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Money, money, money ... money!


Matt Yglesias has a good post on the danger of corporate expenditures:

A group doesn’t actually need to spend vast sums of money to have a decisive influence on politics. It just needs to be able to credibly threaten to spend said sums. Bank of America, for example, dedicates $2.3 billion to marketing in 2008 so it’s clear that they’ve got the budget to mount a $100 million series of scathing attacks on a Senator who pisses them off and basically laugh that off (and note that in 2004 total spending on Senate campaigns was just $400 million). And if you can have it be the case that just one Senator goes down to defeat for having pissed off BofA then everyone else will learn the lesson and avoid pissing them off in the future. You don’t need to actually sustain that volume of campaign spending.

I’ve seen a lot of jokes about the idea of corporate-sponsored candidates and such. But the real issue here isn’t so much affirmative activity on the part of businesses as it is negative activity on the part of politicians. We’ll be looking at one further step toward a political system in which large business interests have a de facto veto over all policy questions.

At the base of this is a simple fact: The amount of money in political campaigns is peanuts compared with (1) the amount of money disbursed by the federal government and (2) the amount of money controlled by large industries. To get an idea of the sums here, the typical winner of a House campaign in 2008 spent $1,372,000. The typical winner of a Senate campaign spent $8,531,000. That year, the federal government spent $2,900,000,000,000. The difference is just absurd.

That means large industries have both an enormous incentive to "invest" in politics to get a share of that money and the power to make those investments pay off with staggering regularity. A lot of people have a tendency to think of this in terms of big issues like health-care reform. But taxpayers are more commonly fleeced on small issues where the public doesn't care enough to offer countervailing incentives. One study examined a 2004 lobbying campaign for a particular tax break. It concluded that the policy "earned companies $220 for every dollar they spent on the issue -- a 22,000 percent rate of return on their investment." Expect a lot more of that kind of thing, too.

Photo credit: AP Photo/Wilfredo Lee.

By Ezra Klein  |  January 22, 2010; 1:47 PM ET
Categories:  Government  
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Congratulations, you've successfully described public choice theory. For bonus points, pinpoint the best way to mitigate this rampant rent-seeking. (*Hint: may have something to do with reducing the number of budget dollars up for grabs in the federal trough).

Posted by: aywkubttod | January 22, 2010 2:23 PM | Report abuse

The "small" amount of money spent influencing elections is more effective at influencing elections and policies than the large amount of money disbursed by the federal government.

One example of this is how the energy lobby controlled US energy policy under Bush. They even managed to get an oilman to lead FERC during the fake energy crisis of 2000/2001, and then managed to get Ken Lay's buddy, Arnold S', to become Governor or the state that lost $100s billions to the enrons during that timeframe.

Ezra seems to think that corporate spending on elections is a small problem. He probably thinks that way because his salary is paid for in part by all the campaign money that goes to the media during elections.

There's a reason corporations spend money on campaigns and politicians. IT WORKS!

Posted by: Lomillialor | January 22, 2010 2:34 PM | Report abuse

The writings of Matt Yglesias, if I am correct, are published by The Center for American Progress Foundation, one of the "favored" non-profits whose favor is now challenged by the most recent Supreme Court ruling. If I am correct -- and certainly the public records should be consulted -- The Center for American Progress Foundation receives most of its funding from corporate donations, donations which no longer need to be laundered through such groups; notably, the "Center for American Progress Foundation" lobby group receives most of its funding from the non-profit, non-partisan charity "Center for American Progress".

I might be incorrect... so it is imperative that public records be consulted before anyone leaps to conclusions. The website seems to have the supporting IRS filings available for free download.

Posted by: rmgregory | January 22, 2010 2:53 PM | Report abuse

I confess that I am still mulling my reaction to the Supreme Court ruling and how I feel about it. On the one hand, I don't like restrictions on the First Amendment. ON the other, well, I don't like politicians beholden to those who give them money, and making decisions on MY life, based on the money someone ELSE gave them. And just look at Bloomberg's remarks on the proposed banking legislation. It's all about money.

I need to do more reading and thinking.

Posted by: bethIllinois | January 22, 2010 4:00 PM | Report abuse

You might be interested in the paper from Chamon and Kaplan(2006):

Their theory on why there is so few money in campaign contributions is based on a "threat" argument, but contrary to Matt Yglesias, the threat is to give to the opposing candidate

Posted by: PtitSeb | January 22, 2010 4:28 PM | Report abuse

The topic "Money, money, money ... money!" is appropriate. I am still confused -- can anyone help me as to the destination of all of the money spent each year on campaigns?

For example, if last year I gave $100 to the corporation calling itself "Center For American Progress". How much of that $100 went to the leader of the Center and how much of my donation went to the "Center For American Progress Foundation"?

Please, help me, I don't understand!

Posted by: rmgregory | January 22, 2010 6:08 PM | Report abuse

If Goldman Sachs had know this case was going to be in favor of unlimited cash money maybe they'd have re-thunk giving $500 million to charity to try and p.r. spin their outrageous bonuses.

That kind of cash in one election cycle, well, it would dwarf the $400M of the senate races. And, remember, this is ONE company's donations to charity, for ONE year.

TeeVee will get rich, and the nation will be awash in crappy, misleading and damaging ads. I'm headed to Iceland. It's broke, and I hear from the Atlantic's food channel that they have really good hot dogs.

Posted by: RalfW | January 22, 2010 7:49 PM | Report abuse

The big problem here is not this specific decision. The big problem is this whole concept of corporate personhood. I doubt seriously that the founders ever considered the bill of rights as protecting anything other than individual human beings, with the exception of the free press and even that largely applies to individuals. In any case, the concept of corporations as people dates to the Gilded Age, when corruption was rampant, and is in itself an instantiation of corruption. Corporations are not people. If they are to be treated as people, then they are a particularly sociopathic type of person, legally devoid of conscience in their fiduciary duty to pursue nothing but profit.

The way to fix it is to overthrow the concept of corporate personhood. That's a long term project that requires an entirely new Supreme Court, but a whole lot of bad law will fall as a consequence.

Posted by: pj_camp | January 23, 2010 1:41 PM | Report abuse

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