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Have you ever heard the saying “If it sounds too good to be true, it probably is?” If a market investment appeared in which investors could make millions or perhaps billions by investing small amounts of money, most people would believe it is “too good to be true.” Skepticism would be a perfectly rational reaction. Welcome to the world of the corporate and union Lobbyists: a world of political favor and special privileges which really are too good to be true.
Lobbying in Washington is not a profit seeking venture as much as a rent-seeking scheme which allows lobbyists to manipulate the tax code and regulations to give them privilege and advantage in the market. Through this system of lobbyist favors, the state has become a vehicle by which everyone lives at the expense of everyone else. In fact, It is often more profitable to rely on government than to out-produce and out- compete fellow competitors in the marketplace.
Lobbying has become an increasingly lucrative investment, with lobbyists’ efforts garnering massive returns for their employers. A well-known lobby group, The Carmen Group, Inc., demonstrated the huge payoffs that lobbying can generate. In 2004, Carmen claims to have collected $11 million in lobbying fees, while generating $1.2 billion in benefits for its customers. While this payoff may seem high, this is rather typical for modern lobbying in Washington. James A. Thurber, a professor at American University and a noted expert on lobbying, has a observed that "the investment in lobbying is minimal compared to the outcomes."
Today, total lobbying expenditures according to the Center for Responsive Politics, exceed $3 billion every year and the payout regularly exceeds the investment. Yet, the loopholes, anti-competitive regulations, and subsidies extracted from government by large corporations and unions come at a heavy price as consumers and taxpayers bear the costs of these practices. Smaller competitors and consumers, who are unable to afford the expense of lobbying, cannot gain the same advantages, allowing large unions and corporations to push out small companies and others who don’t have a voice.
General Electric (GE) is an excellent example of this crony collusion. Since 2010, GE has invested nearly $30 million a year in lobbying expenditures to gain special tax exemptions, loopholes, and preferential regulations. General Electric hired 375 lawyers to focus exclusively on understanding and exploiting loopholes they lobbied for in the tax code. As a result, GE paid a much lower tax rate than many other companies. Not only did General Electric pay a low tax rate, the company collected billions in subsidies from the federal government. Instead of GE gaining profit by being innovative in the market, the lobbying the government has allowed GE to profit at the expense of the taxpayer and its competitors.
Yet, despite General Electric and other organization coercion of Congressional authority, a bloated and expansive government is more to blame than the lobbyists. As the federal government controls larger and larger shares of the economy, General Electric and other lobbyists will allocate more of their resources to influencing government decision makers. A large federal government enables and encourages lobbyists to engage in rent-seeking. Reducing the size and scope of government is the best path toward eliminating Washington’s cronyism.
One of the unique characteristics of free markets is that the best way to succeed in the market is to create value. Apple, for example, is a successful business because of the company’s ability to provide quality products to the market. Successful companies provide goods and services which consumers want and are willing to pay for. Rent seeking never creates wealth; it can only transfer or destroy wealth. Lobbying is quintessential rent-seeking.