Today's Opinions, Tomorrow's Reality 

Washington Gold Rush
America's New Extraction Economy

By David G. Young

Washington DC, April 21, 2009 --  

Lobbyists are raking in a windfall of new government spending for their corporate clients that dwarfs the California Gold Rush of the 1850s.

Like prospectors headed for a gold rush, a flood of opportunists poured out of Washington's Union Station on Monday morning. Fresh off the train from Baltimore, Philadelphia, New York, and other points north, today's miners don't sport the dungarees and pickaxes of the California Gold Rush -- they don slick suits and briefcases, the uniform of choice for those seeking to mine the government of funds and favors.
There's gold on that there Hill!

Since the real estate bubble popped and dragged much of the economy down with it, pursuit of government favors has become the country's most lucrative industry. As first quarter lobbying disclosures trickle in, major stimulus beneficiaries are reporting large lobbying increases. The National Association of Realtors reports spending $5.7 million on lobbying in the first three months of this year, up 38 percent from last year.1 Overall, nearly 1,700 new individuals or firms filed new lobbying registrations in January through March.2

This is a natural consequence of the unprecedented explosion in federal government spending, The $700 billion Wall Street bailout, the $787 billion stimulus package, at least $200 billion in higher budget spending for fiscal 20103, and many hundreds of billions more in spending from the Federal Reserve and the Federal Deposit Insurance Corporation all add up to such an astronomical sum that the California Gold Rush looks like penny ante poker by comparison.

About four million ounces of gold were pulled out of the California hills in the peak year of 1852.4 This was worth $75.7 million back then5, or about $2 billion in today's dollars.6 Just adding up the $700 billion from the Wall Street bailout, and this year's half-share of the $787 billion stimulus comes to over $1 trillion in new spending. In current dollars, just these two parts of the 2009 Washington Gold Rush is worth more than 500 times the one in California in 1852. Calculated as a percentage of Gross Domestic Product, these government handouts (7 percent) are more than twice as big as California's 1852 gold output (2.5 percent).7,8,9

Lobbying provides the best means for getting a piece of this action. A study released earlier this month showed that steering a 2004 tax break earned companies an average of $220 for every dollar spent on lobbying -- a staggering 22,000 percent return on investment.10 An analysis of Wall Street bailout funds last year by the Center for Responsive Politics showed that companies receiving these funds spent a combined $114 million on lobbying and campaign contributions, netting them $295.2 billion, or a 258,449 percent return on investment.11

Like the California miners, the Washington lobbyists can earn a quick fortune for their employers, albeit from the mother lode of the stimulus instead of the mother lode of the Sierra Nevada. But unlike the noble California prospectors, whose grit and determination pioneered new cities and made fortunes off their backbreaking labor, today's lobbyists are often nothing more than parasites. They seek to take or redirect money from the government that must ultimately be paid off by taxpayers or diluted from people's savings through a devaluation of the Dollar. They fuel corruption in American democracy and encourage the growth of wasteful government.

If you think government restrictions on lobbying are the solution to the problem, you'd better think again. Congress tried similar restrictions early in the decade with the McCain-Feingold campaign finance law, and the results weren't pretty. In the first presidential election after the law's passage, 2004 campaign spending grew 64 percent to $820 million. And in last year's election it grew even faster, more than doubling to reach $1.7 billion.12

Attempts to restrict money's influence on politics are always doomed to fail. Academic research shows that the amount of money spent on influencing politicians is directly proportional to how much the government spends.13 Because America's politicians have so much arbitrary power to make and break fortunes, there is a huge financial incentive for companies to try and influence them. And as seedy as lobbyists are, you can't really blame companies for hiring them, given the way the system works.

If President Obama really wants to keep his campaign promise to take the "muddy water" of Washington lobbying and "clean it up,"14 then he'd better start cutting spending now. Since that's clearly not going to happen, maybe we'd all better leave our regular jobs and get our own shiny suits. The Washington Gold Rush is on.

Related Web Columns:

The Temptress of Arbitrary Power, December 30, 2008

Circling Sharks and the Magic Hand, September 30, 2008

More Evil Than Enron, February 5, 2002

Enlightened Prejudice, January 31, 2006


1. Senate Office for Public Records, Lobbying Disclosure Act Database, April 20, 2009

2. Sunlight Foundation, K Street Boom: At Least 1,699 New Clients in 2009, April 1, 2009

3. , Obama Unveils First Budget Plan, February 16, 2009

4. Jenkins, Philip, A History of the United States, 1997

5. National Mining Association, HISTORICAL GOLD PRICES - 1833 to Present, as posted April 19, 2009 ($18.93 per ounce as of 1852)

6. Federal Reserve Bank of Minneapolis, Consumer Price Index (Estimate) 1800-2008, as posted, April 19, 2009 - (654.1/25)*75.7 billion = $2 billion (2009 dollars)

7. In 1852, $75.7 million in California gold amounted to just 2.5 percent of the nation's $3.04 billion GDP.8 Today, $1 trillion amounts to 7 percent of Gross Domestic Product of $14.2 trillion.9

8. Louis D. Johnston and Samuel H. Williamson, "What Was the U.S. GDP Then?", MeasuringWorth, 2009

9. Bureau of Economic Analysis, Current-Dollar and “Real” Gross Domestic Product, March 26, 2009

10. Washington Post, Investments Can Yield More on K Street, Study Indicates, Sunday, April 12, 2009

11. Center for Responsive Politics, TARP Recipients Paid Out $114 Million for Politicking Last Year, February 4, 2009

12. Bloomberg News, Spending Doubled as Obama Led First Billion-Dollar Race in 2008, December 26, 2008

13. Lott, John R. Jr., "A Simple Explanation for Why Campaign Expenditures are Increasing: The Government is Getting Bigger," October 2000

14. USA Today, Obama Pledges to Clean up Washington, August 17, 2007