Testimony

Campaign Finance Reform

Hearings on Campaign Finance Reform
Committee on Governmental Affairs
United States Senate

Good morning, Mr. Chairman and members of the Committee. I am Edward H. Crane, president and founder of the Cato Institute and I thank you for the opportunity to testify before you today. I respectfully request Professor Lillian BeVier’s recent Cato study on the constitutionality of campaign finance proposals be submitted for the record as part of my testimony.

I’d like to begin my testimony with a quote from Buckley that I believe summarizes the case against much of the proposed campaign finance reform now before Congress.

“The mere growth in the cost of federal election campaigns in and of itself provides no basis for governmental restrictions on the quantity of campaign spending and the resulting limitation on the scope of federal campaigns…In the free society ordained by our Constitution it is not the government, but the people - individually as citizens and candidates and collectively as associations and political committees - who must retain control over the quantity and range of debate on public issues in a political campaign.”

Well stated. This is an issue of who controls the political process in America - the government or the people. There is a disturbing theme in the pronouncements of self-described public interest groups that invariably chills political debate, reduces information available to the public, and protects the political class from outside competition.

The initiative recently passed in California and supported by Common Cause dealing with campaign finance would limit to $500 the amount of money one can contribute to a candidate for state-wide office and further limits the ability to raise money to six months prior to the election. Who benefits from such a system? It certainly is incumbents, who have name recognition, mailing lists, and an in-place organization to mobilize voters. It benefits full-time political activists such as “Nader’s raiders”) who are constantly involved in influencing government behind the scenes and who tend to resent the outside participation of those not in the political class. And it benefits the media. The media is the gatekeeper of information to the American people on politics and other issues. To the extent that candidates can communicate directly with the public, the media’s gatekeeping function is diminished.

Why is it that Donald Graham, publisher of the Washington Post, Rush Limbaugh, the conservative radio talk show host, or Gary Trudeau, the liberal cartoonist, can lavish virtually millions of dollars of support toward a candidate they support or against a candidate they oppose? And is it bad that they can do so? Of course not. They are part of a healthy open democracy, whether one agrees with them or not. If the answer is that it is because they are in the media and are therefore protected by the First Amendment that they can employ massive resources for and against candidates, then we are misreading the First Amendment. The First Amendment applies to everyone in this room and, indeed, everyone in this country. The media do not have rights that the rest of us don’t have.

More importantly, the so-called solutions that are being proposed by advocates of campaign finance reform address essentially nonexistent problems. Yesterday USA Today, a great champion (as is most of the major media) of campaign finance reform, breathlessly reported that $260 million had been raised through “soft dollar” contributions in 1996. Let’s see, isn’t that about $1 per American? For this we want to infringe our rights to spend money as we see fit to promote political views we hold? Americans spend about as much on Barbie dolls each election cycle as we do on federal elections. Who are the self-appointed arbiters of American politics to say what is too little, enough, or too much to be spent on politics? Again, the above-referenced quote from Buckley is germane.

Further, Common Cause and the other agitators for campaign finance reform owe us an answer to the question, Who are the law breakers? It is, after all, against the law for congressmen to accept contributions on a quid pro quo basis. Who are these people? Are they members of this committee? The undercurrent of criticism from the reformers is that there’s some kind of endemic corruption going on in Congress. If so, they owe it to us to tell us who the criminals in Congress are. Does something in the form of quid pro quo occur in Congress? Undoubtedly, but on a very limited scale, particularly in view of the larger issues faced by Congress. After all, the issues that affect the American people are issues like term limits, Social Security privatization, our civil liberties, defense policy, and so on. These are issues that are voted on on the basis of three primary factors, according to Cato scholar Bradley Smith. Those factors are ideology, party discipline, and voter sentiment back home.

Indeed, former Senator Nancy Kassebaum, who has been a spokesman for the reformers, was quoted in the Wall Street Journal as saying that she was convinced her colleagues did not vote on the basis of contribution. Her concern was that they had to spend so much time raising money. It apparently did not occur to her that the 23-year-old limit of $1,000 per contribution was the reason so much time had to be spent on fundraising. Nor, apparently, did she recognize that challengers to an incumbent have to spend even more time collecting these relatively small contributions. As Warren Burger put it in his brilliant dissent in Buckley, maintaining a free society is not a costless undertaking. It may well be that a certain amount of undue access is one of those costs, although a very small one relative to the importance of maintaining a free and open political process.

If we want to reform the system in a constructive way, repeal those aspects of the 1974 Amendments to the Federal Election Campaign Act that the Supreme Court left standing in Buckley is the best way to proceed. Most importantly, the $1,000 limit on contributions to federal candidates must be repealed. Such a limit is analogous to a company like WalMart having a law passed that says anyone can compete with WalMart, up to $1,000 in contributions. Limits on monetary expenditures limit speech. Though controversial in some esoteric circles, for most people this is such common sense that we tend not to even think of it. We would all recognize that a law limiting newspapers to spending $1000 per year - or even $1000 per day - would force most daily newspapers to cease publication, and that this would be an unconscionable violation of the First Amendment. Similarly, a law limiting television networks to expenditures of just $1000 per day would violate the First Amendment by effectively shutting off speech. This is true even though - in fact, especially because - newspapers and television stations and networks routinely editorialize on political issues; endorse candidates for office; slant news coverage to promote issues and, implicitly, candidates viewed as important; and give column space, or, in the case of television stations, air time, worth literally hundreds of thousands of dollars, to political parties, candidates, and issues. But even the most mundane political activities, such as publishing a flyer to distribute at a county fair; or purchasing a megaphone to use at a public rally; or traveling somewhere to give a speech; require the expenditure of money. The link between the expenditure of money and speech is unassailable. Because of this link, the Supreme Court, in Buckley, made clear that any restrictions on the expenditure of funds - including limitations on issue advocacy - must be subject to the strictest judicial scrutiny for First Amendment violations.

For a detailed review of specific proposals, I cite Prof. Bradley A. Smith’s, Cato scholar and law professor at Capital University, recent testimony:

Soft Money

An effort was made to ban soft money in the 1974 FECA Amendments, and the 1976 elections were conducted without soft money. This created a shortage of cash for state and local parties, which caused a sharp decline in traditional political activity such as rallies, printing of bumper stickers, buttons, and yard signs, and get-out-the-vote drives. Thus, FECA was specifically amended in 1979 to allow for soft money contributions to the parties. We need to remember this when people talk about banning or limiting soft money. What alleged evil are people after? Do we want to deprive local parties of funds to conduct voter registration drives or get-out-the-vote drives? Stop local parties from printing slate cards, linking a party’s candidates together? Or stop them from printing bumper stickers and yard signs, or providing transportation to the polls for elderly voters, or holding rallies? I think not.

I suggest that the current emphasis on banning or sharply curtailing soft money comes entirely from the extensive use of soft money to fund party sponsored issue advocacy campaigns in the 1996 elections. However, political parties have as much right as other entities to run issue ads. See FEC v. Colorado Republican Federal Campaign Committee, 116 S. Ct. 2309 (1996)(holding that political parties may engage in independent expenditures). If party-sponsored issue ads are protected by the Constitution, what point is there in limiting soft money, unless we do want to restrict funding for get-out-the-vote drives and the like? May I suggest that there is none.

Furthermore, to the extent that candidates dislike issue ads and independent expenditures because they cause the candidate to lose control of the campaign message, efforts to prevent party sponsored issue ads by drying up the supply of soft money will make the situation worse. Why? Because people who now give to the parties to take their message public will simply resort to running independent issue ad campaigns. These independent campaigns are, I think, more likely to be negative or distorting than party run ads.

But it really doesn’t matter, because efforts to ban or limit soft money contributions for issue ads are probably unconstitutional in any event. As Colorado Republican Federal Campaign Committee makes clear, political parties have the same rights in the political arena as other groups. Thus, like other groups, they have a right to raise unrestricted funds for the purpose of airing issue ads. Limiting soft-money, then, if it is constitutional at all, which I doubt, will only dry up funds for activities that are arguably less speech related, such as the voter registration drives, slate cards, and other activities that almost every rational observer supports.

If you want to limit issue ads, the best, and perhaps only Constitutional approach, is to raise the limits on direct contributions to candidates. It is since those restrictions were put on 23 years ago - and never adjusted even for inflation - that groups have turned increasingly to independent issue ads to persuade the public of their views. Raise the limits on direct contributions, and some donors may again decide that giving money to the candidate is a more effective means of spreading their political views. Or, to put it another way, perhaps we should return to the system of free elections under which this country grew into the world’s greatest democracy, fought and won two world wars, passed the great civil rights legislation of the 1950s and 1960s, and generally prospered.

Issue Advocacy

So clear is the constitutional precedent in the area of issue advocacy that the United States Court of Appeals for the Fourth Circuit recently took the extraordinary step of ordering the FEC to pay the legal fees incurred by the Christian Action Network (C.A.N.) in defending itself from an FEC lawsuit. The FEC had attempted to fine the C.A.N. for issue advertising, arguing that the C.A.N.’s ads constituted campaign ads even though they did not include words of “express advocacy.” FEC v. Christian Action Network, Inc. 1997 U.S. App. Lexis 6477 (April 7, 1997). In a stinging rebuke to the FEC, the court concluded, “In the face of the unequivocal Supreme Court and other authority discussed, an argument such as that made by the FEC in this case, that ‘no words of express advocacy are necessary to expressly advocate the election of a candidate,’ simply cannot be advanced in good faith… much less with ‘substantial justification.’…The First Amendment forbids the regulation of our political speech under such indeterminate standards.” Express words of advocacy, the court emphasized, “are the constitutional minima.” Id.

What the regulators seem to have lost sight of is the fact that politics is about the discussion of issues, and candidates’ positions on issues. It is the heart of the First Amendment for individuals and groups to discuss issues and criticize officials. It is all but impossible to talk politics for long in this country without mentioning the individuals holding or seeking office. Or, as the Court said in Buckley, “Candidates, especially incumbents, are intimately tied to public issues…” We will not have a free society for long if government officials are empowered to prohibit some from speaking on the rather bizarre ground that their speech consists of “campaign endorsements or attacks,” while determining that others can speak because their speech “genuinely debate[s] issues,” to use the words of two prominent reformers writing recently in the Washington Post. It is precisely that type of distinction and government censorship which the First Amendment aims to prevent.

After all, the purpose of political speech is to influence public policy, which usually means influencing the election of representatives. The purpose of campaigns is to discuss the positions of candidates on various issues. We do not want a federal bureaucracy determining who can say what, and in what amounts. Thus the bright line that Supreme Court has drawn, requiring words of express advocacy before regula0tion is permissible, is a wise one, indeed.

Many are frustrated that the First Amendment limits our ability to silence certain voices that they feel “distort” or “corrupt” our political campaigns. But the Constitutional limits on regulating candidate and independent expenditures, campaign and soft money contributions, and “issue advocacy,” are no more “loopholes” than the Fourth Amendment prohibition on unreasonable searches and seizures is a “loophole” in the fight against crime. I have little doubt that we could catch more criminals if we could dispense with search warrants, but we realize that that cannot be done consistent with the Fourth Amendment and the protection of our liberties. Few liberties can be more important than the right to engage in political speech, and Congress must tread with great caution in this area. Congress should stop trying to “get around” First Amendment limits on regulating political speech. Only by abandoning such unconstitutional schemes to police political speech, can we gain a new perspective on the issues, and begin to seriously address some of the problems in modern presidential campaigns.

Disclosure of Issue Advocacy

If it is clear that issue ads - or, we might say, political discussion - cannot be banned consistent with the First Amendment, some have suggested that at a minimum it could be forcibly disclosed. This is the approach taken by HR 2183, the so-called “freshman” proposal, and in the so-called “Blue Dog” proposal floated this summer. Unfortunately for the sponsors of these bills, but fortunately for the political and speech rights of the American people, this approach also runs directly afoul of recent Supreme Court precedent.

In McIntyre v. Ohio Elections Commission, 514 U.S. 334 (1995), the Supreme Court affirmed that individuals have a constitutional right to engage in anonymous political discussion and advertising. The reason should be so obvious as not to need explication: people may feel chilled, if not prohibited, in criticizing their government if they feel that that government may use its power to retaliate against them. McIntyre ties together two long-standing strands of First Amendment jurisprudence: the right to anonymous leafleting, see Talley v. California, 362 U.S. 60 (1960)(the right to anonymous publication is necessary because “exposure of the names of printers, writers, and distributors would lessen the circulation of literature critical of the government”); and the right of organizations to protect members from disclosure that could lead to political retaliation and harassment, see NAACP v. Alabama, 357 U.S. 449 (1958).

If disclosure of spending on issue ads, i.e. political discourse, were required, how would it be enforced? It could only be enforced by requiring citizen groups to respond to the demands of federal officials for information regarding the times, places, amount, and manner of speech. And it would have the same chilling effect on speech that led the Supreme Court to strike down limits on issue advocacy in Buckley. For in order to determine if a communication was intended to “influence public opinion” (the standard used in H.R. 2183) and therefore subject to disclosure, it would be necessary for federal officials to examine the communication under much the same vague standards as those that HR 1776 and 1777 would use to ban all issue ads. After all, most speech is, to some extent, intended to influence public opinion. The ensuing chilling effect on speech makes such forced disclosure unconstitutional. Nor can this approach get around McIntyre, NAACP v. Alabama, and Buckley by being called “lobbying disclosure.” The effort is disingenuous on its face - communications to the public have never been considered lobbying, and because they aren’t directed to the legislators, it is difficult to see how they could be. Furthermore, the disclosure would apply to speech that mentions candidates who are not incumbents. One can hardly lobby someone who does not hold office.

It is, of course, frustrating for candidates to find their record and views attacked in ways that may seem distorting and unfair. Similarly, it may seem unfair to be locked in a political race only to have large expenditures made attacking one’s positions on an issue. But this is the nature of politics. And the First Amendment exists to prevent the government from attempting to determine “legitimate” from “non-legitimate” commentary on public issues. As one commentator has noted, no nation has ever succeeded in creating a “benign political police.”

Contribution Limits

Banning or limiting contributions is driven by a desire to decrease the amount of money spent in elections. But campaign spending is not out of control. More money was spent to syndicate “Seinfeld” than we spend on a presidential election. Total direct campaign spending for all congressional races averages out to $3 per eligible voter. PAC spending adjusted for inflation decreased in the ‘94 cycle. And all 1993-1994 PAC contributions for all races would barely have covered Kevin Costner’s production costs for “Waterworld.”

More importantly, there is a very dangerous precedent set by acting on this hysterical desire to take money out of politics. The people in this country have a constitutional right to petition their government. If we succumb to this misinformed, misguided hysteria, is the next step to take the media out of politics to stop all those obnoxious ads? To not let the press report on politics because we’re sick of reading all the horse-race stories?

Money will remain in politics. Money must remain in politics. As issues become more complicated and technology more complex, even more money will be needed to ensure an open political system.

Limiting contributions will distort the political debate. Driving money out of the campaign gives a powerful advantage to candidates with powerful friends such as celebrities and unions. Further limits will similarly enhance the power of the media. When candidates cannot raise or spend the money needed to speak directly to the voters, political discourse will move away from a direct conversation between candidate and voter, and we will surrender to the institutional media’s power to mediate political debate.

Katharine Graham of the Washington Post can editorialize in favor of certain candidates, or shape news coverage to reflect her philosophical perspective. Garry Trudeau can promote Bill Clinton by devoting his comic strip to bashing George Bush and Dan Quayle. Talk show host Rush Limbaugh can do the same in favor of his candidates.

Historically, the most controversial First Amendment issues have centered on whether certain types of speech, such as commercial speech, licentious speech, and symbolic speech are protected by the amendment. What has been undisputed is that the First Amendment protects political speech.

Indeed, as the Supreme Court’s Buckley v. Valeo decision made clear: “dollars are not stuffed in ballot boxes…the mediating factor that turns money into votes is speech…Advocacy cannot be proscribed because it’s effective.” Since a ban on soft money and PAC contributions affects the intensity and frequency of political speech, the measure will infringe on our First Amendment rights.

Additionally, no one would deny that journalists, editors, and pundits influence politics through their outlook and choice of topics. But why should they have the opportunity to be important figures in the political debate while other Americans are excluded because they choose a career other than the media? Indeed, without PACs, how are Americans with limited time and resources to offset the editorial impact of the national media? What is more, the notion that the government, through a ban on PAC giving, can exclude certain types of individuals or organizations from contributing in a meaningful way to the political debate should alarm everyone who believes that Congress shall make no law…abridging the freedom of speech.”

Our Founders recognized that although there may be suboptimal outcomes in a free society, they pale in comparison with the outcomes associated with turning over to government jurisdiction judgments independent citizens should properly make themselves. As Thomas Jefferson put it: “I know of no safe depository of the ultimate powers of the society but the people themselves; and if we think them not enlightened enough to exercise their control with a wholesome discretion, the remedy is not to take it from them, but to inform them of their discretion by education.”

Term limits are the best campaign finance reform of all.

Public Opinion

Finally, I would like to say a brief word about public opinion on this issue. Polls are frequently released allegedly showing broad public support for such things as restrictions on soft money and issue advertising. Of course, as the members of this subcommittee well know, one purpose of the Constitution is to protect our fundamental rights from the ebbs and flows of public passion. But leaving that aside, I think that such polls are terribly flawed, and I would warn this Congress that if it were to actually pass the restrictions on issue advocacy under consideration, it would unleash a firestorm of hostile public reaction.

Consider, for example, one highly publicized poll released this summer by the reform group the Center for Responsive Politics. Supposedly, 70% of respondents favored limiting how much a candidate could spend on his or her own campaign; 75% favored limiting soft money; 71% favored limiting TV ads; 85% favored limiting out-of-district contributions; and 61% favored banning PACs. Yet, oddly enough, in that same poll, 47% favored lifting all restrictions on campaign contributions. Clearly, then, the public is somewhat confused, as the total of those favoring more restrictions and those favoring the abolition of all restrictions substantially tops 100%. You cannot lift all restrictions on contributions and still have restrictions. For more than 25 years groups such as Common Cause, the Center for Responsive Politics, the League of Women Voters, Public Citizen, ACORN and PIRG, along with huge foundations such as the Schuman Foundation, the Pew Charitable Trust, and the Joyce Foundation, have spent millions, virtually unopposed, attempting to convince the public of the merits of such regulation. Their efforts have had virtually unanimous support in the institutional press, which would not have its speech limited by the proposed reforms. Given this, the fact roughly half the public favors scrapping all regulation of the system is truly remarkable.

In fact, when the heated rhetoric is stripped away, the public remains strongly in favor of free political speech. For example, the aforementioned Center for Responsive Politics poll suggests that a substantial majority of Americans would like to ban PAC contributions. Similarly, a recent poll by the independent Tarrance Group found that roughly 60% favor a PAC ban. But when the long-vilified term “PAC” was dropped, 64% believe that “a group of people who have a common purpose or belief can pool small contributions to help elect political candidates who share their views,” with just 29% disagreeing. That, of course, is the definition of a PAC. Why this difference? The Tarrance Poll gives a clue. Fewer than half of respondents considered themselves members of a “special interest.” Yet, when asked about their personal memberships and affiliations, 75% stated that they were members of groups, such as unions, single-issue groups such as the NRA or Handgun Control, Inc., or broad ideological or membership groups of the type that engage in issue ads and political expenditures.

When the public understands what is at stake - i.e., that it is their voices, and the voices of their neighbors, that will be silenced, their perception, I suggest to you, changes dramatically and radically. Just last week I was on a Florida radio phone-in show along with the local Common Cause representative. I described the threat to the First Amendment posed by campaign finance regulation, and the gentleman from Common Cause stated that it was not their aim to reduce political speech. It would be perfectly alright, he said, for individuals and groups to spend whatever they like on advertisements discussing candidates and issues, but they should not be able to make contributions to candidates. This man, a local representative for the reform movement, honestly believed that HR 1776 and 1777, being promoted by his organization, would not limit issue advertising, to the point that he suggested that this was why restrictions on contributions to candidates were not objectionable. I pointed out that limiting independent advertisements discussing candidates and issues was exactly what the reformers, including Common Cause, are seeking to do in this Congress, through bills such as HR 1776 and 1777 and its Senate counterpart, the “McCain-Feingold” bill. When callers to the show discovered that these efforts would limit advertisements and scorecards describing candidates views on issues, they became livid. When we talk about limiting issue ads, we are not talking about silencing the other guy: we are talking about silencing ourselves, and the public doesn’t like it.

In short, the notion being spread by reformers, of some broad public support for these types of regulatory proposals, is a big con job. If the types of proposals being discussed here today pass, when the public understands what has happened there will be a serious voter reaction. And one reason is because Americans do treasure their First Amendment rights, and they do believe that their representatives should take seriously their oath to uphold the Constitution. In fact, in the Tarrance Group poll I’ve mentioned, 86% of respondents said that they would be less likely to vote a member of Congress or Senator who had voted for campaign finance reforms which were unconstitutional. So the public is hardly interested in reform at any price. And, as I have shown today, efforts to ban or curtail issue advocacy, such as those found in HR 1776-1777 and many other bills now before the House, are quite clearly unconstitutional.

Before Congress attempts to solve the problems of campaign finance with more regulations burdening free speech rights, we should take stock of the fact that the current regulatory system is responsible for many of the evils we see in campaign finance. We do not need to plug “loopholes” in the system. Rather, we should scrap most all of the present system of campaign finance regulation, remembering the admonition of the First Amendment to the Constitution, that Congress shall make no law abridging the rights of free speech.

In closing, I encourage the members of this committee to examine the evidence. The fervor to ban or limit soft money is based on impressions created by those who have the most to gain from their demise. Further restrictions on soft money and PACs will only increase the power of incumbents, millionaires, and the media, distort political debate and infringe on First Amendment rights. Millions of Americans will have their right of free association trampled and see valuable and irreplaceable sources of information evaporate.