Contribution Limits and Public Funding of Campaigns

Bob Bauer talks about contribution limits and how campaign finance reformers are excited about the growth of the small donor in the presidential race.

Laura MacCleery of the Brennan Center is cautious, more so than Rick Hasen. She is pleased with the growing significance of small donations in Presidential campaigns, made possible by Internet technology, but she notes that Democrats have done better here than Republicans, and she worries that the same trend is not visible in Congressional elections.

Her argument then assumes a different shape as she analyzes the role of limits in constructing public financing schemes—which she describes as the "exciting new waves of reform." Limits serve to keep "overall costs reasonable"; she explains that "without a system of limits in place, it will be hard for publicly funded candidates to keep up with the spending of privately financed competitors." (Ed. Note: Bauer linked to MacCleery's Roll Call Article and I to the Brennan Center Blog entry is Roll Call is a Subscritpion service.)

MacCleery writes:

So, despite the rise of a small-donor democracy, contribution limits still very much matter and are likely to matter for some time to come. The soft-money ban in the Bipartisan Campaign Reform Act of 2002 deserves much of the credit: By prohibiting corporate and union contributions to political parties, BCRA pushed candidates to reach out more broadly for individual support.

Looking forward, both meaningful limits and transparency rules are important for the health of an exciting new wave of reforms — public funding systems — because they keep overall costs reasonable and inform the public about all of the players seeking to influence the outcome of elections.

Indeed, without a system of limits in place, it will be hard for publicly funded candidates to keep up with the spending of privately financed competitors.

Unfortunately, MacCleery overlooks a basic concept of economics when arguing for more "reforms" in light of the small donor "revolution." Costs are not controlled by limits on contributions.

MacCleery is experienced enough to know that there is a difference between contribution limits and expenditure limits, specifically, the former are permitted and the latter unconstitutional unless voluntarily adopted by the candidate as a system of public funding. But while it is possible to limit the amount of money a single person can contribute to a campaign, it is hard to imagine how those limits can translate into support for publicly funded campaigns.

You need to look no farther than this year's Presidential races to see that even the growth in small donor donations has not served to limit in any remote way the expenses incurred by the candidates. This is where MacCleery really goes off-track.

The success of a public funding mechanism will be predicated upon the ability of the candidates themselves to control the costs of campaigning itself, i.e. the expenses of advertising, mailing, staff, office expenses, etc. But a system of publicly funded campaigns will still have to operate in an environment where the goods and services needed by a campaign are governed by market forces. Unless the campaigns themselves or the state providing the public fudning can control the everyday costs of campaigning, there is going to be no way to prevent campaign costs from continuing their current upward spiral.

Then there is the subsidy problem. As most economists will tell you, if you want more of something, subsidize it. If the state begins subsidizing political campaigning and making the bar to qualify for public spending relatively low, you will get more people campaigning. That sounds like a great idea, until you start tallying the costs of all these additional campaigns qualifying for public funding. While more candidates is good for the choice aspect, it is really bad for the controlling the costs of public funding aspect.

How can costs be contained? Well the first method would be price controls on goods and services and to any legislature that hopes to do that, good luck getting that passed and surviving court challenges. Second, you can impose spending limits (again it must be voluntary to pass constitutional muster). However, voluntary spending limits are going to be no match over the long haul without an inflationary mechansim--witness the death of the presidential primary matching system this year). However, as the inflationary mechanism kicks in, the hard dollar cost of the public funding program increases, taking its toll on the state budget over time.

You could limit the number of candidates that can take public funding in the program, by requiring they pass some sort of threshhold amount. This gets tricky because while the state can mandate certain registration thresholds, you can't set the bar too high without running afoul of the constitutional right to access the ballot. So the state will have to face a certain lower level of qualification--which leads to the subsidizing politics problem.

In none of these scenarios can the limit on how much money a single person can contribute to a campaign serve to control the costs of public funding mechanisms. To make a public funding mechanism work over the long haul, there has to certain features to appeal to candidates regardless of their ability to raise money.

1. The spending limit must be high enough to make it competitive with someone capable of either raising the money through private donations or self-funding. So you need a big number.

2. There would have to some mechanism to counter or at least compete with the candidates who forgo public funding.

3. There must be an inflationary increase every election cycle in order to keep the limits from becoming artifically low.

4. From a large scale perspective, there must be some mechanism to keep the public funding mechanism from overwhelming the budget.

Of course, none of these issues addresses the question of whether we SHOULD have a public funding mechanism, a program I firmly believes violates the notion of political activity in this country. Any system of public funding means that there is no natural mechanism of weeding out the political voices that are so extreme or so unappealing as to not warrant a win in our electoral politics.

Then there is the matter of subsidizing political speech with tax dollars. If we can't subsidize religious thought with public dollars, why are we subsidizing political thought? It seems to violate the principles espoused in the First Amendment.