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In California, Campaign Finance Meets the Un-McCain

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National Journal, March 4, 2000

Last August, I got a phone call from the man who, on Tuesday, may change California politics. He introduced himself as Ron Unz and wondered: Could he come over and tell me about Proposition 25, his upcoming California campaign finance reform initiative? Sure. By then, I had heard of Unz. I knew he is a guy with ideas and passion and money, enough money to put his ideas and passions on the agenda of America's largest state.

Unz made himself a multimillionaire as a Silicon Valley software entrepreneur (his company is called Wall Street Analytics); then he set about changing the world. In 1998, he conceived and successfully backed California's Prop. 227, "English for the Children," which limits bilingual education. The result is that thousands more children are learning English, and test scores in California are going up.

In the course of that campaign, however, he suffered a rude awakening. California politics is awash in money. So is politics everywhere, of course, but California is one of only six states that place no limits on campaign contributions. Candidates can accept donations in the six or even seven figures, and do. Special interests can run advertisements without saying who they really are. Politicians and groups can buy paid endorsements and pass them off as the real thing.

All of that, or some of that, Unz swore to change, in what became his second major initiative campaign. When Californians vote in their primaries on March 7, they will notice, if they squint, Prop. 25 nestled on the ballot.

Unz is a slightly built, intense man of 38 with unruly dark hair and piercing eyes that seem to look past his immediate surroundings to larger issues. He is passionate about public policy, talks a mile a minute, and is very bright. His passion finds expression in his checkbook: He has spent close to $1 million of his own money on Prop. 25. Most of the rest of the backing is coming from—spot the pattern?—a high-tech tycoon named Max Palevsky, who donated another cool million.

As for his intelligence, Unz reminded me of another successful entrepreneur who once found his way into the reform business. Ira Magaziner was a brilliant management consultant who believed that he could rationalize the tangled health care sector if he carefully analyzed the problems and engineered mechanisms to solve them. The result was Bill Clinton's 1,342-page health care reform plan. The rest of that story you already know.

Unz's campaign reform plan, though well short of 1,342 pages, will never be accused of simplicity. In February, the San Francisco Examiner snickered that Prop. 25 is "like the instruction book that comes with VCRs. Nobody but the authors understand it." The initiative is a dense composite of provisions. Are big-money contributions rampant? Then limit contributions to $5,000 for statewide candidates, $3,000 for others. Are donors secretive? Then require immediate Internet disclosure of all contributions of $1,000 or more. Are paid endorsements being passed off as the real thing? Then require that all such payments be disclosed along with the endorsement. Is political spending going through the roof? Then provide publicly financed TV credits and mailings for candidates who agree to accept spending limits. Are candidates and groups relying on stealthy negative ads and underhanded "push polls," while claiming to campaign clean? Then require that all ads and push polls be posted on the World Wide Web, where the whole world can see them.

In at least one respect, however, Unz is no Ira Magaziner. He makes modest claims for what he is doing. President Clinton's health reformers promised better health benefits for everyone forever, at lower cost and with less regulation. Unz attempts to pick out the most egregious of California's campaign abuses, deal with them narrowly and specifically, and let the loose ends take care of themselves.

"We're not claiming that our initiative will solve all the problems in the world—we're not claiming it will cause gun control to either be defeated or passed," says Unz. He describes Prop. 25 as a set of speed bumps. "It doesn't prevent campaigns from using abusive tactics, but it makes those tactics much less cost-effective."

Pretty much the whole world opposes Prop. 25. Unions and business interests oppose it because they like making fat contributions. Politicians and parties—Democrats and Republicans alike—oppose it because they like receiving fat contributions. Most of the state's campaign finance reform groups oppose it because they think it is too weak. After all, those $5,000 contribution limits are way too high, the public financing is too stingy, the "soft money" loophole isn't plugged; why, this thing is mere tinkering, not real reform! "I started talking to these reform groups," says Unz, "and I found out they're all nuts. They're all completely nuts!"

With a couple of exceptions. California's Common Cause is supporting him. And so is Sen. John McCain. In August, when the Arizona Republican was barely a blip on the presidential radar, he made a lonely stop in Sacramento to endorse the Unz plan, calling it "a good first step" despite his disapproval of its public finance element.

Understandably, then, Unz was surprised and not quite convinced when I suggested that his approach makes him more McCain's opposite than his equivalent. But see for yourself. Point your browser to www.itsyourcountry.com. This is McCain's campaign reform Web site. Your eyes are immediately smacked with the slogan "It's _your_ country. Take it back from the special interests!" Followed by "Special Interests Own Washington. Together We Can Stop the Outrage." To the right, notice the featured "Daily Outrage." The site admirably reflects the high dudgeon that has become McCain's signature on campaign finance reform.

It also reflects McCain's obsession—not too strong a word—with soft money (unlimited donations to political parties). "Until we abolish soft money," says McCain, "Americans will never have a government that works as hard for them as it does for the special interests." In case you miss the point, that quotation appears beneath a picture of the White House with a "For Sale" sign plastered over it. Says McCain: "Banning soft money will end the common practice of buying access to high government officials and will make your voice more important to our leaders." Or try this: "We are all shortchanged by soft money. All of our ideals are sacrificed. We are all corrupted."

OK, raise your hand if you think banning soft money will (a) drive the big money out of politics, (b) significantly reduce politicians' responsiveness to special interests, or (c) restore our sacrificed ideals. If you kept your hand down, you may be aware that previous reforms made similar promises but have done nothing, zero, to reverse or even slow the flood of private money into politics. Instead, they have merely diverted money into shadowy and circuitous channels, of which soft money is but one.

Banning soft money might help a little or hurt a little. It all depends on what else is done. Restricting soft money while raising limits on "hard money"—money contributed directly to politicians for their campaigns—would bring more money back into the open, where it is accountable to voters. On the other hand, banning soft money while maintaining or tightening the present contribution limits—which is what most reformers want to do—would simply push the money farther underground.

Note that Unz does not try to ban soft money in California, because that wouldn't work. He does not try to restrict so-called "issue advertising," or try to limit tycoons' contributions to their own campaigns, because those steps are unconstitutional.

Both Unz and McCain make mistakes, but mistakes of opposite sorts. Unz thinks too much; McCain, too little. Unz, the problem-solving businessman, puts too much faith in the power of carefully crafted rules to cleanse politics. McCain, the former prisoner of war who sees life as an honor code, puts too much faith in the power of virtuous gestures and good intentions to cleanse politics.

Not all errors, however, are alike. The technocratic error gradually self-corrects by colliding with stubborn reality. It took decades, or centuries, for economic reformers to learn that successful regulation of the real economy needs to respect market forces and shun "commanding heights" aspirations; Unz's modest claims and targeted approach reflect a growing realization that the same is true of the political economy. In campaign finance, there are only tradeoffs, not solutions.

The sentimentalist error, by contrast, rejects realism in favor of virtue and regards modesty as a sellout. In that respect, when John McCain wins, Ron Unz loses.