Cato Policy Report, March/April 1997
Can Government Change?
After the 1994 elections many observers thought that a downsizing of the federal government was imminent. More than two years later, however, no such downsizing has taken place, and people are wondering if change is impossible. To discuss that issue, on December 4, 1996, the Cato Institute hosted a Policy Forum, "Can Government Change?" The speakers were Jonathan Rauch, author of Demosclerosis; former Democratic congressman from Minnesota Tim Penny; and Jeff Bell of Lehrman, Bell, Mueller & Cannon. Excerpts follow.
Jonathan Rauch: I come, in a sense, as the bearer of bad tidings. Lately I've been making the case for what I call enlightened defeatism. By enlightened defeatism I do not mean that things never change in Washington. Things change in Washington all the time. Change is a constant around here. If the question is simply, "Can government change?" the answer is obviously yes. That's what Congress does from day to day. But reformers like me want more than your usual day-to-day interest-group incrementalism. Reformers want coherent fundamental reform that sets a direction for government and produces structural change rather than just endless reallocation among all the usual suspects. What enlightened defeatism posits is that the deeper sort of reform may in fact not be possible.
Now I'm the first to admit that enlightened defeatism may be too pessimistic. There are problems with it. One is that this year we got two very big changes: the farm bill and the welfare reform bill. Second problem: the idea may in fact understate the importance of ideas. We'll see about that over time. But I do argue firmly that enlightened defeatism is worth taking very seriously and that, if it's a valid point of view, it has important implications.
Let's consider three examples of attempts at large systemic reform for which real political leadership worked very hard. First was the Clinton budget of January 1993, which, I would argue, was stillborn. The president was dissuaded by his advisers and by Congress from making serious structural reform. So, he never really got the ball into play. Second was the Clinton health care plan. The third and the most interesting example, I think, is the Gingrich budget, which, as Steve Moore's work has shown, was watered down before it reached the stage of presidential veto.
In the cases of the health care bill and the Gingrich budget, we saw similar things happen. Both fell victim to three-to-one arithmetic. Three-to-one odds are very hard to beat. And it turns out to be extremely easy, easier than I realized a few years ago, to organize a three-to-one coalition against any kind of systemic change. All you need is for the interest groups to get together with the opposition party and alarm the public, which, as it turns out, is very easy to do. Once you do that, it is very hard for a reformist party to break through the coalition. We saw that on health care; we saw it again with the budget.
A second kind of arithmetic--thousand-to-one arithmetic--is even less promising. That arithmetic is familiar to all of you who know public choice, so I won't rehash it. But basically you've got thousands of little interest groups and occasionally big interest groups in Washington defending particular narrow programs targeted at themselves. No one really knows or cares about those programs except their defenders. The only way you can get something past the defenders, something large, is to package a lot of reforms together in a kind of big sweeping proposal that energizes the public so it says, "The result of this won't be to get rid of just the wool and mohair subsidy; the result will be to reduce taxes substantially, reduce the deficit, and have enough money left over, for example, to fund some important new initiatives." A proposal for sweeping reform has to include a reward for the voters. That kind of proposal gives you at least a possibility, but you're still not home free because now you face the three-to-one problem. The minute you package something, it gets shot to pieces by the "three-to-one" coalition.
Well, that's the good news. Now the bad news. Things are getting worse. Unfortunately, a point that I think is too often missed, and that is in fact the central tenet of my book Demosclerosis, is that Washington is not experiencing a steady-state situation. It is not sitting on a flat plane while things go on around it. It is itself changing. More and more groups are forming in American society every year. Everything you look at suggests that the number of interest groups grows at a steady rate and the number of lobbyists grows at a steady rate. And as the economist Mancur Olson has shown in his seminal work on this, there is very little that can be done to reverse that social process.
Microsoft, you will notice, has, after all these years in business, just come to Washington and hired a lobbyist. It is now going to spend a few million dollars a year here. The result of all this is not no change; the result is a mad scramble that makes it more rather than less difficult to get through a major structural change in government. If enlightened defeatism is right, what are the implications? First activists, it means that basically you are doomed to fiddling at the margins. Now fiddling at the margins is important, it is worth doing, but people who want to reduce the size of government by a third or half can go home. It's all over, folks. This is it. Government won't get significantly smaller, and it won't get significantly larger because of limits on the ability to raise taxes. And structurally it won't change very much, though particular programs will always be in flux.
I think it is awfully important for places like the Cato Institute, which would like to make radical change, to reckon with the idea of enlightened defeatism.
Jeff Bell: I want to be up front about a few things. I have lost my Senate races, my book didn't sell that well, my most recent presidential candidate was Jack Kemp in 1988, and I just came here from trying to start a parental rights movement in Colorado, where we got punched in the nose. In fact, we wound up being accused of facilitating child abuse. Those are quite a few negative marks, and at least on the surface they would tend to reinforce what Jonathan has been saying.
Another point that he has in his favor is the last election. Clinton wins in 1992, and he has all sorts of problems. The Republicans take the House as well as the Senate in 1994, and then after all of that turmoil, what do you get in 1996? You have an election in which, almost without exception, the status quo is ratified. Of all the governors and senators running for reelection, exactly one lost. That's certainly a point for Jonathan's side.
However, I want to go to the thing that makes me believe that big change is possible, my involvement in the tax revolts of the 1970s and 1980s. In 1974 I went to work for Ronald Reagan in Sacramento. My job was to organize, at the staff level, the presidential campaign that Governor Reagan was attempting to put together for 1976. And the first thing I heard about when I got there was something called Proposition 1.
It was a very moderate, very responsible tax limitation proposal put on the ballot in November 1973. Reagan and his operation raised the money for it, and it was very well funded, but it lost. The teachers' unions, the state bureaucrats, a lot of the newspapers, everybody you would expect to do so fought Proposition 1 tooth and nail. So when I went to work for Reagan, there was pessimism about addressing fiscal issues at all.
But the problem with Proposition 1 was, not that it was too radical, but rather that it was too responsible. The drafters had anticipated every conceivable argument that the teachers' union were going to use against it and, as a result, it was filled with qualifications and provisions. The thing was too complicated to understand by the time it got to the voters.
Four years later, of course, people who never won elections, such as Howard Jarvis, came in and got something incredibly radical on the ballot, namely Proposition 13. It passed, and it had a big influence on getting us to the federal tax cuts of the 1980s.
If you had said in 1981 that the top tax rate is 70 percent and on January 1, 1987, the top tax rate would be 28 percent, I think most people would have said that you were a typical bomb-throwing radical who didn't understand that incrementalism is the only way that you ever do anything. But, it turns out, they would have been completely wrong.
The people have what I think is the reaction you want them to have--anger, outrage, and impatience with self-serving devotion to the status quo. And as long as the system is an open democracy, the outrage that people feel is part of what leads to a counterreaction.
You have to think big, you have to be very optimistic, maybe too optimistic, to achieve any significant change. And, to be sure, you will get what you want only part of the time. But some of the time is a lot better then what happens in dictatorships and in elitist versions of democracy like the parliamentary democracies. So, my message is that the public, at least in part, makes it possible to have big change in a country like ours.
Tim Penny: I really think that we are making headway in the area of government change, and I think the trend is irreversible. Let me explain what I mean by that. In his January 1996 state of the union message, President Clinton proclaimed that the era of big government was over. Now Clinton was not so much announcing his own policy or his own belief as acknowledging a reality that he had little choice but to accept. Measured from several perspectives, I think it is undeniable that the trend toward centralized government, which began with the New Deal and was accelerated by the Great Society, has run its course.
Public trust in the federal government has declined dramatically in the last 30 years. Today fewer than 20 percent of American voters express confidence in the government to do the right thing most of the time. Thirty years ago nearly 80 percent of Americans trusted the government to do the right thing. What have been the factors that have caused the dramatic decline in public trust in government and support for government intervention in a variety of areas? There are, I think, two that have to be mentioned. One is hyperpluralism.
Hyperpluralism, as defined in Jonathan's book, results when too many groups come to think of government only in terms of what benefit they can secure from the public treasury. An explosion of government programs, particularly since the 1960s, created interest-group politics and has led to a backlash against hyperpluralism.
There's an old adage that nothing is a priority when everything is a priority. By succumbing to myriad demands to add one more and then one more and then yet another program to the federal budget, Congress, under my party's control, eventually discredited the government by promising too much and creating a bureaucratic mumbo jumbo that delivered too little. So, I think an excess of hyperpluralism is one of the major factors leading to public animus toward the federal government.
The other factor that I think has led to the change in attitude toward government is deficit politics. Deficit pressure has eroded public trust in government and weakened voter support for new initiatives. Voters are not impressed with federal policymakers who, year in and year out, fail to keep the federal budget in balance. It has not been in balance since 1969. The deficit soared from $65 billion in Carter's last year to twice that amount in the first year of Reagan's term. And throughout the 1980s, it never fell below $150 billion.
Deficits have dominated public policy deliberations for more than a decade. In response to the deficit awareness of the public, politicians have attempted initiatives like the Gramm-Rudman-Hollings Act and the pay-as-you-go principles of the 1990 budget agreement to bring some fiscal discipline to the federal budget process. The catastrophic health care bill, first adopted in 1988, was quickly repealed in 1989. And the Clinton health bill was defeated for many of the same reasons. Budget processes demanded that the proposal be honestly financed, and when the public saw the true cost of the program in an open debate they recoiled from the prospect of creating a new large and expensive federal bureaucracy. So deficit politics has been a growing force within the American electorate for a number of years.
I think that brings us to the message of the 1996 election. I believe that election proved that Medicare is not a killer issue; it proved you can deal with controversial and popular entitlement programs without fear of electoral defeat. Now it may be that my party was inept in its handling of the issue. But when all is said and done, the number of voters who cast their ballots in opposition to Republican candidates because of fears of cuts in Medicare was minuscule.
It's also significant to note that in spite of $35 million spent by the AFL-CIO--most of it spent on Mediscare campaign ads--the Republicans retained control of the House and gained two seats in the Senate. That $35 million was spent in a very targeted way, but it did very little good.
So, I think the public has dramatically moved in the last couple of decades to a posture of great skepticism about the size and the scope of the federal government. I think that this past election in particular proved that entitlements are no longer unassailable and that Social Security and Medicare are no longer the third and fourth rails of American politics. And so while Clinton may have said it and not meant it with great fervor, he was correct in acknowledging that the era of big government is over.
This article originally appeared in the March/April 1997 edition of Cato Policy Report.