Tuesday, October 04, 2011

Donating to Both Sides: A Research Proposal

It is, I gather, fairly common for corporate donors to give money to both candidates in some two candidate races. Assuming that is correct, the question is why.

Both donations can't be intended to influence the outcome of the election, since they push it in opposite directions, so presumably the purpose is to buy influence with the winner. But doesn't the donation to the loser reduce the donor's influence with the winner, just balancing an equal donation to the winner?

I can see two possible answers. One is that the information is not always public, so the winner may not know about the donation to the loser. I don't think that's been possible in recent elections, but I'm far from expert on the subject.

The other possibility is that the money isn't intended to be spent on the election. It's my understanding (those who know more are welcome to correct me) that, under some circumstances, a candidate who retires is allowed to keep the balance of past campaign donations. If so, one would expect the pattern of donating to both candidates to be most common when at least one of them is near the end of his career. 

Which suggests some interesting possibilities for research.


P.S. A commenter informs me that my fact is not a fact, that what is actually happening is that donations by employees of a firm, some of whom support one candidate and some another, are being misinterpreted as donations by the firm.


At 9:58 AM, October 04, 2011, Anonymous Miko said...

I'd imagine that the 'donations' to each side are probably unequal, with the side that's perceived as more likely to win getting larger donations. Since politicians care about their own perpetuation and since incumbents are more likely to win, the donation now is a form of signaling for a donation later. And since an incumbent will be receiving the larger donation, they don't have any reason to resent their opponent getting a small insurance-policy donation.

At 10:32 AM, October 04, 2011, Anonymous Gray Woodland said...

I think that's a really interesting question, with multiple plausible answers that I suspect are all more or less true:

1) A signal that one is a player in the game. A company that donates to neither side is not very politically interesting. Nor, to a lesser extent, is a company which is reliably in the bag - it has nowhere else to go. A company that puts up serious money as a prize in the political game, and then divides it between the leading factions according to some agenda of its own, is announcing that it's a company worth courting.

2) A signal of institutional loyalty. The company is signalling that it is the kind of entity which pays tribute to the class of its superiors, unlike some wild and woolly rival interest which might not treat them as its superiors at all. Which kind will politicians as a class tend to favour?

More practically on this front, the effect of split donations is most certainly not neutral on the elections. It is a barrier to market entry by upstart competitor parties, and therefore a real favour to both halves of the duopoly.

3) A move that only makes sense at a finer grain of resolution. For example, the company has people who build relationships with each party: each makes a convincing case that their particular corporate faction is thoroughly behind allegiance X, but needs ammunition to keep the nervous nellies and oppo sympathizers on the back foot, and justify their actions to hard-nosed shareholders, etc. And even if at least one of these relationships is cynically faked and known to be cynically faked, it may be in the practical interests of both sides of it to maintain the polite fiction.

I'd expect Case 1 to increase sensitivity of the donation balance to political events, and Case 2 to reduce it, other things being equal. I'm not sure how one might detect the prevalence of the micropolitical Case 3, except perhaps by the relative unpredictability of donation strategy to persons outside of the loop.

At 11:31 AM, October 04, 2011, Blogger Douglas Souza said...

Instead of looking at the benefit of the donation perhaps we should consider the power of threatening a candidate with denial of future donations. This means that the donations are not meant to increase the chance that any given candidate wins their race. But the corporation now has power over the candidate because they can threaten to remove their support and tip the balance in favor of the opposition candidate. Considering how closely aligned corporations' interests are we can imagine that if one corporation would withhold the donation than it is probable that many, if not all, other donor corporations would also withhold their donations. This gives corporations lots of power over the political process.

Notice also that this does not require a cartel to ensure the corporations act in concert. The market for political power is sufficient to push corporations to act together, unknowingly.

At 12:11 PM, October 04, 2011, Anonymous Alexandra Thorn said...

Donating to the major candidates can also make it even harder for third party candidates (often with views the corporations might see as dangerous) to break into a system already rigged to favor two-party elections.

At 12:21 PM, October 04, 2011, Anonymous Alexandra Thorn said...

Is there rolling over of funds from one campaign to the next campaign? If so, this strategy might also help in subsequent primary campaigns.

Actually, this might be the case anyway, just insofar as having launched a successful campaign the first time around will boost your name recognition in future elections.

At 12:33 PM, October 04, 2011, Anonymous Alexandra Thorn said...

One other thought:

There seems to be a common assumption that campaign dollars can be more or less directly converted into votes. If this is the case, then the candidate who gets elected will always be the one who spends the most. If two candidates receive equal donations and one of them sets aside a chunk of the cash as a retirement fund, the other candidate will win. So using campaign contributions in this way either indicates that the candidate does not wish to be elected (which would defeat the purpose of the donations from the corporation's perspective) or that she is gambling that her opponent will make inefficient use of his own funds.

At 3:00 PM, October 04, 2011, Anonymous Daublin said...

A person buying influence does not want to be restricted to ultimatums. They want to reward and punish politicians at a more fine-grained level. If a politician mishbehaves, the briber doesn't just want to take the contributions to zero, because then they lose all leverage. Instead, they want to decrease their contributions.

One corollary is that you want to start out by giving some baseline level of contributions, not zero. Then you can punish people. You might also want the level of contributions to regress back to the mean level of contributions over time.

This line of reasoning applies to candidates whether you like them or not. Indeed it applies *more* to candidates you don't like.

To try and sum up, this situation is a lot easier to think about if you think of a campaign contribution as just one more kind of gift you would offer an official. You offer them a gift, in a coin that politicians especially value, and you hope they will pay you back. The goal is not to get them elected; the goal is to make them do good things for you once they are elected.

At 10:36 PM, October 04, 2011, Anonymous Daniel said...

I would first love to clearify: who donates to both sides and is it really this common? If an institution gives to both sides, what does this mean? That individuals associated with this institution favour different candidates? This is not conspicous at all.

Or does it mean that you gave money in the Republican Primary to a more liberal candidate and later on, you give more to the democrats? This seems to me, to be consistent as well.

So, I would love to see someone clear these issues up, first.

At 1:06 AM, October 05, 2011, Blogger TheVidra said...

Going to this link http://www.opensecrets.org/industries, I browsed through the major industries, and after a quick glance, I saw very few industries that donate equal amounts to both major political parties. I would say that based on this data, the majority of the companies/groups donate to both parties unequally, the next popular choice is to donate to one single political party, with the remainder splitting their donations evenly between the two parties. I am not sure what this implies, but luckily I live under a benevolent dictatorship at the moment and I am completely spared from the political circus. My economic freedom is much higher than in the US (I don't have to pay any taxes whatsoever, nor do I have to put up with bureaucracy, keep track of what my expenses are etc). So there is far less waste in this apolitical system than in the west, with most of this society's resources going toward creating something (good or service), rather than toward parasitism and circus. There is also stability, since one's economic freedom is secure as long as the ruling family stays in power, and chances of it being overthrown are very small. Whereas in a democratic system, each new election could mean disaster for a business, depending on the new rules being implemented and on which companies are favored by the new regime (of course, the effects are softened in more civilized democracies, like in the US). Of course, mine is a lucky scenario which is not very likely in most other places, given human nature. By the way, it is not my native European country, nor the US (where I lived for two decades and grew to appreciate most things except the high rates of violent crime and their cultural acceptance, the political circus, the bureaucracy, and the work culture). Having said this, despite the huge advantages to living in such an apolitical society which protects one's economic freedom, ultimately I would feel more at home in the US or Europe, due to cultural affinities and a much higher level of education (and sense of logic) of the average person. That makes a huge difference.

At 5:38 AM, October 05, 2011, OpenID albert25 said...

You donate a small amount to a politician you don't like just to be left alone. No donation in many circumstances is offensive to the politician and he will be against you.

So donate small to be ignored.. and then donate larger to your candidate of choice

At 6:43 AM, October 05, 2011, Blogger Joshua L. Lyle said...

Gray Woodland has some great points. I'd like to reinterpret them around the idea of buying access.

On (1), I would add that whatever the outcome, the donation means that one is a court-able party, ready and able to make contributions should attention be given to their issues.

On (2), I would add that the donation indicates seriousness of intent and recognition. Candidates learn that the donor will be heard from again, as issues arise that affect them.

On (3), smartly crafted cross-aisle lobbying teams explicitly assemble a range of individual actors that target the individual candidates. Professional lobbies excel at this - every district has a few members of a profession that can show up in person and are sympathetic to any given candidate's politics. Dropping off a bundle of checks makes an impression that can pay off later when access is needed.

At 8:11 AM, October 05, 2011, Blogger David Friedman said...

The Vidra comments on the advantages of benevolent dictatorship.

You might be interested in a historical novel by Mary Renault, _The Praise Singer_. It's partly about tyranny--in the Greek sense of a popular dictatorship. Her view, pretty clearly, is that it's the best form of government--provided you get the right tyrant.

At 8:16 AM, October 05, 2011, Blogger David Friedman said...

So far the only explanation for donations to both sides that I find plausible is that the donations are not going to the opposite sides of a single race--that the firm donates to a Republican it approves of in a primary, then to a Democrat it approves of in the election, or to a Republican it approves of in one district, a Democrat in another. But that isn't the situation I was asking about.

So far as letting candidates know that your firm is in the market for political favors, donating to one of the two candidates should accomplish that. The threat to donate more to a candidate's opponent should have the same effect as a threat to donate less to the candidate.

But the whole discussion would benefit by more data.

At 11:06 AM, October 05, 2011, Blogger Koby said...

Isn't it a simple case of "kissing the ring?"

I don't think Republican/Democrat politicians are so divided that they're offended when their opponent gets a nod. When a politician loses an election, he/she is probably going to go back to working for the government in some capacity anyway. They're really only losing out on a promotion. It seems no matter who wins, they'll end up having lunch together, exchanging nice words, and probably appointing one another to some office. Maybe not on the presidential or senatorial level, since that would receive too much media attention (although I do believe most of the divisiveness is manufactured) but I've certainly seen that on the local level.

If I worked at a company where two of my colleagues were vying for a high position, I'd probably be very respectful to both of them, while also not appearing to favor one over the other. In the end, I can't imagine the 'new boss' would fault me for being respectful to his/her losing opponent.

At 12:11 PM, October 06, 2011, Blogger Seth said...

I suspect that from most politicians' points of view, a donation to them counts a lot more than a donation to their opposition. "I donated $X to the candidate so I want him to listen to my arguments" is not likely to be met with "you also donated $X to his opponent so we don't care about you."

At 8:21 PM, October 06, 2011, Blogger Edward said...

Corporations are legally prohibited from donating to candidates, so it's certainly not the case that a corporation is donating to multiple candidates in a single race.

What happens is that people will often treat contributions made by employees of a corporation as if they were made by the corporation itself. So, for example, if one guy from Acme Corp gave money to Obama while another gave money to McCain, this would be reported as Acme giving to both candidates.

The fact that people who work for the same corporate entity might have different political views is, of course, hardly shocking. But a little sloppy language is all that's needed to create the appearance that something dubious is going on.

At 9:51 PM, October 10, 2011, Blogger Lorenzo said...

They are buying access. You support both sides, you get access to whoever wins. Since the pool of substantial donors is small, that you also supported the other side does not stop you buying access.

The British used to play this game regularly. For instance, when the struggle in Arabia was Hashemites versus the al-Saud, T E Lawrence was the Arab Office's liaison with the Hashemites and St John Philby (yes, father of Kim) was the India Office's liaison with the al-Saud.

At 6:36 AM, October 11, 2011, Blogger Doc Merlin said...

The point isn't the politics. Its the hangers on and those that surround the power.

The point is to pay off people with contacts and power so your campaign isn't destroyed by them. Perry's war with Rove and subsequent campaign meltdown is a good example of this. The hangers on, consultants, and other parasites (I mean this term in its original sense) don't care about ideology. They just want to get their money.

At 3:17 PM, October 12, 2011, Blogger John Lott said...

That claim about corporations giving to candidates on both sides is simply false. Some employees at different companies give to one candidate and some other employees give to another candidate, but companies haven't been able to give directly to candidates.

Corporate and Association PACs have rules in their bylaws that almost always rule out donations to both candidates in the same race. Steve Bronars and I have a paper in the JLE about a decade ago where we go through that.


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