The Delicious Irony of “Dark Money”

It turns out that the liberal think tank Center for American Progress gets its funding from evil corporations just like everyone else. Among the top donors are multi-national corporations and industries such as Google, Northrop Grumman, and NBCUniversal.

Not a day goes by without some big-government lefty railing about “dark money.”

Just last week, Sen. Elizabeth Warren (D-Mass.) demanded that corporations reveal which think tanks receive their donations. Warren expressed concern that corporate donors are influencing think tank research.

U.S. Sen. Elizabeth Warren. Photo Credit: Alex Wong/Getty Images

The left’s preferred narrative is simple, easy-to-understand and has a ring of truth. It goes like this: Regulation helps consumers but hurts business’ profitability. Individuals give money to big-government organizations to promote regulation. Corporations donate to small-government organizations like Americans for Prosperity, the American Enterprise Institute and the Competitive Enterprise Institute to fight regulation.

But the fact that corporations also fund big-government organizations raises questions about this narrative. If regulation hurts corporations, why are they funding think tanks which promote it?

The truth is that most regulation is written by and for incumbent businesses to erect barriers to entry and to buy advantages over their competitors. That’s why corporations fund groups like the Center for American Progress.

Earlier this year, Center for American Progress donor Citibank hired lobbyists to literally write 70 out of 85 lines of a bill regulating derivatives trading which passed the House. If this regulation was meant to hurt Citibank’s profitability while defending their customers it’s unlikely to have done so.

There are three main reasons corporations like Citibank write their own legislation. First, lawmakers feel pressure from constituents to regulate industries about which their staffs know nothing; corporate lobbyists and lawyers provide much-needed information. Second, it’s much easier and faster for a company to understand and comply with a regulation it wrote. Third, and most important, companies write regulation that is easier and cheaper to comply for them than for their competitors.

[sharequote align=”center”]Companies write regulation that is easier and cheaper to comply for them than for their competitors.[/sharequote]

Writing regulation gives companies a leg up on their competition without ever having to improve quality or lower prices. If lobbying is cheaper than innovating, companies will write regulation instead of taking risks.

While writing regulation is a great plan for companies, it really screws consumers. Regulations lower efficiency and profitability for all companies (though to differing degrees for different companies). These costs get passed right on to their customers. Regulations also rob customers of the innovation, quality improvement and price decrease that results from robust competition.

Citibank Spanish River Branch in Boca Raton, Florida. Photo Credit: Larry Marano/Getty Images for Citibank

In other words, every dollar a company spends paying lawyers and lobbyists to write regulations is a dollar not spent developing new products or methods of manufacture.

Unfortunately, instead of helping consumers, even well-intended regulation actually screws them twice. It first screws them by raising the costs of goods and services. It then robs them of the lower costs and greater quality resulting from businesses having to compete for customers instead of regulators.

Lefty bloggers like those who write for “ThinkProgress,” run by Center for American Progress, like to talk about regulation versus deregulation as if deregulation were an actual thing. The United States has never seen a net reduction in regulation in any industry. What they are referring to are selective exemptions from existing regulation for certain activities and companies. This isn’t so much deregulation as different regulation, and it is also authored and crafted by companies for companies.

For example, last year the House Financial Services Committee inserted language written by corporate lawyer Michael Bopp word-for-word into a 2012 version of a bill which would exempt many trades from Dodd-Frank regulation. It passed the House as written by Bopp, save for a slight change in phrasing. A later iteration of the bill, passed by the House committee earlier this month, also included some of the same wording. This isn’t some ideological war on regulation and in favor of free markets. “Deregulation” is corporate rent seeking in exactly the same way regulation is, only possibly with fewer unintended consequences and costs for consumers.

U.S. President Barack Obama speaks on economic themes at the Center for American Progress December 4, 2013 in Washington, DC. Obama spoke at the think tank about economic inequality and a lack of upward mobility. Photo Credit: Pool/Getty Images

The main thing people fail to understand about money of any shade is that T-Mobile, Toyota, and Visa don’t give to the Center for American Progress despite their calls for greater and more onerous regulation. They give because of their calls for greater and more onerous regulation. And why then do corporations give to Americans for Prosperity, the American Enterprise Institute and the Competitive Enterprise Institute? Sometimes it’s cheaper to fight the regulation their competitors’ lawyers wrote than to write their own.

We all want to believe that regulators understand the industries they’re regulating well enough to improve their functioning. We all want to believe that regulations protect consumers from greedy businesses. Unfortunately none of that is true. And the sooner we stop worrying about what color the money is and start worrying about the actual, real-life effects of the regulation the money promotes the better off we’ll all be.

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