A Lobbying Bonanza

Talks of a debt deal in Washington have lobbyists flooding the new congressional debt committee. This summer, after hours of seemingly endless debate, Congress agreed that it would cut $1.5 trillion from the federal budget. A debt supercommittee composed of 12 members was created for this purpose and also perhaps to avoid placing the blame on members of Congress that are up for reelection in 2012.

After President Obama signed the compromise deal to prevent the nation from defaulting on its debt, members of Congress anticipated the lobbying blitz that would ensue. K Street lobbyists will try to protect their industries because every line of the federal budget is up for the ax. In other words, every sector will fight to protect their rent. As one lobbyist in the article stated "You'd be foolish not to be involved to defend your priorities if you care about the federal budget or taxes, and I suspect that is everybody". When I read this I immediately thought of Tullock's article on Welfare Costs of Tariffs, Monopolies, and Theft. Tullock is concerned with the resources diverted from other uses to rent seeking. Clearly there will be a lot of resources diverted because the size of the prize is very large. In class we mentioned that this is one of the factors that determines the magnitude of rent dissipation. The debt supercommittee will attempt to reform the tax code and there are so many special favors or rents in the tax code that this could sweep up every industry and lobbyist in Washington. Since the size of the prize is large, this particular type of socially wasteful investment called lobbying will be large as well. The holders of these special favors will be willing to invest large resources to protect their rents because the capital value is worth much more.

There are several industries looking to protect their priorities including the telecomm industry, the defense industry, and the technology sector. There will be an unprecedented lobbying blitz because the mandate includes possible cuts from the entire federal budget. This also shows the magnitude of rent dissipation when bids are non-refundable. We can expect to see the same kind of wastefulness that Professor Coppock tried to illustrate in class when he held an open air auction where the bids were non-refundable, only this time there's a lot more at stake than just a couple of dollars.