Clients' Rewards Keep K Street Lobbyists Thriving
Tuesday, February 14, 2006
A few years ago, a coalition of 60 corporations -- including Pfizer, Hewlett-Packard and Altria -- made an expensive wager. They spent $1.6 million in lobbying fees -- a hefty amount even by recent K Street standards -- to persuade Congress to create a special low tax rate that they could apply to earnings from their foreign operations for one year.
The effort faltered at first, but eventually the bet paid off big. In late 2004, President Bush signed into law a bill that reduced the rate to 5 percent, 30 percentage points below the existing levy. More than $300 billion in foreign earnings has since poured into the United States, saving the companies roughly $100 billion in taxes.
Although not every political battle yields $100 billion, the return on investment in lobbying is often so substantial that experts and insiders agree that Washington's influence industry will continue to thrive no matter how lawmakers decide to rein it in.
Congress is crafting restrictions on lobbyists this year after the Jack Abramoff political corruption scandal. The initial revisions from both Republicans and Democrats would reduce the amount of travel and dining that lobbyists could cover for lawmakers and require more disclosure of their activities. Other proposals would decrease the number of narrowly targeted appropriations, called earmarks.
But the new House majority leader, John A. Boehner (R-Ohio), has said he preferred more disclosure without the travel and meal restrictions. And the legislation under discussion would not eliminate earmarks entirely.
No one on Capitol Hill is suggesting a ban on lobbying, a change that would run counter to the First Amendment to the Constitution.
As a result, "lobbying will continue to grow," said Stephen J. Wayne, a political scientist at Georgetown University. The principal reason, said James A. Thurber, a lobbying expert at American University, is that "the investment in lobbying is minimal compared to the outcomes."
The Carmen Group Inc., a mid-size lobbying firm, is so proud of its performance that it annually publicizes its clients' costs and compares them with the benefits they receive. In 2004, the latest year available, Carmen said, it collected $11 million in fees and delivered $1.2 billion in assistance to its clients -- a ratio of less than 1 to 100. The payoff is large but fairly typical of modern-day lobbying, said David Carmen, the firm's president.
Take Carmen Group's experience with the General Contractors Association of New York. The association paid Carmen $500,000 to persuade the federal government to cover its members' insurance premiums for cleanup work at Ground Zero after the terrorist attacks of Sept. 11, 2001. After three years of lobbying, the government agreed to pay $1 billion.
Congressional critics complain that average voters are left out when private lobbyists rush in. And some lobbying campaigns fail. The most recent and high-profile example was the oil companies' attempt to open part of the Arctic National Wildlife Refuge for oil and gas drilling.
But from a business perspective, the rewards that come from lobbying are significant.
Such outsize returns are made possible by the immensity of the federal government -- with its nearly $2.8 trillion annual budget -- and the willingness of Congress and the Bush administration to dispense that money widely. The ability of lobbyists to operate effectively in such a climate has made their work "a relative bargain," said Joel Jankowsky, the longtime head of the government relations practice at Akin Gump Strauss Hauer & Feld LLP.