Posted 7:52 PM by Robert

Politically Polymorphously Perverse

In the eyes of Herr Doktorprofessor Paul Von Krugman, the Bush-led Republican Party is truly a remarkable political organism. Just days ago Herr Doktorprofessor wrote franticly that the Bush Administration - even at the very top - was so riven by uncoordinated, disobedient, self-interested faction that Paul Wolfowitz was actually the leader of a neo-conservative pack deliberately undermining James Baker:

If the contracts don't provide useful leverage, however, why torpedo a potential reconciliation between America and its allies? Perhaps because Mr. Wolfowitz's faction doesn't want such a reconciliation. .... [M]any insiders see Mr. Baker's mission as part of an effort by veterans of the first Bush administration to extricate George W. Bush from the hard-liners' clutches. If the mission collapses amid acrimony over contracts, that's a good thing from the hard-liners' point of view.

Yes, Herr Doktorprofessor convinces us that President is unable to control the "policy freebooting" even within the highest ranks of his own administration. Bush incoherence. Bush incompetence. So it always goes with Herr Doktorprofessor.

But what a difference a few days make! In his most recent column, Herr Doktorprofessor urgently reports that the real threat from the Bush led Republicans comes not from incoherent policy freebooting and refusal to cooperate, but from their monolithic, obedient group-mind:

[I]t's hard to think of a time when U.S. government dealings have been less subject to scrutiny. First of all, we have one-party rule - and it's a highly disciplined, follow-your-orders party. There are members of Congress eager and willing to take on the profiteers, but they don't have the power to issue subpoenas.

So there you have it. A few days ago, the Administration was so undisciplined that feuding factions were undermining and tearing apart each other and the President's policies, but now the entire Republican expanse has become a a highly disciplined, follow-your-orders party - a discipline that extends not just to the White House, the Pentagon and throughout the Executive Branch, but even subsumes Congress! Does, for example, Senator John McCain, know about this? The John McCain who is Ranking Member of the Senate Committee on Commerce, Science, and Transportation, member of the Senate Committee on Armed Services, a member and former Chairman of the Committee on Indian Affairs, and a self-proclaimed high-profile opponent of "pork barrel" spending? Does that John McCain know that he is unable or unwilling to obtain subpoenas to investigate what Herr Doktorprofessor finds to be obvious signs of fraud against the government?

John McCain will not be the only surprised Senator. And that's nothing compared to the surprise that will hit all the divisions of the various intelligence services devoted to detecting and prosecuting federal government contractor fraud (every branch of the armed services has one, for example) - divisions that have been relatively recently expanded and think themselves to be fully and effectively employed. I was speaking to a relatively senior member of one such division just the other day, and I know that they'll really be surprised to find out that they are without the will and power to investigate fraud against the federal government. It's amazing what you can find out by reading the Times.

Herr Doktorprofessor is alarmed that what he sees as a tide of fraud against the government is not just bad - but rising:

Brown & Root, which later became the Halliburton subsidiary doing those dubious deals in Iraq, profited handsomely from its early support of a young politician named Lyndon Johnson. So is there any reason to think that things are worse now? Yes. The biggest curb on profiteering in government contracts is the threat of exposure: sunshine is the best disinfectant.

Since Herr Doktorprofessor has raised the subject of whether there is reason to think that fraud against the federal government is worse now than it was in the 1960's, it's indeed odd that he fails to mention qui tam. What is qui tam? It's a kind of law suit that can be brought under a federal law greatly strengthened and enhanced by Congress in 1986 - well after a young politician named Lyndon Johnson walked the earth - that allows a whistleblowiing individual plaintiff to recover up to 30% of amounts recovered from those who commit fraud against the federal government and grants the whistleblower extensive protection against any retaliation for bringing the suit. As described in one site:

The Civil False Claims Act, also known as Lincoln's Law, the Informer's Act, or the Qui Tam Statute, 31 U.S.C. Section 3729 et seq., allows a private person to sue a person or company who is knowingly submitting false bills to the federal government. The Act also protects qui tam plaintiffs who are demoted, suspended, threatened, harassed or in any other manner discriminated against in the terms and conditions of employment for acts done in furtherance of filing a claim under the Act. This provision allows reinstatement, double back pay, interest on the back pay, plus special damages including litigation costs and reasonable attorneys fees.

More than 2,400 qui tam suits have been filed since 1986, when the statute was strengthened to make it easier and more rewarding for private citizens to sue. The government has recovered over $2 billion as a result of the suits, of which almost $340 million has been paid to relators/whistleblowers.

If the qui tam suit alleging false billings is successful, the whistleblower (known as a "relator") will also be entitled to 15-30% of the government's total recovery, which includes damages for the false bills, tripled, plus civil penalties of from $5,000 to $10,000 per false claim. To recover this bounty, the relator must have complied with the complex and unusual statutory requirements, however. Merely providing information to a hotline will not entitle the relator to a recovery under the False Claims Act.

To state a cause of action under the False Claims Act, a qui tam plaintiff may allege that defendant either:

(1) knowingly present[ed] or caus[ed] to be presented, to an officer or employee of the United States government . . . a false or fraudulent claim for payment or approval;
(2) knowingly, ma[de], use[d], or cause[d] to be made or used, a false record or statement to get a false or fraudulent claim paid by the government;
(3) conspir[ed] to defraud the government by getting a false or fraudulent claim allowed or paid.

To put this in perspective, a Halliburton employee who filed and documented a qui tam suit regarding what that company's more heated critics have said is about $60 million in overcharging for gasoline in Iraq could receive roughly SIXTY MILLION DOLLARS under federal law for blowing that particular whistle. That kind of money buys a lot of disinfectant. Since he's chosen to wring his hands over the issue, one might have thought that Herr Doktorprofessor would mention the economic incentives created by the qui tam statute in favor of employees and contractors for businesses doing work for the government to expose fraud. Herr Doktoprofessor is, after all, supposed to be an economist. But is he a serious economist - has he ever been?

The Man Without Qualities has expressed (here and here and here, for example) serious skepticism over whether Herr Doktorprofessor has ever been a really serious and good economist - instead of another gifted academic self-promoter who exploited weaknesses in the structure of his profession to hype the significance of his own rather modest accomplishments to the point of securing a John Bates Clark Medal and a Princeton appointment. His customary arrogant disrespect for much of his profession is also evident in this recent column, where Herr Doktorprofessor tosses off this nugget:

Let's be clear: worries about profiteering aren't a left-right issue. Conservatives have long warned that regulatory agencies tend to be "captured" by the industries they regulate; the same must be true of agencies that hand out contracts. Halliburton, Bechtel and other major contractors in Iraq have invested heavily in political influence, not just through campaign contributions, but by enriching people they believe might be helpful. Dick Cheney is part of a long if not exactly proud tradition.

Passing over the gratuitous, scurrilous and unsupported lible against the Vice President at the end of the passage, one might ask: Does Herr Doktorprofessor believe the theory of "regulatory capture" to be robustly valid? At first it appears not, since he writes that only conservatives have long warned that regulatory agencies tend to be "captured" by the industries they regulate - and he does not seem to count himself as a "conservative." But then he goes right ahead and argues in support of the very point he is making that the same must be true of agencies that hand out contracts. Further, much "regulatory capture" theory turns on the observation that once widespread public interest in a regulatory matter abates, the regulated parties are free to have their way with the regulators. But public interest in the circumstances of American involvement in Iraq - and especially in Iraq's reconstruction - has certainly not abated. So much "regulatory capture" theory would not apply very well here at all - although that may change once Iraq has been pacified and ceases to appear as front page news every single day. Could that be why Herr Doktorprofessor is so elliptical and tentative in citing "regulatory capture" theory? I leave it to the reader to determine for herself whether a man who passionately - or even seriously - cares about economics would abuse his field to the point of not even disclosing whether he approves of this application of a theory he is in fact using to support his argument and without disclosing that the facts under consideration differ seriously from those generally addressed by the theory in the first place.

I do not.

I have previously noted the casual, even contemptuous, manner in which Herr Doktorprofessor treats broad areas of economics - a treatment that suggests more than anything else that he does not really understand the significance of those areas:

But, even worse than that from a professional standpoint: Herr Doktorprofessor is entirely oblivious to the fact that he is writing a column about a topic which is informed by a fairly well-developed economic theory: regulatory capture. A lot of economic research has gone into analyzing what symptoms one should look for to determine whether a regulated business controls its regulators. But Herr Doktorprofessor ignores all that learning ... But it can't be ignored. ... Further, federal regulation and regulatory capture works mostly through the Congress - not the Administration. But Herr Doktorprofessor just entirely cancels Congress out of both sides of his equation.

Introducing Congress into the equation would expose that Herr Doktorprofessor is also ignoring a second branch of modern economics: public choice theory - the branch of economic that concerns economic choices made by democratic societies. As so often the case with this columnist, resort to silly conspiracy charges substitutes for the hard work of applying difficult economics. He can leave that to real geniuses like Dr. James M. Buchanan, who won the 1986 Nobel Prize in economics for his contributions to public choice theory. A man has to know his limitations.



Others also express skepticism over Herr Doktorprofessor's bona fides.

Don Luskin quotes an e-mail from Reuven Brenner of McGill University, a prolific author of economics:

[I]t is still beyond me why Krugman was ever considered to be a decent economist: I never found anything in his writings. Am still waiting to hear someone identify one insight (have you found it?). I looked into it when Washington-based Institute for International Economics (on whose board Krugman was sitting at the time), asked me to review his book, The Return of Depression Economics. I called it 'Depressing Krugnorance,' and it was reprinted around the world. Parts of it are included in my Force of Finance book. Others appeared long ago in my "Making Sense out of Nonsense" in my Educating Economists book, some 12 years ago."

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