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.