Donald Trump rode to Washington, D.C., on a pledge to “drain the swamp,” but so far his administration has luxuriated in the filth. Trump’s hotels have made a mint from bookings related to government business. And with the president’s tax returns still under lock and key, it remains unclear how the Trump Organization may be profiting from his various policies. Meanwhile, former EPA Administrator Scott Pruitt seems to have used the resources of the Environmental Protection Agency to live high on the hog, tasking staffers with attending to his personal business and receiving sweetheart deals on room and board from special interests.
And it is not just Trump. Senator Bob Menendez of New Jersey, a Democrat, was prosecuted last year for corruption-related offenses stemming from his relationship with the ophthalmologist Salomon Melgen. Although after a mistrial the Department of Justice dropped the charges against Menendez, it is clear that Melgen lavished high-value gifts upon Menendez, and in turn received attention that the average New Jerseyan could never hope to get.
All of this comes at a time when Americans feel especially alienated from Washington, D.C. Populist movements on the left and right have advanced opposing policy solutions, but everybody from Bernie Sanders to Ted Cruz seems to believe that the government is working for the “1 percent,” rather than the people at large.
Unfortunately, there are no easy answers to the problem of political corruption, to the anti-republican bending of government authority to serve the interests of a well-connected few rather than the many. It would be a relief if such corruption were simply the result of a handful of bad actors in politics, or a recent development that might be easily reversed, but its roots go much deeper. Ultimately, corruption is a side effect of the modern state itself. Any government robust enough to perform the tasks the public demands of it is vulnerable to being captured or corrupted by private interests. It’s a problem as old as the American republic itself—and the first step to addressing it is understanding it not as an aberration or departure, but as an inevitable and inherent feature of our system of government.
As soon as the Constitution became the law of the land, a handful of wealthy elites began to appropriate the government’s new powers for their own ends. It’s a story I recount in my new book, The Price of Greatness: Alexander Hamilton, James Madison, and the Creation of American Oligarchy. The nation’s public finances were a mess when Alexander Hamilton became the first Treasury secretary in 1789. The Continental Congress had been unable to tax, allowing federal debts to pile up. Meanwhile, the economic depression that followed the Revolutionary War left many states deep in the red. And public faith in the competence of the government was fading fast.
In response, Hamilton offered a truly brilliant financial-reform package. During its first session, Congress passed a national tax, and the secretary used the newfound confidence in the government as a foundation for public and private credit. He proposed a full repayment of the national and state debts, a sweeping plan that increased the price of all government bonds to face value. Then he proposed chartering the Bank of the United States, which would hold public tax revenues but also engage in private lending. Hamilton, in effect, was creating a public-private partnership between the wealthy few and the government. The moneyed elite would reap windfall profits from his policies, but Hamilton would yoke their private interests to the public good.
Yet Hamilton was overly optimistic about the selflessness of the rich. While he himself never made a dishonest dollar from politics, he surrounded himself with men of dubious morals, who indiscreetly mixed public service with private profit. They caught wind of Hamilton’s plans before they were released to the public and set about snatching up public debt on the cheap. In fact, William Duer, Hamilton’s assistant secretary at Treasury, tried to use his advance knowledge to create an international-banking syndicate that sold domestic debt off to the Dutch. Later on, Duer would try unsuccessfully to corner the market on public securities. When he failed, he sparked a panic that ultimately forced Hamilton to bail the market out with tax dollars, much as the government did in 2008 with the Troubled Asset Relief Program.
Worse, a handful of public officials threatened to blow up the whole system when their paydays were put at risk. Hamilton’s plan to pay back the national debt was more or less uncontroversial, but a handful of states objected to his plan to assume state debts. They reasoned it was unfair to the states that had already paid back a portion of their debts, and that it was better to wait for the federal government to do a full accounting of public expenditures during the Continental Congress. Led by James Madison, this group managed to defeat Hamilton’s assumption plan in the spring of 1790. This would have been a disaster for the speculators, many of whom had friends in government, or were in government themselves. They responded by threatening to derail paying back the national debt altogether—figuring if they were going to be ruined, then the whole country might as well be, too.
Madison was aghast at these developments. He wrote to Thomas Jefferson that Hamilton had turned the rich into the “Praetorian band of the government, at once its tool and its tyrant; bribed by its largesses, and overawing it, by clamours and combinations.” Madison had a point. By granting the wealthy such a bounty from the government, Hamilton had effectively given them a share of political power, which they then proceeded to use to enrich themselves at the expense of the public interest.
Yet the great irony is that, if Hamilton’s program had a corrupting influence, it was also essential to the nation’s long-term well-being. At this point in its history, the United States was the agricultural backwater of the West, mostly an afterthought among the great power players of European politics. It was Hamilton, more than any Founder, who saw just how precarious the country’s position truly was. And it was Hamilton who created the financial framework that led to the Industrial Revolution, and ultimately the prosperity that we take for granted today.
There is a lesson in this seeming paradox—for it points to the underlying, institutional cause of corruption. A government powerful enough to do the sorts of things we all take for granted—protect the homeland, provide social welfare, manage the markets—is inevitably going to get itself entangled with private interests, usually the wealthiest among us. After all, the government does not build tanks or airplanes; it relies on private contractors. It does not build hospitals or hire doctors to provide Medicare; it pays private medical-service providers. It does not clean the air; it regulates the industries that pollute it. And the government’s relationship with the industries that it subsidizes or regulates is not a one-way street. Those private factions often come to exert undue influence over the affairs of state. They can be both the “tool” of the public interest and “the tyrant” of the government, as Madison aptly put it.
And while it is proper to disdain the likes of Pruitt and Menendez, Americans should also recognize that the larger danger is that interest groups will always have a keen interest in influencing politicians of weak morals, so long as the government is involved in their industries.
In theory, a night-watchman state could solve this problem; a government that hardly does anything is not worth corrupting. But few want such a lean state. Instead, Americans need to do a better job of disentangling the private interests and public service of government officials; the place where our government is most vulnerable to corruption is the wallet of the politician.
There’s no shortage of common-sense proposals to do that. Start by restricting the “revolving door” between the government and the private sector—politicians expect to cash in on their time in government, and scholarly research has shown that they bend public policies to the interests of their prospective employers. Create similar standards for high-level congressional staffers, on committees such as Senate Finance and House Energy and Commerce. We also need to pay such staffers a salary that is commensurate with what their skills and knowledge could acquire in the private sector, so that they are not looking for opportunities to cash in.
While we are at it, we should massively expand the number of congressional staffers. Amazingly, the legislative branch has about as many employees as the Department of Agriculture, and many congressional staffers are in local offices dealing with constituent concerns. This means that members of Congress often go to interest groups to acquire information on policy implications. If you have ever wondered why special interests actually write sections of the law, that is your answer. Congress does not have the policy expertise to do it itself.
But we should think bigger, too. Campaign finance looms large, and neither the right nor the left has dealt with it in a realistic way. The right thinks the First Amendment demands a laissez-faire approach to finance, and in so doing overlooks the corrupting influence of money in politics. The left is too obsessed with regulating money, and thus fails to appreciate that politics is expensive, and that campaign funds have to come from somewhere. After more than a century of campaign-finance regulations, it still mostly comes from the same place, at least for the average member of Congress: wealthy interests with a direct stake in policy outcomes. What we really need is an alternative source of campaign funds: The government should step in as a financier of politics, with a matching program that incentivizes members of Congress to fundraise in small-dollar amounts from constituents back in their districts.
Procedural reforms like these should ease the problems of corruption. But the big lesson from the Hamilton–Madison dispute is that political corruption is an inevitable byproduct of a government that handles the big tasks we expect in the modern world. Ultimately, it is voters themselves who serve as the backstop against the republic turning into an oligarchy. When, despite such reforms, some politicians persist in privileging the interests of the wealthy and the powerful, we the people need to just vote the bums out.
