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The laws that have, for more a century and for all practical purposes, barred corporations from spending money on candidate elections, are being tested today. The U.S. Supreme Court is to hear arguments in a case that could undo the legal underpinnings of the nation's campaign finance laws.

NPR legal affairs correspondent Nina Totenberg reports.

NINA TOTENBERG: Today's argument is a double first - the first argument to be heard by new Justice Sonia Sotomayor, and the first time new U.S. Solicitor General Elena Kagan has argued a case in the Supreme Court.

What's more, the justices view the case as so important that they are hearing it three weeks before the official opening of the new term. So, what's the hoopla about? Well, plenty.

The nation's campaign finance laws date back to 1907, when Congress passed legislation banning corporate campaign contributions altogether. Forty years later, it extended the ban to union contributions and to spending. The Watergate scandal prompted more restrictions. And in 2002, Senators John McCain and Russell Feingold won passage of a law that sought to plug loopholes that had made these bans into legal Swiss cheese.

One major provision banned broadcasting independent political ads about candidates, 30 days prior to an election, if the ads were financed by corporate or union funds. The Supreme Court upheld that provision six years ago, but since then, conservative groups have repeatedly brought new challenges, including a relatively minor challenge that was heard by the court in March.

The argument went badly for reformers, and in June, the justices ordered the case reargued. Only this time, they said they wanted the lawyers to focus on whether any ban on corporate expenditures in candidate elections is constitutional. In short, the court said it's considering whether to reverse decades of its own decisions.

At the center of the case is a slashing, 90-minute critique of Hillary Clinton, produced by Citizens United, a conservative group that wanted to buy time to air the film on cable TV during the 2008 presidential primary season. The movie's message was not subtle.

(Soundbite of movie "Hillary Clinton: The Movie")

Unidentified Man #1: She's no Richard Nixon, she's worse…

Unidentified Man #2: …vindictive…

Unidentified Woman #1: …venal…

Unidentified Woman #2: …sneaky…

Unidentified Man #3: …intolerant…

Unidentified Man #4: …scares the hell out of me.

TOTENBERG: When the Federal Election Commission ruled the movie and its ads could not air on cable TV right before a presidential primary, producer David Bossie went to court.

Mr. DAVID BOSSIE (Producer, "Hillary Clinton: The Movie"): People should be able to articulate ideas and visions of candidates without any repercussions.

TOTENBERG: A three-judge federal court said that because of the way the film was financed, it could not be broadcast.

Under the McCain-Feingold Campaign Finance Law, if you want to air a movie that's a virtual campaign ad right before an election, you are not allowed to use corporate or union general-treasury funds, and you have to disclose who paid for the ad.

Since Citizens United failed on both counts, the movie could not be aired. The court pointed repeatedly to the fact that the U.S. Supreme Court had upheld the McCain-Feingold law in 2003.

The composition of the high court today, however, is far different than it was six years ago. Two new Bush appointees now sit on the court, and it's entirely possible that with three other justices long opposed to campaign funding restrictions, there is now a narrow court majority to undo nearly a century of campaign finance law.

Our current election laws are built on the notion that corporations and unions cannot use their general treasury funds to elect or defeat a candidate, because shareholders and union members may disagree with how the money is being spent, and because the amount of money at stake would corrupt and unbalance the system.

Senators McCain and Feingold say there's nothing in the law that inherently prevents David Bossie from airing his movie on TV. Scott Nelson represents the senators.

Mr. SCOTT NELSON (Attorney): There's no prohibition on running any kind of political advertising. It's just a question of how it's funded.

TOTENBERG: Citizens United, he argues, could have aired the movie if it didn't accept corporate funds or if it used money from a political action committee, or a PAC.

A PAC is a group of individuals, including corporate executives, who voluntarily contribute money to fund campaign efforts. Citizens United has a PAC but says it didn't want to be forced to use it for the movie.

The organization, like other opponents of McCain-Feingold, sees campaign spending and disclosure restrictions as interfering with the First Amendment guarantee of free speech.

Lawyer Ted Olson, who argued in support of McCain-Feingold when he was the Bush administration's solicitor general, is today arguing against the law.

Mr. TED OLSON (Lawyer): The most important right that we have in a democracy is the right to participate in the electoral process. And we've smothered that right with the most incomprehensible, burdensome, unintelligible set of regulations and laws, some of which are criminal laws, surrounding that freedom. That's intolerable.

TOTENBERG: Olson maintains that corporations are individuals, in a constitutional sense, and should be able to express their views. Money, he says, is speech.

Mr. OLSON: You can't speak without money. And in this day and age, you need resources to reach people. And that's part of the right to speak. There's nothing more important, under the First Amendment, than to talk about elections.

Mr. TREVOR POTTER (Former Chairman, Federal Election Commission): The question always is: So, who does the First Amendment apply to?

TOTENBERG: Trevor Potter is former chairman of the Federal Election Commission and a longtime adviser to Senator McCain.

Mr. POTTER: Does it apply to foreign nationals? Does it apply to the government of China or Russia or Iran in this country? Does it apply to corporations? Those are all different players who are not individuals, they're not voters, they're not citizens.

TOTENBERG: Corporations, he notes, are creations of the state. Corporations, unlike individuals, can live forever. Their owners are insulated from liability in lawsuits and from responsibility for corporate debt.

Campaign reform advocates say that if the court strikes down limits on corporate campaign spending, the whole electoral system will be distorted. Corporations, with billions of dollars in profits each year, will be able to swamp the system using front groups so that voters won't know who's sponsoring the ads they see. Campaign reform advocate Fred Wertheimer.

Mr. FRED WERTHEIMER (Campaign Reform Advocate): It's a disaster for democracy. It puts corporate money in the driver's seat. It will unleash amounts of money in campaigns that we have never seen before.

TOTENBERG: The Supreme Court is closely divided on this issue. At the March argument, five justices, including Chief Justice John Roberts, appeared hostile to the existing law. For the court, though, the larger question is whether conservatives — and Roberts in particular — are prepared to reverse decades of election-law decisions.

Roberts, at his Senate confirmation hearing in 2005, had this to say about reversing precedent:

Chief Justice JOHN ROBERTS (Supreme Court): I do think that it is a jolt to the legal system when you overrule a precedent. Precedent plays an important role in promoting stability and even-handedness. It is not enough that you may think the prior decision was wrongly decided.

TOTENBERG: The question, said Roberts, is whether society has settled expectations based on the court's previous rulings, whether the precedent is workable and whether reversal would undermine the legitimacy of the court. His answer to those questions will have a profound impact on the way elections in this country are conducted.

Nina Totenberg, NPR News, Washington.

(Soundbite of music)

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