Tonight, President Barack Obama will deliver the State of the Union Address to a joint session of Congress—and perhaps even a Supreme Court Justice or two.
Most observers aren’t expecting another high-profile mention of campaign finance issues. So, to get a glimpse of what 2011 has in store for campaign finance developments, it may be useful to examine the State of the Federal Election Commission’s Union.
Judging from the FEC’s public meeting last Thursday, the agency remains a deeply-divided institution. But the Commission is designed to ensure that no political party can dominate the agency and use it to ram through a partisan agenda for electoral advantage. Contrary to the claims of some in the “reform” community, the system works quite well. “Deadlocked” (3-3) votes are relatively rare. When they happen, the action is usually sufficient to resolve the matter at hand (a 3-3 vote on a motion to find a violation, for example, simply means the motion fails). The setup typically forces compromise and prevents partisan domination. Recently, however, a long-simmering breakdown in cooperation has prevented the agency from acting on big ticket items, such as rulemakings.
At Thursday’s meeting, the FEC’s regulatory block, nominally led by Chairwoman Cynthia Bauerly, proposed a long-awaited Notice of Proposed Rulemaking (NPRM) (Draft A) to implement the Supreme Court’s Jan. 21, 2010 decision in Citizens United v. FEC. Commissioner Ellen Weintraub, the ideological-defender-in-chief of the 143-page draft, pointedly insisted that the agency include questions about modifying regulations impacting companies with international investment and ratcheting up disclosure regulations.
The FEC’s deregulatory block, ably led by Vice Chairwoman Caroline Hunter, released its competing NPRM (Draft B), which narrowly addresses the Court’s core holding in Citizens United: the government cannot prohibit companies, unions and advocacy groups from independent spending on political communications.
Before the main event—soliloquies from the Commissioners about their regulatory posture on the NPRMs—the Commissioners discussed pending audit cases (after starting the meeting 50 minutes due to last minute negotiations). “We’ve been working on some agenda documents in an attempt to try to reach some consensus, and I think we have,” Bauerly said. The FEC took up an audit report on the Tennessee Republican Party, in hope that approving the report—and updated audit report guidelines—would fast-track two related audits. Weintraub clashed with Commissioner Don McGahn, who is one of the most articulate and blunt advocates for First Amendment rights, about the matter.
“Are we done now?” she asked, needling McGahn about the FEC deregulatory block’s preference for agency transparency, avoiding “audit speak,” and process clarity. McGahn explained that the FEC’s three Republicans sought to structure to the documents to make clear which portions were FEC staff audit positions and which sections represented the opinions of the FEC’s legal authority: the “six-headed beast that is the Commission.” McGahn and the other deregulatory Commissioners earlier championed a proposal to allow representatives from audited entities to appear before the FEC.
Weintraub took great umbrage at McGahn’s “false dichotomy,” charging that the “Commission is more than six individuals who get to sit at the dais and make speeches here.” Ultimately, the FEC found consensus, voting 5-1 to approve the audit (Commissioner Steven Walther dissented).
The Commissioners then turned to the reason that the 9th floor of 999 E Street NW was jammed with observers: the Citizens United NPRMs. An FEC lawyer explained that the NPRMs were similar in that both sought public input on proposed regulations to remove corporate and union source prohibition on independent expenditures and electioneering communications, but the Democrats’ draft proposed additional regulations on disclosure and expanding the regulations defining of “foreign nationals” to include U.S. companies with international investment.
Chairwoman Bauerly kicked off the discussion by noting that the Supreme Court announced its opinion in Citizens United nearly a year ago, and the Commission put out an enforcement statement and basic guidance noting they would not enforce related regulations Feb. 5.
“That was a very good start,” she said. “Since then, we have been working hard to complete one of the major steps outlined in that statement: namely, initiating a rulemaking.” Bauerly noted that the Commissioners had been unable to reach agreement on an NPRM over the past year, but the work continues. She said the NPRM contained to obligations for policymaking but should be considered simply a forum to seek public input on relevant regulations.
Next, Weintraub launched into a 14-minute speech, planting the flag of comprehensive disclosure regulations and sweeping regulatory authority to radically regulate corporate governance procedures, including defining U.S. companies with a certain amount of international investors as “foreign nationals.”
“Promoting transparency in American elections is essential to the Commission’s mission, and this transparency in turn is essential to the success of this, the world’s oldest democracy,” Weintraub said. “We don’t believe in doing things in secret.” Of course, the anonymous political speech of Publius, the authors of the Federalist Papers (published in party-organ newspapers), was essential to the founding of the American Republic.
Weintraub argued the Supreme Court didn’t just uphold existing disclosure regulations; in her view, it gave the FEC a green light to expand the campaign finance disclosure regime without any guidance from Congress. “I’ve been doing this for 20 years. I’ve got street cred on this,” she said. Weintraub pledged to not consider an NPRM that did not address additional disclosure regulations, a position she has held since the discussions began nearly a year ago.
Next, Walther speechified. “Regardless of our views on Citizens United, we are all in unanimous agreement that disclosure is one of the most important aspects of a successful democracy.” [Um, no. Have you heard those three folks sitting to your left?] Everyone agrees that some level of disclosure may serve an informational interest, but the regulatory block’s genuflection at the altar of disclosure is not a religion shared by all—least not all the Commissioners.
“I know that some of my colleagues think that because the DISCLOSE Act was not passed, that it’s further evidence that… there’s no congressional intent that we should be in this regulatory scheme,” he said. [Walther’s getting warmer…] He then suggested that if the Commissioners couldn’t reach agreement on the drafts, then it should consider issuing segregated NPRMs or a quasi-NPRM about the NPRM asking what questions the FEC should consider.
McGahn then launched into a 23-minute, full-throated defense of the deregulatory block’s decision to draw a line in the sand at a narrow NPRM.
“Today, I’m here wholeheartedly supporting removing a number of regulations from the FEC’s rules,” McGahn said. “It’s rare that this happens in the modern administrative state—where an agency gets to actually scale back its rulebook.”
“This is done really because of a Supreme Court case… the Citizens United decision. Recall what the issue in that case was: it was the effort of the government to ban a movie—a movie that, with all due respect to Citizens United, was not particularly good and which no one saw. They didn’t see it because it wasn’t available… In the privacy of one’s home, one could not pay to see a movie that said bad things about a candidate for president.”
McGahn then detailed the nuances of the post-FEC rulemaking after FEC v. Wisconsin Right to Life that promulgated a 2-part, 11-factor balancing test to determine the legality of political speech.
“So, we’re here today on what should be a happy occasion for those of us who have sought clarity in the law, less regulation, more of a focus on what the Federal Election Campaign Act is designed to combat, which is corruption or its appearance,” he said. “We are at impasse and… this removal of regs. is going to be held hostage for reasons that, to me, are not appropriate.”
McGahn noted that the two controversial provisions of Draft A bore remarkable similarity to major planks of the DISCLOSE Act, a bill that would have prohibited certain forms of corporate speech, including expenditures by U.S. companies with international investors, and would have required a more onerous disclosure and disclaimer regime. The DISCLOSE Act did not pass Congress.
“Article I of the Constitution is first in the Constitution for a reason. It’s not the job of an unelected agency to decide it knows better,” he said. “We’re an agency of limited jurisdiction. Unlike agencies like the EPA… we do not have some roving power to fill in gaps left by Congress and the like. Instead… we are limited to the language of the statute.”
“The last thing we need is even more regulation,” he added. “In 1980, the Code of Federal Regulations that governed politics, 11 CFR, was 138 pages long; today it’s 555 pages long. Today we have a chance to shrink that ever so slightly.”
McGahn said his objection was that the NPRM does not contemplate that the potential burden of disclosure regulations and corporate governance regulations—and demands by regulated entities to prove to the government why it should not act—has serious consequences for political speakers not complemented by the agency’s regulatory block.
“The Commission, at least some [members], seems to think it can launch a rulemaking based on some unspecified jurisdiction over disclosure of shareholders,” he said. “I don’t think we have quite that much power.”
Another burden, McGahn said, was increasing the instability in the law with an aggressive rulemaking. “The FEC has developed over time, a rather settled area of law in this area. It’s a fact-based inquiry of who’s on what board of directors… Very real people have made very real decisions based upon that settled area of the law… [Corporations] have structured themselves accordingly to be able to participate in politics. Just merely the threat of changing that rule will impact businesses negatively.”
McGahn noted the timing of enhanced interest in disclosure was “interesting.”
“I have trouble supporting a rulemaking at this juncture on theories that could not pass Congress because of the way this rulemaking has been handled,” he said. “There is certainly disclosure mania on the editorial pages and in certain academic circles. It’s interesting that this kind of disclosure seems to have come about in a heated election cycle where accusations of secret money and the bogeyman of foreign nationals was brandished about.” He noted that those issues have existed for many years, and the FEC has addressed the issues in decades-old regulations and advisory opinions.
Next, McGahn addressed disclosure issues in the Supreme Court’s opinion: “To be clear, the Supreme Court did uphold the electioneering communication disclosure of McCain-Feingold. That disclosure requires corporations and unions to file reports with the FEC… and that’s all it did. Courts do not expand the reach of statutes simply because they uphold them,” he said. “It is not a mandate for additional burdensome disclosure. Perhaps if Congress sees some daylight, they may choose to act. They may not choose to act. They tried to act; it didn’t pass. I would suggest the voters spoke on Election Day, and we’re not empowered to nullify that verdict nor are we allowed to nullify what the Court actually said.”
“Corporations and unions do have to disclose… there’s just not as much disclosure as some would like,” McGahn said.
Commissioner Matthew Petersen stressed the importance of following congressional guidance. “I think we can’t ignore the significance of Congress not passing the DISCLOSE Act,” he said. “It’s kind of 8th grade civics class, first day: Congress enacts the law and executive branch agencies administer and enforce [it].”
Vice Chairwoman Hunter provided a glimpse of the behind-closed doors negotiations over the NPRM. She said that the Commission initially agreed on a brief rulemaking to focus on consensus issues with later rulemakings potentially addressing other issues. Negotiations broke down over what would be in the first NPRM. The Republican Commissioners “came to their senses” and realized the Democrats would “hold[] the rest of the NPRM hostage” to expansive disclosure regulations and other non-core issues. She stressed her willingness to continue discussions, though: “I’m happy to talk at any point, in the ladies room—anywhere else.” But Hunter also said Commissioners should consider further options, such as issuing a press release to guide speakers to do what they believe is appropriate pending a final rule or determining the implications of simply not issuing a rulemaking.
“We can move a proposed rulemaking out the door today,” McGahn said after rebuttals from Bauerly and Weintraub. “There’s no reason to keep unconstitutional regulations on the books. There is so much agreement between the six Commissioners that I don’t see a good reason to vote against that approach. Other than that, I have no further questions. You have made my case for me.”
Ultimately, the FEC’s deregulatory block holds the balance of power. There’s absolutely no chance that they will advance a rulemaking process to expand the agency’s regulatory scope (as that would be worse than the status quo), and it would require one of their votes to move forward.
As Chief Justice John Roberts wrote for the majority in FEC v. Wisconsin Right to Life, “[w]here the First Amendment is implicated, the tie goes to the speaker, not the censor.” So it goes at the FEC. Both drafts failed to pass on 3-3 votes.
