Front Group for Military-Industrial Complex Pushes Hard to Slash Social Programs and Avoid Pentagon Cuts

News & Politics

As the so-called fiscal cliff negotiations drag on in Washington with the media covering Repubican House Speaker John Boehner’s latest temper tantrums, a bipartisan coalition of former government officials with deep ties to the defense industry and Wall Street are ratcheting up the pressure to cut retirement programs while sparing military contractors.

“Fix the Debt – a corporate-backed lobbying group advocating debt reduction with a $60 million budget – has failed to embrace defense spending cuts as a viable deficit reduction option, despite the fact that defense spending makes up over half of discretionary spending,” begins a new report by the Public Accountablity Initiative, a non-profit watchdog group, which focuses on the financial interests of who is behind cutting retirement security programs and other needed safety nets.

“The group’s 'core principles' focus on Social Security, Medicare, and Medicaid reforms and 'pro-growth' tax reform, and fail to even mention defense spending,” PAI’s report continues. “Fix the Debt’s eagerness to point the finger at social safety net spending while virtually ignoring defense spending makes more sense in light of its corporate backing. A review of the group’s corporate ties shows that many Fix the Debt leaders have lucrative connections to companies with billions of dollars in defense contracts.”

It’s often said that Washington insiders love ideas more than people—which is why some ideological obsessions, such as dismantling social safety nets, take precedence over more everyday concerns on Americans’ minds, such as jobs. But lurking below the superficial pronouncements in Washington’s policy wars there's often a profit-making agenda—and that is the case in the fiscal cliff crisis and negotiations, PAI reports, as it follows the money.

Take a look at this “Who We Are” page on the FixTheDebt Web site. What you will not see touted among this mix of former and currrent Democratic and Republican officials are their ties to the defense industry, nor how their advocacy of safety net cuts does not extend to curtailing unneeded military programs.

Here’s an excerpt from PAI’s conflict-of-interest trail:

  • 38 Fix the Debt leaders have ties to 43 companies with defense contracts totaling $43.4 billion in 2012. Fix the Debt leaders profiting from defense spending include the group’s co-chairs, steering committee members, and CEO council members; they have ties to these companies as board members, executives and CEOs, and lobbyists.
  • Boeing (with $25.1 billion in defense contracts) and Northrop Grumman (with $8.5 billion) lead the pack. Boeing CEO W. James McNerney, Jr. is on Fix the Debt’s CEO Council, and Northrop Grumman board member Vic Fazio is on Fix the Debt’s steering committee.
  • Four other Fix the Debt-linked companies have more than $1 billion in 2012 defense contracts: GE ($2.1 billion), Textron ($2 billion), Honeywell ($1.5 billion), and World Fuel Services ($1.2 billion).
  • The 38 Fix the Debt leaders with ties to defense contractors drew at least $401 million in compensation from the 43 companies in 2011 – an average of $10.6 million each.
  • Outside of Fix the Debt’s CEO Council, four individuals in Fix the Debt’s core leadership group have strong ties to defense contractors: co-chair Judd Gregg (director, Honeywell), and steering committee members Sam Nunn (director, GE, Hess, Coca-Cola), Vic Fazio (director, Northrop Grumman), and Jim McCrery (lobbyist, GE and Chevron). None of these ties are disclosed on the campaign’s website; all four are characterized as former members of Congress.

Why Isn’t Defense on the Negotiating Table?

The "fiscal cliff" debate is framed around cutting “discretionary” federal spending. But what is omitted from this calculus is that defense spending accounts for more than half of federal discretionary, PAI reports. “According to the CBO, in fiscal year 2011 defense spending totaled $699 billion, or 52% of total discretionary spending of $1.35 trillion,” it said. “By comparison, Medicare spending was $480 billion, Medicaid spending was $275 billion, and Social Security spending was $725 billion.”

Everyone knows that the U.S. also spends far more on defense than other countries. In fact, continuing this status quo and projecting American power abroad may be the only meta-policy the Washington establishment agrees on—which is why Mitt Romney was attacked by Republicans for his premature acerbic response to the killings of four American diplomats in Libya.   

But there are recent signs, PAI said, of “a growing consensus” in Washington that the Pentagon could absorb budget cuts of half a trillion dollars over the next decade, citing a defense industry blog in The Hill, a congressional newspaper, that focused on a report by several defense industry think tanks.

“Researchers at NSN surveyed disparate proposals for Pentagon spending reductions drafted by Project on Defense Alternatives, Center for a New American Security, Center for American Progress, the Stimson Center, RAND Corporation and the Project on Government Oversight,” The Hill blog said. “When averaged in total with the other recommended reduction levels proposed among the remaining think tanks surveyed, the final figure comes to $510 billion.”

One reason defense cuts are not on the negotiating table is that Fix the Debt leaders do not only sit on the boards of military contractors, PAI’s report said, but some are paid lobbyists for those firms. “Steering committee member Jim McCrery, characterized as a former member of Congress on Fix the Debt’s website, is a lobbyist for GE, Chevron, and several other companies with defense contracts,” it said.

“Vic Fazio has lobbied in 2012 for some companies with defense contracts, such as Dow Chemical, though the companies’ contract amounts are relatively minimal,” PAI’s report continued. “Fazio also lobbied on behalf of Corrections Corporation of America (CCA), a private prison company, which has insignificant defense contracts but $380 million in DOJ and DHS contracts in 2012.”

Other Paths to Long-Term Solvency

There have been innumerable reports about how Congress could easily solve the Social Security piece of the so-called debt crisis without changing the cost-of-living index—but, of course, they all require wealthier individuals to pay more. As Joshua Holland writes in The Fifteen Biggest Lies About The Economy, the doomsday projections about Social Security are all based on worst-case scenarios spanning decades. “Right now Americans pay Social Security taxes on the first $106,800 they earn,” he said. “Eliminating that cap would instantly close the ‘Social Security gap’ over the long run.”

Another “tax gap” of around $300 billion comes from owed but unpaid federal taxes—and not from individuals as much as businesses that have turned to using overseas entities to avoid domestic tax liabilities. Holland quotes David Cay Johnson, an ex-New York Times tax reporter whose books discuss the off-shoring trend (equal to 25 percent of corporate earnings in 2009) as well as delaying payment of tax bills, so-called deferrals, which Johnston called “one of the major tools for redistributing wealth upwards.”

Doomsayer in Chief Peter Peterson

Another notable facet behind Fix the Debt coalition is the presence of Michael Peterson on the board. He is the president of a foundation founded by his father, Peter Peterson, a former U.S. commerce secretary under Richard Nixon and co-founder of the Blackstone Group, a private equity firm that made a fortune in the hostile takeovers in the 1990s. Peterson put $1 billion of his own money into the Peter G. Peterson foundation, and has single-handedly bankrolled the war of ideas on the debt crisis, Holland writes.

“The agenda of Peter Peterson and his ilk,” wrote [Center for Economic and Policy Research Co-Director Dean] Baker in 2009, “never had anything to do with generational equity. The point was always to gut Social Security and Medicare. These programs stand out as key targets precisely because they are hugely effective and popular.” What’s remarkable is how successful Peterson has been in obscuring his agenda in a cloud of supposedly sensible bipartisanship.

As Holland points out, Peterson hired a passel of former Clinton administration officials espousing pro-corporate policies, as well as enlisted like-minded Republicans. Some of these officials now sit on the board of Fix the Debt, such as ex-Clinton budget director Alice Rivlin, ex-Philadelphia mayor and Democratic National Committee chairman Ed Rendell, and current Los Angeles mayor Antonio Villaraigosa.

“The result of all of this is what liberal economist Robert Kuttner called a disabling…bipartisan echo chamber on the entitlement crisis,” Holland writes. So it is not surprising that as the fiscal cliff talks speed toward a "deal," as the PAI report found, Pentagon cuts are not just off the table: they’re missing in action.

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