What’s the Racket? A Story of Poverty in the U.S.A.

Costa Rica Earlier this month, the Happy Planet Index 2.0. annual worldwide review was published. It reported that the people of Costa Rica have the highest life satisfaction in the world and have the second-highest average life expectancy of the Americas (second only to Canada).

The USA was listed way down at 114th place.

This seems surprising when you consider the USA still has the largest economy of any single country.  In 2007 it produced $13.86 trillion in goods and services. Surely this high level economic platform equates to prosperity and happiness among its citizens.

Only Monday week, Aspen-based real-estate firm Joshua & Co. announced the sale of a $43 million estate in Aspen, the largest single-family residence sale in the United States this year. The 25,000-square-foot mansion, which sits on 4.5 acres, has 11 bedrooms, including the guest house.  There are 15 bathrooms, a gym, four powder rooms, a wine cellar and a pool.

Other sales in Aspen by Joshua & Co. include Hotel Jerome for $55 million, Crystal Island Ranch for $47 million and Mandalay Ranch for $46 million.  Clearly some folks are happy!

So why the low happiness rating?

Maybe the amount of poverty encountered in the USA and the effect on its children has something to do with it.

According to recent Census Bureau statistics, nearly 36 million Americans live in poverty and since 2000, 4.4 million more people in the USA are living in poverty.  The Census Bureau defines poverty as an individual earning $9,393 or less and $14,680 or less for a family of three.

In 2004, approximately 18 percent of all children in the United States lived in poverty. Over the last five years, child poverty has risen substantially, increasing by 12 percent with some states hit more than others.  New Jersey, for example, showing a 20 percent increase in child poverty from 2000 to 2005.

In 2006, the poverty rate for minors in the United States was the highest in the industrialized world, with 21.9% of all minors and 30% of African American minors living below the poverty threshold.  According to the report, “America’s Children: Key National Indicators of Well-Being,” 18 percent of all children 17 and younger were living in poverty in 2007, up from 17 percent in 2006.

child povertyFederal officials say the statistics predate the current economic downturn, and forecast harder times for some of the country’s 74 million children 17 and younger.

Will this poverty have an adverse effect on the children?

Many studies show children who grow up in poverty experience significant hardships that can have lasting effects well into adulthood. The biological legacy of childhood poverty may linger for decades, leaving adults who grew up poor more likely to get sick.

A recent study published in the July edition of the Canadian Medical Association Journal finds cardiovascular disease is increasing in adults under 50 and those of lower socioeconomic status, despite recent trends which show that cardiovascular disease is declining in Canada overall, say researchers at the Peter Munk Cardiac Centre.

Untreated cardiovascular disease can lead to heart failure, coronary artery disease and death, and is the most common cause of hospitalization in North America.

The researchers conclude ‘these findings have implications on both the policy and individual level. Increasing community programming for physical activity in poorer areas, making cities more pedestrian-friendly and improving healthy eating habits are ways to encourage healthier lifestyles and potentially decrease the rising prevalence of risk factors.’

However, these remedies would require financial assistance.

But is there any money available?

You would think that from the trading figures mentioned, an adequate source from paid taxes would be generated.  Tax payments that include: Individual income taxes, sales and excise taxes, corporate income taxes, property taxes motor, vehicle license taxes, severance taxes and estate taxes. etc… . Indeed during fiscal year 2007 (Oct. 1, 2006, to Sept. 30, 2007) the IRS reported collecting a total of almost $2.4 trillion after refunds.

It would appear to be a big enough pot.

So what’s the problem?

Perhaps it concerns this reported news on July 13 (Bloomberg) — The U.S. budget deficit topped $1 trillion for the first nine months of the fiscal year and broke a monthly record for June as the recession subtracted from revenue and the government spent to rejuvenate the economy.

So the USA is spending more than it’s receiving.

Why is this?  Where’s it all going?

A fundamental reason could be that, unlike Costa Rica who does not have an army, the USA has to account for military spending.

Does this make a difference?

Below are a couple of pie charts showing how USA tax dollars are spent. The first chart is the official government chart. The second is a revised chart when hidden military expenditure is taken into account.  For example, the cost of Iraq and Afghanistan wars and interest paid on war debt.



Total Outlays (Federal Funds): $2,650 billion MILITARY: 54% and $1,449 billion NON-MILITARY: 46% and $1,210 billion www.warresisters.org

So when all spending has been taken into account, 54% of the budget goes to military spending. This military expenditure now accounts for just under half of the world total, at 45%; distantly followed by the UK, China, France, and Japan each with 4 to 5 per cent of the world share.

Is this military spending justified?

There have been a few concerns raised over the years most notably from U.S. Marine Major General Smedley Darlington Butler.

He was one of only 19 people to be twice awarded the Medal of Honor, and one of only three to be awarded a Marine Corps Brevet Medal and a Medal of Honor, and the only person to be awarded a Marine Corps Brevet Medal and a Medal of Honor for two different actions.

smedleyHe had this to say 75 years ago.

“There are only two things we should fight for,” said Butler. “One is the defence of our homes and the other is the Bill of Rights. War for any other reason is simply a racket…

“A racket is best described, I believe, as something that is not what it seems to the majority of people. Only a small inside group knows what it is about. It is conducted for the benefit of the very few at the expense of the masses.

“I spent thirty-three years and four months in active military service… I was a racketeer, a gangster for capitalism.”

In 1934, Butler alleged to the United States Congress that a group of wealthy industrialists had plotted a military coup known as the Business Plot to overthrow the government of President Franklin D. Roosevelt.

Roosevelt was determined to eliminate the abuses of the financial system by subjecting it to federal regulation.

Threatened by prospects of government regulation and taxation of individual wealth as well as corporate profits to fund relief programs and public works, industrialists may well have been concerned.

A committee was set up to investigate Butler’s claims.

The McCormack-Dickstein Committee confirmed Butler’s accusations in its final report stating:

“In the last few weeks of the committee’s official life it received evidence showing that certain persons had made an attempt to establish a fascist government in this country…There is no question that these attempts were discussed, were planned, and might have been placed in execution when and if the financial backers deemed it expedient”.

However, contemporary media dismissed the plot with a The New York Times editorial characterizing it as a “gigantic hoax.”

One of the purported plotters, Gerald MacGuire, vehemently denied any such plot.  He was the man who supposedly approached Smedley on behalf of the businessmen. MacGuire stated a trip to Germany, Italy, Spain, and France was allegedly to study ‘economic’ conditions.  A few months after the initial inquiry apparently MacGuire died of naturual causes at the age of 38.

In 1935 another committee, The Nye Committee, was set to investigate the wrongdoings of big business namely the munitions industry. Committee findings revealed that one of the leading manufacturers at the time, the DuPonts, were heavily invested in fascist Italy, and had played a major role in the rearming of Germany.

According to the Versailles Treaty, which ended WWI, it was illegal to sell arms to Germany.

A Wall Street lawyer represented the DuPonts at the hearings.  He was William Donovan, who went on to become the head of the Office of Strategic Services (the OSS was the forerunner of the CIA) during WWII.

Although illegal, no charges were brought against the DuPonts who went on to build and operate the plant for the Manhattan project.

These alleged events happen over 70 years ago.  Are Butler’s concerns relevant today?

Lets take a closer look at the present situation concerning military expenditure and its resulting connotations.


Italy’s biggest defense company is Finmeccanica who reported a profit of 396 million euros ($499.9 million) for the nine months ending September 2008.  The Group, which is quoted on the Milan Stock Exchange, operates in the following sectors: aeronautics, space, helicopters, defense, transportation, energy and information technology. It is partly owned by the state (34%).


Pier Francesco Guarguaglini

Its Chairman and CEO is Pier Francesco Guarguaglini.  Guarguaglini will earn 5.56 million euros ($7.8 million) this year, according to documents posted online by the Rome-based Ministry of Public Administration.

What’s the connection with America?

Alenia North America is a wholly owned subsidiary of Finmeccanica – a  subsidiary whose parent company owns 100% of its common stock.

In other words, the parent company owns the company outright and there are no minority owners.

In Sept 29 2008  Alenia North America, Inc., of Washington, D.C., was awarded a firm fixed price contract not to exceed $287 million. This requirement is for the acquisition of 18 refurbished G222 (USAF designation: C27A) aircraft to support the Afghan National Army Air Corps (ANAAC).a plane

The procurement also includes an initial inlay of spare parts and Ground Support Equipment (GSE) to support the fleet; technical manuals in English and Dari; two Very-Important People (VIP) modules; technical publications support; engineering studies; mission support kits; and Contractor Logistics Support (CLS) services for one year. At this time all funds have been obligated.

What other business concerns has Finmeccanica SpA in the USA?

On May 13 it was reported (Bloomberg) Finmeccanica SpA agreed to buy the largest U.S. military electronics maker DRS Technologies Inc. for $4 billion (2.58 billion euros) to win Pentagon contracts.  Finmeccanica will pay for the acquisition with a bank loan that it plans to pay back by selling shares and bonds.

DRS Technologies is a leading supplier of integrated products, services and support to military forces, intelligence agencies and prime contractors worldwide.  Focused on defense technology, the Company develops, manufactures and supports a broad range of systems for mission critical and military requirements.

Here are the latest contracts awarded to DRS:

July 2, 2009 DRS Technologies Receives $49 Million Infrared Sighting Systems Order For U.S. Army Tanks And Combat Vehicles

June 17, 2009 DRS Technologies Awarded $43.9 Million In Follow-On Orders For P5 Combat Training Systems

June 11, 2009 DRS Technologies Receives $35 Million Contract From Raytheon For Phalanx Thermal Imagers.

June 11, 2009 DRS Technologies Awarded $28 Million To Complete Chassis Upgrades For The M2A3 Bradley

Does Finmeccanica SpA have any more connections in the USA?

Lets have a look at people running the company.



RICHARD GRECO – DIRECTOR he was born in New York on 05.03.1969.  He has a degree in Chemistry at Fordham University.  He earned an MBA in finance from the University of Chicago and a Master degree in American Foreign Policy from the Johns Hopkins University.

He established Filangieri Advisory Corp., where he is President, as well as Director of Mediware Information Systems, Boliven LLC and Performance Metals, Inc. where director compensation for 2008 was $67,250.00, people.forbes.com.  There are 12 directors.

He was an associate at The Scowcroft Group (Washington, D.C. 1996-1997); he practiced corporate finance at the Stern Stewart & Co (1997-2002); in 2002 he was appointed by the President of the United States as a White House Fellow and he was assigned to the Office of the Secretary of Defense as a special assistant.

He was chief financial officer of the Department of the Navy.  He is author of numerous articles on finance, education and foreign policy, he was elected a lifetime member of the Council on Foreign Relations.



Another director of the company since 1992 is GUIDO VENTURONI.  He was appointed Head of the Naval General Staff, and in 1994 Head of the General Defense Staff.  In 1999, he was appointed to the role of President of the Military Committee of NATO.

Chairman and Chief Executive Officer of the company Pier Francesco Guarguaglini is a member of the board of the Council for the United States and Italy.

The Council for the United States and Italy is a binational, private, non-profit organization founded in 1983 in Venice, with the establishment of the Board of Directors by the founding members (Gianni Agnelli and David Rockefeller among them).

Since then, the Council’s role has been that ‘of promoting US-Italian relations, within the broader context of US-European relations, by furthering mutual understanding and economic interchange between the two countries.’

The membership is composed of business leaders with a personal and or corporate interest in the other country, plus a limited number of leaders from academic and other fields.


David W. Heleniak

The Italian side of the Council is currently chaired by Marco Tronchetti Provera, Chairman of Pirelli.  His American counterpart is David W. Heleniak, Vice Chairman of Morgan Stanley.

Morgan Stanley is one of the world’s top investment banks, offering its clients everything from stock portfolio management to credit services.

Like others in the securities industry, however, it lobbied for money from the federal government in 2008 and 2009 when the industry, along with the economy, was floundering.

The  investment bank received billions in taxpayers money from the bailout bill. Morgan Stanley invests in and advises virtually every industry affected by federal legislation.

It also funds both the Democratic and Republican parties almost equally.  Since 1990, party individuals have received almost $19,000,00o.

Pier Francesco Guarguaglini  is also Member of the NIAF Council (The National Italian American Foundation).

The Business Council of the National Italian American Foundation (NIAF) is a network of prominent Italian and Italian American business leaders, including the CEOs of Fortune 500 companies and many other major corporations.

NIAF serves as ‘an educational resource and voice of the Italian American community while working with the White House, United States Congress, and other government agencies.’

NIAF works closely with the bicameral and bipartisan Italian American Congressional Delegation (IACD) and its Associates, comprised of nearly 200 members of Congress including current Speaker of the United States House of Representatives, Nancy Pelosi.

The IACD is currently chaired by The Honorable Bill Pascrell (NJ-8) and The Honorable Pat Tiberi (OH-12) of the U.S. House of Representatives.

Back to DRS Technologies.  Its Chairman and CEO is Mark S. Newman.  Here’s part of his CV:

‘Mr. Newman is active with many important professional organizations.  He is a director on the board of Business Executives for National Security (BENS) and a member on the Board of Governors of the Aerospace Industries Association (AIA).  He also serves as a member of the Navy League of the United States, the National Defense Industrial Association, the Association of the U.S. Army and the Surface Navy Association, among other professional affiliations.  He is a past chairman of the American Electronics Association (AeA).  Mr. Newman is also a director on the boards of Congoleum Corporation and Refac Optical Group.’

Other members on the board include:

Lt. GEN Jerry L. Sinn, USA (Ret.) President, Tactical Systems:

Lt. General Sinn joined the Company in January 2007 after a stellar 38-year career with the U.S. Army.  During that time, he served as the Military Deputy for Budget to the Assistant Secretary of the Army, Financial Management and Comptroller.  Before that, he served as the Director of the Army Budget for the Assistant Secretary of the Army.

Vice Admiral John G. Cotton, U.S. Navy (Retired) Senior Vice President, Maritime and Air Warfare Strategic Plans and Programs.  He most recently served in the Pentagon from 2003-2008 as Chief of Navy Reserve and Commander Navy Reserve Force.  During his 27 years of military service he served in various positions, including Deputy Director Contracts and Business Management, Office of the Assistant Secretary of the Navy (Shipbuilding and Logistics), and Commanding Officer, Navy Regional Contracting Center, Philadelphia.

Time limitations prevent further analysis.  However, it is hoped an insight has been created in the readers’ mind as to the working scenario, past and present, of political and military industrialism.

Was Major General Smedley Darlington Butler correct in his assumptions?  Are we caught up in a racket?

While only a brief appraisal, it looks like the foundations for such a racket are in place.  Whether these foundations have lead to a house of corruption is open for debate.  The main objective of this article was to highlight the disparity between individuals – some living in million dollar houses and others (children) with not enough food on their plates.

I suppose it helps having friends in the right places.  Maybe it would help if the USA paid Richard Greco an attractive salary to be on the eradication of poverty team.  Then we may see change.

Whose in charge of finances for the USA?


Who knows.  Perhaps these days you wont find a horses head in your bed, only an empty plate for your children.

Result: unhappiness.  Maybe Costa Rica’s got the right idea.  A country with no military.

I think it would be fitting to end this article listening to the words of Major General Smedley Darlington Butler:

Take it away Major General!


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