Tag: defense budget

The Pentagon’s Accounting Problem

The Pentagon’s inability to pass an audit, after years of outright stonewalling, followed by many more years of foot-dragging, is suddenly a hot topic. A few weeks ago, Rolling Stone featured a scathing exposé highlighting the Pentagon’s inability to count.

Writer Matt Taibbi explains

Ahead of misappropriation, fraud, theft, overruns, contracting corruption and other abuses that are almost certainly still going on, the Pentagon’s first problem is its books. It’s the world’s largest producer of wrong numbers, an ingenious bureaucratic defense system that hides all the other rats’ nests underneath.

These and other stories seem to have prompted House Armed Services Committee Chairman Adam Smith (D-WA) to deliver a stern message to officials in the Department of Defense. The Trump administration has requested $750 billion for the Pentagon, but, Smith noted, “We literally don’t know where a chunk of that $750 billion is going to go. We can identify some of it here and there, but by any normal accounting measure, you can’t tell us where you’re spending your money, or how much inventory you have.”

Taibbi continues:

If and when the defense review is ever completed, we’re likely to find a pile of Enrons, with the military’s losses and liabilities hidden in Enron-like special-purpose vehicles, assets systematically overvalued, monies Congress approved for X feloniously diverted to Program Y, contractors paid twice, parts bought twice, repairs done unnecessarily and at great expense, and so on.

Enron at its core was an accounting maze that systematically hid losses and overstated gains in order to keep investor money flowing in. The Pentagon is an exponentially larger financial bureaucracy whose mark is the taxpayer. Of course, less overtly a criminal scheme, the military still churns out Enron-size losses regularly, and this is only possible because its accounting is a long-tolerated fraud.

Judging from the response of DoD’s senior leaders, however, there is absolutely no cause for alarm. Acting Secretary of Defense Pat Shanahan explained last year that they “never expected to pass the audit.” When a reporter asked him why taxpayers should trust the Pentagon with their money if it can’t even “get their house in order and count ships right or buildings right,” Shanahan quipped, “We count ships right.”

Taibbi explains: “This was an inside joke. The joke was, the Pentagon isn’t so hot at counting buildings. Just a few years ago, in fact, it admitted to losing track of ‘478 structures,’ in addition to 39 Black Hawk helicopters (whose fully loaded versions list for about $21 million a pop).”

This cavalier attitude is pretty maddening. It’s almost as though the DoD sees public scrutiny as not much more than a bothersome distraction. As I explained when we discussed Taibbi’s article in War on the Rocks’ latest “Net Assessment” podcast, I had Colonel Nathan R. Jessup’s courtroom monologue from the movie A Few Good Men running through my head.

While on the stand, Jessup (played by Jack Nicholson) tries to deflect questions about his immoral and unethical actions: “I have neither the time nor the inclination to explain myself to a man who rises and sleeps under the blanket of the very freedom that I provide and then questions the manner in which I provide it. I would rather that you just said ‘thank you’ and went on your way.”

DoD leaders may not have the inclination to explain their shoddy accounting, but they do have a responsibility to the American people who pay the bills; and our elected representatives have an obligation to get to the truth. There are reasonable doubts about the Pentagon’s ability to be a responsible steward of the vast sum of money shoveled its way every year. So long as these doubts persist, we shouldn’t expect that Americans will want to spend even more

 

Americans Love the Military — but They Don’t Think It Needs More Money

Those who call for the United States to pursue an ambitious grand strategy of global dominance (aka primacy) also believe the American people will willingly tolerate much higher Pentagon spending. Some even spell out where the additional money will be found. The members of the National Defense Strategy Commission, for example, declare that policymakers must arrest the rise of non-defense spending, and increase tax revenues, in order to “fully fund America’s defense strategy.” 

Such claims do not square with political reality. As Gallup’s Frank Newport points out “Americans clearly respect and appreciate the military, but generally perceive that the nation’s national defense is strong enough (or even too strong), and that current defense spending is about right (or even too much).” Newport’s colleague Lydia Saad breaks down public attitudes here, finding that just 1 in 4 Americans think we spend too little on the military. There is meager support for higher Pentagon spending even among Republicans: 48 percent believe that military spending is “about right” while just 37 percent want more. Three years ago, these numbers were essentially flipped: 62 percent of Republican respondents thought the United States was spending too little on the miltary, while just 22 percent were in the “about right” camp.

Looking back on Gallup polling data over the last several decades, Newport explains “as defense spending goes up, the percentage of Americans saying the nation spends too little goes down.” And, overall, “attitudes about defense spending…[remain] fairly stable, with Americans almost always saying that spending is either about right or too much.”

He continues:

For those who argue that the U.S. needs a much bigger defense budget in the years ahead, Americans’ upbeat feelings about the military and about the strength of national defense could actually be an obstacle – leading to the complacent conclusion that the military budget doesn’t need to be increased. If things are going well (and if the budget has already been increased), why the need to spend more?

To be clear, if Washington continues to hold out U.S. military power as indispensable to all that is good in the world, and if our political leaders mostly listen to those who contend that “America needs a substantially larger military than the one it now has” – then U.S. taxpayers will have to pay more. Much more. And they’ll also have to tolerate much less spending on nearly everything else.

But it is not too late to revisit our foreign policy goals. As I explain in my forthcoming book, there are many problems with primacy, but its greatest shortcoming may be that it does not align with the wishes of the American people. An alternative approach, one that is better suited to our current political moment, would restrain Washington’s impulses to solve problems through the use of force, or the threat of force, and reaffirm the importance of the many other instruments of American global influence, including diplomacy and responsible statecraft, mutually beneficial trade, and peaceful cultural exchange.

 

Trump’s Crazy Military Budget

The White House unveiled its proposed budget for Fiscal Year 2020 and, to the apparent surprise of some military planners, the White House is calling for a top line national defense budget of $750 billion. Pentagon officials had reportedly anticipated a budget of $733 billion, which would have been a 2.4 percent increase over last year’s. They got a 4.7 percent increase instead. According to the supporting documentation, the request is intended to provide the Department of Defense with the resources to “remain the preeminent military power in the world, ensure balances of power in key regions remain in America’s favor, and advance an international order that is the most conducive to U.S. security and prosperity.”

The United States spends more than twice as much on its military as China and Russia combined, and is clearly the world’s “preeminent military power,” but it isn’t obvious that we’re getting the biggest bang for our bucks, nor that this additional spending will be critical to sustaining our edge. More to the point, even with all this “preeminence,” the U.S. military has struggled to bring current conflicts to a satisfactory end. As noted in 2016 by Admiral Mike Mullen, the former chairman of the Joint Chiefs of Staff, “We’re 0 for a lot.” Military historian Andrew Bacevich similarly concludes “having been ‘at war’ for virtually the entire twenty-first century, the United States military is still looking for its first win.” (h/t Steve Walt)

Perhaps it’s not the military’s fault? And perhaps it’s not due to a shortage of funds? I think that the real culprit is that U.S. officials continue to expect the military to solve a host of problems that could be better addressed by other means, or left to be dealt with by other countries.

President Donald Trump has at times shown his frustration, but the reality of his budgets speaks louder than his words. This latest increase comes after he had gone back and forth on what he wanted to spend, initially telling all departments to prepare for a 5 percent cut, then back-tracking and saying the defense budget would not only be exempt from such reductions, but would actually increase. On another occasion, he blurted out on Twitter that it was “crazy” to spend $716 billion on the military, but then reversed himself a week later.

While $750 billion already represents a large increase in the budget, the most notable growth comes from within that request. The White House has asked that $165 billion come from Overseas Contingency Operations (OCO). Last year, OCO received $69 billion. While originally intended as a way to fund the supposedly unexpected costs of the wars in Iraq and Afghanistan, OCO has become a sort of “slush fund” for the Pentagon to avoid the budget caps put in place by the Budget Control Act (BCA). As my former Cato colleague Caroline Dorminey points out, $750 billion is an “astronomical increase” and well above the BCA cap of $576 billion. Taxpayers for Common Sense observes that OCO’s funding level would make it the second largest government agency, in terms of discretionary spending – behind the Pentagon, of course.

For a person who was elected to the presidency by railing against the foreign policy establishment, proclaiming America’s overly militarized foreign policy a “complete and total disaster,” and, most recently, declaring in his State of the Union address that “great nations do not fight endless wars,” President Trump has once again funded a military geared toward perpetuating the status quo, and remaining embroiled in the endless wars that he’s promised to quit.

I expect that House Democrats, beginning with House Armed Services Committee Chair Adam Smith (D-WA), will cast a skeptical eye toward the administration’s request. I also hope, however, that all Americans will dare ask how all this spending actually makes us safer, and ponder why the many other instruments of American power and influence – including diplomacy (Trump’s budget calls for cutting the State Department by 23 percent), trade, and voluntary cultural exchange – continue to get short shrift from this administration. 

(Thanks to James Knupp for his help with this post)

DEFENSE DOWNLOAD: Week of 11/1

Welcome to the Defense Download! This new round-up is intended to highlight what we at the Cato Institute are keeping tabs on in the world of defense politics every week. The three-to-five trending stories will vary depending on the news cycle, what policymakers are talking about, and will pull from all sides of the political spectrum. If you would like to recieve more frequent updates on what I’m reading, writing, and listening to—you can follow me on Twitter via @CDDorminey

  1. Bolton Calls National Debt ‘Economic Threat’ to US,” Toluse Olorunnipa. Hot off the presses! National Security Advisor John Bolton calls for significant cuts to discretionary spending in order to get the country back on the path of fiscal sustainability. The new trajectory? Bolton, and the President himself, have called for defense spending to be cut or levelled off in the short-term—a radical change from the administration’s previous two budgets. 
  2. In The Shadow of Reagan’s Legacy, Trump Is Failing,” Alexandra Bell. This article talks about why Reagan negotiated the INF treaty that President Trump is trying to dismantle and juxtaposes Reagan’s belief in arms control as a stabilizing force against the current administration’s actions. 
  3. The Nation Needs A 400-Ship Navy,” Thomas Callender. In the interest of showing the true breadth of this field, I’ve included this new report by the Heritage Foundation that calls for an increase over the adminstration’s current 355-ship plan for the Navy. Building to a 400-ship Navy will require $4-6 billion more annually than is already allocated, during a time of competing priorities and sky-high debt (see first article). 
  4. Mattis wants to boost fighter readiness. Here’s how industry could help,” Valerie Insinna. Last month, Secretary Mattis said that he’d like to get fighter readiness up to 80 percent—this would include all the F-35, F-22, F-16, and F/A-18 fighter jets. Readiness has been a rallying cry from the Pentagon for several years, but if Mattis intends to put his money where his mouth is, that could mean fewer dollars for new procurement projects in favor of upgrading and sustaining current platforms. 

DEFENSE DOWNLOAD: Week of 10/25

Welcome to the Defense Download! This new round-up is intended to highlight what we at the Cato Institute are keeping tabs on in the world of defense politics every week. The three-to-five trending stories will vary depending on the news cycle, what policymakers are talking about, and will pull from all sides of the political spectrum. If you would like to recieve more frequent updates on what I’m reading, writing, and listening to—you can follow me on Twitter via @CDDorminey

  1. This week has been all Intermediate-Range Nuclear Forces Treaty (INF), all the time. If you’re wondering about the potential upsides, check out “Trump Is Right to Leave The INF Nuclear Treaty” by Kori Shake. If you’re wondering about the potential downsides, I suggest this overview by the New York Times’ editorial board, “‘Getting Tough’ Over a Missile Pact Could Weaken America.” If you have no idea where to start on this issue, stay tuned for tomorrow’s Cato Daily Podcast featuring Eric Gomez and yours truly. (Or you could always start at Wikipedia.) 
  2. Funding for Overseas Contingency Operations and Its Impact on Defense Spending,” Congressional Budget Office (CBO). Since 2001, a significant portion of the annual defense budget has been hived off to pay for wartime operations. But the CBO found that since 2006, at least $50 billion  of annual wartime funds (70 percent of the total OCO account) actually went to enduring activities (i.e. what it takes to run a military this size during peacetime). That’s a substantial misuse or misallocation of funds. 
  3. What Can 24 Satellites Do for U.S. Missile Defense?,” Thomas Roberts. This is pretty in the weeds, but if you follow missile defense or satellite aquisition then you’ll find this brief interesting. It offers a rebuttal to a 2011 report that claimed space-based missile systems could be incorporated in the existing force structure without incurring large program costs. 
  4. Here’s The Pentagon’s Initial Plan for Creating A Space Force,” Marcus Weisgerber. DefenseOne got ahold of an internal document on how the Pentagon is planning to organize the Space Force. Not many firm details are included—but coupled with Secretary Heather Wilson’s estimate of 13,000 people and $13 billion over the next five years, things seem to be in motion. 
  5. The Ticking Nuclear Budget Time Bomb” Kingston Reif and Mackenzie Eaglen. If you aren’t familiar with the nuclear modernization plan, this is a great place to dive into the issue. The article highlights an issue I’ve personally been working on all year: that the nuclear budget cannot be considered in isolation—it’s going to coincide with modernization plans for the Air Force, Navy, and expansion of the Army. 

Some Context on Pentagon Spending

General David Petraeus and Brookings Fellow Michael O’Hanlon recently took to the Wall Street Journal to assure the American people that, despite sequestration, there is no military readiness crisis. A few days later, Thomas Donnelly and Roger Zakheim published a rebuttal in the National Review claiming that the challenges of too few personnel and aging, overextended equipment induced a “wasting disease.” They alleged that the size of the defense budget was a misleading statistic without context.

So, here’s some context. After a rapid demobilization following World War II, the United States slowly rebuilt its forces to balance against the Soviet Union. Spending remained far above pre-World War II levels for the remainder of the decades-long conflict, and ever since. The Pentagon budget averaged $462 billion from 1948–1990 (in FY2017 dollars), with notable spikes for the Korean War, Vietnam War, and the Reagan build up in the 1980’s (See Figure 1). With the end of the Cold War, we see a fairly steep decline in military spending during the H.W. Bush and Clinton years. In the aftermath of the 9/11 terrorist attacks, the reductions of the 90s gave way to much larger Pentagon budgets, as the George W. Bush administration embarked on the wars in Afghanistan and Iraq. Defense spending during the early years of the Obama administration remained above $750 billion as the president ramped up the war in Afghanistan while working to end the war in Iraq. In constant, 2017 dollars, annual Pentagon spending during Bush 43’s eight years in office averaged $612 billion; under Obama, the average is $675 billion (See Figure 2).

One side-note regarding the grouping by presidential administration: Taken alone, the picture can be misleading, in that Reagan inherited Carter’s final budget, Clinton inherited H.W. Bush’s, etc. And, besides, Congress, not any single president, makes the final decision on what the government spends. It is also true, however, that Congress has typically deferred to presidential preferences, particularly when it comes to military spending. Had Clinton wanted more, he likely would have gotten it (and did, starting in 1999); Obama, meanwhile, could have requested less (and, eventually, did). Those variations within four- or eight-year terms get lost in a graph that lumps all the years together in one fat bar for each president.

With respect to whether current spending levels are far too low, far too high, or somewhere in between, the Budget Control Act (BCA) of 2011 and its threat of sequestration tried to rein in spending on both defense and non-defense discretionary spending, but has been only partly successful. Congress has found ways around the defense caps, in part by funneling extra money to the base budget through the Overseas Contingency Operations (OCO) account, which is exempted under the BCA. And, under the BCA caps revised late last year, estimated military spending would average at least $551 billion from 2017 to 2021 (.pdf, see page 15) – and likely more than that if Congress doesn’t kick its OCO addiction. That’s 28 percent higher than in 2000, and 19 percent higher than the Cold War average.

In short, if there is a readiness gap, it’s not due to lack of funding. The BCA, by itself, has not resulted in significant cuts in military spending. In inflation-adjusted dollars, we spend more today than during the average Cold War year, and more than we spent at the start of the War on Terror. It would appear that we are mostly getting less “bang for our buck” than during previous generations.

What Would It Cost to Eliminate All Risk in the World?

I could not write that headline without chuckling to myself, but this is no laughing matter for some members of Congress. They are asking the Pentagon to describe what it would take to eliminate all risk in the world—or at least all the risks to the United States.

POLITICO’s “Morning Defense” reports that Rep. Duncan Hunter (R-CA) is calling on Secretary of Defense Chuck Hagel to return to the practice of submitting to Congress the list of “unfunded requirements” (i.e., all those things that the military services would want if they were unconstrained by budgets—and reality). Then-SecDef Bob Gates eliminated the practice in 2009.

“By not providing an unfunded requirements list,” Hunter wrote in a letter to Hagel, “the department and all of the service chiefs would be suggesting that the budget provides zero risk.”

POLITICO continues:

Hunter’s letter reminded Morning D of a memorable exchange Hunter had with Gates in 2011. Basically, Hunter asked Gates how much money he’d need to reduce U.S. national security risk to zero.

“If I had a trillion dollar budget, I’d still have unfunded requirements. The services would still be able to come up with a list of things they really need,” Gates replied.

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