Why Campaign Finance Laws Make Things Worse

Jonathan Bernstein is a Bloomberg View columnist. He taught political science at the University of Texas at San Antonio and DePauw University and wrote A Plain Blog About Politics.
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Yesterday's fascinating New York Times deep dive into partisan money networks, state legislative elections, and the resulting policy outcomes really underlines the sometimes-complex relationship between campaign finance regulations and effective disclosure:

"Not unlike a political version of Cayman Islands banks, the networks allow political strategists to sidestep regulations and obscure the source of funds. Campaign contributions that would be banned or restricted in one state can be sent to a state where the rules allow money to flow more freely, often scrubbed of the identity of the original donor. Some groups work behind the scenes to orchestrate 'money bombs' of smaller contributions from hundreds of different donors, allowing the groups to provide candidates with large doses of cash -- fingerprint-free -- even in states with low contribution limits."

Under current constitutional doctrine -- and, really, this has been true since the 1970s, well before Citizens United and other recent court cases -- regulations are generally incapable of preventing big money from ending up wherever it wants to go. What regulations can do is disrupt the way money is raised by candidates and parties, forcing political actors to innovate to gain access to funds.

Then there's the effect on campaign finance disclosure. Here's how it works: Parties must set up mechanisms to "launder" campaign money in order to circumvent regulation (in the cases discussed in the Times article, state regulations). Once those methods are established, it's easy for campaigns and contributors -- whether interest groups or individuals -- to use them for the additional purpose of concealing the sources of campaign money.

There's nothing new about this; relatively low contribution limits in the 1970s and 1980s led to all sorts of innovative ways for big money to get from donors to campaigns, including political action committees and the bundling of "soft money" contributions to party organizations, which then disbursed the cash in ways that benefited candidates. In each case, campaigns ended up getting their money -- usually in ways that were difficult for reporters to easily characterize. For those of us who believe in full and meaningful disclosure as an important part of an effective campaign finance regime, the results have been, more often than not, a disaster.

My conclusion? The goal of keeping big money out of elections (whatever its merits) is basically impossible to achieve under current constitutional doctrine. Attempting to achieve it anyway will produce some temporary victories, accompanied by all sorts of (basically unpredictable) disruptions on the political parties. It will also encourage a system that makes it easier to evade meaningful disclosure.

My preferred campaign finance regime is a "floors, not ceilings" approach, combining unlimited contributions with public financing and full disclosure. I can't guarantee that no one would attempt to hide donations under those rules. But I suspect it would be much more rare than it is now. Remember, the primary reason for all the complex mechanisms that parties, donors and candidates have built is simply to get money to campaigns despite rules intended to make it impossible; for the most part, secrecy is just a byproduct. Without complex regulation, there's a good chance that parties would never set up the secrecy infrastructure in the first place, since they and their candidates could accept straightforward large donations. It makes sense to go to all that trouble in order to get millions of dollars that would otherwise be illegal; it's unlikely anyone would bother if the only reason is to conceal sources.

The bottom line: there really is a trade-off between regulation and disclosure.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Jonathan Bernstein at jbernstein62@bloomberg.net