Follow the Money … If You Can
As we have explained in the previous chapter, measuring the impact of lobbying and campaign finance is fundamentally difficult.
Figure 10.3 shows the flow of money and influence from firms and wealthy individuals to government agencies, political parties, and elected officials. The complexity of the chart is immediately apparent. The figure highlights the flows that we observe, the flows that we observe partially, and the flows that we do not observe.
FIGURE 10.3 What we see, and what we don’t
An important distinction must be made between “hard” money and “soft” money. Hard money consists of direct donations to campaigns, political parties, and traditional PACs, and is typically restricted. Soft money consists of donations to the nonfederal accounts of a political party. Soft money is typically spent on television and radio ads. These ads focus on issues and do not expressly endorse candidates, but they are clearly aimed at affecting votes in federal elections.
There is a corollary in the world of lobbying. Firms can hire internal or external lobbyists. Internal lobbyists are employees of the firm and lobby on its behalf. We can observe which agency or which politician they meet, and the issue that they discuss. The same is more or less true with external lobbyists, who must report the name of the firm that hired them.
But much lobbying happens via trade associations. Trade associations create an opaque filter between the firms and their targets. When lobbyists from a trade association meet with a government official, we observe it, and we know the issue being lobbied. However, we do not observe the contributions of firms to the trade association, so we cannot link the lobbying to a particular firm. This means that we cannot compute the total lobbying effort of a particular firm.
Campaign finance is relatively more transparent, or at least it used to be. Most of what we know comes from the Center for Responsive Politics, a nonpartisan research group tracking money in US politics. The center’s website provides most of the data and observations in this section regarding the direct contributions of firms and individuals, as well as those of PACs and super PACs.
Political action committees are used to raise and spend money to help some candidates and defeat others. Most PACs represent business, labor, or ideological interests. PACs can give $5,000 to a candidate committee per election (primary, general, or special). They can also give up to $15,000 annually to any national party committee, and $5,000 annually to any other PAC. PACs may receive up to $5,000 from any one individual, PAC, or party committee per calendar year.b Table 10.3 lists the top PACs of the 2015–2016 election cycle. You can see that most of the contributors are typically large (AT&T), heavily influenced by regulations (banks and credit unions), or reliant on government contracts (Lockheed Martin, Northrop Grumman).
Many politicians also form leadership PACs as a way of raising money to help fund other candidates’ campaigns.c During the 2016 election cycle, leadership PACs raised $49 million. The Democrats received $19 million (38 percent) and the Republicans received $30 million (63 percent). The top five leadership PACs of 2016 are listed in Table 10.4.
TABLE 10.3
Top Sixteen PACs of the 2016 Election Cycle
PAC name
Total
Democrats
Republicans
National Association of Realtors
$3,973,350
42%
58%
National Beer Wholesalers Association
$3,322,700
43%
57%
AT&T Inc.
$2,953,750
38%
62%
Honeywell International
$2,861,364
40%
60%
National Auto Dealers Association
$2,659,250
28%
72%
Lockheed Martin
$2,612,750
38%
62%
Blue Cross / Blue Shield
$2,573,398
36%
64%
International Brotherhood of Electrical Workers
$2,570,650
96%
4%
American Bankers Association
$2,444,007
21%
79%
Credit Union National Association
$2,380,350
47%
53%
Operating Engineers Union
$2,250,300
74%
26%
Comcast Corp.
$2,242,300
36%
64%
National Association of Home Builders
$2,185,625
17%
83%
Boeing Co.
$2,163,135
43%
57%
Northrop Grumman
$2,135,500
39%
61%
Nat. Assn. of Insurance & Financial Advisors
$2,091,950
33%
67%
Total
$41,420,379
42%
58%
Data source: Center for Responsive Politics calculations using data released by the FEC on November 27, 2017
Super PACs are a new form of PAC created after a court decision, SpeechNow.org v. FEC, in 2010 that has reshaped the campaign finance landscape. In February 2008, SpeechNow.org—an organization that pools individual contributions—filed suit against the Federal Election Commission in the US District Court of the District of Columbia, challenging the federal contribution limits and disclosure requirements for political committees that make independent expenditures in elections. The district court denied the request, and SpeechNow.org appealed the decision to the US Court of Appeals for the DC Circuit.d The Court of Appeals decided to stay the case to await a decision by the Supreme Court in a related and highly controversial case.
TABLE 10.4
Top Leadership PACs in 2016
PAC name
Affiliate
Total
Democrats
Republicans
Majority Committee PAC
Kevin McCarthy (R-Calif)
$2,086,513
$0
$2,086,513
Prosperity Action
Paul Ryan (R-Wis)
$1,326,238
$0
$1,326,238
AmeriPAC
Steny H. Hoyer (D-Md)
$1,019,499
$1,019,499
$0
Eye of the Tiger PAC
Steve Scalise (R-La)
$942,485
$0
$942,485
More Conservatives PAC
Patrick McHenry (R-NC)
$697,000
$0
$697,000
Citizens United v. FEC
While SpeechNow.org was appealing its denial, the US Supreme Court was considering the case of Citizens United v. FEC. The conservative nonprofit organization Citizens United wanted to air a film critical of Hillary Clinton shortly before the 2008 Democratic primary, but federal law—based on the McCain–Feingold Act of 2002—prohibited any corporation (or labor union) from doing so within thirty days of a primary or sixty days of an election. In addition, corporations could not spend money to advocate for the election or defeat of a candidate. The court found that these provisions of the law conflicted with the US Constitution. On January 21, 2010, the Supreme Court held that the free speech clause of the First Amendment prohibits the government from restricting independent expenditures for communications by nonprofit corporations, for-profit corporations, labor unions, and other associations.
This landmark decision would affect constitutional law, campaign finance, and corporate law. It was a divisive and controversial decision with a 5–4 majority. Justice Kennedy’s majority opinion—with Justices Scalia, Alito, Thomas, and Chief Justice Roberts joining—found, “If the First Amendment has any
force, it prohibits Congress from fining or jailing citizens, or associations of citizens, for simply engaging in political speech.” A dissenting opinion by Justice Stevens—joined by Justices Ginsburg, Breyer, and Sotomayor—argued that the majority decision “threatens to undermine the integrity of elected institutions across the Nation. The path it has taken to reach its outcome will, I fear, do damage to this institution … A democracy cannot function effectively when its constituent members believe laws are being bought and sold.” The Citizens United ruling is one of the most controversial in the history of the court. For its proponents, it was a defense of the First Amendment. For its critics, it basically legalized corruption.
Let us now go back to SpeechNow.org. Based on the Supreme Court decision, the Court of Appeals for the DC Circuit struck down the federal contribution limits of independent expenditure committees in March 2010. The basic motivation was that “the government has no anti-corruption interest in limiting contributions to an independent expenditure group.” These independent expenditure committees are known today as super PACs.
The decisions did not affect disclosure requirements. The Citizens United case also did not affect the federal ban on direct corporate contributions to candidates or political parties. The Court of Appeals upheld the political committee disclosure requirements.
In sum, the difference between PACs and super PACs is that super PACs can raise as much money as they want from corporations, unions, associations, and individuals, then spend unlimited sums to overtly advocate for or against political candidates. However, unlike traditional PACs, super PACs cannot donate money directly to political candidates, and their spending must not be coordinated with that of the candidates they benefit. Super PACs make no contributions to candidates or parties, but they make independent expenditures in federal races to advocate the election or defeat of a specific candidate—running ads, sending mail, and so on. These committees file regular financial reports with the FEC that include their donors along with their expenditures.
TABLE 10.5
Super PACs with Over $3 Million in Independent Expenditures in 2018
Super PACS
Supports /
opposes
Independent
expenditures
Viewpoint
Total raised
Congressional Leadership Fund
$70,579,180
Conservative
$100,999,974
Senate Majority PAC
$46,632,153
Liberal
$95,693,285
Senate Leadership Fund
$40,977,919
Conservative
$61,962,292
House Majority PAC
$16,366,917
Liberal
$51,456,232
Women Vote!
$13,572,937
Liberal
$19,134,659
New Republican PAC
supports Scott
$12,129,362
Conservative
$10,864,801
DefendArizona
supports McSally
$11,057,869
Conservative
$1,375,200
Club for Growth Action
$9,831,861
Conservative
$13,266,020
National Association of Realtors
$8,071,191
$11,050,215
With Honor Fund
$7,026,669
$17,683,994
America First Action
$6,879,805
Conservative
$18,129,004
Patients for Affordable Drugs Action
$6,402,502
$3,117,279
Restoration PAC
$6,334,807
Conservative
$7,252,065
Americas PAC
$5,807,485
Conservative
$5,657,500
Highway 31
supports Jones
$4,232,558
Liberal
$4,367,528
Wisconsin Next PAC
supports Vukmir
$4,110,362
Conservative
$2,940,050
Change Now PAC
$3,897,079
Liberal
$1,782,491
Integrity New Jersey
opposes Menendez
$3,462,048
Conservative
$2,125,000
Total
$277,372,704
$428,857,589
As of October 6, 2018, 2,153 groups organized as super PACs had reported total receipts of $792 million and total independent expenditures of $350 million in the 2018 cycle. Table 10.5 lists the super PACs with more than $3 million in independent expenditures. Conservative super PACs have raised $225 million and liberal ones have raised $172 million.
What’s in It for Politicians and Businesses?
It’s always been difficult for researchers to draw a straight line from campaign contributions to lawmakers and specific effects, so it’s especially helpful when former lawmakers pull back the curtain for us.
In a speech in April 2018, Mick Mulvaney, a former representative from South Carolina who left Congress to serve in various positions in the Trump administration, told a group of banking industry executives exactly how things worked during his time in the House.
“We had a hierarchy in my office in Congress,” he said. “If you’re a lobbyist who never gave us money, I didn’t talk to you. If you’re a lobbyist who gave us money, I might talk to you.” He encouraged his listeners to continue sending lobbyists to engage with Congress, presumably after having opened the door with a contribution, calling the process one of the “fundamental underpinnings of our representative democracy” and adding, “You have to continue to do it.”
Research supports this perspective. For instance, Stephen Ansolabehere, John M. de Figueiredo, and James M. Snyder Jr. (2003) show that campaign contributions and lobbying are positively correlated, suggesting that campaign contributions are a way for interest groups to buy access to politicians. Once they gain access, lobbyists have a chance to voice the interests of their clients.
So what’s in it for politicians and business groups? The short answer is: re-election and influence.
However, straight-up admissions that money buys access, like Mulvaney’s, are very much the exception to the rule. In general, it is extremely difficult to collect evidence demonstrating what feels like a pretty straightforward insight. On the one hand, it should be obvious. Campaign finance and lobbying allow businesses to gain access and influence regulators. As Thomas Stratmann (2019) explains: “It may be that contributions influence the positions of a candidate, the roll call votes a candidate casts, or even the amount of access time contributors receive from a candidate. These conjectures all derive from the assumption the firms are profit-maximizing and don’t make contributions for reasons that do not benefit their bottom line. They contribute with the expectation of receiving something in return for their contribution.”
Reciprocally, campaign finance should help win elections. However, as Stratmann notes: “from the beginning of the empirical literature up to the present day a consensus has not developed about the role of campaign expenditures for winning elections.”
It is important to keep in mind that money is not the only source of influence. The first thing lobbyists do when they want to move legislation on behalf of a firm is to study the distribution of that firm’s employment across districts. That is a good way to locate one’s allies. Matilde Bombardini and Francesco Trebbi (2012) show that when an industry carries a lot of employment locally, the member of Congress from that district tends to vote as the industry wants. As a result, the industry does not need to spend much in the form of direct campaign contributions.
It is pretty clear that the goal of campaign contributions is to influence not only the outcome of elections, but also the behavior of the politicia
ns after the election. W. P. Welch (1980) shows that most donations go to incumbents who are likely to win and not to those in a close race. Similarly, Stratmann (1998) finds that the timing of donations follows the timing of legislative debates at least as much as the timing of the expenditures of the election cycle.
What is it exactly that firms get in exchange? It’s hard to know. Measurement of outcomes is difficult because the parties have an incentive to hide any quid pro quo. Researchers are forced to work with whatever data are available. For instance, the research on the impact of campaign finance has traditionally focused on roll-call votes because roll-call data are most easily accessible. But do we expect influence to show up in roll-call votes? A quid pro quo exchange of contribution for a roll-call vote would be rather obvious. It might well be noticed and bring in a suspicion of corruption. Interest groups prefer to follow a long-term influence strategy rather than to seek short-term influence on a particular vote (Snyder, 1992). Randall S. Kroszner and Stratmann (2005) argue that the nature of committees actually facilitates long-term influence via repeated interactions. But this makes it much harder to measure.
When we look at election outcomes, we encounter the same endogeneity issue as with lobbying. A classic paper by MIT political economist James Snyder shows that the allocation of campaign resources is deliberate and strategic (Snyder, 1989). Think about it: who would like to spend a lot of money on a campaign: someone who is sure to win or someone who is unsure about winning? Probably the second one. On the other hand, incumbents have an easier time raising funds, and they are also more likely to win because they have already won once. Simply looking at the probability of winning an election and the amount spent on the campaign trail cannot tell us how much money matters and why incumbents have an advantage.
The Great Reversal Page 20