US Arms Makers Are Price-Gouging Amid Ukraine War

Authored by Connor Freeman via The Libertarian Institute, 

American military-industrial complex firms are guilty of “price gouging,” former Pentagon insiders told Newsweek. These accusations come amidst Washington’s exponentially rising demand for weapons systems to both bolster Taiwan – in an effort to destabilize China – and support NATO’s proxy Kiev during its war with Russia.

The Ukraine policy of providing massive quantities of arms “no matter the expense,” in particular,  is weakening America’s national security and combat readiness by depleting stocks which cannot be easily replenished due to the weapons firms’ skyrocketing prices, according to the former officials.

For four decades, Shay Assad worked as a contract negotiator at the Defense Department. He recently sounded off about these “astronomical price increases” and the resultant detrimental effect on the military, during a recent report on 60 Minutes, the CBS news program.

“The gouging that takes place is unconscionable,” Assad said. “There’s no doubt about it,” he continued, “You just can only buy so much, because you only have so much money. And that’s why I say, is it really any different than not giving a Marine enough bullets to put in his clip? It’s the same thing.” Assad previously worked for Raytheon as well, the arms industry giant on whose board Lloyd Austin sat before becoming the Pentagon chief.

According to Assad, the DoD overpays for “for radar and missiles … helicopters … planes … submarines… down to the nuts and bolts.” The report highlighted the fact that a shoulder-fired Stinger missile, produced by Raytheon, which cost $25,000 in 1991 is now priced at more than $400,000. Newsweek described the price rise as an “eye-watering increase,” even when taking inflation into account as well as interim technological advancements.

He went on to explain the Pentagon’s accountability system, such as it is, is completely “broken.” Assad said, “No matter who they are, no matter what company it is, they need to be held accountable. And right now that accountability system is broken in the Department of Defense.” Moreover, Assad cited two more instances of gouging on the part of arms industry behemoths Lockheed Martin, Boeing, and Raytheon.

Lockheed and Boeing were found to have yielded an over 40 percent profit on sales of PAC-3 surface to air missiles to Washington and its allies. Assad explained the companies saw a windfall of hundreds of millions on the deals over seven years, and “based on what they actually made, we would’ve received an entire year’s worth of missiles for free.” Lockheed protested to 60 Minutes that the deals had been negotiated “in good faith.”

By overstating both the cost and time needed to produce the radar equipment, Raytheon was also alleged to have taken obscene profits from the Patriot air defense system. The reporters were told by a company spokesman that Raytheon was working to “equitably resolve” the dispute. It is also noted that, in 2021, CEO Greg Hayes notified his investors that Raytheon schemed to put aside nearly $300 million for probable liability.

Assad demonstrated to the 60 Minutes host that an oil pressure switch was selling for over $10,000, when he claimed the switch should cost $328. The host asked Assad a question regarding the huge discrepancy, to which the former official responded “Gouging. What else can account for it?”

The Pentagon overpays for almost everything…

“The gouging that takes place is unconscionable. It’s unconscionable.”

Shay Assad, a former Defense Department contract negotiator, said the Pentagon overpays for almost everything – from missiles and planes to spare parts. pic.twitter.com/z9xLpGV1iC

— 60 Minutes (@60Minutes) May 21, 2023

Assad went on to say that this widespread practice shows arms firms are hoodwinking and taking advantage of the American taxpayer. “We have to have a financially healthy defense industrial base. We all want that. But what we don’t want to do is get taken advantage of and hoodwinked […] We have nowhere else to go. For many of these weapons that are being sent over to Ukraine right now, there’s only one supplier. And the companies know it.”

Retired Air Force Lieutenant Gen. Chris Bogdan, who oversaw weapons purchases during his time in the military, further explained his concerns over the fact that when companies sell their weapons to the DoD, they retain the proprietary information required to fix the systems themselves, precluding the Pentagon, in some cases, from doing its own repairs.

“It’s not really a true capitalistic market because one company is telling you what’s going to happen. [It’s a] monopoly,” retired DoD auditor Mark Owen told CBS.

These reports come as tensions between Washington and Russia as well as China are growing at a rapid clip. The US is planning on fighting a hot war with China. Concurrently, the White House is committing billions of dollars in unprecedented military aid to Taipei, some of which is being drawn from the same dwindling DoD stocks used to prop up Kiev’s war against Moscow via the “Presidential Drawdown Authority.”

Since 2018, the Pentagon has been shifting its focus away from counter-terrorism in the Middle East and North Africa, to focus primarily on so-called “great power competition” with China and Russia, pegged respectively as the number one and number two targets.

This has been reaffirmed in subsequent national defense strategies, as the shift in 2018 was codifying renewed Cold Wars against Russia and China launched by the US years and, in the case of Moscow, decades prior to the officially adopted national defense strategy.

It is also critical to note, that as the new Cold Wars become hotter, the nominal military budget is nearing a whopping $900 billion and will soon surpass the previously unthinkable $1 trillion mark. However, a closer look reveals the real national security state budget is already fast approaching $1.5 trillion.

This larger figure includes not only the mammoth War Department’s budget but – among a plethora of other expenses – the Department of Veterans Affairs, interest on the warfighting share of the national debt, nuclear weapons, and the Department of Homeland Security.

Congress recently simulated an attack on Taiwan by the Chinese mainland and came to the conclusion that Washington should thus ensure Taipei is armed “to the teeth.” Center for a New American Security (CNAS), the ultra-hawkish beltway think tank which has members and associates planted throughout the Joe Biden administration, carried out the exercise with the House Select Committee on China.

CNAS is funded by Taiwan via the island’s de facto embassy in the United States, as well as the Pentagon, the State Department, Raytheon, Lockheed Martin, and Boeing. In August 2021, investigative journalist Dan Cohen reported CNAS “has taken more money from weapons companies over the last several years than any other think tank in Washington… At least 16 CNAS alumni are now in key positions in the Biden Pentagon and State Department.”