[House Hearing, 111 Congress]
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       DEFINING THE FUTURE OF CAMPAIGN FINANCE IN AN AGE OF SUPREME 
                              COURT ACTIVISM 

=======================================================================

                                HEARING

                               before the

                           COMMITTEE ON HOUSE
                             ADMINISTRATION
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               ----------                              

                Held in Washington, DC, February 3, 2010

                               ----------                              

      Printed for the use of the Committee on House Administration


                       Available on the Internet:
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  DEFINING THE FUTURE OF CAMPAIGN FINANCE IN AN AGE OF SUPREME COURT 
                                ACTIVISM


















  DEFINING THE FUTURE OF CAMPAIGN FINANCE IN AN AGE OF SUPREME COURT 
                                ACTIVISM

=======================================================================

                                HEARING

                               before the

                           COMMITTEE ON HOUSE
                             ADMINISTRATION
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                Held in Washington, DC, February 3, 2010

                               __________

      Printed for the use of the Committee on House Administration


                       Available on the Internet:
   http://www.gpoaccess.gov/congress/house/administration/index.html

                               ----------
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                   COMMITTEE ON HOUSE ADMINISTRATION

                ROBERT A. BRADY, Pennsylvania, Chairman
ZOE LOFGREN, California,             DANIEL E. LUNGREN, California,
  Vice-Chairwoman                      Ranking Minority Member
MICHAEL E. CAPUANO, Massachusetts    KEVIN McCARTHY, California
CHARLES A. GONZALEZ, Texas           GREGG HARPER, Mississippi
SUSAN A. DAVIS, California
ARTUR DAVIS, Alabama
                      Jamie Fleet, Staff Director
               Victor Arnold-Bik, Minority Staff Director


  DEFINING THE FUTURE OF CAMPAIGN FINANCE IN AN AGE OF SUPREME COURT 
                                ACTIVISM

                              ----------                              


                      WEDNESDAY, FEBRUARY 3, 2010

                          House of Representatives,
                         Committee on House Administration,
                                                    Washington, DC.
    The committee met, pursuant to call, at 1:53 p.m., in Room 
1310, Longworth House Office Building, Hon. Robert A. Brady 
[chairman of the committee] presiding.
    Present: Representatives Brady, Lofgren, Davis of 
California, Davis of Alabama, Lungren, McCarthy, and Harper.
    Staff Present: Jamie Fleet, Staff Director; Tom Hicks, 
Senior Elections Counsel; Janelle Hu, Elections Counsel; 
Jennifer Daehn, Elections Counsel; Matt Pinkus, Professional 
Staff/Parliamentarian; Kyle Anderson, Press Director; Joe 
Wallace, Legislative Clerk; Daniel Favarulo, Legislative 
Assistant, Elections; Darrell O'Connor, Professional Staff; 
Shervan Sebastian, Staff Assistant; Peter Schalestock, Minority 
Counsel; Karin Moore, Minority Legislative Counsel; Salley 
Collins, Minority Press Secretary; and Mary Sue Englund, 
Minority Professional Staff. fb deg.
    The Chairman. Good afternoon, everybody. The Committee on 
House Administration hearing on Defining the Future of Campaign 
Finance in an Age of Supreme Court Activism will come to order.
    In his State of the Union speech in 1905, Republican 
President Teddy Roosevelt said, ``All contributions by 
corporations to any political committee for any political 
purpose should be forbidden by law.'' On January 21, 2010, in a 
single sweeping opinion, the conservative majority of the 
Supreme Court threw out nearly 100 years of laws and destroyed 
decades of commonsense legislation and regulations designed to 
adhere to that basic principle.
    Imagine Wall Street bankers creating political campaigns to 
target Members as we debated the TARP plan. Does anyone think 
that giving the Gordon Gekkos of the world access to corporate 
funds to wage political campaigns will make our democracy any 
stronger? I doubt it. Imagine foreign investors waging 
political campaigns during the negotiation of American trade 
policy.
    I am hopeful that we will be able to reach across party 
lines to ensure that, at a minimum, corporations, particularly 
those that are foreign controlled, cannot exert undue influence 
on American elections. Strengthening disclosure requirements, 
protecting the interests of shareholders, and safeguarding 
against foreign influence are three areas where we can start.
    Many Members of Congress have already acted, including Mr. 
Capuano, a member of our committee, who introduced the 
Shareholder Protection Act. Mr. Capuano's bill requires 
corporate CEOs to disclose to their investors or shareholders 
how corporate treasury funds are being spent to influence 
elections.
    In his State of the Union Address last week, President 
Obama said that the Supreme Court decision will open the 
floodgates for special interests, including foreign 
corporations, to spend without limits in our elections. At 
least one jurist seems to believe that this is simply not true. 
I say today to Justice Alito, prove it; prove that Citizens 
United will not lead to an election system that is, in the 
words of the President, ``bankrolled by America's most powerful 
interests, or worse, by foreign entities''.
    Today we begin the process. This is the committee of 
jurisdiction over Federal elections. So, make no mistake, any 
law or legislation that defines Federal elections in the wake 
of Citizens United will be considered by this committee. This 
is our responsibility, and we intend to meet it. To this end, 
this committee will conduct hearings that will allow for a full 
airing of all viewpoints.
    We understand that in the intersection of free speech and 
fragile election law, opinions diverge and passions flair. This 
hearing will therefore not be constrained by a 5-minute rule. 
Members will be given an opportunity to fully air out their 
concerns, but the committee will not, in its relaxation of the 
rules, let it get so relaxed. We respect all opinions, but we 
are also aware that at the end of the day our constituents 
expect us to act.
    I would now like to recognize my friend from California, 
Mr. Lungren, for an opening statement.
    Mr. Lungren. Thank you very much, Mr. Chairman.
    We have worked on a bipartisan basis through this Congress. 
I knew there would be a point in time when we might reach more 
contentious issues, and I think that point has been reached.
    The Chairman. But we are going to do it with a smile on our 
face.
    Mr. Lungren. We shall. We shall.
    I might just start out by saying the first amendment is an 
inconvenient truth. The Constitution is a series of 
inconvenient truths. They have within them various principles 
articulated that establish the relationship of individuals to 
the Federal Government, and sometimes they do not allow us to 
do things we might feel we want to do. But the test of time has 
reached a conclusion that, by and large, we were served well 
with it.
    This hearing comes amidst a flurry of bills introduced in 
response to the Supreme Court's recent decision in Citizens 
United v. Federal Election Commission. We still await a 
promised legislative proposal from the chairman of the 
committee charged with electing Democrats to the House and the 
former chairman of the Senate counterpart. In the meantime, let 
us consider some of the fundamental issues at stake.
    The first amendment states very simply, ``Congress shall 
make no law abridging the freedom of speech.'' Let me say that 
again. ``Congress shall make no law abridging the freedom of 
speech.''
    Mr. Chairman, we know that historically the most sacred 
kind of speech for the Founders was political speech; and even 
though the Supreme Court for decades, in my opinion, has spent 
a lot more time dealing with questions of nude dancing and 
other kinds of issues that probably never were contemplated by 
our Founding Fathers, the essential part is, as Justice Kennedy 
said in his majority opinion, ``The essence of the protected 
speech in the first amendment is political speech,'' and that 
ought to be our focus.
    Our government was not organized to quash dissent, minority 
views, or respected interests of various kinds, but, rather, to 
make those interests compete against one another in the court 
of public opinion. And frankly, it was not just to compete but 
to compete robustly, to have the clash of ideas presented as 
the way that we would best come to conclusions as to how we 
would order ourselves under the Constitution, not say there 
will be disfavored speech or disfavored individuals or 
disfavored groups.
    To attempt to root out free speech and to ration the 
arguments and voices of persons and entities within this 
country by controlling the timing, the manner, the character, 
and mechanisms of political speech defies our tradition rather 
than defines it, defies our Constitution, defies our system of 
ordered liberty, and I would argue it defies common sense. It 
is, in my judgment, judicial activism to read words into the 
Constitution that do not exist or to ignore words that are 
there. Taking the words of the Constitution at face value is 
not judicial activism, it is giving effect to the words or the 
work of our Founders.
    It is this long-held and long-revered truth that the Court, 
in my judgment, affirmed in the decision in Citizens United. 
Far from being the undoing of our system of free and fair 
elections--dangerous hyperbole that I have heard from a number 
of this decision's critics--this decision was the affirmation 
of one of the first principles of our democracy, that as 
Madison wrote during the height of the debate surrounding the 
Alien and Sedition Acts, the ``right of freely examining public 
characters and measures and of communication is the only 
effectual guardian of every other right.''
    What I find most troubling in the midst of this debate is 
the penchant or an apparent indifference by some to speech 
rationing and speech restrictions. As far back as 1976, the 
Supreme Court has worried that limits on political spending 
allow the government to restrict the speech of some elements of 
our society in order to enhance the relative choice of others. 
Mr. Chairman, I believe the government should never be in the 
position of deciding what voices are worthy of being heard.
    I hear many say, well, the answer to all of our problems is 
more restrictions under campaign finance reform. I happen to 
remember as a student in college that there was somebody called 
Clean Gene. His name was Gene McCarthy. He rallied the young 
people of America in an effort to deal with the question of an 
unpopular war.
    President Lyndon Johnson was President of the United 
States. Most people expected that he would basically sail to 
victory in the next election, but Gene McCarthy began the 
``children's crusade'' against him. Interestingly enough, 
Eugene McCarthy was backed by five multimillionaires to provide 
the essence of his ability to speak. Stewart Mott gave him a 
huge amount of money. Today, Mr. Mott would go to prison for 
giving that amount of money to any individual. And yet it was 
Eugene McCarthy who brought down Lyndon Johnson.
    I remember studying at the library at the University of 
Notre Dame when all of a sudden I heard students running, 
running through the floors yelling at the top of their lungs. 
And what they were running about is that President Johnson had 
just announced he was not going to stand for reelection.
    Now, Eugene McCarthy was not the nominee. His position was 
later taken essentially by Robert Kennedy; and, unfortunately, 
we had the tragedy of the assassination of Robert Kennedy in 
southern California. But the fact of the matter is the 
unseating of a President, who was leading us at that time in an 
unpopular war, was effectuated by a lone voice in the United 
States Senate who was allowed to multiply his impact because he 
was assisted by funding from a number of individuals.
    Now, some people interpret that history differently than I 
do, but I have always been struck by the irony of that. Eugene 
McCarthy could not become the candidate he was in 1968 today 
because he wouldn't have that voice.
    During the oral arguments in this case that we are talking 
about here today, the Deputy Solicitor General went so far as 
to suggest that laws passed by Congress would allow the 
government to ban books. I happen to think that is essentially 
when the Supreme Court began to realize what they had in front 
of them. When the Deputy Solicitor General said, yes, if you 
had this book put out by a corporation, 500 pages, and at the 
end it said vote for or against someone, would the government 
be able to ban that book? And the answer was yes. Have we gone 
so far that we believe that banning books are allowed under the 
first amendment?
    As Justice Kennedy powerfully wrote, ``When government 
seeks to use its full power, including the criminal law, to 
command where a person may get his or her information or what 
distrusted source he or she may not hear, it uses censorship to 
control thought.''
    Mr. Chairman, many say they want to stop corruption and the 
appearance of corruption. I, too, support these worthy goals. 
But quashing political speech is not the way to accomplish 
that. That is, frankly, in the opposite direction of where the 
Constitution directs us. The most effective way is to have more 
information, more openness, more transparency, and more 
accountability in the way we do the people's business here in 
the U.S. Congress.
    ``Congress shall make no law abridging the freedom of 
speech.'' Mr. Chairman, I hope that, whatever we do, we will 
not abridge that freedom. Let's not be tempted with abridging 
that freedom. Let's make no law abridging, constricting, or 
shrinking political speech and the societal spaces in which it 
thrives. Let us instead support, strengthen, and encourage 
speech, that very same freedom we are using here today in these 
important deliberations.
    And so, Mr. Chairman, I would say I look forward to hearing 
from our panel of witnesses. I think you have given us an array 
of distinguished witnesses, and I think we are going to engage 
in some healthy debate under the concept of free political 
speech.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Ms. Lofgren.
    Ms. Lofgren. Thank you, Mr. Chairman.
    I think you are right. We don't see this eye to eye. I will 
say that, in reading the majority opinion in the Citizens 
United case, I was really shocked by the lack of judicial 
restraint and the departure from stare decisis, really just 
defining that, since we don't agree, would ditch the precedent. 
It is really not something you usually see in reading Supreme 
Court decisions, and it is really a case of very strident 
activism, I think.
    I am concerned about the impact on free elections. I was 
interested that a former Justice, Sandra Day O'Connor, who 
recently, I just think yesterday, indicated that she is 
concerned that corporate money will influence not only the 
outcome of legislative and executive races throughout the 
country but has expressed concern that the rush of corporate 
money will be problematic--and this is a quote--``for 
maintaining an independent judiciary''. And certainly that is 
of concern.
    I would note that the first amendment really is first 
because it is probably the most important, and yet we do 
sometimes regulate speech. For example, we prohibit Federal 
employees from doing certain political activities because of 
the concern that the mixing of Federal employment and the 
political spectrum might taint both services. We prohibit 
illegal aliens from contributing to political campaigns; and no 
one has said, well, what about their free speech rights if they 
are here? The remedy to the free speech of illegal aliens would 
be the speech of legal residents or U.S. citizens. So it is 
simply not correct to say that we never regulate in the area of 
speech.
    I think it is important to note that when the Founders 
formed this great union, the idea of corporate speech was 
really quite foreign to what they were thinking of when they 
wrote the Constitution.
    But, having said all of that, I recognize that we have a 
Court decision. I may agree with Justice Stevens' dissent a lot 
more than I do with the majority opinion, but that really is 
not what is before us. We have the Court's decision. There is 
no appeal from the Court's decision. And so I read the decision 
looking at what can be done, given the new legal realities that 
we face?
    It seems to me that the Court really did invite certain 
things. They embrace disclosure as a remedy to whatever 
problems might be attendant to the majority decision, and so I 
think we need to take a look at our disclosure laws and make 
sure that they are really up to date.
    The Court spoke with great favor on the Internet and the 
ability to instantly let everyone know who was saying what, and 
I think that bears examination.
    There was more than one reference to the role of corporate 
democracy and what remedy shareholders might have if they were 
concerned about the speech of a corporation. And, actually, 
let's be honest, corporations are people only as a fiction. It 
is really the shareholders who own it, and yet the shareholders 
don't have a say in what is happening. So I think we need to 
think through how do we provide mechanisms for shareholders to 
be fairly dealt with? And I am hoping that the witnesses will 
accommodate that.
    Corporations are entirely creatures of law, and so I think 
we need to think through what of the various elements that we 
grant to corporations are important relative to this new 
freedom that they have in political advertising. I mean, it is 
worth noting that if you added up all that was spent on 
congressional elections in the last cycle--and this is 
information that I got off the FEC--the average amount for 
winning a House seat in the 2008 cycle was $1.4 million. During 
that same cycle, ExxonMobil had $80 billion in profits that 
same cycle. So if ExxonMobil used just 1 percent of their 
profits on political activity, it would be more than all the 
435 winning congressional candidates spent to win their races. 
I mean, the scale of what one corporation could do versus what 
every candidate could do is pretty stunning.
    So I think we need to take a look at those tax issues, 
corporate law issues. And I also hope that we can take a look 
at a bill that our colleague, John Larson, has introduced that 
would allow an opting out of this whole situation, where, on a 
voluntary basis, you could have public funding of campaigns. 
That is not going to be the only answer to this situation, but 
I think it is time to throw that whole concept into the mix of 
this discussion, and I hope some of the witnesses can discuss 
that as well.
    I want to thank you, Mr. Chairman, for holding this 
hearing. I think it is extremely important that we pay 
attention to what the Court has wrought and that we avail 
ourselves of the invitation the Court had in its decision to 
remedy whatever holes have been created from the new law.
    With that, I yield back.
    The Chairman. I thank the lady.
    Mr. McCarthy.
    Mr. McCarthy. Thank you, Mr. Chairman.
    I am actually very eager to hear from the witnesses today. 
As you know, the room is actually packed, and it is nice to 
see.
    One thing I would say, in listening to the opening 
statements, as my colleague from California also brought up, 
public financing, I hope we care as much about the taxpayer who 
would be that shareholder as we conveyed from the other side of 
how much input the shareholder would have from corporations.
    In reading what the Supreme Court wrote, it talked more 
also than just corporations. It talked about free speech. But 
it also talked about the idea I hope comes out within here that 
we are able to hear about, what about those members of unions 
that don't have the say? A shareholder can even sell the stock. 
A union individual would have to quit their job if they didn't 
like the way the money was spent. So I hope we get a very fair 
treatment to all taxpayers and to all citizens out there and we 
keep the First Amendment in the process as we go through and we 
actually find common sense.
    When you go out and listen to Americans today and they see 
what transpires in back rooms that has been happening with 
different bills through here, they are frustrated. I like the 
idea of what the Supreme Court said about transparency. I like 
the idea that everybody can see what is happening on the table, 
that the American public, I always trust them, as long as they 
have the opportunity to see what is all being done and let them 
make the judgment at the end of the day.
    So I yield back, Mr. Chairman.
    The Chairman. I thank the gentleman.
    Mr. Capuano.
    Mr. Capuano. Thank you, Mr. Chairman.
    Mr. Chairman, generally, I don't do comments in the 
beginning, but I feel today it is important that we do.
    Though I respect some of the comments that were made, I 
thought I was listening to Justice Douglas about freedom of 
speech. And I just wish that if that is the only thing you will 
agree with him on, that is wonderful, but I would hope that you 
would agree with Justice Douglas in everything else he ever 
wrote as well, a fine, wonderful Justice.
    At the same time, we have always had some limitation on 
freedom of speech, and I would suggest that what we are doing 
now--what I am doing now--is trying to search for a way that is 
a reasonable, thoughtful, legal, constitutional way to do that. 
And I understand fully well that that is what we do here. We 
try to find ways to do what we are trying to accomplish without 
breaching the Constitution. And if the Court has said that--in 
a 5-4 decision, if I remember correctly--so be it. So I think, 
for me, I am searching for other ways to give the American 
people what I think they really want, which is an unfettered 
opportunity to make their own decisions on a level playing 
field.
    And I would argue that this is only one aspect of it. I 
think we need to talk about other things. I like some of the 
transparencies. I would love to get rid of the 527s, and I 
invite anybody to work with me to do that. If we can't get rid 
of them because, again, they might be free speech things, for 
me, I have no problem with an ad going up saying, Mike Capuano 
is Terrible, brought to you by the Exxon Corporation--let my 
voters know who is bringing it--as opposed to, Mike Capuano is 
Terrible, brought to you by Americans for a Better World, 
funded by the Exxon Corporation.
    I think those are the things we need to talk about, and 
those are things we need to work on. And I look forward to 
doing so over the next couple of months with people who are 
serious about this.
    I will tell you that this campaign finance bill that we 
passed a couple of years ago, I was never thrilled with a lot 
of these things. We talked a good game. But one of the worst 
things we did was increase the amount of money that individuals 
can give. I don't know, maybe I am the only person here who has 
a hard time finding many people who can donate $2,400 at a 
clip. And that is only part of the game because it is really 
$4,800, we all know that, and if they have a spouse, it is 
really $9,600. Now, I have some constituents who can do that, 
and some do, but I hate asking people for $10,000. And I would 
argue that we should be looking at ways to get rid of that as 
well.
    I know that that is a little bit beyond today's scheme, but 
really what I think today is talking about is trying to find a 
way to get the election system back in the hands of the average 
voter so they can make a thoughtful, level-playing-field 
decision, not just on me but on all of us and on issues.
    So I am going to try my best to avoid--which is going to be 
hard to do, of course--to avoid some of the high-flying 
commentary about freedom of speech and everything else. And I 
actually agree with Mr. McCarthy's comment about unions. I am 
looking for ways to get union members to have a say in that 
manner. I think that is a fair commentary, and I would love to 
work with you or anybody else to try to do so.
    I am not trying to stop people from being involved. 
Corporations were always involved. The question is, to what 
degree? And the same thing with unions or anybody else. What I 
would love to do is get everybody out of it, go to public 
financing and let that decide it, let the taxpayers who have to 
rely on us pay for it. I know that is probably beyond the scope 
of what we can do, but that is the best way to get rid of 
everybody, get out of this business, and let the voters have an 
equal say on everything.
    Nonetheless, I actually look forward, and I hope that we 
can get beyond some of the political rhetoric of all of us--we 
all engage in it, me, too--to get to a point where we can 
actually maybe try to work on trying to find some ways to make 
this work.
    And, again, I understand if somebody thinks, forget it, 
just total free speech, everybody can do whatever they want 
with as much money as they want. I respect that opinion. I 
don't agree with it, but I respect it. I think it is reasonable 
one, a thoughtful one, but just say it. If that is what you 
want, a free for all, anybody with the money can put as much 
money as they want on the table, fine, but then don't pretend 
that somehow you want to level the playing field. It is not a 
level playing field.
    That is what I am looking for, is reasonable, thoughtful 
ways to do it in reaction to a Supreme Court decision, which I 
disagree with, but it is not the first Court decision I have 
disagreed with and it won't be the last, regardless of how the 
Court is made up. And to try to find ways to do so legally, 
thoughtfully, with transparency, that hopefully we can all find 
a way to work together. I don't know that we can; and, if we 
can't, I will be happy to do my best to then defeat those 
people who don't agree with me. But that is what the system is 
all about.
    I hope that none of us have to hang a sign underneath our 
nameplates, Brought to You by Exxon. I won't be hanging that 
particular nameplate, because I don't think they would probably 
be donating a whole lot to me, but I do expect that maybe I 
will be brought to you in spite of Exxon.
    With that, Mr. Chairman, I yield back.
    The Chairman. I would like to thank the gentleman and clear 
the record: Mr. Capuano is not a terrible guy.
    Mr. Harper.
    Mr. Harper. Thank you, Mr. Chairman.
    So far, the discussion of Citizens United has been filled 
with much rhetoric about catastrophe. There have been dire 
warnings about foreigners taking over our elections and 
corporations flooding our airways with political 
advertisements. What there has been relatively little 
discussion of or adherence to are actual facts. That is what I 
hope we will hear from our witnesses today and what I would 
like to talk about for a few minutes.
    First, let's dispense with the oft-used talking points that 
Citizens United changed a century of American law. The law that 
is a century old bars corporations and unions from contributing 
to candidates out of their general funds. That law still exists 
in full force today, and Citizens United did nothing to change 
that or disturb that.
    Next, let's suspend with the talking points that the 
Citizens United decision will allow foreign corporations to 
spend without limit in our elections and that American 
elections will be bankrolled by America's most powerful 
interests or, worse, by foreign entities. Existing statutes and 
regulations, undisturbed by Citizens United, address this.
    As we sit here today, it is illegal for any foreign 
national to directly or indirectly make contributions or 
expenditures in any American election or to direct the 
decisions of any corporation or union's election-related 
activities.
    We have also heard talk about banning entities that employ 
lobbyists from making political expenditures. That seems to be 
saying that if you exercise your first amendment right to 
petition the government for a redress of grievances, then you 
must sacrifice your first amendment right to speak on political 
issues.
    We have heard that some corporations are so close to the 
government or look so much like the government that they should 
be treated like they are the government and not allowed to 
speak. Do not mistake the breathtaking scope of this claim. The 
examples cited include Wal-Mart and health insurers. And, of 
course, we have heard that the way to solve all of these 
problems is to use taxpayer funds to pay for congressional 
campaigns.
    All of these points lead in one direction, toward the 
government deciding who can speak, who can't speak, and how 
much they can speak. That is exactly the position our Founders 
rejected when crafting the first amendment, and it is exactly 
the position the Supreme Court rejected in Citizens United.
    Another claim that we hear often these days is that 
Citizens United was an exercise in judicial activism. Ignoring 
words in the Constitution is judicial activism. Reading words 
into the Constitution that aren't there is judicial activism. 
It is not judicial activism to decide that a law banning speech 
is invalid in the face of constitutional language that 
``Congress shall make no law restricting the freedom of 
speech.''
    It is obvious that many individuals, especially on the 
Democratic side, disagree with the Supreme Court's decision, 
but to resort to misleading and overblown rhetoric does force 
us to wonder how much of the response is based on a policy 
disagreement and how much is based on a desire to manipulate 
the rules to benefit their own candidates. For example, they do 
not seem concerned about the ability of labor unions to spend 
freely to support or oppose candidates or show any interest in 
subjecting unions to the same kind of restrictions they would 
place on corporations.
    As we move toward considering legislation, I encourage this 
committee to take great care that its work is not designed to 
benefit either political party over the other.
    Thank you, and I reserve the balance of my time, Mr. 
Chairman.
    The Chairman. I thank the gentleman.
    Mrs. Davis.
    Mrs. Davis of California. Thank you, Mr. Chairman. I really 
came to hear the panel. I appreciate you all being here. I 
didn't realize my colleagues were reading speeches today. There 
are a few things I just wanted to mention then, since it looks 
like I am going to have to go lead my own subcommittee a little 
before 3 o'clock.
    I think the basic questions really are, where are the 
voters in this? I think what we always want to do is encourage 
involvement and not turn people away nor create apathy. So I 
think that is an issue that we want to think about as we do 
this and how we continue to engage them.
    The other issues, of course, are around disclaimers, which 
people have mentioned. What is the most efficient way that one 
can have a disclaimer? Because I think asking people to go to 
another Web site is probably not realistic. People are not 
going to do that. How much can you get into a disclaimer that 
is fair, that really represents what is happening? Do we need 
CEOs to be there saying, I approve this ad, and then you have a 
candidate perhaps, in some cases, doing the same.
    That leads to the other question of coordination. The 
courts threw out, as I understand it, any definitions in terms 
of coordination. Does that mean that elected officials can call 
up a CEO and say, hey, why don't you guys go get an ad out for 
me? I would like that. What is happening then? Where is that 
line going to be drawn? I think that is a very important one.
    The other thing that has been mentioned in terms of unions, 
and I think that we need to look at the history in terms of the 
ways that some organizations, some unions have handled this, 
because they have created a wall of separation in some cases. 
Someone who chooses not to avail themselves of the benefits of 
the union and yet is paying for that representation can pay a 
minimal amount and their dollars do not go to PAC money.
    So we already have that. There are places that do that. I 
think that is worthy to take a look at and understand how that 
could happen. And, obviously, it will happen in terms of 
shareholders if we can come up with something that actually is 
meaningful and works.
    So I appreciate the time, and I certainly appreciate the 
panel being here. Thank you.
    The Chairman. Thank you.
    As I said earlier, I wanted everybody to get a chance to 
speak, and I didn't want anybody's voice not being heard, 
including all of yours. I thank you for being here.
    We would like to introduce the panel.
    Mr. Robert Lenhard. Mr. Lenhard is currently of counsel of 
Covington and Burling D.C. offices and a member of the firm's 
Election and Political Law Practice Group. Prior to his work 
with the Covington and Burling law firm, he served as Chairman 
of the Federal Election Commission in 2007 and Vice Chairman in 
2006. He also previously served as Associate General Counsel 
for the American Federation of State, County, and Municipal 
Employees.
    Judith A. Browne-Dianis. Ms. Browne-Dianis is currently the 
Co-Director of Advancement Project, a legal action group 
committed to racial justice and fighting for fair elections. 
Prior to her work with the Advancement Project, Ms. Browne-
Dianis worked with the NAACP Legal Defense and Education Fund, 
practicing law in the area of voting rights.
    Mary Wilson. Ms. Wilson is the President of the League of 
Women Voters. Ms. Wilson has been with the League of Women 
Voters for nearly 20 years in leadership positions at the 
national, State and local level. Prior to her work with the 
League, Ms. Wilson was counsel with the United States 
Department of Energy and the United States Equal Employment 
Opportunity Commission.
    Ms. Torres-Spelliscy is currently counsel with the Brennan 
Center for Justice Democracy Program. Ms. Torres-Spelliscy has 
worked to defend campaign finance and public funding laws in 
courts across the country. Prior to her work with the Brennan 
Center for Justice, Ms. Torres-Spelliscy was a staff member to 
Senator Durbin's office and worked at the law firm of Arnold & 
Porter.
    Allison Hayward. Ms. Hayward is an Assistant Professor of 
Law at George Mason University School of Law where she teaches 
constitutional law, election law, ethics, and civil procedure. 
Prior to teaching at George Mason University, Ms. Hayward was 
counsel to former FEC Commissioner Bradley Smith; an associate 
at Wiley, Rein & Fielding in Washington, D.C.; and of counsel 
at Bell, McAndrews & Hiltachk in Sacramento, California--you 
California guys jumped in on that one.
    Steve Simpson. Steve Simpson is a senior attorney with the 
Institute for Justice, a public interest law firm dedicated to 
issues of civil liberties. Before coming to the institution, he 
spent 5 years as a litigator with the national law firm Sherman 
and Sterling.
    I thank all of you for being here today and for testifying.
    As I said, we were lax on the 5-minute rule up here. I will 
be lax on the 5-minute rule down there. But if you get a little 
too far out, you will see me squirming a little bit, and then I 
will ask you to sum up. And then there will be time for 
questions, so you will be able to get--anything you couldn't 
get in in your statement, I am sure you will be able to answer 
a question and be able to filter that in, too.

 STATEMENTS OF ROBERT LENHARD, OF COUNSEL, COVINGTON & BURLING 
LLP; JUDITH A. BROWNE-DIANIS, CO-DIRECTOR, ADVANCEMENT PROJECT; 
   MARY G. WILSON, PRESIDENT, LEAGUE OF WOMEN VOTERS; CIARA 
TORRES-SPELLISCY, COUNSEL, BRENNAN CENTER FOR JUSTICE; ALLISON 
 HAYWARD, ASSISTANT PROFESSOR OF LAW, GEORGE MASON UNIVERSITY 
    SCHOOL OF LAW; AND STEVEN M. SIMPSON, SENIOR ATTORNEY, 
                     INSTITUTE FOR JUSTICE

    The Chairman. Mr. Lenhard.

                  STATEMENT OF ROBERT LENHARD

    Mr. Lenhard. Thank you.
    Chairman Brady, Ranking Member Lungren, distinguished 
members of the committee, I want to thank you for the 
opportunity to come and testify today.
    As the chairman noted, I have practiced in the area of 
campaign finance law for close to 20 years, both providing 
advice and counsel to individuals, unions, corporations, and 
trade associations to try to comply with the law, as well as 
serving as a regulator at the FEC trying to faithfully 
interpret and enforce the laws that Congress has passed.
    This has left me with a number of impressions of the 
Supreme Court's decision in Citizens United and the 
implications of it; and while I have submitted a somewhat more 
lengthy written testimony, there are four points that I wanted 
to raise briefly at the beginning.
    The first is that I think the popular perception that this 
was a dramatic change in the law is correct. For as long as I 
have been alive, it has been illegal for corporations to make 
either contributions or expenditures to influence Federal 
elections. The Supreme Court's decision in Citizens United 
changed that. The Court made clear that the first amendment 
protects the right of corporations to make expenditures 
expressly advocating the election or defeat of candidates so 
long as they do so independently of the candidates. The 
consequence of this is that there will be more corporate 
spending in elections, and we can all guess or debate how big 
we think that increase is going to be.
    I like to look at the problem a little differently. I would 
like to look at it just very briefly from the perspective of 
candidates, particularly candidates in very closely fought 
races. Because I think the decision, combined with existing 
law, makes those candidates particularly vulnerable now, and 
the reason for that is this:
    The Supreme Court has made clear that corporations can 
spend unlimited sums advocating the election or defeat of 
candidates, and yet the laws that regulate the collection of 
those funds, the sources of those funds vary dramatically 
between corporations and candidates. Corporations can raise 
those funds through commercial transactions and can spend as 
much as they have. Candidates are constrained by the 
contribution limits. They can raise no more than $2,400 from 
individuals, $5,000 for most PACs. And, consequently, my sense 
is that outside organizations that want to influence close 
elections can have a great effect by coming in and making very 
large ad buys very late in the race that are very negative, 
because my sense is that those kinds of ads can shave several 
percentage points of support off a candidate, and in a close 
election they can be decisive.
    The problem for a candidate is that if you face that kind 
of a situation, you are vulnerable in a number of ways. First 
off, you don't know the money is coming. Your opponent, you can 
look at their campaign fund-raising reports and see how much 
they have raised, how much you have, and make some rational 
budgetary decisions. Money coming from outside groups is 
unexpected. It is like an ambush.
    The second is the amount of money you can raise is limited 
by the statute, and most of the people whom you can pick up the 
phone and call and ask for money, you have already asked and 
they have already given. So as you get to the very last days of 
a campaign, that money is very, very hard to raise.
    And the other thing the law does is, because the 
prohibition on coordination is still in place and because 
coordination includes ads spent at the request or suggestion of 
a candidate, you really can't call up outside groups or even, 
as the law currently stands, political parties and ask them for 
help. Because, if you do, the spending that follows is an 
illegal coordinated expenditure or in-kind contribution, which 
would be illegal, even in a post-Citizens United world.
    That is true even for the political parties. Political 
parties by statute have a very low amount of money which they 
can spend in coordination with the campaign. Under the 
Constitution, they can spend unlimited sums independently. But 
in terms of your reaching out and calling for help, there are 
very, very few places where you can make that call.
    There is a possibility to change that. It will be possible 
for Congress to repeal the limits on how much a party can spend 
in coordination with a campaign, and it would provide 
vulnerable candidates with someplace they can call and seek an 
influx of money to help balance or counterbalance money coming 
from outside, especially in the context of Citizens United.
    This has, I think, a number of advantages. One is that the 
money is hard money. It remains under the restrictions of 
McCain-Feingold prohibiting the use of soft money because all 
that national party committee money is hard money, and the 
McCain-Feingold prohibitions remain in place.
    Second, because that money can be spent in coordination 
with a candidate, the candidate retains some control over the 
message. And one of the problems with outside spending is 
candidates do lose control of the themes that are driving 
voters in their elections.
    And, lastly--and it is a personal view--I think that it 
helps strengthen the parties, makes the parties more relevant, 
which I personally think would be a good thing. Other people 
may disagree, but I think it does make the parties more central 
and would provide candidates who are vulnerable--and I think 
candidates on both sides of the aisle are vulnerable to these 
outside spending ads--some way to try and help counterbalance 
that effect.
    The next thing I would like to talk about very briefly is 
disclosure. Congress has created really three different 
disclosure regimes that cover ads in this area. The first is 
the disclosure regime that exists within the Federal Election 
Commission. Entities that qualify as political committees face 
a relatively rigorous set of disclosure rules. They have to 
disclose all their receipts and disbursements, and they have to 
itemize where that money came from or where it went to if it 
exceeded very low limits--$200 from money coming in, $250 for 
money coming out.
    For organizations that do not qualify as political 
committees--political committees would include PACs as well as 
candidate committees--for organizations that don't meet those 
definitions, there are really two different points at which 
they have to file reports with the FEC. The first is if they 
make independent expenditures, expressly advocating the 
election or defeat of candidates. The second is if they make 
electioneering communications, which was a term Congress 
created in McCain-Feingold (BCRA), which essentially covers ads 
that feature candidates and that run very close to an 
election--30 days with the primary, 60 days with the general--
and target in the district in which the Member of the House or 
the Senate is running.
    And there are more abbreviated disclosure forms that 
organizations that run those kinds of ads have to fill out 
essentially saying how much they spent, and in certain 
circumstances where that money came from.
    The third disclosure regime you have created covers 527 
organizations. These are entities that operate under Section 
527 of the Tax Code which covers entities trying to elect or 
defeat candidates. Congress requires the IRS administer a 
requirement that those kind of entities disclose where the 
money came from and what they spent it on to the degree that it 
reaches slightly higher thresholds--$500 for money coming in, 
$800 for money coming out.
    There are a number of exceptions to who has to file those 
reports with the IRS. And the IRS reports are all on the 
Internet. You can go right now and log in and call them up.
    The first is there are certain kinds of entities that are 
already reporting somewhere else, and they are exempt from the 
IRS rule. So, for example, if you are reporting to the FEC, you 
don't have to also report to the IRS. If you are only involved 
in State elections and you report to the State, you don't have 
to report to the IRS. But Congress' goal there was to try and 
capture the 527 entities a number of years ago when they were 
quite controversial.
    There is an exception there which allows organizations not 
to disclose donors if they are willing to pay the tax, and the 
tax is steep. It is the highest corporate rate, which I think 
runs about 35 percent now. But there have been a couple of 
groups over time that would rather pay the tax than disclose 
the source of their contributions.
    But as you think about this area of the law, there are 
really three different areas where you have created existing 
disclosure regimes.
    And the last thing I want to touch on very briefly is 
coordination, which remains a valid statutory provision. The 
Court has not struck down the statute. It is illegal to 
coordinate with campaigns.
    There is a great deal of back and forth about what the 
nuanced interpretations of that law is. The FEC has come up 
with regulations a couple of times. The courts have struck them 
down a couple of times. The FEC is in ongoing rulemaking right 
now as we speak trying to come to grips with that. But there 
is, I think, some amorphousness as to what that law exactly 
means today; and the question of what is coordination and what 
disclosure exists really, I think, are going to be the two 
areas of law post-Citizens United that are the most debated.
    Thank you very much.
    [The statement of Mr. Lenhard follows:] 

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    The Chairman. Thank you.
    Ms. Browne-Dianis.

              STATEMENT OF JUDITH A. BROWNE-DIANIS

    Ms. Browne-Dianis. Thank you, Chairman Brady and members of 
the committee.
    My name is Judith Browne-Dianis and I am Co-Director of 
Advancement Project, a civil rights organization that supports 
organized communities in their struggles to achieve universal 
opportunity in a just democracy.
    Almost since our inception Advancement Project has been 
involved in the important voting rights issues of our day, 
including issues related to the administration of elections, 
and the elimination of barriers to voting through our voter 
protection program. We have been advocating for the automatic 
restoration of voting rights of persons with felony 
convictions. We have represented communities of color in 
redistricting. And, lastly, we have initiated a campaign for a 
constitutional amendment for a right to vote.
    In addition to the written testimony I submitted, I would 
like to note a few things.
    First, I wanted to note the irony of having this discussion 
today about a case opening the door to the unbridled corporate 
influence on elections on the anniversary of the ratification 
of the 15th amendment, which happened on February 3, 1870, 
prohibiting the denial of the vote on the basis of race, color, 
or servitude.
    The Supreme Court's decision in Citizens United clearly 
ushers in a new and unprecedented era of direct corporate 
wealth influence in our elections. This means that lower- and 
middle-income Americans, who compromise the clear and 
overwhelming majority of the country, will have much less of an 
opportunity to gain access to and interact with their political 
representatives or to help shape the debate in ways that serve 
the interests of the majority of Americans.
    But the wealth disparity in campaign finance is not just an 
issue of class. It is also an issue of race. Unfortunately, we 
still live in a country where race and wealth are intertwined 
such that people of color have accumulated less wealth; and, 
under this new regime, this corporate takeover of our 
democracy, the voices of people of color will be drowned out in 
the efforts to influence the outcomes of our elections.
    Given the historical and lingering racial disparities in 
wealth distribution and transfer caused by government and 
private actions over hundreds of years, coupled with the low 
representation of people of color in the management sphere of 
our Nation's largest corporations and the overwhelmingly white 
demographic of major campaign contributors, it is easy to see 
why any campaign finance regime that allows and relies heavily 
upon private financial contributors, especially major 
corporations, would structurally exclude people of color from 
any significant degree of effective political influence.
    To alleviate the racially discriminatory burdens of money 
and wealth in the campaign finance system, Congress must act 
boldly to strengthen public financing in all Federal and State 
elections, including passing the Fair Elections Now Act, 
establishing direct expenditure and electioneering limits on 
all Federal contracts, and requiring States that receive 
Federal election funds to amend their laws to require explicit 
shareholder and member approval for electioneering 
expenditures.
    What is also disconcerting about the Citizens United 
decision is the Supreme Court's willingness to sell our 
democracy off to the highest corporate bidder in the name of 
free speech and participation while in other instances 
eviscerating protections for citizens--real, live people--to 
have their voices heard by voting. The Court applied the most 
restrictive standard of review in its consideration of whether 
the campaign finance statute issued in Citizens United ran 
afoul of the first amendment, but it is not so exacting when it 
comes to looking at barriers to voting.
    Specifically, in Citizens United, the Supreme Court 
determined that political speech of corporations was subject to 
strict scrutiny under the first amendment, requiring a 
compelling State interest to infringe upon that right. Yet when 
considering Indiana's law requiring voter identification in the 
Crawford case, the Court departed from past precedent and used 
a less stringent standard of review where there was a clear 
burden on the opportunity to vote. It is outrageous that voting 
is not entitled to review under the most stringent protections 
that now apply to corporate influence in the outcomes of 
elections.
    As Justice Stevens rightly noted in his dissent, ``While 
American democracy isn't perfect, few outside the majority of 
this Court would have thought its flaws included a dearth of 
corporate money in politics.''
    To ensure vigorous protection of individual voting rights, 
Advancement Project urges Congress to enact House Joint 
Resolution 28 to amend the Constitution to enshrine an express 
right to vote. We do not have a right to vote in this country, 
along with 11 other democracies and Iran and Libya. Without a 
Federal guarantee of the right to vote, the judiciary will 
continue to regard voting rights as something to be balanced 
while still claiming them as fundamental, and States will 
continue to use their vast control over this basic citizenship 
right in a patchwork quilt of arbitrary rules with vast 
consequences for close elections.
    Finally, Congress should realize that voting is the last 
frontier of our democracy. No matter how much money 
corporations may choose to spend to influence elections in the 
political debate in the wake of Citizens United, the one thing 
they will never be able to do--at least I hope--is to cast a 
ballot on Election Day. It is therefore incumbent upon Congress 
to ensure that all American citizens, especially traditionally 
disadvantaged and disenfranchised citizens of color, do not 
encounter needless roadblocks to registration and voting. To 
that end, Advancement Project urges Congress to enact the 
Protection Against Wrongful Voter Purges Act, which amends the 
NVRA and HAVA in a number of ways to strengthen protections 
against the wrongful removal of registered voters from the 
roles and the wrongful denial or delaying of voter registration 
applications.
    Advancement Project also recommends that Congress enact the 
Provisional Ballot Fairness in Counting Act of 2009, H.R. 3552, 
which would eliminate the wrong precinct rules that relates to 
counting provisional ballots in fair elections. In particular, 
it would require that provisional ballots cast by a voter 
registered anywhere in the State be counted for President and 
Senate elections and ballots cast in correct congressional 
districts be counted for U.S. representatives.
    These two bills would provide immediate fixes to many of 
the perennial voter registration and list maintenance issues 
that have prevented eligible voters from becoming registered to 
vote and have their ballots counted since the 2000 elections.
    In the longer term, Congress should work to improve voter 
registration by enacting legislation that will require 
automatic registration of all eligible voters and permit 
Election Day registration to those who are not already 
registered.
    We clearly believe that in light of Citizens United we must 
strengthen our democracy by ensuring that individuals who are 
actually eligible to cast a ballot have an opportunity to do 
that. This is the only way to balance out the power 
corporations have been given. The one great equalizer, in our 
democracy is going into the election booth to cast that ballot. 
This must be a protected right in order to secure our 
democracy.
    Thank you very much.
    [The statement of Ms. Browne-Dianis follows:]

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    The Chairman. Thank you.
    Ms. Wilson.

                  STATEMENT OF MARY G. WILSON

    Ms. Wilson. Thank you.
    Mr. Chairman, members of the committee, I am Mary Wilson, 
President of the League of Women Voters of the United States. I 
am very pleased to be here this afternoon to talk to you about 
the League's support for legislation that would protect our 
electoral system in the wake of Citizens United v. FEC.
    There is one simple message that I hope the committee 
members will take away from the hearing this afternoon; and 
that is: because the 2010 elections are fast approaching, it is 
imperative for Congress to act swiftly to pass legislation and 
send to the President for signature legislation that governs 
corporate and union spending. That legislation must take effect 
immediately. Waiting until after the 2010 elections is simply 
not a viable option.
    The League of Women Voters of the United States has for the 
last 90 years been working to educate voters, register voters, 
and make sure that citizens have an opportunity to participate 
in our electoral process. I can tell you without a doubt that 
voters want election results that reflect their honestly held 
opinions, not results that derive from big money in elections. 
The voters depend on you, their elected representatives in 
Congress, to protect that open, honest government and a healthy 
democracy.
    The Court's decision in Citizens United upends basic 
campaign finance law that Congress has carefully crafted over 
many years. This fundamental change--with perhaps more coming 
as the Court considers other cases--requires a strong response 
from Congress and the President. Now, I must say we do not 
expect that legislation that would be adopted this year can 
address every possible issue, but some basic voter protection 
can and must be enacted this year.
    There are numerous protections that could be enacted, and 
in my lengthy written statement there are a number of issues 
that I raise, but I want to talk today about enhanced 
disclosure. It is the most basic step toward protecting the 
role of the voter in making decisions in elections.
    The Citizens United decision appears to make it possible 
for corporations, and perhaps unions, to secretly use funds 
that they receive from another corporation to intervene in an 
election. This is not acceptable. Voters need information about 
the sources of funding for those charges and countercharges 
that always come during election campaigns. This is basic. It 
is one of the few ways by which a voter can test the accuracy 
of campaign statements. And I must say, indeed, the Court in 
Citizens United supported such requirements, as they said, ``so 
that the people will be able to evaluate the arguments to which 
they are being subjected.'' We couldn't agree more with that 
statement.
    The League of Women Voters supports strong disclosure 
requirements for both those who receive election funds and 
those who provide such funds. For example, if corporation A 
receives significant funds from corporation B and subsequently 
makes an election expenditure, then corporation A should 
disclose both its own expenditure and the contribution from 
corporation B, and corporation B should disclose its 
contributions to corporation A.
    We believe that corporations should have the responsibility 
for providing disclosure to the public, through disclaimers and 
on the Internet, directly to their stockholders or members, as 
the case may be, and to the Federal Election Commission and the 
Securities and Exchange Commission.
    Disclaimers on public communications should be required for 
every corporation that provides funds above a certain amount 
either directly or indirectly to an election expenditure. The 
Supreme Court clearly approved of disclaimers in Citizens 
United and in fact remarked that, ``With the advent of the 
Internet, prompt disclosure of expenditures can provide 
shareholders and citizens with the information needed to hold 
corporations and elected officials accountable for their 
positions and supporters.''
    After providing enhanced disclosure, the next most 
important step for Congress is to do no further harm. A 
decision as far-reaching in its implications as Citizens United 
will, I am sure, provoke a number of proposals that we, the 
League of Women Voters, believe could make our election system 
and our government processes worse.
    Some, I am sure, will call for increasing or doing away 
with contribution limits to candidates and PACs. There will 
likely be calls to allow corporations and unions once again to 
make huge contributions to political parties, effectively 
repealing the soft money ban in BCRA. There may even be those 
who call for unlimited corporate and union contributions to 
candidates.
    On behalf of the League of Women Voters, I strongly urge 
you not to do any of these things. Each of these steps would 
increase corruption or the appearance of corruption. We need 
fair elections, not greater involvement of big money in 
elections and government.
    In conclusion, the League of Women Voters believes that the 
Court's majority decision in Citizens United was fundamentally 
wrong and a tragic mistake, but this is the decision of the 
Court. Congress needs to respond now, recognizing its own 
authority and responsibility to uphold the Constitution and 
protect the voters. Fair and clean elections, determined by the 
votes of American citizens, should be at the center of our 
democracy.
    Thank you.
    [The statement of Ms. Wilson follows:]

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    The Chairman. Thank you.
    Ms. Torres-Spelliscy.

              STATEMENT OF CIARA TORRES-SPELLISCY

    Ms. Torres-Spelliscy. Good afternoon. Thank you for having 
me here today.
    I request that my report, ``Corporate Campaign Spending: 
Giving Shareholders A Voice,'' be entered into the record.
    The Chairman. Without objection, so ordered.
    Ms. Torres-Spelliscy. Thank you.
    [The information follows:]
    Ms. Torres-Spelliscy. We at the Brennan Center encourage 
Congress to respond to Citizens United in a holistic way. In 
the near future, corporate managers may be using shareholder 
money to play in politics. While other witnesses today may 
argue that nothing has changed because corporate money was 
already in politics, I would respond that while you may have 
been wading in special interest money up to your waist at this 
point, in the future you may be up to your eyeballs or over 
your head.
    Congress should act to ensure that voters and citizens 
remain the central actors in our elections. We suggest a range 
of reforms, including public financing, universal voter 
registration, and empowering shareholders. Today I am going to 
focus on shareholder empowerment.
    Citizens United permits corporate treasury funds to be 
spent on express advocacy for the first time in 63 years. The 
crux of the issue is this: When a corporate manager spends 
``corporate money'' on politics, this includes other people's 
money. There are two basic problems under the current law: a 
lack of consent and a lack of transparency. This is an 
important issue, because one out of every two American 
households is invested in a publicly traded company.
    So when I say that shareholders are not sufficiently 
protected, I am not talking about elites. I am talking about 
average Americans who rely on their investments for their 
current income and for their future retirements.
    When we were studying this issue at the Brennan Center, we 
had a chance to ask some big structural questions. One of the 
questions we asked was, if an investor wanted to know the total 
amount of political expenditures by a given corporation, would 
she be able to find that? And the answer in many cases is no. 
Second, if an investor happened to discover a particularly 
boneheaded, ill-advised political expenditure, what recourse 
would that shareholder have? And the answer to that is there is 
very little legal recourse for a dissenting shareholder.
    In asking these big structural questions, we discovered 
that there are some very problematic gaps between the corporate 
law and the campaign finance law that leaves shareholders 
unprotected, and this problem has increased tenfold with 
Citizens United.
    The first problem is a lack of consent, and the big picture 
is this: Under current law, including the new developments in 
Citizens United, corporations can spend vast amounts of 
corporate treasury funds on politics, and they can do so 
without notifying their shareholders either before or after the 
fact, and they can do it without getting shareholder consent or 
authorization.
    Then there is the related problem of a lack of 
transparency. It is extraordinarily difficult for shareholders 
to learn the total universe of political corporate spending. 
The short answer to why this is is that neither the Securities 
and Exchange Commission nor the Federal Election Commission 
require full disclosure directly to shareholders. So this led 
us to think about shareholder protections that Congress could 
enact.
    We conclude that legislation should have the following 
three prongs: Corporate managers should get shareholder 
authorization of all future political spending; two, companies 
should provide periodic notice of political spending to 
shareholders; and any unauthorized corporate political spending 
should trigger liability. We base this policy proposal in part 
on the British, who have had these protections for their 
shareholders since the year 2000.
    These reforms make sense from the point of view of the 
integrity of our capital markets. If a particular company is 
trying to game the system through political spending, then I 
think that the market and investors should know that. And these 
reforms also make good sense from the point of view of our 
democratic norms because we want consenting individuals at the 
center of our politics.
    I thank you for the opportunity to present today.
    [The statement of Ms. Torres-Spelliscy follows:]

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    The Chairman. Thank you.
    Ms. Hayward.

                  STATEMENT OF ALLISON HAYWARD

    Ms. Hayward. Thank you, Mr. Chairman, Ranking Member 
Lungren, and the committee for providing me the opportunity to 
talk to you today.
    I have provided longer comments for the record, but what I 
want to do today is highlight a couple of things.
    Two points predominantly. First, that, in my view anyway, 
the Citizens United opinion is a sound opinion and one that 
falls within the progression of precedent that the Court has 
enunciated when it has been dealing with independent 
expenditures. Secondly, my skepticism that the consequences 
from Citizens United are going to be as dramatic as maybe some 
of the colleagues that I have on this panel would believe.
    First of all, Citizens United fits within the Court's 
jurisprudence when you look particularly at what the Court has 
enunciated with regard to independent expenditures.
    When the Court was faced initially with the question of how 
to interpret the expenditure ban, it was in a test case teed up 
by a labor organization after the 1947 amendments to the Taft-
Hartley Act, which, by the way, were added at the 11th hour in 
conference committee--not that any of you would be familiar 
with how that works--and without a lot of debate. Labor unions 
were fairly well convinced that it was going to be 
unconstitutional, and so were very comfortable with bringing a 
test case.
    The Court in U.S. v. CIO, which came down in 1948, wasn't 
very helpful in providing constitutional guidance, because what 
they did is they looked at the law and said, whatever this law 
is intended to cover, it couldn't possibly cover your 
newsletter because that would be unconstitutional. So, no case.
    A series of lower court cases, also test cases teed up by 
unions, did not go well for the Department of Justice either. 
In fact, the Department of Justice, through the late '40s and 
early '50s, adopted a policy of non-enforcement out of fear 
that enforcement of the Taft-Hartley amendment would be 
unconstitutional. And you don't have to take my word for that. 
There is testimony provided by the Assistant Attorney General 
at the time in 1955 to a Senate committee where he says 
essentially that. He is very open about it.
    And the Court looks again at the law in the Autoworkers 
decision from 1956, I believe. And there Justice Frankfurter 
writing for the Court says, well, we are going to look at this 
again. It was a case involving some TV spots. The Autoworkers 
had a weekly television program, and some of these programs 
included advocacy for and against particular lawmakers, 
incumbents. And so a few episodes of this larger series were 
the subject of the prosecution, and the Court there said this 
is the kind of expenditure that the amendment was designed to 
address, but because the court below dismissed that question, 
we have to remand it back to the district court. On remand, 
they had a trial, and the jury acquitted the union of making an 
expenditure.
    So, as you can see, as the cases start to develop on the 
expenditure ban, especially with regard to labor organizations 
that were bringing these challenges--I think it is interesting 
to note that corporations weren't testing the law to the same 
degree of vigor and enthusiasm that unions were--you don't get 
a very clear enunciation of the constitutionality of an 
expenditure ban. You get a ``sort-of-there-but-not-there'' kind 
of cloud. And that cloud persists until I think Austin v. 
Chamber of Commerce.
    In the interim, you have other questions involving 
independent expenditures, however, where the court is very 
clear that expenditure prohibitions are not constitutional. You 
have the independent expenditure cap in Buckley v. Valeo. You 
have the independent expenditure cap in the publicly funded 
presidential general election, which is the NCPAC decision.
    And you have Justice Brennan--no conservative he--looking 
at the independent expenditure ban in MCFL and saying, okay--
and this will sound familiar--whatever Congress meant to 
regulate, it wasn't this. And so the legacy in MCFL is an 
exception to the expenditure ban when you have political 
nonprofits that are not using corporate money and there is no 
sense that there are shareholders whose money might be used 
against their will.
    Then you have the Austin case, which Citizens United 
expressly overrules. The Austin case looked at, using strict 
scrutiny, the Michigan law that prohibited a Chamber of 
Commerce from doing the same thing that MCFL wanted to do. You 
can kind of see where the Austin lawyers thought this might be 
the next step. And, applying strict scrutiny, the court held 
that in fact that was constitutional, but using reasoning that 
was controversial at the time and I think has been 
controversial for a lot of scholars since then.
    So when people look at Citizens United as a departure from 
doctrine, I am not so sure. The doctrine was never very well 
enunciated. It has been under a constitutional cloud. I think 
it is instructive that in the immediate aftermath of the 
passage of Taft-Hartley prosecutors were reluctant to prosecute 
on it because they didn't want that bad precedent blowing up a 
tool that they were concerned might be helpful at least as a 
deterrent.
    I want to talk quickly about consequences in the wake of 
Citizens United. I don't know what the consequences will be. I 
am not sure anyone else does either. Corporations do spend 
money in the context of politics now. They are just issue 
advocacy not express advocacy. Now they can say directly what 
they couldn't before.
    Will that mean there is more spending or different scripts 
but the same spenders? I don't know. But I just want to suggest 
that it is not a foregone conclusion that there will be a rush 
for additional money but simply that the people who are already 
spending might spend slightly differently.
    Moreover, I would like to note that States that allow 
corporate expenditures in their campaigns have not seen fit to 
alter their corporate law or other aspects of their State laws 
that regulate those corporations in any sort of novel or 
dramatic ways and seem to be fairly comfortable with 
corporations and unions as participants in political dialogues.
    Briefly--I think this has been mentioned, but I will say it 
from the panel--the foreign national ban remains the law. That 
is to say that foreign nationals cannot make contributions or 
expenditures in any elections--Federal, State or local. 
Congress has exercised its authority in matters of foreign 
affairs and foreign policy to provide for a broad ban in the 
law. That has been interpreted by the FEC to include foreign 
national individuals and their ability to make decisions in 
fund raising. It might be that it is a comfort to some for that 
interpretation to be codified. I don't suggest that as my 
suggestion, but if there is a felt need to clarify or reiterate 
that ban, that would be one way to go.
    On shareholder democracy, just real quickly. Shareholder 
democracy isn't very democratic if you have worked with 
corporations. For one, not all corporations are alike. I don't 
think anyone here is worried about the closely held corporation 
where you have five shareholders who also happen to be the same 
people who are officers and the same people who are directors. 
The corporate roster in any State is filled with those. These 
are people who are incorporating so that they can have a 
fictitious business name to do business so that they can sign 
leases in the name of a fictitious person, not in the personal 
name of the individual business person. Let's set those aside 
because I don't think those are what people are worried about.
    When you have large corporations in a shareholder 
democracy, you have a couple of qualities in voting that I just 
want to alert you to; and the recommendation I would have is 
that you should find a corporate scholar to help you along the 
road if you feel like this is the place you want to go.
    In corporate voting, you can buy votes. It is perfectly 
legal. You can enforce a contract to buy and sell your 
shareholder vote. You can engage--or hedge funds can engage, 
not you personally or me personally--in what is called empty 
voting, where you borrow the voting rights for somebody else. 
So you can vote in a way that is insincere to the corporation's 
interests because you have another investment interest over 
here. It is controversial, but it is an aspect of corporate 
governance today that you should know about. So you will want 
to tread carefully when you start looking at the shareholder 
feedback loop.
    Another question that came up in my mind, just listening to 
my fellow panelists, was, suppose the shareholder is themselves 
a corporation or a labor organization. Do you have to have a 
second-tier approval process, and how attenuated does that 
chain need to be before you feel confident that there is 
consent? It may be something that you can't satisfy.
    So, in closing, Congress has latitude in many areas of 
regulation that may relate to this. I just want to point out 
that Congress has latitude in setting the rules for who can 
contract with the Federal Government. So instead of looking at 
this as a regulation of political activity, you might look at 
it as a regulation of government contracting. Congress, of 
course, has great latitude in how it structures its ethics 
rules. You might look at tax incentives as another way to go.
    And then, finally, I would like to endorse my fellow 
panelist Bob Lenhard's proposal about raising or eliminating 
the coordinated expenditure restrictions that apply to 
political parties. I think that would be a very healthy thing 
to do.
    Thank you.
    [The statement of Ms. Hayward follows:]

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    The Chairman. Thank you.
    Mr. Simpson.

                 STATEMENT OF STEVEN M. SIMPSON

    Mr. Simpson. Mr. Chairman, Ranking Member Lungren, and 
members of the committee, thank you very much for inviting me 
to testify here today.
    The Supreme Court's decision in Citizens United is one of 
the most important first amendment decisions in a generation. 
It arose because the campaign finance laws prevented a 
corporation from disseminating a film and even threatened to 
regulate the publishing and dissemination of books. As the 
Court stated in the decision, ``If the first amendment has any 
force, it prohibits Congress from fining or jailing citizens or 
associations of citizens for simply engaging in political 
speech.''
    Critics have lodged a number of wild claims about the 
decision, but in assessing its impact we should follow the 
Court's own wise counsel and not let rhetoric obscure reality. 
Toward that end, I would like to address some of the more 
prominent myths that have been offered about the Citizens 
United decision.
    First is the idea that under Citizens United corporations 
will be able to buy elections. Now, a corporation can no more 
buy an election with political advertising than they can buy 
market share with commercial advertising. If they could, we 
would all be driving American cars and drinking new Coke, 
Michael Huffington would have been voted Senator a long time 
ago, Ross Perot would have been voted President, John Corzine 
would not have lost in New Jersey. The list goes on and on.
    While it is certainly true that money is necessary to win a 
campaign, that simply does not translate into victory for the 
biggest spender. Indeed, as Professor Hayward made clear, 26 
States allow corporations to make independent expenditures in 
elections. They have not become hotbeds of corruption, nor have 
corporations been able to buy their elections.
    But the claim that anyone can buy an election, whether a 
corporation or anyone else spending money on advertising in an 
election, is not only false, it contradicts the very idea of 
our constitutional republic. As the Court said in Citizens 
United, ``The first amendment confirms the freedom to think for 
ourselves.'' In short, corporate spending does not buy 
elections anymore than anyone else's spending does. It buys 
speech that seeks to persuade. For those who don't agree with 
that speech, the Court provided the answer in Citizens United, 
``It is our law and our tradition that more speech, not less, 
is the governing rule.''
    The second myth I would like to address is that 
corporations, unlike people, have no free speech rights. Now, 
it is true certainly that corporations are not people, but they 
are made up of people just like any other association that 
exists today. Indeed, concerns about corporate speech obscure 
the fact that campaign finance laws in essence treat all groups 
basically the same way.
    A case in point is a case called SpeechNow v. FEC, a case 
that I am now litigating along with the Center for Competitive 
Politics in the D.C. circuit. SpeechNow is an unincorporated 
association. It is a group of individuals who wish to get 
together, exercise their right of association, and spend their 
money advocating the election or defeat of candidates.
    The campaign finance laws treat this group, this 
unincorporated association, essentially exactly the same as a 
corporation. To speak, they must become a political committee, 
and they must comply with the same onerous burdens that the 
Supreme Court just struck down as they apply to corporations. 
Neither the FEC nor campaign finance reform groups have said 
that SpeechNow.org should be relieved of these burdens because 
it is not a corporation. And critics have responded that the 
laws that were struck down in Citizens United don't actually 
prevent anyone from speaking, they merely regulate the funding 
of that speech.
    But this ignores the very real burdens of political 
committee status that the Supreme Court highlighted, excuse me, 
in the Citizens United decision. For instance, in a recent 
study conducted by Dr. Jeffrey Milyo of the University of 
Missouri on behalf of my organization, the Institute for 
Justice, 255 individuals were asked to comply with the 
regulations that apply to ballot issue committees in the 
States. On average they managed to correctly complete just 41 
percent of the tasks that they were asked to complete. After 
the exercise many expressed frustration, saying things like 
this was worse than the IRS and a person needs a lawyer to do 
this correctly.
    It is no exaggeration to say that the campaign finance laws 
often rival the Tax Code in their complexity. Indeed, during 
the oral argument in the Speech. Now in this case I had the 
surreal experience of debating with several judges on the D.C. 
Circuit as to whether the tax laws are more or less burdensome 
than the campaign finance laws. Now, reasonable minds can 
disagree on that question, but it ought not be debatable that 
if Americans come to regard speaking out about political 
elections, as they do filing their income tax returns, far 
fewer of them would bother to try to speak out at all.
    In conclusion, in today's world money and organization are 
not merely important to political speech, they are absolutely 
indispensable to it. As Chief Justice Roberts said in his 
concurring opinion in the Citizens United decision, the first 
amendment protects more than just the individual on a soap box 
and the lonely pamphleteer. The first amendment's protections 
apply whether the speaker is an individual or a group, whether 
he uses a quill pen, a printing press, or the Internet. That 
the Supreme Court understands this is not cause for concern, it 
ought to be cause for celebration.
    Thank you.
    [The statement of Mr. Simpson follows:]

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    The Chairman. Thank you and thank all of you. We will now 
open up for questions, and I would like to start and just ask 
all of you the same exact question if you would just respond 
briefly.
    I am not an expert on constitutional law, but I am a union 
member and a union official for the last 45 years. I know the 
difference between individuals who join unions and individuals 
who purchase stocks. Unions are membership organizations, union 
leadership democratically elected and held accountable to its 
members in regularly scheduled elections. Unions are nonprofit 
organizations bringing together individuals, individual 
interests for the purpose of increasing bargaining power and 
effectively petitioning government. Corporations have 
shareholders. Neither boards nor their executive management 
teams are democratically elected. They are constituated to 
accumulate wealth in the form of a shareholder value rather 
than represent the board interest of the shareholders and 
petition their government.
    Does this distinction between the unions and their 
corporation merit different treatments for unions and 
corporations in America, election law and the election law in 
the wake of citizen alliance? In other words, should unions and 
corporations be treated differently?
    Start with you, sir.
    Mr. Lenhard. I guess the----
    The Chairman. Because they are lumped in in this decision 
and I would like to know.
    Mr. Lenhard. The easy answer is I don't know. Having been 
both a member of a union and a shareholder, I found the 
democratic experience in the union far preferable to that of 
being a shareholder. I think that there are a number of 
procedural protections that union members have, both in terms 
of the--and I actually practiced in this area of law for a 
while early in my career. The courts and in some cases 
legislatures have given people who are covered by collective 
bargaining agreements the right to dissent and to reduce the 
amount of money they pay the union by the proportion of the 
union's expenditures that are attributable to political 
activity, and it is not just campaign contributions, a lot of 
political activity. And people do actively use that right and 
they do pay reduced sums. And they--so there is, I think, a 
reasonably robust process whereby people who want to both get 
information about the money that is spent on political 
activities and the ability to get a portion of that back.
    The same is far from true in the corporate setting, where 
shareholders have a very limited set of rights to vote for the 
board, approve auditors, and particular transactions.
    My sense is that the--and the other factor in this--is the 
enormous disparity in wealth available to unions and available 
to corporations make them very, very different entities. Unions 
are viewed as more politically powerful because the members are 
very active and volunteer their time. But the size of resources 
the unions have is really tiny in comparison to that of 
corporations.
    The Chairman. Thank you. Ms. Dianis.
    Ms. Dianis. I am going with his answer. I have nothing to 
add to that. I think that the point of the activity and 
involvement of union members versus shareholders does bring a 
significant distinction and that they should be treated 
differently because of that. Again, the point about the 
activity of union members and their political activity brings 
it also different from the shareholder who gets a piece of mail 
every once in a while and asking basically for their proxy 
instead of their real involvement.
    The Chairman. Ms. Wilson.
    Ms. Wilson. I certainly think that you, Mr. Chairman, 
summed up the differences between unions and corporations in 
terms of their governance, and I think that is a very key point 
in the discussion. But I also would like to look at it from the 
voters' perspective, and from the voters' perspective I believe 
that the disclosure and disclaimer requirements, whether or not 
it is a union-paid advertisement or a corporation-paid 
advertisement, may indeed look very similar.
    Thank you.
    The Chairman. Ms. Spelliscy.
    Ms. Torres-Spelliscy. To be honest, the Brennan Center has 
not looked at the union question, but we love a good 
hypothetical. And if the committee is interested in that 
particular question, I would be happy to get my cracker jack 
lawyers on that question.
    [The information follows:]
    The Chairman. That is why I asked the question because I am 
interested in it, and I appreciate your help.
    Ms. Hayward.
    Ms. Hayward. I have not written anything formally on this 
but I have thought about it a lot in my research of the history 
of the law, because it does seem to me that the reason labor 
unions and corporations are treated identically in the law has 
much more to do with the political context and a little tit-
for-tat game going on between Democrats in the White House and 
Republicans in--at least after the 1946 election controlled 
both Houses of Congress with fairly great majorities. And they 
are different in such different ways that I don't think that 
you can say that one deserves less regulation than the other. 
They deserve different tailored regulations to address the fact 
that labor unions are membership organizations with a great 
deal of job basis power over their members where publicly held 
corporations have this very dispersed and dissolute 
relationship with hundreds of thousands of people that any 
individual shareholder may or may not care about very much, 
especially if he owns the shares sort of indirectly through a 
fund.
    I think maybe you could make an analogy between a local 
labor organization and a small closely held corporation and the 
kinds of tensions you would have there, but even there I think 
the differences are much greater than the similarities. That is 
in fact an area of legislation that would take a lot of hard 
original thinking to think about the differences in governance 
and oversight and the relationship between the decision makers 
and the rank and file of the shareholders. And it would be a 
great thing to do because it hasn't been done, and I think that 
is just more evidence that the law that we have is not closely 
tailored.
    The Chairman. Mr. Simpson.
    Mr. Simpson. As long as association with either a union or 
a corporation is voluntary then for political speech purposes 
they should be treated identically. Now that has not always 
been the case. Under many State laws members of unions and even 
nonmembers in certain occupations have to pay dues to the union 
and the Supreme Court has dealt with that by effectively 
requiring the unions to allow them to opt out of paying for 
political speech. I think that is appropriate.
    One thing though that is lost in this debate about 
corporations is that shareholders buy their stock voluntarily. 
Indeed, with publicly traded corporations it is probably easier 
to disassociate yourself from a corporation than it is for any 
other entity ever devised by the mind of man. You can go on the 
Internet, you can sell your stock in 5 minutes. That is not 
true of any government I am aware of, it is not true of unions, 
and the idea that shareholders who buy shares of stock really 
want to manage the corporation and make decisions about what 
the corporation spends its money on is counterintuitive, it is 
counterfactual. That is why they are shareholders, because they 
don't want to run the corporation.
    The Chairman. Thank you. It is the selling of the stocks 
that is--it is not the troubling part as to who is buying them. 
But just for the record, every union, any expenditure, whether 
it comes from the general treasury, from a political action 
fund gets voted on by the members.
    Mr. Simpson. I am sorry.
    The Chairman. Every union, every union that has an 
expenditure, whether it may be from the general treasury or 
from their political action fund, gets voted by the members or 
ratified by the members, everyone, not by proxy. You have to be 
there. They can vote yes or they can vote no. So they are going 
to vote on that.
    But I appreciate that and I appreciate your answers and 
thank you for your testimony today.
    Mr. Lungren.
    Mr. Lungren. I would just like to offer a hypothetical to 
all of you. Let's say on election day at 5:00, polls are going 
to close at 8:00, an organization has robo calls going to the 
households of a single party in which they indicate that the 
results are in in the East and the Midwest and the candidate of 
the other party has succeeded and it will make no difference 
whatsoever in the vote turnout in California. This goes only to 
the party that they are suggesting is losing the presidential 
election, it goes on at 5:00; that is, with 3 hours left in the 
voting. Is that kind of a communication the kind of 
communication that should be controlled, required disclosure, 
or does it depend on the organization?
    Mr. Lenhard.
    Mr. Lenhard. I guess that ultimately is a question for you 
to decide. Currently under the statute I think it would be. I 
think that you would have to provide some sort of disclaimer. 
There is a bit of a struggle at the FEC over whether certain 
kinds of media, of communication, robo calls being one, polling 
being another, would require a disclaimer, but I think that the 
state of the law now is that it would.
    Mr. Lungren. The interesting thing that happened is, that 
happened in my election. In fact, I was the recipient of one of 
those calls and we were told that because they did not 
specifically advocate it was merely a news report, that it did 
not--was not required to be reported. And I guess what I am 
just trying to point out is that it is very difficult to kind 
of control the language because they didn't advocate one way or 
the other. Now obviously it was a suppression call. It was only 
to people registered in my party to try to suppress the vote in 
our elections, and we had no recourse. It is kind of 
interesting how those things can kind of go on and, you know, 
technically it is true, they didn't say vote for someone, but I 
think we know what the purpose was. The difficulty is for the 
government then to come in and to try and figure out what the 
motivation was and then punish you or say, no, we are not going 
to punish you, I think is giving government a tremendous amount 
of power that I don't want them to have, even though it was 
against me and the candidates that I supported.
    At least three of the panelists here today have advocated 
taxpayer financing of congressional campaigns. Ms. Torres-
Spelliscy, you did specifically and your organization does. 
What do you say about taxpayers who disagree? For instance, we 
have the scenario now where you have--where usually--it used to 
be that major candidates for the presidency opted for the 
public financing, but we have had a guy named Lyndon LaRouche 
who goes around with public financing even from--I think at one 
point in time from a prison cell for President. I didn't want 
to see money used for that purpose. Of course that was the 
voluntary system. But as I understand those who are advocating 
this, you are not talking about a voluntary system that is only 
based on taxpayers' contributions, you are talking about from 
general revenues.
    Wouldn't the taxpayer be put in the same position as the 
stockholder that you have talked about but even in a more 
difficult situation in that you really wouldn't have any more 
recourse because the Federal Government was making this money 
available with candidates with whom you may have a very, very 
strong disagreement?
    Ms. Torres-Spelliscy. Well, as you said, it really depends 
on how you structure FENA. The way that the presidential public 
financing system has always worked is it is paid for by a 
taxpayer checkoff.
    Mr. Lungren. Right. Do you assume that there is sufficient 
support for that, for public financing for all congressional 
campaigns, all elections, that that would be sufficient 
funding?
    Ms. Torres-Spelliscy. It could be if you had a good public 
education campaign and people realized the difference between a 
privately funded candidate and a clean elections candidate.
    Mr. Lungren. Do all of you agree that at least one of the 
decisions or the fundamental premises of Buckley v. Valeo is 
that money is speech, at least as defined as someone's ability 
to express themselves, to use it on behalf of themselves if 
they run for office or to use it on behalf of expressing a 
political position? Does anybody disagree with that being a 
fundamental part of Buckley v. Valeo?
    Mr. Lenhard. I guess if I could--I mean, I think I would 
frame it somewhat differently. I think money is a means by 
which one projects one's speech, amplifies one's speech beyond 
the sound of your voice.
    Mr. Lungren. Let me put it this way, isn't one of the 
conclusions of that interpretation of the Constitution that, 
for instance, Steve Forbes was unable to contribute whatever 
amount of money he wanted to to Jack Kemp when Jack Kemp ran 
for President in 1988, and short of that, then Steve Forbes 
became a candidate. Maybe it is a rhetorical question, but I 
will ask it anyway: Why was the country better served by having 
Steve Forbes who, while he supported the same positions Jack 
Kemp did, was certainly not as good a presidential candidate, 
why is the country better off that the person who is clearly 
not a viable presidential candidate is able to spend his money, 
as long as he is the candidate, but somehow we corrupt the 
system if he gave the money to a Jack Kemp, who has the same 
ideas but would have been a much better candidate but didn't 
have the resources? That is a question I have tried to figure 
out in my own mind. Maybe I am biased on it because I happened 
to be part of Jack's campaign and I thought it was a terrible 
tragedy that he wasn't able to sustain it. But sometimes I just 
wonder whether we are looking for answers to the question of 
corruption in the wrong places. I just--I find it hard to 
believe that we are better off with Jack Kemp not being able to 
compete in that campaign because frankly we couldn't raise the 
money for it and Steve Forbes, a genuinely nice man who had the 
same views, could use his own money but was not nearly as good 
a candidate. Those are the kinds of real life consequences that 
would bother me when we theoretically think about how we are 
going to sort of set the system up so that we make sure the 
corruption is not here. And yet we still have the first 
amendment which we have always said allows you to use your 
money to express your point of view.
    A rhetorical question, but it is one that I grapple with 
all the time in looking at these issues. I respect all of your 
opinions here, I may disagree with some of them, but these are 
thorny issues that are important issues because it really does 
go to the question of how do we have earnest and active and 
robust debate and maybe disclosure?
    And lastly, I would just say I would hope that others would 
think about the idea of allowing more cooperation and 
coordination from the parties to the candidates, because 
frankly I think that is one of the answers to these other 
issues that are out there. I would rather be held responsible 
for my views in my campaign. I would rather my party be held 
responsible. And if we could work together, then the people 
know what my message is and what my party's message is. If we 
coordinate it, that is so much the better.
    Anyway, thank you for your suggestions there. Thank you, 
Mr. Chairman.
    The Chairman. I thank the gentleman.
    Ms. Lofgren.
    Ms. Lofgren. Well, thank you, Mr. Chairman. And Mr. 
Lungren, you and I don't agree on everything but I think the 
idea that parties are so constrained is really something we 
ought to talk further about, because I am not sure that is good 
for the American system at all. And I am not exactly sure how 
to deal with it, but I think it deserves some future discussion 
and I think maybe we can do something together on that.
    Ms. Torres, I particularly found your testimony helpful 
because I have been thinking, clearly we have got some work to 
do, I think, on the disclosure end and several of the witnesses 
mentioned that, and I think we need to think through what that 
is exactly. I mean the Court mentioned the immediacy of 
technology. And you can--if you make a contribution, there is 
not a reason in the world you can't have the fact of that 
contribution on your Web site within the hour. I mean it is 
easy to do. And so since it is easy to do, maybe there ought to 
be a requirement to do that.
    But I am looking at your testimony. On page 4 you say since 
shareholder money is at stake, shareholders deserve more say 
about whether that money is spent on political contributions 
and expenditures, and note that there is a process in Britain 
to do that. But Britain doesn't have a first amendment and I am 
looking at the Court's opinion, Justice Kennedy, on page 55 of 
the Supreme Court draft. At the end of that paragraph he says, 
the first amendment protects political speech and disclosure 
permits citizens and shareholders to react to the speech of 
corporate entities and shareholders--of corporate entities in a 
proper way. And from that I think he refers to the first 
sentence in that same paragraph about corporate democracy being 
the proper way. And that makes me think about really that the 
Court is envisioning a reaction rather than a prospective 
approval, although they don't say so directly. And it also 
makes me think that we should examine corporate democracy, 
because if they are saying that is where shareholder remedies 
are if they are agreed then we ought to look at what can a 
shareholder do retroactively, and the answer in most cases is 
nothing.
    And so I am wondering in your opinion if we enhance 
disclosure, so for example, I am Good Smelling Soap Corporation 
and I decide that I am going to spend, you know, 3 percent of 
my profit this year campaigning against Mr. Capuano because I 
think that he is dirty and I am a soap guy, right? I am just 
making this up as I go along. My shareholders are aggrieved, 
but what can they do about it? Nothing. If I engage in activity 
that triggers disclosure, should then shareholders have 
additional rights under corporate democracy to hold officers 
and directors accountable in some way for profitability or for 
failure to disclose or for other things? Would that be a burden 
on the First Amendment in your judgment?
    Ms. Torres-Spelliscy. I do not think that giving 
shareholders the ability to consent to political expenditures 
is implicated by the First Amendment. I think this is a 
question of using other people's money in a way in which they 
have had no say. And so I think it is good corporate governance 
and it is good for our democracy to change the securities laws 
to give shareholders more meaningful rights.
    What I find so interesting about Kennedy's opinion is that 
he seems to believe that shareholders already have these 
rights.
    Ms. Lofgren. That is right.
    Ms. Torres-Spelliscy. And I think that is an invitation, an 
opening for Congress, that he is not against shareholders 
exercising control over management's spending in politics.
    Ms. Lofgren. Let me ask you this, the business judgment 
doctrine really protects officers, and you reference that in 
your testimony, from any kind of breach obligation, but those 
business judgments tend to--they relate to running a business, 
whereas political speech generally has been held to be in a 
different sphere. Should we directly repeal or modify the 
business judgment doctrine when it comes to speech that 
triggers disclosure? And again, would that, do you think, be an 
improper burden on exercise of First Amendment rights by the 
corporation?
    Ms. Torres-Spelliscy. Yeah--I mean, business judgment is 
usually--it is something that State courts use to be 
deferential to how corporate managers manage the day-to-day 
workings of a business. So I actually haven't wrapped my head 
around how Congress could change the business judgment rule, 
which tends to be exercised by State court judges.
    Ms. Lofgren. That goes to my next question, if I may, 
because we do generally have the ability to regulate 
corporations under the Commerce Clause. We regulate to the 
Securities and Exchange Commission. So clearly it seems to me 
we would have the ability to create certain Federal 
requirements, at least for those companies that are regulated 
by the Securities and Exchange Commission.
    Ms. Hayward has mentioned several times closely held 
corporations, and the Court itself criticized the regulatory 
scheme as not making distinctions between different corporate 
entities, and I think there is some truth to some of that. For 
example, if the corporation is just me, obviously I should not 
have to go ask myself permission.
    On the other hand, I represent Silicon Valley and there are 
plenty of people who are working for a corporation that hasn't 
gone public yet, but their entire future net worth is in stock 
options or stock that they can't sell because it is not 
publicly traded. In fact, they may be at a greater disadvantage 
than a publicly traded corporation for somebody who engages in 
speech and puts everything they worked for at jeopardy.
    And so I am wondering in terms of litigation, the Cort v. 
Ash case that you reference, again it is not a Federal issue, 
but it could become a Federal issue, whether there is a need to 
provide in cases where activity triggers disclosure some remedy 
for shareholders if shares are damaged in some way or the 
trademark is diluted. I am not sure what all the details would 
be--and that would give--I am thinking aloud, but that would 
give protection to shareholders even when there has not been an 
IPO, and arguably whether you are even more at risk because you 
can't sell your stock. And yet for the corporation that has one 
shareholder, you obviously would never sue yourself, so it 
wouldn't invite those kinds of abuses. Do you think that would 
run afoul of the First Amendment?
    Ms. Torres-Spelliscy. I do not. And Cort v. Ash is a very 
interesting case because this is when the corporate ban was in 
effect and a corporation arguably violated the ban, a 
shareholder tried to sue under FECA and the Court said no, 
there is not a private right of action under FECA. Even though 
the corporation is violating FECA, you as a shareholder don't 
have a right to enforce that. And so part of what you might 
look at is where do you create those private rights of action.
    Ms. Lofgren. And only when the--I am just thinking when you 
engage activity that triggers a new disclosure activity, then 
you might have a different set of rules to protect 
shareholders. I will just ask one more question because I know 
others want to speak.
    On Sub S corporations and some others, I am looking at will 
you spend--when we give benefits to corporations, tax benefits, 
and again this is a question do you think this would be an 
unfair burden on First Amendment exercise. If a certain 
percentage of your revenue or your value is expended in 
activity that must--that triggers disclosure, would that that 
be--we might then question is this really a corporation that 
deserves the benefit of the corporate code or is it really just 
a shell to get tax benefits for political speech and whether at 
some level you say okay, we are going to trigger, you are no 
longer really legitimately a corporation. You are really just 
trying to get the taxpayers to subsidize your political 
activity and we are not going to give you those corporate tax 
benefits anymore. Do you think that would be an unfair burden 
on the First Amendment?
    Ms. Torres-Spelliscy. I think the difficulty, and one of 
the proposals I have seen floating around, is basically you 
would say in, say, the State of Delaware, if you conduct 
independent expenditures then you cannot get a Delaware 
corporate charter. I think that probably goes too far and you--
--
    Ms. Lofgren. I think so, too.
    Ms. Torres-Spelliscy. Yes, because Citizens United is 
Citizens United, it says that corporations have free speech 
rights and so I don't think you could take that away----
    Ms. Lofgren. What I am asking you is not do they have free 
speech rights, they do, the Court already told us that. The 
question is do they have tax benefit rights? And at what point 
does that--we are giving corporations tax benefits for a public 
purpose, which is to engage in economic activity and that 
creates wealth for the Nation and the like. We are not really 
giving those tax benefits to run political campaigns. Where is 
that line drawn and does that run afoul of the First Amendment?
    Torres-Spelliscy. Under IRC, I think it is 162(e), 
contributions and other political expenditures are already not 
tax deductible for corporations. So the Tax Code does speak to 
some of those issues.
    Ms. Lofgren. But the independent expenditures, we are in a 
whole new world.
    Ms. Torres-Spelliscy. Yes.
    Ms. Lofgren. Mr. Chairman, thank you for your indulgence in 
letting me ask these questions.
    The Chairman. Thank you. We are going to have votes at 4 
o'clock. They are the last votes of the day. I would like to 
try to get this done and adjourn rather than bring everybody 
back here again. I mean, I will come back if you will come 
back, but sometimes my colleagues don't always join us. So if 
they would be a little short I would appreciate you getting to 
the pertinent questions.
    Mr. McCarthy.
    Mr. McCarthy. Before I begin, Mr. Chairman, I want to thank 
you in the style in which you are holding this hearing. The 
freedom that you allowed the speakers to go longer is very 
productive for all of us, even on the questioning. I understand 
we are going to have quite a few hearings on this as we go 
forward. And I appreciate the style in which you are holding 
it.
    If we are going to be studying this, let's analyze what the 
case actually said and, Ms. Hayward, you said the Court came 
down and it didn't change the status of the corporation under 
the First Amendment but it allowed a corporation and a union to 
change from an issue ad to a direct ad. So maybe you could 
explain a little of that so we are all on the same page.
    Ms. Hayward. Okay, the way I see it, what Citizens United 
did was say explicitly what the Court had been sort of hinting 
around in a series of cases, Austin being the notable 
exception, that it was focusing more on the independent 
expenditure quality of activity than the identity of the 
speaker. And so independent expenditures received full First 
Amendment protection, which means they get strict scrutiny and 
States have to have a compelling state interest and use the 
least restrictive means to restrict independent expenditures. 
The wholesale corporate expenditure ban doesn't fly under that 
test. I think that is a reasonable continuation from prior 
cases.
    Mr. McCarthy. If I could be quick. So an issue ad from a 
direct ad, would I be wrong in saying it is changing three 
words at the end of the ad to calling somebody to either voting 
for or opposing?
    Ms. Hayward. Quite possibly.
    Mr. McCarthy. And there would be the timing, either 60-day 
or up to the election. Is that why you come to the conclusion, 
Mr. Simpson, that there won't be that much more money different 
in this campaign spent by corporations? Because they can 
already spend it, it is the timing of when you spend it or a 
union in that matter?
    Mr. Simpson. That is a large part of the reason, yes. The 
other part is that we can look to States like California and 
other States and it is not as though corporate speech has 
overtaken their elections. Before we decide that the sky is 
falling from this, we might want to actually look at the States 
that allow corporate independent expenditures and these other 
things. And I think if we do we will see that corporations have 
not spent jillions of dollars in those States.
    Mr. McCarthy. I come from California and they allow it in 
the State house. President Obama was a representative in 
Illinois and they allowed it. Chris Van Hollen from Maryland, 
they allowed it as well. So we have seen this play.
    I want to go back to Mr. Lenhard. With this Court case, can 
a corporation give money to a Member of Congress. Has that 
changed at all?
    Mr. Lenhard. No, it has not.
    Mr. McCarthy. You said, I think it was in the questioning 
with Mr. Lungren--no, no, with Chairman Brady--that between a 
union and a corporation you were concerned because the 
corporations were so much larger in scope playing politically?
    Mr. Lenhard. No, I think what I was trying to say is that 
it was possible to distinguish them because the potential pool 
of resources was so much larger.
    Mr. McCarthy. Do you know off the top of your head who has 
the largest political PAC in the country, who is the most 
active?
    Mr. Lenhard. Yeah, the largest political PAC--I am not 
sure. Certainly the labor--the largest--labor union PACs are 
among the largest PACs in the country.
    Mr. McCarthy. Does their money go 50/50 both parties?
    Mr. Lenhard. No, I think that they give more money to 
Democrats than Republicans. I am not sure if you looked at 
overall, the accumulation of all PAC spending. My guess is that 
if you looked at all PAC spending it probably went to whichever 
party was in the majority.
    Mr. McCarthy. I just checked OpenSecrets, and you are 
right. Operating Engineers are the largest, which is a union, 
they do 80 percent. The second is a corporation, AT&T, they do 
50/50. And the third largest is International Brotherhood, a 
union, and they do 99 percent. The next is a corporation, 
Honeywell, and they do 61 percent to Democrats.
    It made me think again on the questioning of Ms. Lofgren to 
Ms. Torres here, when you are asking that last question there 
that somehow corporations get some type of tax benefit so you 
would have to look at it. Could you not make that same 
argument, when we were talking here about health care and the 
way unions' health care was treated, if that bill that got the 
deal in the Senate would be to pass, would the unions not have 
a special tax incentive for their union members in health care 
and would that not give them a greater advantage because they 
wouldn't be taxed on it so they would have more money to play 
politically; could you make that argument?
    Ms. Torres-Spelliscy. You could make all sorts of 
arguments. I am not a tax attorney, and so----
    Mr. McCarthy. Well, she was asking you tax questions.
    Ms. Torres-Spelliscy. Yes, I probably should have said that 
to her as well. So I just can't comment on the tax consequences 
of these things.
    Mr. McCarthy. Last question. You did the study, Ms. Torres, 
on the concern that you said for the shareholders. And you 
weren't talking about the big wealthy shareholders, you were 
talking about so many of us who invest each month in our 
401(k)s and others, and you thought there had to be a change. 
If that change would take place that we had to approve, would 
that be an opt-in or an opt-out?
    Ms. Torres-Spelliscy. What we are proposing is an up or 
down vote. So the company would propose a political budget, we 
are going to spend a million dollars and then a line on the 
proxy that goes to the shareholder would say do you want 
corporation X to spend a million dollars in the coming year, 
yes or no. So if you want to look at that as an opt-in, then--
--
    Mr. McCarthy. Since the Court case dealt with corporations 
and unions, would you not ask the same question of the union so 
that union member that is middle class that is getting money 
taken out but has to opt out for it, would it not be the same 
question to them as well; if you were crafting a legislation 
would you not want that?
    Ms. Torres-Spelliscy. As I said earlier, we haven't really 
looked at the union question.
    Mr. McCarthy. But would it be fair and in the same plane so 
if we did craft legislation and a corporation was asked that to 
a shareholder, wouldn't that same American that is a union 
worker have the same because they will probably be shareholders 
too? So you would probably agree with the statement that we 
should do the same for both?
    Ms. Torres-Spelliscy. I will decline to agree with you at 
this point.
    Mr. McCarthy. So we should treat them differently? They are 
different people?
    Ms. Torres-Spelliscy. I honestly would rather do some 
thoughtful study and then give written testimony to the 
committee.
    [The information follows:]
    Mr. McCarthy. Their money must be different. Okay, I yield.
    The Chairman. Mr. Capuano.
    Mr. Capuano. Thank you, Mr. Chairman. Mr. Chairman, I will 
be brief because I know we have to go vote. I got to tell you, 
after listening to most of this discussion I really wish I had 
paid more attention to corporate law. All I remember from 
corporate law is you are supposed to borrow somebody else's 
money, make a profit and keep both. That is all I remember from 
corporate law.
    Mr. Lungren. Law school?
    Mr. Capuano. No, it was run by Jesuits as a matter of fact.
    Mr. Chairman, I don't approach it through the 
technicalities of everything and that is why I don't really 
have any questions. I am looking forward to working with people 
on this panel.
    The question I have for everybody, and it is how I come to 
the issue, is what is it that I want? What is the goal that I 
want? I am not looking to thread a needle with a constitutional 
issue, I am not looking to parse this out. What I really want, 
I really want upfront, straightforward elections. I want 
everybody out of the elections except the voters and the 
candidates. If I could, I would have no money at all for 
anybody. I mean maybe a few dollars for some literature so 
people can get educated, and that is it. A level playing field.
    Everybody says you need millions of dollars to run for 
Congress. Why? The only reason you need it is because the other 
guy has it. If the other guy doesn't have it, you don't need 
it. Elections should be decided by regular people, getting rid 
of all the extraneous material.
    Now I know that that is a dream and I know I can't get 
there. My goal is to try to find ways with the stupid laws and 
stupid legal decisions we have. How do I get through all of 
that to get as close to that ideal that I want--I know that 
others don't share it--as possible. And that is all I want to 
do.
    So I am asking the panel, not necessarily today, we don't 
have time today, and I am asking members of this committee to 
try to come up with what is it that you want? I am not looking 
for Democrats to win or Republicans to win. I know that you 
don't believe me, and that is fine. I am not. I am looking for 
voters to make honest, open, unfettered decisions. Not based on 
who has more money, not based on who is part of the political 
machine.
    The last thing I would want is to bring the Democratic 
Party into my elections. Keep them out. I want the Republican 
Party in, please, get me a candidate. I want voters to decide 
on the basis of the people on the ballot. I do agree with not 
cluttering up the ballot. I totally agree I don't want public 
money going to fringe candidates. There is no question, but I 
think there are ways we can avoid that.
    The truth is I don't really want public money. I just see 
it as the only alternative we have left available, as the best 
of a bunch of bad alternatives. What I want is voters to have 
the equal opportunity to hear the ideas of different 
candidates, from school committee to president, on a level 
playing field and make thoughtful decisions on that, which 
requires some involvement by voters. I wouldn't mind requiring 
them to come to debates. I don't know how you quite do that. 
Another court case, I am sure. But for me that is the goal and 
everything else is extraneous. And what we are doing today, I 
would argue, I am trying to find ways to get there.
    And I would ask the panelists, again not today, I know we 
have to go vote, but you will be hearing from me in the next 
month or so. I would ask you to look at it with that goal in 
mind, how do I get there? How do I get as much of this nonsense 
out, not just corporate money. Corporate money happens to be 
the debate today. But I have no problem getting it all out so 
that we can have honest debates and honest elections and let 
the chips fall where they may. I am satisfied with that. That 
is all I want.
    Mr. Lungren, I will tell you that what happened to you was 
wrong, and I would not have any problem at all making it 
illegal, clearly and unequivocally, but it is not the only 
dirty trick I have ever heard of. And it doesn't make it right. 
It is actually pretty easy compared to some of the stuff I 
know. But it doesn't make it right and it doesn't make it good 
for the voters. They should be able to come and vote as they 
please each and every election. So if there are ways to do 
that, I want to work with anybody who wants to do it, and 
without the partisanship as best I can, without the ideological 
answers. I want voters to decide. If they want to go to the 
hard right, I can say they are wrong, but it is okay with me, 
it is okay with me.
    We just lost an election in Massachusetts. It is okay with 
me. We had a huge turnout for a January election. I was on the 
other side, we lost. But you know what, voters came out and 
voted it was okay with me. It was actually a pretty straight up 
election. That is what it should be about, and that is what I 
am here for. I am not here for money or no money or anything 
else.
    And with that, Mr. Chairman, I apologize, but that is what 
I am asking. I am not asking a question today, I am asking you 
to think about it and help us through this, help me through 
this. Thank you.
    The Chairman. Thank you, we have 3\1/2\ half minutes for a 
vote. Mr. Harper.
    Mr. Harper. I will be quick so Mr. Davis will have a 
moment, too.
    Public financing of elections I think is not a good idea 
and a good road for us to go. But I would ask, if I could ask 
Mr. Lenhard, do you believe that the individual contribution 
limits should be done away with?
    Mr. Lenhard. No. No, I think that there is certainly the 
potential, and in some cases actual corruption when people can 
give very, very, very large amounts of money to politicians. I 
think that that has underlain the restrictions and the law and 
the court's decisions for a long time. I don't think--there are 
politicians who are above that and it doesn't matter who gives 
them money and who doesn't. But I think sometimes it does and 
at minimum the appearance of giving someone $100,000 or 
$600,000 would be corrupting or appear so.
    Mr. Harper. In light of what Ranking Member Lungren said 
about Jack Kemp and Steve Forbes and that race, there is 
somebody who can use all their individual money. Shouldn't this 
be about full disclosure so we know exactly where the money is 
coming from and who this is. Does anybody on the panel support 
doing away with the individual limits on campaign contributions 
with full disclosure? I would just be curious.
    Mr. Simpson. I actually agree with Congressman Lungren to 
the extent that he laments the fact that people cannot finance 
candidates that they wish. I think that the answer to the 
problems on this committee is dealing with in the sense of 
corporations or other groups being able to outspend 
politicians. The answer is allow politicians to compete on the 
same basis. So I would do away with or raise them so that 
politicians can actually compete with all of the voices.
    The Chairman. Two minutes to the next vote, 2 minutes.
    Mr. Davis of Alabama. Thank you, Mr. Chairman. Thank you, 
Mr. Harper, for your courtesy in being brief. Obviously given 
the time constraints, I really only have time to make an 
observation to the two members of the panel who were supportive 
of the United decision. It seems a lot of the arguments frankly 
that you made, Mr. Simpson, were probably the very same 
arguments that were made prior to Buckley v. Valeo. Before 
Buckley v. Valeo it was not at all taken for granted that 
contributions could be capped. A number of the points you made 
about the first amendment were made by the people who argued 
for striking down the caps on contributions during Buckley v. 
Valeo. But if memory serves me correctly the Court's logic was 
that in the context of speech if there was a compelling enough 
public interest in reining in speech, that the Court could 
impose caps and could impose limits.
    So I would just end with this observation. Right now if a 
Member of Congress sits down with a corporation, there is a 
difference of opinion on issue, the most a corporation can 
implicitly say to you is I won't write you a check or I will 
write a check to your opponent and they will limit it to the 
tune of whatever the limits are in their PAC, $5,000 per cycle. 
Candidly that is not much of a threat in the modern context of 
campaigns. It would seem that after this decision the worst 
that a corporation can say to a Member ratchets up 
considerably: If you don't vote with me I will put a million 
dollars into defeating you in the next election. I can't 
imagine a greater threat to independent decision making by this 
body than corporations implicitly or explicitly being able to 
say if you don't follow my line, I will single-handedly put 
enough resources into that contest to defeat you.
    The Chairman. Zero time, sir.
    Mr. Davis of Alabama. All right.
    The Chairman. I don't want to cut you off, but I don't want 
you to miss the vote either. Thank you all. We really 
appreciate you being here and it was very, very enlightening. 
Thank you for your testimony. I am sure we will be hearing more 
from you; you will be hearing more from us.
    I ask unanimous consent that the following statements be 
part of the hearing record, statements by the Campaign Legal 
Center, statements by the People for the American Way, 
statements by SEIU, statements by U.S. PIRG, statements by the 
President of UAW and the President of the Communications 
Workers of America, and an article published by the Brookings 
Institution. I ask the record be left open for 5 days to accept 
testimony from others.
    [The statement of the Campaign Legal Center follows:]

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    [The statement of People for the American Way follows:]

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    [The statement of SEIU follows:] 

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    [The statement of U.S. PIRG follows:]

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    [The statement of UAW and Communications Workers of America 
follows:]

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    [The statement of the Brookings Institution follows:]

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    The Chairman. This hearing is now adjourned, and again I 
thank our panel.
    [Whereupon, at 4:05 p.m., the committee was adjourned.]

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