Obama Keeps Pentagon Spigot Open

Though he ran for the White House as a “change” candidate, President Obama has mostly favored continuity, including bending to the usual pressure from the Military-Industrial Complex to keep the Pentagon spending flowing, as budget watchdog Chuck Spinney explains.

By Chuck Spinney

The Pentagon just won another small skirmish in its long war with Social Security and Medicare. That is the unstated message of the budget deal just announced gleefully by congressional leaders and President Barack Obama. To understand why, let’s take a quick trip down memory lane.

Last January, President Obama submitted Fiscal Year (FY) 2016 budget to Congress, and he proposed to break the spending limits on both defense and domestic programs.  These limits are set by the long-term sequester provisions of the Budget Control Act of 2011  (BCA), which, for better or worse, is the law of the land, and Obama was asking Congress to change the law.

President Barack Obama on the campaign trail. (Photo credit: barackobama.com)

President Barack Obama on the campaign trail. (Photo credit: barackobama.com)

Mr. Obama wanted to finance his ramped up spending proposals by increasing taxes.  Of course, he knew that the Republican-controlled Congress lusted for defense increases but hated domestic spending, particularly entitlements, such as Social Security and Medicare.

Moreover, he knew increasing taxes was like waving the red cape in front of the Republican budget bulls. So, he knew his budget would be dead on arrival. Obama’s budget, nevertheless, had one virtue: it was up-front about the intractable nature of the budget problem. In effect, whether deliberately or not, Obama laid a trap that the Republicans merrily walked into during the ensuing spring and summer.

Obama’s gambit set into motion a tortured kabuki dance in the Republican-controlled Congress. The Republicans, as Obama well knew, wanted to keep up the appearances of adhering to the BCA. But at the same time, they wanted desperately to shovel money into the Pentagon’s coffers.

The net result was that Obama’s proposal triggered a series of increasingly irrational Congressional negotiations, bizarre back-room deals and weird budget resolutions.  These machinations came to a head with the passage of a National Defense Authorization Act (NDAA) that proposed to (1) keep the Pentagon’s base budget at the BCA level of about $499 billion, but (2) pack the accounts in the Pentagon’s Overseas Contingencies Operations fund (OCO) with a programs and pork that should have been in its base budget.

The reason for the dodgy OCO “slush fund” rested in the politically irresistible fact that the OCO is a separate war-fighting fund for the Pentagon that is exempt from the spending limits set by the BCA’s sequester provisions. [The OCO is a George W. Bush gimmick, created in 2001 after 9/11 to capitalize on the national hysteria to pay for the Global War on Terror by taking its costs off the books. All our previous wars, e.g., WWI, WWII, Korea, Viet Nam, Kosovo, were funded out of the “base” defense budget and there was no need set up a special war fighting account.]

The net result of the smoke and mirrors by the Budget and Armed Services committees of Congress was a total defense budget that was almost identical to Obama’s original submission, but one that was not accompanied by his domestic funding increases or his tax increases. And this monstrosity was all wrapped up in a ridiculous pretense of adhering to the BCA limits.

Last week, President Obama seemed to close the trap by vetoing the 2016 NDAA. But this too was smoke and mirrors.

The veto put in motion yet another kabuki dance, this time behind closed doors between the White House and the leaders of Congress. The goal was to reach an overall budget deal that would avoid a government shutdown, which the majority Republicans were terrified of being blamed for on the eve of an election year. At the same time, they wanted to dodge the BCA’s sequester bullet while they shoveled more money into the Pentagon.

That deal has now been joined, and the Republic has been saved, albeit at an unknown price. Nevertheless, some of its sordid details or that price are now beginning to seep through the chinks in the Hall of Mirrors that is Versailles on the Potomac. According to this report in Defense News, the elements of the budget deal include the following:

The deal raises the BCA spending caps (again) by $80 billion over next two years; including $50 billion in FY2016 and $30 billion in FY2017. It also increases the Federal Government’s debt limit. These spending increases would be split equally between defense and domestic programs, and they would be financed by two squirrelly provisions, to wit:

The first financing gimmick cuts back Medicare and Social Security disability benefits. But if past is prologue, the cut to Medicare is likely to be reversed again next year, which is an election year, because everyone in Congress wants the endorsement of the American Medical Association. The cut to Medicare providers was first made permanent law by the Balanced Budget Act of 1997, and since then Congress has reversed the scheduled provider cut 17 times.

The second financing gimmick is to sell crude oil from the US Strategic Petroleum Reserve. Ironically, this rather bizarre provision is peculiarly fitting to the culture of Versailles on the Potomac. Few remember that the reserve was justified to the American people in 1975 as an insurance “cushion” to reduce the adverse effects of future rises in oil prices or supply disruptions engineered by OPEC, which is controlled by our supposed “ally” Saudi Arabia.

So why sell the reserve’s oil when prices are near record lows (adjusted for inflation) compared to those of the last 15 to 20 years, particularly since the Saudis are flooding the market to take out the U.S. frackers? Who benefits is a fascinating question with all sorts of twists and turns and is not yet answered.

But it is worth recalling the 1997 Balanced Budget Act had a provision to sell the Naval Petroleum Reserve at Elk Hills (sold in 1998) at that time, the largest privatization of government assets in history, precisely when oil prices were at their lowest level (adjusted for inflation) since the 1960s. It was sold to Occidental Petroleum which made a killing.

There is one thing the deal makes clear, however. The Pentagon’s share of the spending increases would be $33 billion in FY16, made up of a $25 billion increase in the Pentagon’s base budget and an $8 billion increase in the OCO. As for how the Pentagon’s $15 billion increase in FY17 will be allocated, the report in Defense News is silent.

So, there is good reason why champagne corks are popping in halls of the Military-Industrial-Congressional Complex (MICC) and its lobbying affiliates on K Street. Indeed, to celebrate the triumph, the Air Force immediately announced it awarded Northrop-Grumman with a huge concurrent engineering contract (Milestone B) to design and build the first 21 of 100 new long-range strike bombers, which heretofore had been shrouded in heavy secrecy.

No one knows what this bomber will even look like, let alone what the program will cost, but two years ago, there were reports of a “pre-cost-growth” total program cost estimate (R&D and production) reaching $81 billion. At least one of the MICC’s euphoric wholly-owned subsidiaries in the Fourth Estate has already written that 100 bombers are not enough, given the threats we face and the number of aging bombers that need to be replaced. 

This new bomber program is, by far, the largest weapon acquisition program yet started in the Twenty-first Century. Moreover, its heavy concurrency means that the production-related money will quickly start flowing to hundreds of congressional districts, well before the bomber is designed.

So, before you can say sequester next year, the Bomber, like the troubled F-35 Joint Strike Fighter, will be unstoppable. And, like the F-35, it will acquire a life of its own to live on, no matter how badly it fails to meet its cost goals, its capability specifications, or its production quotas, for the simple but powerful reason that a majority in Congress are being bought off today in a way that will ensure they vote for it tomorrow.

But there is more. The new Bomber is just the beginning of the new defense boom that Mr. Obama and Congress are launching beneath the smoke and mirrors of their budget practices. The Pentagon already has a bow wave of increased spending for new weapons in its R&D pipeline.

In that sense, it is no accident that, a year ago, as he was departing the Pentagon, the Pentagon’s ineffectual comptroller Robert Hale characterized the new bomber as the “canary in the coal mine.” He was wringing his hands over the rapidly growing requirements for larger defense budgets in the future, requirements he helped to create.

“Bow waves” are a perennial feature in Pentagon planning. I first heard the term in 1973. The current bow wave, like its predecessors, will lead inexorably to more budget crises and more dodgy budget deals made by the best government money can buy.

So, once again, Mr. Obama had a shot at leading from the moral high ground, and once again, he blew it. He had the Republicans on the ropes, with all their warts on full display, but then he squandered an opportunity to effect even a pretense of challenging a thoroughly corrupt system.

Obama’s most recent performance is yet more proof that he is no change agent. A better characterization would be that he is merely another Manchurian Candidate, whose role is to protect the interests of the factions making up the shadow government that is now running the show, what former Republican congressional staffer Mike Lofgren calls the U.S. “deep state.” [See Lofgren’s upcoming book, The Deep State: The Fall of the Constitution and the Rise of a Shadow Government.]

[This essay is the second in a series of occasional essays on the nature of defense spending. The first can be found here.]

Chuck Spinney is a former military analyst for the Pentagon who was famous for the “Spinney Report,” which criticized the Pentagon’s wasteful pursuit of costly and complex weapons systems. [The article appeared originally at his blog.]

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12 comments for “Obama Keeps Pentagon Spigot Open

  1. WG
    November 1, 2015 at 12:08

    The only thing that will interrupt business as usual is the loss of reserve status for the US dollar. Once the US can’t export their inflation in order to fund this defense largesse the day of reckoning will be at hand for the Military Industrial Complex. Then we will see if America returns to a republic or turns into an outright military dictatorship.

  2. Zachary Smith
    November 1, 2015 at 00:48

    Fox News has a piece up about the fabulous new bomber titled “US Air Force’s new stealth bomber: What you need to know.

    Here is the ‘meat’ of the tell-all:

    “What will it be like?

    The military has kept details of the wish list for its new bomber classified.”

    And that, Mr. Rube, is all you need to know. Just agree to cuts in everything except the Big Military Waste Projects.

    We need a new stealth bomber like roosters need pink brassieres. But as the author says, we’re going to get it. Why? Just because. Same reason we’re throwing unlimited money at the new Ford-class aircraft carriers. The Russians are fielding the S-400, and the S-500 is on the near horizon. Yet the neocons still hyperventilate about Iran getting an S-300 class anti-aircraft system. The new bomber will most likely actually fly, and will carry some sort of weapons. But why in the seventh circle of hell does it need to be “stealth”? Anti-stealth radars and other technologies are already making that ‘invisibility’ questionable. By the time the great new bomber shows up, the thing will be even less invisible.

    Does anybody recall Russia launching 26 cruise missiles from the Caspian Sea? Some of those missiles were launched from itsy-bitsy 1000 ton corvettes. You don’t need an expensive transport for these things! If you’ve got to buy a long-range aircraft to carry your expensive missiles, hit up Boeing for a military version of the 787. Last I heard, these would fly half way around the world without stopping. That’s 12,500 miles, and cutting it in half for a “combat radius”, we’re into 6000 miles territory. Fly your 787 (or long-range Piper Cub) to the launch point, fire off your ordnance, then turn around and go home. WTH do you need stealth?

    Getting back to the Aircraft Carriers, right after that salvo cruise missile launch by the Russians, a nearby US aircraft carrier moved quickly out of range. Back in WW2 the LST (landing ship, tank) was nicknamed Large Slow Target. Suppose a ten billion dollar carrier with 5,000 men aboard moves at 35mph. That’s SLOW compared with everything which might attack it. They’re basically a waste of money, that new bomber is a waste of money, the ABM systems are money pits, but we’re building all of them.

    But hey, the Big Contractors have to make tons of money, don’t they? It’s all about looting the taxpayers, and don’t tell me THAT enterprise isn’t working very well.

    • Joe Tedesky
      November 1, 2015 at 02:16

      About that Stealth plane thing, read the link I’am providing. The article is from Popular Mechanic’s, as you will read, the author is very American. After, I thought about that, that became the more reason that you should read what this reporter is reporting.

      http://www.popularmechanics.com/military/a8107/russian-made-tech-vs-americas-stealth-warplanes-13506974/

      Earlier this evening, I came across a Green Party petition calling out for ‘No More War’. One of their platforms was no more funding weapon R&D…..I agree. Events now, at this very moment, cry out for peaceful leaders, to take the stage. I fail to see how war is profitable.

  3. James
    October 31, 2015 at 21:58

    Re: “Mr. Obama wanted to finance his ramped up spending proposals by increasing taxes.”
    —————–
    http://www.forbes.com/sites/johntharvey/2015/03/27/the-republican-budget/
    http://www.forbes.com/sites/johntharvey/2015/08/10/five-reasons-balanced-budget-is-lunacy/2/

    “The level of ignorance regarding federal government budgeting is horrifying. I don’t just mean among lay people or the general public, but right up the both houses of Congress and the White House-–you know, the people who actually make the decisions. Nor is it limited to one party. While the Republicans have been far more rabid about it, the Democrats, too, are anxious to see the day when the budget deficit is not only smaller, but eliminated entirely. Best of all, they say, we might even reach the point of having surpluses that can cut into our massive national debt. While they may prioritize these goals differently, it appears that just about every single politician in Washington shares these sentiments.

    God help us.

    First off, it is impossible for the United States to be forced to default on the national debt. Not improbable, not unlikely, but impossible. This isn’t an opinion, it’s a cold, hard fact. The reason is that one-hundred percent of the debt is in United States of America dollars, something we and only we are allowed to print. But don’t take my word for it, listen to these prominent scholars and analysts:”

    “As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational.” Federal Reserve Bank of St. Louis

    “In the case of United States, default is absolutely impossible. All U.S. government debt is denominated in U.S. dollar assets.” Peter Zeihan, Vice President of Analysis for STRATFOR

    “In the case of governments boasting monetary sovereignty and debt denominated in its own currency, like the United States (but also Japan and the UK), it is technically impossible to fall into debt default.” Erwan Mahe, European asset allocation and options strategies adviser.

    “There is never a risk of default for a sovereign nation that issues its own free-floating currency and where its debts are denominated in that currency.” Mike Norman, Chief Economist for John Thomas Financial

    “A sovereign government can always make payments as they come due by crediting bank accounts — something recognized by Chairman Ben Bernanke when he said the Fed spends by marking up the size of the reserve accounts of banks.” L. Randall Wray, Professor of Economics at the University of Missouri-Kansas City and a Senior Scholar at the Levy Economics Institute.

    ———————–
    Fifteen Fatal Fallacies of Financial Fundamentalism
    http://www.columbia.edu/dlc/wp/econ/vickrey.html
    ———————–

  4. Joe Tedesky
    October 31, 2015 at 21:55

    From an archived interview of Arthur C. Clarke in Playboy
    (Date unknown possible 1986)

    PLAYBOY: Then do you subscribe to Secretary of Defense Caspar Weinberger’s theory that the reason the Russians are so eager for the U.S. to give up S.D.I. is that they’re so far behind us in technology?

    CLARKE: I do think Weinberger has a point. I think one of the reasons the Russians are so scared of it is that if the Americans do it, the Russians will very rapidly spend a lot of money to get far ahead, spending a lot of money they don’t really have, because their economy is in such trouble. There again, it’s the big-bluff area.

    Not much has changed since Arthur C. Clarke made that comment, about Casper Weinberger’s strategizing his Cold War idea, of how U.S. investment into it’s military might, was driving Russia into an all out spending frenzy, to try and catch up with their rival American arms manufacturers. If Weinberger was admitting it, and Clarke was validating it, then wouldn’t you think that this announcement of ordering 100 new bombers, might not just be a simple ploy. If the Reagan administration had used the SD I program, to make Russia spend money it didn’t have, well then just change the words like Reagan to Obama, and SD I to 100 bombers. Oh, I don’t doubt these planes will appear in the U.S. arsenal of air deployed weapons, one day. No, they’ll appear someday, in some enemy sky, if for no other reason than for the cameras of the American corporate media, to give America more bragging rights. Here’s what counts; it’s all about the bacon our congressional representatives get to flow back home to their respective districts. Many, of these representatives have military contractors, in their own gerrymandered back yards. No one ever thinks to replace this kind of war spending, by building much needed infrastructure projects. Your a damn loon if you wish to bring up any spending on the environment. I once read an interview where Arthur C. Clarke broke out into a hypothetical rant, about a world without war. Clarke, described a world where rather then build military hardware, they would instead build technologies for man to explore space. In the end, Clarke sighed, the only problem was the military were the only game in town with the money and power to get the opportunity to go to outer space. Somehow, we all need to change this.

  5. October 31, 2015 at 14:39

    hi

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  7. October 31, 2015 at 14:34

    good

  8. Abe
    October 31, 2015 at 14:23

    The oil politics plays into the military politics of what geopolitical analyst F. William Engdahl calls “the Lost Hegemon” — the American oligarchs

    Oil & Economic Wars with Russia, China & Iran
    https://www.youtube.com/watch?v=hKfOcN0EScU

  9. Eddie
    October 31, 2015 at 14:20

    RE: ” …to design and build the first 21 of 100 new long-range strike bombers”. Bombers?? Did I miss the time-warp, the one that took us back to the 1950s/60s? Admittedly, I know we ‘need'(?) bombers to subdue all these 3rd world ‘enemies’ like Iran or Syria, but in this day and age of nuclear armed submarines (that are a whole lot less vulnerable to counter measures than bombers), why in the hell would we spend outrageous amounts on weapons that were good for fighting 1950s/60s war? The answer is obvious — we’ve morphed into a militarized society and will spend money on ANY weapon system, no matter how inefficient, unneeded, or expensive. Probably the only thing that may stop this cozy relationship between arms supplier & politicians & bellicose voters is a major, traumatic economic downturn or — the ultimate horror — the completion of a full-blown major-powers war. I sure as hell hope it’s the former…

  10. Abe
    October 31, 2015 at 13:54

    We all know the so-called Cold War never really ended, it is true. However, while many consider America’s theoretical “war on terror” as an acute reaction to a singular event, absolutely nothing could be further from the truth. The terror war is a tool, plain and simple, for instigating the final phases of Cold War II, if you will. Whether or not our reaction to the 9/11 events was plausible or appropriate, is for the historians to determine. 9/11 was however, only a chip in a much bigger game of global domination. Just as accepting China into the World Trade Organization, the Ukraine civil war, the Arab Spring, and Washington’s quest to overthrow Syria’s Assad are singular events, so is the quest for control over all the world’s economies what all war is about. Looking at this grand scope however, our attention is diverted, distracted, even overwhelmed by the sheer magnitude of the business politic. It is in this maelstrom of information, chaos, and dirty dealings the public gets overwhelmed, and ultimately subdued. Do not be overwhelmed though

    […]

    it’s necessary to understand the role war and conflict play, even the role of business failures, where control via lending, and leveraged commodities impact our economies. The biggest take-away I can leave you with here is, there is no coincidence in the war and chaos we see going on. Syria or Ukraine, even past conflicts like Kosovo and the Yugoslavia catastrophe did not simply happen. The forces I am talking about made them happen, and for profit. Right now you can grab hold of the fact Georgia is the central game piece that determines whether we continue warring, or if a new system will emerge. I think people around the world need to begin to question what a world dominated by cohesiveness will look like. We can already see the current world dynamic is people’s divided, war for profit, and ultimately the worst form of subjugation, the illusion of democracy.

    How Vladimir Putin Took Over the World
    By Phil Butler
    http://journal-neo.org/2015/10/30/how-vladimir-putin-took-over-the-world/

    • Bob Van Noy
      October 31, 2015 at 15:10

      Thanks Abe for the insightful response as usual. I would add this by C.Wright Mills written in 1958 and included in the new book by David Talbot, “The Devil’s Chessboard”…

      “In the name of realism, men are gone quite mad, and for precisely what they call utopian is now the condition of human survival.”

      “Utopian Action”—by which Mills meant active diplomacy among the superpowers, a ban on nuclear arms testing, a moratorium on the production of ‘extermination” weapons, scientific and cultural exchanges, and free travel between the West and East—was actually ‘realistic, sound, common sense,’ he wrote. In contrast, ‘practical actions are now the actions of madmen and idiots. And yet these men decide; these men are honored, each in his closed-up nation, as the wise and responsible leaders of our time who are doing the best they can under trying circumstances’.”

      Will the US government ever get international relations right?

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