Constitutional Coup, Privatization, and the Federal False Claims Act

by Sam Halabi — Tuesday, Mar. 6, 2018

There are already so many thorough analyses, illustrative applications, and thoughtful extrapolations of Jon Michaels’s provocative thesis, it took some time to decide where anything more might be usefully contributed.   It is, I think, at the conceptual role “privatization” plays in Constitutional Coup’s core argument.  The threat privatization poses to our fundamental constitutional order, according to Michaels, is the aggrandizement of agency leaders (and their use of non-civil service contractors) at the expense of career bureaucrats (who are in turn increasingly threatened with “market” like discipline such as at-will employment) frustrating the separation-of-powers structure that now characterizes the U.S. administrative state (131).  Michaels spends a great deal of time showing us how we got here – the growth of the administrative state post World War II, the rise of neoliberal attacks on the economic and, later, political justifications for that state, and then the ascendance of privatization’s champions over the course of the 1980s.  Privatization, according to Michaels, is “government reliance on private actors to carry out State responsibilities; government utilization of private tools or pathways to carry out State responsibilities; or government ‘marketization’ of the bureaucracy, converting civil servants into effectively privatized, commercialized versions of their former selves . . .” (106).  A bit later, Michaels draws a distinction between privatization of the more pedestrian sort (which seems to be okay) and what he calls “privatization in policy-laden spaces” (which is not) (130).

But why?  To be sure, Michaels reminds us that the former is in some ways beside the point: the U.S. Constitution is a lumbering mess in order to protect people from unchecked, arbitrary power.  Robust markets might follow good constitutional, democratic order, but they are not its purpose (73-74).  Yet there are good reasons not to shrug off the economic arguments (although Michaels does criticize as illusory some of the supposed efficiency benefits from privatization, especially contracting costs) (115, 120-24).

At the peak of the anti-administrative state movement in the 1980s, Congress and the President became increasingly aware that reliance on the private sector came with abundant problems.  In 1986, Congress adopted strong enhancements to the federal False Claims Act – effectively a bounty hunter statute that rewards people who bring notice of fraud in federal programs to the attention of DOJ – creating its own version of an ex post private solution to combat the problems everyone seemed to know accompanied privatization.  It created substantial inducements for states to do the same.  These provisions have been strengthened regularly since, in response to the corresponding outsourcing of federal functions.  As I have argued elsewhere, litigation under the statute (which is not, as some might think, broadly used against organized crime networks using fake social security numbers, but rather against ordinary men and women with white collar jobs often misapplying federal rules through complex organizational behavior) has shown that even close to the ground, and important, parts of federal law are shaped, manipulated and abused when undertaken by private, for-profit actors – Medicare coverage policies, development aid projects, and hazardous waste disposal rules to name only a few.

Thus, even under the pax administrativa as idealized by Michaels, “ordinary” privatization holds the strong potential to undermine democratic law-making.  This, of course, just means that the legislative custodialism Michaels endorses in Chapter 10 is all the more valuable.  Michaels has made a substantial contribution to an incredibly important debate, there is no need to limit its reach.

This post is part of a symposium reviewing Constitutional Coup: Privatization’s Threat to the American Republic, a new book by Jon D. Michaels, Professor of Law at UCLA School of Law. All of the posts can be read here.

Cite As: Author Name, Title, 36 Yale J. on Reg.: Notice & Comment (date), URL.

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About Sam Halabi

Professor Halabi is a scholar of national and global health law with a specialization in health services, pharmaceutical and agrifood business organizations. He serves as a Scholar at the O'Neill Institute for National and Global Health Law at Georgetown University, where he has also served as a special advisor to the Lancet-Georgetown University Commission on Global Health and Law. His work is published in the American Journal of Law and Medicine, the Harvard International Law Journal, the Journal of Law, Medicine, and Ethics, the Lancet, and the Journal of the American Medical Association (JAMA). He has also published volumes on pharmaceutical regulation and global management of infectious disease with Oxford University Press and Elsevier Academic Press. Before earning his J.D. from Harvard Law School, Professor Halabi was awarded a British Marshall scholarship to study in the United Kingdom where he earned an M.Phil in International Relations from the University of Oxford (St. Antony’s College). During the 2003-04 academic year, he served as a Rotary International Ambassadorial Scholar at the American University of Beirut.

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