Review of Military Budget Needed Amid Rising National Debt
As tensions continue to escalate in Iran and our national debt reaches $40 trillion, it seems like an appropriate moment to scrutinize the military budget more closely. It’s crucial to maintain what the military genuinely requires to stay efficient and ready, but, at the same time, we need to eliminate unnecessary expenditures.
There’s a lesser-known program that has not just missed its goals but has also contributed to rampant government spending. The positive aspect is that Secretary of War Pete Hegseth has call for a review. On the downside, this program is so flawed that it really should be completely dismantled.
In the summer of 2024, a small business deemed “socially disadvantaged” secured two contracts from the Defense Logistics Agency, totaling over $34 million. This company then proceeded to pass along 95% of one contract’s funds to Lockheed Martin and 94% of another to a Leonardo DRS subsidiary, both major players in defense contracting. Essentially, this disadvantaged entity did little more than fill out the forms and take a cut.
This practice didn’t violate any laws. It adhered to the established business model outlined by the Small Business Administration’s 8(a) Business Development Program, which is actually the oldest government contracting initiative based on identity — and is one of the more enduring forms of corporate welfare in Washington.
In January, Secretary Hegseth announced plans for a comprehensive reevaluation of the program, indicating that the Pentagon would take a “sledgehammer” approach and conduct a thorough review of all small business sole-source and set-aside awards exceeding $20 million. He noted that in many cases, these “socially disadvantaged” companies weren’t even actively involved in the work; instead, they’d take fees ranging from 10% to 50% and assign the contract to a larger consulting firm.
While Hegseth has correctly identified the issue, a mere contract review won’t solve the problem. Previous administrations and Congress have attempted to reform the 8(a) program, but those efforts have largely fallen flat because the incentives built into the program encourage abuse. Unfortunately, Congress can’t simply change those incentives; they are embedded in the program’s very structure. The only genuine solution would be to entirely eliminate the 8(a) program.
The current iteration of this program was created by Congress in 1978, when it amended Section 8(a) of the Small Business Act, directing noncompetitive contracts to firms owned by “socially and economically disadvantaged individuals.” The SBA later expanded that definition to include nearly all racial and ethnic minority groups, while excluding white Americans. Lawmakers assured that nine years of preferential access would allow these firms to evolve into independent competitors. Fast forward nearly fifty years, and it seems the exact opposite has happened: a reliance on pass-through firms who merely broker access to the larger defense contractors.
A study from the Claremont Institute revealed that the same pattern has persisted under both Democratic and Republican administrations. For instance, in 2011, the firm EYAK Technology LLC subcontracted a staggering 91% of a $2.9 million contract from the Army to L3Harris Technologies.
From 2009 to 2025, L3Harris received 47 subcontracts from 8(a) firms, totaling almost $1 billion, with eight of those subcontracts making up over 90% of their primary contract’s value. Other large companies, such as General Dynamics and Lockheed Martin, are involved in similar practices.
Efforts to enact reforms consistently fail because a sufficient number of compliance officers would be needed to enforce rule changes. Plus, it’s worth noting that every participant in this scheme benefits from the ongoing malpractices.
The firms affiliated with the 8(a) program make millions without real pressure to enhance their capabilities. Meanwhile, the larger defense companies boost their profits by accessing contracts they wouldn’t be able to secure directly. The contracting agencies fulfill their procurement needs and meet the goals set by the SBA on paper. Honestly, there’s little incentive for anyone involved to change how things operate. The structure effectively fosters dependency rather than the program’s intended goal of developing capabilities.
Supporters of the program often point fingers at a few bad actors, but the root of the problem lies in the program’s design. Any initiative that offers preferential treatment to certain groups is bound to create similar outcomes.
When the government funnels public funds to specific groups under the pretense of addressing their challenges, it leads to greater dependency for those supposed beneficiaries, while middlemen and established firms profit at the taxpayers’ cost.
The Trump administration has taken some commendable initial steps, including demanding three years of financial records from program participants and suspending around 1,000 firms that failed to provide those documents. Hegseth’s contract review indicates a readiness to take action.
However, audits and reviews won’t dismantle the foundational issues; a future administration could simply reverse any progress made. As long as the program remains in place, its flawed incentives will prevail.
Rather than trying to fine-tune the unfixable, Congress and the administration should acknowledge that after 48 years, the 8(a) program has not only failed its objectives but has also wasted taxpayer money while enriching prime contractors and the pass-through firms that do little. Secretary Hegseth needs to take decisive action and completely abolish this program.
