Money Always Finds a Way

Every right-thinking person in America is concerned, if not downright appalled, by the role of money in politics. Citizens want their legislators to base their lawmaking decision on the merits of the case, not how much money corporations and special interest groups are shoveling into their campaign coffers. Some states deal with the problem by putting caps on campaign donations. Here in Virginia, there are no such limits in campaigns for state office, but the Commonwealth does require full transparency. Go to the Virginia Public Access Project to find out who’s donating money — and presumably has the ear of — your elected representatives.

But the debate over money in politics rages unabated. Not without some queasiness, I hew to the view that Virginia does it right. I could cite reasons of lofty principle, such as the argument that campaign contributions constitute a form of free speech that should not be abridged. And I could cite reasons of base practicality: Restrictions on campaign contributions will just drive influence seeking into the shadows where it cannot be tracked.

Now comes research by four economists (lead author Marianne Bertrand with the University of Chicago), “Tax-Exempt Lobbying: Corporate Philanthropy as a Tool for Political Influence,” which illuminates a surprisingly common means of subterranean influence — corporate philanthropy.

The authors examined where philanthropic foundations of Fortune 500 and S&P 500 corporations donated their money. Lo and behold, a significant percentage went to charities in the districts of congresspersons sitting on committees that oversee the industries of the donating firms.

Our analysis suggests that firms deploy their charitable foundations as a form of tax-exempt influence seeking. Based on a straightforward model of political influence our estimates imply that 7.1 percent of total U.S. corporate charitable giving is politically motivated, an amount that is economically significant: it is 280 percent larger than annual PAC contributions and about 40 percent of total federal lobbying expenditures. … Charitable giving may be a form of political influence that goes mostly undetected by voters and shareholders, and which is directly subsidized by taxpayers.

It would be naive to think that corporations are the only players in the philanthropy-for-influence game. Corporate motives might be easier to discern, but individual philanthropists often back causes and crusades of an ideological nature — the environment, social justice, free markets — that intersect with political controversies. Are billionaires and centi-millionaires any less likely than corporations to curry favor with elected officials than corporate executives?

Bertrand et al. posit a mechanism by which charitable contributions translate into influence.

To understand how charitable contributions directed to a congressional district may serve as a channel of political influence, one can build on the notion of credit-claiming by self-motivated politicians, an idea in political economy and political science that dates back at least to Mayhew’s observation that “Credit claiming is highly important to congressmen, with the consequence that much of congressional life is a relentless search for opportunities to engage in it.”

Although it is typically discussed in the context of federal grants and earmarks, political credit-claiming of local charities is a natural means of appealing to voters, given the visibility of many charities to politicians’ constituencies.

As a concrete example, the authors point to Washington Senator Patricia Murray, whose official webpage describes her work on housing, stating, “I was proud to establish the Washington State Farmworkers Housing Trust to help families who work hard to keep one of our state’s most important industries strong.” The charity’s donors include the foundations of JPMorgan Chase, Bank of America, and Wells Fargo. (The authors would have made a stronger case if Murray served on a committee regulating the banking or housing industries, but it doesn’t appear that she does.)

There’s an old saying that water seeks its own level. So does money in politics. We live in a political system that intrudes into every corner of the economy. No business activity is beyond the reach of taxation and regulation. As long as politicians have the power to reward and punish, businesses will have an incentive to influence the political process. If they don’t do it one way, they will do it another. As we’ve seen vividly with the machinations of the Clinton Foundation, politicians and corporations are infinitely ingenious in finding ways to trade in influence. Two hundred and fifty thousand dollars for a speech? Outrageous. But what’s the solution? Prohibit former presidents from being paid to give speeches?

The question for citizens is this: Would we rather they conduct their influence peddling out in the open where we can see it, dissect it, and denounce it? Or would we rather have it go underground?

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21 responses to “Money Always Finds a Way”

  1. djrippert Avatar

    Hooey! Only a creature living at the very lowest level of the primordial ooze zone at the bottom of the Richmond swamp could think that Virginia’s “no rules at all” campaign contribution approach is good for anybody other than the state’s monied interests and the puppet politicians they control.

    Only a true Richmond insider could claim that there is transparency in Virginia regarding money in politics. How do you track a pantload of money that comes to Dick Saslaw from Dominion and then gets bundled, rebundled and bundled again ending up as donations to some other state senator who claims she is not taking money from Dominion?

    As for your hallucination that campaign contributions equate to free speech I think you should re-review Citizens United. Political advertising may constitute free speech but campaign donations do not. 46 states and the federal government limit campaign contributions in some way. I don’t see any lawsuits changing that.

    Ha ha. You need to get outside your gated enclave in Henrico County (Ok, I don’t know if you live in a gated neighborhood, other than mental gates). The first thing you’ll find is that Rt 295 north of Richmond really is 4 lanes in each direction. (Either that or Russian bots are Photoshopping the satellite images on Google Maps … damned Russian bots). The next thing you’ll find is that our state politicians are wholly and totally corrupted by monied interests.

    Do you also think that the unlimited campaign contributions should be spendable on anything the politicians wants with virtually no reporting requirements? After all, our state senators do need those $800 breakfasts and memberships in out of state private clubs.

    1. TooManyTaxes Avatar

      How can you criticize Dick Saslaw? The WaPo endorses him every election. In the eyes of the Post editorial board there is nothing a Democrat can do that makes her/him unacceptable for public office so long as he/she votes for tax increases and, lately, amnesty for illegal immigrants.

      There is, indeed, a difference between campaign contributions and general spending to influence public policy under Citizens United. Keep in mind the suit was about an attempt to shutdown a film critical of Hillary Clinton.

  2. LarrytheG Avatar

    Well this is sorta along the lines of – “you can’t stop all crime so what’s the use of laws”…..

    There will always be those folks who are clever and will find the loopholes and seams of the laws but all that really means is you upgrade the laws just like we upgrade regulations when we find they have flaws.

    But again – that’s like arguing that because you only stopped 90% that the law is a failure.

    We play games like this and we pretend that because we have “transparency” laws it makes up for no caps or restrictions to which I say – in a PIGS EYE!

    First of all VPAP is not a government-required agency…it’s run on donations…and those donations impact what and how the data is depicted and the law ALLOWS money from an identified source to go into a PAC from which it emerges on the other side to a desired target and the source is effectively erased. So at the top of many recipients – the “donor” is listed as some PAC – not the guy it originally came from.

    We do not have real political money laws in Virginia. We have ruses … i.e. “it’s okay because it’s “transparent”. Baloney.

  3. Steve Haner Avatar
    Steve Haner

    I have had individual members of the General Assembly solicit me on behalf of my employers/clients seeking funds for favored charities. Happens all the time. In one case a spouse was employed there and the spouse was openly mentioned. Did it make me queasy? Damn right it did. “No” was a message that had to be delivered delicately. Am I sure others approached happily donated? Equally – damn right.

    This is not a topic Dominion Energy wants to discuss honestly. I have said before it is a major weapon in their arsenal.

    I told DJ once in a prior discussion that he didn’t know the half of it. Can’t write all the columns right away! This is another piece of the process not often discussed. There is more, much more….I don’t think Virginia is any worse than many other places, but it has absolutely no claim to being better.

    1. Reed Fawell 3rd Avatar
      Reed Fawell 3rd

      “I don’t think Virginia is any worse than many other places, but it has absolutely no claim to being better.”

      I agree. It’s everywhere.

      1. djrippert Avatar

        I disagree. There are problems all over but Virginia is absolutely ridiculous in the level of legalized corruption allowed in the state. Over and over and over again Virginia is an outlier when it comes to ethics, transparency or fairness in government.

        Here’s an “oldie but a goldie”:

        Five states get Fs. Guess what grade Virginia got?

        Trust me, it’s not just me that sees Virginia as either America’s most corrupt state or one of America’s most corrupt states.

  4. LarrytheG Avatar

    If you think about it – the way the tax laws are written (for both charitable deduction and expenses) , they actually encourage taking money that would be given to the Feds and instead using it for things that will more directly benefit the corporation -all manner of possibilities from influencing legislation and legislators to “charitable” purposes – some very legitimate and others masquerading as charities…

  5. TooManyTaxes Avatar

    First thing – no charity should be permitted to have tax exempt status if it spends any money (in-house or outside consultant) lobbying or trying to influence legislation or public policy (as a opposed to public opinion) or that gives money to another entity that engages in the same type of behavior.

    Any private foundation should be subject to a limit (say 25 years) after which it must be liquidated with no money going to any other private foundation.

  6. Steve Haner Avatar
    Steve Haner

    No charity (501C3) is allowed to lobby. Big no no. Other non-profits organized under other parts of IRS Section 501 are allowed to lobby, but donations for that purpose are not deductible. For example the portion of your dues to a chamber of commerce which support its lobbying activity cannot be deducted, but other parts of your dues can be. Kind of a broad brush there, TMT. This code section keeps many lawyers and CPA’s busy!

    Figuring out how to track lobbyist giving to favored charities would be difficult but the legislators could be required to include on their annual filings a disclosure if they personally solicit donations. Or they could be prohibited from soliciting any support for a 501 from any lobbyist or any lobbyist’s principal (a company or group that hired a lobbyist.)

    The lobbying business is about relationships, and those get built lots of ways. I had a long (now short) list of legislators who I had helped with campaigns. Folks who went to the same schools or follow the same pro teams might click (and there are Yankees fans and Sox fans and its best to know that….). There are business relationships, or even more tricky the desire to build business relationships (the legislators do have outside jobs and sometimes solicit business from companies that also lobby, and sometimes the lobbyist gets the call!)

    And of course there is information – would you be shocked to learn that legislators can get very quick reports on what’s going on with power outages, for example? Wouldn’t surprise me. Even lowly me got a phone call from a UVA official when my kid got accepted – you know no legislator learns that by the email…..

    But helping out their favorite charity, if identified, is indeed one way to build up some good will. And in most cases you’ll never know it happened. In most cases the donor might not even have been asked.

    Jim mentioned VPAP and the work it does reporting on money in politics, but it is having its big fundraiser in ten days and one reason many of the lobbyists will be there is because so will the office holders. Just one more chance to break bread and talk business. The cheapest ticket is $700! Too rich for me, now. They ain’t paying that for the food.

    1. TooManyTaxes Avatar

      Steve – sorry to disagree with your expertise, but the IRS states that 503(c)(3) entities can lobby so long as its not a substantial part of its work. And here are some more details from a 2011 webinar by Venable attorneys.

      I offer no thoughts on what is insubstantial lobbying.

      1. Steve Haner Avatar
        Steve Haner

        Fair point. The total prohibition is on election activity. And come to think of it I have had a client myself that probably fit that category, and it was very careful about tracking my time and expenses with an eye on those caps. That way I stayed “insubstantial!” 🙂 I now hear the old copy editor saying – don’t say always, never – absolutes get you every time.

  7. Steve Haner Avatar
    Steve Haner

    VPAP offers a vital service and I am a regular reader and donor, usually sponsoring their daily news summary once a year. But do not think it is a watchdog.

  8. djrippert Avatar

    As far as transparency, the Virginia law looks good on the surface but then there are those 170 exceptions:

  9. Steve Haner Avatar
    Steve Haner

    Put in a FOIA request for the most common form of electronic communication these days, the texting function….see what happens.

  10. LarrytheG Avatar

    re: ” No charity (501C3) is allowed to lobby. Big no no. Other non-profits organized under other parts of IRS Section 501 are allowed to lobby, but donations for that purpose are not deductible.”

    In theory. The big IRS “targeting” Scandal was about organizations that engaged in political activities but claimed they were a non-profit and were being unfairly denied 501C3 status.

    The premise that money will find it’s way to it’s intended use and we cannot stop it but requiring it be reported is “better” than other rules – just ignores the fact people who do that are not going to report it either or they will do it in such a way that it’s not as easy to track – charitable donations is one of those ways.

    After all… none of it should be restricted because it’s “free speech” – right? All those rules are inhibiting good old free speech… and why should VPAP be reporting “free speech” to start with – right?

    Bob McDonnell was not bribed… he was merely letting Johnny Williams “speak” to him – and his wife.

    It damages Democracy in many ways but perhaps the biggest is that incumbents generally get the lions share of the money rather than their challengers and usually can easily outspend them on campaign Ads, mailers, etc.

  11. LarrytheG Avatar

    Given the two SCOTUS opinions – the first that money is free speech – and the second – that Bob McDonnell was not guilty
    of bribery – I wonder if many of the existing laws are valid anymore.

    I wonder what restrictions would still be valid.

    Anyone have more knowledge on the subject?

    1. djrippert Avatar

      The Supreme Court never said money was free speech. They said that a movie critical of Hillary Clinton funded by a group funded by The Koch Brothers was free speech.

      Bob McDonnell was not guilty of bribery. Why? Because Virginia’s laws allow bribery. They still do. You can’t break a law that doesn’t exist. McDonnell’s prosecution was a hatchet job by Obama and Holder. They used a federal statute that was widely known to be unconstitutional to kill his political career. The US Supreme Court unanimously struck down the conviction due to the glaring unconstitutionality of the federal law. Clarence Thomas and Sonia Sotomayor actually agreed on something. The Bush Administration could have done the same thing to Tim Kaine when he accepted an $18,000 free vacation to a private Caribbean Island and then re-appointed the gift giver to a prestigious state post.

      The problem isn’t the Supreme Court or Bob McDonnell. The problem is the General Assembly and the US Congress. Useless, worthless charlatans. The General Assembly could end gifts to elected officials, limit campaign contributions, demand that legislators use campaign contributions for legitimate campaign purposes, etc. The US Congress could amend the Constitution to exclude partisan political communication from an all encompassing right to free speech.

  12. Steve Haner Avatar
    Steve Haner

    Larry there are almost 30 classifications of non-profit that enjoy some degree of exemption from federal taxes, and the groups that the IRS was screwing with were not seeking 501C3 status. They were seeking C4 or C6 probably. Political organizations are mainly C4. Chambers of Commerce and other business groups C6.

  13. LarrytheG Avatar

    Legislative responses
    Legislative impact
    The New York Times reported that 24 states with laws prohibiting or limiting independent expenditures by unions and corporations would have to change their campaign finance laws because of the ruling.[121]

    After Citizens United and numerous state legislatures raised their limits on contributions to candidates and parties.[122] At the federal level, lawmakers substantially increased contribution limits to political parties as part of the 2014 budget bill”


    ” Citizens United v. Federal Election Commission has often been credited for the creation of “super PACs”, political action committees which make no financial contributions to candidates or parties, and so can accept unlimited contributions from individuals, corporations and unions. Certainly, the holding in Citizens United helped affirm the legal basis for super PACs by deciding that, for purposes of establishing a “compelling government interest” of corruption sufficient to justify government limitations on political speech, “independent expenditures, including those made by corporations, do not give rise to corruption or the appearance of corruption”.[142]

    However, it took another decision, by the U.S. Court of Appeals for the District of Columbia Circuit, v. Federal Election Commission, to actually authorize the creation of super PACs. While Citizens United held that corporations and unions could make independent expenditures, a separate provision of the Federal Election Campaign Act, at least as long interpreted by the Federal Election Commission, held that individuals could not contribute to a common fund without it becoming a PAC. PACs, in turn, were not allowed to accept corporate or union contributions of any size or to accept individual contributions in excess of $5,000. In, the D.C. Circuit, sitting en banc, held 9–0 that in light of Citizens United, such restrictions on the sources and size of contributions could not apply to an organization that made only independent expenditures in support of or opposition to a candidate but not contributions to a candidate’s campaign.”

    I’d say that things have changed.. quite a bit as a result of that decision… and in my view – not for the better… and it makes Virginia’s shortcomings look positively middling..

  14. One of the best discussions in ages. One of the things that the Chesapeake elected representatives seem to not like is you drawing the comparisons between the $$$ VPAP lists, votes on projects, and areas of the city. Even more so that they get FOIA’ed for anything. I’ve seen a pattern of what appears to be retaliation in regards to doing it. There are certainly comments from different groups of people regarding threats once you start digging in to them. I know I’ve been silenced on forums or blocked from them, on fake pretenses, including a Planning Commission member who has ties to the council, ran for office, and decided to blast me after I left there. Now this is on top of helping people with speeding issues, etc. So yes, money and politics seem to love each other and using threats and blocks/bans only serves to say they’re taking their rules from Soviet Russia.

  15. Peter Galuszka Avatar
    Peter Galuszka

    I am with Don the Ripper. Virginia’s almost anything goes policy encourages unholy bartering. Simply disclosing stuff doesn’t make it right.

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