Back in 2019, we poked fun at the Department of Defense (DOD) for as we put it, “losing $21 trillion.” That sum represented what the Pentagon’s inspector general called “unsupported journal voucher adjustments” between 1998 and 2015.
Well, it turns out the $21 trillion is just the tip of the iceberg. Bloomberg News reports that the DOD recorded “accounting adjustments” for fiscal years 2017, 2018, and 2019 amounting to $94.7 trillion.
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.
In fiscal year 2019, for instance, DOD reported $35 trillion in accounting adjustments. That was nearly 50 times the size of its actual budget. Indeed, $35 trillion exceeds America’s entire GDP for 2019 by more than 50%.
One of the few in Congress who have taken an interest in the “missing” $94.7 trillion is California Rep. Jackie Speier. She told Bloomberg that the DOD had made 546,433 adjustments in fiscal year 2017 and 562,568 in 2018.
Speier asked the General Accountability Office to look into the DOD’s accounting adjustments. It concluded that “96% of the system-generated accounting adjustments were recorded without adequate supporting documentation.” It’s little wonder that DOD’s accounting systems have been on the GAO’s “High-Risk List” since 1995.
For its part, DOD explains the adjustments are necessary “due to a lack of system capabilities or interfaces.”
Investment banker and former Assistant Secretary of Housing and Urban Development Catherine Austin Fitts has taken a particular interest in the missing money. As publisher of The Solari Report, Fitts and her associates have assembled an impressive compendium of documentation relating to Uncle Sam’s inability to balance its books.
The real question is whether $94.7 trillion is actually missing, whether the Pentagon and other government agencies suffer from a chronic case of sloppy accounting, or both.
Consider fiscal year 2019, when the DOD’s budget was $738 billion, and it reported $35 trillion in accounting adjustments. About half of the $738 billion was for easily verified expenses such as paying military personnel. That leaves $369 billion that presumably could be subject to accounting adjustments. But as Solari’s Missing Money 2021 Update put it, “In this scenario, every dollar would have to have been counted 94 times in order to justify $35 trillion in accounting adjustments.”
Economics Professor Mark Skidmore, who prepared the 2021 update, requested additional information from both the GAO and DOD to explain these discrepancies. He concluded that only a request under the Freedom of Information Act could potentially 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.
This is nothing new. Back in 2001, former Department of Defense Secretary Donald Rumsfeld made this astonishing admission:
According to some estimates, we cannot track $2.3 trillion in transactions.
Rumsfeld went on to characterize the money wasted by the military as “a matter of life and death.”
Since then, the problem has only gotten worse. Other than outliers like Jackie Speier, there’s been little interest from Congress in investigating the problem. But in May, Speier, along with 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 of its territory, with virtually no congressional oversight. And that’s on top of $14 billion that Uncle Sam had already spent on Ukrainian aid.
And don’t forget this is the same DOD responsible for overseeing the development of weapons like Lockheed’s F-35 combat jet. America’s taxpayers are slated to shell out more than $1.5 trillion over the plane’s anticipated lifespan. But there are only a few performance issues, such as the fact that the F-35 can’t take off from the Navy’s newest aircraft carriers and their nasty habit of crashing. They also can’t dogfight or even eject pilots in an emergency without killing or seriously injuring them.
But why worry about $33 billion, $1.5 trillion, or even $94.7 trillion? We can afford it! 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 don’t line 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 sure, 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.