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Defense - Budget: FY 1977 (1)
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Defense - Budget: FY 1977 (1)
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This file contains a memorandum of conversation for the President's meeting with Senators.
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The original documents are located in Box 11, folder "Defense - Budget: FY 1977 (1)" of
the John Marsh Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 11 of The John Marsh Files at the Gerald R. Ford Presidential Library
FY 77 U.S. DEFENSE BUDGET
PERSPECTIVES
DONALD RUMSFELD
SECRETARY OF DEFENSE
8 MARCH 1976
INTRODUCTION
By MAY 15, 1976, THE CONGRESS WILL HAVE MADE TWO OF
THE MOST IMPORTANT DECISIONS IT WILL MAKE THIS YEAR ... THE
LEVEL OF TOTAL FEDERAL SPENDING, AND THE PORTION OF THAT
TOTAL WHICH WILL BE PROVIDED FOR OUR NATIONAL SECURITY.
THERE IS CONSENSUS THAT U.S. MILITARY CAPABILITY AND
STRENGTH CAN TODAY BE DESCRIBED AS "SUFFICIENT" ... THAT IS,
WE HAVE "ROUGH EQUIVALENCE" TO THE SOVIET UNION, WHICH IS
WHAT U.S. POLICY DEMANDS,
HOWEVER, THE TRENDS OF THE PAST 5-10 YEARS ARE ADVERSE
WITH RESPECT TO THE MILITARY BALANCES, No ONE CHART OR
STATISTIC CAN PROVIDE THE COMPLETE PICTURE -- BUT A SWEEPING
LOOK AT RESOURCES, PROCUREMENT AND R&D EFFORTS, EQUIPMENT
CONSTRUCTION RATES, FORCE LEVEL CHANGES, AND SHIFTS IN
RELATIVE CAPABILITY CAN MAKE CLEAR WHAT HAS TAKEN PLACE,
A COLLECTION OF SUCH GRAPHICS IS PRESENTED HERE, WITH
APPROPRIATE EXPLANATIONS AND CAVEATS.
THE FACTS DRIVE ONE TO THE CLEAR CONCLUSION THAT THE
U.S. MUST ACT NOW TO ARREST THESE ADVERSE TRENDS, BY
PROVIDING REAL INCREASES FOR NATIONAL SECURITY, UNLESS
THE U.S. IS WILLING TO ALTER OUR POLICY OF MAINTAINING
"ROUGH EQUIVALENCE." IT IS MY CONVICTION THAT THE AMERICAN
PEOPLE ARE NOT WILLING TO ACCEPT A POLICY OF INFERIORITY,
U.S. DEFENSE BUDGET TRENDS (TOA)
Billions $
160
160
TOTAL CONSTANT FY 1977$
SHADED
140
AREA
140
REPRESENTS
PROJECTIONS
120
120
100
100
BASELINE CONSTANT FY 1977$
80
80
TOTAL CURRENT$
60
60
40
40
1964
1966
1968
1970
1972
1974
1976 1977
FISCAL YEARS
U.S. DEFENSE BUDGET TRENDS
THE U.S. DEFENSE BUDGET HAS DECREASED IN REAL TERMS BY MORE THAN
ONE-THIRD FROM THE 1968 WARTIME PEAK, TODAY, IN REAL TERMS (CORRECTED
FOR INFLATION), IT IS 14% BELOW THE LEVELS OF THE PREWAR, EARLY 1960's.
TRENDS ARE SHOWN HERE IN TERMS OF TOTAL OBLIGATIONAL AUTHORITY
(TOA). THE BROKEN LINE SHOWS TOTAL TOA (IN CONSTANT FY 77 DOLLARS);
THE THICK LINE LABELED "BASELINE" SHOWS THE TREND OF RESOURCES DEVOTED
TO MILITARY CAPABILITY (SEASIA WAR COSTS, RETIRED PAY, AND FOREIGN MILITARY
SALES HAVE BEEN EXCLUDED); AND THE LOWER CURVE SHOWS THE PROGRESSION OF
DEFENSE BUDGETS AS THEY APPEARED IN CURRENT DOLLARS,
U.S. AND SOVIET DEFENSE PROGRAM TRENDS
(U.S. Expenditures and Estimated Dollar Costs of Soviet Programs)
Shares of the U.S. Budget
(Constant FY 1977 Dollars)
BILLION
FY 1977 DOLLARS
Percent of Total Outlays
Percent
150
60%
60%
U.S.S.R. (FEB 76 ESTIMATE)
U.S.
140
50%
U.S. National Defense
50%
130
40%
Benefit Payments to
40%
120
Individuals and Grants
U.S.S.R. (OCT 75 ESTIMATE)
30%
110
30%
SHADED
100
20%
AREA
20%
U.S. (LESS SEA MILITARY FUNCTIONS)
SOURCE:
BASED ON INTELLIGENCE ESTIMATES OF THE DOLLAR-COST OF SOVIET
PROJECTIONS
REPRESENTS
90
MILITARY ACTIVITIES, AND OF U.S. EXPENDITURES ON A COMPARABLE
PROJECTIONS
BASIS. CONVERTED BY DOD FROM CONSTANT 1974 DOLLARS TO CONSTANT
10%
10%
FY 1977 DOLLARS. SEA ADJUSTMENT BASED ON DOD DATA ONLY. MARCH '76
0
1965
66
67
68
69
70
71
72
73
74
75
76
71
0
O
1964
65
66
67
68
69
70
71
72
73
74
75
76
77
Fiscal Years
Estimate
SOVIET PROGRAM DEFENSE TRENDS
WHILE THESE REDUCTIONS HAVE BEEN GOING ON IN THE U.S., THE SOVIET
UNION HAS BEEN MOVING STEADILY IN THE OTHER DIRECTION.
THE INTELLIGENCE COMMUNITY HAS WORKED AT THE COMPLEX TASK OF
ESTIMATING THE MAGNITUDE OF SOVIET EFFORT; TWO OF THE MOST RECENT
SHARES OF THE U.S. BUDGET
ESTIMATES ARE SHOWN ON THE CHART ABOVE, THERE REMAINS SOME DISAGREEMENT
AMONG ANALYSTS AS TO THE ABSOLUTE VALUE OF MILITARY EFFORTS IN THEIR
U.S. DEFENSE SPENDING TODAY IS ABOUT 25% OF THE TOTAL FEDERAL BUDGET --
CONTROLLED ECONOMY, HOWEVER, THE FEBRUARY 1976 ESTIMATE SHOWS THAT THE
THE LOWEST SHARE SINCE FY 1940, SHORTLY BEFORE PEARL HARBOR -- HAVING
CONSTANT 1977 DOLLAR VALUE OF THE RESOURCES ALLOCATED TO SOVIET NATIONAL
DROPPED FROM 43% IN PREWAR 1964.
DEFENSE APPEARS TO HAVE GROWN FROM 107 BILLION IN 1965 TO 144 BILLION IN
1975, AN AVERAGE ANNUAL INCREASE OF AT LEAST 3%,
As SHOWN, BENEFIT PAYMENTS TO INDIVIDUALS AND GRANTS HAVE INCREASED
THE CHART COMPARES AN ESTIMATE OF SOVIET PROGRAM COSTS WITH COM-
FROM A 30% SHARE OF THE FEDERAL BUDGET TO MORE THAN 55% DURING THE SAME
PARABLE COSTS OF U.S. DEFENSE PROGRAMS,
PERIOD.
THE EVIDENCE WE HAVE OF THE WEIGHT OF EFFORT AND THE MOMENTUM IN
SOVIET MILITARY PROGRAMS IS FULLY CONSISTENT WITH THESE ESTIMATES,
U.S./U.S.S.R. MILITARY MANPOWER
COMPARATIVE U.S. AND SOVIET MILITARY INVESTMENT*
Billion
(Procurement, Facilities, RDT&E)
FY 1977
(Constant FY 1977 Dollars)
Dollars
70
70
MILLIONS
60
60
U.S.S.R
50
50
SOVIET
4
U.S.
40
40
30
30
20
120
10
-10
of
0
3
1965
66
67
68
69
10
71
72
73
14
75
COMPARATIVE U.S. AND SOVIET PROCUREMENT
COMPARATIVE U.S. AND SOVIET MILITARY RDT&E*
Billion
AND FACILITIES CONSTRUCTION
B-Hien
(Constant FY 1977 Dollars)
(1 1977
" 1977
Dollars
(Constant FY 1977 Dollars)
Dollars
U.S.
60
20
20
U.S.S.R.
50
50
40
USSR
40
10.
10
U.S.
2
US
30
30
20
70
1965
66
67
68
69
70
71
12
23
74
25
10
10
1964
1970
1975
1977
0
1965
65
67
68
69
70
71
72
73
14
is
1 EXCLUDES MILITARY SECURITY FORCES.
'BASID ON RIGENCE ISTIMATESIN 1374 DOLLARS CONVERTED TO
TY 1971 DOLLARSEY 000
U.S./USSR COMPARATIVE INVESTMENT
IN
PROCUREMENT, FACILITIES, RDT&E
COMPARATIVE MILITARY MANPOWER - U.S./USSR
OVER THE PAST 10-12 YEARS, SOVIET INVESTMENT, IN REAL TERMS, IN
DEVELOPMENT AND PROCUREMENT OF NEW SYSTEMS AND FACILITIES FOR PRODUCTION
THE SOVIETS HAVE INCREASED THE NUMBER OF MEN UNDER ARMS (NOT
HAS CLEARLY EXCEEDED THAT OF THE U.S.
INCLUDING SOME 400,000 MILITARY SECURITY FORCE MEMBERS) FROM 3.4 TO
THE TOP CHART DISPLAYS AGGREGATED DATA; THE CHART IN THE LOWER
4.4 MILLION SINCE 1964.
LEFT-HAND CORNER SEPARATES PROCUREMENT AND CONSTRUCTION TRENDS FROM RDT&E.
DURING THE SAME PERIOD, U.S. UNIFORMED MILITARY STRENGTH INCREASED
MILITARY RESEARCH AND DEVELOPMENT IS SHOWN IN THE LOWER RIGHT-HAND CORNER,
FROM A PREWAR 1964 LEVEL OF 2.7 MILLION TO A PEAK OF 3.5 MILLION DURING
THE SOVIETS HAVE DEVELOPED AN INDUSTRIAL BASE WHICH HAS QUANTITATIVELY
THE WAR IN SOUTHEAST ASIA, THEN DECLINED TO 2.1 MILLION TODAY, THERE ARE
OUTPRODUCED THE U.S. IN MOST CATEGORIES OF MILITARY HARDWARE. THE WEIGHT
FEWER AMERICANS IN UNIFORM TODAY THAN AT ANY TIME SINCE THE FALL OF 1950.
OF THE SOVIET EFFORT AND THE MOMENTUM DEVELOPED ARE OF SERIOUS CONCERN.
U.S.S.R./U.S.
CHANGES IN NAVAL FORCE LEVELS -- U.S./U.S.S.R.
NAVAL SHIP CONSTRUCTION
(1965-1975)
MAJOR SURFACE COMBATANTS
ATTACK SUBMARINES
400
1965-1975
400
USSR
300
800
300
U.S
NUMBER
NUMBER
OF
01
200
200
SHIPS
U.S.S.R
SUBVARINES
MAJOR
(200)
COMBATANTS
U.S.
100
100
0
G
63
66
61
68
59
10
71
12
11
14
is
65
56
67
68
69
70
71
72
73
74
75
YEAR
YEAR
STANDOFF WEAPON DELIVERY PLATFORMS
AMPHIBIOUS SHIPS
250
200
MINOR
USSA
(460)
700
COMBATANTS
U.S.
NUMBER
DE
150
& SUPPORT
PLATFORMS
300
150
NUMBER
OF
100
SHIPS
USSR
MAJOR
(140)
100
COMBATANTS
50
50
MINOR
COMBATANTS
(105)
US
0
(140)
SUBS
& SUPPORT
0
65
66
67
58
89
70
71
12
73
14
75
65
56
67
58
69
70
71
72
73
74
75
YEAR
YEAR
SUBS
(55)
U.S.S.R.
U.S.
CHANGES IN NAVAL FORCE LEVELS - U.S./USSR
THE SOVIET FORCE HAS BECOME SMALLER WITH THE RETIREMENT OF LARGE
NUMBERS OF DIESEL SUBMARINES, HOWEVER, THE SOVIETS RETAIN A 2.5-To-1
ADVANTAGE IN ATTACK SUBMARINES.
COMPARATIVE NAVAL SHIP CONSTRUCTION - U.S./USSR
THE SOVIETS HAVE 20% GREATER NUMBERS OF MAJOR SURFACE COMBATANTS --
AIRCRAFT CARRIERS, CRUISERS, DESTROYERS, AND FRIGATES -- ALTHOUGH THE U.S.
HAS AN UNQUESTIONED LEAD IN SEA-BASED AVIATION,
SINCE 1962, WHEN THE SOVIETS BEGAN EXPANDING THEIR MARITIME POWER IN
EARNEST, THEY HAVE BUILT MORE THAN FOUR TIMES AS MANY SHIPS FOR THEIR
THERE IS A MARKED ASYMMETRY IN THE WAY THE TWO NAVIES HAVE DISPERSED
NAVY AS HAS THE U.S.
OFFENSIVE, STANDOFF WEAPONS CAPABILITY ... THE U.S. STANDOFF, OFFENSIVE
STRENGTH LIES ALMOST ENTIRELY IN 13 AIRCRAFT CARRIERS, WHERE THE SOVIETS
THE TWO COLUMNS ON THIS CHART COMPARE QUANTITATIVELY USSR AND U.S.
HAVE SOME 240 SHIPS WITH STANDOFF WEAPONS CAPABILITY.
SHIPBUILDING PROGRAMS -- MAJOR COMBATANTS, MINOR COMBATANTS (1,000 TONS
THE SOVIETS HAVE BUILT A FORCE OF AMPHIBIOUS LIFT SHIPS WHICH NUMERICALLY
OR LESS) AND UNDERWAY REPLENISHMENT SHIPS, AND SUBMARINES -- FOR THE
EXCEEDS OURS, HOWEVER, U.S. ASSAULT CAPABILITY AND FLEXIBILITY VASTLY EXCEEDS
1965-1975 PERIOD.
THEIRS.
NUMBER AND TONNAGE OF MAJOR U.S. AND USSR SHIPS
U.S./U.S.S.R. COMBATANT SHIP-DAYS
ON DISTANT DEPLOYMENT
TONNAGE
5000
80
TOTAL SHIPS
1500
70
60
1000
3000
50
U.S.
SHIP-DAYS IN THOUSANDS
40
500
30
1000
20
U.S.S.R.
10
US SOVIET
US SOVIET
1975
65
66
67
68
69
70
71
72
73
74
75
CALENDAR YEAR
INCLUDES AIRCRAFT CARRIERS, MAJOR SURFACE COMBATANTS, GENERAL
COMPARATIVE NUMBERS AND TONNAGE
PURPOSE SUBMARINES, MINOR SURFACE COMBATANTS, AMPHIBIOUS SHIPS,
AND MINE WARFARE SHIPS.
OF U.S./USSR NAVAL SHIPS
A 1975 COMPARISON OF THE NUMBERS OF SHIPS AND TOTAL TONNAGE OF THE
TWO NAVIES SHOWS TWO ASYMMETRIES. FIRST, THE SOVIETS HAVE MORE SHIPS
(MANY OF WHICH ARE SMALLER THAN 1,000 TONS), CONSISTENT WITH THE
TRADITIONAL VIEW THAT THEIR NAVY IS THE SEAWARD EXTENSION OF THE RED
ARMY, LARGELY COASTAL IN ORIENTATION,
U.S./USSR COMBATANT SHIP-DAYS
ON DISTANT DEPLOYMENT
SECOND, THE U.S. LEADS IN DISPLACEMENT BECAUSE WE HAVE BUILT SHIPS
FOR ROUTINE OPERATION ON DISTANT DEPLOYMENT, (ABOUT 60% OF THE U.S.
ADVANTAGE IN TONNAGE RELATES TO OUR 13 AIRCRAFT CARRIERS,)
As INTERESTING AS THE GROWTH OF THE SOVIET NAVY IS THE WORLDWIDE
DEPLOYMENT OF THEIR SHIPS ON A ROUTINE BASIS, BEGINNING IN THE EARLY
THE MIX OF SHIPS IN THE SOVIET NAVY IS CHANGING STEADILY AS THEY
BUILD BIGGER, MORE CAPABLE SHIPS AND ADD HELICOPTER AND VSTOL AIRCRAFT
1960's.
CARRIERS.
RECENTLY, THE SOVIETS HAVE MAINTAINED A STEADY-STATE NAVAL PRESENCE
WHEN THE CONTRIBUTIONS OF PRINCIPAL ALLIES ON BOTH SIDES ARE INCLUDED,
AT A LEVEL ABOUT TWO-THIRDS THAT OF THE U.S.
THE NUMBERS TEND TO EQUATE.
ESTIMATED U.S./USSR RELATIVE
PRODUCTION RATES
(1971 - 1975)
US/USSR COMBATANT DEPLOYMENTS*
(AVERAGE CY 65 AND 75)
USSR
U.S.
USSR/U.S.
U.S.
1971-75
RATIO
1971-75
U.S.
AVG
AVG
1971-75
USSR
21
13
USSR
8
2
10
3,030
413
7.3:1
8888888
U.S.
1965
1975
U.S.
ATLANTIC
4,000
1,577
2.5:1
U.S.
1,350
271
5:1
U.S.
D
132
USSR
928
609
1.5:1
44
USSR
34
U.S.
U.S.
31
9
28
3
4
1965
1975
USSR
USSR
USSR
INDIAN OCEAN
2
03%
4
1965
1975
1965
1975
PACIFIC
MEDITERRANEAN
*
INCLUDES AIRCRAFT CARRIERS, GENERAL PURPOSE SUBMARINES MAJOR SURFACE COM.
FEBRUARY 1976
BATANTS, MINOR SURFACE COMBATANTS, AMPHIBIOUS SHIPS, AND MINE WARFARE SHIPS.
GEOGRAPHICAL DISTRIBUTION OF
U.S./USSR COMBATANT DEPLOYMENTS
THE SOVIET UNION HAS ADOPTED A NAVAL DEPLOYMENT PATTERN QUITE
U.S./USSR RELATIVE PRODUCTION RATES
DISSIMILAR TO THAT OF THE U.S.
FOR
THIS CHART SHOWS 1965 COMPARISONS TO THE LEFT AND 1975 COMPARISONS
GROUND AND TACAIR FORCE EQUIPMENT
TO THE RIGHT, BY MAJOR OCEAN AREA, THE NAVAL CONTRIBUTIONS OF THE
NATIONS ALLIED WITH THE U.S. AND THE USSR ARE NOT INCLUDED IN THESE
COMPARISONS,
AVERAGE SOVIET PRODUCTION OF MAJOR ITEMS OF GROUND WARFARE EQUIP-
MENT -- TANKS, ARMORED PERSONNEL CARRIERS, ARTILLERY PIECES, AND TACTICAL
AIRCRAFT -- OVER THE PAST FIVE YEARS IS ESTIMATED TO HAVE EXCEEDED
QUANTITATIVELY THAT OF THE U.S. BY THE MARGINS INDICATED.
CHANGES IN QUANTITIES OF MILITARY
EQUIPMENTS-U.S./U.S.S.R.
(1965-1975)
CHANGES IN U.S./U.S.S.R. STRATEGIC
TANKS
ARTILLERY
FORCE LEVELS
50000
25000
ICBMs
SLBMs
BOMBERS
40000
20000
USSR
U.S.S.R.
U.S.S.R.
1500
900
900
30000
15000
USSR
20000
10000
US
US
1000
600
600
U.S.
U.S.
10000
5000
FORCE LEVELS
FB-111A
US
500
300
300
65
I.
69
71
73
75
65
67
69
71
73
75
+ BACKFIRE
USSR
TACTICAL AIRCRAFT
HELICOPTERS
1965
1970
1975
1965
1970
1975
1965
1970
1975
END FISCAL YEAR
7000
10000
U.S.
6000
8000
U.S.
5000
6000
4000
4000
U.S.S.R.
3000
2000
U.S.S.R.
CHANGES IN STRATEGIC NUCLEAR FORCES - U.S./USSR
65
67
69
71
73
75
65
67
69
71
73
75
THE SOVIETS HAVE INCREASED FROM ABOUT 225 ICBMs IN 1965 TO SOME 1,600
TODAY, HAVING OVERTAKEN THE U.S. IN THE LATE 1960's.
THE SOVIET SUBMARINE-LAUNCHED BALLISTIC MISSILES HAVE GROWN FROM 29
GROUND AND TACAIR FORCE MILITARY EQUIPMENT - U.S./USSR
TO MORE THAN 700, WHILE THE U.S. HAS BEEN LEVEL AT 656.
IN THE BOMBER FORCE, THE U.S. MAINTAINS A LEAD,
SOVIET TANK INVENTORIES EXCEED THOSE OF THE U.S. BY ROUGHLY 4-To-1,
THESE COMPARISONS DO NOT ADDRESS QUALITATIVE DIFFERENCES IN THE TWO
AND ARE INCREASING,
FORCES.
THE SOVIETS HAVE 2.5 TIMES AS MUCH ARTILLERY,
THEY HAVE BUILT A MODERN, CAPABLE TACTICAL AIRCRAFT FORCE WHICH IN
NUMBERS, BUT NOT QUALITY, EXCEEDS OURS BY 30%.
IN HELICOPTERS THE U.S. MAINTAINS SUPERIORITY, BUT THE SOVIETS ARE
NOW BUILDING HELICOPTERS IN QUANTITY,
U.S./U.S.S.R. STRATEGIC MISSILE ADVANTAGE
8:1
COMPARISON OF US AND USSR ICBMs
7:1
MISSILES/RVs
6:1
US
USSR
FUTURE PROJECTIONS
ARE BASED ON
NIE "BEST ESTIMATE"
5:1
U.S.
ADVANTAGE
4:1
3:1
TW
RVs
2:1
1:1
MISSILES
MT
TITAN II
MM II
MM III
TYPE
SS-7
SS-8
SS-9
SS-11
SS-13
SS-X-16
SS-17
SS-18
SS-19
1
1
1/3
WARHEADS
1
1
1/3
1/3
1
1
4
1/8
6
2:1
TW
1963
1965
1970
IOC
1962-3
1963
1967-71
1966-73
1969
1975
1974-75
1974
SOVIET
ADVANTAGE
3:1
4:1
5:1
MT
6:1
1964
1968
1972
1976
1980 1981
COMPARISON OF U.S./USSR ICBMs
THE SOVIETS HAVE DEVELOPED FOUR NEW ICBMs IN THE PAST FEW YEARS,
TWO OF WHICH ARE CURRENTLY BEING DEPLOYED WITH MULTIPLE INDEPENDENTLY
TARGETABLE REENTRY VEHICLES (MIRVs). FOLLOW-ON MISSILES ARE IN R&D.
U.S./USSR STRATEGIC MISSILE ADVANTAGE
THIS CHART SHOWS ON THE LEFT THE THREE ICBMs WHICH MAKE UP THE
U.S. INVENTORY -- BY NAME, NUMBER OF WARHEADS, AND YEAR OF INITIAL
THIS CHART -- WHICH EXCLUDES STRATEGIC BOMBER FORCES, AN AREA IN
OPERATIONAL CAPABILITY -- AND THE NINE SOVIET COUNTERPARTS, WHERE
WHICH THE U.S. HAS AN ADVANTAGE -- SHOWS HOW THE STRATEGIC MISSILE
THE NUMBER OF WARHEADS IS DEPICTED WITH A DIAGONAL, IT INDICATES THAT
ADVANTAGE HAS SHIFTED AWAY FROM THE U.S. OVER TIME.
THE LATER VERSIONS OF A GIVEN MISSILE HAVE MULTIPLE WARHEAD CAPABILITY,
TAKING SOVIET IMPROVEMENTS AND U.S. DEVELOPMENTS INTO CONSIDERATION,
WE CAN EXPECT A CONTINUED SOVIET ADVANTAGE IN THROWWEIGHT AND MEGATONS,
ALTHOUGH THE U.S. SHOULD RETAIN A LEAD IN NUMBERS OF WARHEADS. ABOVE THE
HORIZONTAL LINE WHICH DIVIDES THE CHART, THE ADVANTAGE RESIDES WITH THE
U.S.; BELOW THE LINE, IT FALLS TO THE USSR.
CENTRAL EUROPEAN BALANCE
PROJECTED INVENTORY U.S./U.S.S.R.
(2400 SNDV/1320 MIRV LEVEL)
(Non-Mobilized 1975)
MEGATONS
WARHEADS
U.S.S.R. TOTAL
NATO LEADS
PACT LEADS
U.S.TOTAL
MANPOWER
-TROOPS
WARHEADS
U.S.S.R.
MEGATONS
0
U.S. TOTAL
TOTAL
-ARMORED PERSON-
GROUND
-ARTILLERY
NEL CARRIERS
WEAPONS
-TANKS
-ANTI-TANK GUIDED
75
80
85
75
80
85
-MULTIPLE ROCKET
MISSILES
END FY
END FY
LAUNCHERS
THROWWEIGHT
--MORTARS
TOTAL
-GROUND ATTACK
AIRCRAFT
-AIR DEFENSE
THROW WEIGHT THROW WEIGHT
-RECONNAISSANCE
U.S. TOTAL
-HELICOPTERS
75
80
85
END FY
CENTRAL EUROPEAN BALANCE NATO/WARSAW PACT
PROJECTED NUCLEAR INVENTORIES U.S./USSR
CENTRAL EUROPEAN FORCE POSTURES AND DEVELOPMENTS SUGGEST THAT, UNLESS
COUNTERBALANCED, INCREASING SOVIET FIREPOWER AND MOBILITY COULD BEGIN TO
GIVE THE WARSAW PACT FORCES AN UNACCEPTABLE ADVANTAGE.
FROM THE STANDPOINT OF THE TOTAL STRATEGIC NUCLEAR INVENTORY
WHICH INCLUDES MISSILES AND BOMBERS -- PROJECTED TRENDS INDICATE A U.S.
ASYMMETRIES THAT INFLUENCE THE ASSESSMENT INCLUDE THE FOLLOWING:
LEAD IN NUMBERS OF WARHEADS, WITH THE USSR MAINTAINING THE ADVANTAGE IN
NATO HAS SEVERAL ADVANTAGES:
MEGATONS AND THROWWEIGHT,
A DEFENSIVE MISSION WITH ADVANTAGES OF INTERIOR LINES AND
FAMILIAR TERRAIN,
THESE PROJECTIONS ASSUME THAT THE VLADIVOSTOK AGREEMENT LIMITS OF
SUPERIOR TACTICAL AIRPOWER,
2,400 STRATEGIC NUCLEAR DELIVERY VEHICLES (SNDV) AND 1,320 MULTIPLE
INDEPENDENTLY TARGETED REENTRY VEHICLES (MIRV) WILL BE EVENTUALLY AGREED
MORE ANTI-TANK WEAPONS, HELICOPTERS, AND ARMORED PERSONNEL
CARRIERS,
UPON BY BOTH SIDES IN A TREATY,
THE WARSAW PACT HAS:
THE INITIATIVE IN CHOOSING THE TIME AND NATURE OF ATTACK,
MORE TANKS AND ARTILLERY PIECES, AND MODERN SOPHISTICATED
BATTLEFIELD AIR DEFENSE SYSTEMS.
EVOLUTION OF SOVIET POWER
SOVIET WEAPON ADVANCES
1965-1975
STRATEGIC FORCES
NAVAL FORCES
CENTRAL EUROPEAN FRONT
1940
WEAPON
ADVANCES
FORCE IMPLICATIONS
UNSOPHISTICATED
-TANKS
COASTAL DEFENSE
IMPROVED ARMOR
CONVENTIONAL
IMPROVED PROTECTION FOR
SEA DENIAL
CAPABILITY
BERLIN
-ARMORED PERSONNEL
NEW GUN SYSTEM
MEN AND EQUIPMENT
LIMITED NUCLEAR
1950
ATTACK CAPABILITIES
CARRIERS
IMPROVED ARMOR
KOREA
INCREASED FIREPOWER
DEVELOPING NUCLEAR
-ARTILLERY
SELF-PROPELLED
CAPABILITY
ARMORED
-INCREASED MOBILITY
HUNGARY
BOMBER MISSILE
-ANTI-AIRCRAFT
RADAR CONTROLLED GUN
1960
COUNTER CITY
NUCLEAR DETERRENCE
FIVE NEW MISSILES
MOBILE GROUND BASED
CAPABILITIES
AIR DEFENSE
ANTI CARRIER
TRACK MOBILITY
CAPABILITIES
SOPHISTICATED
CZECH
CONVENTIONAL CHEMICAL
-AIRCRAFT
IMPROVED AVIONICS,
-GROUND ATTACK CAPABILITY
SEA CONTROL
AND NUCLEAR FORCES
1970
AIRFRAMES AND
-PAYLOAD RANGE INCREASES
PARITY AND
M.E.
FLEXIBLE RESPONSE
MUNITIONS
WORLDWIDE
PRESENCE
POWER PROJECTION
1980
SOVIET WEAPON ADVANCES
THE SOVIETS FOR SOME TIME HAVE STRESSED AN OFFENSIVE DOCTRINE FOR A
BLITZKRIEG-TYPE WAR, IN THE PAST DECADE THEY HAVE MADE PROGRESS TOWARD
BUILDING A FORCE WHICH COULD IMPLEMENT THAT DOCTRINE, SINCE THE MID-1960's,
EVOLUTION OF SOVIET POWER
THEY HAVE INTRODUCED FIVE NEW TYPES OF AIRCRAFT AND PROVIDED THEIR GROUND
FORCES WITH A NEW GENERATION OF WEAPONS IN MOST MAJOR CATEGORIES.
WHEN ONE CONSIDERS THE STRATEGIC NUCLEAR, NAVAL, AND CENTRAL
THESE WEAPONS HAVE BEEN, IN MOST CASES, NEW DESIGNS -- AND ARE SOPHIS-
EUROPEAN FRONT BALANCES TOGETHER, IT IS APPARENT THAT SIGNIFICANT
TICATED. FOR EXAMPLE, SOVIET DIVISIONS HAVE BEEN EQUIPPED WITH AS MANY
CHANGES IN SOVIET CAPABILITIES HAVE OCCURRED IN THE PAST 15 YEARS,
AS FIVE DIFFERENT SURFACE-TO-AIR GUN AND MISSILE SYSTEMS, EACH WITH OVER-
THE SOVIETS HAVE COME FROM THE UNSOPHISTICATED, CONTINENTALLY CONFINED,
LAPPING AIR DEFENSE CAPABILITIES AND USING DIFFERENT METHODS TO ACQUIRE,
ARMED FORCES OF THE POST WORLD WAR II DAYS TO CLEAR MILITARY SUPERPOWER
TRACK AND ENGAGE AIRCRAFT. THEIR ARMORED PERSONNEL CARRIER CARRIES TROOPS,
STATUS IN THE 1970's.
ENABLES THEM TO FIGHT FROM WITHIN THE VEHICLE, AND MOUNTS ANTI-TANK WEAPONS,
THERE IS POWERFUL MOMENTUM IN SOVIET MILITARY PROGRAMS AND IN THE
MAJOR IMPROVEMENT IN GROUND BASED AIR DEFENSE HAS FREED THE SOVIET
EMERGING PATTERN OF EXTERNAL PROJECTION OF SOVIET POWER.
AIR FORCE FOR AN AIR SUPPORT ROLE,
ECONOMIES AND RESTRAINTS
IN FY 1977 U.S. DEFENSE BUDGET
($ in Billions)
U.S. DEPARTMENT OF DEFENSE BUDGET
DEFENSE BUDGET TOTALS
- CUTBACKS IN EMPLOYMENT AND PERSONNEL
$ .9
($ IN BILLIONS)
COSTS, FY 1976-77
- PAY RAISE ASSUMPTIONS
.8/2.6
FY 1964
FY 1974
FY 1975
FY 1976
FY 1977
INCREASE
CURRENT DOLLARS
ACTUAL
ACTUAL
ACTUAL
ESTIMATE
ESTIMATE
FY 1976-77
GS/MILITARY PAY RAISE CAP, NEW/EXISTING
GS GUIDELINES
Total Obligational Authority (TOA)
50.7
85.1
87.9
98.3
112.7
14.4
- COMMISSARIES AND RETIRED PAY "KICKER"
.2
Budget Authority (BA)
50.7
88.9
91.5
100.7
113.8
13.1
- MILITARY CONSTRUCTION AND FAMILY
.9
Outlays
50.8
78.4
86.0
91.2
100.1
8.9
HOUSING CONSTRUCTION
CONSTANT FY 1977 DOLLARS
SUBTOTAL
2.8/4.6
Total Obligational Authority (TOA)
115.4
107.3
100.7
105.3
112.7
7.4
- STOCKPILE ITEMS
.7/.8
Budget Authority (BA)
115.5
112.6
104.8
108.0
113.8
5.8
Outlays
113.8
101.7
99.1
98.2
100.1
1.9
TOTAL
$ 3.5/5.4
ECONOMIES AND RESTRAINTS
U.S. DEFENSE BUDGET TOTALS
WHILE THE PRESIDENT'S BUDGET PROPOSES IMPROVEMENTS IN FORCE MODERNIZA-
TION AND READINESS, IT ALSO PROPOSES TO TIGHTEN THE BUDGET IN THE FOLLOWING
IT IS CLEAR TO THOSE WHO LOOK AT THE MILITARY BALANCE WHICH RESULTS
WAYS:
FROM THE TRENDS DESCRIBED THAT, IF THE U.S. IS TO MAINTAIN "SUFFICIENCY"
RESTRAINING PERSONNEL COSTS WHILE WORKING TO MAINTAIN THE QUALITY
AND PROFESSIONAL STANDARDS OF THE ALL VOLUNTEER FORCE,
AND WORLD STABILITY, THESE TRENDS MUST BE ARRESTED NOW.
INSTITUTING FURTHER EFFICIENCIES INCLUDING BASE REALIGNMENTS,
THIS CHART SHOWS WHERE THE FY 77 BUDGET -- WITH WHICH WE ARE ATTEMPTING
HEADQUARTERS REDUCTIONS, REDUCED TRAINING COSTS, STOCKPILE LEVEL
TO CHECK THESE RELATIVE TRENDS BY STOPPING THE DOWNTREND (IN REAL TERMS) IN
ADJUSTMENTS, AND CIVILIAN MANPOWER REDUCTIONS,
U.S. DEFENSE SPENDING -- STANDS WITH RESPECT TO BUDGETS OVER PAST YEARS.
THESE RESTRAINTS ADD UP TO $3.5 TO $5.4 BILLION, DEPENDING ON THE
THE TOP THREE LINES DISPLAY DATA, WITH PREWAR FY 64 FOR REFERENCE, IN TERMS
MAGNITUDE OF THE PAY CAP ACHIEVED.
OF CURRENT OR "THEN YEAR" DOLLARS, THE BOTTOM PORTION OF THE CHART PRESENTS
THE SAME DATA IN REAL TERMS
CONSTANT FY 77 DOLLARS,
IF CONGRESS FAILS TO APPROVE THE RECOMMENDED BELT-TIGHTENING MEASURES,
ADDITIONAL APPROPRIATIONS WILL BE REQUIRED TO AVOID UNACCEPTABLE FORCE
REDUCTIONS,
U.S. FEDERAL OUTLAYS-CONSTANT 1977 DOLLARS
$ Billions
$ Billions
U.S. DEPARTMENT OF DEFENSE BUDGET
400
400
FINANCIAL SUMMARY
Total
FY 1964
FY 1974
FY 1975
FY 1976
FY 1977
300
300
Payments to Individuals
DOD/MAP as Percentage:
and Grants
Federal Budget (Outlays)
42.8%
29.2%
26.5%
24.4%
25.4%
Gross National Product
8.3%
5.8%
6.0%
5.7%
5.4%
200
200
Labor Force
7.9%
5.2%
5.0%
4.8%
4.8%
Net Public Spending
28.1%
17.4%
17.3%
16.4%
16.5%
Interest and Other
Nondefense
100
100
National Defense
0
0
1950
52
54
56
58
60
62
64
66
68
70
72
74
7677
Fiscal Years
U.S. DEPARTMENT OF DEFENSE BUDGET
FINANCIAL SUMMARY
ALTHOUGH DoD OUTLAYS INCREASE $8.9 BILLION FROM FY 1976 TO FY 1977 -- UP FROM
$98.2 BILLION TO $100.1 BILLION THE PORTION OF THE NATION'S ECONOMIC RESOURCES
TOTAL U.S. FEDERAL OUTLAY PATTERN
ALLOCATED TO DEFENSE REMAINS VERY LOW, IN SOME CASES THE LOWEST LEVEL IN OVER A
QUARTER OF A CENTURY,
OUR NATION'S NON-DEFENSE SPENDING CAN NO LONGER BE FUNDED OUT OF THE
DEFENSE REPRESENTS 25.4% OF THE FEDERAL BUDGET, UP SLIGHTLY FROM FY 1976.
DEFENSE BUDGET. TODAY, NON-DEFENSE EXPENDITURES ARE NEARLY THREE TIMES
IT REPRESENTS THE LOWEST LEVEL SINCE PRIOR TO PEARL HARBOR.
THOSE OF DEFENSE.
DEFENSE AS A PERCENT OF GNP WILL BE 5.4% IN FY 1977, THE LOWEST SHARE SINCE
PRIOR TO THE KOREAN WAR,
IN THE EXTREME:
DEFENSE EMPLOYMENT (INCLUDING MILITARY, CIVILIAN AND DEFENSE INDUSTRY)
A 10% INCREASE IN NON-DEFENSE SPENDING, TAKEN FROM THE DoD BUDGET,
REPRESENTS 4.8% OF THE LABOR FORCE, THE LOWEST LEVEL SINCE PRIOR TO PEARL
WOULD MEAN A CRIPPLING 30% CUT,
HARBOR,
IN TERMS OF NET PUBLIC SPENDING (FEDERAL AND STATE AND LOCAL) DEFENSE WILL
A 33% INCREASE IN NON-DEFENSE SPENDING, FUNDED FROM DEFENSE SPENDING,
REPRESENT 16.5% OF THE TOTAL, EXCEPT FOR FY 1976, ALSO THE LOWEST RELATIVE
WOULD WIPE OUT THE DEFENSE ESTABLISHMENT ALTOGETHER.
SHARE SINCE PRIOR TO PEARL HARBOR.
CONCLUSION
CONTINUING THE TRENDS OF THE PAST YEARS WOULD HAVE
TO BE CONSIDERED A CONSCIOUS DECISION TO ABANDON THE POLICY
OF MAINTAINING "ROUGH EQUIVALENCE" WITH THE SOVIET UNION.
WHEN, AS WOULD BE INEVITABLE, THE FACT THAT THE
UNITED STATES HAD MADE A DECISION TO SLIP TO AN INFERIOR
STATUS WAS APPRECIATED BY THE WORLD, WE WOULD BEGIN LIVING
IN AN UNSTABLE WORLD, FUNDAMENTALLY DIFFERENT FROM THE ONE
WE HAVE KNOWN DURING OUR LIFETIMES.
29 March 1976
DEFENSE BUDGET ISSUES
DEFENSE BUDGET ISSUES
1. SENATE BUDGET COMMITTEE
Page no.
President's Proposed Savings
President's Alternative Pay Plan
- 23
Wage Board Pay - System Reform
-
- 24
One Percent Retired Pay "Kicker"
- 25
Adjustments in Reserve Pay Practice
27
Three Year Phase-out of Commissary Subsidy
- 26
Fair Market Rental in Military Housing
-
28
Reductions in Navy Reserve Paid Drill
29
Increase Stockpile Sales and Receipts-
- 51
Additional Pay and Compensation Reductions
Military Contributory Retirement System-
1
Pay Absorption
2
Strength Reductions
Troop Strength Reductions
3
Reducing U.S. Pacific Strength
-
4
Civilian Personnel Reductions
-
5
Pupil/Instructor Training Ratios
6
Growth in Defense Program
Proposed Reductions in Program Growth
- 9
Elimination of the B-1 Bomber
- 11
Conventional Power Mix for New Navy Ships
- 12
Low Mix Tactical Air Force
- 13
E-3A Airborne Warning and Control System (AWACS)
- 39
Escalation and Cost Growth in Ship Construction Costs
-
- 43
Effect of Outlay Reductions
- 20
Grant Military Assistance and Foreign Military Sales
- 14
Ship Construction
- 41
-
11. HOUSE BUDGET COMMITTEE
Proposed Reductions in Program Growth
15
Unexpended Balances and Unobligated Balances
17
Effect of Outlay Reductions
20
111. AUTHORIZATION AND APPROPRIATIONS COMMITTEES
Dollar Summary
22
Manpower
President's Alternative Pay Plan
23
Wage Board Pay System Reform
24
One Percent Retired Pay "Kicker-
25
Three Year Phase-out of Commissary Subsidy
26
Adjustments in Reserve Pay Practices
27
Fair Market Rental in Military Housing
28
Reductions in Navy Reserve Paid Dril
29
RDT&E
HASC RDT&E Reduction
30
F-18 Aircraft
31
F-15 Aircraft-
32
Aerial Scout Helicopter (ASH)
33
Submarine Launched Cruise Missile (SLCM)
34
RDT&E "Emergency Fund"
35
Weapons Systems
Additional Funds for B-1 Bomber-
36
Initiate Production of Mk-12A Re-entry Vehicle
37
Additional Funding for Advanced ICBM(MX)
38
E-3A Airborne Warning and Control Systems (AWACS)
-
39
Continuation of A-6E Aircraft Production-
40
Ship Construction
Ship Construction and Conversion-
41
Escalation and Cost Growth in Ship Construction-
43
Operations, Maintenance and Other Procurement
Additional Funds for Depot Maintenance
44
Reductions in War Reserve Materials
-
45
Procurement of Communications Equipment-
46
Reductions in Intelligence Program
48
Consolidation of Undergraduate Helicopter Pilot Training
-
49
Stock Fund Surcharge
-
50
Stockpile Sales
-
51
MILITARY RETIREMENT
QUESTION: Should a military contributory (7%) retirement system
be enacted?
ANSWER:
This is a future possibility. The DoD is considering
a contributory retirement system among other options as
part of the third Quadrennial Review of Military Com-
pensation. This comprehensive review, required under
P.L. 89-132, is intended to provide the basis for
modernization of the entire system of military compensation.
It can also be said that military members presently
contribute 7% of their salary to fund the retirement
system. This contribution is an "imputed" contribution,
in that it is neither received by the military member
nor invested in a retirement fund; however, it is used
as part of the rationale for establishing comparable
levels of pay for military personnel. There is no
unanimity of opinion concerning the imputed contribution:
the House Armed Services Committee accepts the use of the
imputed contribution, the Senate Armed Services Committee
does not.
A major change in the compensation system, such as a
direct contribution system, should be made in the context
of the total system in order to minimize erosion of morale
among the military members. Attempting to move to a con-
tributory retirement system as part of the FY 1977 budget
would be premature.
1
PAY ABSORPTION
QUESTION: Would a 10% pay absorption on the 4.7% pay cap be
acceptable? The result would be a $0.2 billion savings.
ANSWER: In the past, DoD has absorbed cuts in the neighborhood
of 10% of requested pay supplementals. The FY 1977 bud-
get already requires some absorption. It is likely that
if DoD were to absorb 10% of the planned 4.7% pay raise
for military and General Schedule civilians, and 10% of
the planned 3.4% pay raise for Wage Board civilians,
a real program decrease of some amount up to $160
million would result. The pay cap itself already repre-
sents a major restraint on personnel costs. Altogether,
nearly $3 billion in compensation savings is already
built into the President's Budget. Further reductions
in compensation are not warranted.
2
TROOP STRENGTH REDUCTIONS
QUESTION: Are certain reductions in troop strength possible out to
1980? If you are able to phase out 25,000 additional troops
by the end of FY 1977, there would be $0.1 billion savings.
ANSWER:
If active military strength were cut an additional 25,000 by
end FY 1977, it would save about $100 million. However, it
would not be a good idea.
The active military strengths of about 2.1 million programmed
for the end FY 1976 and end FY 1977 are the lowest since just
before the outbreak of the Korean War in 1950. The active
military strength requested for end FY 1977 is a reduction
of about 600,000 (-21%) from FY 1964, which was the last peace-
time year before the buildup for Vietnam. Over 150,000 military
people have been reduced just since FY 1973, and a small reduc-
tion of 5,400 is planned for FY 1977. Conversely, U.S. troop
strength has been declining, Soviet troop strength has been
increasing; from 1964 to the present, Soviet military strength
has increased about 1 million men (+30%).
Active military strength reductions have been forced on us by
rising manpower and other Defense costs. They do not reflect
a lesser need for military forces. As far as possible, we have
minimized the adverse impact of these reductions by management
improvements, involving substantial trimming of headquarters
and support activities and increasing our dependence upon the
National Guard and Reserve. We have, for example, reduced our
support establishment by nearly 250,000 people (11%) from FY 1973
onward, while holding combat manpower steady.
3
REDUCING U.S. PACIFIC STRENGTH
QUESTION: Can additional reductions in Pacific deployments be made,
since the Vietnam war is now terminated?
ANSWER:
No strength reductions are possible by redeploying U.S. forces
from the Pacific to the United States. The size of our
Armed Forces are already at a very minimum level, given the
growing Soviet capabilities. Even if U.S. Forces were to be
withdrawn from the Pacific, which is by no means recommended,
they would not be eliminated from the force structure, and
no appreciable savings would occur -- indeed, some increased
costs might result.
Moreover, the United States has already made appreciable
reductions in its Pacific deployments. Not only have we
eliminated all the forces built up for Vietnam, we are
about 40% below the pre-Vietnam Pacific strength levels, as
is shown in the following table:
Western Pacific Strengths
(end fiscal year - thousands)
FY 1964
FY 1976
Military Personnel
249
154
Civilian Personnel
104
64
Total
353
218
Given the trends in Defense budgets and forces in the USSR,
and our continuing interests in Asia, the present Pacific
deployments are essential to support American interests.
4
CIVILIAN PERSONNEL REDUCTIONS
QUESTION: Are additional civilian employee reductions possible?
If there is a cut of 25,000 additional civilians, there
will be a savings of $0.1 million.
ANSWER:
An additional reduction of 25,000 civilians would save
about $100 million; however, it would not be a good idea
in FY 1977. The President has already included a cut of
29,000 civilians in the FY 1977 budget, for a total cut of
over 60,000 since 1973. These cuts bring civilian strength
down 140,000 below the pre-Vietnam 1964 level (the drop
would have been even greater, were it not that 40,000 military
jobs were converted to civilian jobs). The cuts in civilians
we have taken, moreover, are part of a general reduction
in our support establishment -- which we have reduced nearly
250,000 (11%) since 1972. Additional cuts this year would
be difficult to manage and would adversely affect our defense
posture.
5
STUDENT/INSTRUCTOR RATIO
Question: Are additional civilian employee reductions possible if
current pupil/instructor ratio of 1.34:1 is increased to 2:1 (vs.
10:1 public education and 4.5:1 in non-public eduction) = $0.2 billion
savings.
Answer: Some misconceptions implicit in the question should be cleared
up first.
- The DoD pupil/instructor ratio is about 5:1.
- The ratios cited are not pupil to instructor ratios. They are,
in the case of DoD, the average number of military students during
FY 1977 divided by total manpower in support of training, including not
only instructors but also allocations of manpower supporting the
instruction, operating training bases, and supplying medical and other
support to students, training staff and dependents. The civilian
education ratios are enrollment divided by identifiable total full-time
equivalent employees of the schools.
Total manpower in support of training is being reduced by 31,600
military and civilian spaces, or 16 percent, from FY 1975 to FY 1977.
This reduction was accomplished by assuming the release of excess
training bases, consolidating Service training activities (notably in
undergraduate flight training) and by carefully reviewing all training
activities to remove less than essential manpower. It is important to
note that this very large reduction -- made in a period when the average
number of students to be trained increased by 2 percent -- was the
product of a meticulous review, taking into account the effect of these
or further possible reductions on the quality of training and the
readiness of the force, which depends, to a very large extent, on a
continuing input of trained and disciplined manpower.
The reduction proposed is based on the premise that the staffing
of military training should mirror that in civilian education. In fact,
the two types of training are very different, and the differences are
reflected in the varying needs for manpower.
- Military training includes types of training entirely different
from that taught in the civilian sector - e.g., flight training, and
training with weapons and dangerous equipment. These types of training
require large amounts of manpower for instruction, safety, equipment
maintenance, and operation of such facilities as airfields, weapons
ranges, and complex training facilities.
6
- A very large proportion of military training is "hands-on"
training on actual or simulated equipment, which can only be taught
effectively in small groups. High school and college instruction
make much greater use of the lecture format, in which one instructor
can teach as many students as the classroom will hold.
- Military training operates year-round and generally on a 40-hour
week; civilian education provides 12 to 20 hours of instruction at
the college level, about 25 hours at the secondary school level.
- Military students are paid and supported, so it is efficient to
make courses as short as possible, even if more instructors are required.
The application of higher levels of manpower can result in fewer total
manyears (student and staff) and cost savings. Civilian schools, whose
students are not paid, have no incentive to graduate them as quickly as
possible and, in fact, operate on a fixed schedule -- e.g., a high
school course is four years.
- Military students are housed, fed, provided full medical care,
and otherwise supported to a far greater degree than high school students
and a much greater degree than most college students. Military bases
also support the training staff and dependents.
When these differences are taken into account, there are no grounds
for asserting that the comparison shows inefficiency in the DoD use of
training manpower.
If the suggested reduction were to take place, DoD manpower in
support of training would have to be reduced by 63,500 military and
civilian spaces to reach the imposed ratio. Contrary to the proposal
in the question, the reduction could not be made in civilian personnel,
since there are only 61,200 civilians in the total program. The reduction
would therefore have to be in a combination of military and civilian
personnel.
A reduction of this size (33 percent of total manpower in support
of training) would have the following effects:
- The quality of training would be drastically reduced. Hands-on
training would give way to less effective taching in large groups.
Safe operation of complex equipment would be impaired.
- More training in operational units would be required, diverting
them from their primary missions. This option, even if justified on its
own merits, would tend to be foreclosed by imposing a set ratio, since
it would act to reduce the number of students in formal training and
"worsen" the ratio.
7
- Time in training would have to be stretched out to maintain
effective training. This would "improve" the ratio but waste the
additional student pay and support costs. It would also increase
the number of military members in student status. A 10 percent
increase in training time would increase active force students by
20,000, thus requiring a rise of 20,000 in total military strength
or acceptance of a 20,000 man shortage in operating units.
In summary:
- The proposal is based on fundamentally unsound premises.
- A reduction of this magnitude would have grave consequences
for force readiness and national security.
8
PROPOSED REDUCTION IN PROGRAM GROWTH
Question: Should the proposed real growth of $9.6 billion in budget
authority and $2.9 billion in outlays be approved for DoD budgets?
Answer: This is the central issue of the Senate and House Budget
Committees, thus it is important to have a clear picture of the
defense baseline trend from FY 1976 to FY 1977 in constant prices.
For baseline purposes, DoD sets aside such non-baseline items as
retired pay, prior-year shipbuilding adjustments, military assistance
program, petroleum reserves, and the stockpile. The result is a net
real increase of $7.4 billion in baseline TOA, as follows:
TOA, Constant FY 1977 Prices
($ Billions)
Personnel
Material
Total
Increases
-
$+9.8
$+9.8
Decreases
-1.4
-1.0
-2.4
Net
-1.4
$+8.8
$+7.4
DoD has stressed that these changes are totally separate from the
constraint package -- e.g., higher pay raises would require more
dollars in FY 1977, but would not provide any more real program.
DoD presentations have highlighted net real growth of $7.4 billion.
The House Budget Committee chose to highlight an $8.4 billion growth
in the materiel area. The Senate Budget Committee highlights an
increase of $9.6 billion -- essentially the $9.8 billion shown
above, less adjustments.
Thus, the Senate Budget Committee shows a "real growth in President's
request" of $9.6 billion, offset only by "President's Economies (pay
caps, stockpile sales, etc.) 11 These economies amount to $2.4 billion,
however, and reduce real program growth to about $7.4 billion, as
shown above.
Proposed reductions frequently ignore the need to overcome deficiencies
in our forces that have been accumulating for a number of years. As
can be seen in the following table, Defense has had no real growth in
the past four years in its procurement and RDT&E programs. Priority
has gone to domestic programs. A backlog of deficiencies in our
defense posture is the result.
9
Baseline TOA - Constant FY 1977 Prices
(Billions)
FY 73
FY 74
FY 75
FY 76
FY 77
Procurement
22.1
22.0
21.1
21.5
27.7
RDT&E
10.8
10.2
9.9
10.2
11.0
Total
32.9
32.2
31.0
31.7
38.7
The United States has many equipment shortages to overcome -- tanks
and other armored vehicles, aircraft, ships. It also must repair and
replace the equipment it now has. (A satisfactory "aging" situation
would be one in which the average age of equipment in inventory was
half its useful life; the trend is sharply away from this goal.)
The amount of money required to overcome existing deficiencies is
several times the amount proposed by the President for purchases.
The President's budget aims only at arresting the trend.
The Defense Department has made extraordinary efforts to achieve
economies and efficiencies. Almost 250,000 people have been cut out
of the support forces since 1973, while holding the combat forces
constant. This is a reduction of 11% in the support establishment.
We have lean armed forces. They need adequate levels of modern,
serviceable equipment. Any proposals before the Committee to reduce
purchases -- were they accepted -- would not provide sufficient defense
purchases to achieve an adequate defense posture.
Similarly, outlay reductions cannot be made without having an unaccept-
able impact on the overall Defense Posture. Outlay reductions are
largely comprised of prior year program pay-out and personnel costs.
Making sizable reductions in outlays in the current year would require
significant program reductions and/or further personnel cuts. (See
outlay issue paper).
10
ELIMINATION OF THE B-1
QUESTION: Should the B-1 be cancelled in favor of a stand-off bomber
with cruise missile capability?
ANSWER: Exhaustive studies made by the DoD and reviewed by the
Congress conclude that a bomber force is needed into the foreseeable
future and that the B-1 is the most cost-effective bomber option.
Outside studies which recommend a stand-off bomber with cruise missile
capability (the 'B-747" option) neglect certain essential considerations:
-
The standard wide-bodied commercial cargo design would
have to be extensively re-done to carry out the military mission,
and at considerable cost.
-
A penetrating bomber carrying SRAMs (a short range, super-
sonic, low-radar-cross section air-to-surface missile) is needed
to counter low-altitude SAM systems which exact very high attrition
from cruise missiles.
-
Against the Soviet AWACS and fighter interceptor air defenses
and low-altitude SAMS projected for the 1980s, the B-1 has been shown
to be more cost-effective than improved B-52s, improved FB-111s,
and wide-bodied cruise missile carriers to destroy defended targets.
However, a portion of the bomber force of the 1980s can be equipped
to carry cruise missiles to attack targets which are not defended by
SAMS, that is why DoD is developing the Air Launched Cruise Missile
(ALCM).
Other essential considerations:
-
The strategic bomber force is necessary to the balance of
deterrent forces.
contains about 45% of our nuclear throw weight
contains about 60% of our nuclear megatonnage
- In 1985 the newest B-52 bomber will be 22 years old and the
oldest 28.
11
CONVENTIONAL POWER FOR NEW NAVY SHIPS
QUESTION: Would It be good to choose a conventional power mix
for new Navy forces and thereby save substantially on
DoD budget authority and outlays?
ANSWER:
Budget Committee reductions should be based on realistic
assumptions. To assume that conventional propulsion will
dominate future Navy ship construction is simply unrealistic.
The jurisdictional committees of the Congress have reviewed
the propulsion mix repeatedly and intensively and the
Congress has approved specific legislation directing certain
elements of the mix. The DoD budget request recognizes
the Congressional views but still increases the proportion
of the non-nuclear ships. A Budget Committee ceiling
recommendation based on an even greater proportion of
conventional power ships would be unrealistic and in the
Congressional budget process, could result in lower defense
levels. Such a proposal, therefore, would simply result
in a non-specific reduction in defense.
12
"LOW MIX" TACTICAL AIR FORCE
QUESTION: Would added emphasis on the low end of the high-low mix
provide significant savings without weakening our forces?
ANSWER: The Department of Defense is giving great emphasis to
"low-mix" tactical aircraft. The Congress last year approved this
emphasis and funded specific low-mix programs.
The mix is carefully tailored to provide American air crews effective
and competitive weapons and still curb the tactical aviation cost burden.
A distortion of the low-mix for economy reasons could be a serious and --
to the aircrews -- fatal mistake.
The concept:
- The "high-low mix" involved, for example, the higher cost Air
Force F-15 and Navy F-14 fighters complemented by cheaper
F-16s and F-18s, respectively.
- The higher cost F-15 and F-14 fighters employ powerful and
complex radar fire control systems along with associated radar
missiles. These weapon systems can operate autonomously and
are designed to counter the most sophisticated air threats likely
to be encountered in their respective areas of operation.
- The second line of defense is provided by the lower cost, and
more numerous F-16s and F-18s. They are more dependent on
friendly command and control systems, both airborne and land
based, and will be used to directly engage enemy aircraft in the
lower threat situations.
- It is critical that the "high-low mix" be properly balanced to
insure both adequate quantities of aircraft and an adequate degree
of sophisticated capability to counter the full threat array in both
a quantitative as well as qualitative sense.
- The unit costs of the low mix aircraft will be approximately half
that of the high mix aircraft.
It is vital that the currently planned high-low mix balance not be changed
for the following reasons:
- The F-15 will be the only Air Force aircraft equipped with beyond-
visual-range air-to-air missiles during the late 1980s.
- The F-14 with its Phoenix missile system offers an interception
capability unmatched by any existing or projected aircraft in the
world.
13
MILITARY ASSISTANCE PROGRAM AND FOREIGN MILITARY SALES
QUESTION: Should the levels of the Grant Military Assistance Program
and Foreign Military Sales Credit Program be approved as
proposed in the Budget?
ANSWER:
The President's amended Budget Request for FY 1977 funding
includes $294 million for the Military Assistance Program
and $852 million in Foreign Military Sales credits.
These programs are tools of foreign policy and collective
security. Cuts to these programs would seriously undermine
our policy and defense posture.
For example, the Koreans are trying very hard to acquire
their self defense capabilities. We have requested
$275 million in Foreign Military Sales credits to assist
Korea in the modernization of its defense forces. Such
improved defense is indispensable to eventual withdrawal of the
42,000 troops stationed there.
Another example is the need for $50 million MAP, $2 million
training and $150 million in FMS credit for Turkey. We seek
to restore relations with that country and assure access to
bases in that country which are of significant value to our
own national security.
The largest single recipient of FMS and grant support proposed
for FY 1977 is Israel. The importance of continued support
for Israel need not be stressed. $1 billion of FMS credits
is required to continue our agreed support for the next year.
Because Israel is already devoting so much of its resources
to defense, the President will once again this year ask the
Congress to waive payment of one-half of this amount, or
$500 million.
14
PROPOSED REDUCTIONS IN PROGRAM GROWTH
1. The proposal before the House Budget Committee calls for a reduction
in real program growth by $4.2 billion. In addition, it is proposed
to reduce unexpended/unobligated balances by $1.4 billion; since, in
practice, it will not be possible to achieve reductions in this
account by more than $100 million (and probably not that), the effect
is an additional reduction in programs by at least $1.3 billion.
Thus the proposal before the Committee is, in fact, for reductions in
programs of $5.5 billion.
2. The Committee proposal describes the $4.2 billion cut as still
permitting 15% growth in Defense purchases before inflation, and 8%
in real growth, after inflation. This is misleading in a number of
respects:
First, as noted, the real cut in programs is not $4.2 billion but
at least $5.5 billion.
Second, the Defense budget is not, in any case, developed on a "rate
of growth'' principle. It is based on requirements to maintain armed
forces of a certain size and at a particular level of readiness given
the world conditions that presently exist. The proposed cut means
a less than adequate Defense posture for the country.
Third, the Committee proposal has ignored all but the purchases
portion of the budget. It ignores the manpower cost restraints
proposed by the President. The effect of this is to imply a rate of
growth for Defense budget twice the actual rate of growth.
Fourth, it ignores the need to overcome deficiencies in our forces
that have been accumulating for a number of years. As can be seen
in the following table, except for a relatively small amount in
FY 1976, Defense has had no real growth in the past four years in
its procurement and RDT&E programs. Priority has gone to domestic
programs. A backlog of deficiencies in our defense posture is the
result.
Baseline TOA - Constant FY 1977 Prices
(Billions)
FY 73
FY 74
FY 75
FY 76
FY 77
Procurement
22.1
22.0
21.1
21.5
27.7
RDT&E
10.8
10.2
9.9
10.2
11.0
Total
32.9
32.2
31.0
31.7
38.7
15
3. Soviet spending on procurement and RDT&E, however, has been increasing.
While the United States still maintains a lead in many areas, and the
quality of our forces overall is high, we lag in important respects.
For example, the Soviets out-number us in tanks by 4 to 1, in armored
personnel carriers by 3 to 1, and in aircraft by 1.7 to 1. Moreover,
Soviet equipment is becoming more modern and sophisticated.
COMPARATIVE U.S. AND SOVIET MILITARY INVESTMENT
Bitten
(Procurement, Facilities, RDT&E)
FY 1977
[Constant FY 1977 Dollars)
Dellars
70
70
60
60
USSR
50
50
US
40
40
30
30
20
20
10
10
0
-
1965
46
67
63
69
10
"
"
"
14
75
4. The United States has many equipment shortages to overcome -- tanks and
other armored vehicles, aircraft, ships. It also must repair and
replace the equipment it now has. (A satisfactory "aging" situation
would be one in which the average age of equipment in inventory was
half its useful life; the trend is sharply away from this goal.) The
amount of money required to overcome existing deficiencies is several
times the amount proposed by the President for purchases. The
President's budget aims only at arresting the trend. Neither the House
Armed Services nor the House Appropriations Committees were able to
recommend reductions of this magnitude; indeed, the Armed Services
Committee recommended an increase in the Defense Budget.
5. The Defense Department has made extraordinary efforts to achieve
economies and efficiencies. Almost 250,000 people have been cut out
of the support forces since 1973, while holding the combat forces
constant. This is a reduction of 11% in the support establishment.
We have lean armed forces. They need adequate levels of modern,
serviceable equipment. The proposal before the Committee, to reduce
purchases $4.2 billion -- actually $5.5 billion -- were it to be
accepted, would not provide sufficient defense purchases to achieve
an adequate defense posture.
16
UNEXPENDED BALANCES AND UNOBLIGATED BALANCES *
DoD/MAP unexpended balances are summarized as follows:
(Unexpended balances, $ billions)
FY
FY
FY
FY
FY
1973
1974
1975
1976
1977
DoD/MAP total unexpended
48.1
58.9
63.7
72.6
84.1
Deduct MAP (largely trust fund)
-8.5
-15.2
-19.7
-22.6
-24.3
DoD unexpended balance
39.6
43.7
44.0
50.1
59.8
Obligated (under contract)
-26.9
-28.6
-27.3
-37.8
-45.0
Unobligated DoD
12.7
15.1
16.7
12.3
14.8
Aside from unfilled trust fund orders, the MAP balance is small and
declining. The trust fund is obviously not a source that can be tapped
to finance defense programs.
Obligated balances are large because lead times are long. They
are growing primarily because of inflation.
Unobligated balances are necessary to complete approved programs.
They are not free balances. Such balances exist for two interrelated
reasons:
The Congress has for many years followed the full-funding
principle with respect to defense procurement. When the
Congress approves 10 aircraft, it appropriates all the funds
necessary to deliver these 10 aircraft. There are over-
whelming advantages to this approach, as distinguished from
incremental funding. So far as we know, no one is questioning
full funding.
The Department, as a matter of good management, does not contract
for an entire system (ship or aircraft) at one time, or in the
first year. The longest-lead-time items are contracted first.
Other items (e.g., electronics or ordnance items for a ship) are
contracted later, lead-time away. If everything were ordered
at once, then electronics and ordnance items would come into
inventory long before they were needed. The taxpayers would
pay holding and interest costs. We could easily lose techno-
logically. The Congress recognizes this and provides 5 years
to obligate shipbuilding funds, 3 years for other procurement,
2 years for RDT&E, and no time limit on construction. Here is
the normal obligation rate for major systems:
1st
2nd
3rd
4th
5th
Year
Year
Year
Year
Year
Ships
52%
27%
16%
3%
2%
Aircraft
80%
14%
6%
-
-
Missiles
90%
8%
2%
-
-
17
Thus, 48% of the FY 1977 shipbuilding program would normally be
unobligated at the end of FY 1977; 20% of the aircraft program;
and 10% of the missile program.
These two factors -- full funding and the lead-time-away practice --
make it inevitable that there will be unobligated balances. That's not in
itself a bad condition -- it's the result of sound and logical budgetary
and management practices. The only question is whether unobligated balances
are too high. They've grown just 17% since FY 1973, while prices have risen
46%.
The House Budget Committee has alleged that unobligated balances are
too high, and that some of these funds can be used to finance the FY 1977
program, in lieu of new budget authority. In discussions, they have cited
several points.
First, it is noted that unexpended balances are rising sharply -- from
$48.1 billion in FY 1973 to $84.1 billion estimated for FY 1977. That's
true but, as noted, very little of this has anything to do with unobligated
balances.
Second, the HBC noted a DoD table which showed that $2.8 billion from
FY 1974 and prior budget authority would remain unexpended at the close of
FY 1981. The Committee is correct in concluding that, according to our
best estimates, most of that $2.8 billion will never be spent. The
Committee is incorrect in concluding that these amounts could be applied
to finance the FY 1977 program. About $.3 billion of this amount is for
revolving funds, which turn over several times a year and which require
a minimal cash balance. About $.5 billion involves foreign military sales --
no cash we can use. The remaining $2 billion has largely expired, or will by
June 30, 1976.
Third, the HBC has noted that our financing adjustments (use of prior
balances and free assets in lieu of new budget authority) have fallen off
in recent years -- evidence, to them, that we are piling up balances.
Actually, there are four reasons for this falloff:
The end of the war, and of wartime financing practices.
Inflation, which has dried up the wells.
A falloff in shelf sales, since foreigners have come to prefer
new production items rather than reconditioned items from US
inventory.
The imposition of multiple-year appropriations, in lieu of no-
year appropriations, for procurement and RDT&E starting in FY 1971.
As a result, $894.3 million has lapsed, most of which would have
been available to apply to new programs under the old practices.
18
It is important to bear in mind that this prior-balance issue
arose last year. The House Budget Committee proposed (and this was
carried through into both budget resolutions) a cut of $1 billion in
the FY 1976 defense request, to be covered by "use of funds from prior-
year accounts." After detailed review of the FY 1976 requests, the
Congress found just $122.9 million in such balances. Of that, $75
million arose from the decision to kill the DLGN in the FY 1975 program
and $24.3 million resulted from approval of the President's rescission
proposal involving termination of the FY 1975 quantities of the F-111.
Aside from these unusual actions -- for which there are no counterparts
this year -- the Congress found just $23.6 million in old balances to
apply. What started out as a painless $1-billion financing adjustment
in the Budget Committee wound up as $877 million in FY 1976 program
cuts.
* Unexpended Balances - That portion of prior years' budget authority
which remains either unobligated (i.e, for which no contract has been
awarded) or which, though obligated, has not been paid to a contractor.
Unobligated Balances - That portion of unexpended balances for which
no contract has been awarded.
19
EFFECT OF OUTLAY REDUCTIONS ON THE DEFENSE BUDGET
Table 1 shows FY 1977 proposed Total Obligational Authority (TOA)
and Outlays spread across various budget categories for DoD/MAP.
As noted, $25.5 billion in Outlays will come from prior balances
(largely amounts under contract on September 30, 1976) and $8.4 billion
will be spent for retired pay. These are relatively fixed amounts. Of
the $66.2 billion remaining, two-thirds ($42.2 billion) goes for the
military and civil service payroll. Of the $24 billion remaining,
about $14 billion will go for nonpay operating costs, a large part of
which are tied to the base structure and hence are difficult to control
in the short run.
The remaining $10 billion in Outlays is in the investment area,
shown in the three lower segments. A comparison with the $45.4 billion
in TOA shown in the lower three segments of the left bar shows that, in
the investment area of the budget, a $4.50 change in TOA (or Budget
Authority) produces a $1 change in Outlays.
The conclusion here is that, if Outlays were to be reduced signif-
icantly, manpower costs would have to be reduced. The President's
Budget already assumes that nearly $3 billion will be saved through
initiatives designed to restrain the growth of manpower costs. Thus,
further cuts in manpower costs would require strength reductions. The
nation cannot afford to cut military strength further. As far as
civilian reductions are concerned, the Budget already assumes a reduction
of nearly 29,000 from the level approved by Congress for the end of the
Transition Quarter. About half of this reduction is tied to base
closures and consolidations, while the rest is associated with headquarters
and other support reductions yet to be identified. Further civilian cuts
would be risky since they would be unspecified; the effect would certainly
be to reduce military readiness and possibly to force further base
consolidations.
The main point is this: Outlays largely comprise prior year program
pay-out and personnel costs. Making sizeable reductions in Outlays in
the current year would require significant new program reductions and/or
personnel cuts, which cannot be made without an unacceptable impact on
the overall Defense posture.
20
TABLE I
DEFENSE TOA AND OUTLAYS
FY 1977
($ BILLIONS)
TOA
$112.7B
RETIRED PAY $8.4B
OUTLAYS
$100.1B
MILITARY
PERSONNEL
PRIOR
$26.5B
BALANCES
$25.5B
RETIRED. PAY
$8.4B
0&M $32.4B
MILITARY
PERSONNEL
$26.2B
CIVIL SERVICE
PROCUREMENT
PAYROLL
$29.3B
$16.0B
NON-PAY
OPERATING
COSTS $13.9B
RDT&E $11.0B
PROCUREMENT
$3.7B
ALL OTHER $5.1B
RDT&E $5.8B
ALL OTHER
$0.6B
21
DOLLAR SUMMARY
HASC
SASC
HAC
SAC
Changes to Budget Authority
Manpower
+286
+1,096
+300
RDT&E
-497
Weapons Systems
+488
Ship Construction
+1,088
-800
Other Procurement
-43
-100
Operations & Maintenance
+658
-75
Military Construction
-40
Stock Funds
-398
+ 746
a/
Civil Defense
+39
Foreign Military Sales
-1,601a/ -1,600
Unspecified
-1,000
Other
+161
+61
-743
Recommended BA Total
114,558
114,208
113,975
114,905
Net change from Pres Bud (114,905)
-347
-697
-930
Recommended TOA
113,963
112,866
111,779
112,709
Net change from Pres Bud (112,709)
+1,254
+157
-930
:
a/ Not applicable to TOA.
22
PRESIDENT'S ALTERNATIVE PAY PLAN
President's Budget: Assumes administrative changes in the mechanics
of determining comparability adjustments for General Schedule employees
which would reduce the October comparability pay raise to 6.3%, for an
FY 1977 savings of $1.75 billion in civilian and military compensation.
In addition, the President will send to Congress by September 1, 1976,
an alternative (below comparability) pay raise proposal averaging 4.7%,
for a further FY 1977 savings of $500 million.
Congressional Action:
HASC
SASC
HAC
SAC
+$503M
The Congressional Committees appear generally supportive of the President's
pay proposals. SASC, however, added $503 million to the DOD budget without
prejudice, pending Congressional acceptance of the Alternative Plan.
Key Points:
The Administration has decided to adjust the formula for
determining pay comparability by including secretaries and
computer operators in the annual survey of private sector
wage levels. No Congressional action is required.
This will save $1.75 billion in FY 1977, and over $8.0 billion
between FY 1977 and FY 1980.
In addition, the President proposes to hold General Schedule and
military pay increases this year to an average of 4.7%
(minimum 3%, maximum 5%).
These actions are a major part of our effort to restrain growing
manpower costs. Congressional approval of the President's
alternative pay plan is absolutely essential CO achieving a
balanced Defense posture.
23
WAGE BOARD PAY SYSTEM REFORM
President's Budget: Assumes savings of $250 million resulting from
reform of the pay system for Wage Board employees. The proposed
reforms required legislative action to (1) repeal the ''monroney
Amendment", which causes the Government to pay Wage Board employees
a higher salary than their counterparts in civilian industry, (2) adjust
Wage Board pay grades so that they more closely resemble their counter-
parts in civilian industry, (3) eliminate the uniform night differential
pay rate (which causes the Government to pay more than competitive wages)
in favor of locally-established differentials, (4) equate average private
sector wage to average Federal wage, and (5) adjust the comparability
formula to include state and local employees in comparability calculations.
The effect of these actions, taken together, could result in some Wage
Board employees not receiving a pay raise in FY 1977; accordingly, the
President is also proposing that every employee will receive a pay raise
of at least 3%.
Congressional Action:
HASC
SASC
HAC
SAC
+$241M
SASC added $241 million to the budget without prejudice, pending approval
of the necessary legislation.
Key Points:
O
The Government is now paying wages greater than those being paid
for comparable jobs in private industry.
If the President's proposals are not approved the cost to DoD
in FY 1977 will be $250 million.
The annual savings in FY 1980 will be $1.2 billion.
The aggregate FY 1977-1980 savings in the Defense budget
alone resulting from the President's proposals will be about
$3.2 billion.
24
ONE PERCENT RETIRED PAY "KICKER"
President's Budget: Revises the formula for automatic cost of living
adjustments to civilian and military retired pay. The present formula
requires that cost of living adjustments be increased by 1% over and
above the actual rise in the Consumer Price Index. The President
proposes, and the budget assumes, elimination of this 1% "kicker."
Congressional Action:
HASC
SASC
HAC
SAC
+$48M
+$112M
HASC endorsed elimination of the "kicker" but revised the savings from
$112 million to $64 million or an increase of $48 million.
The SASC placed funds in the budget without prejudice, pending legis-
lative action.
Key Points:
O Retired pay increases are adjusted periodically to keep pace with
inflation as measured by the Consumer Price Index (CPI)
O When the CPI increases by 3%, and remains at or above that level
for 3 consecutive months, retired pay is increased by the highest per-
centage attained in that 3 month period -- plus 1%.
O The additional 1% is intended to compensate for the time lag
between the conditions triggering the increase and the receipt of the
actual increase in retired pay.
O Studies by the Defense Manpower Commission show that the 1%
"kicker" overcompensates during periods of high inflation.
O Eliminating the 1% "kicker" would save about $75 million in
FY 1977 and over $1 billion between 1977 and 1980.
25
PHASE-OUT OF COMMISSARY SUBSIDY
President's Budget: Proposes a 3 year phase-out of the commissary
subsidy, with FY 1977 savings of $94 million, and an eventual annual
savings of about $340 million.
Congressional Actions:
HASC
SASC
HAC
SAC
+$94M
+$128M*
+$128M*
HASC and HAC are rejecting the Administration proposal and are
increasing O&M funds to restore the commissary subsidy. SASC added
funds without prejudice, pending legislative action.
*Preliminary estimate originally submitted with President's Budget.
Correct amount is $94 million.
Key Points:
Continued Government subsidy of the commissary system is not
necessary in this period of pay comparability for military
personnel.
Labor and utility costs can be paid from sales receipts, in a
manner similar to the Post Exchange system.
Other Government support (rent-free space, tax exemptions)
would continue.
Commissary patrons would still receive, through advantages such
as tax-free space and better management, average prices
10%-12% below commercial prices.
Three year phase-out proposal would minimize the impact on
commissary users.
Making the commissaries self-supporting is probably the best
way to ensure their long-term viability.
The FY 1977 savings is $94 million, and the aggregate savings
from 1977 to 1980 approaches $1 billion.
26
ADJUSTMENTS IN RESERVE PAY PRACTICES
President's Budget: Proposes savings of $60 million in FY 1977 through
enactment of legislation and administrative action (1) eliminating dual
pay (civilian and military) for Federal civilian employees on military
leave for duty with Reserve Components ($45 million); (2) reducing the
number of paid drill periods (from 48 to 36 to 24) for National Guard
and Reserve personnel in functions where high training levels are not
required to maintain sufficient proficiency ($14.9 million), and (3)
eliminating the $240 annual allowance (called "administrative duty pay")
for Guard and Reserve unit commanders for duties performed outside
prescribed drill periods ($2. 1 million).
Congressional Action:
HASC
SASC
HAC
SAC
+$60M
+$60M
+$60M
HASC and HAC increased funds by $60M, rejecting all DoD reserve pay
adjustment proposals. SASC added funds without prejudice, pending
legislative action.
Key Points:
Dual pay (civilian and military) for reservists who are Federal
employees is a residual of the low-pay, pre-All Volunteer Force
era. It is no longer necessary or proper to pay Federal employees
twice for annual reserve duty. Therefore, the DoD proposal is to
pay the higher of the civilian or military salary, but not both, for
the two-weeks annual training period.
This follows the most common paractice of civilian firms, which
is to make up the loss in salary occasioned by reserve duty of
their employees.
The reduction in paid drill periods to less than 48 for certain
reservists is based on a decision that (a) certain units no longer
require that level of implied readiness, and (b) certain functions
do not require 48 paid drill periods to maintain proficiency.
Administrative duty pay is also a carry-over from the earlier low-
pay era and no longer appropriate.
Taken together, these proposals will save $60 million in 1977,
and $270 million between 1977-1980.
27
TRANSITION TO CONCEPT OF FAIR MARKET RENTAL FOR MILITARY
President's Budget: Assumes application of a larger portion of
future military pay raises to the Basic Allowance for Quarters, thus
raising quarters allowance at a greater percentage rate than base
pay, and saving $52 million in FY 1977.
Congressional Action:
HASC
SASC
HAC
SAC
+$52M
+$52M
+$52M
HASC and HAC rejected the budget proposal and added $52 million to the
DoD Budget. SASC added funds without prejudice, pending legislative
action.
Key Points:
O Military family quarters, on average, have rental value sub-
stantially above the rates of the Allowance for Quarters, while military
bachelor quarters have value substantially below current allowances.
O We propose to achieve, by 1984, a system for charging military
members living in government quarters a fair market rental.
o
As a first step, the Allowance for Quarters rate would be
adjusted upward toward the average value of family quarters.
O
We would achieve this by applying more than a proportionate
share of future military pay raises into Allowances for Quarters.
O
This would save $50 million in 1977, and about $700 million
between 1977 - 1980.
28
NAVY RESERVE PAID DRILL REDUCTION
President's Budget: Reduces Navy Selected Reserve strength from
102,000 (FY 1976 Congressional appropriation level) to 52,000, by
(1) eliminating 10,000 billets (principally 9 construction battalions)
and (2) transferring 40,000 billets to the Individual Ready Reserve
(permitting summer training but no monthly drill periods). The FY 1977
savings is $60 million.
Congressional Action:
HASC
SASC
HAC
SAC
+$62M
+$60M
HASC and HAC rejected the budget proposal and restored end strength to
102,000. SASC and SAC have not taken a position.
Key Points:
The President's proposal tailors reserve training requirements
to mobilization assignments, eliminates costly training that
exceeds operational needs.
The 40,000 billets transferred to Individual Ready Reserve
are individual augmentees to the Shore Establishment (support)-
whose readiness does not require monthly drill periods. The
15 day summer training is sufficient. Billets include intelli-
gence, security, personnel, administration, headquarters
augmentees -- needed to convert certain stations to 24 hour
operations.
The balance of 52,000 Selected Reservists - augmentees for
ship's companies, aircraft squadrons, Fleet marine forces,
Sea Bees, Coastal and Inshore warfare forces -- need to train
frequently as units, and will do so under the President's
proposal.
The eliminated construction battalions are clearly excess to
all wartime requirements. The balance of 16 Navy construction
battalions (8 active, 8 reserve), augmented by Army and Air
Force engineering units, are sufficient for wartime needs.
Savings of $60 million in FY 1977.
29
HASC RDT&E REDUCTION
President's Budget: Requests $10,854.4 million for RDT&E. The major
thrusts of the program are to:
- Provide real growth in investment sufficient to maintain the
"quality" component of the U.S. deterrent posture in the 1980's
and beyond.
- Strengthen our near-term deployed capabilities by emphasizing
successful completion and fielding of superior systems already
in development.
- Support retention of our technological leadership in areas
vital to our military security.
- Continue to produce affordable weapons and support systems
and minimize costs of operating and supporting these systems.
Congressional Action:
HASC
SASC
HAC
SAC
-$497M
The recommended reduction of $547 million (gross) and $497 million
(ret) practically eliminates the real growth urgently needed in
FY 1977 to achieve long-term U.S. RDT&E objectives.
Cuts will stretch out the development of several major systems (F-18,
F-15, SLCM, ASH), which were previously approved by the Congress.
The delays will require program restructuring, postpone eventual
deployment and increase the costs.
Key Points:
Soviets, in words and deeds, show they are determined to achieve
technological supremacy.
Current U.S./USSR military technology trends, if continued,
could result in Soviet dominance in deployed military technology
in the 1980's.
A fully-funded FY 1977 RDT&E program is required to reverse
these trends and to maintain our technological initiative over
the long haul.
Reductions of this size preclude significant real growth in the US
program.
o The very detailed changes in the proposed program make management
of the program exceedingly difficult and much less efficient.
30
F-18 AIRCRAFT
President's Budget: Includes $346.9 million for continuation of
of Navy's F-18 development and flight test programs.
Congressional Action:
HASC
SASC
HAC
SAC
-$46M
The proposed HASC decrease would require revision of the F-18 develop-
ment and flight test programs. A lengthened design effort would delay
the first flight of the F-18 by several months.
Key Points:
A reduction of this magnitude would stretch out the design
effort, the major area of work during TY 1977, and delay
first flight and the subsequent development milestones,
including the engine development.
An amount in excess of the reduction would be required later
in the program in order to compensate for this delay.
31
F-15 AIRCRAFT
President's Budget: Includes $51 million for additional testing of the
F-15 tactical early warning system and for additional missile tests.
Congressional Action:
HASC
SASC
HAC
SAC
-$45M
Key points:
The major portion ($29million) of the cut would prevent
development of the ground equipment required to support the
avionics of the F-15. The remaining $16 million would hold
back necessary testing.
These reductions will not reduce costs. In fact, they are likely
to increase costs.
The requirements will not go away, they can only be deferred
until a later date -- and at a higher cost.
The cut would also decrease the operational ready rate because
the avionics maintenance would necessarily shift from a field
level "repair or replace" concept to a "black box exchange"
concept which would require many more spare parts. Thus,
we can expect to see a dramatic decrease in the ready rate
with little decrease in maintenance hours required.
32
AERIAL SCOUT HELICOPTER (ASH)
President's Budget: $26 million to continue competitive contractual
efforts which begins in FY 19TQ.
Congressional Action:
HASC
SASC
HAC
SAC
-$26M
HASC deleted all funds for development of the Aerial Scout Helicopter.
Committee believes Army should rely on Armed Attack Helicopter (AAH)
until need for the Aerial Scout Helicopter can be fully defined.
Key Points:
The Defense Systems Acquisition Review Council (DSARC)
supports full funding of the Aerial Scout Helicopter in
FY 1977 ($26 million) and initiation of the airframe in
FY 1978.
Transfer of the FY 1977 funds from Aerial Scout Helicopter
to Armed Attack Helicopter will help in the face of the
HASC cut, but it will have the adverse effect of breaking
continuity in program management and preclude preparation
for airframe contracting.
Development of a common Target Acquisition and Designation
System and Pilots Night Vision System for both the Aerial
Scout Helicopter and the Armed Attack Helicopter is considered
imperative.
However, zeroing the Aerial Scout Helicopter in FY 1977 will
prohibit the close interaction needed between the two Program
Managers.
33
SEA LAUNCHED CRUISE MISSILE (SLCM)
President's Budget:
Includes $164.9M for funding the SLCM engineering
program.
Congressional Action:
HASC
SASC
HAC
SAC
-$64.9M
The proposed HASC decrease would result in a one year delay. Reductions
would be taken as follows:
Delay surface ship launch
$10.2M
Delay land launch
10.7M
Delay tactical SLCM
14.6M
Reduce strategic SLCM effort
29.4M
$64.9M
Key Points:
This is designed to be a long-range cruise missile with both
strategic and tactical uses. It will fit in torpedo tubes
and be capable of launching from a variety of air, surface,
subsurface and land platforms.
The value of a cruise missile lies in its ability to attack,
with a high probability of success, targets which are not
defended by high quality surface-to-air missile units.
The SLCM is needed also as a competitive hedge against
performance shortfalls in the Air Launched Cruise Missile
(ALCM).
Most important, the SLCM is directly related to SALT and
to hedges against failure of SALT.
34
DIRECTOR OF RESEARCH AND ENGINEERING EMERGENCY FUND
President's Budget: Does not include a request to establish an
Emergency Fund.
Congressional Action:
HASC
SASC
HAC
SAC
+$49M
Projected Impact: Although HASC reduced RDT&E funds by $547 million
it also proposed the establishemnt of an emergency fund of $49 million
with specific instructions to use the funds as follows:
-- $15M for development of F-104 engine*
-- $15M for development of Joitn Navy/AF all-weather missile*
-- $11M for R&D effort in conversion of USS LONG BEACH
to AEGIS
-- $8M for R&D effort to refurbish USS BELKNAP
*These items are significant in that they may develop into major
procurement programs.
Key Points:
O
An Emergency Fund would, in principle, enable DOD to meet
unforeseen and unprogrammed research, development, test
and evaluation needs without seriously disrupting current
programs.
O
In the past, this management flexibility has enabled DOD
to advance military technology more than the amount of money
involved would imply.
To be a true emergency fund, however, it ought to be
essentially unrestricted in use, and not designated for
particular projects.
35
ADDITIONAL FUNDS FOR B-1 BOMBER (HAC PROPOSAL)
President's Budget: Includes $1,519.0 ($482.0 for R&D, $1,037.0 for
procurement) for the B-1.
Congressional Action:
HASC
SASC
HAC
SAC
+$200M
HAC increased funds by $200M ($170M for R&D and $30M for procurement).
Key Points:
O
DoD could use the $200 million if it is truly additional.
36
INITIATE PRODUCTION OF MK-12A REENTRY VEHICLE (HAC PROPOSAL)
President's Budget: Does not request procurement funds for the
MK-12A. The MK-12A is still under development and will undergo
qualification and flight testing in FY 1977.
Congressional Action:
HASC
SASC
HAC
SAC
+$25M
HAC increased funds by $25M for procurement of the MK-12A. This
would advance the availability date for MK-12A by about 16 months.
Key Points:
The MK-12A reentry vehicle for the Minuteman III ICBM
takes advantage of improved technology to increase the
yield of the MK-12 -- but with the same weight and the
same aerodynamic and radar signature characteristics as
the MK-12.
Increased yield of the MK-12A provides a limited hard
target capability for Minuteman 111.
37
ADDITIONAL FUNDING FOR ADVANCED ICBM (MX) (HAC PROPOSAL)
President's Budget: Includes $84 million to continue development of the
MX propulsion and guidance systems and to study alternate basing concepts,
prior to a decision in FY 1978 on full-scale development.
Congressional Action:
HASC
SASC
HAC
SAC
+$80M
HAC proposes to increase funds and hasten development.
Key points: Money could be used as follows:
Guidance and Control
about $10. 0M
Establish second source for Advanced Inertial Reference
Sphere development to reduce risk of shortfall by one
contractor and reduce cost by competition.
Post Boost Vehicle
about $15. 0M
Develop preprototype bus and increase payload fraction for
higher efficiency.
Propulsion
about $15. 0M
Begin competitive development of prototype motors to
reduce risk in propulsion system development.
38
E-3A AIRBORNE WARNING AND CONTROL SYSTEM (AWACS)
President's Budget: Includes $474. 7 million for procurement of 6
AWACS aircraft during FY 1977 (1 produced every 2 months), 13 AWACS
aircraft are currently on hand. Future production in FY 1978 and beyond
calls for 6 per year for a projected total of 31.
Congressional Action:
HASC
SASC
HAC
SAC
-$242M
HAC decreased funds by $242M, approving the purchase of 3 instead of
6 AWACS during FY 1977.
HASC proposes to authorize the $474. 7M for procurement of 6 AWACS
aircraft but says that the funds cannot be spent until NATO makes a
favorable decision for the procurement of the AWACS.
Projected Impact: According to the Air Force, the purchase of only
3 AWACS during FY 1977 would entail a production break of up to 9
months and possible additional cost up to $200M to restart production.
Additionally, there would be a delivery slip up to 6 months in the
overall program. The NATO negotiations are such that linking decisions
by NATO countries to U. S. production for FY 1977 would risk a
production break and increased costs.
Key Points:
A decrease of $242M in FY 1977 production funds will not pro-
vide enough resources to purchase 3 aircraft, to buy the Peculiar
Support Equipment for the aircraft currently in production, or to
buy advance procurement items necessary for subsequent pro-
duction in FY 1978.
Prolonging the purchase of spares and support equipment also
results in increased reliance on expensive contractor support
when deploying the AWACS.
A stretchout in AWACS production reduces NATO incentive
for near-term production funding for a NATO AWACS, re-
sulting in possible further delay in a NATO AWACS decision.
39
CONTINUATION OF A-6E AIRCRAFT PRODUCTION (HASC PROPOSAL)
President's Budget: Funds were not requested in the budget for con-
tinuing Navy A-6E production in FY 1977; instead, the decision was
made to terminate A-6E production after FY 1976 funding deliveries.
Congressional Action:
HASC
SASC
HAC
SAC
+$125M
HASC increased procurement funds to allow production of twelve A-6Es
during FY 1977.
Key Points:
The DoD-proposed force is adequate because:
O There would be mutual reinforcement between Navy and Marines.
The Navy needs the A-6, for (1) all-weather anti-ship, and (2)
interdiction missions, while the Marines depend upon it for
(3) all-weather close support. It is difficult to imagine cir-
cumstances in which all three missions would be required simul-
taneously.
Since the A-6 readily operates from either the Navy carriers
or Marine expeditionary fields ashore, a 12-squadron force is
adequate to meet the threat with a prudent level of risk.
o There are other capable aircraft available to complement the
A-6 in combat situations.
40
SHIP CONSTRUCTION AND CONVERSION
($ Millions)
President's Budget: Includes $6,289.5 million for construction of 16 new
ships to provide significant growth in the categories of surface combatant
ships and nuclear attack submarines. Funds also provided to begin growth
in the support ship force.
Congressional Action:
HASC
SASC
HAC
SAC
New Ships
+$2,241M
Cost Growth & Escal.
-$1,153M
-$800M
HASC proposed increases of $2,241 million and decreases of $1,153 million
for a net increase of $1,088 million. HASC proposals include an increase
of four ships, two conversions and the initiation of long lead time pro-
curement for four ships (see table below). HASC proposals are primarily
directed toward achieving growth in nuclear ship construction.
President's
HASC
Budget
Proposals
Totals
New Ships and Conversion
Trident Submarine
1
$791.5
+1
+$728.8
2
$1,520.3
Attack Submarine
3
$958.7
+1
+$357.0
4
$1,315.7
Destroyer, AEGIS, non-nuclear
1
$858.5
-1
-$858.5
0
Frigate
8
$1,179.5
-4
-$589.5
4
$590.0
Destroyer Tender
1
$260.4
+1
+$247.0
2
$508.0
Submarine Tender
1
$260.9
+1
+$248.1
2
$509.0
Fleet Oiler
1
$102.3
+1
+$102.4
2
$204.7
Multi-Purpose Destroyer
+4
+$940.0
4
$940.0
Service Craft
$13.5
$13.5
Rpr and Mod. USS BELKNAP
+$213.0
$213.0
Conversion, USS LONG BEACH (AEGIS)
+$371.0
$371.0
Long Lead Time (3) Cruisers (nuc)
$170.0
+$132.0
$302.0
Long Lead Time (1) CVNX Carrier
+$350.0
$350.0
Subtotal
16
$4,595.3
+4
+$2,241.9
20
$6,847.2
Other
Outfit & Delivery
$71.0
$71.0
Cost Growth
$533.7
-$320.0
$213.7
Escalation
$1,089.5
-$833.1
$256.4
Subtotal
$1,694.2
-$1,153.1
$541.1
Total
$6,289.5
+$1,088.8
$7,378.3
Key Points:
o The President's Budget recommended a minimum prudent risk ship-
building program for FY 1977
41
O The House Armed Services Committee recommended a much larger
program, adding to and altering the President's proposals for
new ships by $2.2 billion.
The Administration has a new study of ship requirements underway.
Any additions to the shipbuilding program must be separately
funded, and cannot be absorbed within the Budget already proposed
to the Congress.
42
ESCALATION AND COST GROWTH IN SHIP CONSTRUCTION COSTS
President's Budget: Proposes $1,623.2 million to complete full funding
for FY 1975 and prior ships, including $1,089.5 million for cost
escalation (inflation) and $533.7 million for cost growth.
Congressional Action:
HASC
SASC
HAC
SAC
-$1,153.1M
-$800M
HASC and HAC are recommending that funds for cost escalation be limited
to those to be obligated in FY 1977, thus cutting the budget by $833
million. HASC also eliminated $320 million for settlement of claims.
Key Points:
The $320 million is expected to be obligated for claims during
FY 1977; if not appropriated other delays will result since
claims, once adjudicated, must be paid.
If other FY 1977 obligations for escalation and cost growth
exceed funds proposed by HASC and HAC, funding shortages could
cause reprogramming of funds and possible delay in ship
completion/fleet modernization to avoid violation of the Anti-
Deficiency Act.
Funds, perhaps in greater amounts, would have to be restored
in future years in order to complete current shipbuilding
programs, displacing other Defense programs if DoD targets
cannot be raised.
If a buy-now, pay-later policy is adopted for cost growth and
escalation, uncertainty about future financing will make all
DoD planning more difficult and shipbuilding more difficult to
execute efficiently.
Despite recent deviations in practice, Congress strongly
supports full-funding in principle.
43
INCREASE IN DEPOT MAINTENANCE
President's Budget: Includes $5,600 million for depot maintenance, which
is an increase of $1 billion over FY 1976 in order to reduce the serious
maintenance backlog, especially in ship overhauls.
Congressional Action:
HASC
SASC
HAC
SAC
+$407M
HASC believes that the budget request is too low because it did not allow
for inflation.
Key Points:
HASC increase covers inflation only
It would permit DOD to carry out a full depot maintenance program.
Without it, ship overhauls would probably be reduced from 105 to
90 in FY 1977.
44
REDUCTIONS IN WAR RESERVE MATERIALS
President's Budget: Includes $358 million for FY 1977 procurement of
war reserve materials.
Congressional Action:
HASC
SASC
HAC
SAC
-$179 M
HASC reduced war reserve procurement authorization by 50%
Key Points:
Adequate stocks of expendable war materials are an unheralded
but essential element of war plan execution.
Failure to provide adequate war reserve stocks is a fundamental
deficiency in our readiness position.
War plans call for $4.4 billion in expendable war reserve
materials to keep men and machines combat operational.
Present stocks contain only $1.8 billion (40% of total
requirements).
President's FY 1976 budget requested $326.8 million but only
$47 million was approved. The FY 1977 request, therefore,
must make up a portion of last year's deficiency.
President's FY 1977 budget request ($358 million) represents
the minimum requirements of each Service to prevent further
dilution of our combat capability. Satisfaction of the total $2.6
billion deficiency is programmed to take place over five years
based on successive, incremental authorizations from Congress.
45
PROCUREMENT OF COMMUNICATIONS EQUIPMENT
President's Budget: Requests $1,132 million, including $428 million
over the FY 1976 level, primarily to provide for additional equipment
procurement as follows:
FY 1977
Growth
Satellite Communications
$627 million
$308 million
Communications Security
148 million
57 million
Tactical Communications
121 million
30 million
All other
236 million
33 million
Total
$1,132 million
$428 million
Congressional Action:
HASC
SASC
HAC
SAC
-$100M
HAC proposes reductions of $100 million in real growth of communications
equipment procurement.
Key Points:
o
Communications equipment needed on a priority basis to
provide more secure and reliable means of controlling and
supporting strategic and tactical forces.
The requested increase over FY 1976 is needed to shift many
systems from R&D into production.
O
Satellite Communications
- Defense Satellite Communications Program will provide
four communications satellites in orbit and two spares.
- Replace two satellites lost in May 1975 due to failure
of a launch vehicle.
- Procure replenishment satellite, launch vehicle, ground
and airborne terminals, to support worldwide command and
control system and improve communication with strategic
forces.
o
Communications Security
- Update and expand security of record/data communications
systems
46
- Procure new families of equipment for voice transmission
security.
O
Tactical Communications
- Army requires increased funding to maintain satisfactory
levels of tactical radios, related equipment, and spare
parts.
- Continue Navy program to automate shipboard communications
47
DOD INTELLIGENCE PROGRAM
President's Budget: Requests continuation of existing intelligence
programs, with no real growth from FY 1976 levels. The recent reorgani-
zation of the intelligence community was not a factor in determining
budget authority for National Foreign intelligence programs. The
reorganization was aimed at improving the quality of the intelligence
produced, not at achieving substantial reductions in strength.
Congressional Action:
HASC
SASC
HAC
SAC
-$75M
HAC believes the recent national intelligence reorganization might make
reductions possible in the DoD intelligence community, and therefore
proposed a decrease of $75 million.
Key Points:
The reorganization was designed to insure that
- the U.S. has strong and effective intelligence capability and
- that these activities are conducted in a lawful manner
The reorganization is not effecting substantial reductions
in manpower and dollars.
The President's FY 1977 Budget request for the intelligence
program calls for no real growth over FY 1976.
DoD has already cut out lower priority programs, and only
essential items have remained in the President's Budget
request for the intelligence community.
48
UNDERGRADUATE HELICOPTER PILOT TRAINING CONSOLIDATION
President's Budget: Operation and Maintenance funding levels assumed
consolidation of all Service undergraduate helicopter pilot training
at Fort Rucker, Alabama.
Congressional Action:
HASC
SASC
HAC
SAC
+$30M
HASC, by legislative initiative, increased operation and maintenance
funds by $30.4 million, the amount of the expected first year savings
from consolidation.
Key Points:
Consolidation will provide the essential training for all
Services without any diminution in quality.
Consolidation makes better use of Defense facilities.
Consolidation will save about 2300 people
Consolidation will save between $30 - $40 million a year.
49
STOCK FUND SURCHARGE
President's Budget: Requests a 7% surcharge (inflation/cost growth
factor) on sales of supplies and materiel within Defense stock funds
during FY 1977 ($188 million). Further requests a 7¢ per gallon increase
in the cost of petroleum products purchased from stock funds ($385
million), for a total increase in authorized stock fund expenditures of
$573 million.
Congressional Action:
HASC
SASC
HAC
SAC
-$219M
-$566M
HASC believes the surcharge concept is sound, but excessive as originally
proposed, and thus reduced the proposed surcharge from 7% to 5% and the
POL increase from 7¢ to 4c per gallon. HAC apparently rejects the sur-
charge in principle.
Key Points:
The stockfund is a mechanism by which Defense purchases goods
from the economy for Congressionally-approved programs, and
"sells" them to the various Defense consumers. Nearly 4 million
items are involved, with an annual volume of business almost
$17 billion.
Inflation causes fluctuation in the cost of supplies and materiel
managed through the stock fund, and the result is that adequate
funds are not available to purchase the supplies and materiel needed
to support the approved programs.
The surcharge would ensure price stabilization within the stock fund,
and provide for more orderly execution of Congressionally-approved
operating programs within a fixed budget - thereby maintaining the
readiness of military forces.
The surcharge would provide a uniform, controlled, and defensible
cost growth factor in formulating budget estimates.
The surcharge would minimize or avoid reprogramming actions.
Without a surcharge, inflation will proportionately reduce the Defense
Department's ability to execute approved programs with approved
funds.
50
INCREASE STOCKPILE SALES AND RECEIPTS
President's Budget: Assumes a savings of $870 million ($746 million
over and above the $124 million currently authorized by law) through
FY 1977 stockpile sales.
Congressional Action:
HASC
SASC
HAC
SAC
+$746M*
SASC does not support stockpile sales in excess of present legal
authorization. HASC approves additional sales of $746 million and
total FY 1977 sales of $870 million -- as requested by the President.
* Budget Authority, not TOA.
Key Points:
The quantities of materials proposed for disposal are clearly
excess to Defense Department requirements.
GSA has determined that the proposed sales will not result
in market disruption.
Receipts from stockpile sales are credited against FY 1977
expenditures, and result in net budget savings.
Interagency Strategic and Critical Materials Stockpiling
Study is providing a means for constant reevaluation of
defense requirements versus existing stockpile levels.
51