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February 23, 2012

Lobbying: The Consequence of Bloated Government

Last week, I watched part 10 of Milton Friedman's Free to Choose. In it, Milton Friedman described the growth of lobbying and special interests in Washington DC. Lobbying was a major issue of George W. Bush's presidency, but has mostly been ignored since Barack Obama became President.

When lobbying was considered a social problem, it was highly debated on how to stop such a problem. If the government made lobbying illegal, lawsuits would follow alleging a violation of the first amendment. A real conundrum seemed to emerge about how to deal with the problem of managing so much power between so few.

In order to fix lobbying, we need to find its root causes. Why does lobbying exist? It exists because wealthy individuals and corporations have special interests that they would like the government to pursue. Why the government? The US federal government is the largest, most powerful organization in the world. Nobody can make special interests happen more than government. Even if it's at the expense of individual freedom.

Therefore, it is simple correlation between the development of big government and the development of lobbying and special interests. But, let's take this further. How related is the growth of big government of lobbying? We went back to 1998 to analyze the growth in government spending versus the growth of lobbying spending. What we found was an interesting relationship.

Lobbying growth of spending and government spending moved in tandem, with lobbying being slightly higher from 1998 to 2008. What was interesting is just before the growth in government spending related to TARP and the bailouts, lobbyist spending skyrocketed. It's interesting to see such an increase in lobbying just as the financial crisis was underway.

Money chasing money. With the increase in government comes the increase in lobbying. In addition to this comes a simple solution. By limiting the size and scope of our federal government, we limit the power of lobbyists that follow and empower individual freedom. Friedman's idea was a constitutional amendment fixing and limiting the growth of government spending. It's an acceptable model used by most states today.

So why don't we do it?

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