How to Disappear Money, Pentagon-Style
Slush funds, smoke and mirrors, and funny money equal weapons systems galore
Now you see it, now you don’t. Think of it as the Department of Defense’s version of the street con game, three-card monte, or maybe simply as the Pentagon shuffle. In any case, the Pentagon’s budget is as close to a work of art as you’re likely to find in the U.S. government -- if, that is, by work of art you mean scam.
The United States is on track to spend more than $600 billion on the military this year -- more, that is, than was spent at the height of President Ronald Reagan’s Cold War military buildup, and more than the military budgets of at least the next seven nations in the world combined. And keep in mind that that’s just a partial total. As an analysis by the Straus Military Reform Project has shown, if we count related activities like homeland security, veterans' affairs, nuclear warhead production at the Department of Energy, military aid to other countries, and interest on the military-related national debt, that figure reaches a cool $1 trillion.
The more that’s spent on “defense,” however, the less the Pentagon wants us to know about how those mountains of money are actually being used. As the only major federal agency that can’t pass an audit, the Department of Defense (DoD) is the poster child for irresponsible budgeting.
It’s not just that its books don’t add up, however. The DoD is taking active measures to disguise how it is spending the hundreds of billions of taxpayer dollars it receives every year -- from using the separate “war budget” as a slush fund to pay for pet projects that have nothing to do with fighting wars to keeping the cost of its new nuclear bomber a secret. Add in dozens of other secret projects hidden in the department’s budget and the Pentagon’s poorly documented military aid programs, and it’s clear that the DoD believes it has something to hide.
Don’t for a moment imagine that the Pentagon’s growing list of secret programs and evasive budgetary maneuvers is accidental or simply a matter of sloppy bookkeeping. Much of it is remarkably purposeful. By keeping us in the dark about how it spends our money, the Pentagon has made it virtually impossible for anyone to hold it accountable for just about anything. An entrenched bureaucracy is determined not to provide information that might be used to bring its sprawling budget -- and so the institution itself -- under control. That’s why budgetary deception has become such a standard operating procedure at the Department of Defense.
The audit problem is a case in point. The Pentagon along with all other major federal agencies was first required to make its books auditable in the Chief Financial Officers Act of 1990. More than 25 years later, there is no evidence to suggest that the Pentagon will ever be able to pass an audit. In fact, the one limited instance in which success seemed to be within reach -- an audit of a portion of the books of a single service, the Marine Corps -- turned out, upon closer inspection, to be a case study in bureaucratic resistance.
In April 2014, when it appeared that the Corps had come back with a clean audit, Secretary of Defense Chuck Hagel was so elated that he held a special ceremony in the “Hall of Heroes” at the Pentagon. “It might seem a bit unusual to be in the Hall of Heroes to honor a bookkeeping accomplishment,” he acknowledged, “but damn, this is an accomplishment.”
In March 2015, however, that “accomplishment” vanished into thin air. The Pentagon’s Office of Inspector General (OIG), which had overseen the work of Grant Thornton, the private firm that conducted the audit, denied that it had been successful (allegedly in response to “new information”). In fact, in late 2013, as Reuters reported, auditors at the OIG had argued for months against green-lighting Grant Thornton’s work, believing that it was full of obvious holes. They were, however, overruled by the deputy inspector general for auditing, who had what Reuters described as a “longstanding professional relationship” with the Grant Thornton executive supervising the audit.
The Pentagon and the firm deny that there was any conflict of interest, but the bottom line is clear enough: there was far more interest in promoting the idea that the Marine Corps could pass an audit than in seeing it actually do so, even if inconvenient facts had to be swept under the rug. This sort of behavior is hardly surprising once you consider all the benefits from an undisturbed status quo that accrue to Pentagon bureaucrats and cash-hungry contractors.
Without a reliable paper trail, there is no systematic way to track waste, fraud, and abuse in Pentagon contracting, or even to figure out how many contractors the Pentagon employs, though a conservative estimate puts the number at well over 600,000. The result is easy money with minimal accountability.
How to Arm the Planet
In recent years, keeping tabs on how the Pentagon spends its money has grown even more difficult thanks to the “war budget” -- known in Pentagonese as the Overseas Contingency Operations (OCO) account -- which has become a nearly bottomless pit for items that have nothing to do with fighting wars. The use of the OCO as a slush fund began in earnest in the early years of the Bush administration’s war in Iraq and has continued ever since. It’s hard to put a precise number on how much money has been slipped into that budget or taken out of it to pay for pet projects of every sort in the last decade-plus, but the total is certainly more than $100 billion and counting.
The Pentagon’s routine use of the war budget as a way to fund whatever it wants has set an example for a Congress that’s seldom seen a military project it wasn’t eager to pay for. Only recently, for instance, the House Armed Services Committee chair, Texas Republican Congressman Mac Thornberry, proposed taking $18 billion from the war budget to cover items like an extra 11 F-35 combat aircraft and 14 F-18 fighter-bombers that the Pentagon hadn’t even asked for.
This was great news for Lockheed Martin, which needs a shot in the arm for its troubled F-35 program, already slated to be the most expensive weapons system in history, and for Boeing, which has been lobbying aggressively to keep its F-18 production line open in the face of declining orders from the Navy. But it’s bad news for the troops because, as the Project on Government Oversight has demonstrated, the money used to pay for the unneeded planes will come at the expense of training and maintenance funds.
This is, by the way, the height of hypocrisy at a time when the House Armed Services Committee is routinely sending out hysterical missives about the country’s supposed lack of military readiness. The money to adequately train military personnel and keep their equipment running is, in fact, there. Members of Congress like Thornberry would just have to stop raiding the operations budget to pay for big ticket weapons systems, while turning a blind eye to wasteful spending in other parts of the Pentagon budget.
Thornberry’s gambit may not carry the day, since both President Obama and Senate Armed Services Committee chair John McCain oppose it. But as long as a separate war budget exists, the temptation to stuff it with unnecessary programs will persist as well.
Of course, that war budget is just part of the problem. The Pentagon has so many budding programs tucked away in so many different lines of its budget that even its officials have a hard time keeping track of what’s actually going on. As for the rest of us, we’re essentially in the dark.
Consider, for instance, the proliferation of military aid programs. The Security Assistance Monitor, a nonprofit that tracks such programs, has identified more than two dozen of them worth about $10 billion annually. Combine them with similar programs tucked away in the State Department’s budget, and the U.S. is contributing to the arming and training of security forces in 180 countries. (To put that mind-boggling total in perspective, there are at most 196 countries on the planet.) Who could possibly keep track of such programs, no less what effect they may be having on the countries and militaries involved, or on the complex politics of, and conflicts in, various regions?
Best suggestion: don’t even think about it (which is exactly what the Pentagon and the military-industrial complex want you to do). And no need for Congress to do so either. After all, as Lora Lumpe and Jeremy Ravinsky of the Open Society Foundations noted earlier this year, the Pentagon is the only government agency providing foreign assistance that does not even have to submit to Congress an annual budget justification for what it does. As a result, they write, “the public does not know how much the DoD is spending in a given country and why.”
Slush Funds Galore
If smokescreens and evasive maneuvers aren’t enough to hide the Pentagon’s actual priorities from the taxpaying public, there’s always secrecy. The Secrecy Project at the Federation of American Scientists recently put the size of the intelligence portion of the national security state’s “black budget“ -- its secret spending on everything from spying to developing high-tech weaponry -- at more than $70 billion. That figure includes a wide variety of activities carried out through the CIA, the NSA, and other members of the intelligence community, but $16.8 billion of it was requested directly by the Department of Defense. And that $70 billion is just the tip of the iceberg when it comes to secret spending programs, since billions more in secret financing for the development and acquisition of new weapons systems has been squirreled away elsewhere.
The largest recent project to have its total costs shrouded in secrecy is the B-21, the Air Force’s new nuclear bomber. Air Force officials claim that they need to keep the cost secret lest potential enemies “connect the dots” and learn too much about the plane’s key characteristics. In a letter to Senator McCain, an advocate of making the cost of the plane public, Ronald Walden of the Air Force’s Rapid Capabilities Office claimed that there was “a strong correlation between the cost of an air vehicle and its total weight.” This, he suggested, might make it “decisively easier” for potential opponents to guess its range and payload.
If such assessments sound ludicrous, it’s because they are. As the histories of other major Pentagon acquisition programs have shown, the price of a system tells you just that -- its price -- and nothing more. Otherwise, with its classic cost overruns, the F-35 would have a range beyond compare, possibly to Mars and back. Of course, the real rationale for keeping the full cost estimate for the B-21 secret is to avoid bad publicity. Budget analyst Todd Harrison of the Center for Strategic and International Studies suggests that it’s an attempt to avoid “sticker shock” for a program that he estimates could cost more than $100 billion to develop and purchase.
The bomber, in turn, is just part of a planned $1 trillion splurge over the next three decades on a new generation of bombers, ballistic missile submarines, and ground-based nuclear missiles, part of an updating of the vast U.S. nuclear arsenal. And keep this in mind: that trillion dollars is simply an initial estimate before the usual Pentagon cost overruns even begin to come into play. Financially, the nuclear plan is going to hit taxpayer wallets particularly hard in the mid-2020s when a number of wildly expensive non-nuclear systems like the F-35 combat aircraft will also be hitting peak production.
Under the circumstances, it doesn’t take a genius to know that there’s only one way to avoid the budgetary equivalent of a 30-car pile up: increase the Pentagon’s already ample finances yet again. Principal Deputy Undersecretary of Defense Brian McKeon was referring to the costs of building new nuclear delivery vehicles when he said that the administration was “wondering how the heck we’re going to pay for it, and probably thanking our lucky stars we won’t be here to answer the question.” Of course, the rest of us will be stuck holding the bag when all those programs cloaked in secrecy suddenly come out of hiding and the bills come fully due.
At this point, you may not be shocked to learn that, in response to McKeon’s uncomfortable question, the Pentagon has come up with yet another budgetary gimmick. It’s known as the “National Sea-Based Deterrence Fund,” or as Taxpayers for Common Sense more accurately labels it, “the Navy’s submarine slush fund.” The idea -- a longstanding darling of the submarine lobby (and yes, Virginia, there is a submarine lobby in Washington) -- is to set up a separate slush fund outside the Navy’s normal shipbuilding budget. That’s where the money for the new ballistic missile submarine program, currently slated to cost $139 billion for 12 subs, would go.
Establishing such a new slush fund would, in turn, finesse any direct budgetary competition between the submarine program and the new surface ships the Navy also wants, and so avoid a political battle that might end up substantially reducing the number of vessels the Navy is hoping to buy over the next 30 years. Naturally, the money for the submarine fund will have to come from somewhere, either one of the other military services or that operations and maintenance budget so regularly raided to help pay for expensive weapons programs.
Not to be outmaneuvered, Air Force Secretary Deborah Lee James has now asked Congress to set up a “strategic deterrence fund” to pay for its two newest nuclear delivery vehicles, the planned bomber and a long-range nuclear-armed ballistic missile. In theory, this would take pressure off other major Air Force projects like the F-35, but as with the submarine fund, it only adds up if a future president and a future Congress can be persuaded to jack up the Pentagon budget to make room for these and other weapons systems.
In the end, however the specifics work out, any “fund” for such weaponry will be just another case of smoke and mirrors, a way of kicking the nuclear funding crisis down the road in hopes of fatter budgets to come. Why make choices now when the Pentagon and the military services can bet on blackmailing a future Trump or Clinton administration and a future Congress into ponying up the extra billions of dollars needed to make their latest ill-conceived plans add up?
If your head is spinning after this brief tour of the Pentagon’s budget labyrinth, it should be. That’s just what the Pentagon wants its painfully complicated budget practices to do: leave Congress, any administration, and the public too confused and exhausted to actually hold it accountable for how our tax dollars are being spent. So far, they’re getting away with it.
© 2016 William Hartung