Freeman

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Will Campaign Finance Reform Enhance the Power of the People?

A Competitive Political Marketplace Is a Voter's Best Friend

SEPTEMBER 01, 2000 by RUSSELL ROBERTS

A common cry among the reform set these days is that there is too much money in politics. Those who decry the role of money in politics imagine a world where the 535 members of Congress along with the president sit around in togas discussing the best way to serve the people. Rather than being influenced by money or special interests, these modern-day Platos and Aristotles would be motivated by the public good.

To achieve that utopia, some would ban soft money, the money that can be donated in unlimited amounts to the political parties. This may violate the First Amendment. But ignoring constitutional issues, can reform enhance or reduce the power of the people?

Getting the money out of politics is a little like trying to take the grinder out of the sausage factory. The federal government currently spends about $1.7 trillion annually. With that much money up for grabs, it’s awfully hard to stop people from trying to influence how it’s spent. It’s only a question of how that influence will manifest itself. Will it be out in the open or hidden?

If you want to see the effect of a ban on soft money, consider the following fable. Once upon a time, there were only two manufacturers of cars, Ford and GM, but cars could only be marketed and sold in a very unusual way. Each manufacturer was allowed to nominate one car that it would manufacture and sell for the next four years. While there were two manufacturers, only one was chosen to actually produce and sell the car. A vote of the people determined the producer. To let the voters and consumers make an informed choice, the car manufacturers took the cars on tour. Unfortunately, voters couldn’t drive the cars, so the people turned to various other ways for information about the candidates. I mean, cars. For example, they watched the advertising campaigns of the manufacturers. In those campaigns, GM knocked Ford’s product and vice versa, but that was often informative. People also relied on information from the media—the writers, reporters, and talk show hosts who covered the car industry and had specialized knowledge of the products.

Choosing the Familiar

In this weird car market the two manufacturers picked their cars carefully. They chose cars familiar to the voters because the voters already knew something about their quality. Sometimes, a manufacturer would introduce a radical new concept, a minivan or a convertible. For these new models to have a chance, a lot of money would have to be spent advertising the product to get voters acquainted with it.

Even rarer than a new product from GM and Ford was a new party—oops, manufacturer. On rare occasions, one would come along and try to get the voters to take a chance on a new offering. They were hesitant to take a chance on an untested brand. But if the product was good enough and sufficient money was spent to inform the voters, a new manufacturer could succeed from time to time.

One day, people decided that the companies were spending too much money advertising their cars. Why not limit the total amount they could spend? Less money would be wasted on advertising, and there would be less influence by special interests, the families always lobbying for minivans and the young folks pushing for convertibles. A law was passed to radically limit the amount of advertising. To make up for the lost advertising, debates were held, where representatives from GM and Ford stood in front of their nominated cars and argued over their relative merits.

With limits on advertising, brand names became even more important. A new manufacturer found it almost impossible to introduce a new model. Without the ability to use a substantial advertising budget to overcome the brand-name advantage of incumbent cars, even high-quality products were unable to get a foothold in the market. They were rarely invited to the debates. After all, explained the organizers, those no-name cars don’t really have a chance. So the two major manufacturers became even more powerful.

Incumbent cars became difficult to defeat. Ford and GM usually nominated the same cars over and over again because they were familiar to voters. Innovation in the industry came to a standstill. Why would Ford and GM improve their cars? Such improvements came at a cost. To let voters know about the quality of the new product required advertising that was no longer possible.

Defenders of the limits on advertising found the greatest solace in what appeared to be the reduction in the power of special interests. But special interests found new ways to influence the process. Because these methods were now behind the scenes, they were harder to detect. Special interests befriended people at Ford and GM to influence which cars were put forward. They took reporters and TV anchormen to dinner to tell them the virtues of their favorite cars. They placed people sympathetic to their outlook on the car company payroll and on newspaper staffs. They befriended talk show hosts. In this way they insured sympathetic treatment of their views without looking heavy-handed.

But few noticed the corruption. And while some complained that the cars seemed to get duller and duller every year, few attributed this to the limits on advertising. Instead people looked for new reforms and regulations to reduce the role of money even further. They didn’t realize that each step in that direction made the market less competitive.

Most reforms of the political marketplace are taking us in the same direction. While they appear to enhance the power of the people relative to the special interests, they do so by reducing competition, the consumer’s and voter’s best friend.

With less competition, the biggest beneficiaries of a ban on soft money will be incumbents. They will find it easier to use their already powerful brand-name recognition to overcome challengers who can no longer expect party money to help them establish their name and ideas.

Ironically, the best way to reduce the power of special interests is to allow hard money to flow without limitations—remove the limits on how much individuals and organizations can give directly to candidates. This would expand the field of potential candidates.

The ultimate arbiter is always the ballot box. Unlimited hard money allows voters to have more choices. Promptly post all contributions on the Internet. Candidates who are in the pocket of special interests can be reviled by the media and then by the voters. When the government spends almost $2 trillion and writes myriad regulations, keeping the political marketplace competitive remains our best hope for enhancing the power of the people.


Filed Under : Special Interests

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September 2000

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