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The Kochs are retreating from national elections. Here's what we should learn.

Charles Koch.
Charles Koch.

The Koch brothers appear to be retreating from national electoral politics. This is what Tim Alberta and Eliana Johnson are reporting in a major story in National Review. Not only are the Kochs mostly pulling out of the 2016 election, but they are, as one insider told the reporters, planning a "return to their roots" in advocacy and education.

They will go back to funding think tanks and research institutes as they always have, and doing the state advocacy work where they have been most effective.

The Kochs' retreat from national electoral politics is an important story because it is a clear lesson about where money is least effective in advancing policy (big dollars in national elections) and where it is most effective in advancing policy (indirectly through research institutes, and at the state level). It's a lesson everybody concerned about the role of money in politics needs to pay close attention to.

How the Kochs learned their lesson

Flash back to January 2015. Charles G. and David H. Koch announced that they and their consortia of super-wealthy libertarian friends were going to spend nearly $900 million on the 2016 election, more than double the estimated $400 million they spent in the 2012 election and more than the $657 million that Republican Party committees had spent in 2012. It was enough to make some wonder whether the Kochs were now effectively the new third party in America.

But then something unexpected happened. Republican primary voters picked Donald Trump, a candidate whose nationalist populism was pretty much the opposite of the libertarian vision the Kochs had for the Republican Party.

It was enough to lead Charles Koch to muse publicly that perhaps he could support Hillary Clinton for president. And not only that, but, as Alberta and Johnson report, the Kochs also started to worry that their investments in Congress hadn't paid off:

The Kochs believed that the [Republican] takeover hadn't changed a thing. No conservative policy revolution was happening in Congress. They couldn't even stop a reauthorization of the Export-Import Bank, a symbol of Washington's "crony capitalism." It was just more of the same.

Many expected that even if the Kochs didn't spend on the presidential election, they might at least spend in congressional races. But Alberta and Johnson now cast doubt on this:

With Trump atop the ticket, some Koch operatives view Wisconsin and Hispanic-heavy Nevada as lost causes. And the network has already made clear it won't spend on behalf of many GOP incumbents, such as Kelly Ayotte in New Hampshire and John McCain in Arizona, due to significant policy differences.

What the Kochs' disappointments tell us about money in politics

Perhaps the most obvious lesson here is that it's harder than it looks to affect political change by throwing even hundreds of millions of dollars into national elections.

Certainly money matters in elections. But it typically matters in a diffuse sense. Candidates who run are those who can raise large sums of money from wealthy donors, which means that they have to be broadly appealing to some set of wealthy donors. This makes certain candidates unlikely and keeps certain issues off the agenda.

It is far harder to get candidates to proactively take on and push for unpopular policy positions on competitive and highly salient issues, which is precisely what the Kochs had hoped to achieve.

For example, it's really hard to kill the Export-Import Bank when the chamber of commerce and a large array of politically active corporations want to keep it. And it's really hard to achieve major libertarian priorities like cutting entitlements when a really large percentage of voters want to do the very opposite.

Meanwhile, lower-salience issues like, say, the Ratepayer Protection Act of 2015, to limit the Environmental Protection Agency's regulation over power plants (which Koch Industries lobbied on) receive far less public scrutiny. But Koch Industries also doesn't need to drop hundreds of millions of dollars to influence policy here. The company just needs to hire a few smart lobbyists to join with all the other energy companies in a big coalition.

In fact, this is how most Washington influence actually works. Yes, energy companies all contribute some money to candidates (enough to be taken seriously and to build networks of reciprocity). But they spend most of their resources on lobbyists to surround congressional offices with information and argument on why the EPA is totally misguided, and why this bill should be the priority among many other possible bills.

Too much money on campaign contributions is probably wasted, and may even be counterproductive. As the Kochs have found, big spending attracts negative publicity, which has lots of side effects. This is one reason why corporations spend 13 times more on lobbying than they do on campaign contributions.

Companies also spend large sums of money funding policy research, shaping the intellectual environment around their favored issues. Creating a veneer of expert consensus for policy typically has far more impact than large-scale campaign spending. Which is why companies do much more of it.

Finally, the Kochs understand that the real bang for your buck is often at the much less crowded state level, where there is far less attention and therefore it is far easier to have a direct impact. Theda Skocpol and Alexander Hertel-Fernandez have documented some of this impact in new research on the Koch network in the states.

So ... focus on research and lobbying, and pay attention to the states. This appears to be the wisdom that the Kochs are rediscovering. As Alberta and Johnson note in their article:

The [Kochs] had always believed that building the intellectual foundation for libertarian ideas in think tanks and universities — and supporting important public-policy initiatives at the state and local levels — paid greater long-term dividends than spending on elections

If the Kochs do indeed retreat from the national election scene, we will likely hear far less about them, as we did before they ventured into federal election prominence. After all, major spending on national elections makes news. It provokes outrage.

But like other billionaires before them (e.g., George Soros, Tom Steyer), the Kochs are now realizing that spending large sums of money on national elections doesn't provide much of a payoff. Lobbying, research, and state politics are a far better bet, in good part because they get far less coverage and attention.

The Kochs are telling us how money actually works in politics — which investments pay off and which ones don't. Hopefully the rest of us will learn the same lesson.