Follow the Money: The Complex Case of the Government’s “Missing” Trillions

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For the last several years, the U.S. federal budget has generally been between about $3.6 and $3.8 trillion, comprising close to 21 percent of the total economy in terms of GDP. All federal spending falls into one of three groups, which include mandatory and discretionary spending (more than 90% of all federal spending falls into these two categories) as well as interest on debt the country owes, according to the National Priorities Project website.

Naturally, a large portion of government spending is put toward defense budgets every year, with the DOD budget totaling around 15% of the total federal budget in recent years (and it’s expected to be higher this year, with a proposed $681.1 billion proposed by Donald Trump for the fiscal year 2019). 

What this money is used for is, of course, an entirely different story. However, in recent years there have been questions raised as to not just how the money is used, but also whether large amounts are effectively being “hidden” by the U.S. government. 

The question goes all the way back to 2001, when then-Secretary of Defense Donald Rumsfeld shared details about a curious predicament during a Congressional hearing. “According to some estimates,” Rumsfeld said, “we cannot track $2.3 trillion in transactions. We cannot share information from floor to floor in this building because it’s stored on dozens of technological systems that are inaccessible or incompatible.” 

In essence, Rumsfeld seemed to be saying that the Department of Defense had effectively “lost” $2.3 trillion in transactions. The timing of the statement–one day prior to the September 11 terror attacks–made it particularly notable among conspiracy theorists, an unfortunate stigma that has not helped in bringing credible attention to an otherwise appalling accounting “discrepancy,” if that’s even an appropriate way to refer to a government agency being unable to account for $2.3 trillion. 

Due in part to this and other problems, “As a result, DoD has developed a credibility problem with Congress, OMB, the General Accounting Office (GAO) and itself, when it comes to financial information,” one 2001 report stated.

Rumsfeld’s admission before Congress wasn’t a one-time affair, either. Over the ensuing years, several similar instances involving apparent transactional discrepancies have occurred, totaling as much as $21 trillion by some estimates. In a recent article appearing in Forbes, Boston University professor of economics Laurence Kotlikoff and Mark Skidmore, a Professor of Economics at Michigan State University, argue that the ongoing problem, while having been acknowledged by the various government branches, remains to be satisfactorily accounted for. 

Kotlikoff and Skidmore write: 

The DOD’s (Department of Defense) as well as HUD’s (Department of Housing and Urban Development) Offices of Inspector General (OIG) reference these transactions as “unsupported journal voucher adjustments.” This is polite accounting language for lost, hidden or stolen money. If such “adjustments” were small, it would be one thing. But they totaled some $21 trillion between 1998 and 2015!

The article, the second in a two-part series that looks at this problem, is based on a report co-authored by Skidmore and Catherine Austin Fitts, president of Solari, Inc., publisher of the Solari Report, and managing member of Solari Investment Advisory Services, LLC. It is worth noting that Fitts has a very interesting background beyond her financial consulting, which includes having written about past experiences that involved a military think tank inviting her to work on a project aimed at effectively “disclosing” to the general public that an extraterrestrial presence exists on Earth. Fitts has also appeared in recent years as a guest on the popular late night radio program Coast to Coast AM, as well as Alex Jones’ InfoWars. Prior to any of this, she had been an Assistant Secretary of that the Department of Housing and Urban Development under George H. W. Bush, and later the lead financial advisor to the Federal Housing Administration, at which time she first became aware of such accounting discrepancies. 

Kotlikoff, Skidmore, and Fitts aren’t the only ones aware of this problem; in fact, it was addressed by David Norquist, Comptroller for the Department of Defense, last January during a Congressional hearing on the process of the Pentagon’s congressionally-mandated first internal, consolidated financial audit, overseen by Bernie Sanders and several other members of Senate. At that time, Norquist referred again to the “unsupported adjustments,” citing them as the underlying source of the confusion. Skidmore and Kotlikoff noted in their Forbes piece, “Though it is not entirely clear from his testimony, it seems Mr. Norquist is suggesting that changes in the valuation of property and equipment due to depreciation, base closures, equipment becoming obsolete, etc. are leading to enormous undocumentable adjustments.” 

However, Norquist’s explanation fell a few marks short of being satisfactory for Kotlikoff and Skidmore. “To our knowledge,” they wrote, “there are no public reports with detailed explanations or additional data. Furthermore, the DOD’s OIG’s failure to respond to reasonable inquiries and Mr. Norquist’s clearly inadequate explanation suggests our government accountants can’t figure out what’s going on when it comes to trillions in ‘unsupported’ outlays/transactions.” 

It might be fair to say that the official explanations that have been offered allow for more than a little “wiggle room.”  However, there have been questions raised about the Kotlikoff and Skidmore’s interpretation too, namely by Mick West over at Metabunk.org, who correctly notes that it would be tricky for trillions to go missing from an annual budget that receives only several billions of dollars in the first place. 

As West points out: 

[T]he Pentagon’s budget is around $600 billion. A measurable percentage of the Pentagon’s budget is not $6.5 Trillion. That’s ten times the amount of money that went into the Pentagon that year, and they still had to run the military. Clearly it’s impossible to both spend most of the money you’ve been given, and also lose ten times that amount.

West doesn’t dispute that some problems do probably exist with the Pentagon’s budget. “Nobody is saying that the defense department does not waste money,” West wrote. “It very obviously does. Hundreds of millions, possibly even billions of dollars are wasted through inefficiencies, incompetence, and corruption. It is probably a measurable percentage of the Pentagon’s budget.”

West further argues that one of the biggest issues with the idea that tens of trillions of dollars are being “hidden” is the way the information appears to be used to justify other unsubstantiated claims, or as West says, “to legitimize implausible conspiracy theories like 9/11 controlled demolitions or even chemtrails.” 

There doesn’t appear to be any indication that Kotlikoff or Skidmore are among those who endorse 9/11 conspiracies. However, Fitts has been a proponent of such ideas, having once served on the board of 911truth.org, and writing articles (like this one) which questioned the official 9/11 narrative. 

That said, even if Kotlikoff and Skidmore were completely wrong in their assessment, this doesn’t remove the fact that there are remaining credibility issues pertaining to the DoD and its treatment of publicly disclosed data that should raise questions. For instance, a recent document referenced by the authors in their Forbes article, which provided a summary of unsupported adjustments for the fiscal year of 2017 appeared in redacted form, obscuring the actual amounts. “That is, all the relevant information was blacked out,” Kotlikoff notes. “We believe the redactions are the direct results of our exposing this issue. That exposure was significant.” In previous years, there had never been similar redactions of this information. 

If the budgetary questions being addressed here are purely the result of a misunderstanding, it is unclear why the DoD would have been so hesitant to address queries the likes of those made by Kotlikoff and Skidmore. This is further complicated by the fact that the recent fiscal summaries they reference featured redactions, unlike past reports. Even if the idea of several trillions of dollars being hidden by our government stands on shaky ground, there is still plenty to justify calls for greater transparency… something we only seem to be getting less of over time. 



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