April 9, 2006
On Lobbying and Campaign Spending
On Lobbying and Campaign Spending-BECKER
The fundamental feature of the political process in any democratic society is that voters have only a weak self-interest to be informed on political questions that will come before candidates running for office, or on the details of the positions taken by these candidates. The simple explanation for this well known "rational ignorance" is that whether any voter supports or opposes particular candidates has a negligible influence over the outcomes of elections when hundreds of thousands, and even many millions, are voting.
Lobbying activities and campaign contributions try to fill this void by either directly trying to influence legislators, governors, and presidents, or by trying to persuade voters to support particular positions. They persuade by providing information and misinformation, and by changing attitudes and beliefs. They sometimes also try to influence elected officials by bribing them with gifts, money, and favors, and also by making campaign contributions that candidates can spend to try to help get elected.
The ignorance of voters implies that many different ways will be used to persuade them to vote in particular ways. Given the powerful and extensive role of government in society and the economy, one might expect that a large number of hours and many dollars would be spent influencing voters and officials. Yet as Posner indicates, what is remarkable is not how much is spent on lobbying and campaign contributions, but how little. Yes, the $3 billion spent in the 2004 presidential and congressional elections is a lot of money in an absolute sense, but it is peanuts compared to the Federal government's expenditures on different programs of over $2 trillion. It is also small relative to the thousands of regulations that directly and in many indirect ways affect business actions and personal decisions.
Posner tries to explain why lobbying and campaign spending is small relative to the important issues at stake. As he indicates, for many reasons the influence of additional spending on outcomes favorable to those doing the spending may be rather small. It remains somewhat puzzling, however, why this additional influence is so small.
Whatever the explanation, it is not clear to me why we should want to restrict spending and lobbying, aside from punishment for outright bribes, and for other forms of malfeasance by officials and contributors. Perhaps we do want to restrict how soon members of say Congress could work as lobbyists after they leave office. According to one study of a few years ago, over 40 per cent of a sample of members of Congress who left government to be active in the private sector eventually registered as lobbyists. Yet ex-legislators may be socially as well as privately helpful as lobbyists since they are familiar with the workings of the legislative process and have good personal contacts.
If as I (and Posner) believe) the essence of democracy is competition in the political process, that competitive process should include persuading and influencing activities. That is, competition in the market to influence political outcomes by persuading voters and legislators is the only effective way to produce checks and balances on points of view that reach voters and officials.
To be sure, the degree of competition is not perfect in lobbying or campaign contribution since some groups are able to collect much more money to spend than are other groups that have an equally vested interest in political decisions. But there are many other ways to influence votes and decisions. Newspapers also influence opinions, and a free press demands no controls over how much newspapers can spend trying to influence the opinions of readers on political issues. The Internet has thousands of bloggers and others who try to influence political opinion. They too are unregulated in order to provide competition in the expression of opinion. Many organizations, such as those with retird persons, encourage members to spend their time on influencing how official vote on particular issues. The use of time for political purposes is essentially also unregulated.
So why should legislation single out explicit lobbying and explicit campaign contributions, and neglect all the other ways of influencing political outcomes? Lobbying and contributing to campaigns are only one major source of persuasive and influence efforts in the vast competitive market that tries to influence political decisions.
Another way to make my point that there is excessive attention in the US to lobbying and campaign spending is to compare political outcomes here with those in Europe or Japan. All the data indicate that much more is spent on campaigning and lobbying in the US than in either of these other places. Yet it is not obvious that either Europe or Japan has better political outcomes, measured either by the quality of legislation, or by the response to public opinion. Indeed, I believe their outcomes are worse, or at least no better. That would suggest that the United States is excessively concerned about the relatively small level of resources that is spent on explicit lobbying and campaigning.
Should Lobbying and Campaign Spending Be Further Curtailed? Posner
In the wake of the Jack Abramoff scandal, measures are under consideration in Congress to restrict lobbying more than at present by requiring more lobbyists to register (and thus provide more information on lobbying activities to the interested public), by requiring more public disclosure of existing lobbyists' activities, and by forbidding lobbyists to buy meals for members of Congress. Citizens' groups want much tighter restrictions on lobbying than anything Congress is contemplating, arguing that lobbying skews government policy. Extensive restrictions have been placed on contributions to political campaigns, which are analogous to lobbying. Republicans, who used to oppose efforts to restrict campaign contributions by PACs (political action committees), are now seeking to place restrictions on a type of PAC called a "527," which can accept unlimited contributions to engage in political advocacy, provided the 527 avoids supporting a candidate explicitly. The Democrats, who were in the forefront of advocating limits on PACs, are opposing limits on 527s, which are primarily liberal.
Lobbyists provide information to members of Congress and other officials, and campaign contributions are used to sponsor political advertising, efforts to register voters thought likely to support the candidate on whose behalf the efforts are made, and other political activities, most of which are broadly informational in the sense of seeking to familiarize the electorate with the candidate and his program. Hence restricting lobbying and campaign contributions is likely to reduce the flow of information to government officials and to voters, and this might seem a substantial interference with the political marketplace.
The main concerns about lobbying and campaign contributions are first that they are wasteful and second that they are a form of quasi-bribery and distort legislation and policy. They are indeed wasteful in an arms-race sense: if one candidate (or industry) spends heavily on advertising, his competitors have to do likewise lest they be drowned out; the incremental information furnished the official or the voter may be slight. This is less of a problem with lobbying than with campaign contributions. Members of Congress and their staffs are spread very thin and would find it difficult to function without the information provided by lobbyists. Most voters, in contrast, have very little interest in political information, even in hard-fought presidential campaigns, in part because they know that their vote isn't going to swing the election.
As for the distorting effect of lobbying on policy, it probably is slight. Of course there are many examples of special-interest legislation that reduce overall social welfare, but there would be much special-interest legislation without any lobbying, since in a democratic society legislators have to be attentive to the preferences of influential constituents. Much such legislation is, moreover, quite inconsequential from an overall social-welfare standpoint. Liberal activists denounce "corporate subsidies," many of which consist simply of tax breaks. The usual effect of giving a tax break is merely to shift the incidence of taxation--if one taxpayer pays less in taxes, another will pay more--with uncertain and perhaps often trivial effects on resource allocation. Most economists consider taxation of corporations inefficient because its effect is to tax investors twice, so tax breaks for corporations probably increase social welfare.
The aggregate effects of lobbying, moreover, may be rather trivial. This is suggested by the fact that annual expenses on lobbying Congress are only about $1.5 billion, even though the total federal budget is more than $2.5 trillion, and the regulatory powers of Congress place much of our $12 trillion economy under congressional sway as well. There are two possible inferences to be drawn from the disparity between the amount spent on lobbying and the total economic rents that Congress could confer on lobbyists' clients. One is that the marginal cost of influencing a member of Congress by a given amount rises very steeply. Perhaps the first nice meal you buy him increases by.001 the probability of his supporting your pet rent-seeking project but you would have to buy him 10 nice meals to increase the probability of his supporting you by another.001, and so on. The second and complementary possibility is that most members of Congress are not bribable, and that all that most lobbyists get for their efforts is access that enables them to furnish information useful to the member. There is (returning to the previous point) only so much that one can spend on generating information; moreover, and because information is relatively cheap to obtain and communicate to a small number of people, even relatively unorganized and impecunious groups who oppose a proposed project can provide offsetting information to the members of Congress. The lobbying market should therefore be competitive.
Campaign financing presents graver issues than lobbying does because a member of Congress cannot be reelected unless he spends a substantial amount of money on his campaign, and the people who contribute that money, many of them anyway, expect something in return. Even so, the effect can be exaggerated. If both parties have roughly equal levels of financial support, a candidate doesn't have to change his political stripes in order to raise money; and donors who share his political views will not be asking him for something he doesn't want to give them.
In the 2004 presidential and congressional elections, total campaign expenditures were approximately $3 billion, a figure that reformers consider shockingly high. It is actually low relative to the stakes in choosing a President and a Congress; it is four one-thousands of the GDP.
I am not a Pollyanna when it comes to evaluating the U.S. government. I believe that it may well be quite incompetent to deal with the problems that the nation is facing in an era of profound global political insecurity interacting with the breakneck pace of technological change. But government incompetence is better illustrated by the congressional reaction to the Abramoff scandal than by Congress's failure to enact "meaningful" campaign and lobbying reforms. An intelligent legislature, learning of a scandal, would first want to determine the likely frequency and consequences of such scandals and the adequacy of existing law to limit their recurrence. This inquiry would quickly reveal that Abramoff had pleaded guilty to criminal activity along with two congressional aides, that other members of Congress were under criminal investigation, and that an immensely powerful member (Tom DeLay) had been forced by the scandal to resign from Congress. The inquiry would further reveal that the scandal was actually an artifact of a surpassingly foolish law, namely the Indian casino law, which by conferring enormous rents randomly on Indian tribes had generated rampant rent-seeking, frequently shading into bribery. (Becker and I blogged about the law on January 9 of this year.) What the inquiry would not reveal would be a good reason for amending the lobbying laws.