Money in Politics, the Economy of America--and Wealth For the Future

 Seventh in a series

There’s money in politics, and there’s money in America—and there’s a lot more of the latter.  And then there’s all the money in the future, of which there’s really a lot more.  So politicians—and those who wish to invest according to political trends—should pay most attention to those political changes that will vector out to big gains in the future.   And that means getting the voters, too, to think about what’s best for them, with longer time horizons.  Let’s dive in.  

Money in Politics 

According to Open Secrets, Americans spent $14.4 billion on the 2020 elections.   That’s for sure a lot of money, and yet to this election participant and observer of more than four decades, the dollar total seems low.  In fact, Open Secrets only counts direct expenditures by Presidential and Congressional candidates.  So what of all the governors and state legislators?  What of all the “soft money” and “dark money”?  And what of the in-kind value of campaign efforts, be it handing out leaflets, calling in to a talk radio station, or posting on Facebook?   Obviously to assign values to all those undertakings would be maddeningly difficult, and the numbers still would be, at best, guesstimates.   But if we had to, let’s come up with a dollar total: let’s double that $14.4 billion and then round it off, upward, to $30 billion.  

Okay, so $30 billion is a big number, and yet here’s something interesting: relative to the economy, it’s still a tiny number.  Consider: The GDP of the U.S. in 2020 totaled about $21 trillion, and so $30 billion is 0.14 percent.  For clarity, that’s one-seventh of one percent.  To put the money-in-politics number a different way, there are more than 250 publicly traded companies in the U.S. boasting a market capitalization greater than $30 billion.   

Once again we can see: while the amount of “money in politics” might seem big, in the scheme of things, it’s rather small.  And that’s a wee bit strange, as the political system exerts much leverage on the U.S. economy—$21 trillion in 2020, and $26 trillion today—as well as the world economy, which, in total, is roughly quadruple the U.S.  Moreover, the world’s total wealth is all the grander; McKinsey & Co. estimates the planetary total to be as high as $1.53 quadrillion.  

Yet if we focus on the nearer term, we might ask ourselves: How much effect has Joe Biden’s victory had on various sectors within the U.S. economy.   For instance, the green sector of the economy, including its ultra-capitalist cutting edge.  How much more is that sector worth—all those solar panels and windmills, all those EV makers, all those software designers rejiggering the power grid, all those consultants and advisers?  We might also venture to ask: What would the sector be worth if Donald Trump had been re-elected?  Biden’s “Inflation Reduction Act” was a sort of Green New Deal; Trump would never have touched that.  We could go on and on, itemizing the economic impact of every choice Biden made that Trump wouldn’t have made—from abortion to education policy to defense spending—and see sectors that have won, or lost. 

So if the economic impact of politics is so big, why are campaign donations so (relatively) small?  Why haven’t investors upped the ante of campaign spending for the sake of their investments?  We can cite five possible answers: 

First, there are restrictions on campaign donations, in terms of direct contributions to candidates, although, of course, soft money and dark money are pretty much designed to get around those limits.

Second, there’s a certain reticence, even disinterest, about bidding up politico-economic outcomes (not total reticence or disinterest, that’s for sure, but some).

Third, the investor class doesn’t see a pure play on campaign donations.  That is, it’s fine to say that giving to Democrats will boost green energy, but Democratic victories will also bring all the other Democratic policies, from tax increases to more spending to wokeness.  Does every investor/donor want all of that?  Of course not.  A similar critique could be made of the Republicans.   Especially these days, they’re hardly a pure play investor party.  If the GOP wins, you may see tax cuts—we saw a big one in 2017, thanks to party-line votes in the House and Senate—and yet you’ll also see Trump & MAGA, gun de-control, and abortion restrictions.  On a lot of social issues, investors and big donors tend to be more secular, “country club,” or even outright liberal or left, and so they don’t want to fund conservative and right-wing social action that could even extend to the richest sector of the U.S. economy: Big Tech. 

Fourth, we can elaborate on this point about the parties, recalling the previous installment on the unaccountability of politics.  Today the two major parties, Democratic and Republican, have become so barnacled and baroque that they are incapable of delivering a “pure play” on an investment agenda.  (And the other parties are probably no better; they’re just minor.)  In homage to investment legend Peter Lynch, who critiqued corporate “diworseification,” as a play on “diversification,” in his 1989 book One Up on Wall Street, we can apply that concept to politics.  We can say that the parties suffer from revealed diworseification; that is, we’ve discovered that they have their fingers in so many pies that they no longer act coherently or predictably on key polices.  In some sense, this is at should be; the American people are, after all, diverse—which means they are deeply divided. Reflecting that status quo, the parties are simply not configured to get big things done.  That’s the reality today, but it doesn’t mean we have to accept it for the future. 

Fifth, regardless of party, the national political system is organized to thwart any “special interest,” no matter how valuable, from getting its way.  That is, votes are filtered through not only the two parties and their diverse candidates, but also through offices at the federal, state, and local level.  In addition, there’s the bureaucracy, which doesn’t always move quickly—and oftentimes doesn’t move at all.  So even the most determined donor could be completely flummoxed, just by our distributed political system. 

For all these reasons, plenty of deep-pocketed individuals and entities have either sat it out, or have canceled each other out.  It’s hard to say that they’ve made a mistake—everything is opportunity cost—and yet at the same time we can insist that they’ve missed an opportunity.  An opportunity that could be huge.  That’s what this whole 13-part series is about: providing a new organizing principle for politics, based on efficiency and effectiveness.  Those are good businesslike virtues, and there’s no reason they can’t be harnessed to the cause of economic and business development, as well as political victory.  

Money in America 

As we have seen the GDP of the U.S. in 2020 was $21 trillion. In November of 2020, about 159 million people voted for president, including 81 million for Joe Biden, and 74 million for Donald Trump.  (For our purposes here, we’re not going to get into allegations about vote fraud.)  So if we were to take a holistic view of money in politics, and money in America, and the potential for political leverage on the economy, we could start by divide that $21 trillion GDP by the 159 million people who voted.   If so, we get a sum of $132,000 per vote.  Once again, we are not saying that each vote is monetizable like that, nor should it be.  And certainly nothing we’re describing here concerns buying or selling votes, or non-votes.  Instead, all we’re doing is illustrating the potential leverage.  

Yet if we’re assigning a dollar number to votes, it can be argued that we need more nuance.  Specifically, we might confine ourselves to “swing” voters, on the theory that “base” voters are fixed.  So if we were to think of swing voters as marginal voters, then we could run our numbers in different ways: first, those who might swing between Democrat and Republican; and second, those who might swing between voting and non-voting.  So now, if we look back at the last dozen presidential elections, 1976 to 2020, we see, first, that the widest “spread” in partisan presidential voting is 21.3 points, that being the difference between the 58.8 percent of the vote gained by Ronald Reagan in 1984, and the 37.5 percent of the vote gained by George H.W. Bush in 1992. (The range of Democratic percentages during this period was narrower.)  And then, second, if we consider the change voter turnout over those same dozen presidential elections, we see that the range was between 51.7 percent of the voting eligible population in 1996 to 66.8 percent in 2020.  With these numbers in mind, we might conclude that the swing vote, defined two ways, is perhaps a quarter of the population, which is around 240 million.  So 60 million voters to think about.  Still a huge number, but more manageable than the total number of voters.  And $21 trillion divided by 60 million is on the order of $350,000 a vote.  Again, that’s not directly monetizable, nor should it be. 

Yet if we think this way, we are reminded that elections have consequences, including for investors.  Moreover, as we get down to 60 million, we start to see numbers that might seem more comprehensible, manageable—and maybe even leverageable.   

Money in the Future 

As we saw earlier, McKinsey & Co. estimates the planetary total of wealth today to be as high as $1.53 quadrillion. And that ginormous “q”number is just wealth at the moment:  Speaking of the near term, if our $26 trillion economy grows at two percent for 20 years, it will be worth $39 trillion in 2043; if it grows by three percent, it will be worth $47 trillion; if it grows by four percent, it will be worth $57 trillion.   So yes, obviously: better policies mean bigger bucks. 

We can add: What’s the future potential of wealth creation, with AI and space exploration and all the other wonders to come, just in the remainder of the 21st century?  Open AI’s Sam Altman suggests that AI could yields a 100-fold increase in wealth.  This is the real money in politics: the money in the future, as it vectors out over the years, decades, even centuries.   If the current political class fails to grasp these potentialities, well, maybe that’s why some new thinking is needed to encourage and bolster sound pro-growth thinking. Indeed, these possible numbers are so huge, potentially, as to defy any sort of quantification; about the only thing we know is that politics—including the politics-by-other-means known as war, could affect those numbers drastically; a bad enough war could reduce the economy, and the human population, to zero.  So we are reminded: investing in sound politics is a good way to encourage the upside, and to fend off the downside.  As the song says, accentuate the positive, eliminate the negative.  

In various writings, this author has considered some big-delta, big-alpha ideas, including desalinated water, carbon capture, medical cures, and accelerated space exploration.  Each is a good idea, each would poll well enough by itself, and yet none of them are anywhere near the top of the national agenda.   To be sure, there are plenty of competing issues, and yet it’s the American Way to politick, legally and peacefully, to move an issue up.  So that’s what we should do, bringing new thinking, and new resources, into the equation.   

In fact, it takes an enormous commitment to building a favorable framework for good goals—and we should do that, too.  So there’s a mission right there: get politicians to think about using their power to galvanize economic activity.  There’re whole books to be written about that topic, of course, and this author has one forthcoming, and yet for now let’s focus on voters, as part of this series on improving the political process. 

Blast from the Past 

Back in 1980, Republican presidential candidate John Connally had an interesting proposal: convert corporate tax payments into a dividend program for voters.  The idea was that if taxable corporate profits went up, so would the dividend to the voters, thus giving the voters a direct  stake in the well-being of corporate America—and, by extension the American economy.  (To some extent this is the idea of the Alaska Permanent Fund, which distributes oil profits to Alaskans, to the tune of several thousand dollars, per resident, each year.) 

Connally’s idea was attacked as "corporatism," and in a literal sense, it was just that.  One of those attackers was the more libertarian Ronald Reagan (for whom this author was proud to work), who defeated Connally, handily, to win the 1980 GOP nomination.  So that was pretty much the beginning and end of the corporate-dividend plan.  

Yet even if the dividend idea has a poor political track record--to my knowledge, nobody at the national level has proposed it since--this Reaganite always thought it was an interesting idea, and thinks even better of it now.  Why?  Because corporatism, freed from sneer quotes, is actually the way of the non-communist world (that is, every country but maybe North Korea and Cuba).  The economy consists of big corporations (which aren't going anywhere) and big government (which also isn't going anywhere).  With those two realities in mind, it's appropriate to think of new ways for corporations and government work together, to form an updated social contract, mindful of new needs.  Such a symbiosis need not come at the expense of individualism or personal freedom.  Instead, it's a simple acknowledgement that free people often prefer to organize themselves as corporate leaders, employees, and shareholders.  Corporatism, seen as the existence and prevalence of large companies (and small- and medium-sized companies) is a proven mechanism for producing wealth.  

So with that in mind, let's always be looking for new ways of bringing people together while not jeopardizing personal freedom.  Is it a bad idea to find new ways to encourage the citizenry to think in terms of the commonweal?  And is it wrong to think that the citizens themselves should benefit when the economy's corporations are doing well?   Is this not the makings of a new kind of stakeholder civics?  No doubt there are other ways to cut people in on the action--the overall economy is, after all, the best and really only guarantor of well-being--and yet it can only help to offer people something immediately tangible (like a check) as well as other things more generally desirable.   One of the strengths of Social Security, for example, is that there'a an actual "account" with one's own name on it.  And while economists might insist that it's all an accounting fiction, Social Security is pretty darn popular.  In that spirit, one can imagine that neo-Connally-esque profit sharing would be similarly popular. 

We’ve been thinking hard about money in plitics, as well as economic growth and politics, and also the future wealth-effect of politics.   In this spirit, let's examine all legal ways to include people in the wealth-generating impact of good policy.  As a way of encouraging them to vote for politicians who advance said positive policies. 

We will be spending the rest of this series pondering this question: How to align votes with good policies?   In fact, in installment six we’ve already considered one mechanism, which is pledges.  That is, if a politicians pledges a good policy, that’s good, and if the voter pledges ti support the politician who commits to good policy, that’s even better.   Because now we’re starting to see the basis of a contract. Not necessarily a legal contract, but rather, a moral and political contract.  

A harmonic convergence of people and politicians, for the sake of the overall economic pie.  There’s big money here.    

Politicians’ Unaccountability: Pledging a Solution

Sixth in a Series 

In past installments, we’ve examined the issues of election legitimacy, campaign inefficiency, voter uncertainty, and media superfluity.  Now let’s look at another problem, politicians’ unaccountability.  That is, how do we get politicians to keep their promises?   How do restore trust?  One answer, as we shall see, is to make promises, in the form of pledges—and then keep them.

George H.W. Bush Breaks His Pledge  

This author had the experience of working, for seven years—in his political action committee, in his presidential campaign, in his White House—for the modern political figure who is probably most famous for breaking a campaign pledge.  That would be George H.W. Bush, who famously said, while accepting the Republican presidential nomination, “Read my lips.  No new taxes.”  Those sound-bite words were spoken on August 18, 1988, at the Republican convention in New Orleans.  

In fact, candidate Bush had pledged not to raise taxes the year before, and that pledge had helped him to secure the GOP presidential nomination—fending off tax-cutter Jack Kemp and clarifying the difference with tax-raiser Bob Dole—as well as helped him win the presidency against Michael Dukakis, the governor of the Northeastern state dubbed “Taxachusetts.”

Yet once in office, the 41st president was persuaded to break his no-new-taxes pledge by Office of Management and Budget director Richard Darman, who saw himself as the Henry Kissinger of fiscal policy.  Bush was a good man, and overall, a good president, and yet he had never particularly believed in the no-new-taxes pledge; it went against his innate Wall Street-mindedness and his genteel aversion to California Reagan-Kemp-types.  Yet it took Darman’s Svengali skills to bring Bush to abandon his promise.

Alas for the 41st president, Darman’s grand plan, so intricately conceived with help from the DC establishment, was not only cynical mendacity, it was also a failure.  The deficit went up after the 1990 budget deal with pro-tax Democrats, even as Bush’s political standing went down. That plummet was disguised for a while by the surge in patriotic feeling from Operation Desert Storm, and yet by the end of 1991, Bush’s peril was obvious, and in fact, by 1992, Bush’s standing had collapsed.  Having won nearly 54 percent of the popular vote in 1988, he fell to 37 percent of the vote years later; it was the most dramatic slide for an incumbent president in U.S history.  And so Bush became a one-termer, bringing an era of Republican national dominance—seven victories in ten elections—to a close.  

Looking back, we are reminded of the power of a pledge.  At the time, as a mid-level White House domestic policy aide—albeit marginalized from the Darman tax negotiations, which I opposed—I joked that Bush could have done just about anything else, no matter how foolish, on domestic policy and suffered less blowback than he did for breaking the tax pledge.  That is, the pledge was so clear that it was simply obvious that Bush had broken his word in a way that couldn’t be spun.   Even ardent Bush loyalists had to admit he had, er, changed his mind.  And plenty of people who simply assume that a promise is a promise took Bush to be a liar.  That's why pledges, and oaths in general, have power: Regardless of policy wherefores, people like the truth, and they especially don't like to be lied to. 

We should recall that the pledge was more than Bush’s words on the campaign trail, or even at the New Orleans convention.  The pledge was also, in fact, a formal, albeit terse, document, composed by Americans for Tax Reform (ATR), the policy group founded by conservative activist Grover Norquist.  ATR and Norquist had brilliantly distilled anti-tax sentiment down to a tightly worded anti-tax pledge.  Bush had signed it in April 1987, as a way of further enunciating his conservative credentials.  

Indeed, the pledge was, and is, so simple and clear that no amount of obfuscation could save a pledge-breaker from the realization that he or she had broken he pledge.  To be sure, not everyone opposes tax increases, or even cares about the tax issue, either way.  And yet for those who do care, the ATR pledge is clarifying. 

The Power of Pledges

In fact, clarity is the friend of the issues-minded voter, but it’s not necessarily the friend of the politician, who often feels that he or she has more to gain from non-clarity.  So the challenge to the issues-minded is to inject reciprocity into the process, so that the implicit-not-explicit “contract” between the electors (the voters) and the elected (the candidates) is upheld.  That is, the voters and the politicians should both keep their promises, and be rewarded, politically.  The voter should get what he or she wants (the position on the pledge, whatever it might be) and the politician should get what he or she wants (election victory, with the presumption that once in office the policy pledge will be kept).  

So we can see that pledge-based politics could be a valuable tool, both for campaigning and governing.  In a sense, pledges are what campaign platforms used to be, but over the decades, platforms have become so bloated and wordy that they have lost their conciseness.  And at the same time, pols have gotten better at being slippery.  So that’s why policy-minded types are thinking more about pithy ATR-type pledges—or at least they should.  Because, after all, Norquist and ATR have changed Republican politics in the past three decades; the GOP is much more firmly the anti-tax party.

We can add a possible refinement on the tax pledge, and other pledges: if the pledge is seen as going both ways, to the voter and to the candidate, it could help both sides of the political transaction.  If the pol takes the pledge on an issue the voter cares about (such as taxes), the voter could pledge to vote for that candidate, or at least another candidate who has taken the same pledge.   So that’s a way of enshrining trust. 

Will this happen?   It already has happened; how much more is up to the people and the pols.  But we can see that if the pledge were expressed in those terms; it could be powerful.  Such pledging might not be the stuff of a binding legal contract, but it could be a moral contract, or even, who knows, down the road somewhere, a blockchain-y smart contract.   

Some will wonder: Could the ATR pledge model be extended to other issues?   Some might argue that the tax issue is relatively straight-forward, in terms of a yea or nay vote, and yet as we know, nothing in politics, including fiscal politics, is simple.   For instance, Norquist himself has been asked about closing loopholes—does that count as a tax increase that violates the pledge?  Norquist’s answer has been that closing loopholes is okay, so long as there’s at least an equal cut in taxes or tax rates somewhere else. That’s a perfectly good response, and yet we can see how uncertainty, even controversy, can slip into the mix as to what is, and is not, a tax increase. 

So what of other issues, foreign and domestic?  Without hashing through all the hypotheticals, we can just say that it’s a challenge to pledge-penners.  For the sake of their issue, their goal should be precision.  Because we should keep in mind that politicians have often sought to perfect the art of letting things—especially unpopular things—happen without their “fingerprints.”  That is, the process is set up to be “automatic,” or on “auto pilot,” such that, say, a tax increase happens even without anyone visibly voting for it.  An example of this is “bracket creep” in income tax rates, as voters are pushed into higher payments due to inflation.   And if that’s possible about taxes, imagine what’s possible about foreign policy.   

The Hypothecation Solution

In fact, on many issues, the opinions of the voters don’t seem to matter.  Back in 2014, the political scientists Martin Gilens and Benjamin Page concluded that voters have essentially zero impact on policy: “The estimated impact of average citizens’ preferences drops precipitously, to a non-significant, near-zero level.”  Sure, they can vote for whomever they wish, but policy, Gilens and Page argued, isn’t affected by the outcome of an election.  Indeed, in times of polarization, if each side knocks the other out, we could see the onset of a sort of negative Nash equilibrium. 

So what’s the way out?  One answer, as we have seen, is pledges.  But there’s another answer from the policy world.  As always, it’s best to identify, if we can, something promising that has already worked—and build on that. 

Here we can introduce a useful concept: hypothecation, also known as ring-fencing.  “Hypothecated” is a two-dollar word for dedicated: the idea of hypothecated taxes is that revenue is specifically dedicated to a certain goal, such as a sales tax that’s exclusively dedicated to schools or parks.  Such taxes are common at the state and local level, where such taxes—even tax increases—prove often to be reliably popular.  That is, voters might feel good about paying a special sales tax, for example, to build a park or a school or a new sewer system.  In fact, the closer the citizen is to a problem, the more likely he or she will be sympathetic to arguments that more taxes could solve the problem.   

We can note that popular federal programs often follow the same model of hypothecation.   The Social Security system, for example, began in the 1930s amidst lots of stern talk about a sacrosanct “account,” into which the payroll taxes of future recipients were deposited.  This account was always something of an accounting fiction, and yet the idea that the citizen, upon retirement, is merely drawing on “his” or “her” account is a powerful notion to this day—and helps explain why Social Security is so popular.  To the extent that hypothecation implies ownership, or at least a property right, well, that’s powerful.  

Another example of alleged federal hypothecation is the highway trust fund (HTF), financed by a “user fee” of gasoline taxes.  In fact, DC lawmakers have long dipped into—some would say looted—the HTF.  And that’s how trust is eroded.  So that’s likely one reason why people don’t much like the federal government.  According to one survey, just 28 percent of Americans hold a favorable view of the federal government; by contrast, the more often truly hypothecated state and local governments enjoy higher approval, 57 percent and 63 percent, respectively.  

We can add that if politics were a series of pledges, that would be a limit on demagogues—they would, at least to some extent, find themselves constrained by their pledges.  So maybe the feds should give dedication another try—and mean it this time.   To be sure, there’s a counter-argument: that elected officials should do what they think best.  The eminent British conservative Edmund Burke made exactly this argument in the 18th century.  He lost.  That hardly settles the matter, but for our purposes, we can say that it would be good if politicians kept their pledges.  

To state the matter positively, once politicians are inspired with a message, they can be very articulate and persuasive.  For instance, Abraham Lincoln.  In the middle of the 19th century, the arguments for and against slavery were fast and furious.  And yet in 1858, Lincoln summed up the abolitionist argument in a few crisp words: “As I would not be a slave, so I would not be a master.”  There in a snap: The anti-slavery argument, 14 words.  By comparison, the ATR tax pledge, at 55 words, is a slog. 

But whether it’s 14 words, 55 words, or even longer the key goal is to boil down the policy point to its comprehensible essential: as a pledge.  If that can be done, voters and elected officials alike will be able to benefit.  And the country, too, will benefit. 

Next: Money in Politics