Lawmakers Pave the Way to Billions in Handouts for Weapons Makers That the Pentagon Itself Opposed

For the better part of a century there was one thing even the U S regime would not do to pad the profits of defense contractors Now more than years of precedent may be coming to an end On Thursday lawmakers in the House approved a pilot undertaking in the pending Pentagon budget bill that could eventually open the door to sending billions to big contractors while providing what critics say would be little benefit to the military The provision which appeared in the budget bill after a closed-door session overseen by top lawmakers would allow contractors to claim reimbursement for the interest they pay on debt they take on to build weapons and other gadgets for the armed services The fact that we are even exploring this question is a little crazy in terms of financial jeopardy The technical-sounding change has such serious implications for the budget that the Pentagon itself warned against it two years ago One big defense contractor alone Lockheed Martin communicated having more than billion in outstanding interest payments last year announced Julia Gledhill an analyst at the nonprofit Stimson Center The fact that we are even exploring this question is a little crazy in terms of financial exposure for the leadership Gledhill stated Gledhill explained even particular Capitol Hill staffers were scandalized to see the provision in the final bill which will likely be approved by the Senate next week Pilot to Where For majority companies paying interest on a loan they take out from the bank is a cost of doing business The pilot venture buried in the budget bill however is one of multiple options in which the federal cabinet would give defense contractors special medicine Contractors can already receive reimbursements from the Defense Department for the cost of research and progress Under the terms of the statute they would also be allowed to receive reimbursements for financing costs incurred for a covered activity Related Trump Administration Diverted Billion in Pentagon Funds to Target Immigrants Lawmakers Say The decree leaves it up to the Pentagon to design the undertaking While it s billed as a pilot there is no hard spending cap in the pending measure The total amount dedicated to the campaign would be determined by the House and Senate appropriations committees The bill tasks the Defense Department with releasing a analysis in February on how well the pilot undertaking worked As approved by Congress however the bill does not explain what metrics if any the Pentagon is supposed to use to evaluate the campaign I don t see any clear parameters for what success looks like Gledhill revealed Are there new entrants Are we building weapons production ceiling Or are new entrants on the way The chairs and ranking members of the House and Senate armed services committees who oversaw the closed-door conference process that produced the final draft of the National Defense Authorization Act did not respond to requests for comment In a document posted online the committee leaders explained that similar provisions were included in House and Senate drafts of the bill Big Spending at Stake The switch to covering financing costs seems to be in line with a larger push this year to shake up the defense industry in light of lessons learned from Russia s brutal war on Ukraine and fears of competition with China The generous view of this provision is Look we have industrial quota constraints and perhaps if we make borrowing essentially free then maybe big maybe contractors will invest in ceiling Gledhill noted She is skeptical that will happen and the Pentagon itself was dubious in a evaluation conducted by the Office of the Under Secretary of Defense for Acquisition and Sustainment The Pentagon discovered that procedures change might even supercharge the phenomenon of big defense contractors using taxpayer dollars for stock buybacks instead of research and enhancement Higher interest rates or increased borrowing only increase Revenue and Profits further the description discovered This creates the real hazard of a moral hazard as it pertains to interest Related When Blood Money Isn t Enough Raytheon Admits to Defrauding Pentagon The sums at stake are enormous The five primes the big defense contractors who claim the lion s share of Pentagon contracts each announced spending massive amounts of money on interest payments last year The companies all disclose their debt loads in slightly different solutions in their annual reports but the scale is nonetheless massive in each affair Lockheed Martin disclosed it had billion in outstanding interest payments RTX formerly known as Raytheon commented it had billion in future interest on long-term debt I don t think a single dollar should go toward interest payments for contractors Northrop Grumman paid million on interest payments in and General Dynamics for its part paid million Meanwhile Boeing reported that it had billion in long-term interest on debt The company did not break down specifically how much of that debt related to its defense business which accounted for percent of its revenue in Along with the five primes Silicon Valley firms such as Anduril and Palantir are increasingly moving into defense contracting It s unlikely that the contractors interest payments would ever be fully reimbursed by the Defense Department Gledhill noted but even getting a fraction covered would amount to a huge giveaway She reported I don t think a single dollar should go toward interest payments for contractors The post Lawmakers Pave the Way to Billions in Handouts for Weapons Makers That the Pentagon Itself Opposed appeared first on The Intercept