Despite Perception, Business PACs Don’t Buy Politicians

 

Takeaway

  • Individuals, not PACs, give the most to political campaigns.
  • Even among PACs, businesses don’t make the majority of contributions.
  • Full disclosure might limit large donations more effectively than caps on giving.

What’s the latest status symbol for a billionaire businessman? Forget about buying a yacht, a mansion, or a private island. Instead, purchase a politician.

These days that’s the popular picture of how corporate money has influenced politics. As of this past October, presidential campaigns had already raised a total of $473 million, according to the Center for Responsive Politics. And many will view the next round of campaign finance reports, due January 31, as more evidence that elections are for sale.

But that view is mostly fiction, say two professors of Business, Government and Society at the McCombs School of Business. In a new analysis of Federal Election Commission filings spanning 20 years, they found that business political action committees don’t dominate campaign contributions. Over time, their weight has even declined relative to other kinds of interest groups.

“It’s portrayed as a situation in which a business’s influence comes from the amount of money it gives,” says Assistant Professor Timothy Werner. “What we find when we look at it academically is that an actual link just isn’t there.”

According to Assistant Professor Brian Richter, the press is partly to blame. “The media tend to focus on scandals,” he says, and this exaggerates the overall impact of business contributions. “Those are extreme cases, rather than how it works in general practice.”

To construct a picture of PAC money in elections, Werner and Richter gathered FEC data for 11 congressional election cycles, from 1992 to 2012. Crunching the numbers, they found that several popular beliefs are flat-out wrong. Some key myth-busters:

Businesses don’t make a majority of PAC contributions. Back in 1992, corporate PACs accounted for 60 percent of the average candidate’s PAC totals. By 2006, they were just under 50 percent.

Businesses aren’t giving any less, says Werner. What’s happened is that other kinds of interest groups are giving more. “We’ve seen a rise in ideological, single-issue groups,” he says. “They’re tied to particular issues, like the environment or gay and lesbian rights, as opposed to broad-based giving to political parties.”

Together, the ideological share of campaign funding rose to 27 percent in 2006 from 18 percent in 1996. A third type of PAC, sponsored by labor unions, stayed nearly flat over the same period, around 25 percent.

PACs don’t make a majority of campaign contributions. Individuals dominated the last two election cycles, giving 70 percent of money the average candidate received. PACs gave 30 percent, with business PACs making up a mere 15 percent.

True, some individual donations are made by corporate executives, and in a separate study, Richter found that individuals increased their giving by an average of 137 percent when they became CEOs. But that only meant an extra $4,029 per election cycle, spread among an average of 3.9 candidates, PACs, and political parties.

“Even if you added up every CEO from every major company,” he says, “the total amount of giving would still be small relative to regular citizens and relative to corporate PACs.”

Businesses are bipartisan. GOP candidates are seen as more business-friendly than Democrats, but you wouldn’t know it from patterns of PAC giving. The average Democratic campaign received 38 percent of its contributions from PACs, while the average Republican got 30 percent.

That doesn’t necessarily mean most PACs favor Democratic policies, says Werner. It’s more likely to mean that over the study period, Democrats held more congressional seats than Republicans. Majority party members averaged 54 percent more contributions than members of minority parties.

Furthermore, individual CEOs were also equal opportunity givers. Richter found that over time, 69 percent had given to candidates from multiple parties within at least one election cycle.

“Businesses are pragmatic,” he says. “That partially explains why they don’t necessarily give more to Republicans than Democrats. Money follows power.”

PACs are not essential to win. During the 20-year timespan, candidates turned down all PAC cash and still won. Their numbers were small — only 1.3 percent of all candidates. But on average, they got 61 percent share of the vote, while PAC-supported candidates received 52 percent.

“It’s a select group of people who could get PAC donations but take the position that they won’t, because they don’t need them,” Werner says. “It may hurt them financially, but in the end, they gain votes for doing that.”

Money buys access. Rather than swinging elections, both researchers say, most contributions aim to buy access: the ability to bend an official’s ear once the election is over. In another study, Werner found corporations spent 15 times more on lobbying than on PACs.

“For rational actors,” he says, “the return on lobbying is far more important than engaging in electoral politics.”

Access doesn’t guarantee that a public official will do a company’s bidding, says Richter, especially if it would imperil re-election. “But even if they don’t buy policy outcomes, it’s still rational for firms to make campaign contributions, especially to candidates with seniority or ones who hold powerful seats. Spending $5,000 [the maximum a PAC can give to one candidate] to get a meeting is pretty cheap, and there’s a risk that you won’t get access if you haven’t done this.”

Getting big money out of politics is a hot topic, at least in campaigning for Democratic primaries, but both researchers take a dim view of many reform proposals — like restricting contributions to the independent committees known as super PACs. Super PACs can’t rescue a weak candidate, says Werner. He points to Jeb Bush, whose $103 million in outside money surpasses all his Republican competitors put together. But Bush has stuck well below 10 percent in most polls.

An approach that might quell some public concern, says Richter, could be to let givers donate larger amounts while requiring them to disclose all gifts — to super PACs, so-called dark money groups, and other conduits — in a single place that makes the identity of both the donor and the recipient clearer. His newer research, he adds, suggests that if limits go up, “firms are unlikely to give much more than they do now.” Such disclosure might even have a self-limiting effect on business contributions. “The incentive is there not to show up in the data in a way that could be interpreted as being corrupt,” he says.

Werner, too, favors disclosure of all contributions so that citizens can see which individuals or companies have outsized influence. “To me as a citizen, the appearance of this is pretty gross, even if I know rationally as an academic that it doesn’t really matter,” he says. “We need to get a handle on what this money is doing.”

Sources of Congressional Candidates&; Funds: Does Interest Group Money Dominate?, Interest Group Politics, 9th ed., 2015.

 

Faculty in this Article

Timothy Werner

Assistant Professor

Tim Werner received his B.A. in political science from Rice University and a master’s and Ph.D. in political science from the University of...

Brian Richter

Assistant Professor, BG&S McCombs School of Business

Brian Richter holds degrees from MIT, UCSD, and UCLA, where he earned a Ph.D. in global economics and management. Prior to joining the faculty at...

About The Author

Steve Brooks

In a quarter-century as a journalist, Steve Brooks has won two Neal awards for excellence in trade reporting and a Press Club of New Orleans award...

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