What do political donors get for their money?

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A reasonable concern about the potentially corrupting influence of campaign donations is one of the key rationales for campaign finance regulation.  As Professor Milyo of the University of Missouri puts it:

“Conventional wisdom holds that money plays a central and nefarious role in American politics. Underlying this belief are two fundamental assumptions: (1) elective offices are effectively sold to the highest bidder, and (2) campaign contributions are the functional equivalent of bribes.”

Stephen’s post below (“The Mischief Rule”) touches on the first of these assumptions, which he thinks – and I agree – is quite weak.  But the second assumption about the nature of campaign contributions is trickier.

Large donations (or cumulatively large series of donations from associated donors) create plausible corruption concerns.  Mandatory disclosure rules for large contributions respond to this concern.  The government’s approach in the latest round of reforms is to strengthen the disclosure regime by introducing a requirement for parties to disclose the total amount they receive “in bands, including donations that fall under the [current] threshold for disclosure.”  The government also plans to develop an “associated persons” test to try to prevent donors from circumventing the disclosure threshold by using related entities to make donations just under the disclosure threshold.  While the devil is often in the detail, these reforms seem sensible.

However, some countries (like the United States) go further by limiting the amount of money that a person can contribute to candidates.  The Ministry of Justice considered such limits in its Issues Paper but the idea was not adopted in the reform package.  A related but slightly different kind of concern probably motivates such limitations – i.e., public knowledge of large donations may not address the potential risk that politicians could become beholden to large donors and use the legislative process to confer legal advantages on them.

Stephen Ansolabehere, John de Figueiredo, and James Snyder have published an interesting article looking at this issue, “Why is There so Little Money in US Politics?” (2003) 17 Journal of Economic Perspectives 105.  They consider whether there is a “market for public policy” in which, “donations come from firms, associations and individuals that seek private benefits in the form of subsidies, favourable regulations and other policies set by the government” (109).  Their provocative title reflects their observation that, while a vast amount of money gets donated or spent on lobbying, the total sum donated is nonetheless small relative to total government spending.  For example, the Washington Post columnist, George Will, once contrasted the amount donated to presidential candidates with the amount of money spent each year on Easter eggs:

“Reformers desperate to resuscitate taxpayer funding cite the supposedly scandalous fact that each party’s 2008 presidential campaign may spend $500 million. If so, Americans volunteering to fund the dissemination of speech about candidates for the nation’s most consequential office will contribute $1 billion, which is about half the sum they spend annually on Easter candy. Some scandal.”

This raises the question of why interest groups don’t donate even more money to try to obtain rents from the government.

I can’t do justice to Ansolabehere, de Figueiredo, and Snyder’s full analysis – and I know Stephen has some ideas on why it’s sometimes harder than it might seem for a politician to directly reward a contributor.

But one of their suggestions is particularly interesting: “campaign contributions should be viewed primarily as a type of consumption good, rather than a market for buying political benefits” (105).  In other words, most “individuals give because they are ideologically motivated, because they are excited by the politics of particular elections, because they are asked by their friends and colleagues and because they have the resources to engage in this particular form of participation” (118).  They suggest that we should consider whether political fundraisers act more like people selling investment products or consumption products.  Political fundraisers often bring in celebrities and musicians and hold exciting events to entertain donors.  They encourage donors to feel that they are part of a community.  In other words, the motivations of many political donors might be similar to charitable donors – i.e., the individual donor’s payoff is the sense of satisfaction from helping the cause and attending events with other like-minded people.

Ansolabehere, de Figueiredo, and Snyder say that the “consumer contributors” unintentionally make it harder for the other “investment” donors to obtain returns.  The “consumer contributors” provide a source of campaign contributions motivated by personal and ideological considerations rather than the expectation that they will receive a concentrated policy benefit (like a subsidy or favourable regulation) for their money.  Their reward was shaking hands with the candidate, or the satisfaction of being part of the political cause, or seeing their favourite band play at the rally.  So, indirectly, “20 million individuals in the United States protect themselves and their fellow citizens from special interest power with their donations of about $100 dollars each” (at 127).  (Of course, this doesn’t suggest that the status quo is necessarily acceptable.  But it does suggest that additional restrictions on political donations might inadvertently make the situation worse.)

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4 Responses to “What do political donors get for their money?”

  1. Eric Crampton Says:

    Check out also the Hall piece on “Lobbying as legislative subsidy” – it’s very nice. Basic model there is that PAC money mostly goes into having lobbyists draft legislation that both advances their interests and advances the interests of a Congressman to whom they’ll give the Bill. The lobbyist then effectively pushes out the Congressman’s budget curve (the total number of things he can get done) while changing its slope towards those issues the PAC wants. So nothing nefarious – just helping out someone in advancing shared goals.

  2. Jesse Says:

    Cheers for that Eric, it’s an interesting piece and I’ve made a short updating post on it above.

  3. Corporatism « Today's Dissent Says:

    […] By stephenwhittington Jesse made reference to the fact that I thought it was harder for the Government to deliver benefits to special […]

  4. Causation and correlation « Today's Dissent Says:

    […] they think are likely to win as opposed to candidates who they think are unlikely to win.  Jesse notes that political fundraisers “encourage donors to feel that they are part of a […]

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