Campaign Financing

IT IS DEPRESSING THAT THE AMERICAN ELECTION has developed into charges and countercharges of corruption. Sen. Obama has been attacked for historic property deals. Sen. McCain has been attacked for his relations with a lobbyist. There are still ancient suspicions of the Rose Law Firm of Little Rock, Ark., in which Hillary Clinton was a partner when her husband was governor.

In the United States, the main problem of finance for politicians comes from the cost of elections. The 2008 presidential election will end up costing $1 trillion, perhaps more. Much of the money goes for political advertising, of which the more effective half is spent on attacking the competence or integrity of the other candidates. The American lobbying system involves the lobbyists — who have their hands out for political favors — raising money from their clients to pay to politicians to spend on these negative campaigns.

In Europe, the personal expenses of candidates or sitting members of European parliaments seem to be more of a problem. In Britain, a member of Parliament has been suspended for two weeks for paying his son out of parliamentary funds for research work he did not actually carry out. About a third of members of Parliament use parliamentary funds, intended for their political staff, to pay members of their families. This applies to all major parties, Labor, Conservative, or Liberal Democrat.

Even the speaker of the House of Commons has been accused of bad judgment, though not of breaking the law, for using air miles from official visits to pay for family travel and claiming his wife’s taxi journeys on official expenses.

There is another and graver scandal in the European Parliament, which has produced, but not published, a report on the claims for expenses of the European Parliament itself. This includes claims for first class flights when the cheapest airlines had, in fact, been used, but it also includes more serious matters in which downright fraud is alleged and the sums involved go up to five or six figures.

Naturally, politicians are reluctant to investigate their own, or their colleagues’, minor expenses fiddles. The judgment of a legitimate expense is usually left to the individual parliamentarian. No man should be a judge in his own case. Many politicians have given up well-paid jobs, or even highly rewarding partnerships in law firms or fund management. They know that they are out of pocket as a consequence of pursuing a public career. They may think that a somewhat inflated expenses claim is a way to redress part of their loss of income.

It is also true that young politicians often find it hard to finance their careers. Very often, the earnings of a husband or wife assist the first stages of a political career. A young married couple, perhaps with children, can afford to live on two incomes after one of them has won a seat in Parliament or Congress, but may find it difficult to live on a single income while the political partner is still a candidate.

In most countries, there are pressures to keep down the pay of politicians. In Britain, median pay of all workers is about £20,000 per year, and members of Parliament are paid about £60,000 per year, but enjoy additional staff and other expenses of over £100,000. If one compares members of Parliament with doctors in the National Health Service, the MPs seem underpaid. General practitioners are the professional basis of health care; they are paid £100,000 per year, sometimes more, sometimes less. That is £40,000 more than MPs.

There are measures that could remove some of the temptations that face even honest politicians. All election expenditure could be limited. If the nominees in the United States accept public funding, they will, apparently, be limited to $85 million each, a reasonable sum to spend on an election. Unfortunately, Barack Obama has raised more money than anyone else, more than Hillary Clinton, more than John McCain. He will be tempted to make use of his advantage, though that would make his statements on campaign expenditure seem hypocritical.

In Europe, the members of parliaments may need to be paid more, related to some acceptable standard of professional pay. Democracy is undermined when voters think that the politicians are on the take, and the present reliance on expenses to supplement income is a temptation for too many politicians who are, in Shakespeare’s phrase, “indifferent honest.”

Lord William Rees-Mogg
March 3, 2008

The Daily Reckoning