Business Strategy for an Era of Political Change

Business Strategy for an Era of Political Change Business Strategy for an Era of Political Change CHARLES S. MACK For...

Author: Charles S. Mack

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Business Strategy for an Era of Political Change

Business Strategy for an Era of Political Change CHARLES S. MACK Foreword by Gregory S. Casey

QUORUM BOOKS Westport, Connecticut • London

Library of Congress Cataloging-in-Publication Data Mack, Charles S. Business strategy for an era of political change / Charles S. Mack ; foreword by Gregory S. Casey. p. cm. Includes bibliographical references and index. ISBN 1–56720–240–3 (alk. paper) 1. Business and politics—United States. I. Title. JK467.M23 2001 322'.3'0973—dc21 2001019185 British Library Cataloguing in Publication Data is available. Copyright 2001 by Charles S. Mack All rights reserved. No portion of this book may be reproduced, by any process or technique, without the express written consent of the publisher. Library of Congress Catalog Card Number: 2001019185 ISBN: 1–56720–240–3 First published in 2001 Quorum Books, 88 Post Road West, Westport, CT 06881 An imprint of Greenwood Publishing Group, Inc. www.quorumbooks.com Printed in the United States of America TM

The paper used in this book complies with the Permanent Paper Standard issued by the National Information Standards Organization (Z39.48–1984). 10 9 8 7 6 5 4 3 2 1

Behind every successful young attorney there lurks a proud (and occasionally astonished) parent. In this case the pride is doubled, because the attorney is wed to a successful and dedicated practitioner of the citizens’ profession, elective politics. So, this book is for “little Alice”—aka Alice McQuaid— for her husband, Rick—and, of course, for the three young McQuaids, Amanda, Bryan, and Cassie.

Contents Foreword by Gregory S. Casey Acknowledgments 1.

xi xvii

Introduction: The Currents of Change

1

The Acceleration of Change The Evolution of American Politics

4 6

2.

Business and Government in the Global Economy The Development of Globalization The Quandary of Globalism versus Parochialism Parochialism and Regulation

13 16 22 26

3.

The America of 2025

35

Population Changes Technology The Economy The International Dimension Political and Social Implications

37 38 40 44 46

The Future of Business–Government Relations: Three Scenarios of 2025 The Populist Democracy The Libertarian Democracy

57 57 60

4.

viii

5.

6.

7.

8.

9.

10.

Contents

The Competitive Democracy Implications of the Scenarios

64 68

Business and the Political Parties Parties and Political Loyalties

69 70

Ideological Polarization

72

The Party of Business?

75

The Preconditions for Legislative Success

82

The Decline and Fall of the Political Parties

89

The Fatal Factors

92

The Wasting Assets

97

The Price of Reform

107

Tomorrow’s Political Powers

113

The Instruments of Politics

121

Politics and Legislation

124

Money and Politics

129

Political Fund-Raising Activities

133

Active Political Participation Programs

142

A Model Corporate and Association Program

145

Issue Advocacy

157

Issue Advocacy in Lobbying

158

Issue Advocacy as a Political Instrument

164

Issue Advocacy and the Law

165

Issue Advocacy by Interest Groups

169

The Internet as a Political Instrument

178

Long-Term Issue Advocacy Applications

183

International Trade

185

National Savings and Capital Formation

197

Social Security and Immigration

205

Campaign Finance

213

Other Issues

222

Conclusion: The Politics of the Future

227

The Impact on the Parties

229

The Role of Major Interest Groups

231

The Business Political Role

233

Contents

What Happens Now? The Reformers Ride Again The Strategic Course

ix

235 236 239

Afterword

243

Selected Readings

245

Index

249

Foreword Unlike lawyers, doctors, dentists, engineers, accountants, and other professionals, those of us who do politics as a profession rarely get the chance to make definitive statements that are accepted as facts. Regarding politics, everyone has an opinion of which they are fully convinced. Few dentists have to argue with their patients about the need for a root canal. Like other professions, however, political practitioners do indeed “know” more than those who only just dabble socially. It is often tough to convince others that some of what we offer is indeed reality. Charley Mack’s work is a perceptive and scholarly review of some of those realities, targeted to enlightened business leaders who already understand the most basic of truths: American business needs to be involved in the formation of public policy because the largest single expense for business is the cost of government in its many forms. The principal value of Charley’s book to the political discourse of our time is his willingness to say that which needs to be said to American business leaders in an instructive and readable manner. It is as thorough a discussion of the current political situation for business and the possible future permutations as I have read. I don’t agree entirely with his method of presentation, nor all the individual conclusions. I’m not particularly fond of the scenarios of America in 2025 used in Chapter 2. Still, he presents a compelling case that change is coming and that business can either shape it or be shaped by it. That message can’t be repeated too often. The end result is a clear message that American business must reassess its approach to political involvement or it will continue to spend more and get less. With his book, Charley adds perspective regarding the changes going

xii

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on in America and its politics, the impact they will have on the future of business, and what business can and must do to accommodate those changes. From my perspective, only a few in business today truly understand the scope of these changes, and even fewer have a plan for dealing with them. While that is not a negative reflection on the modern CEO’s desire to focus on the core business operations that make him or her successful in the near term, it is the recognition that most CEOs tend to relegate political involvement to the category of “necessary evil.” I’ve had countless discussions with business leaders who seem bewildered by my suggestion that politics and grassroots be provided for in their company’s strategic plan. Charley bases his book on the logical belief that those who make public policy have a decisive impact on business. Grasping that reality is essential. That logically leads to a second reality, that business needs to effectively involve itself in issue communication and the election of those policy makers because, in the end, it is the election process that ultimately decides what the public policies are going to be. As a result, for American business to survive and prosper in a system originally designed for it to do so, business must be successful at winning elections. This all seems very logical. For American business, it is critical. So why write a book about it? The answer to that question is the substance of the text. Charley blends the responsibility of business to represent its interests into the reality of our republican system of government. In essence, in our system of government, representatives who make public policy are elected to represent the interests of the governed. If business doesn’t effectively participate in communicating its interests, other interest groups will fill the void. Fortunately, the bizarre nature of the elections of 2000 raised the American consciousness of the dynamics of the political process. People have a renewed awareness that we are indeed a nation of competing personal, professional, and political interests. That makes this text particularly appropriate. As Charley lays out, America’s political climate is in a period of profound change brought about by demographic, economic, and technological evolution. Let me bolster his case with some simplified observations of my own. Late in the 19th century and into the 20th, this nation moved from a regional, agrarian economy to a national, industrial economy. The issues and demographics involved in these economies are considerably different. The Republicans emerged as the dominant party of the early 20th century because they mastered the politics of this new economic paradigm. That changed with the coming of the Great Depression. The Democrats roared back to political prominence because they mas-

Foreword

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tered the politics of President Franklin Roosevelt’s programs of social welfare and direct government economic intervention. Much of that remains the staple of liberal politics today, enhanced over the years by various forms of social contracts and the Great Society. Near the end of the 20th century through today, the national, industrial economy began to give way to a new information-based, international economy. As with past economic paradigm shifts, the issues, demographics, and resulting politics of this new economy are a change from the past, and neither political party has mastered its complexities. Just a few short years ago, it was easy to determine a politician’s underlying economic philosophy by his or her rhetoric on balanced federal budgets, regulation reform, tax reform, welfare reform, free trade, and windfall profits. Today, neither the carefully crafted rhetoric of the last two decades nor the issues to which they relate seem to have the same relevance to a voting public that has already moved on to the next set of concerns. The 2000 campaign reflected that new reality. The perennial concern for social and national security had their places in this campaign as they always do. But the ability to discern which candidates were decidedly liberal or conservative became more difficult. Beyond the issues of integrity and style, this was generally waged as a tactical rather than a strategic campaign. Even the debate on tax reform wasn’t if, but how much and for whom, and the ever-present wedge of rich vs. poor didn’t carry the punch it once did. The emerging international economy, the rise of “new Democrats” brought on by Bill Clinton, his pronouncement that the “era of big government is over,” the unanimity of support for fiscal solvency, and the reform of basic government and the subtle rift between social and fiscal conservatism have made the differences between traditional ideologies, economic philosophies, and the political parties themselves a lot more difficult for the general voting public to understand. It is not as easy as listening to the rhetoric any more. Charley discusses these changes. Esoteric discussions of these issues by themselves have little relevance until put into the broader perspective of their impact on the modern election process. For business to understand that a fundamental change is occurring in issues and political rhetoric is only the beginning. The manner in which these messages are being driven, by whom, to whom, and with what impact on the modern, dual-income, heavily invested, day-trading family is at the heart of his message. It makes the entire book relevant. Charley also does a good job of discussing the changing and declining role of the political parties, while testifying to the fact that they are still needed. In a related statement, Jim Wilkerson of the National Republican Congressional Committee recently said, “We did a poll and there is declining party unity.” USA Today said, “Fewer voters identify themselves as members of a political party.” While party structures will—and

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Foreword

should—continue to have a prominent role in American politics, they may not have the same preeminent role they once had, particularly with regard to voter motivation and turnout. That could clearly be seen in the 2000 elections, where voter and grassroots programs driven by interest groups seemed to grow in prominence. Charley touches on other elements in our modern society that are altering the conduct of politics, one of which is the Internet. In that regard, it is important to point out that the Internet’s rise in prominence is relative to the decline in effectiveness of other methods of message delivery. When I did my first campaign in 1980, I knew that 60 percent of American households regularly watched the evening television news and less than 1 percent owned personal computers. The Internet was still some vague concept. That made the purchase of television time at the news hour an absolute imperative. By 1996, less than 25 percent of American households regularly watched the evening news. By November of 2000, twice as many American households owned personal computers as watched television network news, and the vast majority of those users were surfing the net. People now have “personal” conversations via a computer terminal with people they have never met. “One-on-one” communications once restricted to phone banks and campaign volunteers can now be conducted by e-mail through well-devised intranets. For those running campaigns or investing in message delivery, the new dynamics should be pretty clear. The electronic box might serve as an equalizer in contests where one side has an ample volunteer base and the other a pervasive electronic network. While I was the Sergeant at Arms of the U.S. Senate, the delivery of mail to and from senators’ offices fell under my purview. During my tenure, “mail” went from predominantly paper to predominantly electronic! The movement was so vast, we were simply unable to retool our technology fast enough to accommodate this new form of conversation. Charley does make the single most important point regarding technology: The old ways of pursuing political message delivery in the modern era are neither a sufficient nor an effective use of new opportunities. A theme throughout is that business is at a crossroads in the conduct of its political involvement. I agree. There is more to all this than just change. There are forces at play in American politics that are actually reducing the clout of business in determining public policy outcomes, some self-imposed. He makes a series of statements that frame the parameters of that decline. In Chapter 6 he opines that “organizations with ample financial resources but no grassroots strength will play at best a secondary role” in the future of politics; and yet, to a great degree, American business has opted out of grassroots in preference to gaining its political clout through hard dollar contributions to candidates and soft money contributions to

Foreword

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the political parties. The net result of that course of action is everincreasing costs for business political participation with decreasing results. It would be all too easy and erroneous to simply view this as just another aspect of the ongoing public discussion of campaign finance reform. Charley offers a significant observation. “It is the curse of reformers that they seem perpetually incapable of learning the principle of unintended consequences.” No amount of “reform” will or should ever silence the voices or eliminate the need for interests in a republic to make their wishes known to policy makers and the public. That is a concept older than the republic itself. Let me make one point very clear. Adequate financial resources remain the single most important part of winning elections. Having said that, however, in the age of relative financial parity between the parties, it is the other elements of political activity that make the decisive difference in close elections. The 2000 election was the second consecutive election cycle in which the control of power in American politics was decided by razor-thin margins. There is nothing that would lead us to conclude that that won’t be the case for the foreseeable future. Therefore, an increased emphasis on the non-financial tools of politics must be pursued. Regarding decisions on whom to lavish political contributions, those who disregard long-term issue considerations in deference to personality or congressional rank only contribute to their own demise. Lobbying is no antidote for policy makers antagonistic to the basic premises of free enterprise from the start. Enough said. In Chapter 6, Charley also observes, “The injection of soft money has helped rejuvenate the parties, but it is a therapy with a short half life.” Again, I agree. Soft dollar contributions are a relatively new phenomenon. Yet, the amount of soft money raised in 2000 was up 71 percent over 1996 while partisan participation actually declined. Neither party emerged with a soft dollar advantage in 2000. While both major parties enjoyed the increased financial resources, the essence of motivating voters has moved away from parties to the interest groups with whom the American voters find more affinity. In addition, these interest groups have the increased ability to communicate with voters at less cost. Business spent approximately $400 million in 2000, over $120 million more than the previous cycle, with fewer clear victories. Conversely, the unions spent about the same in 2000 as they spent in 1998 in dollars reported to the Federal Election Commission, about one-seventh what business spent. The union percentage of the total vote rose from 23 percent in 1998 to 27 percent in 2000 in congressional elections. This is a reflection not so much on what labor did, but what business failed to do. I subscribe to the school of thought that the success of the union voter turnout model results more from a lack of credible competition in the workplace than the compelling nature of the union message. Obviously, the unions disa-

xvi

Foreword

gree. In Chapter 3, Charley asks the question, “If there is little connection between where people work, where they engage in commercial activity, and where they live, what is the role of government?” This was said in reference to a different issue, but I think it has relevance here as well. Charley peppers the entire book with discussions of the many political involvement alternatives available to business. What may be missing in his comments is the evidence that the alternatives he discusses actually work. In a pre-election poll commissioned by BIPAC, we found some astonishing results. When workers were asked if they had seen, read, or heard anything from unions or their employers on issues or politics this election, 17 percent said they had heard from unions compared to only 7 percent from their employers. However, when asked who was the most credible source, 17 percent said labor, 27 percent said the political parties (both), and 23 percent said their employers. It is obvious from these results that despite a nearly three-to-one advantage in union message delivery, employers still held a significant credibility advantage. This advantage generally goes unutilized. Where it has been utilized, business holds its own. Charley discusses both the law and real-world applications of various political techniques. Knowing what tools are available isn’t nearly as important as knowing how to actually implement them. That has been one of business’s biggest obstacles over the last several election cycles. However, several prominent national business associations including the National Association of Manufacturers, the American Chemistry Council, the National Association of Wholesale Distributors, the Food Marketing Institute, the Associated General Contractors, the National Federation of Independent Business, and others have rediscovered the value of grassroots in both their lobbying efforts and their political activities. These groups are leading in the effort to reengage business in a dialogue with those that have the most at stake in continuing prosperity—the employees. Although many businesses and business groups continue to pursue their political activities in much the same way they always have, preferring financial contributions over effort, Charley’s book provides ample justification for every business to reevaluate its political activity, and is an insightful primer on how to get started. After more than 20 years as a practicing political operative, I discovered plenty of new material in this book that I plan to use. If but one major U.S. corporation decides to alter its approach as a result of this book, I will have considered it well worth the effort and one more step in the journey to bring American business back to its rightful role in the American elections process. The Honorable Gregory S. Casey President and CEO, Business-Industry Political Action Committee of America (BIPAC)

Acknowledgments This is the fourth in a series of books on lobbying, politics, business associations, and business–government relations overall. Each book since the first in 1989 has generated ideas that led to the next ones. So, in one sense, the book in your hands is an extension of work that went into Business, Politics, and the Practice of Government Relations. In a broader sense, however, the concepts on which this book is built are the product of four decades of experience in politics, business, and government relations, and particularly of my six years as president of the Business–Industry Political Action Committee. Its members and its talented staff contributed to the book’s development in ways they never realized. Several people contributed their personal knowledge and experience in reviewing drafts of the manuscript. Harry S. Flemming, the CEO of Adventor Corporation, shared valuable insights based on his extensive experience in both business and politics. Dr. Lucy Huffman provided helpful comments on the section discussing national savings and capital formation. I am grateful to each of them. I particularly want to express my deep appreciation to Christina L. Kendall for her encouragement and untiring research support. The book could not have been written without her. Writing is a form of personal and professional fulfillment for me. Over the years, two coaches have done what they could to get me to think more clearly about what I wanted to say and, within the limits of the raw material, to make me a better writer. The first is my wife, Alice Barrett Mack, whose advice and criticisms have improved every page. For her love, constant encouragement, and strong support I am eternally grateful. The second is Eric Valentine of Quorum Books, who has edited all four

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of my books with sternness, wisdom, wit, and irrepressible humor. Tutor and taskmaster, he has helped me convert often inchoate ideas into books that both of us hope justify the reader’s investment of money and time. It has been a joy to work with him—well, most of the time. I would acquit all these intellectual benefactors of any responsibility for the book’s flaws and faults, if it had any. (Oh, if that were only true!)


CHAPTER 1

Introduction: The Currents of Change Change is the process by which the future invades our lives. —Alvin Toffler

Once upon a time, there was a young lad so fascinated by politics that he could rattle off election returns and the identities of candidates the way normal kids spouted baseball statistics and team lineups. That was more than half a century ago, and politics still holds the fascination of the adult the boy grew up to be. Boy and man, the author understands very well how historian Fernand Braudel felt when he opened his monumental study of “the sea in the middle of the world” with the words, “I have loved the Mediterranean with a passion.”1 But unlike Braudel’s work, this book is not a celebration of my passion’s past so much as an exploration of its future; and like a lover who beholds a once-great beauty slowly succumb to the ravages of time, I retain the ardor of my youth even as I witness the deterioration of American politics into something very different than it has been. Like so many other institutions and processes in our culture, politics is undergoing significant changes. The accelerating pace of change will be a hallmark of 21st-century society. “The wind of change” will blow through our culture and its institutions with gale-like force in the coming decades, and few institutions will receive its gusts and tempests with greater severity than the structures of political competition. It is difficult to say that these changes will be for the better, but that does not lessen their probability. So, this book is about the future of politics and the politics of the future.

2


It is therefore also about the future of business, though not in the sense of an economic forecast nor the revealed truth of the business gurus. Much as some might wish it otherwise, public policy and politics are deeply intertwined. What affects the one affects the other. Ours is an economy of competitive markets, but hardly one characterized by laissez-faire policies. The policies of government deeply affect what business does and how it does it, and politics, because it permeates government, also affects the conduct and operations of America’s business enterprises, the shareholders who own them, the executives who direct and manage them, and the people who work for them. Politics has always been a significant influence on the business climate in the United States, more so perhaps than many business people have cared to accept. Politics is the process through which the policies and actions of government are made. It is the process that determines who is to set those policies and take those actions. It is the process that transforms popular concerns into public issues, and eventually into public policy. Politics in the American democracy is the bridge that connects the people, or at least the voters, with their government. Many Americans regard politics as a shabby process, one that should play no part in the formation of public policy. The only standard for governmental action, they appear to believe, is the public good, the public interest. The trouble with this thinking is, first, that the concept of the public interest encompasses all the special and partisan interests in American society and, second, that politics is the primary way all those subsidiary interests become translated into governmental decision making. There are no immaculate conceptions in the formation of public policy. The entire process is inescapably political by its very nature. Among the issues influenced by politics are those that profoundly affect the nation’s businesses, individually and collectively. Business has utilized the various techniques of lobbying and government relations to influence the course of many legislative debates, often to great effect. Political factors, however, shape government policy even more powerfully than lobbying. Indeed, much lobbying is really about politics. While both are means through which business executives can influence how legislation and regulation impact the fortunes of their companies, it is politics that is the greater force. But the politics of the next quarter-century will be quite different from the politics of the past. Trends and events are in play that will reshape the entire political environment. They will therefore reshape the way federal and state governments make policy, and thereby profoundly affect the nation’s economic enterprises. American politics has always been conducted through the political parties. The principal theme of this book is that the parties are in a state of terminal decline, for reasons that are the product of political and tech-


3

nological developments over the last half-century. The consequences of this decline have vast significance, for both business and society. As the parties atrophy, they are being replaced by the great interest groups. These interests will supplant the parties in the electoral process and be significant molders of public opinion. Business will surely be one of many such forces, but whether it will be among the most powerful is an open question. Achieving that status and role requires a deeper involvement in traditional political techniques than most companies have heretofore been willing to entertain. More than that, it requires utilization of the most powerful political tool to emerge since the development of television. That tool is issue advocacy, the subject of a substantial part of this book. Issue advocacy is already used extensively and increasingly to influence both legislative and electoral outcomes. Business has the resources and capability to apply this communications technique in novel ways that can reshape public opinion for decades to come. These emerging changes occur in several contexts. One is economic, the vast process called globalization. Study after study forecasts exponential growth of an economy that already reaches well beyond traditional national and regional markets. Yet, the enterprises comprising the global economy continue to be regulated by governments whose very nature is defined by fixed geographic borders. The interrelationship of business and government will necessarily be quite different in the next few decades than it has been. What that relationship will be, of course, will vary by country. Our focus in this book is on the factors changing the political and governmental relationship of companies operating in the United States—which is a rather different group of businesses than “American-owned” companies, since many of the firms doing business in the United States today are headquartered in other countries. Time is the other context in which political change will occur. Time is unvarying. Change is not. Throughout human recorded history, there have been periods of rapid change, other eras of slow change, and times of nearly total dormancy. Sometimes the events that trigger change are almost immediately apparent; other times they are recognized only in hindsight. The varying historical impacts of major religions provide an example. Christianity took several centuries to become a major social force, and only a few devout early believers foresaw the impact Jesus would have on Western civilization; Christianity’s political impacts took even longer to take hold. The growth of Buddhism in Asian cultures was even slower and subtler, but the explosion of Islam and its armies out of the nomadic desert and into Western Europe was an event no one could have missed and whose effects endure to this day. We live in one of those periods of extraordinarily rapid change. How time and change affect society, politics, and the economy is worth a little discussion.

4


THE ACCELERATION OF CHANGE Time and change are the constants of modern lives. Measured by clocks and calendars, time proceeds at its fixed and predictable pace. A week still has seven days, a century 100 years. Measured by the change it brings in our lives, however, time seems to be an accelerating force. A thousand years ago, the human cultures in which any of our ancestors lived were little different at their deaths than at their births, and probably not much different than the eras of their grandparents. Wars, plagues, and famines arrived and passed, almost predictably, but afterward life went on much as it had for centuries. That stability (or, perhaps, stasis) in Western society ended with the Renaissance and then the Reformation, and nothing has been the same since. Change began—social change, economic change, scientific and technological change, political change—and it has seemed to run at ever-faster rates with each new era. The fact of change has long been apparent, at least in hindsight, but its accelerating pace has been observed by those experiencing it only in recent decades. Alvin Toffler was perhaps the first to write about it, and that was only 30 years ago. Since then, there have been formulations like “Moore’s Law”—that the capability of information technology at a given price doubles every 18 months—that now seem to be, if anything, understated. Consider the relatively recent past: Two centuries ago, the Industrial Revolution had not even begun, anesthesia had not been invented, and the principles of heredity were still undiscovered. One century ago, electricity and the combustion engine were just becoming prevalent. A mere quarter-century after that, airplanes had already been used in a world war and automobiles were filling streets and highways. Halfway through the 20th century, atomic power had been used to end a second major war and the use of massive computers relying on vacuum tube technology was growing, but the inventions that enabled computers to vastly multiply their functions while shrinking their size, the transistor and the silicon chip, still lay ahead. Twenty-five years ago, the electronic age was well established, but the first halting steps to develop personal computers and satellite communications were only just being taken. Ten years ago, the Internet was still only a system that linked academic and Defense Department computers. Five years ago, mobile telephones and palmtop computers, ubiquitous today, were clumsy and unreliable technologies. Just during the months that this book was being written, the first map of the human genome was completed, the number of planets identified in other solar systems began to increase exponentially, and scientists announced the discovery that perhaps the speed of light was not quite as absolute as Einstein had thought. Assuredly, between the time this man-


5

uscript is completed and the book’s publication, there will be other, equally historic revelations and innovations. The pace of changes has been nearly as extensive in economics, society, politics, and so many other aspects of civilization. One need be no older than middle age to recall the very different time “when air was clean and sex was dirty”; when it was considered impossible to have full employment without inflation; when political parties were still the driving engines of politics; when the Wall Street Journal was the only daily newspaper that gave serious coverage to business news; when Africa’s demographic dilemma was overpopulation and not a ravaging pandemic; when virtually all American children were born and raised in more-or-less permanent families comprising two married adults of opposite gender; when those children left school literate, numerate, and with the skills they needed to be productive workers; and when relatively few women could (or wanted to) aspire to careers outside the home. To be sure, accelerating change has left many elements of our lives untouched. We still dry ourselves with cotton towels after bathing with a plumbing system that has not changed in any fundamental way since its introduction in the 19th century. The technology of the flush toilet is essentially what it always has been. There may be many more television channels available today, but their intellectual fare remains the same wasteland. There is always still another crisis in the Middle East (or maybe just one more chapter in the same old one). American politics is still highly competitive and the legislative process still rotates around the next election, no matter how recent the last one. Flights from Los Angeles to New York or Tokyo are no shorter than they have been since the invention of the jet engine. The laws of supply and demand have not yet been repealed, and business executives are still obsessed with predicting the interest rate decisions of the Federal Reserve. A certain amount of stability and predictability is essential to sanity, but the fact is that there is less and less stability, and faster and faster change. Not all change is driven by technology, but much of it is—witness the effects on sexual mores and women’s rights brought about by the invention of “the pill”; or the sweeping impacts being wrought by the Internet, from new forms of retailing to the spread of pedophilia, from the rise of e-mail to the decline in personal privacy. “Revolutionary” is an inadequate descriptor when the revolutions seem to occur every month and promise to arrive weekly within only a few more, fast-moving years. Changes like these have pervasive political consequences. The rise of the religious right and social conservatism, and the gender gap that characterizes the different ways men and women (and single women versus married ones) vote in elections, have their roots in technological, economic, and therefore social change. Francis Fukuyama notes that “The breakdown of the nuclear family, reflected in rising divorce rates, illegiti-

6


macy and cohabitation in place of marriage, stems from two sources: the movement of women into the paid labor force, and the separation of sex from reproduction, thanks to birth control and abortion.”2 Another of those vast changes is globalization, a development barely underway as late as 1990. Within 30 years or less, the global economy will grow from one-fifth to four-fifths of aggregate worldwide gross domestic product—and global GDP itself is projected to rise from $28 trillion to over $90 trillion. Globalization, technology, business management innovations, and the productivity improvements they brought about have resulted in an economic expansion of unprecedented length. Low inflation coexists for the first time with low unemployment. Companies (not all of them of the “dot.com” sort) arise, make billions for their founders and investors, and are bought up or perish at dizzying speed. Yet, even as newspapers are filled with ads from companies begging for workers, the sidewalks remain filled with the homeless begging for quarters. THE EVOLUTION OF AMERICAN POLITICS Politics has also changed, though perhaps less radically, and some of the changes seem more apparent than real. The 1990s witnessed a shift from a Republican president and Democratic Congresses to a Democratic president and Republican Congresses—then, in 2000, to a narrowly elected Republican president and Congress—followed shortly by Democratic recapture of the Senate. In recent decades, many American voters have shifted away from straight-ticket voting to split-ticket voting to strategic voting—often deliberately opting for divided, and hence weaker government, out of distrust for government and politics. Indeed, some polls have shown a preference for divided government by a plurality of Americans. The same aversion to the political process, very different from the widespread faith in government as the solver of all public problems that persisted into the 1960s, has produced steadily declining voter turnout in election after election. Millions of Americans enthusiastically cheered on George W. Bush and Dick Cheney as their designated saviors of the future, just as millions of others put equally enthusiastic faith in Al Gore and Joe Lieberman; but the number of viewers watching the 2000 presidential debates was not much more than half the number who saw the 1960 Kennedy–Nixon debates, and more and more of today’s voters put what trust they still retain in individual candidates and fewer and fewer in the political parties that nominated them. These political phenomena have significant implications for business executives. They are rightly concerned about the actions of governments because what the public sector does affects the fortunes of companies to a far greater extent than any other single influence. As business enterprises


7

of all sizes become increasingly intertwined in the world economy, the kinds of interaction they have with government will necessarily change. Businesses whose customers or vendors are spread across several or many countries have quite different needs and interests than they did when their operations were wholly domestic. Those differences reflect themselves in new kinds of issues and in altered governmental relationships. What will not change is the inherently political nature of government. Recognizing and interacting with the political forces that shape governmental decision making in the new century is an ever more critical factor in business success. For those enterprises that intend to prevail in this new global era, lobbying will be as essential as ever to winning future battles in the arena of public policy. Lobbying by itself, however, is no longer sufficient. The reason is that lobbyists deal in the main with an established cast of characters, with the set of legislators who are already in place. Politics, on the other hand, is a craft that has the capability of changing the cast and bringing new actors onto the legislative stage. Assuring that legislative conflicts over future issues result in outcomes favorable to business requires the presence of two conditions. The first is the use of every legitimate means to assure the election of lawmakers favorable to business interests. The second is cultivation of a body of public opinion that understands and supports business positions on tomorrow’s issues. Issue advocacy adds a new dimension to politics and lobbying. It is a means of changing traditional political equations by reaching beyond elected lawmakers to influence the opinions on specific issues of the voters who choose those legislators, and in fact to affect voting decisions about who those legislators should be. Of course, it is not just business that can make use of this expanded form of politics to determine the outcome of the issues of tomorrow. The techniques of issue advocacy are available to many other interest groups and increasingly are being used by them, but business has the financial resources to apply this dramatic new communications device more decisively than anyone else. In this new century, to a far greater extent than the one recently laid to rest, this multidimensional form of politics will influence the great issues that can affect the fortunes of major companies, as well as those that set the fate of smaller enterprises. In consequence, lobbying and government relations are also changing, partly because they are so intertwined with politics and partly because they are also beginning to utilize issue advocacy as a powerful tool of legislative persuasion. Issue advocacy is altering the terms and conditions of politics in ways that have only begun to be explored. Other, even more significant developments are lurking beneath the horizon, likely to emerge within a relatively brief space of time. These are changes in America’s political institutions and in the arena of democratic political competition.

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Political institutions in democracies are not the historical fixtures they sometimes appear to be. Major political parties, as we have seen in both Europe and North America, may have long shelf lives but are perishable nonetheless. The Liberal Party, replaced by the Laborites as one of Britain’s two major parties, fell into minor party status and eventually was forced to join with a Labor offshoot; even this merged party, the Liberal Democrats, is no more than a marginal factor in British politics. Scandals killed off Italy’s Christian Democratic Party (which for decades was the country’s dominant political institution) and created new major parties of both the right and left. The Progressive Conservatives of Canada, for most of that country’s history one of its two major political parties, has been almost extinguished in recent elections, largely replaced by a new party, the Conservative Alliance, an unstable amalgam of the Conservatives’ right wing and a regional party. Mexico’s PRI (the Spanish acronym for the Institutional Revolutionary Party), for 70 years the only party to hold power at the national level, may fragment following its loss of the country’s presidency in the 2000 election. America’s major parties have not experienced this kind of vulnerability in almost 150 years, when the Whig Party expired. The coming political sea change in the United States does not endanger either of the parties individually so much as it threatens the viability of parties as institutions, as the nation’s medium of competition for political victory and governmental power. For reasons discussed in later chapters, the Republican and Democratic parties have been reduced to the status of mere political brand names, their once powerful organizations unable to control even the selection of their nominees or turn out the vote to assure their election. Both major parties have become less cohesive even as they have grown more ideologically polarized. They exist today mainly as collection agents for vast sums of money, which is then used to help any candidates able to manipulate their party’s nominating processes. Given these circumstances, it is questionable whether the parties can endure in anything resembling their present form. It is not that the major parties have outlived their usefulness, and in fact they have not. They continue to provide political vehicles for coalitions of interest groups; but they are consumed by cancers from within and quack cures, such as abolition of soft money, will only hasten their demise. The probability is a long, slow decline into irrelevance rather than some defiant, flaming Wagnerian Go¨tterda¨mmerung, a departure “not with a bang but a whimper.” The passing of the political parties is a prospect that no thoughtful citizen should view with equanimity. No doubt, many people will easily restrain their grief in contemplating their departure, and perhaps even bestow a terse eulogy of “good riddance.” The fact, however, is not just that the Republican and Democratic Parties are aged institutions suffering


9

from terminal disease. It is the two-party system itself that will die along with them, and that will be a severe loss to American politics and governance. There are no third parties with the strength to succeed either one, nor will there be. Nor is at all likely that either party, let alone both, will produce its own replacement, as the dying Whigs did in the 1850s in giving birth to the Republicans, or as Canada’s Conservatives may now be doing. The times and circumstances of America in the 21st century are different, and in some ways unique. The conditions that are killing the Democratic and Republican parties will also prevent any minor party from rising to ascendance. So, as the major parties die off, the two-party system will disappear with them. That is a distressing consequence. The two-party system has been the engine of competitive, majoritarian democracy in America, and its loss will open a period of political instability with which this country has no guiding experience. This does not mean that the United States will not remain a democracy in which all citizens and interests have the constitutional right to speak out on their own behalf. Nor does it imply that that the system of elections in which we choose those who will govern will be any less free. Politics will be, in fact, freer—but also more chaotic. The stability provided by a two-party system will be replaced by the uncertainties of a multiplicity of competing interests. That means the election of candidates who will rarely win a majority of votes, but only more votes than any of their potentially numerous opponents, in many cases perhaps a third of the total vote or even less. The alternative is the establishment of a nationwide system of runoff elections, perhaps like that of France, in which the top two candidates in a first electoral round compete in a second for a majority. Either way, American politics will operate quite differently than it now does. Distressing or not, the parties are going off the stage of American politics, and the only actors with the ability to play their parts are the great interest groups. These new players include advocacy groups for the aged because of their vast and growing numbers, for the environment because of their increasing size and grassroots capability, for social and religious conservatives and liberal cause groups, for labor, especially the unions representing public and service employees, and for various minorities. Among the latter are Latinos, Blacks, and, one day, Whites who will soon no longer constitute a majority of the population. These groups have the capability to mobilize large blocs of voters to their point of view and therefore to elect like-minded political candidates who can assure favorable legislative outcomes on their issues. Interest groups are growing in political power because they are now able themselves to perform functions that once were unique to the major parties, but that the parties have now largely lost. The political role business will play in this new political world is the

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most problematical to evaluate. At its present level of political involvement and by its own choice, the constellation of companies and business associations that we aggregate under the heading of “the business community” does significantly less to mobilize substantial numbers of citizens in its cause than other great interests do. On the other hand, the vast economic significance of business coupled with a relatively modest measure of additional political participation could easily vault it into tomorrow’s top political tier, if the will to do so emerges. Achieving that status requires that business enterprises do more than serve as the financiers of American politics. What is also needed is a commitment to a variety of forms of legitimate involvement in politics—and to the mobilization of public opinion through the device of issue advocacy. The purpose of this book is to guide the business community in the development of political strategies necessary to assure that it is one of the small cluster of interest groups that will dominate politics, and thereby public policy, in the America of the 21st century. There is a misguided but long-held view among many business owners and executives that economic realities should be reflected in public policy more or less automatically. In their minds, some “facts” and “truths” of the marketplace are so self-evident that any right-thinking public official should understand them as these business people do, without the necessity for lobbying or political persuasion. Perhaps it would be nice if that were true, but it is not and never has been. People with this view tend to hold lobbying in low regard. They find politics even more distasteful. They often see it as a cynical manipulation of naı¨ve voters by the power-hungry who have little appreciation of market forces. Many people with such an attitude shun political activity, possibly on the theory that if they ignore politicians they will disappear. Others seem to think that if they give enough money to political parties and candidates, they will have bought all the political, and hence legislative, goodwill they need—an attitude not unlike that of the small merchant who connives with a neighborhood protection racket. Neither lobbying nor politics are that simple, or that corrupt. A better and deeper understanding of both processes, endemic to our democracy, is required if business is to achieve more of its public policy objectives. For business executives, the realm of politics and lobbying begins and ends with economics. Chapter 2 therefore analyzes the paradox of companies operating in a new economy that is increasingly global in scope but that must still contend with old governmental and political structures that remain defined by geographic boundaries. Chapter 3 then explores the demographic, economic, and technological changes that will shape the United States and the world over the next quarter-century. There are an almost infinite number of ways in which the business–government relationship could evolve as a result of those


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changes, but, for purposes of illustration, in Chapter 4 we will consider three contrasting alternative scenarios for the development of American politics and the business–government relationship in 2025. Chapter 5 analyzes the recent changes that have occurred within and between the major parties, the checkered relationship of business with the Republican Party, and the political conditions necessary for achievement of the business community’s legislative agenda. Chapter 6 discusses the decline of the parties, and the role of political “reforms” in contributing to their downfall. This chapter also explores in further detail the succession to the throne: the parties’ likely replacement by coalitions of major interest groups, and the actions business organizations need to undertake to play a significant role in the new politics of the century. Chapter 7 discusses the various political instruments, both traditional and new, that are available to business to help assure the election of probusiness legislators. Chapter 8 analyzes the newest and most potent of these new techniques, issue advocacy, a communications device that informs and influences the public on both issues and candidates. Issue advocacy also has the ability to transform long-standing legislative debates on the direction of public policy. Chapter 9 therefore explores several macro-issues that present significant long-term opportunities for issue advocacy. Each of these issues represents a persistent challenge that will continue to affect business interests for decades to come. They include: • International trade, the case for which needs to be presented in a new form to win public support. • The nexus of an aging population and immigration policy as a formula to fund Social Security and Medicare. • The need to strengthen the personal savings rate as a source of future investment capital. • A new approach to the stubborn problem of reforming the financing of political campaigns. Long-term issue advocacy is a way to reshape public attitudes on such problems and thereby reposition business as a dominant force in national political life. Chapter 10 sets forth our conclusions about the role of business and the future of American politics, especially in light of the 2000 election and its dramatic aftermath. The managements of business enterprises in the United States have too often shunned active involvement in the nation’s political life, contenting

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themselves to be, at most, financial angels for the parties and candidates. If the purpose of that strategy has been the achievement of a pro-business legislative agenda, it has always had its limitations. It will be even less adequate in the emerging post-party political climate. America’s competitive enterprises lie at the heart of the nation’s economic might, but that does not entitle them by default to a leading role in the dramatic changes in politics that are both causing and which will follow the demise of the political parties. Business will have to earn that role. This book is intended as a strategic guide to help the community of business organizations achieve the first ranks of power in the emerging politics of this new century. NOTES 1. Fernand Braudel, The Mediterranean and the Mediterranean World in the Age of Philip II, rev. ed. (New York: Harper & Row, 1966; reprint, London: Folio Society, 2000). 2. Francis Fukuyama, “What Divides America,” Wall Street Journal, November 15, 2000, p. A26.

CHAPTER 2

Business and Government in the Global Economy It is not coincidental that the pace of globalization has picked up with the spread of democratic rights; the two are symbiotic. Yet globalization also widens the concept of what the maximum degree of individual freedom could be. —John Micklethwait and Adrian Wooldridge

The characterizing phenomena of the 21st century’s beginnings are economic globalization and the spread of democratic values and institutions around the world. At the same time, the policies of many governments in the advanced economies have moved significantly to the right. As a consequence, the business–government relationship is changing in many countries. Because this relationship operates in a political context, emerging changes in politics will continue to affect the relationship between business and the state. That evolving relationship, particularly for companies operating in the United States, is the subject of this book. We begin that exploration in this chapter by considering how global economic forces are producing a new kind of tension between business and government. After the collapse of communism and the Soviet Union, two significant developments marked the final years of the 20th century and the opening ones of the 21st: One was political—the adoption of democratic institutions by most of the countries of Eastern Europe and Latin America and, to a lesser extent, Asia. The second, even more widespread, was the movement away from centralized planning and toward market economies by most countries on every continent. While these developments are most marked in the Eastern European

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countries that are former satellites of the Soviet empire, they are also taking place in Third World countries once characterized by socialistplanned economies and authoritarian governments. In general, where central planning once was prevalent, mixed economies are now found, and where national economies once represented the mix of state planning with some capitalism, free markets are becoming the norm. The Cold War was a competitive battle between communism and capitalism. Communism lost and countries across the globe have taken the lesson. Its remnants remain only in Cuba, North Korea, Vietnam, and China, and even the last two are moving in the direction of a market economy as quickly as they can and still preserve the political dominance of the Communist Party. Authoritarianism has been slower to depart the world scene than central economic planning. For almost all countries, the shift to market economics has also meant greater participation in the world’s expanding trading system. Frequently, it has also meant increased privatization of assets, as previously stateowned enterprises are sold to private investors and shareholders. All this has resulted in expansion of the world’s trading system to encompass what has come to be known as the global economy. Companies whose commercial and financial transactions were once limited to other enterprises within their own countries have found that more and more of their business crosses national borders. For a great many such firms, this international dimension has become the most significant one for the future of their operations. As a result, the term “domestic economy” is an oxymoron in Europe and Canada, and is on the verge of becoming one in the United States. During this same period, GATT (the General Agreement on Tariffs and Trade) was transformed into the World Trade Organization. The WTO exists not to regulate global commerce but to provide a forum in which trade issues can be negotiated and disputes resolved. Also during the 1990s, international finance mechanisms and organizations were subjected to heavy fire as a result of financial crises in various parts of the world. The consequence of all these developments has been to alter significantly business–government relationships. Business has new kinds of issues. An example in the United States was the major legislative battle over admission of China into the WTO, the political ramifications of which will be discussed in later chapters. The point here is that issues of international trade now are in the highest rank of importance to many companies and business associations. Government is also changing. There has been a pronounced movement away from socialist dogma over the past two decades in almost every country—from the beginnings of market economies in China in 1979 and later in Russia, through the governments of Margaret Thatcher and Ronald Reagan in the 1980s, to the rightward changes in the British Labour

Business and Government in the Global Economy

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Party and America’s Democrats in the 1990s and the tax reforms enacted by Germany’s socialist government in 2000. On the other hand, the scope and reach of government are not shrinking, nor is its size. In the United States, federal and state budgets have continued to grow under both Republicans and Democrats, fueled in recent years by a record economic expansion. It is true that the number of federal government employees has declined, but that is mainly because so many programs and services have been outsourced to contractors. Rhetoric about translating the new budgetary surpluses into elimination of the federal debt has been exceeded only by competition between congresses and presidents to maximize current spending, the Bush tax cuts notwithstanding. Nonetheless, awareness of the need to maintain healthy economic climates in which companies (and hence employment) can grow is no longer a perception unique to conservatives in North America and Europe, as it long was. Most political liberals have come to adopt this view, although their regulatory impulse remains strong. On the other hand, there is small but significant anti-corporatist sentiment (to use Ralph Nader’s term) on both sides of the Atlantic, as evidenced by disruptive protests at meetings of various international organizations. Politics, the ubiquitous process by which almost every aspect of government operates, is also changing. European parties of the left have abandoned much of the baggage of socialist dogma when they have come to power, often embracing many of the philosophies and policies of their rightist competitors. These dramatic patterns are apparent in Britain and, to a lesser extent in Germany and France. In different ways, they are also visible in North America: A new conservative party has been created in Canada, largely replacing one that was center-left. Mexico’s 70-year-old one-party regime was ousted and a new conservative president democratically elected. In the United States, the centrist Bill Clinton, who adopted a significant portion of Reagan-Bush ideology, was succeeded by a conservative Republican, another Bush. Other changes occurring in the politics of the United States may be less conspicuous and dramatic, but are nonetheless rapidly undermining the traditional institutions through which American politics has been conducted. Because politics and electoral competition in America will be very different in a relatively few years, the ways in which businesses—and all other interest groups—interrelate with government will be deeply affected. The dominance by U.S. companies of economic globalization means that what affects them affects the way the entire world economy is evolving. The business enterprises of every nation, from the smallest to the greatest, collectively encompass and constitute the world marketplace, but America and American companies are its lead players and will remain so for the foreseeable future.

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THE DEVELOPMENT OF GLOBALIZATION It was tempting to open this chapter with a different quotation than the one that appears there: “In place of the old wants, satisfied by the production of the country, we find new wants, requiring for their satisfaction the products of distant lands and climes. In place of the old local and national seclusion and self-sufficiency, we have intercourse in every direction, universal interdependence of nations.” What makes these words truly remarkable is their source, a book that deeply shaped the course of the 20th century—The Communist Manifesto by Karl Marx and Friedrich Engels. Their words were written in 1848; even then the internationalization of trade was a noticeable force. The global economy today has historic antecedents in the free trade movement that characterized international commerce from the early 19th century until its disintegration at the outbreak of World War I in 1914. The period following that war was one of isolationism in the United States and extreme economic nationalism almost everywhere. High tariff walls and other forms of protectionism contributed to and exacerbated the Great Depression of the 1930s. They were an important factor in the rise of Nazism in Germany and the onset of World War II. The democracies that won that war recognized the vast price they had paid for their economic policies of the 1920s and 1930s. The wave of international trade, financial and political conferences and treaties that started in 1944 with the Bretton Woods conference marked the re-liberalization and expansion of international commerce that has continued, with fits and starts, ever since. The collapse of communism and the implosion of the Soviet Union in 1989 freed up physical and psychological resources in ways that had not been possible during the Cold War. Perhaps the most significant of these consequences was an almost religious conversion to democracy and market economics all across the globe. Political parties and governments almost everywhere moved away from leftist dogma and in varying degrees eased the state’s heavy hand on private enterprise. These events and patterns opened the way for globalization. They facilitated the rise of three highly significant and interrelated economic developments in the 1990s: The first of these was increased freedom for capital to move almost instantaneously anywhere in the world. Changes in international economic and financial structures plus new technologies today permit several trillions dollars to move across national borders every day. The benefit is that capital can be quickly moved wherever its applications are most productive. The cost, however, is that those investments often can be uprooted and moved elsewhere, sometimes literally overnight. Second was the transformation of management techniques, launched in


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Japan in the 1970s and 1980s, and significantly enlarged on by U.S. companies since the early 1990s—from workplace teams to just-in-time inventory management, and much more. The third development was the vast innovations in technology that have revolutionized the fields of information processing and communications, and which are the basis of substantial and sustained productivity improvements. Such changes can be frightening to people who scarcely understand them or their causes. Today, no economy is immune to currency crunches, not even advanced ones, as Europeans discovered when the value of the euro began to decline against the dollar almost immediately after its introduction, dropping from $1.15 to less than 85 cents. Even more shocking, to citizens of countries from Mexico to Malaysia, was the experience of a lightning-fast drop in one’s national currency because ill-advised decisions by some bureaucrats caused traders thousands of miles away to sell off the currency in a matter of hours. The pattern is not dissimilar to the experience of many U.S. technology and telecommunications companies. Investment capital that had flooded into them flowed out almost as quickly when their growth rates slowed and earnings dipped or failed to appear at all. No changes are more potentially fearsome than the accelerating upheavals in technology and its consequences. Novelist Arthur C. Clarke once remarked that to ordinary people the sudden appearance of a highly advanced technology is indistinguishable from magic. Many people find magic exciting; many others find it frightening. Half a century ago, some people saw atomic energy as a liberating source of limitless, non-polluting power; others envisioned that their children would become a race of mutants. Neither was right. Today, there are predictions that humanity will become slaves to computers or that genetics will be used to erase all racial, ethnic, and even individual differences. Less “magical” but perhaps even more immediately terrifying is the harsh reality of lost jobs because technology and its accompanying economics have resulted in the obsolescence of a product or service, or because of an employer’s decision to relocate to reduce costs or to get closer to a major new market. These fears bring with them public and political consequences. Fear of poison is at the root of the European Union’s (EU) ban of foods made from genetically modified crops. Fear of job and union membership losses is the cause of the American labor movement’s opposition to international trade. Fear of the power of mammoth, depersonalized international corporations is what lay beneath the protest demonstrations at the WTO conference in Seattle and those that followed in other U.S. and European cities. Fear is the weapon of the extremists within the environmental movement. Fear is what has deterred the development of nuclear power in the United States.

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Over time, unjustified fear can be dissipated by effective communications and demonstrations that the fears lack merit. Occasionally, this can happen fairly quickly. More often, it is a protracted process. Sometimes, it never happens at all, especially if evidence arises that reinforces public fears. Accidents at reactors in Pennsylvania and Ukraine doomed any chance for nuclear power for decades and precluded any rational discussion of its merits. As in so many areas of life, it is not the technology that is at fault but how it is used, abused, or controlled. The same technology that threatens invasions of personal privacy by some government or marketing snoop also allows us to be in instant touch with a friend or relative anywhere in the world by e-mail or mobile phone. The technology that conceivably could be used to produce human cloning or racial homogeneity also saves lives and enables the treatment or cure of diseases that were invariably fatal not that long ago. The technology that has given pornographers vast new markets also transmits messages of liberty and democracy into the hearts of the most repressive totalitarian regimes. “Technology has not devalued individual human life; it has elevated it, creating new opportunities, new connections, new freedoms. The human imagination has not been suppressed; it has been liberated, in ways unimaginable even a decade or two ago. To be alive in America today is to face an exhilarating wealth of choices.”1 To many people, the global economy that technology has done so much to facilitate seems synonymous with multinational corporations. That is no longer true, and it is less true with each day that passes. Giant multinationals are, of course, the leading players on the world’s economic stage, and many of them were its first actors. Among U.S. companies, however, even small ones see their future market growth in global terms. Small businesses constitute 96 percent of all U.S. exporters and generate 70 percent of sales within the EU.2 Half the businesses that operate across national borders employ less than 250 workers.3 Because the overall productive capacity of the American economy is larger than its domestic markets can absorb, enterprises of all sizes see exports as the route to sales increases. At the same time, imports of both raw materials and finished goods are growing because of strong domestic demand and because many overseas producers have cost or other advantages over U.S. competitors; and a rapidly growing number of American firms have production facilities abroad, for consumption in those lands or for export back to the U.S. or to third countries, just as companies based elsewhere have opened plants here. Service industries—whether restaurants, banks and other financial companies, or new telecommunications firms—also continue to expand around the world. The same dynamic is apparent among companies based in Europe, Asia, and Latin America, in many cases to an even greater extent than in the United States.


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Business, thanks very substantially to technological innovations and the improvements in productivity they have fostered, has brought an increase in standards of living in most parts of the planet. The public resources contributed by business enterprises (both directly and through taxes) have fueled other improvements in standards of living, notably including medical discoveries and health care that have enhanced the human condition throughout most of the world. A glance around the world provides repeated evidence of how many countries, and how many of their people, are better off today than they were, say, 25 years ago, and how many more are on a clear path toward further improvement. Some of this is the result of the death of communism, some the consequence of the swell in democratic values, but much of it is the product of the spread of market economics and globalization. Economic growth, powered by international trade, is the engine driving these changes. Gross domestic product in China, the world’s most populous country, is growing by 8 percent annually. India, the second largest, is increasing its GDP by 6 percent a year, and its industrial production is up 12 percent annually. Even Russia is growing by 7.5 percent, with industrial production up 10.6 percent, and GDP in countries like Mexico, Malaysia, and South Korea, in the middle stages of development, is growing substantially faster than in the United States or the EU.4 Most of the countries of Eastern Europe and the Baltic region are making major efforts to modernize and grow and to join the EU. Globalization has not cured all the world’s evils and it has exacerbated a few. Extreme poverty and disease still persist among developing countries. Many African nations remain the world’s direst cases, plagued by enduring poverty, civil wars, corrupt military regimes and, above all, the AIDS pandemic. Globalization did not produce AIDS, but it facilitated its spread and has not done much so far to alleviate it—but then, neither have many African governments. AIDS aside, however, on the whole public health and other living standards everywhere outside of Africa are significantly higher than they have ever been. Even among the wealthiest countries, there remain, deep social and economic problems untouched by globalization and perhaps even worsened by it. Nations on every continent confront the seemingly irredeemable problems of an urban underclass beset by drugs, crime, functional or complete illiteracy, and dysfunctional or non-existent families. Only a short distance from the gleaming financial towers of New York and London, and from Washington’s public buildings and marble monuments, are neighborhoods and communities indistinguishable in appearance from Third World cities. Yet, many countries have also seen the arrival and growth of industries that offer millions a way to claw themselves out of poverty. Human rights activists bemoan the dreadful working conditions in Asian sweatshops, but employment there offers at least a beginning

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step up from the only alternative available to most of their workers, a life of street prostitution and crime. Even poverty is a relative concept. Much of what is defined as destitution would have been considered material comfort not that long ago. In the United States, “All but the poorest of the poor live better today than all but the richest of the rich” a century ago, says columnist Robert J. Samuelson, citing work by economist Robert Fogel. “In 1890, only the top 10 percent of Americans had incomes exceeding today’s poverty line. . . . In 1880 workers labored an average of 11 hours a day, six days a week.”5 And what has happened in the United States has also occurred in much of Asia and Latin America, and certainly in Europe, except perhaps for the eastern countries; only Africa has clearly regressed. It is not that the world’s poor are all worse off (although some are), but that the gap between the haves and the have-nots seems to have widened so significantly. The affluent are accumulating wealth faster than the poor are, the essence of the “trickle-down” criticisms of economic growth. Even if today’s poor are less impoverished in absolute terms than their grandparents or great-grandparents, an enlarged gap separating them from the wealthy creates resentment and social instability. The gap need not be eliminated if the poor are given hope that they, or at least their children, can improve their lot in life. Globalization and economic development are the only way to provide that hope. But this entire argument may be based on erroneous assumptions. An intriguing analysis of 40 years of data for 80 countries by two World Bank economists takes issue with the trickle-down thesis that the incomes of the poor within a country grow more slowly, and later, than those of the rich. Some of their conclusions: Incomes of the poor, the rich, and the country as a whole rise together at about the same rate and time. Economic growth is stimulated by the country’s openness to international trade; the larger the percentage of GDP that imports and exports account for, the greater the growth of the national economy without an adverse effect on income distribution. What does have an adverse effect is inflation and public spending; cutting both, the authors say, actually benefits incomes of the poor.6 “Trickledownism”, the authors imply, may be more apparent than real. Globalization is a prime factor underlying much of this economic growth. “The evidence . . . has long been clear. Poor countries that cut themselves off from the global economy and fail in other ways to establish a platform for growth can indeed stay poor; the rest do in fact ‘converge’ [in economic equality].”7 Technology is also a major factor in economic growth. One dramatic illustration is the spread of mobile phone technology and wireless communications in African, Latin American, and Asian underdeveloped nations, enabling these countries to vault over the entire stage of wired


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telephony. The infrastructure for wireless is cheaper to install than stringing thousands of miles of copper wire or coaxial cable and erecting a network of telephone exchanges. Satellites and third-generation mobile phones have the potential to bring the Internet within the reach of most of the world’s population in the first decade of the 21st century. The vast prosperity that most of the world enjoys at the start of the 21st century is partly driven by gains in technology (and therefore productivity), but also by the internationalization of markets. The liberalization of trade that has taken place since the end of World War II permits companies, wherever they may be based, to expand significantly the number of customers to whom they can sell. In the United States alone, export and imports together account for about a quarter of the GDP, compared to only 9 percent of economic output in 1960;8 and this does not include overseas investments in the U.S. economy from other countries, currency transactions such as repatriated earnings by U.S. multinational companies, or other effects of international finance. Manufacturers and retailers, wherever their bases of operations, export and import more or less freely around the world, limited mainly by a residue (though too often a large one) of tariffs and non-tariff trade barriers. Service industries are bound even less by political constraints. Trillions of dollars in investments and other currency transactions move electronically and instantaneously to and from every corner of the earth— more money each and every day than the GDP of France in a year. Communications of every kind—from vast commercial transactions, news, and entertainment to the most intimate personal messages—are bounced around the globe with imperceptible delays by wireless and satellite networks. It is difficult to identify any large corporation, no matter where it is nominally based, that does not do business across the world. Many of these companies derive half or more of their revenues from international operations. Frequently, their strategic decision is only the business mode those operations will utilize. That choice was illustrated by the comment of an American corporate executive supporting normalized trade relations with China. “If China is admitted to the WTO,” she said, “my company will export products from the U.S., hiring more American workers. If China is not admitted, we will set up new facilities over there and employ Chinese workers.” In point of fact, the end result is mixture of those business strategies, in China as in most other countries in which major corporations operate. Often, raw materials originate in Country A, are processed in Country B and manufactured into components in Country C, assembled as finished goods in Country D, and ultimately sold in Country E. In any given transaction, the nation where the company is based may be one, or none, of those countries.

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For smaller firms, those choices may be less clear-cut, depending on the nature of their businesses. Nonetheless, virtually all of them participate directly or indirectly in international commerce. They may sell to customers on every continent except Antarctica. The products they retail may come from South Korea or South Africa, Chile or China. Materials for manufacture may be imported from Nigeria or Norway, Austria or Australia. Their trucks may run on fuel purchased from oil companies based in Britain or Brazil, and the trucks themselves, wherever they were assembled, are likely to be made from components produced in many countries. The banks they deal with may be headquartered in Geneva or Tokyo. Their advertising agencies are as likely to be based in London as New York. The day is not far off when their stocks will be traded globally, electronically, and instantaneously. The so-called “Old Economy” companies generally started as domestic businesses, and developed an international presence later on. In contrast, the “New Economy” companies in telecommunications, bio-sciences, and the like, often begin life as international businesses. Companies engaged in wireless transmission, e-retailing, business-to-business (B2B) systems, biomedical research, satellite communications, Internet transmission and equipment, all possess a global view of their markets. To an “e-tailer” it matters little where its Internet customer is located, a point of view an increasing number of companies will adopt as the century progresses. Even “old economy” companies like Verizon (nee Bell Atlantic and GTE), whose basic business is still tied by miles of copper wire to local telephone customers, has acquired telephone operations in other countries and, through its own subsidiaries and its joint venture with Vodafone (a BritishGerman company), now has an intercontinental wireless capability. Grocery manufacturers, such as Procter & Gamble (U.S.), Nestle´ (Swiss), and Unilever (British-Dutch)—all of them as “old economy” as you can get— have sales or operations in almost every country. THE QUANDARY OF GLOBALISM VERSUS PAROCHIALISM The great challenge for all these companies is how to resolve the political dilemma of economic globalism: doing business in markets that transcend geographic boundaries under rules established by geographically defined nation-states. The rules under which the international marketplace operates are still largely set by national governments. To be sure, there are entities, the WTO among them, in which nations negotiate the policies, terms, and conditions of international commerce, but these organizations exist at the sufferance of their member countries. Moreover, it is the nation-state that regulates the enterprises based or operating within its borders. Indeed, it


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is the nation-state where all real power affecting trade and commerce lies. There is no sovereign worldwide regulatory power, nor in fact would the vast majority of business executives want one. And so it is that businesses with an international focus, to which the geography of commerce is increasingly irrelevant, are subject to the authority of governments that exist within fixed geographic limits and that remain preoccupied with their internal, parochial concerns. Companies and individuals have very different mind-sets. Businesses, if they are to be successful, conceive of themselves in enduring terms and, today, beyond traditional geographic limits. Individuals, on the other hand, tend to think in terms of limited lifetimes and, even in an era of high mobility, within relatively narrow geographic borders. Even as companies think globally, people—even the executives and employees of those companies—think parochially in terms of their personal concerns. As individuals, some Americans may take a passing, perhaps even an intense, interest in some action of the United Nations, the WTO, the World Health Organization, or the EU. Whatever that degree of interest, however, it is likely to be greatly exceeded by their focus on the policies and pursuits of the federal government; and their interest in state and local governments, though those governmental levels are often less visible than Washington, becomes overriding when authorities take an action that affects citizens and families personally. For many people, for instance, even a large cut in state sales or income taxes, or in a local property tax, may be small potatoes compared to the actual dollars saved by a reduction in federal income tax rates. On the other hand, congressional action on highway or airport authorizations is of vastly less concern than proposals to build a new road through one’s own neighborhood or to increase the number of night takeoffs at a nearby airport. Even when there is an individual focus on national policy, say health care, it is likely to be rooted primarily in a desire for quality and affordable medical care for our families and ourselves. Health insurance companies and other health care industries may be, or become, international enterprises, but, with rare exceptions, their services will continue to be delivered personally and locally. Only academics and policy makers have an abstract interest in the subject of health care, and even theirs undoubtedly has a personal dimension. It is the nature of all governments, especially in democracies, to protect and advance the interests and welfare of their own people. The physical and economic security of the citizenry is government’s absolutely paramount consideration in every action and policy. Ultimately, parochial interests are the guiding principle of governments everywhere, even in international affairs where the overriding concern is always protection of the national interest, however that may be circumstantially defined. A few illustrations:

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• The United States defended Kuwait against Iraq in the Gulf War not primarily to react to military aggression or to protect the oil companies (although those were important considerations), but to assure the stable supply of an energy source essential to American consumers and companies. • The United States created and maintained NATO (the North Atlantic Treaty Organization) because a free and democratic Europe was a vital bulwark against Soviet aggression. The Soviet Union has disappeared but Russian democracy is still in its infancy, and its peaceful intent remains an uncertain consideration for the long term. The U.S. continues to be the mainstay of NATO because the stability and security of individual European countries, and of Europe as a whole, remain critical to that of the United States. That was not only true during the Cold War, but also was the justification for NATO’s intervention in the Balkans, a region of historic explosiveness. The security of its people and borders is the basis of even the most enlightened foreign policy of any country. • With America’s backing and blessing, the states of Western Europe created what is now the EU, to put an end to centuries of war by establishing a single continental economy, and by integrating themselves socially and politically. Originally comprising six countries, and soon to grow well into the mid-twenties, the EU exists because its member states and applicants each see it as the best way to protect their individual security. Countries like Poland and Hungary seek to be members for the same reason that France and Italy have belonged since the beginning: to advance the economic wellbeing and political security of their own peoples. Like any other democratic institution, the EU adopts policies with ease when the interests of its members converge—and with difficulty or not at all when they are at odds. • Europe, Japan, and America want to tie China ever more closely into the world trading system, partly because they see it as a huge, largely untapped market, but also because they believe increasing exposure to highly developed economies and to concerns of human values ultimately will reduce China’s military threat to its neighbors and to global security overall. Integrating China (and really Russia as well) into the world economy will, the advanced democracies hope, transform the focus of both countries from external belligerence to internal economic, social, and democratic development— just as happened in Japan and Germany after World War II. Historian Arnold Toynbee argued that civilizations arise by overcoming great external or internal threats, and fall when they fail to do so.9 Pro-


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tecting themselves against enemies abroad is, of course, a cornerstone of every country’s foreign policy. In addition, though, throughout world history, internal security considerations have also underlain nations’ foreign policies—usually the desire to gain land at the expense of neighboring countries, or to distract and divert their people from social or economic hardships, or sometimes both. Even the crusades were motivated in part by the desire of some of the popes to provide a diversion to potential troublemakers and get them out of Europe for a few years. What separates the past half-century from all of preceding history is the growth of the concept that economic integration among nation-states fosters not only prosperity but also international political stability—a realization that future historians may well point to as the salvation of Western civilization under a threat of nuclear war. It may or may not prove true that democracies never wage war on each other, but it is surely true that democracies with closely meshed economies will not; each understands that it has far too much to lose by the havoc war creates. A corollary is that the more fully developed a national economy is, and the more tightly it is integrated with the economies of other countries, the less militaristic its international relations are likely to be. Only the historians of the future will know if these principles of international affairs prove valid, but they are the basis of the current foreign policies of every one of the economically advanced nations. The Focus of Government Another lesson of history is the universal internal focus of governments. Most governments—even many authoritarian states and certainly all democracies—are concerned first and foremost with the security and welfare of their citizens and their societies. The idealist says that that is the only valid purpose of government. The cynic responds that catering to popular needs and wishes is how regimes and politicians maintain themselves in power. “Few men are so disinterested as to prefer to live in discomfort under a government which they hold to be right rather than in comfort under one which they hold to be wrong.”10 Whatever the motivations of political leaders, it is clear that the vast majority of citizens who believe themselves physically secure, who are increasingly healthy and well educated, who have good jobs with prospects for their children of even better ones, and who are comfortable with the progress of democratic and human values in their societies, are people who in the main support their governmental and political systems. Internally, such peoples are easier to govern. Externally, they are less likely to support, let alone foster, aggressive and warlike attitudes toward people in other countries. It is that spirit that underlies governance in the world’s democracies today, no matter what divergent policies they may adopt in pursuit of this common goal.

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PAROCHIALISM AND REGULATION In pursuit of those values, governments have four kinds of functions: 1. They provide direct services, financed principally by taxes but to some extent by user fees. National defense and police protection are the most basic of these. Public education and public health run a close second, with environmental protection (really an extension of the health function) also in this category. Sometimes, what one group defines as protection of public health and safety (e.g., gun control advocates and abortion opponents) runs across the grain of another’s determination to protect its values and freedoms (e.g., defenders of gun ownership and abortion choice supporters). Oddly, many of those on one side of the gun issue tend to be on the other side of the abortion question. Other direct governmental services include the construction and maintenance of infrastructure, ranging from highways, bridges, and airports to dams, water, and sewage systems. Some governments go further, from locally operated transit systems to nationally operated postal systems, railways, and airlines (though many of these functions are being privatized or converted into quasi-public entities). 2. They regulate at least part of the operations of private enterprise, including competition, working conditions and wages, economic and monetary affairs, consumer marketing, allocation of airwave frequencies, public utility rates, land use, and so on. Indirect regulation operates through tax codes that give preferences to certain economic and social activities—such as home ownership, child daycare services, corporate research and development, charitable contributions, and so on. 3. Governments recycle and redistribute income to provide social services and economic entitlements, including retirement income and medical services for the aged, subsidies for farmers, unemployment compensation, welfare programs, public or subsidized housing, and the like. The belief underlying these programs is that redistribution of wealth and reduction of gaps between rich and poor is a fundamental contribution to social stability. Although political parties in democracies the world over argue vociferously over the extent to which the redistribution of income is necessary, none take issue with the underlying concept. 4. They seek to alter personal behaviors, through programs to reduce use of illicit drugs, discourage tobacco consumption, penalize drivers who consume excess alcoholic beverages, and so forth. All of these are related at least to the public health function and, in the case of drugs, to issues of crime and urban decay. (Occasionally, however, governments may actually promote socially arguable behaviors, notably gambling; in this case, the desire for new revenue outweighs economically regressive consequences.) As a group, behavior modification activities are probably the least effective of government programs.


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A prime purpose of the first three categories is to enhance (directly or indirectly) economic security, growth, and overall prosperity—and all four are intended to facilitate social stability. People of different political ideologies can debate the relative merits or demerits of these functions and services and the effectiveness of governmental performance. It is difficult, however, to argue with the proposition that a strong economy, and the tax revenues it generates, is what makes everything else possible. The Role of Regulation To achieve a constantly rising level of national economic vigor, all governments believe that regulation of domestic commerce is essential. The nature and extent of government economic intervention was the burning ideological issue of the 20th century. The failure and defeat of the communist model has moved governments almost everywhere rightward, toward free-market economics, but the debate about how far to go continues nonetheless, even in the United States, the most capitalistic of the great economies. There really is no national economy anywhere in the world that is wholly “free,” in the sense that it is completely unregulated. Since the fall of communism, socialist (or “social democratic,” if one prefers the term) governments have reduced somewhat the state’s thumb on the scales of free enterprise, but every country still regulates sectors of its economy in various ways and degrees. No government, and certainly not the United States, allows untrammeled capitalism to prevail, restrained only by competitive forces and self-regulation. Each year, the Heritage Foundation, a conservative Washington think tank, ranks the nations of the world by the amount of economic freedom each permits and facilitates. The rankings take into account such variables as government intervention, regulation, property rights, fiscal burden, trade policy, and the like. The United States ranks fifth on this list, tied with Luxembourg. Canada, Japan, and the large industrialized countries of Europe all rank lower than the United States by these measures. It is interesting, though, that four countries top the United States in economic freedom—Hong Kong, Singapore, Ireland, and New Zealand.11 Even among the free and mostly free economies around the world, few business executives would be willing to make a major decision that went against the grain of the powerful agencies and ministries of government. Business may have substantial influence, but it is still the government that makes, interprets, and enforces the law. Economic regulation has two purposes: to restrain excesses and abuses, and to provide a measure of stability. Laws regulating the more predatory features of capitalism (e.g., public utility price regulation and U.S. antitrust policy) serve the first purpose. Macroeconomic policies serve the second

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by seeking to eliminate the extremes from the economic cycle. Markets are inherently uncertain and unstable, argued the influential British economist John Maynard Keynes, whose theories underlie government macroeconomic policies even today. Those policies aim to restrain inflation, promote full employment, and perpetuate long-term moderate growth overall. Economics is as much craft as science, and macroeconomic policies have suffered some monumental failures over the past 50 years (wage and price controls being just one example). Nonetheless, governments in the advanced economies still work to moderate economic cycles, now relying heavily on monetary policy, primarily through the regulation of interest rates. The success of monetary policy in recent decades, administered by independent central banks, has helped to stabilize the advanced economies and reduce much of the economic uncertainty about which Keynes wrote. Still, much of that uncertainty is created in the first place by antitrust and other laws promoting competition. As economists as least as far back as Adam Smith have observed, it is the impulse of business people to fix prices and allocate markets wherever they can, in the usually vain attempt to increase economic certainty. Regulating and usually suppressing that impulse in the name of competition is the purpose of America’s antitrust laws and its counterparts in other economies. So, in a sense, macroeconomic policies modulate the uncertainty that antitrust laws, among other forces, help create; but an economy without both is subject to reduced competition, wild swings in the cost of money, and frequent periods of inflation and recession—for example, the U.S. economy during much of the 19th century. The price of laissez-faire capitalism is higher than anybody today would care to pay. Regulation has its benefits. Bill Clinton once famously proclaimed that “the era of big government is over.” He could have cited a modest decline in public employment as a substantiating indicator, but it is difficult to identify much else that supports his proposition. Airlines, financial industries, and some public utilities have been or are being deregulated to some extent, with mixed success. On balance, though, the regulatory scope of government continues to grow. Taxes consume record percentages of peacetime GDP. Public entitlements increase almost annually. Perhaps the ultimate (if not the most onerous) symbol of regulatory constraints is the Federal Reserve Board’s power to affect interest rates, and the ceaseless, almost hypnotic preoccupation of business people around the globe with what the Fed is doing or yet may do. Most state and local governments are scarcely less activist, often passing new, frequently trivial laws in response to each day’s headlines. The consequence of all this activity is that government is the largest single cost of doing business—for any company, in any industry, and probably in any country. Even in America, the heartland of competitive enterprise, the regulatory hand of government is significant, often substantial


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and, arguably, occasionally oppressive. The United States regulates the business sector with a hand that seems light only to those executives who have experienced the joys of regulation in European social democracies. In American folklore, the genius who starts in a small workshop and builds a great idea into a highly successful business has been a prized legend at least since the 19th century writings of Horatio Alger. To many people, therefore, Bill Gates is a national icon, the epitome of Alger’s folk heroes. That did not, however, deter the government from launching an antitrust attack on the Microsoft Corporation. A pure capitalist would say that the lesson of the Microsoft case for America’s youth is, “Be successful, but not too successful.” Microsoft’s opponents (competitors as well as regulators) would counter that the true lesson should be, “Be successful, but play by the rules.” But whose rules? Those of government, of course—in this case, a rule called the Sherman Antitrust Act. Clearly, though, no nation can long function without the rule of law. Without good government and laws written and enforced equitably, society would degenerate into chaos and anarchy. The economic lawlessness prevalent in post-communist Russia provides a lamentably vivid demonstration of Mafia-style kleptocracy and of capitalism run amok. Rules, fairly and reasonably applied, are essential to the functioning of an efficient and competitive economy. Lawmakers and regulators write the rules in accordance with what they believe to be in the best interests of the citizenry, or at least what those citizens think is in their best interest—the same thing in democracies if not in logic. This places the business executive of the 21st century in a series of conundrums. Companies operating in the global marketplace commonly take as a guiding principle that they will abide by the laws of every country in which they do business. Fine and good, until those laws conflict, or until they operate against the company’s best interest. If the laws of, say, Pennsylvania force the company into violating the laws of California, relief can be sought from the federal government—the judiciary, a regulatory agency, or Congress. If the company finds itself caught between the laws of France and those of Britain, it may be able to ask one of the EU’s institutions to loosen the bind. But what if the conflict arises between the laws of France and those of the United States? If it is a matter falling in the purview of, say, the WTO, perhaps the company can persuade one of the two countries to pursue the problem there; or perhaps not. Compared to the volume and breadth of national laws, there is not a great deal of international business law, and relatively few avenues for recourse. Governments are not omnipotent, however, and even authoritarian ones can find themselves caught between their own values and the changes wrought by technology. A small organization in Washington, D.C., has a website directed to the Chinese people that promotes democratic values

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and human rights. From the standpoint of the Chinese government, this is sheer Western propaganda. The website is illegal in China, but the ban is technically difficult to implement and evadable. Closer to home is the problem U.S. trustbusters face in trying to apply century-old legal theories to rapidly evolving technologies and markets. What is the relevance of antitrust law and traditional doctrines of competition to products that are created, mature, and become obsolete within the space of a year or two, or less? Or to companies that arise, develop new technologies or merge with others to acquire them, and finally themselves are bought out, all within just a few years? The accelerating rate of economic change threatens to render meaningless ponderous antitrust and other regulatory activities. Of course, businesses will try to control markets, but that does not mean they will be able to. . . . [O]ne of the wonders of global capitalism is its capacity to hurl challenges at incumbent champions. Most of the forces of globalization—particularly the availability of capital and technology—favor small companies.12 It is entirely possible that the final resolution of the Microsoft case, for instance, may turn out to be completely irrelevant to rapidly evolving technological and economic conditions. What would happen, for instance, if the company simply decided in the end to move its headquarters a few miles north to Canada, as the province of British Columbia once invited it to do? However the Microsoft case is resolved, it may ultimately lead to a total reexamination of the relevance of U.S. antitrust law and EU competition policy, in the light of 21st century technology and globalization. Similar regulatory dilemmas posed or complicated by technological innovation and the speed of capital movements arise frequently in telecommunications and finance, and probably will soon do so in other industries. A small but growing number of companies are relocating to countries like Bermuda to reduce regulatory and tax burdens. To take another example, if a pharmaceutical company announced tomorrow that it had developed a cure for cancer or AIDS, could the Food and Drug Administration (FDA) (and its counterparts in other countries) justify years of testing for efficacy and safety? But, given the frequency with which new drugs turn out to have harmful side effects, how could it not? The question really is whether regulatory formulas developed in the 19th and early 20th centuries can apply to the economic conditions brought about by globalization and rapidly changing technologies. When companies find themselves in a difficult domestic regulatory situation, they confront another conundrum. Do they make whatever internal changes are necessary to live with the law (the course of action most


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commonly adopted) or, if the shoe’s pinch is too painful, do they work to change the law in some fashion? Companies finding themselves in the latter position can no more afford to neglect efforts to assure that public policy fits them as comfortably as possible than they can ignore any other significant business cost. That is what lobbying is all about. Once again, the Microsoft situation: The company might not have found itself as dangerously exposed to the heavy hand of government regulation had it taken the trouble to build an effective political and government relations capability much earlier than it did. Indeed, for a period of time it was actually a point of pride among high-tech companies to have nothing whatever to do with government or politics, even with numerous examples of companies in other industries that have quietly negotiated acceptable outcomes through effective lobbying and previously established political relationships. The lesson apparently has now been absorbed, painfully by Microsoft and vicariously by other high-tech companies, including some that actually brought the complaint against Microsoft. One useful indicator is the size of political contributions by computer equipment and services companies. Total political giving by the industry was about $1.25 million in the twoyear election cycle ending in 1990. This total rose to just under $4 million in the 1994 cycle, more than doubled to almost $9 million in 1996, rose slightly in 1998, then doubled again to more than $22 million in the 2000 cycle.13 Quite clearly, technology executives are no longer shunning politics. On the other hand, telecommunications companies, which have always been closely regulated by both federal and state agencies, have never deluded themselves about the necessity for government relations and political activities. Effective lobbying and political programs helped companies like SBC and Verizon to make major acquisitions but did not prevent American and European regulators from blocking a merger between Worldcom and Sprint. Similarly, the airline industry’s extensive political and lobbying activities may or may not boost its efforts to consolidate. Political activity is a tool, not a panacea. Still another conundrum for business: What if the political complexion of the lawmakers is unsympathetic to business interests, or at least insufficiently bold to rise fully to their defense? This is essentially the situation in which the American business community found itself in the late 1990s and at the beginning of the 21st century, and it may be a pattern for the future if business does not take steps in its own self-interest (as discussed further on in this book). A related problem is another of those parochial concerns on which governments are fixated, in this case the need to accommodate a wide range of interests and interest groups. In the eyes of some lawmakers, business is the most important of these. To others, business is just one more interest

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group that can get in line with all the rest—and, to a few legislators, at the back of the line at that. A number of these varied interests are often competitive politically with business, and a few are utterly inimical to global enterprise and capitalism per se. The 1999 protests in Seattle, and in Washington, London, Philadelphia, Los Angeles, and Prague in 2000, were a negative tribute to the accelerating force of globalization and the growing power of market economics. Some of the protest groups were labor unions, fearful of losses in domestic jobs and in their memberships. Others were environmental organizations that see business as the cause of pollution, global warming, and other forms of environmental deterioration. Still others were human rights advocates who proselytize intensely to export American cultural values to other societies. Such interests view companies, especially large ones, as the root of the evils besetting the United States and the world, and many extend their antipathy to the very concept of market economics. Capitalism may have defeated communism in the arenas of ideas, diplomacy, and military might, but other antagonists have arisen in its place, at least intellectually. Prominent among these antagonists are protectionists who, notwithstanding their pledges of fealty to free enterprise, wish to erect once again national walls against the development of a single world economy. Ralph Nader has been the patron saint of people with this point of view. Since many of them were persuaded not to “waste” their votes on him but to vote for Gore instead, and other sympathizers chose not to vote at all, the relatively small vote that he won nationally in the 2000 presidential election undoubtedly understates the number of Americans who agree with his point of view. Many of the votes for Pat Buchanan in the same election also were cast by economic nationalists; Buchanan and Nader share similar views on protectionism. (Buchanan was an insignificant factor in 2000, and Nader was severely criticized by the left for “throwing” the election to Bush. Therefore, for the moment, economic nationalism is leaderless, but that does not alter the fact that many Americans hold deeply protectionist views.) In the United States, the community of business enterprises vies constantly with competitive interest groups in the political marketplace. Often, business prevails; equally often, it does not. Despite the recurring, perhaps perpetual, nature of these battles, on issue after issue the business community has lacked an overarching, long-range strategy that ties its efforts to shape public policy making to the realities of politics and public opinion. It is ironic that enterprises that build their businesses through successful economic strategies so often lack an understanding of the need for political strategies to prevail over competitive interest groups. Why is it important that political strategy support and mesh with the achievement of business objectives? The answer is that companies need


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the strong support of the lawmakers and other officials who construct government policy in order to operate from a base of strength, domestically and worldwide. In a democracy such as ours, that requires the backing of informed public opinion. A strong economic home base requires more than high levels of domestic prosperity. It requires a citizenry that is fully informed about, and therefore sympathetic to, the need to tackle longterm problems and issues that, left unresolved, will ultimately undermine the nation’s vitality and weaken America’s ability to remain the world’s preeminent economic, military, and diplomatic leader. It is certainly true that this leadership role requires an outward-looking trade policy, but beyond trade, it requires that we confront issues that have the potential to sap the vitality of the nation as a whole, the wellbeing of every business, and the confidence of the public in our ability to confront real problems with sound answers. Allowed to slide, unresolved issues like the absense of a comprensive energy and environmental policy, a looming demographic crisis, and a deteriorating national rate of savings ultimately threaten to undercut the nation’s global dominance. Campaign rhetoric and congressional oratory notwithstanding, the nation’s political leadership tends to deal inadequately with such issues, except in times of crisis. Who, more than business executives, has greater self-interest in resolving such problems? Who has greater communications skills and resources to lead the public to informed decisions? And who has a greater stake in working to assure the future election of public officials who can develop solutions within a free enterprise context? In candor, there are some people in business who care little about such problems; men and women whose sole focus is the next quarterly earnings report and the elevation of current share prices, whose concept of planning for the long-term vitality of their businesses ends on their expected date of departure or retirement from the company. To such people, this book has little to say. They are Dilbert’s boss, the caricature that the Seattle and Washington protesters would have the public believe is a valid characterization of all business people. However, it is also true that a great many business executives and owners who do care are so preoccupied with the quotidian problems of running their own firms that they have given reduced priority to their implicit roles as trustees, not only for their shareholders and employees, but also for the public legacies of their companies, the free enterprise system, and a democratic way of life. Those legacies are inseparable; to neglect one ultimately is to neglect them all. It is to those business people that the political strategies outlined in this book are addressed. An appreciation of the relevance of politics to the business system starts with an understanding of the interrelationships of business and government.

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As this new century progresses, many variables affecting American society will alter the business–government relationship; demographics, economics, and technology are prominent among them. Let’s examine next what some of those changes will be, and how they may play out politically. NOTES 1. Alan Murray, The Wealth of Choices (New York: Crown Business, 2000). (Quoted in the Wall Street Journal, June 27, 2000, p. B1.) 2. Nua Ltd., “Nua Internet Surveys,” June 26, 2000 (http://www.nua.com/ surveys). 3. John Stopford, “Multinational Corporations Think Again,” Foreign Policy (Winter 1998–1999), p. 12. 4. The Economist, June 17, 2000, pp. 104–106. 5. Washington Post, May 10, 2000, p. A27. 6. David Dollar and Aart Kraay, “Growth Is Good for the Poor” (www.worldbank.org/research/growth/absddolakray.htm). A summary appears in The Economist, May 27, 2000, p. 82. 7. The Economist, May 27, 2000, p. 82. 8. Robert J. Samuelson, Washington Post, April 26, 2000, p. A35. 9. Arnold Toynbee, A Study of History, 12 vols. (London: Oxford University Press, 1946–1957). 10. C. V. Wedgewood, The Thirty Years War (London: The Folio Society, 1999). [Originally published in 1938.] 11. Heritage Foundation, 2001 Index of Economic Freedom (Washington, D.C: the Foundation, 2000). [Published annually.] 12. John Micklethwait and Adrian Wooldridge, A Future Perfect: The Essentials of Globalization (New York: Crown Business, 2000), p. 338. 13. Center for Responsive Politics, as reported in the Wall Street Journal, October 10, 2000, p. A28.

CHAPTER 3

The America of 2025 There are knowns, known unknowns, and unknown unknowns. —Anonymous

Good executives spend considerable time thinking about the future. That, after all, is what planning and budgeting are all about. To know tomorrow’s interrelationships of business, government, and politics requires an equation the calculus for which does not exist. There are, however, some things that will color and shape those relationships that we do know with a fair to high degree of probability. Exploring some of those factors is the subject of this chapter. Conceptually, we know that vast changes will occur in the 21st century. We accept, though perhaps only in principle, that the world will look very different than it does today in terms of demographic and social characteristics, technology and economics, politics and government. Understanding the concept of coming differences is one thing. Appreciating the specifics in all their vast breadth, scope, and depth is something else again, because it affects the psychology of how we look to the future, even the near future. Should we regard it with a sense of wonder or a sense of dread? Probably both feelings are justified if the 21st century alters the world as much as its recent predecessors have. Indeed, the prospect is that the changes will be much vaster than even those wrought in the 20th century. Someone undertaking this exercise a hundred years ago would probably have envisioned a very different world than the one that actually materialized as the 20th century unfolded. That analyst might have envisioned a

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perpetuation of colonialism (although it was not then called that) and the British Empire. He would have been blind not to see the increasing power of the United States, but probably could not have seen the Pax Americana that came to dominate the world—militarily, politically, economically, and technologically—at the century’s close. He might have believed, with some justification at the time, that Argentina and Brazil would also be among the great powers of the New World. He surely would not have foreseen the rise and fall of Nazism and communism, nor “the century of total war” (in Raymond Aron’s phrase), nor the wealth of scientific discoveries and technical innovations wars helped bring about. We understand somewhat more today than our analyst could have about factors likely to shape our future, and their relative probability. We can only grope our way around some of them, and there is much we can never know until it happens. Some discoveries we can anticipate; an eventual cure for cancer, for example. Other revelations and developments will be complete surprises when they occur, like the overthrow of a seemingly stable government or the fortuitous discovery of penicillin. It is still not possible to do much more than fantasize about what the world will look like at the end of the 21st century—there are too many “unknown unknowns”—but we can get a feeble grasp of what the next quarter-century or so will bring. To put that in some context, reflect for a moment on just how much the world has changed during the last 25 years. In 1975, Gerald Ford was president. The United States was in the grip of a rampant inflation that would last until the early 1980s. The Vietnam War finally ended, but the Cold War would continue to be the mesmerizing focus of U.S. and European foreign policies for another 14 years, until the collapse of the Soviet Union. Britain finally decided to join what was then called the European Economic Community (now the European Union), 10 years after its creation. Watches and calculators with liquid crystals were sold for the first time. The Internet was a six-year-old Defense Department network that utilized massive and cumbersome mainframe computers. The world’s first personal computer was just coming onto the market, the Altair 8800, lacking both keyboard and screen. In a garage in Arizona, two teenagers named Bill Gates and Paul Allen were starting up a company called Microsoft. A “mouse” was only a small rodent, and a “web” was a spider’s creation. The telecommunications revolution still lay in the future. Mapping the human genome and the discovery of planets orbiting other suns were no more than science fiction plots. In his 1970 book Future Shock, Alvin Toffler observed that the rate of change occurring throughout our society was accelerating, and predicted that it would continue to do so into the far future.1 Any adult living today has witnessed firsthand the continuing truth of that forecast in virtually every aspect of human life. If the world moved that much between 1975

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and 2000, how much more accelerated change can we expect to see by 2025? One of the interesting aspects of future studies is that certain trends and developments now can be foreseen with some clarity. The crystal ball is murky on most details and unexpected events will always be prevalent, but some major patterns can often be discerned and their implications analyzed in terms of the forking roads that still lie before us. In this chapter, we will examine what seems fairly clear about the next couple of decades. Then, in Chapter 4, we can develop some alternative scenarios of what politics and the business–government relationship may well look like as a result, a quarter-century ahead. POPULATION CHANGES Demographic changes can be predicted with considerable certainty.2 With the retirement of the baby boomers and a flat birthrate among native-born Americans, the population of the United States, almost as much as those of Europe and Japan, will be older and grayer. Unlike those countries, however, there will be more Americans, but most of the new ones will be immigrants. In 2025, according to Census Bureau forecasts, the nation’s population will be about 340 million, a 20 percent increase from 281 million Americans in 2000. (The nation’s population will double before the end of the century.) Three states, California, Texas, and Florida, will account for 45 percent of the national increase over the next 25 years, and Hispanics for close to the same percentage. Whites (particularly women) will constitute both the largest and the oldest group of Americans, Hispanics the fastest growing and the youngest. Hispanics are already at population parity with Blacks, and are rapidly outnumbering them. In 2025, half of all children will be what we regard today as ethnic or racial minorities. But much of this diversity will be concentrated in just 10 states: in the West, Arizona, California, Hawaii, and Nevada; in the South and Southwest, Florida, New Mexico, and Texas; and in the Midwest and Northeast, Illinois, New Jersey, and New York. The rest of the country will still be predominantly White. The non-Hispanic White population of California fell below 50 percent for the first time in 1999. The rest of the nation’s population will follow by 2040. A declining birthrate among White Americans and a static one among Blacks means that domestic population growth will be a function primarily of immigration. In 2025, almost 41 million Americans will be foreign-born. That will be 12.1 percent of the population, compared to less than 10 percent in 2000. Seventy percent of the foreign-born will come from Asia and Latin America, and 70 percent of those immigrants are expected to

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settle in just six states (California, New York, Florida, New Jersey, Illinois, and Texas); California will receive more immigrants than the other five states combined. Notwithstanding the growth of some rural states, the country will be more urbanized and suburbanized than ever. More than 80 percent of the total population will live and work in a relatively small number of metropolitan areas that will produce most of the nation’s income, economic growth, and public revenues. The population aged 65 and over will constitute 18.5 percent of the national total, compared to less than 13 percent in 2000. The median age of the population will rise from 35.2 years to 38.5, and for women to just under 40. In 1995, the aged comprised 15 percent or more of the population in only four states. By 2025, that number will rise to 48 states. Over one-quarter of Florida’s population will be over 65. The populations of some other countries are actually likely to decline. Birthrates in nearly all the advanced economies plus Russia are close to or even below the population replacement rate of 2.1 children per woman. The aging of the population presents serious problems for all the industrialized nations, and even more so for Japan and most Western European countries than for the United States. With a larger percentage of their populations in retirement and a smaller one in the workforce, intergenerational conflict over certain public policy issues seems inescapable in all these countries. People saddled with the costs of living and of providing for their children must inevitably come to resent the ever-growing share of taxes and public resources the aged will consume. In the United States this attitude is likely to be exacerbated by the continued deterioration of the traditional, two-parent family and the increase in poor, single-parent households. Conflict could also spill across ethnic lines, if a browner group of working people see their taxes being paid to support a large, retired, perhaps more affluent population that is mostly White. Intergenerational conflict can also run in the other direction if the aged take exception to tax burdens that benefit young families. In a town in Connecticut with an unusually high proportion of people over 65, seniors staged a tax revolt in the early 1990s to protest property tax increases for the local school system. After one community meeting, the author was chased across a parking lot by senior citizens shouting, “Close the schools, close the schools.” TECHNOLOGY The pace of technological change will undoubtedly continue to accelerate. The engineering to automate transportation is already highly advanced. General Motors says its cars will begin to be automated with the

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2003 models. Major new highways will start to be automated within 10 or 15 years; the problem will be the cost of retrofitting existing ones. Residences will be computerized long before 2025, so that product failures, home fires, or criminal break-ins can all be reported without human effort to the relevant company or agency. Long before then, appliances will be available containing chips and circuits that enable them to report component defects to the manufacturer’s service computer, which will then download a fix—without the homeowner necessarily ever knowing there was a problem in the first place. It is not at all inconceivable that chips could be implanted in the human body to instantly alert the nearest hospital or emergency team when medical emergencies develop. Computer-designed and constructed robots, essentially artificial life forms, have already been created in laboratories, and will be prevalent in a variety of scientific, industrial, and household applications by 2025. Computers equipped with this technology will have the ability to “evolve” the ideal solution to a unique need or problem and then build customized equipment with exactly the characteristics required. This kind of robotics will be prevalent in manufacturing and perhaps in other business applications. It may well be available for a variety of consumer applications, including automatic housecleaning. Computing technology will be very different in other ways. One futurist forecasts that, as early as 2010, computers will be worn, perhaps embedded in eyeglasses using the eye’s retina as the screen.3 Because there are physical limits to the miniaturization of silicon chips, tomorrow’s microchips may be based on an entirely new technology, perhaps virtual DNA. Computing capacity will be measured in exabytes—a billion billion bytes. The entire store of recorded knowledge will be in digital form and widely accessible. Human identification will move past fingerprinting to analysis of unique characteristics of eyes and voices, developments that will have applications ranging from security checks to banking to Internet retailing. The next phase of discovery in biotechnology will be to inventory and decode the 10,000 proteins in the human body. Medical technology will expand, making use of nanotechnology (the utilization of machines of microscopic size), gene therapy, and new pharmaceuticals based on the ongoing wave of genetic discoveries. The focus of medicine will be on the extension of human life through prevention and eradication of disease, not merely its cure, and on accelerated recoveries from surgery and accidental injury. Any American who reaches the age of 65 by 2025 will have a very good chance of living well into his (or, particularly, her) second century. The unification of electronic communications, news media, entertainment, and information processing will be an accomplished fact long before 2025. By that time, the present Internet will be obsolete, replaced by Internet 2 (or perhaps 10!)—completely wireless, transmitted worldwide

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over satellites, microwaves, and fiber optics. The capabilities of fiber optics alone will expand bandwidth—the carrying capacity of a given communications medium—thousands of times over today’s technology. The bandwidth potential of wireless media may be as great. Because many less developed countries are already moving into wireless communications and bypassing the entire stage of wired telephony, the process of economic development will be speeded up worldwide. One can easily envision a single personal instrument, voice-activated and as ubiquitous as today’s wristwatch, which everyone will utilize to communicate, work, write, learn, buy, sell, bank, invest, be entertained, and vote—at any time of the day and at any point on the globe. (Indeed, it may not be that limited; research is actually now underway to extend the Internet to the moon and the planets by the time mankind reaches them physically.) Unique electronic identifiers akin to today’s Social Security numbers will be assigned not to telephones but to individuals, perhaps in childhood or even at birth, so that people can be located and contacted wherever they may be. The effect will be to create a single electronic network comprising all of humanity. Tomorrow’s hermits will be those individuals who shun or cannot afford such a personal communications device, isolated from virtually all the interactions of society, the economy, and most forms of human contact. THE ECONOMY A major business consulting firm has projected that total global output (i.e., the aggregate of GDP for all countries) will increase from about $28 trillion in 2000 to some $90 trillion in 30 years. During the same period, the portion of these sums accounted for by the global economy (as opposed to the share produced and consumed only locally) will rise from 20 percent now to 80 percent.4 Producing numbers of that magnitude requires an annual growth rate of over 7 percent; assuming that inflation accounts for three percentage points, world GDP would have to grow at more than 4 percent annually to reach that projection. That is far from impossible considering the growth rates in many developing countries and the low base at which they start. Continued gains in productivity would have to be a major component, especially for the advanced economies that will not experience significant population growth. Unless they reverse their restrictive immigration policies, Western Europe and Japan can look only to productivity improvements for the source of growth. Another critical set of factors is natural resources. On the whole, global food supplies are likely to be adequate in 2025, especially given advances in biotechnology (and assuming popular biases in Europe and elsewhere against genetically modified foods are overcome). There will still be regional shortages, though, most notably in the drought-ridden countries of

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sub-Saharan Africa. (One of the few possible long-term benefits of the AIDS disaster is that it may result in reduced food consumption demand; more people are dying of AIDS today but perhaps that means that fewer will die of starvation or malnutrition tomorrow.) Related to food supply, though, are supplies of water which may not be adequate everywhere. In addition to Africa and the Middle East, parts of Russia and China may experience problems. “It is easy to see that control over water will come to be seen as a much more important strategic issue between countries and within them,” says British journalist Hamish McRae. “Water will become a political issue in much the same way that oil has been for much of the period after the Second World War.”5 The world will not run short of worldwide energy resources by 2025 or for at least the rest of the century, but that does not mean prices will be stable. Coal and natural gas will remain plentiful, and oil reserves adequate. Continuing spot energy shortages, both in time and place, are inevitable, though, as are occasional periods of glut. The erratic flow of supplies takes its toll in prices, as the United States saw in the depressed fuel prices of 1999 and the high ones of 2000. Hydropower, fossil fuels, nuclear energy, and even firewood (still the major energy source in the world’s least developed regions) all have adverse environmental impacts of one kind or another. The development of other, perhaps “cleaner” sources on large scales will have to wait until fossil fuel prices increase to the point that alternatives become commercially feasible. That may happen sooner rather than later as the costs of environmental control, including those associated with the global warming phenomenon, continue to rise. Completely new environmental strategies will be needed to restrain the inevitable increases in energy costs—just as balanced energy development must contend with environmental deterioration. Some help may be on the way from new technologies, though, such as the improvements in battery storage that will soon bring a larger percentage of electric cars on the market. Exotic energy sources (e.g., tidal, wind, and geothermal power) are unlikely to have more than localized benefits. Electricity generation may also become localized if the technology of micro-power plants becomes cost-effective relative to the expense of long distance transmission, and if they can meet environmentally acceptable standards. Economic growth and standards of living will continue to be determined primarily by two factors: demographics and productivity. The world’s population will continue to increase but primarily in the developing countries, spilling into the advanced economies through whatever amount of immigration the latter permit. These demographic and natural resource factors will necessarily affect economic growth. People are living longer, but most consumption, except for medical care, occurs among younger generations forming households

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and raising children. Prospects for productivity improvements flowing from technological innovations, better management, and economic efficiencies overall are promising everywhere; but countries with low birth rates that are averse to increasing their populations through immigration will grow economically only from productivity gains. The sum of those factors means that the advanced economies will grow, but at slower rates. Growth will also be impeded by any significant extensions of government regulation, and by the increased costs of public social service programs, most notably for the aged, whose numbers, both absolutely and as percentages of national populations, will rise throughout the developed world. Medical advances will bring with them acute societal problems, related to those precipitated by demographics. Perhaps the single most divisive internal political issue in the United States and other industrial countries throughout most of the 21st century will be the financing of retirement income and health care costs of an enlarged aging population, a cost that of necessity will be a net drain on national productivity and public resources. On the other hand, the increased ability and willingness of older people to continue working will require a surge of economic growth if jobs are also to be available for young people entering the labor force. All this has important potential political implications. As McRae points out, “Western-style democracies are bad at coping with a period when living standards do not rise.”6 As we will discuss below, the combination of slow growth and rising tax burdens to support an enlarging aged population can create disruptive social conditions including populist, anticorporate political movements. In varying degrees, the United States will be affected by most of the same problems impacting the advanced countries overall. By 2025, America’s economic activity will be predominantly in the areas of services, technology, and international commerce. Both the overall economy and the total number of jobs will continue to grow, with only a modest percentage remaining in manufacturing industries that increasingly find economic climates abroad more appealing than domestic locations. Among the evergrowing share of GDP that service industries represent, health care will be the largest. The greatest risk to the nation’s economic future may be the glacial pace of educational reforms. It is uncertain if the public school system as it is constituted today can produce the supply of skilled and professional workers that will be demanded in 2025 by a highly technological economy. If not, the result could be a two-tiered economy, with skilled jobs going begging even while unemployed armies of the unskilled roam the streets. No economy has ever had to confront the pain of high unemployment at the lower end of the economic ladder, coupled with acute labor shortages at the upper end. The latter development might well push up wages past

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the point at which they could be offset by productivity improvements. The resulting wave of inflation would take its toll at both the top and bottom of the ladder. However, high economic incentives may keep a large percentage of older people with valuable skills in the workforce, even as another large percentage opts for early retirement. There will be other significant economic changes in the United States by 2025. Outside the public sector, most Americans will work for companies, both large and small, that do business globally, many of them headquartered in other countries. The vast majority of those people here and perhaps in other advanced economies will have the bulk of their retirement savings and other investments in securities of these international companies. Technology will invoke great changes. Networked telecommuting will be the prevalent way in which people work. As more and more workers are networked to their jobs, it will matter less and less where their nominal offices or other workplaces are located, even if not in the same country. Holographic and virtual reality systems may be ubiquitous and make today’s two-dimensional videoconferencing quaint and antiquated. Telecommuting might or might not reduce the burden of rush-hour commuting, since even a smaller percentage of an increased population could still be a huge number. On the other hand, if telecommuting becomes sufficiently widespread, there may be a crisis in the commercial real estate industry as fewer people work in office clusters, and physical retailing and entertainment centers move ever closer to residential areas. The continued growth of metropolitan areas does not necessarily imply the revitalization of inner cities. Retailing also will be very different. One of the most important ways in which the Internet changes retailing is its ability to let consumers compare prices against product or service qualities and characteristics in order to seek out the best value. Many services will become commodity-like if competing providers cannot find truly distinctive ways of differentiating themselves. What is the role of real estate brokers if buyers can cruise the Internet to choose among available homes in a particular locality, and if sellers can conduct their own Internet auctions to determine the best bid? Through much the same process, mortgage banking is already becoming an Internet commodity. Traditional retailing will not disappear, but as much will be sold electronically as in physical, “brick-and-mortar” stores. Consumers will be able to purchase products and services over the Internet (or its successors) from any place in the world. Companies specializing in the rapid physical delivery of those goods will inevitably be a growth industry. The current movement among state governments to conform their sales tax bases and practices and somehow enforce collections across state lines may falter in the face of international Internet retailing. If New Jersey tries to collect

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sales taxes from its consumers on their Internet purchases from a California retailer, they can easily switch their business to competing sources in Germany or Australia from which taxes would be even harder to collect. And the “bricks” are unlikely to stand still very long for a tax system that provides a built-in advantage for their electronic competitors. State sales taxes may therefore be replaced by either uniform value-added taxes or ever-growing state income taxes. Finances overall will be a challenging problem to state governments over the next quarter-century. Banking and securities trading will also be very different kinds of businesses than they are today. As smart cards (which store and spend cash) become integrated with wireless communications, the need for physical bank branches and ATMs could disappear, significantly reducing bank costs. On the other hand, the profitability of their lending operations will drop as consumer and business borrowers shop the Internet to instantly determine where the cheapest rates can be found. Banks also face the threat that the Internet could obsolete their payment and clearinghouse functions. Stocks and bonds will be traded electronically and instantaneously (as currencies and commodities effectively now are) on a 24-hour global securities market. Securities exchanges, already consolidating, may be down to one or two in the world by 2025; indeed, if clearinghouse functions can be completely automated, there may be no physical exchanges at all. Stock brokerages may then become firms that sell only research and advisory services. If all securities are traded globally and electronically, there arises the question of how they are to be regulated. Some international mechanism will have to be created to assume the functions now carried out by the Securities and Exchange Commission (SEC) in the United States and its counterparts in other countries. THE INTERNATIONAL DIMENSION Domestic economies will be increasingly integrated, if not worldwide then in regional economic blocs that will trade ever more extensively within and among each other, their international commerce and investments possibly governed by some supranational body that grows out of today’s WTO. Free trade areas are springing up now in South and Central America, and the United States is committed, at least in principle, to negotiating within this decade a single, hemispheric free trade area, perhaps transforming NAFTA into a system that stretches from the Arctic Ocean to the Straits of Magellan. Similar developments are occurring around the Pacific Rim and within East Asia, and ultimately could include China as well as Japan. Countries ranging from Turkey and the Balkans north to the Baltic, all want to be part of the EU. By 2025 and possibly well before, the EU could encompass up to 30 countries.

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It is possible that, by that time, all of the EU may be a totally unified economy as large as that of North America’s, connected not only by a single currency but also by integrated social, political, diplomatic, and military networks that, taken together, may be only short steps removed from the establishment of a United States of Europe. It is also possible, though, that there may be three tiers to the EU: a core group of countries (comprising Germany, France, Italy, and the Benelux states) socially, economically, and monetarily united, and that cooperate on international affairs; a second layer (of Britain, the Scandinavian countries, and perhaps eventually Switzerland) that are only partially integrated; and a third group of countries to the south and east that want to be part of the first but are still not sufficiently developed. Such a three-tiered Europe would not be the force in world affairs, or the rival to the United States, that a united Europe could be, but it would still be a giant economic power. The mission of NATO, perhaps with the addition of Japan, may be eventually expanded to become a global peacekeeping force sanctioned by the United Nations. The assumptions underlying this picture are that most countries will be market economies and that trade liberalization will progress globally as well as regionally. Either assumption could prove false, but the greater danger is that economic nationalism might arise once again. Two kinds of developments have precipitated economic nationalism in the past. The growth of international commerce that began in the 19th century was abruptly ended by World War I, and did not resume until the end of World War II. Economic integration is a deterrent to war, but there is no absolute barrier to armed hostilities if national leaders are determined to precipitate them. Purely local wars apart, America’s vast network of defense treaties would surely involve it once again in any major regional conflict. Terrorism is a related threat, because of its inherent capability to disrupt commerce and the possibility that it could provoke military retribution. The other potential cause of sweeping economic nationalism is the death of a thousand cuts—a slow torture of small protectionist steps here and there that bring about retaliatory measures, eventually reversing worldwide integration and leading to trade wars and barriers everywhere. This kind of protectionism is a constant danger, latent in every country. Even the most trivial matters can trigger protectionist developments. “The Banana War,” fought between the United States and the EU in 1998–2000, over trade in a commodity in which neither side had anything but an inconsequential economic interest, illustrates how easily economic nationalism can arise. It was a dispute as intense as it was inane. (It is also a demonstration of the influence a small but politically active industry can exert.) If serious disputes can arise out of such trivial issues, trade wars over

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major issues could easily derail the expansion of international commerce. One possible issue is large-scale agricultural protectionism. The EU’s Common Agricultural Policy (CAP) provides huge subsidies (approaching $400 billion) to European farmers, and constitutes a major non-tariff barrier to imports of farm commodities from every other continent. Because European consumers do not protest the high prices the CAP costs them, political leaders have little incentive to end the subsidies to the EU’s coddled farmers. Another barrier, principally impacting the United States, is the EU’s ban on genetically modified grains and foods made from them. This problem, unlike the CAP, reflects vociferous consumer protests and demands in some European countries. Sooner or later, therefore, a truly serious and potentially derailing trade dispute between the EU and agricultural exporting countries seems inevitable. The result could be that the focus of each of the 21st century’s three major trade blocs—the United States (with or without Latin America), Europe, and Asia—turns inward or, much worse, that two of the blocs gang up on the third. Another potential source of economic nationalism is globalization itself. Protectionists will rise to power if substantial numbers of people in the advanced economies come to believe that the losers from expanded trade and globalism outnumber the gainers. Those who are hurt are easily identified, and quick to protest the cause (real or perceived) of their injury. The winners, on the other hand, are everywhere, but they are diffused and not always aware of the source of their prosperity. The inadequate public defense of world trade by American multinationals and other sectors of the U.S. business community contributes substantially to this danger. The most probable outcome seems to be continued economic integration and expansion of the world economy, but not without some painful bumps, jolts, and detours along the route. Yet, however these developments turn out, the results will affect almost every American. This nation’s economic prospects will be increasingly dependent on international commerce as the century progresses. That is even truer for European and Asian countries, most of which are already more dependent on international trade than the United States. The downside of globalization is that retrenchment in international commerce would inevitably produce a worldwide recession, the worst effects of which would be most strongly felt in the countries that are most trade-dependent. That could happen whether the cause of the slowdown is protectionism or a major international crisis, or just a global downturn in the economic cycle. POLITICAL AND SOCIAL IMPLICATIONS The population, technological, and economic changes discussed above range in likelihood from the possible to the certain; some are, no doubt,

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underestimated. What can be set forth with far less confidence are the social and political alterations that such developments will produce. The greatest political threat to future growth and stability is the possibility of major wars. Ethnic and regional conflicts always have the potential to spread, or to create global economic crises like the threats to oil supplies that the recurring crises in the Middle East always present. National chauvinism, perhaps originating in a threatened or aggressive China, is another risk. Resource dislocations (e.g., oil or water shortages) could become precipitating factors. So could population pressures in developing countries and immigration restrictions among developed ones. The dangers that any of these may arise are unknowable, but history provides little comfort. With or without the danger of formal wars, terrorism will remain a constant threat that national governments and international alliances have been ineffective in eliminating. Americans will confront major domestic issues by 2025 that have their roots in the emerging demographic, economic, and technological changes. Technology particularly will give rise to whole new sets of political issues concerning the power of the state over individual citizens and enterprises. A few of the questions that business, society, and government will have to confront are these: 1. If there is little connection between where people work, where they engage in commercial transactions, and where they live, what is the role of government? For instance, if most communications and economic transactions take place via global wireless media, who regulates the radio and light frequencies worldwide? Presumably, not the Federal Communications Commission, whose writ of authority stops at the U.S. border. And who regulates the transactions themselves, and how? Putting aside any questions of desirability, will those governments or societal elements that want to regulate content even have the technical ability to do so? And will the ultimate consequence be liberty or anarchy? 2. How will the educational system respond to the challenges posed by the Internet and wireless communications? If people can earn college degrees over the Internet, why not a high school diploma? One consequence could be the furtherance of home schooling, particularly as more and more parents find themselves frustrated by the inadequacies of public schools. Schools do play an important role in the socialization of children, especially those from families where adults are present for only a few waking hours each day. However, it is not totally inconceivable that other institutions could arise to fill the socialization role, if necessary educational reforms continue to be blocked by teachers’ unions and other recalcitrant advocates of the status quo. 3. As long as children are educated in physical schools (as opposed to wholly electronic ones), and as long as their families travel on roads and highways, there will be a need for local government. But what kind of local government? Will citizens, the vast bulk of whom will live in met-

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ropolitan areas, tolerate a multiplicity of local governments that perpetually feud with each other over public policies? For example, the rapidly growing Washington Metropolitan Area today spreads across two states, the District of Columbia, and about a dozen local governments, all of them in disagreement about transportation and land-use policy. The arguments have gone on for years because, while multiple groups discuss the problems, there is no agency or mechanism empowered to resolve them. Meanwhile, traffic routinely gridlocks even in non-rush hour periods. Issues of this sort are endemic to most metropolitan areas. Will rebellious public opinion eventually bring about a consolidation of local governments in metropolitan areas? What role will business play in bringing about change? 4. What is the role of state government in the kind of society and economy into which the United States is evolving? Many metropolitan areas, where ever-growing percentages of the population will live, straddle state lines, while some of the largest and most problem-ridden (e.g., Los Angeles, San Francisco, Chicago, Boston) lie wholly or largely within single states. Sometimes the states, as often as traditional local governments, are themselves obstacles to problem-solving, in part because of competing pressures for funds from elsewhere in the state, but also sometimes because of ideology or regional chauvinism. Are the historic boundaries of the 50 states completely immutable, or will they someday change to reflect the alterations occurring in America? Even a casual glance at a map identifies only Hawaii as the single state immune from logical splits and mergers at some point within this century. The constitutional implications of remapping the states are, of course, enormous. 5. How will the ever-growing crisis of funding of retirement incomes and health care costs for the aged be resolved? The issue is not merely one of assuring the financial solvency of the Social Security trust fund and of Medicare. The greater dilemma is that financing services for the elderly will be increasingly burdensome on the working-age population as the number of retirees grows both in absolute numbers and as a percentage of the population. Today, there are 4.5 working Americans for each retired person. By 2025 or thereabouts, there will be only 2.8 workers per retiree. That translates to a cost more than 60 percent higher than that borne by current workers, even assuming no further improvement in benefits for the aged by then—an improbable outcome, given the constant generosity to retirees of both Republican and Democratic Congresses. Pension funding is a problem, not just for the United States but also for Japan, Russia, and Western European nations, all of which have birthrates that are stagnating or declining. “To keep the ratio of workers to pensioners steady,” forecasts The Economist, by 2050 European countries will have to rely on immigrant workers, totaling “a staggering 13.5 [million] a year in the EU as a whole.”7

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Medicare has its own pressures. Benefits (e.g., prescription drugs) for seniors and other covered groups in the United States will continue to rise, funded by taxes on the working population as Social Security is. Ironically, many younger workers lack health insurance of their own even as they must pay for health care for the retired. Yet, Medicare benefits do not now keep pace with the medical costs of the aged. Since the political power of seniors will only increase as their numbers grow, one can easily envision legislation at some point that will require all employers to provide universal, fully portable pension benefits and mandate minimum pension levels. Such a requirement would be an expensive nuisance for most large employers, but a painful, perhaps ruinous, burden for small ones. But will the public long accept a system of retirement benefits that puts poorly covered employees of smaller firms at a perpetual disadvantage? A universal private pension requirement would produce constantly recurring political struggles to raise benefit levels every few years, much like the minimum wage issue today. The implications of such legislation for corporate profits and national productivity can only be imagined. The condition of most European economies today provides an indication of the economically depressing impact of high levels of public and mandatory private social benefit programs. What solutions will the business community develop to deal with the retirement financing problem that avoid an economically horrendous outcome? Privatizing part of Social Security has the potential to provide greater retirement benefits, but many people will insist on an expensive government safety net to protect them against stock market drops. Raising or even eliminating the caps on tax deferred savings programs (IRAs, 401(k) plans, and the like) would increase the financial resources of future retirees while also taking a significant step toward improving the declining savings rate of Americans. These same goals would also be accomplished in the realm of health care finance by enhanced, tax-favored medical savings accounts (MSAs) to provide additional protection against catastrophic medical costs. Restoration of full tax deductibility of all health insurance premiums paid by individuals, not just the self-employed, would encourage more people lacking group medical policies to purchase their own insurance. Will the federal budget surplus continue at levels high enough to support tax benefits of this kind? 6. What are the implications of demographic change for immigration policy? In the face of declining birth and death rates, America, like Europe and Japan, will have to rely on expanded immigration from less developed countries to maintain some semblance of the current ratio of workers to retirees. America is indeed a nation of immigrants and the United States has always permitted a steady, if regulated, flow of migrants from other countries. On the other hand, there has always been a broad nativist streak

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among Americans, dating at least as far back as the anti-immigration Know-Nothing movement of the 19th century, and epitomized today by politicians of the Patrick Buchanan stripe. (Nativism is an even more severe obstacle to immigration in Europe and Japan.) Nativism in the United States could easily become a major political force once again, as Whites perceive themselves to be increasingly outnumbered, surrounded, and perhaps economically threatened by Asians and Latinos. (Immigration from Western Europe has not been significant for many decades, and the modest flow from Russia and Eastern European countries can be expected to decline as those economies develop and some of them become part of an enlarging European Union.) Achieving a public consensus behind nativist immigration restrictions would be politically difficult today and will be progressively harder over time as immigrant groups grow in size and political power. To some extent, therefore, the economic problem seems able to solve itself, at least in the United States if not in Japan and Europe, countries far less hospitable to immigration. The social, and therefore the political, problems of high U.S. immigration levels are a different story. Even after waves of legal and illegal migrants, less than 5 percent of the U.S. population now consists of the foreign-born. That will change rapidly. “By 2025, the Census Bureau projects immigrants to be 12 percent of the population; their American-born children will probably represent an equal number. That’s one-quarter of the population.”8 The educational and social costs that situation will generate will be enormous. In consequence, strong nativist reactions and resentments seem an inevitable part of the 21st century’s political landscape. Nativism is not the only source of objections to high levels of immigration. Thoughtful people like former Republican Senator Alan K. Simpson and former Democratic Governor Richard D. Lamm raise the question of whether Americans truly wish their country to reach a projected population of 571 million by the end of this century, double our present numbers. There will be prices to be paid, they point out, in loss of open green space, higher population densities, and a variety of new social and political problems.9 But if we do not wish to pay those prices, we will pay others that most people would consider worse. Immigration restrictions would pose a severe economic threat to the economy: Productivity gains alone cannot sustain high levels of economic growth and prosperity if there is no substantial growth in the number of consumers. As we shall discuss in Chapter 9, immigration will be the primary source of the younger workers the economy needs to finance the retirement and health care costs of the growing older population; the alternative is a ruinous tax burden or the elimination of most other government programs or some combination of both.

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One measure that might alleviate these problems somewhat would be changes in national immigration policy to give permanent priority to educated professionals and workers with skills in short supply, as those of software programmers and computer experts already are. This is only part of the nation’s immigration dilemma, however, and probably not the largest part. As glowing a beacon as America is to the well educated and highly skilled, it is the world’s poor that have always sought to emigrate here by the millions. It is difficult to imagine how the United States, now largely unable to prevent illegal migrants from filtering through our porous borders, could ever successfully close its doors to refugees from poverty, even assuming the necessary political consensus behind such a policy could be achieved. The vast pressures a continuous flow of immigrants exerts on local school systems and other burdened institutions will be a constant challenge throughout this century. 7. Long-overdue improvements in voting technology, brought home to the nation by the Florida debacle in 2000, may make the physical process of voting less complex and more understandable, but will not do much for two more profound democratic concerns. First, energizing greater percentages of Americans to participate in elections. Second, and even more difficult, assuring that voting is the product of informed study of candidates and issues and not one of last-minute whim or interest group manipulation. Should voting booth technology maximize clarity and convenience, or should the voting process provide the opportunity for voters to learn more about what underlies the decisions they are being asked to make? Oregon’s system of universal mail-in ballots, while increasing the potential for fraud, does give citizens an opportunity to learn more about candidates and issues and to decide among them at leisure. Online voting could accomplish the same goal, though with similar risks. Should voting systems seek to increase turnout at the risk of making ballot decisions even less the product of thoughtful study than they now are, and more the product of last-minute impulses to vote for the last candidate to run a political ad? Or is it more important to encourage voters to take the time to research the issues and candidates before deciding how to vote? Implicit in these questions is a recurrent dilemma of democracy—that the vote of the citizen who has reflected long and carefully on the candidates and issues is cancelled out by that of a neighbor who was hardly aware of the upcoming election until the night before. As long as the voters’ physical presence at the polling place is required, the concerned citizen has some advantage over the apathetic one who may or may not take the trouble to turn up. The offsetting argument is that there are valuable gains in political stability when the maximum number of citizens participates in the decisions affecting their governance, and that high voter turnout is therefore more important than the actual election result. The irony is that the easier it

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has become in recent decades to get people registered and voting, the lower the percentage of the voting-age population who actually participate. The exception seems to be complete voting by mail that substantially increased Oregon’s turnout in 2000, although at the cost of unacceptable delays in tallying results. Streamlining ballots by reducing the number of ballot questions and elective offices would also help. But no voting technology will resolve the underlying problem of Americans who are altogether disaffected from government and the political process. That is a problem of democracy itself. 8. A deeper issue for representative government is the effect of voting changes upon the direct democracy movement. About half the states, (mostly in the West), now permit voters to participate in the legislative process through initiatives and referenda. If online voting ever becomes universal in state and federal elections, why not also extend direct democracy rights to the citizens of every state and apply it to national legislation as well, as Ross Perot and others have proposed? Frequently bypassing or second-guessing elected legislatures, ballot lawmaking tends to produce populist results—term limits, tax cutbacks, environmental restrictions, and the like. These then are typically challenged in the courts, thereby inserting the judiciary into what is really a legislative role and keeping the issue in limbo for months or years. Nothing but the electorate’s good sense prevents the adoption of wholly contradictory results. What happens if the voters of, say, California, adopt a new series of government programs in one ballot question while simultaneously cutting the taxes to pay for them in another? In traditional representative government, elected lawmakers study the issues, hear the views of affected interest groups, and eventually negotiate a final result. Direct democracy already risks instant decisions based on inadequate voter information. If not conducted under very carefully circumscribed procedures, online voting could revolutionize political decision making—effectively transforming public opinion polls into instant electronic referenda. That would be a result some populists might favor, but it is hardly consistent with either representative government or thoughtful decision making. 9. What is the future of political parties in the United States, and indeed of the two-party system? As we will discuss in subsequent chapters, the parties have been progressively weakened in recent decades by a variety of changes in communications, reform movements, and political developments. Their long-term survival as the dominant institutions of the electoral process is in doubt. Major interest groups have positioned themselves to fill the void the demise of the parties will create, but there will be a significant price to be paid in political instability. Political stability is part of the bedrock of the American economy, and anything that jeopardizes the one increases the vulnerability of the other. The pattern of party decay

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may have greater consequences for the nation’s economic power in this century than any other single trend or development. 10. What is the future of democratic values in America? From its very beginnings, we have been a people blessed with an exceptional set of circumstances and opportunities. The first settlers found a vast land with equally vast resources, all there for the taking (the objections of the Native Americans notwithstanding). A culture grew based on individual initiative, competition, achievement, and a degree of egalitarianism that has steadily progressed throughout our history. It is a quirk of history that publication of Scotsman Adam Smith’s The Wealth of Nations occurred the same year as American independence. It is on this side of the Atlantic, however, that capitalism has flourished most vigorously. Democracy is capitalism’s consort, a marriage that nations across the globe have belatedly discovered since the collapse of communism. Democratic values have spread more or less evenly with the resurgence of market economies. Democracy in America has been virtually synonymous with liberty, a concept that is more worn and frayed than it was when it was proclaimed as one of man’s inalienable rights in the Declaration of Independence. The words liberty, liberal, and libertarian all have the same root, the Latin word for free. However, liberal to Europeans has a very different definition than it does to Americans, connoting much of what libertarian conveys to us, that is, freedom from repressive control by the state. Perhaps we need a new word, because on the western shores of the Atlantic liberalism has come to mean statism, a preference for government as the problemsolver of first resort. Liberty still means freedom, but freedom today has become subject to contemporary standards of political correctness. Does freedom of speech still apply to those who are shouted down when they seek to express unpopular views on matters of race or sexual orientation? Are we still free when groups work to apply the power of the state against the reproductive conduct, sexual lifestyles, or smoking behavior of others? What kinds of freedom exist when individual enterprises are compelled to undertake costs and behaviors that benefit some other interest or that of society at large? Are our concepts of liberty and democracy being narrowed at home even as they are taking root and expanding abroad? Questions of individual liberty have been confronted since the dawn of the Republic by potentially repressive governments and coercive majorities. They will be vigorously debated throughout this new century and until democracy is interred. In the meantime, everyone concerned about the meaning of liberty should occasionally re-read George Orwell’s great social satire Animal Farm, to be reminded of how easy it is for noble concepts to be inverted and perverted. 11. How is democracy reconciled to global economic power? How do business enterprises legitimately influence democratic decision making?

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Companies with significant international interests have a mind-set that is international, not local or national. Governments, on the other hand, necessarily and properly focus on parochial concerns and issues, sometimes taking business interests into account, sometimes not. Economic power may automatically produce political power in relatively primitive political societies like those of Russia and much of Latin America; it does not do so in the societies of the United States and Europe. Even Japan is slowly reducing the influence of keiretsu (major corporations) on public policy, and the concept of “Japan, Inc.” is on the wane. Mass communications and the new technologies are giving democracy an increasingly populist flavor, opposing the interests of holders of economic power. 12. The face of the business community’s most severe and potent critics is changing. Organized labor, for all its new efforts to mobilize the nonunionized, is a declining force. In 2000, total membership declined to a record low of 13.5 percent of the labor force, with the old-line industrial unions continuing to be hardest hit. Only 9 percent of the private sector workforce is now unionized. The most powerful segment in the AFL-CIO is the public employee unions, to which 37.5 percent of government workers belong. As unions’ overall membership has declined, however, their political activism has increased, and will continue to do so as the most effective way to achieve their legislative goals. A stunning development, given their earlier conservative and Republican political activities, has been the movement among physicians to unionize in response to clamps on health care costs. It is difficult to imagine medical professionals demonstrating union solidarity by joining a picket line outside some factory— but then no one ever expected that airline pilots would do so either. The business antagonists who are growing in size and power are the environmental groups. They are often allied with anti-corporate critics like Ralph Nader, and identify with his attacks on “a government so dedicated to serving the needs of large corporate political donors and well-financed special-interest groups that average citizens can’t get their grievances heard.”10 The power of Nader and his followers is not the size of the Green vote (far smaller here than in, say, Germany, where the Greens are currently part of the governing coalition) as much as their ability to organize major protest movements and to gain valuable publicity and new adherents. However, it is the organizations with a “pure” environmental agenda that have become an increasingly significant force in membership, finances, lobbying strength, and grassroots political capability. Dues-paying membership among nine such groups has increased in the aggregate by almost 700 percent since 1970, to close to seven million.11 Even if their annual rate of growth drops over the next 25 years to a quarter of what it has been, membership would still be 25–30 million—twice the present mem-

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bership of all AFL-CIO unions combined—and exceeded in size only by the AARP, the advocate for the nation’s older people. The Naderites may be the spiritual children of the hippies of the 1960s, but the environmentalists are often quite different—typically welleducated and affluent suburbanites, the kinds of people who once were stereotypical Republicans. There are shades of green, of course, and not all the environmental groups have an anti-corporate agenda. Those that do, however, such as the Sierra Club, are militant in pursuit of their agenda, politically well financed, and highly organized at the grassroots. 13. As environmentalists and their sometime allies, populists (increasingly including conservative populists), experience a resurgence, business people will find it progressively more difficult to deter adverse national and state public policies. In democracies, lawmakers count noses, and there are not a great many of them on the faces of business people who are effective in influencing public policy. In most corporations, senior managers and executives number at most in the dozens or low hundreds; in only the largest worldwide companies might their numbers exceed a thousand. That is not a lot of votes to tally against the vast numbers of voters who may support a position that a particular industry, or even the business community as a whole, opposes. While shareholders could add their voices to those of their executives, in practice they rarely become involved. Institutional investors usually do not want to, at least partly because they have their own government relations problems; and individuals owning shares indirectly through mutual funds and retirement plans generally understand little or nothing about what is involved. Companies have sometimes sought to amplify their legislative and political voices through grassroots programs to mobilize middle and junior managers, though with mixed success. Most often, they rely on trade and business associations, and on corporate or contract lobbyists, supplemented by political contributions from executives directly or though political action committees—and, most recently, by corporate soft money contributions to political parties and candidates. As a group, business executives have otherwise largely shunned direct personal political involvement. Whether and how these strategies will be effective and sufficient in the future are questions we will address in the scenarios below and in the chapters that follow. NOTES 1. Alvin Toffler, Future Shock (New York: Bantam Books, 1970). 2. Sources of data in this section: U.S. Census Bureau, Population Projections Branch. Projections as of July 20, 2000. 3. Marc Ferranti, “Fast-Paced Technology Advances Will Continue,” InfoWorld.com, June 29, 2000 (http/www.infoworld.com/articles/hn/xml/00/06/29/ 000629.xml). The forecast is attributed to Raymond Kurzweil.

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4. Projections by McKinsey & Co., cited in John Micklethwait and Adrian Wooldridge, A Future Perfect: The Essentials of Globalization (New York: Crown Business, 2000), pp. 121–122. 5. Hamish McRae, The World in 2020 (Boston: Harvard Business School Press, 1994), p. 127. 6. Ibid., p. 266. 7. “Europe’s Immigrants,” The Economist, May 6, 2000, p. 25. 8. Robert J. Samuelson, “Ignoring Immigration,” Washington Post, May 3, 2000, p. A23. 9. Alan K. Simpson and Richard D. Lamm, “571 Million Americans,” Washington Post, June 20, 2000. 10. Gerald F. Seib, “Nader’s Mantra: Politics as Usual Taints the System,” Wall Street Journal, June 14, 2000, p. A28. 11. Calculated from data reported in the Washington Post, July 11, 1999, p. B3.

CHAPTER 4

The Future of Business– Government Relations: Three Scenarios of 2025 Few relationships are as critical to the business enterprise itself as the relationship to government. —Peter F. Drucker

A quarter-century is a minute fraction of human history. Any reader over the age of 30 can recall events and experiences of 25 years ago; but even based on factual projections and intelligent guesses about probable developments during the next 25 years, there is an infinity of ways in which the near future can unfold, in which the elements of forecasts may interrelate, and particularly in which the relationships of government, politics, and economic enterprise may develop. This chapter explores three possible scenarios of those relationships, and the factors and considerations bearing on them.1 THE POPULIST DEMOCRACY In this projected year of 2025, the dominant lobbying influences in the United States view capitalism as a largely malevolent force—inimical to the interests of workers and consumers here and abroad, destructive of the environment, and indifferent to the welfare of the American economy and society in the selfish corporate pursuit of global profits. This attitude is reflected in the hostility toward business prevalent in the White House, Congress, and among most state government officials. The Greens are a powerful force in American society, comprising not only what, at the turn of the 21st century, was considered the radical fringe

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of the environmentalist movement, but also avowed enemies of large multinational companies per se. There is a limited spectrum of Green opinion. Some Greens are not anti-business as such, and have a warm spot for small local businesses that, to them, are the epitome of free enterprise. It is the large corporations with widespread international interests that are the prime targets of their animosity. The far fringe of the Green movement goes further, with a fundamental distrust of the profit motive altogether, and adheres to a statist, communitarian ideology. Oddly, the Greens get most of their money from affluent professionals, along with government grants. Another commanding political influence is the advocacy groups for senior citizens—who are more numerous than ever, convinced of their entitlement to expanding pension and health care benefits, and with the time to pursue their demands through political involvement. The success the senior groups have had in winning an income tax exemption for pension income has put them in an uneasy relationship with a number of social welfare and anti-poverty groups. While both the seniors and the poverty advocates favor an expanding role for government in providing social benefits, the latter blame the seniors for taking for themselves a large share of the shrinking pool of tax revenues, leaving less in public expenditures available for the poor. They are united, however, by a shared belief that the regulatory power of government is necessary to restrain the greed of business enterprises. These two groups are among the social democratic interests, known popularly as the “Reds.” The press has termed this working alliance “the Christmas Tree Coalition,” both for its green-red coloration and for its support of state largesse. Labor unions are also part of this coalition, although their composition is very different than it was 25 years before. Vast numbers of domestic jobs have been lost, with the departure of most manufacturing operations to Asia, Africa, and Latin America—and with the rapid growth of electronic retailing, now increasingly based in Ireland, Australia, and other Englishspeaking countries. It is not only “old economy” jobs that have disappeared. The continued resistance of teachers’ unions to educational changes that might affect their jobs has produced a workforce that largely lacks the skills required for employment in technological industries. The shortage of skilled workers is no longer much of a domestic problem because so many employers have moved abroad, to countries with more hospitable economic and educational climates. The American education system, like other institutions, has rigidified; it serves mainly as a daycare center to keep children and teenagers off the streets. Huge numbers of young people leave school functionally illiterate and without marketable skills, but then the number of businesses left to hire them has diminished substantially. Criminal gangs

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of the unemployed infest cities and suburbs, their numbers too large for the police to cope with. The rapid decline of manufacturing and retailing unions has been more than offset, however, by the continued growth of public employee unions and the increasing unionization of professions and service industries, especially among physicians, dentists, and other health care workers. In 2015, the public employee unions forced Congress to give them the right to strike. Public and private sector strikes for all kinds of reasons, often accompanied by disruptive demonstrations and blockades, are now as prevalent in the United States as they are in France and Italy. The elements of the Christmas Tree Coalition have completely taken over the Democratic Party; in fact, they are the Democratic Party. The coalition’s ability to mobilize armies of campaign workers and to generate vast sums of individually small political contributions regularly produces large Democratic majorities in Congress and most states. A Republican has not been elected president since 2004. Relatively few business supporters are found in the Republican minority, which is heavily dominated today by populist social conservatives who are often as unfriendly to big business as the Democrats. Thus, neither party provides a political voice for free enterprise, which has little support among the media and the public as a whole. The parties themselves are now only shells, providing no more than names with which to label the nominating process. Power lies completely among the interest groups that are the core of support for each party. The business community has been politically feeble since a series of campaign finance reforms abolished political action committees, outlawed “soft-money” corporate contributions to candidates or political parties, and instituted public financing of congressional elections, matching $5 for every dollar of individual (and tax-credited) contributions up to $100. Occasional attempts to mobilize managerial personnel in political and legislative grassroots efforts have been bitterly attacked by the Greens, the unions, and the press as an illegitimate use of economic power for political objectives. Small business has maintained some influence in both parties, but larger companies and their associations have learned to keep their heads down lest they be attacked. Nativist protests long ago resulted in severe restrictions on immigration, excepting only refugees from foreign tyrannies. Illegal immigration continues to flourish, however, and its sponsors constitute a substantial black market industry dominated by organized crime. In reaction to the flight of jobs to other countries, protectionism and isolationism dominate, and the United States has abrogated almost all of its trade agreements with other countries. Congress has been steadily imposing and increasing import duties in an attempt to offset declining tax revenues from other sources.

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All voting now takes place via the wireless Internet. Personal devices permitting easy access to the Internet are cheap and ubiquitous, thanks in part to public subsidies. Nonetheless, voting participation continues to fall; it was barely 25 percent in the 2024 elections. The populist sentiment that grips the country is reflected in the spread of direct democracy to all but a few states. Initiatives that undermine business interests are widespread and usually successful. Sometimes, the courts overturn these measures on constitutional grounds, but more often uphold them. Controversial legislation is frequently petitioned to referendum, and state legislatures have been significantly weakened. Most state governors have gained power as a result, although a few have been ousted by voter recalls. Republicans are pressing for a constitutional amendment that would institute public referenda on federal legislation, but the Christmas Tree Coalition is adamantly opposed, lest its ability to control congressional actions be threatened. With unemployment nearing 20 percent, the country has been in severe recession for a number of years now. Federal budgetary surpluses are only a distant memory. Business organizations blame the continuing economic crisis on the Tax Fairness Act of 2018, which taxed corporate profits and capital gains at up to 50 percent—60 percent for companies convicted of major pollution or antitrust violations. The same legislation also raised personal income tax rates to 75 percent on taxpayers in the highest bracket, while exempting senior citizens receiving less than $100,000 in Social Security and private pension income. The Christmas Tree Coalition and congressional leaders deny that this “tax reform” has had anything to do with the continuing recession, and maintain that the real cause has been the “unpatriotic flight of tax-dodging companies” from the United States in the years since 2018. Most observers expect that Congress will soon impose restrictions on movements of capital to other countries, and otherwise restrict the emigration of U.S. employers. The political weakness and public unpopularity of business make it difficult for it to effectively oppose such actions. The country is paying a severe economic price for its dominant populist ideology. THE LIBERTARIAN DEMOCRACY The dominance of economic conservatives that characterizes the political process in 2025 has its roots in two significant developments. One was a strategic shift in the way the business community approached legislative issues. The second was a critical Supreme Court decision on election law. The shift in strategy resulted from a series of closely divided Congresses throughout much of the first decade of the 21st century in which neither political party had more than a narrow majority, although nominal control passed back and forth between Republicans and Democrats in several


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elections. Business interests found it easy to defeat adverse legislation in this climate, but were as frustrated as other interest groups by the congressional paralysis that prevented enactment of most major legislative initiatives, and that precipitated several federal budgetary crises. Congressional failure to approve a series of international trade measures negotiated by the administration during the early years of the century led top corporate executives and business associations to examine their own lobbying tactics. They concluded, after considerable soul-searching, that the lack of adequate cooperation among business groups was selfdefeating. So was ineffective business lobbying on major issues, which became sporadically active only shortly before congressional votes and then died off thereafter. To enable the business community to speak with a single voice on national economic issues and strengthen its lobbying capabilities, several major national business associations merged to create a new super-lobby, the Business Council of the United States (B-CUS). The first B-CUS project was the stimulation and coordination of a longterm advertising, public relations, and lobbying campaign by a large number of companies to demonstrate to the public and elected officials the benefits of international trade to the economy. They built a sustained case for American involvement in the world economy, arguing that trade provides U.S. consumers with more and better choices at lower prices, expands jobs, and helps create a better life for people everywhere. The success of that campaign in obtaining congressional approval of the longdelayed trade agreements taught business three other lessons: First, that a short-term focus on immediate issues had actually impeded long-term political and legislative success. Second, that the strategy that ultimately worked so well on trade could be applied with equal effectiveness to other priority business issues. Third, that political action programs needed to be substantially strengthened, giving political help exclusively to candidates philosophically attuned to free-enterprise approaches to public policy issues. A crucial Supreme Court decision in 2011 provided an important boost to this latter effort. A series of presidential appointments had gradually given the Court a solid conservative majority, one that was willing to declare that the First Amendment’s right of free speech permitted no limitations on political contributions. The Court’s opinion, written by Chief Justice Clarence Thomas, said that every citizen has an unlimited right to express political opinions by supporting the candidates or parties of his or her choice. Political contributions could no more be limited, the Court said, than could the expression of any political opinion. The opinion thus declared unconstitutional federal limitations on the size of political contributions and, by inference, state campaign contribution limits as well. The Court also reaffirmed the principle that the protection of free speech precludes any limits on political expenditures.

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The effect of the Supreme Court decision was to take many of the shackles off the ability of companies and other interest groups to support their favored candidates, through political action committees and other means. Groups of both the left and the right immediately increased their political contributions for the 2012 election campaign, but pro-business candidates were substantially more successful. Left-leaning interest groups, whose greatest strength was in grassroots political action (notably, labor unions, environmentalists, and some other cause groups), elevated their local political activities, but by this time business people had also finally developed effective ways to increase their own grassroots campaigns. At least as important were sustained issue advocacy campaigns by B-CUS and other business organizations to mobilize public opinion in support of candidates who favored free-enterprise positions on key issues. In 2015, the conservative Congress acted to deregulate federal elections altogether. Public financing of presidential elections was repealed. Direct political contributions by corporations and labor unions were authorized. Major donors and all political recipients were required to publicly disclose via the Internet all political contributions and outlays. The immediate result of the new law was a substantial increase in political contributions, but after a few years contributions leveled off, as candidates encountered severe criticisms from their opponents and the press if they accepted too much money from too few sources. Congressional legislative output has begun to progress not so much in conservative directions as in libertarian ones. Although an attempt to remove labor unions’ antitrust exemption failed, the public mood has been strongly in favor of limiting government’s role on all fronts. The legal profession has successfully argued (against vehement B-CUS opposition) that the constant threat of expensive litigation is a better tool than regulation in disciplining corporate excesses. As a result of the altered public opinion and legislative climate, the government’s approach to environmental policy has moved away from regulation toward providing economic incentives to combat pollution. Efforts to repeal the income tax ultimately failed, but the tax code has been substantially streamlined, corporate and individual rates reduced, and the capital gains tax abolished. The libertarian trend prevailed in other areas as well, and cause groups favoring government regulation of personal behavior and in other areas of social policy have experienced sharp declines in public and legislative support. Not all regulation of business activity has been abandoned by any means, but successive presidents and congresses have promoted a series of incentives and trade-offs to stimulate more self-regulation and business codes of conduct. Carrot-and-stick programs have significantly expanded global corporate standards in such areas as employee health and safety, the environment, community educational support, and adult education and


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worker retraining. Press skepticism and close monitoring plus whistleblowing by competitors have proven surprisingly effective, but the main incentive has been most companies’ desire to discipline themselves and their industries in preference to bad publicity, the risk of re-regulation, and the continued threat of liability litigation. Stock options are now routinely part of the compensation of all employees, not just executives, although some business people express concern that this may eventually put control of companies in the hands of their workforce. The anti-capitalist left has changed shape and direction, but certainly has not disappeared. Industrial labor unions have shrunk in size, importance, and political influence in industrialized economies, but have been growing in the developing countries. In the United States, public employee unions have contracted as the size of government has been reduced at the federal and state levels, but they remain strong at the local level. The Green movement and allied causes are alive everywhere, continuing to develop new goals and priorities as older ones are resolved. However, they are divided about the new program to colonize and develop the Moon and Mars: Some support it as a way to build new, communal societies in space; others resist it as a diversion of resources that should be used to help humanity on earth. All, though, are vehemently opposed to the administration’s proposal to allow corporations to bid for the right to operate the space program. The developments of the 21st century’s first quarter have not been universally to the liking of traditional conservatives. State sales taxes have eroded as a revenue source and are disappearing, as a consequence of the growth of tax-free Internet retailing and protests of discrimination by traditional “brick-and-mortar” retailers. Public resistance to offsetting increases in state income taxes or the imposition of value-added taxes is resulting in shrinkage of the role of state government across the country. On the other hand, local governments have been growing stronger, financed not only by property taxes but also by new, metropolitan-area transportation taxes, and by the movement toward cost-effective consolidation of city and suburban governments. Both public and private schools have substantially improved the educational performance of elementary and high school students after voucher systems were finally instituted and public school systems were forced to compete through student achievement for local tax revenues. High school students can no longer graduate without having demonstrated their mastery of mathematical, computer, and bilingual skills. The latter include English plus a second language of the student’s choice, with instruction in both beginning in first grade and continuing through the twelfth. (Spanish is popular, but so are Chinese, Japanese, and Russian.) The new approach to education has enabled the growing number of children of immigrant

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families to compete with the native-born for placement in the best colleges and the best jobs. Steadily growing trade and economic integration have kept most of the world prosperous and at peace, although age-old antagonists always find reasons to battle historic enemies. The European Union (EU) continues to grow in membership as some regions within it break away from the countries of which they were originally part and become states in their own right; Scotland, Wales, and England are the newest members, now that Great Britain is no longer a single entity. The recent secession of Quebec from Canada has led to growing support in some English-speaking provinces to look southward and seek admission as states, or even to create a new United States of North America. U.S. relations with France are currently strained by French support for Quebec’s application to join the EU. On the whole, the remaining years of the century promise to be a time of both ferment and even greater progress than most people expected 25 years ago. THE COMPETITIVE DEMOCRACY The world at the quarter-century mark is a competitive place in ways that few people anticipated when the 21st century began. Businesses rely on the Internet, satellite communications, and rapid decentralization of operations to stay in touch with their markets in the United States and elsewhere. The vast majority of sales, financial transactions, and other aspects of commerce take place electronically today from locations anywhere in the world. Air freight delivery companies are among the fastest growing in the world, although some sales fulfillment is provided by local contractors relying on highly computerized inventory management. Grocery supermarkets are the principal remaining form of domestic retailing. Because corporate intranets are the principal medium of management communication, it makes little difference where companies are based, and so a number of companies have transferred their headquarters to countries with the most favorable regulatory and tax environments. Indeed, a few businesses no longer have any physical headquarters at all, conducting business entirely by intranet and holographic videoconferencing. Yet, other companies have chosen to stay put, whether for reasons of marketing, production, or simply tradition. This presents a new conundrum for governments, in the United States and elsewhere. Government, by definition, exercises sovereignty in territory with fixed geographic boundaries. Yet, this is a world in which people, particularly those who are well educated or who have skills in high demand, can choose to live wherever they find the best opportunities for themselves and their families; and it is a world in which a huge and con-


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stantly growing share of commerce and finance takes place instantly and electronically, without regard to geography, except insofar as physical delivery of goods and services is required. Thus, governments worldwide must compete to attract and retain companies by providing the most favorable regulatory and tax environments, and individual firms are ideally free to pick and choose among them. In practice, though, this is only partly true. Many companies, because of the very nature of their businesses, serve limited territories. Others, even global ones, want or need to stay physically close to their customers. Still others with substantial investments in fixed assets cannot afford to migrate at will, as individuals and families can, and even those firms that sell completely over the Internet need networks of local facilities and operations to help deliver their products or service their customers. But a large number of other companies have relocated headquarters and operations to other countries when they were unable to negotiate satisfactory regulatory environments and tax climates. This has created new sets of pressures for U.S. lawmakers. Even the implicit threat to move has provided businesses with a powerful lobbying argument on legislation affecting them. Most of these companies find it fairly easy to engender supportive communications to legislators from local public officials and media, and from potentially affected managers and employees. These pressures for lower business taxes have put Congress in a constant financial bind. The national debt has largely been paid off, but there are still expensive demands for public services. The aged constitute a large and growing percentage of the population, and demand a high and costly level of public services. The national health care program also consumes a large share of tax dollars. The nation’s educational problems remain acute. The increased number of immigrants needed to maintain the domestic economy requires high levels of educational and other social services to bring them into the mainstream. The problems associated with poverty and a crime-ridden underclass are unremitting. Constant technological upgrades to protect the country against terrorist groups and hostile countries require continued high national defense outlays. The need for taxes to fund these and other programs remains insatiable. The progressive income tax remains the principal revenue source and continues to fall heavily on companies and their upper-bracket executives. The American public’s demand for regulatory protection also remains high. The bar for environmental compliance has been regularly raised as old standards have been met and new problems have arisen, such as those created by the growing shortage of disposal sites for sanitary, toxic, and nuclear waste. Global warming is an unsolved problem. Energy demand has increased faster than supply. Consumer protection groups want reg-

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ulation of Internet retailing tactics and delivery services, regardless of where the retailer is located. All this has increased the need for effective lobbying and other government relations programs by business groups to protect their interests. Although many companies can always threaten to pick up and move elsewhere in the world if their burdens in the United States grow too great, there are constraints on the use of this tactic. For one thing, it can only be used so many times before the bluff is called. For another, there are limits to where they can move: Taxes and the costs of regulatory compliance are as high in Canada, Japan, and most of Europe as in the United States. Most parts of Latin America and Asia pose as many political, social, and regulatory problems as opportunities. Only the still-modernizing countries of Eastern Europe and the capitalist economies of Russia, India, and China welcome migrant companies with open arms, and even then only if not too many employees of other nationalities come along. In their search for an improved U.S. business climate, American companies continue to have strong adversaries. Ecological, consumer, and other anti-business cause groups (who now collectively call themselves “Naderites” in commemoration of the former activist) resist almost reflexively any legislation that would benefit business. They have been effective both in electing sympathizers to Congress and state governments and in pressuring them thereafter to support Naderite legislative objectives. Labor unions have had a political resurgence, following their great successes in organizing immigrants and minorities in low-wage service industries and in unionizing physicians and other professionals; public employee unions have remained strong and politically powerful. Senior citizen organizations are more potent than ever, thanks to their large numbers, and trial lawyers have virtually unlimited political funds to contribute, fueled by successions of expensive court victories over targeted companies. Yet business groups also have resources they either lacked or did not effectively utilize a few decades ago. Companies and business associations now routinely pour vast sums into issue advertising to support their legislative goals, and frequently use that advertising to help or pressure specific legislators. Political action committees, now accepted as a legitimate way for like-minded citizens to combine their campaign contributions, are highly active, amply funded, and widely utilized by both companies and their non-business adversaries. Most significant, business executives and lobbyists have succeeded after years of effort in persuading local managers and their families to get politically involved in their communities. These grassroots advocates are now an important resource in helping to elect more business sympathizers to Congress and state and local office, and then in lobbying them on key business issues. Perhaps an important motivational influence on these


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managers is the fear that their local facilities will be closed or relocated abroad if they do not do their part in improving the political and business climate for their employers. Corporate executives are rarely so heavyhanded as to voice this consideration, but then in today’s world they really don’t need to. Still, without this local grassroots support, business would not prevail to the extent it has, and even more companies would feel compelled to migrate. The widespread use of issue advertising and grassroots political networks by these varied interests has produced a new political paradigm. The traditional Republican and Democratic Parties have largely been supplanted by coalitions of interest groups that now can perform virtually all the functions the parties formerly exercised. State coalitions of business enterprises and their associations have had considerable success in electing allies to public office at all levels. Interest groups, rather than the traditional parties, now control the political process, and most legislatures are organized accordingly. As a result partly of companies’ new political effectiveness and partly of their implicit threat to migrate, the business community enjoys a greatly strengthened competitive position relative to other politically active interests. It has therefore achieved successes that it could hardly have dreamt of at the beginning of the century. For instance, business lobbying has persuaded governments to accept the concept of priorities and trade-offs: If new regulatory burdens are to be instituted and some old ones increased, then low-priority or outmoded programs must be reduced or abandoned. The rising costs of services for the aged, for instance, are being financed in part by major economies in farm subsidies and by forcing the newly merged armed services to accept business-style efficiencies and costeffectiveness throughout military operations and administration. A major business-backed study is also underway to determine how costs can be reduced nationwide by consolidating multiple and overlapping levels of government, regulatory bodies, and public services. These changes and proposals, of course, have produced vast uproars from affected and competing interests. However, widespread use of issue advertising and grassroots political and legislative activity has at last enabled the business community to state its case directly and with great effectiveness both to the voters and to policy makers, with some realistic prospect that fundamental reforms may finally be achieved. And so, in the competitive U.S. democracy of 2025, business wins on some key issues, and loses on others—but it wins far more than it ever did before. The political clout of competitive enterprises still does not wholly match their economic power, and perhaps never can in democratic societies. Nonetheless, companies have learned how to legitimately leverage more of their resources to political and legislative objectives, and

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have therefore become much more of a competitive force in Washington and the state capitals. IMPLICATIONS OF THE SCENARIOS Each of these three contrasting scenarios represents an alternative future that could possibly be realized over the course of the first quarter of the century, given projections of existing trends. Each also incorporates some occurrences and developments that are beyond the business community’s ability to bring about, but the future will inevitably be replete with unforeseen events. However, the scenarios make two important points. First, companies and their associations must be both able and willing to capitalize on events and trends to their benefit. The ability is there as it always has been; the willingness noticeably less so. The second point (and perhaps a corollary of the first) is that it lies within the power of American enterprise to influence the shape of the future business environment in directions much more to its own liking. It is far from an absolute capability because business organizations still must compete legislatively and politically with other powerful interest groups, but companies and associations have seldom flexed their muscles as effectively as most of these competitors. The future is totally plastic. It can therefore be shaped in ways that result in political and legislative power for the business community that much more closely resembles its economic strength. That is not only an achievable goal but also one worthy of attainment. NOTE 1. Some of the material and ideas in this chapter are adapted from “America in the Year 2025,” an unpublished paper prepared in 1999 by a task force of the National Conference of State Legislators. NCSL bears no responsibility whatever for the liberties I have taken with its work.

Chapter 5

Business and the Political Parties To be frank, there is nobody out there who has what we feel is the right spin on trade. But are we going to get out of the political process? Hell, no. We are going to be part of the political process. —George Becker (President, United Steelworkers of America)

Among those business people who choose to involve themselves in politics, some do so for civic reasons, to help candidates and parties they personally believe in, and to bring about better government. Probably a substantially larger number participate because of a desire to affect the legislative climate. They realize that politics is an extension of lobbying and government relations, and that it is much easier to influence legislation if one is communicating with lawmakers whose attitudes are sympathetic to business in the first place. Whichever the motivation, political participation has generally meant involvement in one or the other of the major parties. For most executives, the party of choice has been the Republicans. There have been, of course, notable exceptions. During the long decades of Democratic dominance in the South, business people were as committed to that party as was the rest of the region. Today, the entertainment industry is preponderantly Democratic in its sympathies, and many executives in a wide variety of other industries consider themselves Democrats. Nonetheless, the generalization remains valid, as is borne out by the heavy tilt toward Republican candidates and organizations of business political contributors over many years.

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The major parties have seemed as permanent a part of the American political landscape as have both democracy and representative government themselves. The landscape is shifting however, and tectonic changes are taking place that will make it look very different in the future than it has up to now. Atop a geologic fault, the surface appears much as it always has, while forces beneath build over time until the great upheaval finally occurs. The forces that will precipitate political change have similarly been building for many years, but in fact are neither subterranean nor invisible. Good geologists learn how to read the rocks. Like the clues in Poe’s purloined letter, the signs are out there in plain sight, but we need to understand what we are seeing and what the implications are. What the geology of American politics is telling us is that the long era of political parties is coming to an end. This is not a development that any thoughtful businessperson will welcome—earthquakes, even the political kind, are never good news. Change, however, gives rise to opportunity, and there will be opportunities if American business chooses to seize and capitalize upon them. To understand what the pressures of political change are building toward, we need to understand where we have been and how we got to this point. That is the subject of this chapter. PARTIES AND POLITICAL LOYALTIES The instruments of political competition throughout American history have been the political parties. The dynamics of U.S. politics have concentrated this competition on two major parties, although not always the same two. Minor parties have never achieved power themselves at the national level, and rarely at the state level, but they have occasionally played a role in influencing national policy—as the Socialist Party did early in the 20th century in persuading the Democrats to adopt welfare proposals, and as Ross Perot’s Reform Party did in 1992 in influencing both major parties to support government spending reductions. As political brand names, both major parties have had enormous resilience and staying power. Even in this age of ticket splitting, each can count on a base of millions of Americans who routinely vote for its nominees, sometimes almost without regard to who they are. Indeed, the less visible the office and the candidates running for it, the more likely it is that voters will cast their ballots wholly on the basis of the party label. Nonetheless, the analyses of political scientist Martin Wattenberg document the proposition that while Americans retain their partisan affiliations over long periods of time, they no longer hold them as strongly as they once did, and rely on them less and less as guides to their actual voting behavior.1 How important are the political parties today in shaping national policy and influencing legislation? How effective are they still in electing their

Business and the Political Parties

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nominees to public office? What will their role be in the future? What is the relationship between the business community and the parties? What should it be? America’s two major parties are venerable institutions. The Democratic Party legitimately claims the distinction of being the world’s oldest political party. The party’s lineage goes back to Andrew Jackson (elected president in 1828) and, under a somewhat different name, to the era of Thomas Jefferson. The Republicans first contested the presidency in 1856, more than 140 years ago. Both parties lay claim to regional pockets of strength, small or large, from coast to coast, and some of these one-party local traditions have remained in force since the 19th century. Each party’s base also includes various interests that may or may not be geographically concentrated. Party loyalties evolve over time, however. Black voters were strongly Republican from Lincoln’s Emancipation Proclamation until Franklin Roosevelt’s New Deal. They have been overwhelmingly Democratic ever since. Forty years ago, Congress authorized Alaska and Hawaii to become states through a political compromise between the parties; Alaska was expected to be a fortress of Democratic votes and Hawaii a Republican stronghold. Today, Alaska is predominantly Republican and Hawaii votes overwhelmingly for Democrats. The principal shift in party loyalties has occurred in the South. Because the Republican Party was blamed for the Civil War and the abuses of the Reconstruction period that followed, the GOP was virtually non-existent in the South as late as the 1950s. Since then, the region has become genuinely competitive between the two parties, with Republicans steadily gaining an increasing edge almost everywhere, and in some states (e.g., South Carolina and Virginia) a dominant one. The force driving political realignment in the South has been ideological polarization. Prior to the Great Depression and Franklin Roosevelt’s New Deal, Republicans tilted toward a strong national government, Democrats to states’ rights. Ever since, the philosophies have been reversed. The South, with its strong traditions of states’ rights and economic and social conservatism, witnessed this post–New Deal shift with growing unhappiness, but took 30 years to alter its voting habits. The changes tended to occur from the top down, with southern states first voting for GOP presidential candidates (some as early as the 1950s), then electing Republicans to governorships and Congress, and still later to state legislatures and local offices. Apart from the differences over issues of federalism, for many decades there was heavy ideological overlap between the parties. The Democratic Party ranged the gamut from ultra-conservative to ultra-liberal. Republicans spanned a similar spectrum, although their liberals were seldom as

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far to the left and their conservatives as far to the right (especially on issues of race) as the Democrats. Two elections were watersheds in changing this state of affairs. The first was in 1964 when the GOP’s conservative wing routed Republican moderates and liberals in the nomination for president of Senator Barry Goldwater over Governor Nelson Rockefeller. In the years and decades that followed, the Republican right solidified control of the party organization in most states. Today, moderate Republicans are an endangered species and GOP liberals are almost extinct. During this same time period, Republicans won a growing number of elections for at least top-of-the-ticket offices (and often many lesser ones) in most southern and mountain states. At first, Republicans experienced considerable difficulty in defeating entrenched conservative southern Democrats, especially in Congress. Later, though, GOP candidates commonly replaced these veteran Democrats when the latter finally retired from the House or Senate. All this came to a head in 1994, the second watershed election, when Republicans won majorities in both houses of Congress for the first time in 40 years. Their majorities were quickly enhanced in both chambers by the defection of a number of mostly conservative Democrats. As far back as the Nixon administration, Republicans had developed a “Southern Strategy” to become a national majority by convincing southern voters to transfer their conservative views and allegiance to the GOP. The strategy succeeded almost everywhere in the region. Mississippi, the most doggedly Democratic state in the nation until the early 1960s, exemplifies the success of this strategy. By the late 1990s, both of the state’s U.S. senators and its governor were Republicans, as were large percentages of its House delegation, state legislators, and local officials; and a Mississippian was chairman of the Republican National Committee. IDEOLOGICAL POLARIZATION Conservative southern Republicans gradually assumed dominant leadership roles within the party and in both houses of Congress, propelling it substantially to the right. In the four years following the 1994 elections, the three top House Republican leaders were all southerners. A southerner was elected Senate Majority Leader in 1996. In retrospect, perhaps it was not the Republicans’ southern strategy that prevailed so much as the South’s Republican strategy. Notwithstanding its accommodation to the civil rights movement and to Blacks’ attainment of the vote, the South remains the nation’s bastion of conservative opinion even as it has become almost as strong a bulwark for the GOP as it once was for the Democrats. As conservative southern Democrats departed Congress, they were re-


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placed frequently by Republicans or, in some cases, by more liberal Democrats. Either way, the result was, first, far fewer conservative Democrats and, second, the ideological polarization of both major parties. Its conservative wing decimated, the Democratic Party’s philosophic center of gravity has moved as far to the left as that of Republicans has moved rightward. This pattern has appeared in many state legislatures as well, frequently because of the rise to power within the GOP of religious and social conservatives. They dominate many state Republican Parties in all regions except the East. In the late 1990s, many of the battles among congressional Republicans (both Senate and House) were almost theological—whether their party positions on various issues were sufficiently conservative. Similar disputes about dogma have arisen in a number of states. Among congressional Democrats, there were also often bitter disputes with a Clinton White House trying to move the national Democratic Party at least somewhat back toward the center. A centrist organization, the Democratic Leadership Council (DLC), was formed in 1985 to give moderates (so-called “New Democrats”) a vehicle for the adoption of less left-tilting programs. The DLC had some success in helping the Clinton administration frame some of its policies, but less with the party’s congressional liberals and almost none with its core constituencies. It is noteworthy that the party’s presidential and vice presidential nominees in 2000 were founding members of the DLC. It is equally noteworthy, however, that even before the Democratic National Convention adjourned, both Al Gore and Joe Lieberman found it necessary to adopt fiercely populist campaign rhetoric and issue positions in order to accommodate the party’s liberal base. (DLC leaders blame Gore’s defeat on this leftward shift.) The DLC’s efforts are part and parcel of a broader international movement among political parties of the left (including Britain’s Labour Party and, to a lesser extent, the German Social Democrats) to reposition themselves as centrists. British Prime Minister Tony Blair, who calls this movement “The Third Way,” is its most successful proponent, although he actually adopted the idea from the DLC and the New Democrats. Whether this movement is substantive or mere empty packaging is widely debated.2 “New Democrat” has become a popular label since 2000 among congressional Democrats (in both houses) who are more inclined to support private sector issue positions than their liberal, statist colleagues. There is also a small band of fairly conservative Democrats who caucus in the House as “Blue Dogs.” Polarization has not produced complete ideological homogeneity within the parties. There is still a range of opinion among both Democrats and Republicans, and some philosophic overlap in the middle. Republicans have their moderates whose influence is often greater than their numbers,

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particularly on close legislative votes. GOP conservatives are themselves divided, with some focusing on social issues while others give priority to economic concerns. Still, to the extent that the composition of the House fairly reflects the ideological views of the two parties nationwide, it is fair to say that about two-thirds of Democrats hold traditionally liberal views and that approximately three-fourths of Republicans consider themselves conservatives. Ideology is a strong factor in the interest groups closely allied with one party or the other. Democratic core constituencies include labor unions, environmental organizations, trial lawyers, feminists, and some minorities, notably Blacks. Republicans draw strong support from the religious right and other social conservatives, and from the business community overall, although a sizable minority of executives are Democrats. (It should be noted, though, that among some Republicans, support for business quite frequently stops short of support for big business. The populist streak common among social conservatives often leads them to attack “corporate welfare,” viewing major corporations as just another large vested interest slurping up the public’s money through unjustified subsidies and tax benefits unavailable to most individuals and smaller enterprises.) When the two major parties were more mixed philosophically, many political commentators often decried the ideological blur between them, saying that the country would be healthier if the parties offered a clear choice. The distinction between the parties is now abundantly evident, bringing along with it a whole new set of problems that were never foreseen—which recalls the old admonition to be careful what you wish for lest you get it. For instance, ideological rancor between the parties destroyed the comity that formerly facilitated bipartisan solutions to public issues, making it much more difficult to legislate than it was from the 1940s into the early 1980s. Ending this rancor and restoring bipartisanship was a hallmark of George W. Bush’s presidential campaign in 2000, with but limited success once he took office. The increase in ideological polarity and the rise of strident interest groups is probably a key factor in the parties’ decline. “Parties once channeled political conflict and kept policy differences within reasonable bounds. One result of the decline of partisanship [among voters] is that we now have a system that is capable of expressing a wide diversity of viewpoints but is rather poor at aggregating them. With parties increasingly less able to resolve these conflicts, the tone of American politics is becoming more negative and bitter, and policy compromises are much harder to come by.”3 The vestiges of intraparty ideological disputes came to the fore in the 2000 presidential primaries. Within the Democratic Party, former Senator Bill Bradley positioned himself as more liberal (and distinctly more ethical) than Vice President Al Gore. Bradley’s defeat, however, was attrib-


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uted less to ideological and ethical differences than to his rather passive performance as a candidate. The Republican presidential contest was equally blurry. Then-Governor Bush began his campaign as a centrist (“compassionate”) conservative who could recapture the White House for the GOP, moved rightward during the primaries to gain the votes of conservatives in defeating Senator John McCain (hardly a liberal except in his calls for political reform) and lesser candidates, and then moved back toward the center once McCain and the others were out of the race. Once nominations are settled, presidential contests are generally a battle for the political center, since that is where most independent and undecided voters claim to reside. The center, however, is anything but a fixed point. The nation’s center of political gravity moved well to the right during the 12 Reagan-Bush years, and only partly leftward again during the Clinton era of the 1990s. In the 2000 campaign, the GOP’s right wing muted its issues and its rhetoric in the belief that the ideological polarization characterizing Congress would harm Bush’s candidacy. Bush was the beneficiary of much more leeway from the Republican right than Gore got from the Democratic left. (Social conservatives’ abandonment of Patrick Buchanan, their champion in 1992 and 1996, was the underlying reason he left the Republicans for a Reform Party candidacy in 2000.) Pragmatism goes back in the box (if it ever came out) once elections are over. The victorious presidential nominee may be acclaimed the leader of his party, but still must contend to some extent with his party’s congressional “ultras.” In the losing party, though, defeat is commonly followed by angry finger-pointing and ideological maledictions. The ultras come back out of the closet, denouncing the moderation they claim lost the election, and try quickly to take back control of the party machinery. THE PARTY OF BUSINESS? The Republican-tilting business community was not a particularly instrumental factor in the ideological polarization of the parties. As a group, most business executives were pleased with the conservative economic positions espoused by Republicans in Congress and the statehouses, if not by a catalog of social issues with which many business people personally disagreed—and certainly not by most economic policies of Democratic presidents and congresses. For more than 60 years, beginning with the election of a Democratic Congress in 1930 and of Franklin Roosevelt in 1932, domestic regulatory policy toward business ranged from adverse to hostile. Although Republicans controlled the presidency for 28 years during this period, they had majorities in the Senate for only 10 years and in the House of Representatives for only four. For the rest of this time, policy making was in the

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hands of Democrats, most of whom (in Congress and in a large number of states) could fairly be described as ideologically liberal, pro-union, and largely unsympathetic to business in domestic policy. (Ironically, the exception was support for international trade expansion, which was backed by both parties, liberals and conservatives alike, from the end of World War II in 1945 until the early 1990s.) The business community’s attitudes toward the eight years of the Nixon and Ford administrations (1969–1976) were highly mixed. President Nixon, after all, had supported several pro-union measures and also had instituted wage and price controls in an unsuccessful attempt to control high inflation. Inflation remained rampant until the early 1980s when the Reagan administration (and particularly the Federal Reserve Board) brought it under control, although at the cost of a severe recession. Reagan was popular among business people for his tax cuts and overall conservative philosophy. His successor, George Bush (the elder), lost favor with economic and social conservatives because of a broken pledge (“read my lips”) not to raise taxes, a factor that was instrumental in his 1992 defeat by Bill Clinton. Although Clinton had campaigned on a tax-cutting platform, his first two years were marked by another tax increase (which passed the House by a single vote and the Senate by Vice President Gore’s tie-breaking vote) and by a sweeping national health care proposal (“Hillarycare”), masterminded by Clinton’s wife (now a U.S. Senator), that was defeated after one of the most massive lobbying efforts ever undertaken by the business community. The unpopularity of these issues triggered a voter revolt and the onset of the “Republican Revolution” in the 1994 election. Republicans won large majorities in both houses of Congress for the first time since 1952 and assumed control of almost all of the large state governments. This was a goal long sought by most business people, many of whom saw in the election results the political equivalent of the second coming. Mirroring this elation was the dread of lobbyists for organized labor, trial lawyers, and environmental organizations that the legislative fruits of long decades of congressional support for liberal positions would now be repealed. As it turned out, both the hopes and the fears were exaggerated and largely misplaced. At the time, though, jubilation reigned throughout most of the business community. Expectations were high that important issues on the business agenda would be finally enacted: tax and spending cuts; reform and reduction of federal regulations, particularly in the areas of labor and environmental policy; promotion of international trade; health care changes under the rubric of private sector competition, not government regulation; reforms that would curtail product liability and legal costs, among many others.


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By the 1998 elections, many business people had come to regard the Republican Congress with cynicism and disbelief. To be sure, some important changes had taken place, particularly the achievement of welfare reform, annual budgetary surpluses, and ratification of NAFTA (the North American Free Trade Agreement, actually approved in 1993). Trade terms with China were approved annually (prior to the adoption of permanent normalized trade relations in 2000), but only after contentious debates in which the business community frequently found itself opposed, not only by liberals but also by many social conservatives. But other major trade initiatives had been stymied, most legal and regulatory reforms had been blocked, the minimum wage had been increased, and some conservative Republicans were proposing health care legislation that would actually increase the role of government and expand potential litigation. Nor was there any significant repeal of the laws and programs enacted in earlier years by Democratic congresses that business viewed with hostility. The federal budget was in surplus (thanks more, in the view of most executives, to the policies of the Federal Reserve and a historic economic expansion than to anything either Congress or President Clinton had done)—but along the way there had been government shutdowns and pitched annual battles on federal spending, all of which ended up with the president looking skillful and the GOP Congress shrill and incompetent. Perhaps even worse to business executives, a number of key congressional Republicans were on record expressing distrust of major companies, lumping together big business, big labor, and big government as evils besetting American society. To hear Republicans attacking “corporate welfare” was more than most business people could bear. At this point, cries of anguish went up from many executives: “Are these the same people we helped elect? We contributed personally to the Republican Party and its candidates, and so did our political action committees. This isn’t the way they talked when they were in the minority. What they said then doesn’t have much resemblance to their behavior and their legislative record now.” What had happened? Had business assumed too much and its confidence in Republican leadership been misplaced and naı¨ve? Had the business community done too little on its own behalf? Or were congressional Republicans politically inept and consumed by ideology and social issues? Was it business that was out of touch or the Republicans? In varying degrees, all these things were true. Believing the decades of GOP pro-business rhetoric and propaganda, business executives expected full and early performance, but then often failed to lobby effectively for what they wanted. Within Congress, economic conservatives and social conservatives each had distinctly separate agendas, and frequently ended up paralyzing each other. The congressional leaders, especially in the House, lacked the skills to synthesize these two competing wings. Mean-

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while, Bill Clinton, the most politically adroit president since Franklin Roosevelt, successfully manipulated the Republican leaders, mousetrapping them time and again as they progressively lost popular support. The situation came to a head in the elections of 1998, a year when political history4 and contemporary political analysis argued for Republican gains in both houses. The result, however, was zero net change in the Senate and an actual loss of GOP seats in the House. By the time he resigned from Congress shortly after the election returns were in, Speaker Newt Gingrich had one of the lowest public approval ratings of any political figure. A consequence of all this was that business executives and political action committees (PACs) returned in the late 1990s to a pattern of dividing their political contributions between the parties, especially when it seemed that the Democrats might recapture the House in the 2000 elections. Some Republican leaders, in turn, pounced on this to denounce business organizations as sunshine soldiers, perfectly willing to abandon long-term allies for short-term gains. There is a measure of validity to this charge, typified by the quip of a veteran Washington lobbyist that he had always contributed to the chairman of the Ways and Means Committee prior to the 1994 elections, and that he has contributed to the chairman ever since. Another reason, however, was the realization within the business community that issues within Congress (and, by extension, state and local legislatures) are decided legislator by legislator; that while the nominal majority party may control the legislative agenda, few significant business issues are settled by party-line votes; and that bipartisan coalitions of legislators are almost always required to prevail. As these developments unfolded, the embattled Republican leadership began to turn on its allies. When the Business-Industry Political Action Committee (BIPAC) asked in early 1998 why GOP legislative performance was at such odds with the earlier promises, Gingrich and some other House leaders attacked in rage, demanding that heads roll. They backed down only when it was clear that BIPAC’s protests had the business community’s united support. During this episode, BIPAC was approached by the leader of a major national organization of social conservatives. They, too, had their frustrations with the Republican Congress. Their legislative agenda was making no better progress than that of business, in part because congressional ideologues were concerned more with debating than enacting legislation, and partly because ineffective leadership in the House was unable to broker disputes. Over the course of several meetings, an informal agreement was reached that the lobbies of economic and of social conservatives would make an effort not to get in each other’s way on legislative issues. The underlying problem was the same for both; neither could rely on political leaders to deliver what had been long promised. Dennis Hastert


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of Illinois, Gingrich’s successor as Speaker, made an effort to improve relations with business, but by this time the Republican majority was too slim for much to be done. In truth, the business community, perhaps more than any other interest group sector, has found itself impaled on the horns of a dilemma. On the one hand, given the strong leftward tilt of Democratic congressional leaders on most economic and business issues, the interests of almost every U.S. industry are better served when Republicans control Congress and therefore its committee and subcommittee chairmanships and staff. The largely favorable tax bills passed in 1999 over Democratic opposition illustrate this point (although it was easier to try to please everyone in the knowledge that President Clinton would veto almost any tax bill Congress passed). On the other hand, business and its lobbyists must assemble winning legislative coalitions issue by issue, depending on a core of Republican economic conservative votes, but usually also needing a varying number of moderate Democrats to offset defections from the GOP’s moderates and social conservatives. If insufficient Democratic votes are recruited, the business position seldom prevails. It is the rare business issue that carries with 100 percent of Republican votes against those of all Democrats, in either House or Senate. The problem is more difficult if a Republican president opposes the business position on a major issue, since GOP lawmakers are more likely to side with the president than with business interests. Social conservative interest groups are in a similar situation, except that their Republican defectors are nearly always moderates exclusively; conservative Democrats must be enlisted to comprise a majority of the whole. The China Trade Battle A vivid illustration of the necessity for a bipartisan strategy was presented by the House vote in 2000 on permanent normal trade relations with China (PNTR), an issue that the business community and the Clinton administration both badly wanted for their own separate reasons (trade opportunities and foreign policy considerations, respectively) and overwhelmingly supported. They were opposed with equal vehemence by labor unions, human rights advocates, environmentalists, and other ideological liberals, plus many (though not all) equally ideological social conservatives. Some of the PNTR opponents were economic nationalists. Others protested China’s human rights record. Still others wanted to pressure China (and other countries) to adopt American standards on environmental and working conditions. GOP social conservatives also wanted to use PNTR (as they had other trade bills) as a vehicle to bar U.S. aid to groups providing information on contraception and abortion to people in other countries.

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Following a fierce, months-long lobbying battle, the bill finally passed by a vote of 237 to 195. PNTR supporters included 164 Republicans and 73 Democrats; 57 Republicans and 138 Democrats cast the nay votes. The vote was actually closer than these numbers indicate, since some fencesitters jumped to the winning side once it was apparent that the China trade supporters would carry the day. (A veteran corporate lobbyist correctly predicted to the author that once PNTR supporters reached the necessary 218 votes, the total would jump to over 235.) The reality is that one-third of House Democrats were needed to offset the opposition to PNTR of about one-fourth of Republicans, and that twothirds of the Democrats (including their two top leaders) sided with economic nationalist interests in opposition to both their own president and presidential candidate. While almost 75 percent of House Republicans backed the bill, the quarter that did not raised the question of what their pro-business rhetoric really means. The Senate subsequently passed the China trade bill, with less controversy, by a vote of 83 to 15 and it was signed by President Clinton. Eight of the 15 senators in opposition were Republicans, five of them conservatives. The three moderate Republican opponents may have voted as they did to shore up their position with the unions and environmentalists. That was surely the motivation of six of the seven Democrats; the seventh was a protectionist southerner. PNTR carried the day in both houses of Congress because its supporters mustered a larger bipartisan coalition than the one opposing it. That is how legislation is typically decided. Most controversial economic issues produce coalitions of backers and opponents from both parties. These are floating coalitions, almost never composed of the same legislators. Legislative amendments must generally be negotiated to retain or win over enough votes for the bill to pass. In the case of the Senate vote, for example, several fence-sitters were mollified by being given opportunities to present amendments, even though their amendments were voted down. On other issues, often the amendments must be accepted to win over sufficient votes to gain a majority. On some major business issues, assembling a majority has become difficult and sometimes impossible, particularly in the House. A prime example in the 105th Congress was votes to give the president “fast track” trade negotiating authority (i.e., a waiver by Congress of its right to amend proposed trade treaties, legislation that had long been in effect but that had lapsed early in the Clinton administration). Although supported by the GOP leadership, the bill twice suffered severe Republican defections among both ideological social conservatives and moderates representing districts with high concentrations of protectionist labor union members. On neither occasion were the bill’s advocates able to gain enough votes from pro-trade Democrats.


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Divided government enormously complicates business efforts to navigate congressional shoals. It had been relatively easy in the past to assemble legislative majorities when the same party controlled both the White House and Congress—although this was the case in only nine Congresses (18 years) during the last five decades of the 20th century. During the Clinton presidency, however, Democratic unity was a sometime thing. Only during Mr. Clinton’s first two years did Democrats have congressional majorities; in that time, major Democratic defections resulted in a major tax increase that passed by only a single vote in each house, and a sweeping health care initiative that was soundly beaten. In his last six years, the period of Republican majorities, congressional Democrats were frequently at odds with the president on legislation, although they rallied to his defense during the impeachment process and were somewhat supportive afterwards (perhaps because he moved to the left after the Senate trial). President Clinton’s successors will have some of the same difficulties he suffered during most of his two terms. Democratic presidents will be pressured by Democratic Congresses and constituencies to take positions well to the left of the political center where, by definition, most of the voters are found. President Bush gained united support from the GOP (and from business) on his initial legislative program, but found it fraying somewhat among both conservatives and moderates, especially after Democrats took over the Senate. As a consequence of erratic GOP support for business positions after the 1994 “Republican Revolution,” there has gradually arisen a belief among business executives that the individuals who comprise Congress— and, by extension, state and local legislatures—are a more important concern than which party holds nominal control. As it so frequently is, the truth is more complex than that. Party control does matter because the majority party controls the committees, and its leadership largely determines the issues that come to the floor. The leaders of both parties have a strong influence on how about two-thirds of their members vote on most issues. But in closely divided legislative bodies, and on conspicuous and controversial issues, perhaps a third of the members of each party may be up for grabs. The trade votes are evidence of the mixed record of legislative leaders. The House Republican leadership supported the business and White House positions on both PNTR and “fast track” (more recently called “trade promotion authority”) their Democratic counterparts opposed both. Once upon a time, business people who strongly supported a political party might reasonably expect party leaders to be convincing and effective on their behalf with difficult legislators. Today, this works erratically at best—and those legislators ideologically at variance with the leadership are precisely those least likely to heed its views. A legislative strategy that

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depends for its successes totally on the persuasive skills of party leaders is a risky one, of dubious ability to produce the desired result. This is by no means a problem for business alone. Other interest groups experience the same difficulties. Unions and environmental organizations have placed the highest priority on stopping trade expansion bills lacking provisions on working and environmental conditions that few other countries will accept; sometimes they have succeeded, sometimes not. Nor is trade the only example by any means. Even when the Democrats control Congress, they need to recruit some moderate Republicans to counter defections among conservative Democrats on certain issues. In the recent Republican Congresses, liberal coalitions have succeeded only occasionally, with strong presidential support. All major interest groups have therefore come to the realization that lobbying has become a retail operation—and that depending on a wholesale strategy in which the party leaders can be counted on to deliver the votes works only when one party has overwhelming majorities, and not always even then. This situation has significant implications for the political contribution patterns of business companies and associations. If the purpose is to influence legislative outcomes, giving only to leaders and party committees is a perilous strategy.

THE PRECONDITIONS FOR LEGISLATIVE SUCCESS To many business people, the 2000 China trade vote underscored their belief that party control should no longer be a significant factor in determining their political support, since more and more lobbying needs to be conducted today on a “retail” basis; that is, it must be carried out lawmaker by lawmaker in order to assemble majority coalitions. Others countered by saying that party control is critical; PNTR would never have gotten out of committee nor gained as many GOP votes as it did if the House Republican leadership had not strongly backed it. It is not really contradictory to say that both views are correct. If business interests are to prevail on highly contested and divisive issues in a Republican-controlled Congress, the following factors must all be present: • A reasonably unified business community. When the business community is unified and motivated on an issue, it can be invincible. An example was a congressional vote in 2001 to overturn a workplace ergonomics rule promulgated during the final weeks of the Clinton administration. A large coalition of business associations vigorously lobbied against the rule, whose implementation cost had been estimated as high as $100 million. Labor unions supported


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retention of the rule, but were defeated in both houses when a small band of mostly southern Democrats joined with all Republicans to undo the rule. On the other hand, when business groups are divided, the chances of success are much less. If the issue pits small business against large companies, the former frequently prevails because it is well organized. The principal small business trade group, the National Federation of Independent Business (NFIB), is one of the strongest business associations in Washington and has a potent grassroots legislative network. Business unity may still not be sufficient if there is vigorous opposition from environmentalists, unions, or other strong interest groups. In such cases, major and occasionally massive lobbying efforts are required, and sometimes business groups are not willing to put forth the effort. • Support of the congressional leadership. Issues will not normally advance without the backing of the majority party’s leaders—and of the president if all are of the same party. Even with it, a substantial effort may be needed, because the Senate and House GOP leaders may not always share the business community’s priorities. An example is legal reforms to reduce companies’ vulnerability to product liability litigation and curtail class actions, long a top business concern. Most House Republicans and their leaders supported the business position, but the leadership did not consider it worth a pitched battle with the trial lawyers. In the Senate, a few Republican leaders are close to the plaintiffs’ bar and have blocked movement of these issues. • Active support among the GOP’s congressional rank and file. The leadership’s backing is not always sufficient if large numbers of caucus members hold contrary views. PNTR passed because of the boost the leadership gave it; but on some other issues (like fast track), the leaders have not always been able to carry sufficient party members with them. The minimum wage was increased despite the leadership’s opposition because a large number of members in both houses wanted to placate labor unions. The so-called patients’ bill of rights advanced despite business objections and leaders’ initial opposition because of broad public support for the issue and considerable enthusiasm for it within House and Senate Republican caucuses. Some environmental issues have drawn rankand-file GOP support despite leadership and business opposition. These examples illustrate the contentious problems that can arise between business groups on the one side and many Republicans on the other. There are some Republicans who vehemently disagree with the business

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stance on one issue or another; some others are more concerned with maintaining an amicable relationship with a non-business interest group; and there are still others who occasionally want to poke a thumb in a business eye, especially if the ocular organ belongs to big business. Strategic Considerations It is true that the interests of the business community as a whole, and those of most individual companies and industries, are likely to be better served by Republican legislative majorities. But, as we have seen, not all Republicans are created equal. Even some conservative Republicans have a record of hijacking important business legislation to advance a social agenda. Those social issues may be meritorious on their own, but holding economic legislation hostage makes social conservatives little better from a business point of view than liberals who are outright anti-business. Would business fare better in a Democratic Congress? Four decades of Democratic majorities up until the 1994 elections provided ample evidence that business interests rarely do well in Congresses under liberal control. To be sure, business won on a few issues and succeeded from time to time in ameliorating the worst impacts of others. Overall, however, this was certainly not a period when Congress improved the business climate, except on trade issues; and, as currently constituted, the ideological balance point among congressional Democrats, and particularly among their leaders, is further to the left than it was prior to 1994. As a generalization, business can stop only a few liberal measures under Democratic majorities, and will lose on most issues to interest groups allied with liberal Democrats. In a Republican Congress, it is usually easier to prevent bad bills from passing, but it may be almost as difficult to steer good ones past the reefs and shoals of the legislative process. Even with a Republican Congress, much depends on the identity, party affiliation, and views of the president. If GOP majorities are narrow, or if large ones are boosted by the addition of social conservatives whose support for business issues has often been tepid, George W. Bush and future Republican presidents may have as much trouble as Bill Clinton did with members of Congress of his own party. In that situation, controversial issues will replicate the PNTR model, requiring intense retail lobbying, with neither party able to provide conclusive majorities on economic issues. In some ways, these changes replicate behavior within the electorate. The growth of ticket-splitting indicates a steadily diminishing willingness by the voters to accept candidates merely because of the party label they bear. (The exception is campaigns for minor public offices, which seldom attract much media attention; in these cases, the party label is often all the voters have to go on.) Even among the still large numbers of voters who do routinely vote


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straight-party tickets, there are many who do so because of endorsements of their interest group leaders, not those of party organizations. Black votes for Democrats, usually in the 85–90 percent support range, drop sharply on those rare occasions when their leaders support a Republican. Republican Jeb Bush was elected governor of Florida in 1998 in part because of endorsements by important Black political figures feuding with state Democratic leaders. Two years later, with Black leaders overwhelmingly supporting Al Gore, the Black vote for Jeb Bush’s brother was infinitesimal. Normally, about two-thirds of union members vote Democratic, but that percentage falls drastically when labor leaders either endorse a Republican or make a conspicuous point of staying neutral. Frequently, it is loyalty to the voter’s primary interest group, not the party label, that shapes electoral decisions. The overall national decline of party loyalty within the electorate has profound implications, both for lobbying and for the direction of American politics. Over the course of the next quarter-century, we will see a progressively increasing shift in the legislative loyalties of lawmakers and candidates to the major interest groups who provide the bulk of their funds and other forms of political support. The views of presidents and party leaders outside their chamber’s caucus will be less and less relevant. The real significance of the China vote is that it is the precursor of 21st century legislative politics. The overwhelming majority of House Democrats, including their leaders, spurned their president and the national Democratic Party organization to side with the union-led coalition of PNTR opponents. It is the great interest groups, not the political parties, that already are the paramount influences on major issues. There are still some good reasons to support political party committees—enabling the party to gain or retain control of the legislative machinery and the levers of executive power. But relying primarily on them to advance a legislative objective is no longer a valid justification. It is particularly misleading to rely on party platforms, pledges, and pronouncements—perishable campaign documents whose shelf life expires on Election Day. Six years afterward, much of the GOP’s “Contract with America,” on which Republicans ran when they won control of the House and Senate in 1994, remained unenacted. The campaign vows of the Democratic Party have similarly little meaning. As a reliable guide to future policies, such declarations are not worth the water they are written on. True, President George W. Bush made a major effort from his first days in office to fulfill his campaign promises—but it was his personal pledges that guided his actions, not the Republican platform. It is certainly true that adherence to party doctrine and cohesion among legislators of one party or the other has never typified the behavior of members of Congress and the state legislatures, nor has ideological polarity enhanced it. Party loyalty will be ever more tenuous as incumbents and

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candidates see that their fates and futures lie more and more in the hands of interest groups, and less and less with party organizations. More significant than party alliances to the lobbying success of business enterprises, therefore, will be the strategic sense they adopt concerning their role, not only in the legislative process, but also in the political context in which all legislation develops. There are important strategic choices to be made. Business can remain what it has been—a frequently passive participant that reacts primarily to the initiatives of other interest groups or of those in power, its attention focused on the achievement of short-term objectives. Or U.S. companies and their associations can choose to utilize the substantial influence latent in their enormous economic power to produce a fundamentally different political environment in which they can effectively shape public opinion, voter behavior, and the legislative outcomes that are their consequence. Many business executives have opted for the passive course, not by strategy but by default. They would argue, rightly, that their companies are not in the business of politics, but operate for the betterment of their shareholders, employees, and other stakeholders, and that no pragmatic management can shun the company’s immediate legislative needs. All that is true but ignores the extent to which the destinies of their firms and industries are affected by government policies and action. Spurning opportunities to build enduring, supportive legislative majorities is not in the interests of any enterprise that plans to be in business for more than a few years. Environmental organizations, plaintiffs’ attorneys, senior citizens’ associations, and a whole host of other interest groups are, strictly speaking, “not in the business of politics” either—but they have all come to see how pervasively their interests are affected by what government does. Of all the great interests, it is only business that persists in turning a blind eye. Lobbying and Political Support What then is the underlying purpose of political support? How does it relate to business lobbying on the issues? In the political climate of this new century, direct political contributions to parties and candidates may still be essential, but are no longer sufficient. How money is used, and to whom it is given, are assuming new importance in issues lobbying. Moreover, money in all its political forms is far more effective if it is supplemented by personal political activity that establishes relationships with voters, candidates, and party leaders at all levels; and the power of advertising will be a critical factor in shaping legislative agendas and debates in the coming decades. Cynics will counter that this is wonderful in principle, but that after all,


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90 to 95 percent of incumbents seeking reelection to the U.S. House of Representatives win, more or less routinely. Often this is true in state legislatures as well. A major reason may be political inertia; voters tend to reelect incumbents regardless of party, even in constituencies that tilt to the other party in other contests. Incumbent U.S. Senators also have a significant reelection advantage, although as a group they are less entrenched than House members, perhaps because they frequently are more visible. Why ignore these realities? The first answer to this question is that many of the open seats (those in which no incumbent is running for reelection) are targets of opportunity; most of the House gains Republicans made in the 1990s were in districts in which Democratic incumbents were retiring. One party or the other may still dominate some of these open seats, but there are fewer one-party districts every year. (The open-seat result was almost a draw in 2000. Republicans lost six of their open seats, Democrats five.) Today, there are blue-collar districts in which Republicans are competitive, and affluent suburbs that elect Democrats. In the Senate, the potential for change is often greater. Between 1980 and 1994, party control of the Senate changed three times, and then changed again in 2001 when a moderate Republican defected. In states that have imposed term limits on their legislatures, the number of open seats has increased dramatically. It is in these battleground races where business can make its greatest gains or, through inertia or ineffectiveness, suffer its greatest losses. Second, legislators who win reelection only at the end of a difficult campaign tend to be more receptive to the interest groups who battled them than those who easily coasted to victory. This is why many Republicans in highly unionized parts of the Northeast, Midwest, and West Coast are more willing to negotiate on issues important to labor than those from districts where unions are weak. Even legislators who call themselves conservatives are much more likely to support at least some Green positions if they come from suburban or other districts in which environmental concerns are high in the public’s consciousness. Business, too, increases its ability to win at least some key votes from lawmakers who are aware that business is a significant political force back home. Moreover, as straight party voting declines, so does the number of oneparty constituencies. When it comes to Congress (and, often, the state legislatures), it is the individual candidate whom the voters choose, especially in a well-publicized campaign. They are increasingly likely to pay more attention to his or her personality, record, issue positions, and interest group support than to the party label. New political techniques, as well as effective use of old ones, provide business with an unparalled opportunity to affect legislative races at the federal and state levels, and thereby affect the course of tomorrow’s economic issues.

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NOTES 1. Martin P. Wattenberg, The Decline of American Political Parties, 1952–1996 (Cambridge, MA: Harvard University Press, 1998). 2. Two interesting articles frame the debate. One is by columnist E. J. Dionne Jr., “The Big Idea,” Washington Post, August 9, 1998, p. C1. For the rebuttal, see a column by British journalist Clive Crook, “The Third Way Is a Fraud. And a Very Handy One, Too,” National Journal, October 31, 1998, p. 2538. 3. Wattenberg, Decline, pp. 128–129. 4. Since the Civil War, the party controlling the White House for at least two terms has almost invariably lost substantial numbers of seats in Congress in its second mid-term election.

CHAPTER 6

The Decline and Fall of the Political Parties The governmental system is not working because the political parties are not working. The parties have been weakened by their failure to adapt to some of the social and technological changes taking place in America. But, even more, they are suffering from simple neglect: neglect by presidents and public officials, but, particularly, neglect by the voters. —David S. Broder

David Broder’s verdict is not a recent one. Still today one of the nation’s preeminent political journalists, he wrote those words three decades ago in his book The Party’s Over: The Failure of Politics in America.1 The book’s title notwithstanding, Broder believed that the parties and the public’s confidence in politics and government could be resuscitated if Americans would become more politically involved, if they would make a greater personal investment in the nation’s political life. There was nothing wrong with Broder’s remedy. It just never happened. To the contrary, 30 years later, his hope and prescription are further from fruition than ever. People are more alienated from the governmental and political processes, not less. The younger and the poorer they are, the less relevance they see those processes having to their lives and their futures. In lesser degrees, people of all ages and social classes share that pessimism. Voter turnout, the most fundamental and least demanding form of political participation, has been falling since the 1950s. As a percentage of the voting-age population, barely half voted in 2000, although that was a slight improvement compared to 1996. (The percentage improves slightly

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if the number of eligibles excludes convicted felons, non-naturalized immigrants, etc., but the long-term trend is the same.) That decline transcends nearly all demographic breakdowns of the electorate. Voting participation is lower now than it was in, say, 1964 among the highly educated and those with relatively little schooling; among the affluent and the poor; among the married and the single; and so forth. It is true that the better educated people are, the more money they have, and the older they are, the more likely they are to vote. Still, even among the most affluent group of voters, turnout has dropped from four out of five to less than two out of three. Only voters over 65 continue to faithfully vote, but they are more than offset by the increasing indifference of younger generations, especially the youngest. Major interest groups, including labor unions and the NAACP, made major efforts to increase turnout among their followers in 2000, with some success. Nonetheless, total turnout barely grew. A wide variety of sociological factors has been analyzed among the causes of decreasing turnout, but in the end the blame must lie with the political parties. Getting out the vote is a fundamental party function. Their inability to perform it is a damning indictment of their irrelevance to the electorate. It is particularly significant that among groups that did increase their turnout in some localities in 2000 (Blacks, for example), it was the effort of organizations like the NAACP, not the political parties, that produced it. What, one wonders, does it take to energize the electorate? The 2000 presidential contest was the most hotly contested and, as it turned out, the closest in decades. The campaigns of Al Gore and George W. Bush presented a clear choice in governing philosophies and issue positions. Ralph Nader and Pat Buchanan were also there, for those who wanted other choices in the belief that the Republican Party had drifted too far to the left or the Democratic Party too far to the right. The battle for control of both the House and Senate teetered on a knife’s edge right until the very end. The major parties, and interest groups like the AFL-CIO, the NAACP, the Sierra Club, the National Rifle Association, and some business groups, together spent several billion dollars to get the electorate’s attention during the campaign, and perhaps $100 million just to mobilize Americans to get out and vote on Election Day. Despite all that, almost half of the national voting-age population could not bestir themselves to cast ballots. The NAACP’s effort is particularly telling. Black votes increased significantly over 1996 levels in states where the organization made a major get-out-the-vote effort, but remained the same nationally. The logical inference is that the Black vote must therefore have declined where there was no intense effort. That is probably equally true of other segments of the electorate. The closeness of the presidential election, and the intensity of the post-


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election recount battles, certainly give evidence to the proposition that every single vote counts. Only future elections will reveal whether the 2000 experience counters voter apathy. It is particularly ironic that the public, and even school children, found the post-election battle to decide who would get Florida’s electoral votes far more mesmerizing than the pre-election campaign. Perhaps that is because the media treated it as more significant. CNN covered little else, from Election Day on. Major newspapers like the Washington Post gave the Florida story full-page headlines day after day, something that had rarely happened during the campaign itself. That was quite different than the whiny mood of many voters in the days leading up to Election Day. A PBS program a week before the 2000 election featured interviews with groups of intellectuals as well as crosssections of ordinary voters. All said much the same thing: “The candidates are ignoring me and the issues I’m concerned about.” Yet, the viewer perceived another message beneath the one that was repeatedly voiced: “I’m determined not to hear what they say, no matter what it is.” It was reminiscent of the cartoon of the old man who turns off his hearing aid whenever his wife starts to nag at him. Who is responsible for the communications breakdown? The husband who does not want to listen? Or the wife who has never learned how to get through to him? Politics is, among other things, a communications process. Yet, the voters turn off their hearing aids whenever the parties and candidates try to get their attention. Sociologists and political scientists can debate, as they have for many decades, the causes of public alienation from civic and political life. From the standpoint of the vigorous democracy America has been throughout its history, it is a severe and debilitating disease of the body politic. There is as yet no cure, and perhaps there never will be, but before it is done it will take a drastic toll on the political process as we have known it. Clearly, the American political system as it has existed for more than two centuries is in crisis. The climax of that crisis has not yet been reached, but when it arrives and has been played out, it is difficult to escape the conclusion that the political parties as we have known them will be the victims of their inability to restore public faith in politics. That failure has many roots, some within the parties’ control and some beyond them. The interplay of those factors has irrevocably altered the environment in which the parties once thrived. For all their newfound financial resources, the political parties are in fact weaker than they were when Broder’s book was published in 1971. The consequence is that the parties, long the bulwark of democratic choice and representative government in America, are nearing the endpoint of a protracted process of decay. Populism and the reform movement have been prime factors in undermining the parties, as have the media,

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especially television. There is acute irony in the fact that the major parties are entering upon their final years just after a time when they finally began to represent opposed political ideologies and could collect and spend record sums of money. These are temporary assets, however, and perhaps in the long run will prove not to be strengths at all. How did the parties get to this point? What created the problem? What will happen next? What are the implications for interest groups overall and the business community in particular?

THE FATAL FACTORS In the past, strong party loyalty was what gave overwhelming strength to both Republicans and Democrats: their ability to mobilize voters during political campaigns and on Election Day, through party organizations that reached from the state level all the way down to precincts and neighborhoods. The endorsement of the organization was of vast, commonly decisive importance in deciding who would be the nominees for each office, and was very nearly as potent in delivering the vote in the general election. Today, most of that strength has dissipated. Among many factors that reduced the significance of the major parties, three are paramount—the effects of television, political reforms, particularly including the replacement of party caucuses and conventions by primary elections, and the rise of professional political consultants.

Television The most conspicuous factor was the coming of television, a medium that brought political news and advertising into every living room in the country, far more vividly than newspapers or radio could. Individual candidates, in both primaries and general elections, could reach the voters personally and directly, to a far greater extent than ever before in history. Their dependence on party organizations was reduced accordingly. Candidates who came over well on television increasingly defeated the organization’s anointed choice in primaries, still further diminishing the organization’s power. The party workhorse gave way to the telegenic candidate whose principal appeal was a toothy smile and a blow-dried coiffeur rather than anything that lay beneath it. The watershed event was the first Nixon-Kennedy presidential debate in 1960, in which the appearance of the debonair and handsome senator from Massachusetts contrasted sharply with the image of the perspiring vice president. After that evening, political campaigns were never the same. As the years went by, television, followed by the print media, gave increasing attention to the candidates. Personalities were more exciting and entertaining (the definition of newsworthiness today) than the tired old


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parties. By 2000, the media were giving more coverage to the New York Senate campaign of the president’s wife and to Missouri’s defeat of an incumbent senator by a dead man than to all the other Senate contests together. Yet, once in office, each senator has the same vote as any other; and the real story, almost ignored, was that the Republican Party came unexpectedly close to losing its Senate majority (which it in fact did a few months after the election). Television executives argue that they are only covering what the public cares about, but this turns the chicken back into the egg. As Martin Wattenberg points out, “although media appeals may not be able to tell citizens what to think, they can profoundly influence what people think about. One of the most astute political cartoons concerning the media in recent years pictures a young boy asking his father, ‘Dad, if a tree falls in the forest, and the media aren’t there to cover it, has the tree really fallen?’ Political parties do still exist despite their neglect by the media, but the general emphasis of media campaigns on candidates rather than parties has served to make them less institutionally relevant and salient to the mass public.”2 Primaries Another factor was the spread of primary elections, which had actually arisen earlier but only became prevalent nationally during the half-century after the end of World War II—coincidentally, or not so coincidentally, just as television was coming into its own. Party organizations have much less capability to influence the outcome of primaries than they did in the caucuses and conventions that previously were the prevailing nominating vehicles. For a while, the official endorsements of party organizations were highly influential in determining the results of primaries but, with some regional variations, the value of organizational endorsements has diminished greatly, and in some areas today is meaningless. What has become important is the support of local interest groups who provide the money, the campaign volunteers, and the loyalty of voter blocs that once were the monopoly of the party organizations. With those assets, and particularly with the money to buy television time, primary candidates could reach around and behind the party organizations to connect with the voters directly. “The party organizations simply are not actors in presidential politics. Indeed, they are little more than custodians of the party-label prize which goes to the winning candidate organization. The parties have long since ceased to be judges awarding the prize.”3 And what is true of presidential nominations has become equally true in party nomination contests for Congress and other down-ballot offices. Primaries have their origin in the reform movement that began in the early decades of the 20th century. Primaries were only one of the products

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of that movement, whose overall impact has had negative consequences, not just for the political parties but also for representative government—as discussed later in this chapter. Political Consultants The third development was the rise of professional political consultants, itinerant master craftsmen who move from campaign to campaign, bringing along experience, talent, creativity, and expertise on both proven and innovative political techniques. Perhaps the political consulting business would have arisen on its own, but both television and the decline of party organizations have greatly helped its success. Campaign management was originally the exclusive province of the party organization; no longer. Even small local campaigns today require the services of paid specialists in campaign management. The bigger the campaign, the more of these experts it requires, and heated contests for the most important public offices are staffed by small armies of paid political professionals. Over time, political generalists developed specialties—in opinion polling, strategy development, fund-raising, telemarketing, speech writing, media relations, advertising, get-out-the-vote programs, and so forth—so that candidates frequently need to hire a large number of consultants. Even the specialists have specialized; those who construct television commercials, for instance, are often not the same ones who negotiate television time purchases, and television time buyers are in a different field than those who purchase advertising space in print media. During the 2000 presidential primaries, Vice President Gore famously hired an image consultant whose sole area of expertise was advising him on his attire and his personal demeanor before audiences of voters. Most successful political consultants sign on with multiple candidates, and so are forever dashing across the country, flying from one campaign to the next, typically for only a day or two at a time. Given that the services of these experts are for sale, it is a remarkable characteristic of the field that almost all consultants work only for candidates of one party; each major party has its own stable of these professionals, although that pattern would change overnight if circumstances warranted. Another peculiarity is that some practitioners have a philosophic bent, and will work only for, say, moderate Democrats or Republican social conservatives. Political consulting has also gone international. When they are not roaming the country, working for gubernatorial or state legislative candidates here, congressional candidates there—and in a few elite instances, presidential campaigns—these consultants increasingly sell their services to political parties or campaigns in other countries. Some, especially poll-


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sters, have also developed corporate clients to keep up the cash flow in non-election years. Others have become regulars on the talk show and lecture circuit, and a few have become media personalities in their own right. After he left the White House speech-writing staff and before (and in between) his presidential forays, Patrick Buchanan was a columnist and television commentator. Two consultants, Democrat James Carville, and his wife, Republican Mary Matalin, (before she joined Vice President Cheney’s staff), gained lucrative celebrity status on television and the lecture circuit from their marriage of opposites. The political professionals have completely extinguished the role of party pros whose publicly funded patronage jobs enabled them during their heyday to manage their local organizations’ political campaigns. If they are any good at all, homegrown political managers become consultants because they can make more money that way, and the amateurs who ran local campaigns out of their basements for fun or civic virtue have gone the way of the dodo. The Liberated Candidates Before all these changes and developments, the historic role of political parties had always been to nominate candidates who ran on a platform developed by the organization, and then to compete vigorously to elect them. Now, candidates found themselves increasingly able to win nomination and election largely on their own, with stands on issues of their own choosing. Those candidates able to raise their own campaign funds often beat the organization’s endorsed candidate in primaries and increasingly won in the fall on their own. Many were able to create their own political organizations, comprising people dedicated not particularly to the party but to the candidate personally. Television advertising, professional consultants, and even journalists supplanted the roles previously filled by the party machines. “Where once the organizational leaders played the role of talent scouts and assessors based on past performance in governing, reporters now do so based on performance in caucuses and primaries.”4 Candidates, largely freed of any party discipline, were at liberty to take almost any position they liked, pandering at will to single-issue enthusiasts and litmus-test interest groups in a search for majority coalitions of voters that typically transcended traditional party lines. As the volunteers who once manned the party organizations deserted them to work for some appealing individual candidate, the parties lost their most critical strength, the ability to turn out the vote, precinct by precinct and state by state, on Election Day. No wonder, then, that once elected, the new breed of legislators now feels free to wander off to the far reaches of ideology or, less commonly, to adopt positions indistinguishable from the opposition. Legislative lead-

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ers may try to discipline them by killing their pet bills or denying them choice committee assignments, but are compelled in the end to support their reelection lest the seat be lost to the other party; and, after all, there are only so many of the rank-and-file the leaders dare punish when they themselves often got where they are by the same behavior patterns. If they push too hard, they expose themselves to losing both their legislative following and public support, which is exactly what happened to Newt Gingrich. It will be a long time before any legislative leader risks being quite as aggressive as Gingrich was. Left with barely a shell of their once-traditional functions, the party organizations have withered to a dry husk of what was once a supremely potent role in American politics. People who bothered to watch or attend the 2000 national party conventions, with their throngs of costumed, cheering delegates, may question if this characterization is truly valid. But consider: As late as 1968, only about a third of national party convention delegates were chosen in state presidential primaries; now it is around 80 percent. Large percentages of them are really there to represent core interest groups; witness the large numbers of teachers and other union members who dominate the floor at Democratic conventions. The national conventions meet now mainly to affirm the nomination of presidential nominees effectively chosen months before in the primaries, usually by March, five months before the conventions. It has been nearly half a century since a presidential contest was actually decided on the convention floor by the delegates. The conventions’ only other functions are to ratify the presidential candidate’s personal choice for vice president, and sometimes (though not in 2000) engage in heated battles over party platforms that are then disregarded by all but the ultras at the far edges of each party. (Senator Bob Dole, the GOP’s presidential nominee in 1996, publicly admitted that he had not even bothered to read the party’s platform.) Parties and Primaries Some state party organizations are still relatively vigorous, but many are not. The strength of the political party structure is often affected by state laws governing nominating processes. Party organizations have tended to be stronger in states with closed primary elections, in which only voters registered with a party may vote in its primary. In New York, party organizations are still fairly strong, in part because Byzantine election laws make it very difficult for anyone not endorsed by the organization to get on the ballot. However, a factor that weakens New York’s major parties is the presence of several minor parties that bargain and haggle for concessions and patronage before they endorse the Republican or Democratic nominees. (New York is the only state with


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persistent third parties. In close elections, it is difficult for a major party candidate to win without the support of at least one of these minor parties.) Open primaries, which allow voters to choose either party’s primary at the time they enter the polling place, tend to weaken party organizations. A good example was the Michigan Republican presidential primary in February 2000. Governor John Engler had thrown the entire weight of his personal organization behind the candidacy of George W. Bush. However, crossover votes of Democrats, whose own presidential contest had been effectively decided several weeks before, went overwhelmingly for Senator John McCain, enabling him to win the open Republican primary. The result embarrassed Bush and humiliated Engler. A third variety, the blanket primary, was used in the West Coast states of Alaska, California, and Washington, as well as in Louisiana, though in a different form. The blanket primary listed together all candidates for a given office, regardless of party. Thus, voters could choose Republican candidates for some offices, and Democrats for others, just as in the general election. In a 2000 Supreme Court decision,5 the laws in the three western states were overturned on the ground that they denied the members of a political party the right to decide who its nominees should be. The Louisiana law was upheld because primaries there are non-partisan. Without that court decision, blanket primaries might well have spread to other states, leaving the parties with virtually no role at all in the selection of their candidates. THE WASTING ASSETS After all these developments, why do the major parties continue to survive at all? There are three reasons: Money, the persistence of some voter loyalty to party labels, and the strength of legislative party caucuses. The continuance of these strengths is what, so far, has enabled the two major parties to remain the mechanisms for electoral competition. These are assets whose strength will diminish over time. The Role of Political Money The Democratic and Republican parties are funnels for increasingly large amounts of corporate, labor union, and individual contributions that are today well in excess of the totals these donors can legally give to candidates directly. Corporations and unions are forbidden by law to contribute to presidential and congressional candidates, and individuals and PACs are legally limited in the amounts they can give. But by using socalled “soft money” that mostly goes to party committees, contributors can pour in vast sums.

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In political idiom, “hard money” refers to political funds that are subject to federal regulation. “Soft money” is largely or wholly unregulated. Soft money has arisen since adoption of the regulatory system of the 1970s by the parties’ expansion of exceptions and gaps in the original law, and through various judicial interpretations. (More on the use and regulation of money in national politics appears in later chapters.) Party outlays of soft money are growing significantly. Unlike hard money expenditures, which are severely limited and closely regulated, there is no restriction on the amount of soft dollars the parties can collect and spend, and only some of it is reported. Each party has special (“nonfederal”) accounts that can accept corporate and union money in unlimited amounts, the details of which are only partly reported. State party finances are not reported at all at the federal level, even though much of their activity supports presidential and congressional campaigns. Even examining only hard money, the parties and their candidates have set new fund-raising records with each succeeding election. Both Bush and Gore far surpassed the amounts previous candidates collected prior to the national conventions, and the national party committees also raked in record totals. For the entire 2000 campaign, the grand total ran well into the billions. A substantial share of soft money comes from the business community, which is collectively the largest source of Republican finances, but which also gave heavily to the Democrats in 2000. Although a number of companies grumbled after the 1998 elections about the heavy-handed solicitation techniques party committees used to raise soft money, few curtailed their contributions when the 2000 campaign rolled around and, in fact, the apparent totals of soft-dollar business donations to both parties continued to soar. Much, perhaps most of this money supports issue advertising by national or state party committees that benefits each party’s candidates. However, the ability to collect and spend ever-larger amounts of money is a weaker asset than it appears. How long the existing campaign finance situation will be allowed to continue is a matter of vast debate. The availability and use of soft money has become enormously controversial. Both parties have a vested interest in perpetuating the existing system as long as they can, however, because soft money is a device to permit corporate and union contributions banned from the front door to enter from the back. The GOP has been the beneficiary of the lion’s share of soft money, at least prior to 2000 when Democrats approached a level of parity. Another reason for Republican foot-dragging is that their party lacks an allied interest group with the grassroots strength of the labor unions. Republicans have expressed a willingness to accept restrictions on soft money, but only if the Democrats will accept a ban on the mandatory diversion of


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part of union dues to pay for partisan political activity, a deal their union allies will not allow the Democrats to accept. The rhetoric on the subject has become ferocious—Senator McCain made campaign finance the heart of his unsuccessful presidential campaign and Vice President Gore also pledged major changes. Congress stalled action on the issue throughout the 1990s, under both Democratic and Republican majorities. The pressures of reformers to enact new legislation and the tide of populism among both liberals and conservatives seem almost certain to produce a ban on soft money sooner or later. And the sooner the better, in the opinion of veteran reformer Fred Wertheimer. The longtime president of Common Cause who now runs another reform group (Democracy 21), Wertheimer is particularly incensed about the use of issue ads by the political parties to promote their candidates. The use of issue ads, he maintains, is limited under the Supreme Court’s Buckley decision, to “outside groups and non-candidates only and [does] not apply to communications by candidates or political parties.” Issue ads by the latter, he says, “are illegal, because, among other things, they are being financed with tens of millions of dollars of softmoney contributions that the law says cannot be used to influence a federal election.”6 Well, not exactly. So long as the party ads avoid certain “magic words”—“vote for,” “elect,” “defeat,” “oppose,” and the like— the courts so far have upheld their use funded by soft money. However, Wertheimer is right on target with another accusation, that the party issue ads used in the 2000 campaign are a subterfuge that exploits what amounts to a legal loophole. “In fact,” he writes, “everyone—and I mean everyone—knows that these ads are presidential campaign ads being run for the unequivocal purpose of directly influencing the presidential election. The presidential campaigns and political parties know it, the media know it, and so do the viewers of the ads, which are indistinguishable from other presidential campaign ads being run.”7 It is this subterfuge that may doom soft money altogether, even its use for the “party-building” function that was its original purpose. Wertheimer has built a career on outrage about campaign finance practices, but his views on party issue ads seem to reflect a growing public indignation about the practice. Eventually, Congress, if not the judiciary, may respond. However, what neither Wertheimer nor other reformers seem to have ever grasped is that halting the vast flow of soft money to the parties will not keep that money out of the political process. To the contrary, the entire history of campaign funding shows that political money, blocked at one point, will find other channels and points of access, most likely through issue advocacy campaigns (and perhaps other avenues yet to be invented) sponsored not by the political parties but by various interest groups or wealthy individuals. So long as issue advocacy stays within certain con-

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straints, its use has been declared to be free speech, protected by the First Amendment, and therefore immune from congressional regulation. So, while the funds will remain in the political process one way or another, if soft money is banned those dollars will no longer pass through the hands of the political parties. They may still retain hard money contributions, or possibly even be given expanded public funding, but these amounts will be limited. For all intents and purposes, however, interest group spending will be unlimited. Once that happens, the parties’ slide into irrelevance will accelerate. It will be the great and powerful interest groups, not the political parties, that will be the principal instruments of political competition. If business, labor, environmentalists, trial lawyers, and other interests are prevented from giving directly to parties and candidates, they will spend the money themselves to achieve their political and legislative goals. That, in fact, has actually been happening for several years now. Supplementing the election efforts of each major party have been extensive activities by allied interest groups. Labor unions have the longest history of direct involvement at the community and precinct levels, joined in more recent years by environmental and some other liberal organizations. Other elements of the Democratic coalition have made use of direct mail, often highly targeted, to reach members or other voters with highly specific demographic and other characteristics, and follow-up telephone calls. Conservative groups, such as the religious right and the National Rifle Association, have supplemented particular Republican campaigns with direct mail, telephone banks, and voter guides. On balance, the bulk of this combined effort has been of appreciably more benefit to Democrats than to Republicans. For example, the GOP budget in 2000 for direct mail and telephone banks to get out the vote on Election Day was $50 million. The Democratic budget was about half that, but Democratic leaders were unfazed by the gap, knowing that it would be more than made up by the efforts of allied interest groups. And, in fact, estimates of parallel spending by interests supporting the Democratic ticket were many times that of Republican allied groups. The NAACP spent untold millions on an ostensibly non-partisan get-out-the-vote effort targeted largely at key states where the Gore-Lieberman ticket needed help, knowing perfectly well that nine Black votes out of ten would go to the Democrats. Labor, feminist, and environmental organizations also undertook vast campaigns on behalf of Democratic presidential and congressional candidates. Groups like the Christian Coalition and the National Rifle Association engaged in similar efforts to help the GOP ticket, but the amounts spent by such Republican allies did not approach the scope of supportive Democratic groups. These liberal organizations spent an estimated $60 million in the aggregate on behalf of Democrats (leading one election reformer to remark,


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“The left is stepping over the dead carcass of the campaign finance laws on its way to the TV stations”8). Business companies have done very little by way of activities of this sort, and most of what they have chosen to do has been of a non-partisan nature. Business political support has usually been confined to financial contributions and some issue advertising in recent years. Although it is true that the business community is the largest source of funds for Republicans, it is also true that business has frequently contributed heavily to Democrats as well, as it did in 2000. Several business associations, such as the National Association of Manufacturers and the Business-Industry Political Action Committee, achieved some success in 2000 in stimulating a wider range of political participation by corporate personnel. Other business organizations, including the Business Round Table, the U.S. Chamber of Commerce, and some trade associations, spent money on issue ads to help individual congressional candidates, but not the presidential campaign. Such activities will increase substantially if soft money is outlawed. The Decline of Party Loyalty The second cause of political party survival has been the enduring strength of their “brand names.” The often lifelong loyalty of millions of citizens to the Republican and Democratic labels continues to give the major American parties a powerful grip on the electoral process. They are in fact a political duopoly, akin to a commercial market in which two dominant companies effectively prevent any potential new entrants from gaining significant market share. Minor party protests notwithstanding, this duopoly—America’s twoparty system—has in fact provided enormous stability in our governmental system. A single party produces stability (often tyranny) but no competition; three or more strong parties produce competition without much stability. Only a permanent two-party system gives the voters choices within a stable political framework. The multiparty coalitions that govern in the parliamentary democracies of Israel and most European countries (Great Britain excepted) are unknown here. Canada now has a multiparty system, replacing a long political duopoly. Political systems in these other nations often favor the proliferation of parties, sometimes enabling even the very smallest of them to exert leverage far in excess of the votes they attract at the polls—as Israel’s chaotic domestic politics repeatedly illustrates. However, minor parties have rarely done well in the United States, and none have endured. A key reason, at least at the presidential level, is the Electoral College, which is where the nation’s chief executives are really selected. In most states, the candidate with even a popular vote plurality

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gets all of that state’s votes. Bush’s tiny margin in Florida gave him 100 percent of the state’s electoral votes. This has posed an almost insuperable burden on minor-party candidates. Even in 1948, when four national figures were running for president, Harry Truman’s competitors were unable to prevent him from obtaining an Electoral College victory. Occasional minor party candidates or independents have been elected to Congress, but there have never been more than a small handful at any one time, and never enough of them to keep a major party from obtaining a legislative majority. A significant development in the history of America’s minor parties was the Reform Party, begun in 1992 by industrialist Ross Perot and largely financed by his personal fortune. Perot gained about one-fifth of the popular presidential vote, but won the electoral votes of only Maine. (His popular votes in other states might otherwise have gone largely to George Bush [the senior] and he thereby arguably threw the election to Bill Clinton). Perot did poorly in his 1996 campaign, but won enough votes to enable the party’s 2000 nominee, Patrick Buchanan, to obtain $12 million in public funding. Buchanan, a populist social conservative and economic nationalist, had failed in several earlier attempts to win the Republican presidential nomination. He switched to the Reform Party and won its nomination even though he espoused positions on social issues that directly contradicted the party’s previous stands. Buchanan alienated many original Reform members (including Perot, who endorsed Bush), and won less than one-half of one percent of the vote. The Reform Party will therefore get no further public money and is probably finished as a competitive force. Another presidential candidate, Ralph Nader, ran under the banner of the Green Party in 1996 and 2000, principally on an anti-corporate platform. Nader, for decades a famed crusader for consumer and environmental causes, was the Greens’ principal asset. The party itself has little strength or organization. His personal appeal to liberals drew many votes in some states that otherwise probably would have gone to Gore. In Florida particularly, the Nader vote was large enough to deprive Gore of an easy election night victory without the legal wrangling that kept the presidency undecided for weeks.9 Nonetheless, Nader failed to win the 5 percent of the national vote necessary to make the Greens eligible for public financing in the 2004 election. The Libertarian Party is a small party that has managed to live on for a number of years, even though it gets little media attention and relatively few votes for its presidential nominee, but which occasionally manages to elect a state legislator here and there. The Natural Law and Constitution parties are other perennials in presidential elections that attract little support. The long-term prospects for none of these minor parties seem any more


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lustrous than those of any other third parties in U.S. history. Their tenuous existence only underscores the duopolistic hold that the Democratic and Republican brand names have had on the majority of American voters. Nonetheless, something peculiar has been happening to the major party duopoly. It is not only self-identified independents that are frequent splitticket voters. While most voters continue to identify with one of the two major parties, many do not believe this obligates them to vote for that party’s candidates on all or even most occasions. For major offices particularly (that is, presidential, congressional, gubernatorial, and sometimes state legislative elections), these voters will stray to appealing candidates in the other party: thus, the blue-collar Reagan Democrats; or southern voters who long considered themselves still Democrats even while voting increasingly for Republicans; or moderate northeastern and Pacific Coast suburban Republican women who, out of dislike for the social conservative positions many GOP candidates take on issues like abortion, vote for their Democratic opponents. Partisan affiliation and straight-ticket voting are no longer the same thing, and have not been for many years. It is the less publicized, down-ballot contests where partisan affiliation and voting behavior are most likely to stay connected.10 The power of the major party duopoly is illustrated by the historical reluctance of even habitual split-ticket voters to vote for third-party or independent candidates more than occasionally. Most of the 1992 Perot voters returned to one of the major parties four years later, and almost none voted for Buchanan in 2000. Nader, who scored as high as 8 percent in mid-campaign polls, ended up with only about 3 percent of the final national vote, after Democrats convinced many liberals that they should not “waste” their ballots on a candidate who could not possibly win. Still, the historic success of the Republican and Democratic duopoly no longer implies its long-term continuance. The fact is that the emotional power of party brand names is attenuating among most voter groups, and none more so than younger voters. Numerous studies have shown that, as a group, young people seeking remedies to society’s problems look not to government and politics, but to business, charitable organizations, and other elements of the private sector. Such people see the political process as essentially irrelevant to their lives and concerns. Although these attitudes are most pronounced among people in their twenties and thirties, they are also increasingly held by the generations of their parents and even grandparents. If you seek the cause of falling voter turnout, look no further. Why bother to participate in a process that seems to have no meaning in one’s personal system of values? In his book Bowling Alone, political scientist Robert Putnam argues that depressed voter turnout is merely one symptom of the decline in “social capital”—that Americans are less inclined to participate in civic organizations and have fewer social relationships than they did a few decades

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ago.11 Yet, a survey of college students (reported by David Broder12) found that 60 percent said they were actively involved in community service, although only 16 percent belonged to some kind of political or issuesrelated organization, and a mere 7 percent were willing to get involved in a political campaign. “Overwhelmingly,” wrote Broder, the students “said community service will do far more to solve the problems facing the country than political engagement.” It is not surprising, therefore, that turnout among the youngest voters is even more dismal than in the electorate as a whole. As valuable as community service is, the fact that these young people are, as the hippies of an earlier generation put it, “turned off and tuned out” from the political process is discouraging to anyone who takes the trouble to understand the contributions that two-party politics has made to American life and society. Still, the fact that it is a regrettable viewpoint does not prevent it from being a political reality. Politics, of course, is not irrelevant, anymore than government can ever be. Both processes will continue to make decisions that affect the lives of all Americans, whether or not segments of us choose to opt out. Taxes, for example, will continue to be paid by voters and non-voters alike. Public services will continue to be provided whether or not groups of citizens decide to abstain from decisions about how they will be delivered. To a point, politicians will abide by the desires of those who wish to be ignored; a favorite political shibboleth is that if you don’t vote, you have no right to complain. Still, the prevailing political institutions, the major parties, cannot remain powerful in the face of growing popular indifference. “[T]he problem the parties face is that they are considered less relevant in solving the most important domestic and foreign policy issues of the day. In the voters’ minds, the parties are losing their association with the candidates and the issues that the candidates claim to stand for.”13 When fully half of potential voters opt out of participation in America’s most important national ceremony, democracy is weakened—but the parties are endangered. Politics will endure even if the parties do not, and other institutions, perhaps new ones, will find ways to stimulate the excitement and participation that the parties are losing. The new political instruments will be the organizations that are deeply involved in those public problems that citizens consider most important to them. People whose greatest concern is the quality of the earth will support environmental organizations in whatever way they can. A significant percentage of the growing senior citizen population will involve themselves in AARP or other groups that advocate their needs and interests. At least three-fifths of union members usually vote for the candidates their unions endorse. A huge percentage of African Americans already vote as Black leaders and preachers recommend, and that is not invariably for Democrats. Religious conservatives


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are deeply influenced by voter guides published by groups like the Christian Coalition. These patterns will only deepen as party loyalty continues to weaken. Party identification and interest group affiliation are very different things. The Role of Party Caucuses The third reason the major party labels endure is that they have provided a vehicle by which to take control of the executive branch and to organize the legislative bodies. The two-party system has usually enabled candidates to win—and thereby govern with—a majority. One or the other of the major parties has always been able to elect a majority in each house of Congress and this has been largely (though not invariably) true in the 49 state legislatures that organize themselves by party.14 Party legislative caucuses therefore continue to be important in Congress, and more or less so in the state legislatures. The chief importance of these caucuses lies in their ability to muster all their members in strict party-line votes to organize the legislative chamber, the only legislative vote in which party support is ostensibly mandatory (although some defections have been occurring in recent years). Thus, even a narrow majority of one party or the other in the U.S. House of Representatives has been sufficient to elect the speaker and assume control of all legislative committees, their chairmanships, and staff. Party majorities also continue to control the U.S. Senate, and most state legislative chambers—but not invariably. In California and several other states there have been some instances of defectors from the nominal majority party voting to put the minority in control. In other states (Texas and Virginia among them), power-sharing arrangements have divided committee chairmanships between the parties from time to time. A different form of power-sharing was adopted in the U.S. Senate in 2001, in recognition of the parties’ temporary 50–50 tie. However, even large party majorities appear to be weakening as a force in governance. As is so often the case, the nation’s largest state may be leading in the direction the rest of the country will follow. Gray Davis won California’s governorship in 1998 by 20 percentage points, carrying in with him large legislative majorities of his fellow Democrats. This is the state that leads the nation in the use of popular initiatives and referenda, where environmental and consumer measures that would be considered extreme in other parts of the country are routinely passed, and which is supremely tolerant of all manner of lifestyles still considered unusual and controversial elsewhere. Yet, California is where the tax revolt began, which ejected three state Supreme Court judges because their decisions were considered too liberal, which adopted term limits for state legislators, and which imposed restrictions on immigrants and their families. So Gov-

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ernor Davis hews to positions that are much less liberal and much more cautious than might have been expected only a few years ago, given his party’s large majorities. Even in times of crisis (at least until the electricity shortfall) the policies he supported never migrated very far, either to the left or the right, and he was careful to cultivate business support as much as labor’s. Says “Lexington,” The Economist’s pseudonymous observer of American politics: The truth is that California is not a one-party state but a no-party state. Its policies are increasingly dictated by ballot propositions voted on directly by the people. Term limits have winnowed away the professional politicians and knocked holes in the boilers of the party machines. Mr. Davis’s paralysis is the fear of a politician who has lived through tax-revolts and has seen the punishment that voters mete out to mainstream parties. He has achieved party dominance at precisely the time that the country’s fastest-evolving state is reaching beyond the party lines that have defined American politics in the 20th century.15 Even though third parties have small prospects for viability let alone growth, an increasing number of minor-party and independent candidates for various offices have been appearing on ballots around the country, some of them winning or having the potential to affect which major party candidate wins. Minnesota, which in 1998 chose Jesse Ventura as its governor in an election that rejected both major party candidates, is another state exhibiting a pattern similar to California’s. So is Maine, which has twice elected independent governors and was the only state to cast its electoral votes for Perot in 1992. A third-party candidate was elected governor of Connecticut in 1990, former GOP Senator Lowell Weicker. An independent, Bernard Sanders, who caucuses with the Democrats has been easily elected to Congress from Vermont for many years. Senator James Jeffords, a former Republican, followed his fellow Vermonter’s example in 2001 by becoming an independent and joining the Senate Democratic caucus. A conservative Virginia Democratic congressman, Virgil Goode, was reelected as an independent in 2000 and now caucuses with the Republicans All these successes have been those of individuals. None of the minor parties supporting them have been able to perpetuate themselves. The only sustained minor parties in the country are New York’s Liberal, Conservative, and Right-to-Life Parties, which usually endorse one of the major party candidates and draw their power from their ability to veto unacceptable Republican or Democratic choices with the threat of nominating their own candidates. (New York is the only state that permits such cross endorsements.)


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The significance of all these developments is the fragmentation of the major parties’ traditional bases, not the growth prospects of a minor party. Most third-party and independent candidates have little in common. Some are disgruntled ex-Republicans who tilt to the right of the local GOP nominee. Others are liberals who find the local Democrats insufficiently zealous on some group of issues. Still others, like Ventura, simply want nothing to do with either major party. Few of them attract enough votes to win, although occasionally they pull enough votes from one party to throw the election to the other, as Nader did to Gore in Florida. Green Party candidates in New Mexico captured enough votes in 1996 and subsequent elections to enable Republican Heather Wilson to win her historically Democratic congressional district. Republican Thomas Davis of Virginia, chairman of the National Republican Congressional Committee, is one of the most astute analysts of American politics, in or out of Congress. He has expressed concern about the fragmentation of the major parties’ bases that he sees around the country. “Party coalitions are breaking apart everywhere, and third parties are coming and taking away votes,” he told the Wall Street Journal.16 Davis’s fear is that voters who reject the Republican and Democratic brand names will find more and more reasons to pick someone else, and as more independent candidates win, fewer people will consider support for them as “wasting their votes.” The spread of this phenomenon means that more and candidates will be elected with only 35 or 40 percent of the vote, if that. To require actual majorities would mean greater use of runoff elections, common in some states after primaries but rare following general elections, so far at least. A likely consequence is that Republican and Democratic incumbent legislators who feel threatened by minor and non-party opponents will begin to opt out of traditional party discipline in order to demonstrate their own “independence.” Caucus threats to remove incumbents from preferred committee assignments or other punishments can extend only to a limited number of members. Thus, the decline of party loyalty among voters will ultimately lead to a progressive weakening of the party caucuses, the likely last bastion of party strength. THE PRICE OF REFORM The political transformations that are taking place in California and elsewhere will make the politics of the next decades as unlike the 20th century as it was from the hundred years that began with Thomas Jefferson and ended with William McKinley. The man who made McKinley president was Mark Hanna, a political genius who built a national Republican Party of such strength that it dominated American politics until the Great Depression ushered in the political revolution of the New Deal. In both major parties, this was the age

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of organizational leaders—or, if you prefer, machine bosses. These were men (and yes, they were all males) who controlled nominations and often elections, and who dispensed vast patronage enabling party minions to be paid salaries from the public treasury. The leaders of the dominant party were the real political powers of their state and local governments, regardless of the personage who was the nominal mayor or governor (and sometimes it was the party leader himself). In these pre-welfare times, political machines like New York’s Tammany Hall provided food and coal to the poor, asking only their votes in return, preferably multiple votes from each individual. “Vote early and often” was the motto of the times. The purchase of votes persists, barely disguised, in some areas to this day. Party nominees were officially chosen in caucuses or conventions, but frequently the decision was made beforehand, if not by the leader’s fiat, than by a small group of power brokers. This happened even in the selection of presidential candidates. The famous “smoke-filled room” was in Chicago’s Blackstone Hotel where a handful of Republican leaders from around the country chose Senator Warren G. Harding of Ohio as their 1920 presidential nominee. A late epitome of the political boss was Chicago’s Mayor Richard Daley (father of the eponymous present mayor and of Al Gore’s campaign chairman, William Daley). The first Mayor Daley gave the city effective if heavy-handed government. It was said that under him, Chicago’s citizens were imbued with such civic virtue that the dead rose from their graves to vote, often in alphabetical order. This era died hard, lasting in some cities well into late decades of the 20th century, with remnants here and there still doing business. Democracy was rough, rugged, and frequently dishonest in this prereform era, but the party organizations lent it a discipline that has since been wholly lost. In the late 19th century, political parties were the essential mediators between ordinary people and the government. They ran city machines, selected and financed candidates, mobilized and educated voters. The parties were ruthless and often corrupt, not above rigging ballots and buying votes. On the other hand, they articulated clear and compelling themes, disciplined wayward candidates and drew millions of plebian Americans into active political participation. . . . Thanks largely to the parties, the 75% voter turnout in the 1892 presidential election was considered low.17 It is one of the great ironies of politics that the man Hanna and McKinley picked to be vice president—and who succeeded to the presidency upon McKinley’s assassination—was to become the symbol of the Pro-


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gressive Era, Theodore Roosevelt. Governor of New York at the time of his vice presidential nomination, he was picked partly for his voter appeal, but mostly to get him out of the state and into an office where he could do little political damage. Roosevelt’s legacy, however, was not political reform but largely in the realms of international, economic, and conservation policy. The reform movement arose for the express purpose of combatting machine politics. The earliest and most pervasive of the political reforms that characterized the Progressive Era first arose on the other side of the continent from the national capital and Roosevelt’s state of New York. Progressives and populists in Oregon and California invented the institutions of primary elections, referenda, and initiatives, among other changes, and a number of these reforms gradually spread to other states. As we have seen, variations of the primary are now found almost everywhere in the United States. So, too, is the referendum in one form or another. The most powerful of these forms is the “popular referendum,” through which acts of the state (and sometimes local) legislature can be petitioned onto the ballot for approval or disapproval of the electorate. Popular referenda are most prevalent in the western half of the country—as are initiatives, which bypass the legislature altogether by allowing groups of citizens to propose new laws that are then enacted (or not) by all the voters. “Direct democracy” is the collective name for initiatives and popular referenda. (Another form of direct democracy is the recall, which allows the voters to cut short the term of an elected official; Arizona has been particularly fond of honoring several of its recent governors in this way.) As a group, legislators do not have a high opinion of initiatives and popular referenda. They maintain, with some justice, that these devices are the antithesis of representative government, and can result in laws based more on arbitrary public whim than reflection, negotiation, and compromise. “Simply put,” says David Broder, “the initiative’s growing popularity has given us something that once seemed unthinkable—not a government of law, but laws without government.”18 Advocates of direct democracy counter with some of the same arguments used by supporters of term limits—another “reform” that Broder calls “the clearest expression of the revolt against representative government”19 —that elected legislators soon become captives of “the system,” responsive more to interest groups than to the public as a whole. Direct democracy proponents would like to see the movement spread to all states, and perhaps even to the federal level. The resurgence of populism, on both the right and the left, makes a number of legislators and political scientists fearful that it is only a matter of time before direct democracy is indeed adopted nationwide.

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Reform and the Parties There is an old expression that the road to hell is paved with good intentions. It is the curse of reformers that they seem perpetually incapable of learning the principle of unintended consequences. The reformers who invented direct democracy surely did not intend to undermine the concept of representative government embodied in the U.S. Constitution and copied in the constitutions of all 50 states. However, by allowing interests to appeal legislative decisions to referenda and, through initiatives, to circumvent elected legislators completely, that is exactly what they accomplished. Sometimes, reforms simply fail to solve the problems they seek to attack. For example, voter turnout continues to drop despite all the reforms of expanded voting rights, relaxed registration procedures and “motorvoter” laws, extended voting hours, mail-in ballots and, probably soon, online voting. The underlying causes of falling turnout—widespread alienation from the governmental and political processes, and the disappearance of the sense that voting is a civic responsibility—are beyond superficial fixes. The problem is simply not solvable by mere mechanical repairs. Presumably, though, such reforms at least do little harm. That is not always the case, however. Sometimes, the impulse to reform creates new political diseases worse than the ills they were designed to attack. One example is the curtailment of outside income that legislators and other public officials can receive, a reform widely adopted to improve their “ethics.” A consequence of that reform is that legislatures have tended to be comprised of untalented careerists and ideological zealots; able lawmakers often leave because they can do better in private life and many capable citizens choose not to run at all. So a counterreform, term limits, has arisen to force out the careerists (though, unfortunately, not all the zealots), but in the process has assured that no one remains in the legislature long enough to accumulate experience, expertise, and institutional memory. This is certainly not to say that all reforms are necessarily destructive, or that the very concept of reform is unhealthy. To the contrary, a measure of necessary change keeps our political system in a dynamic state, responsive to the evolving needs of American society and contributing to its vitality. Federal lobbying regulation, for example, insofar as it has forced disclosure of clients and financing, so far seems to be working as it was intended (although some state measures have carried the reform to excess). Yet, neither is it true that all reforms are benign, as the very word seems to connote. In their unremitting belief that money is the root of all political evil, reformers have produced new, frequently worse problems. The epit-


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ome of reform gone bad is the current system of regulating campaign finance, as we shall see in Chapter 9. The next and most significant unintended victim of the reformers will be the nation’s political parties and the two-party system itself. The reform movement has long sought to curb or cure abuses of power within the political party system. Some worked. Others, as we have seen, created problems as bad or worse than the evils they sought to eliminate; nor have we yet beheld all the worst effects of past reforms, let alone those still being pressed with such monomania. In all fairness, the slow cancer eating at the vitals of the two-party system cannot be blamed altogether on the reform movement. The reformers did not invent television, nor did they give rise to the political consulting profession, at least not directly; but the systemic changes for which they are responsible—from the invention of primary elections and direct democracy to term limits, the campaign finance laws of the 1970s and the proposals of today to further “reform” them—will all deserve to be listed as causes on the death certificate. It is hard to argue that all these products of the progressive impulse are inherently bad. They are not. They have wrought changes in American politics that have enfranchised whole new classes of voters, women and Blacks most notably, and have expanded the concept of democratic values to give citizens new points of access into political and public policy decision making. The invention of primary elections vastly extended the voters’ ability to select public officials, even as large percentages of people have opted out of the electoral process altogether. However, ours is a representative form of government. A quarter-billion people and more cannot make rational public policy, even if the technology that would let them do so is very nearly here. Representative government has functioned well in this country because of the organizational discipline the two-party system has given it. Multiple parties would have weakened, perhaps fractured it. No one yet knows how representative government can operate with narrow interest groups dominant and no effective political parties to aggregate them. For all their faults and flaws, the major parties have been one of the most important stabilizing forces of American democracy. They have provided frameworks for electoral competition and for majority governance. Minor parties have made their own contributions to that formula, as sources of ideas that the Republicans and Democrats were frequently happy to co-opt. The reform movement has contributed significantly to the decline of the parties. As we have seen, what continues to keep them alive is the residual power of their brand names, together with the vast sums of money they currently raise and dispense. Perhaps all that money will revitalize and perpetuate the major parties. The argument can be made that soft money, however controversial, is really the key to the parties’ future.

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If so, it is yesterday’s future. True, soft money for interest group issue advertising will continue to grow with little restraint because there is no constitutional way to halt it, although reformers will doubtless try. But soft money to the political parties is doomed—because there is a way to eliminate it and the pressures on Congress to do so have become well-nigh irresistible. It is the injection of soft money that has helped sustain the parties, but it is a therapy with a short half-life. Despite their generous contributions of soft money, few business executives would mourn its passing; too many of them have felt coerced into giving. But what happens once it is banned? In Chapter 9, we make the case for deregulating campaign finance, which could provide the parties with financial resources, at least for a time. However, that is a remedy for which the public needs considerable preparation; soft money will be gone before then. Deprived of their principal financial asset, how long can the political parties coast on the lingering but diminishing power of their brand names? The graveyards of the economic marketplace are filled with tombstones bearing product and corporate names that once were highly respected. Can the parties remain viable political entities if all they have left is ideological rancor, bitter partisanship, and an empty pair of names? One institution that will not disappear is our firmly rooted system of elections. But who will contest them? New parties, which have frequently arisen in the nation’s history, cannot replace today’s Republicans and Democrats because they have neither the brand loyalty nor the money to sustain themselves. Large and powerful interest groups will not readily abandon the major party candidates; established habits are hard to kill. The interests may flirt for a while with independent candidates as a pressure tactic on the major parties, but in the end they “will dance with the date that brung them.” It is only when they think that a serious independent candidate whom they like has a realistic chance to be elected that the tide will start to turn. When flirtation turns into endorsement, and significant numbers of independents successfully convert those endorsements into election, that will be the point at which these interest groups cease to be merely influencers of elections and become power centers themselves. At that point, hard money to the lingering party structures will decline sharply and the power of their legislative caucuses will dissolve, as even veteran incumbents walk away from them to find their own individual routes to political survival. The powerful interest groups are where they will each seek their salvations. The Republican and Democratic duopoly may well nominally survive for a time once this sea change has occurred, but real power will have irrevocably passed from them and into the hands of the great interest groups themselves.


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TOMORROW’S POLITICAL POWERS There is a fundamental difference in purpose between political parties and interest groups. Parties, at least viable major ones, exist to achieve and hold power. For interest groups, the top priority is achievement of their public policy objectives. For all of the parties’ intense rhetoric, ideology and issues are really only means to the end of winning elections. Successful politicians (including, for instance, Presidents Ronald Reagan and Bill Clinton) may be impassioned in their speeches but highly pragmatic in practice. Parties tend to be strongest over time when they can encompass broad ranges of opinion, blur ideological lines, and be flexible on issues. That enables them to reach to the political center more easily. That was how Republicans remained the dominant party from the Civil War until the Great Depression and how the Democrats did so for the 60 years that began with the New Deal. During its dominant periods, each party lost the presidency from time to time, but generally kept control of Congress and most state governments. Similar patterns can be observed in parliamentary democracies—for example, Britain, Canada, Germany, and Japan. When one party becomes intensely ideological, it tends to lose power to a more pragmatic competitor. Ideology is not the only cause; corruption and the sheer weariness of governing after a long period are others, but ideological intensity is a key factor. Political pragmatism uses ideology to succeed. The GOP’s drive to win the South away from its traditional Democratic tilt illustrates the point. From the Civil War until after World War II, Republicans were not remotely competitive in any but a few small pockets of the South. When Republicans won presidential and congressional elections during this 90year period, it was because they gathered enough votes elsewhere in the country to offset their southern impotence. War hero Dwight Eisenhower’s enormous personal popularity enabled him to carry some southern states in 1952 and 1956, and Richard Nixon also had some success in this region in 1960, 1968, and 1972. But Republicans won control of Congress only in 1946 and 1952, and could not sustain control in either of the succeeding elections. As we have seen, this pattern began to change in 1964 as the GOP made a deliberate decision to move to the right to become competitive in the South and become a truly national party. Although this strategy weakened Republicans in the liberal Northeast and parts of the Midwest, the populations and therefore the power of those states were shrinking as those of southern and western states were growing. Ideology was the handmaiden of political success, not the other way around. Later, during the 1990s, congressional Republicans lost considerable popular support as they pursued ideological, not pragmatic agendas. They

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also lost important legislative struggles, particularly on budgetary issues, to President Clinton’s centrist and pragmatic political tactics. Despite his sexual conduct and public mistruths, Clinton retained his popularity to the end. Gore, Clinton’s chosen successor, lost because he abandoned his patron’s centrist rhetoric (if not his policies) in favor of a shrilly ideological, populist campaign style that allowed Bush to position himself as a pragmatic conservative. A key element of Bush’s pragmatism was the distance he maintained in public from the GOP’s congressional leaders during the campaign. Political parties exist to win elections, neither more nor less. In contrast, interest groups (and most minor parties, at least in the United States) are issue-driven. Their participation in elections is a means to achieve legislative success, not power per se. To make the point another way, interest groups work to elect sympathetic public officials so they can fulfill their legislative agendas. The American Medical Association (AMA), the largest organization of physicians, is a good example. For decades, the AMA was one of the staunchest allies of the Republican Party, contributing generously and almost exclusively to its candidates. All that changed when health costs began to soar. Insurance companies and health maintenance organizations, prodded by employers paying for ever more expensive benefits, clamped down hard on physicians’ and hospital bills. Legislation on various issues of health care economics increasingly pitted physicians against business groups, and Republicans—even some physicians in Congress—frequently sided with the latter. The fact that the GOP controlled Congress during this period did not deter the AMA from giving heavy support to congressional Democrats (and still to some Republicans). The association is also seeking to unionize physicians, a development that would have horrified most doctors a decade or so ago. The AMA takes these actions in defense of its members’ interests, not to achieve, or even ally itself with, power. The parties adopt issue positions to cultivate interest group support. Interests tend to ally themselves with whichever party is more sympathetic to that group’s legislative objectives, and sometimes come to dominate it. Among the world’s democracies, labor unions are almost always a dominant influence in the parties of the left, and business interests frequently are in the parties of the right. That is only partly true of business in the United States. Almost alone among major U.S. interest groups, business has been willing to support candidates of either party, sometimes even in the same race, if that advanced its positions on issues. Although most business people tend personally to be Republicans and the bulk of business contributions have generally gone to the GOP, that has not deterred executives and their companies from supporting Democrats when they thought it was in their interest. As we will see in the next chapter, that pragmatism has not always


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been effectively exercised. For one thing, it has been tactically restricted because business has largely shunned any role in election campaigns except that of financial benefactor. For another, even its political contributions have often been given in ways that are inept and sometimes self-defeating. If it is true that interest groups are primarily interested in their policy agendas and seek political power and influence only for that purpose, why would any of them seek to replace the political parties? The answer is they would not. For them, elections are the means to legislative and policy ends. Political power for its own sake is almost certainly not an objective of any significant interest group, not even labor, the most politically proficient interest. But the decline of the parties’ ability to determine election outcomes creates a vacuum into which the interest groups are inevitably drawn. These groups exert themselves in elections as substantially as they now do because the party organizations cannot. Many, perhaps most, of the volunteer workers—union members, for instance, or religious conservatives—who man telephone banks and get out the vote are doing so at the behest of an interest group to which they belong, not the local Republican or Democratic organization. (The parties today often must hire professional firms to do these things.) Even if the volunteers are devoting their efforts to particular candidates, they are much more likely to be working because of personal loyalty to those candidates rather than to the parties. At the same time, interest groups since the mid-1990s have been given a powerful tool in the rise of issue advocacy and its legitimization by the judiciary. The parties also currently make extensive use of that technique, but can do so only as long as they can continue to accept the soft money they need to pay for costly issue ads. Once they lose that financial resource, they will be out of the issue advertising business. It will be only the interest groups that will be legally and financially able to stay in, and they will attract much of the soft money that heretofore has gone to the parties. As they now do, they will use that money to advance their legislative interests and to support the individual candidates who will help them do so. It is the confluence of these factors that pushes interest groups into the vacuum the parties once filled. Is it possible that alliances of significant and politically potent interest groups could evolve into new political parties themselves? Conceivably, but the greater likelihood is that they will look less like traditional parties and more like floating coalitions that shift from election to election as the issues and the candidates change. A candidate of a libertarian bent, for instance, might be able to draw support from both pro-choice and gun rights advocates, a linkage unlikely to persist past that individual’s candidacy. Economic nationalists on the right and the left might join temporarily to support protectionist candidates, but their other issue concerns

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would inevitably drive them apart again. It is hard to imagine the supporters of Pat Buchanan and Ralph Nader agreeing on much besides protectionism. Perhaps these fluid coalitions will call themselves political parties, even adopting the Democratic or Republican names. They will not be parties in anything we would recognize as such, however. The voters’ loyalty will belong to the various interest groups themselves, not the coalitions, and coalition elements will be much more likely to switch back and forth from election to election than anything we see today. Even in a single election, some interests might jointly support a candidate for one office while disagreeing on another, even as they do today. That is not the behavior pattern of political parties. Political power in this climate will require two essential elements—substantial financial resources and the ability to mobilize large numbers of grassroots members and supporters. What interest groups have this kind of political strength? For one, labor unions, which have considerably more experience doing this than any other interest group. Church groups have proven effective at mobilizing Black and religious conservative voters. Local Hispanic groups have also begun to be politically effective in several states. Environmental organizations whose memberships and financial strength are rapidly rising can mobilize their supporters through direct mail and telephone banks. Organizations such as the AARP and the National Council of Senior Citizens that represent the rapidly growing ranks of the aged have massive mailing lists and local chapters, and could easily develop this kind of political capability once they decide to. Not all interests, even large ones, have the will or the ability to play a potent political role. Religious groups are a good example. AfricanAmerican and evangelical Protestant churches tend to be monolithic on certain social issues and potent in influencing their members to vote accordingly. The Roman Catholic Church also has strong positions on issues (abortion, birth control, and social justice, for example), but many individual Catholics do not accept these positions and vote as they please. “For the most part, being Catholic or even being a good Catholic predicts little about a person’s views about social justice and government programs.”20 Catholic voters once were a reliably core group of the Democratic coalition. No longer. “A large and crucial portion of Catholic voters will not be firmly tied to either major party—and probably not to a third party, should one develop.”21 The 2000 presidential vote underscores this view. In exit polls, Catholics favored Gore over Bush 50 percent to 47 percent—only slightly more Democratic than the nation as a whole. (As they usually do, white Protestants voted Republican, by a 56 percent–42 percent margin.)22 For an interest group to be politically powerful, its members must be numerous, reasonably united, and fervent in their views on particular issues, with politically active leaders who can mobilize support among large


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sectors of their membership. African-American and evangelical Protestant churches meet these criteria. As prestigious as Roman Catholic hierarchs are, the American Catholic Church does not meet all these criteria for political power—nor do the mainline Protestant churches. Although a broad base of members and supporters is important, an interest group’s overall size will be less politically significant in the postparty era than the fervor of its views and the unity and militancy with which it pursues them with human and financial resources. On the other hand, organizations with ample financial resources but no grassroots strength will play at best a secondary role in this era. Trial lawyers’ advocacy groups are one notable example. They have militancy and money to pursue their objectives, but their numbers are small—and it is not easy to picture armies of pinstriped lawyers canvassing door-todoor in support of their favored candidates. A critical question for the business community is whether it has the ability, and the will, to be in the first rank of players in this new era. On many issues it is divided, but on many others it exhibits a high degree of unity and sometimes even passion. The larger and more effective its political role, the greater will be its ability to influence the course of business legislation. Unfortunately, the converse is also true. Business organizations will not be in the political major leagues so long as they are only cash cows for favored candidates. Perhaps the collective business community will be content with such a secondary role. But if it wishes to climb into the ranks of the significant players, then companies and business associations will have to develop political capabilities that they have, in the main, chosen not to utilize up to now. Venture capitalists provide a good analogy. The most successful of them are not content merely to put large sums into the businesses in which they decide to invest. They follow up their investments with concrete management assistance to make sure the companies succeed. In the same way, business political contributors need to pursue their political “investments” with other kinds of political assistance to make sure they win. If they fail to do so, they will have neither the clout nor the allies necessary to achieve their legislative objectives. Should business groups concern themselves with this future political scenario now? Other things being more or less equal, business executives do tend to focus on short-term political and legislative goals, and to leave worrying about tomorrow until tomorrow. However, there are valid reasons to begin building a political capability now. By strengthening its ability today to elect legislators who are sympathetic to the interests of competitive enterprise and who favor private sector solutions to public problems, business will begin gaining allies for its immediate legislative objectives. After all, the opportunity to make changes in Congress, perhaps significant ones, arises frequently, every two years, and the product of those changes determines the context for legislation until the next elec-

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tion. It is very much in the interest, both short and long term, of companies and business associations to do as much as their non-business competitors to assure a positive current climate for their issues. Broad-gauge political participation is one means of strengthening the political climate for business. Issue advocacy is another, in part because it supports immediate legislative and political objectives, but also because it has the capability to win the force of public opinion to the business side on fundamental long-term issues. Given its economic strength, the American business community would almost automatically be the nation’s most powerful interest, were it not for three factors. Hatfields and McCoys The business community has a deplorable tendency to divide and engage in family feuds. Industries and individual companies fight each other for competitive advantage not only in the marketplace but also in the halls of government where public policy is made. The Microsoft antitrust case was launched by complaints to the Justice Department from competitors who, unable to best Microsoft commercially, sought government intervention. Nor is the dueling limited to individual companies. Some business associations exert as much effort in battling each other (not invariably on their members’ behalf) as they do in resisting the initiatives of government and non-business interest groups. Yet, when they cooperate and make a major legislative effort on high priority issues, as they did on PNTR for China, they can jointly be a nearly irresistible force. The disagreements and legislative warfare might be understandable, if not wholly justifiable, were the business community the dominant lobbying force, assured of winning most of its issues most of the time in Washington and the state capitals. It is not. Business must recognize that its real political antagonists are not its economic competitors or even government per se, but those interest groups with a profound and abiding distrust of corporate motives and behavior on a wide range of issues. These groups see companies as cash-filled pin˜atas that they can club to extract money for their own purposes, and who want an ever-increasing degree of government mandates and regulation over the private sector. Pander Today, Worry Tomorrow The second obstacle is the short-range focus companies and trade associations typically exhibit on legislative and political matters. It is true, of course, that you have to survive today’s battles in order to contest tomorrow’s. It is also true that ignoring or avoiding multiyear strategies merely postpones defeat if your foes are taking the steps necessary for


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long-term advantage, as they are. Politicians also have long memories. They remember who ignored them yesterday to pander to their opponents. George Will Handle It The third, and greatest, obstacle to business political power has been a lack of will to establish it. Timidity, fear, low priorities, and the desire to let others in the business community take care of problems, all have been factors in the aversion a great many companies display to developing the resources needed to reach their political and legislative capabilities. This is the one task individual companies cannot palm off to their associations. Business executives are naturally risk-averse, but in shunning the current risk they shoulder the greater, long-term one. Organizations like BIPAC, the National Association of Manufacturers, and the U.S. Chamber of Commerce, along with a few trade associations, are working to encourage more effective political programs among their member companies, but those companies have to possess the resolve to increase their political clout in the first place. Without that individual and collective determination to win, business enterprises will find themselves forced to settle for little power, modest influence, and legislative table scraps—hardly the route to continued preeminence in the global economy. Specific steps business can undertake to assure its place among tomorrow’s great political powers are the subjects of the next chapters. NOTES 1. David Broder, The Party’s Over: The Failure of Politics in America (New York: Harper & Row, 1972). 2. Martin Wattenberg, The Decline of American Political Parties, 1952–1996 (Cambridge, MA: Harvard University Press, 1998), pp. 110–111. 3. Austin Ranney, The Political Parties, quoted in Wattenburg, Decline, p. 76. 4. Ibid., p. 75. 5. California Democratic Party, et al., v. Jones, 6. Fred Wertheimer, “Gore, Bush, and the Big Lie,” Washington Post, July 24, 2000, p. A23. 7. Ibid. 8. Joshua Rosenkranz, president of the Brennan Center for Justice, New York University Law School. Quoted in the Washington Post, November 3, 2000, p. A22. 9. Gore lost Florida’s popular vote to Bush by 537 votes. Nader received over 97,000 votes in the state. Source: U.S. Federal Election Commission. 10. See Wattenberg, Decline, for an analysis of the distinction between partisanship and voting behavior. 11. Robert D. Putnam, Bowling Alone (New York: Simon & Schuster, 2000). 12. David S. Broder, “The 30 Million Missing Voters,” Washington Post, July 16, 2000, p. B7.

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13. Wattenberg, Decline, p. 89. 14. Nebraska’s unicameral legislature is non-partisan. 15. The Economist, May 6, 2000, p. 36. 16. September 18, 2000, p. A40. 17. Jonathan Rauch, “Don’t Break Up the Party,” Wall Street Journal, February 4, 2000, p. A18. 18. Washington Post, March 25, 2000, p. B1. 19. Ibid., p. B2. 20. David C. Leege, “Divining the Electorate: Is There a Religious Vote?” Commonweal, October 20, 2000, p. 18. 21. William B. Prendergast, The Catholic Voter in American Politics (Washington, DC: Georgetown University Press, 1999), p. 225. 22. Source: Voter News Service.

CHAPTER 7

The Instruments of Politics Managers and leaders who fail generally do so not because of things they don’t know, but because of things they know perfectly well that they just aren’t doing. —Gary Orren

The legislative process begins and ends in a cycle of elections. Lobbying can influence legislative, executive, and regulatory policies and actions, but only within political endpoints set by results of the last election, pressures generated by the perpetual campaign for the next election and, in between, the public’s mood and expectations. The roster of the decision makers and the climate for governmental policy is always determined by the most recent presidential and congressional elections. At the same time, the permanency of political campaigns that now characterizes national politics means that the struggle to gain or retain the White House or Congress in the next election actually begins before the results of the last one are known. For instance, both parties undertook plans and preparations for the 2002 elections (especially in the area of House reapportionment and redistricting) well before the 2000 campaign went into high gear. Several prominent Democrats began positioning themselves to run for president on 2004, even before George W. Bush moved into the White House. In between elections, voter attitudes are a prime factor in establishing legislation and other public policies. Politicians both influence those attitudes and are influenced by them—through town meetings, opinion polls, focus groups, media and opinion leader commentary, interest group advocacy, and various other forms of communications. It is a constant two-

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way process in which it is sometimes hard to sort out at any given moment who are the influencers and who the influenced. It is difficult to defeat an issue if it is supported strongly enough by public opinion. It is even harder to pass controversial legislation that goes beyond the parameters of what the public will accept. In the short term, lobbying can operate effectively within those parameters but rarely outside them. In the long term, it is often necessary to move the parameters by changing how the public thinks. Welfare reform, for instance, did not happen overnight. It took years to alter public attitudes on the issue plus the watershed election of 1994 to elect state governors and members of Congress who were philosophically attuned to taking a new direction in public policy. Thus, on important and controversial issues, two kinds of actions are required: strengthening or redirecting public opinion and also electing supportive public officials. The two are closely interrelated, but still quite separate endeavors. A variety of means can contribute to one or the other of these goals. Issue advocacy is one of the few that can do both. Insofar as the business community and its long-term issues are concerned, it is hard to overemphasize the importance of molding the climate of public attitudes while at the same time working to shape the choices voters make in elections. This chapter deals with business political participation and the techniques by which it can take place. Influencing public opinion through issue advocacy is the subject of Chapter 8. There are many ways in which business executives and their companies can play a significant role in politics. It is sad that so few of them do. Few companies and business associations have anything resembling an effective program of active political participation. Of those that involve themselves at all, the vast majority confine themselves to a financial role: making political contributions directly or through a PAC or by giving soft money. The time to build a set of political capabilities is not at some point in the future when the political developments discussed in the previous chapter have to come to pass, but to have those capabilities in place and established long before. For business, they are not there yet. Why not? The reasons why so few business people engage in politics are legion and worth summarizing, not to castigate or generate guilt, but to help break through the rhetoric and rationalizations that stand in the way of actions that are genuinely necessary for the well-being of individual companies. • A failure by most business people to understand that the global and national economies, and the climate for individual enterprises, are deeply affected by the quality of people elected to public office. It is easier to get pro-business laws and policies from officials who share the values of competitive enterprise.


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• Personal distaste for politics or lobbying or both. Most businessmen and women prefer to shun these activities, sometimes with an intensity that is deeply emotional. There is a price paid for this aversion. It is difficult to get what you want if you fail to ask for it, which in essence is what lobbying is all about. Lobbying is intimately intertwined with politics, and cannot exist apart from it. It is not necessary to love and embrace them, anymore than it is necessary to adore accounting or engineering or marketing, to use them effectively in business operations. • A belief that the priority that needs to be given to the operation of one’s business is so high and all-consuming that there is no time for politics or lobbying. This is not far removed from another mistake many companies have made, putting the priority on building the better mousetrap, trusting that the customers will then come on their own, with little need to market the product. In truth, politics and lobbying are often as essential as marketing in reaching company objectives. • A preference for community and charitable activity in place of political involvement. Good works are important, but the financial ability to do good usually requires that one first do well. Politics has civic value but it is not do-gooding. It is an avenue for the achievement of business objectives. • Devotion by executives of all their off-hours time to the family. This preference is held not only by businesswomen but increasingly men too. In principle, this is hard to argue with, but it is a reflection of the withdrawal from community and civic life that Robert Putnam wrote about in his book Bowling Alone. This is not the place for an extended discussion of this relatively recent social phenomenon. Suffice it to say here that the investment of a few hours a month in political activity can help strengthen the schools the kids go to, and even build a better world for their future. • The Short-Term Mentality—“If it doesn’t affect the next quarterly earnings report, don’t bother with it.” Almost no one expresses this attitude in so many words, but that it is widely held is clear to anyone who observes the behavior of many publicly held corporations today. • Unseemly Modesty—“My talents are not those that candidates need.” • Insufferable Arrogance—“My time is too valuable to waste on politics.” • Modest Arrogance—“I don’t understand politics and I don’t have time to learn about it.”

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• Snobbish Righteousness—“People of quality and integrity don’t demean themselves by consorting with politicians.” • Excessive Timidity—“Our shareholders might not like it.” Or: “It would irritate the unions.” Or: “The press might criticize us.” Or: “If we do anything for one candidate (or party), we’ll just make enemies on the other side.” • Irresponsible Buck-Passing (1)—“Our competitors will take care of it, so why should we?” • Irresponsible Buck-Passing (2)—“Our trade associations will take care of it. That’s what we pay them for.” It is truly lamentable that all these alibis, cop-outs, and rationalizations have been widely held, and heard, throughout the business community. What they amount to is fear of the unknown, or at least the little understood. Apart from reasons of civic improvement and citizen responsibility, the main justification for business political participation is that politics deeply affects how government treats business generally, individual industries, and particular companies. Lobbyists, for all their skill and the advances made in their craft, must deal with whomever are the incumbent lawmakers. Changing the identity of those elected legislators can only be done through the political process. This fundamental truth is the justification for business political participation.

POLITICS AND LEGISLATION Elections are the most powerful force in the American political process. The drive to affect their outcomes shapes every legislative action, and much non-legislative activity as well. Those who lobby—which is to say anyone who seeks a change in either the law or the ways in which laws are carried out—can never afford to ignore the extent to which politics pervades every legislative action. As much as some idealists might wish it otherwise, government and politics are inseparable. Indeed, they should be. It is the political process that keeps government accountable to the people. There are two corollaries to this proposition. First, political activity is one of the most significant ways to influence the legislative process because it helps determine who is elected in the first place to write the laws that determine public policy. Second, the most effective way to influence a lawmaker’s position on an issue is to appeal successfully directly to his or her constituents. By going directly to the voters through techniques like grassroots programs and issue advertising, interest groups can stimulate and mobilize them to directly lobby their legislators on the issue—and no


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lobbying influence is more powerful than local public opinion forcefully expressed. There is a logical flow to the process, summarized as follows: 1. Legislation is the foundation of all government policy making and regulation. Legislation is the product of an inherently political process. 2. Lobbying and government relations are the ways in which business and other interest groups affect legislation, and the executive and regulatory processes that carry out legislative intent. Lobbying provides public policy makers with facts and points of view that frequently are obtainable nowhere else. 3. Legislators are accountable to their constituents through the process of elections. The voters themselves are responsive to interest group persuasion regarding the merits or demerits of particular candidates—and on issues that affect them and that command their attention. a. Business can affect election outcomes by participating in political campaigns to elect genuinely pro-business lawmakers. These actions include not only financial support, but a variety of other legitimate and effective techniques as well. b. Business can affect legislative outcomes by lobbying and by reaching beyond individual legislators to communicate to the constituents to whom they are accountable. Business communications to the public are therefore an essential component in influencing voter opinion and, thereby, legislative decision making. These principles are the heart of rational and effective business political strategies. Each of them therefore merits further discussion because, taken together, they will determine what the future business political and legislative climate will be. Government and Legislation Elections matter. They matter to business executives as citizens, of course, but they also matter because their results color the climate for public policy on issues that deeply affect the fortunes and futures of individual companies and industries. The future of health care, for instance, was a major issue in the 2000 election, reflected in the contrasting philosophies expressed in both the presidential and congressional campaigns. The parties and the candidates had very different views about the proposed patients’ bill of rights, and

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Medicare restructuring and prescription drug benefits. The thrust of the Democratic proposals was to give the federal government a substantially enlarged role in health care. In contrast, the Republican approach tilted significantly in the direction of market-oriented strategies. The impact of the election will be felt by health maintenance organizations (HMOs), the prescription drug industry, the health insurance industry, and employers generally for decades to come. For these companies, the 2000 election mattered profoundly. The alternatives the campaigns offered on educational reforms, to take another example, will affect not only public schools across the country but the large numbers of companies that sell local school systems everything from textbooks to computers, from standardized test protocols to an array of consulting services. To these educational suppliers, the outcome of the 2000 election also mattered quite strongly. Not all issues are the subjects of national debate, as health care and education were in that election. International trade, a critical issue for many business groups, was hardly discussed, but several made it a point to aid pro-trade (and especially pro-China trade) incumbents. Other issues, less politically conspicuous or controversial, arise constantly with important effects on individual enterprises and entire industries. Even apart from the huge cost of business taxes, public policies affect the fortunes of companies in many ways: for instance, by setting the rules under which commerce is conducted, by facilitating or hindering access to raw materials and markets, and often by directly providing a market to government itself. Government intervenes everywhere, creating opportunities for one enterprise and obstacles for another, and regulating the conditions and circumstances under which those businesses seek markets and profits. Telecommunications companies, to cite still another example, experience the impact of public policy decisions on a daily basis in virtually every aspect of their businesses. Electric power companies offer another vivid illustration, particularly in California. Apart from constitutional principles and provisions, the passage of legislation by elected lawmakers is the most important way by which the policies of government are established in representative democracies. (Popular referenda and initiatives are an anomaly in representative government, but in parts of the United States and some other countries a prevalent one.) Legislators write the laws, though frequently delegating to executive officials and regulatory agencies authority to interpret, extend, and enforce them. Proposals to change the laws, and sometimes the ways in which they are carried out, are also subjects of constant legislative action. Like an athletic team that works hard to recruit the best possible players, the business lobbying position is strengthened if it has made sure that the candidates who support its views are elected.


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The Purpose of Lobbying Lobbying is the process by which individuals and interest groups try to influence public policy in some fashion. Although the instruments and tactics of lobbying continue to grow ever more complex and advanced, all involve efforts to persuade public officials to accept and adopt the lobbyist’s point of view. The various tactics used by lobbyists include facts and arguments conveyed through direct personal contacts, but also utilize avenues to reach lawmakers through their constituents and political or interest group allies, by efforts to influence public opinion, by outreach to mobilize affected potential allies, and the like. Individuals and organizations and their lobbyists seek allies and support among legislators, and among each other and anyone else with access to the legislative ear. Legislators seek support from these same interests to broaden their political bases and achieve their own legislative and political goals. Lobbying and politics are ubiquitous in any system of government; the greater the number of people involved in the decision making, the more prevalent lobbying and politics will be. In democracies particularly, trying to “reform” lobbying and politics out of public policy making is like trying to breathe air in a vacuum. Indeed, the very act of enacting reforms inescapably requires lobbying and therefore political actions. The Power of Public Opinion The greatest tribute paid to the importance of public opinion in the American democracy is the size and extent of the resources spent to influence it. Political figures live and die by the force of voter opinion. Interest groups of every kind work hard to obtain favorable news and editorial coverage, often retaining highly paid consultants and specialists who exist solely for the purpose of shaping public opinion. The Ford Motor Company and the Japanese manufacturer of Bridgestone and Firestone tires spent vast sums on advertising and public relations to improve their public image after their tire recall. Public opinion is a powerful force in democratic societies, and is often influential even in authoritarian states. Even in the recovering dictatorship of Russia, public outrage had a significant effect on official behavior when a badly handled fire in a Moscow television tower followed close on the heels of a failure to rescue the crew of a sunken submarine. In the United States and other democracies, the attitudes of the electorate as a whole, or of blocs of voters with intensely held views, are the strongest single influence in determining the behavior of elected officials. Through waves of public and private opinion surveys, focus groups, and personal contacts with constituents, political leaders seek constantly to measure voter opinion, often to affect and manipulate it, but equally often

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to be able to respond to it. Every politician wants to be loved, admired— and reelected. Lobbyists know that the best way to get a legislator’s vote on an issue is to generate high volumes of supportive constituent communications. They therefore work to enlist local interest groups and opinion leaders, the press and electronic media, and their own members or corporate colleagues, to communicate support for the lobbyists’ position. Advertising has long been used in political campaigns, but its application to lobbying is quite recent. Not only is it capable of influencing public opinion on issues, but also has the capability of indirectly affecting voter attitudes toward elected officials and candidates. The rise of issue advertising will have an immense and growing impact on legislative debates and political campaigns throughout this century, drastically altering the way both are conducted. Politics and Business “Man is a political animal,” Aristotle commented. Were he still on the planet, he would recognize the continuing and universal truth of his observation. So will business executives when they reflect on the highly political nature of many business transactions. No one who has worked in a business organization of any size needs an explanation of the term “corporate politics.” Politics infuses merger or acquisition deals as much as finances do; many a corporate engagement has failed to reach the altar because the CEOs could not agree who would be top boss or even whose executives and allies would run which departments. There are, in fact, many similarities between the legislative and the business worlds. Legislators operate to a significant degree through negotiation, compromise, and consensus just as most corporate executives do, even though the latter work within largely hierarchical organizational structures. Like business executives, lawmakers must make decisions, hundreds of them on a yea-or-nay basis every year, except that most of theirs are displayed on the public record for all the world to see. Politics and lobbying are really quite akin to marketing; both make use of similar techniques and processes. Indeed, hardly is some marketing innovation developed than it is quickly adapted to political applications. Politicians even have their own version of the businessperson’s bottom line; theirs is called “election.” There is, however, one significant difference between the political animals in business and those who make public policy. Legislators do not usually possess the ability to oust business executives with whom they disagree. But determined business people (like the leaders of other interest groups) can mobilize to defeat unsympathetic legislators when they come up for reelection.


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It is a power that business, unlike labor unions and other business adversaries, makes use of too infrequently. In election campaigns in which no incumbent is running, business groups will often become involved, at least financially, to help the candidate whose views are sympathetic to free enterprise. It is considerably less common for companies and their associations to work to defeat an incumbent legislator who regularly votes against their interest, at least in part out of fear that he or she will seek retribution on some key issue. Yet, unions and environmental organizations, among others, rise above such fears and frequently target incumbents whose voting records they find distasteful. They are sometimes successful and, as a result, gain an ally and a reliable vote; but even when they fail to beat the lawmaker, they engender respect if not affection, and often a desire to propitiate them before the next election. That is why moderate Republicans, for example, often vote with the unions on certain labor issues—and why even some conservatives find reason to support environmental positions. It is self-evident that business executives who want to see a law changed (or remain unchanged) will have a far easier time of it if they are dealing with like-minded legislators, particularly ones they helped elect. Often, giving political help to incumbents results in increased personal access and greater receptivity to new information and arguments. Sometimes, however, it is difficult or impossible to change the views of lawmakers on particular issues if those legislators hold firm and contrary convictions. In these latter situations, there are only two ways to alter the positions of legislators: by changing the attitudes and opinions of their constituents, or by changing the legislators themselves, replacing them at the polls with more sympathetic opponents. The rationale for increased business political activity is to improve the climate for a market-oriented legislative agenda. The greater the number of lawmakers with points of view sympathetic to business who are elected to Congress and the state legislatures, the more successful business groups will be in lobbying them on key issues. There are a number of completely legal and legitimate techniques companies and their executives can utilize to improve the climate for favorable legislative decisions. Government regulates some of them but a number are exempt from regulation. MONEY AND POLITICS So what can companies, trade associations, and business executives do to be politically effective, to assure that their message is heard, and heeded, in the political and legislative processes? There is a wide range of proven ways to affect the results of elections. Raising and contributing political funds is one of the most important. In fact, for most of those business people who do participate politically in some way, giving money

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is far and away the preferred medium, but it should not be the exclusive approach. Because political finance is the business community’s favorite form of political involvement, however, it is important to begin with a discussion of its strengths, but also its limitations. Contributors give to candidates and parties for a variety of reasons: sometimes because they simply like and admire the people running or are grateful for some past actions the candidates have taken. More often it is because of a shared political philosophy; or commonly held views on a group of issues, or perhaps only on a single issue that is of high priority to the donor. Other times, people give to help build a personal relationship with the candidate or to ingratiate themselves. In sum, people contribute either to help favored candidates win or (especially in the case of incumbents) to build political good will. Money is essential to its recipients but it is not a political panacea for its contributors. Often, the situation is influenced not only by the size of the contribution but also by the circumstances under which it is given and the motivation of the giver. Some of Bill Clinton’s more generous supporters found themselves publicly embarrassed or in legal trouble because of unwelcome revelations of their donations. Still, “money is the mother’s milk of politics,” as Jesse Unruh, California’s legendary Democratic leader, famously observed. All political campaigns depend on private contributions to operate and get their message out, even those that are publicly funded to some extent. Labor PACs and trial lawyers are among the larger donors to many candidates and political committees, but on the whole, business contributors have been the most generous source of political funds. Contributing money to a political candidate or party committee is, in a sense, a passive activity. It is passive in that once a contribution has been made, the donor seldom has any say in how the dollars are used. On the other hand, there are active uses for money; for example, a program of issue ads. In this case, the donor determines how the money is to be spent, what message it is to support, and whether that message will boost or assault a particular candidate. There are additional forms of active political involvement, as we shall see later in this chapter. Except for those candidates who are personally wealthy, economic conservatives cannot hope to be elected to public office without support from the business community. Giving to such candidates expresses approval of the positions they take, or at least greater approval than of their opponents’ views. Financial support is really an expression of faith—that once elected, the candidates will act in ways that advance the donor’s views or interests. Frequently, that proves true, and so donors also often give to express appreciation for an action the candidate has previously taken, as an incumbent or in another office. Other times, however, the contributor may be ruefully reminded of Samuel Johnson’s characterization of second


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marriages, that they are the triumph of hope over experience. Candidates sometimes find reasons to vote quite differently on an issue than their campaign rhetoric had led contributors to expect. There are, however, no money-back guarantees in politics. Business contributors sometimes give because they like what the candidate is saying about an issue but prefer not to say it themselves (also one of the principal reasons companies belong to trade associations). To a greater extent than any other major interest group, individual business enterprises are loath to speak out on controversial matters, often because of worries about the vengeance of angered customers or other stakeholders. Concerns about marketplace retribution have long been a significant inhibitor of other forms of business political activity. There are several reasons why these fears are not altogether valid. For one thing, while boycotts of individual companies are certainly not unheard of, they rarely occur because of an expression of political opinion. Coors beer became a popular product even among consumers who disagreed with the company’s widely known conservative opinions. For another thing, such fears implicitly assume that a statement or action by a group (or candidate) supported by the company really provides an effective public opinion shield—“That was just the XYZ Association; we had nothing to do with it,” is hardly a credible response. Only fanatics refuse to accept a company’s right to defend its interests by supporting likeminded organizations or candidates. Labor unions that support Democratic candidates do not go out on strike against companies that help their Republican opponents. Closely akin to the fear syndrome is the underlying reason of many business contributors who donate to political parties but not individual candidates: “We like your candidates (or your platform),” they are saying in effect, “but we prefer not to support them directly lest we antagonize their opponents.” Then, having contributed to one party, they turn around and give to the other to cover their bets. In the end, this kind of behavior fools nobody and is actually selfdestructive. Politicians are among the most perceptive and intuitive (or perhaps cynical) people on the planet. They recognize timidity when they see it, and lose respect for its exhibitors. Worse, from the point of view of this kind of contributor, political fund-raisers know they can go back time and again to engender fear that goodwill may be lost if still more money is not forthcoming. In another line of work, this might be called extortion. Some business executives set themselves up for repeated financial extractions by their own transparent fearfulness. Fear is also why businesses contribute so frequently to incumbents whose departure from public life would not grieve them a whit. These incumbents gain support because they hold important positions or are otherwise able to exert significant influence on particular legislative issues.

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The contributor who gives to the chairman of an important legislative committee may also then donate to the individual likely to assume the chairmanship if the other party wins the next election. Businesses justify both contributions as necessary for goodwill and to gain or maintain legislative access. As lobbyists often point out, you can’t affect the opinions and actions of someone you can’t reach. However, none of this is secret. Contributions, at least of hard money, are a matter of public record. Politicians scrutinize each other’s disclosure statements. Everyone knows who is giving to whom and can generally guess why. Patterns of contributing to both sides are among the chief reasons why so many political practitioners believe that business people and their lobbyists are fully paid-up members of the world’s oldest profession. Despite their similarities (or possibly because of them), the scorn with which many business people view politicians is widely reciprocated. Another difficulty with the fear-based rationale for political contributions is that it serves to entrench lawmakers whose views are frequently inimical to particular sectors of business or even to the competitive enterprise system as a whole. Examples of business support for such legislators are appallingly rampant. The justification is generally the need to achieve a high-priority legislative goal. Quite commonly, the overriding urgency of a particular issue makes business people oblivious to the need for longterm changes to achieve or extend pro-business majorities in Congress and the state legislatures. This short-term focus actually helps perpetuate the incumbency of many anti-business lawmakers, and perhaps even promote their advancement. The consequence may actually be to deter progress on the company’s issues. Some business lobbyists exacerbate this problem because they are paid primarily to deal with the here-and-now, and only secondarily, if at all, to change the future political and legislative climate. A significant fraction of corporate chief executives have a related view; their pre-retirement tenures are limited, and their compensation and pensions depend heavily on how well the company’s earnings and stock price do now, not at some point in the nebulous future. Of course, it is dangerous to ignore immediate legislative needs and threats. It is at least as perilous, though, to shun the necessity to work for changes in the political climate. Corporate executives who value the future vitality of their companies and the long-range interests of shareholders and employees devote considerable effort to working for a healthy political environment in which their companies can thrive and grow, an environment that is built by the election of lawmakers sympathetic to the needs of the company, its stakeholders, and competitive enterprise overall. Among many business executives, there is a tendency to see lobbying as the only means to achieve a legislative objective, without recognizing the all-pervading political context within which laws are always made or


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changed. It is true that lobbying strictly on the merits of the case often is sufficient, but the more important or controversial an issue is, and the more competitively involved other interest groups become, the greater the likelihood that political considerations will intervene, sometimes overriding all others. The controversy given health care issues in the 2000 presidential campaign is a good example. Because research found these issues were uppermost in the minds of citizens and likely to be a major influence in their voting decisions, the Democratic campaign trampled all over the support the party had previously received from pharmaceutical and health insurance companies. Elected officials are always dependent on voter goodwill. The nature of representative government therefore leads lawmakers to act in ways that they hope most of their constituents will applaud most of the time. Conversely, it is difficult for legislators to support positions that will engender anger among substantial numbers of their voters or with interest groups important to their reelection. Politicians treat carefully those companies or business associations whose political capabilities and courage they respect, even if they do not always share their views. They also know that the company whose political behavior is colored by fear and timidity can be safely ignored.

POLITICAL FUND-RAISING ACTIVITIES In 1963, a number of corporate and association executives created BIPAC to identify and support congressional candidates sympathetic to the cause of free enterprise. BIPAC’s strength (and that of its state counterparts) is that it does not lobby and hence has no vital issues a disgruntled lawmaker can hold hostage. One measure of BIPAC’s effectiveness is that at various times it has angered both Republicans and Democrats because of the candidates it has supported, and because it has been willing to criticize political allies when their actions were not in the interests of the business community.1 In 2000, BIPAC took a further step, to mobilize companies and associations in a “nationwide effort to maximize business involvement in the upcoming elections,” the first comprehensive attempt within the business community to do so in recent history.2 BIPAC developed a website that companies could adapt for their own internal use so that employees could see how incumbents voted on important issues and what the positions of opposing candidates were. BIPAC also offered business organizations software programs that could be used to develop voter guides on those issues for widespread distribution. State-specific voter registration materials were also available to be downloaded and distributed by individual companies, with messages urging employees to vote. BIPAC estimates that nearly

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2,000 companies used these materials and that 250,000 e-mails were generated to employees each week during the campaign. The great virtue of the type of political action program BIPAC’s Project 2000 sought to stimulate is that it departed from passive political involvement—giving money to someone else to spend—to embark on an active agenda by which the company or association undertakes its own direct efforts to affect the outcome of elections. The advantage of active programs is that they give people a way to become politically involved and give them a sense of genuine participation in an important arena of civic affairs. By taking on a visible leadership role, the company or association also benefits, at least among managers and executives and their families, and perhaps in the larger community. Depending on the actions undertaken, particular candidates may also be helped. Alternatively, the organization may confine itself to activities that are non-partisan. It also still has the option of confining itself to largely passive undertakings. There follows a summary of the political activities individual business enterprises can legally and legitimately undertake in presidential and congressional campaigns. Except as noted, all such activities are regulated at the federal level by law and by the regulations of the Federal Election Commission;3 state laws may also apply and should be consulted. This discussion begins with those activities that raise money that, for the most part, someone else (candidates, political party committees, or advocacy groups) will decide how to spend.

Promotion of Personal Political Contributions Labor unions and corporations have long been barred from contributing directly to federal candidates or party committees. This bar applies not only to business corporations but also to any incorporated entity including, therefore, most trade and professional associations and non-profit organizations. Only individuals and PACs are allowed to contribute to presidential and congressional candidates, or to political party committees supporting such candidates. Politicians call this “hard money” because it is tightly regulated by the Federal Election Campaign Act (FECA) and the Federal Election Commission (FEC). What companies and associations can do, however, is actively urge all their managers, executives, and shareholders (plus their spouses and other family members) to contribute. This group of potential business donors is known technically as the “restricted class.” (Labor unions have their own restricted class, their members.) Only American citizens may contribute. The following limits are per person (i.e., they apply separately to spouses and other family members) and pertain only to federal elections (state laws differ) (see the Afterword to this volume).


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• $1,000 to any single candidate in any election. (Primary, runoff, and general elections are each considered separate elections.) Any number of candidates may be supported, subject to an overall limitation, below. • $20,000 annually to political party committees. • $5,000 annually to any political action committee or committee supporting an independent expenditure effort. • An aggregate total of $25,000 per election cycle (i.e., the election year and the year preceding) to any or all of these recipients. Companies can mount an aggressive effort to encourage individual political contributions within these limits, except that the firm cannot legally collect the checks itself. Because the limits on contributions to a candidate in the general election campaign are computed separately from the primary election, individuals who can afford to do so may give a candidate up to $1,000 for each of these elections so long as they stay under the aggregate cap. In addition, individuals may also be encouraged to undertake fundraising events in their homes on behalf of candidates. If the total costs of such an event exceed $1,000, they are considered an “in-kind contribution,” which falls within the above limits and reduces the dollar amount the host may donate—but not if the costs are held below that amount. So, if a large number of people are expected, it behooves the host to serve potato chips and soft drinks instead of hors d’ouvres and champagne. Political Action Committees (PACs) PACs are entities that are usually organized under the sponsorship of a corporation, trade association, union, or some other interest group, although a few are unaffiliated. PAC members are individuals of similar interests or views who voluntarily choose to pool their contributions to maximize their political impact. Money given to and by PACs operating in federal elections is “hard,” regulated by the FEC. PACs operating only within particular states and not involved in federal elections are under the authority of state laws, which vary widely. Some PACs operate for the purpose of supporting the sponsoring organization’s lobbying program, to promote goodwill, especially among incumbents, and enhance a particular legislative interest. Corporate and union PACs are typical examples. Other PACs contribute for ideological reasons, giving solely to candidates who share their point of view, whether narrowly (e.g., opposition to gun control, support for abortion rights, increased benefits for disabled veterans, etc.) or broadly (pro-business, pro-

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labor, support for civil rights or environmental protection, and so forth). Still other PACs seek to achieve both lobbying and ideological objectives, sometimes by allocation (“no more than X percent may be given to incumbents”). Some PACs are very specific about whom they will support; one PAC, for instance, gives only to candidates who are pro-choice Republican women. Any company or association can organize its own PAC, and individuals may contribute up to $5,000 annually to it. The PAC may solicit executives, managers, individual shareholders, and retirees from these categories, at any time; solicitations of other employees are limited to two a year. Companies, associations, and other organizations sponsoring PACs may not contribute directly to the PAC but are allowed to pay the PAC’s administrative and solicitation costs out of their own funds so that the contributions they collect are not eaten up by overhead expense. Many companies use payroll deduction plans to facilitate maximum contributions. The same rules apply to associations sponsoring PACs whose members are their own employees. However, trade associations run into several obstacles when they try to solicit personnel in their member companies. Association PACs may solicit the same class of people a corporate PAC can, but only once annually, and they must first obtain the member company’s permission. Moreover, the company may give its permission to only one association PAC a year. Another obstacle is that if the company has its own PAC, that of the association is essentially in competition with it for executives’ donations. As a practical matter, these are difficult requirements, which is why relatively few trade association PACs flourish. The most successful trade association PACs tend to be those able to target executives of member companies that have no PAC of their own. PACs affiliated with individual membership associations (e.g., labor unions, medical societies, environmental organizations, etc.) have an easier time and often are among the largest and most successful PACs; some of these PACs, in fact, take in more money than the sponsoring organizations collect in dues. “Non-connected” PACs (i.e., those that are unaffiliated or are independent of a sponsoring organization) have an advantage over corporate and association PACs in that they may solicit any individuals they like. These are always ideological PACs. BIPAC, which supports only probusiness candidates, is one example. Another is Emily’s List, a large feminist PAC. The disadvantage of non-connected PACs is that they must use their hard money contributions to pay for their administrative expenses. Some of these PACs therefore have established educational affiliates that can accept corporate or union money to defray certain kinds of overhead costs. The maximum amount any PAC may give a candidate is $5,000 per


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election; assuming the candidate has a primary contest, the PAC may therefore give him or her up to $10,000 and, if there is a runoff election, up to $15,000. PACs may coordinate with the recipients of their contributions, for example, by advance notification of amount and timing, and perhaps by arrangement of a press announcement. However, the costs of a press release or other coordination expense are considered an in-kind contribution that lessens the maximum permissible donation.4 Independent Expenditure (IE) Committees These are entities more likely to be associated with an ideological movement than with any business interest. They are groups that collect individual contributions and spend the money on behalf of candidates who identify with their cause. Political party committees also can undertake IE programs. IE groups resemble ideological PACs, but their great advantage is that there is no limit on the amount of money they can collect and spend in any particular campaign. Moreover, they can use their money to directly address their issues and, unlike issue advocacy campaigns, may (and usually do) explicitly urge voters to elect or defeat particular candidates. However, IE groups must raise all their money from individuals, may not coordinate in any way with the candidates they benefit, and must pay all their operating costs out of their hard dollar revenue. This has led to some abuses when such a committee has used the bulk of its money for administrative expenses, sometimes including high salaries for the organizers. Even where this has not occurred, large organizational and fundraising costs often leave only a fraction of the funds collected available for the committee’s purpose. IE groups have been active in a number of campaigns, usually by funding negative advertising, but also by undertaking telephone and get-outthe-vote drives. Soft Money Contributions If “hard money” refers to federally regulated political finances, “soft money” means unregulated money. (“Hard” and “soft” money are not legal terms, just shorthand phrases commonly used in political parlance.) Corporate and union funds (as well as money from individuals), prohibited as hard money, may be given to political party committees under a variety of circumstances and conditions. Some of these are explicitly permitted under federal law or FEC regulations. Others are products of creative election lawyers that have been sanctioned in various cases by the federal judiciary. (See the Afterword to this volume.) The categories of soft money are these:

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1. Funds contributed to party committees’ “non-federal accounts.” This money is not given directly to candidates, but is used to support a variety of activities that may benefit them in various indirect ways. The largest of these today is advocacy advertising, which may speak to the party’s position on various issues, or extol its candidates as a group, or even sing the praises (or sins) of individual candidates, so long as it avoids explicit calls for their election or defeat (“express advocacy”). During the 1996 preconvention period after most of the primaries had ended, the Democratic National Committee used large sums of soft money (from controversial and, as it later turned out, sometimes illegal sources) to finance ads of this sort on President Clinton’s behalf. The Republican National Committee undertook a smaller program for Senator Dole. Both national committees greatly expanded these programs in the 2000 campaign to aid Governor Bush and Vice President Gore. So long as the money is not funneled directly to candidates or used in ways that contain express advocacy, there is no limit on the amount of soft dollars a party committee may collect or that a corporation or union may give. Corporate soft money to non-federal accounts is also used by party committees for telephone banks, registration and get-out-the-vote drives, and similar activities, and for general overhead and party-building funds. It can also support certain national convention expenses. 2. Money contributed to state party committees where state law permits. Thirty states permit corporate political contributions (40 allow labor union contributions), and these include some of the largest and most politically important states. Depending on the laws of the particular state, donors of corporate contributions are frequently unreported. These corporate and union contributions can directly assist candidates for state and local offices, though not for president or Congress. More to the point, however, the state party committees can use these contributions for various purposes that indirectly benefit federal candidates, including issue ads and get-out-the-vote campaigns. There is extensive coordination and joint soft money fund-raising between national and state committees of each party. For instance, the National Republican Senatorial Committee and GOP committees in New York cooperated, as did their Democratic counterparts, in raising large amounts of soft money for issue ads to benefit their 2000 Senate candidates. The question of coordination between party committees and their candidates was the subject of a pair of Supreme Court decisions involving the same case. In a 1996 ruling, the Court held that if coordination does not occur, party spending on a particular campaign is treated like independent expenditures, protected as free speech under the First Amendment. The second decision, in 2001, went in a different direction. Where party-candidate coordination does take place, the Court said, party spending is subject to legal ceilings and FEC regulation. The effect of the two rulings may be an increase in uncoordinated party issue ads that may vary, perhaps


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significantly, from the candidate’s own positions and priorities.5 The two rulings relate only to hard dollar spending. The use of soft money, whether coordinated or not, is not directly at issue. Many members of Congress solicit hard dollars for their “leadership PACs”—PACs that build political support for their sponsors by enabling them to help other senators and representatives. A growing number of Republican and Democratic congressional leaders have also set up soft dollar adjuncts to their leadership PACs for use in issue advocacy advertising, and other unregulated activities. The soft money auxiliaries are structured so that there is no limit on the amount companies and unions may give, and generally very little disclosure of their contributors and activities. 3. Corporate and union contributions to certain non-profit, tax-exempt “social welfare” organizations and associations. This money may be used in issue advocacy campaigns or for the distribution of voter guides that may be ostensibly non-partisan but which can produce a clear benefit to one party or the other and its candidates. The non-profit groups6 can accept contributions (with very limited public disclosure), but are restricted in the percentage of their revenues they can devote to political purposes. Such organizations may not expressly endorse candidates or coordinate with them, but otherwise have considerable latitude in what they do. For instance, the NAACP collected and spent considerable sums to increase African-American voter turnout in 2000 for what was, seemingly, a nonpartisan effort but which in reality was designed to benefit Democratic candidates. Trade associations7 have wider latitude in their political activities. They can engage in issue advocacy, produce voter guides, and so on. If they are incorporated, they are not allowed to contribute directly to federal candidates but can utilize the association’s PAC to endorse them. The U.S. Chamber of Commerce usually endorses a group of congressional candidates in this way. Other business groups, among them the Business Round Table, the National Association of Manufacturers, the Health Benefits Coalition, and Americans for Job Security, supported a number of vulnerable congressional candidates in 2000, most but not all of them Republicans, largely through issue ads. Still another kind of group, so-called Sec. 527 political organizations,8 has even greater latitude, and became a very widely used structure in 2000, financed by both companies and non-business groups. Like the non-profit groups, 527s can sponsor issue ads that help candidates, so long as they stop short of express advocacy or coordination. But unlike the non-profits, they may spend all their money on these activities, and were not, for a time, legally obliged to report what they were up to nor to disclose the identities of their contributors. Several members of Congress helped establish particular 527s and raised money for them. The secrecy under which these groups operated drew widespread criti-

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cism, and within months of publicity about them Congress enacted legislation to compel them to disclose their donors and activities. Following passage of the disclosure law, a number of 527s converted to a non-profit status so that they could continue their political operations without having to reveal their financial sources. Others sued to challenge the law on constitutional grounds. Some well-known organizations created 527s, not to hide their own identity, but that of their financial contributors. These groups ranged the political spectrum—from the Christian Coalition, the Faith and Family Alliance, and Citizens for the Republican Congress, to the Sierra Club, the League of Conservation Voters, and Peace Action.9 In other cases, individuals or particular interest groups created 527s under obscure names and used them as vehicles to promote their stands on specific issues. Some reported examples of 527s included the following: • “Citizens for Better Medicare,” reportedly financed significantly by pharmaceutical companies, ran ads attacking a Democratic Senate candidate in Montana for advocating “government price controls” on drugs.10 • “Republicans for Clean Air” reportedly sponsored $2.5 million in ads attacking Senator John McCain just prior to the New York and California presidential primaries. “The ‘group’ turned out to be two Texas brothers who had been major donors to Governor George W. Bush.”11 • “U.S. Term Limits” extensively attacked Republican George Nethercutt (R-WA) for going back on a pledge to serve no more than three terms in the House.12 • “Citizens for State Power” (a conservative group) and the liberal “Electric Utility Shareholders Alliance” ran radio ads starting in 1998 in which both sides denounced utility deregulation, though with different rationales. According to the Washington Post, both groups were “secretly” financed by a group of electric utility companies that “believed using seemingly independent surrogates made their case more believable and shielded them from political risk.” The electrical workers’ union was also reported as a contributor to the liberal group.13 The media are exceedingly fond of breaking stories like these on “secret” activities involving soft money, although there is nothing at all illegal about them. There clearly are a substantial number of interest groups and individuals who, for their own reasons, prefer to exercise their rights of free speech without having their identities disclosed. Unearthing that kind of covert support, however, is a challenge few investigative journalists can


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resist, on the apparent theory that people who hide their support for an organization or cause behind a mask of confidentiality must have nefarious motivations. Groups with an opposite position also try to embarrass their competition by breaking through the curtain of confidentiality if they can. One might speculate, for example, that industrial competitors favoring electric deregulation leaked the identity of backers of the antideregulation groups to the press. By getting the story out, the proderegulation group discomfited its opponents and thereby advanced its own cause, probably at considerably less expense than that incurred by the sponsors of the ads. Individuals and companies who contribute to organizations behind a cover of confidentiality need to understand that their anonymity may not remain protected indefinitely. Since there is limited or no financial disclosure of their political activities by tax-exempt groups, and until recently none by the 527s, there is no way of knowing exactly how much they spent in the 2000 campaign; but knowledgeable observers believe it was substantially higher than in any previous year, perhaps on the order of one billion dollars or so. One study estimates $364 million was spent just in competitive congressional races, on issue advocacy and internal communications to members and employees.14 This does not include such spending for the presidential campaign or by party committees. Whatever their particular legal status, interest groups of all ideological stripes and political persuasions were more active during the 2000 campaign than at any previous time. Many sponsored advertising that was confined to current issues, but many others used their ads to criticize or help particular presidential or congressional candidates. Vice President Gore received far more support from interest group issue ads that discussed presidential candidates than Governor Bush did, perhaps by a ratio of ten-to-one, or possibly more. The groups boosting Gore included prochoice organizations (Planned Parenthood and NARAL), environmental groups (the Sierra Club and the League of Conservation Voters), the NAACP, labor unions, and other liberal causes—along with Democratic committees. Nearly all the issue advertising on Bush’s behalf was generated by Republican committees and affiliates, with little or none from business organizations (although, of course, most of the funding for these GOP efforts came from business-related sources). Much additional, liberal-sponsored issue advertising also was aimed at various congressional races, virtually all of it intended to help Democrats. Individual Senate and House contests were also the focus of various business groups (e.g., the U.S. Chamber and the Business Round Table), with the purpose of aiding endangered pro-business incumbents (including a few Democrats) but, generally, to maintain Republican majorities in Congress.

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ACTIVE POLITICAL PARTICIPATION PROGRAMS Apart from financial contributions of various kinds, there are other activities in which business enterprises can legally engage, activities that have political value and civic merit but that companies have too frequently shunned or ignored. Unlike political contribution activities, which are essentially passive as we have defined the term, the programs discussed below are active ones, because the organization undertaking them makes the decisions about what is to be done and how resources are spent. Many of the activities described here involve communications of various sorts. Under FEC regulations, what you can say in these communications depends to a significant extent on to whom you are saying it. Some messages may be expressed only to active and retired management employees, and to shareholders (the “restricted class” for corporations and associations). Other kinds of political messages may be communicated to all employees; and still others to the general public. Although the FEC’s regulations are not altogether consistent and sometimes a bit illogical, they are legally enforceable and should therefore be complied with as fully as possible.15 It may therefore be useful to consult an attorney knowledgeable about federal election law. Candidate Endorsements Some business people will be surprised to learn that the FEC permits companies to publicly endorse candidates, a potentially powerful tool, especially in communities where a company has a major presence. Endorsements should be made modestly, via a press release to the media with which the company normally and regularly communicates, stating why the candidate should be elected. There may not be coordination with the candidate. However, if the company’s PAC makes the endorsement rather than the company itself, coordination is permitted. Oddly enough, corporate brochures or newsletters announcing an endorsement may be sent (or distributed on an intranet website) only to the managerial class, not all employees—but of course, a news story based on the press release will reach everyone. Candidate Meetings Favored candidates may be invited to meet with the managerial class on company property. There is no obligation to invite their opponents, even if non-managerial personnel happen to attend, unless an opponent specifically asks to come. Managers can be urged at such meetings, or in other ways, to contribute to and volunteer to work for the preferred candidate, but corporate personnel should avoid actually soliciting or collect-


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ing candidate contributions on company time or property. (There is no such bar if funds are solicited for the company’s PAC, even if the PAC gives financial support to the candidate.) The company may also use telephones or other corporate property to urge managerial personnel to register and vote for the candidate. Coordination with the candidate on these activities is obviously permitted. Voting Records and Voter Guides So long as there is neither express advocacy nor candidate coordination, corporations can distribute to the general public the voting records of incumbents, and information on the biographies and issue positions of candidates competing for elective office. Many voter guides are also based on candidates’ responses to issues questionnaires. There are some other “fine print” requirements that are not difficult to comply with but that should be checked out in advance. The company or association is free to select the issues and legislative votes most meaningful to it. If the end product happens to show that one candidate’s positions are “better” than another’s—for the company, for its employees, or for the community—so be it. The Christian Coalition’s voter guides, reporting candidates’ positions on abortion and other social issues, have been widely distributed, at low cost, at services of participating churches and other venues. The purpose, of course, was to benefit candidates who agreed with the Coalition’s views even though formal endorsements were avoided. Similarly, BIPAC’s voter guides were intended to help pro-business candidates. Voluntary Political Activity Even the most cautious company should have no problem urging its managers to become involved in local congressional or other political campaigns without specifying particular candidates. Depending on its relations with other employees, particularly union members, the company may possibly want to make the same recommendation to them, or even to the community at large. A more limited, and perhaps more productive, alternative is to focus on those managers and shareholders with a known interest in political or a related activity—for example, PAC contributors, people active in various civic pursuits (whether on behalf of the company or on their own), or participants in the company’s grassroots legislative program, if it has one. These are the people most likely to be responsive to encouragement to participate in a political campaign, because they have already shown themselves to be politically aware or active in civic life. Volunteered political activity is a different game than it was before the

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era of mass political communications and professional campaign managers, but there is still an important role that individuals can play. People still often place a greater premium on a personal message from someone they know than on impersonal mailings or television ads. There is great credibility in being able to say, “I know Candidate X personally and I can tell you that he has the experience and the ability to be a great legislator. I’ve talked with him about the issues our community is concerned about and his position is exactly the one you or I would take if we were in that office.” The most valuable activity a volunteer can offer, therefore, may be to spend a Sunday afternoon visiting neighbors on behalf of particular candidates, or an evening or two calling friends. Although many campaigns prefer to rely on professional telephone banks, others still use volunteers, and some use both. Banks of callers can assure that the campaign’s message reaches everyone, but no caller reading from a script can ever be as persuasive as a volunteer expressing his or her genuine feelings to people he or she knows. Such personal contacts are more effective in influencing votes than direct mail or telephone banks. Campaigns also need special expertise that business executives can offer as volunteers. Specialists in information systems and computer technology can help in tailoring databases of voters or potential contributors so that a mailing on educational issues, for instance, can be sent to women between the ages of 30 and 50, or one on Social Security and Medicare reforms to voters over 65. Accountants may be able to assist the campaign treasurer. Skilled writers can help with speeches or position papers. On the other hand, it is important to be sensitive to the interests of professional consultants, who, after all, are being paid precious campaign dollars for their expertise. The campaign’s professional media expert, for instance, may or may not welcome the volunteered services of even a talented corporate marketing executive if his or her advice contradicts the consultant’s expert opinions, let alone reduces the advertising commissions that probably represent part of the consultant’s fee. Some kinds of volunteered help may involve no outlay of time whatever. All candidates want as many people as possible to display their bumper strips or yard signs. These may be small things, but in close elections everything helps if it can influence votes. Volunteers can sometimes play more significant roles. A number of years ago, this author lived in an area represented in Congress by one of the so-called “Watergate babies,” young, reform-minded liberals first elected in 1974 in the aftermath of the scandal that forced President Nixon out of office. I arranged for the congressman to speak to a meeting of executives at the company at which I worked at the time. We found him personally arrogant, and disagreed profoundly with his views on issues affecting the country and companies like ours. I took it as a personal mission to find a candidate with the ability to defeat him. Eventually, I


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met an intelligent, articulate, well-connected local school board member with the political savvy and motivation to make a good candidate. She agreed to run, and we spent months raising the money and putting together the campaign elements needed for an effective campaign. She was an effective candidate but lost that first election, though she did better than the incumbent’s other opponents had in recent years. The second campaign was launched at a thank-you party for campaign workers held the Friday after the election. Learning from our mistakes, we put together a far more effective and professional campaign and defeated the incumbent by a substantial margin in the next election. When he phoned to concede on election night, it was very gratifying to take his call personally before putting our newly elected member of Congress on the line. Republican Marge Roukema of New Jersey has served with distinction for more than 20 years. The moral: There is nothing volunteers cannot accomplish in politics when they are motivated and committed to achieve a goal.

A MODEL CORPORATE AND ASSOCIATION PROGRAM It is worth demonstrating how a hypothetical individual company might pull together all the political techniques available to it in order to influence the results of certain elections and to advance its legislative agenda. The name of our wholly fictitious company is “Biometrika, Inc.” It is engaged in the development and manufacture of high-tech products and processes that can uniquely identify any human being, eliminating any possibility of confusion with anyone else. Biometrika utilizes such identification technologies as retinal imaging, handprints and fingerprints, voice and facial patterns, and digital signatures. Systems that employ two or more of its technologies can completely and infallibly guarantee the unique identification of any individual on earth. Its products can ensure the identity of consumers making credit card purchases by home computers, verify that the individual making a cash withdrawal from a bank ATM is the same person to whom the bank card was issued, provide fail-safe identification of licensed drivers and airline passengers, and assure personal identification for numerous other applications. Like its competitors, Biometrika services a variety of commercial and government markets, the latter including several national security and investigative agencies. The (equally fictitious) Personal Identification Technology Council (PITC) is the trade association representing this industry. Biometrika’s headquarters are in Portland, Oregon and it has plants and labs in a dozen states around the country. Spun off from a large, diversified

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European company five years ago, it is well capitalized and has grown rapidly by acquisition and sales. A Fictitious Political Situation The company feels threatened by government initiatives from two directions. On the one hand, legislation regulating its products and services has been proposed in the name of privacy protection. Sponsors of this bill argue that technology enabling flawless identification of any individual is an excessive invasion of individual privacy that should not be permitted without extensive safeguards against misuse. Coming from the other side are pressures from the FBI, the Defense Department, and other government security agencies that not only want access to Biometrika’s technology but also the ability to control it for their own purposes. Biometrika’s management wants to be able to market the company’s technology to any group of interested customers, whether businesses or government agencies, without government controls over use or marketing. The company’s in-house government relations executives and the Washington lobbying firm it has retained have been vigorously opposing both the legislation and the internal security pressures, and have succeeded in delaying any action until after the upcoming election. Biometrika knows that it needs a long-term public opinion campaign to ultimately prevail, but it needs to buy some time for a campaign to work. A key ally in postponing early legislative action has been Senator Hiram Snodgrass, who chairs the Senate’s Business and Technology Committee, but Senator Snodgrass is retiring. Next in line to be the committee’s chairman in the new Congress if the Republicans retain control is Senator Margaret Phillips of New Hampshire, a civil libertarian who supports privacy safeguards and also opposes giving the government any new technology that will let it intrude further into lives of ordinary citizens. Republicans have only a two-vote margin in the Senate, however, and Democrats have a good chance to win control. If they do, the likely chairman of the Business and Technology Committee is Senator Howard Chu of Washington state. Chu leans toward the civil liberties side on many issues, but he is also a strong supporter of the high-technology industries in the Pacific Northwest and has opposed legislation that would deter their growth. Both Phillips and Chu are in tough races for reelection, but so are half a dozen other senators in both parties, several of whom are considered to be in deep trouble. If either Phillips or Chu loses, that probably means the other party will have a majority of the new Senate. If Phillips loses, the next ranking Republican in line for the chairmanship is Ricardo Menendez of Texas, who believes that national security requires the govern-


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ment to have exclusive control of Biometrika’s technology. Ranking right behind Chu on the Democratic side is Wellington Mozart of California, a former Silicon Valley executive and a strong ally of Biometrika. Neither Menendez nor Mozart are up for reelection this year.

The Election Program Biometrika’s vice president for public affairs and government relations, Ken Blandon, has been asked to analyze the political situation and recommend a strategy for the election that will advance the company’s interest. He makes his presentation at a July meeting of senior officers chaired by CEO Dell Cramer. Also attending is Fairweather Breeze, an outside board member who represents several large institutional investors. “You’ve got my detailed written report in front of you,” Blandon begins. “Let me summarize the situation and what I think we should do about it. Frankly, we’re not in good shape in the House of Representatives. We simply don’t have the votes right now to support our position. A large majority of members in both parties are worried about terrorist activities and want the security agencies to have all the tools they need to identify suspected terrorists who try to sneak into the country. Those tools clearly include our technology, which they also realize can help in controlling drug couriers. Some of the legislators don’t even like the idea that private companies could buy our products for commercial use, lest they fall into unfriendly hands. Another large number of congressmen, particularly Democrats, are worried about the domestic privacy issue and want to restrict the ability of banks and our other customers to use our technology. They’re particularly concerned that the information could be used or sold for intrusive marketing purposes. The Administration is divided on the issue, and I’m concerned that the White House could be tilting against us. “There are several serious House bills I’m worried about,” Blandon continues. “We’ll continue to try to keep their sponsors from compromising on one of them, because I don’t think we’d like anything they might draft and I doubt whether we could defeat it at this point. We need several years to put across a message to the public that will help people understand why better systems of personal identification will really give them improved protection against fraud. “The Senate continues to be our best defense for the next few years, but that means making sure the Business and Technology Committee stays in reasonably friendly hands. Senator Snodgrass won’t be there any longer to keep the committee from acting on a bad bill of its own or from approving one that is sent over by the House. We need to do everything we possibly can to assure that Snodgrass’ successor is someone who will help us keep the lid on and buy us the time we need.”

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“You’re not talking about Margaret Phillips, are you?” asks Dell Cramer. “No, I’m not,” Blandon replies. “I’m not sure how far she’d go to help us, and I’m not at all sure she could even if she wants to. She’s not the leader Snodgrass has been, and I doubt she could hold a majority of the committee with her on a tough issue. More to the point, though, her reelection chances are pretty iffy. Her Democratic opponent is the governor and he’s much more popular than she is and he’s raised more money. That would put Menendez in line to be chairman, which is the worst possible choice from our viewpoint. “I know most of us are personally Republicans, and we’ve always been comfortable with the GOP’s approach to business issues,” Blandon goes on. “But we’re in a very critical time for the company, and I believe we will be much better off in the next Congress if Howard Chu is chairing the committee. He’s mostly in our camp now and can be pulled the rest of the way in if he’s approached the right way. Our hand will be strengthened because Mozart is there behind him and ready to step in to the chairmanship if Chu loses.” Fairweather Breeze leans forward, his face red. “Just a minute, young man. Are you seriously suggesting that this company should support the Democrats? The Democrats?” “Yes sir, I am,” Blandon answers. “I don’t like their positions on taxes and most other issues anymore than you do, but we have a very critical situation here. Biometrika will be in big trouble if we don’t have a strong and helpful ally running that committee. We could lose everything.” The CEO taps his pen on the table. “I’m afraid Ken’s right, Fairweather,” Cramer says. “I’ve read his analysis and I have to agree with his conclusions.” Breeze switches his glare from Blandon to Cramer. “Dell, I can’t imagine the investors I represent will care at all for this.” “It’s their investments I want to protect,” Cramer responds. “I hope you’ll explain that to them. We have to do the best thing for Biometrika, for all our shareholders, our employees, and our customers. I don’t think Ken is any happier about his conclusions than the rest of us, but our entire business strategy is at stake here, and the company’s future as well. Ken, please go on with your proposals.” “I can keep the rest of this pretty short,” Blandon continues. “You’ve got the details in my report. First, I recommend a six-figure soft money contribution to the national Senate Democratic campaign committee, spread over several months between now and mid-fall. Second, we should do everything we can to help Howard Chu’s reelection campaign. That includes a recommendation to our PAC’s steering committee for a maximum contribution, and it also includes mobilizing all our people in Seattle and Spokane to help him. Finally, I believe that we should get our trade


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association to undertake an issue ad campaign that will run for several years, until we’re able to pull public opinion over to our side and counter our congressional opponents. I realize we’re talking about a lot of money, but as you said, Dell, it’s the future of the company we’re working to protect.” Breeze spoke up before Cramer could. “I still don’t like this very much, but I have to admit your reasoning is persuasive. I’ll defend what you’re doing to the investors as best I can. But I’m going to put a couple of strings on this. First, you’re not going to do anything to defeat Senator Phillips, are you?” He looks at Blandon. “No,” Blandon says. “In fact, we can send her a modest contribution.” “Good. Second, I think you should give the GOP campaign committee as much as you give the Democrats.” “I can accept that if we run it through PITC. I don’t want it to be obvious that Biometrika is covering its bets by playing both sides,” Blandon answers. “Assuming the company is willing to spend that much more money.” He glances at Cramer who nods his agreement. “One more question,” Breeze says. “Your plan talks about the uses of issue ads. Do you anticipate using them in these Senate election campaigns?” Blandon replies, “I admit that I thought about it, but I don’t see how we could raise the money in the short term without help from our competitors. Just getting them up to speed politically and persuading them to contribute will take some time. Moreover, I don’t think I can take that on right now and still do what we have to do in the election campaign.” “Let me take care of the industry fund-raising,” Cramer volunteers. “The whole industry has a stake in strengthening public support. PITC should do the issue ads.” Blandon is happy to agree. “Anybody have anything else to add?” Cramer asks. “Okay, Ken, consider your plan approved with Fairweather’s additions. Let me know if you need to involve me personally in any of this.” As the meeting breaks up, Cramer pulls Blandon aside. “Ken, if all this works, you’ll be a hero.” Blandon doesn’t have to ask him what the alternative would be. The next day, Blandon pulls his team together to begin implementing the political action plan. They arrange to send the agreed-on soft money contributions in three installments to the non-federal accounts of the national Democratic Senate campaign committee and, through PITC, to its Republican counterpart. Blandon makes sure Fairweather Breeze is informed when the first checks go out. He also copies him later that week on a letter to Senator Phillips, enclosing a $1,000 check from Biometrika’s PAC. The PAC steering committee has no problem with the Phillips contribution, but balks when Blandon recommends the maximum amount to the

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Chu campaign—$5,000 before the Washington primary and another $5,000 immediately afterward for use in the general election campaign. Except for Blandon, the steering committee is made up of operating managers from the company’s various plants and labs around the country, all of them sympathetic to Biometrika’s legislative and political agenda, but none particularly wise in the ways of politics or its intricate connections to the legislative process. Blandon does not want to give the committee members copies of his report and plan lest a leak occur, but he gives them an oral summary and reviews the discussion of the top management meeting at which it was approved. As he explains the reasons for the company’s decision to support Chu, heads begin to nod in understanding and agreement, and they finally go along with the large contribution to the Washington Democrat. Blandon wants their support for more than just a PAC contribution. He wants their active personal involvement not only in Chu’s campaign but also in several other close Senate contests around the country. He asks each of them to serve as the key political coordinator at their respective locations, to encourage local personnel to get involved in various campaigns, but particularly in those Senate races that Blandon and his team have targeted for special help. Some of the candidates to be helped are Republicans, but most are Democrats. Blandon asks the director of the company’s Seattle facility to arrange a meeting of local company engineers and managers at which Chu could speak. The well-briefed lab director, Helene Brownstein, organizes it well, and 80 percent of the invited personnel show up, many bringing their spouses. A number of local retirees from Biometrika’s former parent company also come, most of them now shareholders in both firms. Blandon has flown up from Portland for the meeting, but sits in the audience and lets Brownstein run things. She opens by praising Chu’s support for high-tech companies and announces that Biometrika, which has never formally endorsed a candidate before, is doing so this year because of Chu’s vigorous advocacy of technological causes and industries. (A press release announcing the endorsement over Chu’s insignificant primary opponent and also for the general election was sent the previous day to Biometrika’s usual statewide media list. Blandon was careful not to go beyond the company’s usual press distribution. However, Chu’s campaign staff called editors and television news directors all over the state to alert them to the announcement, and it is getting major coverage.) In his remarks, the senator praises Biometrika as an enlightened and important local employer, and for its leading-edge technology that, he says, gives increased protection and security to customers of bank teller machines, airline passengers, consumers making purchases over the Internet, and many other services where a unique personal identification is vital. He adds that it is important to protect individual privacy, and offers


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to work with Biometrika executives in developing a solution to the civil liberties issues that would not restrain the commercial application of the company’s inventions and innovations. Without going into specifics, Chu also notes the technology’s potential to strengthen national security, but ducks the issue of government control. On balance, Blandon reflects, he could not have asked for too much more right now. When Chu finishes, Brownstein presents him with the pre-primary PAC contribution. She asks everyone to contribute to the PAC if they have not already done so, and urges them to go beyond the PAC’s support by giving directly to Chu’s campaign. She notes that the company is prohibited from collecting contributions, but gives them Chu’s finance committee address where checks can be sent. She concludes by asking the audience to volunteer for personal work in the senator’s reelection campaign, pointing out the Chu campaign staff aide standing near the door ready to take names. Chu’s campaign manager later tells Blandon that a large number of contributions came in after the event from people who identify themselves as Biometrika employees or shareholders. He also says that over 100 volunteers are being put to work on everything from data processing support to precinct canvassing in their Seattle and Tacoma neighborhoods. Later, after the primary, a similar event is held at the company’s Spokane plant, which draws widely from Biometrika stakeholders in eastern Washington. The plant manager follows Brownstein’s script closely, and uses the occasion for presentation of the post-primary PAC check to the senator. Afterward, the plant manager recruits volunteers to make calls from the company’s offices to other company managers, technical personnel, retirees, and shareholders. The volunteers urge them all to register to vote if they have not already registered, and to be sure to vote for Chu. Some of those people express resentment that the company is telling them how to vote, but most accept the solicitations with good grace. During this same period, Blandon’s team of coordinators spreads the word in conversations around Biometrika facilities to explain why the company is acting as it is, and these discussions do much to relieve lingering umbrage. As the Washington Senate campaign progresses, Chu’s Republican opponent, Harris Tweed, criticizes him for not doing more to advance the interests of Washington’s high-tech industry, citing several Senate votes where Chu has voted “wrong.” Brownstein, who by this time has become a member of the senator’s campaign steering committee, organizes a press conference at which she and executives of several other technology companies defend the senator and call again for his reelection. Tweed keeps up the attack and pulls together a rival group of other high-tech executives supporting him, to hold their own press conference disparaging Chu’s voting record. He also attacks several of Chu’s votes that Tweed maintains have not done enough for agricultural exports. The question of which candidate can do more on international trade, important to the entire

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state, and for western Washington’s technology-based economy, becomes the overriding issue in the campaign. In late September, Blandon and several other technology industry executives put together the “Washington Technology and Trade Coalition,” which solicits both Chu and Tweed for their positions on several issues important to exporters and high-tech companies. Working through Brownstein, Blandon makes sure Chu’s responses are crisp and relevant. Tweed’s answers, drafted by a young, inexperienced campaign aide, are vague and in some cases non-committal. A voter guide accurately quoting the two candidates is prepared. In three columns, it shows the issue, paralleled by the positions of the two candidates in the words each candidate’s campaign had provided. The Chu campaign turns Tweed’s attacks back on him and the voter guide proves devastating. The Washington Technology and Trade Coalition distributes hundreds of thousands of copies across the state, in business offices, churches and synagogues, schools and libraries, and door to door wherever volunteers can be found. The last two weeks of the campaign are anti-climactic, even with a couple of televised debates. It is clear that Chu will be overwhelmingly reelected, and he is. On election night, Ken Blandon’s eyes are glued to his television set, as he scrutinizes the returns from Senate races around the country. The Republicans lose four seats, including that of Margaret Phillips. The Democrats take control of the Senate, and Howard Chu, Ken Blandon’s newest best friend, will chair the Business and Technology Committee.

The Issue Advocacy Program Meanwhile, the long-range phase of Blandon’s plan gets into gear. Dell Cramer has been busy on his own assignment, mobilizing the industry and PITC for a multiyear issue advocacy campaign. His first call is to Peter Campbell, PITC’s president. Cramer explains to him why Biometrika believes a series of issue ads is necessary to the industry’s legislative agenda to help the public understand the value and importance of personal identification systems. Campbell agrees with the strategy, but questions where the money to pay for the program of advertising will come from, since the association’s current budget would not begin to support the costs. He says that a special member assessment will be required to pay for the ads and recommends that Cramer undertake some hard lobbying with his fellow industry CEOs before the December meeting of the association’s board of directors. Cramer starts a round of calls and meetings and finds considerable agreement on the importance of the issue ad program, but there is a cautious minority that is concerned about avoiding the public controversy an


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ad program could stir up, and a couple of companies that dislike the idea altogether. A more contentious problem is allocating the program’s costs among industry members, since almost everyone wants to avoid paying very much. Fairweather Breeze ultimately proves helpful here by enlisting his friends in the financial community to persuade some of these companies to participate. Campbell develops a contributions formula that the board ultimately accepts. The more serious problem is the lack of unanimity about the ad program itself, since some of the reluctant companies are among the largest potential givers. Senators Chu and Mozart are invited to the board meeting to summarize the legislative situation. Thanks to Biometrika’s backing for his reelection, Chu is now completely supportive and is willing to keep the unfavorable bills bottled up in the committee as long as he can. “You have to understand, though, that I can’t do this forever. If the House passes a bill, the pressure will mount in the Senate and sooner or later we’ll have to bring something up for a vote. This industry is going to have to do its part, and that means getting the public to understand and accept your point of view.” Senator Mozart adds his perspective. “I know some of you are reluctant to get any more involved in lobbying or public affairs than you have to, but I came out of Silicon Valley and I know the price some of the computer and software companies paid by wanting to stay as far away from politics and lobbying as they could. It was an ostrich strategy that just didn’t work. I urge you all to learn from our mistakes, and take an aggressive stance in your own long-term interests.” Mozart’s comments are persuasive, and the board unanimously agrees to the issue ad program. A committee to oversee the program in cooperation with Campbell is appointed, and Cramer is named to chair it. After reviewing proposals from several advertising agencies, one is chosen. The committee, meeting with Campbell and the agency’s account executive, Marjorie Felton, reviews possible ad themes. After testing various themes with focus groups, Felton suggests two. One would present the advantages to consumers of the industry’s personal identification systems: “Technology can be scary sometimes. We don’t know if some computer hacker can raid our bank accounts or use our credit cards. Or if somebody who doesn’t belong in this country can sneak past immigration and airport security. But technology can protect us, too. The new identification systems being used by banks, retailers, airports, and the government can now make absolutely sure that nobody can pretend to be someone else. That protects you—against financial losses or criminal activity. That’s technology on our side. But some people in Washington don’t want ordinary people to have that kind of protection. Tell Congress

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to keep hands off of personal ID systems so they can be made even more effective without government interference.” The second ad would deal with the privacy issue from the standpoint of assuring protection against improper marketing uses and also government intrusion: “We all want to be secure against crime, secure that the money we work so hard to earn and save is safe, secure against unscrupulous people who’d like to learn things about us so they can try to sell us products or services we don’t want. And we want to be protected against Washington bureaucrats who might snoop into our private lives when we’ve done nothing wrong. The new personal ID systems that protect your bank accounts and credit cards could be misused if the wrong people learn how to use them. That’s why we think Congress should pass laws to keep unauthorized people and the government from poking into private information about us and our families. For more information about how you can help safeguard every American’s sacred privacy, call the number on your screen.” Packages of different ads on these themes begin to run on cable and television stations in states represented on the Senate Business and Technology Committee, and in key House districts. Variations are broadcast on radio stations in these localities during drive time. Print ads appear in leading newspapers and magazines, especially those read by national opinion leaders. Felton also recommends a parallel, grassroots communications (PR) program to influence local opinion leaders and editorial writers, and an agency is hired to pursue the program from this angle. Letters to the editor start to appear, and speeches by leading personalities and respected local political figures are given to local, and sometimes national, organizations. A major network does a show on the issue and, while it discusses both sides, ends up tilting toward the industry’s point of view. The agency also mounts a computerized telephone campaign in certain congressional districts. Citizens who agree with the industry’s position and are willing to say so to their members of Congress are automatically transferred through to the legislators’ congressional offices. A telemarketing, broadcast, fax, direct mail, and e-mail campaign among employees of PITC’s member companies, utilizing the association’s computerized database, also generates a large number of congressional contacts. Meetings with local newspaper editorial boards produce some important opinion columns in these districts, and the agency also arranges appearances by PITC company executives on local radio and TV talk shows. The effect of the issue ad and public communications programs begins to generate a growing shift in public opinion toward the industry’s side. After nearly a year, Chu and Mozart feel comfortable in moving an industry-backed bill through their committee. Their bill provides protection against misuse of personal ID information by marketers by regulating


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the ways in which users of the systems can utilize the data, leaving the personal ID companies themselves free to conduct their own businesses. Mendendez wins an amendment giving federal security agencies access to privately collected information only under a court order, a provision the industry agrees to accept. The legislation passes both houses with large bipartisan majorities and is signed by the president at a White House ceremony, at which he acts as if the bill has always been a major part of his administration’s legislative program. Dell Cramer attends the signing ceremony and receives one of the pens used by the president. Ken Blandon watches the whole thing from his new corner office at Biometrika. The sign on his door now identifies him as executive vice president. NOTES 1. The author does not pretend to be objective about BIPAC. He was its president and CEO from 1993 through 1998. 2. A series of five brochures (“Project 2000 Political Toolkits”) were developed by BIPAC and the National Association of Manufacturers as guides for business political activity. They cover direct contributions, corporate communications, independent expenditures, issue advocacy, and volunteer activity. BIPAC intends to update these publications for each biennial election cycle. Further information is available from BIPAC, 888 16th Street, NW, Washington, DC 20006, or from [email protected]. 3. The FEC publishes a number of guides for corporate and association political activity. For most recent editions, contact the Federal Election Commission, 999 E Street, NW, Washington, DC 20463; telephone: 202/694–1100. See also the Commission’s website, www.fec.gov. 4. For guidelines on PAC operations, see Charles Mack, Business, Politics, and the Practice of Government Relations (Westport, CT: Quorum Books, 1997), pp. 222–224. For a useful checklist, see BIPAC, Direct Contributions Toolkit. 5. Federal Election Commission v. Colorado Republican Federal Campaign Committee, 1996 and 2001. 6. Organized under Sec. 501(c) 4 of the Internal Revenue Code. 7. Under Sec. 501(c) 6 of the Internal Revenue Code. 8. Also a reference to the Internal Revenue Code. 9. Source: Center for Public Integrity (a campaign finance watchdog group), as reported in the Washington Post, July 1, 2000, p. A6. 10. Ruth Marcus, “Flood of Secret Money Erodes Election Limits,” Washington Post, May 15, 2000, pp. A-1, A-6. 11. Ibid. 12. Ibid. 13. John Mintz, “Utilities Secretly Lobbied Congress,” Washington Post, May 11, 2000, pp. A-1, A-15. 14. David B. Magleby, ed., Election Advocacy: Soft Money and Issue Advocacy in the 2000 Congressional Elections (Provo, UT: Brigham Young University, 2001), p. 47.

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15. For additional information, see Mack, Business, pp. 232–234. See also BIPAC, Corporate Communications Toolkit and Volunteer Activity Toolkit (Washington, DC: BIPAC, 2000). In addition, the Federal Election Commission publishes extensive information on corporate political communications and related subjects, accessible in print form and from its website cited above.

CHAPTER 8

Issue Advocacy What is distinctively human at the most fundamental level is the capacity to persuade and be persuaded. —Bertrand Russell

Business organizations, ad hoc coalitions, and a wide variety of other interest groups are increasingly taking their case on important issues to the public through the use of advocacy communications (also known as issue advocacy, issue advertising, or advocacy advertising; we use the terms synonymously here). In many respects, this is the most beneficial and powerful of all the political instruments available to business. Sponsors are free to say almost anything they like in media of their choosing, short of explicit calls for election or defeat of candidates; and issue advocacy is considered by the judiciary to be political free speech that government may not regulate. Issue advocacy is not limited to advertising. Direct mail, e-mail, Internet websites, print media, voter guides, telephone campaigns, and any other form of communications can be utilized for this purpose, but advertising is the most widely used medium. Issue advocacy can be used in three ways. First, it can be applied as a lobbying tool to set forth the interest group’s views on a current issue, and to urge citizens to contact their legislators in support of the group’s position. For instance, a group called Priests for Life televised ads in 2000 to get the voters to discuss the abortion issue with lawmakers. On the other side, pro-choice groups like the National Abortion and Reproductive Rights Action League (NARAL) have been major advertisers.

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Second, it can be used to influence voter attitudes about specific legislators and candidates. While avoiding express calls to elect or defeat them, advocacy communications used in this way can affect candidates’ standing with the voters by criticizing or praising their positions and record on a given issue. During the 2000 presidential campaign, for example, the Sierra Club ran ads attacking George W. Bush’s environmental record, while carefully avoiding express appeals to vote for Al Gore. Third, issue advocacy can be utilized to educate the public on long-term concerns in order to strengthen its understanding of the problem and enlist its support. Certain issues, such as international trade, Social Security funding, and immigration, will be around for decades to come, and the rationale for business’ positions on them needs greater public understanding than they now enjoy. By communicating information on developments and trends now, business organizations can begin to mobilize public opinion on behalf of their positions, in some instances eradicating a flood of misinformation that hampers the advancement of sound public policies. In this chapter we examine issue advocacy generally and the first two strategies. Long-term issue advocacy is discussed in Chapter 9. ISSUE ADVOCACY IN LOBBYING The utilization of advocacy communications as an instrument of lobbying has mushroomed in recent years. On many major issues, and some lesser ones, interest groups are using advertising to appeal to the public for support. There has always been some of this in print media, but more and more of it now also appears on television and radio, and on the Internet as well. Ads have been run on issues as controversial as abortion and gun control, but also on otherwise obscure issues. They have appeared on a wide variety of subjects, but the largest single category has been health care issues. The landmark issue advocacy program was the “Harry and Louise” ads televised nationally to stimulate public opposition to President Clinton’s comprehensive health care proposal in 1993. The Health Insurance Association’s (HIA) campaign was not the first such effort—Mobil (now part of ExxonMobil) had sponsored issue ads for years, primarily in print media—but the HIA’s ads were pioneering in their focus, frequency, and effectiveness, and in their ultimate success. Since then, a large number of other interest groups have used issue ads to generate significant quantities of citizen mail, telephone calls, faxes, and e-mail to legislators on highpriority issues. The Business Round Table, various labor and environmental organizations, and a number of health care interest groups now routinely advertise as an important adjunct to their lobbying campaigns on priority issues. Some of these groups advertise under their own names. Others set up new organizations with positive-sounding names, at least in part to blur the

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identity of their financial backers. One of the largest purchasers of issue advertising time and space in 2000 was “Citizens for Better Medicare,” which received most of its funding from pharmaceutical manufacturers concerned primarily about the Medicare prescription drugs issue. Another campaign was the extensive series of television and print ads undertaken by “Stand Up For Steel,” a coalition of steel companies and the United Steelworkers of America. It was an unusual campaign in that it was jointly sponsored by both industry and a major union. The ads complained about “the illegal dumping of foreign steel [which] has caused companies to go bankrupt and costs thousands of Americans their jobs.” The ads demanded greater restrictions on U.S. imports of steel while also “insisting that foreign countries tear down their walls against American steel imports.” Unlike other protectionist appeals, the steel industry campaign won some support in Congress and the Clinton administration and, more recently, from the Bush administration. The American Civil Liberties Union (ACLU) used television ads in 2000 to urge that voters in Michigan, Missouri, and Utah express support to their senators for legislation banning racial profiling as a local police arrest practice. The ACLU’s ads were intended to pressure three key senators on the Judiciary Committee to move the bill forward. Issue ads opposing Senate confirmation of several of President Bush’s cabinet choices were run in 2001 by various liberal interests. Advocacy advertising can be run in any medium: broadcast or cable television; radio; newspapers, general-circulation magazines, or more specialized publications; Internet websites; direct mail or e-mail; and computerized telephone campaigns. In particular, direct mail, e-mail, and telephone calling can be targeted to general audiences or to those with very specific geographic, demographic, or interest group characteristics. The state of this art is intensely advanced. It is perfectly possible for an interest group to tailor a letter to a particular household, in full knowledge of the fact that the family has income of about $250,000 a year, has a married daughter and a son in college, owns a 1999 Jaguar and a 2001 Lexus, receives home delivery of the New York Times, subscribes to the New Republic, Sports Illustrated, and The Economist, listens to a classical music radio station, bought $5,000 worth of clothing and books from Internet retailers in the past year, contributes generously to environmental causes, and comprises two registered Democrats. A very different mailing from the same group might be aimed at a union family with a combined family income of under $75,000, who own a five-year-old Chevrolet Impala and a 2000 Ford pickup truck, have three children in elementary and junior high school, who do not subscribe to a daily newspaper but do receive an outdoor magazine, have a gun and hunting license, owe a $115,000 mortgage and $10,000 on their MasterCard, K-Mart, and Sears credit cards, and are Catholics and registered Republicans. The legislative communications these two families receive will reflect very little of these dem-

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ographics in the text, but can be meticulously crafted and aimed for maximum appeal to their interests. Their next door neighbors may each receive a rather (or perhaps very), different letter or e-mail communication. The rationales may differ according to the intended recipient, but the message will be essentially the same: Call or write your legislators and tell them to support the interest group’s position on this issue. Data of this sort also guide issue ad placement on television, radio, and in print media. One ad may be aimed at drive-time listeners on a particular radio station. A somewhat different kind of message from the same organization may appear in Thursday evening, prime time weeknight TV advertising, and differ in a few respects from a version aired during the Sunday morning talk shows. Sometimes issue ads are broadcast nationally or are run in print media with national circulations; on other occasions ads are run only in media in targeted states or congressional districts. For example, an ad on an environmental issue of major scope might appear in a medium where virtually everyone will see it. Alternatively, the ad may be published in local newspapers or aired on local television to reach audiences in very specific states or congressional districts, or its publication might be limited to periodicals aimed only at, say, local environmental activists—all depending on the ad’s purpose and strategy. Public policy magazines such as National Journal, that have high circulations among the Washington governmental and lobbying communities, carry considerable issue advertising as well as institutional ads from government contractors. So do Roll Call and The Hill, tabloid newspapers that circulate widely on Capitol Hill and among political consultants and lobbyists “inside the Beltway.” Parallel ad programs at the state level frequently utilize publications similar to these that circulate exclusively in individual state capitals. In a way, it is surprising that these publications are not totally congested with such ads because their readers are the people who make and influence legislation. However, the companies and organizations that might run more of these ads often choose instead (or in addition) to advertise in media that are intended to generate grassroots public support. It is a less direct, more expensive, but probably more effective approach to legislative persuasion. The particular medium for an ad as well as the content and tone of the message depend on the audience at which the ad is aimed. Because there has been widespread criticism of the performance of many public school systems and their alleged lack of accountability to parents and taxpayers, the National Education Association (NEA) ran a series of ads proclaiming improvements in the quality of public education, maintaining that the problems were all in the past and opposing diversion of tax money for private school vouchers. Because of the widespread publicity criticism public schools have received, the NEA’s ads were widely broadcast on the national networks. Had it wished to target a message to selected states or communities,

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rather than nationally, the NEA could have chosen local television or newspapers. If it wished to drum up support in the business community, ads with a message appropriate to the audience could have been run in business magazines and newspapers, or on business cable television shows. Other media would be chosen for a campaign aimed at, say, intellectuals and opinion leaders. On the other hand, a hypothetical NEA campaign to persuade community school board members or public school principals that it is time to be more accountable to parents would use very specialized media (perhaps including direct mail) to reach those targeted audiences. Sponsors of issue ads may be individual companies, industry associations or ad hoc issue coalitions, labor unions, environmental organizations, and indeed any interest group with a timely legislative cause and the wherewithal to finance an advertising campaign. When the Brady Bill was being debated in Congress, for example, ads by Handgun Control sometimes were aired on the same programs as those of the National Rifle Association (NRA), and occasionally appeared cheek by jowl with them. When the subject or the interest group is sufficiently controversial, the ads themselves can become an issue. The NRA’s ad campaign is a prime example, as when the association went on television to denounce President Clinton, all but calling him a liar. The Sunday television talk shows are one of the favorite vehicles for advocacy ads, because their audiences are people with a special interest in public affairs. One Sunday morning, an ad criticizing health maintenance organizations (HMOs) was aired, followed immediately by another ad defending HMOs. The first commercial, sponsored by a group that included the American Medical Association among others, blasted HMOs for allowing decisions regarding patient medical care to be made by clerks and accountants with no medical expertise, and demanded congressional passage of “the patients’ bill of rights.” Hot on the heels of the first ad came the second, this one sponsored by the U.S. Chamber of Commerce and other business and insurance organizations that support HMOs, because they lower the costs of employer-paid medical care. This ad opposed “the patients’ bill of rights” because it would increase HMOs’ expenses by broadening their vulnerability to patient litigation, and warned that some people might see their medical costs rise while others might lose HMO coverage altogether. Presumably, neither sponsor was elated that its ad was paired with that of the opposition, but that was the way the network chose to air them. Because issue ads tend to appear more sporadically than those of major commercial advertisers, their sponsors have relatively little influence about ad placement on a particular program or time slot. The XYZ Coalition, which runs issue messages intermittently and on limited schedules, will not have the influence on ad placement of major, permanent advertisers like Procter & Gamble or General Electric. (GE is particularly influential with NBC, which it owns.)

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Issue advocacy is usually intended to stimulate legislative communications from the public to bolster the interest group’s lobbying case and prospects. Sometimes, the impetus for an ad campaign comes from lawmakers themselves. More than one lobbyist has heard from a legislative friend, “I can’t get many votes for you on this issue unless you can generate some public support and contacts from back home.” In due course, the affected interest group starts running ads that conclude with an appeal to write or call your lawmakers. In high-intensity campaigns, the ads may be tailored to specific congressional districts or states, naming the lawmaker in question and giving the viewer a telephone number or address to contact. Experienced legislators have learned how to respond to such ads. A Cincinnati Republican congressman, hit by union attack ads, bought local television time to respond. He even showed a portion of the labor ad before delivering his own effective rebuttal. A congressman from Washington state countered an attack ad by urging voters not to be influenced by “an out-of-state group who [sic] refuses to disclose their donors.”1 Legislators also train their staffs to placate angry voters calling in response to an issue ad: “I understand you’re upset because Senator Jones voted against the education bill, but you know the TV ad never told you that the reason he voted no is because the bill doesn’t provide enough money for schools in our state.” Sometimes such responses can be effective with the voter who calls as a result of an issue ad, but the ad’s underlying message can still plant a seed of doubt. If Jones later votes against another education bill, the voter may start to wonder who’s kidding whom; and the original message may stick with those voters who don’t take the trouble to call. Clever ads can convert a self-serving lobbying campaign into one that appears to provide a more-or-less real public benefit. For example, nursing home operators sought an increase in Medicare reimbursements that they said had been promised them, but on which Congress had not delivered. Their ads cast the issue in terms of an increase that appeared to benefit nursing home patients rather than the nursing homes themselves. Whether or not viewers accurately understood the underlying issue, enough of them apparently got in touch with their lawmakers to enable the nursing homes to win their increase. Advertising studies have long shown that the public needs to be exposed to a number of repetitions before the message sinks in. The sheer volume of the Business Round Table’s pro-PNTR ads drummed home the message about the importance of trade with China, helped by similar messages in television and print ads from such individual companies as Lucent Technologies, Principal Insurance, and Motorola. The nature of television being what it is, the issue ad has to convey a brief, easily understood message, no matter how complex the underlying issue. If the message appeals to emotions, so much the better. It was easier

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for PNTR opponents to attack China’s human rights record than for business groups to state the case for bringing China into the world economy. The challenge to the interest group’s media creators is to set forth the message in terms with which the public can identify, and which will motivate it to action. A group working for repeal of federal estate taxes, for instance, might prepare a message along these lines: You’ve paid taxes all your life. Why should your family have to pay them again when you die? The death tax forces children or other heirs to fork over a large share, as much as 55 percent of your estate, to the government. Many people have had to sell family businesses or farms that have been in their families for generations, just to pay death taxes to the government. Lots of states have ended the death tax. The federal government should too. Tell your senators and congressman that it’s time to abolish the federal death tax so you can pass on to your kids more of what it’s taken you a lifetime to earn and save. For more information, check our website or call the number on your screen. The same group might prefer to target its ads to specific congressional districts, rather than run them nationwide. In such circumstances, the last sentence might be changed to read: Call Congressman Harvey to urge him to support abolishing the death tax. Or the ad might go even further to say: Congressman Harvey doesn’t want to repeal the death tax because he wants Washington bureaucrats to be able to use the money for more government spending. Call him today at the number on your screen to demand that he change his position. Image ads, also common on both television and print media, differ from issue advertising. In an image ad, the sponsor may talk about what it is doing to, say, help the environment, support medical research, contribute to education, or bolster national defense. ADM, the agribusiness giant, has long run ads promoting the economic contributions of farmers and discussing the need to attack world hunger. Ads by Pfizer, a pharmaceutical company, have emphasized what it is doing to improve the quality of life and extend its duration. Similar ads have been sponsored by the pharmaceutical industry’s trade association. General Electric ads discuss the personal benefits of the company’s various technologies. Image ads from

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Philip Morris talk about its support for charitable endeavors. None of these are truly advocacy or issue advertisements because they do not refer to specific issues or urge viewers (or readers) to take some action about them; but neither are they traditional commercials to boost product sales. Their purpose is to help make the company better known or improve its public image. ISSUE ADVOCACY AS A POLITICAL INSTRUMENT A politically significant version of issue advertising is used to provide help (or harm) to legislative candidates, sometimes incumbents, sometimes not. These ads identify a candidate by name, praise (or criticize) his or her position on the issue, and urge viewers to express their opinions directly to the candidate. Ads of this sort are usually run close to an election and are intended to influence public attitudes toward the candidate. (It is important to note that various federal courts have upheld the legality of ads of this type, so long as they avoid an express call to elect or defeat the named candidate—more about this important point in a moment.) This type of advocacy advertising names particular legislators or candidates, like the last variation in the above estate tax ad. Such ads may have two motives, one overt, the other covertly political. Let’s look at a hypothetical ad by an environmental organization to see how this works: Scientists have been warning for years about the environmental dangers of global warming to our children and grandchildren. We all know that we must act now to prevent big temperature rises, monster storms, and permanent coastal flooding. So why is Congressman Abel O’Riley supporting a bill to let polluters pour more dangerous chemicals into the atmosphere, chemicals that greatly increase the risk of global warming? He says it’s to protect a few local jobs, but is that small risk worth a poisoned world? Call Congressman O’Riley’s office at the number on your screen to say that you want him to vote against HR 1234, not support it. We want the congressman from this district to protect our children’s environment, not help polluters. The overt message is clear: Tell the congressman to change his mind about the bill. The covert political message is in the entire advertisement, but particularly in the last sentence. The ad tries not only to paint the lawmaker as an ally of polluters, but to get the public to think about defeating him at the next election without actually saying so. (A company or industry association could also run an ad praising the same legislator for his effort to protect local jobs and criticizing global warming alarms as speculative junk science.)

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Let’s say the ad (either version) is broadcast in autumn, shortly before the November election in which Representative O’Riley is not only running for reelection, but is in the fight of his life. Is not the ad really trying to influence the outcome of the election? Since labor unions and corporations (including any incorporated trade association or non-profit organization) are legally barred from contributing to candidates for federal office, shouldn’t the O’Riley ad be either forbidden, or at least subject to all the expenditure limitations, reporting requirements, and other restrictions the law and the FEC impose? The FEC thought so for years, and sued sponsors to regulate a number of advertisements much like this one. Organizations that engage in advocacy advertising have the courts, not Congress (and certainly not the FEC), to thank for the right. ISSUE ADVOCACY AND THE LAW In 1978, the Supreme Court held that the First Amendment’s right of free political speech applies to corporations as much as to individuals, and that companies could use corporate funds to pay for their expressions of opinion.2 However, the landmark case was Buckley v. Valeo, decided in 1976, which governs virtually all aspects of federal election law. The portion of the Court’s opinion in that case that is relevant to this discussion established the “express advocacy” standard. The Court said that express advocacy for or against the election of a candidate amounts to a political contribution that Congress and the FEC can regulate, but that political communications lacking express advocacy are free speech protected by the Constitution’s First Amendment. Other federal courts have since relied on the Buckley decision to define “express advocacy” very narrowly, establishing a clear and bright line that a communication must cross. To constitute express advocacy, public communications must use explicit and unmistakable language like “support,” “vote against,” “reelect,” “defeat,” and so on—terms that political types call “the magic words.” Saying that Senator Fielding is a terrible fellow who wants to pollute the wilderness by allowing smoke-belching factories in Antarctica is not express advocacy. Adding a statement that he should therefore be defeated for reelection next fall is. Although the terms sound somewhat alike, it’s very important to distinguish between “express advocacy” on the one hand, and “advocacy communications” or “issue advocacy” on the other. From a legal point of view, their meanings are quite different. Issue advocacy is the communication of ideas or positions on public issues. Express advocacy directly seeks to influence the election or defeat of a candidate. Express advocacy is subject to government regulation. It must be paid for with hard dollars, that is, those contributed by individuals only, like

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contributions to presidential and congressional candidates. Periodic reporting of contributions and expenditures, and other requirements of the FEC’s regulatory apparatus, all apply. (Express advocacy might be more clearly understood if the courts had called it “candidate advocacy,” but we are stuck with the label they have placed on it.) None of that applies to issue advocacy, which the courts have said is political free speech, protected by the First Amendment to the Constitution. Issue advocacy, they have ruled, therefore cannot be regulated, not by the FEC nor even by Congress. Funds to pay for issue advocacy can come from any source including corporations, unions, and individuals, and the only limit on how much they can spend is the size of their purses. Sponsors can pay for these communications themselves or obtain contributions for the purpose from sources that they are under no obligation to disclose. Sometimes, ad hoc organizations are established with innocuous sounding names to obscure the people or interest groups behind the issue advocacy campaign. This is perfectly legal, but the use of such pseudonyms has been known to motivate the press or opposing interests to investigate and disclose who is really behind the campaign; that is also free speech. The bright line established by the judiciary to distinguish between express advocacy and issue advocacy has become increasingly important as various interest groups have undertaken advertising and other communications that come close, sometimes very close, to sounding like an overt endorsement or condemnation of particular candidates. But so long as these groups avoid use of “the magic words”—“vote for,” “defeat,” and their synonyms—they are not engaging in express advocacy. In a number of individual cases, the FEC challenged various issue advocacy campaigns in which candidates were named, maintaining that these in effect were only disguised attempts to influence elections and therefore were either illegal or subject to the same regulations applying to campaign communications that openly support the election or defeat of a candidate for public office. A whole series of federal and state court decisions have disagreed with this interpretation. In a 1999 case involving the Christian Coalition, the judge defined express advocacy quite narrowly—as an “explicit directive . . . unmistakably exhort[ing] the reader/viewer/listener to take electoral action to support the election or defeat of a clearly identified candidate.”3 Such decisions have made clear that issue communications in which no express advocacy occurs are protected speech. Individuals, corporations, business associations, labor unions, and interest groups of all kinds operate under this protection, and without the need to report what they are doing to anyone; nor are they limited to the use of regulated political funds in paying for their advocacy communications. Issue ads can be paid for with money from any source. The net of all this is that corporations and other

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organizations have wide latitude to speak out about both legislative issues and political personalities. It should be noted, however, that the Supreme Court has never accepted any of these issue advocacy cases for review, although its express advocacy comments in the Buckley decision are the basis of all the lower court rulings. An appeal to the highest court would be inevitable if Congress passes campaign finance legislation that includes proposed restrictions on the use of candidates’ names in issue ads. There is a most important caveat that the various court rulings have imposed: Interest groups engaging in issue advocacy may not “coordinate” their activities with political committees or specific candidates about these communications. “Coordination,” however, is a term that remains imprecisely defined. Many of the FEC’s cases sought to persuade federal judges that a restrictive definition should be declared. The courts have not cooperated. In the Christian Coalition case, for example, the court said that a wide variety of contacts between the Coalition and Republican leaders was not illegal because the Coalition’s activities had been neither prompted by the candidates, nor were the product of “substantial discussion or negotiation” about such matters as content and timing. The court also said that issue advocacy could cross into forbidden territory if there was excessive contact with a candidate, but the precise delineation of this line remains undetermined. The FEC chose not to appeal the court’s edict in the Christian Coalition case. Moreover, it relied on that ruling in its own 2000 decision that the AFL-CIO’s intimate contacts with the Democratic Party in the 1996 campaign were not illegal coordination, even though union officials and party leaders jointly planned out campaign ads and made use of the same media consultants. A similar FEC ruling regarding a business group’s contacts with GOP officials followed in 2001. Clearly, the parties and various interest groups now have considerable latitude in working together on issue ads. The line has been pushed back, but where it now lies—or even if it still exists—remains a blurred question. The group that wants to stay completely out of harm’s way should still avoid discussing its plans for an issue advocacy campaign with affected candidates or party committees, say legal experts.4 But, in the light of the FEC’s decision in the AFL-CIO case, it is hard to imagine circumstances that the Commission would now define as illegal coordination. Perhaps the most widespread users of issue advocacy, at least during election years, are party committees. Thus, in 2000 the Democratic and Republican Senate campaign committees established joint soft money fund-raising operations with a number of individual campaigns. The money thus collected was given to various state party committees that then spent it on behalf of their state’s Senate candidate, primarily through coordinated issue ads. Apart from the presidential campaigns, the intensely

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heated New York Senate race was probably the largest single beneficiary of this program in both parties. Of course, the largest overall use of soft money collected by the Democratic and Republican National Committees was the funding of coordinated issue ads to help the Gore and Bush presidential campaigns. (The Supreme Court’s rulings on party-candidate coordination, discussed in Chapter 7, do not apply to political activities funded solely with soft money.) In sum, what all the federal court decisions have done in these cases is to apply the free speech protections of the First Amendment to a wide variety of political and issue advertising, mailings, and other communications, including those specifically mentioning an incumbent official or candidate. The consequence is that interest groups can legally play a much broader and more instrumental role in political campaigns, and a number have begun to do so. Thus, business, labor, environmental, health care, and a wide variety of other interest groups are at liberty to make statements like these: • Senator Alpha opposes the global warming treaty. Write her to say that you don’t want our children’s world poisoned. • We need to help high school kids get honest jobs and keep them off the streets. Tell your friends and neighbors to oppose Congressman Beta’s bill to boost the minimum wage because it discourages employers from hiring young people. • If you support gun control, you’re on the same side as Donald Delta who’s running for the state legislature. His opponent endangered our families by voting against gun control legislation last year. • Tell Assemblywoman Epsilon that you don’t want the state telling drug makers and pharmacies how much they’re allowed to charge for prescription drugs. • Governor Gamma wants health care legislation that would help lawyers, not patients or their doctors. Call his office and ask if there’s any connection between his position and all the political contributions he’s gotten this year from the trial lawyers. Note that none of these messages expressly advocate any candidate’s election or defeat. All talk about particular issues, but plainly are intended to affect public opinion concerning the views or actions of specific lawmakers or officials. Yet, all these statements are protected free speech, not express political advocacy, because there is no use of the magic words. Whether the intent of an interest group is to influence the outcome of a legislative issue, or to have an indirect effect on voter opinion regarding

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incumbents and candidates, there is a very significant benefit to issue advocacy in contrast to express candidate advocacy. Express advocacy must be funded with hard dollars and is regulated by federal election law. Corporations and labor unions cannot make any direct or in-kind political contributions, and even PACs, whether affiliated with them or nonconnected, are limited to $5,000 per candidate per election, including both cash and in-kind contributions. Independent expenditure campaigns can spend substantial sums on express advocacy, but they must be sponsored by freestanding entities financed completely with hard dollars, and may not coordinate with the candidates they wish to benefit. However, issue advocacy is free speech, and therefore not regulated. Not only can a corporation or union spend any amount it wishes on issue advocacy, but it can use its own treasury money to do so. This is a distinct advantage for companies and other interest groups. (PAC funds can also be legally used in unlimited amounts on issue advocacy campaigns, but that is usually a waste of hard dollars that could otherwise be given directly to worthy candidates. A number of individual membership organizations, on the other hand—those of some health professionals, for instance—flush with PAC funds from large memberships, have sometimes chosen to use PAC dollars for purposes other interest groups need to finance with soft money.) Both party national committees aired a substantial number of issue ads in 2000 to benefit their presidential candidates in targeted states. For the most part, FEC regulations require that at least a portion of these national party ads be financed with hard money, although soft dollars can fund the bulk of the costs. ISSUE ADVOCACY BY INTEREST GROUPS Issue ads that refrained from mentioning any particular candidates accounted for less than 40 percent of all issue advocacy during the period of the 2000 presidential primaries, and less than 10 percent in the fall campaign. That compares with about 70 percent in the 1998 elections.5 It will take another election or two to be sure these numbers represent a trend, but clearly, interest groups have found issue advocacy an effective way to be instrumental in election outcomes. Various established and ad hoc interest groups undertook substantial issue advocacy efforts in 2000, advertising heavily to assist their preferred candidates, more often than not by attacking the positions and records of their opponents. Because the sponsors were careful not to cross the express advocacy line, no hard money was required. The totals spent and contributors’ names were therefore rarely disclosed. Issue ads by liberal groups addressed the presidential campaign and also particular congressional contests. Conservative groups did little issue ad-

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vertising as such, preferring voter guides, direct mail, telephone campaigns, and the like. Most of the interest group issue advertising in the 2000 presidential campaign benefited the Gore-Lieberman ticket, perhaps by 10 or 20 times the amount spent on pro-Bush issue ads. Environmental, civil rights, pro-choice, labor, and Medicare advocacy groups all ran ads that were not so much pro-Gore as anti-Bush. Issue ads by business groups in the 2000 general election campaign were confined almost exclusively to specific congressional races, either defending vulnerable pro-business incumbents or helping some open-seat candidates. Most of these business ads ran only during the last weeks of the campaign, after groups allied with the Democrats—including the AFLCIO, the Sierra Club, the NAACP, NARAL, and gun control supporters, among others—had been airing attack ads for several months. In general, business groups chose those candidates whom they would help on a raceby-race basis, aiding mostly Republicans but some Democrats. In contrast, the strategy of the non-business groups was primarily to enable Democrats to gain control of Congress. Like the dog in the Sherlock Holmes story that was notable because it failed to bark, some interest groups that had been heavy advertisers in the past played a small or non-existent role in the 2000 fall campaign. For instance, several anti-immigration groups that had advertised heavily in the spring’s presidential primaries stayed aloof from the fall campaign, because neither Bush nor Gore supported their views. One of these groups, “Negative Population Growth,” sponsored some print ads advocating its point of view but did not mention any of the major party presidential candidates. The overt motivation of interest groups that engage in candidate-naming issue ads is to advance their legislative agendas by helping elect candidates who agree with their positions. Many have a less obvious motive, however. By advertising heavily, these organizations increase their visibility with their own constituencies and make it easier to raise money and draw in new members. Political scientist David Magleby, who is one of the leading students of issue advocacy in political campaigns, has noted this helpful by-product: “Labor leaders not only point to their successes in helping elect candidates in recent elections, but they also see their activities as energizing unions. The Sierra Club and NARAL attacks on Bush were intended to do more than knock the Texas governor down a peg or two in the polls, and the groups wanted to reinforce the impression that they were the leaders in the environmental and reproductive rights fields. Hence, one side benefit of issue advocacy by mass-based interest groups is visibility on their issues and possibly increased membership or contributions.”6

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Issue Advocacy Media Television advertising is the most conspicuous medium of issue advocacy, but not at all the only one. Radio ads are often used, especially by groups that may not have the funds for television or that simply want to reach audiences that may be particularly accessible by radio—rush hour commuters, for instance. Print ads are another favorite medium, again partly because they are less expensive than TV, but also because they permit a longer or more complex message. For instance, Negative Population Growth sponsored a series of newspaper ads for a time that used the problem of growing highway congestion to argue that restricting immigration would reduce the rate of population increase and thereby cut down the number of cars on the roads. It might have been harder to weave that many message elements into a 30-second television ad. On the other side was a group called American Business for Legal Immigration (ABLI), a coalition of companies, business and educational organizations, and academic institutions. ABLI advertised in newspapers like the Wall Street Journal in support of legislation to expand the number of visas granted immigrants with technological skills. On a single day in the fall of 2000, the Washington Post contained the following issue ads: • A demand by the Better World Campaign that the United States pay its share of United Nations’ peacekeeping costs in Africa. • Opposition by the Association for Competitive Technology to the court-ordered breakup of Microsoft. • Support for the Energy Department’s proposed central air conditioning efficiency standards, by the Alliance Standards Awareness Project. • Support by the Justice Project for legislation to assure competent legal counsel for defendants accused of homicide. • Opposition by the Pharmaceutical Research and Manufacturers of America to legislation that would allow lower-cost prescription drugs to be reimported into the United States. • Support by Health-Track, an organization backed by Georgetown University and the Pew Charitable Trusts, for government sponsorship of a proposed national health tracking network to trace the causes of breast cancer and other diseases of possibly environmental origins. One of several health care issues in the 2000 campaign was the question of providing Medicare coverage for prescription drugs. The pharmaceuti-

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cal manufacturers, heavily attacked by the Gore campaign, funded an issue ad campaign by a group called Citizens for Better Medicare that reportedly spent at least $35 million to present the industry’s views on the issue. In addition, the drug makers also funneled some $20 million to the U.S. Chamber of Commerce for use during the final month of the campaign “to help elect political candidates—mostly Republicans—who favor a nongovernmental solution to the problem of high drug costs.” The intent of the campaign was “to defend Republican candidates who have been hit hard with TV ads financed by the AFL-CIO and Democratic Party.”7 This major campaign relied on both electronic and print media. Direct mail, e-mail, telephone banks, and voter guides are other techniques used by various groups to make their case, often to great effect. Labor unions, for instance, relied heavily on direct mail in 2000 to encourage their members to support the candidates they endorsed, because they had found it a more cost-effective way to reach their members than television. Issue advocacy campaigns by other interest groups made use of non-TV media much more extensively in 2000 than in 1996 and 1998. Voter guides are an excellent medium for any interest group wishing to inform its supporters about where the candidates stand on particular issues. The Christian Coalition has pioneered the extensive use of voter guides, distributing them widely in churches, close to elections. This is very nearly a cost-free technique because, apart from research and editing time, the only expense is printing, not even postage. Labor has been increasing its use of this technique because local union halls provide a good distribution venue. Any interest group that is in frequent personal (as opposed to mail) contact with its audience can do much the same thing. Of course, voter guides can be mailed, and often are, but that increases the cost. BIPAC has been promoting the use of intranet websites and e-mail for low-cost dissemination of voter guides to corporate employees. Direct mail, which makes use of targeted lists with known demographic or political characteristics, has been used in the past primarily for its political fund-raising potential. Local political parties have also used it for decades to reach registered voters prior to Election Day. But it is equally available to interest groups that have a political or legislative message that they want to reach their members or a wider group of voters. It is also comparatively inexpensive, especially if the group owns the mailing list and utilizes bulk postage rates. The costs rise somewhat if the mailing is sent first class, and they can escalate substantially if the mailing list must be rented from one of the many companies that specialize in the development of highly targeted lists. The principal disadvantage of direct mail is that everyone receives vast quantities of “junk mail” advertising every single day, much of it not only ignored but often discarded unopened. Political communications, espe-

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cially if sent bulk rate, run a high risk that recipients will treat them the same way. Print advertising in newspapers and magazines has some of the same kinds of problems. Readers can pay attention to these ads or skip right past them, as they choose. Moreover, all print communications (including direct mail and voter guides) lack the immediacy and vividness of television and even radio advertising. The Internet (about which more will be said presently) has many of the same advantages of television advertising at a fraction of its costs. It is probably the fastest growing political medium, whether for issue advocacy or express advocacy, but it has its own limitations. Not the least of these is that the intended recipient of a message must take the initiative in seeking out a specific website. The advantage is that this is a splendid way to reach people who are already interested or at least receptive. It is useless, however, with the passive majority of citizens. E-mail is the fastest and simplest of all the media for issue messages and it is very nearly cost-free, all reasons why its usage by candidates and interest groups is growing so rapidly. E-mail messages need to be fairly brief, but lengthier backup materials can be attached. E-mail also has its “junk mail” component, however, particularly get-rich-quick schemes and promotions for pornographic websites. Like direct mail, senders must have (or purchase) access to a list of intended recipients. Telephone campaigns are widely used by both political and interest groups. They are relatively inexpensive if volunteers are used, but costs rise considerably if a professional consulting or telemarketing firm is involved. The message must be brief and quickly understandable, easier for a candidate or party seeking a vote than for an interest group trying to explain a possibly complicated issue. This is the most interactive of all media, allowing the caller to ask such questions as, “Do you need a ride to the polls?” or “Can I transfer you to Senator Zilch’s office so you can tell him what you think about this issue?” However, automated telephone messages featuring prominent personalities were widely used in 2000: “This is President Bill Clinton. I want to ask you to vote next Tuesday for Al Gore for president and Sadie Glotz for Congress.” Similar automated messages from civil rights and labor leaders were used to increase voter turnout among their members. A problem for all political and issue telephone campaigns, of course, is the congested competition from commercial telemarketers, which leads many people to quickly hang up if they get a call they do not want. Journalists sometimes describe these non-television techniques as “under the radar,” implying that they are somehow covert activities that are therefore suspect. They are not. It is only the media’s radar that they fall below. Reporters who monitor the electronic media for political and issue advertising are unlikely to learn about all the communications that are

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disseminated via voter guides, direct mail, telephone banks, or e-mail. The sponsors of such communications are under no obligation, legal or moral, to announce what they are doing. However, precisely because these communication techniques are not particularly visible to the press, they lend themselves to negative attacks on candidates to a far greater extent than advertising does. It is rare that these messages are publicized in the way they were when a computerized telephone campaign in the 2000 Michigan primary charged that one of the GOP presidential candidates was antiCatholic. Television, and to a lesser extent radio, remain therefore the most powerful ways to communicate with the majority of voters, but also the most expensive. In 1996, issue advocacy by various interest groups seeking particularly to affect the outcome of the congressional elections made heavy use of television. A study of issue ads in 16 competitive congressional races in the 1998 campaign by Professor David B. Magleby found a different result: “In our sample races, we found 111 interest groups active. These groups ran 218 ads on TV or radio and mounted 258 phone banks or direct mail efforts. Most records show that groups used direct mail from preprimary to the day of the election, whereas they used phone banks more in the final month. Television ads aired throughout, but most heavily in the final month and a half of campaigning.”8 A subsequent Magleby study of 17 competitive congressional races in the fall 2000 campaign found that issue advocacy communications in various media were utilized by 211 interest groups. “The biggest players were Citizens for Better Medicare (CBM) at $65 million, the AFL-CIO ($45 million), the NRA ($25 million), Emily’s List ($20 million), the U.S. Chamber of Commerce ($15 million), and Planned Parenthood ($14 million). The second tier of groups included the NAACP National Voter Fund ($11 million), the NEA (over $9 million), the Sierra Club ($9.5 million), and NARAL ($8 million). Other groups that made significant expenditures include the Business Roundtable [sic] ($6 million), Handgun Control ($5 million), and the League of Conservation Voters ($4 million).”9 Note how few business organizations were on this list—and of these three groups, notes Magleby, the efforts of CBM and the Chamber were substantially funded by pharmaceutical manufacturers. An additional business name needs to be added to the list, the National Federation of Independent Business (NFIB), which undertook over 50 mailings and other communications to the small businesses that constitute its members.10 In the 2000 campaign, these business efforts were intended to help mostly Republican congressional candidates and appeared mainly in the final few weeks. In contrast, non-business groups backing Democratic congressional campaigns had been advertising since summer, although their total advertising buys up to Election Day were in fact somewhat less.

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Many of these latter groups also advertised heavily to boost the Gore campaign. In addition to the business effort, groups supporting Republican candidates (including the NRA, the National Right to Life Committee, and the Christian Coalition) implemented major get-out-the-vote communications programs. Interest group spending for issue advocacy does not need to be disclosed to anyone (except for Sec. 527 groups after June 2000), and there is therefore no authoritative total of all their activities, but they clearly are rapidly increasing. There is no limit on the amount of soft money individual companies, trade associations, or business coalitions can either give to the parties or spend directly on issue advocacy; similarly uncapped are the totals given or spent by labor, environmental, trial lawyer organizations or, for that matter, Indian tribes (among the more generous donors in recent years). Implications for the future are that sooner or later (and probably sooner), as all these interest groups spend more on advocating their own views and candidate preferences, and give proportionally less soft money to the parties, we will reach a point at which interest groups spend more to affect elections than the political parties and their candidates spend themselves. Why would interest groups increase their candidate-oriented issue ad spending to that extent? First, of course, to help elect the candidates they like (and harm those who oppose their issues), and also to be able to claim lobbying credit for being instrumental factors in candidates’ victories. Second, and perhaps most important, to persuade the voting public (or particular segments of it) of the validity of the interest group’s point of view on its issues. In some cases, issue ad campaigns, especially negative ones, have continued even when the candidates they ostensibly were intended to benefit asked that they be changed or stopped. These interest groups had their own agendas—including increasing their own visibility and importance—and electing a particular candidate was only one part of them. From the candidates’ perspective, issue ads weaken their ability to control their own campaigns. Even candidates who are treated positively in issue ads have mixed feelings about them. Everyone likes to be praised, of course, but all candidates have issues they would prefer not arise. A candidate in an urban or suburban district might personally be opposed to gun control but still be unhappy if the NRA begins a local ad campaign lauding him for his views. It is important to understand the differences between the goals of candidates and those of interest groups, even completely supportive ones. In any campaign, the candidates have certain issues they want to emphasize and others they wish to play down. Each interest group, though, naturally places the highest priority on its own issues. Issue advocacy allows that group to determine for itself what its message will be, when and how often

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it will be delivered, and over what media. It need not concern itself with where its issues fit into a candidate’s priorities unless it wishes to. It can also express its message directly to the public. It is not dependent on the coverage the news media may or may not choose to give it, nor on how the press interprets its message. Long-Term Issue Advocacy For the most part, both candidates and interest groups focus on the short term: the next election or issues to be considered in the upcoming legislative session. Issue advocacy has shared this focus on the immediate future. However, issue advocacy can also be utilized to educate the public on long-term issues. There are large issues that will not be resolved by any single piece of legislation no matter how broad, issues that will extend for years and decades. Most of these are ignored or poorly understood by the voters, often to the detriment of business interests. An example, one of several to be discussed in the next chapter, is the nexus of two apparently unrelated issues, Social Security reform and immigration policy. Through long-term programs of advertising and other forms of communication, companies could enhance the public’s understanding of such problems, their importance to individuals and their families, and the validity of the business point of view. Very little of this kind of business communication currently exists, although the Archer-Daniels-Midland ads, which draw a connection between world hunger and prospects for global peace, probably come closest. Another illustration is the selective success some companies and industries have had in drawing attention to the long-range adverse effect on jobs and local economies that often results from tough environmental regulation. Directly affected labor unions, their members and communities have come to understand this trade-off, although the public at large probably still does not. Issue Advocacy Guidelines The purpose of any advocacy communication is to move people to take an action, whether to contact their legislators about an issue or to influence their voting behavior, even if indirectly. The issue advertisement (or other communication medium) must therefore state the issue in terms to which ordinary citizens can relate. If it may not affect them directly, the issue should be posed in terms of family (e.g., children or grandparents) or community. Even young people can identify with an ad that deals with some problem of the aging, for instance, if they have elderly relatives or neighbors. The issue should be stated simply and honestly. Simplicity is crucial if the ad is to be successful in promoting understanding by people who rarely

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are technical experts. (The risk, of course, is oversimplification.) Honesty and truthfulness are vital lest the press or an opponent be able to demolish the credibility of the message or the organization sponsoring it. It is not enough to be factually truthful if the overall effect is misleading. That can be equally self-destructive. Moreover, bear in mind that the truth is not always absolute. Truthfulness is what the audience believes it to be. An ad that seeks to correct a popular misunderstanding needs to do it in a way that is dramatic (to get people’s attention) and, if possible, humorous (to avoid angering them or putting them off). Issue ads are not unlike ads for a consumer product. Both want the audience to buy something—an idea, in the case of the issue ad. So the ad must talk in terms of people’s perceived needs, or have the ability to generate the perception of a need. Image is an important element of all advertising, and the idea’s “image” must help create the incentive to buy. Also, like an ad for a product or service, there must be a personal benefit of some kind that will stimulate the impulse to buy. An important part of this buying decision is stimulating viewers or readers to take the action explicit or implicit in the ad—“tell your congressman. . . .” The only case in which the action must be implied rather than stated outright is an issue advocacy message that wants the audience to support or oppose a political candidate, since an explicit appeal would convert the message into express advocacy. Underlying all this is the need for careful research to be sure the ad will really do what its sponsors intend. The use of focus groups—small discussion groups representative of the key segments of the audience the ad is intended to reach and motivate—will help in both defining the message and refining it. Advertising is a specialized business. The expertise of an advertising agency will help in defining and crafting the message and the communications that flow from it. The agency can also advise concerning print media placement and television or radio time purchases. Ad agencies typically are paid by a commission from the medium where the ad is placed, so there may not be a significant cost to using one. The best agencies to choose among are those that have had considerable prior experience with issue advertising. The agency may also be in a position to assist with selection and use of a focus group and other elements of market research. In sum, issue advocacy is an instrument of political communications whose potential to achieve important business objectives has barely been tapped. It can be used to mobilize public opinion on today’s issues, and also to help favorably inclined legislative candidates or oppose those candidates whose issue positions are harmful. It can also contribute to strengthening the long-term credibility of business organizations by educating local or national audiences about emerging crises and unexplored

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solutions, thereby contributing to a more sympathetic understanding of the business position.

THE INTERNET AS A POLITICAL INSTRUMENT The media used for public policy advocacy tend to flow in waves, depending on technological developments. Newspapers and magazines were once the primary means of influencing public opinion. Print media are still important, but less so since the rise of television, which is where most Americans now get their news and which therefore shapes their opinions on current events. The Internet and online communications media are the newest wave. They include, of course, websites, e-mails, chat rooms, and other computer-driven media. The extraordinarily rapid growth of the Internet is transforming politics and lobbying at all levels. Internet websites are a mass medium that costs a tiny fraction of television broadcast time. At the same time, through its interactive capabilities, it is also a highly individualized communications medium. As a mass medium it can be used as television is, to push out messages broad or narrow, on whatever issues the candidate or interest group chooses. Unlike TV or print media, there are no inherent time or space limitations. A website can be as extensive as desired, at a relatively modest cost. It is not schedule-sensitive, as television and radio are; computer users can access a website at any hour of the day or night. As an individualized political medium, candidates can utilize e-mail and chat rooms to provide opportunities for voters and candidates to interact. Candidates can announce that they will be available at certain times (for instance, each Tuesday evening from 7:00 P.M. to 9:00 P.M.) to “talk” with groups of voters in a chat room or to respond to questions from individual voters. E-mail allows individual voters to query candidates (or argue with them) on everything from taxes and foreign policy to neighborhood pothole repair. In a sense, this is a return to the personal politics that prevailed before the age of television, but it can be even more customized than during that earlier era. Incumbents or aspiring candidates (or, as is more likely, their anonymous staffers) can enter into dialogues with voters as extensively as they wish. It is the rare political figure who lacks a website where interested voters can learn about candidates’ backgrounds and experience and their positions on the issues. These websites usually provide opportunities for voters to volunteer, to contribute, or to get on e-mail lists for further information. Senator John McCain, for one, used the Internet with considerable success to communicate his issue positions, to raise money, and to recruit volunteers for his 2000 presidential bid. Some candidates for other public offices in 2000 conducted running opinion polls on issues on their websites, for

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the information itself, but also as sources of names for their databases and to recruit volunteers and contributors. Advanced software and marketing demographics about computer users enable candidates to send e-mail about particular issues to those voters most likely to be interested in them—and each voter has the ability to respond with questions or reactions. What candidates can do with the Internet, interest groups can also do. Virtually all labor unions, business associations, and other major interest groups now have websites with information on their issue positions. These already provide valuable vehicles for issue advocacy. E-mail, listservs, and chat rooms are also being increasingly utilized to activate public opinion on the issues important to these various lobbying organizations. Automated e-mail lists can be used to send legislative or political messages to thousands of people, perhaps hundreds of thousands, virtually instantaneously, to inform them about an issue or a campaign, or mobilize them to take a requested action. Corporate intranets are being used by some companies to put out information to their employees comparing candidates’ positions on key issues, to encourage personal political activity and PAC contributions, and to stimulate grassroots lobbying communications. A number of groups, both established organizations and ad hoc coalitions, have used the Internet to mount aggressive grassroots programs in support of legislative or political agendas, among them the American Civil Liberties Union and the National Education Association. The movement called “Censure and Move On” was organized almost totally on the Internet “to gather signatures online for a petition that urged Congress to censure President Clinton and move on.”11 Websites are also good fund-raising vehicles for money to further spread the message, assuming the sponsor is a non-profit organization eligible to accept public donations. As appropriate, a website can also be used to recruit volunteers, new members, or PAC and independent expenditure contributors. Websites can also be used by interest groups to motivate and enlist voter communications to their lawmakers on particular issues. Sites such as Grassroots.com, Speakout.com, and Voter.com have been launched to stimulate the vox populi on current issues. A key difference between the Internet and the mass media, at least for now, is demographics. Most computer and Internet users are currently people who are above average in income and education (also the same people most likely to vote in any election). This situation is changing rapidly, however, as personal computer prices continue to drop and as more citizens become comfortable with the Internet—assisted, no doubt, by their children who, as a group, have developed a greater degree of computer sophistication than their parents. It is, therefore, not likely to be too

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many more years before this medium becomes as ubiquitous as the home television. Even more significant is the power latent in the Internet’s interactive capabilities, likely to make it a far more potent medium than television has ever been. Through e-mail, chat rooms, and the like, every American family has the ability to participate in grassroots democracy of a kind unknown outside of neighborhood associations and small towns—but without the restrictions of clocks and geography. How many will choose to be participants in this new electronic democracy is another question. If there is a liability to the Internet compared to the mass media, it is that individuals must have enough interest to access a candidate’s, a party’s, or an interest group’s website in the first place. This requires more initiative than that required of the typical television viewer, who does not tune in for the purpose of seeing a particular ad but is exposed to commercials interspersed with programming—or of newspaper or magazine readers, who may or may not choose to pay attention to ads juxtaposed to articles they are perusing. Internet users must be sufficiently motivated (usually by advertising in other media) to call up a particular website before its content can even begin to draw their attention. So-called “push technology” can send information along the Internet in ways that more nearly resemble broadcasting, updating the websites of accessible users at fairly frequent intervals. In the end, though, the Internet’s potential is only as great as the public’s willingness to utilize it. “With countless available information sources for a wide variety of specific interests, it will be extremely easy for those who are not much interested in party politics to avoid the subject altogether.”12 The same can be said of interest group messages. NOTES 1. Washington Post, May 15, 2000, p. A6. 2. First National Bank of Boston v. Bellotti. 3. FEC v. Christian Coalition, U.S. District Court for the District of Columbia. 4. See, for example, Jan Witold Baran, The Election Law Primer for Corporations, 2nd ed. (Chicago: Section of Business Law, American Bar Association, 2000). 5. David B. Magleby, ed., Getting Inside the Outside Campaign: Issue Advocacy in the 2000 Presidential Primaries (Provo, UT: Brigham Young University, 2000), p. 3; in David B. Magleby, ed., Election Advocacy: Soft Money and Issue Advocacy in the 2000 Congressional Elections (Provo, UT: Brigham Young University, 2001), p. 4. 6. Magleby, Getting Inside, p. 4. 7. Wall Street Journal, October 6, 2000, p. A24. 8. Magleby, Getting Inside, p. 23. 9. Magleby, Election Advocacy, pp. 26–27.

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10. Ibid., Table 8, p. 37. 11. Daniel Bennett and Pam Fielding, The Net Effect: How Cyberadvocacy Is Changing the Political Landscape (Merrifield, VA: e-advocates Press, 1999), p. 152. This is a useful book for anyone wishing to explore the political and lobbying potential of the Internet. Chapter 10 provides valuable checklists and suggestions. 12. Martin Wattenberg, The Decline of American Political Parties, 1952–1996 (Cambridge, MA: Harvard University Press, 1998), p. 242.

CHAPTER 9

Long-Term Issue Advocacy Applications The feeble tremble before public opinion, the foolish deny it, the wise judge it, the skillful direct it. —Jeanne-Marie Roland

Business organizations focus their lobbying and public communications efforts almost exclusively on current issues. Yet, there are a number of national problems that will be subjects of national debate for many years to come, and in which the business community has a fundamental and important stake. It is rare for companies or business associations to spend resources to educate the public on long-term issues—perhaps because they are consumed by efforts to influence the current and the immediate, and possibly because they have a dim view of the public’s interest in learning about long-term issues and its ability to retain the information. However, there can be several important political benefits for the business community in opening, leading, and mediating long-term public debates about issues that in some cases will last for decades—as, for instance, immigration policy has for more than a century. For one thing, business can be instrumental in strategically shaping these debates to its interests. That would also allow it to play a much greater role in the development of public policy than by merely reacting to shortterm consequences and issues. For another thing, business has a critical stake in assuring that the climate of public opinion moves toward marketoriented solutions on key issues, and away from further expansion of government programs. A third benefit is that by demonstrating a willingness

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to inform and educate the public about chronic issues, companies and their associations can take advantage of opportunities to don a mantle of national leadership, rather than appear to serve only their immediate selfinterests. This last point is an important element in establishing the legitimacy of business as a preeminent player on the stage of national politics in the eyes of the electorate. It can therefore produce favorable short-term political and legislative consequences as well. Let’s be clear that we are not talking about some futuristic plan to finance the colonization of the planets, or some other issue that will not begin to arise for decades—but rather about issues that are here and now and yet will persist for many years to come. Beginning an effort now to bring the public to greater understanding and support for international trade, for example, can avert future policy crises of the kind that typify this issue today. Trade is a good example for several reasons. First, few issue areas are more important to the future of American business and to its role in the global economy. Second, most consumers (and voters) have a poor understanding not only of the economic significance of trade but also of the role it plays in enriching their lives every day. Third, following a series of pitched legislative battles on trade issues, business has just begun to realize that it needs to undertake a permanent campaign to enlist public support. Over the next decades, there will be debates over future trade agreements with Latin America, the European Union, and Asian countries, and other trade issues. Each of these can produce the kind of intense legislative struggle that occurred over NAFTA and trade relations with China. Alternatively, business can begin now to rebuild the level of public and congressional support for trade that existed through the 1980s, and thereby reduce the danger of future defeat. A number of major national issues are likely to persist in the public forum for a great many years, for reasons specific to each. We deal in this chapter with four of them, as illustrations of ways in which business can enhance its image as a national institution that is truly concerned about producing a citizenry that is educated and supportive on major public policy questions: • International Trade—an enduring area of public misunderstanding and dispute, in large part because economic institutions have done an ineffective job in explaining its true benefits to the nation’s consumers. As a result, few Americans understand how they and their families gain personally from trade; nor do they recognize the fundamental importance to the nation of an unfettered and genuinely prosperous world economy. • The Low National Savings Rate—an economic issue that will inevitably have negative consequences for capital formation and the


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country’s overall economic health. Solutions to this poorly understood problem require public policy reforms on which the business community can provide special leadership. Financial industries have a special stake in enhancing the rate of personal savings among Americans. • Immigration and Social Security—both chronic issues in their own right and yet interrelated in ways that are scarcely discussed. Immigration policy is key to resolving the long-term economic, social, and demographic problems surrounding the financing of Social Security and Medicare. • Campaign Finance—a knotty problem that may never be wholly solvable but which is important to Americans’ support for democratic institutions and our system of government. The “reforms” of recent decades have actually perpetuated and worsened the evils they aim to eradicate. A genuinely sound system can be built on the principles of deregulation and establishment of a political marketplace. The media for the kind of communications efforts proposed here are available today in ways and to an extent not feasible even a few years ago. Issue advocacy, on television and radio, and in print media, will lend itself as effectively to this program as it does to current issues. Television and radio ads can alert viewers to the need to address the problem, and provide a brief action message. Print ads can provide somewhat more detail. Ads in both media can refer citizens to appropriate Internet websites, which are limited in neither time nor space. Websites can provide statements of any reasonable length that outline the nature of the problem, its causes, proposals for change, and action recommendations. The website can also be interactive, providing people with an opportunity to ask questions and exchange opinions with experts who could be available at designated times. Of course, traditional media, from public speeches to brochures, can also be utilized. Examples of possible issue ad messages are offered after the discussion of each issue. INTERNATIONAL TRADE No other national issue carries as much long-term significance for business as does trade, and on no other issue has business done a poorer job in explaining the benefits to Americans. A spring 2000 poll by the Wall Street Journal and NBC1 illustrates the point: 48 percent of those interviewed believed that “foreign trade is bad for the U.S. economy, as cheap imports hurt wages and cost jobs.” Only 34 percent said that “foreign trade is good for the U.S. economy, resulting in economic growth and jobs for

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Americans.” And this was an opinion survey conducted at the height of the China trade issue, a period when business groups were spending millions on television and print ads telling the public how important trade is to the country. The poll illustrates two key deficiencies in business advocacy for trade. First, business has made a persuasive case with barely one-third of Americans. They are substantially outnumbered by people with negative views about trade, with another 18 percent unconvinced either way. Second, nearly half have bought into the protectionists’ argument that “cheap imports” are the problem. The blame lies less on anti-trade forces—after all, they have to use whatever arguments they can find to make their case—than on business itself. Pro-trade advocates have defaulted completely on the import side of the debate, allowing its opponents to have their way unrebutted. In point of fact, U.S. companies completely neglect public communications on the significance of international trade, except when specific legislative issues are about to be decided. Once Congress votes, trade is filed away in corporate back drawers until the next big issue emerges, often several years later. The opportunity to spend a fraction of the cost of the China ads on a year-round campaign to educate the public about all the benefits trade brings the nation is permitted to slide away. Meanwhile, protectionists ranging from union leaders and Ralph Nader on the left to Pat Buchanan on the right preach the cause of economic nationalism, largely unanswered by business leaders fearful that speaking up will only play into protectionists’ hands. However, as the Wall Street Journal survey and similar polls repeatedly point up, those who oppose trade expansion are winning the public opinion battle through default, forcing the business community to undertake enormously costly campaigns whenever major trade issues arise. Those campaigns are specific to the immediate issue (as they were on both NAFTA and China) and one-dimensional, focused mainly on exports. Broader efforts to develop a sustained base of public support for international trade are non-existent. The exquisite irony of this policy of neglect is that if business organizations invested some resources in a continuing public opinion campaign, they would not have to battle so intensely when specific legislative issues arise. A single organization, the Business Round Table, whose members are the CEOs of some 200 major corporations, reportedly spent well over $9 million on China trade issue ads, with its members substantially increasing to nearly $60 million their political contributions to members of Congress as the trade vote neared;2 many other business groups also made significant efforts. It is not unreasonable to believe that a continuing trade advocacy program, perhaps beginning after the close House vote on NAFTA in 1993, would have produced sufficient public support over time


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to reduce the need for a crash campaign on China PNTR seven years later. (It should be noted that international trade bills have rarely run into serious difficulty in the Senate, which has tended over many years to be much more internationalist in its outlook than the House. There are, of course, no guarantees that senators will continue to hold these views.) In between the NAFTA and PNTR votes, there were other occasions when the House took up major trade issues that generated substantial opposition from labor and its allies and also from social conservatives. One of these was the China issue, which was intensely debated annually (and decided by narrow margins each time) until it was permanently settled in 2000. Another issue, that lost twice, would have reauthorized the president to negotiate trade agreements on a “fast track” that would require Congress to vote up or down on these proposed treaties without opportunity to amend them. Fast track was defeated in the House on the first occasion, and withdrawn on the second when it became clear that its proponents did not have enough votes. Like NAFTA before it and PNTR later, fast track authority for a Democratic president was supported by the House Republican leadership and opposed by their Democratic counterparts. One additional issue, which came up in 2000, was legislation to relax trade restrictions with impoverished African and Caribbean countries; opposed by many of the usual economic nationalist interests, it passed largely because of enthusiasm for it among most Black House members and within the business community (the traditionally protectionist textile industry being the principal exception. The steel industry also has a protectionist bent, but did not take a stand on this particular issue.). Over this entire eight-year period, House votes on these trade issues followed a pattern. Each was supported by the Clinton administration, most of the business community, the GOP leadership, and about twothirds of all House Republicans plus roughly one-third of the Democrats. The opposition came from labor unions, most environmental groups, a handful of protectionist industries, and many social conservatives. Neither side was absolutely monolithic—PNTR, for instance, was backed by a former president of the United Auto Workers, Leonard Woodcock, who had also served for a time as ambassador to China, and by Pat Robertson, head of the Christian Coalition—but in general the pattern was quite consistent. Could those relatively fixed coalitions have been changed by a permanent, aggressive campaign to build public support for trade? The answer is almost surely yes; otherwise those crash campaigns that ultimately did prevail would not have succeeded. The case for trade is not that hard to state. Vice President Gore did it with great effectiveness in his 1993 debate with Ross Perot on NAFTA, the only major national debate on trade that has occurred in recent times. Simply put, economic nationalists are on the wrong side of history.

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The reason was well summarized by columnist Albert R. Hunt, reporting on an interview with prominent Washington lobbyist and former Republican Congressman Vin Weber: “Labor’s hard-line approach to trade, driven by the industrial unions, is ultimately self-destructive. They’re perpetuating a ruse. ‘Some politicians and labor leaders tell people that this isn’t a result of technology or a changing world and that it’s reversible,’ observes Mr. Weber. ‘You’re not doing those followers any good because it’s just not true.’ ”3 Not only are technological advances irreversible and the process of globalization probably so, Hunt and Weber might have added, but it would be disastrous for the United States if they were. Reestablishing the trade barriers Congress erected in the years prior to World War II would wreak havoc on the economies of the United States and every country in the world that trades with us. The least consequence would be to permit European and Japanese companies to take over the overseas markets of American companies. The more likely result would be a global depression, and political instability throughout the world. It took a major war to end the Great Depression of the 1930s, which was lengthened and aggravated by protectionism in both the United States and Europe. What would it take to end an economic depression of the scope that would ensue if the unions and other economic nationalists had their way? These lessons of history are clear to those who have studied them. They are far less clear to the majority of Americans, most of whom are too young to remember either the Depression or the events of the immediate post-war period. After World War II, leaders of both parties, including Senator Arthur Vandenberg and Presidents Truman and Eisenhower, persuaded the public to abandon decades of diplomatic isolationism. Few people today remember the eloquence of those leaders—or that their protrade arguments were staunchly supported by an American labor movement that has largely abandoned its internationalist heritage. Presidents and other political leaders can give speeches about the overriding importance of trade, but only business can mount an ongoing communications campaign to rebut the inherently flawed arguments of economic nationalism and build a permanent base of public support for trade. Turning the public away from economic isolationism is a task that only business, with its vast communications resources, can undertake on a sustained basis. Heretofore, that case, and the justification for specific trade issues, has usually focused on exports and the creation of American jobs that sales abroad produce. Exports create new and better jobs, the argument goes, resulting in greater prosperity for local workers, businesses, and communities. This argument is perfectly valid, but it is simply not adequate, either economically or politically. Moreover, it allows protectionists, particularly


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the current generation of union leaders, to fight trade legislation on the political battlefield of their own choosing, imports. There are several reasons why this job creation argument is insufficient. While it is true that exports create domestic jobs—and usually betterpaying ones—it is also true that dislocations occur, primarily from import competition, and some workers in some industries get hurt. This is the heart of union opposition to trade expansion. By fighting for international trade on the battlefield of jobs, business tells a legitimate job formation story, but also allows labor to focus the issue on those who are harmed. This forces many members of Congress, representing states and districts with concentrations of dislocated industries, to oppose trade expansion. Apart from voters in agricultural and other areas dominated by industries that have major markets abroad, the unfortunate fact is that most Americans perceive no visible personal benefit from exports. For them, world trade is just an economic abstraction from which they see no gain to themselves and their families. That makes them susceptible to protectionist appeals, which often come in patriotic wrappings (for example, “Buy American” campaigns). The defense of international trade usually offered by U.S. business advocates is a stool that constantly falls over because of unsuccessful efforts to balance it on one leg. The case for exports is that single leg. It works with the minority of voters who can see the direct personal and community benefits of sales abroad. It has little effect on others who perceive no impact on their own lives. The advantages of the second leg, direct investments in other countries, have been only partly explained and are not well understood. Establishing facilities in overseas markets enables companies to produce and sell more efficiently there (and often in third countries), and ultimately adds to corporate earnings and taxes paid here. It also provides effective ways to evangelize American values regarding human rights, environmental standards, and working conditions, a point that companies made (mostly for the first time in any effective way) on the China issue. But for most people these, too, are abstractions with which they do not personally identify. The economic and social value of the third leg—imports—is treated, like crazy Aunt Nelly stashed away in the attic, as the dirty secret of international trade. Secret it may be, but hardly dirty. To the contrary, imports have enhanced competition and domestic productivity, and brought enormous but largely unrecognized benefits to every family in America. Picture a retired union worker wearing a shirt made in India and slacks from Malaysia, while watching a TV movie produced by a French-owned studio. He turns off his Toshiba television and goes to his basement desk. On his Acer computer (made in Taiwan), he types up a shopping list, then gets in his Korean Hyundai to take care of a couple of errands. First, he

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gasses up at a local Amoco (owned by a British company). En route, he takes out his Ericsson mobile telephone (Swedish) to call his brother who is vacationing at a Mexican resort, using a wireless system partly owned by a British-German firm. Then he drives to a nearby Dutch-owned supermarket where he picks up a few items: a jar of Taster’s Choice coffee (made by a Swiss company, Nestle´, from beans grown in Brazil), plus a few bars of Dove soap, some Pepsodent toothpaste, a package of Lipton’s soup, and a jar of Skippy peanut butter—products all made by Unilever, a British-Dutch company. He also buys some vegetables and salad greens, flown in the day before from farms in Latin America, a bottle of a nice and inexpensive Australian wine, and a book for his grandson that was written by a Canadian author and published by a company based in Germany. Leaving the supermarket, he drives to a meeting at his old union hall, where he cheers on a speaker attacking greedy multinational companies and the job-destroying evils of cheap imports. A ludicrous caricature? Scenes like that occur millions of times a day across America. In all probability, our retired consumer is not remotely conscious that all the items he has just purchased are “cheap imports,” nor of the fact that he is an active participant in the global economy. He doesn’t know those things because no one has bothered to tell him; nor has anyone told farmers or the employees of exporting companies that U.S. sales abroad are contingent on this country’s willingness to buy from overseas suppliers. Our imports from those countries give them the foreign exchange they need to buy from us. There are no one-way streets in world trade. “Cheap imports” are the great and universal benefit of world trade to America’s consumers. Imports expand consumer choice, often introducing higher quality products into the domestic marketplace, generally at lower cost. The result is increased competition, and a spur to higher productivity among domestic producers. This further improves quality at still lower prices for all consumers—which, to repeat, means every family in America. As Adam Smith noted over two centuries ago, consumption is the purpose of and justification for production; it is not the other way around. A more recent economic icon, Federal Reserve Chairman Alan Greenspan, has often pointed out that the prime benefit of free trade is that it enhances standards of living through the effects of competition on productivity.4 A few examples illustrate this point: • The higher safety, durability, and value of American-made cars today are the direct result of the challenge of imports from Europe and Japan. To offset its higher domestic labor costs and retain its markets, Detroit was forced by import competition to strengthen both its products and its productivity. Technologically, the U.S.


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automobile industry now ranks with the best of its competitors around the globe, but that would never have happened were it not for the flood of high-quality “cheap imports” that severely threatened Detroit’s market share and impelled it to improve. • Not so long ago, fresh fruits, flowers, and vegetables were available only seasonally. Today, farm produce can be purchased in supermarkets year-round, flown in from the Southern Hemisphere in the months when it is winter in the United States—not only the familiar tomatoes and oranges, for instance, but also produce that was exotic or even unknown to American consumers only a few years ago. • The personal computer may be an American invention, but it is offshore competition that has spurred productivity, capabilities that improve at almost exponential rates, and falling prices. While many PC brands (though not all) are American, the manufacture of internal components and actual assembly often take place overseas. Monitors are mainly imports. • Consumer electronics tell a similar story. Shoddy quality and high prices for U.S.-made television sets provided market openings for “cheap imports,” mostly from Japan, that were better made than those of U.S. manufacturers. American consumers flocked to them. Cries to “buy American” were no substitute in consumers’ eyes for the better value offered by imports. As a result, television manufacturing has largely disappeared in the United States, but other domestic consumer electronics companies have learned the lesson and applied it: High quality at an affordable price is the essence of both consumer value and successful marketing. Imports can have a transforming effect that forces companies into new lines of business that benefit consumers, workers, and shareholders. For example, as a manufacturer of television sets, Motorola could not compete with cheaper, better quality imports. Today, however, it is a prosperous maker of computer chips, cellular telephones, and other electronic goods. It is a stronger company as a result. Admittedly, not all industries have coped as well. U.S. textile and steel companies have been unable to compete effectively with lower-cost imports for a number of years, and are constantly demanding protection from Congress and the administration. On the whole, though, imports have increased the quality of life and decreased the cost of living for every consumer in America. Imports are not an unfortunate cost or by-product of U.S. sales abroad. It is the other way around. As Adam Smith would point out today, the primary purpose of international trade to our consumer-based economy is imports; the ec-

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onomic significance of exports is that they are the means by which the United States (and every other nation) finances its purchases from abroad. Directly and indirectly, imports have been a key factor—perhaps the significant factor—in the unprecedented length and breadth of the nation’s economic expansion. After all, fully two-thirds of the U.S. economy is driven by consumer purchases. Steadily improving productivity, stimulated by technology and global competition, has for the first time in history kept employment high and inflation low while permitting a safe and reasonable level of wage growth. “The evidence is overwhelmingly persuasive,” says Greenspan, “that the massive increase in world competition—a consequence of broadening trade flows—has fostered markedly higher standards of living for almost all countries who have participated in cross-border trade. I include most especially the United States.”5 If all this is true—and it is—why do almost all trade advocates omit discussions of the significance of imports? Perhaps because business people fear that the subject will provoke union leaders and other economic nationalists; or, very possibly, because many executives have actually bought into labor’s line that imports kill jobs, a complaint that could be lodged with equal validity against technology and productivity improvements. Yet, not since the Luddites tried to stop the Industrial Revolution in the early 19th century has anyone seriously urged that technology be brought to a halt. The process that economist Joseph Schumpeter called “creative destruction” eliminates outmoded industries, companies, and jobs, but it produces new ones, and overall in greater numbers. The introduction of personal computers made the typewriter obsolete, and dislocated workers involved in its manufacture. Should computers therefore be banned and typewriters brought back? By the same reasoning, typewriters should also have been proscribed when they were first introduced, given the vast economic damage they undoubtedly did to people who made their living copying documents by hand. David Ricardo’s concept of comparative advantage is one of the great strengths of the market economy. Companies, and countries, thrive when they concentrate on the things they do best. The competitive pressures that imports exert illustrate the principle of comparative advantage at work—and they are also often instruments of the same creative destruction process as technology. They make companies operate more efficiently and effectively or be forced out of business, replaced by those that can do a better job. The ultimate beneficiaries are this nation’s consumers who, after all, are the real drivers of the American economic engine. Innovation, whether in products or productivity, is a consequence of market competition. Competition produces winners, but also losers. On both sides are shareholders, employees, other businesses those employees patronize, and local communities. If a major local employer moves to an-


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other country, another state, or simply closes down, there are unpleasant consequences for many people. Workers at that facility, now unemployed, must reduce their spending for goods and services, which has an adverse effect on local retailers and perhaps results in still more people thrown out of work. Not only is the local economy hard hit, but so also is its government that suddenly has less tax revenues coming in to finance the increased demand for social services to assist the newly unemployed. Trade opponents say that this process is economic Darwinism at its worst. Of course, there are no complaints about dog-eat-dog competition, only rejoicing, when a community learns that it will be the site of a new facility, whether from another country or another part of this one. There are no easy answers to the dislocation problem, but neither can it be safely ignored. Economic justice is not a concept with which capitalism deals easily, but it needs to be remembered that labor unions arose in the first place because employers treated their workers as merely another form of capital, to be used or ill-used as employers saw fit. Societal values today, and often the law, require remedies for people whose jobs, lives, and families are disrupted because of decisions they had no hand in making. Better programs of reeducation and retraining, both private and public, are needed, along with improved community assistance efforts. Just as the China trade issue awoke business executives to the need to grapple with the trade-related issue of human rights, so does greater attention need to be devoted to the quandary of dislocated domestic workers and hard-hit localities. The problem may be difficult, uncomfortable, and costly for U.S. companies. Ignoring it, however, raises the specter of onerous domestic regulation, import restrictions, and potential global agreements on labor standards, environmental protection, community dislocation, and human rights. The brunt of these economic burdens could be expected to fall on major participants in the global marketplace. International companies can never make enough concessions to buy off economic nationalists and protesters against the global economy, but they can and should take steps that will undermine their most damaging arguments. By acting pragmatically on these problems, and as a demonstration of social consciousness, business will enhance its credibility in attacking the deceptively attractive arguments of protectionists. Demands that the labor and environmental standards of countries that export to the United States be immediately increased to U.S. levels are seductive to many Americans with little economic understanding, frequently including people in dislocated companies and communities particularly. The demands sound attractive because they seem altruistic in some ways; all we are trying to do, the argument seems to say, is make employers in those other countries give their people the same good life we enjoy here. U.S. protectionist leaders know this is economic nonsense. Stricter labor standards increases labor

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costs and will price the allegedly protected workers right out of their jobs in their own countries—but then the protectionists’ real goal is not human rights and worker (or environmental) protection overseas but the export of economic inefficiencies and the erection of import barriers at home. A sincere concern for human rights abroad can hardly ignore the impact on Third World workers if they are dislocated from their jobs by protectionist U.S. actions and forced into the streets where criminal activity is often all that stands between them and starvation. Governments in most developing countries understand this and object (as we certainly would) to a foreign power—the United States—telling them to do things our way, or else. The United States cannot ignore working conditions, human rights, and environmental problems in other countries, but those issues are more fairly and realistically addressed in the context of their betterment through direct foreign investment than as anti-import debating ploy. If these American values are to be adopted by other national cultures, that will happen partly through demonstrations by U.S. companies operating in those countries and partly through demonstrations at home that include genuine steps to alleviate the domestic economic disruptions that trade inevitably produces. One useful beginning is the United Nations’ Global Compact. This is a voluntary agreement sponsored by Secretary General Kofi Annan that was signed in 2000 by executives of 50 multinational companies, in which they pledged themselves to abide by a set of principles relating to human rights, working conditions, and environmental protection. Codes of conduct of this sort sometimes fail to translate into reality, but these companies know that their behavior will be monitored by organizations like Amnesty International, the World Wildlife Fund, and the International Confederation of Free Trade Unions. If the result is corporate policies and actions that these non-business organizations find credible, and if other international enterprises follow the lead of the initial 50 multinationals, some valuable progress in demonstrating the positive impact of trade and globalization will have occurred. Many trade advocates prefer to avoid discussing such problems, however, and therefore quickly skip over the consumer and economic benefits of imports, lest they provide protectionists with another opportunity for a harangue on job-killing. As we have noted, some people are hurt by imports, and often painfully; but so many more benefit that to neglect to point out that fact is self-defeating. Economic nationalists will not stop fighting imports because trade advocates decline to rebut them. On the contrary, the absence of effective rebuttal is what convinces so many Americans that imports are evil—even as they continue to buy them every day, perhaps, like our friend, the retired union worker, unaware that they are imports at all. It is no wonder, then, that so many voters wrongly believe that trade hurts U.S. families when the hidden truth is that every consumer benefits enormously. This


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presents an opportunity for business organizations to restate the case for international trade in new terms. Issue advocacy, along with traditional lobbying techniques, will be an effective way to accomplish this. Even in heretofore protectionist communities, an aggressive public information campaign that explains the value of imports will make it easier for members of Congress to support free trade and particularly to oppose import restrictions. During political campaigns, business executives should make it abundantly clear that support will not be given to candidates who favor import limitations or social policy initiatives that obstruct the passage of pro-trade legislation. Still, there is an economic price to be paid for any excess. The United States consistently buys far more from other countries than it sells, and the resulting trade deficit (for services as well as for products) has reached record levels—a subject we will discuss presently. Import restrictions, whether on consumer or industrial goods, are selfdefeating because other countries retaliate by placing their own ceilings on American exports. The best way to deal with the trade deficit is by increasing U.S. sales abroad through additional global and bilateral trade agreements and removing limits of various kinds on American exports. Stimulating the vigor of the world economy and the ability of other countries to buy American goods and services creates jobs and strengthens the quality of life for everyone, both here and abroad. Most companies and their associations support a renewal of fast track legislation (recently renamed “trade promotion authority”) that would facilitate the president’s ability to negotiate the proposed Free Trade Area of the Americas, and trade expansion treaties with the EU and other countries, and to expand global commerce in additional ways. It is time to take still additional steps to advance trade: • Trade embargoes need to be abandoned as a rarely effective and harmful instrument of U.S. policy abroad. It is usually the voiceless people of these countries rather than their generally unelected leaders who are hurt. More to the point, the brunt of export embargoes falls on U.S. companies and their employees—and import embargoes damage the interests of U.S. consumers. The Cuban embargo is an acute example. Over a period of four decades, it has failed to dislodge the Castro regime, and prevented the subverting effects of American products and culture from reaching Cuban shores. • U.S. anti-dumping laws and related import restrictions should be repealed. Typically administered in ways that protect inefficient domestic industries, these laws inhibit productivity improvements, harm importing companies and, above all, penalize American consumers.

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MODEL ISSUE AD MESSAGES: International Trade Ad #1 International trade is the engine that drives the growth of the American economy. Everyone knows that more exports mean more jobs for U.S. workers. What we sometimes don’t think about is the value of imports to every American consumer. Imports increase consumer selection, often at lower cost, for products we buy in supermarkets and other stores every day. Imports give American families a wider choice at a better price of everything from cars to computers, from mobile phones to television sets; and imports create jobs, too. Just ask any retailer. Think about all that the next time you hear someone try to tell you that imports are bad for America. International Trade Ad #2 We all know that international trade is what helps keep the American economy growing, and we know that exports to other countries increase sales and create more jobs for our workers. But sometimes we forget how important imports are to our economy. Imports increase competition, so that American companies figure out how to make better products at a cheaper price. That helps every family of consumers in the country. Imports also create more jobs for Americans—just ask the people in supermarkets and other stores who sell the products we buy from other countries. And by buying more of their products, those other countries have more money to spend to buy our exports. So everyone gains from international trade. International Trade Ad #3 Some people try to tell us that exports to other countries are good for America, but that it’s bad when we buy products made in other countries. But when we think about that argument for a minute, we realize it’s nonsense. For one thing, if we didn’t buy their products, they wouldn’t have the money to buy ours. For another thing, competition from imports has helped U.S. companies make better products at cheaper prices, like cars and computers. It’s true that some workers are hurt by competition, and the U.S. has to do a better job retraining workers. We also need to work with other countries to get them to improve their working conditions and protection of the environment. But a lot of American workers wouldn’t have jobs if it weren’t for imports. So let’s not throw the baby out with the bath water. Every consumer in America gains from imports. Think about all that the next time you hear someone try to tell you that imports are bad for America.


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NATIONAL SAVINGS AND CAPITAL FORMATION Economists have long bemoaned Americans’ low savings rate, well below that of people in most other industrial countries. Rarely above one percent of personal disposable income in recent decades, in 1999 the savings rate actually turned negative as families, experiencing an almost addictive “high” on the wealth effect of a booming stock market borrowed and spent enthusiastically and boisterously. Even after the stock market slumped in 2000, consumer spending hardly faltered, and remained high into 2001. The savings rate remained accordingly low. The upside, of course, is that this high consumer spending helped drive the economic expansion to record lengths. The downside, though, is that the percentage of family income available for savings is at best tiny in most years. Cuts in interest and tax rates are intended to maintain economic growth, but a healthy economy also requires savings for capital investments. The plain fact is that the American economy does not generate all the capital its future growth and productivity improvements will require. The problem has been disguised because the robustness of the U.S. economy has attracted substantial investments from other countries. The consequence is that capital formation has become increasingly dependent on foreign investment. An analysis by the International Monetary Fund6 found that in March 2000, foreign investors held: • • • •

7 percent of all U.S. corporate stocks 20 percent of U.S. corporate bonds 35 percent of publicly held federal debt 5 to 8 percent of direct investments (i.e., ownership of U.S. companies, real estate, etc.)

International economist C. Fred Bergsten observes that these foreign investors “hold more than $10 trillion in dollar assets, much of which could be shifted into European or other non–U.S. investments at short notice. Americans would join any rush out of the dollar.”7 That is a substantial portion of the American economy, placed here because of the attractiveness and growth of the U.S. economy relative to other countries. But if other areas of the world economy begin to outshine the United States, much of that foreign investment could be withdrawn as quickly as it appeared. Says Robert J. Samuelson, one of the nation’s premier economic journalists, “The magnitude of capital inflows into the United States ought to give us pause. They could reflect America’s genuine strengths—or represent speculative excess. We have ventured into unexplored territory. Hardly anyone truly understands today’s rapidly changing world of global

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finance. Even for the United States, what goes around could come around.”8 What could “come around,” if an outflow was severe enough, could include a sharply declining dollar, inflation, higher interest rates, a depressed stock market, and possible recession. The extent to which even major international currencies can be whipsawed by global financiers is illustrated by the plight of the euro, which plummeted in value against the dollar, dropping about 25 percent in less than two years after its introduction in January 1999. Japan’s yen and other Asian currencies have had their own woes at various times, as has Mexico’s peso. In each case, joint international action by major governments intervened in the markets to bolster the troubled currencies, but in a global economy that moves money around at substantially more than $1 trillion a day, no one knows how much intervention is enough and there is much argument about its desirability. Almost every month, a recurring headline appears in the nation’s press: “Balance of Payments Deficit Reaches Record Levels.” The U.S. current account imbalance (imports and interest payments minus exports and interest receipts) doubled in size between 1997 and 2000. This deficit is now over 4 percent of GDP, larger than that of any other major economy. In the short term, the trade deficit may actually have some economic value. Professor Robert G. Murphy of Boston College (a former Clinton administration official at the Council of Economic Advisers) sees four possible benefits: (1) The trade imbalance helps finance increased domestic investment; (2) it keeps the economy in check because high import levels help meet part of strong business and consumer demand; (3) those imports have aided in keeping prices down; (4) increased foreign competition has been a spur to domestic productivity improvements.9 Those benefits are important, as we discussed above, but there are still grave long-term dangers. The nation’s growing trade deficits cannot be sustained indefinitely without doing damage to the nation’s financial position. Says another economist, Catherine L. Mann of the Institute for International Economics, “the United States cannot forever consume beyond its long-term means; nor will its financial investments always be so favored.”10 A study of 10 other advanced economies by Mann found that foreign investors began withdrawing their money when the current account deficit reached 4.2 percent of GDP,11 about where the U.S. is today. Perhaps foreign investors might choose to disregard Mann’s danger point in the belief that America’s technology-driven improvements in productivity can keep the U.S. economy growing without risk, despite its rising trade imbalance. As Samuelson points out, no one knows how foreign investors will react, or when, but neither does anyone believe that the current account deficit can increase indefinitely without risk to the economy. A government commission looked at the problem in 2000 without reaching any conclusions


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about what to do about it. Clearly, though, if a way is not found to spur exports significantly, protectionist pressures to cut the deficit by limiting imports will only increase. The latter step would have grave consequences for the United States and the world economy. Import restrictions would inevitably trigger protectionist countermeasures in other countries, reducing our ability to export and potentially scaling back economic growth throughout the global economy. At the very least, protectionist actions by the United States would only increase the likelihood that foreign capital would be withdrawn. Even without domestic import restrictions, a sharply falling dollar and resurgent economies in Europe and Asia could increase the risk that foreign investments could be withdrawn and placed elsewhere. Investors place their money where the returns are most appealing relative to the risks involved. As long as the American economy is outproducing those of Europe and Asia and the economic risk of investing here is considered low, the United States will attract and retain investments from abroad; but if the risk–return ratio begins to favor other investment opportunities, at least a portion of the money invested here could flow elsewhere. This is particularly true of so-called “hot money” (e.g., stocks, bonds, commodity and currency futures, etc.) that can be quickly and easily liquidated. “Hot money” movements were a major factor in the financial crises that beset the Mexican and Asian economies during the 1990s. External circumstances beyond U.S. control could also be factors. Japanese investors for example, who own a substantial portion of U.S. assets, could be motivated to repatriate their investments to finance reconstruction costs if Japan suffered a particularly severe internal disaster like the earthquakes to which it is prone. Another cause could be Japan’s rapidly aging population: “As it becomes older it will not only no longer need to save, so to speak, for its old age, but it will positively need to spend the accumulated savings . . . using the funds to help pay the pensions of the large numbers of elderly people.”12 Some of that money might have to come out of Japanese investments here. The point is that foreign investors are always at liberty to sell their U.S. assets and equities for their own reasons and in their own time. That, in turn, could result not only in a falling stock market but also in higher inflation and higher interest rates. In theory, the Treasury Department could freeze foreign assets to prevent or delay their repatriation. In practice, that would wreck the international financial system and jeopardize the liquidity of America’s own overseas investments. Averting such hazards requires two essential developments. First, U.S. exports must be increased. That requires higher levels of economic growth in Europe, Japan, and the world economy overall so that they can afford to buy more American products and services. (Ironically, a somewhat

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lower dollar would reduce the costliness of U.S. exports in world markets.) It also requires permanent efforts to reduce barriers to trade throughout the world. The United States needs to be perpetually aggressive in leading the way toward further trade liberalization. The second essential development is a significantly higher level of personal savings by American families. This would reduce dependence on imported capital while also strengthening domestic capital resources, both for reinvestment and as insurance against future economic turndowns. Putting more money into savings means a modest reduction of personal consumption levels, a short-term risk during economic downturns, but one with substantial long-term benefits. Many American families recognize the value of savings as self-evident: for home purchase, children’s college education, retirement, and rainy-day necessities. A recent study found that the simple fact of saving is a more important factor in accumulating long-term wealth than where the money is invested and even family income.13 “It’s clear that some people with low incomes do save relatively large amounts and that some people with high incomes don’t,” one of the study’s authors told a reporter.14 The savers are self-motivated. The non-savers are not, choosing to spend whatever they earn. Why that is true needs more study, although a reasonable guess is that a factor is a consuming nation’s propensity for self-indulgence, letting tomorrow take care of itself. It also seems reasonable that more people would save if they were given financial incentives to do so. The success of tax-deferred and employersubsidized savings plans is testimony to that. The converse is also true. Americans do not have a propensity to save without incentives. As former Treasury Secretary Lawrence Summers noted, “Half of American families on the brink of retirement had financial assets valued at less than $40,000 in 1998. And for those not as close to retirement, financial assets were even lower.” He went on to say that more than 50 million people lacked any retirement savings at all.15 (Of course, that does not take into account pension plans usually funded wholly by employers or Social Security.) Part of our national disinclination to save may be our cultural preference to acquire as many of the good things of life as we can at the earliest possible moment, in part via high credit card debt. Another part, though, is the relative lack of economic incentives to save—which is precisely the point: Americans tend not to save unless they are induced to do so, and current inducements are sparse. U.S. tax policy, which provides economic incentives for a vast variety of other purposes, is in the main a disincentive toward personal savings and investments. Populist bias built into the law and into most tax proposals provides few savings inducements even for families making $50– 75,000 a year, hardly a level of extravagant wealth today. IRA and 401(k)


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investments will be rising during this decade under the 2001 tax cut, but still not to desirable levels; and while capital gains tax rates have been reduced somewhat in recent years, they are low only in comparison to the rates at which ordinary income is taxed. The knowledge that up to 35 percent of investment and interest income and one-fifth of any capital gains must be turned over to the tax collector is not much of an investment incentive; and those rates do not count state taxes, which generally tax capital gains at the same rates as ordinary income. Of course, those tax penalties are lower for middle- and low-income earners, but they still exist, and the people with the greatest individual ability to add to the nation’s savings are those who are taxed at the highest rates. “As tax rates on the nation’s savers have risen sharply, the private-sector savings rate has declined precipitously,” wrote Lawrence B. Lindsey (before he was named President Bush’s economic adviser). “We are more dependent on imported capital today than at any point in the 20th century. Yet reforms to our tax system designed to reverse this trend are considered ‘risky’.”16 Nevertheless, the 2001 tax cuts phase in very slowly and are only a modest savings inducement. In fact, tax policy adds further penalties on successful savers once they start to reap the benefits of the financial sacrifices they made earlier. Retirees who supplement their pension and Social Security checks with income from the investments they made when they were younger are taxed on that income at the same rates they would pay if they were still in the workforce. Taxed on earned income during their working years, taxed once more on the dividends and capital gains they received on their savings and investments during those years, they find themselves taxed yet again when they convert a portion of their financial assets into retirement income. The “reward” for the virtuous behavior of their years of earnings and savings is punitive taxation in retirement. The justification for part of these taxes is to enable the state to provide a social safety net, apart from Social Security, for those who could not or would not save for their own retirement or other needs, but the effect is a savings disincentive. Why bother saving, deferring all those gratifications of the good life, if government is prepared to bail you out in the end? “To what extent do we wish to be a society in which people manage their own finances, keeping the winnings and living with the consequences of failure, and to what extent do we wish to penalize the winners to repay the losers?”17 For the most part, public policy has continued to avoid confronting this fundamental issue, largely because there are so many effective interest groups advocating for the poor and the needy and so few taking up the cause of the savers. Even the AARP, which represents the nation’s retirees, is largely silent on this question. Apart from the generation of government revenue, the focus of tax

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policy since the New Deal has been the redistribution of income through progressive income tax rates—to the point that tax proposals are often debated today not on their economic benefits but largely on the question of “fairness,” a word that has been turned on its head to mean that those who pay the highest taxes should get back the smallest percentage of tax cuts and public services. Incentives to stimulate personal savings and capital formation should replace income redistribution and “tax fairness” as priority goals of tax policy. The mind-set of many lawmakers and citizens still seems to be a product of the Great Depression, an economic crisis that ended six decades ago. Ours is a very different economy today, with regulatory protections and social safety nets that did not exist prior to the New Deal. The need now is for tax policies that will strengthen the nation’s ability to invest for the future. Business organizations can take the lead through a sustained issue advocacy campaign to advocate tax changes that will expand incentives for personal savings and investment. Enlarging national wealth creates more for everyone. A larger rate of personal savings will generate increased capital from domestic sources, which in turn can create more and better-paying jobs throughout society. At the same time, it is in the national interest to encourage people at all income levels to save and invest more, not only for economic reasons, but because broad ownership of economic assets fosters social stability. Collectively, middle-class families in particular are the greatest potential source of tax-incented new savings capital. For almost all middle-class Americans, current tax policy actively promotes only two forms of personal investment: home ownership (through deductions for real estate taxes and mortgage interest) and, to a very limited extent, capped retirement savings plans. Apart from these two incentives, for the typical American family all income is taxed regardless of whether the money is consumed or saved. Indeed, the effect of the tax system is actually to penalize savings because investment and interest income is incremental earnings that sometimes throw people into tax brackets that are higher than the rates they would pay on salary and wage income alone—a problem worsened by the “Alternative Minimum Tax” (AMT), which limits deductions for upper-income taxpayers. Providing the middle class with greater incentives to save will require new tax policies and a new way of thinking about investment income. One possible approach is a flat income tax—as Steve Forbes proposed in two unsuccessful presidential campaigns—but that is unlikely to stimulate savings by families whose current tax bracket is lower than the flat rate. A more appealing alternative would be a consumption tax that would effectively exempt money saved, but that approach to tax reform currently lacks broad political support. It is not necessary, however, to leap to either a flat tax or a consumption


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tax to provide incentives for personal savings. There are more modest tax changes that could be instituted to stimulate increased savings. The principle should be that taxpayers are rewarded for saving, not discouraged from it as they are through the existing tax system. Possible tax changes might therefore include one or more of the following: 1. Increasing annual IRA contributions (Roth and traditional) to at least $10,000 per person—with this amount indexed to future rates of inflation. The ceilings on investments in 401(k) and similar contributory retirement plans should also be raised to, perhaps, $25,000 per year and indexed thereafter. 2. Taxing income at the lowest rate if it is saved rather than consumed, regardless of the tax bracket in which the individual’s or family’s total income falls. An alternative is to exempt saved income altogether, taxing it at capital gains rates when it is ultimately cashed out. 3. Substantially reducing personal income taxes on investment income (including interest) and capital gains if the amount is reinvested. 4. Eliminating the system of double-taxation of corporate dividends. Let’s examine each of these proposals. 1. Although there is evidence that at least some of the money put into IRA plans is not new savings but is simply transferred from other assets, this might be less true if the tax-deferred ceiling on IRA investments (or “contributions,” as the IRS quaintly calls them) were raised; the higher the cap, the greater the likelihood that IRAs could provide new sources of capital. By encouraging families to put aside more money for retirement, some of the long-term pressures on the Social Security System might be eased. Expanded incentives for educational and medical savings plans, which are tax-deferred arrangements akin to IRAs, would also boost investment capital. 2. Reducing the tax rates on income that is saved rather than spent— and on reinvested dividends and interest—would create incentives for middle-class Americans to set aside substantial additional sums for retirement, down payments on home purchases, children’s educational expenses, high medical costs, and other personal needs. 3. When withdrawn for consumption purposes, interest, dividends, and capital gains would be taxed, just as IRA withdrawals eventually are, but in the meantime savers would have reaped the benefits of tax deferral and the economy would gain from a whole new pool of investment capital. As a possible concession to populists whose greatest nightmare seems to be that the wealthy may somehow escape maximum taxation, the annual

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amount eligible for this savings incentive could be limited to $25,000 or $50,000 per person and twice those amounts per couple. This would focus the benefits on middle- and upper-middle-income families, who are the largest aggregate source of potential new investment capital. 4. Ending double taxation of corporate dividends would also contribute to increased national savings. Currently, corporations pay taxes on their net income. Dividends paid to shareholders out of post-tax corporate net income are then taxed again. If companies were credited with the amounts of their dividends, they could either pay higher dividends or have more money to reinvest in the business. Alternatively, shareholders’ dividends could be exempted from taxation—possibly by requiring that the money be reinvested. (This might disadvantage individuals who depend on stock dividends as an important income source, but they would be no worse off than they now are and would always have the option of transferring the stock assets into tax-free bonds.) Although these proposals would reduce tax collections in the short term, over the long haul they would expand both the economy and tax revenues. More important, they would generate new sources of domestic capital for the economy, and stimulate the habit of personal savings and investment. Undoubtedly, banks, mutual funds, and other financial institutions would advertise these new incentives to attract additional revenue, thereby adding to savings stimuli. Boosting the national savings rate through proposals like these is manifestly in the nation’s interest. The country would become more selfsufficient for capital, and less exposed to the risks of a dollar sliding in world financial markets. Individual companies would have access to increased investment capital. Increased demand for stocks would also be likely to boost share prices, thereby adding still further to the nation’s wealth. Ultimately, American families would be enabled to become more self-sufficient and less dependent on public subsidies or personal debt for their retirement needs, children’s education, and other major costs. Educating the public about the importance of boosting the savings rate, and promoting voter support for the tax changes necessary to bring this about, is a natural fit for long-term issue advertising. While all industries would gain from an enlarged pool of investment capital, there should be an especial attraction for financial companies that would provide the vehicles for increased personal savings. MODEL ISSUE AD MESSAGES: National Savings Ad #1 It’s not easy to save money. The government takes so much in taxes that there usually isn’t much left after we pay for food, housing, and the other necessities of life. But saving for the future is important


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for all of us—for a down payment on a house, for the kids’ education, and for our retirement. It’s important to the country, too, because if all of us save and invest more, the economy will grow and create more, better-paying jobs. The government has to help us boost our savings—by letting us put more money into IRAs and employer-matched savings plans at work, and by cutting taxes on the income we save. We’d all save more if we paid lower taxes on money before we save it and on the dividends and capital gains our savings earn. Tell your congressman that Washington needs to do a better job in giving every family incentives to save more. Each of us will be better off, and so will the country.

National Savings Ad #2 We all want to save more—for a new house, to send the kids to college, for a better life when we retire. The government says it wants us to save more because that means more money to invest in the economy, creating additional, better-paying jobs for Americans. But the government actually makes it harder for us to save—because it taxes income we save at the same rate as the money we spend. If taxes were lower on the money we save, and on the dividends and capital gains our savings earn, we’d all work harder to save more. We’d all be better off, and so would the country. Even the government would gain, because if the economy grows faster, that’s more taxes for Uncle Sam. Tell your congressman that Washington needs to do a better job in giving every family incentives to save more. It’s just good economics for your family, and for America. SOCIAL SECURITY AND IMMIGRATION “We are in the process of becoming an old people’s home and an industrial museum,” an economist told a reporter, adding that the low birth rate and heavy welfare costs are “a ticking time bomb that frightens politicians and voters so much that no one is willing to touch it.”18 As it happens, the economist is a German, speaking of his own country. It may not be that many more years, though, before American economists will say the same thing about the United States, and indeed some already are. The situation is prevalent and worsening throughout the industrialized world as both birthrates and mortality rates decline. This looming crisis will be worse in Europe and Japan because their immigration policies are much more restrictive than those of the United States (but see below).

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Nevertheless, America’s demographic profile is growing inexorably older and grayer. Today, for each citizen 65 and over there are two children under 18; but in 30 years there will be nearly as many seniors as children. People over 85 are the fastest growing age segment in the population, and they are predominantly female. More significant to the Social Security problem are two statistics: the growth of the retired population, and the ratio of workers (who pay the taxes for Social Security benefits) to retirees (who receive them). The working-age population (age 20 to 64) will drop as a percentage of the national total, while the population over 65 will soar, both absolutely and in percentage terms. In 30 years or so, one American in five will be in the 65-plus category, compared to about 13 percent today. There will be fewer than three workers for each retiree, compared to nearly five workers per retiree today—which is to say that a significantly smaller percentage of workers will be around to be taxed in order to finance the benefits paid to an ever-larger number and percentage of retirees. The aging of the baby boomers and progressive improvements in geriatric medicine are the principal causes of this looming emergency. The country not only has more people nearing retirement, but they also will live longer. Within the next decade, the “boomers” will start to reach retirement age, creating a potential demographic, economic, and social crisis unparalleled in our history. As health care for the aged continues to advance, the voting-age population will comprise three, perhaps even four generations, with seniors consuming an ever-growing share of social benefit program costs. Whatever reforms may be made to Social Security and Medicare in the near future, the costs of these programs will still consume huge shares of national wealth—growing by 2030 to more than half of federal expenditures from 40 percent now. These costs will rise to about 17 percent of gross domestic product (GDP) by 2030, up from 10 percent today, with no resulting improvements in national productivity to offset them. Not only will the federal government go back into debt as a result, but in fact cumulative debt could amount to 60 percent of GDP by that year. Even sustained (and unparalleled) increases in GDP will not fund all these costs, if only because economic growth will raise wages and therefore the level of future benefits. Improvements in national savings would help, but this would require, first, substantial increases in the personal savings rate (now at about zero or less) and, second, paying off the national debt. Current projections of federal budget surpluses indicate elimination of the national debt within this decade, but the burden of providing for a rapidly aging population could well put the government back into deficit and debt not long thereafter. A sustained major recession could bring the budget deficit back even sooner. How then can the nation pay for the escalating retirement costs of a


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mushrooming aged population? Because the Social Security and Medicare programs are financed on a pay-as-you-go basis, they will have to be funded by an ever-higher tax burden on the workforce unless benefits are reduced, a most unlikely occurrence. The Social Security Trust Fund will be in deficit by 2015 and run through the last of its reserves 20 years later. Unreformed, the Medicare fund will be broke by 2025. President Bush’s proposal to allow workers the chance to use some of their Social Security taxes for private sector investments as a way to bolster savings for retirement would bolster seniors’ income, but does not alter demographic realities, or the stresses on the Social Security Trust Fund those realities will bring to bear. Even if general revenues were eventually required to pay social benefits for the elderly—an option that successive congresses and administrations have resolutely opposed since Social Security’s adoption by the New Deal—the costs would consume steadily increasing percentages of the federal budget. This share of public expenditures would be enormous even if the government surpluses continue. If the budget lapses into deficit again over the next several decades, the costs to other federal programs would be horrendous. Any of these outcomes would eventually require large and probably painful tax increases, whether in the income tax or the payroll tax. Increased taxes on working families to support rising costs of social insurance programs for the aged would establish intergenerational conflict as the overriding issue in American politics. It is not difficult to imagine young middle-class voters vehemently protesting higher taxes and calling for cuts in elderly benefits at the same time that senior citizens are demanding that other federal programs be extinguished to enable their benefits to continue. Political campaigns fought over this issue would be bitter indeed. This is not the place for a detailed discussion of options for change but, at the risk of oversimplification, there are only five ways in which this dilemma can be resolved. These alternatives are not mutually exclusive, and some combination of them could be adopted. 1. Raise the retirement age. The eligible age for full Social Security benefits is now scheduled to rise from 65 to 67 over the next few years. Raising it to 70 or higher is not an option workers close to retirement are likely to support—indeed the idea was rejected by both Democratic and Republican presidential candidates in 2000 (although the Japanese prime minister floated the idea for his country). Whether workers now under, say, age 50 would accept such a change is, quite literally, a highly debatable proposition. 2. Reduce benefits. There are any number of ways in which benefits could be lessened—including an across-the-board reduction, benefit cuts for persons below a particular age, or a limit on the inflation escalator,

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among others. Any such step would trigger a vast political uproar. Senior citizens, always the most politically involved generational cohort, have waged open revolt whenever Congress has tried to trim benefits. (The then-chairman of the House Ways and Means Committee was chased down a Chicago street some years ago by a crowd of seniors irate over Medicare amendments that had just been enacted; the changes were promptly repealed.) The baby boomers, famous throughout their adult years for their self-indulgencies, seem unlikely to be the first group of seniors to accept reductions in their retirement benefits. 3. Means testing. A variation of a cut in benefits is to reduce, or conceivably even eliminate, payments to retirees whose total income from pensions and investments is over some set amount. The presumable justification for this change is that this group of seniors is the one least dependent on their Social Security checks (and perhaps their Medicare reimbursements), thereby conserving resources for those who are needier. The argument in opposition is that even relatively affluent retirees paid substantial sums in Social Security and Medicare taxes during their working years, and that cutting their benefits breaks the government’s promise to treat them like any other pensioners. Applying a means test would also label Social Security as a welfare program, something Social Security’s advocates have always denied. Whether, and how hard, advocacy groups for the aged would defend continued benefits for pensioners who are better off is another issue for the future. 4. Raise taxes. The total tax burden now represents the highest percentage of GDP since World War II. A substantial percentage of wage earners already pay at least as much in Social Security and Medicare taxes as they do in income taxes. Permanently subsidizing the Social Security and Medicare trust funds out of general federal revenues means a reduction either in other public expenditures or in funds for future tax cuts. It is hard to imagine that voters below retirement age would happily embrace any of these choices. Neither would American employers who pay half of Social Security taxes, if it means their costs would escalate. 5. Increase the labor force. Because the natural rate of population increase will not produce a workforce adequate in size to the financial demands placed on it by the expanding costs of benefits for retirees, there is only one way to increase the number of tax-paying workers. That is increased immigration. Substantially increasing the number of immigrants permitted into the United States poses a number of problems of its own, but it is the only way to expand the base of tax-paying workers to fund retirees’ public costs.


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The Immigration Solution It is ironic that a nation of immigrants has been so divided by immigration policy for so much of its history. From the Know-Nothings of the 19th century to the supporters of sometime presidential candidate Patrick Buchanan, immigration has been a source of recurring controversy in our national politics. The United States enacted no immigration restrictions during its first century but, beginning in 1875, barred the poor, the physically handicapped, and those engaged in immoral pursuits. Legislation establishing national and ethnic limitations and quotas was passed in 1882 and again during the 1920s. Nonetheless, millions of immigrants continued to arrive, primarily from European countries, joining those of African origin who had been brought here involuntarily during the era of slavery. From the 1860s through the 1920s, immigrants added an average of almost 14 percent to the population each decade. Immigration slowed after that, averaging about half that rate per decade from 1930 to the present. In fiscal year 1998, the United States accepted 660,000 legal immigrants; illegal immigrants probably added another 500,000, mostly Latinos. The United States may take in more immigrants numerically than any other country, but not proportionally. Less than 10 percent of the people living in this country were born abroad. By contrast, the percentage of the population that is foreign or foreign-born is over 21 percent in Australia, 19 percent in Switzerland, and more than 17 percent in Canada. Austria, Germany, and Belgium have foreign populations whose size, proportionally, approaches that of the United States. Among industrialized countries, Japan ranks at the bottom with barely one percent of its residents born elsewhere.19 These countries embrace immigration with varying degrees of enthusiasm. Canada has long welcomed immigrants, though it has tended to prefer those with education and needed skills. Japan resists most permanent newcomers. France has experienced social problems because of large numbers of North African immigrants. Germany has a large Turkish population. There have been public protests and heated political controversies there and in Austria over immigration policies. Both Germanic countries are concerned about waves of migrants from the poorer nations of Eastern Europe, a flow likely to increase after those states join the European Union. Notwithstanding America’s immigration traditions, patterns of resistance and protest have long been exhibited in the United States. Each new wave of immigration has been accompanied by vehement objections from groups that had arrived earlier, protesting the economic and social competition the newcomers presented and ignoring the “dilution of the

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American character” they or their forebears had themselves once produced. Franklin Roosevelt rebutted the protesters during the Great Depression of the 1930s when he addressed a convention of the Daughters of the American Revolution, an organization that strongly supported tough restrictions on the number of newcomers allowed to enter this country. The president’s entire speech was encapsulated in his opening three words: “My fellow immigrants . . .”. There is an evening boat tour that every American should be compelled to take. The ship cruises down the Hudson River along Manhattan’s west side into New York Bay and up into the East River, then turns around for the return trip. By the time it has again moved into the bay, it is dusk. As the boat nears the Statue of Liberty, the torch she holds aloft is now lit. Her color, still visible in the twilight, is the bold hue of copper oxide, green with promise. She stands there, majestic and beckoning, as she has for more than a century, a symbol of welcome and the pursuit of a new life, beheld until the age of aviation by untold numbers of immigrants to these shores from the east. She remains that symbol even to more recent arrivals whose first stop is not Ellis Island, but an airport in California or an immigration station in Texas or Arizona or a beach in South Florida— and even to those newcomers who consider a conversation with an immigration agent a formality greatly to be avoided. Lady Liberty greeted the author’s grandparents a century ago and, later, my wife’s parents. In all likelihood, she welcomed the progenitors of people who today prefer to shun the “wretched refuse” of other lands. How easy it is to forget that the heritage of America is a heritage of immigrants and their children, “people not like us,” and yet people who made it possible for “us” to be here. We tend to think of immigrants as people who all go to the bottom of the economic ladder. This is often true, but hardly always. Some of the greatest names in American science, including Albert Einstein, were immigrants. The conductors of many of the nation’s great symphony orchestras are naturalized Americans. Corporate titans from steel industrialist (and philanthropist) Andrew Carnegie to Intel’s Andrew Grove, Rupert Murdoch of News Corporation, and the late Roberto Goizueta of CocaCola were all born abroad. Despite all this, the nativist movement, the cause that would exclude all those not born here, has been a force in America for more than 150 years, and undoubtedly will remain one for decades to come. Unquestionably then, widening the gates to new immigrants will be a burning issue of the 21st century. Yet, putting aside all questions of history, cultural heritage, and social values, there is simply no sound alternative other than immigration to the economic stresses this country will face in the not-so-distant future. (A theoretical alternative to the immigration option has been


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suggested—to encourage companies to relocate plants and facilities to other countries, but to tax them as if their employees were all domestic workers—but this would create a huge political uproar among both U.S. employers and the labor unions representing affected workers.) The business community has many vital stakes in resolving the immigration dilemma. The lesser problem, already hurting high-tech companies, is a domestic shortage of programmers and other skilled workers. The greater quandary, however, is that even with reasonable increases in productivity but without increased immigration, a labor force shrinking in relation to the size of the future economy will have severe economic consequences. These include not only the financial demands of increased retirement costs, but also the specter of escalating labor shortages and therefore wages, high inflation, and a possible depression as the economy implodes. Immigration is as critical to the nation’s future as is the global economy. Interest groups already inclined to turn their backs on the global marketplace are unlikely to support increased rates of immigration, although the AFL-CIO and some of its member unions have been a bit more moderate on this issue recently. Broadening immigration policy will require aggressive business leadership in explaining the issue over a period of years to employees, voters, and public policy makers. Business leadership will also be needed to minimize job dislocations, ethnic and racial divisiveness, and economic disparities potentially aggravating classconsciousness. Immigration need not and should not be expanded willy-nilly. Public policy can avoid the perennial dilemma that many new immigrants tend to come in at the bottom of the economic ladder, often living in conditions of poverty as Americans define it, if not as measured in the countries they have left. It is not unreasonable to require that immigrants have skills that are in short supply in the United States—as the “H1B” visa program now does for potential immigrants with technical capabilities—or at least that they be trainable in those skills. Germany has already taken this step. People accompanying qualified immigrants could perhaps be limited to their immediate families (spouses and children only) and not followed by parents and every distant relative, as current policy permits. Canada has dealt with this issue, and European nations are trying to. So can we. Cultural problems must also be anticipated and tackled. America is the product of the varied cultural values waves of immigrants have brought to our shores. For all the moves toward ethnic consciousness, the melting pot endures. But the nation cannot survive in anything like its present form if it becomes a polylingual society in which one group cannot communicate with another. Multilingualism may work in Switzerland and Belgium, but it has not worked in North America; the social and political stresses arising from Canada’s unsolved Quebec problem teach a painful

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lesson. A new immigration policy must mandate English as this country’s only official language, and new immigrants must agree to learn it and be given every opportunity to do so. At the same time, though, the social skills of all children, whether native-born or of immigrant parentage, will be greatly enhanced by requiring them to learn standard English plus a second language—not just in high school but in the earliest grades when the capability to become multilingual is strongest. The ability to speak several languages will be an enormous asset to a new generation of Americans participating in and leading the global economy of the 21st century. Only business has the resources and the stature to take to the airways, the print media, and the Internet with the message that without greater immigration, economic disaster lurks. Through expanded employee and community communications, issue advocacy, and the other techniques discussed in this book, business enterprises and their executives can lead the country out of its demographic and Social Security dilemma. MODEL ISSUE AD MESSAGES: Social Security and Immigration Ad #1 Nobody wants to pay a whole lot more in taxes, and nobody wants to cut Social Security and Medicare benefits for our senior citizens. But we’ll have to do one or the other when the money to pay for those programs runs out in the future. The politicians don’t want to tell you that, so right now they’re just offering band-aids. What’s the answer? More workers to spread the cost of benefits for older people. We can get the extra taxpayers America needs to take care of our parents and grandparents by bringing in more wage earners from other countries. Tell your senators and congressmen that we need to open up immigration for more workers from abroad. That’s the way to be sure older Americans keep the benefits they need without the rest of us going broke through higher taxes. Social Security and Immigration Ad #2 America is a nation of immigrants. Almost all our families came here from other countries, and some of us were born abroad. Immigration is part of our country’s tradition and legacy. Inviting more people to come to America is a way to take care of a serious national problem we’ll all have to face soon—how to pay for the growing costs of Social Security and Medicare. Higher levels of immigration means more workers, and more workers means that we’ll all be taxed less and still make sure that Social Security and Medicare benefits will be there for us when we need them.


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Tell your senators and congressmen that we need to open up immigration for more workers from abroad. That’s the way to be sure older Americans keep the benefits they need without the rest of us going broke through higher taxes. CAMPAIGN FINANCE If free and fair elections are the strength of democracy, their financing is its curse. At one time or another, all of the great democracies have been beset by campaign finance scandals. None has developed a system free of excess or corruption, let alone a model for others, nor is there any consistent pattern of campaign funding among the democracies:20 • Britain: Political parties are funded by membership dues plus contributions that may be made by individuals, corporations, and unions; there is no public disclosure requirement. Candidates are limited in what they may spend, but not parties, which also receive free television time. • Japan: Candidates and parties are funded by both individuals and corporations. Contribution limits are huge: Individuals can give candidates a total of over $80,000 and can give parties twice that much. Corporate limits are scaled by the size of the company and can top $800,000. Disclosure requirements are weak and easily evaded. • Canada: Political spending is limited but contributions are not, the opposite of U.S. law. Corporate, union, and individual contributions are all permitted. Tax credits provide individuals with incentives to contribute. • Germany: Individuals, unions, and corporations may all contribute. Most financing is through the parties, which also receive substantial public funding plus free television time. Disclosure requirements are weak, but revelation of secret contributions solicited on behalf of his party by former Chancellor Helmut Kohl demolished his reputation after he left office. • Italy: Private political finance was replaced by a system of public funding that subsequently also was repealed. Enormous political scandals are endemic and continuous, to the point that major political parties have been destroyed. • United States: Contributions are limited in federal elections (more so than in any major country) but spending is not. Only individuals and political action committees may give directly to candidates and parties. Unions and corporations are prohibited from contributing

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directly, but devices outside the regulated system enable them, and other groups, to give more and more money (so-called “soft money”) to parties and even candidates. Disclosure requirements for regulated (“hard”) money are stringent but not particularly timely—and for soft money, weak or non-existent. Every state also has its own campaign finance law, no two of them the same. No one disputes that political campaigns in the United States are costly, and get more expensive with each new election cycle. Rough estimates of total spending for the 2000 election are perhaps $3 billion in public, hard, and soft money for the presidential campaign, and something on the order of $2 to $3 billion in toto for congressional campaigns, state party expenditures, and interest group spending for issue advocacy, membership and employee communications, get-out-the-vote drives, and so on—for an approximate total of $5 to $6 billion. Not included are the costs of the postelection recount and legal fight in Florida. Much of that money is publicly disclosed, but much is not. Some people say that such totals are obscene and out of control, and require at the very least a ban on that portion of soft money subject to federal control. Others maintain that the growth of so much soft money is the result of arbitrarily low hard money contribution limits set by federal law 30 years ago and not raised since. Soft money, they argue, helps offset the consequent gross underfunding of candidates. It is worth noting that a substantial amount of soft money is given to state parties and is therefore not subject to federal control—and that federal court decisions have put spending for issue ads beyond the regulatory reach of Congress. Whatever Congress chooses to do, at least some kinds of soft money are here to stay. It is also worth adding to this campaign finance debate the thought that the costs of competitive elections in a country with nearly 300 million people are necessarily expensive—and may, in fact, actually be modest when compared with the advertising and marketing budgets for consumer products possessing rather trivial social value. On a per-voter basis, the 2000 campaign cost about the price of a tank of gas or two. The combined pre-convention fund-raising for Bush and Gore, including matching funds, was $321 million. A baseball player signed a contract for a quarter of a billion dollars. A single movie, Forrest Gump, grossed $330 million.21 How much is democracy worth? The history of campaign finance regulation in America is a checkered one. Like other democracies, the United States has never found a system of elections funding free from abuses and other problems. Scandals have produced “reforms” that then proved deficient in various ways, creating new problems that had not existed before and leading to still further “reforms.” In many respects, in fact, the regulation of political money has


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been an ongoing demonstration of the principal of unintended consequences; the alleged corrections of one era engendered the problems of the next. As Michael Armacost of the Brookings Institution has observed, “[O]bstacles to enacting constructive changes in the law remain daunting. Philosophical differences, partisan calculations, incumbent self-protection, and public disengagement have combined to frustrate recent efforts to patch the leaks that have sprung in our campaign finance system, and this round may prove as unproductive as the others.”22 “Leaks” is an apt metaphor. Money in politics behaves much like water under high pressure in a complex system of plumbing; plugging one set of leaks leads to others, as fluid funds squirt out of newly arisen weak points in the pipes. But like the Bourbons of France who learned nothing and forgot nothing, political “reformers” always have new plugs in hand, never able to accept that the entire system needs to be scrapped. It therefore seems inevitable that the issue of political finance will be around for a long time, as each new era seeks to cope with the aftermath of the last era’s attempted remedies. Perhaps it is time to try a deregulated system, but that will require a multiyear effort to alter public attitudes before Congress and major interest groups will be prepared to support such a revolutionary approach. Campaign finance is therefore another example of a macro-issue that offers great latitude and opportunity for long-term business leadership and issue advocacy. The origin of the current “water pressure” is the strict regime to regulate federal elections adopted in the 1970s, after the Watergate scandals. The defects in that system are fundamental and conceptual. The political reformers of that era, and the present one, believe that regulation and control are synonymous—that if campaign money is regulated tightly enough, its flow can be limited and directed toward only those outlets the regulatory system has authorized. What the experience of three decades of elections has shown is that this simple faith in the efficacy of regulation is unconnected to the realities of politics in a pluralistic democracy. Individuals and interest groups of all philosophical stripes and hues have legitimate points of view to express on issues, and want to be able to support the political parties and candidates who agree with them. These are healthy developments in the realm of First Amendment rights. Like Mark Twain’s comment about whisky, too much free speech is never enough. The law, however, severely limits the ability of these interests to help like-minded candidates with hard money. Just to give a single example, there has never been an increase, not even for inflation, in the limits on hard dollar contributions, even though they were low when they were set 30 years ago. In many, perhaps most, cases, the organizations behind issue advocacy campaigns therefore utilize them precisely because

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the strictures of the law and FEC regulations are so burdensome and unrealistic. The explosion in soft money has the same root cause. It is a fundamentally naı¨ve fallacy that regulation can somehow reduce the amounts of money individuals and interests want to inject into the political system. On the contrary, regulation will only divert political money into channels that regulation does not reach. If you seek the origins of today’s campaign finance problems, look no further than the “reforms” adopted in the 1970s to deal with the scandals of that era. In the words of political analyst Jonathan Rauch, “With the one important exception of disclosure, the 1970s system failed comprehensively. And it failed because it was built on a false premise, namely that sufficiently elaborate legalistic structures can chase private money from the public square. As with most quixotic efforts, many of the results have been perverse.”23 The creative uses of soft money and the extensive utilization of issue advocacy, including its application in political campaigns, are recent developments. Like so many of the other political problems well-intentioned reforms have produced, it is highly probable that neither of these innovations would have arisen had not FECA been so tightly constructed and administered. To return to the plumbing metaphor, the rise of both soft money and issue advocacy stems from the narrowness of the regulatory pipes and the “water pressure” produced by interest groups wanting to spend whatever they can to elect sympathetic public officials. A less constricted regulatory process might have allowed interests of both the right and the left greater latitude to participate in political campaigns without fracturing the system. Perhaps Congress can put some of the genies back in the bottle, but certainly not all. Soft money contributions to parties and candidates may be restricted, perhaps even abolished at the federal level. Federal courts, however, have upheld the right to make soft money expenditures by the parties and that includes the state parties through which much soft money flows. And the most important point of all is that the courts have repeatedly declared that issue advocacy is an expression of the constitutionally protected right of free speech that Congress may not tamper with at all. The entire debate about campaign finance reform therefore really boils down to a single question: Can political campaigns be regulated without infringing on the First Amendment’s protection of free speech? Advocates say it can—and, as Bill Bradley once urged, if it cannot, then the First Amendment should be changed. Bradley’s former Senate colleague and fellow Democrat, Daniel Patrick Moynihan, gave the appropriate response—that no campaign finance problems are so serious that they warrant tinkering with the First Amendment. Columnist Robert J. Samuelson explained the dilemma: “You can have effective contribution limits or free speech—but not both. All the confu-


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sions of campaign finance (‘issue advocacy,’ ‘soft money,’ ‘coordination’) aim to obscure the dilemma. The reason is simple: the First Amendment bars a choice. It requires free speech.”24 Not only have reform advocates ducked this dilemma, but so has the Supreme Court, most recently in its reaffirmation of its 1976 Buckley decision in a 2000 Missouri case. The Court continues to maintain, in essence, that the guarantees of free speech are not infringed by restrictions on citizens’ ability to put their money where their mouths are. This is what puts the political finance system under such enormous pressure. Perhaps the strongest (if politically incorrect) argument in favor of private financing of campaigns is that the candidates’ constant search for contributions forces them to expose themselves to the opinions, plaints, and needs of interest groups that the candidates might otherwise find all too easy to ignore. “To detach politicians from interest-group money is to detach them from interest groups, which is to detach them from reality.”25 It is healthy for the nation’s political elite to have to spend time listening to the points of view of a variety of interests, whether they are the Chamber of Commerce or the Sierra Club. Reformers respond that interest group contributions are intended to purchase access to candidates and lawmakers, which should be the rightful entitlement of every citizen. Perhaps so, in a perfect world, or in a very small country; but, given all the distracting competition for their time, most politicians need a bugle call to get their attention. Campaign contributions (and other forms of political support) provide the bugle. Public financing of presidential campaigns has been in force since the 1976 campaign. It is hard to defend it as a success. During the presidential primary period, candidates get federal dollars to match small contributions from individuals, but must agree to a complex system of spending limits. After the national party conventions (also publicly funded), the nominees theoretically rely totally on public financing, foregoing all private contributions and staying under established spending ceilings. In practice, however, the national parties can spend as much soft money as they can raise to run ads about the positions and records of the presidential candidates. So do all kinds of issue advocacy groups. George W. Bush and Steve Forbes declined to participate in the public financing system during the 2000 Republican primary election period, and raised all their money privately; Forbes largely out of his personal fortune and Bush by record-setting fund-raising successes. It is entirely possible that future major party candidates may also opt out of the general election subsidies; Ross Perot funded his 1992 and 1996 Reform Party campaigns with his own money. On the Democratic side, Gore participated in the pre-convention matching-fund program of presidential public financing and, although he, too, broke all previous fund-raising records, his total did not approach the $100 million Bush collected.

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Reform groups like Common Cause (which played an important role in creating the current system) argue for the extension of public financing to congressional campaigns, and to state elections as well. (Several states have already gone this route for certain elections, e.g., for governor or state legislature.) However, the existence of public financing did nothing to preclude the introduction of soft money and issue advertising in presidential campaigns—and in publicly funded state elections—nor would it if it applied to other campaigns. Public financing proposals are always accompanied by requirements that candidates must agree to limit their spending, which gives an extra advantage to candidates who are already well-known—primarily incumbents and celebrity candidates. Public financing also would not interfere with the ability of personally wealthy candidates to spend unlimited sums of their own money, nor with issue advocacy activities of interest groups. There is little taxpayer support for public financing of campaigns. The percentage that check the “yes” box on their income tax returns has fallen steadily, according to the Internal Revenue Service, from a high of nearly 29 percent of individual taxpayers in 1978 to only about 11.5 percent on tax returns for 1999,26 and will probably soon drop into single digits. Originally funded at $1 for each consenting taxpayer, the fall-off in support continues to jeopardize the financial adequacy of the fund. Congress increased the rate to $3 in 1993, and may be forced in a few years to raise it again, assuming it cannot be persuaded to scrap the system altogether. Some reformers, convinced of the utter righteousness of their cause, respond by saying that the tax check-off should be eliminated and the money automatically provided by the Treasury as an entitlement—welfare for politicians indeed. Opinion poll findings on public funding for congressional campaigns are mixed, depending on how the question is phrased, but the authoritative judgment on public funding continues to be declining participation in the check-off on federal income tax returns. If the vast majority of taxpayers dislike subsidizing presidential campaigns, they are unlikely to favor the use of their money for congressional candidates. An interesting variation on public funding proposals is intended to counter the progressive deterioration of the political parties. It would provide public funds for candidates who accept spending limitations, while allowing the parties to “raise money copiously.”27 No political figure has endorsed this proposal, however, perhaps because it would weaken the power of individual candidates and put them back under the thumb of party organizations. In sum, to a very significant extent the ills of the current political finance system have their roots in the “reforms” of the 1970s, notably including the Buckley decision. The “leaks” occur because the water pressure is so great, the pipes are too narrow and convoluted, and the intellectual ma-


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terial of which they were made was inherently flawed. In all fairness, little of this was foreseen a quarter-century ago. However, the benefits of hindsight do permit us to recognize that the problems will not be corrected by adding new complexity to a system that was defective in the first place— which is precisely the intent of most currently proposed “reforms.” The system can be fixed, but true reform cannot occur within the existing framework. An important reason is that each major political party has vital interests it wants to protect. Democrats, while fulminating against soft money, do not want to alter the ability of the unions to collect political dollars automatically and involuntarily from their members, and to enable those members to use their “voluntary” time to campaign for candidates. Republicans, who have usually collected more soft money than their Democratic competitors, see their financial advantage as a bulwark against union political power and will not willingly concede it. Adamant on the union issue, Democrats’ pro-reform rhetoric needs to be seen in the light of the benefits of both labor support and their own substantial soft money receipts. Democrats have an additional fear. The two major parties were close to parity in soft-dollar fund-raising in 2000, but the GOP has long been significantly more successful in raising hard money—collecting almost twice as many hard dollars in 2000 as the Democrats.28 The latter could be placed at a serious financial disadvantage if soft money is eliminated or restricted. Republicans do not want to end soft money, but they would lose less than the Democrats. Proposals to restrict issue advocacy—by, for example, barring ads that include candidates’ names within the final weeks prior to an election— have drawn fire from interests as diverse as the AFL-CIO, various prolife organizations, and the American Civil Liberties Union. Such groups would immediately file First Amendment court challenges to any congressional restrictions on issue advocacy. Even if restrictions on soft money or issue advocacy survive these challenges, the consequence will simply be a repetition of the 1970s experience: Political money will simply be driven back into the underground pipes, seeking new opportunities to squirt out somewhere else. What the new forms of leakage might be, no one presently knows—but then, nobody back in the 1970s foresaw the rise of soft money and issue advocacy either. Jonathan Rauch put the problem this way: “If we want to place new limits on soft money, the smart way is by simultaneously easing the old limits on hard money—thus giving the money somewhere legal, visible and accountable to go. Oddly, most of the reform groups hate this idea. They are for tighter limits everywhere and always, on the theory that money is evil and that stricter laws will get rid of it. In other words (and

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in [Al] Gore’s words), they insist on getting ‘all the special-interest money—all of it—out of our democracy.’ That, of course, is the approach that got us into this mess.”29 So, what is the answer? At the very least, as Rauch implies, contribution limits need to be raised and indexed for inflation. But the very concept of limits, any limits, is what creates all the leakage in the first place. Increasing them might ease the fundamental problem for a time. It will not solve it. No regulatory mechanism can prevent ingenious minds from developing innovative detours around any campaign finance limits. A totally new regulatory approach is needed—or rather a deregulatory approach. Deregulation of campaign finance would have two elements, both essential. First, removal of all limitations on campaign contributions, including the bars on direct political contributions by corporations and unions. These barriers do not exist in some three-fifths of the states, and there is no evidence that the condition of their political systems is any better (or any worse) than either the federal system or of the states that parallel the federal ban. Second, a requirement that all presidential and congressional candidates, and national political party committees, disclose electronically all contributions within 24 hours of receipt and all expenditures within 24 hours of commitment. The FEC would be required to post these data on its public website immediately. The FEC’s state counterparts should impose the same disclosure requirements for federal candidates within their states and for state campaigns and party committees. Complete and instant disclosure would enable opposing candidates, the media, and various nonpartisan watchdog groups to monitor the system for excesses, and to publicize them. If the voters decide particular candidates have become too dependent on certain interest groups, punishment would take place on Election Day. These coupled reforms would transform the failed system of regulation into a political marketplace, monitored for abuses by the pressures of publicity and partisan competition. PACs might fade somewhat in importance because donors could give directly if they choose, although many might prefer to continue pooling small amounts for their combined visibility. Most of the problems associated with soft money would disappear because there would be no need for it; anyone could give any amount to parties and candidates and their contributions would all be on record. Full and prompt electronic disclosure, plus the threat of unfavorable publicity, would provide all the “regulation” this new system requires. What would not change, however, is the ability of interest groups to engage in issue advocacy. It is too late for that, and, given the protections of the First Amendment, the basis of our most important democratic freedoms, that is just as well.


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However, it needs to be pointed out that the veil of secrecy obscuring many issue advertising campaigns provides considerable ammunition for those reform advocates who want every kind of political activity tightly regulated. The practice of concealing the identity of donors may or may not be ultimately upheld by the Supreme Court; but it contributes to the public’s general sense of illegitimacy about political processes that the reformers are only too happy to foster and enhance. In other words, while donor concealment may turn out to be sound legally, it is poor public relations. Note, too, that there will never be a complete and permanent “solution” to all the problems of political finance. American politics is too complex, too dynamic, and too subject to innovations to permit that. Business, however, has a stake in a stable political system that can win and retain the confidence of most voters, a goal unlikely ever to be achieved under either the present system or the proposals of traditional reformers. An issue advocacy campaign that discusses the problems of the present system can go a long way toward persuading the public and ultimately Congress to consider a remedy based on principles of deregulation and the establishment of a genuine political marketplace. MODEL ISSUE AD MESSAGES: Campaign Finance Ad #1 Nobody likes the way we pay for the American system of elections. You hear a lot of easy talk from people who say we need more reforms. What the self-styled “reformers” don’t tell you is that the reforms they pushed on us 30 years ago are what got us into the present mess. And they don’t tell you that their idea of more reforms means rationing free speech, which is the constitutional right of every American. Let’s go to a simpler system, without bureaucrats standing between us and the Bill of Rights. All Americans have the right to their political opinions. And all Americans should have the right to contribute as much as they like to the candidates they like. Tell your congressman it’s time to take the chains off of free speech—and to take the limits off of campaign contributions. Campaign Finance Ad #2 Politicians take all kinds of secret political contributions. Sometimes we don’t learn about them until long after the election. And sometimes we don’t hear about them at all. The best way to solve the campaign finance mess is to make political parties and candidates reveal over the Internet who’s giving to them and how much—not weeks later but right away.

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Letting in the bright sunshine of immediate disclosure will tell the voters who’s contributing to the candidates. That way, we’ll know before the election. If we do that, then we can also get rid of the limits on free speech the present campaign finance laws place on us. All of us ought to be able to give whatever we want to the candidates we believe in. And all of us ought to know who’s giving what to whom. Tell your congressman to take all the limits off of political free speech, and to require immediate public disclosure of all campaign contributions.

OTHER ISSUES All the great issues discussed in this chapter are enduring ones that will be the subject of public debate for decades to come. A vote on trade today, or on campaign finance or Social Security reform tomorrow, will not alter the recurring nature of each of these long-term issues. In the years ahead, Congress will debate other trade agreements; new difficulties inevitably will arise in the conduct of political campaigns; there will be recurring crises of capital shortages and the current account deficit; and the complex issues of demographic patterns and immigration policy will seem unending. It is the permanent nature of these issues that justifies sustained, long-range issue advocacy programs by the business community. Nor are these issues the only ones that will merit the use of issue advocacy to inform the public. A number of additional knotty issues can be forecast, all of which deserve and probably require long-range business campaigns to educate citizens about approaches consistent with the needs of competitive enterprise and a growing economy. Among them are the following:

Public Education A skilled workforce must of necessity be an educated one. It is a disgrace that a nation as dependent on technology as the United States should rank dead last among 50 industrialized countries on standardized international physics tests, and next to last on mathematics.30 Business has a vital stake in improving public schools and in helping alert the public to the need for greater accountability of our school systems and educators. Vouchers or other funding systems for widespread alternatives to failing schools would apply the cleansing pressures of competition to public education. This issue will endure long past President Bush’s changes. Educational reform plainly requires a strong countervailing force to budge school bureaucrats and teachers’ unions.31


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Health Care The American system of health care was heatedly debated in the 2000 campaign, although major party candidates dealt with only parts of the problem. Public attitudes appear to be moving in the direction of ultimately giving Americans a universal legal right to health care coverage. The failure of President Clinton’s proposals in 1993 will not prevent this issue from reemerging, although other alternatives will undoubtedly be put forth. Every employer, not merely those companies engaged in providing health insurance services, has a critical stake in what will assuredly be a protracted and contentious debate. Private Pensions Similarly, the private pension system, closely related to the dilemmas of Social Security, seems likely to become another issue of heated debate within this decade. On the one hand, employers want to control escalating costs. On the other, an aging population will want to be assured of adequate and stable retirement incomes. For a workforce that changes jobs with increasing frequency, guaranteed portability is likely to be the least of the forthcoming pension issues. Business needs to prepare for more sweeping proposals, particularly including ones to establish a universal legal right to private pension coverage with mandatory minimum benefits. Energy and the Environment The trade-offs involved in balancing the requirements of economic growth, rising energy demand, and job creation, on the one hand, and environmental quality on the other, are unresolved and will remain so for decades. The public (and the business community) clearly wants both ample energy resources and a high level of environmental quality. Environmental activists have successfully turned these into conflicting objectives. The 2001 energy crisis in California and other states may have helped Americans begin to understand the problems inherent in simultaneously demanding continued economic growth, low inflation and unemployment, stringent environmental regulation, and plentiful and unrestricted quantities of gasoline and electricity at low prices. The operative words are “at low prices.” Environmental protection comes at a cost, and the cost is economic. Without a greater willingness to pay higher energy prices for a better environment, the United States will rock from crisis to crisis. The twin goals of environmental quality and sufficient energy resources must also be reconciled economically in the process of developing new petroleum sources, new refineries and energy transmission systems, and safe nuclear power. Greater public understand-

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ing of the costs and trade-offs involved is urgently required to counter arguments by environmental extremists that environmental protection should be “free” or financed by companies at their own expense. At the same time, environmental problems like global warming are not fantasies dreamed up by a radical fringe. Balanced policies that recognize worldwide needs for both a healthy environment and plentiful energy resources are needed. This is not a problem for the advanced economies alone. Developing countries seeking to elevate their economies will not be content with global environmental standards that are deterrents to their own growth. Up to now, the environmentalists have succeeded in obscuring these issues by pursuing regulatory programs whose costs are buried in higher prices, energy shortages, and the overall tax burden. As we have seen, environmental organizations are becoming an ever more influential political force. Only a sustained business effort to educate Americans will counter those groups and bring the public to a greater realization of the economic trade-offs involved in achieving both continued economic growth and environmental quality. The business community has a fundamental stake in helping develop globally balanced and rational energy and environmental policies, but that is only half the problem. The other half will be the equally difficult task of building long-term public understanding and support without constant lurches from crisis to crisis. Direct Democracy Another issue likely to arise in coming years that may warrant a comprehensive issue advocacy campaign will be efforts by reformers to extend direct democracy to the states that currently make limited or no use of it, and possibly to enable its use at the federal level as well. Initiatives and referenda have a wide populist but superficial appeal because they permit the electorate to legislate directly, outside the legislative process. There is no opportunity, however, for elected lawmakers to reflect on the pros and cons of issues, or for affected interest groups to negotiate their differences and develop more or less acceptable compromises. Business has a genuine and significant long-range interest in pointing out the flaws of these populist “reforms”—if only because it has a mixed record of success on the various state initiatives and popular referenda in which it has intervened. The most important reason, though, is that direct democracy attacks the very underpinnings of representative government, which for two centuries has been the core of the American constitutional system. By applying the techniques of issue advocacy to such large and enduring challenges, corporations and business associations can alert and educate


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the public to these macro-issues, begin a series of national dialogs and debates on their resolution, and significantly influence the direction and outcome of those debates. That would be the application of issue advocacy in its highest form. Long-term issue advocacy can be an enormously powerful tool that, carefully applied, would alter not only the business–government relationship, but also the inertia with which most citizens approach even burning public issues. Coupled with intensified programs of political action to assure the election, at all levels, of legislators sympathetic to the needs of competitive enterprise, a giant step would be taken toward establishing the business community among tomorrow’s preeminent set of interest groups. NOTES 1. Wall Street Journal, May 25, 2000, p. A27. 2. Wall Street Journal, May 23, 2000, p. A28. 3. Wall Street Journal, May 25, 2000, p. A27. 4. See, for example, Greenspan’s speech on “Technology and Trade” before the Dallas Ambassadors Forum, April 16, 1999. 5. Ibid. 6. Reported by Robert J. Samuelson, “Where the Money Flows,” Washington Post, September 27, 2000, p. A23. 7. C. Fred Bergsten, “This Tax Cut Could Too Hurt Us,” Washington Post, February 26, 2001, p. A19. 8. Samuelson, “Where the Money Flows.” 9. Robert G. Murphy, “Our Friend, the Trade Deficit,” Washington Post, May 21, 1999, p. A31. 10. Quoted in David Ignatius, “Where Will the Buck Stop?” Washington Post, September 5, 1999. 11. Reported in “The Outlook,” Wall Street Journal, August 14, 2000, p. A1. 12. Hamish McRae, The World in 2020 (Boston: Harvard Business School Press, 1994), p. 149. 13. David A. Wise and Steven F. Venti, Choice, Chance, and Wealth Dispersion at Retirement (Cambridge, MA: National Bureau of Economic Reseach, 2000). 14. Wise, quoted in Albert B. Crenshaw, “Sock It Away, Somehow,” Washington Post, August 27, 2000, p. H2. 15. Address to the National Tax Association, Washington, DC, June 8, 2000. 16. Wall Street Journal, April 21, 2000, p. A14. 17. Crenshaw, “Sock It Away.” 18. Arnulf Baring, Free University of Berlin, quoted in the Washington Post, October 3, 1999, p. A29. 19. Washington Post, October 14, 2000, p. A14. 20. Descriptions relate to elections for the national legislature except as noted. An interesting set of studies of campaign finance in various countries is Herbert E. Alexander and Rei Shiratori, eds., Comparative Political Finance among the Democracies (Boulder, CO: Westview Press, 1994).

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21. Source: National Journal, October 14, 2000, p. 3232. 22. Michael H. Armacost in the foreword to Anthony Corrado et al., eds., Campaign Finance Reform: A Sourcebook (Washington, DC: Brookings Institution Press, 1997). 23. Jonathan Rauch, “A Ludicrous Pledge, Fortunately Ignored,” Washington Post, August 27, 2000, pp. B1–B2. 24. Robert J. Samuelson, “Bye-Bye 1st Amendment,” Washington Post, February 11, 2000, p. A41. 25. Holman W. Jenkins, Jr., “Hooray for Soft Money,” Wall Street Journal, October 27, 1999, p. A19. 26. Wall Street Journal, May 24, 2000, p. A1. 27. Jonathan Rauch, “Campaign Finance Restrictions Collapse. Let Them,” Wall Street Journal, December 15, 1998, p. A22. 28. Source: Center for Responsive Politics. 29. Rauch, “A Ludicrous Pledge.” 30. Source: The Economist, November 4, 2000, p. 28. 31. See, for example, the report of a study on the results of a $500 million grant to the New York, Chicago, and Philadelphia public schools by philanthropist Walter Annenberg to boost student achievement. The project largely failed “because it ran into entrenched school bureaucrats and interest groups that did not always share the program’s goals,” including “a plan to replace the teacher seniority system with performance-based incentives.” (Washington Post, July 4, 2000, p. A9.) As still another symptom of resistance to change, the July 2000 convention of the National Education Association overrode recommendations by its own leadership, voting to oppose experiments with teacher performance pay incentives.

CHAPTER 10

Conclusion: The Politics of the Future I know you believe you understand what you think I said, but I am not sure you realize that what you heard is not what I meant. —Alan Greenspan

To political analysts, elections are points and lines on a graph. We gain an understanding of the future by analyzing and projecting the influences, trends, and patterns inherent in that graph. Elections often provide a signal about the direction in which the voters want political climates and public policies to move. Sometimes, the voters’ desires are eminently clear. At other points in time, the electorate’s message can be as murky as the Delphic prose of the venerable Federal Reserve Chairman. Those seeking a clear command from the voters in the 2000 elections searched in vain. One of the closest and most controversial elections in American history was the product of an evenly divided electorate, polarized between a larger federal role and a smaller one, lacking any popular consensus about the direction the country should take. For all the public lamentations about partisanship and gridlock in Washington, a preelection Wall Street Journal/NBC News survey found that voters actually wanted the White House and Congress under the control of different parties, by a margin of 47 percent to 41 percent.1 They almost got what they wanted. The public’s message to both parties seemed to be, “We don’t like what either of you want to do, so we’re going to make sure you can’t really do very much at all.” Perhaps that was because of the confusing messages of the presidential

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candidates. The thrust of Al Gore’s campaign seemed to be, “The economy is more prosperous than ever, and I’m madder than hell about it.” In the same vein, George W. Bush seemed to be saying, “Americans don’t want change, and I’m the man to give it to them.” The theatrics of the campaign were as nothing, however, compared to the drama that followed the presidential election of 2000. Weeks passed before the nation could be sure who actually won an Electoral College majority and would be the new president. Eventually, it took the U.S. Supreme Court, as closely divided as the rest of the country, to resolve the election outcome in Florida and hence the nation. Similar ambiguities resulted from the congressional elections. The voters in toto spanked both parties, depriving House Democrats of an expected victory and leaving the Republicans with a diminished majority. Senate Republicans retained control only by the grace of Vice President Cheney’s tie-breaking vote—and that for only a few months, until a defection turned power over to the Democrats. Nationally, the presidential popular vote was practically a tie between the two major-party candidates, with a plurality for Gore of a bit over 500,000 votes out of 100 million cast—one-half of one percent. Almost all demographic components of the electorate voted as the country did as a whole, give or take a few percentage points. Voters’ age and education made little difference, and income not a great deal. There were some notable variances, though, and a few surprising ones:2

• Blacks voted ten-to-one for Gore. Hispanics, though, were much more evenly divided, giving 41 percent of their votes to Bush, with 55 percent for Gore. • The gender gap persisted, but it had a subtle dimension. Women as a whole supported Gore by a margin of 54 percent to 43 percent. However, women who do not have jobs outside the home backed Bush over Gore 52 percent to 44 percent—almost the same as men. It was working women who voted preponderantly Democratic, 58 percent to 39 percent. • Marital status mattered. Married voters tended to support Bush. Unmarried voters largely backed Gore. • Stockholders were only slightly more inclined to vote Republican than non-shareholders. • Some pillars of the liberal establishment have sizeable minorities who do not accept the views of their leaders. Bush won 37 percent of the votes in labor union households, and 36 percent of the votes of environmentalists.


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THE IMPACT ON THE PARTIES Neither the major parties nor the minor ones could take much comfort from the election. It was certainly a mandate for no one; not for the twoparty system when a minor-party candidate prevented a clear-cut victory for either the Republicans or the Democrats; not for the Electoral College system of presidential elections that, for the first time in more than a century, produced a winner not supported by at least a plurality of voters; not for the Green Party candidate, Ralph Nader, whose campaign threw the presidency into the hands of the candidate with whom he most disagreed, but who failed to gain enough votes to assure his party the public funding needed to compete effectively in 2004; not for Patrick Buchanan, the Reform nominee, who took control of a party that had at least performed respectably into two previous elections, and left it in complete wreckage; and certainly not for either major party. As in so many other American elections, the votes won by each of the Republican and Democratic presidential candidates seemed to be cast as much against his principal opponent as for him. The campaign and its aftermath left the major parties even more discredited in the eyes of many Americans. The thesis of this book is that American political parties are all in a state of terminal decline, to be supplanted sooner or later by major interest groups. It is not possible, of course, to pinpoint the time when this transfer will occur, but the evidence of the 2000 campaign is that the transition is well underway. A large percentage of Americans still retain their loyalty to the Democratic and Republican brand names, even as another large percentage scorns their performance and relevance. Many in this latter category consistently have chosen not to vote, and perhaps they never will; but they are potentially always there to be mobilized by the right candidates, backed by the right coalition of interest groups under the right circumstances. At the presidential level, it is not impossible for an independent or thirdparty candidate to do fairly well on a one-time basis. Nader and Buchanan failed in 2000 because, like most other minor-party candidates, their support was largely at the ideological margins of national politics. One of the traditional strengths of the major parties has been their ability to appeal for votes at the political center where the sympathies of most American voters lie. In this regard, the campaign of 1992 may be more instructive than that of 2000. Ross Perot won almost one-fifth of the popular vote that year for two reasons: He was able to fund his presidential campaign almost totally out of his personal financial resources, and he appealed to the ideological center. A future independent candidate who can add to these two key strengths a more appealing political personality than Perot’s, the ability to capitalize on some major contemporary issue, and especially

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the support of significant interest groups, might do well enough to prevent either of the major-party nominees from gaining an Electoral College victory, and even win. However, the minor-party candidates in 2000 had none of these assets. As has generally been the case with America’s third parties, the elections left them with no future. Nader and the Green Party under whose banner he ran pointed the way toward a possible future for presidential politics, but it is not a future in which they are likely to play a significant part. The weeks of recounts and litigation occurred because the popular vote in Florida was so close—and it was so close because Nader clearly siphoned off substantial numbers of votes from Gore. Even if some portion of the 97,000 votes Nader drew would have gone to no one else, the ideological nature of his appeal meant that these were votes cast at Gore’s expense that Bush could not have drawn. It was Nader who deprived Gore of a plurality of Florida’s popular votes, of its 25 electoral votes, and therefore of the presidency. No one understood this more clearly than the liberal establishment, of which Nader had been an ally and indeed, an icon. Without disagreeing with his criticisms of both Gore and Bush, but fearing just what indeed was to happen, his fellow liberal activists and cause group leaders publicly begged him late in the campaign to withdraw. Their post-election recriminations were bitter, and the cause groups with which he had long been associated found both their revenues and their political access drying up. (Voltaire’s famous aphorism was turned upside down: The liberal establishment agreed with everything Nader said but disagreed vehemently with his right to say it.) Whatever Nader’s own political future may be, the Green Party’s is dim. Nader was its only asset. It has no real local or state structure and no personality other than him to rally around. The Reform Party found itself in the same situation. The manner in which Buchanan took over the Reform Party ensured that it became a personal vehicle for him and his rightist views. He captured what had been a centrist party and converted it into a vehicle for cultural conservatives. Perot himself endorsed Bush. Unlike the Left’s vituperative assaults on Nader, Buchanan received no blame from the Right for taking votes away from Bush, but that was only because he got no votes to speak of; his campaign was inconsequential. It is possible that the “Perotistas” vanquished by Buchanan may now seek to reassert control of the Reform Party but, like the Greens, they no longer have a viable personality to rally around and, unlike the Greens, no core ideology. Both parties are now financially and politically bankrupt, inhabiting only the unlit fringes of American politics. The lesson is that new parties must either succeed quickly, as none have in the United States since the rise of the Republicans in 1856, or fade away. Meanwhile, as the major parties ponder their ultimate fate as enduring


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political institutions, the vast amounts of money each has collected are a pallid consolation. How long their coffers continue to bulge depends almost completely on how soon Congress resolves the soft-money issue. Even without soft money, the parties could continue for a while if campaign funding was deregulated, as proposed in Chapter 9. In a sense, this would legitimize soft money and eliminate the distinction with hard dollars. Public opinion probably needs a period of time to accept the concept of deregulation, however, and only then after an extended educational effort of the kind a long-term issue advocacy campaign would produce. Soft money may well be abolished before that can happen. Without substantial financial resources, the parties’ ability to mount competitive campaigns for their candidates will shrink to precarious levels. Republicans are likely to retain a hard-money advantage, but it is difficult to believe this will be sufficient to mount major issue ad campaigns of the scope seen in 2000. Both parties, but especially the Democrats, will therefore become increasingly dependent on interest groups, not just for money but also to perform the core functions of political campaigns that the parties once performed exclusively. Much of this, of course, is already occurring. The sea change will take place at the point where the political support candidates can gain from major interest groups is a greater factor in their ability to win than the backing of the party structures. We witnessed another significant measure of party weakness in the surprisingly low influence of the state governors in the 2000 general election, particularly the Republicans. It was his fellow GOP governors who gave Bush his earliest support and who were instrumental in enabling him to lock up most of the rest of the party’s establishment early in 1999. The personal popularity of the governors and the alleged strength of their state organizations were a key element in the Bush general election strategy. In the end, most failed him. Fabled Republican powerhouse organizations in states like New York, Pennsylvania, New Jersey, Michigan, Wisconsin, and Illinois all fell to the Gore campaign. The agonizingly close result in Florida, the focus of the post-election dispute, was particularly galling because its governor was Bush’s brother. As it turned out, the political strength of the GOP governors in these states was a myth. Democratic governors were not much more successful in states of the South (and some in the Midwest), which Bush carried. THE ROLE OF MAJOR INTEREST GROUPS The 2000 campaign reinforced and perhaps accelerated the pattern of decline of the political parties. The real winners were the powerful interest groups who demonstrated their growing strength, albeit selectively. Labor’s campaign to turn out union members and their families unquestionably enabled Gore to win states of the industrial Midwest that otherwise

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would have gone Republican. The NRA and the religious right were instrumental in enabling Bush to carry rural areas generally (winning 59 percent of the rural vote3), and particularly border states like Kentucky, West Virginia, and Tennessee. The NAACP’s drive to increase Black turnout was an important asset for Gore, who received over 90 percent of Black votes, according to exit polls. The bitterness felt by many African Americans over the election nationally, and particularly in Florida, may make it even easier for Black organizations to mobilize their members in future elections. The labor movement was less effective in achieving its goal of returning control of Congress to Democratic hands. The AFL-CIO and its member unions launched a major drive to defeat a substantial number of Republican incumbents, particularly in the House. They failed, as they had in 1998 and 1996. Most of the House districts they targeted stayed in Republican hands, and several of the Democratic seats they defended were lost. (Despite union efforts, a third of union-household voters cast their ballots for House Republican candidates, roughly about the same percentage as in other recent elections.4 Labor had more success in Senate contests than it originally expected to, helping to produce a 50–50 tie. Union efforts were especially effective in defeating GOP senators in several midwestern states. The impact of environmental and abortion rights groups was mixed. Both have tended to be particularly influential among suburban voters who, however, went for Bush by 49 percent to 41 percent for Gore. These organizations also are especially strong in New England, the Middle Atlantic states, and the Pacific Coast, all regions in which Gore did well. There may also, though, have been an environmental backlash in some areas. Hostility toward environmentalism helped push historically Democratic West Virginia into Bush’s column, as it probably did in depriving Gore of the electoral votes of his home state of Tennessee. Gore and Democratic congressional candidates in most parts of the largely pro-life South and West were not helped by their party’s strong alliance with abortion rights interest groups. However, neither could it be said that pro-life groups were any more, or less, effective. The virtual tie between the presidential candidates reflects in part the nation’s cultural divide over changes in the family, the role of women, and the function of government in health care, education, and social issues overall. The political tension these issues create has been growing for a generation and remains unresolved. The increased numbers of women voters—“the feminization of politics”—will make such issues increasingly decisive factors in many elections.5 As the nation eventually moves toward consensus on cultural issues one way or another, the political consequences may have impacts on the kinds of candidates business tends to prefer. Many, though certainly not all, social conservatives tend to be pro-business in their outlook, and their


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increased or decreased success with the voters will affect the number of business supporters elected to Congress and the state legislatures. THE BUSINESS POLITICAL ROLE What was business to make of the 2000 elections? The issues discussed in Chapter 9 remain unresolved; but the central point of that chapter was that forms and permutations of those issues will remain on the nation’s agenda for decades. Long-term issue advocacy by American business will be an effective technique to mold public opinion toward market-oriented approaches on all these issues. As it usually is, the business community was the Republican Party’s principal benefactor in 2000, contributing half a billion dollars to party committees and campaigns. A substantial though smaller sum ($340 million) went to their Democratic counterparts.6 Although this represents a 60:40 Republican edge, business contributions provided over 70 percent of all reported Democratic funds (and slightly under 65 percent of GOP revenues). But, of course, this does not take into account the substantial unreported Democratic advantage in interest group issue advocacy, direct mail, and other political communications. Insofar as issue advocacy and other political communications were concerned, business groups largely abstained from the presidential contest. The overriding objective of most business groups was retention of Republican majorities in both houses of Congress, although a few moderate Democrats also were helped. One organization gave special help to international trade supporters, particularly those who voted for permanent trade relations with China. Business had limited priorities in its targets for direct contributions and issue ad support, focusing its efforts on vulnerable, pro-business incumbents and open-seat opportunities. Most individual companies that were involved in the campaign did little more than give money. Relatively few took advantage of the active political participation opportunities described in Chapter 7. Still, business did not do at all badly. There were two priorities—backing the Republican drive to retain control of the Senate and House (which also included support for a number of GOP open-seat candidates), and helping specific endangered congressional incumbents with pro-business voting records. The vast majority (all but four) of the vulnerable House incumbents supported by business groups, among whom were a few Democrats, won reelection. The open-seat results were a virtual wash: Republicans lost six in the House but gained five from Democrats. Business support was less successful in defending vulnerable incumbent Republican senators. GOP losses ultimately have cost the party control of the Senate. None of the major business organizations gave significant support to Democratic Senate candidates except for a single open-seat candidate in Nebraska.

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The business record in the 2000 elections raises interesting questions: Could the business community have done a better job in achieving its priority goals? On the one hand, it was certainly lavish in its contributions of both hard and soft money and, to a lesser extent, in business-sponsored issue ads. A number of companies (though undoubtedly still a minority) disseminated voter guides to management personnel and some sponsored meetings of their managers with candidates. On the other hand, much more could have been done to get business people directly involved in campaigns or to publicly endorse candidates. How much more could business do? Arguably, business political assets are limited. Certainly, business interests lack the unions’ ability to put thousands of precinct workers in the field and directly mobilize hundreds of thousands of voters; but business enterprises, with relatively few exceptions, still have not made much of an effort to mobilize the resources they do have available; for instance, their credibility with employees and in communities. Moreover, the huge amounts of soft money donated to the party committees might very well have had a greater impact on individual congressional contests had those funds been applied directly to issue ads, direct mail, and voter guides benefiting targeted candidates. Devoting a significant share of such communications to the presidential campaign (as liberal groups did) might have swung some close states to Bush. He did get significant help of this kind from gun owners and cultural conservative organizations. Certainly, business issue agendas would have been advanced by informing and persuading the voters. During his presidential campaign, Al Gore repeatedly attacked the oil, pharmaceutical, health insurance, and tobacco industries. Only the drug makers made a substantial effort to defend themselves, and that defense was mostly indirect. The others responded by contributing vast amounts of soft money to the GOP campaign but otherwise kept their heads down and took the abuse. Would they have done better to initiate massive issue advertising campaigns to take their case directly to the voters? Did they believe that any defense they might mount would be so weak that it might provoke a public and political backlash that could hurt both them and Bush? Or was the lack of industry response motivated by fear that an enraged Gore, if elected, would take revenge on issues affecting them that otherwise lobbying might ameliorate? The president of the U.S. Chamber of Commerce, understanding that it was all of business and not just a few industries that were really being mugged, responded with an op-ed column in a major newspaper. Otherwise, the Gore assaults went largely unanswered. Candidates have learned never to let attacks go unanswered lest the voters accept the charges as valid. Various non-business interests, ranging from the NRA to environmental organizations, have learned the same lesson. Business, unfortunately, frequently carries its posture of caution to


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the point of timidity. This approach carries with it a cost in the achievement of short-term legislative goals, and detracts from the long-term elevation of economic interests to political power centers. WHAT HAPPENS NOW? From the nation’s earliest years, electoral choices have been made in the context of two powerful political parties, long the dominant forces in American politics. More recently, the series of powerful developments discussed in Chapter 6 has substantially weakened the party organizations. At the same time, the roles of major interest groups have been strengthened. Interest groups, increasingly more so than the major parties, are determining the outcomes of American elections, particularly in the most competitive elections. This ongoing process is most visible in presidential and congressional elections, but it is also being felt at the state level and that will only increase in future elections. As we pointed out in earlier chapters, party loyalty is a declining asset and the vast increases in soft money a temporary one. The combined effect of these factors and forces bodes ill for the parties as major political institutions. It is also significant that a minor-party candidate who received only a small percentage of the national popular vote still had such a profound impact on the outcome of the 2000 presidential election. Minor-party candidates have run many times in the past, but none, not even Perot in 1992, had the focused impact Nader did, an impact felt even more strongly immediately after the election than during the campaign. Absent Nader’s candidacy and particularly the size of his vote total in Florida, Gore would have won the state without dispute, and the national election with it. But Nader did run, and the effect of his running will be to stimulate future bids by independent candidates seeking to leverage the election to their own benefit and to the detriment of the two-party system. Minor parties have no more promising long-term future than the Republicans and Democrats—indeed, a lesser one—but that will not prevent a particular party, and especially a galvanizing candidate, from leveraging special circumstances of time and place to success. There was something of a parallel in the presidential election of 1824. Four candidates ran, preventing the leader in the popular vote, General Andrew Jackson, a national hero, from winning a majority of the electoral votes. The election went into the House of Representatives for decision. Deals were made, appointments were promised, and John Quincy Adams was elected. Jackson campaigned against the injustice of the election result for the next four years, and in 1828 beat Adams decisively. By the time he left the presidency eight years later, his supporters comprised the Democratic Party. His opponents also clustered into a single party, the Whigs, forerunners of the modern Republican Party.

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The two parties that had previously existed—the Adams-Hamilton federalists and the anti-federalist Jeffersonians—lacked cohesion and strength. The vigor of the two-party system as we have known it was a direct consequence of the 1824 election. Never again would a multiplicity of presidential candidates prevent one of them from gaining an Electoral College majority. There would be problems with contested electors (1876 and 1888). There would be close elections (e.g., 1916, 1960, and 2000). And there would be third-party candidates who drew enough popular votes in enough states from one major-party candidate to enable his opponent to win (1912, 1992 and, again, 2000). But not since 1824 have minor-party candidates ever won sufficient electoral votes to prevent the nominee of one of the major parties from gaining an outright Electoral College majority. After 1824, the dominance of the two parties spread rapidly downward from the presidential level—to congressional, state, and local elections. The result was a political stability overlaid on the constitutional framework adopted by the founders and replicated in each of the states. That stability, perhaps as much as the constitution itself, has been a core strength of the American democracy. Today’s political climate is quite different from that of 1824, even apart from the obvious fact that the United States is a very different country than it was then. A splintered presidential vote today, settled in the House, would produce vast political bitterness that would only further discredit and perhaps fragment the two major parties. Imagine the consequence if the 2000 election had gone to the House for resolution. House Republicans would have elected Bush even though Gore received more popular votes. Neither party would have emerged whole from the turmoil that would have followed, just as both parties were damaged by the Clinton impeachment process. Nader’s legacy to the country makes such a future scenario only the more probable. The growing dominance of major interest groups in elections increases the likelihood that this course of events will occur, if only because more and more voters take their political guidance from these interests at the expense of party loyalty. The essential difference is that fragmentation of the Republican and Democratic Parties will not lead to permanent new parties, as it did after the election of 1824. What will happen is that the interest groups will emerge from their role of supporting players to become the leads in the political drama. THE REFORMERS RIDE AGAIN The closeness of the presidential election again produced proposals to reform the Electoral College or even to do away with it altogether. If we have learned nothing else from the unintended but often drastic conse-


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quences of past political reforms, cautious changes, not sweeping ones, are the safer course. Actually, outright abolition is improbable because the process of amending the Constitution requires the assent of the small states that the existing system was designed to protect. It is exceedingly unlikely that Electoral College abolition would gain two-thirds of the Senate, let alone ratification by three-fourths of the states. There are indeed good reasons to retain some version of the existing system: Abolishing the Electoral College would only hasten the fall of the two-party system. Independent and third-party candidates would have increased incentive to run by being able to appeal to social interests or geographic regions that felt neglected by Republicans and Democrats campaigning exclusively in the big population centers and on national television. Recount problems in close elections would not be confined to a state or two as they were in 2000, but would be compounded nationwide. Proposals to allocate fractional electoral votes to candidates proportionally to their share of the popular vote in each state would also encourage minor parties hoping to end up as leverage players in a close election. Two more modest changes might have a better chance: First, to adopt the Maine-Nebraska plan whereby electoral votes are awarded by congressional districts rather than on the statewide winner-take-all system utilized now in the other 48 states. Maine and Nebraska give presidential candidates one electoral vote for each congressional district they carry, plus two to the statewide winner. Had this system been in effect in 2000, Bush would still have won, with a somewhat larger number of electoral votes than he actually received under the existing system.7 No change will guarantee that the electoral victor and the winner of the popular vote are always the same person—nothing would absolutely assure that outcome except outright abolition of the Electoral College—but it would bring electoral vote decisions closer to the people than the current statewide system. The second change would abolish the office of presidential electors altogether, awarding electoral votes automatically and without the risk of “faithless electors” who may choose to vote for someone other than the nominee of the party they represent. Actually, no constitutional amendment is required to effect at least the first of these modifications. The 50 states could make the changes in their own laws. An amendment to the Constitution would, however, assure nationwide uniformity. An amendment would be necessary to cast electoral votes automatically and eliminate the office of elector. The 2000 Florida recounts were an education for most Americans, who were unaware of the primitive systems most local governments utilize to administer elections. At this writing, Congress is considering measures to stimulate and help finance adoption of simpler, more accurate voting technologies, improve training of election workers, provide citizens with better election information, and assure that all voters in each state have equal

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opportunities to vote and have their votes fairly counted. These would be true reforms, badly needed in almost every state, and long overdue. Whether state and local politicians with vested interests in the status quo will accept such changes is quite another question. There still remains the nagging question of the estrangement of so many Americans from their government and the political process. All the improvements in the world in elections administration, registration procedures, voting systems, and the like will not draw out unmotivated citizens on Election Day, to say nothing of people who have made a conscious decision not to vote. Robert Putnam’s “Bowling Alone” thesis of Americans’ general disaffection from civic and social participation (discussed in Chapter 6) is undoubtedly an important factor. So, in all probability, the factors we have discussed in earlier chapters have either contributed to the decline of political parties or arisen from it. The changes that have remade politics in America seem, as an ironic consequence, to be driving many people away from interest and participation in the process of selecting their governmental leaders. Political scientist Dennis Hale sums up the case quite well: There was a time in the not very distant past when Americans voted more, special interest groups had less influence over campaigns and legislation, the media were less powerful and less cynical, and Americans felt that the government could be trusted to do the right thing at least most of the time. Then came the liberal reforms of the 1960s and ‘70s: in campaign finance, in the way we choose presidential candidates, in the organization of Congress, in the power of the courts over social policy. Soon the old party organizations that linked the government to the voters were gone; the conventions lost control over nominations; the media took over presidential elections, and money became as important as votes; campaign finance reform took power away from wealthy individuals only to give it to specialinterest PACs; congressional reform weakened leaders and turned the House into an anarchy of self-promoting individualists. Each of these reforms has empowered activists, insiders, special pleaders, ideological fanatics, lawyers and the mass media. Each has discouraged ordinary voters, while promoting policies that many citizens find immoral or absurd. Throw in activist courts, and you have all the ingredients for an estranged marriage between the public and its government.8 Once again, in other words, we confront the unintended consequence of the liberal and reform impulse to do good: in seeking only to cleanse the political system, the reformers have tossed out the baby along with the bath water. Can any of the changes be reversed? Perhaps, but only


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over a long period of time. Meanwhile, their effects will persist, continuing the process of voter alienation, political party disintegration, and the steady rise to power of the great interest groups.

THE STRATEGIC COURSE We have argued in this book that the self-interest of business, to say nothing of its obligations to the country, requires it to take actions now that will position it among the nation’s principal political forces in the postparty era. One of the reasons why this is so will be the need to bring about a measure of stability to what could otherwise be a chaotic political environment, once the parties lapse into impotence and then disappear. It is not possible to have a healthy economic environment if its political context is unstable. Stability requires that political changes occur gradually, within the parameters of what most members of society find acceptable. Stability also means that citizens accept society’s political and governmental system, and have an instrumental choice in determining who its leaders will be. Stability means, too, that a substantial majority must believe that politics and government exist to enable them to enhance their lives. The most significant development of the final decade of the previous century was the joint triumph of democracy and the market economy around the world. Healthy markets require the presence of stable political institutions in a democratic framework. “Politics is a substitute for violence,” as House Democratic Leader Richard Gephardt has accurately observed.9 In the United States, the two-party system has been a major force in achieving political and social stability. At the same time, however, the alienation in recent decades of a large share of the potential electorate from politics and government is a potentially destabilizing factor. The problem is serious and there are no easy answers. Its causes are more social and cultural than political. Most Americans take representative government and democratic institutions for granted, partly because the nation’s democratic values have evolved over time to reflect changes in society—for example, the extension of voting rights to women and Blacks. Another possible cause is that the United States has been able to defeat external threats to democracy without armies battling on our own territory. Europe’s democratic commitments are more hard-won. Individuals frequently relate more strongly to organizations reflecting their own personal interests than to the political parties. A widely voiced view among the politically alienated is that the parties represent interests other than their own. Civic disaffection might therefore be relieved by the political transition from parties to interest groups. In this regard, business may have a hidden strength. As Greg Casey observes in his foreword to

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this book, there is some evidence that companies may have more political credibility with their employees and their families than they realize. Business is a part of a stable political environment, not apart from it. A healthy economic climate does not exist anywhere if there is not a healthy political climate. The decline and fall of America’s political parties necessarily will usher in a period of instability in politics, partly because there will be a transition as new institutions replace them and partly because there will be considerable jockeying from election to election, as major interest groups negotiate the terms of alliance. Business needs to sit at the head table partly to protect its own economic interests, but also to exert an essential stabilizing influence on the political climate. To achieve a status of political leadership requires adoption of the kinds of techniques discussed in Chapters 7 and 8. All of them, especially issue advocacy, are forms of communication. That, in essence, is what politics is—a mode of organized communication. It operates to persuade voters to choose Candidate X over Candidate Y, usually by conveying sets of ideas about issues or personal qualities. Politically active interest groups stress to their members and supporters how the election of Candidate X will advance their own agenda. Thus, environmental organizations emphasize how the election of their chosen candidates will strengthen policies to fight pollution and global warming. Abortion rights and pro-life groups each warn about the dangers of bad Supreme Court appointments if the wrong presidential candidate wins. Unions urge votes for their favored congressional candidates because they will help labor enact the laws it wants and block the bills it opposes. Business interests do some of this, but frequently they are also fearful about publicly airing their positions or their best arguments. We saw, for instance, how pro-trade forces have been reluctant to express the case for imports and why it is important to openly advocate expanded immigration; and yet, how can business ever prevail on legislative issues let alone in elections if it is timid about speaking out and telling its side of the story to the voters? The public may not accept the business viewpoint on every issue (or candidate), but it will accept none at all if that viewpoint is not forcefully expressed. That means business must learn how to express its interests in terms with which the public can identify. The ironic reality is that companies already know how to do that, and how to do it exceptionally well. Every day in commercial marketing and advertising, they utilize the most advanced techniques of persuasion ever developed. It is simply a matter of applying those communications skills to issues and politics—but, most important, understanding why they need to apply them and being willing to do so. Sending a political contribution, even a large one, may be a form of communication, but it is a very limited one that reaches the voters in


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only indirect ways. It does very little to influence public opinion on the major issues affecting the economy. The subjects of interest group communications are ideas. The ideas of business people typically include, for example, a belief in limited government and that public policies and actions should strengthen, not undermine, market economics. These concepts are commonly addressed less in the abstract and more as specific proposals to deal with particular issues. Communicating to the public the business point of view on specific issues, and why individual candidates who share that viewpoint should be supported, is what issue advocacy is all about. It is also the way to prevail in the emerging political environment. The mode of communication must also be directly related to the message. People do not normally buy advertising space to apply for a personal loan. Miles Standish used the wrong intermediary in relying on John Alden to woo Priscilla Mullins on his behalf. In this sense, relying on candidates or political parties to get an issue message across may not be the most effective approach. The medium may not be the message, but it influences the receptivity with which the message is received. There are political messages that can best be conveyed by lobbyists, others in which public communications support the lobbying effort, still others that will work only through public communications, and others yet that will have their greatest impact through political involvement. So, the communication medium employed must be the one that is best able to advance the interests of individual companies or industries. None should be arbitrarily ruled off the table, and that most particularly includes politics. Business issues and interests frequently have their roots in economics, but they are ultimately completely political in their forms of combat and resolution. Public opinion and its political manifestations have always been one means by which business can win on its issues. In the emerging new political era, it is the only way. It is not easy to see through the watery rapids of technological, economic, social, and political change, especially when the currents are streaming by at an ever-faster rate. Still, glimpses of the future flash through and the direction of the flow seems clear enough. The focus of this book has been the first quarter of a new century, a time when changing global economic imperatives will find it increasingly difficult to contend with relatively fixed governmental climates. The United States is only one part of the new world economy, yet the largest and most important part. It will maintain that dominance at least until Europe unites politically, if it ever does, and, further down the road, until China joins the ranks of the fully developed economies. America has been the engineer of much of the change occurring in the

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world, perhaps because forces of change have been so pervasive in our own society and throughout our history. The United States has reinvented itself time and again over the years, and will continue to do so through 2025 and beyond. The political changes that will take place during the intervening years will move the country into a new phase of governance, lacking the political stability our two-party system has always provided. Interest groups will move into this vacuum because no other institutions exist to do so. It remains an open question whether the nation’s individual business enterprises and their associations have the collective will to be in the first rank of those powerful interests. Earlier in this book, we explored three possible scenarios of the business–government relationship in 2025. In other chapters, we have presented a rationale and a strategy by which the business community can actually become a major force in shaping elections, legislation, and public opinion. Only the leaders of America’s business enterprises can bring that strategy to fruition. It is their decision that will determine the final scenario of the world of 2025. NOTES 1. Wall Street Journal, October 20, 2000, p. A1. 2. Source: Voter News Service exit polls. 3. Ibid. 4. Ibid. 5. For a useful discussion of this issue in the light of the 2000 election, see Francis Fukuyama, “What Divides America,” Wall Street Journal, November 15, 2000, p. A26. 6. Sources: Federal Election Commission and Center for Responsive Politics. 7. Source: Congressional Quarterly. 8. Dennis Hale, “Civil Discontent,” Washington Post Book World, March 11, 2001, p. 13. The quotation is from a review of The Trouble with Government by Derek Bok (Cambridge, MA: Harvard University Press, 2001). 9. Meet the Press, NBC, December 10, 2000.

Afterword A book on political strategy should leave the reader with a reasonably definitive description of the rules of the game for the future. Alas, such tidiness is not wholly possible in a work as deeply pervaded by the niceties of campaign finance law and regulation as this one is. Apart from frequent interpretations by the FEC and the courts, Congress seems constantly to be considering new ways to amend the law. The fact that few of those have succeeded over the past quarter-century does not mean that the next efforts will also fail. An entire industry of interest groups and election lawyers exists to pursue or oppose reforms of one kind or another. Important elements of the media also seem dedicated to regulating the First Amendment rights of every interest but theirs. It is not easy for members of Congress to legislate on this issue because they are so deeply affected by it. It is the ultimate conflict of interest. Over the years, lawmakers have made many attempts to revamp the law, some for show and some in earnest. Some of the changes they have considered would help them as incumbents; not many would harm their reelection prospects. Sometimes, one house has passed a reform bill well aware that the other will kill it, or that a president would veto it, or that the courts could be counted on to throw out all or part of it on constitutional grounds. The most recent such effort occurred in the spring of 2001 when the Senate passed the McCain-Feingold bill to ban most uses of soft money, modestly increase hard-money contribution limits, and make it more difficult for interest groups to engage in issue advertising in the final weeks of political campaigns, the latter constitutionally dubious. The political context for the legislation was more complex than usual because there

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Afterword

seemed a good chance that the House would also approve it, thereby compelling lawmakers to confront the real-life consequences of their actions. For that very reason, some traditional pro-reform forces (including some labor and Black interests) broke away from the liberal coalition to oppose the bill, as did conservative groups and most (but not all) business organizations. When the House took up the bill and a competing alternative in July, the legislation was derailed on a close procedural vote. That may or may not be the end of it in the short term, but there is never finality to this issue. Whatever changes in the regulation of political money Congress may ultimately enact, campaign finance will remain a permanent issue on the nation’s agenda. The law’s inherent deficiencies perpetually give rise to ingenious ways to circumvent it. Dissatisfaction with the existing system is as widespread as the varied proposals for change. New remedies will breed new problems, which in turn will engender demands for still further reform. The issue is insoluble because no one has been able to devise an approach that will satisfy most points of view or solve most problems without creating new ones. After this book was largely completed, another work was published which should be required reading for lawmakers before they make yet another run at campaign finance legislation. That book is Unfree Speech: The Folly of Campaign Finance Reform, by Bradley Smith, a former law professor and current member of the FEC. Unfree Speech is a comprehensive analysis and indictment of the rationale of most political “reformers” over the past three decades—that the answer to recurring problems of failed regulation is still more regulation. In the end, Smith comes to the same conclusion that this book does: deregulation of political finance, coupled with immediate and comprehensive disclosure, is an approach that is workable, constitutional, and well worth trying.

Selected Readings The books and articles listed below are good-to-excellent sources of information on the subjects treated in this book. In addition, there are a large and growing number of websites that cover these and related subjects. Because the number of websites is constantly growing, the various search engines will be the best guides to current information on particular topics. Politics is in a particularly dynamic phase. Its rules are established by federal and state laws that are as frequently the product of judicial decisions as they are of legislation and regulatory actions. Changes in the law may affect the tactics and techniques described in this book. The American publications included in the list of periodicals at the end of this list are a good source of news about such changes and other political developments, at least at the federal level. These same periodicals also provide, in varying degrees, useful coverage of the issues discussed in Chapter 9. These issues will remain on the public agenda for decades, even as each is treated or affected by a variety of short-term developments. In addition, The Economist, a British weekly, frequently analyzes developments affecting technology and the global economy, while also providing fine coverage (from a European viewpoint) of U.S. political and economic news. Technology is in a period of rich and rapid change, and will undoubtedly continue to produce major discoveries and applications, sometimes with sweeping social, political, and economic consequences. The reader who wishes to be ahead of the curve of political and issue developments should peruse the better periodicals with care, and in a constantly reflective and analytical frame of mind.

246

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BOOKS AND MONOGRAPHS Alexander, Herbert E. Financing Politics: Money, Elections, and Political Reform, 4th ed. Washington, DC: CQ Press, 1992. Alexander, Herbert E., and Rei Shiratori, eds. Comparative Political Finance among the Democracies. Boulder, CO: Westview Press, 1994. Baran, Jan Witold. The Election Law Primer for Corporations, 2nd ed. Chicago: Section of Business Law, American Bar Association, 2000. Bennett, Daniel, and Pam Fielding. The Net Effect: How Cyberadvocacy Is Changing the Political Landscape. Merrifield, VA: e-advocates Press, 1999. BeVier, Lillian R. Campaign Finance “Reform” Proposals: A First Amendment Analysis. Policy Analysis No. 282. Washington, DC: Cato Institute, 1997. Broder, David S. Democracy Derailed: Initiative Campaigns and the Power of Money. New York: Harcourt, 2000. Broder, David S. The Party’s Over: The Failure of Politics in America. New York: Harper & Row, 1972. Corrado, Anthony et al., eds. Campaign Finance Reform: A Sourcebook. Washington, DC: Brookings Institution Press, 1997 Friedman, Thomas B. The Lexus and the Olive Tree, rev. ed. New York: Farrar, Straus and Giroux, 2000. Gilder, George. How Infinite Bandwidth Will Revolutionize Our World. New York: The Free Press, 2000. Jamieson, Kathleen Hall. Everything You Think You Know about Politics . . . and Why You’re Wrong. New York: Basic Books, 2000. Magleby, David B., ed. Election Advocacy: Soft Money and Issue Advocacy in the 2000 Congressional Elections. Provo, UT: Brigham Young University, 2001. Magleby, David B., ed. Getting Inside the Outside Campaign: Issue Advocacy in the 2000 Presidential Primaries. Provo, UT: Brigham Young University, 2000. Magleby, David B., and Marianne Holt, eds. Outside Money: Soft Money & Issue Ads in Competitive 1998 Congressional Elections. Provo, UT: Brigham Young University, 1999. Malbin, Michael J., and Thomas L. Gais. The Day after Reform: Sobering Campaign Finance Lessons from the American States. Albany, NY: The Rockefeller Institute Press, 1998. McRae, Hamish. The World in 2020. Boston: Harvard Business School Press, 1994. Micklethwait, John, and Adrian Wooldridge. A Future Perfect: The Essentials of Globalization. New York: Crown Business, 2000. Murray, Alan, The Wealth of Choices. New York: Crown Business, 2000. Prendergast, William B. The Catholic Voter in American Politics. Washington, DC: Georgetown University Press, 1999. Public Affairs Council. The Corporate PAC Handbook: A Complete Guide to Successful Fundraising. Washington, DC: The Council, 2001. Public Affairs Council. Winning at the Grassroots: A Comprehensive Manual for Corporations and Associations. Washington, DC: The Council, 2000. Putnam, Robert D. Bowling Alone. New York: Simon & Schuster, 2000.

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Smith, Bradley A. Unfree Speech: The Folly of Campaign Finance Reform. Princeton, NJ: Princeton University Press, 2001. Sorauf, Frank J. Inside Campaign Finance: Myths and Realities. New Haven, CT: Yale University Press, 1992. Stanger, Jeffrey D., and Douglas G. Rivlin. Issue Advocacy Advertising During the 1997–1998 Election Cycle. Washington, DC: Annenberg Public Policy Center, 1999. Toffler, Alvin. Future Shock. New York: Bantam Books, 1970. Toffler, Alvin. Powershift: Knowledge, Wealth, and Violence at the Edge of the 21st Century. New York: Bantam Books, 1991. Toffler, Alvin. The Third Wave. New York: Bantam Books, 1981. Wattenberg, Martin P. The Decline of American Political Parties, 1952–1996. Cambridge, MA: Harvard University Press, 1998. Wattenberg, Martin P. The Rise of Candidate-Centered Politics. Cambridge, MA: Harvard University Press, 1991.

ARTICLES AND PAPERS Boaz, David. “Politicians Hate Competition.” The Journal of Commerce, July 29, 1998, p. 6A. Business–Industry Political Action Committee. Project 2000 Political Toolkits (series of five brochures). Washington, DC: The Committee, 2000. Crook, Clive. “The Third Way Is a Fraud. And a Very Handy One, Too.” National Journal, October 31, 1998, p. 2538. Dionne, E. J., Jr. “The Big Idea.” Washington Post, August 9, 1998, p. C1. Edsall, Thomas B. “Census a Clarion Call for Democrats, GOP.” Washington Post, July 8, 2001, p. A4. Ellis, Joseph J. “The Electoral College Beats the Alternatives.” Wall Street Journal, November 15, 2000, p. A26. Fukuyama, Francis. “What Divides America,” Wall Street Journal, November 15, 2000, p. A26. Heritage Foundation. 2001 Index of Economic Freedom. Washington, DC: The Foundation, 2000. [Published annually.] Jenkins, Holman W., Jr. “Hooray for Soft Money.” Wall Street Journal, October 27, 1999, p. A19. Kaiser, Robert G. “We’re Divided, and We’d Better Get Used to It.” Washington Post, November 12, 2000, p. B1. Leege, David C. “Divining the Electorate: Is There a Religious Vote?” Commonweal, October 20, 2000, p. 16. Mercer, David. “Global Forces Which Will Shape Our Economic and Political Lives.” Futures Research Quarterly 13, no. 4 (1997). National Conference on State Legislatures. “America in the Year 2025.” Denver, CO: The Conference, 1999. Rauch, Jonathan. “Campaign Finance Restrictions Collapse. Let Them,” Wall Street Journal, December 15, 1998, p. A22. Rauch, Jonathan. “Don’t Break Up the Party.” Wall Street Journal, February 4, 2000, p. A18.

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Rauch, Jonathan. “A Ludicrous Pledge, Fortunately Ignored.” Washington Post, August 27, 2000, p. B1. Samuelson, Robert J. “Bye-Bye 1st Amendment.” Washington Post, February 11, 2000, p. A41. Samuelson, Robert J. “Ignoring Immigration.” Washington Post, May 3, 2000, p. A23. Samuelson, Robert J. “Where the Money Flows.” Washington Post, September 27, 2000, p. A23. Simpson, Alan K., and Richard D. Lamm. “571 Million Americans.” Washington Post, June 20, 2000, p. A23. Stopford, John. “Multinational Corporations Think Again.” Foreign Policy (Winter 1998–1999): 12.

PERIODICALS Congressional Quarterly Weekly Report The Economist Los Angeles Times National Journal New York Times Wall Street Journal Washington Post

Index Adams, John Quincy, 235–36 AFL-CIO, 167, 170, 172, 174, 211, 219, 232 African Americans. See Blacks; Voting, African-American AIDS, 19 Alaska, and party voting, 71 Alger, Horatio, 29 Allen, Paul, 36 Alternative Minimum Tax. See Tax policy, in the United States American Association of Retired Persons (AARP), 104, 116, 201 American Business for Legal Immigration (ABLI), 171 American Civil Liberties Union (ACLU), 159, 179, 219 American Medical Association (AMA), 114 Americans for Job Security, 139 Amnesty International, 194 Animal Farm (Orwell), 53 Annan, Kofi, 194 Antitrust laws, 28; and current technologies and markets, 30 Archer-Daniels-Midland Corporation (ADM), 163, 176 Aristotle, 128

Armacost, Michael, 215 Aron, Raymond, 36 Australia, 209 Austria, 209 ‘‘Banana War, The,’’ 45 Becker, George, 69 Belgium, 209 Bergsten, C. Fred, 197 Blacks, 37–38, 74, 85, 90, 116, 244. See also Voting, African-American Blair, Tony, 73 Bowling Alone (Putnam), 103–4, 123, 238 Bradley, Bill, 74–75 Braudel, Fernand, 1 Bretton Woods conference, 16 Britain. See Great Britain Broder, David, 89, 104, 109 Buchanan, Pat, 32, 50, 75, 90, 95, 102, 103, 186, 209 Buckley v. Valeo Supreme Court decision, 99, 165, 167, 217, 218 Buddhism, 3 Bush, George H. W., 76 Bush, George W., 15, 74, 75, 81, 85, 90, 98, 121, 138, 170, 207; and fundraising, 214, 217

250 Bush, Jeb, 85 Business: acceleration of, 4–6; and ‘‘family feuds,’’ 118; importance of politics to, 33; versus the individual, 23; involvement in politics, 3, 9–10; and ‘‘New Economy,’’ 22; and ‘‘Old Economy,’’ 22; political instruments available to, 11; role in 2000 presidential election, 233–35; and social consciousness, 193–94; and trade, 184–85. See also Lobbying Business/government/economic enterprise in 2025, competitive democracy scenario of: electronic commerce, 64–65; grassroots political networks, 66–67; interest groups, 67; issue advertising, 66, 67; lobbying, 66, 67; ‘‘Naderites,’’ 66; regulatory protection, 65–66; the tax code, 65 Business/government/economic enterprise in 2025, libertarian democracy scenario of: Business Council of the United States (B-CUS), 61, 62; business self-regulation, 62–63; deregulation of federal elections, 62; European Union, 64; retailing via the Internet, 63; Supreme Court decision of 2011, 61–62; the tax code, 62; unionization, 63; voucher programs, 63–64 Business/government/economic enterprise in 2025, populist democracy scenario of: campaign finance reforms, 59; ‘‘Christmas Tree Coalition,’’ 58, 59, 60; decline of traditional political parties, 59; the Greens, 57–58; immigration restrictions, 59; interest groups, 59; isolationism, 59; protectionism, 59; the ‘‘Reds,’’ 58; senior citizen advocacy groups, 58; shortage of skilled workers, 58–59; spread of direct democracy, 60; Tax Fairness Act of 2018, 60; unionization, 59; voting via the Internet, 60 Business persons, and lack of engagement in politics, 122–24

Index Business Round Table, 139, 141, 158, 162, 174, 186 Business-Industry Political Action Committee (BIPAC), 78–79, 119, 133–34, 136, 143 Cable News Network (CNN), 91 California, 105–6, 107, 109, 126; energy crisis, 223 Campaign finance, 213–21, 243–44; and the First Amendment, 215–17, 219, 220; model issue ad messages, 221– 22; taxpayer support for, 218 Canada, 15, 27, 101, 209; campaign finance in, 213; and Conservative Alliance, 8, 9; cultural problems relating to Quebec, 211–12; and Progressive Conservatives of Canada, 8 Capital, movement of, 16 Carnegie, Andrew, 210 Carville, James, 95 Casey, Gregory, 239–40 ‘‘Censure and Move On,’’ 179 Change: and U.S. business–government relationship, 10–11; and time, 3 Cheney, Dick, 6, 95, 228 China, 29–30: gross domestic product in, 19; and issue ads, 186; market economy in, 14; and PNTR, 79–80, 82, 83, 85, 118, 162–63, 187; tie-in to the world trading system, 24; trade relations with, 21, 184, 186 Christian Coalition, 100, 105, 140, 166, 167, 175 Christian Democratic Party (Italy), 8 Christianity, 3 ‘‘Citizens for Better Medicare’’ (CBM), 140, 159, 172, 174 ‘‘Citizens for the Republican Congress,’’ 140 ‘‘Citizens for State Power,’’ 140 Clarke, Arthur C., 17 Clinton, Bill, 15, 28, 76, 78, 79, 81, 113, 114, 138, 158; and health care, 223 Clinton era, 75 Cold War, 36

Index Common Cause, 99, 218 Communism, dissolution of, 14, 16 Communist Manifesto, The (Marx and Engels), 16 Community service, 104 Comparative advantage, 192 Congress, and party control, 80–82 Conservative Alliance (Canada), 8 Constitution Party, 102 Consumer electronics, 191 ‘‘Contract with America,’’ 85 ‘‘Creative destruction,’’ 192 Currency crunches, 17

Daley, Richard, Sr., 108 Daley, William, 108 Davis, Thomas, 107 Democracy, 108; direct, 109, 224–25 (see also Voting, and the direct democracy movement); and global economic power, 53–54; as representative form of government, 111 Democratic institutions, adoption of, 13 Democratic Leadership Council (DLC), 73 Democratic National Committee, 138, 168 Democratic Party, 69–73, 84, 85, 98, 99, 100–101, 219, 228–31, 233, 236; and Blacks, 71; ‘‘Blue Dogs’’ and, 73; core constituencies, 74; decay of, 91–92; and the entertainment industry, 69; and ‘‘fast track’’ agreements, 187; ‘‘New Democrats’’ and, 73; in the South, 69. See also Campaign finance; Party caucuses; Political parties; Political parties, decline of; Political reform, and the parties Democratic values, 53 Demographics, 37–38, 159, 206–7 Direct democracy. See Democracy, direct Direct investment in foreign countries, 189 Direct mail, 172–73 Dole, Bob, 96, 138

251 ‘‘Domestic economy,’’ 14 Drucker, Peter F., 57 Economic globalization. See Globalization Economic regulation, role of, 27–34 Economist, The, 48, 106 Einstein, Albert, 4, 210 Eisenhower, Dwight, 113, 188 Elections, U.S. congressional: 1946, 113; 1994, 72, 76; 1998, 77–78 Elections, U.S. presidential: 1824, 235, 236; 1828, 235; 1876, 236; 1888, 236; 1912, 236; 1952, 113; 1956, 113; 1960, 113, 236; 1964, 72; 1968, 113; 1972, 113; 1992, 102, 103, 106, 236; 1996, 102; 2000, 74–75, 102, 103, 126, 133–34, 170, 228–35, 236, 237. See also Campaign finance; Florida, and 2000 presidential election; Political parties; Political parties, decline of; Primaries Electoral College, 101–2, 236–37 ‘‘Electric Utility Shareholders Alliance,’’ 140 E-mail, 173, 180 Emily’s List, 174 Energy/environmental policy, 223–24 Engels, Friedrich, 16 Environmental groups, 54–55 European Economic Community, 36. See also European Union European Union (EU), 17, 18, 23, 24, 45, 195; Common Agricultural Policy (CAP), 46 Exports, 188–89, 199–200 Express advocacy, 165–66 Faith and Family Alliance, 140 Federal Communications Commission, 47 Federal Election Campaign Act (FECA), 134, 216 Federal Election Commission (FEC), 134, 137, 138, 142, 165–167, 216, 220, 243, 244 Federal Reserve Board, 76, 77; and interest rates, 28

252 First Amendment, 168, 215–17, 219, 220 Florida, 85; and 2000 presidential election, 51, 91, 230, 235, 237 Fogel, Robert, 20 Forbes, Steve, 202, 217 Ford, Gerald, 36 Forrest Gump, 214 France, 15, 21; and support for Quebec, 64 Free Trade Area of the Americas, 195 Free trade movement, 16 Freedom of speech, 168, 215–17, 219, 220 Fukuyama, Francis, 5–6 Future Shock (Toffler), 36 Gates, Bill, 29, 36 General Agreement on Tariffs and Trade (GATT), 14 General Electric (GE), 161, 163 Gephardt, Richard, 239 Germany, 15, 73, 209, 211; campaign finance in, 213 Gingrich, Newt, 78, 79, 96 Globalization, 3, 6, 13–15, 188; and AIDS, 19; development of, 16–22; and economics, 10; versus parochialism, 22–25; problems exacerbated by, 19–20 Goizueta, Roberto, 210 Goldwater, Barry, 72 Goode, Virgil, 106 Gore, Al, 6, 73, 74, 76, 85, 90, 94, 98, 99, 107, 114, 138, 170; attacks on big industry, 234; and fund-raising, 214, 217, 220 Government: alteration of personal behaviors, 26; internal focus of, 25; and legislation, 125–26; local, 47–48; provision of direct services, 26; recycling and redistribution of income, 26; regulation of commercial transactions, 47; regulation of private enterprise, 26; state, 48 Great Britain, 15, 26; campaign finance in, 213; and Labour Party, 8, 14–15, 73; and political parties, 8

Index Great Depression, 16, 107, 113, 188, 202, 210 Green Party, 102, 107, 229, 230 Greenspan, Alan, 190, 192, 227 Grove, Andrew, 210 Hale, Dennis, 238 Handgun Control, 174 Hanna, Mark, 107, 108 Hard money, 98–100, 132, 135–37, 165– 66, 169, 214, 219–20 Harding, Warren G., 108 Hastert, Dennis, 78–79 Hawaii, and party voting, 71 Health Benefits Coalition, 139 Health care, 76, 223 Health Insurance Association (HIA), 158 Health maintenance organizations (HMOs), 161 Heritage Foundation, 27 Hill, The, 160 ‘‘Hillarycare,’’ 76 Hispanics, 37, 38, 116. See also Voting, Hispanic Hong Kong, 27 ‘‘Hot money,’’ 199 Hunt, Albert R., 188 Ideology, 74–75, 110, 113–14; and polarization of, 71, 72–75 Immigration policy, 49–51, 183, 209–12 Imports, 189–91, 192, 194, 196 Income tax. See Tax policy, in the United States Independent expenditure (IE) committees, 137 India, gross domestic product in, 19 Individual Retirement Accounts (IRAs), 200–201, 203, 204 Industrial Revolution, 4 Innovation, 192 Interest groups, 9, 85, 100, 169–71, 231– 32; and future politics, 104–5, 113– 18; and ideology, 74; role of in 2000 presidential election, 231–32. See also Lobbying; Political action committees

Index Internal security considerations, 25 International Confederation of Free Trade Unions, 194 International trade, 184, 185–96 Internet, 4, 173, 185: beginnings of, 36; and education, 47; as a political instrument, 178–80; and ‘‘push technology,’’ 180 Iraq, 3 Ireland, 27 Islam, 3 Israel, 101 Issue ads, 171, 176–77. See also Issue advocacy, long-term applications, model issue ad messages; National savings and capital formation, model issue ad messages; Social Security, and immigration, model issue ad messages Issue advocacy, 3, 7, 11, 157–58, 195, 219, 233; guidelines, 176–78; and image ads, 163–64; by interest groups, 169–70; and the law, 165–69; and lobbying, 158–64; long-term, 176; macro-issues and, 11; media, 171–76; as a political instrument, 164–65. See also Express advocacy; International trade; Issue advocacy, long-term applications Issue advocacy, long-term applications, 183–85; model issue ad messages, 196, 205, 212, 221 Italy: campaign finance in, 213; and Christian Democratic Party, 8 Jackson, Andrew, 71, 235–36 Japan, 27; and an aging population, 38; campaign finance in, 213; and keiretsu influence on foreign policy, 54; and management techniques, 16–17 Jefferson, Thomas, 71, 107 Jeffords, James, 106 Johnson, Samuel, 130 Kennedy-Nixon presidential debates, 6, 92 Keynes, John Maynard, 28 Know-Nothing movement, 50

253 Kohl, Helmut, 213 Kuwait, U.S. defense of, 24 Labor unions, 54, 131, 141, 193, 232; votes cast for Bush, 228. See also AFL-CIO Labour Party (U.K.), 13–14, 73 Lamm, Richard D., 50 League of Conservation Voters, 140, 141, 174 Legislation. See Government, and legislation; Politics, and legislation Liberal Democratic Party (U.K.), 8 Liberal Party (U.K.), 8 Libertarian Party, 102 Lieberman, Joe, 6, 73 Lindsay, Lawrence B., 201 Lobbying, 7, 10, 31, 124, 127, 128, 132, 195; and political support, 86–87; preconditions for legislative success, 82–84; as a retail operation, 82; strategic considerations, 84–86. See also Issue advocacy, and lobbying Lucent Technologies, 162 Luxembourg, 27 Macroeconomic policies, 27–28 Magleby, David, 170, 174 Maine, 106, 237 Malaysia, 17; gross domestic product in, 19 Management techniques, transformation of, 16–17 Mann, Christine L., 198 Market competition, 192–93. See also Personal computers, and market competition Market economies, shift to, 13–14 Marx, Karl, 16 Matalin, Mary, 95 McCain, John, 75, 140, 178 McCain-Feingold bill, 243–44 McKinley, William, 107, 108 McRae, Hamish, 41, 42 Medicare, 49, 171–76, 206, 207. See also Citizens for Better Medicare Mexico, 15, 17; gross domestic product

254

Index

in, 19; and the PRI (Industrial Revolutionary Party), 8 Micklethwait, John, 13 Microsoft Corporation, 29, 30, 31; antitrust case against, 118 Mississippi, 72 Model corporate and association program, 145–55 Monetary policy, 28 ‘‘Moore’s Law,’’ 4 Motorola Corporation, 162, 191 Moynihan, Daniel Patrick, 216 Multinational corporations, 18 Murdoch, Rupert, 210 Murphy, Robert G., 198

New York, and political parties, 96, 106, 108 New Zealand, 27 Nixon, Richard, 76, 113, 144 North American Free Trade Agreement (NAFTA), 44, 77, 184, 186–87 North Atlantic Treaty Organization (NATO), 24; intervention in the Balkans, 24

Nader, Ralph, 15, 32, 54, 90, 102, 103, 107, 186, 229–30 National Abortion and Reproductive Rights Action League (NARAL), 157, 170, 174 National Association for the Advancement of Colored People (NAACP), 90, 100, 139, 141, 174, 232 National Association of Manufacturers, 101, 119, 139 National Council of Senior Citizens, 116 National Education Association (NEA), 160–61, 174, 179 National Federation of Independent Businesses (NFIB), 83, 174 National Journal, 160 National Rifle Association (NRA), 90, 100, 161, 174, 175, 232, 234 National Right to Life Committee, 175 National savings and capital formation, 184–85, 199–205; model issue ad messages, 204–5 Nativism, 50 Natural Law Party, 102 Nebraska, 237 Negative Population Growth, 171 Nestle´, 22 Nethercutt, George, 140 New Deal, 71, 107, 113, 202, 207, 208 ‘‘New Economy’’ companies, 22

Parochialism: versus globalism, 22–25; and regulation, 26–34 Party caucuses, 105–7 Party’s Over, The (Broder), 89 Pax Americana, 36 Peace Action, 140 Pensions, 223; funding, 48–49. See also Retirement funding Permanent normal trade relations (PNTR). See China, and PNTR Perot, Ross, 52, 70, 102, 103, 187, 217 Personal computers, 36; and market competition, 191 Personal Identification Technology Control (PITC), 145–55 Personal savings, 200, 202, 205. See also Individual Retirement Accounts Pfizer Corporation, 163 Philip Morris Corporation, 164 Physicians, unionization of, 54 Planned Parenthood, 141, 174 Political action committees (PACs), 97, 122, 130, 133–34, 135–37, 139, 169, 220, 238. See also BusinessIndustry Political Action Committee Political participation programs, 142; candidate endorsements, 142; candidate meetings, 142–43; voluntary political activity, 143–45; voting records, 143 Political parties, 11; and the business

‘‘Old Economy’’ companies, 22 Oregon, 109 Organized labor. See AFL-CIO; Labor unions Orren, Gary, 121 Orwell, George, 53

Index community, 75–79, 239–41; and ideological polarization, 72; impact of, 229–31; and money, 97–101; personal contributions to, 134–35; and political loyalties, 70–72; and ‘‘reforms,’’ 11. See also Campaign finance; New York, and political parties; Party caucuses; Political parties, decline of; Political reform, and the parties Political parties, decline of, 2–3, 8–9, 52–53, 74, 92, 117–18, 229; and liberated candidates, 95–96; and party loyalty, 101–5; and political consultants, 94–95; and primaries, 93–94, 96– 97; and television, 92–93 Political powers of tomorrow, 113–19 Political pragmatism, 75, 113, 114–15 Political reform, 110–12, 236–39; and the parties, 106–7; price of, 107–9 Politics, 10, 104–5; and business, 2, 128– 29; evolution of in the United States, 6–10, 221; instruments of, 121– 24; and legislation, 124–27; and money, 129–33, 215 (see also Campaign finance); rightist leanings, 15; voters’ aversion to, 6 Politics, future, 227–28, 235–36 Poverty, 20; trickle-down thesis, 20 PRI. See Mexico, and PRI Primaries: blanket, 97; closed, 96–97; open, 97. See also Political parties, decline of, and primaries Principal Insurance, 162 Procter & Gamble, 22, 161 Progressive Conservative Party (Canada), 8 Protectionism, 32, 45 Protest groups, 32 Public education, 222 Public opinion, 127–28; in Russia, 127 Public policy magazines, 160 Putnam, Robert, 103–4, 123, 238 Rauch, Jonathan, 216, 219–20 Reagan, Ronald, 14, 76, 113 Reagan Democrats, 103 Reagan-Bush era, 75

255 Reform Party, 70, 75, 102 Reformers, 107–9, 236–69. See also Political reform Republican National Committee, 138, 168 Republican Party, 69–73, 84, 85, 98, 99, 100, 101, 219, 228–31, 233, 236; and Blacks, 71; core constituencies, 74; and decay, 91–92; and executives, 69; and ‘‘fast track’’ agreements, 187; as the party of business, 75–79; and the South, 71–72. See also Campaign finance; Political parties; Political parties, decline of; Political powers of tomorrow ‘‘Republican Revolution,’’ 76, 81 ‘‘Republicans for Clean Air,’’ 140 Retirement funding, 49. See also Individual Retirement Accounts Ricardo, David, 192 Robertson, Pat, 187 Rockefeller, Nelson, 72 Roland, Jeanne-Marie, 183 Roll Call, 160 Roman Catholic Church, 116–17 Roosevelt, Franklin, 71, 75, 210 Roukema, Marge, 145 Russell, Bertrand, 157 Russia: decline of population in, 38; gross domestic product in, 19; market economy in, 14 Samuelson, Robert J., 20, 197–99, 216– 17 Savings rate, 204. See also Personal savings SBC, 31 Schumpeter, Joseph, 192 Section 527 political organizations, 139– 40 Service industries, 18, 21 Sherman Antitrust Act, 29 Sierra Club, 55, 90, 140, 141, 170, 174, 217; attacks on George Bush, 158 Simpson, Alan K., 50 Singapore, 27 Smith, Adam, 28, 53; on consumption, 190; on international trade, 191–92

256 Smith, Bradley A., 244 Social Democratic Party (Germany), 73 Social Security, and immigration, 205– 8; model issue ad messages, 212–13. See also Immigration policy Social Security Trust Fund: deficits, 207; resolving deficits, 207–8 Socialist Party, 70 Soft money, 98–101, 111–12, 137–41, 167–68, 216, 219–20, 234; categories of, 137–41 South Korea, gross domestic product in, 19 South, U.S.: and ideological polarization, 71; and Republican strategy, 72 Soviet Union, implosion of, 16 Sprint, 31 ‘‘Stand Up for Steel,’’ 159 Standards of living, increase in, 19 Strategic voting, 6 Summers, Lawrence, 200 Switzerland, 209 Tax policy, in the United States, 200– 203; and Alternative Minimum Tax (AMT), 202; possible changes to, 203–4 Taxes, 202–3, 207, 208 Technology: and economic growth, 20– 21; fear of, 17–18; innovations in, 17. See also Globalization Texas, 105 Thatcher, Margaret, 14 ‘‘Third Way, The,’’ 73 Time, and change, 3 Toffler, Alvin, 1, 4, 36 Toynbee, Arnold, 24 Trade deficits, 198–200 Trade promotion authority, 195 Truman, Harry S., 102, 188 Twain, Mark, 215 Two-party system. See Political parties Unilever, 22 United Nations, 23 United Nations’ Global Contract, 194 United States, 27, 45, 126, 194, 241–42:

Index campaign finance in, 213–14; cultural problems, 211–12; economic expansion, 192; and exports, 18, 21; federal and state budgets in, 15; gross domestic product (GDP), 206, 208; and imports, 18, 21; isolationism in, 16, 188; and nuclear power, 17; Progressive Era, 108–9. See also Great Depression; Social Security, and immigration; Tax policy, in the United States United States of 2025, 242: and an aging population, 42; and banking/securities trading, 44; demographics of, 37–38, 41; and economics, 42–46; energy resources and, 41; gross domestic product of, 40; natural resources and, 40–41; and productivity, 41; and retailing, 43–44; technological change and, 38–40; and telecommuting, 43 United Steelworkers of America, 159 Unruh, Jesse, 130 U.S. Chamber of Congress, 119, 139, 141, 161, 174, 217 U.S. Supreme Court, 97, 167, 168. See also Buckley v. Valeo Supreme Court decision Vandenberg, Arthur, 188 Ventura, Jesse, 106, 107 Venture capitalists, 117 Verizon, 22, 31 Virginia, 105 Vodafone, 22 Voter guides, 143, 172 Voting: African-American, 71, 104, 228, 232; and the direct democracy movement, 52; and the electorate as a whole, 127–28; Hispanic, 228; and incumbents, 87; issues, 51–52; and marital status, 228; stockholder, 228; straight-party, 85; ticket-splitting, 84; turnout, 89–91; women, 232. See also Strategic voting Wall Street Journal, 5, 171 Wall Street Journal/NBC poll on foreign trade, 185–86

Index War, threat of, 47 Washington Metropolitan Area, 48 Washington Post, 91, 140, 171 Watergate scandal, 144, 215 Wattenberg, Martin, 70, 93 Wealth of Nations, The (Smith), 53 Weber, Vin, 188 Welfare reform, 122 Wertheimer, Fred, 99 Wilson, Heather, 107

257 Woodcock, Leonard, 187 Wooldridge, Adrian, 13 World Health Organization (WHO), 23 World Trade Organization (WTO), 14; admission of China into, 14, 21 World War I, 45 World War II, 16, 45 Worldcom, 31 World Wildlife Fund, 194

About the Author CHARLES S. MACK has more than 40 years experience in politics, business–government relations, and association management. He is the recently retired president and CEO of the Business-Industry Political Action Committee (BIPAC). He previously headed a major food industry association, was director of public and government affairs for a multinational corporation, and served on the staffs of the Republican National Committee and the U.S. Chamber of Commerce. He has managed congressional and other political campaigns in several states. Mack has also taught graduate courses in government relations at the United States Military Academy and at George Washington University’s Graduate School of Political Management. He is a graduate of Haverford College with Honors in Political Science. His three earlier books for Quorum are Lobbying and Government Relations (1989), The Executive’s Handbook of Trade and Business Associations (1991), and Business, Politics, and the Practice of Government Relations (1997).

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Strategy, Innovation, and Change: Challenges for Management

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