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Tuesday, May 25, 2010

How Lobbying Works

Politicians need lots and lots of money for their election campaigns. Corporations want legislation that discourages competitors and boosts profits. Lobbyists, with the help of campaign finance laws, provide the match making between the politicians and corporations.

The executives of a corporation hire a lobbyist. The lobbyist figures out which Senators and Representatives can write and/or get legislation passed. The executives (and underlings) donate money to those Senators and Representatives and even the President in order to further that process. Because these donations are public information, the lobbyist is able to compile a list of donations from the employees of that corporation and calculate a total. The lobbyist goes to the politicians and points out the "generosity" of the corporation. The politicians push legislation through that benefits the corporation.

The politicians, the lobbyists, and the corporations win. The taxpayers lose.

There are some interesting subtleties. The corporation does not demand or require that anybody donate to various campaigns. That would be illegal. Indeed, they may not even suggest it directly. Instead, it's known through the grapevine (but certainly not officially) that your campaign contributions will be monitored (and can be because it's all public information).

When describing corporation strategy and business development in meetings and in company newsletters, the politicians that can help the company are identified. You then donate to those campaigns. You get raises and bonuses that are partly based on reimbursing you for those political donations. Again, not officially, but that's how it works. You don't have to do it, but it will adversely affect your compensation and career if you don't.

It's funny to me that most people think that making donation information public makes politics somehow more fair when, in fact, the whole purpose of doing it this way was to enable corporations to direct their executives and employees to support various candidates. If campaign contributions were secret, it would be much harder to do.

That's why a Media Matters "correction" (via an Instapundit post and Reason article) is so silly. The "correction" was that various articles in the main stream and non-main stream media were incorrect when they stated that Obama received a huge amount of money from BP. According to Media Matters, the money didn't come from BP, but rather from employees of BP.

It's pretty much the exact same thing!


erp said...

Absolutely right, but have you had any luck explaining it to lefties who believe all corporate fat cats are Republicans?

Bret said...

They may well be Republicans, I don't know. That doesn't stop them from playing the lobbying game and funnelling money to those politicians that can help them.

Jeff Shattuck said...

My Dad has an interesting idea for how to deal with lobbying: if you're a politician, all donations go into a blind trust. ou can check the balance quarterly, but you can only see the total. Yes, this would mean that corporate campaign contributions would have to be secret ( a problem ) but maybe the good would be better than harm?

I also think it's ludicrous to define corporations as persons with the same free speech rights as individuals.This is not one man one vote! Not sure what to do about it, though.

Bret said...

The blind trust concept is interesting. Who would administer the blind trust? Congress? The President? Some government bureaucracy created by Congress?

It'd be tricky to make the trust truly "blind", but if it could be done I'd prefer it.

Harry Eagar said...

It is obvious to me that the Constitution did not give corporations the right to vote, so the recent Supreme Court decision was clearly erroneous.

It is amusing. The court managed to get on both wrong sides of the issue by also upholding McCain-Feingold.

Not mentioned so far is one other 'solution': public financing of campaigns. I don't support it, but if you want to cut out the plutocrats, that should do it.

Hey Skipper said...

It is obvious to me that the Constitution did not give corporations the right to vote, so the recent Supreme Court decision was clearly erroneous.

I also think it's ludicrous to define corporations as persons with the same free speech rights as individuals.

What does the First Amendment have to say about this?

Harry Eagar said...

Nothing, so far as I can see.

While I am not an expert in the history of the legal concept of the corporation, I know something about it. There is a great divide between corporations as they were conceived in 1787 and as they are now, following the innovative Delaware legislation of around 1880.

Corporations were not thought of as profit-making institutions but as civic bodies, like Trinity House, which was responsible for erecting lighthouses around Britain. As it happened, with the explosion of trade in the mid-18th c., Trinity House became very profitable, but that was never the intent.

I followed the comments and posts at Volokh about all this, and if any of those experts understands the fundamental change in the concept of 'corporation,' it didn't come through.

erp said...

Harry, why do you think making a profit is such a bad thing?

Harry Eagar said...

I didn't say it was. I said it wasn't part of the original concept of the corporation.

Corporations were originally schools, municipalities, charities.

Hey Skipper said...

Nothing, so far as I can see.

One would think that "Congress shall make no law ..." indicative of something.

I expect there is a reasonable argument to be made that corporations do not have free speech rights, and that the US would be better off if such was the case. (I also think that argument sinks like a greased safe the moment it is inspected by even a sidelong glance.)

Even granting that argument in toto, though, the definition of "no" seems even more clear cut than "is".

So, the answer is to pass an amendment to the constitution, not wishing away the clear meaning of the words therein.

Hey Skipper said...

Nothing, so far as I can see.

Well, except for the part of the constitution that says "Congress shall pass no law ..."

Now, there may well be a compelling argument that corporate speech is a bad thing. IMHO, whatever argument there is runs straight onto the rocks when it comes to defining what a corporation is so that the Maui News remains untouched.

Never mind that, I'll grant the argument as stipulated.

Then introduce an amendment to the Constitution that says what laws Congress can pass.

Until then, "no" means no, regardless of how badly tortured "is" is.

Bret said...

I apologize for the slow moderation of these last few comments. In order to reduce spam, after a post was 10 days old, it automatically held comments in a moderation bin and I didn't notice the comments for a few days.

I've changed the setting to 20 days of non-moderation and I also promise to do a better job watching the moderation bin.

erp said...

Harry said: Corporations were originally schools, municipalities, charities. That may be, but they better all have made a profit or they'd cease to exist pronto. "Not for Profit" doesn't mean run a deficit.

Harry Eagar said...

They just had to cover expenses, there was no requirement for any overage.

I recommend a review of the history of the Trinity House, which never made a profit for the first few hundred years, was always short of funds; later, it accidentally became very profitable.

This was a problem, since it had been set up to break even. Nobody knew what to do with the excess money.

The story is told in "The World's Lighthouses, from Ancient Times to 1820," by David Stevenson, which is about more than lighthouses.

erp said...

Harry, break even? That's a cute trick. Didn't they have reserves for emergencies, maintenance, expansion ...

You should hear my roommate the CPA wax eloquent on this subject. It's one of his favorites.

Harry Eagar said...

'Didn't they have reserves for emergencies, maintenance, expansion ...'


erp said...

So how did they handle unforeseen expenses, say damage repair from the fire?

Harry Eagar said...

It was a cash in, cash out operation.

They had a long list of places needing lights, but it took them centuries to get around to some of them.

If a storm washed away a lighthouse, which happened often, it would be replaced catch as catch can.

They did what they had money to do, didn't borrow.

erp said...

Didn't make much progress either.

Harry Eagar said...

Actually, they did. They accomplished some of the most dramatic engineering feats of their time.

Consider the Eddystone Light.