Operation Rent Seeking

Washington Monthly on Political Books

March/April/May 2015 Operation Rent Seeking

How the war on terrorism became a business model.

In present-day America’s politically polarized atmosphere, it is easy to characterize divisive issues like the war on terrorism, the Wall Street bailout, or the Affordable Care Act as symbols of a clash of ideologies. Ideology is present in all of these issues, but it is possible to overrate it as a factor in contemporary policymaking. When I was a congressional staffer, I became acutely aware that elected officials choose issues to put at the top of their agendas mainly for their ability to shake money out of the purses of contributors. The subsequent histrionics in the House or Senate chamber are pure theater for the benefit of C-SPAN and the poor recluses who watch it. Behind every political cause is a racket designed to privatize the profits and socialize the losses.

It is no wonder, then, that James Risen, national security correspondent for theNew York Times, has been in legal jeopardy with two presidential administrations of different parties. His new book, Pay Any Price: Greed, Power, and Endless War, is a chronicle of fascinating and heretofore secret stories in America’s war on terrorism. The book has a simple and arresting thesis: the longest war in America’s history is pure nirvana for the greedy and unscrupulous. Whatever the architects of the war on terrorism thought they were doing, the Iraq War’s purpose rapidly evolved within the “iron cage” of the Washington public-private ecology into a rent-seeking opportunity for contractors and bureaucratic empire building for government employees. Its real, as opposed to ostensible, purpose seems to be endless, low-level war. The rote appeals to patriotism are just another way of mau-mauing critics. With a theme that attacks the underlying bipartisan consensus on terrorism of the last dozen years, it is no wonder the Justice Department once contemplated heaving Risen into federal prison.

Pay Any Price: Greed, Power, and Endless War by James Risen Houghton Mifflin Harcourt, 304 pp.

The author opens his book with a little-known operation from the Iraq War; it began immediately after the U.S. occupation of that country and continued until the summer of 2004. Air Force C-17 cargo planes transported $20 billion in cash from the vaults of the New York Federal Reserve Bank in East Rutherford, New Jersey, to Baghdad. The ostensible purpose of this cash, much of which had never been formally appropriated by Congress, was to revive the country’s shattered public services and pay Iraqi civil servants.

The program was so hideously mismanaged that $11.7 billion of the $20 billion was unaccounted for, disappeared, or was stolen. As one might expect in a Middle East culture of baksheesh, an unknown quantity was pocketed by Iraqi politicians. But another, also undetermined, amount was skimmed by mid-level and junior U.S. military officers in charge of counting and distributing the cash; Risen mentions the cases of some who were caught depositing suspiciously large sums in their bank accounts in the United States.

Unfortunately he says nothing about the senior officers who had extraordinary discretion over much of the cash under the Commander’s Emergency Response Program. I recall generals trooping to Capitol Hill throughout the mid-2000s to sing the praises of CERP; the reader can imagine just how popular a pallet of cash not subject to the accountability clause of the Constitution would be! A congressional colleague of mine at the time who had just come from a job at the Treasury Department told me that some U.S. personnel in Iraq amused themselves by tossing shrink-wrapped packets of $100 bills back and forth as if they were Nerf footballs.

War, of course, is synonymous with waste, as procurement boondoggles stretching back to the War of Independence attest. But the war on terrorism is in a class by itself. Greatly abetted by then Secretary of Defense Dick Cheney’s blanket outsourcing of military logistics in 1992, the money spent on war has become a gold rush for private, largely unaccountable contractors.

The same holds true in the intelligence community: about 70 percent of the National Security Agency’s budget is spent on contracts. That, combined with the fact that the revolving door to a corporate board seat beckons senior agency officials, means the pull is always toward waste, fraud, and abuse. Former NSA insider Thomas Drake, who blew the whistle on a gold-plated contractor program and was charged under the Espionage Act for his pains, told me last year that his old agency is “literally helpless” without contractors.

It is hardly surprising that the hundreds of billions of dollars funding the war on terrorism will tempt the acquisitive instincts of contractors and their agency counterparts. But it is up to senior officials in the executive branch to exercise oversight and discipline over the process. Oversight is also a key constitutional function of Congress. Risen documents that such oversight is still almost totally lacking. He notes that the administration of George W. Bush habitually obstructed the special inspector general for Iraq reconstruction (SIGIR), Stuart Bowman, who tried to do his job in uncovering fraud and theft. In 2010 Bowman finally tracked down $2 billion of the lost cash: it was in a bunker in Lebanon. Incredibly, the Obama administration did not grant his team clearance to enter Lebanon to continue the pursuit.

What about Capitol Hill, and particularly those gimlet-eyed Republicans whose core philosophy is that government cannot run a lemonade stand, and who mercilessly exposed Solyndra, the General Services Administration’s junkets, and purported waste in the stimulus bill? Rather than exposing waste in the war on terrorism and clawing back the money, GOP lawmakers have exacerbated the mess by throwing more money at the agencies than they could ever spend wisely, assuming wisdom were even present. They are also not terribly interested in bad-news stories about anything that falls under the rubric of national security.

In February 2006, Secretary of State Condoleezza Rice testified before my employer, the Senate Budget Committee, on the State Department’s budget, and much time was spent on the state of reconstruction in Iraq. The secretary began to reel off impressive statistics on the rebuilding of the water, sewer, and electric power systems. At that point ranking Democrat Kent Conrad sharply questioned her based on a leaked draft SIGIR report refuting her optimistic presentation of reconstruction in nearly every particular.

The hearing was finally getting interesting: Rice’s voice fell into that nervous tremolo that we all previously heard when the 9/11 Commission caught her in a less than truthful statement. Nearly instantly, however, the chairman, Republican Judd Gregg, normally an indefatigable fiscal conservative and rooter-out of waste, gaveled the hearing to a premature ending, thereby relieving Condi of her torment and the public of the full story. The next day, I learned from a colleague that as soon as Rice had returned to the State Department from her inquisitorial tribulation on the Hill, Bowen started receiving pressure to withdraw the report.

The true state of Iraq reconstruction was vital for policymakers to learn: not only did the lack of clean water and reliable electricity make Iraqis’ lives miserable; the absence of power meant businesses could not operate and more people were thrown into the swelling ranks of the unemployed and disaffected. Many of those people began to see the Americans as hostile occupiers rather than liberators, and it is not surprising that the growing insurgency targeted them for recruitment.

The syndrome the Bush administration created in Iraq was what former Pentagon critic Chuck Spinney has called a “self-licking ice cream cone”: the measures to fight the war on terrorism guaranteed more terrorists, which in turn guaranteed the agencies more money to fight the war on terrorism. The same process was at work with respect to torture and drone strikes. It is a great business model for contractors and bureaucratic empire builders, but far less favorable as a national survival strategy.

Readers may remember that during the first years after 9/11 a few “terrorism experts” that the cable news channels always give credence to were claiming that al-Qaeda’s propaganda videos might contain tiny alphanumeric and bar codes buried within the pixels; presumably these were coded messages to followers about planned terrorist attacks. Then, after a while, the story faded away. Why?

The story was the sliver that leaked into the public media from what Risen describes as a super-secret program that hoodwinked the Central Intelligence Agency, the Department of Defense, and the White House. The idea was hatched by Dennis Montgomery, a problem gambler with casino debts, and financed by Warren Trepp, a former partner of junk bond king Michael Milken. Neither had experience with defense, intelligence, or IT, but they partnered to develop pattern-recognition software that could supposedly detect messages within video images.

This was manna from heaven for the CIA’s Directorate of Science and Technology (S&T), which had played a lead role during the Cold War but had been sidelined by the war on terrorism. They could finally get in the game, and their desire to be relevant swamped their common sense. Montgomery deceived them in test demonstrations that were much like conjuror’s tricks—Montgomery the gambler was always looking at ways to beat the house.

The S&T directorate sold the program to the CIA leadership and the White House. Risen tells us that John Brennan, the current CIA director, whose dishonesty became notorious during the Senate’s torture investigation, was a fan of the scheme. At one point CIA director George Tenet was feeding the raw—and worthless—data to President Bush, who had to act as his own intelligence analyst.

Even when the CIA leadership finally cottoned on to the fraud, such was their embarrassment that they kept the whole fiasco secret. Prosecuting or debarring Montgomery was out of the question, so he merely continued peddling the hoax to other agencies. The Defense Department’s Special Operations Command fell for the con, paying Montgomery’s company $10 million for the software to aid in automatic target recognition so that the sensors of Predator drones could detect targets to assassinate. Since this worked no better than decoding al-Qaeda’s fictitious secret messages, the Defense Department quietly dropped the program, but kept up a veil of secrecy to hide their own embarrassment.

How could government agencies with a vast network of research labs and armies of science PhDs fall for a technological hoax as elementary as the “Mechanical Turk” of eighteenth-century Europe or the hundred-miles-per-gallon Fish carburetor of the 1950s? There are several factors: the long-standing American bias toward technological panaceas; the bureaucratic competitiveness of the S&T directorate, which wanted to enhance its role in the war on terrorism; and the smothering blanket of government secrecy, which prevented other agencies from learning of the hoax.

There is, however, something more to it that Risen does not explain in his thoroughly disillusioning volume about what goes on in the boiler room of the ship of state as it sails to meet the terrorist foe. The attacks of 9/11 seem to me to have unhinged a significant portion of the American population, particularly those occupying influential positions such as the news media. Government officials, who follow the mob rather than lead it, showed the same psychological symptoms in aggravated form. Disoriented and emotionally labile in the wake of 9/11, they were easy marks for the greedy contractors and out-and-out con men that Risen profiles. As he says, “They are the beneficiaries of one of the largest transfers of wealth from public into private hands in American history.”

Risen unfortunately almost loses the plot in a long middle chapter about private intelligence operations that the lay reader may find hard to follow for want of more interpretation by the author. He does reveal, however, the convoluted and confused methods of U.S. intelligence operations, where it is difficult even—or perhaps especially—for intelligence officials to know who is working with us and who is against us. Risen points out how national security objectives are undermined by competitive and sometimes acrimonious rivalry between the Federal Bureau of Investigation and the CIA, reminding one of the jealousy between the KGB and the GRU (Main Intelligence Directorate) in the former Soviet Union.

Contrary to popular belief, wealth in the Middle East no longer comes only from oil. Risen shows us how the geyser of post-9/11 American money is financing hordes of Middle Eastern arms dealers, informers, money launderers, mafiosi, and not a few terrorists. Risen rubs in the implication that minimum-wage jobs in the United States are the price Americans pay for villas in Beirut and Amman.

The author ends with the contention that the goal of the war is endless war. He does not go into the analysis, but I believe that there are strong structural grounds supporting his claim. During the Cold War, the prospect of open conflict with the Soviet Union was so catastrophic that no one, not even the arms industry, wanted war. What they wanted was a surrogate war: an arms race. America stayed at peace, but defense budgets rose with each new claim of ten-foot-tall Russians. That process was reflected in high procurement budgets that were of interest to the major contractors, while the operations budget, which was mainly an internal Defense Department interest, lagged in comparison.

With the broad outsourcing of operations accounts (the budget that pays for maintaining an army fighting in the field, a budget that grows rapidly during war), contractors now have an incentive for endless low-level war. Someone may have made the cynical cost-benefit analysis that the less-than-existential national stakes and the relatively low casualty rate—6,000 U.S. military dead in thirteen years of war amount to only a third of U.S. dead from the one-month-long Battle of the Bulge—make a prolonged war on terrorism an acceptable business model. And contractor involvement is not only logistical—companies like Blackwater have been involved in actual shooting.

It is difficult to read Pay Any Price and not come away with the sick feeling that the Bush presidency—which, after all, only assumed office by the grace of judicial wiring and force majeure—was at bottom a corrupt and criminal operation in collusion with private interests to hijack the public treasury. But what does that say about Congress, which acted more often as a cheerleader than a constitutional check? And what does it tell us about the Obama administration, whose Justice Department not only failed to hold the miscreants accountable, but has preserved and expanded some of its predecessors’ most objectionable policies?

Partisans may squabble over the relative culpability of the Bush and Obama administrations, as well as that of Congress, but that debate is now almost beside the point. If Risen is correct, America’s campaign against terrorism may have evolved to the point that endless war is the tacit but unalterable goal, regardless of who is formally in charge.

Article was published in the Washington Monthly magazine Link to article