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Saturday, July 05, 2008

Campaign Finance

Robert Frank says voters have the power to take campaign finance reform into their own hands and eliminate the influence of large donors, all that is required is full disclosure of the contributions to each campaign and a preference for politicians who refuse to take large donations:

Untying a Knot in Campaign Finance, by Robert H. Frank, Economic View, NY Times: When Barack Obama announced his decision to reject public financing for his presidential campaign, he caught heavy flak from all sides. Critics, including some of his most ardent supporters, complained that he was willing to abandon the cause of good government to gain a financial edge.

What the critics have ignored is that truly effective campaign finance reform has been precluded by First Amendment concerns. Given that constraint, the Obama campaign’s approach may offer the only realistic possibility of limiting the corrupting influence of money in politics. ...

In legislative matters ... the devil is in the details. Both the Federal Election Campaign Act (amended in the aftermath of Watergate in 1974) and the more recent Bipartisan Campaign Reform Act of 2002 (popularly known as McCain-Feingold) have faced numerous First Amendment challenges, and more are pending. Although the Supreme Court has affirmed the legality of placing contribution and expenditure limits on candidates who accept public financing, it has ruled against imposing similar limits on independent advocacy groups. ...

The harsh reality is that free speech and good government are conflicting goals. When forced to choose, the Supreme Court has essentially sided with free speech. Recent decisions by the Roberts court suggest an even stronger tilt in that direction.

That is the crucial backdrop to the 2008 campaign. Despite the McCain-Feingold law, the First Amendment constraint had essentially made it impossible to impose effective legal limits on campaign spending. As the year unfolded, however, the Obama campaign demonstrated the possibility not only of remaining financially competitive but also of raising record sums by relying primarily on small donations from individuals. ...

This was a significant change. It showed that voters had the power to take matters into their own hands. For them to be able to avoid candidates who are beholden to large contributors, the law need only require full public disclosure of campaign contributions, a step that poses no threat to the First Amendment.

Senator Obama’s fund-raising totals caught many observers off guard. After all, traditional economic models suggest that a campaign financed by small individual donations shouldn’t go far. The problem, according to these models, is that because a campaign’s fate is essentially independent of any given small donation, no individual donor can expect to have any influence. Yet many small donors seem undeterred by that logic.

Campaign finance reform laws notwithstanding, political campaign contributions from large donors have grown explosively in recent decades. Because the marketplace has become so much more competitive, corporations are under much greater pressure to bend the rules to their own advantage. In this effort, the corporate side has had victories like Medicare Part D, the so-called Enron loophole and the deregulation of the financial industry. But the public has often paid a heavy price.

To be sure, the Obama campaign’s move does nothing to reduce the scale of campaign budgets. Nor does the mere fact that small donors can finance successful campaigns guarantee that champions of good government will prevail. A charismatic tyrant, for example, might prove extremely successful as a fund-raiser. ...

The fund-raising success of the Obama campaign, however, has demonstrated that if enough people are willing to withhold donations to politicians who do not credibly refuse to rely on large private contributions, voters have the power to eliminate the fundamental conflicts of interest that have corrupted American politics in recent decades. Because of the First Amendment constraint, that’s something McCain-Feingold and other campaign finance laws simply cannot deliver by themselves.

    Posted by on Saturday, July 5, 2008 at 05:22 PM in Economics, Politics | Permalink  TrackBack (0)  Comments (21)

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