The Nossiter Net
The net that shall enmesh them all
Edited, Written, and Published by Josh Nossiter
Creative Financing
Thursday, February 8th, 2007
The Nossiter Net is cast  to snare some of  the riper rascalities of the day.  Comments?
The gap is widening between the promise of an ideal world and prevailing conditions in the real world.  We’ve got far too many souls engulfed in bloodshed, mired in poverty, undermined by corruption, threatened by disease, and plagued by near or full-fledged illiteracy, while the rest of us seem in danger of imminently drowning, sinking, freezing, or burning up – and that’s just here in the U.S.A.  The time has come to take arms against this sea of troubles.  Conservatives maintain that “throwing money at a problem” won’t fix it, and they have a point.  But if the problem is acute, the amount of money enormous, and the throwing of the latter at the former accurate, there’s no telling what may ensue.  The difficulty is finding enough money to fix really big problems in a budget where almost all the money is already spoken for.  But with a little creativity, there’s actually plenty of money to go around.

Take next year’s military budget.  The Bush administration proposes spending three-quarters of a trillion dollars on the Pentagon.  That’s 62.5 billion dollars a month, or over 2 billion a day, or 85 million dollars an hour -- for a whole year!  It would be pleasant to suppose that all the money will be well spent, but such is not the case.  If you had to get rid of 85 million dollars an hour, spending wisely would quickly take a back seat to spending fast, very fast.  Even so, we amateurs would fail miserably.  There are only so many yachts, Rolexes, and truckloads of caviar on the market, after all.  The Pentagon takes a more professional approach, and it works for them.

Suppose you hired a contractor to redo your kitchen, and you told him to “spend whatever you want, the sky’s the limit.  And when you’re done, I’ll pay you an extra 15% of whatever you spent, for your profit.”  It wouldn’t take him long to figure out that if he spends $10,000, he makes $1,500 for himself.  But if he spends a million, he earns $150,000 and goes to Hawaii for the rest of the year.  Who would contract work on those terms?  The Pentagon does it all the time, just one tactic in the annual race to get rid of that 85 million an hour.

The non-profit, non-partisan Center for Public Integrity* helpfully points out that half of all Pentagon expenditures flow to private contractors.  A third of all those contracts are of the cost-plus variety described above, in which the Pentagon pays all the expenses of the contractor, regardless of amount, and then adds a guaranteed profit.  A third of a half of three-quarters of a trillion is $125 billion.

The military contractors’ trade group, the National Defense Industrial Association,** ruefully notes that the law caps the profit on cost-plus defense contracts at 15%.  So of that $125 billion paid to cost-plus contractors, $18.75 billion is profit.  The balance, $106.25 billion, pays for the cost of the goods they actually deliver to the Pentagon.  Many of those goods are of the type we read about in the news. Tilt-rotor aircraft that crash.  Missile defense systems that miss.  Armor-less troop carriers, helmets that don’t stop bullets, toilet seats at hundreds of times the retail value – the list goes on and on.  Goods that are worthless, or, where death or maiming is the result of their use, worse than worthless.

The solution is obvious.  Pay the contractors their $18.75 billion in profits, instruct them to forget about making or delivering their goods, both the worthless and worse than worthless varieties, and pocket the $106.25 billion balance.  Spend it on schools and hospitals and parks and housing and scientific research and all the other things that close the gap between the awful actual world and the one we’d all prefer to live in.  It’s not enough money to do the whole job, of course, but it’s a start.  And just think what other savings we’ll find in the balance of next year’s $2.9 trillion budget…


©Joshua C. Nossiter, 2007
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VOL. III, No. 6