Your votes or your wallet

by Henry on November 7, 2007

Megan McArdle claims that I got Michael Franc’s op-ed wrong.

Democrats indisputably represent more rich voters than Republicans; their constituency is the people in their district, not the people in their district who voted for them. Moreover, politically, this matters a great deal. The guy from Heritage is actually making a good point: the constituency of the Democrats will force many of them to support the interests of the rich, even where they might ideologically prefer to oppose, because doing so is good for their district.


Let’s just say that this isn’t an especially compelling interpretation of Franc’s piece. As Wikipedia notes, there are two common uses of the term ‘constituency in politics; it either refers to ‘the group of people from whom an individual or organization hopes to attract support, or the group of people or geographical area that a particular elected representative or group of elected representatives represents.’ Megan claims that Franc is exclusively using the second of these definitions when he rather obviously is using evidence about the second to do his damnedest to imply the first. He specifically refers to the Democrats as “the party of the rich,” not “the party that would prefer to oppose the interests of the rich but find themselves obliged by the principles of electoral accountability to represent the people in their districts who didn’t vote for them.” Andrew Gelman responds to Megan’s claim more forgivingly than I would, so perhaps it’s better that I turn the mike over.

I’d respond to this with a Yes and No. In terms of the Constitution, I agree; for that matter, congressmembers also represent nonvoters and people such as children and noncitizens who are ineligible to vote, just as back in 1789 they were said to represent women, non-property-owners, and 3/5 of the slaves. On the other hand, the two parties are different, and voters generally have enough information about candidates to vote for the one who is closer to their preferences. So in that sense, congressmembers do actually represent the people who vote for them. After all, Democrats are much more liberal than Republicans in otherwise-comparable districts. (There’s lots of evidence on this; see, for example, the graph on page 213 of our recent book.)

Another way to look at this is to flip it around and consider the Republicans, who represent richer voters but poorer states. A simple geographically-based analysis would suggest that the Republicans would be trying to raise taxes on the rich and raise benefits for the poor. But they’re not. Arguably the Republicans’ pro-business, low-tax policies are ultimately what’s best for the poor (and also the rich), but they’re certainly don’t seem like the kind of populist notions that would make people in poorer districts happy.

Thus, what the word ‘represent’ means in civics textbooks is quite different from what it means in everyday politics, and the difference is empirically important. But there’s something more systematic to what Franc and others in this intellectual cottage industry are doing, which I should have stated more clearly in my original post. There is very strong evidence that the Democrats are much more responsive to the interests of the wealthy than they should be. Larry Bartels wrote a much-discussed paper a couple of years ago finding that Republican senators were more responsive than Democrats to the opinions of their wealthiest constituents, but that there was no evidence that senators of either party were responsive to the opinions of the least well-off third of their constituents. As Bartels suggests, the evidence seems to support (albeit only indirectly) the hypothesis that much of this is driven by the increased propensity of the rich to donate money to politicians. Certainly, as this article from the Washington Post suggests, donation patterns seem to provide the better part of the explanation for why Democrats have been reluctant to get rid of the deferred interest loophole.

The measure has deeply divided Democrats, pitting a rank and file that has railed for years against inequities in the tax code against the party’s money men, who are reluctant to bite the hand that has generously fed them. … “If you’re a Democrat and you have to choose between the alternative minimum tax and the hedge fund industry, that’s one tough ideological choice,” said Viva Hammer, who recently left the Treasury Department’s Office of Tax Policy and is now a tax partner at the law firm Crowell & Moring. “It’s a choice between your votes and your wallet.” …

the wealth of the Democrats’ target has proven to be a treasure trove for party fundraisers. Hedge funds and investment firms have been pouring money into Washington, contributing $11.8 million in the first nine months of this year to candidates, party committees and leadership political action committees. That is more than the $11.3 million they gave in all of 2005 and 2006, according to the Center for Responsive Politics. More than two-thirds of that money has gone to Democrats.

There is some evidence that specific states’ interests play into this – the Post quotes Barney Frank as saying that this has been a tough issue for Charles Schumer because “[h]edge funds are to New York what tobacco has been to North Carolina. People don’t like to tax their constituents.” But this very obviously doesn’t help explain why Democratic senators from other states without a major concentration of hedge funds have been reluctant to tax them. Here, patterns of donation rather obviously come into play.

So why is it that Franc exaggerates the importance of local politics, while curiously failing to mention political donations as a causal factor? I suspect the reasons are as follows. Claiming that Democrats are the party of the rich because they tend to represent rich states and districts helps to reinforce a populist mythology about the divide between effete gay-lovin chardonnay drinkin yacht-racin Democrats, and salt-of-the-earth hard-working respectable-poor middle Americans that is useful for both the interests of the Republican party and a particular notion of conservatism. Rick Perlstein’s forthcoming Nixonland has some good stuff on the origins of this mythology. Explicit reference to the more substantive explanation for the Democrats’ prevarications – the role of business donations in shaping politicians’ behavior – would raise all sorts of questions about the role of money in politics that would be highly uncomfortable for both Republicans and Heritage conservatives.

To put it this way – if the Republicans were still in control of Congress, this debate wouldn’t be happening because the Republicans simply don’t have an internal constituency pushing for less tax breaks for the wealthy. Tax loopholes for hedge fund types are the matter of political controversy because, as Hammer puts it, Democrats face tradeoffs between votes and access to donors’ wallets. This tradeoff is far weaker for Republicans, to the extent that it exists at all. Thus, I think that Kevin Drum is being too nice to Franc – his op-ed is an ideological confection, intended to obscure the trade-off between votes and fundraising that is driving what’s happening. If you claim that Democrats are behaving the way they are behaving because electoral boundaries make them into the party of the rich, you don’t have to deal with the fact that Democrats’ bad behavior on this issue is in large part a product of the money that hedge fund types are donating to them. Thus, you can have your cake, and eat it too.

{ 22 comments }

1

Thomas 11.07.07 at 4:33 pm

Franc used “constituents” just the way you do in this post, when you discuss Bartels. He agreed with Barney Frank about the relative importance of local politics. And he didn’t ignore the importance of fundraising to the question; he specifically noted the “lawmakers that lead each party’s campaign arm”–these are the fundraisers for the parties. Why else would he mention this? Local politics is part of the fundraising question that Franc doesn’t ignore.

But I take it that the suggestion that Franc was ‘implying’ the point you said he mistakenly made is a retraction of your prior post, so in a sense this is progress. If only you didn’t add a new mistaken charge while taking one away.

2

Jim S. 11.07.07 at 5:16 pm

This is a good analysis as far as it goes, but it does not bring up the uncomfortable fact that many of the oppressed groups and other minorities, which in the falling away of the working class from the Democratic party have come to dominate that party, tend-outside of the “group” issues that they care about the most-to be rather conservative on many issues. One hopes not to sound prejudiced, but many women have been involved with upper classes and aristocracies throughout history, that many gays are Republican, that African-Americans and business elites have old ties, etc. Even Jewish-Americans, when not radical, often are quite “economically liberal” in their stances, as is shown by the ethnic background of many of the neoclassical economists whom the people here seem rightly to deplore.
Frankly, the reason why the Democrats do not appeal to the masses-other than the very poor-is that the core groups are just not that interested in “class” issues. It is very easy to blame outside interests when the problem is the poor politics-and economics-of the main groups.
Sorry to ruffle feathers.

3

Megan McArdle 11.07.07 at 5:25 pm

But Henry, we are discussing a particular piece of empirical evidence in which Democrats are supporting the interests of the rich: the carried interest exemption. If the Democrats are *not* increasingly catering to the rich because they are increasingly representing very rich districts, then why *are* they doing this?

4

Dan Miller 11.07.07 at 5:41 pm

Megan, see from the post: “But this very obviously doesn’t help explain why Democratic senators from other states without a major concentration of hedge funds have been reluctant to tax them. Here, patterns of donation rather obviously come into play.”

5

Megan McArdle 11.07.07 at 5:49 pm

It might. But my understanding is that logrolling is the bigger problem.

6

Robin 11.07.07 at 6:26 pm

I thought the implication here is of relative positions, as Henry implies. Democrats becoming the “party of the rich” seems to suggest that Republicans are more likely to pursue the interests of the non-rich as the new prty of the non-rich. Is there any evidence for that? Henry’s intuition that there wouldn’t even be a debate if Republican’s controlled Congress seems to me to be right.

7

Henry 11.07.07 at 6:29 pm

But I take it that the suggestion that Franc was ‘implying’ the point you said he mistakenly made is a retraction of your prior post, so in a sense this is progress

Thomas, come off it. The claim I am making here is exactly the same as in the first post – that Franc’s bogus op-ed is trying to say that evidence that Democrats tend to be elected by richer districts and states is evidence that Democrats are now the “party of the rich.” This is a claim that is, to put it kindly, not only intellectually flawed but roundly refuted by the empirical evidence that we have available. Your purported hypothesis that Franc’s attack on Democratic leaders is a coded reference to the problems of money in American politics doesn’t even pass the giggle test. I’ll do you the favor of presuming that you mean it as a provocation rather than a serious claim.

Megan – the point is pretty straightforward – but let me develop it a bit more for you. It is highly plausible that representatives of district or state _X_ are likely to have a particular interest in promoting industries that are concentrated in district or state _X_. Hence, for example, we have Schumer defending hedge funds, Californian senators defending the movie industry, Washington State senators defending Microsoft, Iowan senators defending agriculture and so on. I don’t know of any specific pol-sci research on this, but I would expect that what there is bears out people’s everyday intuitions on this. But this is _quite different_ from the claim that Democrats, because they represent richer states, _ipso facto_ represent the interests of the rich – the former doesn’t lead to the latter. There may be some connections, but they’re likely to be pretty indirect, and the empirical evidence that Gelman et al. point to seem to me to suggest that any such effect is swamped by others. _Contra_ Franc and (apparently) you, there is no evidence that the Democrats are the party of the rich, and lots of evidence that they aren’t (at least in comparison to the Republicans). There _is_ a plausible case one could make on the basis of Gelman et al.’s evidence that Democrats in rich states are more likely to be responsive to the interests of both rich and poor, while Republicans in poor states are likely systematically to favor the interests of the rich. The evidence on this is far from dispositive, but Gelman’s post points to ways in which you could investigate this and related effects further.

As for the claim that this is logrolling – if true, then a lot of hedge fund people are behaving _very_ strangely and irrationally with their political donations. Perhaps you could lay out the evidence which has led to your “understanding that logrolling is the bigger problem” so that we can all evaluate it???

8

lemuel pitkin 11.07.07 at 6:34 pm

Rather enough Megan McArdle blogging here for a the time being, no? Especially as Sadly, No! has already done the definitive McArdle post.

9

leederick 11.07.07 at 6:53 pm

“…there are two common uses of the term ‘constituency in politics; it either refers to ‘the group of people from whom an individual or organization hopes to attract support, or the group of people or geographical area that a particular elected representative or group of elected representatives represents.’”

Francs argument is entirely consistent with the first sense. If I’m a democrat representing a rich state, then rich people within my state could vote for me (and, if I remember correctly, do to some degree – there isn’t a hard class cleavage). But neither rich nor poor people outside my state could vote for me. I’ve no hope of attracting support from people outside my state whether they’re rich or poor, but at least a hope of attracting support from those within it. That’s the big problem of an exclusively class based analysis of elections. Constituencies mean the electoral effect on individual politicans is isolated from national class divisions.

Even if we switch to parties, the democrats don’t have much hope of meaningful support from the poor in deepest red states.

10

Henry 11.07.07 at 7:17 pm

leederick – read the quote from Andrew Gelman above.

11

R. Stanton Scott 11.07.07 at 7:25 pm

It seems to me that Franc and McArdle both make two very dubious assumptions: that wealthy people in Democratic states believe they became wealthy despite–not because of–the policies their leaders supported, and that the rich always and everywhere support lower taxes on the wealthy because they think that high taxes threaten their prosperity.

It may be that many wealthy people understand that a certain amount of taxation and collective action is necessary to make and keep them prosperous. They support Democrats because they deliver these policies–that is, perhaps Democrats represent more wealthy people because the policies they implement promote prosperity and wealth.

If this is true, it makes perfect sense for Democrats to continue supporting policies that on the surface appear to negatively affect the wealthy–or some subset of that group–but in practice make the community as a whole, and therefore its most wealthy citizens, more prosperous. They see the benefits of managed redistribution of wealth, regulation of business and manufacturing, investment in infrastructure, and tolerance of behaviors and attitudes that fall outside their own social norms.

Democrats may support changing hedge fund income tax policy because some wealthy people support changing a provision of the code that egregiously redistributes wealth upward and into the hands of a few. To be sure, these few can influence some officials, as you point out, and this causes a debate within the party.

But many Democratic politicians–who have their jobs because their (wealthy) constituents wanted the policies they proposed and implemented–understand that allowing hedge fund managers to avoid taxes on so much of their income does not “promote the general welfare” or fit into their idea of collective action. Moreover, they know their constituents agree–they are paying their share, and want others to do the same.

Indeed, many people who invest in hedge funds but do not manage them may be wondering why so much of the money they generate finds its way into the hands of managers and not investors. They may see taxation as a good way to capture that money and use if for the kinds of policies Democrats favor–which in their experience makes their communities more prosperous. They get two things they value from their investments: increases in their own wealth, and revenues to pay for collective action.

This explains why we have seen no “Blue State tax revolt” (though we certainly do see pressure to maintain the balance that seems to promote prosperity), and why Democrats are pushing to end this tax loophole. Their wealthy constituents want them to.

12

Tom Maguire 11.07.07 at 9:11 pm

That appearance is buttressed by the fact that the WaPo does not make any attempt to present other arguments supporting the “loophole” or attempt to examine the high likelihood that this is a “feel-good” tax that won’t actually raise revenue.

For example, this CBO study explains that the capital gains treatment of “carried interest” mimics the tax treatment that would be incurred if the hedge fund investors:

(a) paid explicit management fees to the manager;

(b) lent the manager an amount of money equal to, e.g., 20% of the net investment;

(c) charged fair-market interest on that loan which offset the management fee;

(d) let the manager share in any capital gains at year end, based on the manager’s 20% ownership of the investment pool (financed by the loan in (b).

*IF* the contracts were drawn that way the manager woul dget mostly capital gains treatment.

Or, if a change in tax law prompts managers to re-draft their contracts to explicitly fit that model, well, maybe that is what they will do, in which case the revenue impact of the tax “increase” will be zero. However, the PR impact of the “increase” may well be positive.

Put another way, the WaPo is telling us that a hedge fund operator looking at an increased tax bill of $35 million made donations of about $50,000 to head it off. Either Congress represents a great bargain (possible!) or he just does not care that much, but figures for the price of walking-around money he can at least explain why Congress is wasting their time.

13

Thomas 11.07.07 at 9:43 pm

Henry, on fundraising: I don’t mean it as a provocation, and I don’t mean to say that Franc sees a “problem of money” in American politics. Rather, I meant to respond to your mistaken claim that Franc doesn’t mention political donations as a factor. He does, and the reference isn’t in code. On whether you’re making the same point here as before: you’re not. Now you say that Franc is giving a mistaken impression to readers (“he rather obviously is using evidence about the second to do his damnedest to imply the first”). Yesterday, however, your complaint was that Franc’s argument relied on a statistical fallacy, not an equivocation in terminology. Your complaint now seems to be that when Franc uses “constituent” he’s using it in a perfectly ordinary way that confuses you except when you use it that way, and when he says that the Democrats are the “new party of the rich” and offers an argument for it, you disagree, because you don’t think it honestly possible to use the phrase “party of the rich” except to refer to the Republican party. Again, all this seems a bit much to try to find a gotcha. Glass houses and all that.

14

Henry 11.07.07 at 11:01 pm

Thomas

Now you say that Franc is giving a mistaken impression to readers (“he rather obviously is using evidence about the second to do his damnedest to imply the first”). Yesterday, however, your complaint was that Franc’s argument relied on a statistical fallacy, not an equivocation in terminology.

What I said above:

Franc’s bogus op-ed is trying to say that evidence that Democrats tend to be elected by richer districts and states is evidence that Democrats are now the “party of the rich.” This is a claim that is, to put it kindly, not only intellectually flawed but roundly refuted by the empirical evidence that we have available.

“intellectually flawed” refers to the statistical fallacy. “empirical evidence” refers to the results reported in Gelman et al. Better trolls please.

As for the “Franc mentions political donations” canard, let’s go back to the text, shall we. Here’s the relevant discussion.

This new political demography holds true in the House of Representatives, where the leadership of each party hails from different worlds. Nancy Pelosi, Democratic leader of the House of Representatives, represents one of America’s wealthiest regions. Her San Francisco district has more than 43,700 high-end households. Fewer than 7,000 households in the western Ohio district of House Republican leader John Boehner enjoy this level of affluence.

The next rung of House leadership shows the same pattern. Democratic majority leader Steny Hoyer’s district is home to the booming suburban communities between Washington, DC, and Annapolis. It boasts almost 19,000 wealthy households and a median income topping $62,000. Mr Hoyer’s counterpart, minority whip Roy Blunt, hails from a rural Missouri district that has only 5,200 wealthy households and whose median income is only $33,000.

Income disparity – to use the class warrior’s favourite term – is greatest among the districts of lawmakers that lead each party’s campaign arm. Maryland senator Chris Van Hollen chairs the Democratic congressional campaign committee. With more than 36,000 prosperous households and a median income of nearly $70,000, his suburban Washington district even out-sparkles Ms Pelosi’s. In contrast, fewer than 5,000 such wealthy households are found in the largely rural district of his Republican counterpart, Tom Cole from Oklahoma. The median income there is only $35,500.

Franc mentions the “lawmakers that lead each campaign arm” as part of an entirely generic and sweeping claim about the leadership of the Democratic party and their districts. He only gets around to them third, after covering the first rank of Democratic leaders, and then the second. There’s not a jot, tittle, iota or scintilla in there about how they raise funds from the rich or indeed from anyone else, and it’s either extraordinarily stupid, or palpably dishonest (or perhaps some combination of these two) to go on maintaining that there is. Franc’s argument is perfectly straightforward – because Democrats represent richer districts than the average, they are _ergo_ the party of the rich. That this is a perfectly stupid and factually bogus argument is equally straightforward and obvious.

15

goatchowder 11.07.07 at 11:14 pm

The only constituents who matter to both Democrats and Republicans are the lobbyists writing huge campaign contribution checks.

We desperately need public campaign financing here, like the Clean Money bill in California or a similar bill that’s been lost in the shuffle in Congress for a while now.

16

leederick 11.08.07 at 12:15 am

There’s being a lot of equivocation around “vote for” and “represent”. There’s a difference between “do republicans represent richer voters” and “do richer voters vote for the Republicans”. Gelman doesn’t refute the first; not if you think that elected republicans don’t represent rich people who vote unsuccessfully for republicans who weren’t elected.

Rich people may be more likely to vote republican, but that doesn’t mean more rich people successfully voted for the republicans than the democrats. That’s another EI. If enough rich republicans are wasting their votes in blue states then the democrats who have been elected may well have got more support from the rich than republicans who were elected. Gelman was asking something like “who would have won if only the rich voted”, Franc seems to be asking somethin more like “out of the winners, how many rich people voted for them”.

I’m not saying Franc’s right – he’s vague and it’s not really that clear what his argument is. But I’m not sure by “the party of the rich” he means “the party rich people vote for”.

17

Thomas 11.08.07 at 12:17 am

Henry, which complaint are you making? It simply can’t be both–there’s either equivocation, or there’s a statistical fallacy, but not both. You do see that now, don’t you? So withdraw or correct your (sloppy?) comment above, don’t complain about my reading of it.

Can you offer an explanation for Franc’s inclusion of each party’s fundraisers, other than as a reference to the parties’ fundraising? Your explanation suggests that the names of random members could have been picked out of a hat. And of course contributions are raised from the rich–who do you think contributes to campaigns? I thought that was your complaint, but now I see we’re supposed to feign ignorance of the point when someone else mentions it.

The final bit is just your restatement yet again that “party of the rich” means only what you want it to mean and nothing more. Calling it names doesn’t help that.

18

bi 11.08.07 at 11:07 am

“‘party of the rich’ means only what you want it to mean and nothing more”

Holy batman, so Franc’s essay is in fact a Rorschach inkblot test, instead of an actual political analysis piece dealing with events in the real world?

What’s up with these trolls?

19

Henry 11.08.07 at 4:33 pm

thomas – it’s getting boring repeating myself but I will do so once more for the record. (1) – the only difference between my two posts is inside your head. (2) – your apparent claim that because Franc lists the head of the DCCC at the bottom of a list of Democratic party leaders he is making an argument about fundraising is risibly stupid. I really don’t know why you persist in this kind of nonsense. For your own amusement? It doesn’t do you, or your side, any credit – we like to see a _better_ and _more sophisticated_ form of trolling here at CT, and claims that could be taken apart by any reasonably intelligent 12 year old just don’t cut it.

20

Thomas 11.08.07 at 7:16 pm

Henry, where to begin? How about at the end. Do you think that your aggressive misreading of op-eds does you or your side any credit? Do you think bad faith is a virtue?

Perhaps it would be good for you to compare your comment to Andrew Gelman’s. Maybe when you stop acting like the reasonably intelligent 12 year old you can be more like him.

Finally, I will take your word for what you meant by “he rather obviously is using evidence about the second to do his damnedest to imply the first.” I read that as a claim that Franc is equivocating, but you say that you didn’t mean that. I’m not sure how to make sense of the sentence if you say that you meant something like “he rather obviously is using evidence about the second because he is relying on a statistical fallacy.” I mean, I don’t see the equivalence between those two formulations, but I’m not nearly so sophisticated as you. Now, back to your name-calling and hand waving.

21

bi 11.08.07 at 7:27 pm

“‘party of the rich’ means only what you want it to mean and nothing more”

“I don’t see the equivalence between those two formulations, but I’m not nearly so sophisticated as you.”

No, you’re just trying to go all philosophical with Platonic ideals and epistemology and critical analysis and all that crap when we’re discussing a _supposed political analysis piece_. Thing is, Franc’s supposed political analysis has zilch to do with the real world, so you just have to make up for that by blow a lot of fact-free smoke.

22

bi 11.08.07 at 7:29 pm

s/critical analysis/literary analysis/

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