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December 7, 2016

Obama’s Pentagon Waste and Outsourcing

$125 billion in waste, F-16 production moved to India. What else?

Now that we have a real businessman headed to the White House, “business as usual” in Washington may start getting a little unusual. At least for Beltway insiders, anyway. For the rest of us, we’re hoping to see some common sense kick in.

This week it seems to be the defense industry that’s getting the attention. But the Pentagon may have brought that on itself by attempting to bury a report that revealed $125 billion in wasteful and fraudulent spending.

An in-depth exposé in the Washington Post explains how the Pentagon commissioned a study in 2014 to look for ways to make its “enormous back-office bureaucracy more efficient and reinvest any savings in combat power.”

The study was conducted by the Defense Business Board, a federal advisory panel made up of corporate executives and consultants from McKinsey and Company. The final report identified $125 billion in wasteful spending to be cut over five years by streamlining bureaucracy through attrition, early retirements, and curtailing high-priced contractors.

Top brass, however, were terrifically embarrassed by such a large amount of waste in the Defense Department. To give some life to their concern, consider the fact that $125 billion represents about 20% of the Pentagon’s annual budget. On top of that, the number of back-office civilian and military personnel is roughly equal to the total number of troops on active duty, a one-to-one ratio. And if that isn’t enough to shock you, 298,000 of those back-office personnel are military, not civilians or contractors.

It’s little wonder that the Pentagon wanted to bury this report, and Barack Obama was no doubt a big supporter — if not instigator — of that decision. Remember the days of the sequester when Obama was blaming Republicans for leaving our national defense vulnerable because of “reckless cuts”? Cuts that were his idea for political gain. Well, if the Pentagon had followed the Defense Business Board’s recommendations, it would have found the savings it needed to balance out the sequester cuts, which was what was intended at the time anyway. But Obama opted instead to close DC memorials and national parks so as to score more political points.

To Obama’s White House, it was never about cost savings or reduced spending, or about keeping jobs and dollars in the U.S. And in its twilight days, the administration has not learned the right lesson.

With Obama’s blessing, Air Force Secretary Deborah Lee James and Defense Secretary Ashton Carter are working out a deal to build Lockheed Martin’s F-16 and Boeing’s F/A-18 fighter jets in India.

The F-16 is being phased out by the U.S. military, but the aircraft is still popular in other countries. There are still a lot of jobs to be had for building and servicing the aircraft, though both the administration and the two companies insist American jobs will be repurposed, not lost. It may make some business and logistical sense to move this manufacturing overseas, but it seems to us there are some things that just shouldn’t be outsourced. America’s iconic military jets are one of them.

In the wake of President-Elect Donald Trump’s recent work to stop jobs from being shipped overseas, the Indian government is wondering if the deal will still hold. It may; it may not. But Trump is definitely making his presence known now in other areas.

In fact, Boeing is now feeling the heat from The Donald for its deal to build two new planes to fly as Air Force One. The new 747s are sorely needed as the current pair of retrofitted planes flying as the airborne White House are around 30 years old. The price tag, however, seems to have climbed past the point of fiscal responsibility — at least according to Trump’s latest Twitter declaration.

The replacement program for the planes was originally budgeted at $2.87 billion for fiscal years 2015-2021, but this was apparently only for research and development, testing and evaluation, not the cost of the planes themselves. However, a Government Accountability Office report from earlier this year claimed the program would cost $3.21 billion, planes included.

That was too much for Trump, and now Boeing is finding itself on the defensive. The Donald couldn’t resist pointing out that his own 757 is posher than Air Force One, which may very well be true, but it doesn’t have defense countermeasures nor can it operate as an airborne command post during a nuclear attack. That we know of…

The point here is that Trump is acting on campaign promises he made to keep jobs in the United States and to make America more economically competitive. He’s also already signaled with his pick of James “Mad Dog” Mattis for defense secretary that the Pentagon could use some cleaning up. After eight years of Obama, that’s going to be a herculean undertaking.

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