The outsized returns from lobbying

Do businesses that hire lobbyists actually get their money’s worth? It sure looks that way. The Economist passes along an analysis by the investment-research firm Strategas, which takes the 50 companies that spend the most on government lobbying (as a percentage of assets) in a given year and compares their performance against the S&P 500.


True, correlation isn’t causation. It’s possible that the firms that invade the halls of Capitol Hill would’ve done perfectly well for themselves without employing K Street’s services. Yet most of the companies on Strategas’ list depend on government in some form or other. Tobacco companies have to maintain constant vigilance against sales taxes and health warnings. Medical providers and for-profit colleges live and die on federal regulations. (Banks, notably, don’t make the Strategas top 50; their lobbying expenditures, while enormous, still amount to a tiny percentage of their assets.)

Then, of course, there are the defense firms that depend on lobbying for federal contracts. The connection here seems fairly straightforward. Back in 2006, Bloomberg News rifled through data for the 20 largest federal contractors. Lobbying turned out to be a sound money-making strategy: “The nation’s largest federal contractor, Lockheed Martin Corp., received $39.8 billion in federal contracts in 2003-04. During the same period, the company spent $15.8 million on lobbying expenses and campaign donations. The ratio of contracts to expenditures was $2,517 to $1.”

That doesn’t mean any old firm can get rich by hiring a lobbyist. Not long ago, a House staffer told me a story about taking a meeting with a local small-business owner who came with a K Street lobbyist in tow. The lobbyist made brief introductions and then immediately slumped into his chair, absorbed in his BlackBerry, saying nothing else for the rest of the meeting. The staffer was amused. “This businessman was a constituent,” he told me. “He didn’t need a lobbyist to make an introduction—we would’ve met with him any time!” Sometimes it’s the client that gets taken for a ride (see, e.g., the career of Jack Abramoff). But for those companies who do know how to finesse the system, lobbying can prove quite lucrative indeed.

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