Air University Review, September-October 1978

Myths About the Defense Budget

For many years, and particularly since the late 1960s, the budget of the U.S. Department of Defense has been a favorite whipping boy of many public opinion leaders in this country--columnists, academics, members of Congress, liberal politicians, and so on. It is the belief of this writer that for little or none of this time have the advocates of cutting the defense budget represented a majority of the American public. It is not, however, the purpose here to debate or attempt to prove the point. Rather, the intent is to examine the premises behind the attacks on the defense budget and some of the reasons for their popularity.

It will be argued that at the case for cutting the defense budget-- and often for reducing or eliminating specific items within the budget—is based largely on myths about the budget or about the national defense which budget underwrites. It will be further argued that it is important to expose and analyze these myths because, as in so many areas of human activity, the myths tend to divert public and congressional debate from relevant issues of rational decision-making.

Myths, of course, do not just happen. They are created by people. They start as arguments, assertions, or simply as stories, and it is through repetition that they become myths. The original statements may or may not have been true, but the term "myths" implies that they are not true now. (If they were once true, the facts may have changed during the period of repetition or justification of the evolving myth). Once statements have become full-blown myths, their easy repetition and uncritical acceptance can become misleading and dangerous.

One may well ask, Why so many myths about defense? Why is the defense budget scapegoat? The reasons are historical, psychological, political, and complex. Their explication is beyond the scope of this article; we will content ourselves with a brief listing of some of the contributing factors.

Historically, this nation has been largely isolationist--and blessed with a physical remoteness that permitted it that luxury. Its roots also gave Americans abhorrence of standing armies and of the strong central power they symbolize.

The aftermath of World War I--virtually a national hangover--and the suffering of the citizens’ army brought a resurgence of isolationist sentiment and the Senate defeat of U.S. membership in the League of Nations, albeit by a "small band of willful men" who prevailed over an ailing president.

The 1920s saw the birth of a genre of antiwar literature (e.g., All Quiet on the Western Front, Good-bye to All That, A Farewell to Arms, etc.) and a theory of the "Merchants of Death"--arms cartels "selling" wars. The 1930s brought economic isolationism, ushered in by the Smoot-Hawley Tariff Act and politicized by disillusion with the Versailles Treaty, tolerance of Hitler, grateful acceptance of "Peace in our time," and finally America Firsters and opposition to aid to a beleaguered Great Britain.

The shock of Pearl Harbor and the political wizardry of FDR turned World War II into a "popular war," and at its end the United Nations was hosted and enthusiastically joined, in atonement for the League debacle.

But there was also an initially unpopular president's use of the atomic bomb, which spawned a generation of guilt-ridden scientists, whose Bulletin of the Atomic Scientists and Federation of American Scientists have lent an aura of intellectual prestige to the antinuclear arms movement. Two unpopular wars, McCarthyism, and the century-overdue civil rights progress have added to the ranks of the post-World War II guilt-ridden. The unprecedented necessity for maintaining large standing U.S. forces since Korea has provided a target for the vocal but still minority anti-arms groups. Inflation has fed their arguments and their ranks.

The synthesis of these and other factors into an adequate theory of public opinion on defense is a monumental task that the writer leaves to others. For present purposes, we only note that we can see many motivations for the myth-makers and at the same time that public opinion polls have long and consistently shown large majorities, however diffuse and unvocal, supporting national defense and the necessary spending to provide for it. We examine, therefore, some of the major myths currently prominent in defense budget debates.

That defense is nonproductive is the oldest and most basic myth with which we must deal here. In Isaiah's mountain of the Lord's house, nations "shall beat their swords into plowshares, and their spears into pruninghooks." To many of his host of readers, Isaiah seems to imply that swords and spears are nonproductive, but plowshares and pruninghooks are. But Isaiah specifically referred to days to come, when "nation shall not lift up sword against nation, nor shall they learn war anymore." Those days have not come, however, and nation still does lift up sword against nation.

It is a curious and arbitrary distinction that says that defense against the swords of others is not productive, but defense against the elements is. Were the rude cabins of our forefathers productive, but their stockades not? If we must make such a value judgment, would it not be better to say that Martin Luther's "wine, woman, and song,"¹ or today's "whatever turns you on," are productive, and all the other things that one does--necessary defense against the obstacles that nature and man place in the way of one's enjoyment of his discretionary income--are either nonproductive or only indirectly productive?

But the point is not whether one or another latter-day interpreter of Isaiah or Martin Luther is semantically correct, but rather that the belief that defense is nonproductive prejudices choices both between defense and nondefense and among alternative defense expenditures or alternative weapon systems. Indeed, if one believes that defense is nonproductive, then one cannot logically invoke cost-effectiveness comparisons in opposing a particular weapon system. The problem is at most that of establishing priorities as to which weapon system to oppose first. To cite a recent example, some of those who opposed the B-1 bomber during the debate of the past two years, invoking the arguments that cruise missiles offered a cheaper, more effective alternative, are now opposing the cruise missile on various grounds, such as that it represents a new step in the arms race, that it raises verification difficulties that jeopardize arms control negotiations, and even that it may be less cost-effective than earlier claimed.²

To deny that arms are nonproductive is not to assert that all arms are productive. There should indeed be rational choices made on the merits of each case. Some arms may not be productive at all in a given environment that includes the weapons and doctrines of potential enemy forces as well as the other weapons and doctrine of the United States. Other weapons may be productive, but less so than some alternatives.

Reciprocally, the theology that non-defense goods and activities, or some subset thereof, are always productive is similarly indefensible, though not necessarily absent in national debate. If one's theology holds that all dams are productive, one may be reluctant to make comparisons among them and may be tempted to vote for every dam that is proposed--and it has been suggested that there is a dam constituency that does just that. The examples are legion. It is a widespread belief that hospitals are good, but the history of the Hill-Burton Act has shown that the building of hospitals can continue to the point where some of the hospitals are nonproductive. Indeed, because competition among hospitals is highly imperfect, empty beds lead to higher per-lay charges, and excessive beds are counterproductive. In short, categorical judgments about productivity are not productive of good decision-making.

Myth number one was succinctly rejected by a high British officer of World War II in these words:

It is customary in democratic countries to deplore expenditure on armament as conflicting with the requirements of the social services. There is a tendency to forget that the most important social service that a government can do for its people is to keep them alive and free:

Closely related to the myth of the non-productivity of defense is the slogan of the 1960s: "We must shift our priorities." It has a much more moderate and reasonable sound. It does not deny that defense may have utility but simply asserts that we have been spending too much on defense as compared with some other activities. The slogan gained popularity during the Vietnam War, with, it must be added, considerable justification in the eyes of most people today--though not so in the early years of that war. But the slogan also became the call to arms of those opposed to arms, not just the Vietnam War. It is still heard today--although the priorities have long since been dramatically shifted.

Table I shows that the implicit priority of defense has declined in less than two decades to about half that assigned to it in the 1950s. This is true when defense is measured in terms of share of the GNP, of the total federal budget, of all government expenditures, or of the total labor force. Yet, the cry is still heard that "we must shift our priorities."

Source: FY 1964 to 1979 from Department of Defense press release, 23 January 1978. 1957 calculated from Economic Report of the President, 1977.

When the myth was still a statement with elements of validity, the United States had unquestioned strategic nuclear superiority that provided a deterrent to large-scale war and, in particular, to violent conflict between the superpowers. Risks of defense budget cutting could therefore be accepted. In contrast, today the U.S. strategic nuclear superiority is gone, and by the 1980s superiority will have swung to the Soviet Union. The author argues elsewhere that this new reality carries grave risks for the security of the United States against coercive diplomacy by the Soviet Union as well as against actual war; he calls for a shifting of priorities back toward defense, where greater expenditures are needed to make up for serious deficiencies accumulated over the last decade-and-a-half.⁴ It is appropriate to add here that the shift in priorities has had much to do with permitting the Soviets to pass the United States in strategic nuclear power.

In the early 1930s, Norman Thomas was fond of pointing out that "the cost of one battleship would pay for five hospitals," reflecting his own priorities. From 1931 to 1933 (if the author recalls the dates correctly), not one hospital was completed in the United States, not because battleships were built but because of a lack of demand during the Depression. Battleships and hospitals were entirely unrelated, except by rhetoric. Even today, the choices are seldom direct. With unemployment hovering between 6 and 7 percent and plant utilization in the neighborhood of 85 percent, an increase in the defense budget would not have to come out of one's favorite social service. An increment of over $40 billion, if required, could be supported by a cut in unemployment of less than two percentage points.

Myth number three:
The arms race--usually meaning the strategic
nuclear arms race—drives the defense budget.

It was noted earlier that national defense is not nonproductive if it serves to provide national security against external threats. The obvious fact that this statement may appear true to other nations quite naturally gives rise to the view that military preparations are a competition among nations, or at least among the major nations of the world, which today means primarily the two superpowers. The popular metaphor for this competition is that of a race. "Arms race" theory goes back in a formal sense to Lewis Richardson.⁵ The arms race concept has been popular in this country for almost three decades because of several factors.

After World Wars I and II, the United States essentially demobilized. In the first case, the country did not remobilize until after the outbreak of World War II and not in a serious way until after the attack on Pearl Harbor. In contrast, the post-World War II demobilization lasted less than five years.

Demobilization was the most popular activity in our war-weary country in 1946, when the national theme was "bring the boys home," and the GIs still overseas spent this time counting the days they were short. But the Soviet troops were not demobilized then and only gradually in the late 1940s. A chaotic Soviet homeland, needing time to reorganize in order to rebuild and assure jobs, did not need the potential further disruption of several million young men, tired and hungry, returning to who knew what mischief if they did not have jobs and food. Moreover, the continued presence of these armed men in Eastern Europe provided the highly visible power with which to gain and consolidate Soviet hegemony over the Soviet sphere of influence, the satellite buffer states. In Churchill's vivid metaphor, they rang down the Iron Curtain. In 1947, the extension of Soviet hegemony southward was only prevented by the U.S. takeover of the support of Greece and Turkey from the exhausted British under the Truman Doctrine, with the $400 million emergency appropriation that preceded the Marshall Plan. In February 1948, the fall of the democratic Benes-Mazaryk regime in Czechoslovakia completed the conquest of the Soviet satellites. Meanwhile, though we did not know it yet, the Soviets were carrying out their own "Manhattan Project" to develop the atom bomb.

Still, in the spring of 1950 we were debating a $13 billion defense budget. It was not until after the June attack on South Korea that Congress passed the $100 billion plus defense authorizations that initiated the partial remobilization of the Korean period.

It may be argued that remobilization would have taken place to some degree in any event, as a consequence of the Cold War, the formation of NATO in 1949, and the Soviet acquisition of the atomic and hydrogen bombs in 1949 and 1953, respectively. However that may be, after the Korean War the United States continued to maintain, for the first time in its history, large peacetime military forces.

For obvious reasons, public concern and debate over these large military forces and expenditures have been dominated by the strategic-nuclear end of the spectrum of potential conflict. The overriding danger in the second half of the twentieth century, in the minds of most people, is the risk of nuclear war. It is widely held that such a war would inevitably be a holocaust, or even the end of civilization. Indeed, nuclear weapons are generally believed to make large-scale conventional war highly unlikely (at least as long as the United States maintains essential equivalence, or parity). The emphasis on Strategic Arms Limitation Talks (SALT) during the past decade has further focused American attention on strategic arms.

This strategic nuclear emphasis has prevailed even though the strategic forces have never represented more than 27 percent of the total Department of Defense budget (1961) and currently are less than 8 percent.⁶ (See Table II.) The defense budget is actually dominated by so-called general purpose forces (conventional and tactical nuclear forces), currently exceeding 37 percent of the budget, or almost five times as much as the strategic forces. Conventional forces are costlier than nuclear forces because they must be far more numerous; people tend to forget that nuclear bombs were invented because they would be cheap!

Nevertheless, in the era of U.S. nuclear force monopoly and then superiority, the strategic nuclear weapons properly dominated national security debates. The United States could afford conventional inferiority in Europe after World War II because its atomic monopoly deterred the Soviets (even when, as we now know, there were no atomic bombs in the stockpile--a unique, successful U.S. bluff). The Soviets regarded their conventional forces as at least partially redressing the correlation of forces while they developed and deployed their own nuclear forces. (It was more than three decades before Brezhnev declared that the correlation of forces had shifted to favor the Soviet Union.)

This nuclear preoccupation was rein-forced by the "massive retaliation" doctrine of John Foster Dulles, subsequent concepts of nuclear deterrence, and the generalized fear of a nuclear World War III (not as dissimilar from the 1930s fear of a conventional World War II as the present generation is wont to think). The nuclear emphasis and the concept of an arms race were further strengthened by the priority assigned by the Soviets to overtaking the United States in the acquisition of nuclear technology and weapons stockpiles.

Moreover, the arms race metaphor fitted the obvious fact of U.S. Soviet competition in the postwar world. It derived added credibility from former Defense Secretary Robert McNamara's "action-reaction" theory in the 1960s. This theory held, in essence, that whatever one side did, the other side would take measures to offset. When he decided against deployment of the first American antiballistic missile (ABM) system in 1961, McNamara announced publicly that the reason was that the Soviets would simply build decoy ballistic reentry vehicles to overwhelm it. (He did not even ask a quid pro quo for the unilateral cancellation. An early opportunity for strategic arms limitation may have been missed.) When the start of the Soviet deployment of an ABM system around Moscow was announced, McNamara said we would offset it by building a multiple independently targetable reentry vehicle (MIRV) capability into our Poseidon submarine-launched ballistic missiles (SLBMs) and Minuteman III inter-continental ballistic missiles (ICBMs). There were in fact multiple causes of the development and deployment of U.S. MIRVs.⁷

Considerable experience and theory have shown that many factors, including technological, bureaucratic, and political imperatives, enter into both U.S. and Soviet defense spending decisions. Nevertheless, because some cases appear to be largely action-reach-on phenomena, reference to the spiraling arms race seemed credible. (Note that the term "spiraling" is always used to imply upward, not downward, motion.)

The concept of the arms race or the spiraling arms race has not provided a valid model for the postwar U.S./Soviet competition. If there has been a race, it has been more on Aesop's model of the tortoise and the hare.⁸ The trends of U.S. and Soviet military expenditures and deployments have certainly not been parallel. The Soviet Union did not demobilize after World War II, as the United States did, nor did it match the U.S. Korean War build-up (whether because it did not think it could afford to or because it did not think it needed to, with North Korea and the People's Republic of China acting as Soviet proxies, or for both reasons). Nor did the Soviets parallel the U.S. rise in military expenditures in the Vietnam War (perhaps for similar masons) or cut back after the Vietnam denouement. Rather, the level of Soviet military forces held remarkably steady in the first ten to fifteen years after World War II' and their military expenditures have been growing by a fairly steady annual percentage in the 1960s and 1970s, as shown in Figure 1.

This chart reflects the latest official data available. Several qualifications need to be made. First, it does not extend back to World War II because, while there is general agreement on the relatively steady Soviet trends discussed above, detailed estimates are not available. Second, the rate of growth of the Soviet budget is probably underestimated.⁹ But even at the conservative estimate of about 3 percent a year, it will stay well ahead of the announced U.S. goal (agreed with NATO) of an annual 3 percent increase.¹⁰

The comparison of strategic force expenditures is even more unfavorable to the United States. Soviet expenditures for strategic forces rose from double those of the United States in 1967 to triple in 1977, reflecting the above-noted buildup toward Soviet strategic superiority.¹¹ The Soviet expenditures include more for strategic offensive forces (largely for ICBMs and SLBMs--but their lower expenditures on bombers do not include the Backfire bombers assigned to other missions but usable strategically against the United States). The figures also include the medium and intermediate-range strategic weapons for "peripheral attack" (vs. Western Europe and China)--the SS-4, SS-5, SS-20, and some Backfires. While outspending us on offensive forces, the Soviets also spend heavily on strategic defensive forces. They maintain and steadily modernize vast air defenses, including more than 10,000 surface-to-air missiles and 2600 interceptors, while U.S. expenditures are nominal--only for maintaining since 1974 some 150 old F-106 interceptors. The Soviets also maintain the Moscow ABM, while we dismantled our one treaty-permitted site at Grand Forks over two years ago. Not included in the comparison but bearing on the strategic balance is civil defense, on which the Soviets have been estimated to be spending over $1 billion a year in the 1970s as compared with less than $100 million by the United States.

The CIA/DOD comparisons cited here have often been criticized because they are computed in dollars, at U. S. prices. There is some merit to the criticism; as every student of index number theory knows, comparison in rubles would make the U.S. expenditures show up more favorably. However, we are interested here in comparing expenditures for the observed forces, as seen by the United States. Moreover, we cannot compare ruble expenditures directly, because there is no real or market-established exchange rate between the dollar and the ruble, and we cannot compare the costs of given forces in rubles because we do not have ruble prices for Soviet weapon systems. But the trends of the Soviet defense expenditures in rubles are consistent with the trends shown here.¹²

If one is interested in comparing the burdens imposed by defense expenditures in the respective countries, then one calculates the figures for each country in its own currency. We have already seen that U.S. expenditures are only about five percent of the GNP. CIA estimates for the Soviet Union are 11-13 percent, and many students believe this to be on the low side. For strategic forces, the Soviet figure is of the order of three percent of GNP, compared to less than one-half of one percent for U.S. strategic forces.

That there are neither parallel trends nor a spiral arms race in strategic weapon deployments in the 1960s and 1970s has been authoritatively documented in terms of numbers of weapons as well as expenditures by Albert Wohlstetter et al.¹³

However, the myth persists. Whatever validity it may have had in other particular cases-in earlier periods, e.g., the British-German naval competition before World War I, and in local regional areas, e.g., the Israeli-Egyptian/Arab competition--it is not valid for the superpowers today. Nevertheless, it continues to obscure rational analysis of what the United States may need to do for its contemporary security in the face of observed Soviet strategic and general purpose force build-ups and reflected in Soviet budget trends.¹⁴

Myth number four:
The $100-plus billion defense budget
goes mostly for weapons.

Strategic systems get the headlines, but other weapons that come in large units, such as ships, fighter aircraft, and tanks, also get a great deal of attention. "Arms" has more frightening connotations than "forces." The post-World War I image of sinister arms merchants foisting their wares on an unsuspecting people was reinforced by the famous passage in President Eisenhower's farewell address:

In the councils of government we must guard against the acquisition of unwarranted influence, whether sought or unsought by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.¹⁵

Eisenhower said many other things in that speech, emphasizing the threats to the country and the importance of resolute defense, but it is the phrase "the military-industrial complex" that caught the public eye, or rather ear, and stuck. It conjured up images of fat cat lobbyists selling nonproductive weapons. The public over-looked the simple fact that one aspect of the checks-and-balances principle on which the American government is organized is that of competing claims--by "claimant agencies" within the government and claimant industries pressing their own interests ("lobbying") from the outside. Clearly, there are many other claimant "complexes"--a health-industrial complex, an agriculture-farmer complex, a housing-urban-local-government-industrial complex, and so on. As we saw in discussing the shift in priorities over the past two decades, the military-industrial complex has in this period been one of the less successful competitors.

Let's look at the facts. Arms appear in the defense budget under the heading, "Procurement," which includes all sorts of nonweapon supplies that the services buy. But even with these inclusions, this category is only 25 percent of the FY 1979 budget. If we consider research and development (RDT&E--research, development, test and evaluation) as an important stage in the budgeting for arms, and, even more than procurement, dominated by weapons, we can add another 10 percent. Thus, the hardware and new technology that constitute the cutting edge of defense account for atmost35 percent, or just over one-third of the total budget. (See Table III.)

In 1964, procurement and R&D amounted to 44 percent, a 25 percent larger share of the budget. why has the share going to create military muscle declined? The first cause is an increase in the allocation to manpower costs, up from 47 percent in FY 1964 to 52 percent in FY 1979 (after peaking at 62 percent in FY 1973). This startling increase has occurred despite a 22 percent decline in the size of the armed forces, from 2.7 million men in 1964 to 2.1 million currently (with a peak of 3.5 million during the Vietnam War). Manpower costs include the pay and allowances of military personnel, the pay of civilian employees, and military retirement pay.

These increased manpower costs are not, as commonly believed, primarily a result of the post. Vietnam creation of an all-volunteer army. Rather, they stem from congressional legislation in 1967 establishing "comparability pay" (government with industry) and tying military raises to civilian civil service raises.

The problem was further compounded by the rapid growth of retirement pay, from one percent of the defense budget in 1962 to over 8 percent currently. This growth, which is expected to continue, stems from the combined effects of two factors. First, the retired military population has been growing rapidly, as the generation of young officers who stayed in after World War II has reached retirement age. Second, the above-mentioned pay raises and cost-of-living escalator clauses in the pension system compound the rising trend.

Table III Department of Defense budget by appropriation category, FY 1977-79

Pensions should not, in fact, be included in the military budget at all. They represent not a cost of maintaining the armed forces but a social-policy decision about the transfer payments that should be made to a given class of citizens. This was implied in the pioneering Moot Report in 1972 ¹⁶ and is beginning to be recognized in proposals by the Defense Department and in Congress to lump military pensions with other government pensions, in a separate budget category (which should include Social Security pensions and perhaps some other transfer payments, if the disastrous tax scheme for Social Security could be reformed--but that is another story beyond the scope of this article). A second step, generally mentioned in the same breath, is possible reform of the escalatory provisions in the retirement laws, early retirement policy, and peculiar vesting arrangements that give zero pension before twenty years, thus encouraging an inefficient service pattern--get out early, after up to eight years or so, or after twenty years and retire with a pension.

Moving retirement costs out of the defense budget would increase the clarity and accuracy with which the federal budget reflects both national defense policies and national transfer-payment policies.

A less important but still significant item that increases the defense budget without enhancing national defense has been the inclusion of Military Assistance Program (MAP) funds. Currently running at $1 billion a year, MAP represents less than one percent of the budget, but as recently as five years ago it was about two percent. The FY 1979 budget finally recognizes that, while military assistance to other nations may involve national security considerations, it is not properly part of the defense budget. The new federal budget proposes that MAP funds be transferred to the international affairs budget.

Budgetary reforms may in time give a clearer picture of the share of weapon procurement in the total budget. This share may also rise somewhat, after more than a decade of disinvestment in the stock of arms. There is increasing recognition of the need to redress the strategic balance in the 1980s and the current conventional balance in NATO, as President Carter agreed with NATO allies in July 1977 and Secretary Brown recognized in the presentation of the FY 1979 budget. Nevertheless, weapons are unlikely at any time in the foreseeable future to dominate the defense budget. We have already seen in Figure 1 that the magnitude of the Soviet defense effort exceeds that of the United States by a steadily widening margin, currently estimated at about 45 percent. The same CIA report ¹⁷ estimates that Soviet procurement is about 75 percent above that of the United States, and the dollar value of Soviet RDT&E is "substantially larger" than that of the United States and growing.

Soviet military budgets are not a reason for matching U.S. defense budgets. However, the very real Soviet threats that their expenditures reflect must be taken into account in U.S. planning. Moreover, because the development of modern sophisticated weapons involves several years of R&D lead time, and their acquisition several years of production and deployment lead time, current defense budgets must be based on estimates of threats 5 to 10 years in the future.

It was noted in the discussions of the arms race myth that, far from exaggerating the size of the Soviet threat, throughout the 1960s and the early 1970s, the official predictions of the Soviet strategic forces were below the numbers that turned out to be actually deployed. This was true in part because of bureaucratic reaction to a considerable hue and cry about the politically generated allegations of a "bomber gap" in the 1950s and a "missile gap" in 1960 (candidate Kennedy, not DOD, coined the "missile gap" in his debates with Nixon).¹⁸

It is important to remember that there was a revolution in intelligence technology in the early 1960s. For observation of the Soviet deployments, and most especially of ICBMs, we had to rely in the 1950s on overflight by the high-altitude U-2 aircraft. Aerial photography is inherently a slow process, in the sense that coverage from an 11-or 12-mile altitude is limited, and it is not possible to photograph in any realistic length of time an area so vast as that of the Soviet Union. One must assign priorities to areas to be photographed, by educated guesses based on very few clues, With the advent of satellites carrying cameras and other sensors at altitudes of one to several hundred miles, coverage could be vastly multiplied. It was then that we could get accurate counts of Soviet silos as well as many indicators of other Soviet military deployments. One such deployment, it might be noted, was the several hundred Soviet medium- and intermediate-range ballistic missiles (M/IRBMs) in Western Russia, targeted on Western Europe. Although the public was told there had been no missile gap, a more accurate statement would have been that there had been no ICBM gap. The Soviets, who always put a strategic priority on Europe, had started their ballistic missile program with the simpler and cheaper medium/intermediate-range missiles and deployed them to hold Western Europe hostage before they started their ICBM deployment against the United States.

We must pause here to note an anomaly. It is precisely this revolution in the technology of intelligence that is credited with having made feasible the SALT I agreements of 1972. Those agreements included the Antiballistic Missile (ABM) Treaty and the Interim Agreement on Strategic Offensive Arms. (The latter expired on 3 October 1977 but at time of writing is being kept in effect by mutual agreement, pending further negotiations on a SALT II treaty.) Both agreements specifically provided that verification would be based on "national technical means," meaning primarily satellite-borne cameras and other sensors. It further provided that neither side would interfere with these national technical means of verification. Since 1972, it has become increasingly apparent that these satellites do not guarantee verification as fully as had been thought or alleged. This is true for three principal reasons:

1. Soviet development and initial deployments of mobile missiles (the SS-16 ICBM, and the SS-20 IRBM that consists of the two first stages of the SS-16 and can be readily converted to an intercontinental SS-16 by the addition of the third stage) make the counting of missile launchers highly uncertain.

2. The Defense Department reports of some nine Soviet antisatellite tests in the last two years and the decision to increase R&D programs to catch up with the Soviet technology in antisatellite capabilities indicate that the Soviets are acquiring a capability to interfere with U.S. verification as well as potential wartime reconnaissance and control on very short notice in time of crisis or actual conflict.

3.SALT I and SALT II proposals to date limit numbers of launchers but not numbers of missiles. It has been alleged by retired Major General George Keegan, former Chief of Air Force Intelligence, and others that the Soviets already have several standby missiles for every launcher (silo) permitted in SALT I Interim Agreement. Such missiles can be kept concealed until time to use them. Much had been made of the Soviet capability for relatively rapid reload of silos because of the cold-launch techniques for the SS-17 and SS-18.¹⁹ But back-up missiles could be launched from "soft" launchers, which could be mobile or concealed in various ways. It would even be possible to launch missiles from inside warehouses or factories, with rapidly removable or opening roofs.

All of these possibilities of avoiding or evading our intelligence are reasons why the United States may underestimate, not overestimate, Soviet strength, with or without SALT agreements. There are no further revolutionary developments in intelligence presently foreseeable to overcome these possibilities.

Finally, the CIA stated in 1976 that they had underestimated the Soviet defense expenditures in 1970-75 by 50 percent,²⁰ and there is considerable evidence that they may be underestimating the rate of growth since that time, so that further Soviet budget estimates will be on the low side.²¹

In short, the Defense Department has not been exaggerating the Soviet threat in order tojustifyappropriations.²² That they are alleged to do so at budget time simply reflects the fact that it is at budget time that the Congress and, therefore, the press pay attention to the statements about the threat, and indeed, the principal DOD official statement the Annual Report or "Posture Statement," is deliberately and properly a part of the budget-planning cycle.

The Russians are not yet ten-feet tall, but in their strategic forces they are as tall as we are and still growing, which we are not. In general purpose forces, they have long been known to have larger ground forces than we, and both President Carter and Secretary Brown have recognized in their 1979 budget that the Soviets have been modernizing these forces to the point where we must increase our R&D and procurement efforts in order to catch up. In naval forces, they are generally believed to be of about our size and, again, to be still growing, while we are not. Indeed, the FY 1979 budget cuts back severely on naval programs to resume growth. The U.S. Navy has fewer ships than the Soviet navy, although still greater tonnage. The numbers of ships in both navies are declining, but the Soviet tonnage is growing and U.S. tonnage is declining. Many of the smaller Soviet ships are faster and more heavily armed, and in particular they have a several-year lead over the United States in the deployment of ship-launched antiship-guided missiles with both conventional and nuclear warhead. In tactical aircraft the United States has long been considered superior, but the Soviets have been rapidly modernizing their tactical aircraft and are producing them at approximately double the U.S. rate.²³

The Russians are not ten-feet tall. But they may well be six-foot-six, and that is enough stature to command the respect of most of us average-sized mortals. But old myths die hard. The author cannot resist citing a curious and rather grudging recognition of the slow but overdue demise of this myth in a renew of the book on the FY 1978 defense budget that he coedited:

This second annual U.S. defense budget survey by the National Strategy Information Center is a straight-forward hard-line approach to the military balance. Its conclusion--the U.S. needs to increase its dangerously inadequate investment in defense--is not new, but acquires more plausibility with each year of the Soviet military buildup.²⁴

Ever since the first large U.S. peacetime defense budget following the Korean War, there have been allegations that the limits on the defense budget are economic, rather than being dictated by the requirements of providing for the common defense. President Eisenhower even suggested at one point that a billion-dollar increase in the defense budget would be tantamount to letting the Soviets tempt us to "spend ourselves into bankruptcy." As former Secretary of Defense James R. Schlesinger has said, "Each of us is entitled to his own opinion, but not to his own facts."²⁵ One may feel that the priorities should be different or that the defense budget is adequate at some given level, but nothing in the history of the 1950s, 1960s, or 1970s validates the judgment that we are pressing economic limits. As we saw in Table I, the defense budget has been declining ever since the 1950s, by all relevant relative measures, i.e., in proportion to GNP, the federal and total governmental budgets, and in share of the national labor force. Even the temporary peak for Vietnam did not return us to the relative shares of the Eisenhower years. Meanwhile, the rate of unemployment (averaging out the peaks and valleys of the short-term business cycle) has been steadily upward since the Eisenhower years.

Despite all of these statistics, many people assert that the myth is validated by the bottom line: that defense has caused inflation. But here, too, the alleged correlations are inverse. The inflation argument was refuted in 1972 (before inflation became really severe!) in the Moot Report, as follows:

Inflation in the U.S. has been most severe since 1968, a period when Defense programs were being massively cut back. [President Johnson's failure to propose timely tax increase for the requirements of the Vietnam War may properly be assigned some of the blame for accelerated inflation in this period, but this is not the same thing as ascribing the inflation directly to the defense budget.]

The aircraft industry--20 times more dependent on Defense than U.S. industry in general--shows productivity increases nearly double the average and has the best balance of trade record in the U.S. economy. Inflation has been the most severe in those industry sectors where the Defense input is the smallest, and conversely. For example, the greatest inflation by far (76.4%, 1964-71) is in construction, where defense accounts for less than 1% the business. Five sectors have had above-average inflation, and defense accounts for less than 1% of the business in four of them, and 2.7% in the fifth. According to Department of Commerce figures, inflation on state and local government purchases has been much greater than on defense purchases.²⁶

Inflation has, of course, accelerated since those words were written--while the defense budget has continued to decline in real, constant-dollar terms as well as relatively. The major causes are well known, although not all of them are yet well understood: the monopoly (more properly, oligopoly) prices of the OPEC oil suppliers' cartel following the 1973 oil embargo; the worldwide increase in food prices, triggered, though only partially caused, by low world grain crops in the early 1970s and the Soviet wheat purchases; raw material scarcities; "indexing" or contractual tying of wage rates to cost of living indexes in union contracts and federal pay scales; economic events in other countries; the overvaluation of the dollar, in the late 1950s and the 1960s, under the fixed exchange rates of the only partially implemented Bretton Woods Agreement of 1944; and so on.

Several techniques are used to reinforce the myth that we are spending all we can and to support the argument by maximizing the apparent costs of defense. High on the list of these techniques is one that was mandated by Congress in 1972: the requirement that future costs (e.g., for a weapon procurement program that will take several years) be presented to Congress in "then-year" (current) dollars instead of constant or real dollars at today's prices. This practice is supposed to help Congress "know what it is commiting itself to," but in fact it is highly deceptive, even pernicious. Inflation rates cannot be accurately predicted and should not be projected for this purpose. We can only understand costs in terms of today's dollars. If prices go up, so will government revenues, as will personal incomes. Future costs should be discounted, that is, less highly valued than costs that must be paid today, both because the future is uncertain and because we can earn interest on money that does not have to be spent until later. In short, future costs are less onerous than present costs. "Then-year" costing is equivalent to using a negative discount rate that makes such costs look more onerous.²⁷

Opponents of a particular weapon program are also fond of putting it in the worst light by cumulating costs over its lifetime--for some systems, such as ships and aircraft, for as long as 30 years. If this is combined with projecting inflation, adding maintenance, modernization and operating costs, and sometimes even "loading" On other costs for items that would be bought anyway (new ammunition, replacement tankers for aircraft, etc.), the costs can be made to sound horrendous, as was done in the organized campaign against the "24.billion-dollar" B-1 bomber. What really matters, of course, is what we must spend each year in relation to what we earn. If a $6000 automobile Were advertised as costing $35,000 over the next ten years, including repairs, tire replacement, gas, insurance, three new CBs, etc., all at projected inflation rates, how many of us would buy it? If we were told it would cost $1200-$1500 a year in today's prices, or X percent of our current salary, we could decide rationally whether we could afford to trade in the old jalopy, which is currently costing us, say, $600 a year and "won't last forever."²⁸

But if by what we can afford is meant what we can expect the Executive to propose and the Congress to approve and fund, then what we are talking about is not economic limits but the limits of political leadership and political will. In view of what has been said and cited here about the growing Soviet military threats, the declining U.S. preparedness, and the potential use of the Soviet forces for political purposes,²⁹ I would strongly urge that how much national defense the United States can afford is how much it needs and has the political will to provide.

Notes

1. No offense to my feminine readers intended. One is constrained to quote accurately; perhaps today Luther would have referred to "wine, person, and song."

2. The cost-effectiveness limitations of a "stand-off" cruise missile force and the importance of a mixed force of penetrating bombers and cruise missiles are discussed at length in Slow To Take Offense: Bombers, Cruise Missiles, and Prudent Deterrence by Francis P. Hoeber (Washington, D.C.: Georgetown University Center for Strategic and International Studies, 1977).

3. Attributed to Air Chief Marshal Slessor in The Economics of Defense Spending: A Look at the Realities, Department of Defense (Comptroller), July1972, p.189. (This was the so-called "Moot Report" and is hereafter so referenced.)

4. See Arms, Men, and Military Budgets: Issues for Fiscal Year 1979, Francis P. Hoeber, David B. Kassing, and William Schneider, Jr. (New York: Crane, Russak and Co., 1978).

5. Lewis F. Richardson, General Theory of Arms Races (London: British Psychological Society, 1939). A more complete and more readily available work was published posthumously: Arms and Insecurity: A Mathematical Study of the Causes and Origins of War (Chicago: Quadrangle Books and Pittsburgh: Boxwood Press, 1960).

6. It is often argued that a figure of about 13-14 percent is more accurate than 8 percent, when one allows for proper allocation of the costs of other programs, including research and development, surveillance, and support. This dubious accounting change would not alter the argument in the text.

7. See Herbert F. York, "Multiple-Warhead Missiles," Scientific American, November 1973.

8. As belatedly recognized in the Department of Defense Annual Report, FY 1979, p. 11.

9. See William T. Lee in Arms, Men, and Military Budgets: Issues for Fiscal Year 1977, William Schneider, Jr., and Francis P. Hoeber, editors (New York: Crane, Russak and Co., 1976).

10. The FY 1979 budget turned out to involve a constant-dollar increase of less than two percent. The Office of Budget and Management rationalized-inconsistently with earlier official statements--that the three-percent figure referred only to the budget for NATO expenditures (which cannot be separately identified). General purpose forces were favored, at the expense of strategic forces and naval forces. (Clearly, losing strategic equivalence will require stronger general purpose forces.) Overall, there is zero increase in procurement over FY 1978 and only three percent in RDT&E (or R&D, as it is more generally known). The two percent total budget increase has also been defended on the grounds that expenditures will rise over three percent, but this reflects previous years' budgets, not the FY 1979 one.

11. CIA, "A Dollar Cost Comparison of Soviet and U.S. Defense Activities, 1967-77,"SR78-10002, January 1978. Hereafter referred to as CIA, SR 78-10002.

12. See Lee, op. cit.

13. See "Legends of the Strategic Arms Race," United States Strategic Institute, U.S.S.I. Report 75-I by Albert Wohlstetter, Fred Hoffman, David McGarvey, and Amoretta Hoeber. A number of national intelligence estimates (NIEs) on Soviet strategic offensive forces--the 11-8 NIE series--were declassified for this study.

14. The Soviet build-up is well documented in John M. Collins, America and Soviet Armed Services, Strengths Compared, 1970-76, Congressional Research Service, in Congressional Record, 5 August 1977, pp.S14064-14104; and in Hoeber, Kassing, and Schneider, op. cit.

15. Dwight D. Eisenhower, Public Papers of the President, 1960-6l, p.1037.

16. See "Moot Report."

17. CIA, SR 78-10002.

18. See the chapter by William T. Lee, "Intelligence, Some Issues of Performance," in Arms, Men, and Military Budgets: Issues for Fiscal Year 1978, Francis P. Hoeber and William Schneider, Jr., editors (New York: Crane, Russak and Co., 1977).

19. "Cold-launch" refers to "popping up" the missile from the silo by use of a gas generator before igniting the rocket motors, thus doing less damage to the silo (as well as permitting a larger missile and a larger throw-weight from a given silo).

20. Estimated Soviet Defense Spending in Rubles, 1970-1975, S. R. 1976-10121U, May1976.

21. See William T. Lee in Schneider and Hoeber, op. cit.

22. As recently as 8 February 1978, Secretary of Defense Harold Brown told the House Armed Services Committee: "The key to this matter (is that) Soviet build-up has been faster than anticipated." George C. Wilson, Washington Post, February 9,1978, p.2.

23. See Robert P. Berman, Soviet Airpower in Transition (Washington, D. C.: Brookings Institution, January 1978); and Hoeber and Schneider.

24. Review of Hoeber and Schneider's Arms, Men, and Military Budget Issues for Fiscal Year 1978 in Foreign Affairs. January1978, p. 445. Emphasis added.

25. Pacem in Terris, Center for the Study of Democratic Institutions, December 1975.

26. Moot Report, inside of back cover.

27. Secretary of Defense Brown has projected a defense budget of $172.7 billion for FY 1983. But that is in 1983 dollars. In 1979 dollars, it would he only $140.3 billion. That is much less startling in relation to the coming year's$126 billion; it represents only 2.7 percent real annual growth.

28. For a more extended discussion of then-year costing and related techniques of exaggerating weapon program costs, see Francis P. Hoeber, Slow To Take Offense, pp. 64-69.

29. See the findings of the "Team B" reviews of the CIA-led interdepartmental National Intelligence Estimates Team in the Fall of 1976 (David Binder, New York Times, December 1976), and article by Richard Pipes, head of Team B, in Commentary, July1977, "Why the Soviet Union Thinks It Could Fight and Wins Nuclear War."

This article is adapted from a forthcoming book, U.S. Defense Policy--Issues and Alternatives, James E. Dornan, editor.

Francis P. Hoeber is President of Hoeber Corporation, an Arlington, Virginia, defense and economic studies firm. He also writes extensively on strategy and other military topics. He has a B.A. degree in economics from Antioch College, did graduate work in economics and statistics at American University, and has completed the Ph.D. examinations in international relations at the University of Pennsylvania. Hoeber was a U.S. government economist from 1940-1952, and he has been a systems analyst and research manager with Stanford Research Institute and the Rand Corporation. He is co-author with David B. Kassing and William Schneider, Jr., of Arms, Men, and Military Budgets: Issues for Fiscal Year 1979 and author of Slow to Take Offense: Bombers, Cruise Missiles, and Prudent Deterrence, a monograph of the Georgetown University Center for Strategic and International Studies.

The conclusions and opinions expressed in this document are those of the author cultivated in the freedom of expression, academic environment of Air University. They do not reflect the official position of the U.S. Government, Department of Defense, the United States Air Force or the Air University.

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