Front-runners in the money primary

The first third of your campaign is money, money, money.

The second third is money, money, money.

The final is votes, press, and money.

Source: Rahm Emanuel

In American presidential nominating process, there are two primaries.  One is to determine who can get the most votes.  The other is to determine who can raise the most money, it is virtually impossible to campaign for votes without money.

I visited the Open Secrets web site to learn how the candidates are faring in the money primary, and where their money support is coming from, which is a better indicator of where they stand than their campaign rhetoric.

Hillary Clinton is the front-runner in the money primary, having raised $222.6 million as of the end of February.  She received $48.7 million from just 20 donors, representing a range of financial institutions, labor unions and charitable foundations.

Her top contributor was Soros Fund Management, headed by the billionaire speculator George Soros, which gave her campaign $7 million.

Organizations aren’t permitted to give directly to candidates.  The Soros donation, and all the organization donations I mention in this post, are totals of donations by Political Action Committees and by officers, employees and their families.

Bernie Sanders is the runner-up.  He raised $140.2 million, of which $92.6 million came from small donations, which are defined as donations of $200 or less.

His top contributor was Alphabet Inc. (formerly known as Google).  Sanders doesn’t accept PAC money, so Alphabet’s $254,614 contribution was all from officers and employees.  His other top contributors were the University of California, Microsoft, Apple and Amazon.

Ted Cruz is the front-runner among Republicans.  He raised just under $120 million.  Just three companies contributed $36.1 million of that.  His top contributor was Wilks Brothers, a fracking company, which gave $15,069,000.  Its owners are strong supporters of the religious political right.

Donald Trump hasn’t bothered much with fund-raising so far.  He received $36.7 million, which included a $24.7 million loan – a loan, not a gift – from his personal funds.  His top contributor was Manchester Financial Group, a real estate developer, which gave $50,000.

John Kasich raised $22 million, including $1 million from the Boich Companies, a coal marketing and trading business.

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.

Business, not public, driving nation rightward

 The political realignment of the Reagan years was a realignment of business interests and not of voter sentiment.  So argued Thomas Ferguson and Joel Rogers, in their 1986 book, Right Turn: the Decline of the Democrats and the Future of American Politics, a book as enlightening now as it was when it was published 25 years ago, because the situation they describe has not changed.

Public opinion polls in the 1980s showed that a majority of voters favored Social Security and Medicare, gave full employment a higher priority than balanced budgets or lower taxes, believed workers have a right to join labor unions, and had no enthusiasm for getting bogged down in foreign wars—as they still do.

How, then, did Ferguson and Rogers explain Ronald Reagan’s landslide victories in 1980 and 1984?  They said this was a reflection of the unpopularity of the Democrats than allegiance to the Republicans.  Jimmy Carter was rejected because he was unable to deal with stagflation and rising oil prices, and because he supported the tight-money program of Federal Reserve chair Paul Volcker, which brought inflation under control by measure Volcker knew would casue a recession.  Walter Mondale was rejected because his only substantive campaign promise was to raise taxes.

If voter sentiment did not change, what caused the Reagan revolution?  Ferguson and Rogers said business interests realigned as a result of rising oil prices and increased international economic competition in the 1970s.

One consequence was a conflict of interest between the oil industry and manufacturing industry, leading to a majority of oil men shifting their allegiance from the Democratic to the Republican party.  Another was a slowing of U.S. economic growth, resulting in a hardening of corporate attitudes toward taxes, labor unions, environmental and health regulation.  In an era when U.S. economic supremacy was unquestioned, these costs could be passed on to consumers; in an era of intensified global competition, this was not possible.  The result of the Reagan revolution and the pro-corporate movement that followed was that the corporate elite received almost all the benefits of what economic growth there was.

Ferguson and Rogers dismiss the idea that the Reagan administration reflected a change in economic philosophy.  If you examine the Reagan policies in detail, they wrote, they consist of payoffs to constituencies, not implementation of a philosophy.  The Star Wars defense plan was a payoff to the aerospace and computer-electionics industries.

The Democrats were unable to challenge this because their party was (as it still is) beholden to Wall Street.  Bankers and financiers fear inflation above all else, because it reduces the value of their assets, and so favor balanced budgets and spending restraint.  This is why Carter supported Volcker and Mondale advocated a tax increase to balance the federal budget, and why Clinton and Obama gave priority to fiscal probity, and why Democrats have a better overall record than Republicans as budget balancers.

The investment theory of politics

I respect honest politicians who do what is right but unpopular.  I understand pragmatic politicians who do what is wrong but popular.   I can understand why politicians refuse to enact laws that are desirable but unpopular.  But what we have now are politicians who are refusing to do things that are obviously necessary and highly popular, such as break up and rein in the “too big to fail” banks.   Why would they do that?

Some light is thrown on this by a book I read recently, Golden Rule: the Investment Theory of Political Parties and the Logic of Money-Driven Political Systems, by a political scientist named Thomas Ferguson.  I became interested in Ferguson’s ideas when I saw him on the on-line Real News Network.

Golden Rule was published in 1995, and incorporates articles published before then, but it is highly relevant.   Ferguson’s analyses of the 1988, 1992 and 1994 elections, with name changes and minor rewrites, could just as easily have been written about the elections of 2004, 2008 and 2010.

Ferguson’s Golden Rule is “to understand who rules, follow the gold.”  This idea is hardly original with him, he did this on a much more granular level than most people.  He contended American politics is about policies—high tariffs vs. free trade, loose money vs. tight money, industrial policy vs. unregulated free enterprise—that some business interests favor and others oppose.

Businesses invest in candidates and political parties, and expect a return on their investment.  Since they have conflicting interests, the public gets to throw its weight onto one side or the other.   But proposals that are adverse to business as a whole don’t get on the public agenda.  According to Ferguson, no political party has ever supported a measure adverse to a business or corporate interest, unless there was some other business or corporate interest behind it.

Ferguson’s research explains a great deal that is otherwise hard to understand—why Bill Clinton, like Barack Obama, ran on a platform of economic growth and then abruptly changed to George H.W. Bush’s priority of bringing down the federal budget deficit.  It is because he could not afford to antagonize Wall Street financial institutions, such as Goldman Sachs.

Rep. Rahm Emanuel once reportedly told his staff:

• The first third of a campaign is money, money and money.
• The second third is money, money and press.
• And the last third is votes, press and money.

By this account, money is six times as important as votes.  That is why there is bi-partisan support for such unpopular policies as the North American Free Trade Agreement, the bank bailouts and “reform” of Social Security.

The influence of corporate wealth is more than just campaign contributions, or even financing right-wing magazines, TV networks, research institutions and advocacy groups.  Wealthy people and organizations have ready access to information that the middle-class voter does not see or even know about.  They understand where their interests lie, and exactly how those interests are affected by governmental action, which is difficult for the average voter to learn. Members of the corporate and financial elite are personally acquainted with members of the political and intellectual elite.  They interact with each other and influence each other, away from the eyes of the public.