Sunday, October 23, 2011

The Unlimited Corruption of Citizens United: What to do about campaign financing?

Citizens United v. FEC threw the rule book out the window.  It blew everyone's mind, not the least of which were corporate executives.  Now, instead of sending candidates and parties voluntary donations from employees to run advertisements, they could send millions scooped out of their multi-billion dollar businesses,  Of course, it was the company's money, meaning the shareholders, but that didn't seem to bother anyone in 2010.

The Campaign Legal Center reported on financing behavior and reporting in 2010 in the wake of Citizens United.  The arena had become increasingly deregulated and opaque, a regular free-for-all.  For the first time in 60 years, corporations and unions could spend their own funds on ads expressly advocating the defeat or election of a candidate.  They could spend it directly or direct the money to an outside group like a tax-exempt foundation which didn't have to disclose donors.

Psychologically corporate executives behaved very differently than they had in the past.  Armed with the SCOTUS seal of approval, they felt little worry about shareholders or consumers and had tax-exempt vehicles as safe houses guaranteeing their anonymity:

[C]orporate executives are feeling freer to act on their perceived economic and ideological interests and to spend corporate funds--rather than money from their own pocket--to support business-friendly candidates.

How do you stuff the reckless forces unleashed by Citizens United back into Pandora's box?  One suggestion is greater disclosure.  Who is funding these "special interests"?  How are they benefiting?  Are foreign interests involved?  Do oil and gas men supply seed money for the new Chair of the Energy Committee?

Unfortunately, disclosure rules are looser than ever.  Corporations can funnel their advocacy money into 501(c)(4)s or 501(c)(6)s, tax-exempt groups which can run election ads without revealing their donors.  In most cases, the FEC requires disclosure only when a donor targets a particular ad.  Because the fundraising is done before specific ads are created, the need for disclosure is negligible.

In 2004, 71% of disclosure reports filed with the FEC detailed the names and associations of donors.  In 2010, only 15% of disclosure reports gave the source of their funds.  Most of the 501(c) groups didn't disclose at all.  No one knows who's giving to whom or what.  Another neutered FEC rule: 501(c) groups cannot have political activity as their primary focus but in practice they often do.

Without enforceable and rigorous disclosure rules, how will we know whose buying our representatives and how much they cost?  Who is benefiting from "special interest" spending?  What's the quid pro quo?  Make public who the beneficiaries are in hopes they may be embarrassed and behave (although that's dubious).  Another suggestion is to reveal how politicians vote in response to the business interests their lobbyists represent.  Perhaps we can try a go-round with public financing, especially for Presidential candidates.  Big-money influence is very powerful in Washington, but cynicism and corruption is costing the American people a fortune. 

Citizens United v. Federal Election Commission (2010): Its Meaning and Implications

To sum it up:

Anything that regulates corporate spending on political advocacy either of a candidate or a cause has a chilling effect on the First Amendment, that of Freedom of Speech.

Holding: Political spending is a form of protected speech under the First Amendment, and the government may not keep corporations or unions from spending money to support or denounce individual candidates in elections.

By removing existing restraints on what and when profit-making and non-profit corporations may say during federal election campaigns, the Court has significantly raised the financial stakes for all such elections.

SCOTUS struck down previous law that restricted corporations from using their own in-house cash to spend on politics.  It seems that corporate spending on politics is equal to free speech.  Political spending gets more constitutional protection because more money is greater (not equal) to less money..

Analysis: This was a constitutional decision, laying down (essentially for the first time), a sweeping free-speech right in politics for “special interest” bodies of all types with the concept of “speech” clearly embracing spending money to influence election outcomes.  If individuals have considerable freedom to express themselves politically, corporations, labor unions, and other “special interest” entities now do, too.

Citizens United reversed a previous holding that federal law prevents corporations and unions from using their general treasury funds to make independent expenditures for speech that is an “electioneering communication” or for speech that expressly advocates the election or defeat of a candidate. 2 U.S. C. 441b.  

An “electioneering communication” is “any broadcast, cable or satellite communication” that “refers to a clearly identifiable candidate for Federal office” and is made within 30 days of a primary election, and that is “publicly distributed” which in “the case of a candidate for nomination for President…means” that the communication “[c]an be received by 50,000 or more persons in a state where a primary election…is being held within 30 days.”  

Corporations and unions may establish a political action committee (PAC) for express advocacy or electioneering communications purposes.  In McConnell v. FEC, this Court upheld limits on electioneering communications, relying on the holding in Austin v. Michigan Chamber of Commerce, that political speech may be banned based on the speaker’s corporate identity.

As Roberts wrote in the majority reversing the previous precedent, a communication “is the functional equivalent of express advocacy only if [it] is susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate”.  [B]ecause speech itself is of primary importance to the integrity of the election process, any speech arguably within the reach of rules created for regulating political speech is chilled.

As a result of the Citizens decision, for all intents and purposes the free flow of other people’s money (OPM) in the self-interest of the corporation filling an unlimited amount of cash in the coffers of candidates that will do its bidding is constitutionally protected.  The more money spent, the greater the impact.  

The St. Petersburg blog quoted an Occupy Wall Street sign, “94% of winning candidates in 2010 had more money than their opponents” (10/5/11) in order to dissect it to get to the truth.  Even if the year and percentage given don’t align precisely, the PoliFact background check proves that  more money in the campaign till gives political candidates a huge advantage over their opponents.  At the very least, 85% have prevailed since 2000.

The importance of campaign money and fundraising cannot be overestimated.  By allowing unlimited spending because it is constitutionally protected free speech, it cannot be regulated as “electioneering communications”. The protections afforded such spending under the First Amendment outweigh any petty concerns about the corrupting influence of money on politics.

Another SCOTUS decision, Reynolds v. Sims (1964), seems to contradict the implications of Citizens United.  The justices were deciding an apportionment case in Alabama where in some counties there was 1 representative per x amount of voters and in another there were 14 per x.  They struck down state senate inequality based on the principle of "one person, one vote" , voting 8-1.

In his majority opinion, Chief Justice Earl Warren said, "Legislators represent people, not trees or acres.  Legislators are elected by voters, not farms or cities or economic interests."

I doubt that Chief Justice Warren (who is probably considered a judicial activist by many on the right, although he was appointed by the Republican President Dwight Eisenhower) would equate corporate spending with free speech.  Under the Citizens United decision, some free speech is wealthier and more powerful than others.

If you take into account history and statistics, the fact that unlimited corporate spending on politicians and their causes is protected under the first amendment can seriously undermine our representative democracy of "one person, one vote".  The politician will be more beholden than ever to a large corporate donor with business interests before Congress.  It's as though the justices cannot fathom that dangling unlimited funds without restriction in front of politicians can corrupt them and the process.

The Citizens United decision will only increase the public's distrust and dislike of politicians, politics and the political process.  Congress's approval rating currently is so low it is barely perceptible.  Citizens United seems to take the voter out of the political equation entirely.  He is merely an afterthought, a thorn in the side of the beautiful relationship between a politician and his donor.

Saturday, October 22, 2011

Timeline for One Party Rule--A Look Back

Sorry for the slithering shape of the chart.  It's legible enough.  It's not comprehensive enough.  Add your own thoughts.

1964                Goldwater Republican nominee-Reagan delivers fiery speech at convention.

1976                Buckley v. Veleo: No restrictions on contributions from individuals and groups could be set so long as the contributions were not directly part of an election campaign.

1978                First National Bank of Boston v. Bellotti: Corporations had a first amendment right to make contributions in an attempt to influence political processes.  Prohibiting the expenditure of corporate funds for “influencing or affecting”voters’ opinions infringed on corporations’ “protected speech in a manner unjustified by a compelling state interest.”

1980                Reagan elected—“The gov’t is the problem, not the solution”—Reagan lowers marginal tax
                        rate from 70% to 28%.  Deregulation—“Trickle-down theory”—Voodoo Economics 

1986                Greed is good—Private citizen Grover Norquist starts Taxpayer Protection  Pledge.                         All Republicans must sign loyalty oath to survive.
1992-2000       Clinton President; Robert Rubin Treasury Secretary; Larry Summers Ass’t TS
                        The great triangulator—the third way
                        Ended welfare
                        Ended Glass Steagall
                        Giant budget surplus

2001-2008       George W. Bush President
                        9/11 pretext for everything: 2 wars; revocation of habeas corpus; enemy combatants
                        Tax cuts for the rich—tremendous wage gains for top 1% (esp. 5 of 1%); all other wages flat
                        or decline.
                        Giant budget deficit—unfunded mandates
                        Unitary president—the president is absolute monarch—signing statements; torture memos.
                        Alan Greenspan (1987-forever): Ayn Rand acolyte; the market knows best.
                        Real estate bubble bursts—Lehman goes bankrupt—TARP—Trillions spent to bailout banks
                        Foreclosures begin/unemployment keeps going up.
2008-Present  Obama President
                        Obama wins presidency with 56% of the popular vote and a clear mandate for change.
                        Passes $787 billion stimulus package derided as "too big" and "too little".
                        Passes Affordable Care Act amid slurs of "death panels".
                        Foreclosures continue.
                        Unemployment doubles.
 2010                Citizens United vs. Federal Election Commission: Political spending is considered a form of protected speech under the First Amendment and the government may not keep corporations or unions from spending money to support or denounce individual candidates.
                        While corporations or unions may not give money directly to campaigns, they may seek to persuade the voting public through other means, including ads, especially when those ads were not broadcast.

Tea Party starts up funded by Koch Brothers, multi-billionaire mineral excavators descended from John Birch Society

Necessary for super-majority (60 votes) in Senate under threat of filibuster.
Obama's legislation is obstructed across the board.
Every Obama initiative blocked including judicial confirmations.

Osama Bin Laden eliminated.
Qaddafi eliminated.

Mitch McConnell-Senate Minority Leader: Defeat Obama at all costs.
Republicans refuse to bring any Obama initiatives to the floor, let alone put them to a vote.
Republicans veto raising the debt ceiling, causing an S&P currency downgrade to AA status.
Republicans' strategy is to destroy the economy to win the election.

Republican Blueprint for One Party Rule

What they learned:
No universal draft.
No more Bork SCOTUS nominations: Stealth idealogues take the Fifth to promote corporate interests.
Plug like-minded judges in every state and local slot.
Every Republican marches in lockstep spouting the same talking points.

Blanket Media Disinformation/Dissemination:
Fox News
Rush Limbaugh
Glenn Beck
Sarah Palin
Little Green Footballs


Think Tanks
Heritage Foundation
American Enterprise Institute
Cato Institute (founded by
the Koch Bros.)

"Free Market" Enforcement
Trickle down theory (aka voodoo economics)
Privatized profits, socialized losses
Buy the politicians and write the legislation

Make the Laws-Establish Your Own Law School
Regents Law School-inventor of the Unitary Executive theory constitutionally supporting the Executive Branch as absolute monarchy (especially prevalent during George W. Bush reign)

Treat Americans like vampires except instead of wooden stakes drive fear into their hearts.

Protect dirty tricksters.  They have a distinguished lineage: Donald Segretti, Lee Atwater, Karl Rove, Roger Stone, and the media giants, James O'Keefe and Andrew Breitbart.  Who can forget Willie Horton?  Or John McCain's illegitimate black baby?  Or Hillary killing Vince Foster?

How to Get to One Party Rule

I have documents, incontrovertible proof, that there is a systematic, decades-old project to move the country to One Party Rule. It's been engineered by concentrated wealth and single-minded pursuit of the goal to funnel all public money into private hands under the mantle of "one hand washes the other".

In 2001, at the time Congress passed the Bush tax cuts (estimated cost $1.3 trillion and there was no talk of "pay as you go"), Grover Norquist, he of the "No Tax Increase" loyalty oath, famously crowed, "I don't want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub."

The plan is not to get rid of all government institutions and civil servants: the EPA, the NLRB (well, maybe that one), the Department of Education (that one, too), the Post Office (that one, too), teachers, firemen, policemen, sanitation workers, transportation workers, infrastructure programs, etc.

The idea is to defund these government institutions and civil servants so that government cannot work effectively; thereby demonstrating that government fails so we should sell off public space/assets to private entities. The Republicans don’t have to shut down government, they just have to starve it to get everyone to agree that it doesn’t function.

The next post will illustrate what lessons the Republicans learned and their resulting tactics.

Saturday, October 8, 2011

Someone Left the Cake Out in the Rain: the NYT fights against Occupy Wall Street under the guise of objective journalism

The New York Times is a paper of record. How it parses its language and tilts its coverage determines opinion.

Under the guise of "objective journalism", it shades its stories to fit its agenda.

Today Cara Buckley, a reporter for the NYT, wrote a story entitled, “For Some, Wall Street is Main Street.” The through line is that the protestors are uncivil, and have come to Wall Street to break plumbing and steal toilet paper. By reading more than half of the article, you’ll get the impression that the protesters aren’t spending money at the local merchants (and worse! They're corrupting our infants!).

The first 2/3s of the article quotes nice middle-class stereotypes, a female psychologist, Sheldon Silver (!), and women who can’t get their strollers through the streets. One woman said she had to shield her child’s eyes from, “the sight of women dancing topless in the park.”

I was there. I didn’t see anyone dance topless, or smoke pot, or even walk pooping dogs. This is a story obviously planted (by Bloomberg? He comes off as an easy-going guy letting the Times do his dirty work) as a way to discredit the meaning of the protest. A reader has to go more than 2/3 down in the story to find small business owners that are happy to sell to the protestors. I bought cheese sticks and apples for the occupants (don’t cry for me, one of the 99%):

A woman who tends the Dunkin’ Donuts kiosk a block from the site said coffee and doughnut consumption had jumped.

Yves Delva, a manager at a nearby Modell’s Sporting Goods, said sales had been brisk for sleeping bags, sweatshirts, hand warmers, sweatpants and goggles — that last item presumably bought to protect the eyes from pepper spray, which has been used by the police in response to the demonstrations.

Some residents said the noise, the crush of out-of-towners and the resulting delays were to be expected in one of Manhattan’s most famous neighborhoods.

Julie Menin, chairwoman of Community Board 1, which serves Lower Manhattan, said that the protesters had been responsive to concerns from the board and had agreed to stop drumming at 10 p.m. and to enforce quiet hours.

Contrary to the article's implications, protestors are not shutting down green space on a wide-spread, long-lived basis. The freedom of assembly has been stripped from our most magnificent public space, Central Park. The Great Lawn was shut down to demonstrators under the dubious reasoning that the grounds would be trampled on. Isn't that what happens in public parks? Our mayor has co-opted large areas of public parks (the Great Lawn is off-limits to most groups, except the Philharmonic—note the demographics?), which was particularly inconvenient for those protesting the Iraq War in 2003 and the Republican Convention in 2004.

Sunday, October 2, 2011

Apocalyptic, Unthinkable: How to Prevent a Second Great Depression

Events in the Eurozone are deteriorating at a rapid pace. Greece, which owes something like $500 billion and whose debt is 180% of GDP, is heading to default.

Spain and Italy are looking dicey. The credit ratings of several major French banks have been downgraded. Eurozone authorities have to act decisively now.

Dozens of European banks hold Greek bonds. The banks need to be recapitalized. If Greece defaults, its bonds and those of half dozen Eurozone countries will be worth a fraction of the value at which they are carried on banks’ books.

The problem with the Eurozone is that its currency, the euro, is centralized but each of its 17 member countries issues bonds and deals with their debt separately. If a weaker country (like Greece) cannot devalue the currency it uses, it can’t lower the cost of its debt.

The Eurozone isn’t prepared to deal with an economic crisis of this magnitude because its funding mechanisms are embryonic and each nation’s sovereignty is at stake. That doesn’t prevent the problems of one country from affecting the rest.

In 2008 when Lehman defaulted causing a global credit crunch, the U.S. coordinated rescues through the Federal Reserve and the Treasury Department, immediately lowering interest rates, which made it cheaper to pay off dollar-denominated debts and setting up facilities to provide liquidity to virtually insolvent institutions. However, it missed the boat by not requiring anything in return. Perhaps that’s why a new crisis erupted so quickly on the heels of the last. The collapse of 2008 was never resolved.

Experts are offering detailed solutions. As to whether they’re politically realistic, that remains to be seen. George Soros proposes:

#1: The 17 member countries must agree to a centralized European Union authority of its national economies. They must agree on a treaty to create a common treasury.

A centralized authority could issue Eurobonds to back the debt of its member nations. However, issuing collective Eurobonds requires the pooling of risk. In other words, a bond’s value is as strong as its creditworthiness. For the Eurobond to be financially viable, it must rely heavily on Germany. Germany has the strongest economy and credit rating, giving it the biggest seat at the table.

#2: There are two separate, major Eurozone financial mechanisms that can work together to staunch the bleeding: the European Central Bank (ECB) and the temporary lending facility, the European Financial Stability Facility (EFSF).

Using the most generous estimates, the size of the EFSF fund is a fraction of what is needed. Previous EFSF bailouts for Ireland, Portugal and Greece have reduced the size of the rescue fund (even with Germany’s recent support) to E440bn ($590bn).

#3: There should be a new intergovernmental agency to enable the EFSF to co-operate with the ECB:

The countries comprising the Eurozone must be put under ECB control in return for temporary guarantee and permanent recapitalization.

The ECB’s guarantees will allow member countries currently paying high interest rates to attract investors at sustainable levels. It could lower its discount rate for the troubled countries to refinance for about 1% during the emergency.

The EFSF would guarantee and recapitalize banks. In exchange, the countries involved would have to sign a contract that they will abide by ECB directives, which include maintaining their credit lines and loan portfolios while closely monitoring risks in their own accounts.

Another theory to prevent a bank meltdown and a run on sovereign debt from Peter Siegel of the Financial Times is to have the EFSF inject capital into banks and purchased distressed sovereign bonds on the open market, lowering borrowing costs that way.

Because the fund’s resources are inadequate, there are several ideas about how to stretch its money, mostly by leveraging (in other words, using the money to raise five times as much in debt):

#1: The EFSF guarantees losses of up to 20% on sovereign bonds rather than buying the bonds outright. This would increase the value of EFSF support 500% with no upfront payments.

#2: Speed up the creation of the EFSF’s replacement, the permanent European Stability Mechanism. ESM capital would come from member countries, which is more easily leveraged in the marketplace.

#3: Rely more on the ECB: turn the EFSF into a bank and allow it unlimited borrowing power. Or have the ECB continue purchasing sovereign debt but have the EFSF guarantee bond purchases, moving potential losses to the fund rather than the ECB.

#4: The EFSF could have creditors take a “voluntary” haircut of 50 cents on the euro. If Greece defaults, they would get far less. Lehman debt discharged in bankruptcy was worth 15 cents on the dollar.

The proponents I quote in this article agree that the only long-term way out of this debt crisis is economic growth, not austerity. When GDP increases, then there is money to make payments. Austerity programs cause massive unemployment, retard growth, diminish tax revenue, and reduce consumer demand. When all countries are on austerity programs at the same time, the recessionary effect is multiplied.

There are no guarantees that the Eurozone authorities can implement these solutions. The resolution of the Euro contradiction requires that each of the 17 member countries submit to a central authority, losing some of their sovereignty. Acting with urgency in the face of looming economic catastrophe can backfire politically. Some citizens are angry about the deep wage cuts, massive layoffs and large tax increases of an austerity program. Others are angry that they were frugal yet have to bail out their profligate neighbors. At any rate, the taxpayers end up footing the bill.