Blog on the Run: Reloaded

Friday, January 1, 2010 6:46 pm

Why I oppose congressional term limits

My Uncle Frank is a big believer in Congressional term limits. He is convinced that term limits will solve the problem of congresscritters who do not act in the country’s best interests. A while back, he asked me to elaborate on why I oppose term limits, and I promised to answer. More recently, he sent me five more specific questions related to term limits that he wanted me to answer.

Well, fortunately for Uncle Frank (and the long list of relatives he tends to cc on these e-mails), I have almost no interest in college football, so instead of vegging in front of the TV today, I got around to answering him.

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Dear Frank (and Happy New Year to all [on the cc list]), I apologize for taking so long to get around to this, but fortunately for you, none of the football games on TV today interest me much, so I’m delighted to tackle your questions. For those following along at home, Frank originally asked me why I oppose term limits. He then followed up with five more specific questions:

1) Do you believe that career politicians have a conflict of interest, e.g. getting re-elected versus doing what is best for the country (example: bailing out banks)?
2) The “Revolving Door—-” article says that a study shows that “bailouts and political connections go hand in hand”.  Question: Why do political connections work?  Would they still work if the politicians knew they could not run for re-election?
3) Would lobbyists for any one particular interest group (bankers?) be effective if the politicians knew they could not run for re-election?
4) Would people like John Dugan have any influence at all if politicians could not run for re-election?
5) What chance is there for solving the “revolving door” problem as long as politicians need votes to get re-elected?

Short answer to # 1: Yes, but that is far from the whole story.
Short answer to #2: They work because there’s a lot of money to be had from making them work, and, yes, everything else being equal, they’d still work if the politicians knew they could not run for re-election.
Short answer to #3: Yes.
Short answer to #4: Yes.
Short answer to #5: Zero, but the presence or absence of term limits will do little by itself to touch the problem.

Perhaps you observe a pattern here. :-)

Slightly longer answer to the overall question: I believe the Framers of the Constitution knew what they were doing and therefore probably had good reasons not to insert term limits. I further believe that any effort to amend the Constitution must therefore bear the burden of proof that 1) there is a real problem that demonstrably prevents the government from carrying out its Constitutionally-assigned duty to “form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity,”  2) that amending the Constitution in the way proposed would fix that problem and 3) that no combination of less disruptive methods would have the appropriate effect.

Before I get into the longer answers, let me do a couple of things.

First, let’s define our problem for the purposes of this discussion. Taking some of Frank’s language, I’m going to define the problem as “politicians [or, more broadly, government] failing to do what is best for the country.”

So what is best for the country? Personally — and, I admit, arbitrarily, although I’m guided by the “general welfare” clause of the preamble to the Constitution — I define “best for the country” as “that which provides net long-term benefit to the greatest number of people.” This problem manifests itself in multiple ways, not all of which have directly to do with elected officials.

Second, let me raise another question, the answers to which will inform our understanding of the term-limits issue: Why do congresscritters want so badly to get re-elected?

The first and most obvious answer is that as a member of the House or Senate, you have the ability to affect a lot of people’s lives, and that power can be attractive for all the right reasons and all the wrong reasons, more often than not in the same person — love of America manifests, for better or worse, at least as often in immoral or amoral people as it does in moral people. Besides that, the job pays better than about 96% of all other American jobs, and getting elected even once guarantees you a place in the history books.

Add to that the fact that Washington, D.C., in many cases because of specific actions Congress itself has taken both on its own behalf and on the behalf of residents generally, is an incredibly attractive place to live by most people’s standards. It has beautiful architecture, good (private) schools, world-class colleges and universities with all the artistic, cultural and entertainment opportunities they offer, major-league sports, a wide variety of outstanding restaurants, proximity to both mountains and beaches, excellent mass transit/rail/air service, a large number of thriving houses of worship, the best/cheapest cab system in America, and a whole passel of other amenities. Its work force is full of educated, intelligent people doing complicated and interesting things, which makes socializing with them more entertaining and networking with them more professionally rewarding. From a weather standpoint it has four distinct seasons. It is, in short, a more all-around attractive place to live than most of America’s 435 congressional districts. It is, in short, a devil’s snare.

As a result, a lot of elected officials come to town and decide right quick that going back to practicing small-town law in Fayetteville, Arkansas, or selling TV sets in Winston-Salem, North Carolina, would be a fate worse than death. So they really, really want to stay in Congress. And for a lot of them, fairly soon after that, the focus becomes: in Congress or out, they want to stay in Washington.

Add to this phenomenon the fact that while significant portions of a congresscritter’s lifestyle are subsidized, staying in Washington generally takes money. And where’s that money going to come from? Well, it ain’t going to come from the Public Interest Research Group or Earth First. It’s going to come from business, particularly large businesses and industries and their trade associations, both directly in the form of campaign contributions and indirectly in the form of investment opportunities never made available to the general public. There’s a long history of people coming to Congress from relatively modest means and leaving a couple of decades later as millionaires. In a city with such a high cost of living, grossing $160,000 or so a year simply isn’t going to make that happen. Yet congresscritters as a group are disproportionately wealthy, and their level of wealth tracks pretty neatly with their length of service. The phenomenon isn’t just that you have to be rich to run for Congress in the first place, although many current congresscritters were.

Why is this a problem? To many people, it isn’t. But if you proceed from my definition of the problem above and watch how things happen in this country, sooner or later you acknowledge that big business in general has a well-documented history of acting not only in its own best interests — which, in a vacuum, is not only understandable but beneficial and even admirable — but also in ways contrary to the best net long-term interests of the largest number of people.

Where American business is concerned, the Original Sin was the 1886 U.S. Supreme Court case Santa Clara County v. Southern Pacific Railroad — in which a court reporter’s note included the opinion, despite its specific disavowal by the Chief Justice and the lack of its mention in the text of the ruling itself, that corporations were entitled to the same equal-protection benefits of the Fourteenth Amendment as are natural persons. Thus, the scribbling of a clerk institutionalized the practical effect of that case, which was otherwise an uninteresting tax case: corporations get most of the rights of human beings, with fewer responsibilities and obligations.

Large corporations understand that what Congress does or refrains from doing can make a difference of tens of billions of dollars per year per corporation. And yet, under current law, corporations are forbidden both from voting and from making direct political contributions. (The Supreme Court is going to overturn that latter ban soon, but that’s an issue for another day.) So let’s say I’m the chairman of Exxon. I want Congress to do what’s best for my shareholders. Indeed, I have a fiduciary duty to try to make that happen. My most effective method is contributing my personal money to the campaigns of people I believe most likely to act in my shareholders’ interests, which may or may not align with the best interests of the country in general.

For me to contribute the legal maximum to one candidate for each of the country’s 535 House and Senate seats, plus the presidency, over a six-year cycle (Senate terms are six years), I’d spend a hypothetical maximum (the actual total would be significantly less because I’m assuming a primary AND a runoff AND a general election, at a maximum allowable contribution of $5,000 per race, for every candidate I back, while almost none will actually face runoffs and few incumbents face primaries) of $19,575,000 for House candidates. Over the six-year course of a Senate election cycle, I’d contribute a maximum $1,500,000. And I’d spend 30,000, max, to back a presidential candidate since there will be two presidential elections during any six-year Senate election cycle.

So I’d spend, at most, a shade over $21 million, or about $3.5 million per year. In real life, the actual maximum I’d spend to influence all 535 seats plus the presidency, would be maybe half that because of the lack of primaries and runoffs for those 536 offices. Also in real life, I wouldn’t contribute in all 536 races — I’d probably just hit the races of the most senior people whose committees oversee my line of work, plus the presidency. So if you’re a CEO grossing, say, $5 million, you’re probably looking at 15 to 20 races, not ([435 x 3] + 100 + 2).. Your country-club tab is probably higher.

Sure, your board members and executive vice presidents and other highly paid officers likely are donating in the same fashion, as are the lobbyists your corporation or industry or trade association employs. But, given the money at stake for your corporation and industry, the return on investment may be the highest available anywhere in the world outside the illegal-drug trade. In some cases, such as telecommunications, it approaches infinity, given that one of the issues surrounding the telecommunications-deregulation act of ’96 was whether to make broadcasters buy taxpayer-owned high-definition spectrum at market rates or just give it to them. Guess what happened.

Finally, there’s another factor contributing to the problem defined above: Some people get elected to Congress who, for reasons utterly independent of where their campaign money comes from, have bought so deeply into pro-corporate, pro-“free market” mythology that they would act against the greater public good in any event. They simply believe that 1) might makes right, and/or 2) what’s good for the rich really is good for everybody [see: trickle-down effect], despite conclusive research that it usually isn’t; and/or 3) an utterly unfettered free market really does provide the greatest good for the greatest number.

A word about that last one. Immediate past Fed Reserve chairman Alan Greenspan came out of the University of Chicago school of economics (school = way of thinking, not a building), which itself was heavily influenced by the thinking of novelist Ayn Rand. There were at least two problems with this school of thought, either of which would be fatal on its own. First, the empirical evidence is overwhelming that markets simply do not regulate themselves. Greenspan himself even told Congress last year that, to his own great surprise, he had found this to be true.

“As I wrote last March, those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity (myself especially) are in a state of shocked disbelief… Such counter-party surveillance is a central pillar of our financial markets’ state of balance. If it fails, as occurred this year, market stability is undermined.”

“It was the failure to properly price such risky assets that precipitated the crisis,” Greenspan said, by encouraging investors worldwide to look at U.S. subprime loans as a “steal” rather than an uncertain bet that relied on escalating home values. “The whole intellectual edifice . . . collapsed in the summer of last year.”

“I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms,” Mr. Greenspan said. Referring to his free-market ideology, Mr. Greenspan added: “I have found a flaw. I don’t know how significant or permanent it is. But I have been very distressed by that fact.”

Mr. Waxman pressed the former Fed chair to clarify his words. “In other words, you found that your view of the world, your ideology, was not right, it was not working,” Mr. Waxman said.

“Absolutely, precisely,” Mr. Greenspan replied. “You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.”

The reason it had “worked exceptionally well” for “40 years or more” was because of Depression-era constraints on the market. When perhaps the most important such measure, the Glass-Steagall Act, was repealed in 2000, Sen. Byron Dorgan stood up in the Senate and predicted that the country would be sorry within 10 years. He was wrong. It only took eight.

Second, a lot of people think our current status quo is free markets. In fact, “free markets” are a myth in many large segments of our economy. (For example, health insurance is the only business besides Major League Baseball to be specifically exempted from the Sherman Antitrust Act, with the result that, here in N.C., for example, Blue Cross Blue Shield of N.C. holds more than 75% of the total health-insurance market and 96% of the market for health insurance for individuals.) In fact, in many of those segments, the reality is much closer to crony capitalism of the type we decry when we observe it in Singapore and elsewhere. Observe, for example, the symbiotic relationship between Goldman Sachs and the federal government.

So, with all that background in mind, let’s proceed to the longer answer to Question # 1. Do I believe that career politicians have a conflict of interest, e.g. getting re-elected versus doing what is best for the country? (Remember, we’re defining our problem as “politicians failing to do what is best for the country” and defining “best for the country” as “that which provides long-term benefit to the greatest number of people.”) Yes, I think that that conflict of interest exists for many, if not most, federal elected officials. However, the problem of government doing what is best for, say, investment bankers rather than the public at large manifests itself in multiple ways, not all of which have directly to do with elected officials.

For example, currently the Securities & Exchange Commission is willfully ignoring a wide array of evidence in the public record with regard to large-scale financial crime. (If you follow finance, you really need to be reading the blog Zero Hedge, which, in its brief existence, has laid out evidence on this and a number of other depressing issues in great detail and called out public officials by name for their failure to address them.) But chair Mary Schapiro, the other commissioners and especially their career staff are not elected. The SEC is only one prominent example of a phenomenon called “regulatory capture,” in which government regulatory agencies are effectively controlled by the industries they’re supposed to be regulating. This phenomenon has been with us a long time, but it accelerated under President Reagan and went into hyperspeed under Bush 43.

This problem happens because the people who come out of an industry to take government jobs regulating that industry most often expect that, following a legally required waiting period after leaving government, they’re going back into that industry, most likely at a good deal more money than the (often already high) amount they were making before, because now they’re going to know how to game the system. While in government, they try to do as little as possible to alienate their once and future employers. This is no big secret. In the specific case of Mary Schapiro, for example, The Washington Post’s Steven Pearlstein wrote an article a year ago warning that she was going to suck as SEC chair. And it has come to pass as it was foretold. Now, how we fix that problem is a subject for another day, but clearly, congressional term limits won’t help.

Relevant to our issue of term limits, this phenomenon’s legislative equivalent has followed the same pattern, particularly when Republicans have controlled one or both houses of Congress, and it went into overdrive after the 1994 GOP victories, with industry lobbyists actively being solicited by congresscritters to draft the legislation that would “regulate” their own industries, a practice that to some extent continues today. Congresscritters want to stay in Washington, they want to stay on the gravy train, and they know that the best way to do it is by kowtowing to the industry and trade associations and lobbying outfits for whom they most likely will want to work when their congressional careers are over.

Will term limits help? Maybe, but I honestly don’t see how. In fact, I could see that the shorter the amount of time you were allowed to serve in Congress, the greater would be the pressure to serve the people for whom you would want to go to work when your time in Congress was up.

Question # 2: Why do political connections work? Would they still work if the politicians knew they could not run for re-election?

Political connections sometimes work because of personal friendships or other factors, but primarily they work because of money, mainly in the way outlined above. Again, I see no way term limits would be likely to solve this problem.

Question #3: Would lobbyists for any one particular interest group (bankers?) be effective if the politicians knew they could not run for re-election?

I think they’d be less effective with congresscritters who, for whatever reason, really intended to get out of Dodge and go back to Arkansas or Oregon  when their terms were up. But in general? They’d still be pretty effective.

Question #4: Would people like John Dugan have any influence at all if politicians could not run for re-election?

[Background on John Dugan is here.]

Yes, absolutely. Even with term limits, Dugan would have influenced 1) elected officials who thought he knew what he was talking about; 2) other regulators; and 3) academics who frequently are in turn themselves used by politicians and regulators.

Question #5: What chance is there for solving the “revolving door” problem as long as politicians need votes to get re-elected?

Well, the revolving door, although contributing to the problem we have defined, is a separate issue, and I don’t know the answer, although I have some thoughts I’m mulling over on that particular point that maybe I’ll lay out for y’all some other time.

But it’s time to conclude this lengthy screed.

To recap: Term limits aren’t found in the Constitution, and I believe that’s because the Framers intentionally rejected them. I could be wrong on that, but IF that’s the case, then we have to presume they knew what they were doing because they clearly did on so many other subjects. Therefore, the burden of proof is on term-limit backers to prove that 1) there’s an identifiable problem, 2) term limits will, in fact, solve that problem; and 3) no combination of measures short of a constitutional amendment creating term limits will suffice to solve the problem.

I see assertion 1 as incontrovertible. I see assertion 2 as incontrovertibly wrong. And I think insufficient research has been done on assertion 3.

One other reason I oppose term limits: If the people of a state or a congressional district are fortunate enough to stumble upon someone who they believe actively and effectively represents their interests in Washington, obeys the law and enjoys the work, why shouldn’t they be free to re-elect him for as long as he wants the job and is able to do it? We’d have been a poorer country in a lot of ways, if, for example, William Proxmire had had to step down after a term or two.

If any of you are still reading at this point, I thank you for your time and attention.

Love to all,

Lex

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