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The "free market" appears to be more a game of shills and payola

When the U.S. Central Intelligence Agency (CIA), U.S. National Security Agency (NSA), and other intelligence firms get their spying dollars they contract out much of their work to private analysts.  But this process has long been suspected by some to be less free market and more outright corruption.  A fresh leak affirms that much like rumors of spying on U.S. citizens -- these claims that were once were dismissed as paranoid irrationalism have now been proven to be true in America's warped political landscape.

I. Intelligence Official: "Brilliant People Get You in Trouble"

The latest document was published in The Washington Post and comes courtesy of former NSA analyst Edward Snowden.

Mr. Snowden was never supposed to have access to this document -- nor many of the others he obtained.  But as with much of his trove of documents, he obtained the kind of whistleblower information that was far too explosive for even a privileged employee of his clearance, by using digital espionage to escalate his privileges even higher.

A former intelligence official quoted by NBC News described Mr. Snowden, stating:

Every day, they are learning how brilliant [Snowden] was.  This is why you don’t hire brilliant people for jobs like this. You hire smart people. Brilliant people get you in trouble.  The damage, on a scale of 1 to 10, is a 12.

Edward Snowden
Edward Snowden was "too smart" to hire, says one former intelligence official.  When he caught wind of massive gov't spying and corruption he blew the whistle in a responsible way when a "dumber" employee might have stayed quiet, ignorant, and obedient . [Image Source: AP]

If that sounds a little bit like a mob mindset, you might not be that far off, when you consider the numbers from this latest document.

While the document has plenty of interesting revelations, perhaps the most revealing graphic as to why the NSA and other organizations are so keen on spying on millions of law abiding Americans can be found on page 79 of the "top secret" classified Budget Summary for Fiscal 2013:

Intelligence spending
[Image Source: The Washington Post]

The graphic above shows that about 18 percent of the intelligence workforce -- or roughly one in five contractors -- is from the private sector ("civilian" workers represent non-military government personnel, i.e. staff at CIA or NSA offices or counterterrorism "Fusion" Centers).

While contractors represent fewer than 20 percent of the workforce, 70 percent of the intelligence budget goes to them, according to a figure from the U.S. Director of National Intelligence Agency (DNI) at a Colorado sponsored by the Defense Intelligence Agency (DIA).  While it's possible that this number is a few percentage points more or less today, that rare peek behind the veil is likely still relatively accurate.

II. Obama's Donors are Cashing in on Pork-Barrel Spy Spending

Traditionally the lion's share of this money has gone to Northrop Grumman Corp. (NOC), Honeywell Int'l Inc. (HON) (via is Science Applications Int'l Corp. subsidiary), Raytheon Comp. (RTN), Lockheed Martin Corp. (LMT), and Edward Snowden's former firm Booz Allen Hamilton Holding Comp. (BAH).

Given that these companies were among President Barack Hussein Obama's (D) top donors, giving twice as much to him as his Republican rival, it seems unlikely that the agency chiefs would cut back funding to these "friends of the state".

The list of President Obama's top campaign donors reads like a who's who of the intelligence contracting industry including -- Booz Allen Hamilton ($176,000 + $281,700 USD to supporting PACs); Lockheed Martin ($285,600 + $854,300 USD to supporting PACs); Honeywell Int'l ($93,600 USD + ~$100,000 USD to supporting PACs); Raytheon ($155,800 + $522,300 USD to supporting PACs); and Northrop Grumman ($251,500 + $323,300 USD to supporting PACs).

Obama spying
Barack Hussein Obama is a master of "spying" a payday... it's not suprising he managed to get elected President (twice) and lavished private intelligence contractors with kickbacks.
[Image Source: Reuters]

Given that "generosity", it's possible that the percentage of the President's intelligence budgets that is being funneled to campaign donors-cum-private contractors may be well over 70 percent at present.

But let us assume the 70 percent figure for a second.  So that figure indicates 70 cents out of every intelligence dollar goes in a private pocket.

One might assume that under the "free market" these contracts would deliver lowers costs.  But in reality it appears they are dramatically higher.  With the information from the latest leak (that contractors only comprise ~18 percent of the workforce), it can be estimated that the federal government pays ten times as much of your taxpayer dollars per private sector analyst as they do per government employees.

In other words in America's political system, the much villainized "desk job bureaucrats" (along with a small contingent of members of the military) are actually raking in much less than the private sector firms "competing" for that work.

Central Bureaucracy
It's an ironic day when bureaucrats are 10 times cheaper than the closed market alternative championed by corrupt politicians. [Image Source: Matt Groening]

This makes no sense from a capitalist perspective until you realize that this isn't capitalism at all and that the nation has devolved into a system in which both parties unilaterally take from the taxpayers and pay off large contractors, who consistently shower both supposed "sides" of America's two party ruling system with campaign cash.

III. Contracts Awarded For Payouts, Not Product

There's no transparency, and little competition to speak of, because contracts typically go to those who pay, not those who offer the best payout of results.  For example, Inc.'s (AMZN) PAC in 2012 paid a roughly 56-74 split (D/R) of campaign cash to members of the House and 37-12 split (D/R) to members of the Senate, according to OpenSecret's numbers from its PAC.  Lo and behold in each case money went to whatever party was in control of chamber and could pass spending legislation.  According to the site's statistics Amazon claimed $2.5M USD in lobbying expenses in 2012 alone.

Congress bribes
Congress is as much in the pocket of the owners of big money intelligence contractors as the President. [Image Source: Wikimedia Commons]

Punch that into your old calculator with the numbers from a 2011 study by researchers Raquel Alexander and Susan Scholz of the University of Kansas School of Business which estimates that per $1 USD spent on lobbying a company gets back $220 USD, on average in contracts, tax breaks, grants, etc. and you get an estimated that Amazon's $2.5M USD contribution should theoretically earn it a $550M USD payoff.

Lo and behold Amazon reportedly received a $600M USD confidential contract recently to provide "data services" to the CIA.

Friendly bribe
Bribery pays big dividends in U.S. politics.  Given that federal politicians have little legal responsibility to recuse themselves from decisions involving campaign donors and given that the payoff is $220 USD per $1 USD spent lobbying it's a dream investment.
[Image Source: Haberrus]

Likewise, Oracle Corp. (ORCL) -- another top tech industry recipient -- spent so much that even Amazon might blush.  It spent $6.7M USD in 2012 alone.  And results?  Consider that Oracle pocketed most of a $1B USD U.S. Air Force project that last year was deemed a complete failure and whose work was mostly tossed out (don't worry Oracle kept that hard earned taxpayer money).  Perhaps that's why Oracle CEO Larry Ellison was so eager to defend the NSA -- an agency who he reportedly helps spy on millions of Americans daily.

IV. Most of the Pork is Pocketed by Big Shareholders, Not Contracting Professionals

So it's been settled that the U.S. government is taxing citizens over $50B USD per year to spy on themselves, and is operating as a closed-market system when it comes to contracting, with any signs of capitalistic life few and far between.  But one would hope at least some of that money was going to the employees of defense and electronics industry intelligence contractors.

But this does not appear to be the case.  While private sector employees do earn more, they don't earn ten times as much.  Associate Consultants at BAH -- a position similar to Mr. Snowden's make an average of $108K USD yearly according to Glass Ceiling (Mr. Snowden reportedly made $122,000 USD/year), while an NSA "analyst" in a similar post reportedly earns around $70K USD.  So if private contractors aren't even earning a measly twice as much, where is all this pork going?

Contractor firms' professional employees only make marginally more than their gov't peers, studies show.  Most of the pork is stuffed into the pockets of hedge fund owners, the ultimate target of intelligence industry pork. [Image Source: Mother Jones]

The answer is that the money is pocketed as corporate profits, which are distributed to shareholders via programs such as dividends, share buybacks, etc.  Of course much of this money goes to America's top 0.01 percent -- the individuals who control the hedge funds, which in turn own much of the corporate IT industry and defense contracting industry's public stock.  Essentially the corporations just act as one more layer in the food chain above the paid off politicians who scavenge on taxpayer dollars.  At the top of food chain are the hedge fund owners, the great whites of the American budgetary sea.

Thus contracting -- the primary recipient of intelligence dollars -- is not only a corrupt closed-market system with artificially inflated prices -- its a system in which skilled professional at most earn a small cut of these ill-gotten gains.  The leech-like construct ultimately funnels the lion's share of defense contracting dollars to a fortunate few, operating as a plutocracy.

V. Small Contractors Show Similar Tendencies

As for smaller contracting firms the same principle applies.  Studies show that funding -- much of which passes through earmarks -- is largely received by contractors that donate to the politicians sponsoring the earmark.  
FBI tracking
Snaller contractors are equally fond of payola, scoring contracts on facial recognition, data mining, smartphone snooping, and other forms of spying. [Image Source: Hang the Bankers]

The U.S. Department of Homeland Security's (DHS) $6M USD "BOSS" project to use facial recognition to spy on American citizens is a perfect example.  The earmark of $6M USD went to Electronic Warfare Associates Government Systems, Inc. (EWA GSI) who had donated heavily to Senate minority leader Sen. Mitch McConnell (R - Kent.) -- who happened to write the earmark.  Lo and behold this award which Sen. McConnell claimed featured a "competitive" bidding process had only one bidder.

More often these small firms -- like EWA GSI -- are private with profits going to their venture capitalist backers -- the same lucky lot that have cornered the big business side of the market via their corporate stock holdings.  Why select one route of corruption when you can have two?  

Mitch McConnelll
Sen. Mitch McConnell (R-Kent.) is fond of funneling kickbacks to his generous "donors".  For example facial recognition spying firm EWA GSI recently got $6M USD [Image Source: AP]

The best plutocrats surely have balanced portfolios of small and big contractors alike, all of whom are wooing the best politicians that money can buy.

VI. How Big Intelligence Taught me to Stop Worrying About Bureaucrats and Love the Bomb

A final point worth mentioning is that while intelligence budgets are at record amounts in dollars -- they are not at record amounts when adjusted for inflation.  In the late 1980s inflation adjusted budgets peaked at around $71B USD, according to The Washington Post.

But what is different is the product that's being paid for and who is getting paid.

In the 1980s most intelligence dollars went to government employees and their expenses.  Intelligence was expensive as it was largely the work of field operations in regions of interest.  This required a lot of employees and a lot of logistics spending.  Contractors are though to have received a far smaller cut.

Today most intelligence money goes to private contractors.  Intelligence today should be far cheaper as most of it's done locally in the U.S. with little in the way of logistics costs.

NSA spying taxpayers
Today federal spying is low cost and focuses more heavily on U.S. citizens.  This all equates to more pork for paid of polticians to push. [Image Source: The People's Cube]

In the 1980s most intelligence dollars went towards spying on the Communists and their allies.  Today a large percentage of the money spent on spying goes towards collecting, storing, and even at times improperly analyzing the communications of citizens of the U.S. and ally states.

Thus America has unwittingly traded expensive bloated bureaucracy in the Cold War for an even more wasteful closed market plutocractic system in the "9/11 era".  And in the process they're getting far less for its money, all while installing systems that could later lead to dangerous violations of citizens' civil liberties.

NSA spying
The bitter irony?  We're paying for the weapons that could one day rob us of our Constitutional freedoms. [Image Source: Nation of Change]

You know you're in a nightmare when you're wishing that you could get your slightly-less-overpaid bureaucrats back.  But that is where America finds itself.  Welcome to the surveillance state.

Sources: The Washington Post [1], [2], [3]

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More piss poor reporting
By flatrock on 8/30/2013 1:00:40 PM , Rating: -1
The military contractors are all publicly held companies, and it doesn't take much effort to see that claims that they are getting paid ten times as much for contract employees as the civil servants cost. It's been shown time and time again that civil Servants are costing the government more per person than contractors, and this isn't different in the intelligence community than for the rest of DOD contracting.

Your typical big prime contractor aims to mark up what their employees cost them on average by 15%. That may sound like a lot but all the administrative overhead as well as the continuous effort to bid on the follow-on work and new contracts just to keep the people they have employed continuously. There are also the training costs of new employees, and there are always new employees because the industry has a high turnover because the it's not really all that secure of employment. Lapses in contracts, having follow-on work given to a competitor that for one reason or another has a good relationship with whoever is in charge when the work comes up for rebid, or even having the contractors all replaced by civil servants. It's partly technical, but there is generally as much if not more politics involved in who gets the bid. One of the biggest costs is having to cover all the salaries of their employees and having to cover the costs of things that were bought on contract while waiting for the government to pay them. The government never pays on time, and a lot of smaller contracting companies have gone bankrupt waiting for the government to pay them what they are owed.

So of course all the contractors lobby the government. They have no choice. I would love to see the earmarks disappear or at least be scaled back dramatically, so would most of the people at the contracting companies (at least all the earmarks they aren't benefiting from).

So why do the budget numbers look so skewed? Most of the purchasing is done through contractors. Need a bunch of new servers, well the money gets put on a contract and the contractor gets the bids and after getting proper approval cuts a purchase order. Seems like it would be a waste to do it that way, but once again it's been proven to be cheaper that way overall time and time again.

I wonder if Snowden is happy with how things have turned out. He said he wanted an honest and open discourse, yet it seems like most of what he released is getting fed through journalists that are sensationalizing it and misrepresenting it, and there seems to be a definite shortage of people in general and especially in the media that are willing to step back and think about if what they are being told and how it is presented makes any sense.

RE: More piss poor reporting
By Master Kenobi on 8/30/2013 3:40:33 PM , Rating: 1
Snowden is a clown that wanted to gain some fame and get into the history books. He has succeeded in that goal brilliantly.

If your goal is honest and open disclosure, you don't run to China and then Russia. You go somewhere like Switzerland.

RE: More piss poor reporting
By Reclaimer77 on 8/30/2013 4:55:57 PM , Rating: 2
Yeah thank god Snowden is blowing the whistle on Government waste!! I mean, who knew!??? I'm flabbergasted and stuff...

RE: More piss poor reporting
By Master Kenobi on 8/30/2013 7:16:05 PM , Rating: 2
If you are surprised about government spending, you don't pay attention. While we're at it, let's do some budget trimming on some of our other big sources of government waste. I'm talking of course about Medicare and Social Security.

I have no problem cutting the defense budget, but I'd also like to see the other two get some heavy cuts as well.

RE: More piss poor reporting
By Reclaimer77 on 8/30/2013 8:01:37 PM , Rating: 2
I was being sarcastic :)

RE: More piss poor reporting
By Master Kenobi on 8/31/2013 9:04:17 PM , Rating: 2
Hard to tell on these boards sometimes :P

By ShaolinSoccer on 9/2/2013 3:16:40 AM , Rating: 1
Well, maybe he got his face on a few magazines, a few TV shows, and a few (insert whatever the hell you want in here). If he made bank, then he accomplished what he wanted. I'm sure he got advice from a bunch of people on what he should do.

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