Congress last week did not finish the bill providing emergency funds for the war against terror and for Hurricane Katrina relief. That was good news for executives and lobbyists of Northrop Grumman, the world’s largest warship builder. They were in a full-court press on Capitol Hill to save half a billion dollars in corporate welfare for their highly profitable firm. Surprisingly, they were not getting the job done.
An earmark in the bill’s Senate version would give $500 million to Northrop Grumman to reimburse cost overruns on U.S. Navy shipbuilding contracts caused by Katrina damage at the Mississippi Gulf Coast shipyards in Pascagoula and Gulfport. If the bill had been completed last week, money for the highly profitable defense contractor would not have been there — an incentive for Northrop Grumman to lobby all the harder this week.
Half a billion dollars is chump change at the Pentagon. But it is a symbol that the intensifying battle against individual lawmakers’ earmarks in spending bills is turning to corporate welfare. That category of pork until now has been inviolate, protected by a bipartisan conspiracy of silence.
The Northrop Grumman earmark was inserted by the Senate Appropriations Committee chairman himself, Thad Cochran of Mississippi. That once would have guaranteed passage without public notice, even though the Defense Department and the Navy oppose the spending as wasteful.
But pork-busting freshman Sen. Tom Coburn of Oklahoma now scrutinizes money bills, and he caught the Northrop Grumman earmark. The company, whose revenue last year totaled $40.7 billion, has received $500 million from its insurer and is in litigation seeking another $500 million. The Defense Contract Management Agency has declared “it would be inappropriate to allow Northrop Grumman to bill for costs potentially recoverable by insurance because payment by the government may otherwise relieve the carrier from their policy obligation.” Factory Mutual Insurance Co., with 2004 revenue of $2.7 billion, then would be receiving indirect corporate welfare.
Coburn told the Senate on May 2 that the Northrop Grumman payment “sets a terrible precedent for the future.” He called it “a step too far. I believe we need to back up and let the private sector take care of its obligations.” He mentioned unspecified federal “largesse” for the company, pointing to the questionable DDX destroyer.
Responding to Coburn, Trent Lott of Mississippi got emotional defending corporate welfare: “This is personal with me. I admit it. This is my hometown (Pascagoula). … My dad was a pipefitter in that shipyard and was in the pipe department when he was killed in an automobile accident. I don’t just see statistics and numbers. I see neighbors, classmates, men and women who believe in what they do and build a quality product. They have been hit a grievous blow.”
Efforts such as Coburn’s over the years have been slapped down hard, but not this time. The Coburn amendment barely lost, 51 to 48, in a rare Senate vote crossing party lines. Republicans split 28 to 27 against Mississippi’s powerful senators, with John McCain and Majority Leader Bill Frist supporting Coburn. Democrats voted 24 to 20 for Northrop Grumman. North Dakota’s twin deficit hawks, Kent Conrad and Byron Dorgan, voted with Coburn, but Edward M. Kennedy, Hillary Clinton and Democratic Leader Harry Reid supported corporate welfare.
The House Appropriations Committee not only rejected the Northrop Grumman payment, but asserted that federal money should not “substitute for private insurance benefits.” That means the company’s lobbying team, which cost $6.1 million last year, pushed hard last week. Philip A. Teel, the Northrop official running the shipyards, in a press conference last week warned that Gulf Coast shipbuilding would be radically reduced if corporate welfare were shut off.
That outrageous threat responded to a climate change in Washington. President Bush has declared he will veto the emergency money bill unless the $109 billion Senate measure is reduced by $14 billion. In making that cut, does Congress really want to keep half a billion dollars for Northrop Grumman at the cost of funds needed by U.S. troops and Katrina relief? If Congress can resist Northrop Grumman’s blandishments and threats, it may soon take a small step toward confronting the massive problem of corporate welfare.