Economic Treason: Middle class whacked while arms manufacturing flourishes, case Michigan

Posted in Made in China, Permanent Fail, Predator State at 6:05 pm by George Smith

The Great Recession caused by Wall Street whacked almost all of the middle class in the United States. Newspaper articles and the opinions of economists discuss the the mass unemployment and hardship caused by it daily. However, there are some industries which escaped the Great Recession, one because of massive government bailout, another because it is also protected by the taxpayer and the US government.

The first, and most obvious, is Wall Street; the latter is arms manufacturing. The arms manufacturing industry in the US enjoys protections afforded no other industry except for Wall Street. It is an exercise in socialism for the private sector, rigged to be underwritten and guaranteed by labor and taxes of the US middle class. It is not subject to pressure from global labor markets, pressures which have been used by American big business and government policy to tear apart and destroy all other domestic manufacturing in this country.

Previously, a graph from the New York Times makes a bad picture very clear.

The Great Recession cratered demand and US non-military production. But arms manufacturing, paid for by the middle-class taxpayer, soared.

At a time when the GOP and Fox News portray middle class union workers — teachers — as pampered parasites, there are two American industries totally immune to any notions of austerity and shared sacrifice. Obviously, one is Wall Street. The other is made up of weapons makers.

While they don’t enjoy quite the same very top fruits of greed and avarice like Wall Street CEO’s, the bossmen of US weapons-makers also make out really really well. While everyone else was getting fired or seeing their incomes shrink, for instance, General Dynamics — one of the top five US arms developers — was richly rewarding its CEO.

“The chief executive of General Dynamics Corp. received pay and compensation the company valued at $17.96 million during 2008, a 15 percent annual increase that came as the defense contractor posted a big profit on the sale of equipment such as armored vehicles, private jets and submarines,” reads a news article from The Street.

“General Dynamics gave Nicholas Chabraja $1.38 million in salary and a bonus of $4.5 million, according an Associated Press analysis of the Falls Church, Va.-company’s proxy filing with the Securities and Exchange Commission Friday. Chabraja’s salary was up slightly from 2007, while his bonus was $1 million richer than the year earlier.”

In 2008, when millions of Americans were being laid off, the SIPRI database on worldwide arms sales showed the US industry ascendant. While everyone else in the heartland was being hammered, seven of the top ten arms sales companies in the world were American.

In the previous installment of the Economic Treason series, I discussed the itty-bitty arms maker, Combined Systems.

Combined Systems, a manufacturer of tear gas, high explosive rounds and handcuffs, is the primary employer in Jamestown, PA. Its entire business is arms manufacturing. It ships worldwide and is not subject to the pressures which have destroyed US non-military production. Famously, its products were seen being used against the now victorious Egyptian revolution.

Located in Mercer County, Pennsylvania, it has flourished while all other
industries making things in the county and its environs have suffered.

But that’s only one small company.

This year, SIPRI described its database on very big worldwide arms merchants in this manner:

With e total arms sales of the SIPRI Top 100 maintained the upward trend in their arms sales, an increase of a total of 59 per cent in real terms since 2002 … 45 of the SIPRI Top 100 are based in the USA. These companies generated just under $247 billion in total arms sales, which is 61.5 per cent of the SIPRI Top 100 arms sales.

While American big business has shipped all the jobs it can to China, US arms manufacturing labor is sacrosanct. It is protected, essentially underwritten by the mass of taxpayers who have been treated so shabbily in the last decade. While we were getting poor, arms manufacturing, like Wall Street, was getting rich through its status as a profoundly unfair industry underwritten and guaranteed by the state.

The Economic Treason series focuses on arms manufacturing businesses, comparing them to the fortunes of everyone else in the communities in which they are located. Because the effects of the economic collapse are so widespread, as a general rule it appears that while weapons production facilities have done well in the last ten years, everyone not in weapons production in the same or surrounding communities has done abominably.

Mass layoffs, which ticked up at the Bureau of Labor Statistics here, are for everyone. Except Wall Street and arms makers.

Mass layoffs occur for everyone else but not at weapons plants. And mass layoffs are now always threatened for public sector union workers, something prescribed as belt tightening as well as shared sacrifice and pain. This is fork-tongued speak. Like Wall Street, no sharing of pain ever comes to weapons makers. They are exempt.

Take General Dynamics Land Systems in Sterling Heights, Michigan.

Unemployment is abominable in Michigan. And it is also very bad in Macomb County, part of the Detroit metro-area, where General Dynamics Land Systems design bureau and corporate headquarters is located.

Michigan’s unemployment rate is 11.7 percent, as noted by the US Bureau of Labor Statistics here. Statistically, it stood out in this report because of the rate of change, which has been greater than most of the rest of the country. While the rate has decreased faster, it is not because Michigan has a good jobs creation program. The rate of change downward is due to a decline in the population of the state.

Unemployment is terrible in Macomb County, Michigan. Unless you work for General Dynamics designing armored fighting vehicles. (Data from the St. Louis Fed here.)

The M1 Abrams tank manufactured by General Dynamics Land Systems is not particularly useful in the war on terror. We were attacked by suicide commandos using boxcutters on 9/11. al Qaeda has no armored fighting vehicles. The M1 tank went into action when we attacked a country that didn’t attack us in a war sold on a variety of now very famous frauds.

The M1 tank also had a visible role in the Egyptian revolution. But while it did no harm it was not really on the side of the people who brought down Hosni Mubarak.

In Macomb County, threatening public workers with layoffs is noticeable in the news. Articles oncoming layoffs at municipalities hurt by the economic collapse is also a common feature in Michigan newspapers in nearby Oakland and Wayne counties.

This recent news item from a place called Clinton Township says:

Clinton Township Supervisor Bob Cannon recommended that three police officers and 12 firefighters be laid off in the 2011-2012 fiscal year budget to help the two departments’ struggling bottom lines.

The board is expected to vote on the budget and possible cuts on March 21, and will make another decision that night on a federal grant that could re-hire seven firefighters already laid off last year.

Cannon made the recommendation at a Feb. 22 public hearing on the budget.

From the city of Troy, in neighboring Oakland County, we read this:

The city projects a $6.2 million budget deficit in 2010-2011, $6 million in 2011-2012 and $3.2 million in 2012-2013.

Under Option One of the restructuring plan, there would be no police layoffs until 2011-2012, when four police officers would be laid off. In 2012-2013, 29 police officers are slated for layoff, 14 in 2013-2014, for a total of 47 police layoffs.

The plan calls for reducing library staff by 39 people in 2010-2011 and 69 in 2011-2012.

The Parks and Recreation Department would also be eliminated in phases …

Armored fighting vehicles — special! Libraries, parks and recreation for children and civilians, not so much.

Unemployment has been craptastic in Allen County, Ohio! Except for the General Dynamics tank-making facility in Lima, the county seat.

“Ohio Fraternal Order of Police (FOP) President Jay McDonald hosted a press conference in Lima to highlight how Congressman John Kasich’s tax plan for Ohio would force local tax increases or lead to layoffs in public safety departments, according to a media release Thursday,” reads this bit of news from the web.

“Congressman [John Kasich’s] tax plan for Ohio would continue the damage he wreaked on the state during his time in Washington and on Wall Street … Similar to how Kasich’s support of outsourcing through unfair trade deals like NAFTA led to hundreds of thousands of layoffs in Ohio, his tax plan would force layoffs in our schools, and just as alarmingly, our police and fire departments.”

M1 Abrams tanks — huzzah! Police, public safety, teachers — eh.

Unemployment bloomed in Lackawanna County when the economy went ka-boom in 2008. Except, you guessed it, if you worked for General Dynamics Land Systems in Eynon, PA.

This item from Lackawanna County, describes public worker lay-offs in 2010 due to fiscal distress:

Majority commissioners have pledged to not raise taxes in 2011. They have cut the county budget by about 5 percent since taking office in 2008 without increasing taxes, but to keep that promise have laid off 109 employees and eliminated many others, including more than 320 positions through the sale the Lackawanna County Health Care Center earlier this year.

It is a drearily familiar thing. Public and private sector workers getting the chop everywhere. But not arms manufacturing. Firemen, hospital workers, policemen, receptionists, teachers — everyone threatened or downsized outright. The economy stumbles along, lives are reduced to splinters, people are tossed away in the wind.

But the factories that produce armored fighting vehicles are sure doing well.

General Dynamics Land Systems corporate headquarters emits a steady stream of truly wonderful press releases — these from 2009 — on tanks and armored fighting vehicle production. Tanks for the Iraqi army. And still more tanks and upgrades for our great pals in Saudi Arabia.

And while 2008 was really bad for almost everybody, it was swimming for General Dynamics Land Systems.

Record numbers of Americans apply for food stamps and unemployment. Every job not in finance or arms manufacturing gets beggared or threatened with shipment to China. Saudi Arabia and Iraq get tanks. More and more tanks. There are never enough.

As a thought experiment, I am going to propose a war-profiteering dividend/tax on US arms sales. Since the core markets for all these businesses are essentially guaranteed by the US taxpayer and government, it seems only fair Americans ought to be regarded as shareholders. And as shareholders, they ought to be in for some rewards. It’s the American way.

Let’s make the war-profiteering tax significant because, although even though I haven’t researched it yet, the US arms industry is probably quite adept at tax avoidance already. So I make it twenty percent of all profits in overseas arms sales — weapons, tanks, aircraft, ships, guns, ammo, bombs, chemicals, computer systems, software, consulting services and support — everything.

Here’s the calculation, using SIPRI’s latest data:

20 percent of 247 billion = 49 400 000 000

Further, I will propose a yearly war-profiteering dividend check for everyone in the United States on food stamps.

According to Reuters: “For fiscal 2011, average enrollment is forecast for 43.3 million people.”

Here is the calculation:

49.4 billion divided by 43.3 million = 1 140.8776

Everyone on food stamps, no exceptions, gets a check from the protected US arms industry, for roughly $1,140.88. That would certainly be a help.

One could also extend the dividend to all tax-filers for a given fiscal year although it would probably cut the size of each check by at least two thirds. The only people who wouldn’t be entitled to checks would be employees of the US arms manufacturing base. They’re already getting dividends as well as security.

Of course, none of this has any chance of consideration. It’s just a thought exercise. The protected industry of American weapons production is a third rail. No one will seriously discuss taking any big whacks at it.

However, this article does illustrate that when politicians, both GOP and Dem, fight for pieces of defense budget funding because of the familiar cry that it preserves “jobs” in their community, what they really mean is this:

Weapons making jobs are good and need preserving. Everyone else can go to Hell because “we’re broke” or belts need tightening or public sector union workers are scum.

It is also fun to imagine that such a war-profiteering tax/dividend might cause American arms manufacturers to raise prices to various clients (often countries whose rulers do not share our now largely theoretical democratic ideals) to retain profit margin. Or they could always start outsourcing to China.

Is there an arms manufacturer in your county? One you’d like to see profiled in the Economic Treason series? Send me a note or leave a comment.

General Dynamics plutocrat compensation — 2010.


  1. Dick Destiny » Economic Treason: Middle class whacked while arms … | Michigan Not Mexico said,

    February 28, 2011 at 11:07 pm

    […] the original post: Dick Destiny » Economic Treason: Middle class whacked while arms … Posted in Mi Unemployment Tags: change-downward, detroit, macomb, macomb-county, not-because, […]

  2. Dick Destiny » The Fork-tongued Ayn Randian piffle of the plutocrat said,

    March 1, 2011 at 3:19 pm

    […] Some of Koch quotes are particularly trenchant when one looks back at yesterday’s post in the Economic Treason series. […]

  3. Richard Roberts said,

    March 8, 2011 at 7:42 am

    You do realize that the corporations that make tanks, war planes, etc don’t sell them overseas, it is the federal government that sells them.

    Ah, ah, ah. If you had read a couple posts upstream instead of just getting angry your question was answered automagically.

    The tools of war are sold to the feds & they in turn sell them to other governments. Are you going to tax the government for these sales as you suggest? Then giving this tax revenue to all food stamp receipants, so now you want to make government dependent individuals more dependant & prosperous (with other peoples money), are you friggin nuts.

    It’s clear as a thought experiment.

    Since lots and lots of people on foodstamps had productive jobs they payed taxes, money which subsidizes and guarantees the arms manufacturing industry in this example of private sector socialism.

    If they’re way underemployed they still pay tax. And unemployment benefits themselves are subject to taxation.

    Anyway, I also patiently explained that as part of that they deserved a war-profiteering dividend. You can also look at it as reapportioning the spoils. Which is obviously what’s bugging you. It would annoy Joe the Plumber and John Galt, too. But I knew that going in.

    So, let me get this right. You like socialism for the private sector and most affluent companies in the world, all with armies of lobbyists and members of the board greedily massaging the system for more and more spending in their self-interest.

    That kind of money from the government doesn’t make them dependent. It’s not entitlement.

    But theoretical cash for people who would otherwise be going hungry, which presumably would be used on more essentials because the actual dollar value was noticeable but not that great, is bad.

    As possibly a Tea Partier and cheerleader for weapons manufacturing, you’re not doing a good enough job here. — Me