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Reinventing America: Just End the Budget-Busting Shadow Government

How do consulting firms, non-profits and other non-governmental entities form a veritable shadow government?

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  • A veritable shadow government, which devises and implements so much policy, warrants close examination. It is the elephant in the room.
  • The shadow government comprises of companies, consulting firms, non-profits, think tanks and other nongovernmental entities.

The U.S. model of governing builds on the nation's rich tradition of voluntary associations playing a role in public and civil life.

The participation of a plethora of entities in governing can be considered not only as a natural outgrowth, but also as a strength of the American system.

Over roughly the past six decades, but especially since the end of the Cold War, the architecture of much of federal governing has transformed. A major pillar of this structure is the shadow government that today comprises the companies, consulting firms, non-profits, think tanks and other nongovernmental entities that swell the ranks of contractors.

These private actors are interdependent with government, involved in all aspects of governing and negotiating "over policymaking, implementation and enforcement," as one legal scholar has noted.

Where once federal employees executed most government work, in today’s United States upwards of three-quarters of the work of federal government, measured in terms of jobs, is contracted out.

Although this practice is not new, it has accelerated and assumed new incarnations, most notably since the early days of the Clinton Administration.

The shadow government, which devises and implements so much policy and forms the core of governance, warrants close examination. It is the elephant in the room.

The façade of small government — so effective as political rhetoric espoused by Republicans and Democrats alike — appears as a perennial ruse in American public discourse despite the enduring reality that de facto federal government has long been growing.

Underlying the growth of shadow government is the effort to cap or even reduce the number of civil servants, which has been making headway for some 60 years. The shadow government is the creature of these attempts to curb official government.

While it may be the elephant in the room, we know little about the nature of the beast. Government scholar Paul C. Light compiles the most reliable available figures on contractors, but these are inexact. The number of contract workers as compared with civil servants, uniformed military personnel and postal service employees increased steadily over the last two decades.

In 1990 roughly three of every five employees in the total U.S. federal labor force (including contractors) worked indirectly for government — in jobs created by contracts and grants, as opposed to jobs performed by civil servants, uniformed military personnel and postal service workers.

By 2002, two of every three employees in the federal labor force worked indirectly for government and, by 2008, the number was three out of four. Phasing out official government grows the shadow government: The very necessity of upholding the façade of contained government in fact begets the opposite.

An even more reliable barometer of the growth of shadow government is the U.S. federal budget. Under George W. Bush’s two-term administration, the shadow government — driven in part by the increase in demand for military, nation-building and homeland security services after 9/11 — captured record levels of procurement (or contract) spending.

The cost of services alone (not counting goods) provided by contractors soared from some $125 billion in 2001 to an estimated $320 billion plus in 2008. Nearly 90% of NASA's and the Department of Energy's budgets go to contracts. The U.S. federal government today is the world's largest customer for goods and services.

Where once the government procured mainly manufactured goods from the private sector, a huge and rising portion of government purchases is now for work that would once have been performed by civil servants.

The shift to contractors highlights the redesign of governing in the United States. This redesign threatens both the accountability of government and the competition of the private sector — all the while hiding behind the grand narratives of democracy and free market that accompanied the end of the Cold War.

Of course, contracting itself, especially simple services, is not necessarily corrosive and can even be beneficial.

For instance, a contractor with access to people at all levels of an organization can correct misimpressions held by people at the top about what is going on at the bottom and vice versa — something a regular employee is ill-positioned to do.

But contracting gone wild facilitates the fusion of state and private (unaccountable) power and enables new institutional forms of governing to flourish beyond the reach of public monitors.

The outsourcing of inherently governmental functions reveals the significance of these new forms — and makes the façade that government is in charge even more dangerous.

Editor’s Note: This feature has been adapted from SHADOW ELITE by Janine Wedel, published by Basic Books. Copyright 2010 Janine Wedel. Reprinted with permission of the author.

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