The Occupy Wall Street (OWS) protestors arrived just in the nick of time. The political right was about to pull off the greatest bait-and-switch in recent memory: convincing an angry, frustrated public that our current economic woes derive from government spending and the federal debt rather than from the burst credit bubble and financial sector meltdown. The Wall Street financiers who precipitated the economic crisis, aided and abetted by the Tea Party and their allies in Congress (and to some extent by President Obama, whose economic message has been muddled, at best), have been content with a national conversation focused on deficits and debt reduction rather than jobs and financial reform.
So, OWS has changed the conversation.
OWS has reminded us that the economic inequality that has come into stark relief during the current economic crisis -- where the 400 wealthiest Americans now have a combined net worth greater than the bottom 150 million, and the top 1 percent possess more wealth than the entire bottom 90 percent -- didn't just happen overnight. It is a byproduct, long in the making, of a financial system that is increasingly rigged to favor those at the top, who in turn have an ever-larger stranglehold on our political system. That's what "we are the 99 percent" means -- that a system controlled by financial and corporate elites is no longer a system of, by and for the people.
The Wall Street protestors have also reminded us that our political system is not only broken -- we already knew that -- but that a major reason for this is the stranglehold that corporate interests and financial elites have on Congress. This corporate takeover of Congress has been greatly advanced by the US Supreme Court's 2010 ruling in Citizens United v. FEC, freeing corporations to spend unlimited amounts on campaign contributions to candidates for public office.
Since 1990, individuals and PACs representing the financial sector (finance, insurance and real estate) have contributed over $2 billion to federal campaigns, more than twice as much as any other business sector. Members of the U.S. House and Senate received an average $142,663 and $1,042,663, respectively, in Wall Street contributions as of July 28, 2008. Thus far in the 2011-2012 cycle, the financial sector leads in campaign contributions once again, far outstripping even the enormous sums spent by health care companies, lawyers and lobbyists, energy companies and agribusiness.
OWS shifted the focus from Washington to Wall Street for the same reason that Willie Sutton robbed banks -- because that's where the money is.
To be fair, there are genuine voices of reform within the financial community. PIMCO's Mohamed El-Erian, for example, has urged policy makers to listen to the Wall Street protests which, he writes, are about "a system that privatized massive gains and then socialized huge losses; allowed bailed-out banks to resume past behavior with seemingly little regulatory and legal consequences; and is paralyzed when it comes to alleviating the suffering of victims.... The result is a visible and growing gap between the haves and the have-nots in today's America."
The sustainable investing industry, from which I hail, has also vigorously supported such measures as the Dodd-Frank financial reforms, shareholder access to the proxy ballot and a majority voting standard for corporate directors, annual "say on pay" shareholder votes, prohibitions on predatory lending, creation of a Consumer Financial Protection Bureau and regulation and oversight of hedge funds and derivatives.
The financial industry is no monolith. If OWS can engage those elements within the financial sector -- and the larger business community -- who welcome a more expansive national dialogue, while continuing to galvanize grass roots public sentiment, then we may find ourselves at an inflection point. A genuine reform movement may take shape outside of Washington that is ultimately strong enough to challenge the status quo in the nation's capitol.
Is there a set of policy goals or ideas around which OWS and moderate to progressive financial and business leaders can coalesce? There are many ideas on the table -- imposing a financial transactions tax; breaking up the big banks; enacting a strong version of the Volker Rule; creating a public infrastructure investment program.
But I want to offer one idea that I hope OWS and responsible members of the financial and business communities can rally around immediately: Public funding of federal elections.
Public funding of federal elections is the most important reform we could make because it facilitates, it is the necessary precursor, it is the key to all other reforms. Why? Because ultimately it is the corporate hold on our political system -- the combination of special interest campaign contributions and lobbying -- that prevents Congress from enacting common sense reforms that benefit the majority of Americans.
We will quite simply not be able to redress economic inequities, create jobs, invest in infrastructure, reform our tax code, reduce fiscal deficits or address other critical national issues, from energy policy to health care policy, until we break the control that monied interests have over Congress.
Fortunately, there is a solution. It's called the Fair Elections Now Act (S. 750 and H.R. 1404) and it provides for voluntary public funding for US House and Senate Races. Its passage would allow federal candidates to run for office without relying on large contributions, big money bundlers, or donations from lobbyists, and be freed from the constant fundraising necessary to finance a campaign today. Candidates who agree to limit their donations of $100 or less from within their districts would be eligible for $5 in federal matching funds for every $1 they raise.
Fair Elections is a new and innovative approach to the problem of special interest money in American elections. It combines what works in our current campaign finance system -- citizen small donations -- with matching public funds to ensure competitive campaigns. It rejects what clearly doesn't work for the vast majority of Americans: big money from lobbyists and special interest groups seeking access and influence in government.
Fair Elections is also the only practical response to the Court's decision in Citizens United. While some argue for a constitutional amendment, that is a long and dubious road. The only achievable solution in the near term is voluntary public funding of congressional elections.
And it is achievable: Fair Elections already has 77 sponsors in the House and 14 in the Senate. It has broad bi-partisan support from former Members of Congress and the Executive Branch: Republicans Warren Rudman, Alan Simpson, Christie Todd Whitman, Frank Carlucci, Bill Brock, Nancy Kassenbaum Baker, Pete Peterson... Democrats Bill Bradley, Bob Kerrey, Walter Mondale, Tim Wirth, Lee Hamilton, Bruce Babbitt, Hodding Carter....
This bi-partisan appeal of publicly funded elections was in further evidence last week when a University of New Hampshire Survey Center poll, released by Americans for Campaign Reform (on whose board I serve) and the Committee for Economic Development, showed deep frustration among likely New Hampshire Republican Primary voters over the increasing influence of special interest money on the federal government:
- Almost two thirds (61%) of likely NH GOP Primary voters "strongly disagree" with the Supreme Court decision in the Citizens United;
- 73% would "strongly support" a law that required corporations, unions and non-profits to disclose their election spending;
- Almost half (40%) would support a proposal for public funding of federal elections that allowed candidates who collect a large number of small contributions (up to a maximum of100) from their home state to receive public matching funds; and
- By a two-to-one margin (45% to 21%), these voters said they would be more likely to support a candidate who supported a public funding system.
These are likely Republican Primary voters, folks. They are probably more conservative than the electorate as a whole and their current crop of presidential candidates is certainly not preaching public funding of federal elections. Yet, if the Republican electorate -- let alone Independents and Democrats -- is so frustrated with the influence of money in politics that they are open to overhauling our campaign finance system, I would suggest that now is the time.
OWS has galvanized public opinion and has challenged Wall Street. It should now seize the moment to push through public funding of federal elections. Responsible voices within the business community should join in. By disclaiming the access and influence that money buys, they can send a powerful message: let the playing field be leveled. Let public policy be shaped by power of ideas rather than the power of money.
There is plenty of work to do, plenty of changes that need to be made. But if we can start electing people to Congress over the next few election cycles who have forgone, and are therefore no longer beholden to, special interest money, then I believe we can reform our financial system and begin to address the inequities and injustices that OWS is all about.
Joe Keefe is President and CEO of Pax World Management LLC, investment adviser to Pax World Funds (www.paxworld.com).