Financial wilding led to our economic collapse. Use of exotic “innovations” — like derivatives and credit default swaps — exploded. Regulators were paralyzed while huge bets were made in the shadows. Markets, we were assured, self-regulate. Congress blocked reform. Big money rushed in, seeking ever higher returns. Laws legitimized shadow financial activities. Speculation careened out of control.
A similar wilding now threatens our democracy as out-of-control big money floods our elections. These exotic derivatives are the super PACs and related operations, fueled by cartloads of secret money. The Federal Election Commission is toothless and paralyzed. Congress blocks new regulations. The Supreme Court opened the floodgates with Citizens United, ruling that corporations have the right to spend unlimited sums in “independent expenditure” campaigns. The marketplace of ideas, we are assured, can regulate itself.
This financial wilding is likely to escalate until it thoroughly corrupts our democracy.
Consider this year’s presidential elections. Each Republican presidential contender essentially mocks the law, with support from a shadow campaign team in the form of an “independent” super PAC, usually run by a former aide or relative. Legally, these groups can raise essentially unlimited secret sums from individuals and corporations.
The result is increasingly poisonous politics. The PACs take on the dirty work, so the candidate doesn’t have to take responsibility. Almost all the super PACs’ ads and mailings are negative — often burlesques on character or distortions of gotcha sound bites. Voters complain about negative ads, but they have proved to be lethal.
Just as the explosion of mortgage-backed securities undermined traditional lending standards, the explosion of secret money in super PACs degrades our campaigns. The candidates take the high road, while the races are decided in the back alleys.
Worse, just as homeowners’ mortgages were transmuted into the speculative gambits of big banks and millionaire investors, elections are increasingly a dirt ball fight among the rich and corporations. But if homeowners were largely victims of Wall Street excesses, politicians are complicit. Favor with Wall Street barons or corporate lobbies can mean millions in contributions. Disfavor can unleash millions in independent expenditures on negative ads.
The Republican primaries demonstrate the foul fruit of this process. Mitt Romney’s super PAC, Restore Our Future — all these groups have interchangeable names — has spent $11.8 million through Feb. 5, primarily to carpet-bomb any rival who seems to be gaining traction — 100 percent of its ad buys have been negative .
Savaged by such ads in Iowa, Newt Gingrich revived his campaign when a billionaire Las Vegas casino mogul and his wife announced they would contribute $10 million to the former speaker’s super PAC, Winning our Future. So Gingrich could “go negative” on Romney in South Carolina.
Romney then went nuclear in Florida. Together, his campaign and super PAC spent a staggering $15.4 million on relentlessly negative TV and radio ads. An estimated 92 percent of all Florida ads were negative.
But the primaries are only prelims before the real slugging begins. The amount spent on the 2012 national elections may reach a stunning $8 billion.
POLITICO reported that the billionaire Koch brothers alone have announced their intention to spend more than $200 million on elections this fall and “potentially much more” through Americans for Prosperity and other fronts. GOP leaders Karl Rove and Ed Gillespie promise to raise $240 million for their American Crossroads operations. They already have spent $11.5 million, and 100 percent of their broadcast ads have been negative, largely targeting President Barack Obama and promising Democratic candidates like Elizabeth Warren in Massachusetts.
Candidates can hardly afford not to play. Obama, whose campaign has raised more money from small and large contributions than the official campaigns of all GOP contenders combined, just conceded that he too has to compete in the shadows. He gave “reluctant blessing” to his donors to put big money in his (supposedly independent) super PAC, Priorities USA.
He essentially acknowledged that his reelection might be endangered unless he taps big donors for big bucks. The head of Priorities USA, Bill Burton, explained this.
“These are not the rules that we would have if we were able to just make them from whole cloth right now,” Burton said. “But it’s the rules that we have, and we are going into an election where Karl Rove and the Koch brothers and others have pledged millions of dollars against Obama.”
This is a haunting echo of the hapless Citibank president, Chuck Prince, who explained that he had to lower lending standards to compete — even as the housing market was collapsing. “As long as the music is playing, “ Price said, “you’ve got to get up and dance.”
As Leonard Lessig details in “Republic Lost,” the escalating big money — supercharged by the ability of corporations to play — inevitably corrupts politics. This not only helps turn our campaigns into spitball fights, it compromises even the most honorable of legislators.
The inevitable result is a system that increasingly serves the few and not the many. Romney pays a 14 percent tax rate, largely because of a ridiculous “carried interest” exemption that Bain Capital and allies have lobbied successfully to defend. Wall Street is a leading donor to candidates in both parties, with the lobbyists of big banks in highly influential roles.
These banks that blew up the economy came out of the crisis bigger and more concentrated than ever, while we still await an aggressive investigation and prosecution of the trampling of the laws that contributed to fleecing investors and homeowners alike.
Over time, the flood of secret money will most likely lead to the erosion of trust in our democracy. After the Citizens United decision, 79 percent of respondents believed that members of Congress are “controlled” by those who finance their campaigns, according to a survey for Common Cause and other groups.
This election is expected to bring a tsunami of negative ads, with billions likely to be expended by the nominally independent super PACs, much of it from undisclosed sources. Candidates and their supposedly independent allies will scramble to raise big bucks from corporations and the wealthiest Americans.
But their excesses only serve to undermine faith in our democracy. Just as the excesses of Wall Street undermined faith in our economy.