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Guns and Butter

| Written by David Morris | No Comments | Updated on Sep 22, 2016 The content that follows was originally published on the Institute for Local Self-Reliance website at https://ilsr.org/guns-and-butter/
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In October 2015, when he was a very, very long shot for the Republican nomination, Donald Trump the businessman promised to make the military “much stronger than it is right now” without increasing military spending. “But you know what?” he declared,  “We can do it for less.”

In September 2016, as the Republican nominee, Donald Trump the politician dramatically reversed his position. He now proposes a massive increase in military spending. And instead of making the military more efficient by cutting Pentagon waste, Trump will “fully offset” the increase in military spending by reducing spending on non-defense programs through reducing their “government waste and budget gimmicks.”

For an idea of what that might entail for non-defense spending, consider the Republican budget blueprint passed by the House in early 2015 (no Democrat voted in favor). To offset a significant increase in military spending, the New York Times reports, Medicaid would be cut by $900 billion. Spending on the food stamp program would be shrunk by hundreds of billions of dollars. Spending for Pell Grants for college, job training and housing assistance would be slashed.

The 2011 Budget Control Act (BCA) stopped the Republicans from achieving their guns-not-butter budgetary. The BCA emerged from a confluence of events: A soaring deficit, the result of extensive federal spending that stopped a major economic recession from becoming a major economic depression and the Republican takeover of the House after the 2010 election. The result was a dramatic near government shut down showdown on how to cut the deficit.

The White House and Congress couldn’t agree. The BCA was a bludgeon, a crude across-the-board spending mandate intended to spur Congress and the White House to negotiate a more thoughtful approach. They couldn’t. As a consequence, in 2013 there was an immediate $110 billion cut in spending, divided more or less equally from defense and non-defense programs. Defense spending comprises about 54 percent of the discretionary budget, that part of the federal budget over which Congress has direct control through annual appropriations. Congress also imposed caps on defense and non-defense spending through 2021.

Although the cuts were supposedly proportional, the pain inflicted was not. Real per-capita funding for non-defense programs have fallen more than 10 percent below 2010 levels while the population served and the demand for services grew. The Veterans Administration, considered non-defense spending, has been swamped by increased demand from older Vietnam War veterans and a new influx from Iraq and Afghanistan war veterans. Rising rents and stagnant incomes have led to an increased demand for rental assistance even while the total number of families receiving assistance has fallen.

The injury to the Pentagon was far more modest. Troop levels declined, but that was to be expected given that two major wars were winding down. The Navy and Air Force got fewer new ships and aircraft than they wanted. Base construction slowed.

The Pentagon also suffered less because it was able to tap into another source of funding: The Overseas Contingency Operations (OCO) reserve established to give the Pentagon immediate flexibility in war spending. Originally the OCO was subject to budget caps but in 2011, the same year caps were enacted, Congress exempted OCO spending, expanded the fund and began tapping it for non war-related Pentagon spending.

Since 2013, Republicans and Democrats have battled over the caps. Each time, at the 11th hour they’ve agreed to increase them equally for both military and non-military spending, most recently in late 2015 after President Obama vetoed the National Defense Authorization Act that would have raised military but not non-military spending.

Donald Trump proposes to eliminate the caps on military spending and reimburse DOD tens of billions of dollars it lost from past cuts. Increased military spending will be offset by decreasing non-defense spending through improving program efficiency and reducing waste. But the evidence is overwhelming that the inefficiencies and waste fall most heavily on the military side.

Consider that in 1994, the Government Management Reform Act required the Inspector General of each federal agency to audit and publish the financial statements of their agency. All Non-Defense agencies complied. The Department of Defense did not.

In 2002, Secretary of Defense Donald Rumsfeld confessed, “we cannot track $2.3 trillion in transactions.” In June 2016, Pentagon’s Inspector General criticized the US Army for misreporting $6.5 trillion (yes, trillion with a T) for the 2015 fiscal year. “(I)nserting phony numbers” is how Reuters describes the Pentagon’s strategy for balancing the books.

In 2009 the Government Accountability Office (GAO) reported on audit quality and independence issues at the Pentagon’s Defense Contract Audit Agency (DCAA), the federal watchdog responsible for auditing oversight of military contractors. One Pentagon auditor admitted he did not perform detailed tests because, “The contractor would not appreciate it.”   That statement makes no sense unless you understand the intimate relationship between the Pentagon and its contractors. From 2004 to 2008, 80 percent of retiring three and four star officers went to work as consultants or defense executives.

“In almost any other realm it would seem a clear conflict of interest. But this is the Pentagon where…such apparent conflicts are a routine fact of life”, an in-depth investigation by the Boston Globe concluded.

The Sarbanes-Oxley Act of 2002 imposes criminal penalties on corporate managers who certify false financial reports. But, according to Mike Young, a former Air Force logistics officer, “The concept of Sarbanes-Oxley is completely foreign” to the Pentagon.

According to the Project on Government Oversight (POGO) the Pentagon so far has spent roughly $6 billion on “fixing” the audit problem without success. (POGO is by far the best resource for information related to military spending.)

I doubt there’s a real sense of urgency. The military knows that if it misses the next congressionally mandated deadline there will be no consequences. In 2012 Representative Barbara Lee (D-CA) introduced a bill Audit the Pentagon that would reduce by 5 percent the budget of any federal agency without an unqualified audit opinion by an external, independent auditor. The bill did not receive a hearing. In 2014 and 2015 she reintroduced the bill but reduced the penalty to a 0.5 percent budget reduction. Still there were no hearings.

For William Hartung, director of the Arms and Security Project at the Center for International Policy we are living in “a golden age for Pentagon waste”. A recent Reuters investigation by Scot J. Paltrow sums up the shocking mess. The Pentagon is “largely incapable of keeping track of its vast stores of weapons, ammunition and other supplies; thus it continues to spend money on new supplies it doesn’t need and on storing others long out of date. It has amassed a backlog of more than half a trillion dollars in unaudited contracts with outside vendors; how much of that money paid for actual goods and services delivered isn’t known. And it repeatedly falls prey to fraud and theft that can go undiscovered for years, often eventually detected by external law enforcement agencies.”

When outside agencies have been able to gather data they’ve discovered rampant fraud. Records show that the Raytheon Company defrauded the Pentagon 5 times up until 2003. Lockheed Martin 7 times as of 2013, Northrup Grumman 7 times as of 2010. They continued to receive huge Pentagon contracts.

What could be more vulgar than corruption disguised as patriotism?

Jon Basil Utley, publisher of The American Conservative describes the sorry process by which the Pentagon develops weapons.

Weapons are designed to be built in key congressional districts, not to be the most efficient or cost effective…. The F-22 had 1,000 suppliers in 44 states. The F-35 has 1,300 suppliers in 45 states in key congressional districts and is now estimated to cost up to $300 million per plane. Weapons manufacturing is started before finalized testing so as to build a constituency for programs’ continuation. Military contractors then get cost-plus contracts to modify the weapons, which won’t work properly because insufficient initial testing was done before manufacturing them.

Given this dysfunctional and self-serving process, it should come as no surprise that the GAO found “staggering” cost overruns of almost $300 billion in nearly 70 percent of the Pentagon’s 96 major weapons.

In the 1960s, Pentagon whistleblower Ernest Fitzgerald exposed $2 billion in cost overruns on Lockheed’s C-5A transport aircraft. It was considered a scandal. Today’s F-35 fighter plane already has posted cost overruns of $500 billion and more is to come. The F-35 has yet to prove itself battle-ready, and may never be. Nevertheless, earlier this year Congress added and the President signed off on 11 additional F-35’s to DOD appropriations.

Wastefulness is not the hallmark only of weapons procurement. Personnel costs are also wildly excessive. The Pentagon is top heavy with officers and generals paid vastly more than civilians with the same skills and education. Most of these officers work in public affairs or procurement or financial management or other jobs that do not require an officer.

The Pentagon currently has over 640,000 private contractors. No one knows the exact number but this is almost certainly an underestimate. They work alongside 800,000 civilian employees. A Rand Corporation report concluded contracting out is 25 percent more expensive than if performed by government employees. One Congressional study found that such contracts are on average, twice as expansive as in-house work. Some 70 percent of federal spending on intelligence is on private contracts. (Think Edward Snowden).

POGO estimates the Pentagon could save more than $20 billion a year if it reduced just its contractor work force by 15 percent.

Walter Pincus writes in the Washington Post about the inherent inefficiencies of contracting out. “The government pays to get the worker qualified, then ends up leasing back . . . former employees.”

There is another danger in contracting out. As a 2014 GAO report warns, “Without a thorough review of contractor activities, DOD risks becoming overly reliant on contractors to support core missions.”

Major Kevin P. Stiens and Lt. Colonel (Ret.) Susan L. Turley have observed, “The government lost personnel experience and continuity, along with operational control, by moving to contractors.” Air Force Colonel Steven Zamperelli adds, “Private employees have distinctly different motivations, responsibilities and loyalties than those in the public military.”

In 2008, in an infamous incident starkly revealed the flaws in private contracting. At least 12 U.S. soldiers were accidentally electrocuted inside their bases in Iraq. Later it was discovered the private contractor knew there were potentially serious electrical problems in the facility’s construction, but its contract didn’t cover “fixing potential hazards.” It only required repairing items already broken!

While politicians refuse to penalize the DOD for not cleaning up its act, many are more than willing to demand accountability for every penny spent on non-defense programs, especially those helping the poor. In March 2014 Virginia House GOP leaders demanded the state’s Medicaid program undergo a two-year external audit before expanding it. More than 60 audits had already been performed. In 2013 the House Committee on Oversight and Government Reform did a detailed analysis of New York State’s Medicaid program because, “Each dollar misspent on Medicaid is one less dollar for the country to use for better health care for the poor, education, infrastructure, national defense, deficit reduction, or any other priority.” To date the Committee has yet to do any such analysis of Pentagon spending.

Facing up to and correcting the wastefulness and corruption in the military budget could go a long way toward meeting the rising demands on the non-military, aka, the “butter” side of our national ledger. In this election season, will the citizenry force this issue, this travesty on the national agenda?