February 15, 2008 / 8:35 PM / 12 years ago

McCain pro-military, but worries defense firms

By Andrea Shalal-Esa - Analysis

WASHINGTON (Reuters) - Sen. John McCain, the presumed Republican presidential nominee, strongly supports the war in Iraq and those in uniform, but his investigations of major weapons deals have defense industry executives uneasy.

Privately, some defense company officials say they are backing Sen. Hillary Clinton of New York, one of the two remaining contenders for the Democratic nomination, who they see as a better ally for the industry in the longer-term.

Barack Obama, the surging Democratic rival to Clinton, is more of an unknown to Pentagon suppliers, reflected in political donation data that shows the Illinois senator behind McCain, who in turn trails Clinton.

Both Clinton and McCain, an Arizona Republican, serve on the Senate Armed Services Committee. McCain has a far longer history on the panel and has aggressively dug into several big weapons contracts in recent years.

It was McCain’s 2003 investigation that ultimately killed a $23.5 billion Air Force plan to lease and buy 100 Boeing Co (BA.N) aerial refueling planes. The probe also sent two former Boeing executives to prison and prompted the resignation of Boeing’s chief executive and two Air Force officials.

McCain, the decorated Navy pilot and former Vietnam prisoner of war, often mentions the Boeing tanker scandal in his campaign speeches, boasting that halting the controversial deal helped save taxpayers about $6 billion.

His work investigating other defense deals has been little noticed in the mainstream media. But it is clearly on the minds of defense executives.

“We’re not too excited about the prospect of a McCain presidency,” said one defense company executive who spoke on condition of anonymity, citing McCain’s aggressive approach to investigating the industry.

This executive said McCain also would come under pressure to reduce budget deficits, and defense spending, the largest area of discretionary spending, would be vulnerable to cuts.

Keith Ashdown at Taxpayers for Common Sense, a nonprofit watchdog group said the “Pentagon cash machine” would be much more difficult for companies to access. “If you’re a defense company and McCain wins, you know that your free ride at the Pentagon is going to be ending.”

Ashdown adds that McCain has no secret plan to cut the budget, but does want to end years of massive cost overruns and delays in virtually every big weapons program.

“...the folks who have perennial cost overruns are going to have trouble under a McCain administration,” he said.

According to the Center for Responsive Politics, Clinton leads in receiving donations linked to the defense industry with $143,433, versus $129,350 to McCain and $70,502 to Obama.

The industry is a relatively small political contributor compared to the financial services, telecoms and legal industries.


Since the Boeing tanker case, McCain has played a key role in drafting legislation to reform defense acquisitions and rework the terms of arms deals to allow greater oversight.

Changing the terms of an Air Force deal for Lockheed Martin Corp (LMT.N) C-130J cargo planes generated savings of over $200 million, according to Senate aides.

“He’s really been very tough on major defense contractors and in a number of cases that has resulted in changes to contracts,” said Phil Finnegan of the Teal Group defense consultancy. “There’s a lot of concern that as president he would step that up.”

The 2008 defense spending law reflects McCain’s fingerprints, including measures aimed at ending a Pentagon practice of continually adding requirements to programs, which can jack up costs and delay delivery. The law also tightened the eligibility rules for multiyear purchase agreements.

In recent years, McCain has also backed the use of “fixed price” contracts which make it easier to hold contractors accountable for cost overruns, and to limit incentive fees to reward only outstanding performance.

McCain is an strong opponent of congressional earmarks — spending measures targeted to lawmakers’ home states or districts — that are inserted into annual appropriations bills, usually without congressional hearings or oversight.

This year, they total just over $9 billion, according to the House Appropriations Committee. Defense bills attract more earmarks than any of the other 11 individual spending bills.

Clinton has earmarked $1.4 billion for defense contractors in New York state since she arrived in the Senate, according to Ashdown’s group. Obama rejects earmarks for companies, supporting only those for universities or government projects.

One issue that could become a political football in this election year is a drive by some lawmakers to add funding to the defense budget for additional Boeing C-17 cargo planes.

The Air Force included $3.9 billion for 15 C-17s in its unfunded priority list, a move both McCain and Sen. Carl Levin, head of the Senate Armed Services Committee, say they oppose.

McCain may worry defense contractors, but Winslow Wheeler, a former congressional staffer now with the Center for Defense Information, says McCain could have done much more during his two decades on the Senate Armed Services Committee.

“He talks tough, but does little,” he said, discounting the effect of acquisition reforms that followed the tanker scandal. “One exercise of oversight doesn’t demonstrate that he is going to be able to regain control of the Pentagon.”

“We have the largest amount of defense spending we’ve ever had since Word War II and the smallest defense inventory since that time,” Wheeler said, noting many defense programs remained over budget and behind schedule, despite all the reforms.

(Reporting by Andrea Shalal-Esa; Editing by Tim Dobbyn)

Andrea.shalal-esa@reuters.com@reuters.net, email: andrea.shalal-esa@reuters.com +1 202 354 5807

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