Capital Calcification


Demosclerosis: The Silent Killer of American Government, by Jonathan Rauch, New York: Times Books, 156 pages, $21.00

"Government's power to solve problems comes from its ability to reassign resources, whether by taxing, spending, regulation or simply passing laws. But that very ability energizes countless investors and entrepreneurs and ordinary Americans to go digging for gold by lobbying government. In time, a whole industry—large, sophisticated, professionalized, and to a considerable extent self serving—emerges and then assumes a life of its own. This industry is a drain on the productive economy, and there appears to be no natural limit to its growth. As it grows, the steady accumulation of subsidies and benefits, each defended in perpetuity by a professional interest group, calcifies government. Government loses its capacity to experiment and so becomes more and more prone to failure. That is demosclerosis: postwar government's progressive loss of the ability to adapt."

Thus does National Journal contributing editor Jonathan Rauch introduce the malady which sorely afflicts our national government. And to Rauch, who yearns for a reinvigorated, adaptive, active government, demosclerosis must be fought with every available medication. Unfortunately, as we shall see, the available medications are not very promising.

Making use of Mancur Olson's seminal analysis of the degenerative evolution of societies and governments, Rauch laments "the democratic public's tendency to form ever more groups clamoring for ever more goodies and perks and then defending them to the death. Free and stable societies, it seems, tend to drift toward economic cannibalism and governmental calcification, unless they make a positive effort to fight the current. Demosclerosis may now represent the most serious single challenge to the long term vitality of democratic government."

Rauch chronicles the onset of the disease with many compelling facts. We are in the midst of an accelerating hyperpluralism. More and more narrowly defined special-interest groups are springing up in Washington, complete with a full array of lobbyists, lawyers, influence peddlers, and PACs, to defend and improve upon their government subsidies, tax breaks, trade preferences, and rigged deals. Forty percent of the members of Congress who retired in 1992 promptly signed up to play this pernicious game.

This feeding frenzy has produced a parasite economy focusing not on wealth production for society as a whole but on transfer seeking—using the power of government to reroute wealth from elsewhere to their own constituencies' pockets. This parasite industry is qualitatively different from vendors in the private economy. You can refuse to buy from your auto dealer or stock broker and emerge intact, but the transfer seeker, like the criminal class generally, can manipulate the government to take your money if you don't hire him. And it is now common for a special-interest group to get a far better return on its investment in the parasite economy than in attempting to improve its productivity in the real economy. One of the iron laws of the parasite economy is: No matter who else loses, lawyers and lobbyists win. (See "Suckers!," May.)

Rauch offers numerous case histories of victories of the parasite economy over the disorganized forces of parsimony and limited government. Citrus marketing orders have forced the destruction of billions of pounds of oranges and lemons. Businesses were straitjacketed in their efforts to lay off unneeded workers. The notorious sugar program extracts some $1.4 billion from consumers to benefit a small but highly organized domestic sugar industry. The mere idea of treating non-veterans in V.A. hospitals, after the veterans, produces a fearsomely effective reaction among veterans' organizations. Federal programs, once created, are virtually impossible to eliminate.

One would think that the most calamitous result of this demosclerotic condition is the horrendous burden government places on the creative, wealth-producing energies of a free people. Not exactly. The biggest malign consequence, according to Rauch, is that government becomes calcified, unable to take advantage of new opportunities for activism. He is romantic about the innovative spirit of the days of Franklin Roosevelt and Lyndon Johnson, when government was bold, progressive, and visionary. Alas, "the same programs which made government a progressive force from the 1930s through the 1960s also spawned swarms of dependent interest groups, whose collective lobbying turned government rigid and brittle in the 1990s."

What would one have expected? The more government becomes the main provider of benefits for interest groups, the more fiercely the hired parasites of those groups must fight to protect those benefits. To avoid the current pathological condition, one should have prescribed that the federal government limit itself strictly to its constitutional duties, instead of throwing a giant buffet for every group which had become politically effective.

That seemingly self-evident conclusion is not, however, attractive to Rauch. Rauch wants to purge government of old, boring, and failed programs to make room for new, exciting, and progressive programs. He laments the power of the parasite industry that quite predictably sprang up to protect what Rauch thinks should be interred.

For example, Rauch weeps over the shrinkage suffered by Bill Clinton's bold "New Covenant" proposal for a national service corps, in which "young people could work for their country to pay back their student loans, learning citizenship and responsibility." A Congress burdened by inherited spending programs and a shortage of revenues was forced to lay out (i.e., borrow) only $1.5 billion for three years of this exciting new venture.

Well, I can remember when we had a somewhat similar program. Young people could borrow money, go to school, get a job, and work for themselves to pay back their student loans. That isn't enough for Rauch, who is excited only by a program where young people "work for their country." Nor does he inquire why it is now necessary to borrow so much money to pay hyperinflated college tuitions, or how the college aid programs have proven to be a massive transfer of wealth from taxpayers to overstaffed and overpaid college faculties, administrators, and assorted supernumeraries, using the student as a convenient political rationalization.

There are, however, some reform successes. Rauch identifies a recent Medicare "reform" as a good example of hemorrhage limitation: "Washington was able to tinker with the program to tame the worst excesses (albeit by shifting many of the costs to the private sector, and so displacing the health cost problem rather than solving it)." The truth is that Washington decided to pay less for services that medical providers were required to provide to the politically potent elderly, thus shifting the cost of service onto the premiums paid by private patients, thus producing a spiraling increase in health-insurance costs, thus creating the health-care crisis that justifies Hillary Clinton's socialization of one-seventh of the national economy. Lord, spare us any more such successes.

Rauch is sharply critical of the two kinds of political creatures he is aware of, liberals and conservatives. He asks liberals, who rely on governments to solve problems (how far our nomenclature has degenerated!), to understand that there are limits, and that when government becomes calcified, it will fail, and with it liberalism itself will fail. (This is one of the more sanguine observations in the book.) Conservatives, he says, are guilty of talking a government-limiting game while lacking the courage to carry through with it. Rauch ignores the awkward fact that most conservative failures occurred because the liberals had the votes.

Conservatives also come in for sharp criticism for their resistance to raising taxes. Rauch believes that to solve the deficit problem, "taxes must go up, probably a lot." He likes the idea of coupling higher taxes with spending cuts. Now if there is any more fatuous idea in Washington, I don't know what it is. Gerald Ford, Ronald Reagan, and George Bush all made deals with Congress to enact tax increases (now) balanced with spending cuts (later), a proposition that certainly merits Sen. Everett Dirksen's celebrated remark, "Ha ha ha, and I might add, ho ho ho."

So what is Rauch's remedy for this government-threatening affliction? He speaks with mild approbation of procedural change such as lobbying restrictions, campaign finance reforms, and term limits, and endorses the benefits of free trade and monopoly breaking. But Rauch's real remedy is "a disciplined regimen of self reform," led by a courageous president "with the backing of the nation as a whole."

Well, it has happened. Jackson killed the Bank of the United States. Van Buren put an end to some egregious bank bailouts. Pierce vetoed a bill for insane asylums, and Cleveland for agricultural subsidies. Calvin Coolidge, rest his soul, said no to practically everything asked of him. Jimmy Carter bagged the Civil Aeronautics Board, and even Ronald Reagan finally laid to rest the Synfuels Corporation and the Clinch River Breeder.

But after reading Rauch's forceful account of the strength of the parasite economy defending demosclerotic government today, one wonders where any modern president can find an effective majority to back his action, let alone "the backing of the nation as a whole." Identifying all the special-interest ripoffs and bagging them all at once sounds like a great idea. The question is whether any president could now browbeat any Congress into doing any of it.

There are some bold steps available to a president determined to lead—and to risk his presidency and the fate of his party. One would be to exercise an enhanced rescission power to perform surgery on spending bills, whether or not Congress agreed to give it to him. Another would be to send Congress a budget resolution that axed virtually every special-interest appropriation, subsidy, and tax preference—and to note that he would prepare a report to the American people providing chapter and verse on which members of Congress restored which schemes in the name of which special interests and would read the appropriate items from that report in a number of states and districts come next election season (a virtual declaration of war against Congress). Yet another would be to propose and campaign for a combined tax and debt limitation constitutional amendment, which would stop the issuance of gross federal debt at, say, $5 trillion and shackle Congress's power to replace debt issuance with higher taxes.

Rauch does not offer these radical remedies, or anything like them, because at heart Rauch thrills to the dream of an active, high-tax, innovative government solving the many problems of the people. As he sees it, the problem is not to cut back on bloated and intrusive government, but to cure demosclerosis, so that government is no longer thwarted in playing its intended progressive role. Unfortunately, it was government playing just that progressive role that got us into this sorry mess.

On the final page of his classic study of interest-group politics, The Governmental Process, published in 1960, David Truman wrote, "On examining the country's stormy past one may in bewilderment conclude that 'the Lord takes care of drunkards, little children, and the United States of America.' " After reading Rauch's book, even the most skeptical may feel the urgent need to pray.

Contributing Editor John McClaughry is president of the Ethan Allen Institute in Vermont.