Voting for Leaders Jude Wanniski February 27, 2004

Memo To: Students of Supply-Side University
From: Jude Wanniski
Re: Choosing Political Leaders

In our lessons in recent weeks, we discussed the democratic process at the simplest level, with the electorate having to vote yes or no on a single issue. We found that on such matters as a bond issue to finance a flood-control project, or a statewide proposition to limit taxes, or state referenda on environmental or gun-control propositions, the voters may at times 1) reject the advice of their political leaders and opinion leaders on which way to vote and 2) tell public opinion pollsters one thing and vote the opposite. In Massachusetts in 1976, we recounted a statewide vote that chose Jimmy Carter for President over Jerry Ford. On the same ballot, there were a dozen single-issue initiatives, each of which was placed on the ballot by a liberal interest on the basis of polls showing clear support for the proposal. In each case, the voters came to the opposite conclusion after serious discussion of its pros and cons. I suggested the image of the electorate as a mainframe computer, which processes all the information AVAILABLE to it in making such calculations in the political marketplace.

This week, we will take the electorate to a higher level of complexity as we consider the means by which it chooses political leaders or representatives -- leaders and representatives being quite different political actors. But first we should bridge the discussion with some comments on the possibility of running an entire political system with national balloting of this kind?

Do we really need presidents and prime ministers and senators and parliaments? The short answer is yes, we do need them, if only because modern society can afford the luxury of giving a small number of its members the job of doing the day-to-day work of lawmaking and rulemaking. Just as we no longer spend part of our week helping our neighbors build a new barn, or build our own homes, we can now buy the services of carpenters and contractors and financiers who specialize in doing those things. We elect those who have a comparative advantage, with the tools and skills, to do the political work of the nation. In doing so we economize on our time, which is the most precious, non-renewable resource we possess. Economics is fundamentally about economizing on our time. Our standard of living rises when we can produce more in the same amount of time, which gives us the option of spending less time producing the same amount or the same time producing more. The political work force is an extremely important segment of the general work force, because it can expand the free time we have when it does a good job of lawmaking and rulemaking. When it does a bad job of it, though, our free-time contracts, as we have to deal with recession, depression or war.

The single most important job in the nation is that of the top leader -- president, prime minister, king or dictator. The leader uses his skills best when he correctly divines what the electorate would do if it took time out of enjoying life to do the calculations that guide the course of the nation state.

We normally think of "politics" as dividing the wishes of liberals and conservatives, however those terms might be defined in a given era. In 1962-64, "liberals" supported the Kennedy tax cuts and "conservatives" opposed them. In 1981, liberals opposed the Reagan tax cuts which were patterned after the Kennedy tax cuts and liberals opposed them. Times change, but in the American two-party system, the divisions are linear: left, center and right.

Because there are so many complexities in choosing the direction which best suits the desires of the national electorate, I like to think of two dimensions instead of the simple linear approach. In deciding where to travel, we imagine a two-dimensional map, with points north, south, east and west. If we were setting out in a preferred direction we would have a compass of 360 degrees covering all the possibilities: SSE, NW, NNW, etc.

Suppose the electorate -- liberals and conservatives and everyone in between --would really would like to move west on the political compass after computing all the points on the compass. If the leader only hears those voices that wish to go east or wants to move east himself and has the power to do so, the electorate will be forced to rouse itself in some fashion to let its displeasure be shown.

A computer, though, will not compute unless it is presented with a problem. We cannot imagine a computer being programmed by a computer, ad infinitum, just as we cannot imagine the universe without a Creator. The electorate does not know if it wants or does not want a flood-control channel, or a reduction or increase in tax rates, until individual members of society who work in these areas ask for a computation by the electorate. This is why individuals are so important in a political system, individuals ready to step forward and offer leadership in one direction or another and make the arguments on why it is the best way to go.

In the economic marketplace, American consumers did not know if they wanted a hula-hoop until someone thought up the idea of a ring of plastic that you could wiggle on your hips, and persuaded others to finance the idea. If you were to ask them in a public opinion poll or marketing survey if they would pay $5 for a plastic hoop to wiggle on their hips, they would almost certainly answer in the negative. When the entrepreneur -- the leader -- takes the risks of trying it in the broad marketplace, a small number of consumers discover it is fun, and persuade others that it is worth $5.

Professor Reuven Brenner of McGill University in Montreal observes the general futility and negative returns of market surveys, when employed by giant corporations wanting to bring new products to the market. Fortunes are spent giving out samples and quizzing consumers before launching multi-million dollar media blitzes to market the new detergent or cookie or cereal only to find it rejected in the marketplace. More often an individual comes up with a new idea, raises the funds to try it out in the market, and when it succeeds, sells the rights to produce it to the corporate giant.

The experience of candidates for President using "focus groups" to find out what the political consumers want and then campaigning on those promises is the exact parallel. Every election season candidates spend tens of millions of dollars on focus groups and useless public-opinion polls. They do not understand the process by which the market has a conversation with itself in sorting out what it wants and what it doesn’t. In the earliest stages of the campaign for the Democratic presidential nomination last year, former Vermont Governor Howard Dean "spoke his mind" on the war in Iraq and zoomed into the frontrunner spot in the polls. Massachusetts Senator John Kerry, who was supposed to be the runaway favorite, got bogged down with advisors who told him what would "sell" according to their polls and focus groups, and as he seemed to be a cardboard candidate in mouthing these directions, his candidacy could not get off the ground. It was only when Howard Dean "spoke his mind" on economic issues that voters rejected while Kerry decided to be himself that the electorate rewarded Kerry and put aside interest in Dean.

It does not help if you get standing ovations at one speech after another, appealing to what you believe to be the tastes of your audience. In his quest for the 1980 GOP presidential nomination, former Texas Gov. John Connally brought the house down everywhere he went with a promise to shut off Japanese imports. I tried to persuade him that he was appealing to the dark side of his audiences and that they would on reflection turn against him. The several million dollars he spent produced only one delegate.

In his 1988 race for the GOP nomination, Jack Kemp’s biggest applause line was that he would refuse to negotiate with the Soviet Union unless Moscow first lived up to its past promises. On reflection, voters decided that they wanted their President to negotiate with Moscow no matter what, as the alternative was nuclear confrontation. Of the several contenders, George Bush was the only one who supported Ronald Reagan’s negotiations with Mikhail Gorbachev. After his losing campaign, Kemp told his closest backers that the line was his biggest mistake of the campaign. It could be a hard line the voters would accept in a candidate for the Senate or House. But that is because the national electorate attempts to elect to these "committees" a mixture of force and diplomacy, hawk and dove, pessimist and optimist. In the one national leader, the President, the electorate requires a balance, an equilibrium, the harmony of yin and yang.

The greatest assistance the leader has in anticipating the desires of the electorate comes from the electorate’s representatives. The congress or the assembly or the parliament is composed of men and women who reflect varied parochial interests, which must be taken into consideration and somehow composed by the nation’s leader. It is useful to think of the U.S. Congress as a committee of the whole people, supported out of the private earnings of the population, which we term the public expense. The committee is a mass of contradictions, especially in a nation as varied as the United States, and the mechanisms designed to compose those differences are unique in the world. If the President is a great leader, one who knows what the electorate wants before it even thinks it needs it -- like a hula hoop or a tax cut -- the electorate will even give him the number of Senators and Congressmen he needs to get his program passed. The phenomenon came to be called the President’s coattails.

Switzerland is the one state that successfully operates with a mechanism that relies on the general electorate to make its own calculations on all serious matters, delegating only housekeeping details to the political work force. There is a head of state in Switzerland and a national legislature, but all matters that involve redesign of the governments tax and spending powers are sent to the voters for ratification. In my entire life in political journalism or political economy, I’ve never known the name of the Swiss president or head of state. Among his many talents, McGill’s Reuven Brenner is an expert on the Swiss political system. He especially appreciates how it can function at such high levels of efficiency with such low levels of domestic conflict when it is comprised of three essentially different ethnic regions -- one German, one French, and one Italian. Suffice it to say that it has found a way to reduce the slippage between the political desires of the electorate and the resolution of those desires. As in Massachusetts, almost every year there are referenda on the Swiss ballot that have been promoted as political fads, after polls show they are clearly popular when the people hear them described by the pollster. The voters then go to work and shred the ideas, looking for nuggets that might be useful someday, but otherwise voting them down.

Switzerland can do without a clear leader because the Swiss choose to be neutral in global affairs while the United States cannot. A nation-state composed of distinct populations of Germans, French and Italians could not be anything other than neutral in a century of war among these ethnic groups. Switzerland is an example of a computer that is programmed by a computer, which is programmed by programmers. A nation has to have a primary leader when it cannot be neutral, when it has to choose sides among competing commercial nations or warring nations. If Switzerland were alone in the world, it would have to have a leader, because it could not program itself. As it is, it is constantly assessing where it is in the world relative to what the rest of the world is doing, on taxation, on monetary policy, and on foreign policy.

Because the United States was formed as a state, not a nation -- albeit a state which brought forth a new nation -- the mechanism our forefathers had to devise in the Constitution was different than all other mechanisms, and really only appropriate to the United States. The careful mixing of democratic and republican forms, the checks and balances of the three branches, and the powers granted to the individual states that comprised the union, had to have a precise kind of architecture. It had to be one that would enable the different ethnic and religious groups that came from other nations to live together in peace and harmony. This not only meant a more democratic architecture than existed in the Old World, but also mechanisms that militated toward the golden mean of moderation and tolerance.

If you want to design a tool enabling you to easily pour liquid into a bottle, without having it splash about, the tool will have to look like a funnel. That kind of thinking went into the design of our mechanism. The best source is The Federalist, which is a compendium of op-ed pieces written for the New York newspapers, arguing the merits of the Constitution. Right up front, in the first of the Federalist papers, Alexander Hamilton describes the concept of the funnel in different words: "Were there not even inducements to moderation, nothing could be more ill-judged than that intolerant spirit which has, at all times, characterized political parties. For in politics, as in religion, it is equally absurd to aim at making proselytes by fire and sword. Heresies in either can rarely be cured by persecution [p.3]"

The key words are "inducements to moderation." The structure of government, with the federal umbrella to state, county and local jurisdictions, is an inexorable inducement to moderation. In a homogenous nation state, parliamentary mechanisms produce simple coalitions of interests. In our federal system, there is the no real glue holding the political parties together. This results in a kaleidoscopic shifting of coalitions from one day to the next, one issue to the next.

Because each member of Congress has to rely on pulling all kinds of strange allies into his coalition, when he wants something that benefits only his constituents, he cannot afford to make many personal enemies. In the Senate, it is rare to find men and women who remain personally hostile toward each other for a long period of time because the mechanisms punish the extremes of passion. Politics makes for strange bedfellows. The fellow on the other side of the aisle whom you would secretly like to strangle today, next week is in your political embrace, as the world has turned and the issues have shifted.

The voters of each political subdivision not only want their representatives to generally represent their interests, but they want men and women who seem to have the political skills necessary to get along with the representatives of the other jurisdictions. During the past century, as a rule Democrats have had more such skills than Republicans, primarily because they come out of heterogeneous subdivisions. They have to be able to speak a little Italian, a little Yiddish, a little Spanish, a little Polish, or they will not be able to represent these combinations in a way that will enable them to defeat the Republican candidate, who need only knit together the Episcopalians, the Methodists, the Presbyterians, the Baptists, and the small- business class that speaks the language of money.

It does not mean you cannot be aggressive. Because Texas is so big, yet has only two Senators to fight for its piece of the resource pie against the likes of Rhode Island, Vermont, New Hampshire, etc., it tends to send hard-nosed scrappers to Congress. There was no Senator who played hardball more than Phil Gramm of Texas, and he had no trouble getting re-elected as a result. He was a pit bull in getting his state’s share of national resources. But this did not work when he ran for President in 1996, when he raised a fortune from a business class that did not understand that when people vote for President, they are not looking for a pit bull.

In both parties, when people vote for their presidential candidate, they assess the likelihood that he will be able to win the general election. It makes no sense to nominate a candidate who says he is bound and determined to move east at all costs when the party members know the electorate as a whole seems to be tilting west. Senator Kerry is now said to have been victorious over Dean because Democratic primary voters deemed him more "electable," but that is only because they saw Kerry being himself on foreign and domestic policies that seem to represent something close to the national consensus on "direction."

In the eight months remaining, we will see both presidential nominees trying to judge the ever-changing consensus of the electorate in the matter of direction. The voters themselves have the task not only of choosing between the two on Election Day, but of providing a mixture of congressional candidates that will help optimize direction for the country in the two-year period between congressional elections. President Bush now finds himself a bit behind when estimates are taken of how things will turn out in the Electoral College, but there is plenty of time for adjustments on all sides. It could be the voters will decide on divided government as they have frequently in the last half-century.

We will continue this discussion in next week's lesson.