Appendix D: How Political Competition Has Been Distorted

Many indicators of the nature of political competition illustrate the growing disconnect between political competition and the public interest.

The number of bills actually passed and signed into law has fallen dramatically, bumping up against an all-time low since consistent data have been available (see Figure 1).*4

Highly salient policy matters, such as health care or immigration, remain stalled for years, bills become more complex, and one Congress punts the decision to the next (see Figure 2). Other research suggests that major legislation is also declining.

The laws actually passed are becoming more and more partisan (see Figure 3). Traditionally, conference committees brought together Republicans and Democrats from the House and Senate to reconcile differences in the bills passed by both houses. Today, voting is more partisan on bills, as shown by the rising proportion of “party unity votes,” the declining bipartisan

support for landmark legislation, and conference committees that are nearly extinct. Parties rarely invite each other to participate in reconciling differences.

The party in power increasingly pushes through important legislation, with little or no support from the minority party.

The share of bills introduced with bipartisan co- sponsorship from 2013–2015 was just 35% for the median Representative and 30% for the median Senator. Bills introduced by Representatives in safe seats (vulnerable only to a primary challenge) appear to be less bipartisan than those in competitive seats.5

Lastly, the number of moderates in Congress has declined dramatically over the last several decades. The basis for bipartisan compromise has eroded sharply.

*The numbers are worse than they look here, because many of the laws that do get passed are not substantive—for example, post offices or anniversary commemorations.

Appendixd-fig1Appendixd-fig3Appendixd-fig5Appendixd-fig7
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Appendix C: US Social Performance Versus OECD Countries

The Social Progress Index is the most comprehensive international benchmarking tool for social and environmental performance of countries. It covers a broad set of measures of social progress, all of which are outcomes or results-based. Indicators are drawn from well respected organizations and have been consistently calculated.

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 compares U.S. social performance with the other OECD (Organisation for Economic Co-operation and Development) countries, the set of advanced economies on a global basis.

The U.S. ranks near the bottom in many areas. Our performance has also declined substantially in a number of areas in recent years, especially in tolerance, inclusion, rights and freedom.

Appendixc-fig1

Appendix B: A Wakeup Call: Declining US Competitiveness

Growing inequality and a falling sense of economic opportunity has emerged as perhaps the central challenge of our time. The American Dream, a bedrock of America's uniqueness is under threat.
Why is this? The U.S. economy has registered disturbing performance since well before the Great Recession.

Since 2011, the U.S. Competitiveness Project at Harvard Business School, co-chaired by Michael E. Porter and Jan W. Rivkin, has studied the root causes and conducted annual surveys of business leaders (HBS alumni) and periodic surveys of the general public. The most recent survey on the strengths and weaknesses is shown in Figure 2 in Part I. As we have noted, both HBS alumni and the general public identified our political system as a major weakness and deteriorating.

Based on the survey findings in 2011 and discussions with business leaders and policymakers, the Project created an “eight-point plan” for Washington that identified the eight most critical policy areas to restore U.S. competitiveness and economic growth (see Figure 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 areas identified were also chosen because there was wide consensus among experts on what needed to be done.*

The latest survey (2016) found overwhelming, bipartisan consensus among HBS alumni on seven of the eight points, and majority support for the eighth (see Figure 2).2 Despite a highly partisan and often misleading political dialog around these areas (we discuss how this occurs in Part IV), the general public supported four of the eight areas, and support was close to 50% on two others.

Despite wide consensus, however, the stunning reality is that Washington has made zero meaningful progress on any of the eight areas in decades. Project leaders made multiple trips to Washington to meet with senators and members of Congress to discuss the eight-point plan. Legislators from both parties all agreed that the steps were necessary, but cautioned that making progress would be challenging.

The lack of progress on these eight policy areas reflects a political system incapable of addressing America’s essential economic challenge. This is why business leaders and the general public, in our most recent (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.

*Healthcare policy was not included in the eight-point plan because in 2012, as in 2017, there was no clear consensus on what needed to be done.

*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.

AppendixB-Fig1
appendixb-fig2

Appendix A: Warning Signs

Many indicators help show that politics is failing to meet the needs and expectations of citizens. While no single measure is perfect, and there is debate about how to interpret individual measures, the overall pattern of public dissatisfaction with politics suggests deep concerns with the system.

Public trust in the federal government is near an all-time low since at least 1958, with a peak after the 9/11 attacks, but then a resumption of a steady decline, with recent stagnation around 20% (see Figure 1).

Congressional approval ratings, which have averaged 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.)

Despite rising partisanship in Congress since 2009, the percentage of Americans who identify themselves as independents has been substantially greater than the percentage who identify themselves with either major party (see Figure 4).

Finally, a clear majority of Americans believe that a third party is necessary (see Figure 5).

There are many more signs of dissatisfaction, disillusionment, and frustration with the effectiveness of our political system. All point to the large and growing divergence between what our political system delivers and what citizens actually want and need.

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AppendixA-Fig4

Part VI: Recapturing Our Democracy

Many Americans now understand that, no matter whom we elect—and we’re always hoping for that next great candidate—political outcomes seem to get worse. And some of the most capable people we have elected to public office have quit out of frustration because they have no impact.

One thing has become abundantly clear: Our political system will not be self-correcting. The problems are systemic and structural, involving multiple factors that are self-reinforcing. This means that the only way to reform the system is with a set of steps to change the industry structure and the rules that underpin it and, therefore, shift the very nature of political competition. We need to move from today’s unhealthy competition to healthy competition that holds elected officials accountable for delivering the desired outcomes in politics: solutions, action, and broad-based consensus.

We admit to a bias that moderate, compromise-oriented politicians have an important value in crafting and delivering solutions to the nation’s problems. We are not suggesting, however, that moderates are the only valuable kind of elected official. Historically, transformational changes in the U.S. have often begun at the fringes—in decidedly non-moderate camps.

Eventually, however, change must be enacted by a majority in democratically-elected legislative bodies. It is here that bipartisan, pro-problem-solving, consensus-seeking moderates are crucial for delivering practical solutions, and it is precisely this genre of elected officials that our current political competition has rendered almost extinct. We believe reinvigorating electoral opportunities for the rational middle must be a central premise of political reform.

What Will (and Won't) Work

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 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, not just the symptoms. For example, we cannot change the system just by electing “better” people (though that certainly never hurts). Even promising candidates would continue to disappoint, because they would be trapped in a system that no single individual can overcome.

Many well-meaning reform ideas—such as promoting bipartisanship, instituting a national primary day, improving civics education, and establishing bipartisan issue-advocacy groups—won’t matter much absent changes in the underlying industry structure. Deeper systemic changes that alter the parties’ competitive dynamics will be required to produce real impact.

Even powerful reforms, however, must also be achievable within a reasonable time frame. The need is too urgent to be distracted by reforms that, while theoretically powerful, are not likely to be achievable in the next decade or two. For example, a constitutional amendment for campaign-finance reform may be desirable, but it is highly unlikely to pass.

Conversely, some reforms may be achievable, but not powerful. Term limits are a good example, because they do not sufficiently change the structure of competition. New candidates would face the same pressures to move to the extremes as incumbents do, while newly elected officials would still face the same obstacles to achieving solutions.

No matter how well-intentioned, then, only reforms that are at the intersection of powerful and achievable will make a difference. We shouldn’t waste our time on reforms that aren’t both (see Figure 1). Note that “achievable” doesn’t mean “easy.” Unfortunately, there are no reforms at the intersection of powerful, achievable, and easy!

There is no one silver bullet. Given the nature of industry structure, reforms on multiple fronts will be necessary to shift political competition sufficiently so that it results in good outcomes. For example, campaign- finance reform, which has consumed so much recent attention, is surely needed. However, money is not the only problem. As we have discussed, partisanship and gridlock are structural issues created by much more than campaign-finance rules. Reforms must address multiple aspects of the structure.

Reforms are needed in both elections and governing. Election and governing rules are both key parts of the industry structure, and reforming each will reinforce the other. Reforming elections will provide opportunities for new kinds of candidates who are answerable to voters instead of to the duopoly and its core customers. But election reform will be more effective if governing reform also gives all legislators more influence. And support for governing reform will be greater if a shift in elections results in less partisan candidates not beholden to the duopoly.

Reforms should be cross-partisan. The reform movement should engage citizens across the ideological spectrum. It should not be used as a Trojan horse for partisan advantage. Historically, both sides of the duopoly have sometimes championed changes to the system under the guise of “reform,” when they were really trying to change the system in ways that were more likely to disproportionally benefit their side. 

Many reforms will need to be enacted state by state, and will require state-specific strategies. State constitutions and legislatures are responsible for most of the rules that enable the duopoly’s core control of elections, so it is not possible (in most cases) to mandate changes once they reach the federal level. Each state will need to follow its own laws and constitutional provisions to enact reform. Therefore, reformers will need to evaluate each state individually and tailor winning strategies state by state.

Depending on the issue and circumstances in an individual state, reformers can utilize three major approaches to implement the needed reforms:

  • Ballot initiatives or referendums in which citizens vote for new rules. These can be very effective, because they are forms of “direct democracy” and, therefore, bypass the elected legislature. Some form of ballot initiative or referendum is available in 27 states.1
  • Legal challenges. Certain reforms have the best chance of success through court action that challenges the constitutionality of existing practices. Or, court action may be a complementary strategy for referendums or legislative action.
  • Legislative action. This requires the support of the state legislature and governor and can be the most challenging, since it can require elected officials to vote against the self-interest of the duopoly. However, we should remember that, in the end,
    state legislators work for the voters. If enough voters want reform and organize to demand it, legislators will respond.

Shortcuts that work around the current politics industry structure will be beneficial. There are steps (described later in this section) that can build momentum and deliver important near-term benefits, even before more systemic changes are enacted at scale. Some wins can show that change is possible— reversing the vicious cycle of citizens dropping out of politics— and generate a sense of hope that will lead to further progress.

A Strategy to Reform Politics

Since much of the design of our political system is not specified in the Constitution, we can change it. While progress has already begun, a realistic time frame for systemic reform is a decade or even two. And the ever-present risk that private interests find new ways to optimize the system around their interests, instead of the public interest, means the task of protecting healthy political competition will never be complete. Ongoing vigilance will be required.

Already, many outstanding, dedicated, and passionate activists are working to improve our system. Together they are creating a strong organizational foundation on which to build, and many are addressing reforms that are at the intersection of powerful and achievable as we just described.

Our proposed strategy involves a short list of such mutually reinforcing reforms. They fall into four areas:

  • Restructuring the election process
  • Restructuring the governing process
  • Reforming money in politics
  • Opening up near-term competition—without waiting for structural reform

In each area, we include links to the websites of specific organizations that are working on it.

Figure 1: The Intersection of Powerful and Achievable

IMPLICATIONS FOR BUSINESS LEADERS

Business has a major stake in the success of our political system: in the nation’s ability to take the steps necessary to support economic growth, to improve the U.S. business environment, and to better prepare citizens for participation in the economy. Business cannot be successful unless America is successful.

Companies should be advocating for policies that make the environment better for all businesses. A good example is Simpson-Bowles, which we discussed in Part I. This plan would have put America’s federal budget on a sustainable path and created a far better macroeconomic environment for investment and stability.

Given the nature of today’s political competition, however, too many businesses have become special interests instead of advocates for the general interest. They pursue special benefits for their companies and their industries, and they fail to put their weight and influence behind policies and steps that benefit business in general and the communities in which they operate. Lobbying by business and industry associations has become a huge business in its own right, but contributes to eroding competitiveness in America, while undermining public support for business. Companies and their trade associations have also increasingly hired sympathetic former members of Congress who sit on key committees to gain influence, 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.

The current political game has undermined trust in the fairness of business and diminished public support for pro-business policies, which are increasingly seen as subsidies and special treatment. As we have emphasized in this paper, we must change this game.

Business leaders have the clout—and the responsibility—to play a lead role in shifting the nature of competition of the politics industry. It starts with opting out of the existing party influence game and shifting support toward broader business and community interests, and away from narrow special interests. Companies can do much to exert pressure to modify the current process of governing, support candidates who are moderates and problem solvers, and get behind changes in election rules and practices, such as nonpartisan primaries and the other steps we have outlined. The next generation of business leaders—the Millennials—are disgusted with today’s political system. It is time for today’s leaders to recognize the failure of today’s business-government relationship and change it. Today’s CEOs also need to redefine corporate purpose in ways that align strategy and business competition with the needs of society, which will mean a different relationship with government.
Business leaders must create a very different set of government priorities for advancing the economy, establishing a whole new relationship between business and political leaders, and generating pressure for action.

1. Restructure the Election Process
Changes to the election process are needed to eliminate competition outside the duopoly.

Institute nonpartisan top-four primaries. As we have seen, the current partisan primary system is perhaps the single most powerful obstacle to achieving outcomes for the common good. Instead, states should move to a single primary election for all candidates, no matter what their affiliation, and open up primaries to all voters, not just registered party voters. The top four vote-getters from such a single primary would advance to the general election, instead of one winner from each duopoly party. This incentivizes all candidates to present themselves to a general electorate, not just appeal to a small cadre of party-partisan voters.

Note that in a nonpartisan primary in a heavily Democratic or Republican district, it may be possible for multiple Democrats or Republicans to advance. In such a case, however, all candidates will be far more incentivized than in the current system to appeal to a broader base of voters and to compete on solutions.

Top-two nonpartisan primaries have already been implemented in some states. However, we recommend top-four primaries in order to create more opportunity outside the duopoly (see Fair Vote's Top Four for more information about the benefits of top-four primaries).

Nonpartisan primaries would also lower the barriers to entry for independents, such as current ballot access rules and the challenge of getting attention in the media. An independent who makes it out of a top-two or top-four primary would command more media coverage versus the candidate on the general election ballot of whom no one had ever heard.

Nonpartisan primaries would also lower barriers to running and create a clearer path for moderates or candidates not adhering in full to their party’s orthodoxy—for example, fiscally conservative Democrats or socially liberal Republicans. Today, such candidates often can’t make it out of either a Democratic or a Republican primary, and a nonpartisan top-two or top- four primary will give them more opportunity to advance.

Nonpartisan primaries would also empower legislators to build records of sensible compromise and of getting things done. For example, federal legislators who were considering voting “yes” on bipartisan legislation, like Simpson-Bowles, would be more willing to do so in a nonpartisan primary system, because they would still have a path to be one of the top-two or top-four vote-getters in the primary (instead of being virtually guaranteed to lose their partisan primary). Once through the primary, they would then be able to appeal to the broader general-election electorate based on having done something to advance the public interest.

Nonpartisan top-two primaries have recently been instituted in two states: Washington and California. These are major steps forward, and we must build on them.2 These states changed their primary systems through voter referendums—proving that it can be done. The Independent Voter Project played a major role in securing top-two primaries in California (see www.independentvoterproject.org).

In moving toward nonpartisan primaries, an initial and interim step can be to move from “closed” party primaries (which allow participation by party members only and which are the rule in many states) to “open” party primaries (in which everyone can vote without being required to register with a party). This will work to reduce the partisanship of primary voters and build momentum toward a fully nonpartisan primary system (see www.openprimaries.org).

Institute ranked-choice voting with instant runoff in general elections. Our current voting system is “first- past-the-post, winner-take-all,” which can easily result in a candidate winning with only a plurality (not a majority). For example, in a three-way race, a candidate can win with as little as 34% of the vote (with the other two candidates each receiving 33%), which indicates that 66% of the voters preferred someone else.

Ranked-choice voting is a different approach, designed to elect the candidate with the broadest appeal to the most number of voters. Candidates who are opposed by a majority of voters can never win under this system, and no votes are ever “wasted.

Here’s how ranked-choice voting works: In a four- candidate general election, voters rank as many of the four candidates as they want in order of preference. If one candidate receives more than 50% of the first- choice votes, that candidate wins. If not, the last-place candidate is dropped in a so called “instant runoff,” and the voters for this candidate are automatically reassigned to each voter’s second choice. This process continues until one candidate achieves a majority. This means that no candidate is ever elected until they receive at least 50% of the vote. (See https://www.facebook.com/IVN/videos/10153216413332465/ for a quick video that explains ranked-choice voting.)

With ranked-choice voting, citizens can vote for the candidate they like the best without worrying that their vote will help elect the candidate they like least. Thus, ranked-choice voting eliminates the “spoiler” argument.

Under this system, candidates no longer focus exclusively on securing first-choice support, because broader support may be necessary to win. This encourages a focus on the issues and reduces incentives for negative campaigning, because candidates must avoid alienating other voters whose second- and third-place support they may need. Candidates in this system are less likely to run scorched-earth campaigns.3,4

Like nonpartisan primaries, ranked-choice voting is also no longer just an idea. Maine became the first state to adopt this reform in a November 2016 ballot initiative (see http://www.fairvote.org/rcv#rcvbenefits and www.rcvmaine.com and www.represent.us).

Institute nonpartisan redistricting. As we discussed in Part II, gerrymandering is the process of drawing legislative district boundaries that create artificial advantage for the party in control. Thirty-seven states currently give redistricting power to the state legislature—effectively handing over control of this crucial part of our democratic process to whichever party is in power.5 Gerrymandering reduces competitive seats and, thereby, minimizes accountability for elected officials (which is exactly the type of behavior one would expect from a self-serving duopoly).

Independent commissions should take over redistricting, an approach which has been instituted in Arizona, California, Idaho, and Washington. So progress is taking place.6 Gerrymandering reform across the country will likely require multiple approaches that include litigation and ballot initiatives, among others, because the redistricting power is delegated to states, and each state may need a different strategy for change.

Several ballot initiatives to reform redistricting are underway, and progress is also being made on the litigation front. In October 2017, the U.S. Supreme Court will hear oral arguments in Gill v. Whitford, a case brought by Wisconsin voters against the State of Wisconsin challenging the state’s Assembly district lines. In November 2016, a three-judge federal panel in Wisconsin struck down the state assembly district map in question, ruling for the first time in 30 years that a state legislative redistricting plan was an unconstitutional partisan gerrymander. A key part of the case is the plaintiffs’ rigorous three-part statistical methodology for identifying partisan gerrymanders, designed to provide an objective standard to evaluate if a partisan gerrymander has occurred. Previous cases were found to lack a manageable standard. If this ruling is upheld by the Supreme Court, the plaintiffs’ three-part test to provide a standard for identifying partisan gerrymanders will constitute an important tool to fight this political practice across the country (see http://www.campaignlegalcenter.org; and, specifically, see the Campaign Legal Center’s report on partisan gerrymandering at http://www.campaignlegalcenter.org/document/make-democracy-count-ending-partisan-gerrymandering).

Rewrite debate access rules for presidential elections. Today there is almost no way to mount a serious bid for the U.S. presidency outside of the duopoly. According to Peter Ackerman, Chairman of Level the Playing Field, “this state of affairs is the product of collusion between operatives from the Democrat and Republican parties who—through the design of hidden rules—jealously guard the perpetuation of their duopoly.”7 One of these hidden rules involves access to the fall presidential debates. A person running as a Democrat or Republican knows that if they win the nomination they will be guaranteed a place in the debates. The Commission on Presidential Debates (CPD), a private organization dominated by partisan loyalists, requires every other candidate to meet a 15% polling hurdle in a three-way race decided just seven weeks before the election. While 15% may seem reasonable, the poll taken so late in the election cycle creates an insurmountable “Catch-22.” The practical effect of this rule is to create a major anticompetitive barrier to any candidates outside the duopoly, and that is why there hasn’t been a third candidate on the Presidential debate stage since 1992.

Level the Playing Field filed and won (in early 2017)8 the first stage of a federal lawsuit to change this rule and open the debates, and the litigation is moving through the courts on pace for a resolution in time for the 2020 election. Success in this lawsuit would be an important step to inject competition debates from those outside the duopoly into the debates. (see www.changetherule.org).

2. Restructure the Governing Process

Political outcomes are affected not just by who wins elections but also by the rules set by the parties to control the legislative and governing process.

Rewrite legislative rules. Party control over day-to- day legislating and governance needs to be significantly reduced. It is clear that today’s process has been designed to enhance the power of the two major parties to control outcomes, rather than to make legislating a process that is most likely to serve the public interest. (For more detail on the hidden partisanship in legislating, see Mickey Edwards' book The Parties Versus the People.)

As a first step toward devising a better system, we propose the establishment of an independent Legislative Reform Commission to design a new set of legislating and governing rules and produce a public report of its recommendations. The Commission should bring together a consortium of leading experts who are independent of the parties and government. We suggest that an alliance of universities jointly create and sponsor this commission.

The Commission’s mandate should be threefold:

  1. Identify the partisanship hidden in the current legislative system;
  2. Design a set of rules that liberate the process of lawmaking from partisan control and that are
    designed to support and encourage truly democratic and solution-oriented debate, vote-taking, and legislative solutions;
  3. Determine a process (i.e., action steps by constituency) by which existing rules can be changed in order to implement the recommendations of the Commission.This process will likely require intense public pressure on Congress, since Congress controls its own rules.

3. Reform Money in Politics

The influence of money is distorting political competition by biasing elections, influencing policies, and creating barriers to new competition. Practical steps are needed to address this.

Campaign-finance reform has been limited by Supreme Court rulings such as Citizens United v. FEC. Fortunately, motivated and creative experts have come together to craft a feasible (though clearly challenging) strategy to diminish, over time, the role of big money in our politics, with a heavy reliance on state and local action.9

In reducing the role of money in politics, including not just campaign-giving but lobbying and post-retirement employment of elected and appointed officials, the perfect should not be the enemy of the good: We should reform all we can in the near term, while we craft and wait for changes in jurisprudence over time to overturn troubling court rulings.10

Here are some critical reforms that can be undertaken now:

  • Enact citizen-funding systems to incentivize small donors. For example, the government could match small, private contributions that a candidate raises up to a set amount—either dollar for dollar or at a certain multiple.
  • Establish 100% transparency in political spending— including for currently “dark” spending (i.e., donors are secret), such as spending by 501(c)(4) organizations and Super PACs.
  • Eliminate fundraising loopholes that favor existing parties over independents. Fundraising rules should apply equally to all candidates, including independents and affiliates of third parties.

Contact www.represent.us to participate in an activist group pressing for campaign finance reforms across the country. Also read “Blueprints for Democracy” (http://www.blueprintsfordemocracy.org/download-pdf-1), a promising, comprehensive strategy to reform money in politics, jointly developed by the Campaign Legal Center and Issue One (see www.issueone.org).

Having said this, diminishing the influence of money alone cannot be expected to transform our political system. The real answer is to dramatically reduce the attractive return on investment that donors currently receive. When we enact the systemic reforms detailed above, the incentive for politicians to respond to constituents will prevail over responding to donors and special interests, thereby reducing the incentive for their spending.

4. Open Up Near-Term Competition—Without Waiting for Structural Reform

As we have described, barriers to new competition from new parties, independent candidates, and even moderates are prohibitive.

While the structural, systemic reforms above are essential, they will take time. In the meantime, we should also pursue steps with more immediate potential to shift political competition in the right direction—even prior to widespread adoption of our recommended structural changes. These steps—some of which were introduced briefly in Part IV’s discussion of “substitutes”—will provide important near-term benefits (as soon as the 2018 elections) while also building momentum for structural and systemic change.11

Implement The Centrist Project’s “Senate Fulcrum Strategy.” A highly leveraged way to break the current political gridlock would be to elect three to five centrist independent U.S. senators with a problem-solving agenda. Ideally, such a group would be large enough to deny either party an outright majority, and thereby become the most powerful swing coalition (i.e., the “fulcrum”) in the Senate. Depending on the policy issue, this coalition could then align with either party, or bring subsets of both parties together, to create a majority to pass legislation providing real solutions to our nation’s toughest challenges.

The Centrist Project’s plan includes strategically identifying a small number of states with a political climate favorable to candidates from “the sensible center,” recruiting promising candidates, and supporting them with a campaign infrastructure, as we discuss further on. The genius of this plan is that, while challenging, it is eminently doable because the number of seats required to deny either party a majority is small. This political innovation could bring transformational change to the U.S. Senate as soon as 2018 with a relatively small investment—sooner and for less cost than the longer-term structural reforms we detail in this section.

The Centrist Project, which describes its effort as an “insurgency of the rational,”12 would use the leverage of the fulcrum to force change from the political center. Similar approaches could be taken at the state level (see www.centristproject.org).

Run (centrist) independents at all levels. Solutions- 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 candidates who are running outside the duopoly and who are committed to staying outside it—rather than viewing them as spoilers. Success in some independent campaigns would reduce voter and media obstacles in others, encourage more and more candidates to seriously explore independent campaigns, and generate more funding and election support (see http://independentvoting.org/about-us/).

Establish a shared independent (and moderate) election infrastructure. Substantially increasing the number of independents and moderates who run and win will require building an effective shared election infrastructure to help independents (and moderates) surmount the barriers to entry created by the parties. Such infrastructure should include raising large, dedicated campaign-financing pools for independents; building a pool of expert political strategists and talented campaign staff; establishing networks and resources to mobilize volunteers; raising resources to surmount obstacles to ballot access; assembling a core of sophisticated media and marketing talent to execute branding initiatives and media strategies, and to build credibility with voters; and investing in access to shared voter data and analytics capabilities. Ideally, this effort should include Super PACs dedicated to supporting independents (see www.centristproject.org).

Create support structures for solutions-minded center-right and center-left party candidates in overcoming primary challengers. Allies of No Labels—a group formed to address Washington dysfunction by getting Democrats and Republicans to work together in a bipartisan fashion—have launched a Super PAC effort for the 2018 election cycle with a dual mandate of protecting pragmatic problem-solving U.S. House members, who are facing primary challenges from the left or right, while also working to defeat the most obstructionist legislators in their primaries.13 Innovations such as this can change incentives to reward problem solving and penalize obstruction, and can help build a coalition of more results-oriented politicians.

This effort will not provide funding for general elections so that it can work with both sides. Innovations such as the establishment of this Super PAC can substantially reduce the barriers to new kinds of competition, while simultaneously altering incentives to reward problem- solving and penalize obstructionists. The result could be a coalition of more collaboration-minded party members who then have access to critical financial support not previously available in primaries. So far, this approach has prevailed in two 2016 races, and the organizers plan to expand it significantly in 2018 (see www.nolabels. org).14

Expand the “Govern for California” model of state- level innovation. Elections for state legislatures have tended to fall off the radar of most citizens. Yet state legislatures have an important role in the design of our political system, because they control many of the rules governing political competition, not to mention the important state level policies they oversee. The political industrial complex pays close attention to state legislatures, but most citizens are barely engaged.

Govern for California is an organization focused on state-level reform by leveraging political philanthropy to support the election of candidates to the California state legislature, whom they select based on non-ideological criteria. Criteria include financial literacy and courage to take a stand, the latter defined by Govern for California’s founder, David G. Crane, as “the demonstrated willingness to stand for something greater than oneself.”15

Govern for California’s ultimate goal is to shift outcomes in the California state legislature by electing courageous, independent-minded, and effective legislators. So far, Govern for California has helped finance 14 successful legislative candidates.16 Such efforts, as well as other state-level support models for independent and moderate candidates and elected officials should be expanded (see www.governforcalifornia.org).

Reform is Possible

It is easy to succumb to a “learned helplessness,” as Charlie Wheelan, founder of The Centrist Project and author of The Centrist Manifesto, describes a common outlook on politics. We must reject such passivity. Many of the approaches we have described are beginning to gain traction, as evidenced by the progress in moving to nonpartisan primaries and ranked-choice voting, as well as the gerrymandering and presidential debate litigation we detailed above. These examples are a promising start and prove it can be done.

However, taking back our political system will require a large-scale national effort. Since the 2016 election, frustration with politics has triggered widespread concern and even public protests. Turning these protests into broad-based political reform that addresses the root causes of today’s broken system will translate this general frustration into powerful and achievable change for America’s citizens. (See sidebar on “Implications for Business Leaders.”)

It is worth repeating that the problem in our politics is 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 the political competition that the current major parties have created and their insulation from new competition. What is needed is to change the way parties compete, which should lead to their better serving the public interest.

The top two parties should always be operating under the potential competitive threat from an upstart that better addresses the public interest. The steps we advocate are designed to create the conditions for healthy (i.e., solutions-oriented and not self-serving) competition, and to hold incumbents accountable for serving the public interest. Then our democracy can take over, with existing parties transforming themselves or a new party coming into being, if that’s what voters want.

Let’s not forget that the health of competition between our major political parties has eroded substantially in the last several decades (see Part V). Historically, other parties, including the Federalist, Whig, American (“Know- Nothing”), and Free Soil Parties were all prominent. The idea that we are—or should be—stuck forever with the Republicans and Democrats in their current form is just historically unsupported. Given that today’s parties have become self-serving—to an extent that may well be unprecedented, just like those corporate executives who have enriched themselves at the expense of their shareholders—it is time to open up competition to bring politics back to serving the public interest.

Our Responsibility as Citizens

Historically, America’s political system was the envy of the world and a crucial foundation of our nation’s success. The system advanced the public interest and gave rise to a long history of policy innovations. But today, our political system is divisive and stands in the way of progress on virtually every important issue our nation needs to address. We believe it has become our nation’s single greatest challenge.

By looking at our political system as the major industry it has become, the root causes of the failure of political competition become clear. The system is delivering what it has been designed to deliver—primarily, for the benefit of the duopoly and the political industrial complex that has grown around it. Most troublingly, many of the major actors in the system are thriving, even as close to 80% of Americans are dissatisfied, and political outcomes are abysmal.17

We can fix the political system, but it will require sustained citizens’ initiative and sustained investment. A new kind of philanthropy in America, which might be called “political philanthropy,” will be needed (see the sidebar “The Power of Political Philanthropy”).18

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 the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.”19

Today, the influence and the perverse incentives of the political industrial complex have become our greatest threat. Our political system will not be self-correcting. It is doing what it is designed to do. Structural change is required to reestablish healthy political competition that advances the public interest and delivers solutions.

We citizens bear the ultimate responsibility for knowing what is good for our society and insisting on change. We can never forget that the political system we have today was designed by our own elected representatives—the people we voted into office. This system was corrupted over time, and most of us did not even notice.

We have the power to fix it, and we must. Reinvigorating our democracy will not be easy—but it is doable, and the need is urgent. We must not forget the words of Benjamin Franklin. When exiting the Constitutional Convention in 1787, he was reportedly asked, “Well, Doctor, what have we got— a republic or a monarchy?” Franklin replied, “A republic, if you can keep it.”20

THE POWER OF POLITICAL PHILANTHROPY

America has a great philanthropic tradition. U.S. philanthropic giving was $390 billion in 2016, addressing a wide range of social challenges such as health care, education, and poverty.21 However,
U.S. states (excluding federal funds) collectively spend that much in less than four months, and our federal government spends that much in just over five weeks.22 Philanthropy is no substitute for effective government.

Given our failing political system and its effect on virtually every social and community issue, we need a new kind of philanthropy in America. It might be called “political philanthropy” where donors (to political reform, political innovation, and solutions- oriented candidates) prioritize the general interest over any personal or special interest.23 Substantial investments will be required to achieve the reforms outlined in this report: changing the rules in Washington, and even state by state, and creating the infrastructure and financing necessary to support independents and moderates.

Arguably, political philanthropy offers the best potential return on investment of any form of philanthropy today. As David Crane, co-founder of Govern for California, makes clear in his work, success in improving government effectiveness, policy choices, and policy implementation would result in more effective spending of public resources and have a major impact on the actual progress our country makes on improving health care, public education, and anti-poverty efforts, to name a few.

Now is the time for concerned donors to redirect a portion of their philanthropic resources to the cause of revitalizing our democracy. In the end, political philanthropy may well now have the greatest impact on advancing our society.

Part V: Worsening System

Why Has the System Gotten Worse?

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Why have the outcomes and nature of competition of our political system worsened over the last decades, especially since the 1960s? While partisanship at some level has existed since our governmental system was created, the structure of the politics industry has changed significantly—for the worse.

Figure 1 identifies some of the most significant industry structural shifts starting in the 20th century.1 This analysis is not meant to be exhaustive, but to highlight the many important changes that have moved competition in the direction of increased partisanship, gridlock rather than practical solutions, and substantially higher barriers to entry for new competition. (See the sidebar “Milestones in Political Competition and Polarization” for a brief overview of some of the important changes that have led to today’s industry structure.)

Of these changes, some were well-intentioned refinements to rules and practices that had unintended consequences. Many other “reforms” were driven by political actors to expand their influence and ensure their growth.2 Some existing practices were optimized over time to benefit the duopoly. For example, through the use of much more detailed and precise voter data and better technology, gerrymandering has become far more sophisticated and effective. Finally, broader shifts in American culture, institutions, and demographics have also played a role.3

An example of a well-meaning reform with unintended negative consequences was the establishment of partisan primaries, which were intended to give citizens greater influence. The idea was that voters would democratically select the parties’ candidates, instead of the parties doing so in “smoke-filled back rooms” or caucuses. However, as we have discussed, an unfortunate effect of partisan primaries has been to foster more extreme candidates and to leave many general election voters with what they perceive to be unacceptable choices.

More recent congressional reforms with unintended consequences include the elimination of earmarks* and rules and norms discouraging closed-door, anonymous votes in committees.4 These would seem to be clearly positive steps. But, in a polarizing system in which the parties were more and more partisan and entrenched, these changes removed some of the last remaining ways to secure compromise. Earmarks served two purposes: They were a “currency” to get deals done, and they allowed legislators to get credit in their districts for benefits they delivered which could help offset the political cost of compromise. Closed-door, secret votes also helped insulate compromises from attack by partisan extremes. While we do not advocate a return to these particular practices, it will be necessary to change the industry structure in other ways to shift competition towards finding common ground and delivering practical solutions.

*Definitions of earmarks vary, but a good basic definition comes from 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 slipped into bills without the review typically given to pending legislation.” See Annenberg Classroom, “Earmarks,” http://www. annenbergclassroom.org/term/earmarks, accessed March 2017.

Outside factors and changes in related institutions also played a part in creating more partisan competition and less solutions-orientation over time. For example, the decline of major newspapers and the once-dominant big three TV networks has contributed to making independent media less influential. The advent of 24/7 media coverage and more partisan media has made any compromise visible and subject to instant attack, as media increasingly thrive on controversy. The rise of social media has proved to be a powerful tool to bombard voters with divisive and sometimes misleading messages that have reinforced partisanship and made divisions worse.5

As is common in complex systems, the collective effect of these changes has become increasingly self- reinforcing. Election changes helped encourage media evolution, which increased politicians’ attacks on the media. The consequences of shifts that led to fewer moderates being elected emboldened the partisanship of winners. And so on. The degradation of the system has sped up over time.

As this historical evolution highlights, transforming political competition will require a comprehensive strategy rather than isolated steps. Structural reforms will be needed in multiple areas to alter incentives now embedded in today’s system and shift the nature of competition. Our challenge is to trigger a new set of self- reinforcing changes that will bring political competition back into alignment with the public interest and not the duopoly’s partisan interests.

THE ELECTION OF PRESIDENT TRUMP

Has the election of Donald Trump changed the structure of our political system, or our analysis, conclusions, or recommendations?

On the contrary, it is a direct reflection of them. The Trump election and presidency only reinforce our conclusion that political competition is dysfunctional, and fail to deliver the outcomes that advance the public interest. The election provides a striking indication of the level of public dissatisfaction with the status quo, as the voters clearly tried to reject the political industrial complex by electing someone from “outside the system.”

In the end, they were not successful. Trump ran within the existing duopoly, correctly recognizing that a truly independent bid would not be successful, due to the very high barriers to entry facing an independent. This, not coincidentally, is the same conclusion Michael Bloomberg is said to have reached as he considered his own run as an independent.6

Does Trump’s election signal a shift in the nature of rivalry and the end of party influence? We do not think so. In fact, partisan rivalry and division are likely to increase. Despite initial skepticism by the Republican party establishment, the Trump election became a victory for the Republican side of the duopoly—not for new competition.

President Trump can be understood as a hybrid substitute to the traditional party system, but, not truly new competition. He ran as a Republican, albeit with mixed party support, and utilized the party system and its advantages to campaign, get on the primary and general election ballots, and win.
Trump’s ability to win reflected a very specific personal and political context. His high brand recognition provided two key benefits: 1) unprecedented free media access because his campaign style attracted viewers7 and 2) his ability to go directly to the public using social media (which was a new innovation as well). These lowered the cost of his campaign and, combined with his self-financing ability, lowered his barriers to entry.

Running as an “outsider” within a party may emerge as a strategy others may imitate. However, the Trump success is likely to be more an anomaly due to his unique personal circumstances. Having said that, it is likely that Trump’s election and presidency will cause adjustments and disruption within both the Republican and Democratic Parties which may be significant.

But neither the structure of the politics industry nor its incentives have fundamentally changed. In fact, it is probable that the specter of the 2018 partisan primaries will increase congressional dysfunction, because Republicans who speak up for anything contrary to the Trump administration’s line will fear primary challenges (unless and until Trump’s support among Republican primary voters drops significantly from current levels).

The same will be true for Democrats who are seen to be anything less than completely obstructionist—no matter what the administration proposes.8

The Trump presidency provides striking support for our belief that the current political industrial complex is dysfunctional. Washington, D.C. has been unable to so far get much if anything done, despite one-party control. Gridlock continues. The duopoly and the broader political industrial complex remain intact.

Finally, the parties will likely be better prepared in the future for such “outsider” contenders, and will likely find ways to restore greater party control. The need to reform our political system to create healthier competition and better outcomes remains unchanged.

Part IV: Industry Structure

How the Structure of the Politics Industry Undermines Competition

In healthy competition, industry actors would be competing to deliver the desired outcomes we just discussed in Part III—and be held accountable for those outcomes. However, as we have seen in earlier sections, today’s political competition fails to deliver the desired outcomes and diverges sharply from the public interest. To understand how and why this is so, we can employ the same tools and concepts used to study countless other fields. The nature of competition in any industry—and the degree to which it is healthy or unhealthy competition—depends on its underlying structure.

Industry structure starts with rivals, or the competitors themselves. The rivals have relationships with and to four additional competitive forces: buyers (customers, channels),* suppliers, new entrants, and substitutes.

The rivals compete to serve buyers. In many industries, channels are used to reach end customers, such as supermarkets for food. Channels act as an intermediate buyer between rivals and the end customer. To access the inputs they need to compete, rivals depend on suppliers of things like talent, raw materials, and technology. Rivals are also subject to new entrants, or potential new competitors. New entrants come into an industry if they see an opportunity to serve customers better. Finally, every industry also faces the threat of substitutes. Substitutes are different ways of meeting the same customer needs, such as online news versus print newspapers.

An industry’s structure is the overall configuration of these five competitive forces and the power relationships between rivals and each of the other forces.** This web of dynamic relationships determines how an industry competes, the value it delivers to its customers, and who has the power to capture that value. Industry structure explains how rivals or other actors can thrive even while customers are dissatisfied—as is the case in the politics industry.

In healthy competition, rivals compete fiercely to better serve customer needs. Channels reinforce this by educating customers and pressuring rivals for better service. Suppliers compete to provide better inputs that allow rivals to improve their products or services. In healthy competition, if rivals fail to serve customers, new entrants come into the industry and compete in new ways, offering better value. Or substitutes shrink the opportunity for rivals—and even replace them altogether—by meeting needs in a new and better way.

Healthy competition is win-win. Both rivals and customers do well, and rivals are continually motivated to better meet 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.
Here, rivals concentrate on the customers who best 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.

*There can be multiple levels of buyers. In this industry, there are two levels: end customers (citizens) and channels.
**For a more detailed explanation of the concept of industry structure, see Michael E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: Free Press, 1980). See also Michael E. Porter, “The Five Competitive Forces That Shape Strategy,” Harvard Business Review, January 2008.

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Industry Structure in Politics

The five competitive forces in the politics industry are shown in Figure 1, and we will examine each of them and their implications. Before we begin, we note two interesting aspects of the politics industry that distinguish it from other industries. First, competition in politics takes place on two levels: contesting elections and governing. These occur together and reinforce each other. Second, the politics industry has two currencies—votes and money.

Customer Power Is Skewed Against the Average Citizen

The nature of competition is manifested in the target customers that rivals choose to serve and who, thus, have the most power to shape outcomes. A political system is supposed to serve the public interest, so all citizens should be its customers. But, in fact, the industry does not aim to serve all customers equally. Just as savvy businesses often choose to prioritize their most profitable customers, the duopoly chooses to prioritize the customers that most advance its interests.

Customers in the politics industry can be divided into five major segments based on how they engage with the industry: partisan primary voters, special interests, donors, average voters, and non-voters. The most important customers for the political industrial 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 interests. They are often overlapping, as shown in Figure 2. The weakest customers are average voters and non-voters. Let’s examine each segment in turn.

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Partisan primary voters: The first of the three powerful customer groups, partisan primary voters, are the “guardians” at the gate—any candidate must pass by them to get elected. These voters, then, are a key part of the “base” that parties cultivate.

Primary voters, as a group, are distinctly different from the average voter. They are more engaged, more partisan, and farther to the left or right within their respective parties.*1 They can also be counted on to turn out in the general election.

In gerrymandered congressional districts and even non- gerrymandered districts where one party has a plurality, the partisan primary is the only election that really matters. In 2016, fewer than 10% of U.S. House races and only about 28% of Senate general election races were competitive.2 The rest were in safe seats, and the winner was effectively decided in the primary.

The strong influence of partisan primary voters is problematic, because this influence is disproportional to their number. For example, only 29% of eligible voters participated in the 2016 presidential primaries.3

In midterm primaries, turnout is typically even lower: Only 19% of eligible voters participated in U.S. Senate primaries in 2010, and 18% in 2006.4 Yet this relatively small group of primary voters has a disproportionate impact on who gets elected. The influence of primary voters is even greater in about half the states, where primaries are closed or “semi-closed” to non-party members.*5

Special interests: A second powerful customer group is special interests. These are organized groups—either policy-related or industry-related—that are heavily focused on influencing political outcomes on particular issues in their favor. Examples of special interests include the pharmaceutical lobby, insurance lobbies, the gun lobby, the pro-choice and pro-life lobbies, small business lobbies, unions, and so on. Special interests are often not interested in compromise on their issues—they want to prevail.

The parties’ importance to many special interests is magnified because partisanship plays an important role in government regulation of private industry. For example, there is a range of influential, supposedly independent “Independent Regulatory Agencies” including the Federal Communications Commission (FCC), the Commodity Futures Trading Commission (CFTC), the Consumer Product Safety Commission (CPSC), and the Federal Deposit Insurance Corporation (FDIC). These agencies are overseen by commissioners nominated by the President and confirmed by the Senate. Of the five commissioners overseeing each agency, no more than three can be from the same party, and the
President designates who shall serve as the Chair. Party affiliation, then, matters for regulation. Party control of the presidency and the Senate can shape the nature of regulation in particular industries and for particular constituencies.

Note that some special interests deliver both kinds of currency: votes (by turning out their “members” or supporters in both primaries and the general election) and money. Funding from special interests can include both spending on elections and spending on lobbying. Many special interests have concentrated their spending more on lobbying. For example, in the 2015–2016 election cycle, the health sector contributed $268 million to campaigns, but spent $1.02 billion on lobbying.6

Finally, some special interests also influence elected officials by offering the potential of a lucrative job after the official leaves the government. Many elected officials follow this path, and their desire to stay in good graces with special interests can affect their positions on legislation.7

Donors: The third customer group—donors—is powerful because parties seek to maximize the dollars raised. Donors were traditionally wealthy individuals who made direct contributions to candidate campaigns. Since the Supreme Court rulings on campaign finance in Citizens United v. Federal Election Commission and McCutcheon v. Federal Election Commission, however, the distinction between donors and special interests has blurred, as individuals and special interest groups (including corporations) can make unlimited donations not only to Super PACs but also to social welfare organizations, unions, and trade associations.8 All of these groups can use these funds for the purpose of influencing elections and public policies.

There is no question that donors continue to enjoy major access to and influence in the duopoly. It’s also true that some donors have, more recently, taken some power from the parties and candidates through the use of the new independent spending organizations. However, the fruits of donor spending still accrue to one side of the duopoly or the other. Hence, the barriers to entry facing new competitors and the ability of the duopoly to keep out new competitors are not substantially diminished.

Average voters: The fourth customer group is average voters. Average voters represent a substantial proportion of voters who don’t vote in primaries and are not regular donors. Average voters include voters making up part of each party’s base and swing voters, though they tend to be less ideologically extreme.9 In our current political system, both types of average voters have little power to influence outcomes.

The parties do pay some attention to the average voter in order to increase the turnout of their base, depress the turnout of the other side’s base, and capture “swing” voters. But since average voters have only two choices in most general elections, parties appeal to them on the margin. The parties do not compete for average voters by delivering outcomes for their benefit, but rather by seeking to be a little less disliked than—or slightly preferred to—the other party. Parties don’t need to deliver solutions, but only convince average voters to choose them as the “lesser of two evils.”

In a normal industry, ignoring such a large group of customers would make a competitor vulnerable to new competition. But in the politics industry, as we will discuss, the barriers to entry are very high, and, therefore, new competition does not emerge. The parties, thus, concentrate on delivering value to their powerful partisan primary voters, donors, and special interests, instead of to average voters.

Non-voters: The final customer group, which includes the least powerful customers of all, is the non-voters. Almost 40% of eligible Americans did not vote in the 2016 general election.10 Those who don’t vote have no influence and, thus, have ceded their customer power to the duopoly and its allies. These individuals, perhaps not surprisingly, tend to be more moderate and more independent.11

*Voters whose views are either “consistently conservative” or “consistently liberal” are significantly more likely to vote in primaries than those who are “mostly liberal,” “mixed,” or “mostly conservative.” Primary voters are not only more ideological, but more often are “very interested in politics.”

Overall, average voters and non-voters represent up to 70% of citizens eligible to vote—the majority.12 Yet elected officials can’t afford to support policy positions based on how popular they are overall with citizens in their districts, or with the public. Instead, they have strong incentives to focus on the opinions of the small set of primary voters who will disproportionately affect their next election, and on the legislative priorities of the donors and special interests who fund them and, in some cases, provide their post-public-service employment.

Recent research supports these conclusions about where customer power actually lies. In 2014, researchers at Princeton and Northwestern examined congressional action on 1,779 policy issues. Their sad finding: “When the preferences of economic elites and the stands of organized interest groups are controlled for, the preferences of the average American appear to have only a minuscule, near-zero, statistically non-significant impact upon public policy.” 13

This perverse influence of customer power on the nature of rivalry has become self-perpetuating. The more voters who drop out in disgust and don’t vote, the more power is ceded to the parties, partisan voters, special interests, and big money. Yet, a major reason that so many citizens do not vote is a direct result of the nature of the competition the parties have created. Many non-voters are turned off by Washington. They believe their vote will make little difference.*

Also, many candidates, and policy solutions that would appeal to less ideological citizens, are driven out by today’s political competition. Thus, more and more average voters drop out. Or—and this may be worse— voters acquiesce and play the game that the duopoly has created of advancing their special interests and making donations. Outcomes only get worse.

Overall, then, most of the customers our political system should be designed to serve—citizens—have the least power to influence its results. Until this changes, bad outcomes will persist.

Channels Have Been Co-opted by the Duopoly

Channels are the means by which rivals in an industry reach customers. In healthy competition, channels help customers better understand and access the products and services that meet their needs. At the same time, channels help competitors better serve customers. Independent channels often play a significant role in objectively informing and influencing customer choices, which improves the vitality of competition.

When existing channels poorly serve customers, new channels often emerge and can be a disruptive force in shaking up the competition and pressuring rivals to better meet customer needs.

Channels in the politics industry are the means by which parties, elected officials, and candidates reach customers with information and persuasion. In the politics industry, there are four major channels: paid advertising, traditional independent media, social media, and direct voter contact.

Paid advertising: Created and paid for by candidates, parties, and (increasingly) other outside groups, paid advertising takes place primarily in the media, such as TV, radio, and digital media, to whom the money flows. Paid political advertising is regulated to some extent.

This channel is largely controlled by candidates and parties, and hence is not independent. The recently increased ability of independent organizations to advertise in elections creates the opportunity for a truly independent voice. But so far, most of the “independent” organizations are simply other members of the same duopoly.

Traditional independent media: The traditional independent media report and offer editorial opinions on candidates, elections, and governing. The independent media include established mainstream organizations—television networks, radio, magazines, and newspapers— but also newer online media such as Real Clear Politics, Ryot, and Vice.

Social media: New channels include Twitter and Facebook as well as numerous blogs. Many of these new channels are independent, but the duopoly has aggressively embraced them as well. The new channels have become major low-cost conduits for reaching, informing, lobbying, and soliciting money from voters. This channel has also made possible the proliferation of fake news and news bubbles to a degree not previously possible.

Direct voter contact: This takes place through face-to- face meetings, rallies, fundraisers, knocking on doors, and phone calls. This traditional channel is largely controlled by the parties. While not growing substantially, the parties take advantage of better voter data to make direct voter contact far more efficient, and to micro- target individuals who are likely to vote.14

*According to a 2006 Pew Research Center survey, of the 22% of age-eligible Americans who were not registered to vote, 33% believed that “voting doesn’t change things,” 43% were “bored by what goes on in D.C.,” and 22% were “angry with government.” For the 23% of Americans who were registered but rarely voted, the corresponding figures were 30%, 42%, and 14%, respectively. According to a 2014 Census Bureau survey, the top reasons why registered voters did not vote in the midterm election were: “too busy” (28%), “not interested” (16%), “illness/disability” (11%), “out of town” (10%), “forgot to vote” (8%), and “disliked candidates/issues” (8%). See Pew Research Group, “Who 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,’” Washington Post, July 7, 2015, https://www.washingtonpost.com/news/ the-fix/wp/2015/07/17/why-dont-americans-vote-were-too-busy, accessed March 2017.

* * *

Why have the traditional channels in politics not been more effective in supporting the public interest? Why have the traditional independent media not held the duopoly accountable for results in terms of solutions, or even presenting the facts accurately? Why have supposedly “disruptive” new independent channels like social media mostly reinforced partisanship and the existing political industrial complex, and done little to shake up competition?

The problem is that many channels are not independent, and even those that are—both the new and old—benefit financially by aligning with the duopoly and embracing the partisan competition it has created.

Political advertising is often negative and reinforces partisan, zero-sum competition. Since political advertising accounts for an important part of media revenue in election years,15 partisanship has become good for media spending and social media traffic regardless of an organization’s journalistic approach.

An independent media should be the loudest voice for the public interest and the hardest for the parties to control. However, partisanship has become too profitable for the media’s business. Viewers and readers are drawn to the bitter fights, to the edgy debates, to who is up and who is down. The 24/7 coverage turns complicated policy into sound bites and efforts at compromise into instant controversy. The 2016 presidential campaign has been compared with a reality TV show, a proven success model for television. The sad thing is that this particular reality TV show really matters for our country.

Although there are certainly exceptions to this, the mainstream media have, in many cases, become less of an independent force holding the parties accountable, and more a part of the political industrial complex. Many media have moved away from journalism into opinion shows (which are good for viewership). And importantly, more media have aligned themselves with the duopoly—for example, MSNBC versus Fox. This amplifies partisanship, rather than acting as a force for independent truth-telling that could promote the accountability of parties and elected officials for results. In addition, independents, moderates, and third-party candidates face major challenges in being taken seriously by the media and getting coverage, because such candidates risk attracting fewer viewers, listeners, and readers.

Even those media aspiring to provide objective, truthful, 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 media often feel they must cover “both sides” of every story, devoting roughly the same amount of time and perceived legitimacy, even when one side is demonstrably ridiculous. Called “false equivalence,” this trend is an increasing problem.16

Not surprisingly, public trust in the media has declined markedly over the last several decades (see Figure 3). The new Internet and electronic technology should have opened up communication and provided a vehicle for voter education, allowing independents and other non-party candidates to reach voters and donors with potentially less need for party infrastructure. In many other industries, electronic communication and social media have been a tool to provide better service to customers (think flight information updates in the airline industry).

In the politics industry, however, new technology and “democratization” of media have so far mostly exacerbated the existing dysfunctional competition. Like partisan television coverage, partisan social media posts get more hits. Also, the political industrial complex has aggressively embraced this new channel, and the duopoly uses social media to bombard citizens with inflammatory and divisive messages aimed at mobilizing angry partisan voters and commentators.

Citizens increasingly self-select both duopoly-connected and “independent” electronic media that reinforce their beliefs. Greg Orman, author of A Declaration of Independents, describes this phenomenon as the self-segregation of voters into “partisan cyber ghettos, where they spend their days reinforcing their preexisting political views while demonizing those with whom they disagree.”17 Sadly, then, the net effect of the new electronic and social media seems to have been to reinforce partisanship and division, and purvey questionable and even fake news.

Finally, effective direct voter contact and person-to- person campaigning require a substantial and expensive infrastructure maintained by the parties and made available only to their candidates and elected officials. Parties now deluge voters with calls, equip volunteers with technology-enabled walk lists to knock on doors, and carefully target the base in get-out-the-vote efforts. Efforts to reach voters with bipartisan messages are virtually non-existent.

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Suppliers Are Controlled by the Duopoly

Suppliers provide the key inputs that enable industry competition. In most industries, suppliers help improve products and stimulate greater industry efficiency, while often encouraging and supporting new competitors to reduce the clout of incumbent rivals. Suppliers usually make competition better in serving customer needs.

In the politics industry, however, most everything necessary to run a modern campaign and govern is tightly connected to—and often controlled by—the duopoly. Suppliers, then, have limited power to shape competition, but face strong pressures to align with one side of the duopoly. In fact, as elections and governing become more complex and partisan, suppliers prosper and their revenues grow. Rather than supporting solutions and finding common ground, suppliers make partisanship worse.

In the political industrial complex, there are five key supplier groups: candidates, specialized talent, voter data suppliers, idea suppliers, and lobbyists.

Candidates: Most candidates, with the exception of individuals with celebrity status or significant self-funding ability, have little independent clout. They depend heavily on their party for legitimacy, money, infrastructure, a field force, voting lists, debate access, and all the other requirements of a modern campaign. Non-party candidates face major obstacles given the lack of such support. The parties also get to decide which of their candidates to aggressively support, and most often back those who are most tightly aligned with their platforms. No wonder the number of moderates elected to office has fallen to historic lows.

Talent: This includes campaign managers, political consultants, pollsters, public relations staff, data analysts, social media directors, ground staff, and the staff supporting elected officials. The skills for running a modern campaign and governing are highly specialized and getting even more so, but talent works only for one side or the other—it comes with a Democrat or Republican modifier. Independent and third-party candidates face major challenges in hiring the experienced, highly qualified staff increasingly necessary for modern campaigns, because those who work outside the duopoly risk being banished.

Voter data organizations: Gathering, maintaining, and analyzing voter data is crucial to modern campaigns, and requires a large and sustained investment. Candidates and elected officials depend heavily on massive voter files to cultivate supporters, raise money, decide on issues to target, turn out the vote, and guide priorities in governing. However, these data are not independently available to just any candidate. Instead, duopoly-linked companies have amassed the best proprietary voter databases and voter lists. These companies decide to whom those data are made available, and at what cost. Party-supported candidates thus reap substantial advantages.

Idea suppliers: These are organizations and individuals that develop, pitch, and advocate the policy ideas that get incorporated into party platforms, policies, and legislation. Key idea suppliers are academics and think tanks such as the American Enterprise Institute, the Brookings Institution, the Hoover Institution, and many others. The U.S. has a deep array of such organizations— an estimated 1,835 U.S. think tanks have total budgets in the billions of dollars.18 This has been a benefit historically by creating vigorous competition on ideas and diverse voices.

Today, however, many idea suppliers have become more and more aligned with one side of the duopoly or the other. Out of 35 leading U.S. think tanks focused on public policy, about 70% can be identified as partisan or partisan leaning.19 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 Institution and the Heritage Foundation. Many think tanks are far more partisan than these. Some think tanks have developed political action units rather than focus solely on policy analysis. More partisan funders have also reduced incentives for think tanks to develop bipartisan or compromise policy positions.

Even some academics, traditional defenders of independence and free speech, have become aligned with the political industrial complex and provide regular partisan political commentary. While we are not saying that partisan leanings of think tanks are inappropriate or unethical, this reality only reinforces the dysfunctional political competition.

There are some bipartisan organizations, and dissatisfaction with politics will perhaps increase their numbers. However, some crucial and explicitly nonpartisan policy-analysis organizations within government have been losing ground. For example, the Government Accountability Office and the Congressional Research Service, which provide nonpartisan policy and program analysis to lawmakers, have seen a 41% decline in staffing levels between 1979 and 2015.20

Lobbyists: Lobbyists advocate for special interests and often control significant donations. This also makes them a key industry “customer” as we described earlier regarding special interests. (Note: Some lobbyists are employed by issue-advocacy groups, whose goals are largely to promote their view of the public interest, but many lobbyists are employed by narrow special interests without relationship to the public interest, and that’s the problem we’re discussing.) Lobbyists have become key purveyors of issue research, policy ideas, and legislative support. They are the hired guns who pitch ideas to increasingly overstretched congressional staffs. While congressional committee staff have been cut by 38% since 1979, lobbying expenditures have risen dramatically.21

Lobbying has become a huge business in its own right. Reported lobbying spending, which significantly understates actual spending, was $3.15 billion in 2016.22

Numerous studies show that spending on lobbying can produce a high return on investment for the spender (see Appendix D). Lobbying, then, often incentivizes partisanship and works against true solutions. The clout of these “suppliers,” who are often looking out for their own interests and not for the public interest, can present the possibility of distorted legislation and even corruption.

* * *

Overall, most everything required to run a modern campaign and govern is now tied to the duopoly and has become part of the political industrial complex. Suppliers, then, amplify partisan competition.

High and Rising Barriers to Entry

Industries that fail to serve their customers are ripe for new entrants that improve value for customers and shake up the market. Barriers to entry determine the extent to which new competitors pose a threat, and are an essential part of the structure of every industry.

In the politics industry, the barriers to entry are extremely high. A sure sign of this is the fact that no major new party has emerged since the founding of the Republican Party in 1854. The Progressive Party (1912) and the Reform Party (1992), both serious efforts, elected only a small number of candidates and disbanded within a decade. Despite widespread and growing public dissatisfaction with the existing parties (see Figure 4), contemporary third parties and independent candidates continue to fare poorly.23 

Today’s entrenched duopoly owes its dominance, in large part, to the high barriers to entry that confront any new competition, many of which have been created by the duopoly itself. The key entry barriers are the following:

Economies of scale: The national scope of the two major parties allows them to spread the large fixed investments needed in infrastructure, data, specialized skills and other functions across elections nationally, creating major economies of scale. This leaves emerging parties and independents contesting one or a few races at a severe disadvantage.

Incumbency advantages in brand recognition, relationships, expertise, and infrastructure: The major parties have universal brand recognition, credibility, talent, resources, and long-term voter relationships. The parties have also built up substantial campaign experience and infrastructure over many years, which are hard for third parties or independents to replicate.

Access to key suppliers and channels: As we have discussed, the duopoly now controls much of what is needed to run a modern campaign, which makes it difficult for non-affiliated candidates to run successfully. The duopoly also has preferential access to or control of the channels, which severely disadvantages non-party rivals seeking a voice and voter access.

Access to funding: Raising the major funding needed for a new party, or even for an independent candidate, is challenging because the new competitors have limited donor lists and fundraising infrastructure relative to those of the parties. Making matters worse is enormous skepticism that a new party or independent candidates are even viable, which discourages donors. Campaign financing rules are also stacked against independent candidates, such as the rule that allows a donor to contribute $847,500 annually to a national political party, but only $5,400 per election cycle to an independent candidate committee.24 While the relatively recent ability to give unlimited sums to Super PACs could help some non-party candidates amass significant funding, they are still at a disadvantage to party candidates, since the duopoly also has access to the same Super PACs structures, as well as traditional party funding.

Election rules and practices: Partisan primaries are the main route to the general election ballot, creating a major barrier to entry that every candidate must overcome. Partisan primaries, gerrymandering, onerous general election ballot access rules for non-major-party candidates, and other rules like the sore loser laws we described earlier, create major disadvantages for third- party candidates, independents, and even moderates within the major parties.

Governing rules: Numerous rules, like the ones we described in Part II, give parties substantial control over the governing process. This adds to barriers to entry for third parties and independent candidates, because voters hesitate to support them, fearing (sometimes legitimately) that such candidates will be marginalized in governing. 

Positioning of new competitors as “spoilers”: The parties also work hard to persuade voters to dismiss third-party candidates and independents, portraying them as “spoilers” who cannot win, but will only split the vote and benefit the “other side.” The parties also ensure that new competitors will also have little influence in governing, and portray them this way. Even capable independents can then be dissuaded from running by such voter skepticism.

* * *

All these barriers to entry are made even more formidable by the winner-take-all nature of competition in elections. In politics, capturing a non-plurality share of votes leads to a lost election, not to influence or to a position on which to build. Thus, new competitors must surmount the entry barriers and win, not just make a good showing.

part4-fig4

All these barriers to entry are made even more formidable by the winner-take-all nature of competition in elections. In politics, capturing a non-plurality share of votes leads to a lost election, not to influence or to a position on which to build. Thus, new competitors must surmount the entry barriers and win, not just make a good showing.

While some of the barriers to entry facing new competition in politics reflect the inherent nature and cost of modern campaigns and governing, many are purely artificial. They have been created by the parties through the strategic adoption and refinement of a wide array of competitive choices, rules, and practices that preferentially benefit the duopoly. And the parties have often explicitly or implicitly cooperated to create and sustain these artificial entry barriers, which block new competition.

With little threat of new competition, better aligning political competition with the public interest is an uphill battle at best.

Few Practical Substitutes

A final potential force for shifting industry competition is substitutes, which offer entirely different ways of competing than those of incumbent competitors. In an industry with entrenched rivals, real competition must often come from substitutes. In many industries where customer needs are poorly met, substitutes emerge and can shake up even dominant competitors. Think, for example, of what happened to large bookstore chains in the face of new online competitors.

What are the substitutes to the current two-party system?

Independents unaffiliated with a party: Independents could be a major force for shifting competition, but they face similar barriers to entry as new parties do. At the federal level, Ross Perot was the last major independent presidential candidate in 1992. In practice, electing independents at any scale will require major dedicated funding pools and shared infrastructure, as we will discuss later. Also, even a totally self-funded independent candidate experiences a strong pull to affiliate with a party to tap into its other resources and advantages. And if elected, independents are incentivized to caucus with one of the parties to gain access to committees and have influence.

Organizations that overlay the existing major-party model: Consider No Labels, a bipartisan organization whose goal has been to bring incumbent elected officials together to find common ground and solve problems. While this is a laudable effort that has attracted significant support, delivering solutions through this approach is challenging, given the strong partisan incentives in the current industry structure. A call for bipartisanship—no matter how inspiring—is usually less powerful (when crunch time or reelection or difficult votes come up) than the clout of the parties and the strong competitive incentives to appeal to partisan primary votes and special interests. Allies of No Labels are launching a promising new strategy that addresses some of the root causes of today’s dysfunctional competition (see the discussion of the new approach in Part VI) and this will likely make them a more effective substitute.

Self-funded candidates running through the parties: A form of substitute is heavily self-funded candidates who will have greater independence. However, party support remains indispensable in running and governing. The Trump election is a notable example of the benefits of an “outsider” with resources running within the party, instead of as an independent (see more on the election of President Trump on page 36). And even if elected through the parties, moderate or centrist politicians can find that party ties complicate their agendas.

Coalitions of independent candidates with similar views: A group of like-minded legislators can become a swing coalition and have the power to influence the process of governing. This is particularly true if their numbers are sufficient to deny either major party a majority on its own. The coalition can then negotiate with the existing parties to shape legislation by offering, in return, the votes needed to pass legislation. (We discuss an innovative example of such an approach in Part VI on reform.)

* * *

Why haven’t more effective substitutes emerged in politics despite the poor results? The most important reason is that any substitute faces virtually all the same entry barriers as forming or growing a significant new party. In addition, politics is different from other industries, where substantially new ways of competing are possible. Disrupting or radically reshaping political competition is highly constrained by the fact that there is only one government structure. A new competitor in politics can’t simply choose to create an alternative government structure and different rules. (The largely symbolic independence movements in a few U.S. states are futile efforts to do just that.)25

Why Political Rivalry Fails to Serve the Public Interest

All the elements of industry structure we have discussed come together to shape the intensity of industry rivalry and the dimensions on which rivals compete. In healthy political competition, industry actors would be competing to deliver the desired outcomes we discussed in Part III. But these are far from the outcomes Americans are getting. Instead, the political system is delivering outcomes that benefit the political industrial complex, but fail to serve the public interest.

Why the disconnect? Our political outcomes are not an accident, but the logical result of the industry structure the duopoly has created. They reflect deliberate choices the two parties have made.

The Nature of a Duopoly

The root causes of our poor political outcomes start with the fundamental nature of a duopoly—an industry with two dominant competitors. Where competitors in any industry have market power, we know that competition can diverge from customer interests. In a duopoly, this divergence can be substantial.

How do duopolies work? In a duopoly, rivalry can appear intense, and that is certainly the case in U.S. politics. But what looks like intense competition to the casual observer is not at all what it appears to be. Rivalry in a duopoly is almost always constrained, because the two rivals recognize that head-to-head competition is mutually destructive. Instead, the two rivals seek to compete in ways that reinforce their differentiation and separation from each other.

In a duopoly, rivals also understand that while they compete, they will both benefit from an “attractive” 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 by high barriers to entry. In a duopoly, rivals also depend on each other to take steps to enhance the attractiveness of the entire industry and avoid undermining it.

The Duopoly Seeks to Enhance Differentiation

To avoid head-to-head competition and enhance differentiation, the duopoly pursues three key competitive practices: choosing which customers to serve; competing on ideology and advancing partisan interests, not solutions; and avoiding compromise.

1. Choosing Which Customers to Serve

The fateful and fundamental strategy choice made by the duopoly has been the types of customers they have chosen to prioritize and serve. As we discussed earlier, customers in the politics industry are not all the same; they are segmented. The duopoly has prioritized those attractive customer groups who best serve their interests—partisan primary voters, special interests, and donors, many of whom often overlap.

Parties differentiate and separate themselves by dividing up customers based on their ideological and partisan interests. This is how the parties populate their respective “bases.” This puts the parties in sharp contrast, and minimizes target customer overlap and common ground. Over time, each party evolves its coalition of partisans and special interests to maintain parity or plurality, as “market conditions” in terms of voter sentiments and interests evolve.

The duopoly has been able to divide up and serve customers this way because of the absence of new competitors that compete in a different way. This allows self-serving competition that fails to advance the public interest to persist.

The duopoly targets mutually exclusive groups of partisans and special interests that are aligned with their respective ideological and policy stances. Interestingly, each party’s collection of interest groups and partisans, and the policies that appeal to them, are sometimes inconsistent. For example, Democrats cultivate teachers’ unions but also champion low-income inner-city residents who suffer greatly from the failure to improve public education. Republicans tout individual liberty, yet they advocate government intervention into citizens’ personal choices. Republicans emphasize fiscal responsibility but advocate defense spending that exceeds the combined defense spending of the next eight highest-spending countries.26

Party platforms, tools with which parties collect and cement their allegiances with their target voters, are similarly often incoherent or inconsistent. This is because they are heavily based on ideology or appealing to partisan interests, as we will discuss further.

The parties separate voters to reduce accountability. They choose to compete on partisanship and division, rather than by appealing to many or to the middle. They fail to forge the broad-based consensus that we want our political system to achieve, as we discussed in Part III. Competing on division reinforces the parties’ differentiation from each other while enhancing their core customer loyalty.

The parties have little interest in targeting the middle, or customer groups with overlapping interests, because this would blur their differentiation. This would also create more pressure to actually deliver real solutions to voters. This fundamental competitive dynamic in a duopoly is what some political theorists have misunderstood in predicting that the parties would move to the middle.

Average voters are not completely ignored, because the parties compete to turn out their base in the general election and suppress the turnout of the other side’s base. The parties also compete to attract swing voters in the middle. However, steps to attract such voters do not come at the expense of focusing on core customers. Because there are only two choices in today’s system, parties don’t need to deliver solutions to the middle, but appeal to such voters as the “lesser of two evils.”

2. Competing on Ideology and Advancing Partisan Interests, Not Solutions

Parties compete to create and reinforce partisan divisions, not deliver the practical solutions that are the most important outcome we need our political system to achieve, as we discussed in Part III. The duopoly appeals to its partisan supporters based on ideology, not policies that work. Ideology offers simplistic and polarized approaches to addressing issues. The definition of ideology includes words such as “beliefs,” “perspectives,” and “doctrine,” not words like “reality,” “objective analysis,” and “facts.” Ideological stances appeal to partisan believers but rarely, if ever, provide an actual solution.

Ideology almost always oversimplifies issues, and ignores the multiple dimensions and complexity of most solutions. Low taxes, for example, is an ideological perspective but not a guide to actual tax policy, which must incorporate the reality of the nation’s (or a state’s) fiscal situation and must recognize the many ways in which it affects citizens differently. The same can be said for small government, reducing income inequality, and many other issues that are part of today’s political debate. 

Today’s partisan and ideological competition presents voters with numerous false choices that frame issues as “either/or”—for example, big government versus small government, cutting taxes versus raising taxes, free trade versus protectionism, supporting lower-income citizens versus supporting higher-income citizens, regulation versus deregulation, and protecting the environment versus protecting business from environmental regulation, to name just a few.

Given that most issues are complicated, nuanced, and involve multiple valid viewpoints, the parties seek to confuse and mislead voters on the facts and what they should want. The duopoly works to make issues simple and divisive through careful selection of “facts,” which are often incomplete and misleading if not completely incorrect. This allows the sides to make voters think that ideology is relevant. On trade, for example, Democrats have tended to describe it as negative—a job killer— despite a large body of evidence that on balance open trade improves the standard of living for all levels of income, and also creates economic growth and jobs.

Republicans attack mandates to buy health insurance as usurping individual liberties, whereas insurance mandates are a feature in many industries (such as car 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.

Finally, given the failure of ideology to deliver solutions, it is no surprise that today’s political competition favors talk over action, and relies on making unrealistic promises that are rarely, if ever, fulfilled. Action and progress are critical outcomes that we want our political system to achieve, but, as we discussed in Part III, this is not what our political competition is now designed to achieve.

3. Avoid Compromise

Most real solutions require finding common ground, compromising, and taking steps to move policy agendas forward over time, rather than achieving everything at once. The ability to compromise is even more important in America, because the U.S. Constitution is designed to protect the rights of individuals and minorities—our governmental system is not designed for simplistic majority rule. Our founders sought a political process that could incorporate the interests of many groups,
not just cater to the dominant interests and ideological perspectives of the day. Today’s political competition violates this fundamental principle.

Despite the essential role of compromise in finding true solutions and making progress on the issues, today’s political competition treats compromise as failure. It is no surprise that bipartisanship, finding common 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 instead hold out to deny the other side any victory.

Party rhetoric divides voters based on hostility toward the other side. Rather than working to bring citizens together to further the public interest, the duopoly demonizes the other side's supporters and their views. It incites citizens to vote based on anger and fear. The duopoly emphasizes hot-button, divisive issues that appeal to emotion to rally supporters and motivate donors. This approach makes real progress on important issues even harder. It portrays other points of view as illegitimate, and even dangerous. Many Tea Party Republicans, for example, made “no compromises” their mantra. Today, there are strong pressures on Democrats to do the same thing—reject any policy put forward by the Trump administration.

In today’s political competition, then, serious legislation can often only be passed when one party forces its bill down the throat of the other party during those rare periods when it has enough power to do so. The results are usually disastrous for the nation (see the sidebar “How Unwillingness to Compromise Fails the Public: The Affordable Care Act”).

HOW UNWILLINGNESS TO COMPROMISE FAILS THE PUBLIC:
THE AFFORDABLE CARE ACT

The Affordable Care Act (often referred to as “Obamacare” or the ACA) was passed by Democrats, including two independents affiliated with Democrats, with no Republican votes. This led to seven years of Republican efforts to repeal the bill, rather than efforts to improve it. After regaining power in the 2016 election, Republicans endeavored to repeal and replace Obamacare, without real engagement with Democrats. So far, their efforts have been unsuccessful. After the failure of an early House bill in March 2017, Speaker Paul Ryan said, “We were a 10-year opposition party, where being against things was easy to do. You just had to be against it.”27 What an admission!

Today, almost a decade has gone by since the ACA was passed, and we still lack a realistic and effective health care solution, a vital national priority. Such a destructive, zero-sum pattern of overreach and payback is repeated all too often, resulting in bad outcomes for the nation.

The Duopoly Seeks to Enhance Industry Attractiveness

1. Set Industry Rules and Practices that Reinforce Partisan Division

The duopoly has worked over time to set numerous rules and practices to reinforce partisan divisions and enhance party separation. A series of election rules and practices—which both sides have advanced, as we have discussed—have enhanced and expanded partisan division and resulted in more and more extreme candidates and elected officials.

Partisan primaries, in which candidates are selected by a relatively small proportion of voters—who tend to be more extreme and politically focused and engaged—push candidates to the left or the right.

This partisanship is reinforced and amplified by gerrymandered districts that virtually guarantee that one party will always win and, therefore, tend to lead to even more partisan candidates. Sore loser laws, which both parties have advanced, can keep moderate candidates— who cannot win the primary—from running in the general election, as we discussed in Part II.

Ballot access rules and fundraising biases invariably disadvantage independents, third-party candidates and often moderates as well. This may even discourage such candidates from entering the race at all. As we have seen, pragmatic moderates in both parties are becoming an endangered species in Congress (see Figures 3 and 4 in Part II).

Governing rules and practices have also evolved to amplify partisanship and work against compromise solutions. Party leaders have created powerful levers to reward “loyal soldiers” and to discipline those who stray from ideological purity. Party leaders decide committee assignments and choose committee chairs (positions formerly based on seniority). Legislators who are considered insufficiently loyal can be kept off important committees, limiting their influence. They can also be denied party funding for reelection.

While partisan differences between and within parties have increased in recent decades, bipartisanship
has been in secular decline. Leadership discourages bipartisan activity, such as co-sponsorship of legislation or cross-party consultation. Party leaders have suppressed reconciliation, the process by which bipartisan conference committees reconcile House and Senate legislation. Parties hold separate discussions, often restricted to party leadership. Bipartisan-minded legislators can be marginalized and threatened with a primary challenge in their next election.

2. Raise Barriers to New Competition

The very existence of the entrenched duopoly in U.S. politics reflects the very high barriers to entry facing new 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.

As we noted in Part II, the industry’s freedom to set its own rules and competitive practices has tightened its stranglehold over the competition.

3. Cooperate When Both Sides Benefit

Rivals cooperate on steps that improve industry growth and influence and protect their collective market power. Barriers to new competition—especially new competitors that compete differently—are essential to sustaining competition that fails to deliver good outcomes for most voters. In the case of politics, a duopoly and barriers to new competition have made the separation and divisive rivalry we experience today almost inevitable.

While the parties fail to serve the public interest, they cooperate where they mutually benefit. This cooperation has taken the form of ballot access rules, fundraising rules, debate access rules, and many others we have described. These raise barriers to new types of competition and reinforce today’s partisan competition.

The duopoly also makes deals where both parties benefit, even agreeing on legislation that is inconsistent with party principles. Cooperation occurs when both sides benefit in serving their own interests and those of their core customers. An important example is budget bills, which almost always increase spending and are “deficit financed” (i.e., increased spending is not offset with spending reductions). Budget bills are often passed at the 11th hour before a government shutdown. These bills are touted as an accomplishment, when they are actually a failure of responsible governance. Both Republicans and Democrats tuck their preferred spending and tax adjustments into these bills to please their respective core constituencies (while looking the other way on what the other side “gets,” even if it conflicts with party principles). For example, the deficit goes up, while Republicans are supposedly for fiscal responsibility; and tax breaks are part of the bill, even though Democrats are supposedly against “tax breaks” for business. The national debt continues to grow irrespective of the party in power.28

Conclusions

The structure of the politics industry, and the nature of the competition that has been created, have failed to serve the public interest and deliver the outcomes most citizens want and need. There are cases where some progress occurs, or individual legislators are able to deliver real solutions in special cases. These are exceptions, not the rule. Despite widespread dissatisfaction with our political system, things are getting worse, not better, as we will discuss in Part V.

The nature of the political competition we observe, and its failure to deliver results for citizens, is not an accident. It is the direct result of the competitive choices the parties have made and the industry structure that the duopoly has created. The abysmal outcomes we are experiencing are the logical result of the nature of competition in this industry. Today’s political competition rewards special interests and partisans, and diminishes the influence of the average voter (much less non-voters). Today’s rivalry incents divisive rhetoric, gridlock, and unfulfilled promises, not solutions. Today’s rivalry undermines the ability to elect pragmatic and moderate public officials, co-opts the independence of the media, and raises ever-higher barriers to entry for third- party candidates, independents, and even moderates.

Beyond this failure to deliver good outcomes, the structure of the politics industry has resulted in three devastating implications for the citizens. First, the parties have an incentive not to solve the nation’s problems; second, there is no accountability for results; and third, there are no countervailing forces that will naturally restore healthy competition.

1. An Incentive Not to Solve Problems

In today’s partisan political competition, there is actually an incentive not to solve problems. Keeping a problem or controversy alive and festering is a way to attract and motivate partisan voters, special interests, and committed donors to each side. Neither party, for example, has strong competitive incentives to solve the problem of immigration, because a comprehensive compromise solution would disappoint some of both parties’ most fervent supporters and reliable donors. Additionally, once an issue is “solved,” voters focused on that particular issue may become less motivated to affiliate with and support the party.

2. No Accountability for Results

Most amazing is that despite making little or no progress on solving the nation’s problems and serving the American people, the duopoly is not held accountable for results.

Healthy competition involves accountability for results. If rivals fail to deliver the outcomes customers want and need, they lose market share or go out of business. In politics, accountability would mean voting party leaders and many legislators out of office if progress is not made, not just the marginal shifts we have observed in recent decades. 

In our political system, neither side has real accountability for failing to deliver solutions that advance the public interest. There are only two major parties, who compete by dividing up and serving partisan voters and special interests. This means that voting out individual legislators means replacing them with others from the same party or the other party who can get elected in the current structure. Replacements from either side will perpetuate the current competition or be neutralized if they try to act differently.

Frustration votes, then, can shift the balance from one party to the other, but nothing really changes. The parties continue to compete on partisan division, the absence of compromise, and talk, not action. The parties have learned that, to win, they merely need to play the game they have created, not deliver solutions.

The parties have made us believe that such competition is normal, and educated us to go along. The duopoly wins. The loser is our democracy.

3. No Countervailing Forces to Restore Healthy Competition

Finally, despite widespread dissatisfaction and delivery of poor results for the average citizen, the duopoly remains dominant, and partisan competition persists. The failure of politics has persisted because the normal checks and balances of healthy competition are neutralized (as they can be in duopolies). In other industries, countervailing forces that make up industry structure would keep competition aligned with the needs of customers. Customers who were poorly served (i.e., the majority of customers in politics) would rebel and look for new kinds of competitors. Powerful channels or suppliers would apply pressure on rivals to serve customers better. And new competitors or substitutes would emerge that met customer needs better.

In politics, however, these forces have been co-opted or eliminated. This is because in politics, the normal checks and balances in healthy competition have been neutralized, as we have discussed. What looks like intense competition to the casual observer is not at all what it appears to be.

The failed competition in politics is perpetuated most of all by the very high barriers to entry, many of which are artificial and intentionally constructed to deter new competition and substitutes. New competitors could bring new ideas, new solutions, and new ways of serving customers. New competitors could break down the partisan separation by winning over the majority of voters and non- voters who are not as partisan.

Part III: Political Outcomes

The Political Outcomes Citizens Want and Need

A Problem of Competition

As we have described, competition in our political system is delivering outcomes that diverge from the public interest. As one casual observer said to us, “It's simple. We [our government] used to be able to solve problems, and now we can’t.”

Why is this? Before we consider the causes, we need clarity on what the desired outcomes look like. In business, the key outcome is clear: profit. But what are the essential outcomes we citizens should expect from our elected officials?

Despite the fundamental importance of this question, there is surprisingly little discussion of outcomes in politics, much less consensus on which outcomes we want. Instead, there is endless commentary on the drama of politics and who did what to whom. This has created a vacuum that has allowed political actors to define success in ways that fit their own purposes, not the needs of citizens.
What we should want from our political system is simple. In a democracy, a healthy political system should deliver four key outcomes:

1. Practical and effective solutions to solve our nation's important problems and expand opportunity

Solutions are policies that address important problems or expand opportunities for citizens. A solution is a policy 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 political system today.

What do we know about the nature of effective policy solutions? While there is no simple way to determine the “best” solution, and there are many opinions, a solution has some essential characteristics.

Effective solutions address reality, not ideology. True solutions rarely arise from applying stylized ideological principles—that often makes things worse. Effective solutions are almost never purely “right” or purely “left.” For example, the question is not “big government” or “small government,” but how to strike the right balance across the various roles that government must 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) without inflicting unnecessary cost on the stakeholders being regulated or on citizens, who ultimately have to pay for it.

Practical and sustainable solutions are not unidimensional. They are nuanced and integrate the range of relevant and important considerations. Solutions weigh and balance points of view across constituencies and make sound tradeoffs in integrating them. Solutions almost always require compromise and bipartisanship.

Good solutions are fair and acceptable to the greatest number of people possible. The challenge is that everyone cannot get everything they want from government, especially in a democracy. The tradeoffs involved in good solutions mean that some individuals or groups will benefit more than others from a given policy, and some will bear more (or less) of the cost. Yet the overall outcome needs to be perceived over time, as balanced and fair. Good solutions are achieved when no group or faction is promised or led to expect everything it might want, or think it wants, in every respect.

Finally, solutions make real progress, but rarely achieve everything at once. The key test, then, is: “Have we made things better?” Effective solutions often initially require partial steps in the right direction, with improvements over time.

The Simpson-Bowles plan to create a sustainable budget, discussed in Part I was a practical solution. However, our political system killed it.

2. Action

Legislation and executive action that matters must be actually enacted and implemented. Our system today often delivers gridlock, not action. Politicians have little incentive to put the public interest first if they believe that blocking legislation is rewarded by their party and inaction is not penalized by voters.

The vast majority of promises made by candidates and political leaders in today’s system never get acted upon. Too often, not even an attempt is made to move a promise toward legislation with a chance of passage. Unrealistic promises and talk without action are worthless. They benefit only political actors, not citizens.

3. Reasonably broad-based buy-in by the citizenry over time

Good solutions should be able to gain—over time— reasonably broad-based acceptance and consensus across the population. While there will never be 100% support for any policy, true solutions (which most often involve bipartisanship) can be accepted over time, by a range of constituents across the political spectrum.

This can occur when the political dialog helps citizens understand the facts and realities of policy options and 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 “the right thing” (that’s why it’s called leadership). At its best, political competition educates, unites, and inspires citizens, rather than dividing them.

4. Respect the Constitution and the rights of all citizens

Finally, good solutions reflect the rights and interests of all Americans. Our constitution is designed to protect the rights of individuals and minorities, rather than for simplistic majority rule. Good political outcomes incorporate these principles and reflect the type of society America stands for, even though this can sometimes make achieving political solutions more complicated.

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What kind of political system is necessary to deliver these outcomes? How can political competition drive good outcomes? These are questions we turn to next.