Crony Capitalism Creeps Into the Defense Budget

Why are so many members of Congress using the defense budget to line the pockets of friends and allies?

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I’m generally a pretty hawkish fellow when it comes to the military: better to be strong than weak. I think of the world as a pretty rough neighborhood, and we need protection.

But as Congress tries to decide how we are going to slash spending and get out of this budget deficit, debates on the defense budget offer more evidence that crony capitalism, rather than sound policymaking, increasingly rules the day in Washington. How else do you explain Congress authorizing more defense spending than the military brass is asking for? How else to explain Capitol Hill pushing weapons systems that the Pentagon doesn’t even want?

At the heart of the matter are mandatory $500 billion defense cuts over the next decade that are scheduled to kick in. Republicans oppose the cuts and even Secretary of Defense Leon Panetta thinks they go too far. But where is the money that we are actually spending really being allocated? Is it being spent in a way that reflects our national-security needs? Unfortunately, the budget seems as if it is less the well-thought-out strategic plan to protect our country and more the giant wallet that politicians can use to pass out to friends and allies.

Like any government agency, the Pentagon has a serious problem with waste. An audit last year by the Government Accountability Office (GAO) found that management failures at the Department of Defense led to $70 billion of waste over just a two-year period. Another GAO report from 2010 found that the Defense Logistics Agency, which acquires military equipment, was ordering 50 percent more equipment than it needed, and $7 billion worth of supplies were sitting in a warehouse.

But the problem is not just ordinary government waste and inefficiency. There is big money to be made, even if it’s waste. Bringing home the bacon for the camo crowd is an expensive and profitable means of spending federal dollars. Members of Congress are loath to see military bases closed in their districts; it means losing jobs and money, so unnecessary bases don’t get closed. Just two weeks ago, the House Armed Services Committee rejected a plan for more military base closings by a 44–18 vote. It wasn’t even close!

Instead, the House committee added billions in spending that the Pentagon did not even request. Earmarks in the military budget are a huge problem. Senators and House members insert provisions in the defense budget to buy things that the military doesn’t even want.

Compounding the problem is that members of Congress making these decisions have family members who serve as lobbyists for defense contractors. Congressman Bill Young (R-Fla.) is the chairman of the powerful appropriation subcommittee on the House Armed Services Committee. His daughter serves as a lobbyist for defense contractors, and in the past Young has steered money to contractors that employed his sons.

Members of Congress who sit on these committees can and often do own defense stocks. The Washington Post found in 2010 that 19 of the 28 members of the Senate Armed Services Committee held investments in military- and defense-related companies that did big business with the Pentagon. As Gordon England, who served as a senior Pentagon official in the George W. Bush administration told the Post, “I am frankly surprised they are allowed to have these investments. Every member of this committee has tremendous influence over every major contract at the Pentagon.”

I’m not going to enter into the debate about what makes the most sense as far as our national-defense strategy is concerned. There are plenty of smart military strategists. But one thing is clear: the Pentagon budget is increasingly determined not by our strategic interests and defense needs, but by the strategic interests and political needs of Washington.

Both sides of the aisle do it. But it’s particularly ironic that the current charge to boost defense spending is being led by conservative Republicans who have traditionally fought hard against at least some forms of crony capitalism. They opposed the Wall Street bailout in some instances, saying that the banks needed to survive on their own. But they now argue that we can’t cut defense too much because it might hurt military contractors like Lockheed Martin and affect their ability to produce weapons systems in the future. Sounds surprisingly similar to the arguments made by people who want to subsidize the solar-energy industry, doesn’t it? As Tim Carney points out, this is a sort of Obama Keynesian argument: we need to artificially spur demand to stimulate these companies.

Nothing in Washington is untouched by cronyism. But perhaps nothing is more important to get right than our military budget.