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I do not believe government should pick winner and losers in private industry. Using publicly available campaign reports, voters can see all of the political donations made to elected officials. Since candidates are required to disclose campaign contributions they receive and the reports are available on the Nebraska Accountability and Disclosure Commission website, voters can easily make their own evaluation regarding these donations.
A much more direct but far less transparent way of influencing public policy is known as political “rent seeking”. Through direct manipulation of policy, a company or trade group can gain a financial advantage in the marketplace. The adoption of regulations that favor one special interest at the expense of others, creating mandates that capture a specific market share regardless of consumer choice, or incentives that lower the cost of production for some businesses but not others, are ways of using the political system to seek financial gain. While direct payment of bribes or corruption are illegal, there are many legal means of political rent seeking that have become common practice. Most of these strategies are not readily obvious to taxpayers.
A tactic I have observed in the Nebraska Legislature is the use of interim studies and task forces to give special interests a public hearing, then using the credibility gained by the subsequent legislative report to pass rent seeking legislation into law. The past two legislative sessions provide a textbook example of how an industry interest can use the system to gain a direct financial payment.
LB 1093, introduced by Omaha Senator Heath Mello, was adopted by the Legislature in 2014. Amended into LB 1093 was LB 987, a bill introduced by Lincoln Senator Adam Morfeld, as well as Mello and Gothenburg Senator Matt Williams, which created the Biosciences Steering Committee. The steering committee was tasked by statute with creating a strategic plan for the biosciences industry in Nebraska. I was selected to serve on the Steering Committee.
The statute stated the committee “shall commission a nonprofit corporation to provide research, analysis, and recommendations to the committee for the development of the study and strategic plan. The nonprofit corporation … shall be engaged in activities to facilitate and promote the growth of life sciences within Nebraska, and shall be dedicated to the development and growth of the bioscience economy.” While Nebraska law prohibits legislation specific to an individual group or company, the criteria written in the statute applies to only one nonprofit corporation: the trade industry group for bioscience companies in Nebraska. Consequently, the trade organization for the industry was paid, using tax dollars, to develop recommendations for policy that would benefit their member companies. Senator Morfeld chaired the committee, hearings were held, and a report was written, with direct input from the special interest.
During the past Legislative session LB 641 was passed. Introduced by Senator Morfeld and designated his personal priority bill, LB 641 used the existence of the Biosciences Steering Committee process to give credibility to the policy of providing $2.5 million in direct financial assistance to bioscience companies over the next two years. The funds were redirected to the industry through repayment of loans made by the Nebraska Progress Loan Fund.
An industry trade group getting paid to conduct and produce a study that results in $2.5 million in public funds for use by the private companies it represents is a perfect example of successful political rent seeking. There is not a publicly available report for voters to identify the specific lobbying activities, participation of lobbyists in the public hearings, or legislation that results from the those activities. While I fully support the biosciences industry, I do not approve of the practice of government financial support of private industry that gives competitive advantages.
As policy discussions continue regarding expansion of Tax Increment Financing to private housing developers, expansion of tax incentives, energy mandates, and countless other issues, voters should carefully look for manipulation of the social or political environment by interests who stand to gain financially. Political party affiliation and campaign contributions are really easy to see and evaluate. The cronyism and influence trading at play in political rent seeking that benefits private interests are difficult to track but have profound implications for voters and taxpayers.