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WASHINGTON — The U.S. Supreme Court is now weighing Sen. Ted Cruz’s challenge to a federal campaign finance law that limits how political donations can be used to repay candidates for money they loan themselves.
At issue during Wednesday’s oral arguments is a 2002 law that caps at $250,000 the amount of political donations made after an election that victorious candidates can use to then repay themselves for personal funds they loaned to their own campaign.
Supporters of the law argue that taking large sums of money to repay loans after a candidate wins office could pose a risk that politicians engage in corrupt practices on behalf of the parties who retroactively and indirectly covered the debt. But the Republican Texas senator and his allies argue that such regulations create a threat to free speech.
“It most dominantly burdens and creates a drag on the campaign’s speech, on the candidate’s speech,” said Charles Cooper, the Ted Cruz for Senate campaign lawyer who argued before the court on Wednesday.
Conservatives have long argued that regulating campaign finance is an encroachment on a candidate’s freedom of speech, because the funds raised can be used to spread their message on television, in digital advertising and in direct mail.
The current limit, he argued, would put a candidate in the position of going “through the calculus of deciding whether or not I am going to loan more than $250,000 to my campaign because my ability to have it repaid is going to be compromised by the statute and by the regulation.”
It’s a common practice in politics for candidates to loan their campaigns a surge of money in the heat of vying for votes and then pay themselves back with donations made after the election or in future cycles.
Supreme Court justices’ questioning on Wednesday shed little light on how the case may turn out.
Deputy U.S. Solicitor General Malcolm Stewart argued on behalf of the federal government and called for the case to be “dismissed for lack of standing.” He accused Cruz of intentionally creating a situation over which to sue.
A day before Election Day 2018, when Cruz narrowly beat Democrat Beto O’Rourke, the Republican incumbent loaned his reelection campaign $260,000 — presumably to sue to overturn the rule and raise money to recover the $10,000 that goes over the cap of $250,000.
“They went out of their way to engage in transactions they would not have otherwise undertaken, solely to subject the senator to a financial loss and thereby lay the groundwork for a lawsuit,” Stewart argued Wednesday.
Donors face limits when donating to a federal candidate each election cycle. Part of the government’s case against Cruz’s argument is that for a candidate to accept contributions from one cycle to pay off personal debt from a previous cycle violates the spirit of avoiding gifts.
“There are severe restrictions on gifts to officials in all three branches of the government, so there’s an established understanding that the government has a substantial and legitimate interest in preventing the effects that might arise if federal officials were given money that would enrich themselves personally,” Stewart said.
Stewart argued that the window of uncertainty between the loan being taken out in one cycle and then in part repaid by a donor in a future cycle is the point where corruption could emerge.
“A contributor who eliminates that uncertainty, who pays in the money that the debt will be repaid is conveying a financial benefit to the candidate, just as if a gift had been made,” he said.
Justices from the conservative wing on the court pushed back on that argument.
“Cruz says that this doesn’t enrich him personally because he’s no better off than he was before,” said Justice Amy Coney Barrett. “He’s paying a loan and not lining his pockets.”
But Justice Elena Kagen was demonstratively skeptical of Cruz’s case. She suggested that Congress intentionally set $250,000 as a breaking point for an officeholder’s personal financial pressure.
“The candidate with $3,000 of debt is a lot less likely to start thinking about how he can sell his votes than the candidate with $500,000 of debt,” she said. “So the candidate is in a very different situation, the more the debt mounts.”
Self-funding and personal loans to a campaign are a common practice, particularly among Texans in Congress. It is not unusual for candidates to carry campaign debt for years. Wealthy candidates often loan their campaigns money and never pay themselves back.
But Cruz, a lawyer, spent years laying the groundwork for this case.
Back in 2012, Cruz was a long-shot Senate candidate running for the GOP nomination against the personally wealthy David Dewhurst, who was the state’s lieutenant governor at the time. As Cruz gained traction, he dumped a $1 million loan into his campaign and eventually won the nomination and the general election.
But he was not able to recoup $545,000 of that sum, as a result of the 2002 law he’s now challenging. Congress passed it to prevent the appearance of quid pro quo between candidates and future donors. The theory behind the limit is that money collected after an election is no longer helping a candidate win office. Rather, the money goes to the officeholder’s bank account.
Correction, Jan. 20, 2022: An earlier version of this story incorrectly said that U.S. Sen. Ted Cruz had recouped $545,000 of a $1 million loan he gave his campaign in 2012. Cruz has never been able to recoup $545,000 of that loan.