Boeing's pay dirt

Posted: May 29, 2003 12:00 AM

WASHINGTON -- No sooner did Congress adjourn last Friday for its Memorial Day recess than the Pentagon declared victory for the Boeing Company over U.S. taxpayers. Against advice from federal budget officials and its own outside advisers, the Defense Department boosted Boeing's ailing commercial aircraft business with a sweetheart Air Force leasing deal. That dramatically demonstrated political power in Washington.

Pressure from the speaker of the House, the president pro tem of the Senate and lawmakers from 17 states where the big defense contractor operates rolled over opposition from the Office of Management and Budget (OMB). While the ultimate decision was made by President Bush, the political balance weighed heavily for Boeing.

"President Eisenhower must be speaking out in his grave about the military-industrial complex that he warned about," Sen. John McCain told me. McCain's was the only congressional voice to speak out when the deal was announced. Bailing out Boeing is a classic case of the public interest subordinated to protect a politically well-connected contractor.

The General Accounting Office (GAO) estimates $20 billion to $30 billion in government costs for leasing 100 Boeing 767 tankers for six years, costing $12.2 billion to $22.4 billion more than simply modernizing existing KC-135E tankers. Actually, the OMB reports the current fleet is in good shape, and the Air Force says there is no need to start replacing the KC-135Es before 2012. None of them, says the Air Force, will meet the time limit on use until 2040.

OMB Director Mitchell Daniels could see that this proposal was in Boeing's but not the nation's interest. Just before last Christmas, he thought the deal was sidetracked. When the Defense Department's leasing committee postponed further consideration, a Pentagon official told me: "It was decided that no deal was to be made." I concluded in a Dec. 19 column: "The deal is dead." Ominously, however, no announcement was made.

Democratic Rep. Norman Dicks of Washington state, who has carried Boeing's water in Congress for over 26 years, predicted after my column that the deal would be saved. Senate President Pro Tem Ted Stevens, Appropriations Committee chairman, hectored Defense Secretary Donald Rumsfeld in an open hearing. House Speaker Dennis Hastert applied the heat behind the scenes. Daniels did reduce the cost to the taxpayers, but could not block the deal.

Concern for Boeing by Hastert, who represents a northern Illinois district, is a major benefit of the company's world headquarters moving from Seattle to Chicago. Boeing further strengthened itself by hiring Rudy F. deLeon, a senior Defense official in both the Clinton and George W. Bush administrations, as chief lobbyist. Boeing had a passionate advocate in Secretary of the Air Force James Roche, who has worked on both the military and industrial sides of the complex.

The drive toward a Boeing deal hit a bump two months ago when the Pentagon asked the opinion of the Institute for Defense Analyses (IDA). Instead of the expected whitewash, the IDA appraisal (from a panel that included retired officers) was negative. McCain's efforts to obtain the report were rebuffed. This column also was unable to get it.

The Defense authorization act passed by the Senate last Thursday night ordered an analysis of alternatives to the Boeing lease. That senatorial intent was ignored by the Pentagon the next day when it announced the deal.

So delighted are Boeing's congressional cheerleaders that they admit the leasing deal was not driven by Air Force needs. Democratic Sen. Maria Cantwell of Washington state exulted that it "will deliver a sustained boost for Boeing's production lines and its workers at a time when they need it most." When McCain asked Boeing whether it had offered a leasing deal to Continental Airlines and been turned down, he was told this was "proprietary" information. Boeing did not have a response to this column.

John McCain cannot reverse this deal, but he can make life miserable for James Roche. McCain said Friday that Secretary Roche contradicted Air Force studies and was "relentless in exaggerating aerial tanker shortfalls and problems in order to win approval of the lease." Roche, nominated to shift over as secretary of the Army to push Rumsfeld's modernization, must confront McCain in confirmation hearings that will explore what has been done for the Boeing Co.