In DC Confidential, New York Law School professor David Schoenbrod describes how Congress degenerated from a responsible legislature, one that took responsibility for difficult decisions, to a body continually looking to dodge blame. The book is an absolute delight. Schoenbrod begins with an arresting story about, of all things, the federal Highway Trust fund. In 2014, the Fund was headed towards depletion, raising the prospect that federal highway construction would grind to a halt. No one wanted that. Besides the delays in repairing and constructing new highways, the road industry would lose a driver of profits and thousands of workers would be unemployed. Members of Congress had to be worried that labor, management, and the public would punish them.
Happily, Congress found $10.8 billion to replenish the fund. This sounds like a success story, one in which virtuous legislators “rolled up their sleeves” and advanced the public interest. But in truth, Congress used a clever cheat, pulling an ace from up its sleeve.
Congress had honest options. It might have raised the gasoline tax, but that would have angered those forced to pay more at the pump. Congress might have issued more debt to refill the fund, but doing so would have generated an increase in the deficit, something legislators are typically (but not always) loath to do. Congress’s actual solution exhibited ingenuity worthy of a genius inventor and a guile that would have made the most adept grifters blush: It allowed firms to contribute less to the pension funds they administer on behalf of their employees. This sleight of hand raised overall corporate tax receipts, funds that were used to replenish the highway fund. No tax increase, no deficit increase, just more federal revenue.
How did authorizing firms to deposit less money into their employee pensions increase tax revenue? When companies happily exercised their newfound authority to put fewer funds into their employees’ pensions, that move decreased their expenses and thereby yielded higher taxable profits, which, in turn, generated greater tax revenue. So, by permitting companies to decrease their current expenses, Congress “grew” corporate tax revenues.
Was everybody a winner? No. Though their taxes didn’t go up immediately, taxpayers were the clear losers. The government guarantees private pensions through the Pension Benefit Guaranty Corporation (PBGC). The latter charges premiums to companies for the insurance it provides. But private pensions were (and are) underfunded, and the PBGC undercharges for its pension insurance. Hence the Highway Trust Fund fix solved one problem only by exacerbating another. When private companies go bust (as many inevitably will) there will be fewer funds in their pension plans—meaning that taxpayers, as guarantors, will have to pony up the funds. Welcome to the beltway of smoke and mirrors.
These sorts of shenanigans are the targets of DC Confidential, and it hits the bull’s-eye every time.
Schoenbrod identifies five “tricks.”
The “money trick” involves supplying goodies to today’s electorate and slyly handing the bill to posterity. When Congress gives us tax cuts or spending increases, some members of the public feel as if they are getting something for nothing. But there is no free lunch. The “debt guarantee trick” involves the federal government guaranteeing the debts of entities, but not charging enough to cover the costs of insurance. The trick results in inflated profits for corporations, with taxpayers making up the inevitable shortfalls. The “mandate trick” consists of forcing states to handle federal tasks without supplying funds to cover the expenses. The “regulation trick” entails passing statutes that announce impressive goals, but leave the difficult details to the alphabet soup of federal agencies. That way, Congress gets the credit for, say, halting pollution while evading blame for the costs associated with that lofty objective.
The final scheme is the “war trick.” Congress takes credit for successful wars, with members marching in parades and basking in reflected military glory. But members successfully deflect blame when wars go sideways, reproaching the president for his adventures. Victories have 535 parents; the president has sole custody of defeats.
Schoenbrod’s solution: America needs an Honest Deal Act.
- First, Congress would have to deliver a biennial letter to the American people about the deficit and the debt. The letter would draw attention to the proverbial mountain of debt.
- Second, a debt guarantee commission would consider whether to continue existing debt guarantees and the rates the government ought to charge for them. Congress would be forced to vote on whether to end debt guarantees and raise premiums.
- Third, legislators could raise “points of order” when Congress attempts to impose unfunded mandates on the states, making it more difficult to impose such commands.
- Fourth, Congress would be forced to vote on major ($100 million-plus) rulemakings. Agencies could propose these rules, but Congress would have to pass them if they were to become effective.
- Fifth, the act would automatically halt funding for wars started by a president unless Congress subsequently authorized those wars. The president would have a free hand for short conflicts, while longer wars would necessitate congressional buy-in.
A theme is obvious: Congress must act, rather than delegating difficult choices to bureaucrats. This is in keeping with an earlier volume by Schoenbrod, Power Without Responsibility: How Congress Abuses the People Through Delegation (1993), a learned treatment of congressional delegation to agencies. One thread linking both these books is that when Congress delegates significant power, it shirks its duties and evades blame for the inevitable tradeoffs. Schoenbrod’s fixes are meant to ensure that Congress, and not the agencies, makes the tough decisions.
Still there are differences across these solutions. Schoenbrod’s fix for the money trick does not attempt to solve the debt and deficit dilemmas. It merely requires disclosure of facts. The thought must be that if the people are made aware of the money trick, they will no longer permit Congress to borrow from their children and grandchildren. Yet we live in an age of disclosure and are drowning in boilerplate. Anyone applying for a credit card, purchasing software, or visiting the office kitchen is bombarded with info about fees, terms, and labor rights. Will a form letter with some fiscal figures cause voters to question fiscal policy?
Count me a skeptic. Recent research by professors Omri Ben-Shahar and Carl E. Schneider—More Than You Wanted to Know: The Failure of Mandated Disclosure (2014)—casts doubt on the utility of disclosure: Sometimes we can know the good, and yet not pursue it. This might especially be true for debt. I’m reminded of J. Wellington Wimpy’s refrain, often uttered to Popeye: “I will gladly pay you Tuesday for a hamburger today.”
Contrast Schoenbrod’s disclosure solution for the money trick with the different solutions for debt guarantees and regulations. For the latter tricks, Schoenbrod harnesses expertise to propose solutions. Experts outside Congress may recommend disestablishing debt guarantees, raising insurance premiums, and enacting regulations, with Congress making the ultimate decisions. Why not similarly establish a commission for the deficit? It could cull the budget for wasteful spending and ask Congress to eliminate those items. Admittedly, Congress does not want to take these votes. But if Congress established a Deficit Closing Commission it might feel pressured, under the right circumstances, to consider the commission’s proposals on an up-or-down basis.
As terrific as DC Confidential is, there will be some who question its focus. For instance, the unfunded mandate trick seems the least objectionable of the five tricks. Indeed, one might say that the real trick of fiscal federalism involves the states keeping their taxes low. States impose relatively small tax burdens, but because the federal government funnels billions to the states, the states actually spend quite a bit more money than their tax revenues suggest.
Shouldn’t states raise their own taxes to fund their own budgets? Moreover, if Congress is to share revenue, why not have an honest redistribution? Stop funding the rich states. Channel money directly to the poor states and avoid the layer of bureaucracy that extracts funds as it administers a host of “cooperative federalism” programs. To be clear, federalism is a bedrock constitutional principle, and the states play a vital checking function. Yet federalism is enervated when states become fat at the federal trough for the states become akin to federal dependencies. In any event, the general point is that there are more significant instances of federal overreach than unfunded mandates.
There are notable omissions as well. Those on the left will be disappointed that Schoenbrod suggests no solution to what they might label the “representation trick,” in which members of Congress claim to represent the people but, in fact, further the interests of the moneyed class. Those on the right may wonder about another unfunded mandate: the concentrated burdens of regulations. Essentially, the government imposes regulations, some of which are justified on a cost-benefit basis. But the winners (the general public) do not compensate the losers (the regulated parties). In the case of private real property, we require compensation when that property is taken. If a regulation imposes $150 million on private enterprise and benefits the public by $350 million, the public ought to compensate the firms bearing the costs.
Of course, no book can be eminently readable and propose solutions to all that afflicts our federal government. David Schoenbrod must be lauded for revealing various tricks of the governmental trade. It is now up to us to end the confidence game.
Saikrishna Bangalore Prakash, James Monroe distinguished professor of law and senior fellow at the Miller Center of Public Affairs at the University of Virginia, is the author of Imperial from the Beginning: The Constitution of the Original Executive.
