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Supreme Court backs Ted Cruz on campaign loan cutoff

The divided ruling favors the First Amendment rights of political candidates over government anti-corruption laws. 

WASHINGTON (CN) — The Supreme Court sided with Senator Ted Cruz on Monday morning in an idealogical split on how much money political candidates can recoup from their campaigns. 

Chief Justice John Roberts wrote the majority opinion, which highlights the important role that the First Amendment plays in allowing political candidates to finance campaign speech with their own funds. The majority found that the law limiting how much candidates can be reimbursed for loans after an election tramples their free exercise of speech. 

“By restricting the sources of funds that campaigns may use to repay candidate loans, Section 304 increases the risk that such loans will not be repaid,” the Bush appointee wrote. “That in turn inhibits candidates from loaning money to their campaigns in the first place, burdening core speech.” 

Justice Elena Kagan — joined in the dissent by Justices Stephen Breyer and Sonia Sotomayor — said the court is turning a blind eye to corruption. 

“In striking down the law today, the Court greenlights all the sordid bargains Congress thought right to stop,” the Obama appointee wrote. “The theory of the decision (unlike of the statute) is hard to fathom.” 

Kagan disagrees with the majority’s assessment that the law prevents candidates from self-funding their campaigns. She said the law actually prevents the candidates' ability to use other people’s money to fund their campaigns. 

“The majority says that Section 304 violates the candidate’s First Amendment rights by interfering with his ability to ‘self-fund’ his campaign,” Kagan wrote.  “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.” (Italics in original.)

Cruz's challenge stems from his tight 2018 race for Senate, saying the government stifled his rights by limiting how much candidates can receive in loan repayments with post-election funds. 

While there is no limit to how much candidates can spend on their own campaigns, there is a limit to how much they can be reimbursed after the election concludes. An amendment to the Federal Election Campaign Act known as the Bipartisan Campaign Reform Act limits the amount a campaign can repay in candidate loans post-election to $250,000. If the transaction occurs within 20 days of the election, however, campaigns can use pre-election funds to repay candidate loans exceeding $250,000. 

The Texas Republican loaned his campaign $260,000 a day before Election Day in 2018. Twenty days post-election, Cruz requested repayment for his loan and was paid back only $250,000 in accordance with BCRA. 

The government claimed Cruz didn’t have standing to bring the case because Cruz’s injury was self-inflicted. Arguing the loan repayment limits are constitutional, the government warned the justices that removing them could lead to corruption. 

When the court hear Cruz’s case in January, the conservative justices appeared supportive of the case brought by the Texas senator while the liberal justices warned the case could result in a bribery scheme. Justice Sonia Sotomayor said removing the post-election loan repayment limit would create a classic quid pro quo situation, and Justice Stephen Breyer remarked that the payments would be paybacks, not contributions. 

For Roberts, though, the government’s standing argument “largely misses the point.” If the court accepts the merits claims in the case, he reasoned, then it must assume the 20-day rule also unconstitutionally burdens speech. 

The majority found that the limits to loan repayments placed “evident and inherent” burdens on First Amendment expression. Roberts wrote that the risk that candidates might not get paid back in full for their loans could deter them from loaning money to their campaigns, creating a “drag” on candidates’ First Amendment rights. 

“The extent of the burden may vary depending on the circumstances of a particular candidate and particular election,” Roberts wrote. “But there is no doubt that the law does burden First Amendment electoral speech, and any such law must at least be justified by a permissible interest.”

Roberts is skeptical of arguments presented by the government and the liberal justices that loan-repayment limitations will prevent corruption. He said the limitations are just another preventative measure regulating campaign finance and that the dissenting justices’ predictions about the impact of this ruling ignore the existence of other active regulations to prevent this kind of corruption. 

“The dissent’s dire predictions about the impact of today’s decision elide the fact that the contributions at issue remain subject to these requirements,” Roberts wrote. “And the requirements are themselves prophylactic measures, given that ‘few if any contributions to candidates will involve quid pro quo arrangements.’ Such a prophylaxis-upon-prophylaxis approach, we have explained, is a significant indicator that the regulation may not be necessary for the interest it seeks to protect.”

Kagan said the majority overstates the First Amendment burdens by the repayment limit and underestimates the anticorruption value the law serves. 

She argues that, if the majority’s logic is used to find that the loan-repayment limit restricts speech, it would also mean other limits the majority condones would violate the First Amendment as well. 

“With the contribution cap in effect, the campaign cannot pay for (nearly) as many advertisements, mailings, signs, and so forth,” Kagan wrote (parentheses in original). “And likewise, to return to the fact pattern here, the campaign has less money available than it otherwise would to repay a candidate’s (or any other) loans. By the majority’s logic, that downstream effect would mean the contribution cap imposes a significant First Amendment burden.” 

Getting rid of the loan repayment limit will create a recipe for quid pro quo corruption, Kagan claims. 

“The recipe for quid pro quo corruption is thus in place: a donation to enhance the candidate’s own wealth (the quid), made when he has become able to use the power of public office to the donor’s advantage (the quo),” Kagan wrote. “The heightened threat of corruption — and, even more, of its appearance — is self-evident (except, it seems, to observers allergic to all campaign finance regulation).”

The Department of Justice declined to comment on the ruling. Charles Justin Cooper, an attorney with Cooper & Kirk representing Cruz, did not immediately respond to requests for comment. 

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