Money Buys Political Friends in Unexpected Places

(Bloomberg Opinion) -- It looks like money doesn’t just talk in politics — it also comments. But you don’t have to take my word for it: New economics research sheds light on the subject.

One paper out this month, by Marianne Bertrand, Matilde Bombardini, Raymond Fisman, Brad Hackinen, and Francesco Trebbi, showed how corporations often amplify their influence through unaffiliated nonprofits.

The authors looked at the process by which the government solicits public comments on proposed laws and regulations. They found that when a company donates to a nonprofit, that nonprofit is likely to comment on the same issues the company comments on — and the nonprofit’s comments tend to line up with those of the donor’s. There’s even some evidence of an effect on outcomes: Final legal rules appear more likely to reflect the views of the company when a nonprofit that received a donation also comments.

This isn’t just about politically oriented nonprofits like the Center for American Progress or the Heritage Foundation. Nor is it evidence of long-term alignment between corporations and the recipients of their largess — the nonprofits’ comments tend to follow close on the heels of receiving a contribution. And the federal rules nonprofits comment on sometimes seem unrelated to those nonprofits’ central missions.

Of course, it’s possible that corporate and nonprofit interests happen to align just when rules go up for comment, and this alignment explains the concurrent donations. But it would require some pretty extraordinary serend­­ipity for that to occur over and over again; the more likely explanation is that corporate money and influence is shaping, if not driving, the nonprofits’ comments.

Speaking of outcomes unlikely to be driven by serendipity: In another new paper, Ethan Kaplan, Jörg Spenkuch, and Haishan Yuan found that members of Congress are “more likely to adopt the positions of special-interest donors” in roll-call votes right after natural disasters.

This doesn’t seem to be caused by special interests valiantly supporting disaster-relief efforts. Rather, the likely culprit is opportunistic response to distraction; the evening news, for example, substantially reduces coverage of political events in the aftermath of disaster, so it’s harder for constituents to monitor their representatives’ behavior. And what better time is there to vote in favor of unpopular legislation than when no one is watching?

All of this is disheartening, reinforcing our low expectations of special-interest politics. But what’s to be done?

One fix for the first problem would be to require nonprofits to disclose relevant corporate ties when commenting on legislation. But getting there presents something of a Catch-22: Corporations are likely to oppose such a disclosure requirement — and nonprofits probably would, too, since it might reduce corporations’ incentives to provide them with financial support. So if a disclosure rule goes up for comment, we surely should expect lots of negative reviews.

Remedying the second problem may be even harder — there’s always a time when people are distracted, whether it’s by a hurricane or a royal wedding. There is a crucial role for the news media here, which should make a point of doing more to show how individuals vote when the cameras aren’t on them. Of course, then it’s still on the rest of us to hold our leaders accountable — something that doesn’t always happen now.

Lawyer Victoria Peng, for example, has recounted how recipients of AT&T grants that expressed support forthe AT&T/T-Mobile merger included a homeless shelter, a special-needs employment agency, and the Gay & Lesbian Alliance Against Defamation (GLAAD) — though it’s not obvious why those nonprofits would have a direct interest in wireless-communication industry consolidation.

Spenkuch and I have co-authored in the past, on a research paper unrelated to the topics discussed here.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Scott Duke Kominers is the MBA Class of 1960 Associate Professor of Business Administration at Harvard Business School, and a faculty affiliate of the Harvard Department of Economics. Previously, he was a junior fellow at the Harvard Society of Fellows and the inaugural research scholar at the Becker Friedman Institute for Research in Economics at the University of Chicago.

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