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Stanford Report, May 17, 2000

Would it be cheaper to throw the bums out or buy them out, researchers ask


Election season aficionados, please take note: Thanks to the availability of some unusual data, Stanford Business School political economist Timothy Groseclose recently completed game theory research looking at whether it would be cheaper for interest groups to contribute to the campaigns of their favorite candidates or whether it would be more expedient simply to buy out incumbent politicians they do not like.

After the AFL-CIO spent $35 million in the 1996 congressional elections to defeat only 18 Republicans, American Federation of Government Employees president John Sturdivant facetiously asked if it wouldn't have been cheaper just to pay each Republican $1 million to go away. After all, many politicians are lured out of public office by lucrative lobbying or consulting jobs anyway. Put simply, is it cheaper to throw the bums out or buy them out? It's a question that intrigued Groseclose.

Nineteen-ninety-two had been a remarkable year in Congress -- not just because a fair number of women seized congressional seats and Democrat Bill Clinton took the White House. It was also the last year that retiring members of the House could keep for their personal use whatever money was left in their campaign war chests. Back in 1979, Congress had changed that law and made it illegal for representatives to convert leftover campaign money; at the same time, of course, it grandfathered the current members. But Congress changed that law in 1989, making 1992 the last year that any member could keep the cash and retire.

The situation provided the means of a natural experiment, says Groseclose. It presented an opportunity to measure how much money it would take to get a member of Congress to leave, since members would be forced to decide between retiring and taking the money or running for reelection and forgoing the money forever. In 1992, there were 159 grandfathered members, or about a third of Congress, who were eligible to take funds. A sixth of the Congress had more than $100,000 in such unused funds. "Like an earthquake is to geologists or an eclipse is to astronomers, this was a once-in-a-lifetime event for political economists," says Groseclose.

The statistical research, which Groseclose conducted with Tufts University economist Jeff Milyo, included variables such as a member's net worth, age and whether he or she might have lost reelection anyway. The study showed that one would have to pay a representative with median wealth (net worth of $356,000) $3 million to get him or her to leave office. However, the estimates are very sensitive to age and wealth. For instance, an older, very rich member, age 53 with a net worth of $2 million, would require $12 million to leave office. Meanwhile, a relatively young member, age 41 with a net worth of $356,000, would require $6 million.

So, why are there so few cases of paying politicians to retire? First, it takes a lot of money. Labor chief Sturdivant was off by a factor of three when he joked that it might have been more efficient for the AFL-CIO to pay politicians it didn't like $1 million each to leave office rather than donate millions to political action committees and advertising. And Groseclose and Milyo say even their estimates probably understate the true price. If an interest group really did try to buy out a politician, the member would face some embarrassment and shame, which would drive up the price.

The researchers also noted that interest groups might find a bought-out incumbent's replacement even more distasteful. They conclude it is probably better for an interest group to fund the campaigns of friends than to try to buy out opponents.

The research highlights some other areas of practical concern. The fact that it would take such large amounts of money to induce politicians to leave suggests that they value their jobs very highly. Notwithstanding their claims of being poorly paid, the findings suggest that the power and prestige of office more than compensate for any burdens.

As a result, if the monetary benefits of office, such as salary or pensions decreased, it would not significantly increase departures. However, the benefits of office do not present an encouraging picture for reforms such as term limits or campaign spending limits. Given that the members value their jobs so highly, it is unlikely that they will pass policies that jeopardize their ability to keep these jobs. SR