THE BLOG
12/22/2011 07:47 pm ET Updated Feb 21, 2012

Hate the Players and the Game: How Legal Corruption Is Eroding Our Democracy

In the race to be the Republican nominee, attacks on a candidate have generally increased with that candidate's poll numbers. This relationship makes perfect sense. After all, why would a campaign waste its finite money and time attacking someone who isn't a direct threat? With Newt Gingrich's rise came attacks on his past infidelities, arrogant personality, and conservative credentials. One refrain that has hurt his campaign is the allegation that he did something illegal in accepting $1.6 million from Freddie Mac, whose collapse was one of the early triggers of this recession. As Newt's experience shows, there are plenty of ways to be involved in Washington corruption without breaking a single law.

The 2008 financial crisis was a direct result of a political system that rewards those who can afford to donate to campaigns and offer comfortable jobs to former government officials. Legally, former senators and representatives are not allowed to leap directly from public service into lobbying. There is a two-year "cooling-off period" during which they cannot lobby their colleagues or work in an industry that they once regulated. There are, however, enough loopholes in these rules to fly a plane through.

The easiest way for legislators to leverage their connections for a quick buck is to simply be hired by any of the many industries that they did not directly oversee. They are still not allowed to lobby their former colleagues for a year, so they are instead initially placed on the company's board, where they advise the company's lobbyists on who to call or what to say. Once the cooling-off period is over, they can start making the personal visits to Capitol Hill to call in favors for their new employer.

The rules are both complicated and non-uniform. The Senate is subject to stricter rules than the House, and all Congressional staff have fewer restrictions on lobbying the executive branch than they do the legislative.

Equally threatening to the quality of our democracy is the decision that corporations can donate unlimited amounts to campaigns. In 2010 the Supreme Court ruled in Citizens United v. the Federal Elections Commission that campaign contributions amounted to free speech, and so contributions from unions or corporations cannot be curtailed. Now there are no barriers for the wealthy to exert as much influence as they have dollars by donating as much as they want to so-called Super-PACs.

In this context, representatives and other government officials no longer feel that their duty is to the people of the United States as a whole but to those who cut them the checks.

It is easy enough to speculate that this corruption contributed to the financial crisis. Fortunately, there is hard evidence to corroborate this gut feeling. The IMF published a report in June stating that from 2000 to 2006, bills unfavorable to the financial sector were one third as likely to pass as bills favorable to the industry. Furthermore, "lenders that lobbied heavily between 2000 and 2006 tended to engage in risky lending practices more often than other institutions over the same period and suffered worse outcomes during the crisis." Well-connected firms essentially thought they could get away with risky practices -- and they could.

But who wouldn't expect some kind of return on the $3.3 billion spent on (or, rather, invested in) financial lobbying in the decade before the crisis? The National Bureau for Economic Research confirms that firms that lobbied Congress harder in the past benefited more from the bailouts. Keep in mind that this analysis was done in May, long before this month's revelation that the Fed gave banks over $7 billion in secret and very profitable loans.

These lobbying expenditures were in addition to the $1.738 billion spent on campaign contributions from 1998 to 2008. As Justice Stevens wrote in his dissent of the majority opinion in Citizens, "While American democracy is imperfect, few outside the majority of this Court would have thought its flaws included a dearth of corporate money in politics."

We can hardly blame rich corporations or individuals for taking advantage of the opportunities afforded them in this political system. They have made their money by making smart investments, and there are few better investments than buying your own congressman. However, it is the duty of our officials to serve the public interest, which they have, on balance, failed to do. Don't expect the corporations to straighten themselves out, and don't expect your representative to straighten them out of their own volition. It is the duty of an informed citizenry to force their representatives to do what the represented want through phone calls, letters, marches, strikes, and, most importantly, ballots.