Is Jim Kunstler Serious?

Can Jim Kunstler be serious when he says "Forget about 'Recovery'?" He is as serious as a financial cataclysm. And if you missed his essay on the "Peak Oil story" . . . . Don't. He's one of the best futurist writers we have today. Frida Berrigan is also hot on the track of the defense contractor bad guys. (Emphasis marks were inserted - Ed.)

While the good times rolled during the long slide from surplus to deficit, from no war to global war, it wasn't just the Merrill Lynches and subprime mortgage giants that cleaned up. Lockheed Martin, Boeing, and Northrop Grumman - the top three defense contractors - had a ball, too. In 2002, the first full year of what came to be known as the Global War on Terror, for instance, those three companies - ranking first, second, and third on the Pentagon's list of top ten contractors - split $42 billion in contract awards, more than two-thirds of the $67 billion distributed among the top 10 Pentagon contractors. In 2007, the last year for which full contracting data is available, the same Big Three split $69 billion in Pentagon contracts, which was more than the total received by the top 10 companies just five years earlier. The top 10 divvied up $121 billion in contracts in 2007, an 80% increase over 2002. Lockheed Martin, the number one Pentagon contractor, graduated from a mere $17 billion in awarded contracts in 2002 to $28 billion in 2007. That's a leap of 64%. Given such figures, it's easy enough to understand how the basic military budget - excluding money for actual war-fighting - jumped from about $300 billion to more than $500 billion during the Bush years. Given the economic climate, it's no surprise that the three defense giants have all posted losses in the past few weeks. But before the hankies come out and the histrionics start, it should be noted that Lockheed Martin alone has an $81 billion backlog in orders, enough to keep chugging along for another two years without a single new contract. If such war spending had been an effective stimulus for the economy, we would be roaring along on 12 cylinders today. But increasingly this kind of spending mainly stimulates corporate shareholders, stock prices, and (of course) war itself. No matter, the staggering new defense budget ensures that, for the defense industry, some version of good times will continue to roll, even if the economic impact of these huge military investments proves negligible and the need in other areas is staggering.

Suzan ___________________

"Buy America"

It's really nice to know that the Pentagon has given Boeing another chance to bid on the "$35 billion contract for midair refueling tankers, allowing Boeing to continue its effort to wrest the business from a partnership of Northrop Grumman and the European parent of its rival Airbus." Or so says The New York Times of today. My favorite sentence of this tasty military equipment (click here for a demonstration) report (how's that for irony?) is "Howard Rubel, an analyst at Jeffries & Company, said that the announcement meant 'that both companies will have an equal opportunity to abuse each other for a while longer.'" This is the same Boeing that was previously found with its hand in the candy jar of fraudulent contract bidding and jail time for its employees. Also the Boeing who has handily subsidized most of the candidates (and every Rethuglican) for the Presidency (and many, many congressional offices) of the US. And John McCain's championing of the Airbus team must have really hurt Boeing's feelings. Now I'm pretty sure that the Air Force wasn't trying to punish Boeing (one of its best customers) by giving the contract without reason to the Grumman-EADS consortium, only get the best (ahem!) deal. But still . . .

The Pentagon announced on Wednesday that it would reopen bidding on a $35 billion contract for midair refueling tankers, allowing Boeing to continue its effort to wrest the business from a partnership of Northrop Grumman and the European parent of its rival Airbus. Defense Secretary Robert M. Gates said that the tanker contract, which was won by the partners Northrop and the European Aeronautic Defense and Space Company in February, would not be awarded until the Pentagon reviewed the rival bids again. The companies have battled fiercely to land the Air Force’s largest contract, with a potential value of $100 billion. The struggle has been caught in issues of national pride, trans-Atlantic relations and even presidential politics. Mr. Gates’s action was a public rebuke to the Air Force, which had selected the offering of Northrop and EADS, the parent of Airbus. Shortly after the Air Force made its selection, the Government Accountability Office, acting on a protest from Boeing, said that the Air Force’s decision-making process was flawed and that the tanker contract should be reopened. In his announcement on Wednesday, Mr. Gates said that a special committee operating out of his office and headed by the Pentagon acquisitions under secretary, John J. Young Jr., would make the final contract selection, not the Air Force. “I’ve concluded that the contract cannot be awarded at present,” said Mr. Gates, citing the “significant issues” pointed out by the G.A.O. The contract, in its first phase alone, would provide for 179 aerial refueling tankers to replace the Air Force’s aging fleet, which is being strained by wars in Iraq and Afghanistan and has planes that date to the Eisenhower era. The Northrop team was offering a variation of its A330 plane, while Boeing was offering a modified 767. The tankers are used to refuel military planes while in the sky. There was no clear winner or loser between the two companies in Mr. Gates’s decision. But it was another blow to the Air Force, whose ability to manage huge weapons-buying programs has been questioned. Two of its top officials were recently fired because of security breaches. “Clearly, this is a vote of no confidence in the Air Force,” said Loren B. Thompson, a military analyst at the Lexington Institute, a Washington research group. Howard Rubel, an analyst at Jeffries & Company, said that the announcement meant “that both companies will have an equal opportunity to abuse each other for a while longer.” Mr. Rubel added that until the Pentagon issued a modified request for proposals from the two companies, it would be difficult to determine which might have an edge. The Pentagon will not reopen the entire contracting process, but will focus on eight problem areas cited in the G.A.O. report, and Mr. Gates said the final decision might be made by December. But many analysts said that timetable might be overly ambitious. Even Mr. Young, the acquisitions under secretary, said on Wednesday that the decision-making schedule might slip. Both Boeing and Northrop issued news releases praising Mr. Gates’s action. A Senate committee is to begin hearings into the tanker contract and the G.A.O. report on Thursday. . . . Northrop said that it applauded Mr. Gates’s decision and added that “the United States Air Force has already picked the best tanker, and we are confident that it will do so again.” Ralph D. Crosby Jr., chief executive of EADS North America, said the company welcomed the rebidding and said it was “ready and anxious to get back to work” on the project. One of the central players in the tanker contract is Senator John McCain, the presumptive Republican presidential nominee. Several years ago, Mr. McCain stopped the contract from being granted to Boeing, after the terms of a tanker lease arrangement between the Air Force and Boeing were revealed. Some have seen him as favoring a European company over an American one, an impression was not eased by the fact that several of his top campaign advisers had worked as lobbyists for Airbus. In a statement on Wednesday, Mr. McCain praised Mr. Gates’s decision as a step toward “full and open competition.” European military suppliers have long thought that the Pentagon has encouraged other nations to buy American military goods, while closing the door to purchases of military equipment made by European suppliers. And European countries thought the Airbus proposal finally gave them a shot at landing a major Pentagon contract, especially after both the British and Australian air forces picked the Airbus tanker. In London, Alexandra Ashbourne, who heads Ashbourne Strategic Consulting, an aerospace analysis firm, said Mr. Gates’s decision “was probably the best of all possible outcomes,” but added that EADS felt “very raw” over the whole process, given the amount of effort and expense that went in to putting in a bid, only to see it slip away. “On this side of the Atlantic,” she said, “there is concern that politics will be allowed to take hold and that Congress will get involved. Then you have pork barrel politics and it is an election year. The timing is very bad.” In Congress, “Buy America” sentiment fueled outrage at the initial selection of Airbus. But that was also tempered by a fierce political battle on behalf of the European supplier by the delegations of the States of Alabama and Mississippi, where EADS promised to build most of the tankers and create jobs. Members of Congress on both sides of the issue released statements on Wednesday praising Mr. Gates, but promoting their own positions. Representative Duncan Hunter, a California Republican who is an outspoken advocate for Boeing, said that he wanted to make sure the “mistakes made in the original competition are not repeated.” Senator Richard C. Shelby, an Alabama Republican who is in the Airbus camp, said that the Pentagon rebid decision was “an appropriate solution.”

So, back to business as usual. Or as a friend of mine says, "Nothing new here. Move along!" Suzan ____________________