THE POWER OF MONEY: First in a Series on Money in Politics

July 5, 2016

This post is re-released to include a new report by the Roosevelt Institute. During the previous two months, I participated in the Demos Legal Convening at the University of Pennsylvania, and the Scholars Strategy Network meeting on Purchasing Power at the Soros and Ford Foundations. The meetings focused on reducing the impact of money in politics, which will be the subject of several of my next commentaries.

Money creates dependence on the narrow group of people who can fund campaigns.[1]

In turn, money affects elections. The best work I’ve seen is not yet public but confirms our intuitions – money increases the votes candidates get and affects how the elected vote. Scholars have even been able to trace which legislators switched votes on legislation.

The economic impact is huge. By non-enforcement of antitrust laws and providing regulatory breaks, political protection enables companies to take advantage of the public. Here, Albany politicians arranged to have themselves showered with gifts by creating a market payable in contributions by corporations seeking permission to build casinos. That’s also why the state ignored the evidence of harm casinos do. On the national level, political protection for favored corporations and industries has had enormous consequences.

The Roosevelt Institute estimates that the financial sector alone cost the public “between $40,000 and $70,000 for every man, woman, and child in the U.S., or between $105,000 and $184,000 for the typical American family”! No new taxes. Just regulatory bonanzas that take our money and put it in company pockets, because of the benefits our elected representatives do for them.[2]

Instead of facilitating productive activity, the financial sector now threatens prosperity, overcharges for brokerage services, ruins lives through predatory lending, misallocates talent to socially unproductive employment, re-orients corporate behavior “to short term speculation that costs jobs, wages, and productivity growth; and choos[es] poor investments that put people’s retirement incomes at risk. …”[3] It’s had a huge impact through private and public pensions, mortgage financing, credit derivatives, asset management services and predatory lending, imposing the resulting costs and financial instability on society and on the poor.[4]

Compare those figures with the costs of political campaigns. Reported expenses for the 2012 federal election cycle including both the presidential and congressional races exceeded $6 billion. But compare the $6 billion with the trillions that the financial sector alone has cost. We are talking about a return to investment of thousands of times, even when the cost of lobbying is added.[5] The costs of political campaigns are small change by comparison. Which is why investing in politics is such a good deal for those looking for big profits at public expense.

That’s why in an upcoming commentary, I will talk about public financing of political campaigns. If you want to spend your money to fill corporate deep pockets, that’s your business. But I’d rather get a lot more value for mine.

— This commentary was originally broadcast on WAMC Northeast Report, July 5, 2016.

[1] Lawrence Lessig, Republic Lost (2011); Ian Shapiro, Notes Toward a Conditional Theory of Rights and Obligations in Property, in Stephen E. Gottlieb, Brian H. Bix, Timothy D. Lytton and Robin L. West, Jurisprudence Cases and Materials: An Introduction to the Philosophy of Law and Its Applications 914 (LexisNexis 3d ed. 2015) (“defin[ing] freedom in terms of the multiplication of dependent relationships”); Bruce Bueno de Mesquita and Alistair Smith, The Dictator’s Handbook: Why Bad Behavior is Almost Always Good Politics (2011); BRUCE BUENO DE MESQUITA, et al,  The Logic Of Political Survival (2003).

[2] http://rooseveltinstitute.org/overcharged-high-cost-high-finance/ (page 3 of the downloaded report).

[3] Id.

[4] Id. at 4, 40-42. And see generally www.OpenSecrets.org.

[5] For studies of the return to lobbying without, however, including the cost of campaign finance, see Lee Drutman, Lobby more, pay less in taxes, http://sunlightfoundation.com/blog/2012/04/16/lobby-more-pay-less-in-taxes/ (note that their studies are examples, not totals); Steven Strauss, Here’s Everything You’ve Always Wanted To Know About Lobbying For Your Business, http://www.businessinsider.com/everything-you-always-wanted-to-know-about-lobbying-2011-11.


Money in Politics

May 26, 2015

For decades before the Supreme Court decided Citizens United, political scientists concluded that more money helped our democracy by increasing competition. They had also concluded that it did not disadvantage Democrats, who would hold their own in fundraising. Even after Citizens United, those conclusions still seem true. But those scholars did not address other ways that money changes politics.

I’m still angry with Ralph Nader for his part in the 2000 election. His claim that there was no difference between the parties seems way off the mark. It’s hard to imagine Al Gore would have made the same mistakes George Bush did. But Nader was onto something else. Every candidate, from Gore to Hilary and Bush to Romney, has sought support from the financial industry and other tycoons and multinationals. Some regulatory proposals looked different when first made but all were whittled down. Obama supported Elizabeth Warren for a new agency but relented to the opposition. Money matters.

That’s fiendishly difficult to measure. Most scientific work is based on comparisons. When everybody’s doing it, there are no satisfactory comparisons.

But the consequences are huge. The cost of campaigns is increasing fast, doubling since 2000. More than a fifth of the expense of Senate races, and more than a third of the cost of House races came from PACs in 2014. Outside organizations now spend more than 20% of campaign expenses, increasingly from undisclosed sources. Of the rest, less than a third of 1% of the adult population of the U.S. provides two thirds of all individual contributions to federal candidates, PACs and Parties.[i]

What do they get for that? From 2007 to 2012, according to the Sunlight Foundation, “America’s most politically active corporations spent a combined $5.8 billion on federal lobbying and campaign contributions.” The Foundation concluded that, in return, those same corporations got “$4.4 trillion in federal business and support,” more than the government paid all Social Security recipients, and two-thirds of all the money that all of us together as “individual taxpayers paid into the federal treasury.” Kevin Phillips had described the power of such political investment as many thousands to one?[ii] Sunlight Foundation calculated that “for every dollar spent on influencing politics, the nation’s most politically active corporations received $760 from the government,” a seventy-six thousand percent return.[iii] Contributions coupled with lobbying work exceedingly well at those levels.

Bruce Bueno de Mesquita and his colleagues elaborated the impact of what they call the “selectorate,” the people who dominate the choice of political leadership.[iv] As the selectorate shrinks, politicians direct ever increasing public benefits toward that shrinking group and fund them on the backs of everyone else, paving a path to the collapse of democratic government. Here, that one tenth of one percent of Americans, who bring home the great majority of America’s wealth, dominate our politics as they do our wallets.

Political scientists urge public funding as the best available solution. Just take money out of the equation. The public doesn’t like funding politicians they may not agree with, and we don’t much like paying their salaries either. But to get a politics which takes account of the welfare of the entire American population, it appears to be the most likely path. And a very good investment.

Next week, the risks.

— This commentary was broadcast on WAMC Northeast Report, May 26, 2015.

[i] The Center for Responsive Politics keeps track of the data at OpenSecrets.org. See https://www.opensecrets.org/overview/index.php, https://www.opensecrets.org/overview/cost.php and https://www.opensecrets.org/overview/donordemographics.php [visited May 12, 2015] for the information presented.

[ii] Kevin Phillips, Wealth and Democracy (Random House 2002).

[iii] https://sunlightfoundation.com/blog/2014/11/17/fixed-fortunes-biggest-corporate-political-interests-spend-billions-get-trillions/.

[iv] Bruce Bueno de Mesquita and Alastair Smith, The Dictator’s Handbook: Why Bad Behavior Is Almost Always Good Politics (New York: Public Affairs, 2011); Bruce Bueno de Mesquita, Alastair Smith, Randolph M. Siverson and James D. Morrow, The Logic of Political Survival (Cambridge, MA: MIT Press, 2003).


Casinos and the Board of Elections

November 5, 2013

When this is aired, I will be in Washington, D. C., where my students and I went to the U.S. Supreme Court to hear cases argued that we have been studying. Since it is also election day, I had to fill out an absentee ballot. On the ballot, the casino proposition leads the group of ballot propositions. Governor Cuomo had “submitted a concurrent resolution to the State Legislature to amend article I, § 9 of the State Constitution to allow for ‘casino gambling regulated by the state.’”[1]

Having been twice approved by the legislature, the proposed amendment is being submitted to New York voters. But the State Board of Elections added the following language to the proposal for the obvious purpose of encouraging voters to support it:

“for the legislated purposes of promoting job growth, increasing aid to schools, and permitting local governments to lower property taxes through revenues generated.”[2]   Read the rest of this entry »


%d bloggers like this: