World's best investment: Buying Congressmen and presidents

Associated Press reports:

Big companies that spent hundreds of millions lobbying successfully for a tax break enacted in 2004 got a 22,000-percent return on that investment…

The [University of Kansas] report details efforts by hundreds of companies in 2003 and 2004 to push through a one-time tax “holiday” that lowered for a year the tax rate they paid on profits earned abroad. All told, U.S. companies saved about $100 billion in taxes, with pharmaceutical behemoths Pfizer and Merck & Co., technology giants IBM and Hewlett Packard, and health products maker Johnson & Johnson among the top beneficiaries.

The study zeros in on 93 firms that spent as much as $282.7 million lobbying on the issue during that period, and ultimately saved a total of $62.5 billion through the tax change…

A separate group of business professors reported last year that companies that lobbied had better market valuations and investment returns than those that did not, and that those that did so most intensively had portfolios that consistently outperformed the market.

Hui Chen of the University of Colorado, David C. Parsley of Vanderbilt University and Ya-Wen Yang of the University of Miami found that, on average, a company’s income rose by more than a half-percent for every 10 percent more it spent on lobbying. That translates into many millions of dollars for a large firm.

David Sirota offers more examples:

In the last decade, the financial industry’s $5 billion investment in campaign contributions and lobbyists resulted in deregulation, which delivered trillions to executives [and shareholders]. And when the bubble burst, there was another boatload of free money! By Bloomberg News' account, $12.8 trillion worth of taxpayer loans, grants and guarantees — all to Wall Street!

…[T]he banking industry recently paid Rahm Emanuel $16 million for about two years of work. That investment was recently paid back when, as President Obama’s chief of staff, Emanuel led the January campaign to release another $350 billion in bank bailout funds. Turning a $16 million down payment into a $350 billion payout — that’s huge!

Likewise, Goldman Sachs hired former Senate aide Mark Patterson as one of its lobbyists — an investment that proved a huge winner when Patterson became the Treasury Department’s chief of staff and the agency subsequently killed proposals to limit executive compensation at bailed-out banks. Cha-ching!

And the hedge fund industry paid economist Larry Summers $5.2 million in 2008 for part-time work — an investment that hit pay dirt when Summers became Obama’s top economic aide and the administration resisted tough international hedge fund regulations that some G-20 countries wanted.

Posted by James on Saturday, April 11, 2009