The Coming Military-Industrial Complex Battle

A Senate panel that I assume doesn't include Evan Bayh or Ben Nelson passed unanimously a bill to rein in the contracting process at the Pentagon. There's a lot to like about this bill, which is co-sponsored by John McCain.

The bill would require the Pentagon to do more extensive engineering studies before embarking on new weapons programs and to rebuild its oversight staff, which was sharply reduced after the end of the cold war.

It would create a position for a project-testing director at the Pentagon and make it easier to end programs that exceed their original budget estimates by 25 percent.

Senator Carl Levin, a Democrat from Michigan who is chairman of the committee, said before the vote on Thursday that the changes were meant to be “tough medicine.”

Defense Secretary Robert M. Gates has been scrutinizing the most troubled programs and is expected to propose cuts in several major programs soon.

The Government Accountability Office, the auditing arm of Congress, reported this week that nearly 70 percent of the Pentagon’s 96 largest weapons programs were over budget last year, for a combined total of $296 billion above the original estimates.

Obviously, it's easy to change the PROCESS for procurement - a fair bit of the bill concerns realistic cost estimates (read: higher ones). The proof of whether Congress can really push back against out-of-control contracting comes when Bob Gates releases his Pentagon budget.

Reporting from Washington -- Defense Secretary Robert M. Gates will announce his plans for a sweeping overhaul of the defense budget on Monday, Pentagon officials said today.

Gates will announce his decisions first in telephone calls to congressional leaders Monday morning and then in an afternoon news conference.

Gates has been working for weeks on an overhaul of the defense budget and has been contemplating tough decisions on whether to cancel the Air Force's F-22 fighter plane, Navy shipbuilding programs, the Army's Future Combat System and a host of other weapons programs.

In an unusual move for the Pentagon, Gates will announce his budget recommendations before shipping the formal recommendation to the White House's Office of Management and Budget.

"It ... reflects the magnitude of the decision," said Pentagon press secretary Geoff Morrell. "These aren't changes on the margins. It is a fundamental shift in direction."

Already Holy Joe and his pals in the GOP are pushing back against this. They cannot conceive of an armed forces without bloated budgets the size of the rest of the world combined. It doesn't matter that America can't afford it, because military spending is magic.

This will be an epic fight.

The Cold War Ended 20 Years Ago

Overshadowed by the continuing (and perfectly appropriate) furor over AIG bonuses, the Obama Administration appears to be readying the first assault on the military-industrial complex since Dwight Eisenhower coined the phrase.

Now, as the only Bush Cabinet member to remain under President Obama, Gates is preparing the most far-reaching changes in the Pentagon's weapons portfolio since the end of the Cold War, according to aides.

Two defense officials who were not authorized to speak publicly said Gates will announce up to a half-dozen major weapons cancellations later this month. Candidates include a new Navy destroyer, the Air Force's F-22 fighter jet, and Army ground-combat vehicles, the offi cials said.

More cuts are planned for later this year after a review that could lead to reductions in programs such as aircraft carriers and nuclear arms, the officials said.

As a former CIA director with strong Republican credentials, Gates is prepared to use his credibility to help Obama overcome the expected outcry from conservatives. And after a lifetime in the national security arena, working in eight administrations, the 65-year-old Gates is also ready to counter the defense companies and throngs of retired generals and other lobbyists who are gearing up to protect their pet projects.

The article claims that other Defense Secretaries have tried and failed to end the defense industry welfare schemes. I think this Defense Secretary is better positioned. First of all, his service for both George Bush and Barack Obama gives this a bipartisan sheen. And Obama has folded the issue of procurement into his overall budget strategy. Finally, this is likely to happen because Gates doesn't come at it with the attitude of a budget-cutter. Steve Hynd is right to note that this will not signal the drawing down of the military budget, at least not in the short term.

This isn't about reducing the overall military budget - it's about repurposing it. While shiny toys are to get the axe (presuming Gates and the Obama administration can overcome recalcitrance from lawmakers and officers as well as intense industry-funded lobbying) there's still going to be a lot of stuff to spend lots of money on.

The U.S. Army and Marines are to collectively add about 92,000 personnel, an increase of about 12% in manpower but since most will be slated for active duty combat brigades it is likely to mean more like a 20% ($30 billion) increase in annual running costs and an initial stand-up bill of about $80 billion. Standing up these new troops will be far better stimulus spending than any other kind of defense spending but don't expect to get clear answers about costs from the Pentagon or White House. Those figures are back-of-the-envelope estimates based on what is known of current costs but no military department has ever done a full assessment of the cost of sustaining its operations so they have to be estimates.

Then there's all the other military spending Obama and Gates intend - the transformation of the military into a COIN force as promised on WhiteHouse.Gov: "civil affairs, information operations, and other units and capabilities that remain in chronic short supply; invest in foreign language training, cultural awareness, and human intelligence and other needed counterinsurgency and stabilization skill sets; and create a more robust capacity to train, equip, and advise foreign security forces." None of that is cheap, especially when you're talking about tens of thousands of people to be trained. Add in "greater investment in advanced technology ranging from the revolutionary, like Unmanned Aerial Vehicles and electronic warfare capabilities", increasing the number of Maritime Pre-Positioning Force Squadrons and investing in more small ships to see even more savings being swallowed up by the military machine instead of going to solve other problems. Add in the expenses for Iraq until withdrawal and the expected one to two decades in Afghanistan that no COINdinista really wants to talk about, neither of which will be funded by supplementals anymore, and the bill could easily swallow any savings from cutting F-22 and other big-ticket programs.

For Gates, this is not about reducing the military budget, but about transforming it. I agree that the military should be constructed to meet modern challenges, and costly weapons systems do little in that respect. However, he will not be leading the Pentagon forever. And the labor-intensive weapons systems will be much harder to phase out than a reduction in force capacity or winding down wars. At the end of the day, the United States will still spend more on its military than any other nation combined, including too much on functions that could be performed by the State Department. The table would be set, then, for medium- and long-term reductions in military budgets. I'm happy to have Gates doing the heaviest lifting in the near term. Ultimately, defense cuts are intimately tied to ending the culture of interventionism in this country, and stopping the constant production of annihilation systems is a necessary precursor.

Andrew Exum has more.

Bipartisan Military Spenders

Here's yet more examples why Obama's fight to end wasteful military spending and corrupt federal contracts is going to be so difficult, because in a very real sense it means taking on the heart of the Washington establishment itself.

When President Obama promised Wednesday to attack defense spending that he considers wasteful and inefficient, he opened a fight with key lawmakers from his own party.

It was Democrats who stuffed an estimated $524 million in defense earmarks that the Pentagon did not request into the 2008 appropriations bill, about $220 million more than Republicans did, according to an independent estimate. Of the 44 senators who implored Defense Secretary Robert M. Gates in January to build more F-22 Raptors -- a fighter conceived during the Cold War that senior Pentagon officials say is not suited to probable 21st-century conflicts -- most were Democrats.

And last July, when the Navy's top brass decided to end production of their newest class of destroyers -- in response to 15 classified intelligence reports highlighting their vulnerability to a range of foreign missiles -- seven Democratic senators quickly joined four Republicans to demand a reversal. They threatened to cut all funding for surface combat ships in 2009.

Within a month, Gates and the Navy reversed course and endorsed production of a third DDG-1000 destroyer, at a cost of $2.7 billion.

I think the whole earmark "problem" is completely overblown, distorting because many of the earmarks are worthwhile projects, and overall they represent a tiny fraction of the overall budget. But it's undeniable that Democrats and Republicans are heavily invested in the military-industrial complex, just as much as defense contractors are invested in them. That's just a fact.

Democrats may talk about it differently, not as much about the need for a "strong national defense" but about the jobs these projects bring to their districts or their states. Either way, it's a symbol of the same corruption. Weapons producers give lots of money to politicians, politicians make sure they get lots of business from the government. And because large weapons systems like the F-22 Raptor are spread out among 44 states, there is enough support to basically maintain the status quo. There's also a sunk cost problem, when billions have already been spent on a lot of these useless programs. Some of them aren't even requested by the Defense Department.

Still, there is hope. When Raymond Odierno cancels contracts on bases in Iraq, you get the sense that the military is coming around to the need to keep down costs. Now we have to get Congress to think the same way.

Tackling Waste

This is a good way for the Obama Administration to deflect the rise of the fiscal responsibility scolds. There is plenty of room for cuts in the federal budget, but they are typically places that the so-called "moderates" don't want to go. In that Politico tick-tock Ben Nelson objected to reductions in Big Ag subsidies because, well, he's from a farm state. And there are plenty of these moderates with defense contractors in their districts who won't like the effort to clean up that process.

President Barack Obama said on Wednesday the U.S. government was paying too much for things it did not need and ordered a crackdown on spending he declared was "plagued by massive cost overruns and outright fraud."

Obama said wasteful spending was a problem across the whole government but he zeroed in on the defense industry after earlier citing a project to build a new presidential helicopter fleet as an example of the procurement process "gone amok."

"The days of giving defense contractors a blank check are over," Obama told reporters.

He ordered a reform of the way the government did business, a move he said would save taxpayers $40 billion a year and help cut the budget deficit, which he has forecast will hit $1.75 trillion for the 2009 fiscal year.

$40 billion a year in savings is more than every federal earmark over the last two years. At least those actually create something. Procurement overruns are just a handout.

If you want spending cuts, there are plenty of places to cut. So, it's up to the moderates to decide whether they believe in fiscal responsibility or not.

...Spencer Ackerman has quite a bit more, and it's a pretty big deal.

Obama today issued a memorandum to the heads of all the executive departments agencies directing them to restrict no-bid contracts; to rein in outsourcing of “inherently governmental activities”; and to, if necessary, cancel wasteful contracts outright. The crucial paragraph, even if it’s written in bureaucratese, particularly calls out the Defense Department:

"I hereby direct the Director of the Office of Management and Budget (OMB), in collaboration with the Secretary of Defense, the Administrator of the National Aeronautics and Space Administration, the Administrator of General Services, the Director of the Office of Personnel Management, and the heads of such other agencies as the Director of OMB determines to be appropriate, and with the participation of appropriate management councils and program management officials, to develop and issue by July 1, 2009, Government-wide guidance to assist agencies in reviewing, and creating processes for ongoing review of, existing contracts in order to identify contracts that are wasteful, inefficient, or not otherwise likely to meet the agency’s needs, and to formulate appropriate corrective action in a timely manner. Such corrective action may include modifying or canceling such contracts in a manner and to the extent consistent with applicable laws, regulations, and policy."

Clearly, this has applications far beyond the Pentagon. But the list of big-ticket defense items that have experienced huge cost overruns is a long one. Future Combat Systems in the Army; the Littoral Combat Ship in the Navy; the Joint Strike Fighter in the Air Force — all of these programs, near and dear to the services, have run massively over budget. If I was a lobbyist for Lockheed or Boeing, I’d be dialing my contacts in the Pentagon and the Hill to figure out what the prospective damage to my company was. And then I’d come up with a strategy to fight this forthcoming Office of Management and Budget review.

Here's the memorandum. In it, the President notes that contracting costs have doubled since 2001 (well, that's an interesting date to start with), with increases in no-bid contracts and overruns. The cost-plus system actually creates an incentive to contractors to spend taxpayer money lavishly. We're talking a lot of money.

A GAO study last year of 95 major defense acquisitions projects found cost overruns of 26 percent, totaling $295 billion over the life of the projects. Improved contract oversight could reduce such sums significantly.

Obama really took a shot across the bow today, not only to end waste and abuse, but to END THE PRIVATIZATION OF GOVERNMENT FUNCTIONS and the greed it engendered.

However, the line between inherently governmental activities that should not be outsourced and commercial activities that may be subject to private sector competition has been blurred and inadequately defined. As a result, contractors may be performing inherently governmental functions. Agencies and departments must operate under clear rules prescribing when outsourcing is and is not appropriate.

Great work. But we have to make sure there's a good follow-through. One of the point people on this procurement reform is deputy Secretary of Defense Bill Lynn, who was a Raytheon lobbyist. The military-industrial complex is not going to be easily calmed or dismantled. But we now have the words of the chief executive, who is willing to fight.

The Day The Music Died

The worst part about today's Daschle/Killefer twin killing is that Obama was scheduled for interviews with every major news channel today, and instead of talking about what he wanted to talk about, the stimulus package and why we have to pass it, he instead took confessional with the media grand poohbahs.

Barack Obama on Tuesday abruptly abandoned his nomination fight for Tom Daschle and a second major appointee who failed to pay all their taxes, fearing a lingering ethics dispute would undercut his claims to moral high ground and cripple his presidency in just its second week. "I screwed up," Obama declared.

"It's important for this administration to send a message that there aren't two sets of rules — you know, one for prominent people and one for ordinary folks who have to pay their taxes," Obama said near the end of a day of jarring developments, little more than 24 hours after he had said he was "absolutely" committed to Daschle's confirmation.

"I'm frustrated with myself, with our team. ... I'm here on television saying I screwed up," Obama said on NBC's "Nightly News with Brian Williams." He repeated virtually the same words in interviews with other TV anchors.

It's great that he can admit mistakes - certainly he's a hell of a lot more of a human being than George Bush ever was. But there's an opportunity cost here. The headlines were about Obama's contrition and falling on the mercy of the court. Nothing about how the reports that the stimulus doesn't spend out enough money in the first two years were bogus and wrong. Nothing about how spending is stimulus and the conservative Senators saying otherwise don't know what they're talking about. Nothing about how tax breaks are, conversely, ineffective as stimulus, despite the bleatings of the right. Nothing about how the economy is dead and this bill is urgent, and the people who broke the economy aren't the ones who can fix it.

What economic talk there was in the interviews was completely disheartening.

President Barack Obama said on Tuesday he did not want to send a protectionist message on world trade and would look at altering "Buy American" language in an economic stimulus bill coming out of Congress.

"I think it would be a mistake ... at a time when worldwide trade is declining for us to start sending a message that somehow we're just looking after ourselves and not concerned with world trade," Obama said on the Fox television network.

This is the typical double standard that America is held to, never allowed to even use normal domestic sourcing standards for our own industries, while the rest of the world goes along protecting their industries to the tune of trillions in subsidies and implementing their own stimulus plans using only domestic materials. It's bullshit and this idiotic study from the Peterson Institute for International Economics - yes, that's Peter G. Peterson's outfit, the right-winger who bankrolled I.O.U.S.A. - which claims that a $825 billion dollar recovery package would only yield 1,000 iron and steel jobs, proves it's bullshit. Corporate lobbyists still rule this country and they rule this President's economic team, sadly.

Meanwhile, in the Senate, where Republicans have been screaming that the package needs more infrastructure spending, they... blocked $25 billion more in infrastructure spending while giving a tax break to consumers to buy cars even though they can't afford cars because they don't have a fucking job. It's a bloodbath in the Senate and it may only get worse.

Barbara Boxer and infamous global warming denier James Inhofe will present an amendment to the Senate stimulus plan that could funnel as much as $50 billion in additional funding to highways, Streetsblog has learned. Friends of the Earth tells us that Boxer's staff confirmed she will introduce the amendment, which could bring the total for highways close to $80 billion, exactly the figure Inhofe demanded last week in a letter to the Committee on Environment and Public Works.

The amendment is expected within the hour, according to Kate McMahon of Friends of the Earth. Inhofe press director Marc Morano didn't deny the number, but said "a lot is going on today and I'll confirm with you shortly."

While Republicans chip away at ridiculously stupid side issues, Senate Democrats are conceding that the bill has to shrink.

Democratic leaders conceded they may soon be obliged to cut billions of dollars from the measure. "It goes without saying if it's going to pass in the Senate, it has to be bipartisan," said Sen. Dick Durbin of Illinois, the second-ranking Democratic leader, adding that rank-and-file lawmakers in both parties want the bill's cost reduced.

One Democrat, Sen. Ben Nelson of Nebraska, said he hoped for reductions "in the tens of billions of dollars."

And Obama is doing nothing but enabling the right's rhetoric by expressing frustration about the bill being a "Democratic wish list". And the one chance he had to message on the bill was caught up in apologies over Daschle.

Man, today is a horrible day for progressive politics.

Transforming The Domestic Economy

The rage over the "Buy American" provisions in the economic recovery package are symptomatic of the entire reason why we're surging toward economic disaster. Let's go over this again: provisions like this are CURRENT LAW for federal procurement. When the federal government purchases, they purchase American goods. Just like every other country does. China is building a huge railroad with their initial stimulus package made entirely out of Chinese products. Every country does this. It's not controversial in the least.

Yet, it's only controversial when America, who has been selling out their industrial and manufacturing base for so long that multinationals expect nothing less, tries to implement the exact same policy they and the rest of the world have been doing for decades. This is ridiculous.

Last week the House of Representatives version of the bill stirred alarm in the EU and Canada by demanding that all iron and steel bought to rebuild the country’s crumbling infrastructure has to be American made.

Anxious lobbying by the EU has fallen on deaf ears as explicitly protectionist language was added to the Senate bill leaving it open to legal challenge under the rules of the World Trade Organisation (bullshit, federal procurement has never been and will never be subject to these trade agreements -ed) [...]

Big multinational corporations, including Caterpillar and General Electric which depend on foreign manufacturing plants, have launched a rearguard attempt to remove the Buy American provisions from the bill. The Emergency Committee for American Trade, another lobby group, is sending out shrill alarms that the stimulus bill could trigger a trade war that would ultimately damage American interests.

“Protectionism is the crackcocaine of economics. It may provide a high. It’s addictive and it leads to economic death,” said Richard Fisher, president of the Dallas Federal.

The Smoot-Hawley Tariff Act was put into place by corporate execs who wanted their companies to profit from the Depression. This measure is being opposed by the ancestors of those corporate execs who want to profit again. Any parallel between the two is completely absurd. It's the inverse.

Which is why even the free-traders in the Obama Administration are zipping their lips about these provisions.

Free-traders on President Obama’s economic team are suppressing concerns over Buy American provisions in the stimulus, derided as protectionist by corporate lobbyists.

Treasury Secretary Timothy Geithner and Obama’s top economic adviser, Lawrence Summers, have raised no objections to tough provisions in the House stimulus bill intended to ensure that U.S. iron and steel are used in any infrastructure projects, such as the construction of highways and bridges, even if they add to the project’s cost.

Nor have they complained about a provision in the Senate bill that would go much further by calling for the use of U.S. iron, steel and other manufactured goods in infrastructure spending in the stimulus.

Some interests have also called for language to ensure that any spending on health technology in the stimulus goes to U.S. firms, and not those in India.

Support in both chambers means the iron and steel provisions, at a minimum, seem likely to be included in the bill sent to President Obama’s desk, despite an outcry from business groups and foreign governments that argue they could set off a new trade war.

Seriously, tough crap. The bottom line is that creating American manufacturing jobs multiplies the stimulus, and goes a long way to transforming what's so sick about this economy. We can leap from bubble to bubble forever, creating enormous pain and suffering in the down times, or we can build an economy that works, based on making things, and selling things that you make because people want to buy them, and because they can afford them because they have a job with a living wage. More from John Judis, who is absolutely correct that this would finally spur our huge global trade deficit that has been killing the economy for years.