In which I argue that no significant rebuilding of liberty can be expected from Congress, even a Congress controlled by Republicans, because of the systemic corruption of the political process.
IN THEORY, WE don’t need a restored Constitution or a reformed legal system to rebuild important aspects of American liberty. It could happen through a Republican Congress working with a Republican president. Congress has the power to abolish any program, agency, or even cabinet department. Congress could pass amended legislation that contains “intelligible principles” that prevent regulatory agencies from implementing their own agendas. Congress could expand the exemptions of small businesses from regulation. Congress could substitute a consumption tax for the income tax, thereby effectively removing the IRS from Americans’ lives.
All this is possible—theoretically. In reality, we live in a world in which none of these things will happen. There will be only tweaks at the margins. The political process in Washington is systemically corrupt in ways that make fundamental reforms impossible. Not improbable but impossible.
Corruption, like lawless, is a strong word, so I should begin by clarifying what I mean. I do not argue that American politicians and bureaucrats in the second decade of the twenty-first century are more venal or dishonest than politicians of the past. Rather, the American political process now has reached a stage analogous to that of the legal system. Just as a technically ruleful legal system now has some of the operational characteristics of lawlessness, today’s political process has produced politicians who, while keeping within the law, do things that are operationally indistinguishable from the way Third World kleptocrats operate.
Think of your image of governmental corruption as you imagine it to exist (or perhaps have observed it) in a Third World kleptocracy. Officials who make a modest official salary live in big houses and drive Mercedes, because government service is a way of getting rich. If you are a citizen who runs a business, you are regularly shaken down by officials as a price of doing business. If you have a problem with the government, you have to pay a bribe to get a hearing, and getting action on your request will require an additional bribe. If you want to get contracts for government business, you must give the bureaucrats their cut.
In a kleptocracy, bribes can accomplish many other things as well. You don’t want to pay an export duty? The inspectors at the ports can be paid off. You have a bothersome competitor? The officials and the cops can make him decide to close up shop. What you want to do is illegal? A law can be designed especially for you.
The only word to describe those kinds of interactions between government and the private sector is “corruption.” Now consider: if for “bribe” one substitutes “financial support for political campaigns and political parties,” what I have described is the reality of how Congress and the private sector interact in today’s Washington—not once in a while, but as the established way of doing business.
As with the gutting of the Constitution, we are looking not at a problem that has persisted throughout American history but at one that was triggered by events over a short period of time. In the case of the Constitution, the critical period was 1937 to 1942. In the case of systemic corruption, the critical period was 1970 to 1975.
Corruption in the political process varies directly with the number and value of things that politicians have to sell. This is the fundamental theorem for explaining the behavior of both the buyers and the sellers of political favors.
Applying the theorem, it is easy to look at American history and guess when and where corruption has been most common. For the federal government, the prime eras for corruption in the nineteenth century were the Civil War, when a profusion of government contracts was up for grabs, and during the building of the great railroads after the Civil War, when contracts and land grants were both up for grabs. Read Mark Twain’s The Gilded Age to get a sense of what Washington was like then.1 Among state and municipal governments, which accumulated much larger inventories of things to sell, corruption was rampant from the Civil War through the end of century.2 “Bribery and corruption are as universal as to threaten the very structure of society,” a Supreme Court justice told Yale law students in 1895. “Probably in no country in the world is the influence of wealth more potent than in this, and in no period of our history has it been more powerful than now.”3 This was old-fashioned corruption based on payment of bribes. Some politicians and some bureaucrats were bribable; others were not.
Only a few industries engaged in this corruption at the federal level in America before the New Deal. A far larger segment of the business world was completely uninvolved in Washington, because so few businesses had an incentive to sway the vote of a senator or representative. Except for the rare industries that were already significantly regulated in 1928, notably railroads, or ones that urgently needed higher tariffs to protect themselves from foreign competition, the federal government was irrelevant to the way they went about their operations. State and municipal governments were already enthusiastic regulators by 1928, but the federal government was not.
The New Deal expanded regulation, but then and through the 1950s that regulation was targeted—the Civil Aeronautics Board regulating the airline industry and the FCC regulating radio and television, for example. Altogether, about two dozen industry-specific agencies were established.4 These agencies did not arouse widespread corporate unease. In practice, cozy relationships usually developed between the regulators and the regulated. If you weren’t in one of those industries that had been assigned its own regulatory agency, not much had changed even after the New Deal. When John Kennedy came to the presidency in 1961, only a handful of corporations maintained even a small office in Washington.5
The pre-1970s environment was also relaxed when it came to campaign funding, because campaigns weren’t expensive. The typical House campaign in the 1950s and early 1960s probably cost well under $100,000 in today’s dollars, and most Senate campaigns probably cost around $500,000.[6] These were not daunting sums to raise, especially since wealthy individuals were free to contribute as much as they wished.
What about contributions from special interests? Corporations had been banned from making contributions to political candidates in 1907. Corporations that did wish to contribute got around the ban through a variety of techniques, some legal and some not.[7] Unions had remained free to use money from union dues as political contributions, but that changed in 1947 with the Taft-Hartley Act. To get around the new ban, the Congress of Industrial Unions formed an organization to collect donations from union members for use in political campaigns. They called their new organization the Political Action Committee—the first PAC.
For the next two decades, other unions formed PACs, but few industries or nonprofit organizations followed their example. There still weren’t many ways in which the federal government could help them or hurt them, and the kind of single-issue politics that motivates PACs on social issues didn’t exist.
I am referring to a political climate so radically different from today’s that readers who grew up after the 1950s will have a hard time believing me. If you want to get a sense of just how different, read a novel called Advise & Consent by Allen Drury, a political journalist who covered the Senate for many years. Advise & Consent was published in 1959, became the year’s top-selling novel, won the Pulitzer Prize, and was widely acknowledged by political pros to be a realistic portrayal of the way the game was played in 1950s Washington. It is not a kind of politics that today’s political pros would recognize. Or you can read Theodore White’s The Making of the President, 1960, also a Pulitzer Prize winner, to get a sense of how different presidential campaigns used to be. Consider this: For the 1960 election, the first candidate to announce that he was running for president, Hubert Humphrey, did so on December 30, 1959, just ten months and two weeks before the election. It was considered an early announcement.
By the end of the 1960s, regulations had been pouring out of Washington in unprecedented volume, adding 27,685 pages to the Code of Federal Regulations from Kennedy’s assassination through 1969. The Civil Rights Act of 1964 had initiated unprecedented federal oversight of hiring, promotion, and firing. Ralph Nader had demonstrated how much effect lobbying Congress could have on the operations of the auto industry. The stage was set for transformative change, and it happened during the first half of the 1970s. Six events were pivotal.
Richard Nixon Ballooned the Regulatory State
From 1970 to 1974, sixteen new major regulatory agencies were established, including the EPA and OSHA, the two with the most sweeping influence. During the same period, the Supreme Court’s decision in Griggs v. Duke Power expanded the regulatory clout of the Equal Employment Opportunity Commission (EEOC). What set those three agencies apart from previous regulatory agencies were their unrestricted briefs. Not limited to a specific industry, each had economy-wide authority to regulate.
Corporate America Got into the Game
In 1971, Lewis Powell, later a Supreme Court justice, wrote an influential memorandum for the Chamber of Commerce arguing that a “broadly based and consistently pursued” attack on free enterprise was under way and that there were “few elements of American society to have as little influence in government as the American businessman, the corporation, or even the millions of corporate stockholders.”8 It was time, Powell said, for American business to acquire political power:
Such power must be assiduously cultivated; and, when necessary, it must be used aggressively and with determination—without embarrassment and without the reluctance which has been so characteristic of American business.… Business and the enterprise system are in deep trouble, and the hour is late.9
Though little known to the general public, the Powell memorandum marked an inflection point in corporate America’s involvement in Washington. Within a decade, most major corporations and industry trade organizations had established offices in Washington.
Television and Polling Revolutionized Political Campaigns
Roger Ailes’s orchestration of Nixon’s 1968 television appearances and ads had opened an era of rapidly increasing sophistication in the use of the media. Polling techniques had improved, and continued to do so throughout the 1970s, becoming a key tool for crafting campaign positions that maximized a candidate’s chances of winning. Television and polling both cost lots of money, and politicians who wanted to stay in office found themselves having to accumulate war chests far larger than they had needed just a few years earlier.
Politicians Became Regulatory Intercessors for Business
The fourth event consisted of obscure procedural changes that never make the news and yet have huge effects.
As described in the previous chapter, regulatory agencies live in a judicial world of their own. In 1975, the Administrative Procedure Act of 1946 was amended in two ways. First, it became easier for outside organizations to participate in the rule-making process. Second, it became harder to appeal against the decision of an administrative law judge. Together, the two changes meant profound unintended consequences for the way that Washington operated. The effect of the first change was to raise the importance of a formal lobbying effort while the rules were being made, thereby giving the lobbying industry a huge new market for its wares. The effect of the second change was to make politicians the de facto court of appeals for overturning the decisions of regulatory agencies. As John Wettergreen summarizes it:
Appeals against the agencies in courts of law were difficult, and appeals against the agencies in the non-Constitutional, administrative legal system were adjudicated by the agencies themselves. So, in practice, political appeals against the agencies were the most effective means available. Accordingly, they became so much more common that ex parte proceedings … which were often felonious in the days before the regulatory revolution, became standard procedure.… That is how the main job of the contemporary Congressmen became liaison with regulatory agencies, not legislation.10
The confluence of the proliferation of regulations in the 1970s and the congressperson’s emerging role as the most effective way to deal with those regulations constitutes an example of what I mean by systemic corruption. For most of recorded history, gatekeepers have been an irresistible object of influence peddling and bribery. Changes in the law made members of Congress the gatekeepers for access to the bureaucracy.
Democracy Came to the House
The fifth event was reformation of the internal operations of the House beginning in 1970 and culminating in early 1975, when the Democratic congressional class of 1974, elected in the aftermath of Watergate, took office.
As of 1970, the House was still controlled by the Speaker of the House and the chairmen of the most powerful committees.11 If you represented a special interest and wanted to get favorable action from the House, corralling votes among the representatives at large was futile. In those days, a substantial majority of representatives could agree on a given policy measure that would nonetheless have no chance of reaching the floor for a vote if the leadership didn’t approve. Of the 435 members of the House of Representatives, only a few dozen of them had things of much value to sell.
The early 1970s saw a series of internal reforms that ate into the monopoly power of the Speaker and the committee chairmen.12 Then the 1974 election brought seventy-five new Democratic members to the House. The first few months of the ninety-fourth Congress saw the revolution completed. Some members remained more important than others, but no longer could a few senior members block legislation from coming to the floor. Unlike the past, it now did make sense to corral votes of ordinary members on behalf of your special interest and to engage a member as your advocate with the regulatory agencies.
Congress Inadvertently Magnified the Role of Special Interests
The sixth event was the passage of the Federal Campaign Act of 1974. The act was intended to diminish the influence of wealthy individuals by limiting the amounts of money they could contribute directly to candidates during elections. But it had two unintended consequences. First, it increased the time that members had to spend raising money—“dialing for dollars,” as it is called on the Hill—because it now took many more individual contributors to get the same amount of money. Second, it gave wealthy citizens an incentive to use alternative ways of getting their political contributions into the system—and there, ideal for serving that purpose, unexploited for a quarter of a century, was the vehicle known as the PAC.
The increased incentive to use PACs led to the creation of many more of them, which in turn created a third unintended consequence. More PACs created new markets for political contributions. Before the PACs proliferated, suppose you were a citizen with some discretionary income who was passionate about preserving the wilderness. You seldom made contributions to political campaigns, however, because a modest contribution to an individual candidate was unlikely to have any effect on the issue you cared about. But once a PAC exclusively devoted to wilderness preservation existed, that same level of passion for wilderness conservation was much more likely to translate into regular contributions to that PAC—it was a much more focused way of getting political bang for your buck.
The 1974 reform was transformative because it magnified the power of special interests many times over. When individuals could contribute as much as they wanted to a campaign, a member of Congress might have a few large contributors whom he wanted to keep happy. But keeping them happy usually amounted to voting the way that the candidate’s publicly held political positions had led big contributors to believe he would vote. Yes, a big contributor in business X might expect the right vote on a bill directly affecting business X, but that would probably amount to one or two votes per session of Congress at most. On the rest of the issues, big contributors usually weren’t on the phone pushing the member to vote one way or the other, but were satisfied if the people they supported voted the way they campaigned. As politics goes, it was a fairly benign way for special interests to have influence. In contrast, once the PACs had spread from broad interest groups to ones representing specific industries and causes, votes on major issues and many minor ones were made in the context of past support from the interested PACs and with implications for their subsequent support or opposition.
Together, these ingredients created systemic corruption. As of 1975, the federal government had acquired power over the activities of the private sector that could make millions of dollars’ difference to the bottom line of individual corporations, and billions of dollars’ difference for an entire industry. Corporate America had finally awakened to that reality. Noncorporate special interests were finding that PACs could attract large sums of money from their constituencies. Large sums devoted to lobbying could tweak the provisions of a proposed regulation, thereby making a big difference to the bottom lines of corporations or advancing the agendas of noncorporate special interests. The way that regulations were administered also meant that soliciting help from members of Congress was the best way to get a favorable ruling or to change an adverse ruling. The way to advance these specific policy objectives was through organizations specifically focused on them—the PACs. And all of this was happening as the cost of campaigns was skyrocketing, making elected politicians frantic to raise enough money to stay in office.
This transformation of the political environment in the first half of the 1970s was swiftly followed by transformations in political practice. The average cost of a Senate campaign in 1974 was $1.9 million, already unprecedentedly high by historic standards. That already-high figure doubled by 1982, tripled by 1994, and quadrupled by 2006.13 The average cost of a campaign for the House in 1974 had been $236,120. That figure doubled by 1982, tripled by 1996, quadrupled by 2006, and quintupled by 2010, standing at $1.2 million.14 All of these numbers are based on constant 2010 dollars.
In the first published list of PACs in 1974, only 89 were affiliated with corporations. By 1982, that number had grown sixteenfold, to 1,467. The total number of registered PACs quintupled during the same period, to 3,371 in 1982.15 Direct campaign contributions by PACs had already reached $114 million in 1978. That figure had more than doubled by 1986 and more than tripled by 2006.16 But direct contributions drastically understate the real increase in spending on political campaigns by the PACs. PACs are free to spend unlimited amounts on political advertising that does not ask people to vote for a specific candidate—in effect, an open invitation to fund negative advertising about the opponent of the person a PAC wishes to support.
The increasing cost of campaigns and the increasing availability of money through the PACs set the stage for the growth of the industry that has come to symbolize all that has gone wrong with the political process: the lobbying industry. It was inevitable. If you want something from a public official, it’s good to have an intermediary seek it for you—someone who specializes in this sort of thing and who has a personal relationship with the person to be influenced. A lobbyist.[17]
The extent of lobbying depends once again on the number and value of things that public officials have to sell. The federal government as of 1975 had a newly expanded inventory of shiny, valuable goods. That alone would have stimulated more business for lobbyists. But the effectiveness of lobbying is also influenced by the distance that separates a member of Congress from substantive knowledge of the issue in question, and this, too, is a key element in the systemic nature of the corruption.
In 1930, the average size of the staff of a member of the House was 2.0—meaning that the average House member had a secretary, and one aide for everything else. The average number of staff for senators was 2.9. Perforce, the members did most of the substantive work themselves. By 1957, those numbers had expanded to 5.6 staff members in the House and 11.6 in the Senate; by 1967, to 9.2 in the House and 17.5 in the Senate.18 But even at this point, according to Gerry Cassidy, a prominent lobbyist who got into the business in those years, “the Senate was a very different place then: small staffs, members did so much of the work themselves, they were on the floor a lot.… And members knew what they were talking about. They had a lot of time.… [They] were very familiar with issues.”19
Just ten years later, in 1977, the average House member had an office staff of 16 people and the average Senator had a staff of 36. The number of issues that members had to vote on had increased. The number of regulatory issues the PACs were bringing to members had mushroomed. Meanwhile, the time representatives and senators could devote to these issues had been slashed—in part because they were now forced to spend so much time fund-raising. In its briefing for newly elected House members after the election of 2012, the Democratic Congressional Campaign Committee presented a “Model Daily Schedule” for members when they were in DC.20 It included four hours of “call time”—the term for phoning contributors—and one hour of “strategic outreach,” which includes such things as breakfasts and meet-and-greets with supporters. When they’re not in Washington, the Model Daily Schedule calls for three hours of daily call time plus one hour of strategic outreach.
The first-order effect was that a large proportion of the decisions members make, and the actions of their offices on behalf of special interests, are not the result of the members’ deliberate, considered judgment, but the result of a staffer’s recommendation. In his 2009 memoir, Ted Kennedy estimated that staff members handled about 95 percent of the legislative responsibility, representing “an enormous shift in responsibility” from the elected members to staff.21 Members who rely so heavily on their staff’s recommendations aren’t being lazy. They are required to make more decisions than they have time to make on their own.
The second-order effect was that lobbyists no longer have just 435 representatives and 100 senators whose influence can produce the desired result; the right recommendation made to a harried member by an aide can also produce the right decision, and the number of people in those positions kept growing. Add in all the people staffing the House and Senate committees, plus all the people in the regulatory agencies who can tweak a regulation, and there has been a population explosion among the people who are worth lobbying.
The lobbying industry flourished commensurately. Here’s another of those facts from the past that are hard for today’s readers to believe: The first firm that explicitly identified itself as a lobbying firm did not appear until 1975.22 Coming up with exact figures on what happened since then is difficult. A 1991 study by the General Accounting Office found that of 13,500 individuals and organizations listed as key “influence peddlers” in a widely used book, 10,000 were not registered as lobbyists.23 At the peak of registration in 2007, before the reform act of 2007 led many lobbyists to deregister (while continuing to lobby), there were 14,837 registered lobbyists, whose annual spending totaled $3 billion.
By this time, politicians needed the lobbyists as much as lobbyists needed them, serving, in Robert Kaiser’s words, as “advisors, fund-raisers, even finance chairmen of their campaigns.”24 Former senator Chuck Hagel explained to Kaiser how the campaign financing aspect of the lobbyists’ services works. The national committees of the Democrats and Republicans alike use huge fund-raising dinners to finance House and Senate campaigns, raising up to $20 or $25 million per dinner. “Who do we go to, to make sure that we get $20 to $25 million?” Hagel said. “I’ve run these dinners so I know what I’m talking about. You go to a committee of twenty-five lobbyists, a steering committee. And you say, Okay, you guys each have to come up with a million dollars.… So we go to them for that fast money.”25
This is not the place to present the detailed evidence for the corruption now systemic in Congress. That evidence has been presented in many recent books. If you want to pursue it, start with So Damn Much Money by Robert Kaiser; Crony Capitalism in America, 2008–2012, by Hunter Lewis; and two books, Extortion and Throw Them All Out, by Peter Schweizer. I can summarize the situation by reviewing the symptoms of corruption in a kleptocracy, and applying it to the contemporary political process.
In a Corrupt System, Government Service Is a Way to Get Rich
In one respect, the current situation is nothing new. In the 1940s and 1950s, Lyndon Johnson became a multimillionaire on a government salary because (among other financial shenanigans) his wife was given a television monopoly for Austin, Texas—something enjoyed by no other owner of a television station in a major city.26 The same kind of financial exploitation of insider contacts, information, and benefits persists today. Consider investment performance. The average American investor underperforms the market. For the last several years, the average hedge fund has underperformed the market.27 An analysis of 4,000 stock trades by US senators found that the average senator beat the market by 12 percent per year.28 A study of stock trades of House members found that they did no better than ordinary investors with most of their stocks but did quite well on stocks with which they were “politically connected.”29 Peter Schweizer gives the gory details of the circumstances leading to specific stock trades by specific members in Throw Them All Out. He also documents numerous instances in which members of Congress have used legislative legerdemain to target roads, public transit routes, and federal facilities so that they increase the value of property held by the members.
These are the traditional ways of getting rich through government service that go back to the founding, but they are arguably more widespread than ever before because the enrichment process has been institutionalized through the “revolving door.” It is accepted that members of Congress, senior staff assistants, and senior officials in the government will use their government service to secure positions in the lobbying industry, or in the industries they have been regulating, after they leave government service. Those jobs pay many multiples of their former government salaries.
This route to enrichment is most definitely not traditional. Robert Kaiser recounts the disapproving gossip among members and journalists in the late 1970s when, for the first time, a former member reappeared on the floor of the House as a lobbyist.30 But the practice soon spread, then became standard operating procedure. By 2007, 188 former members of Congress were registered lobbyists. Between 1998 and 2004, half of the senators and 42 percent of House members who left Congress became lobbyists. Three thousand six hundred staffers went through the revolving door.31 And the same thing was happening among political appointees, especially from the regulatory agencies. As of 2008, 310 officials who formerly worked for George W. Bush and 283 who formerly worked for Bill Clinton had gone to work for lobbying firms, PACs, or industries with which they had been involved while in office.32 Kaiser presents these numbers and summarizes them as follows:
These numbers aren’t just statistics; they describe the entrenched culture of modern Washington. The essential nature of this culture could not be quickly changed by a ban on congressmen flying in corporate jets or accepting meals or travel from lobbyists, or even by a two-year cooling-off period. In Washington it had become normal to use government experience—in Congress and the executive branch—as a stepping-stone to lucrative work in the “private sector” that is devoted to influencing the government.33
There’s a phrase for it among Hill staffers: “cashing in.” When House Speaker Nancy Pelosi wanted to put a two-year cooling-off period (the time between leaving a government job and coming out the other side of the revolving door) in a proposed bill, one of the arguments used to dissuade her was that House members would have a hard time attracting top-flight talent.34 Why would talented people want to become congressional aides unless they could expect to cash in?
In a Corrupt System, You Pay for Access to the Authorities
If you are an individual constituent with a good story, you might still get some time with your member of Congress even if you haven’t given him a penny. But if you are a corporation or an organization with resources, you are expected to pay for access. Once again, it’s standard operating procedure. It doesn’t necessarily have to be a payment directly to the campaign of the person you’re trying to see, but you had better be listed among the “friendlies” by the member’s party, and the way you get listed as a “friendly” is by having contributed. Usually this has been an informal (though universally observed) understanding. After he became Republican Whip in 1995, Tom DeLay brought it nakedly into the open. He prepared “the Book”—a compilation of all the contributions by the four hundred largest PACs made to both Democratic and Republican members over the previous two years. These were used to establish ratings of “friendly” or “unfriendly” for every company, industry, or association that was likely to be a client of the major lobbying firms. The Book was laid on a folder in the anteroom to DeLay’s office in the Capitol Building, where any visitor was welcome to leaf through it. “Friendlies” could get meetings with DeLay. “Unfriendlies” could not. You could easily switch your classification. No protestations of ideological solidarity were necessary. Just contribute enough money, and you became a “friendly.”35
In a Corrupt System, Officials Shake Down Businesses
Members of Congress do not just passively accept corporate contributions as the price of an appointment. They also take the initiative, behaving in ways that look like shakedowns. The former CEO of a major corporation put it this way: “What has been called legalized bribery looks like extortion to us.… I know from personal experience and from other executives that it’s not easy saying no to appeals for cash from powerful members of Congress or their operatives.… The threat may be veiled, but the message is clear: failing to donate could hurt your company.”36
The shakedowns also occur in what Peter Schweizer calls “tollbooth” charges: donations paid to get a politician to do what he is supposed to do anyway. Thus, for example, the Wireless Tax Fairness Act was expected to come to a vote in the fall of 2011. It was supported by the cell-phone industry, had broad bipartisan support, and was certain to pass. But for months House Speaker John Boehner did not bring the bill to the floor for a vote. Finally, he declared a vote for November 1, 2011. The day before the vote, twenty-eight executives of AT&T wrote checks for John Boehner’s campaign fund. The day of the vote, twenty-eight executives of Verizon sent checks to members of Congress, both Democrat and Republican.37 That’s how the tollbooth works. It’s not big money—a total of about $50,000. John Boehner was not behaving in some novel way; Speakers of the House going back to Jim Wright have routinely collected tolls. But think about it for a minute: Large numbers of executives do not spontaneously write campaign contributions on the same day. A message had to have gone out from someone that went something like this: “I’m happy to report that our bill is going to be brought to the floor for a vote tomorrow, but I’m told that it would be appropriate for us to come up with X amount of dollars. That works out to Y dollars from each of you.” It’s corruption. There’s no other word for it.
Or take the case of tax extenders. The tax code is riddled with special “temporary” corporate tax breaks that have an expiration date. But Congress can vote to retain those tax breaks through “tax extenders.” And so it has become an annual game in Washington: Congress leaves it up in the air whether a given tax will be extended and then, just before the tax extender is approved by the relevant committee (which usually ensures approval by the full House or Senate), a flood of checks arrives for senators or House members who run the key committees that can push through tax extenders. One of the most important of these “temporary” tax breaks is the tax credit for research and development (R&D) expenditures enacted in 1981. Its effectiveness in promoting technological innovation is widely thought to have provided major benefits to the nation as a whole. So why, more than thirty years later, is the R&D tax credit still temporary? “They trot out the R&D tax credit every few years,” observed Bob Herbold, former COO of Microsoft, “and it’s always with their hands open, looking for money. It’s like an annuity for them. They won’t make it permanent because it doesn’t make sense for them to make it permanent.”38 In 1998, there were 42 tax extenders. By 2011, they had more than tripled, to 154.39
In a Corrupt System, Public Officials Shower Their Friends with Gifts
In the United States, this has taken the form of pork-barrel projects that members of Congress create for their state or district. It has been going on ever since the government began handing out contracts. This is one type of corruption that has always been systemic: elected officials usually want to be reelected, and reelection is facilitated by getting the government to spend money that directly benefits their constituents. Members who consider themselves to be scrupulously honest can direct these goodies to their constituents without guilt because they tell themselves that their constituents really do need the community centers, roads, jobs, or whatever else the pork consists of, and they, the members, aren’t profiting by even a penny. But in reality it amounts to allocation of public money not on the merits of the case but because of political pull for personal political gain. It’s not the worst form of corruption, but it’s corruption. And it’s been growing. An advocacy organization, Citizens Against Government Waste, has tabulated the projects that it defines as pork.[40] The first year of their data goes back to 1991, when fewer than 400 projects counted as pork. That number reached a high of 14,000 in 2006, with a value of more than $31 billion.41
In a Corrupt System, Bribes Produce Results Independently of Political Principle
In 2007, Charles Rangel of New York, then chairman of the House Ways and Means Committee, proposed to raise the tax on hedge-fund and equity-fund profits from 15 percent to 35 percent. Rangel’s Senate colleague Charles Schumer was among the most progressive members of the Senate, and not shy about saying so. Everything in his avowed political philosophy should have led him to support Rangel’s proposal. And yet, as Robert Kaiser reports,
Rangel’s plan was blocked. Its most effective opponent was the congressman’s fellow Democrat from New York, Charles Schumer. He became the investment industry’s leading advocate in the Senate, a role that benefited him in his job as chairman of the Democratic Senatorial Campaign Committee, which collected millions from investment company executives while Schumer staved off legislation the industry opposed.42
Lobbying expenditures by the financial community went up from $4 million in 2007 to $20 million in 2008. Their political contributions to candidates during the same period increased from $11 million to $20 million.
If you want more than individual cases, a scholarly study of 463 executives who had been prosecuted for violations of the rules of the Securities and Exchange Commission found that “accused executives at firms who make political contributions, either via a political action committee or via the CEO, are banned for three fewer years, serve probation five fewer years, prison for six fewer years, and are 46 percent less likely to receive both prison time and an officer ban” than firms that did not contribute. Furthermore, the amount of money contributed had an independent effect, with high contributions associated with still lesser penalties.43 Another study looked at the investigation phase of possible fraud violations. Companies who retained lobbyists were 38 percent less likely to have a charge of fraud levied against them.44
Now we come to earmarks—those provisions slipped into large bills, especially the massive appropriations bills, that specify that certain funds are to be spent on a particular private entity’s projects, or that exempt a particular business from a tax or regulation. Some of what we now call earmarks are traditional pork instigated by the members themselves. But in 1976, one of the fledgling lobbying firms, Schlossberg-Cassidy, discovered a new way for lobbying firms to attract clients: by acting as go-betweens that could enable entities in the private sector to instigate their own pork. The first such earmark was $20 million for a new nutritional center at Tufts University.45 What had been done didn’t go unnoticed—the Washington Post editorialized against it—but over the next few years Schlossberg-Cassidy parlayed their success into more university clients, and then broke still more new ground when they got Ocean Spray, the cranberry-growers’ cooperative, to start a PAC. Schlossberg-Cassidy then managed the PAC, deciding which members of Congress got contributions so that Ocean Spray’s needs for earmarks could be arranged.
Over the next three decades, earmarks increased from a handful to thousands of provisions slipped into bills. These appropriations were not “approved” by Congress in any meaningful sense of the word. They were just stuck into bills at the behest of one or two members, and the entire bill was passed without anyone but the sponsors even knowing they were in there. Or caring. A study by the Congressional Research Service in 2006 found that the federal budget in fiscal 2005 had 16,072 earmarks by its definitions, up from 4,203 in the first year of its survey, 1994.46
The nakedness of the quid pro quos implicit in earmarks became a national scandal. As I write, a moratorium on earmarks passed in 2010 is still in effect. It is unclear how much of the earmark effort has been converted to alternative methods.
Washington is still not nearly as corrupt as real kleptocracies such as Equatorial Guinea, Uzbekistan, or Sudan.[47] The people who run Washington are generally more honest, more committed to the public good, and less thuggish than the officials in a real kleptocracy. The proportional size of the take in Washington is far less than the take in a real kleptocracy. But the parallels in the ways that Washington and kleptocracies operate are many and troubling.
The moratorium on earmarks that began in 2010 shows that Congress is not entirely immune to the public’s disgust. But we have two test cases of attempts at deeper reform, and neither gives much reason for optimism. One is the reform legislation of 2007, the Honest Leadership and Open Government Act (HLOGA), intended to reduce systemic corruption. It had a long list of provisions. Members of Congress and lobbyists were required to submit many more, and more detailed, reports on their activities. Lobbyists became criminally liable for gifts to members and staff. The rules for earmarks were tightened.48 It all looked great on paper. But it didn’t do anything to change the way that money would flow into campaigns, and it didn’t get to the heart of the revolving door by which former members and their staffs take lucrative positions with lobbyists.49
As I write, HLOGA has been in effect for seven years. During that time, the number of registered lobbyists has gone down, but the spending on lobbying has gone up. How is that possible? Because lobbyists, faced with the new restrictions, stopped registering as lobbyists. Thus former Senate majority leader Tom Daschle went to work for the law firm of Alston & Bird as a “special policy advisor.” The firm’s lobbying income doubled during his first year. Newt Gingrich took home $300,000 a year from Freddie Mac for his work as a “historian.”50 Forty-six percent of those who deregistered continued to work for their same employer, taking advantage of a provision in the law that allows them to continue lobbying without registering if they spend less than 20 percent of their time lobbying—a loophole of gaping proportions. As of 2013, the number of registered lobbyists stood at 12,281. The research of political scientist James Thurber, who has studied congressional lobbying for more than thirty years, puts the true number of lobbyists at around 100,000.51 I am aware of no dispassionate observer of Congress, from either side of the political spectrum, who has tried to make the case that HLOGA achieved anything close to the goals it promised, or even made government more open.
The second test case is the executive order signed by Barack Obama on his first full day in office. It barred anyone who had been a registered lobbyist in the previous two years from a job in his administration, prohibited new hires from working on issues related to their former employers for two years, and required that persons leaving the administration refrain from lobbying for two years. But within weeks, the new president declared that three new senior officials were “uniquely qualified” for the position the administration had in mind, and therefore the anti-lobbying rules were waived.52 Within the first year and a half, forty more waivers followed. On top of those were officials—the general counsel for Health and Human Services and the chief weapons buyer for the Pentagon, for example—who had been lobbyists by any ordinary understanding of their careers but were not registered lobbyists, and thus were exempt from the president’s executive order. The executive order issued with such fanfare at the outset of the administration has become, to borrow a word from the Nixon years, inoperative.
As I write, the Republicans have just won control of the Senate and have their largest majority in the House since 1930. What if they can add a Republican president to those majorities in 2016? To think that it would make any difference in limiting government requires a triumph of hope over experience. Given power, the Republicans have proved themselves to be as embedded in a corrupt system as the Democrats. They aren’t worse than the Democrats, but neither have they been better. Since my readers are overwhelmingly on the political right, I think it is important to take a few pages to make that point.
For two decades following the events in 1970–75 that transformed the dynamics of congressional politics, the Democrats were riding high. They controlled the House throughout and the Senate for all but six years. During that period, they took advantage of their prerogatives under the new rules of the game, and encouraged an unprecedented polarization of congressional politics.53 I don’t need to convince most of you of that. What you may not be aware of is the degree to which the Republican majority in the House from 1995 to 2006 not only perpetuated the corrupt practices of the Democrats but extended them.
Democrats first used earmarks in the modern sense of that term starting in the 1970s, and the use of earmarks expanded rapidly thereafter. One of the GOP’s themes during the 1994 campaign was Democratic corruption, with earmarks being a prime target. The new Speaker, Newt Gingrich, had it within his power to end earmarks altogether. He chose not to, but at least the number of earmarks did not increase markedly on his watch. At the end of 1998, Gingrich resigned, to be replaced by Dennis Hastert as Speaker, with Majority Whip Tom DeLay as the power behind the throne. The use of earmarks took off. Here are some illustrative numbers from the Congressional Research Service study, ranking the cabinet departments by the number of earmarks affecting them in the 1994 budget.
NUMBER OF EARMARKS IN APPROPRIATION ACTS, 1994 AND 2005
| Cabinet Department | 1994 | 2005 | Ratio |
| Energy and Water Development | 1,574 | 2,313 | 1.5 |
| Defense | 587 | 2,506 | 4.3 |
| Interior | 314 | 568 | 1.8 |
| Agriculture | 313 | 704 | 2.3 |
| Commerce, Justice, and State | 253 | 1,722 | 6.8 |
| Transportation | 140 | 2,094 | 15.0 |
| Veterans, HUD | 30 | 2,080 | 69.3 |
| Labor, HHS, Education | 5 | 3,014 | 602.8 |
Source: Congressional Research Service (2006).
Republicans not only multiplied the use of earmarks in the cabinet departments that had seen the most in the past—Energy and Defense—they also took earmarks into departments that had been virtually ignored. Democrats joined in the spree (they accounted for 40 percent of the earmarks), but Republicans led the way.54
As Republican whip, DeLay took the Democrats’ exploitation of the power of the majority to new depths. I have already described “the Book,” which stripped away any pretense that access was not contingent on contributions. But DeLay generated many other stories. For example, there was the letter sent to corporate PACs in the state of Washington when a new Republican member scheduled a fund-raiser. Each letter noted the exact amount the PAC had given to the Republican’s opponent in the preceding election and expressed DeLay’s surprise that the PAC had supported the opponent—but assured the recipient that the PAC now had “the opportunity to work toward a positive future relationship,” concluding with the hard-to-misinterpret sentence, “Your immediate support for Randy Tate is personally important to me and the House Republican leadership team.”55 DeLay also implemented the “K Street Strategy,” which forced lobbying firms to hire Republicans by telling them that DeLay wouldn’t meet with lobbyists who were Democrats.
The Democrats had done similar things when they ran the House, but it was agreed—and the Republican leadership was proud of it—that Gingrich and then DeLay had expanded and systematized the shakedown of PACs, and done it more ruthlessly than ever before.
If Republican complicity in the systemic corruption had coincided with effective action to limit the size and power of government, Madisonians would have to struggle with whether the ends justified the means. But as things turned out, we don’t. Some good things happened in the first years of Republican control of Congress. Growth of regulation was slowed in the last half of the 1990s—in two of those years, the number of pages in the Code of Federal Regulations actually went down—and this was largely the effect of a variety of measures initiated by the Republican House. The Congressional Accountability Act of 1995 took away many of the exemptions from federal legislation that members of Congress had formerly enjoyed. The welfare reform act of 1996 marked a significant improvement in the welfare system. From 1998 to 2001, the federal government ran a budget surplus, mostly because of the booming economy, but measures initiated in the Republican House helped.
But in the six years from 2001 to 2006, when Republicans held the White House and both houses of Congress, not only did the GOP fail to limit government, but it’s hard to find evidence that its leaders wanted to. And the systemic corruption was untouched. In the House, we witnessed one specific episode, the passage of the Medicare prescription drug benefit in 2003, that represents an abuse of power and betrayal of principle that easily matches anything the Democrats ever did.
Begin with the nature of the prescription drug benefit. A Democratic congress could have enthusiastically pushed for it—it was exactly the kind of bill that the Democrats had been passing for decades. But the bill was antithetical to limited government or fiscal responsibility. It introduced a new multitrillion-dollar entitlement liability at a time when federal deficits were already high, but did not propose any new taxes to pay for it. The benefit was extended to millions of Medicare participants who were financially able to pay for their own medications. There was no public demand for the benefit.
George W. Bush had proposed the Medicare prescription drug benefit in his speech accepting the Republican nomination. It had not attracted much attention at the time, but by 2003, presidential advisor Karl Rove had concluded that passing such a bill would shore up support among the elderly in the coming presidential campaign, and the idea got new life. The House leadership threw its power behind it, against the opposition of a minority of Madisonians in the Republican caucus. The legislation for implementing the Medicare prescription drug benefit came to a vote in the House of Representatives in the early-morning hours of November 23, 2003.
Since the installation of an electronic voting system thirty years earlier, the House had established the custom of allowing fifteen minutes for all votes to be cast. Voting occasionally was left open for an additional minute or two to accommodate members who were delayed getting to the floor, but the only egregious violation of custom had occurred in 1987 when speaker Jim Wright kept the vote open for an additional fifteen minutes. Wright’s action was considered to have been unethical even by many Democrats, and was denounced by then-representative Richard Cheney as “the most arrogant, heavy-handed abuse of power I’ve ever seen in the ten years I’ve been here.”56
The roll call on the Medicare drug prescription benefit opened at 3:00 a.m. By 3:15, when the customary fifteen minutes had elapsed, the nays were ahead and the bill should have failed. Voting remained open. By 3:48, more than half an hour after voting should have been closed, an absolute majority of the House had been recorded as voting against the bill. Voting remained open for another two hours. At 5:53, enough representatives had been persuaded to change their votes to pass the bill.
Thomas Mann and Norman Ornstein have provided a detailed account of the arm-twisting, orchestrated by Hastert and DeLay, that went on during the two hours and five minutes between the time when an absolute majority had voted against the bill and when a majority in favor of the bill had miraculously emerged.57 There is a certain perfection to the House leadership’s perfidy: The Republican Party, billing itself as the party seeking to hold back big government, creates a gigantic new giveaway for purposes of winning an election, doesn’t even try to pay for it, and then runs roughshod over the House’s voting procedures and engages in undisguised coercion and bribery to get enough votes. It is hard to think of anything the Republican House could have done that would have made its betrayal of principle more complete.
For Madisonians, Republican control of Congress is still preferable to Democratic control. The Republican-controlled Congress after 2010 was an indispensable roadblock to legislation advocated by the Obama administration that badly needed to be blocked. But this reality remains: The Republicans controlled both houses of Congress from 1995 through 2006, and the White House as well for the last six of those years. During this period, government expanded on every dimension. The Medicare drug entitlement was just one of the legislative expansions. Even after excluding entitlements (Medicare and Social Security), unemployment insurance (directly affected by the economy), and law-enforcement and border-security expenditures (directly affected by 9/11), domestic spending during the six years from 2000 to 2006 when Republicans had nobody to blame but themselves grew by $38.9 billion per year, more in constant dollars than under any other administration except those of Barack Obama and another Republican, George H. W. Bush.58 The number of pages in the Code of Federal Regulations during 2000–2006 grew more per year than at any time since Jimmy Carter’s administration, except for the administration of Bush Sr.59
Most depressing of all, throughout the twelve years from 1995 through 2006, when they controlled both houses of Congress, the Republicans demonstrated themselves to be as systemically corrupt as the Democrats. The nature of that corruption ensures that the size and reach of government will increase no matter which party is in power.