Pethokoukis

Should we tax lobbying to help stem crony capitalism?

Nice catch by my pal Arnold Kling as his new blog, a pointer to a study on lobbying:

We study how ex-government officials benefi t from the personal connections acquired during public service. Lobbyists with experience in the office of a US Senator su ffer a 24% drop in generated revenue when that Senator leaves office. The eff ect is immediate, discontinuous around the exit period, and long-lasting. Consistent with the notion that lobbyists sell access to powerful politicians, the drop in revenue is increasing in the committee assignments power held by the exiting politician. We have shown that staff ers’ political connections are a perishable asset; in other words, they last only as long as the connected politicians remain holding office. This implies that staff ers may have relatively short careers. Once a connection to a powerful Senator has been established, it may make sense to move into lobbying and cash in this unique asset while it is still valuable.

Our paper also has the potential to inform policy. One common instrument to regulate the revolving door phenomenon is to impose ‘cooling o ff’ periods to officials leaving public office (Ethics Reform Act of 1989, Honest Leadership and Open Government Act of 2007; for a review see Maskell 2010). The perishable nature of ex-staff ers’ assets suggests that such restrictions could in fact be quite useful to a legislator interested in signifi cantly decreasing the attractiveness of a lobbying career for ex-government officials.

But is more regulation the best route here? As economist Luigi Zingales points out: “If we want to regulate lobbying because we think it distorts the political process, why do we think that the distorted political process can ameliorate the problem by regulating lobbying?”

Good question. And Zingales has a Pigouvian answer in his recent book, A Capitalism for the People: “Lobbying per so is not bad, but the imbalance in lobbying is. Larger companies lobby disproportionately more and consequently obtain disproportionately greater benefits. Heavily taxing lobbying … would help level the playing field [and] reduce the incentive to lobby.”

Zingales would redistribute the tax proceed in some fashion to opponents. Not sure how that would work, exactly. But it is in an intriguing, pro-market approach to the problem.

One thought on “Should we tax lobbying to help stem crony capitalism?

  1. Heavily taxing lobbying … would help level the playing field [and] reduce the incentive to lobby“…

    Beware those who are looking for that mystical level playing field…

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