Keeping Politics Safe for the Rich

New York Times editorial "Keeping Politics Safe for the Rich" (June 8th, 2010) misunderstands the idea of an implicit tax when writing about free speech. Specifically, it describes the idea of an implicit tax on political expression causing a "chilling" of freedom of speech to be "pretzel logic." The #1 standing of the Times in Corrections provides good evidence of familiarity with such logic.

The candidates argued that the matching funds “chilled” their freedom of speech because they were afraid to spend more than the limit that triggered the funds. A lower court agreed with that pretzel logic, but last month a panel of the United States Court of Appeals for the Ninth Circuit disagreed. It said the speech of the plaintiffs had not been chilled. “The essence of this claim is not that they have been silenced,” the panel said, “but that the speech of their opponents has been enabled.”

The actual causality of political victories and campaign spending is difficult for Corrections to discern (we expect, if political donations are a form of bribery or iterative bribery/wages, that the expected winner should be given more money, purely as a fact that he is expected to win, not because the money helps him win). However, even if we forego that qualm, the impact on political spending should look exactly like a tax.

The idea of the law is as follows.  Individuals can either be given a lump sum of money if they agree to forego large private campaign donations, or raise money but not receive the grant.  However, if an individual who raises their own money spends more than the lump sum amount the other individual has been given, then the lump-sum candidate gets some matching funds.  Corrections depicts this situation graphically below (click to enlarge): it is a graph of political spending ad effectiveness of that political spending for a donation-accepting individual.  As we see, our donation-accepting individual has an increasing effectiveness as he spends more money.  However, upon meeting the threshold, the effectiveness of his political spending declines, as his opponent is gaining matching funds to counter the impact of his commercials.

Our point, however, is that the same graph of effectiveness could have been produced by a simple system of taxation--say, 0% from $0 to the threshold, and 90% thereafter.  This is depicted graphically below (click to enlarge).  In this case, we would have to raise ten times as much post-threshold to have the same impact as we had before crossing the threshold--the response to individuals of Arizona's campaign finance system can be produced just as easily by an explicit tax on donations--surely a "chilling" of political speech and hardly "pretzel logic."