Saturday, March 16, 2013

SPENDING PROBLEM: MILITARY BOONDOGGLES FOR WHITE-COLLAR WORKFARE


President Eisenhower displayed little courage in his 1961 farewell address in which he warned about the “military-industrial complex” (aka since “military-industrial-Congressional complex”).  He had two terms to do something about which he had long-time, high-level experience during World War II, but he ducked the issue.

Six years later, at the height of the Cold War as well as the Vietnam War, Report from Iron Mountain appeared.  It purported to be the findings and recommendations of a secret, blue-ribbon panel convened to address a simple question: what would be “the nature of the problems that would confront the United States if and when a condition of ‘permanent peace’ should arrive”?  The panel was further charged to “draft a program for dealing with this contingency.”  Its major finding: for many reasons, a permanent condition of peace was not in the best interest of the United States.  Its major recommendation: ensure means to keep the United States on a wartime footing.

Controversy immediately erupted, but its focus was the status of the Report: was it real or was it satire?  A few with a conspiratorial cast of mind viewed it as literal, with all talk of its being satirical a ruse to distract from, or diminish the import of, its message.  Most viewed it as satirical, among which number I include myself, for one reason.  My experience with satire suggests that the more reasonable the tone and the more extreme the tenor of the discussion, the more likely the work is satirical.  Swift’s “A Modest Proposal” is the epitome of this kind.  It argues that the impoverished but prolifically breeding Irish should regard their extra children as a source of food to alleviate starvation in Ireland or as a source of revenue by export to England.  It, too, outraged those who took it seriously and delighted those who recognized it for artistic yet caustic criticism of England’s Irish policy.

Whether the Report is literal or satirical hardly matters.  What matters today is that the military-industrial complex, to which the involvement of Congress is essential, is all too real.  What Eisenhower might have prevented then, no one can prevent now.  For the military-industrial complex but recently established and still evolving in his day is now long-standing and fully developed in ours.  As a matter of course, defense contractors give campaign contributions to elected representatives who vote programs and budgets for military procurements managed by Pentagon officials who will retire to senior positions in defense corporations or staff positions in Congress.

The result is a Department of Defense in which waste, fraud, and abuse have been standard operating procedures for decades, impervious to improvement by successive Secretaries of Defense despite their previous military or management experience.  DOD commonly buys off-the-shelf supplies at above-market prices and consistently fails to buy advanced military systems in estimated numbers and within estimated budgets (see below).  It frequently procures ineffective or unnecessary weapon systems in order to keep members of Congress happy with contracts in their districts.  It reflexively demotes or dismisses whistleblowers.

Cost overruns of advanced military systems (ships, planes, satellites, tanks, etc.) DOD has long tolerated, allowed, and, in effect, encouraged because they are the best way for defense industries to make substantial profits.  The initial procurement is competitive; to win the contract, companies have to make very low, if not the lowest, bids for the promised number of systems.  However, once DOD awards the contract, it cannot make the costs of design modifications competitive; to make up for very low bids, companies use these modifications to justify high, non-competitive charges.  Instead of fixing its design before it requests bids, DOD makes post-award design modifications and accepts the companies’ charges for them and their enormous profits.  The results are a smaller number of systems for the original budget, the same number of systems for a ballooning budget, or a combination of both smaller numbers and bigger budgets.

The process makes a mockery of DOD professions of its needs.  If DOD needs 500 advanced fighters for the national defense at a procurement price of $50 billion, or $100 million per fighter; then it accepts a weakened defense posture when the per-plane price flies up to $250 million, for a within-budget procurement of 200 fighters.  The best current example of such a military-industrial scam is the F-22, with not only no peer, but also no opposition.  In rounded-off numbers, the original Air force procurement planned for 750 planes at a cost of $26 billion, or $35 million per plane; after several changes in design and budget, the final procurement was for 183 planes for $62 billion, or $384 million per plane.  Result: one-fourth the number of planes at eleven times the cost per plane.  A jet-jockey mentality costs a lot of money, adds nothing to national defense, but adds a lot to the national deficit.

Outrageous as such procurements are, they are not the major source of waste, fraud, and abuse.  The major source is the perpetuation of outmoded military strategies and tactics as justification for procurements serving little or no important military purpose.  Most of our present procurements of advanced military systems imply preparations for fighting large conventional wars.  The result is that the United States has a defense budget equal to the combined defense budgets of all other countries combined.  The irony is that such forces are so expensive in themselves and in their cost overruns that the country no longer can support logistically one major war, as if it were going to fight one.  Yet some think that the country is losing its defensive pre-eminence because it cannot fight two such wars.  Even so, the battlefield for such a conflict does not exist.  Tank armies are not going to come blitzing through the Ardennes, and troops are not going to mass for assaults on frontline defenses on the Korean Peninsula.

Any rationale for such procurements—generally, for much of the defense budget—is conflicted.  On the one hand, the United States declares itself unwilling to be the world’s policeman and to intervene in foreign wars; on the other hand, it wants to be able to project power abroad.  In this stalemate of antithetical purposes, the country does not relate its need for military forces and their composition and capabilities to its foreign policy.  So it treads water, and not only procures weapon systems unlikely to have any important role in modern hostilities, but also maintains troops and bases abroad which are unnecessary.  Foreseeable hostilities of the future require either anti-missile defenses and some nuclear-weapon deterrent, or small, mobile forces supported by helicopters; submarines; missile-firing or drone-launching air, space, and naval platforms; and other high-technology weapons.  And, unless the United States intends to act unilaterally, it can transport troops and use foreign airfields with a host country’s permission.  It has no reason to maintain most of the bases outside or, for that matter, inside the United States.

Reductions in the defense budget, even large ones, do not place at risk the national defense or its ability to influence other nations, to whom the United States’ military forces are unimportant and against almost all of whom military action is inconceivable.  The real risk is to the effect on defense industries and on their workers, and on the economy.  Most defense industries, having become wards of the federal government, would be unable to make a transition into the civilian economy; they would go broke and their workers would become unemployed.

Some may counter this gloomy prediction by pointing to the major shift after the Second World War from a wartime to a peacetime economy.  For example, industries making tanks went back to make cars and buses, and companies building arsenals and barracks went back to making houses and office buildings.  But the economy at that historical moment was very different from the economy in recent years.  Then, after the deprivations of the depression and rationing during the war, a pent-up demand for cars, homes, and appliances by a strong middle-class enabled the shift in production from guns to butter.  Today, no such pent-up demand exists.  The poor, the country still has; the middle-class, the country has in smaller numbers and strained family budgets, with burdensome mortgages and consumer debt.  A slowly recovering economy suffers from the uncertainties of political gridlock in Washington and a “jobless recovery.”  So large defense contractors, if they lost most or all of their government contracts, would go bankrupt because they could not change production to something in demand but not already available from other companies.  The weakness of consumer demand makes additional supply a bad risk for companies thinking to enter a market with excess production capacity.

The sequester may have a surprising impact on the defense budget.  Washington politicians believed that balancing cuts in defense unwanted by Republicans and cuts in discretionary spending unwanted by Democrats would force both parties to resolve their differences in a long-term, bipartisan resolution to end unbalanced budgets and growing deficits.  Now some Republicans are thinking that cuts in the defense budget are not unthinkable.  Unfortunately, no one can guarantee that such cuts will target ineffective or unnecessary systems.  Moreover, the likelihood that significant cuts will occur is remote; defense contractors constitute a powerful lobby and, as the sequester cuts are showing, no Washington politicians want cuts in contracts or jobs in his or her backyard.

Yet these is a sensible alternative to such pointless government spending on advanced defense systems: government spending on infrastructure: bridges, roads, rails, airports, harbors, and rivers.  Republicans decry such infrastructure spending because it would increase government spending and the national debt; they do not decry defense government spending which sustains pointless government spending and contributes to the national debt.  The difference: infrastructure spending provides jobs for relatively low-skilled construction jobs whereas defense spending provides jobs for relatively high-skilled engineering jobs.  In short, military spending protects profits for white-collar companies and provides welfare for white-collar employees.  Otherwise, since government spending is government spending, the obvious solution is to transfer funds, dollar-for-dollar, from defense to infrastructure spending.  The country will enhance its economy without impairing its defense.

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