Campaign Finance Reform: Wrong Target

Senator John McCain (R. Arizona) makes a lot of political hay portraying himself as the presidential candidate for campaign finance reform and against influence-peddling. He's for restrictions on the "soft money" millions that flow into the campaign coffers of the Republican and Democratic parties from corporations, labor unions and private individuals. Before becoming bamboozled by McCain's message, we might stop to ask: Are political contributions really the problem?

Why do corporations, unions and other interest groups fork over millions of dollars to political campaigns? If you think it's because these groups are simply extraordinarily civic-minded Americans who just love participation in the political process, you probably also believe that storks deliver babies and there really is an Easter Bunny and Santa Claus.

A better explanation is that congressmen are in the favor granting business. The greater the growth of government control over businesses, property and employment, the greater is the value of being able to influence Congress. Two distinguished George Mason University economists, Professors James Buchanan and Gordon Tullock, who've done pioneering work in political economy, use the unlikely term "rent-seeking" to describe what goes on in Washington.

Rent-seeking refers to the use of government as a means to acquire greater wealth by gaining monopoly power or income transfers. Rent-seeking abounds. U.S. automakers and their unions get Congress to enact quotas and tariffs on foreign imports. Dairymen and sugar producers seek import restrictions on dairy products and sugar. Labor unions seek minimum wage laws and other legislation that eliminates competition. When Congress grants these favors, the recipients see increased profits and wages that come at the expense of other Americans.

Using Congress is one way to restrict competition. Using mob violence a la Al Capone is another. But why use violence and risk imprisonment or death when the same result can be obtained with campaign contributions. For example, if Archer-Daniel-Midlands' CEO Dwayne Andreas used goons and violence to stop people from buying sugar from Carribean producers, so he could sell more corn syrup, he'd wind up in jail. If he makes big campaign contributions, he gets the same result, without risking imprisonment. Congress just enacts quotas and tariffs.

Rent-seeking is inefficient. Import restraints on Japanese cars during the 1980s cost American car buyers about $4.3 billion. That's about $160,000 per year for each job saved in Detroit. It would have been cheaper to allow the imports and have Congress give each laid off auto worker $60,000 a year so they could buy a vacation residence in Florida. To have such an open and above board wealth transfer would have been politically impossible.

Some campaign contributions represent extortion. It's the bad cop-good cop sham. One congressman tells a CEO that another congressman has a bill pending that's going to be very costly to his company. It might be environmental or worker safety regulations, import restrictions, etc. The congressman tells the CEO that a fat campaign contribution will help defeat the bill. That's what Buchanan and Tullock might call "rent avoidance."

You say, "Okay, Williams, what can be done?" I say forget about campaign finance reform. If Congress did only what it's constitutionally authorized to do, influence-peddling would be a non-issue because Congress wouldn't have the power to grant favors. It might also help if we had a law that read: whatever Congress does for one American it must do for all Americans. If Congress pays one American not to raise pigs, every American not raising pigs should also receive payments. I fear that neither measure would get American support, so we deserve the rotten government we're getting.

Walter E. Williams
February 20, 2000
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