Black Ops & Red Ink: The Pentagon's $21 Trillion Disappearing Trick

BENJAMIN FRANKLIN reckoned without the Pentagon. The world champions in delivering taxpayer-funded death are uncertain about where $21 trillion (tn) has gone. Where is that money? If you are anticipating a sinister solution, there is both good and bad news.

Bad news first: the mystery is mostly about incompetence. We'll get to the sinister part later.

Money to Burn

REMEMBER 9/11? Rhetorical question. Conspiracists made much to-do of the fact that on 9/10 (so to speak) the Pentagon had announced it had lost $2.3tn.

Perhaps the attack on the Pentagon was designed to destroy all records of this financial disaster? But it had already been public since 2000, and Defense Secretary Donald Rumsfeld was just repeating known facts. Or unknown facts. Or however else he might have put it, in his inimitable style.

Here's what Rumsfeld actually told reporters on "9/10":

Our financial systems are decades old. According to some estimates, we cannot track $2.3 trillion in transactions. We cannot share information from floor to floor in this building because it's stored on dozens of technological systems that are inaccessible or incompatible. ^{(Emphasis supplied)}

And that emphasised bit is where the popular misunderstanding has arisen. Rumsfeld (pictured right) gave one of his typical explanations that only confused things more.

The Pentagon is simply very very bad at keeping its financial records in good order. The Pentagon only has an annual budget of around $600 billion (bn).

I say “only” because $600bn is just under 1/4th of $2.3tn. Yes, the sums involved are that mind-boggling.

The kicker is that the federal government's entire budget (as of 1999) was only $1.8tn. So it wasn't even possible for the Pentagon to lose $2.3tn in 2001, never mind for it to rack up almost ten times that loss by 2018.

How To Lose What You Never Owned

WHAT HAS HAPPENED here is that some dollars are being counted more often than others. Imagine that we meet up in our favourite bar, and I lend you $10. Later, we return to our respective homes. By now, I have forgotten that I loaned you $10 and can't figure out what I spent it on. Separately, you then manage to mislay that same $10 bill. We each find we are $10 short. To an outside observer, taking a financial "snapshot" at that particular moment, it would appear that – impossibly – $20 had gone missing.

It wouldn't matter if later on, I remembered giving that $10 bill to you, and you found it tucked inside a book and paid me back. $20 would have been unaccounted-for at the time that outside observer checked. The outside observer was conducting an audit.

Make that one $10 bill into millions of them, multiply the transactions by thousands every day, and it soon adds up to astronomical amounts.

The Pentagon is like a magician performing the "three cups/one coin" trick (pictured left), except this magician has forgotten which cup the coin is under, so he's just as baffled as his audience.

Embarrassingly, this is fairly common in defence spending. To stay with the US, and to pick a year more or less at random, in 2016 we learned that the US Army had similarly lost track of $6.5tn.

Black Tech & Black Ops

NOW LET'S SHOOT the “elephant in the room” - the bit you actually want to read. Yes, there really have been instances of the military-industrial complex running “slush funds” – deep reserves of cash, kept off the books, to be used for various schemes that they don't want to get attention.

In the mid-1990s, the NRO (National Reconnaisance Office, which runs America's spy satellite program, logo pictured above right ) was discovered to have maintained a slush fund estimated at $1bn. How had the NRO managed this? They over-estimated their costs, billed Congress up front, and kept the difference.

A proper audit of the NRO showed that it had in fact squirreled away almost $4bn. What were the NRO up to, with their secret surplus? No-one's really sure, but it looks like they spent some of it on real estate -- in the form of new offices that were far too big for their intended purpose. Cynics might imagine that this was a form of property speculation that could have paid off handsomely in the long run. Perish the thought.

The astonishing thing is that the NRO itself was a black op for decades. The office was established in 1961, but its existence was only officially disclosed in 1992. During the intervening years, the NRO had been merrily lobbing satellites into orbit without a care in the world, totally unsuspected by the public.

So we might speculate that the NRO was funding some especially fiendish plans with that $4bn stash. This is the same body that produced the notorious “World-Eating Octopus” logo (pictured above left) for one of its projects, which suggests a certain degree of... megalomania.

But $4bn is a far smaller sum than $21tn (to be quite clear, it's 5,250 times smaller). And the entire annual economic output of every nation on Earth adds up to around $79.58tn.

(That $79.58tn estimate for combined global activity? It comes from the CIA. Some might propose that the CIA just invented that figure to obscure the amount of money being spent by the Pentagon. Well, you're on your own with that one.)

The Pentagon's Puzzles

THE BOTTOM LINE is that the latest landslide of errors in the Pentagon's accounts has accumulated into a sum that is roughly equivalent to a quarter of the entire planet's income.

But the Pentagon never had that much money to begin with, so it hasn't really gone missing. Not all of it, anyway. We can't be sure. (We haven't got a clue!)

And since we don't know how much is really missing, it's almost impossible to deduce whether any of it might have been spent on nefarious things.

As the old wisdom has it: “Where do you hide a tree? In a forest.” The case of the NRO's slush-fund is tantalising evidence of what can happen when huge amounts of public money are sucked into a bureaucratic version of the Twilight Zone. We'll look further into this issue in a future Steemit post.

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