Sen. John McCain, R-Ariz., 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
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 Daniels Midland’s CEO Dwayne Andreas used goons
and violence to stop people from buying sugar from Caribbean 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
autoworker $60,000 a year so they could buy a vacation residence in
Florida. But 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, “OK, 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
I fear that neither measure would get American support, so we deserve
the rotten government we’re getting.