Author's Notes:
The following is a summary of the various insights gleaned primarily from two amazing books that I will recommend to any concerned American:
- Winner-Take-All Politics, Jacob Hacker and Paul Pierson (2010)
- Republic, Lost, Lawrence Lessig (2011)
A few other articles were incorporated into the article as well.
This took FOREVER to write and came out at a whopping 13.5 pages. Because of this, PLEASE give your comments and opinions on my interpretation of one of the most important issues of our time: an urgent problem that should galvanize Americans of all political stripes and that will determine the life or death of this nation.
UPDATE: I added a little blurb about the Republican's "fiscal conservatism." Another addition is marked by asterisks.
In the early months of 2011, the
United States faced a myriad of urgent problems. The economy remained in the
doldrums. Tensions in the Middle East precipitated by the Arab Spring triggered
a spike in oil prices. Many issues remained unresolved: environmental
legislation, sensible immigration reform, taxation, public debt, and even a
budget. However, congressmen were vigorously debating the most consuming issue of whether or not to allow banks to charge
fees for the use of debit cards.
To many Americans, this is another
tired episode of a 30-year soap opera: the era when Washington began to serve
the interests of the rich and connected rather than the poor and the middle class.
Trust in government is chronically low today: in 2008, 69 percent believed that government
was run for the benefit of a few big interests, a far higher number than the 29
percent who believed it was run for the benefit of all. A bipartisan 75 percent believe that “campaign contributions buy
results from Congress.” Gallup’s most recent “confidence on Congress poll” finds
that only 11 percent have confidence in this Congress. That is lower than
the level of confidence that the Russian Czar, King Louis XV, and King George
III all had during the Bolshevik, French, and American Revolutions.
The Problem
3 decades ago, technological improvements such as the television and polling caused the cost of campaigning to skyrocket. As private unions quickly lost ground to globalization, congressmen in both parties increasingly sought the solicitations of big businesses and wealthy individuals, who were able to use their influence campaign contributors to control the legislative process and shift legislation towards their narrow interests.
According
to the Center for Responsive Politics, in the 2010 Congressional midterms, the
0.26 percent of Americans who made campaign contributions exceeding $200
provided 2/3 of the $2.2 billion given in individual campaign contribution;
meanwhile, only .05 percent reached the $2,400 limit. In fact, a mere
10 percent of Americans made
any donation. In other words, campaign
contributors are
very unrepresentative of the American
populace as a whole.
Politicians'
addiction to money for election and reelection has created a dangerous form
of dependence corruption, which already causes three major inherent problems:
- It distracts public
policy away from the issues the public cares about.
The public most deeply cares about social issues, macroeconomics and
taxation, foreign policy and aid, education, and social welfare. However,
lobbyists drive the agenda towards health care, finance, fossil fuels and
pollution, foreign trade, intellectual property, and tax expenditures,
ostensibly in order to maximize the rents they gain from the government.
- It dramatically
decreases trust in government. When asked why they didn’t
vote in the 2010 midterms when they turned out with energy in 2008, young people overwhelmingly explained
that “no matter who wins, corporate interests will still have too much
power and prevent real change.”
Internet Donations: A New Hope or Another Pipe Dream?
As Jacob Hacker
and Paul Pierson hopefully noted in their book
Winner-Take-All
Politics, there has been optimism in skillfully using the Internet to
garner large sums from small donors, which can help amplify the voice of the
public. In 2004, despite Bush’s close circle of
large donors, Kerry was able to match Bush dollar by dollar in
spending by using the Internet. In 2008, the enthusiasm generated from
President Obama’s campaign allowed him to garner an even greater sum of
contributions from small donors.
However, there
are four major shortcomings to relying solely on the energy of a campaign or
the Internet to encourage small donations:
- Contributions by moneyed
interests still formed the lion’s share of Kerry’s and Obama’s coffers,
and will do so indefinitely without campaign finance reform.
Because small donors come from the energy of the campaign and are inherent
in every election, they do not require politicians to dramatically adjust
their stances on the issues. However, the remaining shortfall has far more
marginal utility because it is
sorely needed to run more political ads than the opponent and turn a close election. Because special
interests expect some form of reciprocation, and failure to adjust
accordingly would mean future
withdrawal of financial support and
potential contributions towards the opponent,
politicians must govern far more “pragmatically” in practice than they indicate in rhetoric.
- The effect of the
Internet is likely to be muted during Congressional midterms,
which generally engages fewer people than a general election. Moreover,
after two years, voters are disillusioned by the current government, which
is especially bad if Democrats control Congress: historically, nearly all
mid-term elections resulted in substantial electoral losses for the
incumbent party.
- When the energy of a
campaign or party fizzes out, small donors aren’t likely to donate as
much. This is especially true of the 2012 general election,
but usually applies to every
reelection campaign. Because the president usually faces electoral losses
during midterms and inevitably
drops several campaign promises due to deadlock and political posturing,
incumbents usually enter reelection with reduced popularity. If voters
have less faith in the ability of the president to achieve his signature
promises, then they won’t donate as much money.
- Even when an election is
won, special interests have disproportionate influence over the
legislative process. While there is only one way
to pass a bill, there are about a dozen opportunities to water it down or
kill it altogether. Hacker and Pierson explain:
Powerful groups defending
the winner-take-all economy--business coalitions, Wall Street lobbyists, and
the medical industry--are fully cognizant of the massive stakes involved, and
they are battle-ready after decades of training. Vigilant and highly skilled at
blocking or diverting challenges, these organized forces possess big advantages
over the disorganized.
Because Super PACs multiply the power of lobbyists by allowing
their clients to contribute large sums of money to the opponents of reform, and
because lobbyists disproportionately represent deep-pocketed special interests
over poorly funded public interest groups, special interests will have a
permanent advantage in the status quo. While mass and sustained public
engagement (which successfully blocked SOPA/PIPA) can remedy this, it is
excruciatingly difficult to replicate on the myriad of complex issues besieging
our nation today.
Moreover,
anti-reformers often outspend reformers by a wide margin. In his book
Republic, Lost, Lessig named two
examples: for climate change reform, a margin of 9:1; for intellectual property
and copyright, a margin of 1000:1; for financial reform in 2010, a margin of
20:1; for the toothless Dodd-Frank in particular, 2.5:1. Even in public
education, teacher unions gave
a
hundred times the level of donations of
other
reform groups.
From the Court that brought you Bush v. Gore… Super PACs!
In the landmark
case Citizens United v. FEC in 2010,
the Supreme Court arguably made the worst decision since the legalization and institutionalization of
segregation. They opened the floodgates for unlimited independent
expenditures, allowing corporations and unions to spend as much as they like to
influence the outcome of an election. Justice Kennedy, in his opinion, stated
that restrictions on campaign contributions undermined free speech and asserted
that there was no evidence of quid quo
pro (direct) corruption in money in politics.
The concept of
money as a form free speech is ridiculous
for three reasons. First, is it justified to allow deranged millionaires and
self-serving corporations to use a megaphone to drown out the
speech of the 99.74 percent? Second, does political equality still exist when
the rich and businesses get to use buckets of money to visibly sway the outcome of an election? Third, doesn’t a deep
dependence corruption far outweigh any benefits associated with “free speech?”
While Super PACs
were a minor phenomenon in the 2010 midterms (comprising only 2 percent of the
$3.6 billion spent), they have taken a pivotal role in 2012. Even though the
2012 election
isn’t even over,
there has been
$371 million in independent expenditures out of the
$2.11 billion in total
spending so far. In other words, Super PACs alone make up
17.5 percent of all spending so
far, of which an overwhelming amount is devoted to
negative advertising. The heavy presence of Super PACs in overall
spending has
multiplied
the effect of lobbying: special interest groups are able to back their
demands with a much heftier sum of money.
How Special Interests Neuter the Left
In 2008, when an energetic President promising to “change
the way Washington works” was elected and the Democrats made further electoral
gains in both houses, reaching the magical number of 60 seats in the Senate,
many progressives were excited for the potential to finally start making
reforms that would alleviate the serious distortions made by the
winner-take-all economy over the last three decades. They hoped for a second
progressive era to address the woes of the second gilded age that opened in the
previous decade.
Yet, coming into 2012, change has become a sorry joke. The
stimulus plan was far too small to jumpstart economic recovery. The ACA looks
remarkably like a center-right plan backed by the Heritage Foundation in the
mid-1990s. Financial reform was watered down and too big to fail still exists.
There were absolutely no concrete efforts to combat climate change. No
legislation was passed to arrest the alarming decline of private unions. The
influence of special interests actually increased
with the advent of Citizens United. Time and time again, moderate and
cross-pressured Democrats, backed by powerful lobbyists, watered down reform or
blocked it altogether.
Perhaps most
importantly, President Obama’s failure to keep to his promise to “change the
way Washington works” amounts to a colossal
betrayal. He won the Democratic primaries by promising something different from
Clinton, but then executed her playbook in
office. To put it bluntly, the President, by making change such a central
plank of his platform in 2008, might have permanently
cast skepticism in the ability of the President to deliver campaign finance
reform.
Over the past three decades, the Democrats have performed
some heinous acts to react to the decline of unions and gain campaign
contributions from corporations. Significant numbers of them backed the Reagan
and Bush tax cuts, some of the most fiscally irresponsible pieces of
legislation of our time. They backed financial deregulation in the 1990s,
triggering the deep crisis we have today. They supported both the wars in Iraq
and Afghanistan, which further added to our debts. They refuse to consider
cutting defense spending, even though we spend more than the next 25 countries
combined (and most of those are our allies).
All of this reached a head from 2008-2010, a colossal missed opportunity for serious
reform.
Economic Stimulus and
the Obsession with Austerity
The sorrows began with the stimulus plan. President Obama’s
economic advisers recommended at least $1.2 trillion to turn around the
freefall of the economy and resume economic recovery. They emphasized using
most of this money to provide debt relief to states (so they don’t start
shedding public workers to balance their budgets) and consumers (with consumer
debt still at 117 percent of income, they have no flexibility to spend).
Instead, the battered bill was only $787 billion to attract the votes of
wavering moderate Democrats and the Maine senators, and the “stimulus” was very
heavy in tax cuts, which would be used to deleverage and save rather than
spend. This number was also artificially inflated by a
scheduled $70 billion tax cut to prevent more Americans from having
to pay the Alternative Minimum Tax. Between stimulus and the bailout overseen
by the Obama administration,
less
than $75 billion was ever intended to go to homeowners,
and in the end less than
$4 billion
did. Even Mark Zandi, who had advised the
McCain
campaign, admitted that the package was too small.
Meanwhile, as debt relief to the states and municipalities
dried up, they were forced to shed millions of public sector workers and cut
education spending in order to maintain balanced budgets. This raised
unemployment, reduced economic growth, and dealt a severe blow to the political
fortunes of the Democrats.
Because this watered down stimulus plan saved us from an
economic freefall, but did not visibly improve our economic outlook, it became
politically impossible to support further large-scale government spending
programs; instead, the discussion has shifted from spending to austerity and
budget balance. However, economic weakness in the Eurozone and the reduced
economic growth in China and India have caused investors to flock to the U.S.
bond, whose 10-year yields are at
historic
lows. We currently
spend $224.8
billion paying interest on our debt; while that seems like a lot, it is only
6 percent of our total budget and 11 percent of our total revenue.
While debt is indeed an enormous problem in the long term, now we need to focus on economic growth and employment. The
Eurozone provides an excellent example of what would happen under severe
austerity: double-dip recessions will decrease revenues, creating a vicious
cycle. Anything beyond moderate
austerity should not even be entertained until the unemployment is at least below 7 percent, if not below 6
percent. As long as we do not play
political brinkmanship with our debt ceiling, U.S. bonds will remain the safe investment of
choice in the near future. Increased economic growth would provide the revenues
the government sorely needs to balance the budget and reduce our debt-to-GDP
ratio in the long term.
Health Care
The passage of the Affordable Care Act, however monumental, could
not have been achieved without utterly bowing to special interests. The public
option, the only viable way to control health care costs in the long term, was
dropped from the outset. Right now, private insurers are incredibly
consolidated:
a single
private insurer has
70 percent or more of the private market in 24 of 43 states examined.
Because a nationwide public insurer does not need to make a profit and
generally has cheaper administrative costs, they can deliver quality health
care at
70
percent of the cost of private insurers, forcing them to reduce costs or
provide substantially better quality. The public option would also draw from
the success in Medicare in controlling costs, whose costs have grown
far less rapidly than the rest of health
care in general. Moreover, the CBO projected that the public option would save
the government $150 billion over 10 years.
Unfortunately, moderate Democrats needing donations from
private insurers first stripped the public option of price controls; Joe
Lieberman then set the tone of the debate when he threatened to filibuster the
bill unless the public option was removed. For the record, Americans of both
parties, including Connecticut, overwhelmingly support the public option; however,
private insurers have a different opinion, and they will be allowed to pocket
most of the profit gained from universal coverage.
To add further insult to injury, the ACA prevented the
government from negotiating with pharmaceutical industries for drug price,
which could have saved $20-30 billion.
This stipulation has an unfortunate history. In 2003, the
Medicare Prescription Drug, Improvement, and Modernization Act was meant to
help the middle class. However, Part D was a $49.3 billion gift to big PhRMA.
At the time, there was no ambiguity in Obama’s reaction. He was
angry. Not so when the ACA passed in
2010.
The
Wall Street Journal reports:
Initially, the Obamateers and Senate
Finance Chairman Max Baucus asked [big PhRMA] for $100 billion, 90% of it from
mandatory "rebates" through the Medicare prescription drug benefit
like those that are imposed in Medicaid. The drug makers wheedled them down to
$80 billion by offsetting cost-sharing for seniors on Medicare, in an explicit
quid pro quo for protection against such rebates and re-importation. As
Pfizer's then-CEO Jeff Kindler put it, "our key deal points . . . are, to
some extent, as important as the total dollars." Mr. Kindler played a more
influential role than we understood before, as the emails show.
The Obama campaign believed that the ACA’s expansion of
coverage would
increase
pharmaceutical profits by $100 billion every year; under the framework of
the ACA, they will be able to pocket most of this profit. In short, Obamacare, however necessary and
infinitely better than the status quo, gives
a $115 billion subsidy every year to private insurers and big PhRMA.
Certainly not very progressive!
Financial Reform
In financial reform, capping the size of banks to
fundamentally end Too Big to Fail was dismissed from the very beginning as the
financial industry spent $205 million in lobbying during 2010. Dodd-Frank is
better than nothing, but its overregulation will smother small banks while
providing useful loopholes for bigger ones. Regulation in derivatives is
dispersed over dozens of agencies. Right now, if any of the major banks were to
come into financial trouble (from overleveraging of derivatives, perhaps), the
economic costs would be so great that the only pragmatic option would be to
bail them out again.
Moreover, big banks are perceived as safe due to their size
and implicit government guarantee. Economists Oliver Hart and Luigi Zingales
calculated
that the 18 largest banks receive a $34
billion annual subsidy from lower interest rates. Dodd-Frank even
designates certain banks as too big to
fail (which would require government intervention in the event of their
failure), the implicit guarantee will encourage the maximization of risk once
again, and we could see a replay of the financial crisis in a decade or two. This
is an inherently unfair market, and the subsidization of these dangerous banks
is absolutely outrageous. The solution would be to repeal Dodd-Frank, repeal
Gramm-Leach-Biley, centralize regulation of derivatives, and impose a cap on
banks: 4 percent of GDP for commercial banks and 2 percent of GDP for
investment banks would be a great guideline. That way, they can fail without
taking the rest of the economy with it, and the market can operate a lot more
efficiently.
Reforms That Never
Stood a Chance
Efforts to combat climate change were an unambiguous
debacle. The cap and trade bill emerged from the House already battered and
heavily watered down, and Democrat senators in coal states mercilessly shot it
down. As a result, we have NO coherent policy for combating climate change,
which can kill millions in the near future through more hurricanes, flooding of
Florida, and debilitating droughts. It also stops the U.S. from becoming a
powerful leader in combating climate change; it will be very difficult to
convince China to lower its emissions when we have no concrete reform
ourselves.
The Employee Free Choice Act never took flight. Private
unions are
only
a modest drag on the economy (0.4-0.6 percent of GDP), but they are a
powerful voice for the middle class and would increase the wages of
both union members and nonunion workers
within the industry. Unions even increase voter turnout (unions distributed
information to their members and bussed them to the polls). Ironically, the
National Labor Relations Act, which enshrined the right to form unions, only
allowed them to form within companies rather than throughout industries. This
bill was designed to allow unions to form upon the consent of the majority of
workers rather than hold an additional election; right now, employers divide
and conquer workers through one-on-one intimidation and
fire
over 20 percent of employees actively involved in forming a union. It would
increase penalties for employers discriminating workers due to union advocacy,
and force the arbitration of a contract to enforce the power of a private
union. However, it was never even introduced because it would never pass in a
Senate where cash-strapped moderate Democrats would want to tout their
pro-business credentials.
The Democrats will never be a credible advocate of
educational reform because they are held hostage to teacher unions, which are
ironically too strong. One of the best ways to improve education is to increase
the quality of the teachers: measures must be made to attract the top talent
and fire those who are underperforming. Merit pay does not work because it
promotes competition and teaching to the test, but this has overwhelmingly been
the proposed option over reforming tenure.
Most fundamentally, legislation to publicly fund elections
never even passed the House. The Fair Elections Now Act only got so close
because none of the representatives thought it would credibly pass the Senate;
they voted for it because standing for campaign finance reform is usually politically
beneficial. Measures to expose the donors of Super PACs or ban them altogether
wouldn’t even stand a chance.
How Dependence Corruption Co-opts the Right: Contradicting Key
Conservative Principles
Considering the
adverse effects of special interests on the left and their complicity in
shifting the Republican Party far to the right, you might be surprised that
special interests also undermine basic conservative principles.
However, it
should be noted that the objective of special interests is only to protect their wealth. If these groups are threatened by new
innovations under the free market, then their free market credentials vaporize
and they demand the protection of
their market gains. Meanwhile, in an effort to gain an endless stream of funds,
Republican politicians are willing to contradict fundamental conservative
principles as long as it means staying in power.
In this section, four
basic conservative principles would be examined: small government, simple
taxes, free markets, and fiscal conservatism.
- Small and Efficient
Government
Republicans seek
to keep government big so that they
can create a straw man to campaign against and garner lucrative funds from
special interests by promising to make it
smaller. Lessig clarifies:
Having lots of targets of regulation is actually a good way to
have lots of targets for fundraising. And thus, so long as fundraising is a
central obligation of members of Congress, there is a conflict between the
interest of small government activists and the interest of the
fundraising-dependent congressmen.
This is the textbook example of a moral hazard.
Lessig adds that one Joyce Foundation study found that 84 percent of
corporations reported that candidates pressed them for contributions at least
occasionally; 18.8 percent said it happened frequently. As seen in most of this
essay, donors coerce politicians, but in this case politicians were able to
game the system to coerce donors. Neither case is conducive to efficient and
accountable governance.
- Simplified Taxes
For many
Americans, filing a tax return should be simple and could work like a credit
card bill. Because employers report workers’ wages to the government, and banks
report interest and dividend payments, the government should be able to send a
draft tax form that is already filled out and can be freely contested. Not
exactly postcard simple, but taxpayers need only review the information and
only a few would need to make any
changes.
However, after a
successful pilot project in a Californian firm, efforts to implement the system
throughout California quickly hit a
stone wall.
Why? Tax software companies, whose business in making it “convenient” to file
tax returns was existentially threatened, rallied against the reform.
If special
interests have blocked the IRS’s ability to send out tax forms the way credit
card companies send out their bills, then can our tax structure be simplified?
Not so: Republicans also have a vested interest in preserving the insane
complexity of the tax code. This is precisely why Mike Huckabee, whose
signature policy was the Fair Tax, had limited success in the 2008 Republican
presidential primaries.
In addition, both
special interests and politicians gain from obtaining tax expenditures and
loopholes for narrow groups. The American Journal in Political Science found in
2009 that for a firm spending an average of $779,945 lobbying a year, an
increase of 1 percent in lobbying expenditures produces a tax benefit of
between $4.8 million to $16 million. That is a
staggering 600-2000 percent return, making it lucrative for special
interests to lobby and to give contributions to pliant politicians to keep them
in power. Republicans, seeking to enrich their wealthiest donors, are able to
increase their capacity to give campaign contributions, creating a vicious
cycles. In fact, the tax code is
full
of tax credits and loopholes that overwhelming benefit the wealthy.
Politicians of
both parties have also
abused
the sunset clause attached to these tax loopholes and cuts in order to maximize
campaign contributions. When a tax cut or loophole is about to expire,
corporations and individuals are willing to pay up to the amount they save
under the status quo. Since the sunset clause was introduced as a compromise in
1981 to test the efficacy of the tax credit towards research and development,
only two policies with sunset clauses were allowed to expire; one of these was
passed during the subsequent Congress, which still gained the contributions of
the special interest group. This system allows congressmen to use policies such
as the tax credit for R&D or the Bush Tax Cuts as a source for infinite
campaign funding.
- Free Markets
There are only
two things that are guaranteed in a free market. First, new innovations and
competitors will threaten the established parties. Second, entrenched markets
will be strongly encouraged to use everything at its disposal, including the government, to protect
their wealth from the market disruptor.
Neither the
Republican Party nor its benefactors stands for the free market. Many Republicans
voted for protecting the steel industry in 2001 and continue to protect
agricultural subsidies and the sugar industry, all of which protect far fewer
jobs than they cost. While Republicans were initially hesitant about TARP, the
failure to pass the legislation the first time triggered a catastrophic drop in the Dow Jones. This gave the policy a handful
of additional votes necessary to barely squeak past both Houses.
Moreover, the Republicans have a strong
incentive to protect the $90 billion the
federal government spends in corporate welfare every year (subsidies and
regulatory protections granted to certain businesses and industries). Under
this arrangement, whenever a challenge is made towards this significant sum of
money, politicians would rush to the aid of the relevant special interest
groups in an attempt to extract more contributions from them.
- Fiscal conservatism
Oddly enough,
many Americans seem to believe that the Republicans are better than Democrats
when it comes to fiscal conservatism. If you’ve seen Mitt Romney, that is
clearly not the case. In fact, over
the past 3 decades, the Republican presidents have authorized more spending
increases or revenue cuts than Democratic presidents. Certainly not fiscally
conservative!
No Republican
politician gets far without signing Grover Norquist’s pledge not to raise
taxes. Furthermore,
nearly all Republican
politicians are bent on
sharply
reducing tax intake; many of their plans
disproportionately
benefit the rich and uber-rich (e.g. hedge fund managers and company executives).
During the debate with the stimulus plan, Jim DeMint offered the “American
Option” as an alternative. This would have made
all Bush tax cuts for the
rich permanent; the Center for American Progress estimated that the plan
would
cost $3.1 trillion over a decade. Yet when it came up to a vote in the
Senate,
all but four Republicans
voted for it.
---
The Republican platform is actually
very rational: they implement measures
that would enrich their most ardent donors: Grover Norquist and his cronies, the
Koch Brothers, Karl Rove, Sheldon Adelson, et. al. This in turn gives them more
money to donate to Republican congressmen seeking election and reelection,
creating a catastrophic vicious cycle.
“Reforms” that don’t work: Measures that are Impractical or
Ineffective Alone
Campaign finance
reform is not an easy issue with a simple silver bullet. Some believe that what
matters is not who gives the money but
rather whether or not the donor should be identified to the people or the candidate himself. Here is a summary of
Lessig’s evaluation of two proposals: transparency and complete anonymity. This
section will also cover why repealing Super PACs alone is not enough.
- Transparency
The problem with
transparency is that it
simultaneously
tells us too much and too little.
Too
much, in that it produces pages after pages of
all donations over $200, which by itself says
too little about
how the
donors to candidates affect their ideologies. For instance, if candidates took
contributions from businesses, energetic citizens,
and unions, how would they adjust their platform accordingly (or
would they adjust at all)? When it comes to money in elections, context is
everything: a donation has
limited
influence if an
overt expectation is
not clearly telegraphed. Because intentions are usually illustrated by the
presence of a lobbyist behind the contribution, transparency does not
differentiate the vastly different effects between, say, a businessman who
donates because he is impressed with the energy behind a campaign and a gun
rights organization that
has lobbied
extensively on the issue and is trying to loosen gun restrictions. In
addition, money need not be given or withdrawn from
a single candidate in order to carry out a threat. Ethan Kaplan
notes that the threat can also come from
giving
donations to the opposing candidate.
Again, this dynamic is completely ignored by transparency.
Nonetheless,
transparency is necessary and can be effective when complemented with
other reforms that will be discussed below. To best illustrate its role, it is
like the leaked camera of the BP well gushing millions of gallons of oil into
the ocean: it exposes the muck and increases the recognition that a problem
exists, but it cannot be a solution by itself. To maximize its utility, it is
also advisable for the FEC to summarize
contributions to a candidate and group funds by industry rather than by company.
Transparency is
also more effective against Super
PACs: many Americans believe that this particular entity, financed by huge
contributions from a handful of deranged millionaires and businesses, is deeply corrosive to democracy. As a
result, if political will is insufficient to pass an amendment repealing Super
PACs, transparency measures such as the DISCLOSE Act are not a shabby
alternative.
- Anonymity
An interesting
idea that some have advocated is the completely opposite of transparency:
making all funds anonymous to the
politicians as well as the public. As the theory goes, if politicians don’t
who gave his campaign what, it is impossible for him to give favors in exchange
for the money. An important component is the ability for contributors to withdraw the fund at any point. By
severely reducing the level of trust between the donor and the candidate, the
market for favors would also be weakened.
Let’s ignore how this system can actually achieve complete anonymity for a moment. The
problem is that anonymity might be too
effective at curbing dependence corruption. To extent that money is used specifically to influence legislation
(most of it is), anonymity risks causing the funds to dry up completely. This
is precisely what happened in local judicial elections in Florida in 1972: as
soon as donations were made anonymous, the flow of money was severely curtailed.
Even if this
issue can be resolved, the system would be grotesquely
complex. If it is confusing to even experts critiquing the idea, it is likely
to be mind-boggling for the voter. In a nation where we are skeptical that
voting machines even count ballots accurately, many will find it difficult to
believe that the system actually works; it would require a leap of faith.
- Banning Super PACs
Many Americans realize that Super PACs have an incredibly negative effect on democracy and
accountable governance. However, a sizeable number believe that simply getting
rid of Super PACs would sufficiently solve for the distortionary effects of
money in politics.
While Super PACs
are undoubtedly harmful, campaign finance reform
cannot stop at Super PACs. During the late 1970s and the 1980s, a
concerted effort by businesses successfully blocked reforms that would have
given necessary breathing room to declining private unions. In the mid-1990s, the finance industry successfully
blocked
4 anti-derivatives bills,
exempted
all derivatives from
regulation, and repealed the Glass-Steagall Act, effectively dismantling New
Deal financial regulation. Then, during the Bush years, politicians concerned
with rising income inequality associated with globalization and the
decline of private unions loosened
restrictions on credit to reduce
consumption
inequality, which
facilitated
the subprime mortgage bubble and
drove up consumer debt. In
2003, big PhRMA still managed to obtain a $49.3 billion subsidy through
Medicare Part D.
In other words,
banning Super PACs alone does not
even come close to solving a deeper
structural problem. They are a symptom of a system that has allowed special
interests to reign over public interest for most of the past 3 decades.
Reforms that Do Work
The most
fundamental way to reduce the corrosive influence of special interests is to
create a robust system for publicly funding elections. The Fair Elections Now
Act is one option; Lessig's Grant and Franklin project is another. Here is how
Lessig
describes
his reform:
Almost every
voter pays at least $50 in some form of federal taxes. So imagine a system that
gave a rebate of that first $50 in the form of a “democracy voucher.” That
voucher could then be given [in part or in whole] to any candidate for Congress
who agreed to one simple condition: the only money that candidate would accept
to finance his or her campaign would be either “democracy vouchers” or
contributions from citizens capped at $100. No PAC money. No $2,500 checks.
Small contributions only. And if the voter didn’t use the voucher? The money
would pass to his or her party, or, if an independent, back to this public
funding system.
Fifty dollars
a voter is real money: more than $6 billion an election cycle. (The total
raised in
2010: $1.86 billion.) It’s also my money, or your money, used
to support the speech that we believe: this is not a public financing system
that forces some to subsidize the speech of others. And because a campaign would
have to raise its funds from the very many, it could weaken the power of the
very few to demand costly kickbacks for their contributions — what the Cato
Institute calls “corporate welfare,” like subsidies to ethanol manufacturers,
or tariffs protecting the domestic sugar industry. Cato estimates that in 2009,
the cost of such corporate welfare was $90 billion. If cutting the link to
special interest funders could shrink that amount by just 10 percent, the
investment would, across a two-year election cycle, pay for itself three times
over.
Lessig’s voting
voucher has one primary advantage over Fair Elections Now Act. First, it
doesn’t allow “‘your money’ to be used for speech you don’t believe in.” To put
that into perspective, imagine the Fair Elections Now Act financing the
campaign of Rick Santorum. Enough said.
Nonetheless, both
would force politicians voluntarily participating under the
system to accept a $100 cap on individual contributions and refuse PAC or Super
PAC money. That would mean that with a majority vote in the House and 60 votes
in the Senate, this system could be formed without first having to pass an amendment to ban Super PACs, which requires a
supermajority in both houses. In fact, either system would create the political will necessary to
pass such an amendment. Under either system, lobbyist would become a more
benign agent for public policy: they would provide legislators information and policy
expertise on complex issues.
*Without special interests taking both parties hostage, center-rights such as Arlen Specter can stop taking refuge in the Democratic party (where they water down or block Democrat-led reform) and regain control of the Republican party; they would allow the party to live up to its principles. Meanwhile, the reforms that progressive Democrats champion would be more universally supported within the party. Perhaps most importantly, compromise would return because the Republicans no longer have an incentive to say no to everything Democrats support. Even polarization would decrease because the distance between the center-left and the center-right is shorter than the distance between the center and the far-right.
Lessig continues:
If enough representatives were elected under this system, then
whenever Congress did something stupid, it would be because there were more
Democrats than Republicans, or more Republicans than Democrats, or more
pinheads than patriots. But whatever the reason, it would not be because of the
money. No sane soul could believe that special interest money was driving a
result. Every sane soul could instead believe that the mistakes were
democratic mistakes, correctable through a democratic response. This system builds
a treadmill that gets politicians to worry first about what we, the voters,
want.
How many
representatives would opt under the system? In theory, every representative who
genuinely believes that the
government should be dependent on the people and solely on the people would participate. One thing is for certain: the
way the American people revile special interests right now, any politician
participating in the system would have a significant
inherent advantage over any candidate backed by big money.
Moreover, state
examples in Arizona, Maine, and Connecticut demonstrate tangible success with a
publicly funded system. Lessig furthers:
Though the details of these programs are different, the basic
structure of all three is the same: candidates qualify by raising a large
number of small contributions; once qualified, the candidates receive funding
from the state to run their campaigns.
…These “clean money,” or “voter-owned,” elections have had
important success. Candidates opting into these public funding systems spend
more time talking to voters than to funders. They represent a broader range of
citizens than the candidates who run with private money alone. And they have
succeeded in increasing the competitiveness of state legislative elections,
making incumbents if not more vulnerable, then at least more attentive.
As with all
solutions, unfortunately, even this solution has several key weaknesses. There
are two problems with its very implementation:
- It is almost impossible
to get both Houses of Congress
to pass this reform. Special interests groups will
fight tooth and nail against a reform that would dramatically curtail
their ability to obtain corporate welfare, seek rents, and obtain tax
loopholes. Recall how the government spends $90 billion in corporate
welfare alone every year; that would greatly
lighten the wallets of many
angry leeches.
Many congressmen would also be hesitant to embrace an unfamiliar
system. The vast majority of seats in Congress are safe seats, which would be disrupted by a charismatic candidate who
is able to gain the support of the people
rather than big money. Moreover, the
ultimate goal of a number of congressmen and their staff is to enter the
revolving door and become a lobbyist, which pays very lavish salaries under the current system. All that money would
evaporate under the Grant and Franklin Project or Fair Elections Now Act.
- Special interests have a
deep arsenal and can use it to undermine the system. If
the Fortune 500 companies spent 1 percent
of their record corporate profits, they would already be able
to levy greater than $6 billion.
Even if the voucher system were passed, it is likely that limited air space and further breakthroughs in campaign technology would cause campaign costs to continue rising. It isn’t inconceivable that the size of the voucher wouldn't be increased because special
interests would actively attempt to subvert such additional reforms. As long as
special interests were able to block an amendment that would ban Super PACs,
they would be able to swamp the
system with a torrential downpour of money, completely negating the efficacy of
the publicly funded system.
Unfortunately,
given a discouraged and unengaged electorate (which will be covered in a later
post), it is excruciatingly difficult to garner the passionate and sustained public support necessary to push campaign
finance reform through. America’s present crisis is not one of immediate
shock: it will not forge the same unwavering unity the same way that Pearl
Harbor, Sputnik, or 9/11 did. Today’s problems resemble that of the Gilded Age:
an endemic decay of the integrity of institutions, slowly chipping away at the
nation’s vitality but deceptively easy to overlook.
An uninformed and indifferent
electorate poses a further problem: even if the influence of special interests
was successfully cut, our nation would still face deep problems. Americans have
such a distorted view of left and right that the Democrats would probably
identified as left (with its recent addition of moderate Democrats, it is
centrist to center-right in practice) and Republicans as right (when it is far-right in reality). As long as
Americans continue demanding unaffordable entitlements, increasing spending,
and light taxation, then politicians will not be able to deliver the tough
medicine needed to begin reducing our debt-to-GDP ratio to a more sustainable
level. In addition, special interests opposing reform will continue being better organized than their reformist, public interest counterparts; it is reasonable to assume that they would be able to better articulate their concerns. Regardless, campaign finance reform is clearly the root of the problem
and solving it is the prerequisite to all other meaningful
reforms.
A Grim Future
One century ago, the election of 1912 represented a major
crossroads for American history. Just like today, special interests dominated
government and corrupted governmental institutions. On the right stood the
incumbent William Taft; under his tenure, special interests regained ground and
threatened once again to compromise democracy. On the far left was Eugene Debs,
a surprisingly successful socialist. In the middle stood the two Progressives:
Theodore Roosevelt, the big-government reformer, and Woodrow Wilson, who
advocated strong laws and even stronger antitrust than his counterpart. In the
end, a combined 70 percent of the
electorate voted for a progressive, making it a very successful referendum on the progressive movement.
Although the 2012 election also has an ideologically diverse
field of candidates, it is unlikely to bring about the same fundamental change
seen in 1912. An unpopular incumbent will likely trounce an inauthentic
challenger, with few votes going towards the third parties. Regardless of who
wins, special interests will continue to rule Washington at the expense of the
broader segments of society. It may very well take a crisis of the magnitude of
Sputnik before our nation is shocked into action. If it does, it may already be
too late.
