Fixing Campaign Finance The Obama-Tzedakah Way

Much has been written about Barack Obama's "Amazing Money Machine." As of March 31, 2008, Obama had raised about two hundred thirty four million dollars from individual donors. This puts him on track to raise over half a billion dollars for the 2008 elections. And he is doing it with an average donation of under $100. Indeed, his fund raising base is so wide that almost one out of ten Obama voters has given money to his campaign.

It is clear that Obama's model has changed the thinking about campaign finance reform. Joshua Green's article in the Atlantic describes the impact as the conventional wisdom now casts it: "Obama represents a triumph of campaign-finance reform. He has not, of course, gotten the money out of politics, as many proponents of reform may have wished, and he will likely forgo public financing if he becomes the nominee. But he has realized the reformers’ other big goal of ending the system whereby a handful of rich donors control the political process. He has done this not by limiting money but by adding much, much more of it—democratizing the system by flooding it with so many new contributors that their combined effect dilutes the old guard to the point that it scarcely poses any threat."

This is a terrific achievement whose importance to democracy cannot be overstated. But the conventional wisdom that the significance lies in simply diluting the importance of big donors misses the point.

The significance is not that Obama's model ended the system whereby the "a handful of rich donors control the political process." Indeed, McCain -- apparently a campaign finance reformer only when it advanced his political ends -- proves that the rich still control much of the process. His McCain Victory '08 fund creates a "hybrid legal structure" under which "up to $70,000 in individual contributions [can be accepted] by channeling the money into different McCain-centric funds. The first $2,300 of that would go to McCain's primary campaign. The Republican National Committee would receive $28,500 of the donation. The remaining funds would be divided equally, up to $10,000 a piece, among four states the campaign has designated as battlegrounds for November: Wisconsin, Minnesota, Colorado and New Mexico." So a husband, wife, and three adult children could donate $350,000.

It is a remarkable achievement that Obama has built his small money donor base to the point where he can seriously consider eliminating even the inference of improper influence by voluntarily capping donations at well under the currently federally permitted maximum of $2300. Indeed, he would be a formidable fundraiser even with a $150 cap. But as Clinton's $11,000,000 loans to her campaign and McCain's efforts to raise $70,000 per donor indicate, the small donor model does not work for all candidates. Indeed, that model did not work for Obama at the outset, as he was not able to launch his campaign solely with the small donations that he is considering making his sole source of financing going forward.

The significance of what he has done in this year is not that he proved small fund raising is viable in a presidential race (Howard Dean did that). Rather, he proved that functionally anonymous giving can drive a campaign's finances. And that people will give at least $2,300 with no realistic expectation of buying anything except a better chance for their candidate to win.

True, over $200, there is no anonymity -- it is all reported. I maxed out in the primary, and you can look that up on opensecrets, Huffington's fundrace, or directly from the FEC. But the point is that with over 1,500,000 donors, Barack Obama has no idea who I am. His staff doesn't know me. Honestly, I didn't even get a thank you note. And I shouldn't. Because this is not about me. It is not about any of the million and a half donors. Rather, it is about all of us. The thank you I want is Barack Obama, in the White House, keeping his promises. So I donated precisely because I don't get access based on my donation. And in an Obama administration, neither does Halliburton, or the drug lobby, or the $100,00 a pop Clinton "Hillraisers", or McCain's bundlers. Certainly, Obama has big donors in his past, but he has proven they need not be promised a thing -- as they are not central pieces in his fund raising. If he does move forward with voluntarily limiting donations to less than the federal cap, it will seal the deal.

Democrats are often criticized for not discussing their faith, and I should point out that this concept of anonymous giving forms a central part of mine. In Judaism, "Tzedakah", translated as a form of "justice", refers "to the religious obligation to perform charity, and philanthropic acts, which Judaism emphasises are important parts of living a spiritual life; Jewish tradition argues that the second highest form of tzedakah is to anonymously give donations to unknown recipients. Unlike philanthropy, which is completely voluntary, tzedakah is seen as a religious obligation." While it is preferable to give to an unknown recipient to avoid shaming them, when the identity of the recipient is important, Tzedakah teaches that we should still give anonymously, noting that "the greatest sages used to walk about in secret and put coins in the doors of the poor."

The wisdom of anonymous Tzedakah is obvious: One should not give for their own glory or private benefit.

Putting the lessons of the Obama campaign finance revolution together with the lessons of Tzedakah, it becomes obvious how campaign finance reform must play out in order to truly isolate politicians from the undue influence of the money they need to run their campaigns.

My Obama-Tzedakah proposal is this:

(1) Precisely flip the reporting rule. Currently, donors giving $200 and over must be identified in campaign finance reporting. Instead, only donors giving under $200 should be permitted to be identified.
(2) Require that campaigns be prohibited from directly accepting donations over $200.
(3) Allow donations over $200, but require that such donations be made to the FEC which collects the money and forwards it, together with many other donations, in one check to the candidate, while being required by law to keep secret the identity of the donor and the candidate to which they donated. The donor is not permitted to get any kind of receipt or canceled check that identifies the identity of the recipient. For online donations, the donor would be required to be donate through a site operated by the FEC.
(4) The FEC would report aggregate statistics, but not the amounts of individual donations (i.e. "in March 2012, Obama's reelection bid received $28,888,221 from 90,000 donors"). Preferably, the banks and FEC would not be permitted even to identify the fact that somebody had donated to federal campaigns, or to provide any receipt or canceled check for such a donation. If such a rule is not functional, the FEC should make that information available to the public, but only in an aggregate way, giving a single number for each donor's total contributions to all federal candidates combined.
(5) Candidates would be allowed to oversee the process using attorneys or accountants who are prohibited from reporting back to the campaign any specific donor identification information.
(6) To provide a disincentive to end-run the process through a 527 or a structure like McCain's Victory '08 Fund, the maximum donation cap should be significantly increased.

What do we get from this?

First, counter-intuitively, we get more transparency. While we lose the ability to see who gave to which candidate, we get an iron-clad list of everybody who was promised a quid-pro-quo: Nobody. Because a candidate cannot verify that a contribution went to them, even a donor who showed a canceled check for a huge sum could not prove to the candidate that it was made to that candidate, or even in that race.

Second, the free speech arguments that could ultimately fell existing campaign finance laws would be eliminated. The only remaining argument is that it is a free speech right to hand a big pile of money directly to a candidate -- hardly a convincing concept.

Finally, the benefits of the Obama model are immediately visited on the old fund raising models as well. While a person who truly believes in a candidate will still make a big donation, few people will believe they can donate their way to a federal judge or ambassador appointment regardless of the size of their anonymous donation or the number of anonymous donations they claim to have bundled.