READINESS TRAP SPRUNG (III) - Crony Capitalists in Washington
Funhouse Set Stage for Phony Debate Over Defense Spending

August 13, 1998

Comment: #166

Discussion Thread:  #s 159, 165 and readiness related commentaries


[1] George Wilson, "MORE DEFENSE SPENDING ISN'T NECESSARILY BETTER," Navy Times, Aug 17, 1998. (Attached)

[2] Bradley Graham, "Military Readiness, Morale Show Strain," Washington Post, Aug 13, 1998. (Attached)

[3] Memorandum to William Lynn, Director of Program Analysis and Evaluation, "SUBJECT: The Anatomy of Decline (Re: My presentations to you on 16 March, 26 &28 April)," May 5, 1994 (Attached)

Get ready for a phony debate over the defense budget in the data-free analysis and analysis-free decision making funhouse of Washington in the post-information era.

Think about it .... It is only one year after the authors of the Quadrennial Defense Review, the first Congressionally mandated strategic review of the military's role in the so-call post-industrial age of information dominance, concluded "we have a few minor problems, close a few more bases, but we're on the right track, so we'll stay the course."

The readiness problems dragging down the military are REAL. Indeed, I have been warning in my "Anatomy of Decline" study, since I first briefed it to Admiral Owens in October 1992, that a readiness meltdown could occur in the mid-to-late 1990s.

Attachment 3 to this commentary, for example, is one such warning. It is a 5 May 1994 memorandum in which I described these problems after giving the entire four hour briefing to William Lynn, the former Director of Program Analysis and Evaluation in the Office of the Secretary of Defense, now the Pentagon's Comptroller. Note how I warned Mr. Lynn of the possibility of a future readiness debacle, future force structure shrinkage, and/or future pressure to increase the budget. Note also how I requested that he direct the Cost Analysis Improvement Group (CAIG) to check the correctness of my calculations, before he acted on my recommendations. Lynn never responded to this memo, or any of the other memos I wrote to him on this subject. Needless to say, no CAIG audit occurred, although the General Accounting Office subsequently audited and confirmed the accuracy of the central part of the study at the request of Senators Roth and Grassley.

Please understand that I cite the above example to show that the current readiness problems were foreseeable possibilities, that high officials were told about these possibilities before the fact, and that information was presented which showed such problems are not the product of budget cuts, however comforting that excuse may be to the players in the funhouse. Mr. Lynn's non-response is a small part of a pattern of larger pattern of self-inflicted wounds made INEVITABLE by the decision making habits of civilian/military bureaucrats in the Pentagon who are intent on preserving the comfortable Cold War status quo for themselves and their brethren in industry and on Capital Hill, regardless of what threat our nation faces.

Now, the some of the players in the funhouse are going to use the emerging readiness crisis and the unexpected emergence of budget surpluses as excuses to jack up the defense budget, so we can perpetuate our destructive behavior. This was also predictable.

As I have said repeatedly, the Defense Department faces three basic problems: a modernization program that cannot modernize the force, a rapidly deteriorating readiness posture, and a corrupt accounting system that makes it impossible to solve the first two problems. Adding money to the defense budget, while letting the root causes of these three problems fester will not fix things and will squander resources we can no longer afford to waste.

The corrupt information system lies at the heart of the matter. Cooked books are necessary to preserve the status quo of the military-industrial-congressional complex, because they mask the self-destructive effects of a technology-driven political economy wherein costs always grow faster than budgets, even when budgets increase sharply, as they did in the 1980s.

It does not take rocket scientist to figure out that increasing the budget will not fix a budget shortfall, if that shortfall is caused by a structural relationship where cost growth exceeds budget growth. Increasing the budget might relieve pressure in the near term, and make the inhabitants of the Washington funhouse feel good, but it will simply magnify the crisis over the long term by providing room for contractors and their government cronies to jack up costs even further [see Commentary #154 on C-130J for a case study of the elemental harmony of cost growth with crony capitalism].

References 1 and 2 to this commentary provide yet more evidence of the pressure building for a mindless spasm of defense spending at the expense of the soldiers and taxpayers.

In the first reference, George Wilson, a reporter who has always put the interests of the soldier first, describes the buildup of political pressure and argues that money is not the answer to the readiness problem. The second reference provides a good summary of the belated tepid admissions of this problem by the Pentagon's senior leadership. Note, for example, how Admiral Gehman is slowly changing his tune. Compare his remarks to the Washington Post to those reported in the Virginian Pilot in "Perception Gap or Credibility Gap Why There is No Light at the End of the Tunnel,." [See reference to Comment #129].

The real question facing America's defense policy as we enter the 21st Century, is not "How Much?" It is "How Spent?" And, it's high time we faced up to its implications.

[Disclaimer: In accordance with 17 U.S.C. 107, the following material is distributed without profit or payment to those who have expressed a prior interest in receiving this information for non-profit research and educational purposes only.]

References 1:

Navy Times Published: 08-17-98


There's good news in Washington these days for those who believe the Pentagon should get a lot more money. There's bad news for those who believe the Navy, Marine Corps, Army and Air Force are already spending too much on the wrong weapons.

At the moment, the Pentagon is on an allowance. The size of this yearly allowance was set last year by Democrats and Republicans in Congress in consultation with President Clinton. This year's allowance is $271 billion. The established allowances are supposed to hold through the year 2002.

But like parents who cave in when they hear their teen-ager complain that "I can't wear that old thing," a number of lawmakers now are willing to raise the Pentagon's allowance. Chairman Floyd Spence, R-S.C., of the House National Security Committee is chief among them.

Spence told me recently that he met with House Speaker Newt Gingrich, R- Ga., to enlist his support for raising the Pentagon's annual allowance by several billion dollars. If Gingrich would not go along, Spence told the speaker, then Spence and his House allies would vote down this year's budget resolution which sets limits on how much government departments can spend in a given year.

Gingrich, according to Spence, persuaded him not to mobilize against the budget resolution but instead to mobilize support for raising the Pentagon's allowance.

Spence has been trying to do this for months. "I told the chiefs (of the Navy, Army and Air Force) that they're part of the problem," he said, by declaring in public that the Pentagon budget is adequate and then complaining to him in private that it's not.

Spence said he has found a lot of emotional support in Congress for raising the Pentagon's allowance but needs votes to make it happen. For example, if just one senator raised a point of order against breaking the 1997 budget agreement to give the Pentagon a raise above the agreed-upon ceilings, or caps, it would take 60 votes to overcome the objection.

Given that and other obstacles, Spence said that packing a big defense spending raise into Congress' year-end continuing resolution this fall looked like "the best bet."

Such a resolution keeps the Pentagon and other government departments in business if Congress has not finished its appropriating by the end of the Congressional session.

If the resolution is needed, it no doubt would be a Christmas tree of dollars -- with some for everybody.

Such widespread and generous giving might well deter lawmakers from raising a point of order against the resolution containing more money for defense, allowing the appropriations measure to pass by majority vote.

However, there is no guarantee Spence's strategy will work this year.

Heeding the alarm

But next year and the year 2000, it looks virtually certain Congress will raise the caps for defense.

A steadily growing number of lawmakers are hearing and heeding the alarm bells sounded by military people below the Joint Chiefs of Staff.

Fresh evidence of this came on July 30 when the Senate passed a startling amendment offered by Sen. Kay Bailey Hutchison, R-Texas.

It says, among other things, that "it is the sense of Congress that defense appropriations are not keeping pace with expanding needs of the armed forces."

If a majority of senators indeed believe as they voted, how can they oppose providing more money for the Pentagon sooner or later?

There is also a warning for Clinton and Defense Secretary William S. Cohen in the Hutchison amendment about undercutting the military's main mission.

The amendment states, "It is the sense of Congress that the ongoing, open-ended commitment of U.S. forces to the peacekeeping mission in Bosnia is causing assigned and supporting units to compromise their principle wartime assignments."

The amendment directs Clinton to submit to Congress by June 1, 1999, a detailed report on the impact of the Bosnia mission on the armed forces, and on their ability to carry out the national war strategy of fighting two wars almost simultaneously.

I wish I could end this discussion here by saying I feel good about the Pentagon being virtually certain of getting a bigger allowance in the near future. But I can't.

Although I'm all for the troops getting more pay and better housing, only the Marine Corps seems to be looking the 21st century in the face.

I see the Navy, Army and Air Force squandering most of the extra money on a few super-duper Cold War weapons they don't need and cannot afford to buy in quantity or to maintain. The rest of their forces will grow dangerously old.

George C. Wilson is a former national defense correspondent of The Washington Post and author several books on military affairs.

Reference 2:

Military Readiness, Morale Show Strain

By Bradley Graham and Eric Pianin Washington Post Staff Writers Thursday, August 13, 1998; Page A01


The Marine Corps is using retreads on its armored vehicles. Rising numbers of Air Force and Navy jet fighters are being grounded by spare-parts shortages and maintenance backlogs, and pilots fed up with repeated duty in the Persian Gulf are bailing out of military service in droves. At Army training facilities, commanders report that units arriving for exercises have shakier combat skills than in years past.


Republican lawmakers have seized on any evidence of corroding military capabilities -- or, in the case of missile defense, unrealized capabilities -- to lambaste the Clinton administration for going too far in downsizing the armed forces and for committing U.S. troops to too many overseas operations. After taking control of Congress in 1995, Republicans added more than $20 billion to the Pentagon's spending plans in fiscal 1996, 1997 and 1998, before signing on to last year's budget agreement that held the line at about $270 billion in 1999 spending.


But defense experts on Capitol Hill and elsewhere are far from unanimous in thinking that money is the answer. Some argue that the Pentagon should be compelled to spend its already sizable budget more wisely by doing more to trim its billion-dollar wish list for new weapons systems, shutting more bases, relying more on reservists and tailoring units more closely to the kinds of peace operations that now predominate.

"We still have too much of our military aligned towards fighting a war and an enemy that doesn't exist anymore, and it's very difficult to make the transition," said Rep. John R. Kasich (R-Ohio), chairman of the House Budget Committee and a prominent critic of defense spending policies.


Many U.S. troops are busier than ever. Over the past decade, the Army has been used in 29 substantial overseas deployments, compared with just 10 in the four previous decades.


For the Air Force, the biggest problems have been spare parts and pilots. The overall "mission-capable rate" of Air Force aircraft, meaning the percentage of planes able to fly assigned missions, is at its lowest since the 1991 Persian Gulf War -- down 9 percentage points, to 75 percent.


"Each month that goes by leaves us more naked and vulnerable," said Sen. James M. Inhofe (R-Okla.), chairman of the Armed Services subcommittee on military readiness. Added Rep. C. W. Bill Young (R-Fla.), chairman of the House appropriations subcommittee that funds the Pentagon: "We are on a dangerous down-slope. . . . You just can't do more with less."


Some critics of U.S. defense policy say they are far less concerned about another "hollow force" than an increasingly "irrelevant" military incapable of thwarting future threats from international terrorists or well-armed renegade Third World countries.

Copyright 1998 The Washington Post Company

Reference 3:

Memo to William Lynn (reformatted)]

5 May 1994

Memorandum for Mr. Lynn Through Mr. Puscheck Mr. Hempley

SUBJECT: The Anatomy of Decline (Re: My presentations to you on 16 March, 26 & 28 April)

Thank you for the opportunity to present The Anatomy of Decline to you. As per your request, I am forwarding the slides; they should be viewed as a current snapshot of an evolving story. Although Parts II and III are not yet complete, the information in Part I is important enough to warrant immediate action. In this regard, I have the following comments and recommendations:

<#> You said you wanted a copy of the slides, because you could use some of them. I strongly recommend against a selective distribution of the information or any other reductionist impulse to use some of the "parts" without reference to the "whole." Part I describes how a pattern of mutually-reinforcing interactions among macroscopic and microscopic decision-making activities shapes economic and physical outcomes. Any attempt to use a part of this data set without reference to these linkages or the global pattern risks using information out of context. A person without access to the omitted information could easily interpret the data incorrectly and draw erroneous conclusions.

<#> You said you generally agreed with the data, but you were not sure you agreed with the way the data was assembled into the global description. Are you merely uncomfortable with my conclusions, or do you perceive serious errors of evidence or logic? If errors of evidence or logic exist, I will make the required adjustments, but I can not do this unless you tell me specifically what your concerns are.

<#> Finally, I want to reiterate the recommendation I made to you on 28 April: I am convinced that the hydra of mismatches inside mismatches described in The Anatomy of Decline is the most important resource allocation problem now facing senior managers in the Defense Department. It must be remembered, however, that The Anatomy of Decline is the work of one individual (with contractor support for data base management). It needs to be examined critically before we act on it. I strongly recommend that you task the CAIG to examine the procurement spaghetti diagrams to determine if these charts contain errors sufficiently large enough to obviate my analyses. This critical review could be easily accomplished in a few weeks--the computations are straightforward, my analytical methodology is readily available, and the members of the CAIG specialize in analysis of learning curves. Of course, the CAIG's critique should also be open to critical review. If my data passes this test, we need to take immediate action to clean up the FYDP accounting system.1/

Assuming my analysis is correct, why is immediate action necessary? There are at least two reasons: the first relates to decision making and rational planning, and the second relates to the constitutional theory of governance.

First, if we do not come to grips now with the problems posed by the hydra of mismatches, I believe we are setting the stage for a readiness debacle like that experienced in the late 1970s or another round of cost-driven force reductions or both.2/ Without changing business as usual, the only alternative in the medium term would be to pump the defense budget back to cold-war levels, but my analysis also shows how this reaction would set the stage for a recurrence of even larger problems over the long term. Moreover, these "unplanned" increases in the defense budget would have the effect of magnifying the deficit unexpectedly, possibly forcing tax increases or budget reductions in other departments of the federal government. The Anatomy of Decline shows why the hydra of mismatches inside mismatches is the source of these emerging pressures and why this hydra is a self-inflicted wound, created by a repetitive pattern of cynical and deceptive behavior. If we do not take immediate action, pending policy decisions, like those in the upcoming program review, will remain disconnected from reality and be yet another exercise in futility, overridden and forgotten by the "unexpected" events of the ensuing months.

Second, the hydra of mismatches is an issue that goes to heart of democratic governance. The central ideal of our government is that it exists for the people and by the consent of the people. Implicit in this idea of consent is the absolute requirement that government be accountable to the people. The Founding Fathers made the ideas of accountability and consent a central premise of their constitutional design for a government ruled by law not men. When we swear unconditional allegiance to the Constitution, we voluntarily embrace a legal commitment to make our activities accountable within the constraints of the law. In the case of the hydra of mismatches, the implication of our oath is clear: each member of the federal government has an affirmative duty to root out and remove any false, misleading, or delusional information from the government's bookkeeping system. Our top priority must be to detoxify the accounting system immediately. To act otherwise makes a mockery of the principle of accountability and violates our oath of office. The proposal for shock therapy attached to the end of the briefing outlines a strategy for beginning this important task.

Very respectfully,

Franklin C. Spinney

End Notes (Reformatted from Footnotes in original)

1. The mismatches in the FYDP accounting system seem to be part of a global breakdown in the DoD's financial management systems, including, for example, the phenomenon of "unmatched disbursements," which sources in GAO say may exceed $40 billion and the phenomena of "negative unliquidated balances" and "disbursements in excess of obligations," which were described by the DoD Comptroller in a 31 March 1994 memorandum.

2. The rumor (if true) that the Air Force POM will reduce the BUR force of 20 TFWs to 18 TFWs would be a typical example of a cost-driven as opposed to threat-induced force reduction.

Attachment: The Anatomy of Decline (Briefing Slides) [not attached to this message]

Defense and Economics