How Money Influences Policies and Regulations
When corporations, special interest groups, and the wealthy use their financial resources to change, weaken, or sometimes even write regulations or policies to their benefit, it’s all of us and our families who lose.
Lobbying
Lobbying is one of the most common and well-known ways that money can influence regulations and policies. Special interest groups spent a record $4.2 billion lobbying federal lawmakers in 2023. And because of Congressional gridlock at the national level, lobbyists have begun pouring more and more money into the states to get what they want. Since 2015, they’ve spent nearly $14 billion on lobbying at the state level.
So, why are lobbyists spending all this money? It’s pretty simple: They expect something in return.
These staggering sums of money allow corporate and special interest lobbyists to directly influence lawmakers and regulators. By gaining direct access to decision-makers, lobbyists can provide them with information, draft legislation, and directly advocate for specific regulatory outcomes that benefit their clients.
Lobbying, Explained
Is lobbying always bad or can it be used for good? Is lobbying even legal? Here’s everything you need to know about lobbying »
Campaign Contributions
Money talks, especially in an election year. It costs an average of $2 million to win a seat for the U.S. House of Representatives and nearly $20 million to win a Senate seat. In 2020, over $14 billion was spent on federal elections, making it the most expensive election cycle in U.S. history, and the 2024 election is projected to be just as expensive if not more.
Money pours into a candidate’s campaign from direct donations or PACs, which, thanks to decisions like Citizens United, can spend unlimited amounts of cash to support or oppose candidates. This flood of funds can directly sway the regulatory positions of candidates and elected officials.
If you are a candidate running for office whose regulatory views align with a corporation’s or special interest group’s, you might find yourself with powerful financial backing. If your views don’t align, you can bet they’ll be funding your opponent.
The Revolving Door & Regulatory Capture
According to a 2023 report, there were more than 460 former members of Congress who were employed in high paying jobs by lobbying firms.
Too many members of Congress and their staff have abused public office by treating it as a launching pad for their next high-paying job. This culture is deeply embedded and normalized in Washington–and it is ripe for corruption.
These are individuals who have insider knowledge of how the system works and have contacts across various roles in government. Now, they’re leveraging that insider know-how to help corporations and special interest groups tweak regulations and policies in their favor.
These former elected officials who move between roles in government and positions in private industry (lobby firms or corporations) are part of what’s known as the “revolving door” phenomenon which can lead to a form of “regulatory capture” where regulations or policies are shaped by those who previously worked in or will work in the industries being regulated.
Research, Advocacy, and Public Relations
Elected officials can spend up to 30 hours per week fundraising. That leaves them with less time to meet with constituents and actually do their job legislating. And, let’s face it: laws and regulations are dense, complicated, and full of legalese, and not every Member of Congress is an expert in everything.
This presents an opportunity for industries who can:
- Fund research and present data to policymakers with conclusions that support their regulatory interests.
- Fund think tanks and advocacy groups who can shape public policy debates and design regulatory frameworks that align with their interests.
- Commission economic analyses that can highlight the potential negative impacts of regulations on jobs or the economy.
- Launch advertising campaigns and gain media coverage to frame issues in ways that support their position and sway public opinion to their side.
Legal Challenges
If all else fails, there’s the courts. Industries with significant financial resources can challenge regulations or policies they don’t like in court, which can lead to changes or delays in regulatory enforcement. Often, the cost of legal fees is justified for a company if it means avoiding the expenses associated with complying with regulations.
Infamous Examples
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Finance
Financial Industry: The Dodd-Frank Act
- Background: The Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted in response to the 2008 financial crisis to increase regulation of the financial sector.
- Influence: The law was enacted in 2010, but in the years before and since its passage, lobbyists representing the financial industry descended upon lawmakers and regulators in an attempt to dilute the Act. In 2012 alone, financial groups spent close to $200 million on lobbying efforts. Lobbyists for Goldman Sachs met with federal regulators responsible for executing the Dodd-Frank financial reform law nearly 100 times in an attempt to influence them.
- Outcome: As a result of this lobbying, several provisions of Dodd-Frank were weakened or delayed. The parts that were repealed or weakened may have led to the banking crisis affecting Silicon Valley Bank (who lobbied for looser bank regulation) in 2023.
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Pharmaceuticals
Pharmaceutical Industry: Medicare Part D
- Background: The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 created Medicare Part D, providing limited prescription drug coverage for seniors.
- Influence: The pharmaceutical industry spent hundreds of millions and had more than 1,000 lobbyists on their side (including many former Members of Congress). Even Medicare boss Tom Scully was negotiating for a job as a lobbyist with the pharmaceutical industry as this bill was working its way through Congress. In particular, the industry was pushing for a provision that prohibited Medicare from negotiating drug prices directly with manufacturers.
- Outcome: Thanks to lobbying efforts, the final legislation included this prohibition, leading to higher drug prices for Medicare beneficiaries and significant profits for the pharmaceutical companies. This provision remained in place for 20 years until 2023 when parts of the Inflation Reduction Act allowed Medicare to negotiate some prices.
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Telecommunications
Telecommunications: Net Neutrality
- Background: Net neutrality regulations were designed to ensure that internet service providers (ISPs) treat all data on the internet the same, without favoring or blocking particular products or websites.
- Influence: Major ISPs like AT&T, Comcast, and Verizon spent millions of dollars lobbying against net neutrality rules. They also contributed to political campaigns and engaged in extensive public relations campaigns.
- Outcome: In 2017, the Federal Communications Commission (FCC), led by Chairman Ajit Pai, repealed net neutrality regulations, a move that was widely seen as benefiting ISPs at the expense of consumers and smaller content providers.
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Environment
Environmental Regulations: The Clean Air Act
- Background: The Clean Air Act requires the Environmental Protection Agency (EPA) to regulate air pollutants.
- Influence: Industries such as coal, oil, and manufacturing have invested heavily in lobbying and political contributions to influence EPA regulations and delay implementation of stricter air quality standards. These industries have spent more than $100 million per year since 2008 on lobbying efforts.
- Outcome: Various administrations have rolled back or weakened regulations related to air pollution standards, reflecting the influence of industrial lobbying. For example, in recent years the federal government has rolled back several regulations aimed at reducing emissions from coal-fired power plants and has narrowed its own authority to set pollution limits under the Clean Air Act which could constrain future administrations from taking action for decades.
How This Affects Your Life
End Legalized Bribery
May 2 2024
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The sad reality is that these kinds of events will continue to occur so long as corruption plagues our government.
Are there any solutions?
Yes! As part of our anti-corruption policy platform, we champion a number of effective and politically viable solutions including:
- Expanding the definition of “lobbyist” to close loopholes
- Banning lobbyist donations to elected officials
- A cooling-off period between serving in office and working as a lobbyist
- Strengthening penalties on attempts to buy political influence
- Caps on campaign spending
- Requiring disclosures on sources of major donations
- Expanding public finance to even the playing field for candidates
- Ending dark money
Since 2012, we’ve scored 185 wins all across the country to pass tough anti-corruption laws like these. See our wins »
To pass these laws, we follow a proven strategy of bypassing the broken Congress to pass tough anti-corruption laws city by city, state by state, limiting the influence of corporations, lobbyists, and special interest groups and their ability to affect regulations.
You Can Make A Difference
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