Privatize the Independent Counsel!
Kenneth Starr, as you're
surely aware, has spent about $40 million on his investigation of the
president. That comes to roughly 15 cents per American. If there's an American
who hasn't got 15 cents worth of entertainment out of this affair, I've yet to
meet him. On that basis alone, the Starr investigation might be one of the best
bargains the taxpayers have ever had.
There is,
however, a larger issue. Independent counsels are not punished for
overspending, so in general they'll have a tendency to overspend. Over the past
seven months or so, a lot of people have made that point, but few have placed
it in its proper context. Overspending due to bad incentives is not a problem
with independent counsel investigations in particular; it's a problem with
government undertakings in general.
To address that problem by tinkering with the independent
counsel statute--or even by abolishing the office altogether--amounts to a
failure of perspective. No matter how deeply you believe Starr has egregiously
misspent your 15 cents, it would require extraordinary naiveté to imagine that
he's dealt you the most devastating financial blow you've suffered at the hands
of an overzealous public official.
So instead
of obsessing over a minor symptom of a major ailment, maybe we should devote
more attention to the underlying disease. If the disease is incurable, we can
at least think about how best to alleviate entire clusters of symptoms.
To that end, abolishing the independent
counsel's office is not terribly useful. Maybe that office should be
abolished--but it would be a shame if that was the only insight we gained from
this episode. Applying the same insight to more serious instances of spending
run amok, we'll end up making recommendations like "abolish the Pentagon" or
"abolish the Department of Health and Human Services"--recommendations that are
surely unrealistic and possibly unwise. We'll learn more if we ask questions
like this: Assuming that we're going to have an independent counsel, how can we
adjust his incentives to make him more fiscally responsible? By thinking about
that question, we might learn something about how to encourage fiscal
responsibility more generally.
Here's an
idea: Make the independent counsel finance his investigations out of his own
pocket. At the same time, reward him handsomely for results, such as
convictions or impeachments. That sets up two good incentives. First, when
there's good reason to suspect provable wrongdoing, the prospective reward
encourages prosecutorial tenacity. Second, when investigations devolve into
nothing more than political or personal harassment, the prospective expense
encourages prosecutors to shut down sooner rather than later.
There's another advantage to this system. Once the
independent counsels become independent contractors, it will be relatively easy
for legislators to adjust their activity levels. If a prosecutor is too lax,
Congress can either raise the bounty for convictions or subsidize the counsel's
expenses--say, by making him pay only some percentage of those expenses; the
percentage can be fine-tuned at will. If he is too inquisitorial, Congress can
do the opposite. So legislators retain control of the prosecutor's overall
fervor while inducing him to concentrate that fervor where it's most
warranted.
Similar
schemes might improve the performance of any government agency that has clearly
defined goals. For example, the Food and Drug Administration is charged with
keeping dangerous pharmaceuticals off the market. Here the potential problem is
not so much excessive spending as excessive caution, which creates unwarranted
delays in the introduction of safe and effective new drugs. But that's not a
different problem--it's the same problem in a different guise. Just as a
prosecutor is tempted to overprosecute when he's spending other people's money,
so also is a regulator tempted to overregulate when he's playing with other
people's health. If the problems are fundamentally the same, then so are the
solutions. The regulator, like the prosecutor, should bear the costs of his
actions. One way to accomplish that is to pay FDA officials not in cash but in
pharmaceutical company stock, which ought to introduce an appropriate sense of
urgency to the drug approval process. Unfortunately, it will also discourage
diligence--but we can correct that by levying large fines against the
regulators whenever a deadly drug slips through to the marketplace.
The net result could be an FDA approval process
that is either more or less stringent than it is today, at the option of the
legislators who determine the size of the stock grants and the size of the
fines. But either way, it would give regulators an incentive to focus their
attention more precisely on those drugs that are most likely to be
problematic.
Rewarding
people for good outcomes and punishing them for bad ones is relatively easy
when the quality of the outcomes is easy to measure. But it's harder for
officials with broader portfolios of responsibility. Take the president, for
example. How do we know when the president had done a good job? Should we
reward him for keeping us out of war? What if he keeps us out of war through
policies that make the world more dangerous for our children? Should we reward
him for prosperity? What if that prosperity is a temporary illusion? And who
should decide?
Only one system of government has ever dealt adequately
with the incentive problem for the chief executive, and that's hereditary
monarchy. When you know that your beloved heirs are going to, in essence, own
the entire country, you tend to take a long-range view of the national
interest. Unfortunately, hereditary monarchy has offsetting drawbacks, which I
assume I don't need to enumerate for the readers of
Slate
.
But here's
a way to recover some of the advantages of monarchy while retaining the
advantages of our current system of government. We could pay our presidents
their salaries in land instead of in cash. The price of American land reflects
the value of living in the United States of America. If the president mortgages
our future by weakening defense, the price of land will fall. If he raises
taxes to support "defense" programs that fail to justify their costs, once
again the price of land will fall. So by giving the president a sufficiently
diversified portfolio--some ranch land in Wyoming, a bit of California
coastline, a few blocks in the South Bronx, a hill in Tennessee--we can ensure
that the nation's interests and his personal interests coincide. Whenever the
president makes a bad decision, his pocketbook will surely feel our pain.
Here's another way to accomplish the same
thing. Allow the president, upon leaving office, to sell 10,000 U.S.
citizenships to the bidders of his choice. (We can add some side conditions
that prohibit him from dealing with known terrorists and other undesirables.)
If he does a better job, those citizenships will become more valuable, and
he'll get a better price for them.
Let me close by answering in
advance the question that I know I'll be asked in e-mail, namely, "Are you
really serious?" The answer is no and yes. No, I don't believe that anything
I've said in this 1,000 word column amounts to a detailed policy proposal. But
yes, I believe that incentives matter and that we should seriously entertain
radical proposals for improving them. Even when we ultimately reject those
proposals, we learn something by articulating their flaws. And every now and
then a "crazy" idea stops seeming crazy once you've thought about it hard
enough.
