Maximizing participation through campaign finance regulation: a cap and trade mechanism for political money.

• Author: Rinner, William J.

NOTE CONTENTS INTRODUCTION I. CAMPAIGN FINANCE DOCTRINE AND THE CONCEPTUAL DIVIDE A. Buckley and Its Progeny: Regulating Campaign Finance To Reduce Corruption B. Two Views of Regulation and the First Amendment II. A MODEL OF PARTICIPATION A. Campaign Finance and Democratic Participation B. Maximizing Modern Democratic Participation 1. Modern Participation Versus Civic Republicanism 2. Maximizing Participation III. ANALYZING CAMPAIGN FINANCE REGULATIONS UNDER THE PARTICIPATORY MODEL A. Restricting Participation Under the Federal Election Campaign Act B. Regulation After Buckley's Demise 1. Invalidating Contribution Limits 2. Upholding Expenditure Limits (and Reducing Contribution Limits) C. Public Funding of Voters IV. CAMPAIGN FINANCE CAP AND TRADE A. Cap and Trade in Environmental Economics B. Implementing Cap and Trade for Political Contributions 1. Mechanics 2. Benefits C. An Alternative: Regulation Through Taxation D. Problems with Campaign Finance Cap and Trade 1. Cap and Trade and One Person, One Vote 2. Perpetuating Inequality 3. Market Manipulation CONCLUSION INTRODUCTION

The 2008 election cycle challenged the received wisdom of the campaign finance reform movement that political money is the "root of all evil" in democratic politics. (1) Record amounts of money flowed into campaign war chests, but the sheer volume of political money did not deter even small donations. (2) Citizens with little previous connection to democratic politics offered small money donations in record amounts, playing their part in the historic moment. (3) Political money, rather than hindering or discouraging participation in the democratic process, instead allowed citizens to express their support and association in small but meaningful quantities. The election and the Supreme Court's landmark decision Citizens United v. FEC (4) suggest that both the existing framework of campaign finance regulation, and reform proposals that simply seek to limit contributions, warrant a fresh and pragmatic reappraisal.

The "hydraulic" (5) propensity of political money to flow around restrictive regulations toward less-accountable and transparent third parties has frequently stymied reform models aimed at advancing equality in the political process. This Note thus offers a new perspective to the dialogue on the scope and goals of campaign finance reform. It argues that reform efforts should seek to maximize political participation. This goal entails two prongs--broadening the base of citizens who participate in the political process, and enhancing their ability to effectively participate and express their support. Central to this goal is the notion that contributions form a legitimate method of political participation, on par with direct activities such as volunteering. Reform efforts, instead of seeking to quash money in politics, should leverage this method of participation by recognizing that "[t]he First Amendment protects more than just the individual on a soapbox and the lonely pamphleteer." (6)

Based on the recognition that contributions can play a positive social role, this Note follows an alternative conception of campaign money as creating pollution. (7) Like polluters, campaign contributors produce negative externalities, in the form of harms to the system of democratic politics through increased corruption and inequality that are not reflected in the individual cost of a contribution. (8) The goal of regulation, then, is to force the externality-creating party to internalize the cost of the harm caused to his or her neighbors, or to society. (9)

I apply this Note's participatory model to evaluate both existing and proposed reforms in order to consider the optimal method of maximizing participation while mitigating the externalities of political money. Contribution limits pose a substantial hindrance to effective participation under this framework, because they force individuals to choose between two suboptimal methods of participating once they reach prescribed limits. Other reform proposals, arguably superior to the status quo, fall short of either broadening or enhancing participation.

This Note presents a new approach to campaign regulation: cap and trade for campaign contributions. By allowing a market for contributions above existing limits, cap and trade could capture individual preferences while still increasing the price of contributions beyond these limits. The decentralized market mechanism would produce a price premium, which in turn would curb the externalities stemming from political donations. The ability to buy and sell permits for political donations would provide an incentive to new contributors tied directly to the market for political money. This device offers the ability to broaden and enhance participation, while still controlling for the negative consequences associated with high levels of political money in democratic politics.

Part I of this Note provides an overview of campaign finance doctrine and major scholarship. Part II introduces a model of participation and distinguishes it from existing proposals that seek to broaden participation through campaign finance reform. Part III analyzes and critiques several reforms based on this model, and Part IV introduces and defends the cap and trade model for regulating campaign finance.

1. CAMPAIGN FINANCE DOCTRINE AND THE CONCEPTUAL DIVIDE

   The lack of guidance the Constitution and the Founding Era provide the field of election law is accentuated in the domain of campaign finance doctrine. Absent a guiding principle rooted in the text or structure of the Constitution, the divide between proponents and opponents of campaign regulation could not be wider. This conceptual divide carries on today largely as a result of the Supreme Court's controversial 1976 decision in Buckley v. Valeo, (10) which set out a framework for evaluating the constitutionality of restrictions on campaign contributions and expenditures. This Part provides a brief overview of the Buckley decision and its evolution into present-day Roberts Court jurisprudence, highlighting the analytical tension between two competing visions of the constitutionality of regulations on the democratic process.

   1. Buckley and Its Progeny: Regulating Campaign Finance To Reduce Corruption

      Buckley v. Valeo, for all the judicial and academic criticism it has attracted, (11) remains the starting point for understanding modern campaign finance regulation and jurisprudence. As this Section describes, the Court in Buckley drew a distinction between restrictions on campaign contributions and expenditures, evaluating each through the First Amendment lens of barriers to free speech and association--a framework that still holds traction in today's Supreme Court.

      When decided in 1976, Buckley marked a dramatic rebuke to the burgeoning campaign finance movement, which had been inspired in part by the rising influence of money in politics and the perceived need to curb political corruption in the wake of President Nixon's resignation. (12) The 1974 amendments to the Federal Election Campaign Act of 1971 (FECA) established the Federal Election Commission (FEC) and granted the agency powers to enforce sweeping new regulations, which limited political expenditures and contributions and provided optional public election financing. (13)

      In Buckley, the Supreme Court overturned the Act in part, finding expenditure limits unconstitutional while allowing contribution limits and public funding provisions. (14) The Court found that the $1000 limit on individual contributions was directly aligned with "the Act's primary purpose--to limit the actuality and appearance of corruption resulting from large individual financial contributions," (15) which could amount to a "political quid pro quo." (16) First Amendment arguments that such contribution limits burdened individual rights to speech and association were unavailing, given the government's interest in curbing the appearance or reality of corruption.

      The Court was less generous, however, to expenditure limits, finding that "the First Amendment requires the invalidation of the Act's independent expenditure ceiling, its limitation on a candidate's expenditures from his own personal funds, and its ceilings on overall campaign expenditures." (17) The expenditure limits, too far removed from the anticorruption rationale, placed restrictions on "protected political expression ... that the First Amendment cannot tolerate," (18) Importantly, the Court rejected arguments that contribution and expenditure limits could be justified on the basis that they equalize relative speaking power or balance the content of political speech--values which the Court claimed are "wholly foreign to the First Amendment." (19) This contribution/expenditure divide has persisted, even as Buckley has been extended to analogous state regulations (20) and restrictions on "soft money" contributions made to political parties rather than candidates. (21)

      Despite weakening support for Buckley on the Court, and the calls of several Justices for the decision to be overturned altogether, Buckley, and its anticorruption rationale, remains the dominant regulatory paradigm. It is notable, however, that this justification only scratches the surface of the array of government interests that the major campaign finance statutes seek to advance. Moreover, while professing adherence to Buckley, the Court often seeks to advance alternative values and norms in this same manner. The following sections explore normative visions for regulation that extend beyond the anticorruption rationale so often invoked in campaign finance decisions.

   2. Two Views of Regulation and the First Amendment

      One of the dominant criticisms of post-Buckley campaign finance doctrine centers on its indifference to equality norms advanced through regulating campaign contributions and expenditures. Equality-oriented reformers have advanced powerful...