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Cheap Victories: Modern Money and the Roots of Campaign Finance Reform

moneyPhoto Illustration by Nelson Hua

Two weeks ago, New Yorkers were reminded just how much money matters in electoral politics. Although Fordham Law Professor Zephyr Teachout lost the Democratic gubernatorial primary to Andrew Cuomo, she put up unthinkable numbers. Incumbent governors, on average, attain 90% or higher of the total vote in their own party’s primaries. This time around,Cuomo received a mere 62% of the vote, and his running mate, Kathy Hochul, only managed to secure 60% against Columbia Law Professor Tim Wu.

Here’s the kicker: functionally speaking, Cuomo spent $60.62 per vote, while Teachout only spent $1.57.

Zephyr was outspent almost 40 to 1. She began with almost zero name recognition, yet grew more popular at a shockingly rapid pace. It’s not difficult to imagine that with some public funding, Teachout and Wu could have been on their way to Albany.

Campaign Finance Reform (CFR) and combating big money in politics

Teachout herself is a campaign finance reform (CFR) advocate, as well as an antitrust and corruption scholar. Over the years, she has been a trailblazer among activists and academics combating the corrosive influence of “big money” in politics.

We vigorously support Teachout’s efforts, but we also think her campaign shows that the CFR community must strike at a deeper root: public finance itself. At the end of the day, defeating the power of big money requires an understanding of where money comes from, how it works, and how it could be transformed to better serve public purposes.

The Modern Money Network has spent the last two years articulating a progressive vision of public finance reform that complements the goals of CFR. This vision is grounded in one simple insight: money is not a feature of our natural environment, but a social construct, mediated by law. It is generated, structured, and adapted by the state and its organs, whether by stamping faces on shiny metal or altering numbers on a spreadsheet.

Funding public elections from the source of money itself

One profound implication of this view is that the common belief that the U.S. federal budget is constrained like a household budget is a myth. As MMN organizers have written in prior columns, the U.S. federal government does not need to tax or borrow in order to fund itself. Taxes accomplish many functions, but they do not “fund” federal government spending.

As the monopoly issuer of the dollar, the U.S. government can simply spend dollars into existence. Uncle Sam might have to worry about inflation if money creation outstrips productive capacity, but fears that a few billion new dollars will suddenly turn us into Zimbabwe or Weimar Germany have no basis in theory or fact. Indeed, as the Bank of England recently detailed, in the modern era, the vast majority of new purchasing power in the economy doesn’t even come from government spending, but from private banks lending deposits that they create out of thin air.

Once the public understands that the U.S. government cannot “go broke,” and thus most fears of federal budget deficits are irrational, the dream of fundamental CFR becomes much more viable. Public elections do not need to be financed by higher taxation, spending cuts, or greater indebtedness to China and our grandchildren – instead, they can be funded directly from the source of money itself: the U.S. Government. This insight, in our opinion, is ultimately the strongest argument in favor of public election funding, yet it remains sorely overlooked by the CFR community.

Take, for example, Teachout’s colleague and fellow CFR-activist, Harvard Law Professor Lawrence Lessig. A few years ago, Lessig set aside his campaign for a free internet in order to found his own CFR organization, Rootstrikers. True to the name, Lessig has been creatively tackling some of the deepest barriers to meaningful CFR through a multi-pronged approach, including tactics that range from calling for a constitutional convention to forming the Mayday PAC—a crowdfunded SuperPAC dedicated to ending SuperPACs.

Lessig’s preferred strategy, like the Modern Money Network’s, is not to attempt to reduce the power of money outright, but rather to harness and democratize it. Money is like fertilizer—spread around widely, it can be enriching; piled up, it stinks. As Lessig has argued, this problem is most visible in the early stages of political fundraising known as “green primaries;” currently, green primaries in the United States are dominated by just 0.05% of the population – as many people as have the name “Lester.”

Moving forward: public money should be put to work for public purpose

We do agree with Lessig’s view that money undeniably facilitates political participation, and thus serves as the lifeblood of “the economy of influence,” as articulated in the New Yorker. However, when Lessig adopts a fiscal framework that incorporates false fears of looming government bankruptcy, he unintentionally hurts his own cause.

Consider “democracy vouchers,” for example – an old idea that Lessig has re-popularized. Under this proposal, every citizen would receive $50 from the federal government (more than $6 billion in total per election cycle), valid only for use as a political campaign contribution. The voucher could then be given to any candidate who agreed to one simple condition: the only money she would accept would be other democracy vouchers or very small donations (i.e., under $100). Though this is a transformative idea, its flaws stem from the outdated monetary framework in which it is typically presented – one that assumes that the U.S. government can run out of money like a business or household.

Thus, for the CFR community to increase its chances of victory in implementing its policies (especially those aimed at changing the initial distribution of economic power), it must provide a more truthful and accurate account of the relationship between governance and modern money. In order to win over skeptics, CFR advocates need to explain that neither the national fiscal position nor people’s checkbooks need suffer in order for a scheme like democracy vouchers to work. People need to hear that it is right and reasonable for them to ask that public money be put to work for public purpose.

If Teachout, Lessig, and other CFR activists can deliver this message, then the CFR movement will be unstoppable. Then, if billionaires want to have a funding race, the U.S. government can simply drown out “big money” with its infinite supply of dollars.

Monetary reform is trustbusting for the 21st century: it changes distribution from the bottom-up. Imagine if Zephyr Teachout had had a campaign chest filled with hundreds of thousands of citizen vouchers, and she didn’t have to say they were funded by “taxpayer” dollars.

She would have won.