Campaign Finance and the "Trust Us, We're Experts" Con

Campaign Finance and the "Trust Us, We're Experts" Con

Campaign Finance and the "Trust Us, We're Experts" Con

Gossip, speculation, and scuttlebutt about politics.
March 20 2001 6:46 PM

Campaign Finance and the "Trust Us, We're Experts" Con

Among the "campaign reform principles" that George W. Bush unveiled March 15 was the following:


Eliminate Involuntary Contributions: President Bush believes no one should be forced to support a candidate or cause against his or her will. He therefore supports two parallel reforms: 1) legislation to prohibit corporations from using treasury funds for political activity without the permission of shareholders; and 2) legislation to require unions to obtain authorization from each dues-paying worker before spending those dues on activities unrelated to collective bargaining.

The idea that union members and stockholders should be granted a say in whether their money gets spent on political activities seems reasonable to Chatterbox. Indeed, when Republicans first glommed onto the union "paycheck protection" idea, Democrats offered up basically the same sauce-for-the-goose, sauce-for-the-gander retort: We'll talk about requiring a union-member vote on unions' political activities just as soon as you talk about requiring a stockholder vote on corporations' political activities. The topic came up on NBC's Meet the Press on Nov. 2, 1997. Tim Russert had just responded to a "paycheck protection" spiel by Senate Majority Leader Trent Lott by asking, "Would you be open to allow corporate shareholders to have the same right?" Lott sputtered that it would be "difficult to do that because they are voluntary stockholders whereas the union member quite often is, you know, a requirement to have a job, you have to pay the dues." Then Senate Minority Leader Tom Daschle moved in for the kill:

Your question about corporations was very--was on point, Tim. I think we also have to look at other organizations that mandatorily dedicate a significant portion of membership dues to political activity.

Four years later, though, when Bush called the Democrats' bluff, they ran for cover. Here's how Daschle characterized Bush's union paycheck/corporate stockholder proposal on Meet the Press on March 18, 2001:


A bill that would completely eliminate the opportunity for, not only labor unions, but I guess now corporations from participating. That isn't what we want to do.

Sen. John McCain, who is spearheading the current push in the Senate for campaign finance reform, takes pretty much the same position. Although in principle McCain says he would support a provision that required unions and corporations to get members' and stockholders' permission for political activity, in practice he says such legislation would be too difficult to draft. "Someone has to show me how to write that legislation," he told the Washington Post after Bush made his proposals. Much the same line was peddled by political scientist Thomas Mann of the Brookings Institution in a March 19 interview  on NPR's All Things Considered:

In principle, that sounds like a good idea and there's a certain amount of symmetry, equity, here. The problem is when you start thinking about the practical implications, who are the shareholders at any one time, given the huge numbers of institutional investors, mutual funds; given the large turnover in stock holdings from one day to the next, it's a little difficult to know who you'd communicate with and then how you would reimburse them if they fail to give a prior authorization. In a practical sense, it's hard to see how it would work.

But is it really so difficult? Or rather, is it really that much more difficult than requiring unions to do the same thing? Mann hates the idea of paycheck/stockholder protection for both unions and corporations. "It's basically an assault on the whole notion of representative government in private or public institutions," Mann told Chatterbox. But Mann thinks this accountability idea is uniquely impractical for corporations. When pressed about why this should be so, Mann referred Chatterbox to an AFL-CIO statement headlined, "PARITY BETWEEN SO-CALLED 'PAYCHECK PROTECTION' REQUIREMENTS ON UNIONS AND 'SHAREHOLDER PROTECTION' REQUIREMENTS ON CORPORATIONS IS IMPOSSIBLE TO ACHIEVE." Mann conceded that the AFL-CIO was an interested party but said that its arguments were sound. In fact, the AFL-CIO's arguments are ridiculous, and an excellent example of how an idiotic notion can seize hold of official Washington and go unquestioned.


Chatterbox does not intend the following to be a brief for paycheck/stockholder protection. For one thing, it does seem to be a "poison pill" for the larger bill--that is, if paycheck/stockholder protection were to be attached to McCain-Feingold, McCain-Feingold probably couldn't get passed. Chatterbox thinks that would be unfortunate because Chatterbox wants election reform. Moreover, paycheck/stockholder protection might prove so great a nuisance for unions and corporations that it wouldn't be worth doing. On this point, Chatterbox is agnostic. What he feels certain of, however, is that there is no basis for the belief that, assuming stockholder protection were practical and had political support, it still couldn't be enacted because the legislative language would be too fearsomely difficult to write. What Chatterbox is arguing against is the condescending and, in this instance, utterly specious stance of, "It really can't be done, but for reasons so technical that they can't be explained to the lay person."

On to the AFL-CIO's arguments.

Argument One: "Unions are already far more democratic than public corporations, and union spending already far more accurately reflects union members' wishes than corporate spending reflects shareholder views." As Chatterbox understands it, stockholder protection would make corporations more democratic. Why should unions disapprove of that? The AFL-CIO points out, correctly, that union elections are one-man, one-vote, whereas corporate elections give greater weight to stockholders who own more shares. But Congress is free to insist that in this instance, each stockholder's vote would be granted equal weight. (To weed out troublemakers, perhaps the franchise would be granted only to investors who own some minimum number of shares.) Why should unions be opposed to giving more clout to the little guy?

Argument Two: "Mandating prior shareholder authorization of public corporations' political and legislative spending would federalize corporate governance law and require corporations to perform extensive new functions." Since when did the AFL-CIO become an advocate of states' rights, especially when it comes to corporate behavior? It's further argued that stockholders come and go much more frequently than union members. That may be so, but Chatterbox bets the stockholders are easier to track down. (Prosperous people usually are.) And anyway, the vote could be taken every six months, or even once a year; people who own stocks for shorter periods of time than that aren't much interested in the internal workings of the corporation they're investing in.


Argument Three: "In order for individual shareholders to exercise an advance authorization power, the new federal rules also would have to apply throughout the chain of share ownership." Mutual funds, insurance companies, pension funds, and other institutional investors would make the damn thing too complicated. Chatterbox says: Fine! Exempt 'em! It seems an entirely fair principle that only those investors who consciously and deliberately purchased an individual company's stock should be allowed to tell that company what to do.

Argument Four: "Even if these new rules applied to public corporations, almost all for-profit corporations are privately held, so they could not be affected by any 'shareholder protection' law--destroying any possibility of 'parity' with unions." To this, Chatterbox says: Tough luck. People who own corporations are entitled to have them do whatever the law allows. (Maybe this is yet another argument for not only keeping, but raising, the inheritance tax.) The AFL-CIO says that 99.7 percent of all U.S. corporations are privately held. But surely these are mostly itty-bitty corporations small businesses set up to reduce their tax liability. Why, Chatterbox himself was a corporation last year! He was in no position to engage in any political activities that might influence events, including (make that especially) the writing of this column.

Argument Five: "Imposing 'paycheck protection' on unions would necessitate compelling virtually all nonprofit membership organizations to secure prior approval from their dues-paying members before they could spend for political or legislative activities." This is because the Federal Election Campaign Act treats nonprofits the same way it treats unions and corporations. But that doesn't mean it would have to in this instance. If the Sierra Club and the National Rifle Association don't want to poll their members before taking positions on things, there's no great reason the federal government should make them. After all, people join these groups because they already agree with their political agendas. If they end up disagreeing, they can quit. This is quite obviously much easier to do than it is to quit your job or sell your stock (especially in this market).

The AFL-CIO actually missed an argument or two. In an earlier item, Chatterbox noted that John Fund, an editorialist for the Wall Street Journal, had argued that the Supreme Court made a crucial distinction between unions and corporations in First National Bank of Boston v. Bellotti, a 1977 decision. Shareholders aren't compelled to buy stock, whereas employees can sometimes be compelled to join a union (or at least pay union dues) as a condition of employment. Sen. Mitch McConnell, arch-enemy of all campaign finance reform proposals, has made this same point. But Chatterbox, like Fund, doesn't believe in judicial activism. If Congress says it doesn't buy this distinction because people can always quit their jobs, who is the Supreme Court to question it? What do they think this is--a presidential election?

Another argument the AFL-CIO could make is that previous language on paycheck/shareholder protection drafted by Sen. Don Nickles had a loophole for corporations that you could drive a truck through. Stockholders were granted the right to vote on a corporation's political activities only if they were assessed special "duties or fees." But Nickles didn't fool anybody then, and any member of Congress who tried the same thing wouldn't fool anybody now.

[Update, 3/22: The Senate yesterday debated a paycheck/stockholder protection amendment sponsored by Sen. Orrin Hatch. Many of the arguments discussed above made an appearance. Still, if Hatch's amendment was sincerely intended to have the same effect on both unions and corporations, it was poorly drafted. Hatch's floor remarks strongly suggest he was really only interested in screwing unions. So, even if the amendment weren't a poison pill, Sen. Chatterbox would vote nay. Click here and scroll down to the link for pages S2631-51 to read the text of the amendment and the Senate floor debate.]