When you spread food out on a picnic table, you can expect ants. When you put $3 trillion on the table, you can expect special interests, lobbyists and pork‐barrel politicians.
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.
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.
As long as the federal government has so much money and power to hand out, we’ll never get rid of the Abramoffs. Restrictions on lobbying deal with symptoms, not causes.