Why are taxes so high? Maybe because we’re still footing the bill in Afghanistan

This month we will debate tax reform and upcoming tax cuts, and a logical follow-up thought to the tax reform debate is: “why does the federal government cost so much to run?”

Each of us will answer that question differently — possibly depending on our political persuasion — but there’s overwhelming bipartisan agreement on the need to reduce “waste, fraud and abuse.”

Which is why we should all applaud the work of internal government groups like the Special Inspector General For Afghanistan Reconstruction, or SIGAR, dedicated to reporting on waste, fraud and abuse in our nation’s longest war. SIGAR makes quarterly reports to Congress on where our money went and conducts investigations on fraud and enforcement on the Afghanistan conflict, which began in 2001.

If you think like me, you might have this vague gnawing sense that pursuing a perpetual war against a shadowy non-state enemy with no end in sight is the surest way to blow our nation’s budget. When you read a SIGAR report, that vague gnawing becomes very specific, with cold hard numbers attached to it.

Here’s just one example of $70 billion in waste. A recent report by SIGAR studied the cost of building up the Afghan National Defense and Security Forces, or ANDSF. The money appears mostly wasted.

In 2005, officials estimated a $7.2 billion price tag for building up the ANDSF. Bolstering internal police and security forces is an important and logical step toward reducing the U.S. military presence there. As the SIGAR report describes in excruciating detail, 15 years and $70 billion later, our efforts at capacity-building have utterly failed. Afghanistan cannot keep its own peace, and the local security forces are wholly dependent on U.S. support, both financially and militarily.

The devil of this failure is in the details of the report, but the waste, fraud, and abuse is nothing short of mind-boggling.

There’s the obvious, like the $500 million spent on secondhand Italian transport planes that couldn’t operate in Afghanistan’s harsh conditions.

Or like the unspecified cost of what are believed to be thousands of “ghost” soldiers on the payroll of the Afghan army, basically paid for by us. One estimate in 2015 put that cost at $300 million in phantom payments.

The Afghan Ministry of Defense Headquarters, originally budgeted at $48.7 million, ended up costing $154.7 million and took five more years to build than expected.

Oddly, given the amount of money we spent, the history of training the Afghan forces is often one of equipment shortages. In the early years of U.S. rebuilding efforts, Afghan units would attempt to seize Taliban weapons caches because they were better quality than what they could get from us.

Afghanis preferred former Soviet-era weapons because they broke down less easily than the higher-tech U.S. weaponry.

An estimated 70 percent of Afghanistan’s population is illiterate. What that means is that after we deliver state-of-the art military electronics equipment, and then something goes wrong, the equipment can’t be fixed using local expertise. So the U.S. military ends up resuming control of the abandoned high-tech equipment. According to SIGAR, Afghan soldiers remain totally dependent on our high-tech close air support and reconnaissance technology to be effective.

This mismatched technology problem is, in fact, both a cause and a giant metaphor for wasted expenditures in Afghanistan. We continue to build expensive high-tech solutions unsustainable in the Afghan context.

SIGAR estimated in July 2017 that the U.S. has spent $714 billion on the war effort so far. An academic study by Professor Neta Crawford of Boston University, a specialist in tallying war costs, estimates an even higher cost to the Afghanistan war, at $877 billion. That cost can only increase from here, because the ongoing problem is that we can’t seem to walk away financially, without the country’s finances collapsing. The Afghanistan government, according to SIGAR’s July 2017 quarterly report, is on total financial life-support from the U.S. government.

How do we know about this dependency? Here are the numbers: The Afghanistan government raised $2.1 billion in total revenue in 2016. It costs around $7.3 billion a year to run the government with an estimated $4.9 billion spent on the Afghan forces alone. Who pays the difference of roughly $5 billion each year? That would be you and me, with some help from international donors.

It’s as if we built a $50,000 Habitat-For-Humanity house for someone who badly needed a home, but then burdened the house with technology, utilities and taxes appropriate for a $2 million mansion.

The “lucky” recipient now has an unsustainably expensive albatross of a house. He can’t afford to live there. The Afghanistan people cannot afford the armed forces, and government, that we’ve built for them.

There’s no foreseeable path to fiscal sustainability for the Afghanistan government. So, we’re stuck there.

There’s very little to celebrate over the blown $70 billion in rebuilding Afghan security forces, or even the between $714 billion and $877 billion spent to conduct the war since 2001.

If you’re worried about the rising cost of our government, check out SIGAR’s reports and the progress made in our perpetual war, with ill-defined goals, against a shadowy enemy that can’t be defeated. michael@michael thesmartmoney.com