December 10, 1979

December 10, 1979 | Backgrounder on National Security and Defense

Assessing Defense Spending

(Archived document, may contain errors)

106 December 10, 1979 ASSESSING DEFENSE SPENDING I INTRODUCTION The pe rennial debate over an appropriate level of United States defense spending has resurfaced, with added meaning during the recent SALT I1 hearings. This debate, coming as it does in the midst of a larger national debate over the context of U.S. strategic po l icy and SALT 11, will have profound implications for the ability of the U.S. to-meet its security requirements and arms control objectives in the 1980s. The defense spending issue has been resurrected due to the increasing acknowledgement that the Soviet U nion will achieve military superiority in the 1980s if it has not already) unless the U.S. reverses the longstanding neglect in modernization of its conventional and strategic military programs, and works more diligently to prevent any further erosion of t he U.S.-Soviet military balance debate over the defense budget of the United States and importance of the asymmetrical trends in Soviet and U.S spending, and the relative role of defense spending in the U.S budget and its impact on the U.S. economic growt h . Examining these two aspects of the defense debate indicates that the U.S has underutilized its defense resources (in this case, expendi tures) in an effort to forestall Soviet military and strategic superiority. At the same time, contrary to an often pr e vailing attitude, defense expenditure has not impinged upon either govern mental social programs or U.S. economic growth. Rather, the inability of the United States to meet the Soviet threat and increase defense expenditures is largely due to self-imposed restraints This paper examines the two most important components of the the nature I i I I I I I I I THE FOREIGN CONTEXT 1970s It is necessary I 2 u.s.-SOVIET DEFENSE SPENDING TRENDS IN THE I to examine the foreign context of the defense spending debate t o show why the U.S. has failed to match Soviet defense expenditure over the past decade. Longer-term analyses of U.S.-Soviet trends in defense spending are preferable to isolated, yearly analyses because they measure the cumulative impact of defense spendi n g, and therefore are a more reliable indicator of defense spending commitments and general spending policy than isolated yearly figures. Secondly, longer-term analyses can more accurately gauge future spending requirements since they demonstrate in what a reas U.S. defense spending has been deficient. As the recent RAND study prepared for the U.S.

Air Force concluded, the cumulative approach to comparing U.S and Soviet defense spending %or? closely approaches an appropri ate value of force invent0ries.I' Wh at we are to be concerned with here is the Soviet long-term commitment to increased defense expenditure, and the nature of the U.S. response in terms of defense expenditure on strategic force modernization and procure ment in light of the Soviet increase.

SPENDING COMMITMENT The cumulative evidence documenting the decade-long decline in U.S. defense spending commitments, contrasted with the long term real growth in Soviet spending is overwhelming. The signifi cance of this fact is two-fold. First, military spending results in an end in this case, weapons development and procurement.

This end subsequently leads to a second factor increased mili tary capabilities and capacity to apply milita ry power. It is this aspect of the debate which must be fully accounted for especially in the areas of equipment procurement and R D since it relates to both present and future capabilities of the U.S. to deter and, if need be, fight either a conventional or a strategic war and emerge from such a conflict having satisfactori ly accomplished its military and political objectives.

Whether measured in overall dollar spending, spending as a percentage of the Gross National Product (GNP) or spending devoted to military investment and research and development, the Soviet commitment to defense spending in the 1970s far exceeded that of the U.S. The trends indicate that unless the U.S. reverses its the Soviet Union and the U.S. will widen over the next decade decl i ning commitment to defense spending, the spending gap between 1. Arthur J. Alexander, Abraham S. Becker and William E. Hoehm, The Signifi cance of Divergent U.S.-U.S.S.R. Military Expenditure, A RAN0 Note prepa'red for the United States Air Force N-lOOO-A E February, 1979 (Santa Monica, Cal The Corporation, 1979) p. 2. 3 In spite of past CIA estimates of declining Soviet economic productivity and potential energy shortages, little substantial evidence exists to support the hypothesis that the Soviets will l e ssen t)2e burden which defense expenditure places upon their economy. Instead, the Soviet defense spending commitment (esti mated in rubles) hag increased over the 1970s by a minimum 4 to 5 percent every year in real terms, over the past 15 years. Moreove r , the 4 to 5 percent growth figure may be too low. William T. Lee, a noted expert on Soviet defense spending, calculates the annual real growth 04 Soviet defense spending (in rubles) to be' from 8-10 percent expendityre in constant U.S. dollars has ranged from 3.0 to 4.5 percent This has doubled the Soviet military budget Recent estimates of Soviet real growth indicate defense The comparative U.S.-Soviet military expenditure figures used in this study are in U.S. dollars. The figures for U.S Soviet militar y expenditures as a percent of the Gross National Product of the two countries, however, are in dollars and rubles, respectively. Soviet military expenditure figures used in this study have been taken from CIA, DOD, IISS and RAND studies which have measure d Soviet military expenditure, relative to that of the U.S. by the Itdollar costingIt method, which evaluates what it would cost to reproduce Soviet military programs, R&D and manpower expenditures in terms 0f.U.S. dollars. While this method does produce s o me overestimation (especially in manpower costs the CIA (which uses dollar costingko measure the divergence in U.S.-Soviet military procurement) has concluded that "it is clearly not large enough to alter the basic conclusion that the Soviet military prog r q overall is currently significantly larger than that of the U.S.I1 In contrast, the appropriate method from which to gauge the burden of military.expenditure on the country,in question is the ratio of military expenditure to the nation's GNP. this has to be reflected in dollars; for the Soviets, in rubles.

For the U.S 2 3. 4 5 6 See Gregory Grossman The Economics of Detente and American Foreign Policy" in Institute of Contemporary Studies, Defending America (New York: Basic Books, 1977), pp. 72-76; and CI A, "The Soviet Economy Performance in 1975 and Prospects for 1976," ER-7610296, May 1976; and Soviet Military Spending Up," Washington Post, November 2, 1979, p. A3.

Ale.xander, et p. 18.

William T. Lee, Understanding the Soviet Military Threat: How the CIA Estimates Went Astray Agenda Paper No. 6 (New York: National Strategy Information Center, 1977), p 10. See also, "Selected Readings on the Strategic Arms Treaty Soviet vs. U.S. Military Expenditures," Wall Street Journal, September 11, 1979, p. 22.

Alexander, et al p. 14; The Military Balance 1979-80 (London: Interna tional Institute for Strategic Studies p. 12.

CIA, A Dollar Comparison of-Soviet and U.S. Defense Activities, 196501975 SR 76-10053, February 1976 si Therefore, it does not follow that be cause the Soviets devote twice as much of their national resources to the military that they necessarily spend twice as much on defense (evaluated in dollars) than does the U.S since, as the RAND study indi cates, a dollar costing of the Soviet economy wo u ld show it to be Ifas much as 2/3rds of the Americantt economy. The long-term trends in dollar costing of U.S.-Soviet military expenditure do however, signify that Soviet defense production capabilities have far surpassed those of the U.S. in the pa= ten years.

The trend towards increased Soviet defense expenditure began in the mid-1960s. Following the Cuban Missile Crisis, the Soviets changed the economic emphasis of their Seven-Year Plan (1959-1965 to reflect increased defense investment (particularly in the strategic area) as the means bg which to bolster Soviet military power and political influence. Today, according to Donald Burton, chief of the CIA'S Military Economics Analysis Center the Soviets spend roughly 50 percent more on military outlays tha n the U.S. does exceeded comparable U.S. outlays by almost 30 percent.l During the 1970s, Soviet military sqending During the mid-1960s and early 1970s, the U.S. intelligence community severely underestimated both projected Soviet strategic force deploymen t s and overall military expenditure. The CIA had to revise its own estimates of Soviet defense expenditure as late defense spending (in rubles) by a factor of two. During this period, U.S. intelligence projections were tempered by a Ifmirror imaging" of So v iet strategic intentions with those of the United States. It was 'still generally assumed that the Soviets would accept strategic parity with the U.S. and that they bfged their strategic doctrine upon assured destruction concepts mirror-imaging of Soviet s trategic doctrine and intentions served as the intellectual framework from which subsequent U.S. weapons procurement and defense spending policies were made in the mid 1960s and early 1970s. as 1976, when it concluded that it had underestimated Soviet Thi s Soviet military writings and defense spending behavior reveal that the Soviet Union does not share the assured destruc tion strategic doctrines formulated by the U.S. arms control and 7. Alexander, et. al., p. 11 8. David S. Sullivan, "The Legacy of SALT I: Soviet Deception and U.S 9.

Retreat," Strategic Review, Winter 1979, pp. 28-29 Soviet Military' Spending Up." See footnote '2 above; and, "USSR: Arms Estimate Problems," Defense and Foreign Affairs Daily, Friday, November 16,,19

79. Burton concluded, "We think it unlikely that economic problems will force the Soviets to reverse their commitment to continuing improve 10. .Lee, op. cit., pp. 30-37; and Albert Wohlstetter Is There A Strategic ment in their military forces Arms Race?" Foreign Policy, Spri n g 1974. 5 intelligence communities during the 1960s. The Soviet emphasis upon gaining war-fighting and war-winning capabilities has played a major role in causing Soviet defense spending to maintain a fairly constant Tqte of growth in both the conventiona l and It follows, therefore, that this emphasis A strategic 'areas which by nature involves increased offensive potential) necessar ily requires increased defense expenditure An effort was made during the final months of the Ford Administration to bring in a group of outside defense analysts to review the intelligence analysis process and Soviet strategic programs and objectives independently of the intelligence communi ty. The group, called the B-Team, concluded that Soviet strategic behavior is based upon a long-term, determined drive to achieve strategic superiority over the United States. At the time, the seven-man B-Team was unfairly criticized in the press for having a Itworst case" outlook and for somehow having Itbulliedlf the entire intelligence com m unity to accept its conclusions. Yet since that time additional intelligence analyses have warned the current Administration and the Congress of the natrze and serious ness of the Soviet drive for military superiority. However subsequent budget requests a n d ceilings have not reflected, in terms of programs or dollars, an adequate U.S. response to the Soviet drive for a war-fighting and war-winning capability THE U.S RESPONSE Tables I and IS contrast the defense spending commitments of the U.S. and the Sovi e t Union in the 1970s. Table I shows how the U.S. has trailed the Soviet Union in defense expenditures over the past decade, both in terms of current dollar expenditures and percentage of the GNP. Table I1 reveals that this asymmetry has increased since th e beginning of the decade, and that the gap has nearly tripled in the past ten years.

Even more revealing is the contrast in Soviet and U.S defense expenditure when held constant for inflation. As stated earlier, Soviet defense spending has increased after being adjust ed for inflation, whether calculated in rubles or dollars. U.S defense expenditures, when held constant for inflation at 1970 pricefQ have declined at an annual average of 2.69 percent each year This contrast indicates that a significant asy mmetry exists in the defense spending habits of the two superpowers.

The Soviet real growth in defense spending has not been matched 11. Alexander, et al pp. 54-55 12. William R. Van Cleave and Seymour Weiss, "National Intelligence and the USSR," National Review, June 23, 1978, p. 777; and "ASC Press Seminar Focuses National Defense Debate," Washington Report, February, 1977, p 2 13. The Military Balance,'1979-1980, p. 93 6 Table I U. y. -Soviet Military Expenditure U.S. Current TOA 1970-1 79 Estimated Ran g e of Soviet Spending in billions $1 in billions $1 Lee 1970 79.0 80-90 1972 77.0 84-99 1974 85.1 96-112 1975 87.9 105-124 1976 97.5 127-136 1977 110.2 133-148 1978 116.5 148-154 19 79 127.7 161-177 (est Military Spending of GNP U.S. Spending Soviet Spendi n g GNP GNP (CIA) Lee 1970 7.4 11-13 12 1972 6.7 11-13 12 1974 6.1 11-13 12 1975 5.9 11-13 14.15 1976 5.4 11-13 14-15 1977 5.2 11-13 14-15X 1978 5.0 11-13 14-15 1979 4.9 (est 11-13 18% (est Note: CIA estimates Soviet defense spending as percent of GNP to be from 11-13 percent. Lee's recent estimate for 1980 is 18 percent.

Sources: U.S. defense TOA (Total Obligational Authority) figures taken for 1970 and 1972 from U.S. Congress, Senate, Second Concurrent Resolution on the Budget, Fiscal Year 1980, Report of the Committee on the Budget Washington, D.C Government Printing Office, 1979) p. 150; 1974-1977 figures from Donald H. Rumsfeld, Annual Defense Department Report, FY 1978 PP. 315-316, 320; 1978 and 1979 U.S. defense TOA figures from Harold B;own, Departme nt of Defense Annual Report, FY 1980, pp. 20-21 and "Defense Supplemental Bill," Congressional Quarterlz, June 30, 1979, p. 6.

Soviet spending and U.S. and Soviet figures as percent of m3p from The Military Balance, 1979-80, pp. 11-12, 93-94; The Military Balance 1978-1979 pp. 11, 88; The Military Balance, 1975-76, p. 76; The Military Balance 1973 74 p. 74; Alexander, 2. cit., p. 20; Lee, 3. cit., p. 11.

Table I1 in billions of current U.S. dollars Annual' Gap in U.S.-Soviet Defense Spending 1970 v. 1979 Annual Year Spending Gap Soviet Spending as % of U.S 1970 1-11 100-114% (range 1979 35-50 (est 125% (minimum Current CIA figures put the spending gap as high as $50 billion per year 7 I by a corresponding real growth by the U.S., but rather by a decline if adjustments for inflation are taken into consideration becomes all the more apparent when oneconsiders the size of each nation ' s Gross National Product (GNP The U.S14GNP is more than two times the size of that of the Soviet Union. However, the U.S. appears to have trailed the Soviets in all procurement categories of militag expenditure (except tactical air power for the last deca d e non must begin with the basic orientation of U.S. military doc trine and strategy, as well as earlier inaccurate estimates of Soviet strategic doctrine and defense-spending behavior This contrast in U.S.-Soviet defense spending commitments The search fo r a reason for this phenome COMPARATIVE ECONOMIC ='MILITARY EMPHASIS The comparative economic emphasis between Soviet and U.S military spending reveals that during the SALT decade (1969-1979 the Soviet Union has shown little hesitation at increasing their a nnual defense expenditures, regardless of its economic impact Soviet military investment (RDT & E, procurement and construction is estimated currently to be from 65-75 percent greater than that of the U.S. Unilateral actions taken.by the U.S. in an attemp t to influence Soviet military spending and procurement decision making have notably failed to gain the desired result of slowing down Soviet military weapons procurement. Rather, as Under Secretary of Defense for Research and Engineering William J.

Perry has conceded The Soviets have achieved impressive force by configur ing their military production base close to the needs of warthe mobilization and by insulating this base as military economy The Soviet pursuit of military force modernization and higher l evels of military expenditure is.largely independent of domestic economic constraints. The frequently used rationale of bureaucratic inertial' cannot explain either the. intensity or longevity of the Soviet military investment effort. Earlier this month, t he CIA team testifying before the Senate Armed Services Committee on Soviet'military spending overwhelmingly concluded that the Soviet leadership was united on this issue, and that a deterioration of Soviet economic conditions would not change the thrust o f Soviet military spending behavior. It can be argued that an established consensus in favor of obtaining Soviet milita- much as possible fgom the shortcomings of their non 14. Alexander, et al pp. 9-10 15. Charles W. Corddrey Soviet Arms Spending Will Go On, CIA Says Baltimore Sun, November 2, 1979, p. 6 16. U.S. Congress, Senate, Department of Defense Authorization for Fiscal Year 1979.

Research and Development (Washington, D.C Government Printing Office 1978 p. 5634 Hearings before the Committee on Armed Services, Part 8 8 ry superiority exists within the Soviet-political hierarchy.

This consensus is generally willing to sacrifice much, in terms of meeting domestic wants and needs, to spend whatever is needed in the military realm to enable the Soviet Union to achieve these ambitious strategic .objectives.

This should be recognized not only as a serious challenge to the U.S but as a potexgtial weak link in the Soviet military industrial system. AS one author puts it, "Land, labor, capital and system-wid e productivity are all under great pressure USSR now appears to be operating at the limit of its.economic capabilities, though these are generally below Western levels.

Nevertheless, these constraints have not impeded the rapid fTpan Therefore, there is r eason to believe that, in the face of a determined U.S. military modernization effort, the Soviet economic system could not compete effectively with the U.S. over the long term. They are already pushing themselves close to the limit of their economic capa c ity in the absence of a determined U.S modernization effort compared to Soviet defense spending that has come about during the 1970s. The comparative shortfall has grown each year over the past decade, and since 1973 the shortfall in spending for military equipment and facilities has been at least $100 billion.

The U.S. could have purchased (in constant FY 1980 dollars linearly all" of the following military systems during the 1970s if it had invested at the same rate the Soviets had the sion and moderniza tion of Soviet military capabilities II Table I11 depicts the shortfall in U.S. defense spending as 1) 241 B-1 bombers 16 billion 2) MX system, with 340 missiles and 5,000 vertical shelters ($18 billion 3) 13 Trident submarines and all Trident 1 SLBMs 17 b illion 4) 7,000 XM-1 tanks, 500 advanced attack helicopters, 7,000 new Infantry Fighting Vehicles and 300 AMSTs (Advanced Medium STOL Transport 15 billion 5 6 400 F-14s and 800 F-18s ($20 billion 400 F=15s, 1250 F-16s and 500 A-10s 16 billion),18 17. Rich ard B. Foster, "Soviet Economic Performance as a Reflection of State Goals and Objectives," Comparative Strategy, Volume 1, Numbers 1 h 2 19

78. P. 19 18. Alexander, et 6, pp. 47-48. 9 Table I11 Shortfall in U.S. Spending Vs. Soviet Union 1970-1979 constan t 1978 dollars Spending Estimated of U.S.S.R. defense Area (in billions expenditure exceeding U.S Procurement of Defense Equipment and Facilities Research, Develop ment, Testing 65%-75 35 5 O Overall Spending last half of decade 300 (current dollars) 25-3 0 est Source: Alexander, et al pp. 44-49; and "Oil Seen Spurring Soviet Mideast Move Aviation Week and Space Technology, October 1, 1979, p. 1.

Corddrey, op spent $1.35 trillion on military spending, compared to $1.05 trillion for the U.S in current dollar s The CIA reported that from 1970-1979 the Soviets Last half of the decade. Soviet RDSrT spending exceeded that of the U.S. by $40 billion over this period The research and deve1opm;nt spending trends are particular ly disturbing, for they reflect the com m itment of the superpowers to finance future military systems that will come on-line in later years. The R D figures of the 1970s.paint a dark portrait for the U.S. in the 1980s unless substantial commitments are made to invest more funds in military R D. A ccording to Lt. General Thomas P. Stafford, former Deputy Chief of Staff for Research Development and Acquisition of the U.S. Air Force, Soviet RD T spending has increased by 92 percent, in real terms, from 1968 to 1979, while U.S. RD T spendfgg has decli ned in real terms by 19 percent over the same period. only part of the explanation for these trends can be found in the traditional Soviet military emphasis on proliferating weapons systems in large quantities.

Soviet weapons share a much higher degree of commonality, simpli city and limitations in their performance characteristics than do U.S. military systems; which are generally morqOadvanced and tend to take longer to develop, procure and deploy. U.S. weapons procurement policy has been criticized for i ts politicization 19 20. Alexander et al pp. 26-33 U.S. Advantage in Arms Quality Called Defense: of Chicago, July-August, 1979, pp. 1-2 Illusory Aviation Week and Space Technology, November 20, 1978, pp 26-27 A Message to the Taxpayer World Report, First National Bank 10 I its overemphasis on prototyping, and its tendency to hesitate at replacing military systems on the grounds that the replacement although an improvement would soon be I1obsolete.l1 This has resulted, according to defense expert John Coll i ns, in a paradoxical situation in which U.S. R h D policy all too often strains for Ifquantum breakthroughsll in defense technologies, while the Soviets generally pursue incremental technological improvements in weapons systems that have2fnabled them to c l ose the military technology gap with the U.S EMPHASIS BY CATEGORY Soviet and U.S. defense expenditures also differ in terms of the emphasis by category in which defense funding is directed As Table IV indicates, U.S. defense spending is highly labor inten s ive, with more than half of all .defense expenditures being in the personnel category. Soviet defense spending, on the other hand, is hardware-oriented, with nearly 70 percent of Soviet defense spending going into procurement and research and develop ment . The disparity in military procurement spending is particu larly ominous. As Defense Secretary Harold Brown has stated Itthe disparity of military forces that can result from disparate spending will be the accumulation of annual differences each yearly im b alance increases the disparityZ2and in many measures of capability the disparity is cumulative It The RAND study commissioned on this subject for the Air Force also reached a similar conclusion. RAND found that the decade-long trends in U.S.-Soviet milita r y spending have resulted in I1a change in comparative capability relative to the situation of the early 1960 and that a continuation of these trends "is likely to rS3ult in additional capability changes in the same directi0n.I Emphasis added.) The Soviet U nion's growing ability to close the military technology gap between itself and the U.S. could become so serious that, as former Defense Depart ment Director of Research and Engineering Malcolm Currie has observed, the Soviets may be able to obtain superio r ity in gg ployed military technology over the U.S. by the late 1980s 21. John Collins, American and Soviet Military Trends Since the Cuban Missile Crisis (Washington, D.C.: Georgetown University Center for. Strategic and International Studies, 1977) p 62. For a listing of areas in which the Soviets are decreasing the U.S. defense technology lead see page 65 22. U.S. Congress, Senate; First Concurrent Resolution on the Budget, FY 1980 Report of the Committee on the Budget (Washington, D.C.: Government Print i ng Office, 1979) p. 353 23. Alexander, et al pp. 23-24 24. S. A. Conigliaro R h D for Defense The Vital Investment," National Defense, May-June 1979, reprinted in the Congressional Record,.July 19 1979, p. H 6289. 8 11 Table IV I U.S.-Soviet Defense Spend i ng Comparisons Estimated Averages Categoq Procurement, Research Development and Testing 5 Pe rsonne 1 1968-79 Increase/Decrease in RD SI T Spending Real Growth Annual Growth Rate (1971-78 in Defense Spending Real Growth after Inflation) change in defense s pending as a of GNP (1970-1979 U.S. Soviet' Union 30% 68 5 7% 13 19% 92 2.69 3-4.5 dollars 4-5 min rubles 8-10% (max rubles 35 none at CIA level increase at Lee level of close to 50 from 12% to 18% of GNP W.S. drop from 7.8% of GNP in 1970 to 5.0% in 1979 approximates a 35 drop in U.S. defense spending as a portion of the U.S. GNP Source: Senate Second Concurrent Budget Resolution, p. 152; The Military Balance, 1979-80, pp. 11-12, 93; and "Defense: A Message to the Taxpayer," p. 1; and Lee, 9. cit p. 11 Si nce it is deployed military technology and not potential mili tary technology that wins wars, this trend should be considered extremely grave.

The closing of the U.S. lead in deployed military technology should be a central concern of U.S. national security planners and the Congress. The Soviet effort to close.the military gap in deployed military technology is a dedicated and continuous one.

Soviet military R & D eBenditure has increased annually at a rate of 6 to 8 percent. Constant dollar U.S. spending on military R & D declined from 1967-1976 and, although there was aZ6 small increase in 1977, recent trends have shown no real growth I 25. Committee on the Present Danger, Is America Becoming Number 2? Current Trends in the U.S.-Soviet Military Balance ( Washington, D.C.: October 1978 p. 38 26 9 Ibid- Conigliaro, op. cit.

I 12 To preserve the U.S. lead in deployed military'technology requires the determination to modernize and deploy military systems more rapidly in the coming decade and reverse the current adverse trends in the U.S.-Soviet balance.

STRATEGIC SPENDING The disparit y in defense spending is particularly grave in the area of strategic forces. Analyses of the'decade-long trends in U.S.-Soviet strategic spending reveal that Be Soviets have outspent the U.S. in this area by 250 percent. In fact, Soviet spending for strat egic forces spending has exceeded U.S. spending each year over the last 10 years. U.S. funding has de5&ined, in real terms (after inflation) by 53 percent since 19

64. Such a wide divergence in strategic expenditure, coming as it does within the context of SALT, clearly shows that SALT has not markedly inhibited Soviet strategic modernization or force pro curement. More importantly, as the 1980s commence U.S. unilateral decisions taken earlier either to delay strategic force moderniza- tion (MX IOC set bac k three years; Trident slowdown) or cancel new weapons systems (B-1) make this trend all the more serious.

A recent Congressional Budget Office working paper on the costs of strategic force modernization alludes to the probability that the U.S. Mould have to increase its spending in the strategic forces area by 80 percent (in real budget authority) from EY 1980 to EY 1984 just to meet the reyhrements of the Administrationfs own current strategic programs. Moreover, these programs MX8 Trident, cruise missil e carrier, B-52G modification, etc are generally geared for the mid-to-late 1980s into account the need for short-term programs designed to counter the Soviet threat t0'U.S. retaliatory survivability in the 1980 1982 time frame They do not take.

Enhanced s trategic program recommendatigBs for this period so-called quick fixes) have been developed. To develop and deploy strategic systems needed for the early 1980s would, of necessity, require additional spending (above even a 5 percent 27. Alexander, et al p . 44 28. "Oil Seen Spurring Soviet Mideast Move," Aviation Week and Space Technology October 1, 1979, p. 48 29. Congressional Budget Office, SALT I1 and the Costs of Modernizing U.S.

Strategic Forces, Staff Working Paper, September 1979, pp. 3-5 30. Willia m R. Van Cleave and W. Scott Thompson (eds Strategic Options for the Early Eighties, What Can Be Done? (New York: National Strategy Infor mation Center, 1979); and Francis P. Hoeber, "Strategic Forces," in Francis P. Hoeber, David B. Kassing and William S chneider, Jr. (eds Arms, Men and Military Budgets, Issues for Fiscal Year 1979, National Strategy Information Center (New York: Crane Russak Co., Inc 1978 pp. 16-

59. See also Arms, Men and Military Budgets, Issues for Fiscal Year 1981 (forthcoming I 13 re al growth) to guide the U.S. through this period of maximum vulnerability. Thus far, Administration statements acknowledge this period of vulnerability as imminent, but Administration budgets for strategic nuclear force SNF) programs have not reflected a c ommitment to enhanced, short-term strategic programs stration and congressional attitudes toward the gap in U.S U.S.S.R. defense spending. Yet, clearly, U.S. weapons development and procurement decisions, euphoria over SALT, and underestimation of Soviet m ilitary expenditure and force procurement have all served to limit the scope of the U.S. response to the Soviet military threat. The ingrained hostility to larger commitments to defense spending also has roots in competing U.S. domestic interests for fede r al dollars, as well as in inaccurate political assessments of Soviet strategic intentions and poor weapons 31 It is not yet certain what will be needed to change Admini procurement decision making THE DOMESTIC CONTEXT OF THE DEFENSE SPEXDING DEBATE The do m estic context of the defense spending debate reflects the competition of differing special interests eager for a larger share of federal spending. Groups wishing to advance their own particular social goals, through.increased federal spending for social w elfare, concentrate on-the presumed tendency of defense spending to impinge upon the funding of social welfare programs.

Other frequent criticisms of U.'S. spending involve the issue of waste in the defense budget and the presumed negative effect that defe nse spending (especially in military research and development has on America's economic productivity and capacity for technolo gical innovation.

Social Welfare One of the most frequently heard domestic criticisms of increased U.S. defense spending is its supposed negative impact on the ability of the U.S. to meet social needs tions of pro-welfare and anti-defense spending activists (Members of Congress for Peace Through Law, academia, and many private research organizations and foundations) have frequentl y succeeded Liberal coali 31 Dr. Van Cleave on SALT," Congressional Record, October 29, 1979, p.

S15344; and "Defense Expenditures and SALT 11 National Security Record October 19

79. Enhanced, quick fix strategic programs include redevelop ment of the MM I11 missile in an MPS (multiple protective structures mode, dispersal of strategic bombers to non-SAC bases, accelerated produc tion of GLCMs and SLCMs, development of an air-launched cruise missile carrier based on AMST (a mid-term option) and the immedi ate re-opening of the MM I11 production line bomber and submarine alert rates and ABM R&D. p>
Extra funds are also needed for increasing 14 in lobbying against higher defense spending. 32 However, the cumulative evidence does not substantiate their criticisms and if anything, leads one to the conclusion that the reverse is true public sector has diminished the capability of the U.S. to expand its economic productivity and, in turn, increase its capital formation to provide for a larger economic and industrial base from which to meet its strategic and military requirements It can be argued that the unrestrained growth of the Since 1950, federal transfer payments have grown to become Much of the change in the composition of about 9 percent of the U.S. GNP (from s lightly more than 2 percent in 1950) while U.S.3gefense spending is now approximately 5 percent of the GNP the U.S. federal budget was due to the initiation of the Great Society social programs under President Johnson. These trends have continued into the 1970s. Funds allotted to federal income transfer programs h3xe risen from $8.5 billion in 1952 to $198 billion in FY 1979 Even more revealing is the fact that total government spend ing (federal, state and local) has continued to rise as a percent of the GNP, and, more importantly, that the percentage of total government spending going to individual benefit payment progrys has doubled (from 16 percent to 33 percent) from 1955 to 1975.

All governmental individual income benefit programs have nearly tripled (from 4.1 percent to 11.0 percent) as a percentage of the GNP during this same period, while defense spending has decJ&ned from 9.8 percent of the GNP in 1956 to 5.8 percent in 1975.

Tables V and VI document the contrast in the g rowth of governmen tal spending and individual benefit programs with the decline in defense spending as a percentage of the GNP. Chart One depicts the rapid real growth in per capita social welfare expenditures at all levels of government (federal, state a nd local) over the past 30 years, compared with the recent decline in per capita defense expenditures. It clearly demonstrates that defense spending has not impinged upon social welfare spending 32. James L. Clayton, Does Defense Beggar Welfare? Myths Ver s us Realities Agenda Paper No. 9 (New York: National Strategy Information Center 19791, pp. 5-6 33 Ibid pp. 37-38 34. 'Ibid p. 11 35. Senate Second Concurrent Budget Resolution, FY 1980, p. 164 36. Ibid p. 164 and Clayton, s. cit., p. 10 15 CHART ONE PER C A PITA SOCIAL WELFARE AND DEFENSE EXPENDITURES, 1948-1978 1967 Prices I 0-4 1950 1955 1960 1965 1970 1975 Sources: Social Security Administration, Office of Management and Budget, I Department of Defense. The chart appeared in James L. Clayton, I Does Defen se Beggar Welfare Agenda Paper No. 9 (New Yorlc: National Strategy Information Center, 19791, p 40.

Year 16 Table V Defense Spending and Non-Defense Spending Outlays in Billions of Current and Constant (1972 Dollars and as Percent of GNP (1960-1979 Outlays (Current National Federal Federal Non-Defense Defense Non-Defense Payments to Individuals 45.2 47.1 22.9 47.5 71.0 30.5 1960 1965 1970 78.6 118.0 59.8 1975 85.6 240.6 142.7 1979 est 114.5 378.9 213.2 Outlays (Constant 1972 Year National Federal Federal N o n-Defense Defense Non-Defense Payments to Individuals 1960 73.8 77.0 32.1 1965 69.3 103.9 40.1 1970 90.3 130.5 65.1 19 75 67.1 186.4 113.3 1979 (est 68.3 215.9 126.6 Spending as a Percent of GNP Year Defense All Social Welfare Spending 1960 9.3 10.5 1965 7 .6 11.7 1970 8.4 15.2 1975 5.8 19.9 1979 (est 5.1 20. o Source: Clayton, cit pp. 10 and 14; and Senate First Concurrent Budget Resolution, Fp 1980, pp. 346-347; also The United States Budget in Brief, Fiscal Year 1980, p. 81 exceeds 20 percent 17 Table VI Total Government Spending, Individua'l Benefit Spending and Defense Spending (1955-1975 All Government Spending Defense Individual Benefit State, federal, local) Spending Programs Year as of GNP as of GNP %W all Gov't 1955 25% 9.8 4.1% 16 1975 33% 5.8% 11 .0% 33 for 1956.

Table taken from figures in footnotes 34 and 35 spending for the year 2000 come from Office of Management and Budget paper The Trend of Government Spending, 1955-2000 Budget Resolution, FY 1980, pp. 164-165 Estimate of all government See S econd Senate Concurrent Of particular importance is the fact that non-defense spend ing is increasing in constant dollar terms. Certainly, defense spending cannot be said to impinge upon federal social welfare spending when it is shown that the federal sp e nding commitment of these social programs ,is rising, after being adjusted for inflation while that for defense has decreased during the 1970s- Moreover it is clear, given the figures in tables V and VI, that the steady growth of the government at the fed e ral level has been typified by a shift in priorities leading to decreased defense expenditure and increased social welfare spending. As Secretary Brown indicated in February, 1979,'projected increases in current not constant) defense budget authority and outlays for FY 3379 1980 lagged behind those for health, education and welfare.

The arguments made by defense critics that U.S. military spending impinges upon social welfare spending are not consistent with the figures. Perhaps because of this fact, recen t anti-defense spending arguments have turned elsewhere in an attempt to prevent the U.S. from increasing its commitment to defense spending Waste and Cost Overruns A second domestic-related issue that is used by defense critics to argue against higher le v els of defense expenditure is that of waste in the defense budget. Two often-used arguments are that the DOD too frequently uses "sole source contractsif instead of competitive bidding in the granting of defense contracts thus encouraging cost-overruns, a n d that the Defense Department 37. Senate First Concurrent Budget Resolution, FY 1980, p. 348 A projected increase of 7.3 percent in defense budget authority as opposed to one of 10.3 percent for HEW, and a projected increase of 8.8 percent in defense outl ays as opposed to 9..3 percent in HEW outlays 18 runs up hgge "unexpended balances" which the DOD doesn't know how to spend.

While it is true that waste and cost overruns do exist within the federal budget, the reasons for them are primarily political, and cannot be attributed solely to the Defense Depart ment management. Cost overruns on non-defense construction projects far exceed those in the defense area. According to GAO audits, the Pentagon is generally regardedges one of the best managed of all of t he federal departments. Moreover, James T.

McIntyre, the Carter Administration's own Budget Director, has noted that cost overruns in defense programs have four main causes: 1) inflation, 2) alterations in systems capabilities before full-scale development (thus driving up costs), 3) the tendency to make changes in these systems capabilities after competition has ended and the weapons design choice has already been made, thus requiring "sole-source" contracts I 4) and, very importantly, programmatic disrup t ions (or "stretchout that consta85ly stop, start and detour programs from their original plans I Inflation naturally 'drives up costs and is, an important element in cost escalation, but is not the sole reason for sudden increases in defense program expen d itures. The length of the U.S. weapons acquisition cycle, and its subjection to political manipulation, most certainly deserves mention as well. Altera tions in a system's capabilities after initial contracts have been awarded reflects a conscious politic a l decision to obtain in some cases, better performance characteristics even if they require increased cost. And, as Congressman Richard Ichord has noted, some of these t'front-endtl problems are all too often the result of ''the institutionalization 8f pr o totyping, fly-before-buy and operational testing strategies. I' Costs in defense programs have therefore risen primarily due to longer acquisition times at the transition from developmggt to procurement rather than solely longer development times. So, cle a rly, DOD mismanagement is not the only, or even the major, factor in the cost escalation of military systems 38 39 40 41 42 Exchange of Correspondence on Defense Cost Control and Competitive Bidding" in Senate First Concurrent Resolution on the Budget, FY 1980 pp. 386-389; and Lawrence J. Korb, "The FY 1980-1984 Defense Program Issues and Trends AEI Foreign Policy and Defense Review, Vol. I, No. 4 pp. 32-33.

Korb, 0 cit p. 32; See also Paul Ignatius, Department Headquarters Study: A Report to the Secretary of Defense, June 1, 1978.

Senate First Concurrent Budget Resolution, p. 390 U.S. Advantage in Arms Quality Called Illusory," Aviatioa Week and Space Technology, November 20, 1978, p. 27.

Ibid 19 The Stretchout and Shortfall Problems Another reason for c ost overruns is the disruption of the procurement schedule. Program Itstretchoutstt occur when the procurement schedules of weapons systems are moved back to accom modate lower budgetary ceilings. Stretchout will result in cost escalations for both the Tr i dent I1 sqtgarine 1.6 billion) and the F-14 fighter plane ($1.0 billion The stretchout solution reflects a conscious political-judgement to put short-run budgetary considerations before both efficient long-term procurement decision making and national sec u rity considerations program stretchout increase program costs, but it also results in deployment delays at a time when Soviet force deployments are proceeding on schedule. Unfortunately, the stretchout solution may have to be used for many more U.S. milit a ry systems unless44 increased funding is made available within the next few years Not only does The irony in holding down defense budgetary ceilings in hopes of reallocating funds to the social sector of the federal budget is that once the decision to mod e rnize is made, the cost of replacing older systems'becomes all the greater. This further compounds the problem of choosing where the budget is to be constrained. As Lawrence J. Korb has documented, the 20-year-long delay in modernizing U.S. conventional m ilitary systems has resulted in the serious problem of U.S. force block obsolescence and continued inflation has raised the costa50f procuring new U.S. military forces by over 65.5 billion.

Stretching out weapons production lines and deployment dates leads to severe spending shortfalls as well as to eventually higher costs in defense spending. Former Defense Secretary Donald Rumsfeld has estimated that the Carter Administrationls previous defense budgets ET 1978-1980) have already resulted in a $38.6 billi o n shortfall in defense budgetary authority from those of the Ford Administration in January 1977 spending shortfall has already severely impeded the modernization of the U.S. Navy and procurement of naval aircraft. Even under a 5 percent real growth plan, it could be well into the third or fourth year of the program before this shortfall is made up since the projected increases would not amount to anywhere close to $38 billion during the first two years of the program A 5 percent real growth in defense spe nding for FY 1981 ($161.2 billion) would amount to an increase of only about $7 billion Most of this 43 44.

Korb, op. cit., p 14 Armyts Pierre Sees Stretchouts as Solution to Procurement Crunch," Aero Space Daily, September 12, 1979; Congressional Record, September 18 1979, p. S12839-lists conventional programs which would experience fund ing shortfalls under a 3% real growth limit for FY 1980; and Francis J.

West, "Planning the Navy's Future U.S. Naval Institute Proceedings October 1979, p. 26; Korb, 9. cit., pp. 13-14.

Korb, 9. cit., pp. 12-14. 45. 20 Current projections of the .Adminstration's FY 1981 defense budget range from $151-162 billion. A most likely compromise in the middle sector of this range would amount to much less than five percent real g rowth from the FY 1980 budget. Yet, even a five percent real growth would be inadequate. Five percent real growth in the FY 1981 defense budget 6.5-7.0 billion) would be insufficient to fund4gew and enhanced strategic programs needed for the early 1980s. Most of the funding increases moreover would come in non-procurement (personnel, operations and mainten ance, military co,nstruction, etc portions of the budget.

Secondly, a five percent real growth in defense spending would not m ake up for the shortfall in defense budget authority that has accrued over the past three years stration defense officials (including Rumsfeld, former Deputy Defense Secretary William P. Clements, former Amy Secretary Martin R. Hoffman, former Navy Secret a ry William Middendorf and former Air Force Secretary Thomas Reed) have recently urged that annual growth in the defgyse budget be increased by $20-25 billion over the next two years. Due to the excessive defense budget shortfalls that have collected since 1977, it may be necessary to have increases in defense budget authority of similar magnitude during the final three years of the five-year program as well Former Ford Admini Moreover, the congressional budget committees have consistent- ly proposed budget ary ceilings beneath those of the Administration.

Both the Administration and the budget committees severely under- estimated the rate odeinflation upon which their defense budget proposals were made. Because of the three-year-long failure to sufficiently budget for and fund U.S. military weapons programs this shortfall in defense spending may not be made up for many years to come. Unless prompt and vigorous action is taken to fund U.S. weapons programs at levels far above even the 5 percent level, the U.S . will continue to see the comparative balance in defense expenditure and weapons procurement between itself and the Soviet Union erode. Tables VI1 and VI11 illustrate the defense spending shortfall problem that is facing the U.S. as a result of the trends of the past three years 46 47 48 Enhanced strategic programs would cost from $6-10 billion. See Defense Expenditures and SALT 11 National Security Record, No. 14 (October 1979), which is largely excerpted from a forthcoming study by Francis P.

Hoeber to appear in Arms, Men and Military Budgets: Issues for Fiscal Year 1981.

Technology, November 26, 1979, p.

13. For a discussion of the shortfall problem see Statement of Donald H. Rumsfeld on SALT 11," Congressional Record, October 11, 1979, p. S14407; Con gressional Record, September 18 1979, p. S12839; and Richard Burt, "Carter Seeking Rise in Military Outlay," New York Times, October 26, 1979, p. 1.

Vernon A. Guidry 5 Ex-Defense Officials Urge Defeat of SALT 11, Billions More for Arms," Washington Star, November 26, 1979, p. 8; and Raymond Coffey, "Rumsfeld Urges SALT Defeat," Chicago Tribune, November 27, 1979 Senate First Concurrent Budget Resolution, p. 358 See footnote 30; and "Budget Overview," Aviation Week and Space p. 1 21 Table VI1 TOA Shortfall From Ford Recomuiendations FY 1978-FY 1980 in billions of current dollars FY 1978 FY 1979 FY 1980 Total Ford 1/77a 123.1 135.4 145.8 404.3 Final level 116. gb i27.0 1'40. gd 384.9 Short 7.4 8.4 5.3 20.3 Rumsfeld Shortfall (adjusted for inflation 38.6 bill ione a) FY '1978 DOD Report, p. 319 b) Korb 9. cit., p. 28 c) Third Concurrent Budget Resolution, FY 1979 d) Estimate e) Rumsfeld estimate for FY 1978-FY 1980, constant FY 1980 dollars.

Table VI11 Comparative FY 1980 Defense Budget Requests and Budget Comm ittee Recommendations for Defense Spending Ford and Carter) and Congressional Budget Resolutions TOA Outlays Request/Recommendation Ford Administration &/77a 145.8 133.8 Carter original 1/79 135.5 122.7 Carter 7/31/79 revision 138.5 126.8 Carter 9/10/79 r evision 141.4 130.6 136.6 124.2 138.2 128.6 House First Budget ResolutionC House Budget Committee 2nd Recamm.

Senate First Budget Resolution 136.6 124.2 Senate Se ond Budget Resolution 141.2 141.8 130.7 5% growth 144.5 133.3 Expected Appropriation 140.5 es t 129.0 (est C Senate Budget Committee 2nd Recg. 136.8 127.4 3% growthf f a) FY 1978 DOD Report, p. 319 b) Korb, cit., pp. 6 and 29 c) U.S. Congress, House, Second Concurrent Resolution on the Budget, FY 1980 Report of the Committee on the Budget, Septemb er 14, 1979 (Washington D.C.: Government Printing Office, 1979 p. 29 d e) Congressional Quarterly, September 22, 1979, p. 2031 f) House Second Concurrent Resolution on the Budget, FY 1980, p. 3

07. Based Senate Second Concurrent-Budget Resolution FY 1980, p. 50 upon overall inflation rate of 8.4 percent for defense spending. Break down retirement pay 9.3 percent for purchases; 7-percent for payroll and 10 percent for 22 Procurement Decisions Wasteful spending has also occurred due to misguided Defense deve l opment and procurement decision-making. A prime example of the first case is the loss of.$5'.9 billion that was put into R D on the B-1 bomber. President Carter's decision against procure ment of'the B-1 will result in the loss of billions of dollars in a d vanced development technology for a new'deployed penetrating bomber, unless that decision is either reversed, or the Admini stration decides to develop a B-52 follow-on based primarily on B-1 structural designs and technologies The Carter Administration's MX deployment decision is another example of a loss of defense spending potential, not because the MX is unnecessary (the author believes ICBM vulnerability to be the major U.S. strategic problem of the 1980s), but because a much more expensive deployment mode (the closed-loop "race-track was chosen. This mode will run into as many, if not more, environ- mental objections as did the MPS (multiple protective structures system which was the Air Force favorite) mode, which may result in further delays and unn e cessary program stretchout. The MX race-track system is estimated to be from $7.8-13 billigg more expensive than a multiple protective structures system And given a recently published exchange between Secretary of Defense Brown and Soviet Defense Minister Ustinov, there is no evidence that the Soviets will view the race-track system as any more acceptable, from a verification perspective, than the MPS Congressional MX budget cutbacks and Administration waffling on the deployment mode (an air-mobile mode wa s given serious consideration in spite of the fact that it had double the direct life cycle costs of the MPS) due to pre-emptive arms control considerations, will undoubtedly lead to a more expensive, and probably less effective, MX system than if the U.S. had based its MX deployment decision on primarily strategic considerations.

Recent reports indicate that the cost estiygtes of the race-track mode have since been raised by $3 billion greatest loss is that of time. MX program stretchouts, due to pre-empti ve arms control considerations, have seen the MX IOC date move back from EY 1983 to FY .1986 But by far the Military Repair and Construction Military.repair and construction costs comprise another area where cost savings can be made. All too often contrac ts for 49 The Crumbling Keystones Less Than Face Value Armed Forces Journal, June 1979; Clarence A.

Robinson Five year Budget Curbs Aircraft, Ship buy Aviation Week and Space Technology, August 27, 19

79. See also, William H. Gregory Tangled in Policy Avi ation Week and Space Technology, September 24, 1979, p Taking the FY80 Force Improvement Plans at 27 50. David R. Griffiths MX Flexibility Allows Doubling Shelters I Aviation Week and Space Technology, September 17, 1979, pp..16-17 23 military repair and c onstruction are given to advance isolated social and economic goals at the expense of the broader national good. One example of this is the Administration's decision to give the SLEP (Surface Life Extension Program) contract for the overhaul of the Sarato ga aircraft carrier to a Philadelphia ship yard instead of to the better-equipped Newport News, Virginia shipyard. A major reason for this decision was apparently to advance the social goal of increasing employment in Philadelphia.

Yet the taxpayers will find-that they will-have to pay from 37-$100 million more for the cost of overhauling the Saratgaa at Philadelphia than would have been the case at Newport News.

Another means by which the U.S could cut down on military construction costs is to exempt military contracts from the provisions of the Davis-Bacon Act.

Secretary of Defense Perry J. Fliakas, savings of 5-15 percent or from $70 to $210 million) on labor c osts could have been gained if the E'Y 1980 Mi1,itary Construction Authorization Bill had been exempteg2from the prevailing wage requirements of the Davis-Bacon Act. This has significance for the U.S. military procurement problem, since the U.S. cgtjrentl y has a backlog of 35 billion in military construction According to Deputy Assistant Also a recent report of the Government Accounting Office revealed that the DOD has a backlog of $2 billion (from FY 1973 to FY 1978 in property construction and repair wor k reasons given for this large backlog were not DOD mismanagement but rather political and budgetary decision-making. The GAO cited budget constraints, inflation, redefinition of what work was to be included, continued deterioration of the work identified b ut not repaired, and increased emphasis on identifying the backlog as the primary reasons for ths4$2 billion backlog in property maintenance and repair work The p'rimary Unexpehded Balances or DOD llSurplus Fundsll Critics of higher defense spending often charge that the I U.S. runs up huge "unexpended balances" which leave ths5DOD with large sums of money that it doesn't know how to spend. These critics say that the DOD should fund current programs out of 51. Korb, 9. cit p. 30 52. Congressional Record, J uly 30, 1979, p. S10815-108

16. Fliakas' estimates were based on a number of studies, including one by the University of Pennsylvania using 1979 GAO figures, Fliakas estimated that the extra cost of military construction resulting from Davis-Bacon would be "$14 to 126 million for DOD construction 53 54.

Congressional Record, July 30, 1979, p. S10808.

GAO, DOD's Real Property Maintenance and Repair Backlog, LCD-79-314 August 31. 1979 55. Steven R. -Weisman, "Addabbo Plans to be a Hawk on Spending by Pentagon,"

The New York Times, February 11, 1979, p. E-4. 24 those balances. Some sources within this Administration circula ted similar arguments prior to the Senate vote on the Hollings amendment in September in an attempt to sway Senators against voting incr eased defense expenditures The fact of the matter is that all government departments use this accounting procedure balances is about 1/7 of that of the entire federal government.

Of the $87 billion in projected DOD unexpended balances, as of October 1 of thi year three-fourths of that amount, or approxi mately $67 billion, is already obligated to gyture defense programs that must be funded over a long-term period. Monies already obligated for future systems cannot be diverted to fund present systems. Unex p ended balances occur in the DOD budget because of the need to replace obsolete weapons systems through increased procurement, and necessarily, increased spending. Until the U.S fully modernizes its military forces, it can expect DOD unexpended balances to continue to rise The DOD's percentage of unexpenggd The unobligated balances that remain (estimated to be from 22-23 billion are in specific multiple-year or no-year accounts for particular items and services and must either be obligated for those items w

in a specified period of time...or returned to the Treasury higher U.S. defense expenditure based on the charge that %nexpen ded balances" can be used to alleviate current budget shortfalls is a false and misleading one The anti-defense spending criticism of Defense Industry Dislocations Another argument used against increased defense spending is that it results in a decline in U.S. economic productivity and non-defense related jobs. The argument is largely based on the assumption that defense spending co mes at the expense of job creation in other non-defense areas and of increased social welfare.

If that were to be the case, one would expect to find that both defense spending and defense-related employment have progressively increased over a period of ten to twenty years, to the detriment of both private sector job creation and increased social welfare spending. Instead, the facts show that the con stant dollar decreases in defense spending, particularly in the procurement area, have caused significant pr o blems for U.S defense industries as a percentage of the U.S. GNP over the past twenty years, from It already has been shown that defense spending has declined 56. Korb, 9. cit p. 34 57 Ibid p 33. Korb emphasizes that advocates of using unexpected balances to fund current year defense budgets are seeking a means to find.more money for social programs Korb states that only $3 billion in unobligated balances have been returned to the Treasury since 1976 Budget Resolution, pp. 215-219 58 Ibid.

See also House First Concurrent I 25 close to 10 percent to approximately 5 percent. Defense spending now takes up only 23 pergent of all federal spending, a decline from 57 percent in 19

56. Moreover, Secretary of Defense Harold Brown indicated in testimony before the Senate Budget Committee in February that defense-related workers now account for only 4.9 percent of the U.S. work force, the lowest level since before World War

11. The number of DOD civilian employees dropped below the 1 million level in 1976 (from a hi gh of 1,34&0000 in 1969 and has remained relatively constant since then. Both'of these facts demonstrate that defense-related spending and employment have decreased in relation to the growth in the rest of the economy.

The decline in constant dollar (infl ation adjusted) defense spending should be a source of concern for Congress and the Administration, for it has caused a number of problems for U.S defense industries. The constant dollar decline in U.S. defense procurement spending, in particular, has led to I 1) less than full utilization of our defense production capacity 2) increased industry reliance upon foreign military sales, rather than on U.S. sales 3 insufficient investment incentives due to the fluctuating cyclical nature of the U.S. defense sal es market during the 1970s; and 4) a need to upgrade our defense Ifproduction surge CapabilityII the ability to efficiently increase defense production in a short time6geriod) in the event of national mobilization or emergency.

Meanwhile, federal non-defense constant dollar spending (including payments to individuals) has increased, as the U.S. defense Increased public sector spending and chronic government deficits at all levels could lead the U.S. to a situation where it becom es increasingly difficult to develop a tax base broad enough to fund the de

nse programs needed to counter the Soviet threat in the 1980s I I industrial base continues to suffer these serious problems. I R & D Spending Defense spending critics have recentl y begun using a new argument in their attack against higher defense budgets critics contend that U.S. military Research and Development (R&D These 59. Clayton, 9. cit p. 10 60. Senate First Concurrent Budget Resolution, p. 348; and Facts 1978, Depart 61. Jacques S. Gansler Let's Change the Way the Pentagon Does Business 62 ment of Defense, p. 35 Harvard Business Review, May-June 1977.

Clayton, op. cit p. 60; and William Simon, A Time for Truth (New York Berkeley Publishing Company, 1979 26 is harmful to th e overall health of U.S. commercial research and development, and that the monies allotted to military R D must be even further reduced. Ironically, some defense spending critics have long maintained that U.S. technological superiority offsets Soviet quan t itative superiority. spite of the fact that a $35-$40 billion gap in military R D has evolved between the U.S. and the U.S.S.R. during the last decade As an example, one such critic recently contended (in spite of his own use of statistics that showed tha t defense R D spending has dropped from 50 percent of all U.S. R D spending from 1957-1966 to 1/3rd of all R D spending today) t&t U.S military R D is impeding U.S. economic productivity This charge is made in Table IX U.S.-Soviet R&D Personnel Total R&D M i l. R&D in Mil. Research Soviet U.S 850,000 500,000 500,000 150,000 59 30 Source: Senate Second Concurrent Budget Resolution FY 1980, p. 152 Other criticisms of military R D are that it hurts the U.S. in competition with its international economic competit ors that it "produces little knowledge useful in the civilian sector,Z4 and diminishes R D in other scientific and technological areas.

These arguments fail to account for both the complexity and interdependence of the U.S. economy and for the real impact of military R D on overall U.S. research and development expendi ture Cbarent U.S. defense RD&T spending for FY 1980 is $13.5 billion that of the FY 1979 military RG D budget ed for inflation, that amount registers a net decline from military That level o f spending represeggs no real growth from Indeed, when adjust 63 64 65 66 James M. Suarez Too Many Dollars for Military RS9 Christian Science Monitor, June 13,-1979, p.

23. This author also contends that U.S defense R&D has resulted in an excessive "brain drain" of personnel from the civilian industry to the defense industry while all the while conceding that defense-related personnel now account for less of a percent age of total U.S. scientific personnel engaged in military Rs9 (40 than was the case in the 1960s (50 The U.S. should be concerned with the balance in scientific personnel used for military R&D with the Soviet Union has only 150,000.

Ibid Defense Authorizations, 1980 Conference Report," Congressional Record October 24, 1979, p. S150

75. Final appropriation may be even lower.

Conigliaro, op. cit inflation rate budget authorization was 8.5 percent The Soviets have 500,000 personnel in this capacity. The U.S The total would represent no growth at a 6 percent Inflation for overall military spend ing in FY 1980 27 R D spending of the last fiscal year of military R D funding inordinately strains the U.S. interna tional economic competitive edge fails to account for the impor tance of high-technology industries on the general health of the nation's economy A 1976 National Science Foundation study found that the U.S. trade balance in R Dgjntensive goods and technolo gies more than doubled from 1960-

76. The U.S. dominance of the aerospace and electronics markets, both of which are highly defense-relat ed, is a primary reason why the NSF study concluded that "the technology-intensive product group has been responsible for yielding surpluses and largely covering deficits in trade from specific non-R 6'6g intensive product groups throughout the period thr ough 1976.

II Our technolgy-intensive, defense-related industries should be seen as a definite good rather than a drag on U.S. international competitiveness To say that this level Moreover, as the FY 1980 DOD report emphasizes, the Defense Science and Tech nology program is designed not only for increasing a military system! s capabilities, but also for Ittechnology infra structure programs such as those in materials, semi-conductors and electronics that are the basic foundatioEgfor technological advances i n all areas of military interest.lI The DOD has its own staff working with an inter-agency committee on Domestic Policy Review of Industrial Innovation Itto assess the impact of government programs on industrial innovation that could enhance the national c a pacity for innovation ybich will have a direct impact on our military capabi1ities.I R D does not result in some lispin offt1 in the form of improved I technologies in electronics, data processing, and manufacturing and industrial production processes ign o res the interdependence of the military and industrial sectors of our economy. In addition some commercial technologies are developing so rapidly that they even pose an export control problem for the United States, since many have "dual purposell military applications To imply that military Some critics have gone so far as to suggest that U.S. military R D spendiqy should decline by as much as 70 percent over the next decade. The facts clearly point to an opposite conclusion U.S. military R D spending need s to be increased to meet the Soviet military threat of the 1980s spending has suffered, just as has defense spending in general from the decade-long neglect of U.S. defense investment.

As writer Stephen L. Lukasik has noted, U.S. military R D spending has fluctuated over the last twenty years, and by the late 1960s defense and space-related R D spending amounted to less of a percentage of total U.S. R & D spending than did other public and Defense-related R D 67 68. Ibid 69.' FY 1980 DOD Report, p. 225 70 Ibid p. 254 71. Coaigliaro, 9. cit National Science Foundation Report Documents Importance of RS9 on U'.S.

Balance of Trade," Congressional Record, May 11, 1978, p. E2519 28 private R D pend ding mid-1970s, defense-related R & D amounted to less than 30 percent of al+3U.S. R & D spending, a drop from a high of 52.6 percent in 19

58. Clearly, military R D, rather than hindering R & D in other areas, has itself been constrained by conscious political decisions in such a manner as to impede the ability of th e U.S to compete with the Soviet Union Tgr superiority in deployed military forces during the 1980s That trend has continued, and by the Military R & D cannot be said to have stifled creativity in the commercial sector. The private sector is suffering fro m chronic lags in capital investment for new plant equipment and technological innovation due to goveTSnta1 confiscation of capital needed for private investment. The solution to this problem lies primarily in our own governmental non-defense spend ing, ra ther than with military R D. At a time when the Soviet Union clearly outspends us in military R D, and devotes a far larger number of personnel to military-related research, this important fact should be taken into consideration.

CONCLUSION The defense spending debate can be expected to continue, and become even more intense, as the U.S. enters the decade of the 1980s. It is unquestionable that if the asymmetry in comparative U.S.-Soviet defense spending is allowed to continue, So v iet military capabilities will continue to grow, while those of the U.S. will in all probability decline in relation to those of the Soviets. There is no justifiable domestic reason why this state of affairs should be allowed to continue. The United State s has twice the Gross National Product of the Soviet Union, a far more educated and talented citzenry, and an economic system, which in spite of its faults (mainly self-imposed), is far superior to that of the Soviet Union.

Debate shall soon begin on the C arter Administration's proposed FY 1981 defense program and its revised five-year defense plan begin to make up for the severe shortfall and stretchout problems that are facing the U.S. defense program planners at the present A five percent real growth in defense spending will not 72. Stephen L. Lukasik, "Military Research and Development," in Francis P.

Hoeber and William Schneider, Jr eds Arms, Men and Military Budgets Issues for Fiscal Year 1978, National Strategy Information Center (New York: Crane, Ru ssak Co., Inc. 1977 pp. 192-195 73. Ibid., p. 201 74. Conigliaro, 3. cit p. H6289 75. Simon, op. cit p. 1

04. Simdn estimates private investment in the U.S to be approximately 18 percent of the U.S. GNP, while those of Japan and West Germany are 35 percen t and 26 percent respectively. time 76 Congress and the Administration must soon face up to this reality, and develop defense spending guidelines in light of the increased Soviet threat largely caused by the decade-long asymmetry in U.S.-Soviet military m odernization and procurement.

Given the nature of the security problems that face the U.S and the rest of the free world, in the coming decade, arbitrary upper limits on real growth in defense spending cannot be justified on either economic or military grounds.

Conflicting domestic pressures upon the federal budget are bound to continue into the 1980s. Anti-defense spending critics using faulty assumptions and inaccurate anaylses, will continue to oppose the U.S. increasing its commitment to defense in spi te of the increased Soviet threat. The search for an appropriate level of defense spending to meet U.S. military requirements must not be side tracked by either mirror-imaging of Soviet intentions or domestic pressure politics. For, as Air Marshall Sir Jo h n Slessor has written, "It is customary in democratic countries to ments of the social services. There is a tendency to forget the most important social service that a gove-qnt can provide for its people is to keep them alive and free deplore expenditures on armaments as conflicting with the require Wayne A. Schroeder Editor, National Security Record 76. Rumsfeld, Congressional Record, a cit p. S14407; and "Defense Expendi tures and SALT 11 National Security Record, October 1979, No. 14, p 2-3 77. Taken fr om Rumsfeld, Congressional Record, op. cit p. s14411.

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