Money and Politics

Posted by Jeff Carter
on November 22nd, 2011

A lot of folks hate the money being put into politics these days. The Armo Trader wrote a piece about it. Ever since we had campaign finance reform, people have tried to get the money out of politics by limiting it.

It never works. The money chase is endless and black markets work to keep the money flow going. But, as Judge Brandeis said, “sunlight is the best disinfectant.” With the advent of the internet and the real time streaming information that is available, it seems like it would be really easy to make the entire money process transparent.

I would advocate no limit on campaign donations. But, at the same time, every dime donated to you as a candidate would have to be entered into a searchable data base on the internet within a few days of receiving the donation. Checks that were handwritten would take longer to enter, but credit card and electronic donations could easily be converted into a searchable database. My guess if there isn’t one, there would soon be an ap for that.

Democrats would scream, “But corporations would buy elections.” Oh really. Corporations don’t have an unlimited supply of cash. There are constraints on it, not to mention shareholder elections. What would you do if you saw a company you were invested in using all its cash to fund candidates and not company growth?

Republicans would yell about unions. They yell about unions today, and what’s it get them? At least if it there were a searchable data base, unions would be more accountable to their members. Combine that with other reforms and unions might actually have to respond to their membership.

Rich individuals really aren’t a big part of the picture. There are plenty of rich individuals on both sides that contribute to both parties. With a searchable data base and every donated dime online in real time, we would have an inkling of who’s bought and who’s not.

The rub is citizenship. Should non-American citizens be allowed to donate to American political campaigns? They certainly do now. Bill Clinton raised a ton of cash in China. Obama received lots of money from outside the country. At least if every donation were searchable and on the internet, you’d be able to see.

One other thing that needs to be mentioned. A lot of times, money doesn’t buy influence. It does buy an open door and fair hearing. For example, let’s say a company, like Boeing, donates money to a Democrat. Democrats are funded by unions, and virtually all of their policies are pro-union. Boeing employes union workers, but has built a plant in right to work South Carolina. The Democrat might not vote the way Boeing would like to see them vote, but I bet the representative opened their door and and least listened to their arguments. Boeing got a chance. Sometimes that is all that happens.

Other times, a representative will cast a vote because it’s the right thing to do based on economics. For example, I know left and right wing politicians that have cast votes against transaction taxes because they know the consequences of having a transaction tax. Voting against it is the correct thing to do, and steeped in good empirical academics.

There are elected representatives that truly believe in what they are doing, even if it is diametrically opposed to what you believe. It has been proven that minimum wage raises unemployment both in practice and on a blackboard. Yet, politicians out there think that if government has a minimum wage, somehow they are doing some good for the bulk of the people. Even though it is a fallacy. Money, or lack of it, isn’t going to change that.

Most of the time we try to limit things. However, when it comes to economic and financial decisions, the initial thought or gut feel is contradictory to the actual optimal solution. Want to get the money out of politics? Have no limit, shine sunlight on it, and make the information freely available to everyone. Then the public will know who’s bought and who’s not. You may run into a situation where a politician rejects a check from someone before there is a scandal because they don’t want to appear like they are taking too much from them!

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