Property Rights Foundation of America®
Founded 1994

The Special Interest State: Causes and Cures

By James V. DeLong
Author & Journalist
Washington, D.C.

Sixteenth Annual National Conference on
Private Property Rights
October 20, 2012
The Century House, Latham, N.Y.

 


Introduction by Carol LaGrasse: Well, now we have the excitement of hearing our keynote speaker, James DeLong. James V. DeLong, whom we call Jim DeLong, has lived in the belly of the Washington Beltway beast for nearly forty years, working for government agencies, trade associations, think tanks, and himself. He has written two earlier books: Property Matters: How Property Rights Are Under Assault and Why You Should Care, (Free Press 1997), and that was a bit early in the property rights book authorship (there's a fine book, I've read it from the beginning to end), and Out of Bounds and Out of Control: Regulatory Enforcement at the EPA (published by Cato in 2002). He has written extensively for free market-oriented journals, the American, Reason, Claremont Review of Books, Tea Party Review, National Review, and for the Competitive Enterprise Institute, National Legal Center for the Public Interest, the Cato Institute, the Progress and Freedom Foundation, Digital Society and the Convergence Law Institute. He is currently a vice president of the last of these a non-profit organization, which is dedicated to research and education on public policy issues. For four years Mr. DeLong ran the Progress and Freedom Foundation's Center for the Study of Digital Property and he has blogged extensively on intellectual property and tech industry issues at PFF and on behalf of the Digital Society. He is a member of the Board of Advisors of the Heartland Institute in Chicago and Adjunct Scholar at Competitive Enterprise Institute.

In addition to his time in the think tank world, Mr. DeLong's work history includes stints as associate of a large law firm, special assistant in the Department of Housing and Urban Development, senior analyst in the Office of Program Evaluation for the U.S. Bureau of the Budget, assistant director of the Bureau of Consumer Protection of the Federal Trade Commission, and research director of the Administrative Conference of the United States. He has spent several years as an independent lawyer and consultant working mostly in environmental and energy matters. He's one of the few people who, when I receive some review or whatever in the email, I am appreciative to read it. He's a magna cum laude graduate of Harvard Law School, where he was book review editor of the Harvard Law Review, and a cum laude graduate of Harvard College, where he majored in American History. He is the author of Ending Big Sis: the Special Interest State and Renewing the American Republic, which was just published.

James DeLong's speech today is on renewing the American republic.

We thank you very much, Jim.

James DeLong: Well, I appreciate the invitation to come. The last few years I've been involved more in tech issues and IP but in the 90's and the 80's, in fact, I was heavily involved in environmental issues and I know the Property Rights Foundation from that era and its excellent work. I must say, the book on "property matters" was written, was commissioned in 1995, because we had the assumption that the Republicans might well win in 1996 and protecting property would become a big issue. You might say that was a miscalculation. I don't think things have gone terribly well since then.

Well, Carol gave me much too much time to prepare this talk and so I kept going through the book and thinking, "Ooo, I can't possibly leave that out." So, I have here a bunch of notes which I will try to pick and choose from. This the book that Carol spoke of. It's called Ending Big Sis: The Special Interest State and Renewing the American Republic. The cover is an almost empty pie plate with one small piece left and many hands reaching for it. It wasn't my idea, my conception, but I thought it was a really excellent one. You can find out about the book on the website which is on my program. It is www.specialintereststate.org. And you can buy it pretty cheaply on Amazon or as an eBook or a hardcover or from Barnes and Noble as a NOOK book. And I kept the price pretty cheap, it's down around $4.00 for the eBook and about $8.50 for the hard copy because, while I have no objection to selling books, I'm basically an ideologue and I'm much more interested in trying to get out some of the ideas here to the general discussion and such. Some of them, as I'll talk about a little bit later, are difficult traction because people don't like to hear them. The message is not a cheery one.

Now, I chose the term for the book "the special interest state" to contrast it with the welfare state. A lot of current political dialogue revolves around the idea of the welfare state. And this term casts government in a rather benign light. You know, who can be against a government that promotes welfare? Perhaps it goes further than some would like in protecting people against the vicissitudes of life, but on that point you can always pull out the famous Franklin D. Roosevelt quote, where he talked about how the immortal Dante tells us that those of warm-heart are judged more favorably than those frozen in the ice of their own indifference. And, of course, that was a lie about Herbert Hoover. Hoover tried all sorts of things and had a very warm heart. But that's all right. It was politics. Now, my view is rather more jaded. I don't see a lot of concern with real welfare, perhaps. Rather I see a government that has let itself be captured, piecemeal, by a host of special interests. And these interests are then allowed to wield chunks of the government's power for their own purposes. Now, by special interest here I mean not only your familiar, "the special interest" of the crony capitalists and such. I certainly include ideological interests such as the environmentalists and, of course, in the book because of my experience with environmental and energy issues, the "true Greens," as I call them, sort of keep parading through. Just an irresistible number of examples of that.

Perhaps I should start by proving my assertion that the government has been captured. But I think that, after the presentations this morning, I could sort of rest that case. Anyone who sees any relationship between anything you heard this morning and the general welfare has a far better fictive intelligence than I do. Nonetheless, I will talk a little bit about it. Basically, what we've got is that people realize that controlling government is a nifty way to protect one's own interest. Whether that interest is making money from development, or green energy subsidies, or simply having someone devote their property to your favorite use.

Now, the raw numbers. The GDP of the U.S. in 2010 was about $14.5 trillion. Of that, the federal government spent about $3.7 trillion and it's about that level now. Forty percent of that is borrowed, by the way. That is courtesy of the Chinese. State and local governments take another 16 percent that they admit to. The costs of the regulatory system are unknowable. Wayne Crews at CEI who does his annual Ten Thousand Commandments paper, which I heartily recommend to all of you, if you feel a need to be depressed some time, puts it at about $1.8 trillion but that doesn't include a lot of state-level rules. No one knows the cost of the legal system, like how much does the legal system transfer in terms of wealth cost. For example, just medical tests that are required that are necessary. Or various other devices to transfer money through product liability law, or similar things. Anecdotes abound considering the impact of law but I know of no data.

Besides these direct costs, the government influences or compels other massive expenditures. Taxes are a good example, rather tax expenditures, as they're sometimes called. The fact is that if taxes were, if the income tax were enforced very neutrally, without any special breaks, then it would collect about $2 trillion. Because of various breaks it collects $1 trillion. So, half the projected tax is not collected. Now, a lot of that, I might add, goes to crony capitalists but that goes in bits and dribbles and pieces. It is recycled in campaign contributions, but, you know, that's another story. The big items there are sort of middle class entitlements. You listen to some of these debates and you wouldn't quite realize that the middle class does very well out of all these things in many cases. Mortgage borrowers, in particular. There are even grosser things, for example, to get your tax break for your IRA contributions, you have to channel your savings through some acceptable mutual fund or institution.

Well, for decades Wall Street has sort of creamed off about 2 percent per year of those monies, swapping stocks with each other. The mutual funds don't beat the indices. That's beginning to change now as the exchange traded funds become more popular but for a long time, basically, the tax laws required that everyone make a two percent contribution of their savings to Wall Street every year. As one finance professional told me one time, he said, "My job is to stand here in the middle of this river of money flowing through New York and put some glue on my fingers." Another subsidy, now, which I feel very acutely personally, is the Federal Reserve's low interest rate policy, which is channeling hundreds of billions of dollars away from savers and into finance and housing. You play with the numbers a bit and you come to the idea that at least sixty percent of the nation's wealth is disposed by the whims of government, not the market. For comparison, in 1900 governments of all levels spent at about ten percent of GDP. Of this—I've forgotten the exact number now—I think about three-fifths of that was spent by localities and most of the rest by states and a little bit by federal government. So, the contrast was extreme. For example, I was out in Red Lodge, Montana, where my spousal equivalent has a house, and there was a community meeting where they were talking about the repair of the Nineteenth Street Bridge. This is a little tiny bridge over a creek that goes to a city park. This had been the product of long discussions and negotiations with Helena, the capital, because the money had to come from Helena to repair this totally local project. And, of course, what happens is by making all the money, you know, seizing all the money, taking it through Helena, then doling it out. Helena maintains a lot of control. Certainly wouldn't want local autonomy.

Now, the next function is what we get for it. The basic functions of government consist of: law and order, courts and civil justice, a bit of infrastructure, protection of various commons, and prevention of public nuisance, defense, and some relief for the needy and unfortunate. I mean, that's always been accepted as legitimate. Now, I don't know how to calculate what portion of government resources go to those causes, I'd be surprised if they couldn't comfortably be provided at, you know, ten maybe twenty percent of GNP, maybe even the levels of a century ago. It would be hard to calculate because even these basic functions are larded with waste and cronyism, so that even the programs that do come in the category of the general welfare are really overly costly. As Carol said, I used to work for the U.S. Bureau of the Budget many years ago and I still remember one late one night when my boss, the assistant director, looked up wearily from this pile of papers and he said, "You know, every government program consists of a hard core of fat surrounded by bone and muscle, and when they say you're kind of the bone, they mean it and that's because you'll never get to the fat."

I mentioned, too, the financial system and the favoritism it got. That's really the tip of a very large iceberg. The disasters now overwhelming this political and economic system are largely due to massive misallocation of capital, including human capital, I might add, in the areas of housing, education, and health. All of these are compelled by the government. The financial system was not unregulated, it was regulated to death in a very destructive way. You know, for example, reserve requirements were reduced for banks that held mortgages rather than business loans. So that for mortgages and sovereign debt the reserve requirements were zero. Everybody knows sovereign governments could never default. So, now, wherever you look, when you think about it, these policies aren't dictated by the national interest, they're dictated by the benefits to some coalition of the politically powerful. And sure, there are cover stories. No one ever says, "Let's give money to real estate brokers and mortgage lenders." They always say national interest requires that homeowners or something… You know these stories are increasingly thin. You have the impression that they're not even meant to be believed, they're not even meant to be plausible. Whenever I read one now, or some congressman defending a program, I remember a time when I received a phone call. And it was from a man saying he was a policeman. He wanted to sell me tickets to the Policeman's Ball. And I decided I would be clever today and so I said, "When is that?" And he told me and I said, "Oh, I'm afraid I'm going to be out of town." And there was a silence. And he said, "Mr. DeLong, no one ever goes to the Policeman's Ball." So, fairly caught, I bought the tickets. I do have one regret, many regrets, but one of my regrets in life is that I didn't go. Because I would like to know if there really was a Policeman's Ball. Or whether it was held in a bar with a bunch of cops drinking, or what. You know, I'm really sorry I missed that opportunity.

A few minutes ago I said that much political discussion takes the form of arguments for and against the welfare state and it seems to me that for the most part the people who discuss it in these terms are really overanalyzing. But we spend a trillion dollars on welfare now and then a lot more on middle class entitlements of various sorts but we don't spend it because of any philosophy of government, we spend it because of political pressures. Of course, people have noticed this. The real estate developers who were discussed this morning are not acting out of any philosophy of government. They just know it's cheaper to buy a city councilman or a whole council than to pay a fair price for the land. And the true Greens who oppose any form of energy that might actually work, are really totally pragmatic. Controlling government is an effective way of promoting religious views, rather than actually convincing people of the rightness of their cause.

One of the teachings of Karl Marx was that the substructure, the mode of production, determines the superstructure, such as the political beliefs of a society. And interestingly, our current situation fits that theory rather neatly. You know, control of government has become the mode of production and wealth for many people. At least in the form of the distribution of wealth, you know, at a deeper level, of course, not production. And so, naturally, individuals who profit from this gravitate toward a set of beliefs to justify their position and these beliefs cluster under the general label of the welfare state. Now, part of the problem, too, is that government then becomes a powerful special interest pushing for more and more government control. There was a recent book by a scholar Leon Aron, a very fine book, I might add, called Roads to the Temple [Roads to the Temple: Truth, Memory, Ideas, and Ideals in the Making of the Russian Revolution] analyses Russian political thought during the 1989-1990 as the Soviet Union was disintegrating. One of the points Aron makes is that by the late 1980's some eighteen million people were involved in administrating "The Plan." As the materials he uses point out, tractors rusted in the fields because people, drivers were not trained. Good crops were plowed under because the work order said, "Plow this field," even though the crops hadn't been harvested. Billions of rubles of unwanted goods were produced to meet the quota and then just sat in storage. But those eighteen million people just kept on pushing paper and collecting salaries and enjoying preferential access to apartments and stores. They were a powerful force for the maintenance of the system. I doubt if many of them knew or cared about the theoretical foundations of a Marxist-Leninist state. I suppose they could parrot a bit if they had to because they'd been exposed to some reeducation. But they certainly favored anything that put them on the top of the heap.

Now, to some degree, I fear we are in a similar situation in that the special interest state creates an immense demand for an administrators of "the plan," so to speak, including many in the private sector whose job it is to help their employer deal with the government. For example, you know the New York lawyers who represent the landlords in the cases of Jim Harmon's case. They aren't in favor of repealing rent control. You know the Washington lawyers aren't in favor of deregulation. They were terrified in 1980. Now, these jobs all go to the literate children of the upper middle class who are a powerful constituency in itself. And anyway, economists write continually and often about how work has become more intellectual and how jobs requiring manual skills are disappearing and how the economic returns to college are increasing. They assume that these are market-based developments. I am unconvinced in that I think it may well be a government distortion. But, again, it's going to be very difficult to reverse course because, what do these people do? If you read some of the Austrian economists, the recent Austrian work—Arnold Kling, Don Boudreaux, Cafe Hayek—whom I heartily recommend, you realize that once you have these misallocations of resources, it is pure hell to get back because you simply do not have the mechanisms or the expectations that will let you do it.

If you accept that we do indeed have a special interest state, the question is how did we get here? You notice I'm going to run out of time before I get to cures, but that's another thing. After all, the U.S. got along quite well for a number of years with government taking a very modest role. So, what happened? The modest role was not an accident. Americans are hardly the first people to understand that controlling the government is the road to wealth and ease. I say in the book you can go back to the Bible, when the Israelites wanted a king and God says, "Are you out of your minds?" They say, "Yeah, we want a king." The punch line to that actually is that God then says, He'll take a tenth of your wealth. Which just shows that God lacked ambition compared with modern governments.

Now, the difference is, the American Founders saw this quite clearly. That avoiding "capture by faction" was the crucial issue in constitution making. And they saw this. Much of the Constitution is devoted not to the structures of government and powers and such but the idea of defense in depth against the possibility of capture, while at the same time insuring that the government had sufficient power to act effectively when necessary. Now, the three pillars of the protection were basically the idea that legislation had to be general-interest legislation, not special interest. This was codified in both the culture and the law. You have the idea that government could not control everything. Government can regulate but it wasn't to be responsible for whole sectors of the economy, the way we have now. Finally, they feared, like the Devil, the idea of systemic corruption, which is corruption that is then fed back into supporting the government, which they thought would rot the Republic. The reason they thought this was because the British Parliament was stock full of it, in that fully half the Parliament consisted of the king's men who held various posts and various rewards from the government and would support the king. And, you know, a lot of this, by the way, comes from such scholars as John Joseph Wallis, Barry Cushman, and Howard Gilman. It's sort of a revised version of American political history, which I certainly didn't run into at Harvard. But one of Wallis's quotes is, "Fear of corruption, verging on paranoia, became a dominant feature of American politics in the early 19th century...The rhetoric of corruption emerged as the common grammar of politics so overwhelming that it became difficult to discuss public questions in any other language. The word most often brought to mind a fuller, more coherent and more dreadful image of a spreading rot. A frequent metaphor compared corruption to organic cancer eating at the vitals of the body politic and working a progressive dissolution." Well, hard to beat that. And for the Founders, that was not just a few writings but that was sort of their dominant ethos.

Of course, there's always a problem trying to figure out, all right, what's a general interest? I've been to law school. I can play that game forever. But that's a different type of debate than simply assuming that because it's a rich lawsuit or it's like Sandra Fluke, or somehow deserving, everyone should pay for their birth control. The idea that you had to have some justification in terms of an articulable general interest is a very important step to controlling government. Let me say, it didn't always work. They had the big fights over internal improvements, a lot of which were rip-offs and disasters. But at the same time, at least arguing in the right language makes a big difference.

Now, to phrase the issues faced by the Founders in more contemporary terms, we have the idea of the game theory idea of Prisoners' Dilemma, in which you have two prisoners, both of whom can profit greatly if they can cooperate. Both of them have major incentives to cheat and no mechanism of communicating. And so, within the confines of narrow game theory games, single play game, both parties always cheat and spend some time in jail. There is nothing else they can do. So, the problem is society's. And especially if constitution making is setting up mechanisms so that in repeated plays of game theory games, people can cooperate. The most common example that I'm fond of using is the escrow agent. This is so common we don't even think about it. When somebody buys a house, of course, in a narrow point of view, the buyer wants to get the deed and then renege on the payment. The seller wants to get the payment and then renege on the deed. Well, you can have armed guards come, like a drug transaction or something—which is exactly why they do it because they don't have escrow agents— or you can have an escrow agent. And you put the money and the deed in and then this honest intermediary parcels them out. It happens over and over all the time. You know, our society now is full of mechanisms like that in private transactions. Contract law is basically a mechanism like that. The Constitution, to a large extent is like an escrow agent. Another example that I like to use all the time: The First Amendment. Each of us might like our religion to be the established religion. Except for the Greens, we can't all win, they seem to have won, as far as I can tell, but other than that... We would like our religion to be established. On the other hand, we know other people feel the same and we might not win and so we're actually all better off if we agree nobody wins. Then we enforce that bargain, so that if somebody tries to win, even if we would agree with them in the instance, we say, "No. The bargain is more important."

Well, the Constitution with its emphasis on general interest legislation and avoiding the systemic corruption had the same bargain in the economic sphere. The First Amendment takes in the religious sphere. Another way of phrasing this that I've seen on legal literature is people talk about the difference between a Constitutional interest and a particular interest. With the particular interest being your desire to get the house for free, the Constitutional interest being your recognition that you and everyone else are better off if you have a system of escrow agents. And so throughout the Nineteenth Century you had, essentially the courts were enforcers of these ideas but also the strong assist from the general political culture. That lasted really right up to the New Deal. To really track how it broke down, you're going to have to get the boo, because it is a long story and a complex one. Basically, the courts got out of the business and not really for bad reasons. They got too hard to track. It was too confusing. There were a lot of issues with it. You can see why what happened, happened.

But by 1938, basically, the courts finally gave up and gave the government free rein and said, "No, we aren't going to interfere on the economic sphere." But there's one asterisk to that that's very interesting and that is that the Progressive Era and the New Deal both relied heavily on the concept of expert agencies. And the conservatives like to sneer at that, and rightly so, that didn't work. But that was a way of protecting against the politics. You know, the thought was, well, we will set up decisions by expert agencies who won't be captured and who will make honest decisions according to some outside criteria which they will have to invent. And then the administrative procedure after 1946 was sort of meant to effect that bargain and make sure that the expert agencies stayed honest. And that failed. As time went on the courts sort of lost track of what they were doing and they let the agencies run rampant. With one of the big decisions being Chevron [Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc.] in 1984, in which they said agencies are essentially judges of their own power. And since then, now, it's interesting by the way, you can see the courts foundering now. They know EPA is out of control, yet they don't know what to do about it within the confines of their doctrines. So they've started knocking down EPA as going beyond its statutory authority but they can't quite bring themselves to say, "Look, you're a bunch of dishonest crooks." And this is happening to agencies before the FCC gets in town, right, and found they're a bunch of dishonest crooks. But you see this. I read the transcript in the argument in the wetlands case in the Supreme Court [Sackett v. EPA, 2012]. Nothing to do with reality. You know perfectly well what they're doing, what the Corps is doing, and EPA is doing. That is they're trying to take property. And the court goes through these elaborate rationalizations about administrative law and doctrine with nothing to do with reality.

As I say, Wallis is one of several excellent scholars. After you get the book, I recommend that you look in the index notes and you'll see references to quite a few of those people. You'll also find them on my website, I had a lot of books on this. Now, thereafter, since the 1930's the government has grown, decade by decade, with nothing to keep it in check. They get more and more daring. The latest case and one reason for pessimism, more pessimism was while nobody noticed in the run-up to the Obamacare decision, there was another decision out of Indiana called Armour [Armour v. City of Indianapolis] decided by the Supreme Court in which the court said, again and finally perhaps, that they simply will not review state laws for rational basis. And the allegation in Armour was that the state had taken taxes and allowed people to prepay a sewer tax for ten years or something or you could pay it annually. Then they changed their system and so nobody had to pay the tax anymore but they didn't refund the tax people paid in advance. And the Supreme Court said, "No, there was a rational basis for this." One rational basis was that it would be inconvenient to return the money. The second was the state was too incompetent to figure out how to calculate it. To which Scalia, of course, says, "They're too incompetent to calculate anything that an eighth grader with a spreadsheet can do in half an hour?" Of course, the answer to that is probably "yes."

So, I've been told there's a recession on. You can't tell that from Washington. You know, the city's thriving. My son-in-law tried to get a reservation the other day at high-end restaurants and failed on a Wednesday evening; they were all full. Home prices have recovered their former values. And new construction and traffic is jamming it up all over. I just thought you'd like to know that some people are doing well out of all this. The number of lobbyists keeps growing for some reason. Of course, it's like the old saw about the lawyers, "What in a town goes broke to get rich?" The lobbyists do this over and over because they all jack up the price and the only thing you can do against the lobbying onslaughts is — more lobbyists. Now, obviously in the long run the problem, of course, is that now the factors are in balance. You can't raise taxes much. I read a piece recently that said the middle class family in the 50 to 100 thousand bracket probably faces a marginal tax rate of about seventy-five percent if you count their health insurance's tax. The guy was doing this because he wanted to compare with Europe. Seventy-five percent. And, you know, it's probably a pretty fair estimate, you know his numbers were convincing. Obviously, not a sustainable course. You can't keep borrowing the money from the Chinese for this forever.

I have a number of pessimistic things in the book but among the most important one is a death spiral. When everything becomes a pure power grab then that just creates incentives for more of the same. You know, why should you waste your resources fighting benefits for others? The benefits of reducing waste accrue to the public, it's a collective good. No. What you want to do is say, "Hey. Me, too." And so all the effort is going into getting more for yourself. My real remedy when Sandra Fluke says I should pay for her birth control, is not to fight it, it's to join Joe Biden's call for free colonoscopies for the elderly. Why not? And that is what goes. You just go on and on. Also those examples show the system has lost all sense that you even have to try to justify it in terms of the public interest. I might say this is sort of similar to the principle on which my former marriage was run. Which was whenever one of us wasted a sum of money the other wasted an equivalent amount. And it kept the political peace but it really didn't work in the long term.Another reason is that, as I said, there is a deadlock between spending and taxes, and the game theory guys have another concept, which is somebody around here has got to be reasonable and it's certainly not going to be me. So, it better be you. Well, both parties are like that on spending and taxes. Democrats aren't going to be reasonable on spending, Republicans aren't going to be reasonable on taxes. And both of them from their own perspective are right. You know, as a conservative, I don't want to be reasonable on taxes. I think a lot of the people who are wealthy in this culture have gotten wealthy because of government largesse. I would not object at all to taxing some of it away, but on the other hand, I don't think it will do any good. I think the government will spend all it can spend and borrow, and it won't do any good.

Another problem, of course, is that you have the crony capitalism. This means that a lot of money now is going into systemic corruption. It goes to green energy companies and it's kicked back into campaign contributions. At the local level, of course, this is completely out of control. And then you can be absolutely sure that the owners of the Mets are contributing very largely to all sorts of campaigns. You have other problems such as the rational ignorance of the public. Although most people don't pay that much attention to politics, they think it's on the periphery of their lives. And New York is a good example in that actually those million people who are paying "x" for rent because of rent control should be on our side. But they don't pay enough attention, so you can't convince them. And you know, it's like that over and over. I suppose by now you may have figured out I'm not an Obama supporter. I have children who are. In fact, one of my sons, to the great amusement of my conservative friends, by the way, is a liberal professor of economics who's a leading Democratic hatchetman. Nick Schulz of the American Enterprise Magazine just said, "Don't worry, Jim. Nobody really blames you for dropping him on his head when he was a baby."

With the crony capitalism you have, also, the environmental movement which is immensely powerful. Carol and I were talking about the level of foundation money going into it. I've always suspected that Putin and the Middle Eastern sheiks were not limiting their contributions to Europe but I can't prove that. In addition, of course, they've been able to get government funding for some of their stuff. Then you have the conspiracies going on doing EPA and the environmental groups; and these, bring a lawsuit, settle it out, and pay for environmental causes. Other reasons, I don't know, you have sort of a sense one of the things conservatives sometimes don't quite get is how much of our political theology about capitalism depends on the culture set of the nineteenth century when you had very religious capitalists, alleged robber barons, who really saw their duty of investment then, you know, the Parable of Talents and all that sort of thing. That's very different from a place like Latin America where you had sort of a latifundio mentality which was "isn't it nice to have these estates with all these peasants." And if you said, well, you know, you could get a development do all sorts of things, but then there wouldn't be any peasants. And they would far rather have the system they had than be richer themselves. I really think we're getting into that. In this country, you have a very large upper class which is quite happy with the way things are going. They like the privileges and such. I don't know how you get out of it.

But under the crony capitalism I'm going to mention, too, Bruce Yandle, the economist. He wrote an article some years ago called "Bootleggers and Baptists" pointing out how many policies are controlled by a combination of ideologues like that of Baptists, and those on the perceived other side, bootleggers. His example was Oklahoman is "dry." That is, bootleggers and Baptists both supported "dry" Oklahoma: the Baptists, because they thought it was immoral to drink, the bootleggers, because they thought it was immoral to drink any other liquor than theirs. And so, year after year, Oklahoma stayed dry because of this combination. Well, you get that a lot. The combination of all the green crony capitalists plus the enviros is sort of a leading one.

You have a major problem that I mentioned before, government as its own special interest group, the eighteen million people supporting the plan. You know, I read once that the amount of tolls collected by the Maryland Turnpike was almost exactly the amount needed to pay the salaries of the toll booth operators. And that sort of falls in the category of what the news people call "too good to check." So, I never checked it. But when I look at TSA, as I did on my way up here, I have that same feeling. You know, here you have these people, all these facilities, everything else, checking to make sure that my nail scissors are blunt rather than pointed. At the same time you have madmen running around the Middle East with stingers that we gave them. And why aren't those people out surrounding the airport watching for those guys. It's classic in that if you want to prevent hijacking you harden the cockpit, arm the crew, and if you're feeling really daring, arm the passengers, as well, and hijacking is a thing of the past. You don't need to do all this. So, it's just this wasteful insanity that will go on forever.

Now, whenever you look, you find similar examples. You know, the War on Drugs, which hasn't affected addiction rates at all but it's going on and then it's producing this huge enforcement machine... And other property rights issues: sort of outrageous forfeitures where they'll decide if you're a non-English speaking person with $10,000 you must be a drug runner and they'll take it, make you prove you're not. And, you know, teachers' unions' employees' pensions, all sorts of things.

You also have, and you see this in this administration, we were talking about this a few minutes ago, you have the government to the extent it was functioning, breaking down, in that in one point in time, Lyndon Johnson knew about special interests. But in his own White House his own staff was as cynical as he was and so they would arbitrate between them. By the time you got to Carter this was changing, He was bringing the special interests into the White House and now, that's complete. Obama, as president, would logically have some tough-minded person on his staff who would arbitrate between energy and environment. They'd say, "Look, they're both bastards. Here's how you do it." Obama brings in Carol Browner. And then, he doesn't even know what he's done. You know, you don't bring in a representative of the handicapped community to tell you how much to spend on the handicapped community. I mean, Obama is either just so clueless, he doesn't know that. And clueless is flattering.

Now, stepping back and becoming more, sort of, philosophical, the big things, two of the big things are that, basically, the most important concept in politics is the concept of political legitimacy. You know, what is the moral basis of government? And the Founders were perfectly clear: the consent of the governed. But consent of the governed is constrained, it was constrained by their pillars that legislation had to be in the general interest, you couldn't have the cronyism, you couldn't have the systemic corruption, and you couldn't have the government actually running all that much. So, now, as we've gotten away from that, consent is sort of going down. Like a recent Gallup poll a year or so ago where only twenty-two percent of the people said that the government had consent of the governed. And only seven percent are Republicans. And actually, there's a whole class of people in the Tea Parties who were considerably more radical than the Republicans. So, I hate to think what their numbers are. Now, about fifty percent of the Democrats regarded the government as having consent of the governed, which makes you think, probably the other fifty percent thought it didn't because it wasn't giving them enough. But that is a serious lack...

You know, I wonder, was it actually forty-seven percent. It may have been forty-seven. Nah. That would be too neat. But it does seem to me that political legitimacy is really the most important point. I say in an anecdote of the book, I still remember a professor at Harvard who taught a whole course, basically about political legitimacy. A fascinating topic because when a government loses political legitimacy then there's nothing left but force. And things can get very hairy. Lenin is supposed to have said that the Bolsheviks didn't seize power, they found it lying in the gutter and picked it up. As I look around, I see an awful loss of legitimacy going on all the time. What I don't see is any discussion of this in Washington. I find that simply talking about these points with people, they're sort of unbelieving, as if they can't believe that the government could actually lose legitimacy. But from what I see it is that this is possible. I got in the airplane line yesterday and I heard a conversation behind me. A guy saying to another, "The federal government's out of all control."

Then the second thing is that I mentioned, the game theory concepts in connection with the Constitution and the idea of the constitutional interest, a particular interest. And the Prisoner's Dilemma. These are concepts that really evolved formally during the 1960's especially in connection with nuclear wars and such, but are all about how parties interacted. Some very fine works on them. Tom Schelling has a book called The Strategy of Conflict, which includes (I think he's the one) the line about "Somebody's got to be reasonable and it's certainly not going to be me." The academic literature is full of discussions of the Prisoner's Dilemma and all sorts of things. Again, where don't you see it? You don't see any discussion of this in Washington. There is no concept, I have never seen in a newspaper the contrast between collective inter-constitutional interest and particular interest. It's just totally lacking. I sort of scratch my head. Are these people totally uneducated? That becomes a bit of a vicious circle, and because nobody ever uses the terms or talks about it, then you can't use the terms or talk about it because nobody knows what you're talking about.

I said I was more of an ideologue. One of the things I want to do is get these concepts into the debate and get people to talk about, "Is this government acting legitimately? Is a government acting legitimately?" Get these concepts going. Is this a constitutional interest or is it a particular interest? And how do you solve the problem? And return to the question. The Supreme Court obviously has lost all track of this in that it's sort of a joke when you read these opinions. They're so…just sort of weird and just sort of abstract. You know like the Armour opinion, abstract, no rational basis, totally unaware of what they're doing, totally unaware of the idea that they had any role in the political system. I don't know what you do about that because that's not in the law schools.

So, now, I said I was going to carefully run out of time before I got to the cures. I do have some specific suggestions a lot of which are trying to get these terms, these concepts into the debate and get people thinking about them. Get people calling "bullshit" when they see it and I think I'm not over-intellectualizing, recognizing that a lot of these things are simply just not acceptable. There was a very good program on Cato last Tuesday, I think it was, called "The Libertarian Roots of the Tea Party." It's on the Cato website. You can watch it. I really recommend it. It had David Kirby of Freedom Works and then the last one was Jonathan Rauch, who wrote a very good article a couple of years ago on political views of Republicans, Independents, and Democrats. What Rauch did was identify a group of people, whom we now call Tea Partiers, who were far more hard-line than the Republicans and regard the Republicans as being rather squishy on these economic issues and that these people are going to cause a lot of problems for Republicans—to which one says "right on," it's good. I regard the Tea Party as one of the most creative movements in years in that it is contrary to almost all groups, which form to get something more from the government. The Tea Party, when you read the mission statements, are formed totally around this constitutional interest. We want reform. And, again, nobody seems to notice this. You know, it's sort of somebody else.

Now, in terms of the long term, I'm optimistic, in that we were again discussing at lunch, well, we could go bankrupt. And default. If so, that will clear the decks and then also inoculate us against future things. Now, those of us my age and a little older might find this somewhat distressing, but I really don't have much doubt that my grandchildren, who are now about twenty, will wind up living in a better and truer country. And largely the reasons Bonner points out, the promise of cheap and abundant energy; it's the key to civilization. However, the question is, how do you get there? Now, Mancur Olson has written, also, fine works, on collective action and these problems and talked about a lot about these issues. He died much too young. He talked about, well, how do you avoid this once the nation gets into this spiral. And the only things he came up with were World War II and China's Great Leap Forward. I like to think, well, he would have come up with something different if only he'd lived a little longer.

But it's very hard to get out of that. And I don't know if we can. As I say, I think the education is probably the best way. I think Social Security and things like that can be tweaked enough so that they should work. Medicare is harder. How you deal with the huge, sort of, welfare treatment. How you deal with the misallocations of capital. How you deal with not just the lower welfare class but the middle class welfare class. I don't know. These are very tough issues. And I certainly don't see anyone on the political horizon who is really addressing them. Maybe Ryan. I'm really not sure. They can't address them, actually. You have no idea what they're actually thinking. It does seem to me that it's certainly up to all of us to do what we can and to do what we can to promote the return to constitutional values.

I got into trouble with one article I wrote. I'll close with this one. I wrote an article for the American Thinker in which instead of going back and saying, well, we need more originalism in constitutional interpretation, the article was saying, "All right. It's a living Constitution. I'm perfectly happy with that. That means I can learn. And so, I want to learn from the total failure of the Progressive institutions and the Supreme Court's withdrawal from any responsibility for controlling the government. The Constitution lives. That means move on." Nobody got my point. I got all this flack from conservatives saying, "No, No. It's got to be originalism." By way of rebuttal I said, "Look, I was once a litigation lawyer and sometimes, when you're confronted with something that you can't dispute or you can't really argue against, take it, use it, move on." But they weren't having that. But I was perfectly willing to say it's a living Constitution and fight on those grounds. And I think we can do that. When I first read Harmon's case, I thought I was reading the Onion; it wasn't possible that this was happening. But it was. And, as I say, education, ask candidates about it, promote what you can on these things, and keep fighting and perhaps we will, indeed, find good things happen, like fracking and that we will find that this is a stronger country in twenty years. I'd just like to have it be more pleasant when getting there. So, thank you.

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