Billion Dollar Democracy
Patrick Hurley examines the Campaign Finance Reform debate in the United States.
Athletes at the Beijing Olympics were not the only ones to break world records this year. In the United States, candidates in the Presidential race have so far spent more than U.S. $995 million on their campaigns, making it the most expensive election in history. It is expected that the final two candidates will need to raise $500 million apiece and that the figure of total spending by all candidates will exceed one billion dollars.
Democracy, it seems, comes with a big price tag.
For many Americans, the preeminence of money in politics is viewed in a negative light; however, the ongoing debate over whether or not there should be limits to how much candidates may spend on election campaigns transcends matters of dollars and cents. At a greater level, the debate over Campaign Finance Reform (CFR) highlights the paradoxical tension between the American institutions of free speech and political equality. Ultimately, this debate goes right to the heart of what democracy, as a political system, should be.
Democratic deadweight-loss
Democracy is attractive as a political system for the same reason free-market economics has appeal; this being the notion that competition among actors will bring about the best outcome for all. While in theory, the minimal eligibility criteria for the U.S. Presidency allows for perfect competition among candidates, the reality is that due to a myriad of factors such as education, political connections and (most significantly) access to funds, the pool from which Presidential candidates are drawn is relatively small. In terms of a market structure, the U.S. Presidential election most resembles an oligopoly – that is, competition among a small number of firms.
One of the major flaws with the oligopoly structure, however, is the loss of welfare that results from excessive advertising. While advertising in competitive markets does make a positive contribution to society by way of informing consumers about the goods and services that are available, the dominant strategy for competing firms is to spend big on promoting their products in an attempt to ‘out-brand’ their competitors. This excess advertising and product differentiation contributes nothing to society in terms of economic welfare and is arguably an externality due to the confusion and choice anxiety that it creates.
“The debate over Campaign Finance Reform (CFR) highlights the paradoxical tension between the American institutions of free speech and political equality.”
Democracy, however, differs from a competitive market in one key respect: the final outcome. Unlike a market, where products are generally sold by all participating firms, only one ‘sale’ is ultimately made in a democratic election. In the 2008 U.S. Presidential race, the unsuccessful candidates have so far spent over $600 million on their campaigns. While some segments of American society celebrate this figure as a sign of a healthy democracy, others see this ‘dead money’ as a waste that could have been better used to produce more tangible forms of economic welfare. The latter are strong advocates of Campaign Finance Reform (CFR).
The economic deadweight loss of the election process is one of the less prominent arguments cited by advocates of CFR. Professor Gil Troy of McGill University sees the high level of spending on politics in the USA as reflective of a “peculiarly American commitment to liberty at almost all costs”. Other commentators point to the fact that while more than $1 billion may be spent on candidates’ campaigns this year, the winner will subsequently be responsible for discretionary budget spending of around three trillion dollars. The call for legislative reform relates not so much to the overall price tag of American democracy; rather, it is driven by concerns about how money distorts the democratic process by creating unequal suffrage among equal citizens.
The democratic dilemma
Upon close examination, liberty and democracy – the two great hallmarks of the American political tradition – are paradoxically at odds with each other. Free, unregulated political speech is widely viewed as a prerequisite for a functional democracy. Likewise, political equality underpins democratic theory. However, in a world where money talks, legislation aimed at promoting political equality by placing limits on campaign finances is seen by some as an unconstitutional violation of the First Amendment’s guarantee of ‘free speech’. Conversely, others regard the lack of such legislation to be detrimental to the proper functioning of the democracy.
Reform attempts
At the federal level, there have been attempts to restrain the influence of money on politics since 1867, when Congress passed the Naval Appropriations Bill prohibiting government officials from soliciting political contributions from Navy yard workers. The early legislation failed to solve the problem of money-biased politics; instead, it prompted candidates to turn to the corporate sector for campaign funding.
“The internet is arguably the greatest hope for realising the ideal of democracy in the United States.”
Perturbed by the rising trend of corporate involvement in political campaigns, President Theodore Roosevelt proposed in 1905 that “contributions by corporations to any political committee or for any political purpose should be forbidden by law”. Additionally, as a solution to the issue of politicians being distracted by the task of fundraising, Roosevelt pushed for public financing of federal elections. Beginning with the Tillman Act in 1907, which prohibited corporations and national banks from directly financing federal candidates, several legislative reforms were enacted throughout the first half of the 20th century. These reforms introduced financial disclosure requirements and set limits on campaign contributions and expenditures. However, rife with loopholes and lacking in enforcement procedures, they were largely ineffective. Money retained its influence over the political process.
It was not until after the 1972 Watergate scandal that any major legal infrastructure was introduced to limit the distorting effect of money in federal elections. In 1974, a comprehensive public finance system, a central enforcement agency (the Federal Election Commission), as well as strict regulations limiting contributions to campaigns by individuals and Political Action Committees (PACs) were created.
The liberty challenge
These laws, designed to create a more level playing field, were immediately challenged in the Federal Court on the grounds that the contribution limits violated the First Amendment’s guarantee of ‘free speech’. The resulting Supreme Court decision, Buckley v. Valeo (1976), maintained that contribution limits for Presidential candidates operating within the public finance system “serve[d] the basic governmental interest in safeguarding the integrity of the electoral process” and did not “directly [impinge] upon the rights of individual citizens and candidates to engage in political debate and discussion”. Interestingly, the Court treated differently money spent as campaign expenditure and money donated as contributions. While the Court saw contributions as indirect expression, appropriate for regulation on the grounds of preventing ‘quid pro quo’ relations between officials and well-funded citizens, expenditure on the other hand was seen as pure expression, constitutionally safeguarded under the First Amendment.
“A new foundation”
Dr Tom De Luca, Professor of Political Science at Fordham University, interprets the Buckley decision as one that acknowledges the democratic paradox, but ultimately privileges the liberty inscribed in the First Amendment over “the broader goal of equalizing political competition in line with democratic principles”. De Luca argues that the Amendment’s purpose of securing the “widest possible dissemination of information from diverse and antagonistic sources” implies an equalisation goal. He calls for a new constitutional amendment that enshrines political equality as a fundamental right and defines the United States as a democratic republic based on this right.
For different reasons, Stanford Law School Professor Lawrence Lessig echoes De Luca’s call. In a recent interview in The Economist, Lessig argued that “if you protect [politicians] at least from the irrelevant issues like ‘how do I raise money to get elected?’, then some of them will be interested in the issues from the perspective of good public policy… eventually I think we’re going to see that’s going to require some constitutional change”.
The great American flaw?
While supporters of CFR argue that the current ‘money-driven’ system is ‘undemocratic’, many of their proposed changes attract the same criticism. Opponents of CFR point to the fact that limits on campaign spending insulate incumbents whose names are already well known, and argue, rather cynically, that any legislation making it more difficult for a challenger to get his or her message out subsequently makes it easier for incumbents to ignore their constituents. It is also contended that placing financial limits on the people running for office merely serves to increase the media’s power over public perceptions of the candidates. This catch-22 situation lies at the heart of the debate.
While the current debate over restoring political equality is primarily focused on money, the greater question of ‘where to draw the line’ remains pertinent. ‘Natural’ attributes, such as public speaking abilities, charisma, physical energy et cetera, could also be seen as resources enhancing an individual’s political speech and highlight the enormous difficulty in legislating political equality.
Looking ahead
It is likely that future Presidential campaigns will continue to break fundraising and spending records. Democratic candidate Barack Obama’s recent decision to decline an $84 million public grant for his campaign is seen by the election specialist Thomas E. Mann of the Brookings Institute as “the final death blow” to the public financing system. However, Obama’s online fundraising phenomenon has, in the words of one representative, “more than realized the objective of public financing”. By easily allowing ordinary citizens to make small donations, and providing unlimited access to a wide range of political commentary, the internet is arguably the greatest hope for realising the ideal of democracy in the United States.
Prompted by the sustained call for CFR, the U.S. Supreme Court will eventually have to address the tension between free speech and political equality. Reconciling the democratic dilemma – that is, the tradeoff between liberty and equality – will no doubt generate fierce debate at the highest level. Ultimately, what hangs in the balance of this decision is the definition of ‘democracy’ in America.
Meanwhile, this year’s billion-dollar election has yet again proven legislative attempts to limit money in politics to be ineffective. Whether you celebrate this, or feel disconcerted, money looks to remain a key determinant in the election of the President of the United States.
