Campaign finance reform is the subject of ongoing public policy debates in many modern democratic societies. In the United States, individuals and interest groups from across the ideological spectrum have proposed or embraced a variety of campaign finance reforms in attempts to alter the electoral landscape. At least one recent presidential candidate highlighted the issue of campaign finance reform which appear to resonate with voters, as part of a broader strategy to secure his party's nomination. Many of these reforms propose to alter the sources and uses of financial resources in Congressional elections.

This paper examines several hypotheses that have been proposed to explain the existence and growth of legislators' campaign “warchests”. We examine the sources and political consequences of warchests in US House elections over the period of 1978–1998. Briefly, our findings are as follows. First, we find little evidence in support of the deterrence hypotheses. Second, short-term electoral forces-scandals, partisan tides, challenger quality-accounts for a large fraction of the explained variation in savings. Third, incumbents act as if they have finite, “target” levels of total savings. Fourth, some of the accumulated savings before 1992 appear to be for retirement. Finally, we find considerable evidence that many of the largest warchests are accumulated to help members run for higher office.

Interest groups cannot enforce contracts with legislators to work in their favor since fee-for-service agreements would be considered bribery. When such contracts are not available, a system of specialized, standing committees can provide a second-best way to maximize contributions, since such a system facilitates repeated interactions and reputational development between PACs and members of the relevant committees. Using data on PAC contributions by competing financial services interests to members of the House Banking Committee, we find evidence consistent with key implications of our model of committees as reputational-development devises. We then interpret important episodes in the evolution and development of the committee system during the twentieth century from the perspective of our theory. We focus on the revolt against House Speaker Cannon, which resulted in the birth of the modern committee system, and the post-Watergate reforms. We also consider broader implications of this approach for analyzing term limits, corruption, and party strength. JEL classifications: D72, D78, G28.

This paper examines the political activity of US defense contractors over the years 1980–1994. Using econometric techniques to account for both fixed-effects and selection, I examine the industry determinants and distribution patterns of political action committee (PAC) contributions to the US House of Representatives. The analysis finds that the size of the defense budget is a primary factor explaining political activity across the industry as well as within individual firms; firm size, dependency on defense, and defense contract awards explain much less. I also find that firms appeared to change their political strategies in the face of large exogenous shifts in the US defense budget. While defense expenditures were on the rise, defense firms spread their contributions relatively broadly over the defense committee system; when the budget fell, however, the firms switched strategies and targeted committee leaders. An incidental contribution of the paper is an empirical application of the trimmed least absolute deviations estimator for fixed-effects models with selection.

There is a vast empirical literature on the allocation of corporate PAC contributions in Congressional elections and the influence that these contributions have on the policy-making process. The attention given to PAC contributions is far in excess of their actual importance. Corporate PAC contributions account for about 10% of Congressional campaign spending and major corporations allocate far more money to lobbying or philanthropy than their affiliated PACs make in contributions.