Saturday, November 28, 2009

"Commonwealth Cup" a Misnomer This Year

Later today UVA will meet Virginia Tech in one of the South's oldest college football rivalries. Since 1996, the winner of this intrastate rivalry has won the "Commonwealth Cup." Virginia Tech won the cup last year, prevailing 17-14. Generally the winner of this game can properly consider itself Virginia's best college football team.

This year the "Commonwealth Cup" is a bit of a misnomer, however. At best, UVA, with only one win all year, is the state's fourth best college football team, behind William and Mary, which beat UVA in September, and Richmond, which defeated Duke early in the season and barely edged William and Mary last week.

Perhaps the "I-64/81 Cup" would be a more apt title.

Thursday, November 26, 2009

Should Presidents Use Thanksgiving Proclamations to Advocate Their Policies?

Do We Need More (or less) FDR?

Over at the Nation, John Nichols, is criticizing the tone and content of President Obama's Thanksgiving proclamation, calling for "another helping of FDR." According to Nichols, FDR departed from George Washington's example and used the proclamations as a platform to defend his policy initiatives. Nichols thinks this is a good thing and that Obama should do the same.
Nichols quotes some of FDR's proclamations at length.

For instance, FDR's 1933 proclamation included the following:

"May we be grateful for the passing of dark days; for the new spirit of dependence one on another; for the closer unity of all parts of our wide land; for the greater friendship between employers and those who toil."

Moreover, his 1934 proclamation included the following:

"During the past year we have been given courage and fortitude to meet the problems which have confronted us in our national life. Our sense of social justice has deepened. We have been given vision to make new provisions for human welfare and happiness, and in a spirit of mutual helpfulness we have cooperated to translate vision into reality,"

Nichols criticizes Obama for being like Washington and George W. Bush and using the proclamation to emphasize themes that all Americans can endorse, regardless of party affiliation.

I respectfully disagree with Nichols.

1. Roosevelt was obviously referring to his economic recovery package, particularly the National Industrial Recovery Act (NIRA), passed in the summer of 1933. The plan fostered "unity," "dependence," and "social justice" by coercively requiring members of more than 500 different industries to fix prices and adopt other practices, including minimum wages, that disproportionately raised the costs of small businesses and thus fostered the exercise of market power by large entenched firms. The NIRA also required participating firms to bargain collectively with labor cartels known as unions, thereby further enhancing wages above the market level and further disadvantaging small business and racial minorities.

The Supreme Court unanimously declared the NIRA unconstitutional in 1935, and economists from both sides of the spectrum, including the Chair of President Obama's Council of Economic advisors, Christina Roemer, a William and Mary alumna, have argued that the NIRA significantly slowed economic recovery and thus exacerbated the misery caused by the great Depression. Empirical tests have confirmed this result.

The Supreme Court also struck down the Agricultural Adjustment Act and the Bituminous Coal Act, provisions that had similar price-raising, and recovery-stalling, effects.

In short, FDR's unconstitutional economic recovery plan was nothing to celebrate, and it's unfortunate to say the least that he enshrined arguments, albeit somewhat indirectly, for his plan in his Thanksgiving proclamation. Such proclamations should withstand the test of time and speak to timeless values. Roosevelt's arguments for his plan do not pass this test.

2. Some traditions and days should be above politics. Presidents should follow in George Washington's footsteps and use such proclamations to celebrate that which brings us together, not what divides us. Many small businessmen and racial minorities were anything but thankful for President Roosevelt's policies. Kudos to President Obama for taking the right approach here.

President Obama's Thanksgiving Proclamation

Here is President Obama's Thanksgiving Proclamation:

What began as a harvest celebration between European settlers and indigenous communities nearly four centuries ago has become our cherished tradition of Thanksgiving. This day's roots are intertwined with those of our nation, and its history traces the American narrative.
Today, we recall President George Washington, who proclaimed our first national day of public thanksgiving to be observed "by acknowledging with grateful hearts the many and signal favors of Almighty God," and President Abraham Lincoln, who established our annual Thanksgiving Day to help mend a fractured nation in the midst of civil war. We also recognize the contributions of Native Americans, who helped the early colonists survive their first harsh winter and continue to strengthen our nation. From our earliest days of independence, and in times of tragedy and triumph, Americans have come together to celebrate Thanksgiving.
As Americans, we hail from every part of the world. While we observe traditions from every culture, Thanksgiving Day is a unique national tradition we all share. Its spirit binds us together as one people, each of us thankful for our common blessings.

As we gather once again among loved ones, let us also reach out to our neighbors and fellow citizens in need of a helping hand. This is a time for us to renew our bonds with one another, and we can fulfill that commitment by serving our communities and our nation throughout the year. In doing so, we pay tribute to our country's men and women in uniform who set an example of service that inspires us all. Let us be guided by the legacy of those who have fought for the freedoms for which we give thanks, and be worthy heirs to the noble tradition of goodwill shown on this day.

Now, therefore, I, Barack Obama, president of the United States of America, by virtue of the authority vested in me by the Constitution and the laws of the United States, do hereby proclaim Thursday, Nov. 26, 2009, as a National Day of Thanksgiving. I encourage all the people of the United States to come together, whether in our homes, places of worship, community centers, or any place where family, friends and neighbors may gather, with gratitude for all we have received in the past year, to express appreciation to those whose lives enrich our own and to share our bounty with others.

In witness whereof, I have hereunto set my hand this 20th day of November, in the year of our Lord 2009, and of the independence of the United States of America the 234th (year).

Barack Obama

Wednesday, November 25, 2009

Happy Thanksgiving/Washington's 1789 Proclamation


Thanksgiving approaches. During his first year as President, the father of our country issued the following proclamation.

By the President of the United States of America, a Proclamation.

Whereas it is the duty of all Nations to acknowledge the providence of Almighty God, to obey his will, to be grateful for his benefits, and humbly to implore his protection and favor-- and whereas both Houses of Congress have by their joint Committee requested me to recommend to the People of the United States a day of public thanksgiving and prayer to be observed by acknowledging with grateful hearts the many signal favors of Almighty God especially by affording them an opportunity peaceably to establish a form of government for their safety and happiness.

Now therefore I do recommend and assign Thursday the 26th day of November next to be devoted by the People of these States to the service of that great and glorious Being, who is the beneficent Author of all the good that was, that is, or that will be-- That we may then all unite in rendering unto him our sincere and humble thanks--for his kind care and protection of the People of this Country previous to their becoming a Nation--for the signal and manifold mercies, and the favorable interpositions of his Providence which we experienced in the course and conclusion of the late war--for the great degree of tranquility, union, and plenty, which we have since enjoyed--for the peaceable and rational manner, in which we have been enabled to establish constitutions of government for our safety and happiness, and particularly the national One now lately instituted--for the civil and religious liberty with which we are blessed; and the means we have of acquiring and diffusing useful knowledge; and in general for all the great and various favors which he hath been pleased to confer upon us.

And also that we may then unite in most humbly offering our prayers and supplications to the great Lord and Ruler of Nations and beseech him to pardon our national and other transgressions-- to enable us all, whether in public or private stations, to perform our several and relative duties properly and punctually--to render our national government a blessing to all the people, by constantly being a Government of wise, just, and constitutional laws, discreetly and faithfully executed and obeyed--to protect and guide all Sovereigns and Nations (especially such as have shewn kindness unto us) and to bless them with good government, peace, and concord--To promote the knowledge and practice of true religion and virtue, and the encrease of science among them and us--and generally to grant unto all Mankind such a degree of temporal prosperity as he alone knows to be best.

Given under my hand at the City of New York the third day of October in the year of our Lord 1789.
George Washington

Thursday, November 19, 2009

Seven Score and Six Years Ago . . .

Today is the 146th Anniversary of Abraham Lincoln's Gettysburg Address. Here is the entire text:

Fourscore and seven years ago our fathers brought forth on this continent a new nation, conceived in liberty and dedicated to the proposition that all men are created equal.

Now we are engaged in a great civil war, testing whether that nation or any nation so conceived and so dedicated can long endure. We are met on a great battlefield of that war. We have come to dedicate a portion of that field as a final resting-place for those who here gave their lives that that nation might live. It is altogether fitting and proper that we should do this.

But, in a larger sense, we cannot dedicate, we cannot consecrate, we cannot hallow this ground. The brave men, living and dead who struggled here have consecrated it far above our poor power to add or detract. The world will little note nor long remember what we say here, but it can never forget what they did here. It is for us the living rather to be dedicated here to the unfinished work which they who fought here have thus far so nobly advanced. It is rather for us to be here dedicated to the great task remaining before us -- that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion -- that we here highly resolve that these dead shall not have died in vain, that this nation under God shall have a new birth of freedom, and that government of the people, by the people, for the people shall not perish from the earth.

The speech, preceded by a two hour oration by Edward Everett, lasted just over two minutes.

Saturday, November 14, 2009

On the Regulation of Corporate Political Speech

The Blog of the William and Mary Chapter of the American Constitution Society recently posted an article reporting on and summarizing William Van Alstyne's November 11 lecture regarding Citizens United v. Federal Election Commission, currently pending before the Supreme Court. At the end of the last term, the Court ordered reargument in the case, asking the parties to address whether, for instance, the Federal Government may, consistent with the First Amendment, ban speech by Corporations in support of or in opposition to a particular political candidate. The Court first approved such a ban in Austin v. Michigan Chamber of Commerce, 494 U.S. 652 (1990), in a 6-3 decision. Two justices presently on the Court dissented: Justice Kennedy and Justice Scalia. (Justice O'Connor, it should be noted, joined Justice Kennedy's dissent).

Here is a link to the story:

Among other things, the ACS article summarizes the case for stringent regulation of corporate speech as follows:

"Generally speaking, the campaign reform acts were put into place to prevent large commercial corporations from being able to contribute a large, disproportionate amount of money towards a particular campaign under the idea that such a contribution would make the democratic process less pure. Another reason why the campaign reform statutes were enacted was the fact that people purchase stocks from a corporation to further their own economic interest – not to make a political statement. The Supreme Court has upheld these campaign reform acts in the past, finding that a commercial corporation contributing money from its treasury to a candidate comes too close to bribery."

This is a fair summary of the rationales that proponents of such regulation have articulated. It should also be noted that such regulation includes outright bans on corporate political speech in connection with elections. Moreover, statutes banning such speech generally allow corporations to set up PACS that collect voluntary contributions from affiliated persons, such as shareholders and employees. Proponents of such bans on corporate speech argue that such PACS produce "enough" speech to vindicate the legitimate rights of corporations and their individual constituents to influence the political process.

Citizens United involves a slightly more complicated provision, Section 203 of the so-called Bipartisan Campaign Reform Act of 2002. Section 203 prohibits corporations from speaking 6o days before a general federal election and 30 days before a federal primary, whenever such speech requires expenditures from the corporation's general treasury, as opposed to the sort of "separate fund" described above. Moreover, Section 203's prohibitions arguably sweep more broadly than those at issue in Austin, described above, insofar as they apply even to speech that is primarily about issues, so long as a candidate is mentioned and the speech occurs during the requisite unsafe harbors before an election, i.e., when such speech is most likely to be effective.

I do not disagree with Professor Van Alstyne's description of how the Court might rule in Citizens United. Moreover, I agree that the decision could have major implications for the scope of state and federal authority over speech during political campaigns. Finally, I agree that, at least when it comes to regulation by individual states, the correct application of the Constitution could turn on whether corporations are, as the Supreme Court has repeatedly held or assumed for over a century, "persons" within the meaning of the 14th Amendment.

At the same time, I thought I would take this opportunity to offer some thoughts about the regulation/prohibition of Corporate political speech, from the perspective of someone who has taught Corporate Law and once even wrote about the regulation of corporate speech in a paper published by our own Bill of Rights Journal. See Alan J. Meese, Limitations on Corporate Speech: Protection for Shareholders or Abridgement of Expression, 2 W&M Bill of Rights Journal 305 (1993).

First, it is important to distinguish between speech, on the one hand. and contributions to candidates, on the another. Much commentary about the case, particularly by proponents of such regulation, muddies the distinction between these two means of influencing the political process.

Citizens United wants to speak, not make a contribution to a candidate or otherwise fund a campaign. Such speech costs money, but so does speech by individuals. (Even bumper stickers, yard signs and billboards cost money. Ditto for advertisements that an individual might take out in the newspaper or on television. Writing a letter to the editor or canvassing a precinct can cost money, particularly if the author or the canvasser must forgo other opportunities to write or canvass.) Ditto too for the exercise of certain other constitutional rights, e.g., building a church. If a state law provided that "no one shall spend more than $50,000 building a house of worship," we would (properly) call the law a burden on the exercise of religion, not a regulation of "religious spending." A proper application of the First Amendment in the Citizens United case requires the Court to distinguish between "speaking" and "contributing."

Second, the Supreme Court has properly (in my view) held that individuals are generally free to speak as much as they want, even if such speech is very expensive. Thus, the state could not prevent Ross Perot or Bill Gates from spending his entire personal fortune taking out newspaper advertisements in support of a candidate, so long as each really was acting independently. Nor could it prevent Mr. Perot from giving away his fortune to the Church of his choice. It would not matter in this connection if the resulting speech was "disproportionate" to the actual public support for the ideas expressed.

Third, there is no good reason for treating corporations, large or small, any differently from Ross Perot or Bill Gates, both of whom earned most of their wealth from . . . corporations! Corporations are legal fictions, just like "partnerships," "sole proprietorships," "limited liability companies," "labor unions," "non profit corporations," etc. Behind these fictions are actual human beings who contribute labor, capital, know how, etc. to a joint enterprise. Corporations, like other forms of business organization, are best understood as a "nexus of contracts" between various categories of individuals that supply inputs to a joint enterprise. Where corporations are concerned, such suppliers include shareholders, debt holders, managers, employees, directors and others. Hopefully such enterprises earn enough to pay off lenders, pay handsome wages and salaries, and earn a profit. In the case of a corporation, some of the profits are paid out as dividends, some are reinvested in new projects, and some remain in the corporate treasury, for future use at the discretion of management.

Fourth, if a corporation speaks, by, for instance, paying for an advertisement in a newspaper, it is because the directors, elected by the shareholders, have hired managers who think such speech is in the best interest of the corporation, i.e., the shareholders. Shareholders are persons. The funds expended are presumably retained earnings that managers are "investing" in speech they believe will benefit the shareholders. Corporate law traditionally grants managers very wide leeway to make investment decisions, e.g., whether to focus on building large or small cars, cars or tractors, tractors or boats, inboard or outboard motors, etc. Economists and economically sophisticated legal scholars explain this leeway by pointing out that various non-legal market mechanisms align the interests of directors and managers on the one hand, and shareholders on the other. These mechanisms are not perfect; no such mechanism is, but they deter directors and managers to some extent from employing retained earnings for projects that do not advance the interests of shareholders.

There is no reason to believe that directors/managers are any less likely to act in shareholder interests when making investments in speech than when making investments in factories, charitable giving, or research and development. If shareholders think Ford is making poor investment decisions, whether the investments are speech or factories, they can sell their shares. In other words, what we sometimes call "corporate speech" is really speech on behalf of persons who have authorized such speech, utilizing resources that the corporation could otherwise pay out to shareholders in dividends or use to invest in new projects.

As a result, bans on "corporate speech" are really bans on individual speech, and they must stand or fall under the same standards applied to analyze bans on individual speech.

Fifth, there are two counterarguments to the pro-speech approach that I have just sketched. First, that corporations receive "special privileges" from the state that justify additional state regulation, privileges such as perpetual life, entity status, and limited liability. Each such privilege, it is said, facilitates the creation of wealth in the economic marketplace that corporations might improperly transfer into the political arena, by spending resources on speech that exceeds the "actual public support" for the ideas expressed. Second, that shareholders need protection from managers who will use "their" (shareholders') money to speak about candidates the managers support, whether or not shareholders support them.

The Supreme Court bought the first argument in Austin v. Michigan Chamber of Commerce, 494 U.S. 652 (1991). Justice Brennan, in a concurrence, bought the second argument, analogizing corporate speech to a "theft" of shareholder assets to support viewpoints with which shareholders might disagree. Neither argument withstands scrutiny, in my view.

Many corporations, even large ones, are quite young. (Microsoft is ten years younger than I am.) Still, bans on corporate political speech apply "across the board," regardless of the age of the firm. Hence, the "perpetual life" attribute does not justify the current scope of speech regulation. Moreover, limited liability limits the liability of shareholders, not corporations (who are fully liable for their own torts or contract breaches despite limited liability), and it's a bit odd to invoke a benefit granted to individuals to justify disadvantaging corporations. (Also, corporations often "pay" for limited liability because they must pay higher interest rates to compensate voluntary creditors for the latter's inability to access shareholder assets if the corporation is judgment proof.)

To be sure, limited liability, perpetual life, entity status, etc. all facilitate the separation of ownership from control in large public corporations and thereby facilitate the creation and retention of wealth. (An investor is far more likely to purchase shares in a corporation if he or she knows that he or she can only lose the amount invested, without putting personal assets at risk.) Still, lots of background rules, whether contract law, tort law, partnership law, agency law, property law, trademark law, the law of secured transactions, etc., facilitate the creation and retention of wealth by individuals --- where would a franchise be without the state action necessary to enforce a trademark --- but we don't therefore conclude that individuals have received "special benefits from the state" that justify additional limits on their speech. Nor would we, for instance, allow the state to squelch speech by individuals to whom it had guaranteed a minimum income, even if the state argued that it was merely preventing the recipients of state largesse from using that largesse, or the leisure made possible by subsidies from others, to distort the political marketplace. Here again, there is no reason to distinguish individuals from corporations.

Moreover, most industries are characterized by free entry, so there is no reason to believe that the special nature of the corporate form generally allows firms to earn above-average returns, because such returns would just attract additional competition from other corporations. Finally, unless I am mistaken, bans on corporate speech are not reserved for large corporations, but apply even to corporations that are much smaller than many partnerships, for instance. Thus, even taken on their own (unpersuasive) terms, such bans are not narrowly tailored to further their purported interest.

What, though, about the "shareholder protection rationale?" Proponents of this approach argue that, if shareholders want to support a candidate, they can contribute to special funds that then spend the money on speech as directed by the corporation. Under this approach, Justice Brennan said, speech reflects "actual support" for the views expressed. This is mere wordplay. Such speech reflects some actual support, yes, but not the full actual support. As Roberto Romano argued before Austin, reliance upon separate funds is beset by collective action problems. One shareholder's contribution benefits all shareholders, even those who don't contribute. The result will be free riding by some shareholders on the contributions made by others and thus suboptimal expenditures on speech. Such a burden is not justified by any effort to protect shareholders, who have voluntarily agreed to participate in an enterprise that uses retained earnings to speak. Perhaps states could adopt heightened scrutiny of speech to make sure such speech furthers a firm's interest, but an outright ban, relegating shareholders to suboptimal separate funds, sweeps too far and offends the First Amendment, in my view. For an elaboration of this rebuttal of the shareholder protection argument, see Alan J. Meese, Limitations on Corporate Speech: Protection for Shareholders or Abridgement of Expression, 2 W&M Bill of Rights Journal 305 (1993).

Let's hope the Supreme Court keeps these various principles in mind when reconsidering Austin!