Should Lobbying and Campaign Spending Be Further Curtailed? Posner

In the wake of the Jack Abramoff scandal, measures are under consideration in Congress to restrict lobbying more than at present by requiring more lobbyists to register (and thus provide more information on lobbying activities to the interested public), by requiring more public disclosure of existing lobbyists’ activities, and by forbidding lobbyists to buy meals for members of Congress. Citizens’ groups want much tighter restrictions on lobbying than anything Congress is contemplating, arguing that lobbying skews government policy. Extensive restrictions have been placed on contributions to political campaigns, which are analogous to lobbying. Republicans, who used to oppose efforts to restrict campaign contributions by PACs (political action committees), are now seeking to place restrictions on a type of PAC called a “527,” which can accept unlimited contributions to engage in political advocacy, provided the 527 avoids supporting a candidate explicitly. The Democrats, who were in the forefront of advocating limits on PACs, are opposing limits on 527s, which are primarily liberal. Lobbyists provide information to members of Congress and other officials, and campaign contributions are used to sponsor political advertising, efforts to register voters thought likely to support the candidate on whose behalf the efforts are made, and other political activities, most of which are broadly informational in the sense of seeking to familiarize the electorate with the candidate and his program. Hence restricting lobbying and campaign contributions is likely to reduce the flow of information to government officials and to voters, and this might seem a substantial interference with the political marketplace. The main concerns about lobbying and campaign contributions are first that they are wasteful and second that they are a form of quasi-bribery and distort legislation and policy. They are indeed wasteful in an arms-race sense: if one candidate (or industry) spends heavily on advertising, his competitors have to do likewise lest they be drowned out; the incremental information furnished the official or the voter may be slight. This is less of a problem with lobbying than with campaign contributions. Members of Congress and their staffs are spread very thin and would find it difficult to function without the information provided by lobbyists. Most voters, in contrast, have very little interest in political information, even in hard-fought presidential campaigns, in part because they know that their vote isn't going to swing the election. As for the distorting effect of lobbying on policy, it probably is slight. Of course there are many examples of special-interest legislation that reduce overall social welfare, but there would be much special-interest legislation without any lobbying, since in a democratic society legislators have to be attentive to the preferences of influential constituents. Much such legislation is, moreover, quite inconsequential from an overall social-welfare standpoint. Liberal activists denounce "corporate subsidies," many of which consist simply of tax breaks. The usual effect of giving a tax break is merely to shift the incidence of taxation--if one taxpayer pays less in taxes, another will pay more--with uncertain and perhaps often trivial effects on resource allocation. Most economists consider taxation of corporations inefficient because its effect is to tax investors twice, so tax breaks for corporations probably increase social welfare. The aggregate effects of lobbying, moreover, may be rather trivial. This is suggested by the fact that annual expenses on lobbying Congress are only about $1.5 billion, even though the total federal budget is more than $2.5 trillion, and the regulatory powers of Congress place much of our $12 trillion economy under congressional sway as well. There are two possible inferences to be drawn from the disparity between the amount spent on lobbying and the total economic rents that Congress could confer on lobbyists' clients. One is that the marginal cost of influencing a member of Congress by a given amount rises very steeply. Perhaps the first nice meal you buy him increases by .001 the probability of his supporting your pet rent-seeking project but you would have to buy him 10 nice meals to increase the probability of his supporting you by another .001, and so on. The second and complementary possibility is that most members of Congress are not bribable, and that all that most lobbyists get for their efforts is access that enables them to furnish information useful to the member. There is (returning to the previous point) only so much that one can spend on generating information; moreover, and because information is relatively cheap to obtain and communicate to a small number of people, even relatively unorganized and impecunious groups who oppose a proposed project can provide offsetting information to the members of Congress. The lobbying market should therefore be competitive. Campaign financing presents graver issues than lobbying does because a member of Congress cannot be reelected unless he spends a substantial amount of money on his campaign, and the people who contribute that money, many of them anyway, expect something in return. Even so, the effect can be exaggerated. If both parties have roughly equal levels of financial support, a candidate doesn't have to change his political stripes in order to raise money; and donors who share his political views will not be asking him for something he doesn't want to give them. In the 2004 presidential and congressional elections, total campaign expenditures were approximately $3 billion, a figure that reformers consider shockingly high. It is actually low relative to the stakes in choosing a President and a Congress; it is four one-thousands of the GDP. I am not a Pollyanna when it comes to evaluating the U.S. government. I believe that it may well be quite incompetent to deal with the problems that the nation is facing in an era of profound global political insecurity interacting with the breakneck pace of technological change. But government incompetence is better illustrated by the congressional reaction to the Abramoff scandal than by Congress's failure to enact "meaningful" campaign and lobbying reforms. An intelligent legislature, learning of a scandal, would first want to determine the likely frequency and consequences of such scandals and the adequacy of existing law to limit their recurrence. This inquiry would quickly reveal that Abramoff had pleaded guilty to criminal activity along with two congressional aides, that other members of Congress were under criminal investigation, and that an immensely powerful member (Tom DeLay) had been forced by the scandal to resign from Congress. The inquiry would further reveal that the scandal was actually an artifact of a surpassingly foolish law, namely the Indian casino law, which by conferring enormous rents randomly on Indian tribes had generated rampant rent-seeking, frequently shading into bribery. (Becker and I blogged about the law on January 9 of this year.) What the inquiry would not reveal would be a good reason for amending the lobbying laws.

Comments

[Pocahontas]

What's scary is how much influence is bought with so "little" money.

What about the expansion of lobbying in the last decade? Is there a more immediate undue effect due to such expansion?

Interesting commentary, as always.

[Collestro]

It is time to be honest, giving money to advance ideas in which one believes is essential to a free society. Limits on money in politics are limits of the ability of people to speak.

The answer is not to limit contributions, but, to require those who recieve money to state who paid them and how much they are paid.

[J.S.]

Mr. Posner,

With all due respect, I think you make a fundamental error in assuming that the relatively small amount of money (compared to the government budget) spent on lobbying and campaign contributions by special interests means that bribes aren't really taking place (after all, if they were so profitable economic logic would dictate that much more money would be spent). What you fail to recognize is that there is some level of lobbying and campaign contributions that would raise a red flag so large that it would invite unwanted scrutiny. For example, if Exxon-Mobil gave $100 million to the Bush re-election campaign it would be front page news and put so much attention on the links betwee their interests and the Bush Administration that it would probably lead to lower returns. This means that there is a threshold at which contributions to politicians and money spent lobbying becomes too big to remain largely under the radar and the optimal amount is just enough to get a lot of what you want WITHOUT raising too many suspicions. Special interests do get returns of tens of thousands of a percent on their money- amounts most can only dream of- but they need to be careful not to exceed the threshold at which public outcry becomes too big. The system is inherently corrupt, but why give more money and lobby more when you get just about everything you want on the cheap anyway?

J.S.

[Talin]

I agree that lobbyists are an important channel of information to Congress, and that the word 'lobbyist' has unjustly gained a perjorative connotation over the last several decades.

Ideally, a lobbyist is just a representative of some sector of the public. If I want something from the government, I can't afford to travel all the way to Washington myself, so it makes sense to hire someone already there, someone who has the right connections, so that my money won't be wasted.

Its like that old English law that allowed a commoner, under certain circumstances, to have an audience with the king so that his case could be heard. Without lobbyists, our access to the machinery of government would be unjustly limited.

However, all that being said -

The problem with corporate lobbying is that companies are able to spend so much money that in many cases their voices are the only ones heard. A large corporation can afford to so many lobbyists that they can saturate the available bandwidth, blanketing all of the key decision makers with a continuous message. In a sense, they are kind of like one of those town hall bullies that always talks louder than everyone else, and won't let anyone get a word in edgewise.

Also, corporations in this country are power centers of increasing importance. Corporate lobbying is in effect a multiplier for their already-existing influence, which is considerable. It makes financial sense for a company to spend a couple million on a political decision that could have billion-dollar consequences.

I know you probably won't agree, but I strongly feel that *all* power centers - government, corporate, religious, populist, etc. - need to have limits. Its human nature for the powerful to use their power to get more power. Power collects and centralizes over time, and grows without limit unless regulated. Trimming back the centers of power is an ongoing job. You can't just pass a law and be done with it, because no matter what you do, what laws you pass, people will find a way to game the system.

But aren't the corporations simply us, the public? I mean, most of us work for companies, so isn't it true that "what's good for GM is good for America?" Yes and no - my views are not that of my employer. My employer needs to increase shareholder value and compete with its rivals in the market - I don't.

Moreover, human beings will tend to make different kinds of decisions based on how they are organized. A given individual will have different stances depending on whether they are acting as a head of the family, a CEO, or a minister of a church.

By allowing unlimited "economic growth" at the expense of other kinds of growth, you allow one form of decision making to dominate all others, which results in skewed policy that serves only a few. (This is why I am in favor of corporate taxation.)

A comment on the Indian casinos: Where does the 'value' of Indian casinos come from? The answer, I think, is that it is from the illegality of gambling in other parts of the nation. If gambling were legal everywhere, no one would bother driving out to some remote Indian reservation to play slots.

Moreover, those laws only have that effect if they are enforced. And the money to enforce them comes from, guess what, our taxes. So essentially, we taxpayers are paying to maintain the Indian monopoly.

Now, that being said - police enforcement of gambling laws isn't all that expensive, for two reasons. First, the police have been enforcing them long enough that few people expect to be able to get away with it, so the deterrent effect is quite efficent. Secondly, because there are places one can go to gamble legally, there's less of an incentive to do so illegally.

(Personally, I am, like most people, glad that the tribes are using their sovereignty in creative ways - I particularly liked the story of the South Dakotan indian tribe that, upon hearing that abortion had been declared illegal in that state, announced that they would be establishing a Planned Parenthood center on their reservation lands.)

[Pete Pearson]

$3 billion is one four-thousandth of GDP, not
four one-thousandths as stated in the penultimate paragraph . . . right?

[Dan Theunissen]

The US government budget is overstated. While total US government spending in a single year is as you say "over $2 trillion"; the amount the president can realistically impact, the discretionary budget, is just over $1 trillion in FY2006, see
http://www.heritage.org/Research/Budget/loader.cfm?url=/commonspot/security/getfile.cfm&PageID=94196

This does not impact the results of the analysis, just the numeric details.

As for lobbyists consuming all of the available bandwidth, that assumes politicians are gullible and can't figure out the message is coming from lobbyists. Politicians serving me (at least up to US congress) are very careful to check with their constituents for alternative viewpoints on key issues and inform them of their reasoning. Politicians also have staffs whose job is to research issues. The Library of Congress was founded to provide research materials for this, but more staffers these days use the Internet.

The proposed legislation as depicted would do little to change lobbying.
It makes it more public. Since most people rationally ignore the currently available information on lobbying, this has no impact.
It cuts out paid meals. I suspect lobbyists are happy with that, the lobbyist can never be sure whether the Congressmember wants to listen or is just there for free food.

[James]

Here's one thought. Why not ban corporate political spending? A corporation isn't a natural person and shouldn't have any right to speech. Meanwhile, corporations often spend their money in ways that many of their shareholders don't like. These shareholders are essentially making non-voluntary contributions to politicians they might oppose. Of course, you can sell your stock, but this involves high monitoring costs and might even distort the market to some extent.

Corporations could be allowed to set up voluntary political funds so that like-minded shareholders can coordinate their political spending. The management could state that it is in the corporation's interest for certain policies to be enacted. This should protect corporate interests without allowing corporations to force shareholders to fund positions they don't agree with.

[N.E.Hatfield]

If you listen to Delay, there is no scandal. Just a politically motivated smear campaign by certain Texans to destroy him. Boy! Talk about the "kettle calling the pot black"! Lobbying and Campaign Finance reform isn't the real problem, what is, is the inability of Congress to come to grips with and deal with the real issues of the day. When the day is done, what as a Nation have we got to show for all the rhetoric and money spent. Just another case of the Public left holding the bag.

Oh! BTW, if and when there is any reform, the sharpies on the Beltway will have already figured a way around it.

[Adam]

While I agree that the ideal reform would be to require accurate reporting of who pays whom and their relationship, I have two comments on the reasoning in the post.

First, at least in the short term, the relevant budget authority is far lower than the trillion dollar official authority, which for the most part is precommitted towards agency administration. The 15 billion or so a year in new authority that is actually considered "pork" is the amount at issue, and 1.5 billion in lobbying is considerably more relevant in that sense.

Second, much of the interest-group lobbying may be unilateral in the short term. An industry may seek subsidies against which no opposing interest is immediately mobilized. The "cost" of influence for these groups does not depend on outbidding proponents of alternative legislation, but of convincing a majority of Congress to pass the legislation; if a Congressman wants more money, the lobby can find a different one who will peddle influence for less.

[Haris]

Just a quick note, before the discussion deteriorates into a numbers game: many of the decisions that lobbyists try to influence man not affect the budget at all. A company trying to get a regulation or a statute passed or repealed (regarding, say, allowable uses of public lands) may spend thousands or millions on lobbying, but they don't stand to gain anything from the budget per se.

That said, the ideal of lobbying remains full transparancy. Then again, that presumes that voters would bother finding these things out, which would only happen if the media publicized contributions heavily enough.

More realistically, the next-best approach is to regulate lobbying to fix the collective action problems that plague the system. It is much easier for a few large companies to organize and exert influence than it is for the many diffused voters. I'm not sure how one would go about overcoming such problems, but it seems the far more realistic approach than requiring and enforcing full disclosure.

[john]

Comparing the absolute value of 3 billion vs. 2 trillion is a bit misconceived. It could turn out that a small marginal cost yield exceedingly high marginal returns--the converse of Posner's view. An organization like AARP, with its Medicare lobbying and such can influence the allocation of billions in federal resources with the injection of relatively little dollar amounts. How can so "little" money make such a big impact? Well, there are roughly 535 or so legislators and you need more than half to pass any bill. So you only need enough money to sway 270 legislators--even at a mil apiece, the returns can far outweigh any costs.

[john]

Comparing the absolute value of 3 billion vs. 2 trillion is a bit misconceived. It could turn out that a small marginal cost yield exceedingly high marginal returns--the converse of Posner's view. An organization like AARP, with its Medicare lobbying and such can influence the allocation of billions in federal resources with the injection of relatively little dollar amounts. How can so "little" money make such a big impact? Well, there are roughly 535 or so legislators. Assuming you need more than half to pass any bill, you would only need enough money to sway 270 or so legislators--even at a mil apiece, the returns can far outweigh any costs.

[ben]

john

It is commonly held that lobbyists get undue bang for their buck, but it seems to me this overlooks competition. If it were true that a dollar spent on lobbying goes particularly far, we should see lobbying expand until the last dollar spent on lobbying earns a "return" commensurate with other rent- or profit-seeking activities.

People who believe there are exceptional returns to lobbying need to explain what prevents competition eliminating those returns.

[john]

Ben,

You make a good point--competition (of all stripes) can certainly explain the limits of lobbying power.

There seems to me an alternative explanation: the "rent seeking" activities of lobbyists act as monopolies would. That is, the supply of lobbying is limited to promote the optimum outcome. This is plausible when you think about it: given rational voter ignorance and the specificity in which most lobbying is tailored, it's entirely plausible that, contrary to the notion of lobbyists clamoring for attention, a good number don't have much competition at all. The very nature of "special interest" groups implies a group representing a narrow set of interests which takes advantage of majority apathy (AARP takes advantage of the fact that the majority of the population who may be against raising taxes is too largely dispersed to mount much of an effective challenge). To the extent that the media or getting voted out of office may act as a check on such activities, it's certainly curtailed by the fact that most people don't vote--but special interests often do. As monopolies, lobbyists can expand to a certain output beyond which would simply result in diminishing returns--this limit on output, given little or no competition, can be relatively small. It's not at all evident that competition must have the power you and Posner assign to it.

What causes competition to curb the dollars spent on lobbying? Why is this necessarily the case? Coke and Pepsi have not let up on their advertising wars, despite fierce competition with each other. Competition may cause the quality of the opponents' strategies to improve (i.e. better lobbying procedures, better sell tactics, etc) but why does it spell a limit on cash expenditures?

I don't take a position either way in this case--I'm simply not informed enough about the statistical efficacy of lobbying to make any serious pronouncements either way (call me a victim of rational ignorance, if you will). It just does not seem obvious that competition plays as a big a role as you suggest.

[W]

Greater reporting requirements to the public is a solution if one believes the public is paying attention. If the public is not paying attention, then it does not matter that more information is available. How do we know that the public is paying attention? Why would be presume that?

These reforms also presume that voters will get rid of politicians who take lobbyist's cash. The problem is that lobbyists represent entities that can influence elections and markets. Which means the politicians taking cash have the kinds of friends who can influence voters to support him.

These reforms seem categorically inefficient and inevitably doomed for failure.

[Collestro]

"If the public is not paying attention, then it does not matter that more information is available. How do we know that the public is paying attention? Why would be presume that?"

1. The alternative to disclosure is limiting my right to engage in political speech. It seems that one can only push so far in that direction until there is a bloody counter push. We can all thrill at the notion of a modern Charles with his head on a block, but that only came after years of civil war.

2. The voting public may choose not to care. Isn't not caring a choice?

[J.T.Y.]

As a registered lobbyist, I find this thread of more than passing interest. With respect to one point, I do feel a need to chime in.

James suggested banning corporate contributions, complaining that they are an involuntary campaign contribution by shareholders. Note, however, that contributions directly to candidates (so-called hard money) by companines are already prohibited. A company's political action committee, which is the entity that makes the contribution, raises money through voluntary contributions from employees. It is illegal for the company to require employees to contribute or to reimburse employees for their contributions.

[W]

Collestro,

Your post really doesn't seem to have anything to do with mine. To the extent it tangentially does, I think you're assuming that people who have access to information will necessarily understand it, i.e., if they choose to ignore it, they must have fully understood it and chosen not to pay attention to it because they consciously rejected its content. That assumption is a very bad assumption to make. Crafting public policy on the basis of that assumption would be crafting bad public policy.

You also proffer a false dichotomy. It is not true that we have two alternatives: craft public policy that rests on your fallacious assumption or construct First Amendment rights. We could leave the system as it is, which is neither of your alternatives. Your entire conceptual framework is false, and your argument is entirely unpersuasive. This is why I say it really has nothing to with mine; it really has nothing to do with anything.

[W]

constrict, not construct

[Weght Loss]

When the day is done, what as a Nation have we got to show for all the rhetoric and money spent.

[robert]

Both Posner and Becker raise a point that signifies the larger nature of the problem: the present-day overwhelming place of government in the lives of its citizens. If government did not hold such a prominent place, i.e., was limited in the way the Framers intended, lobbyists and others attempting to influence legislators and candidates would have no need to do so in the first place. Accepting this premise, the regulation of contributions and expenditures in the political context is an effect rather than a cause. The answer to the problem lay in limiting government so that legislators/candidates would not have the power to effect matters in the private sector save for that which is mandated by Art. I, Section VIII of the U.S. Constitution.

[jack oneil]

Similar to people that say there are too many people in prison (not true, there are just too many criminals), to say we need lobby reform is ridiculous, we need honest politicians. Stop taking the money and there would be no problems.

[bigbopper]

campaign contributions should be limited for the same reason that bribery is prohibited. no one complains about bribery on the grounds that those offering the bribes are spending too much money. Obviously the problem is what's being purchased not what's being spent.

if i can pay the building inspector $500 to approve an unsafe building i own, then i can undermine a useful public office.

"If both parties have roughly equal levels of financial support, a candidate doesn't have to change his political stripes in order to raise money; and donors who share his political views will not be asking him for something he doesn't want to give them."

if the building inspector is an elected official and i also pay $500 to the guy he's runnig against that hardly ensures that the corruption of the public good has been neutralized. is this really that hard to grasp?

[A. Scott Crawford]

Toyota is building a plant in Washtinaw Co., MI. Part of the corporate motive for doing so is the abundance of engineering talent generated by the University of Michigan, although there are certainly other reasons of at least equal worth in Toyota's corporate calculus. Recently Toyota accounced a $200 million donation to the University of Michigan, a public State institution run by an elected board of regents and primarily for the benefit of the electorate of the State of Michigan. This sum is greater than the entire amount of money Toyota "officially" allocates for direct corporate lobbying at all levels of government in the US. To the best of my knowledge, not one politician in Washtinaw Co. or Michigan or D.C. has objected to Toyota's "gift"...

Yet Toyota and elected politicians at the muncipal, county, State, and Federal level certainly do not imagine that this $200 million dollar "gift" is being offered without strings attached. It is what might be called a "good faith" payment via an indirect source that can be (and will be) used to pressure politicians and public administrators (and prosecutors) regarding pursuit of the public interest if or when said interests come into conflict with the interests of Toyota Corp. Because the financial benefits to the politicians of Washtinaw county are unavoidably tied to the University, it should be obvious that Toyota's gift is merely another form of lobbying, undertaken with the same expectation of practical effect as any direct payment.

This example is intended to illustrate the problem of attempting to regulate and or limit directly paid political donations by corporation or special interests. In practice, quid pro quo payments will still occur, but will play a less explicit, and thus less transparent, role in the manner in which they're used to manipulate public policy.

[A. Scott Crawford Is Wrong]

Random Hater of Free Speech: In practice, quid pro quo payments will still occur, but will play a less explicit, and thus less transparent, role in the manner in which they're used to manipulate public policy.

This is a misstatement. If they are "less explicit" and "less transparent" and "indirect" and "lobbying," then they are not quid pro quo payments. Lobbying is not "manipulating" public policy, it is lobbying. There is nothing underhanded about speaking out for change. There is nothing underhanded about spending greenbacks to speak out for change. If I want my politician to keep doing what he is doing, I will damn well send his PAC some cash as a sign of approval. if I want my politician thrown out of office, I damn well will send cash to the guy or gal who challenges him. I do not see how that is an indirect manner of manipulating public policy; it is called legislative due process and it is essential to democracy.