Free Money - loopholes in campaign finance laws

Reason, August, 2000 by James V. DeLong

The task is complicated by the reality that campaign laws present a stark fox-guarding-the-henhouse scenario: Except for judicial enforcement of the Constitution, incumbents have carte blanche to write the rules under which people will try to unseat them. Any legislators who cannot protect themselves forever are too dumb to deserve to stay in office. In 1998, political action committees gave $220 million to congressional races; 78 percent went to incumbents, 10 percent to challengers, and 12 percent to candidates in open-seat races.

The courts are not big on contemporary political theory, and they rarely make use of public choice models that assume politicians, like actors in the private sector, relentlessly seek to increase their market share. The models of administrative law the courts do use are all based on treacly New Deal platitudes. Nonetheless, many judges, especially in the U.S. circuit courts, are aware of the campaign laws' potential as incumbent-protection devices, and this awareness infuses their decisions, however subtly. In Shrink Missouri Government v. Adams (1998), for example, the U.S. Court of Appeals for the 8th Circuit expressed skepticism about the testimony of various state legislators concerning the need to battle "corruption," noting that they had failed to cite any actual instances.

In Buckley, the Supreme Court struck down provisions of the 1974 law imposing limits on expenditures in House and Senate races. It also threw out, as an unconstitutional abridgement of free speech, limits on how much a wealthy person can spend on his own campaign. But limits on how much a person can give to someone else's campaign were upheld, and so were Emits on how much an individual can give to all campaigns in a single year. Money, in the Court's view, somehow loses its character as speech when it leaves the donor's hands. Stewart Mott, the heir to a fortune in General Motors stock who largely funded Eugene McCarthy's 1968 insurgency, would no longer be able to do such a thing, though he could run himself and spend as much as he wanted. Hence the candidacy of Steve Forbes, who had to carry the economic reform banner himself because he was not allowed to finance a campaign by anyone else.

The contribution limits--$1,000 to individual campaigns and $5,000 to PACs per year, up to a total of $25,000 per year--have not been raised since 1974, even though inflation has reduced their real value by two-thirds. The next time some incumbent moans about how much time he spends raising money, think of how simple it would be to increase the limits, and suppress your sympathy. The limits may make an incumbent's life unpleasant, but they make a challenger's impossible, and that is why they remain.

Pre-1974 bans on campaign contributions by corporations and unions remained in place, except that the 1974 law allows these organizations to pay the costs of administering political action committees. PACs can collect contributions from individuals and dole them out to candidates, subject to the limit on the amount contributed to any single campaign.