Mad Dead Presidents

I don't have a strong opinion about campaign finance reform. On the one hand, I think it's likely that money has too much influence in DC. On the other hand, that might be an unfortunate byproduct of a strong First Amendment. I did have a thought, though, that seems to avoid these problems: ban all corporate spending on political advocacy.

At first, this seems to raise the familiar First Amendment concerns. Of course, corporations aren't natural people, and it would be simple enough to deny them First Amendment rights. The real question is whether this prevents the stockholders from being heard.

The answer is pretty clearly no. We could allow the board of directors of a corporation to set up some sort of advocacy fund, but it would draw all of its money from voluntary donations by shareholders (or employees or whomever). Shareholders will exercise their First Amendment rights if they please, and not otherwise. In the status quo, minority shareholders might unwillingly or unwittingly fund political spending with which they strongly disagree. In my system, not only will political spending probably decline, but it will do so without impinging on anyone's rights. If anything people will be more free to invest without having to worry about the political consequences of doing so.

On top of that, in the status quo Congress can essentially shake down big corporations for lots of money by threatening new legislation. If corporations could credibly promise to give no money, they would avoid costly arms races that end up benefitting only DC incumbents. The legislative process might also proceed in a more rational manner, though I wouldn't count on it.

Now, the only question remaining, I think, is whether there's a downside to reducing corporate political advocacy. Arguably this spending helps Congress make economically intelligent decisions. It gives them a rough gauge of which interests are at stake. Corporations overcome the "free-rider" problem by forcibly donating their shareholder's money on a pro rata basis. On the other hand, in the status quo plenty of corporate donations are made to preserve economically inefficient arrangements that benefit particular corporations. I can't think of a reason that aggregate corporate political spending would yield more efficient economic policy.

A distinction should be made here: when I refer to corporations, I mean business firms. The corporate structure might be used for groups devoted entirely to political advocacy, and that's fine. The point is that investors who buy shares in business corporations generally do so to make money, not to make a political statement. We can serve their needs and respect their rights without the expensive and unseemly political distortions that characterize our system.