After Further thought...

After thinking about the decision in Citizens United a little bit more and after taking some more time to reflect on the way businesses work in real life, I've changed my mind, at least for now, about what the decision may lead to. At first, I thought the decision would lead to a company like GE throwing millions behind a Republican, or millions behind a Democrat. The more I think about it, both are likely to happen, not one or the other. What do I mean? Even corporations who do use treasury funds to support political candidates are likely to give money to both sides (Democrats and Republicans) as a way of hedging their bets.
Businesses “hedge” their bets all the time, and no I’m not talking about hedge funds. Take for example a company who produces natural gas. The price of natural gas, a commodity, fluctuates quite frequently as it is traded on open markets (i.e. it is volatile). In the winter, the price of natural gas traditional spikes as the demand for it increases as a result of its use to heat homes in the Eastern and Northeastern parts of the country. Conversely, in the summer, when temperatures are higher, the demand for natural gas is lower and so is the price that a natural gas company can sell their gas for. So what happens during a unseasonably “warm” winter – does the gas company suffer huge losses? Logically you would think the answer is yes, and logically thinking, you would be correct. However, in reality, this isn’t what happens. In reality, the gas company “hedges” their bets against an unusually warm winter by agreeing to provide their gas at a certain contracted price, agreeing to sell their gas to utility companies at a predetermined price, often times years in advance. For example, if natural gas prices have fluctuated between $3 and $14 dollars on the open market for the past three years, a natural gas company is likely to agree to sell all their gas to a utility company (hedge their gas) at a price of $7. This is a win-win for everybody. Both the utility company and the gas company remove some of the risk that the volatility and uncertainty that comes with the supply and demand of the natural gas market brings to their business models. When natural gas prices on the spot market are $14, utilities are buying it for only $7. When natural gas prices are only $3 on the spot market, gas companies can sell it at $7. Everybody wins. I believe hedging by corporations in political campaigns will work the same way.
From a business standpoint, or more specifically, from a risk standpoint, a corporation like GE would never throw $10 million behind a Republican candidate and no money behind the Democrat. Why? It’s too risky. What is more likely to happen, is that a corporation, like GE would hedge it’s bet and donate $5 million to the Republican candidate and $5 million to the Democratic candidate. As a result of this hedging by corporate donors, my thought is that the decision in Citizens United won’t have as great an impact as I initially thought it might have. There’s no doubt that the amount of money candidates can raise will now increase as a result of a corporation being able to use its treasury funds for political donations, but whether it will swing the balance of power in favor of one political party or another I think, after further thought, is unlikely.