Politics isn’t all that corrupt (maybe)

I read this paper along time ago and thought it was great. I skimmed it again recently and realized that it is FANTASTIC. As a consequence, I’ve added to the section of my favorite papers, which is pretty small at the moment.

Anyway, if you read one scholarly, technical paper, I would recommend this paper. It covers so much in such a clear way and it makes several very thought provoking points. I’ll try to grab some of the highlights.

Overall, the point is that everyone should just chill out about how much money there is in politics and rhetoric to the effect of “our politicians are all corrupt, accepting money from every direction.” The implication is that power groups are manipulating our political process through cash. And they undoubtedly are to some degree. The question is: how dire is the problem? According to this article, things aren’t so bad.

First, only %60 of fortune 500 corporations even have PACS, and those that are active don’t give anywhere near the limit on PAC contributions. If companies are so rich and so eager for influence, why aren’t they giving as much as they possible can? In fact, to approach the limit in this country on PAC contributions, such spending would need to increase THREE FOLD. Also, another striking but somewhat ambiguous factoid is that in one study of 15 large corporations,  roughly 1,000 million dollars was given by these companies to charity while only 16 million was given to campaigns. Again, if corporations are making money off of these contributions (because they “buy” deregulation or subsidies or whatever) then why aren’t they spending more? Also, when 9/11 happened, according to this article, charitable giving from companies went up and political contributions went down. Why would corporations shift to a non-money making use of money from a money-making use?

This is just a subset of a further puzzle, known as Tullock’s puzzle, which suggests that if politicians’ votes have such high economic worth, they should be able to extract a lot of money from corporations. For example, in the sugar subsidy vote of 19…88 (I think) something like $182,000 bought 5 billion dollars in subsidies. A politician who can tilt the odds on a 5 billion dollar law could command a lot more contributions, but we don’t see contribution totals even approaching the amount of money that important bills can sway the bottom lines.

Of course maybe this just means that corporations have all the leverage and so can command huge benefits with a small amount of money. Hard to see how this could be just on an intuitive level since the politicians control the federal government and a 1 trillion dollar budget or whatever…seems like they’re in the driver seat. But in any case the article makes a further point that in almost all cases, most of the money in politics comes from individual donors who are giving about 100 dollars a year on average. So, politicians are not beholden to corporations for most of their revenue and what I find ESPECIALLY interesting is that in close elections, even more of a politician’s money comes from citizens.

This is the significance of the marginal dollar, by which I mean that when a campaign gets tough, you don’t turn to a corporation or an interest group to get the cash you need to win. Rather, you turn to the constituents in your district. And since individuals make the difference in close races, it seems that the money of corporations doesn’t have that much say in what a legislator does. He can likely get elected without them.

There’s even more than these arguments in this article; basically these throw the kitchen sink at the claim that corporate money runs our political system, and some of their other points are really interesting.

There interpretation of the data is different. They suggest that rather than treating corporate giving as an investment designed to spur a quid pro quo with legislators, its better to think of giving from all groups as a consumption good. This is a radical and fascinating point, because the idea is that people spend money on politics not to change it, but because, like charity, it makes them feel good. People want to participate in politics and giving money is one way they can.

Now, this article is a dose of optimism for those like me who are concerned about our country’s political system, and this article deserves to be taken very seriously (these guys surveyed 40 articles and did some regression of their own. This stuff is no joke). But at the same time, something tells me that its not all roses and candy (what’s the actual saying? Not all ____ and _____). Rather, there are probably some ways that money is circulating in deleterious ways in our political system, but at least the article refutes the a crude “interest groups run everything” position. And that’s as it should be. Our legislators are at the center of many forces, and one of the big forces is just plain old ordinary citizens. We should never forget that.