The inference to which we are brought is, that the CAUSES of faction cannot be removed, and that relief is only to be sought in the means of controlling its EFFECTS.
THE FEDERALIST NO. 10 (James Madison)
Systemic, institutional, or “type 2” lawful political corruption is a serious problem. It misallocates resources, undermines trust in government, and contributes to the growing gap between the rich and the poor. Systemic corruption occurs when political representatives routinely face options that advance their own interests at the expense of the public, and for which there is little or no personal or political risk. Many Americans are contemptuous of politicians because they appear to be for sale. People distrust Congress in particular. Why is this and what can we do about it?
It is difficult to avoid the suspicion that there is something wrong with the structure of government. After all, the constitutional design ratified in 1788 is largely unchanged. The natural inclination of elected officials to serve their own interests at the expense of the public interest probably has changed little over the years. Politicians have always been seen as rascals. The Madisonian system was once widely admired but now seems to be failing us. If corruption is a more serious problem today than in the past, perhaps it is because Madisonian democracy is less effective at containing it.
James Madison and his colleagues were well aware of the problem of corruption. They understood that elected officials face an unavoidable conflict of interest between the public welfare and their own careers. The Framers also had a realistic view of how interest groups affect government policy. It was, and remains, perfectly obvious that if there is an organization that has the power to grant benefits to one group of citizens at the expense of others, members of each group will want to influence that organization’s policies. It is not shocking that interest groups matter in policy making. Any form of government, when compared with the alternative of Hobbesian dystopia, requires the support of elite interests to which the Hobbesian alternative appears only somewhat less attractive. Such elites require ongoing favorable treatment by the government.
Madison addressed the problem of “faction” (interest groups) in The Federalist No. 10. He recognized that powerful factions could influence political outcomes in unhealthy ways, including repression of the interests of less powerful or less well organized, but possibly more numerous, citizens. He argued that a strong central government would be better able to control such factions (as compared to individual states) because the number of competing interests would be greater at the national level. Madison also held that the separation of powers, the ability of citizens to discipline political misbehavior through frequent elections, and the limited scope of government itself would help to suppress corruption.
Successful candidates for congressional seats have some combination of the following characteristics: expertise in campaign strategy and operations, high levels of name recognition, sufficient funding to purchase advertising and other campaign resources, local support groups (e.g., parties or interests) willing to help with canvassing, and positions on high-salience issues that are consistent with those of a majority of voters in the primary and general elections. Equally important, of course, is the failure of rival candidate(s) to have these same characteristics in greater measure. Discussions of the importance of money in politics often seem to assume that money is the only thing that matters. Not true. However, it is useful to assume, for the sake of discussion, that all the candidates do the best they can to run an effective campaign, given the money and related support that they command. In that context, money and the resources it can buy makes all the difference between winning and losing.
Campaign donors (or “independent” supporters) can help a candidate by giving or spending money for the candidate, or by not giving or spending money in support of rival candidates.An interest group can influence a candidate or an incumbent seeking reelection without spending a penny in support of that candidate simply by supporting or threatening to support the rival candidate.
Unfortunately, in practice, elections do not effectively discipline systemic corruption. Candidates require several attributes to succeed, but one is indispensable: money. Voters are not inclined to try to assess candidates’ contributions to public well-being. The task is beyond the capability of any voter, however well-informed or diligent. Moreover, elections are biased in favor of the same powerful interests that corrupt legislation because these interests also finance campaign advertising.
It is good that elected officials are responsive to interest groups. That is why the First Amendment has its Petition Clause. However, both legislation and the administration of interventions are vulnerable to corruption because important interests are unable to participate in the process; those interests are diffused, difficult to organize, or lack the resources to invest in political action. Further, neither the judiciary nor the President is in the business of blocking corrupted, welfare-reducing legislation. Finally, most corrupted legislation is obscure, hidden in important unrelated bills, and devoid of interest to the media and media audiences. The canonical checks and balances simply do not work in stemming non-salient, welfare-reducing, and redistributive legislation and regulation.
A major purpose of any democratic government is to provide an arena in which interest groups can reach peaceful solutions to conflicts. The constitutional regulation of this struggle in a Madisonian democracy consists in defining and protecting certain minority rights that the government may not sacrifice to majority demands. Madisonian minority protections are general purpose: they protect not only disadvantaged or unpopular interests but also very powerful minorities with ample resources to influence government policy. Because of these protections, we cannot regulate interest groups and their influence on legislation except through elections or pushback from the other two branches. Regulation that is more direct tends to invade foundational rights that serve important general constitutional purposes.
Systemic political corruption is costlier today than in 1788 because the substantive jurisdiction of the federal government is no longer limited. Washington now regulates nearly every form of human interaction, economic and social. This provides a virtually unlimited menu of opportunities for elite interests and political representatives to design mutually beneficial interventions, the cost of which is borne mostly by the non-elite. Consequently, government often sacrifices the welfare of the poor, the middle class, and perhaps even the elite as a class, to individual elite interests. Not only is the elite share of the pie increased, but also the process shrinks the size of the pie. In the end, everyone may be worse off.
The usual suggestions for reform of the system include tinkering with election or lobbying practices. These are not likely to be successful because they do little to redress the imbalance of interests that contributes to corruption. As the epigraphic quotation from Madison’s The Federalist No. 10 suggests, when reform of the process is not feasible, we must turn our attention to policing the effects.
When the frequent effect of legislation or regulation is to make the people as a whole worse off, or to make each faction of the elite better off at the expense of everyone else, the democratic process has either erred or failed.3 There is good reason to veto such law and regulation because better alternatives (among them the status quo) always exist. The reality is that the rival branches are unmoved by welfare-reducing legislation or regulation, and elections are ineffective in penalizing lawful corruption. A different institution or branch therefore must provide a remedy in the form of effective checks and balances to protect the general welfare. This Essay proposes a general solution and, for clarity, a concrete illustration of how to do that.
Many political philosophers (with such notable exceptions as Plato) have endorsed democracy as a superior method of governance. Winston Churchill rather glibly characterized democracy as a terrible system but better than the alternatives.4 A democracy is a society governed by the will of its people. A people’s will is slippery, vague, fickle and ephemeral. It may be more realistic to say that democracy is a society governed by whatever voters will put up with. What matters to people, of course, is what has always mattered: well-being and justice, or as the Framers put it, life, liberty, and the capacity to pursue happiness. A democracy can claim to be “best” only to the extent that it delivers on these objectives.
“All political systems are prone to decay over time.”5 Constitutions can be social contracts or peace treaties among contending interests. Nevertheless, if the legitimacy of a constitution rests on the will of the People, and if the People’s will is inconstant, it follows that the constitution (or at least its interpretation) must also change. America’s Madisonian democracy is no exception. Shortly after the 1787 publication of the proposed new Constitution, Thomas Jefferson expressed the view that the preservation of liberty might require a bloody revolution in each generation and thus a new Constitution.6 However, violent change has obvious costs and offers no assurance that the well-being of the People will improve. Plenty of revolutions have produced bad outcomes for the people: Russia in 1917 is a good example.
One reason to modify a democratic constitution is to reduce the costs of political corruption. Corrupt law, including administrative rules and procedures, reduces aggregate well-being, or produces regressive redistribution, or both. Political corruption encompasses far more than criminal acts of bribery or extortion.7 It includes other, lawful, behavior that undermines public trust in government. Peter H. Schuck performed a massive review of the literature reporting cost-benefit analyses of major government programs. He found that most programs fail to achieve their supporters’ announced objectives. One possible explanation is that government usually is incompetent. Another is that supporters actually sought altogether different objectives than those announced.8 In the presence of systemic political corruption, one would expect to find elite interests (and the politicians they support) disguising their true intent.
Systemic political corruption is widely acknowledged as a serious problem. Such corruption often impairs efficient production and allocation of goods and services, shrinking the pie. Corruption also often violates consensus principles of equity. Reduced economic efficiency shrinks (or fails to expand) aggregate well-being.9 Following John Rawls, consensus principles of equity require, at a minimum, avoiding policies that reduce the wellbeing of the least favored citizens.10 Corruption of this variety, rather than less common bribery or extortion, is the subject of this Essay. Bluntly, laws and regulations that reduce aggregate well-being or that reduce the wellbeing of the poor are either honest errors or the results of corrupt influence. In any case, they should be avoided or repealed.
Dominant interests that achieve and preserve advantages through corrupting influence each have narrow objectives involving a single political or policy issue. A particular interest may seek a tax concession, an import duty, a regulation increasing rivals’ costs, or a national defense project for which they hope to supply goods and services. Each successful elite interest may affect aggregate well-being only slightly. Nevertheless, the process is ongoing and the aggregate effect is cumulative, and potentially very large.
Even a successful, dominant interest group must protect itself from rivals through continuing expenditures on lobbyists and campaign support. The process is dynamic—a banquet for politicians, lobbyists, and contributors that goes on 24/365, like a free buffet at a Las Vegas casino. In addition, even though each successful interest increases its share of the pie at the expense of other interests, the political process as a whole may result in every interest, strong and weak alike, ending up worse off in absolute terms. The resulting distribution of well-being may be one that even the winners find unattractive.11
Bribery of public officials is commonplace around the world and not uncommon in America.12 The cost of such corruption includes criminal theft or waste of tax revenues and other state resources. A greater cost in many countries is the reduction of private incentives to work, save and invest that stem from expectations of corrupt expropriation. However, many forms of corruption are lawful. Anything that causes a systemic, predictable divergence between the interest of the People and the interests of public officials, who are the agents of the People, gives rise to corruption, lawful though it may be.13
Corruption costs also arise from the adverse impact of hundreds of regulatory interventions that impair the efficiency of production and of markets. Many reflect agency compromises among warring elites, reached without regard for the cost imposed on the public. Major costs result from pervasive distortions in the tax system,14 and legislature-influenced federal procurement decisions.15
The more extensive the reach of government regulation of private economic activity, the greater the burden of corruption on the economy as a whole. Madison did not create a structure with this danger in mind. As a result, there is no institution in today’s government that effectively restrains impositions on economic efficiency or distributional equity resulting from Congress’s and agencies’ responsiveness to well-organized interests—and their neglect of adverse effects on ill-organized interests. Within Washington, the process is taken for granted: it is business as usual, the way things are done.
Madison defended the new Constitution in The Federalist No.10 partly on the basis that a larger and more diverse republic would diffuse the power of interest groups (“factions”) that, in a single state or region, might constitute an oppressive majority. The formation of a larger federal government might render such factions harmless by reducing them to minorities. Madison saw this mitigation of the effects of faction as far superior to attempting to regulate faction directly, for example, by restricting freedoms of speech, press, assembly and so on. The Federalist No. 10 foresees what I am calling systemic political corruption as inevitable, and claims that a strong but limited central government is preferable to individual state governments because factional competition will be more robust in the larger arena.16
It is clear that the increased number and variety of competing factions, which the Federalists insisted would result from a stronger national government, have not forestalled corrupting factionalism.17 Factions are issue-oriented; only the organized factions directly concerned affect policy on a given issue. They do not face pushback from other elite interests concerned with different issues. Perhaps local or regional factions do face greater difficulties in the federal system than they do in dealing with the states, but they have logrolling as a work-around. Moreover, a strong central government encourages the formation of national factions. In any event, the ratification of the Constitution has not prevented political corruption.
A republican or representative structure is a key feature of Madisonian democracy. This feature relies on an “agency” relationship between elected representatives and the voters.18 All types of political corruption reflect an agency failure: a government official sacrifices the public welfare to advance a personal or political agenda. In the Madisonian system, representatives are agents of the People acting in the People’s interest; we rely on elections to produce trustworthy representatives who seek to advance constitutional objectives.19
“Agency” in economics refers to the relationship between a supplier of services and users of those services. Individuals and firms deal with suppliers of goods and services when it is not efficient to produce their own. Although all suppliers can be thought of as agents, suppliers assume an important agency character when, due to information or skill asymmetry, supplier performance cannot easily be monitored by those who rely on the service. This condition may prevail even when users regularly consume the product or service if, for example, readily comparable alternatives do not exist, or some effects on happiness (or profit, in the case of firms) are delayed, occult, or situational. The production of law has this character.
Agency in this economic sense is fundamental to the division of labor that permits scarce resources to be employed more efficiently than would be the case in a world of autonomous individuals. Absent reliance on specialists, which is avoided when agents are seen as untrustworthy; humans would not have progressed much beyond hunting and gathering in small family groups.20 Cooperation among individuals, backed by social and cultural institutions, particularly law, is in constant tension with instinctive human self-interest.
In fact, there exists what may be a metaphor, an analogy, or perhaps even a deep biological connection between this agency tension and the tensions among the specialized cells of all multicellular livings things, including humans. Specialized cells sacrifice themselves to the benefit of the organism because doing so provides benefits from the division of labor and economies of scope, more than repaying the sacrifice. This achievement requires multiple dimensions of protection from cells that would cheat or “free ride” on the cooperative behavior of others, damaging the organism in the process. When these protections fail, the organism suffers from cancer.21 Similarly, when human agents with political power cheat, the social organism to which they belong is corrupted, injuring many or potentially all other members of society.22
Legislators who advance the interests of those who, even tacitly, are necessary to reelection or career advancement are in essence soliciting and accepting bribes, even though the form of the exchange is lawful. It is an indictment of the system as a whole that modern public officials may have no choice. That is, support from one or more powerful interest usually is necessary to election and reelection. As Senator Robert Byrd explained on the Senate floor, “[I]t is money! Money! Money! Not ideas, nor principles, but money that reigns supreme in American politics.”23
Although elections are competitions, they would not guarantee the performance of elected representatives even if the campaign finance system did not corrupt the contests. Voters are “rationally ignorant” of most aspects of their political agents’ performance, especially non-salient legislation and administrative rule making.24 For some citizens voting participation stems in large part from impulse and emotion, motivated by a desire for self-validation. Indeed, many citizens who did not vote in recent elections (but share demographic characteristics with those who did) tend to report falsely in survey responses that they voted.25
electioneering and voting are not exercises in public policy analysis. Voting certainly is not based, and these days could not possibly be based, on well-informed voter assessment of the contribution of incumbents either to local or national well-being. Relative advertising expenditures and simple name recognition strongly influence election outcomes, along with the attitudes predominant in each voter’s immediate social network. A handful of high-salience policy issues dominate the media and influence debate. Changes in attitudes among political elites precede corresponding changes in the electorate. The process that produces elected officials is in many respects identical to the process that produces legislation—that is, a struggle among interest groups—and both are subject to political corruption by elite interests. The major virtue of elections is the absence of superior alternatives, just as Churchill suggested.
The existing Madisonian separation of powers and checks and balances are not effective safeguards against corruption because both the President and the judiciary are disinclined to oppose welfare-reducing legislation.26 Lack of line-item veto power and a need to maintain workable relationships with legislators limits what the President can do. The courts typically avoid substantive review of welfare consequences of legislation and regulation, legal realism notwithstanding.27
Current practice relies on a corrupted institution (elections) and ineffective intramural branch rivalry to discipline a corrupted legislative system. This is rather like relying on the deterrent effect of the criminal law of arson as the sole remedy for house fires. Smoke alarms and firefighters are useful supplements to arson laws. A central theme of this Essay is that mechanisms to reduce the costs of political corruption should focus on examination of the welfare impact of legislation itself rather than on the political, or electoral processes, or motives that led to enactment. In addition to interdicting welfare- or equity-reducing laws directly, interdiction of welfare-reducing law will tend to reduce the incentive for interests and legislators to engage in political corruption.
Corruption is seldom addressed today from a Madisonian perspective. By “Madisonian” I mean the idea of using organizational structure to discipline political action—for example, dividing constitutional responsibilities among rivalrous institutions to achieve a “separation of powers”28 or recognizing that sometimes controlling effects is better than regulating causative processes.29 Intramural rivalry among the branches reflects the trope common to the economic competition that disciplines markets, political competition among rival candidates, and sporting events.
There has been a century-long expansion of central government jurisdiction in the United States. Changing political and policy preferences on the demand side and changing technologies, economic conditions, and political incentives on the supply side, may help to explain the expansion. In any event, I take the expansion as given in order to explore from an economic perspective the roots of political corruption and potential remedies for the modern proliferation of corrupt legislation and regulation. The objective is to explore possible Madisonian structural remedies as alternatives to, or at least as ways to postpone, a potentially radical Jeffersonian reboot.
Parts 2-6 of this Essay chiefly summarize existing literature and understanding. Part 3 describes the problem of lawful systemic or institutional political corruption in detail, explaining its role in reducing public wellbeing and distributive justice. My focus is on legislation that is non-salient and hence inaccessible to public scrutiny via the media or otherwise. Part 4 reviews the relevant objectives of government as described by the Framers of the Constitution. This step is antecedent to measuring the performance of Madisonian governance and a predicate to designing remedies for poor performance. Part 5 reviews a variety of commonly discussed remedies for systemic corruption. I conclude that most are ineffective or impracticable.
Part 6 explores the concept of quality control in organizations and specifically the role of “umpires” in sports and politics. I conclude that the addition of a quality-control umpire to the Madisonian branches would improve the performance of government by reducing the impact of lawful corruption both directly and through changed incentives. I also explore historical precedents and practical impediments. Part 7 provides some illustrative details of an umpire function, formulated as an Amendment, and Part 8 comments briefly on feasibility of the proposed approach to stemming welfare-reducing corruption.
III Lawful corruption
Just two weeks after pleading guilty in a major federal fraud case, Amgen, the world’s largest biotechnology firm, scored a largely unnoticed coup on Capitol Hill: Lawmakers inserted a paragraph into the “fiscal cliff” bill that did not mention the company by name but strongly favored one of its drugs. The language buried in Section 632 of the law delays a set of Medicare price restraints on a class of drugs that includes Sensipar, a lucrative Amgen pill used by kidney dialysis patients.31
Similarly, Igan and Mishra trace much of the blame for the 2008 financial collapse on political corruption in Washington.32 Lessig,33 Kaiser, 34 and many others, offer numerous examples of such lawful corruption and their political and personal motivations.35
Proof that lawful corruption is rife in Washington relies largely on remembered personal experiences of former officials, lobbyists, and lawyers, and often takes the form of anecdotes. However, scholars using modern empirical methods have begun to trace such bad effects of corruption as trade barriers to their sources in corrupting interest group influences.
The most straightforward way to document political corruption is in connection with international trade barriers. Tariffs and quotas imposed on imported goods nearly always reduce welfare; they increase prices and restrict supply, reducing the well-being of both commercial customers and consumers. This is true whether or not foreign governments subsidize the imported goods. The beneficiaries of trade barriers are domestic suppliers of goods that face import competition. To illustrate, consider solar panels, which convert sunshine into clean electricity.
The price of solar panels helps determine how much we can reduce air pollution emitted by conventional coal-fired power plants. In addition to contributing to the problem of global warming, conventional power plants have serious adverse effects on human health. Lower prices for solar panels means less air pollution, as consumers and businesses adopt solar power for their daytime needs. United States policy has been to encourage use of alternative (non-coal) power sources. The federal government and many states subsidize investments in solar power installations. So why would the federal government impose tariffs on solar panels imported from China, which has the world’s largest and most efficient solar panel factories?
Late in 2014, the U.S. government imposed heavy tariffs on Chinese solar panels and their components.36 The tariffs, equivalent to sales taxes, range from about twenty-five to more than seventy percent, are intended to help domestic manufacturers compete with Chinese makers. The result is to increase prices paid by consumers and the profits made by U.S. manufacturers. U.S. producers are less efficient than suppliers in China and several other Asian countries. Higher prices for the panels make U.S. customers less likely to install solar panels, which reduces jobs related to panel installation and maintenance. Further, the tariffs make the environment unhealthier for U.S. citizens, increasing health care costs and reducing life expectancies. These effects are the same as those that would result from a criminal conspiracy among solar panel producers to fix prices. Executives and companies who did that would face jail time, fines, and expensive lawsuits. Fortunately for them, the U.S. government accomplished the same result, reducing the “general welfare.” Consumers were not so lucky.
Trade barriers in general are unambiguous injuries to the general welfare; they result from political corruption. Domestic industries (and their labor unions) seek trade barriers by making campaign donations or independent expenditures to benefit Members of Congress. They also spend money to hire effective lobbyists, often former Members and senior committee staff. Protection of domestic industries is almost literally for sale. So-called “big data” and advanced econometric methods have documented these links.37 Consumers who pay the price increases and suffer the other effects of trade barriers have no effective voice in the political process that results from such systemic corruption.
Corruption has always been a camp follower of political power. Its modern form is imbalanced pluralism. Schattschneider called modern governance “pluralist” because legislative outcomes reflect the interplay of various interest groups.38 Pluralism involves political effort by such well-represented interests as regulated industries and professions (today, virtually all industries and professions) and passionate factions (the gun lobby, AARP, environmentalists). However, pluralism in practice omits unorganized and ill-represented interests such as citizens in their roles as consumers, nonunion workers, small investors, patients and so on. This lack of balance is corrupting because among the outcomes is a reduction in public welfare, at the expense of everyone, but especially absent interests. “If you are not at the table, you’re on the menu.”39
Politics is useful because it addresses conflicts among contending interests without resort to costly and risky violence. Under benign political leadership, these conflicts can be resolved peacefully and often in a way that increases aggregate welfare. But especially now that the scope of government extends to every aspect of our daily lives, corruption has become a more serious threat to prosperity and political stability. The pluralist competition is imbalanced and so are its outcomes. Unless a Madisonian check or balance intervenes, welfare-reducing outcomes are likely to prevail. This undermines in the most fundamental way not merely the performance but also the legitimacy40 of representative democracy.
Public choice theory
The “public choice” literature in economics and political science explores the supply and demand for legislative action and related subjects.41 Like all economic models—indeed, all scientific models, public choice (and its subfield of “constitutional economics”) makes simplifying assumptions. The public choice literature typically assumes that voters and officials are “rational actors,” and often emphasizes economic efficiency while sometimes neglecting income distribution. Critics decry normative conclusions that rely on such assumptions.42
Public choice models predict that Madisonian democracy will be corrupted through the influence of powerful interest groups on the electoral process, just as the Framers feared. Zywicki provides a succinct recent summary of the argument, including several real world examples of such political corruption.43 Public choice theories are attractive to those inclined to libertarian or objectivist views because the theories appear to suggest that “big government” reduces public welfare. Moreover, the logic of public choice undermines the legitimacy of Madisonian democracy because it traces ultimate political power to prevailing interest groups rather than to the people, given the influence of elites on election outcomes.
A common criticism of public choice theory is its neglect of “irrational” behavior. Attributes of honor, morality, and self-regard seem to contradict, or at least undermine, the narrowly defined concept of rationality that forms the basis for the theory. This criticism is vulnerable to empirical evidence that the political system in fact behaves as if its participants were rational actors in the sense relevant to public choice predictions. Such evidence is rife.
A less common criticism is that public choice theory generally neglects solutions other than reducing the size of government. That the extent of government will grow and continue to grow is a prediction of public choice theory itself, making it unlikely that even a heroic one-time rollback of government programs and regulations would create a permanent solution to the problem. A different and more effective solution is to change the structure of the political process that produces welfare losses as unintended byproducts of successful elite influence. It may not be practical to eliminate the political process in which interests compete for shares of the pie. But not all increases in elite shares necessarily come at the expense of the poor or have the effect of reducing the size of the pie. Public choice theory would serve us better if it focused on reforms that have the effect of restricting the set of permitted redistributions to those that do not reduce the welfare of the least well off. This Essay offers an example of such a reform.
Significant expansion of central government jurisdictions and interventions in America began in the Progressive era (roughly 1880-1920), partly in response to demands by organized interests and official desire to create and protect continuing streams of political support. The latter seems to have been an awakening of political entrepreneurship and innovation. National elites found it convenient to substitute federal for state-by-state political influence. Expansions also arose from popular—often populist—demands for protection against “unfair” behavior by others or from various perceived risks to well-being. It was in this era that the modern party system emerged in an ultimately futile attempt to increase electoral accountability. The Great Depression later cemented Americans’ sense of reliance on big government.
Expansion of the federal jurisdiction produces “interventions”—most often, regulatory regimes. Interventions of course can mitigate market and other imperfections in human interactions and thus increase aggregate wellbeing. That is the point, for example, of criminal and civil justice systems.
Nevertheless, interventions intended to remedy even undisputed imperfections (air pollution, to take one example) are subject to corrupt design and implementation. Popular interventions often evolve to serve elite interests by distorting markets and behavior, usually at the expense of ill-organized interests. The greater the number and reach of regulatory interventions, the greater the range of continuing opportunities for political corruption, in which one or more elite interest is serviced at the expense of other, less effective interests. Eventually these effects accumulate to slow or stop the improvement in well-being that results from economic growth and technological change.
When progress slows or stops, public discontent is inevitable. Americans have expectations of increasing prosperity. Such expectations may be out of reach in any case, but today widespread discussion of substantial and growing inequality44 reinforces discontent. While there are many explanations of growing inequality, corruption of political institutions is prominent among them.
“The dramatic rise in U.S. wage inequality since the 1970s has been well documented.”45 According to Joseph Stiglitz, “[r]eal U.S. wages have stagnated for decades. Adjusted for inflation, average hourly earnings of production and nonsupervisory employees have decreased some 30 percent since 1990. More dramatic, … the aggregate share of labor excluding the top 1% compensation … has slid from just under 80% to around 60%.”46
There can hardly be a tavern in America where one can provoke an argument by claiming that all politicians are crooks.47 As the burden of corruption grows, those with poorly represented interests find themselves increasingly frustrated, powerless, open to demagoguery, and attracted to the attentions of opportunistic politicians at all extremes. Politicians that are more centrist often jump on the resulting bandwagon. This process tends to produce additional interventions, each of which presents a continuing stream of opportunities for officials to reward elites within programs characterized and even intended as remedial.The process is a negative-sum game that, unchecked, may eventually have an unhappy Jeffersonian ending.48
The Framers of the American Constitution were familiar with corruption, which permeated the 18th century British parliament and the monarchy. Partly in response, the Framers designed a small federal government with limited powers, which necessarily operated with the available technologies of 1787. That design is no longer adequate to constrain corruption of public officials or to make their incentives reasonably compatible with the interests of the People. What has changed is not necessarily the inclination of a typical elected official to seek private objectives at the expense of aggregate well-being. Instead, that inclination is now presented with a much wider set of opportunities, often embedded in politically legitimate responses to public needs or demands. Specifically, ongoing regulation of any economic or social activity by an administrative bureaucracy creates a fulcrum of interest group leverage. Leverage is exercised directly on the political appointees that head the agency and on career bureaucrats and is traceable in most cases to members of congressional committees.49
Before discussing remedies for these problems we need to agree on the purposes of government and to understand James Madison’s constitutional design and its objectives. In considering remedies for systemic corruption our focus must be on the performance of constitutional structures in achieving the Framers’ (and the People’s) key objectives, which remain largely uncontroversial.
IV The Framers’ objectives
We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America.51
We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. —That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, —That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.52 Key ideas in the Declaration of Independence and the Preamble still appear in the speeches of modern politicians, but they have become ritualistic. It is clear enough how Madison’s Constitution served the ends of life and liberty by creating specific personal rights against the government.53 More important for present purposes, the Preamble says, in different words, the same thing as the quoted paragraph from the Declaration, that the general welfare of the People—their capacity to achieve happiness—should be a primary objective of government, no less fundamental than protection of life and liberty.
The Framers accepted the necessity of government itself as protection from Hobbesian dangers and as provider of essential collective services, such as national defense and justice, and for the peaceful resolution of conflicts. While these functions advance the purposes of government, the Framers also saw two related threats—those of tyranny and of corruption. The larger and more powerful the government, and the broader its scope, the greater the extent or threat of tyranny. Moreover, given the inherent self-interest of public officials—even if only for their own careers—government that is more extensive implies a greater burden of corruption.
The Federalists’ Constitution relies on limited government (now abandoned) and on elections to control corruption. The Framers were well aware of the potential shortcomings of voters and elections, but saw no superior alternative. Indeed, it was Federalist doctrine that the People themselves were the only legitimate source of political power. The Constitution produced by the Philadelphia Convention of 1787 relied on ratification by the People for its own legitimacy.54
This objective helps explain Madison’s creation of a central government structure that permits or even encourages “gridlock.”55 In the absence of near unanimity among the interests supporting the branches, each with veto power over the others, the federal government would be prevented from acting quickly or easily.56 The Framers would also have taken as given the technologies of their times, which themselves limited the roles of central government in a vast and growing nation. Madison could hardly have foreseen or imagined the nineteenth century changes that eventually made unlimited central government inevitable, among them national markets, mass production, the limited liability corporation, and revolutions in communication and transportation. Most important, by the twentieth century, for many citizens government had become the natural panacea for all social and economic discontents and the favored vehicle for all social aspirations.
Madison designed federal government structure to minimize the potential cost, in corruption and tyranny, of supplying what were in 1787 considered the essential services of government. He also designed the Constitution to appeal to a majority of ratifiers. By the early twentieth century the Madisonian structure had come under enormous strain. The ratifiers of 1788 were no longer representative of the popular will. Agricultural, industrial, labor, and other easily organized supply-side interests began to demand added central government protections and compensations in adjusting to the new age of mass production and mass media. By the time of the New Deal, such demands had been greatly magnified.
Simultaneously, the federal government became freer to respond to demands for political solutions to economic discontents. Big business had pioneered the development of scientific management and large organizational hierarchies. A professional and reformed civil service, freed of patronage appointments by early in the twentieth century, faster and cheaper communication and transportation, and national media enabled Congress to offer solutions to the problems of organized interests who could produce votes, directly or indirectly. Simply put, central government services could now expand to meet the demand. As the Supreme Court has noted, the federal government today, a century after the Progressive movement, “wields vast power and touches almost every aspect of daily life …”57
Broadly speaking, the expansion of government that began in the Progressive era has been associated not with provision of more effective or extensive liberties, but with the creation and administration of new entitlements. Both liberties and entitlements require administration, as do taxation and procurement. Administration of each of these functions unavoidably implies policies, rules, regulations, and adjudications that directly or indirectly marshal and reallocate resources within the private economy. Administration, whether assigned to independent or executive branch agencies, entails the exercise of discretion. Both agency officials and members of congressional appropriations and oversight committees must choose among options that create and destroy income and wealth.
Participants in the economy and other interests today therefore have enormous incentives and opportunities to influence government policy. Well-funded interest groups wield much of their leverage by influencing policy options selected. Their objectives, broadly, are to advance their own agendas without regard to the impact on other interests or on the economy as a whole. The public choice term for this is “rent seeking.”58 Rent seeking by elite interests is nearly by definition regressively redistributive and reduces aggregate welfare. The name itself derives from the monopoly rents (profits) gained by Stuart, Tudor, and earlier royal favorites who were granted such concessions as the right to collect customs duties at a British port of entry. Elites succeed today by providing elected officials with financial and other support, by foregoing such aid to rival candidates, hiring appointed officials after they leave office, and providing all officials with substantive resources crucial to the legislative or rule-making process. In consequence, of course, organized interests threatened by rivals are obliged to defend themselves in like fashion. The goals of elite interests often are most effectively pursued by inducing public officials to neglect their obligations to the People as a whole. Public officials, meanwhile, can advance their careers as elective officials or appointed regulators, or later as lobbyists, by servicing these interests.59 elected legislators, in fact, may have little choice, even if they hope merely to remain in office, but to promote interests that will support, or at least not oppose, their reelection. In contrast to pre-Depression practice, the Supreme Court no longer resists these expansions of federal jurisdiction and intervention.
The Framers likely perceived the consequences of corruption in a small and limited government as a tolerable cost of doing business. To put it the other way around, limited government meant limited opportunities for corruption. Further, many potentially effective anticorruption measures conflict with constitutional freedoms; Citizens United makes a good example: to reduce corruption in elections we must invade freedom of speech. Nevertheless, what may have seemed a tolerable cost in 1787, relative to aggregate economic activity, has today been greatly inflated by the expanded role of government, and more so as the freedom to petition Congress has become the focus of a large professional class.
[I]t is the Right of the People to alter or to abolish [government], and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.60
V Potential remedies for political corruption
It is useful to begin with proposals to control political corruption that are not especially Madisonian. These are mostly well known and often advocated, but unsatisfactory in various respects.
A Broaden the reach of criminal law
It is tempting to suggest that authors of welfare-reducing legislation, and perhaps even those who vote for such laws, should face criminal penalties. However, the criminal law would be of little help in controlling currently lawful corruption.61 The behavior of legislators is often difficult to categorize. At one extreme, it may be unlawful, for example, frank bribery or extortion.62 At another extreme, it may be unambiguously virtuous— beneficial to constituents or citizens generally and neutral or adverse to the legislator’s personal interest. Legislative behavior commonly reflects
mixed motives and complex interactions with other legislators as well as imperfect information about the effects of the law itself. For this reason, constraints on legislative behavior intended to deter corruption can easily generate false positive or negative errors and adverse welfare consequences. Classifying currently lawful influences and their consequences as crimes is also inadvisable because of the difficulty of proving intent.
B Campaign finance reform
There is a widespread appreciation that campaign contributions, in cash or kind, are a way to buy influence with elected officials or, when offered to a candidate’s opponent, a way to punish officials who oppose the contributor’s aims. Most officials will admit that large contributions buy access— significant contributors typically can easily communicate their views to an elected official, and those views are likely to receive respect. Even legislators not up for reelection benefit from contributions that flow through to party coffers or other candidates because these contributions buy advancement within the party leadership hierarchy. Membership of legislators on relevant appropriation and oversight committees creates channels of influence to executive and agency officials. Access also accompanies the “revolving door” of congressional staff alumni appointed to regulatory commissions and executive agency positions.
This exchange—money for access—is very much like a bribe. Of course, the official generally does not explicitly agree to vote or otherwise act in the donor’s interest. The agreement is tacit. If the official would prefer to act in a way that is at odds with the contributor’s interests, she will take pains to explain why she cannot support the donor’s position. She will strive to find concessions, compromises, or perhaps side payments on unrelated matters. This interaction is very much like explicit bargaining over the price of (continued) political support. However, because the interaction between officials and supporters is a “repeated game,” there is no need for explicit agreement. The large special interest contributor, unlike the typical voter, is able to monitor the representative’s performance of the tacit agreement. The contributor can punish a reneging official by withdrawing support or by supporting the official’s rivals. Threats to do so are highly credible.
Campaign finance is such an obvious source of corruption that many popular reform proposals focus on limiting contributions from special interests. Examples include the reforms associated with Professor Larry Lessig’s brief 2015 campaign for the Democratic presidential nomination and the related “Honest election Seattle” voucher reforms approved by voters on November 3, 2015.63 In Washington, Congress has enacted a variety of limits and reporting requirements on campaign contributions.
Unfortunately, reforms aimed at campaign finance are unlikely to be effective in limiting lawful corruption. First, the reforms enacted so far have been easily evaded by parties, donors and candidates. The most effective work around is the “independent” organizer of campaign support and expenditure. So long as the independent supporter (individual or corporation) does not coordinate directly with the candidate, the First Amendment provides complete protection for unlimited expenditures.
Second, campaign contributions and independent expenditures, while important, are less significant than the relationships between lobbyists and officials. Lobbyists, often alumni of Congress and congressional staffs, are effective because they earn, or have earned, the gratitude and trust of officials. Officials in need of data or arguments in support of their positions often turn to lobbyists for support, including on matters unrelated to a lobbyist’s immediate interests.64 Sometimes committees or Members of Congress hire lobbyists to serve in important staff positions related to the very issues about which they lobbied. Private sector expenditures on lobbying are many times greater than campaign contributions.65 The relationships between helpful lobbyists and officials generate feelings of gratitude that make officials reluctant to decline support for the lobbyist’s clients.66
On the other hand, the logic of representative government relies on representatives having accurate information about the problems and preferences of the electorate. Direct communication between citizens, their organizations, and representatives is an important means of acquiring such information. Indeed, the Petition Clause of the First Amendment protects such communication. Yet such protected communications, accompanied by support of the candidate for election or re-election, appears to have the same consequence as a cash bribe.
The Supreme Court faced one facet of the problem in Citizens United, which focused on “independent” campaign expenditures in support of a candidate, as opposed to contributions made directly to a candidate. The Court had previously upheld most statutory limitations on direct contributions as well as reporting requirements. In Citizens United, the Court had to balance the public’s interest in clean politics against the First Amendment freedoms to speak and to petition Congress.
The Court’s exceedingly narrow definition of corruption as common bribery informed its decision. The Court evaded the real question posed by corporate expenditure in the context of systemic faction-based political corruption.67 Most constitutional scholars object to the Court’s definition of corruption, or at least to the Court’s originalist argument for the definition. Nevertheless, it is difficult to fault the Court for its choice to promote free expression at the necessary expense of corruption—corruption that, in any case, would not be much reduced by regulation of political spending.
Notoriously, candidates and contributors have evaded or avoided a succession of attempts to limit direct campaign contributions. There is usually a lawful way around any regulatory constraint, albeit generally at some cost. Given that the very politicians targeted by the regulations draft the regulations, any other result would be surprising.68
Campaign finance reform, even if it “succeeded,” would not solve the problem posed by political representatives whose incentives are at odds with the interests of the People. Well-organized and well-financed interests would still be able to influence officials. Given the Framers’ choice to promote access to legislators and their reliance on elections, combined with the inherent ambiguity of political motivation, campaign finance reform appears futile as a remedy for systemic corruption.
C Tighten regulation of lobbying
Although statutes require Washington lobbyists to register, identify clients, and report contributions, there is little chance that such regulation has or will reduce corrupted legislation. After all, the First Amendment encourages lobbying. If lobbying were effectively ended, isolated elected officials would have less information about legitimate (welfare-enhancing) legislation and legislative debate would be less well informed. Moreover, restrictions on access by current lobbyists do not address the underlying problem, which is that important unorganized interests lack the means to hire professional lobbyists. In other words, lobbying is not the problem; the problem is imbalanced lobbying. It is unclear, however, how to define or achieve “balanced” lobbying. Regulation cannot make lobbying more balanced. Once again, as with campaign finance, it appears futile to rely on reforms aimed at decreasing the effectiveness or imbalances of lobbying as a means to improve legislative outcomes.
D Congressional reform
Congressional reform could be a path to mitigate corrupt legislation. On several occasions, Congress has found the means to impose discipline upon itself and its members. For example, a legislative branch agency, the Congressional Budget Office (CBO), “scores” proposed legislation with respect to impact on budget deficits. Members of Congress generally accept the result as an authoritative bipartisan constraint on deficit spending. Another reform permits a suspension of normal procedure for trade bills, the so-called “fasttrack” for ratification of trade agreements. Similarly, the Base Closing Commission (BCC) reviews proposed retirements of domestic military facilities. The BCC produces a list of recommended closings, and the Congress votes on the package as a whole, rather than on individual closings.
Finally, both houses of Congress have rules restricting non germane amendments to bills on the floor and restrictions on so-called “earmarked” bills proposed by individual legislators. Nevertheless, these rules are not effective. Corrupt bills often become law by riding the coattails of “vetoproof” spending bills in the form of non-germane amendments or line items inserted in committee or in conference.
The problem with many, perhaps all, congressional reforms is that Congress cannot bind itself to follow its own rules next week, much less bind future Congresses. The most recent law on a given matter always trumps preceding laws. Moreover, majority party leaders can decide with impunity to ignore congressional rules simply by suspending them. No branch, court, or police agency can intervene; for example, party leaders are in continuing negotiations with members of their caucuses to gain support for legislation that advances party objectives. A crucial bargaining tool in the negotiations is the leaders’ ability to include bills favored by particular members (and the interests supporting that member) in the portfolio of must-pass party legislation. This mechanism is necessary to party discipline and congressional leaders are unlikely to let procedural rules prevent its use.
E The westminster system
One of the remarkable features of Madisonian democracy is its competing independent but inter-dependent branches. Most democracies use a parliamentary system. In the Westminster system, the prime minister is both head of government and the leader of the majority party or coalition in the legislature. The prime minister’s party controls the legislative agenda and executes the resulting law, directing a permanent professional civil service. Gridlock normally is absent from such a system, or has been since the monarch and the House of Lords have been effectively taken out of the picture.
When it comes to the role of well-organized interests and lobbyists, the situation in Britain and other parliamentary democracies is no different from the United States.69 Corrupt influences, corrupt practices, and important ill-organized interests exist everywhere. Party leaders still need to negotiate with members of parliament, and both candidates and parties crave financial and career support from interest groups.
The chief relevant difference between Washington and Westminster is that in Britain there is no ambiguity about assigning responsibility for policy and performance to the current majority party, which may give voters a clearer basis for their decisions in the next parliamentary election. While a parliamentary system might alleviate the frustrations associated with Washington “gridlock,” it is far from clear that it would significantly reduce corrupt laws or corrupt law enforcement by administrative agencies in non-salient matters. The party in power and sometimes the minority, in general, would retain incentives and numerous opportunities to cater to elite interests without regard to the public welfare. Finally, pursuit of a parliamentary structure in the United States would almost certainly require a massive constitutional amendment or a constitutional convention under Article V, perhaps a dangerous undertaking.70
F The presidential veto and the unitary executive
Why does the President not simply veto corrupt welfare-reducing legislation? Most Presidents have wielded their veto power sparingly. This is not difficult to understand. First, the Supreme Court has denied the President line item veto power.71 That enables Congress to package corrupt legislation in bills that the President cannot veto without endangering his own agenda or even the Republic.72 Further, Presidents are in much the same position as congressional party leaders—they are in continuing negotiations, a repeated game with Congress, its leaders, and its members as they seek to advance their own legislative agendas. If they adopted a policy of vetoing corrupt legislation, that might forestall the passage of such legislation but only at the price of depriving themselves of a key negotiating tool. In addition, Presidents are themselves often beholden to the same interest groups that influence Congress. Even Presidents who cannot succeed have loyalties to aides, appointees, and nowadays, family members with political ambitions requiring elite interest support.
A realistic appreciation of the political constraints facing any President also undermines a proposed reform aimed at malfeasance in the federal administrative bureaucracy, which includes cabinet departments as well as independent agencies. Justice Elena Kagan, then a Harvard law professor, discusses the idea in a 2001 law review article.73
The premise of the unitary executive (which Kagan calls Presidential Administration) is that most so-called “independent agencies” such as the Federal Communications Commission (FCC) or the Securities and exchange Commission (SEC) are in thrall to the interests they regulate, producing rules and regulations harmful to public well-being. The Ford and Carter administrations abolished or greatly pared back many regulatory agencies. This was due in part to activism by the Senate Judiciary Committee, then chaired by Senator Ted Kennedy. In almost every case, the result of deregulation was to improve consumer welfare through lower prices, better service or both.74
The evidence from this episode is consistent with the premise for abolition of the independent administrative agency system more generally. Kagan’s suggestion is for the President simply to assume the duties of the independent agencies under Article II of the Constitution. For this to succeed, the Supreme Court would have to reverse or distinguish its holding in Humphrey’s Executor v. United States, a Depression Era decision upholding Congress’s right under Article I to delegate some of its powers to the agencies without thereby granting supervisory power to the President.75 Members of Congress would then have reduced influence on policy making by the agencies. Elite interests may face greater resistance within the executive branch than in the legislature. For analysis of the impact of Humphrey’s Executor on the Madisonian separation of powers see Rao, note 49, supra.
However, giving the President responsibility for the work of the independent administrative agencies runs into the same difficulty as relying on the President to veto corrupt legislation. The President has political reasons to permit some corrupt activity that a disinterested monitor would lack. Further, there are many agencies, parts of the executive branch, where congressional influence exercised through oversight and appropriations dominates presidential control.
G Direct democracy76
The golden age of Athenian democracy relied on direct government by the people. All citizens could vote on matters of policy. Functionaries, including military leaders, were either directly elected or selected at random from the citizenry for very brief terms. This system was—and still is—much admired by political philosophers. It eliminates or at least reduces to an irreducible minimum the problem of agent corruption. However, the Athenian system was flawed in several ways. It was not inclusive—noncitizen residents, women, and slaves could not participate. The Assembly suffered from the natural defects of “crowd-sourcing”—a weakness for impulsivity and a tendency to be guided by emotion and demagoguery rather than logic and knowledge. A standard example is the Athenian Assembly’s disastrous decision, described by Thucydides, to invade Sicily in 415 B.C.77
Direct democracy has avid advocates even today. Modern technology offers potential solutions to the problem of voter numerosity. Political scientists such as Fishkin have offered methods (and some evidence from experiments with a “deliberative” decision process) designed to overcome voter ignorance, emotional motivations, and free rider incentives.78 Of course, any direct process is subject to (and would rely in part upon) persuasive advocacy by well-organized and well-funded interests. Bias in favor of those interests is the likely result.
McCormick, channeling some of Machiavelli’s lesser-known work,79 has suggested reliance on a system of selecting legislative representatives at random from among eligible citizens, excluding those from the elite class.80 That may preserve the advantages of having full-time representatives while eliminating corrupting incentives related to election and re-election campaigns. However, random selection would not eliminate corrupting influences arising from imbalanced interest group lobbying. Juries may be sequestered, but not legislators. A citizen selected at random for a brief term in Congress, with no chance of serving a second term, would be particularly dependent on interest group sources of information and professional advocacy.
H Limited government
A traditional conservative or libertarian perspective is that political corruption is an inevitable consequence of big government, with an obvious remedy: less government. However, that does not solve the problem of corruption. This remedy ignores the likelihood that the People simply prefer many or most of the entitlement and regulatory programs that inhabit the expanded sphere of federal jurisdiction. If so, reducing the scope of the federal jurisdiction would likely require devolution of these programs to the individual states. State governments face many of the same problems with political corruption as the federal jurisdiction. Pushing the problem down one level does little or nothing to solve it. Nevertheless, effective remedies on a state-by-state level could include those considered here.
I Watchdogs and whistleblowers
The growth of the Internet has greatly reduced the cost of communicating specialized information to large audiences. One result has been the creation of numerous “watchdog” organizations, both partisan and nonpartisan, publicizing lapses by legislators and agencies. The category overlaps with investigative journalism and with individual government employees (“whistleblowers”) who leak and publicize agency misdeeds, especially those that officials attempt to conceal. The most famous recent whistle-blower, and certainly the most effective in bringing about change, is Edward J. Snowden, who passed secret U.S. government documents to web sites and newspapers. The documents revealed extensive, and arguably unlawful, government monitoring of private communication of U.S. citizens.81
Watchdogs and whistleblowers have a potentially important role, like all media, in making the public aware of dubious government policies and procedures. Several factors, however, reduce their effectiveness in combating welfare-reducing corruption. First, partisan sources or public donations typically fund these organizations; in either case, the nature of the funding source and any watchdog’s need for continued funding introduces a source of bias that limits its credibility. Second, watchdog organizations seldom are staffed with the skilled analysts equipped to assess the impact of highly technical legislation and regulatory policies on the welfare of those affected. Third, watchdog groups have no direct power to intercede because they cannot end the harm caused by corrupted legislation and regulation.
VI Quality control—in business, sports, and politics
The preceding discussion of popular remedies for political corruption focuses on the selection and regulation of elected representatives and factions. None of these remedies have been (or would appear to be) effective or, in some cases, practicable. It is useful to step back at this point and ask how nongovernment organizations mitigate principal-agent corruption (or equivalently, increase principal-agent incentive compatibility). Leaving aside formal civil and criminal legal remedies, such measures include relational contracts with suppliers and employee compensation designs mostly inappropriate to political representation.82
A more general approach in commercial contexts is quality control. Quality control (of products and services) includes the incentive-related measures just mentioned but is grounded on direct measurement and evaluation of outcomes. Firms inspect and test finished products and services for adherence to design specifications and customer satisfaction. A feedback loop adjusts organizational practices and incentive structures.
Law in its various forms is a major “output” of the administrative state. (Increasingly, the federal government outsources or delegates to the states the actual delivery of government services.83) The output of law is of poor quality, in part because of corruption, but also due to poor or no quality control.84 Compared to ordinary practice in the private sector, there is only vestigial or nominal attention to the relationship between output and the well-being of clients. Corrupted elections are a poor substitute for best-practice quality control. Law at the national level is a monopoly of the state; competitive discipline is absent. The rivalry that stems from the separation of powers is seldom about substantive policy; it is chiefly about branch jurisdiction. The rivalry may protect against tyranny but it does little to forestall corruption.
Quality filters such as presidential vetoes and judicial review attend only to a small subset of legislation and seldom address the general welfare objective of the Preamble. The filtering role of the media is confined to issues of high salience that do not correspond systematically to issues that most deeply impugn welfare. The media seek to produce audiences, chiefly by appeal to emotion, especially fear. By reporting on criminal corruption and high-visibility boondoggles (such as the Alaskan “bridge to nowhere”85), the media incite contempt for politicians but not attention to the welfare and distributional consequences of lawful corruption.
In a Madisonian government the most natural way to interdict corrupted law (and thereby to deter its instigation) in one branch is to assign another branch the responsibility and power to monitor and constrain the effects of processes that have been corrupted.86 (See Madison’s argument in The Federalist No. 10, which includes the epigraph at the beginning of this Essay.) To accomplish this, we need an “independent” monitor, with the power to assess and veto legislation and agency policy that fails substantively to advance the aims of government set out in the Preamble. Such a function could supply Madisonian intramural discipline focusing on the welfare reductions produced by elite rent seeking.
The American people are familiar with the roles of umpires, referees, and kindred officials in sports contests. In addition, while umpires strive to score pitches and runs accurately, their task is to look at plays, not the recruitment of players. The focus generally is on output or performance, not inputs or form. Partisans do often question the rulings of umpires and refs, and sports officials sometimes accept bribes or bet on the outcome of contests, but for the most part sports officiating is credible. Teams and leagues aim to make profits for their owners, an objective that requires, among other things, credible officiating of games. In a sense, sports teams and leagues are analogous to the People in a democracy in needing to monitor and maintain the credibility of officiating and competition by the players on the field. This is not accomplished by asking baseball fans to elect umpires.
Madisonian democracy recognizes the People themselves as the only legitimate source of political power. However, Madisonian democracy also recognizes that the People are unreliable—even dangerous—as a source of day-to-day legislative action. Instead, the People entrust their power to elected representatives. As noted above, this makes elected officials the agents, in an important sense, of the People.
All agents are unreliable to some degree because of self-interest, particularly if their performance is difficult to monitor or evaluate. Madison relied on competitive elections to control this conflict of interest. We can assume that Madison understood that elections would be biased if the partisan influences on voter choices are biased, but saw no better option. In the modern world, voters are woefully bad judges of the performance of their political agents. Voters generally are incapable of monitoring the performance of legislators, at least on non-salient issues.
Unlike private businesses, legislators are not vulnerable to product liability lawsuits. It would be an improvement to rely on disinterested professional umpires to decide which legislative “plays” are welfare-enhancing and which are not, particularly if the umpires themselves could be insulated from the political processes that lead to corrupt laws and policies.
The judicial branch is the sort of umpire that qualifies as a Madisonian element of government. The courts have many roles, but their umpire role is to protect citizens from infringements of constitutional or other rights by other branches of government. Article III courts, while not immune from human failings, are generally trusted by the public—at least more so than the other Madisonian branches.87 The courts could be helpful in stemming lawful corruption if they were competent and willing to police not just the infringement of rights, but also infringements of welfare, or else to treat freedom from government interference with the pursuit of happiness as a negative right.
As with the canonical branches of government, no one should expect perfection from a new “officiating” branch. Welfare-oriented umpires will not perfect or “optimize” the output of law, but at least welfare and equity issues will have a place, and an institutional advocate, in the debate. No less important, insulated umpires will reduce the elite bias that infects current lawmaking. As for legitimacy, what matters in the end is whether people trust the government to act in their interests. Despite being thoroughly undemocratic, the judiciary is seen as far more trustworthy than Congress, and an umpiring branch may usefully rely on similar organization features.
This Essay does not explore the technical means by which to assess the welfare and distributional effects of law. Modern benefit-cost-risk-distribution analysis seeks to include assessments of the significant values citizens place on environmental amenities (such as clean air and water), public services, and policy preferences, including preferences for distributional equity. The literature is enormous.88
Ultimately, of course, the question is whether a given law or policy increases happiness, compared to the status quo or some counterfactual, and of what relevant categories of the population. Suffice it to say for present purposes that the practice of benefit-cost-risk-distribution analysis applied to legislative impact is no less objective, reliable, or accurate than the constitutional and statutory analysis carried out by the Supreme Court. We accept the Court’s decisions not because its reasoning is convincing—obviously it is not convincing to the dissenters—but because we accept the legitimacy of the rule of law, imperfect as it is, and the necessity for finality.
How could we include umpires in the current Madisonian system? Several possibilities suggest themselves.
A Substantive review in the supreme court
The United States lacks a constitutional court separate from its judicial court of last resort. According to Article III of the Constitution, the Supreme Court was to be a court of last resort for the resolution of disputes. John Marshall, Chief Justice of the Supreme Court from 1801 to 1835, believed that his Court should also be a constitutional court with the power to strike down federal legislation that was inconsistent with the Constitution. In Marbury v. Madison, 5 U.S. 137 (1803), the Court awarded itself the right to a line item veto. At a stroke, this made the judiciary a coequal branch of government. Congress might have challenged this usurpation by initiating an Article V amendment process, but did not.89
Article III does not require any judge to have legal training, but the Supreme Court has always been made up of lawyers. The Court’s appellate role makes the appointment of lawyers natural. Other countries, however, often have separate constitutional courts, to which non-lawyers are appointed. France, for example, has the Conseil Constitutionnel (Constitutional Council) on which former presidents of the Republic and other distinguished citizens sit. The Conseil rules on constitutional questions referred to it by any legislator, agency, or citizen.
Because it is made up of lawyers, the U.S. Supreme Court approaches constitutional questions much as it approaches appellate review of cases: focusing chiefly on “matters of law” which are either procedural or involve statutory interpretation, giving much emphasis to precedent, and mostly ignoring substantive effects on welfare. Perhaps worse, for present purposes, it is constrained by “legal reasoning,” a mode of justification for changes in law in which several factors are alleged to motivate or limit some prior action or doctrine, with respect to which the Court may now assign different subjective weights.
A 2015 Supreme Court decision dealing with environmental Protection Agency (ePA) regulation of mercury emissions from coal-burning power plants illustrates the problem.90 The question was whether the ePA should consider costs in deciding to impose regulation. It was undisputed that the costs of compliance would exceed $10 billion per year, while the benefits would be well under $100 million per year. An assessment of the effect on aggregate well-being, on these facts alone, would lead one to reject the proposed regulation. However, the Court could reach this commonsense result only through a tortuous analysis of the Clean Air Act, the Administrative Procedure Act, canons of statutory interpretation, and other legal materials. In the end, the Court’s legal analysis rests in large part on the observation it would be unreasonable for the EPA (or the Congress) to ignore cost. This, despite numerous instances in which Congress has mandated explicitly that costs be ignored in environmental matters, notably in connection with endangered species.91
A more catholic constitutional court would consider substantive analysis of effects and treat “facts” as within its competence. What this suggests, unfortunately, is that the U.S. Supreme Court is unlikely to be comfortable asserting a position that would be perfectly natural for the French Conseil—for example, that a statute was unenforceable because its substance or effect was inconsistent with the general welfare standard in the Preamble to the Constitution, or with its “spirit.” Still, the modern Court has “found” all sorts of new rights and entitlements in the Constitution just as the Marshall Court “found” a momentous new right for itself.
When large numbers of citizens have a common stake in a measure that is under consideration, it may be very difficult for them to coordinate resources on behalf of their position. The corporate form, by contrast, “provides a simple way to channel rents to only those who have paid their dues, as it were. If you do not own stock, you do not benefit from the larger dividends or appreciation in the stock price caused by the passage of private interest legislation.” … Corporations, that is, are uniquely equipped to seek laws that favor their owners, not simply because they have a lot of money but because of their legal and organizational structure. Remove all restrictions on their electioneering, and the door may be opened to a type of rent seeking that is “far more destructive” than what noncorporations are capable of.93
The relatively narrow traditional perspective of the U.S. Supreme Court is unfortunate because the Court represents the least controversial of the possible means to establish a credible umpire function within the existing Madisonian system. As John Marshall demonstrated, no formal amendment is required for the Court to assert such a power, although a modern Court would doubtless move with greater diffidence than did Marshall. One way to begin might be for a President to appoint a distinguished nonlawyer to the Court.94
B Agencies responsible for policy evaluation: OMB, CBO, GAO
Other solutions to the problem of creating a legitimate and credible umpire to serve as a substantive filter for legislative and administrative corruption seem to require a constitutional amendment.95 Any number of existing agencies, including the Office of Management and Budget (OMB), the CBO and the GAO have the necessary expertise to make such judgments, but lack not only the authority to veto legislation or administrative actions but also the political legitimacy to survive resulting push back. Some better method for appointing umpires would be required, such as presidential appointment with supermajority senate confirmation. Those distressed by “gridlock” in Washington today clearly will be even more distressed to consider yet another locus of veto power over legislation.96 The first response to this is that veto points in the legislative process have proliferated precisely because of systemic corruption; each veto point provides an opportunity to extract payments from elite interests, rather like the highway holdups operated by “rebel” groups in lawless nations. Alternatively, one can argue that from a Madisonian perspective it is not so obvious that gridlock is a bad thing. It is a natural result of the checks and balances established to protect the People from ill-considered laws. Further, if a fourth branch of umpires existed, it would deter expenditures on corrupted legislation likely to produce an umpire veto. Paraphrasing Oliver Wendell Holmes, Jr., expectations of what umpires will do deter most rule infractions, not official action on every latent player impulse.97
C The grand jury
“[R]ooted in long centuries of Anglo-American history,” … the grand jury is mentioned in the Bill of Rights, but not in the body of the Constitution. It has not been textually assigned, therefore, to any of the branches described in the first three Articles. It “is a constitutional fixture in its own right.” … In fact the whole theory of its function is that it belongs to no branch of the institutional Government, serving as a kind of buffer or referee between the Government and the people.98
The grand jury is, at least in theory, independent of the executive branch, the legislative branch and even the judiciary, though it interacts with each. In centuries past the grand jury has from time to time bravely interceded to resist excesses of the executive,99 but today it more commonly is accused of being a mere rubber stamp for prosecutors.
With a membership between sixteen and twenty-three citizens subject to the same qualifications as members of a petit jury panel, the federal grand jury is supposed to protect potential criminal defendants from abuse by politically appointed prosecutors. The grand jury votes on the sufficiency of the prosecutor’s evidence to justify an indictment, a majority but no fewer than twelve votes being the minimum required to indict. Proceedings are conducted pursuant to Title III, Rule 6 of the Federal Rules of Criminal Procedure, which is a product of the legislature. A judge of the local district court has limited supervisory duties and issues subpoenas on behalf of the jury. At the state level, the duties of grand juries sometimes extend to civil matters. One state, California, has a “civil” grand jury in each county concerned with investigating and recommending local government efficiency or policy reforms.
The essential elements of the traditional grand jury for present purposes are its common law role of protecting citizens from the power of the state, its status as an agency outside the formal Madisonian framework, its composition of up to twenty-three ordinary citizens chosen at random, and its reliance on a professional staff to coordinate investigations. The work of the grand jury is defined by common law and statute. Arguably, the Congress could create a grand jury tasked with discovering and “indicting” corrupt law, bypassing the need for a constitutional amendment.
There are some obvious problems with relying on repurposed grand juries to serve as umpires. The power of a grand jury lies in denying permission for the state to prosecute an alleged criminal when the prosecutor has insufficient basis to justify a trial. Even “civil” grand juries are limited to making reports and recommendations. Congress would have to give an umpire grand jury the power to veto a law or regulation on the basis that the law reduced the “general welfare.” That is a lot of weight for the grand jury institution to bear—a change from protecting individual citizens from abuse of state power to protecting the People as a whole from abuses of state power.
D Umpires of the past
And whereas laws inconsistent with the spirit of this constitution, or with the public good, may be hastily and unadvisedly passed: Be it ordained, that the governor for the time being, the chancellor, and the judges of the supreme court, or any two of them, together with the governor, shall be, and hereby are, constituted a council to revise all bills about to be passed into laws by the legislature; and for that purpose shall assemble themselves from time to time, when the legislature shall be convened; … And that all bills which have passed the senate and assembly shall, before they become laws, be presented to the said council for their revision and consideration; and if, upon such revision and consideration, it should appear improper to the said council, or a majority of them, that the said bill should become a law of this State, that they return the same, together with their objections thereto in writing, to the senate or house of assembly … who shall enter the objection sent down by the council at large in their minutes, and proceed to reconsider the said bill. But if, after such reconsideration, two-thirds of the said senate or house of assembly shall, notwithstanding the said objections, agree to pass the same, it shall together with the objections, be sent to the other branch of the legislature, where it shall also be reconsidered, and, if approved by two-thirds of the members present, shall be a law.101
The tribuni plebis (or plebi), ‘tribunes,’ were the officers of the plebs first created … traditionally in 494 b.c … The tribunes were charged with the defense of the persons and property of the plebeians … Elected by the plebeian assembly and exercising their power within … the city, the tribunes could summon the plebs to assembly and elicit resolutions (plebiscita). They asserted a right of enforcing the decrees of the plebs and their own rights … They possessed … a right of veto against any act performed by a magistrate … The full acknowledgement of their power came with the recognition of plebiscita as laws binding upon the whole populus and not just the plebs … Tribunes were first admitted to listen to senatorial debates; at least from the 3rd cent. BC they had the right to convoke the senate; … In the first surviving contemporary discussion of the tribunes, from about the middle of the 2nd cent., Polybius … states that ‘they are bound to do what the people resolve and chiefly to focus upon their wishes.’ Succeeding years saw the tribunate active in the pursuit of the people’s interest and the principles of popular sovereignty and public accountability, as evidenced by the beginning of the practice of addressing the people in the forum directly, the introduction of the secret ballot in assemblies, concern with the corn supply agrarian legislation, … and above all by the legislation and speeches, for which contemporary evidence survives, of Gracchus (123–122 b.c.)… Active tribunes came increasingly to be associated with the particular interests and grievances of the urban plebs …102
Briefly, the socioeconomic class called the “plebs” became restive under the tyranny of the aristocratic families that collectively ruled the Roman Republic and staged a credible boycott. The aristocracy and the plebs negotiated a lasting settlement that granted substantial political power to the elected representatives of the plebs. The Plebeian Assembly held these Tribunes of the Plebs to nonrenewable one-year terms. The Tribunes do seem to have sought generally to protect the interests of the plebeian class for several hundred years.103
Our understanding of the political operation of the early Roman Republic is limited; most surviving materials were created centuries after the fact. Still, what we do know of the Plebeian Tribunate offers a useful model for a modern umpire that might reduce the social cost of political corruption, using the veto power. The relevance of the Tribunes to mitigation of modern systemic corruption is twofold: the Tribunes protected the people (or at least the plebs) from executive and legislative actions adverse to plebian interests, and they did so ex post—after the legislation or action was enacted or ordered.
Of all the remedies discussed above, the establishment of an effective umpire function seems most likely to succeed in mitigating lawful corruption. The major difficulty is not the necessity to find consensus on some very important details (illustrated in Part 7), but rather the barrier of formal constitutional amendment, assuming that hurdle proved unavoidable.
no one thinks that either method of amendment under Article V is easy or riskless. Indeed, the prospect of a convention is positively scary, given the 1787 precedent. As noted above, the Constitution is usually amended tacitly by the Supreme Court in the course of interpretation. Something like that likely will have to precede full realization of an umpire institution willing and able to call strikes on lawful political corruption. For example, perhaps a President could delegate “advisory” veto authority to a new organization within the executive branch, made up of umpires. This in itself would do little if anything to reduce corrupt legislation, but it might evolve into a more effective force, without the need for a formal amendment.
even a common understanding of “human nature” as given to us by a complicated mixture of nature and civil nurture should leave no one surprised at manifestations of antisocial tendencies in principal-agent relations, including political representation. That is why we have so many mechanisms to contain it: audit trails, supervision, morality, religion, civil, criminal and reputational penalties, conscience, and so on. Political corruption in America is far from costly to its authors—it is a near requirement of holding a congressional seat, and it is boring to voters and media audiences. We need something more effective than dreams of direct democracy, a return to limited government, or easily evaded controls on interest group activity. If we are to retain the bones of Madisonian democracy and still avoid the growing economic and equitable costs of corruption, we must tweak the Madisonian system. That calls for a branch whose only business it is to monitor and edit Washington’s massive output of corrupt law.
VII Illustrative details
For the sake of concreteness, and in emulation of McCormick,104 I set out below some candidate features of a new or fourth branch of the federal government designed to reduce the impact of legislative and administrative error and corruption on the well-being of the People. In political terms, the illustrative proposal is intended to counter the influence of elite interests in the legislature and the administrative process with a democratic institution representing the principal victims of elite power, the middle class.105 As with any Madisonian system, the effect of such a new branch would be felt chiefly through changes in the incentives of the remaining branches.
The Constitution and its amendments leave most details up to future implementers. If we are to follow this tradition, only the most important provisions should be included in the “umpire amendment.” Which ones are most important? Not necessarily those I have chosen to include in this illustration.
A The umpire amendment106
The United States Council of Review107
- Promotion of the general welfare of the People being chief among the purposes of government, there is established a Council of Review, which shall not be within the branches established by Articles I, II or III of the Constitution.108
- The Council may veto any Law or provision thereof judged likely to reduce the well-being of the People or that of the poorest citizens.109
- For purposes of this Amendment, Law shall mean any provision or related provisions110 of the United States Code, the Code of Federal Regulations, or a Bill enacted during the preceding congressional session.111
- The Council’s action shall take effect when Congress next adjourns, except that a two-thirds majority in each House of Congress may override the Council’s action.112
- Any citizen of the United States, having voted in six of the last seven federal elections and meeting other standards, established by law, of character, education, and mental fitness may apply to join the Council.113
- A new Member shall be selected by lot from among qualified applicants within 45 days of a vacancy, for a term to begin no later than 90 days after selection.
- Members shall serve a term of 15 years.114
- Members must swear or affirm an oath of office prescribed by law.
- For life upon their assumption of office, Members must renounce and divest to the Treasury all income from any source other than as described in this Article.115
- Members shall receive a salary, not less than twice the salary received by the highest-paid Member of Congress, which Congress may not vary during their term of office.116
- Congress shall by law provide for Members’ salaries to be increased or decreased annually after the conclusion of their service in accordance with the increase or decrease in the per capita income of citizens of the United States, after adjustment for inflation.
- Members may receive limited and incidental income from appreciation in value of personal and residential real property, gifts unrelated to their office, and interest on loans made to the United States, as Congress may by law provide.
- Members may be removed by a two-thirds majority of the Council or by impeachment, and Congress may by law provide for the dissolution of such Members’ rights or obligations under this Article.
- The Council shall publish the reasons for its decisions.
- Congress shall by law provide for the Council to compel testimony.
- The Council may, if it deems necessary, deliberate in secret.
- The Council shall elect, and may remove, its Chair, whose term shall last until the addition of a new Member.
- The Council and its Members shall be protected with judicial immunity.
- The Council may not override, or nullify a congressional override, of a presidential veto.
- The Council may, for purposes of its review, consider what alternative(s) would prevail if the subject matter of the review were vetoed.118
- The Council may decline to undertake any review requested of it.119
- A stay pending a decision whether to review a new Law may not exceed 45days.
- Any Law in effect upon ratification of this Amendment shall be subject to review by the Council for 10 years and thereafter for one year at 10-year anniversaries of the Law’s enactment.120
- The Council may not veto a Law based solely on any provision of the Constitution except this Amendment,121 nor treaties except for those provisions concerning international trade and commerce, nor Laws concerning the armed services or national security, including declarations of war, except those provisions dealing with procurement.122
- The Council may consider the principles of stare decisis in its decisions.123
- The Council may not stay or veto appointments to federal executive or judicial offices made by the President with the advice and consent of the Senate.124
- The Chair shall appoint, with the consent of the Council, a Staff Director with a renewable 5-year term.125
- Professional employees of the Council shall serve “at will” and without tenure. Notwithstanding any provision of law to the contrary, the Council may offer staff compensation commensurate with that in the private sector.
- neither a former Staff Director nor any former professional Council employee may earn income from representing or advising clients with business before the Council before five years after leaving employment.
Congress shall authorize and appropriate such sums as are necessary to provide the Council with staff support and facilities sufficient to perform its duties, and may otherwise provide by law for the implementation of this Amendment.126
Proposing the creation of a fourth branch of government will produce snickers in any knowledgeable audience and puzzled frowns elsewhere. Many Americans have heard about the branches, checks, and balances from an early age, even if they do not have a very clear idea of the specifics. Even people with no exposure to “civics” are quick to agree that politicians are corrupt—but what they imagine is bribery: trash bags filled with cash, delivered in dark alleys, or vacation condos on exotic islands. Explaining the problem and costs of “lawful corruption,” how it arises despite the Madisonian checks and balances, how it ensnares well-meaning elected officials, and why interdiction of its effects is likely more effective than reforms aimed at causation, requires a multidisciplinary educational process. However, economic analysis yields the most convincing argument for the feasibility of reform.
Elites engage in costly efforts to influence policy to advance their own interests and to defend against encroachments from rival elites. The result is an escalating spiral of expenditure by each elite interest and consequent corrupt reductions in the general welfare, affecting not just those without influence but also other, unrelated, elite interests. Elected officials are trapped in this gyre no less than the elites. If government were immune to such influence, fewer of these expenditures would be necessary or worthwhile, and the extent of corrupt influence would decline. It is not possible, or even desirable, to make elected officials immune to elite influence because that could be done only by making them immune to all influences. However, it is possible to reduce the cumulative and escalating adverse impact of this process on everyone, elites and non-elites alike. The key is to rule out elite-favored ends that reduce the size of the pie. This leaves elites free to use government to steal from each other, subject to the constraint that the pie as a whole may not be reduced by the policies they promote. Only shares of the pie, and not the size of the pie, are then at risk. Other elites have resources worth stealing, while the poor have little to steal. The share of the middle class remains vulnerable, through tax policy for example, but it can fight back with its greater numbers and passionate causes.
Given the difficulty faced by elites collectively in containing their potentially destabilizing and pie-shrinking greed, it seems likely that an Umpire Amendment also is in the collective interest of the elite.127 Both politicians and elites today face a situation in which it is in the collective interest of each to promote reform. Neither group can do this successfully on an individual basis because there is no way any individual elite interest or politician can commit credibly to avoid future welfare-reducing corruption. The Umpire Amendment, unlike any act of Congress, is a very firm commitment.