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Edwards’ Gambit: Outsourcing War

Hoping perhaps that the vice president would lose his temper, John Edwards mentioned Halliburton and its possible shenanigans several times during the vice-presidential debate. But in an election in which it is not clear what the differences between the candidates or between their parties are, bringing up Halliburton was a dangerous gamble. The vice president did use a four-letter word when he talked about Halliburton before. As he later told Fox News, he was angry because his own personal integrity is not the real issue. Halliburton was awarded one contract without a bid, however, and Cheney’s role in that award still remains unclear. But the vice president is fundamentally right nevertheless. Many of the contracts that were awarded competitively, both to Halliburton and to other contractors, are just as problematic as the no-bid ones. What needs to be debated is not who is the guilty party this time, what needs to be debated is the outsourcing of war. The only problem is, on this issue there is no difference between the parties. Edwards gambled that voters would not notice

Outsourcing by the government is often sticky, but the outsourcing of war is in a class by itself. There are so many uncertainties in war that war contracts must be awarded on a “cost-plus” basis. Yet cost-plus contracts create all the wrong incentives. The military asked Halliburton to produce ice for the troops in Iraq and Kuwait and Halliburton ended up producing much more than what was necessary. Under “cost-plus,” would another contractor have behaved differently? The military asked Halliburton to back up the power supply in its base in Kosovo and meant the hospital and command center. Instead Halliburton backed up the power supply of the whole base. Would another contractor have been less zealous with the same incentives?

As our troops in Iraq have sadly discovered, when a war does not go well outsourcing it can stimulate not only incredible waste but also punishing shortages. Lieutenant General Charles S. Mahan, Jr., the Army’s top logistics officer until his retirement last year, revealed that so many civilian contractors had refused to be deployed in particularly dangerous parts of Iraq that the soldiers in the field had to go without fresh food, showers, and toilets, sometimes for months. Even mail delivery fell weeks behind, Mahan complained. “We thought we could depend on industry to perform these kind of functions,” Mahan said. But it got “harder and harder to get them to go in harm’s way.”

Outsourcing war is such a recipe for malfeasance that it may be surprising that both the Democrats and the Republicans haven’t put it on their platforms to bring an end to it. But outsourcing is tempting to all politicians, regardless of party. The man who designed the transfer of military logistics from the military to contractors was none other than Dick Cheney himself, when he served as secretary of defense in the former Bush administration. But the first commander in chief to implement this policy and award the first contract, to Halliburton, in fact, was President Bill Clinton, in Somalia, in 1992. Furthermore, these contracts grew substantially starting in 1995 in the Balkans. Altogether Halliburton received $2.5 billion for its work there during the Clinton years.

Outsourcing war creates a terrible division among Americans. What’s good for the contractors is bad both for taxpayers and for the troops. Bush and Cheney support outsourcing war. Are Kerry and Edwards against it?

MOSHE ADLER is a research associate at the Economic Policy Institute in Washington D.C. and an adjunct associate professor of economics in the department of Urban Planning at Columbia University. He can be reached at: Ma820@Columbia.edu

 

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Moshe Adler teaches economics at Columbia University and at the Harry Van Arsdale Center for Labor Studies at Empire State College. He is the author of Economics for the Rest of Us: Debunking the Science That Makes Life Dismal (The New Press, 2010),  which is available in paperback and as an e-book and in Chinese (2013) and Korean (2015) editions.

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