2 Center for American Progress | How Campaign Contributions and Lobbying Can Lead to Inefficient Economic Policy
While i is impossible o quaniy he economic harm done by ren-seeking o he American economy, his issue brie reviews he lieraure and ﬁnds ha he harm is likely quie signiﬁcan.Cerainly, no all money in poliics is spen or he purpose o capuring privae avors, bu here is evidence ha a leas a signiﬁcan percenage o i is. Mos Americans do no make campaign conribuions or lobby poliicians.
Raher, he vas majoriy o money spen on hese aciviies comes rom wealhy ciizens and business ineres groups.
Moreover, sudies ﬁnd ha businesses wih he mos o gain rom avorable public policy engage in he mos poliical aciviy.
Even worse, research indicaes ha campaign conribuions and lobbying ofen help shape policy oucomes, which suggess ha ren-seeking eﬀors are ofen successul. While disagreemen exiss abou how much inﬂuence campaign conribuions and lobbying have,
money in poliics seems o be mos eﬀecive in shaping he oucomes o issues ha are less visible and less ideological,
exacly he ype o special avors one would expec ren-seeking o arge. Furhermore, here have been several ﬁndings ha show a clear relaionship beween speciﬁc insances o lobbying or campaign conribu-ions and governmen avors. o ake jus a ew examples:• One sudy ound ha increasing lobbying reduces a corporaion’s eﬀecive ax rae, wih an increase o 1 percen in lobbying expendiures expeced o reduce a corpora-ion’s nex-year ax rae beween 0.5 percenage poins and 1.6 percenage poins.
• Anoher sudy based on daa rom 48 diﬀeren saes ound ha a $1 corporae cam-paign conribuion is worh $6.65 in lower sae corporae axes.
• Finally, ederal conracs were more likely o be awarded o ﬁrms ha have given ederal campaigns higher conribuions, even afer conrolling or previous conrac awards.
Tese ﬁndings are deeply roubling or our democracy and our economy. And, unless acions are aken, he damage is likely o grow worse in he uure. Wih recen cour rul-ings knocking down imporan resricions on money in poliics, ren-seekers will have even greaer opporuniy o seek special avors, doing urher harm o he economy.
Mos economiss agree ha ren-seeking causes a ne socieal loss ha harms he economy.
Ren-seeking involves spending resources o inﬂuence a division o proﬁs, insead o creaing a good or service ha oher businesses or individuals are willing o pay an amoun ha exceeds he cos o producing said good or service.
While ren-seeking exiss in boh privae and public orms,
he scope o his paper is he discus-sion public ren-seeking and speciﬁcally wo public ren-seeking aciviieslobbying and campaign unding.