Extract
Voodoo economics: a look abroad for a supply-side solution to America's campaign-finance riddle.
ABSTRACT
The title of this Note--"voodoo economics"--is, at its core, an analogy: U.S. campaign-finance regulation operates like a price ceiling in the political money marketplace. Political campaigns are financed through money-for-access transactions and campaign-finance regulation caps the level of exchange. Like any other price ceiling, regulation is both effective and flawed. It suppresses the "price" of political money but inherently falls victim to some market players' avoidance activities. This price-ceiling analogy, among other things, makes apparent that many proposals forwarded by pro-regulation and deregulation advocates cannot solve the United States' century-old campaign-finance riddle. Instead, attention should turn to shaping market forces through expanding the political money supply. Political donation incentive programs in Germany and Canada provide attractive supply-side models for reform in the United States. TABLE OF CONTENTS I. INTRODUCTION II. CAMPAIGN FINANCE THROUGH AN ECONOMIC LENS A. Economic Theory and Financial Support for Campaigns 1. Supply, Demand, and Market Equilibrium in Campaign-Finance Markets 2. Is Campaign-Finance Regulation a Restriction on Supply or a Price Ceiling? a. Past View: Campaign-Finance Regulation as a Supply-Side Restriction b. Proposed View: Campaign-Finance Regulation as a Price Ceiling i. Rent-Control Price Ceiling (1) Circumvention (2) Substitution ii. Campaign-Finance Price Ceiling (1) Circumvention in the Political Context (2) Substitution in the Political Context c. Viewing Campaign-Finance Regulation as a Price Ceiling Rather than a Supply-Side Restriction i. Describing Limits' and Disclosure Requirements' Market Roles (1) Placing Disclosure Requirements in the Market (2) Allowing for Limits' and Disclosure Requirements' Dual-Sided Form ii. Reflecting the Regulatory Scheme's Purpose iii. Capturing the Effects of Regulation on the Campaign-Finance Markets (1) Depicting Campaign-Finance Regulation's Prospects for Success (2) Explaining Avoidance Activities B. Historical Examples of Price Ceilings in Campaign-Finance Regulation 1. The Federal Election Campaign Act a. Pre-FECA Regulation and Circumvention i. The Pre-FECA Regulatory Regime ii. Circumvention b. Reinvigorating and Creating Price Ceilings with FECA c. Post-FECA Circumvention and Substitution i. Circumvention ii. Substitution 2. The Bipartisan Campaign Reform Act a. Reinforcing the Donation and Outlay Price Ceilings with BCRA b. Circumvention and Substitution after BCRA i. Circumvention ii. Substitution III. THEORETICAL SOLUTIONS: VIGOROUS ENFORCEMENT AND SUPPLY-SIDE EXPANSION A. Laws with a Negative" Character B. Theoretical Solutions 1. Reducing Demand 2. Expand Supply IV. BUILDING ON THEORY: CONTRIBUTION INCENTIVE PROGRAMS IN FOREIGN NATIONS A. Germany's Tax Deduction 1. Tax Deduction Structure 2. Evaluating Germany's Tax Deduction B. Canada's Tax Credit 1. Tax Credit Structure 2. Evaluating Canada's Tax Credit a. Expanding Supply b. Strengths and Weaknesses of the Canadian Tax Credit V. SOLUTION: EXPANDING THE SUPPLY OF POLITICAL MONEY THROUGH A CANDIDATE-DONATION TAX CREDIT PROGRAM VI. CONCLUSION I. INTRODUCTION Few Americans give money to candidates, parties, and political action committees (PACs). (1) Many worry that this small class of campaign contributors distorts public policy by exercising undue influence over government officials' actions. (2) Surging campaign costs guarantee that their influence will only increase. (3) Regulation and deregulation advocates pitch their respective approaches as the solution to this perceived campaign-finance problem. (4) One thing upon which advocates and opponents of campaign-finance regulation can agree is that political campaign contributors have found creative ways to resist efforts at reform. (5) The battle to regulate political contributions in the United States that began with the 1907 Tillman Act still rages today. (6) Over the last century, Congress has repeatedly enacted limits, prohibitions, and public disclosure requirements to stem the flow of money and access between federal candidates and powerful interests such as corporations, (7) labor unions, (8) and wealthy individuals. (9) The U.S. Supreme Court upheld Congress's latest such attempt, the Bipartisan Campaign Reform Act, (10) but ominously predicted that "[m]oney, like water, will always find an outlet." (11) The Supreme Court summarized a major argument against campaign-finance regulation that brings into question the rationale behind past and future reform. If money is "hydraulic" (12) in the sense that regulation merely causes it to seep into unregulated areas further from the public's reach, then campaign-finance laws may harm more than help the quest for greater democratization of the U.S. political process. (13) This Note examines political money's hydraulic qualities and evaluates campaign-finance regulation's utility--rather than its constitutionality--in l...See the full content of this document
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