Why do lobbyists spend so little?

The economic mysteries of daily life.
April 1 2006 11:07 AM

There's Not Enough Money in Politics

Lobbyists spend $2 billion a year to influence Congress. Why so little?

There are now 35,000 registered lobbying groups in Washington, and they spend more than $2 billion every year trying to influence what Congress does. Only an economist, then, would ask why there is so little money in politics.

We have seen countless hand-wringing books arguing that democracy is for sale, and given the recent court appearances of the disgraced lobbyist Jack Abramoff and the corrupt congressman Duke Cunningham, this is easy to believe. But something doesn't add up.

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Assume for a moment that the most pessimistic hand-wringers are right, that every cent that candidates raise to win elections is some kind of bribe, and that government really is for sale. How much is it worth? Federal government spending is about $2.5 trillion a year—or very close to a nice round $10 trillion in a four-year election cycle. If anything, this is an underestimate of how much it would be worth to control the government, since, if I were an industrialist with the government in my pocket, I could order foreigners to be fended off with tariffs and domestic competitors to be bound fast with red tape.

So, how much would I pay to control the government for four years? In an auction, I would be willing to pay at least $10 trillion. And I would have to, since other people would be interested in spending the same. Lobbying is a more chaotic process than a simple auction, but fancy economic theorems suggest that the total spending by lobbyists shouldn't be influenced by whether it runs through an auction or not: It should simply be influenced by the size of the prize.

The reality could hardly be more different. According to the Center for Responsive Politics, George Bush raised $367 million for the last election campaign and spent most of it. John Kerry raised $326 million. In the current congressional races, Tom DeLay has raised more than $3 million in Texas District 22, and Hillary Clinton has raised $33 million to fight for her Senate seat. But most seats are much less expensive—even including the spending of all the losing candidates, few campaigns cost more than $20 million for the Senate or $5 million for the House. These are puny numbers compared with the $10 trillion that these representatives are fighting to control. Ten trillion dollars—or, to put it another way, $10 million million—makes Bush's $367 million look pretty small.

What can we conclude from all of this? One possibility is that the people who have bought the government have got a fantastic bargain. For example, the economist Thomas Stratmann has estimated that just $192,000 of contributions from the American sugar industry in 1985 made the difference between winning and losing a crucial House vote that delivered more than $5 billion of subsidies over the five subsequent years.

I am not convinced. Think of Starbucks, McDonalds, Coca-Cola, or the Hershey Company. There is no shortage of candidates who would happily pay more than $192,000 to get lower sugar prices. That would mean a bidding war between sugar producers and sugar users to buy the right to rewrite sugar laws, and surely the price would be nearer to $5 billion than to $192,000.

The alternative view is the one you have been thinking since the second paragraph of this article: Thanks to whatever checks and balances we may have, government is not really for sale at all, or at least only in the most marginal way. If the lobbyists are not willing to spend more than $2 billion a year to influence a budget of $2.5 trillion, that suggests they believe that they're going to be able to influence less than one dollar in a thousand of government spending. Put another way, the American government is, very roughly, 0.1 percent corrupt. It's not perfect, but perhaps we can live with it.

Addendum: Some readers have requested footnotes. The economist who originally asked why there was so little money in politics was Gordon Tullock, in a 1972 article titled "The Purchase of Politicians." Stephen Ansolabehere, John de Figueiredo, and James Snyder revisited Tullock's theory and the evidence 30 years later. Thomas Stratmann's papers are here, or check the numbers yourself at the Center for Responsive Politics.

Tim Harford is a Financial Times columnist. His latest book, The Logic of Life, will be published in paperback on Feb. 10.

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