Whether one views Edward Snowden as a hero or a villain, perhaps we could all agree that if the government is to keep secrets, a 29-year-old private contractor with a soft spot for Ron Paul shouldn't have access to a treasure trove of its most sensitive information.

Of course, that assumes that there still exists a bright line between government and the private sector. But that's become an antiquated notion after two decades of ideologically driven outsourcing of what were once considered core government functions. As a result of that effort, there are now a million potential Edward Snowdons – or, more precisely, 483,263 contractors with top-secret clearances, according to James Clapper, the director of National Intelligence – any of whom could slip out with sensitive data on a thumb drive if they have a personal or ideological axe to grind.

More troubling is the fact that we're being constantly monitored by private spy companies with virtually no oversight or accountability. According to journalist Tim Shorrock, around 70 percent of our national security spending now goes to private firms. Michael Hayden, “who oversaw the privatization effort as NSA director from 1999 to 2005,” told Shorrock that “the largest concentration of cyber power on the planet is the intersection of the Baltimore Parkway and Maryland Route 32,” where the NSA's top contractors are located. Hayden coined the term, “Digital Blackwater” to describe the privatization of American cyber security agencies.

“I think it's extraordinarily frightening because the oversight by Congress is so minimal to begin with,” says Robert McChesney, a professor of communications at the University of Illinois and author of Digital Disconnect: How Capitalism Is Turning the Internet Against Democracy. “From what we know, the oversight of spying, intelligence and surveillance is really rock-bottom, with members of Congress often knowing little or nothing” about the details of these programs. “So, they're going off the books [with private firms] to avoid even the minimal oversight they do have.”

Reinventing Government

How did we get here? Ironically, while a lot of Americans are convinced that Democrats hold an unwavering fealty to “big government,” during the 1990s, a central tenet of Bill Clinton's agenda was shrinking down the size of the federal government. The administration's “Reinventing Government” initiative – which took place in two phases, known as REGO I and II – resulted in a whopping 17 percent reduction in the federal workforce.

Ed Kilgore, former vice president for policy at the Democratic Leadership Council and now a journalist with the Washington Monthly, said REGO, “reflected not just a serious determination by the Clinton administration to rethink how government works, but also a much broader trend on the center-left – at think tanks and magazines really for years – that suggested that the future of liberalism depended on sorting out ends and means.”

Liberals, the administration believed, had become too eager to identify progressivism with government programs. “So a lot of the neoliberal movement and the whole New Democrat thing was very explicitly focused on making the efficient achievement of progressive goals the definition of being a liberal rather than just defending programs and how they were administered.”

The initiative resulted in some decent innovations, like government data being made available in easily accessible form over the Internet. But 20 years later, Donald Kettl, dean of the School of Public Policy at the University of Maryland, told the industry magazine Government Executive that the elimination of over 425,000 federal jobs had caused serious problems. “The reduction didn’t happen in a way that matched workforce needs because they used a strategy for downsizing to hit a target,” he said. “The effort got in the way of the ‘making government work better’ piece. Many with special skills left, and people who stayed might have been those we’d have wanted to leave.”

In 1994, when Bill Clinton announced the results of the first phase of REGO, he quipped, “I kind of hate to sign this bill today. What will Jay Leno do, there will be no more $500 hammers, no more $600 toilet seats, no more $10 ashtrays.” But the reality is that one of the most problematic consequences of his reforms was a significant reduction in oversight of government contracts.

According to a 1999 study by the Project on Government Oversight (PoGo), the very agencies that had been “successful at reining in industry fraud” were those hit hardest by the cuts, including a 19 percent cut in staff at the Defense Contract Audit Agency, which had saved “almost $10 for each dollar invested,” and a 21 percent cut in the Department of Defense Inspector General's office.

Rather than eliminating the $500 hammer, PoGo found:

Defense contractors are taking advantage of new opportunities to rip off the federal government under policy reforms instituted by Clinton/Gore's Reinventing Government campaign and an industry-chummy Congress. Spare parts prices have ballooned by up to fifteen times (or 1,532%) by contractors like Boeing and AlliedSignal taking advantage of lax accounting and oversight under federal policy changes.

According to surveys conducted in the late 1990s, the haphazard nature of the downsizing also left many of those remaining in the federal government frustrated, overworked and demoralized.

Bush: Outsourcer-In-Chief

When Bush came to power, he wasn't interested in many of the reforms initiated during the Clinton years, but his administration continued advancing the rhetoric of “reform” by streamlining government procurement processes. Paul Light, a professor of public service at New York University, told Government Executive that the Bush team embraced Ronald Reagan's formulation that “the problem with government is government,” and focused primarily on outsourcing more functions to the private sector.

Then came the attacks of September 11, 2001. In the aftermath, the 9/11 Commission determined that the National Security Agency (NSA) had collected data that might have averted the attacks, but hadn't had the available manpower to analyze them in time. The agency's staffing, like that of the rest of the federal government, had been reduced significantly in the prior decade.

And an agency that had been established during the Cold War to monitor the USSR, a centralized nation-state, now had to contend with a diffuse network of operators spread out around the world – a network that could take advantage of the proliferation of digital communications technologies.

The quantity of worldwide digital communications was exploding just as NSA was trying to adapt to a new enemy with a lighter staff. These factors, combined with the pressure of post-9/11 war rhetoric, sent the agency scrambling to figure out how to analyze the masses of data it was collecting. Although the exact figures are classified, the NSA's budget, the largest of any intelligence agency, is estimated to have doubled to $8 billion in the following years, according to the Project on Defense Alternatives (PDF). And it increasingly relied on private contractors like Edward Snowden's former employer, Booz Allen Hamilton, to sift through the massive amounts of digital information it was sucking up.

For Bush, outsourcing had an additional benefit: it allowed his administration to significantly increase the size of our national security apparatus without expanding a heavily unionized federal workforce. While Clinton and Gore had eliminated the jobs of tens of thousands of unionized federal workers, they'd also strengthened unions' hands by implementing new labor/management partnerships, but according to Elaine Kamarck, a former aide to Al Gore, one of the first things Bush did was dismantle the partnerships. And, as Richard Conley recalled in America's 'War on Terrorism': New Dimensions in U.S. Government and National Security, Bush threatened to veto legislation creating the Department of Homeland Security unless it came with “flexible personnel rules that… ran counter to traditional civil service protections.” (Senate Democrats balked, but after the Republicans' strong showing in the 2002 mid-terms, Bush ultimately got his way.)

Booz is one of a thousand contractors who grew fat at this growing public trough. According to the New York Times, “over the last decade, much of the company’s growth has come from selling expertise, technology and manpower to the National Security Agency and other federal intelligence agencies.” According to the Associated Press, 98 percent of the company's revenues come from government contracts and half of its employees hold security clearances.

A rapidly spinning revolving door further undermines outside security contractors' accountability. Edward Snowden claims that he worked for Dell, the CIA and then the NSA via a contract with Booz. Former director of National Intelligence Michael Hayden is now a principal with the Chertoff Group, the intelligence firm led by former secretary of Homeland Security Michael Chertoff. The current DNI, James Clapper, was formerly an executive with Booz Allen Hamilton. The AP reported that “the ties between government and contract workers are so pervasive in Washington that those on each side are known by nicknames: Contractors are called 'green badgers' for the color of their identification badges. Government workers, who sport blue, are known as 'blue badgers.'"

The Commercialized InterNet Is Ideal for Spying on Americans

According to Robert McChesney, security contractors represent just one part of the increasingly privatized security state. What he calls the “military-digital complex” (and James Bamford calls the “surveillance-industrial complex”) includes Internet giants that have become familiar names in American households. “The key part of the 'military-industrial complex',” says McChesney, “is that there were firms that greatly benefited – arms manufacturers and the like – that would provide a permanent lobby to keep military spending high, Eisenhower warned, even when there might not be a need.”

McChesney says the military-digital complex follows the same logic. Having privatized much of our national security apparatus, “there is this huge commercial interest that benefits from an extension of the status quo.”

He notes that firms like Amazon, Microsoft, Google and Verizon have massive market shares (13 of the 31 companies with market valuations of $100 billion or more are Internet related firms, compared with just three from the financial sector) and adds that these behemoths already collect massive amounts of data on us all, and have little incentive not to cooperate with security agencies. “What we have now are these huge digital companies that are central to the whole process of surveillance and national security,” he says. “They have very close relations with the government and are very much part of the system. It's one of the defining features of our times.”

We Don't Know What We Don't Know

I asked Scott Amey, general counsel for the Project on Government Oversight, if the use of private contractors gave the government the ability to circumvent legal constraints on its own in-house snooping. “It's a tough question,” he said, “because I don't know what we don't know.” With non-security contracts and grants, there's a degree of transparency in the process. “We get to see what the requests and solicitations are, we get to see the summary data of the contract, we can even [use the Freedom of Information Act] to get a copy of the contract. There can be a dialogue over the policy, the mission or the program.” But with “programs being run by the NSA or other agencies in the intelligence community, you don't know if there are the same checks and balances built into the system.”

For spies, whether they're working for a government agency or a private firm, that opacity is a feature, not a bug. While some casually wave away concerns about the civil liberties and privacy implications of all this, it's important to remember that the intelligence community is used to operating in the shadows and outside of the jurisdiction of traditional law enforcement.

As Peter Ludlow, a professor of philosophy at Northwestern University recently wrote in the New York Times, some of the work these private intelligence firms perform “involves another common aspect of intelligence work: deception. That is, it is involved not just with the concealment of reality, but with the manufacture of it.”

Ludlow recalled a recent example when such deception was brought to light by hackers.

Important insight into the world these companies came from a 2010 hack by a group best known as LulzSec … which targeted the private intelligence firm HBGary Federal. That hack yielded 75,000 e-mails. It revealed, for example, that Bank of America approached the Department of Justice over concerns about information that WikiLeaks had about it. The Department of Justice in turn referred Bank of America to the lobbying firm Hunton and Willliams, which in turn connected the bank with a group of information security firms collectively known as Team Themis. Team Themis (a group that included HBGary and the private intelligence and security firms Palantir Technologies, Berico Technologies and Endgame Systems) was effectively brought in to find a way to undermine the credibility of WikiLeaks and the journalist Glenn Greenwald (who recently broke the story of Edward Snowden’s leak of the N.S.A.’s Prism program), because of Greenwald’s support for WikiLeaks.

Embarrassed by the breach, HBGary insisted that the proposal had never been put into action, but it nevertheless provided some insight into the mindset of the private intelligence community. Team Themis considered falsifying documents and feeding them to Greenwald in order to discredit his reporting. They pitched the Chamber of Commerce with a plan to infiltrate Chamber Watch, a progressive group that opposes the CoC's anti-regulatory agenda. They suggested creating “two fake insider personas, using one as leverage to discredit the other while confirming the legitimacy of the second.” And the hack revealed that Team Themis was developing a system with the U.S. Airforce that would have allowed a single operator to control a number of fake online identities in order to influence the discourse in social media. According to Ludlow, that “contract was eventually awarded to another private intelligence firm.”

Can We Put the Genie Back Into the Bottle?

In thinking seriously about these issues, there are a few things one should probably acknowledge. First, data are being collected on us all the time, and there's probably nothing one can do to change that short of going “off the grid.” Second, the government has an interest in keeping some things secret – we can't reasonably expect it to perform the functions we expect it to without covert intelligence. Third, looking for patterns in “big data” can be an effective tool to combat crime, terrorism and other ills.

Finally, whether we like it or not, we need to face the fact that there are powerful incentives for everyone involved in national security to surveil us. There's virtually no political (or career) price to be paid for erring on the side of too much security, but the consequences of allowing another major terror attack are significant. As a nation, we allowed ourselves to be terrorized by terrorism, and in that sense we all bear some responsibility for the rise of the post-9/11 national security state.

If one accepts those premises (and clearly not everyone does), then the real issue here comes down to adequate oversight – making sure there are checks and balances to protect our privacy from snoops and assure that our civil liberties remain intact.

Whatever one thinks of Edward Snowden, his revelations — and a lot of solid reporting since his leaks – have shown that claims made by President Obama and others that there's already sufficient oversight of these surveillance programs are totally untrue. Oversight by both the White House and Congress is a complete joke, and the FISA court is a rubber-stamp that has “rejected only 11 of the more than 33,900 surveillance applications by the government,” according to the Wall Street Journal. Within the halls of hundreds of private security firms, we really have no clue what's going on.

So rather than take on an almost hopeless battle to get the government not to use the technologies available to it, those concerned about these issues would be wiser to focus on restoring some semblance of balance. That would mean real review at the FISA court, real oversight from Congress and, perhaps most importantly, re-nationalizing our intelligence apparatus (or at a minimum paying our spooks enough to keep them working in the public sector).

Because even if many Americans hold an instinctive distrust of government, the fact remains that it is at least somewhat accountable to we the people, whereas the myriad security companies that are getting fat from the “war on terror” are beholden only to their shareholders and the bottom line.