Sunday, December 13, 2015

Follow the Money

The most famous line in the 1976 film "All the President's Men" was delivered by Hal Holbrook as he portrayed Bob Woodward (Robert Redford) as the confidential source "Deep Throat" for Washington Post reporters Woodward and Carl Bernstein (Dustin Hoffman) as they attempted to get to the bottom of the Watergate scandal.


Credit: Imdb.com


Of course, that reporting led to the subsequent resignation of President Richard Nixon.

This is the relevant dialogue from "All the President's Men with my emphasis added.

Bob Woodward: Hunt's come in from the cold. Supposedly he's got a lawyer with $25,000 in a brown paper bag.
Deep Throat: Follow the money.
Bob Woodward: What do you mean? Where?
Deep Throat: Oh, I can't tell you that.
Bob Woodward: But you could tell me that.
Deep Throat: No, I have to do this my way. You tell me what you know, and I'll confirm. I'll keep you in the right direction if I can, but that's all. Just... follow the money.

"Follow the money" has become a catchphrase to describe the money trail that leads to those running (or in political office) their benefactors.

Under the tax law a gift is usually defined as the proceeds of "detached and disinterested generosity". The motivation for gifts are "affection, respect, admiration, charity or like impulses". A true gift is given with no expectation of getting anything back in return.

The reality of political contributions is that there is a usually an inverse relationship between the amount of the contribution to a candidate and the degree to which the donor is "detached and disinterested".  Simply stated, as the dollars contributed increase the motivation for giving starts to tilt more to an interest in influence than affection and admiration for the candidate.

With this as background I thought it would be interesting to look at the 2016 Presidential Campaign Finance reports of the major candidates to give you an idea of the trail of money from donor to candidate.

For simplicity, I am only looking at campaign contributions without including Super PAC contributions for each candidate. Super PAC money is officially outside the control of the candidate and is generally used for advertising. The candidate's campaign committee money is the real lifeblood of the campaign as all staff salaries, travel, consultants, etc. come out of these funds. When this money dries up, the candidate is finished. Witness Scott Walker and Rick Perry.

In this post I will highlight the money trail for the front runners-Trump, Cruz, Carson, Rubio and Bush-in the Republican party.

I will highlight the Democrat money trail in a my next post.

All of the data (unless otherwise noted) is from the Federal Election Commission website where you can view all campaign finance data

$269.5 million has been contributed to campaign committees of the candidate of both parties to this point--- $147.3 million to Republicans and $122.2 million to Democrats.

These are the campaign contributions to the major GOP candidates.


Interestingly, the non-politician Carson has raised more in political campaign contributions than the politicians.

In addition, despite Donald Trump claiming that he is funding his own campaign, he has only contributed $1.9 million of $5.7 million in total contributions.

This is the percentage breakdown of campaign contributions of $200 or less ("detached generosity") and those $2,000 and over ("interested in influence") for each of the major Republican candidates.


This is where you begin to see the difference between an "establishment" candidate and those considered 'outsiders".

75% of Carson's $31.3 million in contributions has come from donors who contributed $200 or less. That is remarkable.

3/4 of the money donated to Trump has also come in small donations.

56% of what Ted Cruz has raised has also come from small donors.

Contrast that with Jeb Bush who has raised over 82% of his money from big donors. Rubio has raised over half his money similarly.

Where is the money coming from for each candidate? What are the two biggest fundraising states for each GOP candidate?

Carson- Texas $1.4m, California $1.3m
Cruz- Texas $9.2m, California $1.2m
Bush- Florida $4.7m, New York $2.9m
Rubio- Florida $2.3m, California $2.2m
Trump- Texas $.14m, California $.13m

You expect the politicians to use their home state to anchor their contributions. However, Trump and Carson's two biggest contributor states are Texas and California. Simply stated, there is a lot of money in those two states.

These bubble charts are interesting in order to contrast the amount of contributions the candidate has raised in each state. The larger the bubble the more they have raised.

These are the contributions to Ben Carson by state. Notice how widely distributed his financial support is nationally among those many small contributors.




Contrast that with Jeb Bush and his heavy reliance on the Establishment Eastern Seaboard. There is not much of a money trail to Jeb in "flyover country".




This is a chart showing the total number of contributors by candidate.

Both Carson and Cruz have received contributions from twice as many people as Bush and Rubio. Of course, Trump has not actively sought contributions but almost 2,000 individuals wrote him checks on their own initiative.

Source: OpenSecrets.org
Note: The FEC only requires campaigns to disclose names of contributors of $200 or more. Therefore, the number of contributors and demographics above is only for those who contributed at least $200.



It is revealing that there are so few people that actually contribute at least $200 to a political campaign for President. Consider that there were over 20 million votes cast in the various 2012 GOP Presidential Primaries. When you add up all the contributors to the GOP Presidential candidates thus far you get less than 100,000 in total. That means about only 1 out of every 200 voters is investing in the process by supporting them financially in a meaningful way.

The data point I probably found most interesting was the industry that the contributor worked in. Certainly this should tell us something about "attempts to influence" through political campaign dollars.

These are the two biggest industry sources to each candidate and the amounts contributed.

Carson- Retired $4.3m, Health Professionals $.5m
Cruz- Retired $3.1m, Lawyers $.6m
Bush- Retired $3.3m, Securities & Investment $1.9m
Rubio- Retired $2.2m, Real Estate $.7m
Trump- Retired $.3m, Health Professionals $.05

I thought it was pretty incredible that for every Republican candidate above the largest category of contributions came from Retired people. It is not even close with any other industry category.

Of course, the money flowing into the 2016 Presidential campaign has just begun.

Consider the fact that Mitt Romney and the Republicans spent $1.1 billion during the 2012 campaign. Romney spent $336 million in campaign funds that he raised for his campaign, the National Republican Party spent another $386 million on Romney and Outside Super PACs and others chipped in another $419 million.

This is another potential problem for Donald Trump that I don't see anyone speaking about.

A big part of Trump's allure is that he is going to fund his own campaign and will not be beholden to any special interests.

Is he really prepared to spend $1 billion of his own money to get elected?

I don't believe he is. I think he loves his own money too much.

I also question whether he would have anywhere near this kind of liquidity in his portfolio. Is he going to start selling properties to finance his campaign? I don't think so.

He also most assuredly is not going to raise $1 billion through a bunch of $200 contributions.

And if he has to go Wall Street and other special interests to fund his campaign like everyone else, a big part of the attraction of Donald Trump washes away.

"Follow the money".

It tells us a lot.

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