costlyre
3Nov/102

$50,000 for a senator’s vote? Aye.

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But putting a politician in office is actually a rather diffuse way to influence policy. Sure, supporters spent $1.4 million for every winning congressman, $8.1 million for every winning senator and three quarters of a billion for a winning president, but wouldn’t it be more effective just to try and spend for the policies that actually affect us, or the things that we care about?

It seems that many have come to that conclusion.

$1.8 billion was spent on lobbying in 1999; by 2009 that number had almost doubled.1 Per congressperson, that works out to $3.5 million lobbying dollars in 1998 and $6.5 in 2009.

$ spent lobbying have almost doubled since 1999

To distill it even further, since 1999 the senate has averaged 1,200 hours a year in session and managed to record a vote every 3.5 hours; so at the current run rate you could imagine lobbying interests paying a little over $50,000 to every senator for every vote cast (assuming that lobbying dollars are equally allocated between the senate and the house).2

What does this all mean? Like anything else, our government can be bought and sold. We sell our votes at a little more than $20 a pop and our representatives sell theirs at 5,000x more. The decisions made by government are monumental but often arbitrary, and the well-placed dollar can make a magnificent difference.

Or can it?

In contrast to much (though not all) of the money raised by political candidates, I suspect that lobbying dollars are allocated dispassionately and supported by an expectation of earning a return. If a business decides to spend money on a lobbyist it is likely doing so because it hopes to influence a piece of legislation that will impact its future profit-opportunity. Assuming that the lobbyists aim to deliver a 20% return on each lobbying dollar invested (and succeed at doing so, at least on average), then the value delivered by the lobbying community to its client-base has grown from just over $2 billion in the late ‘90s to more than $4 billion in 2009.

4 thousand million dollars: not to be sneezed at; though when seated in the context of a $3.5 trillion dollar federal budget the number actually seems relatively slight.

Could it be that our government is not nearly as vulnerable to a parasitic lobbying class as the doomsayers would have us believe? If $3.5 trillion really were up for grabs each year and lobbyists truly were effective at grabbing it, wouldn’t businesses eagerly go to economic war for those funds?3

Instead businesses are spending dollars equivalent to only 1/1000th of the amount that may be amenable to the lobbyists’ sway. Though realistically, the entire federal government's budget isn't up for grabs each year, so perhaps it's more appropriate to focus on the appropriated federal budget at $1.2 trillion in 2009 (and $1.4 trillion in 2010).4 Moreover, businesses are actually aiming to generate a profit-return on their investment, so presuming their lobbying efforts help them to win business from the government, that won business would have to generate earnings (rather that revenue) at a comfortable excess to the lobbying dollars spent.

Take URS, a government construction contractor. Its federal segment generates a margin (before interest, taxes and depreciation) of roughly 6%. If this were representative then it would imply that the $1.2 trillion in appropriated government spending represents a $70 billion earnings-opportunity for businesses. If that were truly the profit available for influencing government businesses should be willing to spend $60 billion or so to win it. Conversely, a $3.5 billion lobbying spend suggests that a little more than 5% of this opportunity is actually open to sway.

So while the money spent on lobbying is gross (and crass and disheartening) it helps to keep things in perspective: while we spent $3.5 billion lobbying political representatives in 2009 (out of $60 billion that one might expect), the Italian economy lost $60 billion to government corruption the prior year (on a $1 trillion dollar government budget).

So while our representatives’ motives may at times seem misbegotten, at least the rules in place seem, in aggregate, to effectively constrain their appetite. There are only so many steak dinners that can be consumed in one week after all (even if, given the lobbying spend pro-rated over the course of a year, each of those dinners do seem to run at a hefty $18,000 per), and certainly it’s better to see politicians pack on the pounds than pocket banknotes by the paper-bagful.

In sum, though we sink money into influencing government, into electing politicians and into affecting their decisions, the size at which we do so turns out to be slight relative to the apparent opportunity.

Chalk one W up for transparent democracy

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  1. All dollar figures are inflation adjusted to 2009. As per the prior post, lobbying spending data comes from opensecrets.org []
  2. Actually dividing 2009 lobbying dollars per senator by votes taken, adjusted for absenteeism, would net a figure of $44,000 per vote due to the above average level of activity (despite which, congress passed fewer laws in 2009 than in any year since at least 1996). []
  3. NB: yes []
  4. Appropriated spending is in contrast to mandatory programs such as social security, medicare and Medicaid. []
Filed under: power 2 Comments
26Oct/100

Democracy for sale! $22 per head

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While we’re on the subject of governments.

As many of you1 may know, election season is upon us, and there seems to be something of a ruckus regarding the amount of money that the government exudes.

Much of that terrain has been well-trodden.

However, I am less interested in the million dollars that the federal government spent in the 10 seconds it took me to write this sentence fragment2 and more interested in the money spent in the service of getting into and influencing government.

Although many discount the utility of government spending, others believe quite fervently that there is value in providing a regulatory function to a capitalist economy. I suspect that both sides could agree, however, that money spent in the hopes of influencing how the government money is spent is an unfortunate byproduct of a capitalist system gone awry and represents a net drag to the economy.3

Framed as a question: how much do we pay to install, to depose, to influence our government? What is the cost of a senator? What is the cost of a president? What is the cost of a vote?

We all have a sense that the cost of getting elected is rising. When power brokers and business executives spend significant fortunes for their chance at taking the tiller (and still fall short), when 24 hour news networks breathlessly audit quarterly fundraising reports, when candidates spend more time in geographies where an electoral win is already assured (but the petty cash is crisp) than in states with votes still in play, we could be forgiven for assuming that the political game requires fewer handshakes than it does shakedowns, is more dollars and cents than it is wonky common sense.

The data would support such an impression. In today’s dollars, senate candidates spent $3.50 per vote in the 1990 and 1992 election cycles and $4.50 per in 2006 and 20084, house candidates grew spending from $3.20 to $7.90 over the same time period, and the expense of winning the presidency increased from $2.80 per vote in ’92 to $10 per in ’08.5 At that rate of growth the first $10 billion presidential campaign could occur by 2028.6 All in, the cost of (or, perhaps, the perceived value of) each general election voter rose from a little under $10 to more than $22 over just 16 years.

Campaign dollars per vote have doubled over 4 election cycles

Of course, vote-cost inflation should come as no surprise.

As the country’s income distribution has grown increasingly disparate, the scarcity value of non-commoditizable items has commensurately increased. (So trinkets and baubles, Rolexes and supercars have all seen relatively robust price increases even as incomes, in aggregate, have stagnated). What could be more scarce than a stake-hold on the presidency.7

Perhaps another way to think about it: as the country’s economic resources have concentrated, the resource holders have lost relative voting power and so have increasingly relied upon economic power to protect their resource pool. In 1996 more than 300,000 earners commanded 10% of the country’s pre-tax income; in 2008 that same income share accrued to 130,000. For those earners every 1% increase in the tax rate would conservatively represent a half million dollar present value loss.8

Given that such a large economic risk is shared by a relatively concentrated minority, it’s no surprise that the price of the presidency has inflated. When measured against a potential half million dollar loss, $10 a vote seems quite the bargain.9

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  1. yes, you two who wandered in here by accident []
  2. with war, health expenditures and retirement making up more than 2/3rds []
  3. Though, as I think about it, I’m sure that many would argue that money serves as the ultimate democratic measuring stick providing brute leverage to those that most deserve it (with a wide wide margin for error), and so influence on government should be exactly, directly proportional to the money that can be spent to influence it (what is a vote, after all, but an exertion of energy and effort that could otherwise be spent in more productive economic activity and so, ultimately, something that, by definition, has to be paid for in some way (blood, sweat, tears or dollars)?) []
  4. I measure the senate and house averaged across two election cycles to adjust for the distortion that a presidential cycle lends to the denominator of the per vote calculation. []
  5. All figures calculated as total spend by all candidates divided by number of votes cast for each. []
  6. $10 billion nominal, with an assumed general inflation rate of 2% between now and then -- brave, I know. []
  7. Think of this as the presidency as a Loius Vuitton handbag theory. []
  8. At a 10% discount rate over 20 years. []
  9. Election spending data compiled from opensecrets.org []
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