The Pitfalls of Privatization

For decades, Republicans and Democrats alike have pushed for government privatization. But, a business-like government is directly hostile to our constitutional order.

Steve Bannon may be gone from the White House, but his war on the administrative state rages on. Hundreds of high-level administration positions remain unfilled, and agencies have spent much of the year coming up with plans to shed staff and trim their operations.

Of course, Bannon didn’t start the war. Republican dogma since the Reagan era has been to privatize or contract out government as much as possible. Democrats have largely gotten on board, too, after getting their clocks cleaned repeatedly by the GOP. Even when Democrats do stand up for the government, they tend to treat it as a necessary evil, accepting the premise that regulation is a drag.

Constitutional Coup

Constitutional Coup: Privatization’s Threat to the American Republic
by Jon D. Michaels
Harvard University Press, 320 pp.

Jon Michaels enters the debate with a new affirmative defense of the administrative state. In his book, Constitutional Coup, he argues that our professional bureaucracies are essential to America’s democracy; moreover, while the Constitution doesn’t stipulate the creation of federal agencies, the administrative state has developed in a way that protects key constitutional norms. Therefore—if it came to it—our public administration could be plausibly defended on constitutional grounds.

To Michaels, the administrative state’s web of slow, deliberative processes, which critics tend to dismiss as “inefficiency,” is precisely the source of its constitutional virtue. After all, it would miss the point to complain that having three separate branches of federal government is “inefficient”—recall your grade school civics lesson on the wisdom of checks and balances. The same wisdom applies to the administration of that government.

Michaels interprets the administrative state as having three major components: politically appointed agency leadership, civil service bureaucrats, and civil society. These components are analogous to the three branches of our constitutional government: they check and balance each other. Agency leadership is like the executive branch, expected to advance the president’s agenda. Career civil servants are professionals—scientists, economists, social workers, and other experts—who are careful to fulfill their legislatively assigned duties and check leadership agendas against legal mandates passed by Congress. In this way they are like the judiciary. Finally, civil society is like the legislative branch: it includes citizen groups, lobbyists, nonprofits, and other non-governmental stakeholders who provide substantive input when agencies institute new rules and regulations.

The framers’ fear of an overly powerful federal government, Michaels observes, was really a fear of an overly efficient government—without checks and balances, one branch would be too good at getting what it wanted. Promises to run government more like a business, he argues, should scare us for the same reason. Far from being a dispassionate, value-neutral attempt at making government work better, privatization (turning government bodies into independent private corporations) and outsourcing (hiring private contractors to do the government’s job) pose a direct threat to republican government. Whether supporters realize it or not, business-like government is necessarily hostile to the constitutional order because it is not in the nature of businesses to be democratic or transparent.

Michaels, a law professor at UCLA, intends for this constitutional argument to be the heart of his book. But as the political history that he teases out shows, the fate of public administration is decided more at the ballot box than in court. In 1964, 75 percent of the American public expressed confidence in the government. But then came Vietnam, the failed War on Poverty, Watergate, and recurring recessions. By 1974, only 34 percent expressed confidence, setting the stage for a political movement declaring government the problem and shifting the bipartisan consensus toward privatization.

While Reagan may have ridden this anti-government momentum to the White House, he also encountered a great paradox: Americans may say they dislike government in general, but they love government programs that benefit them and their communities. That would make it all but impossible to truly shrink the scope of those programs. So Reagan found the next best thing: keep the state but outsource it. Contracting, Michaels writes, “provided a [theoretical] double windfall; the big, popular programs could be preserved and run more cheaply, without the distrusted and sometimes despised agency personnel.”

What’s striking is how quickly the notion that private actors can do government work better than government employees went mainstream—and bipartisan. The Clinton administration greatly expanded the contractor workforce. It also privatized the U.S. Enrichment Corporation (which handles our uranium), In-Q-Tel (the intelligence community’s in-house venture capital firm), and the United States Investigations Services (which conducts background checks for security clearances). At one point Clinton even set his sights on privatizing Social Security. The trend accelerated under George W. Bush and Barack Obama. Whether via privatization or hiring private contractors, the logic is the same: make government run more like a business, because business always does things better than government.

Michaels wonders aloud how Democrats came to embrace this philosophy. The answer is right in front of him. Democrats lost three presidential elections in a row to Republicans who played to the political paradox above. Contractors don’t show up on government employment rolls, so politicians can point to a shrinking workforce as a victory while hiding fact that the same work is being done, just outside government and—more often than not—at a higher cost. Clinton and the Democratic Leadership Council saw no way around the paradox (hate the government, love its programs) except to try to work around it better than Republicans. What Michaels does point out is that Democrats successfully defused “the revolution of its political charge” by reframing privatization as a purely technocratic endeavor without any ideology, anti-government or otherwise, attached to it. “Anti-government sentiment was recast as smart government—and with that change in affect and tone, we could all be privatizers now.”

The true strength of Michaels’s book is reminding us why we have administrative government in the first place. Its design may have not been intentional, but it was created in response to specific problems. American governance before the 1930s operated largely on a “spoils system,” a web of political patronage and legalized corruption between private actors (recall the Pinkerton police force) and party hacks in government roles. The Progressive Movement of the late 19th and early 20th centuries fought hard to pass legislation—crucially, the Pendleton Act of 1883, which laid the groundwork for the creation of a professional, politically insulated civil service, and the Administrative Procedure Act of 1946, which guarantees the public “meaningful and extensive opportunities” to provide input on administrative policy—to move government away from partisan loyalists and toward professional technocrats who serve everyone equally.

Michaels provides a useful reframing of what business-like government really means. Politicians say they want to create a leaner, more efficient operation. Less deliberation, more action; faster, frictionless implementation of directives from politically appointed leadership. More CEO-like power for politicians, in other words, and fewer checks and balances from civil servants. Michaels points out the deep irony that voters’ distrust of politicians leads them to support giving those very politicians more unchecked power. It might be right to say that a privatized workforce is more efficient and responsive—the question is, “Responsive to whom?” The answer is not “the general public.” This reframing by Michaels could be useful to any ambitious politician wanting to defend good government as a populist.

There’s no question that such a defense is sorely needed. But while Michaels’s argument about the virtues of administrative inefficiency are powerful, let’s be honest: a political platform touting inefficiency won’t be a winning one. More compelling is the argument against giving leaders too much power. Rescuing the ideal of public administration will require reminding voters how much worse the alternative is—how our addiction to outsourcing and privatization leads to impersonal government, controlled by the greed of corporations and craven politicians with fewer checks on their power. Victory on those terms is what will lead to the reforms Michaels outlines, and that America needs.

Joshua Alvarez

Joshua Alvarez is an associate editor at Washington Monthly.