Nathan Newman

Privatization and the New Spoils System

Even as progressives have been lambasting social security privatization, there has been relatively little discussion of the expanded privatization of federal jobs. Government employees are increasingly being replaced with private businesses and employees unprotected by civil service rules against political retaliation if they don't follow the administration's partisan line.

Despite the rhetoric, the number of government jobs has been rapidly expanding over the last four decades, they've just been doing so as employees of private contractors. As a Brookings institute study found, the true size of the federal workforce is 17 million people, including 5.6 million jobs created under federal contracts, 2.4 million jobs generated under grants, 4.6 million jobs covered under mandates to state and local governments, on top of the formal civil service workers and uniformed military. The federal government now spends about $100 billion more annually on outside contractors than it does on employee salaries.

Payoffs to Political Donors: And those privatized jobs are increasingly manipulated to shake down those corporate contractors for political donations. Take the recent inaugural; five of the biggest donors to the inaugural received $286 million or more in federal contracts last year, including United Technologies Corp. (contracts worth $1.2 billion), Exxon-Mobil Corp. (120 contracts totaling at least $649 million), AT&T ($366 million in contracts), Michael Dell of Dell Computer (federal sales of $362 million), Ford Motor (government sales of $286 million).

This is just on top of the more obvious partisan deals running through defense contracts &emdash; from Halliburton to security deals handed out to previously small businesses run by GOP partisans &emdash; who have in some cases ripped off the government for millions of dollars. One example surfaced recently of a "security firm" run by Republican activists, Custer Battles LLC of Fairfax, which was paid approximately $15 million to provide security for civilian flights at Baghdad International Airport, even though no planes flew during the contract term. The firm apparently received $100 million in contracts in 2003 and 2004, despite almost no business track record and pretty clear evidence the government was not getting its money's worth.

But these are all part of the new Republican-run spoils machine being run by paying off allies through juicy government contracts. And the Bush administration is planning to privatize hundreds of thousands of more jobs, replacing decent-paying unionized jobs with lower-wage jobs run by firms run by its political allies. The current plan is to turn over 850,000 federal jobs &emdash; roughly one-half of the federal workforce &emdash; to these private firms.

New Rules, New Abuses: All of this is bad enough, but it's likely to get worse.

However much abuse an administration might want to engage in, many decisions on who receives such contracts are decided by government employees protected by civil service protections. But now, the Bush administrations wants to create new rules that would empower supervisors &emdash; often political appointees &emdash; to withhold raises from any employee based on subjective evaluation of their performance. This will open up a whole new realm of coercion to force those government employees to direct contracts to political allies of the administration or face retribution when they next want a pay raise or a promotion.

As Paul Krugman wrote in the New York Times of this new spoils system, "So am I saying that we are going back to the days of Boss Tweed and Mark Hanna? Gosh, no &emdash; those guys were pikers. One-party control of today's government offers opportunities to reward friends and punish enemies that the old machine politicians never dreamed of."

As many federal departments and offices become de facto contract management agencies, devoting upward of 80% of their budgets to contractors, creating systems to prevent favoritism in awards is more and more needed. But the Bush administration is moving public policy in the opposite direction in order to make sure their political allies will receive those contracts without any resistance from the remaining career public servants.

With those government employees now subject to retaliation if they don't hand contracts to allies of the administration, we have seen the de facto return of the 19th century spoils system to our government, as contractors can anticipate massive returns on their contributions in elections and, most ominously, their employees can be told that they either support the electoral choice of their company or they may face retaliation themselves.

This is our rosy, new 21st-century spoils system courtesy of government privatization.

Nathan Newman is a longtime union and community activist and author of Net Loss [Penn State Press] on inequality in the Internet economy. Email or see

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