"MILITARY SPENDING: Where Has All the Money Gone?"

EXECUTIVE Admiral Gene LaRocque (USN, Ret.),

PRODUCER: Pres., Center for Defense Information

HOST: Admiral John Shanahan (USN, Ret.) Director, Center for Defense Information

DIRECTOR

OF RESEARCH: David T. Johnson

DIRECTOR of

TELEVISION: Mark Sugg

SENIOR PRODUCER

& NARRATOR: Ira Shorr

PRODUCERS: Glenn Baker

Daniel Sagalyn

Stephen Sapienza

PRINCIPAL ANALYST

& SCRIPTWRITER: Daniel Sagalyn

SEGMENT PRODUCER: Daniel Sagalyn

VIDEO GRAPHICS: Adam Luther

ORIGINATION: Washington, D.C.

PROGRAM NO.: 852

INITIAL BROADCAST: 10 September 1995

CONDITION OF USE: Credit "AMERICA'S DEFENSE MONITOR"

(Center for Defense Information).

Reserved.

Videotapes also available.

"MILITARY SPENDING: Where Has All the Money Gone?" features:

____________________________________________________________

KELVYN ANDERSON Delaware County Daily and Sunday News

Rep. PETER DeFAZIO (D-OR) U.S. House of Representatives

JOHN ISAACS Council for a Livable World

JEREMY ROSNER Former Special Assistant to the

President

BELEN SARAMOSING Travel House Travel Agency

FRANKLIN SPINNEY Analyst, Department of Defense

and additional comments from:

Senator Strom Thurmond (R-SC) Chairman, Senate Armed Services Committee

Senator CHARLES GRASSLEY (R-IA) Senate Budget Committee

Senator CARL LEVIN (D-MI) Senate Armed Services Committee

Senator ROBERT DOLE (R-KS) Senate Majority Leader

Rep. FLOYD SPENCE (R-SC) Chairman, House National Security Committee

Rep. BOB STUMP (R-AZ) House National Security Cmte.

JOHN HAMRE Comptroller, Defense Department

CHARLES BOWSHER US Comptroller General, GAO

DEREK VANDER SCHAAF Defense Department's Office of Inspector General

- - - - - - -

Senator STROM THURMOND (R-SC) (Senate speech, 19 May '95):

"Mr. President, I am strongly in favor of cutting federal spending and reducing the deficit, but we must meet our national security needs."

NARRATOR: Cutting federal spending has become almost a religion on Capitol Hill. But while domestic programs are getting the axe, military spending is being increased.

Rep. BOB STUMP (R-AZ) (House National Security Committee, 8 Feb. '95):

"What I want to say is that I think there are many of us on this committee, Mr. Secretary, that will do at every opportunity we have what we can to increase this defense budget to the maximum extent possible."

NARRATOR: But not everyone agrees that the Pentagon should receive special treatment.

FRANKLIN SPINNEY: There's an enormous amount of in DoD and it's in virtually every account except for the personnel salaries account. For example, military construction, research and development, procurement, and operations and maintenance.

NARRATOR: This week, "AMERICA'S DEFENSE MONITOR" considers the issue of military spending and asks "Where Has All the Money Gone?"

["AMERICA'S DEFENSE MONITOR" program introduction.]

Adm. JOHN SHANAHAN (USN, Ret.): The administration, the Congress and a majority of the American people want to balance the federal budget. Can the Defense Department contribute to that process? That's the subject of today's program.

NARRATOR: The doubling of military spending from 1979 to 1985 was accompanied by many examples of waste. To end these kinds of abuses, the Packard Commission in 1986 recommended numerous Pentagon procurement reforms. While some of the horror stories of the mid-80s have diminished, there are those who have found that the Pentagon is still wasting money.

Senator GRASSLEY (Senate floor speech, 2 March '95):

"The Pentagon check-writing machine is stuck on full power. It's kind of on automatic pilot, and the accounting department has gone on a long vacation."

NARRATOR: Senator Grassley, a conservative Republican who has monitored military spending for many years, says the Pentagon is wasting billions of dollars through poor accounting and bad budget planning. Grassley maintains that the Defense Department doesn't know what it spent yesterday, is spending today, or will spend tomorrow.

The General Accounting Office, Congress' investigative arm, has found that the Pentagon paid billions of dollars to defense contractors without knowing whether these companies had actually provided the goods or services for which they were paid.

Senator GRASSLEY (Senate floor speech, 19 May '95): "The extent to which DoD accounts are vulnerable to theft and abuse is truly frightening. The latest figures provided by GAO indicate DoD has $29 billion in problem disbursements. That means that the Department of Defense doesn't know how $29 billion was spent."

NARRATOR: John Hamre is the comptroller of the Department of Defense who is responsible for reforming and fixing its accounting problems. He says that the Defense Department is a huge bureaucracy with billions of dollars in bills to pay each month. Hamre argues that only a small percentage of the payments they make are questionable.

JOHN HAMRE (Senate Armed Services Committee, 16 May '95): "We process 2 1/2 million invoices every month and we spend $9.2 billion a month. Senator Glenn mentioned that we process $35 million an hour at the Columbus center. We process nearly ten million paychecks a month. So, that's ten million times to get things screwed up. I've had my pay screwed up six times since I've been in the department. And it's really bad when you screw up your boss's pay, and I've done that a couple of times."

NARRATOR: John Hamre testified before Congress that the Pentagon is consolidating and modernizing its accounting systems to prevent improper payments.

Mr. HAMRE (same hearing): "We're making progress, but we're processing $8 billion a month."

CHARLES BOWSHER. Comptroller General of the US General Accounting Office (same hearing): "I think we're just making modest progress so far. And I think the big thing that we've got to see in the next few years is a much more increased pace of progress, you might say."

NARRATOR: Only a few members of Congress seem to be concerned that the Pentagon is unable to account for billions of dollars.

Senator CARL LEVIN (D-MI) (same hearing, 16 May '95): "This is totally unacceptable. There's a lot of money here which is going through this sieve. And we're told that we've got to cut domestic programs massively. Some of these savings could fund the EPA for a whole year. These are just savings that would come from decent financial systems.

"Department of Education, they were told major cuts in education programs. And then we read, well, you know, half-a-billion is paid per year that isn't owed."

NARRATOR: Senator Grassley believes that Pentagon spending shouldn't be increased until the Pentagon cleans up its accounts.

Senator GRASSLEY (Senate floor speech, 20 March '95): "This situation's a disgrace. It tells me we cannot meet our constitutional obligations to the taxpayers of our country to make sure that things are honestly and legally spent."

NARRATOR: Poor bookkeeping results in the loss of billions of dollars in taxpayer funds, but it's not the only area where Pentagon spending practices could be reformed.

Most Americans don't know it, but the passenger airline in the United States with the second largest number of aircraft belongs to the US Department of Defense.

Senator GRASSLEY (press conference, 8 June '95): "There are too many planes, too many helicopters, too many users and, of course, too much waste of taxpayers' dollars."

NARRATOR: We're not talking about the military's huge fleet of bombers, combat jets, cargo airlifters, communication and spy aircraft or attack helicopters. We're talking only about the multitude of helicopters and executive jets each of the services fly in what is called the Operational Support Airlift fleet, plus the Air Force's 89th Military Airlift Wing.

According to the General Accounting Office, there are about 600 aircraft in this Defense Department fleet, which means it has more aircraft than United, Delta, Northwest or Continental. Only American Airlines has more aircraft.

Senator GRASSLEY (Senate floor speech): "Now when you leave all the mirrors and smoke aside and all the rationale of DoD officials about why this might not be abuse, the bottom line is this fleet is nothing more than the private airline of senior government officials."

NARRATOR: The Department of Defense declined to talk to us on camera, however, their policies state that during wartime these planes are needed to transport critical personnel and high priority cargo. During peacetime these planes are supposed to transport top Defense Department officials who require continuous secure communications, a high degree of physical security, and those whose schedules make flying commercial airlines impractical or more expensive.

The 89th Air Wing is also responsible for flying the president, vice president, and other high level officials in the US and in foreign governments. However, a recent General Accounting Office investigation found that many of the 20 destinations most frequently traveled to by senior level Pentagon officials were also served by lower cost commercial carriers. The GAO also discovered dubious uses of these aircraft by military personnel.

Rep. PETER DeFAZIO (D-OR) (Press conference, 8 June '95): "We had, for instance, $650,000 of cost transporting cadets to football games."

NARRATOR: The Air Force flew at least 22 missions between November 1993 and March 1995 flying cadets to sporting events like this football game in Hawaii.

Rep. DeFAZIO: We could have bought them all coach tickets for a lot less, but instead they went on special military aircraft, essentially on private jets. They were flown to Hawaii.

NARRATOR: According to Congressman DeFazio, misuse of these Operational Support Airlift aircraft has not been limited to the lowest ranking members of the armed forces.

Rep. DeFAZIO: We find a general who flew himself, his cat and one aide in the utmost luxury in a private jet transport, which was flown to Europe to pick him, his cat and the aide up, and then flown back to Denver, Colorado with him, the aide and the cat for a cost of between two and $300,000. We could have bought him the plushest first class travel in the world, his cat could have had a seat in first class, and it would have cost, you know, a fraction of that amount.

He was not on duty. He was, in fact, being transferred to another job, so it was not an operational requirement that he had secure communications. It was just purely he had stars on his shoulder, he could do it, so he did it.

NARRATOR: The widespread publicity of this flight by Air Force General Joseph Ashy from Italy to Colorado, where he was to take over a new assignment, prompted the Defense Department to modify its policies to try to prevent abuses like this from happening again.

Pentagon officials aren't the only frequent flyers on this fleet. Many members of Congress use these airplanes, too, and say supporters, for good reason.

JEREMY ROSNER: My experience has actually been that we want to be just as concerned about Congress not traveling. From my experience, some of the congressional delegations to foreign countries have been enormously influential in what I would think are very positive ways in producing congressional consensus or informing congressional opinion on foreign affairs. I don't think we want the US Congress to be a bunch of insulated stay-at-homes who never look outside our own borders.

Rep. DeFAZIO: There is extraordinary abuse by members of Congress. Not as bad as it used to be. I've heard apocryphal stories about powerful members of Congress who used to fly to Paris for dinner just for fun and then fly back on military aircraft. That doesn't happen anymore. But now they'll fly to Paris to have some essential meeting and have dinner and stay overnight, and then maybe fly somewhere else.

And you got to question whether that was an essential meeting or whether it could have been a teleconference or even telephone conversation or something carried out at some other time in some other manner. You know, if we got to get touch about the budget, frivolous travel should go.

NARRATOR: Some of the most vocal critics of federal deficit spending fly on military aircraft.

Senator ROBERT DOLE (R-KS), Majority Leader (Senate floor speech, 19 May '95):

"And the deficit has increased $4.9 billion since we introduced our balance budget amendment."

NARRATOR: In November 1994, Senate Majority Leader Bob Dole and three assistants flew on an Air Force plane, like this Gulfstream III, to London to meet with the prime minister, and Brussels to meet NATO officials, and then back to the United States. Total cost: $53,000. When asked why he didn't fly on a commercial airline, his spokesperson told us that it was because Senator Dole was flying on "official business."

We asked a travel agent how much the same trip would have cost if the senator and his aides had flown on commercial airlines.

BEREL SARAMOSING: It would cost on economy, the lowest fare would be $793, times four would be $3,173.

Mr. ROSNER: I remember one congressman who I met about 15 years ago as he was just about to go into the House for the first time who didn't know where the Mideast was. And I don't want our members of Congress not to know about the world, I want them to know about it, and that's an important way.

And the military, by providing transportation and sometimes aides to go with them on these trips, I think plays a very important and appropriate role for the education of the American Congress.

NARRATOR: Yet numerous trips that members of Congress take are not for fact-finding or educational purposes.

Senator THURMOND (Senate floor speech, 19 May '95): "Mr. President, I am strongly in favor of cutting federal spending and reducing the deficit, but we must meet our national security needs."

NARRATOR: Senator Strom Thurmond likes to fly military air. He went to these Miss America Pageant activities to honor the reigning Miss America, who was from his home state of South Carolina. This parade took place in Atlantic City. The next day the senator attended a rededication ceremony at Fort Jackson in South Carolina. How did he travel from the Miss America Pageant to the ceremony at Fort Jackson?

According to documents reviewed by "AMERICA'S DEFENSE MONITOR," the chairman of the Senate Armed Services Committee flew on an Air Force C-12. Total cost: $2,497.50.

Ms. SARAMOSING: Atlantic City to Fort Jackson would be a round trip on economy of $439.

Senator GRASSLEY (8 June '95): "It is, in fact, the ultimate in travel convenience but at prices that make first class tickets seem like a real bargain."

NARRATOR: Congressional trips to ceremonial events occur frequently. At this dedication of the John Sparkman Center for Missile Excellence at Redstone Arsenal in Alabama, Senators Heflin and Shelby, along with four aides, were flown in on an Air Force C-20. Total cost: $7,500.

Ms. SARAMOSING: For six people from Washington, D.C. to Huntsville, Alabama it would cost $257 round trip, that's for a seven-day advance notice. Times six, it would cost $1,542 total.

Rep. DeFAZIO: I've long held that members of Congress should have to basically disclose before they go on a trip the itinerary and make it publicly available and the purposes of the trip. Those things are now published deep in the bowels of the Capitol, you know, a couple of times a year, long after the trips too place, and still it's an embarrassment. There is extraordinary abuse by members of Congress.

NARRATOR: In fact, the General Accounting Office gave up trying to audit congressional usage of these planes because the records of who flew where and when were inadequate.

The fleet of more than 600 support aircraft cost a lot to operate and maintain. Between 1993 and 1995, the Pentagon spent more than one billion, one-hundred million dollars flying these aircraft.

While the size of the fleet is supposed to be based upon the number of planes needed in wartime, the General Accounting Office found the current inventory of Operational Support Airlift aircraft to be ten times greater than the number of aircraft used in theater during the Persian Gulf War.

Numerous Pentagon studies have called for the reorganization and reduction in the size of this fleet, most recently in May 1995. How has the Pentagon responded to this recommendation?

According to Inside the Pentagon, a weekly investigative publication, the Joint Chiefs of Staff have called for... more study.

Rep. DeFAZIO (press conference, 8 June '95): "In a time of tight budgets, there should be no part of the government which is exempt from belt-tightening and cost accounting. But this program essentially is."

NARRATOR: According to one Defense Department official interviewed off-camera, each of the services wants to have its own aircraft in order to be able to provide the perk of flying to those politicians who can help them the most.

Representative DeFazio wants to reduce the size of the Operational Support Airlift fleet and save millions of dollars.

Rep. DeFAZIO: From the reports we have, we could reduce Operational Support aircraft costs by $150-, $200 million a year without harming the needed readiness of the military. That's still a lot of money to me. Maybe I haven't been in Washington, D.C. long enough. Maybe, you know, I'm some kind of aberration. But it seems to me if the Pentagon could save $150- to $200 million in just one program because of unnecessary, frivolous use of equipment and personnel that they should eliminate that.

NARRATOR: Congressman DeFazio thinks reducing the size of this fleet could open the door to further savings in military spending.

Rep. DeFAZIO: But what I think is this is the tip of the iceberg. And if we bring about this attitude, if the generals stop hopping in the helicopters and hopping in the private jets and flying to have drinks with their buddy at an Air Force base half a country away and then flying back and calling it an operational need, then maybe they will take that new fiscal attitude when they're hurting a little it, when they don't have that perk anymore, and they'll impose it on everybody else in the military and we'll get control of military spending. You know, it's just a symptom, but it's also real money.

NARRATOR: Besides improving the Pentagon's financial control system and reducing the size of the Operational Support Airlift fleet, are there other areas where savings could be made?

This summer Congress voted to increase military spending by $7 billion on top of the $258 billion the Pentagon requested. Much of the additional money is being earmarked for specific weapons not requested by the Defense Department.

JOHN ISAACS: You have these ultimate defense hawks on the Senate and House Armed Services committees and the various defense appropriation subcommittees, not only are they pouring money into the military budget, but they're targeting that money into specific projects and programs that benefit them, their own districts or their own states.

NARRATOR: Members of Congress are often tempted to bring home the bacon through lucrative weapons contracts, even if the weapons aren't needed or end up not working. A recent example of this was when the Pentagon awarded contracts to build these two Navy oilers to Pennsylvania Shipbuilding Company and then to Tampa Shipbuilding Company.

According to the Defense Department's Inspector General's office, neither of these two contractors were qualified to build these ships. Yet congressional influence prompted the Navy to award the jobs to them anyway.

DEREK VANDER SCHAAF, DoD Office of Inspector General (Senate Governmental Affairs Subcom. on Investigations, 2 May '95) "You know, I would surmise that, you know, there were political pressures, etc., to make that award."

NARRATOR: Kelvyn Anderson, a reporter with the Delaware Daily and Sunday Times, covered the story of these two ships from the beginning.

KELVYN ANDERSON: There were a number of people on the Appropriations Committee, Senator Spector and Senator -- or, actually at the time, Representative Edgar from the 7th District in Delaware County, put a lot of pressure on the assistant secretary for shipbuilding to award the contract to PennShip.

NARRATOR: When these ships could not be finished by PennShip, congressional pressure steered the contract to finish them to Tampa Shipbuilding in Florida, even though according to the Pentagon's Inspector General, Tampa Ship was financially unstable.

Mr. ANDERSON: Representative Bill Young from St. Petersburg, at the time was on the Appropriations Defense Subcommittee and he basically shepherded the whole contract through and the pressure to give the contract for the two oilers to Tampa.

NARRATOR: All in all, the Pentagon spent over $450 million on these two uncompleted ships. These vessels are so poorly constructed that they will never be used. Today, they are rusting in the James River in Virginia.

Defense contractors also take advantage of the government decisionmaking process by spreading contracts and subcontracts to build weapons among many congressional districts, thereby employing people in as many states as possible to gain congressional support, regardless of whether it's the most economical way to produce their products.

Mr. SPINNEY: Over the years, the art of spreading subcontracts around the country, which we in the Pentagon call "political engineering," has become a high art form where it's done very systematically.

NARRATOR: Franklin Spinney is an independent-minded analyst at the Defense Department. The views he expresses on this program are his own and do not necessarily represent the policies of the Department of Defense. In 1983, Spinney landed on the cover of Time magazine and testified before Congress on his concerns about Pentagon spending practices.

Mr. SPINNEY: We spread subcontracts all over the country. That puts enormous pressure on congressman. They find it very difficult to cut back defense programs because it puts people out of work in their districts. So, the voters put pressure on them to keep their jobs. So, defense is very difficult to cut back.

NARRATOR: Besides pressing members of Congress to buy weapons the United States doesn't need, Spinney believes that this process of spreading contracts around results in more expensive weapons.

Mr. SPINNEY: The C-130 could easily be made in the Lockheed, Georgia plant. It's a big plant. It's being used nowhere near capacity. But the C-130 has a subassembly operation in West Virginia, also in Meridian, Mississippi, and South Carolina. And if you look at who represents those areas, you'll find very powerful senators and congressmen.

And as a result, the cost of this program has increased. In today's dollars, taking out the effects of inflation, the cost has increased from about $10 million a copy to $37 million a copy for the exact same airplane.

NARRATOR: Pentagon watchers are calling for more light to be shed on the political reasons Congress is adding money to the military budget.

Mr. ISAACS: And that's what we need now in terms of all the new money that members of Congress are still steering with these weapons programs and military construction. As much public attention paid to the hypocrisy, to the double standard of saying we need other programs cut back, but here we want a lot of money, we want to steer it to our districts. That's not a reform, but again it's a different approach that might work.

President DWIGHT D. EISENHOWER (White House speech): "I get tired of saying that defense is to be made an excuse for wasting dollars. I don't think we should pay one cent for defense more than we have to."

NARRATOR: President Eisenhower was concerned that military spending was soaking up resources that could be better spent on more productive activities.

This summer, Congress voted to cut federal funding for school lunches for children from low income families. Medical assistance for the elderly is on the chopping block. And programs which bring together senior citizen volunteers with children in need is on the verge of being eliminated.

Rep. FLOYD SPENCE (R-SC) Chairman, House National Security Committee, 8 Feb. '95): "We will cut non-defense spending not to be malicious but because we simply have no choice."

NARRATOR: At the same time, Congress voted to increase military spending and give the Defense Department more money than it requested.

Rep. SPENCE (same hearing): "Unlike any other executive agency, addressing some of the defense budget shortfalls and shortcomings will require a commitment to sustain over time a higher level of spending."

NARRATOR: According to some observers, the Department of Defense has been exempt from the same scrutiny given to all other federal government programs.

Mr. ISAACS: There's no question that among the Republicans who now control Congress, a lot of programs are being cut back --Medicare, Medicaid, education, job training -- but the one program that is not is defense, is the military budget, and the military budget is treated as a sacred cow.

NARRATOR: Senator Grassley thinks military spending should be looked at just as closely as domestic programs when it's time to reduce government spending.

Senator GRASSLEY (Senate floor speech, 20 March '95): "So, I'm saying especially to those new Republican members of this body that I hope you will take as tough of a look at how money's being spent in the Defense Department and that you won't buy the argument that you can throw money at the Defense Department and just automatically get new defense. Any more than I know these new members will accept the argument from the other side of the aisle on social welfare and on education and a lot of other domestic programs that all you have to do is somehow spend more money and you just automatically get more and better programs."

Adm. SHANAHAN: In going over the military construction bill for next year, I noted that the House of Representatives added on $500 million over and above what was requested by the Pentagon. For example, $10.6 million of that is for a second gymnasium at the Puget Sound Naval Shipyard in Bremerton, Washington, an unnecessary expense.

Some people say that the only sure things in life are death and taxes. How about adding unnecessary military spending to that list?

For "AMERICA'S DEFENSE MONITOR," I am Jack Shanahan.

[End of broadcast.]

CONDITION OF USE: Credit "AMERICA'S DEFENSE MONITOR"

(Center for Defense Information).

Reserved.