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The MICC Moves to Hose the Taxpayer One More Time

Eisenhower’s Nightmare Arrives

by FRANKLIN C. SPINNEY

In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.

Dwight D. Eisenhower,
President of the United States
Farewell Address, 17 January 1961

As I indicated in CounterPunch on 3 February 2010, the Quadrennial Defense Review (QDR) just released by the Obama Pentagon is a bad joke. That bad joke is about to be given the good housekeeping seal of approval by a special panel appointed jointly by the Secretary of Defense and the defense barons of the Armed Services committees in Congress. When this happens, rest assured, any desire to get control of the out-of-control defense budget will plunge far below its already low level. Chalk up another victory in the Military – Industrial – Congressional Complex’s (MICC’s) war on the Constitution, the American taxpayer, and programs like Social Security and Medicare, which are hallmarks of civilized society.

To understand why this QDR review panel is gearing up to paint lipstick on the QDR pig, it is first necessary to describe what the QDR did not do.

Today, the Pentagon is now spending more in inflation-adjusted dollars than at any time since the end of WWII to support a military force structure that is much smaller and older than at any time since the end of World War II. But the QDR did not even acknowledge the three mutually reinforcing problems that are now combining to produce a catastrophic meltdown of the Pentagon’s budget plans, let alone the cynical modes of conduct that virtually guarantee even more force structure reductions, even if defense budgets will continue to increase:

First, with a few exceptions, the Obama QDR approved a defense budget and a long range program plan that will not buy enough new weapons to replace the weapons in the inventories of the military forces in a timely manner. Consequently, the average age of these weapons, already at a post WWII high, will continue to get older at an accelerating rate. Given this situation, the only way to reduce the growth in average age will be to retire the oldest weapons without replacement, thereby shrinking the size of the forces yet again, in effect continuing a devolution that began as early as 1957 (see Defense Death Spiral, especially pps. 21-25).

The economic roots of the force structure meltdown lie in the MICC’s obsession with modernizing with ever more costly and technically complex weapons. This obsession creates a political economy wherein unit costs (i.e., the cost of the “parts”) always rise faster than budgets (i.e., the cost of the “whole”). This creates a situation a little like cancer cells metastasizing in a body; something has to give.

The asymmetric economics of defense lead to the declining production rates and age growth described above which, in turn, create extortionary political pressure (caricatured by vacuous slogans such as the “hollow military” in the late 1970s or the so-called “procurement holiday” in the mid 1990s) to justify increases in the total defense budget. But increasing the budget, as we did after 1976 and after 1994, actually accelerates the rate of cost growth and thus restores the cancerous asymmetry between cost and budget growth, albeit at a higher budget level. This sets the stage for yet more political pressure to increase the defense budget even further, as the extortionary loop folds back on itself to amplify itself — over and over. Over time, cynical gaming strategies, evolved though trial and error, create and/or exploit this pattern of economic behavior that benefits the “parts” at the expense of the “whole.” Whether these strategies, now known as front loading and political engineering, are the “chicken” or the “egg” is now immaterial, because today, they are ubiquitous and lie at the center of an organic, self-regulating devolution.

So, the asymmetric economics of cost growth greater than budget growth create continual political pressure to bail out a collapsing modernization program. There are essentially two short-term ways for responding to this pressure: (1) decision makers can reduce current readiness for combat in order to transfer money out of, or by slowing the future rate of money growth into, the operating budget (by reducing training tempos, purchases of spare parts, etc.) and then pump the “savings” into the modernization budget, or (2) they could simply increase the total defense budget. Generally, decision makers opt for a combination of both in the short term, but over the long term, the only option is to change their obsessions, which is unthinkable, or to increase the budget, which is the real name of the game.

Second, the Obama QDR also failed to address how the modernization problems described above (i.e., increasing technical complexity + increasing age of weapons) mutually reinforce each other to compound the DoD’s economic problems by creating a phenomenon known as the rising cost of low readiness. This makes it ever more difficult to rob the readiness budget to pump up the modernization budget. The subtle cause and effect relationships underpinning the rising cost of low readiness are explained in the Defense Death Spiral, especially pps. 24-45. For our purposes, it is sufficient to say that the net result is that unit operating costs (i.e., the cost of operating the “parts”) also grow faster than defense budgets (i.e., the cost of the “whole”) and the economic effect becomes a variation on the cancerous theme described above.

Third, and perhaps most importantly, the Obama QDR failed to even acknowledge, let alone address, the related problems posed by unauditable, corrupt, financial management systems — by this I mean both the historical accounting systems and the program planning systems of the Planning, Programming, and Budgeting System or PPBS.

As I explained in both the Defense Death Spiral and my last statement to Congress, not to mention in a public hearing over nineteen years earlier, in March 1983, before the Armed Services and Budget committees of of the Senate — a hearing that resulted in a cover story for Time Magazine (7 Mar 83 issue), cynical bureaucratic gaming strategies systematically corrupt the information flowing though the Pentagon’s central management information system (i.e., the PPBS), which in any event is logically flawed (see, for example, my statement to Congress, beginning on page 15). This makes it impossible to assemble the information needed to sort out the first two problems and to devise appropriate recovery strategies that are based on an understanding of those problems. In this sense, the corruption of the Pentagon’s PPBS can be thought of as bureaucratic grease lubricating the political-economic engine that is protecting the status quo. So, it should not be surprising that our political system is unable to shape rational defense policies and strategies in response to changing conditions, such as adapting our forces while providing a peace dividend to reflect the changes brought about by the end of the Cold War.

Put bluntly, the Pentagon’s corrupt bookkeeping system is the turd in the national security punchbowl. All the players in Versailles on the Potomac have known about it for years, but no one wants to do anything about it, because flushing it out would end their party.

It is not fair to blame President Obama’s political appointees in the Pentagon for this state of affairs, because as I have endeavored to show, it has very deep roots. On the other hand, it is eminently fair to blame Obama’s inept Office of the Secretary of Defense, particularly the spectacularly incompetent Office of the Under Secretary of Defense for Policy, for not even acknowledging these problems in a QDR it spent almost a year putting together.

It would be absurd for the Obama Pentagon to plead ignorance for its obscene omission.

After all, Obama’s QDR is only the most recent variation of a bad joke begun in the Clinton Administration with its publication of the fatally- flawed first QDR on 19 May 1997. Of course, the Clinton Administration was merely continuing the pathological planning practices of the Reagan Administration, which I described in excruciating detail during the March 1983 congressional hearing. And bear in mind, the Reagan Pentagon was merely continuing the bureaucratic pathologies the military reformers began to document in the 1970s — behavioral pathologies that we now know reached back at least to the inception of the Planning, Programming, and Budgeting System by Defense Secretary Robert McNamara in 1961 and probably earlier.
Given the staying power of the defense power games, no one should be surprised that the end of the Cold War resulted only in temporary marginal reductions in the defense budget; nor should we be surprised that twenty years later, the United States is spending more on defense than it did at the height of the Cold War, when we stood toe to toe with the Soviet nuclear-armed superpower, yet had enough extra resources to fight very hot wars in Korea and Vietnam; nor should we be surprised that today we are spending as much on defense as the rest of the world combined. Bear in mind, as I showed in my 2002 statement to Congress, the so-called global war on terror has very little to do with this current budgetary state of affairs. It should be clear, therefore, that the Pentagon has deep systemic problems, and that the most recent QDR, like its predecessors, papered them over, to put it charitably.

Now, with this background in mind, let’s turn our attention to the QDR review panel that is about to “fix” this disastrous state of affairs. Congress created a special review board in 2006 to analyze the 2010 QDR in order — don’t laugh — to provide the Congress with what it called an independent alternative view of the QDR. The 20 members of this review board were to be appointed by the Defense Secretary (12) and the senior Republicans and Democrats of the Senate and House Armed Services committee’s (8).

On 1 March 2010, Ray Locker and Ken Dilanian of USA Today authored a front page report that described and analyzed the makeup of the 20 members of the QDR review committee. Locker and Dilanian showed that “eleven out of twenty members “work for defense contractors as employees, consultants or board directors,” raising obvious questions of conflict of interests. Foremost among these is the panel chairman, William Perry, a long time Democratic defense operative who served in the Carter and Clinton administrations and made a fortune in the defense industry when he moved back and forth through the revolving door. Perry has been one of the most vocal and slickest salesmen of high tech defense systems, especially robots. While Secretary of Defense, Perry did nothing to correct the three problems described above, and in fact, he made them far worse by promoting new cold-war inspired high complexity, high-cost weapons just as the Cold War was ending — most significantly, the problem-plagued Joint Strike Fighter, which is on track to be the most expensive program in the Pentagon’s history. Today, the Obama administration’s Pentagon is well populated with Perry’s proteges.

Locker and Dilanian did an adequate job of identifying contractor connections for the eleven members of the panel; that is bad enough, but their report dropped the ball on highlighting the likely biases of the other members.

In addition to the eleven members who are affiliated with the defense industry, at least six other members work or have worked as defense “intellaaaaactuals” for pro-defense not-so-thinking thinktanks:

* Center for New American Security (CNAS): John Nagl, president. Nagl has been closely tied to the Obama administration’s advocacy of the AFPAK war and his organization serves as a mouthpiece for the Pentagon’s war policies. There is no indication Nagl knows anything about the decision making pathologies discussed above. But his predecessor as president of CNAS, Michelle Flournoy, is now the Under Secretary for Policy in the Pentagon and can be regarded as the key architect of the QDR.

* The Center for American Progress (CAP): Senior vice president, Rudy De Leon, is a former Deputy Secretary of Defense in in Clinton Administration. De Leon did nothing to clean up the Pentagon’s bookkeeping mess as DEPSECDEF, even though he was well aware of these bookkeeping problems from the mid-1980s forward, when he worked for Congressman Nick Mavroules (who ended up in the slammer for racketeering).

* Center for Strategic and Budgetary Assessments (CSBA): Eric Edelman was the Under Secretary of Defense for Policy between 2005 and early 2009. In this role, he was responsible for the vapid, unmemorable 2006 QDR, which is perhaps why Congress demanded the establishment of an independent review panel to “analyze” subsequent QDRs. Now he serves as Distinguished Fellow at CSBA, an organization long associated with promoting the Pentagon’s equally flawed theory of a high-tech, high-cost Revolution in Military Affairs (RMA), whose contemporary incarnation in using robotic drones in a collateral-damage-prone strategy to assassinate Taliban and al Qaeda leaders is creating enemies faster than we can kill them.

* Heritage Foundation: James Talent, the former Senator from Missouri and long time porker for McDonnel-Douglas-Boeing (St Louis), one of our largest defense contractors. The Heritage Foundation has ceaselessly flogged the “benefits” of ever growing defense budgets, since it produced its only critical report, “Ending Defense Stagnation” in 1982. Since then, to the best of my knowledge, it has not produced a study that questioned the Pentagon’s inability to pass financial audits in accordance with the requirements of the Chief Financial Officers Act of 1990, not to mention the Constitution — apparently setting aside the supposed conservative predilection of preserving the original intent of the Framers of the Constitution.

* Institute for Defense Analysis (IDA): General Larry Welch, former Chief of Staff of the AF, did nothing to fix the Air Force’s airplane aging problem when he had a chance to shape the Air Force’s future. As President of IDA, he headed up a not for profit organization whose main customer was the Office of the Secretary of Defense in the Pentagon. During his tenure, the IDA economic analysis office produced no recommendations that would have made the Pentagon’s books more auditable or dealt constructively with the power games causing the meltdown, particularly the cynical use of “learning curves” to support the Pentagon’s front loading operations.

* Center For Naval Analysis (CNA): A not for profit thinktank that is effectively a wholly-owned subsidiary of the US Navy.

So, there we have it: 17 out of 20 members of the QDR review panel have close ties to the status quo Military – Industrial – Congressional Complex. None of them, to the best of my knowledge, has ever discussed, much less analyzed, the three interconnected problems that have produced the Defense Death Spiral or the stunningly flawed QDRs. None of these people have ever tried to step up to the hard decisions needed to fix these problems. Of the remaining three members of the panel, the only one I have any familiarity with is Lt General Paul Van Riper, a former reformer and I believe a truth teller (even reformers occasionally make general). But even if he tries to fix things and the other two members side with him, my guess is that the three of them will be voices in the wilderness and have little or no impact on the outcome — too much money is at stake, and the 17 other members of the panel are card carrying protectors of the status quo.

A QDR review panel where at least 17 out of 20 members have a vested interest in protecting the status quo certainly will not ask the question: Is there an alternative to protecting the status quo?

For what it is worth, here is my answer.

Probably the only way to incentivize the Pentagon to really clean up its act will be to take the money away and force it to think.

Setting aside the question of ending our misbegotten wars (an issue I have discussed in several Counterpunch articles), we should freeze the core, i.e., the non-war related, defense budget in current dollars, or better, reduce that level by two percent a year. Keep this policy in place at least until the Pentagon can pass an audit in compliance with the Chief Financial Officers Act of 1990 and the Constitution. (This is only a starter; we could do much more: Readers interested in one way the Pentagon could go about producing the information needed to fix the mess can read the last section of my statement to Congress at the aforementioned link. No doubt, there are other ways.)
Some naysayers might argue that we can not freeze the defense budget, because we are at war, and we must support the troops. This is an emotional red herring. It is a suicidal logic that implies we should continue a dysfunctional status quo that will make us ever weaker, because we are at war. If deemed necessary, we could always continue a variation of Mad King George’s practice of paying for these wars on a pay as you go basis through supplemental appropriations (which in contrast to my proposal, he used to protect the self-destructive status quo by pumping up the core budget).
Other naysayers might argue that reducing the budget by two percent per year will gut the Pentagon, because the Pentagon is not required to pass an audit until 2018, and the compound effect of -2% per a year for eight years would be devastating. This kind of claptrap is precisely the kind of non-thinking that works to perpetuate the status quo.

With deadlines like 2018, the Pentagon has no incentive to clean up its act.
Moreover, the MICC has a habit of pushing inconvenient deadlines ever further into the future. Consider the track record of how the Pentagon routinely “bow waved” its auditing problems into the future: John Hamre was Chief Financial Officer (i.e. Comptroller) of the Pentagon in the early 1990s during the Clinton Administration; in that capacity, he promised Congress he would fix the books by 1997, a promise that was conveniently forgotten when 1997 arrived. When Dov Zakheim became the first DoD Chief Financial Officer in Bush administration in 2001, he promised to fix the books by 2007. Zakheim’s successor in the Bush Administration, the inept and eminently forgettable Tina Jonas, extended Zakheim’s promise to fix the books by 2016. Congress has now told Obama’s Comptroller, Robert Hale, to fix the books by 2018.

So, given the Pentagon’s behavior and the makeup of the panel, how much do you want to bet that the QDR review panel even mentions, let alone tackles a bookkeeping issue that is widely acknowledged but has been treated with contempt by decision makers in the Pentagon and Congress for at least fifteen years? This behavior is nothing less than a systematic assault on the Appropriations and Accountability Clauses of the Constitution (see Article I, Section 9, Clause 7), which each member of the Defense Department has taken a sacred oath to defend and uphold.

That is why the MICC’s desire to feed its voracious appetite by continuing its assault on the Constitution reflects exactly the kind of misplaced power that President Eisenhower warned America about in his farewell address.

Franklin “Chuck” Spinney is a former military analyst for the Pentagon. He currently lives on a sailboat in the Mediterranean and can be reached at chuck_spinney@mac.com