When President Ford presented his 1976 defense budget to the Congress in January 1975, the Administration stressed the need to reverse what it described as a 10-year trend of declining U.S. military capabilities relative to those of the U.S.S.R. As a consequence, the President requested an appropriation of $105 billion for the Department of Defense, an increase of 15 percent over the previous year. About half of this increase was simply to offset the effect of inflation. The other half, however, was to fund the first-year costs of a continuing program to increase the size of conventional forces and to expand nuclear capabilities at a fairly rapid rate.

After an extensive review of the defense budget, the Congress in November 1975 reduced the request by approximately $7.5 billion on an annual basis, or in other words roughly the amount necessary to keep defense expenditures constant in real terms, that is, adjusted for inflation. These cuts, however, were applied in such a way as to trim a very large number of individual defense expenditure categories, while halting very few programs. Thus, consciously or not, the Congress, despite the cuts, continued to lend support to the Administration's plans to expand military forces.

Should these plans be carried out over the future, the defense budget in real terms would increase by more than four percent a year over the rest of this decade. By 1980 military spending would be about $115 billion in dollars of today's purchasing power, and still trending upward. Put another way, it now seems likely that military spending will continue to absorb about one-fourth of the total federal budget and roughly six percent of total national output for the indefinite future. And even this prospect depends on the international environment staying pretty much in its present fairly equable state. Should foreign relations take a sharp turn for the worse, requirements for defense spending could rise even more rapidly.

One would think that the nation would set off on such a course only after the most thorough deliberation. Yet, curiously enough, the annual debate about whether the military's share of the nation's resources is too big, just right, or too small, hardly measures up to the costs involved or the importance of the underlying military and political issues.

Typically, the President, the Secretary of Defense, and the nation's military leaders argue that the United States is getting a bargain. They contend that the proposed level of military spending is barely enough to keep up with the steadily growing Soviet defense program, that it is essential for a stable world order, and that it is a tolerable economic burden. Anything less would jeopardize the nation's security. For support, they point to a number of impressive facts. Not only has the Vietnam War bulge been eliminated, but the armed forces are now even smaller than they were in 1964-the last year before the buildup. Military manpower has been reduced by one-fifth, or by 500,000 people; there are three fewer Army divisions; and the number of naval vessels has been halved. This shrinkage made it possible to pay the Vietnam peace dividend in full; since 1969, the proportion of budgetary resources devoted to military purposes has dropped steeply and the proportion devoted to social programs has risen sharply. Similarly, the relative burden of defense declined from more than nine percent of national output in 1968 to approximately six percent today, the level where it now seems likely to stay. In sum, the Administration contends that further reductions in military strength would prove to be a costly mistake; indeed, the United States must now start to rebuild forces and to modernize them more rapidly.

Other political spokesmen-the nation's mayors at their annual convention, most of the Democratic presidential hopefuls, much of the Congress-disagree. They argue that military spending still is needlessly diverting limited federal funds from pressing social needs and assert that the defense budget can be reduced further without risk. For support, they unearth cost overruns on new weapons and wasteful military personnel practices that get headlines. And they point to a different set of impressive facts: namely, that the present armed forces, although smaller in size, are more mobile and sustainable in combat, pack greater firepower, and can be used more flexibly than the forces with which the nation entered the Vietnam War. But most of all, critics contend that the cold war has ended-or, at least, that the world is a much safer place than it was 10 or 15 years ago. Consequently, they say, the United States should now devote fewer, not greater, resources to defense.

Posed in these extreme terms, the two views are fundamentally irreconcilable, leaving the size of the defense budget to be settled by subjective judgments about how much defense insurance to carry against an amorphous set of risks, or by the vicissitudes of politics, or simply by inertia. Lacking is a sense of the major issues involved and the specific choices to be faced: what factors are driving up defense costs, how can they be contained, and with what consequences?

II

For a number of years now, the United States has been moving toward a defense structure costing progressively more per unit of force-a trend that has had and continues to have the most profound consequences for the defense budget and the nation's choices. It costs much more in real resources today to maintain an infantry combat soldier in the field, or to operate an Air Force plane or a Navy ship, than it did say ten years ago. As a result, the sizable reductions in military forces that followed Vietnam have not brought anything like commensurate reductions in the defense budget, and cost pressures to reduce forces further continue to be severe.

Three factors are responsible: a sharp jump in the price of defense manpower (military and civilian salaries); a high ratio of support to combat manpower; and the increasing cost and sophistication of weapons.

By far the most important of these factors has been the rise in pay scales. Contrary to a widely held belief, these pay increases did not result from the abolition of the draft; in fact they antedate the shift from conscription to an all-volunteer service. In 1968 the Congress passed legislation to bring all federal pay scales, military and civilian, up to levels competitive with those in the private sector, and to keep them that way. This resulted in "catch-up" pay raises in 1969 and 1970, and especially large ones for the military whose pay had been abnormally depressed. From then on, pay rose each year more or less in line with wage increases in private industry. The Defense Department, with three million employees, three-fourths of all federal personnel, was struck particularly hard. The new pay policy caused a huge increase in defense costs.

In brief, considerations of equity caused a system characterized by persistent underpayment of personnel to be replaced by one based on competitive market forces. As a result, the element of the "free good" in defense manpower-and hence in the defense budget-was eliminated, even overcorrected in some respects. And the cost ran high.

All told, if the average pay of defense manpower had increased since 1968 by no more than the average rise in the private sector, the 1976 defense budget would be approximately $7 billion lower than it is. The 1968 comparability legislation accounts for nearly three-fourths of this difference. The remainder was caused by pay raises and bonuses offered to attract volunteers, particularly those with special skills, and by the sharp rise in the average rank of military personnel that resulted from the Vietnam buildup and phasedown, a rise only now being reversed.

Unfortunately, higher pay scales did not produce any notable off-setting economies in the use of defense manpower. On the contrary, the number of military and civilian personnel employed to man, train, direct, sustain, and otherwise support each combat unit is now substantially larger than it was ten years ago. This has aggravated the effect of higher pay on the defense budget. In part, the higher "tail-to-teeth" ratio can be explained by advances in technology, which, as in private industry, generally go hand in hand with needs for more people to maintain and to operate equipment. Other reasons are not so easy to understand. It is taking an inordinately long time to shrink the large support establishment built for the Vietnam War, particularly to close excess military bases and to cut back on the training establishment. And there is not much evidence to suggest that military administrators have seriously considered radical changes in personnel policies as a means of adjusting to the much higher price of manpower.

Then there is the steady increase in the cost of weapons, a fact that generally attracts the most attention in debates on the defense budget. Each new generation of weapons is more technologically advanced than its predecessor, and also much more expensive. In dollars of constant purchasing power, the Navy's F-I4 fighter costs five times as much, and the Air Force's F-15 three times as much, as the original cost of the F-4, the aircraft they are replacing. Similar comparisons can be made for the proposed nuclear-powered strike cruiser (priced at $1.2 billion), or the B-1 strategic bomber (now estimated to cost $88 million apiece), or most other major weapons ranging from nuclear submarines to tanks. Most of this increase stems from the higher performance constantly demanded of each new weapons generation, the need for which is not always self-evident.

While this trend is well understood and widely publicized, it is by no means about to be reversed, or even brought under control. Nor are its consequences fully grasped. In terms of current budget dollars, annual investment in major weapons systems and other military capital goods continues to rise. But once inflation is taken into account, it becomes evident that real investment has remained remarkably constant for many years. In effect, the spectacular growth in the cost of weapons is causing a steady reduction in the number of units purchased. Consequently, as far as weapons are concerned, U.S. military forces are steadily trading quantity for quality-partly by preference, but partly as an expedient response to fiscal pressures. Such a trade-off cannot continue indefinitely.

In summary, as the cost of manpower has come to dominate the defense budget, military planners have been caught in a squeeze between the constantly rising cost of each unit of military force and the relatively steady ceilings on total spending (after adjusting for inflation and eliminating the incremental costs of the Vietnam War). Thus far the response has been piecemeal, serving principally to put off a day of reckoning that is becoming increasingly more difficult to postpone.

III

The 1976 defense budget continued in the same tradition.1 The Ford Administration responded to the defense dilemma by grappling with the problem of rising unit costs as best it could without making any fundamental changes in military policies and objectives. Indeed, cost problems were aggravated by plans to increase combat forces over the next five years-three more Army divisions, three more tactical air wings, and perhaps 40 more Navy ships-and to expand strategic nuclear capabilities at the same time. The Administration proposed to finance this expansion in two ways: by improving efficiency-trimming fat from the support establishment and simplifying some weapons designs; and by increasing the defense budget at about the same rate as the normal growth in national output, leaving no margin for gradually shifting American resources from military to social needs.

Concern over the future course of Soviet military programs dominated these decisions. There is no disagreement that in the past ten years the Soviet Union has improved its military position relative to that of the United States. There is a great deal of debate, however, about how large the growth in Soviet military capabilities may be, about its significance for the East-West military balance, and about its political implications. In any circumstances, the Administration believes that the trend itself must now be halted or reversed; if not, there could be a serious deterioration in America's political position in the world, which in turn would threaten prospects for keeping the peace.

To avoid such risks, the Administration argues that it is necessary to maintain the present large military establishment in being, and to push for selective increases in its capabilities. In fact, the argument goes, the size of the defense budget, as the most comprehensive measure of present and future military capabilities, is viewed abroad as an eventful signal of U.S. willingness to underwrite its international commitments, and therefore is itself an important determinant of the state of international equilibrium. This belief, more than any assessment of requirements in specific scenarios of potential military conflict, caused the Administration to seek a substantial increase in the defense appropriation.

In the end, though, budgetary totals are almost all translated into programs for the acquisition or operation of specific kinds of military forces. Payments for military pensions and foreign aid, which account for about ten percent of the defense budget, are the exception; neither has much to do with present or future U.S. military capabilities. The remainder of the budget can be divided between strategic and conventional forces.

Strategic nuclear forces, accounting for about 18 percent of the budget, consist of long-range nuclear-armed missiles based on land and on submarines, intercontinental bombers, air and missile defenses, and warning and control systems.2

Decisions on the necessary size of strategic forces are governed primarily by perceptions of the U.S.-Soviet strategic balance. Two assumptions are important. The first is that effective defense against missile attack is impossible; instead, the United States seeks to deter nuclear war by maintaining strategic forces capable of withstanding any conceivable attack and retaliating with a devastating strike on the Soviet Union. The second assumption is that the United States must match Soviet strategic capabilities, even beyond what would be required to maintain secure retaliatory capabilities. Failure to do so allegedly might cause Soviet decision-makers to take greater risks during crises and might persuade other nations that the balance of military power was shifting away from the United States. As a result, spending on strategic forces is much larger than would be required for strictly retaliatory purposes alone.

Conventional forces include ground, air, and naval units. Together they account for about 72 percent of the defense budget.

Ground combat forces have the largest share of the defense budget-28 percent. By the end of Fiscal Year 1977, these forces are slated to consist of three Marine and sixteen Army divisions, three separate Army brigades, and various support units. A large share of American reserve manpower also is assigned to ground combat-nine full divisions, 24 separate brigades or regiments, and numerous support units.

The Air Force, the Navy, and the Marine Corps each contribute units to U.S. tactical air forces. The Air Force now mans 22 tactical air wings and plans to add three more within a few years. Navy units, which are based on aircraft carriers, will soon be reduced to 12 wings; there were 15 Navy wings in 1964. The Marine Corps has three tactical air wings, with no changes contemplated. Together, tactical air forces account for 24 percent of the defense budget.

Naval forces consist of warships, submarines, and land-based patrol aircraft. Aside from strategic submarines, there were 840 ships in the active fleet in 1968. There are about 450 ships in the fleet at present, with plans calling for this number to rise to nearly 540 ships by the mid-1980s. The cost of naval forces accounts for 17 percent of the defense budget.

Finally, the United States maintains long-range and medium-range cargo aircraft, known as mobility forces, which have minor budgetary significance.

The primary purposes of U.S. conventional forces are to maintain a reasonable balance of conventional power in Europe and to perform a stabilizing role in Asia. Forces for Europe dominate requirements; they contribute to a credible NATO military posture in the region and are part of a closely integrated, multinational defense organization. U.S. forces for Asia are spread widely, from Japan and Korea in the north to the Philippines and Thailand in the south. They support a variety of political objectives, from explicit treaty guarantees in Japan to more ambiguous commitments in Southeast Asia. U.S. armed forces are also intended to protect other U.S. interests abroad-most notably to enable the United States to exercise influence in the Middle East and around the Indian Ocean-but such interests are supported in good part with forces primarily maintained for Europe or East Asia.

How contemplated U.S. conventional forces-those deployed abroad and those based in the United States-might be apportioned between the two theaters is shown in the following table:

Oriented Oriented

Type of Force toward Europe toward Asia Unallocated

Active Army Divisions 9 5 2

National Guard Divisions 8 0 0

Marine Divisions/Wings 1 2 0

Aircraft Carrier Task Forces 6 6 0

Air Force Tactical Squadrons 21 9 38

All told, of the $72 billion allocated for conventional forces, about $40 billion will be used for forces for Europe, $20 billion for forces for Asia, and $12 billion for forces that cannot be apportioned to either theater.

IV

Essentially, the Administration's budget strategy concentrates on avoiding short-term risks and political difficulties, a course that could prove to be dangerous over the long haul. In view of present cost trends and the certainty that present fiscal constraints will continue, if not tighten, there can be no guarantee that U.S. military forces will be adequate to carry out their present roles. By standing pat on military strategy and by seeking to keep the three-million-man defense workforce intact, the Administration's budgetary decisions, in fact, risk a steady erosion of the East-West balance in the few places where it really matters, places where deeply unsettling political consequences could result.

Congressional reactions to requests for increases in the defense budget, which in turn reflect troubled national attitudes toward the level and composition of federal spending, offer ample evidence that this erosion will take place. Being unwilling either to permit defense budgets to rise beyond inflation, or to challenge fundamental military policies, the Congress also has temporized. It seeks short-term economies by reducing the number of weapons purchased in a single year, without changing the total number in the program. Or it slows down development programs without killing the proposed new weapons altogether. Or it reduces operating budgets without cutting manpower significantly, thus causing longer queues of equipment waiting for overhaul, smaller stockpiles, and other reductions in readiness.

Congressional action on the 1976 defense budget is a good illustration of this point. The three biggest items in the $7 billion defense cut are little more than window dressing. For example, the President's request for $1.3 billion for military assistance to South Vietnam, which the Congress has eliminated, obviously had been overtaken by events. Another $1 billion was cut from funds requested to pay for cost growth and greater-than-expected inflation in the price of naval vessels that had been authorized in prior years, in one case as far back as 1964. Contracts on most of these ships have already been let; since none were cancelled the cost obligations continue to exist and will have to be paid in future years. The third largest item seems equally evanescent. The Department of Defense requested $800 million essentially to manage the replacement of some of its stocks on something approximating last-in-first-out accounting principles and thus coping with the effect of inflation on this part of its budget on a more current basis. The Congress decided this was unnecessary.

Most of the remainder of the budget cut consisted of reductions in hundreds of individual items, made almost on an across-the-board basis. Their main effect will be to delay rather than to alter procurement goals and to lengthen schedules for the maintenance of equipment. Only $200 million resulted from imposed reductions in personnel and no more than $500 million from the termination, as distinct from the stretching out, of major weapons programs (nuclear-powered cruisers being the principal casualty).

The crucial point is that only 10 percent of the total $7 billion reduction in the defense budget will have a lasting effect on future budgets. Rather than shape the defense posture to accord with some vision of its own about purposes, the Congress for the most part has implicitly supported the Administration's defense objectives, but without providing the resources to achieve them.

If this annual charade continues-the Administration proposing and the Congress disposing, but neither confronting the hard choices -the inevitable drift will be toward a growing gap between defense capabilities and the purposes the armed forces are supposed to serve. Eventually, massive cuts in U.S. commitments will have to be made to bring ends and means into alignment. If present budgetary strategies continue, such a realignment will take place not as part of an orderly and gradual reassessment of defense priorities but as a slashing and largely indiscriminate response to fiscal pressures. Important interests will be dumped along with the less important, and good policies will be thrown out with the bad.

V

There are better ways to deal with the defense dilemma. A reappraisal of the links between foreign policy and military forces is the place to begin.

U.S. military forces are designed in good measure to support foreign policy and not simply to defend the nation from attack. Neither the U.S.S.R. nor anyone else is going to invade the United States and, by mutual agreement, neither the United States nor the Soviet Union attempts to defend itself against nuclear missiles. Maintaining physical security requires only a strong nuclear force to deter attacks; a small navy to watch over the coasts, prevent smuggling, and keep foreign fishermen out of U.S. waters; some tactical air units to monitor the air space and to hedge against the unknown; army units to guard against incursions of outlying U.S. territory, control civil disturbances, and cushion against uncertainties; and a fairly extensive research and development program to keep up with advances in military technology. If the defense of U.S. territory were the only mission of the armed forces, the defense budget could probably be halved.

Unfortunately, while the savings would be very large, they could be achieved only by accepting very grave risks. Today's version of "Fortress America" would not protect vital U.S. interests in Europe, the Middle East and Japan. Indeed, the political disruption following the adoption of such a position would immensely complicate the task of avoiding another world military catastrophe.

In recognition of this danger, most Americans would agree that the continuance of a substantial U.S. contribution to the defense of Western Europe is essential to U.S. security. This defense commitment serves three purposes: militarily, it underpins the perception that East-West forces in Central Europe are in reasonable balance; politically, it avoids the possibility that German military forces would come to dominate non-German forces in Western Europe-a development which would be profoundly disturbing to other Western European countries and even more so to the U.S.S.R.; and economically, it provides a foundation for the close association between the United States and Western Europe that makes possible the unprecedented and mutually beneficial interdependence between them. How large U.S. forces for Europe must be to help ensure a politically stable military balance in the region is difficult to judge, but in view of continuing improvements in Soviet military capabilities, there are no obvious reasons to believe that they could be much smaller than they are now.

Nonetheless, there are a host of questions to be asked about whether U.S. forces are effectively organized for their role in Europe, particularly because it seems increasingly obvious that a war in the region, should it occur, is likely to be relatively short and intense, rather than a replay of World War II. Evidence of this includes Soviet military doctrine, the structure, characteristics, and disposition of Soviet ground and air forces, the incredibly high attrition rates experienced during the most recent conflict between modern armies-the October 1973 War in the Middle East-and the prominent deployment of tactical nuclear weapons on both sides.

If U.S. forces for European contingencies were designed more to fight short wars than protracted ones, the shift would have profound implications for the composition of U.S. military forces-the structure of the Navy, the characteristics of aircraft, the size of the Army's support establishment, and the annual investment of over $2 billion in reserve divisions that could not possibly reach Europe in time to be of any use in a relatively short conflict. Furthermore, there are important efficiencies to be achieved through the closer integration of U.S. and allied forces in Europe and through standardization of NATO weapons. Reforming U.S. military forces to improve their effectiveness in European contingencies and integrating them more closely with other NATO forces would take time to carry out and would not be likely to produce early reductions in the size of the defense budget. These actions, however, could ease pressure considerably for continued increases in military spending and, depending on the depth of reform, could eventually bring substantial economies.

There also is fairly general support in the United States for policies that seek to deter Soviet intervention in the Middle East. This objective can largely be satisfied by the military forces maintained for contingencies in Western Europe, however, and thus poses only small incremental demands on the defense budget.

In Asia, U.S. interests center on Japan. The likelihood of overt aggression against Japan is remote. The danger lies elsewhere, in Japan's possible reliance once again on national military-and perhaps nuclear-power to assure her security and her economic welfare. Japan is most likely to remain a lightly armed non-nuclear power only as long as she remains in close association with the United States and Japan's leaders and public remain convinced that U.S. policies will help to safeguard Japan's security.

Many Japanese see the deployment of some U.S. forces to Japan herself, to Korea, and to the seas around Japan as the best guarantee that this will be the case. How large these forces need be, however, cannot be determined by trying to calculate requirements for a military balance, as in NATO, because the threats to Japan are so intangible. Psychological factors are more important in this case, along with a continued U.S. willingness to cooperate closely with Japan on economic and political questions.

In Southeast Asia, on the other hand, there are no U.S. interests comparable to those in Japan. Even before the fall of Vietnam, a broad national consensus developed that opposed U.S. participation in Southeast Asian wars. Subsequently, Vietnam has come to be viewed as persuasive evidence that military power is not an effective means of protecting U.S. interests in this region. Moreover, China's intentions are now seen in less threatening terms than they were ten years ago. And U.S. defense officials now recognize severe limits on Chinese military capabilities.

Compared with these requirements and interests, the forces the United States maintains for Asian contingencies are excessive, primarily because changes in the U.S. military posture have not kept pace with changes in the political environment. Even now, the United States has 140,000 troops in Asia and the western Pacific, principally: the Second Infantry Division in Korea; the Third Marine Amphibious Force in Okinawa and the Japanese main islands; three Air Force tactical wings in Korea, Okinawa, the Philippines, and Thailand; and the Seventh Fleet, operating in the Pacific and the Indian Ocean from bases in Japan and the Philippines.

Moreover, some forces based in the United States are trained, equipped, and deployed so as to suggest that they are primarily earmarked for, and justified by, Asian contingencies. These forces include four more Army infantry divisions, the Second Marine Amphibious Force in southern California, and the Third Fleet operating in the eastern Pacific from Hawaii and California.

We believe these forces could be reduced by about one-fourth, making it possible, for example, to eliminate two Air Force wings, two Army divisions and three Navy carrier task forces from the U.S. force structure. In making any reduction, the choice between units deployed overseas and those based in the United States is a difficult one. The forces deployed abroad are most important to Japan as visible evidence of the U.S. commitment. On the other hand, overseas deployments sometimes cause friction with local populations, adversely affect military morale, and limit the flexibility of U.S. foreign policy.

The Army division in Korea is a case in point. In view of the size and numerical superiority of South Korean ground forces over those of the North, it contributes little to the military balance on the peninsula. Thus the decision to keep U.S. ground forces in Korea rests on a political evaluation. The location of a U.S. division near the demilitarized zone limits U.S. freedom of action in the event of a new conflict. By the same token, the automaticity of U.S. involvement is probably the single most important reassurance to Japan of the U.S. commitment to the defense of Northeast Asia. Moreover, its presence probably exercises a restraining influence on North Korean and Chinese actions.

Assuming a one-fourth reduction in the forces oriented toward Asia, the cost implications would be the same whether the forces were removed from Asia and disbanded, or simply eliminated from bases in the United States. Either way, if the reductions were made gradually, say over a four-year period, the annual budgetary savings by 1980 would amount to over $5 billion.

What about strategic forces? There can be no question about spending whatever is necessary to maintain secure retaliatory capabilities, since this is the only available means of deterring a Soviet nuclear attack and preventing Soviet nuclear blackmail. But what about programs that go beyond the requirements of maintaining secure retaliatory capabilities? Is it necessary to match Soviet forces in every aspect of strategic power? Do adverse political consequences result from specific imbalances that might develop?

We think not. Maintaining a rough strategic balance with the U.S.S.R., broadly and flexibly defined, should be sufficient to avoid negative political repercussions. We base this view on the judgment that the immense destructive potential of nuclear weapons leads decision-makers throughout the world to consider them unusable. Consequently, relative differences between U.S.-U.S.S.R. strategic capabilities, within wide limits, are irrelevant for decisions by officials in the United States, in the Soviet Union, or in other nations. Decisions taken during crises are far more likely to reflect estimates of relative, applicable, conventional military capabilities (and the will to use those forces) than comparisons of the size or number of strategic missiles on each side.

Moreover, we believe that the Administration's focus on specific measures of strategic capability, such as missile throw-weight, unnecessarily causes observers in foreign nations to attach undue importance to a range of competitive actions and reactions in the strategic field. It thus leads the superpowers to carry out various weapons development programs that might otherwise be avoided; and it also increases the significance attached to nuclear weapons, thus aggravating the proliferation problem.

If the Soviet Union has the advantage in missiles, we would argue that the U.S. advantage in long-range bombers constitutes a sufficient political counterweight. More fundamentally, as long as the United States makes an effective contribution to the conventional defense of Western Europe and Japan, strategic parity with the Soviet Union, broadly defined, is all that is needed for foreign policy reasons. Additional programs, justified on these grounds, are wasteful and potentially destabilizing.

Planning strategic forces on this reasoning would call for restraints on new weapons programs and would gradually produce substantial budgetary savings. For example, the United States could terminate programs to develop new generations of land-based missiles, retire older strategic bombers and slow down the program to build a new one (the B-1), and cut some research programs to develop entirely new delivery systems, such as the air-breathing cruise missile launched from submarines. By 1980, savings from steps such as these could amount to $3-$4 billion a year, all stemming, it should be emphasized, from a reexamination of foreign policy, not military, requirements.

Defense manpower policy is another area in need of reappraisal, if not radical surgery. Today, military pay and allowances, civilian pay, and military retirement pensions together account for more than one-half of the defense budget. Training and medical care raise the proportion to 60 percent. Put bluntly, unless the number of military and civilian employees is reduced, it will be impossible to keep the defense budget under control.

Reductions in force levels along the lines we already have outlined would reduce defense manpower, but in addition, it should be possible to save on manpower costs by using the defense workforce more efficiently. Present personnel practices, based on a rather profligate use of manpower, are a legacy from an era when military manpower was extraordinarily cheap. At that time, they could be afforded; now they create an intolerable burden.

While the Defense Department has moved toward greater efficiency over the past two years, a great deal more could be done to eliminate unnecessary or only marginally useful jobs. There is persuasive evidence for this allegation:

- While military manpower has declined by 40 percent since 1968, civilian manpower, which after all only supports the people in uniform, has declined by 23 percent.

- While the number of Navy ships has declined by 50 percent since 1968, the number of people in Navy uniform is down by only 30 percent.

- The military "pipeline," the number of people in transit or in classrooms, is extremely large. At any one time, one-seventh of all military personnel-some 300,000 people-are either in formal training courses or travelling between assignments.

- Military training schools are too costly. The ratio of students to instructors and support personnel is 1.5 to 1, a much lower ratio than exists in any other educational community in the country. Colleges, for example, run at a 15 to 1 ratio, while the ratios in vocational schools, which are probably the closest analogy, run from a minimum of 2 to 1 to well over 100 to 1.

- Despite some changes and consolidations in recent years, there are still military bases that are excessive for current needs, but which have not been closed down because of congressional opposition.

Manpower requirements are very sensitive to these factors. Raising the average student-to-teacher ratio to 2 to 1, for example, would save 40,000 people. Similarly, shortening basic-level skill-training courses by one week would save 10,000 people. All told, reforms aimed at cutting the support overhead probably would reduce the number of Defense Department employees by at least 200,000 people over a four-year period; by 1980, annual savings would amount to $3 billion.

Other aspects of the personnel system also need reexamination. The military health-care system alone costs over $3 billion a year, with three-quarters of the eligible beneficiaries consisting of dependents and retired military people. If, instead, the Defense Department covered the dependents by a Blue Cross/Blue Shield type of program, it could probably save close to $500 million a year.

Finally, reform of the military pay and retirement systems is long overdue. Both are excessively costly, now that military pay scales are competitive with those in private industry. For example, a military pay system that was made more visible and understandable, that is, one based more heavily on salaries and less on a multiplicity of special allowances and benefits, could itself become a force for using military manpower more efficiently at low cost. Similarly, modernizing the military retirement system so as to bring it in line with the federal civilian retirement system could produce annual savings of $1 billion within perhaps 15 years, with the amount growing steadily thereafter. This is a long time to wait for results, but putting off reform is a poor alternative because then the burden that these anachronistic systems place on the defense budget will inexorably increase.

VI

It is wrong to believe that the United States will or should dismantle its defense forces overnight and shuck off foreign responsibilities as though they were figments of the imagination. For many years to come U.S. military power will continue to be the cornerstone of stable political relations with Europe and Japan and an indispensable basis for preserving a tolerable equilibrium with the Soviet Union.

But this is not a vote to perpetuate a defense status quo; on the contrary, defense policies must be changed if these essential missions are to be carried out effectively. To avoid costly disruptions, however, adjustments should be made discriminately, gradually, and with an eye to where we want to be a number of years in the future.

This will be difficult going. There is not much glamor in taking a hard look at retirement or health care or training systems. Even a reappraisal of U.S. commitments and interests abroad and what they mean or do not mean for military requirements can be grubby stuff. But this is where the money is. And these are the kinds of questions that will have to be faced and the kinds of changes that will have to be made if the United States is to spend less on defense and get more for its money.

Other important rules of the defense budget game should be kept in mind. Bringing troops home in itself does not save money. Military units cost about as much to maintain abroad as at home. Costs depend not on where the troops are located, but on how many are kept in the force structure. Political considerations are quite different, however; because of them, U.S. forces located in Europe are probably the best bargain, while those in Southeast Asia are the worst.

Another rule is that preoccupation with expenditures in the current year amounts to a bad way of reviewing defense spending. Today's military plans determine tomorrow's defense budget. It is more important to change the plans than to try to cut their initial cost. Furthermore, it is sometimes necessary to accept initial one-time costs in order to realize much larger savings in future years.

Perhaps the most important rule is that manpower should receive at least as much attention as weapons. It is always tempting to concentrate on weapons because they wrap up a lot of money in one package. Certainly it is true that some weapons systems make much more sense than others; moreover, the trade-off between quantity and quality will have to be faced squarely and not decided by bureaucratic infighting or congressional logrolling. In short, the types of weapons chosen must provide maximum support for the military and political purposes the armed forces are to serve. But there are good reasons why the total amount spent on all weapons systems together should not decline, and possibly should increase, principally because, as in private industry, advancing technology could lead to an increase in the amount of capital used in support of personnel. Consequently unless defense manpower and force levels are reduced and used more efficiently, it will be impossible to keep the defense budget under control.

What, then, are the prospects for formulating and reviewing the defense posture along these lines? Here the new congressional budget procedure, which in effect establishes a congressional executive committee on the budget, is a factor of potentially great significance. The trial run in 1975 provides the basis for a preliminary assessment.

The new procedure forces the Congress to confront the trade-off between spending on defense and spending on other programs. This is all to the good, but in itself will not assure increased efficiency or better use of defense funds. It is at least possible, however, that the imposition of congressional targets for defense spending each year will lead to a give-and-take and then to serious cooperation between the Defense Department and the Congress in the process of determining how defense funds can best be used. Furthermore, as the House and Senate Budget Committees, supported by the Congressional Budget Office, concentrate on the key factors affecting budgetary spending, new interest may develop in reviewing the future cost implications of present defense programs and eventually in authorizing defense expenditures on a multi-year basis. Developments such as these could have a substantial positive influence in controlling the defense budget.

Following these rules will not radically change the nation's priorities as between defense and everything else. Nonetheless, a lot of money is at stake, much more than can realistically be busted free from any other area financed in the federal budget. The specific actions we have suggested for exploration would make it possible eventually to save roughly $15 billion a year (in dollars of today's purchasing power) in defense spending, a smaller amount at first and reaching the projected figure by 1980. These cuts would represent continuing savings, not the mere postponement of expenditures. This is another way of saying that if the United States used its military resources more effectively the burden of the defense budget could decline gradually from six percent to about five percent of the nation's total output.

Ultimately, considerably more may be possible. A steady U.S. course in maintaining strategic parity with the U.S.S.R. and in helping to maintain a military balance in Europe and Northeast Asia provides at least the hope of reaching more extensive arms-control agreements with Moscow and of creating an international environment in which military forces can be further reduced at acceptable risk to the general peace. Such additional savings, however, are potential rather than actual; attempting to draw upon them in advance would prevent their realization.

Meanwhile, this wealthy and productive nation can afford the armed forces it needs. To aim at less would be foolhardy. But to spend more, wastefully, could prove to be equally dangerous in the end.

Footnotes

1 The shorthand term, "1976 defense budget," is the budget for the present fiscal year which began on July 1, 1975. Under the new congressional budget process, the next fiscal year will begin on October 1, 1976. The appropriation this year includes a separate amount for the three-month period from July 1, 1976, to September 30, 1976, to take care of the transition. These additional funds are not included in any of the figures cited in this article, which are on an annual basis.

2 This percentage, as well as the others that follow, relates to allocation of funds within the budget totals approved by the Congress, not to the original Administration request. Of the amount for strategic nuclear forces, totaling about $17 billion, $7 billion represents the cost of weapons, matériel, research and personnel directly attributable to strategic forces. The remainder is the proportion of research and development, intelligence, communications, and administrative overhead costs which under the methodology used in The Brookings Institution's annual budget review, Setting National Priorities, may be allocated to strategic forces.

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