As Washington wrangles over what, if anything, has been achieved after 20 years and nearly $ 5 billion spent in “Eternal Wars”, there is a clear winner: the US defense industry.
In Iraq and Afghanistan, the US military has relied to an unprecedented degree on private contractors for support in virtually all areas of war operations. The contractors provided trucks, planes, fuel, helicopters, ships, drones, weapons and ammunition as well as support services ranging from catering and construction to IT and logistics . The number of contractors on the ground exceeded American troops in most years of the conflict. As of the summer of 2020, the United States had 22,562 contractors in Afghanistan, roughly double the number of American troops.
The gravy train for the defense industry has also been fueled by the way wars have been budgeted for and paid for. Congress used “emergency” and “emergency” funds that bypassed the normal budget process. During the first decade of the conflict, the United States used emergency credits, which are usually reserved for one-time crises such as floods and hurricanes. Detailed oversight of spending was minimal. And because this type of spending is excluded from budget projections and deficit estimates, it allowed everyone to argue that the wars would soon be over.
The result was what former Defense Secretary Robert Gates called a “never-ending cash culture” inside the Pentagon. The Ministry of Defense made operational decisions; managed the tendering process for contractors; awarded contracts (largely using non-competitive bids); and kept at least 10% of war funds in classified accounts.
Even the 2008 financial crisis could not stop the spending madness. While Congress imposed general spending limits on government programs, war spending was specifically excluded. The Pentagon was able to use the special “emergency” war budget to purchase upgrades, services, and new equipment that were barely tied to Iraq or Afghanistan. As a result, the Pentagon’s budget continued to grow – and was able to double its size between 2001 and 2020.
Defense stocks outperformed the stock market as a whole by almost 60% during the war in Afghanistan, as soaring war spending allowed a wave of consolidation in the industry. The Big Five – Lockheed Martin, Boeing, General Dynamics, Raytheon, and Northrop Grumman – and a handful of others have taken it to the next level from manufacturers such as Hughes Aircraft and McDonnell Douglas.
In the year to June 2020, the Big Five accounted for nearly a third of the $ 480 billion the Pentagon committed to defense contractors. While only a fraction of these sales were More precisely for Iraq and Afghanistan, the conflict has been very lucrative for all the major defense contractors. For example, Lockheed Martin manufactured the Black Hawk helicopters widely used in Afghanistan; Boeing sold the aircraft and ground combat vehicles; Raytheon won the major training contract for the Afghan Air Force; and Northrup Grumman and General Dynamics provided electronic and communications equipment. Thousands of contractors around the world have made money selling night vision goggles, motors, sandbags, communications equipment, and all kinds of things for the war effort. And the world’s oil companies have been the main beneficiaries of the war, since the Pentagon is the world’s largest buyer of fuel.
Meanwhile, the defense industry has spent more than $ 2.4 billion lobbying Congress since 2001 and has made direct campaign contributions to most members.
It is not surprising that much of the wartime spending was a considerable waste. The Inspectors General for Afghanistan and Iraq, the War Contracts Commission, and the Pentagon’s own Inspector General have all documented waste, profit, corruption, and “ghost spending” (money spent on activities that are are found to be non-existent).
According to government analysts, the report The result of large-scale private sector involvement in Iraq and Afghanistan was to significantly increase the cost of war operations. Much of the $ 145 billion reconstruction money was spent on questionable projects with budgets that seemed excessive or simply couldn’t be explained. Many such projects, now destroyed and dilapidated, made headlines last week.
The US presence on the ground may now be over. But America will still have to digest the huge price. The wars were paid for entirely with borrowed money rather than raising taxes – a first in U.S. military history – and the United States still owes $ 2 billion in benefits to future veterans. This financial hangover will be compounded by the need to replace what has been destroyed or simply abandoned, and to pay for weapons and equipment purchased over the past 20 years of go-go defense spending. The legacy of the post 9/11 defense spending spree will continue to engulf the US budget for years to come.
Professor Linda J Bilmes is the Daniel Patrick Moynihan Chair in Public Policy and Public Finance at Harvard University and former Assistant Secretary of Commerce of the United States. She is co-author (with Joseph E Stiglitz) of The Three Trillion Dollar War: The True Cost of the Iraq Conflict