By BRODY MULLINS and T.W. FARNAM
Spending by lawmakers on taxpayer-financed trips abroad has risen sharply in recent years, a Wall Street Journal analysis of travel records shows, involving everything from war-zone visits to trips to exotic spots such as the Galápagos Islands.
The spending on overseas travel is up almost tenfold since 1995, and has nearly tripled since 2001, according to the Journal analysis of 60,000 travel records. Hundreds of lawmakers traveled overseas in 2008 at a cost of about $13 million. That’s a 50% jump since Democrats took control of Congress two years ago.
The cost of so-called congressional delegations, known among lawmakers as “codels,” has risen nearly 70% since 2005, when an influence-peddling scandal led to a ban on travel funded by lobbyists, according to the data.
Alabama Gov. Bob Riley and Sen. Richard Shelby in June were on a river cruise in Paris, where U.S. politicians met with defense-industry executives.
Lawmakers say that the trips are a good use of government funds because they allow members of Congress and their staff members to learn more about the world, inspect U.S. assets abroad and forge better working relationships with each other. The travel, for example, includes official visits to American troops in Iraq and Afghanistan.
Based on information published in the Congressional Record, also shows that taxpayer-funded travel is a big and growing perk for lawmakers and their families. Some members of Congress have complained in recent months about chief executives of bailed-out banks, insurance companies and car makers who sponsored corporate trips to resorts or used corporate jets for their own travel.
Although complete travel records aren’t yet available for 2009, it appears that such costs continue to rise. The Journal analysis shows that the government has picked up the tab for travel to destinations such as Jamaica, the Virgin Islands and Australia’s Great Barrier Reef.
Lawmakers frequently bring along spouses on congressional trips. If they take commercial flights, they have to buy tickets for spouses. If they fly on government planes — as they usually do — their spouses can fly free.
Paris Air Show
In mid-June, Sen. Daniel Inouye (D., Hawaii) led a group of a half-dozen senators and their spouses on a four-day trip to France for the biennial Paris Air Show. An itinerary for the event shows that lawmakers flew on the Air Force’s version of the Boeing 737, which costs $5,700 an hour to operate. They stayed at the Intercontinental Paris Le Grand Hotel, which advertises rooms from $460 a night.
The lawmakers were invited to a dinner party at the U.S. Embassy and had cocktails at a private party at the Eiffel Tower. Mr. Inouye attended a dinner sponsored by the Aerospace Industries Association, a U.S. trade group. Another senator on the trip, Alabama Republican Sen. Richard Shelby, took a cruise on the River Seine with defense-industry executives and elected officials from Alabama, Mississippi and Florida.
Often, lawmakers combine trips to war zones with visits to more tranquil spots. In February, House Speaker Nancy Pelosi led a delegation of Democratic lawmakers to visit U.S. troops in Afghanistan for a day. Before landing in Kabul, the eight lawmakers and their entourage of spouses and aides spent eight days in Italy, spending $57,697 on hotels and meals.
A spokesman for Ms. Pelosi says that she was working in Italy, meeting with U.S. troops at Aviano Air Base, laying a wreath at the Florence American Cemetery, giving a speech to Italian lawmakers and visiting the Pope, among other things.
Homeland Security
Rep. Bennie Thompson (D., Miss.), the chairman of the House Homeland Security Committee, led a group to Brazil, Argentina, Peru and Panama. “This trip further solidified the message that homeland security does not begin or end at our borders,” says Mr. Thompson’s spokeswoman.
Many congressional trips have been to Iraq or Afghanistan. In 2008, lawmakers and aides took 113 trips to Iraq, according to the Journal analysis, down slightly from the prior year. Not much money is spent in the war zones. Lawmakers are not allowed to stay overnight in Iraq and receive only minimal spending allowances for their one-day visits.
In mid-February, for example, six House lawmakers traveled to Kuwait, Iraq, Bahrain and Afghanistan. Each lawmaker reported spending $1,500 on hotels and meals in Kuwait, $400 in Bahrain, and $25 in Afghanistan. They reported no expenses in Iraq.
Scores of lawmakers are spending this week abroad on taxpayer-funded trips. Congressional offices say they won’t release details of the trips for security reasons. Disclosure rules require lawmakers to print some information about their taxpayer-funded travel in the Congressional Record within 30 days of returning home.
Congressional Fleet
The congressional trips are possible thanks in part to an unlimited fund created by a three-decade old law. Nearly two dozen government officials work full-time organizing the trips. Much of the costs are not made public, including the cost of flying on government jets. The Air Force maintains a fleet of 16 passenger planes for use by lawmakers.
Documents obtained by the Journal show that the cost of flying a small group of lawmakers to the Middle East is about $150,000. Larger trips on the Air Force’s version of the Boeing 757 cost about $12,000 an hour. Two federal agencies pay for most of the travel — the Defense Department and the State Department.
In October, Rep. Bud Cramer (R., Ala.) spent two weeks in Europe on government business. Reports show that Mr. Cramer spent $5,700 on hotels, meals and incidentals. Mr. Cramer wasn’t running for re-election and left office just two months later.
“Knowing that I was leaving with my 18 years of seniority, I wanted to conclude some issues that I was working on,” Mr. Cramer said. He now works for a lobbying firm in Washington.
Some of the most expensive travel is to exotic locales.
Last summer, Rep. Brian Baird (D., Wash.) took a four-day trip to the Galápagos Islands with his wife, four other lawmakers and their family members. The lawmakers spent $22,000 on meals and hotels, records show. Mr. Baird, a member of the House Science Committee, said the trip was to learn about global warming.
On the first day, lawmakers toured a breeding center for giant tortoise and land iguanas before dining with scientists, according to an itinerary for the trip. The next morning, lawmakers headed to the Galápagos National Park while their family members had the option of hiking, swimming or shopping. That afternoon, the group boarded a boat to visit a sea-lion colony and search for white-tip sharks.
Maybe we need to have corporate executives travel WITH the lawmakers to justify the trips or travel only to the same destinations-it would seem that all the resorts would be covered.
The announcement that two of the long time DOW components (GM and CITI) were going to be substituted, did not get a lot of press, but that substitution could have major implications for the calculation of the DOW AVERAGE that is so widely publicized.
Some financial analysts did a “what of” analysis to test to see if the two new member components of the DOW; CISCO AND TRAVELERS.
They discovered, that this type of substitution would have had a major effect on the DOW AVERAGE figure that is reported daily. They estimated that if those two stocks were in the DOW for the last 12 months, the DOW would be approximately 300 POINTS HIGHER than reported!
So imagine what that would be like? Is it a run away market, is it a new bull market rally?
The DOW is watched so much and reported daily on all the financial newscasts, yet it could be significantly erroneous or not based on who the components are. So by substituting the stocks, and many other throughout its long history, the distortions could have major implications.
General Motors Corp. and Citigroup Inc., crippled by the first global recession since World War II, were removed from the Dow Jones Industrial Average and replaced by Cisco Systems Inc. and Travelers Cos.
GM, which filed for bankruptcy protection today, and Citigroup, the recipient of $45 billion in taxpayer aid, became the first companies since American International Group Inc. in September to leave the 30-stock average. Their shares have lost more than 90 percent since the start of 2007.
By replacing GM with Cisco, Dow Jones & Co. has removed automakers from the best-known benchmark for U.S. stocks, saying in an e-mailed statement that computers are as central to the economy as cars were in the previous century. Citigroup, until last year the world’s biggest financial firm by assets, is being replaced by a company it jettisoned in 2002 and that was once run by its former chairman, Sanford “Sandy” Weill.
“This announcement brings front and center the challenges facing the U.S. economy as it strives to remain competitive,” said Alan Gayle, director of asset allocation at Ridgeworth Investments, which manages $60 billion in Richmond, Virginia. “The Dow Jones Industrial Average is becoming less of an industrial average. It’s trying to reflect the broader economy.”
Below $5
Citigroup has traded below $5 a share since mid-January and is in the process of converting $52.5 billion of preferred stock into common shares, giving the U.S. government a 34 percent stake. GM’s ouster was foreshadowed in May by John Prestbo, the Dow Jones & Co. editor in charge of indexes, who said it would be removed in a bankruptcy filing.
GM, whose shares will be suspended on the New York Stock Exchange by the end of the day, closed unchanged at 75 cents. Citigroup fell 0.8 percent to $3.69.
“The parlous state of GM has left us with no choice but to remove it from the Dow,” said Robert Thomson, managing editor of the Wall Street Journal, in a statement announcing the change. The newspaper’s editors decide the makeup of the average. News Corp., the media company headed by Rupert Murdoch, has been its publisher since acquiring Dow Jones in 2007.
Travelers Merger
Citigroup, based in New York, was formed in 1998 from the merger of Travelers Group Inc. and Citicorp. In 2002, Citigroup gave up control of Hartford, Connecticut-based Travelers Property Casualty Corp. through an initial public offering and subsequent spinoff. The bank earned $1.6 billion in the first quarter of 2009, ending five straight quarters of losses totaling $37.5 billion.
“We were reluctant to remove Citigroup at the height of the financial frenzy, but it is clear that the bank is in the midst of a substantial restructuring which will see the government with a large and ongoing stake,” Thomson said.
Thomson said Citigroup may be considered again after it has “refashioned itself,” according to the statement.
Cisco, the world’s largest maker of computer-networking equipment, joins Microsoft Corp., International Business Machines Corp., Intel Corp. and Hewlett-Packard Co. in the Dow, boosting its technology weighting from about 17 percent. With the addition of San Jose, California-based Cisco, computer companies will close the gap with industrials including 3M Co., the largest category with about 18.5 percent.
Cisco gained 5.4 percent to $19.50, outpacing a 2.6 percent advance by the Standard & Poor’s 500 Index.
Bank Shares
Travelers, the second-biggest U.S. commercial insurer, joins JPMorgan Chase & Co., American Express Co. and Bank of America Corp. among financial companies in the Dow. Its higher price than Citigroup’s will boost the benchmark’s financial weighting to about 10 percent from about 7 percent. Financials make up about 14 percent of the S&P 500, a broader benchmark.
The choice of New York-based Travelers restored an insurer to the Dow average, which had lacked one since the removal of AIG. Travelers rose 3.1 percent to $41.91.
Kraft Foods Inc. was named to replace AIG in the Dow average on Sept. 18, the day after the nation’s biggest insurer was taken over by the U.S. government to avert its collapse.
GM, which had its last profitable year in 2004, was the worst-performing company in the average last year, losing 87 percent, and 77 percent this year through May 29. Its shares fell below $1 on May 29, putting them below the minimum normally required to trade on the NYSE. GM, based in Detroit, entered the 113-year-old index in 1915, replacing preferred shares of U.S. Rubber.
GM has been in the Dow average continuously since 1925. Only General Electric Co., a component since 1907, has been in the index longer. Travelers joined in 1997, and the company’s name changed to Citigroup in 1998.
Biggest Bankruptcies
GM, the fourth-biggest bankruptcy in U.S. history after Lehman Brothers Holdings Inc. and Washington Mutual Inc. in September and WorldCom Inc. in 2002, had been the lowest-priced company in the average for most of the past year. Citigroup closed at lower prices than GM on 27 days this year, mostly in March. The Dow average is price-weighted, meaning the lower a company’s share price, the less influence it has.
GM and Citigroup were taken out from News Corp.’s 150-stock Global Dow in April, less than five months after that index was introduced.
“The issues facing GM have been widely known and disseminated for some time,” said Jonathan Armitage, head of U.S. large-cap equities at the American unit of Schroders, the U.K.’s largest independent money manager. “It was less a question of if but of when” this day would come.
The Dow average was devised in 1896 by Charles H. Dow, co- founder of Wall Street Journal publisher Dow Jones & Co. Originally containing 12 stocks, it expanded to 20 companies in 1916 and to 30 in 1928.
Reputation, Growth
There are no rules for inclusion in the gauge, according to the Dow Jones Web site. Usually, a stock is added only “if it has an excellent reputation, demonstrates sustained growth, is of interest to a large number of investors and accurately represents the sectors covered by the average,” the Web site says.
Changes in the composition of the average “are rare, and generally occur only after corporate acquisitions or other dramatic shifts in a component’s core business,” the site says. “When such an event necessitates that one component be replaced, the entire index is reviewed,” and “multiple component changes are often implemented simultaneously.”
Three companies left the Dow last year, including AIG. Altria Group Inc. and Honeywell International Inc. were replaced by Bank of America and Chevron Corp. Those changes were the first since 2004.
Sterling Cooper Inc 