Foreign Relations of the United States, 1969–1976, Volume XXXV, National Security Policy, 1973–1976

62. Memorandum From the Director of the Office of Management and Budget (Lynn) and the Assistant to the President for National Security Affairs (Scowcroft) to President Ford ¹

Washington, November 11, 1975

SUBJECT

• FY 1977 Defense Budget

This memo responds to your request for a joint OMB and NSC evaluation of the adjustments to reach your 1977 Budget target level suggested in the memo Secretary Schlesinger left with you on November 1.² An alternate set of potential adjustments to reach the same target levels has been developed by OMB, and both lists have been reviewed by NSC for possible national security policy implications. We wish to emphasize the tentative nature of both plans since we are still reviewing the entire Defense budget. We will be ready to present firm recommendations to you in about two weeks.

There are several general points to be made about the Defense memo:

• The memo neglects to point out that the $110 billion level for 1977 will provide a $12 billion increase in total obligational authority over 1976. This increase covers inflation and includes significant real program growth.

• Due to the sharp decline in anticipated inflation levels since the 1976 Budget was forwarded to Congress in January, we are still estimating some real growth in the 1976 program even after Congressional reductions.

• The actions proposed in the Defense memo emphasize reductions in combat forces and numerous modernization programs. Many of these proposals would seriously degrade U.S. capability and would have adverse effects abroad. The OMB suggested adjustments would protect the existing force structure and would emphasize reductions in support areas and modernization.

The table below identifies the Defense and OMB adjustments required to move from a 1977 request level of $117 billion after an initial budget scrub to target levels of $110 or $107 billion:

	TOA ($ billions)
	Defense Memo	OMB Proposal
Revised Defense Department forecast	117.0	117.0
Tier I Reductions
Support	−1.1	−2.9
Modernization	−4.3	−4.0
Force reductions	−1.6	−.1
Preliminary Guidance Level	110.0	110.0
Tier II Reductions
Support	−.4	−1.1
Modernization	−1.1	−1.9
Force reductions	−1.6
Low Guidance Level	107.0	107.0

Attachment A categorizes the reductions in greater detail.³ Two major differences in approach are noted:

• Defense proposes large force reductions while OMB proposes large support reductions in lieu of force reductions. The OMB support reductions will not hurt our defense capabilities but some will be difficult to achieve—witness the attempt to reduce the commissary subsidy in 1976.

• Both Defense and OMB propose sizable modernization reductions. Defense identifies cuts in the B–1 and Trident strategic programs. OMB proposes no strategic program adjustments, and recommends larger adjustments in conventional forces and intelligence modernization. Under both approaches, there will be sizable growth in modernization above the 1976 level. NSC stresses that in the intelligence area further study of specific issues is required before any firm recommendations can be made.

The following table compares the DOD and OMB programs for 1977 with the 1976 funds anticipated to be received from Congress: ($ billions—TOA)

	1976	1977
	Congress Level	Defense Memo	OMB Proposal
Forces	27	29	31
Modernization	31	39	39
Support	40	42	40
Total	98	110	110

Significant increases are provided in forces and modernization under both options. The Defense proposal produces a larger increase in support funding while the OMB proposal permits greater funds for forces. Both alternatives result in the same overall level of modernization funding.

While we have not completed our budget review and will not be prepared to present our firm recommendations on the Defense budget to you for another two weeks, we are confident that your proposed Defense budget target can be achieved without the drastic force reductions shown in the Defense memo.

1. Source: Ford Library, President’s Handwriting File, Subject File, Box 18, Finance—Budget: Defense Department (5). No classification marking. A note on the memorandum reads: “The President Has Seen.”
2. Apparently a reference to an October 20 memorandum from Sullivan to Schlesinger. Sullivan’s memorandum, found attached, examined the effect of reductions to the DOD’s FY 1977 budget on U.S. defense posture. Sullivan concluded that a cut of “$3 billion in outlays would produce a very significant reduction of defense posture.” An additional cut of $2–3 billion “would provide an unmistakably clear signal to the World at large that the United States no longer intends to retain an evidence balance of force with the Soviet Union.” (Ibid.) On November 1, Ford and Schlesinger met in the Oval Office from 11:45 a.m. to 12:30 p.m. No record of the meeting was found. (Ibid., Staff Secretary’s Office, President’s Daily Diary)
3. The table is attached, but not printed.