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Unleashing the Campaign Contributions of Corporations

Way back in February of this year, more than two-thirds of Californians believed raising more money from tobacco companies to finance cancer research was a good idea. That was before industry money kicked in.

Don Blankenship, former chief of Massey Energy, supported Brent Benjamin.

In just over three months, opponents spent $41 million to defeat the initiative — a proposition to levy an extra $1 on the sale of a pack of cigarettes — five times what its supporters spent. On June 5, it was defeated by 50.2 percent to 49.8 percent.

Similar forces in the next couple of months could shape the November elections. All the funds raised for the presidential and Congressional races so far pale in comparison to the money expected to rush in after the party conventions this week and next.

This is the first presidential election since the Supreme Court’s decision in the Citizens United case removed the last barriers to campaign spending by corporations and other groups. Analysts are bracing for a tidal wave of money from rich individuals, companies and labor unions that could alter the political landscape and transform American democracy.

Voters have always worried about the role of corporate money in election campaigns. Surprisingly perhaps, there hasn’t really been that much.

Gordon Tullock, one of the first social scientists to study the effects of corporate money in politics, remarked 40 years ago that it was a mystery that companies didn’t spend much more given the huge potential return of swaying legislators’ votes.

Ten years ago, Stephen Ansolabehere, John M. de Figueiredo, and James M. Snyder from the Massachusetts Institute of Technology picked up the theme with a study called “Why Is There So Little Money in U.S. Politics?” They noted that campaign spending over the last 100 years had remained stagnant and perhaps even declined as a share of the nation’s gross domestic product.

In 2000, the average contribution to a legislator by political action committees associated with unions, companies or industry groups was only $1,700, they found. This was way below the $10,000 legal ceiling and a trivial amount considering the goodies at stake. In 2000 the military procurement budget was $134 billion. Yet military contractors and their employees contributed less than $25 million to the campaigns of 1998 and 2000.

“The discrepancy between the value of policy and the amounts contributed strains basic economic intuitions,” Mr. Ansolabehere and his colleagues wrote. “Given the value of policy at stake, firms and other interest groups should give more.”

Even the nearly $4 billion in campaign spending in 2010 pales against the government’s $1 trillion in discretionary spending. And corporate money made only a small percentage of the total.

It may seem unbelievable that there has been “too little” corporate money in politics. But it makes some sense. Corporations don’t give more money because most of the time it isn’t really that effective in producing the outcomes they desire.

Some elections — for example, the mayoral race in New York — seem to have been decided by a magnate’s or a corporation’s overwhelming campaign spending. Pressure from Wall Street lobby groups almost certainly contributed to the demise of the Glass-Steagall Act, which had barred banks from engaging in some businesses.

But, over all, there is little evidence that money is effective at swaying legislation or improving the corporate bottom line. One study found that changes in campaign contribution laws from 1971 through 2002 had no impact on the stock price of companies that were heavily engaged in campaign spending.

On the other hand, playing politics can hurt a company’s brand. The chief executive of Target had to apologize two years ago when the company’s contribution to the campaign of Tom Emmer, the Republican candidate in Minnesota’s race for governor and a staunch opponent of gay marriage, led to threats of a boycott of its stores.

Campaign contributions can affect the priorities of elected officials, opening the door for interest group lobbyists. Studies have found that companies that lobby intensely are more profitable, on average, than those that don’t. Still, the evidence suggests most companies do not get any return from their lobbying expenditures. And though businesses have historically spent much more lobbying legislators than on campaign contributions, lobbying expenditures also are small compared with the benefits they could reap.

Richard Hall of the University of Michigan notes that interest groups dedicate most of their campaign contributions and lobbying efforts to legislators they already agree with, helping them make their case, and spend little time trying to persuade opponents. And big donors don’t have exclusive access to legislators, Mr. Hall found. Legislators also grant access to like-minded interest groups with little money to give.

In a way, this narrative may make more sense than the persistent fear that interest groups are shaping policy by getting their allies elected and telling them what to do.

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