The Trump administration’s new executive order to curb arms industry stock buybacks — which boost returns for shareholders — has no teeth, but U.S. lawmakers could and should take advantage.
The White House issued an Executive Order on Jan. 7 to prevent contractors “from putting stock buybacks and excessive corporate distributions ahead of production capacity, innovation, and on-time delivery for America’s military.” The order empowers the Defense Secretary to “take steps to ensure that future contracts prohibit stock buybacks and corporate distributions during periods of underperformance, non-compliance, insufficient prioritization or investment, or insufficient production speed.”
The administration is right to call attention to military contractors getting rich on the taxpayer’s dime, but Congress has the constitutional authority to regulate commerce and control federal funding, not the president.
He could certainly encourage voluntary compliance with the order by recommending that Congress cancel or withhold contracts from firms delivering what it considers excessive stock buybacks, shareholder dividends, and executive compensation. But President Trump proposed a $1.5 trillion Pentagon budget on the same day he released his executive order, and he remains committed to a “peace through strength” agenda partly characterized by the expensive pursuits of military and technological dominance. The $1.5 trillion budget proposal is reason enough for military contractors to call the president’s bluff.
Read the full article on Responsible Statecraft.
