September 7, 1996
National Journal, Vol. 28, No. 36
n June, when congressional Democrats unveiled ``Families First,'' their new policy agenda, the most important part was written between the lines: an acknowledgment that a politician's place, these days, is at the margins. The Democrats contented themselves with a program to prevent teen pregnancy, stiffer penalties for companies that raid pension funds, a tax credit for college students and other such dribs and drabs.
``It's incremental by design,'' Senate Minority Leader Thomas A. Daschle, D-S.D., told reporters. ``We want it to be something that people can understand and believe can happen.'' So much for revolution.
Anybody remember House Speaker Newt Gingrich, R-Ga.? When he ascended to the Speaker's rostrum almost two years ago, he brought with him high, maybe overweening, expectations. ``What I can do between now and Easter is break up the Washington logjam, shift power back to the 50 states, break up all the liberal national organizations,'' he told The Washington Times at the time. Two years before that, President Clinton had arrived with similarly big plans: national service, job training, public infrastructure, health care.
Now 1996 is here. Gingrich has gone underground and Clinton is reduced to proclaiming that the era of big government is over. Both men embarked on ambitious reform efforts. Both saw their plans not only defeated but annihilated. Yet Americans remain deeply disenchanted with government. How can government be so disliked and yet so resistant to large-scale change?
In the summer of 1989, Francis Fukuyama, an obscure State Department functionary, proclaimed, in The National Interest magazine, the end of history. He meant not that events had literally stopped happening, but that the ideological battle over how best to run a human society was over. ``The total exhaustion of viable systematic alternatives to Western liberalism,'' he wrote, led to ``the universalization of Western liberal democracy as the final form of human government.'' If you want to know the way that successful societies will be organized in the future--well, look around. This is it. True, there will be plenty of variations on the theme and lots of struggles and change. But the big question, the history-making question, is settled.
What Fukuyama said about history may now be true of America's central government. That is not to say that Washington won't change, sometimes wrenchingly, and won't face real choices between quite different policies. But if you want to know basically how American government will look decades from now--well, look around. Having passed through a minimalist stage in its first 150 years and an expansive stage in its next 50, Washington has become what it will be: a large, incoherent, often incomprehensible mass that is solicitous of its clients but impervious to any broad, coherent program of reform. And this evolution cannot be reversed.
Well, so what? Does anybody really expect dramatic change? Actually, yes. Hillary Rodham Clinton's health care plan would have entailed a vast, even breathtaking and perhaps also backbreaking, expansion of government's duties. Sorry, Mrs. Clinton. When her husband intoned a requiem for the ``era of big government,'' he meant not the end of big government as such, but the end of liberals' hopes for an ambitious and growing public sector.
Today, curiously, it is the Right more than the Left that clings to millennialist visions of a transformed government. America is full of conservative types--if you doubt it, just tune into talk radio--who rail against government and demand its radical shrinkage. In fact, some of these people were elected to Congress in 1994. Modern conservative rhetoric is premised on the idea that ultimately, government can and should be stripped of many of its current functions.
David Frum, an influential conservative writer and author of the new book What's Right: The New Conservative Majority and the Remaking of America (Basic Books Inc.), thinks that government should be about three-fifths its current size, though he grants that change on that order is unlikely. Others are more optimistic. ``I think we can cut government in half in one generation, 25 years,'' said Grover G. Norquist, a conservative activist who heads Americans for Tax Reform (and is an associate of Gingrich's). ``The age cohort that believes in big government as a matter of faith is dying at a rate of two million a year.''
Here is another view: Conservatives who are waiting in the pumpkin patch for government to get small should just forget it and go home. Taxpayers will not allow the government to do much more than it does now. But government's client groups will not allow it to do much less.
If the end of government has come, that doesn't mean that reforms can never happen. Far from it. It means that reforms will be piecemeal and incremental, will be driven by a constant cash crunch rather than any coherent philosophy, and will alter the composition of the government's activities but not greatly change its size, scope or complexity. If the end of government is here, then programs can be changed but government, fundamentally, cannot.
This may be true, but with two caveats. The first is that the end of government is a theory, not a fact. It may, for example, understate the role of ideas in politics. The second is that the theory applies only to change generated from within the normal political process--not to change generated by outside shocks, such as wars or, some might argue, the civil rights revolution. There will, over time, be more such catalytic shocks. Indeed, the next one is arguably already in sight.
The Arithmetic of Gridlock
The case for enlightened defeatism begins with a standard thought experiment from political science. Imagine a small dinner party--say, four men--at a restaurant. Everyone is going to pay an equal share of the tab. Each person soon notices that if he orders a $10 dessert, he gets to eat the whole thing while paying only a fourth of the cost. So he indulges.
The trouble, of course, is that everyone else makes the same calculation. And so everyone orders dessert. And wine. And appetizers. Soon the bill is high and everyone is distressed. So the four diners talk to one another and decide that from then on, they'll make do with less. End of problem.
Now imagine the same dinner, but with one change. This time there are, say, 10,000 people around the table--so many that any conversation between them all is impossible. So many, indeed, that no one diner can know the intentions of any but a few of the others. Now the problem is greatly magnified, in two ways.
First, the incentive to overorder is much larger. Each diner now pays only one ten-thousandth of the cost of his or her extra dessert. Others may not even notice. Second, there is now no ready solution. You may give up your dessert, and persuade the person next to you to do the same. But how can you have any confidence that others will not merely take advantage of your sacrifice to order more chocolate mousse for themselves?
Lacking someone who can construct and enforce a joint agreement (a point we'll come back to), it's always rational, from any one diner's point of view, to order as much food and drink as he or she can get away with. It is also always rational for the diner to oppose any attempt to take food off his or her own plate.
The very large dinner party is like a society of people and groups who receive, and lobby for, benefits from government. One of the first scholars to explore the resulting dynamic in detail was Mancur Olson, an economist at the University of Maryland (College Park). He noted that any narrow interest group faces strong but ultimately perverse incentives to collect goodies at the expense of the broader public. That is true not just empirically but mathematically.
Take the National Sheep Industry Improvement Center, a scrap of bacon included in the 1996 farm bill for sheep and goat ranchers. It will operate a revolving fund that will have as much as $50 million in federal money ``to strengthen and enhance production and marketing of sheep or goat products in the United States.''
America has lots of farms with sheep, but as of 1992 only 1,773 of them did business of more than $50,000 a year in lamb or wool, and those are the farms that stand to gain noticeably from the new center's activities. How much is it worth to each sheep rancher, on average, to win and keep his new federal toy? To keep matters simple, divide $50 million by 1,773, and the result is slightly more than $28,000 per rancher, a nice little sum. Of course, there are various complications, but the broad point holds. The National Sheep Industry Improvement Center's beneficiaries have much to gain by keeping their foothold in the farm bill, and thus they'll spend ample time and money on lobbyists, campaign contributions, advertising campaigns and trips to Washington.
And how much might anybody else care about stopping the sheep center? This time, divide $50 million by 100 million voters. That's about 50 cents each. At that rate, based on the average hourly wage, a sensible voter who invests three minutes of effort on the sheep center is being overgenerous with his time.
Sometimes, of course, a program becomes the center of a national controversy and attracts attention disproportionate to its cost to the average voter, as with welfare or affirmative action. But in a government as large as ours, such programs are few. Again oversimplifying a bit (but not much): Except in rare cases, only the groups directly affected by any particular program care enough to invest in changing or preserving it, or even in knowing what's going on.
Two conclusions flow inexorably from the arithmetic of governance. First, it is almost always sensible for lobbies to energetically support narrow programs favoring themselves and to oppose reductions in their programs. Second, it is almost never sensible for voters to energetically oppose such programs or to support reductions.
Of course, one hope might be that the lobbies would be few enough to manage. Arguably, that was the situation in Franklin D. Roosevelt's day, when the government could think about getting key business and labor leaders in a room and negotiating a national economic plan. But now add a third element, that of time.
The work of Olson and others shows that lobbies proliferate as the years go by. In 1920, only four farmers' groups had offices in Washington. Today there are more than anybody has counted. In fact, today the majority of Americans are themselves members of groups that lobby. Most people take a special-interest portfolio with them when they enter the voting booth.
By now, therefore, the dinner party is very big indeed, and getting steadily bigger. It is very hard to make any deal involving more than a few of the lobbies at a time. Moreover, it is easy for lobbies to organize and mobilize their own little battalions of voters. There's a fundamental dilemma here. The smaller the group (sheep ranchers), the less reason nonmembers have to know or care about it. But the bigger the group (the old folks' lobby), the more voters it can mobilize.
So however much the idea of reform may appeal in the abstract, when it comes at the expense of any existing group it will always be much more fiercely opposed than supported, usually by orders of magnitude. And voters are fully complicit in resisting unpleasant reforms. That's not because they are selfish or unpatriotic. It's because, as at the dinner party, they are rational. They have a large personal stake in preserving the parts of government that benefit them, and little personal stake in getting rid of, or even knowing about, the parts that benefit others.
Allow this dynamic to work over time, and government turns into a vast collection of programs defended by a vast collection of clients. That was what former Office of Management and Budget director Dave Stockman, when he was still a House aide in the 1970s, denounced as the ``social pork barrel.'' Government becomes like a vast coral reef, populated and tended by thousands of lobbies and their friends in Congress, each looking after its own bit without much caring about anyone else's.
Voters have little liking for the resulting mess. But no one wants to be the first to give up his or her share of it. A tug-of-war ensues. From the top down, voters as taxpayers refuse to pay more than a certain amount for government. From the bottom up, as clients and beneficiaries, they refuse to part with their own goodies. The result is the sort of uneasy equilibrium we have today.
That is not to say nothing happens. The key to understanding the end of government is that it is not a state of inactivity; instead, it is a state of much sound and fury, signifying little. At the microcosmic level of particular programs, each in its own small sphere, change goes on all the time. Congresses and Administrations mainly busy themselves with workaday adjustments--these days, often budget cuts--to countless programs. Borrowing conditions are changed, eligibility rules revised, support levels altered.
But--a key point--this change is neither systematic nor coherent. It is a result of bargaining between many particular politicians and many particular lobbies. Budgets may be cut, but almost always in ways that the groups involved find most amenable. Almost always, the result is that existing groups keep as much as they can and, when possible, further entrench themselves.
This year's farm bill radically changed the nature of some of the old-line farm programs, notably the grain subsidies. Wasn't that a big reform? Yes. But it was expensive: The farmers had to be bought off. (See NJ, 5/5/96, p. 978.) And even that would have been impossible if not for two social changes. First, the number of professional farmers has declined sharply, from about 11 per cent of total employment in 1940 to 1.2 per cent today. Inevitably, farmers' influence, though still disproportionate to their numbers, has also declined. Second, farmers themselves became divided about their old program, with a growing number--particularly younger farmers and those relying on sales in overseas markets--resenting rather than liking the old system of price supports.
In such cases, politicians can step in and make a difference. And so reform happens. But such a change in the government does not happen until change in society allows it. When old people are numerous and united, they get more. When farmers are few and divided, they get less. On the workaday level of programs, government does not reflect rational choices of the electorate as a whole. Rather, it is a mirror of the lobbies in society. Like an ant colony, it shifts this way and that as the occupants (the lobbies) struggle against nature (limited budgets).
The big problem is how to make macrocosmic change: top-down, encompassing reform aimed at serving a larger national interest. This is the kind of change that many Americans desire. It can happen only when politicians can roll over the opposition of countless lobbies, each of them able to stick a pin in any foot that steps on it. How can broad, coherent reform ever be accomplished?
At this juncture, a white knight rides to the rescue in the unlikely person of Olson himself. Olson, as much as any living scholar, has demonstrated the insidious power of special-interest arithmetic (the ``logic of collective action,'' as he famously called it) to cause economic and social rot. Yet he is an optimist. Two weapons, he argues, can defeat the tyranny of narrow groups.
The first is the presidency. A President needs a plurality of the whole electorate to win, which means he needs to care more about the economy as a whole than about any one group's piece of it. If a large-scale reform makes the majority better off, than the President will attempt one, sometimes with success. President Carter deregulated banks and transportation, and President Reagan reformed the tax code. In Argentina and New Zealand, leaders put through painful economic reforms that turned around stricken economies. Such leaders, of course, are like the man who takes charge of the big dinner and says, ``No desserts over $4,'' thus pleasing the diners by reducing their bills.
Olson's second source of hope is the electorate itself. ``The only real solution is for societies to acquire a better understanding of economics,'' he writes in a recent article. ``Each of these tiny minorities will easily be defeated if the public wises up. No historical process that is understood is inevitable.''
And so, Olson says, what reformers need is a leader with a national constituency and a vision for change in the national interest. The leader must then persuade the public to rally to his or her cause.
In the past four years, America has had two reformist national leaders: Clinton and Gingrich, while he was acting as de facto head of the national Republican Party. Both offered large visions for change in the national interest: health care reform for Clinton, budget reform for Gingrich. Both depended on overwhelming the defenses of the narrow groups by rallying the public to their cause.
The political process thus delivered leadership. It was Olson's other requisite, followership, that was nowhere to be found. Clinton and Gingrich called, but the people didn't rally to the call. Indeed, they ran the other way. Something went badly wrong. What?
Go back to the overpopulated dinner party. Now the dinner bill is out of hand and somebody prominent proposes a general deal: Nobody will order salad. This could work, but only if most of the diners believe that most of the other diners will cooperate. What if some agree to forgo salad, but the others, seeing the tab drop, order a double dessert? The moment that more than a few diners sniff this kind of foul play, the deal is off.
Last year the Republican Congress was determined to do something about the spiraling costs of medicare. So it proposed a package of reductions. The Republicans knew old folks would be unhappy, and so they plausibly argued, just as Olson would recommend, that the pain they were imposing on one group would be more than offset by the benefits to everybody from lower deficits, lower taxes and a solvent medicare program.
At that stage, the Democrats and the lobbies--which act as a swing vote, supporting whichever side will help them--did exactly as the playbook suggests. They recast the debate as group versus group rather than group versus nation. They stood on a box with a megaphone and warned: ``Don't believe those Republicans. They're not going to give anything back to you once they've cut medicare. They're financing tax cuts for the rich! They're just taking from you to give to someone else.''
Most Americans will sacrifice for a larger public good, but few will sacrifice for a competing group. The elderly are patriotic, but they will not be played for fools. Moreover, the larger public loses interest in reducing medicare if it believes that the only result will be to shift resources from one group to another. By kindling suspicions that the Republicans were acting in the interests of their favorite clients rather than of the nation as a whole, the Democrats and their allied lobbies had no trouble sinking the deal.
On the budget as a whole, the Republicans' many opponents simply turned the coin over. They depicted the congressional budget as harsh and extreme, and insisted that the deficit problem could be managed, at least adequately, without such pain. By kindling suspicions that the Republicans were grinding their own ax rather than taking necessary steps--asking people to skip salad merely because Republicans despise vegetables--the Democrats and their allies again scuttled the deal.
The Republicans, again allied with various defensive lobbies, did much the same to the Democrats with health care reform. ``This doesn't mean more care at lower prices,'' they said, ``it means poorer care for you and better care for other people, with huge new bureaucracies into the bargain.''
Unfortunately for reformers, this trick of kindling mistrust can almost always be used by somebody. The opponents' charges, while overdrawn, had enough truth in them to be plausible: The Republicans were trying to cut medicare while also reducing taxes for the better off, and the Democrats were relying on bureaucratic controls to expand health access for the poor. In a democracy, parties don't get things done unless they reward their supporters, which means the other side can always cry foul. To make matters worse, the voters' cynicism, which admittedly is often justified, makes them quick to believe that politicians are taking them for a ride. Alas for reformers, cynicism is self-fulfilling. Because people do not believe change will really happen, their suspicions are easily mobilized.
In their guts, if not their heads, the voters understand that they are trapped in a lose-lose game. They hanker for a consensus-building politician--a Colin L. Powell or a Ross Perot--to swoop in from outside the system, butt heads together and arrange a grand pact. Indeed, these days Olson himself pins his hopes largely on the emergence of such a leader. But he concedes that this is a faint and perhaps misguided hope. Sensibly enough, Americans prefer seasoned politicians to Napoleonic upstarts.
Here to Stay
And so we wind up where we now are. In the 1990s both parties ventured bold reforms and, for their trouble, both were beaten bloody by a tripartite coalition of opposition partisans, vested interests and alarmed citizens. So this year the two main presidential candidates are running away from reform, rather than on it.
Experience can mislead and analysis can misjudge. Perhaps recent years will turn out to have been a prelude to an era of grand reform. The trouble is that theory and events both point in the same direction. They imply that a nation in crisis--an Argentina, a New Zealand, a Poland--can muster broad support for comprehensive reform. In a nation where ordinary politics prevails, however, narrow groups ``outvote'' broad majorities, and the exceptions are inherently few and far between. Except in galvanizing circumstances, politicians and the broad electorate lack the power to do much more than jiggle the edges of the client-state.
None of this is to say that elections don't matter. It is to say that elections are not about what politicians say they are about, namely a big choice about the size and role of the federal government. In practice, there is no such choice on offer. The real story is the stasis in federal revenues and spending in the post-Nixon era, after the expansionary period ended.
Yes, politics and politicians can and do change things. In 1986, Washington spent 6.5 per cent of the gross domestic product (GDP) on defense; in 1996, defense will receive little more than half that much. But as for the byzantine and vast structure of programs and agencies and subsidies and regulations that makes Washington what it is--that is here to stay.
Politicians talk as though they are engineers holding the controls of a machine-like government, like pilots in a cockpit. In fact, they are more like elephants in the jungle: highly visible and capable of throwing their weight around or toppling the odd tree, but mostly at the mercy of the intricate ecology that surrounds them. It is the aphids and earthworms and dung beetles and algae, the busy little creatures in all their cozy niches--the farm lobbies and veterans' lobbies and corporate lobbies and university lobbies and a million other species--that shape the jungle's topography.
Conservatives see government as the guarantor of individual rights; liberals see it as the solver of national problems. Both have had their day. But perhaps the final victory belongs to neither. It is the client groups who won. And that is the end of government.
Until the earthquake comes.
The end of government implies that any coherent, systemic change in the shape and scope of government is beyond the reach of normal politics. It says little about abnormal politics: the politics of crisis.
Beginning in about 15 years and accelerating thereafter, the large postwar baby boom generation will retire. The number of people 65 and older will have increased from 32 million in 1990 to 68 million in 2030, under current projections. By now most people have heard that this may pose a problem for a government already strapped for money. They may not be aware how large the problem might be.
In 1950, America had more than seven people of working age (20-64) in its population for everyone 65 and older. The burden of supporting social security was light; and, of course, medicare did not yet exist.
By 1990, the ratio of working-age people to seniors was just below 5:1. A large change, but just a beginning. By 2030, according to the Congressional Budget Office (CBO), the ratio will be below 3:1. That is, every retiree will be supported by fewer than three working-age people (and, of course, not all working-age people work).
To figure out what this might mean if current policies are not changed, the CBO assumed that taxes and spending on entitlements (such as public pensions, which grow automatically as more people qualify for benefits) will continue as under current law, and that discretionary spending (which Congress has more direct control over) will grow no faster than inflation (a conservative assumption). In effect, pension and health programs are left unreformed, but taxes aren't raised to pay for them. What happens?
The CBO's short answer: Social security and health programs about double as a share of GDP, to 17 per cent. The deficit, shockingly, sextuples, from 2 per cent of GDP in 1995 to 12 per cent. The national debt more than triples, to more than 150 per cent of GDP.
That, of course, is the good news. But those figures hold the economy constant, and long before the national debt tripled, the economy would begin to crack. And so the CBO made a second set of assumptions, this time feeding the effects of soaring public debt (higher interest rates, lower capital investment) back into the economic projections.
Now things look quite nasty. By 2030, the federal government has doubled in size as a share of the economy. At 20 per cent of GDP, federal interest payments alone are nearly as large as the entire federal budget is today. The federal deficit is more than a fourth the size of the whole economy. The national debt now stands at more than 200 per cent of GDP. In other words, America is a basket case.
Will it happen? Almost certainly not. The question, rather, is in what way the future will be changed, rationally ahead of time or willy-nilly at the last minute. The CBO calculates that averting a run-up in the national debt would require a tax increase of 3-5 per cent of GDP today, or an equivalent spending cut. That is a 15-25 per cent belt-tightening. Quite unpleasant, but acting early is cheaper, because it stops the problem before it begins to compound.
Washington may indeed anticipate the crisis ahead. But recent events give scant grounds for optimism. At least as likely is that, as with the savings and loan crisis of the 1980s and last year's proposed medicare reductions and, for that matter, as with the deficit itself, the government will temporize, doing the least possible in any given year. If so, it drifts in a dinghy toward a waterfall.
Back, for a last visit, to our populous dinner party. Despite everything, before the dinner tab reaches, say, $10,000 for each diner, something will happen. What happens may not be an orderly change in the menu; it may not be an orderly anything. It may be, rather, a riot, a walkout, a payment strike--who knows? Similarly, something will happen between now and fiscal Armageddon.
At bottom, then, the end of government does not mean that government does not change. It means that government is the slave of change, rather than its master.
September 7, 1996