Let's Reform Our Elections with Democracy Vouchers

by Brian Schrader

We should unleash the power of small-donor dollars to fight big money in politics


If you've been following politics for any significant period of time, then you've heard political candidates complain about the problem of "big money" in politics. Big money refers to the power of wealthy donors and their often large scale donations to candidates that, in return, protect their interests. Traditionally, accepting large donations from the wealthy was the only practical way to get elected, since large-scale crowd-funding was impossible or at least very difficult.

The rise of internet-enabled crowdfunding in political campaigns has been a transformative force in modern politics. Now famous candidates like Bernie Sanders and Elizabeth Warren, as well as scores of state and local candidates, use platforms like ActBlue or their own websites to solicit funds from everyday Americans to fund their campaigns. Free from the burdens of big-time donors, these candidates are arguably more free to take stances that would make them unpopular in elite circles and could cost them the big-time donor dollars they'd need to run their campaigns and get elected.

This new slate of crowdfunding options are great, and they have certainly had some effect in tamping down the power of big donors in the political system, but these crowdfunded systems typically cater to those who are already invested in a particular candidate and who have the disposable income to make repeating donations. It goes without saying that the people who are often in the most dire need of representation in politics often do not have the means to donate to political campaigns and so, even in this new age of crowdfunded campaigns, are still under-represented in the political discourse.

Why is Big Money so Big?

Before we dive into how we can fix the problems of big money in politics, we need to understand why big money is a problem in the first place.

In 2010, the U.S. Supreme Court handed down the fateful Citizen's United vs. FEC decision which effectively bars any limitations on the size of donations to political campaigns.

In a majority opinion joined by four other justices, Associate Justice Anthony Kennedy held that the Bipartisan Campaign Reform Act's prohibition of all independent expenditures by corporations and unions violated the First Amendment's protection of free speech.
- Citizens United v. FEC, Wikipedia

This decision held that spending money was largely protected speech, and the result has been that corporations and unions are effectively free to spend unlimited money on elections. This decision has been fueling the rise of Super PACs in campaign finance and further tilting the scales towards the wealthy and powerful.

As long as the Citizen's United decision stands corporations and the wealthy will be allowed to flood the political system with as much money as they wish, and no real limits can be enacted to stop them. Because of this, the impact of everyday Americans—and especially Californians—is very limited. Most individuals do not have the resources to frequently make large donations to political causes or candidates and so their voices are rarely heard in the halls of power.

That's where democracy vouchers come into the mix.

Redeem for Democracy

Democracy vouchers are an idea that's been floating around the political-wonk class for a while. The basic idea is that, during each election year, every registered voter would receive a set of vouchers they can use to donate to a political campaign of their choice. Public funds would be made available, vouchers would be accepted, and funds would be doled out to campaigns as long as they last. In practice, these vouchers have the ability to further offset the power of big money in politics since everyday voters are essentially given the ability to donate at no cost to them.

Our friends to the north in Seattle were the first in the nation to enact such a program, and they've had a pretty good time with it. Each election Seattle sets aside a few million dollars for the program, then each registered voter receives four $25 vouchers that they can give to city campaigns of their choice, and campaigns can redeem the vouchers for cash while funds last. The program is funded by a slight property tax increase on city residents. Voters can split those vouchers among candidates as they like, or pool them all together to give a single candidate a $100 one-time donation. Money from the vouchers can be spent on campaign-related expenses as explained on the city's website.

The donations are limited to city elections, so their effects on the larger political environment at the state-level are unknown.

Such a program—if implemented in a similar form in California—could work to offset the power of the state's incredibly wealthy donor-class that often have disproportionate influence in the political conversation.

The cost of running for office is getting steeper and big money is part of the reason for this. As campaigns race to attract the big corporate dollars, even a sizable donation from a dedicated and passionate constituent is unlikely to tip the scales in any meaningful way or attract much attention from any candidate. Democracy vouchers effectively inject money into the political apparatus to offset the influence of big donors and shift candidates' attention towards the people they represent.

The good news is that such a program isn't even that expensive to run. Since the vouchers are only redeemable while funds last, the state could set the funding limit in advance and limit the costs to the taxpayer while still working to strengthen the people's say in their government.

Cost-Benefit Analysis

The costs of a California democracy voucher program are a little tricky to estimate, since the state can effectively set the funding limit wherever it pleases. Ideally, such a program should be funded to allow for a large population who want to donate a political campaign to do so, while still constraining potential costs. This ideal case gives us the approximate upper-bound on the costs that such a state-wide program could incur. So, for the sake of discussion, let's run the numbers on this ideal case and see what the costs would be.

In Seattle, roughly 3.3% of vouchers that were mailed out were used, so if we assume that those numbers would be similar in California, we can estimate that California would need to allocate roughly $73 million to meet the demand. Even tacking on an extra $10-12 million for advertising, printing, and administrative costs, the program would likely cost around $85 million per election, or about $42 million per year. That equates to ~0.029% of the state's 2020 budget and is a small cost for strengthening democracy.

Democracy Voucher Program Costs

Democracy voucher program cost breakdown by generosity & redemption rates. Full analysis →

As you can see from the scenarios we've tested above, even if we assume that Californians are over 20% more likely to redeem their vouchers than Seattleites, the costs are still just over 0.03% of the state's annual budget. This means that the costs for a democracy voucher program only change significantly if we decide to make the program more or less generous. Look at how the size of bars of a given color don't change much from left to right (i.e. with higher redemption rates). Bars of the same color are roughly the same size whereas the only real difference in cost is which color (i.e. which funding level) you choose.

Through another lens, let's take a quick look at the costs of a democracy voucher program to the average taxpayer. Luckily, I don't need to do the math since Seattle's city website already did it for us.

The Democracy Voucher Program costs the average homeowner about $8.00 per year.
- About the Program, seattle.gov

We can probably assume that the costs in California would be similar if the program were similarly generous. Seattle's program is paid for by a small property tax increase, but that's unlikely to be the case in California. We'd probably rely on sales or income tax increases to make up the gap.

These estimates show just how small the costs for such a program would be. Raising taxes in California is difficult and property tax increases are even more challenging, but however the program is funded, the costs to individuals would be incidental, and the benefits to the political apparatus in California would be immense.

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Slack in the Line

One important downside to using democracy vouchers to offset the influence of big money is that it's not clear just how much big money is out there and how much the voucher program would affect its flow. We could be tying to dam up a river with pebbles or we could end up building a dam far larger than necessary. Importantly, until the program is enacted, and an election or two pass, we can't really know which scenario we've entered.

Unlike a river, the flow of big money isn't fixed; it changes in response to our efforts to stop it. Donors spend money to influence politics, but they only donate as much as they feel they need to in order to achieve the effect they want. Many could donate more, but there's no reason to. Their influence is already sufficient.

Think of a rope held between donors and the political system. If donors can afford to spend more then the rope is slack. By infusing money into the political system, democracy vouchers force donors to spend more to achieve the same result. However, it's possible that the amount of money added by the voucher program would be too small. This would simply cause donors to spend a bit more, pulling the rope tighter, but leaving their influence on the political system largely unchanged.

Puppies pulling a rope tight

Ideally, the voucher program would cause wealthy donors to pull the rope as tight as possible, forcing them to lessen the number of donations or abandon the prospect entirely because of the expense involved.

In the first case, our democracy voucher program would be significantly less effective than we'd like, but it would still raise the costs for wealthy donors looking to influence politics. This could reduce the impact of smaller wealthy donors, but it would probably only concentrate the power of really big money. In the second case, the program has effectively overpowered the influence of donors and allowed the public to regain their influence in government.

Any additional money injected into the political apparatus would simply be wasted and have no effect.

While funding a democracy voucher program at almost any level would certainly have a significant effect on the incentives of the political system, adequately funding the program to completely offset the power of big money would probably be very expensive. The funding for a voucher program would ultimately depend on whether the drafters of the bill want to limit the impact of wealth in politics or effectively eliminate it. In the latter case, publicly funded elections would be significantly cheaper, but the Supreme Court's Citizens' United decision has ruled out that option for now.

For the time being, we should seek to limit the effects of wealth in politics as much as we feasibly can.

Small Donors Unite!

Big donor politics will be a significant player in the American political system for a while, but the power of big donations can be reduced to a manageable level. Democracy vouchers are a simple way to give everyday voters a more prominent voice in the political system and they're an effective way to limit the influence of wealthy and elite donors.

California is home to some of the largest corporations and the wealthiest people in the world, and both groups consistently use their wealth and influence to shape the political reality of our state. Democracy vouchers are an effective check on this power, and they're an elegant, practical, and relatively inexpensive compromise between our current, flawed system and publicly-funded elections.

In the absence of real limits on the size and scale of political donations, the only remedy is to level the playing field by flooding the political system with small money. Democracy vouchers do just that.

tl;dr Democracy vouchers are good. We should do them.


Filed under: proposal