Constitutional Collapse, Part III: Reform

Earlier posts have painted a grim picture of our Constitution of Affluence. We can no longer afford our institutions, but they are too deeply entrenched to be dislodged by ordinary political means, in ordinary times. The upcoming election promises to be inconsequential: no reform program commensurate to our predicament is even on the table, let alone in any danger of being enacted.

My point isn’t to preach doom and despair; it is to suggest a more fruitful direction for our political-constitutional debate. That debate is polarized not only in an ideological sense but also in a substantive sense—between mere policy at one end and the formal Constitution at the other. It would be good to find middle ground.

Constitutional Moments: Institutions and Political Economy

Much of our public debate revolves around policy—tax cuts, block grants, student loans, etc. Much of this matters, and some policies are more sensible than others. Still, our institutions render sensible, meaningful policy reform both rare and ephemeral. Suppose you could revamp the tax code overnight (flatten the rates and wipe out exemptions): the political system cannot possibly pre-commit to leaving the change in place. Maybe you’d get some temporary economic benefits, but you’d also get a much larger Washington lobbying corps. “Tax reform” simply means that the good guys have won one round in a perennial barroom brawl that cannot end well.

Considerations of this sort, coupled with the direness of our predicament, have prompted a political migration all the way to the other end: what we need is formal constitutional change, either by way of amendment or by way of a Supreme Court that takes the existing Constitution seriously. Count me among the skeptics. Most amendment proposals are seriously misguided, and none of them have a chance of enactment. As for the Supreme Court, it would indeed be good if the justices could remind themselves of their constitutional obligation to check the centrifugal tendencies of our politics. But few of the justices are inclined in that direction, and in any event the Court can (and will) do only so much. And either in its amendment or in its judicial version, formal change will take more time than we have.

It is true nonetheless that we are experiencing a constitutional moment of sorts, eerily reminiscent in many ways of the years leading up to 1787. Feckless, irresolute federal institutions; bankrupt, corrupt state governments; the debasement of the credit of the United States; a mountain of public debt; commerce choking under rival and spiteful state impositions—does this ring a bell?

Ruinous policies, the Founders understood, were the products of lousy institutions: that was their problem, as it is ours. The Founders’ response to the institutional dysfunctions of their (and our) day eventually reached way beyond those problems. But as Herbert Storing (among others) was fond to note, the Founders always started with the specific, practical problems; and in arguing for the dramatic project of establishing a whole new Constitution, they always reverted back to them: nothing else would fix the situation.

We have the good fortune of living under an established Constitution, even if it is often honored in the breach. Still, we can learn from the Founders sharp focus on the institutional causes of political and economic pathologies. On one side, you shouldn’t expect lousy institutions to produce sensible policies. On the other side, you shouldn’t put too much hope in formal constraints. They can’t work as mere “parchment barriers”; to be effective, they have to be linked to what we now call the Constitution’s political economy, meaning the incentives under which political actors (including voters) operate. Any reform that’s worth having must either put existing incentives to better use or else, generate new and more productive incentives. What would that look like?

A Few Modest Ideas

Think of airline deregulation as a mini-example. It was a policy change alright, but it succeeded and has lasted only because it was also an institutional change: it wiped out a federal regulatory agency and categorically prohibited states from going anywhere near the airlines’ rates, routes, and services. Deregulation created a new set of winners (including consumers), so it’s hard to undo the new regime. Can one think of similar reforms on a grander scale? Maybe.

Start with John DiIulio’s observation (echoing a point I’ve fairly obsessed over in these blog pages):

 America would almost certainly have a smaller government than it does today if, by means of some traditional political norm or by some constitutional provision, every post-1960 federal policy, program, rule, or regulation had to be administered directly and exclusively by full-time federal bureaucrats. The use of sub-national civil servants, private contractors, and non-profit grantees to carry out federal laws—a practice surely intended to restrain the size of government—has instead inflated the state…

Put in Madison’s parlance: under contemporary conditions, effective constraints on government may have to do not with the extent of the federal government’s powers but with their operation, which ought to be direct. Administration by state and local officials, typically under conditional grants or conditional preemption programs, violate that principle. If the feds want to regulate, let them pay for the program in its entirety and send hither swarms of officers (and see if we like it).

One can think of several ways to get from here to there. One of them is Senator Lamar Alexander’s proposal (covered in an earlier post): hand Medicaid entirely to the feds and, in return, wipe out any and all federal education programs. In one fell swoop, you’d mow down two intergovernmental bureaucracies and end the moral hazards and fiscal illusions embedded in the programs. If that doesn’t float your boat, consider an alternative:

Medicaid constitutes about eight percent of the federal budget. Suppose we provide that taxpayers in any state that declines to participate in the federal Medicaid program will get a proportionate rebate against their income tax payments: presto, you’d move from fiscal illusions and shenanigans to a grown-up, state-level debate over what we can afford; from a Constitution of Affluence to a Constitution of limits. Texas or Virginia might well exit the system and fund a more efficient and affordable system from own-source revenues. If New York wants to stay in and its hedge fund guys don’t mind paying, that’s their business.

One can think of other ways to stem the proliferation of poorly monitored fiscal and regulatory exactions. For example, many agencies’ budgets are financed in large part through users fees and assessments on regulated industries. Stop it: if the business isn’t worth funding from general revenues, it probably isn’t worth funding at all. Worse yet, many agencies—attorneys general at the state level, the FCC (through license auctions) at the federal level—have become profit centers for legislatures: end it.

Stop obsessing over the authority of the poor, pitiful states. Instead, enact a generic statute to the effect that any and all federal regulatory statutes shall be construed to preempt any and all state law (including tort law) in the field unless Congress unmistakably says otherwise. In addition to curbing states’ ongoing attempts to evade and circumvent federal law, you’d change their incentives going forward. States “as states” usually support federal regulation so long as, and because, they are allowed to regulate on top of and around federal law. Given an all-or-nothing choice, they’d think twice.

And in the End

The foregoing proposals are suggestions, not an exhaustive “to do” list. I’m not wedded to any of them; at this stage, we should let a thousand institutional reform proposals bloom. The emphasis is on institutional, in the sense explained. Our problem isn’t policy, and it’s not the formal Constitution. It’s the small-c constitution—the entrenched, deeply pathological patterns and institutions of our politics.

I’m acutely aware of the difficulties of changing those arrangements. But that’s another thing we can learn from the Founders: a moment of great danger is also a moment of great opportunity, provided we comprehend the nature of the problem and the stakes. We can no longer afford our Constitution of Affluence. Our debts will not be paid. We cannot have what we made government promise us. We either reform our institutions or else, they will by degrees enervate and ruin us. Once the grim reality sinks in, a lot of things that now seem off the wall may begin to look plausible and even necessary.