From $21 Trillion to $94.7 Trillion: The Pentagon’s Escalating Financial Discrepancies
Back in 2019, we poked fun at the Department of Defense (DOD) for, as we put it, “losing $21 trillion.” That colossal sum represented what the Pentagon’s inspector general called “unsupported journal voucher adjustments” between 1998 and 2015.
But as it turns out, the $21 trillion was just the tip of the iceberg. Bloomberg News reports that the DOD recorded a staggering $94.7 trillion in accounting adjustmentsfor fiscal years 2017, 2018, and 2019 combined.
Pentagon Missing Trillions: An IRS Audit Nightmare
We can imagine the reaction of the IRS if during a tax audit they discovered $94.7 trillion in unreported income. Indeed, even a discrepancy one-ten-billionth as much – $94,700 – would undoubtedly warrant their attention and result in a tax assessment, interest, and penalties.
To put this in perspective, in fiscal year 2019 alone, the DOD reported $35 trillion in accounting adjustments. That figure is nearly 50 times the size of its actual budget for that year. To top it off, $35 trillion exceeds the entire US GDP for 2019 by more than 50%.
Congress Takes Notice…Barely
One of the few members of Congress who has shown interest in the $94.7 trillion missing is California Representative Jackie Speier. She revealed that the DOD had made 546,433 adjustments in fiscal year 2017and 562,568 in 2018.
Speier requested that the General Accountability Office (GAO) investigate these accounting adjustments. The GAO’s conclusion:
“96% of the system-generated accounting adjustments were recorded without adequate supporting documentation.”
Given this, it’s no surprise that the DOD’s accounting systems have been on the GAO’s “High-Risk List” since 1995.
The DOD, for its part, explains these massive adjustments as being necessary “due to a lack of system capabilities or interfaces.”
Is the Money Really Missing?
Investment banker and former Assistant Secretary of Housing and Urban Development Catherine Austin Fitts has taken a particular interest in the missing trillions from the Pentagon. Through her platform, The Solari Report, Fitts and her team have compiled an impressive collection of documentation highlighting the US government’s apparent inability to balance its books.
The real question remains: Is $94.7 trillion actually missing, or does the Pentagon suffer from chronic sloppy accounting? Or perhaps, is it both?
Let’s consider fiscal year 2019, when the DOD’s budget was $738 billion, yet it reported $35 trillion in accounting adjustments. Roughly half of the $738 billion was allocated to easily verified expenses like military personnel salaries. That leaves $369 billion that could reasonably be subject to accounting adjustments. But as Solari’s Missing Money 2021 Update pointed out,
“In this scenario, every dollar would have to have been counted 94 times to justify $35 trillion in accounting adjustments.”
Searching for Answers
Economics Professor Mark Skidmore, who prepared the 2021 update, requested additional information from both the GAO and the DOD to explain these discrepancies. He concluded that only a request under the Freedom of Information Act might shed additional light on the matter. In the meantime, Skidmore wrote:
“These figures are so wildly outside anything that could be expected using fundamental accounting principles that we simply have nothing further to offer other than to note the absurdity.”
A Long History of Financial Mismanagement
This is not a new problem. Back in 2001, former Secretary of Defense Donald Rumsfeld made an astonishing admission:
“According to some estimates, we cannot track $2.3 trillion in transactions.”
Rumsfeld went on to describe the money wasted by the military as “a matter of life and death.”
Since then, the issue has only worsened. Besides outliers like Jackie Speier, Congress has shown little interest in investigating the problem. But in May, Speier and every other Democrat in the House of Representatives voted to give the Pentagon $33 billion to support Ukraine in its efforts to repel Russia’s invasion—with virtually no congressional oversight. And that’s on top of the $14 billion Uncle Sam had already spent on Ukrainian aid.
Where Do We Go From Here?
Don’t forget, this is the same DOD responsible for overseeing the development of weapons like Lockheed’s F-35 combat jet. US taxpayers are slated to shell out more than $1.5 trillion over the F-35’s anticipated lifespan. But the jet has encountered a few performance issues, such as being unable to take off from the Navy’s newest aircraft carriers, a tendency to crash, an inability to dogfight, and even an emergency ejection system that risks killing or seriously injuring pilots.
But why worry about $33 billion, $1.5 trillion, $35 trillion or even $94.7 trillion? After all, our government can create as much money as it wants out of thin air. And any government that issues its own currency can always pay its bills with the cash it creates. If investors aren’t lining up to buy the debt, the Fed will purchase it instead and add those “assets” to its balance sheet through the process of quantitative easing.
Sure, this policy of Modern Monetary Theory is inflationary, and yes, the official inflation rate now exceeds 9% annually. (Unofficially, the real inflation rate is closer to 17% per year.)
As Dr. Skidmore observed, the whole situation is absurd. And that leads us to conclude that perhaps it’s time to consider your own Plan B.
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