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Edward B. Foley
Free & Fair is a collection of writings by Edward B. Foley, one of the nation's preeminent experts on election law.

Weekly Comment

Investing in Politicians to Boost Corporate Profits

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December 7, 2004

There is nothing wrong with the profit motive, and nothing wrong with corporations seeking to improve their bottom line. A sound economy runs on such economic activity.

But there is something wrong with businesses buying politicians as a way to boost corporate profits, rather than investing in new technology or otherwise improving productivity.

When businesses try to fleece the public by getting politicians to adopt "special interest" tax breaks and other laws favorable to their bank accounts but contrary to the public interest, the economy as a whole suffers. Inefficient enterprises get subsidized by government favoritism. Consequently, there is less aggregate wealth in society, even though the politician-purchasing businesses are themselves wealthier.

That is why, ever since Teddy Roosevelt, politicians seeking to promote the public interest rather than private avarice have supported banning corporate involvement in political campaigns. They know that business corporations spend money on election campaigns as a way to purchase influence over elected officials, so that they can reap the financial rewards of favorable legislation even when they are inefficient and cannot compete in the market.

In 1907, Congress passed the first federal law prohibiting corporate involvement in political campaigns. In 1947, Congress strengthened this law with the Taft-Hartley Act, so named because of the lead sponsorship of Senator Robert Taft, the grandfather of Ohio's current governor. Then, just two years ago, Congress strengthened this prohibition even further in the McCain-Feingold legislation, after reviewing reams of evidence that corporations had pried open loopholes in the then-existing law – and had used these loopholes to distort Congress's agenda and to divert Congress' attention from the public interest.

Based on this abundant evidence, the U.S. Supreme Court last December upheld the constitutionality of the new McCain-Feingold legislation and rejected the contention that Congress had adopted it solely as a means of protecting the incumbency of its members. As the Court itself observed, "[t]he evidence connects [this special-interest campaign spending] to manipulations of the legislative calendar, leading to Congress's failure to enact, among other things, generic drug legislation, tort reform, and tobacco legislation."

Given this history, it is with dismay that one reads – as the Columbus Dispatch reported last week – that the General Assembly of Ohio, rather than adopting its own version of the McCain-Feingold improvement, is considering a rollback of Ohio's prohibition on corporate campaigning equivalent to the Taft-Hartley Act.

Ohio is supposed to be in the midst of campaign finance reform. The state has been plagued with scandals caused by special interests seeking to exploit the same kind of loopholes that led to the enactment of McCain-Feingold. (For background on the recent campaign finance scandals in Ohio, read here.) Evidently, however, some think it may be possible to use a bill labeled "reform" as a smokescreen for removing a cornerstone of the century-old effort to protect the public interest from corporate cupidity.

There is simply no good reason to repeal Ohio's longstanding prohibition on corporate spending on election campaigns. The argument is sometimes made that disclosure should suffice, that corporations should be free to spend as much as they wish to support a politician's election as long as they disclose what they spend. But that argument, which may work for campaign spending by individuals and nonprofit groups, does not work for business corporations.

No dollar that a business corporation spends on an election campaign is designed, as an exercise of civic-mindedness, to promote the public good. Instead, it is intended to increase shareholder earnings. That's because, by law, everything that business corporations do is supposed to be done with the goal of increasing the return to shareholders. Again, there is no problem with corporations having this motive – it's just that we also need laws that protect the political system from being influenced by corporate activity that necessarily has this motive. (Otherwise, corporations will end up on the public dole even when they are economically inefficient and thus unworthy of government assistance.)

Thus, no amount of disclosure can remove the inherently corrosive effect of corporate spending on political elections. This spending inevitably is intended to purchase improper influence over an elected official and hence needs to be banned. (Since labor unions act in the economic interests of their members in a way parallel to corporate conduct in the interest of shareholders, it has long been believed that labor unions should be barred from engaging in election campaigns to the same extent as business corporations, and the U.S. Supreme Court recently upheld this parallel prohibition on labor unions when reviewing the McCain-Feingold law.)

Moreover, and most important, it is unnecessary to inject corporate money into election campaigns to make them run properly. There is – and will continue to be – plenty of money from individuals and nonprofit groups. Such campaign spending by citizens and civic groups may sometimes be criticized as being motivated more by self interest rather than public interest. But at least some of this spending will be undertaken by a genuine civic-minded desire to improve the public good – and all of it has the capacity to be so motivated, whereas none of corporate spending does.

Therefore, individuals and nonprofit groups must remain free to spend what they wish on election campaigns, and precisely because they must remain free to do so, it is unnecessary that for-profit businesses also be unfettered to engage in campaign spending. Full political freedom for flesh-and-blood citizens, as well as for groups of citizens who join together to achieve common political aims, exists without letting business corporations enhance shareholder earnings by purchasing influence over politicians.

Thus, whatever else the General Assembly of Ohio does regarding campaign finance before this year is out, it should not repeal the state's longstanding prohibition on campaign spending by business corporations.