More to the point, they don't (presumably) have some secret pipeline of highly talented people. I mean, the pool of graduates in mathematics, statistics, computer science, etc., year in and year out, is available to everyone, NSA, other public sector, other private sector, etc. And while the NSA probably prioritizes hiring brilliant math wonks and what-not, so do wall street hedge fund companies, tech companies, etc. And given that at least some small percentage of "really smart people" would probably refuse to work for the NSA just on ideological grounds, I don't see any reason to believe that they have a monopoly on smart people who can do crypto research and what-not.

As for their financing, however... I don't know. I'm not real big on conspiracy theories, but I don't doubt the existence of secret budgets and "off the books" stuff to fund certain government programs. I mean, just go back to the Iran/Contra affair[1] and you can see that some sneaky stuff does go on, at least on occasion.

[1]: http://en.wikipedia.org/wiki/Iran%E2%80%93Contra_affair

[1]Projected US Gov't R&D spending - 2012: http://www.battelle.org/media/press-releases/battelle-r-d-ma...)

Unlikely. And given the secrecy surrounding their budgets, how could you know for sure? Even if you did, the dollars themselves are only part of the picture. The dynamic surrounding the money also has a big influence on how it can be used. A private company needing to post a profit operates under a set of constraints that are dramatically different from those that govern R&D in the military.

Also, unlike private R&D teams, the military can unilaterally classify and restrict entirely categories of hardware (e.g. GPS units that function over specific altitudes or above certain velocities). And they can seize (in secret) any instances that threaten national security.

That's a set of competitive advantages that the private sector, almost by definition, can never hope to match. Or at least not independently.