The recent death of U.S. Supreme Court Justice Ruth Bader Ginsburg has been heralded as the "October Surprise" that may move voters to vote one way or another in November. While Ginsburg’s death and subsequent replacement with a Republican pick for the High Court may alter many "established law" cases dealing with social issues, her death may also impact the interests of investors and financial markets.
Ginsburg joined the four dissenting justices that were overruled by the five-justice majority in perhaps the most important case she sat in on, Citizens United. The Citizens United case ruled that essentially money is speech and therefore cannot be limited when it comes to making political speech. This means that the court lifted previous limits on spending during a campaign and paved the way for the current system wherein a person or corporation is entitled to spend as much as they want in supporting a political party and its candidate.
Had Ginsburg retired while President Barack Obama was in office, or lived long enough to see the next Democratic president, a much younger justice might have replaced her, setting up a battle for the replacement of associate justices of the U.S. Supreme Court Clarence Thomas and Stephen Breyer, both of whom are in their 70s and 80s respectively. While Breyer’s replacement wouldn’t allow for a net gain of seats by the Democrats, Thomas’s would. At that point, the 5-4 majority would shift back to Democrats allowing them to overturn Citizens United at the next chance they had.
John Paul Stevens was an American lawyer and jurist whose dissenting opinion on Citizens United can be summarized in these words: "A democracy cannot function effectively when its constituent members believe laws are being bought and sold." In this way, Stevens made the case that those with money will be able to influence elections and thus decide the fate of the country. Since that case, despite Democrats gaining more votes overall, their strength, especially in the Senate has lagged behind the total votes received. This is in large part due to the Republicans' ability to raise more money than Democrats as the total money raised overall has increased markedly. The cost of winning a Senate seat and House seat have both nearly doubled since the case was decided a decade ago.
How does this impact investors? The majority of members of the Federal Reserve’s interest rate deciding body, the Federal Open Market Committee is confirmed by the U.S. Senate. So too are the secretaries of the treasury and commerce. Decisions relating to income taxes and how investment income is taxed are also decided by Congress. In other words, the members of Congress and how they get elected is a crucial question for any investor, and that question will continue to be decided by the Supreme Court so long as Citizens United stands.