May 11, 2007:
The Lockheed
Martin Corporation ("LockMart"), and its C-130 aircraft program, continue to be
an outstanding example of how political corruption and the defense budget work
together. For decades, key members of Congress, from states where the C-130 is
manufactured, have forced the U.S. Air Force to buy C-130 aircraft they didn't
want or need. The air force has ended up with 500 C-130s, and has retired many
that were still fit for duty.
LockMart was doing what
most defense contractors did, but just did it much better. Since any defense
spending means jobs for some voters, the members of Congress representing those
voters will take notice if the jobs go away. This has become an essential part
of American politics, especially since World War II. Basically, if you are
running for reelection, and your district has lost jobs because of a decline in
defense spending, your opponent will be all over you for not "delivering the
bacon." It's not for nothing that unneeded government spending is called
"pork."
LockMart established a
particularly profitable relationship with the senators and representatives from
states where the C-130, and its components were built. The politicians leaned
on the air force to order more C-130s, and called in political favors to get
the votes for more money to buy the unneeded C-130s. LockMart outdid itself in
the 1990s, when it used a billion dollars of its own money to develop a new
version of the C-130 (the C-130J), which ended up costing twice as much as the
previous C-130H. The C-130J was better than the C-130H, but certainly nothing
like twice as good. Moreover, the air force would have preferred to have
upgraded the older C-130s, like it did for all its other aircraft. But LockMart
would not have made as much money.
The price of the C-130J
has fluctuated. When it went into production, it was pegged at about $67
million (compared to $38 for the C-130H). That went up to $81 million in 2003,
because the politicians were unable to get enough ordered. That was remedied in
the last few years, and if those new orders hold, the price will get below $70
million. Meanwhile, LockMart is offering a stretch version of the C-130J, for
about $95 million. That will be a hard sell. But don't underestimate these
guys. They have proven they can sell these things, whether you need them or
not.
