Thursday, January 29, 2015

Corruption, Legislator Pay, and Public Finance

by Michael Dorf

Last Wednesday, on the fifth anniversary of Citizens United v. FEC, about half a dozen protesters briefly disrupted the Supreme Court's proceedings. The next day, Sheldon Silver, the long-time Speaker of the New York State Assembly, was arrested on corruption charges. The timing was coincidental but the events are nonetheless closely related. (Silver is being replaced as Speaker but for now he says he intends to keep his seat.)

Let's start with Citizens United. According to one well-known criticism of the Supreme Court's campaign finance jurisprudence, the Court makes two errors. First, the Court says that the only interest that justifies campaign finance limits is the interest in avoiding corruption or the appearance of corruption, thereby ruling out of bounds the possibility that campaign finance limits might be adopted in the interest of political equality--to ensure that inequalities in the distribution of material resources do not spill over into our politics to undermine the principle of one-person-one-vote. Second, the Court then employs a too-narrow definition of corruption and its appearance, in which only a quid pro quo of the sort that could lead to a bribery conviction counts as corruption.

On the surface, the Silver indictment might be thought to provide partial vindication for the narrow definition of corruption in Citizens United and related cases. After all, the indictment shows that the campaign finance jurisprudence does not protect so much "speech" by wealthy parties seeking to influence the government as to render a corruption prosecution impossible. Put differently, the fact that Silver had to break the law in order to provide political services in exchange for cash seems to show that the law--even after Citizens United--has bite.

But the argument I have just offered won't fly. Silver is not charged with exchanging political favors for campaign contributions. He may well have done that, but if so, at least the Justice Dep't doesn't (currently) think that he did so illegally. The indictment alleges that Silver supplemented his state pay ($121,000 annually as Speaker plus various perks such as a chauffeured car and a per diem) with millions of dollars in bribes that were presented as legal fees for work he never actually did. At least as of Saturday, Jan. 24, Silver was still listed as of counsel with the personal injury law firm of Weitz & Luxenberg, with a "focus" on mesothelioma and asbestos cases, but Silver's firm profile page describes no actual legal work, and the indictment alleges that he did none. It also alleges that he had additional mechanisms for receiving bribes from parties with business in the state legislature.

If the allegations in the indictment are true, then Silver is an old-fashioned corrupt politician--someone who abused his public office in order to make a buck for himself--rather than someone driven to corruption by a political system in which running for office is extremely expensive, so that to succeed, politicians need to grant access and appeal to the interests of persons and firms willing to pay to put or keep them in office. The Sheldon Silvers of the world (again, if the indictment is accurate) would exist even in a world in which the courts upheld much more rigorous campaign finance regulation.

So why do I say that the Silver case is related to campaign finance? Because there is available a tool that would work as a partial solution to both problems: public finance.

Public finance of electoral campaigns--if funded sufficiently generously--substantially reduces the need of candidates to rely on the support of well-heeled donors or the "indirect" "uncoordinated" efforts of "independent" (equally well-heeled) individuals and groups. Unfortunately, public finance is unavailable for most races and where it is available--as in Presidential elections--it has not kept pace with inflation. Since 2008 candidate Obama's decision to forgo federal matching funds in order to escape federal spending limits, the Presidential system is effectively dead.

A similar problem exists on the compensation side. Under-compensated public servants will find it tempting to supplement their income by selling special favors. The very low pay of police officers in New Orleans (and often elsewhere) has historically operated as an invitation to corruption. The same can be true for state legislators. States do not pay their legislators salaries commensurate to their responsibilities. In New York, the annual salary of a member of the Assembly (other than the Speaker) is just under $80,000, even though the New York legislature makes laws governing a state that would have the world's 16th largest economy if it were a country. That is, of course, a more-than-decent middle-class wage. The median household income in New York State is about $60,000, and so the average voter--who does not get a per diem or a chauffeured limo on top of his salary--is unlikely to be sympathetic to the claim that legislators are underpaid. Thus, NY voters tend to oppose a proposal for the first increase in state legislator salaries in over a decade and a half.

Corruption cases like Silver's provide part of the reason why. A typical voter thinks "I get by on less money; I work harder; and on top of it all, these guys are corrupt. No way am I giving them a raise."

I cannot deny the logic to that line of thinking, but it tends to be self-defeating. Higher pay for legislators should not be conceived as a reward for good performance but as a way of reducing the incentives for corruption. That's why Zephyr Teachout's proposal to strictly limit outside income for legislators is not enough; you need to attack the incentive to seek outside income.

As with legislator pay, so with public financing of campaigns. Extremely wealthy self-funding politicians (like former NYC Mayor Mike Bloomberg) sometimes argue that they are incorruptible because they do not need to raise money from wealthy donors and they will not be tempted to use their office for personal gain. These are fair points, but even if some billionaire politicians are entirely public spirited, they necessarily see the world through their own highly privileged eyes. Excluding all but the extremely wealthy from public office is too high a price to pay for combating corruption.

Finally, to be clear, I do not think that public financing of campaigns or paying public officials wages within shouting distance of comparable private sector jobs would cure all political corruption. Some people will be corrupt under any system--and maybe Sheldon Silver is such a person. The best we can do is design rules that reduce the temptations of the greedy and the venal.


David Ricardo said...

Mr. Dorf’s commentary on compensation for legislators does, I think, reflect the fact that he has a more benign and less cynical view of them then is actually warranted. His position that corruption in government could be reduced by higher compensation for legislators fails to take into account the massive greed of most of these people combined with their view that one purpose of holding public office is enhance the economic position of the officeholder.

First of all, because of add-on’s and other benefits people like Sheldon Silver make far more than the basic pay rate. And because the regulations in New York allow legislators to have outside income people like Mr. Silver can easily make a nice mid six figure income in a legitimate manner. But for people like Mr. Silver that is not enough, and will never be enough. And in their minds people like Mr. Silver see themselves as sacrificing high income in order to ‘serve the public’ and so easily justify behavior that allows them to exploit their office. In their minds, no one is harmed.

Look at the wealth that has been gained by current members of Congress and state politicians. Across party lines the leaders in Congress and the states have gained massive wealth even though most of their income is from their ‘modest’ salary. If there was true investigative reporting in this nation they would document how Gov. Rick Perry of Texas, for example, became a multi-millionaire while starting from a base of poverty and working only in ’low paying’ elected positions.

A position which is held by very few (I may even be a majority of one) is that campaign finance regulation does not reduce or restrict freedom of speech but preserves freedom of speech. Allowing the side with the most money to dominate the debate in an uncontrolled fashion means that a meaningful debate cannot take place, that those without funds can be effectively shut out of the political process. Allowing unlimited funding of campaigns without some public financing moves the nation towards a monopoly of speech. Having some public financing of campaigns may well reduce corruption as Mr. Dorf contends, but the real benefit is to allow those who have good ideas and policies but very little money the opportunity to make their case to the electorate.

Consider the situation, not so farfetched now that the Koch Brothers are going to spend close to $1 billion in the 2016 campaign, where one candidate is able to purchase all of the available time and space on all media outlets. Such a candidate could drown out the opposition and the idea of a free and open democracy where the best candidate with the best ideas wins is replaced by the situation where the candidate that is supported by the oligarchs wins. And no this is not impossible, it takes place every year in countries where the incumbent government controls the media.

Joe said...

The Speaker makes over 100K plus perks, while still being able to make more money doing outside work that need not be corrupting or much work at that, so how much of a raise is necessary here?

The public financing option is intriguing given the various problems with raising money to raise campaigns.

But, above some minimum (some states have part-time legislators or those with salaries that are truly too low to live on or open to a raise to resist corruption), the salary approach is less useful to me. People in Silver's position will always be tempted to take more.

egarber said...

This is a stretch comparison, but I'm reminded of the Chicago Black Sox scandal. Throwing games is a cardinal sin for sure, but it is helpful to understand the context too. Before free agency or really any labor leverage, players were often open to being on the "take" to spite owners who were getting rich off their efforts.

So to Mike's point, there will always be cheaters (roids, deflategate), but it is still worth examining environmental factors as well. Things were very lopsided in the early days of baseball, which created conditions for widespread "corruption" among players (the problem was very common, not limited to the sox scandal, though that was the biggest view into it).

Though the resulting changes allowing players to earn more didn't eliminate poor behavior, they certainly led to conditions that were better for the integrity of the game.

Unknown said...

Two things Mr. Ricardo misses is the fact money tends to be needed for speech and the antidote to speech is, perhaps non-intuitively, more speech.

Were I to design a system to reduce corruption ... actually, I would strike at the root and work toward economic equality. Short of that goal, however, I would issue every Citizen a $10000 voucher which can be donated to official campaign committees only. The transfer of funds would be electronic to ensure compliance and any unused money on January 1 would return to the treasury. We would immediately see a dilution of the influence of private money as a result. The reduced influence would make diversion of such funds to other purposes more productive, reducing the amount of such funds and reducing the influence of the balance further still. Over time, private money is squeezed from the system as not as useful, leaving only the egalitarian vouchers funding election campaigns.

CEP said...

There's also a corollary to the "underpaid public servant" issue in routine torts: The underpaid insurance adjuster, who views a $75,000 pain-and-suffering payment as a windfall compared to his/her $45,000 salary. Applying this to healthcare insurance is left as an exercise for the (soon-to-be-insane) student...

Anonymous said...

David Ricardo's response shows he missed the point. In any system of governance there will be a mixture of good people and bad people--even in a system that paid no salary there would still be the odd good citizen who would do the job for free. Likewise, even in a system of pure equality there will always be a "that guy" who has to try and have it all to his own self.

A sane system of governance neither relies on the idealism of the few nor throws its hands up in despair at the massive greed of a few bad people. What a sane system does is maximize incentives for the people in the middle based upon the belief that the most men and women are practical and neither great saints nor great sinners.

So the question is not what impact higher salaries and public finance will have on the extremes, the question is whether it will improve the lot of the people in the middle. There is every reason to believe it will.

The reason to believe it will is because under the current system there are huge barriers to entry--a political candidate either must have lots of money oneself or spend a lot of time raising funds. Reducing those barriers to entry isn't designed to turn sinners into saints--it's designed to let more of the normal people participate in the process. Those normal people will then dilute the impact of the sinners and the saints.

David Ricardo said...

Mr. Dorf’s post and the subject of campaign finance reform/compensation of office holders deals with two types of political corruption, monetary corruption and policy corruption. Monetary corruption consists of the bribery by various means of political officials in return for actions which enhance the financial position of those doing the bribing. As Mr. Dorf notes, this is clearly the situation with respect to Mr. Silver.

Non scientific observations and casual analysis would suggest that this type of corruption while still present has been in substantial decline over the past 150 years. Transparency and the increase in compensation to elected officials seems to have reduced overt financial malfeasance. One doubts, however, that at the margin increasing compensation to elected officials will result in less financial corruption, the greed and venality of these people being just too great to overcome.

But with the decline (relative) of financial corruption has come the huge increase in policy corruption. Policy corruption can be defined as subverting the system so that policy which the majority opposes is enacted due to the excessive influence through financial means of those advocating that policy. Gerrymandering is an excellent example of policy corruption, as are laws that undermine gun safety and regulation. These policies exists despite opposition of the majority because a well financed minority is able to push these policies through legislators who have been heavily influenced by the financial heft of those supporting the policies.

Correcting this abuse is one major focus of campaign finance reform and public financing of elections. These policies open up the political debate and allow all sides of a question to receive a somewhat equal hearing in the political debate, and increase the likelihood that the best policies and those supported by a majority are enacted. That of course is why regulation of the financing of elections is so opposed by the mega wealthy, it obstructs their attempts to defeat democracy.

Valen said...

The problem with corruption is when I do it, it is OK, Fine and practicle. But when you do it, it is outrageous. If I apply to the lender from and pay 50 pounds to traffic police to avoid going to court for not wearing helmat, that is practicle, but when the same policeman takes that 50, it is not on. We need to change this mentality, unless that is done, no one can route out the corruption. In every country the richer want to become richer and the poor need money to survive. Thanks.

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