Thoughts about political spending limits, 2014

I'd like to add my own remarks to all the sound and fury about the cost of running in an election for public office. In olden days, running for office used to be far less expensive. Some early presidents thought it would be quite unseemly for them to go around trumpeting their virtues, so they just waited quietly at home for the election results. Later on, the party system became entrenched, providing an efficient central organization to take care of fund-raising and expenditures. And yet the money spent on elections in recent times seems to have sky-rocketed, so that fund-raising is now more crucial than ever. What has gone wrong? The left would like to blame the Koch brothers for trying to buy the elections for the right, thereby subverting the democratic process. The right would like to blame Soros and Bloomberg, for the same reason. Congress reacts by placing limits on the amount candidates and their surrogates can spend on running for office, but then the Supremes tell us in the Citizens United decision that these limits tend to run counter to the first amendment! The Democrats then propose a constitutional amendment that would dig a hole in the first amendment to permit political spending limits. And then the Republicans refuse to go along! Good grief! Is this problem insoluble?

Fear not, gentle reader - I am here to guide you through all the complex issues this raises and to lead you to a clear understanding of the proper solution to this vexing problem. Election expenses have become gigantic, but they are still dwarfed by a similar kind of purely private sector expense - product advertizing. (During the last superbowl, I detected a whiff of political advertizing for the first time, but it was nothing compared with the spots for Budweiser and GoDaddy and the rest.) Perhaps any cogent argument for or against political advertizing should be applied equally to product advertizing? Indeed, there is a slim thread of an economic argument for limiting both. Suppose there are just two cola drinks, Coke and Pepsi. Everyone is familiar with them; some have an entrenched preference for one or the other, but others have no strong dedication to a particular brand. "Coke is it!" says Coke and some buyers are swayed to buy more Coke. "Young hipsters drink Pepsi!" says Pepsi and those buyers tend to drift back to Pepsi. "Sexy babes drink Coke!" says Coke and, well, you get the idea. None of the claims really have much to do with the facts of drinking soda, but they still have the ability to sway buyers' judgment by presenting some memorable sound bites and images that are associated with the product and come to mind when you are checking out the soda isle.

Equilibrium in this market requires that the two companies each spend so much in advertizing that soda buyers become saturated with the competing claims. Past that point, it would not pay Coke to increase advertizing even if Pepsi did not retaliate. In this world, it is tempting to say that the billions spent by Coke and Pepsi are a pure waste of money. If we could get Coke and Pepsi in a room together, would they not quickly agree on a pact to spend nothing on advertizing but just let people buy on the basis of other factors? Profits up, prices down, everybody wins.

I remember as a graduate student in economics thinking that banning all advertizing might result in a huge increase in real national income; I believe that some of the current enthusiasm for restricting political spending might arise from the same thinking - not so much that the other guys are cheating, but that both parties have so much to save if they didn't have to raise and spend so much money to support their candidates.

Since then, I have come to my senses. What's wrong with that proposal, I hear you ask?

First and foremost, it assumes that there is no "real" informational content in the expenditures; that is to say, the reasons that buyers are persuaded to buy more Coke have nothing to do with how it tastes or whether it is good for you. And, in the equilibrium I describe above, even the good feelings cancel out, since both companies end up pumping out basically the same appeals to the buyers. And yet this sounds like the reverse of what economists generally claim for competition, which is that competition is the primary driving force that allows better products to replace inferior ones. The problem in the scenario above is that it is a purely static situation, whereas competition is a dynamic process. Even Coke and Pepsi tinker with their recipes, in the hope of making their drinks more appealing to buyers. (Remember New Coke?) If we restrict advertizing, how can they get the word out? Even more important, suppose that another company that is not in this market detects that buyers are being ill-served by both companies and wants to enter the market with their own brand. How do they do it?

This last example is probably the most important argument against having the government restrict political spending. Incumbent candidates who are running for re-election win re-election over 90 percent of the time. A large reason for that is that voters know incumbents better than they know their challengers, just by virtue of their having held the office for a number of years. Why should voters favor an untested candidate about whom they know very little? In the matter of buying groceries, I have instructed my kids very sternly that they must buy at least one item per visit to the store that they have never bought before, just as a way of increasing their knowledge about their options. But voting for an unknown candidate for the senate just to see how they perform can be a lot more expensive than buying a new brand of cola, so a new candidate's ability to put their case to the public is vital for the democratic process to work properly. We sneer at tinpot countries where speaking out against an incumbent candidate can earn you a trip to the penitentiary, but restrictions on political spending are surely just a more genteel way of achieving the same result. We shouldn't be surprised that the most vehement supporters of restrictions on political spending are incumbent politicians.

Second, but no less important, is my conviction that tinkering with the first amendment is a terrible idea and the recent proposed constitutional amendment is clear evidence of this. A few days after it was first put on the table, legal analysts started pointing out that the amendment could support the banning of books on political issues. And what about bloggers on the internet who have a preference for one candidate or another? Our alternative newspaper here in Austin just published their picks on who we should vote for in the upcoming municipal races - would that be OK and if so why? There are way too many possibilities for abuse once we start trying to separate "good" (i.e. protected) speech from "bad" speech.

Does this mean we are doomed to spend ever-increasing fractions of real national income ad infinitum to support the political process? Well, maybe we are, but the way to prevent this from happening - indeed, to effect an enormous reduction in the cost of running for office - is very much in our power. Just consider the guy who decides to run for dog-catcher. Perhaps he sends a letter to mayor Bloomberg, in which he details his unique qualifications for the job, finishing with a request for a couple of million dollars to help him get his message out to the electorate. Bloomberg replies, agreeing that his qualities clearly trump those of the other candidates, but ends up denying his request for funds. Why? Because he doesn't really care who is elected dog-catcher - there's virtually nothing of interest at stake. When a presidential candidate makes that same request, Bloomberg opens his wallet, because the consequences of electing one presidential candidate over another can be enormous to many people. Candidate A wants to scale-back the federal welfare system, transferring money from one group of voters to another. Candidate B wants to expand the programs. Now we have interested parties who are insisting that money be spent on their behalf, to support one or the other candidate and the letters start going out asking for money. Elsewhere, candidate C is outraged by the unfair pricing of plastic bunnies from China and proposes punitive tariffs on their importation. Candidate C's voters happen to include the owner of a struggling plastic bunny factory, along with several thousand workers in that factory. They prove to be enthusiastic supporters of C's position and are happy to contribute to his campain. Candidate D, who would rather let the market work, does not get their votes or their money, but receives one vote from me, a few votes from a sprinkling of economics professionals and some mothers who are unhappy about havinging to pay twice the price for their plastic bunnies.

In short, the driving force behind election spending is the ability and willingness of the government to pass out rewards and punishments to different portions of the electorate. This in turn is regulated by the constitution and the way it is currently being interpreted. So the way to reduce election spending is very simply to curb the power of the government to play the rewards and punishment game. Just think - a little more than a hundred years ago there was no income tax and consequently no questions of how the rate schedule should be tilted this way or that to favor one group or another. Consequently, you could run for congress for a couple of bucks. Then comes a constitutional amendment to permit the Feds to collect an income tax, plus enough time for people to become comfortable with the idea of redefining the function of government into the grand arbiter of "fairness" or "redistribution", and the cost of running for president soars into the billions of dollars. And so long as the bulk of the electorate are willing to push the government further into this role, the dead-weight cost of the political process will continue to soar.

And the only office I am likely to be able to afford to run for is dog-catcher.

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