On Jan. 19, the U.S. Supreme Court heard arguments in Federal Election Commission V. Ted Cruz for Senate, a case that concerns candidates’ ability to loan money to their own campaigns. Should SCOTUS rule in Cruz’s favor, it could be easier for affluent donors to influence legislators, and Cruz appears to have a genuine chance to prevail in a forum where conservative justices control six of the court’s nine seats.
In 2002, Congress enacted the Bipartisan Campaign Reform Act (BRCA) to prevent such loans from being used to legally bribe candidates who go on to become elected officials. A provision of the Act places a $250,000 limit on the amount of post-election contributions that can be used to pay back pre-election loans more than 20 days after Election Day. According to Reuters, the law is intended to foil a contributor’s expectations of favors from the candidate in exchange for an after-election donation.
The day before Election Day 2018, Senator Ted Cruz made two separate campaign finance loans totaling $260,000 to his successful Senate campaign. After the election was over, the Cruz Committee didn’t take a portion of the $2.2 million it had on hand to repay the loans to Senator Cruz. Instead, the committee used the funds to pay vendors and meet other obligations. After 20 days had elapsed, the balance of the loans exceeding the $250,000 statutory cap ($10,000) was reclassified into a campaign contribution from Senator Cruz. Senator Ted Cruz (R-TX) has admitted that he purposefully loaned his campaign an amount exceeding the BRCA limits so that he could file a lawsuit to challenge the restriction on loan repayments.
The government attempted to have the lawsuit thrown out, calling Cruz’s injury “self-inflicted.” However, a district court in Washington ruled in his favor in June 2021, finding that the provision is unconstitutional under the First Amendment and places an unjustified burden on political speech. The Federal Election Commission (FEC) promptly appealed the decision to the Supreme Court, and SCOTUS granted certiorari on Sept. 30. In reviewing the case, SCOTUS will consider whether the government’s interest in preventing actual (or perceived) corruption outweighs the right to free speech guaranteed by the First Amendment.
Cruz is asking SCOTUS to strike down the limit on loan repayments to federal candidates, potentially enabling any lawmaker to make a sizeable high-interest loan to their own campaign and then use the loan to divert donations back into their own pockets. In support of Senator Cruz, the Public Policy Legal Institute says that the FEC’s regulation is unnecessary because there is no record of actual quid pro quo corruption involving the use of post-election contributions to repay a candidate’s personal loan to their own campaign, and such restrictions have been found to increase public suspicion of government misconduct.
However, the FEC maintains that the law decreases the probability of what is known as quid pro quo corruption – a Latin expression meaning “a favor for a favor” – and even the appearance of corruption by limiting the amount of money sought by candidates after an election to repay campaign debt. The commission further insists that the Cruz Committee voluntarily missed the 20-day window to repay the loans, caused its own harm and thus has no standing to sue.
How the Supreme Court rules on this case will likely provide some critical insight into the future of campaign finance regulation. For example, if the district court decision stands, potential candidates might stop “contributing” to their campaigns and extend themselves a loan instead, applying a reasonable interest rate. Striking down the limits on post-election contributions to repay loans could also incentivize candidates who believe they have a legitimate chance to win to self-fund their own campaigns late in the race.
Campaign finance experts insist that the limits should stand because the practice in question dramatically boosts donor expectations for political favors. Paul Smith, an attorney with the Campaign Legal Center, told Reuters: “What should concern all voters here is the simple fact that funds raised after the date of an election are not the same as typical campaign funds – they come with a much higher risk for corruption.”