Manufacturing an ethical conflict

According to consumer advocate and Public Citizen founder Joan Claybrook, “It was totally unethical that GM was lobbying against the government’s position.” Similarly, Ralph Nader, the grandfather of auto industry critics, was indignant that, “Even when the government owned 61 percent of General Motors, the company was arguing against government proposals on auto safety and pollution controls.”

Even the most cursory consideration of these statements reveals their illogic. Businesses lobby for policies that will benefit their bottom line and, by extension, their shareholders. To the extent the government was and remains a significant shareholder in GM and Chrysler, it is still ineluctably true that what’s good for these companies is good for America. Even putting aside the fact of government ownership, the economic health of these companies is crucial to the broader national economy. Or so we were told by both the Bush and Obama administrations, when they injected more than $50 billion of our money into these enterprises. So, the question remains, where’s the conflict?

Moreover, where are the Joan Claybrooks and Ralph Naders when it comes to individual government agencies, which employ legions of full-time congressional liaisons to lobby for their parochial interests, which arguably may conflict with the country’s other, broader interests? When the EPA lobbies for greater authority to impose burdensome regulations on industry, does that not conflict with the Commerce Department’s interest in promoting business growth? When the FDA lobbies for more funding to carry out its drug reviews, does that not conflict with the government’s interest in deficit reduction?

The fact of the matter is, the federal government has taken on such an expansive role in our society, encompassing such a wide array of interests, that so-called “conflicts” are now inherent and unavoidable. The best prophylactic against the semblance of impropriety that critics allege inheres in GM’s and Chrysler’s lobbying efforts is for the government to have stayed out in the first place.

This is not to suggest that using public funds to lobby the government is always appropriate. Quite to the contrary, the Byrd Amendment – named after the late Sen. Robert Byrd (D-W.Va.) – appropriately prohibits federal contractors from using public funds to lobby for additional federal contracts. This prohibition prevents a “self-licking ice cream cone” type of situation, in which federal dollars are diverted to lobby for more federal dollars. However, the government’s ownership of GM and Chrysler is not this type of situation. In a government contract, the parties have an adverse buyer- seller relationship, where the buyer seeks the best value and the contractor seeks the most profit. Moreover, unlike with GM and Chrysler, the government is not a partial shareholder in the vendor of a government contract.

Another context where a conflict arises is when quasi-public firms use quasi-public corporate resources to establish and administer a corporate PAC, which then directs employees’ money (also derived in part from public funds) to their favored Members of Congress and other federal candidates. This type of transaction is inappropriate because it essentially uses public money to help underwrite candidates, often incumbents, whom the public may not support. (Apparently, this is not a problem for the ethics watchdogs when it comes to public financing of campaigns.) Appropriately, and without any prodding from its critics, GM did suspend its PAC contributions upon receiving its bailout.

Cast in their most charitable light, critics seem to liken GM’s and Chrysler’s lobbying efforts to the proverbial tail wagging the dog. What they fail to consider, however, is whether the well-being of the tail is integral to the well-being of the dog. And if they don’t consider the two to be consonant, then perhaps it’s time to cut off the government’s remaining 33- and nine-percent tail in GM and Chrysler, respectively.

Eric Wang, a political law attorney, has advised clients on all aspects of government ethics laws. He can be reached at ericwang@alumni.princeton.edu .