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Lobbying and Congress—Deregulating Trucking

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Recent New York Times editorial speculated what would happen if the proposal to proclaim Thanksgiving an official holiday came before Congress. The bill--introduced, naturally, by the Massachusetts congressman whose district embraces both Plymouth Rock and cranberry bogs--meets trouble at the Agriculture Committee hearings from goose and duck growers who denounce what they call rank favoritism for turkeys. But the outlook for Thanksgiving improves with favorable testimony from the Farm Bureau Federation, representing pumpkin and corn growers; television networks, for whom legalization would mean a three-game football day; and the greeting card industry. The House and Senate eventually pass the Thanksgiving bill in different forms, but they cut deals and compromise in conference. Even the poultry growers are appeased by pledges to promote the Long Island duck for Easter and talk up the Christmas goose.

Satiric license aside, a proposal to create a new national holiday would not likely be dominated by narrow economic interest groups. It's too visible and the impact on individual citizens too direct and widespread.

Far more typical of economic interest-group domination was a fight in Congress reported in the same issue of the Times. The news story described how the tobacco lobby, despite its stiffest challenge ever, had preserved the federal tobacco program--a system of price supports and acreage allotments set up in the 1930s ostensibly to ensure stable prices and supply. Even if those aims were once valid, the program has become a needless subsidy to a politically potent industry. Health effects notwithstanding, the program costs taxpayers millions of dollars a year.

The tobacco lobby's victory was no fluke. Fifty thousand tobacco growers have repeatedly defeated the interests of millions of federal taxpayers because on low-visibility distributive issues, intensity overwhelms numbers in our political system. The loss to an individual grower from ending the inefficient subsidy would be considerable, whereas the gain to an individual taxpayer would be minuscule. Thus the tobacco industry is highly organized around the issue, while the public at large is not. Much of what opposition the industry did meet appeared to represent, not taxpayer representation, but rather backlash against one of tobacco's staunchest defenders, Sen. Jesse Helms (R-N.C.), whose tough stands on abortion, school busing, and food stamps angered moderates and liberals.

The intensity phenomenon also explains why many desirable policy initiatives (as distinct from policy terminations) are never adopted. Whenever a proposed change promises small benefits to many at the expense of substantial losses to a few, potential losers are more informed, organized, and motivated than those who stand to gain. Thus small minorities can block programs that would serve the general welfare.

This political problem is one of the greatest obstacles to economic growth in this country. Respected economists have argued that the solutions exist to the nation's major economic problems--inflation, environmental decay, energy scarcity, and overregulation. But the solutions all require that some identifiable group undergo a significant drop in its standard of living. No group wants to be the one to suffer for the general good, and our political system has difficulty forcing anyone to shoulder the burden.

Special-Interest Benefits

If the strength of narrow interests is a major obstacle to solving our economic problems, it's also an initial cause of those problems. Thousands of organized elites press for favored treatment, and their demands go largely unnoticed by the dispersed majority that pays the cost. Lacking an adequate internal mechanism or incentive to force trade-offs among competing claims, Congress sequentially accommodates these elites with too little concern for overall consequences.

Special-interest benefits take many forms--acreage allotments to tobacco growers, price supports for dairy farmers, tax-exempt municipal bonds, subsidized student loans, parity prices for grain producers, restrictions on auto and motorcycle imports, home mortgage deductions, bailouts for troubled industries, tax credits for owners of wood-burning stoves, minimum-wage guarantees, public-works projects, subsidized financing for international trade, sugar price supports, charter restrictions for banks, marketing orders for oranges and lemons, the oil depletion allowance, real estate tax shelters, low-interest financing for rural electric cooperatives, postal subsidies for nonprofit organizations. While some are justified, many are not; they reduce economic efficiency with no offsetting contribution to equity, equality, or any other legitimate policy aim. "The hogs were really feeding," said OMB director David Stockman about the Reagan administration's efforts to reduce the budget in the face of interest-group opposition.

Special-interest benefits such as import tariffs and price supports are inefficient in the short run. Over time, the accumulation of these short-run inefficiencies stunts the economy's growth by distorting the market's means to allocate resources and thus eliminate surpluses and shortages.

But the most important way economic interest groups impede long-term growth is by limiting the entry of competitors into the markets they control. Acreage allotments, motor carrier operating rights, airline franchises, bank charters, professional licensing requirements, closed-shop laws; these and other barriers to entry-erected by groups that proclaim the virtues of the competitive marketplace for everyone but themselves-create an "institutional sclerosis" that discourages innovation and impedes the healthy struggle for survival in an evolving economy.

The inability of the majority to veto the costly demands of narrow elites is perfectly consistent with economic reasoning. By "the logic of collective action," an economic explanation of organizations and public goods, a rational individual will not voluntarily make sacrifices to help achieve the political objectives of any large group to which he belongs. His absence will not be noticed: The support or lack of support of any single individual will not affect the political outcome. Moreover, the benefits of political victory are nonexclusive, so he will receive them whether or not he pays dues to an organization or writes to his congressman. Thus, while the benefits (losses not incurred) would be worth a great deal to the group as a whole, no single individual has the incentive to contribute to the costs of collective action.

Most members of a large majority don't know enough even to consider collective action against a minority demand. The potential cost to any one of them is so small that it's not worth their while to be informed. Few milk consumers know how their congressman voted on dairy price supports, but every milk producer knows. Thus 200,000 producers can repeatedly defeat the interests of 200 million consumers in Congress.

To a point, the political process should legitimately weigh intensity of feeling. The flaw in a purely democratic system is that an apathetic majority can defeat an intense minority to the detriment of both equity and efficiency. But basic features of our modified democracy serve to give organized minorities undue weight.

Perhaps no feature of our political process does more to generate benefits for concentrated interests than the principle of geographic representation. Under a system of geographic-as opposed to at-large-representation, legislators are foremost concerned with protecting local and regional interests. When a region's economic base is concentrated-as with manufacturing industries such as steel, textiles, or automobiles, or agricultural industries such as tobacco, sugar, or dairy products-political representatives quite rightly serve as spokesmen for that narrow economic interest. Tariffs, import quotas, crop subsidies, defense contracts, public- works projects, tax concessions to individual industries and companies- these are all policies adopted in part because of their economic impact on narrow geographic regions.

In many areas of social and economic policy, such as national defense, foreign affairs, criminal justice, and welfare policy, members of Congress vote according to their (and their constituents') perception of the costs and benefits to the nation as a whole. But where policy has a strong "local imprint" congressmen engage in the "quest for local benefits."

That quest is often successful because of the decentralization and specialization that characterize much congressional decision making. The committee and subcommittee are the loci of power, and assignment to those work groups is based largely on self-selection." Hence, policy affecting the dairy industry is set chiefly by a Senate committee and House subcommittee that over represent dairy states. Even when policies have no particular geographic link, the incentive is for committee members to cater to the narrowly attentive groups. "More than mere specialization," observed Douglass Cater, "the subcommittee system permits development of tight little cadres of special interest legislators and gives them great leverage."

As Richard Fenno so aptly demonstrated, "committees differ from one another." Some are predominantly concerned with gaining influence within Congress, others with making good public policy, still others with ensuring members' reelection. Even among the latter group, there are differences: committees that must balance a range of potentially conflicting interests are less responsive to special interests than those that deal with narrow constituencies.

Whatever their predominant concern, the absence of central leadership--a condition that has described Congress throughout most of its history--means that committees, and individual members within committees, need not compete with one another for resources, at least with respect to low-visibility issues. Rather, the members follow a policy of reciprocity or "reciprocal noninterference," whereby narrow groups form coalitions, each agreeing to support the others' claims in return for support of its own.' As Roger Davidson observed, issues characterized by low salience and low conflict are typically handled in subcommittee with little interference in committee or on the floor. "In the absence of incentives for widespread member involvement, legislators and staff members from the panel with original jurisdiction are the primary, and perhaps the only, cue-givers.

Under other conditions, vote trading produces more efficient collective decisions than straight majority voting. When everyone has an equal stake in the outcome of the entire set of votes, logrolling is a desirable way to reflect the relative intensity of preferences on individual issues. The problem in our system is that narrow groups with a small stake in the total set of issues can trade away votes on all but the few issues that touch them and thus ensure their victory to the detriment of the general welfare.

Political parties, though never very strong in this country, once forced some discipline on this process of accommodating narrow interests out of concern for their own future. But major political and technological developments--civil service, direct primary elections, and television--have usurped the parties' traditional roles in supplying patronage, slate making, and providing cues to voters. Partly in response to the decline of parties, Congress has further increased the number and autonomy of subcommittees and weakened the central leadership still more.

These and other structural adaptations on the pan of Congress were a response to changing economic and political conditions. Historically, several key committees--House and Senate Appropriations, House Ways and Means, and Senate Finance--provided a brake on the expenditure demands of authorizing committees and executive agencies, in keeping with prevailing notions of balanced budgets and limited government. But as postwar public expectations legitimized an increasingly active role for the federal government in providing programs, benefits, and services for constituents, those "control committees" were weakened or otherwise changed to accommodate the new politics of distribution.

Economic growth throughout the 1950s and 1960s enabled Congress to provide distributive benefits to countless organized interests without instituting redistributive policies such as tax increases. But when the 1970s brought a decline in productivity and economic expansion, Congress-- which had only recently completed the adaptation to a politics of growth and distribution--could not, and still has not been able to, respond adequately. These developments, according to Aaron Wildavsky, may explain a political puzzle: the increasing support shown for representatives by their constituents amid a general decline in esteem for Congress as a whole. The key may be that "constituents are in fact getting what they want from their representatives, but what they want and get on each matter does not [equal] what they want in total."

Imposing Losses

Everyone's solution to this dilemma--and to our overall economic dilemma--is the same: Let someone else make the sacrifice. "Each group," wrote Lester Thurow in Zero-Sum Society, "wants government to use its power to protect it and to force others to do what is in the general interest." Most get their wish. For the same forces that produce countless bills and amendments benefiting special interests operate even more reliably to protest organized groups from suffering substantial economic losses.

Human nature is one reason for this difference. People are inherently risk averse: They are more sensitive to sudden and sharp losses than to equally sudden and sharp gains. Thus, an organized minority is even more intense when faced with the prospect of loss than with the prospects of gain.

The political process respects this instant. As Charles Schultze observed in The Public Use of Private Interest, an implicit rule of our political system is "Do no dire harm." Sometimes we make it up to those who get hurt directly by government action--either through monetary compensation or through general income redistribution. But more often, we preclude the harm in the first place.

This happens automatically because the intensity-sensitive features of our political system weight the vote of organized groups according to the potential harm to them. We tacitly observe what Schultze called the principle of increasing marginal harm--the mirror image of the notion of diminishing marginal utility--whereby large costs to a few are more to be avoided than small costs to many.

This principle is rooted in the Constitution. The founding fathers feared that a popular majority would coalesce and trample the liberties of the privileged elites. To guard against a tyranny of the majority, power was parceled out through an elaborate system of constitutional checks and balances. Over the years, other formal and informal rules for decentralizing political control--judicial review, the power of congressional committees, the Senate filibuster--have been developed and justified on the rationale of protecting minority rights.

Our system has reduced the risk of majority tyranny at the expense of facilitating minority tyranny. It is a complex, fragmented system geared to grind slowly. At key stages, influential groups can often veto the alternative preferred by the majority. At the very least, they can substantially delay the harm to themselves, and the power to delay is often the power to decide.

The principle of increasing marginal harm makes sense to a degree. To restate an earlier point, from an economic standpoint, collective action should reflect intensity of feeling. If a proposed change will cost five people $1,000 each but only save 1,000 people $4 each, the change is not efficient. Yet a system of majority rule would adopt it overwhelmingly. Our system errs in the other direction, however, so that efficient changes--ones where the gains outweigh the losses--can often be blocked by the losers.

Of course there is nothing sacred about efficiency, as Schultze reminds us: "Dealing with the problem of losses, which an emphasis on efficiency necessarily raises, is one of the stickiest social issues. There is absolutely nothing in either economic or political theory to argue that efficiency considerations should always take precedence." But Schultze, like many other people, believes that "we place far too much stress on eschewing efficient solutions, and far too little on compensation and general income-redistribution measures. Over time, the cumulative consequences are likely to be a much smaller social pie for everyone." Stated differently, by compensating losers out of the gains from an efficient change, no one need be made worse off. We can have our pie and eat it too.

Some would argue that it is preferable to settle for a smaller social pie overall in return for the assurance that no one will lose part of his or her share. Even if the government could simultaneously guarantee a larger pie and assure protection of those who would lose in the process, this would not be sufficient; the objection is not to the potentially unequal outcomes but to the unjust process.

But if greater economic equality is the goal, a political system that caters to organized interests is hardly the way to achieve it. As E. E. Schatt- Schneider wrote many years ago in response to the popular view that the plurality of special-interest groups reflects all interests: "The flaw in the pluralist heaven is that the heavenly chorus sings with a strongly upper-class accent."

The accent--still distinctly upper class--has faded somewhat. The War on Poverty and the Great Society programs, while not primarily a response to organized pressure, created their own focused constituencies. Disadvantaged groups such as blacks, women, the poor, and the handicapped have become more militant, in part with the aid of federal funds.

The politicization of the have-nots is one reason that it's becoming even harder to find solutions to our economic problems, all of which require that there be losers. Groups that once shouldered much of the burden will no longer tolerate their plight, and our system is paralyzed in the face of their (as well as any other) organized resistance. Economist Lester Thurow calls for major income redistribution as the solution-- equitable in its own right--to the political stalemate.

Thurow cites other reasons that it is increasingly difficult to make efficient (loss-imposing) changes. Industrialization is one. Whereas economic destruction is unavoidable in agrarian societies, which are at the mercy of weather and agricultural blight, in industrial societies destruction results from identifiable human actions. Because economic loss is avoidable, it's become intolerable. Another product of industrialization--the growth of large economic institutions--also forces government to intervene as a protector. While "the doctrine of failure" is at the heart of capitalism, government can't afford the failure of major economic institutions like Lockheed, Chrysler, and New York City. And when one major institution is bailed out, others demand the same treatment.

Changes in our legal and political system have also added to the difficulty of imposing concentrated losses. The courts now provide a way for organized groups to delay that which they oppose. Often the cost of the delay and uncertainty forces both government and private industry to cancel projects that would otherwise be profitable. Also important is the decline of political parties, which could be held accountable for the economic problems resulting from not imposing losses. "When no one can be held responsible for failure,'" observes Thurow, "it becomes possible for everyone who contributed to the failure to be reelected time after time."

Withdrawing Benefit

One can point to significant policy initiatives that were enacted in recent years despite the resistance of highly organized groups. Medicare-- opposed by the powerful medical lobby--is one. Laws regulating auto safety, environmental pollution, and workplace hazards are others. Leaving aside the controversy over whether the benefits of such regulation outweigh the costs, those costs--at least directly--fall narrowly on the regulated industries.

In the cases of Medicare and health and safety regulation, the losses were imposed as the result of initiating a new policy rather than terminating some existing, special-interest subsidy. Even if that distinction is irrelevant in economic terms, it's very important politically. For the most ambitious of all loss-imposing policy reforms are those that seek to deny or reduce special-interest benefits once they are granted.

A client group has all the advantages of a political system set up to protect the rights of organized minorities, and then some. The reform proposal is sent to a specialized subcommittee with strong ties to the group, based on familiarity and a history of goodwill and campaign contributions. A promising reform proposal might get support from another subcommittee looking for a good issue, but generally legislative entrepreneurs find it more rewarding to create than to terminate.

If the proposal gets a hearing, the witness list is typically stacked. Experienced interest-group spokesmen testify that to terminate the program will jeopardize the public interest--something many of them sincerely believe--and they offer well-packaged evidence to support their claims. Skeptics face the risk of electoral damage made credible by a "snow down" of letters and Mailgrams, as well as numerous telephone calls and personal visits, all coordinated by a well-heeled professional organizations whose existence may well depend on the continuation of the government policy in question. Group members, confronted by a clear and visible threat from the outside, become more cohesive and integrated than ever.

The client group has also gained a powerful ally in the time since Congress initially accommodated its interests. Much has been written about the "iron triangle"--the symbiotic link between the committee (and subcommittee) that legislates, the outside group that benefits, and the agency that administers. In addition to sympathetic ties to the client group, a bureaucratic agency develops an enormous stake in administering per se. James Q. Wilson has observed that the "special interests" that regulatory agencies serve are often really the judges, consultants, business lobbyists, and others involved in the regulatory process itself.

Terminating any government undertaking is hard, be it a tariff to protect industry, the U.S. Army Horse Cavalry, or the Vietnam War. A public program inevitably builds up a constituency of direct and indirect beneficiaries who will fight for its survival. Their fight is made easier by the fact that government programs, like national monuments, are built to last. As Robert Biller observed, examples of policy termination are so rare because we have "taken persistence and continuity to be in general what we want to produce [We] assume that our investments in policies and organizations are ... to be amortized through their future 'rightness'-"

Battles to terminate political programs take on a special cast because of their moral element as well. Eugene Bartech concluded that the "peculiar strength of most anti-termination coalitions lies, first, in the general moral repugnance Americans ... feel towards the deliberate disruption of arrangements which people have learned to rely on for a significant portion of their livelihoods or careers." Jerry Wilson, chief of the Washington, D.C., police department, said it another way in describing his (ultimately successful) struggle to abolish the city's motorcycle squad: "It's hard to get people to do things that will hurt somebody."

In sum, in any battle to eliminate government benefits, the defenders have powerful forces on their side, and their leaders are highly skilled at marshalling these forces. "Power is contingent," said a dismayed David Stockman. "The client groups know how to make themselves heard. The problem is unorganized groups can't play in this game."

Trucking Regulation

Until recently, few examples illustrated the power of client groups better than federal regulation of the trucking industry. Interstate Commerce Commission controls on rates and entry resulted in a gigantic subsidy to regulated trucking firms. Consumers unwittingly paid the cost.

By a generous interpretation of history, motor carrier regulation may have served a valid purpose when it was instituted in the days of bread lines and soup kitchens. Many policymakers lost faith in the market during the Depression and feared that excessive competition would destroy struggling industries. Banks and airlines were regulated partly for the same reason: Congress feared they would compete to the death under Depression conditions. But Congress was encouraged in its thinking by established members of those industries--businessmen who preferred the security of regulation to the discipline and uncertainty of the marketplace.

Even if government protection of the trucking industry once served the public's interest, it ceased to years ago. By limiting the number of firms that could compete, and by allowing those firms to collude in setting prices, regulation kept shipping rates above the competitive level. So profitable was the regulated trucking business that individual firms sold their operating authorities for millions of dollars.

Recognizing its stake in preserving regulation, the trucking industry developed one of the strongest lobbies in the country. The industry's political strength knew no geographic boundaries, since there is at least one trucking firm in nearly every congressional district in the country. Moreover, the industry had a powerful ally in the giant International Brotherhood of Teamsters union, whose members received the trickle-down benefits of the truckers' cartel.

Essential to the regulated industry's continued prosperity was the active support of the ICC. Whatever the intent of the Depression legislation, the commission came to see its role as that of protecting the regulated industry. This protection cost consumers billions of dollars annually. But transportation charges are small and hidden enough in the cost of individual items that the prospect of eliminating regulatory controls inspired little enthusiasm on the part of those who would benefit. Harry Truman was the first of several presidents who tried unsuccessfully in Congress to reform trucking regulation.

Jimmy Carter finally succeeded. Despite the all-out opposition of the trucking industry and the Teamsters Union--two of Washington's undisputed heavyweights--Congress passed a bill in 1980 to substantially deregulate trucking. How that reform came about--in seeming violation of all the established rules--is under discussion.

Analyzing this political upset in a way will prove useful to others with an interest in policy reform. Hence the focus is on strategy--which is subject to reformers' control--more than structure. Trucking was only one of several industries that Congress partially or substantially deregulated in the late 1970s and early 1980s. Clearly major structural changes in the economic and political order helped to produce this unusual outcome, and three of them--a highly inflationary economy, greater intellectual acceptance of the competitive-market ideal, and the rise of a consumer movement followed by the mobilization of business interests--received considerable attention. But my major interest is in what trucking reformers did--given a climate that was favorable to deregulation--to bring it about and in what one can say about strategy more generally based on their experience.
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