Topic: Political Philosophy

The Campaign Finance Institute Study II

Two days ago, Brad Smith, Robert Bauer and I criticized a recent study by the Campaign Finance Institute.

The head of CFI, Michael Malbin, has now responded to our criticism. Bauer and Smith have in turn continued the debate in posts well worth your time.

Before turning to Malbin’s reply, I might note that he did not respond to a couple of my earlier points. I argued that the sample used in the CFI working paper was biased and a poor foundation for policymaking. I also suggested that the bias in the CFI sample was interesting: it concerned organizations–on both sides of the partisan and ideological divide–that were heavily involved in national politics and elections. The CFI sample is almost certainly not representive of the entire population of nonfprofits, 527s and interest groups. It might, however, be a workable sample of groups of primary interest to members of Congress, i.e. groups that bear on a member’s primary interest in being re-elected. In that respect, the CFI study might be a poor guide to policymaking but persuasive to policymakers. That should be troubling to the rest of us.

Malbin also does not mention a political point I made in my post. Why should the Democrats give up 527s which they used to spend substantial sums in 2004 in exchange for Republicans forsaking 501c groups that appear to have laid out only a small portion of the Democratic 527 expenditures? If I were a Democrat, I would read that “compromise option” as a ”bad deal.”

Malbin states that we have misunderstood the CFI study. It does not advocate a policy, it merely points out “uncomfortable facts” to foster a needed debate. Of course, you could say that Michael Malbin might know best what the study sought to do (he heads the organization that sponsored it), and we should leave it at that. I’m not interested in questioning Malbin’s integrity so the reader is welcome to that conclusion.

But Mike doesn’t have a monopoly on the correct interpretation of this text. To see why I (reasonably) believed the study was a policy proposal, we need to head on over to the IRS website (of course!).

The Campaign Finance Institute is a nonprofit organized under section 501c(3) of the Internal Revenue Code. That means CFI can educate the public but not propose legislation. Here is the relevant advice from your friendly taxman:

In general, no organization may qualify for section 501(c)(3) status if a substantial part of its activities is attempting to influence legislation (commonly known as lobbying)…Legislation includes action by Congress, any state legislature, any local council, or similar governing body, with respect to acts, bills, resolutions, or similar items…An organization will be regarded as attempting to influence legislation if it contacts, or urges the public to contact, members or employees of a legislative body for the purpose of proposing, supporting, or opposing legislation, or if the organization advocates the adoption or rejection of legislation. Organizations may, however, involve themselves in issues of public policy without the activity being considered as lobbying. For example, organizations may conduct educational meetings, prepare and distribute educational materials, or otherwise consider public policy issues in an educational manner without jeopardizing their tax-exempt status.

So for legal purposes I went to an education meeting at the National Press Club and received educational materials prepared by CFI.

However, the CFI authors urge us to think about campaign finance matters in light of their context (that is, the political facts) rather than “legal pigeonholes.” (CFI study, p. 33) In my original post I set out the political context of the CFI study: legislation on 527s had stalled in Congress because of partisan opposition by Democrats. I could have added to the earlier post: Louise Slaughter, the ranking member on the House Rules committee, suggested in early April that Congress should broaden the 527 debate to include 501c groups which she saw as potential loopholes to current and planned campaign finance regulation. A study then appears that argues both parties use non-regulated entities to fight elections, that such spending probably corrupts representation, and that adumbrates “possible compromise” options for policymakers. (CFI study, p. 33) Given that context and this text, what is a reader to make of the CFI study? It is educational material (it fits the legal pigeonhole) that in context looks a lot like an announcement of the next item on “the reform community’s” agenda for restricting political speech.

There is also a larger legal context here that should be kept in mind. The main justification for regulating campaign finance remains preventing corruption or the appearance of corruption. However, legislative actions to prevent circumvention of laws that address corruption may also justify constitutionally restrictions on campaign finance. The CFI study argues that powerful interest groups use 527s and 501c groups along with regulated spending in elections. Its authors then ask whether those alternatives, taken as a whole, corrupt legislators on the theory mentioned in my earlier post: policymakers do not distinguish among legal categories, which is to say that disclosed spending acts like a contribution. Given that, the use of 527s and 501c groups are both corrupting and a circumvention of campaign finance law. The CFI study thus justifies extending campaign finance regulation to entities that spend money on politics but do not contribute to candidates. That is why I wrote earlier that the CFI study sought to end the distinction between politics and elections in current law and thus constituted a radical break with the past. I would be glad to know that CFI does not support ending that distinction or making that radical break. A fair reading of this study, however, suggests otherwise.


The Future of Campaign Finance Restrictions?

Last week the Campaign Finance Institute published a working paper on nonprofits and campaign finance. CFI styles itself as the moderate to conservative wing of the “reform community.” This paper, however, makes a radical proposal.

First, here’s some political context for the paper:

McCain-Feingold largely outlawed soft money contributions to the political parties. In the 2004 election, erstwhile Democratic soft money contributors used 527s as a vehicle for their political efforts. The Republican party by and large did not use 527s. So after the election, the GOP has naturally tried to eliminate the 527 vehicle. Democrats (and a few Republicans) have resisted that effort, and Congress seems unlikely to do anything about 527s this year. The effort to restrict political activities (i.e. “campaign finance reform”) has gotten bogged down for the moment.

The CFI paper tries to broaden the thinking of Congress and thereby the power of the government over free speech. It studies how 12 interest groups used political action committees, 527s, and nonprofit groups in the 2000, 2002, and 2004 elections. (The federal tax code puts nonprofits in the 501c section; they are allowed to engage in education efforts that involve political advocacy).

The sample relied on by the study should give pause. The study seeks to influence public policy, and campaign finance policy covers everyone involved in elections. Ideally, a study of interest groups in elections should be representative of all groups involved in elections. The CFI study does not try to show that their sample is broadly representative. That’s not surprising. It is highly unlikely that the CFI sample can be generalized. The interest groups chosen for the study will be familiar to students of American elections and policymaking; they are well-funded and highly organized. They are outliers and not a good foundation for making public policy that covers everyone.

The sample does have some interesting characteristics. It is evenly divided along partisan and ideological lines. Since the study looks at well-funded and highly organized groups, it thus examines potent threats to members of Congress on both sides of the aisle.

However, if Congress restricts only 527 spending, Democrats would be harmed more than Republicans. The CFI authors say that Republicans use the 501c groups more than the Democrats. The CFI study thus intimates that new restrictions on the political activities of 527s and nonprofits could be a good bipartisan compromise: Republicans would be rid of the 527 threat while Democrats would gain relief from the GOP nonprofits.

Yet upon further examination, the deal looks like more of a hit to the Democrats. The CFI data show that Democratic 527s spent many times what the GOP nonprofits expended in 2004. (The CFI authors contend public data underestimates spending by nonprofits because of inaccurate reporting to the IRS). So the CFI authors are essentially asking the Democrats to sign on to a bad deal.

Politics aside, the CFI study poses larger and more disturbing questions, too.
Preventing corruption has long been the primary legal justification for regulating campaign spending. To prevent corruption courts have allowed Congress to regulate campaign contributions and to treat spending at the behest of candidates as a contribution. The interest groups studied by CFI abide by these laws by using their political action committees to contribute to campaigns.

The focus on corruption also erected a wall between elections and politics. If you give money to a candidate, the thinking goes, you might bribe him and hence, your contribution should be regulated. If you didn’t give money to a candidate but wanted to spend whatever sums advancing your ideas independent of his campaign, that fell under free speech and enjoyed constitutional protection.

527s and nonprofits, on the other hand, spend money on elections and politics but cannot give to candidates. As they CFI study shows, much of this spending involves groups communicating with their members or trying to persuade the public in general. The 527 and nonprofit spending thus falls under free speech.

The CFI authors suggest otherwise. They argue that 527 and nonprofit spending could corrupt representatives. Members of Congress, they say, do not distinguish spending by legal category; PAC contributions, 527 efforts, and nonprofit work are all understood to be payments to a candidate, presumably prompting legislative favors in response.

If such spending risks “corruption,” it may legally be brought under the restrictions of campaign finance law, primarily mandatory disclosure of sources and limits on donations. Those strictures would eliminate all significant 527 spending and many small nonprofits.

The CFI authors provide no evidence that representatives see spending by 527s and nonprofits as quid pro quo contributions. They are also strikingly indifferent to the consequences of their proposal for the rights of their fellow citizens.

For CFI, the distinction between elections and politics and between contributions and free speech has outlived its usefulness. Not surprisingly, the CFI authors do not mention an unmistakable implication of their proposal: in the future, all spending on political advocacy sooner or later will be subject to campaign finance laws. The CFI authors do not mention how this extension of state power comports with the freedom to engage in politics promised by the U.S. Constitution.

Perhaps that’s because it doesn’t.

The Unseen Sighted in Western Maryland

For supporters of limited government, Bastiat’s What Is Seen and What Is Not Seen summarizes our fundamental lament:

When a government official spends on his own behalf one hundred sous more, this implies that a taxpayer spends on his own behalf one hundred sous the less. But the spending of the government official is seen, because it is done; while that of the taxpayer is not seen, because—alas!—he is prevented from doing it.

This difference leads to bigger government because the electorate is lulled into believing that big government offers great benefits to society while limited government and private decisionmaking offer little. If it were not for government, the thinking goes, people could not respond to emergencies, or the poor and unfortunate would have no protection and assistance, or there would be no economic development and community life.

But once in awhile, we can see what usually goes unseen. Credit my hometown of Washington County, Maryland, for a recent example.

Rising tax receipts resulted in a budget surplus for FY 2006, and the county’s commissioners decided to refund some of that surplus to taxpayers. The local newspaper asked readers to write in, describing what they did with the money. Today’s edition included those letters. Among the uses:

  • Pay for home repairs required after recent flooding.
  • Contribute to the medical fund for an area child with a heart defect.
  • Purchase a bicycle, movie tickets, a dinner and show, and the various goods and services of a local festival.

How about that? People will make sensible and altruistic decisions with their money, without the orchestrations of government

Conscientious Objectors

Can pharmacists have a conscience? Activists are demanding that Congress and state legislatures pass laws forcing pharmacists and other health workers to act against their own conscience in such matters as abortion, morning-after pills, and gay parenting.

Some doctors say it violates their conscience to perform abortions or provide artificial insemination for unmarried or gay people. Some pharmacists believe that the morning-after pill is a form of abortion, and their religious commitment forbids them to dispense it.

And now some patients and activists are demanding laws to force health professionals to dispense the care the patients want, no matter how it violates the health worker’s conscience. Activists who march for a woman’s right to choose want the government to overrule a pharmacist’s right to choose.

I was reminded of Arnold Kling’s question “Is Bioethics an Oxymoron?” when I read in the Washington Post the comments of official bioethicist R. Alta Charo: “As soon as you become a licensed professional, you take on certain obligations to act like a professional, which means your patients come first.” As I wrote in an online debate for Legal Affairs magazine,

this is an example of how one state intervention generates the demand for additional interventions. We say you can’t be a pharmacist unless you get a state license, and now you want to say that that license should empower the state to impose morally offensive obligations on those who were required to get the license.

Similarly, we require a prescription to get many drugs, including some forms of contraception. Why should a woman need a prescription for contraception? Why not just grant access to contraception by allowing it to be sold over the counter? Here we’ve created one intervention—the requirement that people get a prescription from a licensed doctor, which they must take to a licensed pharmacist—and it has led to a situation you don’t like, in which some tiny number of pharmacists are refusing to dispense a particular prescription. So you say we should have another rule, another regulation, another intervention.

As philosopher Loren Lomasky of the University of Virginia puts it in the Post article, “Freedom of conscience has been central to our political notions since even before the United States existed. People should not be forced into doing things that they find morally odious.”

Do the people who want doctors and pharmacists to be forced to provide abortions and morning-after pills want anesthesiologists to be forced to participate in executions? I’d bet not. These activists want their moral values enforced by law, they don’t want a neutral rule that all doctors must obey the laws of the state. If they did take such a consistent position, of course, I’d still disagree: anesthesiologists shouldn’t be forced to participate in what they may regard as murder, any more than gynecologists should.

This seems like such a clear issue to me. Yet most of the people in the Post’s online chat about the issue were insistent that health workers must be forced to do as they’re told, regardless of their own conscience. Whatever happened to the liberal claims of individual autonomy, of the right of conscience, of the individual exercising his or her own mind? Gone with the wind, it seems, when liberals have the power to impose their values on other people’s consciences.

In a country of 290 million people and 14 million businesses, we should let these issues sort themselves out in the marketplace. Chances are that major drugstore chains like CVS and Walgreen’s are going to insist that their stores fill all prescriptions. If they have more than one pharmacist on duty at a time, then they may be willing to tolerate pharmacists who avoid filling certain prescriptions. If they do insist that all pharmacists be prepared to fill any prescription presented by a customer, then pharmacists who can’t accept such rules will have to look for jobs elsewhere. And if customers encounter a pharmacy that won’t give them what they want, then they will have to find another pharmacy.

A prime reason for freedom is pluralism. In the modern world we don’t all share the same moral and religious perspectives. The fact of moral diversity is a good reason for toleration and allowing people to sort themselves out in society according to their own moral choices. Freedom in a pluralistic society should mean that individuals get to make their own choices. Sometimes other people aren’t willing to do what we want them to do. But frankly, it’s involuntary servitude to force other people to work for us when they prefer not to. And it’s appalling that 141 years after the Thirteenth Amendment, some people still want to hold others to involuntary servitude.

The Incredible Expanding Farm Program

The Washington Post reports that a federal program to help dairy farmers and ranchers hurt by drought has been expanded to benefit farmers untouched by drought conditions:

In all, the Livestock Compensation Program cost taxpayers $1.2 billion during its two years of existence, 2002 and 2003. Of that, $635 million went to ranchers and dairy farmers in areas where there was moderate drought or none at all, according to an analysis of government records by The Washington Post. None of the ranchers were required to prove they suffered an actual loss. The government simply sent each of them a check based on the number of cattle they owned.

It’s a typical story of government handout programs. Under “pressure from ranchers and politicians in a handful of Western states that were hit hard by drought,” the Bush administration in 2002 created a fund to compensate them. Within days members of Congress were demanding that more counties be included, and they were. But that still wasn’t enough, and in 2003 Congress expanded the program to cover any kind of weather-related disaster. And then President Bush declared that the shuttle explosion over Texas constituted a disaster, so that made more counties eligible. County USDA officials were pressured to find any kind of “disaster” that would qualify local farmers for handouts.

The Post has run other articles in this series, with titles like Farm Program Pays $1.3 Billion to People Who Don’t Farm and Growers Reap Benefits Even in Good Years. Yet even with front-page stories in Congress’s hometown newspaper, the farm program rolls merrily along, handing out more and more subsidies with less and less plausibility.

It’s enough to make you a public choice economist. So the question is, why doesn’t it make Washington Post and other mainstream-media journalists and editorial writers more skeptical about the benefits of government programs? A great deal of what we know about the failures of government, or way that politics really works, comes from mainstream journalists. Yet many journalists continue to assume that every problem in society suggests a government program to fix it.

Paternalism in Arizona

NPR reports:

In a bid to increase voter participation in Arizona, Dr. Mark Osterloh is spearheading a ballot initiative that would automatically make each person who casts a vote eligible to win a million dollars in unclaimed state lottery money.

I would ask two questions about this proposal: Will it work?  Should it be undertaken?  I think “no” should be the answer to both questions. 

Will it work? Many experts argue that it is rational not to vote. The act of voting involves costs and benefits. The costs are getting information about the candidates, going to the polling place, standing in line and so on. The benefits to the voter are the benefits a voter expects his preferred candidate or party to deliver multiplied by the probability that his vote will swing the election to his preferred party or candidate. That probability is very low, which means that the benefits a voter can expect from voting are also quite low. They are much lower, in fact, than the costs of voting. 

The lottery measure proposes to add to these benefits the expected value of a $1 million dollar payoff. However, that value is also quite low.  2,038,069 people voted in Arizona in 2004.  Each would have had an equal chance of winning the payout. Hence, the expected value of the lottery payment in 2004 would have been 49 cents. Would that additional 49 cents attract many more voters to the polls in Arizona? It seems unlikely. Imagine that every voter was promised two quarters to come to the polls and vote. Would that tip their cost-benefit calculations toward voting? 

Of course, we might say that the state of Arizona should exploit the irrationality of voters who lack information about the number of voters or the ability to calculate an expected value. States already exploit such shortcomings with state lotteries. In that regard, the proposal seems unseemly, even immoral. 

Advocates would no doubt argue that the state might exploit voter irrationality for the higher good of getting people to the polls. Is voting such a valuable activity that the state should force taxpayers to subsidize it? 

Clearly voting is not valuable for those who choose not to vote. The justification for subsidizing voting and the lottery must be that voting provides benefits to people other than the voters who choose not to vote. At one time, experts thought non-voters differed substantially in outlook from voters. If so, voters were a skewed sample of the electorate, and elections did not contain all information about the preferences of “the people.” Studies have shown, however, that non-voters do not differ substantially in ideology or in partisanship from those who do not vote. If everyone voted, the outcomes of elections would change little if at all. It is unlikely, therefore, that society would gain much new information from the electorate by subsidizing an election lottery. 

In the end, for all the appearances of incentives and rational calculation, Mark Osterloh is just another paternalist who believes that people would be morally better if they participated in politics. He enlists the greed of the gambler to serve the endless crusade to “improve” the character of other people through state action. The proponents of the lottery inhabit a world where voting has replaced prayer, and politics has taken the place of religion. What is missing from this crusade, like other crusades before, is any sense that people should be left alone to make their own decisions about whether to vote and that whatever decision they make should be respected, even by the busybodies who think politics is next to godliness. 

And the unclaimed lottery money, of course, should be sent back to the people of Arizona through a tax cut.  

More on McCloskey’s Bourgeois Virtues

Following up on Radley’s mention of Deirdre McCloskey’s article on bourgeois virtues, here’s what I just posted at the Guardian’s “Comment is free” site: 

At Cato Policy Report the brilliant economist Deirdre McCloskey of the University of Illinois-Chicago and Erasmus University of Amsterdam (formerly the brilliant economist Donald McCloskey) writes about “bourgeois virtues,” the subject of her new book. McCloskey says that in Western civilization we have traditionally recognized two kinds of virtues — the aristocratic virtues such as courage, and the peasant or Christian virtues such as faith, hope, and charity.

But, she argues, these virtues were developed for a pre-capitalist world of defined social classes. In the United States and an increasing part of the world, very few people are aristocrats and no one is condemned to peasant life. Rather, we are all bourgeois now. We live in commercial society, mostly in towns (the root of the word bourgeois). We’re mostly middle class and engaged in business, as entrepreneurs, investors, managers, or employees, and also as customers.

And since the beginning of bourgeois society, the vocabulary of virtues has been used to berate and denounce capitalism. We’re told that business is based on greed, not on virtue. It may be necessary to modern life, but businessmen are still expected to accept their dubious moral standing. Wouldn’t sharing be more virtuous than selling? Isn’t it better to serve society than to produce wealth?

McCloskey points out that the assaults on the alleged vices of capitalism “led, in the 20th century, to some visions of Hell.” Surely capitalism has proven better than the alternative. But she wants to make a stronger case than that: “bourgeois life improves us ethically.” It has led not just to vast increases in material wellbeing but to civility, religious tolerance, cosmopolitanism, and honesty. She examines how the classical virtues apply in a commercial world. “The leading bourgeois virtue is the prudence to buy low and sell high…but it is also the prudence to trade rather than to invade, to calculate the consequences, to pursue the good with competence.”

She goes on to add temperance — to save and accumulate, but also to look for compromise. Justice is private property, along with respecting merit, not privilege, and viewing success without envy. And so on through courage, love, faith, and hope, the old virtues for the modern world.

McCloskey says that her goal is to take the word “bourgeois” back from its enemies, to make it a term of honor, by showing how the virtues inform capitalism and how capitalism encourages the virtues.