Those who want to impose more regulations on campaign finance recently succeeded in forcing a vote on their bill in the House of Representatives. They believe the Enron story makes it certain the bill will pass and become law with President Bush's signature. That's not likely. The Enron story actually undermines three vital tenets of the reformers' faith.
Campaign finance "reformers" believe that money corrupts American politics because elected officials provide special favors to their biggest donors. They take it as a matter of faith that most Americans care a great deal about money in politics. The campaign-finance regulation lobby also counts on Democrats -- and not a few Republicans -- inside and outside Congress to advance their cause for partisan and ideological reasons.
The facts so far about Enron contradict these beliefs.
- Enron's money bought less than nothing. Enron contributed a little over $3 million in "soft money" to candidates for federal office from 1995 to the election of 2000. Ken Lay, the head of Enron, may have tried to extract the "quid" for his earlier "pro quos" of campaign contributions. When Enron began to come apart in late 2001, Lay or other Enron managers called three Bush administration officials: Donald Evans, secretary of Commerce; Paul O' Neill, secretary of the Treasury, and Peter R. Fisher, an undersecretary of the Treasury. The Enron managers wanted help, the sort of special favors the campaign-finance crowd decries.
Lay and his team got nothing from the Bush officials. Enron's share value sank to nothing as the consequences of managerial mistakes came home to roost at the New York Stock Exchange. More accurately, Enron got less than nothing from the Republicans. As Enron grew to being scandal du jour in Washington, the House Energy and Commerce Committee released a letter from an Enron vice president that reflected badly on CEO Ken Lay and his company. In other words, Republicans in the House threw gasoline on the Enron fire.
Some now say the Bush administration did not help Enron because it would have caused an enormous scandal. If so, that tells us that the current system of disclosing contributions effectively prevented the corruption so decried by reformers. Why do we need tighter restrictions if the current system worked? Others in the reform crowd say Bush should have helped Enron given the damage done to innocent people. This is a strange argument indeed. The people who make this argument would have accused President Bush of corruption if he had proposed helping Enron. When his administration refused to help, they get attacked for not being "corrupt." Whatever he does, Bush can't win with the "reform" crowd.
On the merits, it would be lousy public policy to bail out the owners, managers, and employees of Enron. Markets work well only if badly managed businesses are allowed to fail. When managers of a corporation make huge errors, we must let them go under for the general good. If government bails out Enron, we will only have more of them in the future.
- Political money isn't the issue. Sen. John McCain (R-Ariz.) and company have a big political problem: Americans don't care much about their issue. Northeastern University political scientist William Mayer recently surveyed the public opinion data and concluded "most Americans don't seem very concerned about campaign finance. I was, frankly, surprised how strong the evidence is on this point." Those who want more regulation on political contributions will try to use the Enron debacle to overcome this apathy.
But the Enron scandal seems likely to turn on questions of liabilities moved off the balance sheet and the ethics and competence of auditors. If there's anything Americans are less interested in than campaign finance, it's regulatory standards for accountants.
- The Democrats duck their boomerang. Congressional Democrats like to cry "corruption" and call for more regulation of political contributions that go mostly to Republicans. We aren't likely to hear much about Enron's contributions. After all, the Democrats got almost $1 million of the soft money that Enron gave to federal officials. Do congressional Democrats believe Enron's money corrupted their judgment on policy? Judging by their spirited attacks, the Democrats are hardly going easy on Enron and its accountants. If a million in contributions didn't corrupt Democrats, how can they argue, now and in the future, that campaign contributions corrupt the Republicans? With luck, congressional Democrats may avoid the easy demagoguery of "Big Money" attacks and work instead on a serious investigation of Enron's demise.
The Enron debacle does not look like a winner for McCain and his supporters. That won't stop them from trying to blow smoke where there's no fire. As this saga winds off into the details of overseeing audits, we should remember the lesson of Enron's bankruptcy. Campaign contributions helped Enron not at all in its hour of greatest political need. Like many faiths before, hard facts contradict the central tenet of the religion of campaign-finance reform. How long before the church itself falls to earth?