Demosclerosis: The Silent Killer of American Government.

At the highest levels of government, the power to decide things has gravitated from the many to the few. Instead of popular will, the government now responds more often to narrow webs of power." Who said that? A) William Greider, B) Kevin Phillips, C) Dan Quayle, or D) Bill Clinton? Actually, that's a Greider line, but it could just as well be all of the above. The idea that a narrow elite or collection of special interests is thwarting democracy and mining the Republic has by now become such a commonplace that asserting it reveals little or nothing about the speaker's politics. The 1990s are becoming the "Them Decade," as Americans increasingly interpret their world as driven by the machinations of colluding strangers--whether Gucci Gulch corporate lobbyists, "the underclass," "the political class," or the Hollywood "cultural elite."

But what if the problem really isn't them, but all of us? That is the thesis of Jonathan Rauch's important new book, Demosclerosis. Contradicting the paranoia of both left and right, Rauch rightly asserts that the "American system of governance today is much less at the mercy of any narrow manipulative few than at any time in the past." The era of back room bosses who called the shots in service of rich patrons is long gone. But that has hardly brought about a more effective, or even more equitable, government, Rauch observes, because it has been replaced by a coalition representing virtually everyone. "We have met the special interests and they are us," Rauch writes. "Much as mutual funds have offered ordinary people the access to almost every type of productive investment, so interest groups have offered ordinary people access to almost every kind of redistributive investment."

What's new and different about modern politics, says Rauch, is the proliferation of non-business interest groups, from the American Association of Retired Persons (AARP) to the Sierra Club. The ability of ordinary citizens to make their voices heard through such groups might sound like a positive development for democracy. But Rauch argues, I believe correctly, that today's hyperpluralism is instead symptomatic of a disease to which all democracies are prone. For lack of a better label, Rauch labels the ailment "demosclerosis"--a thickening or hardening of the body politic that leads to a loss of public purpose and eventual backlash against activist government.

The disease is triggered when citizens realize that it is far easier to enrich themselves by mampulating the political at process than by creating new wealth. Sadly, the more active and successful a government becomes in solving social and economic problems, the more it becomes prone to subsidy-seeking special interests because of the increasing size of the public sector pie. This is why demosclerosis is a disease against which liberalism must be especially vigilant.

Rauch gives a succinct description of the disease's progression:

By definition, the government's power comes from its ability to teassign resources, whether by taxing, spending, regulating, 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 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.

Governments in the throes of demosclerosis also tend to run large deficits and to invest inadequately in the future, Rauch says. The young and the unborn don't organize and lobby and so they are guaranteed losers in a system that brokers to colluding factions.

The theory behind this analysis is not new, and Rauch makes no pretense that it is. He properly pays homage to Mancur Olson, whose 1965 book, The Logic of Collective Action, is the locus classicus of special interest studies, and to Gordon Tullock, whose pioneering work in the late 1960s opened up the academic study of transfer-seeking. Rauch does a wonderful job of popularizing this literature in an easily accessible, almost epigrammatic style. At a time when the central problem of American life is a retreat into tribalism, Rauch's message about the evils of special interest politics cannot be emphasized enough.

Where Rauch tends to disappoint is in his reporting of how demosclerosis manifests itself in the day-to-day of practical politics. A journeyman reporter and contributing editor to National Journal, Rauch was well positioned to tell that story, but he seems to have become too distracted by the abstract elegance of the theory he's popularizing to dwell on how it applies to real life issues like health care reform and Social Security.

In making his case, Rauch spends a lot of time discussing egregious but fiscally insignificant subsidies like the sugar program and not enough exposing the evils of broad middle-class entitlement programs like Social Security, veterans' benefits, Medicare, and the home mortgage interest deduction, which altogether cost the country $465 billion in 1993. To be sure, he does single out the AARP as an example of destructive hyperpluralism. But he does not demonstrate how the AARP's highly popular agenda, just to take one middle-class interest, is in fact constraining liberal government by crowding out resources and encumbering the next generation with debt. Last year, the National Taxpayers Union estimated that new programs advocated by the AARP would add $600 billion in new spending by 2002. And the AARP's staunch resistance to holding down the growth of existing middle-class entitlement programs, such as Social Security, would add another $700 billion annually unless overcome by Congress. If the retirees' agenda becomes law, there will be precious few dollars left to pay for anything but interest on the exploding debt.

Taking on seniors and other big entitlement tribes would have taught Rauch a valuable lesson that Olson and Tullock also do not offer. It is this: People do not band into factions solely out of economic motives; a dangerous admixture of self-pity and recrimination also breeds the modern entitlement ethos. Even the most fervid Gray Power activists, for example, are animated not by pure greed but by a righteous belief that any benefit rollback is akin to theft. "I'm only getting back what I paid in" is such a carefully cultivated myth that even the suggestion that their windfall benefits might be better spent on schools or feeding hungry children drives many upper middle class and rich retirees into frenzies.

Get up close enough to any transfer program and you'll find beneficiaries who nurse similiar feelings of victimization and betrayal. Civil servants are convinced they are paid less than their private-sector counterparts, and so believe they are entitled to generous pensions. Military retirees believe they are owed half pay for life starting at age 38 for the same reason, and because they feel underappreciated by a civilian-dominated society. Farmers see themselves as victims of an industrial economy in which farm prices lag behind rises in the cost of living. Beneficiaries of the home mortgage deduction claim they are owed this tax subsidy because they bought their homes on the assumption that it would always be available. And so it goes.

This phenomenon suggests transfer programs are far more than just an expression of utility maximization by economic parasites. Such programs' growing size is also a manifestation of the modern tendency of even secure, prosperous Americans to see themselves as victims of larger social forces, and of their related tendency to assert they are owed public benefits as a matter of due compensation or right.

How this mindset has evolved since the New Deal is a complex story. Its intellectual origins lie with postwar liberals who celebrated pluralism and social insurance as antidotes to both fascism and communism without realizing how destructive both could be to democratic virtue. In the sixties, the hubris that led many liberal policymakers to worry about "the miseries of abundance" further legitimated special interest politics by embracing the idea that the cost of virtually any group demand could be financed through huge future increases in America's "growth dividend." More recently, liberal romanticism about ethnicity and multiculturalism have reinforced dangerous tendencies toward factionalism in the U.S. that are evident in much more extreme forms around the globe, most tragically in the Balkans.

Rauch does make passing reference to the movement among post-war liberals to celebrate interest group politics, but he nevertheless falls for the currently fashionable idea that social programs should in some way require sacrifice from their beneficiaries. "Does a program give something for nothing? Then take a dim view of it," Rauch counsels. "Instead, favor programs whose costs are covered in some substantial share by the people enjoying the benefits. The whole idea behind transfer-seeking is to capture benefits at cost to someone else, and so a good way to discourage transfer seekers is to make them pay for more of what they get."

This argument makes economic sense, but it is historically naive. Recall FDR's explanation for why he went along with funding Social Security with a payroll tax that punished the working poor: "With those taxes in there, no damn politician can ever cut my social security program." FDR correctly predicted workers could easily be persuaded that their individual payroll taxes were actually "contributions" the government owed back to them, even though the Social Security Act repeats again and again that it establishes no such contractual relationship between taxes and benefits. Instead, the Social Security Act simply allows for the transfer of resources from one set of citizens to another--it is, in other words, a welfare program like any other and should therefore be judged like any other welfare program. That is, if Congress or a majority of the people decided to trim the program to well off recipients in order to spend money on other things, recipients would have no legal recourse to fight the cuts. The Supreme Court has repeatedly ruled that Social Security benefits are not property and can be taken back by Congress at any time without compensation.

But as it has turned out, payroll tax financing of Social Security--and the illusion of an insurance program that it has helped sustain-has made Social Security uncuttable and virtually uncontrollable for most of its history. The lesson here is that the entitlement ethos is exacerbated every time government departs from conveying benefits on the basis of need, and instead asserts (however weakly) a connection between benefits and previous behavior. This is true whether the behavior is service in uniform or the payment of certain taxes. Far from discouraging transfer-seeking, such a strategy abets it. How? By giving a false sense of contractual right and an enveloping myth with which to rationalize whatever windfalls beneficiaries can win through political pressure. It leads to a government that shortchanges the truly needy and favors the well-organized, from agribusiness to the affluent elderly.

Rauch's warning about the evils of hyperpluralism deserves a wide audience. Unfortunately, the disease he correctly diagnoses is more subtle, dangerous, and difficult to cure than his book would have you believe. Many of his solutions are akin to suggesting that the cure to alcoholism is to stop drinking. Cut subsidies, end deficits, decentralize. OK, we'll all stop snorting out of that old bottle, starting tomorrow. The real challenge is to craft reforms that can overcome special interest thinking and exact a price from every group so that no group will feel singled out as the sole scapegoat. This means there are probably no incremental cures for demosclerosis, and that the only hope lies with reforms as universal and dramatic as the last New Deal.