The Post's recent series by Jonathan Neumann and Ted Gup on federal research contracting deals with a single, if revealing part of a larger transformation that has taken place in the federal enterprise. This transformation involves a fundamental change in the way the federal government carries out its business, a change that has been under way for more than a generation but that is still only dimly perceived.
The heart of this change is a shift from direct to indirect or "third-party" government, from an arrangement in which the federal government ran its own programs to one in which it relies primarily on others -- states, cities, special districts, banks, nonprofit corporations, hospitals, manufacturers and others -- to carry out its purpose instead.
To be sure, press accounts still speak of this or that "federal program." But those who work in the federal bureaucracy know that these are merely euphemisms behind which lies a cruel reality in which federal officials are regularly held responsible for programs they do not really run.
Few federal bureaucrats have been the object of more derision than those responsible for "the federal welfare program." In point of fact, however, no such entity exists. This "federal" program is really 50, or 3,000, different programs run by state and local officials who use federal funds but who have the discretion to make their own decision about who is eligible for assistance, over what period of time, under what conditions and at what level of benefits.
Similarly, the $6 million to $8 billion that Congress annually appropriates for employment and training assistance goes not to the Department of Labor, which is regularly held responsible for its wise use, but automatically to more than 450 local "prime sponsors," which are organized by local politicians and community groups and over which the Labor Department has precious little control.
"We don't even know who's in charge of these prime sponsors," one department official recently pointed out. "How can we be expected to control them?"
In area after area, the same pattern holds. Indeed, third-party government now dominates the federal domestic-program landscape, though this has yet to be fully appreciated, let alone carefully analyzed and assessed.
What is involved here is not simply the contracting out of well-defined functions or the purchase of specified goods and services from outside suppliers. The distinctive feature of "third-party government" is that what is being delegated and shared is a far more basic governmental function -- the exercise of discretion over the spending of federal funds and the use of public authority.
The central reality of most federal programs today is that the lion's share of discretionary authority is vested not in federal officials, but in one or another of a wide array of non-federal implementers.
The classic vehicle for this third-party government is the "grant-in-aid," through which federal resources are put at the disposal of state and local officials to assist them in carrying out a federal goal.
From its meager beginnings in the 19th century, the grant-in-aid device has mushroomed into a massive system of intergovernmental action. More than 500 separate grant-in-aid programs are now on the books, providing aid for everything from emergency medical services to the construction of interstate highways. Since 1955 alone, grant-in-aid funding has grown 26-fold, three times faster than the budget as a whole. By 1980, therefore, almost half of all federal outlays for domestic purposes, aside from Social Security and other direct income transfers, went out in the form of grants-in-aid to non-federal government or quasi-governmental entities.
But grants-in-aid have now been joined by a host of other ingenious devices for sharing federal authority with non-federal actors -- credit insurance, loan guarantees, tax incentives, regualations and new forms of contracting and procurement. Here as well, federal officials retain responsibility but are required to surrender much of the operational authority.
In loan guarantee programs, for example, the key decisions are made by private bankers, who process the loan applications and extend the credit that the federal government then guarantees. In the procurement of major military systems, the federal government increasingly depends on contractors not just to provide specified pieces of equipment, but to conceive and design whole weapons systems of enormous complexity.
Since they do not show up in federal budget totals, many of these latter forms of third-party government have gone largely unnoticed. Yet their scale is tremdous. In fiscal year 1979, for example, the federal government assumed over $100 billion in new loan or loan guarantee committments, provided $125 billion in special tax incentives, and exacted regulatory costs totaling $60 billion to $100 billion -- in all, a "hidden budget" in excess of $300 billion.
This curious pattern of third-party government is a natural byproduct of political pressures and of the love-hate relationship Americans have long had with the federal government.
The grant-in-aid device came of age during the New Deal as a political response to the conservative argument that New Deal programs violated states' rights. Since then, cutting key user groups into a piece of the action has been a standard prerequisite for gaining their support for federal undertakings. The third-party approach has also been dictated by federal personnel ceilings and budget pressures, which have clamped a lid on federal employment despite often dramatic expansions of federal programs and responsibilities.
The advantages of this approach, moreover, have been substantial. Through it, the federal government has been able to tap the talents and resources of a wide assortment of different institutions and sectors, to adapt national programs to local circumstances and to limit the growth of the federal bureaucracy. Thanks to the emergence of a third-party government over the past 30 years, it has been possible to hold the federal work force to a growth rate of only 50 percent, while the federal budget increased in real terms by 300 percent and the number of federal programs increased 30- or 40-fold.
But these advantages are purchased at significant cost, for third-pary government brings with it immense problems of management, major impediments to coordination and profound issues of accountability arising from the fact that those who now exercise federal authority are not responsible to the Congress that authorizes the programs.
Whether these problems can be overcome remains to be seen. The first step, however, is to educate the nation about how the federal enterprise actually operates. While exposes that poke fun at the madcap behavior that sometimes results from this brave new world of third-party government can help, there is a danger that the resulting bemusement or cynicism will deflect attention from the underlying cause and add to the problem rather than to the cure.
For, if the argument here is correct, much of the problem results not from the malfeasance or incompetence of federal bureaucrats, but from the curious way we have required them to operate. No amount of preachment about better management or tighter controls can afford to overlook this central fact.