Introduction

Michael A. Walker

A LITTLE MORE THAN TWO years ago the federal government struck a Royal Commission to investigate all aspects of electoral reform. Our Senior Economist, Filip Palda, testified on the first day of hearings and asked the Commissioners to keep a simple principle in mind: whenever elected representatives rewrite the rules of the game, there is room for abuse. The most extreme example were the Communist countries, but democracies are not immune. Palda warned that in Canada, as well as in the U.S. and Europe, campaign spending rules were being rewritten to restrict the ability of challengers to compete.

Challengers need money in an election. Challengers do not have the incumbent advantage of government-paid office staff, mailings, and travel. They have a very brief opportunity to make themselves known, and for this they need to spend as much money as they can. Palda presented evidence that spending limits would hinder political competition, entrench incumbents and preserve the power of the established parties.

Palda was subsequently asked to write two research reports for the Commission. His work was abruptly discontinued after he concluded in early drafts that spending limits, especially limits on advocacy groups, could reduce the competitiveness of Canadian elections (he has since then published his results in a refereed journal).

The Commission's final report went beyond Palda's worst expectations. It is an unabashed plea to protect large parties and stifle free speech.

Unfortunately, neither the press, nor even the advocacy groups whom this legislation would muzzle, have reacted. Election regulation may appear dry and technical, but it is in fact a fundamental issue. Far more is at stake here than many realize. This bulletin puts the topic in perspective by summarizing sections of the Royal Commission's report and by explaining the dangers behind the recommendations.

Tilting the Playing Field: Comments on the Final Report of the Royal Commission for Electoral Reform and Party Financing

by Filip Palda
Senior Economist,
The Fraser Institute

Abstract

THE ROYAL COMMISSION ON Electoral Reform and Party Financing (the "Lortie" Commission) wants to rewrite election laws to strengthen the role of "parties as primary political institutions." The Commission calls for a limit of a $1,000 on what private citizens and groups can spend on political advertising during elections. Government should give millions of dollars to foundations run by the established parties to carry out "political education." A partisan "Canada Elections Commission" will have the power to write election regulation and to enforce it, in some cases by disbanding disobedient parties or by forbidding the rise of new parties. In the name of fairness and levelling the playing field, the Lortie Commission has spent $20 million dollars on a report that protects established parties and incumbent candidates.

Introduction

This monograph reviews the final report of the Royal Commission on Election Reform and Party Financing (the "Lortie Commission"). The report argues that Canadian parties are losing their place as Canada's primary political institutions. Voters do not believe in the integrity of the "political process," and single issue advocacy groups with too much money are distorting the issues and painting the parties in a bad light. Only strict limits on campaign spending and more government funding for the established parties can make elections fair and restore the public's confidence.

I argue here that spending limits and subsidies will stifle political competition and are anything but fair. Such measures will entrench large parties and favour the chances of incumbent candidates. This will reduce political competition and make government less responsive to the needs of voters.

Through the back door

The press showed little interest in the report because Canadians do not see how reform of arcane election procedures touches them. This lack of interest may give incumbents the leeway they need to change the law in their own interests. Two measures stand out as particularly self-serving:

1)    To restore power to the parties the Commission wants government to fund party foundations for "political education." Money would come in proportion to past votes and would not be available to parties which form between elections. If implemented now, the scheme would give most of $3 million annually to the three major parties.

2)    The Commission wants to put a $1,000 limit on what private citizens can spend to advertise their ideas during elections. It does not believe that the Charter of Rights' guarantee of "freedom of thought, belief, opinion and expression, including freedom of the press and other media communication" apply to elections. The $1,000 limit would mute the National Citizens' Coalition, Greenpeace, pro-life, pro-choice, and hundreds of other groups through which the public sends messages of discontent. The spending limits being proposed pretend to cover all election advertising but ignore the government resources incumbents use to promote themselves between election campaigns.

Here lies the unknown challenger

Party foundations and spending limits are part of a larger set of laws being proposed that would make it hard for new political movements to compete. Some of the laws would stop new movements in their tracks. Complicated party registration rules, and rules for reporting contributions put a heavy administrative burden on small parties. A partisan panel appointed by the House of Commons could disband parties who do not comply with these rules. It would be known as the "Canada Elections Commission" and would have the power to make election laws and then enforce them.

Other laws restrict campaigning. Incumbents generally do not benefit as much from campaign spending as challengers do. Incumbents use government resources to promote themselves between elections which reduces the extra popularity they can gain by spending money during elections. Challengers benefit more from exposure because they are less well known. Spending limits, short elections, and restrictions on the publication of polls hurt challengers by choking the flow of information to the public. Combining public subsidies with limits relieves incumbents of the threat from challengers and the headache of having to raise money.

Caution needed

The Commission warns that these measures will protect the public from false advertising. This argument should be used with caution because it can justify any form of intervention. The aim of my review is to put a note of caution on the Commission's enthusiastic chorus for intervention and to point out who stands to gain from intervention.

I do not believe there is an active conspiracy of incumbents plotting to hold on to power by devious means. But I think it is easy to believe a law is good if it is put forth in the name of public fairness and happens to be good for oneself. The Commission has served Parliamentarians an easy legislative porridge to digest. It has taken the unprecedented step of presenting its proposals in legalese, ready for the House of Commons. The following pages explain why Parliament should resist the temptation to pass this convenient package of laws.

Plan of this bulletin:

The Commission has published its recommendations in two volumes. I comment on chapters 5, 6 and 7 in Volume 1, and chapter 3 in Volume 2. These chapters set out the measures that most threaten political competition.

Part 1: In Praise of Older Parties

Abstract

THE REFORM PROPOSALS OF Chapter 5 tilt the playing field in favour of established parties. The Commission wants government to give $3 million a year to party foundations dedicated to "political education." The formula for giving out the money is based largely on performance in previous elections. This would build in the advantages of the established parties. New political parties would also be put in danger by a "Canada Election Commission." It would be appointed by the established parties and would have the power to disband any party of whose constitution it did not approve.

Introduction

Are parties Canada's "primary political organizations"? Are they the best interpreters of public opinion and do they need new laws to protect them from the "unbalanced attacks" of single issue groups? The Royal Commission believes so, and in Chapter 5, Volume 1 of its report it proposes that government give a minimum of $3 million yearly to build "party foundations." Each party's subsidy would depend on how well it did in the previous election. To restore the public's esteem, each party's constitution should reflect democratic principles. A band of political appointees known as "The Canada Election Commission" could decide that a party has violated these principles, and could dissolve the party. Greater government subsidies would go to parties that nominate a certain percentage of women. The chapter promotes the notion that parties are the sole legitimate representatives of Canadian public opinion and belittles the value of single issue groups.

I argue that these recommendations stem from naïve and uncritical admiration for the role of parties, and disrespect for the wishes of Canadian voters. The public is voicing its discontent increasingly through new parties and single issue groups. The established parties could use the proposed laws to mute and confuse this discontent. The most obvious danger is that parties would run year-round campaigns through their foundations. With funding based on past election success, foundations would give the established parties an advantage over new parties that have no political track record, and over single issue groups which have no government funding.

A less obvious but no less serious danger lies in obliging parties to write democratic principles into their constitutions and to submit to a long list of conditions for registration. The danger surfaces on reading that a "Canada Elections Commission" would have the power to punish or disband any party that is deemed to violate its own constitution or the terms of registration. This means that a group of career bureaucrats, appointed by the established parties, would be given the power to disband movements that have the public's support. The established parties could "stack" a Canada Election Commission with patronage appointees inclined to take the established party lines.

The suggestions contained in Chapter 5 go against political competition, stifle innovation in politics, and give the established parties an edge over new or emerging parties. Some suggestions tilt the playing field against new political movements by imposing administrative costs that are the same for large and small parties. Other suggestions are based on a narrow definition of election expenditures that excuses spending by party foundations from being counted under official limits. The chapter shows a strong pro-party centralizing bias and works on the principle that Canadians are too uninformed about their electoral system to impose any discipline on their representatives. I develop these criticisms in the sections that follow.

A just cause: setting the mood

The first 24 pages of the chapter repeat that parties are important to Canadian politics. No one would dispute this, nor the fact that motherhood is sacred. But the repetitions serve a purpose. They prepare the reader for the Commission proposal that parties need special government assistance. The message is that Canadians would prefer to work out their political problems through the parties. The parties have fallen in public esteem and are now vulnerable to the attacks of advocacy groups who "... frequently focus on single issues and are largely unconcerned with balancing competing objectives within the organization" (p. 228). To bolster party images, parties must follow constitutions outlined by the Canada Elections Commission and should receive subsidies to run foundations. Foundations would build public confidence by developing balanced policies for their parties and by "educating" party rank and file.

Throughout, the Commission assumes that federal legislation is the best cure for the short-sighted behaviour of politicians; behaviour that leaves parties badly managed and unable to carry out their vital role. By asserting the fundamental importance of the parties the chapter avoids asking why, if the parties are held in such low esteem, anyone should come to their rescue. The chapter never develops the idea that competition from advocacy groups could force parties to adapt to public demands. The assumption is that parties need to be prodded by election legislation to get moving in the proper direction.

Democratic party constitutions: beyond dispute?

As a first step towards rebuilding their image, the Commission argues that parties need to rewrite their constitutions: "An opportunity exists for political parties to embody some of [the principles of the Charter of Rights and Freedoms] through the development of constitutions that seek to be both inspirational and functional" (p. 246). Not pausing to ask why, if the opportunity exists, parties would not seize it of their own accord, the Commission recommends (in 1.5.1)

...that registered political parties...have constitutions that promote democratic values and practices in their internal affairs and that are consistent with the spirit and intent of the Canadian Charter of Rights and Freedoms.

This is probably a good suggestion but makes a bad law because for laws to be enforced they have to be interpreted. The authors of the chapter would have a partisan board of appointees known as the "Canada Elections Commission" register new parties only if they have what the Commission interprets as a democratic constitution. Recommendation 1.5.2(a) is that "the democratic constitution of a party and of its registered associations be submitted as part of the registration application to the Canada Elections Commission." Recommendation 1.5.4 adds that

(a) the Canada Elections Commission have the power to suspend the registration of a political party for any period; (b) a registered party be subject to deregistration if the Commission deems the party has violated terms of its constitution.

Against these potential shortcomings of enforced constitutions there are few clear gains. Meaningful constitutions cannot be dictated from above. They rise from the constituency and reflect the values and beliefs of its members. Some organizations work best without a constitution. There are administrative advantages to some degree of central control and often unwritten codes of conduct are a satisfactory and inexpensive way of reaching consensus. People with similar views join the same group to achieve common goals. Being of like mind they need fewer formal mechanisms, such as constitutions, to resolve disputes.

The enforced constitution the authors of chapter 5 envision would give the established parties power, through their appointees on the Election Commission, to slow or prevent the rise of new parties. New parties might feel they need to take elaborate and expensive precautions to protect themselves from being outlawed. Video tapes of all meetings, secretaries to take official minutes and notary publics to vouch for the authenticity of the minutes, are examples of the administrative burden of complying with the proposed law. An enforced constitution would also rob the public of information. Much can be learned about a party from the way it manages its internal affairs. A party that runs on brutality and corruption sows the seeds of its own failure.

On the importance of being registered

The Canada Elections Commission being proposed could not outlaw a party. Its main power would be to refuse to register a new party or to de-register an existing one. Even with this power it is not likely that the Commission could long suppress a new movement with a ground swell of popular support. Many new movements, however, do not bloom overnight or rise suddenly on crests of enthusiasm. They take time and resources to build their constituencies. If the Canada Elections Commission did not register them they could not get subsidies and could not compete with the established, heavily subsidized parties.

A small party locked out of the club of registered, subsidized parties would find itself playing on tilted field. Particularly hard hit would be groups with one main issue in their platforms. Examples are environmentalists, or groups seeking to entry to Parliament as protest parties. The authors of chapter 5 reveal their hostility to such groups and their narrow conception of what parties should do, by writing that "...the criteria for inter-election registration would have to be sufficiently rigorous to ensure that the process was not misused by groups not fully committed to participating in the electoral process as political parties. The substantial benefits attached to registration must not be allowed to be diverted for other purposes [my italics]" (p. 249).

Party foundations: keeping the money in the family

The Commission's most important proposal is that the government should fund arms-length party foundations. These foundations would develop policy and promote political "education." The premise for government funding is that the parties have fallen behind what voters expect of them: "The parties need to recapture their position and reassert their role in the realm of political education, policy development and value articulation, including the creation of broader partisan networks" (p. 292). The Commission's diagnosis is that Canadian Parties concentrate too much effort on the short term goal of gaining power. The remedy is to move spending to the off-campaign period in order to build the "capacity for political education and policy interpretation" (p. 295). In the pause between elections, party foundations would "distil and disseminate" knowledge. To paraphrase the authors (p. 294), foundations would,

1)    Advise party leaders on policies not dictated by short-term electoral considerations.

2)    Introduce party leaders to people in universities and the non-profit sector who sympathize with the general aims of the party.

3)    Engage in political education by holding conferences and seminars on policy problems, publishing periodicals on party philosophy and policy.

4)    Bring core party members into contact with experts from outside the party.

5)    Help newly elected governments put their policies into practice.

There is little dispute that foundations would bring benefits to the established parties. But would these benefits be the ones envisioned by the Commission? This depends on how one views the parties. The Commission sees them as loose gatherings of individuals suffering from haphazard, short-sighted management. The remedy is to gather many resources under the same umbrella and to operate like a type of political IBM, with personnel, research, and production all rolled into one.

What the Commission does not consider is that what appears to be haphazard management may be an efficient method of using scarce resources. Parties may not need foundations to carry out the functions listed above because they can draw on already existing intellectual resources such as think tanks, and on the advice of hundreds of well informed lobby groups, and because they can keep in touch with their rank and file through informal but adequate means. Parties may not devote much time to "educating" their members because those members do not have the time or the interest to be continuously kept up to date. One reason for appointing leaders is to exploit a division of labour. Once every election cycle the rank and file assure that competent, like-minded individuals are running their party. The leaders and party professionals they choose then take care of the policy details. A party does not need a foundation to tell it how to make the transition to power. Having won, it can call on career government bureaucrats, and policy experts in the ministry of finance, the Bank of Canada, and other ministries, for advice.

The likeliest benefit to parties-one not considered by the Commission-is that they could exploit the broad mandate of foundations set out in recommendation 1.5.15 for direct gain. This mandate includes promotion of policy alternatives...maintain[ing] a publication program to promote education of party members. In Germany-an example held up by the Commission-the "educational" activities of foundations are often hard to distinguish from direct campaigning (Paltiel, 1980). The foundations also influence policy through international offices that lobby foreign governments on matters of affecting Germany.

Foundations help large parties

The proposed funding formula would reward a party on the basis of past votes: "If such a system were now in place, the annual payments would total $3.04 million and would be allocated to the parties as follows: Progressive Conservative party $1,569,647; Liberal Party $879,122; and New Democratic Party $589,979" (pp. 299-300). Parties formed between elections or parties that did not receive at least 5% of the national vote, at the last election (such as the Greens and the Reform Party) would not be eligible for support.

It does not take a deep analysis to see that this formula is biased in favour of large parties. It puts considerable resources for organizing campaigns and advertising into the hands of parties who may, by the end of their terms, have lost the public's support. It also takes tax dollars away from citizens who might have wished to donate to single issue groups or political movements outside the formal party framework.

The Commission's strong push for the establishment of party foundations cannot spring from the public testimonies it heard. In my readings of the transcripts of the testimonies by Canadians, I found no instance of anyone testifying before the Commission who brought forth the idea of foundations.

Three of the five Commissioners are MPs from the three major parties and one is a celebrated lobbyist with strong government ties. Is it surprising then, that Commissioners with these credentials should want to help their parties? Or that they should believe that "...parties and their leaders must be protected from attacks and criticism if and when alternative pubic policies are explored and discussed within their foundations" (p. 298)?

The role of single issue groups ignored

The chapter gives little thought to the suggestion that single issue groups represent public opinion and act as a check on government. The rise of these groups in the 1980s is a sign that the public is not happy with the way parties do their business. It is impossible to assert, as the authors of the chapter do, that parties are "the primary political organizations formed...for the purpose of...providing forums for the development of alternative policies and programs" (p. 246), that "the presence of a large number of distinct parties indicates that many Canadians want their representational needs affirmed through the electoral process rather than through the specific agendas of interest groups" (pp. 228-229), and that "the continued health of our democracy...requires that people in Canada become more involved in political life through political parties" (p. 292).

The language is vague, but taken in context it means that advocacy groups are an irrelevant and sometimes bothersome fringe. The Commission must push this point hard if it wants on the one hand to recommend large scale government funding for the established parties, and on the other, severe restrictions on what single issue groups can spend. By extolling the virtues of the parties and dismissing single issue groups as unproductive elements the Commission justifies its limited idea of who represents the people.

Leadership contests: three cheers for incumbents

Recommendation 1.5.13(2) is that "spending by individual leadership contestants of registered parties not exceed 15 percent of the election expenses permitted under the Canada Elections Act for the most recent general election." This limit may strengthen the position of leadership candidates who enter the race with large amounts of "recognition capital" accumulated during their terms of parliamentary office. Challengers may suffer because often they are not well known and need to spend heavily on advertising to become recognized.

Jacobson [1985] and Palda and Palda [1985; 1992] have gathered evidence based on campaign spending and voting data that suggests that in Canada and other Western democracies, spending limits tend to harm challengers and help incumbents. Campaign spending by incumbent candidates attracts fewer votes than challenger spending because incumbents are already known. Between elections they use the resources of their office to promote themselves. These activities exhaust the potential of advertising to influence the outcome in the incumbent's favour. A spending limit can save the incumbent considerable expense while protecting him from challenger attacks. My research focused on constituency races for Parliament in 1979, 1984, and 1988, but the principle probably carries over to leadership contests.

Conclusion: Canadian voters accused of discrimination

As a final comment on Chapter 5, I want to reflect briefly on a bizarre recommendation (1.5.11) which appears in the section on candidate selection, because it captures what I believe is the essence of the Commission's approach to reform.

Having identified a "representational deficit" in the House of Commons, the Commission recom- mends that

if at either of the next two elections the percentage of women in the House of Commons has not reached 20 percent, any party with at least 20 percent of its...caucus consisting of women MPs would be eligible for a higher rate of election reimbursement...a party with 25 percent women MPs would receive an election reimbursement equal to 125 per cent of the reimbursement to which it would otherwise have been entitled. The bonus would be capped for each party at 150 percent. (p. 272)

The Commission builds its case on the small percentage of women in Parliament. Observing that women make up 51% of the electorate, but only 13% of the House of Commons, the Commission states without qualification that women are under represented. This narrow line of reasoning fails to respect the wishes and the intelligence of voters. The Commission goes so far as to accuse Canadians of "pervasive and systemic" (p. 269) discrimination against women, and sets out on its own to reshape who sits in Parliament.

On reading these comments I made an informal survey of 8 women who work in my office. None believed that Canadian voters elected representatives entirely on the basis of their sex. I question the Commission's eagerness to jump to the worst conclusion about the electorate and to pontificate beyond its mandate. The Commission was not struck to recommend who should sit in the House of Commons but "To inquire into ... the means by which political parties should be funded" (p. 3).

On this question, as on many others throughout the report, the Commission shows no inclination to consider alternate hypotheses and does not warn of the dangers inherent in its suggested approach. Executives who make a pitch for radical changes to their corporations are expected to assess frankly the possible outcomes, good and bad, of their proposals. Similarly, the Commission, as a presumably non-partisan body, was appointed to make a balanced, controlled case for reform, not to promote sweeping agendas in a political-tract style which ignores the possibility of error.

Part 2: Who can Argue with Fairness? The Propaganda Campaign for Spending Limits

Abstract

CHAPTER 6 OF VOLUME 1 paints elections as a form of class warfare. It portrays campaign spending as the means by which the wealthy gain control of parliament. To assure "fair" elections, the report says that spending limits and public subsidies to candidates are needed. The chapter broadens the definition of campaign spending to include the promotion of issues by private citizens and groups, but turns a blind eye to the value of volunteer labour used by candidates and the amount of government money incumbents spend on self-promotion between elections. The chapter fails to cite numerous studies of Canadian and American electoral systems which find that spending limits protect incumbents from competition by making it hard for challengers to become recognized. The chapter also promotes measures, such as free broadcasting time for registered parties, which discriminate against single issue groups and new political movements.

Introduction

Do campaign spending limits and public subsidies increase competition in elections? Do they allow ordinary citizens to better participate, both as informed voters, and candidates? The Commission affirms that they do, and makes sweeping recommenations. But it fails to look inward and ponder how its advice might backfire. I suggest that spending limits and public subsidies may hinder competition, entrench incumbents, and leave voters poorly informed of their choices.

My case rests on evidence from the U.S. [Jacobson, 1985], and Canada [Palda and Palda, 1985; 1992], that campaign spending gains more votes for challengers than for incumbents. A limit on all forms of spending-including spending by advocacy groups-spares incumbents the expense of pitched campaigns while protecting them from aggressive challenges. Public subsidies and so called free broadcasting time based on past performance at the polls further strengthen the position of incumbents and the established parties.

All these measures are barriers to entering politics. They restrict competition in the same way that government quotas to poultry farmers do. The closer incumbents come to being able to establish a monopoly over government, the less responsive they will be to public demands. Dictatorships are the most extreme example of how barriers to entry lead to abuses of power.

Who benefits from spending limits?

The report of the Royal Commission recommends spending limits on riding contests (1.6.2), party spending (1.6.4), leadership races (1.5.13), races to nominate constituency candidates (1.6.9), and spending by private citizens to promote an issue or a candidate (1.6.6, 1.6.7). The present limits on riding contests are to increase, but the definition of campaign spending is to be broadened so that "In many respects, this higher limit would not mean the actual spending allowed would be much greater, only that additional elements of spending in recent campaigns would fall under the more encompassing definition to be fully reported" (p. 345).

Many (see Johnston, 1987, for a bibliography) have warned that spending limits can act as a barrier to entry. Dozens of studies find that challengers get more votes from advertising than incumbents do. These studies also find that incumbents begin a race with a large block of committed voters (known as the incumbent advantage). Incumbents may get their special edge by campaigning between elections. The government pays for mailings, travel, and an office staff, which incumbents can use to promote themselves. By the time the election has arrived, incumbents have exhausted most of what advertising can do for them.

Palda and Palda [1992] found that in the 1988 Canadian federal elections challengers got between two and four times more votes per campaign dollar than incumbents did. We also found that incumbents begin their races with a several thousand vote advantage. Taken together, these findings suggest that a binding spending limit will reduce challenger votes and augment the incumbent advantage because challengers are not allowed to use their more potent funds to threaten the incumbent's initial vote advantage. Were all spending prohibited, incumbents would gain a 6,000 vote edge over their leading challengers.

Spending limits might not be so bad if they truly took into account all forms of spending, including the government resources incumbents spend on self-promotion. The Commission pretends to do this in recommendation 2.6.6, which forbids incumbents from using government paid mailing during an election. Similarly, 1.6.28 forbids the Crown from advertising government programs during elections "...except in continuation of earlier publications or advertisements concerning ongoing programs (1.6.28.1)" These measures however, do not restrict incumbent spending between elections and can be side-stepped with a little foresight. They do little to address the election advantage incumbents derive from using the resources of their office. What can the Commission have in mind when it speaks of fairness?

Freedom of speech: for some...

Of the many different sorts of limits proposed, one stands out as particularly restrictive. In 1.6.5, the Commission calls for a $1,000 limit on election advertising by private citizens and single issue groups. The spending limit on private citizens and groups is based on the view prevalent among Commission researchers that parties are the sole legitimate representatives of the people and need special laws to protect them from unbalanced attacks. Canadian politics are grounded in the principles of "equality and fairness" which hold that a political advantage that is won by spending money is bad. Spending should be the strict privilege of parties and it should be severely limited. In ceding this doubtful aspect of free speech-which few ordinary people have the resources to take advantage of in any case-the Commission believes that citizens can participate in more informative elections that actually cost less.

The Commission takes the view that "Limits cannot increase the speech opportunities of the non-wealthy majority, but they do reduce the degree to which the debate is dominated by wealth" (p. 326). Elections are a form of class warfare in which the financial capacities of some distort the election process by unfairly disadvantaging others (p. 327). Under a political system which grants rights to everybody, no advantage in equal rights can accrue to those who lack the means to benefit from these rights. This is why the disadvantaged need subsidies and protective laws.

The idea sounds nice until it is put into action. The problem, to paraphrase the legal scholar Leoni [1991], is that all the attempts at integrating political freedom with freedom from want make it impossible to grant everybody freedom, where freedom is conceived as the absence of constraint exercised by other people. Introducing freedom from want into a political or legal system implies a necessary alteration of the concept of freedom, understood as the freedom from constraint guaranteed by that system (Leoni, 1963, pp. 102-103).

The new concept of freedom that the Commission is pushing would severely limit the channels through which people can express themselves during elections. There is no basis for the Commission's claim that "...a spending limit on independent expenditures...does not place an arbitrary or unfair burden on any particular individual or group (p. 354)." Such a limit would make it impossible for single issue groups to pool the resources of thousands of small contributors. Greenpeace, the National Citizens' Coalition and hundreds of smaller groups would lose their voice during elections. It is little consolation to such groups that they can spend what they wish outside the election period. How are they to predict when the election will fall? Outside the campaign period, voters are in a lower state of awareness than during the campaign when the media publicize the issues. The campaign is the best time to have one's point of view heard.

It is hard to argue to a Canadian audience against free speech. This is why the Commission must rely on frequent, hypnotic repetitions of the need for "fairness" and dire warnings about the dangers of rich activists ready to pay their way to power. Instead of trying to seal the argument with rhetoric, I believe it is more helpful to ask who these advocacy groups are and whom they have harmed or helped. I will suggest that the present move to restrict advocacy group campaign spending is in the narrow interests of politicians and of advocacy groups who have more volunteer workers than money.

Advocacy groups and the 1988 election

Today, the Canada Elections Act forbids all forms of advocacy group advertising during elections. This law, however, is not enforced. Debate over the dormant law started after the 1988 election. In 1988 the three main parties had a heated debate on free trade and advocacy groups for the first time became major players in a national campaign. The Canadian Alliance on Trade and Job Opportunities spent $3 million shortly before and $2 million during the election to champion free trade (Lortie Commission Hearings, March 12, p. 9). The National Citizens' Coalition spent $720,000 for the same cause. The Pro-Canada network opposed them with an outlay of $600,000 as did the Canadian Automobile workers with two page advertisements in major newspapers costing about $400,000 (Lortie Commission Hearings, May 31, p. 13). Most of these figures are self-reported. The Canadian Alliance maintained they were the only ones to provide an audited statement of accounts to the public (Lortie Commission Hearings, March 12, p. 9).Note Pro-life and pro-smoking groups were also active but did not spend nearly as much as the free-trade activists.

The N.D.P. and Liberals probably suffered most from these attacks [Johnston et al., 1991] and it shows in their hostile testimony to the Commission. They argued that independent opinion should operate through the parties or should at the very least obey the rules set for the parties. See the testimonies of the Ontario N.D.P. (Lortie Commission Hearings, May 31, pp. 14-15) and of various M.P.s (Lortie Commission Hearings, March 12, p. 10) for examples of the many criticisms of advocacy groups.Note Advocacy groups who had themselves been mauled during the 1988 election campaign said the same. The Ontario Federation of Labour told the Commission that unlimited expenditures by advocacy groups poses a significant threat to Canada's political democracy. The Federation-a traditional supporter of the N.D.P.-claimed that the trade isolationists had held their ground in the debate before the election but that the free-trade forces had crushed them with massive expenditures during the campaign. The solution was to ban advocacy group spending unless it was part of the declared expenditures of a party or candidate (Lortie Commission Hearings, May 31, p. 1). The Council of Canadians argued that they should be allowed to distribute hand-bills and put out lawn signs, but that mass-media advertising should be the privilege of established parties (Lortie Commission Hearings, March 12, p. 7).

These are fine examples of the fact that no one likes to lose an argument and that the losing side in a debate will try to twist the rules in its favour. Groups that rely on volunteers want to stop groups that know how to raise money and how to promote an issue on the air. The 1988 election revealed the talents of each group and pulled many to the side they now take in the question of regulating third parties. The groups who most firmly supported third-party rights before the Lortie Commission were associations of newspaper publishers and broadcasters, libertarians, and groups that had done well in the free-trade debate (Lortie Commission Hearings, May 8, pp. 4-7). Surprisingly, the Canadian Human Rights Foundation was all for regulating third parties (Lortie Commission Hearings, April 10, pp. 12-13).Note

The harm from limiting advocacy groups

Many think it harsh to ban third parties but agree that they need to be regulated. The main argument for third-party rules is that money in elections threatens what Trudeau called the ``principle of equality"-an extension to advocacy groups of the notion that no single established party should be able to outspend another. When Liberal Yvon Pinard put Bill C-169 to the Commons he said that

The intent of the present legislation is to equalize the chances of all candidates in all parties, by setting reasonable limits on election expenses....The basic principle of equality is unfortunately ignored at times by groups or individuals, other than political parties or candidates, that make substantial election expenditures during an election campaign without going through a candidate or party....Under the Bill before the House today, all election expenses shall be made solely by the parties and the candidates who are running. (Hansard 1983, p. 28, 295)

This principle is blind to why any political movement has money in the first place and scorns suggestions that individuals can play a bigger part in politics than to cast their ballots.

The function of single issue groups

Advocacy groups give small contributors of the same mind a strong voice. These groups are agents for the public, who collect money and use it an a disciplined way to keep politicians in line. Some ideas have too little support for a party to embrace, or are too fleeting to found a party on. Advocacy groups with low overheads, little expectation of long life, and no need to please the majority, are their best conduits. When loyal supporters of the large parties have a complaint they can send a message to their leaders at low cost through a single-issue group. Even moderate voters can use these committed groups to their own advantage. Third parties get their force from bending all their efforts to one idea. It does not take long to teach canvassers a single slogan, to devise a publicity campaign, and to learn how to use the press and fight off criticism from other groups. These easy investments in learning can last a long time. In addition, a single-issue group does not have to expend resources to reconcile differences of opinion and to avert strife in its ranks, as major parties must. An organization with only one goal does not have to tolerate dissent.

Does this power make third parties a ``significant danger to Canada's political democracy"? If we think of democracy as a system of government in which anyone can use elections to put demands to the state and contest its actions, then anything that makes it easier for all participants to make their case helps democracy. What is important is that all have equal opportunity to put their resources to best service of their cause. State actions that equalize resources or limit spending, blunt the edge of movements that have found the public's approval and give a boost to voices most were not interested enough to hear. Trudeau's principle of equality goes against the much older principle that a platform should get as much support as the people wish to give it. Any government plan to ``equalize the chances of all candidates, in all parties" goes against the public wish.

More benign sounding proposals for regulation can also do harm. At the very least, many believe that third parties should submit to financial audit, and to other administrative procedures that large parties follow. This would impose large fixed costs that many tiny movements cannot justify. Such methods are common in Europe where some feel that red tape has strangled new movements in the cradle and kept the established parties safe [Paltiel, 1980].

The perverse effect of subsidies

Right now, government subsidizes registered politicians by reimbursing a portion of their campaign expenses, by giving tax breaks to contributors, and by allocating free air time for political advertising. With guaranteed government support politicians have less incentive to heed the opinions of their constituent-contributors. The present scheme of subsidies, however, is not of equal benefit to all sides. Large parties receive more government support. This tends to entrench the established parties and reduce the ability of small parties to compete. The Commission's proposals do not improve on the present scheme of subsidies, and in several cases may make things worse.

Reimbursements

Reimbursements are granted in proportion to past candidate and party spending. "Free" air time is granted in proportion to party votes in the previous election. The Commission warns that "...the present system has disproportionately over compensated the three largest parties and their candidates and under compensated the smaller parties" (p. 367). Ironically, the formula for reimbursement it proposes in 1.6.11 continues and augments the hallowed tradition of over compensating the three major parties.

If 1.6.11 had been in place in 1988, the three main parties would have received an extra $1.02 million in reimbursements. Only an extra $0.3 million would have gone to the remaining parties. The P.C.s would have received 4 times as much extra as the Reform party. Table 1 shows the dollar gain to each party of the reimbursement formula.

Click here to view Table 1

"Free" air time

Just as with reimbursements, the Commission's proposal for changing the allocation of so-called "free air time" shows great continuity with the existing law. Before explaining this in detail, I want to mention briefly that "free air time" is a misnomer. Stations today are obliged to provide roughly 214 minutes of time, free of charge to the parties. This, however, imposes a cost on the stations that is probably passed on to commercial advertisers and ultimately to consumers. Henceforth, I will refer to such time as "forced air time."

In 1.6.24 the Commission recommends increasing the present allocation of forced time from 214 minutes to 300 minutes. This time is to be allocated according to a new formula that would double the time given to small parties (from 3 to 7 minutes), but which would still be heavily based on a party's past electoral performance. Of the three major parties, only the Conservatives would, under the new formula, lose a significant (30 percent) part of their allocation. The N.D.P would lose 10 percent and the Liberals would gain 8 percent more free time than they now get.

The Commission recommends abolishing access to paid airtime based on past performance. But when it comes to forced air time, which has a greater potential for creating artificial election advantages, the Commission proposes only a mild variation on the old law. The complicated formula it proposes changes little. It is a gesture to small parties, but preserves most of the advantages that large parties got from the old formula.

Paid air time

Although it does not fall under the category of a subsidy, I want to comment on the paid air time proposals of chapter 6, because they fit in closely with the forced air time proposals.

The effect of Commission's proposals for reforming air time is hard to predict. At present, registered and non-registered parties are allowed to buy prime-time spots based on a formula in which past party votes and seats won are the central variables. The sum of purchases by all parties is not to exceed 390 minutes with any broadcaster. The Commission laments that the unfairness of the system lies in its imbalance and shows "...a clear bias against emerging parties, regardless of popular support and resources" (p. 387). The realization however does not stop the Commission from proposing that (1.6.15) "...only the registered parties [should] be eligible to purchase the paid time broadcasters are obliged to make available under the Canada Elections Act." This means that any party which does not nominate candidates in at least 50 ridings would be barred from prime-time advertising. Small, regional-based parties would be hard hit.

Contradictions of this sort happen under the strain of trying to reconcile free speech, fairness, promotion of the established parties, and regard for emerging movements. These stated aims result in a muddle of proposals whose final effect on competitiveness is hard to predict. For example, proposal 1.6.16 replaces the existing formula for allocating time, with a formula that makes it easier for small parties to advertise. However, this proposal would reduce the total time permitted to all parties from 390 to 360 minutes. Furthermore, it would cap the amount that any party could buy to 100 minutes. This would diminish the total amount of information which voters receive. The public may be curious about new parties and may wish to hear more than a 100 minutes of their advertising.

What, then, can be said about proposal 1.6.16? It is not clear that its influence on competition will differ greatly from the present system of regulating paid airtime. The present system restricts the flow of information between politicians and voters and makes it hard for new parties to become known. Proposal 1.6.16 could do the same.

Conclusion

The theme of chapter 6, volume 1, is that limits of all sorts are needed to prevent wealthy factions from rising to power, and that subsidies are needed to help the chances of the disadvantaged. I have argued that these measures may stifle competition in elections and cut politicians from their responsibility to the public.

The implicit assumption in chapter 6 is that wealth in politics flows from a few rich interests. This, however, is not the case. Politics in North America are not a form of class warfare. There has been a dramatic rise in the number of contributions from individuals over the past 15 years. And, as Stanbury's [1992] research for the Commission shows, the average size of contributions has fallen steadily since 1974. This reflects the increasing desire of voters to express the intensity of their preferences through contributions, and poor enthusiasm which voters show for politicians who accept large sums from narrow interest groups. These trends, and the danger that incumbents have an incentive to write election rules in their favour, cast doubt on the need for spending limits and campaign subsidies.

Part 3: Regulated Opinion Polls, Tax Credits, and Enforcement

Abstract

OFFICIAL STANDARDS FOR reporting public opinion polls can reduce the amount of information the public gets. A blackout on all poll reporting 48 hours before the election hampers the ability of voters to make strategic last-minute choices. Tax credits to contributors force some people to pay for the opinions of others. Allowing a board of partisan appointees to both write and enforce election laws concentrates too much power in too few hands.

Introduction

Chapter 7 of volume 1 of the Royal Commission's report seeks to strengthen public confidence in the electoral system. The report calls for rigid standards of poll reporting, tax credits for contributions, extensive disclosure of campaign contributions, and a powerful body called the Canada Elections Commission with the power to propose and enforce election laws. My discussion will focus on potential problems with each proposal. I also argue that shortening elections, as the Commission proposes in volume 2, would make it hard for challengers to gain recognition, and that voter information programs carried out by Elections Canada may be redundant and wasteful.

One standard: raising the cost of polls

Recommendation 1.7.15 is that any news organization that acquires a poll result and is the first to report it should also publish the technical details of the poll. According to 1.7.16 further details should be made available at anybody's request. Recommendation 1.7.17 extends these rules to poll results reported in advertisements.

It is not clear why the Commission has singled out polls for this detailed form of regulation. Why not oblige newspapers to report the sources used in writing about political scandal, editorial analyses of election trends, and so on? In his summary of a newly published study on the economic effects of Quebec separation, should a reporter be obliged to explain the details of the study, including the econometric methods used in the prediction?

I am making two points here. First, people have their own mechanisms for deciding whether to believe a newspaper report. Did the item appear in a newspaper or on a TV station that I trust? If so, then I do not need to read technical details. If I cannot trust the source, I simply discount the information and turn to other sources. Similarly, I will regard with suspicion any poll published in anonymous advertisements. The public's demand for correct information is likely to be satisfied in a competitive media environment where profit depends on accuracy. If I do not shop carefully for an accurate source of news, how important can this news really be for my life, and if it is unimportant why do I need the protection of a standard?

Standards force the media to provide a service for which there may be no demand. The press builds its reputation over many years so that it does not have to report the details behind every item of news, otherwise the cost of communicating the news would be senselessly high.

Secondly, an enforced standard of opinion polling could create a legal precedent for official reporting standards in non-election news. The authors of editorials might be forced to sign their writings. Economic reporters would have to provide the technical details of forecasts made by the Conference Board of Canada or by the Bank of Canada.

Voting in the dark

In a brief moment of clarity, the Commission writes that

Polls provide useful information to voters, information that is more reliable than other estimates of public opinion. As sources of information about the voting preferences and issues that concern other citizens, they are a great improvement over the guesses of journalists and pundits. Because Canadians use the information contained in published polls to make their voting decisions, there is no justification for limiting or impeding their access to this relevant information [my emphasis]. (p. 456)

This insight, however, is too fleeting to prevent the Commission from recommending that (1.7.14) "...the publication or announcement of opinion polls be prohibited from midnight the day preceding the election day until the close of all polls on election day."

The problem with this recommendation is that a blackout period of two days on the publication of polls makes it very hard for people to vote strategically. One example of strategic voting is the 1984 race in the riding of Vancouver Quadra, where Liberal leader John Turner presented himself as a candidate. Knowing that the Conservatives were winning at the national level, the traditionally conservative voters of Quadra may have wished to assure some balance by making sure the Liberals had a leader who sat in the House of Commons. This is conjecture, but shows why last minute information may be of vital interest to voters. A two day blackout period would make such educated voting difficult.

Reporting contributions: an excess of procedure

To reduce the time between a contribution and its entry in the public record, the Commission recommends that (1.7.1): "...registered parties and registered constituency associations file an unaudited report of contributions for the first six months of the year and a full audited return on their financial activities for the entire year."

Shortening the reporting period will increase the administrative costs of all parties. The burden will be more difficult to bear for small parties who may receive few if any contributions between elections. It is not clear that biennial reports will provide voters with significantly more information than annual reports. Nor is it clear that all parties should be obliged to file such reports. Some parties receive few if any contributions between elections. A threshold of contributions below which parties should not be forced to report should be set to relieve small parties of the disproportionate administrative burden reporting requirements impose.

Recommendations 1.7.2, 1.7.3, and 1.7.5 deepen the administrative chores which parties must perform in reporting contributions.

Tax credits: paying for other people's opinions

Recommendation 1.7.13 would allow the first $100 of contributions to be claimed as a tax credit. An earlier comment by the Commission to the effect that a system of tax checkoffs that "...would place no additional burden on the treasury, apart from some administrative costs" (p. 454) raises the question of whether the Commission understands the allocative effects of the scheme it is proposing. Tax checkoffs, tax credits, tax deductions, and any other form of tax break place a direct burden on the treasury. They are a disguised form of spending known as tax expenditures. Spending for the benefit of one group necessarily comes at the expense of another group. In this case, contributors benefit at the expense of non-contributors. If I contribute nothing, my tax dollars will go to supporting parties I may not wish to see supported.

The Commission hopes the tax credit will make more people participate in elections through their contributions. But the Com-mission's narrow view of participation only recognizes the parties as worthy objects of political contributions. Citizens who do not agree with the parties and who wish to send their leaders a message through single issue groups are not deemed to merit a tax credit.

The Canada Elections Commission: law maker, judge and jury

A partisan Canada Elections Commission with unusually broad powers offers the established parties too many temptations for abuse. Recommendation 1.7.24 would establish a Canada Elections Commission with seven members chosen by a two-thirds vote of the House of Commons. The chairman would sit for seven years and other members for five. What I find amazing about this proposed entity is that it would both have the power to formulate policy (1.7.25.1) and to enforce election law-namely to disband parties. The Commission would both write the laws and enforce them. Regulations would be "...submitted directly to the House of Commons and deemed approved if not referred for debate or to a committee within 15 days after being tabled (1.2.25.7)."

I am not a legal scholar but it seems to me that the traditional reason for separating the executive, legislative, and the judiciary is to avoid excessive concentrations of power. Moreover, the judiciary should be as far removed from partisanship as possible. The regulatory board being proposed violates all these principles. This board would be given the power to continuously rewrite the rules of the election game. This proposal places an efficient way to put down new political threats at the disposal of the established parties.

To give an example, suppose the pro-life movement decides to abide by the $1,000 limit on campaign spending by single issue groups, but distributes a voter mailing list to its supporters. Each supporter is asked to write a letter to five people on the list explaining why a certain candidate should be thrown out of office. Such a campaign would be within the bounds of the election law envisaged by the Royal Commission but may pose a significant threat to some candidates of the established parties. The Canada Elections Commission could be asked to investigate such activities and to regulate them because the traditional role of "parties as primary political institutions" is being threatened.

I don't know how widely the Royal Commission's profoundly interventionist views are shared, so it is not yet clear whether my example should raise any alarm. If Parliament accepts the Commission's recommendations I will begin to worry more and will point to my hypothetical example as a very real danger of giving too much power to the established parties and dressing up this power in the fine language of the public interest.

Information programs: turn on your telescreens

It is hard to argue against education. Recommendation 2.7.12 would add to the Canada Election Commission's broad arsenal of capabilities the power: "...to promote public awareness of the electoral process through information programs."

I want to note briefly that in the last federal election, the Chief Electoral Officer of Canada spent $4.5 million on his "Voter Information Program," making his office the fourth biggest election time spender after the N.D.P. He justified this sum by stating his conviction that "...the electorate has a right to be informed about their constitutional right to vote and of the opportunities which they have to exercise that right" (1989, p. 29).

This conviction overlooks several points. One of the reasons for our heavily subsidized system of public schools and universities is to promote civic awareness about the importance of voting and participating in elections. It is not clear that we need a duplicate program administered by Elections Canada. Nor is it clear that election information programs have been a success when tried in other countries. After extensive testing, the U.S. General Accounting Office (1990, pp. 43-48) found little evidence that voter information activities such as announcing registration drives and registration deadlines increased voter turnout. In these tight budgetary times, there is less room for experimenting with unproven administrative schemes or for allowing duplicate programs to proliferate.

Short elections: who was that challenger?

To maintain voter interest and increase voter participation the Commission recommends shortening the election period to a minimum of 40 days and a maximum of 47 days (2.3.1).

Short elections are barriers to entry. They can harm challengers by not giving them enough time to use their resources to maximum effect. Campaigns are the best time to advertise and to become known because voters are in a high state of awareness. A short election cuts this time of high awareness during which challengers can use their money to best effect. Incumbents also inform fewer people in short elections but they do not suffer as much because more voters are already aware of them.

Considering this possible harm to electoral competition, better reasons are needed for shortening campaigns than the Commission's lame acceptance of the view that shorter campaigns are needed because "...Canadians are over-exposed to politics and lose interest as a result" (vol. 2, p. 79). If Canadians are still interested at the end of a campaign it suggests they have not had enough information. Voters should leave elections gorged with information and unable and unwilling to take another bite.

Conclusion

This part of the monograph has commented on stray recommendations by the Commission that do not directly fit into the categories of spending limits or direct subsidies to candidates. I suggested that voter information programs may be wasteful, restrictions on polling may leave voters less informed, and that tax credits to contributors forces some taxpayers to subsidize ideas they do not believe in. I also suggested that short elections leave challengers with too little time to mount an effective campaign.

Closing comments

The Royal Commission on Party Financing and Electoral Reform praises the rights of voters but wants laws that limit speech. It approves of new movements and underdogs but wants government to give more money to parties that do well at the polls. The Commission proposes a law to govern every channel of communication between politicians and voters. This intrusion will make it harder for voters to make informed choices and will threaten the rise of new political movements. Its worst proposals are that government should pay for party foundations and that no private citizen or group should be allowed to spend more than $1,000 to promote an idea or a candidate during an election. Both measures would make it hard for challengers to contest incumbents and for citizens to keep their leaders in line.

The report makes many other suggestions which on the surface appear reasonable, but on closer examination become unacceptable. A board of partisan appointees known as the Canada Elections Commission charged with the power to disband parties, along with shorter elections, severe restrictions on the reporting of polls, and government subsidies based on previous electoral performance, might all serve to entrench the established parties-to the detriment of new movements.

Paltiel wrote perhaps the most concise critique of the style of election law which the Commission is promoting:

Specific grants, such as broadcasting, if allocated proportionately benefit the largest groups, or if made equally tend to favour those which have achieved at least some representation in the legislature. In either case, the established groups profit. Even tax incentives, which benefit recognized and registered parties on an annual basis and limit new parties and individual candidates to the formal campaign period, are biased toward incumbents. More significant is the tendency to entrust the administration of these schemes to bodies made up, or subject to the overview, of representatives of the parliamentary parties. Examples are the Ontario Commission on Election Contributions and Expenses, and the informal advisory committee established by the Chief Electoral Officer of Canada, consisting of the senior paid officials of the parliamentary parties... The net result is a clear distinction between the established parliamentary parties and those outside parliament, rather than one of size [my italics]. The grants tend to freeze the status quo ante except where new groups are able to muster new private resources and gain from an ideological surge such as a nationalist movement. [Paltiel 1980, p. 367]

This summarizes much of the present monograph.

Bibliography and Further Readings:

Jacobson, Gary C. [1985], "Money and Votes Reconsidered: Congressional Elections 1972-1982." Public Choice, 47:7-62.

Johnston, R. J. [1987], Money and Votes: Constituency Campaign Spending and Election Results. New York: Methuen, 1987.

Leoni, Bruno, Freedom and the Law. Indianapolis: Liberty Fund, 1991.

Paltiel, Khayyam, "Public Financing Abroad: Contrasts and Effects." pp. 355-384, in Parties, Interest Groups, and Campaign Finance Laws. Edited by Michael J. Malbin, Washington: American Enterprise Institute for Public Policy Research, 1980.

Palda, Filip, Election Finance Regulation in Canada: A Critical Review. Vancouver: Fraser Institute, 1991.

Palda, Filip and Kristian S. Palda [1985], "Ceilings on Campaign Spending: Hypothesis and Partial Test with Canadian Data." Public Choice, 45:313-331.

------ [1992], "Campaign Spending and Campaign Finance Issues: an Economic View." Journal des Economistes et des Etudes Humaines, 3:291-314.

Royal Commission on Electoral Reform and Party Financing, Reforming Electoral Democracy Volumes 1 and 2. Toronto: Canada Communication Group, 1992.

Stanbury, William T., Money in Politics: Financing Federal Parties and Candidates in Canada. Volume 1 of the Research Studies of the Royal Commission on Electoral Reform and Party Financing, Toronto: Canada Communication Group, 1992.

United States General Accounting Office, Voting: Some Procedural Changes and Informational Activities Could Increase Turnout. Washington: 1990.

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