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After last week, it’s tough to accuse the Medium Extended Air Defense System (MEADS) missile of “failure to launch” in the technical sense. Too bad it’s long failed at fiscal responsibility.
In a town known for creating supreme ironies, last Wednesday’s successful test of MEADS at the White Sands Missile Range was among the “supreme-est”. Hailed by its prime contractor as the “culmination of three countries working together” (the U.S., Germany, and Italy), the, ahem, upshot of the test for the Pentagon will be … well, nothing. That’s because the U.S. decided not to procure MEADS for operation in the field.
Having fallen a good ten years behind schedule and far over-budget, MEADS was already looked like a flightless bird to taxpayers, but its lack of military utility also called for its grounding. In a joint 2011 study released with the U.S. Public Interest Research Group, NTU advocated ending MEADS because at the time our allies had no “plans to purchase the system when finished and the Patriot system can be expanded and improved to provide similar capabilities to MEADS.” Unfortunately, Congress kept stringing the program along, most recently through a $380 million earmark in the Continuing Resolution passed in March of 2013 intended to complete its operational testing phase and allow the U.S. to fulfill its putative obligations to its international partners. But that was to be our final taxpayer-funded journey for the “missile to nowhere.”
Many say the plug could, and should, have been pulled earlier. In a 2011 letter to then-Defense Secretary Gates, NTU argued that, “Whatever controversy there may be over the maturity or viability of MEADS, it is clear that U.S. taxpayers will gain little from a further government expenditure.” The Pentagon’s reply to our letter argued that the fees for terminating MEADS that the U.S. would have to pay to its two allies (Germany and Italy) were not worth the savings of backing out at that point.
Yet, our resourceful colleagues at Citizens Against Government Waste found a smoking gun, or perhaps more appropriately, smoking rocket motor (HT to CAGW’s clever website, misguidedmissile.org). In a statement released right after the White Sands test, CAGW noted:
"For several years, DOD officials stated that cancelling the program was prohibitive without agreement from Germany and Italy because of high unilateral termination costs. However, a confidential DOD report to Congress obtained by CAGW concluded that the U.S. could withdraw from the contract without committing additional money or paying termination fees."
Oops. So taxpayers may very well have had a quicker way out of this mess after all.
In the we-couldn’t-have-said-it-better category, we’ll give the final word to our good friend Tom Schatz, President of CAGW, who noted:
"Taxpayers are all too familiar with DOD boondoggles that receive funding long after they are proven wasteful, and [the] duplicative test of the costly and unsuccessful MEADS program is unfortunately a perfect example. Given the DOD’s sequester cuts, and the fact that neither President Obama nor Members of Congress requested funding for the program in FY 2014, the test was a waste of federal funds that should have been allotted to fund ongoing and necessary DOD programs."
Here’s hoping that after this episode of throwing good money after bad, MEADS just keeps “on going” … away from our wallets.2 Comments | Post a Comment | Sign up for NTU Action Alerts
All too many federal agencies can be cited for having budgetary skeletons in their closet, and U.S. Customs and Border Protection (CBP) is no exception. From poorly managing a drone fleet purchase, to making questionable demands for more employees, CBP has raised fears for the security of taxpayers’ wallets in the past. Yet, Congress has an opportunity to ease future fears, over a controversial new CBP project, before it can cause a fiscal fright.
Two years ago, the U.S. Department of Homeland Security (DHS) concluded a letter of intent with the United Arab Emirates to build a “pre-clearance” facility at Abu Dhabi airport which would allow travelers to the U.S. to clear customs before arriving on American soil. So far, so good: pre-clearance can not only save time and reduce congestion at U.S. points of entry, it can also help ease the way for tourists who contribute to economic activity while visiting here.
Now for the not-so-good:
All these drawbacks lead to one long question: Given CBP’s service challenges at existing airports, is it really a good idea to plow ahead with a facility whose use will be comparatively scarce in the near term, and give another leg-up to an airline backed by its own government as well as ours, at the expense of an already overtaxed flying public?
And “overtaxed” is an understatement. As NTU has often noted, the typical overall government tax and fee burden of 20 percent on a $300 domestic airfare is higher than the average effective rate a middle-class American is likely to pay on his or her 1040 income tax return. International air travelers can have it even worse, with impositions such as separate departure and arrival taxes along with a passenger agricultural inspection fee (which the Obama Administration ill-advisedly considered raising in 2009) and a customs fee.
Proponents of the CBP station at Abu Dhabi argue that the investment of U.S. tax dollars will be minimal since UAE will pick up 85 percent of the project’s expense under the current agreement. But that’s little comfort to tax-weary travelers in America (see above), who remain worried that whatever share they will be forced to commit could escalate if construction or operating costs are not contained. Meanwhile, there’s that pesky matter of how best to apply CBP’s fee collections as well as appropriations from general funds – should they be used to expedite higher-priority passenger and cargo entry-exit services?
Many Members of Congress seem to think so. In June, the House of Representatives passed an amended FY 2014 DHS Appropriations Bill specifically blocking the Abu Dhabi pre-clearance scheme. In May, a bi-partisan group of 11 Senators echoed the sentiment of their House colleagues in a separate letter to DHS Secretary Janet Napolitano, questioning whether the agency’s “decision was made as a result of a risk based analysis.”
Alas, earlier this month DHS announced it was moving forward with a data-sharing agreement that could pave the way for the facility’s activation, even as it faces a concerted petition effort from interested industry groups with considerable clout.
Regardless of the politics involved, the taxpayer aspects of the issue deserve further exploration – that goes not only for the Abu Dhabi pact but also the ever-troubling direction of the Ex-Im Bank. Allowing the free market and fiscal responsibility to sort out needs from niceties would provide some badly-needed bone-rattling for those accustomed to budgetary business as usual in Washington.1 Comments | Post a Comment | Sign up for NTU Action Alerts
The 2014 National Defense Authorization Act (NDAA), H.R. 1960, is on the floor today in the House. Currently, the federal government’s expenditures, including last year’s defense budget of $486.3 billion, have placed the United States in a financial crisis. Now Washington is attempting to increase that massive amount to $552.1 billion, exceeding the sequester allocation by $52 billion.
Proponents of a large military have frequently called upon citizens’ patriotism for a carte blanche and then abused that blank check. When forced to address waste and overspending, they have instead cut high profile defense programs and publicly painted the sequester as dangerous. Congress and the military should be focused on implementing efficiency in spending what was allotted under the sequester. A recent study completed by NTU and R Street outlined 100 recommendations which could save the government approximately $1.9 trillion by 2023 by reducing weapons systems, personnel and compensation, and programs and processes while continuing to provide for the safety of American citizens. These cuts include frivolous, politically spurred agendas like the continued production of Abram tanks which the Army insists that they do not want, but are defended by some in Congress because they "create jobs."
While America’s security is of utmost importance, economic stability is a central part of this equation and cannot be overlooked. As the United States is scheduled to significantly scale back wartime activity in the Middle East, the wartime budget should likewise contract to reflect peacetime levels. It is imperative that lawmakers pare back excessive expenditures in the 2014 NDAA and work toward fiscal sustainability.1 Comments | Post a Comment | Sign up for NTU Action Alerts
(AUDIO) Speaking of Taxpayers: Defending America, Defending Taxpayers
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The authors of a new study on trimming the defense budget from a conservative perspective, NTU's Pete Sepp and R Street's Andrew Moylan, join the podcast to discuss their report. And the IRS returns to the Outrage of the Week!0 Comments | Post a Comment | Sign up for NTU Action Alerts
If it was up to General Ray Odierno, Congress wouldn't allocate $436 million towards building and upgrading new Abrams tanks. "[W]e would use that money in a different way," the Army chief of staff said recently.
The issue? Lawmakers (particularly in Ohio, where many production plants are located) are reluctant to cut off funding for the Abrams tank program, which provides jobs for industrial workers and a steady source of revenue for defense contractors. So even though the Army has explicitly stated that it doesn't need the nearly half billion dollars in federal support for the program, Congress wants to spend the money anyway.
The push for more tank funding comes on the heels of the Defense Department's 2014 budget request, which made clear that it wants to avoid the budget cuts it's facing after sequestration -- the request included $526.6 billion in discretionary spending, more than $52 billion above the amount allowed under the provisions of the Budget Control Act. Included in that total are proposals to fund costly programs such as the F-35 fighter jet renovations ($8.4 billion), nuclear attack submarines ($5.4 billion), and additional funding for "cyber operations" ($4.7 billion).
What's more, the existing Army tank force is, on average, less than 3 years old. According to the AP:
Last year, over 170 Members of Congress supported additional tank funding. Members on both sides of the aisle who continue to support the investment program cite the boon it provides to local economies. Senator Rob Portman (R-OH) said "People can't sit around for three years on unemployment insurance and wait for the government to come back. ... That supply chain is going to be much more costly and much more inefficient to create if you mothball the plant."2 Comments | Post a Comment | Sign up for NTU Action Alerts
Sixty-five days past due, the President has released his Fiscal Year 2014 budget request. The National Taxpayers Union Foundation analyzed the data, and posted some of our findings here. We found a lot of overlap between the President's previous proposals and his "new" ones he submitted Wednesday morning. In addition, it assumes historic levels of tax revenue -- which rely on rather optimistic economic projections -- to pay the bills.
The same can be said of the Department of Defense (DoD) budget. Earlier this week I posted a run-down of some of the proposals we were likely to see in the DoD budget. Now that the official budget is out, let's take a closer look.
The President is pushing for a return to pre-sequester spending levels. The DoD budget requests $526.6 billion in discretionary spending. The problem? That's more than $52 billion more than it's actually allowed to spend under the provisions of the Budget Control Act (BCA). It may be just a political move, but unless the President can strike a deal that turns back the BCA spending limit, he'll have to find a way to work with the $475 billion he's slated to get instead.
Some feasible savings proposals are mixed with more weapons spending. The President has proposed halting the Army's Ground Combat Vehicle (GCV) program, and has suggested further rounds of base re-alignment and closures (BRAC). The BRAC program wouldn't begin until at least 2016, in order to give local economies a chance to prepare for the upfront costs. However, it would consolidate excess materials and facilities that DoD has itself acknowledged are unnecessary: in 2005 it was determined that as much as 24 percent of DoD facilities were not needed. Closing those facilities could offer significant long-term savings for taxpayers. As far as the GCV program is concerned, CBO has determined that retaining current units would save over $24 billion with "essentially no programmatic risk" to the service.
Speaking of weapons technology funding, the President opted to continue subsidizing the F-35 fighter jet development and procurement program to the tune of $8.4 billion. Just before the sequester deadline earlier this year, NTU's Nan Swift opined on some of the controversy surrounding the program. Additionally, the budget includes $5.4 billion for nuclear attack submarines, $4.7 billion for "cyber operations," and $1.7 billion for a new air-craft carrier.
Some "savings" -- in exchange for more spending elsewhere. In keeping with last year's practice, the President counts "reductions in Overseas Contingency Operations" as an offset to additional infrastructure spending. However, those reductions -- $167 billion through 2019 -- have already been going on for some time now, as U.S. combat force involvement in areas like Iraq and Afghanistan gradually winds down.
Veterans' benefits programs are growing rapidly. The number of people receiving benefits under many entitlement programs, including veterans' health and pension programs, is expected to grow significantly over the next decade. In Table 26-4 of the budget's Analytical Perspectives section, we can see that beneficiaries for "veterans' compensation" programs are expected to increase by 1.7 million, or 45 percent, by 2023. That's the fastest rate of growth for any program except Medicare's prescription drug plans, and could spark debate on how to handle the additional financial obligations.1 Comments | Post a Comment | Sign up for NTU Action Alerts
On the eve of the President's Fiscal Year 2014 budget request, recently confirmed Secretary of Defense Chuck Hagel is warning Pentagon officials to prepare for significant cuts to military and defense programs, while President Obama is likely to push for a return to pre-sequestration funding levels.
According to Bloomberg News, the Pentagon will request $9.16 billion in funding for missile defense systems in 2014, down roughly $550 million from last year's $9.71 billion request. That decrease, while not small on its own, represents just 0.1 percent of the anticipated total Department of Defense (DoD) budget request of $526.6 billion.
A major contributor to DoD budgetary growth is the cost of acquiring new high-tech weapons systems. A March 2013 Government Accountability Office (GAO) report showed that 86 major defense acquisition programs identified in 2012 are projected to cost over $1.6 trillion. Of those programs, the 10 most expensive alone accounted for 65 percent of the total required acquisition and development spending.
GAO has also shown that the DoD could stand to acquire weapons systems and award defense program contracts on a more competitive basis. According to the above-mentioned report: "Only 17 of the 40 (43 percent) current major defense acquisition programs and 7 of the 17 (41 percent) future programs we assessed reported that they have acquisition strategies that call for the use of competition throughout product development... ." Another GAO report from March 2013 indicates that competition for the $359 billion in contracts that DoD awarded last year is lower than it has been in five years, even though "[c]ompetition is the cornerstone of a sound acquisition process and a critical tool for achieving the best return on investment for taxpayers."
Of course, weapons systems costs are only part of the story when it comes to defense and military funding issues. A significant portion of defense-related funding goes towards veterans' health benefits and the human costs associated with maintaining a military force.
Early reports suggest the Veterans Affairs budget will request a discretionary budget of $63.5 billion, 4 percent higher than what President Obama approved last month. In light of a backlog in benefits claims, the VA budget will include a request to quadruple the funding for a paperless claims system, totaling $155 million. Mental health services designed to help veterans facing post-traumatic stress could increase by as much as $7 billion (7 percent above enacted 2013 funding).
Whatever specific funding the President requests for the Department of Defense in his new budget, it's clear that if the recent sequestration spending cuts remain in place, he will have to significantly rethink the DoD's funding going forward. The CBO has estimated that the DoD will have to cut about $74 billion per year to comply with the spending caps. That could prove difficult for DoD, an agency that consistently appears on GAO's "High Risk" list and which "is one of the few federal entities that cannot accurately account for its spending or assets."0 Comments | Post a Comment | Sign up for NTU Action Alerts
In the wake of the sequester, there's been a lot of talk in Washington about the effect that automatic spending caps could have on the Department of Defense's budget. Specifically, some legislators and government officials are unsure of how to cut costs without undermining national security interests.
The Congressional Budget Office (CBO) released a report on Monday that may provide some answers. In "Approaches for Scaling Back the Defense Department's Budget Plans," CBO analyzed the projected future costs of the DoD's current plans relative to the sequestration requirements.
As the graph above illustrates, the costs of DoD's future plans are still well above what's actually permitted under the Budget Control Act -- the Department would have to reduce its annual budget by about $74 billion per year to meet the requirements. CBO's cost estimates are higher than DoD's own, primarily because CBO is less certain of the Department’s ability to contain costs associated with veterans' health benefits, military and civilian compensation, and weapons acquisition.
CBO looked at four broad policy measures that the Department could implement in order to lower its costs and meet the new budgetary requirements.
Important to note is that the study is not meant to draw any conclusions on military strategy; the paper simply focuses on fiscal issues associated with the DoD's future plans. In CBO's own words:
"The effect of such reductions on national security is beyond the scope of this paper. Although these options would represent a significant scaling back of DoD's plans, U.S. military forces have substantial technological and operational advantages over those of other nations today. Therefore, policymakers may find it acceptable for the United States to reduce the size of its military as a decade of overseas conflicts draws to a close. … Even at their deepest in 2014, the cuts from the BCA will return DoD’s budget to where it stood in real terms in 2006, still 25 percent above the department’s funding in 2000."0 Comments | Post a Comment | Sign up for NTU Action Alerts
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Recorded on the floor of the 2013 Conservative Political Action Conference (CPAC), part one of this episode features Chris Preble of the Cato Institute on defense spending, Travis Brown, author of "How Money Walks", Matthew Vadum of the Capital Research Center, and Kelly Jemison of Students for Liberty! Email the show at email@example.com or tweet us @NTU!0 Comments | Post a Comment | Sign up for NTU Action Alerts
As Sequester Nears, Cutting F-35 Is a Great Place to Start
Just in time for Friday’s sequester deadline, the F-35 fighter jet is back in the news to remind us that yes, Virginia, there is room to pare back the Pentagon budget. Last week’s grounding of the entire fleet, due to a cracked engine blade, was the second time in two months that flight operations have been suspended and was well-timed with a major Time Magazine article lambasting “the most expensive weapon ever built.” While NTU has long voiced concerns over several aspects of the extremely costly and extremely troubled aircraft, it’s about time others start to take notice of how the Pentagon is wasting taxpayer funds on this boondoggle.
Born out of the Joint Strike Fighter program in the late nineties, Time explains that over the past decade the F-35’s price tag has doubled to $396 billion, the program has been beset with one delay after another, and still:
Its pilots' helmets are plagued with problems, it hasn't yet dropped or fired weapons, and the software it requires to go to war remains on the drawing board.
The article goes on to describe how taxpayer funds have been abused and wasted at almost every step of the way:
It opted to build three versions of a single plane averaging $160 million each (challenge No. 1), agreed that the planes should be able to perform multiple missions (challenge No. 2), then started rolling them off the assembly line while the blueprints were still in flux--more than a decade before critical developmental testing was finished (challenge No. 3). The military has already spent $373 million to fix planes already bought; the ultimate repair bill for imperfect planes has been estimated at close to $8 billion.
Back in 2002, Edward Aldridge, then the Pentagon's top weapons buyer, said the F-35 was ‘setting new standards for technological advances’ and ‘rewriting the books on acquisition and business practices.’ His successor voiced a different opinion last year. ‘This will make a headline if I say it, but I'm going to say it anyway,’ Frank Kendall said. ‘Putting the F-35 into production years before the first test flight was acquisition malpractice. It should not have been done.’
The Pentagon and its allies say the need for the F-35 was so dire that the plane had to be built as it was being designed. (More than a decade into its development, blueprints are changing about 10 times a day, seven days a week.)
It would be easy to think that after so many years and so much money taxpayers will have a truly cutting-edge weapon at the end of the day. Unfortunately, that couldn’t be further from the truth:
Aviation Week & Space Technology magazine, the bible of the aerospace industry and a traditional supporter, published an editorial last fall that declared the program ‘already a failure’ on cost and schedule and said ‘the jury is still out’ on its capabilities.
J. Michael Gilmore, Christie's successor as the Pentagon's top weapons tester, reported in January that all three versions will be slower and less maneuverable than projected. Weight-saving efforts have made the plane 25% more vulnerable to fire. Only one of three F-35s flown by the U.S. military, he added, was ready to fly between March and October.
Read the whole thing here.
The increasing costs of the F-35 are even starting to give our allies second thoughts regarding their planned purchases of the jet. Recently, Canada announced it was reviewing plans to buy 65 F-35s – both due to the cost and potential refueling problems with the aircraft itself. Australia and Great Britain are also reconsidering their orders, while Italy has gone ahead with cuts.
So how did taxpayers get stuck with this high-tech albatross that is seven years behind schedule and 70 percent over initial cost estimates? Bloomberg.com sums this up:
It is also the defense project too big to kill. The F-35 funnels business to a global network of contractors that includes Northrop Grumman Corp. (NOC) and Kongsberg Gruppen ASA of Norway. It counts 1,300 suppliers in 45 states supporting 133,000 jobs -- and more in nine other countries, according to Lockheed. The F-35 is an example of how large weapons programs can plow ahead amid questions about their strategic necessity and their failure to arrive on time and on budget.
Only a few years ago, taxpayers were asked to bail out private institutions because they were “too big to fail.” Now, even as we face record debt and politicians crisscross the nation wringing their hands over a mere 2.4 percent pullback in total expenditures that they are certain will doom us all, taxpayers are being forced to continue footing the bill for “too big to kill.”
Buying into the sunken-cost fallacy – throwing good money after bad – is not a path to sound policy, or a strong defense for that matter. Billions of dollars have been wasted that could have been allocated to other successful military programs, to modernization, or even to finally auditing the Pentagon (a small investment of taxpayer money that could yield big returns).
Sadly, it looks like the F-35 will continue to be with us for now:
But thanks to $4.8 billion in Pentagon contracts for 31 planes pushed out the door barely 100 hours before the original Jan. 2 sequestration deadline, much of the program will continue on autopilot.
But it does help make the point that as the “dreaded” sequester looms Pentagon spending should be on the table, because there’s plenty of room for savings. The Cato Institute has an excellent graphic here that helps to put the sequester in perspective, explaining that the coming cuts will only take us back to 2006 defense spending levels, which is still more than $100 billion over what we were spending during the Cold War. And while the sequester does call for some immediate short-term cuts in spending, military expenditures are projected to continue rising, albeit not as quickly, as we go forward.
That fact, more than the small chunk of spending restraint taxpayers get from the sequester, should strike fear in your wallet. The sequester is an important first step, but without other tough decisions and serious reforms, we still have an out-of-control spending situation on our hands. At the end of the day, as NTU Taxpayers’ Friend Award winner Congressman Justin Amash (R-MI) stated, “We’re bankrupting our country, and it’s going to put us in danger.”
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