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The Campaign Finance Red Herring [long]

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Campaign-finance reform is again on the public agenda. The scandals involving the Democratic National Committee and the taint surrounding House Speaker Newt Gingrich have renewed for the umpteenth time the calls for a drastic overhaul of how politics is funded in America. The DNC unilaterally announced it would no longer take money from noncitizens or foreign corporations. It also said it would cap at $100,000 the amount of money it would accept from any one source.

In Congress, Republican and Democratic Senators are sponsoring a bill to limit how much is spent on federal campaigns in return for such goodies as free television time. This is definitely the issue on which a politician can stake a claim to being Mr. or Ms. Clean.

Many reformers would like to see tax-funded political campaigns. For some reason they think the fair and proper way to pay for politics is to force the taxpayers to pick up the bill. They say that is the best way to take the influence of money out of politics. Is it?

The proposal to fund political campaigns through taxation is an abominable idea. Thomas Jefferson said that to force people to finance ideas with which they disagree is tyrannical. But that’s exactly what funding campaigns through taxation would do. Fifty-two percent of eligible voters chose not to vote in the 1996 presidential election. Should they have been forced to give money to the candidates? That would have violated their property rights. And it would have done something else: indicated that participation in the political process is not a matter of choice but of legal obligation. That would fundamentally alter the way people think about politics. It would be more than absurd to compel participation in a political system that is theoretically (though alas not in practice) based on freedom.

As it is, tax money goes to some presidential candidates through the check-off option on the income-tax return. That appears voluntary. But is it really? Taxpayers are permitted to choose only between sending three dollars to the general fund or to the presidential campaign fund. A truly voluntary system would have a third option: the taxpayer’s own pocket. (But three dollars is far too little.)

Whatever one thinks of the money-in-politics problem, then, tax funding is not the solution. It makes as much sense as forcing people to work for candidates or to vote, which is to say, no sense at all.

Another bad solution is a limitation on contributions to campaigns. Any such limitation violates the right of free association and speech. After the Watergate scandal, Congress limited how much anyone — including the candidate — could contribute to a presidential campaign ($1,000). The U.S. Supreme Court ruled that limits on the candidates’ personal financial contributions violate their First Amendment rights, but limits on others do not. That, to say the least, was illogical. A limit on how much a noncandidate can give to a campaign is as much a violation of his freedom as it would be for the candidate. The limit also helps keep incumbents in power. Challengers with low name recognition may need large contributions from a few donors to take on an incumbent. Limits of $1,000 each assure that serious challenges will be seldom seen. (Sen. Eugene McCarthy mounted a credible campaign against President Lyndon Johnson in 1968, eventually driving him from the race, with the money of a few rich men. He could not have done that under today’s rules.)

Most people think money in politics is a bad thing. Incumbents and challengers lament how much it takes to mount a campaign. They say they hate to be constantly asking people for money. What’s funny is that the same people complain that not enough people are involved in the political process. If more people got involved, perhaps more money would be contributed. Besides, how much money is “too much”? Any answer is arbitrary.

We have to look at this issue in terms of basic principles. When we do that, we easily see that the fuss about campaign finance is a clear case of worrying about symptoms while neglecting causes. If the method of funding campaigns is changed while the causes of the “money problem” are not, we can expect the corruption that worries so many people to rear its head somewhere else, perhaps in a less visible place.

Let’s begin with the obvious: the big spenders in politics are trying to buy something. Call it influence or favor or good will — it is payment (either in advance or after the fact) for something of value. Why else would the donor give it? It is a kind of market. Someone is buying something, and that can occur only when there is someone on the other side of the counter selling something that the buyer wants. There are, then, two sides to the money-in-politics issue: the demand side and the supply side. The problem with the usual proposals for campaign finance is that they deal with the demand side and ignore the supply side. It is easy to see why that is so when we examine what is being demanded and supplied.

What would campaign donors be buying? Influence, of course. But influence over whom and for what purpose? Most of what government does is tax the masses and distribute the money to well-organized favored interests. Big donors are looking for influence over the people who write laws and administer programs that bring about those transfers. They want to ensure that when government takes from Peter and gives to Paul, they will be the Pauls who get the loot. The results of influence can be obvious, such as a cash subsidy for research and development or a law or tax restricting a competitor. The results can also be subtle, such as a seat on the airplane that carries the secretary of commerce to a foreign capital to promote American business. One way or another, donors are buying access to the people’s wealth or to the power that can restrict someone else. H.L. Mencken summed all this up when he said that “every election is a sort of advance auction sale of stolen goods.”

Here’s the key question: Would anyone be buying if no one was selling? Obviously not. To the extent government power is limited to protecting individual rights, it has no favors to sell. And if it has no favors, no one will want influence. The way to “get money out of politics” is to get politics out of the business of handing out money. It’s not rocket science.

We should acknowledge another sort of influence-buying that goes on. Call it defensive influence. It is aimed not at getting something that one has no right to but rather at staving off invasions by government. For example, if Congress is considering a regulation on your business and you contribute to a congressional campaign in the hopes that the candidate will favorably consider your case, that is defensive influence-buying. It may not be a good strategy for defending yourself from the government. But the motive can be distinguished from classic “rent-seeking,” that is, looking for gains at the expense of taxpayers and competitors.

That brings up the issue of foreign influence. The Clinton campaign-finance scandal is almost entirely a concern about the influence of Indonesians and other Asians. Advance auctions on property stolen from Americans is fine unless foreigners are allowed to bid. But let’s look closer. Foreign business interests may be trying to do something that is perfectly legitimate and in the interests of Americans: remove trade restrictions. Where many American businesses lobby for measures, such as tariffs, that take money from Americans, foreign businesses have an interest in freeing American consumers from tariffs and quotas. I do not rule out the possibility that they might also lobby for illegitimate favors. But to the extent they seek influence to remove restrictions on consumers, they advance liberty, whether they know it or not.

But even here, note that if the government did not have the power to restrict trade between Americans and foreign businesses, those interests would not need to seek influence with American politicians. Nothing to sell, nothing to buy. It all comes down to limiting government power.

The politicians and good-government types wax indignant over the influence of money. But you will not hear them call for repeal or even a scaling back of government power. Why don’t they see the connection? Are they so wedded to government’s managing our economic affairs that they would tolerate almost anything — including curbs on the freedom of Americans — in preference to a limitation on power? Make no mistake about it: power, not money, is the problem. Phony solutions that cosmetically address symptoms are a fraud.

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    Sheldon Richman is vice president of The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's Families; Your Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State. Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..." Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, The American Conservative, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics. A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.