Lobbying, rent-seeking, and the constitution.

• Author: Hasen, Richard L.

INTRODUCTION I. THE STATE OF LOBBYING REGULATION AND JURISPRUDENCE A. The State of Lobbying Regulation 1. Federal disclosure laws and other early federal laws 2. Federal tax laws 3. New federal laws and regulations (including Obama Administration initiatives) 4. The variety of state lobbying laws 5. Proposals for additional lobbying regulations B. Constitutional Jurisprudence Concerning Lobbying Regulation 1. The traditional approach of the courts a. Disclosure b. Tax laws c. Other lobbying laws 2. The changing tide: constitutional jurisprudence concerning lobbying regulation in a post-Citizens United world II. THE NATIONAL ECONOMIC WELFARE RATIONALE FOR LOBBYING REGULATION A. How Lobbying Works: Lessons from Political Science 1. How lobbyists achieve influence 2. Securing access 3. After the access B. The National Economic Welfare Rationale for Lobbying Regulation 1. Lobbying skew, equality, and inefficiency a. Rent-seeking, social inefficiencies, and social costs b. Inefficiency beyond rent-seeking c. The efficiency costs of lobbying 2. The promotion of national economic welfare as a sufficiently important government interest to be balanced against First Amendment interests C. Balancing the State's Interest in Promoting National Economic Welfare with First Amendment Speech and Petition Rights in the Lobbying Context III. OBJECTIONS AND EXTENSIONS A. Objections 1. Ends-based objections 2. Means-based objections B. Extensions 1. Reenacting, or partially reenacting, corporate spending limits 2. SEC pay-to-play rule for investment advisers CONCLUSION INTRODUCTION

President Barack Obama and former Alaska Governor Sarah Palin may not have a lot in common, but they share a common enemy: "Washington lobbyists." As a presidential candidate, Obama declared that "[i]f you don't think lobbyists have too much influence in Washington, then I believe you've probably been in Washington too long." (1) He explained his refusal to take campaign contributions from federally registered lobbyists on the grounds that lobbyists can "drown out the views of the American people." (2) As President, he criticized an "army of lobbyists" spending millions of dollars in an unsuccessful attempt to block passage of a bill reforming practices in the student loan industry. (3)

Sarah Palin has expressed similar views. When Fox News host Sean Hannity asked Palin if campaign contributions to then-Senator Obama and other members of Congress caused lax congressional oversight over mortgage giants Fannie Mae and Freddie Mac, Palin replied that "even more significant [than contributions] is the role that the lobbyists play in an issue like this." (4) She explained her views further in a Facebook post, in which she decried "crony capitalism" in negotiations over the financial reform bill: "Does anyone doubt that firms with the most lobbyists and the biggest campaign donations will be the ones who get seats in the lifeboat?" (5) She explained that "the big players who can afford lobbyists work the regulations in their favor, while their smaller competitors are left out in the cold." (6)

Newly elected U.S. Senator (and Tea Partier) from Kentucky, Rand Paul, went even further in his criticism of lobbyists. He declared that "[l]ast year, over 15,000 individuals worked for organizations whose sole goal was to rip you off. No, not the mafia or Goldman Sachs, but another distinctly criminal class--Washington lobbyists." (7) He called upon Congress to include in all government contracts worth at least $1 million a clause barring the contractor from engaging in any lobbying activities or making campaign contributions. (8)

The focus by both the left and right on lobbyists and the supposed evils of lobbying is understandable. Every piece of major federal legislation has been influenced by (and sometimes portions even written by) lobbyists. Lobbyists are a key means by which interest groups pursue their goals in the political arena. In difficult times like these, when people are looking for someone to blame for a financial meltdown, (9) a failing health care system, (10) or a broken blowout preventer leading to a catastrophic oil spill, (11) lobbyists are a convenient target.

Despite the recent popular attacks on lobbying and lobbyists, lobbying regulation traditionally has been lax, and therefore lobbying law justifiably has received scant attention from legal scholars. Before the 1990s, lobbying disclosure laws were ineffective, thanks to the Supreme Court's chary interpretation of the scope of the 1946 Federal Regulation of Lobbying Act in United States v. Harriss. (12) The main interesting legal issues arose over the meaning of the term "lobbying" at the intersection of lobbying law and tax law, because certain tax-exempt organizations face limitations on their ability to "lobby" (13) and because of shifting treatment of the tax deductibility of lobbying expenses by businesses. In 1995 Congress passed a somewhat more effective lobbying disclosure law, the Lobbying Disclosure Act, (14) and that new law prompted a small amount of academic writing about whether the revised disclosure rules were constitutional and whether they could be made more effective. (15) Still, the concept of lobbying and the rationales for lobbying regulation remain undertheorized.

Two emerging conflicting forces are likely to move the question of lobbying regulation to the front burner, both for scholars and the courts. On the one hand, in the past few years, government actors have enacted unprecedented new lobbying regulations. (16) For example, the Obama Administration banned lobbyists from orally communicating with the administration about certain economic legislation during the recent financial crisis and required any written lobbyist comments to be posted on government websites. (17) States have imposed their own limits, such as laws barring lobbyists from contributing to candidates or soliciting campaign contributions for the elected officials they lobby. On the other hand, courts, relying in part upon the Supreme Court's new deregulatory campaign finance jurisprudence culminating in Citizens United v. FEC, (18) have begun striking down new lobbying regulations as violating the First Amendment. In Green Party of Connecticut v. Garfield, (19) the United States Court of Appeals for the Second Circuit struck down a Connecticut law that barred campaign contributions to state candidates by lobbyists. It also struck down a law barring lobbyists from engaging in fundraising. In Brinkman v. Budish, (20) a federal district court in Ohio struck down a "revolving-door" statute that barred former state legislators and staffers from lobbying the legislature for twelve months after leaving service.

The conflict between these forces will require us to grapple more deeply with both the concept of lobbying and the rationales for lobbying regulation. The activity of lobbying--trying to influence the legislative and executive branches in a particular area (21)--squarely implicates both the Free Speech and Petition Clauses of the First Amendment. Speech aimed at influencing government action is core political speech, and it would certainly be both unconstitutional and poor public policy to bar individuals from lobbying to change government action. (22) The right to petition promotes accountability of elected officials by ensuring that they are informed about constituents' preferences and the likely effects of public policy choices.

But lobbying has been associated with a variety of social ills as well. One well-known problem is that of quid pro quo corruption. In the past few years, most notably in the Jack Abramoff scandal, lobbyists, elected officials, and staffers have been arrested and convicted for violating various lobbying, reporting, and ethics laws. (23) Most commonly, lobbyists gave misreported or unreported gifts to elected officials or staffers. Relatively few lobbyists have been involved in corrupt activities, but these highly salient events can color the public's perception of the entire profession.

Lobbying is problematic even if we put aside corruption concerns and the overheated (and usually unwarranted) criticism of lobbyists. For example, lobbying appears to skew public policy in particular directions. The reason for the skewing is that those with resources and with narrow (as opposed to diffuse) interests in particular legislation can more easily overcome collective action problems and engage in political activity such as hiring lobbyists who--usually because of their past careers as elected officials or staffers or because of their extensive fundraising activities on behalf of elected officials--have easy access to elected officials and their staff.

When lobbying laws were confined simply to disclosure rules, courts had an easy time engaging in the balancing of individual rights of free speech and petition against state interests. The Supreme Court and lower courts have ruled clearly and repeatedly that the state has sufficiently important anticorruption and information-based reasons to compel the disclosure of lobbying-related information. But the calculus has become more difficult as legislative and executive branch actors have enacted stricter lobbying laws, and as the courts, following the Supreme Court's lead, have become more skeptical of limits on the use of money to influence political outcomes. Green Party and Brinkman both relied upon Citizens United in concluding that parts of state laws regulating lobbyists interfered too much with political rights and could not be justified on anticorruption grounds. The conclusion is unsurprising (though not inevitable) given Citizens United's dictum endorsing a very stingy definition of corruption. (24)

The purpose of this Article is to advance an alternative rationale which could support some (though not all) of the recent wave of new and proposed lobbying regulations: the state's interest in promoting national...