 Welcome to Free Thoughts from Libertarianism.org and the Cato Institute. I'm Trevor Burrus, a research fellow at the Cato Institute Center for Constitutional Studies. Our guest today is Jay Kost, staff writer at the Weekly Standard and author of 2012's Spoiled Rotten, How the Politics of Patronage Corrupted the Once Noble Democratic Party and Now Threatens the American Republic, and 2015's A Republic No More, Big Government and the Rise of American Political Corruption, which is the topic of today's episode. Welcome to Free Thoughts, Jay. Thanks for having me. It's a pleasure to be here. I would call your book a tour de force of American political corruption history. I've never really read anything like it. I'm actually – I'm always surprised when I find books that make me distrust government even more. And it did that on page after page after page, and I highly committed to our listeners. So within the context of the book, you describe the general thesis. And one point you say generation after generation has seen fit to expand the powers of government without altering the structure to handle the new tasks responsibly. Now we simply ask too much of the government, and when we do that, it disappoints us. Can you expand on that as part of your – is your general thesis? Yeah, I'd be happy to. To put that claim a different way, I would put it this way. Put aside the perennial question of bigger government or smaller government, and think about the institutions of our government as they exist and whether or not they are capable of exercising the powers that they now exercise. And to sort of frame the question, or frame the debate, I would posit a hypothetical. Imagine you are looking to build a government from scratch. You've been making for a day and charged with redesigning the government, and your one mandate is that you must create a government as powerful as today's government is. Would you design that government the way our government is designed? And I doubt very much that you would say yes, or that anybody would say yes. And the reason is that the design of this government was meant to match very precisely, very carefully, a lot of consideration and thought and debate at the Constitutional Convention in 1787 to create institutions that could handle responsibly the powers that they were given at that same convention. What has changed over the generations is that we have expanded the powers of that government without due consideration for whether or not the institutions are competent to implement those powers responsibly. And my contention is that they are not, and that the irresponsibility tends to work itself out in the same way, that the institutions of government, when they exercise these expansive powers do so in ways that favor factions or interest groups or pressure groups, there's so many different terms that we could call it, but they systematically favor private interests over the common good. In my understanding of the term, that is corruption. Would you say that you mentioned factions, and of course everyone, well probably many people listen to this podcast, and many other people makes them think of Federalist Number 10. Sure. Written by Madison. And that is often called special interests, almost synonymous with special interests. Do you think that's the same thing he was talking about, that factions is the same thing as a special interest today? Yeah, that's a great question. A lot of times the current process is excused as sort of, well, this is actually a realization of Madison's vision in Federalist 10, and that this has vindicated him, you know, interest group pluralism. I reject that claim, and I actually do, I take that claim on specifically in the middle part of the book. And the argument that I make is that Madison was defending a very different sort of system or different vision. It's one thing, when you talk about factions within society, and Federalist 10, he talks about capital owners and laborers and creditors and debtors, just sort of pointing out there are different ways to slice and dice society, and the ways that you do that will create different and various interests, and that this can be, Madison argues that far from being a defect in Republican government, this can be a saving virtue of it, because if the institutions of government are well-designed, they can balance and check one another. The force is within it. If you read the 10th Federalist in conjunction with the 51st Federalist, that's sort of the basic point. But, you know, what we have today is very different from that, and to sort of appreciate the nuance from a Madisonian perspective, I would point to a letter that he wrote to Thomas Jefferson shortly after the Bank of the United States. The first bank had come to pass and had been implemented. Madison had traveled to New York and saw people clamoring for, you know, shares of the bank, and what he saw was people fighting amongst themselves to acquire a government benefit, which is very different than what he described in Federalist 10. And he worried that the government was actually, in the case of the bank, creating an interest group. Madison doesn't think of these stockholders as a faction as he understands them in Federalist 10. Instead, he worries that they will become the Praetorian band of the government at once its tool and its tyrant, bribed by its largesse and overawing it by clamors and combinations. And that sets up a crucial distinction between the government that we have today and the vision sketched out by Madison and Federalist number 10. The government that we have today, where there's sort of an interest group society, people are actively fighting for their share of the Federal Pi to acquire government rents from an active government that does an array of tasks that were never envisioned in 1787. I sketch out three in particular, the promotion of the national economy, the regulation of that economy, and the provision of direct social welfare. The government is now in the business of picking winners and losers in ways that stretch so far beyond what the Federalist 10 envisions, that it is not sort of healthy Madisonian pluralism. The better way to understand it is an endless series of Praetorian bands that are, as Madison said, the tools and the tyrants of the government bribed by its largesses and then overawing it by clamors and combinations. Now it's pretty amazing that just 1791, just right after the Constitution is ratified, we have this discussion already, the First National Bank, and it's within that question of whether or not we're going to authorize the First National Bank as the Hamiltonian versus the Madisonian vision, which you sketch out in your book, you talk a little about the Madisonian vision, which is interesting too because his view of the Constitution, if it was just him to pass it as his Virginia plan came in, was much more powerful than what we have today, but then Hamilton's was even more powerful than that with less about the strictures of how to properly institutionally constrain power and more about the goals of a great national government. Can you talk a little about that difference? Sure. From Hamilton's perspective, Hamilton would say that Madison didn't understand public finance, and frankly, on that front, he would be correct. Jefferson was a very smart human being, but he didn't understand public finance either. In fairness to both of them, very few people understood public finance in the 1780s. One of them was definitely named Alexander Hamilton. Yes, one of them was definitely named Alexander Hamilton. He had a very keen understanding of how the government's money problems were caused and how they could be solved because the United States in 1787 looked a lot like Greece, heavily indebted, and a growing suspicion that they were never going to pay back their debts. If the government is not going to pay back its debts, then it will not be able to borrow money at a reasonable rate of interest. This problem had to be under control, and then the question becomes, well, how do we do that? Hamilton proposes a series of measures, the most controversial of which was the Bank of the United States, which was a public private institution that had a public charter but was held by private shareholders. That was supposed to facilitate the collection of taxes, stabilize inflation rates, allow the government to borrow at a reasonable rate, and it was a very innovative program. Hamilton took the best lessons learned from the Bank of England and extended them further than they had done. The problem from a Madisonian perspective is that the Constitutional Convention took up a vote on whether or not the Congress should have the power to charter private corporations, and they voted it down. The bank therefore begins this sort of inevitable conflict that the book details. On the one hand, you have pressing public problems that require solutions. In the case of the bank, the problem of public credit. On the other hand, you have the institutions of government as they were written and as they were understood when they were written that have limits to how much power they can wield. You can't put a square peg into a round hole, and giving this government, particular government new powers without redesigning the institutions to ensure that the power could be wielded responsibly can create corruption. This is what Madison and Jefferson saw to a degree with the First Bank. Now, to be clear, the First Bank was not in the grand scheme of things. The First Bank was impeccably run, certainly compared to the early operations of the Second Bank and later on other public private institutions like Fannie Mae and Freddie Mac. Nevertheless, Jefferson and Madison believed a couple of things that I think are largely borne out by the facts. The first one is that this was an enormous transfer of wealth from the South and the West to the Northeast, with the dividing line usually being who was in the know and who wasn't in the know. And by the way, the economic divisions that persisted today persisted then, which is to say that the Northeast was already very wealthy. Another thing that they observed was the Bank effectively buying off members of Congress. Jefferson wrote to Washington arguing and he had information inside your information because the clerk of the House happened to be a strong ally of Jefferson and had reported to Jefferson which members were sort of on the take and been given bank shares or were at least invested in the bank. And Jefferson argued to Washington that look on a fair up or down vote, everybody who doesn't have a, if you only have a vote among the people who don't have a personal stake in the bank, the bank is going to lose in Congress. It's only because these men have been effectively purchased that the bank persists. And this is what Madison, we talked a moment ago about the Praetorian Band. That's what he's talking about, that there was a bank faction or interest group that was created by governmental agency and that this interest group was drawing a rent from the government and turned around and plowed a portion of that rent back into the political process to make sure that their benefit streams continued. And so that's where Madison comes to this idea that the bank, the stock jobbers as he called them, they were the tool and the tyrant of the government. It's interesting because one of the provisions in the Constitution that is often misinterpreted is the general welfare clause because this idea at the core of the Constitution there being the general welfare, not the specific welfare, not for specific people. And then of course, the next interesting thing that happens in the Madisonian, Hamiltonian debate is that essentially the anti-Federalists, the Republicans, the more or less anti-Federalists, the Jeffersonians end up pretty much acceding to the existence of the bank and then Jefferson purchases the Louisiana Purchase Lands which by themselves could possibly create some special interest in the future with the railroads and everyone sort of resets the new level of national power at where the previous administration had set it and that kind of goes forward again and then we get to skipping over a fair amount but Jackson and then we do the second national bank. Now you don't seem to like Jackson too much in your book. No, I don't like Jackson. Let me just say one, make a quick point before we go on to Jackson which I'm excited about. But the Louisiana Purchase, and this is sort of why I enjoyed writing the book because it sort of gives an almost kind of cock-eyed look at so much of American political history because of course the Louisiana Purchase has been remembered as this great event in American history and indeed it was in so many important respects but what has been not remembered as well and if you read my book you'll learn about this is that Jefferson thought that the Louisiana Purchase was unconstitutional and did it anyway and did it anyway because and this gets to sort of the hypothesis of the book, right? The prospect of passing and debating a constitutional amendment, in other words, the process of institutional reform. If we're going to expand the power of the government, we have to have a conversation about whether or not the existing institutions are capable of handling this new power and that's what the amendment process is for. It was inconvenient. Napoleon was, they were worried. Napoleon was fickle. Napoleon decided almost on a whim to sell Louisiana and they didn't want to miss their opportunity and that is so often the case. I mean the greatest expansion in the history of the United States and the scope, size and scope of the federal government was induced by the Great Depression and it was completely ad hoc. I mean you look at the new deal to take it all in its totality is utterly shambolic. There's no rhyme or reason to it. It's almost like, well, FDR woke up one morning and decided he was going to do this. Or decided the price of gold. Right, or decided, right, exactly. That is not a very Madisonian way to approach the problem. But that is how government tends to grow. That's how it grows. Like springing forth from the head of zoos type of. Because Madison took institutional structures so seriously and this is where that story I think gets really interesting is that he and Hamilton were very bitter rivals over the bank in the 1790s. But not only were they on the same side during the ratification process, but Madison supported the charter capacity in the constitutional convention. He had been an advocate of much more expansive governmental authority. For Madison, it's not just simply that, oh, the government needs to grow, so we're going to take advantage of whatever ambiguity might exist in the Constitution. His attitude was, this was the structure we designed. These are the powers that we've given it. These are the promises that we made to the delegates to the ratification conventions. And that's another point he makes about, for instance, the Necessary and Proper Clause. Look, this thing passed by a hair's breadth in the Virginia ratifying convention. Based on promises we made, you don't need to worry about the Necessary and Proper Clause. In other words, institutional design is as important from a Madisonian perspective as the powers that the government exercises. And this is something that I think, and by the way, Madison himself falls short of this ideal because after the disastrous experience of the War of 1812, after the bank, the bank charter had expired in the United States, I personally think somewhat foolishly, decided to go to war against Great Britain and discovered they couldn't raise the money. They got to the other side of that war and they decided we need another bank. And Madison was the person who signed that into law. And he decided then at the end of his political career, at least that time had vindicated the bank and that it had become part of the mainstream of American political thinking and therefore it was constitutional, although 25 years earlier he'd argued exactly the opposite. And then by the 1820s, we see there's a lot of different things in the 1820s, which I think you bring in a little bit in there, Jackson chapter, especially the idea of a popular president, a popular elected president and what maybe they thought the president would be and also the growth of the presidency is another setting sub-story to your general story. I mean, you don't talk about corruption of the president as much, but the president himself starts growing many of the powers, taking on many of the powers of the government as a national leader and Jackson would kind of be maybe the first instance. Absolutely. And again, this sort of gets to this, there's a certain kind of ironic quality to the Jeffersonians, which is to say that they were so hotly opposed to so many federalist innovations, but then when they got their hands on the power, they accepted it and then expanded it in their own ways. And Jackson was the same way in so many respects. You know, Robert Romini, who was, I think, the, and this is not a controversial opinion, I think he is the historian of Andrew Jackson for the modern era, has written hundreds of thousands of words on him and so many different subjects. You know, he, you know, typically the period toward the end of the Jeffersonian era, the Monroe presidency is sort of colloquially remembered as the era of good feelings and he calls it the age of corruption. And what had happened was that it was much more on the state level. States were beginning to grow in the size and scope of their powers and certain, like for instance, in financing canals and the development of the railroad was sort of taking place here, but there was, there was corruption on the federal level in the second bank of the United States, which was until Nicholas Biddle became its president, was terribly well, terribly run. It was corrupt and it was also the men who were running it were ignorant of public finance. Biddle was happy to bribe legislators, but he was also actually very good at public finance. So, you know, Biddle was a good manager of the bank from, from that perspective. And that would be part of the question of the enlightened statesmen that can sometimes keep some big state powers in check. But this is part of, I think, Federal's 51, if I remember correctly, that you won't always have. If you're depending upon enlightened statesmen as being whether it's Biddle running the bank well or Alexander Hamilton running the bank well, if that's who you're depending on to keep government in line, then it's going to fail you more often than not. And to exactly to your point about, you know, the problems of, of, you know, where are the great leaders when you need them? You know, in history, as in sort of understood as sort of not necessarily academic histories, but just the, the sort of the collective memory of the country remembers the great leaders, you know. Hamilton is remembered and celebrated and rightly so is a fantastic finance here. And to a lesser degree, Nicholas Biddle is as well. And I think in some respects, he doesn't get the full credit he deserves. But the bad leaders are so often forgotten. And so whereas Hamilton's leadership of the Treasury Department made the first bank of the United States so well run, followed by the way by Albert Gallatin, who was the only probably major Republican Jeffersonian party leader who understood public finance, made sure that it was well run. But then when they chartered the second bank, they ended up hiring a party hack named William Jones. And Robert Ramini describes him as quote, a corrupt and venal man who was very good at the game of politics, but was very, very ignorant of public finance. And the second bank was a disaster in its early era. You know, Jones could control, effectively control credit, the national credit level if he were to manage the bank responsibly. He could control credit. And he did not, he failed to do that in anything approaching a responsible manner. And the second bank of the United States, its demand liabilities far exceeded the amount of actual gold currency in its vaults. And when the panic of 1819 hit, it just, you know, a credit bubble, an international credit bubble popped. And then it forced the successor, Langdon Shevus of South Carolina, to institute a contraction which facilitated this recession. So, you know, the period has been remembered as, you know, like I said, the era of good feelings. But I think Ramini has more on the nose where it's actually the age of corruption. And this is what makes Jackson an interesting character in my story. Jackson sees himself as the hero of the Jeffersonian Republican virtue, right, that he is going to restore the rule of the people by the people for the people to borrow Lincoln's famous phrase. However, in so doing, in his sort of Jackson had this kind of way about him, I know Robert Ramini was a brilliant historian and his work is impressive to say the least. But, you know, I just walk away from the period with a very different impression of Jackson and see one of his most, perhaps his dominating quality is to mistake the national interest with his own personal pride and then to pursue that quote-unquote national interest at all costs. And so, what we see with Andrew Jackson then is here as a president who seemingly is looking to restore the traditional public virtue inherent to a true republic, but actually expands and grows the authority of the national government, in particular the presidential office in ways that further disrupted the system and further facilitated corruption. And probably, you know, Jackson did a lot of things on that front. I mean, you know, one of the things that he did was he vetoed the second bank of the United States recharter because he didn't like it. That was fairly unprecedented. The presidential veto historically had been reserved for legislation that the president viewed as being unconstitutional. Jackson, of course, made an argument that it was unconstitutional, but his reasoning on that front is unpersuasive, at least in light of, you know, contemporary, you know, the contemporary thinking at the time. And Jackson didn't like the bank and so he vetoed it. Did he view it as not populist enough or it was too much for the bankers, the financiers? Jackson, that's how he framed it. Jackson was in favor of hard currency. He had been burned by banks as a younger man and he inherited, frankly, a lot of the prejudices of the age against banks. Banking and finance are subjects that few people understand really well. And like Jefferson and Madison, for instance, were very brilliant, brilliant on matter of political philosophy and individual liberty, but the concepts inherent to banking just were not something that they really ever grasped fully. I think Jackson comes across the same way in many respects. So anyway, you know, what Jackson does in defense of the traditional small government Republican regime is effectively expand the power of the presidency far beyond what anybody had done up to that point. And Jackson is in many respects the creator of the patronage system. It had existed prior to some degree, but under Jackson, it's not just a quantitative change. There's a qualitative change. There's the sort of Jackson introduces this ethos that, you know, we're cleaning up the government because we want. Can you explain actually for those of us who aren't familiar with the patronage system that's been sort of long dead, I guess, what that actually was? What it meant to take office in, say, 1830 and how you dealt with the current government employee system? Right. Well, the president had, you know, obviously just as today, the president has a series of offices that he is able to appoint. And then below that, there are sub-presidential offices. And today, the sub-presidential offices are normally, you know, they're bureaucratic. They're based on merits, the professional bureaucracy. In the 1830s, that's not the way it was. As the president could fire whomever he wanted that was directly under his discretion. And then his agents, for instance, in the post office or the Treasury Department, you know, dealing with collectors at the port of New York. If you were a supporter of the Whigs and the Democrats won the election in 1844, you're going to lose your job. Everybody loses their job. Even if you're just clerk of the customs house. Yeah. Even if you're just... The janitor, does the janitor lose his job too? Well, you know, that was, you know, that sort of Leonard White was the historian about in the middle of the last century, took an extensive study of the bureaucracy during this period. And what he found was the turnover. Because, of course, it's not just that, you know, it's that in 1832, there's a turnover. And then in 1840, there's a turnover. And then there's 1844, there's a turnover. In other words, the two parties would change office or change swap positions. You know, the Democrats won in 1832. And then the Whigs won in 1840. And the Democrats won in 1844. And the Whigs won in 1848. And the Democrats won in 1852. So what happens is, they just keep sweeping out thousands upon thousands upon thousands of government workers. And then the job is basically left to a bunch of low-level staffers. Now, how did you get the job in the first... Why would you be a person who would get put into the job? Right. And that was the essence of the patronage regime is that the jobs were distributed to supporters of the victorious party. And now look, there was a reason this regime came into place, and not just because of the caprice of Andrew Jackson, although that certainly is part of it, so much of history during Jacksonian America gets down to Jackson's capriciousness. But, you know, the reason there was a patronage regime as there was was because, you know, winning a presidential election, right? And the presidency, remember, and again, this is another innovation to the original regime. You know, the Electoral College, as understood in the Constitution, doesn't call for democratic elections. It leaves it to the state governments, and the state governments eventually sort of coalesce around popular elections. Interestingly, South Carolina was a holdout and never didn't do popular elections at all during this period, and then they succeeded all together. So, but everybody else did popular elections. And, you know, that's so often remembered as a good thing, and rightly so in so many respects, but, you know, it created a political problem, which was, you know, we got to coordinate across a country of enormous expanse. And remember, you know, by this point, the country is basically filled in pretty much all the way to the Mississippi River. Only back then there weren't airplanes, and there was no interstate highway system, and there was, you know, there were canals, and there were horses, and there were a handful of railroads, but nothing like there would be 30 years later. So, how do you coordinate a campaign in a country as far-flung and disparate as this? It takes a massive effort, a massive effort, and basically stretches from Maine all the way down to Louisiana. And how do you incentivize people to go out and work for you if in the end you're the only one who gets to hold the office? And the answer they came up with was the patronage system. It's a solution to the collective action dilemma. The same reason that PBS will offer you a tote bag if you contribute $50. It serves the same basic function. I'm going to skip the Civil War. Not that it's not important. I know Lincoln was very good at patronage. He was. You talked about that in the book. And then, of course, we have this very long reconstruction era. During that time, the thing you discussed in the book is something a lot of people have heard of, but I don't think anyone really understands or gets any more, which are the machines. People have heard of Tammany Hall. People have heard about these political machines, but you do a very good job of explaining how they ran and how that was part of the corruption, too, using people like Roscoe Conkling and other big senators and big figures, and also specifically how it related to the election of senators by state legislators, which is the case before the 70th Amendment. Can you fill in a little bit how that all worked? Of course. Tammany Hall is such an interesting illustrative, in so many respects, story and fascinating, but it was also quite the outlier because Tammany Hall was this democratic redoubt in a state that often was ruled by the Republican Party during this period. Was it really just centered on New York City? It was centered on New York City, and then later on when New York annexed Brooklyn, it became extended there as well. And that is one reason New York politics was such an – it's why there were so many vice presidents from New York. There were always Republican vice presidents and Democratic presidents from New York because New York was so tightly split between Democratic New York City and upstate Republicans that you always wanted to nominate somebody from New York to just tip the scales in one direction or another. So Tammany Hall put it aside as sort of not indicative of the period because it was sort of this almost kind of like a separate city-state almost. But what happened was the patronage regime ends up facilitating the development of statewide political machines because what happened was particularly Ulysses S. Grant, it really accelerates with the eight years of Grant's tenure because Grant is effectively seats the power of patronage to his friends in the Senate. Certain people he liked, certain people he didn't like. He liked Roscoe Conkling, so he effectively gave the power of New York patronage to Roscoe Conkling. This is enormously important because Conkling can distribute the patronage strategically in the state to effectively gain control of the entire Republican party apparatus and then on top of that secure his reelection and then on top of that begin to make side deals with business interests or whatever other groups he sees fit. Patronage is sort of the medium of political power during this period and the people whom Grant sort of blesses with patronage control end up building political machines. They also make money off those political machines too. Absolutely. That was a really shocking thing about how much money you could actually make. They were just thieves. Yeah, in effect. You see Zachariah Chandler in Michigan, you see Blackjack John Logan in Illinois, you see Roscoe Conkling in New York, which was probably the wealthiest of the machines because controlling the New York political patronage operation meant that you controlled the port of New York and could basically bulk merchants as you saw fit without any sort of rebuke. You tell a story in your book about one of these because reminding our listeners that there was no income tax at this point. The majority of U.S. revenue came through tariffs and the majority of U.S. goods came through the Port of New York Customs House, which was I think you say 70% of tariffs were collected there. This is almost all the funding of the entire government. And then you have this Moyatee system. You tell the sort of the Dodge Company and that one specifically and how much they built out of it and Conkling was a part of that. Yeah, absolutely. The Moyatee system you can see how in theory it kind of made sense, but it just ended up being perverted into this outrageous scam. It was like a whistleblower. Yeah, it was basically, yeah, if you blew the whistle on somebody who was basically tax cheat, you got to keep it cut of the loot. And what the New York machine would do so often is they would tell people, okay, well, you actually owe this and later on say, oh, you actually owe 30 times that and you would better settle with us or we're going to seize all your goods. And they would settle and the Moyatee system would give a cut back to the person who blew the whistle, but it would actually go to the Conkling machine in effect is what it did. And some of the frauds that they got away with were just extraordinary. And this is that sort of how the patronage system, it was all, the patronage system served as the foundation for that. And it wasn't for the machines. For the machines, right. And this is what's so extraordinary about the political machines is just sort of an interesting kind of twist is that Grant is the last of the spoilsmen, right, the last true spoilsmen. He's replaced, Grant leaves office in 1876 and he's replaced by Rutherford Hayes, who campaigned as a reformer and he's sort of remembered as Rutherford Hayes because of the contested election of 1876, but he actually won the nomination of the party that year because he wasn't seen as being an opponent of Grant and in the faction called the stalwarts on the issue of patronage. And Hayes tries to stop this and he fails and ultimately what brings down the patronage regime is the assassination of James A. Garfield. And ironically, the person who signs into law, the Pendleton Civil Service Reform Act, which killed the patronage regime was Chester Arthur, who was the collector of the Port of New York during Grant's tenure, which is, you know, history is just full of ironies. I'm sure he got that job because he helped someone along the way. You would never get that job without helping someone along the way. Arthur was, Arthur's an interesting character that is sort of not really remembered, but he was an- Oh, we remember his mutton chops. Right. Well, in his mutton chops, he was a dandy. I mean, he was always, he always dressed very fine and he was a, he was gentleman and he was very well-spoken and he was the perfect guy for the Port because he dealt very comfortably with business interests while at the same time making sure that the machine always got its cut of the action. So that's why, that's why Arthur was so useful to Conkling. Well, Arthur kind of stands in there too of your whole era. I've often wondered how it could be the case that someone could go from being the New York customs house chief or whatever president to vice president. That's not something you'd see today. It's not like you go from mayor to vice president or anything even similar. Yeah. Well, the story, again, this is a story that is not really remembered these days, but it's a fascinating political conflict was that the political bosses like, you know, Conkling in New York and then also Cameron in Pennsylvania. And by that point, I think Cameron had retired and so it was sort of shifting towards his son and then to Matt Quay. They hated Hayes. Hayes harassed them and made their life needlessly difficult. And so Hayes wasn't even, you know, didn't even, wasn't even re-nominated in 1880. He served one term and his own party rejected him. And the spoils men in the big machine states of Illinois and Michigan and Pennsylvania and New York and then also the South, which were basically sort of the Republican delegates from the South were basically rotten burrows. There were no Republican voters left down there. They were just, you know, the postmasters who were appointed. You mentioned this. I just want to, the postmasters were used to distribute political campaign material. Right. Exactly. That's another level of corruption. You have the postmaster on your side. Yeah. They would say part of your job is now to distribute campaign material. Yes, that's right. So they, these groups tried to conspire to re-nominate Grant for a third term in 1880. Grant had left office in 76 and was pretty unpopular. As I say in the book, he had gone overseas and, you know, had sort of managed to, you know, rub some of the grime that had collected on his reputation. And four years later, he comes back. And there's this push for Grant and it stalls. They can't get quite good enough delegates. And Garfield, James A. Garfield is the compromise choice. And then they make, to sort of as a, as a sop to the Grant factions, they make Arthur the vice presidential nominee. So would this be Garfield would be sort of against the patronage system? Garfield was, Garfield, now, to be clear, Garfield, his hands were not, his hands were not entirely clean. He was caught up in the credit moblier scandal, which was a different issue having to do with corruption with the railroads. Garfield's name was brought up with that. But yes, Garfield was not, Garfield, you know, the Republican party was sort of in different factions at that point. There were the Grant forces and then there were the forces behind James G. Blaine, who was the Republican for Maine, who was anti-Grant. And then there were like the Bonafide, a reformer, the liberal Republicans and the Mugwamps as they were. And Garfield was sort of not affiliated very heavily with any of them, which is sort of what made him preferable. And as a sop to the Grant delegates, they beat Arthur, vice president. Arthur got a promotion from collector of the port of New York, who by the way, his resignation was demanded by Hayes and Arthur refused to resign in Congress backed Arthur up. So he gets elevated to the vice presidency and Garfield is assassinated and Arthur becomes president and signs into law the Civil Service Reform Act. And what is so interesting though is that these political machines in these handful of states, you know, they existed to solve a problem, right? Like what I said earlier. They existed to deal with the problem of how do we get people to participate in political campaigns when only one person gets to hold the office that we're contesting. Patronage was one solution. When patronage was eliminated, the smart machine bosses, especially Matthew Quay in Pennsylvania, shift to currying favor with industrial magnets. Blaine had sort of been a trailblazer on that front because he was sort of in tight with the railroads. By the 1880s, the middle of the 1880s, railroad expansion had gone too far and the railroads were cash strapped and sort of on the decline. But that's when you start to see the steel and, you know, the oil and sugar, the rise of the truss and these bosses in the north, Quay in Pennsylvania and Tom Platt, who ends up taking control of New York, and Nelson Aldrich in Rhode Island and there's John Spooner in Wisconsin. All of the northern states, basically. Why not the southern states? Well, because the southern states were operating under a different regime at that point. The southern states were, well, first of all, the economy was not nearly as developed in the south. And there are also no Republicans in the south. No, that's right. The Republican vote, well, first of all, the Republican vote in the south at this period is the black vote. And the black vote has been not yet entirely suppressed but in the wake of the populist uprising in the 1890s, the southern gentry decide because what happened was poor white farmers were aligning with blacks to contest the hegemony of the gentry class. And that's how you got Jim Crow. So it's a different sort of rhythm. And southern politics is a different rhythm. And it's also very, it's pre-industrial as well, basically still. And it's just so far behind the times. So you don't really see political machines. You see bosses and, you know, there's different rhythms. And Georgia, for instance, had a pretty insuperable political machine by the time Roosevelt comes onto the scene. But the north is a very different system where you have these bosses who basically end up in the Senate. And rather than use patronage to control their political operation, they use campaign contributions from big industries. So that's the story so far because we first have the first part type of corruption we see. I would think the way you classify it in the 1790s to say the 1830s is a lot of its land-based canals giving people banks and banks. And then Jackson comes in with the spoil system, the patronage system, very wholeheartedly. So the next sort of era of corruption up until the Pendleton Service Reform Act is patronage, restocking the government, getting people to do things for you and vice versa. And then the big business comes in and that'd be almost like 1885 to, let's say, the new deal and present day. But the new deal also inaugurates the next rate which we'll get to. And then you start talking about campaign contributions because you didn't talk about campaign contributions in the book previously because that's not that really wasn't part of campaigning, but now that's a different type of corruption. That's right. Politicians, they didn't need campaign contributions from business interest because they had things like the loyalty system in New York. They also had, if you got a party job, it wasn't just a gift. I mean, a part of it was a gift. It was a payment for services rendered, but you had to kick back a part of your salary or the party itself. Which is amazing to me. Yeah. So you work for the government and you also have to fund it. And then you might not be against, but you might be against it. And then at campaign time, you were expected to leave your job and go when you would continue to collect the salary, but then you would be a worker at campaign time. And so all of this gets taken away from them or not on the state level, it persists on the state level, but there's a movement toward reform on the state level. But the federal resources start to dry up when Grant leaves and then with Pendleton, it's very quick. And that's 1881. Pendleton is 1880, yeah, something like that. 82, I think it's 82. And so they have to find a new source of revenue. So what do they do? They turn to the giant industrial concerns. They turn to what are becoming the mega banks like JPMorgan, for instance. And they offer, it's a pretty straightforward transaction. The Republican, and it's almost exclusively Republicans, the exception being New York, Tammy Hall did this, and New York Democrats participated in the bargain to some extent. You couldn't avoid it. Wall Street was so powerful even then that you couldn't be a successful statewide Democrat unless you played the game the way they wanted it to play. But there were three policies. The first was the gold standard. The second was Blosset Fair regulatory approach, which is to say you supported Supreme Court nominees who would strike down state regulations based upon a very bizarre interpretation of the 14th Amendment. I'm going to push back on this for you because I started this in the book. And my other job here is being a constitutional scholar. So you talk about the Slaughterhouse cases as an example of them. And listeners will, I could have listened to previous episodes where we talked about this, such as Tim Sandefur's episode, say that that was a problem that they weren't striking down. It was business friendly to not strike down. So for example, in the Slaughterhouse cases, it was a monopoly granted by Louisiana State government. And they didn't strike down that monopoly based on the 14th Amendment. Now, you said a very bizarre reading of the 14th Amendment, which implies Lochner. And it seems like you're saying that Lochner was wrongly decided and it helped businesses. Well, what I'm saying is that in general, there was, the Supreme Court was used as a way to circumvent, to put the brakes on state regulation of businesses. That that was something that had developed. And it didn't look like it would because the court with the Granger cases, for instance, looked like they were starting to go. Mind v. Illinois in 1976. Exactly, that they were going to come in and allow the states to start regulating. But the nominees of that period, and by the way, in both political parties, start pushing back on that and start interpreting. Now, putting aside whether or not, and I view this in sort of my prejudice, if you will, that I tend to view these things in the matter of the balance of interest groups rather than thinking of it in terms of constitutional law. So when I say, I'll put it this way, that the rulings were very beneficial to businesses that contributed lavishly and ensured that nominees to the Supreme Court were of a certain mindset. So that was sort of the second of the three things that they did. And then the third was the tariff. And the tariff, by the way, was also sort of the catch-all. The way it was, the tariff was basically the classic law growl, where you are a wheat farmer in Ohio, and we need to just tweak the tariff a little bit to make sure that you feel like we're on your side so we can hold Ohio. And then, well, you're a Civil War veteran, and you hurt your elbow in the Civil War, and it's all better now, but here have a pension anyway. And that's interesting. You bring that up a lot because that was the Civil War pension was one of the first really affirmative welfare. Here is something for you type of system, which means you're sort of third type of corruption as the actual giving things to people. Here's stuff for you. One of the reasons that the pension benefits were useful was because the tariff regime was so elaborate and extreme that it created an enormous surplus, which nowadays you'd think, oh, well, that'd be great to have surplus. But there was a lot of political pressure. We shouldn't be running a surplus. The government should not be collecting more from the citizenry and taxes. As soon as there was a surplus in the 90s, George W. Bush came in and said, here, tax cuts. And rather than cut taxes, because the taxes were the payoffs to businesses, the Republicans said have pension benefits. And it was a way to think of the major states in the north, Indiana, Ohio, Pennsylvania, New York, Illinois. Most of them were pretty competitive during this period of time. And so if you offered a 60-year-old Civil War veteran a nice pension, he's going to be your voter. And so the problem with the tariff was that it created winners and losers. And the same thing, the problem with the gold standard. And again, this is sort of how I view things. I know the debate about the gold standard and money today is a very hot debate. And it's a little different back then because back then, nowadays people are often partial to returning to a gold standard because of inflation. Well, they had the gold standard then, and there was just this slow deflation throughout the latter half of the 19th century. And it just really rung debtors, just rung them dry. And who was in debt? Farmers. Farmers in the south and farmers in the west. So they were losers in the scheme. And by the way, because a lot of times their product was exported and they bought domestic equipment, they were the losers on the tariff regime as well. And because they had to deal with these railroad monopolies, they were the losers in the laissez faire scheme as well. But the way that the system worked is that ultimately they could lose, but the Republican majority was able to stitch together enough votes here, there, and everywhere through these three policies to basically be effectively unstoppable, at least on a presidential level, until the Progressive Era. And the Progressive Era has a different type of corruption, too. And Roosevelt's very good at, well, he starts trying to crack down on campaign contributions, as you discussed. And then of course, Wilson comes in with his own thing. And that's what he bring in the second part, which is the bureaucracy. Because now we have stopped firing everyone from the government. And that was one type of corruption. But now we have a civil service class, the baby doesn't leave, which has its own different problems to it. And that gets inherent. I'm going to skip forward a little bit, so we can get in the modern era with the new deal. Because then we start creating a new bureaucracy. And we have the new type of corruption. But the story so far too, and all this happening because the institutions have not changed. We need to remember the general thesis, there are no new institutional constraints upon government power. There's nothing else checking anything. It's just we're just growing government. And this is the inevitable result of it. That's right. And the three particular expansions of power. I mean, we've spent a lot of time talking about the first one, which is the Promoting Economic Development. So you see that early on with the First Bank of the United States. You see that with Rivers and Harbour's legislation to develop the infrastructure capacity. And then with the railroad and the tariff, the gold standard, laissez-faire economic policy delivered by the judiciary are all part and parcel of this power, which is not – look, it's not prohibited by the Constitution. And again, this is an illegal argument about what the Constitution allows versus what it forbids. The point is that in 1787 when they had a vision in their head of what this government was supposed to do, how could they possibly have had a vision of industrial – of promoting industrial development through tariff laws because it was a – it was still pre-industrial. They were on the cusp of the industrial revolution. It had begun to take hold in England by that point, but it hadn't come to America yet. So this is in a lot of respects a new power. And per – as we said at the beginning of our discussion, it's a new power that just sort of develops in an ad hoc manner, tariff protection. I mean, Hamilton makes the argument for it. But oftentimes, the tariff of abominations in 1824 was a political log role, and then there were emergency tariff laws during the Civil War and tariff reform acts in the 1880s and in the 1890s and the 19-oughts are all just the result of political compromises. And this sort of – Hamilton had a vision of using a protective tariff to develop and protect industry. And it just – but that's not how it operated and practiced so often. I mean, it did that to an extent, and I'm not denying that it did, but the point is that it became effectively a protection racket and a political protection racket in service of these large northern, largely Republican machines. So – and this is – and I think I want to add too that the abuse of these federal powers, right, this sort of subsidization of the domestic economy was abused and the subsidies were corrupt. And this is – the progressive movement does not spring forth de novo, right? It is a response to the egregious corruption of the period that immediately preceded it. And government had, by that point, been doing so much to help business that the progressive response is, we must now rein them in. We must now interpret the Interstate Commerce Clause as giving the Congress the power to regulate industrial concerns, which, again, put aside the legalistic debate about that. On a legal level, that's a pretty clear cut. It's pretty clear that the Interstate Commerce Clause is pretty clear in its language, so – but on a practical level, again, regulating standard oil. Is that something that the framers had in mind? How could they have standard oil? Even oil itself, you know? I mean, that's not something you can think about oil. They would probably think about oil from Wales in 1787. They wouldn't think about standard oil or Carnegie Steel. Steel hadn't been invented and the entire concept of steel. So it's a power that just sort of gets retrofitted onto our system without – and again, without due consideration, can our system of government handle this power as it is designed now? Or do we need to adjust the institutions to preserve this Madisonian balance to make sure that the power is not used for factional purposes? And that doesn't happen. And then, of course, the new deal, it gets put on overdrive. Absolutely. The new deal is – you know, the new deal has elements to it, particularly the first new deal of 1933, 1934. I mean, there's a real totalitarian streak in the early new deal. The National Industrial Recovery Act, which I spent a lot of time on in the book. And again, so what the National Industrial Recovery Act does is basically it institutes a grand bargain between labor, between left-wing progressive bull moose – bull moosers – and between businesses. And basically, the deal was this. We – business, we will suspend the anti-competitive practices rules. We will allow you to coordinate your activities with one another. Cartelize would be a good name. Yes. We will – that's exactly right. We will allow you to form cartels if you agree to production codes to regulate prices and to regulate wages and to regulate employment. And so it was supposed to be a grand bargain between the government, between business, between labor groups and between consumers to stabilize an economy that was in freefall. Now, the economic reasoning of this was just terrible for starters. The Brookings Institute did a study of this back in the 30s and they had a great metaphor for it that I think is apt is that the NIRA was essentially trying to squeeze blood out of a turnip. Stabilizing wages, you can't do that when profits are collapsing, which is what was happening. But put aside the nonsensical rationale behind it. What happens is businesses, large businesses, end up dominating the construction and enforcement of the codes. And so who gets squeezed? Black people get squeezed for starters because you end up having to control who's hired and who's fired. And at that time, black workers were usually the last ones hired and the first ones fired. Consumer groups end up getting the short end of the stick. Labor groups end up getting the short end of the stick. Small businesses end up getting the short end of the stick. The entire regime ended up being dominated by large businesses. And the case that struck down the entire law, and by the way, was struck down 9-0 in the Supreme Court, including Brandeis who voted against it. And by the way, they probably did FDR a favor, though he'd never admitted because that's sort of the way he was. But what the Schechter brothers had basically done, they were accused of selling unfit chickens, chickens that didn't live up to the code. And Amity Schles does a great job in her book, The Forgotten Man, of going into the abusive nature of how the code authorities ended up going after small businesses and throwing people in jail for charging a nickel too much for dry cleaning. And it's the same thing with the Schechter brothers. They basically imposed ruin upon them for selling what they could prove, they could prove that the Schechter sold one unfit chicken. Okay, so now typically, and not without merit, the NRA and the New Deal in general is remembered as big government run amuck. But the point that I'm making the book is run amuck on whose behalf, right? In the case of the NRA, it is systematically tilted toward the largest industrial concerns. And in the case of the Agricultural Adjustment Agency, which was the major farm program when it started this sort of nonsensical tradition of paying people not to farm, which we still do today to some degree. It's still an American tradition. But this was the essential twist, paying whom not to farm? Who is getting paid not to farm? And how do you get that payment? What do you have to do to get that payment? And so often what would happen under the AAA was wealthy landowners in the South who didn't actually farm. They just owned the farmland, pocketed the money, and largely black share croppers got booted from their land. And by the way, you can draw a direct line between that and the racial unrest of the 1960s because the AAA kicked all of these African Americans off the land and they went pouring into the large cities and there was no work for them there. It created a social crisis. So that's a great example of Hayek's warning about the hubris of central planners. But you know, that's not the story of the book is about, again, it's not just the hubris of central planners, but it's also who owns the central planners. Well, what is, so what does corruption look like now? Now that we've gone through a lot of the history here, what is the unique form that it takes now? Well, you know, the thing is, is that the powers of the government don't recede. I mean, in some instances they do. The court, for instance, struck down the NRA, you know, the 89th, excuse me, the 80th Congress of 1947-48 rolled back the labor laws of the New Deal and gave states the capacity to pass right to work laws. So it's been rolled back in some respects, but by and large it only expands. So Hamilton expands power and then it's forever expanded. Jefferson expands it, it's forever expanded. Jackson and so on and so forth. Wilson, Teddy Roosevelt, Franklin Roosevelt, it's always expanded. And so the government can do basically anything it wants. And what this results in, and again, it's sort of the culmination of the story, is that, you know, take the tariff law, right, in the 19th century. You know, the tariff law stimulated business interests to organize and apply pressure to the government to make sure that their benefits would be increased or at the very least not decreased. The same thing with regulation. Regulation did the same thing. And the same thing with farm subsidies. You know, you start paying farmers, you give them an incentive to organize to make sure that their benefit streams persist over time. And so the every, in other words, return to Madison's metaphor, a praetorian band of government. And to quote him again, because I think it's such an important concept, at once it's tool in its tyrant, bribed by its largesse and overawing it by clamors and combinations. Madison was talking about the people who derived a direct benefit, effectively a subsidy from the Bank of the United States, that they would try to dominate the government and dominate that policy for their own purposes. And Madison was worried that there was no stopping them. And I think that he was right. And I think that what we have now are praetorian bands plural. That in every area where federal policy has expanded beyond the scope of the original founding document, we do not have institutional mechanisms in place to regulate the way that power is exercised, which leaves our regime susceptible to praetorian bands. In other words, interests that are stimulated into organizing to pressure the government to maximize their benefits, or at the very least to prevent their benefit streams from being diminished. Now, the interesting question, I think it's probably the ultimate question, because everything you've said here today and everything in your book, as I was reading it, I thought the same thing, that Elizabeth Warren would like this book. Come up, you're supposedly a conservative commentator, and you are. So she probably wouldn't read it, but she probably doesn't know that she would like this book and a lot of people of her ilk. And you read it and you say, well, what's his point here? And I think what you get out of it is that it's a debate we're having today. Can we create more government if you want it and then create different institutions, something like the CFPB, like the Consumer Finance Protection Bureau, that makes sure that it's doing the right thing and it's not being corrupt, versus maybe the conservative libertarian critique, which is you can't actually do it. And I guess ultimately you're on the latter part, because your book is mostly a diagnosis less than a prescription. But I think the Elizabeth Warrens, the people on the left, tend to think that we can increase this with the right constraints, with the right oversight, or is it impossible? Is it impossible? Is that they conclude that the moral of the story is impossible? In keeping with my Madisonian perspective in the book, Madison famously flip-flops on the bank of the United States, or at least the concept, supporting it at the time of ratification, supporting a charter power, and then opposing it so hotly. And he's criticized for flip-flopping by people. Hamilton suggested that Madison was motivated by a womanly attachment to France, was Hamilton's phrase. Other people I've read suggested that he was under the spell of Jefferson, that he was bewitched by Jefferson. I think all of this takes the gravity of Madison's philosophy. It underestimates him. And I sort of view myself fundamentally as Madisonian in this respect. I would rather have a government of vast powers that behaved responsibly than this government. In other words, what bothers me more than anything else is the mismatch of institutions and the powers that they wield. That was what the point of the book is. So the grand question that animates debate between the left and the right, more government versus less government, I'm not weighing in on that. And my personal preferences would generally be for less government. But the more that I researched corruption and the more that I discovered how much money today is misallocated because of what practices that I think are corrupt, I find that my first choice is, I don't care. Just make it responsible. Now my first choice, my ideal choice would be a government that does substantially less, that is responsible. But responsibility to me, that's, I had a very, I won't mention her name, but she's a very, she's a good friend of mine and a mentor and I imagine a lot of people here would know her if I mentioned her name and I sent her an early copy of the book and I said, can you give me comments on this? And she wrote me back and said, well, where do you come now? You seem ambiguous. And I talked about that. I thought about that a lot and I talked about it with my wife who is brilliant and helped me almost every step of the way and that's what, that's in conversing with my wife. That's what I said. I'm not ambivalent or at least I'm having a different debate. Now I don't have any interlocutors right now because I'm trying to inject kind of a third, a third angle in here. There's the left and the right and I'm coming, kind of coming in and like, let's talk about responsibility. So if I, you know, if that's a bit of a convoluted answer, you know, I appreciate that, you know, that the categories that we have nowadays left versus right are very well defined and they're very important and I am, I am a man of the right. I am, you know, I sort of envision myself as a kind of almost anti-federalist. I think the anti-federalist papers are often very persuasive and they were very prescient and, you know, culturally I'm part of the right and culturally, you know, look, I come from, I come from Western Pennsylvania which was the home of the Whiskey Rebellion and that's sort of in my bones and in my blood, I think. So, but the book isn't about that and the book isn't about the question of whether or not big government can work. The book is about that big government, you know, maybe it can work in theory, maybe the left is right. I don't think they are. If I had to bet, if I had to bet the farm on it, I'd bet they aren't. But regardless, even if they're right, let's just assume the left is right. You cannot retrofit a massive leviathan upon a tiny constitution which is what we've done and that was the motivator of writing this book. That, more than anything now, is what I find so outrageous. I know conservatives get, you know, I find myself getting outraged by different things now having written this book, you know, conservatives get outraged, for instance, about Obamacare because it's perverting the private insurance market and I find that outrageous too. But you know what really gets my blood boiling though is the deal that this president made with the drug manufacturers after specifically calling out the George Bush administration correctly for making a deal with the drug manufacturers. That's the stuff that really gets my goat these days more than anything and the book reflects that. So you think we're institutionally now. I think very institutionally, I think like, it's sort of a Madisonian perspective now. It's like, you know, I just want the government to run well more than anything else and to behave in a responsible manner. Thanks for listening. If you have any questions or comments about today's episode, you can find us on Twitter at Free Thoughts Pod. That's Free Thoughts Pod. Free Thoughts is a project of Libertarianism.org and the Kato Institute and it's produced by Evan Banks. To learn more, you can find us on the web at www.libertarianism.org.