The Scandal of Lobbyists

Symptoms of Rent-Seeking

That's the real lesson of the Abramoff scandal.

Jack Abramoff may have been the sleaziest of the Washington lobbyists but he's not unique. As the federal government accumulates more money and more power, it draws more lobbyists like honey draws flies.

People invest money to make money. In a free economy they invest in building homes and factories, inventing new products, finding oil, and other economic activities. That kind of investment benefits us all -- it's a positive-sum game, as economists say. People get rich by producing what other people want.

But you can also invest in Washington. You can organize an interest group, or hire a lobbyist, and try to get some taxpayers' money routed to you. That's what the farm lobbies, AARP, industry associations, and teachers unions do. And that kind of investment is zero-sum -- money is taken from some people and given to others, but no new wealth is created.

If you want to drill an oil well, you hire petroleum engineers. If you want to drill for money in Washington, you hire a lobbyist. And more people have been doing that.

The number of companies with registered lobbyists is up 58 percent in six years. The amount of money lobbyists report spending has risen from $1.5 billion to $2.1 billion in that time, according to the PoliticalMoneyLine Web site, which compiles data from public reports.

And why not? After all, federal spending is up 39 percent in the same period. That means another $640 billion a year for interest groups to get their hands on.

With federal spending approaching $3 trillion a year -- and even more money moved around by regulations and the details of tax law -- getting a piece of that money can be worth a great deal of effort and expense. That's why they call the hallway outside the Senate Finance Committee "Gucci gulch," because that's where the lobbyists in their expensive shoes hang out waiting to buttonhole members of Congress and their staffs.

Nobel laureate F.A. Hayek explained the process 60 years ago in his prophetic book The Road to Serfdom: "As the coercive power of the state will alone decide who is to have what, the only power worth having will be a share in the exercise of this directing power."

The United States is not Russia or Nigeria, states where government power really is the only thing worth having. But when the government has more money and power, then more of society's resources will tend to be directed toward influencing government.

A study in the Journal of Law and Economics found that 87 percent of the increase in campaign spending over an 18-year period was attributable to the rise in federal spending during that period.

Lobbyists use a broad range of verbal and political techniques to influence legislation. One widely-used tool is the junket, a trip for legislators paid for by the lobby. The junket is corrupt. It amounts to bribery-lite, because a basic fact of human psychology is that when person A gives something to person B, then person B feels an obligation to person A. Specific examples include all-expenses-paid conferences at luxurious resorts, fully paid trips to India, and wining and dining. Although these goodies are duly reported on Congressional financial disclosure forms, they are then typically ignored because the Democrats and Republicans have an understanding that they will look the other way. Tom Delay’s trip to Korea shown on Schedule VII of his 2001 form got him into trouble because the lobbyist had registered as a foreign agent. More typically, Mr. Delay spent 10 legal days in Kona, Hawaii in 2002, and the American Association of Airport Executives reimbursed him for $5,967.28.

Another form of corruption is the revolving door between government and the influencing organizations – the lobby groups, foundations, trade associations, corporations, universities, and think tanks. "Lobby Shops Salivate as Big Names Hit K Street" one headline reads. Powell Moore, a senior lobbyist at McKenna, Long and Aldridge, has had "stints in the Nixon and Reagan administrations and at the Lockheed Martin Corp.," and has been "Donald Rumsfeld’s chief liaison with Congress for nearly four years." Newly-minted lobbyists who are old Congressional hands include Sen. Don Nickles, Rep. Billy Tauzin, and Rep. Jack Quinn. "A seemingly endless list of staffers has moved as well."

This corrupt activity is wrong, pure and simple. It is very difficult for government officials to act objectively if they have the expectation of being rewarded by cushy jobs by the very groups that they are legislating for while still in office! If a Congressman votes against a measure that benefits Boeing, is Boeing more or less likely to hire him when he retires? Or will Boeing hire its "friends"?

Abramoff specialized in manipulating regulations, especially the licensing of casinos. If gambling wasn't so tightly licensed and regulated, then it wouldn't produce extraordinary profits and lavish lobbying. He excelled at crassness and cynicism. But his efforts were small potatoes compared with the hugely expensive and complex programs of the federal government and the lobbying generated by all that spending and regulation.

During the 1970s, when Congress created massive new government regulations, businesses had to invest more heavily in lobbying. Some of it was defensive -- to try to minimize the cost and burden of regulation.

But of course some of the lobbying was more cynical, to ensure that costs fell more heavily on competitors. One study in 1980 showed that 65 percent of the CEOs of Fortune 500 companies came to Washington at least every two weeks. That was up sharply from 1971, when only 15 percent of CEOs visited Washington even once a month.

In 2003 Congress passed a trillion-dollar prescription drug benefit for Medicare recipients. Not surprisingly, there was more lobbying on health care than on any other issue that year, some $300 million by PoliticalMoneyLine's calculation. AARP was the biggest single spender. But unions and pharmaceutical companies accounted for most of the total.

In most states education is the biggest budget item, and the teachers unions are the biggest lobbyists. As states start to spend more on Medicaid than on schools, health care lobbyists may become more numerous and effective than the education establishment.

Meanwhile, the taxpayers have little voice in the halls of Congress. The National Taxpayers Union spent less than $175,000 on lobbying in 2004. And the NTU is one of the very few organizations whose lobbying is aimed at decreasing the size and overall reach of government.

The web definitions of lobbying point to goals such as a specific cause, or laws that further one’s own interest or inhibit those of opponents, or establishing an individual’s or organization’s point of view. This means that lobbyists usually, but not always, are working for the private interests of their sponsors or themselves. They are generally not working for the "General Welfare" but their own welfare. Since the door to such activity has been constitutionally opened by the Supreme Court, the lobbyists and their backers naturally have walked in. That all of this works to the detriment of society has long since stopped being noticed.

All of this lobbying, influencing, pressuring, hiring, and to-and-fro movement of personnel is entirely legal. It’s also entirely sensible given the way the government operates, but it is corrupt. Corruption naturally accompanies the state. The state is plunder, there for the taking. It’s Treasure Island. One only needs the treasure map and a properly outfitted ship. The Jim Hawkins of today is a bright young law school graduate. They come a-flocking. Columbia and Barnard students even have a Lobby Day in Washington. We have institutionalized corruption.

The state pays out a set of valuable prizes in the form of laws, subsidies, taxes, regulations, tariffs, agreements, contracts and policies, jobs, positions, power, access, credential building, and career enhancement. Competition is keen. The American get-up-and-go spirit is far from dead. Given the rules of any game and given an opportunity to play, Americans will be there aiming to win.

For the time being, we are living with this system, so what can we say at the margin about it? Can we still identify the relatively good guys and the bad guys, the relatively good lobbies and the bad lobbies?

Yes. The good lobbies are those that are seeking things that libertarians can applaud, which include lowering aggression, repealing intrusive laws and regulations, lowering taxes, cutting programs, and enhancing freedoms while the bad lobbies are those that are seeking more aggression, more coercive laws and regulations, higher taxes, more programs, and fewer freedoms.

Unfortunately, as long as the federal government has so much money and power to hand out, we'll never get rid of the bad lobbyists like Abramoff. Restrictions on lobbying deal with symptoms, not causes.