Buoyed by the recent Enron scandal, campaign finance reform has suddenly remerged at the forefront of the congressional agenda. Indeed, during the past few weeks, commentators from across the political spectrum have focused a great deal of attention on Enron's substantial political contributions to both political parties. However, a far more important issue has been neglected in this debate: the adverse consequences that campaign finance reform will have on political competition.
In fact, regardless of what happens in coming weeks, we can be certain that campaign finance reform enacted in Washington has already restricted electoral competition, hurt the ability of competitive challengers to raise money, and protected incumbents. Campaign finance reform that has been passed in Washington state, that is.
During the past 20 years, most states have placed stringent limits on donations to candidates running for the state legislature. However, the changes in Washington voters enacted when they passed Proposition 134, which restricted contributions, in 1992 were among the most dramatic. Before the adoption of Prop 134, individuals and PACs were free to donate as much as they wanted to candidates running for the legislature. However, after the reforms, contributions from individuals and PACs were limited to $500 per candidate per election.
Now, the campaign finance reform bills that are currently being debated in Congress differ from Prop 134 in certain ways. For instance, unlike the Shays-Meehan bill, Prop 134 did not attempt to restrict issue advocacy. However, campaign finance reformers in Washington possessed many of the same goals as congressional advocates of campaign finance reform. As a result, important lessons can be drawn from Washington's experience with campaign finance reform during the past 10 years.
The reformers in Washington did accomplish their first goal of reducing the amount of money that is spent in state politics. Spending on state legislative races in Washington increased in every election year from 1978 to 1992. But after the reforms took effect, the situation changed. The amount of money spent on state legislative races dropped by over 20 percent in 1994 and total spending in both 1996 and 1998 failed to exceed the total amount spent in 1992.
Yet the evidence indicates that the reformers in Washington were unable to accomplish their second goal of increasing competition. First, the number of uncontested elections in the Washington legislature has sharply increased since the passage of Prop 134. In 1990 and 1992, the two election years that preceded the reform, 6 percent of the seats in the Washington Senate were uncontested. However, in the four elections that followed the reform, a whopping 21 percent of seats in the state Senate went uncontested. Second, the percentage of major party challengers who defeated incumbents in state Senate races decreased from 15 percent in the two elections preceding the reform to 11 percent in the four elections following the reform
Campaign finance reform likely played a large role in this. After the reform, fundraising for a race in the state legislature would become significantly more time consuming because individuals could no longer obtain most of their funds from a single source. As a result, it seems likely that these reforms discouraged many potential candidates from entering the fray. Additionally, it made fundraising and winning far more difficult for those candidates who did run.
What about the third goal of reformers? Namely, that of reducing corruption in state politics. This is more difficult to evaluate. Because state governments in Washington and elsewhere can use regulations to enrich some companies while bankrupting others, it should come as no surprise that interest groups attempt to influence elections or gain access to those who win.
However, Washington voters may have stumbled on to a better strategy for reducing corruption in state government when they passed Initiative 601 in 1993. Initiative 601 is a Tax and Expenditure Limitation (TEL) that places a cap on the amount of money that Washington's state and local governments can spend. Since it was passed, I-601 has reduced state spending in Washington relative to the size of the state economy and has paved the way for substantial tax reductions in both 1999 and 2000.
Such limits on government hinder the ability of the state to regulate and interfere with the actions of the private sector. Over time, this will make the activities of government less relevant to both private industry and various interest groups. Reducing the incentives of special interests to influence elected officials seems like a far better strategy for reducing corruption than using coercion to restrict the activities of individuals, parties and PACs. Overall, congressmen in Washington, D.C. would do well to learn these lessons from Washington state.