Lots of good stuff came out today.

• A Congressional Research Service (CRS, aka the super-authoritative researchers who members of Congress ask to do reports for them, but typically the reports aren't available to the public) comparison of the House and Senate SCHIP bills
• The House Budget Committee's breakdown of how some of Bush's proposed budget cuts would impact each state
• A knowledgeable article in the Washington Post about the rise in no-bid contracting
• A good New York Times article about take-up rates in the State Children's Health Insurance Program (SCHIP)

Walter Pincus had a story last weekend about a huge new batch of contracts being issued by the Defense Intelligence Agency (DIA)- the Pentagon's not-so-mini CIA. Definitely worth a read, but before you do, take a look at this June article in Salon.com about intelligence agencies and their increasing use of contractors.

More than five years into the global "war on terror," spying has become one of the fastest-growing private industries in the United States. The federal government relies more than ever on outsourcing for some of its most sensitive work, though it has kept details about its use of private contractors a closely guarded secret. Intelligence experts, and even the government itself, have warned of a critical lack of oversight for the booming intelligence business.

A lot of people are commenting on Karl Rove's departure and its implications. From a a fiscal policy perspective, Rove (and President Bush's) governing philosophy has a basic incoherance in its advocacy of tax cuts and a larger state. Rove, i'd venture, was no "starve the beast" advocate, in the style of lunatics like Grover Norquist who want to "destroy" government for some pathological reason I can't identify. Deficits to Rove were never a means toward shrinking the government. They were an unfortunate consequence of Bush's "have my cake and eat it too" attitude about fiscal policy. They wanted big tax cuts for the wealthy at the same time they would expand the state, both of which they couldn't pay for but still wanted anyway. In the long run, that contradiction seems unsustainable.

Rove and Bush once saw a positive role for government in society. It was a conservative role; one where government relies on mostly market mechanisms to achieve some measure of security and prosperity. But it was rhetorically incoherent, as President Bush always projected an unqualified veneration of the market (all the "it's your money and you know how to spend it" b.s.) and never really defended government. It also founders on the market's inability to deliver the security and prosperity that's been promised, which was a big problem in the social security privatization debate, if I recall correctly.

The tragic outcome of Rove's failures, I think, is that President Bush and the leadership of the conservative coalition have abandoned this moderately pro-government approach to policy. The recent fight over the FY08 budget and SCHIP has been rationalized as a fight over government's role, with Bush strongly advocating a reduced role. Last year's tax and program cuts are another example of the far right wing's predominance in conservative affairs.

I'll admit that I've celebrated Rove's fall from grace as much as anyone else. He's a real dirtbag. But I think it's bad for the country that Rove's assertion of a positive role for government is now being seen as a loser for conservatives.

Robert Harrow, Jr., over at the Washington Post's new blog on contracting, asks, what ever happened to Lurita Doan and the GSA contracting scandal?

Doan, of course, oversees what is often described as the government's premier contracting operation. At issue is whether she violated the Hatch Act, which restricts executive branch employees from using their positions for political purposes. The president can take a range of actions, from rejecting the recommendations to dismissing Doan.

Readers of the Washington Post will recall that Special Counsel Scott J. Bloch sent off his recommendation in an edgy letter on June 8. In his missive he accused Doan of "engaging in the most pernicious of political activity" during a Jan. 26 lunch briefing involving 36 GSA appointees and featuring a presentation by the White House's deputy director of political affairs.

Senate Majority Leader Harry Reid has announced that the Senate will vote on the nomination of Jim Nussle to be the new Director of the Office of Management and Budget on Monday, September 4 - the first day back from the August recess. Reid announced there will be three hours of debate on the nomination beginning at 2:30 pm. One hour each for the chairman and ranking member of the budget committee, and one hour controlled by Sen. Bernie Sanders (I-VT).

Sanders has announced a hold on Nussle's nomination because he has serious concerns about the nominee and his philosophical differences with the administration's fiscal policies. Sanders said:

President Bush is completely out of touch with the economic realities facing working families in America. Bush needs to hear the truth, not an echo. He needs a budget director who will make him face the facts, not fan his fantasies.

There's a thin line between being a whiner and having high expectations. So at risk of sounding like a whiner, here's quick examination of what was otherwise an enlightening article in the New Yorker on student loans. In the following paragraph, the author is attempting to explain the causes of waste and graft in the student loan industry, which is basically a privatization scheme, with government providing money and loan guarantees, and private lenders doing the business.

In part, it's ideology, and the dominance of what you might call the privatization mystique—the idea that anything the government can do, the private sector can do better.

Well put.

Often, this makes sense: the free market is more likely to come up with efficient ways of creating and distributing products and services than the government is.

That's called an unjustified assertion of fact. And an unnecessary one- is someone trying to make sure they don't sound like a commie?

But the student-loan market isn't a free market in any meaningful sense of the term, because the government effectively determines prices, insures against losses, and subsidizes volume.

Also because of the market's failure to provide a useful good with positive externalities, but that's ok.

In this environment, most of the competition among private companies is really just squabbling over how to split up the spoils.

The subtext is that this wasteful environment is the government's fault, when mostly it's trying to correct a market failure, and most likely the private market is just as inhospitable to competition as governmental policy.

Economists call this behavior—when a company seeks to manipulate economic conditions rather than actually create value—"rent-seeking." It's common in areas where the fetish for privatization has taken hold, such as the outsourcing of homeland security to private contractors and the boom in private Medicare insurers. (The private insurers are less efficient than Medicare and receive billions in subsidies from the government.)

Ok, that was fine.

Outsourcing tasks to private companies is supposed to let government reap the benefits of the free market. But sometimes it just ends up uniting the worst of government and the worst of the private sector into one expensive mess.

There's an important abstract distinction that needs to be made here, since we're dealing with "privatization" in principle. Policymakers can fix much of what the government does wrong in contracting. But they can't create a market where there just isn't going to be one. The worst of the private sector is likely inevitable- the worst of government, not so much, when it comes to privatization.

For example: Corruption and waste that's caused by governmental failures can be corrected, to a reasonable extent. Contracting procedures and administration could function pretty well, given enough resources, training, and authority. But you're not going to foster true market competition, when, say, there's only one company that can do the job, or when it's too hard to keep tabs on the company that's gotten the contract. This paper makes that argument, partly (we link, you decide).

Ok, other than that, it's a good article.

I thought I'd point up an interesting article I read over the weekend in Reason, a libertarian magazine.

It's a review of a critique by a leftist economist of F.A. Hayek, a strong advocate for free markets who challenged socialist economic policy when it was ascendant in the '30s and '40s (that's right- this leftist blogger is commenting on a libertarian review of a leftist critique of a libertarian economist). Socialist planned economies, Hayek argued, were hampered mostly by information asymmetries and distorted economic incentives that caused massive waste and discouraged work. Hayek made the case that markets served as more efficient means of distributing information, and that market actors over time could price goods more accurately than government agencies.

Much of Hayek's analysis has been borne out by failed planned economies in eastern Europe and Asia. But the review's author, a self-described libertarian economist, recognizes that neither history, nor libertarian principles alone, will convince more people to further relax governmental controls on the market. The key argument is an empirical one- which outperforms the other in achieving common goals, civil society or governmental interventions?

If Burczak is a bellwether, his book suggests the debate over markets vs. socialism will become more and more empirical. Do unconstrained markets produce outcomes for the least well-off that are at least as good as could be produced under other economic systems? Can political processes achieve the goals that critics of markets would like?

The review's author believes these questions have pro-market answers. But recent events and research reveal that they might not. This is the argument that can win the hearts and minds of people who don't reflexively support governmental intervention.

Information asymmetries still cause lots of waste, but they occur because the government isn't involved enough- i.e. in health care. And the free market has unleashed the screwy incentives that have so widened inequality and threaten ecological catastrophe. Meanwhile, the tonic of market competition just doesn't seem to cure what ails us- either in education, product, workplace and environmental regulation, or lending and credit practices, to name a few.

Sometimes the market is the problem, and you don't put out a fire by pouring fuel on it. In other cases, injecting market dynamics just doesn't solve the problem.

A convincing liberalism is one that does not cede the ground of governmental superiority. Liberals can make a selective argument for governmental efficacy and market inefficacy that convinces and helps broaden liberalism's appeal.

EJ Dionne has a good column about shifts in the big government/small government debate.

The "big" vs. "small" government argument rages in state politics around the country, but the fights closer to the ground tend to be less ideological. Unlike the federal government, most states face strict limits on their ability to run deficits, so the relationship between the taxes that citizens must pay and the government programs that voters want is much more explicit.

"For us, it's either slash education, higher education, health care for seniors or for the disabled, or let people out of prison," said Granholm, who is in the midst of a battle with Republicans who control the state Senate over whether to raise taxes -- and which taxes to raise -- to cover a deficit.

I look forward to the day when people consider government just a means to an end and forget about this debate over what size of government is ideal, or whatever. There is no ideal size of government. There are only ideal purposes of government. Government should only be so big as to achieve the purposes given to it.

Same goes for the debate over the "the market." There is no ideal size of the market, because the market is just another means to an end. All the people who love the market, or love government, puzzle me, though I can only think of people who love the market. Don't really know anyone who loves government- seems like that went out of style a long time ago.

A more constructive debate could be had over what government and the market are capable of. Surely that's being had already; it'd just be great if we could raise the profile of the debate over public and private capacity, because there's certainly a lot of work that needs to be done on restoring faith in the effectiveness of government.

Ok, I'm done.

For all you fellow privatization nerds out there, if you're out there, here's an interesting paper on what's called "contracting-in," or when government decides to do in-house something that it once contracted out. Apparently this has been happening quite frequently on the local level, as public managers decide that sometimes contracting out is wasteful and doesn't achieve the goals of reducing costs and encouraging innovation like it was supposed to. The federal predisposition towards contracting out regardless of its practical value, which has given us the $400 billion a year contracting industry, should provoke a similar backlash at some point, too, you'd think.

Anyway, here's the abstract:

Empirical evidence shows local government contracting is a dynamic process that includes movements from public delivery to markets and from market contracts back to in-house delivery. This ''reverse contracting'' reflects the complexity of public service provision in a world where market alternatives are used along with public delivery. We develop a methodology to link responses to national surveys and create a longitudinal data set that captures the dynamics of the contracting process. We present a framework that incorporates principal agent problems, government management, monitoring and citizen concerns, and market structure. Our statistical analysis finds government management, monitoring, and principal agent problems to be most important in explaining both new contracting out and contracting back-in. Professional managers recognize the importance of monitoring and the need for public engagement in the service delivery process. The results support the new public service that argues public managers do more than steer a market process; they balance technical and political concerns to secure public value.