In the not so distant past, members of Congress never admitted in public that donors influenced their policy positions. But as often happens in the Trump era, inhibitions of this sort have weakened. When asked why Republicans were passing a seemingly unpopular tax reform bill, Representative Chris Collins candidly stated that “My donors are basically saying, ‘Get it done or don’t ever call me again’.” Similarly, Senator Lindsay Graham warned fellow Republicans recently that if the Republican tax bill failed, “financial contributions would stop.”
There is of course nothing new about donors trying to affect policymaking. It is a deeply embedded feature of the U.S. political system. Corporations, unions and interest groups of all sorts have always donated money to support their allies and their causes. The reform community characterizes these transactions as institutionalized bribery. Donors say that it feels more like extortion to them since they have little choice but to contribute if they want access to members. Either way, a good deal of reform effort since the early 1970s has aimed to limit the influence of campaign donors.
While the problem is real, political scientists caution against overestimating the effects that donations have on policymaking. The purpose of most campaign contributions is to support longstanding allies, not to bribe members into doing what they would otherwise be disinclined to do. Moreover, campaign contributions are probably not the most important form of special interest influence. The fact that interest groups spend far more on lobbying than on campaign contributions reveals what they think matters the most. And because special interests are not all on the same page, competing campaign finance and lobbying efforts can often result in a status quo-preserving equilibrium of countervailing pressures.
That said, the problem of special interest influence is significant. Modern reforms have substantially reduced the amount of explicit quid pro quo corruption over time via enhanced conflict of interest regulation and disclosure rules. However, the heavy reform emphasis on reducing material corruption as opposed to enhancing political equality or lowering polarization has had some unintended negative consequences. Raising money in limited amounts while campaign costs are escalating means that candidates have to spend more time dialing for dollars. This makes uncapped and more weakly disclosed soft money options (for example, super PACs, 501(c)(4) organizations, and so on) attractive, ironically undercutting several decades of reform efforts.
Indeed, I would argue that modern campaign finance reforms have also unintentionally contributed to America’s political polarization problems. The implicit ideal in campaign finance has been to promote small donors and limit the influence of special interest groups. The latter are typically less interested than the former in ideology and more interested in protecting their bottom-line economic interests. Research shows that individual donors tend to be more ideological and partisan. The average citizen does not contribute to parties or candidates. Donors, like primary voters, tend to skew left and right more than the electorate as a whole. To the degree that the system prioritizes individual donors over special interest donors, it amplifies the same centrifugal pressures we see in low turnout primary elections.
The core problem is that for constitutional reasons American political campaigns are mostly privately financed. Mandatory caps on spending and a system of exclusive public financing are precluded by our strong First Amendment tradition. The individuals and people who step up to the plate and donate are a self-selected mix, either motivated by material interests or higher than average levels of partisanship and ideology. This is a pick-your-poison choice. Favor special interests and you get more material corruption. Favor small donors and you get more activist skew. We would prefer a more representative sample of donors, but most citizens will not take money out of their pockets to donate for candidates or political causes. And the more they find politics distasteful, the less inclined they will be to pay for the misery that it inflicts on them.
This brings us back to the Republican tax reform. Why pass corporate tax relief even though a majority of Americans are against it? Yes, it is certainly true that aspects of the Republican tax reform are motivated by material self-interest such as the repeal of the estate tax that would benefit a small number of very wealthy families. And yes, there is self-interest in the tax cut for corporations and the reduced rate for pass through businesses. The President himself will likely benefit from the latter.
But the donors that Representative Collins and Senator Graham are worried about are not just the ones looking out for their self-interest, but also the ones who care mostly about ideology and party loyalty. Conservatives truly believe that less government and lower taxes are better for prosperity and individual happiness, and party loyalists expect the Republican office holder to deliver on the promises they made during the 2016 campaign. Both could donate less in 2018 if they are disappointed. Collins and Hatch openly defer to donor influence because donors constitute a critical element of the party base, not some outside corrupting influence.
So why does this matter? First, it explains some unusual features of the tax bill. Politicians have always used the budget to reward their allies. However, both the initial House and Senate bills distinguished themselves by the degree to which they aspired to punish their partisan enemies—namely, blue states, the professional class, and universities. Blue states voted against them, so then guess who loses if state and local taxes are no longer deductible? The professional classes lean towards the Democratic Party, so then guess which groups are exempted from the tax reductions for pass through businesses? And since universities seemingly undermine traditional values and produce research that demonstrates uncomfortable facts about climate change, guess who will be taxed on endowment expenditures and graduate student tuition waivers? Tax policy has become a partisan weapon.
Lost in the well-meaning reform efforts to reduce material corruption is the role that money has played in hardening polarization. Groups that used to donate to both parties like the teachers, lawyers, and doctors have over time sorted primarily into one party camp or the other. Ideological super PACs and nonprofits use their donations to reward purity and punish defectors. Pressure from leaders and donors is so strong that many blue-state Republicans will likely vote for this tax bill even though it will put their states and alma maters in fiscal jeopardy.
The key to fixing the campaign finance system is seeing all these trade-offs more clearly. Reform should not be exclusively defined around reducing material corruption. Acknowledging this simple point would greatly improve our efforts at repairing our political system.