Tag Archives: First Amendment

What would real reform in Virginia look like?

A couple of months ago, I blogged about Virginia Governor Bob McDonnell and the gifts he and his family have received from businessman Jonnie Williams, Jr. The comments were eventually picked up by journalist Katie Watson, first in a column and then in an interview with the local CBS affiliate. Eventually the Richmond Times Dispatch invited me to turn the blog into an OpEd and this last Sunday Bart Hinkle of the Dispatch elaborated on the point in an excellent post. I suspect many readers will agree that Hinkle made the point far more eloquently than I:

Many have wondered why McDonnell, otherwise a paragon of rectitude, would take such swag. But nobody has asked why Williams would give it — because the answer is obvious. Star Scientific has not made a profit in a decade. But it might, if the governor were to place the weight of the state on the economic scales.…Virginia’s governor has a lot of quo to give whether or not he takes a fistful of quid.

Image by hin255

Image by hin255

 

In my view, Virginians need to think as constructively as possible about the sorts of reforms that would prevent scandals like this from happening in the future. Unfortunately, my guess is that the political response will focus—to use Hinkle’s words—on the quid and not on the quo. I believe this would be a huge missed opportunity.

In Virginia, gifts to public officials valued at $50 or more are permitted but must be disclosed, while gifts of any value to family members of public officials are permitted and do not need to be disclosed at all. Just about every article I’ve read on the matter emphasizes this point and I’d guess that a number of legislators are busy drawing up bills to change these laws as I type. For his part, the governor himself has indicated an interest in changing the ethics laws, though he’s offered no specifics.

It’s understandable that this is peoples’ first instinct: If business owners are giving money to elected officials and their family members in return for special treatment from government, it seems only natural that there ought to be a law forbidding such gifts to elected officials and their families. I’m not opposed to such laws per se. But it would be a mistake to think that they are going to solve the problem.

Water flows downhill. And as long as elected officials are expected to dole out lucrative privileges to particular firms, particular firms will want to play in the political sandbox.

Even if Virginia adopted a complete ban on all gifts of any size to elected officials and their family members, I predict firms and their leaders would still donate to political action committees, they’d endorse candidates, they’d sponsor third-party political advertisements, they’d organize get-out-the-vote efforts, and they’d host fundraisers and campaign events. In an endless game of whack-a-mole, reformers could no doubt try to curtail these efforts too (with the First Amendment a likely casualty). But so long as businesses face such lucrative incentives to play politics, the reformers will always be one step behind.

A better—more permanent, and more direct—reform would strike at the heart of the quid-pro-quo problem. It would limit the government’s ability to favor particular firms in the first place. This would require the elimination of all targeted tax exemptions and credits. The state could then use the extra money obtained from closing loopholes to lower its corporate and individual tax rates. The state would also need to eliminate all programs that make grants or loans to particular firms (you can see a listing of such programs here).

In one fell swoop, these types of reforms would instantly remove the incentive for firms to seek the favor of politicians. These reforms would also improve the economic climate of Virginia. Without government assistance, industries would be more competitive, lowering their prices and improving the quality of their products. Firms would pay more attention to trends in customer desires rather than political trends. This would help ensure that labor and capital would be allocated on the basis of genuine costs and benefits rather than political costs and benefits. And millions of dollars that are now wasted in seeking government-granted privilege could be put to more valuable uses.

This does not mean that the state would be powerless to entice firms to relocate here. Governors, legislators, and mayors across the state could and should work to make sure that Virginia’s tax and regulatory regimes are the least burdensome in the nation. Elected officials (and their spouses) could and should tout the state’s superior business climate.

And one of their talking points would be the fact that all businesses in Virginia get the same fair shake, whether they donate to politicians or not.

Want Money Out of Politics? Eliminate Government Discrimination

In my work on government-granted privilege, I have repeatedly emphasized the surprising degree of harmony between left and right on this issue. Both abhor the tawdry nexus between corporate power, money, and politics.

(As evidence that I am not the only one who sees such agreement, note that Occupy.com recently reprinted an article highlighting the Mercatus project).

In an article from Friday, progressive blogger Ezra Klein seems to bolster this point:

According to Harvard law professor Lawrence Lessig, only 0.26 percent of Americans give more than $200 to congressional campaigns. Only 0.05 percent give the maximum amount to any congressional candidate. Only 0.01 percent — 1 percent of 1 percent — give more than $10,000 in an election cycle. And in the current presidential election, 0.000063 percent of Americans — fewer than 200 of the country’s 310 million residents — have contributed 80 percent of all super-PAC donations.

“This, senators, is corruption,” Lessig said Tuesday, in testimony before the Judiciary Committee. “Not ‘corruption’ in the criminal sense. I am not talking about bribery or quid pro quo influence peddling. It is instead ‘corruption’ in a sense that our Framers would certainly and easily have recognized: They architected a government that in this branch at least was to be, as Federalist 52 puts it, ‘dependent upon the People alone.’ You have evolved a government that is not dependent upon the People alone, but that is also dependent upon the Funders.”

There is much in here with which I agree. Campaign spending begets access. Access begets privilege. And privilege, in my view, “misdirects resources, impedes genuine economic progress, breeds corruption, and undermines the legitimacy of both the government and the private sector.”

The same article, however, also highlights the ways in which progressives and libertarians disagree about money, politics, and power. Klein quotes and quickly dismisses Cato scholar Ilya Shapiro. In his own testimony, Shapiro argues:

To the extent that ‘money in politics’ is a problem, the solution isn’t to try to reduce the money — that’s a utopian goal — but to reduce the scope of political activity the money tries to influence. Shrink the size of government and its intrusions in people’s lives and you’ll shrink the amount people will spend trying to get their piece of the pie or, more likely, trying to avert ruinous public policies.

This, Klein argues, is impractical. Moreover, he says, “between the dismantling of the social safety net and the destruction of our military might, the cure might be worse than the disease.” Instead, Klein’s preferred solution is campaign finance reform, perhaps necessitating a Constitutional Amendment to get around First Amendment concerns.

I’ll admit I favor Shapiro’s solution. If we shrink the size—and more importantly, the scope—of the government, the wealthy and well-connected will have nothing to gain from playing politics. I also happen to think that Klein’s solution—controlling political speech—is, in fact, “worse than the disease.” (I think Madison would agree…he even used similar language). Moreover, I think that there are plenty of programs to shrink or eliminate before we get to cuts that eviscerate the safety net or threaten our security. To pretend otherwise is to “shoot the cocker spaniel.”

But in the interest of finding common ground with my progressive friends, let me suggest a modest compromise: the abolition of favoritism in government policy. In an interview with James Buchanan, F.A. Hayek once remarked:

[The First Amendment] ought to read, ‘Congress shall make no law authorizing government to take any discriminatory measures of coercion.’ I think that would make all the other rights unnecessary.

This quotation appears in the beginning of an excellent—but often overlooked—book by Buchanan and Roger Congleton called Politics by Principle, Not Interest: Toward Nondiscriminatory Democracy.

Buchanan and Congleton brilliantly trace the political and economic consequences of forgoing favoritism. What happens when government adheres to a sort of “generality” principle by which all policies are required to apply to all equally? What if there are no carve-outs in the tax code? No special favors in the appropriation process? Notice that this need not be the sort of libertarian paradise that Shapiro and I favor. Government might still spend a lot of money and it might still tax a great deal. But it would be constrained by the generality principle to tax and spend in a nondiscriminatory way (Buchanan and Congleton make an allowance for a safety net by proposing “a flat rate of tax on all income combined with a set of equal-per-head demogrants,” p. 161).

Generality would require both sides to give up their own pet projects which favor particular segments of society. No more “targeted investments” in particular green technologies. No more tax credits for people who have kids. No more subsidies for farmers. No more favors for manufacturing. No more bailouts of some firms and not others. Under such a constraint, a majority of Congress could elect to subsidize industry A, but it would also have to subsidize industries B-Z.

The proposal has an intuitive moral appeal. Government, after all, is constituted to promote the general welfare of the entire population, not the specific welfare of certain segments of society. But as Buchanan and Congleton show, it also has economic appeal. For under a generality rule, “no participant has an incentive to invest resources in efforts to secure differential or discriminatory advantage at the expense of others in the collective enterprise.” (p. 44). And that can make the difference between a society that prospers and one that stagnates.

We all—right, left, libertarian, and progressive—seem to agree that something is wrong when wealthy individuals donate to politicians and politicians hand out privileges to these donors. Klein and Lessig think the answer is to regulate donations. Shapiro and I think the answer is to limit the scope of government.

We can continue to talk past one another while the nation slips deeper and deeper into the grips of the pathology of privilege. Or, we can roll up our sleeves and think of alternative solution that might be acceptable to both the left and the right. How about the abolition of favoritism in government policy?