Money and Politicians

One might think that politicians pass bills to put forth the best interest of the country and its people, but in reality many of the bills passed are not to benefit the country or the people, but to benefit the constituents. Many firms, sectors, and industries lobby and contribute a lot towards politicians to persuade them to support certain bills, and to give them government contracts. The reason they can do this is due to the importance of politician’s personal wealth, and how money has the ability to buy votes and contracts. To start this off let us first look at the influence of the industries that have received government contracts, by contributing to politicians.

Give me the Contract

Federal contracts are not new, the United States government has used government contracts from the times of the Civil War and World War II, but the importance lies within the individuals that obtain these contracts. To start off, defense companies tend to donate to incumbents before important congressional budget decisions. This shows that defense companies do receive something from this by donating before decisions are made (Hogan, Long, Stretesky,2010: 595). But, defense companies are not the main focus in this case. What is important are the contracts given when natural disasters occur in the United States. During natural disasters the government must act fast, leading companies to bid on contracts, though during the Hurricane Katrina the government issued a number of contracts that were given to companies without bids occurring (Ibid.,596). Now, this might happen because the United States government must act fast, and cannot spend time on choosing companies, but there is more than just acting fast. In studies done by Hogan, Long, and Stretesky, this reveals that firms that have obtained about 11 government contracts in the past, are more likely to receive a contract for Katrina (Hogan, Long, Stretesky,2010: 600). Also, another interesting thing they found in their research, is that firms that have donated to campaigns are four times more likely to get a contract. They also found that lobbying is insignificant (Ibid.,600). The companies that donated to political campaigns, did not just make small donations, they made large contributions to have a more probability on obtaining contracts from the government (Hogan, Long, Stretesky,2010: 603). These contributions are also important mostly for the politician because politicians that received contributions from these firms, are now “obliged” to continue giving contracts to these firms, to continue receiving funds. Also, if politicians have assets in the firm, then that is more money in their pockets (Ibid.,603). Also, going back to the military, Mr. Santorum has secured benefits for military companies due to their donations to him. Such example of this, is that the Piasecki family donated thousands of dollars to Santorum, and from here Santorum then helped the Piasecki family gain support for military projects (Luo, Mcintire,2012: 5). Nevertheless, from firms making donations to politicians to obtain government contracts and support, let us now look at how contributions affect votes on bills.

Contributions and Bills

As firms contribute to politicians to obtain government contracts, it also holds the ability to change the minds of politicians on certain bills n that go against industries interests. One of the biggest firms that tend to change the minds of politicians would be the banks and the finance industries. Banks and finance firms have always been anti-regulatory and due to this, money and lobbyists have been poured into congress to pull back on regulations. First it happened in the 1990’s when bankers contributed about $400 million dollars to politicians, as they sent hordes of lobbyists to have the government repeat the Glass-Steagall Act (Ferguson, Jorgensen, Chen,2017:21). After the 1990’s, banks in 2006 again sent hordes of lobbyists to have politicians vote against 51 regulatory bills that were in the process of being passed (Igan, Mishra,2011: 28–29). Though all of this changed once the financial crisis hit the United States. Before the financial crises, there were firms that lobbied for a type of bill that would assist them. Once the financial crisis took place the firms that lobbied before the crises were more likely to be bailed out, then those that did not lobby (Ferguson, Jorgensen, Chen,2017: 21). Now the financial crises also led politicians, mostly Republicans, to split from their political party. They split because of the pressure they were getting from their constituents to support Dodd-Frank bill (Ferguson, Jorgensen, Chen,2017: 23). Nonetheless, the lawmaker Dodd also received big money from the creation of the bill, the financial-service industry donated $5.9 million dollars to his Presidential campaign in 2007 and in 2008 (Ferguson, Jorgensen, Chen,2017: 25). Aside from banks pouring in money and lobbyists to compel politicians to vote for bills or against bills, politicians own interests also take place in voting for bills. For example, 11.6% of politicians would vote for H.R. 3397 mainly because they have investments in the financial sectors, now politicians who have no investments in the financial sector are less likely to vote for the bill (Tahoun, Lent,2016: 21). Nevertheless, politicians will vote for bills or against bills when they are either receiving money from companies and being lobbied, or when they have investments in sectors that will be affected by an economic crises, like that of the financial crises. Now, aside from bills and money, let us now look at the connection between the returns companies receive when contributing to politicians.

It’s all about the Money

The first two paragraphs reveal how lobbyists and firms contribute to politicians for various reasons, like getting contracts and changing regulatory bills. What was not mentioned was how politicians have a fair share in companies that contribute to them. Such instances where politicians have bought stocks from companies that contributed to them would be former President Barack Obama when he was senator. When he was a Senator former president Obama bought stocks from two companies that were worth more than $50,000 dollars (Tahoun,2014: 87). The company that he bought stocks was from a satellite communications business who raised $150,000 for his political committee (Ibid.,87). Also, back in 2005 former president Obama bought shares worth $5,000 from a biotech that focuses on treating the flu, after purchasing the stocks he pushed for legislation focusing on having the federal government spend money on battling the flu (Ibid.,87) Now it is not uncommon for politicians to invest in companies, for Democrats and Republicans tend to invest in companies that favor their political parties (Ibid.,87). Also, as politicians buy stocks and shares from companies that contribute to their campaign, these companies also get a return during elections. Such examples would be with George W. Bush campaign back in 2000. During Bush’s campaign the oil and gas industry contributed $1.889 million dollars in his presidential campaign, and these contributions increased the market value approximately $103 billion dollars (Shon,2010: 279). Now the oil and gas industry is not the only one that receive huge returns after contributing the to the Bush campaign, the entertainment industry also contributed to Bush’s campaign and the industry then received a +6.8% in industry returns (Shon,2010: 274). This then uncovers the big connections company’s contributions has on political campaigns.

Conclusion

In the end money matters, whether it be to gain profit, government contracts, or have monkeys in suits change laws, companies will always have the upper hand. Due to this the American government will probably never change, especially when regulatory laws are always attacked. So, in the end companies are the ones running the government, and not the politicians or the people of this country.

Citation

Ferguson, Thomas, Jorgensen, Paul, Chen, Jie. Fifty Shades of Green: High Finance, Political Money, and the U.S. Congress. Roosevelt Institute, Reimagine the Rules, (May 2017).

Shon, John J. Do Stock Returns Vary With Campaign Contributions? Bush vs. Gore: The Florida Recount. Economic & Politics, №3, Vol.22 (November 2010).

Hogan, Michael J., Long, Michael A., Stretesky, Paul B. Campaign contributions, lobbying and post-Katrina Contracts. 2010.

Luo, Michael, McIntire, Mike. Donors Gave as Santorum Won Earmarks. The New York Times. (Jan. 15, 2012).

Igan, Deniz, Mishra, Prachi. Making Friends. Finance & Development, (June 2011).

Tahoun, Ahmed, Van Lent, Laurence. The Personal Wealth Interests of Politicians and the Stabilization of Finance Markets. Institute for New Economic Thinking. Working Paper №52 (October 19, 2016).

Tahoun, Ahmed. The role of stock ownership by US members of Congress on the market for political favor. Journal of Financial Economics. (2014).

Related posts:

They say Utopia is a place that does not exist. But there are two entertaining examples where Utopia does exist. The first find is a small tourist island called "Utopia" near the city of Hurghada…

The earth is calling me to my knees,. “The Call To Return” is published by JNA in Plan-B Vibe.

The world seems to slow down around me as I make my way down this path. As my inner monologue quietens, another self crosses the threshold and possesses. The inane drivel of everyday thoughts…