Northrop Corp. may have been a bit too creative in its dealmaking. This led Senator Russell Feingold of Wisconsin to push a law through Congress last year barring such payoffs as part of U.S. defense deals. In fact, the weapons industry may be prospering at some expense to the taxpayer. Currently, the Pentagon is permitting Sweden to wiggle through a loophole in U.S. regulations that would require an overseas client to pay a share of a weapon's development. So, with a wink from the Administration, Sweden will buy the missile directly from the manufacturer - and avoid a contribution to U.S. tax coffers.
Taxpayers subsidize the industry in other ways as well.
U.S. weapons sold to Israel and Egypt are largely paid for by the U.S. as part of its foreign-assistance obligations. Those demands, funded in part by the U.S., eliminated an unknown number of American jobs. For example, of South Korea's recent purchase of 120 F-16s, only the first 12 planes will be made in Fort Worth, Texas. The rest will be built in Korea. In fact, unlike all 3,400 F-16s built so far, most of the Korean jets will be built not by a U.S. company but by the Samsung Aerospace Industries.