Many of my recent posts have discussed the democracy dollars method of campaign finance reform, in which the government would give all registered voters money that they could donate to political campaigns. This reform would free politicians from their dependence on the millionaires and billionaires who currently finance their campaigns, and allow elected officials to serve the voters, the way it’s supposed to work in a democracy. Today, however, I want to back up and address the question: why is it so bad to have millionaires and billionaires paying for election campaigns? How, exactly, does big money damage our political system? Thanks to reporting this past Tuesday by the Washington Post, we have an unusually vivid example, taken from the shenanigans of the payday lending industry.
Payday lenders may well be the most predatory branch of the sprawling financial services industry. Working online and out of some 16,000 storefronts nationwide, they take advantage of Americans who barely get by paycheck to paycheck, and sometimes come up short when they need to pay their bills. These financially strapped Americans go to payday lenders, who give them short term loans in small amounts – ranging from $300 to $5,000 – which the borrower will supposedly pay back upon getting his or her next paycheck. In practice, however, the borrower is often unable to repay the loan quickly, and has to carry it over to subsequent months as interest on the loan accrues with frightening speed: interest rates on these loans range from 34 to 450 per cent in the case of Enova, one lending company, depending on the amount of the loan, the maturity date, and the borrower’s credit score. About 12 million Americans use such loans every year.
Under the Obama administration, the Consumer Financial Protection Bureau (CFPB) – an agency founded in 2011, in part thanks to determined campaigning by Elizabeth Warren before she became a senator – moved to reign in some of the payday lending industry’s worst abuses. In particular, the CFPB required that lenders assess a borrower’s ability to pay before making a loan. Under Trump, the CFPB now contemplates rolling back that regulation, and the industry is encouraging this change by forging stronger ties with the Trump administration, using generous campaign donations. We learned this from a September webinar produced by an industry consultant, Borrow Smart Compliance, which posted the video on YouTube, only to take it down after being questioned by a Post reporter.
The video features Michael Hodges, founder of the major payday lender Advance Financial, encouraging members of his industry to donate to Trump. “Every dollar amount, no matter how small or large it is,” is important, he said. “For example, I’ve gone to Ronna McDaniel and said, ‘Ronna, I need help on something,’” referring to the chairwoman of the Republican National Committee. “She’s been able to call over to the White House and say, ‘Hey, we have one of our large givers. They need an audience. … They need to be heard and you need to listen to them.’ So that’s why it’s important.” Hodges said that he made more than $1 million in campaign donations since 2016 to help Trump, and that he and his wife had worked to persuade others to contribute as well.
Of course, Hodges did not say “I gave them $100,000 last week in exchange for the CFPB rolling back this regulation.” Such an explicit exchange of money for a political favor is bribery. No one would acknowledge it in public, and few if any campaign contributors would say it in private. It doesn’t need to be said. Both parties in this transaction know what is expected of them. Politicians know that if they take actions which favor this or that industry or individual, they will almost certainly receive campaign contributions from the affected individual or industry. In turn, corporations and wealthy donors know that if they make generous contributions to politicians’ election campaigns, those politicians will take their calls, listen to their needs, and help them to the extent that they can. It’s not a single bribe for a single favor, but rather an ongoing relationship that endures, election after election, played according to rules which both sides understand implicitly.
The only thing unusual about the webinar viewed by the Post’s reporters is that the people who made it were shameless enough to put it up on YouTube, not thinking that it might be embarrassing to share with the public how money buys influence in our political system. The use of campaign cash to purchase influence has become so pervasive that our political class has forgotten that is both undemocratic and morally wrong.