501(c) Organizations, Campaign Finance Reform, Citizens United, Dark Money, David Harsanyi, Disclosure Requirements, Federal Election Commission, First Amendment, Free Speech, Glenn Reynolds, Independent Expenditure Committees, Jeffrey Milyo, Nancy Pelosi, Revolving Door Tax, Ron Paul, Social Welfare Organizations, Super PACs, Term Limits
Everyone seems to hate money in politics, and nearly everyone says campaign finance reform is needed to eliminate political corruption… nearly. Money in politics is blamed for allowing powerful interests to “buy” seats in the legislature, or in executive positions, as well as “tit-for-tat” influence over pieces of legislation. But not so fast: attempts at campaign finance regulation in the past have been largely unsuccessful in achieving their goals. Furthermore, campaign finance reforms may have perverse consequences, which I’ll discuss below. More importantly, while “taking money out of politics” sounds noble to many, it starkly implies abrogation of First Amendment rights. Far from “leveling the playing field”, there is a great danger that it would lead to suppression of minority opinions. For those reasons. it’s better to consider other means of ensuring that elected officials behave even-handedly in attending to their duties.
Former Congressman Ron Paul is highly skeptical that any good can come of campaign finance legislation:
“…campaign finance reform legislation does not limit the influence of powerful special interests. Instead, it violates the First Amendment and burdens those seeking real change in government.”
Here is David Harsanyi on the same point:
“Reducing the power of ‘special interests’ in Washington is always a popular issue with voters. The problem, of course, is that every voter considers another group a special interest. … specific campaign finance reform legislation is always about inhibiting someone’s speech.”
Government attempts to curb speech are bad enough, but there is also interest in subsidizing speech arising from certain quarters. Harsanyi is rightly critical of a House bill that proposes to do just that, and Nancy Pelosi has promised to bring the bill to the floor. Among other things, it would authorize a 6-to-1 federal match of small-dollar campaign donations so as to promote “grass-roots” electoral efforts. It is quite simply a bad idea to create a mechanism whereby government bureaucrats can manipulate campaign funding, potentially favoring certain kinds of speech, via the explicit use of funds from taxpayers who might well blanche at the thought of funding certain campaigns.
The bill would also impose new disclosure requirements on large contributions to 501(c)(4) organizations, which qualify as “social welfare” groups under the tax code, and whose “primary” purpose is not campaign-related. To this he says:
“… this obsession with eliminating anonymity is also a transparent attempt to chill speech and undermine minority opinions.”
Let’s face it: to complain about the use of money in promoting speech is to complain about speech itself. We can all speak out loud, but one can’t hope to spread a message broadly without bringing resources to bear on the effort. That’s true whether you are printing, broadcasting, or spreading messages on social media. It almost always takes staff, including creative talent, equipment, media buying power, and usually office space. If you don’t have the requisite resources then you must hustle, press flesh, cajole members of the media, and join with other like-minded individuals, especially those who might agree to commit resources.
Barring a monopoly on speech, choosing a particular scale at which speech becomes unacceptable is itself a denial of the right to free speech. And that right can be exercised by individuals and by associations of individuals. As to the latter, the form of association makes no difference: the union, nonprofit, and for-profit corporate forms are all valid associations through which individuals can speak as one, just as all for-profit media corporations have always exercised their First Amendment rights. That was the Supreme Court’s ruling in Citizen’s United vs. Federal Election Commission (FEC) in 2009, which remains oddly controversial. Again, if you think the ability to speak from a large platform is too much, then you are also willing to restrict speech by for-profit newspapers and television networks, and you are a tyrant.
Money and Electoral Success
In any case, virtually all campaign contributions originating in the for-profit corporate sector come from employee political action committees (PACs), not from corporations themselves. And since Citizen’s United, there’s been little uptick in campaign contributions from for-profit corporations. In fact, according to this report on campaign finance, unions have been much more aggressive than businesses in leveraging the Citizen’s United decision. The report also demonstrates the unsurprising fact that incumbents tend to spend much more on elections than their challengers. However, the authors note that across incumbents, greater spending is associated with lower vote shares, while the reverse is true across challengers. That just means, however, that incumbents must spend a lot to defeat a serious challenger.
Jeffrey Milyo made the last point more than 15 years ago:
“Most systematic studies, however, find no effect of marginal campaign spending on the electoral success of candidates … How can this be so? The best explanation to date is that competent candidates are adept at both convincing contributors to give money and convincing voters to give their vote. Consequently, the finding that campaign spending and electoral success are highly correlated exaggerates the importance of money to a candidate’s chances of winning.”
There is also a lack of evidence that politicians trade their votes for campaign contributions:
“… donors tend to give to like-minded candidates. Of course, if candidates choose their policy positions in anticipation of a subsequent payoff in campaign contributions, there would be no real distinction between accepting bribes and accepting contributions from like-minded voters. However, studies of legislative behavior indicate that the most important determinants of an incumbent’s voting record are constituent interests, party, and personal ideology.”
A tremendous disparity exists between public perceptions of the importance of money in political campaigns and the actual magnitude of campaign spending. Again, from Milyo:
“If campaign contributions do not buy favors, then why is so much money spent on politics? In fact, scholars of American politics have long noted how little is spent on politics. Consider that large firms spend ten times as much on lobbying as their employees spend on campaign contributions through PACs, as individuals, or in the form of unregulated contributions to political parties (i.e., soft money).”
Milyo’s article was written well before the Citizen’s United decision. At the time it was still illegal for corporations to make campaign contributions, but that seems to have made little difference.
In an Appeals Court decision in 2010, Independent Expenditure Committees (Super PACs) won the right to accept contributions from corporations and individuals beyond federal limits. Super PACs, however, are technically prohibited from coordinating their activities with political candidates for federal office. In fact, Super PACs have been known at times to work at cross-purposes to the political parties whose candidates they generally favor. Furthermore, there is very little evidence that corporate contributions provide more than a small share of Super PAC funds, not even via “dark money” contributions via 501(c) organizations.
Ron Paul (linked above) notes that powerful interests will always find ways to support policies by which they stand to profit. Those interests often benefit from regulatory policies that create burdens for smaller competitors, spending programs that bring fat government contracts, and subsidies in support of favored activities or technologies. However, restricting campaign finance is a particularly troubling and ineffective approach to combating these efforts. As Milyo says:
“The consensus among academic researchers is that money is far less important in determining either election or policy outcomes than conventional wisdom holds it to be. Consequently, the benefits of campaign finance reforms have also been exaggerated.”
Beyond the lack of evidence that reform is needed, Milyo argues that restrictions on campaign contributions may have nasty unintended consequences. First, cross-sectional studies across states have shown that limits on contributions lead to less electoral competition and lower voter turnout. Second, less campaign advertising reduces interest and awareness of candidate positions among voters, also suppressing turnout. Finally, there is a real danger that incumbents can manipulate reform legislation in order to create electoral barriers to potential challengers.
There may be better ways to reduce the influence of moneyed interests on policy than campaign finance reforms. Term limits obviously shorten the duration of the incumbent advantage as well as corrupt actions by any office-holder who is somehow “bought and paid-for”. Most Libertarians favor term limits to reduce corruption and encourage the kinds of “citizen legislators” idealized by the nation’s founders. Others make an opposing argument that it is our electoral duty to remove legislators from office at the ballot box, and therefore term limits were left out of the Constitution for good reason. Still others say that term limits might make corrupt politicians too keen to act quickly.
Another idea is based on the “revolving door tax” often mentioned by Glenn Reynolds. Not infrequently, government bureaucrats are offered lucrative positions with firms whom they regulate, or they take on these firms as private clients once they leave government. Needless to say, this creates perverse incentives for self-interested public servants. Reynolds suggests an additional tax on subsequent income earned after accepting such an offer. Extending the idea to politicians would mean an additional tax on income earned by any former office-holder accepting work for a firm or industry specifically targeted for benefits under legislation they sponsored during their term. There is much detail to be fleshed out, but the idea is fascinating.
Campaign finance reform is futile: there will always be creative ways around it, so it generally doesn’t reap rewards. Campaign funding itself is rather ineffectual at the margin in generating electoral gains. Moreover, campaign finance reform is an endeavor that is almost guaranteed to run afoul of our First Amendment protections of free speech. In addition, the result may a reversion to a less-informed and less interested electorate, lower voter turnout, as well as manipulation of the reform process itself.