Hi Folks,

I have another post here, even though I promised myself I would not sit down at the computer again today. This one concerns relationships between campaign finance and business law.

Here’s the standard view: we regard campaign contributions from business corporations to candidates for office as nothing more than bribes. Businessmen choose their horse, place their bets, and get payoffs in the form of favorable tax and regulatory treatment when their horse wins. If you have a mind to hedge, you bet on both horses (candidates).

People who hold to the standard view don’t like what they see. From this point of view, corporate interests and citizens’ interests are not aligned. Therefore campaign contributions from corporations violate the most fundamental principle of our democracy, that the voice of the people be heard. If politicians see their mother’s milk come from business organizations, they won’t represent the people. That’s why progressives, generally not sympathetic toward business corporations, object so strongly to the Supreme Court’s Citizens United decision. For them the decision made a serious problem much worse.

The Supreme Court justices founded their decision on principles of free speech. Why should business corporations, or labor unions or any other organization motivated to contribute to political campaigns, be unable to do so because some people regard their interests as too narrow? On the Court’s view, no contributor to political campaigns represents the people. All contributors, individuals or otherwise, represent more or less narrow interests. Campaigns and elections are supposed to amalgamate these interests in a legislative body. Why should business corporations be singled out and excluded from that process?

When President Obama scolded the Supreme Court justices seated in front of him at his State of the Union Address, he did not have labor unions’ constitutionally guaranteed freedoms in mind. You won’t ever hear progressives mention labor unions when they criticize Citizens United. For President Obama and his allies, labor unions belong in a special class, just as corporations do, with a clear difference: labor unions are to be protected, corporations restricted.

Yet labor unions contribute to political campaigns for the same reason corporations do: they want favorable treatment from the candidates they support. Remove the possibility of favorable treatment, and you end the contributions. How do you remove the possibility of favorable treatment? Withdraw from government its power to grant advantages or benefits to anyone, corporation or otherwise. Make it so weak that no one would care to seek its favor. It would simply be wrong. No one tries to bribe a referee in a football game.

Once again, why should business corporations be singled out and excluded from participation in political campaigns? The ready answer, of course, is that business corporations have more money to throw at politicians than anyone else. If you fear the influence of business corporations in politics, you want to eliminate that influence altogether if you can. We often compare political campaigns to a boxing match. In this case, you don’t go into the ring with a gorilla: you keep the gorilla in a cage. How? Pass legislation that limits the ability of business corporations to contribute to political campaigns. We want the legislators who receive contributions to regulate contributions. We have seen how well it works.

What if we had a political regime where the question of favorable treatment from government didn’t appear in the first place? I know, you’re going to say: don’t go libertarian on me. We have a system of governance where we tax and regulate business activity. That won’t change. Still, what if? What if we designed tax law and regulatory policies in such a way that favorable treatment from legislators were not possible? Yes, such constitutional principles are a long way from what we have now. Policies that rest on those principles would likely result in lower rates of taxation and a much more libertarian approach to business regulation. That’s what we want from liberty: a system that leaves everyone – including business corporations – free from governmental interference.

Right now we regulate business corporations because the practice of not regulating them in the nineteenth century appeared to yield unfair outcomes. Large corporations domineered so much that only Theodore Roosevelt, a fearsome opponent, could break them up. That is our progressive history. Now we have a practice of regulating business corporations in order to increase fairness, but campaign finance, as an institutional form of bribery, seems to block us from our goal. We think that if we could only regulate campaign finance, we might have fair outcomes. We could also ensure that all voices have equal weight.

We don’t have to return to the nineteenth century to resolve this problem. We can work from where we are now, to make sure the government is not in a position to treat any business corporation more favorably than any other. If business corporations cannot expect favorable tax treatment or favorable regulatory treatment from legislators, they may yet want to contribute to political campaigns, but citizens and their representatives would have ruled out the nefarious purposes people perceive under the current regime. Regulating campaign finance does not achieve its stated aims, and it actually does restrict free speech. Moving toward business taxes and regulations that treat every corporation exactly the same would resolve the favorable treatment problem. Corporations would no longer seek favorable treatment, nor would they need to.

We are a long way from impartial treatment. We have tax incentives, exceptions, allowances, and deductions. We have regulatory incentives, exceptions, allowances, and permits. All of it results in a system of laws and rules that advantage some businesses and disadvantage others. If a business is blessed with favorable treatment, it can succeed. If it is not blessed, it can fail. Public policy doesn’t guarantee failure or success, but businesses understand that it makes a difference. That’s why they want to influence it. Remove both the perception and the reality that public policy affects business success, and businesses won’t waste their money on political influence. They’ll have better places to spend it.