Recent reports reveal that: GOP Presidential candidate Newt Gingrich received nearly $2 million for activities (not technically within the definition for lobbying) resembling lobbying, and former GOP Congressman Tauzin -- the country's highest paid lobbyist -- received $11.6 million.
With rare bi-partisan consensus, all members of Congress assure their constituents that money spent lobbying them and campaign contributions to their campaigns does not influence their judgment. Yet, despite these assurances, 75% of all Americans believe money influences Congress.
Several recent academic studies support the public's concern:
• Tax Benefits: Recent research shows that, in expectation for every $1 a firm spends to lobby for targeted tax benefits, the benefit is between 6x and 21x. (See 1;2 below.)
• Improved Cash Flows: On average, and controlling for other factors, firms that engaged in lobbying received more generous depreciation treatment. (2)
• Increased Market Value: Another study demonstrates that firms which lobby 'significantly outperform non-lobbying firms with respect to increased market value of equity'. This can be as high as adding another 2% per year to returns. (3)
• Protection: A separate analysis found that "compared to non-lobbying firms, firms that lobby, on average, have a significantly lower hazard rate of being detected for fraud, evade fraud detection 117 days longer, and are 38% less likely to be detected by regulators." (4)
These results are from research done by non-partisan academics -- using rigorous statistical techniques -- and are not anecdotes or rumors. Correlation is not causality, but basically it appears that lobbying and campaign contributions can confer special benefits to corporations, while corporations breaking the law can reduce the probability of getting caught.
If you doubt the value of lobbying or campaign contributions, consider that American corporations now spend about $3.5 billion/year on lobbying alone. The Cato Institute estimates the value of the resulting corporate welfare at about $90 billion/year.
The recent Supreme Court decision (Citizens United) held that corporations are people for First Amendment purposes (and thus entitled to make unlimited investments supporting or opposing candidates). To our nation's detriment, large corporations may consequently decide that investments in lobbying and campaign contributions (i.e., investments for preferential treatment at the expense of the rest of society) -- are safer and more lucrative than producing innovative goods and services.
If a firm decides not to participate in the lobbying game (or doesn't have the money 'to pay to play') -- when its competitors do -- the non-lobbying firm will likely be strategically disadvantaged (e.g., pay higher taxes, receive unfavorable depreciation treatment, inappropriate treatment of intellectual property, etc.) compared to its competitors. One might ask (in this context) what the difference is between paying for lobbying and paying protection money. Good question!
While all the GOP presidential candidates have spoken eloquently about small businesses, entrepreneurs, and start-ups -- these are exactly the persons/entities least likely to be able to afford access to Gingrich et al.
The Securities Industry and Financial Markets Association (SIFMA) reported that its member firms collectively lost pre-tax $34 billion in 2008 (an amount equal to the prior 2 years' profits). Despite massive and unprecedented losses, the financial industry did not reduce its expenditures on lobbying and campaign contributions. Instead, it increased lobbying and campaign spending by about 40% over the prior presidential cycle -- from $690 million in 2004, to $956 million in 2008.
This investment in political advocacy appears to have paid off handsomely! In 2008-2009, the Federal government made up to $7 trillion available to support America's banks -- and on such generous terms -- that the banking industry's 2009 recorded profits were double those of its best prior year. All while many American small businesses (unable to afford such generous campaign contributions to their elected officials) suffered record losses/layoffs.
If (like me) you are appalled, consider reading Lawrence Lessig's Republic, Lost: How Money Corrupts Congress--and a Plan to Stop, and join the fight.
I welcome your thoughts and comments.
Much of the above analysis is derived from the Lessig book, but I am solely responsible for any errors and opinions in this essay.
Steven Strauss was founding Managing Director of the Center for Economic Transformation at the New York City Economic Development Corporation. He is an Advanced Leadership Fellow at Harvard University for 2011-2012. He has a Ph.D. in Management from Yale University. Follow him on Twitter @steven_strauss.
Sources: All campaign and lobbying data is from www.opensecrets.org, unless otherwise noted.
(1) Raquel M. Alexander, Stephen W. Mazza, and Susan Scholz, "Measuring Rates of Return on Lobbying Expenditures: An Empirical Case Study of Tax Breaks for Multinational Corporations," Journal of Law and Policy (2009).
(2) Brian Kelleher Richter, Krislert Samphantharak, and Jeffrey F. Timmons, "Lobbying and Taxes," American Journal of Political Science (2009).
(3) Matthew D. Hill, G. W. Kelly, G. Brandon Lockhart, and Robert A. Van Ness, "Determinants and Effects of Corporate Lobbying," [Unpublished working paper] (2011).
(4) Frank Yu and Xiaoyun Yu, "Corporate Lobbying and Fraud Detection," Journal of Finance and Quantitative Analysis (2011).
Follow Steven Strauss on Twitter: www.twitter.com/steven_strauss
Andy Ostroy: Democrats for Newt!
Karen K. Harris: Welfare: Why Don't They Get It?
Dec. 14, 2011 W. Post by Dana Milbank in W. Post:
“And could the billions --now regularly generated in campaign contributions nearly $4 billion in the 2010 elections alone- have something to do with the goodies for pet corporations” Based on the historic expansion of contribution and further stimulated by “Citizens United” would these not likely reach $6 billion in the forthcoming elections?
I had commented on the recent televised interview with Jack Abramson in which he admitted “probably having as many as 100 US congress members and their staffs in his pocket. Now his book being currently published adds gory detail as to how he operated so effectively, sometimes with the assistance of Tom the “hammer” DeLay.
One US Congressman has come forth with a bill to produce a constitutional amendment which would reverse “Citizens United”. Better an amendment which would bar any and all contributions to federal election campaigns except as furnished by an authorized public agency. In addition a rule should be enacted to cut off all “franking” privileges of incumbent members during the 6 months preceding elections. I beieve the number was 78% as the percent of Americans who believe corporate contributions influence Congressional elections.
Outlaw all contribution as the bribery they are.
publicly finance elections with free equal prime time for all the candidates on the ballot.
Duh.
-Chris Henderson
Willard Mitt Romney vs Newton Gringrich.
'ol Buddy Romer is a "Too Honest" GOPer. Tragic isn't it?
"This is one of those confusing process votes that sometimes obscure what's really at stake. So let's keep it simple: The effect of this vote is a big win for a financial industry that is desperately trying to avoid being fully accountable to its customers.
It's a win for opaque language in credit agreements and mortgage documents. It's a win for jacking up credit rates or taking away your house. It'll make it easier for debt collectors to hound you. Private student loan lenders will continue to operate in the shadows.
The industry that did so much to bring on the Great Recession continues to fight every effort to rein in its excesses. In this, the industry has no greater ally than the Republican Party."
To elect Newt is merely the capstone in this transformation to kleptocracy. The government has learned how to divert the public's money to its political benefactors directly with contracts and indirectly with tax benefits. Ordinary citizens pay tax rates twice that of billionaires. Corporations receive huge tax refunds while they offshore jobs and profits. The ONLY solution is a Constitutional Amendment to take the money out of campaigning and repeal Citizens United. Give equal media access to all candidates, and make them spend tax dollars and sweat equity to get elected.