Pentagon contractors are essential in providing tools for our national security, but taxpayers shouldn’t bear the costs of scaling up manufacturing while executives profit significantly. As Congress approaches finalizing the annual policy bill for the Pentagon, there’s a significant opportunity for lawmakers to advocate for taxpayers.
This year, President Trump challenged the excesses of these executives through an executive order aimed at preventing Pentagon contractors from engaging in stock buybacks or issuing dividends to shareholders—common practices used to enhance profits—if they exceed budgets or fall behind on key military projects, which, to be honest, many do. Following the order, some in the military industry have started reducing stock buybacks to dodge possible repercussions, though this has mainly been voluntary and could change, as the executive order doesn’t have the teeth to enforce compliance. Meanwhile, dividends continue to flow, and taxpayers are still footing the bill for increased industrial capabilities.
Fortunately, Republican Senators Josh Hawley and Mike Lee, along with Democrat Elizabeth Warren from Massachusetts and Republican Tim Burchett from Tennessee, are pushing for legislation intended to strengthen Trump’s order.
Similar provisions were also integrated into the core text of the Pentagon’s annual policy bill.
Section 815 specifically aims to stop Pentagon contractors from stock buybacks or dividend distributions unless they first collaborate with the Secretary of War to create a plan for expanding their industrial capacity in light of national security requirements. If this language passes, it would give the Department of War a legal tool to hold contractors accountable. While a comparable amendment was proposed in the House version, it didn’t get a vote. As such, whether to retain the Senate’s provisions will likely depend on Congressional leaders during the upcoming negotiations for the final bill this year.
It’s no surprise that Pentagon contractors aren’t thrilled about being compelled to invest in their industrial capacity—something almost every other industry does routinely—before they can benefit from stock buybacks and dividends. They campaigned vigorously to block the House amendment and are continuing their efforts to persuade Congressional leaders against allowing Section 815 to become law.
Ironically, they claim that this provision would deter private sector participation in the defense industry, as if contractors would just withdraw from working with an agency that currently allocates over $1 trillion annually.
In a laughable turn, the Washington Post Editorial Board lamented the possible negative effects on the profits of its owner, expressing concerns about Amazon and Blue Origin—both founded by Jeff Bezos—holding contracts with the military.
They further question, “Why would a bureaucrat in Washington know better than a board of directors about maximizing shareholder value?” The truth is, they wouldn’t, but this question actually misses the crux of the issue. While a publicly traded company is obliged to its shareholders, the government has a responsibility to American taxpayers, with national security needs taking precedence.
The idea that contractors would flee the Pentagon or that shareholders would disavow Pentagon contractors is just industry scare tactics meant to intimidate policymakers. The reality is, profits will still be abundant, just not at the expense of our national security.
We require a robust military-industrial base to safeguard our interests. But we won’t achieve that until we stop letting the military industry’s elite disregard the needs of taxpayers and service members. The president was right to initiate this confrontation. Now, it’s up to congressional leaders to bring it to a conclusion. Taxpayers will be watching closely.
