United Liberty
Lobbying’s Return on Investment
Fri, 01/23/2009 - 8:41am | posted by William 'BJ' Lawson
When we substitute influence peddling for the Rule of Law, the value of Washington lobbyists becomes evident. As today’s Wall Street Journal notes, the return on investment is huge:
General Motors Corp. spent $3.3 million on lobbying in the fourth quarter of 2008, a period that coincides with the government committing $13.4 billion to the ailing auto maker under the Treasury’s Troubled Asset Relief Program. In all of 2008, GM spent $13.1 million on lobbying, down from $14.3 million in 2007. GM’s reported lobbying expenses for 2008 were only slightly less than combined spending by Ford Motor Co. and Chrysler LLC.
“Lobbying is the transparent and effective way that GM has its voice heard on critical policy issues…that companies should not be required to forfeit if they receive federal funding,” said GM spokesman Greg A. Martin, who added that no funds lent from the Treasury would be used for lobbying.
The last sentence is especially insightful. Clearly, they must keep their lobbying cash in a separate bucket from the truckloads of funds delivered from the federal government. How else would they keep score, and learn that their return on lobbying investment was 1,000-to-1 in 2008? The article also reports the combined Bank of America/Merrill Lynch lobbying return was over 5,000-to-1: $45 billion received, versus $8.8 million spent.
Of course, it’s unfair to claim that such astonishing returns are available on an annual basis. Last year’s climactic payouts resulted from years of lobbying investment — considering the balance of funds received over the past several decades, annualized return is likely much less. However, in a year when traditional investments available to most Americans (including their shareholders) were severely damaged, lobbying as an investment strategy demonstrates excellent uncorrelated performance from the overall market.
Perhaps institutions who have diligently positioned themselves as “too big to fail” could open up new hedge funds that would let sophisticated Americans invest in lobbying efforts for a direct claim on the funds received? Forget about even using those funds to run a business, let’s just set up alternative investments to see who can turn their lobbying prowess into cash as adroitly as possible. Come to think of it, perhaps that’s a better way to describe bondholders in these storied institutions.
In my opinion, however, lobbyists are not the problem. They’re simply following the money, and serving their clients. Our problems are Congress and the unaccountable bureaucracy of the Executive branch. Congress’ job is not to serve lobbyists. Congress must follow the Constitution, and hold the Executive branch in check by controlling spending.
The Constitution is our best attempt to codify a government that upholds the ideals of our Declaration of Independence — thus specifying a government that protects the unalienable rights of individual Americans, as opposed to corporate interests.
Do you know anyone in Congress who serves corporate interests? Perhaps you could send them a copy of Colonel Davy Crockett’s poignant memoir, Not Yours to Give, where Rep. Crockett was confronted by a constituent back home after appropriating public funds for the victims of a Georgetown fire:
If you had the right to give to one, you have the right to give to all and as the Constitution neither defines charity nor stipulates the amount, you are at liberty to give to any and everything which you may believe, or profess to believe, is a charity, and to any amount you may think proper. You will very easily perceive what a wide door this would open for fraud and corruption and favoritism on the one hand, and for robbing the people on the other. No, Colonel, Congress has no right to give charity.
Individual members may give as much of their own money as they please, but they have no right to touch a dollar of the public money for that purpose. If twice as many houses had been burned in this country as in Georgetown, neither you nor any other member of Congress would have thought to appropriating a dollar for our relief. There are about two hundred and forty members of Congress. If they had shown their sympathy for the sufferers by contributing each one week’s pay, it would have made over $13,000. There are plenty of men in and around Washington who could have given $20,000 without depriving themselves of even a luxury of life.
The Congressmen chose to keep their own money, which, if reports to be true, some of them spend not very credibly; and the people about Washington, no doubt, applauded you for relieving them from the necessity of giving by giving what was not yours to give. The people have delegated to Congress, by the Constitution, the power to do certain things. To do these, it is authorized to collect and pay moneys, and for nothing else. Everything beyond this is usurpation and a violation of the Constitution.
So you see, Colonel, you have violated the Constitution in what I consider a vital point. It is a precedent fraught with danger for the country, for when Congress once begins to stretch its power beyond the limits of the Constitution, there is no limit to it and no security for the people. I have no doubt you acted honestly, but that does not make it any better, except as far as you are personally concerned and you see that I cannot vote for you.’
Colonel Crockett learned his lesson. Perhaps it’s time our representatives were reminded, as well.
Both the elected officials and the lobbyists bear moral responsibility, of course. To argue that the lobbyists are paid and therefore are free of any need to behave ethically is a peculiar concept, albeit a common one.
As for your Crockett story, it’s dead wrong from start to finish. One of the advantages of living in a country rather than on your own is that the country insures you from disasters that you alone would not be able to weather. You can see examples of this in the responses to the tsunami in Indonesia or the earthquake in China (but unfortunately not in New Orleans).
There’s no question that this is abused - for example, affluent individuals, buying property in a flood plain and then repeatedly gouging “the people” for damages each time their house is flooded - but there are very reasonable responses to this (“Your house is in a flood plain - we are warning you today that there will be no compensation when your house is inevitably flooded.”) and the overall idea is extremely good.
This also works out well economically. By the time you’re an adult, there’s an awful lot of money invested in you, your education, your upkeep till that point. By allowing you to be broken by a disaster, “society” loses all that investment, and the government loses all that future tax revenue.
I’d also add that any investment the government makes in disaster victims immediately goes back into the fundamentals of the economy - food, shelter, clothing - as opposed to, say, government bailouts of massively rich, pathologically incompetent individuals like all these investment banks (who should simply be allowed to fail in a controlled manner…)
So again, the Crockett anecdote is completely wrong. Of all the functions of government, prevention and recovery from disaster is one of the most valuable.
There is a legion of permanent staffers nudging and controlling policy that is entrenched in Washington not mentioned in this article.
All the bailout money is _loaned_ to these banks and auto makers. You bloggers always forget this fact and continue to claim that the money is a gift. OTOH, lobbying money is a gift.
I fully agree that lobbying is just voicing your position, and can’t be proscribed. The problem is what happens after lobbying takes place. In Michael Kinsley’s famous words “the scandal is not what is illegal. The scandal is what’s legal”; the assymetrical influence of players with access, which is a polite term for ‘quid pro quo’. The scandal is the fact that lobbying language finds its way to legislation in a surreptitious, unaccountable way. There are known cases where nobody would come on record as having inserted certain provisions into a pending legislation.
That is why I favor requiring to keep the emerging legislation under version control. All changes need to be introduced in an accountable way: every change should be logged with clear information on who, when, and why made the change. The technology for that is clearly existing—-most software and office correspondence has been done this way for years. Time for some transparency.
@przemek
I’m not sure I agree with ‘lobbying is just voicing your position’, at least in its current incarnation. Lobbying is currently a semi-formal system of bribery; you state your opinion, then donate money to make sure your opinion influences future policy.
Your idea for revision control is interesting, and is better than what we have now. However, a different, but more complete solution would be to limit bills to one subject at a time. The idea is to make the granularity of scope, and complexity smaller for bills.
Instead of building NASCAR track subsidies into the $700,000,000,000.00 bailout bill, you’d have to submit both as separate bills. That way, there is less moral ambiguity if you agree strongly with one premise but strongly disagree with another that has been attached arbitrarily.
Good article.
Excellent point!
But the congress does have the right to legislate money to help the country continue to prosper.
I think Americans are starting to do the math and all of us really should do that and stop arguing about right vs left and republican vs democrat.
The math is simple. The federal reserve loaned 100’s of trillions to banks and investment banks. The Banks loaned these 100’s of trillions of dollars to corporations to build factories in third world countries to get around American laws like child labor, slave labor, minimum wage, environmental laws.
The Banks also loaned Billions to home owners to buy homes and refinance homes to be able to buy all this junk the corporations were making in foreign countries.
The home owners lost there jobs and become unemployed or underemployed.
Americans could not buy all that junk even under full employment, but it was a complete disaster as all the jobs started going over seas.
Now the corporations can not pay the interest on the loans to the banks and that is why the banks are going under. 100 billion would pay the interest on the home loans that are not being paid because of foreclosure. Trillions are needed for the corporate loans that are going into default.
The media is pounding it in our head every day that we have a housing bubble that burst and a foreclosure problem.
The math is simple, homes cost less than it costs to rebuild them. That is not a housing bubble it is a crater.
The math is simple to many Americans have lost there jobs and continue to lose there jobs.
The answer is just as simple.
Legislation to prevent American banking institutions from over investing in corporations to off shore every single American job.
Legislation to prevent corporations from selling anything in American unless they follow American laws no matter were they produce the goods, like child labor, slave labor, minimum wage, environmental laws.
The jobs would flood back to American and housing prices would reflect the cost to build them.
Again it is math.
The federal reserve, loans to the banks and they loan to corporations and individuals.
The government taxes those who work.
The less people work the less government gets.
It is imperative the government is to make sure America is fully employed and not unemployed and under employed. The government is to make sure the federal reserve and the banking system do nothing to offshore American’s economic security.
That is the math.
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