Being a mercenary doesn't make someone a bad person. A mercenary could easily be more patriotic than a sworn soldier who is only there to get his college tuition paid for. So realize that upfront, that what I am about to say is not a reflection on the personal qualities of any individual contractor or soldier at all.
Mercenaries, who now fight under the politically correct term of "contractor", are damaging to the rule of law. They have the training and capability to apply force outside the military chain of command. This allows the politician or agency that hires them to have more power than our law ever intended, with less oversight than sworn lawful combatants. While this makes them more efficient and flexible, we clearly have laws in place for a reason. Eventually they will always do something that a legal combatant would not be allowed to do - who decides then what law if any they fall under? Combatants on the field of battle, which mercs are, must be under the same law if we say we are a law abiding nation. I won't even get into the obvious conflicts of interest and the danger involved with separate chains of command, one legal and one financial. See Najaf 2004....
A soldier has both the responsibility to and the protection of the UCMJ and the rules of engagement of the combatant commander. Like all men with a job, a mercenary in the end is loyal to the man that signs his paycheck, the only restraint being the extent of his own morality. They are not subject to posse comitatus in civil use, and worse have not been delegated authority from the citizens as is the case with a sworn law enforcement officer. Therefore they have no more authority to use or project force than any other citizen and yet will if ordered. Their use in New Orleans in a police role was one of the worst abuses of the Constitution in modern times even if they operated professionally and were helpful.
Many if not most of the problems in this country derive from politicians who abuse the power delegated to them from the people by assuming an "ends justifies the means" approach. In a Constitutional Republic, the ends never justify the means. We either have the rule of law or the rule of man, and the rule of man always leads to illegitimate government, abuse of power, loss of faith in government and eventually civil unrest. All because some suits with their own agendas decide they know better than the law, or claim exigent circumstances require they assume a little more power than we have given them. Is it any wonder then that we now find our nation in a perpetual state of emergency "requiring" ever increasing government powers with less oversight by, and often without even the knowledge of, the citizens? NSA wire taps without warrants are one example, the use of mercenary armies are another. Even if either one of them actually promotes our security, neither is Constitutional, and neither is consistent with the rule of law and supportive of the perception of legitimate government. The perception of legitimacy is critical to civil society, and impossible these days to fake.
Incidentally, the Consititution in Art I Sect 8 does give Congress the authority the grant a letter of Marque and Reprisal, which would grant a private person the authority to engage in hostilities. It was used in a time of true national emergency in the War of 1812, when national sovereignty was at stake, the White House burned, and we had US Navy that could never be brought up to speed in time to come close to matching the overwhelming superiority of the British fleet. Though such mercenary use was banned by international treaty in the mid 1800s, we did not sign but have since abided by the treaty requirements. The fact that we still have the means to legally employ privateers/mercs and simply choose not to do so, even in WW2, is telling. Today our Congress will neither declare war, nor legalize mercenary action, because politicians actually prefer to operate outside the law, so that they are no longer accountable (read responsible to the people) for the results. The illegal abdication of their Congressional responsibility is but one reason the President is far more powerful than the founders ever intended, one reason why the people have lost faith in our government, and therefore one more reason why we risk civil unrest. Men will endure some injustice due to inevitable human folly as long as they still have faith in the overall legitimacy of government, that government still substantially operates in accordance with the law. However, when the authorities use the color of law to act unlawfully, that faith is destroyed and that government will eventually be smacked in the face by its citizens with the harsh reality that its own unlawfulness is contagious. With an a frightening 7% Congressional approval rating I leave it to the discerning reader to measure how far along we are in that process.