The Supremes: Campaign Finance and Crony Capitalism

Posted on April 3, 2014 by


Yesterday the Supreme Court of the United States passed down a ruling on MCCUTCHEON ET AL. v. FEDERAL ELECTION COMMISSION. Two of my very able colleagues at Bereans at the Gate (professors Haymond and Smith) posted commentary on the ruling yesterday. Both of these gentlemen are more qualified and able to comment on this ruling than I am. Particularly, when I think of the Supremes, I think of the young ladies pictured here.Embed from Getty Images
While I agree with the Court’s ruling in microcosm, I also fear that this is a small brick in a much larger wall that is hindering performance in the United States economy.

During President Obama’s administration the politicization of our economy has increased at a frightening pace. Our economic system is being pushed farther and farther from a market capitalist economy to a crony capitalist economy. In his 2013 book Crony Capitalism in America: 2008-2012 Hunter Lewis (also available at Amazon) lists several ways that politicians are remunerated by people outside the government in payment for expected favors. From pages 14 and 15 of the book the list reads:

Campaign contributions
Direct campaign assistance
Indirect campaign assistance
Assistance with “messaging”
Money (illegal if the takes the form of a bribe, but not necessarily in other cases, e.g. assistance with a loan or access to a “sweetheart” investment,)
Support from “foundations”related to campaign contributors
Regulatory fees to support agency jobs
Jobs for friends, constituents or eventually themselves
Travel, entertainment, other freebies
Power, control, and deference.

It is clear that one of the primary ways politicians are remunerated by their cronies for providing “favors” is through campaign contributions.

Prof. Haymond’s conclusion is that the only way to to keep money out of politics is to shrink the government. Dr. Smith says that the “only meaningful solution … is to disconnect business interest from the government as much as possible.” While I agree with my colleagues that the best solution to this problem is to shrink government and to sever the relationship between business interests and government, I think that to exclusively focus on this one aspect of the issue is a mistake. To focus only on the excessive government regulation providing rent seeking opportunities and to ignore the flow of money to the politicians is to only look at the demand side of the equation (or the supply side depending on your perspective). I agree that the best solution is to shrink our government to lessen the possibilities for corruption and to simplify both our tax and regulatory structure to lessen the opportunity for political favor, but we also have to be very cognizant of the flow of money to the politicians.

A reading of the “syllabus” (the syllabus is 6 pages, the opinion 94 pages – I have not read the entire opinion) on this opinion shows the justices are very much aware of my fear (as is Dr. Smith). Pages 3-4 of the opinion say:

This Court has identified only one legitimate governmental interest for restricting campaign finances: preventing corruption or the appearance of corruption. See Davis, supra, at 741. Moreover, the only type of corruption that Congress may target is quid pro quo corruption. Spending large sums of money in connection with elections, but not in connection with an effort to control the exercise of an officeholder’s official duties, does not give rise to quid pro quo corruption. Nor does the possibility that an individual who spends large sums may garner “influence over or access to” elected officials or political parties. Citizens United v. Federal Election Comm’n, 558 U. S. 310, 359. The line between quid pro quo corruption and general influence must be respected in order to safeguard basic First Amendment rights, and the Court must “err on the side of protecting political speech rather than suppressing it.” Federal Election Comm’n v. Wisconsin Right to Life, 551 U. S. 449, 457 (opinion of ROBERTS, C. J.). Pp. 18–21.

I do not know the solution. The current campaign finance regulation is already vast, but has not successfully done what it was designed to do when passed in 1971. I doubt that this Supreme Court decision will have a huge effect on the relationship of politics and business. But I do fear that it is another trickle in a river that is likely to harm our economy.