Citizens United

What is the Citizens United decision about? The simple explanation of Citizens United is that in January 2010, it alone established unlimited donations for political campaign advertising by corporations and unions where before there was none. This ruling thereby causes tremendous amounts of corruption, as these organizations are better able to buy politicians and control their decisions. Unfortunately, this explanation is not all that accurate.

Did it create the world of unlimited campaign donations? No. Back in the 1990s, corporations or unions could donate unlimited amounts. But they had to donate to one of the two political parties. As stated in a recent New York Times article, the candidates and the party itself thereby had to take responsibility for the advertisements’ claims. However, soft money was banned by the McCain-Feingold law of 2002. What was the response?

The 527 organizations affiliated with Citizens United establish that they were independent organizations, whereas corporations and unions could donate unlimited amounts but could not do so anonymously. Also, advertising was limited to 60 days before the general election. For example, the Swift Boat Veterans commercials that attacked candidate John Kerry’s military record stopped before September 2004.

Then in 2007, the Supreme Court ruled that unions and corporations could buy ads that mentioned a candidate in the weeks before an election if they did not specifically support a candidate’s election or defeat. Subsequently, the Federal Election Commission (FEC) went further and told social welfare nonprofit organizations that they must disclose only if the donors earmarked the money for political ads.

So, given this history, what did Citizens United actually do? The ruling allowed corporations and unions to pay for advertisements calling for a candidate’s election or defeat. Did this ruling help increase donations?

Perhaps it did. One major principle in economics and business is cost-benefit analysis. If you increase the benefits or decrease the costs, you make the activity more frequent. The ruling decreased the cost. It removed legal ambiguities such as what was specifically advocating a candidate’s election, which could otherwise result in fines. Along with the 2007 ruling and the FEC decision, this ruling partly explains why total campaign contributions increased by 30 percent between the midterm elections of 2006 and 2010 compared with the smaller 20 percent increase between 2002 and 2006. That is, the increase from 2006 and 2010 was more than the just the trend of increase.

Was the ruling alone responsible for today’s unlimited donations? No. As stated, there is the previous Supreme Court ruling of 2007 and the FEC decision. As a further example, to make companies and unions disclose their donations, the US Securities and Exchange Commission (SEC) could require it, but the SEC has not.

Has the ruling led to greater corruption? It is something we would normally assume, but is it true? One way to tell would be to look at how much companies donate. Companies are more likely to have to prove that expenditures are worthwhile. Recall that companies like GM recently pulled their ads from Facebook because they did studies and found little benefit. So, do they donate?

The answer is somewhat complicated. Donations from corporations obviously occur. Towards the end of June, the Center for Public Integrity – a US non-profit investigative journalism organization – found that 100 companies had donated about $14.2 million to a pro-Romney Super Political Action Committee (Super PAC).

But most donations are from privately-held companies rather than publicly-traded ones. One of the main differences between them is that privately-held companies do not answer to shareholders. Hence, donations from private companies would stem more from political beliefs and social relationships rather than effectiveness. So, it is hard to show that it has led to greater corruption.

But if the narrative is not true, what are the ruling’s effects? One of the main effects is helping to create Super PACs who are not as accountable as a candidate or political party. This means the candidates now have proxies who can attack the other candidate in ways the candidate cannot do.

So, this decision has led to a huge change in campaigning style away from the candidates and to a more negative tone. According to an article in the Huffington Post, a study undertaken by the Wesleyan Media Project revealed that “Whereas in 2008, candidate-sponsored ads made up 96.6 percent of total ‘airings,’ as of April 22, 2012, that percentage had dropped to 35.8 percent. Campaigns, in short, are outsourcing their airwave operations to allied groups, who in turn are going negative.” Furthermore, the Wesleyan Media Project study “shows that 70 percent of ads aired so far in the 2012 presidential race have been negative, meaning they mentioned an opponent by name. In 2008, the percentage of negative ads at this juncture in that campaign was 9.1 percent.”

The likely effect of such a change in campaign style is that it creates greater dislike and distrust of the opposition candidate, and this leads to greater partisanship. Although the intense partisanship in our national politics arises from many factors such as the rise of a “partisanship industry” that caters to and reinforces conservative or liberal views as well as the method of Congressional redistricting, this ruling has helped make compromise even harder. Unfortunately, because the nation is evenly divided in terms of party preferences, compromise is essential to pass legislation.

So, just like economic models, something simple is often inaccurate. The Supreme Court ruling is not some huge break from the past that drives corruption to unprecedented levels in favor of companies. But that does not mean it has not had a negative effect – it is just in a more subtle way.

Wesley Oliphant is a junior fellow in the economics graduate program. He can be reached at