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Campaign Finance and Corruption: Does Public Election Financing Decrease Corruption?

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“In fact, corporate and union money go overwhelmingly to incumbents. This may be the single most self-denying thing that Congress has ever done.”

- Elena Kagan, Solicitor General, September 9,2009

Elena Kagan, then the Solicitor General of the United States, made the comment above as part of her wholehearted defense of the Bipartisan Campaign Reform Act (BCRA), a 2002 law that severely limited corporations and unions’ ability to raise and spend funds to broadcast political messages. At the time the landmark law was being reviewed by the Supreme Court on the grounds that limiting political contributions or political spending was an unconstitutional barrier to free speech. Ultimately the Supreme Court did overturn several BCRA provisions to create a much less restrictive campaign finance environment, though many concerns about this change persist, such as whether unlimited corporate involvement in elections could lead to heightened political corruption.

As legislators with considerable influence over regulatory standards and government contracts, elected politicians make many decisions that can affect the financial health of corporations. Because of this, corporations have a vested interest in electing politicians who will produce favorable policy decisions that increase their profits. When campaign finance laws are lax, corporations can spend freely to support their preferred candidate. Critics argue that unlimited corporate spending could allow for ‘pay-to-play’ politics, wherein politicians are accepting what are effectively bribes in the form of campaign cash in exchange for policy concessions that benefit their corporate donors. But do politicians really change their policy positions to appease corporate donors? Can a democracy with liberal campaign finance laws really hold big corporations accountable? And finally, would publicly-funded elections help stamp out this kind of political corruption?

In this case study you will examine data on state campaign finance laws from the DemCap Analytics (DCA) tool to discern whether a publicly-funded election would limit corruption. You and your classmates will need to consider the question from multiple angles to decide whether an overhaul of the United States’ campaign finance system would encourage ethical and honest behavior in its elected officials.

History of Campaign Finance Laws in the United States

Prior to the 1970s, most campaign finance legislation was poorly enforced.The Tillman Act of 1907 was the first federal attempt at limiting corporate money in elections, though the legislation provided no mechanism to force compliance with the new restrictions, so businesses easily skirted the law. It wasn’t until 1974, when Congress amended the Federal Election Campaign Act, that the Federal Election Commission (FEC) was created to enforce campaign finance laws. The new amendments also created a host of restrictions on political donations, namely contribution limits, expenditure limits, and disclosure requirements.

The Supreme Court intervened soon after in the case Buckley v. Valeo. The Court held that while limits to campaign contributions were justified to limit corruption, limits on political expenditures by campaigns and independent groups infringed on those organizations’ constitutionally protected right to free speech. The Court rolled back limitations on corporate campaign spending further in subsequent cases like First National Bank of Boston v. Bellotti and McConnell v. FEC. Conservative jurists saw finance laws generally as an intrusion on free speech because they limited the extent to which an individual or organization was able to express their opinion by putting an artificial financial ceiling on their “speech”.

Though 2002’s BCRA attempted to revive restrictions on spending by outside groups and limit independent political advertisements in advance of an election, the Supreme Court decided in Citizens United v. FEC that both of these provisions were unconstitutional. This meant that corporations, unions, and independent advocacy groups unaffiliated with campaigns could raise and spend unlimited funds in support of their preferred candidates. 24 states had to change their campaign finance laws after the decision to be in compliance with the Court’s ruling, and the patchwork of campaign finance laws across the country became much more standardized as the view that financial contributions are tantamount to political speech became enshrined in judicial precedent.

All of these decisions have gradually chipped away at campaign finance restrictions in the United States and created an environment where corporations can spend freely in elections. Having discussed what the actual campaign finance landscape looks like, now let’s turn to a potential alternative.

How Would Public Financing Limit Corruption?

Public election financing might help solve the potential corruption problems associated with big donors’ outsized political influence. Publicly funded elections provide qualifying candidates with government funds to run their campaigns. This decreases the need for private or corporate donations, since candidates are on equal footing with state-provided funds. The United States had a system of publicly funded elections in the wake of Watergate, but a series of Supreme Court decisions chipped away at public financing on constitutional grounds, since it limited the effectiveness of political donations (i.e. political speech).

Public financing might decrease corruption among elected officials by making it easier for challengers to oust corrupt incumbents from office. Research shows that candidates with more campaign cash have a substantially better chance of being elected. In a democracy with no contribution limits, incumbent politicians typically outraise their political opponents. Public officeholders have strong ties to access-oriented interests groups and have experience fundraising from previous campaigns, both of which help them maintain a healthy fundraising advantage. Indeed, the average incumbent in the 2022 US Senate election cycle raised $29,663,644, compared to the average challenger’s $2,129,872. In the US House those figures were $2,855,968 and $307,857 respectively. By instituting public election funding, this advantage of incumbency could be limited, so it would be easier for challengers to beat entrenched incumbents suspected of corrupt or unethical behavior. 

Proponents of publicly financed elections also say that it will help the United States come closer to its goal of being a truly open and participatory democracy. Equalizing political speech such that any one person has the same financial say in election outcomes as any other is in keeping with the egalitarian principle that “all men are created equal” that the United States was founded upon. According to these critics, a democracy beholden to the preferences of corporate plutocrats is hardly a democracy at all.

Some scholarly work pushes back on these criticisms of corporate election involvement. Adriana Cordis and Jeff Milyo test the theory that campaign finance reform limits corruption using comparative data from different U.S. states, and find that corruption prosecutions are no more likely in states with stringent campaign finance restrictions than in states without. However, there are disagreements among academics on the topic: Cala Hummel and colleagues evaluate a dataset of 175 countries and find that public election subsidies significantly reduce corruption among elected officials, even in countries where election reforms are applied unevenly. Your analysis in the following questions will help you decide between these different perspectives.

Assignment

  1. Open the DCA tool and search for the ‘Political Finance Subsidy Index’. This is an aggregate measure spanning from 1900-2015 that captures the extent to which elected governments subsidize political candidacy. Next, choose an appropriate measure of political corruption from those in the tool (perhaps Corruption: Bribery Incidence though feel free to use other measures). Compare these two datasets for the following five countries: The United States, Portugal, Paraguay, Italy, and Japan. What do you notice? Does it seem like public financing of election campaigns decreased the incidence of corruption? Why or why not?
  2. Do you agree with the argument that caps on corporate campaign donations/expenditures would constitute a limitation of corporations’ freedom of speech? If so, is that enough of a reason to permit unlimited contributions? How should we navigate the trade-offs between free speech and an equal democracy?
  3. Elena Kagan noted how passing campaign finance reform was the “most self-denying thing Congress had ever done.” What might she have meant by this? How can legislatures worldwide deliver campaign finance reform when there are strong incentives for them to maintain the status quo?
  4. In the United States, Supreme Court rulings have made it difficult for any fundamentally transformative campaign finance reform proposal to pass legal muster. What can Congress and state legislatures do to discourage corruption or bribery given this reality? 
  5. Considering everything you have discussed in this case study, would public financing of elections be an improvement over the United States’ current campaign finance system?