Why campaign spending rules hurt small business

CNN Opinion
January, 26, 2012

By David Brodwin, Special to CNN

(CNN) -- Two years ago, the Supreme Court upended the rules for campaign finance, unleashing a tsunami of unregulated, unrestricted and undisclosed spending that has, in effect, allowed donors to buy elections. The full impact of this decision is just now becoming clear, and it's bad both for America's businesses and for our democracy.

By a 5-4 majority, the Supreme Court affirmed that money is essentially speech -- a notion first addressed in Buckley v. Valeo in 1976 -- and it outlawed nearly all restrictions on independent spending by corporations or other groups, including unions, to influence elections. Such restrictions are unconstitutional violations of free speech, the court said, and are prohibited by the First Amendment.

You might expect business owners to welcome the elimination of these restrictions, but if so, you're about to be surprised. A recent poll conducted by Lake Research found that 66% of a random sample of 500 small-business owners believe the Citizens United decision was "mostly bad" or "somewhat bad" for small business. Since small businesses create 70% of new jobs in the private sector, according to the Small Business Administration, their view should matter a lot.

The poll was commissioned by the American Sustainable Business Council, the Main Street Alliance, and Small Business Majority -- three groups that represent the views of small business and which have a combined membership of more than 100,000 small businesses nationwide. The poll tapped the views of 500 small-business owners nationwide, most of whom are not members of the organizations conducting the survey.

In addition to taking a dim view of Citizens United, 88% of the small-business owners in the poll had a negative view of the role money plays in politics. (The margin of error in the poll is plus or minus 4.4 percentage points.)

Small-business owners believe in our market-based, capitalist system, which depends on open and robust competition.

Unlimited campaign spending undermines this competition, in three crucial ways.

First, allowing unlimited money into politics allows the past to hold the future hostage. Companies (and individuals who own them) with sufficient resources to sway elections often represent the industries and companies of the past, rather than the industries and companies that are creating the future.

The evidence on this is indirect, because since Citizens United was announced less than a year before the last federal election, its impact has not yet been fully felt or measured. However, we can gauge its future impact by looking at lobbying expenditures, for which multiyear data is widely available. For the period 2008-2011, the computer and Internet industry -- a wellspring of innovation -- spent $458 million on lobbying, according to the Center for Responsive Politics, while the energy and natural resources industry spent more than three times as much: $1.55 billion. The ratio for election-related spending, post Citizens United, will likely be similar.

Second, allowing unlimited money in politics allows the big to achieve an unfair advantage over the small. This is ironic in light of the huge role small business plays in creating private sector jobs in America, even as some large corporations act as net destroyers of American jobs, when outsourcing and offshoring are factored in.

For example, this kind of money in politics gives power to the push by big companies to repatriate offshore profits, giving some big and profitable multinational corporations lower effective tax rates than the grocer on Main Street.

Moreover, unlimited contributions give major Wall Street firms the edge over community banks, because the big banks can win loan guarantees, taxpayer bailouts and deeply discounted borrowing rates that smaller banks can't touch.

Third, allowing unlimited money in politics allows companies to collect IOUs for special favors from presidential candidates -- particularly as a result of contributions made early in the election season, when a few million dollars can swing the result in a small state like New Hampshire.

America's small-business owners embrace competition -- but they demand the competition be open, robust and vigorous. They don't want to be whipped by big corporations that bought an unfair advantage from senators, congressional representatives and other elected officials. When that happens, it's bad for business and America. Many solutions have been proposed, ranging from the Supreme Court reversing its decision, to legislation, to a constitutional amendment.

Momentum for change is growing, as candidates from both political parties learn what it's like to have a campaign with broad public support crushed by a single individual with deep pockets who steps in to help the other side.

Citizens United is an assault on our economy, which is supposed to be based on vigorous, free and open competition. It's time for us to reinvigorate our economy by getting government out of the protection racket, and preventing industries and companies from buying special favors. We must undo the damage wrought by Citizens United.

David Brodwin is a co-founder and board member of the American Sustainable Business Council, a liberal-leaning, nonprofit national business coalition that advocates for public policies that meet the realities of the 21st century global economy.

http://www.cnn.com/2012/01/26/opinion/brodwin-citizens-united/index.html?hpt=op_t1

Free speech that will cost all of us

Transparency in government. That was probably the issue that helped Nikki Haley the most in winning the South Carolina Governor’s election last November.

Who could be against transparency? Who doesn’t want to make sure that government decisions are being made for the good of the taxpayers and not for the good of a deep-pocketed special interest? That is why we have campaign finance disclosure laws and require statements of economic interests for elected officials. It’s all about transparency. Who could be against it?

That would be the U.S. Chamber of Commerce that is opposing a draft executive order that would shine sunlight on the big campaign donations of more than 50 of its members that have received over $44 BILLION in Federal contracts.

The public deserves to know that these corporations aren’t involved in pay-to-play politics. It’s our tax dollars being spent and we deserve to know.

But the U.S. Chamber calls the proposed requirement that Federal contractors disclose direct or indirect campaign contributions over $5000 a chilling effect on free speech. Using the U.S. Chamber’s convoluted logic, all transparency efforts in government should be eliminated because it infringes on free speech (the U.S. Chamber’s code words for big corporations being able to buy political influence to the detriment of the public and small businesses).

The Citizens United Supreme Court decision that allows corporations to make unlimited contributions to elect a politician either on their own or through a third party has made transparency even more important. But the U.S. Chamber is the beneficiary of these big campaign contributions so they are vigorously fighting back.

Tomorrow the House Committee on Small Business and the House Committee on Oversight and Government Reform will hold a hearing on this issue. The title of the hearing tells which side the House majority is on—“Politicizing Procurement: Would President Obama’s Proposal Curb Free Speech and Hurt Small Businesses”.

Once again small business is being used as a front to protect big corporate greed and power.
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For the record on transparency:

“I think what we ought to do is we ought to have full disclosure, full disclosure of all of the money that we raise and how it is spent. And I think that sunlight is the best disinfectant.”

- John Boehner, Meet the Press, Feb. 11, 2007, http://www.msnbc.msn.com/id/17065119/print/1/displaymode/1098/

"Why would a little disclosure be better than a lot of disclosure?"
- Mitch McConnell, Washington Post, May 13, 2010 (the quote is from “the last major fight over regulating money in politics”), http://www.washingtonpost.com/wp-dyn/content/article/2010/05/12/AR2010051205094.html

SCSBCC calls for Justice Department investigation

One thing that we all should agree on regardless of our political differences is that the U.S. Supreme Court Justices should be above partisan politics and absolutely should have no conflict of interest on any rulings they make.

Below is a letter we are sending today to U.S. Attorney General Eric Holder today in regard to a very serious issue.
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March 1, 2011

Eric Holder, Jr.
Attorney General
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001

Dear Attorney General Holder,

The South Carolina Small Business Chamber of Commerce (SCSBCC) supports the January 19, 2011, request from Common Cause for an investigation into potential conflicts of interest of Justices Antonin Scalia and Clarence Thomas in regard to the Citizens United v. Federal Election Commission Supreme Court ruling. Should the Justice Department find that the Justices should have recused themselves from this case, we ask that you file a Rule 60(b) motion with the full Supreme Court seeking to vacate the judgment.

The SCSBCC is a 5000+ non-partisan advocacy organization representing the general interests of South Carolina’s small businesses. We were founded in 2000 with the principle that what is good for big business is not necessarily good for small business.

In this matter we are motivated to insure that the voices of small businesses are heard in the political and legislative process. The Citizens United ruling threatens our ability to do that because of our inability to compete in the area of political expenditures with major corporations. If the Citizens United ruling was improperly influenced by the same big corporate interests that benefited from the ruling, it is imperative for the good of our country’s small businesses and for the good of our Democracy and judicial system that the ruling be set aside.

Sincerely,

Frank Knapp, Jr.
President & CEO

Unmasking the danger of corporate political campaign funds

Now that Halloween is over and the elections are tomorrow, it is really the time to get scared.  The opinion blog below should frighten the hell out of any red-blooded American.


The Baseline Scenario

Foreign Money, National Security, And The Midterm Elections

By Simon Johnson

Campaign contributions by non-citizens are a huge issue lurking behind the midterm elections; they will be even more important in 2012. Think about the economic dynamics:

1.Americans have a long-standing and well-founded aversion to foreign involvement in their politics, and it is well-established that this can happen in part through corporate “commercial” structures. Thomas Jefferson objected to Alexander Hamilton’s plan for a national bank in part because he feared this would become a stalking horse for the British in some form (see Chapter 2 of 13 Bankers for the context). Dubai Ports World was not allowed to invest in the United States – for reasons of perceived national security. You may or may not think that case was handled well, but we have the CFIUS process to vet foreign direct investment for good reason.

2.The Supreme Court has determined that corporations can make political contributions virtually without limit, apparently not understanding or not caring that (a) management has a fiduciary responsibility to shareholders, (b) globalization means more foreign shareholders on average (for privately held companies and funds, as well as publicly traded companies), and (c) at the margin, key strategic shareholders – the people who provide extra capital when the chips are down – increasingly tend to be foreign. Think about the role of Sovereign Wealth Funds in providing funds to our banking system in 2007-08, or the fact that Citigroup goes cap-in-hand to Saudi Arabia every decade or so.

3.During the Reagan years and again, even more, under the Second President Bush, the US ran a large current account deficit – reaching 6 percent of GDP before the 2008 crisis (and still around 3 percent of GDP). You may think this a technical detail that is largely irrelevant to the political process, but you would be wrong. We finance our current account deficit with capital inflows from abroad or, to put that more plainly: Foreigners buy and hold financial assets in the United States. Some of those assets are US government obligations but traditionally and increasingly non-US people have also acquired claims on corporate entities – including common or preferred stock.There are good economic reasons to allow foreigners to buy financial assets in the United States. We like to invest around the world and a high degree of reciprocity is only reasonable.

The US dollar is the “reserve currency” of choice – for the past 50 years this is where countries and careful individuals have chosen to keep their rainy day funds. This was a core idea behind the international trading system constructed after 1945. You may not like it, but what alternative exactly would you propose?

And there is nothing wrong per se with running a current account deficit – although it would be much better if we used the inflow of foreign capital to finance investment, rather than (as in the Bush years) tax cuts that just further encourage overconsumption.

Irrespective of how you feel about foreign capital inflows in economic terms, you have to face the political reality. As foreigners accumulate claims on the United States, they will increasingly diversify into corporate assets (in fact, this is the advice they get from their Wall Street advisers). Some of these corporate assets explicitly come with voting rights – but those are supposed to be voting rights over the corporation (or investment fund), not voting rights in political elections.

We have effectively enfranchised foreigners in US elections. This is clearly and absolutely not what the drafters of the Constitutions had in mind.

This dissonance between our claimed political values and the political reality will grow over time – unless you think our current account deficit will swing into surplus at any time in the future, the net inflow of foreign capital will continue.

The only way to deal with this is to require complete disclosure by all corporate entities (and similar “veils” like investment funds of any kind) regarding the contributions they make to any organization or individual involved in political messaging or campaigning.

To be sure, this would be onerous. Thomas Jefferson and his colleagues would have wanted it no other way. The US Constitution was not drawn up to protect the rights of foreign citizens. It defines who is and who can become an American – and the rights and responsibilities of those who would like to rule the United States.

And however you prefer to define our legitimate national security interests, how are they consistent with letting foreign citizens influence or even determine the outcome of our elections?

Walmart on steroids

If you, like everyone else, are tired of all the negative political ads, take solace in the fact that they’ll be gone next Wednesday.

But unfortunately, what will stay with us is an outright attack on our democracy. Our “government of the people, by the people and for the people,” thanks to the Citizens United Supreme Court decision, might now be better called “government of the corporation, by the corporation and for the corporation.”

And by “corporation,” I’m not talking small businesses. I'm talking about giant special interest, multinational companies that brought us these beauties:

Image: NyeGateway.com

• The Gulf oil disaster
• The financial crisis that led to the recession
• Skyrocketing health insurance premiums
• Jobs exported overseas
• Bloated military budgets to fight unnecessary wars

These corporations have been given the green light to spend all the money (actually their customers' money) they want to influence our elections, while not letting the voters know who is paying for the ads—most of which are negative—or being accountable for the truthfulness of the messages.

Total spending -- by candidates, political parties and special interests -- has topped $3.2 billion and is likely to hit $4 billion when reports detailing last-minute donations and spending are tallied, according to a study released Wednesday by the non-partisan Center for Responsive Politics. That would obliterate the record $2.85 billion spent in 2006, the last midterm elections. Read more….

For the small business owner who might think that these giant multinational companies have their best interest at heart, you’ve been suckered into voting against your future.

Think Walmart on steroids.

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Want to do something about it?

1. Vote this Tuesday, November 2
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The SC Small Business Chamber presents the next installment of our BuySC Micro-Conference series:

Keith Spiro: 5 Steps to Business Freedom
 

When: November 10th, 2010
Where: 701 Whaley, Olympia Room (2nd floor), 701 Whaley Street, Columbia, SC 29201

Time: 6pm - 8pm

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