Issue #27, Winter 2013

How Big Money Corrupts the Budget

To read the other essays in the “Everyone's Fight” symposium, click here.

I was there when lobbyists discovered the congressional budget process. It was 1975 and I was a summer intern with the Senate Budget Committee. The committee’s Democratic chairman, Ed Muskie from Maine, had just done what at the time was considered unthinkable: He successfully led a charge on the Senate floor against a defense authorization bill.

The floor fight was unprecedented. The Senate Budget Committee had only just come into being—it, along with its House counterpart, was created by the sweeping Congressional Budget Act the year before. For a new committee to challenge the powerful Senate Armed Services Committee was shocking. The Armed Services Committee chairman, John Stennis of Mississippi, was known for his legendary parliamentary skills, and the defense authorization bills reported out of his committee were seldom challenged. But Muskie wanted to make clear there was a new budget sheriff in town and he won.

This was the moment that lobbyists realized they had to pay attention to the budget process. Suddenly, lobbyists were interested—an interest that bordered on panic. The reason was simple: No matter how much good will and how many solid connections a lobbyist may have had with members of Armed Services (and every other committee that allocated dollars), that committee’s will could now be thwarted by a committee that had staff the lobbyist didn’t know, members for whom he or she hadn’t raised any money, and access to a new Congressional Budget Office that independently crunched numbers. And it would all be done using new concepts and terms and a very hard-to-understand process that most lobbyists never before had to grasp.

The calls, letters, and personal visits from lobbyists started the next morning. Budget committee hearings that up to that point had barely drawn a handful of Capitol Hill tourists were now so crowded with lobbyists from military contractors and government affairs liaison officers that it was often standing room only, with a line out the door of others waiting to get in. The interest from lawyers, military contractors, trade associations, senators’ legislative assistants, and government affairs officers from the Pentagon and each of the service branches was so great that the briefing sessions on the budget process we previously couldn’t fill were suddenly being conducted daily.

That was the moment when lobbyists discovered the congressional budget process. It was also the moment when budget committee decisions free of lobbyist influence ended and action on the deficit, debt, and federal priorities started to be determined more by those who could devote resources to getting what they wanted than by national need and appropriate fiscal policy.

The change was swift and decisive. The following year’s budget resolution was far more difficult to draft because there was significant opposition from the military spending community—that is, from the lobbyists—to the lower defense number that was being considered. The post-Vietnam War “peace dividend” that was supposed to result in funds being shifted from the Pentagon to domestic purposes never happened, in large part because of the lobbying that took place in the budget committees and on the floors of the House and Senate. The result? Not only was the Defense Department budget that had been expected to be cut left largely untouched, but the “transfer amendment”—the attempt by House members to shift the funds that the budget committee was unable to move because of the pressure that was applied—was resoundingly defeated that year and every year it was offered.

The Pentagon and the Tax Code

This was hardly the first time that lobbyists had influenced what and who the federal government taxes and how it spends the revenue it collects; it was just the first time they had wielded that power in the new budget process. In the close to 200 years before that formal federal budget process had gone into effect, the committees with jurisdiction over taxes and spending were always primary targets for those who wanted more from Washington, who needed to make sure they got no less than they got before, and who sought to deny federal largesse for others.

The reason for this lobbyist involvement and success in the allocation process is that, even though the federal budget ultimately can be reduced to numbers, spending and taxing decisions are not—indeed cannot be—data-driven. As much as we all might like to believe otherwise, objectively comparing the relative worth of projects across departments and agencies that do very different things is virtually impossible. For example, how do you decide whether 1,000 more students getting lunch all year is a “better” expense than having 1,000 more rangers in our national parks? For the record, the last attempt to do anything like this was President Jimmy Carter’s plan to impose something called “zero-based budgeting” for federal agencies, a process that was supposed to allow for the prioritizing of programs that do very different things and for the lowest-ranked ones to be dropped. That was a laughable failure; federal agencies and departments were unwilling and incapable of applying the concept, and no program in one department was eliminated because it was determined to be a lower priority than some other program in a different department. Three-plus decades later, the initials “ZBB” still evoke snarky comments and absolute contempt from federal budget wonks everywhere.

The inability to use rigorous analysis means that federal spending and taxing decisions almost always are made for subjective—that is, political—reasons. Even when there are seemingly hard numbers that confirm or disprove a spending project’s value or provide an estimate of the revenue loss or gain from a tax provision, the decision about whether to proceed is determined by who is in power, which committee has jurisdiction, what the chair of the committee wants to do, and who has access to those making the decision. In other words, federal spending and taxing decisions have always been manna from heaven for lobbyists who have sold their understanding of the politics and their access to policy-makers to earn their fees.

But if lobbyists have always influenced spending and revenue decisions, their importance clearly grew after 1974. The Congressional Budget Act created a new process, more entry points, and many additional reasons for lobbyists to bill their clients. The situation has become worse still over the past decade and a half as the federal budget shifted from a surplus in 1998 to ever-larger deficits beginning in 2002, and the battle for budget dollars has become more desperate. According to the Center for Responsive Politics’s OpenSecrets.org website, federal budget and appropriations by far was the number one area for which clients had lobbyists. In fact, the 12,346 budget and appropriations lobbying clients were almost double the 6,495 clients for the number two issue of defense.

Here are just two examples of how this lobbying corrupts the budget process and overwhelmingly changes what the federal government does, who pays for it, and how the rest of us suffer for it.

First, defense. Almost all defense lobbying is devoted to increasing the overall Pentagon budget and influencing which projects get the most dollars. Very few lobbyists are hired to push for less military spending, and most of those are usually lone voices in the cacophony of those insisting that more is always needed. The lobbyist arguments for defense have become almost unrelated to military threats, with the contractors who make the systems talking about jobs and protecting the industrial base, the local governments explaining the impact of military spending on their economies, and the Pentagon talking about what “the enemy” is doing without anyone ever being able to verify what’s being reported.

That’s why the rise in Pentagon spending between 1998 and 2011—from $367 billion to nearly $690 billion (in 2010 dollars)—is so understandable. And it’s awfully hard to deny that the increase from 611 defense lobbyists in 1998 to 952 in 2011 didn’t have a huge impact on this increase.

A further indication of their success is how the lobbyists have changed the budget process itself, rather than the actual spending decisions, to their advantage. Military dollars used to be included in a catchall classification called “discretionary” spending that generally was considered to be the most susceptible to reductions. Thanks in large part to the defense lobbying community, the Pentagon today is walled off in a separate and less politically vulnerable category. Only what’s left—“nondefense discretionary”—has become the most likely part of the federal budget to be looked at for savings when deficit reductions are considered.

Second, the federal tax code. It’s important to remember that the 1986 Tax Reform Act did much of what’s currently being discussed when “tax reform” is mentioned. That is, make the code less complicated by eliminating many of the hundreds of special provisions that benefit only a particular company, industry, or activity. Why is simplification being discussed with such fervor 26 years later? Because the tax code that was made simpler in 1986 is again bursting at the seams with special tax breaks that were added by lobbyists.

According to the Office of Management and Budget, the 20 biggest tax breaks—everything from the deductibility of mortgage interest on owner-occupied homes to the deductibility of charitable contributions—cost taxpayers more than $900 billion in 2012. That’s right: The revenue lost from just these lobbyist-created and heavily guarded tax breaks was more than 80 percent of the deficit last year. The revenue lost from all special tax provisions exceeded the total budget deficit by billions of dollars and, therefore, created extreme pressure to cut spending.

This raises a crucial point about the deficit. The deficit was created in part because of lobbyist involvement with previous spending and taxing decisions. Simply stated, lobbyists are concerned only with getting more for their clients. How that higher spending or lower revenue is offset—if at all—typically is of no concern.

The Few and the Rest of Us

Unfortunately, the importance of lobbyists in the federal budget process is very likely to grow dramatically in the years ahead as efforts to deal with the federal deficit become more intense. As decisions are considered that will raise taxes on some and reduce spending for others, the perceived need for lobbying on all aspects of the budget by those who might have to pay more, get less, or see their competitors get an advantage will increase substantially. For example, there’s absolutely no doubt that two of the most frequently talked about deficit-reduction alternatives—eliminating or cutting back on the mortgage-interest deduction and imposing a national sales tax—will be savagely opposed by the lobbyists for, respectively, homebuilders, mortgage bankers, and realtors, and every consumer business, from fast-food chains to big-box retailers.

Defense contractors will continue to employ their own army of lobbyists to prevent from taking effect the military part of the across-the-board spending cut that was triggered when the anything-but-super committee failed to agree on a deficit reduction plan in 2011. The defense industry has already paid for advertising, studies, and press releases; attempted to make the reductions into an election issue; enlisted the CEOs of many of its highest-profile companies; and flooded Capitol Hill with its lobbyists.

The new budget process that undoubtedly will be part of any deficit-reduction plan considered in the coming years not only will be discovered by the lobbyists almost immediately, they very likely will play a significant role in crafting it. After all, why take your chances lobbying the budget committees when you can help design a new budget process that will favor your clients and make it harder for those committees to do anything else?

What’s lost in all of this is that federal priorities have been seriously skewed since lobbyists discovered that the budget and budget process could be their friends. Education and the environment are all much further down the list of federal spending areas with lobbyists than defense, for example, because those favoring federal support for those areas simply don’t have the same resources to devote to lobbying efforts. And lobbying for good government efforts such as improving departmental management and making government more efficient is almost nowhere to be found, unless the lobbying is done for the management consulting and information technology firms that stand to benefit from it.

It’s no wonder that voters have been frustrated with what the government has done and is planning to do. The federal budget reflects the priorities of those who can afford to have lobbyists represent them. If you’re not in this group, not only do your priorities at best get short shrift, but more than likely your taxes—which are higher than they otherwise would be because of the special breaks obtained for others—are paying for what the lobbyists have won for their clients.

That makes the conclusion inescapable: The tax and spending priorities in the federal budget represent the few at the literal and figurative expense of the rest of us.

 

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Issue #27, Winter 2013
 

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