Title: How Campaign Contributions and Lobbying Can Lead to Inefficient Economic Policy - Center for American Progress
Headings: How Campaign Contributions and Lobbying Can Lead to Inefficient Economic Policy
How Campaign Contributions and Lobbying Can Lead to Inefficient Economic Policy
Rent-seeking
A modern example: Tesla Motors
Campaign finance, lobbying, and influence
Campaign contributions lead to policy outcomes
Lobbying leads to policy outcomes
Conclusion

Content: Moreover, studies find that businesses with the most to gain from favorable public policy engage in the most political activity. Even worse, research indicates that campaign contributions and lobbying often help shape policy outcomes, which suggests that rent-seeking efforts are often successful. While disagreement exists about how much influence campaign contributions and lobbying have, money in politics seems to be most effective in shaping the outcomes of issues that are less visible and less ideological, exactly the type of special favors one would expect rent-seeking to target. Furthermore, there have been several findings that show a clear relationship between specific instances of lobbying or campaign contributions and government favors. To take just a few examples: One study found that increasing lobbying reduces a corporation’s effective tax rate, with an increase of 1 percent in lobbying expenditures expected to reduce a corporation’s next-year tax rate between 0.5 percentage points and 1.6 percentage points. Another study based on data from 48 different states found that a $1 corporate campaign contribution is worth $6.65 in lower state corporate taxes. Finally, federal contracts were more likely to be awarded to firms that have given federal campaigns higher contributions, even after controlling for previous contract awards. These findings are deeply troubling for our democracy and our economy. And, unless actions are taken, the damage is likely to grow worse in the future.