How Incentives Can Improve Congress

These are ordinary people responding logically to powerful incentives. There’s nothing else to do.” – Republic, Lost

The above quote is very important to remember. Like all humans, politicians do what they are incentivized to do. Maybe I’m an optimist, but I refuse to believe the popular narrative that a group of 535 public servants doesn’t care about the average American. I bet the vast majority of Congress are decent people who want to make the United States a better place. Unfortunately, the structure of our political system does not incentivize that. I don’t believe America will get a Congress it approves of until the system is changed. Don’t hate the player, hate the game.

[Disclaimer: I am far from an expert in politics. But I do read and think about incentives, psychology, and cognitive biases a lot. As I’ve learned more about how our political system is structured, I can’t help but think that many of our problems could be solved by improving the incentives that are in place. Below are my opinions on how to do that.]

Gerrymandering

Every ten years, states redraw their district lines and whatever political party is in charge at the time gets to draw those lines. If I’m a politician at that ten-year interval, it makes sense for me to draw them in my party’s favor. Think about it: I’m a member of that political party because I genuinely believe that party is the best way forward for this country. Thus, redrawing the district lines in my party’s favor is doing a service to this country.

I’m betting the above is how politicians justify gerrymandering to themselves. And I can’t blame them. It’s important to recognize that that as reasonable logic that we all use to justify our actions. I’d probably do the same thing in their shoes. However, I can blame the system that incentivizes this bad behavior.

Unfortunately, the city that I live in, Austin, is one of the worst victims of gerrymandering. As a very progressive city in a conservative state, Texas politicians generally dislike Austin and want to minimize its role as much as possible. Thus, Republicans have successfully gerrymandered Austin to the point that, in a liberal city with six districts, we somehow only have one Democratic representative. Austin is the largest city in the country without a member of Congress whose primary responsibility is representing the city. Below is the 21st district of Texas where I live.

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[Before I get any hate, Democrats are guilty of gerrymandering as well. Austin just happens to be the example that I know best.]

So, the district that represents the part of downtown where I live—a very liberal area—also extends 200 miles into west Texas. I doubt there are many areas in the entire country that have less in common with downtown Austin than west Texas. How is one politician supposed to adequately represent the needs and desires of these very different populations?

That leads into one of the biggest problems with gerrymandering: each district only elects one representative. A Republican can get 40% of a vote in a district, lose, and the result is a very significant portion of that district’s constituents—40%—being poorly represented in the House.

Another issue with gerrymandering is that it incentivizes extremism. The whole point of gerrymandering is to maximize the districts that your party can win and minimize the districts that the opposite political party can win. Essentially, with many districts it’s been decided beforehand what party will win.

In the House, around 60-80% of all seats are considered safe seats—unwinnable by the opposing party. Thus, to win those districts, a politician only has to win their party’s primary election. The general election after that has more or less already been decided. In fact, many of these districts don’t even have opponents run from the other party because there’s no point.

This encourages extremism. If I am a liberal politician in a district gerrymandered in the Democrat’s favor, all I have to do is win the primary election against other liberals. How do I beat another Democrat? Probably by being more of a Democrat! There’s a good chance I can win more votes and attract more donations if I promise to be a more liberal politician than my opponent.

Compounding this problem is that only a small percentage of voters—often 5-10%—turn out for primary elections. Not surprisingly, the small percentage of people who turn out for these elections are the most diehard supporters of that party. Thus, the more extreme views within that party will appeal to the types of voters who show up to primaries.

My favorite solution to both of the above problems is to increase district sizes so there is a minimum of three representatives per district. Along with this, any party that gets at least 25% of a district’s vote is guaranteed at least one seat. Larger districts incentivize better behavior.

Having multiple politicians and multiple parties represent each district creates more competition in district elections. It also encourages candidates to appeal to moderate voters, as opposed to safe seat districts that encourage extremism. Multiple seats per district also ensures that far more constituents in the district are actually represented by their party in the House.

Finally, three seat districts would encourage more politicians from minor political parties. Currently, out of 535 members of Congress, only three are independent. But if a representative only needs 25% of a district’s vote to win a seat, the chances of third-parties winning increases substantially. This incentivizes more third parties to run. Right now, a big problem with our political system is that we essentially only have two parties and they oppose each other on almost everything. Having more legitimate third parties would help fix that.

Campaign funding

The first contest that an aspiring politician must win to become a viable candidate is the one to raise money. And this money mostly comes from the 1% or the 0.1%. From the very beginning of a campaign—before the candidate even thinks about winning our votes—he or she is dependent on the wealthy just to get nominated.

Even when a candidate makes it to Congress, the fund raising never stops. Party leaders require their members to spend anywhere from 30-70% of their time raising money. I think this has two implications. First, they have little time to do the actual job we voted them in to do. I want Congress—all members, not just the ones I like—spending their time trying to improve America, not dialing donors for six hours every day.

Second, more and more potential candidates have named fund raising as a reason they have no interest in joining Congress. I don’t blame them. I’m pretty sure I’ll have no desire to become a telemarketer when I’m 55 years old. If the current job roles of being a Congressmen are discouraging good candidates from running, that’s a problem.

The result of this dependence on fund raising is a Congress that has their hands tied when it comes to regulating certain industries that donate large sums of money to campaigns. This is what’s known as a vetocracy—“rule by veto.” Congress struggles to get anything done because our political system gives so many groups veto power over what Congress does. Before any significant change is enacted through Congress, permission must be granted from the largest commercial interests that the change will affect.

Because of this, entire industries have become very difficult to reform—and unfortunately, it’s the industries that need the most reform, such as Wall Street and healthcare. Concentrated funding is what exacerbates this issue and a vetocracy can only be fixed if we change the way campaigns are funded.

The core problem with campaign funding today is how concentrated it is. The largest industries and the wealthiest people have too much influence. And if the problem is concentrated campaign funding, the solution is diluted campaign funding. One way to do this is through public funding of elections by citizens.

There have been many proposals on how to implement public campaign funding, but the one that I like the most is a voucher system. The idea is that every voter gets a small gift card—say $50—that they can allocate in any way to any candidates running for Congress. $50 doesn’t sound like much but multiply it by the 230 million eligible American voters and the total available funding would be $11.5 billion. That is far more than the $5.2 billion spent by all candidates in 2018, $6.8 billion spent in 2016, and $3.7 billion spent in 2014.

To qualify for these public funds, a candidate would have to demonstrate some minimum amount of public support. If more funding is needed, voters could also be allowed to donate personally, but only in small amounts that are maxed at say $100.

The benefits of this voucher system are numerous. First, citizens would be far more equally represented than they are now. Currently, many politicians care more about rich people because those are the ones who fund their campaigns and allow them to keep their jobs—and I can’t blame them, we all do what we need to do to keep our jobs. If campaigns were funded by most Americans as opposed to the 1%, Congress would be more focused on the entire population.

Outside of elections, politicians and candidates are rarely engaging their voters because they spend half of their free time calling potential funders. But no politician is going to be calling citizens to ask for $50 voucher contributions, so the role of politicians and candidates would completely change. Politicians would have to engage their voters on a more regular basis to ensure vouchers continue to come in. A wider funding base would also force politicians to moderate their views because candidates could not afford to fund their campaigns from only the extremes.

Another benefit is that the value of lobbyists would dramatically decrease because their ability to persuade politicians through donations would be reduced. As the value of being a lobbyist falls, their salaries would also fall and thus the revolving door of politicians becoming lobbyists would slow. If a lobbying group can’t afford to pay the ex-Congressman a million or two per year, that Congressman is less likely to switch roles.

In 2017, Seattle became the first city in the country to use a voucher system. With the obvious disclaimer that one year of results doesn’t prove anything—2019 will be the second election they’re used in—it does appear to be working. More citizens donated and the donor pool was more diverse and representative of the population than non-voucher elections. Minorities, low income households, and young people all donated more.

Congressional pay

I think we should pay members of Congress significantly more than they currently make. Yes, you read that correctly. The current salary for someone in Congress is $174,000 per year. I know that’s a very good income for the vast majority of Americans, but it’s not that much for someone who is required to live in both one of the most expensive cities in the country—Washington DC—and their hometown. Although around 40% of people in Congress are millionaires, there are many who sleep in their Congressional office and shower in the gym to save money.

These are the politicians who are more likely to secure a future for themselves as a lobbyist that will make up for their current livelihood. I don’t blame them for the revolving door of politics when they can’t afford to live as a politician. Again, don’t hate the player, hate the game.

My suggestion would be to increase Congressmember’s total annual income to $1 million. $350,000 of this would be in a cash salary. Doubling their cash salary from $174,000 to $350,000 should allow every politician to be comfortable financially and to support having two residences in Washington DC and their hometown. Call me crazy but I want politicians to be comfortable—even wealthy. I don’t want politicians who are stressed about money and their livelihood. That tempts bad behavior.

The other $650,000 would be paid in long-term options that start vesting after six years and vest equally over ten years. The value of these options would be dependent on the health of the country at that time—things like GDP growth, median wages, productivity, healthcare costs, childhood mortality, reading efficiency of 5-year olds, etc. I’m not the best person to come up with the exact measures, but the point is to financially incentivize Congress to focus on the long-term health of the country.

Right now, politicians are incentivized to keep their job—like we all are—and that requires them to constantly raise money. If I had to raise millions of dollars every year just to keep my job, I’d spend most of my time on that too! And that priority would trump a lot of other things in my job that I’d like to get done. But if elections were funded by the public and my future income depended on the health of the country, that’s what I would spend more time on.

Now, I’m not completely stupid. I know my idea of increasing Congressional pay by almost 500% would never fly with the American public. But it’s important to emphasize that the system can only be changed from the inside. And if Americans want our political system to improve, which seems nearly unanimous, the people who have the power to change it must be incentivized to do so.

Politicians aren’t going to vote to increase district sizes and change how elections are funded if the change could potentially hurt them. This is basic incentives. All of Congress got elected in the current system, so changing that is a major risk to their future job security. However, if those changes are combined with a significant pay increase and an improvement to their daily life—no more calling donors for 30 hours a week—they may be more willing to give their support.

Ironically, increasing Congressional pay can result in better incentives. Poor politicians who are struggling to make ends meet are unlikely to vote for something that decreases their chances of earning millions after they’re done serving the public. But if politicians earn more, they would care less about securing a financial future. Thus, they would be more willing to pass a law to stop the revolving door of politicians. And if politicians make more money now and in the future via long-term options, they would be more open to support publicly funded campaigns, which would significantly decrease the value and thus pay of lobbyists.

Never, ever, think about something else when you should be thinking about the power of incentives.” – Charlie Munger