StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



Rebooting Democracy

28 May 2010
Posted by Andrew Samwick

Harvard Law School Professor Lawrence Lessig visited Dartmouth yesterday to deliver a public lecture with the same title as this post.  His topic was the nearly intractable issue of the role of money and lobbying on policy.  He has written extensively about the issue and has a nascent movement to show for it.  See "Fix Congress First," where he advocates for, among other things, the Fair Elections Now Act

I had the chance to talk with him over lunch. In the course of that discussion, there seemed to be four approaches, not mutually exclusive, that emerge in trying to reduce the corrupting influence of money on politics:

1) Restrictions on who can give to whom

An example of this was what I proposed in my first blog post on this topic (here), in which I suggested that it ought not to be legal to make a campaign donation to a candidate who would not represent you as a constituent.  This would by my definition remove all non-voter money from direct contributions to candidates.  As an option, restricting who can give to whom is unlikely to get much traction with the Supreme Court, which seems to hold the view that money is speech and cannot be restricted any more than speech can.  I continue to think that's crazy -- some money in politics is speech, but plenty of money in politics is bribery.

2) Restrictions on what citizens can spend to broadcast their views during a campaign

I put all of the regulations on campaign advertising by private parties in this category.  As much as I see the corrupting influence that this spending has, I don't see any way that the First Amendment allows it to be restricted.

3) Public financing, whether by law or by very generous incentives

The Fair Elections Now Act is an example (and was referenced by one of the comments on my earlier post).  The hope is that with generous matching of small donations and some other opt-in regulations, candidates could run competitively for office without having to accept funding from special interests.  I am skeptical of whether these would work -- incentive schemes are very hard to calibrate -- but I don't see why some states don't run the experiment and see how it turns out.  (Maybe some states have done so and I am just not aware of the results.)

4) Regulations on the behavior of elected officials

A commenter on the earlier post suggested that elected officials be required to recuse themselves from any matter pertaining to an issue where they have taken campaign money.  A similar idea that occurred to me would be to change the rules on how elected officials could participate in fundraising that involved groups.  For example, what if we forbid candidates or politicians from engaging in activities that help groups raise funds -- no more $1,000-a-plate dinners where they give access to those who have paid a group that can make political contributions or run political ads?

What are your ideas about how to get the corrupting money out of politics?

Start by mitigating conflicts of interest

"What are your ideas about how to get the corrupting money out of politics?"

don't allow donations from companies that politicians are supposed to be regulating (e.g. kanjorski/GSEs)


Get local, first.

In my town, one of our selectman owns the excavation business that does the lion's share of the snow removal.

A candidate for governor in my state owns a company that's up for potential investment from Federal funds for alternative energy.

I think it's hard to recognize the conflicts on the national level when we live so cozily with them on the local level.


The answer is simple --

The answer is simple -- reduce government. The amount of money in politics is commensurate with the power government exercises over our lives. The more power government wields, the more energy will be devoted to lobbying and attempting to influence it.

Perhaps the easier means would be scrapping the tax code, eliminating every loophole and tax credit, and starting over with a flat tax. That alone would put thousands of lobbyists out of work.


We tried that, remember?

We reduced financial oversight. It brought us an economic collapse.

We reduced environmental oversight. It brought us the worst oil spill in American history.

We reduced taxes. It brought us from a budget surplus to a budget deficit.

One definition of insanity is when you keep doing the same thing expecting different results. So I really hope you've got some new ideas and something different to try.


We tried reduced oversight?

We tried reduced oversight? Really? Then why did SEC funding increase last decade? And how does Sarbanes-Oxley count as reduced oversight? The financial sector is one of the most regulated areas of the US economy.

BP oil spill didn't occur from too little regulation. We had plenty of regulation -- and the regulators were busy partying with industry officials. I also don't buy into the notion that any accident can be prevented as long as we have enough rules. Lastly, let's consider why BP was drilling so deeply -- so much of the US coast line is off limits. The LA-TX coastline of one of the few places drilling can take place, and they have to go further and further out.

Lastly, I said nothing about lowering taxes. Actually, eliminating loopholes and tax credits -- which is what I called for -- would be viewed by most people as the opposite.


Deregulation was rampant

"We tried reduced oversight? Really? Then why did SEC funding increase last decade? And how does Sarbanes-Oxley count as reduced oversight? The financial sector is one of the most regulated areas of the US economy."

Don't get me started. Repeal of the uptick rule, continuation of illegal naked shorting (the Reg Sho list was just a lame nod to make us feel "protected"), increased leveraging of the WS banks (there's a great video of the day SEC voted to allow 30:1 leveraging, and the board even makes mention of the disaster that could ensue), the growth of ETFs, unregulated hedge funds, Credit Default Swaps, and other financial instruments of mass destruction (ask Warren Buffet - those are his words) -- these were all unregulated vehicles.

You don't think the mortgage industry needed more oversight? Ever heard of liar's loans? Interest-only loans?

Friedmanites -- hanging is too good for them.


Smaller government is possible but....

Government will never get smaller as long as campaigns are paid for by businesses that depend on or want favorable treatment from the government. Many times the favor is in the form of a tax break or a subsidy or a contract or a bailout or using the government to reduce competition.

The more favors - the more campaign money for incumbents who will protect the favored. Smaller government is possible but we need publicly funded elections (Fair Elections Now Act) to break this cycle. Then we can put the lobbyists out of work (or at least some of them).


require all donations to be anonymous

On how to get corrupting money out of politics, what about the idea of anonymous donations?

See for example
this somewhat somewhat skeptical review. Despite skepticism, the idea seems worth a try).


If donations are speech, how

If donations are speech, how can you ban public speech?


The P Chip

I'm not optimistic about our ability to invent a system of campaign finance and/or spending regulation that significantly reduces the power of money without impinging unacceptably on free speech and free association rights. But I do think that there just might be a technological fix.

The crucial nexus between big money and the outcome of elections is television advertising. Campaigns do spend money on other things -- polling, direct mail, events, yard signs, what have you. But the big dollars go to the production and airing of television ads. And television ads are the most effective way of reaching and persuading the more disengaged "undecideds" who are the swing voters in most races. Break this nexus and you drastically reduce the power of money. But how?

Remember the V-Chip, the little gadget in your television (yes, it's in there!) that allows you to screen out objectionable programming? Why not create (and require) a P-Chip? The P-Chip would give viewers a choice of whether or not to view political advertising. If set to "no", the viewer receives ordinary commercial advertising only; if "yes", then political ads would be shown (when there are any, of course). Notice that this would allow broadcasters to sell the same ad "slot" twice: once to a commercial advertiser and once to a political advertiser.

My impression is that most people *hate* political ads and would love a chance to "opt out" of them. And, of course, the P-Chip could be set to "no politics" by default, making political advertising "opt in" -- which would be even more effective.


I didn't see how you could

I didn't see how you could reduce the influence of money and TV it until you wrote:
> this would allow broadcasters to sell the same ad "slot" twice: once to a commercial advertiser and once to a political advertiser.

Yes, that would mobilize enough interest by the broadcaster to drown out political ads on TV. They hardly offer information anyhow but only sound bites. Their disappearance, CHOSEN BY THE CONSUMER, would be beneficial and legal. Yes, I want that p-chip.


don't let political parties & politicians pick the voters

Voting districts should be based solely on proximity. No gerrymandering for race, poverty, age, historical voting patterns, etc. Without the ability to secure jobs for life, the incentives for politicians would be more aligned with their constituents and local issues would get the attention that they deserve. We can debate what the algorithm should be (e.g., what weight should be placed on walking distance versus driving distance; what penalty should be placed on shifting large numbers of voters in a single redistricting; etc.); but, ultimately, the decision should be removed from the politicians, the political parties, and their army of political consultants.

It is time that we move away from "government by the politicians, for the politicians, of the politicians".


Algorithms are not easily

Algorithms are not easily understood by many and, therefore, can be manipulated. What about the California approach: use a committee of retired judges to draw the boundaries. Personally, I prefer election reform, away from the plurality vote and to other forms, like Instant Run-Off: that would make Gerrymandering simply less effective.


Anonymous Donations

Someone's already said it, but I think making all donations anonymous is a good idea. Of course it can't completely eliminate quid pro quo behavior, but it will reduce the incentives a lot. Politicians will have less incentive to do companies' bidding because they're not sure whether they received the requisite payment.


It would be quite scary to

It would be quite scary to really put the voters in charge. I don't believe this has really been tired before. Monied interests are quite observant with respect to policy while voters are mostly ignorant (and rationally so). Is it really better to be ruled by the whims of public opinion, than by a balance of power among a self-interested oligarchy of special interests?


Oligarchy has failed

What you are really saying is that representative Democracy is a failure because Americans are too stupid to vote intelligently. I have to admit that I think the same thing every time I see Sarah Palin but I also think an Oligarchy is even worse.

For at least the last 30 years we have been slowly ceding control of government to a small number of corporations (citizens united may seal the deal). It is very difficult to look around us now and conclude that that was a wise decision.

Control of government by the banks, Sen. Durbin said that the banks "frankly own the place", resulted in a global economic collapse and a multi-trillion dollar bailout. The invasion of Iraq was conducted, at least in part, at the urging of the defense industry, Halliburton,(the military-industrial-congressional complex), and oil companies. The oil companies have blocked any efforts to slow our use of fossil fuels or deal with global warming or the realities of declining global oil production in the near future. The business lobby has blocked efforts to deal with offshoring, stagnant wages, a loss of manufacturing, unfair competition against small business, while allowing offshore tax havens and multiple tax loopholes for large corporations.

The interests of the 'Oligarchy' do not line up with the interests of the middle-class; they never have and never will. Working families are not represented, the poor are not represented, the environment is not represented, and the future is not represented.


Public Financing

Public financing of elections has been tried in both Arizona and Maine and has done a good job of taking the money out of elections. Each candidate that wants to use clean money has to get a number of small donations (i think $5) then they qualify for public financing but can't collect any other money. Because it is voluntary it doesn't face the same supreme court challenges.

Besides keeping bribery out of politics, the big benefits are that good candidates aren't weeded out because they can't raise money or choose not to raise money the old way. Another benefit that few people talk about is that candidates don't have to spend all their time raising money, they can actually do their job.




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