"Pay to play" politics examined, with lessons for campaign-finance reform.

• Author: McChesney, Fred S.

I don't care if she waddles like a duck And talks with a lisp. I still think I'm in good luck If the dollar bills are crisp ... 'Cause if the purse is fat That's where it's at. William Robinson Jr. and Robert Rogers, "First I Look at the Purse" (BMI) (1) Once upon a time, at least as popularly portrayed, politics was about public service, not personal gain. Political office was something that individuals did in addition to rather than instead of their jobs as butchers, bakers, and candlestick makers. As G. K. Chesterton noted, however, the notion of politics as a substitute for rather than a complement to ordinary economic pursuits has changed in the past century: "The mere proposal to set the politician to watch the capitalist has been disturbed by the rather disconcerting discovery that they are both the same man. We are past the point where being a capitalist is the only way of becoming a politician, and we are dangerously near the point where being a politician is much the quickest way of becoming a capitalist" (qtd. in Fuller 1961, 337). One way politicians become capitalists starts with selling access to the political process to private groups, just as Internet portals, such as America On Line, provide access to the World Wide Web for a fee. Paying for access to politicians is sometimes termed a "pay for play" arrangement: money exchanged for a chance to transact in the political marketplace.

In this article, I discuss some ways in which political office enables its holder to be a political capitalist. It is popularly assumed that what is being sold in political markets is special favors for special interests, and so "pay for play" is synonymous with rent seeking. The political game being played, however, is more complex than that suggested in this typical good-guy/bad-guy characterization. Many payments are made to avoid the imposition of special costs, not to secure special favors. Much of what is popularly perceived as rent seeking by private interests is actually rent extraction by politicians.

That distinction is crucial in any evaluation of legal limitations on giving to politicians. Proposals to reform campaign finance are all based on the popular view that citizen payments to politicians are made for special favors. Therefore, campaign-finance reform plans typically include limitations on payments to politicians, especially on "soft money" payments that do not go directly to candidates. For several reasons (to be discussed), there are many arguments against limitations on political giving, even when the payments are made for special favors. And if some payments are made to avoid special costs that politicians would otherwise impose, then the case against limiting campaign contributions is even stronger.

The "Pay to Play" Phenomenon

Background: Pay

Concerns about "pay to play" begin with the first part, pay. The role of money in politics seems to be growing. It is difficult to establish this thesis rigorously, for no one has ever ascertained exactly how much is paid to politicians either in the past or in the present. (The extent to which political donations can be documented is discussed in Milyo, Primo, and Groseclose 2000, 77.) Even modern campaign-disclosure laws do not require the reporting of every check written in every campaign. Moreover, payments may be made in money or in kind. For a political candidate needing a car to tour his district or state at election time, the loan of a car is just as valuable as a check that would go to rent a car from Avis.

Nonetheless, from what can be documented, growth in political contributions seems apparent. The most visible fund-raising organizations during the past generation have been political action committees (PACs), creatures of the 1970s revolution in campaign-finance laws. (Although I focus in this section on PAC contributions, I do not intend to suggest that they necessarily constitute the most important source of political giving.) As figure 1 shows, the growth in PACs from the mid-1970s through the mid-1980s was substantial, especially the growth in the number of corporate PACs. In 1974 (not shown), there were fewer than 1,000 PACs (Sabato 1984). By 1977, the first year shown in figure 1, the number had risen to considerably more than 1,000. By 1985, the effects of the 1970s campaign-law changes had produced a new and seemingly stable equilibrium. The total number of PACs in 1985, just short of 4,600, was virtually the same as the number in 1997.

[FIGURE 1 OMITTED]

However, the appearances may be deceiving. Although an equilibrium in the sheer number of PACs was established during the 1980s, the amount of money they collect and disburse has grown substantially. The figures shown in table 1 (reported for two-year election cycles), can be summarized for the period from 1985-86 to 1997-98 as follows: growth in PAC receipts, 42.2 percent; growth in PAC contributions to candidates, 57.3 percent. To put the numbers from table 1 in perspective, consider that the figures for 1997-98 represent an average contribution to PACs of $939,396 for each of the 535 House and Senate seats, and PAC disbursements of $411,109 per seat. Ignoring the handful of open seats, incumbents receive some 82 percent of the money disbursed, which means that incumbents receive on average $338,126 in PAC contributions per two-year election cycle (Federal Election Commission 1997). The figure is conservative; with six-year Senate terms, not all 535 seats are contested every two years. In the six national elections from 1988 to 1998, PAC contributions on average made up 34 percent of all campaign receipts in House races and 23 percent of those in Senate races (Milyo, Primo, and Groseclose 2000, 79-80).

Comparably detailed figures from the Federal Election Commission are not available for 2000 as this is written, but there is every reason to think that the growth trend for campaign contributions continued into the most recent national election. Reporting on "softmoney" contributions for 2000 (a record $457.1 million), Common Cause says that the amount is "98 percent more than the $231.1 million raised during the same period of the 1995-1996 election cycle, the last comparable presidential election period" (2000b, 1). (2)

The previous sentence adopts the terminology used popularly (as well as by the Federal Election Committee) in referring to money paid to politicians as campaign contributions. Campaign donations is another term often used. The terms connote eleemosynary motives and self-denial rather than personal motives and self-interest. It is safe to say, however, that few people believe today (if they ever did) that political contributions are truly donations. Discussing PAC contributions and other softmoney payments, Common Cause recently opined, "the soft money system taints everyone in it--the givers, the candidates, and the parties.... [T]hanks to soft money, the public now sees parties largely for what they, sadly, have become: mail drops for special interest money" (2000a, 1).

Thus arises the concern over "pay." If contributions were truly that--donations made without expectation of reward--presumably concerns about the money being paid to politicians would diminish. As indicated by Common Cause's reference to "special interest money," however, altruism is generally thought to play little role in campaign contributions. (3)

The Issue: Play

Although the "pay" phenomenon seems well established, the meaning of play is not so clear. What exactly do contributors purchase? For the most part, commentators content themselves with describing the payments as being made for "access." Milyo, Primo, and Groseclose believe that campaign contributions do not influence politicians in the first place and that "PAC contributions are better characterized as an entrance fee, rather than a bribe" (2000, 82). Ordinarily, however, those who pay for entry, such as movie-goers, are not paying for entry itself. People pay to see what appears on the screen, not just to sit in a theater. (For discussions of how transactions between private interests and politicians work, and of what private interests pay for, see Bronars and Lott 1997; Kroszner and Stratmann 1998; Stratmann 1991, 1992, 1995, 1996, 1998, and the sources cited therein.). To quote Common Cause again, "corporations, unions, and wealthy givers know that big money can result in extraordinary access and influence for their interests. Today, in Washington, if you want to be heard, it's much easier if you have a big soft money check that can help pave the way' (2000a, 1).

Surely, rational private parties pay not for mere access but for influence. Still, to say that the payments purchase influence is imprecise in an important way. Two very different games are being played--two different sorts of influence possibly being purchased--when private interests make payments ("contributions") to gain access to politicians.

The Orthodox Story: Rent Creation

In referring to private-donor money as buying "access and influence for their interests,' Common Cause presents the orthodox version of the game that private interests and politicians are thought to play: rent seeking, where rent refers to returns obtained through the political process rather than through private-market exchanges (Tullock 1967; Stigler 1971). The process can be illustrated by the use of the standard economic diagram of a government-created (or government-sustained) monopoly. In figure 2, the demand for some good or service--say, milk--is shown by the downward-sloping curve D. As the price (P, measured on the vertical axis) declines, the quantity (Q, measured on the horizontal axis) of milk demanded increases. The per unit cost of milk (including a competitive rate of return on investment) is a constant amount. In a competitive marketplace, the equilibrium price ([P.sub.c]) would equal its cost (C), and [Q.sub.c] units of milk would be sold.

[FIGURE 2 OMITTED]

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