October 19, 2007

The Big, Bad Bundlers

Hillary Clinton's contributors made headlines again at the Los Angeles Times, which helped break the Norman Hsu scandal into the national media. Their investigation of Hillary's fundraising records show a lot of dishwashers and waiters sending hundreds and thousands of dollars into her campaign's accounts. The Times also can't account for a large number of these donors at their listed addresses, calling their existence and legitimacy into question (via Memeorandum):

Dishwashers, waiters and others whose jobs and dilapidated home addresses seem to make them unpromising targets for political fundraisers are pouring $1,000 and $2,000 contributions into Clinton's campaign treasury. In April, a single fundraiser in an area long known for its gritty urban poverty yielded a whopping $380,000. When Sen. John F. Kerry (D-Mass.) ran for president in 2004, he received $24,000 from Chinatown.

At this point in the presidential campaign cycle, Clinton has raised more money than any candidate in history. Those dishwashers, waiters and street stall hawkers are part of the reason. And Clinton's success in gathering money from Chinatown's least-affluent residents stems from a two-pronged strategy: mutually beneficial alliances with powerful groups, and appeals to the hopes and dreams of people now consigned to the margins. ...

The Times examined the cases of more than 150 donors who provided checks to Clinton after fundraising events geared to the Chinese community. One-third of those donors could not be found using property, telephone or business records. Most have not registered to vote, according to public records.

And several dozen were described in financial reports as holding jobs -- including dishwasher, server or chef -- that would normally make it difficult to donate amounts ranging from $500 to the legal maximum of $2,300 per election.

Of 74 residents of New York's Chinatown, Flushing, the Bronx or Brooklyn that The Times called or visited, only 24 could be reached for comment.

Plenty will be said about Hillary Clinton's campaign team and its lack of ethics in amassing its fortune, and should be. The connections to the Asian immigrant communities bear an unsettling resemblance to the 1996 fundraising scandal that saw the Chinese flood the zone with improper contributions to the Democrats. These contributions, along with those provided by Norman Hsu, should get close scrutiny by federal election officials and the FBI.

This points to a larger problem than Hillary, however. The practice of "bundling" comes from the limitations of the campaign finance reform laws that we have put onto the books since Watergate. In the interests of ending checkbook politics, we limited the amount of money any one person could donate directly to any one candidate. That supposedly would have ended the influence of the rich on elections.

That hasn't been the experience. It has resulted in an explosion of bad consequences instead. First the money flowed to the political parties as "soft money". When Congress stopped that with the BCRA, the money then went into 527s and similar tax-exempt organizations. Each of those steps removed accountability for both the money and the advertising it funded from the candidates. It made possible all sorts of smear campaigns that candidates could easily disavow.

Bundling has turned into another bad consequence. Instead of having the wealthy donate directly in amounts they see fit, the candidates now have to use them as "bundlers" who squeeze donations from their friends, employees, and hangers-on. In some cases, that doesn't generate enough cash -- and so some of these bundlers simply use the contributors as a money-laundering device for their own cash, which allows them to buy influence anyway.

Have we removed checkbooks from politics? Or have we instead crafted a Byzantine structure that would qualify for RICO prosecution under any other circumstances? The bundling scandals show the folly of our campaign-reform direction and show that a free market with enforced disclosure rules would make campaigns more honest and accountable.


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