By Jessica Budlong, Policy Intern
At a time when almost 18 million Americans are unemployed, and 28 million are at risk of losing a roof over their heads, Congress may vote to pad the bank accounts of the already well-funded defense industry. The current National Defense Authorization Act (NDAA) is set to spend $740 billion on defense, and the recent Coronavirus Aid, Relief, and Economic Security (CARES) Act already provided $688 million to defense contractors. Another $30 billion was also allocated in the Senate’s most recent Coronavirus relief bill on July 27.
Even with all this funding, eight major defense contractors are still asking for more money, warning of “dire consequences for the defense industrial base” due to COVID-19 related costs. If the average American is expected to have a rainy day fund to cover expenses during a pandemic, shouldn’t we expect the same from the defense industry?
On July 7, executives from Lockheed Martin, Boeing Defense, Raytheon Technologies, General Dynamics, L3Harris Technologies, Textron, BAE Systems and Huntington Ingalls Industries sent letters to acting White House budget chief Russ Vought and Pentagon acquisition chief Ellen Lord asking for more funds due to COVID-19 related costs. The CARES Act that passed in March allocated $10.5 billion dollars to the Department of Defense (DoD), with $7.559 billion “to prevent, prepare for, and respond to coronavirus, domestically or internationally,” with the majority of funds going to defense contractors. The most recent House defense appropriations bill includes $758 million “to mitigate the impacts of COVID on second, third, and fourth tier suppliers in the Defense Industrial Base” while the Senate’s most recent bill gives $11 billion to the “Pentagon to cover the costs of reimbursements made to contractors who provide paid or sick leave to employees who can’t access federal facilities during the pandemic.”
This request for more funding comes only months after all eight major defense contractors reported their income statements for 2019. Combined, these eight companies amassed more than $200 billion in revenue, which is 35 times more than the operating budget of the Center for Disease Control (CDC). The cash from operations that Lockheed Martin holds alone is greater than the CDC budget at $7.3 billion. That collective amount is also about 3.2 million times larger than the average American’s household income.
Lockheed Martin is also estimated to have made $59.8 billion in profits in 2019, an increase of almost $6 billion from 2018. Their recent contract to build 95 new F-35s in 2021 is also estimated at $9.1 billion in the upcoming NDAA and $686 million in the July 27 Senate bill proposal. This contract not only provides billions to Lockheed Martin, but other defense contractors profit from this as well. BAE Systems, a signatory asking for more funds, builds the aft fuselages that are needed for the F-35s, adding to their estimated $25 billion in profits.
As BAE Systems’ Chairman said, “a deep order backlog and long-term programme positions giving multi-year visibility” helped improve “operational performance against a backdrop of continued geopolitical turbulence” in 2019. With $57.23 billion in backlog, meaning scheduled contracts, it is hard to understand why American taxpayers need to help them cover COVID-related losses in 2020. Between the eight contractors, the value of their backlog is estimated at $465.41 billion, with almost every company realizing record numbers in 2019. As Raytheon chairman and CEO said, “Raytheon had a very successful year in 2019, delivering record bookings, backlog, sales and operating cash flow,” with $29.2 billion in net sales alone.
With more than 100,000 small businesses permanently closed, and most Americans receiving a paltry $1,200 to make ends meet, Congress has to ask some tough questions before even considering any further relief for defense contractors. Rep. Katie Porter (D-CA-45) told Lockheed Martin’s Greg Ulmer, “I am unable to understand why you need this additional money when your profits are up… Use your 15% increase in profit to pay to protect your workers during COVID. Why are we footing the bill to help a company that is having an uber profitable moment…? To the everyday American, if they had seen their income go up by 15%, they wouldn’t call it a disruption, they would call that a miracle.”
At any time, growing amounts of available cash would be a distant dream for most Americans. It is just an everyday reality for major defense contractors, even though we are in the midst of a global pandemic. These same companies take pains to extol their patriotism. It’s clear that the most patriotic thing they could do at this moment is tighten their belts and stop asking taxpayers for handouts.