Money Talks
Legal changes have opened the door to new kinds of political spending. What does the money buy?
"There are two things that are important in politics. The first is money and I can't remember what the second one is." So said Mark Hanna, a wealthy Ohio businessman, who became famous (or infamous) as William McKinley's campaign manager in 1896. Hanna — dubbed "Dollar Mark" by the press — set up a fundraising operation of unprecedented scale, going so far as to demand that banks and businesses pledge a percentage of their profits to McKinley's campaign.
More than a century later, Dollar Mark's words seem truer than ever. In October 2014, the North Carolina contest between Democratic incumbent Kay Hagan and the Republican challenger Thom Tillis became the most expensive Senate race in history and the first to cross the $100 million threshold; the eventual total was more than $120 million, including the primaries. (The previous record holder in real terms was the 2000 race in New York between Rick Lazio and Hillary Clinton, which cost $70.4 million, or $96.8 million in 2014 dollars.)
North Carolina wasn't the only pricey Senate race last year; the Colorado contest eventually crossed the $100 million line as well, and races in Iowa and Kentucky each cost around $90 million. These races are part of a trend toward more spending in general. In 2014, total spending on congressional races, including by the candidates, the parties, and outside interest groups, was nearly $3.8 billion, compared to about $2.8 billion in 2006, another midterm election year (see chart). The last two presidential races have cost more than $2.6 billion each, compared to $1.4 billion in 2000 and $1.9 billion in 2004.
Corporations might not spend much on campaigns, but that doesn't mean they don't care about politics.
What has changed is the share of spending by outside groups relative to spending by the candidates themselves. Overall, candidate spending still outweighs outside spending; outside groups accounted for about 22 percent of the total in 2014. But outside spending is on the rise: A study by Daniel Tokaji, a professor at Ohio State University’s Moritz College of Law, and Renata Strause, a clerk for the U.S. District Court of the Southern District of Texas, found that independent expenditures on express advocacy for all congressional campaigns increased from about $50 million per election cycle during the period 1980-2008 to $200 million in 2010 and $450 million in 2012, outpacing the increase in candidate spending.
In some races, outside groups spend far more than the candidates. Kay Hagan and Thom Tillis’ record-breaking race was largely funded by outside groups, which spent more than $80 million. In contrast, the race between Hillary Clinton and Rick Lazio 14 years earlier was entirely funded by the candidates’ campaigns. Hagan and Tillis weren’t alone; in 2014, outside groups spent more than the candidates in 28 congressional races. In 2000, that was the case in zero campaigns, according to the Center for Responsive Politics, a nonpartisan research group that tracks political spending.
These independent expenditures appear to be disproportionately funded by a few wealthy individuals. In a recent paper, Ian Vandewalker of the Brennan Center for Justice at New York University’s School of Law found that just 195 donors and their spouses contributed almost 60 percent of the more than $1 billion that Super PACs have spent on Senate races since 2010. During the 2014 elections, the average donation to the Democrat-aligned Senate Majority PAC was more than $170,000; the average donation to the conservative Ending Spending Action Fund was more than $500,000.
It’s tempting to attribute the rise in outside spending — and the concentration of that spending — to Citizens United and SpeechNow.org. But the shift started before 2010. “The era of wealthy donors and outside spending was definitely underway pre-Citizens United,” says Shen. That era may have been an unintended consequence of McCain-Feingold’s ban on soft-money contributions to political parties. As Robert Kelner, a partner at the law firm Covington & Burling, argued in a 2014 Harvard Law Review article, the law put the national party committees in a “legal vice grip,” while leaving certain outside groups free to raise and spend as much as they wanted. (Even before Citizens United and SpeechNow.org, certain groups not subject to FEC oversight, such as 501(c)(4) social welfare organizations and so-called “527” groups, were allowed to accept unlimited contributions and spend unlimited amounts on “issue ads,” which were often thinly disguised political ads.) In 2000, according to Kelner, the national parties aired about two-thirds of all the ads in the presidential election. During the 2004 election, after McCain-Feingold, the share dropped to about one-third and to less than one-quarter in 2008.
Still, the trend accelerated after 2010; the parties aired just 6 percent of ads during the 2012 election. One reason could be that the rules surrounding 527s and social welfare groups had been murky. This “legal cloud” likely deterred both spending and contributions, according to Richard Hasen of the University of California, Irvine School of Law. By lifting that cloud and creating the entirely legal Super PAC, Citizens United and SpeechNow.org may have encouraged more donors and more spending.
Readings
Ansolabehere, Stephen, John M. de Figueiredo, and James M. Snyder Jr. "Why Is There so Little Money in U.S. Politics?" Journal of Economic Perspectives, Winter 2003, vol. 17, no. 1, pp. 105-130. (Working paper version available online).
Bertrand, Marianne, Matilde Bombardini, and Francesco Trebbi. "Is It Whom You Know or What You Know? An Empirical Assessment of the Lobbying Process." American Economic Review, December 2014, vol. 104, no. 12, pp. 3885-3920. (Working paper version available online).
Jacobson, Gary C. "Measuring Campaign Spending Effects in U.S. House Elections." In Henry E. Brady and Richard Johnston (eds.), Capturing Campaign Effects. Ann Arbor: University of Michigan Press, 2006, pp. 199-220.
Kelner, Robert. "The Practical Consequences of McCuthcheon." Harvard Law Review Forum, June 20, 2014.
Tokaji, Daniel P., and Renata E.B. Strause. "The New Soft Money: Outside Spending in Congressional Elections." Ohio State University Moritz College of Law, June 2014.
Zingales, Luigi. A Capitalism for the People: Recapturing the Lost Genius of American Prosperity. New York: Basic Books, 2012.
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