6

Demosclerosis

IT IS APRIL 10, 1992. Four U.S. senators, two Democrats and two Republicans, have marched to the Senate floor with a brave and foolhardy proposal. They are going to take a stab at curtailing federal entitlement spending.

Entitlements are the huge check-writing programs whose benefits are guaranteed (“mandatory”) by law: Social Security, Medicare, farm subsidies, veterans’ payments, welfare, student aid, many more. Most of these are not little “special-interest” programs benefiting the few at the expense of the broad public. Rather, they are among the most popular programs the government runs, distributing Washington’s bounty to millions of Americans and accounting for roughly a sixth of all personal income.

The middle class loves entitlement programs, which is precisely why they are so difficult to control. For the last several decades, they have been eating the federal government alive. Entitlements account for fully three-quarters of all federal domestic spending, and the proportion is steadily rising. By way of discipline, what the gang of four have in mind is an overall limit on the growth of entitlement spending. Bowing to the inevitable, they have exempted Social Security, which is viewed as too popular to touch. Other entitlement programs will collectively grow under their plan, but not as rapidly as in the past. “We do not seek to end entitlements or even to reduce them,” Charles Robb, a Democrat from Virginia, tells the Senate. “We do, however, believe that it is necessary to restrain their growth. That is, first and foremost, what this amendment does.”

Actually, that’s not all it does. It also lights up the civil-defense network of every lobby in Washington. Indeed, well before the proposal reaches the Senate floor, the interest groups are sounding alarms and manning battle stations. Within two hours of the four senators’ first detailed discussion of their proposal, their offices are receiving telegrams, says New Mexico Republican Pete Domenici, “from all over the country, saying that this is going to hurt a veterans’ group, this is going to hurt people on welfare, this is going to hurt seniors on Medicare.” Bill Hoagland, an aide to Domenici, later recalled, “We were inundated. Just about every interest group you can think of was strongly opposed. It was very dramatic, how quickly they all came to the defense.”

The American Association of Retired Persons calls the proposal a “direct attack.” The National Council of Senior Citizens deems it “outrageous.” Children’s Defense Fund: “unacceptable.” Committee for Educational Funding: “unconscionable.” Food Research and Action Center: “devastating.” American Federation of Government Employees: “unfair and unconscionable.” Veterans of Foreign Wars of the United States: “totally unjust.” Disabled American Veterans: “unconscionable.” American Legion: “incredible.” Paralyzed Veterans of America: “inherently unfair.” The National Cotton Council of America, the U.S. Rice Producers’ Group, the National Farmers Organization: “unfair.” American Postal Workers Union: “irresponsible, simple-minded.” And so on.

On the Senate floor, opponents of the spending cap move to exempt disabled veterans. This is a way to kill the cap without actually voting to kill it: Once disabled veterans are exempted, there will be votes to exempt farmers, children, Medicare recipients, nannies with overbites, and everybody else. Each such vote will allow senators to go home and boast about “saving” a program; and each will allow another clutch of interest-group professionals to tell its membership, “See how badly you need us!” Perversely, the end result of this string of votes will be to entrench the very programs that the four senators are trying to restrain.

The veterans’ exemption passes overwhelmingly; the game is over. The senators withdraw their proposal. It is dead. In fact, it never had a chance.

Maybe the senators’ plan deserved to die, maybe it didn’t. Either way, it served a purpose. It provoked a stark demonstration of the forces that are petrifying government.

The key words are “are petrifying”—not “have petrified.” “Demosclerosis”—government’s progressive loss of the ability to adapt—is a gradual but continuing process. It is not like an acute fever, which attacks in a sudden crisis and galvanizes the immune system to respond with an all-out, decisive counterattack. It is more like hardening of the arteries, which builds up stealthily over many years. Like arteriosclerosis, it can be treated only by a long-term change in behavior: a disciplined regimen of self-reform. Also like arteriosclerosis, demosclerosis gets only worse if it is ignored.

To understand it, you need to begin with the right question. That question is not “Why does nothing get done in Washington?” Things always get done in Washington, today no less than ever. To frame the issue as a matter of whether “things get done” is to set off in the wrong direction and wind up hunting for ways to “speed up the process” and so on, which is almost entirely beside the point. The crucial question, rather, is this: Why is it that what Washington does is less and less effective at solving problems?

Out of Kilter

In the American system, of course, it is supposed to be hard to change things. If the founders had wanted government to move quickly and easily, they wouldn’t have bothered with competing power centers and a Bill of Rights. They wanted action to be deliberate, in every sense of the word. And they were right. An institution as powerful and as susceptible to abuse as government ought to move carefully and, where possible, tactfully. Just making change easier (for instance, switching to a parliamentary government, in which a single party controls the whole government) might not solve the problem. In fact, it might make the problem worse, by removing some of the checks and balances that stop interest groups from grabbing goodies at will.

Demosclerosis happens not because change is difficult but because change is easier in one direction than in another. The problem, in other words, is asymmetry—a long-term imbalance of forces. Mancur Olson pointed out one such asymmetry: New interest groups form faster than old ones go away. Now here is another, which the founders could not have foreseen and which few people understand even today: In an interest-group democracy, all kinds of action are difficult, but they are not equally difficult.

Imagine a rocket ship headed for Jupiter on three thrusters. Now imagine that the thrusters are slightly out of balance. At first, you might not notice. After a little while, though, the rocket would be a little off course, and then a lot off course, and then it would be hurtling aimlessly into deep space. To prevent this from happening, you would have to spend energy just working to keep the rocket pointed straight. If you let it slip off course, you would have to struggle all the harder to bring it back. Control could become difficult or even, eventually, impossible. You might run out of fuel long before you reached Jupiter. In any case, you could never relax for long. You might need to exert yourself constantly just to keep control.

An interest-group democracy faces a similar problem. To create a new subsidy or anticompetitive deal is hard, but to reduce a subsidy that already exists is much harder. And to completely eliminate a subsidy or an anticompetitive arrangement is hardest of all.

Consider that as few as three or four well-placed congressmen (sometimes even one or two) can create a new subsidy program, if they are careful not to step on the wrong toes. After all, when you add a new program—assuming you’re fairly clever about it—few interest groups or politicians complain, and the beneficiaries stand up and cheer. But once a subsidy program or an anticompetitive deal is in place, three or four congressmen can almost never get rid of it, because the people enjoying the subsidy can always line up ten or twenty members to defend it.

When you try to trim programs, interest groups complain bitterly and fight hard, as the four kamikaze senators discovered. But woe unto him, above all, who makes bold to grab a subsidy or a special deal by the roots and pull it out entirely. Try doing that, and the affected group flies at you with the fury of the desperate or the damned. It recruits powerful politicians to block you; it floods your office with mail; it finances your political opponents; it does whatever else it needs to do. Unless you want to be shot, stabbed, and set on fire, the cardinal rule in Washington is: Never challenge someone’s sinecure.

Ask Ed Derwinski. He is an affable former congressman who landed in 1989 as the secretary of veterans affairs, overseeing a massive health-care system with more than 170 hospitals, twice that many clinics, and a quarter of a million employees.

Most VA hospitals opened decades ago, when America was a very different place. “What you’ve got,” Derwinski says, “is a structure that, if you invented it today, 50 percent of the facilities would be located elsewhere. I felt the system needed shaking up. But I had been in government a long time, and I realized you couldn’t shake it up.” Derwinski knew better than to propose closing any hospitals, even if closures would help improve service in the system as a whole. The veterans’ lobbies would scream, the bureaucracy would resist, the mayors would cry foul, the local congressmen would throw a fit, and the White House would panic. He did propose some consolidation—turning duplicative hospitals into, say, specialty clinics or nursing homes—but in the end was able to do very little even of that.

Then he committed the cardinal sin. Ever so gingerly, he threatened a monopoly franchise. Derwinski and the secretary of health and human services proposed letting nonveterans use a VA hospital.

In the poor town of Tuskegee, Alabama, the only private hospital within a thirty-five-mile radius had shut down; meanwhile, the large VA hospital there had plenty of extra space. Local residents were driving miles for medical care, even though there were empty hospital beds in their backyard. And so Derwinski proposed opening the VA hospital to needy local patients, for a three-year trial period. He did not propose to turn away any veterans: Only spare space was to be used, veterans would receive priority over nonveterans, and the VA wouldn’t pay an extra cent.

The veterans’ groups rose up in fury. Although representing only a minority of all veterans, they were tightly focused, politically astute, well financed, and well connected to sympathetic politicians at every level of government and in every city, county, and state. Derwinski liked to call them “professional veterans.” In their opinion, the veterans’ health-care system belonged to veterans, and only to veterans. With his rural-health proposal, Derwinski was challenging their franchise.

“This is a ridiculous idea,” said the head of the American Legion. “Just the tip of the iceberg,” said the head of Veterans of Foreign Wars. The VA health-care system “must meet the needs of those it was designed for—veterans,” said the head of the Disabled American Veterans. If there are empty hospital beds, said the veterans’ lobbies, then extend medical benefits to more veterans and their families.

The strafing began. “Our members have deluged congressional offices, the White House, and the VA with letters and telephone calls to object to this proposal,” said the Legion. The VFW called on its posts to “send a telegraph [sic] to President Bush demanding an end to the Rural Health Care Initiative and also (if you agree) demanding that Secretary of Veterans Affairs Ed Derwinski be fired!” In the Senate, Alabama’s Richard C. Shelby rose to proclaim that “veterans’ hospitals are the exclusive domain of veterans and their qualified dependents.” The Senate voted ninety-one to three to kill the test program, whereupon Derwinski retired it, whereupon the veterans’ lobby retired him. In the 1992 campaign, President Bush, seeking the support of veterans’ groups, gave them Derwinski’s head. Bill Clinton, taking the hint, promised in his campaign to “be a good president for the nation’s veterans,” endorsed a bundle of new benefits for them, and, upon winning, appointed a professional veterans’ lobbyist to head the VA. That appointee immediately journeyed to the Tuskegee hospital and “there he made it clear [reported the Chicago Tribune] that he still opposed allowing nonveterans in the VA system.”

Game, set, and match.

Nothing that happened to Ed Derwinski was unusual. You want to update the sadly archaic banking laws? In 1991, the Bush administration sent Congress a banking-reform package. Under ancient statutes dating back to the early years of the New Deal, banks were barred from a variety of money-making activities. They could not underwrite securities, operate mutual funds, sell insurance, or open branches across state lines. Yet their modern competitors—mutual funds, for instance, which didn’t exist when the banking laws were written—could perform many such functions with impunity. And so banks were placed at an artificial disadvantage, which restricted their ability to find profits. Weak banks, in turn, weakened the whole financial system.

What happened? “Bank reform succumbed to a frenzied attack by lobbyists,” said The New York Times. “Small bankers, fearing competition, tore away interstate banking. Insurance firms, fearing competition, tore away insurance underwriting. Securities firms, fearing competition, tore away the proposal to let banks sell stocks and bonds.” In the end, National Journal reported, “every administration proposal for permitting banks to widen their business horizons—every single one—was picked off in the carnage.” The end result was surely one of the most bizarre policies of our time: As the twenty-first century approached, the country limped along with financial rules written in the age of gramophones and green eyeshades.

By the middle of the 1990s, the banking rules were so obviously antiquated that federal regulators more or less waved financial institutions around them, like road crews diverting traffic around a broken water main. But reform attempts repeatedly came to grief, held up by the refusal of this or that lobby to sign off on this or that reform bill, by opposition from this or that member of Congress, or by bureacratic infighting between federal agencies. Congress, to its credit, kept trying, if only because the 1920s and 1930s regime had become ludicrous and wearisome to everyone affected by it. Yet the country was forced to live under that archaic regime until the regime had in essence collapsed altogether, not because living that way made sense but simply because removing the old rules was so difficult.

You want to reform an agriculture program? You may be able to trim a subsidy a little, if you work very hard, but suppose you want to withdraw someone’s monopoly claim completely. Take the sugar program, a classic anticompetitive arrangement that subsidizes growers by artificially pushing up sugar prices and restricting imports. The program costs Americans $1.4 billion a year in higher grocery bills, according to the General Accounting Office. The benefits are highly concentrated; almost half of them flow to 1 percent of the sugar farms. Sugar parasites are voracious.

Senator Richard Lugar of Indiana tried to whack them. “As we tried to reform the farm budget,” he said in a speech in 1992, “I made a specific motion to abolish the sugar program. The administration wanted to cut the support price from eighteen cents to sixteen. Well, my motion to abolish got two votes, Slade Gorton of Washington and my own. I’m ranking [Republican] member of the Agriculture Committee, and I could only get two votes. Five votes out of twenty to cut the support price from eighteen to sixteen. No change in the tobacco program, no change in peanuts, no change in wool, no change in honey or mohair or any of the rest of it.”

In 1996, with Republicans now in control of the Congress, a band of conservative free-marketers and urban farm-welfare opponents went after sugar again. “It’s anti-free-market and it’s corporate welfare,” said Dan Miller, a Republican House member from Florida. They got as far as a vote on the House floor, one of the most dramatic of 1996. “The sugar vote capped a yearlong, multi-million-dollar advertising and lobbying battle that pitted well-heeled sugar cane and beet planters against a powerful coalition of manufacturers, consumer groups and environmentalists,” wrote David Hosansky in Congressional Quarterly. One representative denounced sugar lobbyists for filling the halls of the Capitol “with pockets full of money”; another thundered that eliminating the sugar subsidy would “bring pleasure to Fidel Castro.” Having made some strategic concessions that slightly narrowed the terms of their subsidy, the sugar interests argued that their program had been reformed already; what worried most representatives more than the arguments, though, was the very real possibility that excising the sugar program could leach enough support from that year’s massive farm bill to cause its collapse. As the votes were counted, dozens of sugar lobbyists sat silently in the House gallery, only to break into cheers when the results came in: The attack was repelled by a vote of 217-208, with only a few votes to spare. In truth, this was not quite the near-death experience for sugar that it appeared to be, for the Senate would probably have rescued the program anyway. Still, Miller professed disappointment. “We just need to work harder,” he told me dejectedly, though it was difficult to see how much harder he and his allies could have worked.

You want to reform the schools? Another classic anticompetitive franchise protects public-school employees, who enjoy a monopoly claim on tax dollars for education. (By contrast, people spend their Medicare money at any hospital and their food stamps at any grocery store. No provider enjoys a monopoly claim.) What happens when you try to nibble at that franchise? The Bush people timidly tried in 1991. They wanted to finance 535 “break the mold” schools, both public and private, to be chosen competitively in Washington and funded directly from there. They also proposed some mild incentives for localities to try school voucher plans, which let parents spend public money at private schools. In both cases, the idea was to stimulate innovation by circumventing the entrenched establishment of public-school employees and administrators.

Under intense opposition from those groups, the voucher measure was demolished. “Break the mold” schools turned mostly into block grants for state education agencies and local school districts: more money for the entrenched providers. There would be no going around them to finance new competitors. Later on, the Clinton administration, needing support from the public employees’ unions, carefully avoided reopening the issue. The Clinton people steered a mile wide of vouchers. They even renounced experiments. Hell no, said Richard W. Riley, Clinton’s secretary of education: “I can’t see spending public money to see if something is worthwhile when I’m 100 percent sure it’s not.”

I multiply examples to make a point. Getting rid of some client group’s well-tended perquisite is not impossible, but it is very difficult. It requires endurance, willingness to face daunting odds, and an appetite for pain. (Representative Miller, the sugar opponent, told me after his House defeat that various sugar interests had put a $500,000 price on his head, meaning they were spending that much in an effort to defeat him.) Digging out an interest group and its favorable deal is like digging out a splinter embedded deeply in your foot—so painful that you’d usually rather just limp.

Try, Try Again

All right, so it’s harder to get rid of subsidies and perks than to create them. So what? How does that asymmetry erode government’s ability to adapt? The crucial element—the nub of the argument—is trial and error.

We tend to think of trial and error as a small and sterile idea, a mere commonplace (“If at first you don’t succeed . . . ”). The method of trial and error certainly seems unglamorous by comparison with, for example, the method of large-scale planning. It is tempting to think that lowly trial and error merely roots out mistakes, whereas planning builds cathedrals. To take such a view, however, is to sadly underestimate the power of trial and error, for trial and error is the key to successful adaptation and problem solving in large, complex systems.

In the large, complex system of biological evolution, species undergo mutations. Mutations themselves aren’t evolution. Evolution occurs when a mutant proves better adapted to its environment than its predecessors or its competitors. The critical trick is to find the useful mutation, though you never know in advance which mutation will be useful. The vast majority will fail. A few, however, succeed brilliantly. Those high achievers then proliferate by outcompeting their rivals. That is how life adapts to changing environments. And if you replicate the trial-and-error process throughout billions of species over billions of years, you get a biosphere whose nearly infinite complexity and diversity and flexibility put any cathedral—or any other planned and static structure—to shame.

The genius of a capitalist economy is that it uses the same kind of evolutionary strategy. Stalin was able to build state-of-the-art factories in the 1930s and 1940s; what he could not do was keep the factories up-to-date. His economy could not adapt. Capitalism, by contrast, is good at adapting, and the key to its adaptability is that it makes many mistakes but corrects them quickly. Then it makes many more mistakes and corrects those. Hopeful entrepreneurs open businesses, and corporate executives try new marketing strategies; most fail, but every so often someone hits on a brilliant innovation. You never know in advance which innovation will turn out to be brilliant. But the point of the method of trial and error is that you don’t need to know. The successful innovations proliferate by outcompeting their rivals.

The process is similar with another complex social system, science. No one knows in advance which idea will turn out to be right. Most new ideas, in fact, are wrong. The key to science’s success is that it tries out a million hypotheses every day and abandons most of them. The survivors are our knowledge base. And so the knowledge base adapts through trial and error.

To see the full implications of demosclerosis, it is necessary to apply the same kind of evolutionary thinking to government. In a bafflingly complex world, you can no more know in advance which government programs will work than you can know in advance which mutations will succeed or which new products will be profitable. The only way to find out is to try a program and evaluate the result. Moreover, in a world that changes quickly, today’s successful program is tomorrow’s anachronistic failure. The only way to stay abreast is to keep trying new programs and let the successful ones outcompete their rivals. In other words, the way for governments to learn what works in a protean world is by trial and error.

However, something has gone badly wrong.

The Living Dead

The Reagan administration believed in killing domestic programs, mostly because its conservative officials disliked government. Ronald Reagan, a popular president who effectively controlled Congress in the critical early portion of his first term, made a point of trying to eliminate federal programs. But during his eight years in office, only four major programs—general revenue sharing, urban-development action grants, the syntheticfuels program, and the Clinch River breeder reactor—actually were killed.

President Bush had no better luck. For fiscal 1993 alone, the Bush administration proposed ending 246 federal programs. Unlike Reagan, Bush wasn’t trying to spear any big (or controversial) fish; if all 246 had been eliminated, the budgetary savings would have come to only $3.5 billion, or a quarter of 1 percent of federal spending. You might think that clearing the waters of such small fry would be fairly easy. But you would be wrong. Out of 246, a not very grand total of eight programs actually disappeared, including the commission on the Constitution’s bicentennial (which had occurred in 1987) and a NASA asteroid flyby. The total savings came to an even less grand total of $58 million. In a budget of $1.5 trillion and thousands of programs, that was all the president could get rid of.

It is scarcely an exaggeration to say that, in Washington, every program lasts forever. When you stop to think about it, this is an astonishing fact—indeed, almost incredible. How—why—can it be?

Go back to the world of hyperpluralism described in Chapter 3. Remember that one sure way to get an interest group started is to set up a redistributive program. Soon after the program begins, the people who depend on it—both the program’s direct beneficiaries and its administrators and employees—organize to defend it. They become an entrenched lobby. They have money, votes, and passion. They have professional lobbyists and rapidresponse “action alert” systems. They are slick and sophisticated. When necessary, they scream and yell. At any given moment, it’s always safer to placate them than to defy them.

Suppose, then, that you want to get rid of the Rural Electrification Administration (later renamed the Rural Utilities Service), as the Reagan and Bush administrations wanted to do. The REA started as a New Deal relief program in 1935, when only 10 percent of American farms had electricity. A few decades later, its mission was accomplished. Not only did the vast majority of farms have electricity and telephone service (99 percent had power and 96 percent had phones in 1990), but they were more likely to have such service than the average American household. In fact, the rural electrical subsidies often flowed to the nonpoor and even the nonrural. Many people began wondering whether the country really needed the REA.

Those people faced a formidable obstacle. In 1942, hard on the heels of the rural electrification program, the National Rural Electric Cooperative Association arrived on the scene. Today the association represents a thousand far-flung rural electrical cooperatives; the cooperatives boast ten thousand local directors and six times that many employees; those people are well connected, politically active, and regularly in touch with members of Congress and each other. If anyone makes a move to abolish the rural electric programs, those people, as well as several other lobbying groups, swarm out of the woodwork. “There were so many,” recalled one former government official who opposed the program, “they had support everywhere. It was hopeless.” To back them up, the association’s political action committee donated almost $800,000 to about 360 congressional candidates in the 1995—1996 election cycle alone. And the association, with its imposing building in the suburbs of Washington, wasn’t going away. Interest groups almost never go away. Like everyone else, they want to keep their jobs.

These people have more than just the power of a strong grass-roots lobbying network. They also have the power of conviction. They believe in the rightness of their cause, and they bolster their belief with two appealing arguments—need and fairness.

Proponents of the need argument say, “We need federal money because, having relied on it for all these years, we can’t get along without it.” When I asked Bob Bergland, a former secretary of agriculture who later was head of the electric-cooperative association, why his members still needed subsidies, he replied: “There’s a level at which some of these marginal [rural electric] systems simply won’t be able to pass on the costs.” (However, he also conceded that rates would go up “not much” without the subsidies.)

Proponents of the fairness argument say, “Our competitors are subsidized, so it’s only fair to subsidize us.” Bergland made this argument, too, accurately pointing out that municipal and private utilities enjoy various kinds of tax breaks and indirect subsidies. It would hardly be fair to punish the rural cooperatives while leaving their competitors untouched.

To understand why programs never die, it’s essential to see that both of those arguments—need and fairness—are available to every lobby in Washington. Because groups that receive subsidies (or other kinds of benefits) soon rely on them, every reduction creates some genuine hardship cases. And because nowadays everyone is subsidized one way or another, every reduction hurts some people relative to others. Even in principle, there is no patently “unneeded” program or “fair” reduction. Turn over every stone in Washington, but you will never find one. That is another reason lobbies don’t go away: All are defending something that is economically vital and morally urgent for somebody.

Can’t you at least get rid of the programs that fail? In principle, maybe, but not in practice. One problem is that people disagree about which programs have failed, and even about what “failing” means. Evolutionary systems get around this problem simply by forcing all businesses, ideas, and species to compete. “Success” isn’t argued about; it’s whatever prevails. If the federal government worked on a trial-and-error basis, it could try many rival programs to solve any particular problem, and then abandon all but the one that worked best. It might start with a dozen competing welfare systems and close all but one of them—and then close that system, too, when a better one came along. The trouble, though, is that in today’s world each program instantly generates an interest group, and each interest group lobbies to keep its own program open, drumming up campaign contributions and producing stacks of studies “proving” the program’s success. In the end, we get stuck with all twelve programs instead of finding the best one, and before long they are working at cross-purposes and shutting out any new rivals.

So why don’t all these lobbies cancel each other out? After all, they compete for the government’s money and attention. And, to some extent, that helps curtail excesses. As a rule, though, lobbies work hard to avoid head-on confrontations with other lobbies, for exactly the same reason that politicians work hard to avoid confrontations with lobbies: Challenge someone’s sinecure, and you get his fist in your face. If farmers tell the government, “We want you to kill the ranchers’ subsidies and give us the money,” they can count on a bruising fight with the cattlemen’s association. On the other hand, if they say, “The ranchers are receiving land-use subsidies, so please raise our price supports,” they avoid antagonizing any powerful group directly. The choice is obvious. There are occasions when a direct conflict is inevitable—for example, the showdown over sugar in 1996—and those are the times when programs are most vulnerable. Precisely because of that vulnerability, however, everyone looks for accommodations that keep everybody happy, which is why you can’t rely on competition between lobbies to control lobbying.

Thus, when I asked Bob Bergland whether he would favor cutting his own and his competitors’ subsidies, he demurred. “We think a good argument can be made for support on all sides,” he said. In other words, subsidize our competitors and us—which is exactly what usually happens. Other things being equal, lobbies and subsidies tend to reinforce each other rather than to undercut each other. And now we’re back where we started: Since everybody is subsidized, to cut any particular group’s subsidy is “unfair.” The circle closes.

The result is that, with rare exceptions, we are stuck with everything the government ever tries, including some rather bizarre things. Strange to say, late-twentieth-century America was a land where you needed a government license to grow peanuts. This was because commodity markets were turbulent in 1934. “The chaotic agricultural and economic conditions that caused the Congress to establish the peanut program fifty-eight years ago no longer exist,” noted the General Accounting Office in 1993. “Most peanuts in the United States today are produced by large agribusinesses rather than by the small family farms that dominated agriculture in the 1930s.” Did the peanut program end, once it became a protection for big agribusinesses that employed slick lobbyists to keep newcomers out of the markets? On the contrary: The incentives to defend it only grew. A fifth of the peanut growers controlled more than four-fifths of the peanut licenses, which they could sell or rent for anywhere from $50,000 to $6 million. Of the third to half a billion dollars that the peanut program cost American consumers every year, as much as a fourth was deadweight loss: wealth that was simply destroyed. But that loss was spread very thin. On the other hand, a $6 million peanut license is worth fighting for.

By way of long-lived anachronisms, it would be hard to beat the federal subsidy for wool and mohair. The program was set up in 1954, when wool was a vital strategic commodity for military uniforms. (Mohair growers, who sell the fleece of Angora goats, sneaked into the program and came along for the ride. Don’t ask what an Angora goat is; the point is that there were a lot of them in Texas, which was robustly represented on the House and Senate agriculture committees.) In 1955, a year after the program was created, the American Sheep Industry Association was founded. Eventually it boasted 110,000 members and a budget of more than $5 million, some of which it spent on (what else?) lobbying Washington to preserve the subsidies around which it had formed. In any case, the wool and mohair program failed: Wool production went down, not up, because market forces overwhelmed the subsidies. But even if the program had succeeded, its main rationale disappeared soon after it was born. Synthetic fabrics were developed, and the Pentagon struck wool from its strategic-commodities list. That was in 1960. Nevertheless, in 1992, the wool and mohair program spent a tidy $191 million. Why did Bill Clinton inherit Dwight Eisenhower’s failed strategic-fabrics policy? It survived because it was ably defended by the small but devoted group of people who benefited from it, in some cases richly (several dozen farmers routinely drew subsidy checks of more than $100,000 a year).

If anyone asked the wool growers or the American Sheep Industry Association why the program was still necessary in the 1990s, they said, predictably, that wool farmers needed the money and that their competitors, especially overseas, also were subsidized. When I asked the same question of a professional lobbyist who used to work for the wool growers, he chuckled and answered more frankly. “There’s nothing more permanent in this town,” he said, “than a temporary program.”

In 1993, a remarkable thing happened. Congress, determined to show that it could get rid of at least something, managed to eliminate the wool and mohair subsidy, along with an equally peculiar honey subsidy that dated to 1950. Those two programs were about all Congress was able to get rid of, and accomplishing even that much required a crusade on the part of a few representatives and senators. Nonetheless, effective on December 31, 1995, the National Wool Act was repealed (though duties on wool imports remained).

Well, that didn’t seem entirely fair, now, did it? So in April 1996, Congress passed a new farm bill whose Section 759 was titled “National Sheep Industry Improvement Center.” This, it turned out, was an entity empowered with up to $50 million of federal funds to “enhance production and marketing of sheep or goat products in the United States” and to “design unique responses to the special needs of the sheep or goat industries on both a regional and national basis.” Two western senators, including one very conservative Republican, had dropped this trifle into the farm bill because life was not easy out in wool country, and because, as a wool lobbyist told Congressional Quarterly’s Hosansky, “I think it’s the kind of thing you look to for an industry that no longer has any support whatsoever as a direct payment.” As of 1996, an indirect payment would have to suffice.

Apparently life was not easy in mohair country, either. In 1998, the Texas people and the Mohair Council of America inserted into a giant appropriations bill a provision letting mohair growers take out interest-free federal loans. “There’s nothing free about this deal,” the head of the mohair council told The Washington Post, “except the loans are interest-free the first year.” That seemed logical enough: no subsidy except for the subsidy.

O death, where is thy sting? Grave, where is thy victory?

Life in the Frozen Lane

Not only are programs virtually impossible to kill, but once put in place they are also hard to change. Every wrinkle in the law, every grant formula and tax loophole, produces a winner who resists subsequent reform, unless “reform” happens to mean more money or benefits for the lobbies concerned. America’s basic welfare program for the poor was designed in the 1930s primarily to meet the needs of widows, who weren’t expected to work. As the world changed, the program didn’t. By the 1970s, many scholars understood that some aspects of the welfare program actually deepened poverty by encouraging fathers to leave home, yet the old policy persisted almost as though no one knew any better. Between 1935 and 1996, when, in the signal accomplishment of the Gingrich Congress, welfare was overhauled, only one significant reform of the program was made; and that change, the 1988 Family Support Act, was a modest measure affecting only a minority of welfare recipients. If a complicated program takes sixty years to update, it can hardly be expected to adapt to changing real-world problems.

But surely it’s possible to change an outmoded funding formula, at least? Don’t count on it. In 1989, Pete Perry, an acting head of the federal Economic Development Administration, decided it was time to change the way regional economic-planning districts were funded. There were almost three hundred such districts all over the country, drawing an average of about $50,000 of federal money every year. Perry had a sensible reason to change the formula: The formula was that there wasn’t any formula. Rather, each district received more or less what it had received in earlier years, with an occasional cost-of-living adjustment. By the late 1980s, after two decades when some regions thrived and others decayed, funding bore no relationship to need or anything else. Some of the least needy districts were receiving some of the largest amounts. Moreover, funding wasn’t related to districts’ performance. And so Perry decided to try a new system. Grants for each district would be based on such factors as local population, income levels, unemployment, geographic area, and the planners’ past performance. If a district had grown richer, some of its money would be rerouted to a needier district.

“That,” he said, “hit the fan.” The people who ran the planning districts enjoyed robust support from local bigwigs. They also maintained a pressure group: the National Association of Development Organizations (NADO), which was founded shortly after the Economic Development Administration was established. When I paid a visit to NADO’s executive director, Aliceann Wohlbruck, she agreed that planning-district funding made little sense. “There’s no great logic here,” she said. “We really agree there are things in the programs that need to be changed. We want to work to improve the program.” But her idea of improvement did not include reducing or eliminating funding for any existing district. “I think you’ve got to have a hold-harmless,” she said. “If you’ve had the same level of funding for twenty-five years, how do you tell people you’re going to cut it?”

Not the way Pete Perry told them, apparently. His proposal drew an action memo—URGENT, all capitals, bright pink paper—from Wohlbruck to NADO’s constituents. They dropped a blizzard of mail and phone calls on members of Congress, who complained to the secretary of commerce. By the time the dust had settled, Perry’s new formula was dead, and Congress had raised the minimum level of funding for all the planning districts. End of reform.

To make government work under such conditions is a task only for the masochistic or the criminally insane. Americans love to complain about government workers and managers. “Waste, fraud, and abuse,” they grouse. What Americans overlook, or do not understand, is that their organization into tens of thousands of permanent interest groups is making public servants’ jobs impossible.

Imagine that you are appointed to be head of a bankrupt corporation. Your mission is to straighten out the company’s finances and bring its equipment and product lines up-to-date. “Okay,” you say, “let’s get to work.” But there’s a catch. You’re told that you cannot drop a single product, close a single factory, or get rid of any old equipment. Sure, you can develop new products. But you also have to keep the old ones on the market. You can manufacture the latest ergonomic office chair but not drop your line of 1950s-style Naugahyde dinette furniture. You can open a new factory but not close any old ones. At most, if you concentrate your energy on a few intense battles, in any given year you can drop one or two products and streamline one or two plants. But the effort will be exhausting.

“Impossible!” you say. “No one could revitalize a corporation under such conditions!” You quit. And you’re right.

Talk to anyone who has managed a federal government agency in the age of hyperpluralism, and you soon find that this imaginary situation isn’t so imaginary. Orson Swindle, for instance, ran the Economic Development Administration for a few years during the Reagan administration. He wanted to reform the EDA’s University Center program, which gave each of fifty or so universities about $100,000 a year to help plan local development projects. The trouble—as he saw it—was not with the concept itself, which he supported, but that once a center was set up, it kept receiving funds forever. “If the program has merit,” Swindle said, “then why don’t we wean some of the centers that had been on it for twenty years?” The better centers could stand on their own—selling their services and raising local contributions, for instance. And as money was freed up from existing centers, the EDA would spend it to start new ones. In fact, that was how the program was originally supposed to work when it was set up in the 1960s. “We would never have to ask for any more funds,” Swindle said, “and we’d have more and more centers.”

Unfortunately, that trick never works. The existing centers and their interest group, NAMTAC (the National Association of Management and Technical Assistance Centers), didn’t care for the idea that “their” funding would be diverted to establish new rivals. “Very violently opposed” is how the centers’ reaction was described by NAMTAC’s Washington representative.

“The people that are in NAMTAC,” observed Hugh Farmer, a retired civil servant who had worked at the EDA almost since its doors first opened, “are major universities from across the country, and they have quite a lobbying effort with Congress. They make their living by doing this.” They went riding up to Capitol Hill, guns blazing, and without much trouble obtained a law barring any reductions in existing centers’ funding. Swindle’s attempt to make the program more flexible had instead locked it in place. The program had become a kind of permanent entitlement for a few dozen lucky universities.

So much for innovative management. A disillusioned Orson Swindle wound up as a senior adviser in Ross Perot’s 1992 presidential campaign. Hugh Farmer, too, left the EDA with a bitter taste in his mouth. “I was frustrated by the fact that we couldn’t change anything, we couldn’t try new things,” he said. “I think EDA is in a position where it’s not being effective because it’s too inflexible and it’s too set in its ways. It’s frozen and inflexible. Or it’s semifrozen. It’s kind of slushed. You’re allowed to move a little to the left or right, but you can’t move very far.”

In 1991, President Bush appointed Diane Ravitch, a Democrat, to be assistant secretary of education in charge of educational research. She had plans and ideas. She got nowhere. She soon discovered that all but 5 to 10 percent of her department’s research budget was preassigned, by law, to entrenched recipients. “There’s a little bit of discretion,” she told me, “but the vast bulk is frozen solid.”

A handful of established regional laboratories virtually monopolized a key chunk of the research budget. They maintained a lobbying group, which was run by a former aide to a key member of the House Appropriations Committee. Another grantee, a center for civics education, was run by a man whose lobbyist had previously worked for the chairman of the House committee overseeing education. (You may sense a pattern. Recall that many politicians, Capitol Hill staff members, and government officials later go to work as lobbyists or interest-group professionals. That is probably another reason programs are hard to eliminate: Policymakers would prefer not to offend their future employers.) I asked Ravitch whether she tried to get rid of the civics program. “There was no point trying to get rid of it; he [the lobbyist] was close to all the guys on the Hill,” she replied. “You can’t get rid of those things. They don’t do it.” In the end, she managed to kill one program, called Leadership in Educational Administration. “Amazing,” she said. That tiny program spent only $7—8 million at its peak.

She couldn’t kill; therefore she couldn’t create. She had hoped to develop videos for parents and a computerized information network for educators: “But there was no interest group for that.” In the end, she found, there were only two ways to do the job. One way, the popular method, was to shovel money out the door to the established clients. The other way, always contentious, was to reexamine priorities and fight trench warfare against the established clients. The former approach was politically painless but unsatisfying; the latter was politically painful and almost always unsuccessful.

“At first,” she said of her days in Washington, “I thought it was about people really solving problems. But what it’s really all about is people protecting their districts and the organizations they’re close to. If you don’t get the interest groups’ support, you can’t change anything, but if you change anything, you don’t get their support. That’s the conundrum.”

“At the beginning, I thought I could shape the agency. But I couldn’t do that. That was already done. My priorities were irrelevant. And that, for me, was a devastating discovery.”

How Big Is Too Big?

What would become of a giant, complicated social system if it couldn’t discard its failures and overhaul its anachronisms, or couldn’t modify them quickly enough? Imagine an economy in which every important business enterprise was kept alive by a politically connected coalition of enterprise managers and government officials. Over time, the world would change, but the universe of businesses wouldn’t. Obsolescent companies would gobble up resources, crowding out new companies. They might change, but in ways more suited to pleasing their political patrons than to increasing their efficiency. The economy would cease to adapt.

That is what happened to the Soviet economy. It collapsed.

In principle, the U.S. government’s situation is like the Soviet economy’s, though the U.S. government doesn’t seem likely to collapse. In both cases, the method of trial and error reached the point of critical failure.

In Washington, old programs and policies cannot be excised except at enormous political cost, and yet they continue to consume money and energy. As a result, there is less and less money or energy for new programs and policies. Every time a peanutsubsidy program from the 1930s or an EDA university-center program from the 1960s becomes entrenched, it occupies a spot where an experiment might have been performed or a start-up venture might have been tried. The old crowds out the new.

A second consequence, which is at least as important, is that when every program is permanent the price of failure becomes extravagant. The key to experimenting successfully is knowing that you can correct your mistakes and try again. But what if you have only one chance? What if you are saddled with your mistakes forever, or at least for decades? Then experimentation becomes extremely risky. In fact, an experiment that you can try only once and then are stuck with is not really an experiment at all. In a one-shot environment, the very possibility of experimentation, which by nature is a trial-and-error process, breaks down.

To make this point clearer, let me invoke the physicist Freeman Dyson. In many of his writings, Dyson has argued that size matters. But he doesn’t mean size just in the physical sense. Rather, if you want to know whether a machine is worth building or a program is worth undertaking, you have to scale it to make sure it’s flexible enough to adapt to a changing world. “Never sacrifice economies of speed to achieve economies of scale,” writes Dyson. “And never let ourselves get stuck with facilities which take ten years to turn on or off.” Otherwise, projects are out-of-date by the time they open for business. Speed can make all the difference:

Judging by the experience of the last fifty years, it seems that major changes come roughly once in a decade. In this situation it makes an enormous difference whether we are able to react to change in three years or in twelve. An industry which is able to react in three years will find the game stimulating and enjoyable, and the people who do the work will experience the pleasant sensation of being able to cope. An industry which takes twelve years to react will be perpetually too late, and the people running the industry will experience sensations of paralysis and demoralization.

Detroit’s automakers learned the hard way that a car requiring five years to bring to market is a very different product from a car requiring two or three years to bring to market, even though the two might be physically identical. Slow-to-market cars from General Motors were always behind the market. Quick-to-market cars from Toyota were on top of the market. Quick is beautiful.

Moreover, Dyson argues, not only should a project or institution be quick enough, but it also should avoid one-shot operations, which don’t allow you to fail and try again. Among human beings, it is axiomatic that almost nothing goes right the first time. Any reformer who depends on hitting the bull’s-eye with his first arrow is doomed. When locked in place, first-try “solutions” soon cause more problems than they solve.

“The right size,” according to Dyson, “means the size at which you can afford to take a gamble.” If a project is so big that you’re stuck with it even if it fails, don’t do it. In other words, the right size for any program or institution is no larger than the biggest size that still lets you correct your mistakes in time. Larger, and you either fail to solve problems, or you cause more problems than you solve. By those standards, government today is scaled incorrectly.

Rigor Mortis

The size of government is the great ideological divide in American politics. Liberals want government to do more; conservatives want it to do less. But big versus small is not, in itself, the best place to draw the distinction. The more important question is not how big government is but how flexible.

Flexibility depends not only on the size of government but also on the society in which government is embedded. In a society with few lobbies, government can be large yet still quite flexible. A few decades ago, when fewer lobbying groups were around to defend everything, the government could be more experimental and so was better able to solve problems. But as Americans increasingly organized themselves into transfer-seeking lobbies, they eroded their government’s flexibility and thus, in effect, made themselves harder to govern. Today, the federal government is swimming in molasses instead of water. It can’t correct its mistakes in time. Therefore it has great difficulty solving problems. And, of course, more lobbies form every day.

People sometimes look at Franklin Roosevelt’s period of governmental experimentation and say, “If we could do it then, we should certainly be able to do it now.” But they miss the point, which is that society has changed. In a society dense with professional lobbies, FDR’s brand of experimental central government cannot exist. Roosevelt was able to experiment in ways that are inconceivable today, not only because his government was smaller and more manageable but also partly because there were far fewer organized lobbies around to interfere with change. He was able to move programs into place quickly. On the seventeenth day of his administration, he proposed the Civilian Conservation Corps; three weeks later, it was law. On November 2, 1933, he was given a proposal for a Civil Works Administration employing people to repair streets and dig sewers; by November 23, the program employed 800,000 people, and five weeks later, 4.25 million, or fully 8 percent of the American workforce. Just as important, Roosevelt was able to eliminate programs. He ordered the Civil Works Administration shut down at winter’s end; its total life span was only a few months. Similarly, the Civilian Conservation Corps was dissolved in 1942, once the war effort made it superfluous. In those days, the government had some capacity to move programs on line quickly, try them out, and then get rid of them when their time had passed. It could declare a problem solved and then move on to the next project, and it could correct its errors, if not perfectly, then far more easily than it can today. But this error-correcting capacity—which is the capacity to solve problems—has steadily diminished.

Today we must expect that anything the government tries this year will still be with us fifty years from now. Even the most promising policies and programs cannot be made to work when you lack the flexibility to fail, adjust, and try again. By eroding the capacity for error elimination, demosclerosis has changed the very parameters of the doable.

A good example is so-called industrial policy, which seeks to use targeted subsidies to support industries deemed to have special strategic or economic value. The only way such a policy could ever work is through constant experimentation and tinkering. First you might subsidize steel, but if that didn’t work you could switch to research support for computer chips, and then if that failed or became unnecessary you could tinker with patent rules for biotech. You would constantly move your resources around, hunting for approaches that work. Ira Magaziner, a business consultant and industrial-policy proponent who worked for the Clinton administration (most notably by designing its disastrous health-care plan), has said: “What you could loosely call industrial policies are, by their nature, trial-and-error policies, similarly as they would be in companies.” In FDR’s day, industrial policy might have been possible. (In fact, something like it was tried and rejected.) But in the age of demosclerosis, each industry runs a sophisticated lobby and can capture and then cling to any resources you throw in its direction. Any industrial policy soon turns into an encrusted mass of subsidies for anachronistic industries with high-priced lobbyists. It blocks, rather than advances, useful change.

Or again, suppose you think a national system of high-technology trains is a good idea. In a nonsclerotic world, the government can help develop such a system and, if it fails, adjust it or go on to the next thing. But in a demosclerotic world, the case is very different. You begin setting up a system of, say, magnetic levitation trains this year. With luck, it’s mostly ready ten years hence. Long before then, however, appears the National Association of Maglev Development Authorities (NAMDA), which boasts thousands of influential members around the country and runs a half-million-dollar political action committee. NAMDA’s job is to make sure that the existing high-tech train systems (translation: its members’ jobs) are funded forever. The result: Twenty years hence, the country is burdened with an obsolete train system that blocks other advances in transportation.

The point is not that defended programs never die; now and then, they do. The point is that purging a program is such a slow, agonizing process that the rate of calcification outstrips the rate of adaptation. If you think again about the example of the rocket with unbalanced engines, you quickly see that such an asymmetry of forces can, as it plays out over time, have enormous consequences. In fact, in a demosclerotic environment, the government may find itself trapped in a cycle in which its attempts to solve problems ultimately diminish its problem-solving capacity. With enormous effort, it may succeed in reforming, say, the welfare or banking laws. But a decade later, a thousand lobbies will have nailed the reforms in place, including the ones that failed. The very process of reform may thus be hijacked by the forces of reaction and turned against itself.

“Medicare is a state-of-the-art 1965 benefits package,” Willis D. Gradison, the head of the Health Insurance Association of America, said, by way of illustration. “It’s a good program. It just wouldn’t be done that way today. And if you look at the changes we’ve made in Medicare, it’s amazing how narrow they are.” Indeed, Medicare was a shining reform in its day. But then it calcified. Decentralized private plans evolved new ways to deliver care; by the early 1990s, insurance companies were funneling their customers into health-maintenance organizations, almost half of which the insurers themselves owned. Medicare did no such thing. It failed to evolve.

Eventually, caught in an impossible bind, the whole system may begin to go critical. Driven by the demands of a changing world, the government has no choice but to pass new programs. Yet at the same time, driven by the demands of the organized lobbies, the government struggles desperately to keep doing everything it ever tried for every group it ever aided. And so, lacking any better option, Washington just piles new programs on top of old programs. Laws are passed, policies adopted, programs added or expanded—things “get done”; but, as layer is dropped upon layer, the accumulated mass becomes gradually less rational and less flexible. To form a mental picture, imagine that you were forced to build every new house on top of its predecessor. That could work for a while, but eventually you would have a teetering, dysfunctional mess. Similarly, accumulated programs and policies work to every end at once and often block each other, sometimes creating new problems, which may create the need for still other programs, leading to still more interest groups and entrenchment. Bit by bit, program by program, the government becomes dysfunctional.

As Americans heap ever more tasks on their government, while simultaneously organizing themselves into ever more lobbies, is it any wonder that government fails to meet expectations? And as government disappoints, is it any wonder that Americans despise it? By the 1990s, when polls showed that public confidence in the federal government had fallen to record lows, government and the public had become like the illtempered farmer and the arthritic nag. The farmer loads more and more on the nag, the nag becomes weaker and weaker, the angry farmer beats and whips the nag, and the battered nag becomes weaker still.

In the period beginning with the New Deal and peaking with Lyndon Johnson’s Great Society, Washington seemed one of America’s most adaptive and progressive forces—which, at the time, it probably was. What Roosevelt’s and Johnson’s visionaries did not foresee was that every program would generate an entrenched lobby that would never go away. The same programs that made government a progressive force from the 1930s through the 1960s also spawned swarms of dependent interest groups, whose collective lobbying had turned government rigid and brittle by the 1990s.

Demosclerosis has thus turned progressivism into its own worst enemy. Yesterday’s innovations have become today’s prisons. One of the main paradoxes of demosclerosis, and one of its nastiest surprises, is that the rise of government activism has immobilized activist government.

No one setting out to write a fresh policy today would think to banish banks from the mutual-fund business, or make peanut farmers buy licenses, or forbid United Parcel Service to deliver letters, or grant massive tax breaks for borrowing. Countless policies are on the books, not because they make sense today, but merely because they cannot be gotten rid of. They are like dinosaurs that will not die, anachronisms whose refusal to go away prevents newer, better-adapted rivals from thriving. In a Darwinian sense, the collectivity of federal policies is ceasing to evolve.

A Stricken Giant

As the disease of demosclerosis advances, it causes a paradoxical and pathetic symptom: bogus national poverty. In Washington, it became the conventional wisdom in the 1980s and 1990s that programs and ambitions that were once affordable had become “too expensive.” For a time, penury seemed a result of the fiscal pressure from chronic budget deficits, but after the deficit melted away the budget remained as tight as ever. The deficit, apparently, was not the sole problem. In the 1940s, America could “afford” the Marshall Plan to set Europe back on its feet; in the 1990s, America could not “afford” any remotely comparable effort to help the former Communist countries find political and economic stability. In the 1960s, America could “afford” a program to send astronauts to the moon; in the 1990s, America struggled mightily to “afford” even a modest orbiting space station. Subjectively, in the world of feelings, the government was poor, or in any case much poorer than in the fat years of Kennedy and Johnson. But objectively, in the world of fact, this was absurd.

The United States is now wealthier than any other country in human history, including its prior self. Per capita disposable income, adjusted for inflation, is more than twice as high as in 1960, when the federal government could “afford” almost anything. Real wealth per capita is at least 75 percent higher than in 1960, and real economic output per capita has more than doubled. To speak of the American economy as though it were “poor” or unable to buy what was once affordable is, by this standard, preposterous.

Likewise, the federal government is not poor, either in absolute terms or relative to its postwar heyday. The government’s income, after adjusting for inflation, is more than three times its income in John F. Kennedy’s day; government spending, also adjusted for inflation, is more than four times higher than in 1945, the peak of the mighty mobilization for World War II. The notion that taxes have been slashed to unusually low levels is simply wrong: Measured as a share of the economy, the government’s receipts in the 1980s and 1990s were well in line with the postwar norm and slightly above the level of the “wealthy” 1950s and 1960s. In objective terms, the federal government is better able today to “afford” initiatives than ever before in history.

So here is another paradox: As the nation grew objectively richer, it felt subjectively poorer. Why? If government is “poor,” if it is unable to “afford” things, that is because of its inability to unlock resources from entrenched claimants and reallocate them for new needs. It is not poor; it is paralyzed. It is not malnourished; it is maladaptive. It is trapped in its own past, held there like Gulliver in Lilliput by a thousand ancient commitments and ten thousand committed clients.

Microgovernment

By the middle of Bill Clinton’s presidency, a peculiar term had begun to circulate through Washington: “microinitiative.” Behind its emergence was a poignant story, revealing of Washington in its throes.

Clinton had come to office with grand ideas. He had staked his 1992 campaign on an ambitious plan to make the economy more productive. People could disagree with his platform, but it had the “vision thing” in spades. At its heart was the notion, then popular in the Democratic Party, that the country needed a massive government capital-spending program to improve physical and human infrastructure: roads, bridges, job retraining, smart highways, high-speed rail, electric cars, environmental technologies, information highways, and so on. In fact, Clinton’s ambitious public-investment program was the main plank of his economic platform in 1992: “In the absence of increasing investment in this country, including public investment, you can’t get growth going again,” he said.

Clinton came to office believing, as many of his supporters did, that his vigor and his vision and his mandate would let him restore to government something of the creativity of better days. In the opening weeks of his term, he spoke passionately and often of experimentation. In his inaugural address, he declared, “Let us resolve to make our government a place for what Franklin Roosevelt called ‘bold, persistent experimentation.’ ” So important to him were Roosevelt’s words that he repeated them in his first national address to the public, a few days before the State of the Union message: “Our every effort will reflect what President Franklin Roosevelt called ‘bold, persistent experimentation,’ a willingness to stay with things that work and stop things that don’t.” He sent the same message again in his subsequent economic address: “I have to say that we all know our government has been just great at building programs,” he said. “The time has come to show the American people that we can limit them, too, that we can not only start things, but we can actually stop things.” The passage was ad-libbed, and it showed a crystalline comprehension of what had gone amiss.

To make room for experimentation, however, Clinton would need to eject some of the countless experiments from yesteryear that were still hanging around. In his 1992 campaign, he had talked about change, but he never built much real support for it. Instead, he promised more of everything to practically everyone, at no cost except to foreigners and “the rich.” He promised a $200 billion “Rebuild America” fund for new infrastructure and human-capital programs. He promised to hire 100,000 new police officers and expand drug treatment. He promised national job-retraining programs, community-service jobs for welfare recipients, more money for AIDS and schools, more Medicare benefits. He promised an investment tax credit, a tax break for start-up companies, an expanded tax credit for the working poor, a children’s tax credit, a tax reduction for the middle class. He promised a lot of other things besides. And, in addition to promising more spending and lower taxes, he promised to reduce the budget deficit.

Clinton was boxed in by his rhetoric. He had no mandate to do anything unpopular, which meant he was in no position to force Congress or the pressure groups to accept any change that was unpleasant to them. “We decided early on that we weren’t doing this as an academic exercise,” a Clinton adviser told Time. “We wanted a program that could get through Congress.” Under the circumstances, his administration had little choice but to produce an economic plan that contained almost no restructuring of the government. Clinton’s budget proposal in 1993, when he had his first and, as it turned out, last chance to make a serious change in Washington’s entrenched priorities, was a conventional miscellany of standard Washington maneuvers. The budget did not propose the elimination of a single major or even midsize program, and its offering of mostly trivial terminations accounted for less than 5 percent of the total reductions in spending that Clinton proposed—nothing beyond the routine.

In September 1993, the president’s own National Performance Review declared that “the federal government seems unable to abandon the obsolete. It knows how to add, but not to subtract.” Alas, learning to subtract was not a priority for the Clinton administration. Under the heading “Eliminate Special Interest Privileges,” the panel made four suggestions: eliminate highway demonstration projects mandated by Congress (these were often pork), cut unneeded air-service subsidies to small communities, and abolish the honey and the wool and mohair subsidies, which were already under heavy fire in Congress. Other eliminations were few and mainly inconsequential. When someone complained that the task force’s four hundred recommendations included only fifteen program eliminations, Clinton’s budget director, Leon Panetta, replied, “I would kiss the ground and thank God if we could eliminate fifteen.”

Where you cannot demolish, you cannot build. After the inauguration, Clinton was trapped with no option but to scale back his “investment” agenda. Congress, demanding more by way of deficit reduction, scaled it back even more. What finally emerged, according to the Economic Policy Institute, a liberal think tank in Washington, was a fiscal 1994 federal budget that included less for government investment—that is, for infrastructure, education and training, and civilian research and development—than President Bush had spent the year before.

Even sadder was the fate of Clinton’s national service program. More than any other initiative, national service defined his vision of what he had called “our New Covenant”: Young people could work for their country to repay their student loans, learning citizenship and responsibility. “Just think of it,” he rhapsodized at the 1992 Democratic convention, “millions of energetic young men and women, serving their country by policing the streets or teaching the children or caring for the sick. . . . That’s what this New Covenant is all about.” A year later, the end product was miniaturized by “fiscal reality,” alias demosclerosis. To fulfill anything like Clinton’s vision, national service needed to be a broad, national commitment, not just a showcase for a few lucky applicants. But by February, national service looked more like a pilot program than a defining initiative. That month, Clinton asked for $7.4 billion over four years—“hardly the scholarships-for-all he had initially promised,” wrote Steven Waldman in Newsweek. “So before Clinton’s plan was even introduced to Congress, it had been radically scaled back.” Congress scaled it back still further, approving, in the end, only $1.5 billion over three years. In the end, the program looked more like a new ornament than a New Covenant.

Explaining why it settled for something so unrevolutionary, the Clinton administration at one point brought forward R. Sargent Shriver, John F. Kennedy’s brother-in-law and the first director of the Peace Corps. “With the shortage of money now,” he said, “one has to be satisfied with achieving modest goals.” Imagine—a “poorer” nation than in Kennedy’s day, when the federal government’s budget, in constant dollars, was only a third the size of today’s!

Within the administration’s ranks, the reality of demosclerosis soon sank in. “You either look for fundamental structural reforms or you settle for smaller and smaller quantities of the same old programs,” one of Clinton’s domestic advisers told me. “Those are the only two choices.” I asked him what he thought would happen. “If I had to make a bet,” he said, “I’d say that, nine times out of ten, the defensive forces of the same old programs will be stronger than the offensive forces advocating new programs.”

His conjecture was correct. Paul C. Light, a political scholar at the Brookings Institution in Washington, has compared presidential agendas going back to the Kennedy years, and the results speak plainly of what I call demosclerosis and what Light calls the “derivative presidency.” Presidents Kennedy, Johnson, and Nixon all produced copious agendas, with two or three times as many initiatives as Clinton. “Clinton’s first term,” says Light, “produced just thirty-three proposals, the smallest Democratic agenda in thirty years.” More telling, however, is that roughly two-thirds of the Kennedy and Johnson and Nixon agendas consisted of new programs, whereas two-thirds of Clinton’s consisted of fine-tunings or enhancements of old programs—an increase in the earned-income tax credit, immigration reform, a minimum-wage increase, reauthorization of the water-pollution laws, “and a host of small adjustments to existing programs.” Clinton admired JFK and spoke of emulating FDR. In fact, Light concludes, Clinton’s first-term agenda did resemble that of an earlier president: Gerald Ford. “Despite their very different political circumstances, not the least of which were 116 more House seats working in Clinton’s favor, the two presidents ended up with remarkably simple derivative agendas.”

And so it was that this ambitious young president emerged, by the end of his term, as a recognized master of the “microinitiative.” He would deliver long State of the Union speeches in which he would reel off lists of tiny new tax credits, little enhancements of this or that program, and other marginalia. As Light notes, Clinton argued zealously for school uniforms, guaranteed overnights for hospitalized mothers, safety locks for handguns, a national registry of sex offenders, and a national tutoring initiative. As a candidate in 1992, he had ridiculed President Bush for smallness of vision, and he had sworn to change the government. By the end of his term, it was not the government that had changed, but the president.

Here, There, Everywhere

In America, sclerosis is furthest advanced within the federal government. That isn’t surprising; as a general rule, the larger and more centralized a government and the more redistributive power it commands, the more it is beset by parasites and gold diggers and professional favor-brokers. But the disease is in no sense unique to the federal government.

Look, for example, at California, the largest state government. Dan Walters, a Sacramento Bee columnist who has been covering California state government for years, says, “The process has slowed and slowed and slowed. In terms of major policy stuff, absolutely nothing gets done.” On education, health, tort reform, and other major issues that energize interest groups, there are “no major policy decisions whatever. This is a total lock-up situation.”

Barry Keene, a Democrat representing the northern coast, was the state Senate majority leader when he quit in disgust in 1992. “I came to the Senate to make policy, and the legislative body stopped doing that,” he said, when I spoke to him. “It was like glue in the engine. It just gradually started slowing and slowing and then came to a virtual stop.” After leaving, he became president of an interest group (what else?) called the Association for California Tort Reform. When I spoke with him, he acknowledged that he had joined the problem, but what could he do? The interest groups in California, like the ones in Washington, knew they were choking the system, but none could stop lobbying until all the others did. “There is a general recognition among the interest groups that the thing is not working very well,” said Dan Walters, “but as long as it is the way it is, they’re going to protect whatever interest they’ve got.”

Many Californians, like Washingtonians, blamed sclerosis on divided control of the government: Republicans in the governor’s mansion, Democrats in the statehouse. But that couldn’t be the whole story. In California, divided control has been common for decades, yet sclerosis steadily worsened. Others pointed to California’s sagging economy, which reduced the flow of taxes in the early 1990s, making legislators’ jobs nastier and more contentious. But, again, demosclerosis became glaring well before the economy sank, and it did not depart when the economy revived. So other factors must have been at work.

If you examine California’s official biennial directory of full-time lobbyists, you find that, between the mid-1970s and the early 1990s, the number of companies and groups employing lobbyists more than doubled. “Our directories have been getting bigger every year we publish them,” says David Hulse, a political reform specialist in the California secretary of state’s office. In 1989, that office registered 783 full-time lobbyists (all of whom are required by law to register); by late 1998, less than a decade later, there were 1,279, an increase of more than 60 percent. In the past, California lobbyists worked mainly for interest groups and deep-pocketed companies. More recently, many have gone into business for themselves, as free-floating entrepreneurs. “Now you have lobbyists coming in without a client,” Hulse says. Career-minded entrepreneurs register as lobbyists and then go hunting for work—and they find it. According to the California secretary of state, the amount spent lobbying the California government almost quintupled between 1980 and 1998.

In fact, the day before I talked to Barry Keene, a brand-new interest group—one representing occupational therapists—had paid him a call. They wanted to know how to lobby legislators. “It’s a growing process,” Keene told me. “The people who represented interest groups in Sacramento became more professional, they made more money, you had more contract lobbyists, as opposed to in-house lobbyists. You saw law firms opening offices in Sacramento providing lobbying services and appearances before administrative agencies. And that process is still evolving. You had television, you had targeted computer mail, you had phone banks, and you had the introduction of high-paid hired guns, people who knew how to manipulate these things.”

Familiar stuff, all of that: the standard paraphernalia of professional parasitism in its high-growth mode. But then came something unexpected. As the legislative process died, the initiative process came alive. In theory, initiatives allow voters to pass their own laws. In practice, interest groups can use initiatives, too. “The initiative process is not truly a public process anymore,” Keene said. “So when I say people do things on their own, I don’t truly mean the general public. I mean the people who finance initiatives. They began circumventing the legislature. In doing so, they created a body of law that began putting a straitjacket on the setting of priorities by the legislature and the governor.” In 1978, antitax activists used Proposition 13 to pass a property-tax cut for themselves, and—a classic anticompetitive maneuver—they did it in a way that favored existing property holders (themselves) at the expense of newcomers. Then came the California teachers’ union, which passed an initiative requiring that about 40 percent of the state budget go to education every year.

By the early 1990s, what with initiatives, federal mandates, court orders, and legally guaranteed entitlement benefits, 85 percent or more of California’s giant budget was locked in place, according to the state department of finance. Busy lobbies were working to lock in still more.

In New York City, thanks to the political clout of vested taxicab companies, the number of taxi licenses was frozen at Depression-era levels for about sixty years, from 1937 until 1996 (and even then only a few hundred additional licenses were issued). The schools of New York spend more per student than all but a few other big-city districts, yet produce dismal results. Only a third of each education dollar goes to teachers and classroom instruction; hiring a new security guard can take five layers of bureaucracy. “A Soviet-style bureaucracy has enveloped the school system,” reported The Economist, “and powerful, obstinate unions prevent reforms from happening at anything more than a snail’s pace.”

Sclerotic local governments like New York’s possess a perverse advantage: Their residents can flee and their credit ratings can sink—and then they are forced to reform, at least a bit. Under Mayor Rudolph Giuliani, New York City made some impressive strides. Similarly, after Philadelphia hit the fiscal wall in 1990, it renegotiated its labor contracts, thinned its workforce, and contracted out a few lines of work—for instance, the city print shop. Even so, Philadelphia’s leaders couldn’t bring themselves to close offices or end old programs. “What they wound up doing was proposing to close one small library in a leased building and one stable for the mounted police,” noted Ronald G. Henry, the executive director of the Pennsylvania Intergovernmental Cooperation Authority. “They really have to do much more to try to make some fundamental structural changes.”

If reforming a city is hard, imagine how much harder reforming Washington may be. The U.S. government can’t go bankrupt, and its citizens aren’t about to flee. There is no wall for it to hit, at least in the foreseeable future. And so its slide toward stagnation is that much harder to check.

For conservatives, demosclerosis means that there is no significant hope of scraping away outmoded or counterproductive liberal policies, because nothing old can be jettisoned. For liberals, it means that there is no significant hope of using government as a progressive problem-solving tool, because the method of trial and error has broken down. For politicians, it means tinkering on the margins of public policy. For the public, it means living with an increasingly dysfunctional government, one that gradually turns itself into a sort of living fossil. Only the professionals of the transfer-seeking economy have been consistently happy.

Dysfunction breeds discontent, and discontent breeds backlash, and backlash duly came. Frustrated, even enraged, a series of reformers set out to writhe free of the straitjacket. Their attacks on demosclerosis, alas, showed how little they, and the public, understood it.