How It All Went South
Dorgan Casts a Few Stones
How did we get here?
As once-mighty firms crumble, industry stagnates and the economy continues to hemorrhage jobs, politicians and economists are sorting through the ruins of America’s economy to locate the causes of the worst recession in generations.
Sen. Byron Dorgan (D-N.D.) seems fairly certain where to start. In his new book, “Reckless: How Debt, Deregulation and Dark Money Nearly Bankrupted America (and How We Can Fix It),— Dorgan formulates a damning case against those who allowed the unfettered pursuit of profit to undermine the foundations of the U.S. economy.
Written in a populist voice that often presents facts and arguments with a tone of outright indignation, “Reckless— can read something like a stump speech when it devotes too much page space to Dorgan’s autobiographical anecdotes. But the case it builds for corporate rapacity and staggering corruption in the Iraq reconstruction effort is hard to ignore.
“I think history books will look back on this period much as they did the Gay ’90s and the Roaring ’20s, as a period in which there was great self-indulgence and greed,— Dorgan said in an interview. “Much of what was going on had to do with maximizing the opportunities of sectors and people notwithstanding whether it was in the greater good.—
The book begins by examining an era of economic deregulation that led to the profiteering of subprime lenders, irresponsible expansion of federal debt and the thriving of transgressors such as Enron. Systemic risk-taking — underscored by the prevalence of hedge funds and of financial mechanisms like default credit swaps — became the rule.
“The subprime loan scandal in many ways is an almost perfect description of everything that was wrong here,— Dorgan said. “You know, the notion that somehow you could give home mortgage loans to people with bad credit, or that you could actually advertise to come get loans if you’ve been bankrupt or have no pay — you know, that sort of thing was just way out of the bounds of what anyone would expect to be reasonable business practice.—
Dorgan catalogues a parallel trend of economic inequality, marked by swollen corporate salaries that were increasingly not staked to performance. In 1980, CEOs earned about 40 times the salary of the average worker, a ratio that has since jumped to more than 400; from 1983 to 2004, the top 1 percent of U.S. earners have accumulated more than a third of the total marketable wealth.
Dorgan traces much of this excess to a tax code that seems to reward the very rich through provisions such as the capital gains tax. He also decries the use of shadowy offshore business accounts and a bizarre scheme called “sale-in, lease-out— in which Americans purchase foreign infrastructures — such as sewage systems in German cities — that generate revenue without being taxed by the U.S. government.
“I think the lesson that we learned from history is that when countries have a distribution of income that is so unequal, you’ve got very significant problems as a result,— Dorgan said. “I do think the tax code is a punchboard of gimmicks that still allows some very wealthy individuals to pay lower taxes than middle-income workers, which is terribly unfair.—
The second part of the book is largely devoted to chronicling the actions of contractors assigned by the Coalition Provisional Authority to rebuild Iraq — particularly the Halliburton subsidiary KBR (formerly known as Kellogg Brown & Root) — an undertaking that Dorgan labels “an almost unbelievable orgy of greed and fraud.—
Dorgan offers numerous stories of incompetence bordering on criminality from firms operating with virtually no oversight. He notes that many of the contracts awarded were no-bid, cost-plus contracts, which essentially means that contractors could charge the U.S. government (and by extension, taxpayers) far more than the project’s actual cost and reap the profit. Dorgan quotes testimony by U.S. auditors that “one in six dollars charged by U.S. contractors could not be supported or was questionable.—
Particularly troubling cases Dorgan cites include Halliburton charging for providing soldiers 42,000 meals but only serving 14,000, the Parsons Corp. winning a contract from the Army Corps of Engineers to build health clinics and constructing shoddy structures with raw sewage seeping through the floors, and KBR hiring unqualified electricians to wire military bases, likely resulting in the electrocution of 11 U.S. soldiers.
As all of this went on, Dorgan said, the Department of Defense continued to shield those responsible. In perhaps the book’s strongest proscription, he advocates forming a Congressional committee that would investigate such abuses.
“We know what needs to be done — put it under the microscope and hold people accountable,— he said. “When you have this sort of unbelievable waste and fraud you need to hold people accountable, and that includes contractors and it includes those in the government who were supposed to be supervising them.—
If there is a single thread uniting the book’s various examples of profligacy and corruption, it is that the average middle-class taxpayer has been left to foot the bill. The book will undoubtedly be effective in tapping deeper into a growing sense of outrage against business executives who were blinded by the gleam of easy money, a sentiment whose magnitude the recent American International Group executive bonus scandal revealed.
But “Reckless— is more than just grandstanding on Dorgan’s part. It is a much-needed indictment of the shameless pursuit of profit by CEOs and Iraqi contractors alike, a process in which any conception of integrity was utterly subordinated to what Dorgan calls the “get rich quick, borrow and gamble— mentality. After a long bender of greed, Dorgan provides a sober assessment of just how far we went astray.