April 23, 2003

The War Profiteers: Tax Corporations on Excess War Profits


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Basking in his high ratings from the Iraq war, George W. Bush turned his attention on April 15 to selling his tax-cut plan. Bush’s proposal to cut taxes by $550 billion over the next decade has been roundly criticized as corporate welfare at its best.

Bush’s timing could scarcely be labeled serendipitous. His tax-cut campaign coincides with USAID and Army Corps of Engineers awards of massive reconstruction contracts to corporations that have filled Republican Party coffers with hefty campaign donations. The most egregious aspect of these contracts is that they will result in windfall profits for the corporations that have landed them.

The list of companies that will profit handsomely from the contracts reads like a Who’s Who of Republican loyalists. Topping the list is Kellogg Brown & Root, a subsidiary of Halliburton Co., headed by Dick Cheney before he was tapped for vice president, which was initially awarded the most lucrative Iraq reconstruction contract. The pact for emergency oil-field services may be worth $7 billion over the next two years. It could earn as much as 7 percent profit, or $490 million.

Strikingly, this contract was bestowed upon Kellogg Brown & Root without sending it out for bids, to the consternation of many in Congress. After the General Accounting Office, Congress’s investigative arm, launched a wide-ranging inquiry into the award, the Army Corps of Engineers announced it would send the Halliburton contract out for competitive bids. It remains to be seen whether the Corps’ about-face is simply a perfunctory move to forestall criticism, in which Halliburton will walk away with the contract in the end. Months before the Iraq war, Kellogg Brown & Root had been granted a separate Army logistics contract, which has the unprecedented distinction of carrying no price tag.

Another fat Iraq reconstruction contract for $680 million was awarded to Bechtel Group, which donated most of its $1.3 million worth of political campaign contributions since 1999 to the Republican Party. Bechtel has close ties to the Bush administration.

Donald Rumsfeld once served as a liaison between Bechtel and the Iraqi government to finesse the building of an oil pipeline. And former Secretary of State George Shultz, a member of the board of directors of Bechtel, is also chairman of the advisory board of the Committee for the Liberation of Iraq, a strongly pro-war organization with influence in the White House.

An accused human rights violator, DynCorp, a firm which provides security services and which has donated nearly $70,000 to the Republican Party, won a multi-million dollar contract to police post-war Iraq. DynCorp has been accused of engaging in the prostitution business in Bosnia, and it is being sued in a class action by a group of Ecuadorean peasants for spraying herbicides in Colombia that drifted across the border, killing children and crops.

Many in Congress are miffed because the bidding process for these reconstruction contracts has taken place in secret. Sens. Susan Collins (R-Maine), Hillary Rodham Clinton (.) and Ron Wyden (D-Ore.) have cosponsored the Sunshine in the Iraq Reconstruction Contracting Act of 2003, to bring transparency to the awarding of these contracts.

Tony Blair must also be seething. Notwithstanding Blair’s unwavering loyalty to Bush, Iraq reconstruction contracts will go exclusively to U.S. firms. Foreign corporations can only subcontract for these lucrative jobs.

Moreover, after the Bush administration succeeds in privatizing Iraq’s oil, U.S. corporations will likely be first in line to do business. The hundreds of protestors chanting “No blood for oil” at ChevronTexaco’s world headquarters in San Ramon the day before Bush launched his tax-cut campaign understood this well.

Defense contractors are also profiting handily from the war. SY Coleman, a key company connected to the U.S. Patriot missile system, is headed by Lt. Gen. Jay Garner, the new “sheriff of Baghdad.” And Northrop Grumman, which won $8.5 billion in contracts last year, has ties with the neoconservatives who provided the blueprint for Bush’s doctrine of preemptive war, beginning with Iraq.

It is wrong for huge corporations to profit from war. During the Civil War, there was a public outcry in Georgia against profiteering from that national tragedy. Georgia’s General Assembly responded by enacting a special profits tax.

Congress itself enacted “excess-profits taxes” during World Wars I and II and the Korean War, to prevent firms from making windfall profits from these conflicts. Democratic Rep. Clement C. Dickinson of Missouri eloquently stated the rationale for an excess-profits tax on the floor of Congress in 1917. He said that “those who reap large war profits in times of distress should help to bear the burdens of government, increased by reason of the very conditions that add to the wealth of those who flourish and fatten on the misfortunes of the country.”

President Franklin D. Roosevelt, in his first radio address following the outbreak of World War II, declared that “no American has the moral right to profiteer at the expense either of his fellow-citizens or of the men, women and children who are living and dying in the midst of war in Europe.” The U.S. had not yet entered the war at that point.

In a message to Congress in 1940, Roosevelt sought “a steeply graduated excess-profits tax” to ensure “that a few do not gain from the sacrifices of the many.” The members of the U.S. armed forces who have served in the war on Iraq are not making excess wages for their sacrifices. Many will suffer for the rest of their lives with injuries and, likely, with Gulf War II Syndrome.

On Feb. 13, 2003, former Sen. George McGovern suggested on MSNBC’s “Buchanan & Press” that Congress impose an excess-profits tax. “I don’t think people ought to be making money out of young American blood in Iraq,” McGovern said.

Excess-profits taxes are generally calculated in one of two ways. Any return on capital over a fixed percent may be considered excess profits. Or they might be defined as net income in excess of prewar levels.

In his farewell speech to America in 1961, President Dwight D. Eisenhower warned: “In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex.”

George W. Bush has cited the lofty ideal of bringing freedom to the Iraqi people as justification for this war. He should not then oppose the imposition of an excess-profits tax on corporations that have secured contracts to rebuild Iraq.

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