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Money In Politics

Summary:
I have two thoughts. The first is that major party presidential candidates would be wise to stop participating in big dollar fundraising events. The second is that we can identify the effect of money on political success, but usually assume that correlation is causation. I think that three major party candidates have seriously hurt themselves while raising money from rich donors. Barack Obama wishes he hadn’t said “clinging”, Mitt Romney wishes he hadn’t said 47% and Hillary Clinton sure deplores the day she said “deplorables”. Each gaffe had a non-negligible effect on the campaigns. Each was said to big dollar donors. I think it is easy to understand why. At fund raisers, the candidates feel that they are among friends and are less

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I have two thoughts. The first is that major party presidential candidates would be wise to stop participating in big dollar fundraising events. The second is that we can identify the effect of money on political success, but usually assume that correlation is causation.

I think that three major party candidates have seriously hurt themselves while raising money from rich donors. Barack Obama wishes he hadn’t said “clinging”, Mitt Romney wishes he hadn’t said 47% and Hillary Clinton sure deplores the day she said “deplorables”. Each gaffe had a non-negligible effect on the campaigns. Each was said to big dollar donors.

I think it is easy to understand why. At fund raisers, the candidates feel that they are among friends and are less cautious than they are when dealing with journalists. In exchange for large donations, people expect something other than the usual boilerplate. They expect the person to whom they give money to be frank with them. Also many want to speak and ask questions which are more of a statement than a question. The candidate won’t just say “you are completely wrong” to a donor. Donors are extremely partisan (if they are honest citizens who give because they care who wins not crooks trying to legally bribe). It is hard to avoid insulting them while also avoiding insulting swing voters and borderline engaged citizens.

There are other disadvantages of the big dollar donor events. Everyone assumes that part of what is going on is legal semi-bribery. We all detest the events. Some hold our noses and vote for candidates who beg rich people for money. Others vote Green or stay home. They also consume candidates’ time and energy. Most people are not willing to humiliate themselves in that way, which reduces the pool of honest able politicians (which is not quite entirely empty but is very very shallow).

On the other hand … what ? Since 2008 it has been clear that major party presidential candidates can raise absurd amounts of money in small contributions. The budgets are of major party presidential campaigns are so gigantic that the marginal effect of another million dollars is not necessarily detectable. Some pseudo savvy political handicappers wrote Joe Biden off in the Spring of 2020, because his fundraising was feeble. I gave a hostage to fortune and typed that *before* googling and as the third hit on my first search got “Op-Ed: Here’s why Joe Biden’s campaign collapsed so quickly“.

Some more searching and I get to the key issue — money ” But forget about advertising and campaign staff: It’s now an open question whether Biden will have the cash to pay for his charter plane to fly him around the 14 Super Tuesday states that vote on March 3.” OK Edward-Isaac Dovere explain to president Biden how he was doomed by the fact that he had to “forget about advertising and campaign staff.” And also explain to Senator Sanders how he was right that money rules the Democratic party and everything has changed because of “average donation of $28”.

OK so if something extremely unpleasant and shameful is also ineffective then why they hell do they do it? Here I think the key phrase is “major party presidential campaigns”. Those are a tiny fraction of total campaigns and even of the political experience of the candidates. Big donations may be key to winning a nomination. They may be key to winning election to governor, senator or representative. People willing to beg for money from the rich are selected long before they get close to a party nominating convention. They and their campaign team have been focusing on fund raising for decades and have not been famous enough to raise hundreds of millions on the web. The income of many campaign consultants depends on their credibility with big donors — it is hard to explain something to someone if his salary depends on not understanding it.

Also, when it fits prejudice or interests sometimes people think that correlation is causation. Biden, Sanders, and H Clinton excepted, fundraising is strongly correlated with political success. Data on fundraising are public and at least as useful as early polls. But the direction of causation is hard to determine. Do successful fundraisers win because they buy popularity with advertising or are popular candidates successful both at fundraising and on election day.

As I have noted, there is an easy way to (maybe) identify causation. If the causation is campaign funds cause political success, the origin of the campaign funds doesn’t matter Pecunia non olet. If successful fundraising is caused by popularity and correlated with electoral success because both electoral and fundraising success have the same cause, then it matters whether the money is donated by people who can vote. Looking at state level races, if the correlation is positive because money talks, then out of state donations should be as highly correlated with votes as in state donations. To the extent that donations are a symptom not a cause of political success, then only in state donations matter.

Nate Silver wrote “our analysis finds that a dollar received from within a candidate’s state is about five times as valuable as a dollar received outside of it in predicting the eventual election outcome“.

I think this is a very important result for strategists as well as forecasters.

Robert Waldmann
Robert J. Waldmann is a Professor of Economics at Univeristy of Rome “Tor Vergata” and received his PhD in Economics from Harvard University. Robert runs his personal blog and is an active contributor to Angrybear.

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