Winter Reading: Rick Hasen's "Lobbying, Rent-Seeking, and the Constitution"

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Wed, 02/12/2014 - 05:44

Campaign Finance

UC at Irvine Law School professor Richard Hasen's essay, "<a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1734428" target="”_blank”">Lobbying,
Rent-Seeking, and the Constitution,</a>" 64 Stanford Law Review
191 (2011), is a good complement to <a href="http://www.cityethics.org/content/winter-reading-zephyr-teachouts-forgo…; target="”_blank”">the Teachout essay I recently
wrote about</a>. Besides its valuable look at the idea that lobbying should be regulated because it is harmful to our economy, Hasen's paper looks at two post-Citizens United judicial decisions that struck
down regulations that limited lobbyists' campaign finance activities
and the cooling-off period between public office and lobbying.

Both courts said that the laws could not be sustained on
anticorruption grounds, and Hasen believes that they would not
likely be sustained on political equality grounds, either. In this
essay, Hasen advances an alternative rationale that might support
some lobbying regulations: "the state's interest in promoting
national economic welfare." 
 
Hasen believes that lobbying threatens our nation's economic welfare
in two ways: (1) it facilitates rent-seeking behavior, that
is, the devotion of resources to obtaining financial benefits from
government (and providing financial benefits to officials, sometimes
due to pay to play) rather than putting these resources to a truly
productive use; and (2) the government acts that lobbyists seek to
influence often involve the inefficient use of government resources.
The latter is especially true at the local level where, for example,
lobbying can influence contract specifications to be written so that
contracts do not go to the lowest bidder and so that change orders
can easily be arranged to greatly increase the cost of the contract;
or grants can go to inefficient arts or social service providers.
The cost to our economy of lobbying is many times greater than the
amount of money spent on lobbying. 
 
One way of looking at the Progressive movement of the early
twentieth century is as a means to curb the excessive rent-seeing
activity of the Gilded Age. But the focus then was not on lobbyists.
We like to think that seeing lobbyists as dangerous to our economy
is recent. But Hasen quotes Hugo Black, when he was a U.S. senator
in 1935, as blaming the Depression in part on lobbyists: “our
Government has lost hundreds of millions of dollars which it should
not have lost and which it would not have lost if there had been
proper publicity given to the activities of lobbyists.” 
 
Hasen notes that rent-seeking lobbying occurs most often and
most successfully with low-salience issues, that is, those issues
where officials have little personal preference and where the public
is either ignorant of what is going on or does not have strong
views. "[L]obbyists, like mushrooms, thrive in areas of low light."
This is a good description of most of the local issues in which
lobbying is most successful. 
 
Hasen says that the lobbying regulations that have the greatest
effect on the prevention of rate-seeking are those that regulate
lobbyists' fundraising, which allows them to ingratiate themselves
with elected officials, and revolving door laws, which both prevent
officials from quickly selling their personal access to their former
colleagues and subordinates, and prevent current officials from
being in a position to help companies and lobbyists seeking benefits
in order to ensure their employment upon leaving public office. 
 
Hasen notes that, not only does preventing these activities prevent
the rent-seeking that undermines our national economic welfare, but
that these activities do not involve free speech or petition rights.
That is, no matter what one's views are about First Amendment
lobbying rights, raising funds from others and quickly getting a
lobbying job after leaving public office do not involve free speech
or petition rights nearly as much as lobbyists making contributions
or having access to public officials. 
 
According to Hasen, lobbying rules that do less to promote
efficiency and yet seriously interfere with free speech rights
include bans on lobbyist campaign contributions (limits are more
acceptable). The hardest cases, he feels, are those where both
interests are strong, such as lobbyist fundraising for candidates,
where he feels there needs to be careful balancing. 
 
Federal Lobbying Reform 
Hasen only looks at federal lobbying laws, but it's worth
considering the changes that have been made in recent times. He says
that the Lobbying Disclosure Act of 1995 got through Congress only
by requiring no disclosure of "grassroots lobbying." What the act
added was application to congressional staff and the executive
branch, and an expansion of the definition of "lobbyist" and of the
information that needs to be disclosed. What it did not add was a
good enforcement mechanism, and the required disclosures were still
minimal and not readily accessible. 
 
In 2007, the act was amended to
"marginally strengthen" disclosure requirements (one addition was
bundling), penalties, and gift rules (banning lobbyists from making
gifts to legislators or their staff), and to make disclosure
information available online. It also lengthened the cooling-off
period before a senator (although not senate staff) could lobby,
from one to two years.What it didn't do was require more detailed
information about the specific officials who have been lobbied. 
 
Also, in 1993 an amendment to the Internal Revenue Code got rid of
the deduction for at least certain lobbying expenses, which had been
allowed only between 1962 and 1993. In addition, the Code bars or
limits certain nonprofits' lobbying activities, and 501(c)(4)
organizations that engage in lobbying are no longer eligible for
federal grants or loans. I will have to look into whether in any
state or local jurisdictions, there is a similar rule. My guess is
that there is not. 
 
In 2009, President Obama added lobbying regulations as one of his
first acts. He prohibited the appointment of a lobbyist to a
position, including an advisory panel, without a waiver; or lobbying
by any administration member during the president's term in office.
What is most interesting about the Obama reforms was that he did not
defend them with arguments about potential individual corruption.
His ethics adviser, Norm Eisen, said that it was about “the system
as a whole. For too long, lobbyists and those who can afford their
services have held disproportionate influence over national policy
making.” The policies were geared to “level the playing field” so
that “all Americans and not just those with access to money or
power” would have Washington address their 
concerns, and to “reduc[e] the undue influence of special
interests.” This is not judicial language, it's the language of the
news media, which is closer to how ordinary people think about these
issues. Hasen also feels it's language that won't hold up in court. 
 
Judicially, what we're stuck with is the same considerations as used
in campaign finance: anticorruption, appearance of corruption,
and the interest of the public in information. This will certainly
allow disclosure, and some limits on lobbyist contributions, but
it's not clear yet how much further regulation of lobbyists can be done
in a post-Citizens United world that does not recognize, as
Hasen puts it, "ingratiation and the sale of access." So far, most
courts have allowed lobbyist contribution bans, prohibitions on
contingency fees, revolving door rules, and restrictions on
lobbyists bundling or sitting on campaign committees. But will
things change? Would regulation of grassroots lobbying be permitted,
even with respect to disclosure? 
 
In his glance at state lobbying laws, Hasen notes that many states
limit or ban contributions from lobbyists and have revolving door
provisions, some prohibit lobbyists from having fundraising roles in
campaigns, and most prohibit contingency lobbying, where a lobbyist
is paid based on the success of her work. 
 
Hasen makes some reform recommendations, mostly based on <a href="http://www.americanbar.org/content/dam/aba/migrated/2011_build/administ…; target="”_blank”">the
2011 report of the ABA Administrative Law Section task force</a>.
One recommendation is to prohibit lobbyists from fundraising
for elected officials if the lobbyist has made a lobbying
contact with that official within the past two years. Another is to
further limit contributions. 
 
Hasen notes that <a href="http://scholarworks.gsu.edu/cgi/viewcontent.cgi?article=2216&context=gs…; target="”_blank”">Heather
Gerken has argued</a> for public subsidies for lobbying
activities, as a means of "leveling up." And U.S. Sen. Rand Paul has
proposed that big contractors be barred from lobbying or making
campaign contributions. One problem with Paul's proposal is that
those seeking contracts, as well as trade associations, would still
be able to lobby, and there would be more incentive to get
everything advantageous into the specifications. A better approach
(this is me, not Hasen) would be to have very tight ex parte
communication rules and truly independent contractor selection
committees, so that all lobbying about specifications and selection
would be illegal or ineffective. A similar solution would work for grants. 
 
The Brinkman and Green Party Decisions 
Lobbyist disclosure has consistently been found to be acceptable for
anticorruption and information-based reasons. But these reasons have
not been sufficient with respect to stricter lobbying regulation in
some early post-Citizens United decisions. Hasen sees these
decisions as "canaries in a coal mine," signaling the difficult path
lobbyist laws may have in the future. 
 
The two judicial decisions that Hasen focuses on are (1) <a href="http://docs.justia.com/cases/federal/district-courts/ohio/ohsdce/1:2009…; target="”_blank”">Brinkman v. Budish</a>, 692 F. Supp. 2d 855 (S.D. Ohio 2010), which struck
down an Ohio revolving door statute that had only a one-year cooling
off period; and (2) <a href="http://www.brennancenter.org/page/-/07.13.10%202nd%20Circuit%20Pay-to-P…; target="”_blank”">Green Party of Connecticut v. Garfield</a>, 616 F.3d 189 (2nd Cir.
2010), which (1) upheld the ban on contributions by state
contractors, principals, and their spouses and children, while
striking down (2) the ban on contributions by lobbyists, their
spouses and children, and PACs that they establish or control; and
(3) the ban on both lobbyists and contractors soliciting contributions. 
 
In Green Party, Hasen says that the court applied closely
drawn scrutiny to (2). Insisting that "influence and access ... are
not sinister in nature," it concluded that limitations on lobbyist
contributions would be sufficient. As for (3), the court rejected
the idea that “an individual might secure a political favor by
recommending that another person make a campaign contribution.” That sounds very naive. 
 
The federal district court in Brinkman
also applied strict scrutiny, but its focus was uncompensated
lobbying, whose prohibition the court felt could not be sustained on
anticorruption or level playing field grounds. With respect to
compensated lobbying, the court felt the law was insufficiently
tailored to prevent corruption, because there was insufficient
evidence for the 12-month cooling-off period, even to show the
appearance of corruption. And the law was not limited to matters in
which individual officials had participated and, therefore, had an
opportunity to learn about confidential information. Finally, the
law was too focused on lobbying, ignoring non-lobbying jobs, gifts,
and the like. 
 
Public Choice Theory 
A political science approach called "public choice theory" takes the
position that elected officials seeking to maximize their chances of
reelection will alter their actions in response to large
contributions, including those from and bundled by lobbyists.
Therefore, a cap on such contributions or limits on bundling will
make it more likely that elected officials will not be swayed by
contributions. 
 
Information Theory 
Lobbyists and elected officials tend to use another theory:
that lobbying assists legislative deliberation by providing
specialized information. The result is more informed
decision-making. This is true on many issues. But it is important to
recognize that doing this is part of a reciprocal relationship, which
leads officials to "help a friendly lobbyist achieve her client’s
interests, especially when the client is a constituent or has
business affecting the legislator’s district." A lobbyist's success comes not
from a change of mind about a major policy, but rather in the details
of a bill, of a regulation, and/or of a bill or regulation's
implementation. None of these can be obtained without access, and
access cannot be obtained outside of a reciprocal relationship,
which includes personal relationships and relationships based on
help provided with campaigns. 
 
Another area where it is easier for a lobbyist to be effective,
without the need to provide specialized information, is in blocking
the enactment of new laws, amendments, or regulations. Preservation
of the status quo, which is often in a client's interest, requires
far less expertise than drafting new rules. 
 
While expertise is important in determining which lobbyists work in
which areas, Hasen cites a study, by Marianne Bertrand et al, that
shows that lobbyists "tend to follow their former legislative bosses
from committee to committee, switching from lobbying on an issue
such as health care to one such as defense. Expertise is secondary
to personal contacts." 
 
Disclosure Is Insufficient 
Hasen notes that the requirement of disclosing lobbyists' bundling
of campaign contributions "might have had the perverse effect of
increasing the stature of the lobbyist with an elected official, by
documenting how hard a lobbyist
is working for an elected official or her party. It is only a ban on
such fundraising activities that can help break the cycle of special
access and favors." 
 
The Bottom Line 
For Hasen, the goal of lobbying regulation is to break the ties
between, on the one hand, money and personal connections, and, on
the other hand, government action, with the result of a "a
meritbased system in which the most useful information rises to the
top." 
 
Robert Wechsler 
Director of Research-Retired, City Ethics 
 
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Winter Reading: Rick Hasen's "Lobbying, Rent-Seeking, and the Constitution"

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