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: 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. With recent court rulings knocking down important restrictions on money in politics, rent-seekers will have even greater opportunity to seek special favors, doing further harm to the economy. Rent-seeking
Most economists agree that rent-seeking causes a net societal loss that harms the economy. Rent-seeking involves spending resources to influence a division of profits, instead of creating a good or service that other businesses or individuals are willing to pay an amount that exceeds the cost of producing said good or service. While rent-seeking exists in both private and public forms, the scope of this paper is the discussion public rent-seeking and specifically two public rent-seeking activities—lobbying and campaign funding. When engaging in rent-seeking from public institutions, businesses and individuals may seek favors from the government through both legal activities—lobbying and contributing to political campaigns—and illegal strategies—bribery and corruption.