89. Memorandum From Secretary of Defense Laird to the President’s Assistant for National Security Affairs (Kissinger)1
Attached is the letter from Bob Mayo, providing his views to me on the pending completion of the FY 1971 budget preparation and the initial stages of the FY 1972 planning cycle.2 I concur in his views that (a) an issue identification process for the Department of Defense, as outlined in the Budget Bureau Bulletin 68–9, is appropriate, and (b) it is premature to deal with the FY 1972 cycle.
Much of Bob’s letter bothers me, however. The tone of the letter is strongly aimed at further Defense cuts. The basis for such a predilection is not well-founded, in my judgment. It may be that for any number of reasons such a course will be prudent. But if we do choose that course, it should be on the basis of sound and reasoned analysis, not on the rudimentary analyses which have typified budget and national security resource availability in the past. I believe we have an opportunity to make a quantum jump in our decision-making process at the national level in striving for an optimum resource allocation among our national goals. Pursuing Bob Mayo’s course would miss that opportunity.[Page 196]
Bob highlights, for example, “… the worsening fiscal picture for 1971….” He concludes, without providing the analysis, that we cannot meet our fiscal goals (unspecified) without a lower Defense target. It is not clear that if employment levels and national production rates slacken, thereby impinging on the revenue flow, the best—much less the only—course is to cut federal outlays. Economic analysis might show that employment levels, production rates, and therefore federal revenues would be enhanced by continuing, or even increased, federal outlays. I do not know. I am simply suggesting the case is not clear based on Bob’s statements.
For projecting security outlays in 1972, Bob suggests we wait until the middle of next year to have our discussions, i.e., until Bureau of the Budget has had the opportunity to reexamine economic projections, the revenue picture, the Administration’s other critical programs, and our progress in Vietnam. I agree on the timing. But it would be far better in my judgment to have a broader look than the Bureau of the Budget can provide by itself. To do the analytical job properly, we need to study:
- —The overall economic picture, including the GNP projections; the resources which will likely be available for federal programs; the impact of various spending levels on national goals such as defense, full employment, economic growth, price stability, and balance of payments equilibrium.
- —The sensitivity of higher and lower federal spending increments on our key national goals, i.e., what price do we pay in inflation, if any, for more national security.
- —The allocation of the resources within the Federal sector for optimum distribution.
- —The relation between the supply side of the national security equation and the demand side, i.e., our basic national security commitments.
We now have an institutional arrangement in the Defense Program Review Committee (DPRC) to consider such issues. We should use the DPRC for just these purposes. To do so will in my judgment constitute a major accomplishment for this Administration.
At the same time, if we use the DPRC for lesser tasks, such as assessing the program of individual weapons systems or alternative regional force levels, we shall risk the loss in utility of the Review Committee. Maybe at some later time the DPRC can assimilate such important, but lesser, tasks. But at the start—or at least for the ensuing budget cycles—we should reserve to the DPRC only those major aggregate resource allocation issues ancillary to our top-most national goals.