Why It Is More Blessed to Give: Campaign Contributions

Michael Brush at MSN's "Money Central" reports on an academic paper that tries to quantify the benefits businesses get from giving to government. Some of the findings, as he reports them:

Corporations that give the most have beaten the market by 2.5 percentage points a year over the past 25 years.......

What is surprising is how much companies get for so little money. The public companies that do give money, on average, fork out just $1,700 to $2,000 per campaign and support an average of 56 federal candidates in each two-year cycle.

......The best approach to giving, for instance, isn't to buy a single lawmaker. Rather, companies that contribute to the largest number of political campaigns get the biggest benefit.

"Much like a venture capital portfolio of many startups, a few of the supported candidates will 'pay off big' and result in increases in firm shareholder wealth," says the study, which tracked the impact of more than 1 million corporate campaign contributions by about 2,000 companies from 1979 to 2004.

The study is called "Corporate Political Contributions and Stock Returns," issued in October 2006 by Michael J. Cooper at the University of Utah and Huseyin Gulen and Alexei Ovtchinnikov, both of Virginia Tech. It finds the best-leveraged investments in politicians are to more powerful ones (such as committee heads), to home-state candidates, and to House candidates generally--who are in charge of launching tax and budget law. Also:

Though companies support Republicans more than Democrats ($43,000 per election cycle compared with $31,000, on average), they get a bigger payoff by supporting Democrats. Companies that tilt their contributions to the left, and to home-state candidates, outperform the market by 3 percentage points a year, on average.

Brush's full story here .

Full study about which Brush was reporting here .

Comments

Gimme Back My Dog | March 15, 2007, 5:51pm | #

I didn't RTFA, but I am guessing they ignore the easiest solution to this problem (Do not continue to allow the government to control the economy to the extent that they can choose winners and losers) and instead focus on the solution which has been proven over and over not to work (campaign finance reform)

Pro Libertate | March 15, 2007, 5:51pm | #

This perfectly reflects what government relations folks at my past big corporation jobs have said. Give broadly, give cross party, give locally, and give a little more to the Democrats, because they need buying off more than the slightly more business-friendly GOP.

Pro Libertate | March 15, 2007, 5:52pm | #

Note that I find the whole process reprehensible. Ideally, the federal government wouldn't be strong enough to require big spending to influence. Grrr.

brotherben | March 15, 2007, 6:02pm | #

This seems to me that someone is suggesting that campaign contributions influence the decisions that our elected officials make. If I were a member of congress, I would be deeply offended at the insinuation.
It smacks of the rantings of a bunch of long-haired hippy type pinko fags.

LarryA | March 15, 2007, 6:13pm | #

Of course it's also true that the companies doing the best job of making profits can afford to make more campaign contributions. Chicken? Egg?

Not Weigel | March 15, 2007, 6:18pm | #

more to the Democrats, because they need buying off more

Survey says...BZZZZZZZZZZZZZT.

R C Dean | March 15, 2007, 6:34pm | #

This perfectly reflects what government relations folks at my past big corporation jobs have said.

That's pretty much been my advice when I was doing government relations, as well.

Shelby | March 15, 2007, 6:49pm | #

One Billion Dollars! [Insert Dr. Evil Joke Here]

Katherine Mangu-Ward | March 15, 2007, 6:13pm

Today's Wall Street Journal dismisses Viacom's $1 billion suit against Google/YouTube. It's inevitable that the YouTube model for customer choice will win out, says Paul Kedrosky, even if Google loses:

That is why, to be blunt, YouTube doesn't matter. Because if Viacom wins this suit and busts YouTube--and there is a very good chance it will win; it is, after all, uncontested that this is Viacom's media property we are talking about--that won't change what consumers want one whit. They are demanding unbundled media, sold everywhere and in myriad assortments. Period. And if Viacom won't provide it then some new media entrepreneurs will.

Is this the beginning of the end for intellectual property? Is that a good thing? Discuss.

For more from Reason's treasure trove on intellectual property, go here.

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Comments to "One Billion Dollars! [Insert Dr. Evil Joke Here]":
Add a comment ↓

Nemorosus | March 15, 2007, 6:25pm | #

The people have spoken: the service of reproducing, bundling and delivering content is not appreciated. Companies premised on making money for tasks that computers can do for free should not earn money. What value does Viacom actually add to the content they try to restrict access too?
jtuf | March 15, 2007, 6:45pm | #

The intellectual commons will take a big cut out of intellectual property in the arts. People will still pay a premium for professional artists no matter how good amature work is, because they want the status symbol. However, 20 years from now, most people will consume high quality, free, amature art.
Dave W. | March 15, 2007, 6:47pm | #

False dichotomy here. Bundled versus unbundled is not a Boolean variable. Myriad assortment versus an unmyriad non-assortment is not a Boolean variable. Customer pament, both in amount and terms are not Boolean variables either.

The final result will be somewhere in between what the consumers want, and what Viacom wants.

How well Viacom does in court is one variable. How well they do in Congress is another variable.

Intellectual property is here to stay, for better or worse.

At one time I used to use Napster. Now I use eMusic. eMusic allows me less freedom than Napster and costs me more, but: (1) it doesn't cost me much; and (2) they got a lot of what I want, digital music wise. Other people, with more hegemonic tastes use the iTunes, which costs more, but specializes in crappy bands that sell a lot, and does have less DRM than is theoretically possible, from what I hear.

Similar thing will happen with tv and movie distribution models.

Final comment: these shifts in distribution of copyrighted materials went a lot smoother when the content providers were less consolidated, and Congress was more deliberative and less in-the-pocket of one side of the transacting market. Professor Jessica Litman wrote a book about that. Forgot what it is called, but worth reading.
Shelby | March 15, 2007, 6:47pm | #

I still can't decide which campaign-reform idea I like better: (1) anyone can give anything, but identities and amounts must be released in real time on a publicized website; or (2) all donations go into a bank account from which the campaign can withdraw funds but has no other control; it cannot identify who contributed money or precisely when a given amount was sent in. (1) eliminates anonymity and reveals who is buying who; (2) makes it impossible for the pol to know who "bought" her.

Shelby | March 15, 2007, 6:50pm | #

That was truly bizarre. I tried to post my comment here and ended up copy-and-pasting another story and ITS comments? WTF? Anyway, the second "comment" is my real one.

Ryo | March 15, 2007, 6:53pm | #

Good job Shelby, you broke the internet.

brotherben | March 15, 2007, 7:00pm | #

I have that book too but cant remember the name.It has no cover. A friend of mine photocopied it and gave it to me.

MikeP | March 15, 2007, 8:03pm | #

I have that book too but cant remember the name.It has no cover. A friend of mine photocopied it and gave it to me.

You can probably find the title of the book on the copyright page...

jf | March 15, 2007, 8:08pm | #

I suspect that Sol has been giving a lot of contributions to misdirect people as to the real cause of global warming. Plenty of links on Google News today showing how Mars, Jupiter, and Pluto are warming at the same time as Earth.

brotherben | March 15, 2007, 9:19pm | #

Panderbation- to acheive personal satisfaction by pimping one's influence.

I.Self.Divine. | March 16, 2007, 8:35am | #

Panderbation- to acheive personal satisfaction by pimping one's influence.

Definitely my new favorite word.

JasonL | March 16, 2007, 9:04am | #

Whether it is effective or not, I think there are different reasons businesses give to the each party.

The essence of the Dem platform is to employ force of law or regulatory bodies to restrict what companies do at their discretion. If you like this practice, you view it as levelling the playing field or possibly rectifying market failures (real and imagined). If you are giving money to Democrats as a business representing shareholders, you are trying to keep them from hurting you too bad.

If you are giving money to the elephants, you are trying to get people elected who you perceive to support your interests. This can be pork, but there is a heavy dose of 'he'll leave us alone'.

Dan T. | March 16, 2007, 9:31am | #

Another of the many libertarian problems out there - you guys want people and groups to give unlimited amounts of money to politicians and yet complain when said politicians enact policies that favor their donors.

Dan T. | March 16, 2007, 9:32am | #

Edit: the above should read "be allowed to give..."

Doug | March 16, 2007, 9:53am | #

I would just like to amplify LarryA's chicken/egg concerns. The researchers think using lagged contributions precludes the higher profits CAUSING the contributions, but companies are forward-looking (this is something everyone's hero Milton Friedman was helpful in uncovering), so the "lag" technique is not that convincing.

Maybe looking at differences in returns would be more convincing. THe worry is that big firms, or firms gearing up for large growth, might institutionalize the campaign giving, whereas smaller companies do it on an ad-hoc basis and thus smaller scale.

There are solutions for this stuff, but it doesn't seem like the authors explore them.

steveintheknow | March 16, 2007, 9:55am | #

Dan

The obvious response would be:

If libertarians got their wish of less public influence the affluent among us would have less incentive to purchase more government.

Wouldn't you agree?

Dan T. | March 16, 2007, 10:18am | #

If libertarians got their wish of less public influence the affluent among us would have less incentive to purchase more government.

Wouldn't you agree?

I would agree - but the scenario makes no sense in terms of the real world. Influence is one of the things that money purchases, and no amount of wishing is going to change that.

VM | March 16, 2007, 10:31am | #

"but there is a heavy dose of 'he'll leave us alone'.'

in what way?

How the repubs have a mercantilist streak in them? selective protectionism?

Apologies if I miss the point, and it could be due to the knee jerk reaction to the "leave us alone" and republicans. They are anything but that.

/pours more coffee

JasonL | March 16, 2007, 10:45am | #

VM:

In the 'keep your regulatory agencies from destroying our business model' way.

Your choices are lower regulation and some protectionism and pork or higher regulation and equal levels of protectionism and pork.

steveintheknow | March 16, 2007, 10:47am | #

Dan

By "public influence" I meant government involvement. And how hard is it in the "real world" anyway? Business primarily lobbies for rent seeking anti-competition measures that are only possible if politicians are willing and ABLE to bite - Tariffs, subsidies, licensing, etc.

So the idea is simple - limit what government can do, not how much anyone can influence what it can do. But by me calculations its not yet another libertarian idea gone haywire that make this difficult, its those that like bigger government – and who has the numbers in that market?

JasonL | March 16, 2007, 10:54am | #

"Another of the many libertarian problems out there - you guys want people and groups to give unlimited amounts of money to politicians and yet complain when said politicians enact policies that favor their donors."

Let's be clear. What contributions do is help people get elected by making them more visible. We aren't talking about buying yachts and the like with donor money, right?

So, what are you really doing if you significantly restrict the ability to raise money by politicians? Who gets to choose the field? What does a grassroots campaign look like? Is it better to lower the profile of all candidates?

VM | March 16, 2007, 11:01am | #

gotcha.

thanks!

LarryA | March 16, 2007, 11:20am | #

(2) all donations go into a bank account from which the campaign can withdraw funds but has no other control; it cannot identify who contributed money or precisely when a given amount was sent in. ... (2) makes it impossible for the pol to know who "bought" her.

I can always send her a copy of the check. Or mention it at a town hall. Or she may have a discreet friend at the bank. Your method 2 also prevents anyone else from knowing who made contributions.

Full disclosure is by far the better choice.

Another of the many libertarian problems out there - you guys want people and groups to give unlimited amounts of money to politicians and yet complain when said politicians enact policies that favor their donors.

1. Campain contributions are used primarily to tell voters what the politician stands for. This is a good thing.
2. A major feature of "campaign reform" is keeping independent groups from telling voters what politicians stand for. This is a bad thing.
3. Campaign contributing is competitive. If someone doesn't like that I send $X to the NRA for political lobbying, they can send $X to Handgun Control Inc. for opposition lobbying.
4. Campaign contributions are just like handguns, heroin, and illegal workers in that prohibition cannot stop them, but only drives them underground where the black market does far more harm.