Weening the American Voters off Reliance on the Media in Selecting Candidates

How well do voters (i.e., an electorate) know and thus are able to assess people running for public office? As the proportion of people who know a candidate firsthand decreases, the importance of the campaign ads and debates increases. In other words, the candidate's marketing plays a greater role in who wins. At an empire-level, such as the U.S. Government, an overwhelming percentage of people in an electorate (e.g., voting in a U.S. Senate race, or that of the federal president) are significantly influenced by the candidates' respective media campaigns for lack of real knowledge. In a U.S. presidential campaign, financial contributions are vital in being able to orchestrate an empire-wide media campaign. Also, how a campaign manipulates the media coverage of the candidate is very important. The case of Sarah Palin, who ran as John McCain's running mate in 2008, illustrates the extent of distance that can separate what the public "knows" of the real person from the media-made candidate. When people learned of her shocking ignorance of government, the distance was suddenly transparent, and yet no electioneering reforms were subsequently put into effect. Americans still had to rely on presidential debates to get a glimpse of the "man behind the curtain." 

In the election of 2012, I had the sense in the second presidential debate that Barack Obama looked smug, even arrogant, as if he were running the debate in virtue of his office. His tone directed at the moderated seemed to say, "Ok Candy, you may proceed with that." Perhaps the two labels are unfair, though people who have had contact with the president in person tend to provide similar feedback. I suspect the average Joe (not necessarily "the plumber") voter is turned off by conceit. Watching the debate, I had a subtle sense that whispered in my ears, "American viewers might be reacting negatively to his personality, as if saying to themselves, 'now we see how he really is . . . hmmm.'" There is the brand and the man. In other words, apart from the speeches and the orchastrated ads, Barak Obame might not be someone we would necessarily want to get to know, after all. I wonder if this recognition or awareness was occurring for the American people only then, during the debates, as we observed Obama interact with a rival in real time. "So this is how he plays with others . . . hmmm."

In divining what prompts the electorate's leaning one way or the other in a given election, we would be wise not to leave out "comfort level" with seeing and hearing the candidate at issue. Mentality or attitude is relevant because we know that whoever is elected president will be a regular fixture in our lives, albeit vicariously through electronic means. I am not referring only to whether we like the guy; the matter extends to our comfort with his attitude. This is a very subtle thing. Personality and attitude can thus be understood to play a role, albeit a subtle one, in how a candidate for president is "evaluated." An election is not simply about policy, which is a reason why the latter should be included on a ballot separately. 

Of course, Obama's attitude was not the only one on display during the debate. I have in mind Romney's duplicity, even lying, in his claim, "I care about all Americans" during the debate after he had said in private that it would not be his job to worry about 47 percent of us if elected no doubt turned many people off (at least those of us who follow politics). As he looked straight into the camera and made his statement as though sincere, I wondered whether the highest politicians have such an astonishing ability to act. That is to say, the true gift of a politician could be the ability to come off as incredibly sincere when he or she is simply acting the part. "Wow he's good" was what came to my mind. Of course, the excellence of a skill is of little value if the skill itself is a vice. Perhaps what we are left with is a fleeting glimpse of how little we know about either candidate, and yet we presume we know so much about both. "Obama cares" and "Romney is compassionate" may turn out to be marketing-driven rather than real, yet we cannot be wrong about what we believe to be the case, right?

To offer a less sensitive example illustrating the distance between a person and his character on television, Andy Taylor, the nice, common-sense sheriff in The Andy Griffith Show, was easy for millions of viewers to like. From this viewing experience of  the character, many Americans doubtlessly felt a loss when Andy Griffith died in the summer of 2012 even though the man was reportedly not "good with people." He even fought with the actress who played Aunt Bee, a kind, motherly character (how many viewers could say the actress playing her was so nice?). The actor who played the sheriff was not as kind in person as is his character, yet people with just the character in mind mourned as if they had lost the man himself. This, I submit, is a problem that also impairs political elections. For some reason, the human mind is susceptible to viewing acting as if the actor were the character (i.e., no distance between them). In mourning President Reagan as his funeral was broadcast, the vast majority of Americans had only the actor's presidential character in mind, for they could not get to the man himself. How many knew that he called his wife, Mommie? Where most of an electorate do not get to meet the candidates in person, as in the case of the election for an empire-scale office such as the U.S. Presidency, the susceptibility is particularly strong because the contact comes only through the media and the candidates' own respective media campaigns. As debates can become unscripted, they are perhaps the best means of catching of glimpse of the real persons who would use judgment in office on some very important matters. To the extent that an electorate relies on the real people in offices so far away, getting to the real persons who mask as candidates is important, and yet little if any progress has been made in at least the United States. The European Union is a better construct for this, as more power in the E.U. resides with state-level office-holders. In general, less distance between the voter and a candidate is within states than at the empire-level (i.e., the Congress and the federal president). The sizes of the electorates for federal offices are a leap greater than those within the states. Less distance is involved in the latter, for the electorates are so much smaller. Hence it is easier for proportionately more of such electorates to know the "man behind the candidate." Other things equal, better candidates should be more likely to beat the bad ones. 

I suspect that in 2012 after the second debate, many independents (and perhaps even some Republicans and Democrats) had the sense that better people could have been selected as candidates. This suspicion was confirmed for me when I learned after the third debate that the candidates  to discuss took liberties in discussing domestic policy even though the debate was to be on FOREIGN policy. Such a lapse can itself be a red flag respecting boundary issues or problems with "keeping within the lines" (i.e., as in coloring books). At the very least, it evinces self-centeredness. In short, the debate gave the electorate a glimpse into the man behind the candidate--for both candidates, but should a democracy founded on popular sovereignty--the voters as a group--be satisfied with just glimpses?  They can trigger unfounded inferences, which in turn can lead a voter to use bad judgement in voting. At the very least, then, the American electorates should have better access behind the candidate. For example, release of President Trump's tax returns should have been mandated so voters could get a better sense of how he ran his company, as such an executive role is arguably related to how he would be the chief executive of the U.S. Government. Mandated disclosures could also have pointed to the man himself--his judgments and character. Generally speaking, the People should demand that their government require more along this line. Put another way, the People have a right to be informed even if it means that political media campaigns must deviate from their respective scripts and even have to play defense, losing control of the narrative.

The E.U. Goes After Google: Where Was the U.S.?

In fining Google a record 2.4 billion euros (2.7 billion dollars) in June, 2017, for unfairly favoring its advertisers in its online shopping service, E.U. officials went “significantly further than their American counterparts.”[1] At the time, Google held more than 90 percent of the online search market in the E.U. Why would the E.U. go further than the U.S. in pressing anti-trust violations against a technology company that could be expected to gain monopoly profits? Presumably Google was favoring its advertisers on searches in the U.S. as well. Americans would mind too when an advertiser’s higher-price product comes up rather than a comparable product at a better deal. Was the E.U. more interested in protecting consumers and less concerned about pleasing a large company? The company’s sordid, self-serving practice nullifies any contending claim that the government’s motive was to go after a foreign company. I submit that the E.U. government’s action unwittingly points to a pro-business bias in the corresponding American government.

With the demand that Apple repay $14.5 billion in back taxes in the E.U. state of Ireland, an investigation into Amazon’s tax practices in the E.U., and “concerns about Facebook’s gathering and handling of data,” the E.U.’s anti-trust division was “laying down a marker for more hands-on control of how the digital world operates.”[2] Why no such marker in the U.S.’s anti-trust division? Clearly, concerns about Facebook were not uncommon there. The E.U. “is setting the agenda,” Nicolas Petit said at a European university.[3] Suddenly America looks like the Old World.

Especially after the Citizens United decision by the U.S. Supreme Court in 2010 allowing unlimited spending by companies on political campaigns, the question of the power of large companies in the halls of Congress as well as in the White House at the expense of consumers became more important even if the media kept the issue largely off the public’s radar screen. Is what is good for GM good for America? The fallacy that what is good for a part is necessarily good for the whole is enough to settle that question. The problem, therefore, lies in certain parts having inordinate influence over the whole—more specifically, on the rules by which the whole operates. Insufficient regard for the public good by public officials who don’t want to risk offending corporate chieftains is like the captain of a ship steering according to the desires of certain wealthy passengers instead of looking out ahead.

So it is telling, I submit, that the E.U.’s anti-trust division essentially shamed its American counterpart in being willing to stand up to very powerful private interests. The “proof in the pudding” lies, I suppose, in the dearth of cases in which the U.S.’s government (and those of the member states) has spoken truth to the powers behind the throne and gone on to act on that truth in enacting laws and regulations that protect the public. All too often, American regulatory agencies are captured by the very companies that are to be regulated. Beyond the agencies’ reliance on their respective regulatees for market information and the regulatees’ ability to hire former regulators for lucrative jobs, a company’s monetary influence in electoral campaigns gives elected representatives a powerful incentive to pressure the regulatory agencies to go easy on even an entire industry. From a company’s standpoint, unwanted regulations can be softened or averted outright, or new regulations can be used strategically at the expense of typically smaller competitors that are less able monetarily to comply with stiffer mandates. So it is not simply more regulations that attest to a willingness to “speak truth to power.” Government officials with the courage (and fortitude) to protect the public cannot simply enact laws and regulations that are in a dominant company’s interest. Clearly, the E.U. passed this test in being willing to stand up to Google.

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[i] Mark Scott, “Google Fined Record $2.7 Billion in E.U. Antitrust Ruling,” The New York Times, June 27, 2017.

[ii] Ibid.

[iii] Ibid.

Goldman Sachs’ Venezuelan Bonds: Power Behind the Throne

Goldman Sachs paid about $865 million for $2.8 billion worth of bonds in May, 2017. This represents 31 cents on the dollar and translates into an annual yield of more than 40 percent.[1] The high yield is due to the high risk that is involved, for the bonds had been held by Venezuela’s central bank in what “the government’s opposition decried as a lifeline” to the regime then in power.[2] Indeed, the central bank’s foreign-currency reserves increased by $442 million to $10.8 billion the day the bond deal was completed, and the government needed to raise money it owed to key allies like Russia and China.[3] In indirectly aiding that government, Goldman Sachs risked the ire of the opposition. Writing to Goldman Sachs, Julio Borges, head of Venezuela’s opposition-controlled legislature, indicated that he would “recommend to any future democratic government of Venezuela not to recognize or pay on these bonds.”[4] Hence, the high risk, high return. Though I submit that the risk might have been considerably less than meets the eye on account of the influence of the bank on the U.S. Government.

Goldman Sachs had been “steadily increasing its Venezuelan holdings in recent months, betting that a change in government could more than double the value of the debt if the country, which sits atop the world’s largest oil reserves, reforms its economy.”[5] The American bank could arguably dismiss Borges’ ominous threat because of the bank’s formidable influence, or power, in the U.S. Government. Besides the lavish political-campaign contributions that the bank no doubt extended to members of Congress, prospective candidates, and to the sitting president at the time, the bank had an insurance policy of sorts in that one of its alums, Steve Mnuchin (formerly a partner at Goldman) was serving as U.S. Treasury Secretary and another, Gary Cohen (who had resigned from being the President at Goldman), was the U.S. President’s Chief Economic Advisor (i.e., head of the National Economic Council). Additionally, Steven Bannon, the chief strategist in the Trump administration, had worked in the bank. Ex-Goldman bankers thus held very senior positions in the U.S. Government as the bank was betting that future regimes in Venezuela would recognize the validity of the debt owed to the bank.

The expression, “power behind the throne,” expresses the underbelly of power that has existed without doubt since the dawn of human organization. The advent of the large corporation, whose astonishing accumulation of wealth stems from principles of the Industrial Revolution, meant that private power could trump publicly held power to an unprecedented extent. The governmental discretion of lawmakers and even heads of governments may actually be diminished because of the sheer power behind the strings. In spite of the dubious democratic legitimacy and the horrendous human-rights record of the regime in power in Venezuela when Goldman Sachs bought the bond that had been issued by the state oil company Petroleos de Venezuela, the policy of the U.S. Government could easily be to “look the other way” and even prop up that regime or support any prospective regime that agrees to “toe the line” on repaying the debt owed to Goldman. The power behind the American throne, in other words, might reduce to the bottom-line financial transactions of the large American banks, which, by the way, are too big to fail yet sufficiently powerful to vanquish even public debate on whether the banks should be broken up for the overall interest of the U.S. economies and financial system. In short, follow the money, not the ideals or even enlightened self-interest. The world, moreover, may be in a driverless ship—one whose route is simply a matter of large financial transactions. Those transactions themselves may be the true power, for not even the CEO at a major bank can realistically deviate from seeing them through; the shareholders would have his head.

The discretion, whether in the large corporations or in the halls of government, may really only reside at the point at which the decisions are taken to proceed with a given large transaction. Only an investment banker would know how much discretion is truly present in the decision of whether to commit funds to an investment. In the case of Goldman’s purchase of the Venezuelan state-related bonds, the anticipation of the artificial risk-reduction by means of financial-to-political power could mean the allure of a 40% return on investment is too much to resist (i.e., greed). Yet such a prospect being deemed realistic could mean that Goldman’s managers faced a de facto fiduciary duty to the stockholders to make the non-bet “bet.” The availability of alternative profitable uses of the funds available for a bank like Goldman Sachs could give the bank’s managers some leeway in line with not propping up a regime that suffers democratically and in terms of human rights. It is only on the margins, I suspect, that ideals can get a glimpse of sunlight in a political economy in which large financial transactions hold sway in terms of both financial and political power. Yet the greed leaning strongly toward the 40% return, which crucially is made so realizable only by the bank’s power over political power in the U.S. Government, is hard for human nature to resist, especially that which is well ensconced in the culture on Wall Street. Accordingly, large financial transactions may take on a deterministic hew.

In any case, once a transaction is committed to, power goes to the transaction itself, with its private and public defenders feeling they have little practical choice but to act in the transaction’s own interest. Indeed, bank managers can be fired and government officials can be turned out if they don’t “play along.” The logic of the existing financial transactions may be determinative for the ship of state as well as an economic system. It is no wonder, therefore, that the general public should fear the prospect of a distant iceberg coming unawares over the bow, and that ideals for a better world should fall off along the way like ice melting off the rails. 

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1. Kejal Vyas, Anatoly Kurmanaev, and Julie Wernau, “Goldman Sachs Under Fire For Venezuela Bond Deal,” The Wall Street Journal, May 30, 2017.

2. Ibid.

3. Ibid.

4. Ibid.

5. Ibid.

Iceland’s Pirate Party on Systemic Change in Developing Democracy

Rarely does systems theory become a political issue; instead, political parties and their respective candidates brandish policy positions geared to fixing particular issues (i.e., parts of systems). In Iceland, the Pirate Party proffered an exception leading up to the 2016 election. “We do not define ourselves as left or right but rather as a party that focuses on the systems,” said Birgitta Jónsdóttir, the party’s leader.[1] In other words, the party made system itself the issue. “We stand for enacting changes that have to do with reforming the systems, rather than changing minor things that might easily be changed back,” she said.[2] Even if the minor things could not be easily changed back, I contend that fixing them is still sub-optimal when the systems of which they are part are warped, and thus deficient as wholes. Therefore, a political party’s emphasis on systems as themselves being in need of reform presents the world’s population with a practical way to redress systemic problems.

In Iceland alone, the economy collapsed after the banks failed in the 2008 financial crisis, and in 2016 the prime minister resigned after being named in the Panama Papers scandal. The corruption itself indicates that the political economy—as a system—was broken. The nexus of business and government was particularly in need of reform beyond little fixes. Hence, the Pirate Party’s platform included “advocating for direct democracy” and “total government transparency.”[3] Wikileaks had already given the world’s population an idea of just how valuable transparency can be; at the very least, it had shown just how corrupt the world’s political elite was.

The move to direct democracy makes sense under the circumstances. Were major policy decisions themselves taken by electorates on election day—rather than lumping such decisions with those of which candidate to vote for—the political elite, including elected officials, would have less power. Given the level of corruption revealed by Wikileaks, reducing the power makes sense. Were electorates able to vote on major policy positions, the winning candidates would be obliged legally to implement the winning policies because the popular sovereign (i.e., an electorate) is the source of governmental sovereignty (i.e., the power of governments in republics).

Were policy positions distinguished from the question of who should fill a public office, no longer would voters be put in the position of voting for a candidate in spite of disagreeing with some of his or her policy positions; the decision on candidates would pertain to them (e.g., competence and trustworthiness). Voters not in favor of any of the candidates (e.g., they are all corrupt) could bypass that line and still vote on policies, and thus still participate as a citizen. I suspect that many Americans could have benefitted from such a reform in 2016.

The Pirate Party was essentially saying that humanity needs to catch up with democratic theory; existing systems being warped by political and business elites. Because a given candidate typically takes positions on several issues, a voter is essentially voting on all those positions in voting for the candidate even if that voter does not agree with all those positions. This is a structural flaw in representative democracy that stems from putting too much emphasis on office-holders. To be sure, they could still have discretion on policy matters not on the ballet that are either minor at the time of the election or come up during the term of office. Separating out the policies from decisions on candidates for the offices would provide a closer fit for the voter’s preferences on the major policies as well as the candidates—including on their judgment, which would theoretically apply to the remaining discretion on minor or upcoming policy matters.

To the extent that democracy, which can be viewed as a hybrid of direct and representative, reflects the will of the people, that system of government is rightly deemed legitimate. Given the spread of democracy in the world since the early modern age, addressing the system itself of how candidates are elected and major policies are adopted and implemented would represent a major step in political development for our species.

Unfortunately, systemic change is labeled “radical” by the interests of the status quo. In its article on Iceland’s Pirate Party, USA Today begins with “Iceland’s radical Pirate Party.”[4] The value-judgment that goes with radicalism antedates the judgment of the Icelandic people and thus subtly works against systemic change even though there is a good case for it. The world could do worse than read of a party whose platform makes systemic change explicit (and as being valuable).

Ideally, electorates, as the popular sovereign in democracies, will someday take up the power to decide directly rather than by party (or candidate) on alternative systemic changes. Even the question of whether major policy decisions should be made by electorates on election day apart from voting for candidates for public offices could be put before the electorates in a binding fashion. Few political elites would willingly cede such power willingly, without pressure from an electorate. This is why Iceland’s Pirate Party is so significant; in short, it may show the way.

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[1] Kim Hjelmgaard, “Hacker-founded Pirate Party Could Win Iceland’s Election,” USA Today, October 28, 2016.

[2] Ibid.

[3] Ibid.

[4] Ibid.

Political Contributions in the U.S.: Political Bribery Beyond Access

What exactly does a large political contribution do for a contributor? The standard line is that access is “bought.” Being far removed from the Washington “belt-way,” the American people have swallowed the line, admittedly naively. As of 2015, we can look at the proverbial “man behind the curtain” for a much more realistic grasp of the extent to which private interests seeking particular benefits even at the expense of the whole (e.g., increasing a deficit) corrupt the American political system.

Speaking in 2012, former U.S. president Jimmy Carter asserted, "we have one of the worst election processes in the world right in the United States of America, and it's almost entirely because of the excessive influx of money."[1] In 2015, both Carter and the current federal president, Barak Obama, lamented what Carter characterized as political bribery, “a complete subversion of our political system as a payoff to major contributors.”[2]  No one is clean in Washington, Obama said at a news conference. We have to take the money to compete in elections and that obliges us. In other words, both presidents were confirming for us that major political contributors do indeed get more than access; the elected office-holders feel obliged to repay the contributors with benefits through favorable legislation or regulation.

Hence, Goldman Sachs was the largest single contributor to Obama’s 2008 campaign, and the financial reform law passed two years later steered clear of breaking up the five largest U.S. banks, which at the time had even more assets—a third more—as a group than they did in September 2008. Additionally, Obama backed off including even a public-sector health-insurance option after the health-insurance industry lobby objected. Had that industry contributed to his campaign? If so, did the companies that denied pre-existing conditions bribe the president to insure that the insured would still have to rely on those companies?

Bribery is a strong term; it is a stark indication that the United States are not cities on a hill—salubrious bastions of clean business and government in a corrupt world where bribery runs rampant. American CEOs cannot justifiably lament having to pay brides in other countries because the political contributions domestically are in fact bribes. Put another way, legalized bribery is still bribery even if the shiny veneer makes it more difficult to see underneath. Speaking in 2015, Carter’s recommendation was to make public financing of elections mandatory, hence limiting or expunging altogether private contributions. For this to happen, the U.S. Supreme Court would have to step down from its judicial doctrine that money is speech. The next question in need of a real answer may be whether the Court is subject to bribery, whether directly or through a power-elite.

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1. The Associated Press, “Jimmy Carter Slams ‘Financial Corruption in U.S. Elections,” CBS News, September 12, 2012.

2. Paige Lavender, “Jimmy Carter Blasts U.S. ‘Political Bribery’,” The Huffington Post, July 31, 2015.

The Fed Lets Banks Continue Risky Trades: Too Big To Fail Ensconced

In December 2014, the U.S. Federal Reserve Bank granted banks an extra year past the July 2015 deadline to comply with a major provision of the Volcker Rule requiring the banks to unwind investments in private equity firms, hedge funds, and specialty securities projects.[1] The Fed also announced that it would give the banks yet another year to hold onto their positions. The Fed’s rationale points to an underlying conflict of interest facing the Fed, a banking regulator arguably  too vulnerable to the banks’ lobbying muscle.

Banks pled that dumping holdings quickly would mean having to accept discount prices. “There’s considerable pressure the Fed is feeling in that they don’t want institutions to have a bloodbath trying to divest funds,” Kevin Petrasic, a partner in a global banking practice, said.[2] At the time, Goldman Sachs had $7 billion invested in private equity that the bank might have had to sell for a loss had the extension not been granted.[3] For Morgan Stanley, $2.5 billion is said to have been vulnerable to being sold at a loss. These figures presumably come from the banks themselves, and reliance on the regulated for information is part of what goes into regulatory capture of an agency by the firms being regulated.

Dennis Kelleher, of Better Markets, claimed the “Street has had years of notice to unwind these investments, and it appears that their self-serving complaints have been accepted fairly uncritically without a real analysis for the basis of the claim.”[4] That is to say, relying on both the information provided by the regulated and their interpretation puts the Fed’s regulatory function at risk—and hence the financial system itself at risk. Interestingly, Kelleher sounds more like a regulator than the Fed in observing, “If you can’t get out of a trade in seven years, it’s probably not the kind of trade you should be doing.”[5] The “regulators” at the Fed seem to have rolled over, taking the “self-serving complaints” at face value—ignoring the obvious problem in doing so. At the very least, regulators at the Fed should have assumed that the information would naturally be skewed; from such a perspective, a critical examination would have been an obvious necessary step prior to any decision to give the banks another year.

In short, the Fed comes off looking rather naïve, though underneath the reality could actually involve the banks having too much control over top Fed officials—the banks having a significant role in the appointing process. As a result, eight years after the financial crisis of 2008, risky proprietary trading was alive and well on a street populated by banks even more so too big to fail. Beyond the question of cozy relationships between the Fed and the banks that it regulates, the lack of any public outcry points to a problematic learning-curve societally in the U.S., with disturbing implications on the ability of a people to self-govern. Yet the alternative would seem to be more cronyism divested of any risk of being made transparent.

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1. Zach Carter, “Fed Delays Volcker Rule, Giving Wall Street Another Holiday Gift,” The Huffington Post, December 18, 2014.

2. Jesse Hamilton, Ian Katz, and Cheyenne Hopkins, “Goldman Needs Volcker Delay to Avoid Private-Equity Losses,” Bloomberg, December 5, 2014.

3. Ibid.

4. Carter, “Fed Delays Volcker Rule.”

5. Ibid.

Wall Street Writing Its Own Laws on Risky Derivative Trading

In just four years, Wall Street got away with weakening a part of the Dodd-Frank financial reform law, which became law in 2010 to protect the financial system from the excesses that led to the financial crisis in 2008. Wall Street bankers and their lobbyists accomplished their feat by luring members of Congress into a formidable conflict of interest, which I submit could have been obviated.

The full essay is in Essays on the Financial Crisis, available at Amazon.

Sen. Mitch McConnell Re-elected: A Washington Insider Sustained by the Establishment

The human brain is likely hard-wired to assume that tomorrow will be like today. This coping mechanism effectively narrows the window of our cognitive and perspectival range. The status quo not only endures; it is dominant, whereas reform must push hard to see the light of day. In politics, establishment interests, made wealthy in the status quo, bet their contributions on the political insiders—the establishment politicians who embrace the status quo. As a result, an electorate is manipulated and mislead by branding ads to the extent that it cannot be said that the real will of the people is done. The ensuing public policy is also not of that will; rather, legislation protects the vested interests in return for their contributions. A republic in the grip of this self-sustaining cycle can be said to suffer from a kind of hardening of the arteries. As times change, such a ship of state becomes increasingly unmoored from its people. Eventually, the ship sinks, after the pressure of incongruity has reached an unsustainable level. I contend that the 2014 U.S. Senate election in Kentucky between the Senate’s minority leader, Mitch McConnell, and his Democratic challenger, Alison Grimes, illustrates this political illness in action.

In a Louisville Courier-Journal poll conducted January 30 through February 4, 2014, only 27 percent of registered Kentucky voters viewed Mitch McConnell favorably, while fifty percent had an unfavorable opinion of the minority leader.[1]  President Obama’s approval rating came in 2 percentage points above that of McConnell’s.  With a 3 percent margin of error, the poll gave McConnell 42 percent to Grimes’ 46 percent—meaning that were the election held then and the actual turnout was not skewed, Grimes would be the next U.S. Senator from Kentucky.

With the U.S. House and the president deadlocked through the midterm election in November, legislative achievement cannot explain how McConnell’s 27 percent turned into the 56.2 percent who voted for him. Similarly, Pat Roberts of Kansas had had low favorability ratings only to come up with 53.3 percent of the vote. Both senators were Washington insiders who had strayed from their respective home states. Yet in the end, this is what saved them.

According to the New York Times, McConnell’s campaign benefitted from $23 million in spending from independent groups including the National Rifle Association, the National Association of Realtors, and the National Federation of Independent Business. The Kentucky Opportunity Coalition, registered as a social welfare organization, spent $7.6 million on attack ads against Grimes.[2] That organization ran more political ads in Kentucky than any other outside group, which means that Grimes could not counter the critical ads sufficiently. In short, McConnell’s strategy was at least in part to bring in out-of-state money to get a chunk of Grimes’ favorable rating.  Although positive correlation is not causation, the widening spread between the two candidates through the summer and fall, with McConnell on top, coincided with the onslaught of outside-group spending on attack ads against Grimes. 

It is possible that the people of Kentucky sent their incumbent senator back to Washington in spite his low favorability rating. In other words, Kentucky’s electorate may have been manipulated and mislead, deprived in effect of making the choice.

The implications in terms of public policy are just as bad. Contributors to the “social welfare” organization are not publically listed, so they have cover should anyone accuse the incoming majority leader of paying them back with favors. Whereas Grimes as a freshman senator would have much less power with which to make the favors happen, McConnell’s position as majority leader attracted the contributions like a tall beacon on a clear night. The establishment money, in other words, backed up the Washington insider, effectively protecting the status quo and thwarting real reform.

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[1] James Hohmann, “2014 Election Poll: Mitch McConnell Trails Alison Lundergan Grimes by 4,” Politico, February 6, 2014.

[2] The Editorial Board, “Dark Money Helped Win the Senate,” The New York Times, November 9, 2014.

The New York Fed: A Case of Regulatory Capture

According to The Wall Street Journal, a study sponsored by the Federal Reserve Bank of New York in 2009 uncovered “a culture of suppression that discouraged regulatory staffers from voicing worries about the banks they supervised.”[1] Whereas the report points to excessive risk aversion and group-think as the underlying problems, a fuller explanation is possible—one with clear implications for public policy.

The full essay is at A Case of Regulatory Capture.

John Paul Stevens: Money Is Not Political Speech

In his testimony before a U.S. Senate Committee in 2014, former U.S. Supreme Court Justice John Paul Stevens addressed the need for an amendment to the U.S. Constitution giving Congress and the States the power to restrict political campaign contributions.[1] After listing leveling the playing field such that rival candidates have equal opportunity to persuade, freeing up elected officials from having to spend so much time raising campaign funds, and distinguishing constituents from non-voters (including unions, corporations, and people of other electoral jurisdictions in the U.S.), he stated his position in particularly clear terms. “Money is not speech,” he declared. “Speech is only one of the activities that are financed by campaign contributions and expenditures. Those financial activities should not receive precisely the same constitutional protection as speech itself.”[2] 

Justice John Paul Stevens looking every bit the jurisprud. 

In short, even money given directly to a political campaign does not reduce to political speech. Although Citizens United (2010) and McCutcheon (2014) were being much cited at the time as baleful cases sure to transform the American democracy into a plutocracy, or rule by wealth-interests, Stevens went back to a 1976 case as the reason why a constitutional amendment rather a mere statute would be needed to place limitations on monetary contributions to political campaigns.[3] In denying Congress the power to impose limits on campaign contributions, the Court in Buckley v. Valeo issued the infamous equivalence between money and speech. To Stevens, money is speech is the fundamental error promulgated by the Court in Buckley that has led successive majority opinions to eviscerate campaign finance limitations enacted by Congress. I submit that the ex-jurist could have drawn on the Buckley decision for support, thus undermining the resulting legal doctrine as a legal precedent for the Court. 

  

The appellants in Buckley claim that “contributions and expenditures are at the very core of political speech, and that the Act's limitations thus constitute restraints on First Amendment liberty that are both gross and direct.”[4] Being at the very core of political speech, the monetary contributions effectively constitute such speech; restricting such expenditures thus violates the First Amendment directly in abridging the freedom of speech. In the words of the appellants, “limiting the use of money for political purposes constitutes a restriction on communication violative of the First Amendment, since virtually all meaningful political communications in the modern setting involve the expenditure of money.”[5] The money-speech equivalence is thus a function of modernity, and is therefore not quite as unconditional and inherent as money is speech implies at face value. Indeed, the Court’s majority opinion itself undermines the equivalence.

Seemingly cementing the equivalence yet rendering less than unconditional (and thus tacitly undermining it, strictly speaking), Court’s majority opinion accepts the appellants’ “modernity” argument. “A restriction on the amount of money a person or group can spend on political communication during a campaign necessarily reduces the quantity of expression by restricting the number of issues discussed, the depth of their exploration, and the size of the audience reached. This is because virtually every means of communicating ideas in today's mass society requires the expenditure of money. The distribution of the humblest handbill or leaflet entails printing, paper, and circulation costs. Speeches and rallies generally necessitate hiring a hall and publicizing the event. The electorate's increasing dependence on television, radio, and other mass media for news and information has made these expensive modes of communication indispensable instruments of effective political speech.”[6] The necessity of expenditures for a person (or persons, in associations) to have political speech makes the instrument political speech itself. That is, the necessity of the means essentially collapses the means-end dichotomy into a fusion as money is speech.

Yet the Court does acknowledge that “in contrast with a limitation upon expenditures for political expression, a limitation upon the amount that any one person or group may contribute to a candidate or political committee entails only a marginal restriction upon the contributor's ability to engage in free communication. . . . A limitation on the amount of money a person may give to a candidate or campaign organization thus involves little direct restraint on his political communication, for it permits the symbolic expression of support evidenced by a contribution but does not in any way infringe the contributor's freedom to discuss candidates and issues. While contributions may result in political expression if spent by a candidate or an association to present views to the voters, the transformation of contributions into political debate involves speech by someone other than the contributor.”[7] That is, the expenditure of money on political campaigns, as distinct from what Stevens called “general issues” in his testimony, enables someone else’s political speech. The money-speech equivalence being interpersonal (i.e., my money is equivalent to your political speech), restricting my contributions to a campaign violates the candidate’s right of free political speech.

Although it could be argued following the reasoning of the appellants in Buckley that technology and the contribution-levels enabled by the judicial doctrine of money-speech equivalence make a candidate’s right of political speech contingent on unencumbered political contributions, the interpersonal separation between the spender and speaker renders the money-speech equivalence as something less than a full, or fused, identity; restrictions on a person’s campaign contributions do not violate his or her first amendment rights. Therefore, Stevens could have cited the Buckley case in support of his argument that “money is not speech,” hence undermining the equivalence as a judicial doctrine from within the bloated whale itself.

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[1] John Paul Stevens, Campaign Finance Disclosure, U.S. Senate Committee on Rules and Administration, April 30, 2014.

[2] Ibid.

[3] Even though Stevens distinguished such contributions bearing directly on an election from money spent on general issues, I am not sure this distinction can hold up in practice, especially given the increasingly elongated “campaign season” (which comes at the expense of governing).

[4] Buckley v. Valeo, 424 U.S. 1 (1976).

[5] Ibid.

[6] Ibid.

[7] Ibid.

The Internet Eclipsing Television Networks: Toto, We’re not in Kansas Anymore

Internet start-ups can be said to profit, at least potentially sometime in the future, by leveraging the commons, or public space, even enlarging it in the process. Companies founded on the scarcity paradigm of privateness and even public policy based on a de facto privatized tenet have accordingly gone on the defensive. Although Thomas Kuhn’s The Structure of Scientific Revolutions would suggest that the old guard must die off before the new paradigm can come into its own, the internet revolution has shown a remarkable yet subtle persistence in “seeping through the cracks” into the “light of day.” 

Faced with a burgeoning digital landscape, traditional commercial-television networks had already established a “rear-guard” mentality wetted to the status quo by the time the Aereo case hit the U.S. Supreme Court in 2014. At the time, rather than paying a cable fee, that company picked up television signals on the public airwaves and sent customers the signals over the internet (charging for use of the receptors).[1] Before the advent of cable television, “television” was free, being paid for by the same kind of television commercials that many networks still profited from as the Court heard the case’s oral argument; and yet, the default assumption had (conveniently) morphed into the tenet that viewers should pay for television (including the commercials!), which implies that the public airwaves had somehow been privatized. "You can't take our signal. You just can't," said Les Moonvies, CEO of CBS, as if he were some rejected child-actor.[2] Imagine if a network CEO had made a similar exclamation in the 1960s. "They're my airwaves, Mine!" Although copyright law deserves protection, the networks’ use of the law to protect a “transformed” privatized ethos of what are still public airwaves even as those companies continue to sell and run commercial ads evinces a slight of hand that just does not meet the smell test. Perhaps trying to get away with having something both ways goes along with leaning too much on the status quo for support.

Also associated with the rear-guard mentality is the lobbying strategy of erecting legislation as an artificial bulwark that can buy some additional years of profit. For instance, the ad- and cable-based television networks could seek to “fortify” copyright law based on the assumption of de facto privatized air-waves. Indeed, this assumption has kept the American people from questioning the requirement that political campaign ads must be purchased. If the airwaves are public and broadcasters enjoy licenses to use the commons at a profit, then the notion of purchased political ads could be the outlier; the licensees could legitimately be required to run the ads gratis. Already, when the U.S. president wants to speak to the nation, he does not pay for airtime.

Ironically, the U.S. president who had run on the banner of “real change” (and refused public financing, which, by the way, presumes privatized airwaves) backed the old guard in the case, American Broadcasting Companies v. Aereo. The forces with a vested interest in the status quo are without doubt formidable. However, the internet was already transforming the entertainment industry even before Aereo came along. So, the significance of the case should not be overstated. On the day of oral arguments, David Frederick, the attorney for Aereo, observed, “The cloud-computing industry is freaked out about this case.”[3] Regardless, the cloud industry could still anticipate a promising future. Stepping back from the particular firms party to a dispute takes some of the airs out of the old tires of the tired default.

Indeed, just as the stolid broadcasters were doing battle with the fresh upstart from another era—that of the twenty-first century—Netflix announced plans to increase prices for new subscribers. Citing a “burgeoning roster of paying customers and profits that exceeded expectations,” the managers of the internet-based provider of shows and movies had decided to take their sleek operation out for a spin to see what it could really do.[4] Even without the new content, such as the award-winning series, House of Cards, the managers were well within their proper purview in raising prices out of a sense that the “burgeoning” market would bear it. That is to say, the company legitimately stood to gain from having essentially formed a new industry, with all the risks one would expect. Antithetically, the defense being playing at CBS and other television networks has the distinct odor of weakness befitting an old antiquarian who refuses to retire.

In short, industries could not but change dramatically given all of the computer-based change unleased from the 1990s and well into the next century. The fate of one company (i.e., Aereo, or Napster before it) pales in comparison to the sea-change would all-but-certainly make the second half of the new century very, very different from even its first two decades. Admittedly, placing bets on the commercial winners and losers is fraught with ambiguity; even so, we ought to know which team not to root for—and, even more pathetically, to be on.

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[1] Michael Wolff, “The Battle Over Aereo Will Shape TV’s Future,” USA Today, April 21, 2014.

[2] Christopher Stewart and Merissa Marr, "High Noon for Diller's Aereo," The Wall Street Journal, May 24, 2012.

[3] Richard Wolf, “Aereo, Broadcast TV Collide in High Court,” April 23, 2014.

[4] Mike Snider, “Pumped-Up Netflix Raises Its Fees,” USA Today, April 22, 2014.

Is Money Speech?

Dan Backer represented Shaun McCutcheon before the U.S. Supreme Court in McCutcheon v. Federal Election Commission—a case in 2014 that further relaxed campaign-contribution limits beyond the openings created in the Citizens United decision in 2010.  Backer argued before the Court that any restriction of political contributions is a violation of the First Amendment's right of free speech. In an interview after the Court handed down its McCutcheon decision, Backer said, "I don't understand why anyone should have their free speech limited to help somebody else feel like they can speak more. The Constitution does not envision the idea of, as the court said, 'weakening the rights of some and the speech of some in order to enhance or promote the speech of others.'"[1]

A week after Backer’s interview, when $57 million had already been spent by outside groups on the 2014 midterm elections, David Keating, an advocate of the deregulation of campaign finance, put it simply as “money means speech.”[2] Interestingly, Backer backed off such a stark equivalence. "The court did not say, and really neither does any serious commentator, that money is speech. Money is not speech. Money is a necessary tool to engage in political speech and political association.”[3] Money is not speech; rather, money is a necessary prerequisite. Hence Backer treated the right to spend money (on political campaigns) as essentially the right of free speech applied to politics. In other words, the assumed necessity of money for political speech means that the right of free speech in electoral politics is essentially violated if the right to spend money is severed or even truncated.

However, is spending money really necessary for a person to be able to “speak” politically? Is it necessary to purchase a television ad-slot to be able to make a political speech? Surely more political discourse occurs than what is broadcast as political advertisements. I suspect that spending money can amplify one’s political speech in that the audience is made much larger; this is not to say that achieving such a scale is necessary for one to be able to speak on political matters.

For that matter, is a campaign contributor seeking to influence public policy (directly or via the election of a particular candidate) by spending money on a campaign even speaking? Keating would doubtlessly say yes. Money means speech. Pivoting off Backer’s (common sense?) point that money is not speech, however, we might say that the spending is necessary for one’s own speech to be accomplished through the agency of another party, such as a political campaign or an outside group; spending money on political campaigns essentially “hires” someone else to “do” one’s speech. Is such a “hiring” included in the right of free speech?

Moreover, is the right of free speech—meaning that a person’s political speech cannot be prohibited by the state—the same as the right to speak (not to mention through another party via a commercial transaction)? Similar to how procedural due process somehow got enlarged include substantive due process, I suspect that the right of free speech has inadvertently come to include the right to have one’s political views aired directly and even the right to essentially hire another party to broadcast them (assuming such hiring is necessary to one’s views “getting out there”).

The sheer expansiveness in judicial doctrines such as the commerce clause, establishment of religion, due process and free speech may be similar to the tendency of “weak states” to spend more on consumption than investment due to democratic pressures for instant gratification. In short, people want more and more, and are all too willing to contort prime facie meanings and tolerate absurdities such as “money is speech.” I submit that much daylight exists between government being prohibited from outlawing certain political speech and a right to spend money on political campaigns.

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1. Ryan Grim, “Now He Tells Us: McCutcheon Attorney Admits Money Is Not Speech,” The Huffington Post, April 7, 2014.

2. PBS News Hour, “Why Outside Groups Are Pouring Record Amounts of Money into this Year’s Midterm Elections,” April 16, 2014.

3. Grim, “Now He Tells Us.”