The Two Sides of Money in Politics: A Synthesis and Framework

Abstract

653 MONEY IN POLITICS is a two-sided coin. On its face, campaign spending is a constitutionally protected right vital to informing and mobilizing ordinary citizens. On the flip side, privately financed campaigns may induce politicians to favor wealthy special interests at the expense of those very same ordinary citizens. The challenge for policymakers is to inhibit the negative effects of political money without undermining its beneficial aspects. Given the complexity of the political environment and the many layers of strategic interaction that accompany any regulatory regime, this is no easy task. An essential first step is to present a clear analytical framework that allows policymakers to assess who is affected by a law, what their interests are and, in equilibrium, what they will do. This paper develops such a framework based on empirically motivated assumptions about political actors, their incentives and the good and bad purposes money can serve. The central point to emerge is that the effects of privately financed campaigns are highly conditional. The major corollary is that the effects are not always intuitive: it is possible, for example, for contributions to undermine responsiveness even when there is no possibility of quid pro quo arrangements. Under the most empirically plausible conditions, however, the framework indicates that privately financed campaigns increase responsiveness on major issues at the expense of donor influence on minor issues. This state of affairs is far from perfect and implies potentially chronic contributor influence on less prominent issues. I therefore use the framework to argue reform should enhance the credibility of campaign information and diversify the donor pool. I also raise concerns that limits on large contributors, such as the ban on party soft money in the Bipartisan Campaign Reform Act of 2002 (“BCRA”), may promote wealth bias by disproportionally constraining candidates representing the non-wealthy. This paper proceeds as follows. The next part presents the costs and benefits of privately funded campaigns. The third part integrates these costs and benefits into an analytical framework, paying particular attention to the concepts of anticipated reaction and indirect competition. The fourth part discusses money and politics in practice, including a discussion of the likely effect of limits on very large contributions. The fifth part turns to a discussion of reform strategies that would promote fair representation in the face of vast inequalities of wealth. The sixth part concludes.