What corporate money buys on Hill: inaction
The Enron collapse is shining a bright light on a facet of Washington politics that doesn't get much attention: The most important action is often what doesn't occur.
The laws that don't get passed and the rules that never get written can have broad and long-lasting impacts, and the role of special interests is just as vital to those outcomes as it is to laws that get approved.
Pinning down the precise role corporate money plays is notoriously difficult. Many factors play into congressional votes, and it's not uncommon for a lawmaker to get money from groups on both sides of an issue.
But now many lawmakers are under the gun to account for steps they did not take - or actively discouraged others from taking - that might have prevented Enron's collapse or, at least, have given investors some warning. Critics say these lapses are the result of corporate dollars.
In an era when campaign cash is the key to job security, questions about governmental inaction range far beyond Enron into issues as diverse as healthcare, broadcasting, and automotive fuel-economy standards. "Most lobbying is to prevent new regulation from getting on the agenda in the first place," says Pietro Nivola, an analyst at the Brookings Institution in Washington. "Whenever you have a scandal like [Enron] it adds credibility to the presumption that government should do something."
Only a few weeks into the Enron investigation, members of Congress are already competing for legislative fixes to a problem some concede they helped to create. These range from campaign-finance reform - which seeks to reduce the overall amount of lobbyist money in politics - to mandating greater independence for corporate auditors.
But in the booming 1990s, there was little interest on Capitol Hill in reining in the accounting profession or companies that, like Enron, were seen as bright stars in the economy.
Rightly or wrongly, Congress avoided actions at several junctures - moves in line with corporate opponents who had made donations to key members of Congress.
In 1992, at lawmakers' urging, federal regulators exempted the budding market for "energy swaps," pioneered by Enron, from oversight. Later, Congress relaxed oversight even further: The Commodity Futures Modernization Act, which passed in December 2000, included a special exemption for Enron.
IN 1999, members of Congress also helped prevent regulators from cracking down on possible conflicts of interest in the accounting industry. The Securities and Exchange Commission (SEC) had proposed a rule that would have banned accounting firms from consulting with companies they also audit, but lawmakers threatened to slash the commission's budget.
The rule was not implemented, and some experts say it that may help explain why auditors failed to flag the corporate irregularities that brought down Enron.
"The pressure on us was enormous, including constant threats from Congress that our budgets were being implicated by this," says former SEC chairman Arthur Levitt, after testifying before a Senate committee last week about his experience with the 1999 rule. In the end, the SEC proposed a weaker standard.
Public interest groups say that Enron is already reviving public interest in other corporate efforts to influence public policy.
"Some people say Enron didn't get anything from Washington, but it got exactly what it wanted: It got no regulation," says Celia Wexler of Common Cause, a public interest group.
Some observers worry about powerful lobbies holding up legislation in several key areas, including:
Prescription-drug benefits for seniors. The pharmaceutical industry has been making concerted efforts to derail or tone down national and state plans to curb prescription-drug prices, experts say. "In pharmaceuticals, a lot of the lobbying is trying to stop things," says John Calfee, resident scholar at the American Enterprise Institute.
Broadcast advertising rules. Congress, at the urging of media firms, has blocked a Federal Communications Commission initiative to provide free or reduced-cost television time for candidates. Again, lawmakers threatened the agency with budget cuts. Seventeen Republicans and ranking House Commerce Committee member sent blunt letters opposing the rule, according to a 2000 study by the Center for Public Integrity. Politicians didn't like the edge it could give other candidates, and broadcasters risked millions of dollars in lost advertising.
It "is but one of a stack of proposals that media companies have flattened like pancakes in Congress and the White House in recent years," says Charles Lewis, the center's executive director.
Fuel-economy standards. The automobile industry has pushed, with success in Congress and the Clinton administration, to fend off changes that would have forced SUVs to be classified as passenger vehicles - and thus face tougher mileage standards.
"The corporate players who work in and around Congress are as interested that something not be done as they are that something be done," says former Sen. Howard Metzenbaum, who testified in favor of a stronger SEC rule on conflict of interest.