Wednesday, November 7, 2007

Light Blogging for a Few Days

It's going to be little to no blogging for me for a few days, as I'm going to be out of pocket. Hopefully I'll get the third part of my series on corruption out before I leave this afternoon. In the meantime, read this article about the myth of campaign finance reform, which is perhaps a bit more militant than I would like but seems to grasp the picture pretty well (and yes, the third part of my series is on campaign finance).

Why Big Government Encourages Corruption (cont'd)

I already posted yesterday afternoon about how big government encourages corruption, especially in our form of government, where politicians and government officials have a lot of ability to give benefits to their biggest supporters, as well as a large incentive to do so (ie, the need to get re-elected in order to do what they believe should be done). I discussed how this conflict results in a very real corruption of ideology such that the government official in many instances actually believes they are doing the right thing within the scope of their ideology. I suggested that one solution to issues of corruption in our system of government is primarily to reduce the size of government (I should point out that other systems of government may be less susceptible to corruption, which is another topic entirely, though their examples may have relevance to making improvements to our own systemic problems).

Of course, most people are unwilling to give up big government, and so they will argue that the problem isn't with the size of government but is instead the result of a lack of appropriate safeguards against corruption. My goal in this series of posts is to show how some particularly prevalent safeguards either create more corruption, legitimize the truly nefarious corruption, or simply have costs that far outweigh the problem. The primary reason for this is that these reforms treat symptoms rather than the disease, and have the effect of driving mitigating/countervailing forces from the market. This all isn't to say that good reforms don't exist short of reducing the size of government; just that most reforms do more harm than good (for instance, I have no problem with most disclosure requirements as a matter of effectiveness, though they have their own set of other concerns).

I. Bidding Requirements

The first type of reform that I will address is that of bidding requirements. For the most part, these requirements evolved as a response to bribery of both elected and unelected officials. Bribery is obviously a major and legitimate concern. It is particularly concerning because it provides a personal financial incentive to do a political favor that has nothing to do with the concern for re-election or currying favor with a public employee's superiors. So the need for reform on issues of public contracts and public expenditures was pretty clear.

The problem is that the institution of bidding requirements has at least one of several effects, depending on the relevant requirement: 1. Monopolization of government-obtained services (and in the case of most privatization, government-provided services as well); 2. Has, somewhat counterintuitively, limited competition to a relatively small slice of potential vendors; 3. Has created an illusion of a sanitized process when in fact the process is just as corrupt as it always was, or 4. Have simply added to the government's cost of doing business while having little or no effect on the actual selection of vendors.

In my experience, most bidding requirements can be summed up as the government entity being required to select one of the following methods of awarding contracts, depending on the amount and type of contract:

1. Informal oral or written quote from multiple vendors/contractors
2. Formal "catalog" bid, wherein either one vendor's catalog is selected for nearly everything or, just as commonly, any compliant bidder is awarded the "contract", permitting local officials to order from any awarded vendor at will.
3. Formal bid for specific items or services- item is awarded to lowest bidder on each item or service.
4. "Sole Source"- item or service is awarded automatically to one vendor without any competitive bid on the grounds that the item or service can only be provided by one vendor.

Trouble is, each of these "solutions" actually has its own problems that encourage, rather than discourage corruption. Worse, these "solutions" typically result in higher transaction costs for smaller contractors/vendors, making it very difficult for them to get involved in the process. (To solve this problem, the government tries to implement set-asides for small or minority businesses in most contracts- but these set-asides usually have their own set of problems, which I won't address here).

So, here are the problems:
1. Informal verbal or written quotes- in some ways, this method seems fairly straightforward, and yet it still has major problems. First, this option is usually limited to relatively low-value contracts, meaning that its benefits are limited to the types of transactions that are relatively unlikely to be the subject of bribery. Second, the relevant government official gets to choose which vendors he contacts for pricing. Once the required number of vendors have been contacted, the government official is in the clear. As a result, a corrupt official could just contact vendors he knows beforehand will be unable to compete with the bribing contractor. And this says nothing of the rather small benefit obtained by using this process as compared with the not insignificant expense of obtaining informal quotes, keeping in mind that this process is used only for smaller contracts to begin with.

2. Formal "catalog" bids- this option is almost certainly the least troubling of the methods. In this bidding system, the government advertises for bids; any vendor responding to the advertisement and complying with the terms of the bid gets awarded the bid. One problem with this method, though, is that it succeeds only in limiting the potential pool of vendors to those vendors who are fortunate enough to be aware of the advertisement for bids. Another problem is that the vendors most likely to respond are often the very vendors who would be most able and willing to engage in the corrupt activity to begin with, since those vendors will be the ones most likely to be familiar with the inner workings of the government entity. As a result, once awarded the bid, the corrupt vendors are able to engage in malfeasance almost with impunity, since their actions are less likely to raise red flags once they have the government's tacit approval to deal with whomever will deal with them within the entity. To the extent this method of government bidding represents an improvement, though, it's applicability is extremely limited to vendors providing a wide array of goods. Moreover, a corrupt official can easily influence the process by choosing advertising methods unlikely to reach potential competitors to the preferred, bribing vendor- since the process will be followed, there will be little cause for suspicion of the corrupt official, and the corrupt parties will be able to get away with things.

3. Formal bids for specific items or services- this is the method that the public traditionally associates with government bidding. The concept is very simple- whoever bids the lowest price for the relevant good or service gets the contract for that good or service. It sounds great on paper, of course, but as usual there are major trade-offs involved, and there are plenty of loopholes and ways around the lowest-bidder concept.

First off, when it comes to goods, this is an extremely time-consuming and expensive process; there is almost no possible way that the amount saved by soliciting competitive bids will in many cases be greater than the administrative costs of issuing, reviewing, and awarding the bid. The process of issuing a bid alone requires the purchasing official (who often has little or no understanding of the technical value of the relevant product or service) to obtain information from the relevant government agency as to which products it wishes to procure; in some cases, this may involve questioning dozens of different officials within an agency.

The official then must draft a description for each of usually dozens of products- often, this involves naming a specific product line or even a specific vendor with no appreciation for whether the vendor is the actual manufacturer of the product. When a vendor is named as a manufacturer, that vendor may often have a leg-up on the competition because a corrupt official can simply claim that they didn't think competitors' products met the specifications of the bid- even though the competitor's product is identical in every respect including manufacturer. Moreover, product descriptions are often vague, resulting in a situation where only one bidder (the intended awardee) has sufficient information to actually bid on the product. But even in the ordinary circumstance where a bid for goods is done completely ethically, the government official still has to go through the additional steps of reviewing each line of each bid, comparing each such line to the equivalent line on all other bids; additionally, the government official must then research whether the lowest bid on a given line item actually complies with the bid's specifications. Once this has been done, the official may need to factor in any discounts that bidders have offered should the bidder be awarded all the items they have bid. And all this says nothing of the fact that the official must first review the formalities of each bid to make sure those formalities have been met.

Finally, once an award has been decided, the official must prepare a notification for each bidder indicating what, if any, lines they have been awarded. But this doesn't end the process, necessarily- in some cases, a disgruntled vendor may then choose to protest the bid award, requiring a full-on legal proceeding of some sort. In more common cases, a disgruntled vendor may just seek additional information as to why they were not awarded a line item or as to why someone else was. Point is, this is a much more convoluted process than the average person may perceive, and yet it still leaves plenty of areas for corrupt activity. Indeed, this corrupt activity may be worse than it otherwise would be in some cases, since the size of the contracts awarded are often much larger than they would be if the contracts were awarded on an as-needed basis in which individual officials could easily switch between vendors from one project to the next rather than having to operate under a blanket contract award; moreover, contracts like this (when they are for goods, at least) are usually coordinated by a separate government entity on behalf of multiple other government entities, meaning that the awarded contractor gets monopoly power to deal with multiple agencies, rather than having to negotiate with each agency individually.

As for service contracts- and particularly construction service contracts- the low-bidder formula creates its own set of problem. Specifically, it assumes that any contractor can do just as good a job as any other contractor, so quality of work becomes irrelevant, and the winning bidder is probably nearly as likely to be the winner because of a willingness to cut corners as he is to be the winner because he's just more talented and efficient than the other bidders.

Also- and here is where I probably differ from many conservatives and libertarians- it is somewhat silly to assume that a private company awarded a contract to provide government services, and which is monitored by a bureacracy will be more cost-effective than if the government bureacracy were to provide the service on its own. In other words, competitive bidding out of privatization contracts often creates more, not less, bureacracy. Also worth remembering is that the awarded vendor's customer isn't the taxpayer- it's the government official or agency who awarded the contract, and the interests between the taxpayer and the government official are not necessarily mutual. This isn't to say I'm opposed to privatization per se- just that I'm opposed to privatization where the government is paying the private company to provide the service, rather than the private company paying the government for the privilege of providing the service.

4. Sole Source- ahh, now we come to the worst of the group. The concept behind sole source bidding is simple and common sense- why waste valuable resources on bidding a contract out competitively if there is only one vendor who can provide it? Trouble is that it turns out it's pretty easy for a government official to claim a product or- especially - a service can only be provided by one contractor/vendor. Indeed, "sole-sourcing" can be met in many cases merely by providing a letter stating that no one else provides the vendor's services in exactly the way the vendor does. Since any company wishing to succeed must distinguish itself from its competitors to begin with, you can imagine that it's not very difficult to meet the "sole source" test. It's pretty easy to imagine a situation where a company makes a payoff to a corrupt official so that the official signs off that the company's services qualify as "sole source." Indeed, the existence of the sole source requirement represents a tremendously easy avenue around any restrictions placed by the first three types of government bidding. But the sole source exception pretty much needs to exist. As I think I showed in the previous points, a "sole source" exception effectively exists even if competitive bidding is required, since the government will always get to define the parameters of the item or service sought in a way that either limits or maximizes competition.

The end result of all these bidding requirements is that they only create an appearance that contract awards are immune from corrupting influences. In fact, the bidding requirements may provide additional avenues for corrupting influences; worse, the very existence of the requirements results in less scrutiny and oversight, as long as the requirements were ostensibly followed.

Tuesday, November 6, 2007

Why Power Corrupts (aka Reason 858 Why Small Government Is Best)

Mick at Comments From Left Field attacks Fred Thompson - and Republicans more generally- over his buddy who was convicted of some drug dealing felonies 25 years ago. He then goes on to make this statement:

The arrogance, corruption, and just plain stoopidity in the GOP has reached monumental proportions. I suppose there must be a Republican somewhere who isn’t a crook, a friend of crooks, a sexual hypocrite, a would-be dictator, or an extremist religious whacko, but I couldn’t tell you where to find them. One gets the feeling that the the ones not currently under indictment or otherwise embarrassed by revelations of thievery, calumny, greed, or cruelty just haven’t been investigated yet.

First of all: so the guy has a close adviser who was convicted of some felonies related to the War on Drugs 25 years ago- so what? Given the size of the US' prison population and the number of hangers-on that all politicians have (especially presidential candidates), I'd tend to think that most politicians, who are in a shady business to begin with, have close connections to criminals of various stripes. The bigger question when things like this come out is what does it say about the War on Drugs, other than that it's made drug dealing a very lucrative business.

More importantly though, the ad hominem suggesting that all Republicans are crooks, etc. strikes me as particularly out of line. Not so long ago, I remember the Dems being the ones who were most frequently coming up in scandals of various sorts: Abscam, the Keating Five (four of whom were Dems, including all three found to have acted most inappropriately), Bob Torricelli, Marion Barry, the various "Gates" of the Clinton years (some of which were very real), Gary Hart, the political machines in several major US cities, and countless others.

Fact is, the Republicans are a political party dedicated to getting party members elected, just as the Dems are. That is the only purpose for either party; it just so happens that at this moment in history conservatives tend to be Republicans and Progressives tend to be Dems- but those ideologies exist independent of the parties. The problem occurs when people conflate the ideology (which is really a personal philosophy about the role of government) with party dogma (which is geared towards electing and empowering candidates). The result of doing so is usually that the party dogma infects the ideology, and the ideology eventually becomes incoherent.

Rather than making corruption and criminal behavior by politicians a partisan issue, maybe we should be asking what it is about government more generally that creates corruption and attracts criminals. In other words, maybe we should be asking why we continue to be surprised when the old maxim that "power corrupts" proves true, and why we don't do something to diffuse that power. The politician's first duty will always be re-election and maintenance of power since power is what is needed to implement the politician's ideology; problem is, of course, that the ideology will over time become increasingly corrupted by the need to get re-elected or gain more power. And so, over time, policy becomes increasingly driven by doing favors for those who are most useful to keeping you in power or getting you more power.

Since most people think they are good and honest, they rationalize this behavior by adjusting their ideology such that, say, a capitalist ideology (which in the post-New Deal era meant that business groups were the most important constituency for such ideologues) is transformed into a pro-business ideology (which has relatively little to do with a free market ideology). Similarly, an ideology roughly rooted in FDR's Four Freedoms (which meant that labor unions were the most important constituency) becomes transformed into an ideology that is explicitly pro-union and anti-business (which has relatively little to do with the Four Freedoms). Of course, you still pay lip service to your root ideology, but in the process you've changed the meaning of your root ideology.

But when government is small and relatively weak, there is little incentive for your core constituencies to demand favors from you, since there are few favors that you can grant them. It's tough to have even an implicit quid pro quo when there is no quid. To the extent government is necessary, greater decentralization reduces the size of any given quid, thereby limiting the effects of any resulting ideological change to a local area. For the record, this is essentially Madison's legendary argument about faction in his Federalist 10. Of course, the Constitution has no possible relevance 220 years later, so abandoning core Constitutional principles couldn't have possibly had anything to do with the increasing occurence of corruption, could it?

So, Fred Thompson Doubts He'll Win

In a level of candor that is highly unusual for a candidate considered to be in the "top-tier" in a relatively wide-open race, Fred Thompson made some comments acknowledging that he doesn't think he's going to win.

The overall tone of the article is anything but sympathetic to Thompson, suggesting this was a big gaffe on his part, and repeating the accusations that he is lazy. To me, though, the article actually makes Thompson more appealing, and I'm really starting to warm to the guy.

Frankly, after 8 years of an extremely active executive, maybe a lazy man is exactly what we need, if only for one term. Indeed, despite accusations to the contrary, the man who thinks we don't need to do very much is the man who is likely to be the most genuine optimist. Certainly, a generally lazy attitude towards the use of executive power is as fundamentally libertarian as you can get- even if Thompson isn't a real libertarian himself. On top of all that, his candor about his chances is refreshing- it suggests someone who really is playing the role of the reluctant candidate and is thus not willing to sacrifice who he is at heart in order to get something he doesn't really want in the first place; when it comes to power, frequently the best man for the job is the man who wants it the least.

I still prefer Paul, but oddly enough, my personal willingness to support Thompson is increasing proportionally to the willingness of most others to begin abandoning him. For my preferences, the gap between Thompson and Paul has decreased dramatically these last few weeks.

Romney's Big Endorsement

This is interesting. Influential conservative Paul Weyrich, original lynchpin of the Heritage Foundation and the Moral Majority, has come out and endorsed Mitt Romney. This is just the latest in a string of endorsements for Romney from the theo-con base of the Republican Party, most notably including Hugh Hewitt's endorsement.

But...Weyrich's endorsement may not be as solid as it is being portrayed. In an interview also published yesterday by Newsmax, Weyrich indicates his primary goal is simply stopping Giuliani at all costs. His support of Romney in this interview seems, frankly, lukewarm at best:

I think [Romney] is somebody who is rushing toward the movement trying to present himself as a conservative and in some ways it's more useful to have somebody like that. I think he could be supported.

In other words, Weyrich acknowledges Romney's flip-flopping, but thinks it's the type of flip-flopping that would be primarily beneficial to the Religious Right. More importantly, he also has this to say about Romney as compared to Fred Thompson:

Newsmax: Who would you consider of all these candidates in the Republican
primary race to be the best?
Weyrich: If you mean by that who’s the best campaigner, I think Romney is if you look at his lead in the early states as a result of arduous campaigning. I'd be more comfortable if Fred Thompson were, but he’s a poor campaigner.

This is particularly interesting- it suggests that Weyrich's support of Romney is borne more out of necessity than actual ideological agreement. So, while this is certainly a coup for Romney, it seems to be something of a hollow victory- essentially a decision on Weyrich's part to endorse the lesser of several evils (in the theocons' eyes), while maintaining some hope that the Religious Right will maintain its recent influence on the Republican Party.

Anyways, while I'm not particularly fond of Weyrich's logic, and I am most certainly not one to agree with him on many (if any) social issues, I find some of his rhetoric to be refreshing in its realism (ie, the upcoming election cycle is likely to be a disaster for Republicans), and in its implicit acknowledgement that Republicans by and large deserve what has happened to them and what is likely to happen to them in 2008.

Moreover, I'm impressed to hear a theo-con make statements like this about Iraq:

I felt that it was a mistake to go in there in the first place. We should not be taking initiatives like that with NATO. We're only supposed to defend if attacked. We should not be making initiatives when not attacked.
[I]if we were going to go we should have very carefully examined the Baath party people to determine which ones were there because they were really Saddam's Murder Inc., and which ones were there because they were competent people who knew how to run a country.

And this about Iran:

Bombing would turn the population against us whereas now in Iran they are probably more pro-American than any other place on earth.

Sometimes, it's just good to remember that not all theo-cons are unhinged, and actually still remember why they were conservatives in the first place.

Monday, November 5, 2007


I just wanted to prominently retract my suggestion, originally made in this post that Second Hand Conjecture was both a conservative and trivializing the waterboarding issue. More details about the error are contained in the updated post.

Ashcroft Is Wrong About Telecom Immunity

This morning John Ashcroft has a piece in the NYT arguing for telecom immunity. Since he has earned some credibility since he left the Administration on issues of integrity, it's worth taking his arguments somewhat seriously. However, his arguments are strikingly similar to the arguments made by several other former AG's in the Wall Street Journal last week, which I discussed at length here.

As with the argument in the WSJ, Ashcroft's argument is deeply flawed because existing law already grants sufficient immunity to cover his concerns about a chilling effect on private cooperation with the government. The telecom companies are not small businesses with limited access to legal help; instead they are massive corporations with armies of lawyers on their payroll, not to mention the private firms they keep on retainer. A quick perusal of existing law easily turns up the fact that the telecoms already have immunity- as long as the government provided them with a formal certification (not a particularly high bar to meet).

If the government did not provide them with such formal certification, then even a summer associate would have understood that no immunity would exist. The solution to this dilemma would be easy- demand the government provide appropriate certification; if the government refused to do so, then it would be a pretty easy inference that the government's request lacks a real basis and was thus unnecessary.

Now, I have no knowledge whether the government did provide a formal certification in this case- if it did, then this is all much ado about nothing. But the fact that the intelligence committees, with their superior access to information, feel compelled to issue this specific immunity says to me that the government did not provide proper certification. So prosecution of these law suits should have no effect on future cooperation with the government other than to the extent private companies will need to insist on formal certification. To change the standard from formal certification to "explicit assurances" is to lower an already low bar. Even worse, this reduces the potential liability of government officials since it effectively eliminates the certification requirement and replaces it with a letter merely stating the President authorized the program and determined it to be legal.

Ashcroft also argues that accountability-based arguments for the lawsuits are flawed because, "for domestic purposes" the intelligence committees have oversight, and they are the people's elected representatives, and they are therefore a more appropriate venue for oversight than the courts. A few problems exist with this line of argument, though. First, the people do not have any direct influence on who gets to be on the intelligence committees. Second, the Congress is not what you would call a neutral arbiter, but is instead largely concerned with re-election; the Dems' concerns about being labeled "soft on terror" creates a huge impediment to their independence in evaluating the arguments for immunity. Third, who oversees the intelligence committees? No one. Finally, the intelligence committees are much closer to a grand jury than a trial jury or judge- there is little or no adversarial process involved, so the Administration can selectively choose what it provides to the committees with no questions asked. In the end, his argument amounts to "Just trust us," these are sensitive secrets.