Mark Schmitt

The Case for Optimism About Campaign Finance Reform – While Scalia Lives

 

 

Last Monday, the Supreme Court declined to hear a case challenging the century-old ban on direct corporate contributions to federal election campaigns. That counts as good news in a month that included the Court's earlier decision to hear a case that challenges the aggregate contribution limits in campaign finance, and in which Obama strategist David Axelrod declared via Twitter that he would prefer a system of unlimited contributions with full disclosure. Almost all Republicans, the Supreme Court, and a powerful faction of the Democratic Party now fall somewhere on the spectrum between skeptical and vehemently opposed to the legal regime of limits on contributions. The flimsy remains of the post-Watergate system of campaign finance regulation are on the verge of collapse.

 

Richard Hasen, law professor and proprietor of the indispensable Election Law Blog, argued in Slate last week that there was still hope for campaign finance reform – after Justice Antonin Scalia leaves the Court. Hasen is right, of course, that until at least one of the five members of the Citizens United majority leaves the Court by death or retirement, and is replaced by a Democratic appointee, the best hope for the Court is that it will rule narrowly in cases such as the one involving aggregate contribution limits, rather than using them as opportunities, as they did in Citizens United, to punch holes in the law that are bigger than the cases themselves. He's also right that expecting a constitutional amendment to overturn Citizens United (or do various other things, depending on the version) is far less likely than a change in the membership of the Court to reopen the path toward reasonable balance of the role of money in politics.

 

Hasen proposes that campaign finance reform advocates take the time now "to plan for the next Supreme Court." We should use the indefinite waiting period to "think more about what a reasonable campaign finance regime would look like" and acknowledge that "conservatives are absolutely right that campaign finance laws can boost incumbents and stifle political competition."

 

I agree with Hasen on all of that, even the last points, but I'd go even further: A reasonable campaign finance regime, one that doesn't boost incumbents or stifle competition could even be put in place with the existing Supreme Court. (The current Congress is another story.) The thinking he's proposing is going on right now, and is even being tested, in systems based on the principle of "small-donor public financing." These systems, which are not theoretical, use some combination of matching funds, tax credits, vouchers or generous public financing to candidates who show a base of small-donor support in order to make it easier for candidates to run who don't have big-donor support, in order to enhance public participation, and to ensure that elected officials aren't entirely dependent on big donors or corporations, whether those donors are giving directly to campaigns or to outside groups.

 

The public financing systems in Arizona, Maine, and Connecticut, which have been resilient, strongly supported by the public, upheld in the courts, and used by almost as many Republicans as Democrats, fall into this category. So does the generous matching system in New York City, which is a model for legislation that has the support of Governor Andrew Cuomo and a growing number of legislators. So does Minnesota's system, which is currently unfunded but which until a few years ago offered a quickly refundable tax credit for small contributions, along with a match on the candidate side. All those systems can be considered part of a broad experiment, and scholars are looking closely at them to see whether they change who runs for office, who donates, and ultimately, whether the states' political processes are more responsive to the public.

 

Legislation at the federal level follows the small-donor model as well. Rep. John Sarbanes' Grassroots Democracy Act, for example, draws on elements from several of the successful state programs, including a refundable tax credit for small donors, along with a matching program for campaigns. The Fair Elections Act similarly incorporates a combination of small donor incentives with full public financing. The idea of a voucher that would allow every citizen to contribute in the same way that she votes, long advocated by Yale Law Professor Bruce Ackerman, who calls them "Patriot Dollars," and more recently by his Harvard counterpart Lawrence Lessig, is attracting renewed interest as well. "The Participation Interest,"

 

All these systems are voluntary, and by themselves, they don't make much of an effort to control big money, except for candidates who participate. But they do make it possible for candidates to run who wouldn't be able to otherwise, or who want to run independently of big money. If they're designed well, they can help candidates get to the position where they can get their message out, and at a certain point, it doesn't matter all that much if the other candidate has a lot more money, or more outside money spent on her behalf. (The Brennan Center put out an excellent report in 2011 on the many positive effects of small-donor public financing.)

 

The big question is whether these systems can work without limits on outside money. Without limits, candidates might hesitate to participate, voluntarily limiting their own spending, if they worry about being overwhelmed by big outside campaigns, and it's unlikely that the public will long support throwing good money into a cesspool of unregulated spending. If that's the case, these systems will need backup from the kind of limits that are under challenge in the recent cases or rejected by the Court in Citizens United or other cases. But even after the Court rejected a feature of the Arizona system that gave candidates more money if they were attacked by outside money, the system survived, and a majority of candidates for statewide office in 2010 and 2012 participated in the system.

 

The 2012 federal elections offered even more evidence that small-donor systems can work. It was not that "money doesn't matter" (a view challenged by Roosevelt Institute fellow Thomas Ferguson and colleagues here), but rather that once a candidate for the House or Senate, or lower office, has reached a certain threshold, enough to allow them to be heard, extra money on the other side, whether from outside groups or the opposing campaign itself, matters less. For example, all the Senate candidates hit with outside spending by the Sheldon Adelson and Koch Brothers-funded groups won reelection. If small-donor public financing can get candidates to that threshold, then limits on outside spending won't be as important to making the system work.

 

That's not to say that it isn't worth trying to strengthen the limits that remain, and to build on the broader consensus that supports disclosure. In particular, the Internal Revenue Service should enforce the law governing 501(c)(4) non-profits, which are increasingly being used as vehicles for undisclosed and unlimited campaign spending, but which are not permitted to have influencing elections as their "primary activity." But compounding the Supreme Court's skepticism about limits on outside spending, the sheer number of mechanisms by which a donor can try to influence the outcome of an election has proliferated so far beyond the old standby of broadcast advertising that it will be impossible to chase it all down.

 

The next generation of campaign finance reform doesn't have to be developed just in a laboratory, while waiting for Scalia or one of his colleagues to retire or to encounter a higher judge. It's being designed, refined, tested and improved as you read this, in a half dozen states and municipalities. If it works, it will lead us to a system that will moderate the influence of economic inequality on democracy while enhancing competition and strengthening First Amendment rights of free expression.

 

 

The "Fiscal Cliff" Could Be a Path to Real Tax Reform

(Cross-posted from The Roosevelt Institute's Next New Deal)

It began with a critique of Mitt Romney's tax proposal. But more than two months after the Tax Policy Center released a report with the anodyne title “On the Distributional Effects of Base-Broadening Tax Reform,” the entire promise of tax reform, whether Romney's or some other version, is near death. With its demise goes the idea of a budget grand bargain. It's been a subtle development, but a dramatic one that will reshape the landscape of policy possibilities, especially if President Obama wins reelection – probably for the better.

Tax reform is typically sold as a win-win-win that can achieve three goals at once: reduce rates, bring in more revenue for deficit reduction, and clean up the loopholes in the tax code that create economic distortions and slow growth. This vision was not Mitt Romney's alone. It was and still is shared by many Democrats, notably Senator Dick Durbin, the White House, most members of the Bowles-Simpson deficit reduction commission who voted for its report, and most of the promoters of a budget grand bargain. I've held this religion myself.

But the vision of “base-broadening tax reform” is not just a budget solution – it's a nostalgic fantasy about American politics, a hope that we can recreate the kind of bipartisan compromise and collaboration of the idiosyncratic 1970s and 1980s, symbolized by the tax reform of 1986. (Last week I argued in a debate published in the Breakthrough Journal that the old era of bipartisanship was idiosyncratic, and we shouldn't expect it to come back.)

The Tax Policy Center report was perceived as an analysis of the Romney tax plan, showing that his math didn't add up. But as its title indicates, it really wasn't a report on Romney's plan at all, but on base-broadening reform more generally. It showed that Romney couldn't achieve his two goals – lowering rates and eliminating tax expenditures without significantly increasing taxes on the middle class or raising the deficit – because while tax expenditures such as the home mortgage interest deduction provide large benefits to the very rich, the more numerous middle-class recipients account for a large share of the costs. If Romney can't achieve his two goals (his plan would not explicitly aim to increase revenues or reduce the deficit, relying instead on a vague hope that lower rates would drive economic growth to implausible heights), then how could we possibly achieve three goals: lower rates, fewer loopholes, and higher revenues? Nor would it be easy to achieve a different two other goals, fewer tax expenditures and significantly higher revenues, while keeping rates at their current level.

That's because we're in a very different situation than 1986. In the 1980s, the tax code was littered with provisions that benefited specific industries (especially oil and gas) and permitted individuals and corporations to take losses for tax purposes when they hadn't really put money at risk. These “passive losses” distorted economic decisions. Just as all those provisions had been created by a kind of log rolling among legislators (those from states that benefited from pharmaceutical or agricultural tax breaks didn't object to the oil and gas breaks), legislators in the reform coalition were essentially able to hold hands and eliminate all of their tax earmarks at once. The tax rates were nominally quite high, though no one actually paid them, so bringing the top rate down from 50 percent was a lot easier than bringing it down from 33 percent. And while there was some concern about the short-term federal deficit in 1986, it was easy enough to separate that issue from tax reform and keep it revenue neutral in the long term.

While the tax code is a mess once again, it's a mess in a very different way. Tax rates are now too low, not too high; the most fundamental problem with the system is that it doesn't bring in sufficient revenue to finance basic functions of government (not just in a recession, when that's to be expected, but in the long term); and the biggest tax expenditures are not special benefits to particular industries or constituencies, but large-scale deductions that largely benefit the well-off yet give just enough to the middle class that eliminating them affects a lot of people. And while we might prefer that tax preferences such as the mortgage-interest deduction had never been invented, eliminating them or capping them would be enormously disruptive to the fragile housing market and would disproportionately affect younger families. It's extremely unlikely that Congress will have the will to cut that deduction, the deduction for state and local taxes, or the deduction for charitable giving.

That leaves two alternatives. One is to eliminate some or all of the tax preferences for investment income – not just the “carried interest loophole” through which Mitt Romney makes much of his vast income, but the entire preference for capital gains and dividend income that makes that and other loopholes possible. (Almost all the tax gimmicks exercised by the rich involve redefining compensation as capital gains to enjoy the 15 percent rate.) There doesn't seem to be much enthusiasm even among Democrats for fully equalizing treatment of capital gains and dividends, although we did it in 1986 and the economy thrived. The second alternative is some kind of global cap on deductions, which is where Romney has gone, first suggesting a cap of $17,000, then $25,000, but never with much detail about which deductions would fall under the cap. A $25,000 cap would raise about $1.2 trillion over ten years according to the Tax Policy Center, which is not trivial. But a cap would hit upper-middle income households almost as hard as the very rich.

All these moves, along with the administration's tortured “Buffett Rule,” fall well short of real base-broadening tax reform. But the fantasy of tax reform is essential to those who believe in a budget “Grand Bargain,” because the only moments when Republicans have hinted they might accept any revenue increases have been when it's packaged under the guise of “base-broadening reform.” No tax reform, no grand bargain. That's why the Committee for a Responsible Federal Budget, an organization funded by the Peter G. Peterson Foundation to push for a budget deal, has been almost as obsessive about rebutting the Tax Policy Center's and other analyses as Mitt Romney has been, though not more persuasive. Senator Charles Schumer was the first to say out loud that tax reform wasn't going to happen in an October 9 speech. Since then, other Democrats have recognized that tax reform, especially if it begins with the current Bush tax rates as the baseline, “could be a trap,” as Chuck Marr and Chye-Ching Huang of the Center on Budget and Policy Priorities put it in a June report.

If there's no tax reform and no grand bargain, what's left? The answer is what's called, ominously and inaccurately, the “fiscal cliff.” If some sort of deal isn't reached by January 1, 2013, then all of the Bush tax cuts, as well as some Obama tax cuts for the middle class intended as economic stimulus, will expire.* And the defense and domestic spending “sequestrations” agreed to last summer, in the deal to avoid breaching the debt limit, will hit.

Many of these outcomes are undesirable and could damage the faltering economy if higher taxes and lower spending continue well into 2013. But consider some of the things that happen to taxes:

• Rates go up: the top rate, on income over $397,000, would go from 35 percent to 39.6 percent.
• Tax rates on investment income would go up. The rate on capital gains would go from 15 percent to 20 percent, and dividends would once again be taxed at the same rate as ordinary income.
• If you like the idea of a cap on deductions, such as Romney's $17,000 or $25,000 cap, you get something like it. The Bush tax cuts repealed two provisions, known as Pease and PEP, that phase out itemized deductions and the personal exemption for upper-income taxpayers, and both would return. These have an effect similar to Romney's cap but hit only the very wealthy.
• The estate tax returns.

Put these together and what do they look like? They look a little bit like tax reform. It’s not necessarily a perfect version. But revenues are higher, more income will be subject to tax, deductions will be limited for the well off. This doesn't require a grand bargain, and it's probably better than what would result from a grand bargain, if such a thing were actually possible. It's simply what the law calls for.

There are plenty of less desirable things that will happen on January 1. The bottom tax rate will go from 10 percent to 15 percent, and rates in the middle will go up three percentage points. The child tax credit will go down, as will the Earned Income Tax Credit. And the budget sequester will constrain domestic discretionary spending.

But once we cross that line, we'll be in a very different world. If President Obama is reelected, he will have the initiative to propose a package of tax cuts, restoring some of the Bush tax cuts for the middle class and perhaps others, in addition to other tax changes and modifications to the sequestration plans. Congress, even if one or both houses is controlled by Republicans, will hardly have the option to block everything, because all they would be blocking are middle-class tax cuts. The long-term budget forecast will change immediately, and any effort to temper long-term spending on programs such as Medicare and Medicaid, in addition to the savings likely to be achieved through the Affordable Care Act, will be in addition to the revenues gained from letting the Bush tax cuts expire, rather than held hostage to an unachievable grand bargain.

It's hard for me to say this, because I've long bought the gospel of base-broadening tax reform, but in the weird circumstances of this moment, it's not the right answer, and I'm glad that there's a better alternative, which can be achieved just by letting the law take its course.

* It's worth noting why each of the tax cuts expire. The Obama cuts expire because they were always intended as temporary stimulus. In the case of the Bush tax cuts, it's a different story: congressional Republicans in 2001 and 2003 wanted to push the cuts through without any compromise with Democrats. To do that, they needed to use the 50-vote budget reconciliation process, which prohibits any provision that increases the deficit in the future. To avoid that, they made the tax cuts expire, even though they wanted them to be permanent. That's the deep origins of the “fiscal cliff.

Romney's Tax Plan is Another Shot Fired in the Generational War

[Cross-posted from the Roosevelt Institute's Next New Deal blog: http://www.nextnewdeal.net/romneys-tax-plan-another-shot-fired-generational-war]

On Tuesday, Mitt Romney hinted at a key detail about his mysterious tax reform proposal. While he had previously suggested that he might eliminate some tax deductions or credits to pay for his proposal to reduce rates by one-fifth, yesterday he suggested that he would instead cap each taxpayer's total deductions at $17,000. Some questions remain, such as whether he would include the exclusion for health insurance in the cap, whether it applies to single filers or married couples, or whether it would raise enough money to pay for his proposed cuts. (Probably not.) But assume that it's a cap on the value of the biggest deductions, such as the mortgage interest deduction and the deduction for state and local taxes.

Because Romney would keep the preference for capital gains and dividend income and lower the top rate, any proposal to eliminate major deductions would in effect be, exactly as the Obama campaign has argued, a tax increase for the middle class to pay for a tax cut for the rich. A cap would work differently. Since it would impact only those whose deductions total more than $17,000, it would affect only the fairly well-off – those whose mortgage interest, state and local taxes, out-of-pocket health expenses, and other deductions exceed $17,000. As Suzy Khimm points out at Wonkblog, that will mostly be wealthy people in high-tax jurisdictions – but even the purchaser of a $450,000 house in Washington, DC would pay $18,000 in mortgage interest at the beginning.

Yet the Romney proposal as a whole, with capital gains still protected, would nonetheless redistribute income from the merely well-off to the very, very rich. To see what I mean, let's look at Mitt Romney's own tax return for 2011: Romney's deductions total $4,519,140 – a lot of money. At his average tax rate of 14 percent, deductions saved him $632,679. A cap would take away all but about $2,000 of that $632,679.

But look at what the capital gains preference does for him: Romney took home $12,573,249 in capital gains in 2011. (I've left out dividends, just to keep it simple.) At 15 percent, that's about $1,885,950 of his taxes. But if he paid the same rate as on ordinary income, 35 percent, he would pay about $4.4 million. So the capital gains preference saved him $2.5 million, while deductions saved him only about $632,000.

I'm just using Romney as an example here, partly because he's a very rich person whose tax return I happen to have. But a well-off family, earning maybe $200,000 a year in ordinary income with a $600,000 house, is already paying a much higher rate than the Romneys of the world and would face a significant increase.

There's one more thing about this proposal that hasn't really been mentioned: It would be a giant intergenerational transfer from young to old. Just as Paul Ryan's Medicare proposal creates a generational divide between those currently under 55 (who have spent much of their working lives in a stagnant economy) and those who are older and whose benefits would be protected, capping deductions has a similar generational effect. Why? Because younger people benefit disproportionately from the mortgage interest tax deduction and older people benefit from preferential rates on capital gains and dividends.

The mortgage interest deduction is worth much more in the early life of a mortgage, when most of each monthly payment is interest, than later, when it becomes mostly principal. And the deduction has no value for people who have paid off their homes or paid mostly in cash from the sale of an old home. Finally, older homeowners are more likely to have purchased before the real estate bubble of the 2000s. In a 2008 paper, the economists James Poterba and Todd Sinai examined the distribution of tax deductions by age and other categories. They found that homeowners between the ages of 25 and 35 got an average value from the mortgage interest deduction of $1,155, and homeowners between 35 and 50 got $1,598. But homeowners over 65 got only $149 on average from the deduction.

Who benefits from the preference for capital gains and dividends? Here's a chart from Paul Caron's TaxProf Blog: 

As the chart indicates, taxpayers over 65 are twice as likely to have capital gains or dividend income than those 45-55, and those preferred sources of income make up much more of their income than for younger groups – six times as much in the case of dividends. The Romney tax plan would protect this advantage.

While many older Americans live under great economic stress and poverty, there is a significant portion of them who benefited greatly from the economic prosperity of the post-War era, who had significant economic gains from their early investments in housing and in the stock market in the 1970s and 1980s, and who also benefit from programs such as Medicare and Social Security that provide them significant economic security. The younger generation (by which I mean those under 55) has not had the same advantages, and both Ryan's budget and Romney's tax plan would make it worse for them while protecting the wealthiest of the older generation.

The Theory of the Moocher Class

[Cross-posted from The Roosevelt Institute's Next New Deal blog] 

As David Brooks points out, Mitt Romney's remarks describing 47% of the population as, in effect, moochers who would vote for Obama because they got government benefits were not “off the cuff,” as he described them today. There is a carefully developed theory behind his words, which has seen expression in previous Romney speeches, such as one last December in which he described Obama's vision as an “entitlement society” in which “everyone receives the same rewards,” but in which “we'll all be poor.” The lab where this theory that we're headed toward a radical egalitarian state is being developed is the American Enterprise Institute, the oldest of the conservative think tanks and one that, much like Romney, has forsaken the traditional business-minded conservatism of, say, the first President Bush, for hard conservatism in which everything is a grand showdown of incompatible worldviews. The two recent books by the current AEI president, Arthur Brooks (The Battle and The Road to Freedom) embody this apocalyptic approach, as does a recent essay-with-graphs by longtime AEI scholar, and accomplished demographer Nicholas Eberstadt, called “A Nation of Takers.”

 

AEI invited me to participate on a panel with Eberstadt a few months ago, when the essay was just a series of unpublished PowerPoint slides. I welcomed the invitation, but had to cancel due to a conflict. However, I wrote up notes at the time, and what follows is adapted from those notes.

“A Nation of Takers” shows in some detail the expansion of government benefits since the 1960s and the share of the population they reach. The data is not wrong, but it's selective, and the story that Eberstadt has wrapped around them – that receipt of benefits makes people “dependents,” that people are becoming “chiselers,” choosing to maximize benefits, that the expansion of entitlements was a political effort by the left that slowly overcame “resistance” from real Americans is highly tendentious. The reality is that people who receive benefits are no more or less “dependent” than corporations that get tax breaks or legal protections, that the expanding costs of major entitlements are about rising health care costs and, to a lesser extent, the demographics of an aging nation than more people becoming “takers,” and that the expansion of some benefits to the lower rungs of the middle class was a bipartisan project in which conservatives should take pride.

 There is a story implied in the very word, “takers,” which is reminiscent of former Senator Phil Gramm's oft-repeated metaphor of a wagon: there are “people riding in the wagon,” he would say, and “people pulling the wagon,” and the people riding need to get out and pull. But while you can't pull a wagon and ride in it at the same time, you can certainly be a taker and a giver at the same time, or at different times in life. For example, Eberstadt's charts show that the government benefit that grew fastest in recent years, not surprisingly in a recession, is Unemployment Insurance. Everyone who receives benefits from Unemployment Insurance, without exception, has worked – usually full time and steadily for at least a year – and paid into the system, through their employers. And they will (they desperately hope) work again, and pay even more. Some people might end up receiving more, over their long working lives, while others might pay in while having the good fortune never to be unemployed. But that's the nature of insurance. Most of us, other than the permanently disabled, are givers and takers to government, because that's what it is to be part of a community or a nation.

 A look at the individual programs behind all of these charts indicates that the big story is the extension of the social safety net from the very, very poor to the lower rungs of the working poor, particularly through expansion of Medicaid and tax credits for working families. With bipartisan support, these innovations have fundamentally changed the social safety net that both conservatives like Charles Murray and Lawrence Mead and liberals like David Ellwood described in different ways two decades ago: A system in which it really did make more sense for poor parents not to work than to give up the linked package of benefits that went with non-work – welfare, Medicaid, Food Stamps. Meager as those benefits were, they were often economically preferable to a minimum-wage job without health care or other assistance, and with the added costs of child care. Changing that system was not just a matter of imposing work requirements, but of smoothing the path into the workforce and toward self-sufficiency. Medicaid eligibility was delinked from welfare and linked instead to income, starting at 100% of the poverty level and reaching 185% in the Affordable Care Act. Together with the State Childrens' Health Insurance Program, expansions of the Earned Income Tax Credit, the Child Tax Credit, the Refundable Additional Child Tax Credit, the Child and Dependent Care Credit, the Make Work Pay Credit, expansion of child care, the after-school and summer food programs, and others, we have created a safety net that extends well into the low-income working population. These individuals, too, are both takers and givers – they are working hard, contributing to the economy, and while some of them may not pay federal income taxes at the moment, as they move up, they will.

 This dramatic reorientation of the safety net didn't just happen; most of these initiatives had significant bipartisan and cross-ideological support. Not only do they provide a ladder out of poverty and reward work, they also make possible the relatively low-wage, low-security labor market that gives employers enormous flexibility. Conservatives used to argue, for example, that raising the EITC was a better alternative to raising the minimum wage, and they mostly won that fight. The result is that low-wage employment is essentially subsidized, and businesses are able to hire at very low cost and low commitment, with none of the barriers to either hiring or firing that are common in Europe. Paul Ryan, Mitt Romney and others in the current wave of conservatism seem to have entirely forgotten the merits of these innovations, and in their promise to protect programs only for the very, very poor, they threaten to restore the hopeless poverty traps of the 1970s and 1980s.

 It's also worth noting that most members of the “Nation of Takers” probably don't think of ourselves as “takers.” In her important recent book, The Submerged State, Suzanne Mettler of Cornell looked at data asking people whether they had ever benefited from a government social program. While most participants in the classic, older transfer programs were aware that they had benefited from programs, most of the newer programs, especially those delivered through the tax code, were invisible to a majority of their beneficiaries. (Even 45% of Social Security recipients said they had never used a government program, which may reflect the belief that they are receiving benefits they've paid for.)

 While many on the left latched onto this data as evidence that Americans, especially conservatives, are hypocrites who revel in public benefits while maintaining an anti-government stance, there's really much more to it than that. Delivering benefits through “submerged state” programs has broken any kind of connection between citizens and the benefits we receive. We can't have a clear debate about whether we're a “Nation of Takers” or whether these benefits are essential to maintaining the promise of a middle class country if most of us don't even know the role that government plays in our lives. Conservatives and liberals built the submerged state together, often sharing a preference for delivering benefits through the tax code. But a concerted effort to reduce the long-term budget deficit, with tax reform at the center of it, creates an opportunity to surface submerged programs and replace them with far more efficient, visible, direct programs. When the public is fully aware of the benefits its receiving, its possible that voters will recoil in shock at the degree of their dependency, or perhaps they will regain a healthy respect for the role of government in providing some of the security that helps them take full advantage of their capacities and opportunities.

 It's disappointing that Romney shows no interest in either drawing out the submerged state or in the bipartisan project (of which his health reform in Massachusetts was a part) of smoothing the path to economic success for families. Instead, he just sees half the country as people who can't be convinced “that they should take personal responsibility and care for their lives.” That's a very strange view of this country and a tragic development in modern conservatism.

 

 

Who's the Boss?

[This article originally appeared in The New Republic]

On August 14, several hundred coal miners joined Mitt Romney at the Century Mine near Bealsville, Ohio, to cheer the Republican nominee as he denounced a “war on coal” by the Obama administration.

Two weeks later, an official of the company that owns the mine, Murray Energy Corp. (which has given more than $900,000 to Republican candidates in the last two years, far more than any other coal company) admitted that the miners were not all there by choice. “Attendance at the Romney event was mandatory,” Rob Moore, the chief financial officer of Murray Energy told radio host David Blomquist. Mandatory, but unpaid. Because the mine was closed for the Romney event, miners lost a day of pay.

Is this legal? Is this right? Interestingly, just a few days after the rally, the F.E.C. decided a case involving an employer in Hawaii that required its employees to campaign, on their own time, for Democratic congressional candidate Colleen Hanabusa. (The employer happened to be a union, but the case had to do with its staff, not its members.) In what might seem like a reversal of partisanship, the Commission’s three Democrats supported the general counsel’s judgment that such coercion violated the Federal Election Campaign Act, which  forbids employers from coercing workers to contribute to a campaign. But its three Republicans argued that because the work was part of an independent effort by the union, and didn’t involve contributions to the campaign itself, the law didn’t apply: A union or corporation’s “independent use of its paid workforce to campaign for a federal candidate post-Citizen's United was not contemplated by Congress and, consequently, is not prohibited by either the Act or Commission regulation.” Without a majority on the Commission, it was unable to act.

In the view of the three Republicans on the FEC, then, Citizen’s United means not only that a corporation or union can deploy money in an independent effort to affect the outcome of an election (including money that rightfully belongs to its shareholders), but that it can deploy any other resources it controls—including its employees’ time, both on and off the clock.

Consider that the next time you hear an opponent of campaign finance laws describe the issue as a choice between “freedom” and regulation. In this vision of the world, the unlimited freedom of corporations means that your own rights as a citizen—to participate, or decline to participate, in the political process on your own terms—are surrendered. As the scholar Corey Robin has argued, the greatest threats to our individual liberties come not from anything the federal or state government does, but from these constraints large and small imposed by private-sector employers on their employees. (I emphasize private-sector, because it would be plainly illegal for any public agency to require non-political employees to participate in campaign activities, under state and federal civil service laws, and the same is true of non-profit charities, under tax law.)

One might hope that there is some remedy in employment law—surely a company can’t fire you for your political activity, or inactivity, in your free time? The answer, unfortunately, isn’t so clear. The doctrine of “at-will employment”—an employer can fire you at any time, for any reason or no reason—is quite sweeping, and political affiliation or activity is not protected under Title VII of the Civil Rights Act. Law professor and blogger Eugene Volokh recently published a thorough analysis of state and federal statutes and case law affecting employees’ rights to free speech and political activity, reporting that “about half of Americans live in jurisdictions that protect some private employee speech or political activity from employer retaliation.” But, he explains, many of those protections are quite narrow, and apply only to employers coercing employees to vote a certain way, or retaliating against them for signing petitions, as is the law in both Ohio and Hawaii.

“I am not sure such restrictions on private employers are a good idea,” Volokh, a conservative libertarian, wrote. After all, “employees are hired to advance the employer’s interests, not to undermine it.”

After declaring that “corporations are people,” Mitt Romney earlier this year clarified that what he really meant was that corporations are made up of people—employees and shareholders. But if both the employees’ time and the shareholders’ money can be deployed by the corporation to advance what management sees as the company’s interests, overriding employees’ and shareholders’ own rights as citizens, they are hardly people at all.

It’s difficult for many of us who are educated, white-collar workers with relatively benevolent employers to appreciate the magnitude of the constraints on freedom that are routine elsewhere in the workforce. We might imagine we would quit if our boss ordered us to campaign for a candidate, even one we supported. But many Americans don’t have that freedom—nor the freedom to refuse a drug test or a work schedule that requires them to be on call at almost all times. They face strict parameters about what they can wear, how they can style their hair, when they can use the bathroom, and whether they have access to a phone in order to be reached in a child-care emergency. Libertarians, who believe that only government can restrict freedom, are blind to these encroachments on liberty.

The Ohio rally and Hawaii decision are small blips in the campaign season, and we don’t know how widespread these practices are. But they should serve as a sharp reminder that the choice in Citizens United and other debates about political money is not between freedom and regulation, but between real freedom for individuals and the sweeping power of concentrated wealth.

The New New Deal and the Little-Known Transformation of American Government

Reposted from the Roosevelt Institute's Next New Deal blog

What's the best book about the Obama administration, particularly on domestic policy? A few months ago, I would have recommended Noam Scheiber's The Escape Artists, but The New New Deal, by Michael Grunwald of Time, is not only the best book about the administration and its immediate challenges, but perhaps the only one that will (and should) continue to be read long after 2016. This post isn't a full review of the book (for that, I recommend Michael Cohen in The Guardian, but others are forthcoming) – rather, I want to highlight two aspects of the book that both made me feel a little guilty and got me thinking.

The narrative takes place in three locations: at the White House, in Congress as it interacts with the White House over the stimulus, and deep in the executive branch of government. Grunwald is very good on the drama in the White House, as economic advisors including Larry Summers, Christina Romer, and Jared Bernstein struggled to find a formula to contain the economic disaster that was also politically viable in an environment where neither politicians nor the public fully appreciated the depth of the crisis or the logic of Keynesian stimulus. If his book has none of the contrived Oval Office melodrama of Ron Suskind's Confidence Men, it's because Grunwald understands the subject, and thus knows that the range of options – and the range of real disagreement -- was not that wide.

He amply demonstrates that the great alternative-universe fantasy -- in which the stimulus could have been much, much larger and only political malpractice held it back – is exactly that, a fantasy. The miracle is that the economic stimulus, even if inadequate to fully restore the economy's lost output, was as large as it was, and managed to contain such a multitude of new ideas. Nonetheless, Grunwald acknowledges and digs deeply into the errors that the White House made, such as asking Romer and Bernstein to put forth a projection of unemployment rates with and without the stimulus – which may have been accurate in estimating the difference between the two, but not the overall employment picture.

The New New Deal also shines in its accounting of the legislative response, particularly the Republican opposition to the stimulus -- or, more correctly, to Obama. Grunwald offers a good model for journalists that it's possible to do more than just transcribe something like, "Senator X said he opposed the stimulus because it didn't contain enough tax cuts and infrastructure spending." When a politician's stated positions make no sense and are glaringly inconsistent, a real journalist can say just that. His parsing of Senator Judd Gregg's shifting logic on the stimulus as he flirted with becoming Obama's Secretary of Commerce is masterful, as is his interview with former Delaware Rep. Mike Castle, a moderate Republican whose amiable rationales make even less sense than those of conservatives.

But The New New Deal made me feel guilty in two big ways. First, I've on occasion made the argument that progressives don't really have an adequate set of new ideas, especially about the future of the economy. But as Grunwald shows, not only are there ideas, but many of them are being put into place as we speak, from the Race to the Top education reforms to the birth of an American solar energy and battery industries to the mundane work of weatherization of millions of homes and businesses to save energy. I didn't fully appreciate the scope of the changes to the Unemployment Insurance system, for example. It's far from sufficient to offset the lost potential from the recession; there's a lot more to be done to rebuild the foundations of a broad and secure middle class, and some of it can't be done by government. But the germ of the ideas that will build the future are there.

Why has it been so easy to overlook that? That's the second point on which I feel guilty. Like most writers about public affairs, I tend to focus somewhat on electoral politics and on legislative politics and policy. Most media coverage is grossly overweighted toward electoral politics – that's why there are 15,000 reporters in Tampa to cover a fully scripted non-event. But even those of us who try to focus more on policy and legislation often overlook the big third dimension, which is government. Virtually nothing is written about the actual implementation of policy in the executive branch or in the states. Newspaper coverage is limited to a watchdog role that seeks out stories like the failed loan to Solyndra, which is how that one failure (which Grunwald shows was already underway in the last days of the Bush administration, under an existing loan program) could become the proxy for the entire stimulus, or as they call it in Tampa, the "failed stimulus." Most federal agencies have no journalists at all covering them on a daily basis, other than reporters for specialized publications and industry newsletters.

While there are books comparable to Grunwald's about legislation (The Bill, by Steve Waldman, about the early Clinton public service and education initiatives, Showdown at Gucci Gulch, about the 1986 tax reform, and the classroom classic, The Dance of Legislation, by Eric Redman, which is about the 1970s), very few continue to look at what happened in government after the legislation passed. The richest sections of Grunwald's book open up the internal politics of government: one great set piece tells the story of the Department of Energy's office responsible for administering weatherization assistance for low-income families, one that had been a "turkey farm" (a term commonly used in public administration to refer to an unimportant office to which useless employees are assigned) and couldn't even get funds out the door. Given an impossible assignment in the stimulus – to weatherize 600,000 homes – an entepreneurial young leader, Claire Broido Johnson, turned the office around and exceeded the goal.

Such stories, along with accounts of the ARPA-E clean-energy research program and the Race to the Top education program, show that the Obama administration is changing government in ways that go much further than the "Reinventing Government" initiatives of the Clinton-Gore era, which focused mainly on government's relation to citizens, who would be treated more like customers. Creative, ambitious leadership is encouraged, and real competitions, like Race to the Top, are replacing the formula- or earmark-funded programs of the past. It took a while to get started (which is why some of it was ineffective as short-term Keynesian stimulus), but its long-term effects on both government and the economy are likely to be profound.

To restore confidence in government, it is necessary to do all these things – to make government more responsive, imaginative, tough on failure but supportive of promising ideas. But it won't do any good if people don't know about it, and the phrase "failed stimulus" goes unchallenged. The New New Deal is not only one of the two best books ever written about government (the other is Cadillac Desert by Marc Reisner), but an acute reminder to every journalist, political writer and political analyst to pay more attention to real stuff of government, which doesn't happen at either end of Pennsylvania Avenue.

 

The Reform Group That Came In From the Cold

At last, one campaign finance reform organization has stepped up to its obligation to the public interest, with regard to Senator McCain's machinations. And it's a big one: Common Cause, under the welcome new leadership of Bob Edgar, formerly head of the National Council of Churches, and earlier a member of Congress from Pennsylvania, one of the best of the legendary class of 1974.

Common Cause sent letter to McCain that gets it exactly right:

[W]e are concerned that your recent actions in regard to public funding in the presidential primaries may undermine respect for the federal campaign finance laws, especially the presidential public financing system. Having opted into the system last summer – and having signed a binding certification agreement with the FEC – it is clear to us that you need an FEC vote to allow you to withdraw.

You can read the full letter here (pdf) and the press release here. Common Cause says it "is not prejudging the legal ins and outs of whether your campaign can still withdraw from the system after using the prospect of public matching funds as an active ingredient in a private $4 million loan agreement and to secure free ballot access in several states," which is appropriate -- it's all totally unprecedented, which is why the FEC has to decide. The letter goes on to strongly encourage McCain to support reform of the public financing system, and to support for full public financing for congressional elections and encourages him to return to it, and it asks him to do all he can to break the impassed on nominations to the Federal Election Commission, which are currently held up by Mitch McConnell's insistence on packaging four nominations together, including that of Hans von Spakovsky. My favorite thing about the letter is its straightforward declaration that "As a presidential candidate, you have set aside the reform mantle," and the absence of the fulsome, obsessive, you-still-love-us-don't-you praise of previous reform-group letters to McCain.

The phrase "your actions...may undermine respect for...the presidential public financing system" is particularly important. Right now, a number of candidates who honestly and earnestly opted to participate in the public financing system, such as Chris Dodd, Mike Huckabee, and Dennis Kucinich are still waiting for their checks. The reason they haven't received the funds yet is that the system doesn't have enough money. It doesn't have enough money because taxpayers don't have enough confidence in the system to check of the $3 box. And given McCain's manipulation of the system, why should they? So McCain's manipulation is not a victimless crime. The victims are those candidates in both parties who tried to use the public financing system as it was intended.

A few years ago, McCain and his allies made life very difficult for Common Cause, for not following their line on 527 committees and other regulations. So this letter cannot have been an easy.

I've often been critical of some of the campaign reform groups. But as the only group with a real sizable membership, with a history as "The People's Lobby" that goes back to its opposition to the Vietnam War, Common Cause is different. We need it to be strong, and unafraid. I've long been a supporter of Common Cause, today, I became a member.

Superdelegates and the "Responsible Parties" Tradition

Who would imagine that there was more to say on the subject of the Democratic Party's superdelegates? Yet two posts this week on The Democratic Strategist and on PolitickerNJ add some important context to the historical role of superdelegates, and make clear that their role amounts to a lot more than avoiding an unelectable candidate. On the New Jersey site, former Senator Robert Toricelli recalled the Hunt Commission, which devised the superdelegates, drawing on his role in his youth as Walter Mondale's representative to the commission:

The most important [goal] was to get Members of Congress back in the process. First, unless Congressional leaders participated in the process, they would feel no accountability to the platform and no responsibility for the nominee. To choose a candidate without Members of Congress and Governors participating was bad politics and bad government.

Ed Kilgore puts it similarly:

As I recall from the original discussions surrounding superdelegates, there was another, much simpler rationale: ensuring that major Democratic elected officials would get to attend the convention as delegates. One of the byproducts of the earlier reforms in the nominating process had been to significantly limit elected official participation, except for those who happened to run for delegate positions on successful candidate tickets. And this in turn reinforced a fear that the Democratic Party was increasingly becoming bifurcated into a national party dominated by constituency groups and issue advocates, and state and local parties (and their elected officials) who represented voters, and arguably, the Democratic rank-and-file.

The language of "accountability" and "responsibility" is an echo of the language of "responsible parties" -- a political tradition Matt Yglesias and I have been trying to revive. The idea that there were two Democratic Parties -- a congressional party which was somewhat more conservative and Southern, and a presidential party which was more liberal but also somewhat dominated by constituency groups was inherent in James McGregor Burns  theory of four parties, although it took a different form by the 1980s. Even then, though, there were a lot of Democratic members of Congress who didn't have much interest in their presidential candidate, and didn't care much whether the president was a Democrat or not. Democratic House members in particular assumed that they would control the institution forever, while presidents would come and go. The contempt with which Bill Clinton was treated in 1992-93 was related to that attitude.

After the successive shocks of 1994, the complete alignment of the Southern white conservatives into the Republican Party, impeachment, the 2000 election and the Bush years it's pretty hard to recreate that mindset. Now every member of Congress is deeply invested in both who the next candidate is and who the president would be. That would probably be the case even without superdelegates, but bringing together a single, ideologically coherent, responsible party is still a worthy goal. With the elected officials who are superdelegates now split evenly between Obama and Clinton, it seems that there are now two congressional parties, defined not by ideology but by attitude: On one side, older liberals like Ted Kennedy joined with those elected more recently who have the combativeness necessary in the Bush years; on the other side, a middle-generation elected and brought up under the assumptions of the '80s and '90, very roughly speaking.  But the gap they have to bridge is far smaller than between, say, Southern committee chairs in 1972 and candidate McGovern.

Toricelli (excuse his sleaziness for a minute) and Kilgore remind me why I don't think there's anything illegitimate about superdelegates (although the DNC members are a little more dubious), and why they should be free to vote as they please. It is part of the reconstruction of the kind of political party that can take concerted action. The next Democratic president will be able to govern with far greater support from congressional Democrats than Clinton or Carter ever had, and for anything that plays even a small role in making that happen, we should be grateful.

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Public Justice for McCain, Thanks to Bloggers

Jane Hamsher at Firedoglake, along with Joe Sudbay of Americablog and the Rev. Lennox Yearwood have done a great service by putting together a well-argued complaint to the Federal Election Commission over John McCain's violation of the campaign finance law. While the Democratic National Committee filed a complaint earlier raising all the complex issues posed by McCain's loan and his promise to use public financing to pay off the loan while also avoiding the limits imposed by the public financing system, the Hamsher/bloggers' complaint is much simpler: It uses McCain's recent campaign filing to establish the simple fact that he is now over the spending limit for the primaries and therefore in violation. Since his last official action at the FEC was to apply for and receive certification for public funding, he is still in the system, a view reinforced by FEC Chair David Mason's letter to that effect to McCain.

Even at the best of times, FEC complaints take months to resolve, and a great many complaints that end in even the Commission's strongest resolution -- that there is "probable cause to believe" that a violation occurred -- go into a "conciliation" process that often end in little or no penalty. At the moment, of course, there isn't even an FEC to hear the complaint.

So the best thing we can do is ask for a public judgment on McCain's scam, which as Jane puts it, amounts to regulation "for thee but not for me." So far, almost 35,000 people have signed the complaint. I certainly have. You can join them here.

[cross-posted from TAPPED]

Opening the Box.

The news yesterday and today about a number of Democratic superdelegates moving toward Barack Obama or, even if ardent Clinton supporters like Joe Andrews of Indiana, admitting they would hesitate to be responsible for the superdelegates overruling the pledged delegates, reaffirms a point I've been making for weeks: All this talk about what the superdelegates "ought" to do is a distraction, part of the "fog of nonsense," to use Josh Marshall's phrase, that is keeping the illusion of a Clinton candidacy alive. The relevant question was always what they will do, and there was never a reason to think that they had any pressing desire to overturn the will of the pledged delegates.

As to the "ought" question, even though the historical record shows that superdelegates were created as a way to prevent nominees who would be abjectly unelectable (not that either George McGovern, Michael Dukakis, or Walter Mondale was thought to be unelectable at the moment of the convention), they were given free will and what they ought to do is, whatever they want. If a superdelegate decides to follow the national pledged delegates, the national popular vote, the popular vote in his or her district, some assessment about electability, or his or her own deep preference about who would make a better president, all those are legitimate reasons. And chances are that various superdelegates will make their choices on any and all of those reasons. As a result, the movement of the superdelegates as a bloc in the direction of Clinton was always unlikely; the qualms expressed by even strong Clinton supporters like Andrews make it impossible.

The Clinton campaign now kind of reminds me of the physics metaphor of Schroedinger's Cat. If you recall, this is a thought-experiment that is supposed to help explain transitional sub-atomic states: imagine a cat in a closed box with a vial of poisonous gas and a geiger counter. If an atomic particle decays, the gas is released and the cat dies; if not, the cat lives. Until you open the box, you have a cat that is maybe dead/maybe not.

I have to admit, I've never really understood this metaphor. It seems like it might be simpler to just explain the physics. There's a box with a cat in it and the cat is either dead or alive. So what? It's not both dead and alive. And that seems to be the state of the Clinton campaign now. As long as they can keep spinning -- e.g. Bill Clinton's new line that it's the delegates elected in primaries that count, not caucuses -- they can keep the box closed. The campaign is both dead and alive. But eventually someone will open the box. I suspect it will happen sooner than we think.

[cross-posted at TAPPED]