New Military Mega-Companies: Corporate Interests or National Interests

The Pentagon claims that using taxpayer money to subsidize military mergers will cut overhead and save money by, as Norman Augustine puts it, allowing companies to run "three full factories instead of six half-full factories." In reality, as research by Harvey Sapolsky of MIT has demonstrated, the Pentagon has not shut down a single major weapons production line since the end of the cold war. And even if Lockheed Martin cuts some overhead costs by closing factories and laying off workers, there is no guarantee that the same company that brought us the $600 toilet seat in the 1980s and pioneered in the arts of bribery and influence peddling in the 1970s is going to pass on its savings on overhead to U.S. taxpayers. So, while it may never provide lower weapons prices for the Pentagon, the 1990s bout of government-backed "merger mania" in the military industry has accomplished one thing: it has resulted in a slightly leaner, considerably meaner, and much more politically powerful corporate military sector. As John Pike of the Federation of American Scientists has noted, a company like Boeing, which since its absorption of McDonnell Douglas has over 250,000 employees, leaves a huge "political footprint" that gives the company immense clout on Capitol Hill. Similarly, after the Lockheed/Martin Marietta merger was consummated, Lockheed Martin put out a slick brochure that bragged openly about its "facilities in all 50 states."¹⁴

The geopolitical reach of the new defense megafirms has been reinforced by millions of dollars in campaign cash. In 1997 the top six U.S. military companies spent over $2.4 million in contributions to candidates and political parties, and Lockheed Martin was "leader of the PACs" among weapons contractors (see Figure 6). In fact, from 1991 to 1997, defense companies made more political donations than those other well-known merchants of death, the tobacco lobby, by a margin of $32.3 million to $26.9 million. In addition to these hefty campaign donations, America’s six biggest defense contractors spent an astonishing $51 million on lobbying over the past two years . These lobbying funds go for items like maintaining armies of lobbyists and PR people in Washington, producing slick materials to present to Congress, and running ads touting company products in Capitol Hill publications.¹⁵

Last but not least, the consolidation of the weapons sectors gives arms companies greater leverage over the Pentagon, because the Department of Defense has so few options left when it comes to purchasing a major weapons system. In the spring of 1998, when the Pentagon awarded a $1.6 billion contract to do the so-called "systems architecture" for a National Missile Defense system (the latter day successor to Ronald Reagan’s Star Wars plan), the competition pitted Boeing against a partnership called United Missile Defense, which was a teaming arrangement composed of Lockheed Martin, TRW, and Raytheon. When Boeing won the competition, TRW and Raytheon immediately switched teams and became major subcontractors for Boeing on the project. Given the fact that three of the four major players were going to have a big payday regardless of which company won the competition, how likely is it that TRW and Raytheon officials were racking their brains for innovative approaches to the problem at hand?¹⁶

Buying Weapons That the Pentagon Never Requested

One way that firms like Lockheed Martin and Boeing fatten their bottom lines at the expense of our long-term security is by using their connections on Capitol Hill to force the Pentagon to buy weapons that weren’t included in the department’s original budget request. This "add-on game" is a bipartisan pursuit (see Figure 7). House Speaker Newt Gingrich kept an eye out for Lockheed Martin, which has a plant near his Marietta, Georgia, district, but House Minority Leader Dick Gephardt has been just as aggressive in seeking funds for the McDonnell Douglas division of Boeing, the largest employer in his St. Louis area district. Senate Majority Leader Trent Lott was a master at steering military projects to his home state of Mississippi, but Democratic Sen. Daniel Inouye of Hawaii almost matched Lott’s lobbying prowess: Inouye inserted 31 projects for his home state—worth over $258 million—into the FY 1999 Pentagon budget.¹⁷

The add-on game is designed to increase the revenues of major contractors by extending the production runs of weapons systems that the Pentagon had hoped to terminate. The payback for legislators is twofold: not only do they get hundreds of thousands of dollars in campaign contributions from the contractors, but they also get to claim credit for high-profile, job-producing weapons projects in their districts. This self-serving process has serious costs. First, it wastes billions of dollars in taxpayer funds that could be put to more productive uses rebuilding our schools or restoring our environment. Second, it undermines our security by distorting the spending patterns within the Pentagon budget.

Take the C-130 transport plane, which is built by Lockheed Martin just outside of Newt Gingrich’s Marietta, Georgia, district. Since 1978, the U.S. Air Force has requested a total of just five C-130s, but Congress has purchased 256 C-130s. This ratio of 50 planes purchased for every one requested by the Pentagon may well be a record in the annals of pork barrel politics. Sen. John McCain (R-AZ) has remarked that Congress has purchased so many surplus C-130s that "we could use them to house the homeless." The C-130 has been promoted over the years by everyone from former Senate Armed Services Committee Chairman Sam Nunn (D-GA) to former National Guard and National Reserve subcommittee Chairman Sonny Montgomery (R-MS) to House Speaker Newt Gingrich to Senate Majority Leader Trent Lott. The added planes are generally placed with national guard units based in the states of key members. For example, of the more than two dozen C-130s that Congress has added to the budget in recent years, more than half of them will be based at Kessler Air Force Base in Trent Lott’s home state of Mississippi.¹⁹

The C-130 add-on is an example of "the waste that keeps on wasting." For one thing, Congress has been buying them at such a rapid clip that since 1991 the Air Force has been forced to retire 13 perfectly usable C-130Es with more than a dozen years of useful life left. Secondly, because Congress doesn’t budget funds to operate the added C-130s, the Pentagon will have to come up with over $1 billion to maintain the unrequested C-130s over the next six years, funds that may have to deplete allocations for pay, or training, or other so-called "readiness accounts" of the sort that the Joint Chiefs of Staff have been claiming are underfunded.²⁰

The C-130 is one of dozens of unnecessary items that members of Congress from key committees have been cramming into the Pentagon budget during the Clinton/Gingrich era. Even in 1998, when Congress was allegedly operating under a balanced budget agreement that was supposed to cap the military budget at roughly $270 billion, Senate Majority Leader Trent Lott managed to slip in a down payment on a $1.5 billion helicopter carrier for the Marines (to be built in his hometown of Pascagoula, Mississippi) and $94 million for a spaced-based laser program that Lott hopes to have located in Mississippi. The Texas delegation slipped in a few more F-16 fighters (built at Lockheed Martin’s Fort Worth, Texas, facility), and Connecticut will benefit from the addition to the Army’s budget of no fewer than eight extra Sikorsky Black Hawk helicopters. In June 1998, Senator McCain released a list of $2.5 billion in unrequested projects that members of the Senate had added to the Pentagon’s FY 1999 budget; McCain described the add-ons as the "worst pork" that he had witnessed in the Pentagon budget process in years. Finally, to add insult to injury, in the last-minute maneuvering between the White House and Capitol Hill on the FY 1999 federal budget, the congressional leadership added an astounding $9 billion to the Pentagon’s funding, including an extra $1 billion for Star Wars research. Then, to add insult to injury, in May of 1999 Congress more than doubled President Clinton’s already generous $6 billion supplemental budget request to pay for the war in Kosovo, adding billions in unrequested military funds that had nothing to do with sustaining NATO’s bombing campaign and everything to do with opening up room in the budget for more military pork targeted to the states and districts of key members of Congress.²¹

A few examples of specific industry lobbying campaigns will illustrate how the Big Three arms makers have been using their newfound political clout.

Peddling Weapons Abroad: Lifting the Latin Arms Ban, Promoting NATO Expansion

As the Reagan weapons buying binge of the 1980s begin to wind down, U.S. weapons manufacturers began to focus more attention on foreign markets as a way to sustain their profit margins. Because foreign sales often involve transfers of more "mature" technologies in which the bugs have been worked out of the production process, and because the research, development, and initial production runs on the system have been paid for by U.S. taxpayers (in the form of Pentagon contracts), weapons exports are often more profitable than sales of weaponry to the Pentagon. This quest for easy profits has driven virtually all major weapons producing companies worldwide to make a concerted effort to boost their exports. U.S. companies have fared the best, cornering 40-50% of the total global arms market in the 1990s. Given this impressive market dominance, companies like Lockheed Martin and Boeing have found that the only way to expand their exports beyond current levels is to change U.S. government policy. The changes they want involve either opening up new markets, by eliminating existing restrictions based on the human rights or proliferation record of potential recipient states, or seeking new government subsidies that can be used to create more "cash paying customers" (i.e., foreign clients that use U.S.-taxpayer supplied "cash" to buy U.S. weapons).

The industry’s successful campaign to lift a 20-year-old ban on exports of advanced U.S. combat aircraft to Latin America is a prime example of how its lobbying machine operates. First the industry prevailed on Defense Secretary William Perry to advocate for lifting the ban within the counsels of the Clinton administration and to send U.S. Air Force F-16s to do demonstration flights at the March 1996 air show in Santiago, Chile. Prior to the show, the Pentagon had also arranged for some Brazilian generals to do test flights in F-16 planes deployed with the Puerto Rican National Guard. Then aerospace lobbyists generated letters to then Secretary of State Warren Christopher from 38 Senators and 78 members of the House of Representatives urging him to support the lifting of the ban as well. Time magazine reporter Douglas Waller described the lobbying letters as the "more million dollar letters," because the members of the House and Senate who signed onto the appeal to Christopher received a total of more than $1 million in Political Action Committee contributions from major weapons exporting companies. The industry representatives followed up by holding White House meetings with presidential counselor and confidante Mack McLarty and an aide to Vice President Gore.²²

According to an account by Merrill Goozner of the Chicago Tribune, a Lockheed Martin brochure touting the Latin arms market as "a $3 to $15 billion opportunity over the next 10 years" was even slipped under the hotel door of former Costa Rican President and Nobel Peace Prize winner Oscar Arias during one of his business trips. Dr. Arias has been working with the Carter Center, the Council for a Livable World, and a coalition of DC-based public interest groups to promote a moratorium on new sales of advanced weaponry to Latin America as a first step toward promoting regional discussions on conflict prevention and force reductions. But so far, the power and money of the arms lobby has sidetracked this common sense proposal, which would do far more for the future security and stability of Latin America than would hawking expensive military hardware.²³

On the issue of NATO expansion, the role of U.S. contractors was not to change administration policy but rather to reinforce a questionable policy decision. The Clinton administration decided to expand NATO for a variety of reasons, such as consolidating free market democratic reforms in Eastern and Central Europe and recruiting new allies to help keep the peace in Bosnia and other hot spots. But given the obvious downsides of expanding the alliance—such as alienating Russia, stalling further efforts at U.S.-Russian nuclear arms reductions, and initiating an open-ended, costly commitment to rearm the new member states—the Clinton administration needed allies to help it sell the NATO expansion concept to Congress and the public. By far the most important players in the pro-NATO expansion lobby were organizations of Polish, Hungarian, and Czech-Americans along with major arms manufacturers like Lockheed Martin and Textron, who took an aggressive stance in support of this costly new commitment.

Corporate lobbying for NATO expansion took several forms. Most importantly, Lockheed Martin lent out one of its vice presidents, Bruce Jackson, to serve as president of the U.S. Committee to Expand NATO, a lobbying and public education group housed at the offices of the conservative American Enterprise Institute. The committee sponsored ad campaigns, congressional briefings, speeches, articles, and white papers promoting the "widest possible" expansion of NATO. Jackson claims that his role at the Committee to Expand NATO is a "hobby," but the nature of his work suggests otherwise. For example, in the summer of 1997, when the U.S. Committee sponsored a dinner at which twelve U.S. senators were briefed on NATO expansion by Secretary of State Madeleine Albright, Jackson invited Lockheed Martin board member Bernard Schwartz, who, coincidentally, was the largest individual donor of soft money to the Democratic Party during the 1995/96 election cycle. Schwartz’s presence was a clear signal to the senators present at the dinner that supporting NATO expansion would be a good way to garner support for their campaign coffers. To reinforce that message, a few weeks after the NATO dinner Schwartz sent a $50,000 check to the Democratic Senatorial Campaign Committee.

Other pro-NATO expansion activities pursued by U.S. weapons firms included financial contributions by Lockheed Martin, Textron, and McDonnell Douglas to proexpansion ethnic organizations like the American Friends of the Czech Republic and several Romanian foundations promoting that nation’s candidacy for NATO membership; political funding to help pass the public referendum on NATO expansion that was held in Hungary in 1997; and all manner of wheeling and dealing in East and Central Europe in order to convince the top leadership in Poland, Hungary, the Czech Republic, Romania, and other NATO "wannabe" nations that buying U.S. weapons would be the best way to curry favor with the U.S. government and win its support for their NATO candidacies. It is important to note that many people in Eastern and Central Europe, including democratic leaders such as Vaclav Havel of the Czech Republic and Lech Walesa of Poland, were supportive of NATO expansion based on longstanding fears of Russia, which made them a receptive audience for the NATO expansion proposal.

When the Senate finally voted on NATO expansion in early 1998, it passed by a vote of 81 to 19. But due to public concerns about the costs of future NATO expansion—by one estimate the total cost of multiple rounds of expansion could reach as much as $500 billion over 12 to 15 years, or at least $2,500 for every American household—the next round of NATO entrants may not be invited to join until 2001, not 1999 as originally planned. This delay offers critics of NATO expansion an important political opening to marshal the forces that will be needed to hold back the arms lobby and the executive branch from going further down the dangerous and costly path of expanding a cold war alliance that has no clear purpose in the post-cold war world.²⁴

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