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Boeing’s Amazing Shrinking Tax Rate!

11:14 am in Uncategorized by JP Sottile

Boeings massive tax return highlights our nation's corporate welfare system.Last year, government contracting behemoth Boeing paid an effective tax rate of -1.4%.

Yes, you read that correctly—negative 1.4%.

According to a new report from the Center for Effective Government, one of America’s biggest corporations, with profits ranging from $1.6 to $5.9 billion over the last five years, found ways to whittle down its effective tax rate so much that it became, in effect, a source of revenue as they reaped a whopping $82 million tax refund on $5.9 billion in profits.

And this isn’t new.

As Scott Klinger at CFC points out, “Over the last six years, Boeing has reported $26.4 billion in pre-tax profits to its shareholders, while claiming a total of $105 million in refunds from the IRS [for] an effective tax rate of -0.4 percent.”

But wait, there’s more!

Boeing is also the second largest federal contractor. Last year, the aerospace, aircraft and military hardware giant captured 4.4% of the federal contracting pie, which accounted for just over one-third of all of Boeing’s sales!

The grand total?

Public servants in the White House, the Pentagon and on Capitol Hill redistributed $20,182,591,732 of taxpayer wealth to the patriots populating the plush boardrooms of a 36-story skyscraper in downtown Chicago.

With that type of reliable, tax-free income, you’d imagine that Boeing’s corporate headquarters might just be one of the happiest places on earth. But the denizens of Boeing—like CEO W. James McNerney, Jr., who pulled in $27.5 million in 2012—are not sitting alone in the cornered market of defense-related spending. They and their cohorts who sit atop a great federal contracting pyramid scheme—Lockheed Martin, Northrop Grumman, SAIC, Raytheon and General Dynamics—are in no small part why the Washington, D.C. region is the reigning champion in economic confidence.

In fact, Gallup’s tracking survey found that D.C. is the only place in America with any economic confidence at all. Of the fifty states, every one of them has a confidence score mired in the negative. But D.C. scored an astonishing +19 in the most recent tally. In case you hadn’t noticed, the D.C. real estate market shrugged off the Great Recession of 2008 and, beginning in March of 2009, it has registered positive growth each and every year since.

As the Wall Street Journal declared in 2013, the nation’s capital is “a boomtown!”

Unlike Boeing, companies like the aforementioned Northrop Grumman and SAIC, along with uber-luxury carmaker Bentley, have decided to move their headquarters into the region and, therefore, closer to the cutting of the contracting pie.

And that pie is getting bigger.

According to Stephen Fuller, an economist at George Mason University, “…annual government spending on federal contractors in the D.C. metro area increased from $12.6 billion in 1990 to $29.3 billion in 2000, and to $82.5 billion in 2010. And 70% of the $82.5 billion was for technology services.”

The spike from 2000 to 2010 is staggering and, not coincidentally, concurrent with the coming of the Global War on Terror, the establishment of the Department of Homeland Security and the growth of the NSA-Spying Complex. Since 9/11, the iron reliability of defense and national security-related spending has drawn profit-seeking companies into the D.C. area like moths to an eternal flame.

It has also enriched elected officials—the Representatives in this so-called “representative government” who are charged with the duty of serving the public interest. Infamous examples like Halliburton, Blackwater, the Rendon Group and the hilariously-named “Custer Battles” are exactly what we’d expect to come out of the revolving doors at the Department of Defense and the Pentagon.

After all, there’s no business like war business.

Rather, it’s the cronyism and job security system of self-serving public servants in Congress that strips away—almost irrevocably—the veneer of democracy or the sense that voting even matters. The defense industry is among the most generous when it comes to lobbying, campaign donations and financial glad-handing. The list of top defense dole-meisters features the usual suspects: Lockheed Martin, Raytheon, Northrop Grumman and, of course, Boeing.

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What If Obamacare Was A Fighter Jet?

2:57 pm in Uncategorized by JP Sottile

Imagine if you will … an epic government failure.

Chronic mismanagement and cost over-runs. Incomplete software coding, timely political donations and undelivered promises. And zero accountability.

Now, imagine the outrage.

No, really. You will actually have to imagine the outrage.

That’s because The Great American Outrage Machine™ has no interest in generating a scandal around the ultimate example of government failure: the F-35 fighter jet.

Like the comically bad roll-out of the Affordable Care Act’s website, the long-delayed and often-rejiggered F-35 program is a costly disaster rife with technological snafus, software problems and repeated contractor incompetence.

Unlike the circle-jerk of posturing, pontification and media preoccupation that gave us The Shutdown of 2013, the “first $1 trillion weapon system in history” has quietly metastasized into a debacle that is, to quote Sen. John McCain, “worse than a disgrace.”

And although increasingly well-compensated contractors will “surge” over the next few weeks to remediate the epic fail of a healthcare website that has ballooned from an estimated cost of $94 million to over $400 million, it pales in comparison to an “aerospace megaproject” that is seven years behind schedule and 70% over the initial budget estimate of $233 billion—all to deliver 409 fewer planes than originally planned.

Even worse, a recent report by the Pentagon’s Inspector General detailed an array of management and quality-assurance problems at Lockheed Martin’s production facility in Fort Worth, Texas, all of which contributed to over 200 repairs on each plane. Of course, each of those repairs translates into added cost to the taxpayer-funded program. Citing the report, McClatchy’s James Rosen noted that beyond the 28 “major” problems among the total of 70 found at Lockheed’s Fort Worth facility, there were another 119 “major issues at Lockheed’s five main subcontractors’ plants.”

Despite these problems, the F-35 program soldiered on through the Congressional budget process, thus far emerging both “unscathed” by budget battles and immune to the “indiscriminate” cuts imposed by The Sequester.

Perhaps not coincidentally, the IG’s report was completed at the end of 2012, but was not released until September 30th of this year—months after the House approved $600 billion of Pentagon spending and weeks after the Senate Armed Service Committee submitted its slightly less fruitful version of the defense spending bill.

And Lockheed used the long interregnum between the completion and release of the IG’s report to simply dismiss its claims as “out-of-date” and functionally irrelevant. It is true that Lockheed has trimmed the per plane cost from, according to the Project on Government Oversight, a peak of $161 million per plane to $133 million in 2012 and, if Lockheed is to be believed, downward over the next few years to somewhere between $114 million and $156 million per plane, depending on model specifications, engine options, retrofits and upgrades.

If these numbers are a bit mind-boggling, it is only the tip of a giant contracting iceberg uncovered by Adam Ciralsky in a lengthy Vanity Fair exposé of the F-35 program. It reads like anti-government porn for hot and bothered budget hawks. Here are some of the “sexier” details:

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Military-Industrial Complexities

11:17 am in Uncategorized by JP Sottile

The Great Sequester Hoo-Hah is upon us!

A quick rundown of stories I collected today reads like a dipstick plunged into the perpetual engine of wealth reallocation, which is exactly what the defense budget is, has been and will be so long as the Two-Party collaboration drapes its political fortunes with the flag.

>>There’s gold in them-thar overruns!

The F-35 anti-radar jet is seven years behind schedule. Project cost: $395.7 billion

Ships Leaking $37 Billion Reflect Eisenhower’s Warning

>>Watchdogs bark and then nibble.

Lockheed agrees to $19.5 mln class-action accord: court papers

>>Don’t worry. Be happy (and modernized)!

Lockheed awarded F-22 modernization contract worth up to $6.9 bln

>>No, really. We are running out of money.

Pentagon informs Congress of plans to furlough 800K civilian workers

U.S. Army Pressures Congress With State-by-State Effects of Sequestration

>>Who wants to play a game of Chicken-Hawk?

Defense-Cut Hypocrisy Makes GOP Converge With Democrats

Meet 6 Politicians Getting Rich from America’s Endless Wars

>>Whisper words of wisdom, let it be.

If No Deal is Struck, Four-in-Ten Say Let the Sequester Happen

by The Newsvandal