On Campaign Finance, Congressional Ethics Reform, and Alexandria Ocasio-Cortez

A video of Rep. Alexandria Ocasio-Cortez criticizing American campaign finance laws and congressional ethics rules during a House Oversight and Reform Committee hearing recently went viral. In the clip, Ocasio-Cortez argues (using a Socratic question-and-answer approach) that our current system is “fundamentally broken,” making it easy for a “bad guy” who wants to “get away with as much bad things as possible” to do so. Her focus is on the use of corporate-sponsored political action committee (PAC) money to directly fund political campaigns, and the ability of elected officials to enrich themselves while in office by, for example, purchasing stock in companies that may be impacted by their legislative efforts.

The video has gotten a lot of press, having been widely circulated in left-of-center media outlets, including Vox, Huffington Post, and The Guardian. This attention makes sense. Recent polling suggests that most Americans are deeply concerned about the influence of big donors on political campaigns, and want to limit their spending. For years, large majorities of Americans have also believed that corruption is “widespread in the country’s government.” In the 2018 midterm election, “corruption in Washington” was among the top concerns of voters, according to a WSJ/NBC News poll.

In general, I disagree with Ocasio-Cortez’s views on the Citizens United v. FEC Supreme Court ruling and some of the points that she makes in the video, but I think her line of questioning in this case provided some useful insights into the problems with our current campaign finance system and congressional ethics rules. Given the amount of attention the video has received, it seems like it may be worthwhile to briefly explore some of the nuances around these issues, and explain where I believe Ocasio-Cortez is correct and where I think she’s missing the plot.

1. Corporate PAC donations

If I want to run a campaign entirely funded by corporate political action committees, is there anything that legally prevents me from doing that?

Political action committees — whether they are corporate-sponsored PACs, union-affiliated PACs, or independent PACs — are limited in the amount of money they can donate to any individual political candidate. The contribution limits for the 2018 election cycle were $5,000 per candidate per election for a multi-candidate PAC.

Ocasio-Cortez is correct that there is nothing “legally preventing” a candidate from fully financing their campaign with corporate-sponsored PAC donations. But the practical reality is that the majority of candidates do not fund their campaigns this way. In the 2016 political cycle, the average winning candidate in the House spent roughly 1.3 million on their campaign. An additional $200,000, on average, was spent by outside groups, which are less of a factor in House races. The 2018 election generated even higher levels of spending.

This means that, to fully fund a congressional campaign with corporate-sponsored PAC money, a candidate needs hundreds of separate business PAC donations. This is a tall order, and most candidates do not get the majority of their funding from corporate PACs, but there are a handful of candidates who do. In the 2018 midterm election, there were eight candidates —four Democrats and four Republicans — for whom more than 70 percent of their total campaign contributions were from corporate-sponsored PACs. The highest percentage can be attributed John Shimkus (R-IL), who had 81 percent of his campaign funded by corporate-sponsored PACs.

So, corporate PAC money is a real problem in some districts, and one that I think Ocasio-Cortez is right to highlight.

2. Campaign expenditures and “hush money”

Alexandria Ocasio-Cortez: So, let’s say I have some skeletons in my closet and I need to cover it up so that I can get elected. Is it true that you wrote this article, this opinion piece for The Washington Post entitled, ‘These payments to women were unseemly. That doesn’t mean they were illegal’?

Bradley Smith: Well, I can’t see the piece, but I wrote a piece for the Washington Post, so I assume that’s right.

Ocasio-Cortez: So, green light for hush money, I can do all sorts of terrible things. It’s totally legal right now for me to pay people off.

Whether paying “hush money” is a legitimate campaign expenditure is a thorny legal question, which experts have been debating since the revelations about Donald Trump’s payments to Stormy Daniels through his lawyer, Michael Cohen. Ocasio-Cortez’s response to Bradley Smith — the chairman of the Institute for Free Speech — seems to simply elide the legal complexities.

More egregiously, Ocasio-Cortez gets Smith’s argument exactly backward. In his opinion piece for the Washington Post, Smith contended that using non-campaign funds to pay Stormy Daniels (which Donald Trump did) was not illegal, but using campaign funds to make these payments (which Trump did not do) would have been illegal:

[H]aving campaign donors pay for personal luxuries — such as expensive watches, massages and Brooks Brothers suits — seems more like bribery than funding campaign speech.

That’s why another part of the statute defines “personal use” as any expenditure “used to fulfill any commitment, obligation, or expense of a person that would exist irrespective of the candidate’s election campaign.” These may not be paid with campaign funds, even though the candidate might benefit from the expenditure.

Others legal experts have suggested the opposite — that, had Trump relied on campaign funds, his expenditures might have been lawful. Ultimately, the question of whether using campaign funds to pay Stormy Daniels would have been lawful is a matter of legal speculation at this point, not settled law.

Far from demonstrating Osasio-Cortez’s point that it is “totally legal” for a candidate to cover up bad behavior under our existing campaign finance laws, the competing interpretations on this question show that what is lawful under our incredibly complex campaign finance system is often unclear and sometimes contradictory.

3. Dark money and Citizens United

And that is considered speech. That money is considered speech. So, I use my special interest, dark money-funded campaign to pay off folks that I need to pay off and get elected.

This is probably the most inaccurate part of Ocasio-Cortez’s statement. Her comments seem to be conflating several different things.

Dark money expenditures are those that are made independently of a candidate’s campaign, primarily through nonprofit 501(c)(4) organizations, which are not required to disclose their donors. So, a candidate cannot “pay off folks” with dark money, nor can a campaign be directly funded by “dark money.” Moving from her previous comments about “hush money” to a conclusion about “dark money” just seems like a non-sequitur.

The nuances of how political candidates can spend their campaign funds have nothing to do with dark money. Moreover, none of this has anything to do with the Citizens United decision, which is what Ocasio-Cortez seems to be referencing when she says that paying hush money is allowable because “[t]hat money is considered speech.” The Citizens United decision dealt entirely with independent electioneering communications, not direct campaign contributions or campaign-directed spending.

In fact, the government could pass campaign-finance legislation tomorrow to substantially limit the amount of money that corporate-sponsored PACs can contribute directly to campaigns, and even limit overall percentage of contributions that candidates can receive from corporate-sponsored PACs. The government could also pass a law tomorrow preventing candidates from ever paying hush money from their campaign budget, resolving the competing legal interpretations.

Ocasio-Cortez is right to see dark money as a problem in our system, but it is not a problem that is related to any of the issues she is raising in terms of campaign spending. It is also worth noting that, while Republican-aligned organizations used to be associated with most of the dark money spending in our elections, Democratic Party-affiliated organizations are increasingly responsible for the problem, according to Open Secrets:

Majority Forward, a dark money nonprofit connected to current and former Democratic Senate leaders, led the way [in dark money spending] with $46 million in outside spending reported to the FEC [in 2018]. The former dark money leader, the conservative U.S. Chamber of Commerce, reported just under $12 million in outside spending this cycle, way down from the $35 million it spent in 2014.

4. Financial conflicts of interest

Is there anything that prevents me from holding stocks, say, in an oil or gas company, and then writing laws to deregulate that industry, ’cause, you know, that could potentially cause the stock value to soar . . . ?

On this point, Ocasio-Cortez seems to be on the most solid ground. The concerns that she raises about the potential financial conflicts of interest presented by stock ownership are at the heart of the Anti-Corruption and Public Integrity Act, recently proposed by Senator Elizabeth Warren. In fact, Warren’s bill goes much further, attempting to limit corporate influence over our politics by (among other things) imposing a lifetime ban on lobbying for various public officials.

While lawmakers are required to disclose their stock ownership, studies have nevertheless found that politicians owning stock in specific companies serves as a kind of perverse insurance that they will take actions to benefit those entities, particularly when voting on legislation:

[S]hare ownership by politicians serves as a mechanism that fosters longterm relationships of politicians with firms in which they invest . . . . [T]he stock ownership by politicians serves as insurance for taking actions that benefit the firm, thereby avoiding the breakdown of the politician–firm exchange market.

Eliminating the incentives for lawmakers to form quid-pro-quo relationships with businesses is certainly something Ocasio-Cortez is right to emphasize. Overall, Ocasio-Cortez’s focus on these issues is laudable, but as with many of her previous statements, she has a tendency to play fast-and-loose with the facts.