Throw Them All Out

understand the complexities of financial reform. They are making so many sacrifices on our behalf, they say. They are smart and well educated and could be making a lot more money somewhere else, they claim. We should tolerate a little honest graft on the side, or the occasional financial indiscretion, like failing to report income on their tax returns.

Yet, of course, the political class is hardly the only group of people in the country making a sacrifice for public service. Our soldiers are underpaid. Those who enter West Point, the Air Force Academy, or Annapolis, or those who go through ROTC at a rigorous school, are just as smart. They certainly could be doing something else with their time. They choose the armed forces as an act of service; they are not looking to get rich as officers. Enlisted soldiers are not looking to cash in by joining the infantry. In the military they will never earn anything close to what they might earn in the private sector. And many of our best leaders over the last century or more have come out of our armed services. These are individuals who could have been running large corporations or institutions for far more money. Two-, three-, and four-star generals make less than a freshman member of Congress, even though they may be responsible for the safety and operation of more than 100,000 troops. If today we had a five-star general like Dwight Eisenhower—and we don't—he would still be paid less than a freshman congressman.² And yet it is impossible to imagine that the military brass would ever argue that they deserve to make a little 'on the side' as indirect compensation for their service.

Indeed, in the early 1980s, when the United States was in the midst of another (smaller) budgetary crisis, President Ronald Reagan released to the public letters he had received from American soldiers serving in Europe. They weren't griping about possible cuts. Just the opposite: they offered to take a pay cut if it would help the country. When was the last time you heard a member of the Permanent Political Class offer to do that?

When Gordon England was appointed to become deputy secretary of defense in 2006, members of the Senate committee that would hold hearings and vote on his confirmation had a simple and blunt request: You must give up the lucrative stocks and options you have in companies that do business with the Pentagon. Such divestment had been a requirement of the Senate Armed Services Committee of senior Pentagon appointees for decades, designed to eliminate any 'military-industrial complex' conflict-of-interest concerns that might arise. The restriction was not limited to just missile manufacturers or companies that made bullets. 'We're not allowed to buy Coca-Cola stock because military guys drink Coke,' said England, 'and we couldn't have stock in cereal companies because military guys eat cereal.'³

And who were the senators sitting across from England at those hearings? The same senators who wrote the defense bills, added earmarks, determined which military systems were bought or rejected. The same senators who were privy to private conversations with contractors and Pentagon officials, and received classified briefings on defense contracts, military systems, and Pentagon strategy. In other words, the very people who controlled the federal budget. They were free to buy and sell as many shares of defense stocks as they wanted to. Indeed, 19 of the 28 senators on that committee at the time held stock in companies that do business with the Pentagon.

The Permanent Political Class tells us they are concerned about financial corruption and financial crimes. They applaud legal crackdowns on corporate criminals and berate corporate executives for their huge salaries and tax shelters. The Permanent Political Class believes that everyone needs to be policed on this front. Everyone, that is, except for themselves. Why did the Tammany Hall political machine gain so much power in New York City? Why was it a dominant force for more than a century? You could point to the patronage system, or the payoffs. But in the end the machine survived because the public came to accept it. New Yorkers came to tolerate the idea that you could use 'legal graft' to get rich from 'public service' because that was just the way things were done. Sadly, the same attitude holds true today when it comes to crony capitalism. We get outraged when members of Congress or the President breaks the law, but we ignore the legal graft that is far more prevalent.

As long as the Permanent Political Class gives us what we want, we are happy. This was precisely the goal of Tammany Hall: make people dependent on us. Plunkitt explained that the fondest dream of bosses like himself was a situation where 'the people wouldn't have to bother about nothin'. Tammany would take care of everything for them in its nice quiet way.'⁴

America is supposed to be a nation ruled by laws, not by men. Central to that idea of America is the notion that we are equal before the law. That means that the laws should apply equally to everyone.

For one of the chief architects of the Constitution, this notion of equality before the law was the 'genius of the whole system.' As James Madison wrote in Federalist No. 57: 'I will add, as a fifth circumstance in the situation of the House of Representatives, restraining them from oppressive measures, that they can make no law which will not have its full operation on themselves and their friends, as well as on the great mass of society. This has always been deemed one of the strongest bonds by which human policy can connect the rulers and the people together. It creates between them that communion of interests and sympathy of sentiments, of which few governments have furnished examples; but without which every government degenerates into tyranny.'

Why do the American people feel detached from Washington? Why are they fed up? Why do they feel little connection to their elected leaders? Why do our lawmakers in Washington seem to show so little urgency? Part of the answer lies in the fact that politicians are allowed to operate by a different set of rules. And that is a dangerous place for a representative government to find itself.

The Permanent Political Class is unresponsive to our concerns and needs because it is partly immune to the economic realities the rest of us face. Its business has, in a phrase popular with money managers, downside protection and guaranteed upside potential. For crony capitalists, there is a business cycle, but they control it and can make money no matter how and when it turns. This means socialism for the Permanent Political Class and its friends—and capitalism for the rest of us.

The Permanent Political Class offers all sorts of arguments to justify its special status and its exemption from conflict-of-interest and insider trading laws. Members of Congress will argue, for example, that they are required to disclose their financial transactions and assets, and voters can boot them out at the ballot box. Never mind that those financial disclosure forms are often filled out incompletely or incorrectly. According to the congressional newspaper Roll Call, 25% of them contain significant errors.⁵ The point is, many lawmakers believe they must be kept above the fray, beyond the reach of the executive branch. They regularly exempt themselves from the level of scrutiny placed on other national leaders. They have even exempted themselves from Freedom of Information Act (FOIA) laws and open-document requirements. Their documents are as legally inaccessible as secret documents of the CIA—in fact, they are more difficult to obtain. At least some CIA documents become declassified and see the light of day. Congressional records never do. Congress passed the FOIA in 1966 because it believed that informed citizens would be better watchdogs. But Congress didn't want them looking into its own backyard.

Financial disclosure forms are required for elected state legislators, state judges, and county or city commissions around the country. But public officials are also required to abide by conflict-of-interest and insider trading laws and restrictions. If elected state judges, for example, were held only to the standards of federal lawmakers, they would be free to rule on cases in which they had a financial stake, as long as they faced reelection and filed financial statements. Would anyone like that idea?

In forty-five states, one or both state legislative bodies have a requirement that if a financial conflict of interest exists, a member legislator 'shall not vote on the matter.'⁶

American city councilors and county commissioners often have stricter rules than members of Congress, even though they have far less power and influence. In California, for instance, if you serve on a city council or county commission, you are subject to conflict-of-interest laws. As the state defines it, 'You have a conflict of interest with regard to a particular government decision if it is sufficiently likely that the outcome of a decision will have an important impact on your economic interests.' California has an oversight body, the Fair Political Practices Commission. One of the standards it uses is the 'personal financial effect.' If voting on a bill will cause you to gain or lose $250 or more in a twelve-month period, you should abstain.

The commission offers this hypothetical example: 'The Arroyo City Council is considering widening the street in front of council member Smith's personal residence, which he solely owns. Council member Smith must disclose on the record that his home creates a conflict of interest preventing him from participating in the vote. He must leave the dais but can sit in the public area, speak on the matter as it applies to him and listen to the public discussion.'⁷ In other words, he can voice his opinion like any other citizen, but he cannot help make a ruling on the matter.