Campaign-Finance Law, the State of Nature, and the Nirvana Fallacy

One cannot fault Professor Derek Muller, whose work I admire and respect, for taking a hard libertarian line against campaign-finance regulation in his Liberty Forum essay. After all, that misguided approach is built into the prompt of the question posed by Law and Liberty’s editors:

“Should a democracy through concerns about corruption in politics and equality in participation determine the formation of political opinions through regulations or should campaign regulation be guided by the principle of the free formation of opinion that emerges spontaneously in society?”

Let us try reframing the question this way: Should a democratic society, one committed to both free economic markets and principles of political equality, allow those with great economic power—power they have accrued thanks to state-conferred benefits—to use it to protect their already privileged economic positions?

I confess I laughed aloud when I read the Law and Liberty prompt and its reference to “opinion that emerges spontaneously in society.” This assumes the existence of some state of nature, an unregulated world untouched by government, in which all of us develop “opinions” about politics, “opinions” presumably leading to votes for candidates and ballot measures, which would emerge out of unfettered discussion and deliberation but for the government’s interference through burdensome, unnecessary, and unconstitutional campaign-finance regulation.

The idea here is that, without limits on how much money people can give to candidates and spend on elections, the invisible hand of the political process would work, consistent with the vision of the Founders, to give us a blissful democracy in which the separation of powers (and I presume federalism), brilliantly inserted into the Constitution by the Framers, would serve as the sole check on government abuse and misalignment between politicians’ pursuits and the popular will.

Whether this state of nature actually existed at any point in history is doubtful. In any case it certainly does not describe the state of politics in the 21st century United States. The question as posed by Law and Liberty commits the “Nirvana fallacy”: it compares current conditions to an idealized time that has never existed.

Rather than a state of nature, the current United States is one in which laws facilitate the accumulation and protection of wealth, for some much better than others, for the “haves” much more than the “have-nots.” It is no state of nature that allows hedge-fund managers, for example, to pay much lower taxes than they otherwise would thanks to the carried interest loophole. Indeed, legal systems strongly protecting private property rights are themselves a form of regulation, albeit regulation that lines up with the ideological predispositions of those who call themselves libertarians.

In this system of representative democracy coupled with unlimited personal wealth, individuals—hedge-fund managers, casino moguls, oil magnates, or others—can use their very large wealth, accumulated with the help of state laws and protections, to try to influence politics and policy. One way of doing so is by directing some of those economic resources to candidates and campaigns. During each election season candidates, parties, and outside groups spend literally billions of dollars on political activity aimed at tens of millions of American voters, much of the money destined for television, radio, and now Internet advertising aimed at turning out supporters and swaying the least informed voters. An 18th century salon it is not.

The notion that there is such a thing as “free formation of opinion” emerging spontaneously outside of the structure of government regulation and protection of property rights is incorrect. So, too, is Law and Liberty’s underlying assumption that campaign laws aimed at preventing corruption or promoting political equality simply “determine” public opinion. I am aware of no proof of such determinacy and Professor Muller offers none.

Professor Muller, in making the libertarian case against campaign-finance limits (the costs and benefits of disclosure sadly get barely a mention despite their importance), puts a thumb on the scale. The only constitutional set of rights he recognizes concerns “the open exchange of political views.” Of course, the rights of free speech and association (we need both for open exchanges) protected by the U.S. Constitution’s First Amendment are key and deserve great protection. We need robust discussion of ideas and hard-fought campaigns presenting multiple points of view.

But speech (as measured by the spending of money) and association are not the only constitutional values at stake when it comes to regulating our democratic process and money in politics. If they were, laws against bribery would be unconstitutional; we do not allow wealthy people to simply buy legislative outcomes. Achieving the right balance among competing rights and interests is what makes the campaign-finance question so difficult.

Professor Muller is right to criticize the simplistic approach to campaign finance that the Supreme Court gave us beginning with its 1976 decision in Buckley v. Valeo. In Buckley, the Court recognized only corruption and the appearance of corruption as strong enough interests to stand against First Amendment rights of free speech and association and to justify (some) campaign-finance limits. And the Court rejected, “as wholly foreign to the First Amendment,” an interest in protecting political equality.

The corruption argument, as Professor Muller explains, cannot bear the intense weight the Supreme Court has put on it for the last 40 years. How is it, Professor Muller asks, that a $5,400 contribution (the current limit to federal candidates running in a primary and general) is non-corrupting but $5,401 becomes corrupting? And the Court has clung to the “appearance of corruption” rationale despite a lack of good social science evidence that public confidence in the fairness of the election process rises or falls with campaign-finance limits.

But the English language is malleable, and the term “corruption” has expanded and contracted in meaning depending upon who has sat on the Supreme Court. Liberal justices have read the term broadly and voted to uphold many limits on money in politics. Conservatives, in contrast, in cases such as the 2010 decision in Citizens United v. Federal Election Commission, have read the term as something narrow akin to bribery, and have voted to strike down many limits.

At its broadest, “corruption” can mean anything that deviates from a perfect state of nature; it is this broad meaning of corruption that led the Supreme Court to first uphold corporate spending limits in a 1990 case, Austin v. Michigan Chamber of Commerce, but then overturn such limits in its Citizens United decision. Austin involved limits that the state of Michigan imposed on the campaign activities of for-profit corporations and non-profit corporations, like the Chamber of Commerce, which derive their funds from for-profit corporations. These corporations were not allowed to use the money they made selling shoes or software for election-related spending. Instead these corporations could set up a political action committee (or “PAC”) and pay the PAC’s expenses, soliciting shareholders, officers, and directors to make contributions to the PAC.

When the Supreme Court upheld Michigan’s law in Austin, it did not reach the question whether the law could be justified by the government’s interest in preventing the kind of corruption the Court recognized in Buckley. Instead, the Court held that the law was justified by what it termed a “different type” of corruption: “the corrosive and distorting effects of immense aggregations of wealth that are accumulated with the help of the corporate form and that have little or no correlation to the public’s support for the corporation’s political ideas.”

This “distortion” language evidenced a concern about inequality. Corporate spending was worrisome because it would be disproportionate to the public’s support. The Court in Austin likely used the label of “corruption” to keep the precedents in line. It would have been hard to recognize this “anti-distortion” interest as a species of equality argument without overturning a key aspect of Buckley. The Court said just that in Citizens United when it overruled Austin. But the Court’s concern in Austin about disproportionate spending was a real one that should not have been abandoned.

While the Court scored points for intellectual honesty in Citizens United in recognizing Austin as making an equality argument rather than an anticorruption argument, it made a wrong constitutional turn in rejecting the equality interest always and for all time. In the rest of my response, I want to explain why, and along the way reject as unpersuasive Professor Muller’s critiques of the equality argument.

Let’s begin with these two points.

First, constitutional rights are not absolute, even rights of free speech. In hard cases, the balancing of rights and interests is inevitable.

Second, in balancing constitutional rights against government or societal interests, the Constitution itself provides no lists of rights that are deemed “compelling” or “important,” leaving that question, too, to the value judgments of the justices. Why are preventing corruption, deterring fraud, promoting voter confidence, or preventing ballot confusion good reasons to limit rights, but promoting political equality is not? Because the Supreme Court has said so.

Thus, when the Court in Buckley wrote that promoting political equality is “wholly foreign to the First Amendment,” it was a statement, as Supreme Court Justice Stephen Breyer later wrote, that could not be taken seriously. A limit on how much one can contribute to campaigns is just as much of an infringement on free speech whether it is justified on anti-corruption grounds, equality grounds, or to further some other interest.

Further, the United States has had a long tradition of political equality, which has generally increased over time, with the enfranchisement of former slaves, then women, then 18-to-21-year-olds. The Court’s rulings, especially beginning in the 1960s, promoted the right to vote and the “one person, one vote” principle. Political equality is a well-accepted democratic value in 21st   century America, and it should be recognized as a permissible reason to limit money in politics, if it can survive a careful balancing before the courts.

Why should it be that one person—billionaire casino mogul Sheldon Adelson—can single-handedly bankroll a presidential candidate (Newt Gingrich) to keep him afloat in the 2012 Republican presidential primary? Adelson and his spouse contributed between $98 million and $150 million to campaigns in 2012. Gingrich did not win the primary, but he got multiple chances to make his case, not because that is what many voters wanted, but because a single billionaire wanted it. Money cannot buy elections, but money makes it much more likely that a candidate will get a good chance to be elected. Money also makes it much more likely that a donor can further legislation he or she prefers and, even more likely, block legislation he or she  does not like.

In early 2016, according to a recent New York Times report, about half the money flowing into federal elections to that point came from 158 households out of the 120 million households in the United States. And these very top donors (a much more exclusive group than the famous One Percent) have different views from the rest of Americans—for example, being much less likely than everyone else to support a minimum wage high enough to keep people out of poverty.

My view, advanced more fully in my book, Plutocrats United: Campaign Money, the Supreme Court, and the Distortion of American Elections (reviewed on this site by Stephen Klein), is that the Supreme Court should recognize political equality as a compelling interest that can justify reasonable limits on money in campaigns, so long as it can be shown that the system allows enough money for robust political competition and strong debate.

Professor Muller raises a number of familiar objections to the equality argument, which I discuss in detail in my book, and to which I respond only briefly here.

First, Professor Muller notes that there are many ways of defining equality, including having equality of parties, with the Green Party candidate getting the same resources as the major parties. My view, focused on voter equality, would give each voter $100 in campaign-finance vouchers to contribute to candidates, parties, and groups to fund elections. In such a system, those funded would reflect actual public support. This is not a constitutionally compelled interest in equality, but a constitutionally permissible one.

Second, Professor Muller says that limiting money but not other aspects of elections unfairly discriminates against those with money. But money is different in the sense that other attributes, such as celebrity or the ability to volunteer one’s time to helping a political campaign, are likely to be randomly distributed throughout society. Studies show that money skews in a particular direction: such as (unsurprisingly) against fair taxation of the wealthy.

Third, Professor Muller raises concerns about privileging the media. This is the hardest argument on the reform side, and I devote an entire chapter of my book to it. Very briefly, I argue that the media play an important educative and investigatory function, which justifies exempting media companies from usual campaign finance rules. Further, with the rise of the Internet and social media, there is much less reason to worry about liberal media bias than there ever was.

Finally, Professor Muller points to the Equal Time doctrine and other failed experiments to show why the government cannot be trusted with reform, and argues that reforms could backfire by helping incumbents. These are good points, and show that reform cannot be ham-handed. Experimentation with reform, such as Seattle’s recent adoption of publicly financed campaign finance vouchers, are a step in the right direction. Campaign laws enacted via ballot initiative take incumbency-protection out of the equation.

Smart reforms using generous limits and voucher-like market mechanisms can protect robust political speech and debate even as they help prevent the United States from becoming a plutocracy in which those with the greatest wealth have by far the most influence over who is a viable candidate running for election and, by extension, which policies the government pursues or fails to pursue.

Rather than pretending that campaign-finance laws interfere with a pristine state of nature, we should realize that all systems of power serve as forms of regulation. The public’s outrage over Citizens United and what it has wrought is well-founded. The people should be able to ensure that the Supreme Court does not interpret the Constitution in a way that will destroy American democracy, with its commitment to both free speech and political equality.