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The Madisonian Nightmare

Book excerpt: How Interest Group Liberalism Breeds Corruption

Art by Gary Locke
• February 17, 2015 5:00 am

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As government’s powers spread beyond the original grant offered by the Constitution, the Madisonian system of checks and balances began to break down. As a result, today’s activist government often works for the benefit of narrow, often wealthy factions over the public interest. The way this corruption functions has evolved throughout American history. In the 19th century, insuperable political machines served as mediators between politicians and the industrial magnates, railroad tycoons, and financial giants who dominated society. But that old regime gave way because of the Great Depression.

Thanks to the massive government expansions during the New Deal and Great Society period, the old party bosses mostly disappeared, save for a few holdovers in places like Chicago. Instead, interest group became the principal medium of influence-peddling.

The proliferation of interest groups has utterly transformed the American political process. One of the earliest politicos to recognize this development and its implications was James Rowe, a New Dealer who was an integral part of Truman’s reelection brain trust. In a private memo in 1948, he wrote:

The truth is that the old "party organization" control is gone forever. Better education, the rise of the mass pressure group, the economic depression of the 30s, the growth of government functions—all these have contributed to the downfall of "the organization." Tammany, Hague, Kelley and the rest of the straight party leaders, while still important, are no longer omnipotent, no longer able to determine the issue. For practical political purposes they are moribund; they cannot be relied on to do the job alone.

They have been supplanted in large measure by the pressure groups— and the support of these must be wooed since they really control the 1948 election.

It might be an overstatement to claim that these groups controlled the 1948 election, or any other. Indeed, the party system has proven itself to be incredibly durable, in no small part because parties make alliances with sympathetic interest groups, just as the Democrats committed themselves firmly to organized labor. Even so, pressure groups have become a dominant part of the political system, not just in the electoral arena but also in the legislative and administrative processes.

What sort of groups are we talking about? One group is organized labor; though it predated the New Deal by many years, its politicization was a consequence of governmental action under FDR.

Postwar governmental policies also provoked a shift in the posture of big business. It had long been a participant in policymaking, but with the government claiming more authority for itself, business had every incentive to amplify its influence. Moreover, the election of Eisenhower in 1952 signaled a more business-friendly environment in the nation’s capital, and firms began opening up offices in Washington to see what a Republican would do with the powers set forth by the New Deal.

The Great Society also provoked business interests to organize more aggressively, although this time for defensive purposes. It was during this period that the New Left began to exert itself. Historically, the left had been associated either with the Progressives, New Dealers, or organized labor, all of which were primarily concerned about bread and butter issues like employment and working conditions. The New Left, which sprang forth in large measure from the postwar middle class, was more interested in quality of life issues, like pollution and consumer safety, which posed a new challenge to businesses’ bottom lines.

Meanwhile, those New Left groups were busy supplanting organized labor as the dominant interests on the left. By the late 1960s, labor had peaked as a social force, and while its clout would remain enormous within the Democratic Party, it would have to share space with the environmentalist left, the consumer rights movement, the feminist left, and various other groups, most of whom were relatively new to the scene.

How do these groups operate on the political process? The first and perhaps the essential answer is, they use money. The modern political campaign is vastly different than that waged a century ago. Back then, what was needed above all was volunteers to get the message out door to door. Money mattered, of course; after all, somebody had to pay for all those pamphlets or offer cash to the purchaseable vote in Rhode Island. Yet the proliferation of modern communications technology, particularly television, fundamentally shifted the burden from volunteers to donors. In addition, the modern campaign has grown much more professional, and even scientific. Candidates are compelled to hire paid consultants to tell them how to talk and even dress, to hire media mavens to craft their mass communications, to hire public opinion experts to figure out exactly what the public wants, and most recently social media gurus to exploit other forms of mass communication like Twitter and Facebook.

Meanwhile, changes in campaign finance laws have given interest groups opportunities quite unlike any they enjoyed a century ago (at least, not legally). The culprit is the Federal Elections Campaign Act (FECA) of 1971, which remains the foundational law of campaign finance.

The original law, plus its subsequent amendments of the 1970s, are still the framework by which political money legally flows between parties, interest groups, and candidates. The FECA established individual donation limits and PAC donation limits, limited the amount of direct or coordinated assistance candidates could receive from political parties, established public financing of presidential campaigns, strengthened disclosure requirements, and empowered the Federal Elections Commission to monitor campaigns and enforce the law.

FECA totally revolutionized campaign finance, as virtually every group under the sun formed a PAC. Previously, PACs were mostly limited to labor. In fact, it was organized labor that pressured Congress into passing FECA to legalize PACs, as a federal judge had ruled labor’s campaign practices illegal, and threatened to toss some of its executives in jail.

Labor thought that it was saving itself with the FECA, but in fact the law only paved the way for an explosion in business giving — which eventually swamped labor’s efforts.  In 1978, there were about 1,500 PACs, of which 785 were corporate PACs that gave almost $10 million, about 450 trade association PACs giving about $11 million, and roughly 200 labor PACs giving $10 million. In 2004, there were more than 4,000 PACs, of which about 1,600 were corporate PACs that gave nearly $120 million, 900 trade association PACs that gave $80 million, and 300 labor PACs that gave $50 million.

This money flows overwhelmingly to incumbents, in no small part because the cost of running a campaign has increased enormously, while limits on PAC giving have been constant. It makes more political sense for a PAC to fund a friendly incumbent, to help him scare away would-be challenges, than to toss a measly $5,000 to a challenger who will likely have to raise at least $1 million to win a House seat.

Thus, PACs are, per political scientist Paul Herrnson, the "electoral arm" of an interest group. The best groups combine PAC money with grassroots agitation and lobbying of Capitol Hill and the executive branch.

Professional lobbying is an often misunderstood practice of modern politics. The average person is wont to think of it in terms similar to the quid pro quos suggested by the muckrakers who uncovered graft in the Gilded Age (the 50 years after the Civil War widely remembered for its graft and mismanagement of public affairs): a politician writes a letter requesting cash or some other consideration, the lobbyist obliges, and then later writes back requesting favorable legislation. But that is not really how it works in the modern age.

Above all, lobbying is about the provision of information from a trusted source. In almost every field of public policy, legislators and administrators are faced with mind-bending complexity. Our government seeks to do so many things, that in turn have so many second-, third-, and even fourth-order effects, it is simply impossible for a legislator to develop expertise on all the areas on which he or she is required to legislate. The legislator has trouble predicting what consequences a law will have, both in policy terms (how it will affect my constituents?) and in political terms (how will it affect my reelection prospects?). Enter the lobbyist. From the first to final stages of lawmaking, lobbyists are there to provide legislators with crucial information. They help them write bills. They help them mark them up during committee hearings. They provide feedback during conference committees. They provide technical information to executive agencies looking to clarify legislative intent. They do it all.  And they are everywhere. In 1968, there were fewer than one hundred registered lobbyists working the House side of Capitol Hill. In 2000, there were approximately fifteen thousand lobbyists working both sides. In 2006, there were more than thirty thousand.

Though this system of influence is not nearly as coarse as the behavior of the Gilded Age, it is just as pernicious. While lobbying is most effective when there is a trusting relationship between the lobbyist and the legislator, this does not mean that the information the lobbyist provides is impartial. That’s not to say that lobbyists outright lie to legislators; it is to say that they present them with their employer’s perspective on the truth, one that is inevitably tied up in private interests, and not necessarily the public’s interests. The real danger for the public interest is to be found therein: if legislators lack the expertise to determine whether a policy is in the public interest, and the only ones who know are those whose interests are private, then how can legislators be sure that the public interest is served? Of course, they cannot.

The patterns of corruption during the Gilded Age were more sophisticated than in Jacksonian America. Today, they have been further refined by an order of magnitude. In the modern system, organized interests have instituted ordered, predictable protocols that inoculate them personally from public contempt, even though the effect upon the public interest is the same today as it was in the Gilded Age. Nowadays, lobbyists and politicians can look themselves in the mirror and feel good without temporizing, but the public interest is still undermined all the same.

Indeed, the political science literature of the last quarter century has shown that lobbying works, albeit it in roundabout ways. Lobbyists struggle to win floor votes in either chamber of Congress, especially when the issues are of high visibility, legislator preferences are well known, or partisanship is an important factor. But they do much better in the committee and the subcommittee universe. Lobbyists are adept at steering legislators toward issues that help their employers and away from issues that do not. Additionally, they use their political contacts in the legislature to influence the bureaucracy. Heavy contributions to well-placed members of committees can signal to bureaucrats that an industry is prepared to use its political muscle to fight regulatory incursion, and this often scares away regulators who are politically sensitive.

Firms that spend more money on lobbying per year tend to pay less in taxes, all else equal. Additionally, firms that spend more on lobbying are less likely to be scrutinized by the Environmental Protection Agency, all else equal. Also, hedge funds that are connected to lobbyists trade more heavily in politically sensitive stocks, suggesting that their connections supply them with insider information.

Finally, legislators also seem to profit from lobbying. For instance, the stock portfolios of legislators tend to run ahead of the market insofar as members invest in companies that either have headquarters in their districts or give campaign contributions. Moreover, legislators who plan to leave Congress for a lobbying career are more likely in their final term to offer favorable legislation to woo prospective employers. This is significant because the percentage of former members who are now lobbyists is 50 percent in the House and 43 percent in the Senate, compared to just 3 percent in 1974.

Is this proliferation of interest groups buttressed by sophisticated lobbying operations a good thing? Some argue yes, drawing on ideas reminiscent of Madison in Federalist #10. Per this theory, no one group is able to dominate another, so the end result must be policy that does not harm the public interest. Just as Madison seeks to pit faction against faction to secure the public good, we can be confident that when the Chamber of Commerce squares off against the AFL-CIO, the two will balance one another so that the final product of the policy process is good for everybody.

Yet this is a fallacy of composition. Just because all of the organized interests at the table have signed off on a proposal does not mean that it serves the public interest. Alternatively, it could be that the process of policy development is much too favorable to certain groups over others; in that case, the give and take among interest groups inevitably favors the wealthy over the poor, the organized over the unorganized, the active over the latent. None of this need be consistent with the public good. Similarly, what is to stop the various interests in this pluralist system from coordinating a massive logroll, such that each group is bought off by a particular benefit? Far from advancing it, such collusion could be more detrimental to the public interest than if a single interest group dominated the body politic.

These are the sorts of considerations that prompted political scientist Theodore Lowi to pen a very pessimistic take in The End of Liberalism. Writing in the late 1960s, just as it became clear that this new interest group society was here to stay, Lowi warned that the new regime was inconsistent with truly public policy. His name for this new mode of government was interest group liberalism (a term that can be fairly applied to both parties):

It may be called liberalism because it expects to use government in a positive and expansive role, it is motivated by the highest sentiments, and it possesses strong faith that what is good for government is good for the society. It is "interest-group liberalism" because it sees as both necessary and good that the policy agenda and the public interest be defined in terms of the organized interests in society.

Per Lowi, the problems with this system are that it distributes power to the most interested groups in society, setting up an inevitable conflict between the public good and private demands; it creates new pathways of privilege that usually reinforce the prerogatives of existing interests; and it resists most change, even in the face of declining public confidence.

Interest group liberalism is regularly not public spirited. While there have been instances when government acts according to the public interest, too much of its business is wrapped up in rewarding the factions that have mobilized to pressure it. In many cases, these benefits undermine whatever public-spirited purpose the formulators of the original policy had in mind.

Put bluntly, interest group liberalism has bred corruption in the body politic. It may be more socially respectable than what the muckrakers uncovered 100 years ago, but today’s corruption is at least as widespread and pernicious as anything seen during the Gilded Age. There may no longer be a grubby and direct quid pro quo between senators and the industrial titans, but make no mistake: today’s titans are just as well served by today’s Senate.

This is why the parallels drawn between interest group liberalism and Madisonian pluralism are unsustainable. Madison never intended any of this; in fact, he envisioned a polity that worked in exactly the opposite manner, one he hoped would check what he called "the violence of faction." In the Federalist Papers, he was justifying an eighteenth century government of discrete, limited powers by arguing that, properly designed, it could successfully play referee among the various factions in society.

What we have today is a Madisonian nightmare: a universe dominated by what he once called "pretorian band(s) of the government, at once its tool and its tyrant; bribed by its largesses, and overawing it, by clamours and combinations." These groups, whose "violence" Madison feared would destroy the republic, are not balanced by our system. Instead, they have become the system’s ever-fattening clients.

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Adapted with permission from A Republic No More: Big Government and the Rise of American Political Corruption. Jay Cost is a staff writer for the Weekly Standard. 

Published under: Book reviews