Money walks: why campaign contributions aren't as corrupting as you think

Reason, July, 1997 by Jeff Milyo

Further, such candidate attributes as leadership, integrity, and perseverence are important determinants of both fund raising and electoral success, but are difficult to quantify. Studies that ignore these unobserved factors produce biased estimates that exaggerate the electoral effects of candidate spending. For example, you might observe that candidates who spend more money fare better in elections, but how much of this is actually caused by the money alone? Surely, part of this correlation is due to the fact that the winning candidate was intelligent, articulate, and hard-working. Since those qualities help both fund raising and vote getting, part of the observed correlation is spurious.

The most promising approach to deciphering how large a role money plays in electoral success is to examine changes in candidate vote share associated with changes in candidate spending. To the extent that the other factors that affect elections are constant over time, they will not affect changes in fund raising or vote getting. Only factors that change matter. For example, my research has indicated that House incumbents who transfer onto powerful committees or are promoted to leadership positions receive an extra $50,000 in campaign contributions, all else constant. This windfall translates into higher campaign spending but does not lead to any significant increase in vote share. I have examined several other "spending shocks" for House incumbents, but they also produce no statistically significant increases in vote share. This suggests that at least for incumbents, marginal spending is unimportant. Challengers, of course, might be a different case.

The 2nd Congressional District in Utah provides a unique case study on the effects of challenger spending. In 1992, Democrat Karen Shepard beat Republican Enid Greene in a race for an open seat.

In a 1994 rematch, however, Enid Waldholtz (Greene had gotten married in the interim) defeated the incumbent Shepard. Soon after the election, it was discovered that the Waldholtz campaign had spent almost $2 million in stolen funds. (Because of the resulting scandal, Waldholtz declined to stand for re-election in 1996.) This provides an ideal experiment, since the infusion of illegal cash was not caused by Waldholtz's political acumen, but rather by the activities of her then-campaign manager and husband (and now convict), Joe Waldholtz.

In 1992, Waldholtz received only 36 percent of the vote. In 1994 she won with 56 percent. If we attribute all of the 20-percentage-point increase in Waldholtz's vote to this ill-gotten windfall, then it seems that an extra $100,000 in spending yields 1 percent of the vote. However, other factors also contributed to the Waldholtz victory. First, Shepard's surprisingly liberal voting record alienated many voters (she even needed a police escort at one district meeting). Second, 1994 was a good year for Republicans in general: The average electoral swing to Republicans challenging Democratic freshman was six percentage points.