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Nobel winner: Cut student loan rates (USA Today)

Roosevelt Institute Chief Economist Joseph Stiglitz says he backs Elizabeth Warren's plan to let students borrow at the same discount rate as banks because student debt is holding back our economy, especially compared to countries that are actually doing something about it.

• Roosevelt Take: The Roosevelt Institute | Campus Network's policy report "A New Deal For Students" lays out concrete and innovative policy solutions from students to solve the student debt crisis.

Donors Urge Cuomo to Press for Public Financing of State Campaigns (NYT)

Thomas Kaplan talks to Roosevelt Institute Senior Fellow Ellen Chesler and others who feel public campaign financing is necessary to combat an unusual form of peer pressure -- the kind the wealthy exert on politicians. According to Chesler, it's a moral issue.

In one chart: we have a demand problem, not a skills problem (Working Economics)

Heidi Shierholz looks at the unemployment and underemployment rates of college graduates under 25, and concludes that when even the young and highly educated have trouble finding jobs, the problem is pretty simple: no one is hiring.

America's Scandalous Underfunding of Community Colleges (Slate)

Matt Yglesias uses data on school spending changes to illustrate just how bad things have gotten at community colleges. Even with tuition hikes, they haven't been able to increase spending, which means they're forced to reduce services to our neediest students.

Black Unemployment Is Still Shamefully High (The Atlantic)

Jordan Weissmann knows the jobs crisis isn't close to over in the black community, where unemployment is both high and long-term. But Congress sees a string of decent jobs reports and a booming stock market and convinces itself the recovery is color-blind.

Food Stamp Cuts Backed By Farm Subsidy Beneficiaries (HuffPo)

Arthur Delaney points out the hypocrisy of lawmakers who receive significant subsidies for their family farms but feel the government doesn't have an obligation to feed the poor through SNAP. Anti-poverty programs: too costly. Photo op on a tractor: priceless.

Japan the Model (NYT)

Paul Krugman makes the case for Japan's current intense political efforts to turn around its economy, noting that no one else in the developed world is attempting stimulus on this level, and while it's too early to be certain, the signs look good that it's working.

New on Next New Deal

Michael Kinsley Gets It Wrong On "Austerians"

According to Mike Konzcal, austerians are setting eliminating the deficit as the only priority, while the rest of us see a bigger picture. Kinsley and other austerians are in a fantasy world where everyone saves, no one spends, and the economy improves without stimulus.

What the IRS scandal really shows us is that it's getting harder and harder to draw a line between electioneering and political speech.

As the report of the IRS Inspector General shows, the agency’s scrutiny of conservative groups applying for non-profit status was, more than anything, a clumsy response to a task the IRS is ill-equipped to carry out – monitoring an accidental corner of campaign finance law, a corner that was relatively quiet until about 2010.

That corner is the 501(c)(4) tax-exempt organization, belonging to what are sometimes called “social welfare” groups, which enjoy the triple privilege of tax exemption (though not for their donors), freedom to engage in some limited election activity, and, unlike other political committees (PACs, SuperPACs, parties, etc.), freedom from any requirement to disclose information about donors or spending. The use of (c)(4)s as campaign vehicles didn’t originate with the Citizens United decision in 2010 (Citizens United, the organization that brought the case, was already a (c)(4)), but the decision seems to have created a sense that the rules had changed, and even small groups – especially, apparently, local Tea Party organizations -- rushed to create (c)(4)s.

501(c)(4)s are not prohibited from engaging in political speech of most kinds. They are free to be “biased” without jeopardizing their tax exemption. They can advocate for or against legislation, they can lobby the government or criticize it. They don’t have to make any effort to be “nonpartisan” – for example, they can support a proposal that is only supported by members of one party, or directly advise only members of one party. And they can engage in some activity directly intended to influence the outcome of an election, as long as that doesn’t constitute the organization’s primary purpose.

There’s some confusion about the definition of “primary purpose,” discussed in great depth elsewhere, but what the IRS was trying to do was to identify organizations that seemed more likely to be heavily involved in electoral activity. Since the organizations were new, there was no way to look at their actual activities to see whether they were mostly electoral. So the agency had to rely on clues in the applications, like names and telltale phrases. If organizations had words like “Democrat” or “Republican” in their titles, for example, it would be reasonable to look more closely at their election activities, or possible future activities, than an organization that called, for example, “Save the Turtles.” I’m told that organizations with the names of political parties do receive extra scrutiny, even if in some cases, like “Students for a Democratic Society,” the word might mean something unrelated to the name of the party. That’s what the closer scrutiny would find out.

“Tea Party” in 2009 and 2010 was unquestionably an election category – there were “Tea Party” candidates and there was a “Tea Party Caucus” in Congress. It was not unreasonable for the IRS to use that phrase as an indicator that an organization using that phrase might be more inclined to engage in elections. There are comparable phrases on the left – for example, the term “Netroots” might suggest election involvement, as there were groups that identified and endorsed “Netroots” Democratic candidates in 2006 and later. Perhaps there were simply fewer organizations applying for (c)(4) status with that word, or they came in before the 2010 flood, or perhaps the IRS did screen on that word – we don’t know.

While there’s a perfectly plausible case for the IRS to use flag-words that indicate an election-focused movement, the actual questions asked of the groups do raise some concerns. If accurate, they did seem to go beyond evidence that these organizations were primarily engaged in elections, such as questions about lobbying and the role of family members.

But the reason these questions are complicated for the IRS, or for any agency assigned to police these complicated distinctions, is this: the line between robust political speech and influencing elections has become frightfully difficult to draw. Finding the right line around what is an “election” is really the fundamental problem in campaign finance. Almost everyone accepts the premise of “electoral exceptionalism” – elections are structured and require some particular rules, different from the rules that apply generally to political speech. The rule in most states that keeps campaigners 75 or 100 feet from the voting booths is the most obvious uncontroversial restriction on political speech, and there is broad acceptance of the idea that direct contributions to candidates and campaigns should be limited to prevent corruption and dependence. But what happens after that? What about outside spending that looks just like campaign spending? We used to think there was a clear distinction between “issue ads” that were expressing a view on an issue and “electioneering communications” that were the equivalent of campaign contributions. That distinction is actually what the Citizens United case was about -- the provision of the 2002 Bipartisan Campaign Reform Act that defined broadcast communications that mentioned a candidate within 30 days before a primary or 60 days before a general election as electioneering, which had to be financed with regulated funds.

That was an improvised line then, and it’s gotten even blurrier since. Part of the problem is partisanship – it used to be, for example, that there were environmentalists in both parties, supporters of social spending in both parties. A political ad about the environment was just that. But what’s an ad or brochure attacking “Obamacare” during the election year? Every Republican opposes it, and they’ve given it the name of the president. The Tea Party was based on issues, yes, but above all else, it was based on unflagging, total opposition to Obama and congressional Democrats.

To figure out where election advocacy begins and regular political speech ends in these cases was certainly more than mid-level IRS bureaucrats in Cincinnati could handle. But it’s not an easy challenge for anyone. All the noise about IRS “targeting” and about free speech and corporate speech is a distraction from a real challenge of money in elections: finding an agreement on the line around an “election,” and establishing some clear rules for what happens within that line in order to ensure that elections are fair and open and don’t lead to corruption. 

Mark Schmitt is a Senior Fellow at the Roosevelt Institute.

Audit invitation image via Shutterstock.com

Few on the left were happy with the Supreme Court's ruling in Citizens United that paved the way for so-called corporate personhood and opened the floodgates for money in politics. But taking that frustration and focusing it solely on a constitutional amendment is misguided, as Senior Fellow Mark Schmitt told Democracy Now. "I view it as a real distraction from some of the progress that we can make on money in politics," he explained. The amdendment is "sending the wrong signal to people and overlooking the tremendous progress that’s actually being made…on public financing that offsets the role of money from individuals and money from big corporations."

And there's a lot of hope in public financing for money in politics reformers. "We’re really undergoing a grand experiment of how much we can do with public financing of elections," Schmitt says. "I think we’re beginning to find that those systems that either provide a fixed amount of money to candidates who agree to forgo most private money or that match small contributions…those can really help candidates get to the point of being heard without turning to big money and get them enough that they’re not necessarily shot down by big money." Systems in New York City, Arizona, Minnesota, and Connecticut are all working, he said: "These systems are popular, they’re resilient, they withstand legal challenges, and that’s really where the energy ought to be focused at this point."

While he understands the appeal of a constitutional amendment -- "it’s easy to get people to sign a petition for it because it sounds very clear cut" -- the slow and perhaps even impossible progress on this front could send the signal that nothing can be done. "The message it sends is we can’t do anything until we have a constitutional amendment," he said, which is "exactly the same as saying we can't do anything."

Current limits on money in politics being tested across the country should give reformers hope.

Last Monday, the Supreme Court declined to hear a case challenging the century-old ban on direct corporate contributions to federal election campaigns. That counts as good news in a month that included the court’s earlier decision to hear a case that challenges the aggregate contribution limits in campaign finance and Obama strategist David Axelrod declaring that he would prefer a system of unlimited contributions with full disclosure. Almost all Republicans, the Supreme Court, and a powerful faction of the Democratic Party now fall somewhere on the spectrum between skepticism and vehement opposition to limits on contributions. The flimsy remains of the post-Watergate system of campaign finance regulation are on the verge of collapse.

Richard Hasen, law professor and proprietor of the indispensable Election Law Blog, argued in Slate last week that there was still hope for campaign finance reform – just not until Justice Antonin Scalia leaves the court. But there are other reforms currently being tested on the ground that hold out hope for changing the power of money in politics.

Hasen is right, of course, that until at least one of the five members of the Citizens United majority leaves the court by death or retirement and is replaced by a Democratic appointee, the best hope is that it will rule narrowly in cases such as the one involving aggregate contribution limits, rather than using them as opportunities, as they did in Citizens United, to punch holes in the law that are bigger than the cases themselves. He’s also right that expecting a constitutional amendment to overturn Citizens United (or do various other things, depending on the version) is far less likely to reopen the path toward a reasonable balance of the role of money in politics than a change in the membership of the court.

Hasen proposes that campaign finance reform advocates take the time now “to plan for the next Supreme Court.” We should use the indefinite waiting period to “think more about what a reasonable campaign finance regime would look like” and acknowledge that “conservatives are absolutely right that campaign finance laws can boost incumbents and stifle political competition.”

I agree with Hasen on all of that, even the last points, but I’d go even further: A reasonable campaign finance regime, one that doesn’t boost incumbents or stifle competition, could even be put in place with the existing Supreme Court. (The current Congress is another story.) The thinking he’s proposing is going on right now, and is even being tested, in systems based on the principle of “small-donor public financing.” These systems use some combination of matching funds, tax credits, vouchers, or generous public financing for candidates who show a base of small-donor support. They make it easier for candidates to run who don’t have big-donor support in order to enhance public participation and to ensure that elected officials aren’t entirely dependent on big donors or corporations, whether those donors are giving directly to campaigns or to outside groups.

The public financing systems in Arizona, Maine, and Connecticut, which have been resilient, strongly supported by the public, upheld in the courts, and used by almost as many Republicans as Democrats, fall into this category. So does the generous matching system in New York City that has the support of Governor Andrew Cuomo and a growing number of legislators, which can serve as a model for legislation elsewhere. So can Minnesota’s system, which is currently unfunded but which until a few years ago offered a quickly refundable tax credit for small contributions along with a match on the candidate side. All of these systems can be considered part of a broad experiment, and scholars are looking closely at them to see whether they change who runs for office, who donates, and ultimately whether the states’ political processes are more responsive to the public.

Legislation at the federal level has followed the small-donor model as well. Rep. John Sarbanes’ Grassroots Democracy Act, for example, draws on elements from several of the successful state programs, including a refundable tax credit for small donors along with a matching program for campaigns. The Fair Elections Act similarly incorporates a combination of small donor incentives with full public financing. A voucher that would allow every citizen to contribute in the same way that she votes, long advocated by Yale Law Professor Bruce Ackerman who calls them “Patriot Dollars,” and more recently by his Harvard counterpart Lawrence Lessig, is attracting renewed interest as well.

All these systems are voluntary, and alone they don’t go too far toward controlling big money, except for the candidates who participate. But they do make it possible for candidates to run who wouldn’t be able to otherwise or who want to run independently of big money. If they’re designed well, they can help candidates be in the position to get their messages out, and at a certain point it doesn’t matter all that much if the other candidate has a lot more money or more outside money spent on her behalf. (The Brennan Center put out an excellent report in 2011 on the many positive effects of small-donor public financing.)

The big question is whether these systems can work without limits on outside money. Without limits, candidates might hesitate to participate, voluntarily limiting their own spending, if they worry about being overwhelmed by big outside campaigns. It’s also unlikely that the public will support throwing good money into a cesspool of unregulated spending for very long. If that’s the case, these systems will need backup from the kind of limits that are under challenge in the recent cases or rejected by the court in Citizens United or other cases. But even after the court rejected a feature of the Arizona system that gave candidates more money if they were attacked by outside money, the system survived, and a majority of candidates for statewide office in 2010 and 2012 participated in the system.

The 2012 federal elections offered even more evidence that small-donor systems can work. It was not that “money doesn’t matter” (a view challenged by Roosevelt Institute Senior Fellow Thomas Ferguson and colleagues here), but rather that once a candidate for the House, Senate, or lower office has reached the threshold that allows him to be heard, extra money on the other side, whether from outside groups or the opposing campaign itself, matters less. For example, all the Senate candidates hit with outside spending by the Sheldon Adelson and Koch Brothers-funded groups won reelection. If small-donor public financing can get candidates to that threshold, then limits on outside spending won’t be as important in making the system work.

That’s not to say that it isn’t worth trying to strengthen the limits that remain and to build on the broader consensus that supports disclosure. In particular, the Internal Revenue Service should enforce the law governing 501(c)(4) non-profits, which are increasingly being used as vehicles for undisclosed and unlimited campaign spending, but which are not permitted to have influencing elections as their “primary activity.” The sheer number of mechanisms by which a donor can try to influence the outcome of an election has proliferated so far beyond the old standby of broadcast advertising that it will be impossible to chase it all down.

The next generation of campaign finance reform doesn’t have to be developed in a laboratory while waiting for Scalia or one of his colleagues to retire or to encounter a higher judge. It’s being designed, refined, tested, and improved as you read this in a half dozen states and municipalities. If it works, it will lead us to a system that will moderate the influence of economic inequality on democracy while enhancing competition and strengthening First Amendment rights of free expression. 

Mark Schmitt is a Senior Fellow at the Roosevelt Institute.