What happened to the <1%?

Working at the intersection of politics and technology, I am asked, and in greater daily frequency, what the hell is going on with political contributions these days?  The good news, we have robust tools to collect and analyze the data. The bad news is, it’s still challenging to elicit meaningful conclusions from this data.  In this discussion, I will present an overview of campaign finance today, outline present misgivings, and future opportunities for solutions.First, it’s important to review the state of the market.  Political contributions are expected to reach $10 billion dollars in 2012 (across Federal, State and Municipal levels of government).  This represents a threefold increase in the past twelve years.  Few industries have managed to triple in size in the past decade; this is certainly one of them.  It is however, important, to keep in mind the context of this growth.  For one, improvements in the distribution and delivery of information (i.e. technology) have reduced barriers to entry, and therefore increased the rate of competition within the space of ‘political marketing.’  To keep up with increased competition, both parties, and their respective machines, have had to dig further and further into barrell for more cash.  For all intents and purposes, this trend will continue over the short term.Second, we must analyze the source of these contributions.  This $10 billion industry collects money from a variety of sources: individuals, Political Action Committees (PACs), Super PACs, 527 Independent Expenditure Committees, 501C3’s (to a limited extent), labor unions, corporations, state and federal party committees.  It’s a cross-section of America.  Simply put, anyone with a vested economic or ideological interest will invest in the process.   However, we often times focus exclusively on the 300,000 super donors (and place even greater scrutiny on the 200 very super donors who have contributed nearly 80% to Presidential PACs, and Super PACs in 2012), and not as much on the remaining donors.  The reality is that 9.7 million americans, or nearly 10% of American households make hard money contributions between $200 and $2,500 per year.  Furthermore, an estimated 20 million Americans make contributions under $200, though identifying them becomes more challenging as donor contribution records are not required for small donations (much to the frustration of data miners like myself); though a good place to start might be the Obama email list – supposedly the largest in the galaxy.

Yet the argument remains: is it ‘fair’ or ‘democratic’ for wealthy donors to have greater freedom of speech vis a vis their contributions?  Does this imply a shift towards a plutocratic form of democracy? And how much longer till the masses arise and simply throw the yoke (think Tea Party & Occupy Wall Street on steroids)?

My belief is that the masses have already arisen, yet it is difficult to see and challenging to comprehend.

Let’s first look at the noise.  When considering influencers in the online skies, we will invariably come across top influencers in wide-distribution media platforms (i.e. Twitter).  Whereas the top 10 influencers in twitter command the following of nearly 20% of U.S. households, the top 10 political donors carry less than 0.002% of U.S. household interests.  Money doesn’t seem to buy too many Twitter friends.  But still, it’s more likely the the ideologies and agendas of the top 10 political donors will have a much larger impact on the lives of those same 20% of U.S. households than would the tweets of the most popular noisemakers.  But yet, we’ve stumbled upon an interesting notion: can social media empower political donors to be greater influencers (e.g. can greater spend also grant you greater clout in the online skies)?

The answer is yes.  The beauty of search and social media is the ability to create links based on affinities.  As individuals, organizations, and companies construct a political genome for American politics, the costs  associated with finding like-minded voters and donors decrease, allowing for greater education and engagement.  We see this with every passing month.  Innovative startups like Votizen, NationBuilder, PopVox, NationalField, AmicusHQ and AngelPolitics, are enhancing the ability to identify supporters for campaigns, and reduce the infrastructure costs of fundraising; in effect, marrying the breadth of crowdsourcing/crowdfunding with the efficiency of marketplaces.

What we will see in the coming years is the opportunity for influencers to also become large donors, and donors to become large influencers.  While risks remain that small donors (e.g. the 20 million Americans who make contributions under $200), will be unable to present large collective interests without the branding of a movement (e.g. MoveOn.org), a PAC, or a celebrity, the reality is that never before have we as a society had the tools to build affinity-based communities around issues, candidates and campaigns.  These opportunities exist as a function of improvements in technology, and the current misgivings of our campaign finance system.

Sources: The Center for Responsive Politics, OpenSecrets.org.


By Jesse R. Sandoval


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