Who Will Tell the People: The Betrayal of American Democracy

"Science," the Greek word for knowledge, when appended to the word "political," creates what seems like an oxymoron. For who could claim to know politics? More complicated than any game, most people who play it become addicts and die without understanding what they were addicted to. The rest of us suffer under their malpractice as our "leaders." A truer case of the blind leading the blind could not be found. Plumb the depths of confusion here.

Who Will Tell the People: The Betrayal of American Democracy

Postby admin » Wed Oct 30, 2013 11:50 pm

by William Greider
© 1992 by William Greider




For Cameron McClure Greider and Katharine Smith Greider, with love and awe

Table of Contents:

Inside Front Cover
Introduction: Mutual Contempt
Part One: Realities of Power
o 1. Mock Democracy
o 2. Well-Kept Secrets
o 3. Bait and Switch
o 4. The Grand Bazaar
o 5. Hollow Laws
o 6. The Fixers
Part Two: How May the People Speak to Power?
o 7. The Politics of "Rude and Crude"
o 8. Political Orphans
o 9. Class Conflict
o 10. Democratic Promise
Part Three: Mediating Voices
o 11. Who Owns the Democrats?
o 12. Rancid Populism
o 13. Angle of Vision
o 14. The Lost Generation
o 15. Citizen GE
Part Four: Triumph and Loss
o 16. Crackpot Realism
o 17. The Closet Dictator
Conclusion: The American Moment
Site Admin
Posts: 34633
Joined: Thu Aug 01, 2013 5:21 am


Postby admin » Wed Oct 30, 2013 11:51 pm


"Raises questions that every American who retains a faith in the self-correcting capacities of democracy ought to confront. Greider's assessment is a compelling one." -- Christian Science Monitor

Praise for Who Will Tell the People:

"One of those rare, essential books that should be not merely read but memorized." -- New York Daily News

"Who Will Tell the People sets out to explain precisely how and why American democracy has washed up on the shoals of cynicism. The complaint may sound familiar, but such a brief precis does not do justice to either the freshness of Greider's argument or the ambition of his approach." -- Time

"William Greider has given us the most subtle interpretation of contemporary American political culture yet to appear in print." -- The Nation

"The real question for Greider and for us is what we can do to reclaim democracy, to take it back from the wealthy special-interest groups that control the national agenda .... Who Will Tell the People is a call to action. He makes a good argument that we'd better get busy if we are to make government work for us." -- Houston Chronicle

"Valuable ... Inspiring ... [Greider's] criticism is not only broad but deep." -- The Washington Monthly

"[An] eye-opening expose of how government has become a game for lobbyists, lawyers and influence brokers .... Stirring." -- Playboy

"Greider knows Washington exceptionally well and is a fine guide to the pork-barreling and back-scratching that glue together the private welfare state." -- New York Newsday

"Impassioned account of what has gone wrong with our democracy ... [Greider] brings to his examination of the American political system an outsider's outrage and an insider's knowledge." -- San Francisco Chronicle

"Greider has mastered the knack of being sweeping and meticulous at the same time.... Greider makes it clear that the citizens' corrosive suspicions about their institutions, their parties and their government are well founded." -- The Washington Post

Also by William Greider

The Trouble with Money
Secrets of the Temple
The Education of David Stockman and Other Americans

Back Cover



"Part tough-minded reportage, part cleanly reasoned indictment and, from beginning to end, a clarion call to the American people to take back their government." -- Hodding Carter III

Who Will Tell the People is a passionate, eye-opening challenge to American democracy. Here is a tough-minded exploration of why we're in trouble, starting with the basic issues of who gets heard, who gets ignored, and why. Greider shows us the realities of power in Washington today today, uncovering the hidden relationships that link politicians with corporations and the rich, and that subvert the needs of ordinary citizens.

How do we put meaning back into public life? Greider shares the stories of some citizens who have managed to crack Washington's "Grand Bazaar" of influence peddling as he reveals the structures designed to thwart them. Without naivete or cynicism, Greider shows us how the system can still be made to work for the people, and delineates the lines of battle in the struggle to save democracy. By showing us the reality of how the political decisions that shape our lives are made, William Greider explains how we can begin to take control once more.


"Comprehensive and compelling ... For anyone who worries about democracy's future." -- Business Week

"Greider's populist indictment of politics-as-usual is detailed and devastating." -- Philadelphia Inquirer


William Greider is the author of several books including the bestselling Secrets of the Temple. He writes regularly on politics for Rolling Stone and is a former assistant managing editor of The Washington Post. Mr. Greider lives in Washington, D.C.

Cover design Marc Cohen
Site Admin
Posts: 34633
Joined: Thu Aug 01, 2013 5:21 am


Postby admin » Wed Oct 30, 2013 11:54 pm

Introduction: Mutual Contempt

The decayed condition of American democracy is difficult to grasp, not because the facts are secret, but because the facts are visible everywhere. Symptoms of distress are accumulating freely in the political system and citizens are demoralized by the lack of coherent remedies. Given the recurring, disturbing facts, a climate of stagnant doubt has enveloped contemporary politics, a generalized sense of disappointment that is too diffuse and intangible to be easily confronted. The things that Americans were taught and still wish to believe about self-government -- the articles of civic faith we loosely call democracy -- no longer seem to fit the present reality.

This dissonance between fact and faith is so discomforting that many naturally turn away from the implications. The visible dysfunctions in politics are dismissed as a temporary aberration or explained away, cynically, as the way things always were. The reluctance and evasion are understandable: Some unwanted truths are too painful to face.

The blunt message of this book is that American democracy is in much deeper trouble than most people wish to acknowledge. Behind the reassuring .facade, the regular election contests and so forth, the substantive meaning of self-government has been hollowed out. What exists behind the formal shell is a systemic breakdown of the shared civic values we call, democracy.

Citizens are cut out of the politics surrounding the most important governing questions. The representative system has undergone a grotesque distortion of its original purpose. The connective tissues that in different ways once linked ordinary people to governing-political parties, the media, the secondary mediating institutions -- no longer function reliably.

At the highest levels of government, the power to decide things has instead gravitated from the many to the few, just as ordinary citizens suspect. Instead of popular will, the government now responds more often to narrow webs of power -- the interests of major economic organizations and concentrated wealth and the influential elites surrounding them. These organizations and individuals manage to shape the largest outcomes to the extent anyone does, while they neutralize or deflect what ordinary people think and believe.

In place of a meaningful democracy, the political community has embraced a permissive culture of false appearances. Government responds to the public's desires with an artful dance of symbolic gestures -- hollow laws that are emptied of serious content in the private bargaining of Washington. Promises are made and never kept. Laws are enacted and never enforced. When ordinary people organize themselves to confront the deception, they find themselves too marginalized to make much difference.

Governing elites, not surprisingly, tend to their own self-interest but, even when their intentions are broadly public- spirited, the result is generally the same: The people are missing from the processes of self-government and government itself suffers from the loss. Disconnected from larger public purposes, people can neither contribute their thinking to the government's decisions nor take any real responsibility for them. Elite decision makers are unable to advance coherent governing agendas for the nation, however, since they are too isolated from common values and experiences to be persuasive. The result is an enervating sense of stalemate.

In sum, the mutual understanding between citizens and government necessary for genuine democracy is now deformed or neglected. While democracy's decline has consequences for everyone, certain sectors of the citizenry suffer from the loss of political representation more severely and personally than everyone else. In general, they are the people who already lack the advantages of higher education or social status. Their political influence cannot depend upon private wealth since they have little or none. The atrophied political system has left them even more vulnerable to domination by others.

While none of these complaints can be regarded as exactly a secret, there is a deeper dimension underlying the democratic problem that is not so easy for ordinary citizens to see. Democratic expectations are now confined and debilitated by the new power relationships that surround government and are buried in the everyday context of the nation's politics -- tacit understandings that determine who has political power and who doesn't. These power relationships are rooted in the complexities that have changed American politics so profoundly over the last few decades, either the deep tides of culture and economics or the conscious political action of interested parties.

Uncovering the patterns of these underlying power realities will be the principal task of this book. They are difficult to discern amid all the bewildering daily facts, but they represent the real source of the general discontent with American politics. They are, likewise, the unpleasant truths that people wish not to face.

Many citizens, especially those closest to power, will be reflexively inclined to resist this diagnosis. Partisans typically claim that the governing problems can be blamed on the people now in power -- either Republicans in the White House or the Democrats who control Congress. Others will observe that, whatever obvious flaws now exist, American democracy has always been afflicted by large imperfections and contradictions. Both claims are narrowly correct, of course, but they are also ways to evade the present reality. The roots of democratic decay, as this inquiry will demonstrate, are deeper than personalities or parties and the familiar ideological arguments; the system will not be cured by an election or two that change the officers of government. Furthermore, the nature of the civic breakdown is peculiar to our own time, reflecting our contemporary conditions and failures; the questions cannot be answered by reciting the shortcomings of previous eras.

Another reason why the actual condition of democracy is difficult to grasp is that the form and facade of self-government remain elaborately in place and functioning. In fact, the mechanics of electoral democracy are now more highly developed (and more costly) than at any other time in history. Collectively American voters will select more than five hundred thousand people to represent them in the public's business, from local sewer commissions to the White House. The results, as everyone knows, are so unsatisfying that the active electorate has been steadily shrinking for a generation and "reforming" elections has become a major preoccupation of public-spirited debate.

The distinguishing premise of this book, however, is that the democratic problem originates from a different source -- the politics of governing, not the politics of winning elections. Most political inquiries focus their analysis on campaigns and candidates, the techniques of persuasion and of assembling electoral majorities, the contest of slogans and ideology and so forth.

This book is centered on the complicated politics that lies beyond elections -- the practical questions of how and why some interests are allowed to dominate the government's decision making while others are excluded. After all, this is the realm of politics that matters to people in their everyday lives. And this is the realm where we will find tangible explanations for their discontent.

Politics is not a game. It exists to resolve the largest questions of the society -- the agreed-upon terms by which everyone can live peaceably with one another. At its best, politics creates and sustains social relationships -- the human conversation and engagement that draw people together and allow them to discover their mutuality. Democracy promises to do this through an inclusive process of conflict and deliberation, debate and compromise. Not every citizen expects to speak personally in the governing dialogue, but every citizen is entitled to feel authentically represented.

The substance of governing politics is the stuff that election campaigns and standard political commentaries mostly ignore -- the nettlesome facts of decision making behind the rhetoric and slogans. Typically, political reporters separate "politics" from substantive "issues" as though they were two different subjects. Yet, in government, even the dimmest member of Congress understands that the substance is the politics. No one can hope to understand what is driving political behavior without grasping the internal facts of governing issues and asking the kinds of gut-level questions that politicians ask themselves in private. Who are the winners in this matter and who are the losers? Who gets the money and who has to pay? Who must be heard on this question and who can be safely ignored?

Thus in order to examine the condition of democracy, this inquiry will explore the contours of a lengthy list of governing issues, some familiar and some obscure, asking the same kinds of questions. Economics, taxation, the environment, education, national defense, financial regulation, wages and working conditions, labor law and corporate citizenship -- all these and some others will appear as the raw material. In every case, the overriding purpose is to plot out patterns of behavior that are general in governing politics. As the evidence accumulates from different examples, the central goal is to reveal the deformed power relationships that explain why this democracy regularly disappoints its citizens.

This critique does not rely upon any idealized notions of what democracy means, but on the elementary principles everyone recognizes. Accountability of the governors to the governed. Equal protection of the law, that is, laws that are free of political manipulation. A presumption of political equality among all citizens (though not equality of wealth or status). The guarantee of timely access to the public debate. A rough sense of honesty in the communication between the government and the people. These are not radical ideas, but basic tenets of the civic faith.

Nor does this analysis pretend that American democracy once existed in some perfected form that now is lost. On the contrary, Americans have never achieved the full reality in their own history or even agreed completely on democracy's meaning. The democratic idea has always been most powerful in America as an unfulfilled vision of what the country might someday become -- a society advancing imperfectly toward self-realization. In that sense, democracy is not so much a particular arrangement of government, but a difficult search. It is the hopeful promise the nation has made to itself. [1]

The search itself is now at risk -- the democratic promise of advancing toward higher ground. From the beginning of the Republic, the redeeming quality of American politics -- and the central virtue of democracy -- has been the capacity for self-correction. That capacity is now endangered too.

A democratic governance is able to adjust to new realities because it is compelled to listen to many voices and, sooner or later, react to what people see and express. In the American experience, the governing system has usually found a way to pull back eventually from extreme swings or social impasse and to start off in new directions. Not perfectly, perhaps not right away, but in time it did fitfully respond. This capacity was more than a matter of good luck or great leaders. As American democracy evolved, multiple balance wheels and self-correcting mechanisms were put in place that encourage this. They promote stability, but they also leave space for invention and new ideas, reform and change.

These self-correcting mechanisms are such familiar features of politics as the running competition for power between the two political parties, the scrutiny by the press and reform critics, the natural tension inherent in the coequal branches of government, the sober monitor imposed by law and the Constitution, the political energies that arise naturally from free people when they organize themselves for collective expression. People are counting on these corrective mechanisms to assert themselves again, as they usually have in the past.

The most troubling proposition in this book is that the self-correcting mechanisms of politics are no longer working. Most of them are still in place and functioning but, for the most part, do not produce the expected results. Some of the mechanisms have disappeared entirely. Some are atrophied or blocked by new circumstances. Some have become so warped and disfigured that they now concretely aggravate the imbalance of power between the many and the few.

That breakdown describes the democratic problem in its bleakest dimensions: Instead of a politics that leads the society sooner or later to confront its problems, American politics has developed new ways to hide from them.

The consequences of democratic failure are enormous for the country, not simply because important public matters are neglected, but because America won't work as a society if the civic faith is lost. Unlike most other nations, the United States has always overcome the vast differences among its people, the social and economic enmities and the storms of political disagreement, through the overarching bond of its democratic understandings. If these connections between the governed and the government are destroyed, if citizens can no longer believe in the mutuality of the American experience, the country may descend into a new kind of social chaos and political unraveling, unlike anything we have experienced before. The early symptoms of such deterioration may already be visible.

Naturally enough, most people focus on narrower, less disturbing explanations of what is wrong. In the standard political dialogues, especially among elites, the discussions generally settle on three familiar ways of explaining the current political distress. The problem is diagnosed, for instance, as the failure of ill-informed citizens and the exaltation of fickle public opinion. Or the problem is attributed to the format of modern election campaigns and the elaborate electioneering technologies surrounding candidates. Or it is defined, more bluntly, as a problem of dirty money, the millions of dollars in campaign contributions that flow to the politicians.

None of these is entirely wrong, but all are inadequate to the true scope of the democratic problem. In order to proceed with an examination into deeper causes, let us first take up these conventional ways that people think about the troubled democracy and explain why each falls short. In doing so, I hope to demonstrate that the only way out of the political distress is to address the democratic problem in its fullest terms, whole and direct, as though the civic principles still matter to us.


Many years ago, when I was a young reporter covering the Kentucky state legislature, I witnessed for the first time a spectacle of democracy that is not mentioned in the civics textbooks. In the midst of debate, the legislators erupted in noisy chaos -- shouting wildly at one another and throwing papers in the air, charging randomly around the House chamber like angry children in a group tantrum. As I later learned, any representative assembly may occasionally experience such moments of bedlam, from city councils to the Congress. They occur on especially divisive issues, when the emotional frustrations boil up and overwhelm decorum.

At the time, I was quite shocked, a measure of my youthful innocence. A jaded old statehouse reporter noticed my astonishment and offered some perspective on the unruly behavior of the elected representatives.

"If you think these guys are bad," he said, "you should see their constituents."

His wisecrack was wickedly funny but, as I came to understand in subsequent years, it also stated an inescapable truth about 'representative democracy. At its best moments and its worst, the democratic system is a kind of two-way mirror between the people and those who are chosen to represent them. It reflects the warts and virtues back and forth between them. Sometimes, as if in a funhouse mirror, the image of politics becomes grotesquely distorted and mocks the public's virtuous sense of itself. At other moments, the mirror reflects political behavior that confirms and even exalts the public's self-esteem.

Either way, people cannot easily escape from the connection. If Washington is a city infested by fools and knaves, where did they come from and who sent them? If citizens do not like what they see in the mirror, what do they intend to do about it?

This tension is as old as the Republic, but a peculiar dimension has developed in modern politics. Politicians are held in contempt by the public. That is well known and not exactly new in American history. What is less well understood (and rarely talked about for the obvious reasons) is the deep contempt politicians have for the general public.

Politicians, rather like priests or police officers, are regularly exposed to the least attractive qualities of human nature -- gaudy dimensions of greed and confusion and mindless fear. It requires strong character for a politician to resist cynicism and retain an idealistic sense of the democratic possibilities. The speeches invoking "the people" as the sacred source of political power have taken on a mocking ring for many.

A Washington lobbyist, a former congressional aide with close relations to influential Senate Democrats, described the perspective with more candor than is allowed to politicians. "This city is full of people who don't like themselves, don't like their jobs and don't like their constituents -- and I mean actively don't like their constituents," the lobbyist told me not long ago. "I'm convinced one of the reasons they are in session so long is that members of Congress have gotten used to being here and they don't like going home where they have to talk to a bunch of Rotarians and play up to local leaders who are just dumb as stumps. They prefer to be here, to be around people they know and like and who understand them -- lawyers, lobbyists, the press and so forth."

Alienation, in other words, runs both ways. The mutual contempt that divides the governed from the governing authorities is the attitude underlying everything else in modern politics, both a symptom of the decay and an active agent in furthering the deterioration. In many private quarters of Washington, Alexander Hamilton's derisive dictum -- "The People! The People is a great beast!" -- has become an operating maxim. Survival in office requires a political strategy for herding "the beast" in harmless directions or deflecting it from serious, matters it may not understand. Now and then, to the general dismay of political elites, Hamilton's "beast" breaks loose and tramples the civility of the regular order, though this usually occurs on inflammatory marginal issues that have little to do with the real substance of governing. [2]

Political elites, nonetheless, complain constantly of their own powerlessness to govern. They depict the system as the hostage of random public opinion -- a "plebiscite democracy" directly wired to every whim reflected in the polls and unable to lead in difficult directions. Among themselves, establishment leaders talk, somewhat nostalgically, about the old days when a handful of party leaders could dictate the terms of national legislation. They ponder structural reforms that might somehow restore centralized party control and insulate politicians further from the fickle voters so that "leadership" could flourish once again. Their anxieties, though sincere, would seem most bizarre to the millions of alienated voters who feel left out and ignored. [3]

Voters do sometimes resemble a leaderless mob -- at least that is how they look through the lens of contemporary political events. They are ignorant on important matters and turn away from complexity. They do charge this way and that, spilling bile or temporary enthusiasms on the public arena, then moving quickly to something else. The jaded perspective shared privately among elected representatives is not altogether wrong. However, if the representative structure were someday altered to shield officeholders and distance citizens even further from power, the "people" would likely become even more disruptive.

Whatever frailty and infirmities dwell in the populace, Americans of today are not, on the whole, less capable than their forebears. But the political culture, the terms and conditions that now circumscribe democratic expression, certainly makes them look that way.

If citizens sometimes behave irresponsibly in politics, it is the role assigned to them. They have lost any other way to act, any means for influencing the governing process in positive and broad-minded terms. The subject of how ordinary people have been gradually cut out of a responsible place in the governing process (and how they still struggle to attain a share of power) will reappear in many forms throughout this book. It is one side of the two-way mirror and, in my thinking, the more important side.

Citizens have been pushed into two cramped roles in politics, neither of which can satisfy their own aspirations or the requirements for a functioning democracy. Both also tend to disturb the governing process that elites are concerned about. In one role, citizens are the mindless mass audience that looks so dumb -- the faceless crowd that speaks in politics mainly through opinion polls. They are the spectators who react clumsily to only the most vivid events, a war or sex scandal or pretty TV commercials.

In this embodiment, the "people" are always present in the political debates, but mainly as scarecrows or totems invoked on behalf of someone else's argument. The rich and complicated diversity of the nation is reduced to a lumpish commodity called "public opinion" that is easily manipulated by the slogans and imagery of mass communications. While the spectators watch a political drama unfold, the media and polling companies instantly tote up their "responses" and feed the results back to the politicians.

The other narrow role open to citizens is as special pleaders, defending their own stuff against other aspirants. Millions of Americans are organized quite effectively for this kind of politics, whether as consumers or petitioners for special benefits or the victims of particular abuses. Some well-known citizen organizations -- the American Association of Retired Persons, the National Rifle Association or the American Israel Public Affairs Committee, for instance-are formidable powers on their own terrain and they guard the subjects dear to their members like burly pickets. Self-interested pleas are the warp of democratic politics and always will be, of course, but the contours of modern government make it very difficult for citizens to accomplish anything else.

These two forms of political presence -- the mindless mass audience and the churlish preoccupation with self-interest -- are the familiar grist of political analysis and have been exhaustively examined. This book concentrates, instead, on the vast political space that is concealed by those two facile characterizations -- the ground where citizens are allowed to connect with political issues larger than self, where their self-interest is harmonized with their broader expectations for the society. That political space is now empty on most important subjects-the vast middle ground where democracy has shrunk and citizens have lost their voice.

That observation does not presume that, a generation ago, there was a halcyon era when everyone felt represented on all the major matters in politics, but the politics that constructs such connections and keeps them in good repair has been severely stunted by modern conditions. This is the politics of building reliable mediating mechanisms that enable people to connect with the higher realms of decision making. It is the development of two-way channels of communication that both educate and listen. It is the many strands of connective tissue, both public and private, between the governed and those in power. Without these most citizens will be rendered silent.

A central social irony is involved in this, one that elite critics seem to find difficult to grasp: The disorders of the governing process they worry about are rooted in this same territory of the debilitated citizens. If the government cannot govern effectively, it is not because the "people" are swarming over it with impossible demands, but because the bonds of dialogue and mutual understanding between citizens and government have become so weakened. The governing problem and the democratic problem are one and the same, created by the same circumstances.

Restoring a climate for responsible governing may thus require the opposite of what the elite analysis supposes. Instead of distancing people further from government decisions, it would entail bringing citizens back into the process in ways that seem genuine to them -- that will allow citizens to feel responsible again for self-government.

Many in the mass audience, it has to be acknowledged, are uninterested in this prospect. Despite their grumblings, they have accepted the loss of status without complaint, neither knowing what political capabilities used to exist for them nor able to imagine what might be constructed in the future. Ernesto Cortes, Jr., a highly regarded community organizer from San Antonio, Texas, has observed that Lord Acton's oft-quoted aphorism -- "power tends to corrupt . . ." -- works both ways.

"Powerlessness also corrupts," Cortes said. "We've got a lot of people who've never developed an understanding of power. They've been institutionally trained to be passive. Power is nothing more than the ability to act in your own behalf. In Spanish, we call the word poder, to have capacity, to be able." [4]

The process by which the citizens of America lost the capacity to speak to power in their own behalf is long and complex (and began well before the present era of politics). Many different elements are involved, among them the institutional arrangements in politics, the rise of mass communications, the language of the expert policy dialogue that surrounds the machinery of modern government. While the complexity makes the loss difficult to visualize, most of the elements are not buried secrets, but familiar features of the everyday political landscape.

The transformation of these features was decisive, however. The most obvious one is the atrophied condition of the two- party political system. For all their flaws, the parties once provided a viable connection for citizens, even quite humble citizens, to the upper realms of politics. People who would never be present themselves in the debate, who lacked the resources or the sophistication to participate directly, had a place to go -- a permanent organization where their views would be taken into account and perhaps mobilized to influence the government.

The parties atrophied as organizations for many reasons -- social and political changes as well as their own undemocratic qualities. When they were stronger, the mechanics of party control were often closely held (and regularly abused) to favor certain citizens and interests While excluding others, especially racial minorities and the disorganized segments of society.

Nevertheless, the easiest way to visualize the empty space that now exists in American politics is to consider what party organizations used to do for people -- and what none of the existing institutions of politics does for them now.

If democracy has lost any accountability to the governed, it is because there is no longer any reliable linkage between citizens and those who hold power. If the people sometimes seem dumb in public affairs, it is because no institution takes responsibility for teaching them or for listening to them. If communities now feel more distant from Washington, it is because they are.


Another familiar way of explaining the decline of politics focuses on the deterioration of elections and campaigns. The decline of electoral politics has been underway for at least a generation and is now so advanced that even political elites have become preoccupied with its implications. If the people no longer believe in elections, will they continue to believe in the power of the elected to govern their lives?

Every season, new discussions are convened around the subject, searching for the mechanical "reforms" that might restore faith in elections. A veritable fortune in foundation grants has been spent trying to devise solutions -- educating inert voters or promoting old-style candidate debates or discouraging negative campaign tactics. Despite these good intentions, the active electorate continues to shrink and, 'as we will discuss at a later point, the shrinkage is almost certain to continue well into the future.

By focusing on the electoral process, these inquiries unconsciously define the meaning of citizenship in rather narrow and passive terms -- citizens whose only role is to show up every couple of years and mark a ballot. Nevertheless, the steady decline in voting is the most visible evidence that something is wrong. Elections are the most direct link to governing power -- the collective lever that is meant to make citizens sovereign and officeholders accountable to them. So why don't people use it, especially when they are so unhappy with government?

Since 1960, voting in presidential elections is down 20 percent (and down 30 percent outside the South where the newly enfranchised black citizens raised participation rates). Roughly half of adult America stays home, despite the hoopla and extraordinarily expensive campaigns for the presidency. Elected power in the representative branch rests on an even narrower base -- a third or less of the electorate. In typical off-year elections, important senators and representatives are returned to office on the votes of small minorities, often as little as 15 percent or 20 percent of their constituents.

Nor are elections the satisfying public rituals they used to be -- dramas that renew the popular faith in self-government. After the 1990 congressional contests, three in four Americans said they were not very satisfied with the outcomes, even when their candidates won. [5]

Paul Weyrich, a New Right conservative who heads the Free Congress Foundation, thinks the very legitimacy of government is at stake in those statistics, that people are sending a message the political system does not wish to hear. "We're perilously close to not having democracy," Weyrich said. "I worry about it night and day. Nonvoters are voting against the system and, if we get a bit more of that, the system won't work."

What the disenchanted are saying, what I have heard them say in many different places, is that the politics of elections seem pointless to them -- no longer connected to anything that really matters. Partisan attachments are still active, of course, but much weaker among Americans than they used to be. F9r most citizens, the point of holding elections is not simply to pick Republicans over Democrats (or vice versa) but to decide something real. Elections no longer seem like efficacious exercises for achieving that purpose.

The disconnection between electoral politics and governing was vividly illustrated in 1988 when a Washington polling firm posed a piquant question to voters a few days before the presidential election. Aside from what Bush and Dukakis are saying in their campaigns, what do you want the next president to pursue? The public responded with an unusual list of priorities:

Make sure the wealthy and big corporations pay their fair share of taxes (important to 77 percent; unimportant to 5 percent). Impose stricter environmental regulation on companies that produce toxic wastes (66 percent to 5 percent). Help the poor and homeless to find jobs and earn a decent living (66 percent to 5 percent). Protect American jobs from foreign competition by tougher trade laws (59 percent to 8 percent). Provide long-term health care and health insurance for everyone (55 percent to 5 percent).

The list seems jarring because, as everyone knows, these were not the mobilizing issues of George Bush's campaign nor did they remotely reflect his own priorities. Yet these are the same people who a few days later elected him president. It was only well down the list of the public's agenda that a significant minority could be found for some of Bush's principal goals -- no new taxes (45 percent) or appointing antiabortion justices to the Supreme Court (35 percent). As opinion polls reported, however, most voters assumed that Bush's "no new taxes" pledge was a cynical campaign ploy. They expected him to break the promise once in power and were not especially surprised when he eventually did. [6]

The larger point is that these expressions of popular aspirations did not matter. No one would take them seriously, not the press or even rival politicians. The opinions were regarded as an idle "wish list" disconnected from the governing process. As president, George Bush would govern in a manner directly contrary to most of these particular public desires. Everyone understood this -- including the voters. The disconnection is so commonplace that it now seems "normal" to almost everyone.

Indeed, the idea of accountability has actually been reversed in the logic of modern political analysis: Whatever the winning candidate wants and believes about government, it is conventionally inferred that the voters must want the same. Why else would they have voted for him? Thus, the voters become dependent on the politicians for their political positions rather than the other way around.

The common wisdom of politics has therefore settled on a much narrower idea of what elections are for -- elections are a search for good character. Issues and ideas may provide the fodder of campaigns, but these are mainly useful in illuminating the temperament of the men and women who are running. Are they wise and honest people? Or do they have some hidden flaw? This definition allows conscientious observers to retain their faith in the electoral process and defend its efficacy.

Constructing campaigns around the character and celebrity of the candidates provides another convenient way to empty them of the substantive content of governing. If the search is mainly for good character, then the only "issues" that matter in electoral politics are ones that may help identify the candidate's personal qualities (or denigrate his opponent's). Thus, campaigns turn naturally to irrelevances that provide quick emotional attachments, but have no connection to the real sources of popular discontent.

Electoral politics in the age of mass communications serves as an elaborate mask -- concealing what goes on in government from the untutored mass of voters. But, if the voters have only weak influence over those governing decisions, then who does influence them? That is the question neither political party will discuss with any candor, but citizens at large have inferred the answer. In the 1960s, surveys found that 28 percent of the public was convinced that "the government is pretty much run by a few big interests looking out for themselves." A generation later, this resigned view of politics was held by two thirds of the people. [7]

No amount of tinkering with the mechanics of electioneering is likely to reach the sources of that resignation because none of the people who are in power -- neither Democrats nor Republicans nor their allied interests -- have any incentive to remove the mask (and perhaps much to lose if they did). After all, it works for them. The elected officials of both parties, as well as their supporting interests, understand that their power relationships are sustained by the present arrangement of empty elections. They may occasionally lament the decline in voting, but incumbents are not threatened by this. The fewer citizens who are paying attention and actually voting, the easier it will be for the status quo to endure.

Against these bleak facts, there is a crucial contrary truth, one that is seldom acknowledged and, therefore, not widely understood. It is this: The nation is alive with irregular political energies, despite the failure of formal electoral politics. Citizens of every stripe and status do engage themselves one way or another in trying to move the public agenda, despite all the impediments. Though they may have given up on elections, ordinary citizens do still struggle for democratic meaning, and with imaginative diversity.

Americans have always organized themselves in the myriad "voluntary associations" that de Tocqueville observed in the young Republic, but if anything, the tradition has taken on a kind of manic quality in modern politics. There are literally millions of groups and associations pursuing politics in the broad sense of the word, everything from huge free-floating national organizations to neighborhood crime patrols. Some citizens are attached to so many public causes, they resemble a collage of bumper stickers.

Some of these activities, like the major environmental organizations, have developed real but limited political influence through their ability to define the outlines of the public problems and formulate goals that feed into the main political debate. More typically, citizen politics is detached from any formal structure of political power and, therefore, quite weak.

Even the environmental movement is not able to translate its general public support and potential power into real results since, as the evidence will show, its goals are regularly stalled and 'subverted by the governing system, even when it wins. The environmentalists' potential is enormous but largely unrealized, as their corporate adversaries recognize. Frank Mankiewicz, a liberal activist from the Kennedy era who is now an executive at Hill & Knowlton, the influential public- relations firm, provided a candid glimpse of their nervousness.

"The big corporations, our clients, are scared shitless of the environmental movement," Mankiewicz confided. "They sense that there's a majority out there and that the emotions are all on the other side -- if they can be heard. They think the politicians are going to yield to the emotions. I think the corporations are wrong about that. I think the companies will have to give in only at insignificant levels. Because the companies are too strong, they're the establishment. The environmentalists are going to have to be like the mob in the square in Romania before they prevail."

The irregular politics underway in every comer of the nation provides an optimistic counterpoint for the story this book has to tell about Washington. The contrasting facts of people trying to be heard on large governing decisions, while the governing system responds evasively or not at all, confirm that the democratic impulse is alive. But their difficult experiences confirm also that the impulse is effectively blocked in modern politics.

Some citizens are reduced to flamboyant forms of street theater or even physical disruption in order to make their point. Many are obsessed with the news media because the press seems like their only chance of being noticed or accomplishing anything. Some citizens have become skillful political guerrillas, adept in the tactics of obstructing the government and negating the political agendas they could not otherwise influence.

Conscientious citizens, in other words, have also been stunted by the circumstances of the modern political system. They may blast away at power with telling critiques or try obstinately to block its path. But most cannot imagine the possibility of forming a continuing relationship with power -- a political system that would enable them to share in the governing processes and trust in its outcomes. Even alert, active people have internalized a shriveled version of democratic possibility.


The scandalous question that hangs over modern government and excites perpetual outrage is about political money and what it buys. What exactly do these contributors get in return for the hundreds of thousands, even millions of dollars they funnel to the politicians? For many people, money explains almost everything about why democracy is in trouble, and exhaustive investigations are devoted to searching for hard evidence of bribery. The general pattern is more ambiguous than the cynics imagine, though still not very comforting to democracy.

What do major contributors get for their money? When I asked a lobbyist of long acquaintance who had served as the self-described "money guy" for selected Democratic senators, he responded with flavorful directness. "This was the period when we were shifting from black bags to accounting and disclosure," Charles Fishman explained, "and I knew how to shake the money tree. After the campaign-finance reforms were enacted, that's when the horrendous spigot was turned on. I phased out of fundraising and became a contributor myself.

"Different people wanted different things, " Fishman recalled. "You handled 90 percent of them with a hand job. You played on their minds. It was dinner with the senator or serving on an advisory committee. You could take care of them socially. Ten percent were out to buy you, for whatever purpose, their industry or whatever. They weren't trying to buy you so much as to keep you where you were on their issue. The smart guys were the ones who came at you on something where you didn't have a position.

"The reaction to this depended on your guy. If you had a senator like Adlai Stevenson, he'd throw you out of the office. He reamed my ass one day because I brought in a guy who was too aggressive in what he was saying. He kept saying: 'I expect ... I expect ... Let's understand what we're doing here.... ' Then there were other senators who said to me: 'Get out of the room. I want to talk to this guy alone.' That's when it happens -- when they're talking one on one. "

Enterprising reporters and reformers who keep the seamy subject of campaign money on the front pages are encouraged to do so by a time-honored syllogism of democracy: Dig out the sordid facts, expose them to the people and public outrage will lead to reforms. The trouble is, this logic doesn't seem to be working anymore. One money scandal after another has been offered to the public in recent years, lurid tales of senators and others trying to fix things in government for their big-bucks contributors. But reform does not follow. The system does not get repaired. The parade of scandals simply continues -- rituals of purification, " as Lewis Lapham called them. [8]

The deleterious effects of money are real enough, but the argument of this book is that money scandals reflect not just simple bribery, but much larger and more systemic disorders in governance. As the modern system has evolved, the complexity and diffusion of decision-making points in the federal government have multiplied the opportunities for irregular intervention and bargaining on behalf of interested parties. Nothing in law ever seems finally settled now because there is always one more stop in the process where both losers and winners may try to negotiate different terms.

The federal government has thus become a vast arena for bargaining and deal making on every conceivable question. This reality, in turn, has fostered a permissive culture in Washington politics that tolerates loose legal standards and extracurricular actions far beyond the view of citizens or formal accountability. The campaign money lubricates the deal making, to be sure, but the debilitating impact on democracy would endure, even if money were magically eliminated from politics.

Everyone lives in. this political environment and adapts to it, whether he or she is clean or dirty in the handling of campaign money. A newly elected representative quickly discovers that his job in government -- aside from making new laws -- is to act as a broker, middleman, special pleader and finagler. In casual conversation, a senator spoke unselfconsciously about "my client," meaning a defense contractor in his home state who was quarreling with the Pentagon over contract bids. The senator worried aloud about whether to go to bat for the firm since its campaign donations to him might smell bad, if his intervention were ever exposed.

"Client" has a different meaning from "constituent" or "citizen," but the word accurately describes the common relationships that define contemporary politics. The representative structure has been transformed into something quite offensive to its original intent -- a system in which it is nearly impossible to distinguish the relatively honest, hard-working politicians from the old-fashioned crooks, since they both do the same chores for clients. One must examine motives or eavesdrop on private conversations to establish if a political transaction was bribery or the normal daily business of Washington.

In fact, while Congress is most visible in this arena, the legislators are often only peripheral players. The well-placed officers of the Executive Branch, as the facts will show, do the same sort of work every day on behalf of their clients but with more influence over the outcomes and much less risk of exposure.

Politicians, in other words, are trapped in their Own debilitating circumstances, as much as citizens are trapped in theirs. This is why the money scandals do not lead to meaningful reforms -- because even the most honorable lawmakers know that they too are implicated in the moral ambiguities created by the governing system.

Evidence for this conclusion is abundant and appeared most vividly in the celebrated Keating Five scandal of 1990, in which five senators were accused of fixing things for an important contributor from the savings and loan industry. Despite sensational facts, the Senate ethics investigation ended limply and without meaningful disciplinary action. Fellow senators likewise balked at punishing Senator Alfonse D'Amato of New York though he was caught in a series of transactions that earned him the label "Senator Sleaze." D'Amato explained their reluctance as he defended his own behavior. "There but for the grace of God go most of my colleagues," he said. Even colleagues who despised D'Amato's flagrant deals recognized his point. [9]

If this analysis is correct, if the recurring money scandals are really symptoms of deeper pathologies in the way the government is organized and functions, then it opens up propositions that are even more difficult and disturbing than reformers imagine. Among other things; it suggests there are no easy "villains" to be indicted in the search for a restored democracy but a much heavier burden. It points toward terrain that many will find threatening -- reexamining the very modes and methodologies embedded in the common politics of Washington, confronting the permissiveness about law that has become the shared standard for Republicans and Democrats alike.

This search may be especially painful to those who think of themselves as liberals or progressives because part of what we are talking about is actually the inheritance from the New Deal era -- one of the great moments for democratic reform in the nation's history. The New Deal created many new corrective mechanisms in government designed to redress the imbalances of power -- programs and operating features intended to protect the weak from the strong and give many excluded sectors of the population a seat at the table in politics. On the whole, these innovations worked effectively for a generation or longer and some of them still work.

But the New Deal legacy rests upon an idea of interest-group bargaining that has gradually been transformed into the random deal making and permissiveness of the present. The alterations in the system are decisive and, given everything else that has changed in politics, the ultimate effects are antidemocratic. People with limited resources, with no real representation in the higher levels of politics, are bound to lose in this environment.

The painful irony this book explores in different quarters is how the reforms of an earlier generation have become encrusted as new barriers to democratic meaning. The burden of the present is to find new ways around those obstacles.


The contest of American politics has always been a dynamic drama of "organized money and organized people," as Ernie Cortes put it. Nothing is ever likely to change that. What is missing in contemporary politics, however, is a clear understanding of how this conflict has been changed and why power has accumulated steadily in the direction of "organized money."

Americans find it awkward to examine power directly. The democratic ethos discourages frank discussion, and everyone in politics, including the most powerful, understands that it is unwise to boast about having more influence than others. Important economic interests are sensitive to democratic attitudes and typically seek out allies that do not themselves seem so powerful. Community bankers are recruited to speak for banking. Small-town insurance agents lobby for mammoth insurance companies; independent drillers and gas-station operators defend big oil.

Given the wonderful fluidity and diversity of American life, power is also difficult to pin down in concrete terms. The confusing features of the social reality have frustrated critics and led some to make elaborate road maps of the powerful, lists of the people and institutions said to be running America -- the two hundred largest corporations, the fifty biggest banks and so forth. The lists prove what most people already understand: Money is power in American politics. It always has been. [10]

This book approaches the subject of power from a different angle -- not to make road maps, but to explore the functional realities of government that will illuminate why some powerful interests manage to prevail with some consistency, while the broad public is assigned to a lesser rank. It is these warped power relationships between people and monied interests and government that tangibly define the democratic problem.

As the evidence accumulates, it should be clear that the mystery of how these new power relationships developed is much too complex to be explained by simple moralisms. On one level, powerful economic interests -- corporations and private wealth--actively set out to seize the high ground of politics by deploying their superior resources and they largely succeeded. In another dimension, however, these powerful interests were merely reacting to the same destabilizing political changes that confronted everyone else. Out of practical necessity, defending their own well-being, they adapted better than others. "Organized money" is ascendant and "organized people" are inert because money has learned how to do modern politics more effectively than anyone else.

The fundamentals of how and why this condition occurred are set out in the six chapters that form Part I of this book, "Realities of Power." From Congress to the complex chambers of the Executive Branch, a series of invisible fences have been erected around important public issues -- operating practices and assumptions that both exclude people from the action and subvert such elementary principles as equal protection of the law. The result is government decisions on matters people care about intensely, from taxation to environmental protection, that are cloaked in reassuring rhetoric but driven by favoritism and manipulation on behalf of monied interests.

The fences include the very language and texture of the contemporary political debate, a mystique of rationality that gives natural advantage to educated elites and corporate interests while shunning the values expressed by ordinary citizens. This common barrier is the focus of Chapter One, illustrated by issues ranging from clean air to junk bonds.

Chapter Two, "Who Will Tell the People?," examines the breakdown of the representative system itself and another barrier -- the culture of political clientism. It will answer an intriguing political question about the now-familiar savings and loan disaster: How exactly did the politicians from both parties manage to keep this from the people for so many years and then dump a huge liability on the taxpayers? It turns out that self-correcting mechanisms in both government and the media are nonfunctional.

Chapter Three, "Bait and Switch, " moves to a deeper and more sophisticated plane of political control -- the artful illusions and bipartisan collusion by which monied interests succeeded in steadily reducing their federal tax burdens over fifteen years while everyone else was compelled to pay more. Taxation, after all, is not an obscure subject that citizens don't much care about. How were the few able to win, year after year, at the expense of the many?

Chapter Four, "The Grand Bazaar," confronts territory that is less familiar to people -- the permissive culture of deal making and regulatory bargaining that permeates Washington and underlies virtually every aspect of governing decisions, both in Congress and in the Executive Branch. The result is random law enforcement, so subject to political manipulation that it creates a kind of lawless government in which the weakest players, like injured industrial workers, are left to defend themselves against the more powerful violators.

Chapter Five, "Hollow Laws," reveals the operating methodologies that enable Congress and the Executive Branch to enact hollow laws -- grand pronouncements on toxic wastes and other problems designed to sound responsive to the public, but also designed to be neutered or neglected later in the dense details of the regulatory government. In this realm, meaningless laws exist, not just for years, but for decades, and the political action never ends. In this realm of politics, most citizens cannot play.

Finally, the capstone of this system is the White House, and Chapter Six, "The Fixers," describes how irregular political intervention on behalf of powerful clients is now institutionalized there -- out of public sight and beyond democratic accountability. In sum, from Congress to the White House to the federal courts, there is no protected ground for citizens -- no corner of the political system that faithfully defends their interests or even tells them the truth about what is happening.

Part II, "How May the People Speak to Power?," turns from the deformed governing system to the people themselves -- the irregular politics of active citizens who are struggling to overcome these disadvantages. Their experiences confirm the bleak analysis of the power realities in Washington. But their struggles also demonstrate their own weaknesses. Citizens have largely confined themselves to the margins of politics, distant from formal power-using "rude and crude" tactics that reflect how disconnected they are, when there are no mediating institutions to speak for them.

Part III, "Mediating Voices," confronts the core political institutions that have failed the people -- two major political parties, the press and the mass-media culture. Each in different ways has lost the ability to mediate for the people at large, but each has also converged with the powerful elite interests that dominate politics. Ironically; the only viable mediating institution in contemporary politics -- the dynamic player that has filled the vacuum -- is the corporate political organization. Corporations speak for their own interests, but they also claim to speak for others. In their own way, they have taken the place of political parties.

Finally, the deterioration of American democracy is now enveloped by larger forces -- the politics of the world -- and this reality is addressed in Part IV, "Triumph and Loss." The end of the Cold War offers a historic opening for Americans to rehabilitate the democratic principles that were corrupted by the long struggle with Soviet communism. Yet the global economy is confronting American democracy with the prospect of great loss -- the steady erosion of national sovereignty, the power to enforce laws, and the widely shared prosperity that supports social amity. The democratic challenge now requires new democratic sensibilities -- larger than the nation's borders.

All these burdensome facts need not lead to despair, however, and the conclusion, "The American Moment," describes why it is possible to imagine a regenerating politics that restores democratic meaning. People have it within their power to overcome all of these obstacles and restore a general sense of mutual respect to public life.

That is the hard work of democracy, but it is not more daunting than what people faced and overcame at different times in America's past. The politics of restoration will start, not in Washington, but in many other places, separately and together, when people decide to close the gap between what they believe and what is. People may begin this work by understanding what they are up against.
Site Admin
Posts: 34633
Joined: Thu Aug 01, 2013 5:21 am


Postby admin » Wed Oct 30, 2013 11:59 pm




Ina democracy, everyone is free to join the argument, or so it is said in civic mythology. In the modern democracy that has evolved, that claim is nearly meaningless. During the last generation, a "new politics" has enveloped government that guarantees the exclusion of most Americans from the debate -- the expensive politics of facts and information.

A major industry has grown up in Washington around what might be called "democracy for hire" -- business firms and outposts of sponsored scholars devoted to concocting facts and opinions and expert analysis, then aiming them at the government. That is the principal function of all those enterprises along Washington's main boulevards like K Street -- the public-relations agencies, the direct-mail companies and opinion-polling firms. All these work in concert with the infrastructure of think tanks, tax-exempt foundations and other centers that churn out reams of policy ideas for the political debate. Most are financed by corporate interests and wealthy benefactors. The work of lobbyists and lawyers involves delivering the material to the appropriate legislators and administrators.

Only those who have accumulated lots of money are free to play in this version of democracy. Only those with a strong, immediate financial stake in the political outcomes can afford to invest this kind of money in manipulating the governing decisions. Most Americans have neither the personal ability nor the wherewithal to compete on this field.

The contours of this barrier are embedded in the very texture of everyday political debate itself. Citizens have been incapacitated, quite literally, because they do not speak the language. Modern methodologies of persuasion have created a new hierarchy of influence over government decisions -- a new way in which organized money dominates the action while the unorganized voices of citizens are inhibited from speaking. A lonely congressman, trying to represent the larger public interest, finds himself arrayed against an army of authorities -- working for the other side.

Beyond the fact of unequal resources, however, lies a more troubling proposition: that democracy is now held captive by the mystique of "rational" policymaking, narrow assumptions about what constitutes legitimate political evidence. It is a barrier of privilege because it effectively discounts authentic political expressions from citizens and elevates the biases and opinions of the elites.

This mystique, not surprisingly, is embraced and exalted by well-educated citizens of most every persuasion, the people who are equipped with professional skills and expertise, including the dedicated reformers who attempt to speak for the larger public. After all, it is the basis for their own primacy in political action. Yet the premise of rationality, as the evidence demonstrates, is deeply flawed and routinely biased in its applications.

For those who are active every day in the conventional politics of governing, this proposition may not be so easy to grasp. Indeed, it will seem quite threatening to some of them, for it challenges their own deeply held beliefs about how politics is supposed to work and puts in question the meaning of their own political labors . Ordinary citizens, those who are distant from power, will have much less difficulty seeing the truth of the argument -- that information-driven politics has become a convenient reason to ignore them.


Jack Bonner, an intense young denizen of K Street, has the squirrelly enthusiasm of a salesman who can't stop talking about his product because he truly believes in it. What Bonner's firm sells is democracy, not the abstract version found in textbooks, but the living, breathing kind that occurs when people call up a senator and tell him how to vote. Bonner & Associates packages democratic expression and sells it to corporate clients -- drug manufacturers and the cosmetic industry, insurance companies and cigarette makers and the major banks.

Jack Bonner's firm is an exotic but relatively small example of the vast information industry that now surrounds the legislative debate and government in general. You want facts to support the industry's lobbying claims? It pumps out facts. You want expert opinions from scholars? It has those in abundance from the think tanks corporate contributors underwrite. You want opinion polls? It hires polling firms to produce them. You want people -- live voters who support the industry position? Jack Bonner delivers them.

When the Senate was debating the new clean-air legislation in 1990, certain wavering senators received pleas from the grassroots on the question of controlling automobile pollution. The Big Brothers and Big Sisters of the Mahoning Valley wrote to Senator John Glenn of Ohio. Sam Nunn of Georgia heard from the Georgia Baptist Convention and its 1.2 million members. The Easter Seal Society of South Dakota lobbied Senator Thomas A. Daschle. The Delaware Paralyzed Veterans Association contacted Senator William V. Roth, Jr.

These groups and some others declared their opposition to the pending clean-air amendment that would compel the auto industry to improve the average fuel efficiency of its cars substantially. The measure would both conserve energy and reduce the carbon- dioxide pollution that is the main source of global warming. These citizen organizations were persuaded to take a stand by Bonner & Associates, which informed them, consistent with the auto industry's political propaganda, that tougher fuel standards would make it impossible to manufacture any vehicles larger than a Ford Escort or a Honda Civic.

Vans and station wagons, small trucks and high-speed police cruisers, they were told, would cease to exist. The National Sheriffs Association was aroused by the thought of chasing criminals in a Honda Civic. The Nebraska Farm Bureau said rural America would be "devastated" if farmers tried to pull a trailer loaded with livestock or hay with a Ford Escort.

For twenty years, whenever the government has attempted to improve auto safety or environmental protection through new regulation, the auto industry has always made similar groans -- satisfying tougher standards would be impossible without dire social and economic consequences. The industry warnings have always proved to be false, but the innocent citizens recruited to speak for Detroit probably didn't know this history.

Jack Bonner was thrilled by their expressions of alarm and so was the auto industry that paid him for them. Bonner's fee, which he coyly described as somewhere between $500,000 and $1 million, was for scouring six states for potential grassroots voices, coaching them on the "facts" of the issue, paying for the phone calls and plane fares to Washington and hiring the hall for a joint press conference.

"On the clean-air bill, we bring to the table a third party -- 'white hat' groups who have no financial interest," Bonner explained. "It's not the auto industry trying to protect its financial stake. Now it's senior citizens worried about getting out of small cars with walkers. Easter Seal, Multiple Sclerosis -- a lot of these people have braces, wheelchairs, walkers. It's farm groups worrying about small trucks. It's people who need station wagons to drive kids to Little League games. These are groups with political juice and they're white hot."

In the textbook version of democracy, this activity is indistinguishable from any other form of democratic expression. In actuality, earnest citizens are being skillfully manipulated by powerful interests -- using "facts" that are debatable at best-in a context designed to serve narrow corporate lobbying strategies, not free debate. Bonner & Associates does not start by looking for citizens whose self-interest might put them on the auto industry's side. It starts with a list of the senators whose votes the auto industry needs. Then the firm forages among those senators' constituents for willing bodies.

"We sit down with the lobbyists and ask: How much heat do you want on these guys?" Bonner explained. "Do you want ten local groups or two hundred groups? Do you want one hundred phone calls from constituents or a thousand phone calls?"

Bonner's K Street office has a "boiler room" with three hundred phone lines and a sophisticated computer system, resembling the phone banks employed in election campaigns. Articulate young people sit in little booths every day, dialing around America on a variety of public issues, searching for "white hat" citizens who can be persuaded to endorse the political objectives of Mobil Oil, Dow Chemical, Citicorp, Ohio Bell, Miller Brewing, U.S. Tobacco, the Chemical Manufacturers Association, the Pharmaceutical Manufacturers Association and dozens of other clients.

This kind of political recruiting is expensive but not difficult. Many of the citizens are no doubt flattered to be asked, since ordinary Americans are seldom invited to participate in a personal way in the larger debates, even by the national civic organizations that presumably represent them. In a twisted sense, Jack Bonner does what political parties used to do for citizens -- he educates and agitates and mobilizes.

Since members of Congress are not naive, they understand the artificiality well enough. They know that many of the 400 million pieces of mail they receive each year are contrived by interested parties of one kind or another. Hearing authentic voices from the grassroots, however, provides them with a valuable defense on controversial votes, especially when a senator intends to vote with the auto-industry lobbyists and against cleaner air. Public opinion, as every senator knows, is with the air.

"Obviously," Bonner said, "you target senators inclined to go your way but who need some additional cover. They need to be able to say they've heard from people back home on this issue. Or we target people who are genuinely undecided. It's not a good use of money to target senators who are flat opposed or who are already for you."

Corporate grassroots politics, as Bonner likes to emphasize, is really borrowed from the opposition -- the citizen "public interest" organizations, especially in the environmental movement, who first perfected the technique of generating emotional public responses with factual accusations. "Politics turns on emotion," Bonner said. "That's why industry has lost in the past and that's why we win. We bring emotion to the table."

The democratic discourse is now dominated by such transactions -- information and opinion and scholarly expertise produced by and for the self-interested sponsors. Imagine Bonner's technique multiplied and elaborated in different ways across hundreds of public issues and you may begin to envision the girth of this industry. Some firms produce artfully designed opinion polls, more or less guaranteed to yield results that suggest public support for the industry's position. Some firms specialize in coalition building -- assembling dozens or hundreds of civic organizations and interest groups in behalf of lobbying goals.

This is democracy and it costs a fortune. Democracy-for-hire smothers the contemporary political debates and, while it does not always prevail, relatively few Americans have the resources to hire a voice for themselves. David Cohen of the Advocacy Institute, which trains citizens in how to lobby for their causes, recognizes a kind of class system emerging in the political process itself. "We are moving to a system," he said, "where there are two different realms of citizens -- a society in which those with the resources are going to have the ability to dominate the debate and outcomes while others are not going to be able to draw on the tools of persuasion." If democratic expression is reduced to a question of money, then those with money will always have more.

In previous times, reformers wrote devastating critiques about the "capture" of government regulatory agencies by the industries they were supposed to regulate. The Civil Aeronautics Board became the puppet of the airlines. The Bureau of Mines was owned by the coal industry. The Federal Communications Commission belonged to the broadcasters. The occasional exposes sometimes produced reforms though the basic problem endured.

Now, however, it is not an exaggeration to say that democracy itself has been "captured." The forms of expression, the premises and very language of debate, not to mention the rotating cadres of experts and managers, are now owned in large measure by relatively few interests, much the way that powerful industries came to own regulatory agencies. Democracy is held captive, not just by money, but by ideas -- the ideas that money buys.


Some citizens have discovered that the best way to avoid being overwhelmed by the "shadow government" of K Street is to proceed stealthfully in the legislative arena -- to launch sneak attacks before the information industry notices.

Year after year through the 1980s, Representative Byron Dorgan of North Dakota pursued this lonely strategy, as he tried to get Congress to, curb the profligate buildup of junk bonds and corporate debt. As a former state tax commissioner, Dorgan understood that the Wall Street takeover deals were cannibalizing productive companies and leaving U.S. corporations dangerously overleveraged. Junk bonds didn't become a visible political issue until they started collapsing in the late 1980s, threatening the solvency of S&Ls, banks and insurance companies. But Dorgan could have explained it to people years before.

"I've been giving Wall Street fits," he said, "and they're furious with me and my constituents don't quite understand why I care because we're not exposed to hostile takeovers and stuff like that in North Dakota. But, starting in 1982 when I saw what was happening on Wall Street, I just got much more interested in junk bonds and mergers."

Dorgan set out to eliminate the federal tax deductions for the interest paid on junk bonds -- the implicit federal subsidy for the deals that made the explosive buildup of corporate debt possible. If these tax breaks could be removed or scaled back, Wall Street would find fewer opportunities for raiding companies and breaking them up or leaving them mired in debt.

But the congressman did not launch a noisy campaign to alert the public to the threat posed by junk bonds. Nor did he push the Ways and Means Committee on which he serves to take up the matter directly. He did not make speeches or call press conferences. Dorgan knew all those would be futile -- and would simply alert the opposition to his intentions.

Instead, Representative Dorgan practiced the kind of guerrilla politics that is sometimes possible in the parliamentary confusions of Congress. He literally tried to sneak his amendments into tax measures before the other side found out about them. These were like midnight forays against the opposing army of lobbyists and financial experts (and sometimes even occurred late at night when legislators were weary and the army was asleep). Sometimes, he even succeeded.

Byron Dorgan's personal campaign against junk bonds illustrates how much the legislative process has been distorted by the presence of the K Street industry. Indeed, though he was representing a potentially popular cause, Dorgan's approach was the reverse image of Bonner & Associates, which, though representing industrial clients, went to the "grassroots" in search of popular support. Dorgan's effort is public-spirited but secretive. Bonner's is flamboyantly "democratic" but driven by narrow special-interest objectives.

The flourishing of junk bonds posed an issue of government tax policy with profound economic implications and ought to have aroused a great political debate during the 1980s. Yet there was no debate. Dorgan understood there was nothing to be gained by provoking a democratic dialogue on the subject.

"If you have a controversial idea in this town," Dorgan explained, "the last thing you want to do is raise it up the flagpole where everybody can see it. It's not difficult now for a business to launch thousands of pieces of mail on Capitol Hill and that scares off everyone."

Dorgan chose as his point of attack the gargantuan budget reconciliation measures that move through Congress each year late in the session and are loaded down with hundreds, even thousands of legislative riders. The confusion and complexity of these measures gives an alert legislator the chance to sneak all kinds of things into law without arousing the enemy.

"In reconciliation," he explains, "you have a bill that's ninety-six pages long and with 140 different tax changes which are all little pockmarks on the tax code. If my provision is number eighty-nine on the list and it's not very clearly described, it's likely you can get it passed with about seven and a half seconds of discussion."

In 1987, Dorgan scored in this manner by attaching an amendment that created a 50 percent excise tax on the so-called "greenmail" deals in which a corporate raider is bought off by the corporation under attack. The tax would take the profit out of "greenmail" and save millions for stockholders and targeted companies. Dorgan's amendment was accepted without debate -- before the lawyers and lobbyists from Wall Street brokerages awoke to the threat.

If they had known, the lobbyists could have buried Dorgan in elaborate, authoritative argumentation ostensibly proving that his amendment would unhinge the financial system and destroy jobs. Members would have been buried in mail from protesting clients and constituents. Nor would any lobbyist need remind the politicians that both political parties depended heavily upon the generosity of the corporate raiders for campaign money. During the 1988 election cycle, 240 of the leading dealmakers in leveraged buyouts contributed $3.5 million to Republican and Democratic candidates. [1]

Congressman Dorgan struck again in the 1989 reconciliation bill with an amendment restricting the so-called "payment-in-kind" junk bonds -- a form of discounted debt paper in which the lenders are not paid any actual interest yet the borrowing corporations can still claim a federal tax deduction for making interest payments. The massive takeover deal engineered for RJR Nabisco involved $9 billion in these so-called PIK bonds and might not have gone forward without the hidden and illogical federal tax subsidy.

Salomon Brothers, Morgan Stanley and Drexel Burnham (before it became defunct) all came after Dorgan, but since it was too late to stop the measure, they turned their attention on the Treasury Department where the new tax law would be interpreted in new regulations. "They're trying to screw me at the Office of Tax Policy," Dorgan said.

That same year, Dorgan staged another successful ambush, this time on the House floor in the savings and loan bailout legislation. His amendment prohibited the troubled S&Ls from investing in junk bonds. "Had I proposed that in committee a year and a half earlier, I'd never have gotten anywhere," he said. "The committee would never have scheduled hearings, never would have reported it. It would have been swatted away like an annoying fly. On the House floor, it carried by thirty votes -- just because by now it's impossible to say you're voting for junk bonds."

In broad daylight, Dorgan's argument was a winner, but that is not where most matters get settled. The complex and necessarily drawn-out processes of legislative decision making are dominated by what Dorgan calls "the shadow government" -- the elaborate mechanisms of persuasion that surround most issues.

"All of us who work here are frustrated by the shadow government," the congressman said. "The way attorneys do business in this town is by finding an issue and then going out and recruiting a coalition for it so maybe forty businesses will feed his resources. They write op-ed pieces, they lobby Congress, they write to stockholders and generate a blizzard of computer mail."

Byron Dorgan draws a grim summary of the consequences: "Ideas are the enemy of progress here. At least to some extent, that's true."


While industry and finance generally had their way in the politics of the 1980s, on one important issue they were devastated -- the Superfund legislation enacted in 1986. Among the outrages of the Reagan years, nothing aroused public opinion more effectively than the scary stories of these man-made toxic swamps and their threat to human life and the environment. Popular anger was aggravated further by the revelations of scandalous industry fixes at the Environmental Protection Agency. With citizens fully aroused, Congress was enabled to pass a very tough measure that assigns the cleanup costs where they rightfully belong, not to the general taxpayers, but to the specific companies that created the mess. The discredited Reagan White House was in no position to resist. Popular opinion clearly won the day.

In the months after its defeat, industry did not sulk aimlessly but instead began to plan for the long-term counterattack. By mid-1987, it had created a Coalition on Superfund, a group that would sponsor authoritative analyses on how the Superfund law was working and perhaps recommend "improvements." Major environmental organizations would be invited to join the project, but the founding members were the leading culprits in hazardous waste pollution -- General Electric, Dow, Du Pont, Union Carbide, Monsanto, AT&T and others. They were joined by major insurance companies that were also potentially liable for huge losses-Aetna, Cigna, Crum & Forster, Hartford and others.

The Superfund Coalition illustrates a sophisticated form of political planning that might be called deep lobbying. It is another dimension of mock democracy -- a system that has all the trappings of free and open political discourse but is shaped and guided at a very deep level by the resources of the most powerful interests. The Superfund Coalition is more representative because it demonstrates the strategic skills of the corporate interests and the depth of their sophistication and patience as well as the depth of their wallets.

Other participants come and go in the political debate, especially unorganized citizens, who cannot always afford continuous involvement. They are temporarily aroused by an issue, see reforms enacted and then move on to other concerns. But the corporations do not go away from the legislative debate, even in the off-seasons. By their nature, the people and institutions with large amounts of money at stake are always at the table, fighting over the same points year after year. It is their business to be there. Their profits depend on the outcomes.

If they lose in 1986, the companies begin immediately to prepare the ground for the next fight in 1991 or 1992. The purpose of the Superfund Coalition was to target public opinion in the distant future -- five or six years hence when the Superfund legislation would be up for renewal.

The companies' shared objective, according to an organizing memo prepared by Charls E. Walker Associates, the corporate lobbying firm, was to create "an equitable system of allocating costs" for the cleanup. In simple English, they wanted to escape the onerous financial burdens that Superfund imposed. To achieve this, the coalition members understood that they would have to convince the uninformed that the law was not working. "The nature of changes will depend on the emotional climate at the time of reauthorization and public perception of problems with the existing law. [2]

Given the public's skepticism of industry claims, this could not be accomplished by public- relations hacks. The corporations would have to finance high-quality research and concentrate on "the building of key allies in industry, Congress, the administration, academia, think tanks, the media and select environmentalists." The initial budget was set at $840,000 a year -- a lot of money for political "research" but a pittance compared to the billions the companies might save by changing the law.

To develop the Superfund Coalition, Charls Walker's firm, which specializes in tax issues, formed a joint venture with another consulting firm whose specialty is environmental issues, William D. Ruckelshaus Associates. Ruckelshaus had served twice as EPA administrator, first under Richard Nixon and again when President Reagan called him back in 1983 to restore EPA's tarnished reputation following scandals of non-enforcement. Recently returned to private life, Ruckelshaus assigned the Superfund project to F. Henry Habicht II, who himself had recently resigned as assistant attorney general in the Justice Department for environmental enforcement.

The corporate coalition sought out participation by "select environmentalists" (the planning memos called this "outreach") and chose the Conservation Foundation headed by William K. Reilly to undertake the large research project that the companies wished to fund. Other groups were invited to take part too -- the Sierra Club, the Natural Resources Defense Council, the Environmental Defense Fund, the Audubon Society -- but they didn't like the smell of what was unfolding. They denounced the coalition as a scheme to undo the new Superfund law even before it had a chance to work.

Once the industry coalition became controversial, its sponsors decided to retreat a bit from such high visibility. "I thought what we ought to do was shift management of the study to the Conservation Foundation and let them run it and throw in some EPA money," Ruckelshaus said. "If the study was funded by industry, the results would be suspect."

EPA cooperated in this strategy, despite some congressional complaints, and in 1988 EPA Administrator Lee Thomas contracted with Reilly's organization for a $2.5 million study of the Superfund law. The taxpayers were now picking up the tab for research the polluters had originally envisioned as their political counterattack. The Conservation Foundation said it would deputize a "policy dialogue panel," including the interested industries and environmentalists, to help steer the project to the right questions.

The Superfund law, it is true, wasn't working -- partly because the affected corporations were stubbornly resisting their financial liabilities and partly because EPA was itself quite slothful, cleaning up only a handful of hazardous sites each year from the backlog of thousands. Now, the two main delinquents -- EPA and the corporations -- were teaming up to ask what the problem was.

The larger point is that an informal alliance was being formed by two important players -- government and business -- to massage a subject several years before it would become a visible political debate. There was nothing illegitimate about this. After all, it was only research. But the process that defines the scope of the public problem is often where the terms of the solution are predetermined. That is the purpose of deep lobbying -- to draw boundaries around the public argument.

The political alignments first established by the Superfund Coalition proved to be quite productive for the corporate sponsors, regardless of what happened in Congress. William K. Reilly left the Conservation Foundation before the research was completed because in 1989 he became the new EPA administrator himself. He was appointed by George Bush on the strong personal recommendation of William Ruckelshaus, who by then had become CEO of Browning-Ferris Industries, one of the largest companies in the waste disposal sector.

Henry Habicht, who had managed the industry's Superfund Coalition for the Ruckelshaus firm, also went to EPA, as the deputy administrator, Reilly's second-in-command and, by many accounts, the man who managed the agency day by day. Lee Thomas retired to private life in Atlanta where his consulting firm was awarded a research contract on Superfund questions from -- guess who -- the Superfund Coalition.

None of this influential back scratching guaranteed, of course, that General Electric, Dow Chemical and the other corporations would ultimately get their way, but it prepared the ground for political battle on their terms. As an exercise in deep lobbying, their craftsmanship was to be admired as a nifty feat of triangulation. Three EPA administrators, past and present, as well as important environmental groups were recruited to hold hands with corporate America in the nigh-minded task of making Superfund into a better law.

By the fall of 1991, the polluters were beginning to get the kind of headlines they had hoped for when they created the Superfund Coalition four years earlier. Various authorities were being quoted on how flawed and wasteful the Superfund law was. And some of these experts worked for the very same companies lobbying to escape their financial obligations. At the top of the front page of The New York Times, there was this news:



Most Health Dangers Could Be Eliminated for a Fraction of Billions Now Estimated [3]

If anyone is an authority on how modern democracy works, it is Tommy Boggs, the son of a former Democratic majority leader, a good friend and fundraiser for many members of Congress and one of Washington's premier corporate lobbyists. In an interview with the National Journal, Boggs explained how the system has changed:

"In the old days, if you wanted a levee in Louisiana, you voted for a price support program for potatoes in Maine. Nobody knew what was going on. Now, all of a sudden, there's this tremendous need for a public rationale for every action these guys take." [4]

As lobbyists will tirelessly explain, their basic function in politics is to provide information, fact-filled arguments that provide what Boggs called a "public rationale" for the governing decisions. Many cynical citizens automatically reject that bland explanation as evasion, a self-serving cover for the black bags stuffed with cash. Tommy Boggs and his peers, it is true, do handle lots of money for election campaigns and they perform other ingratiating tasks for politicians unrelated to information gathering. Nevertheless, what the lobbyists say about their role is essentially correct.

Information, not dirty money, is the vital core of the contemporary governing process. This simple truth about the system is difficult for many people to accept, especially middle-class reformers, because it raises an unsettling paradox about the nature of democracy and what exactly has gone wrong with it. "Information" that leads to "rational" choices is supposed to be a virtuous commodity in the political culture. Democracy, it is presumed, can never get too much of it. After all, the lobbyists who inundate politicians with facts are only doing what ordinary citizens, including the reformers, can do themselves.

The reality is that information-driven politics, by its nature, cannot produce a satisfying democracy because it inevitably fosters its own hierarchy of influence, based on class and money. Lawyers or economists or others who are highly trained become, in a sense, supra- citizens whose voices are louder because they speak the expert language of debate. Ordinary citizens who lack the resources or a strong personal financial incentive are priced out of the argument -- and that means most citizens. The playing field of democracy tips toward those few who have the money to acquire the information and a compelling economic motivation to purchase influence over political decisions.

Many Americans perhaps think this is how the governing system is supposed to work -- directed and dominated by an elite few. Many have come to accept the imbalance as inevitable and normal. But it is a political system of privilege and inequality, a rank ordering that assigns most citizens to inferior status. If fact-filled arguments and expensive expertise are the only route to influencing government decisions, then by definition most citizens will have no access. This is the functional reality. It cannot fairly be called democracy.

The origins of information-driven politics are, ironically, traceable to progressive reform as much as to large corporations or wealth. Middle-class and liberal-minded reformers, trying to free government decisions from the crude embrace of the powerful, emphasized a politics based on facts and analysis as their goal. They assumed that forcing "substance" into the political debate, supported by disinterested policy analysis, would help overcome the natural advantages of wealth and entrenched power. But information is never neutral and, in time, every interest recognized the usefulness of buying or producing its own facts.

The modern starting point was World War II and the economic planning that developed under Franklin Roosevelt. But the faith in rational, supposedly objective public policy really originated with the good-government reformers in the Progressive movement early in the century, middle-class professionals and managers themselves. In a complex modern society, they believed, government was corrupt and wasteful because it did not employ the unsentimental decision-making techniques of business -- rigorous economic and scientific analysis done by professionals. In many respects, the Progressives tried to shield the governing decisions from what they regarded as the raw and ignorant passions of the public at large.

The liberal intellectuals who carne of age in the New Deal institutionalized the idea more substantially. The Full Employment Act of 1946, a milestone for its liberal political goals, also codified the technical methodologies on which the government would manage the economy. The Council of Economic Advisors was created to assist the president with scholarly advice, an approach copied subsequently across many other fields of public policy.

The energetic reform movements launched by Ralph Nader and others in the 1960s -- and new information technologies like computers -- gave new relevance and momentum to the idea of rational policy analysis. Why should an issue be decided by a few old bulls in the back room when, in the media age, everyone could have facts and opinions on the matter? The internal democratization of Congress -- and the ventilation of Executive Branch agencies -- created new markets for factual argument to justify decisions, augmented by the news media's unquenchable thirst for information. Instead of following the leader, members of Congress would be free to make up their own minds, and they needed their own facts.

Greed, malice and other crass motives did not exactly disappear from politics, but the spirit of reform now demanded more respectable "public rationales" for agency decisions or how a politician would cast his vote. Chuck Fishman, a Democratic lobbyist, described the new world that faced agents of political influence: "It used to be, if you had access, that was enough. Then there carne a time when you had to have substance too. You couldn't just say: 'Do me a favor, blow these guys away.' The change carne because publicity was too much of a threat, the risk of exposure by the media or public-interest groups. But the substance doesn't do diddly-squat if you don't also have access."

The risks facing politicians and interests were raised significantly by the public-interest critiques of reformers like Ralph Nader and the environmental organizations. Their exposes repeatedly stung the political system by revealing the irrational basis for many government policies -- decisions that had been driven by raw power and secretive influence.

The rise of "public-interest" groups, organized by Nader and others, promised to provide permanent watchdogs for citizens at large. Further, their legislative lobbying spawned a long list of democratizing reforms -- opening up closed meetings and private files, requiring public hearings at various stages of the decision process, forcing federal agencies to explain in detail why they had made certain decisions and what the economic or environmental consequences would likely be. Facts, not influence, would be the new talisman of politics.

The democratic illusion did not last. For a brief moment in the early 1970s, the reformers held the field, but they were swept away as soon as the monied interests figured out the new language of politics and learned to play by the new rules. In 1970, only a handful of the Fortune 500 companies had public-affairs offices in Washington. Ten years later, more than 80 percent did. In the same period, not coincidentally, business political-action committees displaced labor as the largest source of campaign money. In 1974, labor unions accounted for half of the PAC money; by 1980, they accounted for less than one fourth.

Business simultaneously proceeded to finance a counterrevolution of ideas that would overwhelm the voices of vigilant citizens. The American Enterprise Institute, once a cranky little conservative backwater, became a primary source of Washington opinion -- the intellectual fodder that shapes the thoughts and reflexes of both politicians and the media. By 1980, AEI's budget had multiplied tenfold and it acquired the patina of disinterested scholarship.

Meanwhile, AEI's sponsoring patrons include the largest banks and corporations in America: AT&T, $125,000; Chase Manhattan Bank, $171,000; Chevron, $95,000; Citicorp, $100,000; Exxon, $130,000; General Electric, $65,000; General Motors, $100,000; Procter & Gamble, $165,000, and so on. What do these companies get each year for their money? One need not infer that AEI scholars have been corrupted in their thinking by this corporate money. But a reasonable inference is that major business enterprises will not pay large sums of money, year after year, to people whose ideas cannot be useful to corporate political interests. [5]

The money was spread around widely. Murray Weidenbaum, a conservative economist at Washington University in St. Louis, founded the Center for the Study of American Business in 1973 and was given a $750,000 annual budget to crank up the intellectual attack against government regulation. Eight years later, Weidenbaum was chairman of Ronald Reagan's Council of Economic Advisors and deregulation was in the saddle.

The Brookings Institution, once labeled the home of liberal intellectuals, moved steadily rightward, both in its personnel and in its ideological preferences, as corporate contributors financed new rivals that challenged Brookings's status. Right-wing millionaires like Joseph Coors, a beer magnate from Colorado, plunked down small fortunes on conservative scholars, most notably at the Heritage Foundation, an aggressive new think tank that was more willing than AEI to pitch the narrow objectives of particular investors. [6]

The corporate counterattack also had a profound social effect on government: Over the last generation, big money came to Washington, a rush of affluence unprecedented in the city's history. The general political vision was inevitably warped by the gilded prosperity that politicians see all around them. The federal government is now situated in the best- educated and best-paid metropolitan area of the nation. The capital of democracy is seated in a city where citizens of average means cannot afford to live.

"Everyone's here now -- private America," said Richard Moe, formerly the chief of staff for Vice-President Walter Mondale and now a lawyer-lobbyist in the Washington office of an important Wall Street firm. "That's what has changed so dramatically in the last quarter century. Because of regulation and so forth, everybody feels the need to be here -- and they brought a lot of money with them."

That statement provides a crucial framework for understanding every aspect of the democratic problem that will follow in this book: They brought a lot of money with them. The Commerce Department's annual list of the ten richest counties in America, measured by per capita income, is now led and dominated by the Washington metropolitan area. Five of its suburban jurisdictions rank in the top ten. Places like Marin County, California, and Fairfield County, Connecticut, that were once the favorite symbols for the "good life" in America now rank below Arlington County, Virginia, or Montgomery County, Maryland, where so many of Washington's lawyers and lobbyists live. [7]

While Wall Street's new wealth was more spectacular at its pinnacle, Washington's new wealth has a broader base. Between 1980 and 1986, for instance, the number of Washington households earning more than $75,000 a year increased more than fivefold. Meanwhile, the median household income for America at large hovered around $30,000. That is, half of American households earn less. Families of such modest means are actually disappearing from the capital's metropolitan area -- compelled to move elsewhere by luxury home prices and rising rents. Their numbers shrank by 18 percent during the 1980s. [8]

Commerce naturally gravitates to where the high incomes are concentrated and the once sleepy town has become a cornucopia of luxurious shops, prestige department stores' and gourmet dining, both the ostentatious and the tasteful. While many other American cities look worn and shabby at the center, Washington's commercial core has taken on an elegant newness.

The capital's rarefied culture of new money, inevitably, did something to the social sensibilities of government, even among those in politics who are concerned about the less fortunate. The' general affluence makes it harder for the people in power to see the contradictory social facts beyond their own everyday experience.
Site Admin
Posts: 34633
Joined: Thu Aug 01, 2013 5:21 am


Postby admin » Wed Oct 30, 2013 11:59 pm

PART 2 OF 2 (CH. 1 CONT'D.)


Public-interest reforms did indeed open up the processes of government decision making to alert citizens, but these changes had another consequence for democracy as well. As an economist would put it, the reforms raised the cost of entry and participation. Democratic expression became much more expensive -- too expensive for most Americans to afford.

Who can afford to show up at all of these public hearings? Who will be able to deploy their own lawyers or scientists or economists to testify expertly on behalf of their agenda? Who is going to hire the lobbyists to track the legislative debate at every laborious stage? Most citizens do not qualify. Unless they wish to give their lives over to politics, they cannot possibly keep up with the demands on their time and attention or afford the expanding costs. Indeed, unless they have an intense moral commitment to political activism, very few citizens will be able to identify any governing decisions in which their personal stake is so large as to justify the daunting cost of protracted involvement.

The Jeffersonian ideal of engaged citizens, splendidly articulated by Ralph Nader and others, did motivate hundreds of thousands, perhaps millions to participate and it created a vast new network of activist organizations. But it presumes qualities of citizenship that are not inherent in all people and, indeed, the assets of leisure and money are distributed mainly to the best-educated and most affluent.

In any case, even this expansion of citizen involvement was swiftly outflanked by the increased political investments from business. By the 1980s, there were seven thousand interest organizations active in Washington politics, and business's share of this pressure system was overwhelming -- actually greater than it had been a generation earlier, before the public-interest reformers came on the scene.

Public-interest groups, according to a Senate study, were stretched so thin that they were absent at more than half of the formal proceedings on regulatory issues and, when they appeared, were typically outnumbered ten-to-one by industry interests. On some important matters, industry would invest fifty to one hundred times more resources than the public- interest advocates could muster. [9]

This paradox -- democratizing reforms that actually deepen the disadvantages of ordinary citizens -- is rooted, of course, in a much older dilemma of American democracy, the political inequality generated by inequalities of wealth. The fundamental dimensions were starkly outlined nearly thirty years ago by Anthony Downs in his landmark essay, An Economic Theory of Democracy, a book that devastated political scientists' smug faith in pluralist democracy.

"In an uncertain world," Downs wrote, "it is irrational for a democratic government to treat all men as though they were politically equal." [10]

If democracy is analyzed in the economist's terms of costs and benefits, Downs explained, then political action for most citizens will logically be an "irrational" expenditure of their resources, including time, since they cannot possibly derive personal returns sufficient to compensate for their output. In the economist's perspective, he observed, "Only a few citizens can rationally attempt to influence the formation of each government policy."

Downs's analysis provides a plausible explanation for why voter participation has declined steadily in the modern American electorate. As citizens have become better educated and less bound by the "irrational" political habits of family and party tradition, perhaps they perceive more clearly the economic logic that Downs described -- that political participation, even just going to the polls and voting, offers such a diffuse and uncertain return that a "rational" economic man will decide: Why bother?

But Downs's description of "economic democracy" applies with equal force to the governing processes that lie beyond elections -- where the cost of collecting information and acting on it is even higher than for voting. If cost is a permanent barrier to democratic expression, as it obviously is, then democracy becomes a contest merely for the organized economic interests, not for citizens. If there are no strong mediators equipped to speak for them, then most citizens will never be beard. If public desires and aspirations cannot be easily reduced to definable economic outcomes, then they will be treated as secondary -- wishful spectators to the real action. In fact, those conditions form a fair description of the contemporary system -- a shrunken version of "economic democracy" that mocks the original idea.

Democracy, one would think, should at least be permanently committed to the goal of nurturing and defending equality in political expression, even if everyone concedes that private wealth and power will always be unequal and that individuals thus will always be unequal in their ability to exert influence. The reform ideal, one might suppose, would be to create in politics what business people like to call a "level playing field."

The existing political system is prejudiced in the opposite direction. It actually subsidizes the political expression of those who already enjoy the advantage in resources. This subsidy is embedded in the federal tax code in the form of allowable tax deductions for activities that are really self-interested political expression -- tax breaks that, practically speaking, are only available to corporations and people with substantial surplus wealth.

In terms of business tax accounting, this may seem plausible. In terms of everyday democracy, however, it means that all other taxpayers are picking up part of the tab for the political exertion of the vast corporate apparatus that surrounds government. The "white hat" citizens Jack Bonner recruited to lobby against the clean-air bill are a deductible expense for Ford, Chrysler and General Motors. Likewise, both corporations and wealthy individuals are given tax deductions for their "charitable contributions" to tax-exempt foundations, including all the think tanks that produce the sponsored research for them.

In fact, think tanks and foundations perform the research and advocacy functions that in many other industrial nations would be undertaken by the organized political parties. The economic function of political parties and secondary mediating institutions is that, by performing expensive tasks for others, they spread the cost of political participation among many, many people. In other words, only collective action -- organized citizens with common interests -- can reduce the entry costs that are political barriers for all of them.

In an elaborate fiction, the tax code pretends that tax-exempt foundations are not political since they are prohibited from participating in campaign politics. Everyone knows this is a sham. Tax-exempt money, it is true, cannot play directly in partisan elections, but that is not where most things get decided anyway. The tax-exempt foundation is such a congenial mechanism for political influence that politicians have started using it directly for their own purposes.

Representative Les Aspin of Wisconsin, chairman of the House Armed Services Committee, founded his own think tank, named after himself and financed by "charitable" contributions from defense manufacturers. Senator Jake Garn of Utah, ranking Republican on the Senate Banking Committee, did the same, though the Garn Institute is financed by tax-deductible donations from banks and other financial institutions. A survey by the National Journal found 51 senators and 146 House members who are founders or officers and directors of tax-exempt organizations that produce research and propaganda. [11]

Any American, of course, is free to start his or her own tax-exempt foundation. All one needs is the money. Aside from the insult of helping pay for this hidden political subsidy, most ordinary citizens cannot themselves enjoy it. Most Americans do not itemize deductions on their income-tax returns and they will receive no tax benefit even if they contribute twenty-five dollars to a tax-exempt organization working for their favorite cause. An auto company deducts the cost of flying its executives into Washington to lobby senators on the clean-air bill. An ordinary citizen has to pay his own way.

To begin to redress these inequities, the Congress would have to rethink the political favoritism fostered by the tax code and try to correct the balance in favor of ordinary citizens. At the very least, this requires defining the tax code in more honest terms and eliminating the fictions about what is "educational" and what is really self-interested political activity. Government would either withdraw tax concessions for all lobbying and other political actions or make the tax breaks truly available to all citizens.

If government were truly interested in fostering political equality, it would go much further. If tax deductions were curtailed for corporate politics and the assets of foundations were modestly taxed, the revenue could be devoted to the noble purpose of reinvigorating democracy. The tax code might offer an annual tax credit of one hundred or two hundred dollars to every citizen who wished to engage in political expression.

Any citizen would be free to contribute the money to any political activity -- parties, candidates, issue organizations, local political clubs, whatever -- and then be reimbursed for the contribution at tax time. This modest subsidy would not come close to overcoming the advantages of wealth, but it would certainly widen the field of democratic energies. If the reform were to cost the Treasury $10 billion or $20 billion in lost revenue, that does not seem too much to spend on restoring the national legacy.

A new broad-based source of potential funds would create a powerful incentive for political organizations of every kind to redirect their attention to the neglected citizens -- all those people who lack major resources or status. Citizens themselves would have an independent resource base for inventing their own politics-defining political goals and strategies in their own terms -- without the need to beg for funds from beneficent patrons.

Political reforms such as this speak to real questions of who has power. They would thus be deeply threatening to nearly all elements of the status quo, including some of the virtuous citizen organizations that claim to speak for the public at large. Whether they are left or right or nonpartisan, if groups depend upon foundation grants and tax-exempt donations for their own budgets, they do not have much incentive to experiment with citizen choice. Likewise, universities and academic scholars at think tanks would doubtless resist any effort to remove the political sham from the tax code since they are major beneficiaries of the present system.

Giving individual citizens the capacity to deploy political money -- however modestly -- would inevitably shift power away from existing structures and disperse it among the ordinary millions who now feel excluded. Could ordinary Americans be trusted with this power, the ability to decide where and how vast political resources should be directed? How one answers that question will say a lot about whether one believes in a real democracy.

The inequality of resources, however, is not the only barrier erected by information-driven politics and not the most important one. In practical terms, the most dreadful consequence is the way in which ordinary citizens are silenced and demoralized -- made to feel dumb -- by the content of information politics. The very language of the debate and the value-laden ideas that now dominate political decisions have created their own set of privileges.


Political values are mostly derived from personal experience -- commonsense ideas about what constitutes a just relationship, the things one learned in early childhood from parents or the Bible or other children. Those values are what most citizens bring to the table when they engage in political activity. In a democracy, those expressions would be greeted as a valuable contribution.

In the modern political culture, they are disparaged. The public's broad political values have been preempted by other materials -- arcane rules drawn from economics, law and science -- that provide the main grist of information politics. On issue after issue, the public is belittled as self-indulgent or misinformed, incapable of grasping the larger complexities known to the policymakers and the circles of experts surrounding them. That complaint, though sometimes correct in the narrow sense, masks the nature of the conflict.

The real political contest, on issue after issue, is a struggle between competing value systems -- the confident scientific rationalism of the governing elites versus the deeply felt human values expressed by people who are not equipped to talk like experts and who, in fact, do not necessarily share the experts' conception of public morality. Outcomes that economics describes as efficient (and therefore just) will not necessarily satisfy the public's thirst for justice. Aroused citizens, who resist the economist's version and enter the debate not fully understanding its terms, are often puzzled about why no one will listen to them seriously.

If one listens carefully to the language of political decision making, the raw outlines of this struggle can frequently be heard. The public's side of the argument is described as "emotional" whereas those who govern are said to be making "rational" or "responsible" choices. In the masculine culture of management, "emotion" is assigned a position of weakness whereas "facts" are hard and potent. The reality, of course, is that the ability to define what is or isn't "rational" is itself laden with political self-interest, whether the definition comes from a corporate lobbyist or from a federal agency. One way or another, information is loaded.

For elites, the politics of governing is seen as a continuing struggle to manage public "emotions" so that they do not overwhelm sound public policy. The corporate sponsors of the Superfund Coalition worried in their planning memos about how to shape the "emotional climate" that would surround the next Superfund debate. Frank Mankiewicz of Hill & Knowlton described his industrial clients' fear that "the politicians are going to yield to the emotions" on environmental issues. Jack Bonner boasted that his recruitment of grassroots citizens "brings emotion to the table" in behalf of the business position. These expressions are commonplace among governing elites. The theme of unstable public emotions is a staple of newspaper editorials and learned conferences.

The rise of information politics enhanced the elite side of this argument, equipped it with precision and authority and daunting complexity. A favorite put-down of the unreasoning public, for instance, is the accusation that Americans wish to live in a "risk-free society" -- a desire that is obviously utopian, too costly to achieve and ignorant of scientific uncertainty. The complaint is usually expressed by business leaders or conservative scholars who do not themselves live next door to a hazardous-waste dump or downwind from a factory spewing dangerous chemicals into the air. Their economic status and political power protect them from such risks, though they think others ought to be willing to accept them.

In any case, their economic analysis has determined that, dollar for dollar, the cost of eliminating the pollution risk will exceed the potential benefits and is, therefore, an inefficient use of economic resources. The application of this standard is itself fraught with uncertainties and debatable assumptions that the sponsors usually neglect to mention, but essentially they are making an argument about social values, dressed up as a sophisticated claim about economic science.

Angry parents, worried about their children's health or their own, would skip over the economic logic altogether. They are not talking about cost-benefit economics or a utopian "risk-free society." They are talking about the possibility of cancer in their own family. What makes them so angry is the blind injustice -- their well-being threatened by third parties who seem not to care.

Furthermore, the uncredentialed public sometimes "knows" things before science does. Starting in the 1960s, for instance, a popular folklore developed in America concerning a "cancer epidemic" stemming from dangerous industrial chemicals freely distributed in the air, land and water. Science -- and public-policy officials and, of course, chemical companies -- dismissed this talk as stemming from irrational fears, utterly without a factual foundation.

Twenty years later, science began to see the facts that were arousing the public's fears. The National Cancer Institute reported in 1989 that cancer incidence among children under fourteen increased 21.5 percent from 1950 to 1986. Cancer cases among adults (excluding lung cancer) were up by 22.6 percent over the same period. The authors of a similar study by the New York Academy of Sciences did not claim to know the exact causes, but suggested "environmental factors" as the explanation because cancer death rates increased fastest in industrialized regions and among men rather than women, suggesting occupational exposure to cancer-causing chemicals. This does not establish, of course, that widely held popular opinions are always rational or always right, but simply that popular perceptions are entitled to much more respect than the political elites give them. [12]

Many citizens, given these experiences, have come to distrust scientists almost as much as they distrust lawyers, if the scientists are employed by a polluting industry or even by the government. Their skepticism is not altogether irrational. Scientists, like lawyers or economists, may well reflect the institutional biases of their employers. A survey of scientists' attitudes on environmental risk found this bias to be strong and clear. Among industry scientists working for corporations, 80 percent said they believe there is a "threshold exposure" to cancer-causing materials and thus below certain levels there is no health risk. Among government scientists, only 63 percent agreed. However, a majority of academic scientists, 60 percent, believed the opposite -- that there is no safe level of exposure to carcinogens. If the experts' opinions on such a basic question can be defined by where they work, who can say what is rational or irrational? [13]

In any case, the deeper argument is not about science or economics, but about moral law, though most citizens would perhaps not put it that way. Lois Gibbs, national leader of Citizen's Clearinghouse for Hazardous Wastes, a national grassroots movement, explained how the moral issue is obscured by political debate on toxic pollution.

"Would you let me shoot into a crowd of one hundred thousand people and kill one of them?" Gibbs asked. "No? Well, how come Dow Chemical can do it? It's okay for the corporations to do it, but the little guy with a gun goes to jail. ... What they throw at me is that I am a single-issue person. Yeah, I am a single-issue person. I look at the issue of people being poisoned and it makes me mad and I wonder why it doesn't make everybody mad. It's a moral issue and that's why we won't go away. This is a movement for justice and, if people have their morals and ethics intact, regardless of what issue they face, they'll be okay."

By Gibbs's political measure, for instance, the new Clean Air Act enacted in 1990 was a moral travesty. It permits oil, chemical and steel companies dispensing toxic air pollution to kill as many as ten people in one hundred thousand in the neighborhoods surrounding their factories, refineries and mills (and gives companies twenty years to achieve this standard). The new law abandoned the moral standard enacted in the first Clean Air Act in 1970 -- that protecting human life and health would be the overriding purpose of clean-air regulation.

As a practical matter, the federal government had already abandoned the human standard long before, for it now subjects policy decisions of almost every kind to a crazy quilt game of elaborate rationales, economic analyses designed to justify doing--or often not doing- that the law seems to require. These calculations, formally known as "cost-benefit analysis" or "regulatory impact analysis, " attempt to measure the dollars that will be expended versus the dollars to be saved as a result of particular government decisions, from the Department of Housing and Urban Development to Agriculture to EPA.

While the use of cost-benefit formulas originated in the Executive Branch, every legislative debate is now fought out on this murky technical ground. Cost-benefit calculation is the highest art form in the realm of persuasion by information -- and the most deceitful. Its purpose is to construct ostensibly scientific benchmarks to justify what are really political judgments. The results are anything but scientific.

To construct cost-benefit equations, for instance, economists must first decide how much a human life is worth -- since the supposed economic benefit of saving a life will be measured against how much it costs to do so. The government has produced many godlike answers to that question. The Federal Aviation Administration put a value of $650,000 on a human life lost in an airplane crash. The Occupational Safety and Health Administration in the Labor Department decided a dead construction worker would be valued at $3.5 million. The Office of Management and Budget countered that a dead construction worker was worth no more than $1 million. Across the government, nearly every federal agency and department has played Solomon, coming up with wildly different judgments.

The use of these technical tools -- aside from the ludicrous biases and inconsistencies -- leads to conclusions that offend public morality as well as law. In essence, property rights (and profit) are being assigned a higher value than human rights. Human lives are discounted, quite literally, by government economists, as they decide whether it is worth the cost of saving them. Not surprisingly, their supposedly scientific methods are usually biased in favor of not doing anything.

When agencies concoct statistical life values, for instance, they typically include the economic benefit of preventing a death caused by industrial hazards or pollution, but not the benefit of preventing long-term illness and injury, since that is more difficult to quantify. The omission automatically skews the equation in favor of the industrial polluters by reducing the potential benefits of action. "We all know it's much cheaper to bury someone than it is to treat them on a long-term basis," David Vladeck, a lawyer with Public Citizen, observed. [14]

The cost-benefit approach, more fundamentally, obscures the elemental questions of justice that are present in much of what Congress debates -- who must pay and who will suffer if they aren't made to pay? Cost-benefit theory pretends that everyone in the society will share the economic cost of protecting the environment or eliminating occupational dangers, but that is only true in some distant economic sense. In the here and now, the bill has to be paid by particular parties, usually the offending business enterprises, their owners and customers.

That is why businesses lobby so strenuously to escape the costs -- it's their money. Victims, on the other hand, are mostly unknown and in the future, unable to write their congressman because they don't yet know they will be the victims.

The triumph of the cost-benefit logic is perhaps the starkest example of how professional expertise has overwhelmed the public's sense of political values, in the name of economic efficiency. If American lives are only worth what they produce, then some lives should logically be treated as more valuable than others, since obviously some people will produce "more" economic return measured by dollars. Naturally no one would articulate that premise directly, but it is often reflected in which life-threatening problems the government decides to take seriously and which ones it chooses to ignore.

When all the technical complications are stripped away, these economic calculations assume that citizens exist, not as free-standing creatures leading their own lives, but merely as agents of the overall economy. The implicit premise has a faint odor of fascist thinking: that people belong to the state and its larger purposes, not the other way around.

In legislative debate, the economic argument regularly prevails over the human values, not solely because politicians are enthralled by economists, but because the economist's dry statistics are often accompanied by a powerful threat -- the company will close the factory if it doesn't get its way. If the standards are set too high, if the taxes are too onerous, the business enterprise will be shut down, destroying jobs and livelihoods. The threat is often bluff and artful exaggeration. In an earlier era, American industrialists warned that there would be economic chaos if children were prohibited from working in coal mines and garment factories. But the economic threat can also be actualized. [15]

Information politics crystallizes the threat with "facts" and a nervous politician, confronted with elaborate studies, may not be able to tell which is bluff and which is real. During the clean-air debate, the National Association of Manufacturers distributed a "Jobs at Risk" map purporting to show the job losses in every legislator's home state if Congress enacted a tough measure. The data was extrapolated from EPA technological studies in a most dubious manner, but it had a wilting effect on congressional enthusiasm for a tough clean-air measure.

Politicians dwell in the middle of this contest -- caught between public "emotions" and uncompromising "economics" -- or at least that is how most politicians see themselves. But elected officials, unless they are very sophisticated, are not much better equipped than average citizens to judge between business threats and the popular sense of the right thing to do.


Unless one imagines a society in which everyone goes to law school or gets a Ph.D. in economics, the average citizen cannot be present in the contemporary debate, often cannot even understand what it is about. The various public interest organizations that field lawyers and other experts in their behalf help to compensate for the absent citizens, but that is not the same as democratic representation.

Democracy is about aggregating the collective power of citizens to speak in their behalf. That process requires strong mediating institutions that are loyal to their adherents, that will listen to them and translate their values into technically plausible language, that will defend their claims and not forfeit them because the other side has hired better economists or more lawyers. That linkage is a large part of what's missing in contemporary politics.

The underlying contest is not just the tension between values and facts, but also that between personal loyalty and disinterested rationalism. Loyalty is another word, that has fallen into disuse in politics -- the other side of trust. Trusted representatives are rare because the public senses that too few of the people they send to Washington will remain loyal to their untutored opinions, when confronted with the information army. Loyalty and trust are not easily established in politics and certainly not by the manipulative techniques that invent artificial public opinions. The familiar routines of modern government only sow more popular distrust because these are the methods that disparage and dismiss the deeply felt expressions from citizens at large.
The better-educated classes perhaps find it difficult to understand that there are real limits to "rational" information politics. But this is not a mystery to those who lack professional credentials or privileged status. At any neighborhood bar or lunch counter, when citizens talk about politics, they do not talk about the governing process as a rational search for "responsible" policies. They see it, plain and simple, as a contest ruled by power and they know that they do not have much.
Site Admin
Posts: 34633
Joined: Thu Aug 01, 2013 5:21 am


Postby admin » Thu Oct 31, 2013 12:03 am


Because of its shocking size, the savings and loan disaster that unfolded in the late 1980s with massive losses for the taxpayers was widely portrayed as a unique failure of government. In fact, the patterns of political behavior that produced the savings and loan disaster are fairly typical of contemporary government and routinely replicated across many other issues, albeit with less costly results. Leaving aside the financial and economic complexities, the savings and loan bailout is most disturbing as a story of politics -- a grotesque case study of how representative democracy has been deformed.

The political question is simple: How could they have let this happen? The answer involves a tangled drama of governing politics that played out for nearly a decade without the public's ever catching on to the implications. Indeed, the real politics of the savings and loan crisis involved bipartisan management to keep this scandal from public view, even through the glare of a presidential election. Republicans and Democrats cooperated in this objective, and the taxpayers remained ignorant until 1989, when it was abruptly announced that they must put up hundreds of billions of dollars to clean up the mess.

Even the public's huge bill fails to describe the entire loss. In their manipulation of the government's financial regulation, politicians of both parties effectively destroyed a system of financial institutions that was explicitly created to serve citizens with the least resources. The original objective of savings and loan regulation was one of liberalism's noblest legacies -- broadened home ownership among all Americans, even families of modest means. In the end, the goal of housing was thrown over the side and the government's regulatory system was perversely diverted to a different purpose -- "socializing" the losses accumulated by freewheeling bankers and developers by making every taxpayer pay for them.

The obvious explanation for how this happened is the domination of government decisions by special interests. That is true enough, but too simple to be very helpful. Pushy lobbyists and interest-group parochialism are as old as the Republic, and it is impossible to imagine a robust democracy without them. Reformers who dream of "good government" without special interests and lobbyists are trying to imagine politics without the normal human appetites.

The more challenging question about the savings and loan fiasco is: What happened to the public voice in all this? Why was no one looking out for the rest of us? As the story demonstrates, democracy has been deformed by the breakdown of different self-correcting mechanisms, and by the operating climate of government itself. Modern representation has assumed a different purpose -- taking care of clients, not the larger public interest. Since most everyone is engaged in this enterprise, both legislators and the Executive Branch agencies, a mutual interest arises among them -- how to manage things so that all of them will be able to elude public accountability.

In that sense, the savings and loan disaster was actually a success story for the politicians. They managed the crisis year after year to protect their clients from loss, then they abruptly informed the voters of their obligation to pay right after the 1988 election. Yet no one in government was made to answer for the enormous injury they inflicted on taxpayers. The same political officers continued in power -- still managing things in much the same manner.

The story begins, however, with a revealing complication: A handful of conscientious representatives did try to warn the public. A few representatives did prod their colleagues, year after year, to face the problem before it was too late. These honorable politicians were ignored, along with the public.


One of the honest voices was Representative Henry B. Gonzalez of Texas, who has represented his San Antonio district for more than thirty years, accumulating seniority but little prestige. In 1989, despite the doubts and grumbles from some younger colleagues, he succeeded to the chairmanship of the House Banking Committee.

Gonzalez saw the outlines of financial disaster forming quite early and for more than five years made lonely speeches, trying to get someone to listen and act. Nobody in authority would do either. As early as 1982, he testified before his House colleagues, explaining the long-term consequences for the taxpayers if they further liberalized the regulatory rules for the S&L industry. They ignored his warnings.

"It was very difficult," Gonzalez recalled. "The only avenue I had for speaking out was special orders [when the House floor is open to random speeches on any subject]. Going back to 1984, I was making speeches and warning. None of the other members wanted to look at them or apparently anyone else. I made speeches and they were all printed in the Congressional Record. Ah, nobody read them. Nobody cared."

At seventy-four, Henry Gonzalez is an interesting exception to the political norm -- a solitary figure who never bought into the clubby arrangements of Congress, an inner- directed man who regularly upsets colleagues by plunging into discomforting subjects. His character deserves brief examination because the differences reveal many of the qualities that are now missing from the representative system.

"One good thing about not having any clout," Gonzalez confided, "is that all this money didn't come around and try to buy me. It didn't seem worth it to them. So I could say what was on my mind and not worry about losing contributors or anything like that."

To most of his colleagues, Gonzalez seems merely peculiar. He has the demeanor of an agreeable old uncle who insists on telling lengthy stories that will bore the children. He has a large nose and emphatic black eyebrows and a wincing expression when he talks. Listening to Gonzalez requires patience, for he is the type of politician who recounts historic moments with excruciating literalness. His account of counseling Lyndon Johnson back in 1964 on the war in Vietnam begins by describing the highway route the congressman drove from San Antonio to the LBJ ranch and where he stopped for breakfast.

His discourses on government loop loosely back and forth across fifty years of political memory -- from the San Antonio City Council in the 1950s to Reagan's unprovoked invasion of Grenada, back to the Texas legislature where Gonzalez filibustered for civil rights, then over to Richard Nixon's abandonment of the Bretton Woods monetary system in 1971. His elliptical sequences may bewilder even those who are old enough to remember the history.

Only with great patience does one discern that, indeed, these scattered recollections do form a coherent message. The story Uncle Henry is trying to tell is about the slow death of constitutional democracy in our time, as he himself has witnessed it. The American republic, Gonzalez laments, now resembles Rome in the time of the Caesars.

"The Caesars," he explains, "weren't tyrannical. They were guys who wanted to be loved, like the president. But they exercised power unrestrained by a Constitution, just like the president.

"When the president can bomb a foreign leader who's unpopular, we no longer have a constitutional democracy. If a president can do what Reagan did in Lebanon and Grenada and Nicaragua and Libya and what Bush did in Panama, we don't have a constitutional democracy. I'm still in kind of a daze. We have learned nothing. It demoralizes me. Makes me, not sad, but sick of heart. It's too great a country to go by default.

"We have so traduced democracy, cut off the participatory side, that the people don't see any point," he lamented. "I find that the people can see through things. The people are there. But what can they do? When they have no choice between the two parties, no real choice between the overwhelming preponderance of candidates?"

In Washington, these qualities have earned Gonzalez an unfavorable reputation -- he is regarded as an eccentric and dismissed, sometimes quite cruelly, despite his sophisticated grasp of the financial system. "I think all along their concept of me was that I was somewhat limited or inferior," the congressman said. "I've gone through the agony of being pictured or labeled with very little opportunity to give the real picture."

Gonzalez's ancestors came to North America nearly one hundred years before the Mayflower landed in New England, but his family settled in Durango, Mexico. His father was the first generation to live in the United States, where for forty years he was editor and manager of La Prensa in San Antonio, at that time the nation's only Spanish-language daily. The congressman is from a very old American family, yet feels the intense patriotism of the new immigrant who has found his home.

"I am completely indebted to this system," he said. "Without any particular resource, money, position and so forth, I've been given the privilege to serve. My gosh, I'm not going to do anything to ruin it for those who come along next."

Gonzalez is combative in politics and stubbornly so. He filed an impeachment resolution against Ronald Reagan after the Iran-Contra scandal, accusing him of betraying law and Constitution. He introduced another one against Paul Volcker, chairman of the Federal Reserve, during the deep recession in the early 1980s.

"You have to fight a fight," Gonzalez explained. "The trouble with these younger guys is they think you can talk a fight and the people won't know what happened."

If Gonzalez seems eccentric to modern Washington, it is because he is a living remnant from an earlier style of representation -- a politician who tries to do his own thinking. Rather than rely on sponsored policy studies or interest-group propaganda, Gonzalez mostly reads books and, compared to most of his congressional colleagues, is a man of wide-ranging erudition. His idea of a big night out in Washington is browsing in a secondhand bookstore.

Gonzalez is a kind of Jeffersonian fundamentalist living in an age of easy compromises -- a small-r republican who still believes, quite literally, in the restraints and responsibilities set forth by the Constitution. Liberal by political persuasion, he is populist in his skepticism of concentrated power -- including governing power. Naturally, this makes him seem eccentric.

His type is ill-adapted for survival in modern politics and is gradually disappearing. This constitutes a loss for democracy that, though intangible, explains much about the irresponsibility of government. In addition to his own strong character, a congressman like Henry Gonzalez has been empowered by his own constituents to function independently, to be free of the interest-group pressures that confine other politicians. The people back home know him. They trust him. Gonzalez has thus acquired a license to speak on behalf of the larger public interest, regardless of small-minded political currents. His constituents protect him against the retaliation from special interests.

The enduring question for democracy is how to revive and encourage the trusted representative -- how to create political conditions that would permit such relationships to develop and survive. Among other things, trust requires time and patience and sustained human engagement. In the quickness of mass-media politics, it is extremely difficult for either politicians or constituents to develop any sense of personal loyalty to one another. Local party organizations that once lent confidence to such relationships are now mostly defunct. Imposing term limits on elected representatives would, of course, have the opposite effect. It amounts to a permanent declaration of distrust between the voters and their representatives.

Democracy does not require a representative system peopled with philosopher kings or saints, but it does need circumstances that encourage politicians to represent their constituents while also, now and then, speaking for the national interest. Not every politician will rise to the opportunity, even when conditions are favorable. But this much is certain: If the Congress were amply populated with men and women of Henry Gonzalez's nettlesome independence, the savings and loan scandal would never have occurred.

The fact that no one listened to Henry Gonzalez might be interpreted as cultural bias or attributed to the congressman's independent qualities, except for this: The same warnings were also sounded year after year by Representative Jim Leach of Iowa, the second- banking Republican on the banking committee.

Jim Leach is from the other end of America's cultural spectrum -- an Episcopalian businessman, a blond graduate of Princeton, Johns Hopkins and the London School of Economics. He is a forty-nine-year-old moderate conservative whose Davenport district lies in the heart of middle American tradition. Leach also understands finance and banking on a most sophisticated level and, like Gonzalez, tries to be a representative in the larger sense of the word.

Leach saw the savings and loan crisis approaching for approximately the same reasons as Gonzalez and, year after year, he too spoke out. He called press conferences and issued dramatic warnings. He produced financial analyses that described the prospective losses mounting for the taxpayers. Nobody would listen to Jim Leach either.

"It's a wonderful story about the nature of modern politics," Leach said ruefully in 1989. "Why is it so hard for the Congress to do something for the public?"


The savings and loan industry originated on the wrong side of the tracks -- as mortgage associations in working-class neighborhoods. So, despite the industry's subsequent growth and power, the S&Ls were naturally aligned socially with Democrats, the party of labor. Commercial banks, the much larger and richer establishment institutions, are Republican. Investment banks and the securities industry have long-standing ties to both parties. The old blueblood investment money tends to be Republican but, since New Deal days, some of the largest Wall Street brokerages have been close to the Democrats.

The basic sociology of these rival financial interests that encircle legislators and banking legislation is important to grasp because it gets mixed up in complicated ways 'with the other source of their political influence -- campaign contributions. What often frustrates critics of modern politics is that, while political money is always present and always at work, it doesn't always neatly explain why things come out the way they do. The campaign money flows back and forth across these social divisions and sectoral interests in dizzying ways that defy a simpleminded analysis of who bought whose votes.

For instance, Democrats who take care of commercial banking interests, as many of them do, mayor may not get bundles of campaign money in return. Some do it because it provides both self-protection and social enhancement -- an entree with the Republican establishment on the other side of town. Many Republican members have played a similar game with S&Ls, going in the other direction. Political service on behalf of finance is like a price of admission to respectability.

"We've had a lot of liberals who were good on housing and would take care of the banks on the other side," said Jake Lewis, a longtime committee staff aide. "As long as they took care of the banks, they could be as liberal as they wanted." [1]

Some legislators are for sale, no question. But most legislators will take money from several or all of the contending forces in finance and so cannot possibly keep all of them happy at the same time. The Banking Committee, like Appropriations or Ways and Means or Finance, is known as one of the "money committees" because it is always so easy for its members to raise campaign funds from everyone. "If you're on Banking or the Finance Committee," said Senator Dale Bumpers, "you don't even have to open your mouth. They'll throw money at you over the transom."

The larger point, however, is that the setting for nearly all legislation in Congress assumes these client-representative relationships, however tangled. One can go down the dais in the Banking Committee chamber and label most of the members -- though not all -- by simply naming the financial sector or sectors for which they speak, whether it is hometown S&Ls or securities firms, the super-regional banks or the money-center behemoths.

One could draw similar seating charts for most committees of Congress and, for that matter, most regulatory agencies and officials in the Executive Branch. Nearly everyone in government has "clients" to protect or advance, sponsors who often helped put them there.

But this is a crucial point that many miss: Aside from the need to raise campaign money, most politicians want clients. The results of working for a client are visible and concrete, unlike so much of the sprawling legislative process, and client work is often more personally satisfying. Most members of Congress, after all, are relatively anonymous themselves in the larger dramas of Washington. Despite flourishes of grandeur, representatives and even many senators are generally unremarkable people who, without their tides, would be indistinguishable at a Kiwanis dinner anywhere in America.

Their work is unglamorous too -- the exhausting attention to small details of language that is the essence of legislating, the tedium of waiting and listening through endless amendments and arguments. Democracy, at its core, is plodding work and requires a heroic sense of patience.

Clients make them feel important. Who cares about what they do or think at the daily level of their existence? Lobbyists care. They are always available to discuss the fine-print problems of government. A few assorted civic groups might care and, on rare occasions, the C-Span audience might be watching the action. Otherwise, on most complicated and obscure matters, lawmakers are alone with their colleagues and the community of lobbyists. Absent a strong signal from their political parties, they are distant from any larger public and may feel only a distant responsibility to it.

Thus, the utterly normal thing about the savings and loan scandal, as it developed over a decade, is that it was never really treated as a "public issue." It was an intense, complicated political struggle between contending sectors of finance, but not something other citizens were expected to understand or care about. Restoring a public voice on such issues, amid the normal clamor of interests, is the difficult problem that faces democracy.

With some validity, the S&Ls always saw themselves as the historic underdogs on this political battlefield, fending off the superior political influence of the commercial banks while serving a "public purpose" larger than their own profit, namely, providing the easy mortgage terms that fostered broader home ownership. This was the Democratic party's great postwar domestic policy, a marriage of private enterprise and social policy created through the federal ceilings imposed on interest rates. The system provided a discreet subsidy for home buyers, regardless of their economic status, and, for forty years, the system worked: Home ownership steadily increased among American families. It was stopped in 1980 with the deregulation of interest rates -- and home ownership has decreased among Americans every year since.

For competitive reasons, commercial banks had waged a twenty-year campaign against the federal regulatory controls. Starting in the 1960s, banks lobbied to strip the thrifts of their protected position, and they finally succeeded in 1980, amid double-digit inflation, with the deregulation of interest rates. Financial deregulation was done by Democrats in the Carter administration, not by Ronald Reagan and the Republicans as so many assume. [2]

It left Democrats (and many Republicans) feeling vaguely guilty. Their favored clients, the S&Ls, were left in a gravely exposed condition, perhaps doomed by the head-to-head competition with banks. Everything that happened subsequently was influenced by a general feeling that Congress should do what it could to help the S&Ls survive the trauma of deregulation.

In 1982, the thrifts were given more liberal accounting rules and new lending powers that allowed them to plunge into the unfamiliar terrain of commercial real estate. Henry Gonzalez appeared alone before the House Rules Committee, pleading futilely against the measure and explaining the likely consequences if it passed. By 1990, the consequences were fully visible in all the defaulted shopping centers and office buildings owned by the federal government. This same measure, incidentally, also expanded commercial banks' ability to do real-estate lending and, thus, set the stage for another large financial crisis in banking that would also require a huge taxpayer bailout.

As for the public, its visible stake in this sectoral battle was virtually eliminated by the 1980 deregulation legislation. The implicit interest-rate subsidy for savings and loans that for forty years had stimulated housing and the gradual spread of home ownership was abolished. In the ensuing decade, mortgage interest rates were the highest of this century in real terms and home ownership declined for the first time since the 1930s.

Campaign money undoubtedly drove many of those congressional votes and framed the attitudes of legislators. Reforming campaign finance might well weaken the client linkages and thus create more space for a larger public perspective in the debate. Genuine reform could strike at the heart of the matter by enacting this rule: Senators or representatives can serve on. the Banking Committee or they can take the bankers' money, but they can't do both. A strict prohibition on campaign contributions from any interest-group organizations directly affected by the committee's legislative jurisdiction -- bankers, stockbrokers, home builders and developers, all of them -- would help liberate the lawmakers.

But such a general rule, applied to all relevant committees, would produce fierce resistance since it would also sever the political-money linkages for interest groups of every sort -- organized labor, the elderly, the pro-Israel lobby, farm groups, the doctors and insurance agents and teachers.

Furthermore, for those who believe campaign money is the core of the democratic problem, there is the disturbing case of Senator William Proxmire. The Wisconsin Democrat, until his retirement in 1988, was chairman of the Senate Banking Committee and a figure of unquestioned rectitude. During thirty years in the Senate, Proxmire made himself famous as a pinch-penny watchdog of public spending, lampooning dubious federal projects with his "Golden Fleece" awards. More important, Proxmire accepted no contributions for his low-budget campaigns, not from bankers or any other interests that came before his committee. If anyone was untainted by money, it was Proxmire.

Yet, on the savings and loan question, Senator Proxmire behaved more or less like everyone else in authority. He ignored the same facts, made the same misjudgments and took the same evasions. In retirement, he offered the same lame excuses as everyone else. "We were kept in the dark," the former senator claimed. "If we'd known, if we'd had the facts, it would have been a simple decision."

When he was faced with the crucial moment of decision in 1987, what Senator Proxmire did was no different from what so many members of Congress typically do. He called a friend in the industry for advice, someone whose judgment he trusted, the executive of a well-managed savings and loan back in Milwaukee. And the senator followed the friend's advice -- which was to postpone the day of reckoning for another year or two and see what happened.


In May 1985, four economists at the Home Loan Bank Board, the federal agency that regulated the savings and loan industry, prepared a study that made matters plain. At least one sixth of these federally insured institutions were broke -- insolvent. Liquidating all of them and promptly paying off their depositors would cost $15.8 billion. But the federally guaranteed insurance fund had only $6 billion and was, therefore, effectively insolvent itself. In other words, it was a $10 billion problem. If public officials had acted on that estimate in the spring of 1985, that would have been the approximate cost, whoever had to pay it.

Instead, when the report became public two months later, Senator Jake Garn of Utah, then the Republican chairman of the Senate Banking Committee, dismissed the likelihood of a busted insurance fund as "very, very remote." Senator Proxmire agreed, though he acknowledged that the problem was clearly "getting worse, not better." Treasury Secretary James A. Baker III assured senators they were right not to be alarmed.

"Obviously, it's no secret that thrifts continue to be in a fragile transition period," Baker testified. "I think we are encouraged, however, with respect to the earnings trend for thrifts. . . . So we are optimistic with respect to thrifts.... I don't think there is any cause for undue concern and I would reject any suggestion that we are in the midst of some sort of a major systemic problem with respect to any element of our financial services industry." [3]

Six months later, as declining oil prices collapsed the economies of Texas and other southwestern states, the size of the problem became much worse. By the end of 1985, economist R. Dan Brumbaugh, a principal author of the original study, concluded that it was now a $30 billion or $40 billion problem and growing ferociously every day. When he tried to explain the economic fundamentals driving the financial crisis, Brumbaugh was brushed off -- both in Congress and at Treasury.

"These people were profoundly anti-intellectual, " he said. "They did not engage in the ideas of this crisis. They were engaged in the politics of the crisis. They never really attempted to understand, on their own, how bad it was." Brumbaugh, incidentally, began sounding similar warnings in 1988 about impending insolvency for the Federal Deposit Insurance Corporation, the fund that protects depositors at commercial banks. He was again dismissed by bankers, the Treasury secretary, banking regulators and some congressional leaders as an irresponsible alarmist. Three years later, his dismal forecast was confirmed and taxpayers were required to provide $70 billion for the banks too.

The first substantive response to the ballooning S&L crisis did not occur until July 1986 -- a bit more than a year after the economists' initial warning -- when the Reagan administration sent a proposal to Congress for a $15 billion refinancing of the S&L insurance fund. Congress responded by stalling for another fifteen months in wicked back-and-forth between House and Senate. Finally, in the fall of 1987, two and a half years late, Congress approved special federal borrowing of $10.8 billion to replenish the broke insurance fund. Everyone in authority knew this amount was too little. By then, it was no longer a $10 billion problem but more like a $40 billion or $50 billion problem.

Staff economists at the Office of Management and Budget in the White House, the FDIC, the Federal Reserve, the General Accounting Office, and the Senate and House banking committees were all tracking the same problem, making their own calculations of the true cost and coming out, more or less, where Brumbaugh had. "There was a general feeling that it was going to be too low," said William Seidman, chairman of the FDIC. "We certainly knew it was too low." Then why didn't his agency say anything? It was not done. "We have been tarred before for speaking ill of our fellow regulators," Seidman explained.

The august Federal Reserve was, likewise, monitoring the S&L losses and designed a special lending program by which it could provide temporary liquidity loans to the embattled insurance fund, in the event of crisis. As it turned out, one of the first endangered S&Ls that would receive substantial lending from the Federal Reserve in early 1989 (about $100 million) was the infamous Lincoln Savings and Loan owned by Charles Keating. Fed Chairman Alan Greenspan, as a private consultant back in 1985, had himself been hired by Keating to provide an economic analysis of Lincoln designed to persuade S&L regulators to go easy on him.

Greenspan issued his report on Lincoln, certifying the soundness of the institution and the expertise of its managers. In fact, Greenspan authored similar declarations of soundness for fifteen other S&Ls. Fourteen of them failed. In other words, even the chairman of the supposedly disinterested central bank had a strong personal reason not to make a righteous stink about the impending S&L debacle. [4]

Who will tell the people? No one in authority, if they can see no clear advantage for themselves. No one in the political structure -- in either Congress or the Executive Branch -- has much incentive to mess with somebody else's problem. Typically, they will stand clear and watch, anxious only that the unfolding disaster does not splash up on them.

A member of the Armed Services Committee or Appropriations or Commerce might well have been aware that something was terribly wrong with the savings and loan industry, but this was the Banking Committee's baby. Responsibility has become so particularized in agencies and congressional committees that, in the larger public sense, there is very little responsibility at all.

In theory, the party leaders are supposed to intervene at this point and impose a broader perspective. But Democratic leaders, led by Speaker of the House Jim Wright of Texas, were themselves a large part of the political problem. They lobbied tenaciously to obscure the crisis and protect their friends and contributors in the industry.

In the Reagan administration, Treasury Secretary Baker did not raise a political alarm either. He was perhaps preoccupied, along with Vice-President Bush, in the troubles engulfing their own political clients in finance -- the Republican banks in Texas that were failing as dramatically as the thrifts. While the S&Ls were crashing, the federal government simultaneously bailed out most of Texas's largest bank-holding companies, devoting billions to the rescue of some of Baker's (and Bush's) best friends and major fundraisers.

Ronald Reagan, the president, was as usual out of it; he left office without ever once addressing the subject.

Who will tell the people? The question frames one of the most profound and difficult structural problems embedded in the present system. Politics and government are awash in information-facts and studies, propaganda and rhetoric -- yet none of it communicates timely warnings to the citizens. The savings and loan issue never rose to the level of a "public issue" because political leaders in both parties chose not to make it one -- that is, not to educate and exhort on a level that would arouse popular reaction.

In the absence of that, no one (save lonely voices like Leach or Gonzalez) is intelligently monitoring the action for the taxpayers and alerting them to trouble. The political parties used to perform this role but have abandoned it. The media do report endlessly on the major events of Washington but the style and focus of their news do not fulfill this function either. Neither, for that matter, do the ranks of reformers and civic organizations, which are mostly devoted to their own specific issues.

Without meaningful communication of this kind, democracy is bound to fail. With no one watching, those in power are left free to serve their narrow interests -- protecting themselves and their friends.

The ugly political question that explains the politicians' stalling and obfuscation was always this: Would the taxpayers be compelled to put up the money to resolve this financial breakdown? Naturally enough, politicians were reluctant to face that outcome. But, if the taxpayers weren't going to pay for it, then the industry itself would have to. The modest $10 billion bailout enacted in 1987 employed federally guaranteed borrowing to raise the money but the funds were in theory going to be repaid by the S&L associations themselves through the annual premiums they pay to the insurance fund.

Thus, if Congress had provided prompt, adequate financing to solve the crisis, that would have meant raising the industry's premiums sharply or committing public money from the Treasury. Not a pleasant choice, but either approach would have been a great bargain compared to the eventual cost to the taxpayers, approximating $200 billion, not counting the decades of interest that will be paid on the federal borrowing.

The savings and loan industry proposed a political alternative: Paper over the problem for now and let the next president deal with it. M. Danny Wall, who was the Republican staff director of the Senate Banking Committee and became chairman of the Home Loan Bank Board in the final year of the Reagan administration, described the lobbying in 1987:

"The industry was saying very uniformly but quietly that we want to wait for the next president. You won't find that on the record. The hired lobbyists weren't saying it. It was the guys who come to town who were saying it. Every member has got someone in the industry they pay attention to and it's usually the big ones and not necessarily from their own states.. Members of Congress are responsive to banks and thrifts because they're the financial system in their districts. Because the financial institutions are regulated, they come to Washington a lot and a lot of members get to know them. Those guys were saying: Let's just have enough money to get through next year."

The "good ol' boys" from Texas and California and Florida, where the S&L lending has been most reckless and the impending doom was most tangible, had a particular incentive for postponing a reckoning -- the more money that was provided to the federal insurance fund, the sooner their institutions would be closed down. Jim Wright and Representative Beryl Anthony of Arkansas, chairman of the Democratic Congressional Campaign Committee, hectored Banking Committee Democrats not to let these Republican regulators close down "our Democratic S&Ls."

But even executives of the sound and solid S&Ls far distant from Texas had an interest in deferring the problem to the next president: If the mess got big enough, the main burden of paying for it would be shifted from them to the taxpayers. Kenneth McLean, staff director of the Senate Banking Committee when Proxmire was chairman, explained the subtext driving the congressional decision:

"You were talking about taking away industry money and they said, look, we're paying for this mess. We don't think the Bank Board has the capacity to handle anymore money than $10 billion. Now, there were others -- the good ol' boy crowd -- that deliberately wanted to keep the money low so they wouldn't be shut down. So the message was: Let's let the problem build up and dump it on the taxpayers."

Congress, in effect, acquiesced to that logic and so did the Reagan administration. Sure enough, it was dumped on the taxpayers.


A delicate political problem remained for both Democrats and Republicans. Having temporarily papered over the crisis, now they would have to get through the 1988 presidential election season without the people finding out. This proved to be relatively easy since the only remaining power center that might have turned this into an embarrassing campaign issue was the news media. Politicians in both parties counted on political reporters not to catch on and they were not disappointed.

Yet every financial lobbyist in Washington knew, without being told, that a major taxpayer bailout of the savings and loan industry was in the works for 1989. They began to lay the groundwork for it early by drafting their own self-interested blueprints for how the next president should solve the problem. Distant from the empty politics of presidential campaigns, these bailout proposals were circulated freely among key political players.

The main trade group for commercial banks, the American Bankers Association, started work on its bailout plan in the spring of 1988, while voters were being entertained with news stories about Mayor Koch attacking Jesse Jackson in the New York primary or news-magazine essays on whether George Bush was a "wimp." Executives from the major Wall Street brokerages were busy on Capitol Hill too, helping congressional staffs design the new government debt issues that would be needed to finance the project. So many different financial trade groups produced versions of the coming bailout that the House Banking Committee staff created a huge spreadsheet listing all of the lobbyists' competing proposals side by side.

The financial industry naturally shared the politicians' interest in discretion, but the bailout plans were not closely guarded secrets. An inquiring reporter could obtain copies without any special effort at digging. Robert Dugger, lobbyist and chief economist of the ABA, explained the politics:

"Everyone knew the game was: Democrats don't bring this up, Republicans don't bring this up. Because a firefight on this issue will have more bodies on both sides than anyone wants to lose. The financial community knew that and we knew where the play was: Wage the presidential campaign on all issues, but don't use the thrift crisis. We all know it has to be dealt with. We'll do it right after the election." [5]

The chief S&L regulator, Danny Wall, understood the same terms of play. When Wall appeared periodically before congressional hearings, he was always asked whether the fund for liquidating failed S&Ls would be adequate. He always said yes. "I was asked in a code that everyone understood," Wall said. "The code was: Will $10.8 billion be enough to get you to 1989? My answer was, yes, this is enough for the near future. I was trying to be more explicit and still answer in code. Everybody knew what we were talking about."

At the White House, the immediate goal was to get Ronald Reagan safely into retirement without having his final year in Washington marred by an embarrassing taxpayer bailout for a deregulated industry. When Dan Brumbaugh was briefly considered as a candidate for the job of chief S&L regulator, the word came back to him through political channels: "If this guy really wants this job, he's going to have to sit down with Howard Baker [Reagan's White House chief of staff) and assure Baker that we can hold things together until this president gets out of town."

By the spring of 1988, Henry Gonzalez was, by his own account, "almost hysterical" on the subject. He called a press conference to describe once again the fantastic unraveling he knew was underway. He proposed an emergency $50 billion line of credit from Treasury so that regulators could immediately stop the hemorrhaging losses. Nobody in the press came to his press conference, aside from the trade papers covering the financial industry and Texas reporters. Gonzalez's dramatic proposal went unreported.

Simultaneously, Gonzalez pleaded for action with Representative Fernand St Germain of Rhode Island, then the Banking Committee chairman. St Germain, who was defeated that fall by his own sleazy S&L connections, brushed him off.

Gonzalez remembers telling him: "Freddie, you may think this is just Texas but sooner or later your constituents in Rhode Island are going to be alarmed too. Why don't you appoint a task force and tell people the truth about the size of the problem? Freddie says, 'Henry, you know all that'll do?' What? 'You'll have the president going to Texas and saying you're advocating a taxpayer bailout and you're a Democratic big spender.'"

Everybody knew except the voters -- and the thousands of political reporters who were covering the presidential campaign. They were busy covering the Willie Horton issue, Dan Quayle's college record and other complex matters. The corrective mechanism of the press failed the people too, for its own reasons.

Reporters and editors, save for a few rare mavericks, generally take their cues from people in authority; if the people in high places of government say there is no crisis, the media are inclined to accept that answer, even if contradictory evidence is easily available from less prestigious sources. The cultural boundaries imposed on editors and reporters by their own institutions are embedded in their definitions of what is "news." Cries of alarm from lone congressmen like Leach and Gonzalez, notwithstanding their personal brilliance, do not qualify as "news."

Political reporters would surely have written about the prospect of a taxpayer bailout if regulatory officials had announced it or if either the Republican or Democratic candidates had made an issue of it. But, of course, both parties had tacitly agreed not to bring it up.

One of the reasons elections have lost their meaning is that the content of campaigns is confined by this closed loop between the politicians and the reporters. The media define "politics" as the narrow subject of winning or losing elections -- not deciding issues in government. So the campaign coverage generally excludes public questions that people may care about-or ought to care about -- unless the subject figures in the electoral strategies of the candidates.

This premise reverses the dynamic of electoral accountability: Public questions get on the agenda for public discussion only if the campaign strategists select them as useful devices for winning votes. Issues that might lose votes are, not surprisingly, selected out. The only serious intrusion on this monopoly is the press's tenacious inquiries about personal character, sex, drugs and other provocative subjects.

The media, furthermore, have developed their own forms of protective specialization -- a way of defining their responsibilities in narrow compartments that is not so different from the government's. The political reporters who cover campaigns, having defined politics as elections, are not inclined to have much interest in the governing questions, especially complicated matters like financial regulation or economic policy. Meanwhile, the financial reporters who do cover such matters retreat from the broader political implications of what they are reporting.

Thus, though they work out of the same newsrooms, they do not intrude on each other's turf. Political reporters and editors dismiss subjects that are the core of governing as too dense and boring for campaign coverage, while financial reporters dismiss politics as a lot of empty hot air. As a result, though many stories were written in 1988 about the growing troubles of the savings and loan industry, they mostly appeared on the financial pages and were constricted by opaque terminology and timidity.

An average reader, following the news conscientiously, was given no way to divine what was coming right after the election -- much less know that the financial industry lobbyists were already at work designing the taxpayer bailout. Most political reporters, if they had read the same stories, would probably not have figured it out either. [6]

The S&L crisis did almost become a campaign issue anyway, but it was quickly snuffed out before the political reporters awoke to its meaning. Late in the day, the Democratic candidate, Michael Dukakis, issued a stinging attack on the S&L bailouts already underway in the Southwest and blamed the lax regulatory atmosphere created by Reagan and Bush for producing a costly scandal. In late September, the Dukakis campaign was prodded into surfacing the issue by Representative Charles Schumer of Brooklyn, another Banking Committee member trying to sound the alarm.

The political apparatus quickly shut the door on further discussion. Senator Garn went to the Senate floor the next day and denounced Senator Proxmire and other Democrats for playing politics with a bipartisan problem. Republicans in the House threatened to turn the issue around on Jim Wright and the other Texans who had lobbied so hard to protect their industry friends. Senator Lloyd Bentsen, the Texas Democrat who was Dukakis's running mate, communicated to campaign headquarters that this was not going to be a winning issue for their ticket. So did House Speaker Jim Wright.
Representative St. Germain chewed out Representative Schumer for making mischief. That was the last word heard on the subject from Michael Dukakis.


After the presidential election, George Bush was widely congratulated for "facing up" to the problem by proposing a solution -- a $50 billion taxpayer bailout. But the public was once again cut out of the action. Just as Democrats had taken their cues from their special- interest patron, the S&Ls, now the Republicans turned to their clients, the commercial banks. George Bush's bailout legislation, proposed in early 1989, is a remarkably good fit with the blueprint the American Bankers Association drafted the summer before.

This transaction represents another critical juncture in the governing process where democracy breaks down -- the moment when the dimensions of the public problem are first defined and before any visible action has begun. As smart politicians understand, defining the terms of a problem will usually determine the scope of the solutions. Certain ideas and alternatives become the .accepted political agenda; other possibilities are ruled off the table. Smart lobbyists devote their principal energies to this stage because it is often where the contest is won or lost.

In some ways, this moment is when the public at large has the most to contribute -- when the discussion is still generalized instead of technical, when the arguments are about broad political choices and public aspirations. In the routines of modern Washington, this is the point where the public is nearly always excluded. [7]

That is what happened in the autumn of 1988. While citizens remained innocently unaware, the newly elected president's team conducted a series of private meetings to devise a bailout plan that would be announced right after Bush's inauguration. The private consultations actually started a few weeks before the election was decided. Treasury Secretary Nicholas F. Brady deputized two lieutenants, both former finance professors from the Harvard Business School, to begin drafting a bailout plan for the new president.

"Most everybody came through and talked to us," said Undersecretary Robert R. Glauber, "the ABA, the league [of savings and loans], a bunch of lobbyists, the guys from the bank board. It was the usual cast of characters." A public problem that had festered for a decade was now going to be "solved" in two months of backroom meetings at the Treasury Department with lobbyists from the financial industry and a handful of key congressional leaders.

Though they were academics, both Glauber and Assistant Secretary David W. Mullins, Jr., were quite familiar with the viewpoints of the leading commercial banks. In the year before he joined the government, Mullins had earned $262,000 -- four times his Harvard salary -- from Citibank and two other banks for conducting executive seminars. Glauber, in addition to his teaching, was paid $415,000 as a consultant to commercial banks, most of it from Morgan Guaranty of New York. Mullins was subsequently appointed a governor on the Federal Reserve Board, which regulates the banking system, among its other roles.

One politically unsettling idea that Mullins and Glauber came up with -- a small tax on' all depositors to pay for the bailout -- was quickly killed as an alternative when it was leaked to the press. Bank lobbyists made certain the proposal was widely broadcast and the ensuing uproar pushed the Bush administration into disowning the idea. Dugger, the ABA's chief economist, thought the episode reflected a misstep by two professors who did not fully appreciate how Washington works.

"The city works in concentric circles," Dugger explained. "There are a limited number of people -- I mean probably fifty people in the financial legislative arena-whom you can absolutely trust to keep a secret. That is the inner circle you talk to first. They were unfamiliar with this network at that time so Treasury didn't know which lawyers and lobbyists you can try out ideas on."

After the president announced his bailout proposal and Congress began hearings, other voices jumped into the debate, speaking for other public concerns. But it was already too late. The broad terms had already been decided and their new ideas were ruled out of order.

The Financial Democracy Campaign was a coalition of community-based organizations representing consumers, labor, low-income people, farmers, housing groups, churches and others. The coalition proposed new taxes on the wealthy and financial institutions to help pay for the bailout, but everyone in authority had already agreed this was not to be a tax measure. The coalition suggested radical remedies for the crisis in housing, the declining home ownership and homelessness that were the social corollary of the S&L crisis, but everyone agreed this was not to be a housing measure.

The Financial Democracy Campaign marshaled support from several hundred diverse citizen groups across the country and some local officials like the mayor of Boston, Raymond L. Flynn. The campaign generated lots of angry mail and even local demonstrations. Press conferences were held featuring the Reverend Jesse Jackson, Ralph Nader and Representative Henry Gonzalez, the new Banking chairman, to promote a citizens' agenda for reform. The press generally ignored these pleas, judging that these uncredentialed intruders in the financial debate would not be considered relevant by Congress. The press was correct.

In the end, the FDC's public-spirited lobbyists settled on a much smaller goal, a minor amendment that at least promised some concrete benefit for some ordinary citizens. They asked that the tens of thousands of empty houses that the government now owned as a result of the massive defaults be made available to low-income families and community housing organizations on a preferential basis.

Congress included their modest proposal in the final legislation, but it was an empty victory. A year later, the frustrated citizen groups were still trying to get the federal bailout agency to comply by selling vacant housing to poor people. In the meantime, under the same provision the citizen groups had lobbied for and won, General Electric qualified to buy twenty-eight apartment complexes with nearly six thousand units at a price that was half their market value. [8]

"Congress prefers to regurgitate people like us," said Tom Schlesinger, an activist from Charlotte, North Carolina, who manages the Financial Democracy Campaign. "When it wants to be Lady Bountiful, it throws us a crumb but it doesn't change the substance. Many of the 'white hat' groups in Washington have gotten used to that game and so they play it too -- crumbs for the poor-instead of saying: To hell with that, our members are middle class and they're getting screwed. There is a terrible set of mutually interacting traps and our inside-the-Beltway groups fall for them too." [9]

If taxpayers were the obvious losers, the major winners in this political contest were also obvious. The commercial banks, whose basic design had been followed and whose longtime competitors were now in disgrace. The major Wall Street brokerages too, for they got lots of new business by marketing the government's massive new debt issues that they helped to design. Wealthy investors won too, since the government was compelled to pay them premium interest rates on this new borrowing, even though it was guaranteed by the taxpayers.

In the short run, the politicians of both parties were winners too, for they had gotten the gullible electorate to swallow a huge new liability without much damage to any incumbents. In the long run, however, the victory might well prove to be pyrrhic for all these players -- the bankers and the politicians -- for the financial unraveling continued to spread into banking and other sectors like insurance.. As the crisis in banking gained momentum, the same political dereliction continued. Neither politicians nor the press would tell the people in a straightforward way what they were facing.

Impromptu solutions, arrived at in private and without a wide-ranging public debate, often produce embarrassing results for government. Bush's savings and loan bailout, as subsequently became clear, failed utterly to resolve the crisis and, indeed, the bailout itself became a continuing scandal of sorts. One year later -- right after the 1990 elections were completed -- the Treasury sent a new request to Congress for another $80 billion.

Thus, a perversely undemocratic pattern was established. In the even-numbered years, the politicians ran for election. In the odd-numbered years -- 1987, 1989 and 1991 -- they legislated taxpayer bailouts.

At the White House ceremony when the bailout legislation was signed into law, Henry Gonzalez received one of the president's pens. "When he turned to give me the pen," Gonzalez recalled, "I said, 'Mr. President, you realize, don't you, that this is just the beginning?' He looked at me kind of blank. Maybe he had something else on his mind."
Site Admin
Posts: 34633
Joined: Thu Aug 01, 2013 5:21 am


Postby admin » Thu Oct 31, 2013 12:08 am



The political drama of taxation provides what is probably the best measure of democracy's condition, the clearest evidence of where power truly resides in the society. Aside from sending someone to war or to prison, government's ability to make people involuntarily give over their money is its strongest exercise of authority over private citizens and their institutions.

Indeed, the classical case against democracy has always been a theoretical supposition that, sooner or later, the many would use their democratic control of government to violate the property rights of the few. The mob's insatiable appetites would be fed by unscrupulous. politicians, who would use the tax system to confiscate the incomes and wealth of those who have more.

This has not been the case in America, to put it mildly. On the contrary, during the past fifteen years, the monied interests and allied governing elites have used their political power to accomplish the opposite result: Federal tax burdens were steadily shifted from them to everyone else. Clearly, governing power does not reside with the people.

From 1977 to 1990, Congress enacted seven major tax bills and many other minor ones, raising or lowering tax liabilities for individuals and corporations. The results of this legislative torrent are startlingly one-sided. Citizens for Tax Justice, a labor-supported advocacy group, calculated the cumulative effects:

If Congress had done nothing since 1977 to alter the U.S. tax code, passed no new legislation at all, nine out of ten American families would be paying less. That is, a smaller share of their incomes would be devoted to federal taxes.

Yet, paradoxically, the government would be collecting more revenue each year -- almost $70 billion more -- if none of those tax bills had been enacted.

How to explain this? Where did all that money go? Roughly speaking, it went to corporations and to the one in ten families at the top of the income ladder. Their taxes were cut by spectacular dimensions. [1]

The tax burden on the richest 1 percent of the population fell cumulatively by a staggering 36 percent, compared to what they would have owed under the 1977 tax code. As politicians from both parties congratulated themselves on delivering one tax cut after another, families in the very middle of the income ladder experienced a 7 percent increase in their federal tax burden.

Nothing demonstrates the atrophied condition of modern democracy more starkly than those facts. Behind all of the confusion and complexity of the tax debate, democracy's natural inclinations were literally thrown into reverse -- rewarding the few at the expense of the many.

For those who blame Republicans for what has happened and believe that equitable taxation will be restored if only the Democrats can win back the White House, there is this disquieting fact: The turning point on tax politics, when the monied elites first began to win big, occurred in 1978 with the Democratic party fully in power and well before Ronald Reagan came to Washington. Democratic majorities have supported this great shift in tax burden every step of the way. [2]

The politics of taxes pulls together everything that has been described thus far about the deformed power relationships in government. While the preceding chapters focused mainly on the losers -- the ranks of citizens displaced from politics -- this chapter concentrates on the winners, the people and institutions that hold the high ground of power. Though a small minority of the population, they accomplished hegemony on taxation by exploiting all of the systemic weaknesses described in earlier chapters -- from the warped social sensibilities in affluent Washington to the special-interest clientism to the vast resources that monied interests deploy for scholarly expertise and manufactured "opinions."

Those are the common ingredients of the power relationships, but the issue of taxes involves more sophisticated elements as well. After all, this is not an obscure issue like savings and loan regulation or junk bonds that affects people in unseen ways. Everyone cares about taxes and most everyone has strong opinions on the subject.

Therefore, in order to accomplish such distorted outcomes, the governing elites and monied interests are required to create a series of elaborate screens around the subject of taxes -- a moving tableau of convincing illusions that distracts the public from the real content and gives politicians a place to hide. Meanwhile, behind the screens, the action proceeds toward the results they seek. In public, the two major parties struggle contentiously over tax issues. Yet the reality is the collaboration between them. Expert opinion is marshaled in behalf of broad economic goals that seem desirable to everyone -- economic growth and jobs. Meanwhile, elites work out among themselves how these broad goals can be translated into reducing their own tax burdens.

Given the fundamental nature of tax politics, the powerful economic interests have a large and continuing advantage over unorganized citizens at large. The tax contest plays out in the news as dramatic climax -- a tax bill is passed, the president signs it. The real drama, however, continues, year after year, and no outcome is ever permanently decided. Thus, the monied interests are always mobilized and working toward better results, knowing that the continuum of legislative action does not stop with one victory or one setback. Citizens may grow weary and move on to something else, but for obvious reasons, the wealthy are always on the case.

Over a period of some years, the politics of taxation degenerated into what looks like a running game of bait and switch -- a hustle in which the governing system plays the clever salesman while the taxpayers are the mark. The bait is the continuing political rhetoric that seems to promise tax cuts. The sleight-of-hand involves switching this promise for something else.


During the 1988 presidential campaign, George Bush comforted voters with a manly promise to enact "no new taxes," and his pledge resonated profitably with popular opinion. If voters had wished to know what George Bush would actually do as president, they should have been listening to other voices.

An elite consensus of opinion leaders from both political parties -- economic policy gurus, financial and business leaders, strategic lobbyists and, more discreetly, some prominent politicians -- had already developed an agenda for what the next president should do to correct the economic imbalances created by the Reagan era. The next president, they declared more or less openly, should reduce both the federal budget deficit and the trade deficit by first slowing the economy and suppressing personal consumption, perhaps even accepting a recession, and then raising taxes on consumers. Americans, it was said, had been on an irresponsible binge of buying and borrowing during the 1980s and now it was time to sober up.

This could be accomplished, these thinkers explained, by raising taxes on consumption -- on gasoline and other staples -- as well as by cutting back on government benefits such as Social Security, Medicare and Medicaid, assistance to veterans, and civil-service and military retirement. Their logic, roughly speaking, was that if families had less to spend on things, they would buy fewer foreign goods and thus shrink the trade deficit. To encourage savings, they added, the investor classes should be given additional tax relief -- a reduction in the taxes on their capital.

The most influential (and most radical) articulation of this case was made by a prestigious Republican investment banker, Peter G. Peterson, in a magazine article, "The Morning After," published in The Atlantic in October 1987. Peterson, who served as secretary of commerce in the Nixon administration, delivered a scary sermon on what would unfold if Americans did not swiftly rediscover self-discipline. His painful remedies, however, were entirely directed at the population at large, while shielding his own class, the wealth holders, from sacrifice. Peterson suggested, for instance, repealing the tax deduction for interest on home mortgages that is so important to the middle class and imposing a national sales tax of 5 percent on all goods.

Savings, he declared, could be encouraged "by trading off increases in consumption-based taxes for reductions in investment-based taxes." All Americans consume, of course, but only a relative few have the surplus income and wealth to be investors. Eighty-six percent of the individual net financial wealth in America is owned by 10 percent of the people. [3]

In less extreme form, the same general argument was voiced so frequently by other influential voices that it became something of a cliche among the well-informed minority who listen to elite channels of discourse. The shorthand label given this strategy was" austerity" and its appeal seemed bipartisan. Peterson's partner in investment banking, Roger Altman, a Democrat, served as policy advisor and Wall Street fundraiser for Bush's opponent, Michael Dukakis, and echoed the same ideas. Lawrence H. Summers, a Harvard economist who was the principal economics advisor to Dukakis, coauthored a study making similar recommendations.

C. Fred Bergsten, a former Carter advisor who heads the Institute for International Economics, a Washington think tank funded by major foreign and U.S. financial institutions, prescribed a "consumption recession" for the next three or four years. The Cuomo Commission, a committee of notables assembled by the New York governor to study the nation's economic condition, recommended a more moderate version of the same approach -- a gasoline tax, a national sales tax or perhaps higher income taxes on the Social Security benefits of the elderly.

Some analysts at Wall Street brokerages were more blunt: What the country needed was a government-induced recession to clear away the excesses of the eighties and shrink the trade deficit. [4]

Though little noted at the time, the most influential endorsement of this economic strategy came from the chairman of the Federal Reserve Board, Alan Greenspan. Greenspan did not, of course, call openly for an "austerity" regime but he agreed with the others that domestic consumption must be suppressed by government policy, both budget cuts and higher interest rates. "Domestic absorption has to be restrained by macroeconomic policy," he told the Senate Banking Committee in early 1988. [5]

Unlike the other voices, Greenspan had the independent power to carry forward this strategy, regardless of the promises of "prosperity" that both presidential candidates were simultaneously making to the voters. In the summer of 1988, while the two major parties were in noisy convention nominating their candidates for president, the Federal Reserve initiated its own campaign to discourage consumption -- by raising interest rates and retarding the pace of economic growth.

The government's campaign to suppress consumption was conducted by the Federal Reserve with the president's acquiescence and occasional kibitzing for two years. By 1990, it was obvious that the Fed had done its job too well: The nation was in recession. Bankruptcies were multiplying and, as many important borrowers failed, major financial institutions fell into trouble themselves.

"Elite debate" is one of the screens that conceals decision making on the largest economic questions -- taxes and recession -- from the clear view of the general public. The elite discourse goes on more or less in public (though much more explicitly in private), but the talk is disconnected from the formal politics of parties and candidates covered by the press. Ordinary voters are not tuned in (nor are political reporters), since the opinions of various notables have no explicit connection to the candidates.

Neither presidential nominee would address these economic prospects candidly during their campaigns in 1988. Nor were they pressed to do so by the press. The candidates are free to offer woolly platitudes about economic growth and brisk slogans -- "read my lips: no new taxes" -- while serious men in other places are left to discuss the real terms of governing among themselves.

In early 1988 only sophisticated observers could discern that the two major parties were maneuvering toward another compact on taxes of the sort they had entered into many times before. For obvious reasons, they did not wish to share this postelection surprise with the voters.

Democrats in Congress created a bipartisan blue-ribbon commission -- grandly titled the National Economic Commission and composed of "party elders" like corporate lawyer- lobbyist Robert S. Strauss -- which was designed to provide political cover for the next president when he had to undertake such unpopular measures as raising taxes and cutting government benefits. The NEC intended to announce its bipartisan recommendations right after the 1988 election. In the meantime, it kept its mouth shut.

"The White House is putting horrendous pressure on the commission to make no public statements on anything substantive before the election," a staff aide to one commission member told me during the campaign summer. "Their logic is that if the commission positions are aired now, the candidates will have to lock themselves into positions of denial -- no tax increases, no gas tax, no entitlement cuts. It could be counterproductive."

George Bush seized that ground anyway. As a candidate, he accused the Democrats, accurately enough, of plotting to raise taxes if they won back the White House. What Bush did not say was that many influential Republicans were in on the plot too. While the Republican candidate exploited the antitax posture, Richard G. Darman was privately advising key players in both parties not to worry. Darman was then a partner in a major Wall Street brokerage, . Shearson Lehman Brothers, but insiders assumed he would become budget director if George Bush became president.

Never mind the campaign rhetoric, they were told. At the appropriate political moment, a grand bipartisan deal would still be doable. If the Democrats were there on spending cuts, Darman confided, George Bush would be there on raising taxes. This scenario, widely heralded among Washington insiders, became known as the "Big Bang" strategy.

There was only one problem: This elite bipartisan consensus was promoting a policy agenda directly counter to what voters at large wanted. Raising taxes and cutting benefits would be poison for any presidential candidate who touched the subject, which is why such conversations are necessarily private.

"The elite view of what should be done is completely different from everybody else's," said Stephen E. Bell of Salomon Brothers, who had formerly served as Republican staff director of the Senate Budget Committee. "Opinion leaders strongly support a big increase in the gasoline tax. They want big cuts in Social Security and Medicare or higher taxes on the elderly. The public is against all those."

Bell's analysis was confirmed in a Gallup Poll survey, conducted for the Times Mirror Company, which found opinion leaders from finance, business and government aligned against public opinion on these tax questions and 'many others. Only 10 percent of the people favored higher taxes on Social Security benefits; 66 percent opposed higher gasoline taxes; 69 percent opposed a national sales tax. If there must be a tax increase, the citizens said, tax the upper-income brackets. Raising income taxes on those earning more than $80,000 a year was favored by 82 percent of the public. Neither Dukakis nor Bush seemed interested in that solution. Business and financial leaders were, not surprisingly, overwhelmingly opposed, for it meant taxing them. [6]

Thus, the only suspenseful political question, as George Bush took office in 1989, was how the elite consensus might work its will in the face of the stubborn resistance of the citizenry. This is usually the core of the action on taxes: how to distract public anger while things get done. The feat had been accomplished many times during the previous decade, but Steve Bell was dubious that it would succeed again.

"Why can't elites do this deal? Because they won't have the votes," Bell predicted. "The elites understand the precariousness of their situation, not just the financial elites, but the governing elites in this town. The alienation between the governed and the governors is starting to have palpable consequences. The politicians no longer have the ability to go home and persuade their folks to follow when they lead. They know the response will be: Fuck you."


The distorted federal tax code is, as Bell suggested, a central element feeding the popular disenchantment with government and politics. For well over a decade, ordinary voters had heard the perennial chatter from Washington about tax cuts.
While they might not know any of the statistics, they knew at least that their own taxes had not been cut. The public's fierce resistance to new taxes, derided by elites as selfish and short-sighted, is firmly grounded in the facts of their own experience.

Popular anger toward the federal tax system was not always the case, as some assume. In the early postwar years, when income-tax rates were steeply progressive, the public overwhelmingly described the federal tax code as "fair" -- 85 percent, according to the Gallup Poll. By 1984, according to an opinion survey conducted for the Internal Revenue Service, 80 percent believed the contrary: "The present tax system benefits the rich and is unfair to the ordinary working man and woman." [7]

Among the "benefits" reserved for the rich is the fact that even the enforcement of the tax laws was seriously compromised during the Reagan era. The Internal Revenue Service reported that, as of September 1989, the government was owed $87 billion by taxpayers who had underreported or simply not paid their admitted obligations (compared to $5 billion in 1973 and $18 billion in 1981). The chance of getting caught at grand-scale tax evasion was reduced substantially because the sample of income-tax returns that are closely examined by the IRS has been shrunk by 42 percent, thanks to Reagan's severe cuts in the IRS enforcement budget.

The "tax cheats" are not, on the whole, "little guys" who depend on wages and salaries. Most citizens pay their federal income taxes involuntarily through payroll deductions and they file the simplified reporting form that leaves little opportunity for evasive tactics. Only $1.4 billion of the missing $87 billion was attributed to wage earners.

Among the delinquents were 17 taxpayers who owed more than $100 million each and 3,335 taxpayers who each owed more than $1 million. About $10 billion of the uncollected taxes involved income from invested capital, stocks and bonds and capital gains. About one fourth of the missing revenue, $21 billion, was owed by business -- mostly major corporations."

Washington insiders were not unaware of the public anger that had accumulated on these matters. "The American people didn't understand what was happening at first, but now they are beginning to get it," Charls Walker, the premier tax lobbyist for corporate interests, acknowledged in early 1990. "This is an explosive situation we've got here. The political leaders may be able to stanch it this time, but it could blow up if Tom Foley and George Mitchell [the Democratic leaders in Congress] aren't sufficiently responsible."

Something much more complicated than greed is driving the modern tax contest -- an economy that no longer produces enough returns to provide ample shares for everyone. In this economic environment, tax politics is a way to protect oneself or to stick someone else with the loss. For nearly thirty years following World War II, the growth and distribution of incomes in American society had been fairly constant (though grossly unequal). Economic expansion was widely shared among citizens of all classes.

Since 1973, however, wages in real terms, discounted for inflation, have been stagnant or declining. Factory workers in Italy now earn more per hour than U.S. workers. The rewards changed most dramatically in the 1980s -- at the very time government was cutting tax burdens for the well-to-do. During the last decade, the top 1 percent of American families grossly increased their share of total U.S. income -- from 8 percent or 9 percent to more than 14 percent. [9]

"Something's gone wrong with the American dream, at least in material terms," Walker observed. "This is part of the source of the political resentment."

Republicans, historically the party of money, naturally demurred and denied this new reality, at least so long as Republicans were in the White House. But Democrats, supposedly the party of working men and women, turned away from it too. Senator Daniel Patrick Moynihan of New York expressed his own distress:

"The people to whom this is happening know that it's happening to them and they also know that the Democrats don't know it. At least, we don't talk about it. If this were the 1960s, that's all we would be talking about. Good God, what's happening to our country? We're losing touch with that kind of reality. If this is not a crucial proposition for the Democratic party, then our politics have changed."

When the pie is shrinking, someone has to give up his or her slice. Starting in the late 1970s, a fierce political contest ensued on many fronts around this, never-acknowledged question: Who will hang on to their share and who must lose theirs? The U.S. tax code, as revised over the last fifteen years, reveals the winner.

This broad economic explanation, however, does not answer the question of politics: How could this betrayal of the many be accomplished in an ostensible framework of democracy? The short, though overly simple answer is: collusion, artful collusion among governing elites and the politicians who claimed to be adversaries. A government that is ostensibly divided between the two parties has learned to work as one.

As Richard Darman once baldly explained, important tax legislation can be achieved by "the political equivalent of an immaculate conception: a compromise that materializes without any politician having to take blame." [10]


The politics of taxation creates its own ideologies and, through most of the twentieth century, the argument has often pitted elite groups against the general population. The graduated income tax, in which the burden rises in relation to one's wealth and income, was the Populists' answer to the gross maldistribution of economic returns generated by modern industrial society. Its Justifying principle, stripped of corollary arguments, is that government's core function is to preserve the social order. People of great material wealth inevitably benefit from that service more than other citizens -- since social chaos would put their private property at risk. [11]

The monied elites' counterargument was first effectively framed during the 1920s by Andrew Mellon, the wealthy banker who served as Treasury secretary under three Republican presidents. Soaking the rich, Mellon argued, was bad for the economy and, therefore, bad for everyone. His goal was to eliminate the graduated tax system altogether and replace it with flat taxes on consumption, in which rich and poor would pay the same toll. This is not very different from the contemporary tax arguments, except that Mellon enunciated his purpose more candidly than modern conservatives would dare.

"The prosperity of the lower and middle classes depends upon the good fortune and light taxes of the rich," Mellon declared. [12]

The opposing view was expressed by remnant populists like Senator Ralph Yarborough of Texas, who employed this flavorful campaign slogan: "Put the jam on the lower shelf where the little man can reach it." [13]

In most seasons, the politics of taxes plays out between those two poles -- an argument for social equity versus the economic hegemony of the investor classes. This might be called the ideology of taxation, and it provides another important screen that the public cannot see through. Once a politician has accepted the ideological assumptions proffered by the monied interests, then he may proceed on a straight path to their conclusions about whose taxes should be reduced. Since the late 1970s, Andrew Mellon's side has won nearly every contest, but with an ingenious twist -- tax cuts for the rich are sold as tax cuts for the "little guy."

The Reagan conservatives' celebrated doctrine of "supply-side" economics was, one might say, Andrew Mellon in drag-dressed up in populist denim. The economic logic was Mellon's, but the covering rhetoric justified reducing the tax burdens of the wealthy by promising to spread the jam around a little -- to cut everybody's tax rate at once. The regressive effects of the proposal were transparent (and freely acknowledged afterward by the Republican draftsmen), but the basic logic was not challenged by the Democratic opposition. They had already bought into it.

The most dramatic political shift of the 1980s was not in the Republican party, which, after all, had always sided with money. It was among the Democrats who employed facile arguments to abandon the goal of social equity in favor of "trickle-down" economics.

This ideological transformation was accomplished within a political structure very different from what had existed a generation ago. Political parties, whose internal control had been weakened over twenty-five years, were less able to dictate terms to rank-and-file members. In this environment, the political labor necessary to sell a program door-to-door, so to speak, is naturally best suited to the interests with the resources to deploy coordinated networks of lobbyists and chum out the supporting propaganda. In this new environment, business was more creative than organized labor or its other adversaries. It developed new modes of salesmanship -- the myriad clusters and temporary coalitions formed among corporations and across trade sectors, always accompanied by systematic money giving.

With no reliable party structure to defend them or poke holes in the deceptive arguments, unorganized voters were hopelessly outgunned. Whatever its other virtues, the new politics of liberated individuals in Congress has not proved to be a reliable defender of the people on the core question of taxation.

The elites also recognized, however, that intensive lobbying is not sufficient by itself. They must also advance a broad public purpose for their objectives -- a screen that will distance the specifics from their own obvious self-interest. Yes, the wealthy will get a larger tax cut, but that's not the real purpose. The real purpose is to create jobs. To broadcast this disinterested assurance, they create such mechanisms as bipartisan study groups and so- called "blue-ribbon commissions" composed of public-spirited opinion leaders.

"How do you get around the problem that we don't have a Sam Rayburn or a Lyndon Johnson to ram this thing through?" Charls Walker asked rhetorically. "You go the route of the blue-ribbon commission."

The loss of centralized control has left governing elites in a seemingly permanent state of anxiety. Despite their repeated victories on taxes, opinion leaders, with evident sincerity, regularly lament the government's inability to govern -- that is, to implement their far- righted solutions. Since they never get everything they want, they plead constantly for more courageous "leadership." While citizens generally feel abused and ignored by politics, the political elites describe the opposite condition -- a "plebiscite democracy" ruled by the fickle impulses of the voters.

Bush's budget director, Richard Darman, spoke of the public's "self-indulgent" attitudes with droll condescension. "Now-nowism," he called it. "Our current impatience is that of the consumer not the builder, the self-indulgent not the pioneer," he complained. The Reagan tax cutting had begun with the Great Communicator's paeans to the energies of everyday working people. A decade later, with the government mired in debt, Darman likened the American public to a "spoiled child." [14]

Disparaging public opinion is, of course, a necessary prelude to ignoring it. The elites' language of despair over the commonweal is a vital element in their politics, for it creates another screen -- a climate that encourages political leaders to be "responsible" by going against the obvious wishes of their constituents. The hesitant are scolded. Gross deceptions are legitimized in pursuit of the greater good. The oblique dialogues that surround the subject of taxation can then be conducted with a broad wink among the players. Over fifteen years, the screen has worked again and again.


The last progressive tax measure proposed by a U.S. president came from Jimmy Carter in fall of 1977. It was decimated -- in a Congress controlled by Democrats. Egged' on by corporate lobbyists, an uprising in congressional ranks led by right-of-center Democrats turned on their leaders and prevailed. Campaigning for president, Carter had called the tax code a "national disgrace" and promised to eliminate many of the most flagrant loopholes for corporations and the wealthy. He proposed to raise the tax on capital gains and lower rates for individuals. A year later, Congress cut the capital-gains rate in half, lowered the corporate tax rate and made the temporary investment-tax credit for business permanent.

"Carter was screaming that this was a handout for rich people and peanuts for poor people," said Charls Walker, whose Council on Capital Formation helped to inspire the revolt of the haves. "We beat their ass two-to-one on the House floor."

The turning point was the 1978 tax bill, in which governing elites changed the premises of tax policy from achieving equity to augmenting the returns on capital. Amid the aggravations of rising inflation, Walker's corporate clients and like-minded economists persuaded politicians that the problem of lagging productivity in the American economy was caused by the cost of capital. Merrill Lynch, the New York exchange, the Brookings Institution and others all produced expert studies, seconded by influential senators in both parties, that proclaimed the "capital formation problem."

The liberal response to this was quite limp, partly because the Democratic party had been playing its own deceptive game of empty "tax cuts" in prior years. As the persistent inflation of the 1970s swelled government revenues and pushed many wage earners into higher tax-rate brackets, Democrats would magnanimously enact a new "tax cut" every couple of years -- in effect, giving back some of the money to the taxpayers while devoting the remaining surpluses to narrow tax loopholes for special interests or for new government spending. Democrats were not in a position to be too self-righteous about either equity or economic growth.

The Democratic party, furthermore, was getting more distant from its traditional working- class constituencies. A swarm of newly elected younger Democrats who came to office after the 1974 Watergate scandal were mostly not from working-class neighborhoods, but from the suburbs and often from Republican districts. They were intellectually inclined to be more sympathetic to the business argument and also anxious to dissociate themselves from their patty's fading power centers, organized labor and the big-city machines.

Newer Democrats, as Thomas B. Edsall has pointed out, were also reading the election returns. As voter participation declined year after year, most dramatically among lower- income citizens, the remaining active electorate became increasingly skewed toward the upper brackets -- the people who cared most about tax provisions like capital gains. In the process, a large, unorganized bloc of citizens was being left behind. [15]

But the conservatives' attitudes toward tax politics were changing too. Robert S. McIntyre, director of Citizens for Tax Justice, explained the shift:

"Typically, prior to the seventies, Republicans were not big fans of tax breaks for business because it was economic tinkering by government. And Democrats weren't for them because it went against their constituents. In the 1970s, there was a flip-flop. The Republicans started playing constituency politics -- appealing to the people who contribute to their campaigns and their core constituency. Democrats, as big-government types, like to tinker around with the economy through the tax code. It feels good and, ideologically, they have no problem with it."

In terms of who benefited, the 1978 tax bill was perhaps the most regressive measure since the 1920s, but it was only the beginning. Its ingredients led directly to the feeding frenzy of 1981 and Ronald Reagan's famous victory -- a tax measure that would deprive the government of $750 billion in revenue over the first five years.

The across-the-board reduction of 25 percent in individual tax rates was transparently regressive since, as a matter of simple arithmetic, the larger one's income, the greater would be the reduction in the tax burden. The corporate tax code was so thoroughly gutted in 1981 that hundreds of profitable corporations became free riders in the American political system -- paying no taxes whatever or even collecting refunds.

The 1981 tax legislation was so generous in the tax breaks for commercial real estate that it launched the nation's gaudy boom in new office buildings -- the boom that collapsed in bankruptcies at the end of the decade. The new tax rules for depreciation were such that developers and investors found they could put up a new building and make money on it, even if it was half empty. They built lots of them. When the real estate-lending regulations were loosened for commercial banks in the 1982 financial legislation, the stage was fully prepared for the great financial collapse that engulfed both builders and their bankers later -- and led to another taxpayer bailout.

By focusing on the partisan combat over internal disputes, the media portrayed the 1981 legislative showdown as a test of strength between the two political parties, as it was on the surface. The Republicans won on that level. But the partisan clashes obscured the deeper bipartisan consensus that already existed. Most Democrats in the House and Senate had already endorsed the general concept of a regressive "supply-side" tax cut, many of them before Ronald Reagan was even elected. In the end, only a handful of Democrats voted against the idea.

It was not Reagan, for instance, who opened the floodgate of tax giveaways for business interests but Representative Dan Rostenkowski, Democratic chairman of the House Ways and Means Committee. Prompted by Walker and the corporate lobbyists, Rosty initiated the bidding war over tax favors that Republicans were hoping to avoid. In the end, Democrats lost the contest to the more generous Republican White House.

When neither party attempts to impose restraint, power always flows to the margins -- the handful of swing votes that can decide an issue-and opportunistic representatives made deals for scores of clients, trading their votes for tax concessions. "The hogs were really feeding," as budget director David Stockman said. The problem, he added, "is unorganized groups can't play in this game." [16]

Further, it was the Democrats, not the Republicans, who first proposed bringing down the top tax rate on unearned income -- eliminating the traditional distinction that passive earnings from dividends or interest should be taxed at a higher rate than wage income derived from human labor. The Reagan White House graciously accepted the Democrats' proposal and the marginal rate of 70 percent on unearned income was abolished.

"The people who are really active politically are the upper-income people," Walker explained, "and a lot of them happen to be Democrats."

The general public, however, opposed this change at the time and, indeed, still favors a tax code that treats income from work more generously than income from capital. A Wall Street Journal poll in 1990 found that, by 59 percent to 22 percent, people still think earnings from investments should be taxed at a higher rate than income from wages and salaries. Even two thirds of the upper-income people think so. [17]
Site Admin
Posts: 34633
Joined: Thu Aug 01, 2013 5:21 am


Postby admin » Thu Oct 31, 2013 12:09 am

PART 2 OF 2 (CH. 3 CONT'D.)

These details and ambiguities did not get through to most citizens at the time, especially if they depended on television for their news. The contest was portrayed in simpler terms: President Reagan and the Republicans want to cut your taxes and the Democrats are trying to stop them. Not surprisingly, the public rallied around the president. Beneath that broad umbrella, special interests could accomplish quite a lot for themselves. John D. Raffaelli, a tax lobbyist and former staff counsel on the Senate Finance Committee, once explained the "Dan Rather rule" that governs the politics of complex tax provisions: "You can do taxes as long as Dan Rather can't explain them in 10 seconds." [18]

The orgy of 1981 defined everything that has followed since: The perennial tax debate is still preoccupied with finding ways to correct the embarrassing excesses of Reagan's tax legislation and reduce the huge deficits that "supply-side economics" created. Two major tax bills were passed in 1982 and 1984, taking back some of the most egregious loopholes and benefits provided to business in the original Reagan legislation. The projected losses in federal revenue were thus reduced, but not enough to fill the hole, especially given the soaring defense budgets.

Who will have to give the money back? That question has driven all of the subsequent tax debates.

For ordinary wage earners, the question was answered quickly. They would. Even before the Reagan tax cuts were fully phased in, working people were socked with a tax increase much larger than what they had supposedly just been given. In 1983, with a minimum of controversy, Congress raised their taxes by roughly $200 billion -- more than erasing any gain they might have anticipated from the Reagan income-tax cuts. This was among the largest tax increases in history, but it was accomplished without much fuss by increasing the payroll tax collected for Social Security.

This was bait and switch on a grand scale. The payroll tax for Social Security is one of the most regressive levies the government collects from citizens because it has a fixed ceiling that exempts all income above a certain level. A middle-level manager earning $50,000 a year will pay exactly the same amount as his company's CEO, who makes $5 million.

The deal was sold through the mechanism of a "blue-ribbon commission." Right after the 1982 elections, a bipartisan presidential commission, chaired by Republican economist (and future Federal Reserve chairman) Alan Greenspan, recommended the tax increase and other "reforms" to insure the soundness of the retirement system far into the next century. Social Security would be shifted from its traditional structure of pay-as-you-go financing to one that would accumulate vast surpluses -- hundreds of billions collected now from workers and set aside for future beneficiaries.

Three months after the commission reported its ideas, the reforms were law. Ronald Reagan, who had built his career on defending working people against taxes, endorsed the payroll-tax increase after he was told by White House insiders that the rising tax burden on young working people would eventually lead to a taxpayer revolt and the demise of Social Security. "In time, these reforms will sink this thing of its own weight," the president was advised.

Reagan was reportedly cheered by that prospect. Deep in the Republican soul lurks an abiding contempt for the Social Security system, a prejudice lingering from New Deal days when conservatives saw it as the vanguard of socialism. While Democrats used Social Security as an effective scare issue in the 1982 elections, they threw in with the Republicans right afterward and endorsed the tax increase. [19]

The general public, though uneasy, was essentially not represented in the Social Security debate. The two major parties agreed to run this through the system quickly and without alerting working people to the tax implications for them. The media accepted the bipartisan accord as evidence that the issue lacked controversy and treated it routinely.

Even so, there was more public resentment on the issue than the bipartisan harmony indicated. A Washington Post/ABC News survey found that 38 percent of the public felt the Democrats, supposedly the defenders of Social Security, had given away too much to the Republicans. Young people, eighteen to thirty years old, were overwhelmingly skeptical that Social Security benefits would still be available when they reached retirement. Given the drift of politics, their suspicion seemed well founded.

Among governing elites, however, the adroit enactment of the 1983 tax increase is remembered as a triumph of political management. At Harvard's Kennedy School of Government, the episode is used as a case study in good government, illustrating how decision makers can make forward-looking policy and work their way around what the professors call "the fickleness of politics." [20]

For most taxpayers, this event was pivotal -- as well as costly -- to their personal tax equation. The Social Security increases rendered the continuing talk about reducing the income tax largely irrelevant to most working people -- since roughly three fourths of wage earners pay more each year through the payroll tax than they will pay through the income tax. Because the payroll tax was now set to increase in regular increments, no amount of tinkering with income-tax rates, deductions or tax credits was likely to offset the rising burden for average Americans.

The terms were now established for the great shift in the way that the government is financed. From 1980 to 1988, revenue from the Social Security payroll tax increased by 23 percent as a portion of total federal revenue, while the personal income tax declined by 6 percent and the corporate income tax by 23 percent. By 1983, the winners and losers were clearly identified. [21]

Yet the contest did not end. Indeed, notwithstanding the facts of what had already occurred, elite commentators like Robert Strauss and Pete Peterson continued to commit gross distortions, as they tried to explain the huge federal deficits that had been created when their own taxes were reduced. The problem, they kept complaining, was the soaring cost of "entitlements," especially Social Security.

Yet that problem had just been "fixed" and workers were now paying for it. In fiscal terms, ordinary wage earners were now covering the hole left by the excesses of business and wealthy individuals. Social Security was not only paying its own way, but would now accumulate growing surplus revenue each year -- $74 billion in 1991, $126 billion by 1995 and $225 billion by 2000. This mounting hoard collected from workers helped the government to obscure the continuing deficits in the operating budget and to offset the economic consequences.

Nevertheless, the influential "party elders" persisted in portraying Social Security as a dangerous drain on the society's resources -- an example of the self-indulgence that politicians must be brave enough to correct. It was as though the 1983 tax increases hadn't happened.

The next great bait-and-switch transaction -- the celebrated "tax reform" legislation of 1986 -- involved all the same elements, including active collusion between the two political parties. But this contest was not really aimed at the general taxpayers. It was essentially a dispute between the two overlapping power blocs within the monied interests -- wealthy individuals versus corporations -- over who would get the money. The individuals won, but the corporations did not entirely lose either.

For the general public, the usual screens of large-minded distractions were constructed. The purpose of this legislation, Republicans and Democrats jointly announced, was" tax simplification." That theme became a bad joke as the process unfolded and even the president abandoned it. As income-tax rates were reduced, the tax code became so weird that people who make $80,000 a year were left paying the highest tax rate, 33 percent higher than all the wealthier people above them, who pay only 28 percent.

The other announced objective was "fairness" -- closing loopholes to force all those hundreds of profitable corporations to start paying federal taxes again. Some progress was made toward this goal, but much less than advertised. The proportion of profit-making corporations that legally avoid taxes declined afterward from 36 percent to 23 percent -- still roughly one fourth of them. Tax revenue from corporations consistently fell below the government's expectations in subsequent years, as corporate tax lawyers exploited a tax code porous with the exceptions and artful distinctions that the corporate lobbyists had helped craft.

The gravest injury to the general taxpayers, however, was in what the 1986 tax reformers decided not to do -- to confront the federal deficits and reduce them significantly. Instead, President Reagan declared up front that the measure must be "revenue neutral" -- neither increasing nor reducing overall federal revenue -- and the Democratic party swiftly embraced his terms. Walter Mondale, the Democratic candidate for president, had been devastated in the 1984 election by talking about tax increases. This time, as Danny Rostenkowski told me, "You won't see any profiles in courage."

A vast rewriting of the tax code would be undertaken without addressing the fiscal problems that elites were always lamenting. This central political evasion meant that the huge deficits would continue unabated (and indeed would grow to $360 billion by 1991). But the evasion also meant that ordinary taxpayers remained a vulnerable target for future tax politics, when the day came that the political community decided to get serious about restoring the government's revenue base.

To confront the deficits would have required much tougher politics -- closing the major loopholes and raising the top-bracket rates, but without giving the monied elites anything in return. No one in power wished to take that on. Instead, enormous political energy was expended on behalf of the competing interests, while the central governing problem was deferred to future years. Where were the elite scolds who complained so regularly about the deficits and American profligacy? They were busy in the tax debate too, defending their own tax benefits.

The general public, having been burned repeatedly by the bait of tax rhetoric, did not buy it this time. Despite the popular president's barnstorming and the political community's enthusiasm for "tax reform," citizens remained skeptical or even hostile. Opinion surveys found only small minorities (as little as 18 percent) supporting the drastic reduction in the top tax rates.

"Tax reform to the American people means fairness, and their perception of fairness is more progressive, not less progressive," said pollster Burns Roper. His firm found that 77 percent of the people thought the upper-income brackets were already paying too little.

The debate proceeded without them to its predetermined conclusion -- the drastic reduction of individual tax rates, offset by the restoration of some of the taxation on business. These changes, of course, often affect the same people, so that, while the corporations lost, their highly paid executives and major stockholders won. Indeed, the most spectacular beneficiaries in 1986 were a select group of 390,000 Americans whose incomes were $200,000 or higher but who were not giving up any significant loopholes. On average, the lowered rates gave these citizens a tax windfall of $50,000 each -- a total of $20 billion, or roughly ten times what the measure devoted in tax relief for the poor.

One corporate CEO confided to Senator Paul Simon of Illinois that, according to his accountant, he would get a tax cut of $250,000 on his $1.5 million salary. Presumably this softened his objections to the higher taxes being imposed on his company. [22]

Most Democrats sided with the rich people, on the righteous grounds that they were going after the tax giveaways for business. Some liberals argued weakly that, while they were voting for the rich people, they would come back in a year or so and rescind the action by restoring the higher rates. The history of the income tax mocked this wishful thinking. Since 1913, Congress had gotten up the nerve to raise the top income-tax rate substantially on only four occasions -- during World War I, the Great Depression, World War II and the Korean War. In other words, it required a seismic event for politicians to go after rich folks.

The new social and political reality was that most Democrats in Congress appeared to be closer to the wealthy (especially the wealthy who were campaign contributors) than to working stiffs. Robert McIntyre observed this phenomenon whenever he proposed various progressive tax measures to Democrats.

"Democrats don't mind talking about the top fifth of the economy, people making over $50,000 a year, but if you talk about the top 1 percent, people earning $200,000 or more, they get nervous," McIntyre said. "They get cold feet partly because that's where their campaign money comes from. Staff people tell me the politicians don't want to take on the very richest people. In many ways, they are the people the congressmen think of as their peers -- or whom they'd like to think of as their peers."

The major corporations represented by Charls Walker and other lobbyists lost a lot in 1986 when many of the major tax concessions they had won back in 1981 were scaled down. Still, they were not exactly grieving either. After all, they were still way ahead on taxes for the decade. And Walker found many of his CEOs so enthused about their individual reductions that they were uninterested in mounting an all-out campaign to defeat the bill.

"People asked me, would you vote for this bill if you were a member of Congress?" Walker recalled. "I said I probably would. I didn't like the higher rate for capital gains but I loved the lower personal rates. I never dreamed we could get a top personal rate of 33 percent and a corporate rate of 35 percent. If I thought this was the last chapter in federal tax policy, I would be desperate. But I've seen the pendulum swing before." Business would win back the investment tax credit, Walker predicted confidently, when the economy was in its next recession.

Indeed, a few months after the 1986 legislation became law, Walker and other business lobbyists were back on Capitol Hill, recruiting influential cosponsors from both parties for a measure that would undo the grand compromise they had just fashioned. Congress had just raised the rate on capital gains, the tax collected on the appreciation of stocks and real estate when these and other assets are sold. Now, Walker proposed, it was time to cut capital gains.

Bait and switch. Once the wealthy achieved a lower tax rate, they started to work on getting back the loopholes and exceptions they had given up. Andrew Mellon's hoary logic was dragged out once again, this time dressed again as the "capital formation. problem," and subsequently embraced by George Bush. The American economy suffered from lagging investment, it was said, because the cost of capital was too high. Reducing taxes on capital would encourage the wealthy investors to create more jobs for everyone else. If this argument sounds familiar, it is because it is where the story began back in 1978.

Among all their other disadvantages, citizens are particularly handicapped because the tax debate never ends. It is a continuum of politics that stretches over years. As Walker said, the monied elites understand this and know that they can afford to accept trade-offs in one season because they will be back again next time, with new reasons to plead for tax relief. If political parties were reliable organizations, they would defend the citizenry against these perennial raids on the public treasury. The present reality is that both political parties collaborate with the raiders.

There were at least two obvious things wrong with invoking Mellon's economic logic at this point. First, it had already been applied in the grossest terms during the previous decade -- and failed to produce the promised results. New investment during the 1980s was not stimulated by the tax cuts awarded to the wealthy; on the contrary, the pace of investment actually fell below the previous average. A lot of the money flowed, instead, into financial speculation and inflated real-estate values -- the excesses that were unwinding in bankruptcy and financial crisis by the end of the decade.

Second, the business advocates were correct about the high cost of raising capital in the United States -- it was two or three times higher than in Germany or Japan -- but the principal explanation for this was not federal taxes, but the historically high level of interest rates during the decade. Real interest rates in the 1980s -- the nominal interest rate discounted for inflation -- were the highest of the twentieth century. And what caused interest rates to remain so high? If one asked the Federal Reserve, the Fed blamed it on the federal deficits -- the deficits created by the huge tax cuts.

In other words, the facile economic arguments advanced by elites were inducing the political community to chase its own tail. However, from season to season, the chase always ended at the same place -- more tax reduction for the wealth holders.


In another era, Senator Pat Moynihan's remarks might have been passed over as the usual rhetoric one expected from liberal Democrats. Yet, in the political context of the late 1980s, his words sounded like populist thunder. All Moynihan said was: "I think it's about time the American workers got a break." With that, the New York senator proposed to give the wage earners back their money -- that is, to cut the Social Security payroll tax back to its prior levels and to stop the regressive charade surrounding federal taxation.

The senator himself was a bit taken aback by the storm of reaction. He was swiftly acclaimed by voices from left and right, but also denounced as "irresponsible" by tax authorities in his own party as well as the Republicans in the White House. The people who had shaped federal tax policy for fifteen years -- who presided over the betrayal -- were preparing to do so again and they recognized the threatening nature of Moynihan's proposal. Though it was not enacted in 1990 and only cursorily debated, Moynihan's idea crystallized what Charls Walker had called "an explosive situation."

What Moynihan did, in effect, was to put the stinking reality on the table where everyone had to look at it. By formulating a dramatic tax reduction that would be genuinely progressive -- putting real money in the hands of the broad middle class -- Moynihan automatically brought the ranks of the unrepresented into the debate. He may, in fact, have created the political climate that kept the elite consensus from fully accomplishing its agenda in 1990. Some believed -- hoped, at least -- that his provocation would become a new turning point in the deep politics of taxation.

Moynihan seemed an unlikely tribune for popular revolt against the status quo. For one thing, he himself had served on the bipartisan commission that proposed the Social Security tax increases back in 1983. Now he was belatedly denouncing the arrangement as a hoax perpetrated on working people. While the senator liked to invoke his own working- class origins, he was better understood as a public policy intellectual, fully credentialed and comfortable with the governing elites, a Harvard professor who bad dipped in and out of government as a policy thinker for three presidents, before coming to the Senate in 1976.

Moynihan recognized -- and had the nerve to declare -- that the evasive tax politics of the 1980s was leading toward a future fiscal crisis, in which the public at large would be confronted with monstrous alternatives -- either a huge tax increase to fill the hole that was now being masked by the Social Security surpluses or a drastic cutback in the Social Security benefits (thus fulfilling young people's skepticism about the future of the retirement system). Or perhaps both. Moynihan's purpose was to force the crisis now -- and make the political system face it honestly.

His initiative did not have that effect, but it at least exposed the fecklessness of his own party. Ways and Means Chairman Danny Rostenkowski, who presides over tax decisions in the House, belittled Moynihan's proposal as competing for "worst idea of the year." Democratic Senate leaders were struck mute, as though Moynihan had told an obscene joke on the Senate floor. House Democrats appointed a committee chaired by the majority leader to study the idea. The committee never met.

The party's two most powerful constituency groups -- organized labor and the elderly -- expressed their coolness to the idea of cutting young workers' taxes. The American Association of Retired Persons worried about the actuarial tables. The AFL-CIO worried about financing big government. As industrial unions have declined in size, public employees have become a larger and larger proportion of the labor federation's membership. [23]

The tax debate, in any case, was proceeding toward a different goal -- how to embrace the nettle of additional tax increases and spending cuts, as outlined by the elite consensus, without inciting a damaging backlash from voters who would feel betrayed again. Doing the "right thing" required an extended dance of feint-and-parry between the two political parties -- the story that provided the main focus for news coverage -- since Republicans and Democrats were mutually suspicious of getting trapped in blame by the other side. If the Republican president and the Democratic Congress were going to stick the people once again with unpopular and regressive measures, they must agree to hold hands when the deed was done.

The National Economic Commission, created by the Democrats to provide just such political cover, stalled out in stalemate when the newly elected president declined to cooperate with the "blue-ribbon" approach. On the other hand, Democratic leaders succeeded in blocking Bush's capital-gains tax cut, trying to force him into a public admission that taxes must be raised, notwithstanding his campaign promise.

In early 1990, Danny Rostenkowski started the action by offering an olive branch and a broad wink to his old friend George Bush. Rostenkowski proposed what he called a "cold turkey" plan for deficit reduction -- a plan that was a reasonable replica of what the elite opinion leaders had recommended. The idea of a national sales tax was left out -- still too volatile for politicians to embrace in public (though Charls Walker said Rostenkowski has assured him privately that "it's corning, it's coming").

Otherwise, Rosty's "cold turkey" prescribed a familiar list of sacrifices -- 20 billion in new consumption taxes and $22 billion saved by cutting "entitlements" and other federal programs. While he also proposed to nick the highest income earners with a small rate increase, this was interpreted as a proffered trade-off for George Bush in exchange for granting the president's capital-gains cut. [24]

Rosty's ploy set in motion the high-level action that led to a summer of "budget summit" negotiations between the White House and Democratic congressional leaders. These private parlays were meant to serve as the new equivalent of a blue-ribbon commission. The president, rather clumsily, agreed to withdraw his "no taxes" promise to the American people so the discussions could proceed in mutual trust.

Party leaders closeted themselves at Andrews Air Force Base for the tedious back-and-forth on details. For all the many complications' and false starts, these negotiations produced an agreement that should not have surprised any patient observer of tax politics. Just as Darman had suggested two years before, by the grace of "immaculate conception" in which no one could be blamed, Democrats and Republicans produced a "Big Bang" for the voters.

The proposed tax increases and spending cuts of the bipartisan "summit" announced in late September were less extreme, but remarkably consistent with what Rosty had proposed in March. They mirrored in moderate outline what the elite opinion makers had recommended in their "austerity" sermons before the 1988 election. The burden of sacrifice would be distributed regressively, hitting the least among us with the most injury. No increase in the top tax rate. A capital-gains reduction, poorly disguised as investment incentives for small business. Regressive increases in taxes on gasoline, alcohol, tobacco and other items of everyday consumption. A huge reduction in Medicare benefits. The conservative logic of Andrew Mellon had won on nearly every point. [25]

Democratic leaders said it was "the best deal" they could get. The Wall Street Journal, which always covers taxation with more precision and depth than other news media, swiftly put the relevant facts on the table for its well-to-do readers. According to the Joint Committee on Taxation, the top of the income ladder -- people earning more than $200,000 -- would escape once again with the least sacrifice, a tax increase of only 1.7 percent, while people making $30,000 to $40,000 would be hit for 2.9 percent. The poorest families, under $10,000, would suffer a 7.6 percent tax increase because of the regressive nature of consumption taxes.

Rank-and-file Democrats choked on those numbers. So did some backbench Republicans. The next day, the Journal published a devastating account of how the new tax incentives for investment would actually work -- spawning a new tax-shelter industry and allowing wealthy investors to harvest millions in upfront tax breaks. "Although the text of the bipartisan agreement carefully avoids describing these as a capital-gains tax break, that's what they are," the Journal said. In other words, Democratic leaders were giving President Bush what he most wanted and what they had vowed to resist. [26]

The "Big Bang" blew up in their faces. A rump coalition of younger Republicans, angry that Bush had abandoned the GOP's posture of "no new taxes," and liberal Democrats, disgusted by the proposal's gross inequities, united on the House floor to defeat their leaders. This was perhaps the first House roll call of• any consequence in fifteen years where the broad interests of the general public defeated the elites, head to head, on a question of taxes. Among other things, it demonstrated the value of democratic process -- making decisions in public, with up-or-down votes that are recorded, instead of the "immaculate conception" of backroom deals.

Some thought these events represented a new current in American politics, the beginning of resurgence for popular opinion. Others (including myself) remained skeptical. The collapse of the "Big Bang" package did at least demonstrate anew how alienated the leaders of both parties had become from the lives of ordinary Americans.

Senator Moynihan's jarring candor had perhaps altered the atmosphere of tax politics and made the real trade-offs embarrassingly visible. The senator, having made his point, was less ardent about forcing the question on his colleagues. In order not to inconvenience the Democratic leadership, Moynihan agreed to offer his own tax-cut measure for a Senate vote at a time when it was certain to be ruled out of order. The measure carried the Senate roll call, fifty-four to forty-four, in October 1990, but that was short of the sixty votes needed under the parliamentary rules then in force. The next year, Moynihan brought it up again and it was soundly rejected.

Two weeks after the rank-and-file revolt, the party leaders came back with a new package of tax increases and a better deal for the people. Gasoline and other consumption taxes were still raised, but the sting was reduced and some of the pain was shifted upward to hit the wealthy as well. Tax credits gave the poor modest relief; luxury taxes and a small rate increase were aimed at the top brackets. Medicare and Medicaid were still trimmed, but much less drastically.

Danny Rostenkowski overcame his momentary embarrassment and began styling himself as a righteous convert, ready to go after the millionaires on behalf of the people. But the habit of deception was deeply ingrained in Congress and still at work. As The Philadelphia Inquirer revealed, one of the 1990 tax provisions, supposedly aimed at raising $10.8 billion from wealthy people, was actually already in the tax code -- enacted during the 1986 "tax reform." All Congress did in 1990 was to change it from permanent to temporary. [27]

The warped social vision of the political community also endured. Some Democrats began preparing tax proposals for 1992 designed to hit the rich and reward middle-class families -- a promising issue for their next campaign. But some Democrats' idea of what is middle class seemed to hover around families with incomes of $80,000 a year, not the actual middle of American society down around $35,000.

In any case, the sum total of the final package in 1990 or the new tax proposals hardly made a scratch on the gross maldistribution of tax burdens that had been accomplished in the previous seasons of tax legislation. The elite consensus failed to win the full dimensions of its "austerity" agenda, but it did not lose either. It would require a much larger political struggle -- genuine popular revolt and new leaders with a different sense of loyalty -- to overcome the full legacy of collusion and betrayal.


Given the darkening economic prospects, the broad public is likely to lose again in the future, so long as the tax debate is framed in conservative terms as an argument of equity versus investment. "Fairness," as Charls Walker said, always loses to "economic growth" in tough times. The hegemony of the investor classes depends upon convincing politicians and citizens generally that this is the only choice. For most of the century, when American economic strength was ascendant in the world, the equity argument could now and then prevail. Now that the U.S. economy is embattled by global competition, "fairness" has become a much harder sell.

The facts of economic history do not support Andrew Mellon's logic, not in the contemporary experience nor during the 1920s. Reducing tax burdens for the wealth holders is a political program that will reward some citizens and penalize others. As an economic program, it does not yield the increased savings and investment and faster economic growth that the conservative logic promises. This is not entirely a secret. Conservative economists have pored over the numbers for years, searching for evidence to confirm their conviction that taxing the wealthy lightly benefits everyone else. In theory, they are sure it is right. Only they can't find much in the way of facts.

For example, two economists, Robert E. Lipsey and Irving B. Kravis, examined the role of savings and capital formation in economic growth in a study jointly sponsored by the American Council on Life Insurance and the Conference Board, an industry-sponsored research group. Lipsey and Kravis reviewed growth rates in the United States and other leading industrial nations, decade by decade through the twentieth century, searching for correlations with taxes on capital, savings rates and capital formation. They reported some awkward conclusions to their business sponsors:

"We suspect that differences in taxation are not likely to explain the differences in saving rates," Lipsey and Kravis concluded. It is difficult, they said, to find any evidence linking tax rates on capital to subsequent rates of savings, investment or economic growth.

On the contrary, a rapid buildup of capital formation typically follows a rapid expansion of incomes and employment rather than the other way around. The strongest factor predicting increased capital investment is expansion of incomes and employment.

"The relationship was typically stronger between income growth in one period and capital formation in the following period," they wrote. "This finding undermines the idea that a spurt in the capital formation ratio is a necessary prerequisite for growth." [28]

In other words, Mellon had it backward and so do later generations of his apostles. A growing economy with widely distributed incomes and full employment creates the effective demand that leads investors to increase capital investment--new factories and more jobs. Capital will not build new factories to make goods that no one can afford to buy. My intent here is not to settle this central dispute of economics, but to demonstrate that this is the real ground on which tax politics ought to be fought. Is "fairness" in the distribution of tax burdens and incomes an enemy of restoring stable economic prosperity? Or is a progressive tax system a necessary precondition for a healthy economy?

And why is this perspective seldom heard in contemporary politics -- especially from the party that ostensibly represents working people? The argument for social equity is, in fact, a much stronger case as an economic argument for balanced growth. This case, of course, would have to be documented anew and marshaled on many political fronts before the deeper tides of tax politics are likely to be reversed.

When untutored public opinion expresses its desire for a progressive tax system, people are articulating commonsense wisdom that elites seem unable to grasp: As ordinary people understand it, the American economy cannot be considered healthy when most of its workers and consumers are not.

A few lonely voices do try to cast the debate in those terms, but they are drowned out by the general chorus of conventional wisdom. Old liberal-labor Democrats of an earlier generation have been replaced by younger Democrats who treat tax concessions to the broad public or the poor as pious gestures of political charity, not as components of good economic policy. In the present context, one side of the debate holds the floor, year after year, and the other is held silent.

That bleak statement, of course, sums up the general condition of politics. It is the conclusion of everything that has been recounted up to this point-the how and why of the deformed power relationships that govern decisions across a wide variety of public issues. In the elaborate machinery of modern government, surrounded by expensive experts and lobbying mechanisms, it is very hard for the people's case to be heard.

If the complicated facts of these relationships can be reduced to a single message, it is this: The present system provides no reliable mechanism to represent the people on the most important governing questions -- no institution that is committed to listening to them and to speaking for them, no organization that mobilizes the potential strength of people and uses it to confront the rival power of organized money. The problem of modern democracy is rooted in its neglect of unorganized people.

Unfortunately, even this summation does not describe the full scope of the democratic problem before us -- or even its most daunting dimensions. Beyond the visible legislative debate and the familiar arenas of decision making .examined thus far, there is another, more complicated realm of government, where the politics and power relationships are much harder for people to see. That realm is the modern labyrinth of decision making within the Executive Branch, where the laws are enforced or not enforced on behalf of the public. I! is this complex territory where citizens lose again.
Site Admin
Posts: 34633
Joined: Thu Aug 01, 2013 5:21 am


Postby admin » Thu Oct 31, 2013 12:12 am


The gleaming temples of democracy that tourists visit in Washington, the marble shrines to great leaders and great ideals, are no longer an appropriate emblem for the nation's capital. Washington now is more aptly visualized as a grand bazaar -- a steamy marketplace of tents, stalls and noisy peddlers. The din of buying and selling drowns out patriotic music.

The high art of governing -- making laws for the nation and upholding them -- has been reduced to a busy commerce in deal making. Thousands and thousands of deals are transacted every day in diffuse corners of the city. The rare skills required for politics at the highest level are trivialized as petty haggling, done with the style and swagger of rug merchants.

The Department of Transportation dickers with Detroit over automobile safety. The Department of Agriculture makes deals with farmers on the price of corn and the permissible poison level in pesticides. The Treasury Department haggles with important taxpayers. The Department of Defense buys rockets and airplanes and sells them too.

In the grand bazaar, the two staples of trade are the myriad claims on the federal treasury and the commercial rights and privileges that only the government can bestow -- licenses for television stations or airlines, the use of public assets like land or water or timber. All may produce vast good fortune for the winners and the competition for them naturally draws many eager contestants.

It is bargaining over the law itself, however, that provides the richest commerce and has the greatest consequences for democracy. While the news media focus on the conventional political drama of enacting new laws, another less obvious question preoccupies Washington: Will the government enforce the law? Does the new law enacted by Congress really have to mean what the public thinks it means? Or is there a way to change its terms and dilute its impact on private interests?• Lawyers inquire whether exceptions can be arranged for important clients. Major corporations warn enforcement officers of dire economic consequences if the legal deadlines are not postponed for a few more years. Senators badger federal agencies to make sure the law is treating their clients and constituents with due regard.

Washington, in other words, engages in another realm of continuing politics that the public rarely sees -- governing contests where it is even more difficult and expensive to participate. This is where the supposedly agreed-upon public objectives are regularly subverted, stalled or ignored, where the law is literally diverted to different purposes, where citizens' victories are regularly rendered moot.

Confusion spreads across almost every function of the government, a continuing uncertainty about whether laws will actually be implemented. Those interests that have the resources and the incentive to stall the law's application do not always succeed, of course, but their persistent efforts keep government authority always in doubt -- often long after the public was assured that a problem had been addressed.

The transactions where this occurs are mostly submerged in the Executive Branch, scattered across hundreds of bureaus and agencies and focused mainly on the esoteric language of federal regulations and enforcement. The regulatory government is a many-chambered labyrinth, staggeringly complex and compartmentalized in its thousands of parts. But one does not have to study a dizzying organizational chart of federal agencies to understand how it works. One need only visualize what happens to a law after it is enacted to grasp the antidemocratic dynamic.

The deal making is the principal source of the money scandals that occasionally ensnare senators or representatives. When a politician is caught trying to fix things for a campaign contributor, he usually reacts with injured innocence. He was only doing his job. Besides, everyone does it. As morally unsatisfying as these excuses seem, the crooked politicians are articulating an unpleasant truth about modern government. Everybody does do it, including especially the politicians of the Executive Branch.

For democracy, the result is a kind of random lawlessness. Corrective mechanisms that are supposed to prevent irregular political manipulations have been purposely weakened. And the public inherits grave injustice: a government that will not faithfully perform its most basic function -- enforcing the laws.


The regulatory government is arguably the largest or second largest component in the political commerce surrounding the federal government, rivaled only by the defense sector in terms of the human and financial resources it consumes. Professor Robert B. Reich of Harvard attempted a precise census in the early 1980s and found that the "regulatory community" in Washington consisted of 92,500 people -- lawyers, lobbyists, trade- association and public-relations specialists, consultants and corporate reps. Their primary function is to argue over the content of federal regulations -- the precise meaning that will flow from the laws that Congress has enacted. A decade later, Reich's head count doubtless understates reality. [1]

The general-interest press does not try to cover the regulatory government, except for an occasional controversy, mainly because regulatory politics seldom provides a concise, convenient event. These contests are stretched out over years -- a continuum of tedious actions that confounds the standard definition of "news." The regulatory details, moreover, do not look like "politics," but generally surface as mind-numbing arguments over law, science and economics. [2]

The explosion of modern regulation, more than anything else, is what brought the money to Washington and transformed the capital from a sleepy small town to a glamorous power. center. During the 1930s, Roosevelt's New Deal created 42 major regulatory agencies and programs. Most of these involved economic regulation of specific sectors (airlines, broadcasting, oil and agricultural production and others), arrangements usually created in cooperation with the affected industries. During the 1960s, 53 regulatory programs were enacted, as consumer issues and environmental protection gained political momentum. From 1970 to 1980, 130 major regulatory laws were enacted. That is what brought the Fortune 500 to Washington, along with the tens of thousands of lawyers. [3]

Unlike most of the earlier regulatory laws, the modern generation of regulation was primarily aimed at curbing the antisocial behavior of businesses and was equipped to act in much more intrusive ways. New agencies like EPA or OSHA were not confined to specific industrial sectors like airlines or broadcasting, but were responsible for policing conduct across the entire spectrum. In that sense, the purposes were truly national.

This design presumably made it harder for a single industry to capture its regulator and control the agency's decisions, but it also had a unifying impact on corporate politics -- an incentive for diverse business interests to collaborate in campaigns to thwart new laws. Coalition building among different companies and industrial sectors became the preferred mode of corporate' pressure, and these alliances now deploy battalions of lawyers and lobbyists armed with their expert testimony. [4]

While regulatory laws have accomplished many things, the cumulative result is a civic culture that is quite different from the classical version of government described in civic textbooks. The arrangements of regulatory laws invite -- and often require -- that all things be negotiable later in the fine print. In time, once that assumption permeated government, the interested parties established that no principle was exempt from tampering. Theodore J. Lowi, the Cornell political scientist, captured the spirit of modern Washington when he described it as governing by "universalized ticket fixing."

The bargaining mode of governance, as Lowi explained; originated in the pluralist logic that fostered many of the New Deal's innovations -- reforms and economic interventions intended originally to share governing power with the weak and unrepresented. The goal was to create new forums and agencies for decision making in particular fields of interest, which would provide a place at the governing table for groups of citizens that could not hope to win in the larger political contests over general law. Struggling labor unions were given the National Labor Relations Board. Farmers were given an elaborate committee system with which to influence agricultural policy. The fledgling airline industry was regulated but also protected from competition by the Civil Aeronautics Board.

The idea, roughly speaking, was to encourage people to organize themselves into identifiable interest groups whose claims and aspirations the government could address, one by one. Out of the many voices, it was supposed, an equilibrium of just results would emerge from the competition among different groups. Lowi called it "interest-group liberalism." This civic philosophy is now fully internalized by both political parties and, indeed, by most citizens too. However, as Lowi said, it "corrupts democratic government because it deranges and confuses expectations about democratic institutions." [5]

This approach, multiplied and elaborated over time, produced a rudderless vessel -- a government designed to fix things at many different tables in the grand bazaar. At the dawn of the New Deal, principled conservatives (as distinct from those conservatives merely fronting for monied interests) had warned that a government that dabbled in every corner of the society would be unable to sustain a classical sense of general law. Political decisions would resemble, instead, particular deals, made piecemeal across every front. In those terms, the old conservative nightmare has come true.

But so has the liberal nightmare. Instead of containing the political influence of concentrated economic power and liberating government from its clutches, the steady diffusion of authority has simply multiplied the opportunities for power to work its will. The original progressive purpose of the New Deal has been stood on its head and now the weak and unorganized segments of society are the principal victims. In the liberal nightmare, pluralist deal making continues in the guise of governing -- but now the entrenched monied interests are back in charge of the marketplace, running the tables in the grand bazaar.

The practical result is a lawless government -- a reality no one in power wishes to face squarely since all are implicated, one way or another. The clear standards that citizens expect from law -- firm definitions of right and wrong, commandments of thou shalt or thou shalt not -- are corrupted by a fog of tentative declarations of intent. The classical sense of law is lost in sliding scales of targets and goals, acceptable tolerances and negotiated exceptions, discretionary enforcement and discretionary compliance.

To say that government is lawless does not mean that the laws are never enforced or never obeyed. Of course they are. It means that law is applied with such randomness that its reliability is betrayed. It means that the certitude citizens expect in law is now routinely subverted by the application of political influence. The political interventions are generally not themselves illegal, however. Indeed the processes of law often invite them.

This reality betrays the principle that is most necessary to democracy -- equal protection of law -- and, for that reason, it is perhaps the gravest disorder in the governing system. A shared confidence in just laws is the prerequisite social faith supporting every other function in democracy. Citizens are entitled to the presumption, regardless of their own economic and social status, regardless of whether they personally participate in the processes of elections and public debate or decline to do so.

As people everywhere now sense, this presumption has been grossly compromised. Though the problem is seldom addressed in public-opinion studies, I suspect that the general awareness of corrupted law is an important factor feeding the popular alienation from government and politics. This may be part of what people mean when they tell the polls that the government is devoted to serving a "few big interests."

"There is one set of laws we are all supposed to follow and then there's another set of laws determined by calling your buddy and asking him what he thinks," said David Vladeck, a lawyer with Ralph Nader's Public Citizen. Vladeck, like scores of other public-interest lawyers in Washington, devotes most of his energy to suing the government -- trying to get various federal agencies to enforce their own laws. The same agencies are sued endlessly by the other side as well, the corporate lawyers trying to block and dilute the force of those laws. Whether in courtrooms or in bureaucratic forums, this contest over law enforcement, more than anything else, is what consumes the persuasive energies of the capital's many lawyers.

William D. Ruckelshaus, the first administrator of the Environmental Protection Agency in 1971, described the continuing uncertainty of law he found when he returned to the job in 1983:

"When I came back into EPA, I hadn't been in office twenty-four hours when I was sued three times. I asked the general counsel to study it and he found that 85 percent of the decisions made by the EPA administrator that are appealable were appealed. Each case takes three to five years to work out in couI1 and the way it's worked out is a settlement negotiated between the industry and the environmentalists with the government sitting on the sidelines as an arbitrator."

What Ruckelshaus did not mention is that, according to another study, 68 percent of the challenges against EPA decided by judges were ultimately won by the environmentalists. Ruckelshaus himself was once held in contempt of court by a federal judge who called the EPA administrator a scofflaw and threatened to jail him because Ruckelshaus was deliberately ignoring a court order to quit stalling on enforcement. "The judge was right," Ruckelshaus acknowledged cheerfully, though he defended his rank evasion. [6]

The lawless bazaar existed long before Ronald Reagan carne to Washington and so did its permissiveness. But the political favoritism and insider fixes of the Reagan-Bush years were so flagrant -- and crude -- that they encouraged the impression that lawless behavior was a partisan problem, peculiar to a Republican regime indebted to big business. The Reagan appointees, it is true, did bend laws and ignore them with more zeal and thoroughness than any of their predecessors, but the roots of this governing disorder are much too deep and bipartisan to be explained away so easily. [7]

In the simplest terms, the lawlessness is another expression of concentrated political power, in most instances the power of corporations to resist the law. Stated another way, corporate interests, on the whole, still do not accept that they must comply with the new regulatory controls enacted during the last twenty-five years. Corporations do comply with laws, of course, and have spent billions to do so (and also paid many millions in fines for their violations). But major business interests have a choice that is not available to most citizens. If they regard the law as unworthy, irrational or too demanding, they have the ability to fight on.

That's real political power -- choosing whether to honor a law or resist it. Since the cost of resistance is often quite modest compared to the cost of compliance, companies benefit in real dollars from any success at political stalling, even if they know that they may eventually lose the fight. Thus, what often looks like a legal contest on the surface is really a political struggle in its deeper dimensions.

Curtis Moore, a lawyer who served fifteen years as Republican counsel on the Senate Environment and Public Works Committee, described the tortuous struggle to make the laws meaningful in the face of corporate tenacity:

"Twenty years ago, we set out to eliminate sulfur dioxide from the air. Here we are twenty years later and more than 100 million Americans are still breathing air with unhealthful levels of sulfur dioxide. Why? Because the companies fight you when you try to pass a law. They fight you when you try to pass a second law. They fight you when you try to write the regulations. They fight you when you try to enforce the regulations. Nowhere do they ever stop and say: 'Let's obey the law.'"


The very first secretary of transportation to order airbags installed as lifesaving devices in automobiles was John Volpe in 1970 during Richard Nixon's first term. Henry Ford and Lee Iacocca, then Ford's top executive, called on Nixon at the White House the following April and delivered a blustery attack on airbags and other federal safety and environmental laws.

Their visit marked the beginning of a successful twenty-year stalling campaign by the auto industry -- political pleas followed by postponed regulations, more studies, court challenges and watered-down proposals and more litigation. The industry's evasive tactics blocked airbags through four presidencies. The episode is revealing because the Nixon-Ford- Iacocca dialogue was recorded for history in the Watergate tapes. Yet it is also a commonplace story in modern government -- a law in name only, a law deferred to please a political friend.

"We're not only frustrated," Iacocca exclaimed to Nixon, "but we've reached the despair point. We don't know what to do any more." [8]

Airbags, he told the president, were another untested "gadget" that Ralph Nader and other safety zealots wanted, but they would merely increase auto prices and feed inflation. "We are in a downhill slide, the likes of which we have never seen in our business," Iacocca warned. "And the Japs are in the wings ready to eat us up alive.

"So I'm in a position to be saying to Toms [the highway safety administrator] and Volpe, 'Would you guys cool it a little bit? You're going to break us.' And they say, 'Hold it. People want safety.' I say, 'Well, what do you mean they want safety? We get letters. We get thousands on customer service. You can't get your car fixed. We don't get anything on safety!'"

Richard Nixon responded sympathetically with his own diatribe against Nader and the reformers. They are hostile to industrial progress, per se, Nixon complained, and would like to go back and live like the Indians. "You know how the Indians lived?" the president said. "Dirty, filthy, horrible."

The Nixon-Ford-Iacocca dialogue is instructive for its rambling, semi-coherent quality -- a series of unfocused grumblings. Neither Nixon nor Henry Ford seemed to know much about how the regulatory process works. Iacocca tried to instruct them, but his task was confused by his own scattershot invective and rambling asides. Reading the transcript of their conversation will be disturbing to anyone who thinks of the Oval Office as a place where the best minds come together to address the most serious matters.

At the conclusion, Nixon instructed his aide, John Ehrlichman, to take care of "this airbag thing." It was taken care of, and for a long, long time. Through Nixon, Ford, Carter and Reagan, the auto industry successfully kept airbags out of automobiles, making the same arguments at every step to administrators, courts and presidents. Airbags didn't work. They would increase prices. Consumers didn't really want them.

Finally, by 1990, the legal and bureaucratic evasions were exhausted and airbags were at last made available for American consumers. Their effectiveness was demonstrated immediately in dramatic incidents in which motorists survived terrible head-on collisions because their cars were equipped with airbags.

And Lee Iacocca, now CEO of Chrysler, appeared in Chrysler's TV commercials, boasting that his auto company was the leader in making airbags available to American car buyers.

Aside from Iacocca's rank hypocrisy, the story of airbags is unexceptional. It is possible to collect dozens, even scores of similar examples of laws that were bent or stalled in regulatory limbo or simply never enforced at the behest of selected clients.

At the Food and Drug Administration, it took more than twenty-five years -- and twenty- eight postponements encouraged by industry pressure -- before the agency decided to restrict the use of cancer-causing red dyes in food products, a danger the FDA scientists first identified in the early 1960s. [9]

At the Nuclear Regulatory Commission, the regulators issued only 350 fines during the 1980s, though public utilities had reported approximately thirty-four thousand mechanical malfunctions, worker errors and security infractions at nuclear-power plants. [10]

At the Department of Labor, the Occupational Safety and Health Administration referred only forty-two cases of industrial negligence for criminal prosecution over nearly twenty years. Only fourteen of those were actually prosecuted, with ten convictions. No one was ever sent to jail, even for a day, for violating this federal law.

At the Pentagon, exceptions to law were granted routinely to the major defense contractors -- General Electric, Boeing, General Motors, Rockwell, Northrop and others -- who committed criminal fraud against the government itself. The New York Times reported that twenty-five of the one hundred largest contractors have been found guilty of procurement fraud in recent years -- some of them several times. The criminal behavior persists because, other than brief embarrassment, there is no significant penalty, at least for the largest companies. Typically, they plead guilty and pay a fine. To appease the public, the Pentagon sometimes "suspends" contractors, but the suspensions are always lifted in time for the company to participate in the next bidding for contracts. [11]

At Transportation, the law enacted in 1975 to require greater fuel efficiency in automobiles was deferred repeatedly by both the Carter and the Reagan administrations at the behest of industry lobbyists. Whenever it appeared that companies might not meet the legal standard, they appealed to the White House for another postponement: Reagan granted three of them.

At the Environmental Protection Agency, the inspector general found that 80 percent of the case files on hazardous-waste violations showed no evidence that the violators had ever complied with the enforcement order. Instead, typically, EPA "enforces" its rules on land, air and water pollution by negotiating with the offenders -- bargaining with company lawyers over how much or how little they will do to correct their abuses and how soon.

A senator asked the EPA inspector general: "Is it your testimony that EPA's enforcement policies are so weak that it frequently pays polluters to keep polluting and pay EPA's small fines rather than clean up their act?" "Absolutely," the inspector general responded. " ... We have found that over and over again." [12]

When federal laws are so malleable and subject to political intervention, they cannot truly be called laws at all.


It is not quite fair or accurate to blame random lawlessness on faceless bureaucrats -- the professional cadres who operate the government agencies. In fact, to subvert the authority of law, powerful interests have had to eviscerate the authority of the permanent civil service -- those officers and professionals 'of government who are obliged to provide a fair, impartial rendering of laws. Two decades of propaganda from conservative think tanks assailed bureaucracies as the source of waste and irrational decisions. Republican political candidates promised to dismantle the machinery of big government and, once in office, they tried to keep the promise.

Among other things, democracy requires a strong civil service-government employees who are sufficiently protected from random political influences to carry out the law in a disinterested fashion. This paradox is not exactly new; reformers discovered' the same insight in the late nineteenth century when concentrated powers were manipulating government decisions in a similarly shameless manner. In modern political usage, the principle was stood on its head-the permanent bureaucrats were portrayed as the enemy of the public interest and politicians set out to "get control" over them in the name of responsive democracy. They have largely succeeded.

The consequences first became clear in the realm of foreign policy. During the communist- care campaigns launched in the late 1940s and 1950s, the Foreign Service was accused of disloyalty and individual diplomatic officers were pilloried for expressing inconvenient opinions on the true nature of international conflicts. The diplomatic corps has never recovered.

Over time, as the intellectual independence of the Foreign Service was debased, the quality of its expert judgments became less and less relevant to the political appointees who made foreign policy decisions. Recurring episodes of failure -- Vietnam, the debacle in Iran, the war against Nicaragua in the 1980s -- all confirmed the problem of high officials who ignored or actively suppressed informed dissent from the Foreign Service. Instead of nurturing honest voices in foreign policy, presidents regularly appoint political hacks who are routinely dispatched to U.S. embassies as a reward for their campaign contributions.

The Nixon administration, as in so many aspects, was more brutally systematic than others in its efforts to defenestrate the domestic civil service. Frederick Malek, a businessman who served as the White House personnel director in 1969, issued an exhaustive manual for political appointees on how to evade the civil-service laws and intimidate or dislodge uncooperative federal employees who did not accept Nixon's political agenda and his idea of what the law required. "There is no substitute in the beginning of any administration for a very active political personnel operation," Malek wrote. He cited Democratic predecessors, Kennedy and Johnson, as his model.

Among other tactics, Malek recommended personal threats to any civil servant who seemed politically disloyal -- a transfer to distant parts of the country or damaging reports placed in the employee's personnel file. "There should be no witnesses in the room at the time," Malek warned. "Caution: this technique should only be used for the timid at heart with a giant ego. This is an extremely dangerous technique and the very fact of your conversation can be used against the department."

As a grander strategy, Malek proposed: "Another organizational technique for the wholesale isolation and disposition of undesirable employee-victims is the creation of an apparently meaningful, but essentially meaningless, new activity to which they are all transferred. This technique ... is designed to provide a single barrel into which you can dump a large number of widely located bad apples." [13]

Civil servants are not oblivious to this sort of purposeful manipulation. Some react with extraordinary courage, carefully protecting their legal prerogatives and making sure that their decisions are technically correct and invulnerable to political assault. Others, more commonly, learn to keep their heads down. John Moran, who served a dozen years as an occupational health expert at EPA and the Labor Department, described the bureaucratic reality that has evolved:

"I was really trying at Labor. I got out safety alerts largely in spite of the system. They kept tightening the screws until they shut me down. My view is that, in the government, the fundamental rule is: Just play the game. Go with the flow. But don't take initiatives or try to go out and solve problems.

"It makes too many headaches for too many people. You get political flak, you get press. A lot of people in the federal bureaucracy are quite happy with that system. They are the ones, by and large, who survive and get promoted. The higher they get, the more cautious they become."

Another technique for subversion, used most dramatically by the Reagan administration, is to starve an agency for funds so that its civil servants cannot conceivably carry out their functions, no matter how conscientious they might be. Overall, regulatory personnel in the federal government peaked at 131,000 in 1980 and fell to 112,000 by 1986, despite the greatly enlarged regulatory obligations that new legislation continued to produce.

In Reagan's first term, EPA's budget was cut by 10 percent and its staff shrank by more than 20 percent (at one point, EPA's office of enforcement was abolished in one of those "reorganization" ploys recommended in the Malek manual). The Interior Department reduced strip-mine enforcement by nearly 60 percent. OSHA cut four hundred inspectors and its citations declined by half. The National Highway Traffic Safety Administration's budget was cut by 22 percent and its formal investigations into potential car defects shrank from eleven a year to four. At the Food and Drug Administration, the number of "emergency exemptions" granted to new pesticides was tripled. [14]

More insidious is the way in which government has put some functions in the hands of private parties -- "privatized" them, as the conservative scholars would say-by contracting out the work to companies and consulting firms. This trend was promoted in the name of efficiency and reduced costs, but it has inevitably deepened the irresponsibility of government-private contractors are often asked to recommend the rules and standards that will govern their own behavior.

The Department of Energy's flagrant abuse of environmental laws stemmed largely from private companies like Du Pont that were hired to do the government's work for it. "Some of the severity of DOE's predicament stems from the fact that structurally it is a supervisory agency," Gregg Easterbrook wrote in The Washington Post. "Its budget puts bread on the table for about 165,000 people but only 16,000 of them are government employees; the majority work for contractors and consultants." [15]

Despite occasional scandals, government contracting has become a popular remedy for governmental breakdown and tight budgets. If money is saved in the process, this is usually achieved by avoidance of the wage-and-benefit requirements of federal employment. Privatizing governmental functions provides rich contracts for private enterprise, but evades the more difficult questions of authority. It plays to the inherent popular distrust of government bureaucracy, but it also further confuses the public accountability.

Senator David Pryor of Arkansas, a persistent critic of the practice, noted that congressional testimony given before the House Armed Services Committee by the secretary of energy was actually prepared in part by a private defense contractor, unbeknownst to the secretary of energy himself. "Who is running our government?" Senator Pryor asked. "My no. 1 concern is totally unaccountable decision-makers. We don't know who they are, how they got there or why they got there." [16]

Farming out the government's responsibilities to private contractors -- while simultaneously holding federal pay for senior executives and technical professionals below that of the private marketplace -- naturally encourages a "revolving door" in personnel. Young bank examiners typically put in a few years as government regulators, then join regulated banks at much more substantial incomes. Justice Department attorneys take their expertise to private law firms where they represent the violators.

The federal government, as a whole, has been reduced to a training camp for private enterprise -- a school in which the students learn the skills and inside knowledge that will be most valuable to outside employers. Under those circumstances, only the most dedicated civil servants -- or the most incompetent -- are willing to remain in the public's hire. [17]


In a world of unreliable laws, the news media have become a principal agent of law enforcement. Wherever the press turns its beacon, embarrassed officers of government are compelled to follow. The routine of law enforcement has become a hit-or-miss system dependent upon exposure and scandal.

During the last three months of 1988, The New York Times published 108 stories, thirty- seven of them on its front page, devoted to a single scandal. A young reporter named Keith Schneider had discovered the gross and dangerous radioactive pollution emanating from the federal government's own nuclear weapons production plants. At his urging, the Times made a major project of exposing the full dimensions of neglect and deceit. The cost of cleaning up radioactive contamination from forty years of reckless mismanagement at the seventeen federal plants was subsequently estimated to be as much as $155 billion. [18]

The story itself was not entirely new or even secret, despite the rigid national-security classifications that surround the nuclear weapons plants. Congressional committees had investigated the subject for years and voiced their alarm. Freelance documentary filmmakers had produced devastating films exposing the radioactive contamination at Savannah River, South Carolina; Rocky Flats, Colorado; and other installations. Still, it was The New York Times that single-handedly made the nation sit up and take notice.

"Congress doesn't have the ability to get an agency to respond," said Representative Mike Synar of Oklahoma, a member of the House Commerce Committee who has led many of its aggressive oversight investigations. "There's only one way to make them respond and that's to get them on the front page or on the evening news. I was pounding hard on the Department of Defense and Department of Energy installations for six or seven years and nothing happened.

"Then Keith Schneider picked it up and wrote stories for thirteen days in a row on the front page of The New York Times and that changed everything. He has more power than any congressman over regulatory agencies."

Congressman Synar may not be exaggerating. Press exposure is a powerful therapeutic agent against the lawless behavior in government, but it is also quite random. Citizens' groups, large and small, work hard to alert news organizations to their complaints, while government regulators and the regulated industries live in perpetual dread that the roving eye of the media will, for some reason, stop on them. When it does, they are required at a minimum to prepare rituals of responsiveness that will appease the public outrage.

But, as every reporter and editor appreciates, the media's glare is essentially a transient, accidental force. It picks and chooses among many possibilities and usually settles on the most visibly alarming ones. Certain kinds of stories -- dead fish floating in the river or workers who lost their hands in unsafe machines -- are visual and accessible to press exposure. The more complicated, systemic scandals usually are not.

Depending on the media to make government agencies enforce the law is another aspect of randomness, People are often disappointed by the media's fickle attention span, their devotion to certain issues and indifference to others. But frustration with the press is directed at the wrong target. The government is supposed to enforce the law, not the newspapers.


The government, however, is a principal violator itself. As the Times's exposure of the nuclear weapons scandal suggested, major scandals of lawlessness often involve not just private companies, but installations of the federal government itself. During a generation of enacting ambitious environmental protection legislation, the government has been, without doubt, the single worst polluter in the nation. Private corporations can always plead that they were merely following the example set in Washington. The attorney general of Maine, James A. Tierney, compared the two major boatyards in his state -- Bath Iron Works, a private corporation that builds destroyers, frigates and cruisers for the Navy, and the Navy's own Portsmouth yard that overhauls and maintains nuclear submarines -- both of which generate dangerous hazardous wastes.

"One of these yards obeys the law," Tierney said. "One pays penalties when they do not. One pays fees. One has taken a responsible attitude toward the handling of hazardous waste. And that, sad to say, is the private yard. With our public yard, the Portsmouth Naval Shipyard, we have had an exact opposite situation." Shellfish in the Piscataqua River estuary, he said, have been contaminated with PCBs, lead and other heavy metals from the U.S. Navy.

In Minnesota, the Twin Cities Army Ammunition Plant was responsible for contaminating more than twenty square miles of the principal aquifer underlying the northern suburbs of Minneapolis. In the state of Washington, authorities estimate that as many as thirteen hundred hazardous-waste sites mixing radioactive materials with other industrial wastes qualify for Superfund cleanup on the Hanford nuclear weapons reservation; numerous "contaminant plumes" have been observed in the ground water, carrying such deadly chemicals as cyanide and carbon tetrachloride. In Arizona, pollution of an underground area four and a half miles long, contaminated with toxic chemicals that threatened Tucson's sole source of drinking water, was traced to an Air Force plant operated by Hughes Aircraft. [19]

These were not exceptional instances. A survey by EPA in 1988 found that half of all federal facilities caused environmental damage. The General Accounting Office estimated that federal departments violated the clean-water law at twice the rate of private industry.

Many of these federal facilities are in practice operated by private industry -- companies like Du Pont or General Electric that managed the nuclear weapons plants -- but the companies, until recently, were indemnified in their government contracts against any liability for the pollution damage they caused. DOE would pay the fines levied against its contractors -- which put the taxpayers in the role of underwriting violations of law.

The federal government, of course, enjoys a crucial advantage in its ability to evade laws. It owns the prosecutor. Every regulatory case that reaches the stage of formal charges or lawsuits must first pass through a narrow funnel at the Justice Department where the constraint of limited resources encourages negotiation and settlement instead of litigation.

Agencies are told to negotiate a compliance agreement with violators because there simply aren't enough lawyers to go around. During the Reagan years, the Justice Department went much further. Aligning itself with the Pentagon and the Energy Department, Justice argued that their violations were not subject to EPA enforcement action at all. How then would these federal departments be required to comply with the laws? The Justice Department suggested that EPA bargain with them. [20]


The cruel legacy of compromised law is that the task of making laws a reality frequently falls to the weakest parties involved -- the ordinary citizens who are the victims. The law enacted in 1970 to protect workers from occupational health and safety hazards has, for instance, been a well-documented scandal from the beginning. When OSHA is enforced, it is often because injured industrial workers, the unorganized rank and file, have decided to mobilize themselves in protest.

A group of such workers from Ohio's Mahoning Valley gathered one Saturday morning in 1990 in the vestry hall of the First Presbyterian Church of Warren to stage their own "public hearing" on the subject of occupational health and safety. A stenographer recorded their testimony for several hours -- bitter recitals about disease and death in the Youngstown area's major factories, involving such well-known corporate names as General Motors.

Dave Webb, lean and gray-haired at sixty-one, described the plating department at Thomas Steel and the long exposed tanks of acid where he worked many years amid deadly fumes. "I just went through the seniority list since 1966," Webb explained. "Out of twenty-four people who died out of the plating department, fourteen died from cancer. Three are still living with cancer. January, two other people died of cancer. So you're getting up around nineteen people."

After his closest friend died, Webb filed a complaint with OSHA, the federal agency created to protect the health and safety of workers, and Webb said OSHA fined the company $11,000, later reduced by $5,000. His arms flailed angrily in every direction as he recounted his complaints:

"We want a yearly physical, they haven't done anything about that. We want warnings put up all over that you are entering a toxic area, they haven't done that. And we asked them to replace the hoods over the plating tanks, they haven't done that. But they always say it's the cost. What's the cost of one person's life? I can't see where you put a monetary value on a man's life if you are not doing safety-wise what you're supposed to be doing."

Alberta Faber, a frail woman in sunglasses and a white painter's hat, kept a diary of her experiences with blackouts, dizzy spells, bleeding at the mouth and other symptoms when she worked in the paint shop at General Motors's huge assembly plant in nearby Lordstown, Ohio.

"I worked right by the oven," she testified, "so of course at night when the fumes came back, they watched to see when my eyes rolled back and I painted the wrong colors. Then we were relieved ... I felt like a canary in a coal mine, really."

Leonard Grbinick, a millwright for twenty-six years at a mill that was first Republic Steel, then LTV, then Warren Consolidated Industries, complained about the "red dirt" that settled on workers' hair and skin. For people with sensitive skin, it caused "sores all over their skin about the size of quarters," he said. Injured workers were reluctant to complain or file for workmen's compensation for fear they might lose their positions. "Like in Tom's case, he couldn't afford to take off," Grbinick said. "He had five children at home to feed. And I felt bad for him." As the union rep in the department, Grbinick took the complaints to OSHA.

"We complained and bitched and moaned about it," he testified, "and OSHA just says, 'This is a nuisance dust.' Well, yes, it is a nuisance. When you get it on your skin, if you're sweating or if you get wet, it will burn you just like somebody put a match to you.... I would like to take some of that nuisance dust and spread it on some of those OSHA officials' desks and let them breathe it for a while."

The most grisly testimony came from John Wilson, who at thirty-three is incapacitated after working several years as a lacquer sprayer at OM Lordstown. "Basically, forty hours a week, I worked in a cloud of lacquer," he related. "At one point, I found a respirator and put it on and was told I wasn't allowed to wear it because there wasn't good air in the booth and I would probably pass out and be hurt ... I started getting bloody noses ... so I complained to my fellow workers and they said, no problem, some of them had had bloody noses for fifteen years. So, unfortunately, this sounds stupid, but I went along with that program."

Wilson displayed a darkly hallucinatory oil painting he had done to depict the symptoms that have incapacitated him -- recurring painful headaches, constant listlessness and disorientation. He receives disability benefits of $500 a month. "I have a tendency to want to smash everything in sight now," he said. "I am fatigued all the time. I wash the dishes and, when I'm done, I have to sit down and take a nap or rest. I am really pissed off, this really makes me mad, I'm sorry."

These witnesses and others were drawn together by anger and also by their personal courage. The sharing of testimonials buoyed their spirits, but the hearing demonstrated just how isolated they were. Among auto and steel workers in the Mahoning Valley, raising complaints about unsafe working conditions is considered a threatening act. Thousands of local industrial jobs have been eliminated by plant closings during the last fifteen years; survivors who still have jobs fear that complaints from workers will simply target their plant for the next closing. The United Auto Workers, once one of the most aggressive unions, now treats the subject gingerly too, fearing the same consequences.

When the federal government created OSHA, one of its purposes was to eliminate this grim trade-off between jobs and health that often faced individual workers and their unions. Federal standards and nationwide enforcement would supposedly make it impossible for companies to squeeze economic advantage out of dangerous working conditions.

For most companies, however, the odds of even getting caught are quite remote since OSHA has only eight hundred inspectors nationwide -- one for every forty-five hundred employers. When violators are cited, the fines are usually inconsequential -- averaging $239 per violation in 1987. OSHA's huge corporate fines that are sometimes well publicized will normally be reduced drastically in subsequent negotiations with company lawyers. The agency won big headlines when it fined Union Carbide $1.3 million for the catastrophic release of toxic chemicals at Institute, West Virginia, when 141 people were injured in August 1985. The bargaining later reduced the fine to $400,000. [21]

"It's a goddamn joke," said John Moran, a safety authority who worked nearly a decade at the National Institute of Occupational Safety and Health, OSHA's research arm, and who now heads an industry-labor safety committee in the construction industry. "In construction, nobody worries about OSHA anymore. They don't take it seriously. The average construction worker has a life expectancy ten to twelve years less than the average. In Indiana, the average construction worker dies at sixty -- before he even collects Social Security.

"The bottom line is the working man and woman in this country come in last. The regulators at EPA and OSHA never talk to the working man or the small businessman. They're dealing with big corporations and trade associations and labor unions."

In construction, for instance, the serious injury rate was actually higher in 1988 than in 1970 when OSHA was created. But, as Moran points out, this outcome is not dictated by market economics but by company decisions. Bechtel, one of the world's largest and most successful construction companies, has a health and safety record "ten times better than other companies," Moran said, because Bechtel executives committed their company to high standards in the workplace. [22]

In the case of the Mahoning Valley, the "public hearing" was organized by a handful of auto workers from GM's Lordstown plant who pulled together a little group they called WATCH (Workers Against Toxic Chemical Hazards) and set out to make the authorities pay attention -- their union, their company and their government. Charles Reighard, one of the workers, described how WATCH got started. "We were startled at how many names we saw in the paper were people from the auto plant who had died and at their ages," he said. They asked Staughton Lynd, a local labor lawyer and former historian at Yale, how to proceed and Lynd advised them to dig out their own facts.

So Reighard and three companions went down to the local library and pored over eighteen months of the obituaries printed in local newspapers. Even they were stunned by what they found. Between January 1987 and July 1988, they counted seventy-five of their coworkers from Lordstown GM who had died of cancer, leukemia, kidney and heart diseases. The average age was fifty-six years; the youngest was a twenty-nine-year-old woman who worked at Lordstown for ten years before she died of cancer.

"We made copies of every one of those obituaries and we have them to prove that the person did die," Reighard testified. "He wasn't killed. He wasn't shot. He wasn't killed in a car accident. He didn't die ten years ago like the union first said. And every one of them is documented that they died of cancer, leukemia or heart disease, kidney failure, and we feel that it's directly responsible from the chemicals they work in."

Their unscientific research did not prove, of course, that toxic chemicals killed these people, but the workers held a press conference to reveal their dramatic findings. The local news coverage produced official embarrassment. The United Auto Workers and General Motors, both originally hostile toward WATCH's agitation, agreed to cosponsor an expert study on mortality rates among Lordstown workers.

"We are confident the study will reveal that there are no problems out there," a GM Lordstown spokesman declared. A month before the study was made public, the plant manager announced that, in any case, the company's continuing efforts had already achieved "zero hazardous materials" in Lordstown's fabrication plant.

When the official joint study of "proportional mortality rates" was completed, it confirmed what the four auto workers had documented for themselves at the local library. The death rate from cancer among the auto workers at Lordstown's two assembly plants was nearly 40 percent higher than normal. At the fabrication plant, it was 50 percent higher. GM and the UAW agreed jointly to dig deeper into the causes.

Three months later, OSHA belatedly swooped down on Lordstown and did a "wall-to-wall" inspection, found 750 violations and announced fines totaling $211,000 (subject to negotiations). The company and the union have since reported progress on dealing with the health problems, though workers inside the plant said they could not see that much had changed. [23]

The only certain political consequence of WATCH's agitation was its effect on workers at other factories in the Mahoning Valley. They were encouraged to come forward to tell their own stories of dangerous working conditions and recount how the government had ignored them too.
Site Admin
Posts: 34633
Joined: Thu Aug 01, 2013 5:21 am


Postby admin » Thu Oct 31, 2013 12:15 am


For democracy, the enduring consequence of random law is the culture of permissiveness and deception that permeates the highest levels of government. The general political climate is now infected with a cynical understanding that things need not be real in order to satisfy the public's desires and demands. Instead, both political parties and the webs of client-representative relationships surrounding them have perfected the practice of concocting hollow laws -- promises the government makes to the people which it does not necessarily intend to keep.

The political community as a whole, including the media and even many reformers, has come to accept the legitimacy of this and even celebrates new laws that are really no more than gestures of good intent -- grand declarations of what would be nice to accomplish someday. The reality, as every insider knows, is that the laws lack the precision and capacity to deliver on the intentions.

The legislative arena, including the presidency, has become addicted to these artful charades, which are now commonplace, both for regulatory issues and for general subjects like education or social welfare. Every few years, for example, usually just before presidential elections, a new "crime bill" is enacted with bristling resolve in response to public fears. Over two decades, these measures have had no measurable effect on crime or its causes, but they are popular in Washington as election-year gestures to the anxious voters.

Likewise, various social programs are enacted in response to obvious areas of concern -- hunger or homelessness or disadvantaged children -- but none of them is equipped with the funds to accomplish what they promise. These too are merely political gestures. Even a supposedly popular program like the Head Start preschool education program for poor children (universally applauded by both parties) is funded at a level that reaches only one in five of the eligible children.

Symbolic legislation is passed with fanfare, self-congratulation and the knowledge that the real political fight has only just begun. The participants will decide later, elsewhere, what will actually happen. Citizens at large cannot usually see the details of these evasions, but they observe, in time, that nothing much seems to have happened.

"One of the best ways to kill a civil rights concept is to pass a law and not enforce it," Mary Johnson, editor of The Disability Rag, wrote after the Americans with Disabilities Act was enacted in 1990 with huge bipartisan majorities and George Bush's blessing. After al1, she noted, federal agencies were still not observing the terms of disability laws that Congress had passed in 1986 and 1973. [1]

The standard reasoning behind these grandiloquent laws is that the approach leads to some incremental progress. It establishes broad public goals that may be fulfilled sometime in the future. But the political price for this is enormous. The approach fosters public deception on a grand scale and a legacy of deepening cynicism among citizens who thought something might actually be accomplished by government.

Richard C. Fortuna, a microbiologist who spent six years drafting environmental laws as a staff aide on the House Public Works Committee and now works for private industry, described the legacy of deceitful law:

"The worst situation is not the absence of laws, but the presence of laws in name only. Right now, we have lots of laws in name only." [2]


The shame of modern government was conveyed with appropriately dry authority in a statistical printout EPA provided to inquiring congressmen in early 1990. With some reluctance, EPA identified 149 industrial facilities in thirty-three states where the surrounding air was known to be quite dangerous, even deadly, due to extraordinary emissions of butadiene, carbon tetrachloride, chloroform, ethylene oxide and other toxic chemicals.

The worst facility was in Port Neches, Texas, where Texaco operated a chemical plant that dispensed butadiene so freely that the lifetime risk of cancer for neighboring inhabitants was rated at 1 in 10. Asarco, Mobil, Shell Oil, Goodyear, Uniroyal and American Chrome each operated smelters, refineries or factories that created a cancer risk for their neighbors greater than 1 in 100.

The EPA printout listed another 45 industrial plants where the cancer risk was less than 1 in 100 but greater than 1 in 1,000. The remaining facilities on the list posed a risk greater than 1 in 10,000. As a matter of public policy, Representative Henry Waxman of California noted, an environmental health risk greater than one cancer per million is considered unacceptable. [3]

The repetitious details of the EPA list were enlivened only by the presence of some well- known corporate names, including some companies that appear regularly in television commercials proclaiming their devotion to the environment. Weyerhaeuser, which calls itself the tree-growing company, operated four mills with acutely dangerous emissions. Du Pont and General Electric each had four plants on the list. Dow Chemical depicts itself in TV commercials as an enlightened company that recruits idealistic young people to go forth and save the earth. In real life, Dow operates eleven factories where the risk of cancer is alarmingly high.

For twenty years, this sort of behavior has ostensibly been against the law, under the terms of the Clean Air Act of 1970. Yet the toxic air pollution continued with virtually no interference from government regulators. How could these companies get away with it for two decades? The sorry history of the regulation of toxic air pollution provides a convenient vehicle for understanding the tangled politics of debased laws.

The Clean Air Act of 1970 empowered EPA to curb toxic air pollution. from industrial sources in order to guarantee "an ample margin of safety" for the citizens who live nearby. Yet, by 1990, none of the toxic pollutants listed on the EPA printout was being regulated by the agency. Over two decades, EPA had managed to promulgate emissions standards for just seven of the more than 275 dangerous substances emitted by industrial plants. The continuing violations were not a secret to anyone. For instance, both Texaco and EPA had known since at least 1984 that the Port Neches plant was extremely dangerous. Nothing had happened.

The high-risk factories and refineries on EPA's printout were the dramatic edge of a much larger and more generalized form of lawlessness. In a separate accounting from EPA, for instance, the steel industry was found to be operating thirty-six coke ovens that posed a cancer risk greater than 1 in 10,000 -- and six mills where the risk was greater than 1 in 100.

Nationwide, according to the companies' own filings with EPA, a total of 2.7 billion pounds of poisonous chemicals are launched into the air every year by American industries. EPA has estimated that fifteen hundred to three thousand people contract cancer each year as a result but, in truth, the full consequences of this casual pollution, both for human beings and for the natural environment, are unknown and probably unknowable.

A law enacted in 1970 to protect human life from straightforward industrial hazards yielded virtually nothing over two decades. The principal explanation is neither bureaucratic laxity nor scientific uncertainty, but an esoteric form of political deadlock. The companies did not have to bribe people, since they could accomplish the same thing by exploiting the evasive opportunities embedded in the law itself. The evisceration of law is sometimes a story of dramatic backroom fixes by politicians, but more routinely, the law is neutered in the tedious details -- a process that resembles water eroding rock and makes no headlines. Democracy, as political scientist Theodore Lowi once observed, is undone by "administrative boredom."

Enacted with appropriate celebration in 1970, the regulatory terms for industrial toxics were immediately swallowed up in an interminable legal argument over the stringency of enforcement. From 1971 on, lawyers were in court virtually every year punching and pulling at those ambiguous words, "ample margin of safety." Without ever saying so, EPA decided on its own that the terms were unenforceable and went into a deep stall. The agency's evasion was implicitly accepted by the political leaders of both parties, who, aside from a few persistent critics in Congress, did nothing to resolve the impasse.

Stalemate, of course, constitutes victory for opponents of the law -- the oil, chemical, steel, timber and mining industries -- which did not wish to alter their behavior and had the legal and political resources to avoid doing so.

In broad political terms, the government's dereliction could be explained as a function of class bias and geography. Twenty-nine of the high-risk plants were located in Texas and fifteen in Louisiana -- the Gulf Coast industrial belt that is now popularly known as "cancer alley." Dozens more were in other southern states, which, given their history of economic deprivation, were anxious for industrial development on almost any terms. In the South, the conservative Democrats who dominate politics are closely aligned with business interests and they generally work to fend off any form of government interference in the name of defending free enterprise and jobs.

In both North and South, the afflicted neighborhoods that suffer from this toxic pollution are generally the working-class and poor neighborhoods whose citizens are most neglected in contemporary politics. Other Americans might sympathize abstractly, but most would not be directly affected. Several important environmental organizations did mount continuing legal battles in behalf of enforcement, but the environmental movement's major priorities were elsewhere -- the smog problem, the haze over the Grand Canyon and other competing goals for clean-air regulation. No one ever disputed the harmfulness of the chemicals themselves or claimed that toxic emissions control was beyond the capabilities of engineering. It was always fundamentally an argument about whether the risk to people justified the cost of fixing things.

"We're not talking about rocket science," explained Richard Ayres, the Natural Resources Defense Council lawyer who chaired the Clean Air Coalition formed by major environmental groups. "It's just using your brain. Companies don't like it because they never had to pay attention to it before, but basically we're talking about tightening the plumbing -- reducing the leakage."

The regulatory debate focused instead on the vague language of the original law. What exactly was an "ample margin of safety" if even a slight exposure to cancer-causing chemicals was potentially harmful? After listing three substances for regulation, EPA decided, with considerable kibitzing from industry, that the law literally required "zero emissions." Therefore, the standard seemed impossible to achieve, not to mention greatly disruptive to industrial processes.

The EPA's practical decision was to not enforce the law, but this was never disclosed in a forthright manner. Instead, the agency pretended for years to be faithfully pursuing the law's mandate.

"The legislation gives the agency an assignment that the agency's own scientists say you can't accomplish," William Ruckelshaus explained. "It had the effect of freezing the agency. Once you started into the regulatory process, it meant you were going to end up banning the substance, which would not have made any sense. So, instead of starting the regulatory process, the agency studied it and studied it as long as they could."

Banning some substances and compelling industry to use less dangerous substitutes might, in fact, be a plausible solution for some pollution problems, but politicians never considered such questions when they passed the original law. Lawyers for environmental groups conceded that the statute was ambiguous and would have to be resolved politically, but they saw the legal argument being used as a convenient tool for gross evasion.

"Industry argues the zero emissions interpretation so the perfect becomes the enemy of the good," said David D. Doniger, a senior lawyer with the NRDC. "Instead of imperially taking it on themselves to rewrite this law, EPA should have carried out the law and developed the regulations and that would have constructively put the question to Congress for evaluation."

Over more than fifteen years, NRDC, the Environmental Defense Fund and the Sierra Club sponsored a series of lawsuits on various toxic chemicals, designed to force the issue to a resolution. "What we were trying to do was deliberately force the literal interpretation of the law in order to force the matter back into Congress and write a law that would work," Doniger said.

Instead, what resulted was more lawsuits -- appeals brought by both industries and environmental groups, more judicial decisions and court-ordered deadlines and more missed deadlines. The environmentalists thought they had achieved their goal in 1977 when an EDF lawsuit on vinyl chloride was settled with a negotiated agreement that provided a quid pro quo to both sides. "Ample margin" would be defined so that the regulatory agency could require the "best available control technology" on toxic emissions while the goal of total protection against cancer risks would be treated as a long-term objective.

"We said, let's put aside the argument over perfect protection and concentrate on getting a whole lot of protection for a whole lot of people," Doniger explained.

Nothing much happened. EPA instead began defining the control standards in terms of how much it might cost each industry to comply. Environmentalists complained that this was a violation of the settlement terms. The Carter administration, having listed only four more toxics, announced a "cancer initiative" in 1979 and published a priority list of dangerous chemicals. Then it left office without having acted on any of them.

The environmentalists were afraid to turn to Congress for help. By the late 1970s, industry's political campaign against federal regulation in all forms was at its peak. In that political climate, the environmentalists feared they might get something worse if the fuzzy legal definition was resubmitted to Congress as an abstract question of legal definitions.

The Reagan administration was even more recalcitrant than its predecessors, of course, and did virtually nothing beyond defending itself against lawsuits. In 1983, Ruckelshaus promised Representative John Dingell of Michigan, the aggressive chairman of the House Commerce Committee, that he would act on some twenty toxic chemicals by 1985. But, instead of actually listing the twenty chemicals for enforcement, Ruckelshaus merely announced an "intent" to put them on the list. He was held in contempt of court for refusing to observe a court-ordered deadline on regulating the emission of radionuclides.

"Instead of a quid pro quo, what we were getting was a snail's pace and standards very heavily watered down by cost considerations," Doniger said, "and so we raised the issue again in court and tried to drive the legislative debate to get a clean standard."

The Reagan administration's lackadaisical attitude changed somewhat after December 1984. That was the month when Union Carbide's chemical plant in Bhopal, India, released toxic fumes that killed two thousand people and blinded thousands more. Eight months later, another Union Carbide plant in Institute, West Virginia, had a toxic release that injured 141 people. EPA promptly announced a "Policy Initiative" on air toxics.

"It was all hype and nonsense," Doniger said. "They were basically asking industry to care more and, sure enough, industry had a program called CARE. Then EPA referred the pollutants to the states. Nothing happened."

The legal battles dragged on through most of the 1980s and finally in 1986 produced a court-ordered definition of "ample margin" that was presumably acceptable to all sides. By 1990, enforcement standards were in place for a handful of chemicals -- the ones first listed more than a decade earlier.

In a sense, however, the story of air toxics regulation began all over again in 1990. That year, Congress enacted a new clean-air law that largely rendered the previous legal arguments moot. The new legislation sets out different and less ambitious terms for how the government will regulate toxic air pollution. Thus, government begins anew the laborious process of regulation writing and litigation. The new law puts aside the question of health risks and instead attempts a simpler approach -- an engineering standard for tighter plumbing. EPA is ordered to devise technological standards for controlling 189 toxic chemicals, based on the emissions control performance already achieved in the best plants.

A decade hence, in 2001, if the control technology proves inadequate, EPA may then take up again the health question of an "ample margin of safety," now defined by law in much more conservative terms as one cancer case per ten thousand residents.

In effect, the complicated deadlines and exceptions in the new clean-air legislation give industries another twenty years -- till 2010 -- to comply with a public-health objective that was first set in law in 1970. The steel industry is given another thirty years to comply on its coke ovens -- law for the year 2020.

"The new law gives us deadlines," said Richard Ayres of the Clean Air Coalition, "but it's a nonlaw -- making deadlines long enough so that they don't have meaning."

Some leading environmentalists were more confident that, this time, something might actually happen. For one thing, after two decades of indifference and resistance, the chemical industry claimed to have gotten religion on environmental questions, and it launched an aggressive public-relations campaign to persuade the public of its good intentions. The timing was coincidental with the congressional debate on clean air, but some environmentalists like Doniger perceived a genuine change in attitude, at least among some major chemical companies (though not in the oil and steel industries).

Monsanto announced an ambitious commitment to reduce its own toxic emissions by 90 percent voluntarily, regardless of what the future regulations may require. Texaco, Du Pont and others made similar promises. In full-page newspaper ads published on Earth Day 1990, the Chemical Manufacturers Association unveiled its "Responsible Care Initiative," an environmental manifesto signed by 150 companies. Indeed, a number of the companies taking the pledge-Texaco, Du Pont, Dow, Mobil, Exxon, General Electric, Weyerhaeuser, BF Goodrich, W. R. Grace and others-were the same ones that showed up that year on EPA's list of high-risk cancer factories.

What discomfited the chemical companies was not the prospect of stern federal law enforcement-they had been quite effective at neutralizing that -- but the unwieldy threat of aroused public opinion. The regulatory law had proved impotent but another law enacted by some states and by Congress in 1986 had stimulated widespread public alarm by establishing the people's "right to know" about what poisons were being dumped on them. As the plant-by-plant reports on toxic pollution were collected and made public by EPA, community after community became angered by the frightening data.

"It's no secret that a lot of people are unhappy with chemical companies," the CMA advertisement acknowledged. Corporate executives still belittled the health implications of toxic air pollution but, as some of them confided to Doniger, the 2.7 billion pounds of toxic chemicals they distributed each year through America's air had become a "public-relations problem."

The clean-air law itself, nevertheless, is still a doubtful authority. Aside from the virtuous intentions of some companies, the new law does not close off the avenues for evasion and, in fact, the new complexities multiply the litigious opportunities for those who wish to resist by exploiting the fine print. Companies will be free, as always, to choose for themselves whether to comply or keep stalling. If they do not wish to spend the money, they will restart the lawsuits and agency lobbying and can hang up the newly reformed regulatory standards for many years to come.

William Ruckelshaus extolled the new environmental consciousness of corporate management, but he also acknowledged that there are many "bad actors" for whom voluntary compliance is meaningless. "For most companies," Ruckelshaus conceded, "they're not going to spend the money unless the government tells them to. If the government doesn't say what you're doing meets the standards, they won't do anything."


The lawless quality of modern government originates, naturally enough, with the lawmakers themselves. For most members of Congress, the legislative process represents a chance to please public opinion by voting for high-minded legislation while protecting corporate balance sheets or other interests by acceding to the legislation's deceptive details.

As conservative critics have observed, the legislative atmosphere of inflated promises was doubtless encouraged by the grandiose expectations promoted during the presidencies of John F. Kennedy and Lyndon Johnson in the liberal hubris of the 1960s. Great goals for the nation were announced rather regularly -- eliminating poverty, for instance. But the objectives often lay far beyond the government's existing capacities or the sponsor's real political intentions. Indulging in hollow pronouncements has become a commonplace of modern politics. President Bush announced, for instance, that his great goal . for education is that by the year 2000 (well after he has left office) American high schools will have a graduation rate of 90 percent. Senator Daniel P. Moynihan mischievously observed that Ronald Reagan had made the very same announcement back in 1984, only Reagan had set the target date for 1990. Both presidents received abundant congratulations and press attention for facing the problems of education so boldly. [4]

In the media age, however, empty promises make smart politics. Enacting grand measures has the appearance of responsiveness to constituents' desires and creates a sense of forward motion. When the law fails, enact another one. "We don't have just a failure of one law, but a series of laws," said Curtis Moore, former Republican counsel on the Senate Environment and Public Works Committee. "Toxic pollution is such a potent issue, we have been able to enact more than one law. By and large, they've all been failures."

Despite years of industry-government propaganda, the general public does not accept the trade-offs between corporate profit and human life or the environment. But the governing elites do. So dozens of statutes have been designed to paper over this basic conflict. Political action driven by intensified public opinion is artfully derailed in the legislative details.

A public-opinion survey by The Wall Street Journal and NBC in the spring of 1990, for instance, put the question this way: "Sometimes the laws that are designed to protect the environment cause industries to spend more money and raise their prices. Which do you think is more important: protecting the environment or keeping prices down?" The public believed overwhelmingly -- 80 percent to 13 percent -- that the environment comes before costs.

A New York Times survey conducted in the same month sharpened the point further: The public endorsed the view, 71 percent to 25 percent, that "we must protect the environment, even if it means increased government spending and higher taxes." A majority even agreed, 56 percent to 36 percent, that protecting the environment comes first, "even if it means jobs in the local community' are lost." [5]

In a healthy democracy, these popular expressions of value choices would be taken seriously. Public desires would at least be confronted in an open manner by those who think them unrealistic. If the government considered a congressional legislative mandate unachievable, it would explain why. If economic discomfort were the real reason why regulations were not being enforced, political leaders would force a visible debate on the question so that the public could at least understand the terms of the trade-off and respond with its own preferences.

Are Americans serious about their new environmental values and willing to accept the deep changes these values imply for American economic processes? In different ways, the public keeps saying it is serious. But politicians respond as though public opinion is merely a transient romantic sentiment to be indulged. The deeper political question about this clash of values never gets answered because the political community has discovered how to have it both ways -- appealing to the public's environmental values but without disturbing corporate power.

The Clean Air Act of 1990, for instance, advanced matters on several fronts but it did not even consider the technological breakthroughs that many believe are possible. The new law, in effect, rolled over the deadlines for compliance that were first set in 1970 and promised once again that, by 2010, people everywhere will be breathing healthy air.

"We could deal with all this much faster if we wanted to get it done," Richard Ayres of the Clean Air Coalition said. "The government could figure out substitutes for toxics that pollute or it could go 'upstream' and make the chemical companies responsible for the pollution that results from their products and processes. None of that has ever been done. That would be attacking the problem like you really wanted to solve it."

Defenders of the status quo argue that, notwithstanding the evasions and delays, substantial improvements were derived from the original clean-air law and, in time, the system will achieve its goals, however imperfectly. The public at large does not share that optimistic view and even some scholars regard the claims as dubious. Robert W. Crandell of the Brookings Institution wrote, for instance, that "because of delays, poor enforcement, and imperfectly understood dispersion and transport characteristics, it is possible that the entire program has generated little reduction in air pollution.... The data on air quality are so poor that one cannot confidently assert that air quality has improved because of the 1970 Clean Air amendments." [6]

All of the interested parties, however, have learned to coexist comfortably in a system that relies on public deception -- the legislators, the regulators, the regulated industries and even many of the reformers in the environmental movement. Forcing an honest debate would be disruptive and unpopular among political elites, in and out of government.

At their core, the continual evasions are about "the problem of power," as Theodore Lowi put it. What was missing in the modern era of legislation was a straightforward determination to use the government's power to achieve certain results and accept the burdens of doing so. The purpose of representative government, Lowi wrote, was' 'to bring the democratic spirit into some kind of psychological balance with the harsh reality of government coerciveness."

Does the government really intend to use its power to force these changes or doesn't it? When that hard choice is deflected into murky bargaining arrangements and endlessly negotiable standards, it reflects a breakdown of the representative process itself.

Sophisticated members of Congress know how to evade the hard choices about power. The imperfections and impediments built into the laws are not accidental or unintended, but usually represent silent concessions to the lobbyists who were ostensibly the losers in the overall battle. From the perspective of legislators, enacting incoherent laws has a rational purpose -- it allows them to have it both ways. Representative Mike Synar of Oklahoma, himself a vigilant overseer of health and safety laws, explained:

"We're really pretty smart around here and we know pretty well who's going to get mad, so we know how to avoid getting them mad at us. The easiest way is to not decide. It's like a golf game -- you score well by not making bad shots. So we defer the tough decisions to the regulatory agencies. If we're really deadlocked, we say: Let's defer to EPA for a six- month study and let EPA tell us what to do. A lot of people can hide behind that.

"The bureaucrats look at the legislative record and they can see the issues where we didn't want to make a decision. So they know they're in no hurry either. Why make a decision that will make the same people mad at them, if Congress didn't want to make it? Then the lobbyists move in and overwhelm the agency. If a lobbyist sees he's going to lose in Congress, he'll say to us: Let the agency decide. Then the regulatory side of his law firm will get another shot at it."

For most members of Congress, there is very little political risk in this sort of permissiveness. Indeed, the larger risk for them is on the other side -- that the final regulations will be too stringent and angry clients will come back to Congress demanding relief. For the most part, senators and representatives have learned how to deal with this problem too. Senator Dale Bumpers of Arkansas explained:

"When the regulation writers run amok and constituents start writing and saying, 'My God, have you guys lost your minds?' you can write back and say: 'Why, those guys in the agency have gone crazy and this is not what we intended and I'm going to demand hearings on the matter.' Which is usually where it ends."

The dysfunctions of the regulatory system were actually becoming the focus of serious debate in the late 1970s, but ironically, when the Reagan administration came to power, the debate was foreclosed. The Reagan regime's political fixes were so flagrant that a complex problem of governing was swiftly reduced to a simple matter of political hacks doing dirty deals for their corporate patrons.

Yet, if one asks corporate executives about environmental regulation, they will describe it as their nightmare. After all, plant managers are buried in complex and overlapping legal strictures that did not exist a generation ago. Companies have spent billions on compliance and small armies of employees are devoted to keeping up with exhaustive requirements for testing and handling, monitoring and reporting -- not to mention the corporate lawyers and lobbyists who attend to the legal language in Washington.

Lloyd N. Cutler's law firm at one time or another has represented nearly all the major trade groups, chemical manufacturers, petroleum, textiles, motor vehicle manufacturers, pharmaceutical makers and major banks, plus leaders of the Fortune 500 corporations. The suggestion that industry has captured regulatory agencies like EPA seems ludicrous to him.

"It would be wrong to think that corporations are on top or ahead," Lloyd Cutler protested. "They feel very put upon or even defeated. It's true that they manage to survive and deal and push things off -- they feel the added costs of regulation exceed the benefits -- but they would say the notion that they now control or dominate the health and safety agencies is just crazy. Because all industries are fighting running battles with these agencies."

The explanation, as Cutler suggests, is more complicated than the simple image of a captive agency, bound and gagged by its regulated constituency. The contemporary governing system would be more accurately described as a disorderly bazaar that is not securely in anyone's control -- a maze of diffused power with endless opportunities for reversal. If the power to decide things is located everywhere, then it really exists nowhere.

Modern political reforms, combined with the new generation of regulatory laws, had the overall effect of multiplying the decision points within the government-this was often their stated objective -- in order to break up concentrations of power. The decision making was splintered into many discrete steps, and authority was shared among many more agents along the way. While this broke up the easy politics of the back room or at least complicated it, it also created many more doors at which influence might knock and enter.

The diffusion of authority, as Lloyd Cutler himself observed, provides an ideal arena for special-interest lobbyists -- the more of them the better. Corporations may be perpetually frustrated by modern government, but, in the end, corporate interests are much better equipped to manipulate it.

"If you're against something, you're much better off in this diffuse world," Cutler explained. "It's harder to pass a law than to stop one. On the whole, I would say the professional lobbyists and lawyers prefer to live in this world where there are so many buttons to push, so many other places to go if you lose your fight. In a cohesive government, once you lose, it's over."


A minority of conscientious lawmakers has struggled for years to overcome the gap between appearance and reality. One by one, as regulatory laws came up for renewal, Congress often tried to tighten the legislative plumbing, so to speak, by drafting the legal commandments with much more precision and less grandiosity. If EPA would not set meaningful standards, then Congress would do it for EPA.

When this approach did not produce much improvement, innovative legislators devised an even tougher form of legislative command -- elaborate traps written into the statutes that are designed to force the Executive Branch into actually doing what Congress said it intended. These legislative devices became known as "hammers" because they confronted the regulatory agency and the regulated industries with a harsh either-or choice.

If the agency stalled and failed to produce a new regulation by the legislated deadline, then another set of stringent rules -- drafted by Congress -- would automatically go into effect on a date prescribed by law. The "hammer" provisions were intended to take the profit out of delay and inaction, to persuade the industrial sectors they would be better off cooperating with the regulatory process than endlessly obstructing it.

The first set of "hammers" was enacted in 1984 when Congress renewed the Resource Conservation and Recovery Act, better known as RCRA, which governs the handling and disposal of billions of gallons of hazardous wastes. The scandal of careless disposal -- symbolized by Love Canal and hundreds of other despoiled places -- had spawned the Superfund legislation to clean up thousands of old dangerous dumps; RCRA was supposed to prevent the creation of new ones.

The legislators' innovation has proved to be a dubious remedy. By 1990, EPA had complied with all of the "hammer" provisions written into the 1984 RCRA law -- yet the practical experience was not much different. Industry was given six years' advance notice on what to expect in requirements for pretreating hazardous wastes before disposal. Yet industry again claimed at the eleventh hour that the law would force the sudden shutdown of dozens of refineries and chemical plants.

Once again, the terms of the law were subverted in the final stages by strenuous industry lobbying. Once again, the law's meaning would have to be settled in protracted litigation. The message of this regulatory episode is that restoring reliable authority to law is not something that even the lawmakers are likely to accomplish on their own. The political system itself is stacked against the law -- even laws made with reinforced steel.

From the beginning, RCRA has been another story of pliant law. The first version was passed in 1976 and, like so many other environmental statutes, it set deadlines for action that were not kept. The Carter administration gave RCRA a low priority and the bulk of final regulations was not published until four years later, when Congress was already renewing the statute in 1980.

EPA immediately was inundated with fifty-two notices of intent to file lawsuits on the new regulations from industries and environmental groups as well as thousands of specific complaints and questions. The agency began negotiating "technical amendments" with hundreds of private parties, trying to answer their complaints and avoid an avalanche of litigation.

In 1981, Reagan's new EPA administrator, Anne Gorsuch, began suspending and deferring key sections of RCRA's new hazardous-waste rules. Even when federal courts ordered EPA to reinstate the regulations, enforcement was so anemic and compliance so spotty that even some businesses complained. Chemical Week, a trade publication, warned: "In a highly competitive industry, companies cannot afford to spend their resources on environmental protection, however well conceived the rules, unless they perceive those rules are backed up by credible enforcement policy."

By 1984, after the EPA scandals involving hazardous-waste sites, Congress was sufficiently fed up to enact its "hammers" -- a series of five do-or-die regulatory deadlines spaced over six years, requiring industries to treat chemical wastes to reduce toxicity and other characteristics before the materials are dumped in the ground. [7]

The first four "hammers" covered treatment of specific subcategories of industrial wastes such as solvents and organic chemicals and seemed to be effective; that is, the regulators produced meaningful regulations. When the first "hammer" came due in 1986, EPA at first issued a weakened version pleasing to industry, but this set off a firestorm in Congress. EPA had failed to require that the best available treatment methods be applied to solvents before disposal -- in other words, that the stuff be made as harmless as possible before it is dumped into the ground.

Eleven members of Congress, who had been the key draftsmen of the law, complained vigorously that their intentions were betrayed. After the uproar, EPA reversed itself and adopted the best-available-treatment standard for solvents and the three other subcategories covered by subsequent "hammer" deadlines. On the final "hammer" that came due in May 1990, the most important one because it covers roughly half of all hazardous wastes, EPA took a dive.

"In some ways, we've won all the battles and lost the war," said Richard C. Fortuna, executive director of the Hazardous Waste Treatment Council, a trade group composed of companies that manufacture incinerators and other waste-treatment equipment. "If we can't win this back in court, this country is back where it started in 1980 in terms of preventing more Superfund sites."

Fortuna's trade group had an obvious profit incentive in promoting hazardous-waste regulation that imposes tougher standards, but its critique was seconded by angry environmentalists and disappointed members of Congress. The industry treatment council and the Natural Resources Defense Council jointly sued EPA in 1990, charging that the mandate of the 1984 "hammer" had been subverted by regulatory fiat. Instead of requiring the best available treatment technology to reduce toxicity, corrosiveness and other harmful characteristics before the chemical wastes are put into the ground, the EPA regulation set a much more permissive standard.

Companies, in many instances, would be able simply to dilute the chemical wastes with water before injecting the chemicals into deep wells. Dilution, of course, doesn't really change the harmful characteristics of the chemicals. Once in the ground, the toxics are beyond anyone's control.

Deep-well injection has become a widespread practice for hazardous-waste disposal but, like earlier landfill methods, its eventual consequences for land and water pollution are not fully understood. Companies claim the chemicals are pumped so deep into the earth, sometimes thousands of feet down, that the wastes cannot possibly affect surface soil or ground water tables, but no one really knows what may occur ten or twenty years from now.

The practical experience so far suggests that deep-well injections may be a kind of geological crapshoot with the environment. If an underground formation has cracks or leaks through which the hazardous chemicals may migrate, that won't be discovered until many years later when the toxic wastes show up someplace else, perhaps in someone's water supply. A legendary failure occurred at Chemical Waste Management's deep wells in Vichery, Ohio, where 60 million gallons of hazardous wastes mysteriously "escaped."

Companies like Shell Oil, Vulcan Chemicals, Du Pont, BP Chemicals and Monsanto are sufficiently nervous about the practice that they announced their intention to shift away from deep-well injection. For instance, the manager of Du Pont's Beaumont, Texas, works told EPA's Pollution Prevention News that his company "recognizes the public concern about deep-wel1 injection and, for that reason, has set a goal of eliminating all toxic discharges into the ground or verifying that they have been rendered non-hazardous by the year 2000." [8]

In other words, the oil and chemical companies promise to do the right thing and stop polluting the ground -- a decade or so hence. In the meantime, however, these same companies do not want government telling them to stop now.

As the "hammer" deadline approached in the spring of 1990, the oil and chemical industries subjected EPA professionals to an extraordinary full-court press-warning them that dozens of industrial facilities would be imperiled if the agency went forward: with its best-treatment standard. The advocates of stronger regulation were caught off guard because EPA had already issued a preliminary version of the rule in December 1989 that enunciated the more stringent level of protection. Six months later, after lots of meetings with industry lobbyists and lawyers, EPA reversed itself.

"Between the proposal and the final rule, there was no significant new information," an EPA staff professional said. "It was basically a case of EPA management becoming more nervous about what they'd done."

Geraldine Cox, a vice-president of the Chemical Manufacturers Association, described the industry as "very upset," and therefore it mobilized. "We agree with the objectives of the law, " she said, "but we will fight very hard if we think something doesn't make sense."

Environmental regulation often doesn't make sense to chemical companies. "In these matters," Cox said, "there's an awful lot of chasing angels to see how many can dance on the head of a pin. But, if that's what the public wants us to do, we will do it."

A delegation of six lobbyists and experts from the Chemical Manufacturers Association and the American Petroleum Institute first called EPA in October 1989 to open the argument for abandoning the best-treatment standard, even though CMA had just lost a court suit on the same issue. Then another group from CMA came back two weeks later. "CMA believes that EPA can interpret that dilution is permissible for characteristics," according to an EPA official's notes of the meeting. [9]

In early December, experts from CMA, Monsanto and CYRO Industries came in to plead for speedy action on exemptions for fifty-four deep wells that industry claimed would pose no risk of migrating chemicals. J. T. Smith, senior partner at Covington & Burling, a premier Washington law firm, rang up with his own legal interpretations on behalf of CMA. Dow, DuPont, Monsanto and other CMA representatives met again with EPA in mid-January to suggest rules changes for granting the exemptions.

BP Chemicals arranged a teleconference in which it informed EPA staff professionals that its Lima, Ohio, plant would be closed if it received no exemption by the time the new regulation was made final. Vulcan Materials delivered the same message about its Wichita, Kansas, plant.

Many of the same companies appeared once again in early February, accompanied by CMA lawyers, to warn again about the potential economic consequences of a tough standard. ARCO Chemical wrote that its plant at Channelview, Texas, would curtail production in May if its injection wells were not exempted. The plant, ARCO explained, produced waste volume of 142 million gallons a year from the production of propylene oxide and styrene monomer -- various waste streams that were highly corrosive. Celanese, Cyanamid, Du Pont and Monsanto provided similar data and warnings on six other southwestern plants.

Beyond the familiar tactic of economic blackmail, there is a deeper point for democracy: the question of power. Who has the power to decide when industry will make these changes -- the companies or the government? The corporations naturally wish to retain that power for themselves and, in this case, they succeeded.

Most of the lobbyists' meetings were held with EPA division chiefs, middle-level staff technicians and agency lawyers, who mostly listened as the industry experts advanced legal interpretations meant to intimidate. "We were attacked. on a technical basis -- the kind of case they felt they could make in a lawsuit if we didn't yield," the EPA professional said. "Industry argued there would be huge costs if we went forward with the proposed rule. Depending on who you listened to, it was the end of the world."

By late March, industry had evidently won its point. The dialogue was taken to a higher political plane by E. P. Blanchard, vice-chairman of Du Pont's board of directors, who wrote directly to Henry Habicht, EPA deputy administrator and the official who would ultimately decide the matter.

Blanchard wrote: "We ... understand you are contemplating revisions to the agency's so- called Third-Third land disposal proposal to provide relief for underground injection facilities. We applaud and support your efforts to resolve our May 8 difficulties and encourage you to revise the Third-Third final rule." Copies were sent to four EPA division chiefs, Habicht's subordinates.

Some of the corporate pleadings invoked a threat of political fallout if EPA did not fold. Dow Chemical representatives told EPA in April that "they felt compelled to advise Congress that, if finalized, this standard would be very expensive, environmentally counterproductive, and impossible to meet on May 9 or in the foreseeable future." CMA's lobbyists informed EPA staff professionals that they were "likely to raise their concerns to senior Agency management and with Hill staff."

A few weeks after Earth Day 1990, EPA announced its final regulation, which attempted to straddle the argument with half-pregnant logic. The agency claimed the legal authority to impose a higher standard involving best-available-treatment technology, but said it was choosing not to do so in this instance because it lacked sufficient data to justify the tougher rule. In the abstract legal argument, EPA was siding with the environmentalists. In practical terms, it was giving industry what it wanted. EPA, simultaneously, was issuing lots of exemptions for the companies' deep-well injection sites.

The administrative record, typically, is silent on the question of outside political intervention, though EPA staff professionals felt certain that somewhere along the line the White House had added its voice to the case made by industry advocates.

"My understanding," an EPA professional said, "is that there was a lot of back-channel traffic, calls to the White House and to the agency management at every level. I can't prove that because nothing like that is ever said. But we were getting a barrage of questions from EPA management that was almost identical to the questions industry was asking us. When I pushed the management for rational explanations -- why are we changing this? -- they said: 'Listen, this is the way we're going to do it. We've changed our minds.'"

The political overtones seemed "pretty blatant" to Richard Fortuna of the Hazardous Waste Treatment Council, though he had no direct proof either. Three different firms that were members of the treatment council, he said, reported that oil companies had planned to buy equipment for pretreatment and reclamation of their hazardous wastes in anticipation of the new regulation -- then they abruptly canceled the orders before the final rule was announced.

"These guys were on the verge of signing contracts and they were suddenly canceled," Fortuna said. "Our salesmen were being told the same thing by a variety of clients. The oil guys said, 'Hey, Sununu went in and got us a break.'"

Whether or not John H. Sununu, the White House chief of staff, or other presidential aides personally intervened in support of the industry's case could not be determined, but that is not the larger point, in any case. The RCRA episode demonstrates, in up-to-date fashion, that the law remains vulnerable to powerful manipulation -- despite the best efforts of congressional reformers to stymie irregular intervention. The "hammer" provisions, invented as the remedy to political manipulation, had proved as vulnerable as earlier legislative commandments.

Richard Fortuna despaired over the implications, though he believed a stronger standard would eventually win in court. As a congressional aide in the early 1980s, Fortuna had spent years on the RCRA legislation and helped draft the "hammer" provisions meant to insure the law's faithful execution. Now it was clear that even this device could be defeated by Executive Branch politics.

"There are ninety-nine ways to lose and only one way to win -- the final rule on hazardous wastes has every form of capitulation to every political interest imaginable," Fortuna said. "Basically, what they've done is gut the whole RCRA program because it's very easy to dilute hazardous wastes or switch the wastes to another category with easier treatment requirements. I hate to say that about something I've spent a decade of my life on, but I really think it's that serious.

"What EPA and industry are counting on is that this issue is a little too complex and people won't get it, even Congress. They're figuring that the combination of Earth Day and an 'environmental president' will let them slide by. But they can't get away with this. Sooner or later, people will figure out what's been done and fight back. In the meantime, huge quantities of hazardous wastes are going to be dumped under these easier rules."
Site Admin
Posts: 34633
Joined: Thu Aug 01, 2013 5:21 am


Return to Political Science

Who is online

Users browsing this forum: No registered users and 1 guest