So, You Heard About Citizens United…

Alright friends, lets get down to business. Primary season is just around the corner and there’s some things we need to clarify. Over the next few days, I’m going to be talking about campaign finance — an issue people bring up a lot, but rarely know much about. Here it goes.

Part 1: What is Citizens United and How Does it Work?

In 2010, the Supreme Court ruled, in a 5-4 decision, that Citizens United won a case they brought against the Federal Election Commission. As you all likely know, this case was about campaign finance. What you might not know, is that it’s about a very specific part of campaign finance rules.

So lets break it down! (Get hyped, this will blow your mind.)

(Full disclosure, I am not a campaign finance lawyer, I have not even been to law school. However, I worked at the Federal Election Commission this summer for the chair and I have read the entire opinion and discussed it with people who are lawyers who know a lot about this subject.)

Election law is pretty complicated, so we’re going to focus on the specifics of this case. The main issue at hand was a section of the  Bipartisan Campaign Reform Act (BCRA) that banned corporate-funded independent expenditures. An independent expenditure is an when a money is spent on communications (like TV ads, fliers, postcards, etc.) that expressly advocate for a clearly identified candidate’s election or defeat. These communications may not be made in “cooperation, consultation, or consort, or at the request of suggestion of candidate,” the candidate’s campaign, or the people who work for it, or a political party, or the people who work for it. Basically, independent expenditures are expenditures made completely independently from the official campaign and are usually backed by corporations.

In a nut shell, the Court decided that banning corporate political speech all together was unconstitutional. What that means is that corporations, post summer 2010, were allowed to make independent expenditures in elections. This lead to the creation of groups whose sole purpose was to make independent expenditures. We call those groups independent expenditure only political action committees, or super PACs.

The biggest thing that differentiates a super PAC from an official campaign is that there is donation limit. A person can only donate $2,700 to an official campaign, and only individuals can donate. No corporations can donate to campaigns. So, when you hear candidates talk about how this corporation and that corporation have donated to their opponents campaign, that’s not what’s actually happening. Individuals who work for those corporations are donating directly to that campaign (more on this in a post coming soon!).

A corporation or foundation can donate as much as it wants to a super PAC, but the PAC still has to disclose its donors to the Federal Election Commission, who makes this data available to the public.

If you just wanted the nuts and bolts of it, stop reading now! But, if you want to be the talk of the town at cocktail parties (or your local Frat, for my young viewers) KEEP READING! It’s gunna get real.

Part 2: Is the Protection of all Political Speech a Price We Must Pay?

Buckle up folks, and get ready for a crazy ride! You just might rethink everything you thought to be true about money in politics. If only for a second.

Justice Kennedy argued in his majority opinion that political speech is the most valued type of speech in America, and that no one should be deprived of any kind of political speech, because all of it is valuable to the discussion. He argues that political speech is “central to the meaning and purpose of the First Amendment.” That means that Congress isn’t allowed to  inhibit speech, especially political speech, and that this protection extends to corporations. He writes, “political speech is indispensable to decision making in a democracy, and this is no less true because the speech comes from a corporation rather than an individual.”

That’s not even the best part!

Because the identity of the speaker is inconsequential to political speech, the “Government has an interest in equalizing the relative ability of individuals and groups to influence the outcome of elections.” It cannot use “censorship to control thought,” which is what it does by preventing corporations from speaking in elections. “This is unlawful. The First Amendment confirms the freedom to think for ourselves.” He continues, arguing that “no sufficient governmental interest justifies limits on the political speech of nonprofit or for-profit corporations.”

He also says….

Wait for it…

That “it is irrelevant for purposes of the First Amendment that corporate funds may ‘have little or no correlation to the public’s support for the corporation’s political ideas.'” He uses the famed Federalist No. 10 to support this argument, saying that the best way to prevent the rise of factions is to permit them all to speak and give the people the power to judge what is true and what is false.

It keeps going, but here comes the big finish….

The 5 majority Justices all agree that, “the appearance of influence or access [of corporate speakers] . . . will not cause the electorate to lose faith in our democracy.”

 

And there you have it. Citizens United v. The Federal Election Commission, broken down and summarized. See? It wasn’t that bad! Isn’t election law fun?? I certainly think so. Keep an eye out for next week’s post that explains where the money in the election is coming from!

But, before I leave you, I want to bring up the question that titles this section. Reflecting on theses arguments, which flow fairly logically, do you think that the protection of all political speech is a price we must pay for a functioning democracy?

 

 

Advertisements

Distractions, Distractions, Distractions…

campaign

Every election year, without fail, light is shed on some candidate’s involvement in something “scandalous”, or part of a candidate’s past in uncovered, in the hopes of discrediting them in the eyes of voters and consequently losing their votes. This year has been no differ. With the 2016 Presidential Election in full swing, some of the presidential hopefuls, along with the media, are doing anything they can to trump up stories and scandals about their opponents in attempts to gain more votes.

What makes me frustrated is that most of the time (there have of course been instances that have not followed this pattern), these stories can cause many voters to switch their allegiance, while it may have nothing to do with a candidate’s ability to run the country. For example, the Clinton email “scandal”. Firstly, and most notably, the kerfuffle raised by the Republican Party concerning the private server of Secretary Clinton (which had been approved at the time of it’s inception) is absolutely atrocious. The possibility that having her own email server could have compromised her ability as Secretary of State to keep national secrets is ludicrous, yet has enough of an inkling of reality that it has been able to sway some voters. Just recently, “highly classified emails” were found on Secretary Clinton’s server. But these emails were classified after the fact. When they were sent, they did not contain classified information. Let’s also keep in mind that the State Department already cleared all the emails the server contained months ago. While this may sway many voters who are undecided on their candidate thus far, I remain unfazed. I have no reason to believe that Hillary Clinton’s ability to lead is at all tied into how she handles her  emails. Aside from the recent allegations made towards Secretary Clinton, It seems as though very few of these controversies hold any real substance in terms of making or breaking a presidential candidate.

The media may eat up these stories, but, on a large scale, they do little more than distract from the real issues. Some candidates may be more absorbed in attacking their opponents than discussing topics important to the American people, which only serves to inflate their egos rather than contribute anything meaningful to the race to the White House.

Part 3: Economics and Emotions

I’m sorry, but I cannot support a candidate who is more concerned about the feelings of the middle class than they are about the actual strength of the economy.

I know that’s a radical statement coming from the mouth of a liberal, but I honestly can’t do it. I think we can work to help the middle class, working class, and poor America feel better about the strength of the economy and their ability to succeed, while also using rhetoric that is practical and doesn’t give people an inaccurate perception of how it works.

Most Americans haven’t taken a basic economics course, so it’s pretty easy for candidates to essentially say what ever they think their constituents want to hear. What bothers me, is when candidates, especially those who campaign on being straight shooters, use rhetoric that anyone who has taken a high school level economics course can see is impractical and even dangerous.

Economics and emotions are tied together. But, I think they should be left alone to interact naturally with each other. Candidates on both the left and right are playing up the fact that wages are fairly stagnant and people don’t feel like they’re better off than they were 4 or 8 years ago. I don’t think that it’s right for any candidate to take advantage of the distrust that middle class Americans have for the economy.  Playing on the fears and insecurities of the middle class for political gain has potentially negative consequences.

Just because something is popular, doesn’t mean it’s right and just because something is unpopular, doesn’t mean its wrong.

Part 2: Democrats say whaaat??

There are Democrats running for office who are advocating for measures that are more extreme than Dodd-Frank. As part of their rhetoric, they promise that these reforms would protect everyday Americans and prevent the next financial crisis. While some of what they’re advocating for would help protect average Americans, these measures less about the causes of the financial crisis and are more related to people’s feelings about inequality in America.

My biggest concern about these measures are calls to make the Federal Reserve more democratic, and thus, more susceptible to the whims of the people. Further, some candidates have called for the Federal Reserve to be forbidden from “hoarding” funds and charging the banks interest. The justification for that is all the money should be available to the people.

Frankly, I’m baffled by this argument.

First, the Fed is an independent body that is not supposed to be affected by daily concerns of the average person. It cannot be democratically elected for the same reason the federal courts can’t be democratically elected. The Fed should be run by economists, not politicians or average people.

Second, the Federal Reserve doesn’t hoard money. Money doesn’t actually exist. To over simplify, the rates set by the Fed are a response to changes in the money supply. The job of the Fed is to make long term economic predictions concerning the macroeconomic objectives of price level stability, economic growth, and unemployment, using the money supply as means to influence interest rates which in turn have impact on each objective. When the Federal Reserve is trying to stimulate the economy, as it was doing from 2008 until last quarter, it keeps interest rates very low in order to increase lending to businesses which causes an increase in consumer spending, which consequently works to combat unemployment. By raising tightening the money supply, the Fed is manipulating the interest rate upwards, resulting in a slight decrease in quantity of loans issued by banks.   To control the money supply, the Fed buys or sells government securities (or bonds) to banks. When it wants to increase the money supply, it buys government securities from the banks (Banks receive money as payment and the Fed receives a non-liquid asset). To tighten the money supply, it sells them to banks, taking money in exchange for assets, which removes money from the total supply. The interest rate is merely influenced by these transactions, among other methods that the Fed employs to influence the interest rate and money supply.

There are practices on Wall Street that have caused, and likely will cause in the future, significant pain to average Americans. But! There are parts of the system that work okay, like the Federal Reserve.

Part 1: Surprise! Wall Street is Pretty Regulated

I’ve been reading The Big Short by Michael Lewis over my winter break because I saw the movie (which was awesome, you should totally see it). But the book goes into way greater detail about the causes of the Great Recession. One of the things it points to is the lack of regulation of the United States bond market.

I’m going to spin off this for a second.

In the 1980s, investment banks started investing in subprime mortgage bonds. (For reference, Glass-Steagal, a New Deal law that prevented commercial banks from dealing with investment banking, and commercial banks were not participating in the subprime mortgage market.) Banks started making big money on the bond market, as opposed the stock market. Michael Lewis thought this was unsustainable at the time because the investment banks were making money off of “America’s growing debts” (xiv). He was shocked by how long it took for this market to collapse. The collapse of the bond market is what caused the Great Recession in 2007 because so many banks had invested in subprime mortgage bonds that were full of bad mortgages.  Mr. Lewis states subprime mortgage bonds were made up of a lot of bad mortgages, that were marked as bad mortgages and shouldn’t have been placed in the bonds in the first place. The market collapsed when people defaulted on their loans in late 2007, and the banks lost a ton of money because they had invested so much in what was supposed to be the most stable market, the housing market.

Now we’re back to regulating the bond market.

The best way to prevent a similar kind of financial crash is regulating the bond market, but no candidate has said anything about that. Recently, I’ve been thinking about how all the campaign rhetoric I’ve been hearing about Wall Street seems to be way off base. Democratic candidates are focusing on regulating the stock market, criminalizing greed, and downsizing banks. While these policies make good sound bites, I’m far from convinced that they would make good policies.

After some research, I’ve realized that my original perspective on Wall Street was far from accurate. Most of what I’ve heard since the crash is how Wall Street is evil and out of control and needs to be stopped. While there are still many problems with Wall Street,  it seems to me like Democrats running for office are approaching its deficits the wrong way.

The real problem is not Wall Street in general, it’s the bond market.

Average Americans do not participate in the risky side of the bond market, which is corporate bonds (they do, however, purchase US treasury bonds, which are some of the most stable bonds in the world). The corporate bond market is completely run by the wealthiest people in the country. As a result, Michael Lewis writes, there was no populist pressure to regulate it, which lead to deregulation, and the terrible trading practices that created the recession.  My theory was that the best way to solve this problem was to politicize the bond market — encourage everyday Americans to care about what is being done with their debt. While people like you and me can not directly participate in the corporate bond market, we can make it clear to the people who represent us that we do not support its trading practices. We can make it clear to our candidates that regulating risky trading on the bond market is a priority to us.

I spoke briefly with an investment banker this afternoon about what kinds of regulations would actually help prevent another crash because of bad subprime mortgage bonds. His response surprised me. He told me that the banks are so heavily regulated now that a little over a year ago, no one would give out mortgages. He said that important legislation was passed and stress tests were implemented, greatly reducing Wall Street’s leverage.  As a Democrat, I thought that nothing had been done to curtail risky trading practices and that the Wall Street billionaires were running amuck with the money of average Americans. But after a little digging, I found that the only thing that really makes sense right now is enforcing a piece of legislation passed after the market crash, referred to as Dodd-Frank.

So, as it turns out, Wall Street is pretty regulated, and candidates calling for regulating the stock market and popularizing the Federal Reserve (more on the Fed later) seem to be completely missing the point.

Change is Possible and Politics is not Hopeless

The concluding part of the State of the Union is always my favorite. President Obama is fabulous at touching the hearts of Americans who both agree and disagree with him. In this speech, he brought in nearly every type of American, and how each of us has the capacity to change and work hard and love each other.

I found this portion of the speech not only touching but very compelling. I agree, change is possible and politics is not hopeless. All we have to do is care enough to change our behavior. All we have to do is go a little out of our way to care about each other, and how our actions affect the people around us. And I think, if we start to think this way,  we can find places in our hearts for those with whom we disagree. I have found, in moving away from my liberal home town, that the other side of the political spectrum is just as committed to the American dream as I am.

I think that, maybe, just maybe, we can live up to President Obama’s call to come together, and work for political behavioral change, on both sides. But only if we can stop talking past each other and listen; listen to the concerns of  those with whom we disagree and nod and say, “I hear you, but I disagree.” Only then can we truly make America great again.

Thank you, and good night.

 

Disagreements are good

Our founders expected us to argue, he says. But he calls on Americans to remember that trust is important. We have to trust that people on both sides are not motivated by malice. The system breaks down when suspicion between the parties gets worse. He says that he hasn’t done a good job at bridging the divide, but it’s not his task alone. He says that he’s spoken to many in Washington who feel stuck to hard lines because of their base.

He calls for an end to gerrymandering, calls for a reduction of money in politics (roaring applause from Democrats), and to make it easier to vote so that all Americans feel like they have a voice in the political system. “This is America! We want to make it easier for people to participate,” he says.