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Why We Need A New Constitution: Part 20 of 21

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What was true four years ago remains true today. Each of these special-interest groups endorses the notion that the deficit must be shrunk. Some are willing to agree that spending must be cut, others that revenue must be increased. But each group expects the cuts to be ways that do not affect its own tax obligations. Mayors, for example, oppose cuts in urban programs, and the Chamber of Commerce is opposed to any tax increases its members would have to pay.

In 1981, Jones summed up the situation: 'There is a constituency for national defense. There is a constituency for every item of the domestic budget. There is a loud constituency for tax cuts. But there really is no constituency for a balanced budget.'[1]

For structural reasons, the predicament our officials have placed us into will not be defused by them. Deficits are created by the inordinate influence of special interests on Incumbents, and attempts to cure the defect are fought off by those same special interests:

[M]embers of Congress are rational actors who pursue the self-interested goal of re-election. . . . a rational politician interested in maximizing the chances of re-election will not pay equal attention to the preferences of all the district's voters. . . . a rational, self-interested politician will pay particular attention to the desires of those citizens who have managed to form themselves into coherent groups organized around particular issues. . . . organized citizens have a greater influence on the behavior of politicians, who must continually seek re-election, than citizens who are not organized. . . .

[C]itizens are rational and self-seeking. . . . if a large group of citizens all share a common interest that can be promoted by forming an organization, but the additional benefits to each member of the group from joining the organization will be small, it will be virtually impossible to form such an organization. This is because it will be rational for each member of the group to 'let George do it.' But if everyone depends on someone else to do the dirty work, it never gets done. Through a series of decisions that are individually rational, a result is reached that is collectively irrational: the group will not be formed, even though all of its potential members would be better off if it were formed than if it were not. . . .

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[A] small group of firms, each one of which is affected in a relatively significant way by what the government does, is more likely to organize and expend time, effort, and money to procure and influence government policy than is a diffuse and disorganized public. . . .

Most government spending programs provide significant benefits to relatively concentrated, and, therefore, relatively well-organized and politically effective constituencies. On the other hand, the costs of government spending are spread over a large and diffuse group taxpayers. Because the incremental cost of each government spending decision is relatively insignificant to individual taxpayers, and because the benefits from organizing to oppose government spending are speculative and difficult to appropriate, public choice theory predicts that it will be difficult, if not impossible, to organize the broad mass of taxpayers, as such, into an effective counterweight to spending that benefits 'special interest groups' with more narrowly focused interests. Thus, public choice theory implies that there is an inherent bias built into the political system in favor of spending to benefit organized constituencies, even when the total costs of a program exceed its benefits. . . .

[G]roups of taxpayers frequently do lobby and engage in political activities to obtain changes in the tax code that will benefit them. It is worth noting, however, that most of the tax code issues that generate robust political activity tend to benefit relatively narrow groups, such as the oil industry or real estate investors. It is much rarer that groups are organized successfully to lobby to reduce general tax rates, as opposed to supporting particular deductions. [2]

A second central problem is that those who are really opposed to the deficits we are running haven't been born yet!

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But that alone, if true, would not explain the deficit, which is the joint product of government decisions as to revenue as well as spending. . . . politicians 'enjoy' appropriating money to benefit their constituents, but they do not 'enjoy' taxing them. . . . the causes are structural that is, they inhere in the system of incentives facing politicians, regardless of personal preferences. . . .

[B]y creating a deficit and borrowing to finance it, politicians are able to confer benefits on current voters while imposing a portion of the costs on future generations who will have to pay the bill. . . . the interest group that is the weakest politically is one that is even more difficult to organize than taxpayers the unborn. Future generations are truly subject to 'taxation without representation,' because today's politicians can vote to implement programs to benefit today's voters but to be paid for in part by tomorrow's taxpayers.

When someone who cannot vote can nonetheless be made to pay the costs for something that benefits someone who can vote, a powerful incentive is created for politicians to follow what Bruce Ackerman, John Millian, and I have called the 'cost-externalization' strategy, the politician's 'equivalent of a free lunch.' Cost-externalization arises most frequently in a geographic context, when politicians in one state seek to obtain benefits for the voters in their state while imposing disproportionate costs on the citizens of another state. One of the functions of the commerce clause of the Constitution is to restrain politicians from pursuing this tempting type of cost-externalization strategy. Deficit spending provides functionally similar opportunities for politicians to engage in cost-externalization, but across temporal, rather than geographic, boundaries. . . .

[P]owerful incentives are inherent in the existing political structure for politicians to engage in inter-temporal cost-externalization. Unlike the commerce clause, which protects (albeit imperfectly) citizens in other states from geographic cost-externalization, our Constitution provides no restraints or defenses against inter-temporal cost-externalization. [3]

The final nail in the coffin is the desire of these Incumbents to stay in office:

The essential reason why we cannot expect Congress to initiate the kinds of changes that will be necessary to deal with the deficit is that incumbents are among the prime beneficiaries of the present system. The present system allows incumbents to enhance their prospects for reelection by catering to well-organized interest groups and imposing costs on future generations. There is no reason to assume that Congress will volunteer to be part of the solution, because Congress is part of the problem. [4]

After the meticulous cataloging of these insights by Eliot and others, it is not surprising that political scientist Laurence Dodd would observe that "the Madisonian system is self-destructing."[5] Even if an individual member of Congress did want to solve the problem, s/he would have to bypass the impassable Constitutional hurdles:

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As a Congress composed of members who are concerned about public policy becomes increasingly and necessarily enmeshed in institutional immobilism . . . Congress faces the external checks and balances built in the Constitution. Ironically, since the Founding Fathers thought that Congress was the most dangerous branch, the really powerful checks, such as veto and judicial review, were given to the president and the Court to use against Congress. The inability of the legislature to know its will thus is exacerbated by the ability of the president and the Court, separately or in alliance, to debilitate any congressional will that may exist by throwing in front of Congress the requirement that it make legislative policy not by majority vote but by two-thirds vote. [6]

In light of all the foregoing, there is only one final question whether or not people can or will be able to organize quickly enough to head off financial disaster.



[1] 1985 Duke Law Journal 1087-8 (footnote omitted).

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Barry Krusch is president of Intelligent Communities, Inc., sponsors of The Intelligent Community Initiative. He is also author of 2 books, The 21st Century Constitution and Would The Real First Amendment Please Stand Up?

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