- The Washington Times - Thursday, March 22, 2001

First of two parts


As the economy burns, Congress fiddles with campaign finance reform. Innocents depict this as anunambiguous moral crusade, just as they did with several equally quixotic "reforms" enacted over the past 30 years.
Moralizing is easier than analyzing, and it avoids annoying questions about efficacy. Each new generation of reformers has appeared almost eager to remind us that three decades of such moralistic legislation has accomplished nothing. One of the avowed purposes of reform was to cheapen the cost of campaigns (i.e., the annoying expense of an informed electorate).
Yet reformers are the first to complain that reforms have done nothing of the sort. No matter how often the reforms fail, however, such failure becomes the excuse for more of the same for another set of patches to repair the leaks in previous reforms.
The basic problem is that campaign finance reform is endogenous part of the system it pretends to control. Efforts of interest groups to influence laws and regulations are not magically suspended when it comes to laws and regulations that proponents label as "reform." Campaign reform is advertised as an apolitical issue defined by the self-proclaimed moral superiority of reformers and latent corruption of any doubters.
In reality, campaign finance reform has always been about tilting the balance of political power in one direction or another, and nothing else. There are potential winners and losers from any change in the regulation of campaign finance. Interest groups support politicians who favor the types of "campaign finance reform" that will increase their political clout and/or diminish the influence of rival organizations.
Restricting particular channels of campaign finance is like squeezing a balloon. Candidates have to be seen and heard, so reforms that cut off specific means of attaining visibility cannot possibly do more than push essential campaign efforts in some other direction. The money squeezed down from one source just pops up from another. To the extent that reforms may leave some candidates short of cash, that just makes them more dependent on indirect or in-kind help, such as union members going door to door, a favorable press, or tax-exempt organizations producing helpful issue ads.
The main thrust of campaign reform has always been toward disempowering individuals (both contributors and candidates) and thereby elevating the relative power of certain favored groups the major Parties, media, PACs, lawyer-lobbyists, trade associations, labor unions, and "independent" groups producing issue ads. The reformers' bias against individuals, and in favor of their favored groups, has rarely been subtle. Individuals can contribute only $1,000 to a candidate, for example, but $5,000 to a PAC and $20,000 to a national political party. What possible purpose could that set of priorities serve except to make it more essential for candidates to pander to PACs and party bosses?
Aside from favoring organized interests over individuals, the other main goal of reform has always been to protect incumbents from challengers. The more difficult it can be made for maverick outsiders to mount an effective (i.e., expensive) challenge, the easier political life becomes for incumbents, billionaire candidates, and celebrities and famous families gifted with priceless name recognition. Incumbents obviously benefit from any sort of monetary limits on campaigning, because it takes millions to outweigh the incumbents' huge advantage in free publicity and PAC contributions. The fact that 392 of 399 House incumbents were reelected in 2000 shows how effective campaign reform has been, from the point of view of those who write these laws.
The McCain-Feingold crusade aims to extend the ridiculous 1971-74 regulations of campaigns to include regulating the funding of political parties. If that worked, it would tilt the balance of power toward PACs, lobbyists, the media and "independent" advocacy groups. Potential beneficiaries, such as Ralph Nader's organizations, the press, and a few politicized foundations and think tanks, have invested heavily in promoting this particular definition of reform.
On the face of it, the McCain-Feingold obsession with "soft money" looks fishy. Soft money accounts for less than 16 percent of federal campaign expenditures according to Common Cause. And campaign expenditures do not even include some of the most important ways of influencing policy, such as lobbying and issue ads. Lobbying cost $2.7 billion in 1997-98, according to the Center for Respective Politics (CRP), while Common Cause counted soft money collections of merely $193 million during those years. Lobbyists would be wise to lobby for a ban on soft money, because they would then have even more clout and more money.
Everyone in Washington knows who the most politically influential interest groups are, and most of them do not even appear on lists of top soft money donors. Fortune asks lawmakers and congressional staffers to name the most politically powerful organizations. In 1999, the top 10 were the AARP (American Association of Retired Persons), the NRA (National Rifle Association), the National Federation of Independent Business, the American Israel Public Affairs Committee, the AFL-CIO, the Association of Trial Lawyers, the Chamber of Commerce, the National Right to Life Committee, the National Education Association and the National Restaurant Association. What gives most of these groups political clout is not contributions to political parties, but old-fashioned lobbying, public policy advertising, and in some cases (such as AARP, the NRA and the AFL-CIO) the ability to influence a large number of members' votes.
This is not to say that money from political action committees (PACs) is unimportant, only that it is not "soft." One of the main goals of campaign regulation has always been to make sure all the big bucks come only through these organized interest groups rather than individual checkbooks. A few powerful groups have PACs that contribute substantial "hard money" to favorite candidates. The CRP lists the Association of Trial Lawyers as the nation's No. 1 PAC, with contributions of $2.7 million in 1997-98 85 percent of that going to Democrats. The American Federation of Municipal Employees contributed $2.6 million, 96 percent to Democrats. The National Education Association gave $2.2 million, 93 percent to Democrats. Since reformers worry that legislators could easily be corrupted by individual contributions larger than $1,000-$3,000, they apparently find it much safer (and more comfortable) to instead have millions dispensed through interest groups.
In contrast with PAC contributions, only a few of Fortune's most powerful lobbying organization are among the top "soft money" donors all of them, interestingly, on the Democratic side. The American Federation of Municipal Employees is the second-biggest soft money donor to Democrats (contributing $1.3 million), and the National Education Association and AFL-CIO are third and seventh. Individual companies are big soft money contributors to both parties, with Goldman Sachs, Disney and Gallo supporting Democrats and Phillip Morris, Amway, and MCI World Com supporting Republicans. The corporate soft money donors are not obvious beneficiaries of federal largess (most are more heavily regulated or taxed than other businesses), nor are they on anyone's list of powerful organized interests. The best the McCain-Feingold crowd can do is to point to soft money from the tobacco industry a very strange example of an industry supposedly buying favors from the government.
Insofar as soft money donations can be linked to any politically influential organizations, it would appear to be only through labor unions particularly organizations of government employees. But unions have other, far more important sources of political clout, including PACs and block voting. Closing the soft money channel would not curb union influence or even union funding (a greater share of which would then go to candidates and ads, rather than to the Democratic Party).
As you might expect, Democrats are inclined to define "reform" in ways that involve curbing contributions by fat cats and corporations, never by union PACs. For equally obvious reasons, Republicans tend to have a quite different set of reform priorities. All versions of campaign finance reform, however, invariably favor some set of organized interests over individual liberty. That is what this game is all about.

TOMORROW: Reform efforts that failed.

Alan Reynolds is director of economic research at the Hudson Institute and senior editor of the Institute's magazine, American Outlook.


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