Out-of-Control "Defense" Spending Must Be Tamed -- Here's How
Yesterday, the Chairman of the Joint Chiefs of Staff, Adm. Mike Mullen, put out a statement as he released his 2011 National Military Strategy. In it, he spoke words that have been rarely uttered by any high-ranking military or civilian member of the Department of Defense (DoD). He said that the "national debt poses a significant national security risk ... Both our nation and military will face increased budget pressures and we cannot assume an increase in the defense budget," and he added, "As we adjust to these pressures, we must not become a hollow force with a large force structure lacking the readiness, training, and modern equipment it needs."
This is in line with what Secretary of Defense Robert Gates has been saying for over a year, and some people are daring to be hopeful that perhaps the climate is right to finally start reforming the Pentagon. After over 30 years of working toward reforming the DoD and helping sources and whistleblowers to release information on scandal after scandal, I should feel like Sisyphus who, when he gets the rock to the top of the hill, it gets kicked back down again. But with the DoD, I feel like the rock has not been just kicked down the hill, but is at the bottom of the Grand Canyon. (I am not sure what I did in my past life to deserve this and I don't know why I won't give up, but I have also worked on other government fraud areas to good success.)
Since I have been working toward reforming the DoD from the 1980s to the present, the Pentagon has become unauditable, a word that you won't find in the dictionary, but a word that the Pentagon uses to say that they are the one main federal department that has not been able to pass an audit, even though they are required to by law, and as an excuse when they are requested to investigate fraud charges in their spending. On top of that, we are getting less and less bang for each buck, fewer and fewer planes, tanks and ships with each generation because of unrealistic and out-of-control costs and the defense budget has rocketed to such a high level that it is higher, in constant dollars, than anytime since the end of World War II, which makes it larger than all our enemies' defense budgets combined.
Truly reforming the DoD, getting control of its budget and making weapons that truly work are massive tasks that have eluded reformers for years. Many patriotic whistleblowers and internal sources have risked everything to try to change the Pentagon for the sake of the troops and the country, only to have their lives ruined or become very disillusioned as they continue to work in the Pentagon and find that their sacrifices were for naught.
The bulk of the power in this fight to reform the Pentagon is in the hands of the people who benefit from it: defense companies, high-ranking military and civilian personnel and members of Congress, among others. With an attitude of "don't bite the hand that feeds you," they will marshal their considerable force with the same excuses that are used each decade as if they are new. Some of them are:
- We will hurt national security
- If we cut, we will be cutting bone instead of fat
- This new generation of airplane, ship or tank is absolutely necessary to defeat our enemies
- Questioning costs and cutting defense money will show our enemies that we are weak
- We want the best for our boys (a favorite of some of our upper officer corps even though it has been shown that they pick money over troops year after year)
- And the final bastion, one that works very well with Congress: if we cut, we will lose a massive amount of jobs during these hard economic times
So, why is this column going to devote the next two months with entries on how to fix this mess of a government department? First, it is too important to give up because we are sending troops into harm's way without giving them the best they should have. Second, the federal treasury cannot take it anymore, and Mullen is right that we are jeopardizing our national security by ironically spending too much for our national security. And finally, to quote Lao-tzu, founder of Taoism - a journey of a thousand miles began with a single step.
The Solutions column was set up to take realistic and achievable slices of reform to make government work better. While any reform of the DoD is not a small slice due to its shear size, I do have many smart and effective sources, plus my experience to start the process by laying out ideas in many areas of DoD spending. With the many years of work with my sources in this area, we also don't want people interested in reform to reinvent the wheel. There are not that many people around now who knew about the reforms attempted and even passed (to later be eaten alive by the DoD bureaucracy and Congress) and many good ideas in the past that have proven to work and then been ignored or neutralized by those who benefit from the current system.
So, in the next two months, this column will tackle areas of weapons procurement, where the past can show us how to buy in the future; feeding and supplying the troops, including vital equipment that can save their lives; areas of defense and oversight that should not be outsourced to companies, but should remain within the military; problems and unintended consequences in our Foreign Military Sales program; how to truly price weapons and other items bought by the DoD, so that they are realistically priced; how to fix the revolving door, so high-ranking officers don't demoralize their troops by working for defense contractors and having huge conflicts of interest; and how to finally try to make it so the DoD knows where its money is.
Some of these columns will be written by me, some by others who have spent even more years trying to reform the system and some by people who may have new ideas that have never been tried. We will try very hard not to get too wonky for the public to understand, but also educate you on the complicated problems of DoD spending. If you are interested and believe you can contribute a step in this journey of reform, send me a few paragraphs describing your solution at firstname.lastname@example.org and I will look at them.
Check back each week and see a new DoD reform or solution and voice your opinion with comments.
I will leave you with excerpts of an excellent letter that was written in November to the National Commission on Fiscal Responsibility and Reform by a group of DoD reformers, who have been looking at this during their careers for over a combined 300 years. They lay out the desperate need for reform and suggest ideas to fix it.
November 15, 2010
The Honorable Erskine Bowles
National Commission on Fiscal Responsibility and Reform
There is no mystery why the increased spending has led to shrinking, aging hardware inventories. New weapons systems cost three to ten times more to buy and operate than the weapons they are replacing. Even if their budgets could grow steadily at five percent per year (over and above inflation), the cost explosion in new weapons dooms the military services to being unable to buy as many weapons as they had -- hence the shrinking hardware inventories. Because they can buy so few new planes, tanks or ships, they extend the life of the old ones -- hence the aging.
At $707 billion, the defense budget is today higher in than it has ever been since the end of World War II, even when the effects of 65 years of inflation are removed. This spending level is unrelated to the military threat. During the Cold War, from 1948 to 1990, when we faced the sizeable forces of the Soviet Union and the Warsaw Pact, annual Pentagon spending averaged $440 billion in inflation-adjusted dollars, (and that includes the effects of the Korean and Vietnam wars). Today, big spending advocates point to China, with a defense budget variously estimated at from $80 to $180 billion per year, as the future threat we must prepare against. But, if we add the highest available defense budget estimates for China, Russia, Iran, North Korea, and Cuba and then double that sum, the Pentagon still spends more. As to the threat of terrorism, we almost certainly spend more in one day than al Qaeda, the Taliban and all their affiliates spend in an entire year....
Right now, the Pentagon does not know how or where it spends its money. As the Government Accountability Office and DOD's own Office of the Inspector General have reported for decades, the Pentagon cannot track the money it spends. Routinely, DOD does not know if it has paid contactors once, twice, or not at all. We recently learned it does not even know how many contractors it has, how many they employ, and what they are doing. Google the terms "audit" and "Pentagon" and read the horror stories.
The Chief Financial Officers (CFO) Act of 1990 sought to solve this problem by requiring the Pentagon, and all other federal agencies, to pass annual audits of the links between their expenditures and legally enacted appropriations authorizing those expenditures. This requirement was intended as a first step to give meaning to the Appropriations and Accountability Clauses in the Constitution, namely -
"No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time."
In sharp contrast to almost every other federal agency, the Pentagon has failed to comply with the CFO Act, let alone with the Constitution's much more sweeping and absolute requirement for accountability. We are sure you will agree this puts at risk not just fiscal responsibility -- the task of your Commission -- but also fundamental checks and balances in our system of government. As federal officials and members of the Armed Forces, we all took an oath, freely and without reservation, to uphold, protect and defend that principle, among others. The Pentagon, in effect, claims an exemption.
Since the CFO Act was enacted in 1990 to start the journey toward the Constitution's requirement for an uncompromised accounting of Pentagon spending, DOD's managers have made promise after promise to perform. A very modest level of "audit readiness" was promised for 1997; that slid to 2006, then 2007, 2016, and finally 2017- twenty seven years after the passage of the CFO Act. The sitting DOD CFO recently said the Pentagon will need yet another extension: that is, more than twenty seven years. With every promise broken, it is clear that if you ask what a DOD program or policy has cost, is costing, and might cost in the future, the current DOD system will provide you any dollar amount it wants you to hear. Ask for an audit of those numbers, or just an independent review, and listen to the excuses....
Without a jolt, without radically altered incentives, the bureaucratic system that thrives on corrupted, unaudited accounts cannot and will not change. A colleague of yours on the Deficit Commission, Senator Tom Coburn, R-OK, has written to you recommending the urgently required accounting changes, together with a new and strong incentive: the DOD budget should be frozen at current (2010) spending levels until it can pass comprehensive audits of all of its programs, agencies, and contractors.
Freezing the DOD budget at the 2010 level would mean spending $5.5 trillion for defense in the next ten years. That is $1 trillion less than the $6.5 trillion that Secretary Gates' plan would spend. It is not radically different from the slightly more modest $865 billion reduction we understand the Bowles-Simpson Co-Chairs' Proposal would extract. Either spending limit could impose a discipline on Pentagon spending that has been missing for a long time. And freezing spending until the Pentagon passes audits up to the standards we require of taxpayers and businesses -- as specified in the Coburn plan - provides a truly powerful incentive for the Pentagon to conform to the letter of the Chief Financial Officer Act and to the original intent of the Accountability Clause of the Constitution.
These audits are, in fact, the minimal prerequisites for beginning the reforms that actually strengthen defense, but their enforcement would lay the foundation for the decision-making discipline we have long needed. This goes beyond the commendable goal of saving money by identifying waste, fraud and abuse. Trustworthy, audited cost figures allow shaping new, more effective procurement programs -- and ensure that planned procurements and force levels fit actual budgets.
Advocates of continuing DOD budget growth are loath to point out that holding the Pentagon's base budget at the 2010 level is actually a $900 billion increase over the pre-war year 2000 spending level (adjusted for inflation). Nor are they likely to tell you that the frozen budget will remain multiples of what China, Russia, North Korea, and Iran -- combined -- spend. Nor will they tell you it will match the combined spending of almost every other nation on earth.