Friday, July 13, 2012

How to Save American Democracy. Really. No Kidding.

The perennial issue of money in politics is back with a vengeance this year. We have seen Republican primaries where money from corporations and the very rich has had a decisive impact. This trend is particularly worrisome to Democrats, of course, who can expect to get the short end of the stick from large contributors, and who have begun looking around for solutions.

The approach that's now popular among Democrats is a Constitutional amendment saying that corporations do not have a Constitutional right to free speech, thereby making it possible to restrict their political spending. This approach has been advocated by Nancy Pelosi, several Democratic senators, and others.

But there are a couple of obvious difficulties with that solution. First of all, it's not serious; nowadays it’s wildly implausible that anything controversial could get the votes of two-thirds of both houses of Congress and three-quarters of state legislatures. Second, even if that happened, it would leave untouched the ability of a small number of billionaires and hundred-millionaires to drown out the opposition.

In fact, the whole approach is wrongheaded. The most effective cure for the problem of money in politics is... more money in politics. The real issue is not that billionaires and corporations are giving too much money; the real issue is that they are giving too much relative to everyone else. Instead of relying on support from the voters, politicians have to court big donors, because that’s where the money is.

Yet economy-wide the amounts of money involved are not very large. According to the Center for Responsive Politics, expenditures on all Federal elections totaled about $9 billion in 2008 and 2010 combined. Meanwhile, U.S. GDP over the four years from 2007 to 2010 was more than $56 trillion.

So how do we tap the power of small contributors? Here’s a simple way: Every taxpayer gets up to a $100 tax credit (not deduction) for political contributions. This means that contributions up to $100 have no net cost to the taxpayer. The credit could be refundable so that those with no tax liability could still get it.

In 2010, there were 143 million tax returns filed in the U.S. Suppose that, after some period of adjustment, 50% of filers take advantage of the opportunity to make political contributions of $100 at no net cost to themselves.

That comes out to $7 billion a year (somewhat more if we give two credits to joint filers), or $28 billion over a four-year election cycle. Even allowing for state and local elections, it is clear that the hundred-dollar contributions would dwarf everything else.

Over the years, we have devoted a huge amount of energy to trying (in vain) to keep money out of politics. It's time to stop. If we get enough small contributions, we won't need to worry about keeping money from billionaires out. It just won't be very important anymore.

It becomes plausible, in fact, that a Senator or Congressman could get reelected with no special-interest money, and without devoting huge amounts of time to fundraising. Instead, legislators would have to spend more time on appeals to constituents.

Voters’ relation to the political process would be different, too. Political contributions today are the province of a small minority of the electorate, and voters justifiably feel that their own voices are less important than those of big donors. This would change, not so much by raising the importance of individual voters (that’s always going to be difficult, given the large number of individuals) as by lowering the importance of big donors.

And politically this plan seems far more achievable than a Constitutional amendment. It would only require a simple majority (or three-fifths in our modern Senate). While Republicans are likely to be unenthusiastic, it will be hard for them to come up with an ideologically consistent and politically compelling argument against tax credits.

As to how we pay for this, it hardly matters. We could tax an additional 1% of the income of the richest 0.1%. Or we could just say that the national debt will go up by an additional 0.05% each year. I don't think future generations will mind.


  1. Three things.

    I agree that amending the Constitution to deny personhood to corporations is a nonstarter (as a matter of law, I think it would be damned silly, see Dartmouth College v. Woodward). The problem is the finding in Buckley v. Valeo that money is speech. Congress could correct that misunderstanding by resolution (at least that's what SCOTUS said in Buckley). It has chosen not to do so, in large part because money doesn't favor one party over another, but it consistently advantages incumbents.

    We already have a mechanism for public campaign financing. However, candidates can refuse federal funding and the constraints imposed thereby. If I remember correctly, it was Obama in the last presidential election who abjured federal funding, not McCain. Besides many states, my own included, already practice what you preach (I take my $100 tax credit every year).

    There are three ways to think about corporate political contributions: bribery (or, more favorably, coproduction), extortion, or the consumption preference on the part of corporate elites. Most of the evidence (i.e., incumbents get most of the money) supports notions one and two. If you look at campaign finance issues in partisan terms, you are likely to get it wrong.

    1. I'm not sure anything is non-partisan anymore, even protecting incumbency. You're right, of course, that this proposal somewhat reduces the advantage to the "party of the incumbents." But I think Democrats, at least, are scared enough that they may calculate that they are, net, better off. And if they put forward a proposal, I think it's very hard for Republicans to oppose it without looking like the Fat Cat Party.

      Yes, Obama broke the taboo against rejecting public financing. But he had a lot more small contributions than McCain did. Limits on spending by campaigns seem quaint now, when there's so much "independent" spending.

      I didn't know about Oregon. How many people use the tax credit? What are the limits on it?

      I don't claim any particular originality for this proposal. It's not too different from Lawrence Lessig's proposal for vouchers. I think the big point is to worry less about keeping big contributors out and more about bringing small contributors in.