Money in US Politics

Running head: Campaign finance (money in US politics)

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 Money in US Politics
2

Campaign finance (money in US politics)

Introduction

According to a poll by the New York Times, most Americans, regardless of their political

affiliation, believe that money plays a disproportional role in US elections. Consequently,

candidates who win elections support positions of their donors and not those of the electorates.

The same poll found that Americans thinks there is a need to reform campaign financing to limit

the role of the wealthy and corporations from undermining democracy. Senior politicians such as

Bernie Sanders have voiced the same views and called for reforms to restrict the role of money

in US elections. However, while contributions might influence policy, such influence is minor at

best.

The evidence of distortion of policies by electoral strategies is limited and mixed. While some

argue that distortion is real, quantitative work analyzing the relationship between campaign

spending and policy finds no evidence that increased spending leads to policies that favor the

wealthy. However, what is clear is that privately funded campaigns impose costs on the society.

The concerns that that people raise regarding money in politics might be more to do with the cost

the money impose on society1.

Is there evidence of money influence in politics?

Getting complete data on campaign finance in the United States is a hard task. While some of it

is visible, the so-called "dark money" is no visible but still influential. The "dark money" is the

1 Colburn, C. B., & Hudgins, S. C. (2003). The Intersection of Business, State

Government, and Special Interests in Federal Legislation: An Examination of
Congressional Votes on the Road to Interstate Branching. Economic Inquiry, 41(4),
620-638. doi:10.1093/ei/cbg032
 Money in US Politics
3

anonymous donation made through public charities and similar groups not required to indicate

the source of their money. Another problem with analyzing campaign finance or money in

politics is fragmentation of reporting sources and format. Consequently, it 's hard to tally money

used in elections in an election cycle. Without a single unified database containing all

contributions, it 's hard to get the full picture of campaign finance.

The standard for reporting donations is weak, making it easier for donors to avoid compliance.

Most donors, especially the wealthier ones, who want to remain anonymous misspell their

names, fail to complete their entries, use hyphenated names, and refuse to disclose other

affiliations, or list multiple addresses.

The laws meant to regulate campaign financing have not been very effective. In 1911, Congress

outlawed donations from corporations to candidates and parties. In the following decades,

Congress extended the ban to other organizations but the rules lacked enforcement and did not

cover important areas as well. For instance, individuals could give as much money as they

wanted.

In 1974, Congress passed a more comprehensive law named The Federal Election Campaign Act

of 1974 (FECA)2. For the first time, this law set out a comprehensive system of disclosure and

contribution limits. For transparency in accounting, organizations wishing to contribute must

create political action committees or PACs. The PACs, while they might receive administrative

support from their mother organizations, has to raise funds through donations from individuals.

Because the law allows people to contribute, corporate PACs get their donations from managers
2 Colburn, C. B., & Hudgins, S. C. (2003). The Intersection of Business, State
Government, and Special Interests in Federal Legislation: An Examination of
Congressional Votes on the Road to Interstate Branching. Economic Inquiry, 41(4),
620-638. doi:10.1093/ei/cbg032
 Money in US Politics
4

and union PACs from members. The law limits the amount of funding PACs, individuals, and

party committees can give to candidates.

Candidates can get funding from public funding as long as they agree to abide by the spending

limits. The case of Buckley vs. Valeo struck down spending limits. This decision allowed

unlimited spending. Parties also use "soft money" rules to raise an unlimited amount of money

from individuals and groups.

Although the general belief is that special interest groups through PACs have outsized influence

in USA elections, data suggest that the main contributors are individual donors.

Cost and benefits of money in politics

In politics, money can create a distortion by buying votes or policy favors from elected

representatives. While special interest groups spend money on politicians, it is not easy to

ascertain whether contributions change legislator's votes. Instead of spending money to change

legislator's votes, it is likely that special interest groups spend money on politicians whom they

like concerning policy positions. In that case, the money has no influence at all3.

There is evidence that contributions can affect policy behavior. According to Stratmann,

contributions changes voting patterns in Congress4. By focusing on committee work, he found

that representatives who received grants participated in committee work and acted in ways
3 Colburn, C. B., & Hudgins, S. C. (2003). The Intersection of Business, State
Government, and Special Interests in Federal Legislation: An Examination of
Congressional Votes on the Road to Interstate Branching. Economic Inquiry, 41(4),
620-638. doi:10.1093/ei/cbg032

4 Stratmann, T. (2002). Can Special Interests Buy Congressional Votes? Evidence

from Financial Services Legislation. SSRN Electronic Journal.
doi:10.2139/ssrn.303474
 Money in US Politics
5

beneficial to the donors. The findings suggest that for the less reported committee work,

legislators respond to their donors. However, during roll call voting, lawmakers are coy to

support their donors openly due to media and public scrutiny of voting patterns5. Another

evidence of the influence of contributions is the behavior of contributors and legislators. Groups

such as PACs, trade associations, lobbyists, among others, use their money in the hope of

meeting legislators. If that did not happen, they would possibly end the practice of giving their

donations. However, because the method of contributing continues, it is reasonable to assume

that contributions and donations give donor access to politicians.

While legislative strategies appear to work, there is also evidence that ideological leaning

dominates or determine the direction of issues in congress and the senate. In addition to ideology,

other factors that govern the major issues include local factors and partisanship6. Using time

series, Bronars and Lott did not find evidence that contributions changed ideological positions of

legislators7.

Money also affects policy if donors forgo quid pro quo arrangements for supporting candidates

who they think aligns with their strategic positions. While this strategy appears benign at first

glance, it is insidious because in the end, because it encourages candidates to align themselves

5 Ansolabehere, S., Figueiredo, J. D., & Snyder, J. (2003). Why Is There So Little
Money in Politics? Journal of Economics and Perspectives, 17(1), 105-130.
doi:10.3386/w9409

6 Stratmann, T. (2002). Can Special Interests Buy Congressional Votes? Evidence

from Financial Services Legislation. SSRN Electronic Journal.
doi:10.2139/ssrn.303474

7 Bronars, S., & Lott, J. J. (1997). Do Campaign Donations Alter How a Politician
Votes? Or, Do Donors Support Candidates Who Value the Same Things That They
Do? The Journal of Law and Economics, 40(2), 317-350. doi:10.1086/467375
 Money in US Politics
6

with particular interests to increase their chances of winning the election. Even opponents who

do not support an individual interest might appear to do so to limit the funds frontrunners can

raise8. Such distortions not only conditions candidates to support particular interests but also

might lower interest in more pressing issues.

Benefits of money in politics

The modern society cannot function without money. The clash of ideas in modern democratic

societies has to occur within the context of expenditure of money. For instance, if people are

viewing a political debate on TV, someone has to cater for the cost of the broadcast.

During campaigns, candidates and parties have to use the money to communicate to their

supporters and the public. The information they share with supporters includes policy positions,

manifestos, and other related information, including encouraging fans to come out and vote.

Ordinary voters are unlikely to get that information on their own. Someone has to gather the

information and package it for easy consumption. Individual voters lack the motivation to get

information about candidates and their positions on issues. However, candidates and parties have

the incentives to gather information and share it with the public. By sharing positive information

about themselves and negative ones about their opponents, they stand a chance of winning the

support of the public9. Gaining support is a real benefit to gain. Having those with the strongest

8 Colburn, C. B., & Hudgins, S. C. (2003). The Intersection of Business, State

Government, and Special Interests in Federal Legislation: An Examination of
Congressional Votes on the Road to Interstate Branching. Economic Inquiry, 41(4),
620-638. doi:10.1093/ei/cbg032

9 Bronars, S., & Lott, J. J. (1997). Do Campaign Donations Alter How a Politician
Votes? Or, Do Donors Support Candidates Who Value the Same Things That They
Do? The Journal of Law and Economics, 40(2), 317-350. doi:10.1086/467375
 Money in US Politics
7

incentives to share information is safe for democracy, as voters will get more information. The

more resources they have, the better for electorates.

Although some critics dismiss political campaign as a ritual where a few people interested in

legislative seat misinform voters for their personal gain, the assertion is untrue when scrutinized.

Even if parties and candidate peddle half-truths, participation and the statements they make

generate debate. Such debate is likely to boil down to issues, and therefore voters get

information. Also, the needs and preferences of voters force candidates to take policy positions

that will endear them to the electorate; hence, responding to the needs of the people. If

candidates plan to spend a considerable amount of money in their campaigns, they find it to

prudent to take as many policy positions as possible10. If there are many candidates for the same

seat with considerable spending power, they have to make meaningful distinctions on issues and

therefore the campaign does not degenerate to name-calling.

Empirical evidence shows that campaign spending helps voters understand their parties and

candidates on matters relating to ideological stand on important issues. Money also mobilizes

voters. Parties and even groups spend a considerable amount of money to encourage people to

turn out and vote.

On the issue of money and its potential to skew policies, reformers often overlook the benefits of

spending money. Without spending, candidates cannot inform their supporters and mobilize them

to vote. Dismissing spending as an obstacle to democracy is too simplistic.

Looking at campaign spending objectively

10 Ansolabehere, S., Figueiredo, J. D., & Snyder, J. (2003). Why Is There So Little
Money in Politics? Journal of Economics and Perspectives, 17(1), 105-130.
doi:10.3386/w9409
 Money in US Politics
8

Banning money in politics reduces voter responsiveness. Without campaign spending, voters

would not have the means to understand candidates and their positions on issues that matter.

Realistically, banning money in politics cannot work. Voters need information through emails,

adverts, phone calls, etc. While banning money in politics cannot happen, imagining a scenario

where the government has made the ban makes it easier to understand and appreciate the critical

role of money in campaign spending11.

Without campaign spending, politicians would only respond to informed voters. The typical

voter is uninformed; hence, the interest of some of the poorest and marginalized communities

would not matter. The wealthy and the elite, on the other hand, have the resources and means of

getting information and therefore understand candidates. Politicians would respond to the needs

of the elite to the detriment of the poor. Without campaign spending, politicians do not respond

to the needs of the typical voter.

If campaigns are about deception, then money makes voters unresponsive. The argument that

money used in elections buys votes is flawed. It assumes that voters cannot make independent

decisions but candidates who use the highest amount of money sway them. However, evidence

suggests that voters can easily infer candidate support on issues based on donations they get. If a

candidate gets a grant from an environmental group, it is easy for voters to conclude that the

candidate probably supports the panel on climate change for instance. Some voters might like the

support and others might not. Voters are, therefore, able to understand candidates and parties

using cues such as who are their donors, party affiliation, and their endorsers12.

11 Ansolabehere, S., Figueiredo, J. D., & Snyder, J. (2003). Why Is There So Little
Money in Politics? Journal of Economics and Perspectives, 17(1), 105-130.
doi:10.3386/w9409
 Money in US Politics
9

Anticipated reaction drives, to some extent, the behavior of politicians. For instance, if a

candidate were engaged in corruption or caught up in a sexual scandal, rivals would inform

voters. Strategic representatives anticipate that in a case of moral failure, voters would learn from

his opponents. Therefore, even incumbents are responsive to the needs of citizens. If a candidate

has a substantial amount of money, the higher the chances of informing voters and mobilizing

them about their failures of the incumbent13. Anticipated action, while it makes politicians

responsive, it also makes it hard to observe the positive effect of money. For instance, a

candidate might campaign based on a corruption scandal involving an incumbent, but in reality,

access to money and not the scandal itself is the driving force. In a race where candidates have a

substantial amount of money to spend, voters get more information and policy issues dominate.

In such cases, policy issues mask the role of money.

In a scenario where there is few contributors, responsiveness of the candidate is small. On the

other hand, with many contributors supporting different causes, various candidates align

themselves to causes they like and use it the resources to inform the public. Information is safe

for democracy and makes the voter turn out to vote, and the candidate remains responsive to the

electorate14.

12 Colburn, C. B., & Hudgins, S. C. (2003). The Intersection of Business, State

Government, and Special Interests in Federal Legislation: An Examination of
Congressional Votes on the Road to Interstate Branching. Economic Inquiry, 41(4),
620-638. doi:10.1093/ei/cbg032

13 Bronars, S., & Lott, J. J. (1997). Do Campaign Donations Alter How a Politician
Votes? Or, Do Donors Support Candidates Who Value the Same Things That They
Do? The Journal of Law and Economics, 40(2), 317-350. doi:10.1086/467375

14 Bronars, S., & Lott, J. J. (1997). Do Campaign Donations Alter How a Politician
Votes? Or, Do Donors Support Candidates Who Value the Same Things That They
Do? The Journal of Law and Economics, 40(2), 317-350. doi:10.1086/467375
 Money in US Politics
10

The bottom-line is that even with funding from special interest groups, candidates have to

respond to the issues of the electorate. On issues which voters do not consider important, the

influence of contributors is greatest.

The real influence of money in practice

High stake issues during the election campaign attract massive funding from groups that are in

support and those against and therefore fund candidates in the hope of getting a favorable

outcome. Candidates use the money and transform the issue into a key election plank. With more

information about the issue, the prevailing opinion by electorate carries the day. Ignoring the will

of voters often leads to electoral loss.

Reforming campaign funding

Despite the need for money in politics, misuse can naturally result in an undesirable outcome.

There is a need for changes. The most harmful effect of money is when campaigns are deceiving.

In general, campaigns increase voter information. However, if the information reaching the voter

is misleading or false, there is the likelihood that the candidate involved want to manipulate the

electorate into making the wrong choices15. Thus, to fight misleading information, the process

needs reform. In any case, misleading information does not add value to the electoral process and

democracy. Voters need more information so that they place competing claims by candidates in

context. Instead of merely listening to what candidates are saying, it is essential to read their

manifestos and policy briefs. Perhaps the best way to force candidates to account for their words

is credible news reportage. Political information often reaches the voters through the media.

15 Ansolabehere, S., Figueiredo, J. D., & Snyder, J. (2003). Why Is There So Little
Money in Politics? Journal of Economics and Perspectives, 17(1), 105-130.
doi:10.3386/w9409
 Money in US Politics
11

However, due to accusations of media bias, voters cannot rely fully on the press. Voters require

alternative means of getting political information and such means might include ad-watches. Ad-

watches examine the content of political ads and expose misleading or false information16. Civil

organizations and the media should also focus on presenting false information coming from

parties and candidates.

The government can use public money in campaign period in voter education. However, instead

of just reminding voters about the importance of voting and participating in the electoral process,

education campaign can encourage citizens to debate or guide voters to place competing visions

next to each other to promote discussion. Discussions provide further information, forcing

candidates to clarify further their vision.

Money from unified source is a threat to democracy and can distort positions. When contributors

are diverse, the policy position of the majority prevails. On the other hand, unified contributors

force candidates to align themselves with a few policy positions without choice. Reform on this

issue should focus on diversifying the pool of donors. Alternatively, the government can use

public money to support candidates fighting for the middle class or the working class17.

Another way of encouraging ordinary people to fund their preferred candidates is giving tax

credits to contributors. Instead of focusing on a few contributors, making easier for individual

16 Colburn, C. B., & Hudgins, S. C. (2003). The Intersection of Business, State

Government, and Special Interests in Federal Legislation: An Examination of
Congressional Votes on the Road to Interstate Branching. Economic Inquiry, 41(4),
620-638. doi:10.1093/ei/cbg032

17 Ansolabehere, S., Figueiredo, J. D., & Snyder, J. (2003). Why Is There So Little
Money in Politics? Journal of Economics and Perspectives, 17(1), 105-130.
doi:10.3386/w9409
 Money in US Politics
12

donors to provide tax deductible funding would give candidate greater access to resources and

make them responsive.

On the main issues, politician act in the interest of the public. However, on low-profile issues,

politicians do the bidding of donors. The biggest problem with limiting the influence of money

in politics is ensuring how the interest of voters remains relevant even in low profile issues18.

Reformers have suggested limiting donations. However, for the reasons already described,

limiting contributions might cause more harm.

The solution might be more contributions. Contributors cannot manipulate the system even on an

issue where one side has more money. Political competition tends to punish candidates who hold

unpopular positions. Therefore, if a policy issue is unpopular, no amount of funding from

contributors can make candidates support it as long as voters are against it. Also, politicians tend

to raise money from donors on one issue and use the proceeds to publicize actions of rivals

considered too compliant with the wishes of the donors. Again, such a thing neutralizes the role

of money in politics. Finally, limiting contributions does not eliminate lobbying which might be

the most insidious form of influence19. Enough resources foster accountability, which is good for

democracy.

Conclusion

18 Colburn, C. B., & Hudgins, S. C. (2003). The Intersection of Business, State

Government, and Special Interests in Federal Legislation: An Examination of
Congressional Votes on the Road to Interstate Branching. Economic Inquiry, 41(4),
620-638. doi:10.1093/ei/cbg032

19 Ansolabehere, S., Figueiredo, J. D., & Snyder, J. (2003). Why Is There So Little
Money in Politics? Journal of Economics and Perspectives, 17(1), 105-130.
doi:10.3386/w9409
 Money in US Politics
13

The issue of money in politics is a controversial issue. The public, as evidenced by the polls,

believes that special interest groups have captured electoral process and candidates do their

bidding. This paper shows that while candidates have an incentive to favor donors, it is not easy

to favor them. Under some conditions, privately financed campaigns can produce harmful

outcomes20. However, in the majority of cases, more money is better than a little money. Parties

and candidates use the money to communicate their vision and reach out to people. More money

or campaign financing tends to orient the focus on issues as opposed to name-calling.

The perception that big business "buy votes" is misleading. It is even more harmful to limit

funding that allowing it. When interest groups can contribute, it is easier to track contributions

and candidates use the money to inform voters on rivals aligning with unpopular policies. In the

end, despite financing by interest groups, the will of the people prevails. For minor issues that

politicians are willing to concede to contributors, the solution lies with more funding, which

would raise the profile of such matters. Reform that aims to limit financing is also harmful

because influence peddling moves to lobbying, where candidates are more likely to give in to

special interest groups.

References

Ansolabehere, S., Figueiredo, J. D., & Snyder, J. (2003). Why Is There So Little Money in

Politics? Journal of Economics and Perspectives, 17(1), 105-130. doi:10.3386/w9409

Bronars, S., & Lott, J. J. (1997). Do Campaign Donations Alter How a Politician Votes? Or, Do

Donors Support Candidates Who Value the Same Things That They Do? The Journal of
20 Colburn, C. B., & Hudgins, S. C. (2003). The Intersection of Business, State
Government, and Special Interests in Federal Legislation: An Examination of
Congressional Votes on the Road to Interstate Branching. Economic Inquiry, 41(4),
620-638. doi:10.1093/ei/cbg032
 Money in US Politics
14

Law and Economics, 40(2), 317-350. doi:10.1086/467375

Colburn, C. B., & Hudgins, S. C. (2003). The Intersection of Business, State Government, and

Special Interests in Federal Legislation: An Examination of Congressional Votes on the

Road to Interstate Branching. Economic Inquiry, 41(4), 620-638. doi:10.1093/ei/cbg032

Randolph, G. M., & Tasto, M. T. (2012). Special Interest Group Formation in the United States:

Do Special Interest Groups Mirror the Success of their Spatial Neighbors? Economics

& Politics, 24(2), 119-134. doi:10.1111/j.1468-0343.2012.00394.x

Stratmann, T. (2002). Can Special Interests Buy Congressional Votes? Evidence from Financial

Services Legislation. SSRN Electronic Journal. doi:10.2139/ssrn.303474