The Folly of Public Campaign Funding

Should political candidates get their campaign costs covered by the government? What if a candidate chooses not to take taxpayer money? And should taxpayers give more money to his opponent if a candidate raises more money for his campaign? Those are the questions that the Supreme Court is discussing today as they hear oral arguments in McComish v. Bennett, a case challenging Arizona’s taxpayer-funding for political campaigns.

Supporters claim that such public financing encourages political debate. They contend that giving everyone the same amount of money ensures all points of view will be heard. The argument seems simple enough, but empirical research indicates just the contrary, that such restrictions actually entrench incumbents and reduce competition.

Arizona’s law essentially imposes campaign spending limits. The Constitution won’t let the governments ban candidates from raising money, so Arizona tries a less direct approach: Whenever a candidate raises more money than is provided by public financing, their opponents are given more taxpayer dollars to spend. This certainly discourages fundraising, which is actually a rather expensive activity. If a candidate is really lucky, raising $100 may take only $50 in fundraising costs. Only $50 is left over for real campaigning. For challengers, it is very costly just finding out which donors might support them. They are fortunate to just break even on direct-mail fundraising. But why raise the money if your opponent gets $100 without having to spend any money to get it? The law is meant to force everyone to take public financing and limit spending to the same amount per candidate.

Spending limits help incumbents. Because of their past campaigns and media coverage while in office, incumbents are already much better known than their challengers. Take a simple extreme case. Suppose that campaign expenditure limits were set at zero. Voters would never get to know the lesser-known challenger and the incumbent would sail to reelection. The trick for incumbents, who pass these regulations, is to set limits so low that challengers never really overcome the incumbent’s reputational advantage.

With federal spending reaching $3.82 trillion, we really don’t spend very much on political campaigns. All the presidential candidates together spent about $1.8 billion on the 2008 race. Is it really that outrageous to spend an amount equal to about 5 hundredths of one percent of that year’s budget on informing Americans what the candidates planned to spend government money on? Last year, Microsoft spent $400 million launching Windows Phone 7. Do you remember many of the ads? But two years earlier, John McCain took public financing and was limited to just $84 million in the general election.

In 1976, the Supreme Court ruled in Buckley v. Valeo that public financing was constitutional as long as candidates were free not to participate. But, as we have just seen, candidates aren’t free to do that. For each $50 or less they raise after fundraising costs, their opponent might get $100.

Public financing and campaign-expenditure limits have been a disaster for competition. One need only look at the impact on presidential campaigns. Incumbent presidents rarely face serious primary challenges. That lets them save up their campaign funds until the challenger in the opposing party is selected. After a bruising primary battle, challengers are often already up against their spending limits. When the challenger finally captures the nomination, there is little money left to counter attacks from the sitting president. We have seen this time after time in 1984, 1996, and 2004.

Justice Scalia made a prediction in 2003, when the Supreme Court heard oral arguments on the McCain-Feingold law: “If history teaches us anything, [it] is that when you plug one means of expression, the money will go to whatever means of expression are left.” The government soon found itself arguing that it had the power to ban movies or books that mentioned a politician’s name in order to ensure equal spending for each candidate. Fortunately, last year in Citizens United v. Federal Election Commission, the Supreme Court rejected that claim.

Campaign finance regulations were pushed as a way of encouraging political debate, but instead they have entrenched incumbents, reduced the number of challengers, and, with fewer contested races, reduced voter turnout. The only beneficiaries of these laws have been incumbents, who of course wrote them.

John R. Lott Jr. is a contributor, an economist, and author of the recently revised third edition of More Guns, Less Crime.

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