As someone who has observed the domestic political landscape for over 30 years, one theme that has kept recurring is the word ‘Reform’. We hear about tax reform, Social Security reform, Medicare reform, financial reform, spending reform, welfare reform, etc. etc. However, with the exception of welfare reform (passed two decades ago), any reform that is passed (assuming that anything is passed at all) tends to be watered down and ineffective. The end result largely appears to the public as if nothing was passed at all. The question is, how is it possible that so many smart people, most of whom know and admit that this system or that system badly needs reform, be so unable to produce any meaningful reform?

The first thing to remember is that no matter how idiotic a situation may seem, it makes sense to somebody. This is true in a macro political system like the U.S. or in a smaller political system like the company that you work for. Any system that exists anywhere is benefiting enough people to sustain it. So no matter how ridiculous a rule, regulation, tax, or policy may seem, someone with more power and influence than you is benefitting from it.

The second thing to remember is that any reform is going remove something that is currently benefitting someone. And that someone isn’t going to like it, and will resist it, either with money, or through other measures. For all of the talk about money in politics, this isn’t the only problem. Normally when we think of money in politics, we think of powerful interest contributing money to political campaigns. While this is certainly a major factor, sometimes the influence is more basic than that. Politician X isn’t just going along with Special Interest Y because Special Interest Y gives money to his campaign or will give money to his opponent if Politician X doesn’t play ball. Sometimes it is that Politician X and Special Interest Y are friends outside of office hours, attending the same parties, seeing the same people. Maybe even their wives are friends. Under these conditions, if Politician X ticks off Special Interest Y, it is going to be personally awkward for him.

If we look at attempts at reform over the last 6 years, we see either major resistance and/or watered down reform to point of being nearly meaningless. I am speaking of ‘healthcare reform’, ‘financial reform’, and what the Tea Party might call ‘spending reform’.

In the case of healthcare reform, we are still seeing major resistance 5 years later. Part of this is because of the way it was designed to force people to do things not in their perceived best interest. Part of it is because it ignored really much input from 1 of the 2 major political parties. But the main reason for the resistance is that it proposed to fundamentally alter a system that affects everyone (everybody needs healthcare) and a system in which 70% of the public had health insurance AND liked what they had.

Financial reform doesn’t look like it has had much of an effect or will have much of an effect in preventing the next crisis because it hasn’t fundamentally altered the system. The reason for this is, yes, due to the money that Wall Street gives Washington. But the resistance to reform is simply caused by the fact that a fundamental alteration of the system would result in a LOT less money going to Wall Street. According to CNN, the average bonus this year on Wall Street is $173k!!. That is a BONUS, not a salary. The average pat on the back, “you did a good job, kid”, “way to go” money is 3.4 x’s the average household income in the U.S.  I wouldn’t want to change this system either.

Finally, the Tea Party wasn’t able to achieve spending reform. However, it was, for a brief moment, able to succeed in actually cutting spending by an insignificant amount (in terms of the whole federal budget). I say “actually cutting spending” because most “spending cuts” in Washington are not true “cuts” as in, “I spent $100 last year and I will spend $50 this year”. But rather they are a reduction in the increase of spending as in “I spent $100 last year, I was going to spend $120 this, but I will ‘cut’ this to $110”. The Tea Party was able to get a real reduction in spending, but what they had to do get it was to essentially threaten (and appear to really mean it) to crash the U.S. credit rating.

This last example illustrates more than anything the practical impossibility of real reform taking place. That cutting what amounted to a rounding error in the federal budget would effectively require the figurative taking of hostages is not a system that is capable of any meaningful reform. The proposal of reducing discretionary spending from 2013 levels to around 2010 levels was met by the bureaucracy with the shutting down of monuments and generally trying to make cuts as visible and as painful as possible for the general public. As the government was somehow able to function in 2010 without inflicting this pain on the general public, these actions were clearly punitive and deliberate. The hysteria that emanated from some quarters was to the extent that one would have thought that the proposal on the table was a repeal of the New Deal. These actions illustrate the resistance that can and will be brought to bear if any real reform is attempted.

One can only conclude that if fundamental reform in various areas is needed and necessary (and it is becoming increasingly clear that it is), this system is probably not capable of providing it.