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Thread: Measuring Rates of Return for Lobbying Expenditures

  1. #1
    Member sohaminator's Avatar
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    Apr 2010

    Default Measuring Rates of Return for Lobbying Expenditures

    I found an interesting paper on the rate of return for money spent on political lobbying. Given below is the abstract and portions of the conclusion.

    Link to the paper


    The lobbying industry has experienced exponential growth within the past decade.
    The general public, the media, and special interest groups perceive lobbying to be a
    powerful mechanism affecting public policy. However, academic research finds
    inconclusive results when quantifying the rate of return on political lobbying
    expenditures. In this paper we use audited corporate tax disclosures relating to a tax
    holiday on repatriated earnings created by the American Jobs Creation Act of 2004 to
    examine the return on lobbying. We find firms lobbying for this provision have a return
    in excess of $220 for every $1 spent on lobbying, or 22,000%. Repatriating firms are
    more profitable overall, but surprisingly, profitability is not a predictor of repatriation
    amount. Rather, industry and firm size are most predictive of repatriation. Cash on
    hand, a proxy for ability to repatriate, is not associated with the repatriation decision or
    the repatriation amount. This paper provides compelling evidence that lobbying
    expenditures have a positive and significant return on investment.
    Portions of the conclusion

    We find that firms lobbying for this provision had a return in excess of twentytwo thousand percent on their lobbying expenses. Repatriating firms were more profitable
    overall, but surprisingly, profitability was not a predictor or repatriation amount. Rather
    industry and firm size was most predictive. Cash on hand, which proxies for ability to
    repatriation, was not associated with the repatriation decision or the repatriation amount.

    Firms lobbying for the repatriation provision were quite effective in receiving
    lucrative tax benefits but the tax policy implications are troubling, particularly in light of
    recent efforts by some members of Congress to renew the repatriation holiday for a
    second time.101 The tax benefits are accrued to older, larger firms that are declining in
    market value. Many economic development policies are aimed at supporting emerging
    firms and industries; this tax provision appears to be doing the opposite as it provides tax
    subsidies to well-established firms and industries with declining opportunities and market
    growth. Coupled with recent research that suggests firms used repatriation funds to
    repurchase stock and bolster their financial position instead of pursuing business
    opportunities,102 the efficacy of another repatriation holiday is highly questionable.

  2. #2
    Milo Drinker of Death Flagg's Avatar
    Join Date
    Oct 2003
    The (South)Island of Misfit Toys



    Something that is also interesting would be to add up all the money spent on average for each federal legislative/executive election then divide it by US federal spending and the US GDP.

    Because if you think about it.......all that political campaign money purchases strong influence over a $15+ trillion economy and considerable control over the $3.5+ trillion federal spending.

    It makes profit margins for crack dealers look pretty weak by comparison.

    And that right there is the fundamental reason why the US is broken and will remain broken until this existential issue is resolved.

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