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8.01.03
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ANNOUNCER: Tonight on NOW WITH BILL MOYERS, Senator John McCain calls it a "billion dollar boondoggle."

MCCAIN: I've seen a lot of ripoffs in my more than 20 years here. This is clearly the most obscene.

ANNOUNCER: Will billions in taxpayer money go to bail out a troubled corporation? And a warning from deep inside the Pentagon.

SPINNEY: ...that many of the weapons we're getting... the best you can say about them is that they are not designed for the threats that we face. Some of them may not work at all.

ANNOUNCER: Are the megaweapons crammed in the defense budget putting our national security at risk? An exclusive interview with a Pentagon insider.

MOYERS: You've said it's a moral sewer there on the Potomac?

SPINNEY: That's correct.

MOYERS: What do you mean "moral sewer"?

SPINNEY: Well, we are in effect undermining the Constitution because we won't address this issue of accountability.

ANNOUNCER: All that tonight on NOW WITH BILL MOYERS, the weekly newsmagazine from PBS.


ANNOUNCER: From our studios in New York, Bill Moyers.

MOYERS: Welcome to NOW. When terrorists attacked America on the 11th of September two years ago, this country was spending almost $1 billion a day on national defense. That didn't stop the terrorists.

Now, almost two years later, we're spending over a billion a day, and more is coming, much more. A recent story in the WASHINGTON POST put it this way:

"...the defense budget is set to grow over the next few years much faster than forecast growth in the economy."

Will so much money make us safer?

The government seems to think so. By a vote of 98-1 in the Senate and 361-68 in the House, Congress has given the President another $400 billion for the armed forces, more than he actually asked for. The reason, said Congress, is the war on terrorists.

Against such a chorus of consent it's hard to hear anyone who says, "Wait a minute. Are we getting our money's worth? Are our men and women in uniform getting the support they really need? Where is all all that money really going?"

In this broadcast, you will meet a Pentagon insider who says the spending is out of control and could even be putting the nation in peril. Not many of you will ever heard the name, but Chuck Spinney has a lifetime of experience to back up his claims, and there are some powerful voices in Washington that echo his witness.

MOYERS: Senator John McCain is one angry man.

MCCAIN: I've seen a lot of rip-offs in my more than 20 years here. This is clearly the most obscene.

MOYERS: What has him outraged is how the Pentagon wants to spend some 30 billion of our tax dollars.

The issue is America's fleet of aerial tankers — the flying workhorses the Air Force uses to refuel fighter jets in midair.

These tankers have been extra busy since 9-11. Critical, the Air Force says, to the military success in Afghanistan and Iraq.

But the tanker fleet is getting a little long in the tooth. Some of the planes date back to the Eisenhower administration.

GEN. ESSEX [before House Armed Services subcommittee]: And we know that the aircraft fleet is old. It's running into all kinds of problems, more expensive, longer to maintain, less availability, and that trend cannot be reversed.

MOYERS: So the Air Force has asked Congress for new tankers.

GEN. ESSEX: It looks to me like we definitely should proceed with replacing these old airplanes and move ahead.

MOYERS: The Air Force has made a deal for 100 new, specially modified 767s to be built by the Boeing Company, one of the country's biggest defense contractors.

GEN. ESSEX: I am totally convinced that we're doing the right thing.

MOYERS: The deal is for the Air Force to lease the planes instead of buying them outright, at a cost of $24 billion over the years of the lease. But there's a hitch. When the lease ends, the Air Force won't even own the planes. To keep them, it will have to pay another four to five billion dollars more.

MCCAIN: This is a bad deal for the taxpayers, a great deal for Boeing and the military industrial complex.

MOYERS: A lease, the Air Force says, will mean quicker delivery of the planes under the complex rules of Washington.

But critics contend this is all about "creative" accounting. A lease keeps initial costs low and pushes the true costs into the future.

An expert on leasing testified before Congress last week:

PLUEGER: If you're going to keep an aircraft and operate it for a long, long period of time, just like you do with a car, it's cheaper over the long run to buy it.

MOYERS: Even the Air Force admits a lease could cost as much as $900 million more. Critics say it could run into the billions.

What's more, Senator McCain isn't convinced the new planes are even needed now. Boeing itself did a study for the air force in 2001, concluding the current tanker fleet was "…structurally viable [until the year] 2040."

But, says the Air Force, just look at what's happened since that study was done. Wars in Afghanistan and Iraq have put extra stress on the old planes.

SAMBUR: The report did not really anticipate a time after 9/11 when the tanker utilization would increase dramatically and did not understand the corrosive effects on that plane.

MOYERS: Show me the evidence, says Senator McCain.

MCCAIN: Well, if there's validity to their argument, then they should be agreeable to doing what every… in the acquisition of any major weapons system has done, and that is an analysis of alternatives.

In other words, an analysis to say… to find out whether there are other ways to achieve the mission and a goal yet, at lesser cost.

They refuse to do that.

MOYERS: What's going on? Senator McCain has another name for leasing.

MCCAIN: It's a bailout for Boeing, whose line in this particular type of aircraft was about to shut down.

MOYERS: A group of conservatives, liberals and many in between have written Congress calling the "gold-plated tanker lease" a "sweetheart deal" that "appears to be a profligate waste of taxpayer dollars."

And Grover Norquist, the conservative's leading crusader against taxes, put out a statement of his own, calling the deal nothing more than "corporate welfare" — a "billion dollar boondoggle" to help Boeing.

There's no question it's a good deal for Boeing. The company hasn't been selling as many commercial aircraft as it used to. Just last month, Boeing announced another round of layoffs… this time, 4 to 5 thousand more workers.

MCCAIN: I don't blame Boeing for trying to get a government contract at the best deal for Boeing. That's their job.

But the incestuous relationship between the Secretary of the Air Force in particular, but others from the Pentagon and Boeing, is really a disgrace. They've reached a new high or a new low, depending on how you look at their ability to rip off the taxpayer for billions of dollars.

MOYERS: Supporters of the plan don't see it that way, especially members of Congress from districts where Boeing jobs are at stake.

They include Senators Patty Murray and Maria Cantwell, and Congressman Norm Dicks, all prominent Democrats from Washington, where Boeing is the largest employer in the state.

Kansas Republicans, Senator Pat Roberts and Congressman Todd Tiahrt, have been fighting for the deal as well. The lease is expected to bring thousands of jobs home to the Boeing factory in Wichita, Kansas.

And, according to BUSINESS WEEK, Republican Dennis Hastert, the Speaker of the House, called the White House's Chief of Staff Andrew Card to help broker the lease. Hastert is from Illinois, home to Boeing's corporate headquarters.

Boeing has been generous with its campaign contributions — almost $2 million during the 2002 election cycle.

On top of that, in the same period, Boeing spent more than $15 million lobbying federal officials.

MCCAIN: I would imagine that Boeing will win. I would imagine that when the Air Force announced where these tankers would be based so that they would get the Congressional support for that, that it'll increase their support for it.

But I'm not gonna quit fighting. And these kinds of excesses, sooner or later, people are gonna be called to account. And we won't quit fighting it.

MOYERS: There's a post-script to this story. The Air Force has been concocting this little deal with Boeing even as the very same Air Force has been investigating the very same company for committing, quote, "serious and substantial violations of federal law."

The Air Force says Boeing had in its possession thousands of documents stolen from another big defense contractor, Lockheed Martin. The two companies had competed for a satellite launch contract worth almost $2 billion back in 1998. Boeing won the competition, but has now publicly apologized for its behavior.

As punishment, the Air Force took away seven satellite launches from Boeing and for the time being has banned the company from other such contracts. The Justice Department is conducting a criminal investigation into the matter.

But that hasn't stopped the Air Force from moving ahead with the leasing deal that so enrages Senator McCain. Others are also indignant.

The CONSERVATIVE NATIONAL REVIEW has this to say:

"...a bailout is a bailout even when it's a lease. In this instance, it's expensive, wasteful, and attempts to reward a company with questionable ethical practices."
As we shall see, though, the real fight is about more than one sweetheart deal between the Pentagon and a contractor. The fight is over the culture that has grown up in Washington and whether Americans are getting the national defense we're paying for.


The story of Boeing and the leasing scheme would raise the hair on your neck even if it were just an isolated case of waste and inefficiency in a otherwise benign process of deciding the best weapons for the best defense. Unfortunately, it's a story so familiar, we seem almost blase about what it means to our national security.

Remember, those terrorists were not deterred by defense spending of almost a billion dollars a day. So how does it happen? How is it we can spend so much money and still be so insecure?

For the answer, we go way back to the 1970s when a handful of Pentagon bureaucrats, most of them former military officers and all of them patriots, got very angry. They figured out that the Pentagon was spending more money for fewer weapons and consistently underestimating their cost.

What ticked them off is that while this meant big profits for the defense contractors, who live on the spoils of war, it meant peril for the troops who fight the war. These fellows worked in an obscure corner of the Pentagon known as the Office of Program Analysis and Evaluation. From there, they waged a relentless bureaucratic battle to reform the system.

They've all moved on now, except for one, dubbed by reporters as the last man standing. His name is Franklin C. Spinney, C. for Chuck and he's the subject of this report by producer Peter Meryash.


MOYERS: Chuck Spinney has worked inside the Pentagon for almost 30 years, committed to a strong national defense. It's a conviction ingrained in him, as the son of an Air Force colonel and a former Air Force officer himself. But he has a shocking story to tell — one he wants every American to hear.

MOYERS: Are we getting the best weapons at the lowest prices?

SPINNEY: No. No way at all. We could get… the weapons we're buying, we could get at lower prices if we held the contractors' feet to the fire. And I submit that many of the weapons we're getting, the best that you can say about them is that they are not designed for the threats that we face. Some of them may not work at all.

MOYERS: He should know. For the last three decades, Spinney's job at the Pentagon has been to analyze the cost and effectiveness of America's weapons. And he says, national security is at risk because the country's not getting what we're paying for.

SPINNEY: I think it's out of control. I think a lot of people have just thrown up their hands.

MOYERS: So out of control, says Spinney, that the Pentagon can't account for billions upon billions of the dollars it's spending while its financial books border on pure fiction.

SPINNEY: We have an accounting system that is unauditable. Every year they do an audit and the inspector general would issue a report saying we have to wave the audit requirements, issue a disclaimer of opinion because we can't balance the books. We can't tell you how the money got spent.

MOYERS: Case in point: since 1995, the General Accounting Office has ranked the Defense Department's financial management among the worst in the federal government "… on [the] GAO's list of high-risk areas vulnerable to waste, fraud, abuse, and mismanagement."

What's more, in fiscal year 2000, the Defense Department's own inspector general found that the Pentagon could not account for more than $1 trillion — trillion with a "t."

Spinney says it amounts to a constitutional crisis.

SPINNEY: We have all, every member of the federal government has taken an oath to defend and uphold the Constitution. It's our fundamental oath of office. We don't take personal loyalty oaths in this country, we take oaths to the Constitution. And the rock solid foundation of the Constitution is accountability.

That the government represents the will of the people. And if it can't account for its own activities then there's no way the people can enforce its will on the government. Because they don't know what's happening.

MOYERS: Spinney's truth telling has long angered the military establishment. It began with his groundbreaking report in the late 1970s. The title was simple — DEFENSE FACTS OF LIFE — but it soon earned a reputation as "one of the most important documents ever to come out of the Pentagon."

The report documented a crisis in national defense — how an obsessive pursuit of ever-more complicated weapons threatened to wreck the budget and impair our security.

It brought Spinney to the attention of such reform-minded members of Congress as Senators Sam Nunn and Gary Hart, as well as journalists who wrote about a dysfunctional Defense Department.

Enter Ronald Reagan.

President Reagan promised a massive military build-up, leaving Congress to figure out how to pay for it.

At the same time, Spinney was working on his next report and it would prove to be a bombshell.

By 1983, Senator Chuck Grassley, a conservative Republican from Iowa, wanted to hear what Spinney had to say but the Pentagon was so rankled by Spinney's findings, it refused Grassley's request.

Only under threat of subpoena did the Pentagon give in. Congress scheduled hearings, but even then, Pentagon allies tried to bury Spinney's testimony in a small hearing room on a Friday afternoon.

So many members of Congress and journalists demanded to hear Spinney that his testimony was moved into a much larger room — the very place where the Watergate hearings had been held almost a decade earlier.

Spinney made big news.

DAN RATHER: When Chuck Spinney talks about defense costs overruns, Congress listens.

MOYERS: The country heard from Spinney how the Pentagon routinely underestimated the true costs of weapons.

SPINNEY [before Congress 2/25/83]: We projected that our modernization costs in 1982 would be here. It actually turned out to be here. That's a mismatch of 100 percent.

MOYERS: The Pentagon low-balled initial costs, Spinney told Congress, well-aware that hundreds of billions of dollars more would have to be spent in the future.

SPINNEY [before Congress 2/25/83]: If we don't face these structural problems and try to resolve them, we could hurt the consensus for a strong defense that has been so painstakingly built over the last 6 years.

MOYERS: Underestimating costs, Spinney testified, left less money for other weapon systems and slowed modernization. It even hampered military readiness.

GRASSLEY: If what you are saying is true, then we not only have a budget problem, but I think that we frankly have a major problem in national defense.

MOYERS: That was 1983. Spinney's courage and candor landed him on the cover of TIME magazine which called him "the unlikely hero" of the Pentagon reform movement.

Now, fast-forward 20 years. The defense budget continues to climb and Spinney is still speaking out.

MOYERS: President Bush has the military budget he wanted, $400 billion in one year alone. Is that enough?

SPINNEY: It's too much. And you have to remember that the way we do our budgeting, this is a peace time budget. When we fight wars we ask for extra money. It's a little bit like a fire department spending all this money on new equipment and then a fire alarm goes off and they say, "Well, we'd be happy to put out the fire but you got to send us some money so we can pay for the gas and the extra duty hours and the hazardous duty pay."

MOYERS: And that's just what has happened. The new $400 billion defense budget doesn't include the nearly $37 billion for homeland security … or the cost to keep American troops in Iraq and Afghanistan, which the Bush administration only recently admitted would run more than $4 billion a month.

BYRD [Senate floor statement 5/22/03]: Our country spends more on defense than all other 18 members of NATO plus China, plus Russia, plus the six remaining rogue states combined. In an age when we talk about smart bombs, smart missiles, and smart soldiers, any talk of smart budgets has gone out the window.

MOYERS: How's the public to make up its mind? I mean, you've got a senator like Byrd of West Virginia, a democrat who says, quote "Our defense budget seems more the same as ever. Not more bang for the buck, just more bucks. Then you get the chairman of the Armed Services Committee, Senator John Warner, saying quote "This sends a strong signal throughout the world that we are unified in the war against terrorists." Who are we to believe?

SPINNEY: Well, I'm not sure what the signal that it sends to the world is. It sends a big signal to the defense industry that we're unified to convert the war on terrorism into a big spend-up in defense. If you look at the weapons that we're buying, they're not for the war on terrorism. New air craft carriers, new submarines, F-22 fighters, Comanche helicopters. That's not about Osama bin Laden, that's about some sort of vestige of the Soviet Union.

These are basically legacy systems. Even though some of them may have started after the Cold War, they reflect the Cold War mentality of preparing a defense program to deal with a massive national power.

MOYERS: Look no further, Spinney says, than ballistic missile defense — so-called star wars, a protective shield made popular by President Reagan, who believed it would stop incoming missiles from hostile powers.

President Clinton was not convinced it would work.

CLINTON: I simply cannot conclude with the information I have today that we have enough confidence in the technology and the operational effectiveness of the entire system to move forward to deployment.

MOYERS: Nonetheless, Clinton refused to kill it. And less than a year later, his successor declared full speed forward:

BUSH: When ready, and working with Congress, we will deploy missile defenses to strengthen global security and stability.

MOYERS: But there's one little problem, says Spinney. Ballistic missile defense doesn't work. The only tests in which missiles have ever hit their mark turned out to have been rigged. For example, the incoming dummy targets were often equipped with homing beacons, making them easier to hit.

And yet, there have been several, high profile failures, including this one in June.

In an April report, the General Accounting Office called missile defense "…an expensive and risky endeavor…" that has so far relied on "…immature technology and limited testing."

With failure after failure of even limited testing, the White House has plunged ahead, deploying the unproven system which, by some estimates, could eventually add up to cost hundreds of billions of dollars.

MOYERS: Is it conceivable to you that the powers that be will not allow the ballistic missile to be tested because they know it won't work?

SPINNEY: Well, yes. I'm not sure the cause and effect thing. They don't want it to be tested, there's no question about that. And in fact, they have concocted this whole theory of development called spiral development, which means we deploy a program before it is fully tested. And this isn't just ballistic missile defense, this is gonna be everything. And then we'll work the bugs out of it after it's in the field.

MOYERS: And that's just what's happening. When Defense Secretary Donald Rumsfeld testified before Congress recently, he was challenged about the lack of testing.

LEVIN [2/13/03]: How do you justify bypassing operational testing requirements?

RUMSFELD: I happen to think that thinking we cannot deploy something until you have everything perfect, every "i" dotted and every "t" crossed, is probably not a good idea. In the case of missile defense, I think we need to get something out there, in the ground, at sea, and in a way that we can test it, we can look at it, we can develop it, we can evolve it and find out, learn from the experimentation with it. It happens that it also provides a minimal missile defense capability.

LEVIN: If it works.

RUMSFELD: I beg your pardon?

LEVIN: If it works.

RUMSFELD: If it works, of course.

SPINNEY: Nobody, no manufacturer would spend his own money this way. It is economically suicide. So it's…

MOYERS: But we're talking about huge…

SPINNEY: …suicidal.

MOYERS: …weapons.

SPINNEY: Right. Right.

MOYERS: If they don't work, we're in jeopardy.

SPINNEY: Absolutely. I agree with that.

MOYERS: You're putting the United States at risk.

SPINNEY: That's right.

MOYERS: And implausibly, says Spinney, the war on terror has been used to justify the need for ballistic missile defense.

SPINNEY: The war on terror is in some ways a marketing device to continue the thing going. Like for example, there were people in the U.S. government right after September 11th that basically went before Congress, they went before the American people, that said, "This proves we need ballistic missile defense."

Now that's ridiculous. Basically what you had was some guys took advantage of a lax security system at the airlines. They took advantage of cell phones to coordinate attacks. They taught themselves how to fly. It was a brilliantly simple operation. Basically all they had to do was take off planes from the east coast at roughly the same time. Then they flew them into the World Trade Center and the Pentagon.

Now that doesn't have anything to do with ballistic missile defense. In fact, if we had a fully functional ballistic missile defense system at the time, they'd have been sitting there with their thumbs in their mouth watching it on the tube just like we were watching it on the tube at the time.

MOYERS: And yet, this was used as an excuse…

SPINNEY: Absolutely.

MOYERS: …to escalate the spending on the missile defense?

SPINNEY: Absolutely.

MOYERS: The Bush administration has budgeted $9 billion next year alone for missile defense and says it will need a total of $50 billion over 6 years for further research and development.

But many experts predict it will cost far more, making it the most expensive weapons system in the history of American defense. And that without even knowing whether it works.

And now, the Pentagon has shrouded the program in greater secrecy, classifying details about future tests and cost estimates, keeping information from the press, from taxpayers, and from Congress.

And that's not all. Last May, Deputy Defense Secretary Paul Wolfowitz went before Congress with a startling request:

WOLFOWITZ [May 6, 2003]: We have proposed more flexible rules for the flow of money through the Department. We have proposed elimination of onerous regulations…

MOYERS: Translation: the Defense Department wants even less oversight on how it's spending the public's money.

WOLFOWITZ [May 6, 2003]: The bill before you will also give the Armed Forces the flexibility to more efficiently react to changing events…

MOYERS: Among other things, what Wolfowitz asked for would have reduced Pentagon accountability by eliminating more than 100 reporting requirements Congress can use to oversee how taxpayer money is spent.

The Pentagon's request for even less oversight and accountability infuriates Chuck Spinney. He knows it can lead to dire consequences. And he gives a chilling example.

SPINNEY: During Vietnam, the infantrymen's rifle was the M-16. And it jammed. And basically it went into production and was deployed with known defects, that it jammed under an enormous number of circumstances likely to be found on the battlefield. And soldiers were writing home about how bad this gun was. Some of our soldiers and marines were actually taking AK-47's off of dead Vietcong and using them 'cause the weapon was preferred.

And basically this problem went on for years and years and a lot of guys died because they couldn't reload the gun and fire in the middle of a firefight.

MOYERS: A young Ted Koppel interviewed a soldier in Vietnam in 1967.

KOPPEL: Just about everyone who has served out here for any length of time has heard one story or another about the M-16 not firing under combat conditions. Have you heard any of those stories or do you know of any such instances?

SOLDIER: Yes sir, I have. A matter of fact, there's a guy out here and his rifle jammed on him. And uh, that's the only one I've heard of really jamming on him, but I've heard a lot of stories about the M-16.

SPINNEY: Eventually, the letters that were going home where they were pleading to their parents to get Congress to do something finally had some resonance in Congress, and they had a series of hearings.

MOYERS: Those hearings found that over the 3 years the M-16 had been in the field, the gun had experienced "serious and excessive malfunctions."

The chairman of the investigating committee told a reporter at the time:

ICHORD: There have been many instances where the gun has jammed on them while in combat, and that could be the cause of their death.

MOYERS: Moreover, according to the congressional report, the gun's manufacturer, Colt, had warned the army: "…more than half of the rifles would not pass [an] acceptance test…" if standard ammunition was used.

And yet, soldiers were sent into combat in Vietnam with the M-16, even though army ammunition at the time was likely jamming the gun.

The report concluded: the army's behavior in this case "…border[ed] on criminal negligence."

What happened with the M-16 preys on Spinney's mind as he considers what's happening now with the ballistic missile defense program deployed without proof it will work.

MOYERS: This is like an ammunition maker selling someone ammunition that he knows is a blank but he doesn't tell you?

SPINNEY: Absolutely. Absolutely. When it's not tested, it is morally equivalent in my opinion. And you're putting people's lives at risk as a result.

MOYERS: Where is the outrage over this? I mean, the people in this room who are taping and filming and lighting this interview are ordinary working people in America. They're being taxed in order to build a multi-billion dollar system that won't work.

SPINNEY: One of several that won't work.

MOYERS: Where's the outrage? Why are we so complacent about this?

SPINNEY: I, you know, I don't know. I can't answer the question.

MOYERS: So the system rolls merrily on and the missile defense, popularly known as star wars, is being deployed despite the fact that it bears about the same relationship to reality as its namesake.

Take a look at this 400-page study, which examines the feasibility of shooting down enemy missiles shortly after they are launched. The study was issued last month by scientists at the American Physical Society, which publishes some of the world's most prestigious research in physics. Their conclusion: a cornerstone of a national defense system against potential threats from North Korea and Iran could be obsolete by the time it's installed.

Earlier this summer, there was an event in Washington, that like many in our lives, its bittersweet flavor.


MILLER: For a lifetime of hard work and unyielding integrity, we're proud to present you with POGO's Good Government Award.

MOYERS: Earlier this summer Chuck was recognized for his work by POGO, Project On Government Oversight.

MILLER: It's hard not to be impressed with a guy like Chuck who can accuse the Department of Defense of cooking the books on national television and then return to his Pentagon office without the locks being changed.

MOYERS: They never did change the locks. Though at times they may have wanted to. Now there's no need. Chuck Spinney retired this summer. The "last man standing" closed the door to his office, ending his long career in public service.

MOYERS: Why did you do it? Why did you spend all this time a voice in the wilderness, and things kept getting worse? Why didn't you quit?

SPINNEY: Well, that's a really good question. I don't know.

It hasn't been a negative experience in any sense of the term. It's been a very, very positive experience. And I have to be honest, I love a good bureaucratic fight. You know? So I don't feel abused or anything like that. And I would hate for anybody to think that, you know, I'm one of these guys who thinks he's a martyr or anything. I don't feel that way at all.

MOYERS: Show me your scars. I mean, pull…

SPINNEY: Yeah. No, I've got the battle scars, but battle scars are a sign of honor. I'm proud of 'em.

MOYERS: How did your superiors treat you after you appeared on the cover of TIME?

SPINNEY: Well, depends on which superior you're talking about. My immediate superiors and his supervisor were basically supporters of mine. They knew I was… they agreed with what I was doing. They might wished I hadn't done it 'cause it made their life a little more difficult. But they basically agreed with what I was saying and they thought it should be said. They sort of wished they weren't in the line of fire, I expect.

Above them, there was a political appointee who was an Assistant Secretary of Defense and he basically tried to put pressure on my two intermediate superiors to reduce my performance rating.

Now, they couldn't fire me because it would just create too overt a thing. So the idea was to put… the way I surmised it, the idea was to put into place a plan to gradually reduce my performance rating. Build a track record of non-cooperative and bad behavior. And then fire me three or four years down the stream. That's the way you do things in the government.

And anyway, I decided to nip it in the bud. We… I had several of my friends go in and talk to these guys. They all… the two guys admitted that they were being pressured to reduce my performance rating, it was unfair. So essentially we had a case for a conspiracy to do an illegal act because it's illegal to take retribution to a person who just appeared before Congress, who had testified to Congress.

MOYERS: And you told the truth?

SPINNEY: And I to… oh, sure, and no one could rebut it. No one could rebut it. In fact, if you look at my big studies, there's never been a rebuttal that has taken.

MOYERS: You've always been vindicated?

SPINNEY: Yeah. Right. And so…

MOYERS: Your studies.

SPINNEY: Right. So anyway, what happened was we created a stink and they backed off. And actually, they actually increased my performance rating after it was all over.

MOYERS: Let me come back to your first concern. I mean, why aren't these military budgets not watched as carefully by the Defense Department as a corporation? Why isn't the Department of Defense being held accountable?

SPINNEY: Well, you raise a very good point there. The President is holding education people accountable for standards. He says, "I want to have measures, performance measures for accountability." He also has tried to do the same for foreign aid if you recall.

Over in the Pentagon, we're not holding people accountable.

I think basically here is you have in Congress the oversight committees for defense, which are essentially the Armed Services Committee. And the Defense Appropriations subcommittees in both houses are so tied in to the Pentagon and the defense contractor base that essentially oversight has been displaced by what some of us call "overlook." They're basically watching the money flow out the door and encouraging it to go.

And basically it's in members of the Senate Armed Services Committee's best interest to keep the money flowing. It's in the Pentagon's best interest to keep the money flowing.

MOYERS: Because?

SPINNEY: It's in the defense contractors' best interest to keep the money flowing. Because it's the military industrial Congressional complex and this is their way of life. They live on the money flow.

MOYERS: The military industrial Congressional complex?

SPINNEY: Right. Which I believe was a term that Eisenhower considered using in his speech, but he dropped the reference to Congress.

MOYERS: He talked about the military industrial complex. But you say Congress is the driving force here?

SPINNEY: I don't think there's any simple villain that you can point to and say, "If we fix this, everything's gonna change. In my opinion it's the product of a long-term evolution that occurred in the 40 years of Cold War. If you think about it those 40 years were a very unique period in our nation's history. Now what happened was during that period the different players in the military industrial Congressional complex basically fine-tuned their bureaucratic behavior to exist in that environment. It was almost like this self-contained environment in which a peculiar evolution took place.

A lot like the Galapagos Islands and how the beaks on finches changed from island to island. And we developed certain practices in order to generate budgets that were more inwardly focused toward distributing defense pork to our allies around the country.

And one of the most pernicious effects of this trend was the gradual buildup of what an anthropologist might call habitual modes of conduct. Sort of almost like an innate response of threat inflation. We literally exaggerated the threat to jack up the budgets.

MOYERS: The threat from abroad, from the Soviet Union.

SPINNEY: The threat from the Soviet Union.

MOYERS: Yeah.

SPINNEY: Well, those habits became so ingrained in our system the Soviet Union evaporates and you still have this acculturated response going on.

MOYERS: Help me to und…

SPINNEY: And that's what makes it scary.

MOYERS: Scary?

SPINNEY: Yeah, because you can't control it.

MOYERS: The people who are supposed to control it benefit from it?

SPINNEY: Exactly.

MOYERS: Tell me how members of Congress benefit from increasing costs like this, driving weapons systems that the country doesn't need, spending money that puts us deeper and deeper in deficit. How does Congress gain?

SPINNEY: They gain because they get money flowing to their Congressional districts. It's in the way Congress gains from controlling the federal budget. They get money flowing to the districts, that helps build your power bases.

MOYERS: Give me an example.

SPINNEY: Back in 1990, and this may sound like ancient history but I was there. The Senate Armed Services and the House Armed Services Committee took opposing views on the F-16 fighter. One committee said, "We're gonna terminate production."

The other committee said, "Let's fully fund the Pentagon's request." And of course they were just setting the stage for a part… for reducing the Pentagon's request but keeping the program alive. That's the way Washington works.

But as soon as those two positions came out, the Lockheed lobbyists… at that time it was General Dynamics… The General Dynamics lobbyists hit the streets. And I found out about this through a very personal way. I had a very good friend who was a Congressional staffer working for Andy Ireland who was a member from a small citrus growing district in Florida. Had almost no defense business in his district.

And they received a letter. And the letter basically had about three or four pages. The first page was a text which said, "The F-16 is absolutely vital for national security." And that was the first paragraph. And then it basically extolled the economic benefits of the F-16 for the remainder of the letter.

Attached to that letter were two maps. The first map was the spending for government financed equipment across the United States. So you saw the dollars in each state scattered around there. It sort of looked like a bombing chart for the strategic bombing campaign of identifying the critical targets in Russia back in the old days of nuclear war.

And then the second page was tailored for the particular person who received the letter. In this case, Andy Ireland was from Florida so it had a map of Florida and it had each Congressional district in there with the money going by Congressional district.

Well, my friend was just outraged by this. He says, "This is just blatant influence peddling, you know. And they're just trying to, you know, put the pressure on us." And he was cursing and rant… he was literally ranting and raving. And I for one of the few times in my life actually tried to calm someone down. I said, "Wait a minute." I said, "If they sent one to you, they sent it to everybody. What you ought to do is call 'em up and say, 'This is really a great display. We can really use it. Could you send us the whole atlas?'"

And he said, "Yeah, you're right." He understood immediately. And he goes, "Yeah, that's what to do." And so he does it. And within an hour, he had the whole atlas, which then I had in about two or three hours. It was about this thick. It was for I think 45… 43, 45 states. And it had each state with all this thing down… all the money listed by Congressional district, plus of course the national map. And it was down to the dollar. And like in California, I mean the list was… they had to print small because there was so much money going to so many Congress… there was just table after table down to the dollar.

Now this is, you know, in the Pentagon we can't account for any of our money. Meanwhile, the contractors know exactly where it's going, or at least they say they do.

MOYERS: So every Congressman could know what part of the pork was coming into his district?

SPINNEY: Right. Let's say I'm the program manager for the F-16 in the Pentagon. I get a call from one of my wholly owned subsidiaries over on the Hill on the Armed Services Committee. "We got it funded for you guys, but those guys in the House are gonna screw us." So you know, "You got to do something."

So all I have to do is I call up the program manager at the prime contractor, who I know because I work with him on a daily basis. And say, "Hey, we got a problem.

"The House is gonna kill our program. The Senate's on board. Turn on the pressure." Well, at that point, I don't have to do anything in the government. The rest of it takes care of itself because the people whose future it…are at hand are gonna work overtime to solve that.

The contractors then start calling up the subcontractors. They unleash the fax attacks. They unleash the emails. And then of course they start calling the lobbyists, the Gucci shoe crowd on K Street, and say, "Hey, you got to start beating the… beating the pavement in the halls of Congress. We need some newspaper op-eds." The whole process takes care of itself. One phone call turns it on.

MOYERS: Who gets the money?

SPINNEY: The contractors get it. The Congressmen get it, you know through… they get the power because they keep getting voted back in office. They may also get some Congressional contributions. But I think the bigger benefit is the power, the stability of their job.

And remember the people in the Pentagon that are promoting this thing are basically… they're also creating a situation where they can roll over and get into that sector and make the big bucks. All you have to do is look at the number of retired generals working for defense contractors.

MOYERS: The revolving door?

SPINNEY: Yeah, yeah. The revolving door.

MOYERS: Have you seen these figures that CEO pay at Lockheed Martin went up from $5.8 million in 2000 to $25.3 million in 2002. I mean, that's five times increase in less than three years. CEO pay went up at General Dynamics from $5.7 million in 2001 to $15.2 million in 2002. It went up at Honeywell from $12.9 million in 2000 to $45 million in 2002. It went up from Northrop Grumman from $7.3 million in 2000 to $9.2 million in 2002. What do those figures say to you?

SPINNEY: Well, that's Versailles on the Potomac in action. It doesn't surprise me. The Defense Department if you think about how we really operate we essentially operate according to an internal political economy. It's this closed cell that I mentioned earlier. In this bubble that developed during the Cold War. And all economies are political economies.

The military industrial Congressional complex is a political economy with a big P and a little E. It's very political in nature. Economic decisions, which should prevail in a normal market system don't prevail in the Pentagon, or in the military industrial complex.

So what we have is a system that essentially rewards its senior players. It's a self… what we call it, we call it, we have a term for it, it's a self-licking ice cream cone. We basically take care of ourselves. And that's also why we have this metaphor "Versailles on the Potomac." It basically is internally self-referencing.

MOYERS: But is…

SPINNEY: So when I see those salaries that you mentioned it's perfectly predictable that money goes into the defense budget and it gets reflected in these things. While the people doing the fighting are basically… they're getting more money then they used to get but they're not participating in this.

MOYERS: Where… and your specialty is the defense budget. Where is the money going?

SPINNEY: Well, it goes into cost growth.

MOYERS: Cost growth.

SPINNEY: Cost growth. We basically if you want to understand how the Pentagon operates like everything else in Washington you follow the money.

MOYERS: I don't understand the term cost growth.

SPINNEY: Basically the cost of weapons increases faster than the budget. And this has been going on for 40 years. And when the budget increases, that basically creates an incentive structure to jack up the cost even further.

Now we saw this in the 1980's. You can think of the 1980's as the mother of all experiments. And when Ronald Reagan poured money into the defense budget, the cost went through the roof.

MOYERS: Are you saying that costs went up because the…

SPINNEY: The money went in.

MOYERS: The money went in.

SPINNEY: I have data showing that when we reduce the budget the contractors cut their costs. In some cases they come in under cost estimates when the money dries up. Producing the same product. It makes no economic sense in any kind of commercial context. It makes perfect political sense.

MOYERS: Because someone could say that war is not a commercial venture. That it's the… it's not driven by markets. The markets don't exist in a military economy.

SPINNEY: I agree. And that's why we ought to treat the defense industry as a public sector. And that would be… and if we did that then you wouldn't see these gross disparities in salaries creeping in. But essentially if you try to understand what's going on in the Pentagon and this is the most important aspect, and it gets at the heart of our democracy. Is that we have an accounting system that is unauditable. Even by the generous auditing requirements of the federal government.

Now what you have to understand is the kind of audits I'm talking about, these are not what a private corporation would do with a rigorous accounting system. Essentially the audits we are required to do are mandated under the Chief Financial Officers Act of 1990, and a few amendments thereafter. But it's the CFO Act of 1990 that's the driver.

And it basically was passed by Congress that required the inspector generals of each government department, not just the Pentagon, but NASA, health, education, welfare, all the other departments, Interior Department where the inspector general has to produce an audit each year. Saying, basically verifying that the money was spent on what Congress appropriated it for. Now that's not a management accounting audit. It's basically a checks and balances audit.

MOYERS: But in layman's terms explain that.

SPINNEY: It's to enforce the accountability clause of the Constitution. Which means that you can't spend money unless Congress specifically appropriates it. Well, the Pentagon has never passed an audit. They have 13 or 15, I forget the exact number, of major accounting categories. That each one has it's own audit. The only one of those categories that's ever been passed is the retirement account.

Now under the CFO Act of 1990 they have to do this audit annually. Well, every year they do an audit and the inspector general would issue a report saying we have to waive the audit requirements, because we can't balance the books. We can't tell you how the money got spent.

Now what they do is try to track transactions. And in one of the last audits that was done the transactions were like… there were like $7 trillion in transactions. And they couldn't account for about four trillion of those transactions. Two trillion were unaccountable and two trillion they didn't do, and they accounted for two trillion.

MOYERS: So, you mean, they're…

SPINNEY: They don't know where the money's going.

Well, guess what the Senate Armed Services and the House Armed Services agree to do in their infinite wisdom? They decided to waive the Pentagon's requirement for these annual audits in their authorization bills. So the Pentagon no longer has to do it.

Now the rationale was that we all know that this is a problem, we don't need to be told every year. Of course the one good thing about these audits was it would generate a small burst of news stories every April or May when the audits were due saying the Pentagon can't follow it's money. You know, there's a trillion dollars unaccounted for.

MOYERS: What does this do to the national ethos?

SPINNEY: Oh, I think it corrupts it. I think it corrupts it. Essentially you have all the pretensions of a democracy, we're really a democratic republic where you have representatives of the people in the government, and you have the representatives are under certain strictures to behave in a certain way. And in fact they're not behaving that way.

MOYERS: Your own…

SPINNEY: It's a fundamental moral issue.

MOYERS: Yeah, you've said it's a moral sewer there on the Potomac.

SPINNEY: That's correct.

MOYERS: What do you mean "moral sewer?"

SPINNEY: Well, fundamentally we take an oath of office to preserve the Constitution and we are in fact… in effect undermining the Constitution because we won't address this issue of accountability.

A lot of the people that are involved in this don't realize the moral implications of what they're doing. They regard what they're doing as being for the most patriotic of motives.

You know, "We've got to get the money out of Congress. And if we have to lie to get it, we'll do it. If we have to cook the books in order to sell a program, we'll do it because we're trying to save the country from the hoards," the Communist hoards or whatever…

MOYERS: And don't you think most people, most ordinary citizens say, "Well, if we have to endure some waste and some superfluous and some corruption just to be safe, we'll do so"?

SPINNEY: Oh, absolutely. Absolutely. And particularly when you have a political system. It gets really out of control when you have a political system that caters to fear which is what I think is going on now.

MOYERS: But the fear is legitimate today, given 9/11 and the war on terror?

SPINNEY: Absolutely. I don't want to diminish the terrorist threat in people's minds.

The problem is that if you start thinking about how you deal with these kinds of threats, you don't need B-2's. You don't need ballistic missile defense. You don't need Comanche helicopters. Basically what you need are really highly trained individuals that are basically... understand economics, anthropology, and as well as fighting, particularly in close quarters combat which is the most difficult form of fighting.

And basically that these guys can insert themselves and infiltrate these nodes at lower levels of distinction. Not this nation v. nation conflict.

MOYERS: But wouldn't you con…

SPINNEY: And my point here is those kind of solutions don't generate big budgets. And that's the problem.

MOYERS: So we keep spending big money on those old systems even…

SPINNEY: For the wrong threat.

MOYERS: But America has just won a war against Iraq. I mean, some people would say, "Look, somebody must be doing something right."

SPINNEY: Well, the first thing I would say is Iraq has been under sanctions for ten years or so. They have a defense budget of 1.8 billion. Most of their equipment is vintage Soviet equipment. They're untrained. We spend $460 billion when you count the supplemental for fighting the war to take out Iraq in a month. If you can't do that for $460 billion, what can you do?

MOYERS: Is this 400 billion dollar Congressionally approved budget a scandal in your mind?

SPINNEY: Yes. It isn't gonna fix our problems. It's certainly unnecessary. And you can't look at this budget in isolation. This budget is being put into place, and it's gonna generate an enormous tail in the out years because we're politically engineering all these programs and building up all this support in the Congressional districts. It's gonna be very difficult to turn this spending off.

MOYERS: This strikes me as somewhat mad.

SPINNEY: It is. We're in Versailles on the Potomac. It's Ver… we basically exist for ourselves. And we live in a hall of mirrors. It's a good metaphor.

MOYERS: Like Versailles.

SPINNEY: Like Versailles. And you have to remember, our decisions basically are to spend other people's money, and ultimately to spill other people's blood. We don't pay the price for these decisions. There's an asymmetric burden of risk.

The risk that the promoters of something like Star Wars or an F-22 or you name it, whatever kind of weapon bears is a risk that the program might be canceled. But if you look at the other risk, the other risk, the taxpayer bears the economic risk. Not the program manager. And the soldier who may have to use this piece of equipment in a serious war. You know, his life is on the line.

Well, those risks don't really have much of an impact on decision-makers who are more interested in the preservation of their program.

MOYERS: Chuck Spinney, thank you very much.

SPINNEY: Thank you.


MOYERS: Many of you have written to ask what you can do about the stories we report that arouse your own outrage. The stock and worthy answer is to find who represents you in Washington and let them hear from you. There's even a Defense Department hotline where you can report suspicions of fraud or mismanagement. We've posted a lot of useful information on own site at pbs.org and we can link you to other relevant sites as well.

For example, if you want to know how your tax dollars are being spent right now, check out the National Priorities Project. You can enter the amount of income tax you paid last year and receive a line accounting of how the government spends it.

On the same site is a database where you can measure budget tradeoffs — what the cost of funding say, a ballistic missile defense equals in spending on other needs such as housing, healthcare, even firetrucks.

Although he's retired, Chuck Spinney has updated his own Web site Defense and the National Interest.

And the non-partisan Center for Defense Information, started by retired senior military officers as a watchdog on wasteful Pentagon spending, has a Web site crammed with useful information about Pentagon policy and defense programs.

You can learn about lobbying by the defense industry, Boeing, and others both at the Center for Responsive Politics and the Senate's Office of Public Records.

Finally, here's a Web site that has become even more pertinent since reports a couple of weeks ago that the cost of the war and occupation of Iraq may be as much as one hundred billion dollars by the end of next year...double what we were told before the invasion. You're looking at it right now, clocking the cost of the war.

And that's it for NOW. We'll be off for two weeks while many public television stations take a break to ask for your support. Thanks for watching. I'm Bill Moyers.


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