Everyday Corruption

In 2006, congressional Democrats accused Republicans of wallowing in a "culture of corruption," pointing to the peccadilloes of Tom DeLay and the excessive political generosity of Jack Abramoff. Now, in the months leading up to the 2010 midterms, congressional Republicans accuse Democrats of much the same.

But most of this is for the cameras. If we define political corruption as actions causing the public to lose confidence that politicians make decisions in the public's interest rather than in the special interest of those who give them financial support, the biggest corruption of our political process is entirely legal. It comes in the form of campaign contributions that would not be made were it not for implicit quid pro quos by politicians, bestowing favors of one sort or another on the contributors.

These are not, technically, bribes. Elected officials are not personally enriched -- at least not directly (their offices may be stepping stones to lucrative lobbying positions later on). By virtue of these contributions, the elected officials gain or keep power, which to many of them is its own reward. And to the extent there is a quid pro quo, the exchange inevitably leads to legislative outcomes and decisions that would not be made but for the contributions.

Over the last 40 years, spending by candidates in all major elections -- the presidency, Senate and House seats, governorships -- has grown exponentially, adjusted for inflation. The vast majority of this money has come from contributions made to the candidates and elected officials. In recent years these contributions have come overwhelmingly from corporate political action committees, corporate executives, and corporate trade associations, although in presidential elections and specific congressional elections, contributions from organized labor are also significant. Funding by individuals through the Internet was an important source of funding in the presidential election of 2008 but is still dwarfed by corporate and corporate-related funding.

Corporate-funded "issue advertising" that is actually meant to indirectly support or attack candidates has been a growing factor in all major elections as well, as have advocacy groups known as 527s (named after a section of the tax code), which make independent expenditures on behalf of particular candidates. Corporations and trade associations also support a vast array of lobbyists and lawyers who act as lobbyists even though they are not officially registered as such. Organized labor has a half-dozen lobbyists on Capitol Hill; so-called public-interest groups finance about an equal number.

There are several conventional explanations for why so much corporate money has flooded into Washington over the last three or four decades. Large corporations have much more market power, which translates into more political power. Politicians have become more corrupt or rapacious. The Republican Party has been ever more effective at raising money. The increasing size and scope of the federal government have required that corporations spend more in order to protect themselves. Corporations have greater need to confront the countervailing power of unions.

All of these explanations are wrong.

The real reason is the structural shift in the economy, beginning in the late 1970s, toward far more intense competition for consumers and investors. Globalization, deregulation, and technological advances -- especially computers and the Internet -- have been the driving forces. They have shifted almost all industries in almost all rich economies from being organized around stable oligopolies, in which competitive advantage derived mostly from economies of scale, toward far more intense competition in which competitive advantage comes from innovation -- and from favorable treatment by government.

The fights that actually preoccupy Congress day by day, which consume weeks or months of congressional staffers' time and which are often the most hotly contested by squadrons of Washington lobbyists and public-relations professionals, are typically contests between competing companies or competing sectors of an industry or, occasionally, competing industries. The result has been a clamor of business interests -- a cacophony so loud as to almost drown out serious deliberation over the public good.

Consider, for example, the recent fight over health-care reform. The casual outside observer would have seen it as a battle between the health-care industry on one side and the public (or, shall we say, public-interest groups putatively representing the public) on the other. Not so. Most of the skirmishes over health-reform were not between a monolithic health-care industry and the public but among different industries and subsets of industry.

Doctors squabbled over whether primary-care physicians would get a Medicaid payment boost or a somewhat smaller boost would go to all doctors. Insurers that specialize in higher -- cost plans mainly going to unionized companies squared off against those specializing in plans that cater to lower-wage workers on whether taxes should be raised on high-cost plans and at what level the tax would kick in. Middle -- sized companies fought against small employers over the size of businesses that will be exempt from the requirement of insuring their employees. And on and on.

Many of these battles continue but have moved into the regulatory process, where different companies, sectors, and industries are seeking rules that advantage them and disadvantage their competitors. The deals that were struck in formulating the final legislation, and the deals that will be struck in rule -- making, represent the relative bargaining strength of these parties within Congress and the Obama administration. To the extent these industries are publicly traded, the relative value of the winners' and losers' shares of stock are likely to follow suit.

As a practical matter, this means that in order to enact any piece of legislation that may impose costs on the private sector, Congress and the administration must pay off enough industries and subsets of industries -- starting with those with the greatest clout in terms of campaign donations, lobbyists, and public relations -- to gain their support and therefore a fair shot at winning a majority (or in the case of the Senate, typically 60 votes).

It's been much the same with financial reform -- small banks versus Wall Street giants, for example. Rather than a fight between the financial industry and the public, it's really been a fight among different companies and segments of the financial industry. And the battle over so-called cap-and-trade legislation is in fact a battle between carbon-intensive industries, such as oil and coal, and non-carbon-intensive energy industries, such as nuclear and corn-based ethanol. One of my graduate students recently surveyed every major company, industry, and trade association with a lobbying presence in Washington, asking whom they considered their major opponents on issues that mattered most to them. In every case, they named another corporation, industry, or subgroup.

You can see how these political expenses over time resemble an arms race. To the extent that one competitor invests in politics, other competitors must invest at least as much, if not more. Until Google went public in August 2004, it took pride in being a maverick outsider. But once it became a multibillion-dollar public company, it needed to become part of the Washington establishment. In 2005, it spent more than $500,000 hiring lobbying firms and consultants. Google had no choice. Yahoo, Microsoft, Apple, and a gaggle of telecom companies were already well represented in Washington. In 2005 alone, Microsoft spent almost $9 million on lobbying, and its executives donated millions more to politicians on both sides of the aisle. The competitive positions of every one of these companies, relative to one another, would be influenced by decisions made in Washington on issues ranging from intellectual capital, antitrust, international trade, and relations with China.

Few of these battles are ever concluded, because laws can be amended and regulations extended or altered. In the words of lobbyist Lauren Maddox, "The policy process is an extension of the market battlefield."

The answer is not necessarily found in broader or stricter "ethics rules" barring specific gifts to politicians. Such rules may have little effect and will not, on their own, restore public trust. Instead, we need to consider how to prevent high-stakes market competition from intruding on political decision -- making, to create what might be considered "safe zones" where the market has no influence.

This is, in my view, the way to think about a true system of public funding of campaigns for the presidency and Congress. In order to create a genuinely safe zone, public financing should match the money raised by any major opponent in a general election campaign who opts to raise money privately. A dollar-for-dollar match is critical; any private money going to a candidate should be neutralized by public money.

A second-best alternative would be to opt for the opposite of disclosure, the current preferred method of controlling (or embarrassing) outside contributors. Instead, we might require that all contributions to any candidate or 527 be deposited into a "blind trust," so that the candidate may never know who contributed what. (Any breach of secrecy would be met with criminal penalties.) The point here would be to create another sort of safe zone in which the quid of the contribution was severed from the quo.

In addition, elected and appointed officials, and their staffs, should be required to sign the equivalent of "prenuptial agreements" barring them from subsequently taking any job that enriches them by virtue of their public service -- whether it be with a firm or industry they regulated or contracted with during their term of public office, or for the purpose of influencing government on behalf of private parties (regardless of whether in the capacity of a "registered" lobbyist or an informal adviser and consultant). The prenup should be for a minimum of five years after leaving office. Here, too, the goal is to create a safe zone in which the public can be confident that hopes or expectations of a future job do not influence public decision-making.

The question is not whether high-stakes market competition is good; under most circumstances, it is. The question is how to limit its scope so it does not distort the decisions of people on whom we rely to do the public's work. Our democracy cannot function if payoffs to powerful industries continue to be the precondition for accomplishing important public purposes.

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