Empirical evidence in the debate on campaign finance reform.

• Author: Lott, John R., Jr.

In the debate about campaign finance regulation, empirical evidence is often overlooked or ignored. The evidence suggests that campaign finance regulations have accomplished the opposite of what their enactors intended. Specifically, limitations have entrenched incumbent candidates, given wealthy candidates an advantage, increased many types of corruption, and led to more negative campaigns. Limits on contributions have also been unsuccessful in limiting the total amount of resources that have been spent on campaigns.

Recently, empirical evidence gained the attention of the Supreme Court in Nixon v. Shrink Missouri Government PAC.(1) Justice Breyer's concurrence in particular was interested in several empirical questions.(2) Even Justice Souter, writing for the Court, seemed open to the consideration of empirical evidence, at least in regard to corruption.(3) His ability to interpret correctly the empirical studies that he referenced is another question. Unfortunately, the facts of the Shrink Missouri case were insufficient for these issues to receive adequate attention.

Campaign finance regulation has now been tried. The fundamental question is whether it has improved the political system, or whether it has instead aggravated the perceived problems it intended to solve. The available empirical evidence indicates aggravation rather than amelioration.

First, restrictions on the size of campaign contributions have hardly affected total expenditures on campaigns. They have spawned higher levels of independent campaign expenditures that have largely offset any declines in candidates' own expenditures. Indeed, independent expenditures did not play a role in any meaningful forum prior to the rules first promulgated in 1974.

Campaign finance rules have attempted to treat symptoms--larger campaign contributions and expenditures--without addressing why contributions and expenditures have increased. The analogy to price controls is pertinent. The results of price controls imposed on gasoline in the 1970s provide a useful example. Price controls did in fact lower the official dollar prices that consumers paid for gasoline. But in effect, as long as the actual value of the gasoline was higher than its official price, people competed in other ways for the resource: consumers simply spent another valuable resource--time--by waiting in lines. If the government forced prices even lower, people spent even larger amounts of time queuing up for gasoline. In essence, time was bartered for gasoline. Consumers were willing to make the exchange because the official price of gasoline had been forced beneath its true value.

Similarly, limits on campaign contributions may succeed in reducing the amount of money given directly to candidates. But if there are benefits to additional expenditures, potential beneficiaries and victims of government actions will find other ways to support candidates who support their positions.(4)

Price controls also generate types of competition more objectionable than queuing. For example, in cities such as Santa Monica and New York, which have price controls on apartment rents, "key money" and other under-the-table payments from tenants to landlords are widespread.(5)

The same thing happens with campaign finance rules. Recently Maria Hsia was convicted of charges stemming from the 1996 campaign fund-raising activities of President Clinton and the Democratic National Committee.(6) The crime was arranging a scheme of straw donors--funneling money through many different people--as a way of...