12:54 p.m. November 9, 2013

The Defense Industry's Grand Bargain

Or, how we agreed to cut spending and export the bomb.

Translated from Washington-speak, the trite phrase "grand bargain" is basically a trumped up label for what used to be called compromise - though, even that's being charitable. In the current vernacular, it means Congress enacting big cuts to programs Americans don't want cut in exchange for small tax changes that lots of citizens support - but that Corporate America hates. In other words, the phrase is designed to put a cheery label on another heist. The only thing "grand" about such a bargain is the fact that proles get thrown a few bones (which, to be fair, is unusual these days).

Lately, of course, we've been told that any "grand bargain" is - to use yet another "Double Down"-esque cliche - "off the table." Evidently, Democratic lawmakers' eagerness to betray their old "lockbox" promises and join Republicans in slashing Social Security is not enough to get Republicans to even discuss ending massive corporate subsidies written into the tax code. In quite bizarre fashion, the GOP's undying fealty to those subsidies is effectively protecting fixed-income seniors from getting another financial kick in the dentures.

The sound and fury over the prospect of this particular "grand bargain" will no doubt attract all the attention over the next few months. Yet, there is another grand bargain that is already being implemented by Washington's national security elites - and this bargain is being felt across the globe.

The story of this other grand bargain starts, as every current political story seems to, with the Tea Party.

While the D.C. punditburo smugly declared the Tea Party-engineered government shutdown an ideological loss for the right, it unfortunately was the opposite. Conservatives managed to make once-controversial sequester cuts the new White House-approved baseline from which future budget negotiations now start. That kind of institutionalized austerity is a huge victory for the right's drown-government-in-the-bathtub ideologues.

Normally in these situations, there's a convergence of interests whereby a policy victory for those conservative ideologues is also considered a victory for the lobbyists, corporate-owned politicians and private contractors in both parties who comprise Permanent Washington. But while that transpartisan elite surely doesn't object to cuts to stuff like food stamps, and while that elite is probably more than happy that sequestration and budget austerity have hamstrung regulatory agencies, that elite is also very concerned about cuts to the sacrosanct National Security State.

Indeed, when it comes to spending on non-military matters, Permanent Washington is with the right - but when it comes to spending on the bloated National Security State, Permanent Washington typically sounds like a Big Government-loving socialist conspiracy.

Of course, D.C. is first and foremost is worried about cuts to the national security apparatus not because it is genuinely concerned about defending the country. After all, with military leaders arguing that debt poses a grave national threat, it is hard to pretend that wasting this much money on defense spending does anything but weaken - rather than strengthen - America's security. No, Permanent Washington is fretting over sequestration cuts to the defense budget because - whether through lobbying clients, campaign contributions or government contracts - Permanent Washington is itself financially tied to taxpayer spending on the military, the CIA, the NSA and other defense-related agencies.

The political problem, though, is that all the tough-on-spending rhetoric from both parties in Washington has boxed in the defense industry's congressional and White House allies. Politicians have given so many speeches about balanced budgets, uttered so many odes to tightening the belt, offered up so many prophecies of fiscal bankruptcy and ginned up such anti-spending fervor that even the most reliable military spendthrifts in the Republican Party are suddenly being forced to try to live up to their austerity rhetoric.

Not surprisingly, some of them have tried to meld their affinity for defense largesse with their hatred of the social safety net, and then repackage their politics under the banner of budget-balancing fiscal responsibility. Specifically, they rail on debt, and then insist that huge cuts to Social Security, Medicare and social safety net programs can - and should - finance ever-more subsidies their campaign contributors in the defense contracting industry. Ignoring the deficits they created under George Bush, these extremists portray their positions as pay-as-you-go conservatism. In reality, though, it is old-school let-them-eat-cake-ism - the kind that slashes the safety net to further expand a defense budget that is already so huge officials have completely lost track of $2 trillion.

Others like Senate Republican leader Mitch McConnell are simply defending the Pentagon cuts on the merits. With the Senate Republican leader facing a Tea Party primary challenge back at home, he is abandoning his career as a loyal supporter of ever higher defense spending bills. Today, he is recasting himself as a full-scale libertarian. Yes, according to Politico, McConnell now is now claiming "victory for conservatives precisely because (the budget) continues sequestration, the automatic spending cuts that have hit the Pentagon and the sprawling defense industry especially hard."

If this were the end of the story, then perhaps this really would be an unvarnished victory over the out-of-control Military-Industrial Complex and National Security State - a victory not just for the anti-government right (or the anti-war left) but for the majority of voters who want the defense budget reduced. But, of course, this isn't the end of this story. For all the agitprop pretending the defense contracting industry is somehow the powerless and persecuted victim, that industry remains a multi-billion-dollar colossus with an army of lobbyists and a physical presence in almost every congressional district in the country. With that kind of power, it didn't just see the sequestration and abruptly decide to give up its post-World War II reign over American politics. Instead, it engineered a grand bargain.

In this particular deal, the defense contracting industry saw the possibility for a left-right political coalition against Pentagon spending and reacted with a deft lobbying pivot focusing on weapons exports. As the Lexington Institute's Loren Thompson described it, the defense industry and its client politicians are aiming to "compensate for plummeting domestic demand" - read: cuts to U.S. weapons procurement budgets - "by facilitating foreign arms sales." It was a wildly successful move, as the same Democratic president who floated some defense spending cuts and the same congressional Republicans who sequestered the Pentagon budget joined together to recompense the defense industry by radically deregulating the international arms market.

This side of the grand bargain started back in 2010, when the White House and Congress inserted language into an Iran sanctions bill that deregulated the arms export approval process. The U.S. then delayed the international Arms Trade Treaty - and once the Obama administration belatedly signed the pact, the Senate swiftly positioned itself to block it. At the same time, the Obama administration - with no serious objection from congressional Republicans - began circumventing a 2008 statute prohibiting arms exports to nations that use child soldiers. It also started working to undermine an international pact against cluster bombs (not coincidentally just before facilitating exports of cluster bombs to the Middle East).

Summing up the situation, ProPublica reported this year that the moves collectively mean "thousands of parts of military aircraft, such as propeller blades, brake pads and tires will be able to be sent to almost any country in the world, with minimal oversight – even to some countries subject to U.N. arms ebargos." Additionally, the news organization reports that "U.S. companies will also face fewer checks than in the past when selling some military aircraft to dozens of countries." That's on top of both parties resurrecting the Reagan-era idea of using arms exports to empower rebels to wage U.S. proxy wars.

The predictable result of all this has been an arms export bonanza for the defense industry. As Table 4 of a recent Congressional Research Service report documents, U.S. arms exports to the developing world almost quadrupled in just Obama's first term. Overall, the New York Times reported last year that "weapons sales by the United States tripled in 2011 to a record high" $66 billion - or "more than three-quarters of the global arms market." The Pentagon told Congress that it ultimately aims to get that export number up to over $100 billion a year.

Thompson may be right that a grand bargain which trades budget cuts for a deregulated arms export market may ultimately result in a net reduction in revenues to the defense contracting industry. But that hasn't occurred yet. The more than $40 billion increase in annual arms sales that has happened under Obama is larger than the $37 billion cut to Defense Department spending brought on by sequestration. In other words, so far in this grand bargain, the military budget cuts have been relatively small and the arms exports have been huge, likely meaning a net revenue gain for the arms industry.

To be sure, Fortune magazine is right to point out that at least some of this is driven by geopolitics.

"Weapons transfers are also a subtle yet potent form of diplomacy," the magazine noted. "By arming its allies, the U.S. can spread the burden of policing hot spots...and arms exports give Obama's State and Defense departments tremendous negotiating clout with buyers."

That, however, doesn't negate the financial machinations that are also at work. The defense contracting industry is big business, and it made a shrewd shift in the face of a changing budgetary politics. It traded some of its reliance on domestic Big Government socialism for a lucrative brand of international free-market fundamentalism. In the process, the industry crafted a grand bargain that successfully played to Washington's ideological opposition to government spending and its ideological support of market-based solutions and/or "public/private partnerships."

Sure, watchdog groups warn that this will mean better-armed child soldiers, stronger dictators, weaker international anti-proliferation initiatives and a generally more violent world. And yeah, it may also endanger the United States if either newly armed regimes and rebels turn against America or if the armaments we gave them fall into enemy hands.

But for all the saccharine political rhetoric to the contrary, those grave human rights and national security concerns are considered unimportant in a capital whose grand bargains are all about protecting the corporate bottom line.