Supreme Court greenlights corruption

There are few meaningful limits remaining on money in politics. As a result, politics has become increasingly dominated by the wealthy. The average U.S. Senator is a multi-millionaire. On Monday, the Supreme Court made the situation a little bit worse. 

For the last 20 years, there has been a modest restriction on wealthy candidates that loan their campaigns money. Candidates are free to loan their campaign an unlimited amount of money. And, during the campaign, they can pay themselves back however much they want. But, after the campaign is over, any outstanding debt to the candidate over $250,000 is considered a contribution and cannot be repaid. 

The rationale is, after the conclusion of the election, contributions cannot possibly benefit the campaign. This money is going directly into the pocket of the candidate. So there is a threat of real and perceived corruption. 

The Supreme Court, by a 6-3 vote, has now decided that this provision, which has been law since the enactment of the Bipartisan Campaign Reform Act of 2002, is unconstitutional. 

Chief Justice John Roberts, writing for the majority, says wealthy candidates loaning their campaigns large amounts of cash is an essential part of the democratic process. He describes loans in excess of $250,000 as a key tool "to jumpstart a fledgling campaign or finish strong in a tight race." Massive personal loans can be "a useful tool to signal that the political outsider is confident enough in his campaign to have skin in the game, attracting the attention of donors and voters alike." Not allowing these loans to be paid back in full with money raised after the election, Roberts argues, risks "inhibiting candidates from making such loans in the first place."

This, according to Roberts and the five other conservative Justices, is a violation of the First Amendment. Roberts notes a candidate has a constitutional right “to speak without legislative limit on behalf of his own candidacy.” This includes candidates spending unlimited amounts of their own money. The restriction on repayment, Roberts writes, "burdens candidates who wish to make expenditures on behalf of their own candidacy through personal loans." 

Writing in dissent, Justice Kagan lays out a scenario which, as of today, is now legal:

A candidate for public office extends a $500,000 loan to his campaign organization, hoping to recoup the amount from benefactors’ post-election contributions. Once elected, he devotes himself assiduously to recovering the money; his personal bank account, after all, now has a gaping half-million-dollar hole. The politician solicits donations from wealthy individuals and corporate lobbyists, making clear that the money they give will go straight from the campaign to him, as repayment for his loan. He is deeply grateful to those who help, as they know he will be—more grateful than for ordinary campaign contributions (which do not increase his personal wealth). And as they paid him, so he will pay them. In the coming months and years, they receive government benefits—maybe favorable legislation, maybe prized appointments, maybe lucrative contracts. The politician is happy; the donors are happy. The only loser is the public. It inevitably suffers from government corruption.

Kagan notes that the supposed interference with First Amendment rights is largely illusory. Even with the restriction in place, a "candidate can in fact self-fund all he likes." Rather, like other campaign finance rules, the restriction on post-election repayment limits a candidate's "ability to use other people’s money to finance his campaign."

Kagan says that by greenlighting, in the aggregate, unlimited donations that will go directly into the pocket of the candidate, the majority's "decision can only bring this country’s political system into further disrepute." 

While Roberts claims loan repayments have no provable corrupting influence, Kagan notes that the majority has no "reason to second-guess Congress’s experience-based judgment about the specially corrupting effects of post-election donations to repay candidate loans." She also provides several examples of the corrupting influence of post-election loan repayment in states where the restriction is not in place:

In Ohio, various law firms donated almost $200,000 to help the newly elected attorney general recoup his personal loans. Those donors later received more than 200 state contracts worth nearly $10 million in legal fees.

In Alaska, a lobbyist collected almost $100,000 for post-election repayment of the Governor’s personal loans. A business in which he held an interest later received a $9 million state contract.

In Kentucky, two Governors loaned their campaigns millions of dollars, “only to be repaid after the election by contributors seeking no-bid contracts.”

In the majority opinion, Roberts dismisses these examples as "media reports." Roberts acknowledges that a donor that personally enriches a candidate by repaying a loan may gain influence and access. But Roberts writes that "influence and access" are "a central feature of democracy—that constituents support candidates who share their beliefs and interests, and candidates who are elected can be expected to be responsive to those concerns."

From campaign debt to profit

Now that there are no limits on loan repayment, creative members of Congress will be able to profit from campaign loans. In 1998, before the restriction went into effect, Congresswoman Grace Napolitano (D-CA) loaned her campaign $150,000. In 2009, the Los Angeles Times reported that Napolitano "collected tens of thousands of dollars in personal income by charging double-digit interest on money she lent her campaign…and soliciting donations from Washington lobbyists at 'debt retirement' fundraisers." 

Napolitano initially charged her campaign an interest rate of 18%. She reduced the rate to 10% in 2006. Between 1998 and 2009 "the congresswoman had paid herself $221,780 in interest." The money was repaid, in part, through fundraisers "hosted by 21st Century Group Inc., a Capitol Hill lobbying firm whose clients include several transportation interests." Napolitano is a member of the House Transportation Committee.

While Napolitano received special permission from the FEC to charge a high interest rate, her use of lobbying firms to repay her loans illustrates the corrupting influence of post-election repayment. 

A fake case

The further erosion of the flimsy guardrails around political corruption was purposely engineered by Senator Ted Cruz (R-TX). On the final day of his 2018 Senate race, he loaned his campaign $260,000 even though he had millions in the bank. He then repaid himself $250,000 but left $10,000 outstanding as a pretext to challenge the restriction. 

The government argued that Cruz should not have been permitted to sue because his injury, if any, was "self-inflicted." Roberts rejected that argument.