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

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.