Spending in the New Jersey gubernatorial race

Jono has previously posted on the uncertain relationship between election spending and election outcomes (noting that other factors such as national partisan swings and candidate attributes mean that election spending is not strongly determinative of election outcomes).

Spending reports from last year’s governor’s race in New Jersey, in which the Republican challenger Chris Christie beat the incumbent Democratic governor Jon Corzine, provide an interesting data point.  Reports indicate that Corzine outspent Christie by 2-1. 

Realclearpolitics reports: 

The final tallies are in for the Gubernatorial race in New Jersey last year. Jon Corzine outspent Chris Christie two-to-one the primary and general election campaigns, $31.5 million to $15.5 million. Even those numbers are a bit misleading since Corzine was essentially unopposed in the primary while Christie had a legitimate race on his hands.

Additionally, the Republican Governor’s Association spent another $7.3 million on Christie’s behalf, which was offset by $7.1 million in spending by Democratic groups on Corzine’s behalf.

Despite the $15 million spending advantage, however, Corzine lost by four points.

So when politicians say that they need to impose restrictions on advertising to control the influence of “big money”, it’s worth asking whether there is any cogent evidence that the relationship between election spending and election outcomes is as direct as they claim or whether they are just making assumptions.

A culture of justification?

The New Zealand Bill of Rights Act, unlike its Canadian and American equivalents, is not supreme law. If a provision of any enactment is inconsistent with the Bill of Rights Act, section 4 explicitly states that the enactment prevails. This has led some to conclude that our Bill of Rights is “weak”. While it is certainly weaker than other models, the Bill of Rights nevertheless reflects a commitment by the New Zealand government that the rights contained in the Bill should only be subject to limits which “can be demonstrably justified in a free and democratic society”.

In light of this, it is reasonable to expect that government policy will be developed with the Bill of Rights in mind. In the words of two leading commentators, the Bill of Rights was designed to create a “culture of justification”:

A “culture of justification” means a culture in which citizens are entitled to call upon the provision of reasons for measures that affect their rights, are entitled to challenge those reasons, and in a sense more importantly, are entitled to expect that in advance of impairment thought will have been given to the reasonableness of a particular limit. [Butler and Butler The New Zealand Bill of Rights Act: A Commentary (LexisNexis, 2005) at para 6.8.1.]

Prior to the introduction of the Bill of Rights, Sir Geoffrey Palmer noted that one of the problems with the development of legislative proposals was that government officials are “not required to test them against basic principles and they are not invited to apply a set of standards to them” [510 NZPD 3761 (21 August 1990)]. Sir Geoffrey hoped that the Bill of Rights would change this.

Perhaps picking up on this suggestion, the Ministry of Justice has published Guidelines on the Bill of Rights Act to assist the public sector in the development of government policy. In those guidelines, the Ministry of Justice explains that the requirement that limits be “demonstrably justified” means that the onus is on the government to justify any limits to rights [see Ministry of Transport v Noort [1992] 3 NZLR 260 (CA) at 283]. The guidelines explain:

That means justifying your policy or proposed law with evidence such as research, empirical data, findings from consultation, reports, or the results of inquiries or reviews. As with any good policy development, it is important not to act on assumptions, but to provide a well-argued case – based on high-quality analysis and research – that clearly establishes why a particular course of action is necessary. You should avoid relying solely on comparable overseas developments to justify your proposals. The social/political and cultural context in those countries, which would go to demonstrating the justification in their jurisdictions, may be significantly different to our own.

I think that is good advice and accords with my view that “demonstrably justified” limits are limits that are based on actual evidence and not mere supposition.

Last year a friend sent the Ministry of Justice an Official Information Act request in relation to the electoral finance reform project to find out what evidence the Ministry had collected to support its apparent belief that there is a strong causal relationship between electoral spending and electoral outcomes.

The Ministry of Justice responded by indicating that it holds no documents, reports or studies carried out or procured by it on or after 18 September 2005 (ie in the period where it worked on both the Electoral Finance Act 2007 and the current review of electoral law) concerning:

• the empirical relationship between party expenditure and electoral outcomes in New Zealand;
• the empirical relationship between candidate expenditure and electoral outcomes in New Zealand; and
• the empirical relationship between (non-party and non-candidate) interest group expenditure and electoral outcomes in New Zealand.

This is surprising. The Issues Paper prepared by the Ministry of Justice as part of its review of electoral laws, makes reference to the need to create a “level playing field” and highlights the concern that high spending limits may “’tilt’ the playing field unreasonable”. Given the policy decisions that have been made, these concerns must have been accepted to some degree. In fact, the rationale behind much of the Ministry’s work is that there is a strong link between electoral spending and electoral outcomes.

Has the Ministry followed its own advice? Or has it fallen into the trap it warns of in the guidelines and acted on mere assumptions?

Colorado Supreme Court strikes down limits on campaign contributions

Continuing the campaign finance theme briefly, Volokh reports that the Colorado Supreme Court has just struck down certain campaign contribution limits. Campaign contribution limits are limits on the amount that one can contribute to a political candidate, as opposed to limits on expenditure independent of a candidate (ads saying vote for or against candidate X). It was this later type of restriction which the US Supreme Court considered in Citizens United.

Anyway, the case is Dallman v Ritter. The Denver Post has a supportive editorial here.

I haven’t had a chance to read the case in detail yet but once I do I may write a further post.

Will corporations rush to increase spending in US elections?

A fascinating article at Politico discusses the likely impact of the United States Supreme Court’s decision in Citizens United. Briefly, the Supreme Court found that a prohibition on corporations and unions engaging in electioneering communication or expressly advocating for the election or defeat of a candidate was a violation of the First Amendment right to free speech.  There has been something of a Chicken Little response to the decision, as the video in Jesse’s comment below points out.

Anyway, the Politico article suggests that the response from corporates may be quite modest.  The article identifies a number of reasons why many corporations have been trying to get out of political giving:

In the past decade, corporations have actually been trying to get out of the business of big political giving. They sided with reform advocates when the McCain-Feingold law was first challenged in 2003 and testified on behalf of its ban on unlimited corporate giving to the political parties, which were dubbed “soft money” donations.

The reasons for this reluctance were complex. Some executives hated the way politicians always had their hands out, making appeals that were difficult to turn down for fear of retribution in the legislative process. Others didn’t like the lack of control they had over how their money was spent.

The court ruling would give corporate officials that control, but many of them may decide — especially those in publicly held companies — to keep the cash for their real business needs.

Running attack ads against political targets would create real risks of alienating customers and shareholders. And, given voters’ sentiments toward corporations today, most politicians would probably not welcome a glowing ad campaign on their behalf that was funded by Big Business.

The article goes on to note that:

The penchant CEOs have shown for keeping a low political profile for their businesses has been reinforced lately by shareholder groups that are pressing companies to publicly disclose their political spending and the process by which they distribute that money.

Currently, about 70 firms, or roughly half of the Standard & Poor’s top 100 companies including Microsoft, Aetna, and Time Warner, have adopted such practices.

Bruce Freed, head of the Center for Political Accountability, an organization that advocates for such disclosures, said he will redouble his efforts in light of the court ruling. He expects success largely because a shareholder disclosure policy will be a corporations best reason “to resist the heightened pressure” to give to political groups.

It will be interesting to watch the upcoming US midterm elections and see how corporates and unions respond to the Supreme Court’s decision.

How much money was spent by electoral candidates in 2008?

In the ongoing back and forth that Stephen and Michael are having in the comments section in response to one of Stephen’s earlier posts, Michael comments that he would be more convinced that spending plays a limited role in elections if politicians “started acting as if money for campaigning didn’t matter”.

As a result I’ve been wondering how much electorate candidates spent in the 2008 election.  If candidates believed that spending would have a significant influence on the outcome of that election, they would presumably have spent as close to the $20,000 cap as possible.

I’ve compiled a table (which is included at the bottom of this post) of the spending by the two highest polling candidates in the closest electorate races in the 2008 election (using the figures from the Electoral Commission’s website).  I selected all those electorates which were decided by less than 2,000 votes (15 electorates) on the basis that if money matters, presumably it matters more in close races. The table shows the amount spent by each candidate and that figure as a percentage of the $20,000 spending cap.

Obviously, a range of factors impact on how much a candidate spends in an election (not least how much the candidate can raise).  The table also has obvious limitations, so I include it only because I think it is interesting to note that in a number of these races candidates could (assuming they could raise more money) have spent more. The average amount spent by the candidates in the table below was $14,660.07 (or 73.30% of the maximum). Did candidates refrain from spending more because they didn’t think it was worthwhile or did they face fiscal constraints?

Finally, when I was compiling the table I noticed that spending in the Maori electorate seats seemed generally quite low.  On average the Maori Party candidates spent $11,935.87 per seat and the Labour Party candidates $10,052.71 per seat (I haven’t had a chance to work out the average for the other seats yet). Interestingly, the Cabinet Paper records that the Maori Party were in favour of increasing spending limits for constituency candidates in electorates in excess of 20,000 square kms (see para 43).  The Cabinet Paper doesn’t say how much the Maori Party wanted to increase the limit by.  I wonder what the thinking behind the Maori Party submission was? Perhaps they are hoping to have more funds to spend at the next election?

 

Update: Jono has just informed me that Nikki Kaye actually raised over $20,000, but according to the table above went on to spend just under $12,000.  Pretty remarkable if advertising is an important influence on voter preference. Equally a bit of a problem for my view that advertising is the best of a bad bunch in terms of convincing voters. – Steve

Advertising and Cost

Let us assume that the volume of advertisements help potential politicians win an election.  At what period of human existence would campaign finance restriction be an effective way to “level the playing field”?

Certainly, political advertising two thousand years ago was not all that expensive. This caricature, drawn on a wall in Pompeii, would cost more time than money. Then again, holding a large banquet or putting on a show was quite expensive.  However, this was typically the role of the politician – not the candidates – and was often seen as an obligation rather than a political opportunity.

In many ways, it seems like campaign finance laws are last century’s battle. It is undoubtedly expensive to advertise in National newspapers and on television. But newspaper subscriptions are declining, and many are downloading television shows in order to avoid advertisements.  The cost of advertising seem to me to be declining rapidly, in which case it is difficult to maintain that there’s a barrier faced by certain political parties. Set up a blog, have a weekly podcast, register on facebook and twitter.

Equally, the idea that the influence of money can “drown out” other messages is nonsensical. The diversity of media available is enormous, and people tend to self-select in terms of what messages they are exposed to.

Causation and correlation

In response to Stephen’s post, The Mischief Rule, Michael points in a comment (by the way thanks for reading and commenting)  to then Senator Obama’s victory over Senator McCain in the 2008 US Presidential election and suggests that Obama’s ability to outspend his rival was one of the factors that led to his victory:

There were no doubt many factors that contributed to senator obama defeating senator mccain but i think it would be hard to maintain that his ability to massively outspend his opponent on the ground and in the air in all the major swing states wasnt one of them.

In the case of Obama there was certainly a correlation between outspending his opponent and electoral success but was there causation?  I doubt it.  The Republican party was relatively unpopular in 2008 and McCain was always going to face an uphill battle.

As for Obama’s ability to raise large amounts of money, Stephen has already noted that Obama’s ability to persuade voters to vote for him was correlated with his ability to induce campaign contributions. I agree. It’s not surprisingly that candidates that convince people to vote for them find it easy to convince voters to donate to them as well.  I also suspect that donors find it more rewarding to donate to candidates that 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 community”.  People generally prefer to be part of winning communities rather than losing ones.

The studies into the link between campaign expenditure and electoral outcomes do not provide a particularly strong basis for concluding that electoral outcomes are highly dependent on campaign spending.  Jesse, Stephen, Yogesh and I canvassed some of those studies in our submission on the Ministry of Justice’s Issues Paper which you can find here (the discussion is at paras 8.5-8.17).  A study by Steven Levitt is particularly interesting. I’ve reproduced below the summary of it that we included in our submission:

Studies which seek to isolate the effects of increases in campaign spending that are unrelated to a candidate‘s direct appeal to voters are one way to determine the nature of the relationship between campaign expenditure and election outcomes. While these studies are difficult to undertake, some recent studies have used sample selection to reduce the bias shown above. One study sought to isolate campaign spending by limiting the sample to those elections in which the same candidates faced one another on multiple occasions – a sample which consisted of 633 elections in the United States between 1972 and 1990. Assuming that candidate quality therefore remained the same, and controlling for other factors such as incumbency and national-level partisan swings, the author found that “campaign spending has an extremely small impact on election outcomes”.

I acknowledge that there are of course other studies (and we referred to some of those in the submission).

There is another point.  Not only is there good evidence which suggests that campaign spending is not causative of electoral success, even the correlation between campaign spending and electoral outcomes is not clear cut.  Consider the table below (also from our submission to the MOJ) which compares spending in the 2001 and 2005 UK general elections.

Despite spending less in 2001 than the Conservative Party, the Labour Party won far more seats. However, despite increasing its spending by nearly 64% in the 2005 UK parliamentary elections – and despite spending virtually the same amount of money as the Conservative Party in 2005 – the Labour Party had a significant net loss of seats. It is possible to surmise a number of reasons for this based on, for example, national partisan swings or the likelihood that many Labour Party gains in 2001 were in electorates which would be difficult for that party to hold in the long-term. However, there seems to be no basis for explaining the changes in electoral performance based on spending.

A comparison of the 2005 and 2008 general elections in New Zealand is similarly inconclusive.

Update: Lobbyists

In a comment on the earlier post about political donations, Eric Crampton points to an interesting article about political lobbyists: “Lobbying as Legislative Subsidy” (2006) American Political Science Review 69 by Professors Hall and Deardorff.

The standard way of thinking about political lobbyists is that they attempt to sway wavering politicians on key votes (i.e., they are trying to change legislators’ preferences).  Hall and Deardorff acknowledge that this model is quite a good explanation of how lobbyists behave in the following situation:

“(i) The legislator is perceived to have a weak preference … (ii) a specific matter is likely to be decided by a public vote; and (iii) the outcome of that vote is thought to be in doubt.”

However, Hall and Deardorff think that this doesn’t explain a great deal of legislator-lobbyist interaction.  Why do legislators give access to think tanks, for example, that don’t have a large membership base and don’t make large monetary contributions?  They can’t offer the legislator much in the way of votes or money.  And why do lobbyists spend time working with legislators who already have strong pre-existing commitments to their causes – shouldn’t they concentrate primarily on trying to sway legislators who think differently?  Yet some studies show that lobbyists spend most of their time with “those whose views they least needed to change—–their already strong supporters.”

Hall and Deardorff suggest an alternative account, which is pretty interesting:

“The main idea is that lobbying is primarily a form of legislative subsidy—–a matching grant of costly policy information, political intelligence, and labor to the enterprises of strategically selected legislators. The proximate objective of this strategy is not to change legislators’ minds but to assist natural allies in achieving their own, coincident objectives.”

In other words, Hall and Deardorff argue that lobbyists give their expertise to political allies to improve their allies’ legislative resources.  Their model is based on five assumptions:

For a legislator to have much influence on policy, she must work at it. […]

Legislators’ resources are scarce. […]

For any given period, individual legislators care about influencing more than one policy at a time […]

Legislators care about some issues more than others […]

Relative to legislators, lobbyists are specialists.

In their view, lobbyists increase the amount that legislators can accomplish in relation to goals on which the legislators and lobbyists already agree.

What do political donors get for their money?

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.)

The Ectopic Nature of Electoral Finance Law

Professor John Prebble has a theory that the incomprehensibility of tax law is caused by the misalignment between “natural law” and “the laws of men and women.”  There exists, he argues, an ectopia (or dislocation) between the economic concept of income and the legal concept of income that essentially cannot be solved.  This ectopia is the result of physical facts such as geography (e.g. where someone is resident) and time (e.g. income is earned on an annual basis) that the law is unable to treat neutrally.

I believe that the same thesis applies to electoral finance law.  It is a law of nature that people will try to convince others of their beliefs.  Trying to convince others will always have a cost – sometimes it will cost money, sometimes it will cost time – but it will always cost.   However, the laws that we design to try to deal with speech are necessarily contrived.  Electoral finance laws have to target particular kinds of speech (it cannot regulate what I say to my neighbour), and have to target a particular type of expense (typically money, not time).  That’s all you need for the entire system to start to represent a nonsense.

As an example, consider the initial Government position to cap expenditure of political parties, but not parallel campaigners.  The obvious flaw – as pointed out by Metiria Turei – is that parties will merely use parallel campaigns to advertise beyond the legislated limits.  In order to maintain the effect of limits on political party expenditure, they have to prohibit parallel campaigners from supporting a party.  The implication of this is an increase in the amount of negative campaigning by parallel campaigns.  Negative campaigning is not per se problematic, but when it arises by virtue of a distortion in the advertising market, then we are decreasing human welfare. 

Starting down the road of electoral finance law leads inexorably to arbitrary decisions you wish you did not have to make.  No matter how many times you compile an Issues Paper, seek comments on a Proposal Paper, or send potential laws to a Select Committee, there is no real way to avoid the ectopia of electoral finance law.

Whenever the debate over electoral finance laws becomes circular, I am reminded of a quotation from Marla Daniels to Cedric in The Wire:  “You cannot lose if you do not play.”