Too Much Money in Campaigns?

by david_park on December 3, 2007 · 5 comments

in Campaigns and elections

The NY Times ran an editorial on Sunday lamenting the amount of money in political campaigns. They note that the price for presidential and congressional elections is “rocketing toward $5 billion, shocking even political professionals.” They go onto say that the two presidential nominees are expected to break the $1 billion mark in combined spending – a 50% increase over the “outrageously” high cost of the 2004 campaign.

Ansolabehere, de Figueiredo, and Snyder flip the question on its head and ask, Why is There So Little Money in Politics? Here are some facts from their paper. Candidate and party committees raised nearly $3 billion during the 1999-2000 election cycle. The majority of the money came from individuals in small amounts. They estimate that individuals contributed $2.4 billion, public treasury $235 million and corporations, unions and other associations $380 million. The average contribution from an individual was $115.

Approximately 4,500 PACs are registered with the FEC. In 2000, 3000 PACs gave to federal candidates or parties or engaged in some form of independent expenditure; the remaining 1500 were inactive. The number of active PACs declined by 12% after 1988. Only 60 percent of the Fortune 500 companies even havdPACs. Only 4% of all PAC contributions to House and Senate candidates were at or near the $10,000 limit. The average PAC contribution was $1,700.

Candidates, parties and organizations may have raised and spent $3 billion; however, total federal government spending in 2000 equaled $2 trillion (yes, with a “t”); consumption and gross investment was $590 billion; and the cost of compliance with regulations probably ran into the hundreds of billions of dollars.

As Ansolabehere, de Figueiredo, and Snyder note, “If extraordinary rates of return can be earned through political investments, then we would expect firms, individuals, and associations to flock to campaign finance. But most firms and people do not give.” So is there too little or too much money in campaigns?

{ 5 comments }

Scott McClurg December 3, 2007 at 8:37 pm

I’m not so sure why they find it puzzling that the average contribution is so low, especially when returns for contributions are so tremendously uncertain.

AaronSw December 4, 2007 at 1:16 am

It would be interesting to calculate the return taking the uncertainty into account. When you read stuff like Ken Silverstein’s piece on pork (random example: “Night Vision won a $1.25 million earmark … paid $60,000 [to lobbyists] … [$21,250] to [Sen. Arlen] Specter”) it just sounds like amazing returns.

Now obviously publicly-disclosed donations don’t include all of the money involved and obviously there are some uncertainties (although Specter’s seat seems fairly safe), it just seems like these are incredible deals. If I could turn $60,000 into $1.25M I’d do it in a heartbeat. What are we missing?

Scott McClurg December 4, 2007 at 7:23 am

Its not just uncertainty in who will win, but uncertainty in turning contributions into gains. Take the Specter example…there is no guarantee that he can make that happen ahead of time.

Also important here is to consider the alternatives to political contributions. Maybe businesses don’t contribute more because they get better return on their money elsewhere.

Tom Gais December 4, 2007 at 12:21 pm

The puzzle is less puzzling if you distinguish between campaign contributions and political advocacy expenditures in general. A lot of money is spent on legislative and administrative lobbying, public information campaigns, etc.–all of which dwarfs campaign contributions, especially among the politically strongest interest groups. I wrote about the relative weakness of contributions over a decade ago in my book, “Improper Influence.”

hardheadedliberal December 4, 2007 at 5:13 pm

Perhaps the uncertain utility of political contributions is related to the recent finding in a study by the Carlson School of Management at the University of Minnesota that poorly managed companies make the largest amounts of political contributions.

The study is noted in a recent article in the Minneapolis Star-Tribune which can be found at the following link:

http://www.startribune.com/535/story/1569606.html

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