The Subprime Mortgage Crisis and the Tea Party Movement

• In Event: Donors, Lobbyists, and Democracy

Abstract

Prior work suggests that voters increasingly support extremist politicians following economic shocks. To see whether campaign donors respond similarly, I link nationwide campaign finance and real estate transactions to examine how localized exposure to the subprime mortgage crisis affected Republican donors’ support for Tea Party candidates, who oppose government relief for distressed homeowners. Preliminary difference-in-differences findings include: 1) Republican donors in high-foreclosure neighborhoods gave less to Tea Partiers, but not to other GOP candidates; 2) this is inconsistent with economic self-interest as few donors were at risk of mortgage default; and 3) in-group bias may be relevant as donors in distressed neighborhoods disproportionately rejected Tea Partiers when their neighbors are less likely to be black or young adult residents. Because both campaign donors and their neighborhoods experience economic shocks differently than the rest of the nation, donors may provide distinct electoral incentives in times of economic distress.

Author

• Zhao Li, Princeton University