Stephen Reader covers politics for It's a Free Country, WNYC's interactive politics site. He joined the station in 2010 and has also worked for Studio 360, WNYC's Peabody Award-winning show about art, culture, and creativity.
Explainer: Can Foreign Companies Make Political Donations?
Friday, January 20, 2012
Political Action Committees connected to foreign corporations have already raised over $5 million for the 2012 elections, continuing a trend of increasing contributions from U.S. subsidiaries of foreign interests.
In the entire 2000 election cycle, foreign-connected PACs raised just over $7 million. In 2008, the total shot up to $15 million. We’re on pace for another big year.
UBS, the Swiss financial services company, for example, is headquartered in Zurich and Basel, Switzerland, but its American subsidiaries are free to run a PAC (UBS Americas) to raise money for federal campaigns. UBS Americas is among Mitt Romney’s top 20 donors in the 2012 election cycle, having contributed almost $75,000. So is Credit Suisse, also headquartered in Zurich, whose U.S. subsidiaries have raised over $200,000. So is Barclays, headquartered in London, whose U.S. subsidiaries have raised over $150,000.
This is perfectly legal so long as it’s American employees running the PAC and contributing the money, and so long as the PAC remains unfinanced by the foreign parent corporation.
Should it be?
Let's dive down the rabbit hole of campaign finance philosophy, a hole made even deeper by the Supreme Court’s ruling in Citizens United two years ago.
The argument for allowing U.S. subsidiaries to form PACs and spend money on campaigns is as follows: American employees should not be penalized for working for a foreign corporation. If employees of domestically-controlled corporations can form PACs and spend money to influence elections, why not afford employees of foreign-controlled corporations the same freedom? So long as they’re American citizens using money that the business made in America, and their political activities aren’t being dictated by the foreign corporation for which they work, what’s the problem?
For many, it’s anxiety. Anxiety about foreign influence is as old as the republic. In Article I of the U.S. Constitution, the Founders forbid members of government from receiving gifts or titles of nobility from foreign states for fear that the fledgling democracy would be corrupted by outside influence. These concerns would echo through the next two centuries as immigrant populations exploded, foreign wars escalated, and the Soviet Union rose to power. (For all the leeway that U.S. subsidiaries of foreign corporations enjoy, the ban on contributions from foreign nationals was reaffirmed on January 9th of this year.)
The worry is that domestic subsidiaries would put their foreign parent company's political and economic interests ahead of their country's. Even with the prescribed separation of the U.S. subsidiary’s political activities from the foreign parent, it’s easy to imagine a situation in which those rules are bent or broken. It’s even easier to imagine this happening in a post-Citizens United world. In his 2010 State of the Union address, President Obama said that the Supreme Court had “reversed a century of law that…will open the floodgates for special interests—including foreign corporations—to spend without limit in our elections.”
If companies can set up Super PACs to get around campaign contribution limits, what other means might corporations both domestic and foreign find to funnel money into the political process? Especially when those foreign corporations have domestic subsidiaries.
Too little, too late
It turns out opening new channels for money to flow from overseas into candidates’ coffers might be the least of our worries about money influencing politics.
“Increasingly, political power doesn’t come from direct contributions, but rather from theoretically uncoordinated—but ideologically aligned—expressive activity,” says Zephyr Teachout, Associate Professor of Law at Fordham University.
Foreign interests have already enjoyed increased access to American politics via technology, and it’s had little to do with domestic subsidiaries starting PACs. Thanks to the internet, non-citizens can engage in informational campaigns from the other side of the globe, be it through blogs, videos, or advertising on non-U.S. websites. The channels for speech are already open.
Teachout says that Citizens United notwithstanding, the creep of foreign electioneering has gone mostly unchecked because election law hasn’t evolved past the 1970s.
“What mattered back then were contributions and TV time and political parties. If you could put a clamp down on [those], you have some control. Now that isn’t what matters. It’s independent expenditures, media ownership. I don’t have to contribute to an ad, I can just own my own media company.”
Spending on political campaigns has taken a backseat to spending on information campaigns: the latter are more difficult to regulate; indeed, they’ve been deregulated in recent years.
In a 2009 paper that preceded the Citizens United ruling, Teachout estimated that by 2030, a third of all money spent on elections for Senate, Congress, and governorships will come from non-American interests:
Foreign private interests will put substantial money into viral videos about candidates; foreign newspapers will editorialize with an eye to actually influencing elections, not merely expressing opinions; foreign television stations, broadcasting online, will do the same. Foreign unions will fund cross-national phone banking, literature drops, and door-to-door canvassing around issues that are likely to influence elections. Foreign governments will funnel money into organizations that do all of these kinds of electioneering.
“The vast majority of these activities will either be legal or, if illegal, their prohibitions unenforceable,” Teachout concluded.
What it means for U.S. elections
We hear a lot about the influence of money in politics—trading favors for special interests and the like—but what are the negative impacts of such information campaigns being run for afar, sometimes with little evidence of who is producing them, and, by extension, to whom victorious politicians may be indebted?
Teachout says that on one level it’s hard to argue with allowing space for international voices—free speech is a democratic ideal. But on the other hand, “If fear of these interest ads are driving your internal dialogue, that has a real effect on what you’re going to do as a candidate. It also affects what citizens think their own interests are.” This is not a power the Founders wanted foreigners to wield.
For all the rules about foreign money, foreign influence on American elections does not appear to be something that U.S. law can regulate or remedy. Thanks to globalization, technology, and, most recently, the legal interpretation that money equals speech, the United States is ensured an increasingly cluttered electoral process. The authenticity of that process may have to rely more on an informed and responsibly populace than a regulatory framework always struggling to keep pace.