When deals go bad, most businesses absorb the costs or negotiate a new arrangement. Not the defense contractor Boeing/McDonnell Douglas. It arranges for taxpayers to pick up the tab, as Boeing did with a stealth provision inserted without debate, discussion, or vote into the Senate emergency appropriations bill which passed on March 26. The inconspicuous provision, added by Sen. Christopher S. Bond (R-MO), would set terrible precedents for "emergency spending."
Under the $272 million Boeing bailout, taxpayers would purchase eight F/A-18 fighters that Thailand was scheduled to buy. Because of financial difficulties and plummeting exchange rates, Thailand sought out of the deal. If the $272 million remains in the bill after negotiations with the House, the Marines will receive eight new planes that they did not ask for.
The funds are not offset by spending reductions and would therefore bust tenuous hopes for a balanced budget. The Pentagon will not have to prioritize funding to determine if it really wants the planes, nor will it have to touch its $796 million rainy-day-fund - available because of lower than expected inflation.
Moreover, there was no pressing "emergency" that warranted including the funds in an emergency appropriations bill designed to pay for natural disasters and operations in Bosnia. The merits of such a bailout - and the precedent it would set for future arms deals - could have been discussed on the floor at a future date. However, Senator Bond was able to circumvent the usual congressional process and avoid such deliberations.
Setting the stage for a budget battle, the House version of the emergency spending bill does not contain funds to purchase the planes. In addition, the House, unlike the Senate, has offset the bill's additional spending with cuts to maintain budget balance.
Bond publicly praised the Senate provision for helping McDonnell Douglas, a major employer in his state. Also important is the help that McDonnell Douglas and its merger-partner Boeing have given politicians. Combined, the two corporations have already given $39,200 towards Senator Bond's 1998 reelection campaign, according to the Center for Responsive Politics. They have spent almost $4 million on lobbying and given $750,000 to candidates and parties during the 1997-98 election cycle. In addition, the two corporations have given $1,183,540 over the last three election cycles in soft money for "party building" expenses.
Thailand's withdrawal also highlights the potential for future taxpayer bailouts from a loan guarantee fund designed to help 19 Eastern European countries upgrade their militaries to NATO standards. If the Eastern European countries encounter similar financial problems, defense contractors won't even need special legislation to make sure they get paid. The Defense Export Loan Guarantee Fund already puts taxpayers on the hook for up to $15 billion in risky business deals.
For more information, contact David Madland at email@example.com .