The Business of America Is Lobbying (2015)

Teal Deer

TL;DR

This book carefully lays out something that may not be too surprising at this point: corporate lobbying is a worrying phenomenon in the U.S.

The Business of America Is Lobbying

The Business of America Is Lobbying (2015) by Lee Drutman

I read this book because a political activism website I was reading recommended everyone should read it before talking about how corporate lobbying affects legislation. Having read the book, though, I’m not sure I would recommend this as a starting place to understand the problem of corporate lobbying. The reason why is that this book is (and definitely reads like) a PhD thesis i.e. five interesting papers stapled together. That said, it is certainly a place to start, even if I’m not confident it is the best place to start, and it contains some very interesting empirical work.

This book seeks to answer several questions. The most general is:

(1) What does corporate lobbying behavior look like now and how has it changed over time?

The other two questions follow from a consistent (but perhaps surprising) finding in political science: the amount of money companies put into lobbying for a particular issue does not actually correlate with success on that issue. Given that this is the case:

(2) Should we worry about how much money companies pour into lobbying?
(3) Why do companies pay for lobbyists at all?

What does corporate lobbying behavior look like now and how has it changed over time?

There is more corporate lobbying money now than ever before, but this is not new. As far as we can tell, it has always been true that (1) lobbying steadily increases, and (2) lobbyists largely represent business.

New since the 1970s, however, is that more corporations (1) have their own lobbyists (not trade association representation), (2) view their relationship with the government as cooperative rather than antagonistic, and (3) view lobbying as a long-term project where successful lobbying efforts make up for/pay for failed lobbying efforts. Thus, a pervasive presence in Washington is beneficial to maintain, and doing more lobbying is always better than doing less (as lobbying overall pays for itself).

Should we worry about how much money companies pour into lobbying?

The short answer is yes. The long answer is this flowchart I made of the contents of the chapter where the author lays out the effects of more ubiquitous lobbying (more companies regularly putting more resources into lobbying):

Flowchart on the effects of increased corporate lobbying

Drutman does this by showing how each of these trends connect to each other, and providing empirical data to show that these trends are happening. I will only briefly summarize the process here.

There are four bad effects (orange boxes), which lead to the conclusion that lobbying does indeed benefit corporate interests. The first bad effect leads to entrenched power, and the last three together lead to companies getting their way more often.

Bad effect #1: Difficulty changing the status quo (especially in a comprehensive or subtractive manner)

When you have a lot of companies lobbying, and having lobbied in the past, they will raise a fuss when you try to do a legislative overhaul that would eliminate one of their hard-earned benefits. Ubiquitous lobbying and increased competition add to general status quo bias and inertia to create a situation where (1) victories tend to be permanent and (2) subtractive or comprehensive change is hard. As an example of this, the tax code has been changed many times (according to the 2005 Report of the President’s Advisory Panel on Federal Tax Reform, “Since 1986, there has been nearly constant tinkering –- more than 100 different acts of Congress have made nearly 15,000 changes to the tax code” (p. 16)), but comprehensive tax reform bills — proposed and worked on by many different people at many points in time — consistently die.

This asymmetric deadlock disproportionately benefits entrenched power.

Bad effect #2: People without money (regular people, people-backed interest groups) are increasingly shut out of politics

Driving this process is increased competition — when the field is so packed, you need to pay big money just to be competitive. Another factor is that, as more companies lobby, there are more lobbying jobs available in industry, and these tend to be much higher paying than what interest groups can pay. As a result, companies get much better representation in Washington than interest groups representing a diverse group of citizens. The result is that companies are much better able to have their interests represented in Washington.

Bad effect #3: Congress increasingly relies on industry to draft legislation and understand the problem space

There are many things driving this effect.

First is the increased number of high-paying lobbying jobs available in industry. The 2012 median earnings of a lobbyist are the same as a member of Congress ($180k vs. $174k). The 2012 median earnings of a lobbyist with prior experience working in government is nearly three times that of lobbyists without government experience and higher than the peak salary for staffers ($300k vs. $113k (lobbyist without government experience) and $116k (peak staffer salary in the past, although it goes up to $120k+ nowadays). The working conditions of a congressional staffer are generally harder than industry (long, inflexible hours, cramped quarters, no job security). This means it is very difficult to keep good talent working in Washington resulting in (1) a brain drain from congress where congress is increasingly understaffed and staffed with inexperienced legislators, and (2) a revolving door where people who work in congress are often tapped to work in industry when they leave. This didn’t make it into the flowchart above, but this revolving door where people are offered lucrative jobs after leaving Congress poses serious conflicts of interest.

At the same time, increased corporate lobbying has the effect of making bills more complicated as more actors lobby to ensure the language of the bill benefits them or at least doesn’t negatively affect them. (Other factors unrelated to increased lobbying also drive the growing complexity of legislation: technological change, globalization, economic segmentation and differentiation, and more specific and precise language in bills.) This combined with the anemic congressional staff means that legislators need to accept help from lobbyists to understand the problem space and to write the legislation itself.

Finally, as the space of lobbyists gets more crowded and competitive, companies realize they need to do everything they can to shape the environment in which people in the legislative and executive branches are making decisions. The result is a comprehensive lobbying program that includes funding think tanks, publishing white papers, developing talking points and explanations of policy, writing speeches and letters in support of policies, proactively seeking out co-sponsors — essentially, seeing a bill through from start to finish. In an environment of tons of papers, letters, explanations, analyses, statistics, competing proposals, etc., congress relies more on lobbyists to filter and summarize information and provide easy-to-grab-onto narratives.

Bad effect #4: Opportunities for low-salience lobbying

Although there is no clear link between lobbying expenditure and success, there have been findings that companies are more successful in getting their agenda through when public attention is NOT on an issue. The increasing complexities of bills as more people jockey to have their interests represented in it creates opportunities for problematic provisions and bills to slip past the public radar and get little attention.

In summary:

The large amount of corporate expenditure into lobbying has worrying consequences, even if companies can’t concretely point to legislative wins as a result of that expenditure. The author summarizes this situation as: “While the relationship between inputs and outputs may be far from predictable, the conditions under which lobbying now takes place are more favorable than ever to the corporations who can afford to build multi-million-dollar lobbying operations that allow them to invest their resources everywhere and anywhere” (p. 45).

Why do companies pay for lobbyists at all?

Through interviews with lobbyists, literature on lobbying, and analysis of datasets, the author puts forward several reasons why companies lobby even though historically there has been opposition by corporate managers to getting involved in Washington, and the cost/benefit calculation of lobbying is uncertain.

Existential threat + lobbying as a “sticky” process

The author lays out a process where a significant number of companies mobilize in response to government threat. There are also other reasons why companies begin lobbying: in the author’s survey of lobbyists, while 10 of the 18 companies who gave a reason for starting lobbying said it was a response to government activity, other reasons included proactively asking the government for help in a private-sector issue, reaching a certain size, the CEO wanting to start lobbying, and so on. Whatever the reason, the author argues that lobbying is a sticky process, meaning that once it’s started, companies continue to lobby even when the original threat subsides, and even begin to develop more confidence and increased presence in Washington.

One chapter of this book focusing on the history of lobbying talks about major waves when companies begin to lobby. In the 1960s, Ralph Nader spearheaded a consumer advocacy movement, criticizing corporate excesses in the form of unsafe products, environmental pollution, etc. Throughout the 1970s, corporations started waking up to how important government lobbying was in order to avoid being strangled by regulations. During this time (1967-1980), the U.S. Chamber of Commerce (“focused primarily on anti-communism and free-market fundamentalism” (p.57)) went from 36k members to 160k with a budget of $55 million. From 1971-1982, the number of firms with registered lobbyists in Washington went from 175 to 2,445.

Another panic occurred in the mid 1990s under Bill Clinton. Three major things happened during this time period: (1) Clinton pushed for a healthcare bill to increase access to healthcare in the U.S., (2) Republicans won a majority in Congress and enacted a “K Street project”, providing lobbying jobs to Republican congressional staffers (“K Street” = nickname for the lobbying sector in Washington, D.C.), and (3) Microsoft was hit hard with an antitrust suit, demonstrating the dangers of not having a strong presence in Washington.

In the wake of Clinton’s attempted healthcare overhaul, a lot of health and pharmaceutical companies opened up an office in Washington. Even after the bill was sunk, though, those companies continued to lobby, and became more (not less) involved in politics, more proactive, and more ambitious in lobbying:

For a long time, pharmaceutical lobbyists told me, the drug industry opposed a Medicare prescription drug benefit, because the industry was convinced that it would mean bulk government purchasing, which would undoubtedly cut into industry profits. […] But sometime around 2000, industry lobbyists began to hatch an idea: what if you had a Medicare prescription drug benefit, but without bulk government purchasing? That idea became the 2003 Medicare Modernization Act, a boon to the industry that one study estimated at $242 billion over 10 years — almost 2,000 times the $130 million the industry spent lobbying in 2003 (p. 64).

It goes on: in 2004, pharmaceutical companies successfully lobbied for Project BioShield, a $5.6 billion allocation to stockpile drugs in case of a potential bioterrorist attack. After getting this passed, they went on to demand protection from losses involved in developing bioterrorism vaccines.

In addition to these anecdotal data points, the author also analyzes lobbying expenditure data to show that government spending, government attention, and company size are not good predictors of lobbying expenditure, while past lobbying expenditure is. This suggests that once companies put forth the effort of creating a presence in Washington, they continue to leverage that presence.

Reward structures and information asymmetry in lobbying

The author summarizes David Lowery and Kathleen Marchetti (You Don’t Know Jack: Principals, Agents, and Lobbying) who describe the activity of lobbying as having a variable ratio reward schedule, meaning that “playing” gives a reward intermittently at random intervals. This is similar to the payout scheme of gambling, and has highly addictive properties. The author uses a 2004 bill as an example:

Yet all it takes is an occasional big payoff to justify the importance of political engagement. Take the 2004 American Jobs Creation Act. What began as a simple fix to resolve a subsidy dispute with the World Trade Organization eventually evolved into a 633-page bill with $140 billion worth of changes to the U.S. tax code, helping everybody from tobacco growers to film producers to NASCAR track owners to manufacturers of archery equipment, sonar fish finders, and tackle boxes. Starbucks got coffee roasting qualified as manufacturing. […]

And because one never knows when such a “Christmas tree” bill will come along, it pays to be always in the game. […]

Perhaps the only certainty in political engagement is that if you don’t participate, you have no chance of wielding influence over outcomes (p. 127-8).

The author also talks about the relationship between lobbyists and the corporate managers who have to determine whether a lobbyist is worth paying for. An important feature of this relationship is the existence of an information asymmetry: lobbyists have more knowledge about the domain of lobbying, are often located far away from corporate headquarters, and talk to people who the managers don’t know. This information asymmetry is a double-edged sword: on the plus side, it means that lobbyists have some control over what kind of information to present to the corporate managers, meaning they can inflate their work and contributions. On the negative side, it means that there is uncertainty in managers’ minds on what the actual value of lobbying is to the company. This skepticism from managers encourages lobbyists to seek particularistic benefits (things that only benefit this company or a very small set of companies) and to focus on winning quantifiable monetary benefits (for example, winning Medicare/Medicaid reimbursements for specific drugs, patent exclusivity, tax legislation, and trade policy). The author is worried for good reason that these kinds of wins are parasitic — they allow companies to extract profit from the government without making the world better.

Summary

Overall, this book makes a strong argument that corporate lobbying is detrimental to the functioning of democracy. Another important point the book makes is that there is a very worrying revolving door between congress and lobbying positions, including a system where corporate lobbyists function as a kind of auxiliary civil service. Unfortunately, this book is so disjointed I’m not sure I would recommend it (it certainly is hard to summarize).

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