Doubling Down

Introduction 

There is a long tradition of victorious presidential candidates rewarding large donors with positions of influence or prestige in their administrations. Donors most interested in affecting policy, however, might prefer spots on an incoming president’s transition team, which plays a key role in determining the trajectory of the new administration, especially through its selection of appointees.

As an instructive example, Enron Corp. CEO Kenneth Lay was on the transition team of President- elect George W. Bush. Lay was highly influential in determining key appointees relating to oversight of the energy sector, including spots on the Federal Energy Regulatory Commission. Lay and other Enron officials also helped shape the administration’s energy policy, which ended up including numerous features requested by Enron. Among them, in keeping with Lay’s request, Bush opposed an emergency request by California Gov. Gray Davis (D) to cap wholesale electricity prices while the state was suffering from skyrocketing prices and rolling blackouts.

By the end of 2001, Enron submitted what was then the largest bankruptcy filing in United States history. Subsequent revelations showed that Enron had engineered electricity shortages in California. Lay was convicted on multiple counts of fraud and conspiracy in May 2006. He died less than two months later.

Lay had been a “Pioneer,” a designation given by Bush to those who raised at least $100,000 for his presidential campaign. Employees of Enron contributed more to Bush’s 2000 campaign than those of any other firm. Although the extent of Lay’s role as an administration adviser was undoubtedly unusual, contributors often make up a large part of incoming presidents’ transition teams. Forexample, more than half of the 470 people on George W. Bush’s transition team were contributors to his campaign. Eight years later, 56 percent of the nearly 400 members of President-elect Barack Obama’s transition team had contributed to his campaign.

The ability of individual contributors to influence the outcome of this year’s presidential electionwill potentially be greater than for any election since the enactment of campaign finance reforms in the wake of the Watergate scandal in the mid-1970s. That is because individuals and organizations can spend as much as they want to support candidates as a result of the U.S. Supreme Court’s 2010 decision in Citizens United v. Federal Election Commission and such “outside spending” is becoming an ever greater part of campaigns.

Most outside spending is conducted by super PACs (although a significant portion is done by 501(c) nonprofits that do not have to disclose donors, but face some restrictions on the extent of their activities). It has become customary for super PACs to form with a purpose of supporting a specificcandidate, often with the candidate’s endorsement. All but two of the candidates who sought the Republican or Democratic presidential nominations this year benefited from at least one dedicated super PAC.