Supreme Court Strikes Candidate Loan Repayment Limits


Sludge produces investigative journalism on lobbying and money in politics. The American Prospect is republishing this article.

The Supreme Court ruled this week to strike down a 20-year-old provision of federal campaign finance law and allow candidates to personally pocket unlimited amounts from private donors to repay themselves for money they have lent their campaigns. 

Since 2002, federal law had prohibited candidates from repaying themselves more than $250,000 per election from their campaigns with funds they raise after the date of their election. Regulations promulgated by the Federal Election Commission (FEC) under that law, the Bipartisan Campaign Reform Act commonly known as McCain-Feingold, allowed candidates to repay portions of loans over $250,000 with pre-election funds within 20 days after the election, but any amount not repaid within that window had to be treated as a campaign donation that could not be repaid at a later date. 

The Supreme Court decision wiping out these rules came in a case brought against the FEC by Sen. Ted Cruz. In 2021, the D.C. Circuit Court had sided with Cruz in determining that the limit “burdens political speech and thus implicates the protection of the First Amendment,” and the Supreme Court, in a 6-3 decision written by Chief Justice John Roberts, agreed. 

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“The loan-repayment limitation abridges First Amendment rights by burdening candidates who wish to make expenditures on behalf of their own candidacy through personal loans,” Roberts wrote. “This burden is no small matter. Debt is a ubiquitous tool for financing electoral campaigns, especially for new candidates and challengers. By inhibiting a candidate from using this critical source of campaign funding, Section 304 raises a barrier to entry—thus abridging political speech.”

Campaign finance regulation advocates, however, believe the decision increases the risk for corruption and thus the Court was in a position based on its precedents to rule in favor of restricting political speech in this case. 

“There is abundant evidence from across the country that post-election contributions can give rise to actual and apparent corruption,” said the Campaign Legal Center President Trevor Potter, a former FEC commissioner. “This decision conflicts not only with the Supreme Court’s longstanding recognition that putting money into candidates’ pockets creates an inherent risk of corruption but also with common sense and historical experience.” 

Common Cause, which joined an amicus brief submitted in the case with Campaign Legal Center and other groups, similarly criticized the Court’s action. 

“[The] decision creates a shell game that will only serve to further undermine public faith in their elected officials,” said the group’s president, Karen Hobert Flynn. “These loans could run into the millions of dollars and voters will now not know who bankrolled a candidate’s campaign until after the election.”

So far this election cycle, 1,483 campaign loans have been made for House and Senate races, according to data from the FEC. Sixty-four candidates have lent their campaigns more than $250,000 and 19 have made loans totaling $1 million or more. 

The largest campaign loans reported to the FEC so far this cycle have been made by the two Republican primary candidates for the Pennsylvania Senate seat being vacated by Sen. Pat Toomey, Dave McCormick and Mehmet Oz, who are currently in a dead heat as the final ballots are being tabulated following Tuesday’s election. McCormick, a former hedge fund CEO with a net worth of at least $116 million, has lent his campaign $14.7 million, while Oz, a TV personality with a net worth of at least $100 million, has lent $12.7 million to his campaign. 

In her dissent, Supreme Court Justice Elana Kagan blasts the majority’s decision as greenlighting “all the sordid bargains that Congress thought right to stop” in the 2022 law. 

The Court stated in its decision that campaign loans are a particularly useful tool for non-incumbent candidates, and that appears to be the case based on the 2022 cycle loan data. Of the top 20 campaign-lending candidates by amount this election cycle, only 2 are current members of Congress. This bias in the use of campaign loans in favor of new candidates and challengers was one of the reasons the Court gave for why it should rule on the matter rather than deferring to Congress. “Given scant evidence of corruption, deference to Congress would be especially inappropriate where, as here, the legislative act may have been an effort to “insulate[ ] legislators from effective electoral challenge,” Roberts wrote.

While wealthy candidates who lend money to their campaigns or take out bank loans may benefit from the Supreme Court’s decision, many candidates may not have access to such funds. The median net worth of congressional incumbents is more than $1 million, far greater than the average of $121,000 for all U.S. households as of 2019. 

In her dissent, Supreme Court Justice Elana Kagan blasts the majority’s decision as greenlighting “all the sordid bargains that Congress thought right to stop” in the 2022 law. 

“The majority says that Section 304 [of McCain-Feingold] violates the candidate’s First Amendment rights by interfering with his ability to ‘self-fund’ his campaign,” writes Kagan. “But the candidate can in fact self-fund all he likes. The law impedes only his ability to use other people’s money to finance his campaign—much as standard (and permissible) contribution limits do.”

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