[House Hearing, 111 Congress] [From the U.S. Government Printing Office] DEFINING THE FUTURE OF CAMPAIGN FINANCE IN AN AGE OF SUPREME COURT ACTIVISM ======================================================================= HEARING before the COMMITTEE ON HOUSE ADMINISTRATION HOUSE OF REPRESENTATIVES ONE HUNDRED ELEVENTH CONGRESS SECOND SESSION ---------- Held in Washington, DC, February 3, 2010 ---------- Printed for the use of the Committee on House Administration Available on the Internet: http://www.gpoaccess.gov/congress/house/administration/index.html DEFINING THE FUTURE OF CAMPAIGN FINANCE IN AN AGE OF SUPREME COURT ACTIVISM DEFINING THE FUTURE OF CAMPAIGN FINANCE IN AN AGE OF SUPREME COURT ACTIVISM ======================================================================= HEARING before the COMMITTEE ON HOUSE ADMINISTRATION HOUSE OF REPRESENTATIVES ONE HUNDRED ELEVENTH CONGRESS SECOND SESSION __________ Held in Washington, DC, February 3, 2010 __________ Printed for the use of the Committee on House Administration Available on the Internet: http://www.gpoaccess.gov/congress/house/administration/index.html ---------- U.S. GOVERNMENT PRINTING OFFICE 55-410 PDF WASHINGTON : 2010 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, Washington, DC 20402-0001 COMMITTEE ON HOUSE ADMINISTRATION ROBERT A. BRADY, Pennsylvania, Chairman ZOE LOFGREN, California, DANIEL E. LUNGREN, California, Vice-Chairwoman Ranking Minority Member MICHAEL E. CAPUANO, Massachusetts KEVIN McCARTHY, California CHARLES A. GONZALEZ, Texas GREGG HARPER, Mississippi SUSAN A. DAVIS, California ARTUR DAVIS, Alabama Jamie Fleet, Staff Director Victor Arnold-Bik, Minority Staff Director DEFINING THE FUTURE OF CAMPAIGN FINANCE IN AN AGE OF SUPREME COURT ACTIVISM ---------- WEDNESDAY, FEBRUARY 3, 2010 House of Representatives, Committee on House Administration, Washington, DC. The committee met, pursuant to call, at 1:53 p.m., in Room 1310, Longworth House Office Building, Hon. Robert A. Brady [chairman of the committee] presiding. Present: Representatives Brady, Lofgren, Davis of California, Davis of Alabama, Lungren, McCarthy, and Harper. Staff Present: Jamie Fleet, Staff Director; Tom Hicks, Senior Elections Counsel; Janelle Hu, Elections Counsel; Jennifer Daehn, Elections Counsel; Matt Pinkus, Professional Staff/Parliamentarian; Kyle Anderson, Press Director; Joe Wallace, Legislative Clerk; Daniel Favarulo, Legislative Assistant, Elections; Darrell O'Connor, Professional Staff; Shervan Sebastian, Staff Assistant; Peter Schalestock, Minority Counsel; Karin Moore, Minority Legislative Counsel; Salley Collins, Minority Press Secretary; and Mary Sue Englund, Minority Professional Staff.
fb deg. The Chairman. Good afternoon, everybody. The Committee on House Administration hearing on Defining the Future of Campaign Finance in an Age of Supreme Court Activism will come to order. In his State of the Union speech in 1905, Republican President Teddy Roosevelt said, ``All contributions by corporations to any political committee for any political purpose should be forbidden by law.'' On January 21, 2010, in a single sweeping opinion, the conservative majority of the Supreme Court threw out nearly 100 years of laws and destroyed decades of commonsense legislation and regulations designed to adhere to that basic principle. Imagine Wall Street bankers creating political campaigns to target Members as we debated the TARP plan. Does anyone think that giving the Gordon Gekkos of the world access to corporate funds to wage political campaigns will make our democracy any stronger? I doubt it. Imagine foreign investors waging political campaigns during the negotiation of American trade policy. I am hopeful that we will be able to reach across party lines to ensure that, at a minimum, corporations, particularly those that are foreign controlled, cannot exert undue influence on American elections. Strengthening disclosure requirements, protecting the interests of shareholders, and safeguarding against foreign influence are three areas where we can start. Many Members of Congress have already acted, including Mr. Capuano, a member of our committee, who introduced the Shareholder Protection Act. Mr. Capuano's bill requires corporate CEOs to disclose to their investors or shareholders how corporate treasury funds are being spent to influence elections. In his State of the Union Address last week, President Obama said that the Supreme Court decision will open the floodgates for special interests, including foreign corporations, to spend without limits in our elections. At least one jurist seems to believe that this is simply not true. I say today to Justice Alito, prove it; prove that Citizens United will not lead to an election system that is, in the words of the President, ``bankrolled by America's most powerful interests, or worse, by foreign entities''. Today we begin the process. This is the committee of jurisdiction over Federal elections. So, make no mistake, any law or legislation that defines Federal elections in the wake of Citizens United will be considered by this committee. This is our responsibility, and we intend to meet it. To this end, this committee will conduct hearings that will allow for a full airing of all viewpoints. We understand that in the intersection of free speech and fragile election law, opinions diverge and passions flair. This hearing will therefore not be constrained by a 5-minute rule. Members will be given an opportunity to fully air out their concerns, but the committee will not, in its relaxation of the rules, let it get so relaxed. We respect all opinions, but we are also aware that at the end of the day our constituents expect us to act. I would now like to recognize my friend from California, Mr. Lungren, for an opening statement. Mr. Lungren. Thank you very much, Mr. Chairman. We have worked on a bipartisan basis through this Congress. I knew there would be a point in time when we might reach more contentious issues, and I think that point has been reached. The Chairman. But we are going to do it with a smile on our face. Mr. Lungren. We shall. We shall. I might just start out by saying the first amendment is an inconvenient truth. The Constitution is a series of inconvenient truths. They have within them various principles articulated that establish the relationship of individuals to the Federal Government, and sometimes they do not allow us to do things we might feel we want to do. But the test of time has reached a conclusion that, by and large, we were served well with it. This hearing comes amidst a flurry of bills introduced in response to the Supreme Court's recent decision in Citizens United v. Federal Election Commission. We still await a promised legislative proposal from the chairman of the committee charged with electing Democrats to the House and the former chairman of the Senate counterpart. In the meantime, let us consider some of the fundamental issues at stake. The first amendment states very simply, ``Congress shall make no law abridging the freedom of speech.'' Let me say that again. ``Congress shall make no law abridging the freedom of speech.'' Mr. Chairman, we know that historically the most sacred kind of speech for the Founders was political speech; and even though the Supreme Court for decades, in my opinion, has spent a lot more time dealing with questions of nude dancing and other kinds of issues that probably never were contemplated by our Founding Fathers, the essential part is, as Justice Kennedy said in his majority opinion, ``The essence of the protected speech in the first amendment is political speech,'' and that ought to be our focus. Our government was not organized to quash dissent, minority views, or respected interests of various kinds, but, rather, to make those interests compete against one another in the court of public opinion. And frankly, it was not just to compete but to compete robustly, to have the clash of ideas presented as the way that we would best come to conclusions as to how we would order ourselves under the Constitution, not say there will be disfavored speech or disfavored individuals or disfavored groups. To attempt to root out free speech and to ration the arguments and voices of persons and entities within this country by controlling the timing, the manner, the character, and mechanisms of political speech defies our tradition rather than defines it, defies our Constitution, defies our system of ordered liberty, and I would argue it defies common sense. It is, in my judgment, judicial activism to read words into the Constitution that do not exist or to ignore words that are there. Taking the words of the Constitution at face value is not judicial activism, it is giving effect to the words or the work of our Founders. It is this long-held and long-revered truth that the Court, in my judgment, affirmed in the decision in Citizens United. Far from being the undoing of our system of free and fair elections--dangerous hyperbole that I have heard from a number of this decision's critics--this decision was the affirmation of one of the first principles of our democracy, that as Madison wrote during the height of the debate surrounding the Alien and Sedition Acts, the ``right of freely examining public characters and measures and of communication is the only effectual guardian of every other right.'' What I find most troubling in the midst of this debate is the penchant or an apparent indifference by some to speech rationing and speech restrictions. As far back as 1976, the Supreme Court has worried that limits on political spending allow the government to restrict the speech of some elements of our society in order to enhance the relative choice of others. Mr. Chairman, I believe the government should never be in the position of deciding what voices are worthy of being heard. I hear many say, well, the answer to all of our problems is more restrictions under campaign finance reform. I happen to remember as a student in college that there was somebody called Clean Gene. His name was Gene McCarthy. He rallied the young people of America in an effort to deal with the question of an unpopular war. President Lyndon Johnson was President of the United States. Most people expected that he would basically sail to victory in the next election, but Gene McCarthy began the ``children's crusade'' against him. Interestingly enough, Eugene McCarthy was backed by five multimillionaires to provide the essence of his ability to speak. Stewart Mott gave him a huge amount of money. Today, Mr. Mott would go to prison for giving that amount of money to any individual. And yet it was Eugene McCarthy who brought down Lyndon Johnson. I remember studying at the library at the University of Notre Dame when all of a sudden I heard students running, running through the floors yelling at the top of their lungs. And what they were running about is that President Johnson had just announced he was not going to stand for reelection. Now, Eugene McCarthy was not the nominee. His position was later taken essentially by Robert Kennedy; and, unfortunately, we had the tragedy of the assassination of Robert Kennedy in southern California. But the fact of the matter is the unseating of a President, who was leading us at that time in an unpopular war, was effectuated by a lone voice in the United States Senate who was allowed to multiply his impact because he was assisted by funding from a number of individuals. Now, some people interpret that history differently than I do, but I have always been struck by the irony of that. Eugene McCarthy could not become the candidate he was in 1968 today because he wouldn't have that voice. During the oral arguments in this case that we are talking about here today, the Deputy Solicitor General went so far as to suggest that laws passed by Congress would allow the government to ban books. I happen to think that is essentially when the Supreme Court began to realize what they had in front of them. When the Deputy Solicitor General said, yes, if you had this book put out by a corporation, 500 pages, and at the end it said vote for or against someone, would the government be able to ban that book? And the answer was yes. Have we gone so far that we believe that banning books are allowed under the first amendment? As Justice Kennedy powerfully wrote, ``When government seeks to use its full power, including the criminal law, to command where a person may get his or her information or what distrusted source he or she may not hear, it uses censorship to control thought.'' Mr. Chairman, many say they want to stop corruption and the appearance of corruption. I, too, support these worthy goals. But quashing political speech is not the way to accomplish that. That is, frankly, in the opposite direction of where the Constitution directs us. The most effective way is to have more information, more openness, more transparency, and more accountability in the way we do the people's business here in the U.S. Congress. ``Congress shall make no law abridging the freedom of speech.'' Mr. Chairman, I hope that, whatever we do, we will not abridge that freedom. Let's not be tempted with abridging that freedom. Let's make no law abridging, constricting, or shrinking political speech and the societal spaces in which it thrives. Let us instead support, strengthen, and encourage speech, that very same freedom we are using here today in these important deliberations. And so, Mr. Chairman, I would say I look forward to hearing from our panel of witnesses. I think you have given us an array of distinguished witnesses, and I think we are going to engage in some healthy debate under the concept of free political speech. Thank you, Mr. Chairman. The Chairman. Thank you. Ms. Lofgren. Ms. Lofgren. Thank you, Mr. Chairman. I think you are right. We don't see this eye to eye. I will say that, in reading the majority opinion in the Citizens United case, I was really shocked by the lack of judicial restraint and the departure from stare decisis, really just defining that, since we don't agree, would ditch the precedent. It is really not something you usually see in reading Supreme Court decisions, and it is really a case of very strident activism, I think. I am concerned about the impact on free elections. I was interested that a former Justice, Sandra Day O'Connor, who recently, I just think yesterday, indicated that she is concerned that corporate money will influence not only the outcome of legislative and executive races throughout the country but has expressed concern that the rush of corporate money will be problematic--and this is a quote--``for maintaining an independent judiciary''. And certainly that is of concern. I would note that the first amendment really is first because it is probably the most important, and yet we do sometimes regulate speech. For example, we prohibit Federal employees from doing certain political activities because of the concern that the mixing of Federal employment and the political spectrum might taint both services. We prohibit illegal aliens from contributing to political campaigns; and no one has said, well, what about their free speech rights if they are here? The remedy to the free speech of illegal aliens would be the speech of legal residents or U.S. citizens. So it is simply not correct to say that we never regulate in the area of speech. I think it is important to note that when the Founders formed this great union, the idea of corporate speech was really quite foreign to what they were thinking of when they wrote the Constitution. But, having said all of that, I recognize that we have a Court decision. I may agree with Justice Stevens' dissent a lot more than I do with the majority opinion, but that really is not what is before us. We have the Court's decision. There is no appeal from the Court's decision. And so I read the decision looking at what can be done, given the new legal realities that we face? It seems to me that the Court really did invite certain things. They embrace disclosure as a remedy to whatever problems might be attendant to the majority decision, and so I think we need to take a look at our disclosure laws and make sure that they are really up to date. The Court spoke with great favor on the Internet and the ability to instantly let everyone know who was saying what, and I think that bears examination. There was more than one reference to the role of corporate democracy and what remedy shareholders might have if they were concerned about the speech of a corporation. And, actually, let's be honest, corporations are people only as a fiction. It is really the shareholders who own it, and yet the shareholders don't have a say in what is happening. So I think we need to think through how do we provide mechanisms for shareholders to be fairly dealt with? And I am hoping that the witnesses will accommodate that. Corporations are entirely creatures of law, and so I think we need to think through what of the various elements that we grant to corporations are important relative to this new freedom that they have in political advertising. I mean, it is worth noting that if you added up all that was spent on congressional elections in the last cycle--and this is information that I got off the FEC--the average amount for winning a House seat in the 2008 cycle was $1.4 million. During that same cycle, ExxonMobil had $80 billion in profits that same cycle. So if ExxonMobil used just 1 percent of their profits on political activity, it would be more than all the 435 winning congressional candidates spent to win their races. I mean, the scale of what one corporation could do versus what every candidate could do is pretty stunning. So I think we need to take a look at those tax issues, corporate law issues. And I also hope that we can take a look at a bill that our colleague, John Larson, has introduced that would allow an opting out of this whole situation, where, on a voluntary basis, you could have public funding of campaigns. That is not going to be the only answer to this situation, but I think it is time to throw that whole concept into the mix of this discussion, and I hope some of the witnesses can discuss that as well. I want to thank you, Mr. Chairman, for holding this hearing. I think it is extremely important that we pay attention to what the Court has wrought and that we avail ourselves of the invitation the Court had in its decision to remedy whatever holes have been created from the new law. With that, I yield back. The Chairman. I thank the lady. Mr. McCarthy. Mr. McCarthy. Thank you, Mr. Chairman. I am actually very eager to hear from the witnesses today. As you know, the room is actually packed, and it is nice to see. One thing I would say, in listening to the opening statements, as my colleague from California also brought up, public financing, I hope we care as much about the taxpayer who would be that shareholder as we conveyed from the other side of how much input the shareholder would have from corporations. In reading what the Supreme Court wrote, it talked more also than just corporations. It talked about free speech. But it also talked about the idea I hope comes out within here that we are able to hear about, what about those members of unions that don't have the say? A shareholder can even sell the stock. A union individual would have to quit their job if they didn't like the way the money was spent. So I hope we get a very fair treatment to all taxpayers and to all citizens out there and we keep the First Amendment in the process as we go through and we actually find common sense. When you go out and listen to Americans today and they see what transpires in back rooms that has been happening with different bills through here, they are frustrated. I like the idea of what the Supreme Court said about transparency. I like the idea that everybody can see what is happening on the table, that the American public, I always trust them, as long as they have the opportunity to see what is all being done and let them make the judgment at the end of the day. So I yield back, Mr. Chairman. The Chairman. I thank the gentleman. Mr. Capuano. Mr. Capuano. Thank you, Mr. Chairman. Mr. Chairman, generally, I don't do comments in the beginning, but I feel today it is important that we do. Though I respect some of the comments that were made, I thought I was listening to Justice Douglas about freedom of speech. And I just wish that if that is the only thing you will agree with him on, that is wonderful, but I would hope that you would agree with Justice Douglas in everything else he ever wrote as well, a fine, wonderful Justice. At the same time, we have always had some limitation on freedom of speech, and I would suggest that what we are doing now--what I am doing now--is trying to search for a way that is a reasonable, thoughtful, legal, constitutional way to do that. And I understand fully well that that is what we do here. We try to find ways to do what we are trying to accomplish without breaching the Constitution. And if the Court has said that--in a 5-4 decision, if I remember correctly--so be it. So I think, for me, I am searching for other ways to give the American people what I think they really want, which is an unfettered opportunity to make their own decisions on a level playing field. And I would argue that this is only one aspect of it. I think we need to talk about other things. I like some of the transparencies. I would love to get rid of the 527s, and I invite anybody to work with me to do that. If we can't get rid of them because, again, they might be free speech things, for me, I have no problem with an ad going up saying, Mike Capuano is Terrible, brought to you by the Exxon Corporation--let my voters know who is bringing it--as opposed to, Mike Capuano is Terrible, brought to you by Americans for a Better World, funded by the Exxon Corporation. I think those are the things we need to talk about, and those are things we need to work on. And I look forward to doing so over the next couple of months with people who are serious about this. I will tell you that this campaign finance bill that we passed a couple of years ago, I was never thrilled with a lot of these things. We talked a good game. But one of the worst things we did was increase the amount of money that individuals can give. I don't know, maybe I am the only person here who has a hard time finding many people who can donate $2,400 at a clip. And that is only part of the game because it is really $4,800, we all know that, and if they have a spouse, it is really $9,600. Now, I have some constituents who can do that, and some do, but I hate asking people for $10,000. And I would argue that we should be looking at ways to get rid of that as well. I know that that is a little bit beyond today's scheme, but really what I think today is talking about is trying to find a way to get the election system back in the hands of the average voter so they can make a thoughtful, level-playing-field decision, not just on me but on all of us and on issues. So I am going to try my best to avoid--which is going to be hard to do, of course--to avoid some of the high-flying commentary about freedom of speech and everything else. And I actually agree with Mr. McCarthy's comment about unions. I am looking for ways to get union members to have a say in that manner. I think that is a fair commentary, and I would love to work with you or anybody else to try to do so. I am not trying to stop people from being involved. Corporations were always involved. The question is, to what degree? And the same thing with unions or anybody else. What I would love to do is get everybody out of it, go to public financing and let that decide it, let the taxpayers who have to rely on us pay for it. I know that is probably beyond the scope of what we can do, but that is the best way to get rid of everybody, get out of this business, and let the voters have an equal say on everything. Nonetheless, I actually look forward, and I hope that we can get beyond some of the political rhetoric of all of us--we all engage in it, me, too--to get to a point where we can actually maybe try to work on trying to find some ways to make this work. And, again, I understand if somebody thinks, forget it, just total free speech, everybody can do whatever they want with as much money as they want. I respect that opinion. I don't agree with it, but I respect it. I think it is reasonable one, a thoughtful one, but just say it. If that is what you want, a free for all, anybody with the money can put as much money as they want on the table, fine, but then don't pretend that somehow you want to level the playing field. It is not a level playing field. That is what I am looking for, is reasonable, thoughtful ways to do it in reaction to a Supreme Court decision, which I disagree with, but it is not the first Court decision I have disagreed with and it won't be the last, regardless of how the Court is made up. And to try to find ways to do so legally, thoughtfully, with transparency, that hopefully we can all find a way to work together. I don't know that we can; and, if we can't, I will be happy to do my best to then defeat those people who don't agree with me. But that is what the system is all about. I hope that none of us have to hang a sign underneath our nameplates, Brought to You by Exxon. I won't be hanging that particular nameplate, because I don't think they would probably be donating a whole lot to me, but I do expect that maybe I will be brought to you in spite of Exxon. With that, Mr. Chairman, I yield back. The Chairman. I would like to thank the gentleman and clear the record: Mr. Capuano is not a terrible guy. Mr. Harper. Mr. Harper. Thank you, Mr. Chairman. So far, the discussion of Citizens United has been filled with much rhetoric about catastrophe. There have been dire warnings about foreigners taking over our elections and corporations flooding our airways with political advertisements. What there has been relatively little discussion of or adherence to are actual facts. That is what I hope we will hear from our witnesses today and what I would like to talk about for a few minutes. First, let's dispense with the oft-used talking points that Citizens United changed a century of American law. The law that is a century old bars corporations and unions from contributing to candidates out of their general funds. That law still exists in full force today, and Citizens United did nothing to change that or disturb that. Next, let's suspend with the talking points that the Citizens United decision will allow foreign corporations to spend without limit in our elections and that American elections will be bankrolled by America's most powerful interests or, worse, by foreign entities. Existing statutes and regulations, undisturbed by Citizens United, address this. As we sit here today, it is illegal for any foreign national to directly or indirectly make contributions or expenditures in any American election or to direct the decisions of any corporation or union's election-related activities. We have also heard talk about banning entities that employ lobbyists from making political expenditures. That seems to be saying that if you exercise your first amendment right to petition the government for a redress of grievances, then you must sacrifice your first amendment right to speak on political issues. We have heard that some corporations are so close to the government or look so much like the government that they should be treated like they are the government and not allowed to speak. Do not mistake the breathtaking scope of this claim. The examples cited include Wal-Mart and health insurers. And, of course, we have heard that the way to solve all of these problems is to use taxpayer funds to pay for congressional campaigns. All of these points lead in one direction, toward the government deciding who can speak, who can't speak, and how much they can speak. That is exactly the position our Founders rejected when crafting the first amendment, and it is exactly the position the Supreme Court rejected in Citizens United. Another claim that we hear often these days is that Citizens United was an exercise in judicial activism. Ignoring words in the Constitution is judicial activism. Reading words into the Constitution that aren't there is judicial activism. It is not judicial activism to decide that a law banning speech is invalid in the face of constitutional language that ``Congress shall make no law restricting the freedom of speech.'' It is obvious that many individuals, especially on the Democratic side, disagree with the Supreme Court's decision, but to resort to misleading and overblown rhetoric does force us to wonder how much of the response is based on a policy disagreement and how much is based on a desire to manipulate the rules to benefit their own candidates. For example, they do not seem concerned about the ability of labor unions to spend freely to support or oppose candidates or show any interest in subjecting unions to the same kind of restrictions they would place on corporations. As we move toward considering legislation, I encourage this committee to take great care that its work is not designed to benefit either political party over the other. Thank you, and I reserve the balance of my time, Mr. Chairman. The Chairman. I thank the gentleman. Mrs. Davis. Mrs. Davis of California. Thank you, Mr. Chairman. I really came to hear the panel. I appreciate you all being here. I didn't realize my colleagues were reading speeches today. There are a few things I just wanted to mention then, since it looks like I am going to have to go lead my own subcommittee a little before 3 o'clock. I think the basic questions really are, where are the voters in this? I think what we always want to do is encourage involvement and not turn people away nor create apathy. So I think that is an issue that we want to think about as we do this and how we continue to engage them. The other issues, of course, are around disclaimers, which people have mentioned. What is the most efficient way that one can have a disclaimer? Because I think asking people to go to another Web site is probably not realistic. People are not going to do that. How much can you get into a disclaimer that is fair, that really represents what is happening? Do we need CEOs to be there saying, I approve this ad, and then you have a candidate perhaps, in some cases, doing the same. That leads to the other question of coordination. The courts threw out, as I understand it, any definitions in terms of coordination. Does that mean that elected officials can call up a CEO and say, hey, why don't you guys go get an ad out for me? I would like that. What is happening then? Where is that line going to be drawn? I think that is a very important one. The other thing that has been mentioned in terms of unions, and I think that we need to look at the history in terms of the ways that some organizations, some unions have handled this, because they have created a wall of separation in some cases. Someone who chooses not to avail themselves of the benefits of the union and yet is paying for that representation can pay a minimal amount and their dollars do not go to PAC money. So we already have that. There are places that do that. I think that is worthy to take a look at and understand how that could happen. And, obviously, it will happen in terms of shareholders if we can come up with something that actually is meaningful and works. So I appreciate the time, and I certainly appreciate the panel being here. Thank you. The Chairman. Thank you. As I said earlier, I wanted everybody to get a chance to speak, and I didn't want anybody's voice not being heard, including all of yours. I thank you for being here. We would like to introduce the panel. Mr. Robert Lenhard. Mr. Lenhard is currently of counsel of Covington and Burling D.C. offices and a member of the firm's Election and Political Law Practice Group. Prior to his work with the Covington and Burling law firm, he served as Chairman of the Federal Election Commission in 2007 and Vice Chairman in 2006. He also previously served as Associate General Counsel for the American Federation of State, County, and Municipal Employees. Judith A. Browne-Dianis. Ms. Browne-Dianis is currently the Co-Director of Advancement Project, a legal action group committed to racial justice and fighting for fair elections. Prior to her work with the Advancement Project, Ms. Browne- Dianis worked with the NAACP Legal Defense and Education Fund, practicing law in the area of voting rights. Mary Wilson. Ms. Wilson is the President of the League of Women Voters. Ms. Wilson has been with the League of Women Voters for nearly 20 years in leadership positions at the national, State and local level. Prior to her work with the League, Ms. Wilson was counsel with the United States Department of Energy and the United States Equal Employment Opportunity Commission. Ms. Torres-Spelliscy is currently counsel with the Brennan Center for Justice Democracy Program. Ms. Torres-Spelliscy has worked to defend campaign finance and public funding laws in courts across the country. Prior to her work with the Brennan Center for Justice, Ms. Torres-Spelliscy was a staff member to Senator Durbin's office and worked at the law firm of Arnold & Porter. Allison Hayward. Ms. Hayward is an Assistant Professor of Law at George Mason University School of Law where she teaches constitutional law, election law, ethics, and civil procedure. Prior to teaching at George Mason University, Ms. Hayward was counsel to former FEC Commissioner Bradley Smith; an associate at Wiley, Rein & Fielding in Washington, D.C.; and of counsel at Bell, McAndrews & Hiltachk in Sacramento, California--you California guys jumped in on that one. Steve Simpson. Steve Simpson is a senior attorney with the Institute for Justice, a public interest law firm dedicated to issues of civil liberties. Before coming to the institution, he spent 5 years as a litigator with the national law firm Sherman and Sterling. I thank all of you for being here today and for testifying. As I said, we were lax on the 5-minute rule up here. I will be lax on the 5-minute rule down there. But if you get a little too far out, you will see me squirming a little bit, and then I will ask you to sum up. And then there will be time for questions, so you will be able to get--anything you couldn't get in in your statement, I am sure you will be able to answer a question and be able to filter that in, too. STATEMENTS OF ROBERT LENHARD, OF COUNSEL, COVINGTON & BURLING LLP; JUDITH A. BROWNE-DIANIS, CO-DIRECTOR, ADVANCEMENT PROJECT; MARY G. WILSON, PRESIDENT, LEAGUE OF WOMEN VOTERS; CIARA TORRES-SPELLISCY, COUNSEL, BRENNAN CENTER FOR JUSTICE; ALLISON HAYWARD, ASSISTANT PROFESSOR OF LAW, GEORGE MASON UNIVERSITY SCHOOL OF LAW; AND STEVEN M. SIMPSON, SENIOR ATTORNEY, INSTITUTE FOR JUSTICE The Chairman. Mr. Lenhard. STATEMENT OF ROBERT LENHARD Mr. Lenhard. Thank you. Chairman Brady, Ranking Member Lungren, distinguished members of the committee, I want to thank you for the opportunity to come and testify today. As the chairman noted, I have practiced in the area of campaign finance law for close to 20 years, both providing advice and counsel to individuals, unions, corporations, and trade associations to try to comply with the law, as well as serving as a regulator at the FEC trying to faithfully interpret and enforce the laws that Congress has passed. This has left me with a number of impressions of the Supreme Court's decision in Citizens United and the implications of it; and while I have submitted a somewhat more lengthy written testimony, there are four points that I wanted to raise briefly at the beginning. The first is that I think the popular perception that this was a dramatic change in the law is correct. For as long as I have been alive, it has been illegal for corporations to make either contributions or expenditures to influence Federal elections. The Supreme Court's decision in Citizens United changed that. The Court made clear that the first amendment protects the right of corporations to make expenditures expressly advocating the election or defeat of candidates so long as they do so independently of the candidates. The consequence of this is that there will be more corporate spending in elections, and we can all guess or debate how big we think that increase is going to be. I like to look at the problem a little differently. I would like to look at it just very briefly from the perspective of candidates, particularly candidates in very closely fought races. Because I think the decision, combined with existing law, makes those candidates particularly vulnerable now, and the reason for that is this: The Supreme Court has made clear that corporations can spend unlimited sums advocating the election or defeat of candidates, and yet the laws that regulate the collection of those funds, the sources of those funds vary dramatically between corporations and candidates. Corporations can raise those funds through commercial transactions and can spend as much as they have. Candidates are constrained by the contribution limits. They can raise no more than $2,400 from individuals, $5,000 for most PACs. And, consequently, my sense is that outside organizations that want to influence close elections can have a great effect by coming in and making very large ad buys very late in the race that are very negative, because my sense is that those kinds of ads can shave several percentage points of support off a candidate, and in a close election they can be decisive. The problem for a candidate is that if you face that kind of a situation, you are vulnerable in a number of ways. First off, you don't know the money is coming. Your opponent, you can look at their campaign fund-raising reports and see how much they have raised, how much you have, and make some rational budgetary decisions. Money coming from outside groups is unexpected. It is like an ambush. The second is the amount of money you can raise is limited by the statute, and most of the people whom you can pick up the phone and call and ask for money, you have already asked and they have already given. So as you get to the very last days of a campaign, that money is very, very hard to raise. And the other thing the law does is, because the prohibition on coordination is still in place and because coordination includes ads spent at the request or suggestion of a candidate, you really can't call up outside groups or even, as the law currently stands, political parties and ask them for help. Because, if you do, the spending that follows is an illegal coordinated expenditure or in-kind contribution, which would be illegal, even in a post-Citizens United world. That is true even for the political parties. Political parties by statute have a very low amount of money which they can spend in coordination with the campaign. Under the Constitution, they can spend unlimited sums independently. But in terms of your reaching out and calling for help, there are very, very few places where you can make that call. There is a possibility to change that. It will be possible for Congress to repeal the limits on how much a party can spend in coordination with a campaign, and it would provide vulnerable candidates with someplace they can call and seek an influx of money to help balance or counterbalance money coming from outside, especially in the context of Citizens United. This has, I think, a number of advantages. One is that the money is hard money. It remains under the restrictions of McCain-Feingold prohibiting the use of soft money because all that national party committee money is hard money, and the McCain-Feingold prohibitions remain in place. Second, because that money can be spent in coordination with a candidate, the candidate retains some control over the message. And one of the problems with outside spending is candidates do lose control of the themes that are driving voters in their elections. And, lastly--and it is a personal view--I think that it helps strengthen the parties, makes the parties more relevant, which I personally think would be a good thing. Other people may disagree, but I think it does make the parties more central and would provide candidates who are vulnerable--and I think candidates on both sides of the aisle are vulnerable to these outside spending ads--some way to try and help counterbalance that effect. The next thing I would like to talk about very briefly is disclosure. Congress has created really three different disclosure regimes that cover ads in this area. The first is the disclosure regime that exists within the Federal Election Commission. Entities that qualify as political committees face a relatively rigorous set of disclosure rules. They have to disclose all their receipts and disbursements, and they have to itemize where that money came from or where it went to if it exceeded very low limits--$200 from money coming in, $250 for money coming out. For organizations that do not qualify as political committees--political committees would include PACs as well as candidate committees--for organizations that don't meet those definitions, there are really two different points at which they have to file reports with the FEC. The first is if they make independent expenditures, expressly advocating the election or defeat of candidates. The second is if they make electioneering communications, which was a term Congress created in McCain-Feingold (BCRA), which essentially covers ads that feature candidates and that run very close to an election--30 days with the primary, 60 days with the general-- and target in the district in which the Member of the House or the Senate is running. And there are more abbreviated disclosure forms that organizations that run those kinds of ads have to fill out essentially saying how much they spent, and in certain circumstances where that money came from. The third disclosure regime you have created covers 527 organizations. These are entities that operate under Section 527 of the Tax Code which covers entities trying to elect or defeat candidates. Congress requires the IRS administer a requirement that those kind of entities disclose where the money came from and what they spent it on to the degree that it reaches slightly higher thresholds--$500 for money coming in, $800 for money coming out. There are a number of exceptions to who has to file those reports with the IRS. And the IRS reports are all on the Internet. You can go right now and log in and call them up. The first is there are certain kinds of entities that are already reporting somewhere else, and they are exempt from the IRS rule. So, for example, if you are reporting to the FEC, you don't have to also report to the IRS. If you are only involved in State elections and you report to the State, you don't have to report to the IRS. But Congress' goal there was to try and capture the 527 entities a number of years ago when they were quite controversial. There is an exception there which allows organizations not to disclose donors if they are willing to pay the tax, and the tax is steep. It is the highest corporate rate, which I think runs about 35 percent now. But there have been a couple of groups over time that would rather pay the tax than disclose the source of their contributions. But as you think about this area of the law, there are really three different areas where you have created existing disclosure regimes. And the last thing I want to touch on very briefly is coordination, which remains a valid statutory provision. The Court has not struck down the statute. It is illegal to coordinate with campaigns. There is a great deal of back and forth about what the nuanced interpretations of that law is. The FEC has come up with regulations a couple of times. The courts have struck them down a couple of times. The FEC is in ongoing rulemaking right now as we speak trying to come to grips with that. But there is, I think, some amorphousness as to what that law exactly means today; and the question of what is coordination and what disclosure exists really, I think, are going to be the two areas of law post-Citizens United that are the most debated. Thank you very much. [The statement of Mr. Lenhard follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] The Chairman. Thank you. Ms. Browne-Dianis. STATEMENT OF JUDITH A. BROWNE-DIANIS Ms. Browne-Dianis. Thank you, Chairman Brady and members of the committee. My name is Judith Browne-Dianis and I am Co-Director of Advancement Project, a civil rights organization that supports organized communities in their struggles to achieve universal opportunity in a just democracy. Almost since our inception Advancement Project has been involved in the important voting rights issues of our day, including issues related to the administration of elections, and the elimination of barriers to voting through our voter protection program. We have been advocating for the automatic restoration of voting rights of persons with felony convictions. We have represented communities of color in redistricting. And, lastly, we have initiated a campaign for a constitutional amendment for a right to vote. In addition to the written testimony I submitted, I would like to note a few things. First, I wanted to note the irony of having this discussion today about a case opening the door to the unbridled corporate influence on elections on the anniversary of the ratification of the 15th amendment, which happened on February 3, 1870, prohibiting the denial of the vote on the basis of race, color, or servitude. The Supreme Court's decision in Citizens United clearly ushers in a new and unprecedented era of direct corporate wealth influence in our elections. This means that lower- and middle-income Americans, who compromise the clear and overwhelming majority of the country, will have much less of an opportunity to gain access to and interact with their political representatives or to help shape the debate in ways that serve the interests of the majority of Americans. But the wealth disparity in campaign finance is not just an issue of class. It is also an issue of race. Unfortunately, we still live in a country where race and wealth are intertwined such that people of color have accumulated less wealth; and, under this new regime, this corporate takeover of our democracy, the voices of people of color will be drowned out in the efforts to influence the outcomes of our elections. Given the historical and lingering racial disparities in wealth distribution and transfer caused by government and private actions over hundreds of years, coupled with the low representation of people of color in the management sphere of our Nation's largest corporations and the overwhelmingly white demographic of major campaign contributors, it is easy to see why any campaign finance regime that allows and relies heavily upon private financial contributors, especially major corporations, would structurally exclude people of color from any significant degree of effective political influence. To alleviate the racially discriminatory burdens of money and wealth in the campaign finance system, Congress must act boldly to strengthen public financing in all Federal and State elections, including passing the Fair Elections Now Act, establishing direct expenditure and electioneering limits on all Federal contracts, and requiring States that receive Federal election funds to amend their laws to require explicit shareholder and member approval for electioneering expenditures. What is also disconcerting about the Citizens United decision is the Supreme Court's willingness to sell our democracy off to the highest corporate bidder in the name of free speech and participation while in other instances eviscerating protections for citizens--real, live people--to have their voices heard by voting. The Court applied the most restrictive standard of review in its consideration of whether the campaign finance statute issued in Citizens United ran afoul of the first amendment, but it is not so exacting when it comes to looking at barriers to voting. Specifically, in Citizens United, the Supreme Court determined that political speech of corporations was subject to strict scrutiny under the first amendment, requiring a compelling State interest to infringe upon that right. Yet when considering Indiana's law requiring voter identification in the Crawford case, the Court departed from past precedent and used a less stringent standard of review where there was a clear burden on the opportunity to vote. It is outrageous that voting is not entitled to review under the most stringent protections that now apply to corporate influence in the outcomes of elections. As Justice Stevens rightly noted in his dissent, ``While American democracy isn't perfect, few outside the majority of this Court would have thought its flaws included a dearth of corporate money in politics.'' To ensure vigorous protection of individual voting rights, Advancement Project urges Congress to enact House Joint Resolution 28 to amend the Constitution to enshrine an express right to vote. We do not have a right to vote in this country, along with 11 other democracies and Iran and Libya. Without a Federal guarantee of the right to vote, the judiciary will continue to regard voting rights as something to be balanced while still claiming them as fundamental, and States will continue to use their vast control over this basic citizenship right in a patchwork quilt of arbitrary rules with vast consequences for close elections. Finally, Congress should realize that voting is the last frontier of our democracy. No matter how much money corporations may choose to spend to influence elections in the political debate in the wake of Citizens United, the one thing they will never be able to do--at least I hope--is to cast a ballot on Election Day. It is therefore incumbent upon Congress to ensure that all American citizens, especially traditionally disadvantaged and disenfranchised citizens of color, do not encounter needless roadblocks to registration and voting. To that end, Advancement Project urges Congress to enact the Protection Against Wrongful Voter Purges Act, which amends the NVRA and HAVA in a number of ways to strengthen protections against the wrongful removal of registered voters from the roles and the wrongful denial or delaying of voter registration applications. Advancement Project also recommends that Congress enact the Provisional Ballot Fairness in Counting Act of 2009, H.R. 3552, which would eliminate the wrong precinct rules that relates to counting provisional ballots in fair elections. In particular, it would require that provisional ballots cast by a voter registered anywhere in the State be counted for President and Senate elections and ballots cast in correct congressional districts be counted for U.S. representatives. These two bills would provide immediate fixes to many of the perennial voter registration and list maintenance issues that have prevented eligible voters from becoming registered to vote and have their ballots counted since the 2000 elections. In the longer term, Congress should work to improve voter registration by enacting legislation that will require automatic registration of all eligible voters and permit Election Day registration to those who are not already registered. We clearly believe that in light of Citizens United we must strengthen our democracy by ensuring that individuals who are actually eligible to cast a ballot have an opportunity to do that. This is the only way to balance out the power corporations have been given. The one great equalizer, in our democracy is going into the election booth to cast that ballot. This must be a protected right in order to secure our democracy. Thank you very much. [The statement of Ms. Browne-Dianis follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] The Chairman. Thank you. Ms. Wilson. STATEMENT OF MARY G. WILSON Ms. Wilson. Thank you. Mr. Chairman, members of the committee, I am Mary Wilson, President of the League of Women Voters of the United States. I am very pleased to be here this afternoon to talk to you about the League's support for legislation that would protect our electoral system in the wake of Citizens United v. FEC. There is one simple message that I hope the committee members will take away from the hearing this afternoon; and that is: because the 2010 elections are fast approaching, it is imperative for Congress to act swiftly to pass legislation and send to the President for signature legislation that governs corporate and union spending. That legislation must take effect immediately. Waiting until after the 2010 elections is simply not a viable option. The League of Women Voters of the United States has for the last 90 years been working to educate voters, register voters, and make sure that citizens have an opportunity to participate in our electoral process. I can tell you without a doubt that voters want election results that reflect their honestly held opinions, not results that derive from big money in elections. The voters depend on you, their elected representatives in Congress, to protect that open, honest government and a healthy democracy. The Court's decision in Citizens United upends basic campaign finance law that Congress has carefully crafted over many years. This fundamental change--with perhaps more coming as the Court considers other cases--requires a strong response from Congress and the President. Now, I must say we do not expect that legislation that would be adopted this year can address every possible issue, but some basic voter protection can and must be enacted this year. There are numerous protections that could be enacted, and in my lengthy written statement there are a number of issues that I raise, but I want to talk today about enhanced disclosure. It is the most basic step toward protecting the role of the voter in making decisions in elections. The Citizens United decision appears to make it possible for corporations, and perhaps unions, to secretly use funds that they receive from another corporation to intervene in an election. This is not acceptable. Voters need information about the sources of funding for those charges and countercharges that always come during election campaigns. This is basic. It is one of the few ways by which a voter can test the accuracy of campaign statements. And I must say, indeed, the Court in Citizens United supported such requirements, as they said, ``so that the people will be able to evaluate the arguments to which they are being subjected.'' We couldn't agree more with that statement. The League of Women Voters supports strong disclosure requirements for both those who receive election funds and those who provide such funds. For example, if corporation A receives significant funds from corporation B and subsequently makes an election expenditure, then corporation A should disclose both its own expenditure and the contribution from corporation B, and corporation B should disclose its contributions to corporation A. We believe that corporations should have the responsibility for providing disclosure to the public, through disclaimers and on the Internet, directly to their stockholders or members, as the case may be, and to the Federal Election Commission and the Securities and Exchange Commission. Disclaimers on public communications should be required for every corporation that provides funds above a certain amount either directly or indirectly to an election expenditure. The Supreme Court clearly approved of disclaimers in Citizens United and in fact remarked that, ``With the advent of the Internet, prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters.'' After providing enhanced disclosure, the next most important step for Congress is to do no further harm. A decision as far-reaching in its implications as Citizens United will, I am sure, provoke a number of proposals that we, the League of Women Voters, believe could make our election system and our government processes worse. Some, I am sure, will call for increasing or doing away with contribution limits to candidates and PACs. There will likely be calls to allow corporations and unions once again to make huge contributions to political parties, effectively repealing the soft money ban in BCRA. There may even be those who call for unlimited corporate and union contributions to candidates. On behalf of the League of Women Voters, I strongly urge you not to do any of these things. Each of these steps would increase corruption or the appearance of corruption. We need fair elections, not greater involvement of big money in elections and government. In conclusion, the League of Women Voters believes that the Court's majority decision in Citizens United was fundamentally wrong and a tragic mistake, but this is the decision of the Court. Congress needs to respond now, recognizing its own authority and responsibility to uphold the Constitution and protect the voters. Fair and clean elections, determined by the votes of American citizens, should be at the center of our democracy. Thank you. [The statement of Ms. Wilson follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] The Chairman. Thank you. Ms. Torres-Spelliscy. STATEMENT OF CIARA TORRES-SPELLISCY Ms. Torres-Spelliscy. Good afternoon. Thank you for having me here today. I request that my report, ``Corporate Campaign Spending: Giving Shareholders A Voice,'' be entered into the record. The Chairman. Without objection, so ordered. Ms. Torres-Spelliscy. Thank you. [The information follows:] Ms. Torres-Spelliscy. We at the Brennan Center encourage Congress to respond to Citizens United in a holistic way. In the near future, corporate managers may be using shareholder money to play in politics. While other witnesses today may argue that nothing has changed because corporate money was already in politics, I would respond that while you may have been wading in special interest money up to your waist at this point, in the future you may be up to your eyeballs or over your head. Congress should act to ensure that voters and citizens remain the central actors in our elections. We suggest a range of reforms, including public financing, universal voter registration, and empowering shareholders. Today I am going to focus on shareholder empowerment. Citizens United permits corporate treasury funds to be spent on express advocacy for the first time in 63 years. The crux of the issue is this: When a corporate manager spends ``corporate money'' on politics, this includes other people's money. There are two basic problems under the current law: a lack of consent and a lack of transparency. This is an important issue, because one out of every two American households is invested in a publicly traded company. So when I say that shareholders are not sufficiently protected, I am not talking about elites. I am talking about average Americans who rely on their investments for their current income and for their future retirements. When we were studying this issue at the Brennan Center, we had a chance to ask some big structural questions. One of the questions we asked was, if an investor wanted to know the total amount of political expenditures by a given corporation, would she be able to find that? And the answer in many cases is no. Second, if an investor happened to discover a particularly boneheaded, ill-advised political expenditure, what recourse would that shareholder have? And the answer to that is there is very little legal recourse for a dissenting shareholder. In asking these big structural questions, we discovered that there are some very problematic gaps between the corporate law and the campaign finance law that leaves shareholders unprotected, and this problem has increased tenfold with Citizens United. The first problem is a lack of consent, and the big picture is this: Under current law, including the new developments in Citizens United, corporations can spend vast amounts of corporate treasury funds on politics, and they can do so without notifying their shareholders either before or after the fact, and they can do it without getting shareholder consent or authorization. Then there is the related problem of a lack of transparency. It is extraordinarily difficult for shareholders to learn the total universe of political corporate spending. The short answer to why this is is that neither the Securities and Exchange Commission nor the Federal Election Commission require full disclosure directly to shareholders. So this led us to think about shareholder protections that Congress could enact. We conclude that legislation should have the following three prongs: Corporate managers should get shareholder authorization of all future political spending; two, companies should provide periodic notice of political spending to shareholders; and any unauthorized corporate political spending should trigger liability. We base this policy proposal in part on the British, who have had these protections for their shareholders since the year 2000. These reforms make sense from the point of view of the integrity of our capital markets. If a particular company is trying to game the system through political spending, then I think that the market and investors should know that. And these reforms also make good sense from the point of view of our democratic norms because we want consenting individuals at the center of our politics. I thank you for the opportunity to present today. [The statement of Ms. Torres-Spelliscy follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] The Chairman. Thank you. Ms. Hayward. STATEMENT OF ALLISON HAYWARD Ms. Hayward. Thank you, Mr. Chairman, Ranking Member Lungren, and the committee for providing me the opportunity to talk to you today. I have provided longer comments for the record, but what I want to do today is highlight a couple of things. Two points predominantly. First, that, in my view anyway, the Citizens United opinion is a sound opinion and one that falls within the progression of precedent that the Court has enunciated when it has been dealing with independent expenditures. Secondly, my skepticism that the consequences from Citizens United are going to be as dramatic as maybe some of the colleagues that I have on this panel would believe. First of all, Citizens United fits within the Court's jurisprudence when you look particularly at what the Court has enunciated with regard to independent expenditures. When the Court was faced initially with the question of how to interpret the expenditure ban, it was in a test case teed up by a labor organization after the 1947 amendments to the Taft- Hartley Act, which, by the way, were added at the 11th hour in conference committee--not that any of you would be familiar with how that works--and without a lot of debate. Labor unions were fairly well convinced that it was going to be unconstitutional, and so were very comfortable with bringing a test case. The Court in U.S. v. CIO, which came down in 1948, wasn't very helpful in providing constitutional guidance, because what they did is they looked at the law and said, whatever this law is intended to cover, it couldn't possibly cover your newsletter because that would be unconstitutional. So, no case. A series of lower court cases, also test cases teed up by unions, did not go well for the Department of Justice either. In fact, the Department of Justice, through the late '40s and early '50s, adopted a policy of non-enforcement out of fear that enforcement of the Taft-Hartley amendment would be unconstitutional. And you don't have to take my word for that. There is testimony provided by the Assistant Attorney General at the time in 1955 to a Senate committee where he says essentially that. He is very open about it. And the Court looks again at the law in the Autoworkers decision from 1956, I believe. And there Justice Frankfurter writing for the Court says, well, we are going to look at this again. It was a case involving some TV spots. The Autoworkers had a weekly television program, and some of these programs included advocacy for and against particular lawmakers, incumbents. And so a few episodes of this larger series were the subject of the prosecution, and the Court there said this is the kind of expenditure that the amendment was designed to address, but because the court below dismissed that question, we have to remand it back to the district court. On remand, they had a trial, and the jury acquitted the union of making an expenditure. So, as you can see, as the cases start to develop on the expenditure ban, especially with regard to labor organizations that were bringing these challenges--I think it is interesting to note that corporations weren't testing the law to the same degree of vigor and enthusiasm that unions were--you don't get a very clear enunciation of the constitutionality of an expenditure ban. You get a ``sort-of-there-but-not-there'' kind of cloud. And that cloud persists until I think Austin v. Chamber of Commerce. In the interim, you have other questions involving independent expenditures, however, where the court is very clear that expenditure prohibitions are not constitutional. You have the independent expenditure cap in Buckley v. Valeo. You have the independent expenditure cap in the publicly funded presidential general election, which is the NCPAC decision. And you have Justice Brennan--no conservative he--looking at the independent expenditure ban in MCFL and saying, okay-- and this will sound familiar--whatever Congress meant to regulate, it wasn't this. And so the legacy in MCFL is an exception to the expenditure ban when you have political nonprofits that are not using corporate money and there is no sense that there are shareholders whose money might be used against their will. Then you have the Austin case, which Citizens United expressly overrules. The Austin case looked at, using strict scrutiny, the Michigan law that prohibited a Chamber of Commerce from doing the same thing that MCFL wanted to do. You can kind of see where the Austin lawyers thought this might be the next step. And, applying strict scrutiny, the court held that in fact that was constitutional, but using reasoning that was controversial at the time and I think has been controversial for a lot of scholars since then. So when people look at Citizens United as a departure from doctrine, I am not so sure. The doctrine was never very well enunciated. It has been under a constitutional cloud. I think it is instructive that in the immediate aftermath of the passage of Taft-Hartley prosecutors were reluctant to prosecute on it because they didn't want that bad precedent blowing up a tool that they were concerned might be helpful at least as a deterrent. I want to talk quickly about consequences in the wake of Citizens United. I don't know what the consequences will be. I am not sure anyone else does either. Corporations do spend money in the context of politics now. They are just issue advocacy not express advocacy. Now they can say directly what they couldn't before. Will that mean there is more spending or different scripts but the same spenders? I don't know. But I just want to suggest that it is not a foregone conclusion that there will be a rush for additional money but simply that the people who are already spending might spend slightly differently. Moreover, I would like to note that States that allow corporate expenditures in their campaigns have not seen fit to alter their corporate law or other aspects of their State laws that regulate those corporations in any sort of novel or dramatic ways and seem to be fairly comfortable with corporations and unions as participants in political dialogues. Briefly--I think this has been mentioned, but I will say it from the panel--the foreign national ban remains the law. That is to say that foreign nationals cannot make contributions or expenditures in any elections--Federal, State or local. Congress has exercised its authority in matters of foreign affairs and foreign policy to provide for a broad ban in the law. That has been interpreted by the FEC to include foreign national individuals and their ability to make decisions in fund raising. It might be that it is a comfort to some for that interpretation to be codified. I don't suggest that as my suggestion, but if there is a felt need to clarify or reiterate that ban, that would be one way to go. On shareholder democracy, just real quickly. Shareholder democracy isn't very democratic if you have worked with corporations. For one, not all corporations are alike. I don't think anyone here is worried about the closely held corporation where you have five shareholders who also happen to be the same people who are officers and the same people who are directors. The corporate roster in any State is filled with those. These are people who are incorporating so that they can have a fictitious business name to do business so that they can sign leases in the name of a fictitious person, not in the personal name of the individual business person. Let's set those aside because I don't think those are what people are worried about. When you have large corporations in a shareholder democracy, you have a couple of qualities in voting that I just want to alert you to; and the recommendation I would have is that you should find a corporate scholar to help you along the road if you feel like this is the place you want to go. In corporate voting, you can buy votes. It is perfectly legal. You can enforce a contract to buy and sell your shareholder vote. You can engage--or hedge funds can engage, not you personally or me personally--in what is called empty voting, where you borrow the voting rights for somebody else. So you can vote in a way that is insincere to the corporation's interests because you have another investment interest over here. It is controversial, but it is an aspect of corporate governance today that you should know about. So you will want to tread carefully when you start looking at the shareholder feedback loop. Another question that came up in my mind, just listening to my fellow panelists, was, suppose the shareholder is themselves a corporation or a labor organization. Do you have to have a second-tier approval process, and how attenuated does that chain need to be before you feel confident that there is consent? It may be something that you can't satisfy. So, in closing, Congress has latitude in many areas of regulation that may relate to this. I just want to point out that Congress has latitude in setting the rules for who can contract with the Federal Government. So instead of looking at this as a regulation of political activity, you might look at it as a regulation of government contracting. Congress, of course, has great latitude in how it structures its ethics rules. You might look at tax incentives as another way to go. And then, finally, I would like to endorse my fellow panelist Bob Lenhard's proposal about raising or eliminating the coordinated expenditure restrictions that apply to political parties. I think that would be a very healthy thing to do. Thank you. [The statement of Ms. Hayward follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] The Chairman. Thank you. Mr. Simpson. STATEMENT OF STEVEN M. SIMPSON Mr. Simpson. Mr. Chairman, Ranking Member Lungren, and members of the committee, thank you very much for inviting me to testify here today. The Supreme Court's decision in Citizens United is one of the most important first amendment decisions in a generation. It arose because the campaign finance laws prevented a corporation from disseminating a film and even threatened to regulate the publishing and dissemination of books. As the Court stated in the decision, ``If the first amendment has any force, it prohibits Congress from fining or jailing citizens or associations of citizens for simply engaging in political speech.'' Critics have lodged a number of wild claims about the decision, but in assessing its impact we should follow the Court's own wise counsel and not let rhetoric obscure reality. Toward that end, I would like to address some of the more prominent myths that have been offered about the Citizens United decision. First is the idea that under Citizens United corporations will be able to buy elections. Now, a corporation can no more buy an election with political advertising than they can buy market share with commercial advertising. If they could, we would all be driving American cars and drinking new Coke, Michael Huffington would have been voted Senator a long time ago, Ross Perot would have been voted President, John Corzine would not have lost in New Jersey. The list goes on and on. While it is certainly true that money is necessary to win a campaign, that simply does not translate into victory for the biggest spender. Indeed, as Professor Hayward made clear, 26 States allow corporations to make independent expenditures in elections. They have not become hotbeds of corruption, nor have corporations been able to buy their elections. But the claim that anyone can buy an election, whether a corporation or anyone else spending money on advertising in an election, is not only false, it contradicts the very idea of our constitutional republic. As the Court said in Citizens United, ``The first amendment confirms the freedom to think for ourselves.'' In short, corporate spending does not buy elections anymore than anyone else's spending does. It buys speech that seeks to persuade. For those who don't agree with that speech, the Court provided the answer in Citizens United, ``It is our law and our tradition that more speech, not less, is the governing rule.'' The second myth I would like to address is that corporations, unlike people, have no free speech rights. Now, it is true certainly that corporations are not people, but they are made up of people just like any other association that exists today. Indeed, concerns about corporate speech obscure the fact that campaign finance laws in essence treat all groups basically the same way. A case in point is a case called SpeechNow v. FEC, a case that I am now litigating along with the Center for Competitive Politics in the D.C. circuit. SpeechNow is an unincorporated association. It is a group of individuals who wish to get together, exercise their right of association, and spend their money advocating the election or defeat of candidates. The campaign finance laws treat this group, this unincorporated association, essentially exactly the same as a corporation. To speak, they must become a political committee, and they must comply with the same onerous burdens that the Supreme Court just struck down as they apply to corporations. Neither the FEC nor campaign finance reform groups have said that SpeechNow.org should be relieved of these burdens because it is not a corporation. And critics have responded that the laws that were struck down in Citizens United don't actually prevent anyone from speaking, they merely regulate the funding of that speech. But this ignores the very real burdens of political committee status that the Supreme Court highlighted, excuse me, in the Citizens United decision. For instance, in a recent study conducted by Dr. Jeffrey Milyo of the University of Missouri on behalf of my organization, the Institute for Justice, 255 individuals were asked to comply with the regulations that apply to ballot issue committees in the States. On average they managed to correctly complete just 41 percent of the tasks that they were asked to complete. After the exercise many expressed frustration, saying things like this was worse than the IRS and a person needs a lawyer to do this correctly. It is no exaggeration to say that the campaign finance laws often rival the Tax Code in their complexity. Indeed, during the oral argument in the Speech. Now in this case I had the surreal experience of debating with several judges on the D.C. Circuit as to whether the tax laws are more or less burdensome than the campaign finance laws. Now, reasonable minds can disagree on that question, but it ought not be debatable that if Americans come to regard speaking out about political elections, as they do filing their income tax returns, far fewer of them would bother to try to speak out at all. In conclusion, in today's world money and organization are not merely important to political speech, they are absolutely indispensable to it. As Chief Justice Roberts said in his concurring opinion in the Citizens United decision, the first amendment protects more than just the individual on a soap box and the lonely pamphleteer. The first amendment's protections apply whether the speaker is an individual or a group, whether he uses a quill pen, a printing press, or the Internet. That the Supreme Court understands this is not cause for concern, it ought to be cause for celebration. Thank you. [The statement of Mr. Simpson follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] The Chairman. Thank you and thank all of you. We will now open up for questions, and I would like to start and just ask all of you the same exact question if you would just respond briefly. I am not an expert on constitutional law, but I am a union member and a union official for the last 45 years. I know the difference between individuals who join unions and individuals who purchase stocks. Unions are membership organizations, union leadership democratically elected and held accountable to its members in regularly scheduled elections. Unions are nonprofit organizations bringing together individuals, individual interests for the purpose of increasing bargaining power and effectively petitioning government. Corporations have shareholders. Neither boards nor their executive management teams are democratically elected. They are constituated to accumulate wealth in the form of a shareholder value rather than represent the board interest of the shareholders and petition their government. Does this distinction between the unions and their corporation merit different treatments for unions and corporations in America, election law and the election law in the wake of citizen alliance? In other words, should unions and corporations be treated differently? Start with you, sir. Mr. Lenhard. I guess the---- The Chairman. Because they are lumped in in this decision and I would like to know. Mr. Lenhard. The easy answer is I don't know. Having been both a member of a union and a shareholder, I found the democratic experience in the union far preferable to that of being a shareholder. I think that there are a number of procedural protections that union members have, both in terms of the--and I actually practiced in this area of law for a while early in my career. The courts and in some cases legislatures have given people who are covered by collective bargaining agreements the right to dissent and to reduce the amount of money they pay the union by the proportion of the union's expenditures that are attributable to political activity, and it is not just campaign contributions, a lot of political activity. And people do actively use that right and they do pay reduced sums. And they--so there is, I think, a reasonably robust process whereby people who want to both get information about the money that is spent on political activities and the ability to get a portion of that back. The same is far from true in the corporate setting, where shareholders have a very limited set of rights to vote for the board, approve auditors, and particular transactions. My sense is that the--and the other factor in this--is the enormous disparity in wealth available to unions and available to corporations make them very, very different entities. Unions are viewed as more politically powerful because the members are very active and volunteer their time. But the size of resources the unions have is really tiny in comparison to that of corporations. The Chairman. Thank you. Ms. Dianis. Ms. Dianis. I am going with his answer. I have nothing to add to that. I think that the point of the activity and involvement of union members versus shareholders does bring a significant distinction and that they should be treated differently because of that. Again, the point about the activity of union members and their political activity brings it also different from the shareholder who gets a piece of mail every once in a while and asking basically for their proxy instead of their real involvement. The Chairman. Ms. Wilson. Ms. Wilson. I certainly think that you, Mr. Chairman, summed up the differences between unions and corporations in terms of their governance, and I think that is a very key point in the discussion. But I also would like to look at it from the voters' perspective, and from the voters' perspective I believe that the disclosure and disclaimer requirements, whether or not it is a union-paid advertisement or a corporation-paid advertisement, may indeed look very similar. Thank you. The Chairman. Ms. Spelliscy. Ms. Torres-Spelliscy. To be honest, the Brennan Center has not looked at the union question, but we love a good hypothetical. And if the committee is interested in that particular question, I would be happy to get my cracker jack lawyers on that question. [The information follows:] The Chairman. That is why I asked the question because I am interested in it, and I appreciate your help. Ms. Hayward. Ms. Hayward. I have not written anything formally on this but I have thought about it a lot in my research of the history of the law, because it does seem to me that the reason labor unions and corporations are treated identically in the law has much more to do with the political context and a little tit- for-tat game going on between Democrats in the White House and Republicans in--at least after the 1946 election controlled both Houses of Congress with fairly great majorities. And they are different in such different ways that I don't think that you can say that one deserves less regulation than the other. They deserve different tailored regulations to address the fact that labor unions are membership organizations with a great deal of job basis power over their members where publicly held corporations have this very dispersed and dissolute relationship with hundreds of thousands of people that any individual shareholder may or may not care about very much, especially if he owns the shares sort of indirectly through a fund. I think maybe you could make an analogy between a local labor organization and a small closely held corporation and the kinds of tensions you would have there, but even there I think the differences are much greater than the similarities. That is in fact an area of legislation that would take a lot of hard original thinking to think about the differences in governance and oversight and the relationship between the decision makers and the rank and file of the shareholders. And it would be a great thing to do because it hasn't been done, and I think that is just more evidence that the law that we have is not closely tailored. The Chairman. Mr. Simpson. Mr. Simpson. As long as association with either a union or a corporation is voluntary then for political speech purposes they should be treated identically. Now that has not always been the case. Under many State laws members of unions and even nonmembers in certain occupations have to pay dues to the union and the Supreme Court has dealt with that by effectively requiring the unions to allow them to opt out of paying for political speech. I think that is appropriate. One thing though that is lost in this debate about corporations is that shareholders buy their stock voluntarily. Indeed, with publicly traded corporations it is probably easier to disassociate yourself from a corporation than it is for any other entity ever devised by the mind of man. You can go on the Internet, you can sell your stock in 5 minutes. That is not true of any government I am aware of, it is not true of unions, and the idea that shareholders who buy shares of stock really want to manage the corporation and make decisions about what the corporation spends its money on is counterintuitive, it is counterfactual. That is why they are shareholders, because they don't want to run the corporation. The Chairman. Thank you. It is the selling of the stocks that is--it is not the troubling part as to who is buying them. But just for the record, every union, any expenditure, whether it comes from the general treasury, from a political action fund gets voted on by the members. Mr. Simpson. I am sorry. The Chairman. Every union, every union that has an expenditure, whether it may be from the general treasury or from their political action fund, gets voted by the members or ratified by the members, everyone, not by proxy. You have to be there. They can vote yes or they can vote no. So they are going to vote on that. But I appreciate that and I appreciate your answers and thank you for your testimony today. Mr. Lungren. Mr. Lungren. I would just like to offer a hypothetical to all of you. Let's say on election day at 5:00, polls are going to close at 8:00, an organization has robo calls going to the households of a single party in which they indicate that the results are in in the East and the Midwest and the candidate of the other party has succeeded and it will make no difference whatsoever in the vote turnout in California. This goes only to the party that they are suggesting is losing the presidential election, it goes on at 5:00; that is, with 3 hours left in the voting. Is that kind of a communication the kind of communication that should be controlled, required disclosure, or does it depend on the organization? Mr. Lenhard. Mr. Lenhard. I guess that ultimately is a question for you to decide. Currently under the statute I think it would be. I think that you would have to provide some sort of disclaimer. There is a bit of a struggle at the FEC over whether certain kinds of media, of communication, robo calls being one, polling being another, would require a disclaimer, but I think that the state of the law now is that it would. Mr. Lungren. The interesting thing that happened is, that happened in my election. In fact, I was the recipient of one of those calls and we were told that because they did not specifically advocate it was merely a news report, that it did not--was not required to be reported. And I guess what I am just trying to point out is that it is very difficult to kind of control the language because they didn't advocate one way or the other. Now obviously it was a suppression call. It was only to people registered in my party to try to suppress the vote in our elections, and we had no recourse. It is kind of interesting how those things can kind of go on and, you know, technically it is true, they didn't say vote for someone, but I think we know what the purpose was. The difficulty is for the government then to come in and to try and figure out what the motivation was and then punish you or say, no, we are not going to punish you, I think is giving government a tremendous amount of power that I don't want them to have, even though it was against me and the candidates that I supported. At least three of the panelists here today have advocated taxpayer financing of congressional campaigns. Ms. Torres- Spelliscy, you did specifically and your organization does. What do you say about taxpayers who disagree? For instance, we have the scenario now where you have--where usually--it used to be that major candidates for the presidency opted for the public financing, but we have had a guy named Lyndon LaRouche who goes around with public financing even from--I think at one point in time from a prison cell for President. I didn't want to see money used for that purpose. Of course that was the voluntary system. But as I understand those who are advocating this, you are not talking about a voluntary system that is only based on taxpayers' contributions, you are talking about from general revenues. Wouldn't the taxpayer be put in the same position as the stockholder that you have talked about but even in a more difficult situation in that you really wouldn't have any more recourse because the Federal Government was making this money available with candidates with whom you may have a very, very strong disagreement? Ms. Torres-Spelliscy. Well, as you said, it really depends on how you structure FENA. The way that the presidential public financing system has always worked is it is paid for by a taxpayer checkoff. Mr. Lungren. Right. Do you assume that there is sufficient support for that, for public financing for all congressional campaigns, all elections, that that would be sufficient funding? Ms. Torres-Spelliscy. It could be if you had a good public education campaign and people realized the difference between a privately funded candidate and a clean elections candidate. Mr. Lungren. Do all of you agree that at least one of the decisions or the fundamental premises of Buckley v. Valeo is that money is speech, at least as defined as someone's ability to express themselves, to use it on behalf of themselves if they run for office or to use it on behalf of expressing a political position? Does anybody disagree with that being a fundamental part of Buckley v. Valeo? Mr. Lenhard. I guess if I could--I mean, I think I would frame it somewhat differently. I think money is a means by which one projects one's speech, amplifies one's speech beyond the sound of your voice. Mr. Lungren. Let me put it this way, isn't one of the conclusions of that interpretation of the Constitution that, for instance, Steve Forbes was unable to contribute whatever amount of money he wanted to to Jack Kemp when Jack Kemp ran for President in 1988, and short of that, then Steve Forbes became a candidate. Maybe it is a rhetorical question, but I will ask it anyway: Why was the country better served by having Steve Forbes who, while he supported the same positions Jack Kemp did, was certainly not as good a presidential candidate, why is the country better off that the person who is clearly not a viable presidential candidate is able to spend his money, as long as he is the candidate, but somehow we corrupt the system if he gave the money to a Jack Kemp, who has the same ideas but would have been a much better candidate but didn't have the resources? That is a question I have tried to figure out in my own mind. Maybe I am biased on it because I happened to be part of Jack's campaign and I thought it was a terrible tragedy that he wasn't able to sustain it. But sometimes I just wonder whether we are looking for answers to the question of corruption in the wrong places. I just--I find it hard to believe that we are better off with Jack Kemp not being able to compete in that campaign because frankly we couldn't raise the money for it and Steve Forbes, a genuinely nice man who had the same views, could use his own money but was not nearly as good a candidate. Those are the kinds of real life consequences that would bother me when we theoretically think about how we are going to sort of set the system up so that we make sure the corruption is not here. And yet we still have the first amendment which we have always said allows you to use your money to express your point of view. A rhetorical question, but it is one that I grapple with all the time in looking at these issues. I respect all of your opinions here, I may disagree with some of them, but these are thorny issues that are important issues because it really does go to the question of how do we have earnest and active and robust debate and maybe disclosure? And lastly, I would just say I would hope that others would think about the idea of allowing more cooperation and coordination from the parties to the candidates, because frankly I think that is one of the answers to these other issues that are out there. I would rather be held responsible for my views in my campaign. I would rather my party be held responsible. And if we could work together, then the people know what my message is and what my party's message is. If we coordinate it, that is so much the better. Anyway, thank you for your suggestions there. Thank you, Mr. Chairman. The Chairman. I thank the gentleman. Ms. Lofgren. Ms. Lofgren. Well, thank you, Mr. Chairman. And Mr. Lungren, you and I don't agree on everything but I think the idea that parties are so constrained is really something we ought to talk further about, because I am not sure that is good for the American system at all. And I am not exactly sure how to deal with it, but I think it deserves some future discussion and I think maybe we can do something together on that. Ms. Torres, I particularly found your testimony helpful because I have been thinking, clearly we have got some work to do, I think, on the disclosure end and several of the witnesses mentioned that, and I think we need to think through what that is exactly. I mean the Court mentioned the immediacy of technology. And you can--if you make a contribution, there is not a reason in the world you can't have the fact of that contribution on your Web site within the hour. I mean it is easy to do. And so since it is easy to do, maybe there ought to be a requirement to do that. But I am looking at your testimony. On page 4 you say since shareholder money is at stake, shareholders deserve more say about whether that money is spent on political contributions and expenditures, and note that there is a process in Britain to do that. But Britain doesn't have a first amendment and I am looking at the Court's opinion, Justice Kennedy, on page 55 of the Supreme Court draft. At the end of that paragraph he says, the first amendment protects political speech and disclosure permits citizens and shareholders to react to the speech of corporate entities and shareholders--of corporate entities in a proper way. And from that I think he refers to the first sentence in that same paragraph about corporate democracy being the proper way. And that makes me think about really that the Court is envisioning a reaction rather than a prospective approval, although they don't say so directly. And it also makes me think that we should examine corporate democracy, because if they are saying that is where shareholder remedies are if they are agreed then we ought to look at what can a shareholder do retroactively, and the answer in most cases is nothing. And so I am wondering in your opinion if we enhance disclosure, so for example, I am Good Smelling Soap Corporation and I decide that I am going to spend, you know, 3 percent of my profit this year campaigning against Mr. Capuano because I think that he is dirty and I am a soap guy, right? I am just making this up as I go along. My shareholders are aggrieved, but what can they do about it? Nothing. If I engage in activity that triggers disclosure, should then shareholders have additional rights under corporate democracy to hold officers and directors accountable in some way for profitability or for failure to disclose or for other things? Would that be a burden on the First Amendment in your judgment? Ms. Torres-Spelliscy. I do not think that giving shareholders the ability to consent to political expenditures is implicated by the First Amendment. I think this is a question of using other people's money in a way in which they have had no say. And so I think it is good corporate governance and it is good for our democracy to change the securities laws to give shareholders more meaningful rights. What I find so interesting about Kennedy's opinion is that he seems to believe that shareholders already have these rights. Ms. Lofgren. That is right. Ms. Torres-Spelliscy. And I think that is an invitation, an opening for Congress, that he is not against shareholders exercising control over management's spending in politics. Ms. Lofgren. Let me ask you this, the business judgment doctrine really protects officers, and you reference that in your testimony, from any kind of breach obligation, but those business judgments tend to--they relate to running a business, whereas political speech generally has been held to be in a different sphere. Should we directly repeal or modify the business judgment doctrine when it comes to speech that triggers disclosure? And again, would that, do you think, be an improper burden on exercise of First Amendment rights by the corporation? Ms. Torres-Spelliscy. Yeah--I mean, business judgment is usually--it is something that State courts use to be deferential to how corporate managers manage the day-to-day workings of a business. So I actually haven't wrapped my head around how Congress could change the business judgment rule, which tends to be exercised by State court judges. Ms. Lofgren. That goes to my next question, if I may, because we do generally have the ability to regulate corporations under the Commerce Clause. We regulate to the Securities and Exchange Commission. So clearly it seems to me we would have the ability to create certain Federal requirements, at least for those companies that are regulated by the Securities and Exchange Commission. Ms. Hayward has mentioned several times closely held corporations, and the Court itself criticized the regulatory scheme as not making distinctions between different corporate entities, and I think there is some truth to some of that. For example, if the corporation is just me, obviously I should not have to go ask myself permission. On the other hand, I represent Silicon Valley and there are plenty of people who are working for a corporation that hasn't gone public yet, but their entire future net worth is in stock options or stock that they can't sell because it is not publicly traded. In fact, they may be at a greater disadvantage than a publicly traded corporation for somebody who engages in speech and puts everything they worked for at jeopardy. And so I am wondering in terms of litigation, the Cort v. Ash case that you reference, again it is not a Federal issue, but it could become a Federal issue, whether there is a need to provide in cases where activity triggers disclosure some remedy for shareholders if shares are damaged in some way or the trademark is diluted. I am not sure what all the details would be--and that would give--I am thinking aloud, but that would give protection to shareholders even when there has not been an IPO, and arguably whether you are even more at risk because you can't sell your stock. And yet for the corporation that has one shareholder, you obviously would never sue yourself, so it wouldn't invite those kinds of abuses. Do you think that would run afoul of the First Amendment? Ms. Torres-Spelliscy. I do not. And Cort v. Ash is a very interesting case because this is when the corporate ban was in effect and a corporation arguably violated the ban, a shareholder tried to sue under FECA and the Court said no, there is not a private right of action under FECA. Even though the corporation is violating FECA, you as a shareholder don't have a right to enforce that. And so part of what you might look at is where do you create those private rights of action. Ms. Lofgren. And only when the--I am just thinking when you engage activity that triggers a new disclosure activity, then you might have a different set of rules to protect shareholders. I will just ask one more question because I know others want to speak. On Sub S corporations and some others, I am looking at will you spend--when we give benefits to corporations, tax benefits, and again this is a question do you think this would be an unfair burden on First Amendment exercise. If a certain percentage of your revenue or your value is expended in activity that must--that triggers disclosure, would that that be--we might then question is this really a corporation that deserves the benefit of the corporate code or is it really just a shell to get tax benefits for political speech and whether at some level you say okay, we are going to trigger, you are no longer really legitimately a corporation. You are really just trying to get the taxpayers to subsidize your political activity and we are not going to give you those corporate tax benefits anymore. Do you think that would be an unfair burden on the First Amendment? Ms. Torres-Spelliscy. I think the difficulty, and one of the proposals I have seen floating around, is basically you would say in, say, the State of Delaware, if you conduct independent expenditures then you cannot get a Delaware corporate charter. I think that probably goes too far and you-- -- Ms. Lofgren. I think so, too. Ms. Torres-Spelliscy. Yes, because Citizens United is Citizens United, it says that corporations have free speech rights and so I don't think you could take that away---- Ms. Lofgren. What I am asking you is not do they have free speech rights, they do, the Court already told us that. The question is do they have tax benefit rights? And at what point does that--we are giving corporations tax benefits for a public purpose, which is to engage in economic activity and that creates wealth for the Nation and the like. We are not really giving those tax benefits to run political campaigns. Where is that line drawn and does that run afoul of the First Amendment? Torres-Spelliscy. Under IRC, I think it is 162(e), contributions and other political expenditures are already not tax deductible for corporations. So the Tax Code does speak to some of those issues. Ms. Lofgren. But the independent expenditures, we are in a whole new world. Ms. Torres-Spelliscy. Yes. Ms. Lofgren. Mr. Chairman, thank you for your indulgence in letting me ask these questions. The Chairman. Thank you. We are going to have votes at 4 o'clock. They are the last votes of the day. I would like to try to get this done and adjourn rather than bring everybody back here again. I mean, I will come back if you will come back, but sometimes my colleagues don't always join us. So if they would be a little short I would appreciate you getting to the pertinent questions. Mr. McCarthy. Mr. McCarthy. Before I begin, Mr. Chairman, I want to thank you in the style in which you are holding this hearing. The freedom that you allowed the speakers to go longer is very productive for all of us, even on the questioning. I understand we are going to have quite a few hearings on this as we go forward. And I appreciate the style in which you are holding it. If we are going to be studying this, let's analyze what the case actually said and, Ms. Hayward, you said the Court came down and it didn't change the status of the corporation under the First Amendment but it allowed a corporation and a union to change from an issue ad to a direct ad. So maybe you could explain a little of that so we are all on the same page. Ms. Hayward. Okay, the way I see it, what Citizens United did was say explicitly what the Court had been sort of hinting around in a series of cases, Austin being the notable exception, that it was focusing more on the independent expenditure quality of activity than the identity of the speaker. And so independent expenditures received full First Amendment protection, which means they get strict scrutiny and States have to have a compelling state interest and use the least restrictive means to restrict independent expenditures. The wholesale corporate expenditure ban doesn't fly under that test. I think that is a reasonable continuation from prior cases. Mr. McCarthy. If I could be quick. So an issue ad from a direct ad, would I be wrong in saying it is changing three words at the end of the ad to calling somebody to either voting for or opposing? Ms. Hayward. Quite possibly. Mr. McCarthy. And there would be the timing, either 60-day or up to the election. Is that why you come to the conclusion, Mr. Simpson, that there won't be that much more money different in this campaign spent by corporations? Because they can already spend it, it is the timing of when you spend it or a union in that matter? Mr. Simpson. That is a large part of the reason, yes. The other part is that we can look to States like California and other States and it is not as though corporate speech has overtaken their elections. Before we decide that the sky is falling from this, we might want to actually look at the States that allow corporate independent expenditures and these other things. And I think if we do we will see that corporations have not spent jillions of dollars in those States. Mr. McCarthy. I come from California and they allow it in the State house. President Obama was a representative in Illinois and they allowed it. Chris Van Hollen from Maryland, they allowed it as well. So we have seen this play. I want to go back to Mr. Lenhard. With this Court case, can a corporation give money to a Member of Congress. Has that changed at all? Mr. Lenhard. No, it has not. Mr. McCarthy. You said, I think it was in the questioning with Mr. Lungren--no, no, with Chairman Brady--that between a union and a corporation you were concerned because the corporations were so much larger in scope playing politically? Mr. Lenhard. No, I think what I was trying to say is that it was possible to distinguish them because the potential pool of resources was so much larger. Mr. McCarthy. Do you know off the top of your head who has the largest political PAC in the country, who is the most active? Mr. Lenhard. Yeah, the largest political PAC--I am not sure. Certainly the labor--the largest--labor union PACs are among the largest PACs in the country. Mr. McCarthy. Does their money go 50/50 both parties? Mr. Lenhard. No, I think that they give more money to Democrats than Republicans. I am not sure if you looked at overall, the accumulation of all PAC spending. My guess is that if you looked at all PAC spending it probably went to whichever party was in the majority. Mr. McCarthy. I just checked OpenSecrets, and you are right. Operating Engineers are the largest, which is a union, they do 80 percent. The second is a corporation, AT&T, they do 50/50. And the third largest is International Brotherhood, a union, and they do 99 percent. The next is a corporation, Honeywell, and they do 61 percent to Democrats. It made me think again on the questioning of Ms. Lofgren to Ms. Torres here, when you are asking that last question there that somehow corporations get some type of tax benefit so you would have to look at it. Could you not make that same argument, when we were talking here about health care and the way unions' health care was treated, if that bill that got the deal in the Senate would be to pass, would the unions not have a special tax incentive for their union members in health care and would that not give them a greater advantage because they wouldn't be taxed on it so they would have more money to play politically; could you make that argument? Ms. Torres-Spelliscy. You could make all sorts of arguments. I am not a tax attorney, and so---- Mr. McCarthy. Well, she was asking you tax questions. Ms. Torres-Spelliscy. Yes, I probably should have said that to her as well. So I just can't comment on the tax consequences of these things. Mr. McCarthy. Last question. You did the study, Ms. Torres, on the concern that you said for the shareholders. And you weren't talking about the big wealthy shareholders, you were talking about so many of us who invest each month in our 401(k)s and others, and you thought there had to be a change. If that change would take place that we had to approve, would that be an opt-in or an opt-out? Ms. Torres-Spelliscy. What we are proposing is an up or down vote. So the company would propose a political budget, we are going to spend a million dollars and then a line on the proxy that goes to the shareholder would say do you want corporation X to spend a million dollars in the coming year, yes or no. So if you want to look at that as an opt-in, then-- -- Mr. McCarthy. Since the Court case dealt with corporations and unions, would you not ask the same question of the union so that union member that is middle class that is getting money taken out but has to opt out for it, would it not be the same question to them as well; if you were crafting a legislation would you not want that? Ms. Torres-Spelliscy. As I said earlier, we haven't really looked at the union question. Mr. McCarthy. But would it be fair and in the same plane so if we did craft legislation and a corporation was asked that to a shareholder, wouldn't that same American that is a union worker have the same because they will probably be shareholders too? So you would probably agree with the statement that we should do the same for both? Ms. Torres-Spelliscy. I will decline to agree with you at this point. Mr. McCarthy. So we should treat them differently? They are different people? Ms. Torres-Spelliscy. I honestly would rather do some thoughtful study and then give written testimony to the committee. [The information follows:] Mr. McCarthy. Their money must be different. Okay, I yield. The Chairman. Mr. Capuano. Mr. Capuano. Thank you, Mr. Chairman. Mr. Chairman, I will be brief because I know we have to go vote. I got to tell you, after listening to most of this discussion I really wish I had paid more attention to corporate law. All I remember from corporate law is you are supposed to borrow somebody else's money, make a profit and keep both. That is all I remember from corporate law. Mr. Lungren. Law school? Mr. Capuano. No, it was run by Jesuits as a matter of fact. Mr. Chairman, I don't approach it through the technicalities of everything and that is why I don't really have any questions. I am looking forward to working with people on this panel. The question I have for everybody, and it is how I come to the issue, is what is it that I want? What is the goal that I want? I am not looking to thread a needle with a constitutional issue, I am not looking to parse this out. What I really want, I really want upfront, straightforward elections. I want everybody out of the elections except the voters and the candidates. If I could, I would have no money at all for anybody. I mean maybe a few dollars for some literature so people can get educated, and that is it. A level playing field. Everybody says you need millions of dollars to run for Congress. Why? The only reason you need it is because the other guy has it. If the other guy doesn't have it, you don't need it. Elections should be decided by regular people, getting rid of all the extraneous material. Now I know that that is a dream and I know I can't get there. My goal is to try to find ways with the stupid laws and stupid legal decisions we have. How do I get through all of that to get as close to that ideal that I want--I know that others don't share it--as possible. And that is all I want to do. So I am asking the panel, not necessarily today, we don't have time today, and I am asking members of this committee to try to come up with what is it that you want? I am not looking for Democrats to win or Republicans to win. I know that you don't believe me, and that is fine. I am not. I am looking for voters to make honest, open, unfettered decisions. Not based on who has more money, not based on who is part of the political machine. The last thing I would want is to bring the Democratic Party into my elections. Keep them out. I want the Republican Party in, please, get me a candidate. I want voters to decide on the basis of the people on the ballot. I do agree with not cluttering up the ballot. I totally agree I don't want public money going to fringe candidates. There is no question, but I think there are ways we can avoid that. The truth is I don't really want public money. I just see it as the only alternative we have left available, as the best of a bunch of bad alternatives. What I want is voters to have the equal opportunity to hear the ideas of different candidates, from school committee to president, on a level playing field and make thoughtful decisions on that, which requires some involvement by voters. I wouldn't mind requiring them to come to debates. I don't know how you quite do that. Another court case, I am sure. But for me that is the goal and everything else is extraneous. And what we are doing today, I would argue, I am trying to find ways to get there. And I would ask the panelists, again not today, I know we have to go vote, but you will be hearing from me in the next month or so. I would ask you to look at it with that goal in mind, how do I get there? How do I get as much of this nonsense out, not just corporate money. Corporate money happens to be the debate today. But I have no problem getting it all out so that we can have honest debates and honest elections and let the chips fall where they may. I am satisfied with that. That is all I want. Mr. Lungren, I will tell you that what happened to you was wrong, and I would not have any problem at all making it illegal, clearly and unequivocally, but it is not the only dirty trick I have ever heard of. And it doesn't make it right. It is actually pretty easy compared to some of the stuff I know. But it doesn't make it right and it doesn't make it good for the voters. They should be able to come and vote as they please each and every election. So if there are ways to do that, I want to work with anybody who wants to do it, and without the partisanship as best I can, without the ideological answers. I want voters to decide. If they want to go to the hard right, I can say they are wrong, but it is okay with me, it is okay with me. We just lost an election in Massachusetts. It is okay with me. We had a huge turnout for a January election. I was on the other side, we lost. But you know what, voters came out and voted it was okay with me. It was actually a pretty straight up election. That is what it should be about, and that is what I am here for. I am not here for money or no money or anything else. And with that, Mr. Chairman, I apologize, but that is what I am asking. I am not asking a question today, I am asking you to think about it and help us through this, help me through this. Thank you. The Chairman. Thank you, we have 3\1/2\ half minutes for a vote. Mr. Harper. Mr. Harper. I will be quick so Mr. Davis will have a moment, too. Public financing of elections I think is not a good idea and a good road for us to go. But I would ask, if I could ask Mr. Lenhard, do you believe that the individual contribution limits should be done away with? Mr. Lenhard. No. No, I think that there is certainly the potential, and in some cases actual corruption when people can give very, very, very large amounts of money to politicians. I think that that has underlain the restrictions and the law and the court's decisions for a long time. I don't think--there are politicians who are above that and it doesn't matter who gives them money and who doesn't. But I think sometimes it does and at minimum the appearance of giving someone $100,000 or $600,000 would be corrupting or appear so. Mr. Harper. In light of what Ranking Member Lungren said about Jack Kemp and Steve Forbes and that race, there is somebody who can use all their individual money. Shouldn't this be about full disclosure so we know exactly where the money is coming from and who this is. Does anybody on the panel support doing away with the individual limits on campaign contributions with full disclosure? I would just be curious. Mr. Simpson. I actually agree with Congressman Lungren to the extent that he laments the fact that people cannot finance candidates that they wish. I think that the answer to the problems on this committee is dealing with in the sense of corporations or other groups being able to outspend politicians. The answer is allow politicians to compete on the same basis. So I would do away with or raise them so that politicians can actually compete with all of the voices. The Chairman. Two minutes to the next vote, 2 minutes. Mr. Davis of Alabama. Thank you, Mr. Chairman. Thank you, Mr. Harper, for your courtesy in being brief. Obviously given the time constraints, I really only have time to make an observation to the two members of the panel who were supportive of the United decision. It seems a lot of the arguments frankly that you made, Mr. Simpson, were probably the very same arguments that were made prior to Buckley v. Valeo. Before Buckley v. Valeo it was not at all taken for granted that contributions could be capped. A number of the points you made about the first amendment were made by the people who argued for striking down the caps on contributions during Buckley v. Valeo. But if memory serves me correctly the Court's logic was that in the context of speech if there was a compelling enough public interest in reining in speech, that the Court could impose caps and could impose limits. So I would just end with this observation. Right now if a Member of Congress sits down with a corporation, there is a difference of opinion on issue, the most a corporation can implicitly say to you is I won't write you a check or I will write a check to your opponent and they will limit it to the tune of whatever the limits are in their PAC, $5,000 per cycle. Candidly that is not much of a threat in the modern context of campaigns. It would seem that after this decision the worst that a corporation can say to a Member ratchets up considerably: If you don't vote with me I will put a million dollars into defeating you in the next election. I can't imagine a greater threat to independent decision making by this body than corporations implicitly or explicitly being able to say if you don't follow my line, I will single-handedly put enough resources into that contest to defeat you. The Chairman. Zero time, sir. Mr. Davis of Alabama. All right. The Chairman. I don't want to cut you off, but I don't want you to miss the vote either. Thank you all. We really appreciate you being here and it was very, very enlightening. Thank you for your testimony. I am sure we will be hearing more from you; you will be hearing more from us. I ask unanimous consent that the following statements be part of the hearing record, statements by the Campaign Legal Center, statements by the People for the American Way, statements by SEIU, statements by U.S. PIRG, statements by the President of UAW and the President of the Communications Workers of America, and an article published by the Brookings Institution. I ask the record be left open for 5 days to accept testimony from others. [The statement of the Campaign Legal Center follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] [The statement of People for the American Way follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] [The statement of SEIU follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] [The statement of U.S. PIRG follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] [The statement of UAW and Communications Workers of America follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] [The statement of the Brookings Institution follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] The Chairman. This hearing is now adjourned, and again I thank our panel. [Whereupon, at 4:05 p.m., the committee was adjourned.] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]