Two Takes on Political Donations

by Chidem Kurdas

The Wall Street Journal reports that the biggest campaign spender of 2010 is a public sector union, the American Federation of State, County and Municipal Employees, which lavished $87.5 million on helping Democrats. This single union outspent the US Chamber of Commerce, which came second with $75 million.

Reading the WSJ article by Brody Mullins and John D. McKinnon, I thought that AFSCME is giving taxpayer money to politicians who will help it further pick my pocket.  Whereas had I confined myself to reading the New York Times’ front-page piece on the same topic, I would have had no such concern, because there is no mention of AFSCME.  The NYT campaign finance story focuses entirely on the US Chamber of Commerce and says not a word about the public union.

Now, you can tote up political donations in different ways and the amounts change all the time. Nevertheless, the NYT closely follows a script propagated by the Obama White House and Democratic party, according to which business interests dominate political spending and have a corrupting influence on Republicans.  

That storyline is false on two counts. Democrats are deep into taking money from and fostering special interests like unions. But there is a more fundamental hypocrisy.

Organized groups seek political influence to redistribute income in their own favor—called rent seeking in public choice economics. Thus AFSCME seeks a greater share of public budgets in the shape of higher pay and benefits for its membership. The growth of government creates more opportunity for rent seeking. By expanding government activity every which way, the Obama administration has created greater room for special interests while protesting that business interests are the problem. 

Groups that have costs imposed on them by government fiat will necessarily try to protect themselves— that is, they will spend resources on rent avoidance. Gordon Tullock, a founder of public choice with James Buchanan, predicted more than 30 years ago that as there is more government activity, more money will be spent on protection. Members of the Chamber of Commerce are spending to protect themselves.

For society at large, it does not really matter which party gets how much largess from a certain rent seeker or certain rent avoider. It’s all a waste anyway. Resources are wasted on fights to change the way the pie is sliced instead of spent on making more pie. The only way to shrink rent seeking and avoidance is to shrink the government.

On another subject, the WSJ analysis provides vivid evidence as to why infrastructure projects don’t get much money even as government spending balloons. AFSCME controls politicians and hence state and city budgets, with the result that tax revenues increasingly disappear in the black hole of union entitlements. There isn’t a whole lot left to do other things, like repair roads.

24 thoughts on “Two Takes on Political Donations

  1. Yes, both sides are guilty. The difference is the GOP is receiving money, via the Chamber of commerce, that comes from foreign interests. And they are not required to divulge from who the contributions were received. Foreigner corporations are influencing OUR elections.
    The American Chamber of Commerce actually instructs corporations, foreign and domestic, on how to outsource American jobs. Thank you Supreme Court for your idiotic Citizens United decision that has allowed the further corruption of our elections.
    One man, one vote. We must change the culture in D.C., where money rules…and he who has the money, makes the rules.

  2. The NYT story says the big givers to the Chamber of Commerce are American corporations. One of the points of the article is that foreign donations are not what driving it.

  3. Re the various numbers, they vary by what’s included and when exactly period in question starts and ends, but it’s not clear to me why there are such large variations.

  4. “Foreigner corporations are influencing OUR elections.”

    Yeah, but don’t our elections influence the welfare of foreigners? Its not like the USG is practicing isolationism at this point.

  5. “The necessary result, then, of the unequal fiscal action of the government is, to divide the community into two great classes; one consisting of those who, in reality, pay the taxes, and, of course, bear exclusively the burthen of supporting the government; and the other, of those who are the recipients of their proceeds, through disbursements, and who are, in fact, supported by the government; or, in fewer words, to divide it into taxpayers and tax-consumers.

    But the effect of this is to place them in antagonistic relations, in reference to the fiscal action of the government, and the entire course of policy therewith connected. For, the greater the taxes and disbursements, the greater the gain of the one and the loss of the other — and vice versa; and consequently, the more the policy of the government is calculated to increase taxes and disbursements, the more it will be favored by the one and opposed by the other.

    The effect, then, of every increase is, to enrich and strengthen the one, and impoverish and weaken the other. This, indeed, may be carried to such an extent, that one class or portion of the community may be elevated to wealth and power, and the other depressed to abject poverty and dependence, simply by the fiscal action of the government; and this too, through disbursements only — even under a system of equal taxes imposed for revenue only. If such may be the effect of taxes and disbursements, when confined to their legitimate objects — that of raising revenue for the public service — some conception may be formed, how one portion of the community may be crushed, and another elevated on its ruins, by systematically perverting the power of taxation and disbursement, for the purpose of aggrandizing and building up one portion of the community at the expense of the other. That it will be so used, unless prevented, is, from the constitution of man, just as certain as that it can be so used; and that, if not prevented, it must give rise to two parties, and to violent conflicts and struggles between them, to obtain the control of the government, is, for the same reason, not less certain.”

    John C. Calhoun
    A Disquisition on Government

    There is nothing new in the world.

  6. So, it was written about 60 years after James Madison made the same point in the Federalist Papers. And you could find precedents to James Madison, likely.

  7. Oh, I’m sure one could find plenty of precedents. I just happened to remember the Calhoun passage and knew where to find it. He also outlined an early version of public choice theory so I thought it relevant. Alex Tabarrok and Tyler Cowen wrote a paper called The Public Choice Theory of John C. Calhoun which Alex was kind enough to forward to me last year. As I said, there’s nothing new in the world which is really pretty depressing when you think about it. We’re fighting about the same things now as we were in the 19th century. Heck, for that matter we’re still having the same kind of financial crises. There isn’t an ounce of difference between the 2008 crash and say the Panic of 1819. A little war, some currency debasement (suspension of specie payments), a central bank credit expansion (Second Bank of the US), a real estate boom (government subsidized credit for land purchases; does nothing change?), credit contraction and depression. Calls for debt forgiveness and further credit expansion as a cure along with some public works to aid recovery. Calls for stricter enforcement of usury laws sounds a lot like financial regulatory reform. Sigh….

  8. I should get the Tabarrok and Cowen paper. Interestingly there’s almost always some kind of government involvement in creating a bubble or scheme. Through the centuries, all over Europe. Charles Mackay details a number of them in Extraordinary Popular Delusions and the Madness of Crowds. He puts this 724-page tome into perspective as “a chapter only in the great and awful book of human folly.” And he was looking back in time from the vantage point of the early 19th century.

  9. The only resort is to reduce the Government. Ofcourse particular interests will disagree with that which includes the business lobbies”

  10. Yes, all interests will want to preserve whatever benefits them. James Buchanan suggested that at some stage it may be possible to reach all around agreement–I agree to give up mine if you agree to give up yours.

  11. Mancur Olsun does a good job on this topic in The Rise and Decline of Nations.

    And of course there is big business as well.

    BTW the Chamber of Commerce receives about $100k a year from foreigners. Not a lot.

    And the terrible truth is that we have not shrunk the government since the WWII. No wonder progressives hold the populace in contempt; they’ve dragged them kicking and screaming into their future for over a hundred years now.

    Once a regulation is in place, it stays there. The inertia of bureaucracy, more than anything, probably defines the eventual fall of any society or large organization in general.

  12. The more recent tallies of campaign donations show that the public unions gave a lot more than the US Chamber of Commerce:

    “AFSCME, the SEIU, and the National Education Association have spent $171.5 million, compared to political outlays of $140 million by the U.S. Chamber of Commerce, American Crossroads and Crossroads GOP.”
    This from a very interesting editorial in the WSJ

  13. Government workers pay their union dues out of their hard earned wages – at the point in time it’s contributed, it’s not taxpayer money – the Chamber is just one avenue businesses can contribute to political campaigns – I don’t think union membership has as many campaign contribution avenues as corporations do –

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