From warfare to welfare Lockheed Martin wants to make huge profits from social programs

March 22, 1998|By William D. Hartung and Jennifer Washburn

By 2000, America's largest weapons manufacturer, Lockheed Martin, may be as familiar to social service bureaucrats as it is to the Pentagon's top brass. If the company's strategy succeeds, Lockheed Martin will not only be a major aerospace manufacturer but also a leading dispenser of public assistance to America's neediest citizens.

The company's split personality is already evident in Maryland, where a division of the company, Lockheed Martin IMS, operates the nation's largest privatized child support office in Baltimore (and another in Queen Anne's County).

In February, in a hearing before state legislators, company officials conceded that Lockheed Martin did not meet its first-year performance goals in Baltimore. The company blamed the problems on old city records and the extensive poverty and frequent moves of families. Despite the slow start, the company collected 15.6 percent more from Nov. 1, 1996, through Oct. 31 than state workers collected in the previous year.

Lockheed Martin is also poised to begin operating an electronic toll collection system throughout the Baltimore area under a major contract with the Maryland Transportation Authority.

Surprised? Lockheed made headlines when it tapped American taxpayers for $855 million to pay for a recent series of mergers that sent its stock prices soaring. Now, this king of corporate welfare turned free-marketer is trying to cash in on the drive to privatize welfare and boot poor people off the dole.

Already, Lockheed Martin IMS has been pushing to run full-scale welfare programs, worth several billion dollars apiece, in Texas and Arizona. Although public employee unions and social welfare advocates have managed to sidetrack these bids for now, a new welfare reform division is busy gobbling up contracts to run welfare-to-work programs (including at least two in Wheaton and Rockville, worth $1.8 million) and automated kiosks for the distribution of food stamps and cash assistance in dozens of states and localities.

Unfortunately, the move from warfare to welfare is not an exercise in beating swords into plowshares; rather it is part of Lockheed Martin's grand strategy to grab taxpayer dollars.

Today, the average household pays a "Lockheed Martin Tax"of about $200 a year to cover an array of military and civilian government contracts. Beyond the $12 billion it continues to rake in annually from the Pentagon, Lockheed Martin receives $6 billion to $8 billion in nonmilitary funds from federal agencies as diverse as the Energy Department and the U.S. Census Bureau.

And that doesn't even include the corporation's growing empire of state and local business. If you're a "deadbeat dad" in Florida, Lockheed Martin gets 12 cents from the government for every vTC dollar it collects from you. Get slammed with a parking ticket in Washington, and Lockheed Martin gets what could be as much as an average $3 cut.

Now that new federal welfare laws have ceded states control over an annual $17 billion in welfare funds, Lockheed Martin is betting that public assistance will be the next big prize.

So what's at stake here? Contracting out garbage collection, computer upgrades and other routine public functions is one thing. But what Lockheed is proposing would allow private companies to run entire government programs; in the case of welfare and Medicaid, moreover, these are essential government services, affecting the most disfranchised members of the population, who are least able to defend their rights. Such concerns become even more troubling when Lockheed Martin is the privatizer in question.

This is the company whose fondness for dolling out bribes helped Congress to pass the Foreign Corrupt Practices Act in 1977; the company whose multibillion-dollar overcharges on the C-5A transport plan made "cost overrun" a household phrase, and the company whose $250 million government bailout in 1971 inspired Sen. William Proxmire to coin the term "corporate welfare."

Lockheed and other privatizers boast that their technological expertise and innovation will cut governments costs so dramatically that they can profit and still save taxpayers money. But a close look at Lockheed's performance thus far raises serious questions about whether to rush to privatize is going too far, too fast.

In November, California canceled its contract with Lockheed to build a statewide computer system to track child support collections when Lockheed's problem-ridden system, originally projected to cost $99 million, escalated into a $277 million debacle. Lockheed's contract limits its own liability to just $3 million - a legal sleight of hand that could put California taxpayers on the hook for the bulk of the system's $170 million-plus cost overrun.

Similarly, last summer, Connecticut terminated a $14.3 million computer contract with Lockheed to handle the state's foster-care programs after the system nearly delivered $8 million in overpayments.

While bidding to privatize Texas' welfare system, Lockheed Martin became mired in allegations of improper lobbying.

That same summer in Washington, the company was linked to a $26 million parking contract that sparked a federal investigation of 12 former officials of Mayor Marion S. Barry Jr.'s administration.

If Lockheed's past performance is any indication, Maryland would do well to keep a tight rein on its public system.

Otherwise, taxpayers and people who rely on public benefits could end up paying a high price to finance corporate profits.

This article was adapted from a longer piece that appeared in the March 2 issue of the Nation magazine. The authors are based at the World Policy Institute at the New School for Social Research in New York.

Pub Date: 3/22/98

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