Thursday, August 03, 2006


Boeing, Ford and the politics of extortion

In a detailed explanation of the Justice Department's decision, [Deputy US Attorney General] McNulty noted there were limits to the government's potential punishment of Boeing, given its place as one of a few large defense contractors and its role in Pentagon projects that extend through 2020.

"Contracts at issue are critical to national security; they cannot practicably be terminated," McNulty said.

I suppose I could generate a lot of sparks pointing out players in this scandal included  Richard Perle, Donald Rumsfeld, Dennis Hastert, Andrew Card and George Bush.  But no one would be surprised to learn that.  So I won't go down that path.

Instead of focusing on a bunch of people looting the treasury I want to focus on the how they get away with it even when everyone knows exactly who is doing what to whom.

Let's look at the politics of extortion.

Here's the background, Boeing has been involved in a couple of contracting scandals worth anywhere from $17 to $100 Billion dollars.  After investigating this for the last few years, the Justice Department negotiated a settlement with Boeing that included $50 million in criminal fines and $565 million in civil penalties.

Here's the problem: We are talking multi-billion dollar contracts, so a few hundred million dollar settlement is basically overhead. Since the scandals first broke, Boeing's stock has not merely doubled in value, they've paid dividends every quarter.

Here's the kicker: This deal precludes criminal prosecution of the company and would have allowed Boeing to deduct settlement costs from its taxes!  In other words, they ripped us off, and we get to pay for the investigation, the settlement, and the fine. Why?  Because they are critical for "national security."  This brings a whole new meaning to "protection" don't it?  Boeing decided to forgo the double dip after people starting yelling about that.  Note: the Justice Department didn't remove it, Boeing did.  That alone speaks volumes about who is protecting whom.


Holding people hostage to fear and getting them to pay for "protection" is an old and venerable practice among criminal organizations.   We have been letting people do that to us for decades.  Remember the "bomber gap" that justified a huge build up in long range bombers?  Remember the "missile gap" that justified the building of ICBMs and MIRVs?  Remember the "window of vulnerability" that justified "Star Wars"?

Some would argue that Star Wars was a brilliant plan to spend the USSR into oblivion, and the fear mongering was just the window dressing they needed to justify it; one version of the "ends justifies the means" approach to public policy.  Personally, I think that is hindsight and revisionist history.  I say that because everyone, including the Soviet desk at the CIA and State Department were caught off guard by the collapse of Communism in the former USSR.  In other words, it wasn't like they planned for the collapse.

Now of course we don't worry about Communism ruling the world.  Not because it is a failed ideology heading towards the trashbin of history.  Once again, the politics of fear hold us in check.  We are more than happy to let China hold all our money since we buy all their stuff.   No one dares comment that for every 100 shipping containers entering the US from China,60 containers are sent back empty!  People are justifiably afraid of what would happen if China got angry and decided to dump dollars for euros.  We all know that could destroy what's left of America's economy.

Which brings us to Ford and the politics of fear.  I'm not talking about Ford Motor Company.  I'm talking about Harold Ford of Tennessee.  I recently pilloried him and 33 of his Democratic congressional colleagues by name as sell-outs who should be voted out.  Here's why I take that position:

We simply cannot afford representatives who vote in favor of illusory increases in the minimum wage and a real repeal in the estate tax.

I got a lot of negative responses, not because their policy position was good, but because people were afraid.  Afraid of the perception that Democrats would be cast as anti-minimum wage.  Afraid that a Republican will win the Senate seat in Tennessee unless Harold Ford votes like a Republican now.  The "realist" crowd offered the apologist argument that they "had" to vote like this to protect themselves at home.  "Besides," they rationalized, "the bill will die in the Senate so it's really a non-issue."

Time will tell if they are right, but today's news raises the possibility this bill might actually pass:

The bill contains various "sweeteners" to make it hard for key Democrats to vote against, including tax breaks for the timber industry in Washington state and miners in West Virginia and bond-related perks for Arkansas. Senators from those states facing potentially tough re-election fights in November - including Maria Cantwell, D-Wash., and Robert Byrd, D-W.Va. - may be loath to block the legislation for fear that losing those special breaks could cost them votes back home.

"It's kind of a political box they've tried to put us in," said Sen. Mark Pryor, D-Ark., adding that he'd been in private meetings with colleagues on both sides of the aisle all day. "It's such a big, enormous, wide-ranging proposal, there are a lot of merits to consider here."

"The Democrats are going to have to explain why they were against tuition tax deductions, timber capital gains. . . . They're the ones that got the problem," said Sen. Trent Lott, R-Miss.

Senate Republicans could fend off a Democratic filibuster and pass the wage and tax package this week before leaving town for a month-long recess if all 55 of their members support it - and they pick up five Democrats. Two Republicans have indicated that they'll consider breaking ranks, but seven Democrats are considered possible defectors.

So there you have it folks, because Democrats in the House did not stand firm, Democrats in the Senate are potentially going to follow suit.  Instead of working as a party to stand for something fundamental, they have opted for the politics of the moment, triangulation, strategy, and perception management.  Why?  Because they are afraid.  Just like the enablers who support them.

Blinded by panic, these politicians and their apologists are too busy looking over their shoulders to realize they are rushing headlong over the cliff as they abandon fundamental principles of fairness, honesty, and equity.

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