Re: CUTTING CORPORATE WELFARE, by Ralph Nader
Posted: Tue Oct 29, 2013 11:00 pm
DEFENSE AND HIGHWAY PORK
It is important that "pork" -- federal monies for unnecessary projects or inflated contracts -- is understood as a subset of, not a synonym for, corporate welfare. While pork is a significant drain on the federal treasury, it is not, by and large, a helpful analytic term. Labeling a project "pork" stigmatizes it as unnecessary; the response of the project's defenders is to say that in fact the project is necessary. "Pork" does not offer objective criteria by which the dispute can be resolved.
Nonetheless, while analysts may differ over whether one or another project is pork, almost no one disputes that pork exists and is widespread. Pork is in part a reflection of our regional and state representative system of governance, with legislators trying to return federal dollars to their districts or states. But it is also derivative of a corrupt political system in which special interests exert an unhealthy influence.
PENTAGON PORK
The Pentagon budget is a bloated source of contractor pork. Without entering into a discussion of U.S. national security imperatives, it is clear from many official reports by both the Congress and the Executive Branch that much of what the Pentagon procures is unnecessary; that Pentagon waste and fraud is persistent; and that these problems reflect the political power of the military contractors.
One classic example of unnecessary procurement is the C-130 transport plane, which is built by Lockheed Martin in Georgia, near former Speaker Newt Gingrich's district and in the home state of former Senate Armed Services Committee Chairman Sam Nunn. The Air Force has requested just a small fraction of the more than 250 C-130 transport planes for which Congress has appropriated funds since 1978. The planes cost about $75 million apiece. [79]
Systematic corporate contractor fraud and waste have long been, and remain, too widespread at the Pentagon. [80] Among recent revelations, the Department of Defense Inspector General reported on spare parts provided to the Pentagon by Allied Signal at a 57 percent markup over commercial prices. [81]
It is important to understand the political underpinnings for ongoing Pentagon welfare and the failure to crack down on waste, because it illustrates the importance of competition and economic decentralization in curbing corporate welfare, and because it presents a case where outrageous corporate welfare benefits helped consolidate the political influence of narrow business interests.
During the early years of the Clinton presidency, the Pentagon encouraged the defense sector to consolidate, and it backed up its encouragement by subsidizing mergers through payments to cover the costs of consolidation -- including extravagant "golden parachute" bonuses to executives of acquired companies. No industry knows how to respond to corporate welfare subsidies like the defense industry, in part because they conceive and lobby for them, as did Norman Augustine, the now retired CEO of Martin Marietta. The result of the Pentagon's encouragement is that military suppliers have undergone an ear-splitting consolidation that has left but three major prime contractors: Lockheed Martin, Boeing and Raytheon. Today's Lockheed Martin is the product of the merger of Lockheed, Martin Marietta, Loral, parts of General Dynamics and about two dozen other companies. Boeing leaped to the top tier of the contractor pack with its acquisition of McDonnell Douglas. Raytheon gobbled up Hughes.
With manufacturing facilities spread across the United States, these three companies now have enormous political influence -- they can show that new military contracts will mean jobs in the districts of hundreds of Members of Congress, and in nearly every state. For districts where they do not have facilities, they can employ suppliers to help give them a political presence. This structural power, which is supplemented by major investments in campaign contributions and lobbyists, [82] helps enable the contractors to preserve the cycle of wasteful spending and abuse at the Pentagon. The tight consolidation of the industry also leaves the Pentagon much less able to deploy one of its most powerful sanctions against contractor wrongdoers -- procurement disbarment -- because of the paucity of alternative prime suppliers.
HIGHWAY PORK
The federal highway bills are another major source of pork. While important progress has been made in directing highway monies to road and bridge repair, as well as for modes of public transport, last year's highway bill, the Transportation Equity Act for the 21st Century (TEA-21) will allocate billions of dollars to new road construction, much of it unnecessary and harmful. [83] Instead of supporting modern mass transportation, Congress continues to surrender to the demands of road construction interests and the highway lobby. The harmful consequences include sprawl, air pollution and contributions to global warming.
It is important that "pork" -- federal monies for unnecessary projects or inflated contracts -- is understood as a subset of, not a synonym for, corporate welfare. While pork is a significant drain on the federal treasury, it is not, by and large, a helpful analytic term. Labeling a project "pork" stigmatizes it as unnecessary; the response of the project's defenders is to say that in fact the project is necessary. "Pork" does not offer objective criteria by which the dispute can be resolved.
Nonetheless, while analysts may differ over whether one or another project is pork, almost no one disputes that pork exists and is widespread. Pork is in part a reflection of our regional and state representative system of governance, with legislators trying to return federal dollars to their districts or states. But it is also derivative of a corrupt political system in which special interests exert an unhealthy influence.
PENTAGON PORK
The Pentagon budget is a bloated source of contractor pork. Without entering into a discussion of U.S. national security imperatives, it is clear from many official reports by both the Congress and the Executive Branch that much of what the Pentagon procures is unnecessary; that Pentagon waste and fraud is persistent; and that these problems reflect the political power of the military contractors.
One classic example of unnecessary procurement is the C-130 transport plane, which is built by Lockheed Martin in Georgia, near former Speaker Newt Gingrich's district and in the home state of former Senate Armed Services Committee Chairman Sam Nunn. The Air Force has requested just a small fraction of the more than 250 C-130 transport planes for which Congress has appropriated funds since 1978. The planes cost about $75 million apiece. [79]
Systematic corporate contractor fraud and waste have long been, and remain, too widespread at the Pentagon. [80] Among recent revelations, the Department of Defense Inspector General reported on spare parts provided to the Pentagon by Allied Signal at a 57 percent markup over commercial prices. [81]
It is important to understand the political underpinnings for ongoing Pentagon welfare and the failure to crack down on waste, because it illustrates the importance of competition and economic decentralization in curbing corporate welfare, and because it presents a case where outrageous corporate welfare benefits helped consolidate the political influence of narrow business interests.
During the early years of the Clinton presidency, the Pentagon encouraged the defense sector to consolidate, and it backed up its encouragement by subsidizing mergers through payments to cover the costs of consolidation -- including extravagant "golden parachute" bonuses to executives of acquired companies. No industry knows how to respond to corporate welfare subsidies like the defense industry, in part because they conceive and lobby for them, as did Norman Augustine, the now retired CEO of Martin Marietta. The result of the Pentagon's encouragement is that military suppliers have undergone an ear-splitting consolidation that has left but three major prime contractors: Lockheed Martin, Boeing and Raytheon. Today's Lockheed Martin is the product of the merger of Lockheed, Martin Marietta, Loral, parts of General Dynamics and about two dozen other companies. Boeing leaped to the top tier of the contractor pack with its acquisition of McDonnell Douglas. Raytheon gobbled up Hughes.
With manufacturing facilities spread across the United States, these three companies now have enormous political influence -- they can show that new military contracts will mean jobs in the districts of hundreds of Members of Congress, and in nearly every state. For districts where they do not have facilities, they can employ suppliers to help give them a political presence. This structural power, which is supplemented by major investments in campaign contributions and lobbyists, [82] helps enable the contractors to preserve the cycle of wasteful spending and abuse at the Pentagon. The tight consolidation of the industry also leaves the Pentagon much less able to deploy one of its most powerful sanctions against contractor wrongdoers -- procurement disbarment -- because of the paucity of alternative prime suppliers.
HIGHWAY PORK
The federal highway bills are another major source of pork. While important progress has been made in directing highway monies to road and bridge repair, as well as for modes of public transport, last year's highway bill, the Transportation Equity Act for the 21st Century (TEA-21) will allocate billions of dollars to new road construction, much of it unnecessary and harmful. [83] Instead of supporting modern mass transportation, Congress continues to surrender to the demands of road construction interests and the highway lobby. The harmful consequences include sprawl, air pollution and contributions to global warming.