110. Talking Points Prepared by the Director of the Program Analysis Staff, National Security Council (Lynn)1

Meeting with Shultz, Ehrlichman on DPRC, Defense Budget

I. Background of DPRC

Two major factors contributed to establishment of DPRC:

  • National Security Study Memorandum 3, Review of the U.S. Military Posture;
  • —Initiated on January 20, 1969;
  • —Produced a substantive review of alternative strategies for strategic and general purpose forces;
  • —For the first time showed the trade-offs between defense and non-defense spending within the framework of our overall economic and fiscal policy for a five year period; [The NSSM 3 Report on General Purpose Forces is at Tab A; see the table on page 29.]2
  • —Though analysis was admittedly crude, it enabled the President to decide on a world-wide defense strategy in the light of its implications for both defense and non-defense spending. [NSDM 27 recording that decision is at Tab B.]3
  • —President was quite impressed with the value of this work in helping him shape our defense posture.
  • —Last summer, in anticipation of a $3 billion reduction in the Administration’s defense budget by Congress, the Administration the Administration decided to formulate its own program for reducing the defense posture.

This exercise produced a classic confrontation between the Budget Bureau and the Defense Department on the scope and nature of the reductions. The President was forced into a position of having to referee disputes over specific line items and dollar amounts without any idea of the implications of his decisions. Further, he first learned of some DOD plans, e.g., reducing our NATO naval forces, in the newspapers.

Based on these experiences, the President decided to establish an Under Secretary-level group to insure balanced and objective analysis of major DOD policy and program issues, along the general lines of [Page 240] the NSSM 3 work, on a continuing basis. At the final NSC meeting on NSSM 3, he underscored two points:

  • He wanted to stop the bilateral bargaining between BOB and DOD , which failed to shed any light on the major defense issues and which puts him in the position of having to arbitrate disputes on literally dozens of line items, usually at the last minute when all parties are set in concrete and there is no time for thoughtful analysis;
  • He wanted to prevent a situation in which inter-service logrolling and compromising among the chiefs was the basis for the defense posture.

Accordingly, the DPRC was formed on October 11, 1969. [NSDM 26 on the DPRC is at Tab C.]4 Its major purpose is to consider the political, economic, diplomatic and military consequences of issues requiring Presidential determination that result from:

  • —proposals to change defense strategy, programs and budgets,
  • —proposals to change U.S. overseas force deployments and committed forces based in the U.S.,
  • —major defense policy and program issues raised by studies.

In all candor, it must be admitted that the DPRC has been a controversial institution since its inception:

  • —The Director of the Budget Bureau has been concerned that the DPRC might interfere with his prerogatives as the President’s budget adviser and with the role of the BOB staff. [On October 24, 1969 I analyzed Director Mayo’s position and the issues it raised in a memorandum to you which is at Tab D.]5

    Moreover, Director Mayo’s concept for the FY 72 budget review really doesn’t contemplate a fundamental role for the DPRC; it envisions BOB’s traditional role in the budget review process with some modifications. [My April 8, 1970 analysis of Director Mayo’s views are at Tab F.]6

  • —Secretary Laird has wanted the DPRC to focus on the broad questions of defense versus non-defense spending and avoid concern with the Defense program. [On March 26, 1970 I sent you a memorandum analyzing Secretary Laird’s views. See Tab E.]7

Nevertheless, the DPRC has been active.

  • —In a series of meetings last fall, the DPRC reviewed the Defense budget and major unresolved issues. [At Tab G are talking points you used last fall to brief Ehrlichman and the President on the DPRC [Page 241] review.]8 The major focus was on the ABM program, on which about 4 meetings were held.

    In the end, the DPRC played no real role except on the ABM. However, as a result of this process, the President indicated that he wanted a variety of substantive issues reviewed by the DPRC prior to next year’s budget review.

  • —To insure more orderly staff work for the DPRC in preparing papers, the President established the DPRC Working Group on January 19, 1970. [See Tab H],9 The same directive outlined the studies that were to be undertaken by the DPRC, under the general supervision of the Working Group.
  • —However, Secretary Laird sent you two memorandums on March 14, 1970 questioning the DPRC’s role.10 Because of the controversy, including the question of who should chair the Working Group, no progress was made on the studies.
  • —On March 23, 1970, you held a meeting of the DPRC to review where we stood. [Your papers for that meeting are at Tab I.]11 The main result of this meeting was that Packard initiated an exercise within DOD to cut $3 billion from the FY 72 DOD fiscal guidance, $1 billion from each Service.
  • —To break the impasse over the DPRC’s role, the President directed a series of studies on April 2, 1970 designed to flush out the basic issues in shaping the Defense posture for 1972 and beyond. [The Directive is at Tab J.]12 At Secretary Laird’s request, you agreed to have Gardiner Tucker, ASD(SA), chair most of the studies under the general supervision of the Working Group. The DPRC met on April 24, 1970, at which time you provided guidance to the DPRC Working Group on how the studies should be carried out, with Tucker’s role spelled out.
  • —On the weekend of May 30–31, Secretary Laird gave the President a three page memorandum which indicated that we faced an $18 billion budget deficit in FY 72. Thus, he proposed that “unless I hear from you to the contrary,” he would revise the DOD fiscal guidance downward by $6 billion in FY 72. He said, “We will keep you informed of necessary changes in our strategy and commitments as our planning proceeds.” [Tab K]13
[Page 242]

Note that the DPRC was informed on March 23, 1970, that the deficit projected for FY 72 was $3 billion using standard projections and almost $7 billion using pessimistic assumptions. Two months later, Secretary Laird, with BOB’s concurrence, was talking of a deficit of $18 billion, a staggering deterioration. I understand the story will get even worse, perhaps by $3–4 billion.

The President reacted on June 2, 1970 by directing the DPRC “to consider urgently the full implications” of Secretary Laird’s memorandum in time for NSC consideration on July 15, 1970. [Tab L] On June 13, 1970 you directed the DPRC Working Group to prepare the analysis. [Tab M] This work is now underway.

II. The Present Situation

In the face of an admittedly bleak fiscal outlook, DOD and BOB have already reached agreement that $6 billion must be cut from DOD’s fiscal guidance. [Recent BOB tables showing fiscal projections are at Tab N.]

This serious fiscal situation has implications for critically important issues:

  • NATO force deployments (including the delicate question of timing our decisions with respect to the NATO posture review and possible BFR discussions),
  • SALT (DOD’s view on the timing and the substance of our SALT discussions is now dominated by budgetary considerations),
  • ABM,
  • —the U.S. naval posture in the Mediterranean and its implications for the military balance in the Middle East,
  • —our whole Vietnam posture: withdrawal schedules, air activity levels and effectiveness, etc.
  • —troop levels in Korea,
  • —the combat readiness of our entire military posture.

Of course, vitally important issues on the domestic side are affected as well.

The question is, how can the President be given the opportunity to make key policy decisions in a timely manner, in the light of a rational and objective evaluation of their implications?

—The DPRC was set up by the President to provide the support he needs on the national security side. The President clearly wants it to function effectively. For this to happen, the agencies involved must cooperate.

Moreover, the DPRC’s activities must be meshed with the agencies’ internal decision making processes.

—But there must be order on the domestic side as well. Secretary Laird complains that the President’s domestic advisers persuade (or allow) the President to make incremental commitments to domestic programs out of political necessity without alerting him to their implications [Page 243] for the fiscal outlook or explaining how he may be mortgaging the future; when the inevitable fiscal crisis comes, DOD, because its spending is controllable, absorbs a disproportiate share of the punishment.

On this point, Secretary Laird is right. There has been no domestic NSSM 3, there is no domestic DPRC, and there is no widespread recognition of the need to examine systematically and in advance the total problem and the issues that must be resolved in setting priorities and allocating funds. To date, the domestic agencies don’t even have fiscal targets for FY 72 and haven’t begun to face up to their fiscal problems.

There are three key questions at this point:

  • —What decisions should the President make in the cause of putting together the budget?
  • —What facts and analyses are needed to inform the President’s decisions, and how should they be prepared?
  • —How and when should the President make these decisions?

Shultz, Ehrlichman and Kissinger should address these questions as a matter of priority and set up an orderly process to insure Presidential control over the formation of his budget and program. 14

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 235, DPRC & DEF Budget, 1970, Vol. I. Secret. Lynn drafted the talking points for Kissinger’s meeting with Shultz and Ehrlichman scheduled for June 24. (Ibid.)
  2. All brackets are in the source text. Tab A is not printed.
  3. Tab B is not printed.
  4. Document 79.
  5. Document 82.
  6. Not printed.
  7. See Document 101.
  8. Not printed.
  9. Document 93.
  10. Documents 98 and 99.
  11. Not printed.
  12. Document 102.
  13. Tabs K, L, M, and N are not printed.
  14. No record of the discussion at their June 24 meeting has been found.