Campaign finance – The Economist (blog)

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IN JULY 1964, a divided Republican Party nominated Barry Goldwater as its presidential candidate. The nomination launched not only a new conservative political movement but a revolution in political fundraising. Abandoning the wealthy elites who had bankrolled previous presidential campaigns, the Arizona senator used direct mail and television to appeal to a broader group of ideological grassroots conservatives—the “true believers” as he put it. Goldwater would eventually amass some $5m in campaign contributions from hundreds of thousands of mostly small donors. 

Today, 50 years later, small donors are considered a key asset in a successful presidential campaign. “Hillary has a healthy mix of traditional bundlers and online, low-dollar donors”, Andy Spahn, a top Democratic fundraiser, told the New York Times in February. These low-dollar donors, he said, “will be necessary to win in November”. Enthusiasm for small donors is non-partisan. Chart Westcott, a Republican donor told the Washington Post in October that Republican candidate Ted Cruz’s ability to draw both large- and small-dollar donors make him a “powerhouse on both sides of the ledger”. Comments like these make for good punditry. But does donation size correlate with success at the ballot boxes? 

One of the benefits of raising money from many small donors is that it gives a candidate the appearance of an underdog or a political outsider—both popular traits in the current political environment. Another advantage is the independence it can give. Small donors who give $10 or $20 at a time rarely want anything in return. Large donors (defined as someone who gives more than $200) are more demanding. And candidates who can count on a steady supply of cash from ordinary voters do not have to seek the support of big donors, which also makes them appear more autonomous and less beholden to special interests. Still, presidential campaigns rarely succeed without eventually gaining the support of big donors and party establishment figures. History is full of insurgent candidates who were able to rally small donors early in the race only to fizzle out later. 

The advantages of small grassroots donors are rarely mentioned in academic literature. Several studies document the relatively minor role that small donors play in funding American elections. Many argue that a greater dependence on such donors would make American politics more democratic and representative. Another strand of the literature looks at the ways in which large and small donors differ. Large donors tend to care about economic issues while small donors are driven by social ones. Small donors are often attracted to polarising candidates, which suggests that they may be more extreme in their political views than their large donor counterparts. Large donors also donate more often to winning candidates. Small donors may be more willing to “waste” money on losing candidates because they are driven more by emotion than self-interest. 

But an analysis of Federal Election Commission (FEC) data by The Economist suggests that rather than propelling a campaign to victory, small donors may in fact drag it down. Since 1980, successful Democratic and Republican primary candidates have raised an average of 74% of campaign money from large donors. Losing primary candidates, meanwhile, have relied on such donors for just 54% of their campaign cash. No primary candidate has ever won the nomination of the Democratic or Republican Party without raising at least half of their money from large donors. The candidate to come closest was Walter Mondale in 1984 who raised 51% of his contributions from large donors. Our analysis shows that each ten-percentage-point increase in the share of money that a primary candidate raises from large donors increases the candidate’s likelihood of winning the nomination by over 7%. This does not appear to be driven by bandwagon effects. At the start of the primary season, before ballots have been cast, winning candidates typically draw 85% of their money from large donors, compared with 65% for candidates who are ultimately unsuccessful. 

The evidence suggests, therefore, that a candidate’s “donor mix” may influence presidential primary outcomes, though not in the way that many pundits suggest. Indeed, total fundraising is a better predictor of success in a presidential primary, regardless of its source. Each ten-percentage-point increase in a candidate’s share of total party fundraising during a primary election increases the candidate’s likelihood of winning the nomination by 20%. Raising a lot of money in relatively large increments, like Bill Clinton in 1992 and Bush in 2000, is still a better strategy than raising more modest sums in smaller amounts like Jesse Jackson in 1988 or Pat Buchanan in 1996. 

If Donald Trump goes on to win the Republican nomination, this empirical relationship will be severely weakened. Mr Trump has raised a smaller share of his money from large donors (currently 25%) than any successful primary candidate since the FEC began collecting data in 1976 (see chart). Mr Trump, who has received just 4% of the GOP’s individual donations, would also be the first general election candidate not to lead his party in total campaign contributions since Ronald Regan in 1980.

Just as Barry Goldwater proved in 1964 that he could run a presidential campaign without the support of large donors, Donald Trump is today proving that he can run his campaign without almost any donors at all. Of course, Goldwater went on to lose to Lyndon Johnson in one of the most significant defeats in presidential history. Without the support of donors and party establishment, Mr Trump could suffer a similar fate. 

Campaign finance – The Economist (blog)}

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