With Republicans in Congress unwilling to pass President Obama’s jobs bill, many believe that the Federal Reserve is the only institution left that can lift the economy out of its seemingly perpetual slump.

That has led to the normally quite secretive Federal Reserve, the nation’s most important economic institution, coming under increased scrutiny. This in turn means that the question of who leads the Fed is growing more important.

A new report has revealed that an overwhelming majority of the Fed’s leadership is made up of executives from banks and private corporations, confirming previous American Independent reporting. The report, from the Government Accountability Office (GAO), looked at the membership of the boards of directors of the 12 regional Federal Reserve banks.

Using a voluntary survey of the currently serving directors, the GAO found that over three-quarters of the regional Federal Reserve directors are the president or CEO of the company they work for. Of the directors that have served from 2006 through 2010, only six represented labor and five represented consumers, while 56 represented commerce or industry interests, and 73 represented banking interests.

The report recommends extending director recruitment efforts beyond the senior executive level: “To the extent that director searches are limited to chief-level executives, the Reserve Banks not only limit the diversity of the pool of potential candidates but also risk limiting the perspectives shared about the economy in the formation of monetary policy.”

Federal Reserve Chair Ben Bernanke said in an official response to the report that the Fed has “has already broadened the pool of candidates for these positions to consider qualified candidates who are not chief executives.”

Sen. Bernie Sanders (I-Vt.), who requested the report as part of the Dodd-Frank financial regulatory reform law, called the financial sector’s influence over Fed leadership “unacceptable.”

“Not only do they run the banks,” said Sanders in a statement, “They run the institutions that regulate the banks.”

“Recruiting consumer and labor representatives is a challenge”

The Federal Reserve System is comprised of the central bank in Washington, D.C. and 12 regional Federal Reserve banks. These are charged with carrying out policy dictated by the Federal Reserve guiding committee, the Federal Open Market Committee (FOMC), which in turn is required by Congress to craft policy keeping unemployment low and prices stable. The presidents of the regional Feds, which are selected by the boards of directors, also rotate through five of the twelve voting seats on the FOMC.

Each board consists of nine members: six members are selected by the member banks of the Federal Reserve, and three are selected by the national Federal Reserve Board in Washington. “Class A” members of the regional Fed boards are selected by banks that participate in the Federal Reserve to represent their interests, and are usually commercial bank officials.

The Federal Reserve Act requires that the other 6 directors of each board, 3 “Class B” members appointed by the member banks and 3 Class C members appointed by the national Board, “represent the public” and be “elected with due but not exclusive consideration to the interests of agriculture, commerce, industry, services, labor, and consumers.”

But Fed officials told the GAO that “they generally focus their search on senior executives… usually CEOs or presidents.” Officials also told the GAO that “having senior executives on the board of directors helps elevate the stature of the board” and that senior executives “may have a broader view of how their industry is being affected by the economy.”

Despite the fact that Class B and Class C directors aren’t allowed to have ties to the banking industry while serving on the board, the GAO report found that “at least 56 percent [of the surveyed directors] have had some financial industry experience.”

The GAO cited a 2010 memo from the Federal Reserve Board that said recruiting representatives of organized labor and consumers to serve on the regional Fed boards was a “high priority.” But two Fed officials told the GAO that “recruiting consumer and labor representatives is a challenge because many of them are politically active,” and the Board’s policy restricts a director’s political activity.

It’s unclear how the national Board defines “political activity”. TAI’s previous reporting has shown many of the directors have donated generously to political campaigns. And the political activities of at least one director, JPMorgan CEO Jamie Dimon, are regularly the target of speculation by the national media, given his close relationship with the Obama administration and his recent meetings with Republican candidate former Massachusetts Gov. Mitt Romney.

Using data from the Equal Opportunity Employment Commission, the GAO compared the demographics of the Fed board directors with the demographics of “executive and senior level officials and managers” of firms with more than 100 employees, and found that they were quite similar.

Women and racial minorities are extremely underrepresented on the boards: In 2010, 15 of the 108 directors were minorities, and 18 were women. Despite officials telling the GAO that “Class B and Class C directors are a source of demographic diversity on Reserve Bank boards,” only 32 of the 202 Class B and C directors since 2006 have been women, and 23 have been minorities.

The education level of the directors is also unrepresentative: An “overwhelmingly majority” of the directors have a bachelors’ degree, and at least 55 percent have some type of advanced degree.

The GAO found that the selection process relies heavily on personal networking, with many directors selected after a personal recommendation from a current or previously serving director. 86 out of the 91 surveyed directors in 2010 serve on some other board of a for-profit or non-profit company.

One official told the GAO that “they look for candidates in a variety of industry lists such as a Forbes’ magazine list of the most powerful women in business,” while other directors have pursued the job by reaching out to the Fed staff themselves.

“The appearance of conflict of interest”

Fed watchers have noted that regional Fed presidents, selected by the boards of directors, tend to have the most conservative voting records on the FOMC when considering whether to use extraordinary measures to reduce unemployment. Reuters recently rated FOMC members and Fed presidents on their aversion to further stimulating the economy, and found that the most hawkish or anti-stimulus members of the Committee were all regional Fed presidents.

The importance of diversity in the country’s most important economic institution can be seen in the unemployment statistics: While the unemployment rate for people with at least a bachelor’s degree was 4.2 percent in September, for those with only a high school diploma it was 9.7 percent. For whites, the unemployment rate is 8 percent, but for Hispanics it’s 11.3 percent and for African-Americans it’s 16 percent.

Rep. Barney Frank (D-Mass.), the Ranking Member of the U.S. House Financial Services Committee, has proposed eliminating the voting power of the regional presidents. Frank says that all of the voting members of the FOMC should be directly appointed by the president and confirmed by Congress, rather than selected by boards made up of business leaders.

The GAO appears to agree, at least in part, with Frank: “The statutory requirement for three classes of directors was intended to provide representation of both stockholding banks and the public… However, the existence of Class A and to a lesser extent Class B directors on the boards creates an appearance of a conflict of interest, particularly in matters involving supervision and regulation.”

This became especially apparent during the recent financial crisis, when the Fed created multiple emergency programs that provided direct financial support to the country’s largest banks.

The report found no instance of a director being directly involved with the supervision of a program that benefited his or her banking institution. Nevertheless, the GAO recommended that any waivers granted to directors in the event of a conflict of interest be made public.

“I think without a doubt that we have a problem with drug safety in this country,” Harkin said Thursday morning by phone. “Forty percent of our finished drugs come from overseas, mostly from China and India, and 80 percent of the ingredients that go into our drugs — both over the counter and prescription drugs — come from overseas. We just have an inadequate inspection system.”

The GAO found inspections of foreign drug manufacturers have improved since its similar 2007 report indicated only 8 percent of foreign establishments were subject to inspection. At the initial rate, the U.S. Food and Drug Administration would need 13 years to inspect all foreign facilities. The FDA’s inspection efforts in fiscal year 2009 represent a 27 percent increase in number of inspections it conducted previously. The GAO also notes that FDA officials understand that they remain far from achieving foreign drug inspection rates comparable to domestic inspection rates.

In addition, current types of inspections by the FDA do not generally include all parts of the drug supply chain, and holding such inspections abroad continues to pose unique challenges — including the authority to require such facilities to undergo FDA inspection.

For example, when tainted Haparin, a blood thinner often used in dialysis treatments, was distributed in the U.S. in 2007, leading to at least 81 deaths and numerous injuries, the problem was traced to a Chinese manufacturing facility that had never been inspected by the FDA. Although Herapin was made by an American company, the active ingredient had been sourced from the Chinese manufacturer, which had relied on other smaller suppliers. The tainted aspect of the drug, according to FDA reports, was likely added in China as a way to cut manufacturing costs.

And, according to FDA estimates, the number of drug products made outside of the U.S. has doubled from 2001 to 2008. In 2010, nearly 20 million shipments of food, drugs and cosmetics arrived at U.S. ports of entry — a decade earlier that number was closer to 6 million. According to the FDA, foreign facilities have grown by 185 percent, while inspection rates have decreased by nearly 57 percent.

In order to combat the existing problem and stem compounding problems that are sure to surface in future years, Harkin says the government needs to revamp old laws governing FDA inspection so that it is better equipped to secure a global supply chain — an effort very similar, he said, as to what Congress passed last year in relation to food safety.

Congressional Hearing

On Wednesday, Harkin and the full HELP Committee held hearings on government oversight of the drug supply chain, gathering testimony from FDA and GAO officials as well as advocacy groups and corporate interests.

Allan Coukell, director of medical programs for the Pew Health Group in Washington, D.C., lamented the fact that no one had yet been held accountable for the earlier incident involving the tainted Herapin.

“This incident represents a clear breach of the security of the U.S. pharmaceutical supply,” he said, adding that Congress has yet to act to update statues that govern drug manufacturing. “Numerous experts have asserted that, absent changes to the system, another such event is inevitable.

“In the case of Herapin, it appears that criminals deliberately introduced a substandard active ingredient into the supply chain. At other times, consumers may be at risk because of failures by manufacturers to comply with quality standards. Poor adherence to quality standards has been observed both in the U.S. and abroad, but the shift of manufacturing to low-cost environments with reduced oversight creates an increased risk. According to one estimate, ignoring Good Manufacturing Practices (GMPs) can save up to 25 percent of a factory’s operating costs. The expectation of inspections is an incentive for compliance with quality standards.”

In 2008, he noted, an Indian manufacturer was cited by the FDA for alleged falsification of stability testing records and use of active ingredients made at unapproved sites, according to a U.S. Department of Justice subpoena motion. And, in 2010, another Indian manufacturer was found to have falsified batch manufacturing records for an anti-platelet medicine. European Union inspectors discovered at least 70 batch-manufacturing records in the plant’s waste yard, all of which had been rewritten, and in some cases original entries changed.

In fact, Coukell added, in 2006, dozens of people in Panama died after taking cough medicine that had been made with diethylene glycol, a sweet-tasting poison solvent. It had been wrongly labeled in China and pass through a series of international brokers, who repeatedly re-labeled it, presumably without performing independent testing. Remarkably enough, it was a diethylene glycol poisoning in the U.S. in 1937 that prompted the government to enact the Federal Food, Drug and Cosmetic Act, which is the document that so many pharmaceutical experts and industry watchdogs now believe needs to be updated to reflect the circumstances of the 21st century.

Kendra Martello, assistant general counsel for Pharmaceutical Research and Manufacturers of America (PhRMA), which represents researched-based pharmaceutical and biotech companies, said her organization favors granting FDA discretion to set routine inspection intervals for foreign and domestic facilities according to risk and in lieu of the agency’s current rolling two-year schedule.

“We support providing FDA with the flexibility to prioritize inspections of foreign establishments based on the risks they present, and believe in relying on set criteria such as compliance history, time since last inspection, and volume and type of products produced, will enhance the FDA’s ability to target its inspection resources efficiently and effectively,” Martello told the lawmakers.

She also suggested that the FDA should recognize and utilize foreign inspection reports or those from accredited third parties to facilitate the often difficult task of oversight of those manufacturers.

“These inspections would not take the place of FDA inspections, which are a necessary and important part of the agency’s mandate; however, they would provide FDA with the flexibility to leverage the work of foreign regulatory bodies and maximize its resources, all without foreclosing its ability to inspect any facility.”

Deregulatory Climate

Amid national discussions on how to spur job creation and enhance the economy, calls for reviewing or eliminating government oversight and regulation of private industry have become common both in Iowa and throughout the nation as part of the 2012 Republican presidential nomination process.

In fact, while U.S. Sen. Mike Enzi, a Wyoming Republican and ranking member of the HELP Committee, noted the need for concessions in U.S. policies regarding the globalization of the pharmaceutical supply chain, he also added a caveat that such increased oversight shouldn’t hinder private industry.

“We want to make sure FDA has the tools it needs to ensure supply chain security,” Enzi said. “At the same time, I am concerned about FDA over-regulating in a way that threatens jobs and patient access to therapies.”

When Congress moves forward to address the problem, Harkin said he will push for strengthened FDA inspection authority for foreign products and facilities.

“We do need legislation and we are working on that. That’s what the hearing was about yesterday. Next year, when we turn to the reauthorization of the Prescription Drug User Fee Act, we’re going to have something in there about FDA’s authority and ability to ramp up inspections of important drugs and components,” he said.

Companies, he said, including pharmaceutical companies, have begun reaching out to lawmakers about increasing foreign inspections and oversight.

“They want this. Why? Because many of them who have sourced their goods in this country have been placed at a competitive disadvantage. They want a level playing field. If we are going to inspect here, then the drugs that come in should also be inspected,” Harkin explained.

“I think this is an area that cries out for some form of regulation and support for a leveling of the playing field. If there are Republicans that say they don’t want to regulate on this are they telling people that this is a just a case of buyer beware? When you give medicine to your kids, you don’t know if it is safe or not? Is that what they want to say?”

The GAO’s statement before the HELP Committee is embedded below:

FDA Faces Challenges Overseeing the Foreign Drug Manufacturing Supply Chain

According to Environment and Energy Daily, the Interior Department’s Bureau of Land Management (BLM) “plans to issue a rulemaking that would place greater scrutiny on the use of categorical exclusions, or CXs, used to bypass traditional environmental reviews, according to sources familiar with the issue.”

A Government Accountability Office (GAO) report in 2009 found that between 2006 and 2008 the BLM used CXs to sign off on more than 6,100 oil and gas drilling permits in 20 states, mostly in the mountain west. The GAO also concluded that in 85 percent of those cases BLM officials failed to follow guidance and provide adequate justification for using CXs, which allow for drilling permits outside of the National Environmental Policy Act (NEPA) process in order to speed up production.

British Petroleum’s Deepwater Horizon well in the Gulf of Mexico was approved using a CX on April 6, 2009. A year later an explosion at the well sent millions of gallons of oil spewing into the Gulf of Mexico.

“The BP oil spill disaster proved that allowing companies to take shortcuts is a bad idea,” DeGette said. “It’s unfortunate that some continue to attempt an end-run around the law and protections for Colorado’s water, air, and public lands.

“We need reasonable, common-sense solutions that allow for balanced energy development, and I commend Sec. Ken Salazar for his diligent work to ensure responsible energy policy in the West.”

U.S. Rep. Doug Lamborn, R-Colo., held a hearing today of the Energy and Mineral Resources Oversight Subcommittee entitled “Impacts to Onshore Jobs, Revenue, and Energy: Review and Status of Sec. 390 Categorical Exclusions of the Energy Policy Act of 2005.”

Lamborn argues that the Obama administration’s tougher stance on CXs, which were implemented during the Bush administration under the Energy Policy Act of 2005, is yet one more regulatory hurdle standing in the way of increased domestic oil and gas production and more high-paying American jobs.

It’s a theme the ranking Republican member of Colorado’s congressional delegation has hammered on over the past year, and he raised it again in reaction to President Barack Obama’s jobs speech Thursday night.

“Like all Americans, I support the president’s goal to create more jobs,” Lamborn said in a prepared statement. “But I reject his big government solutions. I favor pro-growth policies that will allow business owners to invest with confidence and hire more workers. One common-sense place to start is by rolling back burdensome regulations.”

However, a recent report (pdf) by Montana-based Headwaters Economics indicates the domestic oil and gas industry doesn’t need greater regulatory freedom. According to the report, the industry has added about 10,000 jobs a month so far this year.

“The energy sector today is experiencing rapid growth,” said Headwaters’ Julia Haggerty, Ph.D. “Oil and natural gas drilling activity is now approaching a 30-year high, having made a strong recovery since reaching a recession-induced low in 2009. Market prices and advancements in drilling technology account for most of the increases in drilling activity.”

U.S. Rep. Raúl Grijalva, D-Ariz., also issued a statement backing the Interior Department on the CX issue: “We need leasing reforms that make sure the public, for the first time, benefits from development of public land at least as much as the companies that get sweetheart deals and taxpayer subsidies.”

High Country News in 2010 dubbed Salazar’s efforts to reform the process an exercise in “Safe(r) CX.”

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A recent report by the U.S. Senate Health, Education, Labor and Pensions Committee revealed a combined $521 million in benefits for veterans, and from the Defense Department benefits for veterans in 2010 was received by 20 for-profit schools.

Provided by the U.S. Senate Health, Education, Labor and Pensions committee

For-profit institutions are required to follow the 90/10 rule. That is, only 90 percent of their revenue may come from federal aid. If the formula used for determining the 90 percent included benefits for members of the military, many of these colleges would not pass.

This information has been helping to fuel efforts led by U.S. Sen. Tom Harkin (D-Iowa) and U.S. Sen. Tom Carper (D-Del.) to increase scrutiny on for-profit colleges.

“[T]hey are really going after the military in a big way,” Harkin told The Iowa Independent, believing it is because it does not count towards the 90/10 law.

Further fueling the nearly year-long investigation through the HELP Committee, which Harkin leads, is questionable recruiting and retaining efforts that have been uncovered.

Harkin said private non-profit colleges in Iowa, such as Buena Vista University, Simpson College, Graceland College and the like are still doing a good job of educating low-income students; perhaps even better than the Regents, because of the endowments they receive. But his attention toward the for-profit private colleges has raised a number red flags.

“The federal government is putting out half a billion dollars a year in educational assistance for veterans and for active duty personnel,” Harkin further told The Iowa Independent. “When I inquired from the Department of Defense as to where it was going, what was happening to these military people — Were they graduating? Were they getting diplomas? Were they getting jobs? — I got nothing back. The Department of Defense has no data on that. They simply send the money to them and that’s it.”

A Government Accountability Office report concluded along with the investigation Harkin led that the Defense Department and the for-profit industry lacked sufficient scrutiny over where tax dollars were going and how they were being used.

Carper told the Chronicle on Higher Education he was surprised to learn military aid was not included in the 90/10 rule, and suggested the government should consider adjusting that.

“I’m a big advocate of skin in the game,” he said. “There has to be skin in the game for markets to work.”

Provided by the U.S. Senate Health, Education, Labor, and Pensions committee

For-profits have not been alone in courting members of the military. Nonprofit and public colleges have as well. A 2009 Iowa task force found adding 100 veterans a year would yield an additional $800,000 in tuition income annually for the University of Iowa and nearly $2 million in revenue for the city of Iowa City.

For-profit schools have become the fastest growing sector of higher education, moving from 550,000 students in 1998 to more than 1.8 million students by 2008. Although they are still only 10 percent of the total higher education student population in the U.S., they take 42 percent of all Pell Grants.

Deceptive Recruitment Practices

With little oversight by the government as to where the education benefits for veterans are going or being used, for-profit colleges have stepped up their recruitment of members of the military.

In one instance a veteran was repeatedly told by recruiters that his post-9/11 GI Bill benefits would completely cover the cost of his degree. It was only after enrollment, the veteran said, that he learned he would owe approximately $11,000 beyond his military benefits to Bridgepoint-owned Ashford University.

This veteran, or veterans overall, were not the only students to file formal complaints against Ashford. The complaints came from students of different backgrounds — more than 700 in a two-and-a-half year period. They accused school officials not only lying to them or misleading them, but of charging them with undisclosed fees.

One student claimed he was told he would be able to receive his teaching license from Ashford, based in Arizona. Yet a year later, right before his scheduled graduation, he learned Ashford was not allowed by the state of Iowa to award teacher licenses, and that he would have to attend a “cooperating school” in Arizona for a year. In the complaint he stated, “I was really blown away to find out that I had spent so much time and money at a college that I was not going to be able to obtain my teacher’s license from.”

A number of students also reported receiving very little help once inside for-profit institutions, insisting there was more emphasis on recruiting rather than assisting students’ classwork. Indeed, some documents detailed instructions for officials to make at least 50 outbound calls a week in recruiting efforts and hold meetings almost daily with prospective students.

In undercover audio recordings by GAO agents, counselors at the for-profit schools can be heard discrediting traditional universities for large class sizes, insisting they would not be receiving a value education. While there are lecture courses with sometimes more than 300 students in a class, most classes taken at Iowa’s public universities throughout a degree program have less than 50 students in them. They also go on to tell potential students they would have to try to get less than a B in their classes at the for-profit college.

The GAO encountered some schools encouraging prospective students to falsify documents in order to receive more aid.

Perhaps the most alarming tactic found within internal documents recently released was the use of the “Pain Funnel.”

Lines within the documents from the for-profit ITT Technical Institute, which has more than 100 campuses nationwide, include “Remind them of what things will be like if they don’t continue forward and earn their degrees” and “Poke the pain a bit and remind them who else is depending on them and their commitment to a better future.”

Drop Out Rates

Colorado Tech University’s online program has a 61 percent drop-out rate. The University of Phoenix’s Axia College has seen 84 percent of their students drop out.

Jason Deatherage, former admissions adviser at Colorado Tech, was fired for not meeting his quota of recruiting military vets. He told the New York Times there is massive pressure to enroll more veterans.

“We knew that most of them would drop out after the first session,”  Deatherage said. “Instead of helping people, too often I felt like we were almost tricking them.”

Bridgepont Education had a 63 percent drop-out rate in 2009. Despite such a high rate of drop-outs, that year Bridgepont’s Chief Executive Andrew S. Clark earned almost twice as much as Charles Edelstein, CEO of the University of Phoenix, when he raked in $20.5 million.

Provided by the U.S. Senate Health, Education, Labor, and Pensions committee 

Student Debt Load and Career Barriers

Although, 11 of 16 community colleges in Iowa report graduation rates comparable to or worse than Bridgeport, students at for-profit institutions are almost twice as likely to default on their student loans.

Katie Bushnell currently attends Full Sail University, a for-profit school focused on the entertainment business. Bushnell takes classes online and expects to graduate within a year with a Bachelor’s degree and nearly $70,000 in student loan debt.

According to recent data released by the U.S. Department of Education, 13.8 percent of students who began repaying their public-private partnership loans in 2008 have since defaulted. For-profit institutions, however, reported 25 percent of their graduates defaulting after three years. There has been increased scrutiny over for-profit colleges as they enroll less than a fifth of all students but produce nearly half of all loan defaulters.

Bushnell actually walked away from traditional schools before coming to Full Sail. She started at Iowa State University, then attended Des Moines Area Community College and Indian Hills Community College. Much of her collegiate experience has been financed through student loans; however, she’s been working full-time hours to afford housing and living expenses since her family cannot contribute.

She counters the complaints students have lodged at other for-profits about not receiving support while taking classes.

“Full Sail does have excellent career services that has been helping me with resumes and career building exercises,” Bushnell said.

But Bushnell is worried about what she might end up doing after college since the entertainment business in Iowa is so small. She wanted to do music promotions, but with limited opportunities, she’s now considering out-of-state sports teams. Taking classes online, combined with trying to find work and build experience booking concerts during college has also placed obstacles in her way.

“I do miss having a set class time, because it is very difficult to focus and very easy to procrastinate with online classes,” Bushnell said. “Working full time and then coming home to classes is tough chore. I am envious of students who don’t have to work full time and still get by while in school.”

Watching tuition increases and budget cuts to public universities though is a big incentive for Bushnell to avoid going back to public colleges.

Contributions and Oversight

Part of Harkin’s investigation found 95 to 98 percent of students attending for-profit colleges borrowed money to attend. Since the average cost of a credit hour was often more than double that of tuition for a public college, the debt loads were significantly higher. Iowa has ranked in the top five for highest average student debt load by the Project on Student Debt every year that they’ve compiled data, ahead of all other Midwestern states.

With all of these reported problems, Harkin is seeking better oversight of the half a billion taxpayer dollars going to the for-profit colleges through military members’ benefits.

The Department of Education has already brought forward a new plan that would deny for-profits from receiving federal student aid if their graduates cannot pay off their student debt in a reasonable time frame.

While Harkin has been leading this charge, he has also been among the recipients of donations from the industry. As The Iowa Independent reported in 2010, he took significant donations from DeVry, Inc. and Bridgepoint. Democratic U.S. Reps from Iowa, Bruce Braley and Dave Loebsack, also took contributions, as did U.S. Sen. Chuck Grassley (R-Iowa).

U.S. House Speaker John Boehner (R-Ohio) was one of the biggest benefactors in contributions from the industry, receiving more than $30,000.

DeVry, based in Illinois, spent more than $300,000 on lobbying efforts in 2009 and 2010. Ten of the industry’s top companies collectively upped their spending on lobbying from $1.5 million in 2009 to more than $4 million in the first nine months of 2010. The industry is fighting against any new regulations.

“We need better oversight, and we need to bring this to light,” Harkin said. “I’ve had this ongoing investigation and it seems things keep getting worse and worse.”

The Education Department held back on imposing their new plan for regulations after facing heavy push-back from lobbying and opposition in Congress.

Wall Street money manager Steven Eisman testified before the HELP Committee last summer and called for-profit colleges “marketing machines masquerading as universities.” Eisman has hedged bets on some of these education corporations, but warned the committee the industry was reaping those rewards while taxpayers were at risk, as the companies are running on federal aid.

Harkin said Attorneys Generals around the country, including Florida, Illinois, Kentucky and Iowa’s Tom Miller, have launched investigations into the schools for any unlawful conduct. California and Maryland’s legislatures are pushing through bills to reduce or eliminate state aid to the for-profit colleges.

Maybe it is different this time.

Earlier this month the Government Accountability Office released a 350-page report identifying duplication in federal programs. As you can imagine, it didn’t take long for politicians to grab the report and promise to use it for something beside weight lifting.

Maybe Colorado Republican Rep. Cory Gardner and Democratic U.S. Senator Mark Udall were on to something when each announced legislation to force Congress to examine ways to use the information as a means to actually cut waste from the federal budget.

The report is tantalizing with its tawdry promises of free money for the grabbing. One person familiar with the report told The Colorado Independent that it is possible Congress could cut as much as $200 billion a year from the federal budget by eliminating or combining duplicate programs and services.

From Reuters:

Duplicating, overlapping and fragmented government agencies are wasting tens of billions of federal dollars every year, according to a GAO study…

From a summary of the report itself:

Section I presents 34 areas where agencies, offices, or initiatives have similar or overlapping objectives or provide similar services to the same populations; or where government missions are fragmented across multiple agencies or programs. These areas span a range of government missions: agriculture, defense, economic development, energy, general government, health, homeland security, international affairs, and social services. Within and across these missions, this report touches on hundreds of federal programs, affecting virtually all major federal departments and agencies. Overlap and fragmentation among government programs or activities can be harbingers of unnecessary duplication. Reducing or eliminating duplication, overlap, or fragmentation could potentially save billions of tax dollars annually and help agencies provide more efficient and effective services.

…

For example, while the Department of Defense is making limited changes to the governance of its military health care system, broader restructuring could result in annual savings of up to $460 million. Similarly, we developed a range of options that could reduce federal revenue losses by up to $5.7 billion annually by addressing potentially duplicative policies designed to boost domestic ethanol production.

Gardner has sponsored legislation in the House that would instruct each House committee to look at any areas mentioned in the report that fall under that committee’s purview and determine if unnecessary duplications exist and what can be done to eliminate such duplication where it does exist.

Gardner released this statement:

Recently, a report released by the Government Accountability Office made headlines when it identified billions of dollars of duplicative government programs and functions. Examples included more than 100 programs dealing with surface transportation issues, 82 monitoring teacher quality, 80 for economic development, 47 for job training and 20 devoted to homelessness.

The amount of waste detailed in the 345-page report is mind-boggling. It is time to dig into why there are so many different programs with overlapping purposes and whether or not they need to be eliminated or combined.

To that end, I have teamed up with Rep. Gary Peters, a Democrat from Michigan, to introduce a bipartisan resolution that will call for the relevant congressional committees to hold hearings on all of the programs deemed duplicative by the GAO. The hearings will have to be held within 90 days of the report’s release.

From a prepared statement issued by Udall:

I partnered with Senator Orrin Hatch to introduce legislation that would establish a bipartisan Senate committee to identify and eliminate ineffective or redundant government programs. The Committee to Reduce Government Waste would add teeth to our efforts to streamline the federal government and thus save taxpayers’ dollars and strengthen the economy by chipping away at the national debt.

The Senate has dozens of committees dedicated to writing new legislation and creating new government programs. Most programs are created with good intentions, but in too many cases, Congress has also created a redundant and wasteful bureaucracy rather than strategically targeting resources where they are needed. This committee would do more than just recognize that spending cuts need to be made to put our country back on the right track; it would identify redundant and wasteful programs that can be cut or consolidated and push them onto the Senate floor for an expedited vote.

Government waste is not a new problem, and this committee is not a new idea. A similar committee was created by Senator Harry F. Byrd in response to the rising costs of WWII. The Byrd Committee was a great success, saving more than $38 billion in today’s dollars over just three years, and I believe that reviving this idea to address our modern budget crisis can be equally effective.

Gardner’s office did not return a call seeking further comment.

Udall responded to questions via email:

“Most government programs are created with the best intentions – but over time, we end up with a bureaucracy of programs with overlapping and even redundant missions. The problem is that the lawmakers who created the programs in the first place are often reluctant to cut them, and if we ask those lawmakers to make the decisions about what to cut, we’re not likely to get very far. The most efficient way to trim the fat is to create an objective, bipartisan committee with the single mission of finding redundancies and recommending cuts or ways programs can share resources. We’ve done it before – after World War II, a similar committee saved more than $38 billion in today’s dollars – and we can do it again,” Udall wrote.

The Government Accountability Office went undercover to investigate how 18 recruiters would respond to questions about how to hire foreign workers, who can be less expensive than native-born workers. Three of them took the bait, recommending the fictional landscape employer dissuade Americans from applying by scheduling job interviews before 7 a.m., requiring drug tests and making applicants “run around the shop carrying a 50-pound bag to determine [if] they were fit for the work.”

For the foreign workers who eventually get jobs under H-2B visas, the GAO found employers sometimes underpay or charge visa workers excessive fees for visa processing, housing or transportation. More than half of the cases reviewed by government investigators involved fees that drastically reduced paychecks for workers, sometimes to as low as $48 in a two-week period.

Labor rights groups say that foreign-born workers are often exploited by employers who rely on their lack of connections or access to resources in the United States. This can be even worse for undocumented workers, who rights groups say suffer frequent wage theft and other workplace abuses because they fear being turned over to immigration authorities.Workers on H-2B visas are in the country legally, but at times it’s through employers who are cheating the system by skipping over qualified American applicants.

For more on workplace exploitation, it’s worth re-reading the Star’s series on trafficking from last year. After the series ended in December, Department of Homeland Security Janet Napolitano said she would begin more work on ending human trafficking, including a campaign launched in July to improve trafficking assistance and awareness programs.

The Labor Department, which also handles the issue, has added investigators to its Wage and Hour Division to audit seasonal H-2B visa workers. Labor Secretary Hilda Solis has argued for fair wages for all workers — even undocumented ones — and appeared in advertising this summer telling workers “every worker in America has the right to be paid fairly, whether documented or not.”

But the Coast Guard has always pursued multiple missions. And by its own performance measures — good enough that the GAO cited them in 2009 testimony on the agency’s budget — the Coast Guard has been meeting its goals for both homeland security and environmental safety, while it’s had a harder time living up to expectations for “migrant interdiction” and “defense readiness.”

The agency’s real problem, one which the Post’s story passes over glibly, is not that it has too many missions but that expected budget cuts could make it more difficult to fulfill them all. Indeed, the Post itself reported back in February on former Commandant Thad Allen’s worries about the cuts: “Our force is more fragile this year than last and we are accepting increased operational risk while recapitalizing aging cutters,” Allen said.

What’s more, the Post wades into a long-fought dispute over who in Congress should has oversight over the Coast Guard. The story depends on Rep. James Oberstar (D-Minn.) to argue the Coast Guard lacks the personnel to carry out its multiple mission, but again, the Post rushes over an important fact–that Oberstar favors moving the Coast Guard out of the Department of Homeland Security.

Since the creation of DHS, and more importantly, since the creation of the House Committee on Homeland Security, Oberstar’s Transportation and Infrastructure committee has had to share jurisdiction over the Coast Guard. If it’s true that the Coast Guard’s homeland security duties are taking away from its other missions, then, the logic goes, why not revert to a state of affairs closer to the pre-9/11 system? Move the Coast Guard out of DHS, have it focus on its traditional missions, and restore total oversight to Oberstar’s committee.

GAO’s ruling is full of complicated bureaucrat-ese, so here’s the bottom line. DynCorp, a rival security contractor, held a contract through a branch of the State Department called INL to train foreign police. Last year, the Pentagon moved to take control of that contract, setting the stage for it to be bid out through an obscure Army office known as CNTPO. DynCorp protested, since CNTPO is a counternarcotics office and the police-training contract desired by the U.S. military in Afghanistan is rather tenuously connected to counternarcotics. Today, GAO sided with DynCorp, saying the contract’s “services are significantly broader than the counter-narcoterrorism efforts anticipated by the underlying contracts.”

But that doesn’t mean the Army loses control of the contract or the contract reverts to State’s INL branch. “We recognize the Army’s position that it needs to swiftly award a contract for these services,” Ralph O. White, GAO’s acting managing associate general counsel for procurement law, said in a statement. “In sustaining DynCorp’s protest, we recommended that the Army cancel the task order solicitations and either conduct a full and open competition, or prepare the appropriate justification required by the Competition in Contracting Act to limit competition.”

Put simply, the Army can’t go forward with the bid under the five contractors eligible for it under CNTPO — including Blackwater — but it doesn’t lose control of the contract. Even CNTPO could potentially still be in control of it: GAO is agnostic about what part of the Army awards the bid. It is conceivable that Blackwater could still bid on the contract, then, since no contracting official has formally recommended Blackwater for being “debarred,” a term designating the firm to be ineligible to win government contracts. Failing that, it’s up to the Army to design the contract’s next set of procedures — or, if the administration so chooses, State and Defense can work out a new contract vehicle for the bid. Will Blackwater still be eligible to make money off the government even after its employees killed civilians in Iraq, shot at them in Afghanistan, set up a shell company to win an Army subcontract and stole guns intended for the Afghan police from a U.S. military depot near Kabul?

Fine as far as it goes. But now consider that the security company poised to win a potential billion dollar contract for this allegedly crucial task is Blackwater, a company last seen in Afghanistan performing such squeaky-clean tasks as stealing hundreds of weapons intended for the Afghan police and signing for them using the name of a ‘South Park’ character. That’s after Blackwater got its contract through contract fraud by creating a shell company to obscure its corporate involvement, according to former top Blackwater contracting officials. Why would Blackwater need to obscure its corporate involvement in the first place? Because it’s best known for shooting fleeing civilians in Iraq.

It is hard to think of a worse example to set for a police force trying to shed the stigma of corruption and incompetence than to allow Blackwater to conduct their training. To give Blackwater that contract will be to tell the police that they have to follow the law and then immediately wink an eye, jab an elbow in the cops’ ribs and giggle. Unsurprisingly, when you call around to the Pentagon and to Caldwell’s command about how Blackwater can possibly be eligible for this contract after everything it’s done, every single official you talk to denies responsibility for the possible contract award — and that Blackwater’s right to bid is protected by good-government legislation. And the U.S. is going to lecture the Afghans about anti-corruption?

In a letter yesterday to GAO, Reps. Henry Waxman (D-Calif.), Charlie Rangel (D-N.Y.), Pete Stark (D-Calif.) and John Lewis (D-Ga.) voiced concerns that the companies are “artificially raising prices for certain pharmaceutical products in expectation of new reforms that could otherwise reduce prescription drug prices or price growth by encouraging patients and the government to be more efficient purchasers.”

Any price gouging is unacceptable, but anticipatory price gouging is especially offensive. We request that the GAO prepare on an expedited basis a report that analyzes recent trends in prescription drug pricing. In addition, we request that you prepare a proposal to ensure ongoing monitoring of pharmaceutical manufacturer pricing practices, and periodically report to the Congress on your findings.

Not that the pharmaceutical industry is taking the Times’ report sitting down. In a statement released Monday, Ken Johnson, senior vice president of the Pharmaceutical Research and Manufacturers of America, said the price increases represent “the natural result of market forces.”