President Obama Flunks Campaign Finance 101

Last Thursday, in a 5-to-4 decision, the Supreme Court struck down portions of the 2002 Bipartisan Campaign Reform Act, commonly called McCain-Feingold, that prohibited corporations and unions from explicitly endorsing candidates thirty days prior to a primary and sixty days prior to the general election (direct contributions to candidates remained banned). The Court's majority framed the issue in First Amendment terms --McCain-Feingold had gone too far in limiting the free speech of corporations and unions.

Reaction to the decision followed the liberal-conservative divide, with conservatives welcoming more free speech (even for unions) and liberals worried that permitting yet more election money would undermine democracy. Court narrowing of campaign finance laws is hardly new. Remarkable was President Obama's near-hysterical (and ill-informed) reaction to this decision. A day after, he called it "a major victory of big oil, Wall Street banks, health insurance companies, and other powerful interests that marshal their power every day to drown out the voices of everyday Americans" [1]. The rhetoric soon escalated: "This ruling strikes at our democracy itself. ... I can't think of anything more devastating to the public interest" [2]. Obama further added that he was instructing his advisers to work with Congress on a "forceful, bi-partisan response."    

The president's reactions betray a profound ignorance of campaign finance. If democracy is to be safeguarded by regulating campaign spending, then America's virtue is impregnable. Justice Kennedy's opinion noted that campaign finance laws apply to seventy-one distinct entities, cover some thirty-three types of political speech, and the Federal Election Commission supplies some 568 pages of regulation, together with 1,278 pages of explanations and 1,771 advisory opinions offered since 1975 (states also have their own dense compendiums to protect our democratic virtue). Masochists are invited to visit FEC.gov and see for themselves. Justice Kennedy's majority opinion also noted that one hundred thousand pages of legal evidence failed to cite a single case of corporate donations purchasing a legislative vote. Indeed, these complicated laws require candidates to hire election law experts, and if anything, these requirements undermine electoral access by hindering those on shoestring budgets.  

Obliviousness was compounded by amnesia and denial. If excessive spending hurts democracy, President Obama is the Grim Reaper. In 2008, Obama outspent Senator McCain more than two to one ($720 million to $333 million), and, of the utmost relevance, he declined public matching funds (a keystone of campaign finance reform) so as to spend without limit. That much of this money was raised from "special interests," notably Wall Street, that Obama now excoriates only adds to the irony. Nor has his election cooled his thirst for fundraising, including incessant Air Force One travel, to promote his agenda. A cynic might suggest that Obama condemns "big oil" but forgets about big, well-oiled, White House-organized public relations machine.  

The president is also misinformed about evil "special interests" being some GOP auxiliary. According to OpenSecrets.org, which tracks campaign donations, between 1998 and 2009, corporations and unions overwhelmingly favored the Democratic Party. Somebody should tell the president that six of the top ten givers are unions, and these will now be allowed to explicitly endorse candidates without restrictions! Of the leading hundred donors in terms of contribution size, the first one that even leans toward the GOP is the American Medical Association, and it is ranked number fifteen. The first solid GOP benefactor (more than 90% to the GOP) is Amway at number 87. This is not to say that big business actually adores Democrats; rather, they are savvy political players who donate opportunistically. Even the far-left Barney Frank receives corporate contributions -- an excellent investment, given his influence and safe seat.

One can only wonder if this Ivy League-educated president, who majored in political science at Columbia, ever took a course about elections. If he had, he would have learned that all the efforts to reduce the flow of money into elections have failed miserably. The bill for all federal elections in 2000 was $3.1 billion, $4.1 billion in 2004, and $5.4 billion in 2008. This upward trend is probably irreversible for reasons that such a course would make clear. Moreover, political money is governed by the hydraulics principle: Ban it in one place and it pops up elsewhere. So if Congress restricts what an individual can personally donate (current law), then he might give in another person's name, donate to a state organization outside federal supervision, or just create an "independent" organization to promote his favored candidate. George Soros, among countless others, is a brilliant hydraulic engineer. Moreover, if Obama had taken a course on elections, he surely would have learned that the link between campaign donations and legislative reciprocity is not nearly as clear-cut as agitated idealist reformers insist.  

Obama's hypothetical election course would also reveal that money is only one of many factors predicting victory, and many of these other elements are beyond regulation. To take a random example, consider mobilizing the politically lethargic. One costly but largely ineffective tactic is to use call centers to hector the stay-at-homes. There are also media campaigns like the ill-fated "Vote or Die." These will, however, require FEC reporting and thus catch the regulator's eye. Much cheaper and under the regulatory radar is to direct government-funded community organizers to coral voters on Election Day. Better yet, and equally invisible to the FEC, permit fellow community activists to challenge an opponent's petition signatures or go over registration rolls with a fine-tooth comb to expunge hostile voters.

Perhaps the all-time winner for running a cheap campaign that escapes regulatory scrutiny is to use celebrities. Celebrities are worth their weight in gold and count for zero in publicly financed campaigns. Want widespread free TV coverage and huge crowds? Easy -- just appear with Oprah Winfrey. Need a fundraiser with top-drawer donors but can't afford to hire an expensive events coordinator? No problem if Barbra Streisand will host it. More generally, having Hollywood on your side is worth millions in free-of-charge media coverage and glamor-seeking donors. And guess which political party has the edge here. Imagine President Obama saying, "The impact of Hollywood celebrities on American elections is pernicious, and I demand Congress pass legislation that treats this assistance as a cash equivalency donation and thus limited to $2400, the same as ordinary citizens." According to my calculations, Oprah could help a candidate for exactly 1.9 seconds before the meter hit $2400. This would be a bonanza for the GOP, given that its celebrities have lower hourly rates.   

"Excessive" campaign money hardly corrupts democracy, but even if it did, far better ways exist to cut campaign costs besides futile micro-regulation. Better to remove government from our lives: "Special interests" give only if they can receive some benefit, and if nothing is to be gained, then why give?

Attack the incentives; don't micromanage campaign finance to protect some illusive public interest. It is hardly accidental that as Washington has aggressively inserted itself into health care, automobile safety, home mortgages, education and countless other policy domains once ignored or left to the states, campaign contributions, have exploded. Why has UPS spent some $24 million in political donations between 1989 and 2009 if not to fend off federal government intervention in their workplace? What if Washington ignored UPS and let the market judge its business practices? In fact, politicians know full well that if the coffers are running low, just propose some legislation that will adversely affect an industry, and the cash will come. "Shakedown" is a bit harsh, but that's the idea.

President Obama's reaction can be viewed from two perspectives. The first is his decision to "go populist" and condemn the usual populist targets -- Wall Street, Big Oil, and all the rest. That this attack is factually incorrect makes no difference. It's the public image that counts. A second interpretation is that the president (and his advisers) has genuinely failed to understand a fairly straightforward Supreme Court decision. That he majored in political science, graduated from Harvard Law, and even taught "Con Law" makes this latter interpretation particularly disturbing.


[1]Adam Liptak, "Justices 5-4, Reject Corporate Spending Limit," New York Times, January 22, 2010. Online edition.

[2] Sheryl Gay Stolberg, "Obama Turns Up Heat Over Ruling on Campaign Spending," New York Times, January 24, 2010, p. 18.

Last Thursday, in a 5-to-4 decision, the Supreme Court struck down portions of the 2002 Bipartisan Campaign Reform Act, commonly called McCain-Feingold, that prohibited corporations and unions from explicitly endorsing candidates thirty days prior to a primary and sixty days prior to the general election (direct contributions to candidates remained banned). The Court's majority framed the issue in First Amendment terms --McCain-Feingold had gone too far in limiting the free speech of corporations and unions.

Reaction to the decision followed the liberal-conservative divide, with conservatives welcoming more free speech (even for unions) and liberals worried that permitting yet more election money would undermine democracy. Court narrowing of campaign finance laws is hardly new. Remarkable was President Obama's near-hysterical (and ill-informed) reaction to this decision. A day after, he called it "a major victory of big oil, Wall Street banks, health insurance companies, and other powerful interests that marshal their power every day to drown out the voices of everyday Americans" [1]. The rhetoric soon escalated: "This ruling strikes at our democracy itself. ... I can't think of anything more devastating to the public interest" [2]. Obama further added that he was instructing his advisers to work with Congress on a "forceful, bi-partisan response."    

The president's reactions betray a profound ignorance of campaign finance. If democracy is to be safeguarded by regulating campaign spending, then America's virtue is impregnable. Justice Kennedy's opinion noted that campaign finance laws apply to seventy-one distinct entities, cover some thirty-three types of political speech, and the Federal Election Commission supplies some 568 pages of regulation, together with 1,278 pages of explanations and 1,771 advisory opinions offered since 1975 (states also have their own dense compendiums to protect our democratic virtue). Masochists are invited to visit FEC.gov and see for themselves. Justice Kennedy's majority opinion also noted that one hundred thousand pages of legal evidence failed to cite a single case of corporate donations purchasing a legislative vote. Indeed, these complicated laws require candidates to hire election law experts, and if anything, these requirements undermine electoral access by hindering those on shoestring budgets.  

Obliviousness was compounded by amnesia and denial. If excessive spending hurts democracy, President Obama is the Grim Reaper. In 2008, Obama outspent Senator McCain more than two to one ($720 million to $333 million), and, of the utmost relevance, he declined public matching funds (a keystone of campaign finance reform) so as to spend without limit. That much of this money was raised from "special interests," notably Wall Street, that Obama now excoriates only adds to the irony. Nor has his election cooled his thirst for fundraising, including incessant Air Force One travel, to promote his agenda. A cynic might suggest that Obama condemns "big oil" but forgets about big, well-oiled, White House-organized public relations machine.  

The president is also misinformed about evil "special interests" being some GOP auxiliary. According to OpenSecrets.org, which tracks campaign donations, between 1998 and 2009, corporations and unions overwhelmingly favored the Democratic Party. Somebody should tell the president that six of the top ten givers are unions, and these will now be allowed to explicitly endorse candidates without restrictions! Of the leading hundred donors in terms of contribution size, the first one that even leans toward the GOP is the American Medical Association, and it is ranked number fifteen. The first solid GOP benefactor (more than 90% to the GOP) is Amway at number 87. This is not to say that big business actually adores Democrats; rather, they are savvy political players who donate opportunistically. Even the far-left Barney Frank receives corporate contributions -- an excellent investment, given his influence and safe seat.

One can only wonder if this Ivy League-educated president, who majored in political science at Columbia, ever took a course about elections. If he had, he would have learned that all the efforts to reduce the flow of money into elections have failed miserably. The bill for all federal elections in 2000 was $3.1 billion, $4.1 billion in 2004, and $5.4 billion in 2008. This upward trend is probably irreversible for reasons that such a course would make clear. Moreover, political money is governed by the hydraulics principle: Ban it in one place and it pops up elsewhere. So if Congress restricts what an individual can personally donate (current law), then he might give in another person's name, donate to a state organization outside federal supervision, or just create an "independent" organization to promote his favored candidate. George Soros, among countless others, is a brilliant hydraulic engineer. Moreover, if Obama had taken a course on elections, he surely would have learned that the link between campaign donations and legislative reciprocity is not nearly as clear-cut as agitated idealist reformers insist.  

Obama's hypothetical election course would also reveal that money is only one of many factors predicting victory, and many of these other elements are beyond regulation. To take a random example, consider mobilizing the politically lethargic. One costly but largely ineffective tactic is to use call centers to hector the stay-at-homes. There are also media campaigns like the ill-fated "Vote or Die." These will, however, require FEC reporting and thus catch the regulator's eye. Much cheaper and under the regulatory radar is to direct government-funded community organizers to coral voters on Election Day. Better yet, and equally invisible to the FEC, permit fellow community activists to challenge an opponent's petition signatures or go over registration rolls with a fine-tooth comb to expunge hostile voters.

Perhaps the all-time winner for running a cheap campaign that escapes regulatory scrutiny is to use celebrities. Celebrities are worth their weight in gold and count for zero in publicly financed campaigns. Want widespread free TV coverage and huge crowds? Easy -- just appear with Oprah Winfrey. Need a fundraiser with top-drawer donors but can't afford to hire an expensive events coordinator? No problem if Barbra Streisand will host it. More generally, having Hollywood on your side is worth millions in free-of-charge media coverage and glamor-seeking donors. And guess which political party has the edge here. Imagine President Obama saying, "The impact of Hollywood celebrities on American elections is pernicious, and I demand Congress pass legislation that treats this assistance as a cash equivalency donation and thus limited to $2400, the same as ordinary citizens." According to my calculations, Oprah could help a candidate for exactly 1.9 seconds before the meter hit $2400. This would be a bonanza for the GOP, given that its celebrities have lower hourly rates.   

"Excessive" campaign money hardly corrupts democracy, but even if it did, far better ways exist to cut campaign costs besides futile micro-regulation. Better to remove government from our lives: "Special interests" give only if they can receive some benefit, and if nothing is to be gained, then why give?

Attack the incentives; don't micromanage campaign finance to protect some illusive public interest. It is hardly accidental that as Washington has aggressively inserted itself into health care, automobile safety, home mortgages, education and countless other policy domains once ignored or left to the states, campaign contributions, have exploded. Why has UPS spent some $24 million in political donations between 1989 and 2009 if not to fend off federal government intervention in their workplace? What if Washington ignored UPS and let the market judge its business practices? In fact, politicians know full well that if the coffers are running low, just propose some legislation that will adversely affect an industry, and the cash will come. "Shakedown" is a bit harsh, but that's the idea.

President Obama's reaction can be viewed from two perspectives. The first is his decision to "go populist" and condemn the usual populist targets -- Wall Street, Big Oil, and all the rest. That this attack is factually incorrect makes no difference. It's the public image that counts. A second interpretation is that the president (and his advisers) has genuinely failed to understand a fairly straightforward Supreme Court decision. That he majored in political science, graduated from Harvard Law, and even taught "Con Law" makes this latter interpretation particularly disturbing.


[1]Adam Liptak, "Justices 5-4, Reject Corporate Spending Limit," New York Times, January 22, 2010. Online edition.

[2] Sheryl Gay Stolberg, "Obama Turns Up Heat Over Ruling on Campaign Spending," New York Times, January 24, 2010, p. 18.

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