The Business of America is Lobbying. Lee Drutman.
During the past forty years, wealthy special interests have managed to create a cycle of increasing influence on US government leading to ever-increasing inequality (as well as decreasing protection for the environment and the economy). This influence is exerted by a variety of means, such as lobbying, campaign contributions, think tanks, university institutes, media outlets, and quasi-grass roots groups, all generously funded by the fruits of inequality. Author Lee Drutman focuses on the increasing importance of corporate lobbying as a component of this special interest influence on government. Lobbying by politically active groups increased from $200 million to $3.55 billion per year from 1983 to 2010 (corrected for inflation), of which more than three-quarters represented corporate America.
Prior to the 1970s, few corporations had their own lobbyists, and the trade associations that represented them were of limited scope. In the late 1960s and early 1970s congress passed a series of environmental and consumer regulations that business lacked the capacity to stop. This awakened the sleeping giant. Between 1971 and 1982, the number of firms with registered lobbyists in Washington grew from 175 to 2,445. The number of registered lobbyists in Washington reached a peak of 14,849 in 2007. Corporations’ approach to lobbying was initially merely reactive against their perceived enemies in labor and government. But as labor was defeated and government became much more pro-industry, corporate lobbying became more proactive and particularistic to exploit government as a source of profits and assistance. Also, lobbying increased from its own internal momentum (stickiness). Once fixed start-up costs were met, marginal costs for additional lobbying declined. Lobbyists themselves drove the process with the advantage of asymmetric information to sell their services to managers.
Corporations now have more political power than at any time since the 1920s and are favored by the status quo. Any major policy change now generally requires mostly one-sided lobbying, which is increasingly unlikely in today’s dense and competitive lobbying environment. The need to respond to many lobbyists also makes legislation more complicated. This complication hides the growing tendency to redistribute resources upward to the wealthy and the organized. Also, it overwhelms the limited capabilities of congressional staffers who must then rely on lobbyist specialists for information and drafting of bills. This imbalance is exacerbated by the siphoning off of more and more talent from the public sector by the much higher salaries in the lobbying industry. Between 2001 and 2011, almost 5,400 congressional staffers had registered as lobbyists with increased salaries of up to $200,000 to $300,000 per year.
Mostly, these changes benefit corporate interests because they increase the importance of money. While other interests may enjoy more legitimacy, corporations have substantially more money and easily overwhelm these interests. In 2012, corporations spent $56 for every $1 dollar spent by labor unions and $34 for every $1 spent by diffuse interest groups and unions combined. Financial companies that lobbied the most aggressively on mortgage lending and securitization in the 2000s subsequently engaged in the riskiest lending practices and were most likely to be bailed out after the crisis. Studies have shown that the more firms lobby, the lower their effective tax rate, and that policy outcomes lean toward corporate interests and wealthy donors.
Numerous examples are provided to show the overwhelming influence of high priced lobbying. Since the Tax Reform Act of 1986, more than 100 acts of congress have made almost 15,000 changes to the tax code. Consequently, in 2010, GE was able to use 1000 employees to file a 57,000 page tax return that enabled it to pay no federal taxes. The 2003 Medicare Modernization Act was essentially written by lobbyists to provide a prescription drug benefit, but without bulk government purchasing. This bill was a boon to industry of $242 billion over ten years at a cost of a mere $130 million in lobbying in 2003. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ran to 383,013 words after lobbying by 900 unique organizations, including 509 corporations and 201 trade associations. The Affordable Care Act of 2010 ran to 327,911 words after lobbying by 1,483 unique organizations, including 514 businesses, 242 institutions (mostly hospitals), 224 trade associations, and 162 professional associations.
Major lobbying operations in Washington are mostly conducted by the very biggest companies of which 127 account for almost half of lobbying expenditures. The top 20 companies on average employ 18 full time lobbyists and contract with 28 different Washington lobbying firms. On average, they have weighed in on 17 different issue areas, before 20 agencies, and on 63 different pieces of legislation. In 2007 Blue Cross/Blue Shield had the biggest lobbying presence with 56 in-house lobbyists and contracts with 30 different Washington lobbying firms. Still, the majority of publicly traded companies (close to 90%) do not have their own lobbyists and instead rely on trade associations for representation. Large companies participate in trade associations, as well. They do so to avoid ceding leadership to others, for coordination among companies for a strategy of divide and conquer, and to obtain cover on difficult issues for which they do not want to be up front. In 2007, 1,820 lobbying firms represented clients in Washington, but 75% had three or fewer registered lobbyists. The top 20 firms (about 1%) had from 26 to 145 registered lobbyist and took in 25% of lobbying revenue.
Recent reforms have included the 1995 Lobbying Disclosure Act, the 2006 Honest Leadership and Government Act (which slowed the revolving door for senators and staffers to lobbying firms and limited gifts but not campaign contributions from lobbyists), and Obama’s exclusion of registered lobbyists from his administration. These reforms have accomplished very little because they addressed the wrong problems. The author maintains that there is not much outright quid pro quo corruption or bribery. Instead, he identifies three genuine problems that need to be fixed: 1) Balance of power. The fight is not fair when corporate interests spend $34 for every $1 of unions and diffuse interests combined. 2) Complexity and asymmetry of information. When government actors are forced to rely on outside lobbyists, outcomes are distorted. 3) Particularism. Companies are increasingly oriented towards narrow, rent-seeking outcomes that crowd out the capacity of the political system to address larger problems.
The author goes on to suggest three solutions: 1) The Madisonian Solution—the best way to counter faction is for faction to counteract faction. This is complicated by the markedly unequal resources between corporations and their opponents and by the problem of collective action when issues affect a handful of companies greatly but most citizens only marginally. The solution would involve government subsidies to even the fight, similar to the use of court-appointed lawyers for indigent criminal defendants. One approach would be for a diffuse interest group to show that its perspective was shared by a threshold percentage of citizens (perhaps 25,000) and that it was outspent by a threshold ratio (perhaps 4 to 1). Another approach would be to establish an Office of Public Lobbying to identify and represent under-represented voices.
2) The Genuine Public Conversation Approach. In 1946, Congress passed the Administrative Procedure Act that resulted in most executive agencies requiring public comments from all interested parties and public responses from agencies before a rule could be finalized. What if Congress passed a Congressional Lobbying Procedure Act that established a uniform process for congressional lobbying? This process could require that advocacy be posted within 48 hours on a central website that would include a summary of the meeting, who attended, and what was advocated. This real-time electronic transparency would enable watchdogs to identify narrow provisions that are now hidden in legislation until they become very difficult to oppose or change. Also, it might make congressmen more wary about sneaking rent-seeking provisions into bills, and it might help to limit the complexity of bills.
3) Increasing Government Policy Capacity—which would limit the need for staffers to turn to lobbyists for help. Congressional policy capacity has declined while policy complexity and specialization have increased. Hence, Congress needs to improve working conditions and salaries of congressional staff to attract and retain more top policy talent. Congress could significantly increase the budgets of the Congressional Research Service (CRS) and Government Accountability Office (GAO) to increase their ability to provide independent expert advice and research. Congress could partner with universities, such as by providing a congressional clerkship program analogous to the judicial clerkship program. Finally, Congress could fund policy research consultants that would be available to congressional offices as the lobbyist equivalent of public interest law firms.
The author spends little time on campaign finance because corporations spend roughly 13 times more on lobbying than they do on PAC contributions. However, he does note that members of Congress spend far too much time fundraising. In the 2012 campaign cycle, 28% of the nearly $6 billion in contributions came from 0.01% of the US population. Those who can appeal to these donors can run for office, and those who can’t usually can’t. Appealing to wealthy donors involves taking policy positions they like and not wasting time on issues that don’t concern them. Partial or full public funding of elections (as is the norm in almost all other industrialized democracies) would help to level the playing field. However, it would not solve the expertise, complexity, and revolving door problems, and would likely push corporations to redouble their efforts for influence in other areas, including lobbying. Hence, focusing only on electoral reform has limited benefit and needs to be part of a larger package to reform the greatly exaggerated influence of wealthy special interest groups on government.
