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Defense Contractors Are Using Tax Dollars to Profit Off War in Ukraine

More than half of the income taxes remitted to the U.S government are spent on Pentagon accounts.

Ukrainian troops fire with surface-to-surface rockets MLRS (Multiple Launch Rocket System) towards Russian positions at a front line in the eastern Ukrainian region of Donbas on June 7, 2022. The Biden administration has confirmed that Ukraine will be receiving U.S.-made MLRS in a future package of security assistance.

Part of the Series

If United States taxpayers knew that half the income tax dollars they sent to the Internal Revenue Service every year was being spent on weapons, war and war preparation, political support for such programs might significantly decline. Unfortunately, no agency of the federal government communicates to taxpayers how the Congress spends their money.

Massachusetts State Rep. Carol Doherty and State Sen. Jo Comerford have introduced a bill into the state legislature, the Taxpayers’ Right to Know Act, supported by Massachusetts Peace Action and allies. The bill instructs the state treasurer to communicate to Massachusetts taxpayers how the state and the federal government spend their income tax dollars. This is a first step toward federal legislation bringing transparency to the Congressional Discretionary Budget.

Organizers hope to promote such bills in other states, given the roadblock against such open and honest reporting from the federal government. These are small but important first steps in focusing attention on income taxes being used to finance corporate drivers of dangerous and costly nuclear weapons purchases, especially in the context of Russia’s invasion of Ukraine.

Ukraine War Profiteering

Purchasing weapons and military services with taxpayer dollars has always been, and continues to be, a highly profitable endeavor for defense contractors. But it is in a real war, such as in Ukraine, that such profiteering truly thrives.

President Joe Biden recently sent to Congress his budget proposal for 2023. It included an astounding $813 billion for Pentagon and military expenditures. This is more than half the income taxes citizens send to the federal government each year, and a more than $31 billion increase over the already bloated fiscal year 2022 Pentagon budget. It also more than the defense budgets of the eight next biggest military spenders put together, including Russia, China and India.

The proposed increase for 2023 was cloaked in the flag of support for Ukrainians, but make no mistake, most of this bloated budget was in the pipeline years back, prior Russia’s invasion of Ukraine.

In late April, the president announced a plan to spend another $33 billion for weapons and military supplies for Ukraine. On May 19, Congress quickly passed an even larger $40 billion appropriation, with unanimous Democratic support. This included some humanitarian aid but was primarily for the $20 billion in weapons and weapons support, including Patriot anti-aircraft missiles, Javelin anti-tank missiles and artillery.

This is closer to the true war budget, with built-in assumptions of material loss and need for replacement. Such expenditures can be even more lucrative than the base Pentagon budget. The weapons shipments to Ukraine will be considered justification for further purchases to maintain the U.S.’s stockpile, according to The New York Times:

Noting that the more than 5,000 Javelins sent to Ukraine amounted to a third of the administration’s stockpile of anti-tank missiles, Senator Roy Blunt, Republican of Missouri asked the pentagon officials … if they were prepared to quickly replace the anti-tank missiles. “It is not only possible; we will do that” said Defense Secretary Lloyd J. Austin III.

The purchase of weapons and supplies in preparation for war and for maintenance of forces in the field is a singularly lucrative and profitable business because of the cost and nature of most contracts; the guarantee of Pentagon purchases; and the protection from offshore competition, such as industries in China, India or Mexico. During “peacetime,” missiles, artillery shells, airplanes and armored vehicles need to be replaced at a relatively slow rate. This limits the weapons sales market. That is part of the reason for pressure from the industry for “new” weapons to increase their markets.

Beating the drums of war will enhance the corporate bottom line, as noted by Raytheon CEO Greg Hayes commenting on the benefits to their business of the Ukraine crises:

We would expect … a benefit to the [Raytheon missiles and defense business] top line” and to the wider business, as defense budgets and replenishment orders increase over the coming years, chief executive Greg Hayes told analysts on the company’s first-quarter earnings call on Tuesday.

Too often during Pentagon budget debates, foreign policy “concerns” obscure the driving imperative coming from the weapons industries. As The Nation pointed reported, at the onset of the invasion of Iraq,

Even before US troops arrived in Baghdad, looting broke out — in Washington. While Republicans in Congress and their allies in the media yammered about the need to silence dissent and “support the troops,” corporations with close ties to the Bush Administration were quietly arranging to ink lucrative contracts that would put them in charge of reconstructing Iraq. Bechtel’s contract, worth up to $680 million, to rebuild Iraqi roads, schools, sewers and hospitals drew a lot of media attention, but it was chump change compared with the deal greased through by Vice President [Dick] Cheney’s old oil-services firm, Halliburton.

Historians of World War II, often fail to emphasize the role of the major Japanese and German major manufacturing industries in driving their country’s war efforts. As long as the war continued, these businesses were guaranteed continuing weapons sale to their governments and military forces.

U.S. naval historians note that the Japanese Kamikaze attacks were very wasteful, since both plane and pilot were lost and neither could engage in further sorties. But in fact, they were not wasteful for corporations like Mitsubishi, since every fighter lost meant a new sale to the Japanese government.

The Pentagon Budget Is Only Peripherally for Protecting Ukrainians

Earlier this year Congress voted $768 billion as the 2022 Defense authorization. Such bloated budgets have been voted for many years and are not a response to events in China, Ukraine or any actual foreign or military threat. Thus the 2021 Congressional Discretionary Budget was voted in 2020, long before the Ukraine conflict.

Among the most expensive items — more than $34 billion — are the upgrades of all three legs of the U.S. nuclear triad: land-based intercontinental ballistic missile systems, nuclear-armed submarines and long-range bombers. Unfortunately, nuclear saber rattling by Russia and North Korea provides cover for these expenditures. These upgraded weapons systems won’t be operable for many years. They cannot be used to protect Ukrainians from their neighbors, Afghans from the Taliban, or South Koreans from the North Korean government.

The presence of thousands of U.S. nuclear weapons on hair-trigger alert hasn’t prevented the North Korean regime from moving ahead with their nuclear programs; Britain’s nuclear weapons did not prevent the Argentinian government from occupying the Falkland Islands; Russia’s nuclear weapons didn’t deter Chechen rebels from attacking Russia. Neither India nor Pakistan’s nuclear arsenals have deterred each other’s militants from attacking one another across the contested Srinagar boundary in Kashmir. Despite claims to the contrary, nuclear weapons cannot protect the people of Ukraine, who would be decimated in a nuclear exchange.

Given that these weapons cannot be used in any conventional war, and if used would be disastrous for the U.S. public, why are our tax dollars being invested in upgraded nuclear weapons? The answer has nothing to do with foreign policy — the red herring used to justify the expenditures. These purchases are better understood as the business plan of the nuclear weapons and military-industrial-congressional complex, guaranteeing high profitability. As President Dwight D. Eisenhower warned Americans more than 60 years ago, our congressional budget has fallen fully under the control of a narrow segment of U.S. corporations.

More than half of the Pentagon appropriation goes to large defense contractors, of which the leaders are Lockheed Martin, Boeing, Raytheon, General Dynamics and Northrop Grumman. Together, they reaped $198 billion in taxpayer funds last year alone. In 2020, the top 100 contractors took in $551 billion.

The profits of these corporations are guaranteed by costly contracts; legislation prohibiting awarding such contracts to foreign firms, assuring virtual monopolies; and national security criteria used to prevent auditing and close fiscal oversight.

At the same time Congress voted some $782 billion for Pentagon accounts, they couldn’t find the $5-$10 billion needed to insure that vaccination against COVID-19 is available to all Americans.

One of the components of the bloated $782 Pentagon budget is for purchase of new nuclear-armed submarines, even though the U.S. already has 14 lethal Ohio Class submarines, each capable of launching 192 nuclear warheads. Cancelling two of these unnecessary and provocative new weapons systems would save more than $10 billion. This would easily provide the funds needed to insure vaccination for all Americans from COVID, and also to finance vaccines for those in under-developed economies.

The pie chart below shows the division of the Congressional Discretionary Budget for 2021 — pre-Ukraine — among competing agencies and programs including the Defense Department, Veterans Affairs, the Department of Health and Human Services, food stamps, agricultural subsidies, the Department of Energy (nuclear weapons) and the National Science Foundation. (The discretionary budget does not include the two major mandatory funds Medicare and Social Security. These are trust funds — citizens pay in and hopefully are paid back. Congress cannot use these funds for other purposes.) A number of the categories in the annual congressional budget (from income taxes) are labelled here:

Federal Discretionary Spending Fiscal Year 2021

This pie chart from the National Priorities Project shows the allocation of our Congressional Discretionary Budget among diverse categories for the 2021 fiscal year, voted on in 2020, prior to Russia’s invasion of Ukraine. The military sector is underestimated, since a number of military-related programs, such as nuclear weapons and foreign military aid, are listed under domestic programs.

The single most important fact is that more than half of the income taxes remitted to the U.S government are spent on Pentagon accounts. In general, citizens are not aware of the scale of these expenditures. Though the government is aggressive in collecting income taxes, no agency of the government reports back to the taxpayers how their tax dollars are spent. Thus, many Americans assume that taking care of service men and women wounded in war or other military actions are covered by the defense budget. In fact, Veterans Affairs and veterans’ hospitals are part of the civilian or “domestic” budget, often squeezed by pressures of the military-industrial-congressional complex to increase funding for the Pentagon.

Pentagon Spending Versus Preventing Disease

It’s very difficult to grasp the impact of a $782 billion Pentagon budget. One approach is to compare it to other appropriations. For the past two years, our nation and all the nations of the world have faced the crises of the COVID pandemic. The virus has killed more than 1,000,000 Americans. How did this happen in the wealthy, technologically advanced U.S., the world leader in biomedical research and development, biotechnology and pharmaceuticals?

One major reason has been the failure to invest in a robust health care and public health system, as well as the failure to develop a comprehensive national testing and vaccination policies. However, a source of the failure to invest in these sectors has been to the diversion of tax dollars in the Congressional Discretionary Budget to Pentagon accounts. The development of diagnostics, vaccines and therapeutics rests on the research federally financed through the National Institutes of Health (NIH), entirely dependent on annual congressional appropriations.

The NIH budget of about $45 billion is responsible for developing prevention and cures of all the diseases that afflict us — cancer, heart disease, stroke, Alzheimer’s, diabetes, and many others. Let’s consider only the health burden and social impacts on our population of people afflicted with Alzheimer’s disease. More than 6.5 million Americans suffer from this tragic and debilitating illness with the numbers steadily increasing. Alzheimer’s patients accounted for some 20 percent of Medicare and Medicaid’s budgets, more than $250 billion a year. Unfortunately the NIH investment in searching for a underlying mechanisms, more reliable diagnosis and more effective therapies was for 2020 on the order of $2.8 billion per year.

Given the human suffering and debilitating social and economic impacts, this is clearly an inadequate investment. For a social cost of $250 billion, perhaps 10 percent of the $250 billion in medical costs — $25 billion — would approach a sound and humane NIH research budget. Though Congress couldn’t find it in the budget to appropriate such funds. Instead, they are sending $33 billion in primarily military aid to Ukraine.

Many millions of Americans face suffering and death from these ills would be saved if we understood these diseases more deeply and invested more. There is no comparison between the health value of $45 billion NIH investments with the $782 billion defense budget. The new bombers, submarines and missiles don’t house us, don’t clothe us, don’t get us to work, don’t cure or prevent disease, and don’t protect our environment or climate.

Sadly, these Pentagon expenditures will also not increase national security, at home or abroad. Rather, they will increase the chance of a devastating nuclear weapons exchange. They represent not the needs of the people, but the business plan of the military-industrial complex, which President Eisenhower so tellingly warned us against on leaving office, and scholar Seymour Melman described in detail in The Permanent War Economy.

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