Congress for sale: The new money game

Big money has always influenced American politics.  But today this power of money has reached heights not seen since the Gilded Age of corruption in the late 19th century.  Political scientist Thomas Ferguson, in a paper entitled “Politicians Never Bowl Alone,” published earlier this year, spelled out how the new money game originated in the 1990s and how it works.

[House Speaker Newt] Gingrich and his leadership team, which included Dick Armey and Tom (“the Hammer”) DeLay …implemented a formal “pay to play” system that had both inside and outside components. 

On the outside, DeLay and other GOP leaders, including Grover Norquist, who headed Americans for Tax Reform, mounted a vast campaign (the so called “K Street Project”) to defund the Democrats directly by pressuring businesses to cut off donations and avoid retaining Democrats as lobbyists.

Inside the House, Gingrich made fundraising for the party a requirement for choice committee assignments.  The implications of auctioning off key positions within Congress mostly escaped attention, as did the subsequent evolution of the system into one of what amounted to posted prices ….

The K-Street project ultimately fizzled.  Big donors were unwilling to give up the power to influence both parties.

By contrast, the changes in House procedures and rules that the Republicans instituted proved durable.   Democrats rapidly emulated the formal “pay to play” system for House committee assignments, leading to a sharp rise in campaign contributions from members of Congress of both parties to their colleagues and the national fundraising committees.  Soon leaders of the Democrats, too, were posting prices for plum committee assignments and chairmanships.  They also centralized power in the leadership, which had wide discretion in how it treated bills and more leverage over individual members.

I don’t think it is a coincidence that the rise of “pay to play” coincided with the financialization of the U.S. economy and the growing concentration of income among 1 percent of Americans.

Gingrich and his allies were painfully aware that transforming the GOP’s gains at the presidential level into a true “critical realignment” of the political system as a whole required breaking the Democratic lock on Congress.  So they shattered all records for Congressional fundraising in their drive to get control of the House.

Their success in this is what polarized the system.  The tidal wave of political money they conjured allowed Gingrich, Gramm, [Haley] Barbour and their allies to brush aside the older, less combative center-right Republican leadership and then persist in their efforts to roll back the New Deal and remake American society in the image of free market fundamentalism.

In power, the Republicans restructured their national political committees and the Congress into giant ATMs capable of financing broad national campaigns to protect and extend their newly won position in Congress.

The Republican success left the Democrats facing the same dilemma they had in the late seventies, as the Golden Horde first formed up behind Ronald Reagan.  They could respond by mobilizing their older mass constituencies or emulate the Republicans.  That battle had been settled in favor of so called “New Democrats.”  Dependent for many years on campaign money from leading sectors of big business where regulation kept recreating divisions – notably finance and telecommunications – the Democrats reconfirmed their earlier decision to go for the gold.

They followed the Republicans and transformed both the national party committees and their Congressional delegations into cash machines, with the leaders in each chamber, but especially the House, wielding substantially more power than at any time since the famous revolt that overthrew Speaker Cannon in 1910-11.  As the Republicans moved further and further to the right, the Democrats did, too, constrained only by the need to preserve something of their mass base.

Both Democrats and Republicans are responsible for evading and weakening campaign finance laws, Ferguson wrote.  Newt Gingrich in 1986 took over GOPAC, founded by Pete DuPont to strengthen the Republican Party organization, and made it a powerful campaign finance organization.  At least 172 individuals contributed $10,000 a year, and GOPAC raised at least $13 million over eight years.

Later President Bill Clinton and the Democrats found a loophole allowing “soft money” to be spent by political parties “independently” of individual candidates.  The McCain-Feingold campaign finance reform law closed this loophole, but opened the door to soft money spending by “527′ organizations, which supposedly were independent of parties.

Political money is complex.  It strikingly resembles the electromagnetic magnetic spectrum.  Vast stretches of it are normally invisible to humans, including newspaper reporters and academics …

  • Lawyers flock to politics with the expectation of having legitimate business steered their way.
  • Congresspeople receive big fees from serving on corporate boards and contributing little except their influence.
  • Congresspeople, as well as academics and journalists, receive huge lecture fees for addressing business groups.  Ferguson said a top White House adviser received nearly a million dollars for advising a major investment firm on “philanthropy.”
  • Congresspeople get valuable investment tips not available to the public.  Some studies indicate that U.S. Senators and Representatives typically get returns on their investments equal or better than that of corporate insiders.
  • A public official who serves the interests of an industry can expect to have a lucrative job waiting for him or her in that industry.  The growing disparity in income between top corporate executives and middle-class professionals makes this appeal harder to resist.

When the Force is with them—when, that is, Congressmen and women, their staffs, presidential aides and federal regulators can be sure of walking out of their offices to become multimillionaires when they retire or step down—expecting them to act consistently in the public interest is futile, even if all representatives were elected on 100 percent public funding.

This explains our dysfunctional law-making process, Ferguson said.  It explains, for example, why the Dodd-Frank bill fails to limit the size of “too big to fail” banks, why bank concentration has been allowed to increase, why derivatives (financial securities not backed by any asset) continue to be unregulated, and why abusive lending practices go unchecked.  It explains why both President Obama and the Republicans use the budget crisis as an excuse to give banking regulators the tools they need to do their jobs.

And it explains why the Occupy Wall Street folks think they can’t trust the normal operations of their political system to respond to their plights.

Click on Legislators Never Bowl Alone: Big Money, Mass Media and the Polarization of Congress PDF  for the full text of Thomas Ferguson’s paper.

Click on Our Polarized and Money-Driven Congress for comment on the paper by Yves Smith on her Naked Capitalism web log.

Click on Party Requirements for Fund-Raising for comment on the paper by Jim Fickett on the Clear on Money web site.

Ferguson said some economists think the great mystery is not why corporate interests spend so much in politics and lobbying, but why they spend to little, since an investment of a few million dollars can generate a return of billions of dollars in spending on such things as transportation and defense.

Click on The investment theory of politicsBusiness, not public, driving nation rightward and Congress for sale: Posted prices for earlier posts of mine on Thomas Ferguson’s ideas.

Another political scientist who’s looked into this subject is Eleanor Powell of Yale, who published an academic paper late in 2010 on the relation of fund-raising to advancement in Congress.  She did statistical analysis which showed that fund-raising on behalf of colleagues led to promotion to chairmanship and leadership positions, and that seniority aslo helped, but legislative activity didn’t matter at all.

She said it would be hard to understand why Republican John Boehner was chosen to chair the House education and workforce committee following the 2000 elections if you didn’t know that he contributed $243,803 to the campaigns of fellow Republican House members.

According to her, the pioneer in the system was Jesse Unruh, the Democratic speaker of the California assembly from 1961 to 1969.  His seat was relatively safe, so he asked lobbyists to contribute to the campaigns of Democrats in more difficult races.  These Democrats expressed their gratitude by voting with Unruh on key issues, which of course increased Unruh’s influence with lobbyists.

California Democrats Phil Burton and Henry Waxman carried this practice into the House of Representatives, she wrote, where it was picked up by both parties.  Waxman in particular raised a lot of money from Hollywood actors and executives.

She said the practices of a few entrepreneurial Congresspeople evolved into an informal system and now to stated requirements—the “posted price” system described by Thomas Ferguson and Marian Currinder.

But she said fund-raising is ceasing to be correlated with promotion to leadership spots.  Contributing money is no longer enough to get you promoted.  Rather it is something you have to do to be considered at all.

Click on Where Money Matters in Congress PDF to read her paper.  She is less indignant and also less readable that Thomas Ferguson, but she gives a useful second perspective.

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