Public Crime and Debt Machines

IF government-bashing were the way to make it better, the 1980s would have been a high point of probity in Washington. But they weren't. From the S&L fiasco to the self-dealing in housing programs, government often mirrored the disparagement heaped upon it.

The reason is suggested in a new history of government corruption by Nathan Miller, Stealing from America: A History of Corruption From Jamestown to Reagan (Paragon House, 399 pp., $25.95). Miller is among those who compare the Reagan administration to that of Warren Harding, but he argues that rapacity in public office has a much longer lineage. It rears up particularly, he suggests, in administrations that have little respect for government in the first place.

American history can be read as the struggle between two competing themes: the idealism of John Winthrop's "City on the Hill" and the pecuniary goals of the early explorers. Miller traces the latter strain. He begins with Samuel Argall, the early governor of Jamestown who stole Pochahontas from her father - and much of the colony's wealth as well - and follows this unseemly trail down through Teapot Dome and into the '80s. Many episodes are familiar, but others will jolt even a hardened reader. Profiteer ing in times of war is an example. While the troops were freezing at Valley Forge, American merchants were cornering the market on shoes and winter clothes, then selling them to the Continental Army at enormous profits. "Murderers of our cause," Washington called them.

Miller is an experienced journalist and recounts these tawdry tales at a crisp, anecdotal clip. Regrettably, he never rises above the pop history to ask what it all means. There is no discussion of the periodic efforts to curb corruption, for example. Civil-service reform, open-government laws, inspector generals, the General Accounting Office - have any of these done any good? If not, why?

The striking thing about the current lineup of antigovernment reforms - such as term limitations and the balanced budget amendment - is that they would do nothing to stop the pecuniary self-dealing of the kind chronicled here. Miller documents a distinct pattern. Those who disparage government tend to preside over the worst in it. Even those who say government should do little can regard those smaller functions with honor and respect.

The government bashing of the '80s had another regrettable effect. It pushed much of government into the nether world of public authorities - the obscure bodies that operate local transit systems, turnpikes, hospitals, and the like. The result was less democracy and more debt.

That is the argument of Robert Axelrod in Shadow Governments: The Hidden World of Public Authorities - And How They Control Over $1 Trillion of Your Money (John Wiley & Sons, 344 pp., $24.95). The subject of local housing authorities may induce a yawn, but that's exactly what many officials want, Axelrod says. Boredom is the protective coloration that enables their empires to flourish.

It all started with Nelson Rockefeller, the author says. The then-governor of New York couldn't get voters to approve a bond issue for the state university and other projects. So he enlisted John Mitchell, later Richard Nixon's attorney general, to devise a subterfuge. The result was the cleverly packaged "moral obligation" bond that, for technical legal reasons, didn't require voter approval.

Rockefeller was off and borrowing, and soon other governors followed - Republican and Democratic alike. Today some 35,000 public authorities are funded through this tricky debt, which equals half-a-trillion dollars. Mitchell's device was catnip to elected officials, enabling them to sweep deficits under the rug while hiding tax increases in the form of fees for tolls, transit fares, and so on.

President Bush resorted to this stratagem when the S&L bailout threatened to bust the federal budget, Axelrod says. Rather than pay for the bailout directly, Bush proposed the new Resolution Trust Corporation, which raised the money by floating bonds. The interest payments will be buried in the fine print of the federal budget over the next 30 years.

Axelrod shows how these agencies are insulated from legislatures and the public. He presents an impressive dossier of wrongdoing and exposes the bond lawyers, underwriters, and others who have turned public debt into a growth industry - and a honey pot of campaign funds.

Regrettably, however, Axelrod gets so caught up in the corruption that he gives short shrift to some important questions. Why exactly is an agency like Delaware's Solid Waste Authority a model of professional management, for example, while the Metropolitan Boston Transit Authority has an unfortunate reputation for patronage and waste? The author himself notes that public authorities are sometimes a good solution and are often necessary because of antique debt limits in state constitutions. So we need to know how to make such agencies work.

Axelrod makes a strong case for getting rid of the old debt limitations so that borrowing can come back out into the sunlight. "Citizens would have to count on a responsible, representative government to do the job" of controlling debt, he says.

Twenty-five years ago that would have been a clarion call. Today it falls on skeptical ears. That tells Americans something not just about the United States government but also about themselves. Americans want low taxes but also want the roads and schools and other benefits that taxes support. Americans vote for politicians who promise both. The public authority is a debt machine that lets Americans have their cake and eat it too. For a while at least.

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