Lobbying in the U.S.: Why Not Call It Bribery?

  The huge bailouts taxpayers have generously given to the U.S. banking industry are probably in part due to very powerful lobbying. Our federal legislators are the targets of the most powerful lobby on Capitol Hill. As a recent blog by a constituent of Senator Dick Durbin of Illinois states, “they own the place.”

 

A major factor in the meltdown of Wall Street was due to the mixing of risky speculative investing with what used to be seen as conservative local banking. This occurred in 1999 when the post-Great Depression regulations that kept these two very different cultures separate was repealed. It took only nine years for the resultant bubble to blow up. A bubble with which we infected the entire world! Here again we have the most powerful lobby in Washington calling the shots.

 

When powerful lobbies are allowed to have so much influence on legislators and participate in writing the rules that favor their industries or enterprises there is a major blurring of the boundaries between being influential or informative and corrupting lawmakers to tilt the playing field in their favor. We’ve all heard stories of widespread bribery in other countries. Some of you may have firsthand knowledge of this cost of doing business in countries where bribery is commonly practiced.

 

So what is the difference between paying an official to obtain a favor and contributing to a campaign, helping to write favorable legislation or encouraging preferential treatment under the already-skewed laws to gain similar favors? Here’s a portion of the concluding remarks of a paper published by Kellogg School of Management at Northwestern University which attempts to address this question:

 

Corruption and lobbying are to some extent substitutes. Through lobbying a firm may be able to change existing rules to the firm’s advantage. Through bribery a firm may get the bureaucrat to bend the rules and thus avoid the full cost of a policy. We believe that one important difference between these two strategies is that the effect of lobbying is more permanent than bribing, simply because the bure[au]crat cannot commit to not ask for bribes in future periods. Based on this simple assumption, we find that the firms prefer bribing to lobbying early in the development process. At later stages, when firms have invested more, their bargaining power relative to the bureaucrat is smaller and the bribes therefore larger. Then, the firms are more likely to lobby the government.

 

Before anyone starts accusing me of being an anti-capitalist or left wing, I’m not simply pointing to corporate lobbying but all lobbying. Between 1998 and 2008, the number of registered lobbyists grew from 10,692 to 15,287, nearly a 50% increase in just ten years! This is a huge disparity when you realize they are all trying to get their way from only 535 federal legislators.

 

Lobbyists’ spending increased during that same ten-year period from $1.44 billion to $3.27 billion – way more than double! (see http://www.opensecrets.org/lobbyists/). One of the biggest annual jumps in the lobbyist population – a whopping 30 % - was between 1998 and 1999 when the banking regulations were repealed. Could these two events be related?

 

Of course, the lobbyists aren’t entirely to blame. They needed the votes of the legislators to repeal regulations and fund the bailouts nine years later. Legislators, under huge pressure to comply with lobbyists’ influence, still bear personal responsibility for their actions, and this includes both parties. But this system is flawed and now we know it was fatally flawed for at least nine years, a flaw which unfortunately has hurt the taxpayer much more than those responsible.

 

I am hopeful that our legislators are considering regulating those who have proven untrustworthy of our blind faith in their ability to police themselves, treating the public trust with all the recklessness of Dodge City/anything goes types of wealth tilting ploys. The practices of these lobbyists who “own the place,” as well as the behavior of the legislators who are subject to their influence peddling, need to be closely examined, regulated and responsibly overseen considerably more than in past years. And this could and perhaps should include criminalizing those activities that more closely resemble bribery.

 

The only reason thousands of people aren’t in jail today due to this global tragedy – this 21^st Century Great Recession which is causing countless pain and suffering around the world - is that the laws allowed this sort of thing to happen. And who saw to it that these laws were so relaxed that everyone complicit is not now doing jail time? The most powerful lobby in Washington, that’s who. When it is bribery let’s call it that, even if it has been “legalized.” There’s no need to continue putting up with this nonsense.

 

 

 

Comments

[John Renesch]

In an uncanny comparison of which party's politican are invested in what stocks, look at this graphic just published by Miller-McCune magazine: http://www.miller-mccune.com/politics/partisan-portfolios-1297.

The first impression one gets is the incredulous comparisons, where one party invests heavily the other is opposite.

I'll be doing more on lobbying in July.

[John Renesch]

This from Judy Kimmel:

"Interesting article regarding lobbying in this country, as a Board director of The Peace Alliance, I note that one huge area of lobbying omitted from the discussion was citizen action, whether through a C-4 or independently as individual activists. Our national organization although struggling economically in these bad economic times, has had tremendous influence in shifting conversations and expanding dialogue in educating our House and Senate members about the plethora of alternatives to violence and war, it's extreme cost to society, and the multiple solutions at our finger tips not yet acknowledged. Let's not walk the streets in protest, let's walk the Halls of Congress to influence."