Aiming at Government and Hitting Big Business

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This post first appeared on the Dirt Diggers Digest.


The tea party caucus calling the shots in the US House of Representative is gloating about having shut down the federal government while simultaneously claiming that technical problems in the rollout of the Obamacare health exchanges are a sign of the failure of the public sector. On both fronts the truth is a lot more complicated.

What the critics of big government tend to overlook is that the public and private sectors are so intertwined that it is difficult to tell where one ends and the other begins. The tea party crowd may have no concern about the hardships they are imposing on 800,000 furloughed federal workers, yet their shutdown is also threatening the well-being of the much larger number of contractor employees — once estimated at more than 7 million — who often work alongside those directly on the federal payrolls. USA Today quoted someone from the National Federal Contractors Association estimating that 250,000 to 300,000 workers could be affected.

It’s not only a labor issue. The employers of those contract workers are also being affected, some immediately and many more if the shutdown lasts more than a few days. The federal departments and agencies covered by the USASpending website together accounted for some $517 billion in contract spending in FY2012. The Defense Department, of course, was responsible for the bulk of that total ($361 billion), but other departments and agencies also make extensive use of contractors for goods and services; for example, Energy ($25 billion), HHS ($19 billion), Veterans Affairs ($17 billion), NASA ($15 billion) and Homeland Security ($12 billion). Another 15 each spent $1 billion or more.

Many large corporations eat heartily at this contracting trough. Businessweek reminds us that some depend on the feds for more than half of their revenue: Lockheed Martin (80 percent), Booz Allen Hamilton (71 percent) and Raytheon (59 percent), for instance. A Bloomberg story entitled “Businesses Often Opposed to Government Beg for Its Return,” quotes someone from the Aerospace Industries Alliance urging a resolution of the shutdown standoff: “You can’t run a business this way. The uncertainty is killing us.”

Despite the wrong-headed rhetoric on the Right about a government takeover of healthcare, the Affordable Care Act is also an example of the incestuous relationship between the public and private sectors. This begins, of course, with the fact that the ACA is creating millions of new customers for private insurance companies (while also extending Medicaid coverage to more lower-income families).

Earns Northrop Grumman
A contractor is silhouetted while assembling model planes at an airshow exhibition booth for major defense contractor Northrop Grumman at the site of the Singapore Airshow. (AP Photo/Wong Maye-E, File)

At the same time, a great deal of the administration of the ACA itself has been placed in the hands of contractors. The blame for the snafus in the new online healthcare exchanges rests with the companies hired to build the websites and the related call centers.

As I wrote about last year, the exchanges have been a goldmine for contractors such as Accenture, Xerox and Maximus. Accenture got a $359 million contract just for the California exchange while Maximus got awards from states such as Minnesota and Connecticut as well as the District of Columbia.

The involvement of companies such as Maximus and Accenture do not bode well for the future of the exchanges. Both companies were involved in a major scandal involving the creation of a $900 million social services enrollment system in Texas, while Maximus has been at the center of contracting controversies in numerous states. In 2007 it had to pay $30.5 million to resolve Medicaid fraud charges related to its contract with the District of Columbia.

Another tainted company, Serco, got a contract worth up to $1.2 billion to help determine which users of the healthcare exchanges are eligible for federal subsidies. The firm’s parent Serco Group is being investigated by British authorities for irregularities relating to its contract to monitor offenders on parole and individuals released on bail. It was recently reported that the UK’s Serious Fraud Office is looking into allegations that some of the people Serco was charging the government for electronically tagging were either still in prison or dead.

What is commonly seen as a crisis of government is actually a pair of crises for the private sector — one in which the corporations feeding off the public sector face an interruption in their revenue stream and another in which some of those contractors failed to deliver, at least initially, on a high-profile project. The tea party contingent needs to face the fact that it is now impossible to take a swipe at Big Government without hitting Big Business.

Philip Mattera is the director of the Corporate Research Project and the research director of Good Jobs First. Phil has been doing strategic corporate research for labor, environmental, public-interest and other activist groups around the country for more than two decades. Before that he spent a decade as a business journalist. He is a licensed private investigator, author of four books on business, labor and economics and a long-time member of the National Writers Union (UAW Local 1981). His blog on corporate research and corporate misbehavior is the Dirt Diggers Digest.
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  • Anonymous

    Being from Wisconsin, my perception might be skewed, but if the shutdown is hurting for-profit businesses, that means it will be over soon, doesn’t it? If it hurts the folks who are in the drivers seat, they will soon turn the ignition key and start the thing back up, no?

  • Anonymous

    Aim carefully……….shoot off own foot!

  • Anonymous

    Excellent article !

  • Neil Forte

    I didn’t and most don’t know that the ACA exchanges are privately run

  • Anonymous

    Be sure when shooting off own feet use Uzi With 100 round replaceable clip. I would like each Congressional district that wants small govt. to get just that. Close the bases, suspend all farm & natural resourcw extraction subsidies including farm revenue stop loss insurance, all corp of engineers projects, federal highway projects, information from the national weather service, no FEMA, the list goes on. Oh – if the military says they don’t need tge F-35 or any weapon system take their word for it. That would reduce deficit spending significantly since red states collect way more than 1 dollar for each dollar they pay in fed. taxes. Somehow I doubt that giving up their own welfare payments is quite the smaller they have in mind.