Waste Not, Want Not

by

by guest poster Gary Farber.

How much is $50 billion? 

That's how much the president proposes we spend:

[…] It calls for a quick infusion of $50 billion in government spending that
White House officials said could spur job growth as early as next year —
if Congress approves. […]  Central to the plan is the president’s call for an “infrastructure
bank,” which would be run by the government but would pool tax dollars
with private investment, the White House says. […] Specifically, the president wants to rebuild 150,000 miles of road, lay
and maintain 4,000 miles of rail track, restore 150 miles of runways and
advance a next-generation air-traffic control system.

[…]

The White House did not offer a price tag for the full measure or say
how many jobs it would create. If Congress simply reauthorized the
expired transportation bill and accounted for inflation, the new measure
would cost about $350 billion over the next six years. But Mr. Obama
wants to “frontload” the new bill with an additional $50 billion in
initial investment to generate jobs, and vowed it would be “fully paid
for.” The White House is proposing to offset the $50 billion by
eliminating tax breaks and subsidies for the oil and gas industry.

After months of campaigning on the theme that the president’s $787 billion stimulus package was wasteful, Republicans sought Monday to tag the new plan with the stimulus label. The Republican National Committee called it “stimulus déjà vu,” and Representative Eric Cantor of Virginia, the House Republican whip, characterized it as “yet another government stimulus effort.”

Which sounds good to me, if not to you, but we can all agree that we don't want to "waste" money.

Even before the announcement Monday, Republicans were expressing caution.

“It’s important to keep in mind that increased spending — no matter the
method of delivery — is not free,” said Representative Pat Tiberi, an
Ohio Republican who is on a Ways and Means subcommittee that held
hearings on the bank this year. He warned that “federally guaranteed
borrowing and lending could place taxpayers on the hook should the
proposed bank fail.”

Such concern might have come earlier: 

Rebuild iraq money

  • The Department of Defense is unable to account for the use of $8.7
    billion of the $9.1 billion it spent on reconstruction in Iraq.
  • Source: Special Inspector General for Iraq Reconstruction (PDF).

You can't trust the Democrats not to waste money:

An audit recently conducted by the Special Inspector General for Iraq Reconstruction
(SIGIR)has found that the Pentagon cannot account for 96 percent of the
$9.1 billion it has been receiving since 2004 to rebuild the war-torn
nation, a state of affairs that the report blames on poor internal
controls within the Department of Defense (DoD) that left the money
vulnerable to “inappropriate uses and undetected loss.”

The audit specifically concerns the Development Fund for Iraq (DFI), an income source separate from the, so far, $53 billion
appropriated by Congress for the same purpose. Established in 2003, the
fund is made up of Iraqi petroleum revenues, frozen Iraqi assets and
leftover monies from the now defunct Oil for Food program, meaning that,
despite being used by the U.S. government, it technically belongs to
Iraq.

According to the special inspector general’s report, government
agencies handling money that doesn’t belong to the federal government
are required by the Treasury Department to establish special Deposit
Fund Accounts, a “key financial management tool” that allows for the
maintenance of accountability and oversight. By the time the DoD
comptroller even got around to establishing guidance for these accounts,
six months had already passed and, even with the instructions for how
to set up these accounts now released, only one branch actually managed
to do so: Army Central Command (ARCENT).

How much worse could it be?

[…] While the goal of the audit, to determine whether DoD organizations
adequately accounted for the funds they received from the DFI, had been
achieved, said the report, it had been significantly hampered by the
fact that many DoD organizations maintained few or no records of their
use of the Iraqi funding. Even when records were maintained, not all of
them were complete. Further, said the report, auditors were unable to
locate personnel with knowledge of DFI activities between 2003 and 2005,
when the largest part of contracting activities from the fund occurred.
This led to situations where the Pentagon was unable to explain how
vast sums of money were actually spent.

“For example, DoD could not provide documentation to substantiate how it spent $2.6 billion,” said the report.

Yes, they couldn't even find people who had a clue as to what the Development Fund for Iraq was doing during its most active years.

Of course, that's just the DFI money.  

Auditors are currently about halfway finished with another,
much larger audit of the more than $50 billion worth of reconstruction
funds. Much like this audit, that investigation, though not yet
complete, has already discovered numerous instances of waste, fraud and
abuse that include duplicate payments, cash payments to fictitious
contractors, pay-to-play bribes and simple “pilfering of cash.”

Yep, it's much worse.

A special multi-agency task force has been using complex data mining techniques to examine
more than $50 billion that various military and civilian organizations
have been spent, supposedly, to aid the reconstruct of war torn Iraq.
The task force is about halfway done with its investigation, having
sifted through about $28 billion already.

Through its investigation, the task force, Special Inspector General for Iraq Reconstruction, has already discovered schemes such as duplicate payments, cash
payments to fictitious contractors, pay-to-play bribes and simple
“pilfering of cash.” These have added up to hundreds of millions of
dollars lost to wide scale corruption and theft.

This could be an extremely conservative estimate. An Iraqi official in 2008 told
the Senate Democratic Policy Committee that some $13 billion worth of
reconstruction funds have been lost to corruption. Auditors found that
many projects that had already been paid for were simply not implemented
and that, in Iraq, “nobody cares” about investigating these cases.

Imagine if the Bush administration and Republican Congress hadn't let these tens of billions disappear behind the Iraqi couch cushions like this.

But that's the past, you say? 

How about Afghanistan?

After five years of investigations and 250,000 pages of audits, Stuart
W. Bowen Jr. wishes he could say that the $50 billion cost of the U.S.
reconstruction effort in Iraq was money accounted for and well spent.

"But that's just not happened," Bowen said.

Instead, the largest single-country relief and reconstruction project in
U.S. history — most of it done by private U.S. contractors — was full
of wasted funds, fraud and a lack of accountability under what Bowen,
the congressionally mandated special inspector general for Iraq
reconstruction, calls an "ad hoc-racy" of lax or nonexistent government
planning and supervision.

And despite the Iraq experience, he said, the United States is making many of the same mistakes again in Afghanistan, where U.S. reconstruction expenditures stand at more than $30 billion and counting.

"It's too late to do the structural part and make it quickly applicable
to Afghanistan," Bowen said in an interview last week. None of the
substantive changes in oversight, contracting and reconstruction
planning or personnel assignments that Congress, auditors and outside
experts proposed as the Iraq debacle unfolded has been implemented in
Afghanistan.

I know it's crazy, but what if we spent that money on infrastructure in America, paying American workers to build things we use?  Where could we spend $50 billion?

Where could we have spent one trillion dollars?

by guest poster Gary Farber.

36 thoughts on “Waste Not, Want Not”

  1. It’s nice to have one’s suspicions confirmed.
    I guess.
    When do we start talking about consequences (criminal or Congressional investigations, etc)?

  2. There’s a cliche on project management; you can do fast, cheap, and right. And you get to pick any two. The U.S. got the negative hat trick on Iraqi reconstruction, it was unconscionably slow, it was outrageously expensive (due to corruption and outsourcing the construction), and what did get built is not even close to right.

  3. Silly Gary, don’t you know that military spending isn’t actual spending? It’s freedom.
    Now, domestic spending that isn’t helping bankers, THAT is spending.

  7. It’s like a reconstruction plan inspired by “Three Kings”.
    SPOILER ALERT (SO SEE THE MOVIE ALREADY):
    Only without a bunch of Iraqis being rescued at the end.

  8. Just from this story:

    […] A $40 million prison sits in the desert north of Baghdad, empty. A $165 million children’s hospital goes unused in the south. A $100 million waste water treatment system in Fallujah has cost three times more than projected, yet sewage still runs through the streets
    As the U.S. draws down in Iraq, it is leaving behind hundreds of abandoned or incomplete projects. More than $5 billion in American taxpayer funds has been wasted – more than 10 percent of the some $50 billion the U.S. has spent on reconstruction in Iraq, according to audits from a U.S. watchdog agency.
    That amount is likely an underestimate, based on an analysis of more than 300 reports by auditors with the special inspector general for Iraq reconstruction. And it does not take into account security costs, which have run almost 17 percent for some projects.

    And there are some specific examples gone into.

  10. Meanwhile, Paul Krugman comments on the Obama transportation measure:

    Some bleary-eyed thoughts from Japan on the reported administration proposal for $50 billion in new spending:
    1. It’s a good idea
    2. It’s much too small
    3. It won’t pass anyway — which makes you wonder why the administration didn’t propose a bigger plan, so as to at least make the point that the other party is standing in the way of much needed repair to our roads, ports, sewers, and more– not to mention creating jobs. Once again, they’re striking right at the capillaries.
    Beyond all that, the new initiative is a chance for me to air one of my pet peeves: the stupidity of the claim, which you hear all the time — and you’ll hear again now — that it’s always better to provide stimulus in the form of tax cuts, because individuals know better than the government what to do with their money.
    Why is this claim stupid? Because Econ 101 tells us that there are some things the government must provide, namely public goods whose benefits can’t be internalized by the market.
    So suppose we’re going to put $50 billion of resources that would otherwise be idle to work. Is it better to use them to produce public goods like improved roads, or private goods like more consumer durables? That’s not at all obvious — and anyone who tells you that basic economics settles the question, that is says that devoting more resources to production of private goods is better, doesn’t understand Econ 101.
    And there’s a pretty good argument to be made that we are, in fact, starved for public goods in this country, so that it would actually be a good idea to shift some resources to public goods production even if we were at full employment; in that case, we should definitely give priority to public goods when trying to put unemployed resources to work. [….]

  12. But think how much more negative reactions to the course of the wars in Iraq and Afghanistan would have been if Congress had actually attempted to set taxes (or cut other spending) to pay for them. Oh, the horror!

  14. Leftists everywhere!

    […] “I think we’re in a mess in Afghanistan and I think we’re in a mess in Iraq,” said Hagel, who voted in support of the war in Iraq based on the intelligence assessments and later admitted he regretted his vote. “Our military has been more valiant and done a better job than we could have ever hoped. But we have put the military in an impossible situation.”
    Hagel flatly rejects the notion — now conventional wisdom among many Americans — that the war in Iraq has been a success. “Did you see today’s paper?” he asked, holding up a front-page story in the Washington Post that described vast swaths of the country as being plagued by electricity outages.
    “Look at the facts: No government, less electricity and people want us out,” Hagel pointed out. “Anyway you measure Iraq today I think you’re pretty hard pressed to find how people are better off than they were before we invaded. I think history is going to be very harsh in its judgment — very, very harsh. And I think we’re headed for a similar outcome in Afghanistan if we don’t do some things differently.”
    He stands by his assessment, outlined in his 2008 book “America: Our Next Chapter,” that the invasion of Iraq is the worst American foreign policy blunder since Vietnam, and one of the five worst in U.S. history.
    Hagel said the United States “made a terrible mistake taking our eye of the ball in Afghanistan when we invaded Iraq.” Now, he argues that the United States is doing in Afghanistan exactly what George W. Bush famously warned against during his 2000 presidential campaign: nation building.
    “We are where we are today — going into our 10th year in Afghanistan, our longest war — because we did take our eye of the ball,” he said. “It’s becoming clearer and clearer. We really made some big mistakes during that time. I have never believed you can go into any country and nation build, and unfortunately I think that’s what we’ve gotten ourselves bogged down in.
    “You can dance around that issue any way you like, but the fact is that there are billions and billions of dollars we’ve spent and are still spending, over 100,000 troops, and all the assistance we’ve got going in there,” Hagel continued. “It’s nation building. We should not nation build. It will always end in disaster.”

    There’s a whole lot more of Chuck Hagel there.

  15. Speaking of Three Kings, Russell, have you followed what David O. Russell’s current picture is?
    Gary’s link makes me think of a simple and effective cost-cutting measure for the DoD.
    What we need is a zombie army. They work cheap, they don’t need much in the way of support (just some fresh brains now and then) and there is a vast and self-replenishing population of dead people to draw on.
    It’s the army that sustains itself, anywhere and anytime.
    We could have zombie border guards, too. That would keep those sneaky illegals on their toes.
    Just keep them outside our own borders. Posse commitatus and all of that.

  18. I didn’t spend a lot of time on Gary’s links, but it looks like the wastage was in the 5-10 billion neighborhood. Is that right? Does someone have a quick and authoritative link that shows a different number?

  19. If I’m reading Gary’s post right, as high as $13 billion in Iraq alone. Plus an unknown % of the $30 billion spent in Afganistan.

  20. Of course, if you think the entire Iraq War/occupation/ongoing mission of whatever was a waste (and believe that Afganistan should have been a far more limited operation), this is simply a few drops in the bucket.
    It still pisses me off.

  21. McKT: If you’re talking about the original $9 billion, “wastage” is too kind–we don’t know enough to know whether it was wasted, evaporated, or got stolen. It just disappeared.

  22. Interesting, and not entirely unrelated:

    Washington, D.C. has become a vast wasteland of computer contracts. The U.S. government spent $81.9 billion in 2010 on information technology and much of that money is misspent, crippling the ability of government to do the jobs with which it has been entrusted.

    There’s a video of a speech at the link which is interesting to watch or just listen to.

  24. ?
    Seems to me that people criticize governmental waste constantly. Even liberals, in my experience (though less so than their conservative counterparts). There seems to be a massive blindspot when it comes to military adventures.
    If the government is corrupt & inefficient at home, it stands to reason that it would make a mess of things abroad as well. If true, one would expect people to be very reluctant to take over other people’s countries. And yet…
    But the real point is that the Iraq war itself was a massive waste/mistake/awful policy. That the reconstruction (the only part I thought might do any good) was wasted is just an added irritation.

  25. Slarti, I really wonder how the federal government compares to large private organizations in terms of computer wastage.
    My wife has just started a grad school program. She has had to waste days of her time because the university has really really bad IT. She has 8 different accounts using four different usernames. We both went to a school that did IT right so we had no idea that apparently (based on recent conversations with friends), almost all universities screw up their IT/administration to a degree that boggles the mind.

  26. Judging by someone’s comments on EVERY GODDARNED THREAD TODAY, that someone must have just paid his quarterly self-employment tax or something.

  27. My wife is an IT project manager. She recently took over a project that was a mess. They recently had to increase the budget by about 50% for that project. It’s a pretty damned important one that should have been under plenty of scrutiny. Yet all sorts of things were missed, swept under the rug, etc. It’s taken her months to figure out all the things that are screwy, and it’ll take her more months to fix them.
    The people most responsible for the mess moved on (one left first and then brought the other over). They will suffer no consequences whatsoever.
    Hmm, that sounds familiar.

  28. Judging by someone’s comments on EVERY GODDARNED THREAD TODAY, that someone must have just paid his quarterly self-employment tax or something.
    No, my fricking state franchise taxes–cleaned me out, as a matter of fact, but that’s part of it. Actually, I have a bit of free time and haven’t dropped by in a couple of days.

  32. Well, at least the dragon tank has historical precursors. Look at some renaissance designs. and Germany might have build tanks in the 1000-1500 t range, had the project not been stopped by Speer. The war could have been far shorter, had the German industry been converted to building these.

  33. Tangentially related:

    Today the Sunlight Foundation launched analysis that reveals more than $1.3 trillion in federal reporting data from 2009 is broken. These data inaccuracies account for 70 percent of the total $1.9 trillion in government spending data reported last year.

    I suspect there’s not much history to show that The Center Cannot Hold, but there’s some.

  35. The only tiny flaw I see in your plan, Russell, is the army we need to guard the zombie army.
    Details.
    Also, from my experience, large and/or complex IT projects go south on a fairly regular basis pretty much anywhere they’re attempted. Public sector / private sector, same-same.
    It’s hard to do large and/or complicated things. Not impossible, just hard.

  36. Spencer Ackerman: Who’s Really Responsible For Afghan Corruption? You:

    You pay your taxes, right? Well, Anthony Cordesman of the Center for Strategic and International Studies argues in a new paper (.pdf) that the explosion of U.S. cash — $450 billion in ten years, thrown into a country with a $29 billion annual GDP – put Afghanistan on a path to institutional dysfunction. With more foreign money than the capacity to absorb it, corruption in Afghanistan became “the real internal system of national politics,” not a deviation from it. The narco-palaces of Kabul; the millions squirreled away to Dubai to protect warlords’ assets; the villagers shaken down by police officers — that’s all on us. [….]

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