Sorry, I'm late.
I had to stop by the Wax Museum again and give the finger to FDR.
We know Al-Qaeda, Zawahiri, is supporting the opposition in Syria.
Are we supporting Al-Qaeda in Syria?
It's a proud day for America.
And by God, we've kicked Vietnam syndrome once and for all.
Thank you very, very much.
I say it, I say it again.
You've been hacked.
You've been took.
You've been hoodwinked.
These witnesses are trying to simply deny things that just about everybody else accepts as a fact.
He came, he saw us, he died.
We ain't killing they army, but we killing them.
We be on CNN like Say Our Name been saying, say it three times.
The meeting of the largest armies in the history of the world.
Then there's going to be an invasion.
All right, y'all.
Introducing Dave Lindorf, who is a contributor to The Nation and says here, formerly covered Hong Kong and China news for Businessweek back in the 1990s.
So that would explain some of the expertise involved in reporting this story for The Nation, exclusive, the Pentagon's massive accounting fraud exposed.
Welcome to the show, Dave.
How are you doing?
Thanks for having me on.
Very happy to have you here.
And hey, this is interesting.
So, I mean, we all know that the budget is out of control and that if you throw in the VA and the nukes and the Department of Energy and everything, it's right around a trillion a year we spend on militarism here.
And we also all know that they never account for where all the money goes.
But you actually really did figure out a whole new thing here.
A whole new facet to the story of how this all works and or doesn't work at the Pentagon here.
And you have the anecdote even, which is, I think, somewhat famous of Donald Rumsfeld from September the 10th, 2001, saying, hey, there's $3 trillion missing.
And people said, missing?
Sounds like embezzled, but $3 trillion sounds like a lot.
And what's the explanation for that?
And then, of course, there's an attack the next day.
And no one in power anyway ever mentions it again, I don't think.
No one in the media did either, in the mainstream media.
It was a big story and then it disappeared.
Right.
And now there are a lot of conspiracy theories about that, which it seems like, hey, embezzlement is a crime.
So right there, somebody ought to be charged with conspiracy, something.
But also, you know, and I'm not sure who all should get the credit for reporting this.
I just know it from a long time ago that really a big...
And I forget if you mentioned this in your piece, you may well have, about Rumsfeld was really using this as a cudgel against the officers.
And he was saying, you know, the real sheriff, civilian authority is in town.
He'd been secretary of defense before and he had real plans for, you know, whipping these generals into line.
And he was hitting them over the head with their bad accounting practices so that he could accomplish his transformation of the military and promoting more special operations forces and less infantry divisions and these kinds of things.
That was his priority at the time.
But anyway, that was part of it.
You know, that's possible.
I think, though, that the reason I included it in the story is it showed that, you know, it's possible.
I don't know if it's true, but it's certainly possible on the evidence of Rumsfeld, who was a, you know, classic micromanager, that even people in the top ranks of the Pentagon don't know what the hell this all is about.
You know, this could be something that's been going on in the Pentagon for decades at the mid-levels to keep things all opaque.
Because, you know, frankly, I was just talking with somebody.
I was saying, I don't think a guy like Mattis particularly gives a damn about the Pentagon's accounting.
It's not a priority item for the guy.
And, you know, if there's a lot of fraud going on in the accounting and the books, and they're working the magic of increasing the Pentagon's budget every year, why would anybody look into it at the Pentagon?
Right.
Yeah, why do they care?
I think there was a CIA report one time that said the national debt was something to worry about, but I can't think of any DIA reports that said that.
None of these guys have ever had a job in their life.
What do they know about accounting or anything?
Why do they care about that?
It all comes straight out of our paychecks to their accounts, so they're not too worried.
And here was the thing, too.
They had half-trillion dollar budgets through the 90s.
They were wildly inflated still, even after the Cold War and through the Clinton years.
So $3 trillion does sound like a lot.
But you explain in here where those inflated numbers really come from.
As bad as they are at misspending our money, they're not as bad as they claim to be.
Well, I think they are as bad as they seem to be, but not in the way that people have suspected.
You've seen these numbers and wondered about them.
I know when Mark Skidmore, who's the professor at Michigan State University, who gets the credit for having tallied up all the numbers— and by the way, there may be more, because he only was able to look at the Office of Inspector General numbers at the DOD, and they only audit a portion of the Pentagon budget each year.
That's an internal group auditing their budget.
And they would audit, say, the Army budget in 2015, the Navy budget in 2017, the Marine budget—I can't remember what year they did the Marine budget.
But they'll do a unit, and they'll do other parts of the Pentagon budget, too, at different years, because they've got limited staff.
And these are what they found in those limited audits— $21 trillion in 20 years, from 1998 to 2015.
So almost 26, 25 years.
But anyway, there's other parts of the Pentagon budget that haven't been looked at.
So it might be double that, the number of plugs.
Mark was speculating that some of this significant amount of this could be secret money flowing to the Pentagon that's unappropriated.
And we've gone back and forth on this in discussions.
The problem is that they can't be real money in any significant way, because if the Pentagon were spending trillions and trillions of dollars in— or even $1 trillion a year in unaccountable spending, that would have a huge impact on the economy, and we wouldn't have even had a recession.
You know, it would be— Wow, I love that.
It would have gone amok.
And if anything, what we'd have is a lot of inflation, which we haven't had, because of the amount of money being poured in, and the printed money that wouldn't be backed by anything.
So I kind of doubt that any significant amount of it is secret money, but I wouldn't deny that the accounting is so gimpy that it's possible some small amount of it is money that's bypassing the congressional appropriations process, which would be totally unconstitutional.
Right.
But then— OK, I mean, but what you're saying in here, though, really, is you came up with the simplest explanation, a reasonable explanation for why it seems like they're missing all this money, and that's really because, for their own bureaucratic purposes, it makes sense for them to claim that they've spent all of this money that they never had in the first place and that they've never spent in an attempt to get more in their budget next year.
Everybody, well, my age, is familiar with that old Michael Douglas movie, Falling Down, where he's the defense contractor who gets laid off when there's no more Cold War, and now he's got to go get a real job, and so he's all mad.
And then he finds the guys who were tearing up the freeway, and he makes them admit that the only reason they're blocking all the traffic and closed down all the bridges at this big interchange is just because they have to spend all the money in the budget so they get more next year.
But you're saying, so this is that same phenomenon, but they're inflating even more, vastly more, than they even expect to really get.
Yeah, and there's two things about that.
One is that it's been done before, as Chuck Spinney told me.
In 1980, they built up a slush fund of $100 billion pretty quickly by overstating the amount of inflation that they needed to get advanced in their budgets.
They were putting a 30% inflation adjustment in all their budget figures back in the 80s.
And we did have high inflation back then.
It got, I think, as high as 12% one year, but nothing like 30%.
And they were pocketing the difference that was unspent and building up this unaccountable surplus that they could use for things like Grand Contra and stuff.
So I think it's quite likely that that's what they're doing now.
They say they spend more than they do.
Congress then appropriates a higher budget for the next year based on believing that they spent all that money that they gave them the prior year.
And then the Pentagon takes the unspent money and shoves it into corners where it can't really be spotted.
And they've got money that they can use without any oversight for whatever dark purposes they might have.
But I do know that I was told that one of the most corruption-prone areas of the Pentagon budget is contractor support, which is – contractor support funds are the funds that go to, say, take Lockheed Martin that has this $1.5 trillion Flying Turkey, the F-35 project, that has contractor support that's pushing the cost of maintenance of those planes for the life of the project up to now another $1.5 trillion.
And the Air Force, I think, last February said that they couldn't figure out what Lockheed Martin was doing with the contractor support funds.
Which would relate to this kind of hokey accounting.
And they said that because of the rising costs of the plane, they were considering cutting their order by a third, which doesn't bother Lockheed Martin because they just raised the price per plane.
But it means that instead of a $1.5 trillion plane, I mean a $130 million unit price on the plane, it may go up to $200 million per plane.
So there is all of that going on.
I think part of this could be shoveling money to the defense industry.
They get right now about $350 billion a year in Pentagon budget money.
And the Pentagon brass loves to give them money because they later get to be on the boards of those things when they retire.
As we've covered on the show extensively too, even the biggest of these corporations like General Atomics and Lockheed and General Dynamics, they spend measly tens of millions of dollars, maybe hundreds of millions of dollars a year on lobbying Congress, bribing Congressmen.
In other words, chump change.
Nothing.
And then they get to engage in scams like you're talking about where, oh, you want fewer planes?
Well, we're going to charge you the same price for half as many planes then.
They do the same thing with submarines.
Inflating the order and then cutting it.
It's a great return on investment.
Absolutely.
And of course with the F-35, it'll never be combat ready.
It's not ever meant to be.
The whole thing is a turkey in the first place and everybody knows it.
And everybody's known it all along and they keep going with it anyway.
I did a piece on how they had one F-35 run a sortie against some Taliban fighters.
It's like, what?
This was not a plane that was designed to be attacking Stone Age fighters with AK-47s.
That same week they were like, yay, F-35 does first combat sortie.
And then that same week, F-35 falls out of the sky in North Carolina or one of those.
They had to ground them all to check and see why this happened.
It was some kind of hose that broke.
No, it's a terrible plane.
I think Spinney called it a whole, I may be quoting him on the wrong plane, but I thought it was this one he was referring to, that it was an assembly of spare parts lying in formation.
That's funny.
And that sounds like him.
I mean, and the F-22 is a joke, but at least it can get off the ground and fly in the rain.
Apparently, I don't know.
Except that they left 17 of them in the tarmac in Florida when the hurricane came and they all got destroyed.
There's government planning for you right there.
You know there's a storm coming.
No, don't worry about it.
Jimmy's in charge of that, not me.
It's fine.
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And patreon.com slash scotthorton show.
Anyway, so now explain to us about the plugs and the nippering and the new vocabulary words here.
Yeah, no, these are terms of art in the Pentagon only.
They're not accounting terms.
But the plugs are where these guys, they're the Pentagon budgeteers and accountants.
They're just bookkeepers.
There's this army of these guys in Indianapolis at the Defense Finance Accounting Service who do all the Pentagon's accounting.
And they just plug in numbers when they're doing the books without any supporting documentation.
And sometimes there is some supporting documentation.
And actually the OIG reports that it gets removed and it's erased or whatever.
So these are like untraceable numbers.
And they just paste them in.
And nobody ever gets fired for that.
They just continue to do it.
And I think it escalates, too, because some of the numbers are to make last year's ending numbers match with this year's starting numbers.
So once they are out of whack, they keep getting more out of whack.
So those are the plugs.
And it's a very good descriptive term.
The money just gets plugged in.
Money numbers get just plugged in.
And by the way, it gets plugged in on the asset and liability side.
So there's a sort of a cancellation.
Like the one I cited in the piece, there was 900 in the Army's $122 billion budget.
There was an entry for $974 or $24 billion in accounts receivable, which means bills due to be paid.
And a $724 billion fund transfer from the Treasury to the Army's budget.
And that's pretty weird because the Army's budget is only $122 billion.
So I tried to trace that out, and there was no indication at Treasury that that ever left Treasury.
So I think it was a made-up number.
You know what seems strange, though, is if they're coming to the Congress every year and saying essentially that they've spent $10 trillion and they need another $10 trillion, when everybody knows that they couldn't possibly have spent that much and that, no, they're not getting that much next year, they still keep the round number for the DoD in the $600 to $700 billion range, and it's not going too far above that for now.
So it seems like, I guess, the accounting, all of this is just internal inside the Pentagon, but it's for the purposes of intimidating the Congress into giving them more.
But they're not asking for that much more.
So help me understand that.
Well, I think part of it is that these financial statements with the weird, you know, wacky numbers in them do go to Congress.
It's an indication of the complete disinterest that the Armed Services Committees of the House and the Senate have in actually doing oversight of the Pentagon that nobody asks questions and says, what is this $6.5 trillion number here?
Or this $900 billion item, or I guess it was $97 billion in the $122 billion Army budget.
Nobody asks questions.
And that was one of the things that made Grassley stand out to me is that he actually is saying, what the hell is going on here?
Why aren't you guys having an auditable budget?
And nobody else even asks.
So, I mean, I've been trying to get – I've worked on this article for several months.
I was trying to get Beto O'Rourke, who was on the House Armed Services Committee, Tulsi Gabbard, Bernie Sanders, who is talking about Pentagon waste all the time.
And none of them were coming in to talk with me.
Nobody made the time to talk to me about this story.
Now I'm trying again.
Now that the story is out, maybe they'll say something.
I don't know.
I think people are scared of the number.
It's also true that in the years – like the article I did for FAIR two years ago was really about how there's this weird number, and nobody in the mainstream press is reporting it.
And I thought that was strange because it seemed to me, okay, it is a real number.
It's a number that is being reported by the OIG.
Why isn't the New York Times or the Washington Post asking questions about it?
And I think what's happened is that – and maybe this is part of – by design by the Pentagon – that the numbers are so screwy that the mainstream press is afraid of it.
They're afraid to be accused of being tinfoil-headed conspiracy theorists, which is the worst thing you can say to a New York Times editor or a Washington Post editor.
It takes somebody who has no shame or self-respect like me to ask the question.
And now that we have the article out and it's well-documented and with named sources saying, yeah, these are real and the Pentagon's budgets are garbage, I was thinking maybe that the mainstream press would pick it up, but they have not.
Yours and the best – the closest to mainstream we got was The Takeaway, which did a great interview on it, but nobody else is picking up on it.
Nothing from the Times, nothing from the Post, nothing from the L.A. Times.
Nowhere.
It's just not in the mainstream press.
No TV.
You'd think somebody would be doing something.
I even thought that the Times would have maybe moon-landing-sized headlines, Pentagon fails first audit, but that didn't even make the first page.
Yeah.
And by fails means – I mean, really, I think the way you're describing here is they failed to even do it.
Basically, the accounting firm came in and said, well, we spent a year looking at it and we don't know where to begin, and so we got nothing for you.
They failed to have an audit.
That's incredible.
It's sort of Enron on steroids.
The typical situation with an audit is that you have, say, General Electric, and they'll have an audit, and the outside auditor that they have to have every year on quarterly and annual financial statements will write a comment letter along with reviewed documents, and it has to be published in their annual report.
They have this comment letter saying that we disagree with X, Y, Z in the audit.
But basically, the numbers are there, and you can look at them, and you can look at the one that they question and figure out why they're questioning it.
But with the Pentagon, they had 1,200 guys from a bunch of the top audit firms in the country at a cost of $900 million spent a year to cover the Pentagon's budget, and they couldn't do that.
They couldn't come up with a budget with comment letters.
They had to just provide a list of thousands of deficiencies that need to be fixed before they can really do an audit because the numbers are so out of whack.
And that, I mean, even when you get one comment letter on an audit, it makes a company's stock tax a tank, a public stock.
So what the hell this means with the Pentagon, if they were a private company, they would be junk bond status, and their stock would be down in the toilet.
Well, like you said earlier, they're just whistling past the graveyard.
They don't really know what these numbers are or care.
A mad dog, Mattis, he's not thinking about that.
And meanwhile, you know, we're left with the reality that half of our taxes, 54% of our taxes go to pay for the Pentagon, and we don't know what the hell they're spending it on.
Well, and another huge portion of it is just to pay interest on the debt, which is taken out in order to pay the Pentagon as well.
So calculate that in.
We're all funded on debt.
For just regular working class or middle class people, where every bit that they are taxed in income taxation, taken out of their paychecks, their whole lives from the time they're 16 years old, for their entire working lives, and think of all that money just going to be the remainder on some payment to some bond holder for the national debt, where it didn't even go to a tire nobody ever used on one of these worthless jets.
It went to nothing.
It costs that much to you, and think about how much you've paid in tax, to think that money just goes to the ether, you know?
You know what gets me is that if this same story were about something with some little budget in two digits, you know, like tens of billions of dollars, like the Health and Human Services Department, or the Education Department, or the EPA, or one of those parts of the government, and the same scandal happened of these plugs and nippering, the public, the Congress, the media would be going ballistic.
It would be...
Hopefully anyway.
That would be on page one.
And you'd have congressional hearings into it.
The scandal of the Welfare Department, you know, with plugs and nippers and that stuff.
And it's the Pentagon, which is like a factor of ten larger than any of those other budgets, and nobody gives a damn.
Well, and according to the polls, you're looking at the last single institution in American public life that enjoys confidence, broadly speaking.
So, if it came to a real contest between them and the Congress and the Presidents, I think that people might just take the side of the Pentagon.
I know Nicholas Kristof would.
You know, that's kind of the...
Yeah, yeah, that's true.
That's true.
The center-left Democratic thinking is that, look, no one's more capable of accomplishing things than David Petraeus, even though all he's ever done is lose two wars.
But anyway, the Pentagon, the Army, it works.
And the rest of society could learn a lot from their example.
You know what it is?
People get confused.
Let's say, I mean, I think your average grunt...
People join the military for two reasons.
One is that they're psychos and want to kill people.
And the other is that, you know, they...
Well, three reasons.
One is that they want a job and they can't get one in the private market.
And the third is that there are people who actually join to serve their country.
And all of those are...
Aside from the ones who just want to kill people, you know, the guys who want to get a job and the guys who want to serve their country, or women, too, are, you know...
They're doing a noble thing, just like anybody who goes to work, or is a teacher, or whatever.
And, you know, more power to them.
But, you know, when you go up the ranks into the people that make policy, that do budgets, that do all this stuff, they're the same self-aggrandizing, greedy, self-promoting people that you see in every other branch of government.
There's nothing special about generals and about, you know, the politicians, the civilian politicians.
Yeah, Harry Brown used to say, they're just the post office with M-16s.
Yeah, yeah, that's right.
That's about right.
There's nothing noble about these guys.
They're self-promoting.
They're building their power and budgets just like every other bureaucratic organization.
There's nothing honorable about them.
They're not there to defend our freedom.
They're there to defend their budgets and their salaries and their pensions.
And, by the way, the two areas that they were able to account for were pensions and payroll.
Oh, yeah.
Well, and, of course, I mean, they're a society that are wholly dependent on them.
I mean, it really is a welfare program for working-class people as much as it is a welfare program for the Lockheed and all the guys on the top end.
I mean, the infantry and all their wives and all their kids, all their housing and all their health care and all their education, everything is on the public dime.
Yeah, they can take care of it.
It's a jobs program and a welfare program and a housing program all rolled together.
There's a lot of interest groups involved.
Everybody always screams to high heaven when they want to close a military base, and yet it's always only economically beneficial wherever they do.
Turn Air Force bases into airports and turn Army bases into shopping districts or industrial parks or whatever that stuff.
It works great every time.
I mean, you know, practically speaking, I mean, the Bergstrom Airport outside of Austin, for example, used to be a Bergstrom Air Force base, and then when the Soviet Union ceased to exist, it ceased to exist as a base anymore, and they said, yeah, Austin's growing.
We're going to have to move the airport out of town anyway.
Let's go ahead and do it, and I don't think anybody's complained since.
Right, right.
I can think of some more around here that could use closing.
But anyway, yeah, you know what?
It's a fascinating thing, and I think maybe most of all about how little anybody in the mass media cares.
Sort of just the simple Chomsky propaganda model where the reality as presented within that framework, you can argue about it, but you cannot challenge the framework of what's going on or the basic facts of the situation of whether it's the motive behind this is all spreading democracy or whether it's the Pentagon budget is this skewed but not that skewed or we have to go save the people of Libya from Muammar Gaddafi or whatever ridiculous thing that everybody in D.C. is supposed to believe in this week.
You know, they rival Hollywood, I guess, in their self-importance and their groupthink and their trendiness, basically.
Come on, guys, we're going to do coin in Afghanistan.
Everybody whoop it up for this new fad, and they just go from fad to fad and they go from whatever it is, but somebody like you, The Nation, it's a liberal magazine, but it's not a leftist one.
It's acceptable mainstream within Democratic Party politics type stuff.
Not to sell it short, I'm not trying to be mean about that, I'm just saying that the wisdom in there is sometimes really, really great, but it's oftentimes very conventional and not revolutionary in any real aspect, and so should be respectable enough is what I'm trying to say, and yet still they ignore it just because the truth that you're getting at here is too far outside the way they ever look at it.
Yeah, and to that, I would say that The Nation did a yeoman job of, first of all, Mark Hertzgaard, my editor, who's the investigations editor, really made sure this was a solid story and really helped push me to nail things down.
On top of that, we went through three days, agonizing days, of a very determined, dogged fact checker making me line up all the facts for everything I was asserting in there more than I usually would get in the years that I was a newspaper reporter because that's all pushed through every day and you can't fact check everything.
You just have to trust the reporter.
They didn't trust me at all at The Nation.
I had to prove every damn thing.
Really, this is a solid story and they should be, and I think an editor should realize that looking at it, so it should be getting picked up elsewhere, but I think they're just afraid of it.
You certainly spotlighted it on antiwar.com the other day.
Yeah, this is really Chomsky, an example of what Chomsky writes about.
You can't cross the line and this crossed the line.
Well, congratulations for it, too, because it really is important stuff and I sure appreciate it.
Well, I really appreciate your giving it some air down here in Texas.
All right.
Well, thank you everybody.
That is Dave Lindorf writing for The Nation.
This one is called Exclusive The Pentagon's Massive Accounting Fraud Exposed.
Thanks again, Dave.
Okay, thanks for having me.
All right, y'all.
Thanks.
Find me at libertarianinstitute.org at scotthorton.org antiwar.com and reddit.com slash scotthortonshow Oh yeah, and read my book, Fool's Errand, Timed and the War in Afghanistan at foolserrand.us
