Yves here. The idea of a favorite scandal no doubt sounds like an oxymoron. But you may have books or movies you went back too often, or enjoy ritual performances holiday music or traditional dances. One of their appeals is that they are immutable and provide an anchor of sorts. The long-standing Pentagon audit failure is like that.
The Pentagon already has a huge black budget but that’s apparently not good enough to feed its maw of unending need (correct me if I have this wrong, but isn’t that a lot like always hungry Rahu?) And the inability to keep proper books is just a remarkable way to syphon off even more funds. It also proves, BTW, that MMT is indeed an accurate description of how the funding of a currency issuer like the US works. As one wag said, “We never worried about where the money for the next bombing run in Iraq was coming from.”
Consider this as support for the idea that poor records, whether by accident or design, covers for overspending. From The Cradle:
Furthermore, in 2019 alone, the Pentagon made $35 trillion in accounting adjustments – a figure larger than the entire US economy.The Pentagon budget is not only gargantuan, but replete with waste – from vast overcharges for spare parts, and weapons that don’t work, to forever wars with far reaching human and economic consequences.
These shadowy practices have, however, boosted the profits of US weapons makers like Lockheed Martin, Raytheon, Boeing, and Northrop Grumman, with major gains made despite the challenges posed by inflation and supply chain issues caused by the coronavirus pandemic.
By Lindsay Koshgarian, who directs the National Priorities Project at the Institute for Policy Studies. Originally published by OtherWords.org.
The Pentagon just failed its audit — again. For the sixth time in a row, the agency that accounts for half the money Congress approves each year can’t figure out what it did with all that money.
For a brief recap, the Pentagon has never passed an audit. Until 2018, it had never even completed one.
Since then, the Pentagon has done an audit every year and given itself a participation prize each time. Yet despite this year’s triumphant press release — titled “DOD Makes Incremental Progress Towards Clean Audit” — it has failed every time.
In its most recent audit, the Pentagon was able to account for just half of its $3.8 trillion in assets (including equipment, facilities, etc). That means $1.9 trillion is unaccounted for — more than the entire budget Congress agreed to for the current fiscal year.
No other federal agency could get away with this. There would be congressional hearings. There would be demands to remove agency leaders, or to defund those agencies. Every other major federal agency has passed an audit, proving that it knows where taxpayer dollars it is entrusted with are going.
Yet Congress is poised to approve another $840 billion for the Pentagon despite its failures.
In fact, by my count Congress has approved $3.9 trillion in Pentagon spending since the first failed audit in 2018. Tens of billions have gone through the Pentagon to fund wars in Afghanistan, Ukraine, and now Israel. Accountability for those “assets” — including weapons and equipment — is also in question.
At this point, lawmakers surely know those funds may never be accounted for. And year after year, half of the Pentagon budget goes to corporate weapons contractors and other corporations who profiteer from this lack of accountability.
There is an entity whose job it is to prevent this sort of abuse: Congress. With each failure at the Pentagon, Congress is failing, too. Every year that members of Congress vote to boost Pentagon spending with no strings attached, they choose to spend untold billions on weapons and war with no accountability.
Meanwhile, all those other agencies that have passed their audits could put those funds to much better use serving the public. Too many Americans are struggling to afford necessities like housing, heat, health care, and child care, and meanwhile our country is grappling with homelessness, the opioid epidemic, and increasingly common catastrophic weather events.
With another government shutdown debate looming in early 2024, you’ll hear lawmakers say we need to cut those already inadequate investments in working families. But if they’re worried about spending, they should start with the agency that has somehow lost track of nearly $2 trillion worth of publicly funded resources.
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It makes you wonder why no one in congress even brings up the fact that the military can’t pass an audit, and that the money is just disappearing. You have to assume it is a combination of bribery and blackmail that keeps them all on the same page. Just about the same way an organized crime family would maintain order.
Do not forget dividends and stock buybacks.
It is quite likely that most of congress, and/or their kin, are invested in the MIC and similar.
So any government spending on new pentagon toys etc will turn right round and land in the, likely offshore, accounts of congress critters.
After all, insider trading is legal on Capitol Hill.
The first thing criminals do when they get in charge is change the rules so that what was illegal is now legal.
Not necessarily. They could also take over the enforcement apparatus to ensure the laws are unevenly enforced.
«you may have books or movies you went back too often»
Ok, now my refrain: The Pentagon is the empires’ Jobs Guarantee; the annual audit failure is proof positive that MMT is more a description than a prescription.
The Pentagon must use the same accountants that Hollywood uses. The fact is that the Pentagon is a lot like Project Afghanistan as described by Julian Assange. Huge amounts of public money goes through the Pentagon where it is washed and makes its way to all sorts of people in Congress, lobbyist firms, generals, private projects, corporate executives and anybody else with a rice bowl. Who knows how many multimillionaires and billionaires that all that Pentagon money is making but the number must be substantial. It would be interesting to know what percentage of that money is siphoned off by corruption and the like but if it was less than 25% I would be very much surprised. At this point money going to the Pentagon is like the sunk cost fallacy. They keep on putting more to justify what they have put in but it never seems to buy combat capability.
Sunk cost fallacy is the pentagon paradigm.
F-35 is arguably 20 years late.
In 2008 with $20 billion spent they agreed to double R$D and procurement to $200 BILLION, bc can’t walk from $30 billion, and there is no chance starting over would get any thing better.
Good thing no one is using low freq radar or stealth is useless.
F-35 is your typical multi role boondoggle.
Every successful plane etc has started out with one role in mind, but with an airframe flexible enough to take on others over time.
Have you heard of Col John Boyd and the F-16 tale?
We had to struggle with the old enemies of peace–business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering.
They had begun to consider the Government of the United States as a mere appendage to their own affairs.
We know now that Government by organized money is just as dangerous as Government by organized mob.
Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me–and I welcome their hatred.”
Election eve speech at Madison Square Garden (October 31, 1936)
Franklin Delano Roosevelt
The pentagon has three (4) appropriations f,feeding its oversized maw.
R&D/Procurement, mil pers (mil retirement elsewhere) and operations/maintenance (O&M)
R&D/Proc delivers weapons and support stuff. Problem here is designs not tested, so we cannot “value” military equipment for a book price. F35 could not afford, or run the airplane enough to test, and delays make many subsystems obsolete, if they would have worked. V-22 continue to crash.
Mil pers has evolved to mostly operators fewer supporters bc recruiting limits, fewer uniforms and all vol force.
O&M has shifted more to contracts bc mil pers and cost overruns make no money for pentagon owned repair chains. Missed spec means readiness for budget is rarely delivered.
The audit suggests a lot of rot.
Dangerous in a world where the other guys have smaller rot.
Indeed. A proper audit would reveal the inadequacy of our military readiness and pop the bubble of American military supremacy (which for those in-the-know is long popped already).
The only way to keep up the Kayfabe is just to keep dumping money down the hole. Otherwise, we will realize our own helplessness, which is the true fear of TPTB.
GAO 23-106217 reports on the tactic aircraft of USAF, USN and USMC which have failed to achieve budgeted “readiness” for over 10 years!
Another GAO report suggests DoD look at all tactical aircraft as a portfolio for investing to overcome aging and poor maintainability.
A lot of overhead for a little capability, that may not measure up.
Designs are most certainly tested. They just fail. And then the only way to fix them is to shovel more money at the corporations that failed to begin with. All working as planned.
Way oversimplified. First off, you neglect the MilCon appropriation, from a separate set of Congressional committees (probably historical result of creating the Army Corps of Topographical Engineers in the early 1800s for public works). But at the congressional level the budgets are enacted with service-specific appropriations, with “procurement” split into several categories (known as “color of money”) also with varying lifespans (constitution limits army appropriations to 2 years), so you have 1 year money like OMN (Operations and Maintenance, Navy), 2 year money RDTEN, 3 year money OPN (Other Procurement Navy) and 5 year money SCN (Ship Construction Navy).
R&D is further “fenced” into 6.1, 6,2, 6.3, 6.4, and 6.5 money. Procurement money and MILCON is fenced into programs.
A lot of work in DoD is not “mission funded” rather internally “contracted” as “Economy Act” orders. Then on the industrial side work is done via what was called in my day Defense Base Operating Fund, but now Defense Working Capital Fund.
The complexity and historical wall of separation between War and Navy departments (and now DoD agencies layered on top) is what makes auditing such an issue.
As far as D/OT&E (test and evaluation) has nothing to do with accounting, other than of course the program office has to pay for it.
It’s military Keynesianism run amok.
Not at all: it’s a glaring example of massive, in-your-face, institutionalized corruption.
Some of it is blatantly illegal, but the oligarchy is above the law.
Wasn’t the Pentagon talking about tracking the money and weapons sent to Ukraine? With such a record as described above, how would they even notice something amiss? The mind boggles.
That nothing is being done about it to me proves that it’s on purpose and that Congress is de-facto in on it.
Why would it be so hard to put controls in place? Or give less money upfront, and tell the Pentagon to put in specific requests for any extra needed monies?
Defense budget discussions are devil’s bargains.
Pentagon: We make jobs in your districts. Are you against jobs, Mom, America and apple pie?
Congress: We are not soft on defense. Have your lobbyists call mine about photo ops.
Don’t forget in parts of the country military support jobs are the only way to the middle class for Blacks. Consider the massive accumulation of bases in South Carolina which I know well. These are providing middle class jobs with healthcare benefits fully covered and retirement for Jim Clyburn’s constituents. The old agricultural sector is automated and migrants do the labor. Look at Mississippi where there is huge military shipbuilding down on the coast. The VA hospital in Jackson is the largest employer and military retirement benefits are the largest source of cash flowing into the state. Migrants do the agricultural labor. Even Bernie went for jet fighter benefits in Vermont. Private enterprise will never provide this nation’s or any nation’s economic backbone. Private enterprise thrives on cheap migrant labor. With socialism one could hope that we could provide those salaries and benefits to build things like high speed rail, housing, better education, nuclear power etc. And the middle class in Texas and Oklahoma is formed of defense department retirees and those working on the many bases in the area.
Of course it’s on purpose. The reason they fail audits is Congress mandates conflicting rules, authorizes X but appropriates Y, changes it’s mind every other year while insisting on multi-year contracts. That’s before you get into all the different ‘colors’ of money. It’s all a massive shell game. The military leadership is certainly at fault for playing the game instead of, you know, defending the country, but Congress set up the board and dealt the cards.
There’s plenty of controls. But at the Congressional level, what Congress provides is “Budget Authority” (BA). That’s like money in your checking account. The Comptrollers dole that out to programs. Programs then can “write checks” (obligate) the funds in their BA. Managing obligations is a key HQ metric. Typically around August the comptrollers start trolling through unobligated balances looking for expiring (30 Sep of that year) BA that can be swept up and reprogrammed.
But there can be a big time lag between obligating (writing the check) and actually cashing the check (outlays). That IMO is where the accounting system gets weak.
Rummy on 9-10-2001. Better excuse than ‘my dog ate it’ the next morning. Prob laughing with Kissinger right now about it at a barbeque.
Or screaming and crying in agony in Hell, getting barbecued over the everlasting flames. :-)
i had that same memory.
We tend to think of places like Ukraine as corrupt but it would seem the Pentagon is far worse than any other country. That said, setting aside the question of corruption, a military which can’t do accounting is not a military you want to take to war, its a military which, when SHTF, the left hand doesn’t know what the right hand is doing and even the top brass doesn’t know what’s what, cannot plan, strategize or manage.
I wonder, is there a name for this phenomenon? For example, many, if not most, cities cannot rein in police budgets, cannot say no. Police budgets therefore eat up the majority of city spending at the expense of infrastructure and social programs, consume the majority of a city’s tax dollars. Like the Pentagon, the police budgets are ever-growing. People are led to believe chaos would ensue if they don’t indefinitely increase them, police don’t ever need to justify expenses. The same is happening with the US and the Pentagon.
I love the songs that NC commentators have changed the lyrics to.
It seems an appropriate time to repost my clumsy attempt, using the late John Prine classic–Sam Stone.
There’s a hole in my nations soul where all the money goes
Jesus Christ died for nothing I suppose
The MIC says it’s for defense
when they turn wedding parties into red mist
The empire’s soldiers came home
To their wives and families
After serving in the endless wars overseas
And the time that they served
Had shattered all their nerves
And left them with prosthetic arms and legs
But the Oxycontin eased the pain
Of a country that didn’t know or care to explain
About the bombing and torture and murder non-stopping
When they could just go shopping
The American empire is bereft
All its schemes have come adrift
For the whole world to gasp at
All the death and destruction that trail behind
And the smell of death that
Our feral elite don’t seem to mind
There’s a hole in my nations soul where all the money goes
Jesus Christ died for nothing I suppose
The MIC says it’s for defense
When they turn wedding parties into red mist
Not clumsy at all, Camelotkidd, it’s actually quite good.
I must have missed the first time you posted it, because I don’t recall your name. Thank you for reposting it so I can include it in the Volume Three of the Songbook.
And I thought it is a country song from North Carolina. Could someone sing it in southern accent?
No wonder US government is crazy for war. Weapons aren’t done for peaceful purposes.
Ever since the Pentagon failed its first audit, I wondered who ultimately approved the transfer of excess funds to suppliers. Perhaps I don’t understand simple accounting, but when someone cuts a cheque for an invoice in the real world, if there are insufficient funds in the bank account, the cheque bounces.
The cheques have never bounced for the Pentagon, so there has always been sufficient in its bank accounts to cover costs.
My simple question is: how can this be? If a certain budget is approved each year, how can there be more in the account than that? I can understand a few billion for black ops and the like, but we’re talking trillions here paid out to suppliers. Cannot wrap my head around it, how it could happen, how cheques never bounced.
Actually, the Pentagon has often been accused of “slow pay” so Congress passed the “Prompt Payment Act”. Here’s a basic example of how things work. Congress appropriates $500 mil for a ship. Navy has 5 FY to “spend” that money. “Spend” meaning write checks. The program office awards a contract for $400 mil to a contractor to build it. Rest of the money goes elsewhere, paying for things like GFM (governmnent furnished equipment), administration (Supervisor of Shipbuilding/Defense Contract Administration Service) etc.
From program/Congress perspective, the $400 mil is “spent”. But depending on the FAR (Federal Acquisition Regs) contract type rules, the contractor will submit invoices for payment over time. If the administration system approves it goes to Defense Financial Accounting Service where it is reconciled. But maybe the contractor puts in a claim (Request for Equitable Adjustment). That might take years of haggling before the contracting officer approves. Now the problem is how to pay for it. That’s where things get sticky.
Fiat is kinda meta. It can disappear into thin air virtually without consequences. And when there has been an enormous pig at the trough for at least 80 years now, our outrage is too little too late. Because the consequences are slightly removed from our consciousness and they are mind boggling. It’s the Environment stupid, right? At this point in our evolving absurdity we should consider the Environment to be the “account.” It’s pretty clear when you are forced to face it. The best thing we can do is consider this deficit to be a resource. It actually is because it is a lesson learned, however embarrassing, and most importantly it is proof that we can use sovereign fiat to make the changes we need. Big changes. I’d just submit that the military is not a write off; the military has funded and achieved all sorts of things we can put to good use in our emergency to save the environment and establish sustainability. We might want to rethink and come up with a better definition of “profit” so that it is not allowed to exponentiate in a pointless world of financialization, but instead reinvests the cooperation of all us humans to fix our messes.
Since there are no consequences for failing audit after audit, there is not need to pay any attention to an audit. Let the scams and the padded contracts and the skimming and the bribes and the money laundering continue. Hey, its fiat money anyway. Ain’t MMT wonderful got the unaccountable?
well, not exactly. Because money has no value nor definition until it is spent. so money is as money does and therefore it is always a delayed manifestation of whether it was good or bad. Which is why when it was very bad it hits us belatedly like a ton of bricks. Like now.
And ;-) this is probably why we developed a conscience. Evolution is a mystical thing, no?
“In its most recent audit, the Pentagon was able to account for just half of its $3.8 trillion in assets (including equipment, facilities, etc). That means $1.9 trillion is unaccounted for — more than the entire budget Congress agreed to for the current fiscal year.”
This is not the first time I read something like that, but because this is a pair of numbers that I understand like that
1. Pentagon has lists of asset items and their values, values add to 3.8 trillion.
2. Auditors have found assets with value 1.9 trillions only.
Given that some assets are small, e.g. a computer, a hand-held gun, there are millions of those items, so actually checking their physical presence “somewhere” is a herculean task that, lacking demi-gods on staff, would require an army of auditors. So we may have different explanations:
a. the auditors’ army was too small, one year was not enough for their limited manpower
b. military assets move from base to base, to fields were they are used, etc., so Pentagon books do not have adequate centralized data base about their localization
c. something dire, e.g. out of 360,242 155 mm shells of type X, only 149,239 are in storage, out of 23 nuclear submarines, only 15 exits and so on.
Explanation of type a. could imply that there is nothing to worry about, type c. would suggest that accounting is at par with states like Nigeria where an agency can get funds to build a road from X to Y while actually doing nothing besides cleaning the bank accounts with those funds (perhaps nowadays it does not happen anymore…). So 15 submarines were delivered, and the vendor was paid for 23, or some submarines sunk and it was never reported.
Unfortunately, I never seen any details, or even examples of details. Perhaps even a keenly interested person like Lindsay Koshgarian from National Priorities Project at the Institute for Policy Studies could not see any of them.