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March 30, 2007

The Devil and Campaign Finance Disclosure

Most of our readers know that I supported Measure 37 and the eminent domain ballot measure last Fall. They will also remember that I was very interested in uncovering the Howard Rich funding scheme that partially paid for those measures, as well as TABOR and Term Limits, which I did not support. Knowing who backed the measures and why was important to me even though it did not necessarily change my position on the measures in the end. The reason was because it allowed me to consider what the primary goal of the measures might actually be. Backers went to great lengths to hide themselves from the public because they did not want the public to understand the libertarian, limited government philosophy behind the measures. They wanted people to respond to a simplified characterization of the measures. The information that people like Hart Williams uncovered about Howard Rich helped to turn the tide in those campaigns. It also angered the libertarians behind the measures. That is why CATO Institute and the Institute for Justice, both strongly linked to Howard Rich, are calling for an end to contribution and expenditure disclosures for ballot measure campaigns.

This pro-corruption position was rejected by voters in several states last year when it was revealed that CATO board member Howie Rich was responsible for what one state judge called "a pervasive and general pattern of fraud" in his attempt to foist an extreme agenda on voters through hidden money and dirty tactics in the ballot initiative process.

Disclosure is the foremost mechanism to ensure honest debate in the field of direct democracy. The lack of contribution limits in ballot measure campaigns allows wealthy individuals and powerful special interests to routinely spend thousands and sometimes millions of dollars to qualify and pass measures.

According to the Institute for Justice (I.J.) report, disclosure in ballot measure campaigns is only supported by the public when it doesn't include disclosure of their own contributions. Moreover, they say the public does not pay attention to the ballot measures, who is behind them, or who is paying for them and do not even know where to access that information. Therefore, they claim, such disclosure serves no good and should not be required. They also argue that while disclosure about contributions to candidates is justified by a desire to prevent corruption, laws are different. When a law is passed, that law will not change its position based on who contributed money to its passage, so no corruption exists that can be prevented by campaign finance disclosure.

This is, of course, a fundamental mischaracterization of the purpose of campaign finance disclosure. It is not just about detecting undue influence. It is about understanding the potential hidden outcomes of electing a particular candidate or measure. When an extremist group is supporting a particular candidate or measure, it naturally raises questions as to whether that candidate or measure will, in some heretofore undetected way, advance the agenda of that extremist group. Necessary information, in my opinion.

To support its call for an end to the rules that expose manipulative crooks like Howard Rich, I.J. conducted a survey in six states (interestingly, they did not include Oregon). They found that:

• More than 56 percent of respondents opposed disclosure when it includes their name, address and contribution amount.

• Opposition rose to more than 71 percent when an employer’s name must be disclosed.

This opposition translates into a lower likelihood of becoming involved in political activity through donations, meaning that mandatory disclosure “chills” citizens’ speech and association:

• A majority of respondents would think twice before donating to a ballot issue campaign if their name, address and contribution amount were disclosed.

• An overwhelming plurality would think twice before donating to a ballot issue campaign if their employer’s name were revealed. When asked why they would think twice, respondents cited, among other things, privacy and safety concerns, fear of retribution, and the revelation of their secret vote.

In Oregon, aggregate contributions up to $50 per person are not disclosed publicly. Personally, I think this should be increased to $500 per person. Contributions of that size are not the significant ones that affect people's opinions of a measure and I see no valid reason to disclose them. The contributions that really matter to the public are those of $5,000 or more.

In any case, the assertion that public disclosure of small contributions is somehow impeding giving is absurd, at least in Oregon. Our political tax credit makes a contribution of up to $50 per person both non-disclosed and "free" – that is, you will pay that money one way or the other anyway, so you can choose whether to pay it to the State or pay it to the political campaign of your choice. This is quite a good incentive to get people to make their $50 contribution, which is about all most people will make anyway. And it never gets reported to anyone other than the recipient campaign. Perhaps this is why I.J. didn't survey Oregonians. We're so smart we've solved the problem.

I.J. also asserts that all that disclosure information is useless to voters:

Not only are there serious costs associated with disclosure, it’s a regulation devoid of the benefits typically touted by proponents, namely “better,” more informed voters:

• A little more than a third of respondents knew where to access lists of campaign contributors or took the time to read such information before voting. Therefore, citizens appear to know nothing about a law they strongly support and appear uninterested in accessing the information it produces.

"A little more than a third" is "nothing"? I think anyone who has ever been involved in political campaigns will realize that if you have more than a third of voters interested in who is backing a campaign and knowing where to find that information, then that information will significantly impact the outcome of the election.

And it did, in fact, affect the outcome in Oregon. It used to be that based on pre-campaign polling of the ballot title itself, one could forecast whether a measure would pass or fail, and even by how much. In other words, campaigns made very little difference unless they were very significant. But Oregonians have wised up since Bill Sizemore came on the scene and now they are paying more attention to the issues on their ballots. A campaign can have a huge impact on the outcome of a measure. Backers of TABOR and term limits in Oregon were shocked at what happened in the polls when voters began to learn about who was behind the measures. That is something that Howard Rich simply cannot allow to continue. Hence, CATO and I.J. are proposing significant change:

Instead, we propose a system of voluntary disclosure in which campaigns and contributors weigh the costs and benefits of disclosing key information. In this way, campaigns and citizens retain their rights to free speech and association without onerous government intervention—and without the invasion of privacy that comes from the government posting personal information on the Internet as a condition of political participation.

I call bullshit!

I.J. goes to great lengths to discuss in its report why requiring contribution and expenditure disclosure for ballot measures is at least unnecessary, if not downright bad. They throw out the old complaint about how difficult and expensive it is to comply with the law. It is "burdensome" because the group has to "register with the government." It sounds much worse than it actually is. In Oregon, this means filing a simple form with basic information such as who you are and what ballot issue or candidate you intend to support or oppose.

Then, I.J. complains, you must have a separate bank account for campaign contributions and expenditures. The horrors! Can you imagine how nightmarish it would be to track contributions and expenditures for a campaign when you have a dedicated bank account for it? Oh, wait a minute. That actually makes it easier.

Next is the very difficult task of determining what portion of salaries, benefits and overhead were used in support or opposition to that ballot issue or candidate. I would suggest that if employees clock in and out when they're working on political campaigns, then the salaries and benefits part is a piece of cake. Determining the rest of the overhead can be confusing, but if you make a reasonable effort to determine the percentage of your time spent pursuing the campaign, you can pretty much conclude that percentage of your overhead costs should be allocated to the campaign and paid directly by the campaign. For instance, if you are spending a fourth of your time as an organization on political activity, and you have an electric bill of $100, you should send the electric company two checks – one for $75 from your main organization and one for $25 from your separate political account. A separate phone line for political activities is preferable, but if the lines are shared you can still pay proportionally for the basic service and separate out long distance calls. It simply takes having the will to do it. Having been through the wringer on this issue, I believe this approach should be easy to defend if challenged by an opponent.

And, as I.J. notes in its crybaby report, if a group decides to be involved in a political campaign, it will have those hideous campaign finance reports to file. If the small group is only minimally involved in the election, as implied by I.J., these reports will be extremely basic. The Oregon Secretary of State is no more interested in meaningless minutia than the public and requires very little of bit players. If the reports are complex, that indicates the group's involvement is also rather large, in which case they can certainly afford to hire someone who will be capable of filing the reports. The lion's share of a campaign finance report in Oregon simply requires regularly inputting the data – that is, entering the contribution information as money is received and entering the expenditures as they are made. When it is time to file the report, it is simply a matter of asking the program to print it out for you. Loans, in-kind contributions, and outstanding debts add a bit of complexity to the process, but nothing that can't be understood by someone with a bookkeeping background. Heck, I'm lousy with bookkeeping and I understood it.

(I am assuming here that the bugs have been worked out in campaign finance software. When I was doing these reports, the program we used routinely "lost" information and drove us crazy. As I understand it, things are better now.)

Finally, I.J. claims that the organization will have to disclose its entire donor list to the government. That is patently absurd. If the organization has set up a separate bank account for its political effort, as I.J. acknowledges it must, then it must only disclose those contributors who have donated to the effort. Its organizational donor list is entirely safe from disclosure.

Knowing who is behind a ballot measure campaign is essential to understanding the implications of passing a measure. In the case of the 2006 set of ballot measures, that information did not change my mind, but knowing the motivation of supporters and opponents helped me understand the facts of the measures and lessened the likelihood I would be conned into believing something that was not true. If I was going to be dancing with the devil, at least I was allowed to know it.

------------UPDATE------------

Check out Paul Jacob's opinion piece on the I.J. study. Jacob worked hand-in-hand with Howard Rich in last year's initiative campaigns and was personally involved in the organization's less-than-savory activities.

Posted by Becky at March 30, 2007 11:14 AM