Tag: public financing

Three Problems with Taxpayer Financing of Election Campaigns

The new Democratic majority in the House of Representatives has introduced H.R. 1, a bill with two public financing components: one a pilot program for vouchers, and the other a conventional if generous subsidy program for small donations. I focus here on the latter. 

Public financing schemes have often focused on encouraging small donors in part to allegedly counter the influence of “Big Money.” The financing of campaigns by taxpayers fits easily into a number of dichotomies that structure our public discourse: small/large, vulnerable/powerful, poor/rich, left/right, and of course, friend/enemy. The realities are less exciting and persuasive than the rhetoric. 

It is an odd time to be pushing government spending on congressional candidates. Federal deficits are now approaching a trillion dollars annually. Small donor fundraising is much easier and much more successful than in the past. ActBlue, a “fundraising technology for the left [seeking] to democratize power and help small-dollar donors make their voices heard in a real way,” had a record election in 2018. It funneled over $1.6 billion to Democratic candidates.     

In that respect, this bill is entirely predictable in a highly partisan time. The government subsidy is six times the sum raised by small donations. A new majority is thus proposing a $9.6 billion (yes, billion) subsidy for its congressional candidates in the 2020 election. All things being equal, that would be a massive advantage for the party in that election. 

But things need not be equal. Such a huge subsidy would encourage the GOP to find small donors. Maybe “ActRed” would ready for 2020 and enjoy equal success. That’s not likely but let’s assume it is for purposes of argument.  

Where would the billions needed to finance this program come from? The funding  would involve new taxes or borrowing since it is new spending. So either current or future taxpayers would finance the program.  

Here’s one problem: the government would be using its power of coercion to force people to support candidates and parties they do not support (indeed, to support people they don’t want their children to marry). This coercion would happen more to Republicans than Democrats at first, but Republicans might get better at claiming the subsidies over time. We would end up with the government coercing everyone without regard to partisan commitments.  

Advocates of taxpayer financing also might think the scheme takes the side of “the people” (small donors) against the elite (current donors). ActBlue reports they had 4.9 million unique donors in 2018. That’s a large absolute number. But it constitutes about 3 percent of eligible voters in the United States. These ActBlue contributors are not average Americans. ActBlue donors are also a small portion of liberals in America. In 2016, about 26 percent of the nation identified as liberal or about 47 million people. Hence ActBlue got money from just over 10 percent of liberals. By any measure, ActBlue donors are a political elite. No doubt they are a political elite that believes their policy views represent what’s good for the nation and the average American. But they are not average Americans.  

Finally, this bill asks taxpayers to provide the parties with large sums for their campaigns. But ActBlue showed that the small donor elite can be mobilized, and Republicans have every incentive to match ActBlue’s success. Given that private political entities are doing well with small donors, why should the taxpayer be forced to support candidates and parties they do not want to support? Don’t taxpayers have better uses for $20 billion? 

Public Financing of Vikings Stadium a Bad Deal for Fans, Taxpayers

The collusion between big business and big government that fleeces the rest of us has struck again – Tim Carney, iMessage your office – this time in the sports world. 

Minnesota governor Mark Dayton recently signed the midnight deal that state lawmakers struck with the owners of the state’s football team, the Minnesota Vikings, to build the team a new stadium.  This caused plenty of celebration in Minneapolis and elsewhere across the Gopher State.  Alas, the hangover is about to come for taxpayers regardless of their gridiron allegiance or level of fandom.

As former Cato legal associate (and Minnesotan) Nick Mosvick and I write in the Huffington Post, these stadium deals hurt most fans:

That’s because they lead to increased taxes and higher prices, squeezing the average fan for the benefit of owners and sponsors.  And that’s not even counting the overwhelming majority of taxpayers, regardless of fandom, who never set foot in these gladiatorial arenas.

Let’s look at this particular deal.  The stadium costs $975 million on paper, with over half coming from public funds, $348 million from the state and $150 million from Minneapolis—not through parking taxes or other stadium-related user fees, but with a new city sales tax.  In return, the public gets an annual $13 million fee and the right to rent out the stadium on non-game-days.

Vikings ownership, NFL commissioner Roger Goodell, and local politicians make a typical pitch for the deal: the stadium will attract investment to the area; local establishments will see a rise in game-day sales of $145 million; jobs will be created, including 1,600 in construction worth $300 million ($187,500 per job?!); tax revenues will increase $26 million; property values will rise; and, of course, the perennially underachieving team’s fortunes will improve.

Such arguments are always trotted out for these sweetheart deals, but the evidence regarding the economic effects of publicly financed stadiums consistently tells a different story.  For example, Dennis Coates and Brad Humphreys performed an exhaustive study of sports franchises in 37 cities between 1969 and 1996 and found no measurable impact on per-capita income.  The only statistically significant effects were negative ones because revenue gains were overshadowed by opportunity costs that politicians inevitably ignore.

An older study looked at 12 stadium areas between 1958 and 1987 and found that professional sports don’t drive economic growth.  A shorter-term study looked at job growth in 46 cities from 1990 to 1994 and found that cities with major league teams grew more slowly.  Even worse, taxpayers still service debt on now-demolished stadiums, including the $110 million that New Jersey still owes on the old Meadowlands and the $80 million that Seattle’s King County owes on the Kingdome.  And we shouldn’t forget that local governments often employ property-rights-trampling eminent domain to facilitate these money-squandering projects.

Read the whole thing.  It’s not a matter of ideology; we even quote Keith Olbermann approvingly!

The point is that these deals benefit team owners and the politicians who get to wrap themselves in team colors to the exclusion of taxpayers or fans (who are priced out of the games their increased taxes support).  If luxury stadiums were hugely profitable, why would the savvy businessmen who own the teams let the politicians in on the windfall?

A Year After Citizens United, Campaign Finance Back at the Court

As Caleb noted earlier, today marks the one-year anniversary of Citizens United, a case I first thought ”just” concerned some weird regulation of pay-per-view movies, but turned out to be about asserted government power to ban political speech — including books and TV commercials — simply because the speaker was not one individual but a group (in corporate or or other associational form).  See also this op-ed by ACLU lawyer Joel Gora.

Roger similarly noted the continuing discussion in Congress and elsewhere about the public financing of elections.  As it turns out, the Supreme Court has agreed to hear a challenge to such a system, specifically Arizona’s Clean Elections Act.  Brought by our friends at the Institute for Justice and the Goldwater Institute and supported by our brief at the cert petition stage, this lawsuit challenges a law that aimed to “clean up” state politics by creating a system for publicly funding campaigns.

Participation in the public funding is not mandatory, however, and those who do not participate are subject to rules that match their “excess” private funds with disbursals to their opponent from the public fund. That is, if a privately funded candidate spends more than her publicly funded opponent, then the publicly funded candidate receives public “matching funds.”

Whatever the motivations behind the Clean Elections Act, the effects have been to significantly chill political speech: privately funded candidates changed their spending — and thus their speaking — as a result of the matching funds provisions. In elections, where there is no effective speech without spending money, matching funds provisions such as those at issue here diminish the quality and quantity of political speech.

In 2008, however, the Supreme Court struck down a similar part of the federal McCain-Feingold law in which individually wealthy candidates were penalized for spending their own money by triggering increased contribution limits for their opponents (Davis v. FEC, in which Cato also filed a brief). Even this modest opportunity for opponents to raise more money was found to be an unconstitutional burden on political speech.

Cato’s latest brief thus asks the following question: Whether Arizona may give a publicly funded candidate extra money because a privately funded opponent or his supporters have, in the state’s judgment, spoken too much. We highlight Davis and numerous other cases that point to a clear answer: if the mere possibility of your opponent getting more money is unconstitutional, then the guarantee that your opponent will get more money is even more so. Allowing the government to abridge political speech in this fashion not only diminishes the quality of political debate, but ignores the fundamental principle upon which the First Amendment is premised: that the government cannot be trusted to regulate political speech for the public benefit. Moreover, the state cannot condition the exercise of the right to speak on the promotion of a viewpoint contrary to the speaker’s.

The case is McComish v. Bennett, consolidated with Arizona Free Enterprise Club’s Freedom Club PAC v. Bennett.  The Court will hear it March 28, with a decision expected by the end of June.