Senate Majority Leader Chuck Schumer (D-NY) made a similar point in a statement on the Senate floor during the debate over that deal. "The debt ceiling deal," he said, "does nothing to limit the Senate's ability to appropriate emergency/supplemental funds to ensure our military capabilities are sufficient to deter China, Russia, and our other adversaries and respond to ongoing and growing national security threats."
One potential (and surprising) snag in the future plans of those Pentagon budget boosters in both parties may be the position of House Speaker Kevin McCarthy (R-CA). He has, in fact, described efforts to increase Pentagon spending beyond the level set in the recent budget deal as "part of the problem." For the moment at least, he openly opposes producing an emergency package to increase the Pentagon budget, saying:
"The last five audits the Department of Defense [have] failed. So there's a lot of places for reform [where] we can have a lot of savings. We've plussed it up. This is the most money we've ever spent on defense -- this is the most money anyone in the world has ever spent on defense. So I don't think the first answer is to do a supplemental."
The Massive Overfunding of the Pentagon
The Department of Defense is, of course, already massively overfunded. That $886 billion figure is among the highest ever -- hundreds of billions of dollars more than at the peak of the Korean or Vietnam wars or during the most intensely combative years of the Cold War. It's higher than the combined military budgets of the next 10 countries combined, most of whom are, in any case, U.S. allies. And it's estimated to be three times what the Chinese military, the Pentagon's "pacing threat," receives annually. Consider it an irony that actually "keeping pace" with China would involve a massive cut in military spending, not an increase in the Pentagon's bloated budget.
It also should go without saying that preparations to effectively defend the United States and its allies could be achieved for so much less than is currently lavished on the Pentagon. A new approach could easily save significantly more than $100 billion in fiscal year 2024, as proposed by Representatives Barbara Lee (D-CA) and Mark Pocan (D-WI) in the People Over Pentagon Act, the preeminent budget-cut proposal in Congress. An illustrative report released by the Congressional Budget Office (CBO) in late 2021 sketched out three scenarios, all involving a less interventionist, more restrained approach to defense that would include greater reliance on allies. Each option would reduce America's 1.3-million-strong active military force (by up to one-fifth in one scenario). Total savings from the CBO's proposed changes would, over a decade, be $1 trillion.
And a more comprehensive approach that shifted away from the current "cover the globe" strategy of being able to fight (though, as the history of this century shows, not always win) wars virtually anywhere on Earth on short notice -- without allies, if necessary -- could save hundreds of billions more over the next decade. Cutting bureaucracy and making other changes in defense policy could also yield yet more savings. To cite just two examples, reducing the Pentagon's cohort of more than half-a-million private contract employees and scaling back its nuclear weapons "modernization" program would save significantly more than $300 billion extra over a decade.
But none of this is even remotely likely without concerted public pressure to, as a start, keep members of Congress from adding tens of billions of dollars in spending on parochial military projects that channel funding into their states or districts. And it would also mean pushing back against the propaganda of Pentagon contractors who claim they need ever more money to provide adequate tools to defend the country.
Contractors Crying Wolf
While demanding ever more of our tax dollars, the giant military-industrial corporations are spending all too much of their time simply stuffing the pockets of their shareholders rather than investing in the tools needed to actually defend this country. A recent Department of Defense report found that, from 2010-2019, such companies increased by 73% over the previous decade what they paid their shareholders. Meanwhile, their investment in research, development, and capital assets declined significantly. Still, such corporations claim that, without further Pentagon funding, they can't afford to invest enough in their businesses to meet future national security challenges, which include ramping up weapons production to provide arms for Ukraine.
In reality, however, the financial data suggests that they simply chose to reward their shareholders over everything and everyone else, even as they experienced steadily improving profit margins and cash generation. In fact, the report pointed out that those companies "generate substantial amounts of cash beyond their needs for operations or capital investment." So instead of investing further in their businesses, they choose to eat their "seed corn" by prioritizing short-term gains over long-term investments and by "investing" additional profits in their shareholders. And when you eat your seed corn, you have nothing left to plant next year.
Never fear, though, since Congress seems eternally prepared to bail them out. Their businesses, in fact, continue to thrive because Congress authorizes funding for the Pentagon to repeatedly grant them massive contracts, no matter their performance or lack of internal investment. No other industry could get away with such maximalist thinking.
Military contractors outperform similarly sized companies in non-defense industries in eight out of nine key financial metrics -- including higher total returns to shareholders (a category where they leave much of the rest of the S&P 500 in the dust). They financially outshine their commercial counterparts for two obvious reasons: first, the government subsidizes so many of their costs; second, the weapons industry is so concentrated that its major firms have little or no competition.
Adding insult to injury, contractors are overcharging the government for the basic weaponry they produce while they rake in cash to enrich their shareholders. In the past 15 years, the Pentagon's internal watchdog has exposed price gouging by contractors ranging from Boeing and Lockheed Martin to lesser-known companies like TransDigm Group. In 2011, Boeing made about $13 million in excess profits by overcharging the Army for 18 spare parts used in Apache and Chinook helicopters. To put that in perspective, the Army paid $1,678.61 each for a tiny helicopter part that the Pentagon already had in stock at its own warehouse for only $7.71.
The Pentagon found Lockheed Martin and Boeing price gouging together in 2015. They overcharged the military by "hundreds of millions of dollars" for missiles. TransDigm similarly made $16 million by overcharging for spare parts between 2015 and 2017 and even more in the following two years, generating nearly $21 million in excess profits. If you can believe it, there is no legal requirement for such companies to refund the government if they're exposed for price gouging.
Of course, there's nothing new about such corporate price gouging, nor is it unique to the arms industry. But it's especially egregious there, given how heavily the major military contractors depend on the government's business. Lockheed Martin, the biggest of them, got a staggering 73% of its $66 billion in net sales from the government in 2022. Boeing, which does far more commercial business, still generated 40% of its revenue from the government that year. (Down from 51% in 2020.)
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