What if America banned corporations?

United States

Jörg Hebenstreit

To person

Dr. Jörg Hebenstreit is Post-Doc at the Institute for Political Science at Friedrich Schiller University Jena. His main research interests include party system and responsiveness research as well as the influence of economic interests in politics. In spring 2020 his doctoral thesis on "Campaign Financing and Democracy in the USA" was published by Nomos-Verlag.

The incumbent US president is a billionaire; almost half of all congressmen have millions in their accounts. Money plays an important role in the US election campaign - but are the sums really decisive for the election?

Supporters for Democratic nominee Elizabeth Warren in Milford, New Hampshire speak to a man dressed as a Super PAC on September 2, 2019. Warren dropped out of the election campaign after the poor result on Super Tuesday. (& copy picture-alliance, ZUMAPRESS.com)

Money and politics have a symbiotic relationship in the United States. How closely this interdependence is at times can be seen on the one hand from the fact that almost half of all congressmen, at least two thirds of all judges of the Supreme Court (Supreme Court) and more than three-quarters of all members of the Trump administration are millionaires, the current president is even a billionaire. [1] On the other hand, a look at the area of ​​lobbying and election campaign financing makes it clear what enormous sums are spent in the area of ​​brokering interests and the electoral filling of political offices. The total costs of the 2020 presidential election cycle amounted to almost 14 billion US dollars [2] - in no other country in the world do election campaign costs even come close to comparable spheres. Jesse Unruh (1961-1969 spokesman for the California State Assembly), inextricably linked to the US system of government and can therefore be considered the breast milk of politics ("mother’s milk of politics") can be characterized. [3]

Legal regulations from a historical perspective

Almost unlimited donations, extensive financial participation by companies and banks and the often hidden identities of large donors were not always the hallmarks of US election campaigns. On the contrary, a steady process of deregulation and privatization has been observed since the mid-2000s, which has razed the formerly consistent and comprehensive structure of election campaign financing regulations almost to its foundations. The former foundation stone for that "building" was in 1907 with the so-called Tillman Act placed. Against the background of corrupting financing practices, companies and banks were prohibited from transferring campaign donations to candidates and their campaigns. After this ban by the Taft-Hartley Act In 1947, when the Watergate Affair became known [4], the legal requirements were fundamentally expanded from June 1972 onwards, which can be seen as the birth of modern election campaign financing. In response to the biggest corruption scandal in US history, the defined Federal Election Campaign Act (FECA) including explicit rules for the amount of income and expenditure as well as the public declaration of those funds. Just two years later, the Supreme Court should put the spending limit in the case Buckley v. Valeo (1976), however, declare it unconstitutional. In 2002 it came with the Bipartisan Campaign Reform Act, which was supposed to plug numerous loopholes of FECA (including the so-called soft money loophole), for the last real expansion of the funding regulations. Since then, the highest court has risen to become the determining actor in the field of campaign finance. After a shift in the majority within the Supreme Court, a steady process of dismantling some of the regulations that had existed for more than 100 years began. This development should culminate in the decision Citizens United v. FEC (2010), which heralded a radical turning point.

In the extremely tight decision (5: 4), the conservative majority of the 9 judges ruled that companies and banks (I.) have the same rights as natural persons (corporate personhood) and that (II.) any donation limit a restriction of the right to freedom of expression (money is speechDoctrine). Because the resulting unlimited flow of money cannot be donated directly to traditional actors such as candidates and parties (inside spending), so-called Great Political Action Comittees (PACs), who receive an unlimited amount of campaign donations, but are not allowed to be coordinated with the candidates' campaigns [5]. Direct donations to candidates and political parties are still limited (or even prohibited for companies), but these regulations are only a shadow of themselves. Because with the help of Great PACs and 501 (c) groups this restriction can be easily circumvented and the origin of the donations can also be effectively disguised. The Harvard law professor Lawrence Lessig summarized the current status quo as follows: "We can do everything legally these days that Nixon [in the course of the Watergate affair] had to do illegally." [6]

glossary

Soft money loophole

As soft money campaign donations are understood that do not require approval or disclosure and, according to the regulations, only for party building-Activities, such as voter information on political education (voter education) Voter registration (voter registration) or for so-called issue ads may be used. In issue ads Only topics, not specific candidates, may be advertised. The term loophole Finally, points to legal loopholes that election campaigns have used effectively over time.

Great PACs

Campaign organizations that you through Fundraising Donate money you have acquired (e.g. from companies, banks, trade unions or individuals) not to candidates, but to so-called uncoordinated political expenditures output. Because Great PACs are not allowed to make strategic agreements with campaigns by candidates (uncoordinated), they can collect an unlimited amount of campaign donations. Great PACs are considered a direct consequence of the two court decisions Citizens United v. FEC (2010) and SpeechNow.org v. FEC (2010).

501 (c) groups

Non-profit organizations that take their names from the relevant paragraphs of American Central Tax Law (Internal Revenue Code, IRC) and are almost completely exempted not only from tax payments, but also from transparency obligations. Apply together with Great PACs among the most active players in the field of outside spending.

Inside spending & outside spending

The Citizens United-Decision has meant that campaign donations may be made in two clearly distinguishable areas: the inside as well as the outside spending-Area. The former include the classic campaign actors such as candidates, parties and PACs (donation collection machines operated by interest groups). As outside spending- Actors, on the other hand, will be the newly formed Great PACs as 501 (c)Organizations classified. Both areas are considered to be separate from one another, as the respective actors are not allowed to cooperate with one another.

Dark money spending

With the so-called dark money it concerns election campaign expenses which are intended to influence the decision of a voter, but for which the identity of the donor or the source of the money remains unknown. Those opaque dark money-Money usually comes from the area of ​​the outside spending and are therefore particular Great PACs as 501- (c) Attributable to organizations.

Permanent campaigning

With the concept of permanent campaigning describes the phenomenon that elected officials in the USA conduct an uninterrupted election campaign even after election day. The electoral campaign and government phases, which used to be clearly separable from one another, now almost completely overlap. As an essential characteristic of the permanent campaignings the non-stop collection of campaign donations applies (fundraising), an activity that MPs of all parties often devote several hours a day.


From record sum to record sum

As expected, the opening of the legal locks has led to a renewed increase in the already remarkable amount of donations. If you look at election cycles in which both presidential and congressional elections took place, the total cost of the election nearly quadrupled in just two decades - from $ 3.1 billion in 2000 to $ 13.88 billion in 2000 2020. [7] The majority of the increase in costs is due to the congressional elections, for which an uninterrupted increase in the total costs can be observed since 1998. [8] The immediate effect of the Citizens United-Decision should also be shown in particular on the basis of three developments: an increase in outside and dark money spending as well as the significant increase in donations from wealthy individuals. At the outside spending it concerns those funds raised by the newly established Great PACs be invested. [9] After only $ 33.8 million in 2000, that total literally shot through the roof by 2020, growing more than 7,500% to $ 2.6 billion. [10] As a subcategory of this flow of money, election campaign donations also grew, the origin of which is unknown due to porous transparency obligations - in 2020 these added up dark moneyFunds totaling $ 101.02 million. [11]

Since 2016 at the latest, however, there has been a counter-trend to the non-transparent cash flows that often come from the accounts of only a few wealthy individuals. Above all candidates from the democratic camp (D), but occasionally also from the republican camp (R) (especially Trump), increasingly collected small donations that do not exceed a monetary value of 200 US dollars. Compared to the 2016 election cycle, the share of small donations in total donations rose by around seven percentage points from 15.2% to 22.4% in the 2020 election year. [12] By consciously doing without Great PACDonations should on the one hand credibly articulate the criticism of the excessive influence of money and on the other hand signal that one is not in a corrupting dependency on wealthy individual interests. Strategically, one also hopes to be able to generate not only a broad network of donors, but also potential voters.



Choice or auction?

The 2020 election cycle is a mixture of the financing practices outlined above. On the one hand, Bernie Sanders (D), as a candidate for a candidate in the primary campaign, was able to generate 54% of the 180 million US dollars raised from small donations, [13] on the other outside spending-Sources almost unchanged. In addition, with Tom Steyer (D), Michael Bloomberg (D) and Donald Trump (R), three billionaires have competed in a presidential election campaign for the first time, some of whom finance their campaigns entirely from their own accounts. Bloomberg invested $ 1.1 billion in his candidacy and spent $ 16 million every day in February alone on his candidacy for the highest office in the United States. [14]

However, the fact that Bloomberg abandoned its candidacy after just three and a half months and was only able to win the unimportant area code in the outlying area of ​​American Samoa also shows that the campaign donations factor is not necessarily proportional to the votes generated must stand. Contrary to what many reports suggest, the best candidates do not necessarily win. Instead, the effect can be observed, especially at the presidential level, that the effect of the money invested decreases significantly after a certain threshold value has been exceeded. [15] The effect of the first dollar invested is therefore considerably greater than that of the ten or one hundred millionth. It is therefore essential for candidates to advertise programmatic positions and information about themselves within the electorate at the beginning of an election campaign. However, once this information is disseminated and generally known, the vote-increasing effect decreases significantly. Campaign donations can therefore be classified as a prerequisite for the election, but not necessarily a decisive factor. Ultimately, other factors, such as the experience, competence and programmatic position of a candidate, or economic framework conditions, determine the outcome of the election. Those factors that would also decide an election campaign in which both candidates would have exactly the same amount of money.

Effects on the political system

In all discussions about the influence of campaign donations on the election outcome, however, the consequences of unlimited donations elsewhere in the political system are often overlooked. On the one hand, studies indicate that unlimited and non-transparent campaign donations lead to a loss of confidence in central institutions but also in the electoral process (electoral integrity) as such. It is not uncommon for such a loss of trust to result, conversely, in a lower willingness of citizens to participate. [16] Equally problematic is the fact that campaign donations have been identified in highly regarded studies as central mechanisms for the transfer of economic to political inequality. With regard to the consideration of bourgeois preferences by political decision-makers, a largely deregulated campaign financing system thus contributes to the fact that the political preferences of the average voter in the USA are only given minimal consideration. [17] Another direct consequence of the financing regulations is the phenomenon of permanent campaignings to evaluate. As a consequence of the enormous increase in election campaign costs, candidates have to spend a considerable amount of time collecting donations. In return, the time for the actual tasks of parliamentarians is reduced, such as maintaining contacts with voters or devoting themselves intensively to the legislative process. After all, from a normative perspective, the legal status quo is difficult to reconcile with central criteria such as political equality, fairness and transparency.

Conclusion and outlook

Even if not every campaign donation has been finally declared and the exact total amount is still unknown, it is already clear that the 2020 presidential election year is in every respect the most expensive election cycle in the history of campaign finance to date. In addition to the record sums at the presidential (6.63 billion US dollars) and congressional levels (7.25 billion US dollars) [18], the most expensive self-financed election campaign (1.1 billion US dollars, Michael Bloomberg), the most expensive Senate election campaign (North Carolina: US $ 286.17 million) [19] and the largest amount donated to date by a wealthy major donor (Sheldon Adelson: US $ 183.07 million) [20]. The logic of increasingly expensive election campaigns has therefore not only solidified, but accelerated even further. This can be seen solely from the fact that the cumulative costs of the 2012 and 2016 election cycles are still lower than the total costs of the 2020 cycle - even though the COVID-19 pandemic and the associated economic recession is very likely to lead to one have contributed lower grand total. Given the enormous politicization of the current election campaign, which is particularly associated with Donald Trump, it is difficult to imagine that these record sums will be set again (at least at presidential level) in 2024, but certainly not in the event of the latter running again locked out. On the other hand, the fact that the newly elected US President Joe Biden is unlikely to be able to change the current status quo of campaign finance law is somewhat certain. Even with a Democratic majority in both houses - which is still possible due to the runoff elections in Georgia - reform packages are unlikely to withstand a constitutional review by the conservative majority in the supreme court.