MUCH as some businesses whine about government intrusion, others do pretty well out of it. An index based on the amount of lobbying that American firms do has outperformed the broader market since its creation in 2008; data going back to 1998 show that it has done better over the longer term, too.
The index is produced by Strategas, an investment-research firm. A first effort, to rank firms on the amount they spend on lobbying, was no use: it just corresponded with the largest firms. Strategas now looks at the intensity of lobbying—expenditure as a percentage of assets—to create an index of 50 firms that is revised quarterly.
In aggregate the results have been stunning, comparable to the returns of the most blistering hedge fund. The index has outperformed the S&P500 by 11% a year since 2002 (see chart). There have been bumps along the way: the index fell sharply in 2008 and again this summer, when debt-ceiling brinkmanship raised the prospect of government austerity. But at other times, it seems remarkable that companies would do anything but lobby. A particularly vivid example was in 2004, when an aggressive corporate campaign prompted Congress to grant a one-off tax holiday for American companies to repatriate foreign earnings. The outright return on lobbying costs, according to one of the various studies that served as inspiration for the Strategas index, was $220 for each $1 spent.
Firms that qualify for the index tend to be under the government's cosh. Tobacco companies are routinely threatened with every tax and sales restriction going, and are perennial fixtures on the list. So too are defence contractors. This year witnessed the entry into the index of several private-education providers, an area that has been under scrutiny by the administration of Barack Obama, as well as medical firms worried about the myriad loose ends to be tied up in Mr Obama's health-care plan.
Banks do not make the list because their balance-sheets are so leveraged that lobbying expenditures are small as a percentage of assets. That omission probably flatters the index in recent years but harms it in earlier ones. Finance still makes an appearance, most recently through Federated Investors (a provider of money-market funds) and the two ratings agencies (Moody's and McGraw-Hill, the parent of Standard & Poor's). Other index members include Monster Worldwide, a jobs website; Brown-Forman, maker of Jack Daniel's whiskey; and CBS, a broadcaster.
Various laws have been proposed or enacted to curtail lobbying, with limited success. The most effective answer may be the most straightforward: cut government spending. Strategas has just developed an index for that unlikely eventuality, allowing investors to short firms that derive the greatest proportion of their sales from federal-government contracts.