Small Donor Democracy?

“Money On My Mind” is a monthly column by Jay Mandle. The views expressed here are those of the author, (not necessarily those of Democracy Matters or Common Cause), and are meant to stimulate discussion.

April 2007
By Jay Mandle

Mark Schmitt agrees with us that “the most urgent cause in our democracy is to prevent the profound inequalities of our economic system from being echoed, reinforced and exacerbated in the political system.”1 But Schmitt believes that to move to that goal our movement should “revisit the principles on which it was founded.”

 

It is clear that a “clean elections system” is not Schmitt’s reform of choice. Arguing that “there is a place for private money in politics,” he supports “a small donor democracy.” He writes favorably about the use of the Internet to raise campaign funds and endorses systems that match public funds with private political donations.

 

Schmitt believes that, as pioneered by the Dean presidential campaign in 2004, candidates now can use the Internet to raise the funds they need from small donors. Doing so through what he calls the “netroots” allows candidates to “be more outspoken on issues and …independent of lobbyist money.” According to him, what has emerged is “a true small-donor fund-raising base in both parties.”

 

Schmitt is also enthusiastic about New York City’s finance system in which $4 of public money is provided for each $1 dollar raised from private sources. He describes this as “the closest thing” we have to striking the proper balance in allowing “both poor and rich to give financial expression to the relative intensity of their [political] desires.”

 

There is however an obvious problem with accepting such a role for private donations. The risk is that low and middle income people – people who cannot afford to make substantial financial contributions to political campaigns – will be put at a disadvantage. Schmitt does acknowledge this problem. But in his zeal for “netroots” and New York’s matching system he brushes this concern aside.

 

Nonetheless, the fact is that neither “netroots” nor New York’s matching system does enough to ensure that private wealth is prevented from exercising disproportionate power in the political system. It is true that in elections for Congress and the Presidency in 2004, small donations became much more important than in the recent past. Using data prepared by the Institute for Politics, Democracy and the Internet, my estimate is that in 2000 about 625,000 made such contributions while in 2004 that number had increased to 2,800,000. Money raised from small donations increased from about $38 million in 2000 to $206 million in 2004. As a result, the share of the money raised by politicians from small contributors increased from 3.0 percent to 9.7 percent, a significant change.2

 

With that said, it nevertheless remains the case that the financing of electoral races in the United States continues to be overwhelmingly dependent upon big contributions from a very small segment of the American population. Even after the big influx of small donors, political contributors comprised less than 2 percent of the population, and more than 90 percent of contributions for Congressional races came from big donors (in excess of $200). The rise of the “netroots” has not altered the fact that a tiny fraction of wealthy Americans pay for our politics and thereby get to shape the political agenda.

 

New York City’s matching system too allows wealthy individuals to continue to possess excessive power. Instead of creating a small donor democracy, the approach adopted there actually allows a small number of large donors to leverage the system to their own benefit.

 

In New York contributions of up to $250 can be used to trigger the match. But private donors to a mayoral campaign are allowed to give an additional $4,700. With overall spending capped at $5,728,000, of which $3,150,400 can be public funds, it takes only 3,150 big contributors to fully fund a candidate’s election efforts.3 Instead, in short, of creating a small donor democracy, New York City’s system in fact allows a few donors to dominate the financing of city-wide elections.

 

It is not clear why the kind of clean elections system – now present in Arizona, Maine, and Connecticut and proposed in the Fair Elections Now Act offered by Senators Dick Durbin (D-IL) Arlen Specter (R-PA) in the Senate – does not receive more extended treatment by Schmitt. I find only one reference to “Arizona’s ‘clean money’ system” in his essay. There he says that it serves a similar purpose to the one in New York, but he does not elaborate.

 

The irony is that it is “clean elections” that best achieves Schmitt’s goal – a system in which small donors can help shape the choices presented to the electorate. With it, candidates are required to raise small contributions in substantial numbers before they receive public funds. The Durbin-Specter bill for example requires a specified number of $5.00 donations. With such a low contribution limit, people who can afford to make only minimal donations are placed on an equal footing with those who could afford to contribute much more but are prevented from doing so by “clean elections” rules. And Schmitt’s goal of allowing people financially to signal whom they support is also achieved by the $5.00 donation.  

 

There is nothing magical about the $5.00 level. It could be set higher. But the order of magnitude is right. There are a myriad of ways that wealthy people can indirectly use their resources to influence public opinion and therefore the political process. They after all do own and control the mass media. Because this is so, we should make certain that their financial power is not also employed in the political process. Neither the “netroots” nor the New York system prevents that from happening. A “clean elections” system holds out the promise that the use of private funds in elections and political equality can be reconciled.