Are We Better Off: Out of Sight

Federal contracting is as old as the Constitution. But we still haven?t figured out how to keep our private government accountable.

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Mother Jones: Did the Founding Fathers anticipate this type of government by proxy? Or is this a product of the growth of the federal government in the late 20th century?

Daniel Guttman: At the dawn of the era of the modern state, government bureaucracies used contractors to basically do everything from collect taxes to found and run empires. Remember the Spanish conquistadors? The British East India Company was a private corporation chartered by the crown that at one time had an army of about 250,000 and was running the subcontinent of India. So at the time our Constitution was written, the notion that private actors would perform public purposes was very much in the picture. Indeed, the most direct thing our Constitution says about contracting is that Congress can charter private folks– otherwise known as pirates– to be our representatives in war. They got letters of mark and reprisal to go out and attack enemy ships under what we would today call “performance contracting,” where they got a share of the bounty. So the notion that the government relies on private actors is hardly a new one.

What we really are talking about in today’s world is not something that started with Thatcher and Reagan in the 1980’s, as many people think. Since World War II we’ve had a bipartisan policy of growing our government– not through the use of civil servants, but through the use of contractors.

MJ: What legal constraints are there on the use of contractors, constitutional or otherwise?

DG: Our Constitution says virtually nothing about what can and can not be contracted out. There is nothing that says that anything other than perhaps the presidency and some other offices have to be official functions. What we’re acting on now is a policy that was put into effect by the executive branch as the post-World War II government began to contract out. [This policy] says that “inherently governmental” functions should be performed inside the government. But that policy has typically been honored in the breach, because since World War II, we’ve prohibited ourselves from hiring more officials. So when new work has to be done, regardless of whether it is inherently governmental or not, it’s been contracted out.

MJ: Is there anything inherently wrong with the government contracting out jobs it may not be able to do itself?

DG: There’s no question we’re going to have contractors. There’s also no question we’re going to have contractors doing much of what the citizen thinks of as the basic work of government: writing rules, dealing with citizens, enforcing the law, doing intelligence gathering, you name it. The question that I have is, what are we going to do to bring the reality in sync with the fiction that officials are still in control? The dirty political reality is that neither Republicans nor Democrats are in the business of beefing up the official workforce. If that’s the case, then we should realize the consequences and the need to do something to insure that those who are increasingly making the decisions– the contractors– are subject to rules that will provide for accountability. And that’s not anything that anybody’s figured out how to do yet.

MJ: Is using contractors the same as privatizing government functions?

DG: “Privatization” is an unfortunate word. It can mean any which thing depending upon what part of the world you are in. In the U.S., contracting out is really not privatization in the sense that we’re saying to the private sector, “You go do it and let the market take care of it.” If the contractor fails, we’ve got to pick up the pieces. The government is on the hook; it will bear ultimate responsibility if the contractor fails.

MJ: When President Dwight Eisenhower mentioned the “military industrial complex” in his farewell speech, was he referring to some of these issues we’re dealing with today, such as the loss of oversight?

DG: That’s what’s sort of remarkable. We’re not talking about something that is new. In 1965, Don Price, who was the first dean of Harvard’s Kennedy School of Government, wrote a book called The Scientific State, in which he said, “We Americans have always hated big government; we’ve been concerned about it, but we need big government. And what are we going to do about it? We’re going to reform big government by diffusing sovereignty, by contracts and grants, so Americans will no longer have to fear centralized totalitarian bureaucracy.” And so one part of the liberal elite, but also I’d suspect the conservative elite, saw this as a basic change in the nature of government for the better. We were avoiding the perils of centralized bureaucracy.

Eisenhower, from his perspective, saw the same thing. But he says, “Holy smokes! We are changing the constitutional checks and balances. Now we’ve got people outside of government being paid by government. In the most basic ways they can end-run the separation of powers. They can go directly to Congress and they can lobby for their money and for program money. Officials can’t do that; there are all kinds of laws and rules.”

This basic debate, which was framed 45 years ago by the early reformers– the guys from the business community and Harvard, and Eisenhower on the other side– remains unaddressed.

MJ: You’ve written that the Manhattan Project “established the template for government by third party.” That sounds like proof that contracting can be very efficient.

DG: The Manhattan Project was extraordinary. The [technological] successes in World War II, not simply the atomic bomb, were remarkable in demonstrating that the genius of America was not simply that we had physicists and chemists. We had the ability to manage the genius to put together complex arrangements of governmental and non-governmental organizations, to do things that nobody had even dreamed of doing five or ten years earlier. When we are engaged in periods of what you might call “high charisma”– a shared sense of national mission– as we obviously were during World War II and a large part of the Cold War, that can make up for a lot of deficiencies. People will work together. They won’t cut corners. They’ll try to get the mission done.

MJ: People are fairly familiar with the Halliburton contracts in Iraq. What are some lesser-known areas where contractors are being used heavily?

DG: Let me give you a couple of examples that have sort of been on the tip of the news. About a year ago, there was a large controversy about the Total Information Awareness program. Well, what got very little attention was that almost 99 percent of that program was being done by contractors, because the defense agency that was directing it, DARPA [Defense Advanced Research Projects Agency], has very few in-house staff. Now why should we care? If it had been defense officials running that program, they would have been subject to the Constitution and citizens would be protected against violations of privacy under the Fourth Amendment. But that program was largely contracted out and the Constitution likely does not apply to the contractors.

We listened to Condi Rice talking [before the 9/11 commission] about the basic problem we have in homeland defense, the compartmentalization of security. The FBI doesn’t talk to the CIA and the DoD [Department of Defense], and so forth. Well, the interesting thing is that if you look at the big contractors that are doing work on intelligence, they are boasting on their websites that they’re working for all of these intelligence agencies. And moreover, whom do they have on their staff? They have on their staff former heads of these agencies, as well as dozens– hundreds– of former officials. If we look at this basic problem of the absence of networking, or coordination, there is an argument that this function is now increasingly being fulfilled by contractors.

MJ: How do the Bush administration’s initiatives like faith-based programs and the push to privatize Social Security fit into all this?

DG: My view might be considered a little bit perverse. But to me, the Bush initiatives are perfectly consistent with the bipartisan liberal tradition. Social services and welfare services have long been done by contractors. The question is, what kind of contractors? And the Bush people are saying, “Well, the faith-based organizations are better suited to do them than the contractors we had.”

The privatization of Social Security is quite consistent with the bipartisan view that if we don’t have government officials in charge, then we can align incentives to make things work. And it’s a powerful view because there is so little confidence in what used to be called public administration.

MJ: How does contracting fit into the strategy of small-government conservatives? It seems that contracting has shrunken the size of the civil service without really shrinking the size of government. Is that what the small-government conservatives want, or do they see this as a way to give money back to the people who deserve it, i.e., the “taxpayers” and companies?

DG: I don’t purport to be either a small-government conservative or a big-government liberal Now, the question is, what’s the game that is being played here? Part of it really is good government: we are trying to avoid growing the civil service because we can use outside resources effectively and they can check and balance the civil service. Another argument might be that that’s really a way of destroying big government. It’s hard to know, because motives are complex and the relationship between motives and programs is often quite murky. But the reality is that we are growing big government, systematically, continually.

MJ: Is anyone is focusing on these issues in Congress?

DG: Well, not very many people. What we’re talking about presents itself as a terribly dull, gray issue. So the number of people in Congress that really are involved in this issue is very small. Instead we see, as we saw in the paper yesterday, Senator Kerry– in his first shot at this issue– saying, “Let’s cut the number of contractors.” Who do you want to cut? You want to cut Blackwater that’s guarding Mr. Bremer in Iraq? Nobody’s looking at the big picture.


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