A comedy show on Russia Today starring Lee Camp (stand-up comedian and former writer for The Onion) has become the latest outlet to push an old debunked story - the idea that there are trillions of dollars missing from the Pentagon. This myth arose because the the Pentagon (i.e. the Department of Defense) has multiple different accounting systems across multiple departments. These systems have a serious problem: they are not "interoperable". This means that entries on one system do not automatically flow to another system.
So when the military has to make quarterly or year-end financial statements, some entries, like the value of certain assets (like aircraft carriers) or liabilities (like pensions), have to be transferred either manually or by an automated but uncertified system. Because of this it's marked as "unsupported" because it lacks a rigorous audit trail. But it's not missing. It's just a long list of entries, like the value of the Navy's ships, that don't meet proper accounting standards. Since these things don't go away, the same entries can be made year after year, and you can add the numbers up to get bigger and bigger amounts. But it's not missing money or undocumented spending.
This can be a difficult thing to understand. On a House Armed Services Committee hearing held on Jan 10 2018, Representative Walter Jones raised the issue, reading from a Reuter's article. Jones seem to have thought that the money was missing. Defense Department Comptroller, David L. Norquist, explained it to him.
And this is not a new story, it dates back to 2001 and before, in an April 2001 report, the DoD explained what the entries typically were for:
REP. WALTER JONES
Of all the articles I've seen about waste in the 22 years that I've been here, probably this is in the top four or five. It's from two years ago [reading] "US Army fudged its accounts by trillions of dollars, auditors find. The Defense Department Inspector General, in a June report, two years ago, said the army made a $2.8 trillion in wrongful adjustments to accounting entries in one quarter alone in 2015 and $6.5 trillion for the year, yet the Army lacks receipts and invoices to support these numbers, or simply made them up." This would be something, I would think, would be under your department's jurisdiction. [...]
Let me address that, that's a very important one. One of the issues you're talking about related to journal vouchers, which occurs after the money is spent. So when you see in the article it says trillions of dollars and you realize we only receive about $600 billion in a year, there's a mismatch in the story. What this refers to is: we have systems that do not automatically pass data from one to the other. The army [and others] goes in at the end of their financial statements, finds the number from their property book and writes it into their general ledger. That is called a journal voucher entry. Depending on the property it could be hundreds of billions of dollars. Because they don't have adequate support for that journal voucher, the whole entry is considered unsupported. Now from a management point of view this is bad. It's not the same as not being able to account for money that the Congress has given you to spend, but it's still a problem that needs to be fixed. Part of that relates to systems that were built as "stove-pipes", and in private sector they don't talk to each other, you wouldn't let them field a system that wouldn't automatically pass up its data. So we are addressing exactly that type of challenge and one of my concerns is — only by eliminating the types of ones that are just an entry issue can you find underlying issues that are hidden among inaccurate data. So it's important, I wouldn't want the taxpayer to confuse that with something like the loss of trillion of dollars, that wouldn't be accurate. But it's an accounting problem that does need to be solved because it can help hide other underlying issues.
DoD notes that many of these entries included end-of- period estimates for such items as military pension actuarial liabilities and contingent liabilities, and manual entries for such items as contract accounts payable and property and equipment values.
- "Military pension actuarial liabilities" are "The amounts calculated based on actuarial assumptions that represents the present value of the pension benefits accrued in pension plans" - i.e. it's totals that will vary from year to year, but represents an estimate of how much money is needed in the future.
- "Contingent liabilities" are amounts that the department will probably be liable for, things like class action lawsuits or defaulted loan guarantees. These estimates vary, can last for years, and again don't represent spending.
- "Contract accounts payable" are amounts owed to contractors. The DoD pays slowly and the account goes though various stages. Here there are estimates of the totals of these various stages in different departments.
- "Property and equipment values" are estimates of the values of things that the DoD owns. Things like buildings, weapons, fighter jets, fuel, battleships, etc. This is not spending, as they have already spent the money to acquire the asset. It's an estimate for things like depreciation, insurance, and replacement budgeting.
Nobody is saying that the defense department does not waste money. It very obviously does. Hundreds of millions, possibly even billions of dollars are wasted through inefficiencies, incompetence, and corruption. It is probably a measurable percentage of the Pentagon's budget. But the Pentagon's budget is around $600 billion. A measurable percentage of the Pentagon's budget is not $6.5 Trillion. That's ten times the amount of money that went into the Pentagon that year, and they still had to run the military. Clearly it's impossible to both spend most of the money you've been given, and also lose ten times that amount.
Lee Camp spends a good portion of his comedy segments illustrating just how much money $6.5 Trillion (or $21 Trillion) is with comparisons to the GDP of the UK, and illustrations like how tall a stack of $1000 bills worth $6.5 trillion would be. These comparisons elicited only somewhat strained laughter from the RT studio audience, but that does perhaps illustrate the unfamiliarity most people have with "trillions", and the reason why this story continues to have legs. Losing $6.5 trillion from a budget of $600 billion almost looks like it makes sense. But is you put it like losing $6,500 billion from $600 billion, then the impossibility is a bit more apparent.
How did we get here? The $6.5 Trillion number comes from a Jul 2016 report titled: Army General Fund Adjustments Not Adequately Documented or Supported, which goes some way to describe the complexity of the issue. But the $21 trillion comes from later work by Mark Skidmore, a Professor of Economics at Michigan State University, who added up a number of similar reported journal voucher issues over several years to come up with the larger number. This is just more of the same though, still not missing money, still just unsupported accounting information transfers.
Skidmore has been skirting the conspiracy circuit with this idea. He co-authored a Forbes blog piece with Laurence Kotlikoff, he collaborated with Catherine Austin Fitts (a frequent guest on Coast-to Coast AM, and sometime 9/11 conspracist) in searching for the journal voucher adjustments, and he gave an interview with Greg Hunter supporting the idea that the numbers represented missing money. This insinuation has been accepted as fact by the more overt conspiracy community, like Alex Jones and David Wolfe.
Like Norquist says, "it's an accounting problem that does need to be solved because it can help hide other underlying issues." It's helping hide the very real (but much smaller) amounts of money that the Pentagon wastes every year. But it's also being falsely used for a broader purpose — to legitimize implausible conspiracy theories like 9/11 controlled demolitions or even chemtrails. If the Government can steal trillions of dollars from us (the argument goes) who knows what else they would do, especially now they can afford it?
But nobody stole trillions of dollars, it's impossible, and it's just adding up a bunch of accounting. It's accounting that's difficult to follow. So unfortunately, because of this difficulty, this particular myth is going to stick around for a while.