Transcripts For CSPAN2 Book Discussion On A Republic No More

CSPAN2 Book Discussion On A Republic No More March 1, 2015

[inaudible conversations] good afternoon. And welcome to our book forum here at the Cato Institute today for a republic no more Big Government and the rise of american political corruption by jay cost. I am john samples, Vice President and publisher here at the Cato Institute. And i again would like to welcome you to this event today for this very important book. Now, if you have been to book forums before youll notice today our event will proceed in many ways the same as all other book forums have that is, you will hear from some participants and then there will be a question and answer session about 1 00 and then lunch. Also one other thing is like all of our other events please turn all your cell phones now so that we can have the event both in peace and quiet. But some things are going to be different today. Were trying some different things, different format. In this particular case our author, jay cost, will speak for a while about the book to give you a general sense of the lay of the land, and then jay will be joined by two of my colleagues mark colabria and Chris Edwards, and they will for a few minutes give you some impressive their impressions of the book, and then mark jay and chris will have a conversation about the spread of political corruption in america and our book a republic no more. So im going begin by getting administrative stuff out of the way. Ill introduce everyone you will be hearing from and then we can go straight to our event. Jay cost is an elections analyst, political historian, and pundit who writes for the Weekly Standard. If you read the Weekly Standard regularly you will know jays work well. He rote for the horse race blog at real clear politics. And he had an earlier book spoiled rotten. How the politics of patronage corrupted the once noble Democratic Party and now threatens the american republic. Cost received a b. A. In government from the university of virginia, as well as an m. A. In Political Science from the university of chicago. In 2005, while working on this dissertation at the university of chicago, cost joined the staff of real clear politics and then became a writer at the Weekly Standard in 20022010. His background is in Political Science huh claims to rely more on his reading of the history of elections than Political Science and Public Opinion polling. Our book today is the fruit of that and in political hoyt which many of us would say has an Important Message for Political Science and indeed for american politics. My colleagues are mark calabri a and Chris Edwards, mark is the director of Financial Regulation studies here at cato. Before joining cato in 2009 he spent six years as a member of the senior professional staff of the u. S. Senate committee on banking, housing and urban affairs. In that position mark handled issues related to housing, Mortgage Finance Economics Banking and insurance, for Ranking Member richard shelby. Prior to his service on capitol hill he served as Deputy Assistant secretary for Regulatory Affairs at the u. S. Department of housing and urban development. And also held a variety of positions at Harvard Universitys joint center for housing studies, the National Association of home builders, the National Association of realtors and also been a Research Associate with the u. S. Census bureaus center for economic studies. He holds a doctorate in economics from george mason university. If you dont know the cato staff very well today, when the conversation starts mark will be the one with the yellow tie on. The other fellow will be Chris Edwards. Chris is the director of tech policy studies at cato, editor of downsizing government. Org. A top expert on federal and state tax and budget issues. Before joining cato edwards was a senior economiest on the congressional joint economic committee, manager with Price Waterhouse coopers and an economist with the tax foundation. Chris has testified to congress fiscal issues many time and his articles have appeared in the Washington Post winds and the wall street journal and other major newspapers. No one at cato rails against political corruption better than Chris Edwards so he was a natural for our event today, and he comes up with a lot of examples. Chris holds a b. A. And m. A. In economics and was a member of the fiscal future commission of the National Academy of sciences. Please join me in welcoming jay cost to the Cato Institute. [applause] thank you john for that very kind introduction and thanks as well to mark and chris for participating today. And thank you to everybody who is here, and thanks especially to the Cato Institute for hosting this forum. So as john said, were here to talk about my new book public no more Big Government and at the rise of american political corruption. I was attracted to the idea of a history of political corruption because i like the idea of writing a history of something that nobody studied in isolation before as a different subject, a subject that most people dont want to talk about because it doesnt paint the hoyt of our nation in the brightest of lights. I thought i would set sail on the grimy back waters of american politics and see might find and i discovered quite a bit. My book is one part history, one part civics and one part policy analysis, and i was thinking about a way to tie all of that together in these brief remarks and since mark is here im sure well talk about fannie mae and freddie mac which i analyze in the final chapter of the book. So i am looking forward to that because their behavior, to talk about fannie and freddie, their behavior was the most obscene example of legal corruption that i discovered. So, im going to take an opportunity at the end of these remarks to bring them into the picture. But first let me just outline exactly what my argument is. I take a broader and more philosophical view of political corruption than what we typically read in newspapers or see on television. Where usually its a matter of extortion or bribery or kickbacks. In my telling those are all examples of corruption, but i view the problem much more broadly, and my framework is a madisonian one. James madison has the phrase, the need to break and control the violence of factions. If you read the federalist papers youll know that hamilton is by far the better in those essays but the phrase violence of faction knocks me off my feet. He defines the faction thusly. Quote, a number of citizens whether amounting to a majority or minority the whole united and actuated by some common impulse of passion or interest adverse the rights of other citizens or to the permanent and aggregate interests of the community. So that gives me, at least very useful definition of corruption. It occurs when the government does violence to the Public Interest or individual rights by allowing factions to dominate Public Policy for their own ends. Its incompatable with republican form of governance and its suppression is at the very heart of madisons project. After all a republic, a true republic must resist factions if it hopes to govern for the sake of all and with respect to the individual rights of all. Madison rejected the idea that virtue provided through Civic Education or public religion could overwhelm what he saw as the inevitable human tendency tornado factionalism. He said is it sow n into the very nature of man and suggested el a small city state would be an ideal for a republic because in those instances small groups are less likely to bicker over big issues. But madison observed, and especially during the 1780s, the general of the State Governments saw exactly the opposite and indeed in the federalist papers he makes the persuasive claim that even when men dont have something substantive to bicker over they will find invent reasons to fight one another. So, as an alternative to this madison embraces an institutional solution because after all, if factionalism is sow n into the very nature of man, theres a problem there. Republican governorrance is inpatiently unstable. If virtue doesnt cut and it its of small size of the city state doesnt cut it, what would you do . Madisons solution was institutional. He thought that so long as the institutions of government were were designed factionalism could be thwarted, and this idea, this principle is at the very heart of our complicated system of checks and balances. It is an effort to build the institutions of government just so. Just so that the Government Works on behalf of everybody rather than a select few. Madison called that goal the great another very evoc staff afraid. Woodrow wilson once called our regime a new toneam system with forces calibrated against one another. In other words the rules of the constitutional game were to be structured so the vast array of forces in society could combine within the government produce something in the common interest that a faction may have representatives who will do it bid neglect government but those agents will only possess limited power and will be regularly stymied by agents aligned with other factions. So through per madisons theory its irrelevant if those who check the selfish ambitions are themselves driven by selfish ambition. All that matters is the result. The only proposal that should make it through the constitutional gauntlet and be enacted into law will be those that benefit the people generally. Everything else will fall but the wayside offering a decisive check on and but to be truly madisonian requires something other than strike adherence to the constitution. Its not simply commitment to that document. And the constitution cannot be understood as it is rather compromise hammered out at the Constitutional Convention in 1787 convened after the existing Governmental Authority had proved up workable. The status quo at that time could no longer stand, but what to do next . Delegates disagreed on many points and two important disputes are illustrative for my purposes. The first is how powerful should the new government be, and how dependent on local interests should it be . One group, leveled by madison, Alexander Hamilton and George Washington wanted a powerful government immune from local concerns madisons original proposal envisioned a government distant from localities. The senate was to be selected by the house, the president by both chambers of congress and the congress would actually have Veto Authority over state legislation. Finally, a counsel of revision would have authority to monitor and veto state laws excuse me veto federal laws. Meanwhile the congress would have enormously wide discretion. It could legislate in all this is a quote in all cases to which the separate states are incompetent or in which the harmony of the United States may be interrupted by the exercise of individual legislation. The virginia plan was a truly National Plan of government. Opponents rallied to a proposal from William Patterson of new jersey which called for slight alterations to the existing articles of confederation, which had a limited power and parochial orientation. Under the new jersey plan the Continental Congress would acquire the power to tax and an executive couple would be created to provide executive couple would be created. The constitution as was finally worked out occupies the middle ground between these views. After months of debate delegates decided that the government should have more power than patterson proposed but less than what madison proposed and it would depend more on local perspectives than madison wanted but less so than what patterson envisioned. This is not merely a splitting of differences. The framers sense blue blended die sergeant die sergeant view divergent views. You can see them make sure this compromise actually worked the various pieces fit together into a coherent whole. It was remarkable compromise for america of 1787. This was a people deeply skeptical of centralized power and fearful of creeping monarchism, yet they were in tells separate need of a Central Authority that could deal with urgent problems. The constitution gave them gave the government enough power to meet the existing crisis but no so much as to overwhelm state and local authorities. It also distanced the government from popular sentiment but certainly not without cutting it off entirely. And over the ensuing two centuries and more the American Population grew from 4 million to over 300 million, and society changed. Straining the original compromise and gradually forcing an effective revision of the governing charter. New problems emerged and repeatedly the public decided that the power of the federal government had to grow to deal with new threats and grow it did. Today washington, dc has achieved the scope of centralizees power envisioned in the virginia man. For all intents and purposes the federal government can legislate whatever is it sees fit. Rarely does the Supreme Court remind washington of any constitutional limits. Yet in this this where is we turn to problem of corruption. The country never substantially revised the institution that channeled government ever expanding powers. We have tinkered at the margin, tweaked the Electoral College after the election of 1800 mandated the direct election of senators and of course expanded the franchise. Nevertheless, for all of to the growth in federal authority the basic institutions remained largely as they were, when the constitution went into effect in 1787. And from the madisonian perspective this is the problem. If our institutions require a particular design in order to break and control the violence of faction and serve the common good then it is imprudent to give greatly expanded powers to institutions that were originally intended to do much less. But that is exactly what we have done. And we have done so in a decidedly ad hoc manner. Even if the trajectory and the growth of government has always been upward it has been a zig and a zag. At crises arise voters elect a new governing class that expands power to deal with the challenge and the expansion is retained even after the danger has abated. This haphazard process left us with institutions that are far too parochial and tied to factional interests to permit the wide exercise of this expansive authority. Perhaps not surprisingly our 18th century institutions wield their 21st century powers corruptly. Lacking adequate checks and balances in this new redesigned regime, they regularly tilt Public Policy to benefit narrow interest groups. Madison called it the violence of faction. Sometimes conservatives call it cronyism. Liberals call it corporate welfare. I call it corruption. And this i think gets the heart of madisonian jim. It is not blind faith in the constitution. It is a commitment to the ideal of proper institutional design. It is a commitment to the principle that we must take institutions seriously. They must be welldesigned if a truly republic republican regime will endure and this country that not been very madisonian. Put aside the debate of Big Government versus small government and think of it this way. If we expand the power of the government, will the existing institutions be capable of exercising their powers responsibly or will they need to be revised . That is the madisonian question, and it is one that in my search through history i have rarely seen asked. So having outlined my theory i briefly want to tie fannie mae and freddie mac into the story as i think it illustrates this point. For the sake of brevity ill assume youre generally familiar with fannie and freddie. The bottom line is they combined unsafe, unsound financial practices with an unprecedented lobbying operation to protect their investors and pad the bonuses of their executives. To hell with the credit risk, was their motto. For those who study the subject fannie and freddie are government sponsored entities. Theyre not part of the government. They are instrumentalities of the government. Theyre private corporations with pentagon public charters. The first and second banks of the United States, the experience with the banks, the second bank in particular, is eerily similar to the experience of fannie mae and freddie mac. Normally when we think about the second bank of the United States, were wont to think of nick rat biddle very farsighted financier and we tend to think of the bank war where in my opinion Andrew Jackson comes across as much worse. But that is as far as the common understanding usually goes. But it overlooks something which is that the bank had been in place for about a decade before biddle came onboard and it was terribly run. Po

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