A new look at political contributions

Big business and big unions pour record-breaking amounts of money into the political process. Both parties benefit – but the country doesn't.

By , Guest blogger

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    It's not a partisan issue: money floods into both sides of the aisle. It's an American issue.
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The Wall Street Journal reports that the biggest campaign spender of 2010 is a public sector union, the American Federation of State, County and Municipal Employees, which lavished $87.5 million on helping Democrats. This single union outspent the US Chamber of Commerce, which came second with $75 million.

Reading the WSJ article by Brody Mullins and John D. McKinnon, I thought that AFSCME is giving taxpayer money to politicians who will help it further pick my pocket. Whereas had I confined myself to reading the New York Times’ front-page piece on the same topic, I would have had no such concern, because there is no mention of AFSCME. The NYT campaign finance story focuses entirely on the US Chamber of Commerce and says not a word about the public union.

Now, you can tote up political donations in different ways and the amounts change all the time. Nevertheless, the NYT closely follows a script propagated by the Obama White House and Democratic party, according to which business interests dominate political spending and have a corrupting influence on Republicans.

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That storyline is false on two counts. Democrats are deep into taking money from and fostering special interests like unions. But there is a more fundamental hypocrisy.

Organized groups seek political influence to redistribute income in their own favor—called rent seeking in public choice economics. Thus AFSCME seeks a greater share of public budgets in the shape of higher pay and benefits for its membership. The growth of government creates more opportunity for rent seeking. By expanding government activity every which way, the Obama administration has created greater room for special interests while protesting that business interests are the problem.

Groups that have costs imposed on them by government fiat will necessarily try to protect themselves— that is, they will spend resources on rent avoidance. Gordon Tullock, a founder of public choice with James Buchanan, predicted more than 30 years ago that as there is more government activity, more money will be spent on protection. Members of the Chamber of Commerce are spending to protect themselves.

For society at large, it does not really matter which party gets how much largess from a certain rent seeker or certain rent avoider. It’s all a waste anyway. Resources are wasted on fights to change the way the pie is sliced instead of spent on making more pie. The only way to shrink rent seeking and avoidance is to shrink the government.

On another subject, the WSJ analysis provides vivid evidence as to why infrastructure projects don’t get much money even as government spending balloons. AFSCME controls politicians and hence state and city budgets, with the result that tax revenues increasingly disappear in the black hole of union entitlements. There isn’t a whole lot left to do other things, like repair roads.

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