INTERNATIONAL POLICY CIP REPORT PROMISING THE SKY: PORK BARREL POLITICS AND THE F-35 COMBAT AIRCRAFT By William D. Hartung January 2014 Executive Summary Lockheed Martin claims that the development and construction of the F-35 combat aircraft sustains 125,000 jobs in 46 states. The company describes the F-35 as “the single largest job creator in the Department of De- fense program.” Lockheed Martin’s numbers have been routinely reported in the media, and have become a mainstay of the debate over the fate of the F-35 program. There’s just one problem with Lockheed Martin’s assertions about F-35 job creation. They are greatly exagger- ated, as documented in this report: •Lockheed Martin’s claim of 125,000 F-35-related jobs is roughly double the likely number of jobs sus- tained by the program. The real figure, based on standard estimating procedures used in other studies in the field, should be on the order of 50,000 to 60,000 jobs. •Similarly, the company’s claim that there is significant work being done on the F-35 in 46 states does not hold up to scrutiny. Even by Lockheed Martin’s own estimates, just two states – Texas and California – ac- count for over half of the jobs generated by the F-35. The top five states, which include Florida, Connecticut and New Hampshire – account for 70% of the jobs (see appendix Table 2 for further details). •Eleven states have fewer than a dozen F-35-related jobs, a figure so low that it is a serious stretch to count them among the 46 states doing significant work on the program. These states are Iowa, South Dakota, Montana, West Virginia, Delaware, Nebraska, North Dakota, Alaska, Hawaii, Louisiana and Wyoming. •This study identifies 138 major F-35 contractors operating in 231 separate locations. Well over half of the contractors identified – 88 – were foreign companies conducting F-35 work outside of the United States. This does not necessarily indicate that a majority of the work on the plane is being done overseas, but it does suggest substantial outsourcing of F-35 work (for details see appendix tables 3 and 4). Countries with the most identified production sites include Italy (36), Australia (30), the United Kingdom (24) and Turkey (12). The United Kingdom is the largest participant in terms of sheer amount of production, but the work is concentrated in fewer sites than in some other countries mentioned. •There is also evidence indicating that Northrop Grumman and Honeywell have used or produced F-35 com- ponents in China – including specialized magnets and sensor components – in violation of U.S. laws ban- ning the use of Chinese parts in U.S. defense equipment. The companies assert that they have stopped using Chinese parts, but this issue will bear watching as production of the F-35 moves forward. A Publication of the Center for International Policy 2 •The four most important F-35 contractors – Lock- heed Martin ($4.1 million), BAE Systems ($1.4 According to standard industry accepted forecasting, the million), Northrop Grumman ($3.5 million), and multi-role 5th generation stealth fighter is responsible for United Technologies, the parent company of F-35 more than 125,000 direct and indirect jobs, making it the engine-maker Pratt and Whitney ($2.1 million) single largest job generator in the Department of Defense program budget.2 – have made a total of $11.1 million in campaign contributions in the 2011/2012 and 2013/2014 Lockheed Martin has widely promoted the notion of election cycles. The vast majority of these contri- the F-35 program as an unparalleled job creation ma- butions have gone to key members of the armed chine, in advertisements, in fact sheets distributed to services or defense appropriations committees Congress, and in an online interactive map. in the House and Senate, or to members of the 39-member House F-35 caucus. The claims about the F-35 as a job generator are an argument of last resort for a program that has been •The top five recipients of contributions from plagued by cost overruns, performance problems, F-35 contractors in the House of Representatives and questions about how many are needed in a world in the past two election cycles are House Armed in which aerial combat between rival fighter planes Services Chair Howard P. “Buck” McKeon, seems like an increasingly obsolete form of warfare.3 $218,650; F-35 Caucus co-chair Rep. Kay Granger (R-TX), $195,950; Rep. Mac Thornberry (R-TX), The debate about cost, capabilities, and strategic need $162,500; F-35 Caucus co-chair John Larson (D- will continue, but if past history is any guide, the fate CT), $137,450; and Rep. Jack Kingston (R-GA), of the plane may well hinge on the ability of the Air $85,000 (for further details see Appendix Table 5). Force and the company’s contractors to sell Congress and the public on the value of the F-35 as an economic Given the uncertainties surrounding the F-35 program, development program. If so, it wouldn’t be the first which has been identified as a possible budget-cutting time that pork barrel politics trumped national security target by a wide range of non-governmental and priorities in weapons procurement decision making. governmental bodies, it makes sense for communities Given that fact, it is important to assess the accuracy that are looking to the F-35 as an important part of of the economic claims that are being made on behalf their economic futures to develop fallback plans that of the F-35. How large will its economic impact be, can be implemented in the event of the cancellation or and how does it compare to other uses of the same scaling back of the F-35 program. States like Con- money? necticut – home of the Pratt and Whitney division of United Technologies, which builds the engine for the Do the F-35 Job Claims Hold Up? F-35 – have taken the lead in this area by establishing As noted above, Lockheed Martin asserts that its their own transition commissions to develop strategies claim of 125,000 jobs created by the F-35 program is to diversify their economies (for a list of organizations derived from standard industry forecasting methods. that have recommended scaling back or canceling the But a quick look at other studies in the field calls this F-35 program see footnote 21). assertion into question. Introduction: Promises, Promises The standard method for estimating the job impact of “Powering Job Creation for America and Its Allies” – a given form of spending is called input/output analy- so says the headline of Lockheed Martin’s web site for sis. This approach looks at three types of jobs gener- its F-35 combat aircraft. According to the company, ated by a given activity: 1) Direct jobs involved in the program – which if fully funded will cost an esti- the building of the product (for example, assembling mated $1.5 trillion to build and operate over its life- the F-35); 2) Indirect jobs created at companies that time – will not only provide for the common defense supply materials and services (“inputs”) that go into but it will also deliver “tens of thousands of high pay- producing the item; and 3) Induced jobs, which are the ing, high quality jobs to American workers across the jobs created when workers in categories one and two country, and around the world.”1 The company’s claim spend their wages (for example, workers at an arms 4 about F-35 job creation sounds impressive indeed: factory buying lunch at a local restaurant). For short- A Publication of the Center for International Policy 3 hand, some accounts – including Lockheed Martin’s Lockheed Martin has a long history of attempting to – simply refer to “indirect” and “induced” jobs as one parlay the geographic spread of its contracts and sub- category, indirect jobs. contracts into budgetary clout. For example, in the early 1970s, when the company was seeking a govern- The ratio of direct jobs to total jobs in the Lockheed ment loan guarantee to stave off bankruptcy, company Martin estimate far exceeds the ratio suggested by CEO Daniel Haughton cited an alleged 34,000 jobs in other studies in the field. Lockheed Martin claims that 35 states generated by its L-1011 aircraft, a troubled the 125,000 jobs created by the F-35 include 32,500 airliner that was a central to the company’s survival.6 direct jobs and 92,500 indirect jobs. So the 125,000 When the Senate vote on the loan guarantees came total jobs are nearly four times the 32,500 figure for down to the deciding vote – it won by 49-48 – Sen. direct jobs (3.85, to be exact). By contrast, a 2011 Lee Metcalf (D-MT) switched to the pro-Lockheed analysis by Robert Pollin and Heidi Garrett-Peltier of side because, he said, “I’m not going to be the one the University of Massachusetts estimates total jobs putting those thousands of people out of work.”7 per billion dollars generated by Pentagon spending at 11,200, with 6,800 of those being direct jobs. That But the jobs argument doesn’t always carry the day. puts total jobs at 1.6 times direct jobs, far lower than For example, in the case of its F-22 Raptor, Lockheed Lockheed Martin’s figure of 3.85. Even an Aerospace Martin repeatedly asserted that the aircraft would Industries Association-funded study by Dr.