"All questions in a democracy [are] questions of money."
--Mark Hanna, 1896 campaign manager for GOP candidate William McKinley
Well-meaning just doesn’t cut it anymore. The history of attempts to prevent money from perverting our politics is as old as the Republic, but only in 1896 did Mark Hanna, a manipulative genius of the highest magnitude, turn political fundraising into a science.
The reaction of well-meaning people has been behind the curve ever since. Money finds a way.
As Jack Beatty noted in a wonderfully prescient piece in the Atlantic in 2007, William McKinley’s talent for channeling corporate money into his 1896 campaign won him the White House but also thoroughly blackened his name and compromised his administration.
After an anarchist murdered McKinley in 1901, his successor, Teddy Roosevelt, demanded a complete ban on corporate giving to presidential campaigns—something he got from Congress in 1907.
The Taft-Hartley Act in 1947 (passed by a Democratic administration, to continue the irony), extended the ban to labor unions. Campaigns, unions, and corporations continued to seek loopholes—Nixon famously had “bagmen” collect money from plutocrats like Yankees owner George Steinbrenner, helping spawn the Federal Elections Commission in the reform-minded early 1970s. But for years, Taft-Hartley and TR’s 1907 reforms did for U.S. political campaigns what the Glass-Steagall Act had done for markets: ensured that efforts to manipulate them would be illegal.*
Alas, money found a way.
Eventually, in part due to the grandiosity of these “well-meaning” efforts, each one of these reforms failed, all falling afoul of those who claim their right to free speech was being unconstitutionally curbed because (as they argued) spending money on campaigns is a form of speech. Add to the list the post-Watergate effort to ensure only public money was available for campaigning, efforts in the 1980s to ban soft money, the largely failed campaign to get candidates to foreswear PAC money in the 1990s and 2000s, and of course the McCain-Feingold effort that began in 2002.
Well-meaning people still haven’t taken the lesson, though. Current efforts to curb out-of-control super PACs and corporate and labor donations still rely on high-minded constitutional arguments. Americans Elect, that late-night dorm-room attempt to inject reason into our politics, died on the vine. In fact, the solution is much simpler: Attack the conflict of interest that exists at the heart of these transactions, not the transactions themselves.
Rather than legislating what types of money are or are not dirty or attempting to define which class of citizen (corporate or otherwise) deserves free speech, Congress should simply create incentives for civic-minded behavior.
How? Well, start with corporations: The law should make political neutrality a requirement for doing business of any kind with the U.S. government and reserve certain privileges—like the right to classify all one’s income as investment income or qualification for Federal Deposit Insurance, for instance.
Corporations could always defy that and eschew government business and benefits—that’s their choice as “people.” Or, if they truly love democracy, they can choose to donate to the federal public campaign financing fund (the one funded by the little $3 check box at the top of your tax return). Banks could do the same, but interest rates on the cheap money being poured into their balance books by the Fed would go up. Ditto defense contractors, think-tank professionals, members of federal employee unions. Freedom, after all, isn’t free.
This at a stroke would eliminate most of the corporate money and special interest money in our politics today. Indeed, it would eliminate the donations of a good number of the unions (whose pension funds are backed by U.S. pension insurance), and a whole lot of so-called nonpartisan and bipartisan groups (that avoid taxes with those phony monikers).
But wouldn’t that leave the country at the mercy of the billionaires and their super PACs—figures the right love to hate (Warren Buffett, George Soros) and their counterparts hated by the left (Sheldon Adelson, Foster Friess)? Not if the law were properly configured.
To discourage the kind of political vandalism our moneyed class is funding this year, I would advocate changes to U.S. tax law that tie excess campaign donations to the tax code. In effect, anyone donating beyond the $50,000 individual limit—itself a huge amount to most people—would no longer be able to avail themselves of itemized deductions or special tax vehicles of any kind. The cost of doing that kind of business on our democracy, in effect, would be applying the 1040EZ formula to plutocrats. It’s a way the balance the budget, too!
One can imagine how Romney would feel about this. But don’t be unfair: The Democrats, in this cycle, may not be as rich, but they are at least as hypocritical.
Look at what’s going on in Charlotte, N.C., this week. Little real business will be conducted—we all known President Obama will leave at the top of the ticket, and that Smokin’ Joe Biden will be beside him.
But thanks to the failure of one BIG IDEA after another on campaign finance reform, there will be plenty of money changing hands in Charlotte, too. Even though the Democrats nominally banned corporate money from their convention back in February, like most such vows these days, this one was not worth the paper it was printed upon.
By now, the activities of New American City Inc., the shell company created by a bunch of banks and other companies to get around President Obama’s corporate money ban, is as famous on the right as Romney’s super-secret (or nonexistent!) tax returns are to the left.
When AFL-CIO President Richard Trumka chose not to pony up extra funds for the convention—a protest against the DNC’s “right to work” choice of North Carolina at the host state—it may have put a crimp in party coffers. But, as Bloomberg notes, that will hardly put a crimp in the lobbying.
From airlines to investment banks to Disney, corporate lobbyists and senior executives will be present in force, sponsoring cocktail parties, shuttle services, raw bars, and after-hours entertainment. And, of course, many of the valued “super delegates” owe their very careers to these same folks who “educate” them with campaign money whenever times get tough. No questions asked—really—they do this just because they love democracy.
The Republican convention was, if anything, even more of a Gomorrah. But this is all part of the free market, of course, and since corporations are people, in Mitt Romney’s famous phrase, what’s the fuss about these “people” rubbing elbows with their elected representatives?
Google had a lavish media lounge, free copies were available from Xerox, free Cokes from Coca-Cola. Somehow, freed from having to pretend not to be in the thrall of corporate America, all the Wall Street versus Main Street rhetoric of the Tea Party got somehow lost in the officially sponsored confetti.
Corporate receipts, according to Public Citizen, amounted to $55 million for the GOP gathering—added to $50 million the federal government ponies up for security and another $17.7 million in taxpayer funds available to, well, fund just about anything. (Now there’s a spending cut I can get behind). The Democrats are still claiming it’s all done with small donations, but they have refused to comment on New American City Inc., which is, of course, not affiliated with the DNC. Yes They Can!
How can we let this happen? The answer, simply put, is that well-meaning people do not fare well in our overly litigious society. In our system, money will find a way as sure as water will enter a basement. The tactics we have pursued to shut down corporate money have been shut down on the grounds of First Amendment objections and high-minded notions of a city on a hill. It’s time to take a more incremental, targeted approach. Because if it’s money that’s the problem, chances are that money is the solution too.
Correction, Sept. 4, 2012: This article originally misspelled the Glass-Steagall Act. (Return to the corrected sentence.)