Dollars in Democracy -- Part I: Super PACs

04/16/2015 04:52 pm ET | Updated Jun 16, 2015

Lobbying. It's a loaded word that can mean many things. Google defines "lobbying" as "seek[ing] to influence (a politician or official) on an issue." For some, lobbying is a morally grey but necessary area of democracy; a requirement to represent otherwise underrepresented voices in the political process. For others, it is taboo -- a dirty word synonymous with corruption.

Regardless of what one might think about lobbying, its magnitude (solely in terms of campaign contributions) has seen a marked increase since the Citizens United v. Federal Election Commission decision in 2010. That decision ruled in favor of unlimited corporate donations to political campaigns as long as neither the candidate nor the party is involved. Justice Anthony Kennedy wrote for the majority, saying: "The [Supreme] Court has recognized that the First Amendment applies to corporations... and extended this protection to the context of political speech."

The major implication of the decision was that it opened the floodgates for increased super political action committee (PAC) involvement in political races. A PAC is "organized for the purpose of raising and spending money to elect and defeat candidates. Most PACs represent business, labor or ideological interests."

Vis-à-vis the Citizens United decision, PACs can now make contributions without limits or restrictions on the sources of funds for independent expenditures (i.e. not directly donated to candidate or party committees) in federal races (PACs are still limited in the amount of direct contributions they are allowed to give and receive). Explicit collaboration between super PACs and candidate/party committees is illegal (explicit being the key word).

The Citizens United case was not the only landmark decision in which the U.S. courts sided with facilitating more corporate involvement in political races. In Buckley vs. Valeo (1967), while the Supreme Court held that campaign contributions be limited, the SCOTUS held that "spending money to influence elections is a form of constitutionally protected free speech." More recently, the decision in McCutcheon vs. FEC (2014) ruled that, though contributors are still limited in how much they give to a candidate or a party committee in a federal race, "a single contributor is no longer capped on how many candidates and party committees he/she can give to in a given election cycle."

However, since Citizens United, the number of super PACs has exploded, as has their spending on political races. According to the Center for Responsive Politics (CRP), "as of March 09, 2015, 1,340 groups organized as Super PACs have reported total receipts of $696,002,318 and total independent expenditures of $348,545,054 in the 2014 cycle [alone]."

The CRP reports that, in 2010, outside spending (which includes political expenditures from any groups or individuals, like super PACs and excludes candidate and party committee fundraising) hovered a little over $315 million. In the 2012 election cycle, that figure reached around $1.03 billion. The 2014 midterm cycle saw a considerable drop -- down to about $550 million -- but still well past the 2010 mark.

So what? What effect does all of this money have on the political process? Does this money equate to political influence (and therefore power)?

According to a faculty study from the University of Mississippi, the answer is a resounding yes. Three professors there found that corporate lobbying has a significant positive effect on the contributor. An excerpt from the paper reads:

"...the market value of an extra dollar spent on prior period lobbying is roughly $200. This estimate coupled with the sample mean of annual lobbying expenditures ($1.273M) indicates lobbying can increase shareholder wealth by roughly $253M per year. Hence, lobbying appears to be a worthwhile investment, especially given the market value of research and development expenditures and average internal rates of return on other corporate investments"

The "investment value" of an extra dollar spent on lobbying implies that whatever bill or initiative toward which the money lobbies is resolved in favor of the lobbyist. In other words, politicians are overwhelmingly committed to do the bidding of their lobbyists, resulting in clear monetary gains for the lobbyist -- even more so than other forms of corporate investment.

Though the analysis above is not specific to campaign contributions, the incentives still apply. From the perspectives of both corporations and politicians, it makes sense to lobby and to listen to lobbyists. If a politician is able to be influenced in such a way that the politician will create laws and regulations so heavily in favor of a corporation's interests that that company sees a return rate of up to 200 times the amount invested, it makes absolute sense to lobby through campaign contributions.

And if a corporation or an influential person spent hundreds of thousands or millions of dollars to get you elected (through TV spots, attack ads against opponents, events, sponsors, etc.), there is at least an implicit understanding that, once in office, you owe that donor some political favors. You wouldn't be there in the first place without their help. And if push came to shove, big-money supporters would not be slow in reminding you of that fact, especially if you wanted to get re-elected. The study above shows that politicians are indeed responsive to the interests of their "investors," given the rates of return those donors experience.

Immense amounts of money from super PACs are flooding in to support politicians. The implications of lobbying are up for debate. However, it seems that lobbying provides a significant amount of political clout going to those with the greatest wealth. Based on the reasoning above, politicians are more likely to defer to the interests of big industries and corporations. It is worth noting that politicians are also affected by the voters themselves. But undoubtedly, money is power. And right now, the road to Washington is paved green.