Economy & Business

Corporate Lobbying Is the Ultimate Tragedy of the Commons

(Photo Illustration: NRO)
Lobbying can help individual companies, but it damages our political process.

In the well-known account of the “tragedy of the commons,” herdsmen graze their cattle on common pastureland. Over time, each herdsman puts as many of his own animals as he can on the pasture, which leads to overgrazing; as a result of this narrow self-interest, the pasture is damaged to the point where no one can use it. Everyone would have been better off in the long run with restraint. But if some herdsmen exercised restraint and others didn’t, the former would lose out; for fear of that, nobody was capable of restraint. Short-term thinking undermined long-term well-being.

This is an increasingly apt metaphor for the growth of corporate lobbying in Washington. Over the last several decades, corporate lobbying has metastasized into a multi-billion-dollar industry, fueling a dysfunctional political process. And while it appears to pay off in the short term, like much in corporate America, it has a very dangerous long-term cost — a government that is increasingly unable to function, overwhelmed by both the never-ceasing demands of these lobbyists and the ever-more-muddled and hard-to-fix policy complexities that their lobbying produces. In the long run, this is very bad for business.

Consider the regular Washington ritual of the “tax extenders,” a package of 50 or so temporary tax breaks that Congress almost always votes to reauthorize — but only after waiting until the last possible minute.

The many companies and industries lobbying for these breaks would very much like them to be made permanent. But making them permanent would leave many lobbyists who work on these issues bereft of lucrative contracts. Making the tax breaks permanent would also do away with the accounting gimmicks that allow Congress to understate the true costs of the breaks by falsely assuming they will expire. So this process repeats itself at the end of each congressional session, further contributing to a tax code that is “a hopelessly complex mess, antithetical to growth, and is crammed with conflicting incentives,” in the words of the late Representative Bill Frenzel (R., Minn.).

Taxes are always among the most heavily lobbied issues, especially by large corporations and their trade associations, which are mostly lobbying not to reach the grand simplification bargain that just about everybody ritually calls for. Instead, they are lobbying either to preserve their existing benefits, to add new ones, or most commonly a little of both. Between 1986 and 2005 (following the 1986 Tax Reform Act), Congress passed 15,000 changes to the U.S. tax code.

And so the tax code grows ever more incoherent, standing as an impressive testament to the increasing political disconnect between what’s good for business as a whole (a simpler tax code) and what’s good for businesses individually (a complicated tax code that gives special benefits to individual companies and industries that lobby for them).

Tax lobbying also highlights how what’s good for business as a whole (again, a simpler tax code) is very different from what’s good for corporate lobbyists, who are in the greatest demand when the tax code is very complicated (requiring their expertise) and when tax reform is a perpetual threat (requiring their services).

Though the tax code is the most glaring example, it’s not the only aspect of Washington politics that is affected. The ever-increasing total investment in corporate lobbying (now about $2.6 billion a year) has led the political process overall to become more complicated, unpredictable, slow, and particularistic. Or, in the words of so many commentators, just plain “broken.”

And yet, for corporations wanting to gain influence, the solution to this tough political sledding is to . . . hire more lobbyists. Which of course further contributes to the contested and complex politics, which requires even more lobbying. And so it keeps getting worse. And lobbying becomes ever more costly, though no more effective.

For lobbyists, the swift resolution of policy disputes is not nearly as profitable as the slow churn of uncertainty.

While we tend to think of lobbyists as mere extensions of their corporate clients (“hired guns,” they’re often called), lobbyists enjoy greater autonomy and independence than you might imagine — largely because corporate managers’ attentions are elsewhere (usually on running the business) and politics is rarely straightforward. Managers rely on their lobbyists to tell them what to do in Washington. But, as we saw above in the discussion of taxes, the interests of companies and of the lobbyists they employ are not always well aligned. Companies generally want policy questions to be resolved quickly, and they do not want to spend more money than they have to. But for lobbyists, the swift resolution of policy disputes is not nearly as profitable as the slow churn of uncertainty. The uncertainty produced by increased political incoherence and complexity means more demand for lobbying.

At what point do business leaders declare, “Enough!”? During the 2013 government shutdown, World Fuel Services CEO Paul Stebbins (who had been active in the “Fix the Debt” campaign) told the Washington Post, “It is grossly reckless to [stand by and] watch the long-term business trajectory of the U.S. to be at such risk. And we are part of the pathology that got us here. We’ve all had our K Street lobbyists who are part of the problem.” Then — as now — every company was looking out for its own interests, and nobody was paying attention to the larger issues, like the basic functioning of Congress. After all, a strongly functioning Congress serves no one company’s unique interest. A weak Congress that depends on lobbyists to do basic policy work is much easier to influence.

As the tragedy of the commons teaches, the cattle can graze on the shared land for only so long. The policy process in Washington looks more and more like a barren, overgrazed pasture — incapable of producing anything. Whatever short-term gain companies win by lobbying, they are only hastening the demise of our political process. If we have a government that fundamentally breaks down, it will be far worse for companies than the short-term loss of a favorite tax benefit.

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