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ARMS TRADE RESOURCE CENTER REPORTS – Peddling Arms, Peddling Influence: For further information: Special Report note:This report should be used in conjunction with the April 1997 “Peddling Arms, Peddling Influence Update,” which provides updated statistics on some of the data contained in this report. Acknowledgments The World Policy Institute would also like to thank the following foundations whose support made this project possible: the Compton Foundation, the S.H. Cowell Foundation, the HKH Foundation, the Ruth Mott Fund, the Ploughshares Fund, Rockefeller Family Associates, and the Spanel Foundation.
Table of Contents List of Tables:
I. Introduction: Exposing the Arms Export Lobby In its quest for increased arms sales, the U.S. defense industry has applied the same time-honored lobbying techniques that have served it so well in pressing for expanded funding for Pentagon procurement of major systems like the B-2 bomber and the F-22 fighter plane: making massive political contributions to presidential and congressional candidates, touting the jobs that a given sale will provide in key states and congressional districts, and influencing policy directly by lobbying key decisionmakers in the executive branch and on Capitol Hill to implement regulations and legislation that will make it easier (and more profitable) for U.S. firms to sell weapons overseas. This report provides concrete examples of the arms export lobby at work. Section II, “Buying Influence,” analyzes the patterns of political contributions by the top 25 U.S. arms exporting firms during the 1995/96 election cycle. Section III, “Reaping the Benefits,” gives examples of policy changes that have been enacted for the benefit of U.S. arms exporting companies by their allies in the Executive Branch and the Congress. And Section IV, “Boosting the Bottom Line,” provides new data on how much major companies like Lockheed Martin, McDonnell Douglas, and Northrop Grumman have earned from foreign arms sales since the Clinton Administration took office in 1993. Section V provides recommendations for changes in U.S. arms export policy that should be implemented to ensure that the short-term special interests of a few major defense contractors no longer undermine the United States’ abiding national interest in limiting the proliferation of advanced weaponry to regions of conflict.
II. Buying Influence: Political Contributions by the Top 25 U.S. Arms Exporting Firms The most striking fact that jumps out of the figures on campaign spending by the top U.S. arms exporting companies is the sheer volume of cash they have been investing in candidates for federal office. In the past six years, these twenty-five firms alone have contributed $18 million in Political Action Committee (PAC) funding to candidates for the House, Senate, and the presidency, plus an additional $3.2 million in so-called “soft money” to Republican and Democratic national campaign committees for use in presidential and congressional campaign efforts. In total, this represents more than $21 million in campaign spending during this decade, for an average of $840,000 per firm. Data released as of October 2nd of this year, which covers contributions made through late summer of 1996, indicates that the 1995/96 election cycle could yield the largest levels of campaign contributions by arms exporting firms to federal elections of any cycle in this decade. Even without data on the last three to four months of this year’s election campaign, which often involve heavy doses of additional campaign contributions to the industry’s preferred candidates, PAC contributions to candidates for federal office during 1995 and 1996 had exceeded $5.2 million. This figure is just $700,000 short of the recent high of $5.9 million in PAC spending by these same firms in the full 1991-1992 election cycle. At a time when Common Cause, an independent citizen’s watchdog organization, has made serious charges regarding the illegal use of soft money contributions by the Democratic and Republican parties to finance millions of dollars in television ads on behalf of the Clinton and Dole presidential candidacies, arms exporting firms have been dramatically accelerating their own soft money giving. Even before figures for September and October are added in, soft money contributions by arms exporters to Democratic and Republican committees during 1995/96 have soared to over $1.3 million, a whopping 46% increase over the previous high of $943,000 reached during the full 1993/94 election cycle.[3] Defense industry PACs have traditionally been conservative in their political spending habits, tending to favor incumbents over challengers, to give heavily to members of key committees like armed services and appropriations which have direct influence over weapons spending, and to support members from states and districts where defense companies have major facilities. These spending habits help reinforce the pork barrel triad of weapons/jobs/campaign contributions that has made the arms lobby one of the most formidable special interest groupings in Washington. This tendency to favor the already powerful is evidenced in the figures on arms exporters PAC and soft money contributions during the 1990s. In 1991-92 and 1993-94 when the Democrats controlled both houses of Congress (and the chairs of key committees and subcommittees), arms exporter PACs gave 54% and 58% of their contributions, respectively, to Democratic candidates. After the Republicans took control of the House and Senate in the November 1994 elections, there was an abrupt shift of funding towards the new powers that be on Capitol Hill. Through late summer of 1996, 69% of arms exporters’ campaign contributions for 1995/96 had gone to members of the newly formed Republican majority in Congress, outpacing contributions to Democrats by a two-to-one margin. Moving on from patterns of contributions by party affiliation to donations to individual members of Congress, Tables I and II give a detailed accounting of which Congressional candidates were the top recipients of PAC funding from arms exporting firms during the 1995/96 election cycle.
Source: Data on contributions by the top 25 arms exporting firms was supplied by the Center for Responsive Politics, using Federal Election Commission data.
Source for Table II: Same as Table I, above.
Without exception, the top recipients of arms exporters’ PAC money in the House and Senate occupy positions of power and influence from which they can make decisions that directly provide both funding and favorable policy treatment for these companies. Of the fourteen House members who received $40,000 or more from the top weapons merchants in the 1995/96 election cycle, six served on the National Security Committee (the new name of the former Armed Services Committee), including committee chairman Floyd Spence (R-SC); four served on the National Security Subcommittee of the Appropriations committee, including Subcommittee Chairman Bill Young (R-FL) and Ranking Democratic member John Murtha (D-PA); one was chairman of the Appropriations Committee, Robert Livingston (R-LA), who topped the list with $85,000 in donations; one chaired the potentially critical Rules Committee, Martin Frost, (D-TX); and two were in the Republican House leadership: Speaker Newt Gingrich (R-GA) and Majority Whip Tom DeLay (R-TX). On the Senate side, the list of top recipients is similarly stacked towards members who can do the arms industry favors, including Sen. John Warner (R-VA), Chairman of the Airland Forces Subcommittee of the Armed Services Committee; Sen. Ted Stevens of Alaska, who chairs the Defense Subcommittee of the Appropriations Committee; Armed Services Committee Chairman Sen. Strom Thurmond (R-SC); Budget Committee Chairman Sen. Pete Domenici (R-NM); and Mitch McConnell (R-KY), Chairman of the Foreign Operations Subcommittee of the Appropriations Committee. Arms exporter funding for key members of Congress is given added impact by the fact that the vast majority of these members also have major arms manufacturing facilities in their states or districts. Lockheed Martin’s Marietta, Georgia facility — which produces C-130 military transport planes for export and F-22 “stealth” fighters for the U.S. Air Force — is located just outside the boundaries of House Speaker Newt Gingrich’s district, and the majority of the workers at the plant live in Gingrich’s district. In California, the undisputed military-industrial hub of the United States, representatives Jane Harman, Jerry Lewis, Duncan Hunter, and Randy “Duke” Cunningham all have numerous weapons manufacturing firms located in or near their districts. Texas representatives Martin Frost, Chet Edwards, and Tom DeLay are all mindful of Lockheed Martin’s role as a major employer in their state, by virtue of the location of its F-16 fighter plane factory in Fort Worth. Rep. Ike Skelton of Missouri has long looked after the interests of home state behemoth McDonnell Douglas, while Norm Dicks of Washington state regularly goes to bat for Boeing, shepherding through myriad defense projects that have redounded to the benefit of that Seattle-based firm. The examples could be extended, but the underlying point is clear: Senators and Representatives from weapons producing areas seek out positions on defense-related committees so they can push through programs that benefit their home state firms and provide jobs and income in their states or districts. In return, those firms reward those members of Congress with hefty campaign contributions that help keep them in office, and voting industry’s position on major issues. As defense contractors have shifted their operations to the South and West to take advantage of lower cost, less unionized labor, the locus of power in Congress over defense spending and arms sales has shifted to representatives from these areas. Weapons exporting firms are spending their political money in a manner that reinforces this geographic redistribution of defense dollars. In the House, twelve of the fourteen top beneficiaries of arms exporter PAC funds in 1995/96 were from the South or West, as were nine of the top twelve arms PAC recipients in the Senate.[4] This vicious circle of pork barrel politics and special interest money has been a regular feature of defense budget politics for decades, resulting in higher levels of Pentagon spending than might be justified by an objective assessment of the security threats facing the United States. More recently, this same pork barrel logic has been applied with renewed vigor to the issue of subsidizing and promoting U.S. arms sales, a potential new growth area that major defense firms are focusing on in the wake of post-Cold War reductions in Pentagon weapons spending. Before analyzing specific subsidies for arms exporters that were promoted by the 104th Congress and signed into law by President Clinton (see section III, below), it is worth looking at a few examples of specific actions that members of Congress financed by arms exporters’ PACs have taken on behalf of the defense industry.
The Quid Pro Quo: PAC Recipients Go to Bat for the Arms Industry
Pushing the B-2 Bomber — Duncan Hunter, Duke Cunningham and Norm Dicks:
Jane Harman and the $15 Billion Arms Export Loan Guarantee Fund:
Joe Barton and F-16s for Taiwan:
Texas Delegation Pushes Sale of Textron/Bell Super Cobra Helicopters to Turkey: Barton and Geren’s campaign on behalf of the Cobra sale to Turkey also generated letters to Secretary of State Warren Christopher, Secretary of the Navy John Dalton, and President Clinton himself from heavy hitters on Capitol Hill such as senior Democratic Senators Daniel Inouye of Hawaii and Sam Nunn of Georgia, Senate Armed Services Committee Chairman Strom Thurmond (R-SC) and Senate Foreign Relations Committee Chairman Jesse Helms (R-NC). These assiduous efforts on behalf of Textron have been well rewarded. Representative Barton was the biggest recipient of Textron campaign funds during the 1995/96 election cycle, receiving $7,500 from the firm; and as a group, the members of the Texas delegation who have helped push the Cobra sale have received nearly $50,000 in campaign funds from Textron over the past two years. So, far, these efforts to push the Clinton Administration to move forward on the Cobra sale to Turkey have been stymied. A coalition of human rights and arms control organizations, working with key Congressional allies like Sen. Paul Sarbanes (D-MD) and Rep. John Porter (R-IL), have convinced the Clinton Administration to postpone the sale due to concerns over Turkey’s use of U.S. weaponry in attacks on the Kurdish population of southeastern Turkey that have left thousands of people dead and resulted in the evacuation of over 2,500 Kurdish villages. But Textron’s allies in the Congress continue to look for opportunities to pressure the administration to revive the Cobra deal.[9]
Gephardt and the F-15 Sale to Saudi Arabia:
Gingrich, The Speaker from Lockheed: There are two principal explanations for Gingrich’s success in getting campaign funds from weapons makers. First, he came into the Speaker’s chair as a self-described “strong leader” who planned to exert unprecedented power over committee chairs and the House Republican caucus as a whole. Hence, the road to influence in the 104th Congress appeared to go through the Speaker’s office, not merely through cultivating particular committee chairs. This message was further driven home by Gingrich’s statement during the 1994 election campaign that it would be “the coldest two years in Washington” for companies that didn’t contribute to Republican challengers for seats in the House if the Republicans won control of Congress. The defense industry has done well for itself under the Republican-controlled Congress: in the F.Y. 1996 budget passed last year, the Pentagon received $7 billion more than it originally requested, and in the F.Y. 1997 budget plan passed this October, military spending will be over $9 billion more than the Pentagon asked for. As indicated above, the World Policy Institute has found that arms exporter PACs have favored Republican congressional candidates over Democrats by a margin of more than two-to-one during the 1995/96 election cycle. This pronounced “Republican tilt” is partly due to Gingrich’s aggressive fundraising efforts, and in part a case of weapons makers voting with their dollars for a continuation of the Republican defense spending gravy train (which the Clinton Administration has signed onto with minimal opposition). The second secret to Gingrich’s arms financing bonanza is his close connection to the Lockheed Martin Corporation, which runs a large facility in Marietta, Georgia, just outside the boundaries of his district. One of the very first meetings Gingrich held after the Republicans took control of the House in November 1994 was with Lockheed executives at their Marietta facility. He came out of the meeting singing the praises of the company’s F-22 stealth fighter plane, which at $160 million per copy is the most expensive fighter plane ever built. Gingrich parroted company claims that the total cost of the plane could be cut by 20 to 40% if only Congress would provide more long-term funding up front. Ironically, the General Accounting Office — in a report that was savagely attacked by Gingrich — had argued that the F-22 was not needed at all in the current security environment, and that upgrades of current generation F-15s could meet any conceivable threat through at least the year 2014. Meanwhile, Lockheed’s own marketing brochure for the plane makes the argument that because so many countries can now buy top-of-the-line fighters, the U.S. needs to stay one step ahead of potential adversaries by building the F-22. The centerpiece of the brochure is a map of the world listing 48 “Countries With Advanced Fighter Capabilities”; more than half of the countries on the list received those fighter planes from the U.S., in the form of McDonnell Douglas F-15s and F-18s and Lockheed Martin F-16s! In essence, Lockheed Martin is acknowledging that in the post-Cold War era the United States is now running an arms race with itself, selling advanced weaponry to troubled regions with one hand and asking the taxpayers to fund even costlier, newer models for the Pentagon with the other. Gingrich has abetted this company strategy by working behind the scenes to defeat a 1995 effort to cut funds from the F-22 to pay for education and Gingrich’s special relationship with Lockheed Martin was sealed with $10,000 in campaign contributions in the 1995/96 election cycle, the highest level of funding given by the company to any House candidate, and the highest level allowed by law. In fact, Lockheed Martin was so anxious to help speaker Gingrich that they originally gave him $12,200 during the 1995/96 cycle, $2,200 more than the legal limit. The extra $2,200 has since been returned. Lockheed’s recent efforts on Gingrich’s behalf have been impressive, but the firm was helping him well before he ascended to the Speaker’s chair. In 1991 Lockheed provided $10,000 to help finance his “Renewing American Civilization” satellite-TV lecture series, which is the subject of ongoing controversy over whether Gingrich abused funds allegedly raised for educational purposes to support his partisan political activities. As late as 1995, Gingrich was criticized by the university that hosted his American Civilization course for plugging specific companies such as Lockheed, Federal Express, and the Waffle House in his lectures. Ironically, at the time that Gingrich was citing Lockheed as a model of forward looking management practices in his lectures, the company was under indictment for offering a $1 million bribe to a member of the Egyptian parliament in connection with an attempted sale of Lockheed C-130 transport planes to Egypt. If the Republicans retain control of the House in the 1996 elections, Lockheed Martin and its allies in the weapons exporting business can rest easy knowing that they have a friend in the Speaker’s office.[12]
Lockheed Martin, Lobbying Powerhouse:
A summary of political spending by major arms exporting firms is provided in Table III (see page 12, below).
Source: Center for Responsive Politics, based on Federal Election Committee data released electronically. PAC contributions cover reports released by the FEC through October 2nd, 1996; soft money data covers reports released by the FEC as of September 3rd, 1996.
III. Reaping the Benefits: Increasing Subsidies for Arms Exports These new subsidies have been on the industry’s agenda since 1988, but it took the convergence of a pro-export Democratic President and a pro-defense Republican Congress to bring the proposals to fruition. Both the arms export loan guarantee fund and the elimination of recoupment fees had been suggested in a November 1988 report by the Defense Policy Advisory Committee on Trade (DPACT), a panel of top defense industry executives that provides confidential advice to the Secretary of Defense on arms sales policy issues. The chairman of DPACT, both in 1988 when the report was released and in 1995 when its recommendations finally became law, was Norman Augustine, who currently serves as the CEO of Lockheed Martin, the Pentagon’s largest contractor and the nation’s leading weapons exporting company. Augustine was a central figure in the industry’s efforts to lobby for these changes, organizing an Aerospace Industries Association letter to Clinton’s first Secretary of Defense Les Aspin on behalf of the loan fund and personally writing to every member of the House Armed Services Committee to tout both the loan fund and the elimination of recoupment fees. Augustine’s appeals for the subsidies were reinforced by a steady flow of campaign cash from Lockheed Martin and its constituent companies: since 1990, the companies that now make up the Lockheed Martin conglomerate have made over $4.2 million in PAC and soft money contributions in an effort to influence federal elections. Each of the new subsidy programs took different paths to implementation, relying on different points of influence. On recoupment fees, the Clinton Administration supported the industry’s position early on, submitting legislation to repeal the fees every year it has been in office. Finally, in 1995, the administration won a compromise victory over the objections of congressional opponents like Rep. Howard Berman (D-CA). The administration can now waive the fees on Foreign Military Sales (FMS) deals if the President deems it “likely” that the sale will be lost otherwise, or even if a case can be made that exports of the item in question can lower the Pentagon’s unit costs for purchasing the same system. Since President Clinton has supported repeal of the fees from the outset, it is likely that all or nearly all of the roughly $200 million per year that had been collected via this route will be waived from now on. These funds are supposed to be counterbalanced by corresponding cuts to the Pentagon budget — whether these cuts are made as required remains to be seen. In the mean time, the $200 million per year that used to reimburse U.S. taxpayers for the costs of researching and developing U.S. weapons — weapons that are exported for private profit — will now go into the pockets either of U.S. arms exporters (in the form of higher profits) or U.S. arms clients (in the form of lower prices). On the arms export loan guarantee fund, industry had to work without assistance from the Clinton Administration, which never asked Congress to create such a fund and indicated when asked that it thought that such a program was not necessary at this time. But the industry had strong support in Congress. In addition to California Representative Jane Harman, a top industry PAC recipient who spearheaded efforts in support of the arms export loan fund in the House, the industry’s key point people for the legislation in the Senate all had direct ties to weapons manufacturers. Sen. Dirk Kempthorne (R-ID), the chief sponsor of the loan guarantee bill in the Senate, is a former vice-president for governmental affairs at the FMC Corporation, a major arms exporting company. Moderate to liberal Democrats like Senators Diane Feinstein (D-CA) and Christopher Dodd (D-CT) were among the most aggressive proponents of the arms sales loans during the Senate debate on the program, in large part because they were interested in what the proposed fund could do for major weapons exporting firms based in their states. The version of the loan guarantee fund that was finally passed by the Congress and signed into law by President Clinton in late 1995 allows the Pentagon to offer U.S.-government guaranteed loans to a list of 37 countries in Europe and Asia, ranging from Rumania and Hungary to Singapore and Indonesia. In an effort to make the plan appear to be “cost free to taxpayers,” the fund is being created without the traditional appropriation of a reserve fund to cover bad loans. The reserve fund will be financed through fees charged to the nations purchasing the U.S. weapons covered by the loans. That means that countries that are already too great of a credit risk to get loans to buy U.S. weaponry without a U.S. government guarantee will be even more financially stressed by having to kick in extra money up front. The likelihood of default on these loans will be high; similar government backed loans programs for arms and arms-related technologies have resulted in over $10 billion in bad loans in this decade alone. When the loans go bad, it is U.S. taxpayers, not Lockheed Martin or McDonnell Douglas or their foreign clients, that will have to make good on them. Not surprisingly, the Senators who helped make this financially reckless arrangement the law of the land have been the recipients of generous contributions from arms exporting companies.[14] As a measure of how much campaign spending by weapons exporting companies may have influenced the industry’s remarkable record of getting what it wants from the 104th Congress, a look at several key votes is instructive.
Rewarding Allies, Buying Influence: The Impact of PAC Spending on Arms Sales Votes There is also strong evidence to suggest that the industry’s generous political spending may have provided its margin of victory in the loan guarantee vote. The 67 Senators who received arms exporter PAC funds during 1995/96 voted to keep the arms export loan guarantee fund by a margin of 19 votes (43-24), 2 votes more than the 17 vote margin by which the industry position won in the Senate as a whole. By contrast, of the 33 Senators who received no arms exporter PAC funds, a slight majority voted against industry and for the elimination of the loan fund, 17-15 (with one Senator not voting). The industry’s investment of nearly $1 million in Senate campaign funds appears to have been an important factor in helping to obtain approval for its controversial new subsidy in the Senate.[15] In a vote with significant potential impacts for the arms exporting companies in the long-term, the Senate voted on July 25, 1996 on an amendment sponsored by Sen. Mark Hatfield (R-OR) that would have established a Code of Conduct for U.S. arms sales. Under the Code, there would be a presumption against selling U.S. weaponry to regimes that violate the human rights of their own citizens, engage in aggression against their neighbors, come to power through undemocratic means, or refuse to participate in the United Nations arms register (an annual accounting of arms imports and exports). The Code of Conduct was defeated by a vote of 65 to 35. Industry had vigorously opposed the measure on the grounds that it would complicate the process of getting approval for major arms sales and ultimately reduce the potential volume of U.S. weapons exports. From its own financial perspective, the industry’s concern was well founded. An analysis by the Washington-based organization Demilitarization for Democracy indicates that roughly three-quarters of the volume of U.S. arms sales to the Third World since 1991 have gone to nations where our own State Department has determined that citizens have no peaceful means for bringing about a change in their government. This high incidence of undemocratic governments among major U.S. arms clients would likely mean that a number of significant arms sales that have been routinely approved in the past would be prohibited if the Code of Conduct became law. Hence the export industry’s opposition to the proposal. Arms exporter PAC funds appear to have had an even more decisive influence on the 1996 Senate vote on the Code of Conduct than they did on the 1995 vote on the arms export loan guarantee fund. Senators voting with industry to block the Code received eight times as much PAC money from arms exporters as Senators who voted for the Code of Conduct. The 65 Senators who voted with industry’s position and against the Code of Conduct received $1.2 million in campaign funding from top arms exporter PACs during 1995/96, for an average of $17,947 per Senator. Furthermore, the leader of the floor fight to defeat the Code of Conduct bill in the Senate was Mitch McConnell (R-KY), who ranked number 5 in arms exporter PAC receipts in the Senate, getting a total of $65,400 from these firms during the 1995/96 election cycle. The 35 Senators who voted against industry’s wishes and for the Code of Conduct received a total of $81,399 in arms exporter PAC funds during 1995/96, for an average of $2,325 per Senator. As was the case in the loan guarantee vote, it appears that the industry’s heavy spending on Senate races helped produce its margin of victory in defeating the Code of Conduct in the Senate. The 67 Senators who received some arms exporter PAC money during 1995/96 voted against the Code by a margin of 35 votes (51-16), 5 votes more than the industry’s margin of victory in the Senate as a whole. The 33 Senators who received no arms exporter PAC money voted in favor of the Code of Conduct by a margin of 5 votes (19-14). Given these numbers, it would be interesting to see how the Code of Conduct on arms sales would fare under a system in which special interest contributions by arms exporters were either banned or sharply curtailed, so that Senators would have a better chance of evaluating the proposal strictly on its merits. The May 25, 1995 vote on the Code of Conduct bill in the House of Representatives, which went down to defeat by a margin of 262 to 157, showed a similar pattern of arms exporter money favoring members who voted industry’s way on the proposal. House members voting with industry against the Code received an average of 2 and * times as much PAC funding from arms exporter PACs as members who voted for the arms sales Code of Conduct. The 262 House members who voted with industry to block the Code received a total of $2.8 million from arms exporter PACs, for an average of $10,724 per member. The 157 House members who voted for the Code of Conduct received a total of $634,050 from arms exporter PACs, for an average of $4,038 per member. As in the Senate, this special interest money appears to have provided the industry’s margin of victory. The 368 members of the House that received some arms exporter PAC money voted against the Code by a margin of 107 votes (230 to 123 with 15 members not voting), two votes more than the margin that the proposal was defeated by in the House as a whole. The 67 members of the House who received no arms exporter PAC funds voted for the Code by two votes (34 to 32 with one not voting). Obviously, PAC money is not the only factor influencing votes on a major foreign policy issue like arms sales. Economic factors come into play (such as the location of major defense plants in key districts), as can differences in perspective on what role the United States should play in the world, who our allies should be and how best to support those allies, as well as numerous other considerations. But the fact that arms exporter PACs have so heavily rewarded members of Congress that have voted their way on key issues like the arms export loan guarantee fund and the Code of Conduct legislation, and that members supported by these PACs have supplied the margin of victory for industry’s position on these votes, raises serious concerns about whether these critical issues are being decided on the merits or distorted with the weight of special interest political money.
IV. Boosting the Bottom Line: Corporate Beneficiaries of U.S. Arms Sales Aside from a brief surge in orders stimulated by the 1991 Persian Gulf War, the trend in the dollar value of the international arms market has been on a steadily downward slope since its recent peak in the mid-1980s. In inflation adjusted dollars, the total value of arms sales to the Third World is now at only about one-quarter of the level of just seven years ago, down from more than $60 billion per year in 1988 to roughly $15 billion in 1995. Figures on worldwide arms sales are likewise moving downward, to approximately one-quarter of the levels reached in the all-time peak year of 1984. However, even at these reduced levels, there is plenty of money to be made by the big players in the arms market. Furthermore, the shrinking of overall sales has created a frenzied “buyer’s market” in which big companies offer all sorts of concessions to potential customers to close the few big deals that are available to be made. It is also a market in which U.S. government subsidies loom large. In 1995, more than half of the $15 billion in arms sales made by U.S. government were paid for by U.S. government-backed grants, loans, and cash payments. In effect, the biggest financiers of U.S. arms sales are no longer foreign clients like Saudi Arabia or Taiwan; they are U.S. taxpayers, who pay for the wide array of subsidy programs that have helped prop up U.S. arms sales in a flagging market.[16] As Table IV demonstrates, a handful of U.S. arms exporting firms continue to make a substantial volume of weapons sales on the international market. Over the first three years of the Clinton Administration, six companies have racked up $1 billion or more in Foreign Military Sales (FMS) contracts. As noted above, the FMS program is an arms sales channel in which the Pentagon negotiates arms sales with foreign nations, collects the funds for the weapons, and provides money to the U.S. firms that build that system in the form of a Foreign Military Sales contract. Most sales of major military equipment go through the FMS channel, accounting for roughly 75% of all U.S. arms sales in a given year (the bulk of the remainder is accounted for by commercial arms sales which are licensed by the State Department).
Source: Data from Department of Defense contracting tapes, analyzed by Eagle Eye Services, Vienna, Va. As measured by FMS contracts for 1993 through 1995, the “billion dollar arms merchants club” for includes the following six firms: 1) Lockheed Martin ($5.6 billion); 2) McDonnell Douglas ($4.5 billion); 3) Raytheon ($1.8 billion); 4) General Dynamics ($1.4 billion); 5) United Technologies ($1.3 billion); and 6) General Motors/Hughes ($1.1 billion). Lockheed Martin and McDonnell Douglas have dominated the Foreign Military Sales market in recent years, accounting for over 48% of the total of $21 billion in FMS sales concluded by U.S. companies from F.Y. 1993-1995. As will be demonstrated shortly, the biggest single source of FMS revenues for these firms is fighter plane sales: Lockheed Martin’s export moneymaker is the F-16, while McDonnell Douglas exports both F-15 and F/A-18 fighters.[17] Despite the overall downward trend in the arms market worldwide, FMS awards to U.S. companies went up from $ 6.5 billion to $7.3 billion from F.Y. 1994 to F.Y. 1995, an increase of 12%. Lockheed Martin alone more than accounted for this increase, as its own FMS awards jumped from $1.1 billion in F.Y. 1994 to $2.7 billion in F.Y. 1995, a 130% increase. The dominance of FMS awards by Lockheed Martin and McDonnell Douglas increased sharply in F.Y. 1995 as well, as the two firms accounted for 62% of all FMS contracts awarded to U.S. firms for the year. The dominant position of these two firms in the FMS market was tied directly to their ability to conclude lucrative deals to sell advanced fighter aircraft to a few key customers. More than 75% of Lockheed Martin’s FMS awards for F.Y. 1995 involved sales of F-16 fighters, the bulk of them involving the 1992 sale of 150 F-16s to Taiwan. Roughly 2/3 ($1.1 billion) of McDonnell Douglas’s $1.8 billion in F.Y. 1995 stem from the ongoing revenues from one major deal, the 1992 sale of 72 F-15s to Saudi Arabia, while major sales of F-18s to such diverse customers as Switzerland, Finland, and Malaysia accounted for most of the rest ($532 million).
The Importance of Fighter Exports to Industry:, Lobbying to Open the Latin American Market Since the Clinton Administration has taken office, major arms exporting firms have moved aggressively to overturn the fighter export ban to Latin America. The Defense Trade Advisory Group (DTAG), which was set up late in the Bush Administration to provide ongoing input to the State Department on arms sales policy, weighed in against the fighter ban in an April 1995 paper produced by a study group chaired by Joel Johnson, the Vice-President/International of the Aerospace Industries Association. It is no surprise that DTAG’s advice would closely mirror industry’s agenda: not only was its study group chaired by one of the industry’s principal lobbyists in Washington, but 54 of the group’s 57 members are executives of major arms exporting firms. In Congress, the push for lifting the Latin American fighter ban has been led by members of the Texas delegation such as Representatives Joe Barton and Peter Geren (see discussion above of their work on helicopter sales to Turkey) along with Rep. Bill McCollum (R-FL). These three members helped circulate a dear colleague letter in April of 1996 that eventually resulted in a letter to Secretary of State Warren Christopher from 79 members of the House of Representatives urging him to lift the F-16 ban. The letter was generated at the urging of the Aerospace Industries Association and its largest member company, Lockheed Martin. The industry has also applied pressure directly to Secretary of Defense William Perry, who was persuaded to send F-16s to the March 1996 FIDAE Air Show in Chile at taxpayer expense. The planes did demonstration flights at the Chile Air Show, and Perry spoke optimistically at the show of the prospect of lifting restrictions on the sale of U.S. fighter aircraft to Latin America by the end of this year. Dwain Hancock, the President of Lockheed Tactical Systems, told a reporter at the FIDAE show who asked about the Pentagon’s efforts on behalf of F-16 Just to make sure it was covering all bases, the arms industry also lobbied the Republican Party to include a plank in its 1996 presidential campaign platform stating that “The Clinton Administration’s policy of denying most Latin American countries the opportunity to replace their obsolescent military equipment . . . will be reversed by a Republican administration.” The Republican Party’s willingness to come out squarely in industry’s corner on the Latin American fighter plane issue has been rewarded with ample contributions from arms exporting firms: Republican Presidential contender Bob Dole has received over $18,000 from arms exporter PACs during 1995/96, compared to no arms exporter PAC funds for President Clinton; in addition, Republican party committees received over $792,000 in soft money contributions from arms exporting firms during 1995/96, which represented 57% of their soft money donations over that time period.[18] The Clinton Administration is scheduled to announce its decision in its review of the Latin America fighter policy by January of 1997. There is still some strong sentiment in the State Department in favor of keeping the fighter export ban in place, on the grounds that the last thing the fledgling democracies of the area need at this point in their development is to engage in a race to buy expensive high tech fighters. But Lockheed Martin and its allies in the export industry appear to have the inside track on changing U.S. policy and lifting the fighter ban. V. Recommendations: Re-exerting Democratic Control Over Arms Sales Policy
Notes 2. The figure of 75% of U.S. arms sales being accounted for by the Pentagon’s Foreign Military Sales program is based on calculations by the author using data from F.Y. 1986 through 1995 taken from U.S. Department of Defense, Defense Security Assistance Agency, Foreign Military Sales, Foreign Military Construction Sales, and Foreign Military Assistance Facts as of September 30, 1995 (Washington, DC: U.S. Department of Defense, 1996). 3. Information on campaign contributions contained in this section is drawn from data on Political Action Committee and soft money contributions by the top 25 U.S. arms exporting firms for the 1991-92, 1993-94, and 1995-96 election cycles supplied by the Center for Responsive Politics, which utilizes data released electronically by the Federal Election Commission. The determination of the top 25 arms exporting firms was made by reviewing listings of the top 25 Pentagon Foreign Military Sales contractors for F.Y. 1993, 1994 and 1995. This information was based on an analysis of Pentagon prime contracting data tapes conducted by Eagle Eye Services of Vienna, Virginia. For details on the Common Cause allegations of abuses in the use of soft money by the Democratic and Republican parties, see “Statement of Common Cause President Ann McBride at News Conference Asking for An Independent Counsel to Investigate Campaign Finance Activities of Clinton, Dole Campaigns,” Washington, DC, Common Cause, October 9, 1996. 4. The most detailed accounting of the role of pork barrel politics and political influence in the Pentagon budget process is contained in Gordon Adams, The Iron Triangle: The Politics of Defense Contracting (New York: Council on Economic Priorities, 1981). For a more recent report documenting this same phenomenon, see Nancy Watzman and Sheila Krumholz, Best Defense: Will Campaign Contributions Protect the Industry? (Washington, DC: Center for Responsive Politics, 1995). On the shift of defense spending to the South and West see Louis Uchitelle, “Long March of the Arms Contractors: They Migrate South for Cheaper Labor in the Low Cost States,” New York Times, April 19, 1995; and Christine Evans-Klock, National Defense Industry Layoffs, 1994 and Mid-Year 1995. 5. On the B-2 lobbying effort, see Mary McGrory, “Stealth Vote,” Washington Post, June 22, 1995; and David Marianiss and Michael Weisskopf, Washington Post, September 24, 1995. 6. On the defeat of the Berman amendment to eliminate the arms export loan guarantee fund, see “Congress Considers New Sales Financing,” in Lora Lumpe, ed., Arms Sales Monitor, No. 30, July 20, 1995, p. 6; on Harman’s support for Star Wars funding see John Pike, “The Force is With Her,” Mother Jones, September/October 1996, pp. 58-59; on her support for the extra C-17s, see Philip D. Duncan and Christine C. Lawrence, Politics in America 1996: The 104th Congress (Washington, DC: Congressional Quarterly, 1996), p. 172. 7. On Barton’s role in promoting the F-16 sale to Taiwan, see Don Oberdorfer, “1982 Arms Policy with China Victim of Bush Campaign, Texas Lobbying,” Washington Post, September 4, 1992. 8. On this point, see letter from Barton, Geren, and other members of the House from Texas to White House Chief of Staff Leon Panetta, October 18, 1995 (copy in possession of the author). 9. Data on Textron contributions to members of the Texas delegation are drawn from a profile of Textron PAC donations for 1995/96 provided by the Center for Responsive Politics. On the Clinton Administration’s decision to postpone the Cobra sale to Turkey, see Raymond Bonner, “U.S. Helicopter Sale to Turkey Hits Snag,” New York Times, March 29, 1996. Copies of all letters referenced in this section are in the possession of the author. 10. On McDonnell Douglas’s push for the F-15 sale to Saudi Arabia and Gephardt’s role in it see William D. Hartung, And Weapons for All (New York: HarperCollins, 1994), pp. 171-175 and 282-285; and Caleb Rossiter and Anne Detrick, “Are Arms Makers Sold on Clinton?” St. Louis Post-Dispatch, August 2, 1992. 11. See William D. Hartung, “The Speaker From Lockheed,” The Nation, January 30, 1995; “The F-22 Air Superiority Fighter: Peace Through Conventional Deterrence,” Lockheed brochure, March 1994; Richard Whitt, “Conservative Agenda Will Help ‘America Succeed,’ Gingrich Says,” Atlanta Constitution, November 18, 1994; Philip Finnegan, “PACs Cast a Powerful Vote,” and “Defense PACs Shun Republican Pleas for Contributions,” Defense News, November 7-13, 1994; and Dan Morgan, “Defense, Energy Projects Fare Well in Hill Panels,” Washington Post, July 26, 1996. 12. Jeanne Cummings, “Donors to Gingrich Class Currying Favor? — Some Contributors to the Kenesaw State College Course Are Also His Campaign Supporters,” Atlanta Constitution, September 3, 1993; “Gingrich Still Plugs Corporate Donors in His Televised College Class,” Wall Street Journal, March 10, 1995; “Lockheed Pleads Guilty to Egyptian Bribery,” in Lora Lumpe, editor, Arms Sales Monitor, No. 28, February 15, 1995, p. 5. 13. Philip Finnegan, “Industry Reverses PAC Trend,’ Defense News, August 12-18, 1996. 14. Information on taxpayer subsidies for arms exports contained in this section, including the progress of the arms export loan guarantee fund and the repeal of recoupment fees through Congress, is documented in detail in William D. Hartung, Welfare For Weapons Dealers: The Hidden Costs of the Arms Trade 1996 (New York: World Policy Institute at the New School, June 1996), pp. 11-42 and 51-60. 15. Analyses of arms sales-related votes detailed in this section are based on calculations by the author, utilizing the official vote tallies from the Congressional Record and comparing them with a list of PAC contributions by the top 25 arms exporting firms to all candidates for the House and Senate during 1995/96. The list of PAC donations was generated by the Center for Responsive Politics, using Federal Election Commission data. 16. Data on arms sales to the Third World represent agreements or orders, not final deliveries, and are expressed in constant 1995 dollars, from Richard F. Grimmett, Conventional Arms Transfers to Developing Nations, 1988-1995 (Washington, DC: Congressional Research Service, August 15, 1996) p. 46; figures on worldwide arms sales represent deliveries of weapons on the international market from 1984 to 1994, from U.S. Arms Control and Disarmament Agency, World Military Expenditures and Arms Transfers 1995 (Washington, DC: U.S. GPO, 1996), p. 9. 17. Information on Foreign Military Sales contract awards utilized throughout this section is based on calculations by the author, using data generated by Eagle Eye Services of Vienna, Virginia. Eagle Eye conducted a computer analysis of Pentagon contracting data tapes for F.Y. 1993 to F.Y. 1995 to identify the top 25 Foreign Military Sales contractors for each of those years, and to tally the total value of FMS awards for each year. 18. On the Latin American fighter ban, see Dear Colleague letter by Bill McCollum, Pete Geren, and Joe Barton, April 10, 1996; Aerospace Industries Association fact sheet, “U.S. Arms Transfer Policy to Latin America,” undated, 1996; Lockheed Martin Corporation “Arms Export Control Policy for Latin America,” March 25, 1996; Philip Finnegan, “U.S. Firms Urge Latin American Access,” Defense News, July 8-14, 1996; Calvin Sims, “U.S. Weighs Lifting Curb on Arms Sales to Latin America,” New York Times, July 21, 1996; and “Lockheed Martin Confident that USA Will Lift Aircraft Sale Ban,” Jane’s Defence Weekly, March 20, 1996, p. 8. For a thorough critique of efforts to lift the Latin American fighter export ban, see Caleb Rossiter, “Promote Civilian Leadership: Export Push Could Undermine South American Efforts,” Defense News, August 5-11, 1996. On the language promoting arms sales to Latin America that was written into the Republican Party platform, see Thomas W. Lippman, “U.S. Ready to Relax Restrictions on Arms Sales to South American Nations,” Washington Post, August 17, 1996.
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Recommendation 1: Set Stricter Standards on What Nations Can Receive U.S. Weaponry