Jonathan Kay: From unbuilt bridges to unfired teachers — how political corruption is destroying AmericaJonathan Kay Jun 20, 2012 – 6:34 AM ET | Last Updated: Jun 20, 2012 7:00 AM ET
Imagine, for a moment, that the Tea Party gets its wish: Not only is Barack Obama booted from office, but so too are dozens of Democratic lawmakers. Their numbers strengthened by an incoming class of rock-ribbed GOP congressman, President Mitt Romney repeals Obamacare and systematically dismantles the heavily regulated welfare state that has been built up, by Democratic and Republican administrations alike, since the New Deal.
That’s the fantasy: a small-government revolution to take America back to the libertarian blueprint created by the nation’s Founding Fathers. But it won’t happen, no matter what happens in November. That’s because, as David Frum reminded us in his recent column about the campaign to build a new Detroit-Windsor bridge, many of the Republican politicians and special-interest groups riding the Tea Party phenomenon don’t really want to get rid of government’s power to decide economic winners and losers. They just want to capture the levers of government so they can pick different winners and losers:
The existing Ambassador bridge is privately owned, and the main owner – Forbes 400 member Manuel Maroun – does not welcome competition. Even more than competition to his bridge, Maroun objects to competition for his duty-free gasoline stations. Those stations are exempt from taxes, yet sell gasoline for only marginally less than their tax-paying competition. Maroun has mounted a furious lobbying campaign against the second river crossing. He has gained some unexpected allies, including Americans for Prosperity, the Tea Party group headed by Dick Armey. The Michigan chapter of AFP posted convincing-looking (but fake) eviction notices on homes near the proposed crossing route. The group acknowledged that the tactic “was meant to startle people.” AFP refused to say whether Maroun was paying for the campaign, explaining that its donor lists were private.
Frum’s column is about a single bridge. But the example perfectly captures a much larger phenomenon that is turning American public life into a sort of massive shell game. A country that can’t build a badly needed infrastructure project without the project being nearly suffocated by political corruption is a country that is no longer fit to provide the free world with economic leadership. How long do you think it would have taken for China to build this bridge? Or even Canada?
How did America get to this point? A good place to find answers is Lawrence Lessig’s ambitious new book, Republic, Lost: How Money Corrupts Congress — and a Plan to Stop It.
Lessig is a self-confessed liberal. Yet he has written a book that transcends the conventional left-right divide. As he argues, the main problem facing America — let us call it the Meta-Problem, since Lessig identifies it as the root of Washington’s many other dysfunctionalities, as well as the breakdown of public trust in government – is the insidious way by which well-funded special interests have come to dominate the national policy-making process. This corruption of Congress, he argues, is a pathology of Democrats seeking to bloat public budgets as much as of right-wing Republicans doing the bidding of fatcat multinationals.
Lessig, who directs the Edmond J. Safra Center for Ethics at Harvard University, is a utopian wonk who believes that government actors should make decisions primarily on the basis of rational cost-benefit analysis. (In Canadian terms, his perspective might be compared directly to that of Andrew Coyne, whose quarter-century of column writing in this country is largely dedicated to the same theme.) As Lessig surveys Washington, he sees lobbyists and distorting policy in every imaginable area of policy:
In economic and thermodynamic terms, the use of corn to produce ethanol is a pointless, and even destructive, commercial practice. Yet it persists, with enormous government subsidy, thanks to a small group of industrialists led by the Archer Daniels Midland Company. Because presidential contenders must start their heartland campaign in Iowa, ground zero for corn farming, standing up for common sense has become perversely difficult.
While the majority of climate scientists and policy experts agree that man-made global warming is a serious problem, environmental activists are swamped by the much larger influence of energy-industry lobbyists, who argue for permissive emission standards and a do-nothing approach to climate change — and who even sow doubts in the media about established science. (In 2009, environmental groups spent $22.4-million lobbying Congress. Their opponents spent seven times that amount.) Politicians, Lessig argues, should concern themselves with the “externalities” imposed by energy production — such as the hundreds of billions of dollars worth of damage that carbon combustion produces. But because such externalities cannot be monetized in the form of campaign contributions, they are largely ignored.
The key to great public education is great teachers. According to a Hoover Institute scholar whom Lessig quotes, eliminating just the bottom 6% to 8% of bad teachers would bring America’s mediocre test scores up to the standards of world-leading nations such as Finland. Yet well-funded teachers unions consistently block such moves, rigorously defending a model based on seniority and tenure. (These unions, Lessig notes, are among the largest contributors to the Democratic Party.)
Everyone agrees that a major factor in the 2008 financial crisis was the moral hazard surrounding banks that were “too big to fail.” Yet thanks to aggressive lobbying by those same banks, none of the regulation to come out of that crisis has put a cap on the size of financial institutions. “In October 2009, there were 1,537 lobbyists representing financial institutions registered in D.C., and lobbying to affect this critical legislation – 25 times the number registered to support consumer groups, unions and other proponents of strong reform,” Lessig writes. The result: Wall Street players have gotten bigger, as the rich swallowed the poor in the post-2008 shakeout. And so when the next crisis comes, taxpayers will again be on the hook for bailouts.
Given the numbers Lessig provides, it’s a wonder that American companies don’t spend more money on their lobbying operations. From 1999 to 2008, America’s financial sector spent $2.7-billion in reported federal lobbying expenses – yet it reaped many times that amount during and after the financial crisis. A 2009 academic paper found that, on average, every $1 that a company spends trying to secure a tax benefit can be expected to generate between 6$ and 20$ in “profit.”
Certainly, those are numbers the aforementioned Manuel Maroun would understand. For pennies on the gas-station dollar, he’s used lobbying and the threat of litigation to maintain a bridge monopoly that pays him windfall profits. And amazingly, he’s recruited Tea Partiers to run the propaganda campaign in the name of “free markets.”
Numbers like these should be especially alarming to laissez-faire conservatives, who sometimes imagine that capitalism wins when governments give tax breaks to companies. That principle only works if taxes decrease universally for all players. What is happening in Washington, by contrast, is a system in which entrenched industrial incumbents are leveraging their wealth and political influence to game the system in a profoundly anti-capitalist way. Drawing on the work of Jacob Hacker and Paul Pierson (authors of the 2010 book Winner-Take-All Politics), Lessig argues that this growing bias toward those who are already rich helps explain America’s growing wealth inequality.
“Conservatives have always objected to people getting rich because of the government,” he writes. “It’s one thing to invent [something] and thereby become a billionaire … It’s another thing to use your financial power to capture political power, and then use political power to change the laws to make you even richer.”
Lessig concedes that corruption of one form or another always has been a prominent feature of American political life. (Indeed, he acknowledges that insofar as truly criminal brown-paper-envelope corruption goes, Washington is actually much cleaner now that it once was). But he argues that the policy-distorting effects of money have grown worse in recent decades for a variety of factors.
First, the U.S. Supreme Court decision in the 2010 case of Citizens United opened the floodgates for literally unlimited corporate political contributions. Second, the cash requirements for election campaigns have gone up by several orders of magnitude, even for rank-and-file congressmen: Whereas, as recently as 1974, an average congressman could run for re-election with a war chest of just $56,000, by 2008 the figure was $1.3-million — with much of the money going to expensive TV ads and well-paid campaign consultants. Third, lobbying has gone from a Washington sideline to a major beltway industry: In the 1970s, just 3% of retiring U.S. federal legislators became lobbyists. Now, the figure is about 50%. This career transition allows former pols to add a zero to their income level, as they buy up Georgetown mansions by hitting up their old Capitol Hill friends and colleagues on behalf of corporate clients.
Lessig doesn’t imagine that American politics-as-usual is up to the task of solving this meta-problem: American legislators, from both major parties, are simply too vested in the current system to do anything about it. And so Lessig provides readers with a menu of “guerilla” tactics they can implement to militate for change. His ultimate goal is a system that encourages politicians to move away from dependence on corporations and plutocrats, and instead solicit campaign funding from small donors. Lessig imagines a framework in which every citizen has a 100$ campaign-finance voucher that can be directed to any party or candidate the citizen chooses. (Citizens would also be able to kick in another $100 of their own money.) Under such a system, politicians would be motivated to create policies that please ordinary voters, not Bank of America or Exxon.
It’s a utopian scheme — a sort of political Hail Mary. But given America’s dire situation, drastic change seems necessary. America, once an inspiration to free-market capitalists and democrats around the world, is suffering a slow-motion political suffocation.
From this side of the bridge, it’s a sad thing to watch.
jkay@nationalpost.com
— Jonathan Kay is Managing Editor for Comment at the National Post, and a fellow at the Foundation for Defense of Democracies. Follow him on Twitter @jonkay. This essay was adapted from a review of Republic, Lost that appears in the current edition of the Dorchester Review.
