Every right-thinking person in America is concerned, if not downright appalled, by the role of money in politics. Citizens want their legislators to base their lawmaking decision on the merits of the case, not how much money corporations and special interest groups are shoveling into their campaign coffers. Some states deal with the problem by putting caps on campaign donations. Here in Virginia, there are no such limits in campaigns for state office, but the Commonwealth does require full transparency. Go to the Virginia Public Access Project to find out who’s donating money — and presumably has the ear of — your elected representatives.
But the debate over money in politics rages unabated. Not without some queasiness, I hew to the view that Virginia does it right. I could cite reasons of lofty principle, such as the argument that campaign contributions constitute a form of free speech that should not be abridged. And I could cite reasons of base practicality: Restrictions on campaign contributions will just drive influence seeking into the shadows where it cannot be tracked.
Now comes research by four economists (lead author Marianne Bertrand with the University of Chicago), “Tax-Exempt Lobbying: Corporate Philanthropy as a Tool for Political Influence,” which illuminates a surprisingly common means of subterranean influence — corporate philanthropy.
The authors examined where philanthropic foundations of Fortune 500 and S&P 500 corporations donated their money. Lo and behold, a significant percentage went to charities in the districts of congresspersons sitting on committees that oversee the industries of the donating firms.
Our analysis suggests that firms deploy their charitable foundations as a form of tax-exempt influence seeking. Based on a straightforward model of political influence our estimates imply that 7.1 percent of total U.S. corporate charitable giving is politically motivated, an amount that is economically significant: it is 280 percent larger than annual PAC contributions and about 40 percent of total federal lobbying expenditures. … Charitable giving may be a form of political influence that goes mostly undetected by voters and shareholders, and which is directly subsidized by taxpayers.
It would be naive to think that corporations are the only players in the philanthropy-for-influence game. Corporate motives might be easier to discern, but individual philanthropists often back causes and crusades of an ideological nature — the environment, social justice, free markets — that intersect with political controversies. Are billionaires and centi-millionaires any less likely than corporations to curry favor with elected officials than corporate executives?
Bertrand et al. posit a mechanism by which charitable contributions translate into influence.
To understand how charitable contributions directed to a congressional district may serve as a channel of political influence, one can build on the notion of credit-claiming by self-motivated politicians, an idea in political economy and political science that dates back at least to Mayhew’s observation that “Credit claiming is highly important to congressmen, with the consequence that much of congressional life is a relentless search for opportunities to engage in it.”
Although it is typically discussed in the context of federal grants and earmarks, political credit-claiming of local charities is a natural means of appealing to voters, given the visibility of many charities to politicians’ constituencies.
As a concrete example, the authors point to Washington Senator Patricia Murray, whose official webpage describes her work on housing, stating, “I was proud to establish the Washington State Farmworkers Housing Trust to help families who work hard to keep one of our state’s most important industries strong.” The charity’s donors include the foundations of JPMorgan Chase, Bank of America, and Wells Fargo. (The authors would have made a stronger case if Murray served on a committee regulating the banking or housing industries, but it doesn’t appear that she does.)
There’s an old saying that water seeks its own level. So does money in politics. We live in a political system that intrudes into every corner of the economy. No business activity is beyond the reach of taxation and regulation. As long as politicians have the power to reward and punish, businesses will have an incentive to influence the political process. If they don’t do it one way, they will do it another. As we’ve seen vividly with the machinations of the Clinton Foundation, politicians and corporations are infinitely ingenious in finding ways to trade in influence. Two hundred and fifty thousand dollars for a speech? Outrageous. But what’s the solution? Prohibit former presidents from being paid to give speeches?
The question for citizens is this: Would we rather they conduct their influence peddling out in the open where we can see it, dissect it, and denounce it? Or would we rather have it go underground?
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