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US: Making Money On Terrorism

by William D. HartungThe Nation
February 5th, 2004

We all know that Halliburton is raking in billions from the Bush Administration's occupation and rebuilding of Iraq. But in the long run, the biggest beneficiaries of the Administration's "war on terror" may be the "destroyers," not the rebuilders. The nation's "Big Three" weapons makers--Lockheed Martin, Boeing and Northrop Grumman--are cashing in on the Bush policies of regime change abroad and surveillance at home. New York Times columnist Paul Krugman was on target when he suggested that rather than "leave no child behind," the slogan Bush stole from the Children's Defense Fund, his Administration's true motto appears to be "leave no defense contractor behind."

In fiscal year 2002, the Big Three received a total of more than $42 billion in Pentagon contracts, of which Lockheed Martin got $17 billion, Boeing $16.6 billion and Northrop Grumman $8.7 billion. This is an increase of nearly one-third from 2000, Clinton's final year. These firms get one out of every four dollars the Pentagon doles out for everything from rifles to rockets. In contrast, Bush's No Child Left Behind Act is underfunded by $8 billion a year, with the additional assistance promised to school districts swallowed up by war costs and tax cuts.

The bread and butter for the Big Three are weapons systems like the F-35 Joint Strike Fighter (Lockheed Martin), the F/A-18 E/F combat aircraft (Boeing/Northrop Grumman), the F-22 Raptor (Lockheed Martin/Boeing) and the C-17 transport aircraft (Boeing). Northrop Grumman is also a major player in the area of combat ships, through its ownership of the Newport News, Virginia and Pascagoula, Mississippi, shipyards. All three firms are also well placed in the design and production of target-ing devices, electronic warfare equipment, long-range strike systems and precision munitions. For example, Boeing makes the Joint Direct Attack Munition (JDAM), a kit that can be used to make "dumb" bombs "smart." The JDAM was used in such large quantities in the wars in Iraq and Afghanistan that the company has had to run double shifts to keep up with Air Force demand.

The Bush nuclear buildup--large parts of which are funded out of the Energy Department budget, not the Pentagon--is particularly good news for Lockheed Martin. The company has a $2 billion-a-year contract to run Sandia National Laboratories, a nuclear weapons design and engineering facility based in Albuquerque. Lockheed Martin also works in partnership with Bechtel to run the Nevada Test Site, where new nuclear weapons are tested either via underground explosions--currently on hold due to US adherence to a moratorium on nuclear testing--or computer simulations. Late last year, Congress lifted a longstanding ban on research into so-called "mini-nukes"--nuclear weapons of less than five kilotons, about one-third the size of the Hiroshima bomb. It also authorized funds for studies on a nuclear "bunker buster" and seed money for a multibillion-dollar factory to build plutonium triggers for a new generation of nuclear weapons. These new investments will be presided over by Everet Beckner, a former Lockheed Martin executive who now heads the National Nuclear Security Administration's nuclear weapons complex.

The Big Three are also poised to profit from President Bush's plan to colonize the moon and send a manned mission to Mars, both of which are stalking horses for launching an arms race in space. Boeing and Lockheed Martin were already well positioned in the military-space field through major contracts in space launch, satellite and missile defense work, plus a partnership to run the United Space Alliance, the joint venture in charge of launches of the space shuttle. Northrop Grumman bought into the field through its acquisition of TRW, a major space and Star Wars contractor. The new presidential commission charged with fleshing out Bush's space vision is being chaired by Edward "Pete" Aldridge, the Pentagon's former Under Secretary of Defense for Acquisition and a current member of Lockheed Martin's board of directors. Meanwhile, over at the Air Force, the under secretary in charge of acquiring space assets is Peter Teets, a former chief operating officer at Lockheed Martin. His position was created in accordance with the recommendations of the Commission to Assess US National Security Space Management and Organization, an advisory panel that published its blueprint for the militarization of space just as Bush was taking office. The group, which included representatives of eight Pentagon contractors, was presided over by Donald Rumsfeld until he left to take up his current post as Bush's Defense Secretary. Rumsfeld has been dutifully implementing the commission's recommendations ever since.

The Big Three are also wired into numerous other sources of federal contracts for everything from airport security to domestic surveillance, all in the name of fighting what the White House now calls the GWOT (Global War on Terrorism). The $20 billion-plus total that Lockheed Martin receives annually is more than is spent in an average year on the largest federal welfare program, Temporary Assistance for Needy Families, a program that is meant to provide income support to several million women and children living below the poverty line. Under Bush and company, corporate welfare trumps human well-being every time.

One would think that with the military budget at $400 billion and counting--up from $300 billion when Bush took office--all would be well in the land of the military-industrial behemoths, especially since the Pentagon budget is only one opportunity among many. (The budget of the Department of Homeland Security is $40 billion and counting, and the wars in Afghanistan and Iraq have racked up $200 billion in emergency spending to date, over and above normal Pentagon appropriations.) Yet in my discussions with industry representatives at the June 2003 Paris Air Show as well as in their recent behavior, I have detected an unmistakable sense of desperation, a sense that even this embarrassment of riches may not be enough to stabilize these massive companies.

On the desperation front, Boeing is head and shoulders above its rivals. After losing the highly touted "deal of the century"--the $300 billion F-35 Joint Strike Fighter program--to its rival Lockheed Martin in 2001, the company took a huge hit to its commercial-airliner business when air travel plummeted in the wake of the September 11 attacks. A bailout was in order, and the company pulled out all the stops to create one in the form of a deal that would have required the Air Force to lease 100 Boeing 767s for use as aerial refueling tankers. As initially crafted, the deal would have cost $26 billion over a decade, $5 billion more than it would have cost to buy the planes outright. Behind it was a group that included Senator Ted Stevens, who used his clout as chair of the Senate Appropriations Committee to insert an amendment into the Pentagon's budget specifically requiring the lease arrangement; Secretary of the Air Force James Roche, a former VP at Boeing's sometime partner Northrop Grumman; Boeing senior vice president of Washington operations Rudy deLeon, a former top official in Bill Clinton's Pentagon; and House Speaker Dennis Hastert. Like most pork-barrel projects, the deal was a mix of strategic thinking and self-interest. Roche made no bones about the fact that part of the point was to throw some money Boeing's way so that it would remain healthy. What you and I might call a "bailout," folks in the Pentagon call "maintaining the defense industrial base."

Boeing used every possible lever to get the deal done. It hosted a fundraiser in Seattle for Stevens at which Boeing executives threw $22,000 into his campaign coffers. It enlisted Hastert, who had wooed the company to move its headquarters to his home state of Illinois, to weigh in directly with President Bush. Representative Todd Tiahrt, whose Wichita district includes the Boeing plant that would retrofit the 767s for use as tankers, raised the issue so often with Bush that the President nicknamed him "Tanker Tiahrt." Members from Washington State, home of Boeing's main production complex, also lobbied vigorously. Defense Policy Board member and Rumsfeld pal Richard Perle wrote an op-ed in favor of the deal for the Wall Street Journal--but only after Boeing had invested $20 million in Trireme, a Perle investment firm. Boeing sponsored the 2001 annual dinner of the Jewish Institute for National Security Affairs, a neocon redoubt with which Under Secretary of Defense Douglas Feith was closely associated before joining the Administration. The honorees were the secretaries of the three military services: The Air Force's Roche, Navy Secretary Gordon England (formerly of General Dynamics) and Army Secretary Thomas White (formerly of Enron). The host for the evening was Boeing Washington office head Rudy deLeon.

For once all this influence-peddling may go for naught. The deal is on hold thanks to relentless questioning by Senator John McCain, who has denounced it from the beginning as "war profiteering," and persistent public pressure by good-government groups. The last straw was the revelation that Boeing offered Air Force acquisition official Darleen Druyun a job while she was negotiating the lease deal with the company.

Boeing isn't the only corrupt weapons company; it's just the one that was too desperate for a short-term payoff to cover its tracks. Rumsfeld's preference for industry executives and ideologues of the Perle/Feith variety has created an ethically challenged, politically tone-deaf environment that needs to be opened up to public scrutiny and reform. Some steps are under way. The Pentagon's Inspector General is investigating all Boeing contracts that Druyun was involved in. The Senate Armed Services Committee will hold hearings on the Boeing deal, and McCain has promised hearings on the Pentagon-industry "revolving door."

Much more needs to be done. At the height of World War II, Senator Harry Truman made a name for himself by uncovering profiteering and fraud at companies providing supplies for the war effort. Given the high political and economic stakes in the war on terror, a comparable investigation is in order now. Whether the work is being done in Iraq, Washington or points in between, contracts involving US national security should be opened to true competitive bidding. Profits should be limited, and the books of contractors doing the public's business should be open and available for inspection. Politicians and bureaucrats who are lining their pockets under the guise of fighting terrorism should face criminal penalties, not symbolic fines. The public should demand that all candidates for the presidency and Congress renounce campaign contributions from companies involved in the rebuilding of Iraq, the war in Afghanistan or any of the other far-flung outposts of Bush's war on terrorism.

The culture of cronyism that allows arms-industry executives to pull down multimillion-dollar compensation packages while wounded veterans are shunted into makeshift medical wards has to end. Getting rid of George W. Bush and his gang of neocon profiteers is an excellent place to start. But it's only a start.





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