Grover Cleveland against the special interests.

• Author: Haeffele-Balch, Stefanie
• Position: Essay

When Grover Cleveland, a lawyer turned politician, became president of the United States in 1885, he had established a reputation for being honest, exposing corruption, and advocating government reform. Whereas Republicans of the era tended to support protectionist policies and subsidies (particularly for railroads) and perpetuated the practice of the "spoils system" for political appointees, Cleveland and other Democrats, such as the reform-minded Bourbon Democrats, stood for a limited government and opposed granting privileges to special-interest groups.

As Henry Graff describes, before being nominated as the Democratic candidate for president, "Cleveland's reputation for integrity was spreading from one end of the land to the other. His partisans later would say that he was the candidate of the people before he became the candidate of his party" (2002, 46). Alyn Brodsky similarly notes that Cleveland was the right man to challenge the Republicans because "he was free from the taint of fractional quarrels, he had no ties to any machine, and he had a proven reputation for honesty and incorruptibility" (2000, 70-71). Likewise, John Pafford describes Cleveland as "a strong-willed man who did not flinch at challenges to his principles and policies" and who "mastered his office with single-minded determination, dedication to duty, and absolute integrity" (2013, 161).

During his first term as president, Cleveland continued to stand up to special-interest groups, despite pressure from Congress and the opposition party, by vetoing hundreds of bills that aimed to increase the scope of government. (1) For example, he vetoed more than two hundred private-pension bills, which attempted to grant pensions legislatively to veterans whose claims had been denied by the Pensions Bureau. Cleveland also stopped federal disaster aid from going to farmers in Texas, who lost crops due to drought, based on the notion that propping up a small group of citizens at the expense of the American public was outside of the scope of the federal government. Cleveland's first term is, for the most part, an example of supporting limited government and opposing favors to special-interest groups over the greater public. Arguably, Cleveland chose to uphold classical-liberal principles and therefore to forgo the certainty and power that comes with catering to special interests that engage in rent seeking. As such, Cleveland is something of a political anomaly.

Public choice theory views public officials as pursuing not only the public interest, but also and often primarily their own interests. Based on this theory, then, we would expect politicians to seek to maximize their potential to secure winning coalitions in future elections by pursuing policies that concentrate benefits in the hands of a select few and disperse costs across the broader electorate. Rather than resisting efforts by special interests to secure benefits, politicians often welcome them. Rather than opposing protectionism, politicians often champion it because the benefits of free trade tend to be dispersed, whereas protectionism can benefit particular firms or employees within their constituency (see, for instance, Frey 1984).

Cleveland, however, opposed a number of the policies that (based on public-choice theory) we would have expected him to support. His approach also stood in contrast to the political norms of his era. As Brodsky highlights, post-Civil War politics involved many activities that Cleveland strongly opposed, including "governmental corruption, bimetallism, protectionism, a ghastly Indian policy, what is referred to euphemistically as 'the taming of die West' but was in truth its spoliation, and above all, the ideology of Manifest Destiny" (2000, 3). While politicians and special interests benefitted from these practices, citizens began to demand reform, and Cleveland fit the necessary role. As Graff notes, "[E]ven ordinary citizens were now sensitized to the shenanigans of so many of their politicians, and there was a widespread feeling that corruption was undermining the republic itself, and that it was time to clean out the stables" (2002, 22). What is interesting is that Cleveland not only promised reform during the campaign but continued to hold a strong position against special interests once he was in office. Pafford posits, perhaps too strongly, that "[o]nce [Cleveland] identified the right direction, he would not be shaken, no matter the cost" (2013, 32).

Public choice theory also explains that politicians, once elected, will frequently support policies that deviate from those that would please the median voter even if in an effort to secure electoral success they had campaigned for policies that the median voter supported (Holcombe 1989). Through this view, Cleveland's campaign platform of reform and lower tariffs reflected the changing views of the public in the late 1800s. By campaigning on positions that the voters cared about, Cleveland was able to win the election of 1884 and secure the administration for the Democratic Party for the first time since before the Civil War. Thus, although it is not surprising that his policy positions matched those of the median voter, it is indeed surprising that Cleveland took a persistent stance against special interests and rent seeking both during his campaign and once in office.

Cleveland's policies ultimately proved politically disadvantageous. Cleveland lost his reelection bid to Benjamin Harrison in 1888 by losing the electoral vote despite winning the popular vote. The tight race highlights the tension between the views of the median voter and the powerful coalitions (such as the Union veterans, protectionism advocates, and industry and agricultural leaders) of that time period. During his tenure, however, the economy recovered from a recession that lasted from March 1882 to May 1885 (National Bureau of Economic Research 2010). Furthermore, throughout his first term as president, productivity continued to increase consistently as the economic development of the country grew from the advances of the Industrial Revolution (Creamer 1954; Field 20ll). (2)

The rest of this essay uses the lens of public choice economics to examine a sampling of Cleveland's policies during his first term. First, we very briefly review the public choice literature on the economics of politics and the incentives facing politicians. The aim of the section is to describe the lens that we will be using to view Cleveland's position. Then, we focus on a few of Cleveland's actions during his first term that exemplify his deliberate refusal to cater to special interests and to the pressures to expand the scope of government in ways that were inconsistent with the Constitution. We also highlight the economic outcome of these policies.

Public Choice Theory and the Incentives Facing Political Officials

James Buchanan and Gordon Tullock ([1962] 1999) developed a theory of collective choice concerning individual actors and incentives within the structure of democracy. Although human actors make decisions as representatives for the nation, they still face incentives to pursue their own self-interest. Congressmen, in efforts to maintain their office, will pursue legislation that benefits their direct constituents rather than society more generally (i.e., pork-barrel spending) and will make deals to trade votes in order to get their agendas passed (i.e., logrolling). Further, special interests, especially when composed of relatively small and powerful groups, can effectively influence policy by threatening to withhold votes or campaign resources. In addition, corporations, unions, and other special interests will seek privileges through rent-seeking behavior--such as funding campaigns, giving gifts, and making other wasteful expenditures (Tullock 1967). Such privileges include protectionist trade policies and regulations that burden competitors.

A large body of literature deals with the power and influence of special interests in politics. Special interests gain economic returns by supporting politicians who will pass the legislation those interests favor, and these groups choose the level of support they provide politicians in order to maximize their returns from government-granted privileges (Olson 1971; Brock and Magee 1978). Barry Weingast, Kenneth Shepsle, and Christopher Johnsen (1981), for instance, provide a neoclassical model for understanding why politicians pursue pork-barrel projects that are economically inefficient by focusing on the political costs and benefits associated with favoring special interests. Essentially, the concentrated benefits to constituents can lead to larger political benefits for the elected officials. Similarly, by looking at the distributive aspects of the Confederate Constitution, Randall Holcombe (1992) highlights how legislation often favors special interests over the public's interest.

In the United States prior to the Civil War, many individuals sought political rents from the federal government (Hughes 1977; Holcombe 1992). Yet the first major special-interest organization, for veterans, did not establish its influence until after the Civil War. In the late 1800s, as discussed in more detail later, veterans supported Republican politicians in return for an increase in the scope and size of veterans' pensions. According to Holcombe, "this [exchange] opened the door for others to petition the federal government to protect their economic interest, and the federal government was transformed, in the period from the Civil War to World War I, from a protector of individual freedoms to a promoter of economic interests" (1999, 324).

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