-Caveat Lector-
the Virtual Smoke Filled Room Emerges
> I n f l u e n c e I n c.
>
> SUMMARY
>
> Nineteen ninety-eight was a tough year for Congress. With
> impeachment in the air and control of the House of
> Representatives at stake, Congress stalemated on most of the big
> policy issues it faced. Despite lofty goals and campaign
> promises, there were no breakthroughs on Social Security and
> Medicare reform, banking modernization, managed health care
> legislation, electricity deregulation, anti-smoking legislation,
> or campaign finance reform. The speaker of the House quit and his
> designated successor resigned before even taking office. The
> 105th Congress born with an activist agenda and promises of
> bipartisan cooperation ended with a bitterly divided House
> voting to impeach a shamed president. But not everybody
> on Capitol Hill had a bad year in 1998. Washington's
> lobbying industry thrived amid the partisanship and inaction.
> Expenditures on federal lobbying last year increased nearly 13
> percent, to $1.42 billion from $1.26 billion in 1997. Congress'
> preoccupation with impeachment and reelection in the second half
> of 1998 did nothing to dampen lobbying spending, which actually
> was slightly higher ($713 million) in the second six months of
> 1998 than in the first half ($710 million). The number of
> lobbyist-client relationships (either an interest lobbying on its
> own behalf or paying an outside firm to lobby for it) increased
> 21 percent, to 15,705 in 1998 from 12,960 in 1997, according to
> the Senate Office of Public Records. More dramatically, the
> number of registered lobbyists swelled to 20,512 by June 15,
> 1999, a 37 percent increase from the 14,946 lobbyists registered
> on Sept. 30, 1997, and a 10 percent increase from the 18,590
> lobbyists registered on Sept. 30, 1998, according to the Senate
> Office of Public Records. The number of organizations that
> reported spending more than $1 million during the year increased
> by 43 to 261 in 1998. Thirty-nine spent more than $5 million on
> lobbying, nine spent more than $10 million, and three spent more
> than $20 million. The number of lobbying firms that reported
> earning more than $1 million increased by 16 in 1998 to 117.
> In all there were more than 38 registered lobbyists and
> $2.7 million in lobbying expenditures for every member of
> Congress. This report marks the first time that
> year-to-year lobbying trends have been tracked on a comprehensive
> basis. The Center's inaugural report on 1997 lobbying provided
> the first-ever in-depth study of lobbying spending for an entire
> year, based on the new reporting requirements mandated by the
> Lobbying Disclosure Act of 1995. It also established a baseline
> for analyzing the patterns of lobbying spending from one year to
> the next. With a few notable exceptions, many of the big
> players identified in the 1997 lobbying report remained unchanged
> in 1998. The elite lobbying firms in 1997 remained among the
> top-grossing firms of 1998. Only one of the 20 top spending
> industries in 1997 dropped out of the list in 1998. Chemical &
> related manufacturing dropped from 14th place to 22nd place, and
> hospitals/nursing homes moved from 22nd place to 20th. Likewise,
> most of the organizations that led the list of big spenders on
> lobbying in 1997 were near the top of the list in 1998 as well,
> although several swapped places in the rankings. Many of
> the leading firms on K Street the heart of Washington's
> lobbying industry prosper from year to year because they
> represent a broad range of clients with a wide variety of policy
> interests. Just as shrewd investors diversify their portfolios to
> ride out the fluctuations in the markets, lobbyists who represent
> many kinds of clients can avoid the boom-or-bust that can occur
> when Congress' priorities change. Likewise, organizations trying
> to influence Congress on a variety of issues, such as the Chamber
> of Commerce of the United States (fourth leading spender in both
> years studied), are likely to remain active from one year to the
> next. Sometimes the gridlock that afflicted Congress in
> 1998 can be profitable to Washington's lobbyists. Banking
> "modernization" legislation, which would essentially break down
> the legal firewalls that separate the banking, securities, and
> insurance industries, is a subject of perennial debate in
> Congress. It's no coincidence that the commercial banks,
> insurance, and securities and investment industries ranked among
> the top 20 in 1997 and 1998. Congress' failure to act guarantees
> that the issue will be back the next year with another big
> payday for the army of lobbyists working that high-stakes
> legislation for the competing interests. In other cases,
> however, the currency of an issue before Congress can
> dramatically affect the lobbying spending of relevant interest
> groups. During the first half of 1998, Congress picked up where
> it had left off in 1997 in considering sweeping changes to the
> regulation of tobacco products. Proposed legislation, designed to
> settle a series of lawsuits against tobacco companies bought by
> state attorneys general included a large increase in cigarette
> taxes and major monetary penalties designed to discourage
> teenagers from smoking and settle a series of lawsuits brought by
> state attorneys general. Faced with a bill that could
> fundamentally alter their industry, tobacco companies
> dramatically stepped up their lobbying spending in 1998. Industry
> spending on lobbying increased 1.8 times, to $67.4 million in
> 1998 from $38.2 million in 1997. That moved the tobacco industry
> from eighth place in 1997 to fourth place in 1998. British
> American Tobacco (parent company of Brown & Williamson Tobacco
> Corp.), which spent $4 million on lobbying in 1997 and ranked
> 54th, increased its lobbying expenditures six-fold in 1998, to
> vault to No. 1 among all spenders at $25 million. Like last year,
> Philip Morris, another tobacco company, ranked second among all
> spenders at $23 million (up 46 percent from $15.8 million in
> 1997). A closer look at the numbers, however, shows how
> widely spending can fluctuate when an issue before Congress is
> hot. British American Tobacco spent $18.4 million on lobbying
> 73 percent of the total for the entire year and more than any
> organization spent on lobbying for all of 1997 during the first
> six months of 1998. Likewise, Philip Morris made 63 percent of
> its lobbying expenditures for the year during the first six
> months, when the industry succeeded in scuttling the anti-smoking
> bill that Sen. John McCain (R-Ariz.) was pushing. Tobacco
> also provides an example of how an individual lobbying firm's
> fortunes can rise or fall if it is heavily dependent on a
> particular industry. In 1997, the lobbying firm Verner, Liipfert,
> Bernhard, McPherson & Hand (which employs former Senate Majority
> Leaders Bob Dole and George Mitchell) ranked first among all
> firms in lobbying income, with half of its earnings coming from a
> handful of tobacco companies. Cigarette makers paid Verner
> Liipfert $7 million during the first half of 1998 when the issue
> was hot, but just $380,000 in the last six months of the year,
> after the McCain bill had been killed. As a result, Verner
> Liipfert earned $12.9 million overall in the first six months of
> 1998 and $5.9 million in the latter six months, for a total of
> $18.8 million. In contrast, earnings by Cassidy & Associates were
> more evenly balanced: $8.9 million in the first six months of
> 1998 and nearly $11 million in the second half, for a total of
> just under $20 million enough to unseat Verner Liipfert from
> first place. The lobbying expenditures reported to the
> Secretary of the Senate and the Clerk of the House cover more, of
> course, than just the salaries paid to the individuals who
> personally contact members of Congress and the executive branch
> and their staffs. Overhead costs related to the lobbying such
> as support staff, office expenses, payments to outside firms and
> trade associations, expenses for background preparation and
> coordination of lobbying are all included in the numbers.
> However, there are plenty of lobbying-related costs that
> are not necessarily included in the disclosure reports.
> For example, Dole the 1996 Republican presidential
> nominee provides advice on legislative strategies to clients.
> But since Dole does not personally contact his former Senate
> colleagues or other officials covered by the law on legislation,
> he is not considered a lobbyist under the law and is not
> registered. And thanks to a loophole in the reporting
> requirements, the lobbying expenditures reported by each
> organization are not strictly comparable. The law allows a filer
> to use either the reporting method spelled out in the Lobbying
> Disclosure Act of 1995 or a separate method developed for reports
> under the Internal Revenue Code (IRC). Bell Atlantic (No.
> 3 on the list of top spenders in 1997 and 1998) used the IRC
> method. Unlike the Lobbying Disclosure Act, the IRC requires
> disclosure of all expenditures on state, local, and grassroots
> lobbying potentially a major expense for a company like Bell
> Atlantic that is affected by legislation and regulation in many
> states. However, the definition of public officials covered by
> the IRC i.e., those with whom contact is considered "lobbying"
> is much narrower than that in the Lobbying Disclosure Act.
> British American Tobacco and Philip Morris, on the other
> hand, used the Lobbying Disclosure Act formula for reporting.
> Thus, they were not required to report any state or grassroots
> lobbying expenditures. As a result, the lobbying expenditures by
> the tobacco industry reported to Congress are undoubtedly
> understated, as the five largest tobacco companies teamed up in
> early 1998 on a reported $40 million television and radio ad
> campaign designed to frame anti-smoking legislation as a tax
> increase and to encourage popular opposition to the bill. The
> industry also has backed a "grassroots" smokers'-rights movement.
> The General Accounting Office recently released a report
> recommending approaches that could make the filings more
> consistent. It remains to be seen whether Congress will act on
> the recommendations. Among the broad economic sectors,
> finance, insurance & real estate, the perennial leader in
> campaign contributions, topped the list of spenders on lobbying
> for the second consecutive year, at $203 million. The
> communications and electronics sector, which includes telephone
> utilities and the computer industry, leapfrogged from fourth
> place in 1997 to second in 1998, at $186 million, with the
> computer industry alone spending one-third more. Every sector
> reported an increase in lobbying spending in 1998 including the
> defense sector, which reported a $776,449 increase to $48.7
> million. At the industry/interest group level, insurance
> ($77.2 million) moved into first place and pharmaceuticals/health
> products ($73.8 million) slipped to second place. Telephone
> utilities remained in third place ($67.9 million), but tobacco
> ($67.4 million) jumped from eighth place to fourth. Among
> the top spending organizations, the American Medical Association
> slipped from first place to fifth, at $16.8 million, behind
> British American Tobacco ($25.1 million), Philip Morris ($23
> million), Bell Atlantic ($21.3 million), and the Chamber of
> Commerce of the United States ($17 million). Successful
> lobbying is often backed up by political clout, which either
> takes the form of campaign contributions or political pressure
> from grassroots constituencies and sometimes both. The
> American Association of Retired Persons (AARP), for example,
> exerts enormous influence on Capitol Hill through the power of an
> active membership, even though the organization has no political
> action committee and its employees make few campaign
> contributions. Labor unions tend to rely on political action
> committee and soft money contributions, plus their large
> memberships, to flex muscle with Congress. Public sector unions,
> for example, ranked eighth among all industries/interests during
> 1997-98 in federal campaign contributions but ranked 56th in
> lobbying expenditures. Businesses, on the other hand,
> usually don't have a natural grassroots constituency, so they
> tend to rely more on campaign contributions to open doors in
> Washington. Philip Morris, for example, was both the
> second-biggest spender on lobbying in 1998 and the second-leading
> overall contributor to federal campaigns and party committees in
> 1997-98. The insurance industry ranked first in lobbying
> expenditures and sixth in campaign contributions. Among the 20
> industries/interests that spent the most in 1998 on federal
> lobbying, 11 also made the top 20 list of industries/interests
> contributing to federal candidates and parties in 1997-98.
> Of course, the huge amount spent on lobbying is a drop in
> the bucket compared with the potential return on the investment.
> The tobacco industry's success in killing McCain's anti-smoking
> bill saved cigarette makers billions of dollars. The insurance
> industry spent $77 million on lobbying in 1998, but has billions
> of dollars hinging on the outcome of managed care reform and
> banking modernization legislation. The lobbying industry
> continues to offer lucrative career opportunities to retiring or
> defeated members of Congress, as well as prominent congressional
> staffers and leading executive branch officials. The Center
> identified 138 former members of Congress who turned up as
> registered lobbyists during 1998. Bidding ensued among leading K
> Street firms as prominent lawmakers left Congress. Former House
> Appropriations Committee Chairman Bob Livingston (R-La.), who was
> in line to replace Newt Gingrich as speaker before resigning in
> January, former House Rules Committee Chairman Gerald Solomon
> (R-N.Y.), and former Democratic Congressional Campaign Committee
> Chairman Vic Fazio (D-Calif.) were particularly hot commodities.
> Former Rep. Bill Paxon (R-N.Y.), who headed the National
> Republican Congressional Committee, signed with the law firm
> Akin, Gump et al for $1 million a year, National Journal
> reported. Former lawmakers are especially valuable as
> lobbyists because they know the process intimately, understand
> the ins-and-outs of complex issues they dealt with while serving
> in Congress, and have personal ties to their former colleagues.
> In a business where success often depends on having access to
> decision-makers, former members of Congress are more likely to
> get their telephone calls returned. Big-name lobbyists the
> so-called rainmakers can also attract new clients to a firm.
> Ethics rules that ban former members from lobbying Congress for a
> year are not difficult to work around. Many former members
> provide strategic advice to clients, lobby other government
> agencies, or rely on colleagues in their firms who are not bound
> by the same restrictions. Many lawmakers depend on
> lobbyists as valuable sources of information about complex issues
> and ideas for legislation. It is not unheard of for lobbyists to
> draft suggested amendments or bills that sympathetic lawmakers
> introduce as their own. At the very least, lobbyists are
> regularly asked for feedback on recommended legislation,
> sometimes simply to make sure before legislation goes to a vote
> that the affected parties will not raise any objections.
> At the dawn of a new century, an industry based on
> personal contacts is entering the computer age. Interest groups
> are using websites and e-mail as tools to rally popular support
> for their causes and keep their memberships apprised of new
> developments. In the latest twist, Bloomberg News recently
> reported on what could be called "on-line lobbying." A group of
> lobbyists are setting up a website that will allow lawmakers with
> password access to post prospective bills and amendments and
> obtain feedback by the affected industries in advance. Call it
> the virtual smoke-filled room.
>
>
> QUALITY OF REPORTING
> AND REGULATION
>
> The quality of the lobbying data is far from perfect.
> Filers continue to make a variety of errors, such as listing the
> incorrect filing period and failing to complete required portions
> of the disclosure forms. A common and significant error is
> the failure of organizations that employ in-house lobbyists to
> include payments to outside consultants and lobbying firms in the
> total lobbying expenditures they report. The Center found dozens
> of cases where lobbying firms reported earning more money from a
> client than the client reported spending. These discrepancies
> make analyzing the data difficult. Nevertheless, the
> quality of the filings has improved since 1997. Thanks in large
> part to redesigned forms and updated instructions issued by the
> House and Senate in time for the first filing period in 1998, the
> newest lobbying data appear to be more reliable and complete than
> the data from 1997. The House and Senate streamlined the forms
> and provided clearer instructions which also highlight common
> filing errors. The new filing system resulted in
> considerably less unnecessary paperwork approximately 5,000
> fewer pages for each of the six-month reporting periods in 1998,
> according to the Senate Office of Public Records. Less paperwork
> and an additional employee enabled the Senate to computerize the
> year-end filings submitted on time in eight weeks and make them
> available to the public. This is less than half the time it took
> a year ago. The Senate has plans to make its computerized
> database available on the Internet. Work will commence on this
> project after the current fiscal year ends on Sept. 30, once more
> immediate priorities have been handled. The existing system,
> available now only in person at the Senate Office of Public
> Records, enables users to search by almost any category that
> appears on the forms. After posting the lobbying disclosure forms
> on the Internet, the Senate plans to make an electronic filing
> option available for the lobbying industry. The Clerk of the
> House's office is considering several options to upgrade its
> filing system and make electronic filing available, but no plan
> has been put in motion. The House foresees potentially
> significant savings in reducing labor costs by having the data
> filed electronically.
>From www.opensecrets.org
A<>E<>R
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