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  • Scoop Market Mysteries 10-9-22 (Lobbying)

Scoop Market Mysteries 10-9-22 (Lobbying)

🔎 Market Mysteries: How do corporations influence government policy?

 Market Mysteries of the week

   How do corporations influence government policy? 

Answer:

Corporations can influence public policy in their favor through political donations and lobbying, leading to regulations that may decrease their accountability, reduce their taxes, or unlock new business opportunities.

What is lobbying?

Lobbying is the practice of seeking to influence government policy on issues that serve a particular interest.

Lobbyists are typically paid to promote the interests of non-governmental institutions or organizations. While

it is illegal for lobbyists to donate money directly to politicians or political campaigns,

many more tools are at their disposal. 

Instead of directly donating,

lobbyist groups may host elaborate fundraising events to get others to donate to the campaigns they seek to gain favor with

. Groups can also spend on advertising to boost the likelihood of success for relevant ballot initiatives. On-demand service companies like

to ensure the success of a special 2020 California ballot measure that allowed the companies to continue classifying their workers as contractors, exempting them from paying full employee benefits. The pro-contractor group spent over $200 million to support their interests, roughly 10x more than the opposition.

Lobbying is a business of relationships where favors go a long way.

Lucrative job offers are very common

.

and a third of retiring house representatives go on to become lobbyists. That’s up from less than 5% in the ‘70s. Beyond fundraising and relationship building,

lobbyists also often literally write policy for legislators

, reducing their workload and ensuring language works in the lobbyist’s favor. Lobbying is an effective tool to influence policy, obtain federal contracts, and secure grants.

Does every corporation lobby?

While there’s limited transparency in the flow of money,

most corporations attempt to influence policy directly or through coalitions representing collective interests.

Last year, roughly

, and the healthcare, technology, and insurance industries collectively accounted for

Several large corporations spend robustly to advocate for their unique needs on particularly relevant issues. Some of the

last year were Blue Cross/Blue Shield ($25M), Meta ($20M), and Amazon ($19M).

Far more companies put their money into coalitions for their industry or shared interests.

The biggest lobbyist groups in the United States are

By acting as intermediaries,

these groups collectively exert influence while absolving their individual business members from the transparency

of engaging directly in corporate political activity. The US Chamber of Commerce, representing 3 million companies, spent

in lobbying efforts in 2021. The next two highest spenders were the National Association of Realtors ($44M) and the Pharmaceutical Research and Manufacturers of America ($30M). 

Political influence offers corporations a valuable return on investment.

Between 2014-2017, America’s 100 biggest corporations turned

of federal grants and contracts. Boeing received the most business from the government in that period, roughly $900 million in grants, sub-grants, and federal contracts to build its planes and defense equipment. Other studies have identified

These groups can also effectively limit the expansion of regulations.

The US Chamber of Commerce, American Bankers Association, and several other trade groups recently sued the Consumer Financial Protection Bureau to

Do corporations donate to political campaigns to gain favor with future legislators?

Corporations cannot directly contribute to campaigns for an individual or political party,

but they have ways around that. Instead of writing a check to a campaign directly,

companies form or donate to Political Action Committees (PACs)

, segregated pools of money operating separately from any corporation’s cash balances. PACs may be company-specific or solicit donations from broad groups and individuals to directly finance campaigns for or against candidates, ballot initiatives, or specific legislation. 

Donations to and from PACs operate with strict dollar limits.

PACs may only receive up to $5,000 per year from any one individual or company and may only donate $5,000 to a single candidate per election. But,

corporations can maneuver around this by donating to Super PACs.

Super PACs cannot directly donate to campaigns or coordinate with campaigns directly, but they can spend money on basically everything else that can help a campaign succeed, like political ads, events, outreach, and fundraising efforts. They can receive and spend unlimited amounts and have different disclosure criteria. Corporations are influential backers of Super PACs. In the 2016 election,

that went to super PACs came from corporations. 

Have corporations always had such influence?

Lobbying for one’s beliefs is a core component of our democracy

and dates back through the history of the United States, but

the rules and practices around political donations have changed significantly over the last decade

. The

shifted standards on campaign financing of the last century, enabling corporations to

spend unlimited funds on elections to support or oppose candidates

indirectly

, such as on advertising and fundraising. This helped popularize super PACs and political spending through

. During the 2020 election cycle, over

was spent in dark money channels. The recently blocked

aimed to make it mandatory for political organizations to disclose big donors, making dark money channels more transparent.

Do you think there should be more transparency in campaign finance? Check your company’s website to see if they disclose their political donations or track them on

.

âš¡The Share Scoops Team

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