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The Constitution of Affluence, Part I

We live under a Constitution of Affluence. Obviously, I don’t mean a constitution that produces affluence. (Prosperity may be right around the corner, but it’s the corner behind us.) I mean a Constitution whose basic institutions presuppose and depend on high levels of affluence and, equally important, public expectations that life will get better and richer.

The United States Constitution—the formal Constitution and its nineteenth-century arrangements—is (or was) not a Constitution of Affluence in the sense just explained. It sought to create conditions that would be conducive to rising prosperity—principally, by way of ensuring political stability, meaning institutional arrangements that would let citizens go about their business without constant fear that somebody, someplace might confiscate the proceeds. But it was supposed to work, and it did work, even in times of prolonged economic stress—in one of those “varying crises of human affairs,” as John Marshall might have said and in fact did say.

The first big step toward a Constitution of Affluence was the New Deal. In ways and for reasons discussed below, the New Deal Constitution’s characteristic arrangements—administrative agencies, “cooperative” federalism, industry cartels, modest social programs, extreme judicial deference to “economic” legislation—all depend on an expectation of sustained economic growth. However, the New Deal Constitution still reflected a recognition that rising affluence required private production. Thus, the New Deal Constitution still embodied limits—not so much formal, judicially enforced limits, but institutionally enforced limits: not everything can be up for grabs.

Our Constitution of Affluence recognizes no such limits. Its central premise is that everything must be up for grabs, and it has built institutions to ensure unceasing progress to that end. Its tragedy is that it will eventually undermine the affluence on which it rests. Our affluence has ended, and so will our present constitutional arrangements. The only question is how.

Factions and Interests

Start on the familiar territory of Federalist 10: factions are bad. You have to accept them as a fact of political life, but you certainly don’t want to entrust the business of government to their care. Their demands are “adverse to the rights of other citizens, or to the permanent and aggregate interests of the community”; letting them hold sway entails political instability and a “mutable government.” To break the violence of faction and to control its effects, the Founders established a constitutional government of checks and balances, ranging over an extended republic. The checks and balances do two things (hopefully): they limit government’s output, and they bias it toward public-regarding legislation.

Now look at the picture from another perspective—that of twentieth-century pluralism. “Factions” is just a derogatory term for interest groups—upstanding citizens who organize in any number of venues, around any number of goals and for the purpose of pressing their rightful demands on the government. Ain’t that America, home of the free? Grievances, petitions: First Amendment stuff, when you think of it. Nobody here but us Tocquevillean chickens.

From this vantage, it becomes difficult to explain why you’d want to make things so hard on the chickens. A government that perennially frustrates their demands through institutional contrivances looks more sclerotic than stable, and it certainly isn’t democratic. On this view, you don’t want a Constitution of checks and balances; you want what Jerry L. Mashaw has called a Constitution of ratchets and amplifiers—institutions that make it easier for interests to have their way (more below).

What of the Founders’ fear of political instability and mutable government? Totally overblown. So long as the country and its politics splinter into an endless array of contending interests, they will cancel each other out: that recognition, the pluralists argued in a freakish misinterpretation of Madison, was the genius of Federalist 10. The Constitution, they insisted, had done little if anything to ensure stable democratic government; it had remained stable because our democratic politics was stable. The only useful purpose of a Constitution is to determine who should be given advantages and disadvantages in a principally boundless political process.

Institutions

If pluralists could have their druthers, what would the (small-c) constitutional order look like? In a word, familiar.

First thing you do, wipe out formal constraints and throw open wide the door to interest group politics. This piece of the pluralist-New Deal Constitution became official doctrine on April 25, 1938. Carolene Products effectively abolished judicial review of even the most obnoxious interest group bargains and established the baseline of the New Deal Constitution: the will of the legislature shall prevail. Erie Railroad (decided, as Richard Reinsch has noted to my I-can’t-believe-I-missed-that chagrin, the very same day) unleashed state courts as instruments to exploit the commerce of the United States fifty times over. Feel free to add your favorite New Deal decisions to this pair: Blaisdell, Nebbia, Parker, Wickard… It’s the same story every time.

Second, you’ll want to multiply access points and, relatedly, turn veto points into opportunity points. Centralized authority means limited access; compartmentalized authority means limited competences. Move to a world of multiple, decentralized power centers with overlapping authority, and the pluralist game is on. As one canonical text put it:

[A] system of many power centers is well suited to meet the infinite variety of expressed needs…Because there are many points for decision, citizens and citizen groups have multiple opportunities to influence decisionmaking. If a group does not get satisfaction at one place, it can try another. And if the second is unresponsive, there may exist a third or fourth.                                

 Morton Grodzins, The American System: A New View of Government in the United States, ed. Daniel J. Elazar, 335.

The most important embodiment of this strategy is the New Deal Constitution’s federalism. Government as a shopping spree is what Louis Brandeis meant by celebrating states as “laboratories of democracy.”

Third, you’ll want to create dealmaking institutions. If all interest group bargains had to be concluded once and for all in Congress, few would come about: the place is too unwieldy, and too many interests swirl about. The answer is to kick the conflicts into administrative agencies. They can’t create bargains on their own; but within a broad legislated framework, they can channel, monitor, and adjust them. The National Labor Relations Board is a good example, as are ratemaking agencies.

Fourth, you’ll want to create ratchets and, relatedly, prevent defection. Overlapping authority can create ratchets, as when states may set minimum wage levels above but not below the federal standard. And, federal transfer programs create ratchets. A few states “experiment,” with the result that even the initial opponents of the program will now try to offload a portion of the costs on the federal program. And once the federal program is in place, every state’s taxpayers pay for it, with the result that no state can defect. The entrenchment effect spells the difference between a mere policy and a constitutional arrangement.

Fifth, you’ll want to reduce transparency and create fiscal illusions. Like dealmaking institutions, these strategies reduce the cost of transacting interest group business. Administrative agencies reduce transparency (and accountability), relative to legislative bargaining; “cooperative” federalism arrangements do so relative to a world in which tax and spending authority are aligned. Fiscal illusions make things look much cheaper than they are. The most celebrated example is FDR’s insistence on funding Social Security through a tax so that “no damn politician” could ever take it away: it put voters under the twin illusion that (a) they have personal accounts in Baltimore and that (b) they “earned” their benefits, and the beast will grow and be around forever. Similarly, federal transfers to states reduce the perceived cost of programs (such as Medicaid) at the state level. The illusion is immune to evidence.

Limits

The picture just sketched tends to produce apoplexy among libertarians and Claremonsters. I sympathize (in my book, April 25, 1938 should live in infamy), but it’s like howling at the moon: for good or ill, the New Deal Constitution is a constitution. And in very important respects, we’d be blessed if only we could have it back. The New Deal Constitution was a Constitution of Affluence; but it was still a limited Constitution. The limits collapsed around 1970 and gave way to a pure, unlimited Constitution of Affluence. That’s a whole lot worse.

To see the trajectory, re-consider the pluralist faith that interest group politics will be stable and harmonious: it rests on the notion that conflicts will remain within tolerable bounds. If people start to think that politics is a (racist, plutocratic, socialist) conspiracy and begin to organize accordingly, the pluralist game is up. So you have to believe that all political disagreements can be monetized; we’re just fighting over who gets how much. Conflicts that didn’t fit this pattern had to be suppressed or marginalized. For example, civil rights legislation was kept off the table for decades because it would have threatened the racial caste system in the South and, in the process, broken the New Deal coalition.

Moreover, and critically for present purposes, pluralist politics depends on rising affluence and economic growth. Social Security is the obvious example: so long as incomes rise and the demographics work for you, there’s no problem. But the general principle applies across the board. Without growth, distributional games become zero-sum and therefore much harsher—too harsh to handle for a system that isn’t set up to inflict losses. Germany’s post-War “social welfare state” was consciously built on this logic: you can redistribute growth, but never make anyone worse off. The New Deal Constitution was far more improvisational, but the basic idea was the same.

It’s easy to see how this stuff can get out of hand: by public demand, the system may place ever-bigger bets on future affluence. However, this did not happen for more than a full generation. The New Deal Constitution reflected a recognition that a Constitution of Affluence requires an economy that can produce it and which, to that extent and purpose, must be shielded from excessive demands. The New Dealers sought (idiotically) to prevent “ruinous” competition, but they still wanted competition. Institutional arrangements reflected this calculus. The New Deal Constitution was never fully pluralist but had strong corporatist overtones: if you got the big players—say, GM and the UAW—into a room, you could get things done and make deals stick. Independent agencies superintended “their” industry cartels—the FCC, AT&T and three networks; the SEC, the exchanges; the CAB, a handful of airlines. There were no activists, plaintiffs’ lawyers, judges and juries, or grandstanding state regulators to contend with. In the same fashion, the New Dealers created and ran intergovernmental cartels: “entitlement programs” were for states (and most certainly not for individuals). The congressional committee system stabilized the New Deal consensus against legislative attack.

Workable pluralist politics, you could say, depended on keeping actual pluralism at bay. That calculus eventually collapsed and gave way to an unlimited Constitution of Affluence. More about it in the next post.

Reader Discussion

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on May 17, 2012 at 16:06:02 pm

Mr.Greve,your thesis about the "New Deal Constitution" is very interesting and enlightening. 1st. The New Deal ,and especially Social Security could never have been put into effect unless the 16the Amendment(Income Tax) was implemented along with the Federal Reserve Act,which facilitated the expansion of the money supply by creating fiat currency out of thin air. The original intent of the 16th Amendment was a tax on the income of corporations or special privileged entities (see the Supreme Court Brushaber decision among others) which allegedly canceled out the direct taxation clause in the original Federal Constitution(although people are still arguing,to this day,over the Income Tax's lawfulness). 2nd. What FDR did after making it illegal to deal in or own gold dollars,plus seizing all the gold he could was to declare the United States bankrupt. Who did he declare bankruptcy to? The answer is the owners of the Federal Reserve Banking Cartel and whoever held America's debt. With that done,FDR then facilitated(according to your thesis) the implementation of a Fascist System. In other words the combining of government,business and organized labor into one economic entity. 3rd. The whole concept of Social Security,even to this day, is to make virtually every American a walking corporation thus allowing the paying of the Income Tax to be implied and to cancel out any kind of individual sovereignty. This is why,even to this day having a Social Security number is still "voluntary." In other words you can't forcibly make citizens give up their sovereignty. In the end,without direct taxation and fiat currency the New Deal and the later growth of the Welfare State(Medicare/Medicaid,Unemployment Insurance,Food Stamps,aid to this aid to that) would have been impossible. Your correct,the New Deal was a turning point in history.,much to the detriment of Liberty loving people.

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libertarian jerry
on September 24, 2012 at 11:50:51 am

The problem is us. We have had mavsise annual tax breaks for corporations/the richest 1% for the past quarter century, amounting to billions of dollars. What this means is simply that the tax debts of the rich are now paid with public funds, i.e., welfare . At the same time, we repealed welfare aid to the very poor, and what is left of welfare programs is now very punitive. What we have spent to cover the cost of those tax breaks for the few rich far exceeds what we would have spent on welfare, had it not been reformed . As a result of welfare reform , the infant mortality rates among America's poor now exceed that of most Third World nations, and the life expectancy of America's poor has been falling. In short, people are dying because of these policies. So where is the outrage? How do you explain the morality of an American public that has remained mostly silent about this?

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Abdul

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.