The Constitution of Affluence, Part II

The New Deal Constitution, I argued in an earlier post, depended on rising affluence to support and sustain pluralist interest group politics. However, it still featured institutional, quasi-corporatist limits, reflecting a residual recognition that affluence requires production. Our Constitution of Affluence, in contrast, recognizes no such limits. It takes affluence for granted and then stages an all-encompassing pluralist festival, on the unspoken premise that we can afford it.

Let’s skip the fact that the premise is no longer tenable (duh!) and, for the time being, the excellent question of what happens next. The point of today’s demoralizing sermon and well-rehearsed litany is that mere policy initiatives, from tax cuts to block grants to tort reform, will make little if any difference.  Our unsustainable policy and fiscal commitments are anchored in institutional arrangements that we can change only with very great difficulty, if at all.

Pluralist Democracy

In the 1960s, after a long period of rising prosperity, the country decided to have a nervous breakdown. The institutional arrangements of the New Deal Constitution began to look deeply suspect. And in fact, there was something very unjust and undemocratic about a political system that kept civil rights questions bottled up; routinely sacrificed consumer interests to support an endless array of industry cartels; left millions of people in poverty; and along the way wrecked the environment.

Once you have persuaded yourself that interest group politics is a terrific constitutional prescription, its institutional limits begin to look artificial.  Thus, the natural answer to pluralism’s pathologies was to make the system more pluralist-democratic. The congressional committee and seniority system imploded. Parties lost their grip on political campaign finance. Administrative agencies—old and new—were exposed to sunshine laws and judicial review at the behest of theretofore excluded claimants. Federal courts threw their doors wide open to poverty lawyers, public interest groups, and the trial bar.

Along with the reform and “democratization” of existing institutions went a proliferation of independent, quasi-autonomous power centers: judges and juries; state regulators and attorneys general; administrative “czars,” boards, and commission; multistate agencies and special-purpose bodies at all levels of government (for example, financial control boards that have in many states taken charge of ungovernable, near-bankrupt cities and counties).

Predictably, the proliferation of access points was further accompanied by an enormous expansion of the lobbying industry. In Washington, D.C., the first twelve-story office building on K Street was constructed around 1960; today, the K Street community occupies much of Washington, plus Arlington and Alexandria.

Standard measures (expenditures, employees, pages in the Federal Register) capture the growth of government only imperfectly. As Paul C. Light described in a fine book on The True Size of Government (1999), the federal government has become increasingly adept at hiding its size and at leveraging its expenditures—foremost, by “cooperating” with public and private contractors. Overwhelmingly, federal programs are administered by state and local officials; the notorious “federal bureaucrats” are a comparatively rare species. And citizens can spend years knee-deep in government programs (such as Medicaid) without ever encountering an actual government worker.

A recent National Affairs article by John J. DiIulio (“Facing Up to Big Government”) provides a depressing overview of Big Inter-Government and its Private Administrative Proxies, or BIG PAP for short. It includes the military-industrial complex; the government health care-industrial complex (Medicare, Medicaid, and their nominally private providers); the security-industrial complex (188,000 Homeland Security employees, plus over 200,000 private employees); the environmental-industrial complex, featuring thousands of EPA contractors and DoE subsidy recipients; the welfare-industrial complex (with, in 2009, 13.5 million employees and $1.9 trillion in spending, much of it from government grants and contracts), and so on ad infinitum. DiIulio summarizes:

BIG PAP looks staggeringly immense. It represents some $7 trillion a year (and counting) in spending, more than 20 million public workers, and millions more de facto government employees in the business and non-profit sectors. It consumes more than 40% of GDP, and is on track to push the national debt above $20 trillion by the year 2020.

I’m inclined to think that these are low-ball estimates. For example, you could add financial institutions that, in a Dodd-Frank world, are joined at the hip with government (which is how a lousy bet at J.P. Morgan becomes a political event); a nominally private housing sector that lives on government fumes and subsidies; and large chunks of the farm economy.

No politician is seriously proposing to dismantle any of this. Among the reasons: you are looking at a huge slice of the American middle class—teachers, nurses, non-profit managers, construction workers, aircraft engineers, prison wardens, consultants. Any halfway serious attack on BIG PAP would tee off very large constituencies and, moreover, translate into something like a Euro-style austerity program.

Barring a bone-rattling shock to the system, therefore, BIG PAP will continue to grow. It is built to grow: if you believe that interest group pluralism produces a healthy polity and economy, you ought to draw everyone and everything within its orbit. That logic has no internal limits.

No Limits: Transfer Programs

Transfer payments to individuals are a widely used (though, for reasons just noted, partial) indicator of government growth. Social Security and Medicare are now at around a combined $1.25 trillion, tendency rising. They are matched by an equally voluminous set of means-tested programs. (Numbers in this paragraph are taken from the Brookings Institution’s Ron Haskins’ recent testimony in Congress; Cato’s Michael Tanner has very similar, equally bracing numbers.) In 1962, federal spending under the largest means-tested programs came to a princely $516 (2011 dollars). In 1980, the figure was about $4,300; now, it is over $13,000. Add in a gaggle of smaller federal programs plus state and local matching contributions, and the total comes to $1.143 trillion, or $23,731 per person. For a single “Julia” with two kids, that works out to over $70,000. To be sure, means-tested programs do not benefit the poor exclusively (they reach far into the middle class), and not all of them come in cash or cash equivalents. Still, the numbers are mind-blowing.

They will keep growing, as they have since the 1960s. (Neither the “Reagan revolution” nor the much-heralded 1995 welfare reform made a lasting dent in the upward curve.) Medicaid, food stamps, welfare, education, etc. are administered by dense political networks of federal state, and local bureaucrats, advocacy groups, unions, provider groups, and congressional subcommittees. The inhabitants of this jungle fight (sometimes fiercely) over who gets what, but they are united in wanting more money. Budgetary constraints have eroded. State-side, Medicaid incentivizes politicians to overspend and overtax, lest federal dollars are “left on the table”; meanwhile, Congress will match whatever states decide to spend.

In short, the institutional system is designed to generate its own growth. Regardless of whether the machinery generates any external, useful result at all, it ensures that enough is Never Enough, to quote the title of William Voegeli’s splendid 2010 anatomy of “The Limitless American Welfare State.” Perennially disappointing results (for example, in education) are both a given and a bonus: “mission accomplished” might translate into reduced investments.

You build a system like that if and when you think you can afford it. When you no longer can, the system wins and you lose.

No Limits: Values

“We can afford it” drives not only (re-)distributive politics but also the “values” politics—over public health, safety, and the environment—that emerged in the late 1960s. (In 1962, “car design” meant tailfins and horsepower. A decade later, it meant seatbelts and mileage standards.) The values are all consumption values—reflected not in authentic consumer demand (which runs from big station wagons to incandescent light bulbs) but in vicarious political definitions of what the demand ought to be. Almost by definition, the values are non-negotiable. Administrative agencies may make a show of calculating costs and benefits, and politicians and advocates may drone on about “green jobs” and the like; but at the end of the day, the system is driven by a conviction that the snail darter must live “regardless of the cost” (as the Supreme Court put it in a path-breaking 1978 case). [Tenn. Valley Auth. v. Hill, 437 U.S. 153, 188 n. 34]

Here again, boundless we-can-afford-it ambitions have institutional consequences. Traditional political institutions (parties, conventional interest groups, New Deal agencies) are pretty good at distributive politics but awful at values politics, precisely because the differences can’t be split by way of side payments. So, in a kind of pluralist parody, we invented and then empowered interests that represent nothing and nobody except a principle, as embodied by the ozone layer or the delta smelt. And we designed an administrative-legal regime that grants the groups a privilege to (at one end) press their “never-enough” demands on government and (at the other end) to block productive projects and investments.

And, no: we are not going to dismantle this apparatus, either. Economists are fond of showing that private and public (aggregate private) demand for environmental goods behaves like demand for a luxury good. The institutionalization of that demand commits us to a Rolls Royce policy all the way to bankruptcy court.

No Way Out?

Pluralism’s institutional derangements are broader than just suggested. For example, they include a progressive erosion between government and society, public and private. They include political polarization, civic alienation, and a loss of legitimacy on the part of both elected institutions and “independent” bodies, such as the Federal Reserve and the Supreme Court. Pluralism relies on those institutions to provide political stability—to put stuff you don’t want to mess with (monetary stability, rights) beyond politics. By now, the institutions have inherited the instabilities they are supposed to contain. Most Americans look to the Supreme Court as little more than a kind of mediator for awkward disputes. The Fed’s vaunted independence will last only so long as it agrees to provide fuel for a dysfunctional, ruinous political process. And so on.

All this leads back to the beginning: our policy failures and political discontents are rooted in the institutions and practices of our Constitution of Affluence. They are products of politics, but they are more entrenched than formal constitutional norms. (It’s a piece of cake to read the Contract Clause out of the Constitution; it’s a completely different proposition to dismantle the intergovernmental education blob.) The fact that they are entrenched and ruinous at the same time is a measure of the trouble ahead. Concluding remarks and a few modest proposals later this week.

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The Upside-Down Constitution

Many of my contributions to this blog will riff my forthcoming tome on the Constitution and its federalism, cleverly entitled The Upside-Down Constitution. The publisher’s (Harvard University Press) release date is February 15. However, you can already pre-order the book on Amazon.com. What exactly is “upside-down” about our Constitution? Keep reading to find out.