Report: Peddling Arms, Peddling Influence – World Policy Institute – Research Project

ARMS TRADE RESOURCE CENTER

REPORTS – Peddling Arms, Peddling Influence Update
April 1997

For further information:
William D. Hartung,
212-229-5808, ext. 106
or Frida Berrigan,
212-229-5808, ext. 112

New Data Reveals a Record $10.8 Million in Contributions
by Arms Merchants During 1995/96 Election Cycle;
Lockheed Martin Remains “Leader of the PACs”

by William D. Hartung

Table of Contents
Introduction
Giving Money, Getting Favors
Influencing Votes
Winning Corporate Subsidies
Quid Pro Quos
The Helms/McCollum letters
Friends in High Places
Recommendations

Tables
Table I
Table II
Table III

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Introduction
New York — If money talks, then the nation’s largest weapons exporting firms made their voices heard loud and clear during the 1996 elections. According to a new analysis by the World Policy Institute at the New School for Social Research, the top 25 arms exporters gave a record $10.8 million in Political Action Committee (PAC) and soft money donations during the 1995/96 election cycle. Nearly 40% of these funds, $4.3 million in all, poured in during the last few months of the two year cycle, between September and December of 1996. This analysis, which updates the Institute’s October 1996 report, Peddling Arms, Peddling Influence, is drawn from Federal Election Committee data analyzed by the Center for Responsive Politics.

The $10.8 million in contributions by top arms exporters represented a 56% increase over their recent peak of $6.9 million during the 1991/92 election cycle. The contributions for 1995/96 consisted of $6.6 million in Political Action Committee (PAC) donations and $4.2 million in soft money. Arms exporter PAC funding was up by 12% from its recent peak of $5.9 million in 1991/92, while soft money donations by arms merchants increased by a whopping 346% over their previous high of $943,000 in 1993/94.

Lockheed Martin was the “leader of the PACs” among arms exporters — its constituent companies donated $1.4 million in PAC funds and $928,585 in soft money during 1995-96 for a total of more than $2.3 million in political giving during the election cycle. Lockheed Martin accounted for more than one out of every five dollars contributed by major weapons exporting firms for the 1996 campaign.

“Lockheed Martin and its fellow arms merchants received billions of dollars in new subsidies from the 104th Congress. Their record contributions during 1995/96 are a clear sign that they will do everything in their power to keep these corporate welfare payments flowing,” said William D. Hartung, a Senior Research Fellow at the World Policy Institute.

For the arms export lobby, the 104th Congress will go down as one of its most successful sessions ever. From 1994 to 1995, total subsidies for arms exports increased by 8.5%, from $7.0 billion to $7.6 billion. Arms export subsidies have stabilized at roughly $7.5 billion per year since that time. President Clinton’s F.Y. 1998 budget request retains the same mix of grants, subsidized loans, tax breaks, and promotional activities that have made subsidies for the arms export sector the second largest source of corporate welfare spending in the federal budget, after agricultural subsidies. For 1995, the most recent year for which full statistics were available, more than half of the $15 billion in arms sales made by U.S. companies were paid for by U.S.-government-backed grants, loans, and cash payments, not foreign arms purchasers like Saudi Arabia or Taiwan.

Arms exporter PACs favored Republicans over Democrats by a margin of more than two to one, with 69% of their donations going to Republican candidates ($4.6 million) versus 31% for Democratic candidates ($2.2 million). Soft money donations were more evenly distributed, with weapons exporting firms donating 54% of their contributions to Republican party committees ($2.3 million) versus 46% to Democratic party committees ($1.9 million). The Loral Corporation was the top giver of soft money among arms exporters, with total donations of $632,000 during 1995/96; contrary to the general industry trend, 95% of Loral’s soft money contributions ($601,000) went to Democratic party committees. Loral merged with Lockheed Martin in 1996, thereby helping to ensure that the nation’s top Pentagon contractor and the world’s largest arms exporting firm will maintain solid ties among both Republican and Democratic officials.

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Giving Money, Getting Favors
Major donors routinely play down the impact of their political contributions by arguing that they ensure “access, not influence.” But however one chooses to describe the lobbying clout of the arms industry, there is no question that their political “investments” (in the form of campaign contributions to key lawmakers) have paid off many times over in the form of legislation and regulations favorable to the industry.

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Influencing Votes: The Code of Conduct Bill
One way to measure the impact of arms exporter campaign spending is to see how members supported by this sector voted on key pieces of legislation affecting the industry’s bottom line. The most important piece of arms export policy legislation dealt with by the 104th Congress was the Code of Conduct bill, which was co-sponsored by Rep. Cynthia McKinney (D-GA) and Sen. Mark Hatfield (R-OR). The Code — which would sharply curtail U.S. arms sales to dictatorships and human rights abusers — is bitterly opposed by U.S. weapons exporting firms. The Code of Conduct bill went down to defeat in its initial votes in the House and Senate, in part due to generous campaign contributions by the arms exporting companies to members of Congress who voted against the measure. As the House prepares for a second vote on the Code of Conduct in late April or early May of 1997, the influence of arms exporter political spending on this critical arms sales policy measure bears watching.

In July of 1996, the Senate defeated the Code of Conduct proposal by a vote of 65 to 35. Senators who voted with industry to block the Code received five times as much PAC money from arms exporters during 1995/96 as Senators who voted for the Code of Conduct, for an average of $18,928 per Senator voting with industry to $3,840 per Senator voting against industry. The leader of the floor fight to defeat the Code of Conduct bill in the Senate was Mitch McConnell (R-KY), who received $73,305 from arms exporter PACs during the 1995/96 election cycle. McConnell, an adamant opponent of campaign finance reform who chairs the Republican Senatorial Campaign Committee, is the author of a recent fundraising letter which alleges that President Clinton took “illegal foreign cash” from a “Communist regime” (China); while it has yet to be proven that Chinese government money was used to contribute to the 1996 campaign, Senator McConnell clearly has no qualms about accepting tens of thousands of dollars from arms exporting firms that have been putting U.S. weaponry in the hands of repressive regimes throughout the world, including potential U.S. adversaries.

When the House of Representatives voted on the Code of Conduct on May 25, 1995, it went down to defeat by a margin of 262 to 157. The House vote showed a similar pattern of arms exporter money favoring members who voted industry’s way. House members who voted with industry against the Code received an average of more than 2 and * times as much PAC funding from arms exporters during 1995/96 as members who voted for the arms sales Code of Conduct. House members who voted with industry to block the Code received an average of $13,132 per member, while the members who voted for the Code of Conduct received an average of $5,109 per member.

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Winning Corporate Subsidies: The $15 Billion Arms Export Loan Guarantee Fund
On an issue of more immediate financial interest to arms exporters, on August 3, 1995, Sen. Dale Bumpers (D-AR) introduced an amendment to strip provisions creating an arms export loan guarantee fund from the Department of Defense authorization bill for F.Y. 1996. On average, Senators who voted in favor of the arms industry’s position on this critical issue received more than twice as much PAC money from arms exporting companies in the 1995/96 election cycle as those Senators who voted against industry. The 58 Senators who voted with industry to sustain the loan fund received an average of $18,113 per Senator from major arms exporting companies. The 41 Senators who voted to kill the loan fund received an average of $7,731 per Senator from arms export industry PACs. The loan guarantee fund, which may be used to authorize up to $15 billion in U.S. government-backed loans to foreign arms purchasers, represents a boon to arms exporters, who will receive the bulk of these funds in the form of new weapons orders; but it is a bane to taxpayers, who could be on the hook to cover billions in bad loans if financially unstable foreign governments default on their loan payments (as has happened frequently with similar arms sales loan programs in recent years).

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Quid Pro Quos: Actions by Specific Lawmakers on Behalf of the Arms Industry
In addition to rewarding members who vote with them, arms exporters have cultivated a powerful grouping of individual members who take a leadership role in securing funding or favorable regulations, making it easier (and more profitable) to sell U.S. weaponry overseas. As Tables I and II demonstrate, industry contributions are heavily concentrated among key committee chairs and ranking members on armed services, appropriations, foreign relations, and budget committees; members in leadership positions (including House Speaker Newt Gingrich); and members from states with clusters of major weapons manufacturing facilities (most notably California and Texas). A few examples are presented below.

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The Helms/McCollum letters and fighter plane sales to Latin America:
Lockheed Martin and McDonnell Douglas have been vigorously lobbying to reverse a 25 year-old U.S. ban on exporting advanced fighter planes to Latin America, and the Clinton Administration took a giant step in that direction in late March when it authorized the firms to provide technical data U.S. combat aircraft to the Chilean Air Force. At a pivotal point in their campaign to lift the fighter ban, in the spring of 1996 the companies prevailed upon Senate Foreign Relations Committee chairman Jesse Helms (R-NC) and Rep. Bill McCollum (R-FL) to send letters to Secretary of State Warren Christopher urging him to reverse U.S. policy and open the way for sales of U.S. combat aircraft to Latin America. Taken together, Helms and his 37 Senate co-signers and McCollum and his 77 Senate co-signers received over $1 million in campaign contributions by Lockheed Martin, McDonnell Douglas, and other major prime and subcontractors for the F-16 and F-18 aircraft.

Jane Harman (D-CA) and the $15 Billion Arms Export Loan Guarantee Fund: In June of 1995, Jane Harman led a successful fight in the House to preserve one of arms export industry’s pet projects, a $15 billion government-backed loan fund (see above). Harman received $66,750 in arms exporter PAC funds in 1995/96.

Norm Dicks (D-WA), Randy “Duke” Cunningham (R-CA), Duncan Hunter (R-CA) and the B-2 Bomber brigade: These West coast lawmakers, whose districts are close by Northrop Grumman’s B-2 facility in Southern California and Boeing’s B-2 subcontracting work in Seattle, spearheaded the fight to keep the B-2 alive during 1995/96. All three made the top 10 list of arms exporter PAC recipients (see Table II, below), and they were richly rewarded by B-2 contractors Northrop Grumman, Boeing, and General Electric: Dicks received $19,500 from the three firms during 1995/96, Cunningham got $18,211, and Hunter received $10,500.

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Friends in High Places — Newt Gingrich, William Cohen, and Fred Thompson:
Speaker of the House Newt Gingrich (R-GA) has received considerable negative publicity for using funds raised by GOPAC, an educational foundation, for partisan political purposes. Less attention has been paid to the generous funding he has received from traditional political action committees run by special interest groups. In 1995/96 arms export PACs gave Gingrich $52,000 in contributions. Lockheed Martin, which has a major production facility just outside of Gingrich’s district in Marietta, Georgia, was so enthusiastic about supporting him that they originally gave $12,200 in PAC funds for the 1995/96 election cycle, $2,200 more than the legal limit (the excess funds have since been returned). Gingrich has gone to bat for Lockheed Martin, both in public statements and behind the scenes in Washington, in support of increased Pentagon funding for the firm’s F-22 “stealth” fighter and exports of modernized versions of the company’s C-130 military transport. The speaker even touts Lockheed Martin as a model of sound management in his controversial satellite-TV lecture series “Renewing American Civilization,” which was started in part with a $10,000 contribution from Lockheed back in 1991.

While Gingrich’s political star has been falling of late, two rising powers in Washington are equally indebted to the arms export sector. William Cohen, the former Republican Senator from Maine who is now the Clinton Administration’s Secretary of Defense, received $42,600 in arms exporter PAC money in 1995/96. Cohen returned the favor: not only did he vote against the Code of Conduct bill and for the $15 billion arms export loan guarantee fund, but in June of 1996 he pushed through a special amendment that created a $100 million tax break for U.S. overseas arms clients. The tax break comes about through the elimination of “recoupment fees,” a surcharge that used to be assessed against foreign arms deals to reimburse the U.S. Treasury for the cost of government-financed research and development of weapons that U.S. firms later sell on the world market for a profit.

Another key Washington player who is high on the arms exporter’s donation list is Sen. Fred Thompson (R-TN), the actor/lawyer/Republican presidential hopeful who is heading up the Senate’s investigation of improprieties in campaign financing during the 1996 elections. Thompson, who received $46,675 in arms exporter PAC funds in 1995/96, voted with industry to block the Code of Conduct bill and approve the $15 billion arms export loan guarantee fund.

Tables I and II provide data on the top recipients of arms exporter PAC funding in the House and Senate for 1995/96.

Source for Table I: Data on contributions by the top 25 arms exporting firms was supplied by the Center for Responsive Politics, using Federal Election Commission data released electronically as of February 2, 1997.

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Source for Table II: Same as Table I, above.

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Boosting the Bottom Line: Corporate Beneficiaries of U.S. Arms Sales
Increased subsidies for arms sales and increased U.S. government promotion of these exports has benefited companies like Lockheed Martin and McDonnell Douglas, earning them billions in revenues in recent years. During F.Y. 1995, the most recent year for which full statistics are available, Lockheed Martin ($2.7 billion) and McDonnell Douglas ($1.8 billion) dominated the Pentagon’s Foreign Military Sales (FMS) program, accounting for 62% of all FMS sales by U.S. companies during that year. The FMS program is the largest channel for the export of U.S. weaponry, accounting for an average of 75% of all U.S. arms sales in recent years. Given these impressive sums, it is not surprising that major weapons manufacturers have been using their political clout and campaign spending to insure a pro-export policy on the part of the Clinton Administration and the Congress. Table III provides data on campaign spending and FMS revenues for major arms exporting firms.

Sources: Data on Foreign Military Sales Contracts for FY 1993-95 are based on Pentagon data tapes on prime contract awards analyzed by Eagle Eye Services of Vienna, Virginia. Data on campaign spending is drawn from FEC data released as of February 2, 1997, analyzed by the Center for Responsive Politics.

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Leveling the Political Playing Field: Reforms Recommended
In order to counter the special interest clout wielded by arms exporting firms in Washington, the World Policy Institute recommends four major reforms:
1) Passage of Code of Conduct legislation that would sharply limit U.S. arms exports to dictatorships, human rights abusers, and aggressor nations; 2) Sharp reductions in the current $7.5 billion per year in U.S. government subsidies for arms exports;
3) Strict limits on campaign contributions and spending, tied to a system of public financing of federal campaigns and the abolition of soft money donations; and
4) An end to the “revolving door” that allows top officials to go back and forth between arms exporting firms and arms policy positions in government.

“Tough questions have been raised recently about the role of foreign donations in our political process,” argues William Hartung, the author of the Institute report. “We should be equally vigilant in ensuring that U.S. arms exporting firms don’t abuse their influence to promote unnecessary subsidies for dangerous weapons exports.”

Note: Additional data on donations by arms exporting companies to specific members of Congress is available from the World Policy Institute on request.

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