11 April 2012

Want a 22,000% return on investment? Hire a lobbyist


Lest anybody argue that money doesn't make a difference when currying political favor...

Alexander, R. M., Mazza, S.W. and Scholz, S. (2009). Measuring rates of return for lobbying expenditures: An empirical analysis under the American Jobs Creation Act (April 8, 2009). Available at SSRN: http://ssrn.com/abstract=1375082 or http://dx.doi.org/10.2139/ssrn.1375082

[ABSTRACT] The lobbying industry has experienced exponential growth within the past decade. The general public, the media, and special interest groups perceive lobbying to be a powerful mechanism affecting public policy. However, academic research finds inconclusive results when quantifying the rate of return on political lobbying expenditures. In this paper we use audited corporate tax disclosures relating to a tax holiday on repatriated earnings created by the American Jobs Creation Act of 2004 to examine the return on lobbying. We find firms lobbying for this provision have a return in excess of $220 for every $1 spent on lobbying, or 22,000%. Repatriating firms are more profitable overall, but surprisingly, profitability is not a predictor of repatriation amount. Rather, industry and firm size are most predictive of repatriation. Cash on hand, a proxy for ability to repatriate, is not associated with the repatriation decision or the repatriation amount. This paper provides compelling evidence that lobbying expenditures have a positive and significant return on investment.

2 comments:

wunelle said...

I find I'm not knowledgeable enough about history to answer my main question: was it not always this way? Was our government not always in thrall to the moneyed interests? And if so, is our idea of a popular democracy not a sham?

Chris Hedges points out that there are now more than 30,000 paid lobbyists in Washington. 30,000 people lobbying 636 elected representatives and a few hundred staff. And that was before Citizens United; god only knows what kind of influx of cash into the workings of government we're seeing now. In this setting, it seems naive in the extreme to think that any decision that goes against those moneyed interests has any chance of passage, whatever we may think as a voting public.

I don't know how the concerns of business should be accounted for in governance, but the current way seems manifestly not to be working for the average person.

Karlo said...

People talk about how much money is paid to politicians, but looked at another way, we should be surprised that so little is being paid for so much in return. For a large multinational, a hundred grand or a million bucks isn't all that much money. I think the only hope is for people to elect candidates who run very cheap campaigns--both for the most part, I don't see that happening.