Berkowitz: Katrina Unleashes Corporate Vultures

"Private entrepreneurial activity and vision, not bureaucratic government, must be the engine to rebuild."
- From Tragedy to Triumph: Principled Solutions for Rebuilding Lives and Communities by Ed Meese, Stuart Butler, and Kim Holmes, The Heritage Foundation, September 12, 2005.

As the toxic waters inundating New Orleans receded into Lake Pontchartrain, headed for the Gulf of Mexico, huge corporations circled the devastated Gulf Coast like vultures. Kellogg Brown & Root (KBR), a subsidiary of the Houston, Texas-based Halliburton – the company formerly run by Vice President Dick Cheney, which has made hundreds of millions of dollars off the War in Iraq – inked a $16.6 million Navy contract to repair Gulf Coast military facilities. The Shaw Group, a Baton Rouge, La.-based $3 billion-a-year construction and engineering firm, announced, “that it had received two contracts of up to $100 million each, one from FEMA, the other from The Corps of Engineers, to work on levees, pump water out of New Orleans and provide assistance with housing,” the New York Times recently reported.

Both KBR and The Shaw Group have at least one thing in common; they are clients of Joseph M. Allbaugh, the former head of the Federal Emergency Management Agency. Allbaugh is the man principally responsible for bringing “Brownie” – Michael Brown, the woefully unprepared head of FEMA who recently resigned from the agency – on board. Allbaugh also spearheaded the Bush Administration’s efforts to downsize the agency.

In early September, Allbaugh came to Baton Rouge hunting up business for The Allbaugh Co., the Washington, DC-based lobbying outfit he and his wife Diane established after he left FEMA in 2003. The Allbaugh Co. specializes in advising companies how to get in on lucrative disaster relief projects.

In a related development, on Thursday, September 8, in a stroke of the pen that must have sent hearts fluttering at the conservative Heritage Foundation, President George W. Bush signed a proclamation voiding Section 3142(a) of title 40, of the US Code of Federal Regulations. That’s the section which provides that "every contract in excess of $2,000, to which the Federal Government or the District of Columbia is a party … shall contain a provision stating the minimum wages to be paid various classes or laborers and mechanics."

“The move,” wrote Kate Randall in a piece posted at the World Socialist Web Site, “will affect the thousands of workers who will be employed in the massive reconstruction operation in the wake of the hurricane disaster. With the suspension of the 1931 Davis-Bacon Act, companies will not be obligated to match the wages in these areas, which are already lower than in most parts of the country. In the New Orleans area, for example, the prevailing wage for an electrician is $14.30 and for a construction worker or a truck driver working on a levee it is about $9.”

AFL-CIO President John Sweeney said that issued a perfunctory statement criticizing Bush’s action. “Taking advantage of a national tragedy to get rid of a protection for workers the corporate backers of the White House have long wanted to remove is nothing less than profiteering,” Sweeney wrote. He concluded with a toothless appeal to Congress to reverse “this short-sighted decision.”

Randall also reported that changes in federal contracting rules will allow contractors “to spend up to $250,000 on hurricane-related contracts and expenses without seeking competitive bids.” In addition, “Restrictions have also been eased that favored the contracting of small and minority-owned businesses. Previously only purchases up to $2,500 in normal circumstances, or $15,000 in emergencies, were exempt. Republicans have sought a change in these regulations for years.”

“Private contractors, guided by two former directors of the Federal Emergency Management Agency [Allbaugh and James Lee Witt, the agency head under President Clinton] and other well-connected lobbyists and consultants, are rushing to cash in on the unprecedented sums to be spent on Hurricane Katrina relief and reconstruction,” the New York Times reported on Saturday, September 10.

In what may likely be the “largest domestic rebuilding effort,” corporations large and small – but mostly large – are poised to “reap a windfall of business.”

With “normal federal contracting rules” already suspended and “hundreds of millions of dollars in no-bid contracts” already signed and billions at stake, the possibility for widespread “contract abuse, cronyism and waste that numerous investigations have uncovered in post-war Iraq, is likely to manifest itself, the Times pointed out.

In an op-ed piece in the Boston Globe, Robert Kuttner, co-editor of The American Prospect, described the Bush Administration’s carefully calibrated spin on its response to Hurricane Katrina: “The message: There's no point in playing a '’blame game,’ ….The New Orleans disaster just proves the unreliability of government in general rather than this feckless president in particular. We should be looking forward to rebuilding -- with the private sector taking the lead.”

Ultimately, “Katrina could even be a political windfall, [for the administration] promoting the campaign to cripple government, permanently displacing some reliable Democratic voters from the swing state of Louisiana, causing the faithful to rally 'round their beleaguered president, and knocking even more unpleasant news off the front pages and network TV.”

It appears that those that will reap the greatest benefits from the clean up and rebuilding efforts are corporations, particularly those receiving no bid contracts, and conservatives, whose reduce-government-at-all-cost agenda is coming to fruition.

ENDS

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