The impact of legislator attributes on interest

The Impact of Legislator Attributes on
Interest-Group Campaign Contributions*
KEVIN B. GRIER
George Mason University, Fairfax, VA 22030
MICHAEL C. MUNGER
University of Texas, Austin, TX 78712
Legislators possess political assets that economic interest groups may find valuable in pursuing their goals. This paper examines the effect these legislative assets
have on the campaign contributions made by two large and easily identifiable
interest groups: corporations and labor unions. Committee assignment, voting
record, and electoral security are significant predictors of both corporate and
union contributions to House incumbents, while party affiliation and years in
office also influence the behavior of union political action committees.
1.
Introduction
The Federal Election Campaign Act (FECA), enacted in 1971 and amended in
1974and 1976, represents a substantial change in the way that economic interest
groups participate in the political process. From 1943 to 1971, both corporations
and unions were legally proscribed from making contributions to political candidates. Now, these contributions, though regulated, limited, and a matter of public record, are an important source of funds for politicians.
This paper focuses on the activities of corporate and union Political Action
Committees (PACs) over the period 1978 to 1982. We present and test a model that
predicts interest-group contributions based on observable qualities of legislators,
finding that these PACs contribute disproportionately to legislators who have a
comparative advantage in producing the services desired. This paper reviews the
history of corporate and union campaign contribution laws (Section II); summarizes previous work on this issue (Section III); outlines our model of the importance of legislative assets in obtaining interest-group contributions (Section IV);
explains the nature of the data and statistical procedures (Section V); and presents
the econometric results (Section VI).
*We thank James Bennett, Mark Crain, Art Denzau, Bob Tollison, and Barry Weingast for comments
and suggestions of fundamental importance in the development of this paper. Of course, they bear no
responsibility for any shortcomings of the final result. The research in this paper was supported by the
Sarah Scaife Foundation and the Washington University Committee on Political Economy.
JOURNAL OF LABOR RESEARCH
Volume VII, No.4
Fall 1986
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JOURNAL OF LABOR RESEARCH
II. History of Corporate and Union Contribution Laws
The first attempt to regulate corporate political activity, the Tillman Act (1907),
grew out of a concern that corporate funds could unduly influence elections. The
act, which prohibited monetary contributions, was extended by the Corrupt
Practices Act (1925) to disallow contributing anything of value. During this
period, labor unions were allowed to make direct contributions, an imbalance
that was reduced by the Hatch Act (1940) which placed a $5,000 limit on contributions. The Smith-Connaly Act (1943) and the Taft-Hartley Act (1947) equalized the
treatment of unions and corporations by outlawing contributions by either group.
This status quo was incorporated in the Federal Election Campaign Act
(FECA) of 1971, which regulated contributions by individuals and non-affiliated
clubs and proscribed all corporate and union contributions. The Supreme Court
ruling in Pipefitters Local #52 vs. United States in 1972 opened the door for direct
interest group contributions. The Pipefitters created a campaign fund and were
charged with violating Taft-Hartley as amended by FECA. The Court ruled,
however, that the fund complied with the statutes because it was strictly separate
from other union funds for accounting purposes and contributions were not a
condition of union membership. This decision marked the inception of the
Political Action Committee (PAC) as a vehicle for interest-group contributions to
political candidates.
In 1974, FECA was amended to incorporate the Court's decision and to
impose a significant set of regulations on business and union PACs. The Federal
Election Commission (FEC) was created and criminal enforcement provisions
were strengthened by increasing fines for violations and closing loopholes by
redefining illegal activity. Contribution limits were also imposed: $1,000 by persons per candidate per election and $5,000 by multicandidate committees (i.e.,
PACs). Despite further amendment in 1976, including the elimination oflimits on
contributions by individuals, this is still basically the regulatory environment for
union and corporate contributors. I
Both the number of PACs and the amount of PAC money in elections have
been increasing. Table 1 reports the number of corporate and union PACs from
1978 to 1982, while Table 2 shows the level of contributions by these groups to
House incumbents running for re-election over the same time period. Union contributions increase 78 percent from 1978 to 1982, but the explosive growth in corporate PAC contributions is more notable. Corporate contributions have grown
by over 300 percent and have become larger than the union figures, both in total
and average contributions. Individual union PACs are still larger than their corporate counterparts, with average total contributions per PAC being $27,400 for
union and $11,100 for corporations in 1982.
'The 1976 amendments were designed to incorporate another Supreme Court ruling; Buckley vs.
Valeo struck down limits on individual contributions by equating political spending with freedom of
speech. The interest group limits were not changed.
KEVIN B. GRIER and MICHAEL C. MUNGER
351
Table 1
The Growth of Political
Action Committees, 1978-1982"
Union
Corporate
201
224
276
682
1,062
1,102
1978
1980
1982
aOata are the number of PACs registered with the Federal
Election Commission in each election cycle. Not all PACs
exist in all election cycles.
Table 2
Patterns of PAC Contributions"
A: TOTAL PAC CONTRIBUTIONS TO HOUSE INCUMBENTS
Union
Corporate
1978
$4,390,386
$ 3,623,686
1980
6,673,205
8,195,495
1982
7,566,439
12,271,746
B: AVERAGE NON-ZERO CONTRIBUTIONS TO HOUSE INCUMBENTS
Union
Corporate
1978
$13,180
$10,290
1980
20,040
21,910
1982
22,860
34,660
aAll figures are in 1982dollars. Data are from the FEC, as reported by corporate and labor
PACs on FEC form A, schedule A, line 15-17, as required by law.
III.
Other Research
The role of interest-group campaign contributions to political candidates has
been considered by numerous authors in a variety of contexts. Theoretical papers
by Barro (1973), Welch (1974), Ben-Zion and Eytan (1974), Peltzman (1976), and
Becker (1983) treat contributions as one of the many transactions through which
markets for policy clear.
Barro sets out the agency problems that voters face in controlling elected representatives and points out that these problems increase the possibility that inter-
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JOURNAL OF LABOR RESEARCH
est-group contributions will affect policy outcomes. Welch seeks to distinguish
contributions made for the purpose of affecting election outcomes from those
made as payment to politicians for services rendered. Ben-Zion and Eytan model
the connection between economic and political power using a vote-maximization
objective for candidates and allowing interest groups to make contributions in an
effort to influence policy.
There has been relatively little empirical testing of these theoretical propositions. Abrams and Settle (1978) examine the implications of restricting access to
campaign funds. Crain and Tollison (1976) and Crain, Deaton, and Tollison
(1977)attempt to measure the value of a legislative seat by examining factors that
determine how much candidates will spend to obtain it. Jacobson (1980) and
Welch (1980) examine the effect of campaign spending on election outcomes and
policy decisions, respectively. None of these papers addresses the question posed
in this paper: What determines the contribution patterns of corporate and union
PACs to incumbent legislators? The empirical work most similar to ours is Kau
and Rubin (1982), who compare PAC contributions in the 1972and 1978elections
and Poole and Romer (1984), who study the pattern of interest-group PAC contributions in the 1980 election.
IV.
Legislative Assets and Campaign Contributions
Our model is based on Denzau and Munger's (1986)theory of the interaction between voters, interest groups, and legislators. They assume that legislators maximize the probability of re-election, where that probability is a function of dollars,
or campaign contributions, and voter reaction to legislative performance. We
focus on the attributes that make a legislator attractive to an interest group.
The cornerstone of this model is the recognition that legislators are not identical. Each is elected from a distinct geographic district with voters whose preferences
may vary widely across districts. Each legislator also has different endowments of
ability and experience and a different position in the legislative committee system.
Thus, the cost of providing services to interest groups will vary across legislators,
and interest groups can be expected to employ the legislator or group of legislators that are the least-cost suppliers of the desired policy.
The contributions received from an interest group depend on the comparative advantage the legislator has in performing the services the group desires.
Each legislator will specialize in activities where his effort is the most productive.
Attempts to exchange interest-group services for contributions in an area of comparative disadvantage will fail because the interest group can purchase the service
elsewhere at lower cost. The following attributes or "legislative assets" will help
determine which legislators will be the low-cost suppliers of a specific service and
will thus receive disproportionate contributions from a specific interest group.
Committee assignments. Committees are the basic unit of legislative power
in the U.S. House of Representatives. Policymaking in the House is divided into
KEVIN B. GRIER and MICHAEL C. MUNGER
353
separate, though sometimes overlapping, jurisdictions: the 22 standing committees. Each committee has effective veto power over legislation within its jurisdiction (Denzau and Mackay, 1983). The committee can always protect the status
quo by simply refusing to report out new legislation. It also controls the writing
and progress of new legislation in its area. Even after a bill is passed and is being
administered or regulated by the bureaucracy, the committee with jurisdiction
has substantial power to influence the administrative agency through hearings,
agency appointments, and the ability to control future appropriations to the
agency (Weingast and Moran, 1983; Weingast, 1984; and Grier, 1985).
The committee seat that a legislator' 'owns" giveshim a comparative advantage over politicians not on that committee in influencing policies in the committee's jurisdiction. This implies that legislators on the committee with jurisdiction
over an area of policy that concerns an interest group willhave a cost advantage in
producing services and that the group will tend to purchase the desired service
from these low-cost suppliers through larger campaign contributions.
Voter preferences. Denzau and Munger demonstrate that an important
determinant of the cost of providing interest-group service is the reaction of the
legislator's constituency. While interest-group contributions produce votes indirectly, if voters disapprove of the action the legislator may lose more votes
directly than can be gained through use of the campaign funds. Politicians with a
pro-union constituency would charge a very high price to produce corporate
interest-group services, regardless of productivity, because it will be costly in
terms oflost votes.' On the assumption that legislators in some broad sense "vote
their constituencies," the legislator's voting record is a good proxy for constituent preferences.
Electoral security. The effort that a legislator willoffer for a given contribution should depend on how badly money is needed to finance his campaign. That is,
if a legislator expects a close race and needs extra money to defeat his opponent,
he will be motivated to solicit contributions by producing interest-group services
simply because the money is more valuable to him than to an unopposed or secure
incumbent.
Tenure. Years in office may serve as a proxy for a variety of legislative
assets, such as procedural expertise and collegial respect. Tenure also helps legislators advance in the committee hierarchy, but in the House the link between
tenure and committee leadership is weakening.'
'We take voting as a determinant of contributions, rather than the reverse hypothesis that offers of
money determine votes, based on the view that politicians are the constrained agents of their constituents in the final analysis and on the evidence that the voting behavior of incumbent politicians is relatively stable. See Glazer and Robbins (1985) and Dougan and Munger (1986).
'For example, Les Aspin and Pat Gray are non-senior chairs of the Armed Services and Budget committees. The possibility of taking the chairmanship without being the senior majority member has existed since 1975, when the House rules were changed to de-emphasize seniority.
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Party. A legislator's party affiliation may carry information about his voters'
preferences and his access to the leadership that affects legislative productivity.
V. Data and Model Selection
Our data consist of three election cycle (1978-1982) cross-sections of PAC campaign contributions. The FEC classifies PACs into five groups: labor, corporate,
trade/membership/health, cooperatives and non-connected. Here we analyze
the contributions of corporate and union PACs to U.S. representatives running
for re-election.'
In the corporate PAC contributions data, 46 incumbents did not receive any
money in at least one of the three elections. The average per-election contribution
by all corporate PACs to incumbents is $21,412, and the maximum is a little over
$200,000 (received in 1982by John Rousselot, R-Calif.). In the union data, there
are 176incumbents who receive no money in one of the elections; the average contribution is $16,501; and the maximum contribution is $134,060 (in 1982to James
Howard, D-N.J.).
The type of data available to test our model is necessarily truncated at zero.
An incumbent can receive anywhere from zero to an infinite amount of contributions, but explicit negative contributions do not occur. This mass point at zero in
the distribution of PAC contributions biases ordinary least squares estimates. Yet,
we have much more information than purely qualitative estimation procedures,
such as Logit or Probit, use. The best estimation procedure in this case is Tobit.
This method estimates a non-linear, maximum-likelihood probability model and
then uses the first partial derivatives of the likelihood function to generate linear
regression coefficients that can be used to predict levels of contributions. For
detailed discussions of the problems of truncated data and the properties of Tobit
estimation, see Tobin (1958), Ameniya (1973), and Heckman (1976).
Our theory assumes that interest-group contributions are purchases of legislative services and implies that groups will seek out the low-cost suppliers of such
services. There are three major elements of the cost of special-interest service that
we test. First is the institutional cost of providing the service. Legislative jurisdictions are apportioned across committees; and the major substantive committee
for union interests is Education and Labor, while the prime business committee is
Energy and Commerce.' Our theory predicts that members of these committees
are the most cost-effective in obtaining services for union and business groups
respectively, and thus should, ceteris paribus, receive a greater amount of campaign funds from their respective demanders. As a secondary proposition, mem-
·We exclude the FEe category of corporations with no stock from the corporate data set.
'If the same legislators served on both committees, we would have problems separating the effects. In
the House, most members have only one substantive committee assignment. and over our 1978-1982
sample there is no membership overlap.
KEVIN B. GRIER and MICHAEL C. MUNGER
355
bers of the business (labor) committee should receive less funding from union
(corporate) PACs. We test these propositions by including dummy variables that
indicate membership on a substantive committee (EDLAB and ENCOM).
Second, there is the cost of disenchanting constituents by servicing special
interests. Legislators who have a reputation of being conservative (pro-business)
will not surprise constituents by supporting organized business interests. Indeed,
this behavior will broadly reflect the economic or ideological interests of the
voters that elected him. The same argument applies to liberal legislators and their
constituency. Legislators with conservative voting records should get more corporate money; liberal voters, extra union funds. The Chamber of Commerce Vote
Score (CHAMBER VOTE), where pure pro-business is 100and anti-business is 0,
is used to test this hypothesis.
The third cost component is the legislator's marginal disutility of effort.
Serving interest groups is hard work, and legislators who have "safe" seats will
need fewer campaign funds and be less willing to supply special-interest service at
low cost. We use a measure. of the margin of victory in the incumbent's last election (% VOTEE - 1) to test for this effect.
To complete the empirical model, we include two other variables that are
often considered important and may proxy for cost parameters in our theory: a
dummy variable for party affiliation (DEMOCRAT = 1 if legislator is a democrat, otherwise = 9) and a measure of the length of service of each incumbent
(TENURE).
Tobit regressions of this model on corporate and union data sets are presented in Table 3 and Table 4. To allow for the effects of inflation, the equations
are estimated using contribution figures in 1982dollars. We examine the stability
of the slope coefficients over time by estimating a separate regression for each
cross-section and then testing the hypothesis that the coefficients are equal. The
null hypothesis of coefficient equality is rejected only in the case of Chamber of
Commerce Vote Scores." The reported regressions constrain all coefficients but
Chamber vote and the intercept to be constant across election cycles.
VI.
Corporate and Union Regression Results
Table 3 contains the estimates of our model on the corporate data set. In general,
our theory is not in discord with the empirical results. Using the linearized coefficients, the R 2 between actual and predicted corporate contribution levels is .31.
'The particular test involves comparing the maximized values of the unrestricted and restricted
likelihood function, called the likelihood ratio test. Specifically, - 2*log (ratio of the likelihood functions) is distributed chi-square with k degrees of freedom, where k is the number of restrictions. We
also put union and corporate observations into one large data set (n = 2267) and tested H.: union
slope coefficients = the corresponding corporate coefficients. This hypothesis is resoundingly rejected at any significance level chosen.
JOURNAL OF LABOR RESEARCH
356
Party and years in office (DEMOCRA T and TENURE) are not significant predictors of the likelihood of an incumbent receiving money, but all the other
regressors are significant. The committee variables perform exactly as expected: a
seat on Education and Labor greatly reduces corporate contributions ( - $6,6(0)
while Energy and Commerce is worth about an extra $6,700.
Reputation is also very important. CHAMBER VOTE is positive and significant in each year, with the significance level rising each election cycle. In 1978, 10
additional Chamber of Commerce Vote points were worth $1,350; in 1980,
$4,730; in 1982, $4,070. Taking an extreme pro-business position (a 100percent
Table 3
Predicting Corporate Contributions to House Incumbents, 1978-1982°
Tobit
Coefficient
Variable
TENURE
0.005
Regression
Coefficient
95
(1.12)
%VOTEE _ 1
-0.013
(6.24)
-264
DEMOCRAT
-0.115
(1.41)
-2,384
CHAMBER
VOTE-78
0.007
(2.89)
135
CHAMBER
VOTE-80
0.023
(4.38)
473
CHAMBER
VOTE-82
0.019
(8.30)
407
EDLAB
-0.319
(2.93)
-6,640
ENCOM
0.325
(3.11)
6,743
CONSTANT
1.037
(5.22)
21,526
DUMMY-80
-0.638
(1.79)
-13,247
DUMMY-82
0.449
(2.77)
9,316
Log of Likelihood Fn: -12360.5
Non-Limit Observations: 1084
Limit Observations: 46
Durbin-Watson: 1.83
Pseudo R 2 : .310
p(Y> 0 I Average X's): .84
"Data are in 1982 dollars. DUMMYSO and DUMMYS2 are time-series intercept shifts. Numbers in
parentheses are asymptotic T-ratios.
KEVIN B. GRIER and MICHAEL C. MUNGER
357
Table 4
Predicting Union Contributions to House Incumbents, 1978-1982°
Tobit
Coefficient
Regression
Coefficient
TENURE
-0.009
(2.36)
-176
%VOTEE _ ,
-0.030
(13.88)
-545
DEMOCRAT
0.983
(11.46)
17,700
CHAMBER
VOTE-78
-0.009
(4.16)
-177
CHAMBER
VOTE-80
-0.030
(5.77)
-544
CHAMBER
VOTE-82
-0.030
(12.34)
-550
EDLAB
0.446
(4.04)
7,999
ENCOM
0.229
(2.16)
4,126
CONSTANT
2.442
(11.62)
43,824
DUMMY-80
1.940
(5.41)
34,824
DUMMY-82
1.750
(10.49)
31,585
Variable
Log of Likelihood Fn: -10896.9
Non-Limit Observations: 961
Limit Observations: 176
Durbin-Watson: 1.86
Pseudo R': .521
P(Y> 0 I AverageX's): .78
aData are in 1982 dollars. DUMMYSO and DUMMYS2 are time-series intercept shifts. Numbers in
parentheses are asymptotic T-ratios.
voting record) generates $40,700 in extra corporate contributions as of 1982. The
ease of victory in the previous election is a significant negative influence on corporate PAC contributions to incumbents, reflecting our hypothesis that secure incumbents provide fewer interest-group services because their marginal valuation
of additional campaign funds is lower than that of an incumbent in a tight race.
Consider now the union PAC contribution equation in Table 4, where all the
regressors are statistically significant. Unlike corporations, union PACs treat
party affiliation as an important signal in distributing money. Of the 176incumbents who received no union contributions in an election cycle, 131 of them were
JOURNAL OF LABOR RESEARCH
358
Republicans. Also, the coefficient on DEMOCRATin the union equation implies
that, ceteris paribus, being a Democrat generates around $17,000 in extra union
contributions. The effect of committee assignment on union contributions is also
somewhat at variance with the corporate result. A seat on the main jurisdictional
committee (EDLAB) does generate extra campaign revenue of around $8,000,
but members of the Energy and Commerce committee also receive about half that
amount in extra union PAC funds.
As predicted, the effect of the incumbent's voting record is the mirror image
of the corporate equation. The negative effect of pro-business voting increases in
size and significance each election. By 1982, each 10points of Chamber Vote score
cost an incumbent $5,500 in union contributions.
The incumbent's percentage of the vote in the previous election also significantly reduces union contributions. Also, years in office (TENURE) has a small
negative and significant effect on union PAC contributions. The linear R 2 of this
equation is .52. 7
We experimented with several other hypotheses in unreported regressions.
First, the models were checked for possible interaction effects between party, voting record, and committee assignment and tenure and committee assignment with
no significant effects uncovered. Second, we included dummy variables for the
chairmen of the Education and Labor and Energy and Commerce committees.
These turned out to be negative, but insignificant. Third, dummies for all other
Table 5
Data Summary
Variable
Mean
Std. Deviation
Min
Max
Total Union Contributions
Total Corporate Contributions
Tenure
% VoteE-t
Chamber of Commerce Vote
16,501
21,412
8.07
68.61
56.0
22,560
24,215
7.35
14.50
23.5
0
0
0
38
0
134,060
209,770
41
99
99
'Our results on the effects of party and % Vote.-t on corporate and union PAC contributions, confirm
and extend the Poole and Romer study of the 1980election data. Poole and Romer also use a measure
of conservatism they generate with a "multidimensional unfolding" technique that has the same
qualitative effect as our CHAMBER VOTE variable. They model seniority non-linearity and find it
significant for corporations, but insignificant for unions, which is the opposite of our findings with a
linear variable and the elections before and after 1980included in the sample. Poole and Romer do not
have a model that predicts the sign or significance of their regressors.
KEVIN B. GRIER and MICHAEL C. MUNGER
359
committee assignments were included and all, with the exception of Foreign Affairs, were insignificant.' A seat on Foreign Affairs has a small negative effect on
contributions by both types of PACs. We have no explanation for this effect, but
it does not influence the size or significance of our reported results.
VII.
Conclusions and Extensions
Our argument assumes that special interest groups are interested in obtaining
cost-effective legislative services. From this we predict that specific legislator
characteristics will attract contributions from some, but not necessarily all, interest groups. We test the model by predicting corporate and union PAC contributions to House incumbents as functions of committee assignment, voting record,
and electoral security. The available data are explained relatively well and clearly
demonstrate that the two interest groups purchase services from different types of
legislators. Our results imply that having a seat on Energy and Commerce and a
voting record two standard deviations above the mean produce about $25,500 in
additional corporate PAC contributions while a seat on Education and Labor and
a voting record two standard deviations below the mean garners almost $34,000
in extra union contributions compared to the amount received by an "average"
legislator. Specific legislative assets clearly have different values to different
interest groups.'
An important assumption made in this study is that corporations and unions
are monolithic interest groups. That is, we assume that a certain committee
assignment has the same value to all unions or corporations. The significance of
the results indicate that this assumption may not be too extreme, but it would be
valuable to disaggregate PAC contributions by line of business and test for intragroup differences in contributions. Another interesting test of our theory would
be to apply the model to predicting when and how much PACs will contribute to
challengers in House elections.
'Poole and Romer include all 22 committees as dummy variables and note that some committees are
significant with no expectation if this result is good, bad, or even interesting. Our theory predicts only
certain committees should be significant, and in the empirical tests, they, and only they, are.
'By average, we mean a Democrat with the average vote percentage and voting record, not on the committees of interest. Evaluating our linearized coefficients at the means of the continuous independent
variables, our model predicts corporate contributions to the "average incumbent" to be $33,500,
while union contributions to this individual are predicted to be $25,000.
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JOURNAL OF LABOR RESEARCH
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