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What Ezra Klein gets wrong about big vs. small money in politics

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Over at Bloomberg View, columnist Ezra Klein yesterday decided to throw some cold water on the small donor solution favored by many campaign finance reformers. His argument: complain as you like about the power of big corporate donors. Small donors might be worse. They are highly partisan!

Klein gets his spark of insight from a remark by Sen. Chris Murphy (D-Conn.). On Monday, the senator offered a fundraising confessional at a Yale University conference on money, politics and inequality.  “When I send out a fundraising e-mail talking about how bad Republicans are, I raise three times as much as when I send out an e-mail talking about how good I am,” Murphy said. “People are motivated to give based on their fear of the other side rather than on their belief in their side.” (I was also at this conference, as a panelist).

From this observation, Klein then slips into a two-sizes-fits-all approach to campaign funding: There is big money, and there is small money.

Just as big money is corrupting, small money is polarizing. And it’s polarization that probably poses the bigger threat to American politics right now. Big money, for example, generally wants to raise the debt ceiling. Small money is one reason Republicans in Congress came close to breaching it. Big money often wants the two parties more or less to get along; no one gets a tax break if legislation dies on the floor. Small money will turn on you if you dare cut a deal with the other side. Big money erodes what little trust Americans still have in their political system. Small money attacks the bipartisanship that, for better and worse, is required for the system to function.

First of all, let’s understand how Klein gets there. Talking about how your opponent will destroy this country indeed makes a good fundraising pitch. And small donors may even, on average, be more partisan than big corporate donors. Stanford political scientist Adam Bonica has some excellent research to support this point.

But if big corporate money is to be held up as centralizing force in American politics (Klein’s implicit argument), it has done a terrible job of it. In the last election, 32 super PAC donors gave a combined $313 million to the presidential campaigns, the equivalent of 3.7 million small donors. In 2010, one percent of one percent of Americans accounted for about a quarter of all individual donations. Yet American politics is at record levels of partisanship.

In fact, two of the most pronounced trends in American politics in the last two decades have been increasing polarization and increasing role of big money in elections. If big money does in fact play a tempering role on partisan extremism, you would not expect the historically high levels of partisanship we observe.

A plausible hypothesis connecting the two trends is that the rising costs of elections, driven by big money, have increased the need for highly-partisan fundraising calls.

When you need to raise a lot of money quickly, demonizing your opponent can work well. From every indication, Murphy would have preferred to raise money with positive messages about himself. But when you have to raise millions of dollars in a short time frame because you know your opponent is going to raise more, you go with what is proven to work.

If we follow this logic through, it suggests that polarization is actually a consequence of big money elections. The more costly an election, the more candidates need to strike fear into their potential donor pool. Over time, this fear-mongering feeds polarization, making partisan fundraising even more effective. Rinse and repeat.

It’s also important to note that there is plenty of big money that is also highly polarized. On the left, today’s Washington Post reports on wealthy liberal donors sending a letter treating a presidential denial of the Keystone XL pipeline as the moral equivalent to Lincoln outlawing slavery. The Koch brothers offer an obvious and salient example on the right. Nor is there any stretch of any reasonable imagination that would describe the largest business association in America, the Chamber of Commerce, as a centripetal consensus-driving force. The organization spent more than $30 million in outside money in the last election trying to get Republicans (and only Republicans) elected.

Reality aside, it even seems strange to even idealize big corporate money as consensus-oriented. Big corporate money mostly wants what’s good for that particular company or industry. Corporate leaders might say they want comprehensive tax reform. But which big corporate donors are willing to give up their favorite part of the tax code? Additionally, big corporate money is often quite eager to see gridlock. Just ask big oil if it would like an active Congress on climate issues. Or ask hedge funds donors if they’d like an active Congress on the taxation of carried interest.

What is to be done? When it comes to the kind of campaign system we want, Klein assumes that there are only two options: a small-donor system fueled by partisan taunts, or a big-donor system dominated by corporate executives.

New York City’s 6-to-1 donor matching program has been getting a lot of attention lately, and for good reason. It has not only increased the number of small donors, it also increased the demographic and class profile of donors, bringing in more contributions from traditionally low-income areas of the city, according to research by Michael J. Malbin and colleagues. As they conclude:

There can be little doubt that bringing more small donors into the system in New York City equates to a greater diversity in neighborhood experience in the donor pool. Increasing the number of small donors has been more than a means to dilute the power of the major givers. It has also led candidates to reach out to and engage a more representative set of constituents as they raise their campaign funds

True, Malbin and colleagues did not specifically address the polarization of the donors. And city politics are different from national politics in a number of ways, including the importance of partisanship.

But here’s one reason why a small donor matching system might not lead to the kind of partisanship Klein fears. Candidates will presumably not need to raise money at the same levels in such a system, which both will free them up from the highly-charged partisan appeals and give candidates who lack the partisan fire-breath a chance to compete.

But even if you still feared the partisanship of small donors, you could take steps in a small-donor matching program, recognizing that most polarizing money tends to come from out of district. Bonica (the Stanford political scientist who finds empirical support for the polarization of small donors) suggests one alternative:

The relationship between small donors and polarization does not mean we should abandon campaign-finance reform, but it does suggest we should favor some proposals over others. For instance, restricting matching funds to residents of a candidate’s constituency, a feature of New York City elections since 1989, might diminish the polarizing influence of out-of-state money. We can take this idea a step further with a tiered system of matching funds that places a large premium on first-time donors.

I can certainly understand how one could have concerns about the polarized nature of many small donors. And perhaps Klein is simply playing the role of provocateur, doing that well-honed journalistic trick of trying to turn the conventional wisdom on its head, in the hopes of stimulating a conversation.

But if we are going to have a conversation, let’s not pose it as a false choice between either having a corrupt system and a polarized system. Because right now we have something that kind of looks like the worst of both worlds, which makes it ripe for experimenting with better approaches.