The Baseline Scenario

Who Cares About the Clinton Foundation?

By James Kwak

Imagine that while George W. Bush was governor of Texas and president of the United States, various people and companies decided to write him checks for hundreds of thousands of dollars, just because they thought he was a great guy. Those people and companies, just coincidentally, happened to have interests that were affected by the policies of Texas and the United States. But when he thanked them for their money, Bush never promised to do anything in particular for them. You would be suspicious, right?

Now, that’s roughly what has been happening with the Clinton Foundation. Various people and companies have been writing checks for millions of dollars to the Foundation during the same time that Hillary Clinton was secretary of state and, following that, the most likely next president of the United States—a title she has held since the day Barack Obama’s second term began. (The Clintons finally decided to scale back the Foundation earlier this week.)

There are two main defenses for the Clintons’ actions. Both are distressingly naive.

One, made by Kevin Drum among others, is that Clinton didn’t actually do any favors for her Foundation donors. So even if people were trying to buy access and influence, they didn’t get any, and there’s nothing to see here.

First of all, there is evidence, some compiled by Jeff Stein, that Foundation donors were more likely to gain access to the secretary of state. On an individual basis, I’m sure that each of these meetings could be justified . But the same thing is true whenever a lobbyist arranges a meeting for a client with a member of Congress. The question is whether giving money increases your chances of getting through the door. We’ll probably never have the data you would need to answer that question.

More generally, what matters the impact that a donation has on the donee. Anyone who will want to raise money in the future naturally finds it difficult to take actions contrary to the interests of the people who are most likely to give that money. Donating to the Clinton Foundation is a great way to signal that you might donate more money in the future. And that means that, somewhere in the corner of her massive brain, Hillary knows that making a certain decision will reduce her foundation’s future revenues. That’s why we worry about campaign contributions, remember? If you want to argue that Hillary Clinton is so incorruptible that the standards we apply to other politicians shouldn’t apply to her—well, be my guest.

The second defense is: The Clinton Foundation is a charity, for God’s sake! It helps people! This is even more naive, for a simple reason that I don’t think has been emphasized enough.

The Clintons are vastly wealthy. Since 2007, they have earned more than $150 million. They have far more money than any family can reasonably consume in a lifetime. Bill and Hillary are getting on in years, they only have one child, and she is married to a hedge fund manager. When you have that much money, a dollar in your foundation is as good as a dollar in your bank account.

Once you have all your consumption needs covered, what do you need money for? If you’re a Clinton, you want to have an impact in the world, reward your friends, and burnish your legacy. A foundation is an excellent vehicle for all of those purposes, for obvious reasons.(That’s why it’s hardly a sacrifice for Mark Zuckerberg to donate the vast majority of his Facebook stock to a private company that he controls.) It is also an excellent way to transfer money to your daughter free of estate tax, since she can control it after you die. The fact that it may or may not do good things for the world is irrelevant. A $1 million donation to the foundation might as well be a $1 million donation to you, because, at the end of the day, your marginal $1 million is going to your foundation either way.

So the real question is this: Do you think it would be appropriate for people and companies affected by U.S. policy to be writing $1 million checks directly to the Clintons? If the answer is yes, then you should be against any campaign finance rules whatsoever. If the answer is no, you should be worried about the Clinton Foundation.