Why Billionaires Donate So Much Money To Politicians

Why Billionaires Donate So Much Money To Politicians

If you're paying attention to the presidential fund-raising race, you might be thinking: Hey! I could sure use $100 million!

That's the sum casino mogul Sheldon Adelson is willing to spend to boot Barack Obama out of the White House. Whether he gets his wish or not, Adelson will likely become America's most lavish campaign funder. 

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Adelson and his wife Miriam have already donated more than $30 million to Republican SuperPACs, the third-party groups that collect unlimited funds from wealthy donors to support any candidate or issue they choose. Adelson supported Newt Gingrich in the former House speaker's quixotic primary campaign, and he's now begun to funnel money into SuperPACs such as Croosroads GPS and Restore Our Future, which run ads on behalf of Mitt Romney and other Republicans. He has reportedly told fundraisers his donations could ultimately hit the $100 million mark.

Billionaire donors obviously favor government policies friendly to their interests, such as low taxes andless regulation for business. So it's not surprising that many corporate figures who feel Obama is hostile to business want to send him packing. Other big Republican donors include Charles and David Koch of the energy conglomerate Koch Industries, Texas businessmen Harold Simmons and Bob Perry, and California entertainment and real-estate honcho Jerrold Perenchio. All have donated millions so far, according to the Center for Public Integrity, with much more where that came from. Obama's well-heeled donors include many from the Hollywood set, plus unions representing teachers and blue-collar workers.

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But what drives the rich to support politicians? Rich donors can be far less pragmatic in their political avocations than in their business or personal lives, sometimes supporting dark-horse candidates with very little chance of winning. They may not just be aiming for influence over government policies that could enhance their bottom line. Wyoming mutual-fund investor Foster Friess, for example, spent more than $2 million keeping Rick Santorum's primary campaign alive, even though handicappers gave Santorum low odds against front-runner Romney. Investor Peter Thiel, an early Facebook funder, has given nearly $2 million to a Ron Paul SuperPAC, even though Paul has no chance as a Republican contender..

It could just be more of a power trip than anything else. "Candidates start agreeing with you," says Robert Shapiro, a senior fellow at Georgetown's McDonough School of Business, Democratic strategist and former Commerce Secretary. "It's psychic satisfaction for megalomaniacs."

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For people whose every material fantasy has been fulfilled, one of the few things left to obtain is power. Many billionaires already dominate their firms, industries, families or philanthropies. Helping swing the election of a president, or the makeup of Congress, or even the rise or fall of a governor, may be one of the few challenges left to master.

Besides, you've got to spend all that money somehow. Most billionaires already have more homes, planes, cars and other appurtenances than they can use. Assets of $5 billion will generate income of $250 million per year if the rate of return is just five percent, which is very modest for investors with the world's most capable hedge-fund honchos and private wealth managers at their disposal. Much of their income is taxed as capital gains, at the friendly rate of just 15 percent--less after deductions.

Forbes estimates that Adelson's net worth is more than $20 billion, which suggests he earns more than $1 billion per year by doing nothing except shepherding his investments. So giving $100 million to political candidates this year would leave him with at least $900 million to live on. "It's like the average person giving $100," says Shapiro. Except $100 million buys you a lot more.

Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.