Is Campaign Spending a Lousy Idea, or Does it Help the Economy?


President Barack Obama and Republican presidential candidate Mitt Romney were both campaigning in the swing state of Ohio earlier this summer. Both sides are poised to spend $1 billion each in the race to the White House.

Paul Solman frequently answers questions from the NewsHour audience on business and economic news on his Making Sen$e page. Here is Thursday’s query:

Name: Mary K. Reeber

Question: All this campaign money being spent to influence some three million undecided voters. What’s the economic impact? Should we ignore what seem to be lousy priorities and just be glad they are “job creators”?

Making Sense

Paul Solman: Scholars of campaign spending like Tom Ferguson have long pointed out that campaign spending represents something substantially more problematic than a “lousy priority.” He might use the term “pernicious priority.”

I assume you’re being ironic, Mary, and that you don’t actually wonder if campaign finance is a covert form of economic stimulus. So let me address the larger issue of campaign money. Ferguson’s famous book is “Golden Rule: The Investment Theory of Party Competition and the Logic of Money-Driven Political Systems,” published in 1995. It took its title from the old gag-line: “He who has the gold makes the rules”; i.e., campaign spenders get what they pay for. Since by definition richer people have more money than poorer ones and that’s been getting more true in America for decades, the danger is that the “have-mores” will influence policy on their own behalf, to the detriment of everyone else. If they spend more than the opposition, they should have more influence over your “three million undecided voters” than the opposition, all else equal.

At the moment, just a few percent of Americans control 50 percent of our net wealth. To those who worry about the influence of money on politics, that’s bad enough. But as Lawrence Lessig of the Harvard Law School points out in a new article in The Atlantic, “a tiny number of Americans — .26 percent — give more than $200 to a congressional campaign. .05 percent give the maximum amount to any congressional candidate. .01 percent give more than $10,000 in any election cycle. And .000063 percent — 196 Americans — have given more than 80 percent of the super-PAC money spent in the presidential elections so far.”

“These few don’t exercise their power directly,” notes Lessig. “None can simply buy a congressman, or dictate the results they want. But because they are the source of the funds that fuel elections, their influence operates as a filter on which policies are likely to survive. It is as if America ran two elections every cycle, one a money election and one a voting election. To get to the second, you need to win the first. But to win the first, you must keep that tiniest fraction of the one percent happy. Just a couple thousand of them banding together is enough to assure that any reform gets stopped.”

Lessig’s conclusion?

“Some call this plutocracy. Some call it a corrupted aristocracy. I call it unstable. Just as America learned under the Articles of Confederation, where one state had the power to block the resolve of the rest, a nation in which so few have the power to block change is not a nation that can thrive. The only way to cure this disease is to spread the power to fund elections more broadly.”

Finally, there’s a new book, “Affluence and Influence,” by Princeton professor of politics Martin Gilens, writing in the tradition of his well-known colleague Larry Bartels and his seminal book, “Unequal Democracy.” Writes Gilens on the last page:

“As resources flow toward the already more advantaged Americans, their ability to use those resources to shape policy increases. Of course rich Americans hold diverse preferences, just as the poor and the middle class do. But despite some prominent liberal counterexamples, rich Americans tend to support the economic policies from which they have so greatly benefited. This raises the disturbing prospect of a vicious cycle in which growing economic and political inequality are mutually reinforcing.”

By now, I hope it’s clear how all this connects to the Mary Reeber question. If richer Americans tend to support economic policies that benefit them, and richer Americans spend far more on elections, and voters are influenced by advertising, then the “economic impact” of campaign money is not increased spending as a form of electioneering stimulus, but — potentially — increased inequality of both wealth and power. Libertarian law professor Richard Epstein has argued here on Making Sen$e that economic inequality might actually be a good thing. The Supreme Court has ruled that campaign finance is a form of free speech. And there is a long and honored intellectual tradition, dating back to Plato’s “Republic,” of financing the most able among us to run the show.

But a skeptic might feel queasy nonetheless.

This entry is cross-posted on the Making Sen$e page, where correspondent Paul Solman answers your economic and business questions