The Military Industrial Complex

Who is in control of the budget talks?  One thing that hardly anyone from either party talks about is cuts in defense (offense) spending and most of them are talking about cuts to medicare and Social Security.  As Matt Yglesias points out that not the way the American people see it.  

Defense spending reductions, meanwhile, are much less popular. There's a nontrivial bloc of congressional Democrats who favors major reductions, but that's not a stance embraced by party leadership or recent presidential candidates. But as a recentEconomist/YouGov poll confirms—key result replicated above—public opinion is pretty different. An overwhelming 71 percent of the population says it favors spending cuts to reduce the budget deficit, but cuts to Social Security, Medicare, and Medicaid are all unpopular. Defense cuts, by contrast, poll pretty well. The modern-day version of the guns or butter choice is guns or grandma's hospital bills, and the public clearly prefers grandma's hospital bills.

At The American Conservative Jon Basil Utley thinks that just eliminating waste at the Pentagon could do more to reduce the deficit than doing away with a few tax deductions but even that gets little but lip service from DC politicians.

Compare these with another study that breaks down all national-security costs. Those total some $1.2 trillion—far more than just the Pentagon’s costs, if one includes the CIA, veterans programs, pensions, interest on war debts, etc., but not the Afghan War, which is another hundred billion. The military establishment’s waste is so extraordinary that anyone in Washington who defends it either plans for America to start more wars (e.g., neoconservatives) or is on the take in some way—perhaps subsidized by a think tank getting money from military contractors. A good overall view of defense spending is by budget expert Winslow Wheeler, “The Defense Budget: Ignorance Is Not Bliss.” And this does not include big-ticket items like the F-35—scheduled to reach a trillion dollars for an average five hours of flying time per week over its lifetime—or a 12th aircraft carrier battle group. Would tax-paying Americans really prefer a new fighter plane, when America already dominates the world’s skies and seas, rather than have their home mortgage interest deduction?
The CIA and other intelligence agencies cost some $55 billion that we know about. In 2010 some $27 billion more was spent on military intelligence programs. Waste is incredible. The Washington Post ran a series of articles about waste and duplication of efforts at the many intelligence agencies. It pointed out among other numbers that some 50,000 intelligence reports are issued yearly. No congressman, to my knowledge, demanded an investigation. A recent interesting information tidbit was how Defense Secretary Leon Panetta has Air Force planes fly him home to California every weekend. The news came to light when he transferred to the Pentagon, which publishes such information. Earlier at the CIA he did the same, but it was a secret expense. The exploding cost of homeland security is also somewhat hidden: for example, airline passengers pay for much of the government’s costs in higher fares.

Utley links to The defense budget: Ignorance is not bliss by Winslow Wheeler which is a must read.

Polling from Pew and Gallup reveals major public misconceptions about the defense budget. Fifty-eight percent of Americans know that Pentagon spending is larger than any other nation, but almost none know it is up to seven times that of China. Most had no idea the defense budget is larger than federal spending for education, Medicare or interest on the debt.


The scurrilous in Washington promote the misimpression of an under-funded Pentagon. They imply it is smaller than during the Cold War by saying it was at 8 percent of gross domestic product in the late 1960s, but only 4 percent of GDP now. Therefore, it’s gone down and is now low, right?

Some use hyperventilated rhetoric to pressure for more defense dollars. Sadly, this category now must include Secretary of Defense Robert Gates, who termed “catastrophic” the recommendations of the Obama deficit commission to merely maintain defense spending at its post-WWII high, and who deemed a “crisis” the idea of a 1 percent — $5 billion — reduction in the 2011 defense budget compared to 2010.

The defense budget is untouchable because the military industrial complex is a major contributor of reelection money.  This is nothing new.  In the early 70s those in the intelligence community knew the Soviet Union was collapsing - no, Ronald Reagan was not responsible for the collapse. 

Tolstoy would look at the assertion that Reagan brought down the Evil Empire and say: no he didn’t. The individual decisions by millions of Russians, Poles, Latvians, Georgians, Germans, etc. brought down the Evil Empire, and the relationship between those individual actions and the action of any one man is obscure – and, moreover, anything Reagan did that was significant was overwhelmingly likely to have been done by someone else in his place at that time, because those actions were forced choices, driven by necessity, even if we don’t fully understand the laws thereof.

The hype of the threat from a rapidly failing Soviet Union allowed defense spending to remain inflated.  We see the same thing today except it is even more absurd this time because the threat is not from a world power but a number of bands of outlaws.

If "everything" is on the table then that must include dramatic cuts to defense spending but don't hold your breath.

The continuing air tanker saga

Boeing's loss of the Air Force tanker contract continues to make waves. Perhaps the Northrup Grumman/EADS proposal is better. Perhaps the embarrassment that resulted from Boeing's unethical conduct in 2003 was a factor. That said this could still hurt John McCain:
McCain advisers lobbied for European plane maker

WASHINGTON (AP) -- Top current advisers to Sen. John McCain's presidential campaign last year lobbied for a European plane maker that beat Boeing to a $35 billion Air Force tanker contract, taking sides in a bidding fight that McCain has tried to referee for more than five years.

Two of the advisers gave up their lobbying work when they joined McCain's campaign. A third, former Texas Rep. Tom Loeffler, lobbied for the European Aeronautic Defence and Space Co. while serving as McCain's national finance chairman.

[.....]

"The aesthetics are not good, especially since he is an advocate of reform and transparency," said Richard Aboulafia, an analyst with the aerospace consulting firm Teal Group. "Boeing advocates are going to use this as ammunition."

McCain, a longtime critic of influence peddling and special interest politics, has come under increased scrutiny as a presidential candidate, particularly because he has surrounded himself with advisers who are veteran Washington lobbyists. He has defended his inner circle and has emphatically denied reports last month in The New York Times and The Washington Post that suggested he helped the client of a lobbyist friend nine years ago.

He has also cast himself as a neutral watchdog in the Air Force tanker contract, one of the largest in decades.

And McCain himself is getting some of the blame.

But Boeing supporters already have begun to accuse McCain of damaging Boeing's chances by inserting himself into the tanker deal.

One of them, Rep. Norm Dicks, D-Washington, said the field was "tilted to Airbus" because the Pentagon did not weigh European subsidies for Airbus in its deliberations -- a decision he blamed on McCain. Everett, Wash., is where Boeing would perform much of the tanker work, and Dicks is a senior member of the House Appropriations defense subcommittee.

In December 2006, just weeks before the Air Force was set to release its formal request for proposals, McCain wrote a letter to the incoming defense secretary, Robert Gates, warning that he was "troubled" by the Air Force's draft request for bids.

The United States had filed a complaint with the World Trade Organization alleging that Airbus unfairly benefits from European subsidies. Airbus in turn argued that Boeing also receives government support, mostly as tax breaks.

Under the Air Force proposal, bidders would have been required to explain how financial penalties or other sanctions stemming from the subsidy dispute might affect their ability to execute the contract. The request was widely viewed as hurting the EADS-Northrop Grumman bid.

The proposed bid request "may risk eliminating competition before bids are submitted," McCain wrote in a December 1, 2006, letter to Gates. The Air Force changed the criteria four days later.

Dicks said the removal of the subsidy language was a "game-changer" that favored EADS over Boeing.

This has become an issue for both the right and the left. As Jazz explained here the right is enraged that a defense contract would be given to the French. The left is enraged that good union jobs would be outsourced to France.

Update

It would appear that St John received some cash from EADS after his intervention.

McCain, the presumptive GOP presidential nominee, played a crucial role in blocking the deal to build air tankers from going to U.S.-based Boeing, instead paving the path for EADS to score the loot. He framed his decision as an example of political integrity; Boeing has previously been exposed of contract abuse. But a review of campaign finance donations and lobbying records suggests that money and personal lobbying may have also been in play.

On January 15, 2007, McCain appeared at Alabama Gov. Bob Riley's gubernatorial swearing in ceremony and formally called for multiple bidders in the tanker deal. The push for an open process had only one true beneficiary, however, and that was the Northrop Grumman/EADS consortium, which was poised to be Boeing's sole competitor.

A day after McCain made his proclamation, the contributions began to flow. John Green, a lobbyist for EADS donated $2,100 to the senator's presidential campaign. Ten days after that, Michelle Lammers, the "Chief of Staff" for EADS North America, gave $250 to the McCain campaign. It was her first political contribution ever. Less than a month later, the long-time head of EADS' government affairs program, Samuel Adcock, made a $2,100 donation to McCain. And eleven days later, Ralph Crosby, the head of EADS North America, donated $2,300 himself.

Update II

I agree for the most part with this editorial in my local paper, The Oregonian today.
Boeing's stinging defeat on air tankers

From a purely provincial viewpoint, it's disappointing that the Air Force picked a European supplier over Boeing to build its next generation of refueling tanker aircraft.

The $35 billion contract would have created 44,000 jobs in the United States, most of them in the Northwest, according to Boeing. The company's failure to secure the deal becomes even more painful when you consider that it could grow to more than $100 billion, making it one of the biggest military purchases in history.

But the Air Force appears to have acted properly. It based last week's decision not on what's best for Boeing and the Seattle area, but on what's best for the nation and its defense.

Predictably, a furious outcry has arisen from politicians in Washington state and Kansas, where most of Boeing's manufacturing occurs. Air Force officials, however, counter the backlash with a convincing argument that they chose the better offer, one that will produce a better, bigger airplane at lower cost to U.S. taxpayers with delivery sooner than Boeing can offer.

Concerns about lost jobs in the United States also are being overstated in this controversy. The winning bidder is a partnership between America's Northrop Grumman and the parent company of Europe's Airbus, known as EADS. It says the new tanker will be assembled in Alabama and outfitted with General Electric engines, also built mostly in this country, supporting a total U.S. work force of about 25,000.

Boeing backers also warn there's risk in outsourcing sensitive defense contracts to foreign entities. This argument ignores the global nature of military procurement in an age when Boeing and other U.S. companies sell military aircraft and other defense hardware worldwide.

For its part, Boeing complains that the bidding process was flawed and skewed toward the EADS-Northrop combine. Congress should look into those complaints and make sure the competition was fair and open.

But Boeing needs to do some self-examination, too. The company could have locked up the tanker deal several years ago if it hadn't been for a procurement scandal that led to prison terms for a former Air Force official and a top Boeing executive, along with the departure of the company's chief executive.

Does the latest Boeing setback reflect a company that still has lessons to learn? Does it suggest arrogance, overconfidence or flagging competitiveness?

Amid all the protectionist rhetoric, those are worthwhile concerns for America's legendary aircraft manufacturer.

More on the air tanker deal

Below Jazz discussed the bru ha ha over the contract awarded to Northrup Grumman and EADS for the next generation of air tankers. As I said in the comments section there is a little more to the story than free trade. If they were going to use an existing airframe, the most economical thing to do, there were two choices, Boeing and EADS (Airbus). By all rights Boeing should not have even been able to bid on the deal and here is why:

Unethical conduct
In May 2003, the US Air Force announced it would lease 100 KC-767 tankers to replace the oldest 136 of its KC-135s. The 10 year lease would give the USAF the option to purchase the aircraft at the end of the contract. In September 2003, responding to critics who argued that the lease was vastly more expensive than an outright purchase, the DOD announced a revised lease of 74 aircraft and purchase of 26.

In December 2003, the Pentagon announced the project was to be frozen while an investigation of allegations of corruption by one of its former procurement staffers, Darleen Druyun (who had moved to Boeing in January) was begun. The fallout of this resulted in the resignation of Boeing CEO Philip M. Condit and the termination of CFO Michael M. Sears. Harry Stonecipher, former McDonnell Douglas CEO and Boeing COO, replaced Condit on an interim basis.

Druyun pleaded guilty to inflating the price of the contract to favor her future employer and to passing information on the competing Airbus A330 MRTT bid (from EADS). In October 2004, she was sentenced to nine months in jail for corruption, fined $5,000, given three years of supervised release and 150 hours of community service.

And this was not the only example of unethical conduct on the part of Boeing.

Industrial espionage
In June 2003, Lockheed Martin sued Boeing alleging that the company had resorted to industrial espionage in 1998 to win the Evolved Expendable Launch Vehicle (EELV) competition. Lockheed alleged that the former employee Kenneth Branch, who went to work for McDonnell Douglas and Boeing, passed 25,000 proprietary documents to his new employers. Lockheed argued that these documents allowed Boeing to win 21 of the 28 tendered military satellite launches.

In July 2003, Boeing was penalized, with the Pentagon stripping $1 billion worth of contracts away from the company and awarding them to Lockheed Martin. Furthermore, the company was forbidden to bid for rocket contracts for a twenty-month period which expired in March 2005.

In early September 2005, it was reported that Boeing was negotiating a settlement with the U.S. Department of Justice in which it would pay up to $500 million to cover this and the Darleen Druyun scandal.

If Boeing had been a bit more honest it might have had a better chance of winning the contract.

The Pentagon's Department of Corrective Thought

Pentagon to start 24-hour Iraq info desk
Office to distribute data ahead of military progress report due in Sept.

WASHINGTON - Shaping the Bush administration’s message on the Iraq war has taken on new fervor, just as anticipation is building for the September progress report from top military advisers.

For the Pentagon, getting out Iraq information will now include a 24-hour-a-day, seven-day-a-week Iraq Communications Desk that will pump out data from Baghdad — serving as what could be considered a campaign war room.

According to a memo circulated Thursday and obtained by The Associated Press, Dorrance Smith, assistant defense secretary for public affairs, is looking for personnel for what he called the high-priority effort to distribute Defense Department information on Iraq.

Now we all no what this will be - all good news all of the time.

Official: Not a 'war room'
The Pentagon dismissed suggestions that the communications desk will be a message machine or propaganda tool, and instead said it is being set up to gather and distribute information from eight time zones away in a more efficient and timely manner.

Right! and FOX news is "fair and balanced". Now there may be some good news from Iraq but it is overwhelmed by the bad news - like:

• Iraq is not going to have a functional government in the lifetime of anyone over 50.
• The Sunnis in Anbar who are now cooperating with the US to eliminate AQI will turn on the US troops as soon as the AQ threat is diminished.
• The largely Shi'ite US trained Iraqi military will turn on the US troops as soon as Bush/Cheney do the unthinkable and attack Iran.
• The US military is demoralized and broken after over four years in the meat grinder that is Iraq.