Smart Money Bets on Dems

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Political contributions are one of the big mysteries in American politics. Why would anyone give to their favored candidate or political party when they could simply free-ride on the donations of others? It’s even more of a mystery than voting, which strikes most political scientists as irrational since the chance of any one vote making a difference is miniscule. Big donors are making an even larger sacrifice than voters, yet the chance of any individual donor’s contribution making a difference is probably just as miniscule.
The most likely answer is that political giving isn’t like voting—whereas voting is anonymous, giving is disclosed. This means political giving can have effects that voting cannot, such as winning favor with politicians receiving the contributions. This, in turn, suggests that giving patterns should differ from voting patterns because the two actions are differently motivated. Voting is a symbolic act whereby voters express a political preference and engage in solidarity with other citizens. You don’t get points for voting for winners or losers (unless it just makes you feel good to have voted for a winner). Giving is a self-serving act—so it makes a lot more sense to give to winners than losers. Think of it this way: voting is like praying or hoping; giving is like betting.
This year it seems that hedge funds and private equity shops are going long on Democrats.

Of the $7.4 million contributed by employees of the 100 largest hedge funds and 50 biggest buyout firms in 2005-06, Democrats received $5 million, Federal Election Commission records show.

That’s a pretty big bias toward Democrats. It seems that the smart, the quick and the agile are betting the Republicans will get smashed soon.

Hedge Funds, Buyout Firms Favor Democrats With Campaign Money
[Bloomberg via WSF]

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