Trump’s Case Is the Exception, Not the Rule

Former U.S. President Donald Trump was recently convicted on 34 felony counts, each punishable by a fine or up to four years in prison. The crimes at issue here were all of an economic nature, centering on the falsification of business records for the purpose of covering up hush money payments to the adult film actor Stormy Daniels—and improving his chances of winning the 2016 presidential election.

How are the finances of U.S. election campaigns regulated? How much does the United States spend on its criminal justice system compared to other countries? And how unusual is it for white-collar crimes to get prosecuted?

Those are a few of the questions that came up in my recent conversation with FP economics columnist Adam Tooze on the podcast that we co-host, Ones and Tooze. What follows is an excerpt, edited for length and clarity. For the full conversation, look for Ones and Tooze wherever you get your podcasts. And check out Adam’s Substack newsletter.

Cameron Abadi: The hush money payment was intended to cover up an affair that could have disrupted Trump’s original campaign for the presidency in 2016, which amounted to a campaign finance violation. How does the way that U.S. presidential campaigns are financed compare with the systems in other countries? It’s notoriously more expensive to run for office in the United States. Are the finances in those elections at least any more transparent? Are there any relative advantages that the U.S. system has?

Adam Tooze: They are relatively transparent, and what the transparency in the U.S. case shows is just how much of a sham the effort to regulate campaign financing is. I mean, it’s so much of a sham that I think to describe it as a regulated system is kind of absurd.

So there are rules, the most important of which is that any one individual can only give any one candidate $3,300. (During the 2016 election, it was $2,700.) But you can organize a lot of people to each give that amount. And you, as a rich individual, can give that amount to a number of politicians. You can also give to parties. You can contribute essentially unlimited amounts of money to so-called independent organizations that then campaign on issues, but only indirectly for a particular candidate. Corporations can give money. There’s no public funding for candidates that’s really worth applying for, and there’s no limit on advertising.

And so when you add all of that up, what you end up with is a system in which we can transparently track that about $14.5 billion was spent on the 2020 election in the United States, of which a minority—actually, slightly less than $6 billion—went to the presidential campaign. And the rest went on congressional campaigning. That’s $14.5 billion to the U.S. elections of 2020. Now, that is unusually expensive—though it isn’t the most expensive. And I’ll come to the most expensive one in a minute.

But it’s unusually expensive. And it’s interesting why others don’t spend as much. It isn’t simply because of regulations. So, you know, Germany has relatively few restrictions on giving money to politicians, but there’s ample public funding, and there are limits on advertising. So you end up with a low-level equilibrium in which it really just doesn’t make sense to pump billions of dollars into German political campaigning. It’s not obvious that it really yields any benefits.

Clearly, in every respect, why would anyone want to foster an American-style system? Because what it essentially does is to turn what should be a democratic race into a race for money, and it allows the weight of economic and social inequalities to manifest themselves in the electoral system. And the only economic benefit that you get, you know, is a large, overgrown, and overpaid system of political professionals who feed off this flow of billions of dollars during campaign years.

I mean, the money stays in the U.S. economy. It’s not wasted. It’s just, is this really a sensible application of talent, and does it distort the political process? And it clearly does.

The only country with a system that is—in fact, by the latest count—more expensive than the U.S. one, is, perhaps unsurprisingly, the biggest democracy in the world, which is India, where elections now cost more than they do in the United States. I think it’ll be a surprise if the recent general election in India didn’t, in the end, end up costing $16 billion. This is in an obviously much, much poorer society. And it’s a hotly contested political system. So it’s one where you actually have to fight for votes, as Prime Minister Narendra Modi has discovered to his cost, with a very disappointing result.

It’s a huge country, so obviously, elections are going to cost more. But they have also created an entire structure of corporate donations. They have vast advertising spending. And they have, more or less, open electoral bribery. So votes in India are more or less openly bought and sold in exchange for cash handouts and doling out liquor. And the consequence of this is, as you would expect—and this true of the U.S. as well—a hugely distorted system where the median wealth of winning candidates in the 2019 elections was 16 times higher than the candidates that they beat, and even those candidates are much richer than your average Indian.

And if you ask who, in a vast teeming society like India, has this kind of money to spend, it’s often people with connections to organized crime. And nearly 30 percent of the winners in the 2019 election in India had serious criminal cases filed against them at the time of their victories, compared to 13 percent of the competition. So it’s a system that encourages ruthlessness to the point of the willingness to stretch the law, and it reinforces structures of hierarchy and inequality, even within the context of what is in other respects, of course, an extraordinarily impressive display of mass democracy in a society that remains far, far, far poorer than the United States.

So these problems are not confined to the United States, and it is important to get the perspective right. The United States is no longer the most expensive democratic political system in the world.

CA: How much generally does the United States spend on its criminal justice system? And how is that compared to other countries?

AT: From the evidence I was able to gather, the United States doesn’t actually spend more than other places. I say that with a degree of surprise, because I experience the United States as extremely heavily policed by excessively equipped police officers. And of course, it’s notorious for having a huge and overgrown carceral system. But as far as I’m able to figure, the U.S. justice system—this is data from the Justice Department—costs the equivalent of about $305 billion a year. And that was in 2017.

And if you ratio that to U.S. GDP, that’s about 1.3 percent of GDP. And that appears to be almost exactly the same as what is spent in the European Union. And if you look at large European countries such as France, they also seem to have a remarkably similar rough breakdown between the different components. That’s between the police, the judiciary, and prisons. And if you look at costs per prisoner, they also seem to be roughly similar, in the range of $40,000 to $50,000 per prisoner per year.

So I think the way that this works is, essentially, the United States uses its higher GDP per capita to incarcerate more people at roughly the same cost. If the United States incarcerated fewer people, then its higher GDP per capita and the similar cost of incarceration would enable it to have a lower bill for justice. But instead, its preference reveals itself in incarcerating more people at the same price in an otherwise more productive economy. And so therefore, you end up with very similar levels of spending.

Putting people in jail is hugely expensive. It’s about $50,000 a year, per person. And that appears to be the kind of number everywhere. And so, how do you make these numbers add up? Well, the answer is that that’s a fixed cost, and the United States is more productive, so for the same share of GDP, the United States can have more people in jail. And that’s apparently how you make these numbers add up. But I was genuinely surprised. I really thought the United States’ spending would be considerably higher, notably on the carceral side. On the share of GDP, it doesn’t appear to be that different.

CA: In the Trump case, is it unusual that a white-collar crime is getting prosecuted at all? Does the United States approach white-collar crime categorically differently than other types of crime?

AT: If you look at federal arrest and criminal records, then it appears that white-collar crimes, in the strict sense, account for about 12 percent of federal arrests. The big categories of violent crime at one end, immigration, and drugs, those are the really big ones. They’re about twice as significant in the record. So white-collar crime does get prosecuted. Fraud gets prosecuted all the time. But it is one of the crimes for which when a case is referred to the prosecutor’s office, it has a relatively slight chance of being carried forward to trial.

So only about somewhat less than 40 percent of criminal referrals for white-collar crimes actually go to trial or to prosecution. The percentage is much higher, say, for immigration cases, for narcotics, where, in the case of narcotics, 73 percent of cases referred to the prosecutors are actually carried forward. In the case of weapons, it’s 68 percent. So for white-collar crime comparatively, it has slightly more than half the probability of actually moving forward.

This has a lot to do with the complexity of the cases. White-collar crimes are difficult to try, and obviously the prosecutors have to decide what they have the greatest chance of achieving success with. And what we have seen over time in the United States is quite a marked and alarming fall in the number of federal prosecutions for white-collar crimes. This does go to your point that Trump is, to an extent, unlucky to have found himself in this case.

As recently as 2010 and 2011, the United States was prosecuting about 10,000 white-collar crimes a year, and the figure is now down below 4,000 a year. So, it’s more than halved. It’s really quite a dramatic fall. So 4,000 a year, it’s 15 in a day. It’s not as though these cases aren’t being brought to trial at all, but they certainly are not being brought on the same volume as drugs cases, immigration cases, and cases of violence and the use of weapons.

And that, no doubt, has to do with the sociology of the system. This goes all the way down to the average punishment to expect if you’re found guilty of a white-collar crime. You know, if you’re white and college-educated, your chances of getting a prison sentence of four years or more are quite slight. If you’re Black or you have a poor education, your chances are much, much more serious of actually finding yourself in jail.