Oiling the War Machine: Corruption of the Land of the Free

Oiling the War Machine

Corruption of the Land of the Free via Project Censored

Congress Invested in Defense Contracts

The nonpartisan Center for Responsive Politics has calculated that more than 151 members of Congress have up to $195 million invested in major defense contractors that are earning profits from the US military occupations in Iraq and Afghanistan. 

When General David Petraeus, the top US military officer in Iraq, went to Capitol Hill to brief Congress in April of 2008, he was addressing lawmakers who had a lot more than just a political stake in the Iraq occupation. Along with their colleagues in the House and Senate, the politicians who got a status report from the general and the US ambassador to Iraq had millions of dollars of their own money invested in companies doing business with the Department of Defense (DoD).  

In 2006, the investment portfolios of 151 current members—more than a quarter of Congress—had between $78.7 million and $195.5 million invested in companies that received major defense contracts (over $5 million). The portfolios include holdings in companies paid billions of dollars each month to support America’s military. These companies provided almost everything the military uses, from aircraft and weapons to medical supplies and soft drinks.  

Lawmakers with the most money invested in companies with DoD contracts include Sen. John Kerry (D-Mass), with up to $38,209,020; Rep. Rodney Frelinghuysen (R-NJ), with $49,140,000; Rep. Robin Hayes (R-NC), with $37,105,000; Rep. James Sensenbrenner Jr. (R-Wis), with $7,612,653; Rep. Jane Harman (D-Calif), with $6,260,000; Rep. Fred Upton (R-Mich), with $8,360,000; Sen. Jay Rockefeller (D-WVa), with $2,000,002; Rep. Tom Petri (R-Wis), with $5,800,000; Rep. Kenny Ewell Marchant (R-Texas), with $1,163,231; and Rep. John Carter (R-Texas), with up to $5,000,000. 

Forty-seven members of Congress (or 9 percent of all members of the House and Senate) in 2006 were invested in companies that are primarily in the defense sector. The average share price of these corporations today is nearly twice what it was in 2004. Lawmakers’ investments in these contracting firms yielded them between $15.8 million and $62 million in income between 2004 and 2006, through dividends, capital gains, royalties and interest, the Center found. 

Companies with congressional investors received more than $275.6 billion from the government in 2006. The minimum value of Congress members’ personal investments in defense contracting firms increased 5 percent from 2004 to 2006, but because lawmakers are only required to report their assets in broad ranges, the value of these investments could have risen as much as 160 percent—or even dropped 51 percent. 

Senator John Kerry (D-Mass.) and House Representative James Sensenbrenner (R-Wis.), two of Congress’s wealthiest members, were among the lawmakers who earned the most from their investments in defense contractors between 2004 and 2006, with Sensenbrenner making at least $3.2 million and Kerry reaping at least $2.6 million. The Senate Foreign Relations and Armed Services committees both have members who are major investors in Defense companies. Chairs of other defense-related committees are similarly invested. Sen. Joe Lieberman (I-Conn.), chairman of the Senate Homeland Security and Governmental Affairs Committee, had at least $51,000 invested in defense companies in 2006. Rep. Howard Berman (D-Calif.), who heads the House Foreign Affairs Committee, had at least $30,000 invested in defense companies. 

As the military operations in Iraq and Afghanistan have expanded and transformed, so too has the need for goods and services that extend beyond helicopters, armored vehicles and guns. Giant corporations outside of the defense sector, such as Pepsico, IBM, Microsoft and Johnson & Johnson, have received defense contracts and are all popular investments for both members of Congress and the general public. 

A spokesman for Sensenbrenner, who has supported the administration’s policy in Iraq, said the congressman’s stocks were left to him by his grandparents and are managed almost entirely by his investment advisors. Kerry, who has been particularly outspoken against the Bush administration’s strategy and policies in Iraq, is a beneficiary of family trusts, which he doesn’t control, the senator’s spokesman said. 

 

Update by Lindsay Renick Mayer

When we sat down to write this story, we had in mind a few of the obvious war contractors: Boeing, Lockheed Martin, General Dynamics, and so on. But when we finished, we had a story about the fact that nearly every lawmaker was invested in war contractors because the scope of the war had grown to the point that otherwise unlikely suspects, such as Pepsi and Johnson & Johnson, were involved. This meant that not only was it difficult for lawmakers to avoid having such investments, it was equally hard for any member of the public with a diverse blue-chip portfolio to steer clear of them. 

Members of the public, however, weren’t making decisions about defense legislation that could affect the value of those investments. Lawmakers continue to do so, of course, and continue to hold on to these investments. In 2007, their defense-related assets were worth between $5.3 million and $11.1 million. (Because lawmakers report the value of their investments in ranges, it’s impossible to calculate their exact worth.) 

The 2008 personal financial disclosure reports are also now available on OpenSecrets.org at http://www.opensecrets.org/pfds/search_cid.php. 

Lawmakers aren’t just benefiting from the defense sector personally, but also politically. In the first three months of 2009, the defense sector gave nearly $2 million to candidates, party committees and political action committees, with 57 percent of that going to Democrats. In the 2008 election cycle, the sector gave $23.5 million. Rep. John Murtha (D-Penn.), House Defense Appropriations Subcommittee chairman, has collected more money from the sector than any other lawmaker since 1989 at $2.6 million. Murtha has gotten some heat—and a lot of attention—this year for his connections to now-defunct lobbying firm PMA Group, which the FBI is investigating for allegedly violating campaign finance laws. The firm’s clients were primarily defense companies that sought earmarks from Murtha’s subcommittee. 

Should President Obama stick to his timeline to start bringing troops home from Iraq, it will be interesting to watch as lawmakers decide whether to continue investing in war contractors, especially if their need (and, therefore, lucrative DoD contracts,) diminishes over the coming years. 

We’ve been pleased that the mainstream press has been interested in covering lawmakers’ personal finances, in addition to their various financial connections to the defense industry. The press—including the Wall Street Journal, Washington Post, New York Times, prominent bloggers, and other watchdogs—frequently pulls data from OpenSecrets.org and cites our reports, including this one. It’s important that the public understands the full relationship between lawmakers and the companies affected by their legislative votes. Only then can members of the public determine whether decisions are being made based on the merits or the money. 

To read more about how lobbying, personal finances, and influence peddling are shaping legislation, keep up with CRP’s blog at http://www.opensecrets.org/news/. 

And to do some investigating yourself, dive into our personal financial disclosure database: http://www.opensecrets.org/pfds/index.php.

Source:
Opensecrets, April 3, 2008
Title: “Strategic Assets”
Author: Lindsay Renick Mayer

Student Researchers: Leora Johnson and Michael Seramin
Faculty Evaluator:  Peter Phillips PhD
Sonoma State University

 Dollar Glut Finances US Military Expansion

The worldwide surplus of dollars is forcing foreign central banks to bear the costs of America’s expanding military empire. Keeping international reserves in “dollars” means that when US financial speculation and deficits payment pumps “paper” into foreign economies, these banks have little option but to recycle it into US Treasury bills and bonds — which the Treasury then spends on financing an enormous, hostile military build-up to encircle the major dollar-recyclers: China, Japan and Arab OPEC oil producers. These governments are forced to recycle dollar inflows in a way that funds US military policies in which they have no say in formulating, and which threaten them more and more belligerently. 

To date, countries have been powerless to defend themselves against the fact that this compulsory financing of US military spending is built into the global financial system. Neoliberal economists applaud this as “equilibrium” as if it is part of economic nature and “free markets” rather than bare-knuckle diplomacy wielded with increasing aggressiveness by US officials. The mass media chime in, promoting the assumption that recycling the dollar to finance US military spending is the international community’s way of “showing faith in US economic strength” by sending “their” dollars here to “invest.” The implication is that a choice is involved.

However, the foreigners in question are not consumers buying US exports, nor private-sector “investors” buying US stocks and bonds. The largest, most important foreign entities putting “their money” here are central banks, and it is not their money at all. They are sending back the dollars that foreign exporters and other recipients turn over to their central banks for domestic currency.

The US economy can create dollars freely, now that they no longer are convertible into gold, or even into purchases of US companies. Consequently, the US remains the world’s most protected economy. It alone is permitted to protect its agriculture by import quotas, having grandfathered these into world trade rules half a century ago. Congress refuses to let “sovereign wealth” funds invest in important US sectors. 

US Treasury prefers foreign central banks to keep on funding its domestic budget deficit, which means financing the cost of America’s war in the Near East and encirclement of foreign countries with rings of military bases. The more capital outflows US investors spend to buy up foreign economies—¬the most profitable sectors, where the new US owners can extract the highest monopoly rents—the more funds end up in foreign central banks to support America’s global military build-up. 

No textbook on political theory or international relations has suggested axioms to explain how nations act in a way so adverse to their own political, military and economic interests. Yet this is just what has been happening for the past generation. 

The ultimate question is what countries can do to counter this financial attack. How can nations act as real nations, in their own interest, rather than in America’s interest? Any country trying to do what the United States has done for the past 150 years is accused of being socialist or protectionist—this from the most anti-socialist economy in the world. 

The problem of speculative capital movements goes beyond drawing up a set of specific regulations. It concerns the scope of national government power. The International Monetary Fund’s Articles of Agreement prevent countries from restoring the “dual exchange rate” systems that many retained down through the 1950s and even into the 60s. It was widespread practice for countries to have one exchange rate for goods and services (sometimes various exchange rates for different import and export categories) and another for capital movements. Under US pressure, the IMF enforced the pretence that there is an “equilibrium” rate that just happens to be the same for goods and services as it is for capital movements. Governments that did not buy into this ideology were excluded from membership in the IMF and World Bank,¬ or were overthrown. 

The implication today is that the only way a nation can block capital movements is to withdraw from the IMF, the World Bank and the World Trade Organization (WTO). For the first time since the 1950s this looks like a real possibility, thanks to worldwide awareness of how the US economy is glutting the global economy with surplus “paper,” and US resistance to stopping its free ride. From the US perspective, this is nothing less than an attempt to curtail its international military program of global domination. 

Update by Michael Hudson

The largest “free lunch” in the world is the ability of the US Treasury to issue what is now $4 trillion in paper in exchange for foreign exports, the sale of foreign companies and real estate to US buyers, and US military purchases abroad. These three dynamics make up the US balance-of-payments deficit—which is “free” to the extent that foreign central banks recycle the surplus dollars into Treasury bonds and other US securities (including Fannie Mae junk mortgages between 2004 and 2007).

China has sought to limit its acquisition of dollars, and other countries are discussing how to limit further dollar inflows.

Corporate media continue to talk of a “global savings glut,” as if foreign governments invest in Treasury bills because they are “a good buy” and foreigners “have faith in the US economy.” But Treasury bills are only yielding 1 percent now, and the dollar is weakening, so it is not a good buy at all. Foreigners are trapped in the mechanics of the international financial system controlled by the US via the IMF and World Bank. At the recent G-20 meeting in April, countries reached an impasse. But the press did not explain the conflict of interest behind this impasse.

I have written about the dynamics of the dollar’s free ride in Super Imperialism: The Economic Strategy of American Empire (1972, new ed. Pluto Press 2002). The remarkable thing is that the information is “in plain sight,” in the sense that Edgar Allen Poe meant when he discussed how to hide the purloined letter. Reporters just don’t read the Federal Reserve Bulletin and the Treasury Bulletin for the month-to-month statistics that tell where the bodies are buried. Instead, they repeat handouts from the Treasury or Federal Reserve, ignoring the statistics on US Government liabilities to foreign central banks and other foreign holders.

Source: Global Research, March 29, 2009
Title: “Economic Meltdown: The “Dollar Glut” is What Finances America’s Global Military Build-up”
Author: Michael Hudson

Student Researcher: Frances Capell
Faculty Evaluator: Mickey Huff
Sonoma State University

[Saddam Hussein’s only real weapon of mass destruction was the regional oil bourse he was about to instigate with close oil-rich neighbours – which would have seen oil trade conducted in the Euro instead of US dollars. This was the real trigger that set the timer on the illegal invasion and occupation of Iraq. – R.A.]

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