By R. Jeffrey Smith, the Center for Public Integrity
“What can you do with a general, when he stops being a general?” crooned Bing Crosby in the 1954 movie “White Christmas.” “Who’s got a job for a general when he stops being a general?”
Alas, the answer, 58 years later, is now clear. Retired generals don’t open ski resorts in Vermont. Instead, they hunker down in Washington as the paid employees of corporations that draw most of their income from the service branch in which the generals worked. Once there, they work to maintain a stream of funding from the public treasury.
The revolving door between government service and private companies for those with beribboned chests is now an entrenched feature of life in Washington, according to a new report from Citizens for Responsibility and Ethics in Washington (CREW), a nonprofit government watchdog group.
Updating a 2010 Boston Globe report that documented the practice, CREW found that over the last three years, 70 percent of the 108 three-and-four star generals and admirals who retired “took jobs with defense contractors or consultants.”
What’s more, CREW found, some of these same retirees were then appointed to Pentagon advisory boards, such as the Defense Policy Board. The study did not cite examples of improper decision-making, but said the retired generals’ advice to the Pentagon may not be “unbiased,” due to their new financial interests.
The Pentagon’s rules only require a one-year wait before retired generals can contact former colleagues still at the Pentagon on behalf of their new employer. But even before that brief period ends, they can provide useful advice to new bosses about how to tap into fresh revenue streams and tip them on upcoming contract opportunities.
As Sen. Claire McCaskill, D-Mo., put it during a 2009 hearing on Obama’s nomination of former Raytheon executive William Lynn to become the deputy secretary of defense, “it’s an incestuous business, what’s going on in terms of the defense contractors and the Pentagon and the highest levels of our military.”
The financial impact of these cozy relationships was studied this year by two political economists at the Swiss Economic Institute, who concluded after a rigorous examination of the Pentagon’s revolving door across six administrations that investors widely expected that hiring senior defense officials would produce higher profits.
They found that American defense companies merely had to announce they had hired a top former Pentagon official to see their stock prices jump, a circumstance they observed in dozens of instances. It was particularly evident in cases where the officials joined corporate boards or became top company executives during Democratic administrations, when strong government-corporate ties are generally scarce.
“It is hard to think of other reasons for higher expected returns than conflicts of interest,” said the scholars, Simon Luechinger and Christoph Moser.
After the London Sunday Times published an article last month revealing that retired British general officers were helping defense firms obtain contracts and boost revenues, British defense minister Philip Hammond told reporters that he was contemplating banning the retirees from the ministry building and rewriting any contracts found to have been tainted by such connections.
No similar outrage has erupted on this side of the Atlantic.