Small government!
Conservatives and Their Carnival of Fraud
By THOMAS FRANK
Conservatives and Their Carnival of Fraud
Wall Street Journal June 25, 2008; Page A13

I wonder if, back in the rosy-fingered dawn of our conservative era, all those Adam Smith-tied evangelists of "limited government" had any idea that they were greasing the skids for a character like 22-year-old arms dealer Efraim Diveroli?

Mr. Diveroli, whose tousled, slightly confused visage recalls the perpetually stoned Jeff Spicoli from the 1982 film "Fast Times at Ridgemont High," was the improbable recipient of a 2007 government contract to supply ammunition to our allies in Afghanistan.

The trouble was the munitions he sold were, like, seriously bogus. Old and partially defective, the stuff apparently originated in China, which is a Pentagon no-no. Mr. Diveroli was indicted by a federal grand jury in Florida on Friday on numerous counts, including allegedly attempting to defraud the government.

How could a kid barely able to buy beer secure a nearly $300 million defense contract? It will be interesting to find out. Maybe Mr. Diveroli's story will be the one that finally fixes public attention on the carnival of fraud, waste and profiteering that characterizes our system of government-by-contractor. Maybe it will finally persuade us to ask our politicians why it is that they hire Blackwater to do the job of the Marines and pay Kellogg Brown and Root to arrange the logistics for the Army wherever it goes.

And maybe it will finally call into question one of the greatest shibboleths of conservative governance. Although contracting-out has been celebrated by big thinkers from both parties and although it has been practiced in some form or other since the earliest days of the republic, an ideological commitment to outsourcing is one of the signatures of conservative rule.

The ostensible justifications for it, in the early days, were thrift and efficiency. The 1984 "Grace Commission," in which a battalion of corporate executives ransacked the government looking for waste, recommended privatizing federal operations as a way to save money. With the government plunged deep into deficit, government needed to hire out its duties to business in order to save itself.

The ideological assumption was only barely concealed: Whatever "big government" could do, the private sector could do better, cheaper and faster.

There was another unspoken ideological angle: Every federal job privatized was a job pried from the grip of the hated Washington bureaucracy. Every dollar contracted out meant that much less for bureaucrat unions and that much more for friendly companies, well-connected lobbyists and corporate political action committees.

In the Bush era, the idea was pushed to a sort of extreme, with each of our great national initiatives – the Iraq occupation, Katrina reconstruction and the Department of Homeland Security – largely entrusted to private contractors. We now often read about federal employees quitting to work for private contractors to do the same job as before for twice the pay.

We also read about efforts to shut down or outsource the agencies charged with scrutinizing outsourcing. Last week, the New York Times reported on the travails endured by one of the Army's chief contracting officials who says he became suspicious of huge, sketchy expenses being run up by KBR in Iraq. When he threatened to withhold future payments from the company – harsh toke, dude! – he quickly found himself out of the loop; the Army contracted out his job to a company that accepted KBR's numbers.

One fact about government outsourcing is settled: It sure doesn't save money. A Washington Post reporter who scrutinized Katrina reconstruction contracts in 2006 found that "the difference between the job's actual price and the fee charged to taxpayers ranged from 40 percent to as high as 1,700 percent." To cover damaged roofs with tarps, certain contractors billed the government $1.50 per square foot of roof covered; some of the people who actually did the work got under 10 cents per square foot. Guess who kept the difference.

Privatization also constitutes a fundamental change in the constituency to which government answers. Journalist Tim Weiner estimates that, by 2006, about half of the people working for the CIA in Iraq and the National Counterterrorism Center were contractors, former CIA personnel accountable not to the American public but to their employers. "The spectacle of jumping ship in the middle of a war to make a killing was unremarkable in twenty-first century Washington," he writes in his book, "Legacy of Ashes." Among the CIA's new hires, he reported, the saying is, "Get in, get out, get paid."

The days when conservatives railed against red tape and shrieked for efficiency in Washington now seem like a lifetime ago. When they finally got the opportunity to put their theory into practice, conservatives contrived instead one of the most wasteful systems ever seen.

It is time for a new Grace Commission, this one examining the sordid history of privatization in all its details. President Barack Obama should launch it on day one.