The Volokh Conspiracy - Unintended Consequences of Campaign Finance Reform:

It is hard not to shake your head at the absurdities spawned by campaign finance reform.

First there was the bizarre episode earlier this week where Bob Corker asked the RNC to stop running an ad criticizing his opponent that he characterized as "tacky and over the top." The RNC has finally relented. Assuming that Corker's protests are sincere, this sort of problem arises because campaign finance regulations prevent candidates from coordinating their messages with the parties. If Corker's protests are bogus, then this gives him plausible deniability to allow these sorts of attacks to be made while the candidate denies any responsbility for their content. Either way, it is hard to see how this improves political campaigns.

Today Brad Smith and John Lott note another major loophole in the campaign finance laws--if you own a media network. They cite the example of Air America, which just filed Chapter 11 and has failed as a business enterprise. But they suggest that it never really was a business enterprise, rather it was a political enterprise:

When is a campaign donation not a campaign donation? Apparently if you spend the money to run a radio program instead of paying for campaign ads that run on that same program. Just look at Air America. With $41 million in losses since 2004, and $9.8 million owed just to Robert Glaser, RealNetworks chairman, Democrats who bankrolled this "company" weren't so much investors as campaign contributors. The losses are seen as simple business ineptitude, but Air America effectively, and perhaps intentionally, cleverly avoided the campaign finance limits which Democrats had worked so hard to pass.

With McCain-Feingold's "hard money" donation limits of $2,000 per candidate and "soft money" limits to party campaign committees of $57,500, there is no way that Mr. Glaser or other wealthy Democratic donors could have legally given such large sums directly to Democrats. But Air America provided a vehicle for their multimillion-dollar political campaigns.

Take Al Franken's show last Friday, the very day the network was declaring bankruptcy. The program devoted two-and-a-half hours to "Meet the Democrats," where five U.S. House and Senate candidates explained why they were the people for the job. Two-and-a-half hours straight of candidates talking is hardly stirring radio, but it is the Democrats' version of religious radio. Hardly meant to make a profit, but there to inspire the troops. After all, when the network started in 2004, Al Franken announced that: "I'm doing this because I want to use my energies to get Bush unelected."

Since Air America started, successful radio entrepreneurs — most notably Rush Limbaugh — have argued that Air America never had a business model that made sense. But perhaps it had a model that made political sense.

The concern, of course, that rather than admitting defeat, the regulatory crowd will simply redouble their efforts to close these loopholes. Lott and Smith note that two radio talk show hosts in Seattle have already been found guilty of violating Washington state's campaign finance regulation.

Please be aware that improper Comments will be deleted.

Update:

A couple of Comments asked an interesting question, which is whether Corker's protests, and the RNC's decision to stop running the ads, violates the coordination rules of McCain-Feingold. So I sent the question along to Brad Smith one of the co-authors of the above-cited article (btw, Brad is also the Chairman of the Center for Competitive Politics, http://www.campaignfreedom.org/ which has further commentary on the Air America issue today). Here's Brad's response to my question about whether this would violate the law:

This arose in past cycles when the DNC quit advertising in Wisconsin at Feingold's request. Arguably, yes. However, the counter argument, I think generally accepted, is that in order to coordinate, you must spend. If someone asks you not to spend, and you stop, then you have not made an "expenditure" in coordination.

However, suppose the RNC just changes it's message and goes back on the air? Now it is arguably changing its message at the candidate's request, which looks more like a coordinated expenditure.

But there is another caveat- is it coordination if Corker merely publicly condemns the ads, which is all that appears to have happened? Some "reformers" would like to say so, yet I don't think the First Amendment allows the government to stop a candidate from making public statements, or others from acting on them. If Bob Corker says e.g. "I hate these ads. I wish the RNC would stop running them," is it illegal coordination, any more than if Harold Ford publicly says, "This campaign is about change," and the DNC responds by running ads saying, "We need change in Washington?" I don't think so.

	[Todd Zywicki, October 26, 2006 at 1:07pm] Trackbacks Unintended Consequences of Campaign Finance Reform: It is hard not to shake your head at the absurdities spawned by campaign finance reform. First there was the bizarre episode earlier this week where Bob Corker asked the RNC to stop running an ad criticizing his opponent that he characterized as "tacky and over the top." The RNC has finally relented. Assuming that Corker's protests are sincere, this sort of problem arises because campaign finance regulations prevent candidates from coordinating their messages with the parties. If Corker's protests are bogus, then this gives him plausible deniability to allow these sorts of attacks to be made while the candidate denies any responsbility for their content. Either way, it is hard to see how this improves political campaigns. Today Brad Smith and John Lott note another major loophole in the campaign finance laws--if you own a media network. They cite the example of Air America, which just filed Chapter 11 and has failed as a business enterprise. But they suggest that it never really was a business enterprise, rather it was a political enterprise: When is a campaign donation not a campaign donation? Apparently if you spend the money to run a radio program instead of paying for campaign ads that run on that same program. Just look at Air America. With $41 million in losses since 2004, and $9.8 million owed just to Robert Glaser, RealNetworks chairman, Democrats who bankrolled this "company" weren't so much investors as campaign contributors. The losses are seen as simple business ineptitude, but Air America effectively, and perhaps intentionally, cleverly avoided the campaign finance limits which Democrats had worked so hard to pass. With McCain-Feingold's "hard money" donation limits of $2,000 per candidate and "soft money" limits to party campaign committees of $57,500, there is no way that Mr. Glaser or other wealthy Democratic donors could have legally given such large sums directly to Democrats. But Air America provided a vehicle for their multimillion-dollar political campaigns. Take Al Franken's show last Friday, the very day the network was declaring bankruptcy. The program devoted two-and-a-half hours to "Meet the Democrats," where five U.S. House and Senate candidates explained why they were the people for the job. Two-and-a-half hours straight of candidates talking is hardly stirring radio, but it is the Democrats' version of religious radio. Hardly meant to make a profit, but there to inspire the troops. After all, when the network started in 2004, Al Franken announced that: "I'm doing this because I want to use my energies to get Bush unelected." Since Air America started, successful radio entrepreneurs — most notably Rush Limbaugh — have argued that Air America never had a business model that made sense. But perhaps it had a model that made political sense. The concern, of course, that rather than admitting defeat, the regulatory crowd will simply redouble their efforts to close these loopholes. Lott and Smith note that two radio talk show hosts in Seattle have already been found guilty of violating Washington state's campaign finance regulation. Please be aware that improper Comments will be deleted. Update: A couple of Comments asked an interesting question, which is whether Corker's protests, and the RNC's decision to stop running the ads, violates the coordination rules of McCain-Feingold. So I sent the question along to Brad Smith one of the co-authors of the above-cited article (btw, Brad is also the Chairman of the Center for Competitive Politics, http://www.campaignfreedom.org/ which has further commentary on the Air America issue today). Here's Brad's response to my question about whether this would violate the law: This arose in past cycles when the DNC quit advertising in Wisconsin at Feingold's request. Arguably, yes. However, the counter argument, I think generally accepted, is that in order to coordinate, you must spend. If someone asks you not to spend, and you stop, then you have not made an "expenditure" in coordination. However, suppose the RNC just changes it's message and goes back on the air? Now it is arguably changing its message at the candidate's request, which looks more like a coordinated expenditure. But there is another caveat- is it coordination if Corker merely publicly condemns the ads, which is all that appears to have happened? Some "reformers" would like to say so, yet I don't think the First Amendment allows the government to stop a candidate from making public statements, or others from acting on them. If Bob Corker says e.g. "I hate these ads. I wish the RNC would stop running them," is it illegal coordination, any more than if Harold Ford publicly says, "This campaign is about change," and the DNC responds by running ads saying, "We need change in Washington?" I don't think so.