Mises Daily

Why Politicians Sell Out

Thirty-six years as an economics professor has left my office walls lined with overflowing bookshelves. Included on my shelves are the 1974, 1978, 1981, and 1985 membership directories for the American Economic Association (AEA). Dated membership directories, even for flagship organizations like this one, figure to be irrelevant. Not in this case, however. They offer an interesting example of “beltway conversions”—to wit, U.S. congressmen and senators becoming more tolerant of government excess once they become ensconced within the Washington D.C. beltway.

The example revolves around former Texas congressman and senator, Phil Gramm. First elected to the House of Representatives in 1978, then to the Senate in 1984, he retired from the Senate in 2002, having made a brief run for the Republican presidential nomination in 2000. As many probably know, Gramm’s pre-Beltway incarnation was as an economics professor at Texas A and M University (from 1967 to 1978). He earned an academic reputation for insightful analysis of private property and open markets as engines of economic progress.

Gramm had biographical entries in each of the above AEA membership directories, after which his AEA membership apparently lapsed. Our focus is on the research agenda Gramm included in his 1974 and 1985 biographical entries. The two entries correspond to Gramm’s pre- and post-Beltway incarnations (he indicated no research agenda in 1978 or 1981). To avoid question, I repeat the two entries in their entirety, highlighting the research agenda. First the 1974 entry: 


GRAMM, William P., academic; b. Columbus, Ga., 1942. Educ. B.B.A., U. of Georgia, 1965; Ph.D., U. of Georgia, 1967. Doc.Dis. Constant Taste and the Theory of Demand, 1967. Fields 300, 040, 720. Pub.”Wage Rates, Transactions Costs, and the Demand for Money,” Amer.Econ. Review, 1973; “The Real-Balance Effect in the Great Depression,” Jour. Of Econ History, 1972;  “The Stock of Money and Investment in the U.S., 1897-1966,” American Econ. Rev. 1969. Res. How to Get Rid of Govt., Cur. Pos. Prof. of Econs., Texas A and M U. since 1967. Address Texas A and M Univ., Dept. of Econs., College Station, TX 77843. (emphasis added)  


Note Gramm’s 1974, pre-Beltway research agenda. A professor at a major state university researching how to get rid of government should encourage all with a libertarian bent. We can only speculate what media pundits would have done with this had Gramm’s presidential candidacy become more serious. Maybe he could have said he “never inhaled the heresy,” huh?  Anyway, what’s important for our purpose is that the research agenda did not survive seven years within the Beltway. His entry in the 1985 directory was:


GRAMM, W. Philip, 4201 Yuma St. NW, Washington, DC 20016. Phone: (202) 225-2002; Home (202) 362-5541. Fields: 300, 040. Birth Yr. 1942. Degrees: B.B.A., U. of Ga., 1965; Ph.D., U. of Ga., 1967. Prin. Cur. Position: U.S. Senator, 1985. Concurrent/ Past Positions: U.S. Congressman, 1979-1984; Prof. of Econs., Texas A. & M. U., 1967-78.   Research: Balancing the Federal Budget. (emphasis added) 


Alas, instead of trying to figure out how to slay the government monster, Gramm had metamorphosed into trying to figure out how to feed it with tax dollars instead of printing press or debt dollars. Gramm’s conversion admittedly was not end-of-spectrum to other end-of-spectrum. But going from something that smacks of a healthy dose of libertarianism to the pedestrian objectives of country-club Republicans represents significant movement across the spectrum.  

Why Does It Happen? 

Beltway conversions like Gramm’s occur all the time. Nevertheless, political analysts and politicians are clueless when it comes to explaining them. Some media commentators playfully attribute Beltway conversions to the “water” or “air” in Washington D.C. This is little more than cluelessness hiding behind humor. Cluelessness plus arrogance describe those left-leaning pundits who credit Beltway conversions to politicians’ “personal growth.”  That is, you’re “growing” when you espouse positions I espouse.  

A January 21, 2003 Wall Street Journal op-ed by Georgia senator Zell Miller offered another clueless perspective. Miller ascribed the phenomenon to congressional and senatorial memory lapses. As Miller put it, limiting government spending is “…..often mentioned on the campaign trail, but amnesia strikes as soon as the candidates win and get inside the Beltway.”  While more scathing than water/air explanations, Miller’s perspective is equally clueless.   

In fact, Senator Miller’s hollow effort is a subset of a larger class of explanations that I call the “Jimmy Stewart” theory of government. Namely, the only way to avoid government failure is to have people like the Jimmy Stewart character in the old movie, “Mr. Smith Goes to Washington” in office. You know, good people do good things, and bad people do bad things perspective. End of story. High sounding?  Yes. Emotionally satisfying?  For many. Applicable this side of the Garden of Eden?  No.          

What About Incentives? 

More prosaic, but essential to explaining these conversions, is an understanding of the incentives that confront Beltway politicos. The fact is that U.S. federal tax institutions give Americans powerful incentives to pick the pockets of their fellow citizens in other districts/states. I live in Indiana. Who, pray tell, antes up the millions upon millions of dollars in federal spending in Indiana? The short answer: Hoosiers don’t! 

Indeed, non-Hoosiers pay virtually all the bill for the simple reason that six million Hoosiers account for a miniscule percentage of all Americans. It follows that Hoosier congressmen and senators have powerful incentives to load Hoosier plates to overflowing with federal programs. Why not, someone else is paying. Indeed, an important yardstick by which Hoosiers measure their congressmen and senators is how much “federal bacon” (fat or lean, it makes no difference!) they bring home.

Ditto for Americans in other states and other congressional districts; they face the same incentives. In effect, U.S. fiscal institutions offer incentives to those in Congress to be cross-state and cross-district pickpockets. Is it unfortunate that we all end up pickpocketing each other under the aegis of Uncle Sam? Yes. Theft decreases national wealth. Is it surprising?  No.     

There was a time, of course, when there was less, much less, cross-state/cross-district pickpocketing. This was when there was a de facto constitutional mandate that severely limited activities of the federal government in terms of both ability to tax and ability to spend. Many scholars argue that the undermining of this mandate began with the conclusion of the Civil War.              

Regardless of when Americans stepped out on to this slippery slope, however, it means that remedies for government failure must be radical in nature. Wishing and waiting for an “army” of Mr. Smiths or pre-Beltway Phil Gramm thinkalikes to arrive in Washington D.C. is naïve. Better public-sector outcomes must wait not upon better people but upon a better system that does not permit some to live at others’ expense.


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