Transcripts For CSPAN2 Book TV 20150222

Then they have the kids to a lot of times. Then they have to prepare food. Its a hard life. I always say just because i dont know anything because not much has been written about asmat women what appears to be a culture in which women have very little importance for power isnt necessarily true. Its just that we men are privy to mans world and we are the writers. I always say that if you know of any ph. D. Candidates who are women who are looking for a thesis, a woman could go live in asmat and come up with really remarkable stuff. The role of the women and really what their role is. Obviously much greater than we in and my interactions with them would indicate. But it is cut off to me. Thank you and i think that was it. Thank you everybody. Appreciate it. [applause] [inaudible conversations] the judges decision in 2010 was instructive. Hes the first person who is a neutral person to have reviewed all of the evidence in the case and he decided that the evidence in the case was either not credible because it was obtained through torture or coercion or for other reasons. I remember reading the first time i was able to read the diary years ago so much more became clear to me because mohammad talks about the torture that he was subjected to that resulted in him providing false information about himself and others because essentially he was told what they wanted him to say. So he was also in a position he said in the book of more incriminating the fiction he could make up the happier his interrogators were. There is one point, he talks about whenever they asked me about somebody in canada i had incriminating information about that person even if i didnt know him. Whenever that about the word i dont know i got nauseous because i remember the words often redacted. All you have to say i dont know, i dont remember and fu and that of course is the word that was used. Mohammad doucet i erase these words from a dictionary. That passage comes after you read about the pain that he goes through. One of the things again that i think about in this book in the last year that we had with more information coming out about torture our debate about torture has been debased and await because its focused on effectiveness and effectiveness doesnt matter. Its a moral. This book shows yet again that there are two things that torture absolutely guarantees. One is pain and the other is false information. Good afternoon and welcome to our book form at the Cato Institute today for a republic no more Big Government and the rise of american political corruption by jay cost. My name is john samples paradigm Vice President president and publisher here the Cato Institute and i again would like to welcome you to our event today for this very important book. Now if you have been to book forms before you will notice they will proceed in many ways the same as all other book forms have. That is you will hear from some participants and then there will be a question and answer session about the talk and then lunch. Also one other thing is like all of our other events. Please turn off your cell phones now so that we can have the event in peace and quiet. Some things are going to be different today. We are trying some Different Things different format. In this particular case of our author jay cost was beaten for a while about the book to give you a general ally of the land and jay will be joined by my colleagues mark calabra and Chris Edwards. They will for a few minutes give you their impressions of the book and then mark jay and chris will have a conversation about the spread of political corruption in america and about the book a republic no more. Im going to begin today by getting beaten in straight of stuff out of the way. Im going to introduce everyone youll be hearing from and then we can go straight to our event. Jay cost is in elections analyst political analyst and pounded at the Weekly Standard if you read the way the Weekly Standard regular you will know his work well. He previously wrote for the horserace blog and realclearpolitics. Some of you may remember those days and he had an earlier book spoiled what and how the politics of pretended corrupt the once noble Democratic Party and now threatens the american republic. He received a b. A. In from the university of virginia and an m. A. In Political Science from the university of chicago. In 2000 by while working on his dissertation at the university of chicago costs joined the staff of realclearpolitics and became a writer for the Weekly Standard in 2010 pickup of his education background is in Political Science jay claims he is come to the reading history of american elections than Political Science and Public Opinion polling. Our book today is proof of that interest in political history which many of us would say has an Important Message for Political Science and indeed for american politics. My colleagues are mark calabra and Chris Edwards. Mark calabra is director of Financial Regulations at cato. Before joining cato in 2009 he spent six years as the senior professional staff of the u. S. Senate committee on banking, housing and urban affairs. He handled issues relating to Housing Mortgage finance economics, banking and insurance for Ranking Member richard shelby. Prior to his service on capitol hill calabria 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 homebuilders, the National Association of realtors. He has been a Research Associate with the u. S. Census Bureau Bureau center for economic studies. He holds a doctorate in economics from george mason university. If you dont know the cato step well today when the conversation mark will be the one with a the yellow tie on. The other fellow would be Chris Edwards. Chris is the director of tax policy studies at cato and editor of downsizing government. Org. He is a top expert on federal and state budget issues. Before joining cato edwards is a senior economist on the congressional joint economic committee, and manager with pricewaterhousecoopers and an economist with the tax foundation. Chris has testified to congress on fiscal issues many times in his articles on tax and budget policies have appeared in the washington post, the wall street journal and other major newspapers. I can say this because chris is a collie. No one at cato rails against political corruption better than Chris Edwards so he was a natural for our event today and i must say in his research he comes up with a lot of examples. Chris holds a b. A. And m. A. In economics and a member of the Fiscal 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 thank you especially to Cato Institute for hosting this forum. As john said we are here to talk about my new book a republic no more Big Government and the rise of american political corruption. I was attracted to the idea of the history of political corruption because i like the idea of writing a history of something that nobody is studied in isolation and it was a different subject. The subject may be a lot of people dont particularly want to talk about because it doesnt show our history and the brightest of lights. I thought i would set sail in american politics and see what i might find it as it turned out i discovered quite a bit. My book is one part history one part civics in one part policy analysis. I was thinking about a way to tie all of that together in some brief remarks and since markets here and sure we will talk about fannie mae and freddie mac which i analyze in the final chapter of the book. Im looking forward to that because their behavior, their behavior was probably the most obscene example of legal corruption that i have discovered. Im going to take an opportunity at the end of these remarks to bring them into the picture. First let me outline exactly what my argument is. I take a broader and more philosophical view than what we typically read in newspapers or see on television. 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 in my framework is James Madison opens federalist number 10 with a very provocative phrase. They need to break and control the violence of factions. If you read this in the federalist papers you know hamilton is by far the better polemicist in those essays that phrase violent factions knocks me off my feet when i ponder it. He defines as faction quote a number of citizens whether amounting to a majority or minority to hold united and actuated by some common impulse of passion or interest adverse to the rights of other citizens or to the permanent and aggregate interests of the community. That gives me some very useful definition of corruption. It occurs when the government does violates by lowing faction to dominate public its incompatible with the form of government. Its suppression at the heart of massa heart of nasas project after all all the republic all the, which are republic busters as faction if it hopes to govern for the sake of all an retrospect of the individual rights of all. Madison rejected the idea that virtue provided for Civic Education or public religion could overwhelm what he saw as the inevitable tendency to factionalism. He said it is sewn into the nature. He also rejected other thinkers who suggested that a small nation our city state would be ideal for her public because in most instances so the theory went small groups are less likely to bicker over big issues. But madison observed in especially during the 1780s the experiences the State Government saw the opposite. In the federalist papers he makes a persuasive claim in my opinion that even when men dont have something substantive to bicker over they will find and invent reasons to fight one another. As an alternative to this medicine madison embraces an institutional solution because after all factionalism is sewn into the nature of man and popular rule is at the heart of the republican project. Theres a problem here. Republican governance is inherently unstable. If virtue doesnt call a small size and the city and state doesnt cut it what you do . Madison solution was institutional. He thought as long as the institution of government was welldesigned factionalism could be thwarted and this idea of this principle is at the very heart of her 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 desideratum of government and other provocative face. Woodrow wilson once called our constitutional regime a utopian system with forces calibrated against one another. In other words the rules of a constitutional gamer to be structured so that the vast array of forces in society could combine within the government to produce something that is in the common interest. A faction may have representatives who will do its bidding in the government but those agents will only possess limited power and will be regularly signing by agents allied with other factions. Per madisons theory its irrelevant to check these selfish ambitions driven by selfish ambitions. All that matters is the result. The only proposal that should make it through the constitutional gauntlet and the enactment into law will be those that benefit the people generally. Everything else will fall by the wayside a decisive check on correction in per serving the republic integrity of the regime. To be truly truly madisonian may require truly madisonian may require something other than strictly parents to the constitution. Its not simply commitment to that document. In the constitution cannot be understood. It is rather compromise hammered out at the Constitutional Convention in 178087 convened after the existing Governmental Authority has proved unworkable. The status quo at that time could no longer stand. Delegates disagreed on many points in two important disputes are illustrative for my purposes. First is how powerful should the new government be and how dependent on local edges should be . One group led by Madison Alexander hamilton and George Washington wanted a powerful government. Mostly immune from parochial or local concerns apart from a popularly elected house of representatives. Madisons original proposal envisioned a government distant from the gallows. The gallows. As i was beat to selected by the house the president by both chambers of commerce and the congress would have Veto Authority over state state legislation. Finally a council of revision would have authority to monitor and veto state laws or excuse me vetoes federal laws. Meanwhile the congress would have enormously wide discretion. It could legislate and this is a quote in all cases to which separate states are incompetent or which the harmony of United States may be interrupted by the exercise of individual legislation. The virginia plan was a truly National Plan of governance. Opponents rallied to the proposal of William Patterson of new jersey which called for slight alterations to the existing articles of confederation which had limited power and parochial orientation. Under the new jersey plan the Continental Congress would acquire the tax and an executive council be created to provide direction to Public Policy. The constitution is worked out occupying middle ground between the two. After months of debate delegates decided the government should have more power than patterson proposed that less than what madison proposed. Furthermore it would depend more on local perspectives and madison wanted but less so than what patterson and vision. This was not merely a splitting of differences either. The framers blended the divergent views and you can appreciate this if you read madisons notes on the Constitutional Convention. You can see them taking care to make sure that this compromise actually worked, the various pieces fit together into a coherent whole. It was a compromise and eight. These were people skeptical of centralized power and fearful creeping monarchism get they werent desperate need of a central authority. The constitution gave them gave the government enough power to meet the existing crises but not so much as to overwhelm state and local authorities. It also distance the government from popular sentiment but certainly not without cutting it off entirely. Over the ensuing two centuries or more the American Population grew from 4 million to over 300 million in society change. Straining the original compromise and gradually enforcing an effective revision of the governing charter. New problems emerged and repeatedly the public decided the power of the federal government had to grow to deal with new threats. Today washington d. C. Has achieved the scope of centralized power that was envisioned in the virginia plan. For for all intents and purposes the federal government can legislate whenever it sees fit. Rarely does the Supreme Court remind washington of any constitutional limit yet this is where we turn to the problem of corruption. The country never revived. The institutions that channel government ever expanding powers. We have margins and the Electorate College mandated the expanded the franchise but nevertheless the basic institutions remain largely as they were when the constitution went into effect in 1787. From the madisonian perspective this is a problem. If our institutions require a particular design in order to break into the violence faction and serve the common good than it is imprudent to give expanded powers to institutions that were urgently 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 his sake and as senate. As crises arrive voters elected new covering to deal with the challenge and expansion is retained even after the danger has abated. This haphazard process has left us with institutions that are far too parochial and tie to factional interest to permit the white exercise of the expansive authority. Perhaps not surprisingly our 18th century institutions wield their 21st century powers. Lacking adequate checks and balances in this new redesigned regime they regularly killed Public Policy to benefit our interest groups. Madison called it a faction. Conservatives call that cronyism. Liberals are prone to call corporate welfare. I call it corruption. This i think as to the heart of madisonianism. It is not blind faith in the constitution. The commitment to the ideal proper institutional design. The commitment to the principle that we must take institution seriously and it must be well designed in truly republican regime will endure. I do not think this country has been madisonian for its history. Put aside the debate of Big Government versus small government and think of it this way. If we expand the power of the government with the existing institutions capable of exercising their powers responsibly or will they need to be revised . That is the madisonian question and its one that in my search through history i have rarely seen asked. Having outlined my theory i want to tie fannie mae and freddie mac into this story because i think it illustrates my point. For the sake of brevity i will send you are familiar with fannie and freddie. They combined combined unsafe on sound financial practices with an unprecedented lobbying operation to protect investors and tap the bonuses of their and fannie and freddie are governmentsponsored entities. They are not part of the government, they are instrumentalities of government. Their private corporations. In the case of my book the corruption inherent to the first gses. The first and second banks of United States experience with the banks second bank in particular eerily similar to the experience of fannie mae and freddie mac. Normally when we think about the second bank of the United States we think of Nicholas Biddle was a farsighted financier and if we think beyond him we tend to think of the bank where in my opinion Andrew Jackson comes across as much worse. But thats as far as the common understanding usually goes. But it overlooks something which is that the bank had been in place for a decade before biddle came on board and it was terribly rife politicized and selfinterested Bank Managers abuse the public good out of ignorant vanity and banality and all the while the government could do practically nothing about until its too late. The reason why is the bank was wellconnected into the political system. Members of congress were given advance salaries for instance. They received campaign contributions. They got personal loans. This greasing up the skids may not have been a comprehensive and that the skids were nevertheless greased. As a consequence of this toxic brew bad management and political influence peddling the second the countrys economy in its early years. It did not cause the panic of 1819 but it reacted far too late to it and then it overreacted. Because it was run by men who understand politics better than they understood public seems to me and i make this argument the book that history repeated itself a couple of years ago. The same story that i just described the second bank applies equally if not more so the fannie and freddie. Only the latter were better politics and the collapse of 2000 was much worse than the panic of 1819. The history would repeat itself in this way goes to show how little attention the Political Class and by extension the people at large have paid to the design of our governing institutions. Franklin roosevelt was not aware of the second banks troubled history when he created fannie mae. He wanted to jumpstart the housing market. Lyndon johnson was certainly ignorant of its history when he private days fannie mae. His motivation was to get fannies obligations of the federal books because the vietnam war and the great society. Similarly Richard Nixon had no knowledge when he created freddie mac as a competitor to fannie mae. In this way leaders were following the american peoples demand to solve problems without fussing over abstract concerns like weather system could actually keep these entities in line. This is an unfortunate pattern i have found throughout the process of research. For a country founded by men who works us with how institutions could ensure truly republican results citizenry and the Political Class over generations has been decidedly disinterested in such questions. They hardly consider pass institution mistakes when designing new structures, hardly revisit core assumptions even when those institutions appear to be functioning poorly and almost unquestionably accept ad hoc structures whose provenance is decidedly political. People are too quick to blame personalities rather than institutional melodies when bad policies produce. To put it bluntly is decidedly unmadisonian and the country is pay the price again and again in the form of political corruption most recently from the damage caused by fannie mae and freddie mac. Thank you very much. [applause] [inaudible conversations] we will take a few minutes to give you our impressions of the book. [inaudible] let me say how much i really enjoyed the book. Obviously some of the issues dealing with finance are close to my own heart having spent my time on the hill trying to work on Financial Issues but but also as well my dissertation work was on regulatory areas during the progressive era so i found that chapter to be very much of interest. Let me also make an emphasis the subtitle of the book is the rise of Big Government and i think it really is a book that is less about the size of government and about the structure of government. In fact if you read this book and immediately read gabriel cocos classic you would be hardpressed to find a lot of differences on those errors. I really would suggest that despite the Big Government the title might be offputting to my friends on the left that this is a book that anybody of any political spectrum would enjoy that i think its a great introduction to the history. Some of my critiques would be that and again this is going to reflect my bias is an economist. Theres a whole literature and economics some of the encryption and some of the constitutional design. Again this is a Political Science history book. Despite my own temptations that every single book should continue to look at it. To me again some of the conversations particularly about some of the u. S. Bank, my friend alex pawlik from aei a number of years ago wrote a wonderful essay comparing fannie and freddie to the first and second bank of United States so to me its always a wonderful parallel with some of the same problems that were there. So i found this a great introduction. To me it was a little bit frustrating in terms of can we really have some fixes here . I guess i would put it this way. If you are looking for a laundry list of how we can fix all this and go back in time you will probably be disappointed. Again its a great read of history and a great set of examples. I think again i really enjoyed it and look forward to the next next book to matt prater will turn it over to chris for a while. Thanks jay. It is a fantastic book and youre clearly a historian by heart. The detail is tremendous. If you want a good introduction to america 19th century Public Policy this is a great book to start with. Your discussion of the rise of the patronage in the 19th century the rise of the parties the rise of the Progressive Movement the new deal fantastic. Jay has chapters on farm subsidies and medicare tremendous introduction. Each of those chapters could be a separate standalone study on those issues so he does a tremendous job at the history. Three main critiques i think. The first is that in my view Big Government gets corrupt and wasteful whatever their basic structure. For example farm subsidies to these which jay has a chapter on our terrible policy. They are distortionary and unfair but every major western country has a big distortionary Farm Subsidy Programs. So the problem with farm subsidies and this is what i think it maybe markey touching on on that jay gives us a critique a specialinterest critique of government. Think what he leaves out is the Central Planning critique of government and maybe thats a separate book. The problem with farm subsidies is not so much the specialinterest problem but a Central Planning problem. Farmed subsidies are always distortionary no matter what the structure of government. The same with medicare which is a tremendous chapter that if you want a good introduction to some of the distortions of the medicare system this book is a good place to go. The problem with medicare is not the specialinterest handout. There is unfairness and loopholes but its a Central Planning problem. Medicare soviet style Central Planning price control system. Medicare is thousands of prices on providers that are imposed on providers and doctors that cause a tremendous amount of distortion. But you see the same sorts of distortions another sorts of Government Systems in other countries. So jay ignores i think the basic adam smith for Frederick Hayek critique. He complained about what he called them in the system. They are people who get in government and think they can centrally planned the economy is that the economy or is it society was like a chessboard that the government could manipulate. An essential and crucial problem in government. Back to the 19th century various programs. The discussion of Woodrow Wilson observed one of the big problems with the decentralized power structure in washington was know one knew who was responsible for failed government policies. It is a huge and central problem right now and you can see the difference in countries the United States, countries with the british parliamentary system like canada and britain were government comes in the power and essentially, its a shortterm dictatorship. Everyone knows who is at fault. The united the United States is much more difficult. Political accountability is something that is a real a real problem in the american system. Woodrow wilson was a terrible president. A final. The election of 1800 was a landmark in american history. Jefferson promised a smaller government, a repeal of all internal taxation, spending cuts while this type of stuff. J argues that the jeffersonians were quickly overwhelmed by federalist ideas sustained power. Jefferson for example, did example, did follow through and repeal internal taxes. That policy held until the civil war. Jefferson hated that. He and his treasury secretary hated that and they promised they would cut it. They did cut it and that policy, the hatred of debt in favor of balanced budgets lasted all the way through until the knew deal with the exception of war. There is something hear. Culture plays a role hear too. The idea that we ought to have balanced budgets and pay down debt was an idea that the institutional structure of the government did not guarantee balanced budgets but we generally balance budgets all the way from 1800 through to the knew deal. We balanced about 70 percent of those years. So i think again, i think one thing that is left out the culture of our governing institutions which is a a bit of a different issue than the institutional structure. Useful to kind of to me you take a very specific definition of corruption in the book and certainly as five different people what you mean by corruption and you will get six different answers so i think it would be helpful if you could sort of layout what exactly you are defining. That is a a good question, and it was something that i struggled with what i was writing the book. You book. You can win any argument depending on how you define the terms. The question then became where should i . What is my foundational premise . And he just it just has to be the premise. And i decided that madison at least as i read him and i think i read him reasonably i think madison his definition of factionalism and i chose that for a couple of reasons. I think it illustrates pervasive problems that are often overlooked the two narrow definition but i also chose a because i really, you know, my read my reading of history, i have been really struck by the struggles of the 1780s leading up to the Constitutional Convention leading up to the document that was produced. What were men like hamilton and washington and madison so worried about . And they were very worried and they were worried about factionalism and i think that it is not unreasonable to use that as a definition because i look at the behavior of a lot of the State Governments in the 1780s and see an awful lot of corruption. It is certainly worth observing that a lot of that corruption was what we would all commonly think of corruption Public Officials and their friends lining their pockets. You can certainly say the smallest faction faction one. But i think that is very helpful. To me the book is very much about these concentrated groups essentially taking advantage of the government for there own benefit at the public expense. I think jay sort of you can tell he struggled a bit with the idea, what is private versus Public Interest. And people on every end of the political spectrum we will say that is what they want, but what does that mean . Im writing an essay now on why the federal government fails when there is a similar problem. The definition of baylors failures when the federal government doesnt do something about. But know one it is hard to special interests like the one mark used to work for them argue that what they are proposing is in the general Public Interest. The mortgage Interest Deduction is in the general Public Interest, and it is hard to get a really good hard definition of how the special interests undermine the general welfare. It is. That reminds me in the introduction i recount and it was jeffersons telling which may be might make it a dubious accuracy, but it was for his personal record, his personal notes. He recounted a conversation he had with john adams and hamilton about the british constitution. Adam said it would be the most perfect constitution if it only was purged of its corruption and given a quality of representation. Hamilton said, purge it of its corruption and it will become a useless institution. As it stands as it stands it is the most perfect government ever. Jefferson, of course, was appalled by this hamilton thought what is the problem if the king has to browse small minded members of parliament to do what they should do anyway . And we have seen that at times throughout history. Lincoln had to dispense patronage to a congressman from new jersey to get the 13th amendment passed. The response when i read that command was striking. One reaction would be think god he had available patronage. At the same time it is a difficult seemingly difficult to find the Public Interest of times but it is sort of the way Justice Potter stewart described pornography, you know it when you see it. We can talk about the difficulty of the public good in the abstract, but then you start calculating the deadweight loss inherent to foreign subsidies since the knew deal and look at where the foreign subsidies are going. There is no question. Similarly you look at the patronage machine by the end of the 19th century and you can make an argument in early jan jackson and jefferson to a a lesser extent were trying to hold the political coalitions together. But you look at the way the port of new york city functioned. It was disastrous, harmful to the national interest. When you read the stories and see exactly what was going on theyre is not a lot of doubt. I think that the concept of Public Interest from a certain perspective is often hazy and informs a lot of our public debate. But then theyre are these issues with the split is 95 the five which is what i try to look at the book. Something you can elaborate on the whole logrolling issue. Was i right . You write about the constitutions but it does seem to me almost as soon as the ink was on the constitutional law ego into detail about how starting agis 1826 they started passing big harbour army corps of engineers project bills where they initially started passing these army corps of engineers projects. A lot of them fail the legislature but then they got a great idea of bundling a few hundred of them together and putting them in an omnibus. That was the beginning. You bundle everything together. Thats right. That is something i dont get into in the book. You know because you have to select your stories and certain days get left on the cutting room floor, but youre right. I dont remember what the particular issue was. It might have had to do with internal taxation, but im not sure. The 1st or 2nd congress was disturbed by what he saw and of course by the 1820s which is just a generation and the knew government not only do you get rivers and harbors legislation but then you also you dont think its a big deal nowadays but if you think about the country in the 1820s it was hugely important. When you get the tariff of abominations which was 1827 28 which was basically a log a log roll between new england and the Midatlantic States at the expense of the south. Ultimately if precipitated the nullification crisis. That was something he missed. Of course today i talked about this in the 2nd half of the book they usually dont get on the house floor. Gains from trade. You hand discretionary power over the process to committees and then people who want pork gravitate to whatever committee has particular control over it. That was not forget which is why you get things like rivers and harbors. I want to go back to what i think is an interesting issue. Theres good corruption and ill use some of the examples. Chris has written on the large grants and subsidies we give the states and localities. They want the check without any federal strings. On. On a regular basis on the hill, some senators say can you exempt us from this requirement . And of course my usual answer everybody and nobody the shocking thing was, i was the only one who ever took that position. I never had anyone argue with me on principle. The Mortgage Finance stuff. The areas of public assistance you do often hear this argument is not explicit implicit. If you dont want the special interest providers take some portion of the subsidy, nobody will lobby for it and we wont have these things and poor people die in the streets. The greater. So he gets his exemption and then a year later he comes in and says the exemption you gave was perfect and wonderful but has affected me in this way. Any any year later some alleles comes in and says the same thing. That is that is ultimately the question of whether or not it was hamilton right, are all these deals, the grinding necessity of managing the political comics. The argument that i make in the book and go through. Corporate taxes and fannie mae. It was sort of a spitball. You can get precise estimates. I rank the chapter. The father in the book you go the more wasteful and pernicious the effects of the policy are. And so by the time you get to financial Regulatory Reform and regulation and you see regulatory capture happening i mean, it is overwhelming that managing for the sake of the greater good. And i think you see it especially in the two prior chapters on corporate taxes and medicare. You know in 20 years medicare would be the last chapter in the book by a long shot because the waste inherent to medicare is going to become more problematic by a court in order of order of magnitude as baby boomers retire and this inefficient system that privileges waste and payoffs is going to become more incentive. Often said that if you start from the premise of thinking that Financial Regulation is actually about stability and safety then you we will never understand one of the things that struck me a commonality whether it is fannie or freddie or medicare many of the added subsidies, it is all kind of hidden. Chris works on budget issues a lot and theres a lot of stuff that outrages you. It seems to me that some of the worst of these contingent liabilities but they are essentially hidden. Let me let me ask you is it the corruption particularly worse . I would say so. The extent to which they are hidden is extraordinary. I remember when everyone kept telling me that gs is never fail. We were all told these things would be great. And im sure thats true. In the case of fannie and freddie, one of the problems was they were not keeping honest books. There was know discovery, but ill give you an example of just how difficult these issues get. A knew senator from arkansas voted last year. He was the only member of the delegation to do so, and early in the year charlie cook an old political hand and a very insightful guy wrote a column criticizing him for doing that and saying well, this is not smarter politics. This this is ideology trumping common sense arkansas values. Toward the end of the cycle chuck todd, very plugged in connected, smart guy made the same point, and. And i took to the electronic pages of the Weekly Standard and excoriated them for it. You have to be kidding me. The percentage who draw benefit from this farm bill is vanishingly small and moreover the entire kansas delegation voted against the farm bill. I think the. Is people who make to file jollity and do a good job of understanding politics i dont want to single those two out. I mention that simply to. Out the extent of the expected five the extent of the obscurity. The farm bill has been around for 80 years. Chris mentioned culture and i think this is incredibly important. I can say from my time on the help reflect this washington mentality. The way you get reelected is bringing goodies home to the constituents rather than standing for something. That viewpoint is for a sieve and members have internalized it. Farm subsidies, an interesting aspect with respect to transparency. The Republican Congress and 96 did a big big farm reform bill, freedom of the farm bill that made a lot most of the federal subsidies a lot more transparent which is why theyre was a decade or more of embarrassing stories about how folks like ted turner were massive collectors and farm subsidies and in the recent Farm Bill Congress they realize this is a big problem. We are getting a lot of negative publicity. They publicity. They ended that direct Farm Subsidy Program and then switched to insurance subsidies passing tens of billions of dollars to the farmers through private insurance companies. It has essentially laundered money which has made the recipients more invisible. Congress doesnt buy transparency and and they work against it. An interesting. Is sometimes it almost seems i dont i dont see how we could have avoided it. The federal government accumulated a vast amount of land. It had to you a lot of Corruption Associated with it. It. I dont know how we couldve ever gotten around it. Its a good thing they got rid of the land. I dont want the big federal government with big land. Another example is indian treaties. The relationship between the federal government and Indian Tribes was generally awful right up until the 1970s. The federal government wrote treaty after tree. From one perspective their was a special a special interest problems. White settlers were moving west and lobbying representatives to break treaties but which was bad. Theyre are millions of settlers pushing out over the appellations and squatting on indian land. I dont know how we couldve avoided. A final example final example is with the Corporate Income tax i differ with you somewhat on the how and why the Corporate Income tax is so complicated and corrupt as it is. The is. The basic problem is that the basic structure of it the complex and comes thats the government up for failure and corruption. The Corporate Income tax the fundamental structure is so complicated that it is easy for corporations to go to washington. This this tax is unfair to me because of this and this and this. Sort of a neutral basis. It is an open end to corruption. That gets back to your initial response to the book. This is a a Good Opportunity for me to respond to that. To the question of Something Like farm subsidies, is this just a fundamentally misguided policy that we will always produce pernicious, perverse effects that would accurately be labeled corruption . I am not an economist. I cannot answer that. For what its worth i think the answer to that question is yes. But i didnt deal with that in this book. The merits of the policies as policies. What i wanted to do was sort of what happens is malfunctioning policies always seem to malfunction the same way the problems with the tariff regime we didnt need such every protective tariffs and this is an misguided policy. To your. About corporate taxes not to say that i we will have opinions on the where i come down on most of these policies. When they malfunction and dont work their seemed to be commonalities to it. Like i said, as i noted in my remarks it gets back to the structure of the government. That is a good. You can look at it as a feature. I felt like it might sound surprising, too easy. With with that said i do think that is a balance. A discussion of the merits of the programs that were listed discussion of the function of them. Let me raise what is to be an interesting issue in some of the cases, particularly the us bank. Theres an economic new york you no of course we remember during the 20s 30s and 40s sort of entry barriers. So to me whatever you think and ill say this as an aside, there are lots of arguments about the financial crisis. You dont wade into those. This is not about city versus fanny. It is about about the specific institutions they privileges that no one else got. And so interestingly what the professor argues with his work is that you have all of these statechartered institutions with the legislatures were handing out charters. And what he saw his the really big change in about the 1840s and 50s, the creation of General Corporation so that anyone who wanted to start a bank, a corporation did not have to bribe politicians. You just go down and file the paperwork the question to you is how much of this is driven by exclusive special charters and privileges at least in the financial sector. Certainly the story of fannie and freddie and i think that basically its enormously valuable. About 10 billion was the value. And then there was a real bombshell that so that said that only two thirds of it returned back to homeowners. The even less. And so this is the problem with charters. Widely known. Madison and jefferson were infuriated by the behavior of the first bank. Jefferson had it early on in the banks days banks days and was appalled by the scramble for federal paper. He knew the poor farmers in the south and west were not on the inside of it. And he worried that the stockholders the band of government, once its bribed by his largess is an overwhelming it with disclaimers. The little tidbits. One of its biggest offenders was actually. I sort of got humor writing this book. Of book. Of course Daniel Webster has been remembered. The great defender of the union. If there was somebody whos pocket he could put his hand into, thats what he did. Maybe the last quick question the budget amendment. Amendment. Term limits that you would favor to try to take down. I would favor of those. I would favor a whole host of them. The them. The problem ultimately is the amendment process has to go through congress. Pro what its worth i have i have a peace of the Weekly Standard. Overnight and then i have something coming out of National Affairs talking about next steps and that tried to frame it. It comes off a little small. For instance regulating not campaignfinance and regulating speech but regulating who members can accept pac money from. If you were the chairman of the community that oversees an agricultural interest how are you taking contributions . If you were a judge and did that and they were before your court you get kicked off the bench. Those are some of the suggestions. I want to write something that i didnt feel like was pieinthesky. Thanks very much. That was really excellent. Really excellent. I was thinking that our friends at home might come and hear the conversation and think wow it sounds it sounds like an interesting book but i wonder what it is the title of the book is public know more. Big government and the rise of american political corruption. You can obtain the book in the usual places online or at your local bookstore. Here, however, we are going to go to the questionandanswer part of our event. What i would ask is that people raise there hand but then wait for the microphone bring the microphone so everyone can here your question. Identify yourself and the affiliation you have unless you wish to remain anonymous in which case you can. Otherwise lets start right down hear in the front. And i we will. Rudely at you. I dont know your name. Unless you specify otherwise will assume your questions for jake. My question is for jb i would like to everyones opinion. My name is steve. I am a cato groupie. I noticed the title has the word the republican it a word that i have been looking at for three years trying to get a handle on what the definition is. Of course, there is always the common definitions that basically say, well it is not a monarchy. There are other definitions that go all the way to say, no, it requires a constitution. You have to have individual rights. I am shocked by the range of definitions that i found in them also shocked by the fact that nobody seems to have her when they about her public attempt to define it. I dont know if your book does, but my experience has been that people use the word republic all the time and make no attempt to define it. My question is how would you define what a republic is . Thats a good a good question. I think that one of the challenges is that a republic is not a republic is almost the product of government. It is almost as if in democracy, monarchy, whatever that whatever that is the process. Republic almost refers to the end result. The british system was the most perfect republic ever invented by human artifice. Hamilton similarly is within the republican spectrum very close to the british system. Meanwhile madisons 1st choice was not as close to a monarchy on the spectrum. The final product of the Constitutional Convention was far off, and i think that the range of opinions, the diversity of opinion in the Constitutional Convention, those who signed the document, the most monarchical side would be hamilton and those who rejected the document who refused to sign it they are and what the republican spectrum because it is not about the process per se but the end result. My understanding in the way i define it is that a republic is a system of government, whatever the eventual design may be that governs for the sake of the people as a whole rather than individual interest. Madison specify that a little bit and added the condition, republican principle which i think was widely accepted that ultimately the majority rule has to play an essential role in the republic somehow but again there are vast differences about what role it should play. Hamilton saw most institutions of government completely and permanently separated from majority rule i would still say he is a republican with a small are. Summarizing very shortly what i think he is getting at in layman terms. The intention is the republic is a government aimed at trying to broadly serve the general interest rather than a reflection of a monarch. What i think the book is trying to reflect is the reason we have a republic know more is this erosion of the general interest for the fractional or special interests. Lets go to another question the dillman on the aisle. One of the themes. My question is theyre are some areas where corruption is especially beneficial. Lets say in the development of infrastructure. We pick up an example with railroads between 1865 in 1950 america 1950 america, five miles of rail year command we let the world in rails transportation both an amount any quality. Since we regulated and eliminated corruption from the system americas rail system has become the laughingstock of the world. China built 10,000 miles during the last decade, far superior than anything we have ever built my history. And so the question is maybe the really positive elements the future of the tv spectrum. We have decided we we will give the broadcasters close 200 billion in giveaways is this the only way we know how to transition to getting them to provide repurpose repurposing for cellular services. No other solution in a system. Theyre are a lot of issues like that the only way we can progresses with a pretty significant dose of corruption in that area. I am profoundly aware of his genius and i found myself overwhelmed. The challenge with the argument talking about the railroads the best way things could have been done. The railroads had a vice grip. Republican voters embrace populism. The populist party and the populist movement which was a far leftwing movement. As late as 1907 it is time for the state to control the railroad. That that is antithetical for our system. In 1896 she came shockingly close to becoming president of the United States. If it were not for the uptake and we prices he very well could have one. Why did the system almost produce probably the most radical president that it could have produced . And it was because of the atrocious conditions of the American Farmer and generally American Farmers treatment at the hands of the railroad was a general condition whereby the nations political economy the, the Political Economic development of industrialization was grossly unfair to the American Farmer who by the way about 1880 constituted the majority of the workforce. The majority were farmers. That speaks to the dangers. We can look in retrospect at this time. It was a good thing in the long run. Most american railroads in the 19th century were not built with government subsidy thousands of miles in the east with the government subsidy. Government started to subsidize. My take is that america would have been railroaded without any government subsidy. Went up on the northern route. Completely subsidized. Probably about faster. This massive amount of land. That may be a bad result. Let me follow up on a related issue. Certainly lots of places around the world. You dont pass that checkpoint or that border it facilitates transportation. Lots of councilmembers about all my another things get done. The fact that that system is probably better. This is not a generality. Other imperfections. When you in the book it doesnt in my judgment coming to nearly associate criticism their differences. Await all political coalitions. They finally collapse of the assassination. And i try to get to that. Whatever noble spirit purposes exist. Three up into over. Frederick bussey asked the law. Ponder how the law can be misused. In terms of monetary unit usery. The wealth of the laboring class. The corporations and politicians and financial interests. The most precious aspects of life. I have a lengthy section on Andrew Jackson to comes in general for fairly harsh treatment deservedly so in my estimation. When i this is the 2nd book i have written and i find that i have a certain historical character opinion when i go into a book and when i come out it is interesting see how they have changed. Jackson has plummeted to about as low as any can plummet. The currency is an issue that i elected not to i was very strategic and looking at picking the issues which is not to say that currency does not fit into the hypothesis. It was just that i i have limited space and wanted to be strategic in my selection so that the chapters can be grounded on the chapters i tried to find consensus views of the facts. I felt like regulation of the currency is something where theyre is such deep division between people that theyre was not Common Ground from which i could make an argument. One benefit of the book, theyre are many issues. Again, the decor is one of those and i find it one of the fascinating episodes in american history. I encourage jacksons veto message one of the powerful arguments against privilege. I see jackson as next. The trail of tears and his rejection of the Supreme Court decision in that regard. One of the worst episodes in american history. So he is quite a mixed bag. To me there are some discussions. Not a lot. I do think some of the economics are a little off but that is a topic you are going to pursue in the future. I would encourage people to do some research into that area in general. The woman on the island of the barrier. Five. Meredith mcgehee with the Campaign Legal center. You touched just at the end theyre about solutions and not surprisingly well we may disagree on many other areas this notion of the corruption that is inherent in special interest in washington notwithstanding michener, claim that theyre is know such thing as special interest. I would be more interested in hearing you speak more about the role that you think money and politics plays in the corruption however you want to characterize it. Some of us not only influence the outcome of elections but obviously along with lobbying and others the policies that get made. The end of the book is sort of a call for a bipartisan cross Ideological Coalition theyre are areas of agreement. I find myself agreeing a lot when i was i was writing, especially the last chapter with ralph nader. Recognize that it was a a problem. Put it right next to peter lawson. They disagree on more things but on that one they do agree and i i dont think its deniable the specialinterest money is a problem. Because of the limitations inherent i think it has to be the small end of the wedge. And it is sort of maybe a better metaphor to say it would be the foundation of what has become a pervasive transactional relationship whereby you have campaign contributions, statements of public support lobbying and providing partial information to legislators and face policy and Political Uncertainty in dealing with the questions that they have to deal with and on top of that you have the revolving door which is basically a way to subsidize legislators to make relatively little money. Your average american would say, come on, they make 200,000 a year but if you compare them in terms of social status they are grossly underpaid. In marketbased there is only 435 of them. They should be able to negotiate a better a better wage. What happens is they take that salary but no when they leave office they have a nice thing coming to them. I deal with that because it is interesting to me because it happened as a product a product of the progressive reforms during the 1st half of the 20th century. They did away with the old corrupt style of doing business which was the party machine. A lot of conservatives complain to me about the 17th amendment and often times depending upon the type of mood i we will he wear them or say you dont understand how bad it was before the 17th amendment was passed because it was a disaster. If you look at the cover of the book, the person at the top years Nelson Aldrich whom Lincoln Steffens called the head of it all. The head of this vast alliance between corporate interest and the political barons that controlled the senate and two in turn controlled State Government, it is one reason why we never got any sort of sensible tariff reform until Woodrow Wilson became president for better or worse on that. The. Is that this regime was undone and in this current regime came up in its place. Relatively knew. It is about 50 or 60 years old. It is not as badly as the old regime. The old regime was grubby. He found them in 1909 and them in his pocket and to 1912 the executives standard oil and the politicians, and the politicians were like, i need money and the executives were like, okay. No problem. And if you get a chance please kill this reform. Nowadays we dont have any of that. Everything that. Everything is couched in a legalistic veneer with plausible deniability. I refer you to counsel. I dont recall that. The result is the same. In the Campaign Finance system as it exists, the foundation of it. It has been at least a decade. Now i also know one of the fathers of the Federal Reserve system. The question i have, and this is one of the things i i struggle with in the book. Part of the suggestion is this maybe what i we will characterize as a marriage between progressives and libertarians that break off from separate parties and you use the example of Grover Cleveland as is someone who is able to do that. At least in theory. Know president has been perfect. Exactly. To me i think someone who tries to build these coalitions on a regular basis, it often comes down to where you think the actual source of corruption is. This government basically creating runs which to extort and then redistribute, or is this business corrupted . You know and again it is probably a little bit of both but i do think that purposefully you skip around that issue in the book. I ask you where to wish you see as the predominant source of this. Im not sure that it matters for the sake of an alliance. Alliance. Do you treat the underlying malady or the symptoms . We get a little relief from treating the symptoms. I think it matters in the sense of to me if we believe the problem is that government essentially creates pseudo monopolies by restricting market entry and the answer is not less just regulated more. Whats not hand out special privileges. Lets have competition and open market. I. Out that that seems to be the solution at the state level in the early 18 hundreds. Well, you no, i wrote the book. The the book was meant as a diagnosis rather than a cure and so the final concluding section is just sort of a suggestion pointing toward a cure. Like i said, the peace i have is just stuff that i think is more salable. And i say all that, i dont disagree with anything that you said but but i think as a practical i wanted to be practical. Excuse me. I cannot help recall on the question of money and politics the name of another book the fallacies of campaignfinance reform which takes a slightly different view of these matters. I would also mention that we should keep in mind the people engaged in the practice as documented in this book will be the ones who write federal campaignfinance regulation. With that. Way for a microphone. I am convinced. Thank you. To publicprivate partnerships from Building Infrastructure produce factions that threaten minnesota in and local government . Well i think the answer is yes. I think the short answer is yes. The long answer, i we will give you an example. I mentioned in my previous question about how grubby the 19th century was. I have to admit that i i often find the scrubbing is charming in a way. The devious characters, i i found some sort of refreshing for the frankness and one of the more sort of and also for there overthetop quality as well there is just something to the. I have this. In the preface where i talk i talk about matt clay who actually was born near where i live. And so he is all before community. Are you investing . Are you speculating . Yes, i am and i we will i we will continue to do so and theres nothing you can do about it. A bit of a classic archetype, the ideal of that kind of character was Simon Cameron the originator of the pennsylvania political machine that dominated from basically the civil war until the Great Depression and this guy was such a snake but so good at politics that lincoln and hired him as a secretary of defense and shortly had to fire him because he was so overthetop in his corruption and yet it did not stop him a decade later he was in control of the entire state. How did he manage such a feat . He was so wealthy. Why was he wealthy . He was a newspaperman in the 1830s and pennsylvania. The newspapers in the 1830s were partisan. Todays papers are partisan, too. They were just openly partisan. He became a republican, but when he became a republican, but when they started handing out charters for this and that he transitioned seamlessly from being a newspaperman to a businessman and made a vast fortune. You know, i cite all all of the various corporations that he was in charge of. It was ridiculous how many things he controlled. And cameron is the perfect illustration. Yes. Top franchise granting as a pathway to corruption. Creating a political machine that would only be brought down by the Great Depression you could have a purely private. You can have the government, oldfashioned contracting or you could theyre has been development of the last couple of decades. The capitol beltway in washington. Three quarters of that virginia kicked in the rest. To widen the beltway in virginia either you could do oldfashioned contracting ppp which is sort of halfway privatization for the private sector kicks in some in the government kicks in some. You can get corruption and both of those ways. Before ppp arose in recent decades it was oldfashioned Government Contracting and there was often corruption, who got the contract. A knew way of doing Government Contracting where some of the risk is handed to the private sector. There can be lots of problems, but there can be lots of problems and an oldfashioned government contract as well. So it is not a pure black and white. They are interesting because there are a lot of folks on the left against them. There are also a number of conservative groups against them as well. And i dont think it is a pure black and white kind of answer. The risk. Well, in the capitol beltway and virginia the partner, the private partnership took a lot of the risk. If the revenues from the traffic that they projected does not come through they take a hit. They make more profit if they can maximize the flow on the highway and keep the operating and Maintenance Cost down. That is not true. Yes. Powerbook today has been a republic know more, and i would i would like to thank its author for coming hear today. I would also like to thank my colleagues who once again have reminded me that it is a good thing to have your colleagues. I would like to thank you all for coming. Now we are going to go to lunch. Lunch we will be held on the 2nd level. Go up the staircase, the George M Yeager conference center. Restrooms are yeager conference center. Restrooms on the 2nd floor. Just look for the yellow wall excuse me, me, the yellow wall. Thank you very much. [applause] behindthescenes pictures and video, author information and to talk directly with offers dialogue program. Here is a look at the current bestselling nonfiction books according to the washington post