Amazing Facts and Figures from the Pentagon’s Failed Audit

Plus, Trump's privatization push for veterans' health care By Yuval Rosenberg and Michael Rainey Amazing Facts and Figures from the Pentagon’s Failed Audit The Department of Defense announced Thursday that, to the surprise of no one, it has failed its first-ever comprehensive audit. Rep. Mike Turner (R-OH), the outgoing chair of the House Subcommittee on Tactical Air and Land Forces, said lawmakers knew “the outcome would paint a bleak picture of the financial controls and information systems at the Department of Defense.” But now that the first audit is complete, “we have a clearer picture of the failures at the DoD, we can take action to fix them, hold leadership at DoD accountable,” Turner said. The audit wasn’t all bad news, though. Five organizations within the Department of Defense earned “unmodified opinions” — accounting-speak for a clean bill of health. Those organizations are the U.S. Army Corps of Engineers – Civil Works; the Military Retirement Fund; the Defense Health Agency – Contract Resource Management; the Defense Contract Audit Agency; and the Defense Finance and Accounting Services – Working Capital Fund. Auditors found no evidence of fraud, and all “major military equipment” was accounted for, the Pentagon [said](. On the other hand, the Army, Navy, Air Force, Marines, Special Operations and Transportation commands all failed the audit, with multiple issues that need to be fixed. And information technology security at the Pentagon is a mess, the audit found, with multiple systems in operation that are vulnerable to hacking. A [236-page financial report]( released Thursday, which is based on the auditors’ findings, is loaded with interesting facts and figures about the sprawling U.S. Defense Department. A few examples: - The audit covered $2.8 trillion in Department of Defense assets, which account for more than 70 percent of the U.S. government’s total assets. - Those assets include more than 585,000 buildings and structures worldwide. - DoD operates 4,700 sites around the world, covering 26.9 million acres — roughly the size of [Tennessee](. The sites range in size from weather towers occupying a few square feet to the 3.5 million-acre White Sands Missile Range in New Mexico. - The U.S. military operates 15,700 aircraft and more than 280 “battle force” ships. - The Pentagon is one of the nation’s largest employers, with 1.3 million active personnel, 770,000 civilian employees, and 800,000 personnel in National Guard and reserve forces. - The consolidated audit was performed by the Pentagon’s Office of Inspector General and was based on 20 standalone audits performed by independent accounting firms involving about 1,200 auditors. - The auditors conducted over 900 site visits at 600 locations. - The audit took nearly a year to complete, at a cost of $413 million. - It found [more than 2,000 problems]( that need to be addressed. - The Pentagon said it expects to spend more than $500 million to fix problems identified in the audit. Trump Administration Plans Costly Private-Care Expansion for Veterans The Trump administration is working on a plan that would dramatically expand the private sector’s role in veterans’ health care, shifting millions of former servicemembers to private care, [ProPublica’s Isaac Arnsdorf reports](. The administration is looking to unveil the plan during the president’s State of the Union address in January, four sources tell ProPublica. More from Arnsdorf: “The cost of expanding private care is hard to predict, but VA officials have told Congress and veterans groups that it will range from $13.9 billion to $32.1 billion over five years, the four people said. Since the administration opposes lifting overall government spending, Democrats say the increased cost of private care will come at the expense of the VA’s own health system. Some lawmakers said the administration’s plan defies the purpose of the law they passed.” VA Secretary Robert Wilkie has pledged that he [won’t privatize]( the agency’s health care services, but Arnsdorf reports that the share of VA care delivered through the private sector has risen from 22 percent in 2014 to 36 percent, and policy changes being considered by the Trump administration would raise it even further, to 55 percent. [Read the full ProPublica piece here.]( New Tax Brackets for 2019 The IRS [released]( its inflation adjustments for the 2019 tax year this week, which include new brackets and limits on deductions and exemptions. A few highlights: - The standard deduction for single filers in 2019 will be $12,200 (up from $12,000 in 2018); $24,400 for married couples filing jointly (up from $24,000); $18,350 for heads of household (up from $18,000). - The Alternative Minimum Tax exemption amount will be $71,700 (up from $70,300) and begin to phase out at $510,300 (up from $500,000); for married couples filing jointly, the AMT will be $111,700 (up from $109,400) and begin to phase out at $1,020,600 (up from $1 million). - The maximum Earned Income Credit amount will be $6,557 for taxpayers filing jointly who have three or more qualifying children (up from $6,431). Here’s a summary of the individual tax brackets for 2019, via [CNBC]( Column of the Day: Why the GOP Tax Cuts Fizzled A long-time critic of Republican fiscal policies, economist Paul Krugman takes on the GOP tax overhaul in Friday’s New York Times, asking, [“Why Was Trump’s Tax Cut a Fizzle?”](Why%20Was%20Trump’s%20Tax%20Cut%20a%20Fizzle%3F”) Krugman notes that the tax cuts failed to provide a political boost for Republicans in the midterm elections and appear to be failing to provide the long-term investment boom that was promised by President Trump’s economic advisers. The reason, Krugman argues, is that “business decisions are a lot less sensitive to financial incentives — including tax rates — than conservatives claim.” Here’s how Krugman sees the underlying economic dynamics: “It’s a dirty little secret of monetary analysis that changes in interest rates affect the economy mainly through their effect on the housing market and the international value of the dollar (which in turn affects the competitiveness of U.S. goods on world markets). Any direct effect on business investment is so small that it’s hard even to see it in the data. What drives such investment is, instead, perceptions about market demand.” The other part of the GOP tax plan — the big jump in growth to be delivered by the repatriation of billions in corporate profits held overseas — fares no better in Krugman’s analysis. As many critics have argued, Krugman says that repatriation is largely a matter of accounting transfers that have little effect on real investment: “[T]he money U.S. companies reported moving home after taxes were cut hasn’t shown up in jobs, wages and investment: Nothing really moved. Overseas subsidiaries transferred some assets back to their parent companies, but this was just an accounting maneuver, with almost no impact on anything real.” The failure of the tax cuts to produce the promised results is nothing less than an indictment of Republican economic doctrine, Krugman says: “[T]his doctrine keeps failing in practice. President George W. Bush’s tax cuts didn’t produce a boom; President Barack Obama’s tax hike didn’t cause a depression. Tax cuts in Kansas didn’t jump-start the state’s economy; tax hikes in California didn’t slow growth. And with the Trump tax cut, the doctrine has failed again.” [Read Krugman’s full column here](. Number of the Day: $530 Billion U.S. employers spend about $880 billion on health care benefits for employees and their dependents, but poor health among workers costs them another $530 billion — or about 60 cents for every dollar spent, according to a [report]( released this week by the Integrated Benefits institute, which describes itself as a nonprofit health and productivity research organization. That additional cost stems from illness-related absences, disability leaves, impaired job performance and occupational injuries and illnesses, the Institute says. IBI said its estimates are based on 2017 data from the U.S. Bureau of Labor Statistics as well as its own benchmarking data from 66,000 U.S. employers. “To put this in further context, the cost of poor health to employers is greater than the combined revenues of Apple, Amazon, Microsoft, Netflix, EBAY and Adobe,” IBI President [Thomas Parry]( in a statement. “There’s not a CEO or CFO that can placidly accept their business expending the equivalent of almost two-thirds of their health care dollars on lost productivity. Illness costs this country hundreds of billions of dollars and we can no longer afford to ignore the health of our workforce.” Your Prize for Making It Through the Week Time magazine is out with its annual list of the [50 Best Inventions]( of the year, an interesting, fun and only occasionally frivolous look at new products ranging from ["unbreakable" pantyhose]( to [alternative sausage]( to [gravity-defying toolboxes](. News - [Battle Over Wall Risks Shutdown as Lawmakers Scramble to Fund Government]( – New York Times - [GOP Leaders Aim to Avert Shutdown Over Wall Funding, but Trump Makes No Promises]( – Washington Post - [Sen. Grassley Will Step into Tax Storm, Finance Gavel in Hand]( – Roll Call - [Fed Chairman Seeks to Reassure Those Left Behind by Roaring Economy]( – New York Times - [Treasury Yields Fall After Fed Vice Chairman Says Central Bank Is Getting Closer to Neutral Rate]( – CNBC - [Mike Pence to Unveil Rival to China’s ‘Dangerous’ Belt and Road Initiative]( – South China Morning Post - [U.S. Marshals Service Spending Millions on DeVos Security in Unusual Arrangement]( – NBC News - [Senior Defense Officials Offer Dueling Pricetags for Space Force]( – Defense One - [Watchdogs Are Gunning for Hospital Coding]( – Axios - [GOP Lawmaker Pushes Back on Trump Drug Pricing Proposal]( – The Hill - [California's New Governor Embodies Democrats' Dilemma On Single Payer]( – Politico - [Incoming Kansas Gov. Says State Will Expand Medicaid Next Year]( – The Hill - [California Clears CVS-Aetna Deal After Concession To 'Not Increase Premiums']( – Forbes - [A Newcomer Rises to the Defense of Pharma — and Tries to Salvage Its Bruised Reputation]( – STAT - [Amazon Eligible for More New York Tax Incentives; Virginia Perks Capped]( – Bloomberg Tax - [Inside the Movement to Derail Amazon HQ2 Incentives]( – CityLab - [Postal Unions Making Big Ad Buy to Stop Postal Privatization before Trump Releases Plan]( – Washington Post - [Forget the Playoff, College Football’s Burning Question Is About Taxes]( – Wall Street Journal (paywall) Views and Analysis - [These Charts Show How Democrats Represent the Growing Modern Economy – and How Republicans Are Left Behind]( – John Harwood, CNBC - [Post-2018, the Republican House Caucus Represents Much More Trump-Friendly Turf]( – Philip Bump, Washington Post - [Why Businesses Should Be Optimistic About the Midterm Results]( – Benjamin Harris, Fortune - [Tax Law Failed to Save GOP Majority]( – Naomi Jagoda, The Hill - [Post-TCJA, Your State Should Consider a Refundable Child Tax Credit]( – Richard C. Auxier and Elaine Maag, Tax Policy Center - [Moving Beyond the Earned-Income Tax Credit]( – Colin McAuliffe and Sean McElwee, The Nation - [What the Amazon Tax Breaks Really Mean]( – Matthew Yglesias, Vox - [Amazon Played American Cities for Suckers]( – Los Angeles Times Editorial Board - [Congress Must Address the Looming Tax on Seniors in Medicare Advantage]( – Former Rep. Allyson Y. Schwartz, The Hill - [A Solution to Stop Our Veterans from Dying While Waiting for Medical Care]( – Trey Kovacs, The Hill - [How Taxes Affect the Incentive to Invest in New Intangible Assets]( – Congressional Budget Office - [The Next Capitalist Revolution]( – The Economist Copyright © 2018 The Fiscal Times, All rights reserved. You are receiving this newsletter because you subscribed at our website, thefiscaltimes.com, or through Facebook. 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