Well Emplear, maybe you can explain to us how your playing.
I did not buy Sins of a Pirate Empire, because it seems either all my money goes to pay them or they are attacking me. The hole game was pirates, pirates, pirates.
Hm. I dunno how Emplear is playing, but I can tell you how I play. I have the latest version of diplomacy, and I enjoy the challenge of diplomacy pirates. The only thing I don't like is that the AI never bid against each other anymore.
I play single player. I'm usually TEC. I was playing versus all hard AI (either random or economist) and a while ago moved up to all unfair AI. I mostly play large FFA games, and ALWAYS with the pirates on.
I concentrate on my economy first and foremost. I rarely build more than the free cap ship until relatively late in the game, and often don't even send any support to it. I find that a single Sova is enough to take almost any planet, except maybe those tough deserts with 3 Kodiaks and their friends. This keeps my supply cost at 0.
If the enemy is close I'll build minimal defenses needed, always concentrating on the econ.
I click over frequently to look at the pirate clock, and if it's less than a minute away I'll curb my expenditures. When it hits 0 I sell all my metal and crystal, then I wait about 25 seconds (since 30 seconds is minimum for pirate launch) and (depending on the situation) then put at least half of my cash on whatever enemy is next to me, or seems the most threatening. Every few seconds I'll put another 250 or so to prevent them snipe bidding near the end (because they're trying to build up cash to beat me the whole time, or so I think).
Most games I don't get raided at all, and when I do it's usually because I was caught up in multiple battles and didn't notice the pirates were about to launch a raid. I've rarely seen the AI outbid 10k, so when my economy is strong enough I'll often bid that or higher and not bother babysitting the pirate clock for the whole 30 to 90 second countdown. Until I can do that though, I don't watch anything else while it's going.
So basically by concentrating entirely on economy, I can just hire out a navy instead of building my own. It's especially useful once you research the ability to send the pirates to particular planets. Even when I build my own navy, that's good for wiping my allies off of an artifact or otherwise juicy planet.
I've won entire games militarily while keeping my fleet supply cost at 0.