Just Follow the Money
Whose interests do the two parties represent?
This article is from Dollars & Sense: Real World Economics, available at http://www.dollarsandsense.org
This article is from the
September/October 2024 issue.
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From one point of view, the aphorism “you get what you pay for” does not apply when it comes to U.S. electoral democracy. Enormous amounts of money are spent on elections in this country, but few would say their exorbitant cost is a mark of quality. The total cost of federal elections has increased with each election cycle, but the 2020 election marked a quantum leap in the level of political spending. There was a staggering $14.4 billion in total spending on federal elections, including both presidential and congressional campaigns, in 2020. This was more than double the total amount from 2016, which was itself the most expensive election cycle ever to that point.
But if you’re a billionaire instead of an average voter or small-money donor, the old saying still means something. Earlier this summer, news outlets reported that tech billionaire Elon Musk, whose estimated net worth is over $250 billion, planned to donate $45 million per month to a new pro-Donald Trump outfit called America PAC (both Musk and Trump denied these reports). As of mid-July, the group had already raised upwards of $8 billion, largely from titans of the tech world. Its main backer is Joe Lonsdale, who co-founded the software and data firm Palantir with Peter Thiel.
As for Thiel—who funds much of MAGA-world’s political and intellectual apparatus—he must be rather happy with the returns on his political investments. In 2015, he recruited a fresh-faced Yale Law School graduate and soon-to-be bestselling author named J. D. Vance to his Silicon Valley investment firm Mithril Capital. After Hillbilly Elegy went big, Vance moved back to his native Ohio to start laying the groundwork for his political career. Fifteen million dollars of Thiel’s money followed Vance back to the Buckeye State, where it boosted his successful 2022 campaign for a U.S. Senate seat. Less than two years later, Trump tapped Vance as his 2024 running mate, capping this Potemkin populist’s lightning ascent to the heights of Republican Party politics. At just 39 years old, Vance would be the third youngest vice president in U.S. history if he and Trump win this fall’s election.
Red Money, Blue Money
The D&S Debrief
Click here to listen to an interview with Chris Maisano about the big-money donors to the Republicans and Democrats. This segment is part of the September 26, 2024 episode of Economics for the People on KKFI FM in Kansas City.
One of the biggest themes of the money race so far is the movement of prominent segments of the technology sector into the Republican camp. Thiel has always been there, but several leading Silicon Valley figures who loudly lamented Trump’s 2016 election have bought first-class tickets on the Trump train. Their number includes high-profile investors like Marc Andreesen and Ben Horowitz as well as Chamath Palihapitiya and David Sacks, who as hosts of the “All-In” tech podcast have become prominent right-wing commentators. However, the tech industry’s pocketbook is still largely aligned with the Democratic Party. According to the watchdog group Open Secrets, roughly 80% of tech industry donations have gone to Democratic candidates so far this cycle. But that is down from 90% in 2020, and if the Trump-Vance ticket prevails in November it’s possible that Silicon Valley’s shift to the right could go from a minority trend to a more durable realignment.
The driving forces behind this development have to do with both ideology and self-interest, though it’s not always easy to tell where one ends and the other begins. Bilious rhetoric against “wokeness” fills up the ideological side of the register. Musk recently announced he is moving the headquarters of both X and SpaceX from California to Texas in protest of state laws that protect transgender schoolchildren, though one suspects the move has just as much to do with cost-cutting as genuine conviction. A recent Financial Times report quotes Palantir executive Alex Karp, a Silicon Valley bigwig who still backs Democrats but whose loyalty is wavering: “Political correctness in the party is a huge problem, the Democrats can’t yet understand the cost of it.” By the same token, Karp complains that “People who innovate are fleeing” the industry because of regulations that supposedly throttle start-ups before they can get off the ground. Securities and Exchange Commission (SEC) Chair Gary Gensler has been a major thorn in cryptocurrency’s side. According to one crypto observer quoted by the Financial Times, big crypto investors “must get him out. They will spend whatever it takes to accomplish that.”
Tech for Trump may garner headlines, but FIRE (finance, insurance, real estate) is still first. As Open Secrets puts it, the “financial sector is far and away the largest source of campaign contributions to federal candidates and parties,” and they are far and away the largest source of campaign contributions to Trump 2024. As of July, donations to Trump from the securities/ investment industry reached nearly $100 million, with a single donor, the investor and banking family heir Timothy Mellon, accounting for an astounding $75 million (Mellon has also donated $25 million to Robert F. Kennedy Jr.’s independent campaign). Oil and gas is the next industry on the list, at $13.5 million. Other top industries supporting Trump include (using Open Secrets’ industry categories): miscellaneous manufacturing and distributing ($12.6 million), air transport ($10.5 million), and real estate ($10.4 million). Trump is also attracting enormous donations from individual donors who list their occupation as “retired” ($92.5 million) as well as from Republican/conservative ideological organizations ($41.2 million) of various kinds. These figures chime with what we know about today’s Republican Party and its core bases of support: ideological conservatives, older voters, extractive and manufacturing industries, and the very upper reaches of the top 1%. Nearly half of Trump’s donations in dollar terms have come from just four states: Wyoming (19.6%), Florida (11.3%), Texas (9.9%), and California (7.5%).
President Joe Biden has dropped out of the race, but most of the data we have so far reflects contributions to his campaign. Vice President Kamala Harris will inherit his donor base. Donations to the Democrats also reflect major business interests, including the politically ubiquitous securities/investment industry, but Democratic money is concentrated in a different set of industries and sectors. Moreover, unlike Trump and other GOP candidates, Biden and Democratic candidates generally receive significant contributions from labor unions. Teamsters President Sean O’Brien may have had a prime-time speaking slot at the Republican National Convention, but organized labor remains firmly entrenched in the Democratic coalition.
The weeks-long Sturm und Drang over whether Biden should drop out of the race shed light on Democratic big-money networks. Many of the mega-donors who were most vocally committed to pushing Biden out were from Hollywood, entertainment, and media. George Clooney was the most prominent Tinseltown figure to demand a change at the top of the ticket, but many rich and powerful people without household names were in on the donor strike too. According to one New York Times report, a big-time Hollywood talent agent told Senator Martin Heinrich of New Mexico: “If you don’t publicly call for Biden to step aside, you are not getting a dime from me.” As of July, the communications/electronics sector, which includes TV, movies, music, and telecommunications companies, accounted for the second-largest source of business donations ($21.1 million) to Biden 2024 after FIRE ($44.5 million). Other leading industries donating to the Biden campaign were lawyers/law firms ($12.7 million), education ($9.1 million), and health professionals ($6.3 million). The two largest sources of donations to Biden’s campaign as of July were Democratic/liberal ideological groups ($45 million), followed by retirees ($37.2 million). Taken together, labor groups had given about $10.6 million, which outpaced some business sectors but lagged far behind the leading business and ideological groups.
Despite the headlines, Silicon Valley capital remains largely committed to supporting Democrats. Two of the Biden-Harris campaign’s top three largest contributors, Greylock Partners and Sequoia Capital, are Silicon Valley investment firms. Reid Hoffman, a partner at Greylock and a major Democratic donor, has made no secret of his disdain for Federal Trade Commission (FTC) Chair Lina Khan, who has made the mistake of acting on her office’s antitrust mandate. Hoffman recently took to CNN to opine that “antitrust is fine. Waging war is not.” Khan’s fate under a potential Harris administration remains to be seen, and she has strong support among Democrats who praise her for taking a tough anti-monopoly line. The intra-Democratic wrangling for influence over Harris’s personnel decisions, as well as the wide array of industries and interests in its donor base, coincide with what we know about today’s Democratic Party and its core bases of support: ideological liberals, media and tech industries, legal, educational, and health care professionals, and organized labor. Like Trump and the Republicans, the Democratic donor base is highly concentrated in a few states that reflect the geographical distribution of their coalition. Nearly half of Biden’s donations in dollar terms came from just three states—California (25.6%), New York (9.7%), Illinois (5.5%), and the District of Columbia (7.8%).
Golden Rule
It’s fair to ask where all this money actually goes, and what difference it makes in terms of electoral outcomes. Readers will not be surprised that the lion’s share of it goes to media and advertising. The Biden-Harris campaign spent heavily on the advertising air war. As of July, a whopping 60% of its total spending, nearly $65 million, was on media and advertising. Despite this tidal wave of advertising, President Biden’s standing in the polls deteriorated to the point where he was pushed out of the race. Moreover, this spending frittered away the Biden campaign’s fundraising advantage over Trump, who raised enough money this year to erase the Democrats’ cash advantage (early evidence, however, seems to show that Biden’s decision to step aside has unleashed Democrats’ enthusiasm as well as their pocketbooks. The Harris campaign raised a staggering $310 million in July alone, easily topping Trump’s $138.7 million haul). The Trump campaign’s spending patterns have been more balanced so far. Its leading expenditure is also media, but this accounts for just a quarter of its total spending. It has spent a nearly equal amount on administrative costs, which includes spending on event planning for Trump’s signature mass rallies. As of July, a single event planning vendor, Event Strategies Inc, had received 64 payments from the Trump campaign totaling $8.1 million.
Political spending constitutes an entire economy of its own, with partisan-aligned firms providing a range of very lucrative services to candidates up and down the ballot. The total cost of the last four federal election cycles topped $40 billion, a figure that does not even include spending on thousands of state and local races. Since the election results are a foregone conclusion in most states, much of that spending is concentrated in a handful of places to move very small margins. Trump’s 2016 win depended on 80,000 votes in Michigan, Pennsylvania, and Wisconsin, while Biden’s 2020 win turned on a 44,000-vote margin in Georgia, Arizona, and Wisconsin.
In his classic 1960 book The Semisovereign People, the political scientist E. E. Schattschneider put his finger on an essential truth of U.S. politics: “The flaw in the pluralist heaven is that the heavenly chorus sings with a strong upper-class accent.” All of us have the right to contribute to candidates and campaigns, but rather few of us have the capacity to do so on a scale that ensures our interests will be represented in the political system. Forty percent of all political donations come from an extremely rarified set: the top 1% of the top 1%. This is not to say that there are no meaningful differences between the two parties, because there are. To the extent that working-class people find political representation for their class interests, it is through the Democratic Party and its enduring alliance with organized labor. But judging by the state of U.S. society, it’s clear that our political system observes its own version of the golden rule: Who has the gold, makes the rules.
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