No, the pentagon didn’t lose $8.5 trillion.

Reuters has an interesting article which has been making the rounds recently, which is summarized by ignorant inattentive articles asserting that the Pentagondoesn’t have a clue" how it spent  $8.5 trillion.  Now, I’m no fan of military spending—but I’m an implacable enemy of lying about numbers.  This one is total crap. Worse, it’s obvious crap. the number is too large for it to have been ‘lost’ by the Pentagon.  In fact, a moment’s calculation will let you know, as it did me, that $8.5 trillion is the total spending by the pentagon since 1996. This is confirmed by reading the actual article. We have a pretty good idea of what the Pentagon has spent nearly all of that money on; if we didn’t we couldn’t make any of the nice graphs of pentagon spending the reuters article has in it.
What’s weird to me is how many news outlets seem unable to reason for themselves about this, and to realize that this money just can’t be ‘lost’. All it takes is knowing the single-year budget for the pentagon, roughly, and multiplying by, roughly, 20.  I understand how intelligent readers can be mislead, but how can so many headline and content writers not stop to evaluate or think about the numbers they are writing about?
The reuters article would like you to consider the entire pentagon budget "unaccounted for”, which is true in the sense that the article details, that the Pentagon’s myriad accounting practices are very shoddy—but it’s nothing like the common person’s understanding of the word ‘lost’.
For instance, from the original article:

Q: How much taxpayer money has the Defense Department spent that has never been audited since the 1996 deadline?
A: About $8.5 trillion.

True, but not exactly transparent.  The article doesn’t give any estimate of plausible bounds on the total error, leaving the reader in a murk of uncertainty. Not giving any summary of the total error allows a particular sort of dishonest move, common to large-number conversations: In this move, we leap from tiny uncertainty to complete ignorance.  The trouble is that the practical on-the-ground truth is that accounting is always filled with small uncertainties–even post-auditing.  This is just the truth of life, and by itself, isn’t problematic.  Lot’s compare a few statements which are comparable in terms of relative uncertainty:
  • What did the DOD spend it’s last 10 billion dollars on?: It isn’t known
  • How old is your ten-year old child, in minutes?  What’s that? You don’t know? Then your child’s age isn’t known.
  • Exactly how many words did Shakespeare write, including in his letters, journal, diary, and receipts? Oh dear, the literary output of Shakespeare is totally unknown-it’s all gone.
  • What’s Newton’s constant of gravitation?  According to the National Institute of Standards and Technology, and the dishonest logic I’m mocking here, we have absolutely no idea. We lost it.
 You see my point? We just can’t turn errors on the scale of 10^-5 into complete failures of data tracking. Both may be bad, but they aren’t the same.
To be fair, the accounting practices do appear to be pretty bad. Unfortunately, the authors of the Reuters article do, as far as I can tell, no summary estimate of how bad the problem might be. . The individual errors reported actually mostly seem very small, from the particular accounting-relevant perspective of tracking how much money is lost.   For instance, the article notes " In the Cleveland DFAS office where Woodford worked, for example, “unsupported adjustments” to “make balances agree” totaled $1.03 billion in 2010 alone, according to a December 2011 GAO report.”  Well, that sounds bad—but DFAS handles, apparently, the full federal budget of $500 billion. This would be like finding that a moderately wealthy family could not report $150 of spending over a year, and concluding that they had squandered their whole $80k income. Caveat: the Cleveland office is just one office, so the total may be more like $1000 out of $80k, say.  This is rather more than I spend in a year on coffee, but not much more.
The article is inflammatory, fascinating, important, hugely misleading, and I think largely right in its broader message. It’s important.  Read it.  What bothers me, though, is just that if anyone thought about the magnitudes of the numbers they were talking about, they would come to very different conclusions than anyone in fact seems to be coming to.  Don’t come away thinking that the Pentagon spent half our national debt on corruption and graft: come away thinking that the Pentagon has standards of accounting that are fairly typical of your average small business, and that we probably want them to be higher than that (and the budget itself to be lower!!).
Just to be really specific:
The watertown daily times says :"The Pentagon can’t account for $8.5 trillion it spent (Reuters), money that might better have covered the Department of Veterans Affairs’ $2 billion budget shortfall".  This is double-counting nonsense. The $8.5 trillion already includes whatever was spent on DoVA, and would not matter what. It’s the whole budget, as common sense would have told you.
Daily kos asserts "Combine "Known" Pentagon waste (like the 1.5 Trillion dollar F35) with missing pentagon money and you have a good chunk of our entire national debt represented. "  Only, you guessed it, you can’t combine any money paid for the F35 with the $8.5 trillion,  because the $8.5 trillion already includes it.  Actually, I guess this might be okay, because as far as I can tell, the cost referred to includes about $1 trillion in costs that would be paid over the next 30 years.  Still can’t really include it in our national debt.
Daily kos also says ""Oh really, you’re concerned about deficit spending and the debt?  Fully 1/3 of the national debt it is money we sent the Pentagon and they can’t tell us where it went.  It’s just gone." This is right, if by ‘just gone’ you mean ‘tracked only quite a lot more accurately than anyone I know tracks their own expenses."

10 thoughts on “No, the pentagon didn’t lose $8.5 trillion.

  1. lydia

    I have a couple of questions:

    1. How come there is a lot of talk about this right now, when the Reuters article is from 2013? Is it because we are in a presidential campaign now or something? Just curious.

    2. Do we know how (whether) these "stacks of hundred dollar bills" visualizations are any good at making people understand big numbers? It always seems kinda meaningless to me when people are like "That’s enough dollars to go to the moon and back." Because yeah I don’t know what a trillion dollars is, but I also don’t know how far away the moon is, not really.

    1. David Post author

      1. I don’t know–there may not even be increased talk about. I just happened to run into a few articles referencing it within a few days of each other.

      2. No–but I’d really really like to know that!

  2. ZS

    That’s bad even by the usual low standards of the popular press (usually though not always outside of the Wash Post and NY Times) for reporting on Pentagon budgets. It’s rather hard to mislay ~50% of current annual GDP even over the course of 20 years. (Obviously, as an actual annual component of GDP it is much smaller). It’s as bad as popular beliefs over the size of foreign aid.

    How do you sort out the effects of ignorance about actual policy from those of large number innumeracy? It strikes me they are interactive where to draw really dumb conclusions one has to be both innumerate and poorly informed. Either would act as a corrective in these cases. I’d think outright motivated and unmotivated biases (dislike of a type of spending and expectations of waste) would also make folks more apt to believe stuff which is patently ridiculous.

  3. donnie

    So if we take David’s numbers (yearly budget = roughly and rounded to 6 billion) and multiply that by 20, that’s only 120 billion. There is still a lot of money missing.

    1. David Post author

      Actually, the yearly budget for the pentagon these days is about 6 *hundred* billion, not 6 billion. On average, over the last 20 years, it’s been more like 400+ billion, which multiplied by 20 comes to 8+ trillion–awfully close to the full 8.5 trillion. I should have been more explicit in my first post.

  4. Tara

    You are indulging in semantic distraction, and missing the point. Whether the money is "physically" not there, or simply "can’t be accounted for", this situation is totally unacceptable. The law states they must regularly audit and be accountable. Heads should roll for this failure to do so. Of course the money didn’t "disappear", it is used for the innumerable Black Ops programs, and I understand why it could be VERY akward to keep an accurate record on that. I have been an accountant. This is fraud, any way you slice it.

    1. David Post author

      I’m not missing the point, I’m making an important separate point. The situation may well be unacceptable. Personally, I think it probably is. But the article misleads, and you’ve gotten misled yourself when you say that "the money" didn’t disappear. *The* money? What money? $8.5 trillion was used for Black Ops programs? No more than you spent *all* your money on coffee, just because you’re not sure how much went to coffee. The vast majority of that $8.5 trillion went exactly to the main, well-known programs such as army payroll, construction and maintenance of buildings, etc. Some small portion of it is not accounted for at all (and maybe did go to very despicable projects), and much of it is not well accounted for. But ‘not well accounted for’ is importantly different from lost.

      Of course, one person’s distraction is another person’s point. I think it’s important to know whether the fraud we’re talking about is in the scale of trillions or billions–a factor of one thousand! And I think it’s important that we hold our news media to task for misrepresenting problems.


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