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Money isn’t often seen as the great equalizer — especially when it comes to politics.

But in into the economic consequences of Citizens United vs. Federal Election Commission, in which the U.S. Supreme Court lifted most restrictions on campaign spending, Stanford's Greg Buchak casts doubt on the idea that money in politics is universally a zero-sum game.

Instead, the researchers find that Citizens United allowed more companies, especially those that were smaller and younger, to participate in the political process at the state level. This, in turn, diluted the power of established special interests, which had long relied on lobbying and personal ties to lawmakers to help sway policymaking. The court ruling also shook up state elections: Incumbent governors and state legislators lost their bids for re-election at higher rates, impacting Democrats and Republicans similarly.

The increased turnover shifted the focus of state policymaking, according to Buchak. Elected officials were more prone to adopt pro-growth laws and regulations, and avoid controversial social issues, to appeal to a broader voter base. The growth-focused agendas paid off as businesses expanded, lifting total output within states by 2 percent on average.

Buchak calls the study results “very surprising,” especially the finding that workers benefited directly from Citizens United — a result that challenges assumptions that big business and other deep-pocketed donors would gain the most from Citizens United.

“We thought, like everyone else did, that Citizens United would help businesses and that workers would be worse off in the end,” says Buchak, who is an associate professor of finance at Stanford Graduate School of Business. “As it turns out, both are better off.”

Biggest winners: New corporate donors

When Buchak and his coauthors — of the University of Toronto, of Columbia Business School, and of The Federal Reserve Board — set out to study how politics impacts workers versus employers, they found an ideal experiment in the Citizens United case: 23 states had campaign spending limits that the Supreme Court invalidated on the grounds that political donations constitute free speech. The remaining 27 states did not have restrictions, so they were unaffected by the decision.

The real-life split allowed the researchers to compare the two groups of states and link the economic outcomes they find to Citizens United. The researchers collected data from nearly 20 sources, including the Internal Revenue Service and The Bureau of Economic Analysis. They also ruled out other potential reasons for the increases, including the economic recovery from the 2008-09 financial crisis and the surge in oil and natural gas production beginning around 2010 known as the “shale boom.”

The researchers conclude that the economic benefits they identify were the direct result of Citizens United, which enabled new types of donors to seek political influence and increased turnover in state government. As politicians sought to appeal to a broader donor base, they were more likely to adopt more centrist policies focused on economic growth.

“Citizens United appears to have motivated politicians at the state level to avoid socially divisive issues like gay marriage and abortion and work together on economic policies that would at minimum deliver a small benefit to everybody,” Buchak says.

Among the biggest beneficiaries of these pro-growth policies, the researchers find, were companies that either weren’t around or weren’t active in politics when the Citizens United decision came down.

Jobs and wages grew the most, they show, at companies that were 5 years-old or less. Earnings for workers at these companies grew almost twice as fast as incomes among employees of similarly sized older businesses. And among large businesses that had no known political connections prior to the court ruling, wages for workers grew more than they did for employees at large companies with longstanding political ties.

“The turnover in state government that followed Citizens United appears to have led to laws and regulations that were most beneficial to companies that were no longer political outsiders,” Buchak says.

The Citizens United paradox

Even so, the study has a few important limitations. One is that the data analysis ends in 2016, when Donald Trump was elected president. The political landscape has changed significantly since, and it’s not just that polarization has deepened and campaign spending has skyrocketed. Companies, for example, are more likely to take a stance on social issues, like Google’s recent confrontation with Florida Governor Ron DeSantis over the state’s so-called “Don’t Say Gay” law and the company’s special tax status.  

“A lot of issues in the 2024 election are very different today than from what they were when Trump was elected,” Buchak cautions. “Politicians and coordinated special interests are much more engaged in social issues, and we don’t yet know what the economic effects of that may be.”

Also, although the study finds that Citizens United boosted wages, hiring, and business incomes, that doesn’t mean that the pro-growth policies that enabled those benefits are necessarily beneficial in the long run.

There’s one more critical caveat, says Buchak: He and his coauthors aren’t saying that unlimited campaign donations — or even money in politics more broadly — are good for democracy just because, as their Citizens United analysis shows, they contributed to economic growth.

“If no money and no outside influence in politics are the best-case scenario in a democracy,” Buchak says, “Citizens United took us from, say, 10th best to 9th best.”