In Downturn, Lobbying Still Grows

Companies mask involvement through trade associations.

February 2, 2009, 12:15 PM

February 2, 2009— -- It's almost every day now that another company announces a drop in revenues or a new round of layoffs. But there's one industry that keeps growing: lobbying.

Last year Washington lobbyists netted $3.2 billion, a 13.7 percent increase from 2007, according to the nonpartisan Center for Responsive Politics.

And it's the industries most affected by the economic downturn that seem to be doing much of the spending: finance, insurance and real estate, the group found.

But it's not the companies themselves doing most of the lobbying. Instead, the greatest increase in lobbying expenditures comes from trade associations, which some critics say is less transparent.

"Companies use the association because the associations act as a blind," said Bruce Freed, executive director of the Center for Political Accountability. "It's a way for them to lobby but not be as visible but not attract the same attention."

Companies in those three sectors – finance, insurance and real estate – only showed an 8.7 percent increase in lobbying, less than the overall average for the industry. And they had a net decline in the sectors from 2006 to 2007, which saw an 11.2 percent increase in lobbying expenditures, according to the center. Indeed, troubled mortgage giants Fannie Mae and Freddie Mac both scaled back on their lobbying tabs by nearly 30 percent while other embattled companies like American Insurance Group pledged to stop entirely, the center found.

That contrasts with some of the industry's top trade associations, such as the U.S. Chamber of Commerce which spent $92 million, a 73 percent jump over 2007, according to the center. Other groups saw significant hikes as well. The National Association of Realtors increased its lobbying by 25 percent while the American Bankers Association's bill jumped 47 percent to $9.1 million. (A spokesperson for the Chamber noted that part of the increase was because of additional election-year lobbying.)

This contrasts with some other major trade associations, such as the powerhouse PhRMA, the pharmaceutical industry group, which saw its lobbying drop from $22 million to $20 million in 2008.

Lobbying Comes Under Fire

Lobbying spending has come under fire in recent months, particularly by companies receiving federal bailout money. Some members have called for banning companies receiving TARP aid from lobbying entirely. The Department of Treasury has urged greater spending disclosure and transparency among companies receiving federal aid.

And others have criticized the spending at a time when many of the companies are struggling to stay afloat. But lobbyists say that it's at times like these that their services are most important.

"The answer on why business is spending so much on lobbying is simple," said Scott Talbott, top lobbyist for the Financial Services Roundtable. "Lobbyists are valuable sources of information for politicians. We are in very uncertain times now and lobbyists fill that gap. We should not be reducing the flow of information to the government. It should be exactly the opposite."

Eric Wohlschlegel, a spokesperson from the Chamber of Commerce echoed that, saying that it is important to "ensure that the government and its policies help these businesses" and not by "over-regulating, by overtaxing them or by simply overburdening them. And it's more important than ever to amplify that voice and make sure the new congress get that message loud and clear."

Many of these groups expect to continue their spending in 2009, even as the Obama administration has pledged to change the culture of coziness between lobbyists and lawmakers inside the Beltway.

One of their key focuses will be the regulatory reforms Congress is expected to debate in the coming months. While few question the need for legislators to reach out to industry during the overhaul, said Freed, "the question is what happens in terms of trying to influence the decisions, oversight, and enforcement actions."

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