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The Coming of the Fourth American Republic

Tuesday, April 21, 2009

The Special Interest State that has shaped American life for 70 years is dying. What comes next is uncertain, but there are grounds for optimism.

The United States has been called the oldest nation in the world, in the sense that it has operated the longest without a major upheaval in its basic institutional structure.  

From one perspective, this characterization is fair. The nation still rests on the Constitution of 1787, and no other government can trace its current charter back so far. Since then, France has had a monarchy, two empires, and five republics. England fudges by never writing down its constitutional arrangements, but the polity of Gordon I is remote from that of George III. China’s political convolutions defy summary.  

Shift the angle of vision and the continuity is less clear, because we have had two upheavals so sweeping that the institutional arrangements under which we now operate can fairly be classified as the Third American Republic. Furthermore, this Third Republic is teetering (these things seem to run in cycles of about 70 years) and is on the edge of giving way to a revised Fourth Republic with arrangements as yet murky to our present-bound perceptions.

This prediction should be seen as optimistic, not pessimistic, despite the stresses the transition puts on those of us standing on the ice as it cracks. At the risk of practicing “Whig history”—a term applied to the interpretation of history as a story of progress toward the enlightened present—the infelicities of the Third Republic grow tedious, and reform is needed to clear space for the progress of American, and world, civilization. 

Understanding the current upheaval is aided by a brief description of the earlier ones.

The first was the Civil War and its aftermath, which established that sovereignty belongs to the nation first and the state second, and that the nation rather than the state claims a citizen’s primary loyalty. When the United States was founded, this ordering was not so clear. James Madison assumed the opposite in Federalist 46 and a generation of southern West Point graduates followed their states into secession in 1861. The shift was traumatic and took decades to complete, but eventually the states became largely instruments of federal policy, except for a few areas in which conformity is unnecessary or special interests have managed to preserve state autonomy for their own purposes.

The upheaval of the Civil War era resolved a second issue, the relationship between the government and the onrushing technological and industrial revolution. The newly dominant federal government would not cripple private action in pursuit of national markets and industrialization, and would not allow the states to do so. Much of this agenda was administered by the Supreme Court—as the American Enterprise Institute’s Michael Greve documents in a superb recent lecture, “Commerce, Competition, and the Court: An Agenda for a Constitutional Revival”—but it represented a clear political agenda supported by the dominant forces of the time.

The later historians of the New Deal and the Great Society sneered that the idea of “laissez faire” was an abdication of governmental responsibility, but this was propaganda. The best translation of the term is the activist “let us do,” not the passive “let us be,” and the societal quid pro quo was dynamic economic expansion, not the easy life of the rentier. To a large degree, the ideology of laissez faire was designed to protect interstate commerce from rentiers in the form of government officials extorting payments.

The Special Interest State

The next great institutional upheaval was the New Deal, which radically revised the role of government. The process of economic growth was tumultuous, and the losers and dislocated were constantly appealing against the national political commitment to “let us do.” The crisis of the Great Depression provided a great opportunity, and it was seized. Starting in the 1930s, the theoretical limitations on the authority of governments—national or state—to deal with economic or welfare issues were dissolved, and in the course of fighting for this untrammeled power governments eagerly accepted responsibility for the functioning of the economy and the popular welfare.

Like the primacy of federal over state sovereignty, the shift continued even after the watershed event. Remaining limits on governmental authority were eliminated by the dialectic of the civil rights revolution, in which the federal power over commerce was expanded to meet moral imperatives, and the new standards were then fed back into regulation of commerce.

The combination of plenary government power combined with the seizure of its levers by special interests constitutes the polity of the current Third American Republic.

Inherent in the expansion of governmental power was the complicated question of how this unbridled power would be exercised. As the reach of any institution expands, especially anything as cumbersome as a government, it becomes impossible for the institution as a whole to exercise its power. Delegation to sub-units is necessary: to agencies, legislative committees and subcommittees, even private groups.

The obvious issue is how these subunits are controlled and directed. The theoretical answer had been provided by the Progressive movement (the real one of the early 20th century, not the current faux version). Much of the Progressive movement’s complaint was that special interests, often corporate, captured the governmental process, and its prescriptions were appeals to direct democracy or to administrative independence and expertise on the theory that delegation to technocrats could achieve the ideal of “the public interest.”  

The real-world answer imposed by the New Deal and its progeny turned out to be special interest capture on steroids. Control comes to rest with those with the greatest interest or the most money at stake, and the result was the creation of a polity called “the Special Interest State” or, in Cornell University Professor Theodore Lowi’s terms, “Interest Group Liberalism.” Its essence is that various interest groups seize control over particular power centers of government and use them for their own ends.

It is this combination of plenary government power combined with the seizure of its levers by special interests that constitutes the polity of the current Third American Republic. The influence of “faction” and its control had been a concern since the founding of the nation, but it took the New Deal and its acolytes to decide that control of governmental turf by special interests was a feature, not a bug, a supposedly healthy part of democratic pluralism.  

And so the Special Interest State expanded, blessed by the intelligentsia. And it feeds on itself; the larger and more complex the government becomes, the higher the costs of monitoring it. This means that no one without a strong interest in a particular area can afford to keep track, which leaves the turf to the beneficiaries. And as existing interests dig in to defend their turf, new interests require continuing expansions of governmental activity to stake a claim on.

The appropriations committees and their pork barrels are the most obvious example of rule by special interest, but not always the most important. Whole departments are dedicated to special interests—Labor, Education, Energy. Money is important, but regulation is every bit as useful, especially because regulations can shift property rights from third parties without going through the budget process. For example, environmentalists successfully combined a vaguely worded Endangered Species Act with control of the Fish and Wildlife Service to shift the costs of their no-development ethic onto random land-owners, regardless of costs, benefits, or fairness.

Tax provisions, both credits and deductions, are substitutes for government budget outlays. They also have important indirect effects. For example, Wall Street favors high taxes on incomes to force savers to use 401(k)s and similar plans, and these, to qualify as tax exempt, must be channeled through financial houses, which make a fortune in management and brokerage fees by swapping stocks with each other. Indeed, wherever one finds a public policy disaster, it is likely that the tax code is involved. The wreckage wrought in part by the favored treatment given to home mortgages now litters American exurbia.

Laws are an important source of power. If “card check” passes, the transfer of wealth from the public to a subset of the labor force and an even smaller set of union officials will be significant, as will the deadweight drag of the mandatory arbitration provisions, but they will not show up in the federal budget.

Laws can also raise transaction costs, which is much in the interest of the legal profession, itself one of the most powerful of the special interests. Legal looting also goes on via the endless list of regulatory laws. The Federal Communications Bar Association has over 3,000 members, most of them writing comments and briefs that will be read by very few of the other FCBA members before the Federal Communications Commission does what the congressional committee chairmen tell it to do. At the last annual FCBA dinner, a colleague looked at the 1,000-deep rank of power-necktied lawyers and commented: “Everything wrong with Washington is here in this room.”

Even as it developed, the legitimacy of the Special Interest State as a way of ordering a polity did not go unquestioned. Lowi critiqued the concept in the 1960s. The late Professor Mancur Olson, famous for The Logic of Collective Action, considered The Rise and Decline of Nations in 1982, laying out the thesis that “the behavior of individuals and firms in stable societies leads to the formation of dense lobbying networks of collusive, cartelistic, and lobbying organizations that make economies less efficient and dynamic and polities less governable.” Jonathan Rauch added the term “Demosclerosis” in the 1990s, as he channeled Olson in Government’s End: Why Washington Has Stopped Working.

As Rauch points out, these criticisms have always resonated with the electorate, and promises to curb “the special interests” are as much a part of any election season as kissing babies. But nothing results, and the promises are submerged in day-to-day and decade-to-decade pragmatic accommodation to the expansionary dynamics of special interest power.

It is another example of “prisoners’ dilemma,” almost everyone would be better off if we dismantled the Special Interest State, but there is no easy way to get there and no one will volunteer to go first. Given that such a state exists, the rational response is to redouble one’s efforts to try to get an advantage over the other special interests, with the result that, in William F. Buckley’s image, the sky is blackened with crisscrossing dollars, and, he might have added, with crisscrossing laws, regulations, and tax breaks.

Almost everyone would be better off if we dismantled the Special Interest State, but there is no easy way to get there and no one will volunteer to go first.

Besides, all special interests now have their professional representatives, who are themselves a special interest dedicated to sabotaging any decline in the importance of special interests. Millions of lobbyists, government officials, and compliance officers make a living from the system, and, even if their clients might benefit from mutual disarmament, they would not.

In Washington, the debate has atrophied, and few lawyers and lobbyists even know that it was once questioned whether the Special Interest State is an appropriate form of organization for a polity. The theory that government is and should be a contest among alliances of special interests has swept the day. Of course groups struggle to grab and exploit levers of power for selfish ends and then use these to the maximum, and of course agency and congressional staff ally with one or another of these mercenary armies while in government, and of course they then go to work for the interests they used to “govern” (wink, wink), and so what? Do you have a point here?

Even businesses, supposedly the defender of the alternative view that markets and laissez faire are a superior way of organizing economic activity, have no interest in opposing the Special Interest State. When they support the market, it is because they calculate that is where their short-term interests lie at the moment, and if this calculus changes the support evaporates. Their opponents are not wrong to scoff at business claims to superior principles.  

The needs of the Special Interest State have also come to dominate electoral politics. Both parties have become alliances of special interests. The focus of conflict is on the fact that most people belong to more than one group, and so electoral contests focus on emphasizing one or another group identity. Only a small band of sort-of Republicans holds out—lonely free marketers reading the Wall Street Journal by flames kindled from old issues of The Public Interest—regarded as amusingly quaint by the other players.

The End of the Third Republic

This Third Republic has had a good run. It was wobbling in the late 1970s, but got bailed out by a run of good luck—Reagan; the fall of the USSR; the computer and information revolution; the rise of the Asian Tigers and the “BRICs”; the basic dynamism and talent of the American people—that kept the bicycle moving and thus upright.

It could continue. It is characteristic of political arrangements that they go on long after an observer from Mars might think that surely their defects are so patent that they have exhausted their capacity for survival. Besides, as the Declaration of Independence counsels, “Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed.” The culture, the people, are astonishingly creative and productive, and may demonstrate a capacity to keep the bicycle moving faster than the demands of the Special Interest State can throw sand in the gears.

But it is more likely that the Special Interest State has reached a limit.

Few Washington lawyers and lobbyists know that it was once questioned whether the Special Interest State is an appropriate form of organization for a polity.

This may seem a dubious statement, at a time when the ideology of total government is at an acme, but it is not unusual for decadent political arrangements to blaze brightly before their end. Indeed, the total victory of the old arrangements may be crucial to bringing into being the forces that will overthrow it. In some ways, the grip of the aristocracy on 18th-century France tightened in the decades leading up to 1789, and the alliance-of-states idea could have lasted a while longer had the Confederacy not precipitated the crisis. So the utter triumph of the Special Interest State over the past 15 years, and particularly in the recent election, looks like the beginning of its end.

A catalogue of its insoluble problems includes:

Sheer size. The usual numbers concerning the size of government in the United States are that the Feds spend about 20 percent of GNP and other levels of government at least another 16 percent. These do not reflect the impact of tax provisions, regulations, or laws, however, so an accurate estimate of how much of the national economy is actually disposed of by the government is impossible. Whatever it is, it is growing apace, and the current administration is determined to increase it considerably.   

Responsibility. As the government has grown in size and reach, it has justified its claims to power by accepting ever more responsibility for the economy and society. Failure will result in rapid loss of legitimacy and great anger. It is amusing to read pundits’ pronouncements that the Chinese government must deliver economic stability and growth or suffer social unrest; what do these pundits think will be the fate of an American government that fails in these tasks? And as the government’s reach extends, any chance that it will meet its self-proclaimed responsibilities declines.

Lack of any limiting principles. There is no limit on the areas in which special interests will now press for action, nothing that is regarded as beyond the scope of governmental responsibility and power. Furthermore, special interests are not limited, cynically trying to get an undeserved economic edge or subsidy. Would that they were! Inevitably, special interests try to convert themselves into moral entitlements to convince others to agree to their claims. The problem is that many have convinced themselves, which means that no half loaf satisfies. The grievance remains sharp, and compromise immoral.

It is not unusual for decadent political arrangements to blaze brightly before their end.

Thus environmentalists claim not just a few million dollars for endangered species protection, but total control over all land use, and, most recently, over the entire economy in the interests of protecting the polar bear. Social conservatives claim control over other people’s desire to terminate their own lives or use pot. Some minority-rights groups claim the right to control all speech. Victim groups of all kinds see a never-ending need for lawsuits. A provision inserted at the behest of the Teamsters into the recent stimulus bill, which was read by no member of Congress in its entirety, started a trade war with Mexico for the sake of banning 97 Mexican trucks from U.S. highways. Providers of higher education demand continuing escalation of subsidies for four-year B.A. programs rooted in the 19th century. Public employees have become perhaps the largest and most powerful interest group—20 million strong, politically active, and dedicated to the ideals of no cuts in employment, absolute pension safety no matter what happens to everyone else’s retirement accounts, and little accountability.

Conflicts. The Special Interest State could get along quite well when it simply nibbled at the edges of the society and economy, snipping off a benefit here and there, and when the number of victorious interests was limited. But the combination of moral entitlement, multiplication of claimants, and lack of limits on each and every claim is throwing them into conflict, and rendering unsustainable the ethic of the logrolling alliances that control it.  

The guiding principle is that no member of the alliance will challenge the claims of any fellow member. But this principle has a limit, in that unlimited claims cannot help but impinge eventually on each other.

To pick on the Democrats: basically sensible financial operators will not challenge the climate changers. Now, the climate changers are asserting a power and a duty to control (i.e., shut down) the economy. At the moment, the financiers simply trust that their own inside-government people will somehow manage to control the situation, even if they get no public support from the other elements of the Democrat coalition. This is unlikely, so either the financial operators will wind up losing big or they will have to confront the issue directly. (Of course, many of them have joined the climate changers, and hope to profit from the issue, but this is not an infinitely large bandwagon.)   

As a free market man, I see the Democrat Party as consisting of a collection of parasites on the productive economy that has lost any capacity to understand that they all depend on a healthy host. The groups regard the economy as a commons, and each is determined to loot as much as possible for as long as possible, regardless of the long term. Democrats make corresponding claims about the Republicans, of course.

U.S. leaders do not grasp the situation. None of the leaders of any branch are demonstrating an appreciation of the problems and limits of the Special Interest State.

Past presidents have understood the importance of keeping special interests out of the White House. They may have given up the agencies, but most ensured that the White House staff worked for the president, not for his constituencies. President Obama has no grasp of this. To stick with the climate change issue, to choose global warming fundamentalists as personal advisers on this issue is absurd; there is no chance that the skeptics’ case will receive representation.

At the Supreme Court, “liberals” and “conservatives” each dwell in a world of “originalism,” “federalism,” “Chevron deference,” and other abstractions that do not reflect the realities of the Special Interest State. Missing is any recognition of the real point of much constitutional litigation: a Constitution is a mechanism by which polities solve prisoners’ dilemma problems, allowing cooperation over geographic and temporal distance and, in a democracy, protecting against the tyranny of the majority. Yet the term “prisoners’ dilemma” appears nowhere in Supreme Court jurisprudence, and the alternative formulation of “Constitutional Interest vs. Particular Interest” is almost as rare.

On various occasions, the Court has noted that it is not compelled to live in a world of abstraction. Consider Justice Taft in 1922, noting that the purpose of the tax on child labor was to eliminate the practice, not collect revenue: “All others can see and understand this. How can we properly shut our minds to it?” Or Justice Frankfurter in 1949, observing that police sometimes coerce confessions: “There comes a point where this Court should not be ignorant as judges of what we know as men.” Ever since the New Deal, however, the Court has managed to erect a jurisprudence that is blind to the fundamental nature of the polity of which it is an important part. For example, under “the Chevron doctrine,” each special-interest-captured federal agency gets to decide the scope of its own power if Congress leaves any ambiguity. So Congress leaves the limits ambiguous and allows the agency to press to the utmost.

We are in a crisis of legitimacy. The concept of legitimacy, the right to rule, is the single most important factor in political life. The particulars of how it is gained and lost are infinitely varied, according to the culture and history of the polity. In Monty Python’s “Holy Grail,” Dennis says to King Arthur: “Strange women lying in ponds distributing swords is no basis for a system of government.” But indeed the Lady of the Lake can be sufficient, if that is what enough people think, and a proponent of the Divine Right of Kings would regard committing the decision to the votes of the people as ludicrous.

Ever since the New Deal, the Supreme Court has managed to erect a jurisprudence that is blind to the fundamental nature of the polity of which it is an important part.

In the United States, legitimacy is conferred by elections, but it is not total. Through the ages, the basic question mark about democracy as a form of government has been that 51 percent of the electorate can band together to oppress the minority—“the tyranny of the majority” is a valid concern. To address it, the United States has a formal written Constitution to guarantee basic rights, but it also has an unwritten constitution that sets limits on how far the winners can push their victories. Exceed the amorphous bounds, and not only does the minority no longer accept the legitimacy of the government, many members of the majority coalition will have a guilty conscience as well, knowing that their acquiescence to the demands of one of their allies was a bad deed. As Thomas Jefferson said, “Great innovations should not be forced on slender majorities.”

Over the past few years, political winners have become increasingly aggressive, culminating in President Obama’s recent “We won” as an assertion of an unlimited mandate. Losers have become increasingly restive, ready to attack the legitimacy of the winners’ victory. Bush, in particular, was the target of an amazing and consistent campaign of de-legitimizing, and the opposition to Obama is on a hair trigger.

The merits of the case in each instance is a topic for another day, but the problem is a fact, and an important one. In particular, if each party is regarded by the other as a principle-free alliance of special interests, eager to claim the government so as to loot the other side, then a large chunk of legitimacy is lost. All that remains of that concept depends on the government’s ability to deliver overall economic prosperity and national defense, and if the rulers falter in either of these realms, they will receive no slack. Nor should they.

What Comes Next?

Given these trajectories, and the lack of any mechanisms for altering them, it is hard to see how the polity of the Third Republic can continue, and, as former Council of Economic Advisers Chairman Herbert Stein said: “If something cannot go on forever, it will stop.” The question is whether the landing will be hard or soft.

Stein meant his observation optimistically; his point in context was that a balance of payments problem would be self-correcting. Such optimism could be right; it happens with polities sometimes, as Great Britain’s political changes came gradually and peacefully, if not always smoothly.

But it is difficult to see any self-correcting mechanisms in the Special Interest State. Quite the reverse; the incentives all seem to be pushing the accelerator rather than the brake. Observers as astute as Jonathan Rauch and Michael Greve came up with little in the way of recommendations for reform, beyond exhortations to change our ways. Rauch commented: “Government has become what it will remain: a large, incoherent, often incomprehensible mass that is solicitous of its clients but impervious to any broad, coherent program of reform. And this evolution cannot be reversed” (italics from the original). He recommended “maturely diminished expectations.”

Rauch’s recommendation does not take account of the expansionist nature of the Special Interest State, however. If the evolution cannot be reversed, and the tendency toward expansion cannot be checked, and if at the same time the arrangements cannot expand forever, then we seem to have a paradox, because what cannot go on must stop. If the evolution cannot be reversed, and mechanisms of gradual adjustment are lacking, abrupt tectonic shifts are the only alternative. Change will not necessarily be violent, though that is certainly possible, but it could be sudden. If one characteristic of political arrangements is to continue longer than one might think possible, another is that when they change, they change with amazing speed.

So what will the Fourth American Republic look like, and how will it come about? The answers are shrouded in the mists of a highly plastic future, and depend to a large extent on the outcome of the current economic crisis. If that grows severe, the change will be quick and explosive. As noted, an American government that presides over a depression will immediately lose the Mandate of Heaven—the Lady will reclaim the sword.

If this immediate crisis is alleviated, then change may have to await the next one, which will certainly come as more and more sand gets thrown in the gears of the Special Interest State and the bicycle eventually stops.

If each party is regarded by the other as a principle-free alliance of special interests, eager to claim the government so as to loot the other side, then a large chunk of legitimacy is lost.

One can safely predict that the ultimate result will be a democratic republic, because that is American culture. It could come about through yet another judicial reinterpretation of the Constitution of 1789, or by a revision or amendment. Exactly how its provisions are framed will depend on what precipitates the final fall of the Third Republic and which of our current warring tribes dominate the process. One can also predict safely that it will incorporate elements of all three earlier republics, reinstating some principles that, on reflection, should not have been discarded. For example, Democratic presidents of the 19th century were particularly adamant about applying the general welfare clause of the Constitution, a position worth revisiting. Some of the Progressives’ ideas about nonpolitical technocrats also deserve a rehearing. Greve makes good suggestions about the role of the Supreme Court in protecting the polity against special interests.

Two possibilities for change seem most promising. The first is a third political party that explicitly repudiates the present course and requires that its members eschew the legitimacy of the Special Interest State. This would require a certain almost religious fervor, but the great tides of history and politics are always religious in nature, so that is no bar. 

This second would be more bottom-up. The Constitution has a residue of the original alliance-of-states polity that has never been used. Two-thirds of the state legislatures can force Congress to call a constitutional convention, and the results of that enterprise can then be ratified by three-quarters of the states. So reform efforts could start at the grassroots and coalesce around states until two-thirds of them decide to march on the Capitol. There is already a lively movement along these lines. On the other hand, the states are no paragons, in that the model of the Special Interest State reigns triumphantly there as well, so a few comments about pots and kettles could be made. Realistically, though, organization from the bottom up is a real possibility.

While we await events, none of this analysis should be regarded as a counsel of pessimism. Political arrangements should change with time and experience, and to expect the political architects of any era to foresee all the problems inherent in their institutions is to demand the impossible. By 2090, it will probably be time for the Fifth American Republic, and, Heaven willing, more after that.

On the other hand, it would be unwise to treat the issues with anything other than utter sobriety. The nation made a fundamental political transition peacefully on one occasion, and only with appalling bloodshed on another, and it is hard to buy ammunition these days because the dealers’ shelves are bare. So all patriots would be well advised to pick up a copy of Crane Brinton’s classic The Anatomy of Revolution, and figure out how we can achieve the necessary segue to the Fourth Republic without becoming a chapter in the next edition.

James V. DeLong is a former research director of the Administrative Conference of the United States and a former book review editor of the Harvard Law Review.

FURTHER READING: In other articles for The American, DeLong wrote “Preparing the Obituary” on the decline of the newspaper industry and “Avoiding a Tech Train Wreck” on the intersection of technology and politics.

Image by Darren Wamboldt/The Bergman Group.

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