Political Contribution Imbalance

I could not resist posting one more thought on the political rumblings involving the oil companies. As mentioned yesterday, the political machinery is moving to find some way to address consumer fears about high gas prices. Even people otherwise known for sound economic policies are seeming to turn on the oil industry, as they seek a scapegoat to mollify voter concerns.

A look at the data at www.opensecrets.org, a site run by the Center for Responsive Politics, may provide some insight. The opensecrets site collects data on political contributions, which can be sliced and diced many different ways. You may be wondering where oil industry money goes?

Republicans have been getting an increasing share of these funds. In 1990, Republicans outdistanced Democrats by 62% -38%, which is still a considerable margin. But data for 2006 show that the margin has increased, reaching 84% to 16%. Thus, Republicans have raised about $6 million to the Democrats $1 million. The actual data by year can be found here:

http://www.opensecrets.org/industries/indus.asp?Ind=E01

This got me thinking. Political contributions don't come with guarantees. The recipient can always change his or her mind about your cause. If you hedge your bets, giving some to both sides, you may be able to exert some quiet influence if your position is sound, and the money you give to the other side will perhaps mollify them somewhat in order to keep them from resisting your interests. Lopsided giving removes the silencing effect on the minority side. When, as in the current situation, you touch upon a hot-button political issue, the minority-fundraising side has a big wedge issue to expose the other side's unseemly behavior. They can point fingers without a mirror shining back at them.

That could be what is happening with Republicans these days. In response to the concerns about finger pointing, they have incentives to do whatever they can to seem independent and uncooperative with the affected interest group. As mentioned above, we all know that support can be fickle, and the industry can expect its support to shift if the votes aren't there from the people.

I don't think that supporting the Oil & Gas industry is a bad thing. There are good reasons for the shift in contributions. After all, contributing to a political machine that wants to raise gasoline taxes for the purpose of cutting demand for your product is hardly good for business. (Other commentators have recently raised this point about Democrat association with schemes to raise gas taxes - including Ann Coulter.) The windfall profits tax discussed by Ernie a couple of days ago is along these same lines, though even worse for business due to its direct impact on global competitiveness.

But this era of transparency in political support, coupled with the potential for rapid communication, means that there may be special risks associated with being a lopsided contributor. It may also help explain some of the crazy political rhetoric we have been hearing.

EAM