Universal Rot

In my last post, I noted that - at least politically - the current crisis in the American health care system represents a societal failure of the free market; individual companies make money, but in the truest tradition of the tragedy of the commons, the public good is an under-served afterthought. If one were to go further however, and imagine what the level of public failure might be without the oversight that exists for the health care and health insurance industries, the result would almost certainly look like the track record of private companies operating under the aegis of the United States government in Iraq.

One of the pillars of convention conservative wisdom is that, as a rule, the private sector will outperform public bureaucracy. To that end, outsourcing and the privatization of functions once performed by the government have increasingly become the norm during the presidency of George W. Bush. The most notable example of this trend has been the war in Iraq, which has seen an army of contractors paid handsomely to support the invasion and occupation of that country. The results of this grand experiment in privatization, however, have been nothing short of total fiasco, with superior performance being demonstrated not in efficiency or effectiveness, but in venality, theft, fraud, and racketeering on a scale that has been absolutely jaw-dropping to behold.*

While Congressman Henry Waxman has managed to call attention to some of the worst abuses in legislative hearings, not much in the way of redress has actually occurred, and the proceedings have done little - if anything - to diminish the sheer arrogance and cold greed at play. On Thursday, The Boston Globe reported that Kellogg Brown & Root (K.B.R.), the largest private contractor working in Iraq with a total of $16 billion in no-bid contracts from the U.S. government, has been discovered to be systematically evading its social security and unemployment tax obligations on a truly massive scale:

Kellogg Brown & Root, the nation's top Iraq war contractor and until last year a subsidiary of Halliburton Corp., has avoided paying hundreds of millions of dollars in federal Medicare and Social Security taxes by hiring workers through shell companies based in [the Cayman Islands].

More than 21,000 people working for KB.R. in Iraq - including about 10,500 Americans - are listed as employees of two companies that exist in a computer file on the fourth floor of a building on a palm-studded boulevard here in the Caribbean. Neither company has an office or phone number in the Cayman Islands.

The Defense Department has known since at least 2004 that K.B.R. was avoiding taxes by declaring its American workers as employees of Cayman Islands shell companies, and officials said the move allowed K.B.R. to perform the work more cheaply, saving Defense dollars.

But the use of the loophole results in a significantly greater loss of revenue to the government as a whole, particularly to the Social Security and Medicare trust funds. And the creation of shell companies in places such as the Cayman Islands to avoid taxes has long been attacked by members of Congress.

You read that right: the Department of Defense has been aware of the deceit for four years, and K.B.R.'s explanation is that by violating the law and dodging their tax obligation - on income earned from tax dollars, no less - it is working to save the government money. Just roll that around in your mouth for a little bit like a fine wine; the full body of the soulless corruption is complemented by the overtones of sleaze and criminality, crescendoing into a finish that can only be described as sociopathically shameless.

With the sheer scale of the dishonesty being exhibited in Iraq, it is perhaps unsurprising that individuals are dipping their own hands into the till, too - after all, if it goes unpunished at the corporate level, who should care about the $150,000 David Ricardo Ramirez, an employee of another contracting firm, is alleged to have stolen from cash reserves imported into the country and then shipped home in a cardboard box?

And if skimming a little of the $12 billion in cash that L. Paul Bremer had airlifted into Baghdad on shrink-wrapped pallets - of which only $3.2 billion can be accounted for, by the way - who is to say that other things aren't alright, too, like gang rape, kidnapping and intimidation? K.B.R. and former parent company Halliburton are still claiming that Jamie Leigh Jones - who has testified that she was sexually assaulted by several co-workers in Iraq and then imprisoned in a shipping container, refused medical treatment and threatened - cannot sue them because the contract she signed includes a provision stating that all disputes will be settled by a company-appointed arbitrator, and not in the courts. House Judiciary Chairman John Conyers is currently pushing the Justice Department for results of their investigation into the matter, but the air of invincibility that would permit a company to lump rape in with things like stealing office supplies and wage disagreements is so far beyond the pale that it would be laughable if it weren't so inhuman.

Remember when Bill Clinton's extra-marital sex life was - in the opinion of countless Republicans clutching their pearls while barely warding off the vapors - tainting the very character of the nation? Me neither; I recall some sordid, but largely personal, matters that, by themselves, in no way affected affairs of state, the foundational principles of the country, or created a culture in which individuals operating in good faith are made victims of rampant abuse. Today, by contrast, the leadership of the Bush White House and the cabal that has supported it has corrupted almost everything it has touched with a nearly universal moral rot. If they're honest - and I'm not sure we can expect them to be - those who believe that private enterprise and the market are the solution to all our ills should be every bit as disgusted. While Mr. Bush has done his level best to destroy the credibility of the presidency and the executive branch, he has also helped private contractors brand themselves as venal cutthroats who would rather make a buck than serve their nation honestly.

* For background, see the post Utter Scum. It details the blatant contempt for the American taxpayer that has been the hallmark of Bush Administration Iraq reconstruction policy, as well as the complete disregard for human life and duty to country that has been so emblematic of American private contractors working in that troubled nation.