Voting With Dollars





A New Paradigm for Campaign Finance





by



Bruce Ackerman and Ian Ayres*









Not to be considered published. Do not cite or quote without express permission. Copyright c 2000.





File: U:\Zip\ackerman\vwd.wpd









Table of Contents







Part One: The New Paradigm



Chapter One. Reforming Reform 2



Chapter Two. Patriot 16



Chapter Three. The Donation Booth 38



Chapter Four. Regulations of Last Resort 73





Part Two: The Paradigm in Practice



Chapter Five. Mixing Paradigms 90



Chapter Six. Designing Patriot 102



Chapter Seven. Designing the Donation Booth 150



Chapter Eight. Plugging the Gaps 181



Chapter Nine. Safeguarding the Guardians 213



Chapter Ten. Who's Afraid of the Supreme Court? 234



Chapter Eleven. Patriotic Politics 274





Part Three: Model Statute and Technocratic Commentary 308

(with Danton Berube)



Appendix A: The Stabilization Algorithm 343



Appendix B: The Secrecy Algorithm 349



Appendix C: Tailoring Contribution Limits 355



Appendix D: How Much Will It Cost? 371













Part One

The New Paradigm



Chapter one

Reforming Reform

Campaign finance lives in a time warp, untouched by the regulatory revolution of the last generation. The standard "reform" looks like a standard statute controlling pollution. Just as the Environmental Protection Agency restricts each polluter's right to dump garbage into a waterway, the basic proposal restricts each citizen's right to dump cash into the stream of campaign contributions. Just as the EPA limits the total junk in a waterway, reformers limit the total cash a politician may spend on his campaign - and when the Supreme Court prevents this in the name of the First Amendment, every conscientious reformer cries foul.

The debate is no less pre-scripted when reformers try to substitute public for private financing of campaigns. They invariably understand the injection of "clean money" as a centralized process replete with heavy-handed requirements that favor incumbents, entrench existing parties, and alienate citizens from funding decisions. The basic reform design would serve just as well for farmers or arms exporters -- with only minor modifications required before politicians can join in the feast at the federal trough.

For conservatives, the prospect of a political feeding frenzy only heightens anxieties provoked by heavy-handed command-and-control over private fund-raising. But when they turn to the third plank of the reform program, their response is more muted. On this front, the reigning reform paradigm demands that all contributions be offered up in the bright light of publicity: the public has a right to full and immediate knowledge about who is paying whom when. With every deal open and above aboard, voters will be in a much better position to decide whether a big gift from a particular giver taints the candidate's integrity.

This full-information plank has gained increasing prominence over the last decade. Even strong conservatives have come to concede that there may be something wrong with secret transfers of cash. (1) If the public keeps demanding reform, the way to channel protest is by providing full information. Still more recently, leading liberals have come to the same conclusion, as they despair at the seemingly intractable difficulties of implementing more ambitious parts of the traditional reform agenda.(2)

We challenge the organizing premise of this now-familiar debate. All three pathways to reform draw from a century-long argument about the regulation of the economy. Whenever a policy wonk confronts the widget market, it is second-nature to ask whether widgets generate harms to third parties that require command and control regulation, whether widget-producers need subsidizing to achieve optimal levels of production, and whether widget-consumers require better information to make informed choices.

This standard set of responses systematically misleads when the subject turns to campaign finance. Command-and-control, bureaucratic subsidies, and full information are part of the problem, not part of the solution. The challenge is to reject on models drawn from the regulation of widgets and draw inspiration from our tradition about the suffrage. When dealing with the ballot, Americans do not champion the virtues of full information. To the contrary, we make it a crime for anybody to penetrate the sanctity of the voting booth. Nor do we suppose that votes, like widgets, may be sold off to the highest bidder. To the contrary, each citizen expects his ballot to have equal weight in the final decision.

Why not think of campaign finance in similar ways? It is not enough to assure formal equality for all voters on election day. Each American's status as an equal citizen should also be reflected in the way we fund our electoral debate. Just as each registered voter gets a ballot on election day, he should receive a special credit card to finance his favorite candidate or political organization. Call it the Patriot card, and suppose that it had been available to each voter during the last election -- with Congress providing fifty "patriot dollars" in every account. If the 100 million Americans who voted on election day had also "voted" with their patriot cards during the campaign, their combined contributions would have an enormous impact. No longer would potential candidates focus on getting a share of the approximately $3 billion doled out by private donors during the last electoral cycle.(3) They would also compete for the $5 billion dollar fund contributed by the patriotic citizenry. Under this scenario, would George Bush and Al Gore -- two heirs of political dynasties -- have emerged as the leading candidates? If so, would they have made different issues central to their campaigns?

Our patriotic initiative avoids many of the difficulties associated with traditional "clean money" proposals. The standard paradigm creates a special bureaucracy charged with the delicate task of doling out funds to qualifying candidates and parties. But the patriot program does not keep ordinary Americans on the sidelines while bureaucrats give politicians hand-outs. Our new paradigm makes campaign finance into a new occasion for citizen sovereignty - encouraging Americans to vote with their dollars as well as their ballots, and thereby give renewed vitality to their democratic commitments.

We have only begun to tap the potential of voting with dollars. Our paradigm also points in a new direction for the regulation of private contributions. Both liberals and conservatives have increasingly converged on the "full information" plank of the traditional reform agenda - to the point where it is fast becoming a Motherhood issue. Who could possibly complain about a requirement forcing candidates to reveal who is bankrolling their campaigns, and how much they are giving? (4)

We do. Full publicity makes sense only on one assumption -- that the candidates themselves know the identity of their contributors. Since candidates will naturally be grateful to big givers, shouldn't they be obliged to share this knowledge with the public? Otherwise, ordinary voters can't subject political rhetoric to a basic reality test -- matching each politicians' words against the list of contributors who will come around after election day to assert, however discretely, their claims to official favor.

But this argument begs a big question - why should candidates know how much money their contributors have provided ? When we are dealing with widgets, this kind of knowledge seems like a self-evidently good thing -- if the widget producer doesn't know who is paying for his goods, and how much money is on the table, he won't be able to deliver the goods.

But this basic point doesn't apply here. A victorious politician is guilty of corruption if he delivers the goods to his campaign contributors in too-obvious a fashion. Once again, the analogy with the ballot box provides a sounder guide for policy. The secret ballot came to America only during the late nineteenth century. Voters previously cast their ballots in full view of the contesting parties, who carefully monitored each decision. Within this framework, corrupt vote-buying was commonplace. Party hacks could readily determine whether they got what they were paying for. No voter could receive his election day turkey without casting his ballot before the watchful eyes of the turkey's provider.

It was the secret ballot, not some sudden burst of citizenship virtue, that transformed the situation. Once a voter could no longer promise to vote one way, and actually vote another, it was no longer easy for him to sell his vote. Even if he sincerely intended to perform his side of the bargain, vote-buyers could no longer test the credibility of his commitment. Suddenly, the promise of a voter to sell his suffrage for money became worthless -- and as a consequence, vote-buying declined dramatically.(5)

We use the same logic in dealing with private contributions. On analogy with the secret ballot, we propose the "secret donation booth." Contributors will be barred from giving money directly to candidates. They must instead pass their checks through a blind trust.

Candidates will get access to all money passing intended for him. But we will take steps to assure that they won't be able to identify who provided the funds. To be sure, lots of people will come up to the candidate and say they have given vast sums of money. And yet none of them will be able to prove it. As a consequence, lots of people who didn't give much will also claim to have provided millions of dollars.

The resulting situation will be structurally similar to the one created by the secret ballot. Protected by the privacy of the voting booth, you are free to go up to George W. Bush and tell him that you voted for him enthusiastically in 2000 - even though you actually voted for Al Gore. Knowing this, neither George nor you will be prone to take such protestations seriously.

The same "cheap talk" regime will disrupt the special interest dealing we now take for granted. Just as the secret ballot makes it more difficult for candidates to buy votes, a secret donation booth makes it harder for candidates to sell access or influence. The voting booth disrupts vote buying because candidates are uncertain how a citizen actually voted; anonymous donations disrupt influence peddling because candidates are uncertain whether givers actually gave what they said they gave. Just as vote-buying plummeted with the secret ballot, campaign contributions would sink with the secret donation booth.

But not to zero. There are lots of reasons for contributing to campaigns, and the new regime undercuts only one of them - the desire to obtain a quid pro quo from a victorious candidate. It would no longer make much business sense for a group of trial lawyers, or oil barons, to contribute big bucks to a candidate to encourage special interest legislation. But the secret donation booth would not deter gifts from citizens who simply wished to express their ideological commitment to a candidate's causes without any expectation that their gifts would subsequently buy them special access or influence. Call these ideological gifts, and they may well be very substantial, depending on the candidate's charisma and the attractiveness of her positions.(6) Nevertheless, the overall volume of private donations will generally be much lower than it is today.

Especially when the existence of Patriot is taken into account. After all, each voter already has 50 patriotic dollars at his disposal to support candidates and political organizations during the campaign. Only those who find this sum inadequate to express the depth of their convictions will dip into their private funds. Cumulating our two initiatives, it seems safe to predict that our new paradigm will generate a big change in the prevailing public-private mix of financing. While the last campaign season saw $3+ billion flow into the campaign coffers of all aspirants for federal office, we would be surprised if half this sum were generated under the new regime; in contrast, $5 billion or more would be coming into the campaign through the Patriotic system. On the most conservative assumptions, public funds would dominate by a ratio of 2 to 1, and probably much more. At the same time, the total resources available for political speech would be much greater under the reformed system -- in contrast to the $3+ billion under the ancien regime, politicians would have $6+ billion with which to engage the voters. The new paradigm, in short, promises an effective increase both in political equality and in political expression. It achieves this without compromising any of the basic liberties of any citizens -- even the freedom to give private contributions. So long as givers channel money through blind trusts, they should be free to give substantial amounts to the causes they favor.

This conclusion leads us to distance ourselves from the final, and most important, remedy in the traditional reform repertoire. . Above all else, the great progressive goal has been to limit the amount of private money flowing into campaigns. Ever-more-rigorous-restrictions are pursued on two levels: first, reduce the amount any particular giver can give; second, reduce the total amount any candidate can spend. The reform legislation sponsored by Senators McCain and Feingold is the most well-known example at present, but in fact we have been through previous cycles of restriction before, and the results have consistently disappointed expectations over the long haul.

The dismal cycle looks like this. Time one: legislators impose limitations in response to popular disgust at the role of big money in politics; time two: big givers devise legal loopholes enabling them to continue giving large sums; time three: reformers mobilize another wave of popular disgust; time four: legislatures respond with more command-and-control, which is subverted at time five by more legalistic manipulations of big money; and so forth. The seemingly remorseless character of this cycle has greatly impressed even liberal academics of late -- leading them to question the efficacy of the traditional emphasis on command and control. On this increasingly fashionable view, controlling the flow of campaign funds is rather like the effort to dam the Mississippi. While you may stop the river from overflowing its banks at one point, this triumph will only lead to unexpected inundations elsewhere. Like water seeking its own level, private money will inexorably flow around reformist barriers to overwhelm the political process. Rather than trying to dam the flow, sober reformers should simply try to inform public as to its true extent. Speaking broadly, the new "hydraulicists" urge the reform movement to reject its previous fixation on command-and-control and to make full information their first priority.(7)

We have already explained why the hydraulicist emphasis on full information is mistaken. We also think their despairing diagnosis of command-and-control is exaggerated. Direct control can sometimes be effective and we will be making strategic use of this tool when necessary. Nevertheless, we agree that there is a Sisyphean aspect to the on-going struggle for ever-more stringent and comprehensive controls.

Restrictive command-and-control should no longer be the first priority of reform. It should function as a technique of last resort, filling in gaps left by a structural measures like the secret donation booth. Requiring a blind trust doesn't place substantive limits on private fund-raising, but does purge the practice of some of its worst features. We should consider additional restrictions only after assessing the dangers that remain even after special interest deals are disrupted by the secret donation process mandated by the new paradigm. So long as a patriotic finance initiative assures the dominance of citizen funding in the overall mix, we believe that only very selective controls - targeted only at the very biggest givers - will seem sensible.

To sum up the new paradigm: we reject centralized campaign subsidies in favor of massive democratization of campaign finance through Patriot dollars; we reject full disclosure of private contributions in favor of the secret donation booth; we reject comprehensive controls on private money in favor selective controls imposed only as a last resort.

We call this "voting with dollars" because it mimics two core attributes of suffrage: citizens are given equal voting power, but they must exercise this power anonymously. The basic equality of citizens is expressed by their equal access to patriot dollars. The secrecy of the ballot box is expanded to disrupt special interest dealing in campaign finance.

We refuse, in short, to view the problem of campaign finance as if it represents the all-or-nothing choice of suppressing private contributions or leaving them unregulated. Our new paradigm uses anonymity to cleanse private giving of its worst abuses while allowing it to serve as a valuable supplementary support to the robust public debate fostered by billions of patriot dollars allocated by millions of concerned citizens.

The remainder of Part one scrutinizes these basic issues at greater length: What is really at stake in the choice between new and old reform paradigms? How do the different components of the new agenda fit - or fail to fit - together?

Part two begins the hard work required to convince traditional reformers, and ultimately ordinary citizens, to take the new paradigm seriously. Whatever the weaknesses of the old agenda, it is now a familiar part of the established debate. When legislators meet at federal and state levels, they find it "natural" to argue about statutory details surrounding command-and-control, centralized subsidy, and "improved" information. Newfangled notions like patriot dollars and secret donation booths won't stand a chance unless they achieve practical form in the shape of proposed legislation. We move down this path from theory to practice by considering key questions of statutory design: How to assure against massive corruption by sleazy types who offer to buy 50 patriot dollars for 10 greenies? Who should qualify for a patriot account and who should be authorized to receive the money? When a patriot card-holder goes to her neighborhood ATM machine, should she be able to spend all her money on any campaign she likes, or should the $50 be broken into subaccounts for presidential, senate, and house races?

Similar questions arise in organizing the secret donation booth. Imagine, for example, that a big donor deposits a check for $250,000 into the booth and directs it toward a particular candidate. When the grateful politician receives word that his campaign balance has increased by such a whopping sum, won't he make every effort to identify the big donor with precision? Isn't it naive to suppose that some clever bit of institutional engineering will stop the big donor from establishing that he was in fact the guy who forked over the quarter of a million?

Finally, it is essential to design adequate institutions manage new system. Chapter 9 takes on this task. The current Federal Elections Commission has proved itself a by-word of ineffectiveness. How might a new Commission be constituted to withstand the enormous political pressures generated by the joint operation of patriotic currency and the secret donation booth?

Our solution places central responsibility on a new five-member FEC consisting entirely of retired members of the judiciary. We do not suppose that these senior jurists can properly be placed entirely above politics -- like all other major officials, they should be nominated by the sitting President and confirmed by the Senate. But once they have assumed office for a ten year term, they should be given primary responsibility for making the appointments, and approving the regulations, required for the effective operation of the new paradigm.

If we can't provide plausible answers to these and similar design questions, we might as well fold our tents and return to the ivory tower. But even if we respond with realistic solutions, we are not home free. Although we may persuade you that the new paradigm can be transformed into an operational reality, we must still defend its constitutionality.

Since its epochal decision in Buckley v. Valeo, the Supreme Court has proved a formidable obstacle to reform under the old paradigm. Traditional reformers have responded in kind by casting the Court as Public Enemy Number One. In this familiar morality play, "real" reform must wait until the Court comes to its senses and overrules Buckley. Until this great moment of judicial redemption, realists can only hope for interstitial reforms -- mere band-aids which barely palliate the dis-eases of the body politic.

Chapter ten challenges this reformist apologia. By framing our proposals to comply strictly with all existing constitutional requirements, we establish that the new paradigm authorizes massive change now, and that activists need not content themselves with marginal improvements until the dawning of the day of judicial repentance. Indeed, it is a mistake even to yearn for Buckley's total repudiation. The case contains some principles of enduring importance.

Part three concretizes our reflections in the form of a model statute, accompanied by a commentary. Our draft needs much technical improvement. But the only way forward is to expose our model to more general scrutiny, encouraging sharp legal minds to plug loopholes and find problems that we have not yet glimpsed, let alone resolved.

1. For example, Representative John Doolittle has proposed "The Citizen Legislature and Political Freedom Act," which essentially would repeal all limits on campaing contributions and merely require immediate disclosure by candidates when they do receive contributions. H.R. 1922, 106th Cong. SS 2, 4 (1999). See CATO: Best Campaign-Finance Reform Is No Limits, Doug Bandow, USA Today, 11 August 2000, p. 15A; The Heritage Foundation: Backgrounder Nr. 1308, 19 July 1999, Campaign Finance "Reform": The Good, the Bad and the Unconstitutional, James Bopp, Jr., pp. 3, 20, 21-22 (found on Webpage www.heritage.org); an: Cites to Cato, Heritage. Conservative politics. See Pete du Pont, Campaign Finance Defies a Complicated Solution, Tampa Trib., Sept. 7, 1997, at 6. This theme is taken up by Justices Kennedy and Thomas in their separate opinions - Kennedy concurring, Thomas dissenting -- in Nixon v. Shrink Missouri Government PAC, 120 S. Ct. 897, 915, 926 (2000).

2. See, e. g., Kathleen M. Sullivan, Political Money and Freedom of Speech, 30 U. C. Davis L. Rev. 663, 688-89 (1997); Samuel Issacharoff &Pamela S. Karlan: The Hydraulics of Campaign Finance Reform, 77 Tex. L. Rev. 1705, 1736-1737 (1999); Testimony of Ira Glasser, Executive Director of the American Civil Liberties Union, before the United States Senate Committee on Rules and Administration, 22 March 2000, FDCH Congressional Testimony; Kathleen Sullivan: Against Campaign Finance Reform, 1998 Utah L. Rev. 311, 326-327; Joel M. Gora, Buckley V. Valeo: A Landmark of Political Freedom, 33 Akron L. Rev. 7, 35-36 (1999).

3. See www.fec.gov/finance/ (contributions to federal candidates and parties of federal "hard" monies were in excess of $2.9 billion). See also Don Van Natta Jr., Dough Gets Little Rise Out of Voters The 2000 Campaigns For President And Congress Might Cost a Record $3 Billion, But People Don't Seem to Care, 1/30/00 Portland Oregonian D03 ("Never have so many given so much in so little time. If the current dizzying pace of fund raising continues, political operatives and campaign finance experts estimate that the 2000 elections for president and Congress will end up costing a total of $3 billion, an amount that would dwarf the $2.1 billion spent in 1996.").

4. Only one serious problem arises within the "motherhood" framework: mandatory disclosure may have a chilling effect on contributions to unpopular groups. But since we argue for the abolition of the framework itself, we have no need to emphasize this very serious problem. See, e.g., NAACP v. Alabama, 357 U.S. 449 (1958) (finding production order issued in connection with litigation over qualification of NAACP to do business in state unconstitutional to extent it required disclosure of members within the state, because of potential chilling effect on affiliation with NAACP). Buckley accordingly exempts from the disclosure requirement minor parties that show can "a reasonable probability that the compelled disclosure of a party's contributors' names will subject them to threats, harassment, or reprisals from either Government officials or private parties." Buckley, 424 U.S. 1, 73. See also Brown v. Socialist Workers '74 Campaign Comm. (Ohio), 459 U.S. 87, 93-98 (1982) (finding that Ohio could compel the disclosure of neither campaign contributors nor recipients of campaign disbursements when the people so identified would likely be subject to harassment).

5. See, e.g., Jack C. Heckelman, The Effect of the Secret Ballot on Voter Turnout Rates, 82 Pub. Choice 107, 119 (1995) (estimating a 6. 9% drop in voting in states utilizing the secret ballot and attributing drop to the elimination of bribery).

6. Even ideological giving raises the question of democratic fairness, since ideologies favored by the rich will have an obvious advantage. Chapter 3 will suggest ways in which this problem can be ameliorated -- it can never by magically "solved" -- within the framework of a free society.

7. See, e.g., Samuel Issacharoff & Pamela S. Karlan, the Hydraulics of Campaign Finance Reform, 77 Tex. L. Rev. 1705 (1999) and Kathleen M. Sullivan, Political Money and Freedom of Speech, 30 U. C. Davis L. Rev. 663, 688-89 (1997).