By Ryan McMaken, Mises Wire | December 05, 2024
It should go without saying that asking generals and other Pentagon bureaucrats about defense spending is like asking your barber if you need a haircut. They are hardly disinterested observers.
So, it’s not surprising at all that the usual pentagon uniformed technocrats, after failing their audit for the seventh time in a row, remain unrepentant. Last month, after failing to provide documentation showing the Pentagon actually knows what it does with its money, the DoD engaged in the song and dance we have come to expect. For example, the Pentagon’s CFO Michael McCord announced that in spite of its abysmal performance in its audit, the Department “has turned a corner in its understanding of the depth and breadth of its challenges.” “I think we’re making progress,” he added.
That’s swell, but it’s unclear that this “progress” amounts to much given that last year, the Pentagon admitted it can’t account for 63% of nearly $4 trillion in assets.
The Pentagon has never passed an audit since the agency became legally obligated to carry them out in 2018.
Not that any of this matters in terms of any real consequences for the privileged class of parasite tax-eaters that are high ranking military officers and their corporate cronies at places like Boeing.
Military spending just keeps growing to new historic highs every few years, even in inflation-adjusted dollars.
Moreover, the dollars that go to the DoD directly are just part of the spending on so-called “defense.” The Pentagon effectively shares its functions with two other federal agencies, the Department of Homeland Security, and the Department of Veterans Affairs. The VA, after all, is just an agency tasked with spending the deferred costs of previous military operations. That is, the VA delivers the benefits to veterans who were promised ongoing compensation—in the form of healthcare and other benefits—for military “service.” Without VA benefits, the Pentagon would never be able to recruit the troops it needs for its next round of foreign policy debacles. Thus, any true accounting for military budgets has to account for the long-term personnel costs that become apparent in VA spending.
Meanwhile, the Department of Homeland Security contains numerous agencies related to nuclear war, biowarfare, the Coast Guard, and more.
Source: Office of Management and Budget.
When we look at these three agencies combined, the spending is astronomical. In 2024, the Department of Defense’s budget is still fourteen percent higher than it was at the height of Reagan’s Cold War buildup. After nearly 25 years of nearly continuous war, however, the costs of veteran’s benefits have soared, meaning that the total combined costs of military and defense spending are now 60 percent above their old Cold War peak.
None of this, by the way, takes into account the immense contribution to the national debt made by defense spending. In the 2024 fiscal year, the US paid $884 billion in interest payments on the debt. It’s safe to say that federal interest payments would be hundreds of billions of dollars lower were it not for military and defense spending.
The cost of various failed military occupations contributes much to this endless gravy train for the military, but much of the waste now comes in the form of technology spending. This spending on newer and more expensive toys for government agencies often amounts to little more than corporate welfare. The F-35, for example, is the quintessential example. William Hartung writes:
If carried to completion, the F-35 will be the most expensive weapons program in history, at a cost of $1.7 trillion over its lifetime. Yet 23 years into the program, the F-35 still has major flaws in its software and hardware — over 800 unresolved defects according to one Pentagon analysis. And it spends inordinate amounts of time out of action for maintenance. Versions of the plane for the Air Force, Navy, and Marines were designed to carry out multiple functions — aerial dogfights, bombing targets on the ground, close air support for troops, landing on both airstrips on land and the decks of aircraft carriers — and it does none of them particularly well.
For his part, [Elon] Musk has referred to the F-35 as “jack of all trades, master of none” and “the worst military value for money in history.” His critique is right on target. It is long past time to cut the F-35 program short in favor of cheaper, more reliable alternatives.
In other words, that’s $1.7 trillion down the drain in terms of actual defense. But it sure has made many of the Pentagon’s 500,000 “private” contractors rich.
Hartung has also noted that the Pentagon’s tech spending—i.e., corporate welfare—has now begun flowing in every larger quantities to Silicon Valley. The alliance between Silicon Valley and the Pentagon has substantially grown in recent years. Parasite “capitalists” like Peter Thiel are among the biggest beneficiaries. For example, Thiel’s Palantir, an AI platform designed to help the CIA spy on Americans, has seen big gains in its stock price following another infusion of more than $400 million in the third quarter alone. Taxpayer dollars accounted for 56 percent of Palantir’s revenue during the period, while actual private-sector revenues disappointed. Silicon Valley is increasingly fueled by government contracts, and defense spending is a growing part of this.
It remains to be seen what any of this has to do with actually effective deterrence, diplomacy, or defense. But, it does help build a corps of corporate welfare-queen lobbyists who will fight tooth and nail to prevent any meaningful cuts to defense spending.
Unfortunately, there will be no meaningful progress made on bringing the federal government’s runaway spending under control without substantial cuts to military spending. Much of the “discretionary” spending that can be cut in the appropriations process is found in the military and defense budgets. Elderly voters, of course, will throw a fit if anyone mentions cutting their favorite welfare programs, Social Security and Medicare. Moreover, that spending is “non-discretionary” meaning Congress must pass new laws changing spending formulas on top of the appropriations process. That should all be done, of course, but it also means we might as well start with cuts to defense spending.
There is plenty of fat to trim. American taxpayers still spend generously to maintain more than 165,000 US troops overseas, many in countries that are wealthy allies who can easily afford their own military defense. As reported by Statista this week
According to data from the Defense Manpower Data Center, South Korea has the third highest number of active U.S. troops deployed of any country outside of the contiguous U.S., at over 23,000 personnel. It follows only after Japan (52,852) and Germany (34,894). As of June 2024, there are 165,830 active personnel overseas, rising to 1,294,191 active personnel when including those in the U.S.
Meanwhile, in spite of the Pentagon’s gargantuan budgets, dirt-poor Houthi rebels have effectively sent Red-Sea shipping into chaos. Yet, Americans have been told for 200-plus years that the US Navy keeps the “high seas” open for shipping. This is not money well spent.
If so-called fiscal hawks were serious about cutting federal spending, they’d be advocating for hundreds of millions of dollars in cuts to the military and defense budgets. At the very least, spending must be returned to its old Cold War peak with a cut of more than $470 billion right off the top. Most of that should come out of the Pentagon budget since cuts to the VA would rightly be portrayed as a ghoulish attempt by Pentagon brass to preserve their own salaries and toys at the expense of ordinary veterans.
Even these “huge” cuts wouldn’t abolish even half of the $2-trillion-plus deficits that the US will be facing each year in coming years.
But, we all know that, until a significant change in the public’s ideology about federal spending takes place, we will not see any real cuts to federal spending, military or otherwise. The American public still largely views federal deficits and debt as free money, so there are few calls for any real cuts. This is reflected in public opinion surveys that show Americans still want to see more spending pretty much everywhere.
Nor will there be any top-down reforms. Contrary to the beloved beltway myth that “personnel is policy,” policy actually stems from public opinion, and the regime will never push anything more than the most milquetoast reforms until the public demands otherwise. Those who think otherwise are lost in the throes of “cope” and wishful thinking. This administration will not spend political capital on any sizable cuts to any program given that there is no public demand for any such thing. It doesn’t matter that Trump’s newest Secretary of Whatever wrote an op-ed ten years ago calling for big budget cuts. That’s simply not going to translate into anything meaningful in the year 2024.
Rather, what is really going to happen is the US will continue downward in its debt spiral, racking up ever larger deficits. Yields on Treasuries will gradually rise as the federal government floods the markets with ever more debt. Interest will on the debt will rise ever higher, siphoning off more and more resources from present spending to pay off the deficits of long-ago failed wars and welfare programs.
Meanwhile, the central bank will attempt to keep yields under control by being the “buyer of last resort” and mopping up the excess Treasuries. That will manifest as price inflation as the central bank must create new money to pay for all those bonds. Then, it will be “rinse and repeat” as inflation and debt mounts, and federal spending continues unabated, funneling ever larger dollar amounts to Silicon Valley billionaires and fat-cat weapons makers.
Only after the debt- and inflation-fueled destruction of the middle class becomes undeniable will the public finally lose faith in the idea that ever more government spending makes the people better off. Only then will we see the bottom-up demands for change that are badly needed right now.
That, of course, is the good-case scenario. If we do our job as free-market activists, a growing share of the public will see the destruction wrought by our debt spiral, and real reform will come sooner than later. Without free-market activists, on the other hand, there may be no end in sight at all. In the bad-case scenario, the public rejects markets and laissez-faire entirely, and simply concludes that the only way out is total central planning and soviet-style socialism. The time for fight for radical change toward laissez-faire is right now.
Ryan McMaken is executive editor at the Mises Institute, a former economist for the State of Colorado, and the author of two books: Breaking Away: The Case of Secession, Radical Decentralization, and Smaller Polities and Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre.
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