The Effects of Corporate Lobbying, Pt. 1
By Josh Sager
In a post-Citizen’s United v. FEC political landscape, lobbying has become a multi-billion dollar industry. The floodgates were opened by the Supreme Court -- which decided that money was speech, thus making political donations constitutionally protected -- and we are now seeing more money in politics than at any other time in recent history. With the gigantic amounts of money being spent by corporations on lobbying, those who study politics are faced with answering three questions, the answers of which are vital for understanding the new political landscape:
- What are the policy results of lobbying?
- How do the results of lobbying affect the rest of society?
- Should citizens work towards getting money out of politics?
Only by understanding the results of lobbying, both on politicians as well as on the rest of society, can we understand why many Americans have begun pushing to separate money from politics. This is an uphill fight, against an adversary with virtually unlimited resources, and will likely take years to complete, if it is ever achieved.
As a corporation’s only goal is to make a profit, and close to $3.32 billion was spent by corporations to lobby the government in 2011 alone, the only logical conclusion is that corporations receive billions in benefits from their lobbying campaigns. The type of benefits from lobbying vary based upon the corporation doing the lobbying, but a majority of these benefits come in the form of reductions in taxes or regulations, government contracts, and sometimes favorable consideration under the law.
While the base corporate tax rate in the USA is relatively high (35%), most corporations pay only a small percent of this rate due to loopholes and subsidies. These loopholes and subsidies are protected (or even increased) by politicians who receive money from corporate lobbyists; the more lobbying a company does, the more likely it is to receive tax breaks and loopholes.
According to a 2010 study by the Daylight Foundation, which used tax data to correlate increases in lobbying with decreases in real taxes paid for corporations, many of the top corporations in the USA have utilized millions in lobbying to save billions in taxes. As calculated in this study, between 2007 and 2009, the top eight lobbying spenders (Exxon Mobil, Verizon, GE, At&T, Altria, Amgen, Northrop Grumman, and Boeing) gave approximately $540 million via lobbying; by 2010, these companies had seen a reduction in taxes of approximately $11 billion. The potential return on investment demonstrated here is over 2,000% -- a higher rate of return of most any investment other than a winning lottery ticket.
Regulatory laws and agencies are under the control of politicians, many of whom take money from lobbyists. In a manner virtually identical to tax rates, regulations decrease as corporate lobbying goes up. Corporate interests which cause pollution or pose a risk to public safety can reduce regulations, thus decreasing their costs, by lobbying politicians who control their regulations.
Tobacco and extraction (oil, coal, and gas) companies are the largest beneficiaries from reduced regulations, mostly due to the fact that their products are toxic to consumers and bystanders. Over the years, regulations have been slowed or suppressed totally by lobbying from these industries, increasing these industries’ profits by billions; a perfect recent example of this phenomenon is that of hydraulic fracturing (“fracking”). Due to regulatory loopholes put in place by politicians -- who received thousands from extraction lobbyists -- fracking companies don’t even need to disclose what chemicals they are pumping into the ground. Despite evidence that these chemicals are toxic to humans and animals, can pollute groundwater or even render it highly flammable, and sometimes cause earthquakes, this loophole persists; there is no possible rationale for this continued lack of disclosure other than the effects of corporate lobbying swaying politicians (exploding water, higher cancer rates, and random earthquakes should sway even the most recalcitrant politician to action, barring the interference of money).
While Americans would like to believe that the law is applied equally, regardless of race, gender, or money, this is not always the case. Corporate lobbying is sometimes directed at preventing legal action against a company for illegal acts. The largest, and most consequential, example of a corporation mitigating legal consequences with money is that of the Wall Street banks. In 2008, the U.S. economy crashed, largely due to the systemic fraud perpetrated by the country’s top five banks. Despite clear proof of their crimes, banks received bailouts to save themselves, avoided any new regulations, and have yet to encounter any prosecution for fraud. These banks came within a hairbreadth of destroying the world economy and caused trillions in damage, yet there has been no accountability for those responsible. There can be only one of two explanations for this lack of legal accountability: Either bankers and banks managed to evade responsibility through targeted “donations” and lobbying to key legislators, or these same officials are merely so incompetent and spineless that they are unwilling to take on the banks.
While the previously mentioned benefits are the most common goals of lobbying, there are many other ways that corporations benefit from their lobbying. Government contracts are often given out to corporations which have spent significant amount of money in lobbying (e.g., Boeing). Lobbying can get corporations increased access to information and allow for them to take advantage of opportunities which those without access would miss (e.g., JP Morgan execs being briefed about the impending bailouts). The limits on what lobbying can get a corporation are only limited by the willingness to sell out of the politician in question and the money spent by the corporation. As lobbying has an exceptional investment return rate and some politicians have been known to support virtually anything for the right amount of money, it is likely that lobbying will continue for as long as it is legal for huge amounts of money to interfere with politics.