Congress Shall Make No Law...
2:08 PM
Politicians to Political Entrepreneurs: Keep Out!

In the marketplace for goods and services, entrepreneurs are engines for innovation and change. Likewise, in the political arena, political entrepreneurs bring new ideas and voices to public debate and provide outside competition that keeps the political establishment on its toes.


As part of the Institute for Justice’s new Citizen Speech Campaign, we released a report by campaign finance expert Jeffrey Milyo that explains the value of political entrepreneurs to the vibrancy of American democracy—and shows how campaign finance laws tell them to “keep out.”


Milyo points to the civil rights movement of the 1960s and today’s Tea Party movement as classic examples of political entrepreneurs challenging the status quo. IJ’s Robert Frommer pointed to another example when he highlighted the growth of “SpeechNow Groups” following the model created by political entrepreneur David Keating, and yet another in a group of Florida citizens who want to speak up about a constitutional amendment on the ballot.


Yet campaign finance laws in all 50 states erect barriers to entry for such political entrepreneurs, just as occupational licensing laws keep upstarts from competing with established interests in the marketplace.


Keating overcame one type of barrier—arbitrary contribution limits on independent groups that speak about candidates—with the help of IJ and the Center for Competitive Politics. But despite that federal court victory, similar laws remain on the books in 22 states.


Milyo shows how contribution limits impede political entrepreneurs. First, they make it harder for new groups to raise the start-up funds that are critical to getting off the ground. Political entrepreneurs typically need a political patron or two to start a new group, people willing to take a risk and put in a lot of seed funding, but contribution limits make that impossible. To see the value of large contributions to new groups, check out this graph from Milyo’s report.


Nearly all of the groups new to the political scene in the 2004 presidential election relied on very large average contributions, especially compared to older groups that already had a well-established base from which to raise funds. If the new groups had had to abide by federal contribution limits of $5,000 per donor, it is hard to imagine they could have ever formed.


Second, contribution limits reduce the resources available for political advocacy. This graph makes that clear.


Milyo estimates that if four groups in the 2004 election were not subject to contribution limits, they might have had dramatically more money to spend on their speech.


Finally, in all 50 states, independent groups that speak out about candidates are treated like political action committees, as are groups that speak out about ballot issues in the 24 states that permit them. This means citizen groups, in order to speak, must register with the state, open a separate bank account, and complete a host of complicated forms tracking just about everything they do—all under threat of fines and other penalties for mistakes.


Registering with and reporting to the government to speak about politics is no small task. In earlier research, Milyo asked 255 people to fill out real-life forms for a small ballot issue committee. No one did so correctly. The average score was a miserable 41 percent correct.


“These regulations raise the costs of citizen engagement and restrict the flow of resources to independent citizen groups,” concludes Milyo. “In fact, these regulations are so burdensome, it is apparent they are intended to deter political entrepreneurship.”


Simply put, the message from the political establishment to would-be political entrepreneurs could not be clearer: Keep out!