Suckers!
Washington's parasite class keeps growing and growing and growing and...
"Let us give this capital back to the people to whom it belongs!" cries Bill Clinton, in his inaugural address. Take government back from "the people who always figure out a way to prosper even as more Americans suffer," says former California governor Jerry Brown, during his 1992 presidential campaign. Take government back from the "permanent class of career legislators," writes the columnist George F. Will. Take government back from "the awesome power of the Washington nomenklatura," says Will Marshall of the Democratic Leadership Council's think tank in Washington. Everyone is getting into the take-government-back act.
Conservatives have always spoken of Washington as being, in some worrisome sense, out of control, but recently consternation has washed centerward. Sen. Robert Kerrey of Nebraska (like Jerry Brown, a 1992 Democratic presidential contender) talks grimly about the strangely self-referential, self-feeding quality of modern government. "We allow interest groups to create new bureaucracies and then the bureaucracies serve the interest groups," he says. Across Capitol Hill, Rep. Timothy J. Penny (D-Minn.) says glumly, "It's a control game we're playing now. It's an insider's game." From Penny and Kerrey and Marshall and Will and Brown and Clinton and others comes a chorus of demands to "give this capital back to the people to whom it belongs."
The issue at hand is not just the size and growth of government but the size and growth of the professional lobbying industry attached to and feeding upon government. It was said of the Soviet military complex that when we built, they built, and when we didn't build, they still built. Something similar seems to happen with lobbies: When government grows, they grow, and when government doesn't grow, they still grow, though maybe not as fast.
The take-government-back crowd assumes that, somehow, Washington can be restored "to the people." But what if they're wrong? Few have yet confronted this question: What if government cannot be "taken back" from the entrepreneurial professionals who increasingly dominate it? Emergent theory and postwar experience give reason to think that the infestation of parasites in Washington is ineradicable. Worse, the infestation isn't stable. It grows.
On this score, the facts speak without ambiguity. By all known measures, the transfer-seeking economy has grown spectacularly over the past 30 or so years, with no end in sight. The number of groups listed in the Encyclopedia of Associations more than quadrupled between 1956 and 1990, from 4,900 to more than 22,000. Those groups represent only a fraction of the total. The number just of environmental groups, including local cleanup coalitions and the like, is now estimated at 7,000; the number of gay groups listed in the Washington Blade's resource guide grew from 307 in December 1990 to 405 earlier this year. Not all groups lobby, of course, but many do. Evidence suggests, indeed, that groups have become more likely to engage in lobbying; the proportion of trade associations based in Washington has been steadily rising, which suggests deepening political involvement.
Counting lobbyists is hard, but all counts show increases. The number of active lobbyists registered with the U.S. Senate has jumped from 3,000 in 1976 to around 8,000 last year; between 1961 and 1982, the number of corporations with Washington offices increased tenfold. The number of lawyers in Washington quadrupled between 1972 and 1987, from 11,000 to 45,000. And the investment in politics, as measured by real campaign spending, has tripled since the early 1960s.
One could go on and on this way. The data leave no doubt that the past several decades have witnessed explosive growth in the lobbying sector—a trend quite unruffled by the comings and goings of Democrats and Republicans, conservatives and liberals, Reagan or Clinton or whomever. Why?
At the heart of the problem are the curious internal mechanics of the goody-hunting industry, with its virus-like ability to convert the organs of government into factories producing more lobbies. To understand why this parasitic subeconomy grows and grows, ascend some steps in the spiral logic of lobbying.
1) Transfer seeking—the chasing of existing wealth—is inherently alluring to individuals yet inherently hazardous for society. The concept of transfer seeking (or "rent seeking," as professional economists more obscurely call it) is intuitively familiar, though its economic implications are not. For any individual, there are two ways to become wealthier. One is to do something productive. The other is to redistribute existing resources in one's own favor. From an individual's self-interested point of view, the two kinds of enterprise are more or less interchangeable, because either can make you richer. But from a social point of view, they are very different. If we all work, we create wealth, and society is better off. But if we all do nothing except try to get our hands in our neighbors' pockets, we will all be very busy, yet we will all eventually starve.
One major form of transfer seeking, theft, is prohibited. But not all forms of transfer seeking are illegal. Indeed, some large quantity of it is inevitable. We call it "lobbying," in the broadest sense of the word: pressuring government to give us things we value.
2) Any government that's strong enough to govern is vulnerable to entrepreneurial exploitation by lobbies—there's no getting around it. It is government's very power to be government that creates the market for legal transfer seeking—a point that deserves emphasis, because so many people refuse to face up to it. Inherently, government transfers and assigns resources, whether by levying taxes to pay soldiers or by setting patent rules. This power would be unproblematic, except that resources will always be contested, and one reason we have politics is to decide how to assign them. Some people daydream about ways to adjust the Constitution or otherwise fine-tune the process so that government is empowered to deliver only "wise" or "necessary" or "legitimate" benefits. But that's a tall order.
Was the Superconducting Super Collider a national-interest (or even world-interest) project? Or was it a pork-barrel handout for hard-lobbying scientists and harder-lobbying Texas construction contractors? Are the advocates of lower capital-gains taxes out to revitalize the economy, or to line their pockets? The answer, of course, is that there is no answer. It's all a matter of opinion, and government's job is to decide—so we're back where we started.
Transfer seeking is as old as government itself. A century ago in America, veterans and manufacturing industries wielded considerable lobbying clout. Being both inevitable and hallowed, lobbying might not be much of a worry if it stayed constant over time. But the rude surprise is that it doesn't. Lobbying, a physicist might say, is dynamically unstable.
3) The transfer-seeking economy, like any lucrative enterprise or sector, is a magnet for capital. In a developed economy, a marginal dollar invested in a new die-cutter or inventory-control system might produce a return of, say, 10 percent a year. Compare that with a shrewd investment in lobbying. In 1992, The New York Times reported that a handful of sugar refiners donated $8,500 to Sen. Alfonse D'Amato (R-N.Y.) and received his successful support for a tariff rebate worth $365 million—a return of about 4 million percent. Only a fool would pass up such an investment, or even the occasional shot at one. "If I throw in a million here or a million there, I might get a hundred million back," a Washington lobbyist once told me. "And there are probably enough cases like that so they keep throwing money in."
Not only does lobbying offer a rich assortment of investment opportunities, today it also enjoys unprecedented access to investment capital. In the old days of the smoke-filled rooms, access to lobbying was restricted mainly to the privileged ("special interests"). Democratization of the system justifiably opened the doors, but with a side effect: Today, in the age of mass-membership organizations and computerized mailing lists, the pool of people who can invest in lobbying comprises the entire adult population. To invest in lobbying is as easy today as to invest in a mutual fund: Find an interest group you like, if one doesn't find you first, and write a check.
Of course, any growing industry attracts capital—until further growth becomes superfluous, at which point profits vanish and investment dries up. But the lobbying sector, unlike conventional industries, doesn't seem self-equilibrating. To the contrary:
4) Transfer-seeking investment tends to be self-fueling, sucking in capital which tends to suck in yet more capital. This is a kind of whirlpool effect, and it is the reason I refer to the transfer-seeking industry as a "parasite economy." Parasites in nature force you to spend energy and resources fending them off. Transfer seekers are analogous, because they require their targets to fend them off. It takes a lobbyist to stop a lobbyist, and in a society where everyone can lobby, everyone needs Washington representation to defend against raids by everyone else's Washington representatives. When environmentalists lobby more, business lobbies more, and vice versa.
The cycle never seems to stop of its own accord. Because the best defense is a good offense, interest groups constantly angle for new goodies. Retirees' groups seek long-term care and prescription-drug subsidies, dairy farmers seek higher price supports, utility companies seek laws mandating electric cars, and so on. When the sugar people win a benefit, the corn-sweetener people need to try to even up the score. Each group's angling induces its competitors to redouble their efforts, and, as more lobbies dicker and more is invested in lobbying, it becomes all the more important not to be the poor sucker who gets taken to the cleaners. The more people play this game, the more people need to play. Demand creates more demand, business generates more business.
5) Further fueling the cycle, professionals in the transfer-seeking sector can churn up business, and do. Transfer-seeking professionals—politicians and lobbyists and interest groups—are good at stirring the pot, and so at creating jobs for each other. Whether they do so out of idealism or financial interest—usually the former, I believe—the end result is perpetual motion. Other things being equal, the more contention, the better. The parasite economy as a whole benefits when problems are solved with a maximum of fuss but a minimum of success—a pretty good description of Washington at present. Significant bills revising the tax code were enacted in 1981, 1982, 1983, 1984, 1986, 1988, 1989, 1990, and 1993 (another was vetoed in 1992), yet no one seemed particularly happy with the tax code. Well motivated or not, constant tax-law churning is good business for one group above all: professionals in the transfer-seeking business.
This is not to say that most or even much of what Washington does is drummed up by lobbyists and politicians purely to generate fees. Not even Washington is quite that cynical a place. The point, rather, is that the lobbying dynamic is self-perpetuating: Activity generates lobbying generates activity. As the activity level rises, with it rises the public's ire, because:
6) Transfer-seeking professionals win no matter who else loses. This is what so infuriates the public (and Jerry Brown). Yes, it's better to win than lose, and better to have a good track record than a bad one. But any fight over resources benefits transfer-seeking professionals as a class, because they reap the fees. In that respect, lobbyists, politicians, and interest-group professionals are like lawyers: Though some clients lose, the fee takers, as a class, all win. They're like plumbers in a city that's springing more and more leaks.
Year after year, in budget after budget, the Reagan and Bush administrations proposed abolishing the Economic Development Administration, which dishes out grants and subsidies to localities. Reagan and Bush always failed, but they did succeed in reducing the EDA's budget, notably by eliminating general revenue sharing. "We figure our programs were cut about 70 percent," says Aliceann Wohlbruck of the National Association of Development Organizations, a group of EDA beneficiaries. Yet in 1979, before Reagan, the group had only one full-time staff person; it now has four, plus part-timers. The program's budget got smaller, but its lobby got bigger—a neat trick. This pattern is not inevitable, but it is common. Over time, lobbies tend to grow. Having grown, they are very hard to get rid of; in fact, attacking them can perversely help them to mobilize and consolidate their bases. One implication is:
7) As a class, transfer-seeking professionals don't much care who is in power. President Clinton came to office promising an assault on high-priced lobbyists: "They are the defenders of decline." And were the defenders of decline alarmed? Crowed one exultant lawyer-lobbyist in the Legal Times after the election, "We are all expecting about a 33 percent increase in fees." At firms with good Democratic connections, "the jubilation was palpable," reported the newspaper. But Republicans were hardly less elated, citing, as one prominent lobbyist told National Journal, "an almost automatic defensiveness from the corporate community on most issues it faces." Oh happy day!
Bill Clinton generally takes an expansionist view of government. Ronald Reagan generally took a reductionist view. Interestingly, however, the numbers of lobbyists and interest groups and campaign contributions rose impressively under Reagan. And that, really, is no surprise. If government expands, you need a lobbyist or an interest group to get a piece. But if government contracts, you need a lobbyist or an interest group to defend your piece. Remember, it is the level of contention and activity, not the size of government per se, that primarily influences the lobbying sector's growth. Reducing the size of government may be worthwhile on the merits, but it is unlikely to reduce the population of parasites, except perhaps temporarily.
So the beat goes on, come Republicans or Democrats, liberals or conservatives. In 1993, the American Automobile Manufacturers Association moved to Washington; so did the National Association of Independent Schools, saying it "wanted to be closer to the source"; so did the Business Roundtable. Washington offices opened left and right: the Society of Manufacturing Engineers, the Christian Coalition, MasterCard and Visa, even Major League Baseball. The latest trend, reports Eliza Newlin Carney in National Journal, is for universities (including public ones) to open their own offices in Washington: Rutgers, Princeton, Harvard, Vanderbilt, the University of California, MIT, and more to come.
Where does it all end? Maybe it doesn't.
8) There is no apparent limit to growth of the parasite economy. There are constraints on the speed of its growth, such as the scarcity of politicians' time and attention; and some particular lobbies will stagnate or contract or disappear altogether, as presumably buggy-whip lobbies have done. Other sectors, however, will expand quickly or even explosively. The health industry's congressional giving was up 25 percent in 1993 over its comparable 1991 level, and the number of health groups in Washington has more than sextupled (!) since 1979. On balance, given the deep pool of potential capital for lobbying, plus the virtually infinite supply of potential goodies to lobby for (or against), plus the tendency of lobbies to accumulate, plus the tendency of lobbying to create more demand for lobbying, it is hard to see why the lobbying sector as a whole would stop growing and start shrinking.
Few trends, of course, go on forever. To say that at present one can see no limit isn't to say that no limit exists. One may hope that at some point the lobbying buildup will go into reverse of its own accord. One might suppose, for instance, that after a while there would be so many lobbies that many of them, like bees swarming a puddle of honey, would be unable to penetrate to the food and would simply go away. Yet even this might only slow, rather than stop, the accumulation. Remember: A lobbyist doesn't need to actually pass a bill or win a new subsidy to earn his keep. In fact, in any given year the typical lobbyist never comes close to a big score. However, he doesn't need to score, as long as someone else does. Then he need only persuade some folks that they should look after their interests in Washington. And that is an easy case to make.
Suppose, then, that the worst turns out to be true: that, at least for the foreseeable future, lobbying activity grows and grows no matter who is in power, albeit with lulls and spurts. New lobbies keep appearing and old ones only rarely go away. What would that mean?
The first reflex is to predict economic disaster, both because the product of lobbying is a heavy burden of subsidies and special-interest benefits, and because lobbying itself sucks in more and more resources. But disaster need not happen. In fact, it probably won't happen. I'm not saying that the growth of a self-feeding parasite sector is economically innocuous; it isn't. Only that it needn't be the end of the world—if American society stays as open as possible to new competitors and innovations.
In a closed economy, like India's or the old Soviet Union's or Mexico's until recently, entrenched lobbies and reactionary interests can drive the country to penury. Lobbies are like fungus: They thrive in stagnant, sheltered places. For decades, Japan sealed its rice market, giving shelter to a ruthless farmers' lobby that drove food prices up, held farm productivity down, and bought and bullied politicians on a massive scale. By contrast, America's farm lobby, though strong, is weaker than Japan's, yet America's farmers are more productive than Japan's—all thanks to the comparative openness of the American agricultural market.
Openness—to new technology and to new competition, foreign and domestic—turns out to be a good inoculation against the worst economic depredations of lobbying, because it batters entrenched interests. By definition, what lobbies want is a permanent hold on their benefits. That is, they seek monopoly control of some piece of the private market (through trade protection, for instance, or favorable regulations) or some piece of the public treasury (through subsidies or tax breaks). Once they've got their goodies, they go to great lengths to defend them—which is why heavily protected and subsidized industries, such as shipping, textiles, and agriculture, usually spend much more on lobbying than do less-protected ones, such as semiconductors and software. The converse is also true. Squeeze a lobby's monopoly, and you crimp its lifeline.
So the way to weaken the public-school employees' lobby—one of the most deeply entrenched and reactionary groups in American politics today—is by freeing tax money for public schools' competitors. The way to weaken the farm lobby is to reduce agricultural subsidies. The way to weaken entrenched textile lobbies is to tear down their protective trade walls. The way to weaken cable-television lobbies and phone-company lobbies is to get rid of rules preventing the two industries from competing with each other, as the Clinton administration proposes to do. In short, the way to weaken coddled interests is to expose them to competition.
The rub is that exposure to competition is exactly what lobbies organize to avoid. Public-school teachers, farmers, textile companies, and the rest fight tooth and nail to keep every perk and goody they have ever acquired. They win more often than not, and even when they lose they rarely stay down for long. After 33 years, Congress finally managed last year to kill the honey subsidy, but the beekeepers' lobby bounced right back with a campaign for new trade restrictions on imported honey.
So we shouldn't kid ourselves. Crimping the transfer-seeking sector isn't easy. In fact, it is very difficult. It will require much more of the kind of innovative and forceful political leadership that produced the deregulation of transportation industries in the late 1970s, the subsidy-smashing tax-reform bill in 1986, and the North American Free Trade Agreement in 1993. Harder still, it will require the voters to support politicians who attack subsidies and protections that the voters themselves, speaking through their myriad groups, so fiercely protect.
To date, brave leadership and enlightened followership have both been scarce and sporadic. But we can hope that, as the parasite economy feeds and grows, the public will see more clearly why strong medicine is worth taking: The alternative is worse.
Jonathan Rauch, a contributing editor of National Journal in Washington, is the author of Demosclerosis: The Silent Killer of American Government, just published by Times Books.