Foreign Relations of the United States, 1969–1976, Volume XXXIV, National Security Policy, 1969–1972

206. Minutes of Defense Program Review Committee Meeting¹

Washington, February 10, 1972, 3:08–3:57 p.m.

• SUBJECT
  • DOD Budget and Five Year Defense Plan

• PARTICIPANTS
  • Chairman—Dr. Henry A. Kissinger
  • State
    • Mr. John N. Irwin
    • Mr. Leon Sloss
    • Mr. Seymour Weiss
  • DOD
    • Dr. Gardiner Tucker
    • Mr. Robert C. Moot
    • Dr. John Christie ²
  • JCS
    • Adm. Thomas H. Moorer
    • R/Adm. William St. George
  • CIA
    • Mr. Bruce Clarke
  • OMB
    • Mr. George P. Shultz
    • Mr. Kenneth Dam
  • CEA
    • Mr. Ezra Solomon
  • ACDA
    • Mr. Gerard Smith
    • Col. Ira B. Richards
  • OST
    • Mr. John Walsh
  • NSC
    • Gen. Alexander M. Haig
    • Mr. Philip Odeen
    • Mr. John Court
    • Lt. Cdr. John Knubel
    • Mr. Jim Hackett

It was agreed that:

• —DOD will follow the President’s guidance on force levels, particularly with respect to air defense forces and army divisions.³
• —OMB and DOD will reconcile the budgetary differences in their projections between $82 billion and $84 billion.
• —DOD will submit an interim report on the strategic implications of the increasing procurement cost of new weapons systems and means of controlling those costs.
• —DOD will put out policy guidance that, in general, follows the fiscal guidance agreed upon.⁴
• —DOD will issue Fiscal Guidance for FY 74–78 based on the FY 73 program as projected.

Dr. Kissinger: Our primary purpose today is to decide a preliminary approach to the five year defense program. If Defense will present its views first, we will then hear what OMB has to say.

Dr. Tucker: I want to remind everyone that we are just entering the process of review of our five year defense program. Last year we began the five year program for the period FY 72–76 with the basic fiscal and program guidance, then went into the program decision cycle and considered specific programs at a series of DPRC meetings, got presidential guidance and then added 4-1/2 billion dollars. Next, the services submitted their detailed budgets for the first year, we scrubbed them with OMB and took out 2-1/2 billion dollars, after which we put back one-half of a billion, then extended the decisions reached during the budget scrub through the whole five years of the program. By that time, we had in fact produced a new five year program.

Dr. Kissinger: So what you are saying is that every year we will have a new five year program.

Dr. Tucker: Yes, that’s true. Congress cut us 700 million, we then adjusted our estimates for the whole period to include estimated congressional cuts at the same ratio. What we want to do now is review this program, consider OMB projections and views, include any new policy guidance and then begin work on the next new program.

Dr. Kissinger: In several areas the trends you have followed have been different from the guidance you were provided; for example, in Air Defense, anticipated savings have not been realized and the Army division level we contemplated has not been reached. Why do we go through this elaborate planning process if you aren’t going to carry out the guidance you have been provided?

Dr. Tucker: We have followed the guidance. With regard to Air Defense, we reached a decision on Continental Air Defense that was more modest than our original idea—to defend the Continental U.S. against bomber attack with limited warning.

Dr. Kissinger: You have given existing forces a new mission instead of changing the forces.

Dr. Tucker: We have changed the forces.

Adm. Moorer: We’ve had trouble in Congress because of the cuts in forces. A plane flew into New Orleans from Cuba last year and some people on the Hill were very excited about it.⁵ They’re not anxious to cut Air Defense forces with this sort of thing happening.

Dr. Kissinger: That has nothing to do with your force levels. When you had higher levels of air defense, a Cuban plane flew into Miami while the President was at Key Biscayne.⁶ I don’t think anyone is worrying about an air invasion of the southern United States.

Dr. Tucker: You are raising questions about specific numbers of interceptors, but what we are discussing is the implementation of budget cuts. It is a matter of allocation of both cuts and resources.

Dr. Kissinger: What about the decision to have 13 divisions? We only have 11-1/2.

Dr. Tucker: We are carrying 13 in the structure of the Army, but with the drawdown of Army strength and the Vietnam cuts, they are not at full strength.

Adm. Moorer: The Senate has arbitrarily cut 50,000 men from the Army force structure⁷ and we are having trouble maintaining the units fleshed out.

Dr. Christie: We will reach our goal by the end of FY 73 but not in FY 72.

Dr. Kissinger: Is this your (DOD’s) decision?

Dr. Tucker: No. We have been cut by Congress 50,000 men more than we want to be cut.

Adm. Moorer: The shortfall actually is in the strategic reserve. We’re suffering turbulence from the draw downs in Vietnam and the cuts by Congress occurring at the same time.

Dr. Kissinger: You (Mr. Shultz) sold us the CIA reorganization⁸ to save money and now we find we’re not saving any.

Mr. Shultz: That’s not true! We never argued for the reorganization for that purpose, we did it to increase efficiency.

Dr. Tucker: We have reduced 32,000 positions in the intelligence community. You won’t realize any savings from that in the first year because it costs more to terminate or transfer people than to keep them on the payroll, but over the long run there will be a substantial savings.

Adm. Moorer: We’re closing intelligence bases in Japan, Turkey, everywhere. We’re cutting our intelligence forces all over.

Dr. Tucker: There are a lot of problems involved in going from an eleven to a thirteen division Army, switching from earlier to subsequent guidance. We want to change an infantry division to a mechanized division for NATO, reduce the speed of retirement of ships and now we’re getting involved in pollution control problems. Our strategic forces are down from 2.7 to 2.3 million for FY 72–73, which will be less than pre-Vietnam, nevertheless, the budget continues to go up. Research and development is up 700 million, support to other nations is down significantly, unit costs per weapon are up sharply, all at the same time.

Dr. Kissinger: We sent you a memo on the cost of weapons about six months ago.⁹ When can we have an answer?

Dr. Tucker: These are very complex issues and difficult questions.

Dr. Kissinger: I know they’re complex, but at least give us an interim answer.

Dr. Tucker: O.K., in about a week. Right now we are in the early part of the five year program. We are getting hit with the initial costs of the large and expensive items of hardware. Near the end of the five years the unit cost will be much lower.

Dr. Kissinger: Isn’t a lot of the increased cost caused by inflation and pay raises, in addition to the rising cost of weapons? Costs that we can’t do much about? Can we maintain the force structure we want and have modernization too?

Dr. Tucker: Costs are above last year’s fiscal projections, but we can do it. Modernization of the force structure will cost less in the future. We will have fewer ships but more expensive ones, and also our tactical air is getting old and will need some attention soon.

Adm. Moorer: When you reduce the volume of purchases to save money, the unit cost goes up.

Mr. Shultz: Well, if you try to maintain a larger base than you need, you then get into these problems of high unit costs. Now if we start with the FY 73 budget as the latest expression of the President’s fiscal thinking and go on from there …

Mr. Moot: From an outlay point of view, you come out with about the same expenditures in FY 76 as in FY 73, so in the end you find that reduction of forces is the only solution.

Mr. Shultz: Do you all agree with that?

Mr. Dam: Then you (Mr. Moot) are suggesting the (OMB) paper¹⁰ is wrong? Is it wrong?

Mr. Moot: In the real world—I’m not suggesting you (OMB) don’t live in the real world—but this planning figure of 82 billion is just not realistic. You can only reduce these levels of expenditures by cutting forces.

Dr. Kissinger: I hope Jack Anderson ¹¹ doesn’t get the minutes of this meeting.

Mr. Shultz: If you project the FY 73 budget, we (OMB) arrive at 82 billion while you (DOD) figure 84 billion. We should be able to reconcile that difference.

Mr. Moot: In reaching our (DOD) estimate of 84 billion, I assumed that we would only be able to get the Vietnam pipeline and support costs down to about three billion per year, not to the 2 or 2-1/2 billion you estimate.

Mr. Shultz: You may be right about that.

Mr. Odeen: There is a six billion increase in TOA.

Mr. Moot: But there are no outlays there, while the cost of arms goes up one billion.

Mr. Shultz: Are you saying that the FY 73 budget figures extended to FY 74 and the years beyond can be used as a base?

Mr. Moot: I think we can agree on a figure for planning purposes that way, but not for the specifics of the force structure. When you consider force structure you have to get into force levels, research and development, manpower and modernization. But I don’t think we will have any trouble reaching a figure we can agree on for planning purposes.

Dr. Tucker: This figure and the contents of the plan is what we have agreed upon; now we must study any proposed modifications of programs and their costs. The easiest approach is to put out fiscal guidance that closely matches these projections, and then to put out the force levels later.

Dr. Kissinger: If we are to make any changes in fiscal guidance, will we be forced into a change of policy guidance?

Dr. Tucker: Yes, we will. Or if we change the policy guidance, we will have to adjust the fiscal guidance.

Dr. Kissinger: We don’t change policy without discussing it. Do you have any objections, George (Shultz)?

Mr. Shultz: No, as I understand it, it’s all right with me.

Mr. Odeen: What about the R & D levels?

Dr. Tucker: We are figuring 700 million more for R & D.

Dr. Kissinger: (to Dr. Tucker) So you will put out policy guidance that in general follows the fiscal guidance, but which will not be locked in concrete and can be changed as developments require?

Dr. Tucker: (nodded agreement)

Mr. Shultz: The one thing I want to stress is our need to keep the Defense budget in its proper context as part of the overall federal budget. This is absolutely essential. When our projections of revenues are too high, we not only have no margin to do anything additional that may be needed but we also find ourselves having to take out of the budget large chunks of money that you have already planned to spend.

Mr. Moot: This year is going to be a little different. We will look at the trend of budget planning harder than before.

(Dr. Kissinger was called from the meeting at this point)

Adm. Moorer: As a result of Congressional actions on the present budget, we will have to make changes in some of our plans.

Mr. Odeen: We also have to discuss the five year defense budget.

Mr. Irwin: I hope we have the answers on the FY 73 Asian deployments¹² before the trip to Peking.¹³

1. Source: National Archives, Nixon Presidential Materials, NSC Files, NSC Institutional Files (H-Files), Box H–118, DPRC Minutes, Originals, 1969–73 [2 of 3]. Secret. The meeting was held in the Situation Room of the White House. In a February 9 memorandum, Odeen informed Kissinger that the meeting was to address three issues: the inconsistency between Presidential decisions and Defense Department strategic guidance, the overall level of defense spending needed to support the Five Year Defense Plan for FY 1974–1978, and the relationship between planned defense spending and the Nixon administration’s long-term economic and budgetary goals. (Ibid., Box H–105, DPRC Meeting, DOD Five Year Program, 2/10/72)
2. Principal Deputy Assistant Secretary of Defense (Systems Analysis).
3. On November 13, 1971, Laird sent Kissinger the draft Defense Policy and Force Planning Guidance for FY 74–78. According to Laird’s covering memorandum, the paper translated Presidential decisions into “definitive guidance” to the Defense Department for planning and evaluating its forces and programs. (National Archives, Nixon Presidential Materials, NSC Files, Box 230, Agency Files, Department of Defense, Vol. XVI) In a February 28, 1972, letter to Laird, Kissinger expressed concern that the guidance was inconsistent with Presidential decisions in several areas: U.S. assistance to Asian allies in the event of a massive PRC attack, reserve forces, and strategic air defense. (Ford Library, Laird Papers, Accession 2000–NLF–045, Box 1, Memorandum to Laird from Kissinger—Planning Guidance FY 74–78)
4. See Document 203.
5. On October 26, 1971, an airplane with 22 Cubans aboard landed without warning at the New Orleans International Airport. (The New York Times, November 3, 1971, p. 16)
6. See footnote 7, Document 149.
7. See Document 185.
8. See footnote 6, Document 203.
9. Nixon sent Laird a memorandum on May 28, 1971, expressing concern about the increasing costs of new weapons systems and the rising portion of the Defense budget dedicated to manpower costs. (National Archives, Nixon Presidential Materials, NSC Files, Box 227, Agency Files, Department of Defense, Vol. XII) That memorandum followed Kissinger’s May 26 memorandum to the President apprising Nixon of the situation. (Ibid.) On January 15, 1972, Kissinger sent Laird a memorandum reminding him of Nixon’s “deep concern over the impact on future force levels of the ‘excessively high unit costs of new weapons compared with the cost of the weapons they replace or the weapons of our potential enemies.’” Kissinger asked the Department of Defense to assess the trend toward more costly weapons and to complete its evaluation by February 1 in time for a DPRC meeting. (Ibid., NSC Institutional Files (H-Files), Box H–105, DPRC Meeting, DOD Five Year Program, 2/10/72)
10. Not further identified. Kissinger’s preparatory materials for the meeting include “Federal Budget Projections (FY 74–77),” a paper prepared by representatives from several agencies, including the OMB. The 19-page report assessed the 5-year federal budgetary outlook and outlined alternative policies to promote consistency between U.S. defense and economic planning. It estimated FY 1974 defense expenditures to be $82 billion. (Ibid.)
11. Washington Post columnist.
12. See footnote 2, Document 202.
13. President Nixon, accompanied by Kissinger, left Washington for China on February 17. He returned on February 28. (National Archives, Nixon Presidential Materials, White House Central Files, President’s Daily Diary)