By Jay Mandle
When private wealth is employed to finance political campaigns, political equality is put at risk. Paying for electoral campaigns with individual donations places wealthy individuals in a position to exercise greater political influence than those with fewer resources. In the
I.
Consider the relationship between restrictions on campaign contributions and equality of electoral influence. At one extreme a total ban on private contributions, in the absence of public funding, would produce an electoral system characterized by a very high level of political inequality. Only the rich could be effective political candidates since running for office would require self-financing. In such a context, the introduction of a strictly limited level of private campaign contributions would have the effect of increasing equality. It would open candidacy to a wider segment of the population – those who, though not necessarily wealthy themselves, would be able nevertheless to gain access to the funding necessary to mount an effective campaign. At some level of permissible contributions, however, further increments would start to have the opposite effect. They would increase inequality. This would occur because, as the allowable level of contributions increased, the wealthy would be the ones who disproportionately would take advantage of these increments. As a result, they would come to exercise excessive influence in the electoral process. In this way a U-shaped function characterizes the relationship between inequality in political influence and restrictions on campaign contributions. At first, the removal of restrictions increases equality, but beyond a certain point continuing to removing restrictions tends to increase inequality.
Seen in this perspective, we believe that the
Thus, according to data compiled by the Federal Elections Commission and analyzed by The Center for Responsive Politics , of the $2.4 billion raised by candidates during the 1996 elections, $597 million came from 630,000 donors, each of whom contributed at least $200. Another $161 million came from candidates themselves. This latter group included not only presidential aspirants such as Steve Forbes who contributed $37.4 million to his own campaign and Ross Perot who spent $8.7 million of his own money. Also in this grouping were 54 Senate candidates and 91 House campaigners, each of whom paid out at least $100,000 to support him/herself. In combination this meant that 630,000 individuals, representing 0.3%, of the 196,509,000 people of voting age in the country in that year, contributed 31.5% of campaign donations.
The problem is that this group of powerful donors is very far from representative of the American electorate. A poll of 1,100 individuals, each of whom contributed $200 or more in the 1996 election reveals, for example, that 81% possessed a family income of $100,000 or more and that 46% in excess of $250,000. By contrast in that year median family was $42,300. Furthermore compared to the electorate as a whole these large contributors were composed of more men, more elderly people, better educated individuals, and more occupants of high status occupations. There thus is no doubt that those who influence the electoral system most, through their financing of campaigns, are not representative of the voting age population as a whole.
One possible response to this situation would be to conclude that there is a need to reduce the acceptable level of campaign contributions. The idea would be to achieve greater equality by limiting the ability of the rich to use their wealth in the electoral process. Since the
Public financing of elections represents such an alternative. The reasoning that motivates this alternative is that public financing offsets the advantages to the wealthy of both self-financing and individual campaign donations. Simply banning large private donations leaves intact the ability of rich candidates to spend their own money in pursuit of office. In contrast, making the public sector a source from which revenue for political uses can be drawn mitigates both the ability of the wealthy to gain advantages when they run for office and their ability to influence others through donations. It thus reduces the political inequality which benefits the rich.
II.
Public financing, fairly administered to all viable candidates, is attractive because it promotes enhanced democracy and does so without interfering with the free political speech represented by the ability of the wealthy to make political donations as they choose. The objective of greater political equality can be secured, at least in part, through public expenditures and taxation. But success in convincing the American people of the merits of this view requires that its advocates overcome the antipathy present in this country to public expenditures and the preference for low levels of taxation. Particularly important in this regard is the need to meet the objections of those who would not voluntarily spend their wealth on political campaigns and therefore would object to being taxed for such a purpose.
The case for the use of tax revenues to finance expenditures might be more convincing if it could successfully be argued that the electoral system is a “public good.” In economic theory public goods are those products and services that are valuable to society but which are undersupplied when society relies on private markets to provide them. Because they are needed and will not be made sufficiently available through private markets, public goods need to be supplied by the government. Classic examples of public goods include street lights, city roads and police protection.
The undersupply of public goods occurs in part because individuals cannot be prevented from using these items whether or not they pay for them. Furthermore, the use of such goods by one person does not diminish the ability of others to use that product. Under such circumstances everyone has a powerful incentive to be a free-rider – to consume but not to pay – and there can be little effective opposition to their doing so. Private firms, therefore, are reluctant to supply goods that are characterized by heavy free-ridership. Profit opportunities are skimpy when consumers have easy and free access.
Because of this, products characterized by heavy free-ridership are not subject to the self-correcting mechanism present in competitive markets. In such markets when prices increase because there is insufficient supply relative to demand, the opportunity to earn profits induces new suppliers to come into the market. But where free riding is strong, this mechanism breaks down. Since, unlike consumers in competitive markets, free riders do not bid up prices, the price mechanism does not act to induce more supply in the market. Goods needed by the society, but possessing the characteristics of public goods, therefore, will be made abundantly available only if private markets are by-passed. Instead of individual consumption, collective purchases, through the agency of government, is needed. By requiring, in effect, universal participation, the government prevents free-riding.
III.
To make the case that elections are public goods, the focus of attention should not be on the free-riders, but on those who do not free ride. This is because those who voluntarily pay for public goods, when most do not, obtain a disproportionate influence over the content and quality of those goods. This problem does not emerge, or at least is minimized, in a competitive market setting. There, producers respond to the preferences of all those in the market. To be sure the influence consumers exert is affected by how much they buy. The more purchased, the greater the influence. Even so, all of the consumers have at least some impact, since they all contribute to the revenue and potential for profits of the producers. In contrast, in a free riding context those who consume but do not pay forfeit their ability to influence product content. Suppliers have no reason to respond to the preferences of those who do not buy from them. Where free ridership is possible and is extensively exercised, a relatively small proportion of those who use the good – namely, those who pay – can actually have a decisive impact on its quality and characteristics.
Here lies the source of serious difficulties. An individual or institutional consumer of a public good might choose to pay rather than free ride in order to influence the nature of that public good in a way designed to promote private advantage. In a competitive market context there is not necessarily a problem with such a decision. Indeed, the strength of the market precisely is that suppliers will possess a strong incentive to respond to the preferences of their paying consumers. But when a few users of a good shape its content, even though it is to be used by the entire population, the potential for abuse is present. When the nature of a good is determined for the entire community by only those able and willing to pay, it is likely that it will not satisfy the preferences of that wider population.
To see what this might look like consider the case of the national defense. Few would defend a scheme to fund the defense budget which included only the taxpayers of one section of the country. To be sure, one objection would be that it is not fair to allocate the entire burden to the people of just one region: they will be asked to carry too heavy a burden. But opposition to such a scheme would be justified even if a sub-group in the population volunteered alone to support the defense establishment. The concern would be that the resulting defense policy would be distorted. If the residents of, for example, the Northeast were the sole funders of the defense budget, they, more than the people of other sections of the country, would be able to exercise influence over the pattern of that defense. In all likelihood, the result would be that the Northeast would be better defended than other regions, an outcome clearly contrary to the national interest.
Latent in the concept of public goods therefore is not only the idea that it is wrong for people who benefit not to pay, but also that it is wrong to allow people to benefit individually by paying. A segment of the population should not carry disproportionate responsibility for the financing of essential public goods. Doing so places that group in a position to shape the resulting output in a way which is favorable to their narrow interests at the expense of the broader well-being of the society. Thus free riding is objectionable not only because it allows some people to have access to goods without paying for them, but also because it places too much power in the hands of those who do pay.
IV.
The electoral system in the United States clearly satisfies the definition of a public good: it affects all of the people of the country whether or not they pay for it, and its use by one person does not preclude its use by others. But though the electoral system shares the characteristics of a public good, its funding, for the most part, in this country is provided by voluntary donors. It thus is not surprising that there is wide-spread agreement that the benefits of the electoral system accrue disproportionately to the tiny minority who possess the wealth and inclination to contribute major financial outlays to candidates.
One perspective on the problem, understood in this way, is that an overwhelming majority of the electorate choose to free ride. As we have seen those who do contribute to electoral campaigns represent only a very small proportion of the electorate. The people who do not contribute either cannot afford to do so or judge the benefits they would obtain from doing so as relatively low compared to other ways they could spend their resources. The results are predictable. Just as a defense policy financed exclusively by the Northeast would, in all probability, be biased to the region’s interests, so too with the electoral system. It is shaped in the direction of those who finance it at the cost of those who do not. In this way the principle that all citizens in a democracy should have an equal opportunity to influence the political process is undermined.
It is possible to make a case for this system. After all, it is voluntary: no one is forced to do anything. Campaign contributors do, it might be conceded, buy disproportionate influence, but this simply represents the preferences of the population. As in any market, some wish to buy that influence and others do not. And in any case, the argument continues, the imbalance which results in the representation of points of view and interests need not be permanent. Those who come to feel aggrieved have recourse by themselves becoming campaign contributors. In this way they too can gain in the political arena.
This response, consistent as it is with market theorizing, nevertheless concedes what ought not be conceded: that an electoral system of equality is impossible or undesirable to attain. Political influence should not be treated like an ordinary consumer good. In any scheme in which some are donors and others are not, there will be differential levels of influence. With private campaign donations financing the electoral system, the representation of interests and ideas necessarily is uneven, corresponding to the pattern of contributions. Even if many more people made contributions, perhaps as an expression of dissatisfaction with the current pattern of influence, there would still be serious inequalities. Since income in society is unevenly distributed, universal contributions will not result in equal contributions. The more wealthy will likely contribute more than the less wealthy. As a result, inequality in influence will continue. For that reason, such a system should be unacceptable to those who believe that the electoral system should allow equal opportunity to participate in the political process among the entire population.
It follows from this discussion that public financing of elections would best mitigate the inequality in the current political process. With public funding, those who would be free riders in a voluntary contribution system would be represented collectively through the public financing of campaigns. As such they will be endowed with an enhanced ability to influence the political process.
Even so, some degree of inequality will persist. That is because it still will be possible for private individuals and institutions to use their wealth to support candidates and/or their programs. Purchasing advertisements supporting candidates, and making campaign contributions will still be acceptable. Since the retention of this right favors the wealthy, it will remain the case that to some degree the electoral system will retain the bias which public financing is intended to correct.
This bias however can be constrained. What is needed is to set the level of public financing at an appropriately high level. In a system of public financing, political inequality will be inversely related to the level of funding provided by public authorities. Fundamentally this results from the fact that the higher the level of support the less the importance of private contributions to politicians. Where public funding is skimpy, candidates will feel deprived of the resources necessary to articulate their view-points successfully and as a result will seek out private funding. But to the degree that funding permits political viability, the utility of a search for private money is reduced. With high levels of public funding, politicians will feel less urgency to seek voluntary contributions and might even be induced to agree to voluntary agreements not to accept any private money at all. If this occurs, a high level of political equality will have been established without precipitating an active conflict between political and free political speech. A commitment to electoral equality requires therefore that the subsidies received by candidates be substantial. Only with that the case can ambitious politicians be freed from the necessity to be subservient to private donors.
V.
In the current system, donors are able to buy influence because political campaigns cost money to run. Campaign staff and consultants, polling, phone banks and other telecommunications, mass mailings, and many other requirements of effective campaigning all demand the expenditure of resources. But recently the stampede for money has been fueled more by television advertising and production costs than by any other single source. Though we do not want to debate the desirability of alternative strategies to secure public funding of elections, we think that television’s centrality requires us to address this medium specifically.
In recent years the requirement that television and radio stations provide public service has lapsed and all but disappeared. But those media outlets nonetheless remain licensed to use the public airwaves. As a result, there is no reason that they could not be required to provide a certain level of free access to candidates. In doing this, the same principle which even today is employed when franking privileges are provided to politicians could be applied to elections. Resources should be made available by the public sector to advance the public interest. In this case, the provision of free air time could significantly affect the electoral process. Political campaigns could be freed from the need to raise the enormous amounts of money required to finance an effective media blitz.
Private television and radio stations will, no doubt, object to this possibility. Their first line of defense may be that such a requirement represents an infringement on their right of “private property.” This argument is unconvincing. The broadcast spectrum is itself a public resource to which no private individual or corporation has a natural claim. The public has every right to impose requirements on those who use it. Doing so has nothing to do with restricting the content of political speech. Rather, there is a judgment that, in light of the limited space available on the broadcast spectrum, part of this public resource should be opened to political speech on equal terms.
Television and radio stations are also likely to stress the financial losses they will incur in complying with such regulations and in doing so point to the burden it will impose on the viewing public. In brief, the audiences for electoral programming will be small and the stations will not be able to sell advertising time. This position will be bolstered by the argument that if there were an audience for politics, normal market mechanisms would be sufficient to ensure that they would already be satisfying it. Requiring political programming, they might summarize, exacts both a broad public cost by denying people the entertainment they would prefer and a more narrow one relating to their own foregone revenue.
Much of this argument must be conceded. If asked whether they would rather watch (and listen to) a politician or the programs to which they have become accustomed, there is little doubt what most people would say. In this sense, there is a public cost. And precisely because this is the case, the imposition of a political time requirement on the media will reduce revenue and profit at television and radio stations. While this is all undoubtedly true, none of it threatens our position. Our argument is that greater equality of political influence can be achieved only by treating elections as a public good, the provision of which is not free. These costs seem to us to be relatively low ones to pay to achieve an electoral system of greater equality.
Some degree of political inequality will nonetheless persist. That retention will be the inevitable result of the right of all people in a society of economic inequality to express their political view points. Wealthy individuals still will retain the ability to have their views disseminated more widely than non-wealthy individuals. Even generous public financing of elections, that is, will not entirely eliminate the trade-off between free speech and political equality. In fact, a further change in that trade-off may well await the attainment of a society in which wealth is more evenly distributed than is the case at present. In the meantime, however, by understanding the electoral system to be a public good, what can be hoped for is a system in which the public assumes a large share of the cost of elections. With that, the country will move to greater political equality without having to confront difficult trade-offs between political equality and free political speech.
The author of this article, Jay Mandle, is co-founder of Democracy Matters and the W. Bradford Wiley Professor of Economics at Colgate University.