Posted by “Money makes the world go around.” John Cander
“Honor the Lord with your wealth.” Proverbs 3:9
We have been investigating the reasons why America in the current era is so divided. Our argument thus far is as follows:
- We are living in one of the most contentious periods in American history.
- The proximate cause for this division is the rise of identity politics.
- Our tribal divisions have been amplified by confirmation bias, social bubbles and echo chambers.
- These divisions have led to political divisions which have become more pronounced because of too little democracy (gerrymandering) and too much democracy (the rise of primaries in choosing candidates).
The current post examines the role of political money in making our politics more divisive.
First, it would be helpful to distinguish among the various sources of political money:
- Candidate Committee Funding. This is the garden variety contributions from individual donors (although some may be high rollers) and bundlers.
- Political Action Committees (PACs) (also known as 527s) are organizations dedicated to electing or defeating candidates. They can give up to $5,000 to a candidate for each election. They may receive $5,000 annually from an individual.
- Super PACs make no contributions to candidates or parties. They do, however make independent expenditures in federal races – running ads or sending mail or communicating in other ways with messages that specifically advocate the election or defeat of a specific candidate. Super PACs differ from traditional PACs in three important ways. First, there are no legal limits on the amount an individual or organization can give to Super PACs or the amounts Super PACs can spend to advocate for or against candidates. Second, Super PACs are allowed to raise funds from corporations and unions. Third, restrictions are placed on Super PACs to prevent directly coordinating expenditures with any candidate or party.
- 501 (c) (sometimes referred to as “dark money”) Dark money refers to political spending by nonprofit organizations—for example, social welfare organizations, unions, and trade associations—that are not required to disclose their donors. Such organizations can receive unlimited donations from corporations, individuals and unions. In this way, their donors can spend funds to influence elections, without voters knowing where the money came from.
How much political money is there?
The following chart lays out federal election spending (presidential and congressional races) for every presidential election year between 1992 and 2016.
The chart above points out several important facts:
- Election spending took a big jump between 2000 and 2004 (57%); thereafter, between 2004 and 2016, it increased by about 8% each cycle.
- The Bipartisan Campaign Reform Act of 2002 banned “soft” money, leading to an increased role for 527s.
- The Citizens United Supreme Court decision in 2010 created space for the rise of Super PACs and “dark money.”
- Candidate Committee funding of federal elections fell from 88% of all spending in 2008 to 60% in 2016, as a result of the rapid expansion of Super PACs.
- Between 2004 and 2016, candidate funding declined by 4% per year; 527 funding remained constant; dark money increased by 70% per election, although it was almost cut in half between 2012 and 2016; and Super PAC fund more than doubled between 2012 and 2016.
So what does this all mean?
The growth of independent political financing has made election spending more unequal. The big change in election financing came with the Supreme Court’s 2010 ruling in CITIZENS UNITED V. FEDERAL ELECTION COMMISSION. The fundamental question the Court dealt with was whether there could be limitations on financial election contributions from corporations as was called for in the 2002 Bilateral Campaign Reform Act (BCRA). “By a 5-to-4 vote along ideological lines, the majority held that under the First Amendment corporate funding of independent political broadcasts in candidate elections cannot be limited…The majority maintained that political speech is indispensable to a democracy, which is no less true because the speech comes from a corporation.”
I am reading a very interesting book entitled Our Declaration which discusses in detail the tension in American history between liberty and equality. The Supreme Court, in Citizens United, came down on the side of liberty, arguing that 1) corporations have the same free rights as individuals and that political contributions are a type of “free speech.” The Court’s thumb on the scales redefines free speech as it shifts the democratic ideal of “one man, one vote” to “one dollar, one vote.” Clearly this raises the possibility that the rich will control political speech.
And that’s what happened.
As Adam Bonica pointed out, “One concern raised by reformers is that permitting citizens and corporations to make unlimited political contributions exacerbates unequal access to the political process. The rise of independent expenditures corresponded with a commensurate increase in inequality in political giving, further concentrating political contributions among an elite group of wealthy donors. The top 1% of the 1% of the voting age population accounted for between 9 and 15 percent of total contribution dollars during the 1980s, and has risen steadily since then. By 2016, the share of total contributions from the top donors exceeded 40%.
What has been the impact of Citizens United on political discourse?
First, we need to examine the impact of political money in general. Political campaigns spend the largest share of their money on advertising. According to Travis Ridout “In 2012 and 2014, the average Senate campaign spent 43 percent of its budget on ads and the average House campaign spent 33 percent. Presidential races spend an even bigger chunk of their budgets on advertising. In 2012, for instance, ads made up more than 70 percent of President Obama’s campaign expenses and 55 percent of Mitt Romney’s.”
However, academic studies on the impact of political advertising are ambiguous at best. While winning candidates spend more money it is just as likely that causation runs the other way: that winners get more money because they are winners, not that those who get more money win. This is especially true in the current era when voters are more partisan.
The only experiment that examines the impact of money was conducted on Rick Perry’s run for governor in 2006. Gerber et. al. “reported the results of the first large-scale experiment involving paid political advertising. During the opening months of a 2006 gubernatorial campaign, approximately $2 million of television and radio advertising on behalf of the incumbent candidate was deployed experimentally…Results indicate that televised ads have strong but short-lived effects on voting preferences. This result is virtually identical to that found by John Sides in his analysis of the 2012 presidential campaign. “The larger the advertising advantage that either candidate had, the more vote share he received. However, the effect of ads appeared to decay quickly. Ads on the day before the election appeared to produce small but measurable gains in vote share.”
Adam Bonica published a study that found, unlike the general election, early fundraising strongly predicted who would win primary races. That matches up with other research suggesting that advertising can have a serious effect on how people vote if the candidate buying the ads is not already well-known and if the election at hand is less predetermined along partisan lines. Basically, said Darrell West, Vice President and Director of governance studies at the Brookings Institution, advertising is useful for making voters aware that a candidate or an issue exists at all.
If the impact of political money is so marginal, how important has been the Citizens United decision? Alexander Fouirnaies studied a very long-run data set from elections in Britain examining the impacts of restrictions on spending as they changed over time. In particular, “he tested four theoretical predictions concerning the consequences of spending limits derived from theory: namely that loosened spending limits increase the cost of campaigns, reduce the number of candidates, increase wealthy candidates’ share of the candidate pool, and amplify the incumbency advantages…Consistent with theory, the results suggest that when spending limits are raised by £100,000, on average, the mean cost of a campaign increases by £43,000, 0.3 fewer candidates run for office, the percent of candidates with an upper-class background increases by 10 percentage points, and the percent of money and votes that flow to incumbents surge by approximately 10-15 percentage points. In summary, higher levels of permitted spending diminish electoral competition.”
Although the British and American systems are somewhat different, it’s a good bet that reducing restrictions on political money in the U.S. would also result in increased spending, fewer candidates and wealthier candidates running (Strayer and Bloomberg?). The question of whether unlimited spending favors incumbents is not as clear. Thomas Edsell writing in the New York Times argued that the rise of right-wing media coupled with the new financial heft of non-party organizations, many of which were strongly ideological, has led to the weakening of the Republican Party establishment and the empowering of right-wing ideological think tanks and groups. This, in turn, has led to the phenomenon we noted in an earlier post –the retirement of Republican incumbents.
The Billionaires -Tom Steyer and Michael Bloomberg
Conclusions. The role of money in our worsening political division is unclear. There is more money (though not a lot more); a larger percentage of it is provided by Super PACs and other entities independent of the candidates and the two parties; and a large share of the political money is coming from the richest Americans. What does this money buy? Recognition, particularly for those less well-known, and particularly in primary elections, rather than general elections. Money also acts as a screen, eliminating those candidates who can’t raise a minimum needed to run an organization and get their name put in the public space. Finally, wealthier candidates are more likely to be successful.
However, I could find no solid evidence that our campaign finance rules are contributing to the increasing ideological purity of the political parties.