Understanding Campaign Finance and Its Influence

>> Brandice Canes-Wrone: Okay, so today, I'm gonna be talking about what many would call hot topic, campaign finance. This is a topic on which there are lots of policy reforms floating around, often not a lot of evidence attached to those reforms. In fact, one working group, kind of a reform group I'm on.

Which is a bipartisan reform group across a number of campuses and including outside policy officials. We, for fun, looked up, yeah, for fun, we kind of put into an AI ChatGPT program. What would you do to reform campaign finance? It was a good lesson for me in terms of pedagogy and teaching.

Because a lot of things that spit out from it have not only no basis in the kind of academic literature. But are actually countered by what a lot of the academic literature says. But that's really consistent if you think about what GTP might be putting through. Which is that there are lots of websites making just big political claims for various purposes.

And again, without that much evidence. So today, what I'm gonna do is spend most of the time taking you through a portion of the evidence. We have just an hour on a number of topics. And then at the end, talking a little about what these findings mean in terms of thinking about current policy debates within this context.

So first, just to get us all on the same page, I'm gonna talk a bit about some historical trends and campaign finance kind of bring us up to speed. Again, that could be a whole hour. We'll do that pretty briefly. And then talk about what research says about the effects of money and campaign donors on the US political system.

So one of your readings by Gary Jacobson deals with this in terms of how money affects election outcomes. And I'm also gonna talk a bit about what we know about how campaign finance and campaign donors affect policymaking itself. This next part will be some of my own recent research with collaborators on what do we know about donor opinion.

And what donors actually want and think, what motivates them? That fourth part is also in your readings from work I did with Mike Barber and Sharece Thrower. And then finally, we'll get to the policy debates. Okay, so presidential campaign spending has gone up, particularly, in the most recent election.

It's relative to congressional spending, which I'll show you in a moment. It was flat for a while because for quite some time after the Federal and Election Campaign Act of 1978, presidential candidates were accepting public financing. So that kind of left things pretty level. And then increasingly, candidates stopped doing that and campaign spending took off.

It's increased steadily in congressional races. This is in real dollars. So this is not just an inflationary effect. This is just showing House and Senate winners. And as you can see, again, a steadier increase then for presidents, particularly on the House side, but also kind of a recent large increase as well.

And even without having had any sort of public subsidy or the like, that was no longer being accepted. A lot said about independence spending. And I'll get into some more details on that as we proceed. Just as a kind of background definition, what people mean by that or should mean is spending that's officially and kind of legally not coordinated with the official campaigns.

That relates to Citizens United, which we'll talk a bit about. That relates to concerns about Super PACs, which I'll talk a little bit about. And we can say more in the Q and A, if you'd like. And what's worth noting here is that's also been going up. It's also worth noting that's not in the figures that independent expenditures are still not a majority of spending.

They've been increasing at a large rate. But most spending is still channeled through the official campaigns and through FEC regulations that relate to official campaign spending. But it's going up. And so the kind of crude summary would be. It's not really as big of a deal as kind of most advocacy groups make it out to be, but it's increasing quickly.

And so it could, in our theory, overtake other types of spending over time. That remains to be seen. What's really changed over time, and advocacy groups tend to think this is a good thing. And so you don't hear a lot about it, is that the people who are financing campaigns.

Or the kind of sources of campaign financing have changed dramatically since the turn of the century. So there was a large academic literature in the 1990s, in the late 20th century on political action groups. And political action groups are the kind of official and regulated campaign financing arms of corporations, labor unions, also of advocacy groups, whether on the right or the left.

One issue causes, though a lot of their funding, actually a lot of the actual money, is in the realm of corporations and labor. There was a large literature because they were the primary source of funding. But as the Internet took off and it became easier to reach individuals.

Individual donations vastly now outweigh PAC spending, and individuals are the largest source of donations. I'm not gonna leave you, I know some speakers at boot camp. It's satisfying in one way, may tell you this is what we should do. Sometimes I like talks like that. I'm gonna do a little less of that today, except to say here's the evidence.

And you should think hard about that when you think about these policy reforms in terms of what we should do. Cuz what you wanna do is gonna depend a bit on what you wanna achieve. I will say we don't wanna just assume that individuals are better than political action committees.

And we're gonna get into some reasons why. So that table's from earlier work that Mike Barber did. That happens to end in 2014. So I updated it. It takes a while. I was looking for 2022. I did, but the FEC data takes a while to come out, and then once it comes out, you have to clean it.

So anyways, that 2020 portfolio that I put up just came out in a 2023 publication this summer. So I am giving you up to date in terms of cleaned data information. And you can see that it just continues to rise or stay at a very high level for individuals to dominate PAC.

And also to vastly dominate party spending. Party spending was, of course, Course, kind of at the heart of what the McCain Feingold reform went after. It was never quite as high as it was made out to be, but it's even lower now, okay? And lastly, it's worth noting that these individual donations are not simply, particularly in the case of congressional candidates in district or in state donors, that this increase has come largely from out of state donors to candidates.

And in fact, there are a very small number of zip codes, including this one, or if not literally the Stanford one, then the Palo Alto and Silicon Valley area. Along with New York, Houston, Boston, major metropolitan areas, Chicago, that almost all of the money is coming from, from individuals for campaigns.

So that has big issue implications for representation in United States. So, here it's framed in terms of percent of money from in state, and you can see that's gone down considerably and it's now below 50% for Senate candidates, okay?

>> Brandice Canes-Wrone: Okay, so how does it matter? There are articles, I'm not gonna focus on those because I think that, as the Jacobson review piece points out, the balance of the evidence suggests that there is an effect of money on campaign outcomes.

But there are some interesting studies that suggest it has no effect. So you should be aware of that. A relatively well known economist, for those who ever read treeconomics by Steve Levitt, he has a study that looks at repeat races, where the same candidates are competing against each other.

This is obviously kind of an unusual set of races, right? Because it means that an incumbent was redistricted out and they faced the same person again, I wouldn't call it a representative set of races, but he does find that in those races, money matters zero. So in some ways, that should be the challenge that others have to kind of face when they go in to study how much money matters.

As Jacobson's argument, which is, I agree, is the kind of general sense, kind of meta analysis, so to speak. Loosely speaking of the literature suggests that campaigns particularly make a difference in getting the message out of the fundamentals. So back when McCain announced he was suspending his campaign against Obama and was not gonna campaign, those who kinda knew the literature didn't think this was such a great idea in terms of winning the election that you don't wanna really be spending zero.

You need to get your message out if you want to win because other candidates are getting their message out. Having said that, the financing is more effective when you're, say, advertising that the economy is in your favorite. That the policy positions are in your favor, that wartime conditions are in your, and peacetime conditions are in your favor.

There's some evidence for effects in that line of conventions and debates. They tend to be fairly short lived, as Jacobson points out. However, it's also the case that the other party is going full throttle at the same time. So the short lived nature is an equilibrium effect where each party is pushing as hard as they can.

There's also some evidence, again, that advertising matters, but it matters kind of less than very marginal effects, again. And I sort of highlight some work that would be, you could say, consistent with the Levitt analysis, although, again, I wouldn't. If you're gonna, some of you may run for office.

So please don't go away from this saying, I was told not to spend anything and not to campaign. That's not the piece of advice. However, you should note, if you are Michael Bloomberg and you've amassed that much wealth, you should also not assume that your wealth can win you the election alone.

The evidence is pretty strong, and I will say on Michael Bloomberg, I note that, there's a little bit of a frustration in political science. Sometimes you say these things that follow from the literature. I was living, I was on the faculty at Princeton at the time, and I was basically telling people this.

And then no one thinks you're right. Everyone's like, you don't really get it. And then when you do get it, they all say, it's so obvious. It's so obvious. So, I mean, a lot of this stuff is obvious in retrospect. And it's worth noting, although Biden did outspend Trump in the most recent election, Hillary Clinton spent almost double what Donald Trump did in 2016.

So it's another cautionary tale that on the whole, money matters, as Jacobson highlights. But it's not gonna overcome a lot of these fundamentals.

>> Brandice Canes-Wrone: In non presidential races, money arguably matters a little bit more for challengers in particular. That's because challengers are less well known. And one could argue that actually this has mattered more over time because local media, as you probably know, has faced pretty harrowing conditions with the rise of free news on the Internet.

So there's less natural coverage for challengers. There's still a really difficult inference challenge for social scientists, which is that the candidate who's most likely to win raises tends to raise the most money. So both corporations in particular tend to give in a bipartisan way and want to have access to whoever the winner is.

So if it's known that someone's likely to win, they're gonna go in and donate. So you're gonna have this effect that it looks the winner has outraged and therefore, because they've outraised, outspent the losing candidate. And social scientists have a range of ways you try to get at this by looking at sort of candidates own wealth, by looking at, quote, natural experiments and shocks.

And the best evidence suggests that spending does matter, again, marginally. It can help your campaign. You certainly wanna be in there doing it. But again, not the Bloomberg story is a cautionary tale. There's also research that's been done on independent spending and that suggests, and this is, you probably know, political science isn't exactly the bastion of conservatives.

I mean, despite, kind of people who may want without knowing their personal beliefs. They may want to say that independent spending has large effects, but they're serious social scientists and researchers. So far, the research suggests minimal effects beyond that. That's already in the effects of minimal effects beyond those you generally expect from spending and campaigns, those marginal effects.

And that it's complementary to the official candidate campaigns rather than substituting. Again, things change quickly in this environment. So that could change in four years. But at this point, it doesn't suggest to have shifted dramatically the campaign environment. It's also worth noting, I'll kind of mention this again when we discuss potential policy reforms that a lot of states for their state elections.

Even before Citizens United did not restrict independent spending in a large way, they basically had the legal regime that we have now at the federal level for Citizens United prior to it, just for state elections, not federal. The evidence is that it didn't really advantage one party or the other.

Could it have advantaged businesses? That's harder to examine, but that there isn't a large partisan effect, partly because the parties each compete hard for this independent spending and tend to be fairly well matched. Okay, policy making. So even if it were the case, right, that campaigns, I didn't say they had zero, but even if they did have zero, right?

In fact, we'd still care a lot about whether money was going into the system because of the effect it could have on policymakers behavior. And here the results are pretty surprising. So for political action committees, there's a large body of work that interest group spending, or at least there's often surprising to outsiders.

Maybe not to you, that political interest group spending has little effect on roll call voting of members. And there was just study after study done of this, and there have been kind of true meta analyses that kind of think, well, maybe you don't see it here on this session, but if you put it all together, you'll find it.

There is evidence, on the other hand, that PAC spending affects access of interest groups and legislative effort. And when you think about it, members are gonna be very beholden for these roll call votes when they come up for reelection. And so if a position is really unpopular with their district, for them to take a roll call vote for an interest for a particular corporation or labor union or other advocacy group could carry pretty high costs.

On the other hand, exerting effort is something, and getting things on the roll call floor, that is a little less known. What were you not exerting effort on? What could have been on the floor? What could you have done in the committee if you weren't doing this? And so the evidence suggests that that's where most of the influence comes.

So, again, that's not to say that there's not. In fact, it suggests there is influence on the types of bills that are considered, but ultimately, their votes on what bills are on the agenda tend to not reflect PAC spending. Again, what's a little surprising is that the research on individual donors, some of which I've done, full disclosure, actually suggests a little bit more influence on roll call voting, which at some level is a bit of a surprise, right?

Like individual donors if some of you, I'm sure, have been donors of some sort to a campaign, right? Given even if it's a small amount I know I have a daughter who's in college, and I was not happy with who she donated to on our credit card. So maybe you all are better, more respectful of your parents.

Wait, how did this? It was $5, but I still felt like, okay, that's my $5, not yours. So there's less. But sort of that doesn't mean that you give, if you give $5 to a campaign, that you're gonna get access to the member and a private one on one meeting for an hour.

So you might think, why would there be influence? There's evidence that members are increasingly pressured to, by their parties to spend their time fundraising on the hill. And for those of you who have interned on the hill, you've probably seen a lot of this up front that members go off to call said, I see some nods, call centers.

And they're under pressure to constantly build that list and increase the amount that they're contributing, not just to their own campaign, but to other members in their party in order to move up within the party. And when you interview members, they'll tell you, or I should say, and their staff as well, about this pressure.

So we did a study with Ken Miller, who's on the faculty at University of Nevada in Las Vegas. And Ken had actually worked on some campaigns over time as well, and basically looked at what happens when you have a bill and the member's position. The member has to choose between district opinion on the bill and voting with what we call kind of national donor opinion.

So people who have self identified as donors. And what we found is that, at least for the sets of issues, and we use sort of issues that had been designated by others as key votes. 81% of the time, the member votes with the national donor opinion. And what really shocked us was that, well, let's say that's just kind of, they care about.

They're gonna get primaried, right? So members may just have an incentive to worry about getting primaried, but actually, two thirds of the time they voted with national donor opinion, even when it conflicted with not just district opinion, but also primary opinion, the opinion of kind of the party self identified partisans in their district.

And in the paper, which you were not assigned, because I'm aware that you're kind of being assigned a lot of papers very quickly this week. We do this kind of, as we do here, with just these very simple statistics but then with a lot of controls and a battery of statistical tests to really see if the effect holds up, and it does.