LoBello Matt LoBello December 15, 2013 Political Economy Professor Wurth

Enabling The Voice of The People Politics and economics are inextricably interwoven. We have seen during events such as The Great Recession, that the actions, ideologies, and practices of one can have a monumental impact on the other. However, there are distinct differences that recently have driven one to be successful and prosperous, and the other to become stagnant and idle. The word compromise is a founding principle that is expected to be synonymous with our government. The foundation of the American political system is based upon political parties, the idea that the best decisions emerge from different viewpoints and philosophies. Yet, that has been lost in modern day politics, replaced, not by efficiency and productivity, but by sluggishness and incompetency. Recently, it appears that American politics has been characterized by a political party victory and not what is best for the people and nation. In a representative democracy, elected legislatures are supposed to be an accurate representation of the American people. In his book The Semisovereign People, political scientist E.E. Schattschneider believes the basis for democracy#1 is liberty, leadership, and a way that the public can participate in the decision-making process (pg. 138). However, current legislatures have been characterized by hypocrisy. During recent governmental deliberation, did politicians believe the best course of action for American citizens was shutting down the government? Did they believe the same individuals who elected them, who have supported and donated to their campaigns would be content losing their jobs? Following the failed negotiation that led to the government shutdown, a majority of politicians simply began bickering and

LoBello criticizing the opposition for their own failures. Democrats and Republicans were using issues such as the debt ceiling and the Affordable Care Act as commodities to seemingly bargain with in their political game. This dynamic is similar to the one that American political scientist and economist Herbert A. Simon describes in his academic piece Organizations and Markets as the gap between ownership and control#2. In reference to organizations, he evidences the discrepancies between the goal of ownership (profit) and managers (personal status, wealth, career). Similarly, politicians and voters have different ambitions in our system. The voters are striving for whats best for the nation and themselves, while the representatives seem to be caught up in political game theory. On March 23, 2010, President Obama signed into law the Affordable Care Act, the largest overhaul of the United States healthcare system since the creation of Medicare and Medicaid. The bill would mandate healthcare for millions of Americans, while making it illegal for insurance companies to deny individuals based upon pre-existing conditions or gender.

During this time, there were looming debt-ceiling negotiations to continue funding a government that was already trillions of dollars in debt. For weeks, politicians had been negotiating a potential extension, but always seemed to hit an impasse involving the friction between funding the government and the Affordable Care Act. In this illustration, the debt-ceiling and Affordable Care Act will serve as what Schattschneider calls the lines of cleavage. Every shift of the line of cleavage affects the nature of the conflict, produces a new set of winners and losers and a new kind of result (pg. 61). These lines of cleavage#3, represented the political and economic controversy, as one line of cleavage shifts, it alters how the other is perceived, creating a reorganization of political alignments. Schattschneider describes this as a displacement of conflict#4. If the Democratic Party were to stand by the Affordable Care Act, they would win

LoBello by protecting health care legislation, but lose by not instilling favorable economic policies. That is precisely what happened and subsequently led to a government shutdown. Critics have met the Affordable Care Act with great question and resistance. Among other issues, the opposition is concerned with the contract theory and economic problem of asymmetry of information#5. As mentioned by American economist George A. Akerlof in his scholarly piece, The Market for Lemons: Quality Uncertainty and the Market Mechanism, asymmetry of information occurs when one party has a greater knowledge or extent of information than another party during negotiation. With that asymmetry of information an

individual or firm can engage in adverse selection. For example, before the Affordable Care Act, an individual could potentially conceal parts of their medical history to prevent denial of medical coverage or higher premiums. As a result, insurance companies face a problem of adverse selection#6, because health insurance is more appealing to the sick or ill. This can in turn raise rates for all consumers, even though the healthy are not as reliant upon insurance as the sick are. Consequently, insurance companies will then engage in the business practice of cream skimming#7, resulting in only the high-value or low-cost consumers receiving medical insurance. These actions reduce the transaction cost#8, or the potential cost that is associated with providing health care, which results from market imperfection. This is a classic example of what Akerlof would describe as a result of a lemon#9, or the bad (in this case the sick) driving out the good (the healthy). However, many citizens are also in favor of the Affordable Care Act because it provides consumers with something that has been absent within health care, a guarantee#10. As Akerlof illustrates, Numerous institutions arise to counteract the effects of quality uncertainty. One obvious institution is guarantees (pg. 499). This legislation provides users with a level of

LoBello assurance, that no matter your medical history, no matter your social problems, you will be covered and have a reasonable expectation of medical support. During this period, Democrats maintained their unwavering commitment to the Affordable Care Act, while Republicans were insistent upon significantly reducing government spending. Neither side was willing to compromise, which led to a government shutdown. Schattschneider would describe this dynamic as the contagiousness of conflict#11. Nothing

attracts a crowd so quickly as a fight. Nothing is so contagious At the root of all politics is the universal language of conflict. (pg. 1). As Schattschneider illustrates, the contagiousness of conflict is the attraction or magnetism to clashes, the human nature to be drawn to controversy. This has been evidenced through right wing Tea Party members such as Ted Cruz, who is seemingly steadfast and unwavering in his refusal to agree to any compromise with Democrats. Consequently, other political representatives are the spectators as Schattschneider would say, who are drawn to the fight, but do not intervene. This unwavering and firm stance on politics can be categorized as a special interest#12. Tea Party members are justifying their severely biased actions as public interest. In reality, however, this is an attempt to project their personal motivations and draw attention to their cause. Actions by Cruz such as his twenty-one hour filibuster against the Affordable Care Act, is an ideal example of what John Gaventa describes in his book Power and Powerless as the second dimension of power#13, which seeks to influence decision making by shaping the agenda. Cruzs actions, while not successful, brought negative publicity to the Affordable Care Act. Moreover, even the name Obamacare, which has become synonymous with the Affordable Care Act, attaches President Obamas name to the bill, further evidencing an agenda-setting theory and Gaventas second dimension of power.

LoBello Recently, Speaker of the House of Representatives John Boehner addressed a very similar issue regarding the leadership and following of Tea Party members. Well frankly, I think they are misleading their followers. I think theyre pushing our members in places where they dont want to be. And frankly, I just think that theyve lost all credibility. These strong words by the Speaker evidence the dissatisfaction that politicians have towards the movement. Boehner is a Republican, just like representatives of the Tea Party. However, he is strongly denouncing their cause and condemning their manipulation of the American people. The use of the words, lost all credibility is his attempt to illustrate the outrage from politicians, and a warning to citizens to question the actions and motivations of the organization.

A key issue that is currently evident in American politics, as Simon would describe, is the principal-agent#14 problem. The principal-agent problem explores the relationship between the principal, or the American people, and the agent, the politicians. I would argue that the motivations of both the principal and the agent are very different, which is drawing us into this political ineptitude. I believe the motivation that is resulting in shirking#15, or this slighting of responsibility, loyalty, and leadership by politicians within government, is economically based. The economic motivations that are evident within politics are both apparent and questionable. Campaigns have emerged into large-scale auctions in which corporations spend millions of dollars donating to political parties with the hope of achieving a political advantage or preference for their organization. Schattschneider illustrates this dynamic between pressure politics vs. party politics#16 when he says, It cannot really be said that we have seen a subject until we have seen its outer limits and thus are able to draw a line between one subject and another (pg. 22). These outer limits that the author illustrates are becoming harder and harder to identify. Political parties view these corporations as an opportunity to generate money, which

LoBello in turn, can provide them with more advertisements to win the election. At the same time, corporations favor this process because they can influence the political spectrum, political campaigns, and elected officials. So, applying Schattschneiders assessment of politics to this situation, Every political party consists of discordant elements which are restrained by the fact that unity is the price of victory. The question always is: Which battle do we want most to win? (pg. 65). Politics has become a game, a game in which one party wins, and the other loses. The goals of productivity and efficiency within government have been replaced by a quest for dominance and political

power. As a result, the answer to Schattschneiders question, Which battles do we want most to win? is a political party victory. To clarify, I dont believe this assessment applies to all representatives and campaigns. I believe legislators attempt to do what is best for the nation; however, some get personal motivations attached to those goals, which lead to the inefficiency and negative governmental stigmas. In fact, in recent days, our government has showed great progress. On Wednesday, bicameral legislation came together to avert another government shutdown as well as a potential fiscal crisis. These actions show compromise within Washington, and prove to the American citizens that cooperation is possible. So how do we improve upon these events? As English economist E.J. Mishan demonstrates in his scholarly piece Pangloss on Pollution, we need to establish a degree of liability#17 between the people and elected officials. We must hold these politicians to a higher standard. This will result from citizens directly addressing government about inefficiencies. It is our government and, as Albert Hirschman evidences in his book Exit, Voice, and Loyalty, we have to voice#18 our displeasure, to bring our

LoBello feelings and attitudes to the forefront of political deliberation. These actions will force government, just like management, to reflect upon their hardships and cultivate solutions.