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HVK Archives: Politicians for rent

Politicians for rent - The Economist, London.

Posted By Ashok V Chowgule (ashokvc@giasbm01.vsnl.net.in)
8 Feb 1996.

Title: Politicians for rent
Publication: The Economist, London.
Date: Feb 8, 1996.

Campaigns and money are inextricably linked, nowhere more notoriously
than in the United States. Is this pernicious? And has any country found
a formula to keep campaign spending under control?
EVER since partisan appeals were chiselled into the walls of ancient
Greece, election campaigns have cost money. And ever since the first
political contribution changed hands, money has been used to influence
the process of government. The lust for power and advantage is human
nature. Democracy is supposed to restrain it. Elections demand fairness;
when the tally is made, every vote counts equally. Yet before that, some
people, using money, will always try to speak louder than others--and
will often succeed.
Last year in the United States, at least $660m was spent by
candidates and parties in search of seats in the House or the Senate;
estimates for spending in all elections exceed $3 billion (see chart).
Michael Huffington spent $30m contesting a Senate seat in California in
1994. It has been calculated that, if the average Senate campaign now
costs $4.5m, each senator must raise at least $14,000 every week of his
or her six-year term to pay for it.
Such costs are exceptional: the only other democracy in which
candidates spend so much seeking office is Japan. True, not every
American considers the sums outrageous. They are small compared with the
advertising budgets of large companies (ten of which each spent over $1
billion on advertising last year). Nonetheless, most Americans are not
flattered to have money of this order spent on getting their attention.
On the contrary, they feel the present campaign-spending system is out
of control. Politicians, many think, are spending most of their working
hours raising funds for the next campaign; governing America is done in
their spare time. The huge sums needed to run for office also raise the
entry barrier into politics and confer unfair advantages on incumbents.
The last set of reforms, passed in 1974 in the wake of Watergate
(which itself began as a campaign-finance scandal), set limits on
spending for congressional races and on individual donations; it made
provision for public funding of presidential races, and set up the
Federal Election Commission (FEC) to enforce the law. Since then, the
system has been under steady attack.
In 1976 the Supreme Court struck down spending limits, saying they
infringed the constitutional right to free speech. In the 1988 campaign
candidates discovered the delights of "soft money", funds that could be
given without limit to parties for grass-roots "party building" and
which, strange to say, found their way into general campaigning. The
1996 campaign marked the sudden multiplication of equally helpful
"indepen dent" money from unions ($35m) or companies ($60m) which, be
cause it did not advocate the election or defeat of individual
candidates, could also be spent without limit to advance the cause. Not
least, last year saw the funnelling of large amounts of foreign money,
which is illegal, into the Democratic campaign.
The story is familiar. Campaign-finance reform is a constant game
of catch-up. Matters get out of hand; some curb is introduced;
candidates find a way round it, or break it; and a new curb is erected
further down the street. In this, America is no exception: most
countries set limits on the role money plays in elections and many
political scandals have had some connection with campaign finance. These
have ranged from the "money politics" that brought about the fall of the
Liberal Democrats in Japan in 1993; to Belgium's extraordinary
corruption-and-paedophilia scan dals; to the collapse of the old Italian
political elite in 1992-94, in the wake of investigations by Milanese
magistrates which showed corruption on a massive scale.
America's problems are nothing like as bad as these; but all the
same, in the new Congress, dozens of different clean-up bills are being
introduced. Some are meant to tighten up laws that are being broken;
others are meant to plug loopholes. And, on past experience, most are

How bad is it, really?
A basic question, which sometimes goes unasked, is why so much money is
needed in American campaigns. The one-word answer is television. In
Britain, parties may not buy television time and most political
advertising goes on relatively cheap billboards. In America, with its
television-hungry audience and huge electoral districts, candidates take
to the airwaves to broadcast their message.
Television is not the only culprit. America is unusual in that its
political parties play a relatively small role in financing candidates'
campaigns. In European countries, party ma chines--often subsidised by
the tax payer--bear much of the cost of an election. In America, candi
dates have to raise most of the money themselves. Japan, the only other
big democracy where campaign costs are comparable, is also the only
other place where politicians have to run their own campaigns. Big
national parties seem to offer economies of scale in campaigning which
America (like Japan) does not capture.
The explosion in costs also comes from the fees of political
consultants, now considered essential to campaigns, and from
fund-raising, a relentlessly rising spiral of lavishing money in order
to raise more. What does the money go on? Broadcast time. Thirty-second
attack ads must be answered by more thirty-second attack ads, whatever
the cost. This suggests that candidates are not so much corrupt, as
trapped: they dare not be outspent.
Is this foolish? It is clear that even prodigious spending may not
help a flawed candidate: Mr Huffington lost his race. The same thing can
be seen abroad: in the 1993 general election in Canada, for example, the
Conservatives were wiped out by the Liberals despite heavily outspending
them. But more often than not, money helps. As a rule, incumbents in the
United States enjoy a big money advantage over challengers (receiving
four times as much in the 1996 elections as challengers) and, in almost
every case, those who spend more win. Even in "revolutionary" 1994, over
90% of incumbents who sought re-election won and the overall Republican
advantage lay mostly in higher spending. (The big change in Congress's
composition that year came about because there was an unusually large
number of open seats.)
Once candidates have won, moreover, money often goes on working;
favour is repaid for favour. This is universal, and it could be argued
that it is merely what "representation" means. Money some times buys
votes. In Japan in 1991 (after the campaign-finance rules had been
rewritten in the wake of the Recruit scandal), a steel-frame maker was
found to have given %80m ($600,000m) to a former cabinet minister in
return for contracts. But even where money's influence falls short of
this, it can still make politicians and voters disproportionately aware
of the demands and interests of donors. In 1989 John Major, then
Britain's chancellor, refused to consider a bill to require foreigners
doing business in Britain to pay taxes on their earnings. There may have
been no connection but the association was unfortunate: certain of these
foreigners were big donors to the Tory party.
Americans suspect a similar sort of quid pro quo in the case of the
Asian contributions that flowed last year to the Democratic National
Committee. They worry, too, when they read that Philip Morris, a tobacco
company, makes large contributions to both Republicans and Democrats,
who then (they think) show bipartisan softness towards the dangers of
smoking. A study by Herbert Alexander of the University of Southern
California showed that only 25% of congressmen's votes were directly
influenced by donors to their campaigns: constituent interests and party
ideology played a bigger part. But that 25% may well have included the
most important issues the congressmen had to consider.

In search of clean money
Politics is not inevitably distorted by the money that washes around in
campaigns. Yet too much emphasis on money can have a bad effect on
ordinary citizens, convincing them that big interests rule the political
process and that it is hardly worth voting. Those who cherish democracy
should worry, and do worry, about that.
There are two main ways of regulating campaign finance: to limit
supply (donations), or to limit demand (spending). If supply is limited
but demand is mostly left alone, as in the United States, sheer pressure
of demand will quickly find inventive (read questionable) means of
supply. But if demand is limited, and not supply, as in Britain (where
there is a limit of, on average, #8,000, or $13,000, on what candidates
may spend on their campaigns), voters may see no reason to get involved
on any scale in helping political candidates.
The contrast can be seen when people are asked their opinions about
state financing. In the United States, although only 33% of taxpayers
tick the box which asks 'do you want some of your tax dollars to help
fund campaigns?', a narrow majority favours public financing for all
races; they think the money would be "cleaner". (The same view prevails
in most continental European countries, where the government finances
political parties and often pays some of the costs of individual
candidates' campaigns.) In Britain, however, 79% of the public are
against state financing, not seeing why a pot of (their) money is needed
at all.
Where state financing exists, it is usually meant to level out
financial disparities between parties. In Japan, Germany, France, Spain
and Belgium, parties are given public money in proportion to the seats
they hold in the legislature or the votes they have won. In Canada,
parties and candidates are reimbursed for part of their election
spending. The sums are not large, just a drop in the bucket of America's
federal budget. But most American politicians feel that public money
will never be enough to finance campaigns, especially when budgets are
tight; and that the government should not be any deeper in the business
of paying for elections anyway.
Besides, state financing is no guarantee of democratic purity.
Spain, Japan and Belgium have all come a cropper on campaign-finance
scandals. Italy provides a poignant example. There, generous state
financing of political parties contributed to the wholesale corruption
that infected political and business life from the 1970s onwards. In
1993, after the collapse of the old elite in elections, Italians voted
over whelmingly in a referendum to scrap state financing. Late last
year, however, politicians of all stripes agreed to revert to it. If
money had become an obsession even with state help, it was even more of
an obsession without it. Against human greed, no system is immune.
Tracking the big boys
What exists in all democracies, however, is the idea--however vaguely
and cynically expressed--that donations to parties from ordinary
citizens are preferable to those from the big, rich and powerful. Direct
donations from companies are always treated with care. In Japan,
individual candidates must receive nothing from them in cash or kind. In
Belgium, donations from either companies or unions are forbidden;
Germany bans union donations.
When the Germans reformed their campaign-finance system in 1982,
they introduced a tax deduction for contributions in the hope of
attracting small donors. When the Canadians reformed their system in
1974, they introduced a (more equitable) tax credit for the same
purpose. Both countries reported huge increases in small donations to
political parties. Could Americans see the same? There used to be a tax
credit for small donations, but it disappeared in 1986. From time to
time, someone will suggest increasing the donation box on the tax form.
But the expansion of taxpayer financing seems to be a lost cause.
However much the involvement of the little man is courted there, it is
big groups, and big donations, which will always come out on top.
This much becomes clear from studying America's political action
committees (PACs). These developed after the 1974 reforms with the aim
of replacing fat-cat donors with little people, who would bundle up
their donations and have more influence than they could ever enjoy
individually. There are now nearly 4,000 PACs, and they contribute
around one-third of all campaign receipts, twice as much as in 1978.
Yet, far from being grass-roots groups, most have become the voice of
special interests, representing business, labour, or trial lawyers (big
donors to Democrats). For this reason, PACs are much maligned.
Yet, under present rules, PACs at least disclose their spending,
and may donate no more than a meagre $5,000 to each candidate (the limit
on private donations in Spain is $80,000, while in Germany and Britain
there is no limit at all). The real distortions in American campaign
spending occur when companies and unions abandon PACs and try a less
accountable approach. They exert pressure on the fringes of campaigns,
spending independently on, say, a last-minute television blitz, or
donating money to parties for "issue-oriented advocacy", "good-faith
efforts on matters of public policy", or any one of a number of fuzzy
definitions. Almost all western democracies have such loopholes in their
rules: through them, money cascades into election campaigns.
Can anything be done about it? The most popular idea in America is
that soft money and non-party spending should be banned, or treated in
the same way as direct donations to candidates for cam paigns: in other
words, they should be limited, and voters should be fully informed about
the source and use of them. Voters dislike this sort of money not only
because of its quantity, but because of the deception it implies;
therefore, if limits are problematic on free-speech grounds (see below),
at least remove the element of secrecy.
All western democracies have some sort of disclosure requirement
for large donations, which must usually be listed and attributed in
party accounts. The notable exception is Britain. British politicans
(particularly Conservatives) contend that transparency puts donors off.
There is something in this argument. In Canada, the Conservative Party
noticed a decline in corporate donations after 1974, when disclosure was
It is also true that disclosure, even of fairly small donations,
has not avoided scandals in several Euro pean democracies. The problems
there are the same as in America. First, although disclosure is quite
comprehensive (even for donors of soft money), ways are always being
devised to avoid it: independent spending by "non-parties" is merely the
latest. Second, while the identities of donors may be disclosed, no-one
knows either the use to which the donation was put, or whether the donor
was seeking or had obtained a government contract. Third, the lists of
donors (along with any mentions of infringements of the rules) are made
public only after the cam paign is over, when the horse is safely past
the post.
If disclosure is to inform voters about possibly unhealthy connec
tions between business, unions and politicians, it needs to be both full
and timely; and there should be penalties that hurt. In America, it
usually takes several years before the poorly-financed FEC gets round to
slapping the wrists (rarely more) of politicians who have broken the
rules. An FEC with the power, say, to deprive candidates of their seats
if these were obtained with illegal funds might be quite a deterrent.
But it would hardly get government out of the business of regulating
money in elections.

Free spending, free speech
Enforcement of the rules is clearly a problem. Yet so too, sometimes,
are the rules themselves. As explained above, tight caps on donations
tend to encourage evasion. They also tend to favour incumbents. Some
Americans now argue that the limits on individual and PAC donations
should be raised: if candidates could get more cash that way, soft money
would lose its lure, and everyone could spend less time on the arduous
business of fund-raising. Yet any sort of cap on donations will work
better if there is some concomitant limit on spending; and this is the
most vexed area of all.
Some western democracies restrict spending tightly; others put no
limit on it. Britain, with some of the tightest rules on spending by
candidates themselves, allows parties to spend what they like
(television-time excepted) on national elections. Germany has toyed with
voluntary spending limits (so did Bill Clinton in his state-of-the-union
address), and the result is unsurprising: when it comes to the crunch,
everyone breaks them. The difficulty is not just a desire to gain
advantage; it is also the question (in America, a constitutional one) of
whether political spending qualifies as free speech, which should not be
This is clearly a lesser problem in countries where free speech is
not enshrined in a bill of rights. Britons get more exercised about
disclosure than about candidates' rights to express themselves. The
Canadians did not worry until, in 1982, they adopted a charter of rights
that included protection for free speech: at which Alberta promptly
decided that it could not abide by federal limits on independent
spending, and won its case.
In the United States, the notion that campaign spending by both
individuals and parties constitutes free speech has been upheld by the
Supreme Court in Buckley v Valeo (1976). According to the ruling,
spending may not be limited, except as a condition of receiving public
financing; but curbs on contributions are acceptable to prevent
corruption. In practice, a contribution expresses an opinion as clearly
as spending does, which suggests that the logic of the ruling is
strained. Nonetheless, the decision rules out mandatory limits on
spending now or in future, unless it can be altered or reversed by a
subsequent case or by constitutional amendment.
As usual, the Supreme Court was not unanimous. It can be argued
that the decision, while ensuring unfettered free speech for those who
can pay for it, limits the free speech of those who cannot. Yet, in a
democracy, those voices (or at least those votes) are meant to be
politically equal. Many legal scholars are now arguing that the spending
of big money in elections violates the fifth and 14th amendments, which
guarantee equal protection of the laws; some suspect that it may violate
the first amendment, too.
Surveying the well-trampled field of campaign-finance reform in
various democracies, Americans have certain questions to ask themselves.
The first is whether they have too soon rejected the notion of public
financing, and in particular the use of tax credits as incentives. The
second is whether they are prepared to submit to, and pay for, the
systems of full disclosure and enforcement that would be necessary if
limits on giving, as well as spending, were largely swept aside.
But the last is the most fundamental: whether, in the context of
elections, free speech should be an unassailable priority, or whether
questions of equity should also be considered. Elections, like any other
contests, should not--indeed, can not--be made entirely fair. This may
not mean, however, that govern ments should not try to make the process
more open, more honest and, in the deepest sense of the word, more

) Copyright 1997 The Economist Newspaper Limited. All Rights Reserved

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