The Three-Card Monte Of Your Tax Dollars And Its Corporate Beneficiaries

SHORT TAKES: Democratic "Radical Corporatists" Tank Drug Cost Savings; Ignored California Recall Lesson: Immigrants' Rights Matter; Some Garment Workers Keep Protection But Gap Couldn't Care Less

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LONG TAKE

It’s an outrage: Medicare is shoveling tens of billions of dollars to private corporations, outsourcing work to a handful of very big contractors, especially in the past twenty years. Not to mention: while a small number of very rich CEOs and high-ranking folks are making a bundle--and buying off members of Congress to keep this scam going--thousands of regular people working for Medicare are making peanuts, with no rights on the job. Cut Medicare Now!!! Don’t let our tax dollars go to waste and increase the debt to our children!!!

Uh… well, this story isn’t actually about Medicare.

It’s about the Pentagon.

And it’s the deep, unrelenting scandal that is quite obvious if you only take a cursory look. And it deserves constant attention, focus and elevated conversation especially when we are drowning in the rhetoric of those who want to stand in the way of expansive, needed spending for the people.

You see, the whole game of budgets and priorities is a Congressional version of Three-Card Monte. A refresher course: Three-Card Monte is a a confidence game in which the victims, or “marks”, are tricked into betting a sum of money, thinking that they can find the winning “money card” among three face-down playing cards; the dealer, the crook, is helped along by shills who either play along and, now and again, “win” or egg on unsuspecting onlookers from the fringe. I used to see this game played a lot in the old Times Square in NYC--before it got turned into an awful mall with big video screens, indistinguishable from any mall you’d find in Middle America because that’s what tourists from Nebraska felt comfortable with…but I digress.

In our Congressional Pentagon budgetary Three-Card Monte, the dealer and the shills are all part of the same confidence game, and the average taxpayer is the mark. The dealer is, at any given moment, a big defense contractor (more on that in a moment) whose “money card”--the fake, losing card--is a litany of rhetorical claims that it is doing business to serve “national security”. The shills are people like Joe Manchin, who are aided by media shills, who paint the Manchinites with the “moderate” moniker when it comes to attacking social spending, crying about (phony) deficit or debt crises but, never, never question the unrelenting spending on the Pentagon and on weapons of war.

My regular readers will note that I’ve spent a fair amount of time on this topic--including last week in a deep dive into the economics of war and the failure to learn the lessons of Afghanistan--because, folks, this is both where big, corrupting money goes at the expense of real peoples’ needs AND how that big money feeds the drumbeat of American Exceptionalism and “national security” that costs so many lives across the globe.

I come back to the topic this week because to the big picture I’ve sketched out above and in prior posts, today, we have some more concrete numbers to dig into, to consider, to share with others. It comes through a very thoughtful paper called “Profits of War: Corporate Beneficiaries of the Post-9/11 Pentagon Spending Surge” by William D. Hartung of the Center for International Policy who wrote this up as part of the Watson Institute for International Public Affairs on-going Costs of War Research series.

Here are some of the key pieces relevant for today:

While the costs and consequences of America’s war policies of the twenty-first century have been well-documented, the question of who has profited from this approach has received less attention. Corporations large and small have been, by far, the largest beneficiaries of the post-9/11 surge in military spending. Since the start of the war in Afghanistan, Pentagon spending has totaled over $14 trillion, one-third to one-half of which went to defense contractors. [emphasis added]

And:

The Pentagon’s increasing reliance on private contractors in the post-9/11 period
raises multiple questions of accountability, transparency, and effectiveness. This is
problematic because privatizing key functions can reduce the U.S. military’s control of activities that occur in war zones while increasing risks of waste, fraud and abuse. Additionally, that the waging of war is a source of profits can contradict the goal of having the U.S. lead with diplomacy in seeking to resolve conflicts. More broadly, the outsized influence of defense contractors has resulted in a growing militarization of American society. This is manifested in everything from the Pentagon’s receipt of the lion’s share of the federal discretionary budget—more than half—to the supply of excess military equipment to state and local law enforcement agencies.

Here is what the Pentagon’s budget looks like in a graph stretching back to 1948:

Note the highwater mark right after the Iraq War was launched by Bush-Cheney--that was a budget-on-steroids that settled back slightly, but, then returned to its inexorable rise:

The increase in U.S. military spending between Fiscal Year 2002 and Fiscal
Year 2003 was more than the entire military budget of any other country, including major powers like China, Russia, the United Kingdom, Germany, and France. And in the new political climate, increases in Pentagon spending reached well beyond expenditures specifically tied to fighting the wars in Iraq and Afghanistan. [emphasis added--and remember that one!]

Now, why is that? This has very little to do with so-called “national security”. It is largely about greed, corruption and self-interest.

The benefits of the post-9/11 surge in Pentagon spending have been highly
concentrated. One-quarter to one-third of all Pentagon contracts in recent years have gone to just five major weapons contractors: Lockheed Martin, Boeing, General Dynamics, Raytheon, and Northrop Grumman.

These five companies received over $286 billion in contracts in Fiscal Year 2019 and Fiscal Year 2020 alone (see Table 1). From FY 2001 to FY 2020 these five firms alone split over $2.1 trillion in Pentagon contracts (in 2021 dollars). To put these figures in perspective, the $75 billion in Pentagon contracts received by Lockheed Martin in FY 2020 is well over one and one-half times the entire budget for the State Department and Agency for International Development for that year, which totaled $44 billion. [emphasis added]

But, see, that’s the stuff we know. What’s a tad less visible are the two other pieces that make war a great business: logistics and reconstruction, and private security contracting.

In English: plan an invasion or a coup, destroy a country, then, put it back together again (even if that’s done in a slipshod fashion) and, of course, leave enough conflict and misery to give a giant slice of on-going work to gung-ho, gun-toting, former Special Forces knuckleheads.

Which gets you this:

The chaos of war, the lack of adequate government oversight, and the sheer volume of funds poured into the reconstruction effort in a short time frame all contributed to an environment that enabled massive waste, fraud and abuse in the reconstruction efforts in Iraq and Afghanistan.

The best known reconstruction and logistics contractor in Iraq and Afghanistan is
Halliburton, through its Kellogg, Brown and Root (KBR) subsidiary. At the outset of the two wars, Halliburton was the recipient of the Pentagon’s Logistics Civil Augmentation Program (LOGCAP) contract, an open-ended arrangement that involved coordinating a wide array of support functions for troops in the field, from setting up military bases, to maintaining equipment, to providing food and laundry services. Halliburton’s Pentagon contracts grew more than tenfold from FY2002 to FY2006 on the strength of its contracts to rebuild Iraq’s oil infrastructure and provide logistical support for U.S. troops in Iraq and Afghanistan. By August 2008 the company had received over $30 billion for work under the LOGCAP contract.

Who you think had a hand in this golden calf and made big profits?

At the outset, Halliburton’s role was controversial, drawing considerable criticism in the press, from independent analysts, and from key members of Congress. The notion of privatizing logistics was initiated by Dick Cheney when he served as secretary of defense in the George Herbert Walker Bush administration in the early 1990s. An August 2000 essay in Mother Jones described the conflict of interest involved in contracting out wartime support services: “In 1992,” it said, “the Pentagon, then under Cheney’s direction, paid Texas-based Brown and Root Services $3.9 million to produce a classified report detailing how private companies—like itself—could help provide logistics for American troops in potential war zones around the world.” Cheney went on to serve as the CEO of Halliburton, the corporate parent of Kellogg, Brown and Root, up until the point that he became the Vice-President in the George W. Bush administration in 2001. Cheney had stockholdings in the company worth $46 million, and as late as 2002 he received $162,000 in deferred compensation from the company. Cheney’s journey from the government to Halliburton and back was a classic case of the revolving door between the Pentagon and the defense industry, with all the real and potential conflicts-of-interest that entails.

Corruption? Boatloads of it:

In a May 2009 testimony before the Commission on Wartime Contracting, the Director of the Defense Contract Audit Agency (DCAA) testified that after auditing $1.2 billion of Dining Facility Costs (DFAC) from the KBR contract, the DCAA “took exception” to approximately $352 million of the total costs. DCAA Director April Stephenson stated that the main reason for these “exceptions” was KBR’s practice of billing the U.S. for many meals that were not actually provided. A DCAA Audit found that the number of meals KBR charged the government for could have been up to 36 percent greater than the accurate number. By February of 2004, KBR was forced to refund the U.S. for $27.4 million of “potential over-billings” at dining facilities in Iraq and Kuwait. [emphasis added]

Imagine the amount of fraud not found.

Of course, this story is not complete without the obvious--the way in which the deep corruption of our system is oiled by massive amounts of money thrown at Congress through campaign contributions and lobbying. And it’s a bi-partisan disease. Courtesy of Open Secrets, check out the following two graphs. The first shows the large amounts of money that goes to both political parties from the top defense contractors:

The second graph is even more instructive, frankly, because while campaign contributions also include money your average worker at a company might give to a candidate (say, Bernie Sanders!), the graph below is a direct reflection of the actions of the top brass at defense contractors--the ones who pocket huge multi-million dollars paychecks--who finance the intense grab for tax dollars to finance weapons and war:

Another mostly hidden scandalous piece of this is the abuse of thousands of workers who are thrown into the malestrom of the war-profiteers. While reading Hartung’s paper, I came upon this report from a few a years ago that is still releveant, again from the smart folks at the Costs of War project: “The Guards, Cooks, and Cleaners of the Afghan War: Migrant Contractors and the Cost of War”.

Noah Coburn writes about the unseen sea of thousands of people who aren’t lauded as heroes and certainly are not paid enormous salaries:

Teer was one of two hundred and fifty contractors who provide labor for America’s
war in Afghanistan whom I interviewed in 2015 and 2016 in their home communities in Nepal, India, Turkey, and the UK. This number is just a small fraction of the tens of

thousands of laborers who travel from these and other countries, such as Bangladesh, the Philippines, Sri Lanka and Colombia, to work on military bases and for firms contracting from the United States military, sometimes in dangerous and exploitative conditions. Teer’s case was more distressing than most, and many foreign contractors in Afghanistan earned higher wages than what they would have made in Nepal or other countries of origin. Yet most had paid high fees to brokers and bribes to government officials in order to secure these work opportunities, and they worked in far more dangerous positions and earned far less than they had been promised, some ending up deeply in debt.

And:

While race, country of origin, class and other factors shaped how contractors fared, all shared some similar legal and physical vulnerabilities. Some worked for companies that failed to provide a minimum standard of living, with dangerous conditions essentially imprisoning contractors on bases making it impossible to leave. Beyond this, I interviewed contractors who had been held hostage by brokers, who had been robbed, and who had been forced to perform incredibly dangerous tasks not in their contracts.

To the Pentagon, and certainly to the military contractors, these folks are disposable--to be abused, exploited and, then, tossed aside because they have no rights and they have no voice and they have no advocates to make sure they are treated with a modicum of basic humanity. This is almost an inevitable consequences of the system of war.

Lastly, to power all this corruption, you need an enemy. In the post WWII era, it was the Soviet Union. After 9/11, it was the amorphous--but very lucrative--“War on Terror”.

In the future, it’s obvious who the enemy is: China. Starting in May, I flagged in this newsletter (here, for example) the new “red scare” that would be the central theme of the defense contractors looking to fleece the public.

Hartung joins me in raising this danger, pointing out that on the National Defense Strategy Commission that hyped the China threat “Nine of the 12 members of the commission had direct or indirect ties to the arms industry, a reality that no doubt had some influence over their deliberations and conclusions.” What did that turn into?

The China threat argument has been utilized to justify the quest for a 350 ship
Navy—up from about 300 ships currently; major Air Force purchases like a new bomber and the F-35 combat aircraft; the Pentagon’s $1.5 trillion, three decades-long proposed nuclear weapons upgrade plan; the Space Force, a new branch of the armed forces; major expenditures on missile defense systems; and large new investments in cyber technologies and tactics (offensive and defensive), unmanned systems, hypersonic weapons, and artificial intelligence. Many of these initiatives were well along before China became the primary preoccupation of U.S. military planners, but the “China card” has become the argument of choice to consolidate political support for these expenditures. The most likely impact of the shift towards China will be to further tighten the grip of major weapons makers like Northrop Grumman, Lockheed Martin, General Dynamics, and Raytheon
Technologies on the Pentagon budget.

This is the place where real money is wasted--and how the next big war is being funded.

SHORT TAKES

• These are not “moderates” and we should stop sitting quietly by when the media refers to them as such:

  Democrats' signature legislation to lower drug prices was defeated in a House committee on Wednesday as three moderate Democrats voted against their party.
  
  Reps. Kurt Schrader (D-Ore.), Scott Peters (D-Calif.), and Kathleen Rice (D-N.Y.) voted against the measure to allow the secretary of Health and Human Services to negotiate lower drug prices, a long-held goal of Democrats.

  These are corporate shills who pocket big-money from Big PHARMA or other drug industry-related donors, and, to boot, are more mindful of filling up their campaign coffers than following smart economics: it is indisputable that health care costs eat up an ungodly amount of the nation’s capital (15 percent of GDP) and sky-high drug prices are a big factor. Not to mention the burden of drug prices on millions of people, especially seniors.

  They are not “moderates”--when the vast majority of the people are FOR giving the power to HHS to negotiate lower drug prices so everyone can save a little money.

  These three are “radical corporatists”.

  The “moderate” tag confers some manner of respectability, and helps them skate responsibility for a truly despicable vote.

• The recall election in California--which was a monumental bust that cost up to half a billion dollars (!!!)--was Exhibit A on the almost wall-to-wall failure of the traditional media to comprehend history, and there is a political lesson in the history of the state, for not just journalists but politicians especially Democrats, on the deep importance of standing up for comprehensive immigrants rights.

  Yes, California was once a Republican state. Yes, it is now deeply Democratic--though that is only relative to the third-place, almost rump status the Republican Party now has in the state compared to a larger slice of people who call themselves “independent” but who lean Democratic when it comes to social issues.

  But, how did that happen? Here’s your answer. In 1994, then-Governor Pete Wilson, a Republican, put the full force of his office behind pushing Proposition 187--a deeply anti-immgrant bill that, among other things, denied a whole host of services like education to undocumented immigrants. The proposition passed--but was, then, rulled unconstitutional.

  And that was that for the Republican Party when it came to statewide races. In 1992, Bill Clinton won the state but only with 46 percent of the vote (Ross Perot got a bit above 20 percent running as an independent). By 1996, the wave was building--Clinton won the state with 51 percent of the vote. From thereon, the Republican Party was done.

  Which is a message for today: those Democrats who do not put immigrants rights at the top of the agenda, and fail to fight like hell for undocumented people (or worse--see Barack Obama), are going to rue the day in California and other states. And fighting for immigrants also means understanding the putrid economic policies Democrats pursue that turn people into migrants--the flow of undocumented immigrants, especially from Mexico, to California, was exacerbated, if not triggered, by the passage of the North American Free Trade Agreement (NAFTA) which was negotiated by George Herbert Walker Bush and pushed through by Clinton; NAFTA impoverished millions of people, particularly small farmers who were, then, forced to leave their homes in order to survive.

• An important story to keep track of--After the horrific collapse of the Rana Plaza garment factory in Bangladesh, which killed over 1,100 garment workers and eventually led to murder charges against 41 people, a worldwide outcry arose to end the long-term, slave-like dangerous working conditions for a vast sea of exploited workers in poor countries like Bangladesh. Be clear: those conditions were blessed by huge multi-national corporations who used the cover of contracting with local companies to pretend like the home office had nothing to do with the criminal conditions human beings worked under. And they knew full well what was going on.

  The outcry led to something known as the Accord for Health and Safety in the Textile and Garment Industry. In theory, the Accord was supposed to require significant upgrades to safety and health conditions in the factories--and a system to monitor that such conditions were in place. The Accord was signed by many international brands--even as others came up with a phony, hollow alternative.

  I will say I am always skeptical of such deals that do not confer independent power to workers through trade unions, which, in poorer countries, often don’t have the resources or the legal power to really defend workers’ rights.

  But, that said--this is better than the alternative, which is the Rana Plaza-style conditions.

  The Accord expired earlier this year. But, just recently, it was renewed, after very tough negotiations with major brands who signed including H&M, Zara and PVH. But, there are holdouts:

  The fact that other major companies sourcing from Bangladesh, including Gap, VF Corporation (North Face), Primark, Desigual, and Auchan, have not signed the new agreement is extremely worrying and means that the workers in their supply chains will continue to risk their lives in dangerous factories and that these brands are not contributing financially to make factories safer. The Clean Clothes Campaign network and its allies will start a public campaign calling out all brands that fail to prioritise their workers’ safety by signing the International Accord.

  So, the pressure must continue.