Big Corporations Play Both Sides (or get played)
We can't be naïve when it comes to money and politics. And the players with the biggest money are corporations and the billionaires who own large chunks of them. While we know that corporations are playing both sides of the aisle, we also need to look a bit deeper and ask if the politicians aren’t also playing big corporations—for extortion? Let’s dig in and keep it simple.
By one tally around 2013, business-oriented interests (lobbyists) were more represented in Washington than citizens’ interests by a factor of 8-to-1.1 That creates a pretty tilted playing field for legislators who need to be accountable to their constituents. Peter H. Schuck wrote in his book, Why Government Fails So Often, about the corrupting influence of money in politics. While some people claim that money drives public policy, others realize that “more powerful government draws more private money into the political system. Expanded public authority makes groups more vulnerable to policies that can seriously harm them, which raises the stakes in averting those harms through whatever sources of influence they can muster.”2
Political scientist John J. Pitney wrote of these concerns in 2012, “Big money is not necessarily ideological or even partisan. Some interest groups side with conservatives on tax issues, but others have a material stake in the expansion of government programs and thus may side with progressives.”3 A look at ten of the biggest lobbyist organizations in 2022 will shine some light on the incentives that drive corporations to flex their muscles to put their interests ahead of the American people.
Meta (formerly Facebook) has been active in preventing antitrust legislation from breaking the company and its many mergers into a smaller set of individual companies operating in multiple social media domains. There has also been concern about how tech companies moderate content (including political speech), display ads, and protect personal information and the privacy of their users. Amazon is another tech company that faced antitrust concerns and lobbied heavily in Washington, D.C. Concerns regarding laws impacting the internet and e-commerce also rank high for Amazon. A third lobbyist group that touches another area of media is NCTA—The Internet Television Association. This used to be called the National Cable Telecommunications Association. This organization represents more than 200 cable networks. It has focused heavily on net neutrality and municipal broadband.
Next, we include four groups in the healthcare industry. First, we have the American Medical Association. With Coronavirus impacting the industry so heavily from 2020 to 2022, the lobbyist concerns were to be expected. However, this group is routinely positioning to stop various attempts at healthcare reform. The group has been fighting forms of national health insurance since 1949. Some medical students and members in the AMA are tired of the self-serving stance that the AMA uses to pursue its interests ahead of patients or citizens. Second, we have Blue Cross/Blue Shield, a big health insurance company. As a big participant in Medicare, BCBS engages frequently with issues around this government program. Third, the American Hospital Association (AHA) is also on the list of big lobbyists. The AHA strongly supports the creation of an efficient and effective platform for health information exchange, which caters to patient-centered care. Data privacy and health information sharing are among its key concerns. Fourth is the Pharmaceutical Research and Manufacturers of America, which pushes for policy that supports the discovery of new medical drugs.
To round out our list, we include three business consortiums: the U.S. Chamber of Commerce, the Business Roundtable, and the National Association of Realtors. The U.S. Chamber of Commerce represents many mid-size and small businesses; its activities are broad in scope. The group has been involved in climate change concerns, DACA for immigration, and policies that support American business growth. The Business Roundtable represents a large group of CEOs that want policy to favor business interests. This group is well-known for blocking labor law reform. It also supports various free trade agreements and competitive tax codes. Finally, the National Association of Realtors (a divided mix of corporate groups and individual entrepreneurs) takes interest in all laws and regulations impacting real property. The association lobbies to protect the real estate industry from burdensome regulatory changes and always takes a stand against eminent domain.
Author and journalist Ezra Klein notes the involvement of business in politics this way:
Institutional donors want government to work, it's true—but they want it to work in their favor. If individual donors give money as a form of identity expression, institutional donors give money as a form of investment. Individual donors are polarizing. Institutional donors are corrupting. American politics, thus, is responsive to two types of people: the polarized and the rich.4
In his book, Extortion: How Politicians Extract Your Money, Buy Votes, and Line Their Own Pockets, Peter Schweizer describers the unique situation of political bills that might be categorized as a double-milker. As Machiavelli penned in The Prince, “It is better to be feared than to be loved, if one cannot be both.” Any why not be feared on both sides?
A milker bill gives politicians the opportunity to “milk,” or squeeze, an industry for money. Whether the bill passes or not, the politicians still cash in. The best milker bills are those that allow the Permanent Political Class to squeeze two cows at the same time, one on each side of an issue. Nothing beats a so-called double-milker.5
Mr. Schweizer uses President Obama and other members of Congress in 2011 to paint the story of milking Hollywood and Silicon Valley at the same time—two of the fatter cash cows in Monopoly USA. Ever since the internet exploded with the creation and sharing of digital media, the pirating industry has grown rampantly.
Bring in Joe Biden, who as chairman of the Senate Judiciary Committee, had been considered a good friend to Hollywood due to his rhetoric against piracy. In December 2009, Biden convened a White House meeting for media industry executives and key government officials—Attorney General, Commerce Secretary, and head of Homeland Security—to discuss the issue. He said, “It offends me that the international community has treated this as a mild irritant. It’s flat unadulterated theft, and it must be dealt with.”6 As an aside, nothing about this is inappropriate; we expect the executive branch of government to enforce the law and seek justice for those who have been abused by those who break the law.
Fast forward to 2011, and the media industry is tired of all the talk without significant action. The studios helped craft two bills that would be introduced in the House (October 2011) and the Senate (May 2011). Note, at this same time, the enchantment with Obama was waning within the Hollywood class and other parts of the country and 2012 would be an election year. Engaging the business class of Hollywood and the tech class of Silicon Valley became a key concern. As Obama saw small-dollar donors showing more disgruntled feelings than were registered in 2008, the election of “Hope and Change,” he needed to squeeze a new audience for campaign contributions. The campaign to target online privacy began in April 2011 with Obama making stops and speeches in California on his fundraising tour—the DNC netted $12.4 million that month for the Obama Victory Fund. The Senate bill was soon introduced and gained about 40 cosponsors. The bill had bipartisan support as a number of Republicans had big media players in their home states. By late May, the antipiracy bill had cleared the Senate Judiciary Committee with total support.
On the flip side, the antipiracy bill was a big threat to big tech companies like Google, Microsoft, eBay, Yahoo, and others. Companies warned that the bill would undermine the legal and commercial structure of the internet. This is when the double-milker extraction began to move with full force. From a political standpoint, big tech was less engaged than other industries—many within the industry leaned libertarian and simply wanted to be left alone by government while the game of innovation continued full swing. But that started changing. By June 2011, it was reported that Microsoft was hosting “Capitol Hill Family Game Night” to connect the political class with the joys of technology. The Motion Picture Association of America was giving free screenings of Hollywood films to politicians and bureaucrats. Again, both sides working the legislative tussle. The political class needed fundraising dollars, but also cashed in on payments for lobbyists (former politicians and connected family members), as well as job offers and internships for family members in lucrative and growing industries where it pays to be well connected. The payday for online antipiracy was stupendous: 145 different companies lobbied for or against the bill in the House, and 157 for or against it in the Senate. In the fourth quarter of 2011, the two sides together had spent $104.6 million lobbying on these issues.
The issues continued to simmer with meetings in Washington in December 2011. Hillary Clinton wrote a letter to the cosponsor of the House bill (SOPA—Stop Online Piracy Act) to lend her support to the idea. However, President Obama played it cool. He gave no indication of any problem with the legislation, indicated that he would probably sign it, but had often been cozy with the tech industry. But after sufficient funds had been flowing from both sides, Obama pivoted on January 14, 2012, when the White House announced that it had problems with the antipiracy bills. And with the signal from the conductor, the political class herd began to backtrack on the bills. The House Judiciary Committee never brought its version of the antipiracy bill to a vote. Hollywood studios felt run over. So, why did the White House flip?
Senator Orrin Hatch, who was the chairman of the Senate Judiciary Committee during the Microsoft antitrust case, told tech company executives at a conference during this period (2000), “If you want to get involved in business, you should get involved in politics.” And when Microsoft didn’t play along as expected, Senator Hatch called the company “knuckle-headed and hard-nosed.”7 According to Timothy Carney, senior columnist at the Washington Examiner, the message was clear: “If you become successful, you must hire lobbyists, you must start a political action committee, and you must donate to politicians. Otherwise Washington will make your life very difficult.”8 So, Big Corporations play both sides of the political machine, but just as interestingly, Big Politicians play both sides back. Who is playing whom? It’s a fair question to ask.
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Peter H. Schuck, Why Government Fails So Often: And How It Can Do Better (Princeton, NJ: Princeton University Press, 2014) 70.
Ibid., 216.
Ibid., 217.
Ezra Klein, Why We're Polarized (New York: Avid Reader Press, 2020), 190.
Peter Schweizer, Extortion: How Politicians Extract Your Money, Buy Votes, and Line Their Own Pockets (Boston, MA: Houghton Mifflin Harcourt, 2013) 80.
Ibid., 82.
Ibid., pp. 87-88.
Timothy P. Carney, "How Hatch Forced Microsoft to Play K Street's Game," Washington Examiner, June 24, 2012, https://www.washingtonexaminer.com/carney-how-hatch-forced-microsoft-to-play-k-streets-game (accessed November 22, 2023).
I do not blame corporations for trying to influence policy at all. They have a mandate to expand their profits; it is the sovereign’s duty to permit a fair marketplace for all participants so that everyone can share in inclusive growth.
Money will flow to where the best ROI is. In an ideal market, that would be toward capital investment, investments into labor, and R&D. If that money flows toward lobbyists instead, it tells us that corporations have found it easier to rent-seek their way toward growth than to actually compete in the market.
Renting seeking is the pathway toward “extractive growth” that misallocates resources from productive to unproductive uses. It is not sustainable in the long term and is corrosive to democracy.
I have an essay coming out on the merits of a DBCFT that would, in theory, reduce the incentive for lobbying and rent-seeking behavior.