Sunday, February 24, 2008

Government Regulation Run Amuck, Example No. 9: Political Campaigning

Ann Coulter's 2/20/08 column entitled "How to Keep Reagan Out of Office" does an excellent job of explaining one reason why campaign finance reform isn't really campaign reform but rather campaign rigging, that favors incumbents and discourages the advancement of good but unknown political candidates by limiting vital funding in today's very expensive US political process.

As most readers know, the legislature voted in 2002 to regulate campaign financing, and the result was the McCain-Feingold Act, also called the Bipartisan Campaign Finance Reform Act. (For more, see also this entry.)

The idea was to get big-money donors out of politics and bring the game back down to the fair-and-square level of the people.

But government intentions are full of what the economic scientists call "unintended consequences." McCain-Feingold is no exception.

[Thanks to Harry Short and for the photo.]

There are two reasons. First, McCain-Feingold backfired. As laudable as the spirit of this law is, it has become a hindrance to good politics, as we see from Ms. Coulter's piece.

Second, McCain-Feingold didn't work. It failed to contain big-money donors, who simply found other ways to contribute their financial strength to a particular candidate, to wit the Section 527 committees that were so influential in 2004.

Senator McCain himself seems to recognize this, judging from his own activities in a non-profit called the Reform Institute.

According to this 2/12/08 article at, McCain's non-profit has been funded by the likes of George Soros and Teresa Heinz-Kerry since 2001. (I note in passing that McCain is listed as a Republican, and both these donors are strong liberal Democrats--just for the irony.)

McCain would defend himself by saying that political opponents can work together on issues. He might also say that the Reform Institute is not involved in any way in his campaign. Unfortunately, we learn from the article that Rick Davis, current campaign manager for Senator McCain, had been previously employed at the Reform Institute for years, as have others on McCain's campaign committee.

The made this comment back in 2005:

"As the New York Times noted yesterday, RI provides a back-channel method of keeping his campaign staff employed without McCain having to do any fundraising for his political campaigns -- and avoiding the donation caps that come into play for his donors." (I'm not sure whether there is enough evidence to accuse McCain of this, but the liaison surely doesn't look good.)

The linked New York Times article goes into more detail about the appearance of conflict of interest:

"[S]ome campaign finance experts say that Mr. McCain is moving dangerously close to violating his own principles and that as a chief advocate of clean election rules he should make certain he is above criticism. [...] The problem [...] lies in the close and unregulated relationship between the nonprofit groups and politicians. [...] [The Reform Institute could be just a way of] keeping some of the senator's advisers busy in the months before any formal presidential campaign operation would be established. According to the institute's public tax records, Mr. [Rick] Davis, its president, received a $110,000 consulting fee from the group in 2003. Mr. Davis said he was making the same amount this year. [...] 'We don't do campaign work,' said Mr. Davis, who said contributors typically were zealous about political reforms."

And yes, that's the same Rick Davis.

As for big-business donors to the McCain campaign, this is what the New York Times says about the donors to the Reform Institute:

"Some donors [...] are communications industry giants who had business before the Commerce Committee when Mr. McCain was its chairman."

(See some more leftist vitriol against McCain and Davis here.)

Federal regulators please note: I am in no way trying to accuse McCain of any intentional wrongdoing, nor do I condemn one party or another. Rather, I wish to use this illustration to point out how government regulation can run amuck. Whether it be through naivety or cunning is not for me to judge.

Unintended consequences are neither a Republican nor Democratic issue. Ultimately, the issue is big government vs. small government. See my previous blog for more on this new political division running across both parties.

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