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Debate Club

Who Controls Campaign Finance?

Richard Briffault and James C. Miller, III debate.

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Vermont stringently limited contributions to and spending by political campaigns and the amount political parties can give to candidates. In a challenge to the state law, a federal trial judge upheld the limits on contributions but struck down those on spending, under a rule established 30 years ago by the Supreme Court in the landmark case of Buckley v. Valeo. On appeal, the Second Circuit became the first court since the Buckley decision to hold that spending caps are constitutional because they serve a compelling state interest in reducing political corruption. The Supreme Court will hear arguments in the Vermont case next week.

In an era when policy experts are looking to states to regulate abortion, gay marriage, and other socially divisive issues, should states also be encouraged to impose stricter limits on campaign finance than the federal government?

James C. Miller, III is a Distinguished Fellow at both the Center for Study of Public Choice and the Mercatus Center at George Mason University. Richard Briffault is the Joseph P. Chamberlain Professor of Legislation at Columbia Law School.

Miller: 2/21/06, 08:50 AM
Richard, I'm glad to have the chance to discuss this topic with you.

We have to address three questions. First, will Americans be allowed to practice their First Amendment rights to petition their governments—not only by means of personal contacts but through financial support to others holding similar views, including candidates for public office?

Second, notwithstanding equal treatment protections of the Constitution, will some Americans have superior rights when it comes to supporting issues and candidates? Will those associated with certain media (newspapers) have advocacy rights that are denied other citizens? Will some candidates for political office, namely incumbents, have rights denied others, namely challengers?

And third, are the benefits of "campaign finance reform" worth further deterioration in the performance of the market for political representation?

With good intentions, advocates of Vermont's campaign finance law and similar laws in other states and at the federal level (McCain-Feingold) seek to restrain the resources devoted to political campaigns. The reasons are two. First, proponents argue that money in politics has a corrupting influence. Yet, there is little evidence that federal campaign finance laws have reduced political corruption (just turn on your TV). Also, there's little or no evidence that those states with relatively "tight" campaign finance laws are marked by less political corruption than those which don't.

Second, proponents of campaign finance laws argue that so much money in political markets is unseemly, wasteful, and diverts incumbents' attention from the business of representation to raising money. Well, there's no doubt that the airwaves are filled with political ads in the weeks before elections. But even then, compared with the resources commanded by elected representatives (some 30-40 percent of GDP), expenditures on political campaigning fall far below expenditures to promote products and services in commercial markets. And as for the poor incumbent: there's little need to raise money except to establish an insurmountable advantage for the next election.

Campaign finance laws have been designed by incumbents to appeal to public purpose, but—should we be surprised?—have the effect of protecting incumbents from challengers. As any political consultant will tell you, a challenger has virtually no chance of winning unless she can raise enough money to become "competitive." Laws which hinder the ability of challengers (as well as incumbents) to raise money suppress the competitiveness of political markets. And just as we've known for hundreds of years, competitive markets are better for consumers—and voters as well.

Briffault: 2/21/06, 02:47 PM
Jim, you raise a number of important points about free speech and equality, competitive elections, and the effectiveness of campaign finance laws. But these issues actually support campaign finance reforms, like the one adopted by Vermont.

First, as Justice Breyer has observed, there are First Amendment concerns on both sides of the equation. Reasonable contribution and expenditure restrictions can promote political speech and participation by preventing affluent donors and interest groups, the politicians they back, and self-funded millionaire candidates from drowning out other political voices.

Money talks very loudly in our campaigns. Reasonable limits could create space for the views and ideas of people without a lot of money. This would advance both free speech and equality in politics.

Second, incumbents benefit from the current system, not from campaign finance limits. Incumbents are in the best position to amass the funds needed to pay for unlimited spending. Incumbent warchests discourage some potential opponents from even entering a race while allowing the incumbent to dramatically outspend their challengers. In the campaign finance arms' race, incumbents—who can use the perks of office to help gather donations—enjoy a built-in advantage, regardless of campaign laws, in raising money. Only campaign finance laws can check the incumbent advantage and improve the prospects for challengers.

While I agree there is a danger incumbents can dominate campaign finance regulation, we should see what the laws actually do. The Vermont law before the Supreme Court actually sets a lower spending ceiling for incumbents than for challengers—even though the law was adopted by incumbents. And of course, many campaign laws - like Arizona's "clean money" reform—were adopted by voter initiative.

Third, I also agree that the effects of campaign finance reform so far have been uncertain. But that is at least partly due to the Supreme Court's Buckley decision, which permitted contribution limits but struck down spending limits. That created a "worst of both worlds" situation in which candidates engage in endless fundraising, "bundlers" who can pull together large numbers of donations have special leverage with candidates, and the well-funded can financially overwhelm their opponents.

Vermont has tried to deal with this by addressing contributions and expenditures together. Although, as I hope to discuss in future posts, limits alone cannot fully reform our campaigns, Vermont's package of contribution caps backed by spending caps are more likely to achieve the anti-corruption goals you mentioned.

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Miller: 2/22/06, 12:00 PM
Richard, you believe some of the points I raised actually support campaign finance reforms. You will not be shocked to learn that I disagree.

First, we should distinguish between the right to "speak," which the First Amendment guarantees, and the "right" to be heard, which it does not.

Second, big-money "speakers" may drown out those with modest resources, but that's the point: by making it difficult for challengers to raise money, conventional campaign finance reforms ensure that their voices are among those drowned out! Which are the big-money voices in elections? Answer: incumbents'.

Third, I agree with you that "incumbents benefit from the current system," but why make the asymmetry worse by limiting opportunities for challengers to approach parity? Let's try a thought experiment: suppose we had a really "tight" campaign finance law that outlawed political contributions and forbade all campaign spending. Would that make political competition more robust? Of course not! Such a law would be an incumbent's dream—and a challenger's nightmare.

Fourth, there is considerable empirical evidence that in terms of vote margins additional money in the hands of challengers generates substantial positive returns, but in the hands of incumbents generates low (and in some cases negative) returns. (The reason is that challengers typically have very little money and challengers have a lot - and there are diminishing returns.) In the words of political consultants, "it's not whether you raise more money than your opponent, but whether you raise enough to get your message out."

Fifth, I am delighted that the Vermont law incorporates a provision allowing challengers to spend more than incumbents. (Once, only semi-facetiously, I suggested that incumbents' spending be limited to what their challengers spend minus an imputation for the value of incumbency.) But the Vermont law's limits on spending are so low and the allowable (incumbent vs. challenger) differentials are so small as to make this situation somewhat like the "no-spend" regime described above.

Finally, I could not agree more that campaign finance reform alone "cannot fully reform our campaigns." Let me make a few suggestions: (a) eliminate certain "perks" of office, such as unrequested franked mail and bloated staffs engaged in "constituent service," (b) end the use of pork spending and tax breaks to generate constituent support and campaign contributions, (c) control the overall size of government, to reduce the extrinsic value of elective office, and (d) impose term limits.

Briffault: 2/22/06, 08:23 PM
I was struck by your "thought experiment." Do you mean to say that if swallowing a whole bottle of aspirin would kill someone, we should ban all uses of aspirin in any dosage?

In the real world, no one is calling for a complete ban on political contributions and expenditures. We all know that adequate funding is crucial for candidates to get across their ideas and arguments and to make elections truly open and competitive. The real questions are how should candidates get their money, and what is the impact of unlimited contributions and spending on fair elections and representative government?

Let me suggest a slightly different thought experiment. Suppose we capped contributions at an amount an ordinary citizen is capable of giving; we limited candidate expenditures to the levels spent in recent competitive races for the office in question; and we provided qualifying candidates with public funds or other resources that would enable them to spend up to the competitive level without being dependent on big donors.

Such an experiment would be a challenger's dream and an incumbent's nightmare. The incumbent's advantage in exploiting his or her office would be gone. The incumbent would no longer be able to amass the large warchests that scare off some challengers and overwhelm others. By leveling the playing field, challengers as well as incumbents could both spend at competitive levels.

Nor should we frame the debate solely in terms of incumbents and challengers, as important as that question is. Our current campaign finance system creates other inequalities and distorts the political process.

Surely multimillionaire candidates benefit from the absence of spending limits. Few ordinary mortals can match the $70 to $80 million spent by my mayor, Michael Bloomberg, or the mega-millions spent by the governor of my neighboring state, Jon Corzine.

So, too, the system favors the candidates who are backed by the wealthy and by interest groups hoping to get something for their donations. Indeed, the ability to win the financial support of large donors is a crucial threshold test for all candidates other than those who can self-fund. Well under 1 percent of all Americans provide the large donations that currently fuel our campaigns. Their funds have a disproportionate influence on elections. The efforts of candidates and other officeholders to win their contributions surely skews government decision-making.

By all means, let's have a system in which candidates have enough money to be competitive. But let's also take into account the effects of the fund-raising system on elections and on governance.

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Miller: 2/23/06, 10:15 AM
Richard, the purpose of my thought experiment was to show that ceilings on candidate spending (limits on contributions have a similar effect) help incumbents and hurt challengers. Limits on spending or contributions are not like aspirin (a couple make you feel better; a bottle-full could kill you) or ice cream (a couple of scoops at one sitting make you feel good; a few bowls could make you sick). As the literature makes clear, there is a steady (monotonic) deterioration in the competitiveness of elections the tighter the limits on spending or contributions.

Your thought experiment is interesting and, of course, very different from mine. For one thing, I gather you favor the arrangement you describe, whereas I oppose the "no spend" regime in my thought experiment. Second, your experiment / proposal begs the question: who would decide which candidates were "qualifying" and thus deserving of public support? I have a sneaking suspicion that incumbents would have a lot to say about this.

No doubt "multimillionaire candidates benefit from the absence of spending limits." But they benefit even more when you limit contributions. When candidates are hampered in raising money, the rich, self-financed candidate may be the only challenger who can mount a credible campaign.

All this is arguably beside the point, which is: do Americans have a right to advocate issues and the election of candidates—and to contribute resources to that end? I believe the First Amendment's answer is in the affirmative.

As you probably suspect, I believe more important than how much money candidates raise and spend is how the market for political representation is organized. Consider this: Congress passes laws to "regulate" the election process and then establishes a Federal Election Commission to make sure its "rules" are carried out. Furthermore, Congress establishes a seniority system and uses it to distribute political "spoils;" Members agree not to support challengers but to help incumbents; they make false or deceptive claims about themselves or their opponents; they amass and use "war chests" to intimidate would-be challengers or to defeat actual challengers; and finally, they limit the amounts that may be spent on campaigning. All of this is quite legal.

But participants in the market for goods and / or services engaging in the same (or equivalent) behavior would quickly find themselves hauled into court for violating antitrust (or consumer protection) laws mandated by—you guessed it—Congress!

Is there any wonder political markets perform so poorly?

Briffault: 2/23/06, 03:17 PM
I'm glad you've brought us back to the First Amendment. The relevant question, however, is not whether Americans have a right to advocate issues and candidates—surely that right is not at issue. Rather, the question posed by the Vermont case is whether Americans have a right to contribute and spend unlimited amounts of money on candidates. As a First Amendment matter, that is a little harder than you allow.

First, the Supreme Court has for thirty years held that contributions to candidates—and to parties and PACs that give to candidates—can be subject to reasonable limitations.

Second, the Court has upheld laws requiring candidates to disclose their contributions and expenditures, despite the possible chilling effect of disclosure and even though similar disclosure would surely be invalidated outside the electoral setting.

Third, the Court has upheld some restrictions on campaign advocacy, such as laws that prohibit electioneering near polling places.

These decisions recognize that there are compelling interests—prevention of corruption, protection of public confidence in government, promotion of voter information, prevention of voter intimidation and election fraud—that can justify limited restrictions on campaign activity.

None of these regulations attempt to censor the content of electoral speech. Instead, they are aimed at promoting the fundamental goals of democracy—free, fair, informed elections and honest government. The Court has recognized that the First Amendment's protection of political speech is consistent with such reasonable regulations of the conduct of the electoral process.

Of course, the Court has until now rejected limits on spending by candidates and other individuals (while upholding limits on corporations and unions). Spending limits can directly cap the amount spent on communications with the voters. But, like the other restrictions the Court has upheld, they are viewpoint-neutral. And spending limits are aimed at important process concerns: stemming the arms' race competition between candidates for money, curbing the strategic role of bundlers in enabling candidates to amass war chests, and protecting officeholders from the time demands of endless fundraising.

Given the intense disagreement over the values at stake—and the great uncertainty of how spending limits will play out in practice—should we be looking to settle this question once and for all with a single national rule? Given the role of states and cities as laboratories of democracy, wouldn't it make sense to let Vermont try its spending limits experiment so we can see how it works?

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Miller: 2/24/06, 11:00 AM
Richard, nicely reasoned piece. But are such limitations (compromises, interpretations, abridgments, whatever) with respect to First Amendment rights really necessary, even assuming for the sake of argument they are constitutional?

Recall that Buckley v. Valeo was about the Federal Election Campaign Act of 1974 (FECA), which was a(n) (over)reaction to Watergate. The rationale the court gave for approving a limit on campaign contributions was to prevent corruption in politics. Yet, as you conceded in your first response, "the effects of campaign finance reform so far have been uncertain." (For more on the effects of the FECA, see my Monopoly Politics, Hoover Institution Press, 1999.)

Suppose we eliminated all anticompetitive restraints on markets for political representation. (Of course, voter fraud would still be a crime, as would buying votes, bribing elected officials, and so forth.)

Without limits on contributions and on the productivity of expenditures (such as the form and content of messages), candidates would be better able to communicate their agendas and their qualifications. Without a requirement for candidates to obtain a "license" from the FEC before running for federal office (committee, treasurer, initial filing, periodic filings, responding to inquiries, et cetera) and without the threat of prosecution because of violating laws with which few are familiar, many more citizens would be willing to run for public office.

In a more competitive political market, elected officials would be more accountable. Without the assurance of so many contrived advantages in election contests, incumbents would no longer have so much "freedom" to ignore the wishes of citizens. They would have less room to maneuver and would be less responsive to interest groups.

Transparency could be a ready source of differentiation. Whereas one candidate might shield contributors from view, another might publish more information than is now required by the FEC. Candidates might make other strategic decisions, such as refusing to accept funds from business, labor, or other interest groups, just as some do now.

Would the outcome be perfect? Not in the judgment of everyone. But one thing is certain: a regime without anticompetitive campaign laws and regulations would not degenerate into a "law of the jungle," as some have alleged. To the contrary, political markets would become more orderly and far more responsive to the interests of the electorate.

Enjoyed the exchange.

Briffault: 2/24/06, 03:08 PM
Jim, the difference between us is best captured by your repeated references to the electoral process as the political market. The market has many virtues. It lets individuals make decisions and promotes competition. But many of the basic features of markets are in profound opposition to the basic ideas underlying democratic elections.

First, markets rely on financial exchange—the use of money to buy goods and services. Yet, as you note, both buying votes and buying government decisions are crimes. In other words, we reject the idea that we can make political choices through financial exchange. But that means we do not want politics to be a market.

Second, market competition assumes some people are willing and able to pay more for some good or service than other people—and the higher payers get more or better goods. But elections are based on political equality. Everyone gets to vote regardless of wealth (or the lack of it). And every voter—the pauper and Bill Gates—gets exactly the same vote.

Third, and perhaps, most important, the market is about individual choice, not majority rule. Even if most people eat oat bran for breakfast, I am free to buy sugar-frosted flakes. But elections are about collective choice. In an election, we are all bound by the decisions of the group. If the majority picks Bush, then I can't have Kerry as my president. (Of course, the 2000 election did not quite follow majority rule, but that's for another debate.)

With all these critical differences, the market is not a useful model for thinking about campaign finance. I'd rather rely on democracy instead.

What campaign finance rules best serve democracy? Contribution and spending limits that control the influence of private wealth on elections promote the political equality that is central to democracy. Reasonable spending limits and public funding for qualifying candidates make elections more competitive, and that promotes democracy. Limiting donations to candidates makes elected representatives more responsive to the interests of the general public rather than to their donors, and that promotes democracy, too.

We both want government to be, as you put it, "far more responsive to the interests of the electorate." Only I think the way to accomplish that is not to make elections more like the wealth-based market, but to make their financing more democratic.

I, too, enjoyed our exchange. I hope our readers have benefited as well.

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