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Keep Out! Campaign Finance Laws as Barriers to Entry

By Lisa Knepper

Entrepreneurs bring vitality to the marketplace, driving innovation and change. But all too often, established interests respond to such competition not by competing in turn, but by colluding with government to pass laws like occupational licensing rules that keep upstarts out of the market.

In the political arena, campaign finance laws have the same effect, as University of Missouri economist and campaign finance expert Jeffrey Milyo shows in a new IJ strategic research report, Keep Out: How State Campaign Finance Laws Erect Barriers to Entry for Political Entrepreneurs. (For a copy of the report, visit: www.ij.org/KeepOut.)

“Whether it is the civil rights movement of the 1960s or today’s tea party movement, outsiders in American politics have always played a crucial role in challenging the status quo by pushing new ideas to the fore and inspiring newcomers to run for public office,” writes Milyo.

Such political entrepreneurs bring vibrancy to American democracy and keep the political establishment on its toes. Yet campaign finance laws in all 50 states erect barriers to entry that effectively tell newcomers to keep out.

Milyo shows how contribution limits and campaign finance red tape make it harder for political entrepreneurs to form new groups and reduce the resources available for political advocacy.

Consider IJ’s clients in our Citizen Speech case in Florida (see previous page). They wanted to make their voices heard with their own message—not donate to support some other more-established group’s message. But Florida ties them up in red tape if they speak out on their own.

Or consider SpeechNow.org. The group wanted to defeat candidates who favor campaign finance laws, but federal contribution limits made large donations to its efforts illegal. Milyo shows that such new groups in particular need large contributions—political venture capital—to get off the ground and attract support. With help from the Institute for Justice and the Center for Competitive Politics, SpeechNow.org defeated the federal limits, but similar laws remain in nearly two dozen states.

To political pros, these laws are barely nuisances. But to would-be political entrepreneurs, they are barriers to the political arena. That is how campaign finance laws lead to fewer new voices and cement the status quo. Indeed, that is entirely the point.

Lisa Knepper is IJ’s director of strategic research.

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