Topic: Government and Politics

Lobbying: A Booming Business in a Politicized Economy

Lobbying expenditures are up in the second quarter of the Obama administration, reports the Center for Responsive Politics. Well-connected Democratic lobbyists like former House majority leader Richard Gephardt and Tony Podesta, the brother of Obama transition director John Podesta, did especially well. Given the administration’s focus on nationalizing health care and energy, it’s no surprise that health care and energy companies were the biggest spenders. Businesses don’t have unified interests, of course; some health care companies and industry sectors lobby against a government-run insurance plan while they support a federal mandate that every American purchase health insurance. Other firms may just work to get their own members onto the gravy train.

As Craig Holman of the Nader-founded Public Citizen told Marketplace Radio the last time such a report was issued, “the amount spent on lobbying … is related entirely to how much the federal government intervenes in the private economy.”

Marketplace’s Ronni Radbill noted then, “In other words, the more active the government, the more the private sector will spend to have its say…. With the White House injecting billions of dollars into the economy, lobbyists say interest groups are paying a lot more attention to Washington than they have in a very long time.”

Of course, this is not a new story. I pointed out in the Wall Street Journal in 1983 that Hayek had told us what to expect back in 1944:

If more money can be made by investing in Washington than by drilling another oil well, money will be spent there.

Nobel laureate F.A. Hayek explained the process 40 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.”

In a graphic on page A6 of the February 13 edition, not available online, the Washington Post reported that “A Washington Post analysis found that more than 90 organizations hired lobbyists to specifically influence provisions of the massive stimulus bill.” The graphic showed that the number of newly registered lobbying clients had peaked on the day after Obama’s inauguration and continued to grow as the bill worked its way through both houses of Congress. More on the frenzied efforts to get a piece of the taxpayers’ money in the spending bill here and here.

And the beat goes on: The congressional newspaper The Hill reports, “Lobbyists lining up for shot at climate bill.”

And that of course is why Patrick Appel reports at the Andrew Sullivan blog that Washington is the hottest city for job-seekers these days.

If you want money flowing to the companies with good lobbyists and powerful congressmen, then all these spending and regulatory bills may accomplish something. But we should all recognize that we’re taking money out of the competitive, individually directed part of society and turning it over to the politically controlled sector. Politicians rather than consumers will pick winners and losers.

Just as important, businesses will devote their time, money, and brainpower to influencing decisions made in Washington rather than to developing better products and delivering them to consumers. The tragedy is that the most important factor in America’s economic future – in raising everyone’s standard of living – is not land, or money, or computers; it’s human talent. And an increasing part of the human talent at America’s companies is being diverted from productive activity to protecting the company from political predation. With every spending program and every new regulation, the parasite economy sucks in another productive enterprise. Do we really want the best brains at companies from General Motors and General Electric (this quarter’s biggest lobbyist) to Google and Goldman Sachs focused on working Washington rather than serving consumers?

Transparency: Obama’s Waterloo?

“When congressmen scoff at the notion of reading legislation because they aren’t qualified or they aren’t competent to understand it, how can we be confident that those congressman are competent to reengineer the entire health care system?”

So asked a citizen at a town hall meeting where Secretary of Health and Human Services Kathleen Sebelius and Senator Arlen Specter (D-PA) held forth before a cantankerous crowd.

It’s a fair question. And President Obama offered an answer during his campaign. He promised that he would post bills coming to him from Congress online for five days before signing them. Rather than relying on Congress, the public should have more oversight of it.

(Alas, it’s a promise he has violated thirty-nine forty-one times. He signed two more bills into law last week within a day of receiving them.)

Under President Obama’s “Sunlight Before Signing” pledge or the 72-hour-hold in Congress preferred by the Sunlight Foundation, members of Congress and senators would be more reticent to introduce potentially controversial amendments, and they would be more obliged to know and defend what is in the bills they vote on.

President Obama set the standard—if not the precedent—by which lawmaking practice will be judged. He will have to rise to that standard as the public has more leisure to take the measure of his presidency. Congress will too.

(It’s not the president’s Waterloo, of course. I just put that in the title to attract your attention.)

States Are Always Surprised When the Bubble Bursts

Steve Chapman points out in the Chicago Tribune:

The crisis in state budgets is not an accident, and it wasn’t unforeseeable. For years, most states have spent like there’s no tomorrow, and now tomorrow is here. They bring to mind the lament of Mickey Mantle, who said, “If I knew I was going to live this long, I’d have taken better care of myself.”

If they had known the revenue flood wasn’t a permanent fact of life, governors and legislators might have prepared for drought. Instead, like overstretched homeowners, they took on obligations they could meet only in the best-case scenario – which is not what has come to pass.

Over the last decade, state budgets have expanded rapidly. We have had good times and bad times, including a recession in 2001, but according to the National Association of State Budget Officers, this will be the first year since 1983 that total state outlays have not increased.

The days of wine and roses have been affordable due to a cascade of tax revenue. In state after state, the government’s take has ballooned. Overall, the average person’s state tax burden has risen by 42 percent since 1999 – nearly 50 percent beyond what the state would have needed just to keep spending constant, with allowances for inflation.

Would that other journalists would show such good sense when governors and legislators moan about the draconian budget cuts they’re being forced to make, taking their state budgets back to the dark Dickensian days of 2003 or 2005.

A Chance to Rethink How We Regulate Political Speech

At the March 24 argument in Citizens United v. Federal Election Commission, the U.S. government argued that Section 203 of the Bipartisan Campaign Reform Act of 2002 (otherwise known as McCain-Feingold) permits the FEC to ban corporations, including ideological nonprofits like Citizens United, from making independent expenditures on films, books, or even “a sign held up in Lafayette Park.”  The jurisprudential justification for this extraordinary and shockingly expansive view of the government’s power to suppress political speech traces to the Supreme Court’s 1990 decision in Austin v. Michigan Chamber of Commerce.  In Austin, the Court held that Michigan had a compelling state interest in banning political speech funded with wealth accumulated using the corporate form.  Though the Court contended that such speech, because it bears little correlation to public support for the political ideas expressed, constituted a “different type of corruption,” in reality it upheld Michigan’s statute as a “counterbalance” to the “distorting” and “unfair” influence corporate funds could have on the outcome of elections.

This relative-equality rationale—suppressing disfavored speakers to enhance the voice of other government-favored speakers—is antithetical to core First Amendment protections and elsewhere has been expressly rejected by the Court (in Buckley v. Valeo and, more recently, in Davis v. FEC).  Accordingly, to decide Citizens United’s appeal, the Court ordered rebriefing and reargument on Austin’s continuing validity.

On Friday, Cato filed its brief, the second we’ve filed in the case. We argue that Austin, and the part of McConnell v. FEC that upheld Section 203’s facial validity, are not entitled to stare decisis deference and should thus be overturned.  These relatively recent decisions are poorly reasoned, have engendered no reliance interests (no one relies on less freedom of speech), and have spawned an unworkable and irrational campaign finance system in which the government rations different levels of permissible political speech to otherwise equally situated speakers.

The case will be reargued September 9, in a special session about a month before the official start of the Court’s new term.

Here’s a Cato Institute video detailing some elements of the original Citizens United oral argument:

Administration’s Fiscal Muddle

Recent comments by Treasury Secretary Tim Geithner and National Economic Council Director Larry Summers illustrate the incoherence of the administration’s fiscal policy. Previously, they were against raising taxes in the short-run because that would damage the economic recovery. Now they are hinting or suggesting that recovery depends on raising taxes to reduce the deficit.

Previously, they supported rising levels of spending and deficits to supposedly grow the economy, but now they are saying that deficits need to be cut for the economy to grow. Geithner and Summers seem to be repeatedly changing their message depending on the political requirements of the news cycle, rather than providing a consistent program based on economic theory.

The reality is that rising taxes and spending suck resources out of the private sector economy, which damages growth whether we are in an expansion or a contraction. That’s because governments in America already consume more than one-third of everything produced in the nation, and so further resources added to the government sector produce very little or negative returns.

Geithner and Summers ought to stop trying to manipulate the short-term macroeconomy, and instead focus on economic reforms to remove obstacles to private sector growth over the long-term.

Another Dumb “Stimulus” Idea at Taxpayer Expense

Sigh.  Will the error never end?  If you listen to Washington, you would think that taking money from taxpayers, who otherwise would buy cars, homes, computers, and any number of other items, and giving it the same taxpayers to get them to buy cars is a great way to stimulate the economy.

Of course, the Keynesian hope is that Americans will spend rather than save, as if the best way to resolve a crisis  resulting from too much spending and borrowing is to encourage more people to spend and borrow more.  Alas, Washington has never met an expensive new program that it didn’t like.

In fact, the “Cash for Clunkers” program is an even dumber idea than most “stimulus” proposals.  Cato’s Alan Reynolds notes how easily the program can be manipulated to frustrate the objective of improving auto gas mileage.

Moreover, the initiative probably doesn’t increase auto sales.  Rather, it primarily rewards people who would have bought a new car anyway.  Explains Jeremy Anwyl in the Wall Street Journal:

Nearly everyone now seems to be praising “cash for clunkers”—the federal program recently launched that will credit you up to $4,500 to trade in your old car for a more fuel-efficient vehicle. President Barack Obama says the program “has succeeded well beyond our expectations and all expectations.” Transportation Secretary Ray LaHood claims “this is the stimulus program that has worked better than any other stimulus program that was conceived.”

But cash for clunkers is also a program in limbo, having quickly run out of the $1 billion budgeted for it. Congress must now decide whether to let it die or whether to pump more money into it. So it’s time to ask if this program is really a good idea.

It is true that Internet car shopping activity, showroom traffic, and sales are all up, which is why the auto industry wants to keep the program going.

I love a good sales surge as much as anyone. But it’s not that simple. First, it’s not clear that cash for clunkers actually increased sales. Edmunds.com noted recently that over 100,000 buyers put their purchases on hold waiting for the program to launch. Once consumers could start cashing in on July 24, showrooms were flooded and government servers were overwhelmed as the backlog of buyers finalized their purchases.

Secondly, on July 27, Edmunds.com published an analysis showing that in any given month 60,000 to 70,000 “clunker-like” deals happen with no government program in place. The 200,000-plus deals the government was originally prepared to fund through the program’s Nov. 1 end date were about the “natural” clunker trade-in rate.

Let’s hope we can be saved from additional “stimulus” proposals which do far more to waste money than spur the economy.

Transparency: Read the Bill? See the Earmarks!

Via MLive.com, here’s House Judiciary Committee chairman John Conyers (D-MI) pooh-poohing the idea that members of Congress should read legislation before they vote on it.

He is under attack for it – attacks he can deflect because they’re partisan and because he’s from a quintissential safe district. So instead of gulping the too-potent elixir of outrage, let’s sip a while on substance.

Members of Congress don’t read bills. Instead, they efficiently (for them) place trust in staff and other politicians to know enough of what’s in a bill, and enough of the politics, to get by.

I agree with the ReadtheBill campaign, which wants Congress to post all legislation online for at least 72 hours before it is considered. It’s complementary to President Obama’s 38-times-broken promise to post bills online for five days before he signs them.

The point, of course, is not having 535 people sit down and thumb through every single page of the legislation coming before them. It’s having the 535 members of the House and Senate know what’s in the bills they vote on. But even more than that, it’s about letting the public know what is in the bills before Congress votes.

“What good is reading the bill if it’s 1,000 pages and you don’t have two days and two lawyers to find what it means after you read the bill?” says Conyers. Give us two days – no, make it three – and Americans, including lawyers, will let you know.

The thirst for transparency is not speculative. WashingtonWatch.com (a site I run) recently asked the public to gather data about congressional earmarks, which have long been shrouded in secrecy. In under two weeks, ordinary Americans have put more than 8,000 earmarks into the database to create a ”United States Earmarks Map.” (It loads a little slowly because of all that data.)

Through this project, a relatively small group of people will help expose how the Washington spending machine works, and by exposing it, change it.

You can review Chairman Conyers’s earmarks by selecting “Michigan” in the drop-down menu below the map, then selecting “Rep. John Conyers.”  And if the earmarks your member of Congress requested are not in the database yet, you can enter them here.