What If We Funded Science The Way We Funded The Pentagon?

Or maybe we shouldn’t. Anyway, Dave Lindorff describes just how screwed up the Pentagon budgeting ‘process’ is (process is scare quotes because process implies some sort of nominally rational and comprehensible process; boldface mine):

On November 15, Ernst & Young and other private firms that were hired to audit the Pentagon announced that they could not complete the job. Congress had ordered an independent audit of the Department of Defense, the government’s largest discretionary cost center—the Pentagon receives 54 cents out of every dollar in federal appropriations—after the Pentagon failed for decades to audit itself. The firms concluded, however, that the DoD’s financial records were riddled with so many bookkeeping deficiencies, irregularities, and errors that a reliable audit was simply impossible

For decades, the DoD’s leaders and accountants have been perpetrating a gigantic, unconstitutional accounting fraud, deliberately cooking the books to mislead the Congress and drive the DoD’s budgets ever higher, regardless of military necessity. DoD has literally been making up numbers in its annual financial reports to Congress—representing trillions of dollars’ worth of seemingly nonexistent transactions—knowing that Congress would rely on those misleading reports when deciding how much money to give the DoD the following year, according to government records and interviews with current and former DoD officials, congressional sources, and independent experts…

When the DoD submits its annual budget requests to Congress, it sends along the prior year’s financial reports, which contain fabricated numbers. The fabricated numbers disguise the fact that the DoD does not always spend all of the money Congress allocates in a given year. However, instead of returning such unspent funds to the US Treasury, as the law requires, the Pentagon sometimes launders and shifts such moneys to other parts of the DoD’s budget.

Veteran Pentagon staffers say that this practice violates Article I Section 9 of the US Constitution

So-called “one-year money”—funds that Congress intends to be spent in a single fiscal year—gets shifted into a pool of five-year money. This maneuver exploits the fact that federal law does not require the return of unspent “five-year money” during that five-year allocation period.

The phony numbers are referred to inside the Pentagon as “plugs,” as in plugging a hole, said current and former officials. “Nippering,” a reference to a sharp-nosed tool used to snip off bits of wire or metal, is Pentagon slang for shifting money from its congressionally authorized purpose to a different purpose. Such nippering can be repeated multiple times “until the funds become virtually untraceable,” says one Pentagon-budgeting veteran who insisted on anonymity in order to keep his job as a lobbyist at the Pentagon…

In fiscal year 2015, for example, Congress appropriated $122 billion for the US Army. Yet DoD financial records for the Army’s 2015 budget included a whopping $6.5 trillion (yes, trillion) in plugs. Most of these plugs “lack[ed] supporting documentation,” in the bland phrasing of the department’s internal watchdog, the Office of Inspector General. In other words, there were no ledger entries or receipts to back up how that $6.5 trillion supposedly was spent. Indeed, more than 16,000 records that might reveal either the source or the destination of some of that $6.5 trillion had been “removed,” the inspector general’s office reported.

Here’s an example:

Digging deep into the OIG’s report on the Army’s 2015 financial statement, the researchers found some peculiar information. Appendix C, page 27, reported that Congress had appropriated $122 billion for the US Army that year. But the appendix also seems to report that the Army had received a cash deposit from the US Treasury of $794.8 billion. That sum was more than six times larger than Congress had appropriated—indeed, it was larger than the entire Pentagon budget for the year. The same appendix showed that the Army had accounts payable (accounting lingo for bills due) totaling $929.3 billion.

This is like saying two plus two equals fish. It makes no sense. The most generous reading of this is that the Army actually spent $134.5 billion, instead of the budgeted $122 billion, but who knows? It does allow the U.S. military to conduct operations without any Congressional oversight. For instance, we only found out about our presence in Niger when four special forces operatives were killed, otherwise Congress didn’t know about this. And this is part of a much more bigly problem:

To make sure that fiscal year 2015 was not an anomaly, Skidmore and his graduate students expanded their inquiry, examining OIG reports on Pentagon financial records stretching back to 1998. Time and again, they found that the amounts of money reported as having flowed into and out of the Defense Department were gargantuan, often dwarfing the amounts Congress had appropriated: $1.7 trillion in 1998, $2.3 trillion in 1999, $1.1 trillion in 2000, $1.1 trillion in 2007, $875 billion in 2010, and $1.7 trillion in 2012, plus amounts in the hundreds of billions in other years

To be clear, Skidmore, in a report coauthored with Catherine Austin Fitts, a former assistant secretary of the Department of Housing and Urban Development who complained about similar plugs in HUD financial statements, does not contend that all of this $21 trillion was secret or misused funding. And indeed, the plugs are found on both the positive and the negative sides of the ledger, thus potentially netting each other out. But the Pentagon’s bookkeeping is so obtuse, Skidmore and Fitts added, that it is impossible to trace the actual sources and destinations of the $21 trillion. The disappearance of thousands of records adds further uncertainty. The upshot is that no one can know for sure how much of that $21 trillion was, or was not, being spent legitimately

Let that sink in for a moment: As things stand, no one knows for sure how the biggest single-line item in the US federal budget is actually being spent. What’s more, Congress as a whole has shown little interest in investigating this epic scandal. The absurdly huge plugs never even get asked about at Armed Services and Budget Committee hearings.

Needless to say, if science-related agencies budgeted like this, there would be calls to shut them down–and people would be justified to do so.

By the way, when people like Matthew Yglesias* argue that the federal government should be sent hither and yon around the country, there’s a downside to that:

For its part, the inspector general’s office has blamed the fake numbers found in many DoD financial statements on the Defense Finance and Accounting Service (DFAS), a huge DoD accounting operation based in Indianapolis, Indiana. In review after review, the inspector general’s office has charged that DFAS has been making up “unsupported” figures to plug into DoD’s financial statements, inventing ledger entries to back up those invented numbers, and sometimes even “removing” transaction records that could document such entries. Nevertheless, the inspector general has never advocated punitive steps against DFAS officials—a failure that suggests DoD higher-ups tacitly approve of the deceptions.

Here’s the problem: few national reporters would be willing to be stationed in Indianapolis to cover this. If DFAS were headquartered somewhere in the D.C. area, it would be much easier for news agencies to report and work sources, especially as news bureaus are being slashed. Can even a national agency afford to station a defense reporter with a background in accounting (which is a pretty specialized skill set) away from the Pentagon. And I wonder if the local papers would want to tangle with an employer of 12,000 people–and if they have the expertise and resources to investigate. Likewise, it’s much harder for Congress to conduct oversight (though it seems they’re not that interested in oversight…).

And before my MMT compatriots argue we can’t run out of money, this is true in one sense, but once funds are budgeted, they are locked in. There is an annual budgeting and appropriations process, so, in that sense, money spent in one area such as defense is coming from another area like, well, everything else.

*Yglesias might be better than some pundits, but he’s a guy who styled himself a foreign policy maven after supporting the Iraq War, and an education expert who supported standardized testing (even as it was clear he didn’t really understand how the assessment statistics work). What could possibly go wrong with one of his suggestions?

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One Response to What If We Funded Science The Way We Funded The Pentagon?

  1. Min says:

    Many years ago Peter F. Drucker pointed out that US gov’t agencies take care to “spend” the money they are appropriated every year, to prevent their appropriations from dropping. Where is the GAO?

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