothing requires the Smith Victory Committee to explain in advance to Rich Donor all of the various transfers that will take place, and nothing prevents the entities in the Committee from informing the donor and the receiving candidate after the fact what has transpired. Accordingly, the money can be donated and rerouted to Candidate Smith without the donor having violated the base limits or any other FEC regulation. And the evidence in the McConnell record reprinted in Appendix A, infra—with respect to soft money contributions—makes clear that Candidate Smith will almost certainly come to learn from whom he has received this money.
The parties can apply the same procedure to other large donations, channeling money from Rich Donor Two to Candidate Jones. If 10 or 20 candidates face particularly tight races, party committees and party candidates maywork together to channel Rich Donor One’s multimillion dollar contribution to the Most Embattled Candidate (e.g., Candidate Smith), Rich Donor Two’s multimillion dollar contribution to the Second Most Embattled Candidate (e.g., Candidate Jones), and so on down the line. If this does not count as evasion of the base limits, what does? Present aggregate limits confine the size of any individual gift to $123,200. Today’s opinion creates a loophole measured in the millions.
Example Three: Proliferating Political Action Committees (PACs)
Campaign finance law prohibits an individual from contributing (1) more than $5,200 to any candidate in a federal election cycle, and (2) more than $5,000 to a PAC in a calendar year. It also prohibits (3) any PAC from contributing more than $10,000 to any candidate in an election cycle. But the law does not prohibit an individual from contributing (within the current $123,200 biannual aggregate limit) $5,000 to each of an unlimited total number of PACs. And there, so to speak, lies the rub.
Here is how, without any aggregate limits, a party will be able to channel $2 million from each of ten Rich Donors to each of ten Embattled Candidates. Groups of party supporters—individuals, corporations, or trade unions—create 200 PACs. Each PAC claims it will use the funds it raises to support several candidates from the party, though it will favor those who are most endangered. (Each PAC qualifies for “multi candidate” status because it has received contributions from more than 50 persons and has made contributions to five federal candidates at some point previously. Over a 2-year election cycle, Rich Donor One gives $10,000 to each PAC ($5,000 per year)—yielding $2 million total. Rich Donor 2 does the same. So, too, do the other eight Rich Donors. This brings their total donations to $20 million, disbursed among the 200 PACs. Each PAC will have collected $100,000, and each can use its money to write ten checks of $10,000—to each of the ten most Embattled Candidates in the party (over two years). Every Embattled Candidate, receiving a $10,000 check from 200 PACs, will have collected $2 million.
The upshot is that ten Rich Donors will have contributed $2 million each, and ten Embattled Candidates will have collected $2 million each. In this example, unlike Example Two, the recipient candidates may not know which of the ten Rich Donors is personally responsible for the $2 million he or she receives. But the recipient candidate is highly likely to know who the ten Rich Donors are, and to feel appropriately grateful. Moreover, the ability of a small group of donors to contribute this kind of money to threatened candidates is not insignificant. In the example above—with ten Rich Donors giving $2 million each, and ten Embattled Candidates receiving $2 million each—the contributions would have been enough to finance a considerable portion of, and perhaps all of, the candidates’ races in the 2012 elections.