Faulty assumptions and undemocratic consequences of campaign finance reform.

• Author: Smith, Bradley A.

Very few aspects of American politics fit the metaphor of Plato's cave

better than the realities of American campaign finance.

1. INTRODUCTION

   Over the past twenty-five years, efforts to reform the campaign finance system have been exceptionally popular with both the general public(2) and legal academics,(3) and few commentators have argued against the need for some kind of reform. Most reformers have attempted to limit alleged political corruption" and to promote a brand of political equality. Taking an instrumentalist view of the First Amendment, they have chafed at the more libertarian First Amendment approach to campaign finance taken by the Supreme Court in Buckley v. Valeo.(4)

   This Essay argues that reform scholarship has erred in its assumptions about the causes and effects of political corruption. It challenges the basic assumptions of campaign finance reform advocates, rather than the mechanics or structure of regulation. Further, this Essay argues that it is actually campaign finance regulation that is in conflict with accepted notions of equality, so much so as to be broadly characterized as undemocratic. Regulatory reform efforts thus fail to accomplish even those goals that, under the reformers' instrumentalist First Amendment theory, justify limitations on speech. Beyond asserting the failure of the reformers' program on their own terms, this Essay argues that First Amendment protection, applied unflinchingly to political activity such as campaign contributions and spending, is not a barrier to greater political equality or to the rooting out of corruption, but is a considered instrumentalist response to these problems.

   The longstanding agenda of the campaign finance reform movement has been to lower the cost of campaigning, reduce the influence of special interests in both elections and the legislative process, and open up the political system to change.(5) Reformers have sought to accomplish this primarily through campaign contribution and expenditure limits and, ultimately, through public funding of political campaigns. In 1974, the reform movement seemed to achieve its greatest victory with the passage of major amendments to the Federal Elections Campaign Act (FECA).(6) Many FECA provisions were soon echoed in state legislation around much of the nation.(7) Yet the reformist agenda remained unfulfilled. Between 1977 and 1992, congressional campaign spending increased by 347%.(8) Congressional election contributions by political action committees (PACS) increased from $20.5 million in 1976(9) to $189 million in 1994.(10) Since 1974, the number of federal PACs has increased from 608(11) to over 4500.(12) House incumbents, who in 1976 outspent challengers by a ratio of 1.5 to 1, in 1992 outspent challengers by almost 4 to 1.(13) Meanwhile, incumbent reelection rates reached record highs in the House in 1984 and 1988, before declining slightly in the 1990s.(14)

   Despite the apparent failings of the 1974 FECA amendments, critics of reform measures have generally accepted, at least on a theoretical level, that reform can accomplish its goals.(15) Rather, their objections to reform have focused either on the First Amendment,(16) or on the difficulty of controlling for "unintended consequences."(17)

   However, the problem with campaign finance reform is not merely unanticipated consequences; rather, at their core, reform efforts are based on faulty assumptions and are, in fact, irretrievably flawed.(18) Reform proposals inherently favor certain political elites, support the status quo, and discourage grassroots political activity. Even if these proposals worked as intended, they would have an undemocratic effect on American elections.

   Part II of this Essay provides a brief historical overview of campaign finance patterns. The legal literature on campaign finance reform is happily uncluttered by any serious consideration of life much before FECA's 1974 amendments. Therefore, a brief review of the historical patterns of campaign finance is necessary to place in perspective the reformers' claims of a serious modern-day "crisis" in American democracy and to provide a background against which to evaluate reformist assumptions about the role and effects of money. Part III discusses the reformers' basic assumptions and identifies their weaknesses. Part IV describes how campaign finance reform based on these faulty assumptions leads to political results that can be broadly characterized as undemocratic. Part V argues that public financing of elections suffers from the same weaknesses as does campaign finance reform in general. The Essay concludes with the suggestion that the policy difficulties that allegedly necessitate substantial campaign finance regulation are already addressed through the First Amendment, which provides for robust freedom of action and debate in the political arena. The First Amendment ought to be examined not as a libertarian constitutional barrier blocking necessary regulation, but as a considered response to the problems of political corruption and equality and, therefore, the problems posed by campaign finance.

2. A BRIEF HISTORY OF THE FINANCING AND REGULATION OF AMERICAN CAMPAIGNS

   The debate in legal journals over campaign finance regulation is carried on with surprisingly little awareness of the history of financing elections.(19) History, however, can be useful in putting supposedly modern issues in perspective. It sometimes seems that supporters of campaign finance would be shocked to discover that our nation survived for over one hundred years with no campaign finance laws.(20) Reformers often operate on the assumption that American democracy faces a unique modern crisis caused by the influence of money in politics.(21) In fact, reformist concerns are not new. The current campaign finance "crisis" is in fact nothing of the sort, but instead the result of public misperceptions, fueled by the rhetorical fervor of campaign finance reform advocates.

   In early U.S. elections, most campaign expenses were paid directly by the candidates. Such expenses were relatively minimal, going toward an occasional campaign pamphlet and, especially in the South, food and drink for voters at public gatherings and rallies.(22) Candidates did not "run" for election, but "stood" for office, relying on their reputations and personal recommendations to carry them to victory.(23) Though free from the "corrupting" effects of money, elections in this early period were generally contested by candidates representing aristocratic factions standing for election before a relatively small, homogeneous electorate of propertied white men.

   This genteel system of upper-class politics began to change in 1828, when Martin Van Buren organized the first popular mass campaigns around Andrew Jackson and the Democratic party. It was Van Buren's democratization of the process that created the need for significant campaign spending. Money became necessary not only for the traditional expenditures on food and liquor, but also for newspaper advertisements, widespread pamphleteering, rallies, and logistical support.(24) Even these new, mass parties, however, obtained financing from a small number of sources. Funding for the new style of public campaigning initially came from those who benefited most directly from gaining or retaining power-government employees. Absent a professional civil service, most government employees depended for their jobs on their party's staying in office. It became common practice to assess these employees a percentage of their salaries to support their party's campaigns.(25) Similarly, would-be officeholders allied with the opposition served as a major source of challengers' funds.(26) In 1878, roughly ninety percent of the money raised by the Republican congressional committee came from assessments on federal officeholders.(27) However, after the passage of the Pendleton Act in 1883, which created a federal civil service, and the adoption of similar laws in the states, campaign money from assessments on officeholders gradually dried Up.(28) Only then did politicians look for new sources of funds. Two dominant groups of donors emerged: wealthy individuals and corporations. In the latter part of the nineteenth century, government regulation and corporate growth formed a symbiotic relationship. The acceleration of Northern industrialization that accompanied and followed the Civil War created the new phenomenon of the large, national corporation. Wartime government contracts and increasingly common land and cash grants to railroad companies created the foundations for many of these enterprises.(29) Corporations also benefited as Republican Congresses sheltered many industries behind high tariff walls.(30) To tame the corporate power it had helped to create, Congress expanded the sphere of federal regulation. Thus, for example, it created the Interstate Commerce Commission in 1881 and passed the Sherman Antitrust Act in 1890. Simultaneously, state regulation of railroad rates, business competition, and working conditions became common.(31)

   With the growth of state and federal government powers, including the increased regulation and subsidization of industry, corporate America recognized the need for increased political participation.(32) The stated goal was not to buy legislative votes, but to elect candidates supportive of corporate interests.(33) In 1888, roughly 40% of Republican national campaign funds came from Pennsylvania manufacturing and business interests.(34) State parties were probably even more reliant on corporate funding. By 1904, corporate contributions constituted over 73% of Theodore Roosevelt's presidential campaign funds. The Democratic party relied less on corporate contributions but was also heavily dependent on financing from the personal wealth of a handful of prominent businessmen. Industrialist Thomas Fortune Ryan ($450,000) and banker Augustus Belmont ($250,000)...