305. Memorandum from Maj. Smith to Bundy, November 221

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SUBJECT

  • FY 65 Budget Discussions

You undoubtedly will get comments on specific programs from BOB and Spurgeon Keeny. The attachments hereto are an attempt to put the budget packages I, II, and III into a somewhat broader perspective, with specific comments directed more to suggesting a sense of direction than to hitting hard particular programs. The attachments discuss the Budget’s Message, DOD Analytic Methods, and Strategic Forces.

After reviewing the DOD memoranda, I agree with your judgment that there appear to be few burning dollar issues to concern the President. (The attachments raise some issues of tactics and procedures.) Ken Hansen mentioned some problems in TOA (Total Obligational Authority). If there is such a problem, I would think BOB would be asked to carefully sort out TOA, NOA, and expenditures. Only then can the dimensions of the problem be properly evaluated.

W.Y. Smith
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Attachment

The Budget’s Message

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Assuming that this year, as in previous ones, the SecDef will use rationale before Congress similar to that found in his draft memoranda, and further that much of this rationale will reach the press, the public probably will get this picture of the defense budget:

a. An across-the-board cutback (see attachment). As compared with the FY 62 budget, strategic offense TOA will have decreased 42%, defense 18%, and general purpose forces 10%.2

b. The completion of a reversal in overall strategic doctrine. The SAC sword of the 50’s will become the shield in the late 60’s; the ground forces in Europe are to become the sword.

c. Indecision with respect to active and passive defense of the United States.

d. A reappraisal and downgrading of the enemy threat.

Of these four points, three of them (a, b, and d) were found in abbreviated form in the SecDef’s Economic Club speech. That speech created a small flurry in European newspapers; when this budget hits the streets the reaction will almost certainly be much more pronounced. Are we prepared diplomatically to explain our reasoning to our allies? The December NATO meetings become important in this connection. The Europeans may deduce that the US is not planning either to make sufficient resources available to make possible (even with increased European budgets) the local defense of Europe, or to build strategic offensive forces that would be used in the defense of Europe (because of their inability to strike first and reduce counterdamage sufficiently.) This realization may further accelerate the divisive trends within NATO. Such a development could have and—in an election year especially—probably would have domestic implications as well. In addition, if DOD arguments lend themselves to the criticism that this Administration is cutting back both our ability to strike the USSR and to defend ourselves against a Russian attack, more fuel would be available for the domestic political fires.

What all this adds up to is that the coming year is not a good time either at home or abroad to launch forth on educating the world in our new military thinking, especially since most people have not yet absorbed the materials (and different emphasis) from previous years.

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Attachment

TOA
(Billions of $)
FY 62 FY 63 FY 64 FY 65
Strategic Offense 9.11 8.53 7.53 5.33
Continental Defense 2.12 1.94 1.96 1.75
General Purpose Forces* 7.67 7.63 7.61 6.90

* Army and Marine only.

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Attachment

STRATEGIC FORCES

If there is any controversy in the budget, it probably will range around strategic forces. Carl Kaysen showed me his comments on the earlier DOD strategic forces draft, and seemed to believe that 950 Minutemen could do almost the same job as 1200. He did not press for a reduction in the force goals, however. The DOD memorandum also is a bit open-ended on this point.

In terms of total force objectives, a case of sorts could be made for going above 1200, if one holds to the DOD approach of evaluating missiles in terms of possibly saving lives. Basically, DOD is saying that the cost of additional missiles beyond a certain point is not worth the lives they might save. How would this look if expressed in terms of cost effectiveness? According to TOA figures, 950 Minutemen cost $10.2 billion. Following a US first strike such a force would insure the survival of about 372 million US and West European citizens (derived from table, p. 21). For about another $2.7 billion (p. 15) one could get another 450 missiles and save 417 million people, some 45 million more. The cost per life potentially saved is about $62. The cost figures used, however, are total program costs through FY 69. Assuming 1967 delivery, the cost per year for each life saved would be less than $31 through FY 69—and the cost per individual per year would go down for some time longer. The cost per life potentially saved going from 950 to 1200 missiles is about $57, or less than $24 per year for the two year period.

Is it somewhat absurd to put a value on life that way, or to determine force requirements in such a way? It seems that is where the DOD approach must eventually lead. As long as one holds to the marginal theory, it is not merely enough to be in the area of diminishing marginal returns. As long as “marginal returns” exceed marginal costs, it is still “profitable” to build missiles.

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The preceding is not designed to justify any particular number of missiles as an objective. It should cast some doubt on the numbers and the methods of reaching them in DOD.

In the FY 65 budget, rather than focusing solely on 950 or 1200 for FY 69, it would seem better to analyze what we need to attain our objectives between now and then. The DOD memorandum at present concentrates on what the situation will be as the President probably will [Facsimile Page 5] be leaving office, rather than on what it will be while he is there. For example, if we adopt a Minuteman goal of 950, in 1967 we could have 1786 ICBMs and Polaris missiles facing the East, and the USSR could have some 1980 missiles (IR/MRBMs with soft missiles having a reload capability; ICBMs; all medium estimates) facing the West. Is that a satisfactory position?

With respect to the FY 65 build, I would be inclined to make it something between the 50 recommended by the SecDef and the 200 recommended by Secretary Zukert. My principal reasons are:

a. In the absence of some political agreement, it is still too early to reduce pressure on the USSR militarily. (Nor should we now increase our pressure; we should continue along the same lines as in the past two years.)

b. We are much more likely to reach some arms control agreements if the Russians believe such agreements are needed to reduce pressure on their allocation of resources. If we reduce unilaterally the Russians get what they want with the freedom to change courses later.

c. It is still preferable to destroy the obsolescent sooner, if desired, than not to build the new.

  1. Provides analysis and information for November 15th budget meeting. Secret. 5 pp. Johnson Library, National Security File, Agency File, Def Bud 65.
  2. Army and Marine only.