When, in his farewell address in 1961,
President Dwight D. Eisenhower warned of the dangers of the “unwarranted
influence” wielded by the “military-industrial complex,” he could never have
dreamed of an arms-making corporation of the size and political clout of
Lockheed Martin.
In a good year, it now receives up to $50
billion in government contracts, a sum larger than the operating budget of the
State Department. And now it’s about to have
company.
Raytheon,
already one of the top five US defense contractors, is planning to merge with
United Technologies. That company is a major contractor in its own right,
producing, among other things, the engine for the F-35 combat aircraft, the
most expensive Pentagon weapons program ever. The new firm will be second only
to Lockheed Martin when it comes to consuming your tax dollars—and it may end
up even more powerful politically, thanks to President Trump’s fondness for
hiring arms industry executives to run the national security state.
Just
as Boeing benefited from its former Senior Vice President Patrick Shanahan’s
stint as acting secretary of defense, so Raytheon is likely to cash in on the
nomination of its former top lobbyist, Mike Esper, as his successor. Esper’s
elevation comes shortly after another former Raytheon lobbyist, Charles
Faulkner, left the State Department amid charges that he had improperly
influenced decisions to sell Raytheon-produced guided bombs to Saudi Arabia for
its brutal air war in Yemen. John Rood, third-in-charge at the Pentagon, has
worked for both Lockheed Martin and Raytheon, while Ryan McCarthy, Mike Esper’s
replacement as secretary of the Army, worked for Lockheed on the F-35, which
the Project on Government Oversight (POGO) has determined may never be ready
for combat.
And
so it goes. There was a time when Donald Trump was enamored of “his”
generals—Secretary of Defense James Mattis (a former board member of the
weapons-maker General Dynamics), national security adviser H.R. McMaster, and
White House Chief of Staff John Kelly. Now, he seems to have a crush on
personnel from the industrial side of the military-industrial complex.
As POGO’s research has
demonstrated, the infamous “revolving door” that deposits defense executives
like Esper in top national security posts swings both ways. The group estimates that, in 2018
alone, 645 senior government officials—mostly from the Pentagon, the uniformed
military, and Capitol Hill—went to work as executives, consultants, or board
members of one of the top 20 defense contractors.
Fifty years ago,
Wisconsin Senator William Proxmire identified the problem when he noted that:
the
movement of high ranking military officers into jobs with defense contractors
and the reverse movement of top executives in major defense contractors into
high Pentagon jobs is solid evidence of the military-industrial complex in
operation. It is a real threat to the public interest because it increases the
chances of abuse.… How hard a bargain will officers involved in procurement
planning or specifications drive when they are one or two years away from
retirement and have the example to look at of over 2,000 fellow officers doing
well on the outside after retirement?
In
other words, that revolving door and the problems that go with it are anything
but new. Right now, however, it seems to be spinning faster than ever—and
mergers like the Raytheon-United Technologies one are only likely to feed the
phenomenon.
THE
LAST SUPPER
The
merger of Raytheon and United Technologies should bring back memories of the
merger boom of the 1990s, when Lockheed combined with Martin Marietta to form
Lockheed Martin, Northrop and Grumman formed Northrop Grumman, and Boeing
absorbed rival military aircraft manufacturer McDonnell Douglas. And it wasn’t just a matter of
big firms pairing up either. Lockheed Martin itself was the product of mergers and
acquisitions involving nearly two dozen companies—distinctly a tale of big fish
chowing down on little fish. The consolidation of the arms industry in those
years was strongly encouraged by Clinton administration Secretary of Defense
William Perry, who held a dinner with defense executives that was later dubbed
“the last supper.” There, he reportedly told the assembled corporate officials
that a third of them would be out of business in five years if they didn’t
merge with one of their cohorts.
The
Clinton administration’s encouragement of defense industry mergers would prove
anything but rhetorical. It would, for instance, provide tens of millions of
dollars in merger subsidies to pay for the closing of plants, the moving of
equipment, and other necessities. It even picked up part of the tab for the
golden parachutes given defense executives and corporate board members ousted
in those deals.
The most egregious
case was surely that of Norman Augustine. The CEO of Martin Marietta, he would
actually take over at the helm of the even more powerful newly created Lockheed
Martin. In the process, he received $8.2 million in payments, technically for
leaving his post as head of Martin Marietta. US taxpayers would cover more than
a third of his windfall. Then, a congressman who has only gained stature in
recent years, Representative Bernie Sanders (I-VT), began to fight back against
those merger subsidies. He dubbed them “payoffs for layoffs” because executives
got government-funded bailouts, while an estimated 19,000 workers were laid off
in the Lockheed Martin merger alone with no particular taxpayer support. Sanders
was actually able to shepherd through legislation that clawed back some, but
not all, of those merger subsidies.
According to one argument in favor of the
merger binge then, by closing half-empty factories, the new firms could charge
less overhead and taxpayers would benefit. Well, dream on. This never came near happening, because the
newly merged industrial behemoths turned out to have even greater bargaining
power over the Pentagon and Congress than the unmerged companies that preceded
them.
Draw
your own conclusions about what’s likely to happen in this next round of
mergers, since cost overruns and lucrative contracts continue apace. Despite this
dismal record, Raytheon CEO Thomas Kennedy claims that the new corporate
pairing will—you guessed it!—save the taxpayers money. Don’t hold your breath.
INFLUENCE
ON STEROIDS
While Donald Trump
briefly expressed reservations about the Raytheon-United Technologies merger
and a few members of Congress struck notes of caution, it has been welcomed
eagerly on Wall Street. Among the reasons given: the fact that the two
companies generally make different products, so their union shouldn’t reduce
competition in any specific sector of defense production. It has also been
claimed that the new combo, to be known as Raytheon Technologies, will have
more funds available for research and development on the weapons of the future.
But focusing on such
concerns misses the big picture. Raytheon Technologies will have more money to
make campaign contributions, more money to hire lobbyists, and more production
sites that can be used as leverage over members of Congress loathe to oppose
spending on weapons produced in their states or districts. The classic example
of this phenomenon: the F-35 program, which Lockheed Martin claims produces
125,000 jobs spread over 46 states.
When
I took a careful look at the company’s estimates, I found that they were
claiming approximately twice as many jobs as that weapons system was actually
creating. In
fact, more than half of F-35-related employment was in just two states,
California and Texas (though many other states did have modest numbers of F-35
jobs). Even if Lockheed Martin’s figures are exaggerated, however, there’s no
question that spreading defense jobs around the country gives weapons manufacturers
unparalleled influence over key members of Congress, much to their benefit when
Pentagon budget time rolls around. In fact, it’s a commonplace for Congress to
fund more F-35s, F-18s, and similar weapons systems than the Pentagon even asks
for. So much for congressional oversight.
Theoretically,
incoming defense secretary Mike Esper will have to recuse himself from major
decisions involving his former company. Among them, whether to continue
selling Raytheon-produced precision-guided bombs to Saudi Arabia and the United
Arab Emirates (UAE) for their devastating air war in Yemen that has killed
remarkable numbers of civilians.
No
worries. President Trump himself is the biggest booster in living memory of
corporate arms sales and Saudi Arabia is far and away his favorite customer. The Senate
recently voted down a package of “emergency” arms sales to the Saudis and the
UAE that included thousands of Raytheon Paveway munitions, the weapon of choice
in that Yemeni air campaign. A similar vote must now take place in the House,
but even if it, too, passes, Congress will need to override a virtually
guaranteed Trump veto of the bill.
The Raytheon-United
Technologies merger will further implicate the new firm in Yemeni developments
because the Pratt and Whitney division of United Technologies makes the engine
for Saudi Arabia’s key F-15S combat aircraft, a mainstay of the air war there.
Not only will Raytheon Technologies profit from such engine sales, but that
company’s technicians are likely to help maintain the Saudi air force, thereby
enabling it to fly yet more bombing missions more often.
When pressed, Raytheon
officials argue that, in enabling mass slaughter, they are simply following US
government policy. This ignores the fact that Raytheon and other weapons
contractors spend tens of millions of dollars a year on lobbyists, political
contributions, and other forms of influence peddling trying to shape US
policies on arms exports and weapons procurement. They are, in other words,
anything but passive recipients of edicts handed down from Washington.
As Raytheon chief
financial officer Toby O’Brien put it in a call to investors that came after
the murder of Washington Post columnist Jamal Khashoggi, “We continue to be
aligned with the administration’s policies, and we intend to honor our
commitments.” Lockheed Martin CEO Marillyn Hewson made a similar point,
asserting that “most of these agreements that we have are
government-to-government purchases, so anything that we do has to follow
strictly the regulations of the US government.… Beyond that, we’ll just work
with the US government as they are continuing their relationship with [the
Saudis].”
HOW
POWERFUL ARE THE MILITARY-INDUSTRIAL COMBINES?
When it comes to
lobbying the Pentagon and Congress, size matters. Major firms like Lockheed
Martin, Boeing, and Raytheon can point to the jobs they and their
subcontractors provide in dozens of states and scores of congressional
districts to keep members of Congress in line who might otherwise question or
even oppose the tens of billions of dollars in government funding the companies
receive annually.
Raytheon—its
motto: “Customer Success Is Our Mission”—has primary operations in 16 states: Alabama, Arkansas,
Arizona, California, Colorado, Florida, Indiana, Kentucky, Massachusetts,
Michigan, Minnesota, New Mexico, Pennsylvania, Rhode Island, Texas, Utah, and
Virginia. That translates into a lot of leverage over key members of Congress
and it doesn’t even count states where the company has major subcontractors.
The addition of United Technologies will reinforce the new company’s presence
in a number of those states, while adding Connecticut, Iowa, New York, and
North Carolina (in other words, at least 20 states in all).
Meanwhile,
if the merger is approved, the future Raytheon Technologies will be greasing
the wheels of its next arms contracts by relying on nearly four dozen former
government officials the two separate companies hired as lobbyists, executives,
and board members in 2018 alone. Add to that the $6.4 million in campaign contributions and
$20 million in lobbying expenses Raytheon clocked during the last two election
cycles and the outlines of its growing influence begin to become clearer. Then,
add as well the $2.9 million in campaign contributions and $40 million in
lobbying expenses racked up by its merger partner United Technologies and you
have a lobbying powerhouse rivaled only by Lockheed Martin, the world’s largest
defense conglomerate.
President Eisenhower’s proposed
counterweight to the power of the military-industrial complex was to be “an
alert and knowledgeable citizenry.” And there are signs that significant
numbers of individuals and organizations are beginning to pay more attention to
the machinations of the arms lobby. My own outfit, the Center for International Policy, has launched
a Sustainable Defense Task Force composed of former military officers and
Pentagon officials, White House and congressional budget experts, and research
staffers from progressive and good-government groups. It has already crafted a
plan that would cut $1.2 trillion from the Pentagon budget over the next
decade, while improving US security by avoiding unnecessary wars, eliminating
waste, and scaling back a Pentagon nuclear-weapons buildup slated to cost $1.5
trillion or more over the next three decades.
The Poor People’s
Campaign, backed by research conducted by the National Priorities Project of
the Institute for Policy Studies, is calling for a one-year $350 billion cut in
Pentagon expenditures. And a new network called “Put People Over the Pentagon”
has brought together more than 20 progressive organizations to press
presidential candidates to cut $200 billion annually from the Department of
Defense’s bloated budget. Participants in the network include Public Citizen, Moveon.org,
Indivisible, Win Without War, 350.org, Friends of the Earth, and United We
Dream, many of them organizations that had not, in past years, made reducing
the Pentagon budget a priority.
Raytheon and its arms industry allies
won’t sit still in the face of such proposals, but at least the days of
unquestioned and unchallenged corporate greed in the ever-merging (but also
ever-expanding) arms industry may be coming to an end. The United States has paid an exorbitantly high price in blood and
treasure (as have countries like Afghanistan and Iraq) for letting the
military-industrial complex steer the American ship of state through this
century so far. It’s long past time for a reckoning.
https://www.zerohedge.com/news/2019-07-18/defense-contractors-are-tightening-their-grip-our-government
