John McCain's War on Political Speech

How the Arizona senator and other campaign finance reformers use the law to muffle critics and trample the First Amendment.

Bradley Smith from the December 2005 issue

(Page 2 of 3)

Literally dozens of studies have been conducted trying to isolate the effects of campaign contributions on legislative behavior. And the substantial majority of these found no statistically significant impact. A small minority of the studies have located some correlation but have also found that the effect is distorted by several other factors, including ideology, party position, and constituent desires.

It's hard to isolate and measure political influence, and promoters of broad restrictions on corporate political activity have criticized these studies for precisely that reason. Nevertheless these surveys represent the best information we have, and they show that there isn't really a measurable problem. Regulatory enthusiasts like to say, "Well, those for-profit corporations must be getting something for their investment," but corporations give roughly 100 times as much to charity without getting much more than some decent P.R. and a sense of well-being. And we know from studies that corporate executives often act in ways contrary or tertiary to maximizing profits--by, for instance, choosing relocation sites based simply on where they'd prefer to live.

Similarly, most political giving seems to be "consumption" rather than "investment" spending. Corporate executives make more personal and corporate contributions because they simply like making contributions, whether because it fits their ideology, because it makes them feel like big shots, because they get invited to rub shoulders with politicians, or because they enjoy doing what they see as their civic duty--being a "good corporate citizen."

Whatever the motivation, do these corporate contributions actually buy "undue" influence? Even before McCain-Feingold, only about half of the Fortune 100 made soft money contributions. That suggests right away that the idea that political giving is a bottom-line plus for firms is suspect; obviously, half the firms don't think so.

But what of those who do make contributions? If a Fortune 100 company's profits are roughly $5 billion a year, and the company makes $500,000 in political contributions in a two-year election cycle (an amount few donors ever reach), and if the firm further receives a 100 percent return on those soft money contributions, the profit would amount to about 0.01 percent of the corporation's two-year profit. That's hardly enough to matter. But suppose even that they were getting a 1,000 percent return on investment--meaning about 0.1 percent of the company's profits over two years--or even something higher: Wouldn't that nefarious influence purchasing be reflected in their stock prices?

And here is where the work of three economists at the Massachusetts Institute of Technology, led by Stephen Ansolabehere, is relevant. Ansolabehere's group divided the Fortune 500 into three groups: 216 companies that did not make soft money contributions, 142 that were modest donors (giving up to $250,000), and 142 large donors who gave more than $250,000. From the latter group, they also looked at a super-donor list of 50 who gave $1 million or more.

The researchers studied stock prices in the wake of five events related to campaign finance reform: the passage of the McCain-Feingold bill in the House of Representatives; the passage of the bill in the Senate; the signing of the bill into law by the president; oral arguments in the Supreme Court (at which Chief Justice William Rehnquist, who previously supported such restrictions, indicated that he had changed his position, which many people thought would make the Court much more likely to strike down the law); and the announcement of the Supreme Court decision upholding the soft money ban.

Were political donors penalized by the capital markets after the soft money ban? No. All these events had no measurable adverse effect on the stock valuation of these companies. If anything, it was the opposite. When the Supreme Court announced its decision on December 10, 2003--the most definitive event upholding the soft money ban--nondonors' stock suffered more than the stock of moderate donors, moderate donors did not do as well as large donors, and large donors did not do as well as the subset of million-dollar donors. Similarly, on the day the Senate passed the bill, large donors did the best of all, followed by moderate donors, and then nondonors. Now, most of these findings did not rise to the level of statistical significance. But the few that did indicated that the ban on soft money actually helped companies that had been making soft money donations. In short, none of the evidence supported the thesis that corporations were buying beneficial results.

What's More Corrupt?

So is this a problem that requires broad, prophylactic ethics rules? There are problems with arguing that donors are buying tangible results. On the other hand, there is strong reason to believe that the reformers and regulators who pursue these restrictions are not as concerned about government ethics as they claim. When I compare actions to rhetoric, their worries about the influence of corporate money on politics are a little too selective for me.

For example, there are no laws preventing, say, BellSouth from hiring the offspring of Sens. John Breaux (D-La.) and Trent Lott (R-Miss.)--both members of the influential Senate Commerce Committee--as lobbyists. [Breaux retired last year.] No concerns about the "appearance of corruption" prohibited the wife of former Sen. Tom Daschle (D-S.D.) from working as an aviation lobbyist while her husband was majority leader. Family members of high-ranking legislators are also frequently paid to sit on corporate boards and to make highly lucrative speeches. The wife of Sen. Joe Lieberman (D-Conn.), for example, earned $328,000 in speaking fees in 2001, just after her husband shot to national prominence as Al Gore's running mate. I do not believe that any of these senators are corrupt, and these activities did not violate Senate rules. But campaign contributions arguably amount to far less of an "appearance of corruption" than do personal cash payments to members' spouses or relatives. And politicians themselves can also easily line their pockets from fat book contracts or shake down corporations for donations to their "family foundations" and trusts.

Why should personal payments to successful politicians be relatively free from regulation, yet much smaller campaign contributions to not-yet-successful politicians be strictly regulated and reported, down to the contributions from parents of the candidates? (Yes, it's true: A parent cannot contribute $2,500 to his or her child's run for Congress, because it might corrupt that individual. While I've been at the FEC, we've fined sons for giving too much to their parents, parents for giving too much to their kids, and husbands for giving too much to their wives.)

For other "appearance of corruption" examples, we need look no further than the father of campaign finance reform himself, Sen. John McCain. In 2001 the Brennan Center, a group that advocates campaign finance reform, held a large fund-raising dinner whose honored guest and speaker was the "straight-talking" senator from Arizona. Several big corporations--many with interests before the Senate Commerce Committee, of which Sen. McCain was then the ranking minority member--sponsored the event. These sponsors included such companies as Coca-Cola; the investment firm Bear Stearns; many top law firms with lobbying practices in Washington; cigarette manufacturer Philip Morris--yes, Big Tobacco; and even Enron, which as we know is the most evil corporation in the history of the world. The event grossed an impressive $750,000.

Now what does the Brennan Center do? Well, the Brennan Center lobbied extensively to pass the McCain-Feingold bill, an issue that Sen. McCain once declared was of "transcendent importance to me." (An interesting choice of words, since transcendent, if you look it up in the dictionary, means "beyond human comprehension.") The Brennan Center also provided legal services, pro bono, to defend the constitutionality of the McCain-Feingold bill in court.

So let's put this together: The Brennan Center invites Sen. McCain to speak and then approaches a large number of corporations, perhaps saying something like, "Sen. McCain--the ranking minority member of the Commerce Committee, before which your company has a great deal of business, and a possible future presidential candidate--is coming to speak. Would you care to sponsor a table?" And Enron and Coca-Cola and Philip Morris just suddenly decide that they are very interested in campaign reform and kick in some good old soft money, which the Brennan Center uses to lobby and provide free legal services for an issue of "transcendent importance" to none other than Sen. McCain. Appearance of corruption, anyone?

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Pingback| 11.22.09 @ 11:38PM

Of Everything That Stands, The End links to this page. Here’s an excerpt:

…Aren’t we the one’s who voted for “ compassionate progressive conservatism,” and stumped for “ Wilsonian” McCain? Seriously. McCain drastically infringed our right of free speech, and “suspended” his campaign to pass TARP. What about Bush? Don’t even get me started … No Child Left Behind, prescription drugs, never-ending war, stimulus, TARP,…