In late April, Senator Charles Schumer (D-NY) and Representative Chris Van Hollen (D-MD) introduced a bill in response to Citizens United. Their Democracy Is Strengthened by Casting Light on Elections (DISCLOSE) Act, endorsed by President Obama, contains four major sections.The first two would prohibit election spending by corporations with $50,000 or more in government contracts, as well as by U.S. corporations with a specified minimum of foreign ownership or control. These provisions would reinstate bans on spending that had existed for all corporations before Citizens United, but would do so only for corporations that the sponsors believe they are still constitutionally permitted to reach. The bill’s central provisions call for deeper disclosure about a wider range of independent election spending than is mandated by current law. The bill would also require executives to “stand by their ads” with public statements similar to those required of Federal candidates since 2003. Finally, the bill would permit political parties and candidates to interact more than they do now when the parties advertise in support of their candidates. This is the one potentially transformative provision in the bill, but only if it is modified. Each of these provisions raises its own issues and quirks. Some, for example, have questioned the bill’s definitions of foreign-owned corporations and contractors; others have raised a variety of technical questions. The bill’s disclosure provisions, in particular, show why it’s so tough to write effective legislation in this arena. The bill’s sponsors are concerned that donors (including corporations) can avoid having their names become public under current law by giving to certain intermediaries. They do have to disclose currently if they give to a political committee, give in response to an electoral solicitation or try to direct their money toward political spending. But unrestricted contributions to trade, advocacy or other organizations need not be disclosed, even if the receiving organizations typically use some of their general treasury money for electioneering. Under current law, disclosure is triggered by a donor’s affirmative effort to steer money toward a political organization or use. Schumer-Van Hollen would reverse the presumption. Unrestricted gifts would be disclosed even if they pass through several organizations before one buys political ads. A donor would have to restrict a gift from political use to avoid disclosure. This requirement will elicit objections from many organizations, including some prominent liberal and conservative advocacy groups. Meaningful disclosure may well require the ability to follow a money trail, but there is no longer an easy consensus behind disclosure. Let’s suppose Congress resolves this issue. That would bring us to the next boundary-line problem, which is even harder to surmount. Under Schumer-Van Hollen, foreign controlled corporations and government contractors would be prohibited from election spending, and disclosure is to be required for electioneering. This assumes we can distinguish election advocacy from other protected forms of speech, such as issue speech. Making that distinction has plagued election law for more than 35 years. Under the status quo in place the day before Citizens United, corporations were prohibited from election spending but not from emotionally intense, candidate-specific issue ads. Some will quarrel with the Supreme Court’s definitions of political versus issue speech, but the real problem is not with the dividing line’s exact location. These kinds of boundaries necessarily are porous. About the only way to make them airtight would be to allow regulation of all issue speech as well as electioneering. I, for one, would not be comfortable with a First Amendment interpreted like that. These problems, even taken together, do not constitute an argument for deregulation. It is not futile to legislate and enforce contribution limits, including limits for political party soft money. Some of the new post-Citizens United proposals also make sense. But rearranging the deck chairs in first class does nothing to help those in steerage. Eventually all of us—and that especially includes legislators at all levels of government—must ask ourselves how much personal energy and political capital it is wise to spend on these boundary-line issues. If one is seriously interested in the health of American democracy, then expanding participation holds more promise for real change. Changing the Game
There are at least three good reasons to care about increasing the role of small donors: to dilute the role of large donors, to make the system more representative and to increase democratic engagement as a good in itself.1 Assuming it is good to have more small donors and volunteers, how can we bring more of them into the system? Two answers come most readily to mind, one depending mainly on technology and the other on public funding. Both are needed.The low cost of Internet communications has been changing fundraising techniques over the past several election cycles. But in 2008, new tools went well beyond money by enabling peer-to-peer communications that dramatically magnified the scope. Technology clearly creates important opportunities for change. Consider the track record. We all know about the importance of small donors in the presidential election of 2008. Barack Obama raised $409 million in the primaries, $121 million of which came from donors whose contributions amounted to $200 or less. He then raised another $337 million for the fall campaign, $114 million of which was from small donors. Of course, the Obama campaign’s breakthroughs were not only about money. From the outset, he recognized the value of online communications and social networking tools, making them integral to his outreach and mobilization efforts. By election day, more than two million profiles had been created on the Obama campaign’s social networking site and he had 3.4 million supporters on Facebook. The campaign also had an email list of 13 million, one million text-message subscribers and four million donors. Contributing and volunteering (offline and online) fed off each other, as an unprecedented number of Obama supporters became repeat givers and activists. The Obama campaign thus suggests the heady possibility that the natural impulses of self-interested candidates might lead them generally to reduce the system’s dependence on large donors. But it would be a huge mistake to draw this conclusion from the success of one charismatic candidate in the country’s most visible election contest. Technology tools alone will not be enough to increase participation across the board. Most of the other presidential candidates in 2008 raised most of their campaign funds from donors who gave $1,000 or more (as did Obama for most of his campaign’s first year.) And except for a few “nationalized” races, the role of small donors becomes more anemic as one moves down the ballot. Senate incumbents raised only 9 percent of their money from small donors in 2008; House incumbents raised only 6 percent. For most state elections, the funding balance looks much like that of the Senate and House. But these low small-donor percentages were not universal. In the 2006 election cycle, the most recent with gubernatorial elections in most states, the proportional role of small donors in eight of the states in races for legislature and governor was well above the national numbers for the U.S. House, Senate and even most presidential campaigns. Minnesota led the way with 51 percent of candidates’ money coming from donors who gave $250 or less. Some say that particular state’s culture explains its behavior, but that argument does not hold up: Most of the surrounding states with political cultures similar to Minnesota’s have small-donor numbers that look more like those of most other states. What Minnesota has that the others lack is distinctive and effective campaign finance laws. It has low contribution limits, a rebate of up to $50 for political contributions (unfortunately, partly suspended at present), and partial public funding for candidates. Other states with high levels of small-donor participation also had some form of public funding or other rules that promoted small donations. There’s a lesson here begging to be learned. Public Funding
as Democratic Catalyst
The key to a successful public financing program is to realize that it has to be about creating incentives for broader participation. If it tries instead to “drive private money out of politics”, it will fail. As long as the First Amendment protects independent spending and issue speech, it is impossible to do this. The solution is to augment the amount of public money in the equation and use it as a force-multiplier for democracy.The best way to do this is to avoid all arrangements that might look like “welfare for politicians.” No public money should go to a politician unless specifically triggered by a small donor’s gift. New York City’s system could be a model, with some modifications, although the Fair Elections Now Act (FENA) proposed for congressional elections also has much to commend it. New York City offers six-for-one matching funds for the first $175 given by any donor to a candidate. With that large a match a $175 contribution is worth $1,225 to a participating candidate. FENA starts off with a flat grant for qualifying candidates (not a good idea) and then moves to a multiple-matching system. Even better than a multiple-matching system by itself would be one that supplements the matching grant with a means-tested partial tax credit or rebate for small donors. In every public financing system currently in effect, candidates have to agree to a spending limit in return for accepting public funds. Spending limits have proven to be the Achilles’ Heel for the presidential system and others. When spending limits are too low, candidates who can afford to do so will reject public funds. The major point to be underlined is that the candidate is the person who decides. The Supreme Court in 1976 held mandatory spending limits to be unconstitutional. None of us can be smart enough to predict how much spending will look “reasonable” to a candidate from one election to the next. Presidential candidates thought the spending limits in the Federal system were reasonable—until they did not. Then the candidates began opting out. George W. Bush in 2000 was the first major party nominee to refuse public funding for the primaries. Every nominee has done so since. Barack Obama was the first to refuse it for the general election. Unless the system is changed, others will follow. The presidential candidates’ behavior has forced a rethinking. Is the root problem really the spending or is it more about the funding sources behind the spending? Is there anything wrong with candidates or parties spending large amounts for political communications if the money comes from small donors? Rather than ask a candidate to accept a spending limit as a condition of public funding, it would be better to let the tradeoff be a lower contribution limit. Once a candidate has received a specified maximum amount of public money, let the candidate continue to raise private funds, but only from smaller donors. Would multiple matching funds work? Because New York City is the only jurisdiction with a long-standing program in place, the empirical evidence is thinner than we would wish it to be. However, the Campaign Finance Institute’s research shows benefits beyond question: New York City’s system increases participating candidates’ financial dependence on small donors, and it increases the percentage of the population that gives money. Moreover, it does this with a system that could perform even better with tweaks to the city’s law. The best way to prevent the domination of American politics by independent spenders and major donors is for citizens to reclaim their own democracy. Generalized exhortations to participate, however, will not persuade many of us to rise up spontaneously in the name of an abstract cause. People give or volunteer because they are persuaded to do so. The “ask” need not come from a candidate, but the candidates are still the most effective sellers of their own cases. The issue, therefore, is about changing the incentives for those who do the asking so that they are willing to pay attention to those who give less. Public matching funds do this. Is this a legitimate use of public funds? Some say no, but I frankly cannot imagine a more legitimate use of public money than to foster participation in representative self-government. Of course, Congress may not be ready for public financing in the near future. It is therefore important to remember that public financing is only one tool among several. One other tool involves the political parties. Under current law, the parties may spend unlimited amounts to help their candidates, but only in the form of independent spending, decisions about which must be kept completely separate from the candidates. This forced separation is not healthy for candidates or parties. The Schumer-Van Hollen bill would let the parties and candidates work more closely together and, on the whole, this would be good. But in the bill as introduced, donors could and probably would use the parties to get around the contribution limits for candidates. This unintended consequence is easily resolved: Let the parties coordinate their spending fully with candidates, but only with money they raise from small donors. This is entirely feasible. When Congress passed the 2002 McCain-Feingold law that prohibited unlimited “soft money” contributions, the national party committees shifted their fundraising and markedly increased their yield from small donors. As a result, the parties have enough small-donor money in their accounts right now for the recommendation about coordinated spending to have a major impact in 2010. In addition, we were reminded by McCain-Feingold that the world is not static: Parties shift their fundraising patterns to fit the law’s incentives. If the parties are told that small donor money will be privileged, we may be certain they will go looking for more of it. Enhancing the incentive for parties to seek out small donors is fully compatible with, but does not depend upon, small-donor matching funds for candidates. The two ideas point toward a common end. Citizens United has triggered a concern that is said to be about corporate regulations. The problem in fact is much deeper. It is about expanding participation in a democracy that has a free (and therefore unequal) economy. Regulating the legal boundary lines does not by itself address the larger problem. Only a serious effort based on citizen participation can do that.
1For more detail, see the report, issued jointly by the Campaign Finance Institute, the American Enterprise Institute and the Brookings Institution, by Anthony J. Corrado, Thomas E. Mann, Norman J. Ornstein and myself, Reform in an Age of Networked Campaigns: How to Foster Citizen Participation through Small donors and Volunteers. This report was released in January 2010, a week before Citizens United.