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Money for Nothing

Think the almighty dollar rules American politics? Think again.

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Most Americans believe that corporations can give money directly to presidential and congressional campaigns (it's been illegal for more than 90 years). Most think that the Democratic Party raises more money than the Republican Party (it doesn't). A few years ago, when the Center for Responsive Politics asked these questions as part of a five question true-or-false poll, only 12 percent of the respondents got three or more right.

"Untrained gerbils pressing levers randomly could do better than that," says University of Chicago political economist Jeffrey Milyo. When it comes to money in politics, we'd be better off knowing nothing, because a lot of what we think we know isn't so.

Milyo tends to blame the media, whose coverage of money in politics rarely rises above the level of MTV political reporter Tabitha Soren's 1996 interview with Bill Clinton. She prefaced one question with the statement, "Young people are alienated from politics--young people think politics is rigged by money, and they're right."

If "rigged by money" means that campaign contributions buy elections--or buy lawmakers' votes afterward--then the kids are wrong. Researchers have found little evidence for either claim, though it should be noted that they have mainly studied the U.S. House of Representatives, not state governments. If "rigged by money" means that some interest groups have more money with which to press their causes than others have, then the kids are right. But Milyo isn't sure that's a bad thing. Politics is competition: some competitors have money, some have grassroots organizations, and some have the good luck to catch the fancy of Garry Trudeau or Martin Sheen.

Milyo, an assistant professor at the Harris Graduate School of Public Policy Studies, has been trying for years to make a dent in the misinformation on this subject. Last week he tried again, over a buffet luncheon on the sixth floor of the university's elegant Gleacher Center, off North Michigan Avenue just north of the river. A dozen or so political junkies, including foundation people, campaign finance reformers, and staffers from Senator Richard Durbin's office showed up to hear his wry take on what political scientists and economists think they've learned about money and politics.

Everyone knows that candidates who outspend their opponents usually win. But do they win because they have more money, or do savvy donors give them more money because they already look like winners? Separating cause from coincidence is how Milyo and his colleagues earn their pay.

"The early studies found that campaign spending was important for challengers but not for incumbents," Milyo said. "Well, the folks who did that work now have long gray beards and work at places like the Brookings Institution and get interviewed a lot, so what they say has become the conventional wisdom. But there are problems with those studies. They didn't consider that incumbents don't raise money unless they feel they have to. And they didn't consider that challengers may differ in ways that are hard to measure but are noticed by voters. Different challengers may be more trustworthy, or likable, or articulate." Pause. "Well, I guess that last doesn't matter."

Researchers have since looked for situations where the level of contributions changed but the candidates didn't. University of Chicago economist Steven Levitt studied races where the same candidates faced each other in more than one election. In such contests, having more money helped neither the incumbent nor the challenger. "The marginal effect was zero. Given the amount already being spent, an extra $100,000 made no difference." The point here is that going from zero to $100,000 may make a difference, but above a certain threshold an extra $100,000 adds little or nothing to a candidate's vote share. If you prefer anecdotes to statistics, think Pat Buchanan.

Candidates who repeatedly run against each other may not be typical of the American political universe, however. So Milyo went looking for occasions when Political Action Committees (PACs) suddenly gave candidates more money--"natural experiments" in which monetary windfalls occurred but not much else changed. When Dan Rostenkowski's House Ways and Means Committee was working on the 1986 tax reform bill, committee members each picked up an extra $150,000 or so from interested parties. That's not chump change, given that the average congressional race at the time cost $450,000. "But it led to no changes in their share of the vote [in the following election]!"--whether compared to other districts or other years. Likewise when Budget Committee members got extra clout from the 1985 Gramm-Rudman-Hollings deficit-reduction act: interested parties gave an average of an extra $180,000 to committee members, yet the members garnered no more votes than before. If big windfalls make so little difference, asks Milyo, how corrupting is a $1,000 PAC contribution likely to be?

"Maybe we're looking in the wrong place," he said at the luncheon. "What if money scares off good challengers?" Political scientists found no such effect when they tabulated which incumbents had politically experienced challengers, or any challengers at all. Taking a slightly different tack, Milyo examined how wealthy incumbents fared in 1992 House races. If money discourages strong challengers, then these rich folks should have gotten more votes than average and been reelected more often. But they didn't. Of course, 1992 is only one election year. "I've collected data from 1982 to 1996," he said, "and I have a work-study student getting it into reasonable shape to look at. Put an asterisk by that one."

David Morrison, coordinator of the Illinois Campaign for Political Reform, reflected on the luncheon afterward, wondering if Milyo is "treating politics like a hard science when it's more of a liberal art. We know that Paul Simon retired from the Senate because he didn't want to have to raise the kind of money he would need in order to run again. I don't know if you can prove these things mathematically. Maybe [Milyo] is spending too much time on the computer and not enough time on the phone."

If the special interests don't buy elections for their friends, couldn't they just be buying their votes on key bills in Congress? "Of course, incumbents cast roll call votes consistent with the interests of their contributors," Milyo said. But that doesn't prove contributors bought those votes, any more than a rooster makes the sun rise. According to Milyo, once you control for party affiliation and constituent interests--hence the need for mathematics--there's no relation between roll call votes and contributions. Evidently party discipline and fear of being unelected usually make bribery superfluous.

"Roll call votes are a pretty blunt measure, though, and maybe not a good one," Milyo said, acknowledging that much legislative action happens beforehand. More recent studies have accordingly looked at less obvious activities like sponsoring bills, attending markup sessions, and attending hearings. They still revealed no connection to PAC contributions.

Milyo has observed another peculiar aspect of PAC contributions. If "special interests" are buying something no one has yet been able to define and detect, how come the bulk of PAC contributions are between $500 and $1,500, and very few PACs give the maximum allowable contribution of $10,000? Why is it that all corporate PAC contributions in the 1997-'98 federal election cycle totaled $140 million while at the same time corporations were spending $2.3 billion on federal lobbying? "It just seems like the magnitudes are wrong," Milyo said. "Why spend so much time networking and talking to people if you could just give money?"

Milyo and his fellow researchers are not corporate apologists. They understand that contributors are not giving out of public spirit but rather have an interest in making things go their way. "Numerous studies find that the allocation of PAC contributions can be understood as if they were bribes," he said. "Regulated industries are more likely to form PACs. More PAC money flows to relevant committee members [than to other representatives]. More PAC money flows to committee and party leaders. But this pattern is also consistent with seeing PAC contributions as fruit baskets--just thanking you for being there," cementing a long-term relationship but not directly purchasing votes in what Milyo likes to refer to as a "spot market."

The white tablecloths had been cleared of plates by the time Milyo got to political philosophy. He suspects that many campaign finance reformers have a naively romantic view of democracy. Contrary to that view, as he wrote on IntellectualCapital.com last year, "Democracy is not a procedure for implementing some collective will; it is instead the process by which competing interests battle for the power to coerce others. The Founders...were not naive enough to think they could prevent special interests (or factions) from influencing policy." Instead, they designed the Constitution and the Bill of Rights so that whenever a majority tried to scapegoat a minority or confiscate its property, that minority could speak out, associate, and defend itself politically. "To do so effectively in a large democracy is an expensive enterprise. Consequently, the existence of myriad and well-funded special-interest groups is a symptom of democracy, not an illness in itself."

The minorities Milyo has in mind defending themselves in this way may not be the ones you expect. "If big oil and big pharmaceuticals are under attack by the majority, is it wrong that they should defend themselves?" Money, he suggested last week, might be a way in which people express their intense concern about a given issue. Later he was asked if money corrupted politics not by rigging elections or vote tallies but at the level of agenda setting--lawmakers having time to discuss which millionaires get a piece of a new gambling casino and none to consider the predicament of public housing tenants. Milyo acknowledged, "Only some intense interests get represented that way. I should have mentioned that."

Once the discussion turned to state politics, Milyo acknowledged that in wide-open states like Illinois and California campaign contributions amount to almost as much as lobbying expenses--a pattern quite different from the federal situation. In other words, whatever it is that contributors are buying (or renting) from politicians, they pay more (and perhaps get more) in political arenas where contributions are not limited by law. "Contributions," Milyo said, "are more influential when they aren't limited." By that token, perhaps the contribution limits championed by reformers do some good after all.

There are no white-coat laboratories in political science, but there are smoke-filled ones. Milyo is a bit surprised that no researcher has taken full advantage of the wide variations among states. Vermont and South Carolina, for instance, limit "soft money" contributions to political parties; Wisconsin and New Jersey offer limited public financing to candidates who agree to spending limits; Iowa and West Virginia prohibit corporate contributions but allow union contributions; and of course anything goes in Illinois and Texas. Milyo's current project is to use the 50-state laboratory the founders so thoughtfully provided. He's just finished compiling all state campaign finance laws since 1950 and is ready to start looking at how different laws have affected voter turnout, party success, tax rates, government size, unemployment, family income, infant mortality, and more.

Is he too ambitious? Is it a stretch to try to connect a state's campaign laws with, say, its percentage of children in poverty? Maybe so, but it's a stretch that campaign finance reformers make on a regular basis. In April 1997, former U.S. senator Paul Simon told an Oak Park audience, "Almost one-quarter of our children are in poverty. That's way more than any other developed country. This is no act of God. It's flawed policy--policy that responds to those who contribute rather than to those who need."

If Simon is right, then states that limit the political power of money presumably treat poor children and other impecunious groups better than those that let the money flow. Do they? If numbers can tell us, Jeffrey Milyo might be the guy to find out.

Art accompanying story in printed newspaper (not available in this archive): photo/Robert Drea.

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