why competition in the politics industry is failing america

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1 SEPTEMBER 2017 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA A strategy for reinvigorating our democracy Katherine M. Gehl and Michael E. Porter

2 ABOUT THE AUTHORS Katherine M. Gehl, a business leader and former CEO with experience in government, began, in the last decade, to participate actively in politics—first in traditional partisan politics. As she deepened her understanding of how politics actually worked—and didn’t work—for the public interest, she realized that even the best candidates and elected officials were severely limited by a dysfunctional system, and that the political system was the single greatest challenge facing our country. She turned her focus to political system reform and innovation and has made this her mission. Michael E. Porter, an expert on competition and strategy in industries and nations, encountered politics in trying to advise governments and advocate sensible and proven reforms. As co-chair of the multiyear, non-partisan U.S. Competitiveness Project at Harvard Business School over the past five years, it became clear to him that the political system was actually the major constraint in America’s inability to restore economic prosperity and address many of the other problems our nation faces. Working with Katherine to understand the root causes of the failure of political competition, and what to do about it, has become an obsession. DISCLOSURE This work was funded by Harvard Business School, including the Institute for Strategy and Competitiveness and the Division of Research and Faculty Development. No external funding was received. Katherine and Michael are both involved in supporting the work they advocate in this report. For purposes of full disclosure: Katherine is on the Board of The Centrist Project, and a donor and fundraiser for a variety of political reform and innovation organizations. She has donated to and raised funds for the Campaign Legal Center (for its lawsuit against partisan redistricting in Wisconsin). She is also a donor to No Labels; the Fix the Debt campaign; FairVote’s campaign for ranked choice voting in Maine; and Govern for California (which supports selected candidates in California). Before shifting focus to non-partisan political innovation, Katherine was a fundraiser and a member of the National Finance Committee for the 2008 Obama campaign, and a significant donor in 2012. She donates to political candidates. Michael is a donor to and hosted a fundraiser for The Centrist Project. He has advised, contributed to publications, and spoken at No Labels events. He donates to political candidates. DISCLAIMER The views expressed in the paper are the sole responsibility of the authors and are not meant to represent views of Harvard Business School or Harvard University.

3 PREFACE Many Americans are disgusted and concerned about the dysfunction and abysmal results from Washington, D.C., and so are we. However, this paper is not about adding to the depressing national dialog about politics, but about how to change the system by taking action that will work. Too many people—including many pundits, political scientists, and politicians themselves—are laboring under a misimpression that our political problems are inevitable, or the result of a weakening of the parties, or due to the parties’ ideological incoherence, or because of an increasingly polarized American public. Those who focus on these reasons are looking in the wrong places. The result is that despite all the commentary and attention on politics in recent years, there is still no accepted strategy to reform the system and things keep getting worse. We need a new approach. Our political problems are not due to a single cause, but rather to a failure of the nature of the political competition that has been created. This is a systems problem. We are not political scientists, political insiders, or political experts. Instead, we bring a new analytical lens to understanding the performance of our political system: the lens of industry competition. This type of analysis has been used for decades to understand competition in other industries, and sheds new light on the failure of politics because politics in America has become, over the last several decades, a major industry that works like other industries. We use this lens to put forth an investment thesis for political reform and innovation. What would be required to actually change the political outcomes we are experiencing? What would it take to better align the political system with the public interest and make progress on the nation’s problems? And, which of the many political reform and innovation ideas that have been proposed would actually alter the trajectory of the system? Politics in America is not a hopeless problem, though it is easy to feel this way given what we experience and read about every day. There are promising reforms already gaining traction including important elements of the strategy we propose. It is up to us as citizens to recapture our democracy—it will not be self-correcting. We invite you to personally engage by investing both your time and resources—and by mobilizing those around you—in what we believe is the greatest challenge facing America today. It is often said that “We in America do not have government by the majority. We have 1 government by the majority who participate.” Today the challenge for Americans is to participate not only as voters, but also to participate in the reform of the political system itself. This is our democracy, and the need is urgent. This report is about politics, but it is not political. The problem is not Democrats or Republicans or the existence of parties per se. The problem is not individual politicians; most who seek and hold public office are genuinely seeking to make a positive contribution. The real problem is the nature of competition in the politics industry. Katherine M. Gehl & Michael E. Porter

4 TABLE OF CONTENTS 1 EXECUTIVE SUMMARY PART I: SETTING THE STAGE 8 PART II: A PRIVATE INDUSTRY THAT SETS ITS OWN RULES 12 18 PART III: THE POLITICAL OUTCOMES CITIZENS WANT AND NEED PART IV: HOW THE STRUCTURE OF THE POLITICS INDUSTRY UNDERMINES COMPETITION 20 PART V: WHY HAS THE SYSTEM GOTTEN WORSE? 34 PART VI: REINVIGORATING OUR DEMOCRACY 37 APPENDICES 46 70 BIBLIOGRAPHY AND RECOMMENDED READING 4

5 EXECUTIVE SUMMARY expect from a well-functioning political system, but are Harvard Business School (HBS) launched the U.S. not achieving. Competitiveness Project in 2011 as a multiyear, fact-based effort to understand the disappointing PART IV uses the Five Forces framework to analyze how performance of the American economy, its causes, and the evolving structure of the politics industry has led to the steps needed by business and government to restore the failure of political competition to serve the average economic growth and prosperity that is widely shared citizen—and to the antithesis of the outcomes we need across all Americans. to achieve. The Project identified a consensus set of essential policy PART V explores the deliberate changes that have steps needed to do so. Over the course of the Project, undermined our political system beginning in the early however, we found that Washington is making virtually 20th century. no progress—and hasn’t made any in decades—in of these steps. Meanwhile, many other any addressing Finally, PART VI puts forth a strategy for reinvigorating countries are getting better. A similar failure to progress our democracy by addressing the root causes of the has also afflicted the nation’s social agenda, where political dysfunction we are experiencing. This will require America has fallen from being a leader—and often a action by our fellow citizens, because our political system pioneer—to a position well behind most other advanced will not be self-correcting. We must change it. countries. Citizens are beginning to understand that something COMPETITION THINKING SHEDS NEW LIGHT is deeply wrong with our democracy. Surveys of both ON THE FAILURE OF POLITICS IN AMERICA, Harvard Business School alumni and the general public WHICH HAS BECOME A MAJOR BUSINESS identified the political system as America’s greatest IN ITS OWN RIGHT. competitive weakness. It wasn’t always that way. America’s political system was long the envy of the world. It advanced public interest Key Findings and gave rise to a grand history of policy innovations Today, that fostered both economic and social progress. The political system isn’t broken. It’s doing what however, our political system has become the major barrier it is designed to do to solving nearly every important challenge our nation The starting point for understanding the problem is needs to address. to recognize that our political system isn’t broken. In this report, we bring a new analytical lens to Washington is delivering exactly what it is currently understand the performance of our political system: designed to deliver. The real problem is that our political the lens of industry competition, used for decades system is no longer designed to serve the public interest, to understand competition and performance in other and has been slowly reconfigured to benefit the private industries. Competition thinking sheds new light on the interests of gain-seeking organizations: our major political failure of politics in America, which has become a major parties and their industry allies. business in its own right. Our political problems are not due to a single cause, but instead the result of the nature This report is about politics, but it is not political. of the political competition that the actors have created. The problem is not Democrats or Republicans. Most PART I sets the stage by assessing the outcomes that individuals who seek and hold public office are politics is delivering, revealing a broken system that has genuinely seeking to make a positive contribution. The problem is not the existence of parties, per se, become the major barrier to progress in America. or that there are two major parties. The real problem PART II shows how the political system is not a public is the nature of political competition that the institution but a private industry that sets its own rules. current duopoly has created, their failure to deliver In the process, it has fundamentally diminished our solutions that work, and the artificial barriers that democracy. are preventing new competition that might better serve the public interest. PART III describes the essential outcomes we should 1 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

6 often created behind closed doors and largely invisible of politics, itself, is By nearly every measure, the industry to the average citizen—continue to take their toll at both thriving. There’s just one problem. The people whom the the federal and the state levels. politics industry is supposed to serve have never been more dissatisfied. Public trust in the federal government The politics industry is different from virtually all other is hovering at a near 60-year low. industries in the economy because the participants, themselves, control the rules of competition. There is Competition in politics appears intense, which is usually no truly independent regulation of politics that protects good for customers. But today’s competition is failing, the public interest. Free from regulation and oversight, delivering gridlock and growing division instead of the duopoly does exactly what one would fear: The rivals offering practical solutions to the nation’s problems. The distort the rules of competition in their favor. Examples parties compete on ideology and unrealistic promises, of this includes controlling access to the general election not on action and results. The parties compete to divide ballot, partisan gerrymandering, and the Hastert Rule, voters and serve special interests, rather than weigh and which puts partisan concerns above legislating for the balance the interests of all citizens and find common public interest. ground to move the country forward. And there is no accountability for results. Those who fail the average These biased rules and practices have many competitive citizen year after year remain in control. consequences, including a sharp decline in legislation passed, the near extinction of moderates in the Senate There is a long list of culprits commonly blamed for our and the House, declining bipartisan support for laws political problems: the influence of special interests, enacted, and many others. the role of big money, the decline of bipartisanship, the polarization of the American public, and, most recently, Citizens should expect four outcomes from the proliferation of fake news. Many of these play a role, a healthy political system—which currently but they are symptoms. The underlying root cause is delivers none of them the kind of political competition that the parties have created, including their insulation from new competition 1. Practical and effective solutions to solve our that would better serve the public interest. nation’s important problems and expand citizen opportunity. Solutions are policies that address important problems or expand opportunities for THE POLITICS INDUSTRY IS DIFFERENT citizens. Solutions actually work and make things FROM VIRTUALLY ALL OTHER INDUSTRIES better in practice. Effective solutions address reality, IN THE ECONOMY BECAUSE THE not ideology. Practical and sustainable solutions are not uni-dimensional, but nuanced, and they integrate PARTICIPANTS, THEMSELVES, CONTROL the range of relevant and important considerations THE RULES OF COMPETITION. involved in virtually every good policy. Solutions weigh and balance points of view across constituencies, and make sound tradeoffs in integrating them. Real The political system is a private industry that solutions almost always require compromise and sets its own rules While the importance of solutions bipartisanship. seems obvious, solutions are almost non-existent in Most people think of politics as its own unique public America’s political system today. institution governed by impartial laws dating back to the founders. Not so. Politics is, in fact, an industry— Legislation that matters is legislation that 2. Action. most of whose key players are private, gain-seeking is actually enacted and implemented. Yet the vast organizations. The industry competes, just like other majority of promises made by candidates and political industries, to grow and accumulate resources and leaders in today’s system never get acted upon. influence for itself. The key players work to advance their Little serious legislation is even advanced, much less self-interests, not necessarily the public interest. passed. It’s important to recognize that much of what constitutes 3. Reasonably broad-based buy-in by the citizenry today’s political system has no basis in the Constitution. over time. Good solutions should be able to gain As our system evolved, the parties—and a larger political over time reasonably broad-based acceptance and industrial complex that surrounds them—established and consensus across the population. While there will their optimized a set of rules and practices that enhanced never be 100% support for any policy, true solutions our democracy. These changes— power and diminished 2

7 today’s political competition is unhealthy competition in (which most often involve bipartisanship) are those which rivals are entrenched, insulated from the pressures that can be accepted over time by a range of to serve customers better, and protected from new constituents across the political spectrum. competition. The political industrial complex expands and For this to happen, political leadership is required grows, but the nation fails to progress. and must—at times—be ahead of popular opinion (that’s why it’s called leadership). At its best, political The structure of the politics industry competition should educate, unite, and inspire citizens, rather than dividing them. Today, politics is How have political actors distorted competition to serve dividing us, not bringing us together. their interests, not the public interest? There are four essential elements: Respect the Constitution and the rights of all 4. citizens. In our democracy, good solutions reflect A political system is 1. Who the duopoly serves. the rights and interests of all Americans, rather than supposed to serve the public interest, so all citizens simplistic majority rule. This can sometimes make should be its customers. Instead, customers in achieving political solutions more complicated, but the politics industry can be divided into five major is part of what has made America the remarkable segments based on how they engage with the country it has become. industry: partisan primary voters, special interests, donors, average voters, and non-voters. The parties These desired outcomes seem self-evident, yet many prioritize the customers that most advance their citizens have lost sight of what we want from our political interests through the two currencies of politics: votes, system. This has created a vacuum that has allowed money, or both. The most powerful customers are political actors to define success to fit their own purposes partisan primary voters, special interests, and donors. instead of public purposes, and mislead citizens in the Average voters and current non-voters, the majority process. of citizens, have little or no influence on policy or outcomes. The structure of the politics industry has created The parties do pay some attention to the average unhealthy competition that fails to advance the voter in order to increase the turnout of their base, public interest depress the turnout of the other side’s base, and The nature of competition in any industry—and the capture “swing” voters. But since average voters have degree to which it meets the needs of customers— only two choices in most general elections, parties depends on its underlying structure. To understand the appeal to them on the margin. The parties do not failure of politics, we can employ the same tools used to compete for average voters by delivering outcomes study competition in other fields. for their benefit, but rather by seeking to be a little less disliked than—or slightly preferred to—the other What is the structure of the politics industry? It is a party. Parties don’t need to deliver solutions, but only textbook example of a duopoly, an industry dominated by convince average voters to choose them as the “lesser two entrenched players. Around the two major parties, of two evils.” In a normal industry, ignoring such a the Democrats and the Republicans, has arisen what we large group of customers would make a competitor call the “political industrial complex,” an interconnected vulnerable to new competition. But in the politics set of entities that support the duopoly. These include industry, as we will discuss, the barriers to entry are special interests, donors (particularly “big money”), very high, and therefore, new competition does not pollsters, consultants, partisan think tanks, the media, emerge. lobbyists, and others. The political industrial complex is big business. And virtually all the players in the political Recent research supports these conclusions about industrial complex are connected to one side of the where customer power actually lies. In 2014, duopoly or the other—the right or the left—which has researchers at Princeton and Northwestern University contributed to failed competition. examined congressional action on 1,779 policy issues. Their sad finding: “When the preferences of In healthy competition, industry actors would be economic elites and the stands of organized interest competing to deliver the desired outcomes for groups are controlled for, the preferences of the customers—fellow citizens—and be held accountable average American appear to have only a minuscule, for results. Political rivals who fail to serve the public near-zero, statistically non-significant impact upon would be replaced by new competitors who do. Instead, public policy.” 3 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

8 2. Controlling the inputs to modern campaigning Competing in ways that benefit the parties, not There are five key inputs to modern and governing. average citizens political competition: candidates, campaign talent, All these elements come together to affect how the voter data, idea suppliers, and lobbyists. Increasingly, parties compete. To make sense of this competition, one most everything required to run a modern campaign must understand the essential nature of duopolies. and govern is tied to or heavily influenced by one party or the other, including think tanks, voter data, Rivalry in a duopoly is almost always constrained, and talent. because the two rivals recognize that head-to-head competition is mutually destructive. Instead, the two This amplifies partisanship and becomes rivals seek to compete in ways that reinforce their a disadvantage for third-party candidates, differentiation and separation from each other. independents, and even moderates. In a duopoly, rivals also understand that, while they compete, they will both benefit from an “attractive” PARTIES DIFFERENTIATE AND SEPARATE industry (as defined from their perspective)—one that THEMSELVES BY DIVIDING UP CUSTOMERS strengthens and reinforces their way of competing, limits BASED ON THEIR IDEOLOGICAL AND the power of other actors, and increase barriers to entry. In PARTISAN INTERESTS. a duopoly, rivals will also cooperate (or collude) to enhance the industry in their favor and avoid undermining it. Co-opting channels for reaching voters. The 3. How the duopoly competes parties increasingly control not only direct voter contact and political advertising, but have also Parties differentiate and separate themselves by coopted both social media and independent media. dividing up customers based on their ideological and Mainstream media are less and less independent and partisan interests. This is how the parties populate their have aligned with the duopoly and reinforced partisan respective “bases,” putting the parties in sharp contrast competition. and minimizing target customer overlap and common ground. Erecting high and rising barriers to new 4. competition. In the politics industry, a sure sign that The duopoly targets mutually exclusive groups of barriers to entry are high is the fact that no major partisans and special interests that are aligned with their new party has emerged since the founding of the respective ideological and policy stances. Interestingly, Republican Party in 1860. And, despite widespread each party’s collection of interest groups and partisans— and growing public dissatisfaction with the existing and the policies that appeal to them—are sometimes parties, contemporary third parties and independent inconsistent. candidates continue to fare poorly. Competing on division reinforces the parties’ Barriers to new competition include economies differentiation from each other while enhancing their of scale; a well-developed infrastructure; brand core customer loyalty. Competing on partisanship recognition; deep and growing expertise and rather than by appealing to a broad range of voters relationships; privileged access to funding; election reduces accountability. Appealing to the middle, or to rules and practices favoring parties; and governing customer groups with overlapping interests, blurs party rules creating party control of the legislative process. differentiation while creating more pressure to actually deliver results. While some of the barriers reflect the inherent nature and cost of modern campaigns and governing, many Parties, then, compete to create and reinforce partisan are artificial and have been created by the parties divisions, not deliver practical solutions. The duopoly through the strategic adoption and refinement of appeals to its partisan supporters based on ideology, not a wide array of rules, practices, and choices that policies that work. preferentially benefit the duopoly. This partisan and ideological competition presents voters Even higher barriers to entry confront alternatives to with false choices that frame issues as “either/or”—for the party system, such as independents. The duopoly example, big government versus small government, has systematically disadvantaged candidates and free trade versus protectionism, regulation versus elected officials who are outside the parties. 4

9 the independence of the media, and raises ever-higher deregulation. This approach creates artificial divisions, barriers to entry for third-party candidates, independents, and the parties seek to reinforce these divisions through and even moderates. confusion and by misleading voters on the facts about what they should actually want. Beyond this failure to deliver good outcomes, the structure of the politics industry has resulted in three The duopoly avoids compromise. Party rhetoric divides devastating implications for the citizens: voters based on hostility toward the other side. Rather than working to bring citizens together to further the 1. An incentive not to solve problems. Keeping a public interest, each party demonizes the other party’s problem or controversy alive and festering is a way to supporters and their views. The duopoly incites citizens attract and motivate partisan voters, special interests, to vote based on anger and fear. and committed donors to each side. Solutions can also mean that voters focused on that particular This approach makes real progress on important issues issue will become less motivated to affiliate with and even harder. In today’s political competition, then, support the party. serious legislation can often only be passed when one party forces its bill down the throat of the other party Despite making little 2. No accountability for results. during those rare periods when it has enough power to or no progress on solving the nation’s problems and do so. serving the American people, the duopoly is not held accountable for results. In politics, accountability would mean voting party leaders and many legislators Cooperation to reinforce party success out of office if progress is not made. However, since The parties work together to improve industry there are only two major parties who compete by attractiveness and to strengthen and reinforce the way dividing up and serving partisan voters and special they compete. Over time, the duopoly works together to interests, voting out individual legislators means set numerous rules and practices that reinforce division replacing them with others from the same party or and enhance separation. A series of election rules and the other party who can get elected in the current practices—which both sides have advanced—have structure. Nothing really changes. enhanced and expanded partisan division, resulting in No countervailing forces to restore healthy 3. more and more extreme candidates and elected officials. competition. Despite widespread dissatisfaction These include partisan primaries; gerrymandered and poor results for the average citizen, the duopoly districts; ballot access rules and fundraising biases that remains dominant, and partisan competition persists. disadvantage independents; and governing practices The failure of politics has persisted because the in Congress that amplify partisanship, work against normal checks and balances of healthy competition compromise solutions, and discourage bipartisan activity, have been neutralized. such as co-sponsorship of legislation or cross-party consultation. RATHER THAN WORKING TO BRING CITIZENS The very existence of the entrenched duopoly in U.S. TOGETHER TO FURTHER THE PUBLIC INTEREST, politics reflects the very high barriers to entry facing new competition, as we described earlier. While remaining EACH PARTY DEMONIZES THE OTHER PARTY’S fierce competitors, the parties have also cooperated to SUPPORTERS AND THEIR VIEWS. raise barriers, such as implementing the election and governing rules we discussed earlier, controlling key The system has gotten worse over time suppliers, and growing party alignment with the media and party control of other key channels. While partisanship at some level has existed since our governmental system was created, the structure of the The devastating implications for citizens politics industry has changed significantly—for the Today’s political competition rewards special interests worse. Of these changes, some were well-intentioned and partisans and diminishes the influence of the average refinements to rules and practices that had unintended voter (much less non-voters.) Today’s rivalry incents consequences. Many other “reforms,” however, were divisive rhetoric, gridlock, and unfulfilled promises, driven by political actors to expand their influence not solutions. Today’s rivalry undermines the ability to and ensure their growth. Some existing practices were elect pragmatic and moderate public officials, co-opts optimized over time to benefit the duopoly. For example, 5 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

10 through the use of much more detailed and precise Our recommended strategy addresses the voter data and better technology, gerrymandering has following four pillars: become far more sophisticated and effective. Finally, • Restructure the election process broader shifts in American culture, institutions, and demographics have also played a role. • Restructure the governing process A strategy for political reform • Reform money in politics Our political system will not be self-correcting. The • Open up near-term competition, without waiting for problems are systemic and structural, involving multiple structural reform factors that are self-reinforcing. This means that the only way to reform the system is by taking a set of steps to 1. Restructure the election process change the industry structure and the rules that underpin it—shifting the very nature of political competition. Establish nonpartisan top-four primaries. The current partisan primary system shifts both campaigns and Many well-meaning reform ideas—such as term limits, governance toward the extremes. States should move electing better candidates, promoting bipartisanship, to a single primary ballot for all candidates, no matter what their affiliation, and open up primaries to all voters, not just registered party voters. THE ONLY WAY TO REFORM THE SYSTEM IS Institute ranked-choice voting with instant runoff in BY TAKING A SET OF STEPS TO CHANGE THE This system will ensure that no general elections. INDUSTRY STRUCTURE AND THE RULES THAT candidate is elected with less than majority support, resulting in the election of candidates with the UNDERPIN IT—SHIFTING THE VERY NATURE OF broadest appeal to the most voters. POLITICAL COMPETITION. Drawing legislative Institute nonpartisan redistricting. district boundaries must be non-partisan to eliminate artificial advantages for the party in control. instituting a national primary day, improving civics education, establishing bipartisan issue-advocacy groups, Rewrite debate access rules for presidential elections. and others—won’t matter much absent changes in the Current requirements for participation in presidential underlying industry structure. debates are unreasonable (for anyone except the Democratic and Republican nominees) and In thinking about realigning competition, it is important anticompetitive. to recognize that historically, transformational changes in the U.S. have often begun at the fringes—in 2. Restructure the governing process decidedly non-moderate camps. Eventually, however, change must be enacted by a majority in democratically Eliminate partisan control of House and Senate rules elected legislative bodies. It is here that bipartisan, Legislative and governance rules and processes. pro-problem solving, consensus-seeking moderates must align the process with the public interest and are crucial for delivering practical solutions, and it is reduce the ability of parties to control Congressional precisely this genre of elected officials that our current deliberations and outcomes simply for partisan gain. political competition has rendered almost extinct. From a strategy standpoint then, we believe that restructuring 3. Reform money in politics the election process, reducing barriers to entry, and The influence of money is distorting competition and reinvigorating electoral opportunities for the rational biasing elections. Reform is challenging due to the middle must be a central premise of political reform. First Amendment, but experts have crafted practical Fortunately, many reforms to change competition in steps to diminish big money’s influence (i.e., systems politics have already been proposed, and numerous for citizen funding, 100% transparency in political organizations are already involved in reform efforts. Our spending, and eliminating loopholes favoring existing analysis highlights those reforms that will be the most major parties in fundraising). powerful in addressing root causes and discusses how to However, a focus on money alone will not transform combine them into an overall strategy. our political system. The real answer is to reduce the 6

11 attractive return on investment that donors currently Our responsibility as citizens enjoy. The systemic reforms detailed in this report We can fix our political system, but it will require will shift the incentives for politicians to respond to sustained citizens’ initiative and significant investment. constituents, instead of responding to donors. A new kind of philanthropy, which might be called 4. Open up competition, without waiting for “political philanthropy,” is needed. Donors who support structural reforms the collective interest in political reform, innovation, and solutions-oriented candidates will have a huge impact The top two parties should always be operating under on America’s progress in addressing the many societal a potential threat from competitors that better serve needs our nation faces. the public interest. The innovations in this section can start to open up competition as soon as the We can never forget that the political system we have today 2018 election cycle, and should be implemented now was designed by our own elected representatives—the rather than waiting the decade or more it may take to people we voted into office. This system was corrupted implement all the structural reforms needed. over time, and most of us did not even notice. We have the power to reinvigorate our democracy, and we must. Implement the Centrist Project’s “Senate Fulcrum St ra t e gy.” Structural reform will take time. A highly It is easy to become resigned that the system will never leveraged way to break the current political gridlock change, and that reform is hopeless. However, many would be to elect three to five centrist independent of the steps we have described here are beginning to U.S. senators to act as a swing coalition and force gain traction, as evidenced by the progress in moving change from the political center. to nonpartisan primaries, ranked-choice voting, gerrymandering reform, presidential debate litigation, and Solutions- Run (centrist) independents at all levels. others we detail in this report. We can do this. oriented, independent campaigns would bring critical new competition to politics, and can be powerful change agents. Today, it is difficult to run outside the duopoly, and even more difficult to win outside the duopoly. Concerned voters should seek out and actively support such independent candidates. Establish a shared election and financing infrastructure for independents (and moderates). Shared election infrastructure will be needed to reduce the barriers to entry for independent and moderate candidates. In addition, support structures are needed for solutions- minded center-right and center-left party candidates to help them withstand primary challengers. Create and expand state-level models, such as “Govern for California,” to shift election outcomes. State legislators have an important role in our political system, both in setting policy as well as election and governing rules. “Govern for California” focuses on state-level reform through leveraging political philanthropy to support candidates who put citizen interests ahead of personal, party, and special interests. Such efforts, as well as others that provide state-level support for independent and moderate candidates and elected officials, should be expanded. 7 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

12 PART I: SETTING THE STAGE hovering at a near 60-year low (see Figure 1). In 1958, It is often said that “Washington is broken.” But this three out of four Americans trusted the government. widely held belief reflects a common misunderstanding In 2017, this had fallen to one in five. There are many of the problem. In fact, Washington is delivering exactly other signs of citizen dissatisfaction and disillusionment what it is currently designed to deliver.* The real problem (see Appendix A). is that our political system is no longer designed to serve Rather, with little public awareness the public interest. What’s going on? Competition in politics appears intense, or oversight, the system has been slowly reconfigured which is usually good for customers. But competition to benefit the private interests of gain-seeking in America’s political system is failing. It is delivering organizations—our major political parties and their gridlock and growing division, not practical solutions to industry allies. the nation’s problems (see the sidebar “Politics Fails to The parties compete Solve Problems: Simpson-Bowles”). By nearly every measure, the industry of politics, itself, is on ideology and unrealistic promises, not on action and Campaigns are now seemingly endless and put thriving. results. The parties compete to divide voters and serve to work an immense roster of canvassers, pollsters, and special interests, rather than weighing and balancing the staff; top consultants are in high demand; media interest interests of all citizens and finding common ground to is endless. And when it comes to elections, overall move the country forward. spending (a normal proxy for an industry’s success) 1 continues to rise. There’s just one problem. The people whom the politics *We are indebted to Mickey Edwards for this foundational insight. See industry is supposed to serve have never been more The Parties Versus the People: How to Turn Republicans and Democrats Public trust in the federal government is dissatisfied. into Americans (New Haven: Yale University Press, 2012). The Simpson-Bowles report provided an actual, POLITICS FAILS TO SOLVE PROBLEMS: comprehensive solution. Why did it go nowhere? SIMPSON-BOWLES While there was bipartisan support from numerous Simpson-Bowles, an effort to create a sustainable legislators, this wasn’t enough. In practice, neither federal budget, provides a telling example of the party was willing to go against its party orthodoxy, or failure to deliver solutions. A substantial majority of to give up or even compromise on any of its special Americans agree that our unsustainable federal debt interests. Instead, Simpson-Bowles died a bipartisan 2 In 2010, President and deficits must be addressed. death. Obama established the National Commission on Fiscal Representative Paul Ryan, who served on the Responsibility and Reform—most often referred to Commission, voted against it. President Obama, who by the last names of its co-chairs, Alan Simpson and created the Commission, declined to forcefully support Erskine Bowles. it. No other legislators jumped in to save it (though The product of their work was a sound report with a some from both parties were courageous enough to well-crafted compromise solution. The preamble to voice public support). Most legislators were unwilling the report says: “The President and the leaders of to go against their party line and risk a primary both parties in both chambers of Congress asked us to challenge from their right or their left. address the nation’s fiscal challenges in this decade Simpson-Bowles also demonstrates another important and beyond. We have worked to offer an aggressive, The duopoly controlling today’s political reality: fair, balanced, and bipartisan proposal—a proposal competition has no accountability for results. Neither as serious as the problems we face. None of us likes Representative Ryan nor President Obama nor every element of our plan, and each of us had to Congress paid a political price for failing to deliver a tolerate provisions we previously or presently oppose solution to this pressing national problem. President in order to reach a principled compromise. We were Obama won a second term, Representative Ryan willing to put our differences aside to forge a plan 3 became Speaker of the House, and the re-election rate because our nation will certainly be lost without one.” 4 in Congress was 90%. (Emphasis added.) 8

13 FIGURE 1: DECLINING PUBLIC TRUST IN THE FEDERAL GOVERNMENT As of April 2017, about one in five Americans trust the federal government always or most of the time. 80 % % 7 3 70 % Post 9/1 1 a ttack 60 % blic 50 % re of pu 40 % Sha 30 % % 2 0 20 % cris is t-ceiling 2011 d eb 10 % Dec 1988 Dec 2008 Dec 1998 Dec 1958 Dec 1968 Dec 1978 ril 2017 Ap Note: From 1976-2016, data are three-survey moving averages. Surveys took place in 1958, 1964, 1966, 1968, 1970, 1972, and 1974. From 1974 survey frequency increased. Data from 1976-2016 represent multiple surveys a year. Post-9/11 markers indicate two surveys in October 2001; debt-ceiling markers indicate four surveys in 2011 after the U.S. hit the debt ceiling in May. Source: Data from “Public Trust in Government: 1958-2017,” Pew Research Center, May 3, 2017, http://www.people-press.org/2015/11/23/public-trust-in-government-1958-2015/ , accessed August 2017. FIGURE 2: ASSESSMENTS OF ELEMENTS OF THE U.S. BUSINESS ENVIRONMENT IN 2016 (HBS ALUMNI) 60% ness Weak but Improving th an Streng d Impro ving COM MUNICA S TION INFRASTRUCT URE ENTREPRENEURSHIP 40% FIRM LEVEL MANAGE MENT USTERS CL UNIVERSITIES ATION INNOV 20% PITAL MARKETS CA 0% ERTY RIGH PROP TS or y -20% HIRING AND FIRING SKILLED LABOR LEGA L FRAMEWOR K raject HEALTH CA RE FISCA L AND MON ICY ETARY POL -40% ATE TAX CODE COR POR CA K–12 EDU TION U.S. t SYSTEM REGU LATION NATION AL TAX CODE -60% LOGI URE STICS INFRASTRUCT LITICAL SYSTEM PO -80% th but Deteri orating Streng ng orati d Deteri an ness Weak -100% -40% -20% 0% 20% 40% 60% 80% 100 % -80% -60% nt U .S. pos vance d e con re d t o other ad co mpa it ion omies rre Cu Note: Half of respondents were asked to assess the national tax code; the other half were asked to assess the corporate tax code. Source: Harvard Business School’s 2016 survey on U.S. competitiveness. See Michael E. Porter, Jan W. Rivkin, and Mihir A. Desai, with Manjari Raman, “Problems Unsolved & A Nation Divided,” U.S. Competitiveness Project, Harvard Business School, September 2016. 9 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

14 FIGURE 3: INCREASING CONGRESSIONAL GRIDLOCK ON IMPORTANT ISSUES th The share of salient issues deadlocked in Congress has risen from about 1 in 4 during the 80 Congress to about th 3 in 4 during the 113 Congress. 80% % 7 4 70% ed dlock 60% 50% t is sues dea alien 40% re of s Sha 30% 2 % 6 20% 90th 94th 96th 98th 100th 102nd 104th 106th 108th 110th 112th 92nd 86th 84th 82nd 80th 88th 109th 107th 97th 95th 113th 111th 91st 87th 81st 105th 83rd 85th 89th 93rd 99th 101st 103rd -1948 1947 2013-2 014 gr ess of Con Session Note: Salient issues for each session of Congress were identified using the level of editorial attention. Deadlocked issues are ones on which New York Times Congress and the president did not take action during the session. Source: Updated from Sarah Binder, “The Dysfunctional Congress,” Annual Review of Political Science (2015) 18:7.1–7.17. FIGURE 4: DECLINING BIPARTISAN SUPPORT FOR LANDMARK LEGISLATION Demo ers Memb crat House 388 Vot es pub Re lic an House Memb ers 372 Vot es Othe known Party Hous e Memb ers r/Un 328 Votes 307 Votes 289 Vot es 237 Votes 219 Votes se “y ea” votes in al Hou of f Number Affo rdable Care il Right s Ac t Dodd—Fr ank Ac t Highw Medic are Ac t ay Ac t Welfa re Re fo rm Socia l Securit y Civ (2010) t (2010) t (1996) Ac (1965) (1964) (1956) t (1935) Ac Ac Percent of Possib le Votes fo r Each Party: 90% 86% Democrats 81% 49% 87% 92% 60% Republicans 75% 93% 76% 50% 98% 0% 2% - Othe know n 73% - - - r/Un - - Note: The number of members of each party has fluctuated over time. Percentages indicate the share of House members of the given party who voted for the legislation. The bills cited above specifically refer to H.R. 7260, H.R. 10660, H.R. 7152, H.R. 6675, H.R. 3734, H.R. 3590, H.R. 4173, respectively. , accessed August 2017. GovTrack.com Source: 10

15 A similar failure to progress has also afflicted the It wasn’t always that way. America’s political system nation’s social agenda. In areas such as public was long the envy of the world. It advanced the public education, health and wellness, personal safety, water interest and gave rise to a grand history of policy and sanitation, environmental quality, and tolerance and innovations that fostered both economic and social inclusion, among others, U.S. progress has stalled or Today, however, our political system has progress. gone in reverse. In these areas, where America was often become the major barrier to solving nearly every important a pioneer and leader, the U.S. has fallen well down the challenge our nation needs to address. This was the list compared to other advanced countries. Tolerance, unexpected conclusion of the multiyear Project on U.S. inclusion, and personal freedom are registering troubling Competitiveness at Harvard Business School, established declines, a sign of growing divisions in our society. (For in 2011 to understand the causes of America’s weak international comparative data on key areas of U.S. economic performance and rising inequality that social performance, see the findings from the Social predated the Great Recession. As shown in Figure 2 on Progress Index in Appendix C.) page 9, the research revealed that the U.S. business environment has seriously eroded, especially in those In public education, of particular significance for citizen areas that are primarily the responsibility of government, st opportunity, in math the U.S. was ranked 31 out of while other nations have progressed. 35 OECD countries (the other advanced economies The Project identified a consensus set of essential using the respected PISA process) in 2015, down th economic policy steps needed to restore U.S. economic from 25 in 2009, 20 in reading (down from 14) and 5 th growth and shared prosperity. Our research found, 19 Instead of progress, in science (down from 17). however, that Washington has made virtually no progress then, our government is mired in gridlock and inaction. in decades in addressing any of them, while other Increasingly over the decades, Congress has been unable countries have enhanced their policies. Instead, surveys to get things done, especially on important issues (see of both Harvard Business School alumni and the general Figure 3). As political divisions have kept increasing, public identified the political system as America’s the ability of the parties to come together on landmark greatest competitive weakness. (For more detail on legislation has become a thing of the past (see Figure 4). the findings of the U.S. Competitiveness Project, see A broken political system has become the greatest threat Appendix B.) to our nation’s future. (See Appendix D for more detail on the distortion of competition in politics.) 11 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

16 PART II: A PRIVATE INDUSTRY THAT SETS ITS OWN RULES dread so much as a division of the republic into two great How did this happen? What explains the current state of parties, each arranged under its leader, and concerting affairs that not only worries Americans but increasingly 2 measures in opposition to each other.” others around the world? Republicans blame Democrats, Our founders— and Democrats blame Republicans. The long list and most Americans today—would be shocked by the of other suspects usually includes the influence of extent to which our democracy has been hijacked by special interests, the role of big money, the decline of the private and largely unaccountable organizations that bipartisanship, the polarization of the American public, constitute today’s political industrial complex. and, most recently, the proliferation of fake news. We want to be clear that the problem is not the existence Many of these play a role. But we believe that these are of parties, per se. Parties serve an important role in symptoms, and not the underlying disease. The root democracy, and the fact that there are two major parties cause of all those symptoms is found in the structure of The real problem is the nature is not in itself the problem. the politics industry and the kind of competition it has of the political competition that the current parties have created. And yes, our political system is a major industry, created, including their insulation from new competition even though that is not the way most of us have thought that would better serve the public interest. of it. A Problem of Competition IT'S IMPORTANT TO RECOGNIZE THAT MUCH To fix our political system, we must see politics as the OF WHAT CONSTITUTES TODAY'S POLITICAL major industry it has become, the major economic benefits it provides for its participants, and how today’s SYSTEM HAS NO BASIS IN THE CONSTITUTION. political competition is not serving the public interest. And we must understand the politics industry’s underlying structure to see the root causes of this dysfunctional Most people think of politics as its own unique public competition and identify what to do about it. institution governed by impartial laws dating back to Our politics industry is a textbook example of a duopoly, the founders. Not so. It is, in fact, an industry—most of an industry dominated by two players. Our two major private whose key players are , gain-seeking organizations. parties, the Democrats and the Republicans, are the The industry competes, just like other industries, to grow rivals at the center of the industry. Around them has and to accumulate resources and influence for itself. arisen what we call the “political industrial complex,” an The key players work to advance their self-interest, not 3 interconnected set of entities that support the duopoly. necessarily the public interest. These include special interests, donors (particularly “big It’s important to recognize that much of what constitutes money”), pollsters, consultants, partisan think tanks, today’s political system has no basis in the Constitution. Super PACs, the media, lobbyists and the organizations There is no mention of political parties, party primaries, they represent, and others. The political industrial caucuses, ballot-access rules, segregated congressional complex is big business (see the sidebar “How Big Is the cloakrooms, party-determined committee assignments, Political Industrial Complex?”). filibuster rules, or the countless other practices that 1 Virtually all the players in the political industrial complex today drive our dysfunctional politics. are connected to one side of the duopoly or the other— As our system evolved, the parties—and a larger political the right or the left. This division of industry actors industrial complex that surrounds them—established and between the rivals is unusual and contributes greatly optimized a set of rules and practices that enhanced their to the huge barriers protecting the duopoly from new power and diminished our democracy. These changes— competition. often created behind closed doors and largely invisible We know from studying other industries that it is to the average citizen—continue to take their toll at both not individual components of industry structure and the federal and the state levels. competitive choices that drive results. It is how they all The result: America’s political system today would be interact to drive the nature of competition. In this report, unrecognizable to our founders. In fact, certain of our we use the lens of industry structure and competition to founders warned against political parties. John Adams, understand how the many moving parts of the political our second President, said, “There is nothing which I system come together—and how the myriad rules, arcane 12

17 the duopoly where they can agree—and used as a practices, and incentives have combined to produce weapon of partisan warfare where they can’t. In addition, today’s disappointing outcomes. Only by understanding while every state has the theoretical ability to regulate the politics industry structure as a whole can we have any many aspects of politics, in most cases regulatory hope of proposing a strategy that would actually change decisions are biased toward the duopoly rather than the the outcomes our political system delivers. public interest. Overall, politics is a classic example of The politics industry is different from virtually all other “regulatory capture.” Exacerbating the problem, the industries in the economy because the participants duopoly is not subject to antitrust laws. themselves control the rules of competition. There is no This reality helps explain how the industry’s power and federal regulatory agency that acts truly independently influence has grown despite its continued divergence from the interests of the duopoly and protects the public from the public interest. Free from regulation and interest without partisan concerns. The only federal regulator, the Federal Election Commission (FEC), was oversight, the duopoly does exactly what one would fear: created post-Watergate in 1975 to regulate campaign The rivals distort the rules of competition in their favor. financing. Despite its designation as “independent,” typically the FEC is made up of three members from each major party, and party-line voting results in FEC 4 deadlock. Effectively the Commission is used to protect 9 major television shows covering politics and elections. HOW BIG IS THE POLITICAL INDUSTRIAL Major advertising is flowing to radio shows and other COMPLEX? political media, but data are unavailable. It is difficult to determine the true size of the politics However, direct political spending is only the industry, and how the money is spent, because of proverbial tip of the iceberg. The political industrial a lack of transparency. What is clear, however, is complex also exerts a major influence over the largest that the political industrial complex is itself a major single industry of all, the combined federal, state, industry, and direct political spending is only part of and local governments. The federal government the picture. 10 alone spent about $3.9 trillion in fiscal year 2016, Baseline direct political spending at the federal level and the politics industry plays an important role is, at a bare minimum, $16 billion during the recent in determining where these trillions in government two-year election cycle. About 40 percent of this is spending go. election spending, another 40 percent is reported Politics also has a huge effect on the economy overall spending on lobbying the federal government, and through its influence on virtually all policies and the balance is partisan think tanks and non-political 5 regulations affecting business. Regulation and taxation advertising flowing to key political television shows. alone involve trillions of dollars in benefit and cost to Actual spending is likely to be many billions of dollars corporations, while affecting industry competition. higher due to substantial unreported spending, including so called “shadow lobbying” and below Given this huge economic impact, it is little surprise 6 At least 19,000 reporting threshold expenditures. that businesses and other organizations seek to jobs in 2016 can be directly attributed to lobbyists, influence public policies through lobbying, which campaign consultants and campaign workers on takes various forms. There is a substantial literature payroll, and staff at partisan or partisan leaning that finds that, in the current system, lobbying think tanks. We could also identify over 1,000 spending, earns a very high return on investment. organizations with major consulting contracts involving (For more detailed findings and supporting references, 7,8 Politics is clearly big business. campaigns. see Appendix E.) Politics is also big business for the media. Election related political advertising and advertising on shows heavily focused on politics represent a meaningful percentage of overall media advertising revenue in election years. At least $1.5 billion in non-political advertising is flowing to the media to support just 13 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

18 When parties control access to the general election How the Industry of Politics Has ballot, one of the pillars of democracy is undermined. Undermined Our Democracy As any business person knows, this kind of anti- competitive rule would be illegal in most industries. The ability of the politics industry to set its own rules has allowed it to pervert some of the basic principles Democratic Principle #2: One person, one vote. of what most of us think we know about representative Well, not always. Many Americans have heard of democracy. To begin to understand how the industry “gerrymandering,” but few fully understand its works, here are three examples. significance. Our country is divided into roughly equal Democratic Principle #1: The will of the people will congressional districts, and House members are prevail at the ballot box. supposed to represent constituents in their district. Districts are redrawn every 10 years after each census Well, not always. Our political system is not as open as in order to reflect the changes in population. In the most Americans think it is. That is by design—based on great majority of states, this task is delegated to the specific rules created by and for the duopoly. legislature, so the party that controls the state legislature 14 Consider the case of Mike Castle. In 2009, Michael also controls the redistricting process. Redistricting “Mike” Castle, arguably the most popular politician in has become a process whereby politicians choose their 15 Delaware, was the odds-on favorite to become the next voters instead of voters choosing their politicians. Thus, senator from the state. Instead, he suffered a shocking the process is anything but nonpartisan, and it is not defeat in his Republican primary. A highly partisan Tea designed to represent the people. The use of redistricting Party candidate named Christine O’Donnell won with just as a partisan political tool is called “gerrymandering,” 30,000 votes, in a state of 1 million people, because of named after Massachusetts Governor Elbridge Gerry, the typically low voter turnout in primaries. who drew a politically motivated district in the shape of a 16 salamander back in 1812. A logical next step would have been for Castle to then run as an independent in the general election—but For example, consider a state that’s controlled by the he could not. The problem was that Delaware has a Democrats. When redistricting takes place, the party sore loser law. If candidates run in a party primary and analyzes huge amounts of voter data and uses the lose, they cannot be on the general election ballot in analysis to draw district lines to create the greatest 11 November regardless of their popularity with voters. A possible number of districts that are safe for Democrats. law created to protect the parties from competition kept This means “packing” Republican voters into as Delaware voters from being able to choose the candidate few districts as possible to “waste” their votes, or whom they likely would have wanted as their senator. “cracking” them into different districts where they will be outnumbered by Democrats. In either case, the result is to dramatically reduce the likelihood that Republican votes have any impact whatsoever on election results. REDISTRICTING HAS BECOME A PROCESS Historically, both parties have been about equally guilty WHEREBY POLITICIANS CHOOSE THEIR of gerrymandering. VOTERS INSTEAD OF VOTERS CHOOSING Gerrymandering reduces competition by creating “safe THEIR POLITICIANS. seats” for one party, which means that the primary winner of the party for whom the district was made “safe” is virtually guaranteed to win the general election. Most Americans are surprised to learn that 44 states have The effect of this reduction in competition is to reduce either similar laws or registration dates for the general the accountability of elected officials to citizens: election that accomplish the same objective of preventing Representatives from gerrymandered districts answer candidates from running on the general election ballot primarily to primary voters in their own party. 12 after losing in a party primary. In other states without An example of a gerrymandered district is shown in these rules, outcomes can be different. For example, Figure 1, which compares Virginia’s 3rd District in moderate Connecticut Democrat Joe Lieberman lost his the 83rd and 114th Congresses. For partisan political 2006 Senate primary but went on to win comfortably in reasons, what was once a contiguous area became a the general election as a third-party candidate. This was grossly distorted collection of disparate areas patched possible only because Connecticut was one of four states 17 13 together. at the time without a sore loser law. 14

19 RD CONGRESSIONAL DISTRICT FIGURE 1: EVOLUTION OF VIRGINIA’S 3 rd th 83 Congress Congress vs. 114 th 6 rd 3 ct, Distri th 7 rd 83 Con gre ss Dec (Throu . 2, 1954) gh st 1 th 5 Richmond nd 2 st 1 rd 3 nd 2 th 4 rd 3 Distri ct, nd 2 th 114 gre ss Con Miles 20 0 10 * (Throu ) gh Jan. 6, 2016 *Virginia’s congressional district boundaries displayed here have since been re-drawn. Source: Shapefiles maintained by Jeffrey B. Lewis, Brandon DeVine, Lincoln Pitcher, and Kenneth C. Martis. (2013, last updated May 30, 2016) Digital Boundary Definitions of United States Congressional Districts, 1789-2012, http://cdmaps.polisci.ucla.edu , accessed February 17, 2017. For more details, see endnote 17, Part II. a bill unless a majority of the majority party (i.e., the Over time, gerrymandering has become increasingly even if Speaker’s party) supports the bill— the majority of sophisticated, and many congressional districts have the entire House would vote to pass it. Unless Speakers been affected. One study published in 2015 by the ignore this practice (which they do from time to time, but stated that “the plans University of Chicago Law Review rarely), even legislation supported by a majority of the in effect today are the most extreme gerrymanders in 18 country or by a majority of the House has no chance of modern history.” passing. Democratic Principle #3: The majority rules in For example, in 2013, the U.S. government shut down legislating. from October 1 to October 16. The shutdown could Well, not always. The duopoly has infiltrated day-to- have been averted or ended earlier if then-Speaker day legislating through the establishment of myriad John Boehner had allowed a floor vote on legislation rules and practices. The “Hastert Rule,” for example, passed by the Senate and supported by a majority of is a particularly egregious example of party control the House (i.e., virtually all Democrats and a minority taking precedence over the legislature’s ability to work of Republicans). The shutdown ended only when the collectively—even when constituents want it. The Hastert Speaker broke with his party—and broke the Hastert Rule has become a well-accepted practice of the Speaker Rule—to allow the vote. Effectively, this “made up” rule of the House: The Speaker will not allow a floor vote on cements majority party control in a legislature that is 15 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

20 We can recapture our democracy, but first we must supposed to represent all U.S. citizens, and it allowed a understand how competition in the politics industry small number of extreme partisans to hold the country actually works. We will turn to this in the next two Parts. hostage for 16 days in a shutdown. Note that most of our analysis in this report will focus primarily on the federal government; however, much of The Consequences for Our Government the industry structure and practices also apply at the state level. the duopoly has As these examples so vividly illustrate used its power to set the rules of engagement in both But reinvigorating our democracy will require more truly elections and governing to enhance its own self-interest than just analysis. We must be willing, as citizens, to put and power, at the expense of the public interest. These that understanding to work. As political activist Doris biased rules and practices have many competitive Haddock said, “Democracy is not something we have; it’s 19 consequences including a decline in legislation passed, 20 something we do.” We will put forward a strategy to the near extinction of moderates in the Senate and the reform our political system in the last section, Part VI. House, and declining bipartisan support for laws enacted (see Figures 2, 3, and 4). While many individual industry practices such as these are familiar to political insiders, the understanding of their collective implications has been hazy at best, and has become our central challenge—and opportunity. FIGURE 2: FEWER LAWS ENACTED BY CONGRESS Number of laws enacted has trended downward from 772 during the 93rd Congress (1973-74) to 329 during the 114th Congress (2015-16). 900 800 7 7 2 700 gre ss 600 by Con 500 act ed 400 en ws 2 9 3 300 of la 200 Number 100 0 95th 97th 99th 101st 103rd 105th 111th 93rd 107th 109th 113th 114th 96th 98th 100th 102nd 94th 106th 108th 110th 112th 104th 1973-74 2015-16 1993-94 , accessed April 2017. https://www.govtrack.us/congress/bills/statistics Source: GovTrack.us, 16

21 FIGURE 3: DECLINING PROPORTION OF MODERATES IN THE SENATE As of the 114th Congress (starting 2015), 14% of Democrats and 4% of Republicans in the Senate are moderates. In 1951, roughly 50% of Republicans and 80% of Democrats were moderates. 90% 80% 80% 70% 60% 50% 47% Republicans 40% 30% Democrats 20% 14% 10% Share of members who are moderates 4% 0% 1999 2015 2007 1955 1959 1963 1967 1971 1975 1979 1983 1987 1991 1995 2011 2003 1951 First year of congressional session Note: “Moderates” within each party are defined as -0.25 to +0.25 on the first DW-NOMINATE dimension, which represents the ideological [liberal (-1) to conservative (+1)] spectrum. , accessed August 2017. voteview.com Source: Data from Professor Keith Poole, University of Georgia, FIGURE 4: DECLINING PROPORTION OF MODERATES IN THE HOUSE OF REPRESENTATIVES As of the 114th Congress (starting 2015), 11% of Democrats and 1% of Republicans in the House are moderates. In 1951, roughly 60% of both Republicans and Democrats in the House were moderates. 80% 70% 62% es 60% 58% erat Repu ns blica od 50% are m 40% s Democrat 30% ember s who 20% re of m 11% 10% Sha 1% 0% 1979 2003 2015 1999 1995 1991 1987 1983 2011 1975 2007 1971 1967 1963 1959 1955 1951 ngre ssion al s ession Fir st year o f co Note: “Moderates” within each party are defined as -0.25 to +0.25 on the first DW-NOMINATE dimension, which represents the ideological [liberal (-1) to conservative (+1)] spectrum. , accessed August 2017. voteview.com Source: Data from Professor Keith Poole, University of Georgia, 17 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

22 PART III: THE POLITICAL OUTCOMES CITIZENS WANT AND NEED without inflicting unnecessary cost on the stakeholders As we have described, competition in our political being regulated or on citizens, who ultimately have to system is delivering outcomes that diverge from the pay for it. public interest. As one casual observer said to us, “It's simple. We [our government] used to be able to solve Practical and sustainable solutions are not problems, and now we can’t.” unidimensional. They are nuanced and integrate the range of relevant and important considerations. Solutions Why is this? Before we consider the causes, we need weigh and balance points of view across constituencies clarity on what the desired outcomes look like. In and make sound tradeoffs in integrating them. Solutions business, the key outcome is clear: profit. But what are almost always require compromise and bipartisanship. the essential outcomes we citizens should expect from our elected officials? Good solutions are fair and acceptable to the greatest number of people possible. The challenge is that Despite the fundamental importance of this question, everyone cannot get everything they want from there is surprisingly little discussion of outcomes in government, especially in a democracy. The tradeoffs politics, much less consensus on which outcomes we involved in good solutions mean that some individuals want. Instead, there is endless commentary on the or groups will benefit more than others from a given drama of politics and who did what to whom. This has policy, and some will bear more (or less) of the cost. Yet created a vacuum that has allowed political actors to the overall outcome needs to be perceived over time, as define success in ways that fit their own purposes, not balanced and fair. Good solutions are achieved when no the needs of citizens. group or faction is promised or led to expect everything it What we should want from our political system is simple. might want, or think it wants, in every respect. In a democracy, a healthy political system should deliver Finally, solutions make real progress, but rarely achieve four key outcomes: everything at once. The key test, then, is: “Have we made things better?” Effective solutions often initially 1. Practical and effective solutions to require partial steps in the right direction, with solve our nation’s important problems and improvements over time. expand opportunity The Simpson-Bowles plan to create a sustainable budget, discussed in Part I (see the sidebar on Page 8) Solutions are policies that address important problems or was a practical solution. However, our political system expand opportunities for citizens. A solution is a policy killed it. approach that actually works and makes things better in practice. While the importance of solutions seems obvious, solutions are almost non-existent in America’s 2. Action political system today. Legislation and executive action that matters must be What do we know about the nature of effective policy actually enacted and implemented. Our system today solutions? While there is no simple way to determine the often delivers gridlock, not action. Politicians have little “best” solution, and there are many opinions, a solution incentive to put the public interest first if they believe has some essential characteristics. that blocking legislation is rewarded by their party and inaction is not penalized by voters. Effective solutions address reality, not ideology. True solutions rarely arise from applying stylized ideological The vast majority of promises made by candidates principles—that often makes things worse. Effective and political leaders in today’s system never get acted solutions are almost never purely “right” or purely “left.” upon. Too often, not even an attempt is made to move For example, the question is not “big government” a promise toward legislation with a chance of passage. or “small government,” but how to strike the right Unrealistic promises and talk without action are balance across the various roles that government must worthless. They benefit only political actors, not citizens. play. Similarly, the issue is not “regulation” or “no regulation,” but how to craft regulations that deliver the desired social or economic benefits (e.g., less pollution) 18

23 4. Respect the Constitution and the rights 3. Reasonably broad-based buy-in by the citizenry over time of all citizens Good solutions should be able to gain—over time— Finally, good solutions reflect the rights and interests of reasonably broad-based acceptance and consensus all Americans. Our constitution is designed to protect across the population. While there will never be 100% the rights of individuals and minorities, rather than support for any policy, true solutions (which most often for simplistic majority rule. Good political outcomes involve bipartisanship) can be accepted over time, by incorporate these principles and reflect the type of a range of constituents across the political spectrum. society America stands for, even though this can This can occur when the political dialog helps citizens sometimes make achieving political solutions more understand the facts and realities of policy options and complicated. the rational compromises needed for a solution to work. This is not to say that elected officials should only * * * respond to public opinion. Political leadership is required and must—at times—be ahead of popular opinion in order to move the country forward or to do What kind of political system is necessary to deliver “the right thing” (that’s why it’s called leadership). At its these outcomes? How can political competition drive best, political competition educates, unites, and inspires good outcomes? These are questions we turn to next. citizens, rather than dividing them. 19 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

24 PART IV: HOW THE STRUCTURE OF THE POLITICS INDUSTRY UNDERMINES COMPETITION same customer needs, such as online news versus print In healthy competition, industry actors would be competing newspapers. to deliver the desired outcomes we just discussed in Part III—and be held accountable for those outcomes. An industry’s structure is the overall configuration of However, as we have seen in earlier sections, today’s these five competitive forces and the power relationships political competition fails to deliver the desired outcomes between rivals and each of the other forces.** This web and diverges sharply from the public interest. To of dynamic relationships determines how an industry understand how and why this is so, we can employ the competes, the value it delivers to its customers, and who same tools and concepts used to study countless other has the power to capture that value. Industry structure fields. The nature of competition in any industry— explains how rivals or other actors can thrive even while and the degree to which it is healthy or unhealthy customers are dissatisfied—as is the case in the politics competition—depends on its underlying structure. industry. , or the competitors rivals Industry structure starts with In healthy competition, rivals compete fiercely to better themselves. The rivals have relationships with and to serve customer needs. Channels reinforce this by four additional competitive forces: buyers (customers, educating customers and pressuring rivals for better channels),* suppliers, new entrants, and substitutes. service. Suppliers compete to provide better inputs that allow rivals to improve their products or services. buyers . In many industries, The rivals compete to serve In healthy competition, if rivals fail to serve customers, , such as are used to reach end channels customers new entrants come into the industry and compete in supermarkets for food. Channels act as an intermediate new ways, offering better value. Or substitutes shrink buyer between rivals and the end customer. To access the inputs they need to compete, rivals depend on of things like talent, raw materials, and suppliers *There can be multiple levels of buyers. In this industry, there are two new entrants technology. Rivals are also subject to , or levels: end customers (citizens) and channels. potential new competitors. New entrants come into an **For a more detailed explanation of the concept of industry structure, Competitive Strategy: Techniques for Analyzing see Michael E. Porter, industry if they see an opportunity to serve customers (New York: Free Press, 1980). See also Industries and Competitors better. Finally, every industry also faces the threat of Michael E. Porter, “The Five Competitive Forces That Shape Strategy,” Harvard Business Review, January 2008. . Substitutes are different ways of meeting the substitutes FIGURE 1: THE STRUCTURE OF THE POLITICS INDUSTRY SUBSTIT UTES Competing without arty affi liating with a major p BUYERS RIV ALRY A MONG SUPPLIE RS CUSTOMERS CHANNELS EXIS TIN G COMPETIT ORS Citizens Key inputs to p olitica l nsisting of the A d uopoly co ach Channels to re co mpetition cu stomers two d ominant parties (ci tizens) THREAT O F NEW ENTRANTS ew party m ajor n Entry of a Expansion of an existing fri nge p arty Source: Author analysis. 20

25 the opportunity for rivals—and even replace them FIGURE 2: CUSTOMER POWER IN POLITICS altogether—by meeting needs in a new and better way. Healthy competition is win-win. Both rivals and customers Partisan do well, and rivals are continually motivated to better meet pr imary vo ter s customer needs. In unhealthy competition, entrenched rivals are dominant, protected from new competition and insulated from pressure by channels or suppliers to improve products and better serve customers. In unhealthy competition, customers lack the clout to pressure rivals to improve. Spec ial Donors Here, rivals concentrate on the customers who best in ter es ts serve the rivals’ own interests, rather than addressing the needs of all customers. Unhealthy competition is win-lose. Rivals win, but at the expense of customers overall. Industry Structure in Politics The first of the three powerful Partisan primary voters: customer groups, partisan primary voters, are the The five competitive forces in the politics industry are “guardians” at the gate—any candidate must pass by shown in Figure 1, and we will examine each of them and them to get elected. These voters, then, are a key part of their implications. Before we begin, we note two interesting the “base” that parties cultivate. aspects of the politics industry that distinguish it from other industries. First, competition in politics takes place Primary voters, as a group, are distinctly different from on two levels: contesting elections and governing. These the average voter. They are more engaged, more partisan, occur together and reinforce each other. Second, the and farther to the left or right within their respective politics industry has two currencies—votes and money. 1 parties.* They can also be counted on to turn out in the general election. Customer Power Is Skewed Against the Average Citizen In gerrymandered congressional districts and even non- gerrymandered districts where one party has a plurality, The nature of competition is manifested in the target the partisan primary is the only election that really customers that rivals choose to serve and who, thus, have matters. In 2016, fewer than 10% of U.S. House races the most power to shape outcomes. A political system and only about 28% of Senate general election races is supposed to serve the public interest, so all citizens 2 were competitive. The rest were in safe seats, and the should be its customers. But, in fact, the industry winner was effectively decided in the primary. does not aim to serve all customers equally. Just as savvy businesses often choose to prioritize their most The strong influence of partisan primary voters is profitable customers, the duopoly chooses to prioritize problematic, because this influence is disproportional to the customers that most advance its interests. their number. For example, only 29% of eligible voters 3 participated in the 2016 presidential primaries. Customers in the politics industry can be divided into five major segments based on how they engage In midterm primaries, turnout is typically even lower: with the industry: partisan primary voters, special Only 19% of eligible voters participated in U.S. Senate interests, donors, average voters, and non-voters. The 4 primaries in 2010, and 18% in 2006. Yet this relatively most important customers for the political industrial small group of primary voters has a disproportionate impact complex are those who reliably deliver votes or money (or both)—the two currencies that matter in this industry. Three powerful customer groups shape today’s political competition: partisan primary voters, donors, and special *Voters whose views are either “consistently conservative” or “consistently liberal” are significantly more likely to vote in primaries interests. They are often overlapping, as shown in than those who are “mostly liberal,” “mixed,” or “mostly conservative.” Figure 2. The weakest customers are average voters and Primary voters are not only more ideological, but more often are “very interested in politics.” non-voters. Let’s examine each segment in turn. 21 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

26 McCutcheon and United v. Federal Election Commission on who gets elected. The influence of primary voters is , however, the distinction v. Federal Election Commission even greater in about half the states, where primaries are 5 between donors and special interests has blurred, closed or “semi-closed” to non-party members.* as individuals and special interest groups (including Special interests: A second powerful customer group corporations) can make unlimited donations not only is special interests. These are organized groups—either to Super PACs but also to social welfare organizations, policy-related or industry-related—that are heavily 8 unions, and trade associations. All of these groups can focused on influencing political outcomes on particular use these funds for the purpose of influencing elections issues in their favor. Examples of special interests and public policies. include the pharmaceutical lobby, insurance lobbies, There is no question that donors continue to enjoy major the gun lobby, the pro-choice and pro-life lobbies, small access to and influence in the duopoly. It’s also true that business lobbies, unions, and so on. Special interests are some donors have, more recently, taken some power from often not interested in compromise on their issues—they the parties and candidates through the use of the new want to prevail. independent spending organizations. However, the fruits The parties’ importance to many special interests is of donor spending still accrue to one side of the duopoly magnified because partisanship plays an important role or the other. Hence, the barriers to entry facing new in government regulation of private industry. For example, competitors and the ability of the duopoly to keep out there is a range of influential, supposedly independent new competitors are not substantially diminished. “Independent Regulatory Agencies” including the Average voters: The fourth customer group is average Federal Communications Commission (FCC), the voters. Average voters represent a substantial proportion Commodity Futures Trading Commission (CFTC), the of voters who don’t vote in primaries and are not regular Consumer Product Safety Commission (CPSC), and the donors. Average voters include voters making up part of Federal Deposit Insurance Corporation (FDIC). These each party’s base and swing voters, though they tend to agencies are overseen by commissioners nominated 9 be less ideologically extreme. In our current political by the President and confirmed by the Senate. Of system, both types of average voters have little power to the five commissioners overseeing each agency, no influence outcomes. more than three can be from the same party, and the President designates who shall serve as the Chair. Party The parties do pay some attention to the average voter affiliation, then, matters for regulation. Party control in order to increase the turnout of their base, depress of the presidency and the Senate can shape the nature the turnout of the other side’s base, and capture “swing” of regulation in particular industries and for particular voters. But since average voters have only two choices constituencies. in most general elections, parties appeal to them on the margin. The parties do not compete for average voters Note that some special interests deliver both kinds by delivering outcomes for their benefit, but rather by of currency: votes (by turning out their “members” or seeking to be a little less disliked than—or slightly supporters in both primaries and the general election) preferred to—the other party. Parties don’t need to deliver and money. Funding from special interests can include solutions, but only convince average voters to choose them both spending on elections and spending on lobbying. as the “lesser of two evils.” Many special interests have concentrated their spending more on lobbying. For example, in the 2015–2016 In a normal industry, ignoring such a large group of election cycle, the health sector contributed $268 million customers would make a competitor vulnerable to 6 to campaigns, but spent $1.02 billion on lobbying. new competition. But in the politics industry, as we will discuss, the barriers to entry are very high, and, Finally, some special interests also influence elected therefore, new competition does not emerge. The parties, officials by offering the potential of a lucrative job after the official leaves the government. Many elected officials *Rules governing closed primaries vary greatly between states. They take follow this path, and their desire to stay in good graces three basic forms. (1) Closed primaries limit voting only to registered party members, and voters must declare their party affiliation in advance, with special interests can affect their positions on before arriving at the polling place. (2) Semi-closed primaries vary in 7 legislation. how they treat unaffiliated voters. For example, some states allow the party to choose if non-members can vote; other states consider voting in a primary as a form of party registration. (3) In a caucus system, the The third customer group—donors—is powerful Donors: state or political party arranges a meeting where participants vote by because parties seek to maximize the dollars raised. openly showing support for a candidate (for example, by raising hands or clustering into groups). Caucuses can be open or closed. According Donors were traditionally wealthy individuals who made to FairVote, as of May 2016, Republicans held closed or semi-closed direct contributions to candidate campaigns. Since the presidential primaries or caucuses in 29 states, compared with 26 states for Democrats. For congressional races, Republicans and Democrats held Supreme Court rulings on campaign finance in Citizens 26 closed or semi-closed primaries. 22

27 power to influence its results. Until this changes, bad thus, concentrate on delivering value to their powerful partisan primary voters, donors, and special interests, outcomes will persist. instead of to average voters. Channels Have Been Co-opted by the Duopoly Non-voters: The final customer group, which includes the least powerful customers of all, is the non-voters. Channels are the means by which rivals in an industry Almost 40% of eligible Americans did not vote in the reach customers. In healthy competition, channels help 10 2016 general election. Those who don’t vote have no customers better understand and access the products influence and, thus, have ceded their customer power and services that meet their needs. At the same time, to the duopoly and its allies. These individuals, perhaps channels help competitors better serve customers. not surprisingly, tend to be more moderate and more Independent channels often play a significant role in 11 independent. objectively informing and influencing customer choices, which improves the vitality of competition. * * * When existing channels poorly serve customers, new Overall, average voters and non-voters represent up 12 channels often emerge and can be a disruptive force in to 70% of citizens eligible to vote—the majority. Yet shaking up the competition and pressuring rivals to better elected officials can’t afford to support policy positions meet customer needs. based on how popular they are overall with citizens in their districts, or with the public. Instead, they have Channels in the politics industry are the means by which strong incentives to focus on the opinions of the small parties, elected officials, and candidates reach customers set of primary voters who will disproportionately affect with information and persuasion. In the politics industry, their next election, and on the legislative priorities of the there are four major channels: paid advertising, donors and special interests who fund them and, in some traditional independent media, social media, and direct cases, provide their post-public-service employment. voter contact. Recent research supports these conclusions about where Created and paid for by candidates, Paid advertising: customer power actually lies. In 2014, researchers at parties, and (increasingly) other outside groups, paid Princeton and Northwestern examined congressional advertising takes place primarily in the media, such as action on 1,779 policy issues. Their sad finding: “When TV, radio, and digital media, to whom the money flows. the preferences of economic elites and the stands Paid political advertising is regulated to some extent. of organized interest groups are controlled for, the preferences of the average American appear to have only This channel is largely controlled by candidates and a minuscule, near-zero, statistically non-significant impact parties, and hence is not independent. The recently 13 upon public policy.” increased ability of independent organizations to advertise in elections creates the opportunity for a truly This perverse influence of customer power on the nature independent voice. But so far, most of the “independent” of rivalry has become self-perpetuating. The more voters organizations are simply other members of the same who drop out in disgust and don’t vote, the more power duopoly. is ceded to the parties, partisan voters, special interests, and big money. Yet, a major reason that so many The traditional Traditional independent media: citizens do not vote is a direct result of the nature of the independent media report and offer editorial opinions on competition the parties have created. Many non-voters candidates, elections, and governing. The independent are turned off by Washington. They believe their vote will media include established mainstream organizations— make little difference.* *According to a 2006 Pew Research Center survey, of the 22% of Also, many candidates, and policy solutions that would age-eligible Americans who were not registered to vote, 33% believed that “voting doesn’t change things,” 43% were “bored by what goes appeal to less ideological citizens, are driven out by on in D.C.,” and 22% were “angry with government.” For the 23% today’s political competition. Thus, more and more of Americans who were registered but rarely voted, the corresponding figures were 30%, 42%, and 14%, respectively. According to a 2014 average voters drop out. Or—and this may be worse— Census Bureau survey, the top reasons why registered voters did not vote voters acquiesce and play the game that the duopoly has in the midterm election were: “too busy” (28%), “not interested” (16%), “illness/disability” (11%), “out of town” (10%), “forgot to vote” (8%), created of advancing their special interests and making and “disliked candidates/issues” (8%). See Pew Research Group, “Who donations. Outcomes only get worse. Votes, Who Doesn’t, and Why,” October 18, 2006, http://www.people- press.org/2006/10/18/who-votes-who-doesnt-and-why/ , accessed March 2017; and Scott Clement, “Why don’t Americans vote? We’re ‘too busy,’” Overall, then, most of the customers our political system Washington Post , July 7, 2015, https://www.washingtonpost.com/news/ the-fix/wp/2015/07/17/why-dont-americans-vote-were-too-busy , accessed should be designed to serve—citizens—have the least March 2017. 23 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

28 for television. The sad thing is that this particular reality television networks, radio, magazines, and newspapers— TV show really matters for our country. but also newer online media such as Real Clear Politics, Ryot, and Vice. Although there are certainly exceptions to this, the mainstream media have, in many cases, become less of New channels include Twitter and Social media: an independent force holding the parties accountable, Facebook as well as numerous blogs. Many of these and more a part of the political industrial complex. new channels are independent, but the duopoly has Many media have moved away from journalism into aggressively embraced them as well. The new channels opinion shows (which are good for viewership). And have become major low-cost conduits for reaching, importantly, more media have aligned themselves with informing, lobbying, and soliciting money from voters. the duopoly—for example, MSNBC versus Fox. This This channel has also made possible the proliferation of amplifies partisanship, rather than acting as a force fake news and news bubbles to a degree not previously for independent truth-telling that could promote the possible. accountability of parties and elected officials for results. This takes place through face-to- Direct voter contact: In addition, independents, moderates, and third-party face meetings, rallies, fundraisers, knocking on doors, candidates face major challenges in being taken seriously and phone calls. This traditional channel is largely by the media and getting coverage, because such controlled by the parties. While not growing substantially, candidates risk attracting fewer viewers, listeners, and the parties take advantage of better voter data to make readers. direct voter contact far more efficient, and to micro- 14 Even those media aspiring to provide objective, truthful, target individuals who are likely to vote. and independent political coverage are prone to capture * * * by today’s interpretation of “fairness” and “balance,” and by political correctness. In practice, this means that the Why have the traditional channels in politics not been media often feel they must cover “both sides” of every more effective in supporting the public interest? Why story, devoting roughly the same amount of time and have the traditional independent media not held the perceived legitimacy, even when one side is demonstrably duopoly accountable for results in terms of solutions, ridiculous. Called “false equivalence,” this trend is an or even presenting the facts accurately? Why have 16 increasing problem. supposedly “disruptive” new independent channels like social media mostly reinforced partisanship and the Not surprisingly, public trust in the media has declined existing political industrial complex, and done little to markedly over the last several decades (see Figure 3). shake up competition? The new Internet and electronic technology should The problem is that many channels are not independent, have opened up communication and provided a vehicle and even those that are—both the new and old—benefit for voter education, allowing independents and other financially by aligning with the duopoly and embracing the non-party candidates to reach voters and donors with partisan competition it has created. potentially less need for party infrastructure. In many other industries, electronic communication and social Political advertising is often negative and reinforces media have been a tool to provide better service to partisan, zero-sum competition. Since political customers (think flight information updates in the airline advertising accounts for an important part of media industry). 15 revenue in election years, partisanship has become good for media spending and social media traffic In the politics industry, however, new technology regardless of an organization’s journalistic approach. and “democratization” of media have so far mostly exacerbated the existing dysfunctional competition. Like An independent media should be the loudest voice for partisan television coverage, partisan social media posts the public interest and the hardest for the parties to get more hits. Also, the political industrial complex has control. However, partisanship has become too profitable aggressively embraced this new channel, and the duopoly for the media’s business. Viewers and readers are drawn uses social media to bombard citizens with inflammatory to the bitter fights, to the edgy debates, to who is up and and divisive messages aimed at mobilizing angry partisan who is down. The 24/7 coverage turns complicated policy voters and commentators. into sound bites and efforts at compromise into instant controversy. The 2016 presidential campaign has been Citizens increasingly self-select both duopoly-connected compared with a reality TV show, a proven success model and “independent” electronic media that reinforce 24

29 FIGURE 3: DECLINING PUBLIC TRUST IN THE MASS MEDIA As of September 2016, 32% of the American public overall trusted the mass media either a “great deal” or “fair amount,” versus a high of 72% in 1976. 75% 70% 6 8 % 65% 60% blic 55% 50% re of pu Sha 45% 40% 35% % 2 3 30% 1975 2014 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 1972 2016 Note: Gallup began surveying on Americans’ trust in the mass media (e.g., newspapers, television, radio) in May 1972; 1974; 1976; and on a yearly basis since 1997. Trust defined as confidence to report the news “fully, accurately, and fairly.” http://www.gallup.com/file/poll/195575/Confidence_in_Mass_ Source: Data from Gallup, “Gallup Poll Social Series: Governance,” Question 13, , accessed August 2017. Media_160914%20.pdf reduce the clout of incumbent rivals. Suppliers usually their beliefs. Greg Orman, author of A Declaration make competition better in serving customer needs. , describes this phenomenon as the of Independents self-segregation of voters into “partisan cyber ghettos, In the politics industry, however, most everything where they spend their days reinforcing their preexisting necessary to run a modern campaign and govern is political views while demonizing those with whom tightly connected to—and often controlled by—the 17 they disagree.” Sadly, then, the net effect of the duopoly. Suppliers, then, have limited power to shape new electronic and social media seems to have been competition, but face strong pressures to align with one to reinforce partisanship and division, and purvey side of the duopoly. In fact, as elections and governing questionable and even fake news. become more complex and partisan, suppliers prosper and their revenues grow. Rather than supporting solutions Finally, effective direct voter contact and person-to- and finding common ground, suppliers make partisanship person campaigning require a substantial and expensive worse. infrastructure maintained by the parties and made available only to their candidates and elected officials. In the political industrial complex, there are five key Parties now deluge voters with calls, equip volunteers supplier groups: candidates, specialized talent, voter data with technology-enabled walk lists to knock on doors, suppliers, idea suppliers, and lobbyists. and carefully target the base in get-out-the-vote efforts. Efforts to reach voters with bipartisan messages are Most candidates, with the exception of Candidates: virtually non-existent. individuals with celebrity status or significant self-funding ability, have little independent clout. They depend heavily Suppliers Are Controlled by the Duopoly on their party for legitimacy, money, infrastructure, a field force, voting lists, debate access, and all the Suppliers provide the key inputs that enable industry other requirements of a modern campaign. Non-party competition. In most industries, suppliers help improve candidates face major obstacles given the lack of such products and stimulate greater industry efficiency, while support. The parties also get to decide which of their often encouraging and supporting new competitors to 25 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

30 reduced incentives for think tanks to develop bipartisan candidates to aggressively support, and most often back those who are most tightly aligned with their platforms. or compromise policy positions. No wonder the number of moderates elected to office has Even some academics, traditional defenders of fallen to historic lows. independence and free speech, have become aligned This includes campaign managers, political Talent: with the political industrial complex and provide regular consultants, pollsters, public relations staff, data partisan political commentary. While we are not saying analysts, social media directors, ground staff, and that partisan leanings of think tanks are inappropriate or the staff supporting elected officials. The skills for unethical, this reality only reinforces the dysfunctional running a modern campaign and governing are highly political competition. specialized and getting even more so, but talent There are some bipartisan organizations, and works only for one side or the other—it comes with a dissatisfaction with politics will perhaps increase Democrat or Republican modifier. Independent and their numbers. However, some crucial and explicitly third-party candidates face major challenges in hiring the nonpartisan policy-analysis organizations within experienced, highly qualified staff increasingly necessary government have been losing ground. For example, the for modern campaigns, because those who work outside Government Accountability Office and the Congressional the duopoly risk being banished. Research Service, which provide nonpartisan policy and Voter data organizations: Gathering, maintaining, and program analysis to lawmakers, have seen a 41% decline 20 analyzing voter data is crucial to modern campaigns, and in staffing levels between 1979 and 2015. requires a large and sustained investment. Candidates Lobbyists advocate for special interests and Lobbyists: and elected officials depend heavily on massive voter often control significant donations. This also makes files to cultivate supporters, raise money, decide on them a key industry “customer” as we described earlier issues to target, turn out the vote, and guide priorities regarding special interests. (Note: Some lobbyists are in governing. However, these data are not independently employed by issue-advocacy groups, whose goals are available to just any candidate. Instead, duopoly-linked largely to promote their view of the public interest, but companies have amassed the best proprietary voter many lobbyists are employed by narrow special interests databases and voter lists. These companies decide without relationship to the public interest, and that’s to whom those data are made available, and at what the problem we’re discussing.) Lobbyists have become cost. Party-supported candidates thus reap substantial key purveyors of issue research, policy ideas, and advantages. legislative support. They are the hired guns who pitch These are organizations and individuals Idea suppliers: ideas to increasingly overstretched congressional staffs. that develop, pitch, and advocate the policy ideas that While congressional committee staff have been cut get incorporated into party platforms, policies, and by 38% since 1979, lobbying expenditures have risen 21 legislation. Key idea suppliers are academics and think dramatically. tanks such as the American Enterprise Institute, the Lobbying has become a huge business in its own Brookings Institution, the Hoover Institution, and many right. Reported lobbying spending, which significantly others. The U.S. has a deep array of such organizations— 22 understates actual spending, was $3.15 billion in 2016. an estimated 1,835 U.S. think tanks have total budgets 18 in the billions of dollars. This has been a benefit Numerous studies show that spending on lobbying can historically by creating vigorous competition on ideas and produce a high return on investment for the spender diverse voices. (see Appendix D). Lobbying, then, often incentivizes partisanship and works against true solutions. The Today, however, many idea suppliers have become clout of these “suppliers,” who are often looking out for more and more aligned with one side of the duopoly or their own interests and not for the public interest, can the other. Out of 35 leading U.S. think tanks focused present the possibility of distorted legislation and even on public policy, about 70% can be identified as 19 corruption. partisan or partisan leaning. While there are clearly exceptions, Democrats tend to source ideas from the * * * likes of the Economic Policy Institute and Brookings, and Republicans from such organizations as the Hoover Overall, most everything required to run a modern Institution and the Heritage Foundation. Many think campaign and govern is now tied to the duopoly and tanks are far more partisan than these. Some think tanks has become part of the political industrial complex. have developed political action units rather than focus Suppliers, then, amplify partisan competition. solely on policy analysis. More partisan funders have also 26

31 creating major economies of scale. This leaves emerging High and Rising Barriers to Entry parties and independents contesting one or a few races Industries that fail to serve their customers are ripe for at a severe disadvantage. new entrants that improve value for customers and shake Incumbency advantages in brand recognition, determine the extent Barriers to entry up the market. The major relationships, expertise, and infrastructure: to which new competitors pose a threat, and are an parties have universal brand recognition, credibility, essential part of the structure of every industry. talent, resources, and long-term voter relationships. In the politics industry, the barriers to entry are extremely The parties have also built up substantial campaign high. A sure sign of this is the fact that no major new experience and infrastructure over many years, which are party has emerged since the founding of the Republican hard for third parties or independents to replicate. Party in 1854. The Progressive Party (1912) and the Access to key suppliers and channels: As we have Reform Party (1992), both serious efforts, elected only discussed, the duopoly now controls much of what is a small number of candidates and disbanded within needed to run a modern campaign, which makes it a decade. Despite widespread and growing public difficult for non-affiliated candidates to run successfully. dissatisfaction with the existing parties (see Figure 4), The duopoly also has preferential access to or control of contemporary third parties and independent candidates 23 the channels, which severely disadvantages non-party continue to fare poorly. rivals seeking a voice and voter access. Today’s entrenched duopoly owes its dominance, in large Access to funding: Raising the major funding needed part, to the high barriers to entry that confront any new for a new party, or even for an independent candidate, competition, many of which have been created by the is challenging because the new competitors have duopoly itself. The key entry barriers are the following: limited donor lists and fundraising infrastructure Economies of scale: The national scope of the two relative to those of the parties. Making matters worse is major parties allows them to spread the large fixed enormous skepticism that a new party or independent investments needed in infrastructure, data, specialized candidates are even viable, which discourages donors. skills and other functions across elections nationally, Campaign financing rules are also stacked against FIGURE 4: INCREASING DESIRE FOR A THIRD MAJOR PARTY As of September 2016, nearly 6 in 10 Americans believe that a third major party is needed, relative to 4 in 10 in October 2003. 65% 60% 7 % 5 55% blic 50% re of pu Sha 45% 40% % 0 4 35% Sept 2008 2009 2010 2011 2012 2013 2014 2015 2016 2003 2004 2005 2006 2007 2016 Note: The first poll in which Gallup asked whether a third party is needed was October 10-12, 2003. This was followed by a poll in 2006; two polls in 2007; 2008; 2010; two polls in 2011; and then annual polls starting in 2012. http://www.gallup.com/file/poll/195941/160930ThirdParty.pdf, Source: Chart data from Gallup, “Gallup Poll Social Series: Governance, Question 20, accessed August 2017. 27 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

32 implicitly cooperated to create and sustain these artificial independent candidates, such as the rule that allows entry barriers, which block new competition. a donor to contribute $847,500 annually to a national political party, but only $5,400 per election cycle With little threat of new competition, better aligning 24 to an independent candidate committee. While the political competition with the public interest is an uphill relatively recent ability to give unlimited sums to Super battle at best. PACs could help some non-party candidates amass significant funding, they are still at a disadvantage to Few Practical Substitutes party candidates, since the duopoly also has access to the same Super PACs structures, as well as traditional A final potential force for shifting industry competition party funding. is substitutes, which offer entirely different ways of competing than those of incumbent competitors. In an Partisan primaries are Election rules and practices: industry with entrenched rivals, real competition must the main route to the general election ballot, creating often come from substitutes. In many industries where a major barrier to entry that every candidate must customer needs are poorly met, substitutes emerge and overcome. Partisan primaries, gerrymandering, onerous can shake up even dominant competitors. Think, for general election ballot access rules for non-major-party example, of what happened to large bookstore chains in candidates, and other rules like the sore loser laws we the face of new online competitors. described earlier, create major disadvantages for third- party candidates, independents, and even moderates What are the substitutes to the current two-party system? within the major parties. Independents unaffiliated with a party: Independents Numerous rules, like the ones we Governing rules: could be a major force for shifting competition, but they described in Part II, give parties substantial control over face similar barriers to entry as new parties do. At the the governing process. This adds to barriers to entry federal level, Ross Perot was the last major independent for third parties and independent candidates, because presidential candidate in 1992. In practice, electing voters hesitate to support them, fearing (sometimes independents at any scale will require major dedicated legitimately) that such candidates will be marginalized in funding pools and shared infrastructure, as we will governing. discuss later. Also, even a totally self-funded independent candidate experiences a strong pull to affiliate with a Positioning of new competitors as “spoilers”: The party to tap into its other resources and advantages. And parties also work hard to persuade voters to dismiss if elected, independents are incentivized to caucus with third-party candidates and independents, portraying one of the parties to gain access to committees and have them as “spoilers” who cannot win, but will only split influence. the vote and benefit the “other side.” The parties also ensure that new competitors will also have little influence Organizations that overlay the existing major-party in governing, and portray them this way. Even capable Consider No Labels, a bipartisan organization model: independents can then be dissuaded from running by whose goal has been to bring incumbent elected officials such voter skepticism. together to find common ground and solve problems. While this is a laudable effort that has attracted * * * significant support, delivering solutions through this All these barriers to entry are made even more formidable approach is challenging, given the strong partisan nature of competition in elections. winner-take-all by the incentives in the current industry structure. A call for In politics, capturing a non-plurality share of votes leads bipartisanship—no matter how inspiring—is usually less to a lost election, not to influence or to a position on powerful (when crunch time or reelection or difficult which to build. Thus, new competitors must surmount the votes come up) than the clout of the parties and the entry barriers and win, not just make a good showing. strong competitive incentives to appeal to partisan primary votes and special interests. Allies of No Labels While some of the barriers to entry facing new competition are launching a promising new strategy that addresses in politics reflect the inherent nature and cost of modern some of the root causes of today’s dysfunctional They campaigns and governing, many are purely artificial. competition (see the discussion of the new approach in have been created by the parties through the strategic Part VI) and this will likely make them a more effective adoption and refinement of a wide array of competitive substitute. choices, rules, and practices that preferentially benefit the duopoly. And the parties have often explicitly or 28

33 Self-funded candidates running through the parties: The Nature of a Duopoly A form of substitute is heavily self-funded candidates The root causes of our poor political outcomes start with who will have greater independence. However, party the fundamental nature of a duopoly—an industry with support remains indispensable in running and governing. two dominant competitors. Where competitors in any The Trump election is a notable example of the benefits industry have market power, we know that competition of an “outsider” with resources running within the party, can diverge from customer interests. In a duopoly, this instead of as an independent (see more on the election divergence can be substantial. of President Trump on page 36). And even if elected through the parties, moderate or centrist politicians can How do duopolies work? In a duopoly, rivalry can appear find that party ties complicate their agendas. intense, and that is certainly the case in U.S. politics. But what looks like intense competition to the casual Coalitions of independent candidates with similar observer is not at all what it appears to be. Rivalry in views: A group of like-minded legislators can become a duopoly is almost always constrained, because the a swing coalition and have the power to influence the two rivals recognize that head-to-head competition is process of governing. This is particularly true if their mutually destructive. Instead, the two rivals seek to numbers are sufficient to deny either major party a compete in ways that reinforce their differentiation and majority on its own. The coalition can then negotiate with separation from each other. the existing parties to shape legislation by offering, in return, the votes needed to pass legislation. (We discuss In a duopoly, rivals also understand that while they an innovative example of such an approach in Part VI on compete, they will both benefit from an “attractive” reform.) industry as defined from their perspective—one that * * * strengthens and reinforces their way of competing, limits the power of suppliers and customers, and is protected Why haven’t more effective substitutes emerged in by high barriers to entry. In a duopoly, rivals also depend politics despite the poor results? The most important on each other to take steps to enhance the attractiveness reason is that any substitute faces virtually all the of the entire industry and avoid undermining it. same entry barriers as forming or growing a significant new party. In addition, politics is different from other The Duopoly Seeks to Enhance Differentiation industries, where substantially new ways of competing To avoid head-to-head competition and enhance are possible. Disrupting or radically reshaping political differentiation, the duopoly pursues three key competitive competition is highly constrained by the fact that there practices: choosing which customers to serve; competing is only one government structure. A new competitor on ideology and advancing partisan interests, not in politics can’t simply choose to create an alternative solutions; and avoiding compromise. government structure and different rules. (The largely symbolic independence movements in a few U.S. states 1. Choosing Which Customers to Serve 25 are futile efforts to do just that.) The fateful and fundamental strategy choice made Why Political Rivalry Fails to Serve the by the duopoly has been the types of customers they have chosen to prioritize and serve. As we discussed Public Interest earlier, customers in the politics industry are not all the All the elements of industry structure we have discussed same; they are segmented. The duopoly has prioritized come together to shape the intensity of industry rivalry those attractive customer groups who best serve their and the dimensions on which rivals compete. In healthy interests—partisan primary voters, special interests, and political competition, industry actors would be competing donors, many of whom often overlap. to deliver the desired outcomes we discussed in Part Parties differentiate and separate themselves by III. But these are far from the outcomes Americans dividing up customers based on their ideological and are getting. Instead, the political system is delivering partisan interests. This is how the parties populate outcomes that benefit the political industrial complex, their respective “bases.” This puts the parties in sharp but fail to serve the public interest. contrast, and minimizes target customer overlap and Why the disconnect? Our political outcomes are not an common ground. Over time, each party evolves its accident, but the logical result of the industry structure coalition of partisans and special interests to maintain the duopoly has created. They reflect deliberate choices parity or plurality, as “market conditions” in terms of the two parties have made. voter sentiments and interests evolve. 29 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

34 The duopoly has been able to divide up and serve 2. Competing on Ideology and Advancing Partisan customers this way because of the absence of new Interests, Not Solutions competitors that compete in a different way. This allows Parties compete to create and reinforce partisan self-serving competition that fails to advance the public divisions, not deliver the practical solutions that are the interest to persist. most important outcome we need our political system The duopoly targets mutually exclusive groups of to achieve, as we discussed in Part III. The duopoly partisans and special interests that are aligned with their appeals to its partisan supporters based on ideology, respective ideological and policy stances. Interestingly, not policies that work. Ideology offers simplistic each party’s collection of interest groups and partisans, and polarized approaches to addressing issues. The and the policies that appeal to them, are sometimes definition of ideology includes words such as “beliefs,” inconsistent. For example, Democrats cultivate teachers’ “perspectives,” and “doctrine,” not words like “reality,” unions but also champion low-income inner-city residents “objective analysis,” and “facts.” Ideological stances who suffer greatly from the failure to improve public appeal to partisan believers but rarely, if ever, provide an education. Republicans tout individual liberty, yet they actual solution. advocate government intervention into citizens’ personal Ideology almost always oversimplifies issues, and choices. Republicans emphasize fiscal responsibility but ignores the multiple dimensions and complexity of most advocate defense spending that exceeds the combined solutions. Low taxes, for example, is an ideological defense spending of the next eight highest-spending 26 perspective but not a guide to actual tax policy, which countries. must incorporate the reality of the nation’s (or a state’s) Party platforms, tools with which parties collect and fiscal situation and must recognize the many ways in cement their allegiances with their target voters, are which it affects citizens differently. The same can be similarly often incoherent or inconsistent. This is because said for small government, reducing income inequality, they are heavily based on ideology or appealing to and many other issues that are part of today’s political partisan interests, as we will discuss further. debate. The parties separate voters to reduce accountability. Today’s partisan and ideological competition presents They choose to compete on partisanship and division, voters with numerous false choices that frame issues as rather than by appealing to many or to the middle. “either/or”—for example, big government versus small They fail to forge the broad-based consensus that we government, cutting taxes versus raising taxes, free want our political system to achieve, as we discussed trade versus protectionism, supporting lower-income in Part III. Competing on division reinforces the parties’ citizens versus supporting higher-income citizens, differentiation from each other while enhancing their core regulation versus deregulation, and protecting the customer loyalty. environment versus protecting business from environmental regulation, to name just a few. The parties have little interest in targeting the middle, or customer groups with overlapping interests, because this Given that most issues are complicated, nuanced, and would blur their differentiation. This would also create involve multiple valid viewpoints, the parties seek to more pressure to actually deliver real solutions to voters. confuse and mislead voters on the facts and what they This fundamental competitive dynamic in a duopoly is should want. The duopoly works to make issues simple what some political theorists have misunderstood in and divisive through careful selection of “facts,” which predicting that the parties would move to the middle. are often incomplete and misleading if not completely incorrect. This allows the sides to make voters think that Average voters are not completely ignored, because the ideology is relevant. On trade, for example, Democrats parties compete to turn out their base in the general have tended to describe it as negative—a job killer— election and suppress the turnout of the other side’s despite a large body of evidence that on balance open base. The parties also compete to attract swing voters trade improves the standard of living for all levels of in the middle. However, steps to attract such voters do income, and also creates economic growth and jobs. not come at the expense of focusing on core customers. Republicans attack mandates to buy health insurance Because there are only two choices in today’s system, as usurping individual liberties, whereas insurance parties don’t need to deliver solutions to the middle, but mandates are a feature in many industries (such as car appeal to such voters as the “lesser of two evils.” insurance) and a fair and just policy to avoid free-riding by some citizens who avoid paying their share of costs and who inflict costs on other citizens. 30

35 Finally, given the failure of ideology to deliver solutions, it The Duopoly Seeks to Enhance Industry is no surprise that today’s political competition favors talk Attractiveness over action, and relies on making unrealistic promises that The parties work together to improve industry Action and progress are critical are rarely, if ever, fulfilled. attractiveness and to strengthen and reinforce the way outcomes that we want our political system to achieve, they compete. (For a historical overview of many of but, as we discussed in Part III, this is not what our the steps that have shifted industry structure, see Part political competition is now designed to achieve. V.) To do so, the duopoly pursues three additional key 3. Avoid Compromise competitive practices: set industry rules and practices that reinforce partisan division; raise barriers to new Most real solutions require finding common ground, competition; and cooperate when both sides benefit. compromising, and taking steps to move policy agendas We will examine each in turn. forward over time, rather than achieving everything at once. The ability to compromise is even more important 1. Set Industry Rules and Practices that Reinforce in America, because the U.S. Constitution is designed Partisan Division to protect the rights of individuals and minorities—our The duopoly has worked over time to set numerous governmental system is not designed for simplistic rules and practices to reinforce partisan divisions and majority rule. Our founders sought a political process enhance party separation. A series of election rules that could incorporate the interests of many groups, and practices—which both sides have advanced, as not just cater to the dominant interests and ideological we have discussed—have enhanced and expanded perspectives of the day. Today’s political competition partisan division and resulted in more and more extreme violates this fundamental principle. candidates and elected officials. Despite the essential role of compromise in finding true Partisan primaries, in which candidates are selected by solutions and making progress on the issues, today’s a relatively small proportion of voters—who tend to be political competition treats compromise as failure. It more extreme and politically focused and engaged—push is no surprise that bipartisanship, finding common candidates to the left or the right. ground, and compromise—fundamental principles of good political outcomes—have become anathema to the duopoly. Even in areas where the sides agree, they fail to pass legislation that would represent progress, and HOW UNWILLINGNESS TO COMPROMISE instead hold out to deny the other side any victory. FAILS THE PUBLIC: THE AFFORDABLE CARE ACT Party rhetoric divides voters based on hostility toward the The Affordable Care Act (often referred to other side. Rather than working to bring citizens together as “Obamacare” or the ACA) was passed by to further the public interest, the duopoly demonizes the Democrats, including two independents affiliated other side's supporters and their views. It incites citizens Republican votes. This with Democrats, with no to vote based on anger and fear. The duopoly emphasizes led to seven years of Republican efforts to repeal hot-button, divisive issues that appeal to emotion to rally the bill, rather than efforts to improve it. After supporters and motivate donors. This approach makes regaining power in the 2016 election, Republicans real progress on important issues even harder. It portrays endeavored to repeal and replace Obamacare, other points of view as illegitimate, and even dangerous. without real engagement with Democrats. So far, Many Tea Party Republicans, for example, made “no their efforts have been unsuccessful. After the compromises” their mantra. Today, there are strong failure of an early House bill in March 2017, pressures on Democrats to do the same thing—reject any Speaker Paul Ryan said, “We were a 10-year policy put forward by the Trump administration. opposition party, where being against things was 27 What an easy to do. You just had to be against it.” In today’s political competition, then, serious legislation admission! can often only be passed when one party forces its bill Today, almost a decade has gone by since the down the throat of the other party during those rare ACA was passed, and we still lack a realistic and periods when it has enough power to do so. The results effective health care solution, a vital national are usually disastrous for the nation (see the sidebar priority. Such a destructive, zero-sum pattern of “How Unwillingness to Compromise Fails the Public: The overreach and payback is repeated all too often, Affordable Care Act”). resulting in bad outcomes for the nation. 31 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

36 As we noted in Part II, the industry’s freedom to set its This partisanship is reinforced and amplified by own rules and competitive practices has tightened its gerrymandered districts that virtually guarantee that one stranglehold over the competition. party will always win and, therefore, tend to lead to even more partisan candidates. Sore loser laws, which both 3. Cooperate When Both Sides Benefit parties have advanced, can keep moderate candidates— who cannot win the primary—from running in the general Rivals cooperate on steps that improve industry growth election, as we discussed in Part II. and influence and protect their collective market power. Barriers to new competition—especially new competitors Ballot access rules and fundraising biases invariably that compete differently—are essential to sustaining disadvantage independents, third-party candidates and competition that fails to deliver good outcomes for most often moderates as well. This may even discourage such voters. In the case of politics, a duopoly and barriers to candidates from entering the race at all. As we have new competition have made the separation and divisive seen, pragmatic moderates in both parties are becoming rivalry we experience today almost inevitable. an endangered species in Congress (see Figures 3 and 4 in Part II). While the parties fail to serve the public interest, they cooperate where they mutually benefit. This cooperation Governing rules and practices have also evolved to has taken the form of ballot access rules, fundraising amplify partisanship and work against compromise rules, debate access rules, and many others we solutions. Party leaders have created powerful levers to have described. These raise barriers to new types of reward “loyal soldiers” and to discipline those who stray competition and reinforce today’s partisan competition. from ideological purity. Party leaders decide committee assignments and choose committee chairs (positions The duopoly also makes deals where both parties benefit, formerly based on seniority). Legislators who are even agreeing on legislation that is inconsistent with considered insufficiently loyal can be kept off important party principles. Cooperation occurs when both sides committees, limiting their influence. They can also be benefit in serving their own interests and those of their denied party funding for reelection. core customers. An important example is budget bills, which almost always increase spending and are “deficit While partisan differences between and within parties financed” (i.e., increased spending is not offset with have increased in recent decades, bipartisanship spending reductions). Budget bills are often passed at has been in secular decline. Leadership discourages the 11th hour before a government shutdown. These bills bipartisan activity, such as co-sponsorship of are touted as an accomplishment, when they are actually legislation or cross-party consultation. Party leaders a failure of responsible governance. Both Republicans have suppressed reconciliation, the process by which and Democrats tuck their preferred spending and tax bipartisan conference committees reconcile House and adjustments into these bills to please their respective Senate legislation. Parties hold separate discussions, core constituencies (while looking the other way on often restricted to party leadership. Bipartisan-minded what the other side “gets,” even if it conflicts with party legislators can be marginalized and threatened with a principles). For example, the deficit goes up, while primary challenge in their next election. Republicans are supposedly for fiscal responsibility; and tax breaks are part of the bill, even though Democrats 2. Raise Barriers to New Competition are supposedly against “tax breaks” for business. The The very existence of the entrenched duopoly in U.S. national debt continues to grow irrespective of the party politics reflects the very high barriers to entry facing new 28 in power. competition, as we described earlier. The parties have taken major steps to increase and widen the barriers to entry. The election and governing rules and practices we just discussed substantially increase barriers to entry facing new parties and independents. The tight connections forged between parties and the key suppliers needed to contest elections and govern also raise barriers to new competition. So does the growing party alignment with the media and party control of other key channels. The barriers have not only blocked new parties, but also different kinds of competitors, such as independents and even moderates within the parties. 32

37 accountability would mean voting party leaders and many Conclusions legislators out of office if progress is not made, not just the marginal shifts we have observed in recent decades. The structure of the politics industry, and the nature of the competition that has been created, have failed to serve the In our political system, neither side has real accountability public interest and deliver the outcomes most citizens want for failing to deliver solutions that advance the public and need. There are cases where some progress occurs, interest. There are only two major parties, who compete or individual legislators are able to deliver real solutions in by dividing up and serving partisan voters and special special cases. These are exceptions, not the rule. Despite interests. This means that voting out individual legislators widespread dissatisfaction with our political system, things means replacing them with others from the same party or are getting worse, not better, as we will discuss in Part V. the other party who can get elected in the current structure. Replacements from either side will perpetuate the current The nature of the political competition we observe, and its competition or be neutralized if they try to act differently. failure to deliver results for citizens, is not an accident. It is the direct result of the competitive choices the parties Frustration votes, then, can shift the balance from one have made and the industry structure that the duopoly has party to the other, but nothing really changes. The parties created. The abysmal outcomes we are experiencing are the continue to compete on partisan division, the absence of logical result of the nature of competition in this industry. compromise, and talk, not action. Today’s political competition rewards special interests and partisans, and diminishes the influence of the average The parties have learned that, to win, they merely need voter (much less non-voters). Today’s rivalry incents divisive to play the game they have created, not deliver solutions. rhetoric, gridlock, and unfulfilled promises, not solutions. The parties have made us believe that such competition Today’s rivalry undermines the ability to elect pragmatic and is normal, and educated us to go along. The duopoly wins. moderate public officials, co-opts the independence of the The loser is our democracy. media, and raises ever-higher barriers to entry for third- party candidates, independents, and even moderates. 3. No Countervailing Forces to Restore Healthy Competition Beyond this failure to deliver good outcomes, the structure of the politics industry has resulted in three devastating Finally, despite widespread dissatisfaction and delivery of implications for the citizens. First, the parties have an poor results for the average citizen, the duopoly remains incentive not to solve the nation’s problems; second, there dominant, and partisan competition persists. The failure is no accountability for results; and third, there are no of politics has persisted because the normal checks and countervailing forces that will naturally restore healthy balances of healthy competition are neutralized (as they can competition. be in duopolies). In other industries, countervailing forces that make up industry structure would keep competition 1. An Incentive Not to Solve Problems aligned with the needs of customers. Customers who were poorly served (i.e., the majority of customers in politics) In today’s partisan political competition, there is actually would rebel and look for new kinds of competitors. Powerful an incentive not to solve problems. Keeping a problem channels or suppliers would apply pressure on rivals to or controversy alive and festering is a way to attract and serve customers better. And new competitors or substitutes motivate partisan voters, special interests, and committed would emerge that met customer needs better. donors to each side. Neither party, for example, has strong competitive incentives to solve the problem of immigration, In politics, however, these forces have been co-opted or because a comprehensive compromise solution would eliminated. This is because in politics, the normal checks disappoint some of both parties’ most fervent supporters and balances in healthy competition have been neutralized, and reliable donors. Additionally, once an issue is “solved,” as we have discussed. What looks like intense competition voters focused on that particular issue may become less to the casual observer is not at all what it appears to be. motivated to affiliate with and support the party. The failed competition in politics is perpetuated most 2. No Accountability for Results of all by the very high barriers to entry, many of which are artificial and intentionally constructed to deter new despite making little or no progress on Most amazing is that competition and substitutes. New competitors could solving the nation’s problems and serving the American people, bring new ideas, new solutions, and new ways of serving the duopoly is not held accountable for results. customers. New competitors could break down the partisan separation by winning over the majority of voters and non- Healthy competition involves accountability for results. If voters who are not as partisan. rivals fail to deliver the outcomes customers want and need, they lose market share or go out of business. In politics, 33 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

38 PART V: WHY HAS THE SYSTEM GOTTEN WORSE? influence. The idea was that voters would democratically Why have the outcomes and nature of competition of select the parties’ candidates, instead of the parties our political system worsened over the last decades, doing so in “smoke-filled back rooms” or caucuses. especially since the 1960s? While partisanship at some However, as we have discussed, an unfortunate effect level has existed since our governmental system was of partisan primaries has been to foster more extreme structure of the politics industry has changed created, the candidates and to leave many general election voters with significantly—for the worse. what they perceive to be unacceptable choices. Figure 1 identifies some of the most significant 1 More recent congressional reforms with unintended industry structural shifts starting in the 20th century. consequences include the elimination of earmarks* and This analysis is not meant to be exhaustive, but to rules and norms discouraging closed-door, anonymous highlight the many important changes that have moved 4 votes in committees. competition in the direction of increased partisanship, These would seem to be clearly gridlock rather than practical solutions, and substantially positive steps. But, in a polarizing system in which the higher barriers to entry for new competition. (See parties were more and more partisan and entrenched, the sidebar “Milestones in Political Competition and these changes removed some of the last remaining ways Polarization” for a brief overview of some of the important to secure compromise. Earmarks served two purposes: changes that have led to today’s industry structure.) They were a “currency” to get deals done, and they allowed legislators to get credit in their districts for Of these changes, some were well-intentioned benefits they delivered which could help offset the refinements to rules and practices that had unintended political cost of compromise. Closed-door, secret votes consequences. Many other “reforms” were driven by also helped insulate compromises from attack by partisan political actors to expand their influence and ensure extremes. While we do not advocate a return to these 2 their growth. Some existing practices were optimized particular practices, it will be necessary to change the over time to benefit the duopoly. For example, through industry structure in other ways to shift competition the use of much more detailed and precise voter data towards finding common ground and delivering practical and better technology, gerrymandering has become far solutions. more sophisticated and effective. Finally, broader shifts in American culture, institutions, and demographics have *Definitions of earmarks vary, but a good basic definition comes from 3 also played a role. the Leonore Annenberg Institute for Civics: Earmarks are “allocations of revenue in a bill that are directed to a specific project or recipient typically in a legislator’s home state or district. [...] They are often An example of a well-meaning reform with unintended slipped into bills without the review typically given to pending negative consequences was the establishment of partisan http://www. legislation.” See Annenberg Classroom, “Earmarks,” annenbergclassroom.org/term/earmarks , accessed March 2017. primaries, which were intended to give citizens greater FIGURE 1: POLITICS INDUSTRY STRUCTURE CHANGES FOR THE WORSE Governing reforms Advent of 24/7 Partisan think tanks partisan media Escalating money Partisan in politics primaries Partisan primaries for verning rules New go and norms pre sident End of earmarks for Congr ess 2010s 2000s 1980s–1990s 1970s–1990s 1900s–1920s 1960s 1970s Gerrymandering Emerge Republican nce of ga shift righ t social media ins strengt h Improving Move to partisan talent data analytics Proliferating special interests Voter turnout begi ns to decline Southern realign ment Note: The order and placement of the events roughly correspond with the chronology. Source: Author analysis from multiple sources. See endnote 1, Part V, for details. 34

39 MILESTONES IN POLITICAL COMPETITION AND POLARIZATION Numerous changes in rules, practices, norms, legal decisions, party realignments, and the nature of associated institutions such as the media and think tanks have collectively shifted the structure of the politics industry and the nature of the political competition over the last half-century. Here we summarize some of the notable changes; this list is not meant to be exhaustive. Progr essive Era reform seeks to weaken party and back-room control of selecting PA IMA RIES RTISAN PR th Early 20 Century FOR CONGRESS candidates through the institution of direct primaries. MO CRATIC PA RTY ly disappear, leaving a more DE Conservative Southern Democrats large 1960s SOUTHERN REALIGNME neous left-of-center party. NT homoge nes. Turnout in pr esidential years declined from 64% in Overall voter turnout decli DE Beginning in CLINING 1960 to 52% in 1996, rebounding somewhat to 59% by 2012. Voter turnout in the mid-1960s VOTER TURNOUT midterm election years declined from 49% in 1966 to 36% in 2014. Specialized political media and campaign staff emerge and almost always work PA Beginning in the 1960s with one party or even one wing of a party. National party committees often played RTISAN TALENT alent matchmaking. a role in t GERRYMA NDE RING Gerrymandering became increasingl y sophisticated and widespread. Beginning in the 1960s SPE CIAL INTERESTS Special interest gr oups proliferate. Beginning in the 1960s Early think tanks emerge in the Progr essive Era to foster professional and objective analysis. By the 1970s, new think tanks are increasingl y partisan and PA RTISAN THINK TANKS Beginning in the 1970s move into advocacy. Think tanks become holding orga nizations for the parties’ elected and appointed officials. PA RTISAN PR IMA RIES Late 1960s–1970s Partisan primaries spread to presidential elections (led by Democrats). ESIDE NT FOR PR s in the House and Senate take place in the 1970s, Many of the key rule change 1970s, 1980s, initially led by the Democratic Congr ess. Over the 1980s and 199 0s, leadership GOVERNING REFORM and 1990s moves to more aggr essive use of power and resources to enforce party loyalty. These shifts involve both parties. r a shift to more partisan Political attacks on the independent media trigge . This is amplified by media fragm entation and the gr owth of new media, coverage er which increased competition. The rise of high ly partisan talk radio and oth shows can be traced to the 1987 abolition by the Federal Communications Beginning in the PA DI A RTISAN ME of all Commission of the Fairness Doctrine, which had required balanced coverage 1980s–1990s political opinions. The overall tone of news coverage becomes increasingl y nega tive and less focused on issues. Public confidence in the media starts declining dramatically in the early 1970s. Republican Par ty thinking shifts to the righ t, including neo-conservatives, the Christian righ t, and the low-tax movement. The Republican Party shifts from a BLICAN SHIFT RIGHT Late 1960s–1990s REPU minority party that cooperated and compromised, having a meaningf ul impact on ly partisan and confrontational party. the legi slative process, to a high Social media proves to reinforce partisanship, as individuals seek out or a re Beginning in the 2000s NEW ME DI A targe ted with information reinforcing their partisan leanings . Major improvements in voter data and analytics lead to far more sophisticated DA Beginning in the 2000s targe ting of information to voters and of campaign interventions, making partisan TA ANALYTICS approaches more effective. Citizens United v. FEC opens up unlimited spending by companies, individuals, NEY IN PO LITICS 2010s MO and unions to advocate for candidates. The elimination of earmarks reduces mechanisms for achieving compromise, as 2010s EARMA RKS does the end of closed-door votes. Note: See endnote 1 for sources. 35 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

40 evolution, which increased politicians’ attacks on the Outside factors and changes in related institutions also media. The consequences of shifts that led to fewer played a part in creating more partisan competition and moderates being elected emboldened the partisanship of less solutions-orientation over time. For example, the winners. And so on. The degradation of the system has decline of major newspapers and the once-dominant sped up over time. big three TV networks has contributed to making independent media less influential. The advent of 24/7 As this historical evolution highlights, transforming media coverage and more partisan media has made any political competition will require a comprehensive compromise visible and subject to instant attack, as Structural reforms strategy rather than isolated steps. media increasingly thrive on controversy. The rise of social will be needed in multiple areas to alter incentives now media has proved to be a powerful tool to bombard voters embedded in today’s system and shift the nature of with divisive and sometimes misleading messages that competition. Our challenge is to trigger a new set of self- 5 have reinforced partisanship and made divisions worse. reinforcing changes that will bring political competition back into alignment with the public interest and not the As is common in complex systems, the collective duopoly’s partisan interests. effect of these changes has become increasingly self- reinforcing. Election changes helped encourage media provided two key benefits: 1) unprecedented free media THE ELECTION OF PRESIDENT TRUMP 7 access because his campaign style attracted viewers Has the election of Donald Trump changed the structure and 2) his ability to go directly to the public using social of our political system, or our analysis, conclusions, or media (which was a new innovation as well). These recommendations? lowered the cost of his campaign and, combined with On the contrary, it is a direct reflection of them. The his self-financing ability, lowered his barriers to entry. Trump election and presidency only reinforce our Running as an “outsider” within a party may emerge conclusion that political competition is dysfunctional, as a strategy others may imitate. However, the Trump and fail to deliver the outcomes that advance the public success is likely to be more an anomaly due to his interest. The election provides a striking indication unique personal circumstances. Having said that, it is of the level of public dissatisfaction with the status likely that Trump’s election and presidency will cause quo, as the voters clearly tried to reject the political adjustments and disruption within both the Republican industrial complex by electing someone from “outside and Democratic Parties which may be significant. the system.” But neither the structure of the politics industry nor its In the end, they were not successful. Trump ran within In fact, it is incentives have fundamentally changed. the existing duopoly, correctly recognizing that a truly probable that the specter of the 2018 partisan primaries independent bid would not be successful, due to the will increase congressional dysfunction, because very high barriers to entry facing an independent. This, Republicans who speak up for anything contrary to the not coincidentally, is the same conclusion Michael Trump administration’s line will fear primary challenges Bloomberg is said to have reached as he considered his (unless and until Trump’s support among Republican 6 own run as an independent. primary voters drops significantly from current levels). Does Trump’s election signal a shift in the nature of The same will be true for Democrats who are seen to be rivalry and the end of party influence? We do not think anything less than completely obstructionist—no matter 8 so. In fact, partisan rivalry and division are likely to what the administration proposes. increase. Despite initial skepticism by the Republican The Trump presidency provides striking support for our party establishment, the Trump election became a belief that the current political industrial complex is victory for the Republican side of the duopoly—not for dysfunctional. Washington, D.C. has been unable to so new competition. far get much if anything done, despite one-party control. President Trump can be understood as a hybrid Gridlock continues. The duopoly and the broader political substitute to the traditional party system, but, not truly industrial complex remain intact. new competition. He ran as a Republican, albeit with Finally, the parties will likely be better prepared in the mixed party support, and utilized the party system and future for such “outsider” contenders, and will likely its advantages to campaign, get on the primary and The need to find ways to restore greater party control. general election ballots, and win. reform our political system to create healthier competition Trump’s ability to win reflected a very specific personal and better outcomes remains unchanged. and political context. His high brand recognition 36

41 PART VI: REINVIGORATING OUR DEMOCRACY the system just by electing “better” people (though that Many Americans now understand that, no matter whom certainly never hurts). Even promising candidates would we elect—and we’re always hoping for that next great continue to disappoint, because they would be trapped in candidate—political outcomes seem to get worse. And a system that no single individual can overcome. some of the most capable people we have elected to public office have quit out of frustration because they Many well-meaning reform ideas—such as promoting have no impact. bipartisanship, instituting a national primary day, improving civics education, and establishing bipartisan One thing has become abundantly clear: Our political issue-advocacy groups—won’t matter much absent system will not be self-correcting. The problems are changes in the underlying industry structure. Deeper systemic and structural, involving multiple factors that systemic changes that alter the structure of the politics are self-reinforcing. This means that the only way to industry and the parties’ competitive dynamics will be reform the system is with a set of steps to change the required to produce real impact. industry structure and the rules that underpin it and, therefore, shift the very nature of political competition. Even powerful reforms, however, must also be achievable We need to move from today’s unhealthy competition within a reasonable time frame. The need is too urgent to healthy competition that holds elected officials to be distracted by reforms that, while theoretically accountable for delivering the desired outcomes in powerful, are not likely to be achievable in the next politics: solutions, action, and broad-based consensus. decade or two. For example, a constitutional amendment for campaign-finance reform may be desirable, but it is We admit to a bias that moderate, compromise-oriented highly unlikely to pass. politicians have an important value in crafting and delivering solutions to the nation’s problems. We are not Conversely, some reforms may be achievable, but not suggesting, however, that moderates are the only valuable powerful. Term limits are a good example, because they kind of elected official. Historically, transformational do not sufficiently change the structure of competition. changes in the U.S. have often begun at the fringes—in New candidates would face the same pressures to move decidedly non-moderate camps. to the extremes as incumbents do, while newly elected officials would still face the same obstacles to achieving Eventually, however, change must be enacted by a majority solutions. in democratically-elected legislative bodies. It is here that bipartisan, pro-problem-solving, consensus-seeking No matter how well intentioned, then, only reforms moderates are crucial for delivering practical solutions, that are at the intersection of powerful and achievable and it is precisely this genre of elected officials that our will make a difference. We shouldn’t waste our time current political competition has rendered almost extinct. on reforms that aren’t both (see Figure 1). Note that We believe reinvigorating electoral opportunities for the “achievable” doesn’t mean “easy.” Unfortunately, there rational middle must be a central premise of political are no reforms at the intersection of powerful, achievable, reform. and easy! What Will (and Won’t) Work FIGURE 1: THE NARROW INTERSECTION OF POWERFUL AND ACHIEVABLE There are a growing number of political reform initiatives involving a wide variety of approaches. The question is: In which ones should we invest? Which reforms and innovations have the greatest potential to fundamentally alter the ability of the political system to deliver outcomes that matter for the common good? In order to Power ful Achie vab le produce real change, our analysis of political competition suggests a set of key principles for reform. Reforms must be both powerful and achievable. For a reform to be powerful and, therefore, have real impact, it must attack the root causes of poor political outcomes, Rec om mend ed not just the symptoms. For example, we cannot change Ref or ms 37 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

42 constitutionality of existing practices. Or, court action There is no one silver bullet. Given the nature of may be a complementary strategy for referendums or industry structure, reforms on multiple fronts will be legislative action. necessary to shift political competition sufficiently so that it results in good outcomes. For example, campaign- This requires the support of the • Legislative action. finance reform, which has consumed so much recent state legislature and governor and can be the most attention, is surely needed. However, money is not the challenging, since it can require elected officials to only problem. As we have discussed, partisanship and vote against the self-interests of the duopoly. However, gridlock are structural issues created by much more than we should remember that, in the end, state legislators campaign-finance rules. Reforms must address multiple work for the voters. If enough voters want reform and aspects of the structure. organize to demand it, legislators will respond. Reforms are needed in both elections and governing. Shortcuts that work around the current politics Election and governing rules are both key parts of the There are steps industry structure will be beneficial. industry structure, and improving each will be mutually (described later in this section) that can build momentum reinforcing. Reforming elections will provide opportunities and deliver important near-term benefits, even before for new kinds of candidates who are accountable to more systemic changes are enacted at scale. Some wins voters instead of to the duopoly and its core customers. can show that change is possible—reversing the vicious But election reform will be more effective if governing cycle of citizens dropping out of politics—and generate a reform also gives all legislators more influence. And sense of hope that will lead to further progress. support for governing reform will be greater if a shift in elections results in less partisan candidates not beholden A Strategy to Reform Politics to the duopoly. Since much of the design of our political system is not The reform Reforms should be cross-partisan. specified in the Constitution, we can change it. While movement should engage citizens across the ideological progress has already begun, a realistic time frame spectrum. It should not be used as a Trojan horse for systemic reform is a decade or even two. And the for partisan advantage. Historically, both sides of the ever-present risk that special interests find new ways to duopoly have sometimes championed changes to the optimize the system around their interests, instead of system under the guise of “reform,” when they were those of the public, means the task of protecting healthy really trying to change the system in ways that were more political competition will never be complete. Ongoing likely to disproportionally benefit their side. vigilance will be required. Many reforms will need to be enacted state by Already, many outstanding, dedicated, and passionate state, and will require state-specific strategies. activists are working to improve our system. Together State constitutions and legislatures are responsible for they are creating a strong organizational foundation on most of the rules that enable the duopoly’s core control which to build, and many are addressing reforms that are of elections, so it is not possible (in most cases) to at the intersection of powerful and achievable as we just simply mandate changes once at a federal level. Each described. state will need to follow its own laws and constitutional provisions to enact reform. Therefore, reformers will need Our analysis highlights those reforms that will be the to evaluate each state individually and tailor winning most powerful in addressing root causes and discusses strategies state by state. how to combine them into an overall strategy. The reforms fall into four areas: Depending on the issue and circumstances in an individual state, reformers can utilize three major • Restructuring the election process approaches to implement the needed reforms: • Restructuring the governing process in which citizens vote • Ballot initiatives or referendums • Reforming money in politics for new rules. These can be very effective, because they are forms of “direct democracy” and, therefore, • Opening up near-term competition—without waiting bypass the elected legislature. Some form of ballot for structural reform 1 initiative or referendum is available in 27 states. In each area, we include links to the websites of specific Certain reforms have the best chance • Legal challenges. organizations that are working on it. of success through court action that challenges the 38

43 still have a path to be one of the top-two or top-four 1. Restructure the Election Process vote-getters in the primary (instead of being virtually Changes to the election process are needed to open up guaranteed to lose their partisan primary). Once through competition from outside the duopoly. the primary, they would then be able to appeal to the broader general election electorate based on having done Institute nonpartisan top-four primaries. As we have something to advance the public interest. seen, the current partisan primary system is perhaps the single most powerful obstacle to achieving outcomes Nonpartisan top-two primaries have recently been 2 for the common good. Instead, states should move to a instituted in two states: Washington and California. single primary ballot for all candidates, no matter what These are major steps forward, and we must build on their affiliation, and open up primaries to all voters, not them. These states changed their primary systems just registered party voters. The top four vote-getters through voter referendums—proving that it can be from such a single non-partisan ballot would advance done. The Independent Voter Project played a major role to the general election, instead of one winner from each in securing top-two primaries in California (see www. duopoly party. This incentivizes all candidates to present ). independentvoterproject.org themselves to a general electorate, not just appeal to a In moving toward nonpartisan primaries, an initial small cadre of party-partisan voters. and interim step can be to move from “closed” party Note that in a nonpartisan primary in a heavily primaries (which allow participation by party members Democratic or Republican district, it may be possible only and which are the rule in many states) to “open” for multiple Democrats or Republicans to advance. In party primaries (in which everyone can vote without being such a case, however, all candidates will be far more required to register with a party). This will work to reduce incentivized than in the current system to appeal to a the partisanship of primary voters and build momentum broader base of voters and to compete on solutions. toward a fully nonpartisan primary system (see www. ). openprimaries.org Top-two nonpartisan primaries have already been implemented in some states. However, we recommend Institute ranked-choice voting with instant runoff in top-four primaries in order to create more opportunity In most cases, our current voting general elections. outside the duopoly (see http://www.fairvote.org/ system is “first-past-the-post, winner-take-all,” which can top4#why_top_four ) for more information about the easily result in a candidate winning with only a plurality benefits of top-four primaries). (not a majority). For example, in a three-way race, a candidate can win with as little as 34% of the vote (with Nonpartisan primaries may also lower the barriers to the other two candidates each receiving 33%), which entry for independents, such as current ballot access indicates that 66% of the voters preferred someone else. rules and the challenge of getting attention in the media. An independent who makes it out of a top-two or top-four Ranked-choice voting is a different approach, designed primary would command more media coverage versus the to elect the candidate with the broadest appeal to the candidate on the general election ballot that no one had most number of voters. Candidates who are opposed by ever heard of. a majority of voters can never win under this system, and no votes are ever “wasted.” Nonpartisan primaries would also lower barriers to running and create a clearer path for moderates Here’s how ranked-choice voting works: In a four- or candidates not adhering in full to their party’s candidate general election, the voter would have the orthodoxy—for example, a fiscally conservative Democrat choice to rank candidates in order of preference, from or a socially liberal Republican. Today, such candidates first choice to last choice. If no candidate receives a often can’t make it out of either a Democratic or a majority in the first round, the candidate with the fewest Republican primary, and a nonpartisan top-two or top- first choices is eliminated and voters who liked that four primary will give them more opportunity to advance. candidate the best have their ballots instantly counted for their second choice. This process repeats until one Nonpartisan primaries would also empower legislators https://www. candidate reaches a majority and wins. (See to build records of sensible compromise and of getting facebook.com/IVN/videos/10153216413332465/ for a things done. For example, federal legislators who were quick video that explains ranked-choice voting.) considering voting “yes” on bipartisan legislation, like Simpson-Bowles, would be more willing to do so in With ranked-choice voting, citizens can vote for the a nonpartisan primary system, because they would candidate they like the best without worrying that their 39 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

44 Supreme Court, the plaintiffs’ three-part test to provide vote will help elect the candidate they like least. Thus, a standard for identifying partisan gerrymanders will ranked-choice voting eliminates the “spoiler” argument. constitute an important tool to fight this political practice Under this system, candidates no longer focus exclusively http://www.campaignlegalcenter. across the country (see on securing first-choice support, because broader ; and, specifically, see the Campaign Legal Center’s org support may be necessary to win. This encourages a http://www. report on partisan gerrymandering at focus on the issues and reduces incentives for negative campaignlegalcenter.org/document/make-democracy- campaigning, because candidates must avoid alienating count-ending-partisan-gerrymandering ). other voters whose second- and third-place support they may need. Candidates in this system are less likely to run Rewrite debate access rules for presidential 3,4 scorched-earth campaigns. elections. Today there is almost no way to mount a serious bid for the U.S. presidency outside of the Like nonpartisan primaries, ranked-choice voting is also duopoly. According to Peter Ackerman, Chairman of Level no longer just an idea. Maine became the first state to the Playing Field, “this state of affairs is the product adopt this reform in a November 2016 ballot initiative of collusion between operatives from the Democrat http://www.fairvote.org/rcv#rcvbenefits www. and (see and Republican parties who—through the design of rcvmaine.com www.represent.us and ). hidden rules—jealously guard the perpetuation of their 7 duopoly.” One of these hidden rules involves access Institute nonpartisan redistricting. As we discussed to the fall presidential debates. A person running as in Part II, gerrymandering is the process of drawing a Democrat or Republican knows that if they win the legislative district boundaries that create artificial nomination they will be guaranteed a place in the advantage for the party in control. Thirty-seven debates. The Commission on Presidential Debates states currently give redistricting power to the state (CPD), a private organization dominated by partisan legislature—effectively handing over control of this loyalists, requires every other candidate to meet a crucial part of our democratic process to whichever 15% polling hurdle in a three-way race decided just 5 party is in power. Gerrymandering reduces competitive seven weeks before the election. While 15% may seem seats and, thereby, minimizes accountability for elected reasonable, the poll taken so late in the election cycle officials (which is exactly the type of behavior one would creates an insurmountable “Catch-22.” The practical expect from a self-serving duopoly). effect of this rule is to create a major anticompetitive barrier to any candidates outside the duopoly, and Independent commissions should take over redistricting, that is why there hasn’t been a third candidate on the an approach which has been instituted in Arizona, Presidential debate stage since 1992. California, Idaho, and Washington. So progress is taking 6 place. Gerrymandering reform across the country will 8 Level the Playing Field filed and won (in early 2017) the likely require multiple approaches that include litigation first stage of a federal lawsuit to change this rule and and ballot initiatives, among others, because the open the debates, and the litigation is moving through redistricting power is delegated to states, and each state the courts on pace for a resolution in time for the 2020 may need a different strategy for change. election. Success in this lawsuit would be an important step to inject competition debates from those outside the Several ballot initiatives to reform redistricting are www.changetherule.org duopoly into the debates. (see ). underway, and progress is also being made on the litigation front. In October 2017, the U.S. Supreme 2. Restructure the Governing Process Court will hear oral arguments in Gill v. Whitford, a case brought by Wisconsin voters against the State of Political outcomes are affected not just by who wins Wisconsin challenging the state’s Assembly district elections but also by the rules set by the parties to lines. In November 2016, a three-judge federal panel in control the legislative and governing process. Wisconsin struck down the state assembly district map in question, ruling for the first time in 30 years that a Rewrite legislative rules. Party control over day-to- state legislative redistricting plan was an unconstitutional day legislating and governance needs to be significantly partisan gerrymander. A key part of the case is the reduced. It is clear that today’s process has been plaintiffs’ rigorous three-part statistical methodology for designed to enhance the power of the two major parties identifying partisan gerrymanders, designed to provide an to control outcomes, rather than to make legislating a objective standard to evaluate if a partisan gerrymander process that is most likely to serve the public interest. has occurred. Previous cases were found to lack a (For more detail on the hidden partisanship in legislating, manageable standard. If this ruling is upheld by the .) see Mickey Edwards' book The Parties Versus the People 40

45 As a first step toward devising a better system, we • Establish 100% transparency in political spending— including for currently “dark” spending (i.e., donors are propose the establishment of an independent Legislative secret), such as spending by 501(c)(4) organizations Reform Commission to design a new set of legislating and Super PACs. and governing rules and produce a public report of its recommendations. The Commission should bring together • Eliminate fundraising loopholes that favor existing a consortium of leading experts who are independent of parties over independents. Fundraising rules should the parties and government. We suggest that an alliance apply equally to all candidates, including independents of universities jointly create and sponsor this commission. and affiliates of third parties. The Commission’s mandate should be threefold: Contact www.represent.us to participate in an activist • Identify the partisanship hidden in the current group pressing for campaign finance reforms across the legislative system; http:// country. Also read “Blueprints for Democracy” ( www.blueprintsfordemocracy.org/download-pdf-1 ), a • Design a set of rules that liberates the process of promising, comprehensive strategy to reform money in lawmaking from partisan control and that are designed politics, jointly developed by the Campaign Legal Center to support and encourage truly democratic and ). www.issueone.org and Issue One (see solution-oriented debate, vote-taking, and legislative solutions; Having said this, diminishing the influence of money alone cannot be expected to transform our political • Determine a process (i.e., action steps by constituency) system. The real answer is to dramatically reduce the by which existing rules can be changed in order to attractive return on investment that donors currently implement the recommendations of the Commission. receive. When we enact the systemic reforms detailed This process will likely require intense public pressure above, the incentive for politicians to respond to on Congress, since Congress controls its own rules. constituents will prevail over responding to donors and special interests, thereby reducing the incentive for their 3. Reform Money in Politics spending. The influence of money is distorting political competition 4. Open Up Near-Term Competition—Without by biasing elections, influencing policies, and creating Waiting for Structural Reform barriers to new competition. Practical steps are needed to address this. As we have described, barriers to new competition from new parties, independent candidates, and even Campaign-finance reform has been limited by Supreme moderates are prohibitive. Court rulings such as Citizens United v. FEC. Fortunately, motivated and creative experts have come together to While the structural, systemic reforms above are craft a feasible (though clearly challenging) strategy to essential, they will take time. In the meantime, we should diminish, over time, the role of big money in our politics, also pursue steps with more immediate potential to shift 9 with a heavy reliance on state and local action. political competition in the right direction—even prior to widespread adoption of our recommended structural In reducing the role of money in politics, including not changes. These steps—some of which were introduced just campaign-giving but lobbying and post-retirement briefly in Part IV’s discussion of “substitutes”—will employment of elected and appointed officials, the provide important near-term benefits (as soon as the perfect should not be the enemy of the good: We should 2018 elections) while also building momentum for reform all we can in the near term, while we craft and 11 structural and systemic change. wait for changes in jurisprudence over time to overturn 10 troubling court rulings. Implement The Centrist Project’s “Senate Fulcrum Strategy.” A highly leveraged way to break the current Here are some critical reforms that can be undertaken political gridlock would be to elect three to five centrist now: independent U.S. senators with a problem-solving • Enact citizen-funding systems to incentivize small agenda. Ideally, such a group would be large enough donors. For example, the government could match to deny either party an outright majority, and thereby small, private contributions that a candidate raises up become the most powerful swing coalition (i.e., the to a set amount—either dollar for dollar or at a certain “fulcrum”) in the Senate. Depending on the policy issue, multiple. this coalition could then align with either party, or bring 41 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

46 subsets of both parties together, to create a majority to should include Super PACs dedicated to supporting ). pass legislation providing real solutions to our nation’s independents ( see www.centristproject.org toughest challenges. Create support structures for solutions-minded The Centrist Project’s plan includes strategically center-right and center-left party candidates identifying a small number of states with a political Allies of No in overcoming primary challengers. climate favorable to candidates from “the sensible Labels—a group formed to address Washington center,” recruiting promising candidates, and supporting dysfunction by getting Democrats and Republicans to them with a campaign infrastructure, as we discuss work together in a bipartisan fashion—have launched a further on. The genius of this plan is that, while Super PAC effort for the 2018 election cycle with a dual challenging, it is eminently doable because the number mandate of protecting pragmatic problem-solving U.S. of seats required to deny either party a majority is small. House members, who are facing primary challenges from This political innovation could bring transformational the left or right, while also working to defeat the most 13 change to the U.S. Senate as soon as 2018 with a obstructionist legislators in their primaries. Innovations relatively small investment—sooner and for less cost such as this can change incentives to reward problem than the longer-term structural reforms we detail in this solving and penalize obstruction, and can help build a section. coalition of more results-oriented politicians. The Centrist Project, which describes its effort as an This effort will not provide funding for general elections 12 “insurgency of the rational,” so that it can work with both sides. Innovations such as would use the leverage the establishment of this Super PAC can substantially of the fulcrum to force change from the political center. reduce the barriers to new kinds of competition, while Similar approaches could be taken at the state level (see simultaneously altering incentives to reward problem- ). www.centristproject.org solving and penalize obstructionists. The result could be Run (centrist) independents at all levels. Solutions- a coalition of more collaboration-minded party members oriented, independent campaigns would bring critical who then have access to critical financial support not new competition to politics, and can be powerful change previously available in primaries. So far, this approach agents. Today, it is difficult to run outside the duopoly has prevailed in two 2016 races, and the organizers plan and even more difficult to win outside the duopoly. www.nolabels. to expand it significantly in 2018 (see Concerned voters should seek out and actively support 14 ). org such candidates who are running outside the duopoly and who are committed to staying outside it—rather than Expand the “Govern for California” model of state- viewing them as spoilers. Success in some independent level innovation. Elections for state legislatures have campaigns would reduce voter and media obstacles tended to fall off the radar of most citizens. Yet state in others, encourage more and more candidates legislatures have an important role in the design of to seriously explore independent campaigns, and our political system, because they control many of the generate more funding and election support (see http:// rules governing political competition, not to mention independentvoting.org/about-us/ ). the important state level policies they oversee. The political industrial complex pays close attention to state Establish a shared independent (and moderate) legislatures, but most citizens are barely engaged. election infrastructure. Substantially increasing the number of independents and moderates who run and Govern for California is an organization focused on win will require building an effective shared election state-level reform by leveraging political philanthropy to infrastructure to help independents (and moderates) support the election of candidates to the California state surmount the barriers to entry created by the parties. legislature, whom they select based on non-ideological Such infrastructure should include raising large, criteria. Criteria include financial literacy and courage to dedicated campaign-financing pools for independents; take a stand, the latter defined by Govern for California’s building a pool of expert political strategists and founder, David G. Crane, as “the demonstrated talented campaign staff; establishing networks and 15 willingness to stand for something greater than oneself.” resources to mobilize volunteers; raising resources to surmount obstacles to ballot access; assembling a core Govern for California’s ultimate goal is to shift outcomes of sophisticated media and marketing talent to execute in the California state legislature by electing courageous, branding initiatives and media strategies, and to build independent-minded, and effective legislators. So far, credibility with voters; and investing in access to shared Govern for California has helped finance 14 successful 16 voter data and analytics capabilities. Ideally, this effort legislative candidates. Such efforts, as well as other 42

47 the political competition that the current major parties state-level support models for independent and moderate have created and their insulation from new competition. candidates and elected officials should be expanded (see What is needed is to change the way parties compete, www.governforcalifornia.org ). which should lead to their better serving the public interest. Reform is Possible The top two parties should always be operating under the It is easy to succumb to a “learned helplessness,” as potential competitive threat from an upstart that better Charlie Wheelan, founder of The Centrist Project and The steps we advocate addresses the public interest. author of The Centrist Manifesto , describes a common are designed to create the conditions for healthy (i.e., outlook on politics. We must reject such passivity. solutions-oriented and not self-serving) competition, and to hold incumbents accountable for serving the public Many of the approaches we have described are beginning interest. Then our democracy can take over, with existing to gain traction, as evidenced by the progress in moving parties transforming themselves or a new party coming to nonpartisan primaries and ranked-choice voting, as into being, if that’s what voters want. well as the gerrymandering and presidential debate litigation we detailed above. These examples are a Let’s not forget that the health of competition between promising start and prove it can be done. our major political parties has eroded substantially in the last several decades (see Part V). Historically, other However, taking back our political system will require parties, including the Federalist, Whig, American (“Know- a large-scale national effort. Since the 2016 election, Nothing”), and Free Soil Parties were all prominent. frustration with politics has triggered widespread concern The idea that we are—or should be—stuck forever with and even public protests. Turning these protests into the Republicans and Democrats in their current form is broad-based political reform that addresses the root Given that today’s parties just historically unsupported. causes of today’s broken system will translate this have become self-serving—to an extent that may well general frustration into powerful and achievable change be unprecedented, just like those corporate executives for America’s citizens. (See sidebar on “Implications for who have enriched themselves at the expense of their Business Leaders,” on Page 44.) shareholders—it is time to open up competition to bring It is worth repeating that the problem in our politics is politics back to serving the public interest. not the existence of parties, per se. While we support reforms that create opportunities for independents, we believe parties are essential for the system, and parties can help brand and win support for policies, organize voters, and support candidates. The structural reforms we have proposed could lead to a new, more centrist third party. Our purpose here, however, is not to advocate for any particular party or a proliferation of parties. The real problem is the nature of 43 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

48 The current political game has undermined trust in the IMPLICATIONS FOR BUSINESS LEADERS fairness of business and diminished public support Business has a major stake in the success of our for pro-business policies, which are increasingly political system: in the nation’s ability to take the seen as subsidies and special treatment. As we have steps necessary to support economic growth, to emphasized in this paper, we must change this game. improve the U.S. business environment, and to better Business leaders have the clout—and the prepare citizens for participation in the economy. responsibility—to play a lead role in shifting the Business cannot be successful unless America is nature of competition of the politics industry. It successful. starts with opting out of the existing party influence Companies should be advocating for policies that game and shifting support toward broader business businesses. A all make the environment better for and community interests, and away from narrow good example is Simpson-Bowles, which we discussed special interests. Companies can do much to exert in Part I. This plan would have put America’s federal pressure to modify the current process of governing, budget on a sustainable path and created a far better support candidates who are moderates and problem macroeconomic environment for investment and solvers, and get behind changes in election rules and stability. practices, such as nonpartisan primaries and the other Given the nature of today’s political competition, steps we have outlined. however, too many businesses have become special The next generation of business leaders—the interests instead of advocates for the general interest. Millennials—are disgusted with today’s political They pursue special benefits for their companies system. It is time for today’s leaders to recognize the and their industries, and they fail to put their weight failure of today’s business-government relationship and influence behind policies and steps that benefit and change it. Today’s CEOs also need to redefine business in general and the communities in which corporate purpose in ways that align strategy and they operate. Lobbying by business and industry business competition with the needs of society, which associations has become a huge business in its own will mean a different relationship with government. right, but contributes to eroding competitiveness Business leaders must create a very different set of in America, while undermining public support for government priorities for advancing the economy, business. Companies and their trade associations have establishing a whole new relationship between also increasingly hired sympathetic former members of business and political leaders, and generating Congress who sit on key committees to gain influence, pressure for action. in a process that distorts policies and regulations. We believe that companies have increasingly moved in the direction of seeking special benefits from government, because that is the way today’s game is played. And it works. This is the game that the duopoly wants business to play. Studies show that the ROI on lobbying in today’s political system is high, as we discussed in Part II. Companies too often fall into the trap of believing that, if they fail to play the special interest game, their business will suffer, or they will lose access. Yet the duopoly’s game is not a good game for America—or for business. It has led directly to many of the weaknesses in America’s business environment that we discussed earlier. A convoluted and uncompetitive tax code is the result of decades of business success in winning special exemptions and favors, resulting in a high overall tax rate and capital frozen overseas. Industries have advocated for their pet government projects, but the overall infrastructure in the U.S. is badly lagging and driving up costs for all businesses. 44

49 the acquisition of unwarranted influence, whether sought Our Responsibility as Citizens or unsought, by the military-industrial complex. The Historically, America’s political system was the envy potential for the disastrous rise of misplaced power exists 19 of the world and a crucial foundation of our nation’s and will persist.” success. The system advanced the public interest and Today, the influence and the perverse incentives of the gave rise to a long history of policy innovations. But political industrial complex have become our greatest today, our political system is divisive and stands in the threat. Our political system will not be self-correcting. It way of progress on virtually every important issue our is doing what it is designed to do. Structural change is nation needs to address. We believe it has become our required to reestablish healthy political competition that nation’s single greatest challenge. advances the public interest and delivers solutions. By looking at our political system as the major industry We citizens bear the ultimate responsibility for knowing it has become, the root causes of the failure of political what is good for our society and insisting on change. We competition become clear. The system is delivering what can never forget that the political system we have today it has been designed to deliver—primarily, for the benefit was designed by our own elected representatives—the of the duopoly and the political industrial complex that people we voted into office. This system was corrupted over has grown around it. Most troublingly, many of the major time, and most of us did not even notice. actors in the system are thriving, even as close to 80% of Americans are dissatisfied, and political outcomes are We have the power to fix it, and we must. Reinvigorating 17 abysmal. our democracy will not be easy—but it is doable, and the need is urgent. We must not forget the words of We can fix the political system, but it will require Benjamin Franklin. When exiting the Constitutional sustained citizens’ initiative and sustained investment. Convention in 1787, he was reportedly asked, “Well, A new kind of philanthropy in America, which might be Doctor, what have we got— a republic or a monarchy?” called “political philanthropy,” will be needed (see the 20 18 Franklin replied, “A republic, if you can keep it.” sidebar “The Power of Political Philanthropy”). In 1961, President Dwight D. Eisenhower, in his farewell address to the nation, warned against the influence of what he called the military industrial complex. “In the councils of government,” he said, “we must guard against Washington, and even state by state, and creating THE POWER OF POLITICAL PHILANTHROPY the infrastructure and financing necessary to support America has a great philanthropic tradition. U.S. independents and moderates. philanthropic giving was $390 billion in 2016, Arguably, political philanthropy offers the best potential addressing a wide range of social challenges such 21 return on investment of any form of philanthropy today. However, as health care, education, and poverty. As David Crane, co-founder of Govern for California, U.S. states (excluding federal funds) collectively makes clear in his work, success in improving spend that much in less than four months, and our government effectiveness, policy choices, and policy federal government spends that much in just over 22 implementation would result in more effective Philanthropy is no substitute for effective five weeks. spending of public resources and have a major impact government. on the actual progress our country makes on improving Given our failing political system and its effect on health care, public education, and anti-poverty efforts, virtually every social and community issue, we need to name a few. a new kind of philanthropy in America. It might be Now is the time for concerned donors to redirect a called “political philanthropy” where donors (to portion of their philanthropic resources to the cause political reform, political innovation, and solutions- of revitalizing our democracy. In the end, political oriented candidates) prioritize the general interest 23 philanthropy may well now have the greatest impact Substantial over any personal or special interest. on advancing our society. investments will be required to achieve the reforms outlined in this report: changing the rules in 45 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

50 APPENDIX A: WARNING SIGNS Despite rising partisanship in Congress since 2009, the Many indicators help show that politics is failing to percentage of Americans who identify themselves as meet the needs and expectations of citizens. While no independents has been substantially greater than the single measure is perfect, and there is debate about percentage who identify themselves with either major how to interpret individual measures, the overall pattern party (see Figure 4 on page 48). of public dissatisfaction with politics suggests deep concerns with the system. Finally, a clear majority of Americans believe that a third party is necessary (see Figure 5 on page 48). Public trust in the federal government is near an all-time low since at least 1958, with a peak after the 9/11 There are many more signs of dissatisfaction, attacks, but then a resumption of a steady decline, with disillusionment, and frustration with the effectiveness of recent stagnation around 20% (see Figure 1). our political system. All point to the large and growing divergence between what our political system delivers Congressional approval ratings, which have averaged and what citizens actually want and need. under 20% in every calendar year since 2010, stand at 20% as of August 2017 (see Figure 2). A large proportion of the general public have an unfavorable opinion of both parties, and this proportion is at a near all-time high (see Figure 3). (Note that the recent modest improvement in favorability is typical in a presidential election year.) FIGURE 1: DECLINING PUBLIC TRUST IN THE FEDERAL GOVERNMENT As of April 2017, about one in five Americans trust the federal government always or most of the time 80 % % 3 7 70 % 1 a ttack 9/1 Post 60 % blic 50 % re of pu 40 % Sha 30 % % 0 2 20 % 2011 d eb t-ceiling cris is 10 % Dec 1968 Dec 2008 Dec 1998 Dec 1988 Dec 1978 Dec 1958 ril 2017 Ap Note: From 1976-2016, data are three-survey moving averages. Surveys took place in 1958, 1964, 1966, 1968, 1970, 1972, and 1974. From 1974 survey frequency increased. Data from 1976-2016 represent multiple surveys a year. Post-9/11 markers indicate two surveys in October 2001; debt-ceiling markers indicate four surveys in 2011 after the U.S. hit the debt ceiling in May. Source: Data from “Public Trust in Government: 1958-2017,” Pew Research Center, May 3, 2017, , accessed August 2017. http://www.people-press.org/2015/11/23/public-trust-in-government-1958-2015/ 46

51 FIGURE 2: LOW CONGRESSIONAL JOB APPROVAL RATINGS IN PAST DECADE As of August 2017, 16% of Americans approve of the way Congress is handling its job 100% 90% Highest: 84% Month following 9/11 attack 80% 70% 60% blic 50% 40% Share o f pu 30% 30% 20% 16% Lowest: 10% Month following Oct 2013 9% government shutdown 0% 2013 2016 1974 1977 1980 1983 1986 1989 1992 1995 2010 2001 2004 2007 1998 Aug. 2017 Note: The first poll in which Gallup tracked congressional approval was April 12-15, 1974. Survey frequency increased over time; since 2001 surveys were conducted often, but not always, on a monthly basis. , accessed August 2017. Source: Data from Gallup, “Gallup and the Public,” http://www.gallup.com/poll/1600/congress-public.aspx FIGURE 3: INCREASING UNFAVORABLE OPINION OF THE MAJOR PARTIES As of January 2017, nearly half of the public holds an unfavorable opinion of the Democratic and Republican parties 65% 65 Repu blica n Party 60 60% 55% 55 50 50% 9 4 % 4 % 9 blic 45% 45 % 5 4 re of pu 40% 40 Sha ic Party ocrat Dem 35 35% 3 % 3 30 30% 25% 25 Jan 1992 2004 2002 2000 1998 1996 2016 2012 1994 2014 2010 2008 2006 2017 Note: The first poll in which Pew tracked party favorability was July 9, 1992. Favorability surveys for Republican Party and Democratic Party conducted via national sample that includes those who identify as Republican/Lean Republican and Democratic/Lean Democrat. , accessed http://www.pewresearch.org/data/ Source: Data from Pew Research Center, “Republican Party Favorability” and “Democratic Party Favorability,” August 2017. 47 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

52 FIGURE 4: RISING PROPORTION OF AMERICANS IDENTIFYING THEMSELVES AS INDEPENDENTS As of 2016, nearly 4 in 10 Americans identify as Independent, relative to roughly 3 in 10 for both Democrats and Republicans. 55% 50% Democ rat ) 45% ans Independent eric 40% 39% 35% n (% of Am o ti 31% a 30% c Republ ican tifi 28% 25% Party Iden 20% Ga Sta rti ng in 1988, llup ed fr om in-per son mov 15% ne pol ling. to te lepho 10% 1939 2002 2009 2016 1995 1981 1974 1967 1960 1953 1946 1988 Note: Data are yearly averages and are based on the general public response. Starting in 1988 (bold lines), Gallup party identification data was collected via telephone polling. Interviews were previously conducted via in-person polling. The mode change limits comparability of data before and after this period. Data unavailable for 1941. Independent data unavailable for 1951-1956. , http://www.people-press.org/interactives/party-id-trend/ Source: Data from Gallup. 1939-1987 Gallup data adapted from Pew Research Center analysis, accessed April 2017. 1988-2016 data from Gallup, received March 2017. FIGURE 5: INCREASING DESIRE FOR A THIRD MAJOR PARTY As of September 2016, nearly 6 in 10 Americans believe that a third major party is needed, relative to 4 in 10 in October 2003. 65% 60% 5 7 % 55% blic 50% re of pu Sha 45% 40% % 0 4 35% Sept 2006 2003 2008 2009 2010 2011 2012 2013 2014 2015 2016 2004 2007 2005 2016 Note: The first poll in which Gallup asked whether a third party is needed was October 10-12, 2003. This was followed by a poll in 2006; two polls in 2007; 2008; 2010; two polls in 2011; and then annual polls starting in 2012. Source: Chart data from Gallup, “Gallup Poll Social Series: Governance, Question 20,” http://www.gallup.com/file/poll/195941/160930ThirdParty.pdf, accessed August 2017. 48

53 APPENDIX B: A WAKEUP CALL: DECLINING U.S. COMPETITIVENESS The latest survey (2016) found overwhelming, bipartisan Growing inequality and a falling sense of economic consensus among HBS alumni on seven of the eight opportunity has emerged as perhaps the central points, and majority support for the eighth (see Figure challenge of our time. The American Dream, a bedrock 2 2 on page 50). of America's uniqueness is under threat. Despite a highly partisan and often misleading political dialog around these areas (we Why is this? The U.S. economy has registered disturbing discuss how this occurs in Part IV), the general public performance since well before the Great Recession. supported four of the eight areas, and support was close Since 2011, the U.S. Competitiveness Project at to 50% on two others. Harvard Business School, co-chaired by Michael E. Porter and Jan W. Rivkin, has studied the root causes Despite wide consensus, however, the stunning reality and conducted annual surveys of business leaders (HBS is that Washington has made zero meaningful progress on alumni) and periodic surveys of the general public. The any of the eight areas in decades. Project leaders made most recent survey on the strengths and weaknesses is multiple trips to Washington to meet with senators and shown in Figure 2 in Part I. As we have noted, both HBS members of Congress to discuss the eight-point plan. alumni and the general public identified our political Legislators from both parties all agreed that the steps system as a major weakness and deteriorating. were necessary, but cautioned that making progress would be challenging. Based on the survey findings in 2011 and discussions with business leaders and policymakers, the Project The lack of progress on these eight policy areas reflects created an “eight-point plan” for Washington that a political system incapable of addressing America’s identified the eight most critical policy areas to restore essential economic challenge. This is why business U.S. competitiveness and economic growth (see Figure leaders and the general public, in our most recent 1 1). These were policies in key areas of weakness, where the federal government led policy (unlike, for example, public education where policy is set by the states). The *Healthcare policy was not included in the eight-point plan because in areas identified were also chosen because there was wide 2012, as in 2017, there was no clear consensus on what needed to be done. consensus among experts on what needed to be done.* FIGURE 1: TOP FEDERAL POLICY PRIORITIES FOR WASHINGTON with lower statu cor por at e tax 1 e Simplify the tory rat es an d no loop hol es cod 2 Move to a ter rit or ial tax syst em like al l othe r lead ing nati on s’ Ease im migration of hig hly skilled in div id uals the 3 Aggre ssi al dre ss dist or tion s an d abu se s in the in ter nation vely ad tr ad in g syst em 4 an log istics, com munic ation s, Improve d ener gy in frastr uc tu re 5 Simplify an d stre am line reg ula tion 6 dget , including re form of entitlements le fed Cre bu er al at e a susta in ab 7 e Resp onsi bl y develop Am eri ca’ s u ncon vention al ener gy ad van tag 8 Source: Michael E. Porter and Jan W. Rivkin. “An eight-point plan to restore American competitiveness.” The Economist: The World in 2013. (Nov 2012). 49 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

54 (2016) survey, identified the U.S. political system as among the nation’s greatest weaknesses.* By a huge margin, business leaders believed that the political system was obstructing U.S. growth and competitiveness versus supporting it. This extreme degree of gridlock is not inevitable in politics, but the result of an American political system misaligned with the public interest. *Michael E. Porter, Jan W. Rivkin, and Mihir A. Desai, with Manjari Raman, “Problems Unsolved and A Nation Divided,” September 2016. The report is available on the Harvard Business School’s U.S. . Competitiveness Project website at http://www.hbs.edu/competitiveness FIGURE 2: SUPPORT FOR PROPOSED FEDERAL POLICIES IN 2016 er s ess Gen . busin U.S lead er al public Libe All Con se rvative se rvative Con ral Libe All ral 47% 42% 57% C or por ate tax refo rm 76% 67% 83% 69% ble fe deral budge 57% 54% 65% S ust aina t 76% 79% 81% 77% 39% 49% 37% tion -sk ill immigra igh H 83% s 77% 69% 84% 47% 44% 57% S treamlin ed regula tion 81% 64% 68% 88% 85% nfr ast ructure in vest ments I 69% 74% 58% 55% 67% I nternatio nal tradin g syst em 53% 70% r ou sib esp on R ly develop 66% 52% 77% 58% 49% 70% ncon advantage ventio nal energy u 62% 81% 34% 29% 42% T e errit or ia l tax cod 73% Note: U.S. business leaders represent HBS alumni. Respondents who identified as moderate/middle of the road are included in the “All” category. Respondents who answered “Don’t Know” or “Refused to Answer” for a federal policy are excluded from analysis. “Liberal”/“Conservative” includes HBS Alumni who self- identified as “very” liberal/conservative or “somewhat” liberal/conservative. General public ideological designation includes those who self-identified as “Extremely liberal/conservative,” “liberal/conservative,” or “slightly liberal/conservative.” Support is defined as respondents “strongly” or “somewhat” agreeing with policy http://www.hbs.edu/competitiveness/ proposals. For full description of respondent political ideologies, questions and response choices, see methodology at . Documents/USComp-SurveyMethodology2016.pdf Source: Harvard Business School’s 2016 Survey on U.S. Competitiveness. 50

55 APPENDIX C: U.S. SOCIAL PERFORMANCE VERSUS OECD COUNTRIES Figure 1 compares U.S. social performance with the The Social Progress Index is the most comprehensive other OECD (Organisation for Economic Co-operation and international benchmarking tool for social and Development) countries, the set of advanced economies environmental performance of countries. It covers a on a global basis. broad set of measures of social progress, all of which are outcomes or results-based. Indicators are drawn from The U.S. ranks near the bottom in many areas. Our well respected organizations and have been consistently performance has also declined substantially in a calculated. number of areas in recent years, especially in tolerance, inclusion, rights and freedom. While the U.S. has traditionally been a leader, and often a pioneer, in many of these areas, current U.S. performance is weak versus other advanced countries. FIGURE 1: SELECTED U.S. SOCIAL PERFORMANCE INDICATORS: RANK VERSUS 35 OECD COUNTRIES 2017 Rank 2017 Rank Personal Safety Education Traffic Deaths 32 Secondary School Enrollment 33 * Homicide Rate 32 Primary School Enrollment 23 * Political Terrorism 27 Environment Tolerance a nd In cl usion Wa stewater Treatment 33 Religi ous Tolerance 27 Rural Access to Improved Wa ter Source 30 Discrimination and Violence 25 Greenhouse Gas Emissions 28 inst Minorities aga Biodiversity and Habitat 28 ** Tolerance for Homosexuals 18 ** Tolerance for Immigr ants 13 Health Maternal Mortality Rate 30 Rights a nd Fre edom Child Mortality Rate 30 ts Political Righ 26 Premature Deaths from 29 Press Freedom 25 Non-Communicable Diseases Freedom Over Life Choices 25 26 Life Expectancy at 60 Community Safety Net 23 ts Private Property Righ 18 Indica tes a substantial decl ine in OECD rank (five or more pl ace s) t year of co mpr ehensive SPI data. since 2014, the firs Notes: *Indicates missing data for some countries, which results in rankings involving fewer than 35 countries. The U.S. Political Terrorism rank of 27, for example, is compared to 34 countries, while Primary School Enrollment rank of 23 is versus 32 countries. **The U.S. has made major strides in tolerance and rights for homosexuals, but this progress has regressed significantly since 2014. The historical U.S. tolerance for immigrants has also declined substantially. Sources: Data from Social Progress Index 2014 and 2017, accessed August 2017. 51 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

56 APPENDIX D: HOW POLITICAL COMPETITION HAS BEEN DISTORTED support for landmark legislation, and conference Many indicators of the nature of political competition committees that are nearly extinct. Parties rarely invite illustrate the growing disconnect between political each other to participate in reconciling differences. competition and the public interest. The party in power increasingly pushes through The number of bills actually passed and signed into law important legislation, with little or no support from the has fallen dramatically, bumping up against an all-time minority party. low since consistent data have been available (see 4 Figure 1).* The share of bills introduced with bipartisan co- sponsorship from 2013–2015 was just 35% for the Highly salient policy matters, such as health care or median Representative and 30% for the median Senator. immigration, remain stalled for years, bills become more Bills introduced by Representatives in safe seats complex, and one Congress punts the decision to the (vulnerable only to a primary challenge) appear to be less next (see Figure 2). Other research suggests that major 5 bipartisan than those in competitive seats. legislation is also declining. The laws actually passed are becoming more and Lastly, the number of moderates in Congress has more partisan (see Figure 3). Traditionally, conference declined dramatically over the last several decades. The committees brought together Republicans and basis for bipartisan compromise has eroded sharply. Democrats from the House and Senate to reconcile differences in the bills passed by both houses. Today, *The numbers are worse than they look here, because many of the laws voting is more partisan on bills, as shown by the rising that do get passed are not substantive—for example, post offices or anniversary commemorations. proportion of “party unity votes,” the declining bipartisan FIGURE 1: FEWER LAWS ENACTED BY CONGRESS Number of laws enacted has trended downward from 772 during the 93rd Congress (1973-74) to 329 during the 114th Congress (2015-16). 900 800 2 7 7 700 gre ss 600 by Con 500 act ed 400 en ws 9 2 3 300 of la 200 Number 100 0 97th 93rd 107th 113th 111th 99th 105th 103rd 101st 109th 95th 108th 110th 112th 114th 94th 96th 98th 100th 102nd 104th 106th 1993-94 2015-16 1973-74 , accessed April 2017. https://www.govtrack.us/congress/bills/statistics Source: GovTrack.us, 52

57 FIGURE 2: INCREASING CONGRESSIONAL GRIDLOCK ON IMPORTANT ISSUES The share of salient issues deadlocked in Congress has risen from about 1 in 4 during the 80th Congress to 3 in 4 during the 113th Congress. 80% 7 4 % 70% ed dlock 60% 50% t is sues dea alien 40% re of s Sha 30% 6 % 2 20% 92nd 94th 96th 98th 100th 102nd 104th 106th 108th 110th 112th 82nd 84th 86th 88th 90th 80th 107th 95th 91st 87th 113th 97th 109th 81st 83rd 85th 89th 93rd 99th 101st 103rd 105th 111th -1948 1947 Session 014 of Con gr ess 2013-2 Note: Salient issues for each session of Congress were identified using the level of New York Times editorial attention. Deadlocked issues are ones on which Congress and the president did not take action during the session. Source: Updated from Sarah Binder, "The Dysfunctional Congress," Annual Review of Political Science (2015) 18:7.1–7.17. FIGURE 3: THE DECLINE IN BIPARTISANSHIP (CONFERENCE COMMITTEE REPORTS) th Congress (1995-96) to eight Number of conference committee reports has trended downward from 67 during the 104 th during 114 Congress (2015-16). 70 6 7 60 ts 50 40 nce Repor 30 nfere of Co 20 10 8 Number 0 109th 105th 106th 111th 107th 110th 112th 113th 114th 108th 104th 2005-06 2015-16 1995-96 Note: A conference committee reconciles differences in legislation that has passed both the House of Representatives and the Senate. The committee produces a conference report, which proposes the legislative language to reconcile the bills from each chamber before a final vote on the legislation. Source: Congress.gov , accessed August 2017. 53 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

58 FIGURE 4: INCREASING PROPORTION OF PARTY UNITY VOTES Party unity votes in the Senate and House have risen from about half of all roll-call votes in 1953 to 69% in the Senate and 75% in the House as of 2015. 80% e in whi ch a major ity of A party unity vot e is on vot ing 7 5 % Democ rats op vot ing Rep ublicans. a major ity of pos ed e Senat 70% % 6 9 60% ll v otes 5 2 % 50% Share o f a Ho us e 40% 30% 20% 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013 1953 1957 1961 Note: Data are for all roll-call votes. Source: Congressional Quarterly Weekly Report, various issues. Most recent update from Party Unity Tables, CQ Almanac, 2015. FIGURE 5: DECLINING BIPARTISAN SUPPORT FOR LANDMARK LEGISLATION Demo ers Memb crat House 388 Vot es lic an House Memb Re pub ers 372 Vot es known Party Hous r/Un e Memb ers Othe 328 Votes 307 Votes 289 Vot es 237 Votes 219 Votes se “y ea” votes in al Hou of f Number Socia l Securit y rdable Care s Ac t ay Ac t Dodd—Fr ank Ac t Medic are Ac t Highw Welfa re Re fo rm Civ il Right Affo (1956) (2010) t (1996) Ac (1965) (1964) Ac t (1935) Ac t (2010) Percent of Possib le Votes fo r Each Party: Democrats 90% 86% 60% 81% 49% 87% 92% Republicans 75% 93% 76% 50% 98% 0% 2% - - - - - - Othe r/Un know n 73% Note: The number of members of each party has fluctuated over time. Percentages indicate the share of House members of the given party who voted for the legislation. The bills above specifically refer to H.R. 7260, H.R. 10660, H.R. 7152, H.R. 6675, H.R. 3734, H.R. 3590, H.R. 4173, respectively. , accessed August 2017. GovTrack.com Source: 54

59 FIGURE 6: LOW SHARE OF BIPARTISAN LEGISLATION INTRODUCED IN CONGRESS, LEGISLATIVE YEARS 2013 TO 2015 Percent of bills introduced by legislators in a given legislative year which had both a Democratic co-sponsor and a Republican co-sponsor. Chairs/ Ranking Serving All Competitive Me mbers ars Me mbers Republicans Se ats De mocrats Sophomores 10+ Ye Safe Seats H ous e of Represent at iv es Median 35% 42% 28% 33% 33% 33% 45% 37% Observations 330 310 301 115 571 69 85 640 S enat e Median 30% 29% 32% 31% 28% N/A N/A 31% Observations N/A 40 145 109 105 N/A 253 139 Note: Observations only include Members of Congress who sponsored more than 10 bills in a legislative year. Sophomores are Members of Congress whose first term (in the same chamber) was the preceding Congress (e.g., a House sophomore in the 113th Congress would have served his or her first term in the House in the 112th Congress). A ranking member is the senior-most member of a committee not in the majority party. Each observation represents the percentage of bipartisan legislation introduced by a given Congress member. Source: , Report Cards for 2013-2015, accessed November 2016; author calculations. Govtrack.us FIGURE 7: DECLINING PROPORTION OF MODERATES IN THE HOUSE OF REPRESENTATIVES As of the 114th Congress (starting 2015), 11% of Democrats and 1% of Republicans in the House are moderates. In 1951, roughly 60% of both Republicans and Democrats in the House were moderates. 80% 70% 62% es 60% 58% erat blica ns Repu od 50% are m 40% s Democrat 30% ember s who 20% re of m 11% 10% Sha 1% 0% 1955 1959 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015 1951 al s ession ngre ssion f co Fir st year o Note: “Moderates” within each party are defined as -0.25 to +0.25 on the first DW-NOMINATE dimension, which represents the ideological [liberal (-1) to conservative (+1)] spectrum. voteview.com , accessed August 2017. Source: Data from Professor Keith Poole, University of Georgia, 55 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

60 FIGURE 8: DECLINING PROPORTION OF MODERATES IN THE SENATE As of the 114th Congress (starting 2015), 14% of Democrats and 4% of Republicans in the Senate are moderates. In 1951, roughly 50% of Republicans and 80% of Democrats were moderates. 90% 80% 80% 70% 60% 50% 47% Republicans 40% 30% Democrats 20% 14% 10% Share of members who are moderates 4% 0% 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015 1951 1955 1959 First year of congressional session Note: “Moderates” within each party are defined as -0.25 to +0.25 on the first DW-NOMINATE dimension, which represents the ideological [liberal (-1) to conservative (+1)] spectrum. , accessed August 2017. voteview.com Source: Data from Professor Keith Poole, University of Georgia, 56

61 APPENDIX E: THE SIZE OF THE POLITICAL INDUSTRIAL COMPLEX 3. Definition of Spending Categories, Sources and I. Total Size of Political Industrial Methodology Complex A. Campaign Finance (Federal Only) 1. O ver view Spending in the 2016 election reflects the cumulative To estimate the size of the politics industry at the disbursements reported to the Federal Election federal level, we identified four categories of spending Commission (FEC) from the following entities: connected to the political-industrial complex, where data was available: election spending (including paid andidate co mmittees C political advertising); lobbying activity; partisan leaning, pending In cl uded: ypes of S Authorized co mmittee T public-policy-focused think tank revenue; and television nditures for pr xpe e ndidates esidential, Senate and H ouse ca advertising revenue from political coverage (excluding rties cr oss a ll pa a political advertising). We estimated total spending/ Federal Elect ion Commission, : ource S ov/ data/ ttps :/ /beta.f ec.g h revenue from each of these categories and summed them to arrive at our total estimate, ≈$16 billion in direct P ACs (incl uding Supe r PACs) spending over the recent two-year election cycle at the T ypes o f S pending In cl uded: Coordinated and i ndepe ndent federal level. e xpe nditures (not i ncl uding e lect ioneering co mmunica tions mmunica tions co o r co sts) Below, we describe the periods during which we collected S ource : Federal Elect ion Commission, spending/revenue figures, the definition we employ of ov/ data/ h ttps :/ /beta.f ec.g each category, and the procedure we use to determine mmittees P arty co the size of each category. ypes o f S T ndent pending In cl uded: Coordinated and i ndepe e xpe nditures (not i ncl uding e lect ioneering co mmunica tions 2. Time Frame o r co mmunica tions co sts) S ource : Federal Elect ion Commission, Our estimates for a single election cycle, the 2015–2016 h ttps :/ /beta.f ec.g ov/ data/ election cycle or the most recent two years of data available: S oci al w elfare organizations; Unions; Trade associ ations; Other rations, indivi dual, pe ( opl e, other groups , etc.) e.g ., co rpo rties and S upe e xcl uding pa r PACs C at eg ory Time Frame ndent expe nditures, T ypes o f S pending In cl uded: In depe ommunica tion co sts, elect ioneering co mmunica tions c 2015–2016 E le ction sp endin g Center for R espo : ource S nsive P olitics a nalysis of FEC d ata, L activ it y ob 2015–2016 bying h p ttps :/ /www.o pe nsecr ets.o rg/outsidespending/fes_s umm.ph st recent fisc Tw o mo al ye ars T tank revenue hink availa ble Notes: on-polit ic al advertising fr om N 2015–2016 ic al cov erage olit p • Intra-system money movements: Only disbursements from the “final spender” are accounted for within committee spending, per FEC Beta’s methodology (which can be found here: https://beta.fec.gov/ data/#spending). In other words, intra-system money movements (contribution refunds, loan repayments, and transfers, etc.) are netted out. Spending from the last group described above report outside spending via Form 5, which ensures no double counting with spending from candidate committees, PACs, and party committees (which report spending via Form 3, Form 3P and Form 3X). • Not included in our election spending estimate are: any disbursements that did not need to be reported to the FEC, which include spending on “issue 57 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

62 ads” by the 501(c)s listed above;* and campaign spectrum-2012/ committees and PACs with financial activity below ) http://think-tanks.insidegov.com/ c. InsideGov.com ( FEC reporting thresholds which are not required to report disbursements to the FEC. Where multiple political orientations were given for a single think tank, priority was given to source (a) followed • Activity from federal committees of state and local by source (b). parties are included in our estimate. Third, we excluded think tanks that had little or no focus B. Lobbying on U.S. policy specifically. This analysis was conducted Lobbying activity includes lobbying-related income via study of each think tank’s mission/description from from registered lobbying firms, and lobbying-related the organization’s website. expenditures from organizations employing in-house The final list included 24 think tanks: Center for lobbyists that are reported to the Secretary of the American Progress (left), Economic Policy Institute (left), Senate's Office of Public Records. Lobbying firms are not Institute for Policy Studies (left), Demos (left), Center required to report income from clients spending less than for Economic and Policy Research (left), Institute for $3,000 in a quarter, while organizations with in-house Women's Policy Research (left), Brookings Institution lobbyists are not required to report expenditures totaling (left-leaning), Urban Institute (left-leaning), Center on less than $12,500 in any quarter (increased to $13,000 Budget and Policy Priorities (left-leaning), New America starting January 1, 2017). Lobbying activity will also not Foundation (left-leaning), Center for Strategic and capture what is known as “shadow lobbying,” or activity International Studies (right-leaning), Cato Institute (right), that is similar to lobbying but does not require disclosure, Heritage Foundation (right), American Enterprise Institute such as strategic policy consulting. Importantly, the for Public Policy Research (right), Hoover Institution Center for Responsive Politics avoids double counting (right), Hudson Institute (right), Foreign Policy Research from amended reports and screens for errors in individual Institute (right), Manhattan Institute for Policy Research reports. For a full methodology on how lobbying activity (right), Mercatus Center (right), Reason Foundation is calculated, see https://www.opensecrets.org/lobby/ (right), Pacific Research Institute (right), Competitive methodology.php . Enterprise Institute (right), Mackinac Center (right), Tax Foundation (right). C. Think Tank Revenue Think tank revenue was gathered for public policy Finally, we compiled revenues from the two most recent focused think tanks (i.e., U.S. policy on domestic and annual revenue figures available via Guidestar or annual foreign matters) with a partisan orientation. We used the reports. following procedure. D. Non-political advertising from political coverage First, we gathered a comprehensive list of influential *We thank Kantar Media for providing advertising revenue think tanks. The base list of think tanks includes all data. those included in James McGann’s “Top Think Tanks in the United States” in his 2015 Global Go-To Think Tank Total advertising revenue was estimated for political Index Report, published February 9, 2016. coverage aired by television shows in 2015 and 2016, with an emphasis on politics. Second, we determined political orientation of think tanks, and excluded any think tanks that did not have We used the following procedure: a partisan leaning. To determine partisan leanings, we First, we determined a list of political television shows consulted three sources, each of which label think tanks based on author analysis of all shows aired on ABC, CBS, with a political orientation using around five categories: CNN, Fox/Fox News, MSNBC, and NBC. left; left-leaning; non-partisan/centrist; right-leaning; and right. The three sources were: Second, we categorized TV shows based on level of political coverage. We divided them into three groups: a. James McGann’s categorizations in Table 3.5 of Think Tanks and Policy Advice in the US: Academics, These • Debate/convention/political event coverage: published in 2007 Advisors and Advocates, shows focused exclusively on politics. b. A 2012 study by FAIR (for details of method *Center for Responsive Politics, “Total cost of 2016 election could reach for determining political orientation, see http:// $6.6 billion, CRP predicts,” October 25, 2016, https://www.opensecrets. org/news/2016/10/total-cost-of-2016-election-could-reach-6-6-billion-crp- fair.org/extra/fair%E2%80%88study-think-tank- , accessed March 2017. predicts/ 58

63 Note: Advertising dollars from debate/convention/ Fourth, to calculate the political advertising aired on political event coverage aired during regular these shows, we employed the following procedure. programming for the shows listed below were deleted Determine proportion of total political advertisements A. to avoid double counting. aired on shows for which we collected revenue. Using the Political TV Ad Archive’s full dataset for 2016 These were shows with the • Politically-focused shows: ), we then https://politicaladarchive.org/data elections ( majority of coverage focusing on elections as well as counted the total number of political advertisements politics more generally. aired on our shows and divided it by the total number The list of shows classified as “politically-focused” of political advertisements in the database. are: 11th Hour With Brian Williams; AM Joy; Andrea Mitchell Reports; Face The Nation; The Five; Fox B. Apply this proportion to estimated total political News Sunday: Chris Wallace; Fox News Sunday; We applied this proportion of total advertising costs. Hannity; Hardball Weekend; Hardball With Chris advertisements to the total cost of ads aired during Matthews; Inside Politics; Kelly File; Last Word the 2015-2016 election cycle for presidential ($854 with Lawrence O’Donnell; Meet The Press; Morning million), House ($335 million), and Senate ($655 Joe; Morning Joe At Night; MSNBC Live with Steve million) races on broadcast television and national Kornacki; MTP Daily; O'Reilly Factor; Politicsnation; cable. This estimate was extracted from Table 1 in Rachel Maddow Show; Situation Room; Smerconish; Erika Franklin Fowler, Travis N. Ridout, and Michael M. Special Report with Bret Baier; State Of The Union; Franz, “Political Advertising in 2016: The Presidential This Week with George Stephanopolous; With All Election as Outlier?,” The Forum 14, no. 4, 2016. This Due Respect; Wolf. estimate used Kantar Media/CMAG data and is based on analysis by the Wesleyan Media Project. • Mixed coverage: These heavily covered politics and the election, but had segments covering other topics E. Summing spending (sports, weather, and/or pop culture, and so on). We summed total spending across each category to arrive The list of shows included as “mixed coverage” at our ≈$16 billion figure. are: All In With Chris Hayes; America's News HQ; Anderson Cooper 360; At This Hour With Berman; There are other categories of the political industrial CNN Tonight; CNN Tonight With Don Lemon; Fox complex’s spending for which it was not possible to And Friends; Fox And Friends First; Fox And Friends construct reasonable estimates, such as radio shows and Saturday; Fox And Friends Sunday; Lead With Jake podcasts covering politics, political websites, and social Tapper; MSNBC Live; MSNBC Live With Andrea media. Mitchell; MSNBC Live With Craig Melvin; MSNBC Live With Hallie Jackson; MSNBC Live With Jose Diaz; MSNBC Live With Kate Snow; MSNBC Live With Stephanie Ruhle; MSNBC Live With Tamron Hall; MSNBC Live With Thomas Roberts; New Day- CNN; Tucker Carlson Tonight. Third, we applied a conservative adjustment factor to avoid including advertisements aired during non-political segments. The adjustment factors, by category, are displayed in the table below: C ory Adjust men t Fact or at eg D ebate/c onventio n/p olit ic al event No dow nward adju st me nt P olit ic ally -fo cuse d 80% of advertising revenue 50% of advertising revenue M ix ed cov erage 59 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

64 4. Lobbying and Troubled Asset Relief Program II. The Return on Investment from Lobbying Support Direct spending in the political industrial complex does A. Benjamin M. Blau, Tyler J. Brough, Diana W. Thomas, not capture to the full extent the economic influence “Corporate lobbying, political connections, and the that politics has on other industries. Researchers Journal of Banking & Finance bailout of banks,” 3 7, have identified several types of “returns” associated 2013. with lobbying activity, such as federal tax savings, the enactment of more favorable regulations, delayed fraud B. Ran Duchin, Denis Sosyura, “The politics of detection for corporations, and the allotment of increased government investment,” Journal of Financial federal resources. We group such findings into six Economics 106, 2012. broad categories in the list below. While the list is not exhaustive, these studies collectively provide compelling 5. Lobbying and the Public Sector (Education evidence that lobbying is a financially effective Institutions, Cities) mechanism to influence public policy. A. John M. de Figueiredo and Brian S. Silverman, 1. Lobbying and Tax Savings from the American Jobs The “Academic Earmarks and Returns to Lobbying,” Creation Act , 49, no. 2, 2006. Journal of Law & Economics A. Raquel Alexander, Stephen W. Mazza, Susan B. Rebecca Goldstein and Hye Young You, “Cities as Scholz, “Measuring Rates of Return on Lobbying Lobbyists,” American Journal of Political Science , April Expenditures: An Empirical Case Study of Tax Breaks 2 017. for Multinational Corporations,” Journal of Law and Politics XXV, no. 401, 2009. 6. Lobbying and the Energy Sector B. Hui Chen, Katherine Gunny, and Karthik Ramanna, A. Karam Kang, “Policy Influence and Private Returns “Return on Political Investment in the American Jobs from Lobbying in the Energy Sector,” Review of Creation Act of 2004,” Harvard Business School Economic Studies 83, 2016. Working Paper, No. 15-050, December 2014. 2. Lobbying and Trade Policy A. Seung-Hyun Lee and Yoon-Suk Baik, “Corporate Lobbying in Antidumping Cases: Looking into the Continued Dumping and Subsidy Offset Act,” Journal 96, no. 3, October 2010. of Business Ethics B. Patricia Tovar, “Lobbying costs and trade policy,” Journal of International Economics 8 3, 2011. C. Karam Kang, “Policy Influence and Private Returns from Lobbying in the Energy Sector,” Review of Economic Studies 83, 2016. 3. Lobbying and Legal Leeway (Fraud Detection, SEC Enforcement) A. Frank Yu and Xiaoyun Yu, “Corporate Lobbying The Journal of Financial and and Fraud Detection,” Quantitative Analysis 46, no. 6, 2011. B. Maria M. Correia, “Political connections and SEC Journal of Accounting and Economics enforcement,” 5 7, 2 014 . 60

65 b. A disbursement description by the filer that includes III. Number of Jobs Involved In the “payroll” or “consult” (or both). That is, if the filer Political Industrial Complex does not include “payroll” or “consult” in the purpose of disbursement, then the disbursement was not To gauge the direct economic influence of the political counted in this analysis. Keywords such as “salary” industrial complex, we investigated the number of and “wage” would significantly add to our results. people employed at above minimum wage, in its key components: federal campaigns; federal government c. Entity type categorized as “Individual.” lobbying; partisan or partisan-leaning think tanks; and political media. Clean the data. FEC forms for reporting Step 2: disbursement data have a number of complexities for this Methodology analysis. In particular: The data were collected from a variety of sources. The a. Disbursements are reported periodically, according to sources used and methodology employed for each the filer’s reporting schedule, and there is no unique category are discussed below. identifier for the individual receiving the disbursement. As a result, with each filing of a disbursement, the name 1. Jobs Related to Lobbying the Federal Government of a single individual can be reported in multiple ways (n = 11,166) (e.g., the inclusion or exclusion of a middle initial or middle name; a period or comma after a middle initial or The number of unique registered lobbyists was collected name; abbreviated first names; a suffix after a last name; from the Center for Responsive Politics’ lobbying receipts from honorifics), which makes identifying total database. individuals complex. unique Source: Center for Responsive Politics, data for most To clean these data, we employed the following general recent year downloaded May 16, 2017, https://www. assumption: opensecrets.org/lobby/ , accessed June 2017. We sum expenditures from disbursement form recipients 2. Jobs Related to Leading Partisan and Partisan-Leaning with identical first and last names, unless the last name is Think Tanks (n = 4,171) commonplace (e.g., Smith) or the middle initial or names differ. Definition: Think tank jobs were gathered for public- policy-focused think tanks (i.e., U.S. policy on domestic Important notes: and foreign matters) with a partisan orientation. • If two recipients have the same first and last names, See procedure from Section I above. For this list of think but one has a middle initial identified, while the other tanks, we gathered the most recent annual employment does not, then disbursement recipients are assumed to figure available (2015/2014) via Form 990s. be the same individual. 3. Jobs Related to Federal Campaigns (n = 3,840) • Given a last name that is commonplace (e.g., Smith), if the first and last name matches across multiple A. Individuals on payroll and independent consultants disbursement forms, and the recipient address is from the same ZIP code, then we assume only one The number of jobs via payroll and independent consultants reflect an estimated number of unique individuals who individual. earned at least $15,080 in payroll or consulting receipts in 2016. We caution interpretation here: our analysis is rough In addition, we manually searched names to identify due to narrow restrictions we place on keyword searches potential spelling errors in names. Spelling errors come (see below). Our estimate is likely a substantial under- in two forms: improper recognition of letters from the estimation. physical form in FEC’s online database; or misspelling by the filer. These cases were dealt with on a case-by- We used the following procedure: case basis, and reference to the recipient ZIP code was generally utilized. St ep 1: Download pre-processed disbursement data from Federal Election Commission (data has been categorized Step 3: Count unique names with total disbursement and coded by the FEC) with: of at least $15,080. This cut-off represents the annual earnings for a full-time minimum-wage worker at the a. A “transaction time period” of 2016; current federal minimum wage of $7.25. 61 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

66 B. Organizations with major consulting contracts (n = 1,036) Download pre-processed disbursement data from Step 1: Federal Election Commission (data has been categorized and coded by the FEC) with: a. A “transaction time period” of 2016 b. A disbursement description by the filer that includes “consult.” That is, if the filer does not include “consult” in the purpose of disbursement, then the disbursement was not counted in this analysis. c. Entity type categorized as “Organization” or left blank (since the overwhelming majority of blank entity types are organizations). Step 2: Clean the data. FEC forms for reporting disbursement data have a number of complexities for this analysis. In particular: a. Disbursements are reported periodically, according to the filer’s reporting schedule, and there is no unique identifier for the organization receiving the disbursement. As a result, with each filing of a disbursement, the name of organization can be reported in multiple ways (e.g., abbreviations, the inclusion of organizational structure, different spacing), which makes identifying total receipts from unique organizations complex. To clean these data, we evaluated each potential match on a case-by-case basis. Generally, we considered organizations that have nearly identical names (see variations above) and are from the same state to be identical. b. For any recipient with an entity type not identified by the filer, we deleted disbursements to those which appear to be to an individual. In addition, we deleted all disbursements to political action committees (PACs). Step 3: Count unique names with total disbursements of at least $50,000. 62

67 ENDNOTES Preface 1 This quotation is often attributed to Thomas Jefferson, although it has never been found in his writings. See the Thomas Jefferson Foundation, https://www.monticello.org/site/research-and-collections/government-majority-who-participate-spurious- , accessed August 2017. quotation#footnote1_g10ty41 Part I 1 For example, according to the Center for Responsive Politics, the total cost of elections during presidential cycles increased 60% from the 1999–2000 cycle to the 2015–2016 cycle, after adjusting for inflation. As noted by the Center for Responsive Politics, 2016 total cost projections include spending by PACs on overhead expenses, which are attributed to Congressional races. The total cost accounts for “all money spent by presidential candidates, Senate and House candidates, political parties, and independent interest groups trying to influence federal elections.” Source: Center for Responsive Politics, “Cost of Election,” https://www. opensecrets.org/overview/cost.php , accessed February 2017. 2 According to a January 2016 Pew Research Center survey, 56% of U.S. adults see budget deficit reduction as a “top priority.” For details, see Pew Research Center, “Budget Deficit Slips as Public Priority,” January 22, 2016, http://www.people-press. , accessed April 2017. org/2016/01/22/budget-deficit-slips-as-public-priority/ 3 https://www. National Commission on Fiscal Responsibility and Reform, “The Moment of Truth,” December 2010, fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/TheMomentofTruth12_1_2010.pdf , accessed March 2017. Emphasis added. 4 Author analysis of the widely used set of data compiled by the Brookings Institution, “Vital Statistics on Congress,” January 9, https://www.brookings.edu/multi-chapter-report/vital-statistics-on-congress/ , accessed April 2017. 2017, Table 2-7 and 2-8, 5 http://www.oecd.org/pisa/data/ , accessed June 2017. Data from OECD, Programme for International Student Assessment (PISA), Part II 1 Work by Mickey Edwards has helped to highlight this observation. See The Parties Versus the People: How to Turn Republicans and Democrats into Americans (New Haven: Yale University Press, 2012). 2 The Works of John Adams (Boston: Little, Brown and Adams to Jonathan Jackson, letter, Amsterdam, October 2, 1780, in Company, 1854), 9:511. 3 Use of the term “political industrial complex” in U.S. contexts appears in several prior works. See, for example, Gerald Sussman, Global Electioneering: Campaign Consulting, Communications, and Corporate Financing (Lanham, MD: Rowman & Littlefield Publishers, 2005); Gerald Sussman and Lawrence Galizio, “The Global Reproduction of American Politics,” Political Communication 20, no. 3 (July 2003): 309–328; and “Political-Industrial Complex,” , March 28, 1990, p. Wall Street Journal A14. 4 See, for example, Office of Commissioner Ann M. Ravel, “Dysfunction and Deadlock: The Enforcement Crisis at the Federal Election Commission Reveals the Unlikelihood of Draining the Swamp,” Federal Election Commission, February 2017, https:// www.fec.gov/resources/about-fec/commissioners/ravel/statements/ravelreport_feb2017.pdf , accessed August 2017. 5 https:// These estimates are based on data from various sources. Federal election spending from the Federal Election Commission, beta.fec.gov/data/, accessed March 2017, as well as select data from Center for Responsive Politics, http://www.opensecrets.org/ , accessed March 2017. Lobbying data from Center for Responsive Politics, based on data from outsidespending/fes_summ.php Senate Office of Public Records, https://www.opensecrets.org/lobby/ , accessed March 2017. List of think tanks gathered from James G. McGann, “2015 Global Go To Think Tank Index Report,” TTCSP Global Go To Think Tank Index Reports, February 9, 2016, Table 7. To gather political orientation of think tanks, we referenced multiple sources: James G. McCann, “Think Tanks and Policy Advice in the United States” (Abingdon, UK: Routledge, 2007); FAIR Think Tank Spectrum Study 2012; and InsideGov. com . Revenue figures of think tanks from Guidestar/organization websites. Advertising revenue to the media from political shows based on author analysis of advertising revenue data provided by Kantar Media. To exclude political advertising from our list of political shows (to avoid double counting), we used data from Political TV Ad Archive, , accessed https://politicaladarchive.org/data/ March 2017 and Erika Franklin Fowler, Travis N. Ridout, and Michael M. Franz, “Political Advertising in 2016: The Presidential Election as Outlier?” A Journal of Applied Research in Contemporary Politics, February 22, 2017. 6 See, e.g., Tim LaPira, “How Much Lobbying is There in Washington? It’s Double What You Think,” Sunlight Foundation, November 25, 2013, and Emma Baccellieri and Soo Rin Kim, “Boehner joins the not-quite-a-lobbyist ranks,” Center for Responsive Politics, September 21, 2016. 7 Registered lobbyists alone account for 11,170 jobs in 2016. See Center for Responsive Politics, Lobbying Database, https://www. opensecrets.org/lobby/ , accessed August 2017. 8 Total jobs reflects estimated number of registered lobbyists, employees of partisan / partisan-leaning think tanks, individuals earning at least $15,080 (annual earnings for a full-time federal minimum wage worker). “Major” consulting contracts defined as cumulative earnings of at least $50,000 in 2016. Lobbying jobs from Center for Responsive Politics, https://www.opensecrets. org/lobby/ , accessed June 2017. Think tank jobs from Guidestar/annual reports. Campaign payrolls and consulting contracts from author analysis of Federal Election Commission data, https://www.fec.gov/data/disbursements , accessed July 2017. 9 Estimate represents advertising revenue from political coverage on major television shows primarily covering politics. Based on author analysis of advertising revenue data provided by Kantar Media. 10 Industry size determined by value added as a percentage of gross domestic product for “Government” (the combined value added 63 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

68 from (a) federal and (b) state and local government) in 2016, versus non-aggregated Bureau of Economic Analysis industries. Data from Bureau of Economic Analysis, GDP-by-Industry data, accessed August 2017; author analysis. Federal outlays data (FY 2016) https:// from Congressional Budget Office, “The Budget and Economic Outlook: 2017 to 2027,” Budget Data, January 24, 2017, www.cbo.gov/publication/52370 , accessed March 2017. 11 This illustrative example is provided by Mickey Edwards in “How to Turn Democrats and Republicans into Americans,” in Scott A. Frisch and Sean Q. Kelly, eds., (New York: Politics to the Extreme: American Political Institutions in the Twenty-First Century Palgrave Macmillan, 2013), pp. 219–226. 12 This number is down slightly from 46 after Washington (2004) and California (2011) adopted nonpartisan primaries. For details on the multiple forms of sore loser laws and when states adopted them, see Barry C. Burden, Bradley M. Jones, and Michael 39, no. 3 (August 2014): 299–325. S. Kang, “Sore Loser Laws and Congressional Polarization,” Legislative Studies Quarterly Contrary to Burden et al. (2014), we do not categorize a nonpartisan primary as a form of sore loser law. 13 , July 16, 2006, http://www.nytimes.com/2006/07/16/opinion/ See Troy K. Schneider, “Can’t Win for Losing,” New York Times nyregionopinions/16CTschneider.html?mcubz=0 , accessed August 2017. 14 According to Ballotpedia, 43 states participate in redistricting following the completion of each census, while the remaining states only have one congressional district. “As of June 2017, congressional redistricting was the province of the state legislatures in 37 [of the 43] states. In four states, independent commissions were responsible for congressional redistricting. In two states, the https://ballotpedia.org/State-by-state_ task fell to politician commissions.” Ballotpedia, “State-by-state redistricting procedures,” , accessed August 2017. redistricting_procedures 15 This observation was made by President Obama in his remarks to the Illinois General Assembly on February 10, 2016, in https://obamawhitehouse.archives.gov/the-press-office/2016/02/10/remarks-president-address-illinois- Springfield, Illinois. See general-assembly . 16 According to one recent study of the geographic compactness of congressional districts since the “original gerrymander” (a Massachusetts State Senate district in 1812), “20% of all districts ever drawn ... are less compact than the original gerrymander.” Furthermore, the authors found that “the geographic integrity of congressional districts has worsened in the United States since the 1960s.” See Stephen Ansolabehere and Maxwell Palmer, “A Two Hundred-Year Statistical History of the Ohio State Law Journal Gerrymander,” 77, no. 4 (2016): 741–762. 17 A trial court first ruled that this map showed an unconstitutional racial gerrymander on October 7, 2014. This decision was later vacated by the U.S. Supreme Court, but the trial court reaffirmed its earlier decision on June 5, 2015. A new court-drawn congressional map was imposed on January 7, 2016. On May 23, 2016, the Supreme Court dismissed an appeal by three Republican representatives challenging the court ruling. The number of districts in Virginia increased from 10 in the 83rd Congress to 11 in the 114th Congress. Virginia’s apportionment population was 8,037,736 in 2010 (2.6% of U.S. apportionment population total) and 3,318,680 in 1950 (2.2% of total). Apportionment population from Kristin D. Burnett, “Congressional Apportionment,” U.S. Census Bureau, November 2011, https://www.census.gov/content/dam/Census/library/publications/2011/ dec/c2010br-08.pdf , accessed March 2017; and Michel L. Balinski and H. Peyton Young, Fair Representation (Washington: Brookings Institution, 2001). For legal history through June 2015, see Dawn Curry Page, et al. v. Virginia State Board of Elections, no. 3:13cv678, Mem. Op. & J., June 5, 2015. 18 Nicholas O. Stephanopoulos and Eric M. McGhee, “Partisan Gerrymandering and the Efficiency Gap,” University of Chicago Law no. 82 (Spring 2015): 831-900. Review, 19 We recognize that a count of the numbers of laws passed gives an incomplete picture of Congress’s legislative productivity. As noted by political scientists J. Tobin Grant and Nathan J. Kelly, “Scholars interested in legislative productivity have rightly noted that simply counting laws without accounting for their content is likely to produce measurement error when attempting to measure policy production. Not all laws are created equal in their contribution to policy change.” Still, the authors state that because “lawmaking in general is an aspect of policy production,” the number of laws enacted “measures one conceptual aspect of legislative productivity.” See J. Tobin Grant and Nathan J. Kelly, “Legislative Productivity of the U.S. Congress, 1789–2004,” 16, no. 3 (Summer 2008): 303–323. Political Analysis 20 Mike McCabe, Blue Jeans in High Places: The Coming Makeover of American Politics (Mineral Point, WI: Little Creek Press, 2014), p. 161. PART IV 1 For ideology/partisanship of primary voters as compared to average voters, see, e.g., Pew Research Center, “Political Polarization in the American Public,” June 10, 2014, http://assets.pewresearch.org/wp-content/uploads/sites/5/2014/06/6-12-2014-Political- Polarization-Release.pdf , accessed August 2017; Seth J. Hill, “Institution of Nomination and the Policy Ideology of Primary Quarterly Journal of Political Science Electorates,” 10, no. 4 (2015): 461–487, as well as Gary C. Jacobson, “The Electoral Origins of Polarized Politics: Evidence From the 2010 Cooperative Congressional Election Study,” American Behavioral Scientist 56, no. 12 (December 2012): 1612–1630. For engagement with politics, see John Sides, Chris Tausanovitch, Lynn Vavreck, and http://cwarshaw.scripts.mit. Christopher Warshaw, “On the Representativeness of Primary Electorates,” Working Paper, June 2016, edu/papers/primaries_160617.pdf , accessed August 2017. We note, however, that Sides et al. find only slight differences between the ideologies of primary and average voters. 2 Author analysis of data from Cook Political Report, “2016 House Election Results by Race Rating,” November 8, 2016, http:// cookpolitical.com/house/charts/race-ratings/10168 , accessed March 2017; Inside Elections with Nathan L. Gonzales, “House Ratings,” November 3, 2016, https://insideelections.com/ratings/house/2016-house-ratings-november-3-2016 , accessed March 2017; and Daily Kos, “Election Outlook: 2016 Race Ratings,” http://www.dailykos.com/pages/election-outlook/2016-race- ratings#house , accessed March 2017. Estimates for Senate races were not consistent, and the average of the three estimates was used. 3 The numerator is total votes counted (different from total ballots cast in that it excludes rejected ballots) for all states that have a 64

69 statewide primary (excludes caucuses and conventions). The denominator is the voting-eligible population (excludes persons under age 18, non-citizens, and felons). Data from United States Elections Project, “2016 and 2008 Presidential Nomination Contest http://www.electproject.org/2016P and , accessed March 2017. Turnout Rates,” http://www.electproject.org/2008p 4 Turnout for 2010 is as of September 1, 2010. Data for 2014 were not available. The numerator is total ballots cast (versus counted) for U.S. Senate for all states that have a statewide primary (excludes caucuses and conventions). The denominator is the population of age-eligible U.S. citizens (does not exclude felons). Data from Center for the Study of the American Electorate, http://www.american.edu/media/upload/2010_PrimaryTurnoutData_webversion_.pdf , accessed March 2017. 5 http://www.annenbergclassroom.org/term/closed-primary Annenberg Classroom, “Closed Primary,” , accessed March 2017; National Conference of State Legislatures, “State Primary Election Types,” July 21, 2016, http://www.ncsl.org/research/elections-and- , accessed March 2017; D’Angelo Gore, “Caucus vs. Primary,” FactCheck.org, April 8, 2008, campaigns/primary-types.aspx http://www.factcheck.org/2008/04/caucus-vs-primary/ , accessed March 2017. For data on primary type by state, see FairVote, http://www.fairvote.org/primaries#presidential_primary_or_caucus_type_by_state , “Presidential Primary or Caucus Type by State,” accessed March 2017. 6 Author analysis based on data from Center for Responsive Politics, “Health,” https://www.opensecrets.org/industries/indus. php?cycle=2016&ind=H , accessed March 2017. 7 According to a recent study, nearly 60% of senators and 40% of House members who left their posts in 2012 went on to register as lobbyists (up from about 5% in 1976, the first year for which data were available). See Jeffrey Lazarus, Amy McKay, and Lindsey Herbel, “Who walks through the revolving door? Examining the lobbying activity of former members of Congress,” Interest 5, no. 1 (March 2016): 85. Groups & Advocacy 8 For an overview of rules related to these groups, see Center for Responsive Politics, “Dark Money Basics,” https://www. opensecrets.org/dark-money/basics , accessed August 2017. 9 For ideology/partisanship of primary voters as compared to average voters, see, e.g., Pew Research Center, “Political Polarization in the American Public,” June 10, 2014, http://assets.pewresearch.org/wp-content/uploads/sites/5/2014/06/6-12-2014-Political- Polarization-Release.pdf , accessed August 2017; Seth J. Hill, “Institution of Nomination and the Policy Ideology of Primary Electorates,” Quarterly Journal of Political Science 10, no. 4 (2015): 461–487, as well as Gary C. Jacobson, “The Electoral Origins of Polarized Politics: Evidence From the 2010 Cooperative Congressional Election Study,” American Behavioral Scientist 56, no. 12 (December 2012): 1612–1630. For engagement with politics, see John Sides, Chris Tausanovitch, Lynn Vavreck, and Christopher Warshaw, “On the Representativeness of Primary Electorates,” Working Paper, June 2016, http://cwarshaw.scripts.mit. edu/papers/primaries_160617.pdf , accessed August 2017. We note, however, that Sides et al. find only slight differences between the ideologies of primary and average voters. 10 Midterm-year general election turnout (based on voting-eligible population) figures since 1980 have been around 40%. Presidential-year general election turnout figures have more variance, usually between 50% and 60%. Data from United States http://www.electproject.org/national-1789- Elections Project, “National General Election VEP Turnout Rates, 1789–Present,” present , accessed March 2017. 11 For ideological comparisons of voters and non-voters, see, e.g., Jan E. Leighley and Jonathan Nagler, “ On the Representativeness ,” Chapter 6 in Who Votes Now? (Princeton, NJ: Princeton University Press, 2013); Gary C. Jacobson, “The Electoral of Voters American Behavioral Scientist Origins of Polarized Politics: Evidence From the 2010 Cooperative Congressional Election Study,” 56, no. 12 (December 2012): 1612–1630. For partisanship comparisons, see, e.g., Stephen Ansolabehere and Brian Schaffner, “Beyond the Core and Periphery: A New Look at Voter Participation Across Elections,” Working Paper, November 30, 2015, https://cces.gov.harvard.edu/files/cces/files/ansolabehere_schaffner_core_periphery.pdf , accessed August 2017. 12 This figure represents 100% less the 30% of eligible Americans who voted in presidential primaries (excluding caucuses and conventions). We further note that, according to a sample of validated turnout data in the 2010 and 2012 elections, roughly 45% of adults did not vote in either election. See Stephen Ansolabehere and Brian Schaffner, “Beyond the Core and Periphery: A New Look at Voter Participation Across Elections,” Working Paper, November 30, 2015, https://cces.gov.harvard.edu/files/cces/files/ ansolabehere_schaffner_core_periphery.pdf , accessed August 2017, Table 2. 13 Martin Gilens and Benjamin I. Page, “Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens,” 12, no. 3 (September 2014): 564–581. Perspectives on Politics 14 Nickerson and Rogers (2014) explain how campaign data analytics can yield key competitive advantages. They note that “campaign data analysts ... develop predictive models that produce individual-level scores that predict citizens’ likelihoods of performing certain political behaviors, supporting candidates and issues, and responding to targeted interventions. The use of these scores has increased dramatically during the last few election cycles.” Further, they found that campaigns “use these [predictive] scores to target nearly every aspect of campaign outreach: door-to-door canvassing; direct mail; phone calls; email; television ad placement; social media outreach (like Facebook and Twitter); and even web page display.” The authors’ model shows that targeting persuasive communications at voters with a responsiveness score in the top quintile produces three times as many votes as would untargeted efforts. See David W. Nickerson and Todd Rogers, “Political Campaigns and Big Data,” Journal of Economic Perspectives 28, no. 2 (Spring 2014): 51–74. 15 For example, Comcast notes in its Form 10-K, “Advertising revenue [for its Cable Communications segment] increased 9.6% in 2016 primarily due to an increase in political advertising revenue. In 2015, advertising revenue had decreased 3.8% over the previous year, primarily due to a decrease in political advertising revenue.” See Comcast Corporation, December 31, 2016 Form 10-K (filed February 3, 2017). 16 A recent study, which analyzed newspaper and television news coverage of the 2016 general election, concluded that “false equivalencies abound in today’s reporting.” The study showed that pervasive, “indiscriminate” criticism of Hillary Clinton and Donald Trump overshadowed “important distinctions” in several allegations connected to the two candidates. Clinton and Trump received an identical proportion of negative (87%) and positive (13%) news reports related to their “fitness” for office. See Thomas E. Patterson, “News Coverage of the 2016 General Election: How the Press Failed the Voters,” Harvard Kennedy School’s 65 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

70 Shorenstein Center on Media, Politics and Public Policy, December 7, 2016, https://shorensteincenter.org/news-coverage-2016- , accessed March 2017. general-election/ 17 A Declaration of Independents: How We Can Break the Two-Party Stranglehold and Restore the American Dream Greg Orman, (Austin, TX: Greenleaf Book Group Press, 2016), p. 158. 18 http:// Number of think tanks from James G. McGann, “2015 Global Go To Think Tank Index Report,” February 9, 2016, repository.upenn.edu/cgi/viewcontent.cgi?article=1009&context=think_tanks , accessed December 2016. Budget estimate based on author analysis using the most recent revenue data available for U.S. think tanks identified in Table 7 in McGann. Revenue data are available for just 64 of the think tanks from McGann’s list, totaling more than $2 billion. Revenue data from Guidestar and annual reports. 19 For a list of leading U.S. think tanks, see James G. McGann, “2015 Global Go To Think Tank Index Report,” February 9, 2016, , accessed December 2016. Political orientation http://repository.upenn.edu/cgi/viewcontent.cgi?article=1009&context=think_tanks is identified through consultation of multiple sources, including James G. McGann, Think Tanks and Policy Advice in the United http://fair.org/ (Abingdon, UK: Routledge, 2007); Michael Dolny, “FAIR Study: Think Tank Spectrum 2012,” July 1, 2013, States extra/fair%E2%80%88study-think-tank-spectrum-2012/ http:// , accessed March 2017; and InsideGov, “Research Think Tanks,” think-tanks.insidegov.com/ , accessed March 2017. 20 Author analysis of the widely used data compiled by Brookings Institution, “Vital Statistics on Congress,” January 9, 2017, Table 5-1, , accessed March 2017. https://www.brookings.edu/multi-chapter-report/vital-statistics-on-congress/ 21 Data on congressional committee staff from Brookings Institution, “Vital Statistics on Congress,” January 9, 2017, https://www. brookings.edu/multi-chapter-report/vital-statistics-on-congress/ , accessed March 2017. Lobbying expenditure information from Lee Drutman and Steven Teles, “Why Congress Relies on Lobbyists Instead of Thinking for Itself,” Atlantic https:// , March 10, 2015, www.theatlantic.com/politics/archive/2015/03/when-congress-cant-think-for-itself-it-turns-to-lobbyists/387295/ , accessed March 2017. 22 Lobbying data from Center for Responsive Politics, , accessed July 2017. https://www.opensecrets.org/lobby/ 23 The most significant new party since 1860, the Progressive Party (also known as the Bull Moose Party) dates back to the period from 1912 to 1916. It was founded by Teddy Roosevelt so that he could run for president after he lost the 1912 Republican nomination. The party successfully elected 13 Representatives, but it disintegrated when most of its members rejoined the Republican Party. The Reform Party, the most recent party that achieved any electoral success, grew out of Ross Perot’s 1992 presidential candidacy in which he won 19% of the popular vote. The Reform Party lasted from 1992 to 2000, with its major success being the election of Jesse Ventura as governor of Minnesota in 1998. Today’s most significant third parties, the Libertarians and the Greens, each run numerous candidates every year, but they have yet to win a single congressional or gubernatorial campaign. See Encyclopedia Britannica, “Bull Moose Party,” July 12, 2015, https://www.britannica.com/topic/Bull-Moose-Party , accessed March 2017; “Progressive (Bull Moose) Party (1912),” in Guide to U.S. Elections , 6th ed., vol. 1 (Washington: CQ Press, 2010); Reform Party National Committee, “About,” http://www.reformparty. , accessed March 2017; CQ Voting and Elections Collection, “Third Party Results,” from CQ Press Electronic Library, org/about/ accessed March 2017. 24 Total is for 2017–2018 cycle and includes Advisory Opinion 2014-12 (which allows separate contribution limits for national convention committees). Methodology from R. Sam Garrett, “Increased Campaign Contribution Limits in the FY2015 Omnibus Appropriations Law: Frequently Asked Questions,” Congressional Research Service, December 19, 2014, http://op.bna.com. s3.amazonaws.com/der.nsf/r%3FOpen%3Dsbay-9s6pa3 , accessed March 2017. Updated contribution limits from Federal Election http://www.fec.gov/info/contriblimitschart1516.pdf , Commission, “Contribution Limits for 2015–2016 Federal Elections,” accessed March 2017. 25 Texas and California have two of the most well-known independence movements, each of which is driven in large part by a sentiment that the state’s culture and values conflict with those of the United States as a whole. In the economic sphere, Texans seek smaller government and lower taxes, while the Yes California independence group argues against Californians’ “subsidizing the other states to our own detriment.” In 2013, an online petition to “peacefully grant the State of Texas to withdraw from the United States of America and create its own new government” attracted 125,746 signatures. A 2017 Reuters/Ipsos poll found that 32% of California residents supported the state’s peaceful withdrawal from the union. See Annabelle Timsit, “5 U.S. Independence Movements Inspired by Brexit,” Politico, July 4, 2016, http://www.politico.com/magazine/story/2016/07/5-us- independence-movements-inspired-by-brexit-214010 , accessed March 2017; YesCalifornia, “The 2019 #Calexit Independence Referendum,” http://www.yescalifornia.org/ , accessed March 2017; and Sharon Bernstein, “More Californians dreaming of a country without Trump: poll,” Reuters, January 24, 2017, http://www.reuters.com/article/us-usa-trump-california-secession- , accessed March 2017. idUSKBN1572KB 26 U.S. military spending in 2016 ($611 billion) exceeds the combined expenditures of the next eight highest military spenders ($595 billion): China, Russia, Saudi Arabia, India, France, the United Kingdom, Japan, and Germany. As a percentage of GDP, military spending for the U.S. (3.3%) is second among OECD countries only to Israel (5.8%). Spending represents 2016 prices https://www.sipri.org/databases/milex , and exchange rates. Data from SIPRI, “SIPRI Military Expenditure Database 2017,” accessed August 2017. 27 “Republican Health Care Bill Failure,” The Lead with Jake Tapper , CNN, March 24, 2017. From transcript provided by CNN, http://www.cnn.com/TRANSCRIPTS/1703/24/cg.01.html , accessed March 2017. 28 Philip Bump, “The story behind Obama and the national debt, in 7 charts,” Washington Post , https://www.washingtonpost.com/ news/the-fix/wp/2015/01/07/the-story-behind-obama-and-the-national-debt-in-7-charts , accessed August 2017. PART V 1 For more information on each topic presented in Figure 1, please see the following sources. Partisan Primaries (for congressional 66

71 and presidential races): Marjorie Randon Hershey, Party Politics in America , 14th ed. (New York: Longman, 2011); Encyclopaedia https://www.britannica.com/topic/primary-election . Partisan Talent: Adam Sheingate, Britannica, “Primary Election,” Building a (New York: Oxford University Business of Politics: The Rise of Political Consulting and the Transformation of American Democracy Press, 2016). Gerrymandering: Stephen Ansolabehere and Maxwell Palmer, “A Two Hundred-Year Statistical History of the Ohio State Law Journal 77, no. 4 (2016): 741–762. Special Interests: Allan J. Cigler, Burdett A. Loomis, and Gerrymander,” Anthony J. Nownes, eds., Interest Group Politics , 9th ed. (Thousand Oaks, CA: Sage CQ Press, 2016). Southern Realignment: The Broken Branch: How Congress Is Failing America and How to Get It Back on Track Thomas E. Mann and Norman J. Ornstein, (New York: Oxford University Press, 2008); also Hershey, Voter Turnout: United States Elections Project, Party Politics in America. “National General Election VEP Turnout Rates, 1789-Present,” . Governing http://www.electproject.org/national-1789-present Party Wars Reforms: Barbara Sinclair, (Norman, OK: University of Oklahoma Press, 2006). Partisan Ideas: Tevi Troy, “Devaluing National Affairs , Winter 2012, the Think Tank,” . 24/7 http://www.nationalaffairs.com/publications/detail/devaluing-the-think-tank Partisan Media: Jonathan M. Ladd, Why Americans Hate the Media and How It Matters (Princeton, NJ: Princeton University Press, 2012). Governing Norms: Sinclair, Party Wars . Republican Shift: Sinclair, Party Wars . New Media: Mostafa M. El-Bermawy, “Your Filter Bubble Is Destroying Democracy,” Wired https://www.wired.com/2016/11/filter-bubble-destroying- , November 18, 2016, ; Thomas J. Johnson, Shannon L. Bichard, and Weiwu Zhang, “Communication Communities or ‘CyberGhettos?’: A democracy/ Path Analysis Model Examining Factors that Explain Selective Exposure to Blogs, Journal of Computer-Mediated Communication 15, no. 1 (October 2009): 60–82. Data Analytics: David W. Nickerson and Todd Rogers, “Political Campaigns and Big Data,” Harvard Kennedy School Working Paper RWP13-045, November 2013, http://scholar.harvard.edu/files/todd_rogers/files/political_ campaigns_and_big_data_0.pdf . Money in Politics: Wendy L. Hansen, Michael S. Rocca, and Brittany Leigh Ortiz, “The Effects of Citizens United on Corporate Spending in the 2012 Presidential Election,” Journal of Politics 77, no. 2 (April 2015): 535–545. Earmarks: Barbara Sinclair, “Question: What’s Wrong with Congress? Answer: It’s a Democratic Legislature,” Boston University Law Review 89, no. 2 (April 2009): 387–397; Jonathan Rauch, “How American Politics Went Insane,” Atlantic , July/August 2016, https://www.theatlantic.com/magazine/archive/2016/07/how-american-politics-went-insane/485570/ . 2 Barbara Sinclair, Unorthodox Lawmaking: New Legislative Processes in the U.S. Congress , 4th ed. (Washington: CQ Press, 2012). 3 For example, cultural changes in the 1960s and the realignment of the Southern Democrats left the parties more ideologically homogenous. This shift extended to party activists in the electorate (e.g., primary voters, donors, and special interests) who also became increasingly ideologically consistent. The Republican Party shifted to the right, led by Evangelicals and intellectual neoconservatives. Average voter ideology has become increasingly correlated with income, leading to ubiquitous self-sorting, the effects of which have been compounded by increasingly sophisticated gerrymandering. See Barbara Sinclair, Party Wars (Norman, (New York: Oxford The Broken Branch OK: University of Oklahoma Press, 2006); Thomas E. Mann and Norman J. Ornstein, University Press, 2006). 4 , July/August 2016, https://www.theatlantic.com/magazine/ Jonathan Rauch, “How American Politics Went Insane,” Atlantic , accessed February 2017. archive/2016/07/how-american-politics-went-insane/485570/ 5 For a discussion of connections between a polarizing electorate and the increasing influence of partisan news media, see Gary C. Jacobson, “Partisan Media and Electoral Polarization in 2012: Evidence from the American National Election Study,” in American , edited by James A. Thurber and Antoine Yoshinaka (New Gridlock: The Sources, Character, and Impact of Political Polarization York: Cambridge University Press, 2015), pp. 259–286. 6 Bloomberg , March 7, 2016, https://www.bloomberg.com/view/ Michael R. Bloomberg, “The Risk I Will Not Take,” articles/2016-03-07/the-2016-election-risk-that-michael-bloomberg-won-t-take , accessed March 2017. 7 According to mediaQuant, Inc., in the 12 months to November 1, 2016, Trump’s “free media” (online news, broadcast, blogs & forums, Twitter, and print) value totaled $4.96 billion, relative to Clinton’s $3.24 billion. By comparison, free media value during this period in 2012 was $1.15 billion for Barack Obama and $0.7 billion for Mitt Romney. See Mary Harris, “A Media Post- Mortem on the 2016 Presidential Election,” mediaQuant, Inc., November 14, 2016, https://www.mediaquant.net/2016/11/a- media-post-mortem-on-the-2016-presidential-election/ , accessed December 2016. 8 For example, a new hybrid PAC formed by the left, called “We Will Replace You,” was established as an “anti-Trump movement” specifically pledging to “support primary election challengers against any Democrats who won’t do everything in their power to resist Trump.” See . http://wewillreplaceyou.org/#learn PART VI 1 http://www.iandrinstitute.org/ Initiative & Referendum Institute, “State-by-State List of Initiative and Referendum Provisions,” , accessed March 2017. states.cfm 2 Louisiana has had a form of a nonpartisan primary system since 1978 (with the exception of the years 2008–2010). There, all congressional candidates irrespective of party affiliation compete in a general election. If no candidate receives at least 50% of the vote, the top two compete in a runoff election in December. For more details, see Chris Hughes, “Louisiana’s Cajun Primary: An Innovative Primary Undone by Electoral Stagnation,” FairVote, November 20, 2015, http://www.fairvote.org/louisianas-cajun- primary-an-innovative-primary-undone-by-electoral-stagnation , accessed March 2017. 3 In a survey study conducted by the Eagleton Institute of Politics at Rutgers University on the effects of ranked-choice voting in local U.S. elections (2013 and 2014), respondents found that registered voters in cities using ranked-choice voting “perceived less candidate criticism and negative campaigning in the lead up to their local elections,” relative to control cities holding plurality elections. See FairVote, “Campaign Civility: Ranked Choice Voting and Civil Campaigning,” http://www.fairvote.org/research_ rcvcampaigncivility , accessed April 2017. 4 For a video explanation, see Minnesota Public Radio, “MPR News: Instant Runoff Voting Explained,” YouTube, published May 10, 2009, https://www.youtube.com/watch?v=_5SLQXNpzsk , accessed March 2017. For a general resource, see FairVote, “Ranked , accessed March 2017. Choice Voting / Instant Runoff,” http://www.fairvote.org/rcv#rcvbenefits 5 According to Ballotpedia, 43 states participate in redistricting following the completion of each census, while the remaining states 67 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

72 only have one congressional district. “As of June 2017, congressional redistricting was the province of the state legislatures in 37 [of the 43] states. In four states, independent commissions were responsible for congressional redistricting. In two states, the task fell to politician commissions.” Ballotpedia, “State-by-state redistricting procedures,” https://ballotpedia.org/State-by-state_ , accessed August 2017. redistricting_procedures 6 In Iowa, nonpartisan legislative staff members in the Legislative Services Agency work with an independent commission to submit district maps for the state, but the Iowa legislature retains final authority to implement redistricting maps. For details, see Justin Levitt, “All about Redistricting—Iowa”; , accessed March 2017. Many states will find http://redistricting.lls.edu/states-IA.php it easiest to adopt Iowa’s approach so that they do not have to change their state constitution. Congressional districts drawn by independent commissions from Ballotpedia, “State-by-state redistricting procedures,” https://ballotpedia.org/State-by-state_ , accessed August 2017. redistricting_procedures 7 Peter Ackerman, Chairman of Level the Playing Field, email message to author, August 29, 2017. 8 The ruling requires the Federal Election Commission to reconsider two administrative complaints filed by Level the Playing Field (and other plaintiffs) against the Commission on Presidential Debates (CPD). These allege that, in violation of FEC regulations, the CPD was not nonpartisan and that “the CPD-sponsored debates had amounted to illegal corporate contributions to the campaigns of the 2012 general election presidential candidates who participated.” The FEC was required to issue a new decision that adequately responds to the evidence presented in the complaints, as well as to reconsider a petition for rulemaking filed by Level the Playing Field which had asked the FEC to amend its rules to prohibit the CPD from using a polling threshold as the sole criterion for accessing general election presidential and vice-presidential debates. On April 6, 2017, the FEC issued its decision that it would not take enforcement action against the CPD and that it would “defend, rather than change, its current rules, which give the debates’ sponsor broad leeway to decide who can participate.” Source: FEC, “Level the Playing Field, et al. v. FEC,” http:// , accessed April 2017; and Kenneth P. Doyle, “FEC Nixes Enforcement Against Presidential www.fec.gov/law/litigation/LPF.shtml Bloomberg BNA Debates Sponsor,” , April 6, 2017, https://www.bna.com/fec-nixes-enforcement-n57982086312/, accessed April 2017. 9 Lawrence Noble, “Blueprints for Democracy: Actionable Reforms to Solve Our Governing Crisis,” Joint Report of Issue One and http://www.campaignlegalcenter.org/news/press-releases/campaign-legal-center-and- The Campaign Legal Center, November 2015, issue-one-provide-blueprints-democracy-legislators-new , accessed April 2017. 10 Legal systems are shaped by “three relatively distinctive yet intersecting elements—ideas, interests, and institutions,” over time. A historical analysis of laws, their interpretation, and their enforcement shows that these elements must align before major changes can be seen. Much of the time, the application of the law is not circumscribed by the theoretical frameworks, but rather by institutional capacities that may limit even-handedness or coherence. Certain structures like an appeals system through which particular aspects of the law can be tested and interpretations of the law can be made, as well as universally held legal principles based on established norms or scientific understanding (such as the presumption of an individual’s innocence unless proven otherwise) need to be sufficiently developed in order for the law to function as well as it should in a purely theoretical framework. This analysis is based on changes in jurisprudence related to criminal responsibility in English law since the eighteenth century . Virginia Law For a more detailed discussion, see Nicola Lacey, “Jurisprudence, History, and the Institutional Quality of Law,” 101, no. 4 (June 2015): 919–946. Review 11 We raised such approaches in Part III as potential substitutes to the existing party-dominated system. 12 The founder of The Centrist Project, Charles Wheelan, attributes the phrase to David Brooks of the New York Times and defines it as “a generation of Americans who are fed up with the current political system, who believe we can do better, and most important, who are ready to do something about it.” See Charles Wheelan, The Centrist Manifesto (New York: W. W. Norton & Company, Inc., 2013), p. 24. 13 Rebecca Ballhaus, “Group Launches Effort to Protect Moderate Candidates From Primary Challenges,” , Wall Street Journal December 4, 2016, https://www.wsj.com/articles/group-launches-effort-to-protect-moderate-candidates-from-primary- , accessed April 2017. challenges-1480879988 14 Ibid. 15 David G. Crane, conversation with author. 16 Andrew Crutchfield, Director at Govern for California, email message to author, February 19, 2017. 17 Dissatisfaction as reflected by congressional disapproval ratings in August 2017 (79%). Data from Gallup, “Congress and the Public,” http://www.gallup.com/poll/1600/congress-public.aspx , accessed August 2017. 18 David G. Crane, “Tithe to democracy - donate to well-meaning candidates,” SFGATE, May 17, 2014, http://www.sfgate.com/ , accessed March 2017. opinion/article/Tithe-to-democracy-donate-to-well-meaning-5484784.php 19 “Text of the Address by President Eisenhower, Broadcast and Televised from His Office in the White House, Tuesday Evening, January 17, 1961, 8:30 to 9:00 p.m., EST,” press release, January 17, 1961, on Eisenhower Presidential Library, Museum, and https://www.eisenhower.archives.gov/research/online_documents/farewell_address/1961_01_17_Press_ Boyhood Home website, Release.pdf , accessed March 2017. 20 Suzy Platt, ed., Respectfully Quoted: A Dictionary of Quotations Requested from the Congressional Research Service (Washington: Library of Congress, 1989), no. 1593, via Bartleby.com, , accessed March 2017. http://www.bartleby.com/73/1593.html 21 Total philanthropic giving from Indiana University Lilly Family School of Philanthropy, “Giving USA 2017: The Annual Report on Philanthropy for the Year 2016,” Giving USA Foundation, 2017. 22 State spending (FY 2016) from National Association of State Budget Officers, State Expenditure Report (Washington: National Association of State Budget Officers, 2016), http://www.nasbo.org/mainsite/reports-data/state-expenditure-report , accessed March 2017; author analysis (excludes spending of federal funds by states). Federal outlays data (FY 2016) from Congressional Budget , accessed Office, “The Budget and Economic Outlook: 2017 to 2027,” January 24, 2017, https://www.cbo.gov/publication/52370 68

73 March 2017; author analysis. 23 http://www.sfgate.com/ David G. Crane, “Tithe to democracy - donate to well-meaning candidates,” SFGATE, May 17, 2014, , accessed March 2017. opinion/article/Tithe-to-democracy-donate-to-well-meaning-5484784.php APPENDICES A–E 1 Michael E. Porter and Jan W. Rivkin, “What Washington Must Do Now: An Eight-Point Plan to Restore American Competitiveness,” Economist , November 21, 2012. in “The World in 2013,” 2 Michael E. Porter, Jan W. Rivkin, and Rosabeth Moss Kanter, “Competitiveness at a Crossroads: Findings of Harvard Business School’s 2012 Survey on U.S. Competitiveness,” February 2013. The report is available on the Harvard Business School’s U.S. Competitiveness Project website at http://www.hbs.edu/competitiveness . 3 Unreported findings from Michael E. Porter, Jan W. Rivkin, and Mihir A. Desai, with Manjari Raman, “Problems Unsolved and A Nation Divided,” September 2016. The report is available on the Harvard Business School’s U.S. Competitiveness Project website at http://www.hbs.edu/competitiveness . 4 For a discussion on congressional productivity with respect to “ceremonial” versus “substantive” legislation, see Drew DeSilver, “Congress continues its streak of passing few significant laws,” Pew Research Center, July 31, 2014, http://www.pewresearch.org/ fact-tank/2014/07/31/congress-continues-its-streak-of-passing-few-significant-laws/ , accessed March 2017. 5 Observations only include Members of Congress who sponsored more than 10 bills. Statistics for 2013 legislative year are as of December 1, 2014; 2014 legislative year are as of January 12, 2015; 2015 legislative year are as of January 9, 2016. Sophomores are Members of Congress whose first term (in the same chamber) was the preceding Congress (e.g., a House sophomore in the 113th Congress would have served his or her first term in the House in the 112th Congress). A ranking member is the senior-most member of a committee not in the majority party. Source: Govtrack.us, accessed November 2016; author calculations. 69 WHY COMPETITION IN THE POLITICS INDUSTRY IS FAILING AMERICA

74 BIBLIOGRAPHY AND RECOMMENDED READING While all of these publications are valuable, we have starred works that are particularly germane to the thesis. The Polarized Public: Why American Government Is So Dysfunctional. 1. Boston: Pearson, 2013. Abramowitz, Alan. 2. Alexander, Raquel, Stephen W. Mazza, and Susan Scholz. “Measuring Rates of Return on Lobbying Expenditures: An Empirical Journal of Law and Politics 25, no. 4 (Fall 2009): 401–457. Case Study of Tax Breaks for Multinational Corporations.” 3. Aldrich, John. Why Parties. Chicago: University of Chicago Press, 2011. 4. Ansolabehere, Stephen, and Maxwell Palmer. “A Two Hundred-Year Statistical History of the Gerrymander.” Ohio State Law 77, no. 4 (2016): 741–762. Journal Bailey, Michael A., Jonathan Mummolo, and Hans Noel. “Tea Party Influence: A Story of Activists and Elites.” American Politics 5. Research 40, no. 5 (September 2012): 769–804. Fair Representation: Meeting the Ideal of One Man, One Vote. Washington: Brookings 6. Balinski, Michel L., and H. Peyton Young. , accessed September 2017. Institution, 2001. https://www.brookings.edu/book/fair-representation/ Atlantic http://www. 7. , August 3, 2016. Ball, Molly. “How Farmers and Big Business Took Out a Tea Party Congressman.” theatlantic.com/politics/archive/2016/08/a-tea-party-defeat-in-kansas/494210/ , accessed December 2016. 8. Ball, Molly. “There’s Nothing Better Than a Scared, Rich Candidate: How Political Consulting Works – or Doesn’t.” https://www.theatlantic.com/magazine/archive/2016/10/theres-nothing-better-than-a-scared-rich- Atlantic , October 2016. , accessed February 2017. candidate/497522/ 9. Binder, Sarah. “Polarized We Govern.” Brookings Institution, May 2014. https://www.brookings.edu/wp-content/ uploads/2016/06/BrookingsCEPM_Polarized_figReplacedTextRevTableRev.pdf , accessed October 2016. 10. Blau, Benjamin M., Tyler J. Brough, and Diana W. Thomas. “Corporate lobbying, political connections, and the bailout of Journal of Banking & Finance 37, no. 8 (August 2013): 3007–3017. banks.” Brown, Heath. . Santa Barbara, CA: ABLO-CLIO, 2015. 11. The Tea Party Divided: The Hidden Diversity of a Maturing Movement Buchanan, James M. “The Domain of Constitutional Economics.” Constitutional Political Economy 1, no. 1 (1990): 1–18. 12. , accessed http://www.walkerd.people.cofc.edu/400/Sobel/2A-8.%20Buchanan%20-%20Constitutional%20Economics.pdf October 2016. The Calculus of Consent: Logical Foundations of Constitutional Democracy. 13. Ann Buchanan, James M., and Gordon Tullock. Arbor: University of Michigan Press, 1962. 14. Burden, Barry C., Bradley M. Jones, and Michael S. Kang. “Sore Loser Laws and Congressional Polarization.” Legislative Studies Quarterly 39, no. 3 (August 2014): 299–325. Burghat, David. “Tea Party Endorsed Candidates Dominate Election 2014.” Institute for Research & Education on Human 15. Rights, November 6, 2014. http://www.irehr.org/2014/11/06/tea-party-election-2014/ , accessed December 2016. Carson, Jamie L., and Jason M. Roberts. Ambition, Competition, and Electoral Reform: The Politics of Congressional Elections 16. Ann Arbor: University of Michigan Press, 2013. Across Time. Chen, Hui, Katherine Gunny, and Karthik Ramanna. “Return on Political Investment in the American Jobs Creation Act of 17. 2004.” Harvard Business School Working Paper, No. 15-050, December 2014. 18. Interest Group Politics , 9th ed. Thousand Oaks, CA: Sage CQ Cigler, Allan J., Burdett A. Loomis, and Anthony J. Nownes, eds. Press, 2016. Correia, Maria M. “Political Connections and SEC Enforcement.” Journal of Accounting and Economics 57 (2014). 19. 20. Handbook of Social Choice and Voting , edited by Coughlin, Peter J. “Probabilistic Voting in Models of Electoral Competition.” In Jac C. Heckelman and Nicholas R. Miller. Cheltenham, UK: Edward Elgar Publishing, 2015. 21. Crane, David G. “Tithe to democracy - donate to well-meaning candidates.” SFGATE , May 17, 2014. http://www.sfgate.com/ * , accessed March 2017. opinion/article/Tithe-to-democracy-donate-to-well-meaning-5484784.php DeSilver, Drew. “Congress continues its streak of passing few significant laws.” Pew Research Center, July 31, 2014. http:// 22. www.pewresearch.org/fact-tank/2014/07/31/congress-continues-its-streak-of-passing-few-significant-laws/ , accessed March 2017. Detterbeck, Klaus. “Cartel Parties in Western Europe?” Party Politics 11, no. 2 (March 2005): 173–191. 23. 70

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79 ACKNOWLEDGMENTS Many thoughtful individuals have recognized the problems in our political system, and there is an extensive literature on both problems and proposed solutions. There are also an array of promising initiatives underway directed at political reform. We are indebted to many others for their research, insight and leadership in taking action—particularly Mickey Edwards (whose pioneering work on the role of parties in our system jumpstarted our effort), Charlie Wheelan, Greg Orman, David Crane, Maya MacGuiness, Ruth Greenwood, Nancy Jacobson, and Peter Ackerman. We also recognize and have benefited from the efforts of the many leaders in the political reform and innovation community, including Nick Troiano, Chad Peace, Jim Jonas, John Opdycke, Josh Silver, Rob Richie, Elizabeth Beck Reynolds, Gerry Herbert, Nicholas Stephanopoulos, Mike Murphy, and Cara McCormick. Many individuals more knowledgeable than we are, in so many ways, generously answered our calls and questions. We especially thank Evan Bayh, David Gergen, Steve Fraidin, Brendan Nyhan, and Charles “Rick” Rule. Bill Ackman, Jim Hagedorn and Michael Fisch provided feedback and hosted important events on the research. We also appreciate the counsel of many who read drafts and provided helpful comments along the way including Michael Anders, JoAnne Anton, Elizabeth Brenner, Edward Chapman, Andrew Crutchfield, Kathryn Flores, Adam Hanft, Adi Ignatius, Johnny Johns, Christian Ketels, David Lubar, Peter Mahler, Greg Marcus, Bill McNabb, Michael Moskow, Don Peck, Austin Ramirez, Gus Ramirez, Tom Rossmeissl, Lynde Uihlein, Susan Yackee, Nick Zeppos, and Robert Zimmer. Michael’s colleagues at Harvard Business School (HBS) contributed in important ways to this work. Jan Rivkin, co-chair with Michael of the U.S. Competitiveness Project, was instrumental throughout from conception to synthesis. David Moss helped inspire this work with his thought- provoking article “Fixing What’s Wrong with U.S. Politics,” published in the March 2012 special issue of Harvard Business Review on U.S. competitiveness. We thank the participants in an HBS faculty seminar on this research early this year for their many, very helpful, comments. Finally, this research would not be possible without support and comments from Nitin Nohria, Dean of the Faculty. We are very grateful to the team at Harvard Business School for its contribution on this multi-year effort, starting with Manjari Raman for her project leadership, insights, and editorial support; Andrew Speen and Alexandra Houghtalin for their invaluable assistance in the research underlying this paper; Ilyes Kamoun for help with literature review and data collection; Stuart Gardner for assistance in manuscript development and production; Gabriel Ellsworth for copyediting and proofreading; and Jill Hogue for just about everything. Joan Magretta provided invaluable editorial guidance, as did Alan Murray, Clifton Leaf, and their Fortune colleagues on an early version of these ideas published in Fortune, March 2017. We also appreciate the expertise and counsel of Katie Boyce, who supports Katherine on her political reform efforts. Finally, Richard Edelman and his colleagues provided invaluable guidance in helping us disseminate this work to the media and other stakeholders. While all these individuals deserve our great appreciation, they do not necessarily agree with our analysis, conclusions, or recommendations. We alone bear full responsibility for this research and its findings. FOR FURTHER INFORMATION: Visit Harvard Business School’s U.S. Competitiveness Project at http://www. hbs.edu/competitiveness/ Please direct inquiries to Manjari Raman ( [email protected] ). Report design: Terberg Design, LLC Corrigendum: This report was updated on November 20, 2017 to correct the federal government spending statistic on page 13.

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