I suppose it’s somewhat nice to see that at least one sector of the economy is doing well lately.
Washington’s influence industry is humming steadily while the national economy is declining in what several economists predict will be the worst recession in 50 years.
[...]
Many industries, ranging from oil to financial-services companies, are terrified about the prospect of layers of new regulation and higher corporate taxes under the new Democratic regime.
“A number of interests are extremely concerned that they are going to be hit with legislation, and this includes a number of parties who have not had to worry in the Republican era and now see a major threat,” said Wright Andrews, a partner at the lobbying firm Butera & Andrews, which represents several financial-services firms.
“Everyone I’ve talked to thinks it’s going to be a banner year,” said Andrews. “I’m just smiling, quite frankly, at what seems to be happening.”
Charming.
I’m not a terribly big fan of lobbyists, special-interest groups, trade associations, “grassroots organizations”, and the like. The principle is fairly sound, as principles often are: since politicians aren’t (and really can’t be) specialists in every (or any) area they propose to legislate, the people likely to be affected by that legislation should make an effort to educate the politicians. The theory, I suppose, is that legislators listen to the various relevant groups, consider their (opposing or at least not entirely compatible) arguments, and gain a little bit of insight into the problem about which they’re about to legislate before casting their votes. It sure beats balls-out ignorance on the part of the politicians, doesn’t it?
(There’s an implicit false-dilemma fallacy in there: I described only the choice of lobbyists or no lobbyists, leaving fixed the circumstances — sweeping legislation — that made lobbying seem like the “right” answer. But since coercive government isn’t going to go away any time soon, we can ignore that in the pragmatic, short-term context.)
The obvious problem, of course, is that lobbyists are under no obligation to educate anyone. Instead, they act as propagandists for their particular causes, selling starry-eyed visions of utopian dreams built on the foundations of, say, slave-grown cotton or public libraries or light-rail transit.
This needn’t be a matter of crass avarice or cold manipulation, either. Hayek writes:
The movement for planning owes its present strength largely to the fact that, while planning is in the main still an ambition, it unites almost all the single-minded idealists, all the men and women who have devoted their lives to a single task. The hopes they place in planning, however, are the result not of a comprehensive view of society but rather of a very limited view and often the result is a great exaggeration of the importance of the ends they place foremost. This is not to underrate the great pragmatic value of this type of people in a free society like ours, which makes them the subject of just admiration. But it would make the very people who are most anxious to plan society the most dangerous if they were allowed to do so — and the most intolerant of the planning of others.
(F.A. Hayek, The Road to Serfdom, p. 99, 2007 paperback edition)
One point to take from the above is that these people quite naturally place more value on the fields in which they specialize than they do on other endeavours about which they know less. (I put more value on computer graphics research than I do on, say, critical histories of 17th Century religious art, but an art history doctoral student would probably hold the reverse opinion.) A trade association of drywall contractors would naturally see the importance of the construction sector. The Electronic Frontier Foundation is vitally concerned about internet regulation.
Another point — and this is critically related to the first — is that while specialists may know their own fields quite well, and sufficiently savvy politicians might be able to listen to half a dozen competing lobbyists and make a half-assed decent guess at which interests their own constituents might ultimately prefer, the problem of the legislators — Hayek’s planners — is to balance government resources and intervention across all fields. Since government cannot create wealth, this is a zero-sum game: when Bush 43 magicked up a $13.8 billion dollar half-assed bailout for GM and Chrysler out of TARP money, he took that money from its previously intended purpose of shoring up banks overcommitted to bad loans (and so on). When lobbyists convince politicians to support one cause, they’re effectively convincing those politicians to withhold resources from the other causes which don’t have lobbyists in play at the moment.
This brings up a third problem (which is more or less endemic in a legislatively intrusive environment) — you have to pay to play. By considering legislation that affects an industry, government gives the players in that industry — especially the bigger players who can afford the best lobbyists — the opportunity and incentive to influence government policy. For example, CAFE fuel-economy standards, which were intended to force auto companies to make smaller and more efficient cars, instead led to the rise of the sport-utility vehicle (which was regulated, thanks to industry — and if you believe Megan McArdle, UAW — lobbying as a light truck) and ultimately drove up fuel consumption. The very presence of the legislation allowed the big players to shut out everyone else and drive the agenda. (Witness also the ultimate passage of the deeply unpopular bank and GM-Chrysler bailouts.)
None of this makes me particularly happy.
Edit: If I’d been a proper economist I’d probably have picked up on this on my own, but instead I came across it after posting. Don Boudreaux has written a letter on the Blagojevich scandal and the costs of rent-seeking, which is germane to the topic of lobbyists:
In particular:
[I]t’s understandable that companies spend considerable effort courting politicians who can bestow such privileges. That’s wasteful. Time, energy, and other materials that could be used to expand the output or improve the quality of goods and services are instead used to lobby government for narrow benefits that may harm society at large. And the larger the potential gain from being granted such a privilege – that is, the larger the rents – the more intense will be rent-seekers’ incentives to chase after them. That puts tremendous pressure on – and gives tremendous leverage to – politicians.
This is implicit in the article from The Hill, which notes:
While companies look to trim expenses by freezing wages, laying off workers and reducing matches to employee 401(k) accounts, many executives realize they cannot skimp on representation in the halls of Congress.
“We have clients who have significant economic problems and we’re discussing that with the leadership, saying: ‘As you put the stimulus package together, here’s a part of the economy that has severe credit problems,’ ” said former Rep. Marty Russo (D-Ill.), a lobbyist at Cassidy and Associates who served on the House Ways and Means Committee.
So… companies are cutting jobs in order to pay lobbyists. They need the lobbyists to get a piece of the $850-odd billion stimulus package in the works, whose main objective is to… wait for it… create or preserve jobs.
Clever.
