Who Rules?

The most obvious question is that of power. Who rules? The battles of the budget, involving all the federal government's choices as to who gets and pays what over a period of years, provide the best possible evidence for answering such a question. At first blush, the answer is simple enough. The candidates are the mass public, elected officials, civil servants (bureaucrats, if you prefer), interest groups in general, business groups in particular. Required to give a short answer, a reader of this book would be compelled to say either "elected officials" or some compound of "elected officials and the mass public."

It is clear that citizen opinion, as recorded in innumerable polls and as reflected in elections—whether indirectly through anticipation, directly through petitioning legislators (e.g., against social security cuts or interest withholding), or through elections—placed limits on what politicians could do. There were to be neither reductions in social security, nor, after income tax cuts were enacted, increases for the bulk of the population. These constraints ruled out the two most obvious (because most ample) sources of deficit reduction: higher income taxes and

greater reductions in the rate of increase in entitlements. Within these biting but broad constraints, elected and appointed officials initiated alternatives and made the ultimate decisions. It cannot be said that public opinion demanded either the Kemp-Roth tax cuts or tax reform, but neither did it oppose them. It can be said that mass opinion wanted more defense and less welfare spending than Carter offered in 1980 and the reverse in regard to Reagan after 1982. Although the public clearly disapproved of deficits, it just as clearly objected to doing anything conclusive, therefore drastic, about them—a state of opinion neatly reflected in the actions of elected officials. At any time in this story, the movement of taxing and spending may be said to be reasonably in accord with the preferences of the mass public.

The most decisive statements of opinion and major causes of budgetary behavior were elections themselves. The difference between 1980 and 1981 was the difference between a troubled but basically Democratic Congress and a Congress dominated (barely) by the Republican/boll weevil coalition. The 1982 election ended that coalition.

Civil servants are seldom heard from, apparently speaking only when spoken to. Because there are multiple and competing sources of advice—agencies, OMB, CBO, CRS, private groups—the politicians are able to choose among them. Economic forecasting is the preeminent example of staff unable to dominate with their expertise given the many competing sources. This does not mean staff is without influence; after 1981 the Treasury's tax policy staff successfully pushed a series of revenue-raising initiatives. They succeeded because their political superiors, John Chapoton and Donald Regan, were skeptical of many business tax breaks. Stockman's OMB and Reagan's political agency appointees show the extent to which an administration can bypass civil servants if it wishes. These administrators could appeal on back channels to the appropriations committees, which might reverse the administration's cuts. But such a strategy only reveals the preeminence of elected officials; it takes Congress to defeat the president. Either way, bureaucrats are not in charge.

Interest groups are ubiquitous, but are they dominant? The difficulty in appraisal consists in differentiating them from other actors who want what they want. From the mid-1970s through the first year of the Reagan administration, for instance, the politicians' concern with capital accumulation led to a considerably reduced effective corporate tax rate. Big business could hardly have done better than it did in 1981. How should these events be interpreted in terms of business power?

Look at what followed. In 1982 and 1984, corporate preferences were whittled down. Did business have fewer resources? No, but the politicians wanted to do something about the deficit; business was the target of

opportunity. The agendas of business and elected, officials had diverged. Tax reform was an example of the president's agenda differing from that of business; there, also, business lost.

Of course, business groups are a force to be reckoned with, and politicians went to great lengths to adjust their packages so as to anger as few groups as possible. Equally clearly, business groups needed allies. When they did well, as in 1980–1981, it was because the agenda of national policy making—"productivity"—favored them. When business did poorly, the agenda—deficit reduction, preferably from those who could afford it and who had fewest votes—was unfavorable. Business groups could try to set this agenda: a lot of publicizing and lobbying went into building a concern with capital formation, just as a campaign put infrastructure on the agenda in 1982. Yet their influence on the issues in debate was limited. Whatever happened to capital formation, anyway?

Other interest groups were able to exploit opportunities or to beat off attacks. Federal employees and retirees won battles against the budgeters in 1980 and 1982. Oil interests—which means whole states—did very nicely in 1981 and not so badly thereafter. But they and their states still suffered badly from the sharp decline in international oil prices. The banks overwhelmed Congress on withholding in 1983. Most important, whenever the deficit dentists went after social security, the elderly lobby chomped down on them. One thing is evident: the more an interest group looks like a whole mass of angry voters—from five million affected by civil service retirement provisions to untold millions interested in interest withholding, and virtually everyone involved, either immediately or potentially, in social security—the more powerful it gets. That makes it difficult to distinguish interest group power from that of the public. If many, many people want something, Congress either supplies it or doesn't take it away. Is this bad?

Sometimes we distinguish interest power from public preference by emphasizing resources (e.g., money) used by groups: When Congress responds to threats or inducements involving campaign contributions, we see a force that differs from citizen opinion. The dairy lobby is a good example of a sophisticated group that poured money into politics; while it lost some battles, some claim it should have lost more. Business in general with its checkered outcomes is another example of a monied interest. The history of revenue policy shows, at the least, that politicians like to please groups that are big contributors (remember the "commodity tax straddle" in 1981). Yet our politicians also are capable of playing monied interests off against each other (as in 1982, 1984, and 1986). There could not be a better example of a policy discombobulating

interest groups—who hardly knew what was happening to them, even if it wasn't that bad—than tax reform. In part because there are so many interests, politicians have substantial independence.

Have we come all this way, then, only to repeat elementary school maxims—America is ruled by its people acting through its elected officials? Given the separation of powers, moreover, Congress counts a great deal, so much, in fact, that any theory of rule in America that omits the legislature is hopelessly wrong. Yes, we think these are truer maxims at this time than common alternatives—America is ruled by business or the military-industrial complex or bureaucrats. Yet judgments of relative power do not explain its exercise. Nor does the relative power of voters and elected officials mean that some citizens are not favored over others, that the system is unbiased. Indeed, bias may arise not from the ways interests are aggregated but from the ways people determine their interests.

Evaluation again cannot be separated from values. Bias exists only in reference to some standard; the system is said to favor business, labor, or farmers if it provides benefits to those forces at the expense of the public interest. Such an evaluation depends on what you think the public interest is. If capital formation is necessary to the general welfare, then policies that favor it, even if they aid rich people more directly than poor, cannot be said to show the system's bias.

Many analysts would argue that who wins the battles of the time is not the issue. Accepting those battles as the standard omits fundamental questions. Why are some people rich and others poor, some well organized and others disoriented? Where do the alternatives come from? Not all alternatives are offered. Medicare was a budgetary crisis, but no one suggested socializing medicine as a solution, though that is common in most of the industrialized world. Hardly anyone suggested getting out of NATO, which might save big bucks. Certain kinds of options—challenges to private property, retreat from America's world role—were not considered.

Whether you believe the political process even asks the right questions—never mind gives the right answers—depends on your ideology with its accompanying worldview, which shapes your judgment about both bias and effectiveness. Yes, public officials rule, economic conservatives agree, that is the trouble. For, in order to curry favor with the electorate, they spend too much, thus taxing too much and thereby weakening capitalism. To stop the government from governing too much, they want a balanced budget—spending limit amendment.^[1] That's the trouble, say radical democrats (with a small "d"); the state budgets instead of the people. Instead of ordinary people gaining experience in reconciling differences, they are depoliticized in favor of control by corporations

and experts.^[2] The real trouble, other critics say, is that the state ought to govern but actually does not. Real power is delegated to irresponsible interest groups.^[3] Too simple and too nice, Marxists reply. The state rules not in the public interest but on behalf of private, capitalistic interests. Indeed, the state does better by capitalists than they can for themselves, thus perpetuating an unjust system.^[4]

Ultimately, for most people, the questions, Who does the system favor? and Does the system work? merge into one: Does the system serve the public interest? An irony of the deficit battles is that observers from across the political spectrum can agree the deficits reveal the system's failure, even as they disagree about the lost public interest and the found bias.