Nuclear Weapons Profits

Tomgram: Krushnic and King, The Corporate Nuclear Complex

Privatizing the Apocalypse

How Nuclear Weapons Companies Commandeer Your Tax Dollars

By Richard Krushnic and Jonathan Alan King

Imagine for a moment a genuine absurdity: that somewhere in the United States there was a set of corporations whose highly profitable operations were based on ensuring that sooner or later your neighborhood would be destroyed and you and all your neighbors annihilated.  And not just you and your neighbors, but others and their neighbors across the planet. What would we think of such companies, of such a project, or of the mega-profits made off it?

In fact, of course, such companies do exist.  They service the American nuclear weapons industry and the Pentagon’s vast arsenal of potential world-destroying weaponry.  They make massive profits doing so, live honored lives in our neighborhoods, and play an active role in Washington politics.  Most Americans know little or nothing about their nuclear activities and the media seldom bother to report on them or their profits, even though the work they do is in the service of an apocalyptic future almost beyond imagining.

Add to the strangeness of all that another improbability.  The nuclear question has been screaming headlines in the American news for years now and yet all attention in this period has been focused like a spotlight on a country that possesses not a single nuclear weapon and, as far as the American intelligence community has been able to tell, has shown no signs of actually trying to build one.  We’re speaking, of course, of Iran.  Almost never in the news, on the other hand, are the perfectly real arsenals that could actually wreak havoc on the planet, especially our own vast arsenal and that of our former superpower enemy, Russia.    

In the recent debate over whether President Obama’s nuclear deal with Iran will prevent that country from ever developing such weaponry, you could search high and low for any real discussion of the U.S. nuclear arsenal, even though the Bulletin of the Atomic Scientists estimates that it contains about 4,700 active warheads.  That includes a range of bombs and land-based and submarine-based missiles. If, for instance, a single Ohio Class nuclear submarine -- and the U.S. Navy has 14 of them equipped with nuclear missiles-- were to launch its 24 Trident missiles, each with 12 independently targetable megaton warheads, the major cities of any targeted country in the world could be obliterated and millions of people would die. Indeed, the detonations and ensuing fires would send up so much smoke and particulates into the atmosphere that the result would be a nuclear winter, leading to worldwide famine and the possible deaths of hundreds of millions, including Americans (no matter where the missiles went off).  Yet, as if in a classic Dr. Seuss book, one would have to add: that is not all, oh, no, that is not all.  At the moment, the Obama administration is planning for the spending up to a trillion dollars over the next 30 years to modernize and upgrade America’s nuclear forces.

Given that the current U.S. arsenal represents extraordinary overkill capacity -- it could destroy many Earth-sized planets -- none of those extra taxpayer dollars will gain Americans the slightest additional “deterrence” or safety. It matters remarkably little, for instance, for the nation’s security whether, in the decades to come, the targeting accuracy of missiles whose warheads would completely destroy every living creature within a multi-mile radius was reduced from 500 meters to 300 meters.  If such “modernization” has no obvious military significance, why the push for further spending on nuclear weapons? 

One significant factor in the American nuclear sweepstakes goes regularly unmentioned and unconsidered in this country: the corporations that make up the nuclear weapons industry.  Yet the pressures they are capable of exerting in favor of ever more nuclear spending are radically underestimated in what passes for “debate” on the subject.

Privatizing Nuclear Weapons Development

Start with this simple fact: the production, maintenance, and modernization of nuclear weapons are sources of what can only be called super profits for what is, in essence, a cartel.  They, of course, encounter no competition for contracts from offshore competitors, given that it’s the U.S. nuclear arsenal we’re talking about.  In addition, the government contracts offered are screened from critical auditing under the guise of national security.  Furthermore, the business model employed is “cost-plus” in which no matter how high the cost overrun compared to the original bid, the contractor receives a guaranteed profit percentage above their costs. High profits are effectively guaranteed, no matter how inefficient or over-budget the project may become.  Thus there is no possibility of contractors losing money on the work, no matter how inefficient they may be, very far from the corporate free market model.

All of this produces a formula for mega-profits.  Those well-protected profits and the firms raking them in have become a major factor in the promotion of nuclear weapons development and naturally undermine any efforts at nuclear disarmament of just about any sort.  Part of this process should be familiar indeed, since it’s an extension of a classic Pentagon formula that Columbia University industrial economist Seymour Melman once described so strikingly in his books and articles -- a formula that infamously produced $436 military hammers and $6,322 coffee makers.

Given the process and the profits, the weapons contractors have a vested interest in ensuring that the American public has a heightened sense of danger and insecurity (even as they themselves have become a leading source of such danger and insecurity).  Recently, the International Campaign to Abolish Nuclear Weapons (ICAN) produced a striking report, “Don’t Bank on the Bomb,” documenting the major corporate contractors and their investors who will reap mega-profits from the coming nuclear weapons upgrades. Given the penumbra of national security that surrounds America’s nuclear weapons programs, authentic audits of the contracts these companies have gotten are not available to the public.

At least, the major corporations profiting from nuclear weapons contracts can now be identified. In the area of nuclear delivery systems -- bombers, missiles, and submarines -- these include a series of familiar corporate names: Boeing, Northrop Grumman, General Dynamics, GenCorp Aerojet, Huntington Ingalls, and Lockheed Martin. In other areas like nuclear design and production, the names at the top of the list will be less well known: Babcock and Wilcox, Bechtel, Honeywell International, and URS. When it comes to nuclear weapons testing and maintenance, contractors include Aecom, Flour, Jacobs Engineering, and SAIC; missile targeting and guidance firms include Alliant Techsystems and Rockwell Collins.

To give a small sampling of the contracts: In 2014 Babcock and Wilcox was awarded $76.8 million for work on upgrading the Ohio class submarines; the BAE contract for maintaining the ground based Minuteman III Intercontinental Ballistic Missiles (ICBM) from 2014 to 2021 is of the order of $535 million; In January 2013, General Dynamics Electric Boat Division was awarded a $ 4.6 billion contract to design and develop the next-generation strategic deterrent submarine. More of what is known of such corporate weapons contracts can be found in the ICAN Don’t Bank on the Bomb Report, which also identified banks and other financial institutions investing in the nuclear weapons corporations.

Many Americans are unaware that much of the responsibility for nuclear weapons development, production, and maintenance is the responsibility not of the Pentagon but of the Department of Energy (DOE), which spends more on nuclear weapons than it does on developing sustainable energy sources.

Key to the DOE’s nuclear project are the federal laboratories where nuclear weapons are designed, built, and tested. They include Sandia National Laboratory in Albuquerque New Mexico, Los Alamos National Laboratory (LANL) in Los Alamos NM, and Lawrence Livermore National Laboratories in Livermore, California.  These reflect a continuing trend in national security affairs, so called GOCO sites, “Government Owned, Contractor Operated”. This system represents a form of the corporatization of the policies of nuclear deterrence and nuclear weapons strategies. Through contracts with URS, Babcock and Wilcox, the University of California, and Bechtel, the nuclear weapons labs are to a significant extent privatized. The LANL contract alone is of the order of $14 billion. Similarly, the Savannah River Nuclear Facility, in Aiken, South Carolina, where nuclear warheads are manufactured, is jointly owned and run by Flour, Honeywell International, and Huntington Ingalls Industries. Their DOE contract for operating the South Caroline nuclear facilities to 2016 totals about $8 billion dollars. In other words, in these years that have seen the rise of the warrior corporation and significant privatization of the U.S. military and intelligence community, a similar process has been underway in the world of nuclear weaponry.

In addition, to the prime nuclear weapons contractors, there are also hundreds of subcontractors, some of which depend upon those subcontracts for the bulk of their business. Any one of these subcontractors may have 100 to several hundred employees working on its particular component or system, and, with clout in local communities, they help push the nuclear modernization program via their local congressional representatives.

One of the reasons nuclear weapons profitability is extremely high is that the National Nuclear Security Administration (NNSA) of the Department of Energy that is responsible for the development and operations of DOE's  nuclear weapons facilities does not monitor subcontractors, which makes it very difficult to monitor the prime contractors.

For example, when the Project on Government Oversight used a FOIA request for information on Babock & Wilcox subcontractor for security at the Y-12 nuclear complex at Oak Ridge, Tennessee, WSI-Oak Ridge, the NNSA responded that it had no information on the subcontractor.  Babcock & Wilcox was in charge of building a uranium processing facility (UPF) at Y-12.  B&W subcontracted design to four other companies and then failed to consolidate or supervise them.  This led to an unusable design which was scrapped after the subcontractors received $600,000,000 for work which was useless.  This Oak Ridge case triggered a Government Accountability Office (Congress' nonpartisan GAO) May 2015 report to Congress on how this problem was general in the DOE's nuclear weapons facilities:  NNSA Actions Needed to Clarify Use of Contractor Assurance Systems for Oversight and Performance Evaluation

The Nuclear Lobbyists

Federal tax dollars expended on nuclear weapons maintenance and development are a significant component of the federal budget. Although difficult to pin down precisely, the sums run into the hundreds of billions of dollars. In 2005, the Government Accountability Office reported that even the Pentagon itself had no firm numbers when it came to how much the U.S. nuclear mission costs, nor is there a stand-alone nuclear weapons budget of any sort, so the overall costs must be estimated. The Center for Nonproliferation Studies, analyzing the Pentagon budget and that of the Department of Energy's National Nuclear Security Administration, as well as information gleaned from Congressional testimony, suggests that, from 2010-2018, the United States will spend at least $179 billion to maintain the current nuclear triad of missiles, bombers, and submarines, with their associated nuclear weapons, while beginning the process of developing their next-generation replacements.  The Congressional Budget Office (CBO) projects the cost of nuclear forces for 2015-2024 at $348 billion, or $35 billion annually, of which the Pentagon will spend $227 billion and the Department of Energy $121 billion. 

In fact, the cost of the nuclear arsenal is actually far greater than either that $179 billion for a previous near decade or the $384 billion for the decade to come.  While those numbers include most of the direct costs of nuclear weapons and strategic launching systems like missiles and submarines, as well as a majority of the costs for military personnel responsible for maintaining, operating, and executing the missions, they don’t include many other functions, such as decommissioning and  nuclear waste disposal involved in “retiring” weapons,  which are often obscured in the government’s budget documents.  Nor do they include the pensions and health-care costs that will go with retiring their human operators.

In 2012, a report from high-level committee chaired by former Vice Chairman of the Joint Chiefs of Staff General James Cartwright concluded that “no sensible argument has been put forward for using nuclear weapons to solve any of the major 21st century problems we face [including] threats posed by rogue states, failed states, proliferation, regional conflicts, terrorism, cyber warfare, organized crime, drug trafficking, conflict –driven mass migration of refugees, epidemics, or climate change. In fact, nuclear weapons have on balance arguably become more a part of the problem than any solution.”

Not surprisingly, the roster of corporations involved in the U.S. nuclear programs could care less about this.  Quite the opposite, they maintain elaborate lobbying operations in support of their continuing nuclear weapons contracts. In a 2012 study for the Center for International Policy, “Bombs vs. Budgets: Inside the Nuclear Weapons Lobby,” William Hartung and Christine Anderson reported that, for the elections of that year, the top 14 contractors gave nearly $3 million directly to Congressional legislators.  Not surprisingly, half that sum went to members of the four key committees or subcommittees that oversee spending for nuclear arms.

In 2015, the defense industry mobilized a small army of at least 718 lobbyists and doled out more than $67 million dollars pressuring Congress for increased weapons spending generally.  Among the largest contributors were corporations with significant nuclear weapons contracts including Lockheed Martin, Boeing, and General Dynamics. Note as well that such pro-nuclear lobbying is augmented by pressure and contributions from missile and aircraft companies that are primarily non-nuclear. Some of the systems they produce, however, are potentially dual-use (conventional and nuclear), which means that a robust nuclear weapons program increases their potential market, too.

The Republican’s continuing pressure for cuts in domestic social programs are a crucial mechanism that ensures federal tax dollars will be available for lucrative military contracts. In terms of quality of life (and death), this means that underestimating the influence of the nuclear weapons industry is singularly dangerous.  For the $35 billion or more the U.S. taxpayer will put into that weaponry annually to support the narrow interests of a modest number of companies, the payback is fear of an apocalyptic future. After all, unlike almost all other corporate lobbies, the nuclear weapons one (and your tax dollar) puts life on Earth at risk of rapid extinction, either following direct destruction from a nuclear holocaust or the radical reduction in sunlight reaching the Earth’s surface from a nuclear winter. At the moment, the corporate-nuclear complex is hidden in our midst, its budgets and funds shielded from public scrutiny, its project hardly noticed.  It’s a formula for disaster.

Richard Krushnic is a former real estate loan asset manager and housing and business contract analyst at the City of Boston Department of Neighborhood Development, and current involved in community development in Latin America. He can be reached at [email protected]. Jonathan Alan King is Professor of Molecular Biology at MIT and Chair of the Nuclear Abolition Committee of Massachusetts Peace Action. He can be reached at [email protected].

Copyright 2015 Richard Krushnic and Jonathan Alan King