Raytheon Mourns End of Afghan War: Covets Increase in DoD Contracts

October 29th, 2021 - by Eil CLifton / The Quincy Institute for Responsible Statecraft

CEO says military budget is ‘aligned’ with Raytheon’s interests. 

Arms Execs Lament Losses from Afghanistan Exit;
Tout Pentagon’s Billion-dollar Budget Bail-out

Eil CLifton / The Quincy Institute for Responsible Statecraft

{October 27, 2021) — Speaking to investors on Tuesday, two of the biggest US weapons manufacturers provided estimates on how the US withdrawal from Afghanistan, a war that cost US taxpayers over $2 trillion and took over 243,000 lives, impacted their bottom lines. Both companies also expressed enthusiasm about a bipartisan push to increase the 2022 defense budget by $29.3 billion, a five percent increase over the 2021 budget and more than $10 billion more than President Biden requested.

Approximately half of the defense budget goes to contractors like Lockheed Martin and Raytheon, both of whom explained to investors how the end of a 20 year war will impact their profits while still painting a rosy picture of ballooning defense spending driving corporate revenue and padding the bottomline for shareholders.

Raytheon CEO Gregory Hayes, who took home nearly $21 million in compensation last year, acknowledged that the end of a war was bad for the bottomline, telling investors:

Yeah. So the lost sales on the defense side, I would category — three categories of issues there. One, I think the pullout in Afghanistan, there’s about a $75 million impact to full year revenue, not huge but meaningful.

But Hayes might be bullish on his long-term business prospects, despite the “not huge but meaningful” financial hit from the end of a 20 year war.

Earlier in the call, the weapons executive boasted about bipartisan support for boosting the defense budget above what the White House requested. “[As] we’ve said, defense spending is nonpartisan, and we’re encouraged to see Congress supporting plus ups to the president’s budget that are also aligned to our business and our investments in new technologies,” said Hayes, offering an unusual interpretation of the bipartisan motivation to boost defense spending.

Hayes’s assessment that the budget was “aligned” with his business and financial interests instead of national security priorities like climate change, which the Pentagon and the White House identify as existential national security threats, is a moment of candor from the weapons industry. The alignment of the defense budget with the business needs of for-profit-weapons-firms might not be a total coincidence. The weapons industry spent over $1 billion lobbying Congress between 2002 and 2020 while government funding of the top five weapons firms grew by 188 percent

Raytheon’s optimism about future profits fueled by ballooning defense budgets was shared by Lockheed Martin on its own earnings call conducted on the same day. Lockheed’s CFO acknowledged that the Afghanistan withdrawal created “a $200 million year-over-year headwind,” referring to the negative financial impact on the company from the withdrawal.

But Lockheed CEO James Taiclet, who received over $23 million in compensation last year, was quick to pin his company’s future profits to, among other factors, “the size of future defense budgets and the global geopolitical landscape.”

In other words, a defense budget that exceeds the White House’s requests and a geopolitical landscape defined by great power competition — a state of affairs that Taiclet previously used to justify Lockheed’s consolidation of the missile engine market despite concerns by antitrust regulators — is central to the company’s growth. 

Much like Raytheon’s CEO, Lockheed’s CFO spoke optimistically about the defense budget increases, not in terms of US national security, but in relation to the company’s financial wellbeing, telling shareholders, “I’d say we’re encouraged about the direction of the various committee markups as they reflect really good support for a number of our programs.”

Congress Urged to Tighten Rules on Lobbying:
Pentagon Contractors Hired 1,718 Former DoD Officials to Lobby Congresss

The revolving door from the Pentagon to the weapons industry keeps war profitable.

Eil Clifton / The Quincy Institute for Responsible Statecraft

WASHINGTON, DC (September 20, 2021) — Fourteen Pentagon contractors hired 1,718 former Department of Defense senior civilian and military officials from 2014 to 2019, raising serious questions about the safeguards in place to limit lobbying by former DoD officials and undue influence by weapons firms over national security policies.

The data, laid out in a Government Accountability Office report this month, resulted in a number of good governance and foreign policy groups, including the Quincy Institute, sending a letter today to House Rules Committee Chair Rep. James P. McGovern (D-Mass.) and Ranking Member Rep. Tom Cole (R-Okla.), urging them to strengthen revolving door restrictions on former DoD personnel in the 2022 defense authorization bill.

“Existing restraints on lobbying by former DOD officials are woefully inadequate and undermine efforts to prevent undue influence on the national security policies of the United States,” says the letter, organized by the Project on Government Oversight. “Amendments to further limit the revolving door will enhance integrity in the operations of the Department of Defense.”

Specifically, the coalition asks Congress to ban former government employees from registering as lobbyists for two years (an increase over the current one year ban), extend the period in which Pentagon officials must recuse themselves from decisions involving their former employers from one to four years and require contractors to report their hiring of former senior Pentagon officials and officers.

The steps, if implemented, would signal that Congress is serious about combating the fiscal and national security costs of revolving door employment and influence peddling. “Influence peddling by former senior officials on behalf of contractors risks diminishing military effectiveness, undermines competition and performance, and leads to higher costs for the military and taxpayers,” says the letter.

That threat has risen in profile as critical assessments of the US war in Afghanistan show that weapons firms pocketed at least $4.4 trillion since September 11, 2001, while the post-9/11 wars have imposed $8 trillion in past or future costs on taxpayers. 

Alan Davis, Raytheon’s CEO for UAE investments.

The revolving door for top Pentagon brass was highlighted in a Washington Post investigation earlier this month. It found “eight generals who commanded American forces in Afghanistan between 2008 and 2018 have gone on to serve on more than 20 corporate boards,” including former chairman of the joint chiefs of staff Ret. Gen. Joseph Dunford Jr., who joined the board of Lockheed Martin.

An investigation by Responsible Statecraft and The Daily Beast earlier this year found that two-thirds of the Afghanistan Study Group, a blue ribbon task force established by Congress that recommended President Joe Biden extend the US troop presence in Afghanistan, have current or recent financial ties to the weapons industry, a financial conflict of interest that went undisclosed by the ASG. 

The amendments highlighted in the letter “would take significant steps toward restoring Americans’ faith in their government and ensuring that the military and its civilian leadership are above reproach in their service to our nation,” says the letter. “Current restrictions have done little to slow the revolving door, and it’s clear that systemic legislative change is needed.”

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