Campaign Spending Limits Make Good Business Sense

Unlimited campaign donations are bad for the economy and bad for innovation.

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Next week, the U.S. Supreme Court will take up the latest case on campaign finance limits: McCutcheon v. Federal Election Commission. This case is an attempt to undo one of the few remaining restraints on campaign contributions left after the Supreme Court's Citizens United decision in 2010. The McCutcheon case calls for overturning a rule by the Federal Election Commission that puts a cap on the total donations a person can make to all candidates running for federal office in a given election cycle.

You'd think that most business owners would join the call for eliminating spending limits, but it turns out they don't. In a scientific poll of several hundred business owners, American Sustainable Business Council found that 66 percent of small business owners opposed unrestricted campaign spending:

[See a collection of political cartoons on the economy.]

Why would business owners oppose – by a huge margin – a bill that makes it easier for business owners to buy favor with candidates? The answer has to do with what kind of businesses are doing the buying – and what that does to the economy as a whole.

There are two ways to succeed in business. One is to make a truly superior product or service, one that beats the competition, one that customers are willing to buy at a premium a price. That's called innovation and entrepreneurship.

The other way to win is to curry favor with government so you don't really have to be an effective competitor in order to make a lot of money. For example, you can curry favor in the form of having government pay you for not working (as with agricultural price supports). You can get the government to keep your competitors out of the market (as with government prohibiting the importation of prescription drugs from other countries). You can get the government to sell you raw materials at below-market prices (as with federal mineral leases). You can get government to force the purchase of your products even though real customers don't actually want them (as with weapons systems pushed through Congress for the pork they bring, even though the armed forces reject them).  And you can get special provisions put into the tax code that give you an artificially lower cost structure than others.

Conservative thought leader Ayn Rand had a special phrase for businesses that curry favor in ways like this, and for the people who run them: she called them “looters.” These people loot the economy to gain rewards they lack the talent and fortitude to earn on their own.

[See a collection of political cartoons on Congress.]

The problem with unregulated campaign finance is the looters are far better positioned to take advantage of it than are the true innovators. They have been playing the game longer. They have more and better-organized lobbyists. They have more cash on hand to throw at the Washington game than others, and they can easily outspend the small, scrappy entrepreneurial teams that are building the next iPhone, Facebook or Google.

When the looters win, the economy suffers, and the rest of America loses. The American economy is not helped when we prop up obsolete and inefficient businesses that cannot win in a fair fight with fresh, nimble competition. The American economy is not helped when we give looter banks a free put to dump their bad loans on the taxpayer. The American economy is not helped when companies that enjoy a false economy of scale, based on nothing but tax dodges, defeat other companies that are actually better operators and which do more to build the skills and productivity of their staff.

The argument against campaign spending limits is essentially that campaign spending is speech and hence must be protected under the First Amendment. Free speech is precious, but there are limits to it, and in our society we regularly balance the damages that can come from speech against the need to protect most speech, most of the time. For example, we don't protect Bradley Manning's right to spill government secrets. We don't protect someone's right to spread libel that hounds the victim to suicide. And we don't protect someone's right to falsely yell fire in a crowded theater, as Justice Oliver Wendell Holmes famously observed.

The Supreme Court should recognize that the need to protect America – and our government of, by, and for the people – has often been raised by the court as a valid reason to trim the rights of speech a bit. This is a time for trimming. For our economy to prosper, we must limit the looters' ability to purchase policy and corrupt the Congress. This can't be accomplished without spending restraints and radical transparency about who is trying to buy whom.

David Brodwin is a cofounder and board member of American Sustainable Business Council. Follow him on Twitter at @davidbrodwin.

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