Shock and Audit: The Hidden Defense Budget

What The Pentagon Really Spends.

Part 1 of a Mother Jones special report.

By Rachel Morris
June 22, 2009
Courtesy Of Mother Jones

The Defense Budget That Dare Not Speak Its Name

Somewhere in the middle regions of Barack Obama's Herculean to-do list is a task that's defeated many of his predecessors: taming the runaway Pentagon budget. Earlier this year, to much fanfare, Obama and his defense secretary, Robert M. Gates, released a Defense Department budget proposal that slashed several troubled weapons programs and promised further reforms to combat rampant waste. But although the press touted the proposals as bold and ambitious, they sounded suspiciously like the basic budgeting tips a financial adviser would dispense if you'd lost total control of your personal expenses. The essential principles were:

• Keep track of money that comes in and goes out
• Don't buy things you don't need
• Don't buy things that don't work
• If you do buy something that doesn't work, don't order 200 more of them

Unfortunately, Washington pols have been saying similar things ever since the Defense Department was created. And over the years a nearly constant procession of blue-ribbon commissions and special taskforces and congressional crusades has attempted to tackle the problem and failed. (See, for example, the Fitzhugh Commission, the Grace Commission, the Nunn-McCurdy Amendment, the Packard Commission, the Carlucci Initiatives, the Defense Management Review, the National Performance Review, the Bottom-Up Review, the Federal Acquisition Streamlining Act, the Federal Acquisition Improvement Act, the Acquisition Streamlining Task Force, Total System Performance Responsibility, and the spiral development and capabilities-based acquisition initiatives.) Cost overruns for major weapons programs now total $296 billion. We could never afford this rampant squandering of public money, but now, with the economy in crisis, the need to end the Pentagon's profligacy has become even more urgent.

But will Obama's attempt at reform be any different from all those that have gone before? Over the next few weeks, Mother Jones will attempt to find out. We'll dig into the gory details of Pentagon spending and watch out for porky shenanigans as Gates' budget makes its way through Congress. We'll take you behind the scenes to meet the key players who will determine whether the Pentagon cleans up its act or continues on with business as usual. Above all, we promise to do our best to make it interesting. You can read our reports here; if you have tips or questions that you want us to chase up, send them to rmorris@motherjones.com.

The Hidden Defense Budget

This year Obama asked Congress for $534 billion to fund the Department of Defense. That's a lot of dough. But the real amount that the US spends on defense is actually much higher.

The Office of Management and Budget calculates a total for defense spending throughout different parts of the government (it includes money allocated to the Pentagon, nuclear weapons activities at the Department of Energy and some security spending in the State Department and FBI). In the 2010 budget, that figure was $707 billion, more than half of the government's discretionary spending for the year. (Discretionary spending is the money that's appropriated every year by Congress, rather than entitlement programs like Medicare for which funding is mandatory).

Source: Office of Management and Budget

But the real number is even higher, because, among other things, the OMB doesn't count supplemental spending on the wars in Iraq and Afghanistan. We've combed through this year's budget documents to add up military-related spending throughout the entire government. Here's what we found:

Pentagon budget	534 billion
Extra appropriations for military personnel	4.1 billion
Iraq and Afghanistan supplemental funding (fiscal year 2010)	130 billion
Iraq and Afghanistan supplemental funding (fiscal year 2009, yet to be signed into law)	82.2 billion
Nuclear weapons and other atomic spending (Department of Energy)	16.4 billion
Military and economic aid to Iraq, Afghanistan, and Pakistan (State Department)	4.9 billion
Security, counterterrorism assistance, and military aid to foreign countries, including the Middle East and Israel (State Department)	8.4 billion
Coast Guard spending in the Department of Homeland Security	583 million
Total defense spending throughout the government	780.4 billion

As you'll see, we leaned on the conservative side here by only counting money that's directly related to military activities. We didn't, for instance, add in money for the Department of Veterans Affairs ($55.9 billion), which would take the total to $836.3 billion; or the rest of the Department of Homeland Security ($54.5 billion), which would take it to $890.8. (The wider national security apparatus isn't included either—budgets for the intelligence services are classified.) If we did include these extras, here’s what the difference between the official budget and the real one would look like:

Research credit: Taylor Wiles

Special Report: Shock & Audit

• Part II: Operation Overrun
• Part III: Where’s My Flying Tank? Gates’ “No Brainer” Defense Cuts
• Part IV: The Axis of Pork: Sen. James Inhofe (R-Lockheed) And Other Foes of Defense Reform
• Part V: Mission Impossible: Is Defense Reform A Lost Cause?

(Links will go live as reports are published.)

Part II: Operation Overrun

And you thought $600 toilet seats were bad.

This is Part II in a Mother Jones special report on the defense budget.

Let's start with the biggest no-brainer of a problem: the Pentagon's mind-boggling budget blowouts. That is, setting aside for a moment the question of which weapons the DOD should or shouldn't buy, how much money does it waste?

In 2008, the Pentagon calculated that its existing weapons commitments will ultimately cost the government $1.6 trillion. A big chunk of that total—$296 billion, to be exact—is cost overruns.

Source: GAO

That $296 billion doesn't come from a few big programs running over budget and messing up the balance sheet, either. Blowouts are the norm, not the exception.

Source: GAO

And the overruns are frequently significant—in fact, on average weapons programs cost 26 percent more than the initial estimates. Missed deadlines are also standard practice:

Source: GAO

In other words, almost nothing about Pentagon contracting works as it should.
It would be tempting to blame all of these excesses on the Bush administration's lax attitude toward oversight: Overruns and delays definitely got worse between 2000 and 2008. But if you take a look further back, you see that overruns have increased at a predictable clip over the past 15 years—an average of 1.86 percent a year, to be exact. If Pentagon spending continues at its current rate, average overruns will reach 46 percent in 10 years.

Source: Deloitte Consulting LLP

There has been much fanfare about Gates' spending "cuts," and there will be a brief obsession with whatever Congress approves when it eventually passes a defense budget. But even if Congress resists the urge to stuff the bill with pork and gives Gates everything he wants, real Pentagon spending will inevitably be far, far higher.

Our Overruns Kick China's Ass

That $296 billion in cost overruns is so staggering that I wanted to put it in some perspective. There is no single country whose entire military costs even close to what the US has wasted to date on big-ticket weapons programs. To wit:

(Foreign defense budget totals are for 2008)

That's right: China, which was the world's single second-biggest defense spender in 2008 after the US and supposedly such an existential threat that it justified the purchase of obsolete and exorbitant weapons programs, spends less than a third of what the Pentagon is wasting.

In fact, the amount the US is wasting on weapons exceeds the GDPs of some sizeable countries, including:

Romania	$271 billion
Norway	$256 billion
Chile	$245 billion
Vietnam	$242 billion
Bangladesh	$224 billion
Denmark	$205 billion
Israel	$201 billion

Research credit: Taylor Wiles

Special Report: Shock & Audit

• Part I: The Hidden Defense Budget
• Part III: Where’s My Flying Tank? Gates’ “No Brainer” Defense Cuts
• Part IV: The Axis of Pork: Sen. James Inhofe (R-Lockheed) And Other Foes of Defense Reform
• Part V: Mission Impossible: Is Defense Reform A Lost Cause?

(Links will go live as reports are published.)

Part III: Where’s My Flying Tank?

A quick refresher on Gates' "no-brainer" defense cuts—and the programs he should have axed.

This is Part III in a Mother Jones special report on the defense budget.

A quick primer on the problem programs Gates wants to cut and the ones he left intact:

F-22 Raptor Fighter Jet

Designed for dogfighting with Soviet planes, an F-22 costs $351 million, more than double the original projections. It was put into production before being fully tested, and, not surprisingly, has run into all sorts of snags—in fact, it has never flown a single combat mission in Iraq or Afghanistan. Gates wants to buy just 4 more, capping the US's collection at 187 instead of the 243 that the Air Force wanted.

However, Lockheed Martin cannily ensured that manufacturing and assembly for the planes was dispersed across at least 44 states, including Texas and California, which have powerhouse congressional delegations. Earlier this year 194 representatives and 44 senators wrote to President Obama urging him to buy more F-22s, and in mid-June lawmakers on the House Armed Services commmittee inserted money for 12 more jets into the defense budget authorization bill. The fate of the F-22 will be the test of whether Gates can get his budget through Congress more or less intact.

C-17 Globemaster III Cargo Plane

Gates actually likes this long-haul plane but says that the Air Force already has 205 of them and doesn't need any more, thanks very much. Try telling that to those thoughtful folks on Capitol Hill who recently slipped $2.17 billion for the planes into a recent war supplemental bill. The C-17s are another handy gauge of how the administration's budget proposal is faring on the Hill, because the plane has a lot of fans. Sadly, even Sen. Claire McCaskill (D-Mo.), who is normally great on the subject of wasteful government spending, has been urging Gates to buy more C-17s. Boeing, which makes the C-17, says that it provides 900 jobs in Missouri, or 6,000 direct and indirect jobs.

Future Combat Systems

This is the flagship of the Army's fancy modernization program, conjured up by Donald Rumsfeld. It consists of weapons, vehicles, and robots linked by a common communication system, and is yet another case where sci-fi wish lists were put into action before the technology was actually proven. (Exhibit A: the genius who ordered a tank that can be transported by plane before anyone knew whether that was possible.) The FCS contract also ceded way too much oversight responsibility to the contractors—in this case Boeing and Lockheed—and so predictably costs got out of hand. The overall price tag has jumped 73 percent since 2003 to about $159 billion. An internal DOD analysis from 2006 predicted that taxpayers will eventually get stuck with a $203 billion to $234 billion bill if the program is allowed to continue.

Gates wants to axe some of the most controversial, pie-in-the-sky parts of FCS—thus saving a tidy $87 billion—and rethink the entire program in the coming months.

VH-71 Presidential Helicopter

Lockheed Martin was supposed to deliver 23 next-generation helicopters to be used by the president and other high-ranking officials. But the helicopters are six years late and will cost twice the original estimates. Obama called them a poster child for "the procurement process gone amuck." The DOD's new undersecretary for acquisitions, technology, and logistics, Ashton Carter, cancelled the program in May. Still, the existing presidential helicopters are pretty old, and it's worth watching closely how Congress decides to replace the failed contract.

DDG-1000 Destroyer

These ships were supposed to cost $4 billion but independent assessments put the real price at closer to $6 billion. They weigh 14,500 tons, so they're not exactly nimble. The Navy initially signed up for 16 to 24, but as problems piled up it decided that it could really use the money for something cheaper and more versatile. So it cut the total DDG-1000s it planned to acquire to eight, and then decided to buy just two instead. However, a group of lawmakers from the New England states where the destroyers are made (mostly Maine and Massachusetts) threw a fit. This year Gates will attempt to phase out the program at three destroyers.

Missile Defense

Gates chopped two of the most problematic aspects of this program—the Airborne Laser Prototype aircraft and the Multiple Kill Vehicle, both flawed Soviet-era relics.

The Boondoggles Gates Should Have Axed

However, while the Obama administration proposed some sound cuts, they didn't go far enough. In a couple of cases, Gates allows a severely troubled program to bleed money for a few more years instead of ending it right away. If it makes no sense to buy 60 more F-22s, why even buy 4? The same logic applies to the DDG-1000, which Gates should have canceled instead of caving to congressional demands for a third ship. Plus, he barely shaved an inch off missile defense spending—his cuts only represent 10 percent of the total missile defense budget.

Worryingly, Gates also signed up for a couple of obvious clunkers. One is the Littoral Combat Ship, yet another Lockheed project rushed into development before testing was complete. The LCS's costs have almost doubled over first estimates. "We'd see a real change if he said that we'll test the hell out of it and make no further decisions until we see what we got," says Winslow Wheeler of the Straus Military Reform Project at the Center for Defense Information. Instead, Gates committed to 55 ships.

Perhaps the biggest clue that Gates' budget isn't all that radical is his decision to more than double the Pentagon's order of F-35 stealth fighters from Lockheed Martin, making it the DOD's biggest acquisition program. (The idea seems to have been to placate Lockheed for the cancellation of the F-22.) On the face of it, the switch to the F-35 seems like a plus—they're a comparative steal at $100 million each.

The problem is that the Pentagon has been repeatedly warned that the F-35 isn't remotely close to being ready. By November of last year, only 2 percent of the required flight-testing was completed, and under the current production schedule, the DOD will put down an estimated $57 billion for 360 planes before the flight-testing is finished. To speed things up, Lockheed devised a plan to do only 17 percent of the required trials via flight tests, and the other 83 percent on a simulator. Unfortunately, according to a Government Accountability Office investigation released earlier this year, "the ability to substitute [simulation labs] for flight testing has not yet been demonstrated." Read: The DOD plans to test the F-35 using equipment that itself hasn't been fully tested. This makes some critics wonder whether we should be signing up for 2,456 of them.

The current cost estimates for the F-35 are almost certainly understated. That's quite mind-boggling, because official projections already put the price tag for the entire program at more than $1 trillion—i.e., more or less the same size as the national deficit—once you combine the $300 billion it costs to buy the planes and the $760 billion it will take to operate and maintain them. But because the Pentagon plans to buy so many planes before the testing ensures that the technology is sound, delays and cost increases are inevitable. That Gates would double the order of F-35s under these circumstances is not an encouraging sign.

Special Report: Shock & Audit

• Part I: The Hidden Defense Budget
• Part II: Operation Overrun
• Part IV: The Axis of Pork: Sen. James Inhofe (R-Lockheed) And Other Foes of Defense Reform
• Part V: Mission Impossible: Is Defense Reform A Lost Cause?

(Links will go live as reports are published.)

Rachel Morris is the articles editor in Mother Jones' Washington bureau. For more of her stories, click here.