143. Memorandum From Secretary of Defense Laird to President Nixon1

    • The Defense Budget—Fiscal Year 1971 and Beyond

In order to make any discussion of what we plan to do in Southeast Asia more meaningful,2 it is most essential that we consider first the severe fiscal problems we face both in FY 71 and FY 72. Not only must we live within the planned budget constraints for FY 71, but we must anticipate another $1B reduction in the FY 71 defense budget by the Congress.

On the basis of the latest projections of the economy and the federal budget for the next five years, it is clear to me that you may be forced to look to defense for reductions below what we had previously estimated.3 Non-defense expenditures and decisions already approved make these circumstances almost a certainty. Lower levels of defense spending will reduce our military capabilities and require reductions in U.S. commitments; at this point in our planning I can only estimate possible consequences. In addition to the following summary of the fiscal situation, I plan to provide you a more detailed report by early July on some of the major decisions we must face on our strategy and commitments.4

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Since last fall, our planning in the Defense Department has been based on the strategy and financial guidance in National Security Decision Memorandum (NSDM) 27 (issued October 11, 1969).5 Based on the projections of federal revenues and expenditures shown below, it seems clear that the NSDM–27 levels of defense spending are high.

Projected Federal Budgets for FY 72–76

(Outlays in then-Year $ Billions)

FY 72 FY 73 FY 74 FY 75 FY 76
NSDM–27 Defense Budgets 76 75 75 76 77
Increased Inflation 1 2 3 4 5
Volunteer Service  2  3  3  3  3
Repriced NSDM–27 Budgets 79 80 81 83 85
Non-Defense Programs 154 162 172 182 194
Total Federal Budget 233 242 253 265 279
Total Federal Revenues 215 234 251 266 283
Margin -18 -8 -2 +1 +4

The deficits shown are understated for two reasons. First, no new Presidential initiatives beyond FY 71 are included. Second, some domestic programs may still be underestimated. A “normal” amount of Presidential initiatives together with cost overruns on domestic programs, I predict, will widen the gap by $3–5 billion in FY 72, and by much larger amounts in later years. For example, your new initiatives in FY 71, after Congressional adjustments, are expected to grow from about $3 billion in FY 71 to about $11 billion in FY 72. Thus, the table above should not be interpreted to mean that we face only a one year problem in FY 72.

A budget deficit of even $18 billion in FY 72 would cause severe economic problems. The rate of inflation would rise again, unemployment would decline somewhat, government borrowing would increase the already high demand for savings, holding interest rates at high levels and holding down housing starts. Further pressures on thinly capitalized industries could cause failures and resulting severe economic dislocations.

A 10% surcharge on personal and corporate income taxes would increase revenues only $13 billion, not enough to close the gap.

I agree that we must take steps now to reduce planned federal expenditures. However, the figure that some are using in BOB and CEA as a defense expenditure rate for Fiscal Year 1972 of $69 billion is completely unrealistic. I realize that we in defense must face up to these [Page 517]fiscal problems but the maximum effort we can make would require an expenditure rate of at least $73 billion for Fiscal Year 1972. As a result the following are steps I presently contemplate:

FY 72 FY 73 FY 74 FY 75 FY 76
Current defense totals 79 80 81 83 85
Reduction –6 –7 –7 –8 –9
Revised defense planning level 73 73 74 75 76

These revised budgets will cause severe reductions in our military capabilities and will require some reductions in U.S. commitments. The following changes from FY 71 budget levels are illustrative of changes that I will have to initiate:

  • —retirement of 3–4 attack carriers, 1–2 fewer on forward station
  • —inactivation of 2 Army divisions, at least one withdrawn from Korea
  • —reduction of 4 Air Force fighter/attack wings
  • —retirement of all 4 anti-submarine warfare carriers
  • —reduction of 130–140 of our oldest B–52 bombers
  • —large reductions in continental air defense forces
  • —reduction of about 800,000 military and civilian personnel
  • —cancellation of some major procurement programs

These reductions will have to be started in FY 71 to help our FY 71 budget problem and to maximize the savings we get from them in FY 72. Indeed, our force reductions can be held to these illustrative levels only if we meet our current budget planning assumptions for Southeast Asia deployments and sortie levels:

End-Year Deployments and FY Average Sortie Rates

as of 6/30/70 Approved Budget FY 71 Suggested Budget FY 72 Suggested Budget FY 73
South Vietnam 424,000 260,000 152,000 43,000
Thailand 42,000 34,000 20,000 4,000
fighter/attack sorties 20,700/mo 14,600/mo 10,200/mo 3,400/mo
B–52 sorties 1,400/mo 1,200/mo 900/mo 300/mo

Less rapid withdrawals or higher sortie levels will cause reductions in the forces not deployed in SEA and seriously affect our NATO commitments. For example, an increase of 3,000 fighter attack and 200 B–52 sorties per month for one year would cost $500 million. Slowing the rate of redeployments to only 60,000 prior to February 1971 would cost $400 million and require an increase of 30,000 draft calls. If offsets [Page 518]of this magnitude had to be found, in addition to the reductions shown above, we would have to withdraw a division force from Europe and inactivate it and reduce tactical air forces in Europe or our carrier forces in the Mediterranean.

The changes in forces, commitments and Vietnam levels shown above must be faced. We must pay for increases in one area with decreases in another. Therefore, unless I hear from you to the contrary I intend to base our defense program on the revised defense budget levels and on the Southeast Asia assumptions shown above. We will keep you informed of necessary changes in our strategy and commitments as our planning proceeds.6

Melvin R. Laird
  1. Source: Ford Library, Laird Papers, Box 28, Strategy of Realistic Deterrence, Vol. 1. Top Secret.
  2. Nixon, Laird, Kissinger, Packard, Wheeler, Moorer, and others discussed the war in Vietnam during a meeting held at the Western White House in San Clemente, California on May 31. For the record of the meeting, see Foreign Relations, 1969–1976, volume VI, Vietnam, January 1969–July 1970, Document 313.
  3. According to the minutes of Laird’s weekly staff meeting, June 2, Tucker announced, “The President has been alerted that we cannot sustain the present level of defense within the dollars targeted for Defense.” Laird added that his purpose was “to alert various members of the Executive Branch that we can’t keep approving new [domestic] program on a piecemeal basis.” Laird found it necessary “to present a case [that] is not being adequately presented today. Defense shouldn’t have this responsibility, but decision-making processes are going on without an over-all look.” Laird, Packard, and Wheeler agreed that the DPRC was designed to examine defense spending within the larger fiscal context, but had not “accomplished its purpose.” According to Wheeler, “there is a tendency for the DPRC to focus on [Defense] programs in detail and ignore the larger issues. Mr. Laird said if they ignore the larger issues we are not doing our job of protecting the security of the country.” (Washington National Records Center, OSD Files: FRC 330–76–0028, June 1970) See also Document 132 and footnote 5 thereto.
  4. Laird sent an 11-page memorandum to Nixon on July 8 in which he expanded on the issues presented in this memorandum. (Washington National Records Center, OSD Files: FRC 330–74–142, No. 24)
  5. Document 56.
  6. On May 31, Kissinger sent Nixon a memorandum in which he argued that, although Laird’s memorandum painted a worst-case scenario, it “highlights the serious fiscal implication which should be sorted out in the immediate future” by the DPRC. In the meantime, Kissinger recommended that the President instruct Laird “to withhold” the actions proposed in the final paragraph of his memorandum pending consideration of the issues by the DPRC. (Library of Congress, Manuscript Division, Kissinger Papers, Box TS 65, Memoranda to the President, May 1970) Two days later, on June 2, Nixon sent a memorandum to Rogers, Laird, Helms, and Kissinger with Laird’s May 30 memorandum attached. The President directed the DPRC to prepare a report by July 15 on the FY 1971 and beyond Defense budget for eventual consideration by the NSC. (National Archives, Nixon Presidential Materials, NSC Files, NSC Institutional Files (H-Files), Box H–98, DPRC General, 1969–Feb. 1970)