Special K

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DECEMBER 30, 2002

Special K

When President Bush appointed a successor to Treasury Secretary Paul
O'Neill earlier this month, a handful of news outlets (this magazine
included) pointed out that the identity of Bush's pick was
essentially irrelevant to economic policy-making. The policies that
new Treasury Secretary John Snow will be asked to sell to the
public--tax cuts, tax cuts, and more tax cuts--have already been
crafted without any need for his input, thank you very much.
Indeed, the fact that policymakers in the Bush administration have
been reduced essentially to an ornamental role was spelled out
explicitly in an article by reporter Ron Suskind in the January
issue of Esquire. In the piece, former administration staffer John
DiIulio, along with two anonymous White House officials, alleged
that the White House has totally subsumed its policy-making to its
political decisions. "There is no precedent in any modern White
House for what is going on in this one: a complete lack of a policy
apparatus," DiIulio told Suskind. "What you've got is
everything--and I mean everything-- being run by the political
arm." Lest anybody doubt DiIulio's analysis, a column on National
Review Online by Republican economist Bruce Bartlett affirmed it.
"[O]ne cannot dispute [DiIulio's] characterization because it
clearly is true. Since the beginning of the Bush administration,
insiders have complained to me that the policymaking process was
not working," Bartlett wrote. "This vacuum in terms of policy
analysis has tended to be filled by those in the White House who
look at issues solely in terms of their political implications."Suskind's explanation for this disturbing and unprecedented state of
affairs is straightforward: The power wielded by political adviser
Karl Rove (whether you believe he wields it for good or ill) is so
great that he simply eclipses any other influence in the
administration. "I was still regarding this White House in terms of
the long-standing model," Suskind writes, "in which the art of
political strategy is carefully balanced against serious policy
discussion, in which church-state separations of these two distinct
functions are respected, even championed. It seemed that in the
person of Karl Rove such distinctions had been blurred."

But the total dominance of politics over policy in the Bush
administration is not merely a function of personality; it is a
reflection of deeper structural forces. Put simply, the
administration is subservient to economic pressure groups to an
extent that surpasses any administration in modern history. Whereas
the Clinton administration was regularly forced to weigh policy
demands from competing interests within the Democratic coalition,
the Bush administration's presumptive allegiance in virtually every
case is to corporate America. It is simply unnecessary for the
White House to generate its own policies because that role has been
filled by business lobbyists. Bush has abdicated to K Street the
basic functions of domestic governance, not merely in cases where K
Street's interests run roughshod over liberal principles, but in
cases where they contradict conservative principles as well. Indeed,
the simple rule for understanding Bush's economic policy is that in
virtually every instance, whether tacking right or left, the
president sides with whatever interest group has the strongest
stake in the issue at hand. The result is an administration whose
domestic actions persistently, almost uniformly, fail to uphold the
broader public good.

One might wonder why the Clinton administration was not captive to
its economic supporters while the Bush administration is. The
answer isn't, as some Clintonites have suggested, that the denizens
of the previous White House possessed more moral courage than their
successors. It's the deep asymmetry between the two parties'
financial support. The Republicans receive support from business or
from groups, such as the religious right, that don't oppose
business's agenda. (Pat Robertson may not have any special passion
for, say, protecting offshore tax havens, but he won't denounce
them, either.) Democrats, by contrast, draw financial support from
a broader range of interests--from corporate America, too, but also
from labor, environmentalists, consumer groups, trial lawyers, and
other associations whose agendas regularly conflict with those of
business.

One way to think about this dynamic is a political science theory
called democratic pluralism. Pluralism was a way of describing, and
justifying, the system that emerged after World War II. The most
active players in the political system of the 1950s and 1960s were
large organizations like the United States Chamber of Commerce and
the AFL-CIO. Even though these pressure groups wielded far more
influence than everyday citizens, pluralism theory held that most
citizens' interests were adequately accounted for anyway, because
the various pressure groups represented them by proxy. Political
scientists applied this theory to the U.S. political system as a
whole, but currently it's a decent model only for the Democratic
Party. That is, since Democrats must listen to representatives of
business, labor, consumers, and others, the consensus that it
reaches is usually a pretty good reflection of the broader good.
But Republicans, whose base represents just a narrow elite sliver of
the economy, usually fail to take account of the broader interest.

This dynamic does not apply to cultural issues--Republicans are no
more subservient to the whims of social conservatives than
Democrats are to social liberals. Nor does it apply to foreign
policy, where both parties make policy largely free from the
influence of organized special interests. And, while it should be
noted that the Democratic Party as a whole draws from a variety of
economic interests, individual Democratic politicians do not. In the
Senate, for instance, New York Democrat Charles Schumer is
essentially a tool of the financial industry; Louisiana's John
Breaux, the oil and gas industry; Michigan's Carl Levin, the auto
industry; and so on. But the diversity of, and lack of agreement
between, these interests generally allows a Democratic
administration to transcend this sort of parochialism. Conservatives
attack the Democrats as beholden to unions and other left-wing
special interests. Meanwhile, leftists like Ralph Nader attack it
as having sold out its union and liberal allies for the embrace of
business. They're both half right: Being beholden to everybody
means being beholden to nobody.

This can be seen in the behavior of the Clinton administration. At
the time, the president's dogged pursuit of soft money was seen
both by liberals and conservatives as the apex of political sleaze.
But, in fact, the breadth of Bill Clinton's fund-raising is
precisely what insulated his decision-making from undue influence.
In 1993, Clinton infuriated his labor allies, but pleased his
business backers, by lobbying for and signing NAFTA. In 1995, he
delighted trial lawyers, but angered lobbyists for business
(especially in the Democrat- friendly technology industry), by
vetoing a GOP-backed bill making it more difficult for investors to
sue based on misleading financial reports. As surpluses emerged in
the last few years of his term, Clinton stymied both the
tax-cutting urges of his business allies and the spending urges of
his labor allies by insisting on debt reduction. The point is not
that Clinton got every policy decision right but that the
discordant nature of his support put him in a position where, on
most issues, it was at least possible for him to make a detached
judgment on the merits. That is precisely what Bush cannot do.

The extent of the Bush administration's bond with the lobbyists of K
Street is necessarily hidden from public view, since neither party
to the relationship has any incentive to publicize it. But a sense
of it can be gleaned from stories like the one that appeared in The
Wall Street Journal last January. "Top administration officials,"
the Journal reported, "led by political adviser Karl Rove, have
been meeting with industry lobbyists in recent weeks seeking input
on the president's 2002 agenda." The article proceeded to detail the
ways in which corporate America's wish list coincided with Bush's
agenda for that year.

In fact, if you look at the major economic issues of the Bush
presidency, in every instance Bush's position has been identical to
that of whichever interest group applied the heaviest political
pressure. On behalf of the accounting industry he fought
tooth-and-nail against audit reform, until a 99 to zero Senate vote
overwhelmed his opposition. (And, after the heat was off, Bush
weakened the new auditing oversight board and reneged on his promise
to boost the Securities and Exchange Commission's budget.) His
energy bill was written in consultation with energy producers and
reflected their desires almost perfectly. In signing legislation to
overturn workplace ergonomic standards and supporting tougher
bankruptcy standards on consumers, he fulfilled longtime corporate
demands by using a broad-based corporate coalition. He fought
campaign finance reform until opposition grew politically untenable,
and even now his appointees to the Federal Election Commission are
helping gut it. His telecommunications position preserved the
monopoly status of local cable providers. His positions on
prescription drugs and a patients' bill of rights were the
positions of the drug industry and HMOs, respectively. He supported
the oil companies in their quest to drill in Alaska and the auto
companies in their disdain for higher fuel-efficiency standards.
When, after the September 11 attacks, private airline security
firms enlisted a massive lobbying effort to keep their contracts,
Bush supported them (until that, too, became politically
unsupportable). In none of these cases did organizations
representing those affected by these policies--labor, environment,
or consumer organizations--receive any meaningful hearing.

Paradoxically, the only major issue on which Bush exerted any
discipline upon K Street was his tax cut. And even that was done in
the spirit of mutual interest. Bush decided that if lobbyists
loaded up the tax cut with business tax breaks, the entire thing
might sink from its own weight. And so, business was persuaded to
line up behind a tax cut that left corporate rates untouched--
forming a "tax-relief coalition" that raised millions to press for
the bill's passage--with the promise that subsequent bills would
directly give corporations their long-sought breaks. (To be sure,
corporate executives, as highly compensated individuals, would have
benefited disproportionately from Bush's income tax cuts even if
they hadn't been followed by corporate tax relief.) And indeed,
last winter, Bush unsuccessfully pushed for a package of business
breaks under the guise of "stimulus," and he is preparing to do so
yet again this year.

It is often on the smaller issues, which receive almost no public
attention, where the influence of lobbyists can be seen most
clearly. There are countless such case studies, but, rather than
slogging through all of them, consider just one: the Research and
Experimentation Tax Credit. This was created in 1981 in order to
reward companies whose product research generated broader
scientific benefits. Alas, as Robert S. McIntyre of Citizens for
Tax Justice has written, companies quickly claimed the credit for
researching products with no merit whatsoever, such as Chicken
McNuggets. In 1997, the Clinton Treasury Department imposed a new
regulation restricting the credit to actual scientific advances.
But, when Bush took office, his Treasury Department quickly
rescinded it. Mark Weinberger, Bush's Assistant Secretary of the
Treasury for Tax Policy at the time, had served as a tax lobbyist
immediately prior to joining the administration. His clients
included the R%amp%E Tax Credit Coalition, which represented
corporations seeking to preserve this particular scam. Early in his
tenure, Weinberger described his goal to the Journal thusly: "I want
to change the 'us versus them' mentality--the 'us' being
government, the 'them' being business."

That line would serve as an appropriate epigram for Bush's governing
philosophy. Since he's taken office, government and business have
melded together as one big "us." Scores of mid-level appointees,
like Weinberger, oversee industries for which they once worked.
Deputy Interior Secretary J. Steven Griles is a former coal-bed
methane lobbyist. Interior Department Solicitor William Geary Myers
III previously lobbied to preserve federal grazing subsidies.
Assistant Secretary of Energy for Fossil Energy Carl Michael Smith
came to government from the oil industry and told one oil and gas
group that his job is to determine "how best to utilize taxpayer
dollars to the benefit of industry." The prevalence of such
appointees is a stark departure from the previous administration.
"Clinton weighed factors other than whether you contributed
significantly to his campaign," explains G. Calvin MacKenzie, who
studies presidential appointees for the Brookings Institution.

It has become common under Bush not only for appointees to move
easily between pleading for industry and adjudicating such
pleadings but to do both simultaneously. Republican National
Committee (RNC) Chairman Marc Racicot not only comes from K Street
(which is hardly unprecedented for either party) but proposed to
continue his lobbying work while serving as party chairman. The
unpleasant symbolism of this forced Racicot to reverse himself, but
the real scandal wasn't that his lobbying would conflict with his
chairmanship of the RNC--it was that it wouldn't. Last year, Enron
Chairman Kenneth L. Lay privately promised to support keeping the
chairman of the Federal Energy Regulatory Commission (FERC) if he
would reverse his stance on energy regulation--implying that Lay
had veto power over the FERC chairmanship. My colleague Jonathan
Cohn reported in these pages last week that two members of the
Advisory Committee on Childhood Lead Poisoning Prevention were
solicited for their positions not by the Bush administration but by
the lead industry itself (see "Toxic," December 23). That is,
lobbyists have in some instances literally taken over the
responsibilities of governing.

Bush's defenders would no doubt maintain that it's only natural that
a conservative president regularly sides with business, which
usually desires less taxation and regulation. It's true that, in
most instances, conservative ideology and business self-interest
both militate toward the same end. Yet no disinterested
conservative ideology would take the form of Bush's actual mix of
policies. His energy bill, proposing massive new production
subsidies, earned disdain from free-market purists like National
Review and the Cato Institute. Bush has quietly acquiesced to
congressional pork, declining to veto a single spending bill.
Meanwhile, he has cut funding for programs--such as recovery of
loose radioactive material--that many conservatives support but that
lack powerful constituencies. Back in the 1980s, Ronald Reagan's
Budget Director David Stockman pledged to attack "weak claims, not
weak clients." Bush has done just the opposite.

One of the great perversities of Bush's domestic policy is that,
when he does deviate from conservatism, he follows this same
pattern--that is, he tacks left not because it is in the broad
public interest but because it will please a narrow but powerful
special interest. Take, for example, the three domestic policy
decisions for which he has taken the most flak from free-market
conservatives: support for farm subsidies and for tariffs on steel
and textiles. In each case, Bush acquiesced to the demands of a
small, organized minority whose interests clearly run contrary to
those of the majority. Studies have found that every job saved by
tariffs costs consumers $800,000 in higher prices. Farm subsidies
are even less justifiable: They artificially deluge the agriculture
industry and transfer money to relatively affluent farmers by
boosting the price of food, which disproportionately hurts the poor.
Note that in all those instances Clinton managed to stand up to the
special pleaders, despite the fact that acquiescing would have been
more compatible with his ideology than it was with Bush's.

Perhaps the most important common element of Bush's leftward lurches
is that they involve adopting positions through which he can win
favor with a Democratic-leaning pressure group without running up
against business interests. For instance, Bush has embraced
scandal-tarred carpenters' union President Douglas McCarron and
Teamsters President James P. Hoffa--this despite the fact that GOP
opposition to organized labor is frequently explained by aversion
to "corrupt union bosses." So why has Bush cozied up to two of the
more controversial bosses around? Because, as my colleague John B.
Judis has pointed out, whereas most union leaders' top priorities
involve winning concessions from employers, both McCarron and Hoffa
are equally concerned with having the administration help them with
internal issues--in McCarron's case, squelching a court case
brought by reformers within the union (see "Drill Sergeant,"
December 16); in Hoffa's, lifting the Independent Review Board that
oversees the union as a result of past transgressions (see "Dirty
Deal," April 1 %amp% 8, 2002).

The only factor that clearly mitigates Bush's embrace of an agenda
set by the business sector is his own sense of political
self-preservation. After all, if the administration is publicly
discredited as shilling for K Street, then it will be less
effective at shilling for K Street. This is where Rove comes in.
Sometimes half-measures (say, an industry-friendly prescription-drug
plan) must be embraced to stave off more sweeping changes. Other
times full retreat (as on airport security) is required in order to
avoid a p.r. debacle. Hence Bush approved offshore drilling in
politically marginal California but not in politically crucial
Florida. This is also the reason that Bush has not endorsed some of
the business lobby's more politically unattainable goals, such as
complete abolition of the corporate income tax. This caution should
not be mistaken for principled independence.

But caution has generally proved to be unnecessary for this White
House because the public so rarely has focused upon Bush's domestic
agenda. The reason for this lies in another phenomenon of political
science: Bad policies can exist when they have concentrated
benefits and diffuse costs. For instance, the public should be
outraged at steel tariffs, but in fact most people are not because
the cost to each individual is very low. The people who care the
most about steel tariffs are those who work in the steel industry,
and they're all for tariffs. Likewise, few people have any desire
to run long-term deficits in order to provide a large tax cut for
the affluent. But the people who stand to gain the most from such
tax cuts tend to appreciate them a great deal, and they express
their appreciation, among other ways, in the form of political
donations that can be used to help convince the majority that the
tax cuts are actually aimed at them.

On virtually every issue that has come before him, Bush has sided
with the intense preferences of the well-organized minority.
Judging from his lofty polls and his bulging coffers, the strategy
has worked brilliantly. In a democracy, of course, you can never
completely discount the possibility that the majority will
eventually focus on the fact that it is getting persistently
fleeced. From what we've seen of Karl Rove, though, he doesn't
appear very worried.

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