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?

A Deregulation That Could Reduce Foreclosures

One of the obstacles to reducing mortgage foreclosures is that so many of the homes being foreclosured upon are not occupied by their owners.  Approximately 20 percent of homes are vacant investor-held properties, while according to the National Low Income Housing Coalition another 20 percent are occupied by renters.

Addressing the issue of renter occupied foreclosures has been one of the harder nuts to crack.  We should have no sympathy for vacant homes purchased purely for speculative gain - the best course of action for those homes is foreclosure, or even better, speculators should be expected to continue paying those mortgages even in the face of losses.   Where homes are currently rented however, it may be in the interest of both the bank and the renter to continue that relationship.  Unfortunately, there is one larger barrier:  the very same bank regulators who are pushing lenders not to foreclose.

As banks are not in the business of property management, their regulators strongly discourage banks from keeping foreclosured properties on their books.  In fact bank regulations generally prohibit lenders from entering into long-term leases with tenants.  Legislation (HR 2529) introduced by Republican Gary Miller and Democrat Joe Donnelly would allow banks to do so for up to five years.  While the bill is sure to have some flaws - it merits a closer look.

Although most banks are unlikely to want to become property managers, allowing some to do so, even on an interim basis could reduce both the unnecessary eviction of renters and foreclosures on rental properties.   And unlike proposals that would force banks to make uneconomical modifications, or prohibit lenders from taking ownership of a renter-occupied home, relaxing regulations governing bank management of foreclosured properties could keep some families in their homes without having to violate contracts or re-distribute wealth.

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.

The End of the World War I Generation

Harry Patch died a little over a week ago.  At 111 he was the last British veteran of World War I.  No French or German participants in that horrid war survive.  Only one American participant still lives–Frances Buckles, age 108, who drove an ambulance during the war.

World War I is largely ignored in America, but it seared Europe in particular, as well as other participants, such as Australia and New Zealand, onetime British colonies which sent off soldiers to die for their parent nation.  Although less bloody than World War II, the first conflict set the stage for the second, far more murderous contest, as well as the Cold War that followed.

World War I, once called the war to end war, was foolish and stupid for all participants.  Nothing was at stake that warranted a death toll which approached 20 million.  On top were even more injured and maimed, economic collapse, and political chaos, leading to the rise of fascism, Nazism, and communism.

Harry Patch understood that he had been deployed in a mistaken crusade.  Reports the Washington Times:

Mr. Patch did not speak about his war experiences until he was 100. Once he did, he was adamant that the slaughter he witnessed had not been justified.

“I met someone from the German side, and we both shared the same opinion: We fought, we finished and we were friends,” he said in 2007.

“It wasn’t worth it.”

War sometimes is necessary.  But as Robert E. Lee intoned while looking down on the impressive military tableau at the battle of Fredericksburg, “It is well that war is so terrible, lest we grow too fond of it.”

Harry Patch certainly understood.  According to the Times:

His most vivid memory of the war was of encountering a comrade whose torso had been ripped open by shrapnel. “Shoot me,” Mr. Patch recalled the soldier pleading.

The man died before Patch could draw his revolver.

“I was with him for the last 60 seconds of his life. He gasped one word - ‘Mother.’ That one word has run through my brain for 88 years. I will never forget it.”

Iran’s Stalinesque Show Trials

Stalinism was dropped even by the Soviet Union when the murderous Joseph Stalin died, but it has never disappeared completely.  North Korea, for instance, mimics the bizarre personality cult promoted by the Soviet dictator.

Now Iran appears to be adopting the Stalinesque tactic of staging show trials, with “confessions” from the obviously brutalized accused.  Reports the Wall Street Journal:

On Sunday, reaction by Iranian newspapers and Web sites to the trials of some 100 detained opposition members, including a former vice president, was polarized as some raised questions about whether their confessions were coerced.

The trial by Tehran’s Revolutionary Court appears to be paving the way for President Mahmoud Ahmadinejad to secure his grip on power and cap a gradual takeover of Iran’s political landscape by hardliners. Mr. Ahmadinejad, whose government claimed victory in the disputed June 12 presidential elections, is to be inaugurated Monday for a second four-year term. Opposition leaders said the election was rigged.

Top reformist figures appeared in court Saturday looking disheveled and dazed. They sat in the front row wearing gray prison pajamas and plastic slippers without socks, in an apparent attempt to humiliate them in public. The reform leaders were unshaven and had lost weight.

Mohammad Ali Abtahi, a cleric and former vice president to former President Mohamad Khatami, appeared without his robe and turban. Mr. Abtahi, who should legally be tried at the special tribunal for clerics, clutched a piece of paper and took the stand to give an elaborate confession. He said that reform leaders had been plotting for years to take over the government and had vowed to stick together.

By putting its outrageous repression forward front and center, the regime–fronted if not controlled by President Mahmoud Ahmadinejad–has delivered its own affirmative answer to the question whether the recent ballot was stolen.   Although the regime has sufficient coercive force to remain in power at the present, it has sacrificed any remaining legitimacy at home as well as abroad.  The oligarchy led by Ayatollah Ali Khamenei is likely to have an ever more difficult time fending off challenges within the governing elite as well as among the people.

Americans should wish the forces of liberty and democracy well.  There is little that the U.S. government, with an unsavory record of supporting repression in Iran, can do, other than ensure that Washington does not divert attention from the responsibility of the Tehran regime for the many problems facing the Iranian people.  But people around the nation and world can help publicize the struggle in Iran and provide Iranians with the tools of freedom, including freer access to the Internet.  The Iranian struggle against tyranny is one with which all lovers of liberty should identify.

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: