Vol. 13 No. 3 (March 2003)

SCANDAL PROOF: DO ETHICS LAWS MAKE GOVERNMENT ETHICAL? By G. Calvin Mackenzie (with Michael Hafken).  Washington: The Brookings Institution Press, 2002. 196 pp. Cloth $39.95, ISBN: 0-8157-5402-7.  Paper $16.95, ISBN 0-8157-5403-5.

Reviewed by John Samples, Director, Center for Representative Government, The Cato Institute. Email: jsamples@cato.org

When proposing what later became the Ethics in Government Act of 1978, Jimmy Carter said the law would assure the American people that “their government is devoted exclusively to the public interest” by creating “far-reaching safeguards against conflicts of interest and abuse of the public trust by Government officials” (p.37). Calvin Mackenzie examines the 1978 law and previous regulations governing the conduct of executive branch officials. He concludes that federal ethics policies have failed to realize their stated aspirations. In recounting that failure, the author adumbrates a different and more interesting story about federal ethics policies.

His main story about ethics regulations fits well into the genre called “the public interest theory of regulation.” That genre assumes government regulations aim to solve public problems caused by market or political failures, thereby maximizing some larger public values like the general welfare. True to the “public interest theory” Mackenzie states, “we undertook new ethics policies to raise the level of public integrity in government and to enhance public faith and confidence in that integrity” (p.153).

Mackenzie’s story about the public interest and ethics policies has several parts. His initial chapters provide a general overview of politics and corruption prior to 1961 when John Kennedy initiated the modern era of ethics regulations of federal officials. The middle two chapters examine the growth and content of federal ethics regulations over the past four decades. (To Mackenzie’s credit these chapters are not nearly as boring as they sound). The rest of the book assesses the costs and benefits of the policies, and sets out lessons learned which includes a call for reform.

Mackenzie does not have much data to assess the consequences of ethics policies. He measures the integrity of public officials by counting indictments and convictions by the Department of Justice. Such legal actions have increased, but Mackenzie believes the increase reflects a change in reporting requirements rather than additional corruption. Ethics watchdogs keep thousands of financial disclosure forms on file but throw them out after six years, simultaneously protecting the privacy of individuals and denying Mackenzie time-series data. Instead, Mackenzie relies on press reports to create a few bar graphs.

However, other measures of public trust in government are not lacking. The famous time-series collected biennially by the National Election Studies group provides a long and consistent measure of public confidence in the federal government. Mackenzie evokes but does not much exploit the Michigan data. This is a shame because the public trust measure varies—it mostly goes down with the notable exceptions of Reagan’s first term and Clinton’s last. Mackenzie records data about policy inputs in ethics regulation (for example, the number of forms filed and so on), but the question remains as to whether they affected public trust. A multivariable regression might have yielded some insights here.

Mackenzie should be more careful about asserting causality. Closer attention to the public trust series might have dissuaded him from baldly asserting that ethics policies have led to a steady decline in public trust in government (p.159). The ethics law passed in 1978, and public trust rose from 1980 to 1984. This connection may not be causal, but it certainly is not a steady decline in public trust. He also claims that the era of increased ethics regulations has seen a steady decline in voter turnout among adults (p.109). Yet MacDonald and Popkin (2001) have shown that the turnout of eligible voters (the voting age population less those not eligible to vote) has remained flat following a steep decline between 1972 and 1974.

Mackenzie offers somewhat better evidence on the costs of ethics policy. He believes ethics regulations have made it much harder to staff new administrations, a point supported by the testimony of several (mostly Republican) former executive branch officials, and he also offers reliable numbers about the increasing delays in staffing executive branch positions. Mackenzie draws up a balance sheet on ethics rules and concludes that we should deregulate the conduct of executive branch officials because of the costs involved and because there is a lack of evidence that a real problem ever existed with bureaucratic ethics. Thus ends Mackenzie’s main story about ethics regulation, a tale of policy gone wrong by accident.

Along the way, Mackenzie’s main story undermines his analytic framework. His evidence does not really fit the genre “the public interest theory of regulation,” no matter how many times he asserts it should. He offers another story of partisan and political finagling that properly belongs in the genre “public choice theory of regulation.”  To understand the public choice story in these pages, we might recall Mackenzie’s incorrect assertion that “we undertook new ethics policies to raise the level of public integrity in government and to enhance public faith and confidence in that integrity” (p.153). “We” undertook nothing. Several presidents and the 95^th Congress enacted ethics regulations. Unusually large partisan majorities controlled that Congress; Democrats made up 60 percent of the Senate and 67 percent of the House, a fact absent from Mackenzie’s book. Of course, those presidents and that Congress assured everyone that the new policies were aimed at restoring public faith or some version of “the public interest.”

In devastating detail Mackenzie shows that these ethics policies fell most heavily on business executives who would be likely candidates to serve in Republican administrations. These executives were the wealthiest of potential appointees and most likely to be affected by conflict-of-interest regulations. Mackenzie also understands the partisan purposes behind the policies: “The congressional majorities of the time were increasingly liberal and often little sympathetic to the consequences of these rules for business executives.” When Reagan sought appointees in 1981, he found some were unwilling to be nominated. Mackenzie remarks “these recruiting difficulties caused few tears to be shed by the Democrats who controlled the Congresses that created many of the ethics regulations that so nettled the Reagan personnel recruiters” (p.33). Even if a nominee agreed to go forward, the Reaganites found that the new ethics regulations prolonged the process from weeks to months and required “significant alterations in their personal finances” (pp.46-47). Mackenzie notes that ethics regulations are especially effective in taking away momentum from a newly elected administration.

Mackenzie uncovers other facts contrary to the “public interest theory” story. If the federal government enacted ethics laws to deal with a decline in public trust, the policies should have acted as a solution to the problem. However, he shows that Kennedy and Johnson promoted important elements in federal ethics regulation even as public confidence in government hit its zenith. The 1978 law does follow more than a decade of failing confidence, but ethics regulations did not spring to life in response to low ratings by the public.  That anomaly might have suggested that ethics laws might have some purpose other than restoring public faith in government.

Mackenzie’s non-partisan perspective weakens his analysis in other ways. He collects data about indictments and convictions of federal officials from 1970-1999 as a way to measure the integrity of executive branch officials. He notices that both have risen but concludes that the increase reflects a change in reporting the data (p.104). If we take that change into account, however, the data could be interesting for other. After the change in reporting in 1983, indictments of federal official rose steadily and peaked in 1992 when they began to decline until 1999. Indictments and convictions rose during Republican administrations and fell during the Clinton era. Perhaps federal officials appointed by Republicans are more corrupt than their counterparts in the Clinton administration. An alternative conjecture is that the merit system employees in the Public Integrity section of the Department of Justice are committed liberal Democrats who try harder to indict and convict Republican officials. My guess may be wrong, but the correspondence between partisan change and rising (or falling) indictments should have set off alarms with a political scientist.

Of course, a public choice analysis of ethics regulations focusing on partisanship would have to answer some difficult questions. If Democrats enacted ethics regulations to wound incoming Republican presidents, why haven’t George Bush and the new Republican Senate and House set out to repeal these laws? Perhaps they have not had enough time. Perhaps they are not willing to pay the price of ending the regulations. Most likely, the Republicans wish to use ethics regulations against the next Democratic president.

Given all this, it makes little sense for Mackenzie to call for regulatory reform in ethics regulation. Deregulation comes about only when technological or other changes exhaust the rents created by a regulation (Peltzman 1989). We have little or no evidence that the rents associated with ethics regulation are anywhere near exhausted. To the contrary, the political benefits of ethics regulation may have increased, if the Republicans now see the value of such laws in harassing the next Democratic president.

SCANDAL PROOF is well-written and admirably free of obscurity. Most readers will welcome the author’s generally sober tone on a topic that often evokes more heat than light. That being said, Mackenzie sometimes falls short of his own standards. Although he believes we have no “common definition of corruption” (p.97), he nonetheless attaches the adjective “corrupt” to legal campaign contributions (p.8) and a “faith in free enterprise” (p.16). The millions of Americans who share that faith will be surprised to find they are corrupt. Worst of all, he indulges in a two-page rant about the “ethics sewer” created by the “fetid campaign finance system” which predictably permits “legal bribery” (pp.170-2). Mackenzie adds nothing to our understanding of campaign finance regulation and apparently knows little about the vast literature on the question of the influence of campaign contributions (and other questions whose answers he here takes for granted). Those two pages are distracting—but fortunately relatively rare in this book.

I take the following lessons from the evidence presented in SCANADAL PROOF. First, Americans should be skeptical of any regulation seeking to improve the ethics of anyone, not least of which are laws purporting to improve public confidence in government. They will have little to do with ethics and much to do with the political advantage of their authors. Second, it makes little sense to write as if a law were aimed at “the public interest” when your evidence clearly shows it sought narrow partisan goals. Why not self-consciously tell the whole story of ethics regulation? Yes, the authors of ethics regulation evoked public trust in government but the laws themselves served private agendas. Why not simply say what this book shows, despite its author’s intentions? Ethics regulations are corrupt efforts to end political corruption.

REFERENCES

McDonald, Michael P. and Popkin, Samuel. 2001. "The Myth of the Vanishing Voter," 95 AMERICAN POLITICAL SCIENCE REVIEW 963-974.

Peltzman, Sam. 1989. "The Economic Theory of Regulation after a Decade of Deregulation," Brookings Papers on Economic Activity, Microeconomics, vol. 1989, pp. 1-41.

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Copyright 2003 by the author, John Samples