The Government’s Billion-Dollar Blunder

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The other day I received a note from a reader who suggested I “should stay out of politics and only comment on government financial and economic actions that impact investing.” He was reacting to a piece in last weekend’s Sovereign Digest in which I reviewed Pope Francis’s recent speech to Congress.

I occasionally comment on politics for two reasons. First, The Sovereign Society is dedicated to individual sovereignty in all its aspects, not just investing. Our philosophy, which was developed by my father Bob Bauman and others, emphasizes personal liberty and prosperity, of which profit from investment is one, but not the only, component. Also important are the habits of mind that underlie everyday decision-making. Observing political life is a critical part of this.

Second, the “government financial and economic actions that impact investing” are rooted in a bigger picture … one that every investor urgently needs to understand.

A great example of this bigger picture is the Bawlmer Blimp.

Chroist Hon, What’s That in the Sky?

I spent my formative years in Baltimore (“Bawlmer” to locals). I know the city well, and have followed its ups and downs over the years, even when I lived abroad.

Baltimoreans have a strong sovereign streak. It’s an eccentric and irreverent place, producing oddballs like filmmaker John Waters and musicians Frank Zappa and David Byrne. I recall many nights spent in vibrant dives like the Marble Bar, Jules’ Loft and 8 x 10. Few baseball stadiums have the bohemian feel of the Orioles’ Camden Yards.

So I can only imagine how the natives are responding to the presence of a massive government surveillance blimp hovering over the city. They must be muttering choice profanities over their mugs of Natty Boh.

You see, the Army has been testing giant high-tech blimps called JLENS at Aberdeen Proving Ground, just east of Baltimore. They are meant to provide an early warning of attacks by cruise missiles, drones or other low-flying weapons. They float at 10,000 feet, where they can see 340 miles in any direction … or straight down, monitoring activities on the ground as well as cellular communications.

But after 17 years of research and $2.7 billion, the system doesn’t work. For example, JLENS failed to spot a guy who flew undetected through 30 miles of highly restricted airspace, before landing on the West Lawn of the U.S. Capitol, demanding campaign finance reform.

And yet they survive in the Pentagon’s already-bloated budget. The reason is an excellent illustration of the intersection of “politics” and the U.S. investment environment.

Pork Barrel in the Sky

The Army awarded the first JLENS contract in 1998 to a joint venture led by Raytheon, for an estimated $292 million. Then, the 9/11 attacks made the far-seeing blimps seem like a great idea, so the Army ponied up another $1.3 billion and ordered 28 of them.

But they never worked as intended. The fire-control systems were hopelessly buggy. The blimps were supposed to be mobile, but their thick Kevlar tethers, power generators, reinforced concrete anchor pads and ground crew of about 130 made that impossible. A storm in 2010 destroyed one, costing $182 million.

A senior commander finally pointed out that what the Army really needed in its “wars” in Iraq and Afghanistan was better protection from old-fashioned rockets, artillery and mortar fire. He tried to cancel the program. But contractor Raytheon mobilized a team of lobbyists that included former senators Trent Lott, a Mississippi Republican, and John Breaux, a Louisiana Democrat.

They in turn mobilized federal legislators, both Republican and Democrat, from states with JLENS-related contracts, including Maryland, California, Texas, Virginia, North Carolina, Massachusetts, Oregon, Alabama, New Mexico and Utah. Congress kept JLENS alive, even though it still didn’t work, and our servicemen and women in the field desperately needed other things to do their jobs and survive.

The Real Zombie Apocalypse

JLENS is what’s known as a “zombie” program — one that’s clinically dead but still stumbling around and causing havoc for the living.

Like the F-35 Joint Strike Fighter ($1 trillion) and the Navy’s littoral combat ship ($30 billion), JLENS doesn’t do what it’s supposed to do — and the Pentagon doesn’t even want it. In fact, thanks to the budget “sequester,” the Pentagon can barely keep the troops trained, ready and capable. They have begged Congress to terminate the zombies, to no avail.

The only people who want JLENS and other tax-eating zombies are in Congress — you know, the guys who can’t pass a budget and are preparing to shut down the government at a cost of billions. The same guys who demand that we spend $48 million a year to ship $25 million worth of food to U.S. military-base grocery stores in Asia instead of using local producers, just so agricultural-industry lobbyists will keep writing them checks.

The U.S. government is $18 trillion in debt. The Federal Reserve runs its electronic printing presses 24/7 to feed this beast. This and corporate capture of government by lobbyists are the greatest threats to your prosperity.

And yet “politics” tells us that the problem is “welfare,” the annual costs of which amount to about 6% of the cost of just JLENS. I’m no fan of welfare, but I’m even less fond of the bait-and-switch nonsense that our political system uses to pull the wool over our eyes. It’s a direct assault on our sovereignty.

And as long as those assaults keep coming, I’ll be talking about it … after all, building your sovereignty is my job.

Kind regards,
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Ted Bauman
Offshore and Asset Protection Editor