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Supreme ignorance about the corruption of campaign finance

mccutcheon-campaign-finance

mccutcheon-campaign-financeA river of anguished ink has flowed since the Supreme Court delivered its latest decision loosening the limitations of private money in political campaigns, the case of McCutcheon vs Federal Election Commission. Many have hyperventilated, with good reason, that letting the wealthy influence elections to an even greater degree will further degrade the principles of democracy in America. Chief Justice John Roberts’ logic in the McCutcheon decision is based on the gut-laughingly absurd notion that giving money in large quantities to candidates and political parties does not lead to “quid pro quo corruption,” per se. Sane, thoughtful citizens of this republic might be forgiven for then yelling at the reading device of their choice, “Well, what does cause corruption, Mr. Roberts? Spores? Bacteria? Evil leprechauns?

One wonders how the dominant legal minds of our country can have been reduced to emitting the same genre of talking points as tobacco industry lobbyists who contend that “you can’t prove” that cigarettes “cause” cancer (because, technically, there is only a crushing correlation, not causality!) It is terrifying to consider that thinking of this quality represents the pinnacle of the legal profession in the United States, but this is the same group of people who think that the government also has the right to rectally-invade people for traffic violations, because they might be a terrorist, maybe.

The calamitous implications of these new campaign finance laws have already been well described by other opinion writers. The threadbare protestations of McCutcheon‘s supporters are perhaps the best arguments of all against the decision. (See the Cato Institute’s Robert Levy and his piercing argument, “It’s OK because it’s fine!”) Still, one of the most compelling reasons to dismantle this grotesque equation of speech and money has not been sufficiently explored. To understand the true perversion of these new laws, we must look at how the monetary system itself is already twisted. A currency scheme engineered, intentionally or not, to serve wealthy, private interests cannot possibly be seen as a just, reasonable way to allow individuals to express themselves politically, as well. That is, unless the real goal of our Supreme Court is to permanently deliver the nation to plutocracy. Either situation deserves intense scrutiny.

Money devolves into illusion

Most of the arguments about campaign finance reform have turned around the question, “What is speech?” The follow-on question is “if giving money to a candidate is a form of speech, what right does the government have to limit it?” The current Supreme Court seems to be concluding that if speech is a right according to the First Amendment, and money helps citizens exercise that right, then the government should allow campaigns to be financed with little or no interference.

But another question is perhaps more fundamental: What is money? If money has a material effect on politics, then it must be understood in full – something that isn’t so easy these days. The following questions become immediately germane:

  • How is money created?
  • What is the function of money?
  • When a person or organization has a lot of money, how did it come into their possession?
  • If money does not lead to corruption, then what is the benefit of financing candidates?
  • Did we create the current money system in the hopes of facilitating commerce or politics?

To answer these questions is actually to destroy the arguments of the Roberts court. Once you know what money means in 2014 America, it is impossible to equate it with an individual’s right to express an opinion. Instead, the obvious becomes clear despite the protestations of SCOTUS: today’s campaign finance is the soul of corruption.

Let’s go point by point:

How is money created?

Perhaps if there were a gold standard, or a scheme that had an absolute amount of currency in circulation, then money could be just one more commodity an individual might leverage toward supporting a candidate. It might still be corrupt, but at least it would be transparent and limited in scope.

The current system, however, is the furthest thing from that kind of transparent simplicity. In the United States, money is created by fiat – dollars are willed into existence by the U.S. Treasury, either by an actual printing press or by digital transfer to other institutions. Then, the U.S. Federal Reserve Bank, a powerful institution that exists outside our democratic systems, sets the interest rates that determine the time-value of money, which determines whether it is better to save or speculate. They provide liquidity to private sector banks, which then get into the business of financial alchemy. Through fractional reserve lending, banks can essentially create liquidity in the markets by making more loans than they have cash reserves. (Keep one dollar, loan ten, twenty or thirty.) These loans then go to fuel the real economy for things like buying inventory and machinery, but also are used for leveraged buyouts, IPOs, junk bonds, and the flora and fauna of modern finance. Further prestidigitation occurs when banks get into the business of building financial instruments on top of those fiat dollars, such as derivatives. Complexity of this sort is clearly difficult to explain in layman’s terms – and that’s no accident. The more complex we have made finance, the more money the financial sector has extracted from the economy, resulting in trillions of dollars in compensation for its executives, irrespective of the success of its supposed clients, much less society at large.

Money, then, has become a gossamer invention of secretive engineers, a system which by its very nature benefits a few sophisticated insiders. Already, one must doubt its equivalence to speech, which is a natural right of citizenship – not created in secret and mass manufactured in the dark cauldrons of Washington and New York.

What is the function of money?

barterMoney is supposed to be a medium of exchange between two parties, one that is dramatically more efficient than barter and thus encourages transactions of a wider range of goods than you could access if you literally traded cattle straight for cars. The goal of money, then, is an efficient economy. The actual function of money in 2014 America is two-fold. First, it is an end in itself, the feedstock for a “financial” sector, described above, that exists to make money shuffling paper back and forth even if the wealth is simply being siphoned from one class to another and nothing is being created. The second end is essentially symbolic – to provide people with a scoreboard of how valuable they are in society, and to give them a sense – however false – that they will receive a materially comfortable retirement. Witness how fast the financial system was restored to its exact same dysfunctional status in 2008 and 2009, and how much the people, missing their fake 401(k) statements, cheered its restoration. Note also the sudden innovations in digital currency and peer-to-peer markets for car sharing and sleeping arrangements that are essentially replacing what money should be doing while it’s busy screwing around with derivatives and junk bonds. Money itself seems to have lost its raison-d’être.

How does a person or institution acquire money?

If there were no state interventions in money, if money came uniquely from labor and the rules were cruelly simple and immutable, then perhaps we could still equate money as a pure, if Aristotelian, proxy for a citizen’s right to speech. The fact is, the state intervenes constantly, and labor is not the primary method for individuals to come by large amounts of money. Given the rules of estate taxation in the United States, the best way to get lots of money is to come from a family that already has lots of it. For example, Sam Walton’s children apparently own wealth equal to the bottom 40% of the entire nation of 310,000,000 human beings. I am not familiar with their exploits; perhaps they invented light without heat, or finally devised a way to divide by zero when I wasn’t looking. More likely, they have it because their Dad founded Wal-Mart. One must ask if a citizen should be more prominent in political matters because of what their Dad accomplished 50 years ago; Heaven knows Justice Roberts never did.

Beyond individuals, we also should ask how institutions and their handmaiden executives might come by their money. Let us take again the case of for-profit banks. In 2009, after digging their mitts straight into the Federal Treasury to pay off their crack-headed bets on fraudulent derivatives, the megabanks on Wall Street were able to flood Washington DC with lobbyists to advocate for their interests, using money that came straight from taxpayers. Defense contractors located right across the Potomac from Congress are able to send their money back over to DC, restricted only by a few technicalities, to pay lobbyists to trumpet their “unique perspective.” Those Beltway Bandits typically only have one major client – the Federal Government – so the U.S. taxpayers’ cash is essentially swirling about the Capital, allowing DC to talk to itself like a homeless guy wandering around traffic circles.

In the fantasy world of our current Supreme Court, money is created in the form of pure, gleaming silver coins that spring forth, perfectly minted, straight out of your forehead when you accomplish something of value for the broader society. More often, someone gave it to you, and under the Roberts Court you can give even more of it back to the government itself so nobody inadvertently taxes you like a normal person, or stops the flow of contracts to your company.

If money in politics is not intended for quid pro quo paybacks, then what is its use?

The basis of Roberts’ decision to loosen regulations on campaign finance is that there is no “proof” that the money is destined to guide legislation in the favor of the donor. A little application of Occam’s Razor would make this a coffee-spittingly funny assertion, if the implications were not so dangerous.

Roberts would have us believe that all those check-bundling K Street lobbyists and $5000-per-plate fundraisers and the billion emails from Team Obama exist simply for the Platonic ideal of pure political dialogue. The McCutcheon decision asserts – with a straight face – that no donors have a vested interest, even when catapulting millions at parties, PACs and candidates. Those dudes must just like campaigns. And the candidates seem nice. So, irrespective of the potential benefit that might come from free access to such officials once elected, the donor just wants to help finance advertisements, campaign staff, travel costs that are 100% required to get elected. Alito, Kennedy et al., being intellectual purists, eschew the puerile cynicism that would suggest that the donor might expect a legislation written in his interest after the fact. Perish the thought.

The Roberts Court believes that all those people on K Street are just there for the beautiful architecture, tasty new food trucks, and easy access to the Smithsonian museums. Apparently, they have never calculated the ROI of lobbying which is one of best investments out there, right after stock in Too-Big-To-Fail banks. Consider the return on lobbying investments in Medicare Part D. The pharmaceutical industry flooded DC with hundreds of millions of dollars to swarm Congress. They spent a nine-figure sum to get ten- and eleven-figures of return, and their point man in Congress, Billy Tauzin of Louisiana, left “public service” to pick up a multi-million dollar salary (latest estimate: over $11 million) as the head of PhRMA, the industry’s lobbying arm. The sugar industry dumps in millions of dollars per year to candidates and it gets a government willing to shape the market in their favor to the tune of one billion. I needn’t continue; there are thousands of examples large and small of real financial return from sluicing money to candidates and elected officials. If our Supreme Court justices cannot be bothered to walk twenty-five yards outside of their chambers to ask how DC actually functions, then they are too intellectually unserious to maintain their positions.

Is the U.S. monetary system designed to enable commerce or politics?

At the end of the day, the design of American currency is barely up to the task of enabling a healthy economy. Central planning for the currency is starting to look like how all central planning ends up, rife with unintended consequences and unforeseen crises. The Federal Reserve has set policies that encourage speculation and industrial consolidation over sober economic planning and conservative savings rates. The currency itself is susceptible to frauds and scams, as seen in LIBOR and Forex rigging, not to mention the continued presence of trillions of dollars worth of unregulated derivatives that could yet again devastate the average person’s ability to buy the basics of life in the event of another “unpredictable” mishap. Meanwhile, people are willing to risk the adoption of new money such as Bitcoin and local currencies rather than settle for the economic status quo. Basically, American money barely functions for the purposes of daily transactions, if the constant fraud and repeated threats of collapse are any indicator. If the whole world did not have to purchase petroleum in dollars, we may have had to drastically change our policies years ago.

But as a proxy for political speech, money is far worse. The currency is created from thin air by policy makers with limited intellectual curiosity as to the effects of their decisions. Many of the wealthiest citizens receive their stockpile of cash through no labor of their own. Certain industries receive money through either subsidies, bailouts or favorable market regulations, and yet, amazingly, are still allowed to recycle that cash back into the political system. And the more cash that pours in to the electoral system, the more that seems to be required, as seen in the estimation that it takes around one billion dollars to become president – per candidate. The result is a system where the only influential citizens are those directly from moneyed interests, as has recently been concluded by Princeton’s Gilens and Page, not to mention the instantly famous Thomas Piketty. The evidence is piling up that money does not so much equal free speech in politics. It would be more fair to say that it results in the silencing of everyone that cannot afford to give thousands and millions in donations to candidates, which is a massive majority of the citizenry.

To conclude, campaign finance is deeply corrupt, and thanks to the McCutcheon decision, it is getting worse.

Truly free speech should be cheap and easy to accomplish

The assertion that money is required for free political speech in the days of the mobile, global Internet is an absurd failure of imagination. Nearly every citizen has a supercomputer in their pocket, connected to a broadband network of some sort. I figure we could put twenty smart kids in a room to come up with a system by which, every two to four years – we communicate the latest political ideas to the electorate, have them vote for the candidates they like the best, and invest the winners with political power. The system would run on code, not money, and it would solve for the best ideas, not the best access to existing elites.

The idea that you need lots of money for a campaign so you can purchase TV ads? From which cave in 1983 did that notion crawl? This isn’t a society limited to one-way communications, and we could act like it any time we choose. The only people supporting that tired, dysfunctional system of the 20th century are those who benefit directly through – sorry, Justice Roberts – corruption.

So come on, Silicon Valley! Nobody needs another app for gamification/restaurant review/dating/social media. We desperately need a digital system that will show the electorate who is running for office, their main political ideas, and their track record, and thus allow the electorate to narrow down their choices to a final vote in November. We need a system that is resilient against the corruption that comes when people with large amounts of cash get to have more say than their neighbors. This latest Dot Com boom is getting long in the tooth, so surely some of you have time for a cool side project. The whole nation will be grateful, save for a few thousand lobbyists and people rich enough need a hobby other than controlling the nation’s entire government.

Come on tech guys: Make us a new system for free political speech. I already trust your vision of the future a hell of a lot more than the one coming from this Supreme Court.

  • https://www.coachaccountable.com John Larson

    Thank you Eric for providing your usual insightful and refreshing take on things. Though you provide many, I think the most delightful twist that you introduce is the reminder that “truly free speech should be cheap and easy to accomplish”.

    For me, a site like Hacker News is a great example of how a well-structured internet community can collectively vote on (and thus bring to prominence) works and ideas that are of genuine merit. This gives me confidence that this sort of democratized approach would work in political arenas as well, (1) to vet and give a voice to genuinely good candidates (as opposed to those candidates shouting loudest through traditional media), (2) to sort out truly important issues of policy (as opposed to those hand selected by political funders), and (3) to enable transparency via widespread awareness (as opposed to that awareness being carefully selected and spun by traditional media).

    I reckon it safe to say that the vast majority of us here in the US wouldn’t miss the political ad season on TV for a second (I personally would be delighted to do without). So your charge to Silicon Valley to take a break from making another me-too app and create a political dialogue platform to take its place really resonates.

    The way I can see this playing out to a good endgame in the next few years is that (1) the high-dollar political ad sprees are rendered largely impotent against a viable, internet-enabled platform for cheap-and-easy-free-speech and (2) Lawrence Lessig’s plan for a SuperPAC to end all SuperPACs (http://mayone.us/) succeeds in causing the necessary reform to dismantle the corruption of campaign finance.