Where Power Lies in America

Update 9/29/14: according to the 2014 data, the ATM fees for using an out of network ATM have risen to a record $4.35. This represents a 5% increase from last year and a new record. The post below explains why we are likely stuck with these fees. 

There is one policy proposal that just might achieve 100% public approval. A proposal so simple and so popular that it would be a no brainer except for one small fact— a very powerful special interest, that according to the Center for Responsive Politics spent $62 million on lobbying in 2013, would hate it. 

What is this proposal you ask? A ban on ATM fees. Every American loathes spending money to get access to their own money. You can't even pay a mere one fee anymore. Nope. You need to pay 2 fees to get your money—one to your bank and one to the bank who operates the ATM. If polls asked about such things, ATM fees would probably have as much popularity as Congress and STDs (really little). 

To offer a recent story— I was all set to board a local regional rail train a few months ago when I realized that the station was closed in the middle of a Friday. Because Philadelphia's regional rail system currently exists in the 1980s (or maybe the 1950s?), I couldn't pay for my fare on the train with a credit card. Left with 5 minutes before my train, I had no choice but to sprint across the street to the closest ATM. $7 in fees later, I had my quick cash. $7 in fees no matter how much OF MY OWN MONEY I had taken out (according to Bankrate's 2013 survey, the average ATM fees combine to be $4.13 for using an ATM that isn't part of your bank's network). 

So I can't imagine a single politician who wouldn't like to brag to his/her constituents that he/she played a key role in eliminating these fees. The banking industry, however, relies on these fees to make profits. Even after the financial crises when Congress passed a law limiting credit and debit card fees, the bill didn't eliminate ATM fees.

In fact, as Congress has limited other types of fees that banks can charge, they have looked to ATM fees to help recoup the lost profits (which explains why they keep increasing)

So why am I blogging about this topic (other than how good it feels to vent)? 

Because it tells us something important about our policymaking process. Many Americans believe that lobbyists and special interests control our government. The reality is far more complicated.

In Lobbying and Policy Change: Who Wins, Who Loses, and Why, a team of political scientists explain that in most cases resource distribution does not drive policy outcomes— especially when both sides have relatively even resources (the study defines resources broadly). 

But one area where special interests and/or powerful minorities do continue to have great success in driving policymaking is where the opposition is the public interest, and there is no concentrated interest to support the other side.

It's hard to get the majority of Americans interested in what is going on in Washington. They are busy with their day to day lives, and ill informed about what is being debated in Congress. In a lot of cases, they support one side of a policy debate, but they aren't intensely invested. By contrast, an impassioned minority or a special interest is extremely invested in a policy debate affecting an issue about which they care. 

From the perspective of politicians, it behooves them to cater to the demands of those special interests, or impassioned minorities because those minorities/interests will vote (and spend campaign money on the issue).

The best example of this process is the way in which the NRA has stifled new gun restrictions, such as expanded background checks, for decades in spite of widespread public support for them. Politicians know that NRA supporters will vote against them for supporting these proposals, whereas the majority of Americans who support these policies may vote on any number of other issues. 

In the case of a special interest, like the banking industry, given the new campaign finance climate, they could start a Super PAC to hammer congressmen who proposed or supported a ban or restriction on ATM fees. They might spend millions trying to defeat those congressmen. 

By contrast, most Americans might support the proposal. But they aren't likely to vote on the issue. If you oppose the local Congressman because you dislike his position on taxes or gay marriage, you aren't likely to vote for him because he works to ban ATM fees. Additionally, no equally powerful interest on the other side of the issue exists to counter the attack ads that the interest groups could run against the Congressman. 

Indeed public interest groups are relatively weak, in terms of financial might, number of lobbyists, and connections, in comparison to private interests.

Many industry groups have lobbyists who are either former high level congressional staffers or former members of Congress. These people have access to their former colleagues and friends on Capitol Hill. This access allows them to present their arguments and to stifle proposals before there is any public debate on them. 

These groups can also organize members to call their local congressmen and senators to oppose proposed legislation that might hurt them. 

Public interest groups largely lack this heft. They certainly don't have treasuries large enough to spend millions on ads defending a congressman who is being raked over the coals. 

This structure explains why most reforms that would benefit the public, but hurt special interests are such hard hauls. Tax reform is another perfect example. Each special interest is intensely invested in provisions that benefit them, and are ready to go to the mattresses to preserve them. By contrast, John Q. Public, who doesn't itemize deductions and would benefit from closing loopholes and lowering rates, can barely follow the debate to find out how he would benefit, let alone become deeply invested in the debate. 

This systemic imbalance explains why only after the financial crisis, when being aligned with banks and financial interests had the potential to be politically fatal, could Congress limit credit and debit card fees/rates/tactics. The banks were at the nadir of their power, and being attacked by financial interests likely would have been a political badge of honor. The public also demanded action of some sort against the banks.

As such, a rare window opened in which public interest legislation was possible. Yet, even then, there were limits as to what was passable. An amendment in the Senate to cap credit card interest rates failed miserably. 

Unfortunately, absent a "focusing event"/crisis like the financial meltdown, or a better informed and more invested public, any sort of public interest legislation faces long odds. As such, we'll likely continue to keep paying ever increasing amounts to access our own money.