Tech Lobbying, Entrepreneurship, and the Innovation Economy

By Jim Harper

Adam Thierer’s lead article in the most recent Cato Policy Report is called “The Sad State of Cyber-Politics.” It goes through so many ways tech and telecom companies are playing the Washington game to win or keep competitive advantage.

It’s a nice set-up to a Washington Post opinion piece from this weekend in which TownFlier CEO Morris Panner talks about the growing riches accruing to Washington influencers:

We are creating so much regulation – over tax policy, health care, financial activity – that smart people have figured out that they can get rich faster and more easily by manipulating rules on behalf of existing corporations than by creating net new activity and wealth. Gamesmanship pays better than entrepreneurship.

Thierer sees some hope for the tech sector, for a few reasons:

Smaller tech companies have thus far largely resisted the urge [to engage with Washington]. Hopefully that’s for principled reasons, not just due to a shortage of lobbying resources. Second, the esoteric nature of many Internet and digital technology policy discussions frustrates many lawmakers and often forces them to lose interest in these topics. Third, the breakneck pace of technological change makes it difficult for regulators to bottle up innovation and entrepreneurialism.

Panner’s broader piece calls for “a national campaign to create transparency in our legislation and a national moratorium on the creation of commissions, regulators and czars. It is time for Congress to do the hard job of saying what lawmakers mean in clear and easy-to-understand language.” He continues, “We should reject bills that are thousands of pages or that delegate vast authority to unelected regulators.”

That would be a start.

Tech Lobbying, Entrepreneurship, and the Innovation Economy is a post from Cato @ Liberty – Cato Institute Blog

Cato @ Liberty

Private prison lobbying and Arizona’s SB 1070

(Sasha Volokh)

I just read this roughly two-week-old NPR story about private prison lobbying for the Arizona immigration law. The idea is this: “NPR spent the past several months analyzing hundreds of pages of campaign finance reports, lobbying documents and corporate records. What they show is a quiet, behind-the-scenes effort to help draft and pass Arizona Senate Bill 1070 by an industry that stands to benefit from it: the private prison industry.”

I take an interest in this, since my 2008 Stanford Law Review article, Privatization and the Law and Economics of Political Advocacy, took a look at the argument that private prison firms will lobby in favor of measures that increase incarceration. I argued there that there was no clear theoretical reason why private prison firms would do this (essentially, they would, under plausible assumptions, prefer to free-ride off of the advocacy expenditures of the larger public-sector actors interested in incarceration, for instance the prison guards’ unions), and very little empirical evidence that they’ve done it. So if this NPR article is right, then this is potentially an important piece of empirical evidence going the other way.

Trouble is, the NPR story is very short and low on details. So if anyone knows more, I’d be happy to know.

First, the story explains how the Arizona legislator who thought up the idea ran it through the American Legislative Exchange Council (ALEC), a conservative organization that writes model legislation. Various corporations, including private prison firms, are members of ALEC. Private prison firms are also members of ALEC’s Criminal Justice Task Force, which worked on this legislation. But this is ambiguous evidence of private prison involvement in pro-incarceration issues, since the Criminal Justice Task Force also deals with prison privatization, where we’d fully expect private prison companies to be involved. So I don’t take the reported ALEC activity to be any kind of smoking gun.

(By the way, for what it’s worth, CCA says it “doesn’t participate in or lobby for stricter sentencing”, though that’s vague enough to not rule out participating in a process that increases legal penalties for certain activities. Also, in 2006, a CCA executive told me that CCA hadn’t participated in, voted on, or endorsed any stand on model legislation for sentencing or crime policies within ALEC. Not that we should necessarily take the corporation’s statements at face value; just know that this is what they say.)

Later in the article, it says that some of Governor Brewer’s advisors are former private prison lobbyists. I don’t take this to be a smoking gun for private prison influence either: (1) it’s not surprising that private prison lobbyists would have common ideological ground with Republicans (note, though, that private prison companies give to both Republicans and Democrats), and (2) Republican support for privatization is sufficient to explain most contacts between Republican officials and the private prison industry.

But here’s an interesting set of claims:

As soon as Pearce’s bill hit the Arizona statehouse floor in January, there were signs of ALEC’s influence. Thirty-six co-sponsors jumped on, a number almost unheard of in the capitol. According to records obtained by NPR, two-thirds of them either went to that December meeting or are ALEC members.

That same week, the Corrections Corporation of America hired a powerful new lobbyist to work the capitol.

The prison company declined requests for an interview. In a statement, a spokesman said the Corrections Corporation of America, “unequivocally has not at any time lobbied — nor have we had any outside consultants lobby – on immigration law.”

At the state Capitol, campaign donations started to appear.

Thirty of the 36 co-sponsors received donations over the next six months, from prison lobbyists or prison companies — Corrections Corporation of America, Management and Training Corporation and The Geo Group.

If there really was a significant spike in lobbying activity, specifically by private prison companies, right at the time when the immigration bill was being considered, that would be interesting.

Does anyone know where I can find more details on this?

To summarize: Behind every non-tape-recorded contact between a politician and the private prison industry, there may be advocacy not only of privatization but also of greater incarceration. Who knows. I’m just saying is that there’s almost no hard evidence of it. I’d like to find evidence if there is some, but I’ve looked at most of the claimed instances and found them to be mostly innuendo. Put the lack of evidence together with the theoretical model of free-riding (which I discuss at the beginning of my Stanford Law Review article), and it looks likely that there’s no there there.

But, as I’ve said, I’m interested in getting to the bottom of this incident to see if this is really a good piece of evidence on the other side.

The Volokh Conspiracy

To Block EPA Regulations, Koch Industries Expands Lobbying Campaign To Children

Koch Industries, the privately owned industrial conglomerate, is using any available method to fight the enforcement of laws to limit its toxic pollution. This summer’s “Regulation Reality Tour,” produced by Koch’s grassroots marketing arm Americans for Prosperity (AFP), featured a “moon bounce in the shape of a SWAT car for children,” ostensibly symbolizing the boogeyman of Environmental Protection Agency “Carbon Cops.” “Let’s make sure we keep doing our part to ensure that our generation passes on to our children and grandchildren the same freedoms we enjoyed,” AFP cries, in protest of sewage overflow rules.

While AFP stokes fear in its Tea Party network about the supposed economic and libertarian disaster of reducing pollution, Koch’s lawyers and contractors flood the Obama administration with submissions challenging proposed rules so that it can keep pumping out pollution for free. Here are just a few of the health and environmental rules that Koch Industries and its many subsidiaries are challenging:

– Koch Industries is protesting the EPA’s effort to update the Toxic Substances Control Act (TSCA) Chemical Substance Inventory. [Docket EPA-HQ-OPPT-2009-0187]

– Koch Nitrogen Co. LLC, the Koch Industries fertilizer subsidiary, is challenging the disclosure of unit-specific or facility-specific greenhouse pollution, calling it “misguided.” [Docket EPA-HQ-OAR-2008-0508]

– Flint Hills Resources, LP, the Koch Industries oil and gas subsidiary which operates six major hazardous air pollutant facilities, is protesting EPA’s proposed national emissions standards for hazardous air pollutants from industrial boilers. [Docket EPA-HQ-OAR-2002-0058]

– Flint Hills Resources “supports the elimination of all crude oil data reporting requirements” for greenhouse pollution compliance. [Docket EPA-HQ-OAR-2010-0109]

– Georgia Pacific, the Koch Industries forestry product subsidiary, claims that dioxins aren’t really toxic or carcinogenic. [Docket EPA-HQ-ORD-2010-0395]

– Georgia Pacific, is fighting the EPA’s efforts to tighten water quality standards for stream-dumping. [Docket EPA-HQ-OW-2009-0596]

– Invista, a Koch Industries chemical subsidiary, argues that chemical plant greenhouse pollution should not be monitored. [Docket EPA-HQ-OAR-2008-0508]

After eight years of inaction under the Bush presidency, the health and safety of the American public is now a higher priority than polluter profits — but Koch Industries and other industrial polluters are fighting tooth and nail, even if they have to poison our democracy to win.

Wonk Room

To Block EPA Regulations, Koch Industries Expands Lobbying Campaign To Children

Koch Industries, the privately owned industrial conglomerate, is using any available method to fight the enforcement of laws to limit its toxic pollution. This summer’s “Regulation Reality Tour,” produced by Koch’s grassroots marketing arm Americans for Prosperity (AFP), featured a “moon bounce in the shape of a SWAT car for children,” ostensibly symbolizing the boogeyman of Environmental Protection Agency “Carbon Cops.” “Let’s make sure we keep doing our part to ensure that our generation passes on to our children and grandchildren the same freedoms we enjoyed,” AFP cries, in protest of sewage overflow rules.

While AFP stokes fear in its Tea Party network about the supposed economic and libertarian disaster of reducing pollution, Koch’s lawyers and contractors flood the Obama administration with submissions challenging proposed rules so that it can keep pumping out pollution for free. Here are just a few of the health and environmental rules that Koch Industries and its many subsidiaries are challenging:

– Koch Industries is protesting the EPA’s effort to update the Toxic Substances Control Act (TSCA) Chemical Substance Inventory. [Docket EPA-HQ-OPPT-2009-0187]

– Koch Nitrogen Co. LLC, the Koch Industries fertilizer subsidiary, is challenging the disclosure of unit-specific or facility-specific greenhouse pollution, calling it “misguided.” [Docket EPA-HQ-OAR-2008-0508]

– Flint Hills Resources, LP, the Koch Industries oil and gas subsidiary which operates six major hazardous air pollutant facilities, is protesting EPA’s proposed national emissions standards for hazardous air pollutants from industrial boilers. [Docket EPA-HQ-OAR-2002-0058]

– Flint Hills Resources “supports the elimination of all crude oil data reporting requirements” for greenhouse pollution compliance. [Docket EPA-HQ-OAR-2010-0109]

– Georgia Pacific, the Koch Industries forestry product subsidiary, claims that dioxins aren’t really toxic or carcinogenic. [Docket EPA-HQ-ORD-2010-0395]

– Georgia Pacific, is fighting the EPA’s efforts to tighten water quality standards for stream-dumping. [Docket EPA-HQ-OW-2009-0596]

– Invista, a Koch Industries chemical subsidiary, argues that chemical plant greenhouse pollution should not be monitored. [Docket EPA-HQ-OAR-2008-0508]

After eight years of inaction under the Bush presidency, the health and safety of the American public is now a higher priority than polluter profits — but Koch Industries and other industrial polluters are fighting tooth and nail, even if they have to poison our democracy to win.

Wonk Room

Political Lobbying By Murder: It’s The Islamists’ Way

By Barry Rubin

A woman is on trial in London for having stabbed her member of Parliament, Stephen Timms, twice. She made an appointment to see Timms at the office where he helps constituents, last May. It has emerged from the trial that she tried to kill him because he had supported the Iraq war.

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YID With LID

The Anti-Israel Lobbying Group, J Street, and the Dirty Money of George Soros

George Soros is the source of the dirty money behind the front group to destroy Israel, J Street, as J Street executive director Jeremy Ben Ami has finally admitted to the media, after lying about it since the group’s founding: “I accept responsibility personally,” said Ben Ami, “for being less than clear about Mr. Soros‘ support once he did become a donor.”

Of course it was Soros. George Soros vowed years ago to start an anti-Jewish organization under the nefarious guise of a Jewish organization, in order to counter the influence of the American Israel Political Action Committee (AIPAC). He knew full well that there would be lowlife Jews who would be only too happy to serve as funktionshäftling.

He assisted the Nazis, so is it any wonder he wants to destroy the Jew? If at first you don’t succeed…

If you are unfamiliar with Soros’s actual past, remember that, as 60 Minutes reported in 2006, “While hundreds of thousands of Hungarian Jews were being shipped off to the death camps, George Soros accompanied his phony godfather on his appointed rounds, confiscating property from the Jews.”

Since then, Soros — convicted in France for insider trading — has his black hand in every evil thing: the legalization of drugs and prostitution; betting against America and making millions by making what he called “a good call against the dollar”; violating the U.N.’s neutrality by funneling money through its Development Program to Georgia’s President. He was financier of guilty terror lawyer Lynne Stewart’s defense fund; and was involved via his stooges at America Coming Together in election fraud and via his investment in WellCare, in Medicare irregularities.

And now Soros has given $ 750,000 to J Street. Another $ 811,697 came from a mysterious woman in Hong Kong named Consolacion Esdicul, who has apparently acted as a representative for Black Rock, a New York hedge fund with close ties to… George Soros.

What galled me was the tragic gullibility of leading American Jewish organizations that insisted Soros was not funding J Street. I spoke to numerous heads of various organizations after J Street had been established, and they were parroting the leftist/Islamic narrative that Soros wasn’t financing it.

It was a brazen deception. James Besser, the Washington correspondent for New York Jewish Week, says that when he had asked whether J Street was getting money from Soros, they lied to him outright: “I was one of the many journalists who asked the question and received in return something significantly less than the truth. Okay, it was a lie.”

But it also took extraordinary delusion for anyone to buy the idea that there was no connection between Soros and J Street. Back in October 2006 (before there was a J Street), I reported on how Soros was pairing with “the dovish pro-Israel community” to consider establishing an alternative to AIPAC in order to, at the very least, undermine it, and eventually destroy it.

There were other connections between Soros and J Street as well. When Obama appointed anti-Israel Senator Chuck Hagel co-chair of his Intelligence Advisory Board in October 2009, the appointment was announced at J Street’s first annual conference – by Steve Clemons of George Soros’s New America Foundation.

Of course, it was common knowledge that J Street was an anti-Israel, anti-Semitic, fringe organization that no one took seriously. Isi Liebler, former chairman of the Governing Board of the World Jewish Congress, challenged J Street’s “duplicity in trying to masquerade as a Jewish mainstream ‘pro-Israel’ organisation while consistently campaigning against the Jewish state.”

Philip Klein, The American Spectator’s Washington correspondent, says that “while the group bills itself as the ‘pro Israel’ and ‘pro peace’ alternative to the American Israel Public Affairs Committee, in reality it is a liberal organization actively campaigning against Israel’s right to defend itself.”

Just how extreme and anti-Israel is J Street? According to Liebler, as of October 2009 “Arab and pro-Iranian elements were providing approximately 10% of J Street funding, a somewhat bizarre situation for a genuinely ‘pro-Israel’ organisation.”

That is, until Barack Obama became president. Obama is a longtime Soros toy, so it was no surprise when White House visitor logs listed Ben-Ami as a frequent visitor.

Yet despite Obama’s tacit support of this dangerous group and his manifest preference for the company of Jew-haters, the vile anti-Jewish J Street is being shunned by K street, Congress, and anyone with an ounce of basic human decency. Only Barack Obama has sanctioned this stain on humanity.

His support for J Street, and his role as a stooge for the odious Soros, is another revolting notch in the belt of the enemy in the White House.

Big Journalism

The Real Special Interest: Government Lobbying Government

Illinois, like many states, is broke. Its credit is even worse than that of California and its highly publicized financial quagmire.  In such a fiscal environment, taxpayers are rightfully demanding that governments tighten up and are increasingly zealous about ensuring that money is spent productively. One way in which they may be surprised to find that local Illinois governments, along with those all over the country, collectively waste millions of dollars is by lobbying other governments for handouts.

Thanks to a recent report conducted by Diana Lopez of Sunshine Review, we know that local governments in Illinois have spent at least $ 6.2 million since 2005 on the lobbying of other governments. I say “at least” because local officials don’t like to disclose this information in a systematic and open way. The report, furthermore, only looked at the state’s 10 most populous counties, and also didn’t capture state government expenditures. So you can bet the actually numbers are much, much higher.

Individually it might be hard to blame these governments. They shouldn’t ever be spending taxpayer money lobbying for specific policies at higher levels of government, as many are, but in the case of begging for state and federal funds, they might be bringing in more money to the district than they are spending. They are therefore acting in their interests, as would be expected.  The problem is the offering of these funds in the first place, because it’s unequivocally bad for taxpayers and serves as a barrier to good governance.

When state and local governments tailor policy toward capturing federal dollars, they often end up wasting significant sums of money on unproductive activities. For instance, in 2009 the state of Washington mailed $ 1 foodstamp checks to 250,000 residents so that it could collect millions more from the federal government. I also warned of the likelihood of similar situations like this when the “stimulus” was first passed.

Grants to the states by the federal government have grown considerably over the last few decades, and the trend shows no signs of reversal. As federal tax levels and the proliferation of state grants continue to grow, states and local governments will only increase their reliance on lobbyists to capture these funds. Not only does this waste tax dollars on both ends of the fiscal shuffle, but it reduces accountability by further separating taxpayers from tax spenders.

As Ms. Lopez discovered in the course of her research, local governments are rarely transparent when it comes to the use of taxpayer dollars to fund lobbying for more taxpayer dollars. This is all the more reason why federal and state governments should not be funneling money to lower levels of government in the first place. Federal grants to the states should be eliminated and the money returned to taxpayers through lower rates. This will leave lower-level governments with more potential tax revenue to capture if they really need it, while providing greater accountability in government and increased transparency in both the collection and use of tax dollars.

Big Government

Financial Reform Rulemaking Gets Underway With Mega-Banks Lobbying For Weaker Derivatives Rules

One of the legitimate criticisms of the Dodd-Frank financial regulatory reform bill that passed this year is that it leaves a lot of the details of reform up to regulators, instead of laying out hard-and-fast rules. There are pros and cons to this approach, but one of the big drawbacks is that the rule-making happens when the subject has faded from public view, giving the financial services industry even more influence over the process than it already has.

Case in point, the country’s biggest banks have been meeting with officials at the Federal Reserve in an attempt to shape the new rules governing derivatives trading:

Goldman Sachs Group Inc., Citigroup Inc. and others have also discussed tough rules for derivatives with government officials. Citi executives, meeting with the Fed on Aug. 18, expressed concerns about the effect of the new rules on U.S. firms. “Citigroup representatives also expressed concerns about a narrow interpretation of the definition of hedging and the importance of retaining their ability to hedge across markets,” the meeting summary prepared by the Fed said.

Non-financial companies and lobbying groups are also trying to influence the new derivatives rules, including the American Petroleum Institute and the U.S. Chamber of Commerce.

First, I’m glad to see that these meetings were disclosed relatively quickly. Other bank regulators, including the FDIC, have been planing to make a concerted effort to disclose their meetings with private sector representatives regarding the implementation of Dodd-Frank, and its good to see the Fed follow suit.

But on to the substance. The derivatives portion of Dodd-Frank is one of the better parts of the bill, bringing much-needed transparency to an unregulated market and restricting some of the riskier derivatives trading in which banks can engage, by forcing them to move certain activities into a separately capitalized subsidiary (although this provision was watered down from a much-stronger one at the very last minute). But activities that qualify as related to hedging risk don’t have to be walled off.

Therefore, it’s in the banks interest to have as much activity as possible qualify as hedging, which is what these meetings seem to have been about. But the wider these definitions are, the less effective Dodd-Frank is going to be and the more risky trading will occur in the heart of the financial system. The added lobbying of the Chamber and API, which both falsely portrayed the effect that financial regulation would have on corporations while negotiations were ongoing, is only going to tip the scales in favor of a wider definition and more risk in the system.

If regulators don’t craft strong rules during this implementation stage, financial reform isn’t going to amount to much. And, sadly, there’s no logical counterweight that has at much at stake in the discussion.

Wonk Room

Monsanto’s 2010 lobbying bill: $4.74 million (Jan-June)

The AP article provides no detail other than this: Monsanto spent $ 2.18 million in the second quarter and $ 2.56 million in the first quarter. The issues: antitrust and patent law.

Monsanto is a global player in the genetically modified foods arena. Just last week, a Monsanto variety banned in Europe was found growing in an Irish-government test plot.

According to a press release … routine tests by DAFF discovered that the Pioneer Hi-Bred maize is contaminated by Monsanto’s patented GM “event” NK603. The genetic modification forces the crop to survive heavy spraying with glyphosate, part of the cocktail of toxic chemicals contained in Monsanto’s controversial Roundup herbicide. Cultivation of this GM maize is illegal the EU, although importation is allowed for animal feed and human food.

Genetically modified canola has been found in the wild alongside the road in North Dakota, despite claims by Monsanto and Bayer that they don’t “compete well” in the wild.

And contrary to President Obama’s early promises to close the revolving door, his FDA deputy commissioner for foods is Monsanto’s former chief lobbyist. For example:

In November 2007, Obama boasted at a campaign event that lobbyists “won’t find a job in my White House.” He later softened that rhetoric to say that lobbyists “won’t dominate” the White House.

Need more?

During the campaign, on the Obama-Biden change.gov website, the ethics agenda page quoted candidate Obama as saying: “I am in this race to tell the corporate lobbyists that their days of setting the agenda in Washington are over. I have done more than any other candidate in this race to take on lobbyists—and won. They have not funded my campaign, they will not run my White House, and they will not drown out the voices of the American people when I am president.”

Reality check: Monsanto would not be spending millions to lobby the federal government if it thought it was pouring the money down a black hole.

The Moderate Voice

Federal Lobbying by Minnesota’s Local Governments Flies Under the Radar

Local governments in Minnesota have already spent at least $ 729,000 of taxpayer money this year to lobby policymakers in Washington, DC.

If federal lobbying records are any indication, Minnesota’s local governments are increasingly turning to our nation’s capital in search of funding for local programs. A Freedom Foundation of Minnesota analysis of Lobbying Disclosure Act filings finds that Minnesota’s local governments and their associations spent at least $ 5.217 million lobbying the federal government from 2006 through the first half of 2010.[i] Annual lobbying expenditures have risen each year and are on pace to set a new record in 2010, with at least $ 729,000 spent the first half of the year.

So far in 2010, the biggest spenders have been the City of Minneapolis ($ 90,000), the City of Moorhead ($ 80,000), and Scott County ($ 60,000).

Overall, the biggest spenders since 2006 have been Scott County ($ 815,000), the City of Moorhead ($ 620,000), Hennepin County ($ 405,000), the North Metro Mayors Coalition ($ 375,000), and the Anoka County Regional Railroad Authority ($ 369,000).

“I do believe that given the multitude of issues at the federal level that directly impact the cost of county government that it is important the county have a voice and be heard,” said Gary Shelton, Scott County Administrator. “I also believe it has been money well spent.”

The controversial practice of using taxpayer money to lobby for additional taxpayer money is nothing new in Minnesota. In fact, local governments and their associations are required to report lobbying expenditures to the Office of the State Auditor (OSA), which prepares an annual report on local government lobbying activities. However, the state law requiring local governments to report lobbying expenditures to the OSA does not apply to federal lobbying.

Consequently, Minnesota’s local governments are able to spend a great deal of taxpayer money on Washington lobbyists, largely out of public view.

“Local governments are spending millions of tax dollars to lobby for millions more,” said Freedom Foundation of Minnesota Vice President Jonathan Blake.“At a time when people are demanding accountability in government and an end to reckless spending, that just doesn’t make sense.”

Blake continued: “When local governments use taxpayer money to lobby legislators in St. Paul, they are required to report those activities to the state. We should require the same level of transparency when local governments lobby policymakers in Washington.”

Click here to view annual totals for each local government.

Local Government Rankings: Total Federal Lobbying Expenditures (2006-2010*)

# 1 Scott County $ 815,000
# 2 City of Moorhead $ 620,000
# 3 Hennepin County[ii] $ 405,000
# 4 North Metro Mayors Coalition $ 375,000
# 5 Anoka County Regional Railroad Authority $ 369,000
# 6 Northstar Corridor Development Authority $ 363,000
# 7 City of Minneapolis $ 310,000
# 8 Anoka County $ 280,000
# 9 Metropolitan Airports Commission $ 220,000
# 10 City of St. Cloud $ 180,000
# 11 City of Willmar $ 180,000
# 12 St. Cloud Planning Organization $ 180,000
# 13 Duluth Airport Authority $ 180,000
# 14 Stearns County $ 140,000
# 15 Bemidji Regional Airport $ 140,000
# 16 Beltrami County $ 120,000
# 17 Minnesota Association of Small Cities $ 80,000
# 18 Minneapolis/Duluth Superior Passenger Rail Alliance $ 50,000
# 19 Association of Minnesota Counties $ 40,000
# 20 City of St. Paul $ 30,000
# 21 Dakota County $ 30,000
# 22 Ramsey County $ 30,000
# 23 Marshall Transportation Group $ 20,000
# 24 St. Louis County $ 20,000
# 25 Olmsted County $ 20,000
# 26 Ramsey County Regional Railroad Authority $ 20,000
* Q1 and Q2 expenditures only

[i]Under the Lobbying Disclosure Act, federal lobbyists file quarterly reports with the Clerk of the U.S. House of Representatives and the Secretary of the State detailing their lobbying activities on behalf of clients. Filers are instructed to “a good faith estimate of all income received from the client, other than payments for matters unrelated to lobbying activities.”
[ii]Lobbying Disclosure Act records indicate that Hennepin County’s lobbying expenditures have never exceeded $ 40,000 in any year covered by this report. However, officials with the Hennepin County Public Affairs Department have informed FFM that the county has had a $ 90,000 annual federal lobbying contract with an outside firm throughout the years covered, and advised FFM to use this annual figure as a more accurate reflection of the county’s federal lobbying expenses.

Tips, comments, or suggestions? Contact Tom Steward, FFM Investigative Director (952-451-3684).

Big Government

Lobbying and Policy Change

The current issue of Miller-McCune features a great Melinda Burns writeup of the moderately counterintuitive findings in the award-winning recent book Lobbying and Policy Change: Who Wins, Who Loses, and Why by Frank R. Baumgartner, Jeffrey M. Berry, Marie Hojnacki, David C. Kimball, and Beth L. Leech. I’m not 100 percent sure what the best way to characterize their findings is. I’ve heard it glossed as showing that lobbying “doesn’t matter” or doesn’t matter “as much as you think” but I’m not sure that’s quite right. I’d say it’s something more like “the policy agenda in Washington is dominated by issues that have substantial lobbies on both sides, and relative strength of the lobbies doesn’t determine the outcome; also the outcome is usually that nothing changes.”

Here’s how Burns puts it:

The real outcome of most lobbying — in fact, its greatest success — is the achievement of nothing, the maintenance of the status quo. “Sixty percent of the time, nothing happens,” says Frank Baumgartner, one author of the book and a political science professor at the University of North Carolina at Chapel Hill. “What we see is gridlock and successful stalemating of proposals, with occasional breakthroughs. We see a pattern of no change, no change and no change — and then some huge reform.”

But those large reforms — such as health care for 32 million uninsured Americans under President Barack Obama, the scheduled phase-out of the estate tax under President George W. Bush, and the normalization of trade relations with China under President Bill Clinton — are far more often linked to a change in who inhabits the White House than to campaign contributions or K Street hires.

On the one hand, this punctures some insidery illusions about change happening as a result of an awesome duel between skilled lobbyists and advocates with the better policy change ninja winning the day. At the same time, I think he does help explain the ways in which interest group strength do shape policy outcomes in decisive ways. It’s not possible to reform the health insurance system without arousing some powerful opposition. Consequently, to get it done it had to be done in such a way as to induce some other powerful lobbies—in the case of the Affordable Care Act, mostly pharmaceutical firms and labor unions—to line up in favor of change. But once you have strong lobbies on both sides, it’s not like you win by having more or better lobbyists: “across the board for the 98 issues, the side with more lobbyists, more PAC donations, bigger organizational budgets and more members won only half the time.”

There’s a lot you could say about this, but the main upshot is that reforms aimed at curbing the power of lobbyists or what have you seem to be somewhat barking up the wrong tree. More important than disempowering the most powerful actors is to find ways to try to empower the powerless. If you don’t have any lobbyists, donations, members, or organization at all then you’ve got a real problem. And the other is simply that the system’s overwhelming feature is its massive tilt toward the status quo—something I don’t like, that others do like, and that it might be possible to change.

Matthew Yglesias

Health Insurers Lobbying To Make Profits Seem Smaller Than They Are

Yesterday, the National Association of Insurance Commissioners (NAIC) adopted relatively robust draft definitions for calculating the medical loss ratios (MLR), prohibiting “insurance companies from considering costs related to fraud prevention and detection, utilization review, and individual wellness promotion (among others) when calculating their medical loss ratios (MLRs).” The insurance industry, which has been lobbying the NAIC to include a broad range of activities as medical expenses, criticized the document and warned of “unintended consequences” if certain practices could not be classified as “quality improvement.” Under the new health care law, insurers are required to spend 80% to 85% of premiums on health care and issue rebates to consumers if they fail to meet this threshold. But consumer advocates who attended the NAIC conference tell me that the real battle will now focus on whether issuers will be able to deduct all federal taxes before calculating the MLR, an issue the NAIC punted during its conference.

Insurers have seized on a single mention of “federal taxes” in Section 2718 of the health law — the section that deals with MLR — to argue that they should be allowed to exclude all federal taxes from their revenue (the denominator in the MLR ratio), a move that would save issuers millions of dollars and allow them to meet the MLR requirements without necessarily spending more on care.

Democrats are now disputing their claim. In a letter to HHS Secretary Sebelius, the six Democratic committee heads with jurisdiction over health care argued that they did not intend for issuers to exclude all federal taxes — only those that pertain to health care:

As the NAIC works to craft proposed definitions, we are writing to clarify legislative inent as it pertains o the exclusion of Federal taxes from revenue calculations. Section 2718 sets forth the computation of MLR for the purposes of computing annual premium rebate. Section 2718(b)(1)(A) defines the denominator of the MLR for this purpose as “the total amount of premium revenue (excluding Federal and State taxes and licensing or regulatory fees…).”

“Federal taxes and fees” in this context is meant to refer only to Federal taxes and fees that relate specifically to revenue derived from the provision of health insurance coverage that were included in the PPACA. Thus, the Federal taxes and fees that fall into this category are: (1) the annual free imposed by section 9010 based on each health insurer’s market share based on net premiums written; (2) the annual fee imposed by section 6301 on each health insurance policy (based on the average number of people covered under the policy), and (3) the tax imposed by section 9001 on high-cost employer-sponsored health coverage. Federal income taxes or payroll taxes were not intended to be excluded from the denominator.

Similarly, NAIC consumer representative and Washington & Lee Law Professor Timothy Jost argues in this brief that issuers’ insistance on a very literal translation of the statute is transparently self serving and hypocritical. Throughout the definition making process, Jost argues, the NAIC “have consistently eschewed a literal approach to interpreting the statute, trying practically to effectuate the intent of Congress while accommodating the practical realities of insurance regulation.” “Time and again insurers have supported definitions that deviate from the literal language of the statute when following the literal language of the statute would be to their disadvantage.”

Ultimately, allowing insurers to deduct all federal taxes would frustrate the intent of the law — it would make the companies’ income appear to be lower than it actually is and deprive consumers of possible rebates. For now, the industry is determined to get its way and has, according to some sources, even threatened to go to court over the matter.

Wonk Room

Net Neutrality Group Caught Fudging Lobbying Disclosure

A top network neutrality advocacy group is weathering a flap over its sketchy lobbying disclosures after it was reported last week the group had taken numerous unreported meetings with senior aides at the Federal Communications Commission (FCC) and the National Telecommunications and Information Administration (NTIA).

Free Press, among the fiercest and better funded Beltway groups lobbying for the adoption of net neutrality rules, has taken great pains to criticize industry groups for holding off-the-record meetings with FCC officials. But the group’s staff had lobbied FCC officials on more than two dozen undocumented occasions since January 2009. Additionally, discrepancies were discovered between the group’s filings relating to lobbying.

Federal legislation mandates the disclosure of lobbying efforts directed at federal employees with regard to the formulation of federal rules and laws. According to recently-obtained ex-parte data, serious discrepancies were discovered between filings with the Internal Revenue Service-which are to disclose generic, grassroots lobbying expenses-and those figures reported under the Lobbying Disclosure Act-which is to monitor federal-specific lobbying expenses.

Between the years 2005 and 2010, Free Press LDA disclosures showed the group had spent little more than $ 150,000 on direct lobbying of legislators and federal employees. But tax filings with the IRS-only presently available up to the year 2008-revealed the organization had spent nearly $ 1 million on lobbying in little more than half that time.

When it was reported recently that senior FCC officials were taking off-the-record meetings with leaders in the telecommunications industry over the agency’s proposed redesign of the nation’s broadband system, Free Press cried foul, claiming that top federal regulators were “meeting exclusively with industry representatives.”

But federal regulators were not holding exclusive meetings with industry figures: As early as 2009, Free Press aides were meeting with senior officials at the NTIA; the meetings were never disclosed in the group’s quarterly LDA reports.

Emails obtained by the Daily Caller revealed one senior Free Press staffer had requested meetings with NTIA’s chief of staff Tom Power to discuss the administration’s net neutrality agenda. It was agreed that the men would meet at a Capitol Hill Starbucks — conveniently at a location where the meeting would go unreported.

According to Power’s public schedule, the pair met privately a total of three times in 2009. And on a separate occasion, Power and an aide met with a Free Press agent in August.

None of the meetings were disclosed.

Separate to the undisclosed NTIA coffee house rendezvous, FCC visitor logs revealed Free Press staff visited the agency on nearly 30 separate occasions between February 2009 and October 2009.

None of those meetings, either, were included in Free Press’ LDA reports.

“It’s a tough sell to argue that on 30 separate visits, Free Press staffers only went to the FCC-the gatekeeper of net neutrality-to talk about the weather,” one keen observer of telecommunications industry told Capitol Confidential. “Pretty obvious that Free Press willfully broke federal disclosure laws.”

Big Government

Health insurers are lobbying to weaken regulations, despite record profits.

With the economy in recession and a growing number of Americans going without health insurance coverage, the big health insurers are still posting impressive profits. Wellpoint, the nation’s largest insurer by membership, “reported a 4% increase in profit for the second quarter that helped generate earnings of $ 1.6 billion since the beginning of the year – a 26% increase over the same period in 2009,″ and Aetna said its “second-quarter profits rose 42 percent, with a net income of $ 491 million, compared with $ 346.6 million for the same quarter last year.” Earlier this week, Health Care for American Now! (HCAN) released a report which found that CEOs from the 10 largest for-profit health insurance companies “collected pay of $ 228.1 million, up from $ 85.5 million in 2008.” As a group, insurance CEOs saw a “167 percent raise,” while “Americans saw their averages wages increase by about 2 percent.” Insurers are spending less on health care and seeing higher profits:

These numbers contradict insurers’ claim that stringent regulations would jeopardize the industry and, as the Wonk Room argues, should embolden regulators to impose tough consumer protections.

Think Progress

Insurers Lobbying To Weaken Regulations, Despite Record Profits

Over the last several months, I’ve noted that even while the economy is in recession and a growing number of Americans are going without health insurance coverage, the big health insurers are posting higher profits. Americans are actually using less care — filing fewer claims — but still paying more in premiums.

Wellpoint, the nation’s largest insurer by membership, “reported a 4% increase in profit for the second quarter that helped generate earnings of $ 1.6 billion since the beginning of the year – a 26% increase over the same period in 2009,″ and Aetna said its “second-quarter profits rose 42 percent, with a net income of $ 491 million, compared with $ 346.6 million for the same quarter last year.” Earlier this week, HCAN released a report which found that CEOs from the 10 largest for-profit health insurance companies “collected pay of $ 228.1 million, up from $ 85.5 million in 2008.” Collectively, that’s a “167 percent raise,” while “Americans saw their averages wages increase by about 2 percent.”

Insurers are spending less on health care and seeing higher profits:

Despite these riches, the industry is still lobbying regulators to soften the medical loss ratio reporting requirements and other mandates that are part of health care law. For instance, the Hill’s Healthwatch reports that lobbyists are using the August recess to lobby lawmakers “for greater flexibility” to avoid the stringent grandfathering regulations that exempt certain plans from reform’s new consumer protections. They’re pressing for rules that would allow the insurance industry to reclassify administrative expenses as medical spending and are now wrangling with regulators over “which tax payments can be deducted” from the revenue part of the medical loss ratio.

Insurers are spending millions in premium dollars to lobby for regulations that would protect their profits and argue that they could be subject to future economic woes. But the industry’s financial prowess (their incredible profits) implies that issuers can withstand fairly stringent medical loss ratio reporting requirements and afford to charge smaller premiums. That’s something regulators should remember as they’re being lobbied by insurers.

Wonk Room