Dialling for Dollars

Deborah Friedell

  • Corruption in America: From Benjamin Franklin’s Snuff Box to Citizens United by Zephyr Teachout
    Harvard, 376 pp, £22.95, October 2014, ISBN 978 0 674 05040 2

My mother once worked for a large American chemical corporation. When it made her an executive, all the usual things happened: she got a bigger office, and share options. She was no longer allowed to travel with more than a few other senior employees, to minimise the loss to the company if the plane went down. And among her new responsibilities, she was ‘invited’ to have ‘voluntary contributions’ deducted from her salary: payments to the company’s political action committee. A law prevented corporations from giving money to politicians directly, but it could be circumvented by having employees give their own money to the senators and congressmen, governors and state legislators who might be able to help the company – when it came to setting tariffs, for example, or drawing up environmental regulations.

None of this was unusual or secret. Shareholders expected the company to do everything it could, within the limits of the law, to get its way in Washington. And in recent years, as some of those limits have disappeared, shareholders have been able to expect even more to be done for them. In Corruption in America, Zephyr Teachout argues that until recently it was assumed that political donations threatened republican virtue, and so the courts embraced a ‘particularly demanding notion of corruption’. The diamond snuffbox that Benjamin Franklin brought back from France, a present from Louis XVI, troubled Congress: a gift wasn’t necessarily a bribe, but it could become one. Laws governing how much money individuals and organisations could give to politicians were prophylactics, designed – however imperfectly – to prevent corruption by limiting how much money could change hands. Then, in 2010, the Supreme Court ‘effectively gave wealthy individuals and wealthy corporations the right to spend as much money as they wanted attempting to influence elections and policy’. The result, as Teachout sees it, is that the United States has almost ceased to function as a representative democracy. Wealthy donors have become so powerful that ‘candidates and elected officials work for their donors as opposed to the public.’

Teachout, who was one of the leaders of Howard Dean’s campaign to win the Democratic nomination in the presidential election of 2004, teaches law at Fordham University. Last year, she ran against Andrew Cuomo for the Democratic nomination for governor of New York. In more than 90 per cent of American elections, the politician who raises the most money wins. Teachout raised around $800,000; Cuomo raised more than $40 million. She hadn’t expected to beat him: she ran to needle the party, and to draw attention to the subject of campaign finance reform. Until the country fixes the way it funds elections, she doesn’t think it’ll be able to fix much else.

In 2008, before Hillary Clinton lost the Democratic nomination to Obama, a conservative group called Citizens United (it describes itself as ‘an organisation dedicated to restoring our government to citizens’ control’) produced Hillary: The Movie, a ninety-minute profile of a psychopath out to destroy America. It’s not much of a film, just old news footage and clips of pundits describing the Hillary they know: a ruthless crypto ‘European socialist’ who would transform American healthcare into something more ‘like what citizens in the UK and Canada experience’. Citizens United wanted to broadcast Hillary: The Movie through a video-on-demand service, but they were blocked by the Federal Election Commission because of a law prohibiting corporations from broadcasting campaign commercials within thirty days of a presidential primary. Citizens United sued, claiming that since Hillary: The Movie was a film and not a commercial, they should be allowed to show it whenever they liked. Before the case made it to the Supreme Court, what was at stake seemed to be awfully narrow: was Hillary: The Movie actually a movie? But the court didn’t rule narrowly. Instead, it held that it was unconstitutional for the FEC to prevent Citizens United – or indeed almost any association – from spending its own money (as much as it wanted) on political campaigning (whenever it liked). After all, what is a political campaign but an attempt to communicate, ergo a kind of speech, and isn’t free speech protected by the constitution? According to the court, the government shouldn’t be preventing the ‘voices and viewpoints’ of any American or group of Americans ‘from reaching the public and advising voters on which persons or entities are hostile to their interests’. There would no longer be any limit to the amount of money a corporation could spend in furtherance of political ‘speech’.

One barrier, or so it seemed, was that corporations still couldn’t give money directly to a candidate. And individuals were still prevented from giving unlimited sums of money to particular politicians (at the moment, for federal elections, a person can only give up to $2600 per candidate). And so a new kind of vehicle to collect and spend campaign contributions – the SuperPac – came into being. There is no limit to the amount of money a SuperPac can spend, so long as the money is spent ‘independently’ of particular candidates or parties, even though in practice SuperPac money is scarcely distinguishable from money given directly to a candidate. The Restore Our Future SuperPac to support Mitt Romney’s presidential campaign in 2012, which raised more than $150 million, was technically considered to be working independently of Romney, because it claimed that it was, even though it was founded by Romney’s lawyer. Most of the Restore Our Future millions paid for TV advertisements: the only noticeable difference between a Romney campaign ad and a Restore Our Future ad is that at the end of a Restore Our Future spot (‘How many jobs did Barack Obama create as a community organiser? … Mitt Romney turned around dozens of American companies and helped create thousands of jobs’), an attractive male voice says: ‘Restore Our Future is responsible for the content of this message.’ In 2011, in order to show off the ridiculousness of campaign finance laws, the comedian Stephen Colbert got approval from the Federal Election Commission to form his own SuperPac (Americans for a Better Tomorrow, Tomorrow), raised more than a million dollars from his fans, declared he was running for president of the United States of South Carolina, then handed control of his SuperPac over to ‘this guy I barely know’, the co-executive producer of his TV show, Jon Stewart. Rechristened as The Definitely Not Co-ordinating with Stephen Colbert SuperPac, it paid for some TV ads (one compared Romney to a serial killer), and the rest of the money was given to charity, though it could have been spent on ‘any lawful purchase’: shoes, vacations, first editions. Sarah Palin uses SarahPac to pay for family holidays, and to support American publishing: she gave at least $63,000 to HarperCollins to buy up copies of her own memoir.

Obama has boasted that his huge base of ‘small donors’ – the four million people who gave him $200 or less – ‘changed the way campaigns are funded’. At Grant Park in Chicago the night he was first elected president, he said that his campaign had been ‘built by working men and women who dug into what little savings they had to give $5 and $10 and $20 to the cause’. But in 2008, small donors supplied just 30 per cent of Obama’s campaign funds (in 2012, it was 28 per cent). And many of Obama’s most important ads weren’t even bought by his campaign, but by the SuperPacs founded to support him. One of them, Priorities USA Action, was run by Harold Ickes, Bill Clinton’s former deputy chief of staff. ‘It’s hard, fundraising,’ Ickes told the New York Times. ‘You have to raise it in big chunks. Of the $200 million we raised, $95 million of that came from five sources.’ And in the 2016 presidential election, money raised from all the small donors in America will be of little consequence if the billionaire businessmen Charles and David Koch make good on their promise to spend $900 million to help the Republicans.

Citizens United divided the Supreme Court along the usual lines. All the justices appointed by Reagan or the Bushes were for it. The rest weren’t. Justice Stevens, appointed by Gerald Ford, once described himself as a ‘judicial conservative’ who only appeared liberal because of the right-wing judges who had come after him, each ‘more conservative than his or her predecessor’. He wrote in his dissent that Citizens United might cause ordinary Americans to ‘lose faith in their capacity, as citizens, to influence public policy’ – no kidding. What happens when a legislative decision mainly affects people who don’t contribute to political action committees, or who can’t afford to lobby for their own interests? You can guess. Banks and credit card companies spent more than $40 million lobbying for the Bankruptcy Abuse Prevention and Consumer Protection Act, which has made it harder for Americans to discharge their debts. Meanwhile, capital gains taxes are as low as they’ve been since the Great Depression. A 2009 study showed that for every dollar a company spent lobbying for targeted tax benefits, the expected return was between $6 and $20. On one bill, the American Jobs Creation Act (despite its name, really just a corporate tax cut), researchers from Washington and Lee University and the University of Kansas calculated that ‘the return on investment to lobbying’ was 22,000 per cent.

Here’s an example of the way political spending affects a marginal, not remotely sexy issue, which nevertheless ends up costing Americans more than $2 billion a year. It’s an issue that I didn’t realise had anything to do with politics until I started working in England, and kept trying to get a recommendation for an accountant, and discovered that none of my friends seemed to use one. In the US, even people with very simple financial arrangements – say, a single woman with no dependents whose only income comes from her wages – often pay several hundred dollars a year for help with filling out their tax returns (there are more than a million professional tax preparers in the US), or spend around $60 a year on computer programs (my family uses one called TurboTax) that guide them through the forms. This is because American tax returns are long and bewildering, and people are scared of getting into trouble by screwing them up. My father volunteers at a local library to help people complete their forms, and even though he’s a law professor, he still sometimes struggles with parts of them. A New York Times report (‘Tax Preparers Targeting Poor with High Fees’) found that most of the poorest Americans are unable to complete the forms themselves, and so are routinely ripped off by commercial tax preparers, who often don’t do the job properly. Doing my British taxes didn’t take me any time at all: HM Revenue and Customs knew how much I earned (as the IRS knew how much I earned in the US), and told me how much to pay. If I wanted to challenge them, I could, but there was no need. Reagan promised to make tax forms easier, as did Obama. The IRS knows how much most people need to pay: why doesn’t it just give people pre-filled returns?

In 2005, the agency that collects state income tax in California began a pilot programme called ReadyReturn (later called CalFile), a voluntary, ‘simple, easy-to-use service that offers free, direct to government e-filing’, similar to the British system. It saved the people who used it money and time, and was projected to save the state half a million dollars a year in administrative costs, since its tax officers wouldn’t have to spend months correcting the mistakes that people make when they do their taxes themselves. The programme was so popular that both Republicans and Democrats wanted to take the credit for it. What could go wrong? Enter Intuit, the Silicon Valley software company that owns TurboTax. During the 2006 race for state controller (the state’s chief financial officer, who oversees tax collection), Intuit funnelled a million dollars to the candidate who said he opposed ReadyReturn because it would hurt ‘private enterprise’ – that is, Intuit. The company also gave more than a million dollars in campaign contributions to the state’s legislators, who promptly killed off ReadyReturn. The state government had to change before the tax board could bring the programme back. More than a million Californians now use it. So why not expand it to the rest of the country?

A report from National Public Radio and the news organisation ProPublica suggests that Congress has consistently blocked bills that would make it easier for people to file their federal taxes because of political donations from commercial tax preparers, particularly Intuit, which in only five years spent more than $11 million lobbying federal politicians. In all, according to the Sunlight Foundation, commercial tax preparers have spent more than $28 million lobbying Congress to oppose any changes that might cut into their business. So far they’ve prevailed because the people who would benefit most from having easier tax forms can’t afford to do their own lobbying. But there’s no need for a congressman even to meet with a lobbyist for the tax preparers: he knows – because this is the way the system works – that if he opposes legislative changes that might hurt Intuit, he’ll attract their campaign contributions. According to Teachout, American laws against bribery have never been more permissive: ‘there is only one kind of thing that is clearly corrupt: openly asking for a deal in exchange for a specific government action.’ As long as there’s no explicit acknowledgment of what a political donation is supposed to achieve, everyone is doing exactly what they’re supposed to be doing. In early February, the Pennsylvania state treasurer, Rob McCord, pleaded guilty to federal corruption charges after admitting that he had told two potential contributors to his gubernatorial campaign that he ‘could make things difficult for them’ if they didn’t give him money. A lot of Pennsylvanians were sympathetic to him: McCord admitted that he ‘stepped over the line’, but who knew where the line was? Local reporters wondered whether McCord had behaved any differently from the other candidates: was his only mistake that he had made explicit what was supposed to be implied?

Politicians take contributions from Intuit because they need the money. There’s a scene in the fourth season of The Wire when Thomas Carcetti, would-be mayor of Baltimore, complains that he’s spending too many hours in a room with just a phone, ‘dialling for dollars’. He doesn’t enjoy sucking up to rich people – ‘I can’t do it anymore. I hate it. I hate it more than anything. I fucking hate it … Oh Jesus. I fucking hate this’ – but if he doesn’t raise $30,000, he won’t be able to buy any TV spots for the last two weeks of his campaign. He gets the money, he wins the race. But he could never have taken on the real mayor of Baltimore, Stephanie Rawlings-Blake, who raised $1.9 million in 2011, enough to blanket the airwaves with her campaign ads. ‘She’s a great mother, a great wife, and a person I’m proud of every single day,’ the mayor’s mother assured everyone in central Maryland who watched TV. Between 1974 and 2012, the average amount it took to run successfully for re-election to the House of Representatives grew from $56,000 to $1.7 million. Winning senators spent much more: an average of $10.5 million each. The 2014 midterm elections were the most expensive in American history at $3.7 billion overall. More than a hundred million dollars was spent on the 2014 North Carolina Senate race alone. And as the amount of money required to win an election increases, politicians are forced to spend more time raising it – by most estimates from a third to half of their working hours. Once that would have seemed incredible, but last summer, an internal memo from the office of the Georgia Democratic Senate candidate Michelle Nunn was leaked to the National Review: Nunn’s staffers thought she needed to spend ‘70 to 80 per cent’ of her time raising money.

One of the leaders of the campaign finance reform movement is Lawrence Lessig, who teaches law at Harvard and created a ‘SuperPac to end all SuperPacs, including this one’ to raise money for sympathetic congressional candidates. He supported Teachout in the race against Cuomo, and has proposed a system he calls ‘Democracy Vouchers’: the state would give every American a $50 tax rebate that could be donated to any political candidate, or spread around. Politicians would get the money only if they agreed not to accept large donations from other sources. (On her website, Teachout supports public matching funds. Already in New York City, for example, for every dollar an individual gives a political candidate, the city gives $6, up to $1050 a donor. In exchange, the candidate has to agree to spending limits.) But, whatever the arrangement, public financing is phenomenally unpopular: Americans dislike the idea of their taxes paying for campaigns. And even people who could never afford to write their favourite politician a cheque think that trying to limit the size of political contributions somehow lessens their freedom: Big Brother has no place telling Americans how to spend their money.

Lessig argues that without public financing, what donors are explicitly buying with their contributions is access, and access to power is often power enough. In his manifesto, Republic, Lost, he quotes Paul Simon, a former senator from Illinois, to explain how it works:

If I got to a Chicago hotel at midnight … and there were 20 phone calls waiting for me, 19 of them names I didn’t recognise and the 20th someone I recognised as a $1000 donor to my campaign, that is the one person I would call. You feel a sense of gratitude for their support. This is even more true with the prevalence of much larger donations … Because few people can afford to give over $20,000 or $25,000 to a party committee, those people who can will receive substantially better access to elected federal leaders than people who can only afford smaller contributions or cannot afford to make any contributions.

A congressman can’t become an expert on all voting issues, not least because so much time is spent fundraising. A lobbyist who gets to explain one on one, maybe over lunch, why a particular bill will hurt that congressman’s district, can be more persuasive than hundreds of letters from anxious constituents, which the congressman doesn’t have time to read. Walt Minnick, a former congressman from Idaho, told the radio programme This American Life how easy it was to be swayed by donors: ‘You may end up voting the wrong way because you haven’t fully understood both sides of the story, even if you do have integrity.’ One issue he faced was how to regulate payday lenders: ‘They’re a big political contributor in Washington. And so that’s an example of – there weren’t any people who were applying for payday loans that came in to see me. The consumer side of that doesn’t contribute a nickel.’

Political spending doesn’t only affect the way politicians think about the issues, but also which issues they’ll think about. Lessig refers to a report from the Huffington Post: ‘the most consuming issue in Washington – according to members of Congress, Hill staffers, lobbyists and Treasury officials’ – wasn’t the war in Iraq, but debit card fees, the little commission that banks and credit card companies take every time a customer swipes one of their cards. The nation’s largest retailers, Walmart among them, wanted to limit the fees; the largest banks and credit card companies didn’t. One lobbyist admitted that there had ‘been more lobbying – there’s been more hours and minutes spent on Capitol Hill discussing interchange reform – than there has been talking about a shutdown of the government’. Many politicians claimed not to be happy about this, but they wouldn’t do anything about it because they wanted to keep getting campaign contributions from banks and retailers.

Obama has said he favours a constitutional amendment ‘that would allow us to actually regulate campaign spending the way we used to, and maybe even improve it’ – but there’s little chance of such an amendment making it through state legislatures or the House anytime soon. The unavoidable irony is that if the campaign finance reform movement is to succeed, it’s going to need more and better lobbyists, and a ridiculous amount of money.