The Freakonomics of Congressional Politics

University of Chicago economist and John Bates Clarke medal-winner Steve Levitt's 2005 bestseller, "Freakonomics," examined many everyday situations from an economist's perspective. So popular and influential was Levitt's book that a recent Wall Street Journal review of yet another economist's book in the same vein, this one dealing with parenting, bemoaned the flood of wanna-be imitators in the wake of Levitt's original work.


There's one topic Levitt omitted from his four-year old work, his treatment of which I would love to read. That is, of course, the economics of Congressional office-holding.


I'm not a PhD in economics, but given how much of it I studied to earn my two business degrees, I might qualify for a minor in it. In any case, in Levitt's absence, let me try to begin reasoning why people run for US Senate and House seats and, more to the point, continue to run and sit.


It seems logical that there are three possible reasons for someone running for a Congressional seat:


1. They have a burning desire to work on and/or influence the resolution to one or a few key issues.


2. They have an ego the size of Texas, and believe they should be the Representative or Senator entrusted with the job of working on all federal issues for their district or state.


3. They expect to make a healthy, risk-adjusted financial return on the time and money they spend running for and holding the seat in question.


The first reason, while quaint, doesn't seem to be true, for long, anyway, anymore. The second reason doesn't rule out the third. Or even the first.


Let's face it- we all pretty much suspect, either explicitly, or implicitly, that it's the third reason that drives most of our US Representatives and Senators most of the time.


How would you determine this? Well, ideally, you'd possess perfect information on answers to the following types of questions:


1. Is the percentage and/or scalar increase in net worth of a Representative or Senator positively related to their time in office?


2. What is the average net return to Representatives and Senators of holding their seat, expressed as the change in their net worth over time, or their income stream, as a function of the stream of payments over time to get and remain elected?


3. Is the average net return to a Representative and Senator better than that of a similarly-aged, educated and IQ'd person in their district or state?


4. Adjusted for education, intellect, and other relevant factors, how does the average growth in net worth for Congressional officeholders compare with the general population?


I'm sure there are more questions that would provide evidence for the hypothesis underpinning my third reason for running for a Congressional seat. But these give a general idea as to how you'd go about quantifying the value and financial impact of holding a Congressional seat.


Just sitting here, reflecting on a conversation about this topic earlier this week, I find it pretty hard to believe most Representatives and Senators don't expect graft, corruption and various second-career lobbying income to more than repay them for the rising expenses of running for and remaining in office.


How could a US Representative possibly afford to spend, every two years, such significant sums of money, if s/he didn't expect to recoup that ongoing expense in some way? Surely, it's not coming from their Congressional salary. Probably not even from their lush, uniquely-federal pension and benefits plans.


No, it has to be something else.


As I mused in this recent post,

"Having seen today's full-time, professional political class in action at the federal level, I believe the Founders would prevent that through term limits, limits on the amount of time during the year in which Congress could be in session, or draconian limits on Congressional pay, with the removal of a pension, in order to reinforce the nature of the offices as service to the citizenry, rather than a lifetime career."

Sometime in the last century, Congress passed itself a pension plan. As a friend of mine opined, they probably justified it with reasoning something like this,

'We have to provide a pension, and competitive pay, so we can (continue) to attract the best people to serve (i.e., make a career out of serving) in Congress.'

Consider, however, the recent demise of former Senate Minority Leader Tom Daschle's aspirations to be Wonderboy's healthcare czar. Daschle forgot to report and pay taxes on hundreds of thousands of dollars of gifts in the form of a car and driver, courtesy of one-time cable mogul and liberal Democratic fundraiser Leo Hendry. It was even reported in the press that Hendry rather crudely put forth his own slate of candidates for hire, including, of course, himself, should his political stooge, Daschle, make it into the West Wing.

Daschle has been lucratively perched in some Washington law firm as a lobbyist, since his ouster from the Senate a few years ago.

See how it works? Coming from hopelessly-poor South Dakota, Daschle didn't even bother to return "home." He quickly settled into the D.C. lobbying landscape and promptly turned his former Senate seat into gold by using his access to former colleagues on the Hill.

I'd love to see Steve Levitt tackle this question. The answer would be, to paraphrase Mastercard, "priceless."