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In this present crisis, government is not the solution to our problems; government is the problem.

– Ronald Reagan

Ronald Reagan was well-read on Friedman and Hayek and learned some pragmatic political lessons from Goldwater’s drubbing in 1964.¹ By the time he got to the White House in 1980, Reagan knew who he wanted to hear from on economic matters: the Chicago School’s top guns. Reagan’s economic policy board included Friedman, George Schultz, who was a former dean of the University of Chicago’s graduate school of business (GSB) and a Freidman acolyte, and Alan Greenspan, another libertarian who’d replace Volcker as Fed chairman late in Reagan’s second term.²

Reagan and Freidman got on like chocolate and peanut butter. It didn’t hurt that Friedman’s latest book, Free to Choose, was the best-selling nonfiction title of 1980 and was adapted into a popular PBS TV series.³ Friedman was the undisputed face of American libertarianism in the early ‘80s. Another member of Reagan’s economic policy board would later recall that “The Gipper” simply “could not resist Friedman’s infectious enthusiasm and Reagan’s eye sparkled with delight every time he engaged in a dialogue with him.”⁴

The feeling was mutual. In his memoirs, Friedman wrote, “No other president in my lifetime comes close to Reagan in adherence to clearly specified principles dedicated to promoting and maintaining a free society.”⁵ Aww, crying face, eggplant emoji, eggplant emoji.

Part of what Friedman did on Reagan’s policy board was to pry open the door to increased federal budget deficits. Newsweek’s chief economics writer, Rich Thomas, summarized this dynamic as follows:⁶

Friedman’s gospel stresses the paramount importance of money – the absolute necessity of stable growth in the supply of cash and credit circulating in the economy at one time. But Friedman also had a little-known theory about budget policy that Reagan absorbed and practiced from Day One in the White House.

In Friedman’s view, the most important thing about budgets is the level and direction of spending – not the size of the deficit…Guided by Friedman’s theory, Reagan set aside the deficit problem when he came to Washington.

Well, hello there, rising national debt. The federal government’s annual deficits in the 1980s were a side-effect of the l-f-lib ideology. Friedman and others on Reagan’s economic policy board sketched it all out on a nice little napkin in red ink. Part of their grand vision was to “starve the beast”. The GOP abandoned its longstanding principle of maintaining balanced federal budgets at that point. In the Kennedy administration, let’s recall, Republicans in Congress voted down Kennedy’s proposed tax cut on the grounds that it would push the federal government too far into hock. That principle was roadkill by the early ‘80s. The supersizing of America’s national debt was built into the Reagan revolution from day one.

In many respects, the libertarians’ “small government” mantra can be traced back to a 1959 paper by another Chicago Schooler, Ronald Coase. Born near London, England in 1910, Coase got a teaching job at Chicago Law School in 1964 and spent the rest of his career there; he and Aaron Director wound up co-editing the institution’s Journal of Law and Economics for many years.⁷ Coase’s 1959 paper, “The Problem of Social Cost”, turned out to be an effective calling card that helped him land that Chicago gig. Coase became an MPS member in 1948. Friedman and he had been of a like mind for 15+ years by the time Coase got to Chicago.

“The Problem of Social Cost” posited that if transaction costs were zero and if property rights were extremely well defined and transferable, market agents could efficiently allocate radio spectrum, the specific market backdrop reviewed in the paper, without the FCC being involved in the allocation process at all.⁸ The idea that market-based mechanisms, such as negotiations and contracts, were sufficient to allow companies to self-distribute scare resources like radio spectrum as optimally as a government body could do, assuming certain market conditions were met, was like catnip to l-f-lib academics.⁹ By 1980, this premise was widely known as the “Coase Theorem” and it was used to promote the privatization of a range of government services, and it helped set the table for more tax cuts by extension.

Reagan’s first big tax cut arrived in mid-1981. The Economic Recovery Tax Act (ERTA) was one of the largest tax cuts in U.S. history and included a characteristic that defines supply-side economics: a bias towards what’s financially beneficial for top 1% corporations and neo aristocratic families.¹⁰ The top marginal income tax rate was cut from 70% to 50%. The lowest rate went from 14% to 11%. You don’t need to be a rocket scientist to grasp that ERTA delivered a massively regressive tax cut.

Previously known as the Kemp-Roth bill, thanks to its stalwart Republican backers who shepherded it through Congress, ERTA slashed the estate tax as well. Other provisions cut capital gains taxes and corporate taxes. The legislation expanded business-related exemptions and loopholes that additionally eased the tax burdens on large companies especially. If you were already a millionaire or owned a big piece of a big business, you were allowed to pop two bottles of bubbly on New Year’s Eve 1981.

David Stockman was director of the OMB in Reagan’s first term. He ran the numbers on the Kemp-Roth bill and was horrified. Stockman, a former GOP congressman from Michigan and an early fan of supply-side economics, apparently never got the confidential l-f-lib memo about ignoring large deficits. Stockman was candid about the central goal of the legislation in a 1981 interview in The Atlantic:¹¹

“The hard part of the supply-side tax cut is dropping the top rate from 70 to 50 percent—the rest of it is a secondary matter,” Stockman explained. “The original argument was that the top bracket was too high, and that’s having the most devastating effect on the economy. Then, the general argument was that, in order to make this palatable as a political matter, you had to bring down all the brackets. But, I mean, Kemp-Roth was always a Trojan horse to bring down the top rate.”

That’s a concise description of what supply-side economics has been about from day one. Stockman’s OMB calculated the 1-2 punch of the Kemp-Roth tax cuts and Reagan’s proposed defense spending increases would yield a federal budget deficit in 1982 of $82 billion, and that the deficit would rise from there to $116 billion in ‘84.¹² That amount of red ink was unprecedented in peacetime in U.S. history.

Galbraith’s warning that supply-side economics was “witchcraft” and “a relatively sophisticated form of fraud”, and its comparison to “snake oil” by another prominent Keynesian, Robert Solow, was beginning to show up as a $100+ billion annual red holes in Stockman’s computer model of the federal government’s books. His interview in The Atlantic was his way of sounding the alarm bell.¹³

Reagan took Stockman “to the woodshed” for being so honest about the intent and effects of the l-f-lib ideology in his administration, and pressed on.¹⁴ Reagan’s next act was to deregulate multiple industries. From airlines, trucking and railroads to long-distance phone services and bank interest rate caps, the Reagan administration yanked back on the reins of America’s governmental beast in the early ‘80s.

All these actions squared with the message of George Gilder’s 1981 bestseller, Wealth and Poverty. Gilder was an investor who’d later co-found the aforementioned Discovery Institute, a pro-intelligent design think tank. Wealth and Poverty was a love letter to supply-side economics and to libertarianism’s top guns like Friedman, “Austrian school” economists, and the novelist Ayn Rand.¹⁵

One might be tempted to compare Gilder’s book to Andrew Carnegie’s “Gospel of Wealth” were it not for the fact that, in Gilder’s interpretation of Christianity, wealthy Americans were under no obligation to give away their fortunes to charity, to do for “the least of these”, before passing on.¹⁶ In Gilder’s Christianity, the more money one had, the more righteous one became. God was obviously smiling on you. No irony here in seeing millionaire televangelists flying around in Learjets, worshipping mammon, and having extramarital liaisons.¹⁷

A third major vector in the l-f-lib effort to curb government power in the early ‘80s involved the courts. One of Reagan’s nominees to the U.S. Court of Appeals was Richard Posner.¹⁸ A card-carrying MPS member, Posner had been a longtime lecturer at the University of Chicago Law School and moonlighted as a consultant for corporations that were battling the government in court. After being confirmed in late ‘81, Posner left behind a colleague, Richard Epstein, at Chicago Law. Epstein was another MPS member who, in 1982, wrote that regulation and taxation were “instruments of confiscation.”¹⁹ Posner did his best to do his old pal proud and channel his inner Albert Nock from the bench for the next 35+ years.

Posner published Overcoming Law in 1994. That book is veritable cornucopia of anti-government and pro-deregulatory sentiment. Posner acknowledged that the rule of law is a valuable public good but then drops the hammer, writing that “major parts of the law should be overcome, because they are ‘pretentious, uninformed, prejudiced and spurious’ and need to be improved by more ‘pragmatism’.”²⁰ Translation: the U.S. should excise all sorts of laws related to market oversight.

Overcoming Law was one of many bottles of acid thrown by l-f-lib’s against the nation’s Arrow-Smith ideal firewall that guarded competitive, efficient capitalism for decades prior to 1980. Posner and company’s efforts paid off in the 1980s and ‘90s, as big chunks of that protective infrastructure disintegrated.

Something that also came apart in the ‘80s was the GOP’s commitment to monetarism. Volcker and Reagan did their best to follow the Friedman playbook during the nation’s second stagflation crisis but the numbers simply stopped adding up. A mid-1986 New York Times article described the divorce between the monetarist’s theory and real-world measurements:²¹

Increasingly, however, the money supply has been running way ahead of economic growth, and monetarists have been at a loss to explain it…

By disavowing its belief in monetarism, the [Reagan] Administration appears to leaving more room to jawbone the Fed, an independent agency, into stimulating the economy. The Fed, however, has been taking such steps slowly, for fear of reigniting inflation…

The problem is that no one knows what money is anymore. To economists, money comes in many forms and many gradations – from currency, to Treasury bills and common stock, to savings bonds and credit cards – and no one can isolate the true money supply money that economists want to track…

”What has happened,” said Lyle E. Gramley a former governor of the Federal Reserve Board and now chief economist for the Mortgage Bankers Association here, ”is that the relationship between growth of the economy and the growth of the money supply is just no longer there.”

Did some navel-gazing occur on the part of the monetarists once their great white whale, “true money”, vanished into the depths? Surely you jest. After monetarism proved a useless tool for governing the national economy – this pillar of the l-f-lib ideology went from cradle to grave in under a decade from a policy standpoint – the l-f-lib’s fell back to a vaguer veneration the Federal Reserve System, and they started clinging to every word, burp and fart emanating from Volcker and Greenspan like it was manna from heaven.

By the late ‘80s, the 1-2 punch of the l-f-lib ideology, which kept streaming from the University of Chicago’s economics department (and its law and business schools to a lesser extent) after Friedman left, plus the direct pounding by the USCC and the growing army of pro-big business lobbying firms, PACs and think tanks surrounding Washington, DC, had dealt serious damage to the nation’s infrastructure that maintained substantive competition in the vast majority of large industries.

Friedman himself helped ring the dinner bell that drew more big businesses to the table of self-interested, deregulatory investing. On the topic of corporate responsibility, Friedman had famously written in the 1960s that there was “one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” When pressed in the ‘70s whether this meant that it was fine if corporations used their profits to push for changes to the rules that governed capitalism, and Freidman gave that idea two thumbs up and added a rowdy “Dyn-o-mite!”²²

Corporations aren’t just free from the responsibility of maintaining social consciences in the l-f-lib ideology, they’re painted as irrational actors if they don’t try to bend or shred the rules of capitalism in a manner that benefits themselves. The logical endpoint of their line of reasoning is The Trump Organization.  Donald Trump didn’t just become the face of the GOP in 2016, he became the standard-bearer for the version of capitalism that #MAGAheads believe should dominate society, and that belief is rooted in Friedman’s description of how big businesses and capitalism should relate.

♦

Two streams of American conservatism converged in the 1970s and ‘80s: the laissez-faire libertarian ideology, most effectively championed by academics at the University of Chicago, and pro-big business forces, most effectively championed from a public policy change standpoint by the U.S. Chamber of Commerce. We’ll refer to these converged streams as the #unholyunion from this point forward.

I’ll also slap the broader base of #unholyunion supporters, whether they rally behind causes associated with the ideological/academic libertarian tributary or behind causes of the big business and neo aristocratic household/family tributary, with the #trickledownfaithful label. This latter group has largely morphed into #MAGAheads since 2016.

The hit parade of new #unholyunion orgs around Washington, DC kept a-comin’ in the 1980s:

• The Charles G. Koch Charitable Foundation was established in 1980 by Charles Koch, whose l-f-lib credentials need no introduction. The think tank’s aim is to disseminate “the Science of Liberty”, wink, wink, nod, nod.
• Atlas Network was founded in ’81 by Antony Fisher (yup, the same dude mentioned earlier; he and the Koch brothers must have had a running bet as to who could found and fund the most l-f-lib policy-pushing orgs in the U.S.). This nonprofit spends its time and money pushing free-market economic policies, and former EVP Leonard Liggio was a card-carrying MPS member.
• The Federalist Society started as symposium of 200 students in 1982 at the University of Chicago Law School, Yale Law School and Harvard Law School.²³ It took off, and its headquarters soon relocated to Washington, DC. The org now bills itself as “a group of conservatives and libertarians dedicated to reforming the current legal order,” and it claims >75,000 members across its lawyer, faculty and student divisions.²⁴ The Federalist Society is different from the other orgs outlined here in that, instead of trying to influence the legislative branch, its focus is bashing and rewiring the legal branch so that it lines up better with the #unholyunion agenda.
• Citizens for a Sound Economy was a think tank, and later a PAC, founded in ’84 by Charles and David Koch. With Ron Paul as its first chairman, it took money from companies in tobacco, oil/energy, sugar, and other industries to promote its free market, limited government agenda. In the 2000s, it split into two orgs that became key funders of the Tea Party movement.
• Americans for Tax Reform (ATR) is a conservative advocacy group that was founded in ’85 by Grover Norquist. Its goal is to realize “a system in which taxes are simpler, flatter, more visible, and lower than they are today.”²⁵ ATR seeks to reduce the size of the U.S. government as a share of GDP. Norquist became famous in the late ‘80s for his “Taxpayer Protection Pledge”, which was signed by many GOP candidates and congresspeople, and which committed them to voting against future tax hikes. ATR is an Astroturf, anti-tax group, but Norquist is a registered lobbyist as well, and he’s been known to take money from corporations and then turn around and push for specific policy changes that they want.²⁶

One could go on in this direction as well, especially if we expand the scope to include l-f-lib think tanks, PACs and lobbying groups that formed outside Washington, DC in the ‘80s. The way the 1-2 punch worked, and still does, is that the l-f-lib ideology, as defined by academics and refined by think tanks, is weaponized by lobbying firms’ lawyers to convey the legal preferences of their clients to lawmakers and federal agency executives in no uncertain terms.

It’s illegal for lobbyists to give money to public servants, their families or to people working with them directly. Where there’s a will there’s a way, however. After the lawyers come in and dump the buckets of #unholyunion water they’re carrying, associated think thanks and PACs follow up and give generously to the reelection campaigns of public officials who’ve responded favorably to the lawyers’ deluge. Wealthy l-f-lib ideologues can, and do donate directly to these same campaigns. Such think tanks, PACs and l-f-lib ideologues may spend money on negative ads that undercut the electoral chances of their preferred candidate’s opponent as well.

To say the environment in which lawmakers have labored since 1970 has grown increasingly rife with conflict of interest and corruption opportunities is an epic understatement. This is exactly how Friedman and Powell envisioned a revised legislative sausage-making process to look like.

Following scandals that implied quid pro quos were indeed a growing problem between congresspeople and corporations – the Keating Five scandal was a prominent case in the late ‘80s – public interest intensified around legislation to curb lobbying activities and more closely track the rising tide of lobbying dollars flowing around Washington, DC.²⁷ The result was 1995’s Lobbying Disclosure Act. Among other sunshine-y changes, this legislation required lobbyists to register or face a $50,000 fine and a referral to the local U.S. Attorney’s office for potential investigation (which could culminate in disbarment).²⁸

Knowing how many lobbyists were employed in Washington, DC before to the late ‘90s is tough due to weak reporting processes. According to the American Foreign Relations website, an online resource run by Advameg, there were about 500 lobbyists in Washington, DC at the close of World War II.²⁹ CRP data show there were ~10,000 lobbyists in Washington, DC in 1998 (the first full year in which the CRP aggregated this data), and in 2020 this figure was >11,000.³⁰ Suffice to say that precious few of these lawyers are there promoting stronger public goods and beefed-up Arrow-Smith ideal policies.

The ascent of lobbying in the past two generations has coincided with rising U.S. socioeconomic inequalities. Lobbying’s growth has also far exceeded the rate of U.S. population and GDP growth. The explosion in lobbying is a key element of the #unholyunion win streak. It’s the future that Friedman and Powell envisioned in the 1970s.

Total federal lobbying expenditures were apparently <$100 million in 1975.³¹ The comparable total in 2000 was ~$1.5 billion; this total crossed $2.5 billion in 2007 and it’s averaged >$3 billion a year in the 2017-2020 period.³² Onward and upward for the pro-big business half of the #unholyunion. If the Lobbying Disclosure Act had kneecapped K Street’s ability to chalk up W’s for clients, these figures would have trending down since 1995. That they haven’t is telling.

Let’s double-click on a corner of lobbying’s growth. I’d prefer to use USCC lobbying expenditures over time to tell this story, but that information doesn’t seem to be publicly available before to the late ‘90s. I’ll instead use the findings of a Pew Research Center study into religious advocacy groups to imply a broader trend. Pew Research’s 2012 paper, “Lobbying for the Faithful: Religious Advocacy Groups in Washington, D.C.”, found that there were 25 groups that had a clear religious affiliation and that lobbied federal officials in the late 1940s, and that this total was still <40 orgs by the late 1960s. By the end of the ‘70s, though, this figure had climbed to 67 and then spiked to 111 by the close of the ‘80s – and it nearly doubled from there to 215 groups through early 2010.³³

It’s fair to say that the Lobbying Disclosure Act didn’t tamp down the number of religious advocacy groups in the Washington, DC area after ‘95. Figure 24 illustrates what Pew Research found regarding the growth of religious advocacy orgs since World War II. The implication is that religious groups followed the larger pro-big business lobbying herd.

Pew Research’s paper also found that lobbying orgs with a religious bent employed >1,000 people in the late 2000s and that these orgs together spent ~$350 million a year.³⁴ That’s about a tenth of all lobbying dollars spent in that timeframe. The top ten religious advocacy groups, moreover, contributed >$190 million of the $350 million annual total, Pew Research data showed, so it may be that only a dozen or so orgs had the clout to get their preferred policy preferences fully aired in front of lawmakers (the top spender, with $88 million in outlays in 2008, was the American Israel Public Affairs Committee).³⁵

Federal lobbying dynamics are sometimes described as a tug-o-war between the interests of business owners/execs and the interests of unions and organized labor. The truth is that this isn’t a contest, it’s a blowout. From 2008 to 2020, according to the CRP, special interests spent a total of $42.35 billion lobbying federal lawmakers and agencies. Of that total, $36.9 billion was spent pushing business/corporate interests. That’s over 87% of all lobbying outlays.³⁶

Labor’s share was a little over 1% of total lobbying in this same timeframe, or <$600 million. Labor was also outmuscled by what the CRP classifies as ideological (or single-issue) group spending, which came to $1.85 billion in this period. Some of the groups there have a religious orientation. The last piece of the lobbying pie falls into CRPs’ “Other” bucket, which contained 7% of outlays (~$3 billion).

CRPs’ online database compiles lobbying expenditures by specific business too. It isn’t hard to cross-reference this list with, say, Fortune’s list of America’s largest companies. I scratched the surface and went 50 companies deep on the Fortune 500 list in 2020, which ranks companies by revenue.³⁷ Every one of the top 50 businesses spent at least some money lobbying in Washington, DC in the 2008-2020 period. The vast majority of these businesses lobbied year in and year out. Companies on the Fortune 50 list in 2020 spent $3.6 billion lobbying in the 2008-2020 period, or nearly 10% of all corporate/business lobbying done in this timeframe.

Here’s the federal corporate lobbying top ten list in the 2008-2020 period:

1. General Electric (~$217 million spent on direct lawmaker/agency lobbying)
2. Boeing ($211 million)
3. AT&T ($203 million)
4. Comcast ($192 million)
5. Exxon Mobil ($184 million)
6. Verizon Communications ($175 million)
7. FedEx ($165 million)
8. Alphabet/Google ($164 million)
9. Chevron ($135 million)
10. CVS Health ($122 million)

To be clear, this spending is over and above the nearly $1.3 billion the USCC spent lobbying in Washington, DC from 2008 through 2020. There are other pro-big business lobbying groups in Washington, DC as well. The Business Roundtable, for example, which expresses the specific desires of the CEOs of America’s largest companies, spent >$208 million lobbying from 2008-2020, CRP data show.³⁸ (For what it’s worth, Exxon Mobil placed highest on the Fortune 50 list by revenue in 2020, at #3, and FedEx placed lowest, at #47.)

If you’re a corporation that wants more access to lawmakers and the machinery of how then you both lobby directly and give to the USCC and similar orgs to amplify your message. Imagine what share of total corporate/business lobbying funds were spent across the entire Fortune 500.³⁹ Imagine what this share would be if all of America’s several thousand publicly traded companies, or if all of the nation’s several thousand big businesses (as defined circa figure 11 back in Chapter 2) were included.

It’s safe to say the vast majority of federal lobbying is done by large, often publicly traded companies. America isn’t suffering from a vague and ill-defined lobbying problem (read: a regulatory capture problem as defined by George Stigler). It’s suffering from a quite well-defined, top 1% corporation lobbying problem. Those are the entities responsible for the overwhelming majority of lobbying work carried out in Washington, DC since the 1970s. That’s my point here.

Conversely, I’d wager that direct lobbying outlays by the nation’s millions of privately held SMBs falls somewhere between negligible and a low single-digit share of all lobbying done in the past two generations. The axe of these companies hasn’t been ground in Washington, DC. The desires of their CEOs and owners aren’t being heard. We haven’t even gotten to the interests of the median flesh-and-blood U.S. citizen yet.

Lobbying has a huge bias built into it. That bias runs in the direction of big businesses that are part of the #unholyunion, and whose execs, boards and top shareholders have a direct self-interest in seeing that ideology more fully realized. The rise of lobbying since 1980 is another piece of the #unholyunion win streak. The Supreme Court’s 2010 decision in Citizens United v. FEC spiked the football in this regard.⁴⁰

A natural follow-on question is whether or not lobbying has indeed affected the type of laws and regulatory changes that have been made in recent decades. The growth in lobbying expenditures certainly suggests that many big businesses believe that putting their thumb on the scale of how the rules of capitalism are reworked is a pragmatic investment, but is there a more direct means of assessing whether the nation’s legal changes have tended to favor what America’s top 1% companies and its top 1% wealthiest households have preferred since 1980?

♦

Larry Bartels was a professor of public policy and international relations at Princeton University in the 2000s. Part of an excellent book that Bartels got published in 2008, Unequal Democracy: The Political Economy of the New Gilded Age, reviewed the voting patterns of U.S. senators between 1988 and 1992. Those votes, in turn, were contrasted with the policy preferences of each senators’ constituents at the state level. More specifically, Bartels examined the voting patterns of U.S. senators on legislation involving minimum wage, civil rights, government spending, and abortion-related changes, and then he compared those votes to the policy preferences of the general public in each state by income level, as captured in related surveys.⁴¹

A headline takeaway from Unequal Democracy is that Bartels found that senators were far more responsive to the policy preferences of high-income voters than to middle- and low-income voters. “Indeed, my analyses indicate that the views of constituents in the upper third of the income distribution received about 50% more weight than those in the middle third,” Bartels wrote. “Meanwhile, the views of constituents in the bottom third of the income distribution received no weight at all in the voting decisions of their senators.”⁴²

Moreover, “The roughly linear increase in apparent responsiveness across the three income groups, with those in the bottom third getting no weight and those in the middle and top thirds getting substantial weight,” Bartels elaborated, “suggests that the modern Senate comes a good deal closer to equal representation of incomes than to equal representation of citizens.”⁴³ So much for senators reflecting the will of “the people”.

The capper is that Bartels’ analysis showed that “Republican senators were about twice as responsive as Democrats to the views of high-income constituents.”⁴⁴ This gap is excellent proof of the #unholyunion win streak. This is trickle-down economics in action in the senate. The rise of the l-f-lib ideology, and the disproportionate impact that archconservative think tanks, PACs and lobbying groups have had on GOP lawmakers since 1970 has to be considered the prime suspect in the whodunit of why Republicans senators are biased towards whatever their high-income constituents prefer.

In late 2014, Princeton professor Martin Gilens and Northwestern professor Benjamin Page came back for another bite at this same apple. Their paper, “Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens”, considered the results of >1,750 survey questions, asked of the general public between 1981 and 2002, and that involved clear federal policy choices (and that also collected respondents’ income level).⁴⁵ Gilens, Page, and their research assistants isolated the policy preferences of top 10% of U.S. households by income, which in 2012 dollars worked out to >$146,000. The authors of the paper dubbed this group economic elites. The same process was used to isolate the policy preferences of the typical or median voter based on income level.

Using a multivariate model, the professors found the “impact of average citizens’ [public policy] preferences drops precipitously, to a non-significant, near-zero level. Clearly the median citizen or ‘median voter’…does not do well when put up against economic elites and organized interest groups.”⁴⁶ The authors continued, “By contrast, economic elites are estimated to have a quite substantial, highly significant, independent impact on policy…[E]conomic elites stand out as quite influential – more so than any other set of actors studied here – in the making of U.S. public policy.”⁴⁷

Ouch. More specifically, Gilens and Page wrote, a “proposed policy change with low support among economically elite Americans (one-out-of-five in favor) is adopted only about 18 percent of the time, while a proposed change with high support (four-out-of-five in favor) is adopted about 45 percent of the time.”⁴⁸

Gilens’ and Page’s paper didn’t explore the partisan divide in lawmakers’ responsiveness to economic elites’ policy preferences, but the paper did shine a light on a different aspect of the story we’re pursing here: the impact of interest group lobbying on public policy decision-making. The process of measuring this effect was complex – one might even call the waters surrounding it muddied – so I recommend reviewing Gilens’ and Page’s (free online) paper if you’re interested in those details.⁴⁹ The nutshell version is that the authors and their assistants took a list of the top 25 most potent interest groups in Washington, DC and added to that the ten industries that spent the most on lobbying between 1981 and 2002, then sussed out the policy preferences of these interest groups on key issues (based on a review of materials they published) and that were addressed in public surveys as well as voted on by Congress within four years of the related survey question being asked.⁵⁰

The bottom line coming of all that work was that the study’s authors found the policy preferences of interest groups did align fairly well with the federal government’s ultimate public policy choices in this period. Gilens and Page wrote that, “[W]hen support for policy change is low among interest groups…the probability of that policy change occurring is only .16, but the probability rises to .47 when interest groups are strongly favorable…” Moreover, “When both interest groups and affluent Americans [economic elites] oppose a policy it has an even lower likelihood of being adopted (these proposed policies consist primarily of tax increases).”⁵¹

Whaddayaknow? Companies and high-income households didn’t want to see their taxes go up between 1981 and 2002 and Congressional proposals in that direction generally became roadkill. That feels about right. Gilens’ and Page’s paper backed up the findings in Bartels’ book. Both analyses put scientific rigor behind the idea that the #unholyunion has gone on a winning streak since the 1970s.

The American Legislative Exchange Council (ALEC) was founded in 1973. This org hasn’t been brought up before because its focus is statehouses, not the federal government. ALEC was co-founded by the conservative activist Paul Weyrich, a co-founder of Moral Majority and the Heritage Foundation. Another ALEC co-founder was Lou Barnett, who went on to become the director of Ronald Reagan’s PAC. ALEC was originally established to counter EPA actions at the state level.⁵²

The Guardian newspaper accurately characterized ALEC as “a dating agency for Republican state legislators and big corporations, bringing them together to frame rightwing legislative agendas in the form of ‘model bills’.”⁵³ ALEC blurs the line between a think tank, a PAC and a lobbying group. ALEC is the state-level equivalent of the process we’ve been documenting at the national level.

ALEC’s scope expanded in the late ‘70s to include model legislation on anti-public school bussing measures, anti-abortion initiatives, pro-religious freedom regulations and pro-gun ownership laws.⁵⁴ The org pivoted in a deregulatory direction in the 1990s. ALEC’s growth and evolution mirrors the #unholyunion wining streak that’s played out in Washington, DC.

ALEC end-runs the legislative process and simply lets businesses write the laws they’d like to see passed. GOP-dominated state governments have eagerly rubber stamped this process in exchange for campaign dollars and cushy private sector gigs after politicians retire or are voted out of office. An effective quid quo pro process has been institutionalized in many states.

The #unholyunion takeover of the GOP has been anything but hostile. It’s been a mutually beneficial marriage of convenience, like the relationship between the l-f-lib ideology and a portion of the big business community. And it is mostly big businesses that get in bed with ALEC. As correspondent for The Nation put it, “multinational corporations…[get to] make more money…[based on the] opening up of areas via privatization…” that ALEC’s legislative process short circuiting enables.⁵⁵ It’s often small, private SMBs that get the short end of the stick as a result. Many of ALEC’s “wins” have a pro-top 1% business bias in them. This moral break with the U.S. Constitution isn’t a harmless crime.

There’s no liberal or Democratic equivalent of ALEC that helps state lawmakers and agencies craft stronger public goods and beefed-up Arrow-Smith ideal laws. It’s been as much of a blowout at the statehouse level as the illusory federal tug-o-war between corporate lobbying and organized labor lobbying. The bottles of acid being thrown by ALEC and the #unholyunion against the bulwark of governance that has protected efficient capitalism and democracy in America have weakened this infrastructure greatly from coast to coast since 1980. These actions directly presage Trumpism.

The Reagan administration rolled out a second round of tax reforms in 1986. That year’s Tax Reform Act, among other things, cut the top income tax rate from 50 percent to 33 percent.⁵⁶ Stockman was long gone by then, but it isn’t hard to imagine the rising tide of red ink that showed up in the OMB’s computer model of the federal books that year.

Then the S&L crisis hit. Deregulatory actions taken in the early ‘80s – legal changes made at the behest of “thrifts” – allowed S&L orgs to wade into deeper, riskier lending waters.⁵⁷ A boom and bust cycle ensued; scores of S&L’s were insolvent by 1986.

Almost one-third of the S&Ls nationwide were belly up by the time the crisis wound down in the mid-1990s.⁵⁸ The cost to taxpayers for cleaning up that mess worked out to ~$130 billion (and total economic costs came to >$160 billion).⁵⁹ S&L deregulation produced a net negative ROI for the U.S. economy. Did the #unholyunion have a come-to-Jesus moment after the S&L debacle, and put a moratorium on their deregulatory efforts in finance? O ye, of little faith.

Part of team #unholyunion was already handcrafting another deregulatory disaster that involved financial services: Enron. The company was founded as regional energy company in 1985 but was soon bitten by the deregulation bug and yanked in a “dot com” direction in the ‘90s. Enron’s 2001 collapse was the result of deregulation at the intersection of energy and financial services, coupled with bad actors at the apex of company (plus the intentional blindfolding of the government’s ability to see what Enron was doing). At its height in 2000, the Houston-based energy and services company employed ~29,000 people and claimed revenues of >$100 billion a year.⁶⁰ It was gone less than two years later in the largest corporate bankruptcy in U.S. history, and Arthur Andersen, one of the world’s largest auditing firms, was a collateral damage casualty.⁶¹

Phil Gramm, who jumped ship from the Democrats to the GOP in 1983 and who’d represent Texas in the U.S. senate from 1984 to 2002, had his fingerprints all over the “Enron loophole” that barred regulators from overseeing derivative trading in the energy sector beginning in the year 2000.⁶² Would it surprise you to learn Enron was a busy beaver in Washington, DC in 1999 and 2000? The company lobbied to the tune of almost $3.5 million in those years, and helping Phil Gramm get that derivative trading loophole over the finish line was at the top of Enron’s to-do list.⁶³

In January 2002, Sean Wilentz wrote a pitch perfect article in The American Prospect that captured the broader deregulatory context of Enron’s implosion:⁶⁴

Enron is the belated culmination of the age of Ronald Reagan, George Bush the elder, and Newt Gingrich. It stands as a monument to the era of deregulation and laissez-faire business politics that has endured for more than 20 years…

With Gingrich as their fire-eater, congressional Republicans and their K Street bankrollers mounted huge resistance to the regulatory efforts of the Clinton administration, as well as to the existing regulatory rule-books. [Enron founder, CEO and Chairman] Kenneth Lay and Enron lobbyists were particularly aggressive. They sought to gain political influence, largely with Republicans in Texas and in Washington, D.C., in order to alter regulations and gain exemptions so that Enron could operate in a completely deregulated zone…

The so-called free market that resulted was no state of nature. It was a highly-crafted artifice, coolly manufactured on K Street and on Capitol Hill by the Republican Congress – and in Enron’s case, with the help of Kenneth Lay’s close friend, the new governor of Texas, George W. Bush.

Lay was the son of a Baptist minister and one of his favorite quips was, “I believe in God, and I believe in free markets.”⁶⁵ From your lips to the #trickledownfaithful’s ears, Ken. Lay was like a latter-day hero ripped from the pages of Gilder’s Wealth and Poverty until the day we all found out he was really one of the most incompetent CEOs on planet earth and/or crooked to a nearly Trumpian degree.

Enron’s commodity traders had been managed like Wall Street traders rather than like people involved in the sleepy exchange of a naturally monopolized commodity such as electricity. Traders’ results, peer reviews, and a few other performance metrics were dumped into a pot each year, stirred, and out came pink slips for traders that scored in the bottom 10%.⁶⁶ Is it any wonder these traders manipulated the market to meet personal and company targets and, by extension, price-gouged the people and state of California while subjecting millions of households and businesses there to rolling blackouts?

California’s electric bill almost quadrupled in the year 2000, to $27 billion, the year after deregulation, and Enron’s market manipulation was the direct and sole cause of that massive price spike.⁶⁷ The impact of federal deregulation on energy trading in California was much worse quality of service at much higher prices, the mirror opposite, of course, of the rationales employed by #unholyunion advocates to get their deregulatory efforts over the finish line in Washington, DC and in statehouses coast to coast.

Enron’s rise and fall mirrors the S&L crisis in many respects: near-term boom, then a bust, then fraud, then bankruptcy and significant public damage (a key difference is that although Enron’s execs sought a federal bailout, they were denied by the Bush administration).⁶⁸ Did the #unholyunion and the #trickledownfaithful slow their deregulatory roll after Enron’s implosion? Dream on. Blind eyes were turned, fingers jammed into ears. A few “bad apples” were swept under the rug and ignored. These aren’t the driods you’re looking for. The #unholyunion’s deregulatory pièce de resistance, the financial crisis and Great Recession, was still being drafted in 2001.

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