Tag Archives: campaign contributions

Why Washington’s gridlock won’t go away

Pundits have suggested that the Republican control of U.S. Senate will lead to a new era of bipartisanship, which will offer new solutions on immigration, the environment and tax reform. These arguments are extremely myopic. A critical look at the recent structural shifts in the American political system shows that the gridlock in Washington is caused by increasing inequality and benefits the rich.

To be sure, Congress is facing an almost unparalleled level of gridlock. Since President Barack Obama took office in 2009, we have seen an unprecedented use of the filibustervery little major legislationlong delays in mundane appointments, government shutdowns and highly partisan attacks on a progressive legislative agenda.

To understand the current congressional gridlock, it’s important to look at who is benefiting from the stalemate. A recent report published by the University of Tennessee at Knoxville found (PDF) that gridlock in the U.S. political system benefits the rich and has significantly contributed to rising inequality. The findings have been confirmed by Alfred Stepan and Juan Linz, who conclude that the structure of the Senate, the majority-constraining capacity of veto players and the filibuster all contribute to rising inequality.

The question then becomes, Why have we not seen the same level of gridlock in our lifetimes?

The growing economic power of U.S. elites coincides with increasing political dominance. Numerous studies have shown that the U.S. political system is no longer responsive to the electorate. In part this is because the United States’ political system is designed to be slow moving, with multiple checks and balances. In addition, as with other developed countries, the United States has incredibly low voter turnout. The 2014 midterm elections saw the worst voter turnout in 72 years (a dismal 36.3 percent of eligible voters). Higher voter turnout is positively correlated internationally with higher income redistribution (PDF, see chart on page 27). A vast body of literature shows that low-income voter turnout leads to more-left-leaning governments. The U.S. political system has had persistent class bias, but in the past these factors did not prevent stymie important legislation that benefits the poor.

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The dramatic reduction in top tax rates and the deregulation of finance in the 1980s opened the door for mass inequality. Rising inequality had three important effects on U.S. politics. First, it allowed the rich to take over the political system. Research shows (PDF) that the richest 0.01 percent of Americans now provide 40 percent of political contributions — up from 10 percent in 1982.

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By nearly every measure, the rich are far more likely to participate in the political process, and the superrich make up most of the donors. A 2013 study in The Journal of Economic Perspectives found (PDF):

In 1980, the top contributor … gave $1.72 million (in 2012) dollars, nearly six times the amount given by the next largest contributor. In 2012, the two largest donors were Sheldon and Miriam Adelson, who gave $56.8 million and $46.6 million, respectively. Other members of the Forbes 400 accompany the Adelsons; 388 current members are on record as having made political contributions. They account for 40 of the 155 individuals who contributed $1 million or more to state and federal elections during the 2012 election cycle.

At a time when Congress increasingly dominated by superrich (and white) politicians, these contributions buy enormous political influence. A similar study by Jesse H. Rhodes and Brian F. Schaffner found (PDF) that “millionaires receive about twice as much representation when they comprise just 5 percent of the district’s population than the poorest wealth group does when it makes up 50 percent of the district.” As Duke University professor Nicholas Carnes has demonstrated (PDF), “representatives from working-class occupations exhibit more liberal economic preferences than other legislators, especially those from profit-oriented industries.” But those measures often die or are shelved in deeply gridlocked Congress.

Second, rising inequality has created ideological structures. As the rich grow richer, they justify their wealth by inflating their sense of intelligence and superiority. The poor and middle class begin to accept this narrative,forgoing their desire for redistribution. Since individuals understand inequity by relating it to their circumstances, higher inequality leads to its growing acceptance. Given the United States’ racist history, whites try to avoid feeling being in the last place by punitively harming blacks. In turn, the rising inequality erodes the social trust necessary to reduce inequality.

“The best policy response to growing inequality is to enact universalistic social welfare programs,” Bo Rothstein and Eric Uslaner, wrote in a 2005 study (PDF) published by World Politics. “However, the social strains stemming from increased inequality make it almost impossible to enact such policies.” Because the rich views the poor as personally responsible for their failings, they see no reason to help them up the ladder. A recent Gallup poll found that fewer Americans than ever believe that hard work can help one get ahead in life. Data from the American National Election Survey shows the percentage of people who say the government is run “by a few big interests looking out for themselves” has grown dramatically. (See chart below.)

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Finally, amid rising inequality, both Republicans and Democrats have moved to the right, rejecting liberal economic policies to woo wealthy donors. Democrats have struggled to maintain their coalition of single women, people of color and educated progressives. In fact, as Benjamin Page, Larry Bartels and Jason Seawright noted in the journal Perspectives on Politics last year (PDF), “on economic issues wealthy Democratic respondents tended to be more conservative than Democrats in the general population.”

Studies show that the strength of unions is a far more important bulwark against inequality than the number of Democrats in Congress. “The effect of the Democratic Party [on the rate of financial deregulation] is not very large, but rather varies along with the strength of unions,” writes Christopher Witko in an upcoming paper on the rise of finance. He argues the Democratic Party has been attempting to win the votes of professionals (that is, rich people), pulling them to the right. Other studies confirm that the decline of unions has led to steep rise in inequality.

Meanwhile, the wealthiest Americans have increasingly favored one party. In a 2003 paper, Nolan McCarty, Keith T. Poole and Howard Rosenthal examined 40 years of data and found that “partisanship has become more stratified by income.” In a later study, the researchers show how tight polarization tracks with inequality (PDF, see chart on page 108) and wages in the financial sector. American National Election data also confirm the rising class polarization of the electorate, particularly at the 68th to 95th income percentile range, which went from a nearly 40 point margin preference for Democrats in 1952 (58 percent Democratic, 20 percent of Republican) to a 5 point margin for Republicans (43 percent Democrat, 48 percent Republican) in 2008. In the 2008 elections, the poorest Americans (below the 16th income percentile) preferred Democrats by 42 points, while the richest (above the 96th income percentile) preferred Republicans by 40 points.

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Widening class divide

The increasing class divide within the two parties has made gridlock inevitable. But Republicans automatically win from gridlock. The asymmetric partisanship of the last six years is driven by a simple dynamic: Government inaction benefits the wealthy and harms the working class. When Republicans are in the majority, they hollow the government out from the inside with tax cuts, deregulation and austerity. When they are not in power, the easiest way to benefit the rich is to dither. In essence, the GOP serves a 1 percent agenda, based entirely on making government fail. “We should not be judged on how many new laws we create. We ought to be judged on how many laws we repeal,” House Speaker John Boehner said in a moment of honesty earlier this summer.

Rising economic and political inequality have coincided over the past three decades. As the rich have grown richer, they have been able to exercise more political power. Their aim is to allow laissez-faire to do its dirty deeds by preventing the government from working for the poor and middle class. As a result, conservative-leaning rich Americans oppose reducing economic inequality. (See chart below.) Politics is nothing more than a class war by other means. The problem is that the poor are losing. Nothing that happened in this year’s midterm elections will change that.

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This article originally appeared on Al Jazeera

Big Box Retailers Own The Political Process On Black Friday

Co-Written with Catherine Ruetschlin.

Big retail has dramatically increased the amount of money it spends influencing the political system. Back in 2000, all the big retailers together (Walmart, Costco, Home Depot, Target, Lowe’s and Best Buy) spent a meagre $5 million (in 2013 dollars) buying influence. In 2014, a relatively unimportant midterm election, that number increased six-fold.

Among the big box retailers we examined, the biggest were Walmart and Home Depot, followed by Target and Best Buy. Walmart’s political activities are unsurprising — politicians have richly rewarded the company. A recent study by Americans for Tax Fairness finds that Walmart saves $1 billion a year in tax breaks and avoids taxes on $21.4 billion it holds offshore. Added to that are the $6.2 billion Americans taxpayers subsidize Walmart’s employees with food stamps and other public aid, because Walmart doesn’t pay its workers enough to live. In a recent annual report, Walmart openly admitted that changes to government food stamp programs may hurt its financial performance.

Walmart’s spending on the political system has increased dramatically, with total spending topping $10 million in the last four elections. It’s clear why, the AFT estimates that Walmart could save $7 billion more over the next decade if the corporate tax rate falls to 25 percent.

In addition to Walmart’s spending, the Walton family spends millions on the political system. They’ve also hired a private lobbyist to lobby for changes to the estate tax that now benefit them to the tune of hundreds of millions. In addition the Walton Family Foundation is one of the biggest education funders in the country, and is one of the biggest supporters of the privatization agenda. As the chart below shows, Democrats rarely benefit from the Walton family’s largess.

In fact, Democrats rarely benefit from any of the big retailers. Over the period studied, Republicans got $2 for every $1 given to Democrats for the major retailers. Among the big retailers, only Costco showed a preference for Democrats, while Lowe’s had the largest disparity, favoring Republicans 3.5 to 1.

It’s important to note that these numbers massively understate the influence of big box retailers. Because of bad disclosure laws, we just don’t know that much about corporate spending. We don’t have the foggiest idea what big box retailers are spending on state and local elections. We don’t know how much they pay to be members of organizations like ALEC. We don’t know how much they give to 501(c)6 organizations like the Chamber of Commerce. Walmart, for instance, is a member of the the RATE Coalition, Alliance for Competitive Taxation (ACT) and the Business Roundtable (BRT).

All of this money brings rewards for companies. Retailers lobby on a variety of issues, including tax policy, labor issues, and the terms of international trade. A vast literature shows that these efforts produce returns, often at the expense of other democratic interests. The research firm Strategas maintains an index of the fifty firms that lobbying most intensely. The index hasoutperformed the S&P 500 every year since 1998. In a comprehensive study of conflicts between lobbying groups and other coalitions, researchers found that business interests prevailed in 9 out of 11 issues in which businesses and labor were opposed. In the 16 cases that pitted business groups against citizen group coalitions, businesses won 9.

Although the vast amounts of money went to lobbying, campaign contributions also produce benefits There is strong evidence that the most important impact of campaign contributions is to increase access to politicians with the intent of setting the political agenda. A study of the telecommunications industry finds that regulators respond to private political spending with regulations that favor the donors. Companies that bid for federal contracts across industries are more likely to be granted those contracts if the bids are complemented by campaign contributions. Big retail normally backs winners: a Demos analysis finds that 81 percent of the 291 candidates that received money from Walmart in 2014 won their election.

What can be done to stop the spread of big money in politics? Over the long-run we need to overturn laws like Citizen’s United that opened the floodgates of money into Congress. But there are also short-term solutions. The Supreme Court explicitly endorsed disclosure as the alternative to campaign contribution limits. On the heels of Citizens United, Congress came within one vote of overcoming a party-line filibuster to pass the DISCLOSE Act. In the absence of Congress, shareholders should demand that corporations either get out of politics, or disclose their donations to organizations like ALEC that they might not approve of. SEC should require this disclosure if Congress won’t.

Publicly financed elections can help candidates not in the pockets of big money get into office, and more states should consider the system. To slow the rise of lobbying states and the federal government should regulate it more strictly. Patrick Flavin finds that states with stricter regulations on lobbying are more politically equal — that is, responsive to voters of all income groups. Policies that help people vote, instead of disenfranchising them, would also go a long way to making the political system more responsive. Americans need to tell Congress that even on Black Friday, government isn’t up for sale.

This article originally appeared on Talking Points Memo

Mr. Walton Goes to Washington

When retail workers want something, they ask their employers, get denied, get bullied and sometimes fired. Sometimes, they take to the streets, as they have for the last three years on Black Friday. By contrast, when retailers want something, they scurry to the halls of Congress, where they purchase influence with their exorbitant profits.

The largest big-box retailers have spent a total of $111 million since the 2000 election cycle on lobbying and campaign contributions. During the 2014 election cycle, big-box retailers spent $30 million on federal campaign contributions and lobbying, which is almost six times what they spent in 2000 (after an inflation adjustment).

Wal-Mart in particular is known for its status as a corporate-welfare queen; one studyestimates that one 300-person Supercenter costs taxpayers $904,542 to $1,744,590. Another estimates that Wal-Mart and the Walton family pull in $7.8 billion a year in tax breaks and subsidies. Meanwhile, a brand-new report from Americans for Tax Fairness finds that Wal-Mart also avoids taxes on more than $21 billion in offshore profits. In its most recent annual report, Wal-Mart openly admits that changes to government food stamp programs may hurt its financial performance. Hundreds of thousands of Wal-Mart workers make near-poverty wages.

Wal-Mart certainly benefits from other favorable government actions. Changes to labor laws allow it to abuse worker schedules, although sometimes it ignores them completely and just refuses to pay workers, flat out. Since Wal-Mart is a serial polluter, lax environmental standards are beneficial. It’s also very concerned about taxes, trade and intellectual property. To advance these interests, Wal-Mart spent $2.4 million on campaign donations and $12.5 million in lobbying in 2014 alone.

As the data below show, the last four election cycles have seen an explosion of big-box money in politics.

Of all spenders, Wal-Mart was by far the largest, followed by Home Depot. Both companies are considered “heavy hitters” by the Center for Responsive Politics, meaning they are among the top 100 political donors over the period for which data is available.

Even still, these numbers vastly understate political spending. For one, there is not yet a comprehensive database on state and local political spending. Further, many of these retailers are members of 501(c)6 groups like the American Legislative Exchange Council (ALEC) and the Chamber of Commerce; money paid to these groups is not reported. Also unreported are donations to 501(c)3 groups. As Demos has noted before, there is a clear need for stronger disclosure requirements, so that the full political influence of companies can be made available to the public. What we do know tells us that Republicans live up to their reputation as the “party of big business” and pull in more than $2 from retail for every $1 that goes to Democrats. With the exception of Costco, every big-box retailer heavily favors Republicans.

Numerous studies find that this money buys influence. Retailers lobby on a variety of issues, including tax policy, labor issues and the terms of international trade. A vast literature shows that these efforts produce returns, often at the expense of other democratic interests. In a comprehensive study of such conflicts, researchers found that business interests prevailed in 9 out of 11 issues in which businesses and labor were opposed. In the 16 cases that pitted business groups against citizen group coalitions, businesses won nine.

Taxes were the most frequently lobbied issue by large retailers in 2014, and by a wide margin. This legislative area has proven lucrative for business in the past; a 1 percent increase in businesses lobbying expenditures yields a lower effective tax rate of between 0.5 and 1.6 percent for the firm that lobbies. One study on the subject finds that the market value of an additional dollar spent on lobbying could be as high as $200. In 2014, the largest big-box retailers reported lobbying on a total of 37 incidences of specific taxation issues, including corporate tax reform, Internet sales tax and the extension of temporary tax breaks. The next most common issues of lobbying were health care reform, labor, antitrust and workplace regulations. As one example of the power of lobbying, the research firm Strategas maintains an index of the 50 firms that lobbying most intensely. The index has outperformed the S&P 500 every year since 1998.

Campaign contributions also produce benefits. There is strong evidence that the most important impact of campaign contributions is to increase access to politicians with theintent of setting the political agenda. A study of the telecommunications industry finds that regulators respond to private political spending with regulations that favor the donors. Companies that bid for federal contracts across industries are more likely to be granted those contracts if the bids are complemented by campaign contributions.

What can be done to stop the spread of big money in politics? Over the long run it will be necessary to overturn laws like Citizens United that opened the floodgates of money into Congress. But there are also short-term solutions. The Supreme Court explicitly endorsed disclosure as the alternative to campaign contributions. On the heels of Citizens United, Congress came within one vote of overcoming a party-line filibuster to pass the DISCLOSE Act. In the absence of Congress, shareholders should demand that corporations either get out of politics, or disclose their donations to organizations like ALEC that they might not approve of. The SEC should require this disclosure if Congress won’t.

Publicly financed elections can help candidates not in the pockets of big money get into office, and more states should consider the system. To slow the rise of lobbying, states and the federal government should regulate it more strictly. Patrick Flavin finds that states with stricter regulations on lobbying are more politically equal — that is, responsive to voters of all income groups. Politicians need to tell Congress that even on Black Friday, government isn’t up for sale.

This article originally appeared on Salon

When Retailers Shop the Season Doesn’t End at Christmas

Co-written with Catherine Ruetschlin, Senior Policy Analyst at Demos.

Unfortunately for voters, the $3.7 billion spent over the most recent election cycle did not come with a gift receipt. Despite being rung up as the most expensive midterm in US history, nearly two-thirds of Americans sat out the election—the lowest voter turnout in more than 70 years. Those who didn’t turn-out were disproportionately low-income people, who are increasingly shut out of the political process. It makes sense to see growing disillusionment with politics alongside massive outside spending, since the interests of ultra-wealthy donors are unlikely to reflect the experiences of most citizens. On issues like the minimum wage, the divergence can be stark. That is one reason why low-wage retail workers are making their case for better working conditions in big-box parking lots for the third straight year of Black Friday strikes. They need a public forum on the Walmart economy, and big-box retail took the last one on the shelf.

In our recent paper, Retail Politics: How America’s Big-Box Retailers Turn Their Economic Power into Political Influence, we found that the six largest big-box retailers in the US spent $30 million on campaign contributions and lobbying during the latest election cycle—that’s six times more than they spent in 2000. Walmart and Home Depot, in particular, rank among the top campaign spenders in the nation. And this spending is not like consumption spending on, say, some cheap imported merchandise, it is an investment with real returns.

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Political spending of big business is as much about flooding the process with friendly faces as it is about establishing access once the election is over. The campaign and committee donations of wealthy interests first fill the playing field with candidates who share their priorities, and then elevate the issues they care about most. Over time, big-box retailers have supported Republicans over Democrats by a clear margin of 2-to1. But in the 2014 cycle these companies spent their political dollars widely, giving on both sides of the aisle—and even donating to opposing candidates in contested races.

2MyReport3_PartySpendingRatio

This campaign spending combines with millions of dollars in lobbying to allow those with the fattest wallets to shape the country’s political agenda. As a result, the small population of affluent Americans sees their priorities reflected in our legislative objectives, even when the majority of the country disagrees with their preferences. For example, taxes were the most frequently lobbied issue by big-box retailers in 2014 by a large margin. This legislative area has proven lucrative for business in the past—experts in corporate strategy research show that a 1 percent increase in businesses lobbying expenditures yields a lower effective tax rate of between 0.5 and 1.6 percent for the firm. Yet when there is conflict between big corporations and other interests over policy change, policy sides with big business lobbyists the vast majority of the time.

Meanwhile, the increase in big-box retail’s political spending occurred at the same time that the most important lobby for workers floundered. Previous research by our organization, Demos, has found that unions are the only interest group that consistently lobbies in the interests of average Americans. However, data from the Center for Responsive Politics show that business interests outspend unions 15 to 1. The democratic chorus in Washington has shifted from one that is broadly in favor of business interests to one virtually devoid of any other voices. It is unsurprising in this context that after an almost two-decade fall, the share of Americans saying that government is “run by a few big interests,” is as high as 70 percent.

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That loss of trust in the equal democratic voice for all Americans also reflects where the money is. According to data from American National Election Studies, unskilled workers  are more   likely to agree that government is run by a few big interests than their white collar and professional peers. That perception is reinforced by the escalating importance of private money in elections, and it shows an intuitive read of the very real problems with democracy, like research that suggests the preferences of average Americans simply won’t change much in Washington.

There are no Black Friday bargains when it comes to political contributions, but there are ways to make small-dollar donations matter more to those on the receiving end. Public finance, federal matching of small donors and effective lobbying regulations can amplify the voices currently drowned out by big money, and begin assuring Americans that democracy is not for sale.

This piece originally appeared on Huffington Post.