93. Executive Summary of a Study Prepared by the Ad Hoc National Security Study Memorandum 228 Interagency Group1

I. INTRODUCTION

In National Security Memorandum (NSSM) 228,2 the National Security Council directed that a study be performed by representatives of eight federal departments and agencies to reassess current stockpile planning guidance.

Phase I of this study, which was completed in November 1975, examined the methodology of stockpile planning and identified and defined a number of factors that have a significant effect on stockpile goals. The report of Phase I suggested that additional study be undertaken to assess the methodology and define planning factors in more detail.

In its directive of February 13, 1976,3 the National Security Council asked that the study be continued in the following areas:

—Alternative values which might be assigned to each of the planning factors;

—The computational methodology and the validity of the input data;

—Political reliability of foreign sources of supply;

—Market and budget impacts of acquisitions and disposals;

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—Other strategic stockpile planning issues which may arise.

It directed that the complete stockpile planning process be analyzed and that these results be incorporated in a report of the study chaired by the representative of the Administrator of General Services.

The study was chaired by the Director, Federal Preparedness Agency as the representative of the Administrator of General Services. An Interagency Steering Committee (ISC), composed of representatives of the NSSM addressees, was convened to review and approve significant components of the study, such as study group reports.

There were four major actions associated with the conduct of the study. The first major action was the establishment of study and review groups to address planning factors and topics requiring refinement or redefinition. These groups prepared reports and submitted them to the ISC for approval. The stockpile planning factors represent key assumptions in determining the “imbalances,” i.e., the differences between estimated supplies and estimated requirements.

In addition to the planning factors, other investigations were conducted to define market and budget impacts affecting commodity activities in general, to evaluate the computational procedures and the validity of the data, and to reexamine the complete stockpile planning process.

The second major action was the establishment of a Planning Factors Review Group, interagency in composition and chaired by FPA. This group used the reports of Part I to prepare estimates of the assignments to be made to each of the planning factors. The report of this group also was approved by the ISC.

The third major action involved the development of five options based on issues that had carried over from Phase I or that had arisen during the Phase II study; these options embraced priorities regarding the four issues raised for decision and review.

The fourth major action was the development of a proposed stockpile planning process to replace present stockpile management procedures.

The major accomplishments of the study are:

—Alternative values have been assigned to each of the planning factors.

—The computational methodology and validity of the input data have been subjected to rigorous examination.

—A new procedure has been developed to estimate the political reliability of foreign supplier nations, merging statistical techniques with the judgment of experts at the Department of State to provide a basis for rapid re-evaluation of foreign developments.

—A number of effects accompanying potential acquisition and disposal activities have been identified for use in estimating market [Page 391]and budget impacts. These effects include international commodity market structure and industrial structure.

—A major accomplishment of the study is the development of new defense expenditure patterns expressing recent rapid changes in weapons systems technology. These expenditure patterns give a more effective basis for planning. The category-by-category distribution of civilian expenditures into essential and general components, though less than perfect, also represents a step forward.

—A new stockpile planning process has been developed making it possible to perform stockpile planning in a systematic, manageable way.

II. SUMMARY OF REPORT

The report of the study has six chapters which are summarized below. The chapters are entitled: Chapter I, Introduction; Chapter II, The Stockpile Planning Process; Chapter III, Planning Factors and Assigned Values; Chapter IV, Major Issues for Decision; Chapter V, Priorities and Policy Options; and Chapter VI, Matters for Review and Decision.

A. Introduction

Chapter I summarizes Phase I of this study and gave an overview of the Phase II methodology.

B. The Stockpile Planning Process

Chapter II presents a proposed stockpile planning process designed to overcome the following undesirable characteristics of the previous stockpile planning system: 1) a static planning process, resulting in stockpile objectives which were quickly out of date because of changes in economic, national security, technological, or foreign conditions; 2) inadequate mechanisms to upgrade data used in planning; 3) cumbersome mechanisms for developing interrelationships among disposal and acquisition decisions; and 4) lack of scheduled policy review of planning assumptions.

The proposed stockpile planning process consists of three main elements:

1. Review of Presidential Planning Guidance

The President will direct a review of stockpile planning policy guidance every four years and more often if the situation requires. This review will be conducted in an interagency framework.

2. Updating of Stockpile Goals

The Federal Preparedness Agency will update stockpile goals on a continuing basis as part of their normal stockpile management function, using Presidential guidance, current data, and the methodology established in this interdepartmental study.

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3. Preparation of Annual Material Plan

The annual plan will be developed by a formal interdepartmental process, chaired by the Director, Federal Preparedness Agency. It will address incremental acquisition and disposal actions for the ensuing fiscal year and will be forwarded for inclusion in the President’s Budget. Because the plan will be prepared each year, it will reflect current budgetary and political conditions. The plan will also employ the results of a detailed market impact analysis. This analysis will be conducted for each material by forecasting the following two events: market behavior without Government entry as a buyer or seller of a particular material; and market behavior with government entry. International ramifications of stockpile transactions will be analyzed with the help of the Department of State and other interested organizations.

C. Planning Factors and Assigned Values

Chapter III discusses the stockpile planning factors examined in the study, and the derivation of the values assigned to them.

The interagency study groups agreed that the econometric techniques used in examining planning factors comprised the most advanced methodology available today. The methodology involved a large number of variables relating to many complex issues, requiring the use of a detailed macroeconomic model of the U.S. economy. This sophisticated approach to stockpile planning provides a sound basis for determining what the nation’s stockpile of strategic and critical materials should contain.

A number of separate planning factors are discussed in Chapter III. Three of them are discussed below to illustrate the type of work that was done during Phase II.

1. Political Reliability

Phase II substantially refined the concept of political reliability and improved its measurement. The concept was broadened to include a wide range of quantitative and qualitative characteristics of countries which affect their political reliability as suppliers of imports to the United States. The measurement of the concept has been improved in three major ways: a) by introducing procedures to include or exclude the countries with respect to supplying specific needs, in keeping with the philosophy of the variable-confidence level approach; b) by statistically re-estimating the political reliability of countries incorporating quantitative data with the qualitative judgments of Desk Officers of the Department of State; and c) by developing a rating form to be used by experts as a basis for recurrent reassessments of country ratings. An Appendix to Chapter III contains a table comparing the values assigned to these stockpile planning factors in Phase I and Phase II.

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2. Civilian Tiers and Economic Planning Factors

To analyze stockpile requirements for civilian needs, the study split civilian consumption into two tiers, resulting in a total of three tiers: Defense, Essential Civilian, and General Civilian. These tiers were used to calculate stockpile imbalances for up to three years. Imbalance was defined as the shortfall that occurs when requirements exceed supply.

A stockpile imbalance was estimated for each tier, Defense, Essential Civilian, and General Civilian, in that order, for each year of the assumed war. These partial imbalances were added to obtain the total stockpile goal.

The principal distinction between the Essential Civilian and General Civilian tiers is the degree of risk one is willing to assume that civilian needs will go unmet. For Essential Civilian needs, only a low risk is acceptable, while for General Civilian needs a higher risk may be accepted. Products in the Essential Civilian tier must be made without substantial reduction in their content of strategic and critical materials, and are more directly related to the war effort. Products in the General Civilian tier may be made in varying degrees from substitute materials and are less supportive of the war effort. The degree of substitution on nonstrategic and noncritical materials for strategic and critical materials which is feasible in the economy is a necessary planning factor in estimating stockpile requirements.

3. DOD Expenditure Patterns

Defense expenditure estimates assume that a balanced force structure will be maintained during wartime. The balanced force concept relates production to the manner in which a war will be fought, by appropriate force-level mixes, for example, armored divisions to infantry divisions. The ability of the economy to manufacture the appropriate mix of combat equipment and weapons systems in balance with combat forces sets the pace of expansion of the nation’s defense force. Estimating the required plant expansion and the associated increase in military manpower make it possible to estimate the funds required to procure weapons systems and to pay military personnel.

Substantial improvement in defense expenditure pattern data was made in the course of the study. Phase I used 1969 data on weapons technology and manpower utilization to depict defense expenditure patterns. Phase II used updated information incorporating the effects of rapid changes in weapons systems technology, the latest available information on equipment attrition rates, and developments in manpower utilization rates that have taken place since 1969.

Phase II included estimates for three non-nuclear scenarios based on a balanced force structure: a) a simultaneous European and Asian [Page 394]conflict preceded by a one-year warning period; b) one-front war without prior warning with redeployment from other theaters; and c) a one-front war with prior warning and no redeployment from other theaters.

4. Other Factors

Other areas discussed in detail in Chapter III included transportation losses; substitution of non-critical materials, import and export levels; material consumption ratios; which relate an industry’s level of output to its physical consumption of a material; special materials; computational methodology and data validity; storage of upgraded forms (semi-processed materials); and market and budget impacts.

Participating agencies agreed on the adequacy of the econometric techniques adopted for use in estimating stockpile goals. The agencies also expressed consensus regarding the values to be assigned to planning factors, and agreed that this approach to stockpile planning incorporates the best techniques available. Although participants acknowledged that there are uncertainties associated with the modeling process, with the accuracy of input data, and with the setting of the values of the planning factors, it was generally agreed that the estimates of stockpile imbalances are adequate for the next five years.

D. Major Issues for Decision

The study defines four major issues needing resolution and illustrates the issues in five policy options. Selection of one of the five options, described below, would resolve the four issues.

1. What type of war should be assumed for stockpile planning?

Alternatives include a) a two-front war or a one-front war with redeployment from a different theater (designated Level 1 mobilization) and b) a one-front war with no redeployment from a different theater (designated Level 2 mobilization).

2. What amount of lead-time for industrial and military mobilization should be assumed for stockpile planning?

Alternatives include a) no warning (M-Day and D-Day coincide) and b) one year of warning for mobilization (M-Day precedes D-Day by one year).

3. How many of years of war should be assumed for stockpile planning?

Alternatives include stockpiling for a) the first year of a non-nuclear conflict, b) the first two years of a non-nuclear conflict c) three years of a non-nuclear conflict, and d) more than three years of a non-nuclear conflict.

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4. What degree of protection of civilian requirements should be assumed for stockpile planning?

Alternatives include a) Essential and Civilian tiers and b) only the Essential Civilian tier.

E. Priorities and Policy Options

Chapter IV presents priorities in the form of four issues requiring resolution. Chapter V presents five policy options containing combinations of priorities related to the four issues. Alternative stockpile levels have been derived within the framework of a variable-confidence system which allows the development of total stockpile levels consistent with the type of conventional war for which the President decides to prepare.

Calculations of total stockpile requirements to support two alternative levels of mobilization (Level 1 and Level 2) are based on separate calculations for Defense, Essential Civilian, and General Civilian needs in each of three war years. Separate calculations make it possible to 1) group the requirements for all three years into three tiers permitting the selection of one, two, or all three tiers, and 2) group requirements according to war year, permitting a selection of the first, the first two, or the first three years of the war effort for stockpile planning.

This nine-cell year-tier grouping permits flexibility in risk assignment in stockpile planning. As indicated in the Phase I report, the majority of participating agencies believe that any acceptable level of mobilization or other policy preference, such as the extent of stockpiling for civilian needs, can be represented in the year-tier matrix by the risks associated with removing one or more of the nine cells. Three agencies did not adopt this point of view and believe that a separate matrix is required for each level of mobilization. Six-cell options which exclude General Civilian requirements are presented for both levels of mobilization.

Chapter V presents estimates of the dollar values associated with each of the resulting five options. The dollar figures are useful as a reference for relative magnitude, but in no way reflect the actual dollar flows that would accompany any given option. Because of the way in which the stockpile planning process will work in practice, as will be explained later, comparison of the options by stated dollar value is of limited significance for fiscal purposes.

As discussed above, Phase II of the study introduces a new process requiring policy guidance review every four years. Planning should focus on a mid-term evaluation to be undertaken about every five years instead of trying to implement directly goals that might take 15 to 20 years or more to attain because of market disruption problems. This would be useful in accounting for change in relevant data, variations in [Page 396]international conditions, and changes in economic and technological conditions. Keying planning to the mid-term permits tracking these data and events. This will also be consistent with policy review every four years. It also provides the flexibility to consider major programs in an incremental context through the use of the priorities accompany-ing the option selected. The mid-term evaluation will determine 1) progress to date on the planning, 2) new directions required because of changes in the environment in which the process must operate, and 3) the new guidance required to keep the system viable.

Additional flexibility is introduced in the decision and budgeting process through the annual plan. As priorities are applied to acquisitions, appropriate amounts of disposals also can be scheduled.

The five policy options presented for the President’s consideration, and the planning guidance associated with each one are below. A table following the discussion lists the five options and the planning guidance associated with each.

1. Option A

Option A assumes a two-front war (Level 1 mobilization), with one year of lead-time or warning, with the stockpile meeting the requirements of the Essential and General Civilian tiers for the first three years of war.

This option is supported by representatives of the Departments of the Interior, Commerce, State, and Defense (including the Joint Chiefs of Staff), and of the Federal Preparedness Agency, GSA. Twenty percent of the value of the option falls into the Defense tier, 26 percent in the Essential Civilian tier, and 54 percent in the General Civilian tier.

The sponsors of this option believe that, of the options presented, it provides the most risk-free stockpile configuration with respect to national security because:

a) it provides a stockpile with the flexibility to respond to a conventional war with more than one front (and, hence, any conventional war of smaller magnitude); and

b) it incorporates acceptable assumptions regarding the degree of austerity imposed in the event of such a conflict.

Opponents of Option A believe that it is unlikely that the United States will have to engage in a prolonged conventional two-front war of extended duration. They also believe that a greater degree of civilian austerity than that required by Option A is acceptable as a basis for stockpile planning.

2. Option B

The major difference between Option B and Option A is that Option B assumes no year of warning or lead-time for military and indus[Page 397]trial mobilization prior to war. Option B assumes a one-front war with redeployment from the second theater (Level 1 mobilization) with no year of lead-time or warning, with the stockpile meeting the requirements of the Essential and General Civilian tiers for the first three years of war.

Not sponsored by any agency, this option is offered to highlight the issue of whether stockpile planning should assume that there will be a year of warning for mobilization prior to war.

The distribution of the Option B stockpile within tiers is similar to Option A, but there is relatively less in the Defense tier (18 percent of the stockpile versus 20 percent in Option A) and relatively more in the Essential Civilian tier (31 percent versus 26 percent for Option A). This reflects a lower starting level of U.S. industrial capability and preparedness when there is no warning period.

The argument for Option B is that the industrial base of the economy is so strong and adaptable that the nation does not need to plan on a year of warning before war.

The argument against Option B is that it imposes unacceptably high rates of capacity expansion on industry by assuming no lead-time for industrial mobilization.

3. Option C

The major difference between Option C and Option A is that Option C does not provide for General Civilian needs. It provides for the Defense and Essential Civilian tiers during the first three years of war and assumes a two-front war (Level 1 mobilization) with one year of warning. The Defense tier carries 44 percent and the Essential Civilian tier 56 percent of the Option C stockpile.

Representatives of OMB, Treasury, and CIEP endorse Option C. However, their support of this option is contingent on rejection of Option E, which they prefer.

Supporters of Option C argue that the nation should stockpile for a major two-front war, but that it is not essential for General Civilian needs to be covered because the level of austerity assumed in the option is acceptable. The argument against Option C is that it requires an unacceptable level of austerity in the civilian economy.

4. Option D

Option D assumes a one-front war (Level 2 mobilization) with one year of lead-time or warning, and no deployment of forces that might be available from another theater. The Option D stockpile provides for Defense, Essential Civilian, and General Civilian needs during the first three years of a war.

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Those who argue against this option believe that it may not meet our minimal national security requirements, especially if a one-front war cannot be contained, or if the war evolves into one of extended duration. Nonsupporters believe that it is very risky to assume that containment to one front would be possible.

No particular agency sponsors Option D. It is offered to provide a comparison between the stockpile for a two-front war (Option A) and a one-front war (Option D). The argument for the option is that it is unlikely that the United States will be engaged in a war of sufficient size to require that forces be redeployed from a second theater.

5. Option E

Option E assumes a one-front war (Level 2 mobilization) with one year of lead-time or warning, and no redeployment of forces that might be available from another theater. The Option E stockpile provides for only Defense and Essential Civilian needs during the first three years of war.

Representatives of OMB, Treasury, and CIEP sponsor this option. Their argument for supporting it is that it is unlikely that the U.S. will be involved in a war requiring high levels of mobilization, and thus, there is no need either to stockpile for such levels or to provide for all civilian requirements.

The argument against Option E is that it is very risky to plan on the assumption that mobilization necessary to fight on a two-front basis will not be required. If the assumption about the level of mobilization process proves to be invalid, a) national defense requirements cannot be met by providing for only a Level 2 mobilization, and b) civilian austerity levels envisioned will be intolerable.

The table, Policy Options and Associated Planning Guidance, summarizes the five options and the assumptions which they employ.4

6. Implementation of Goals

Stockpile goals associated with any option are unlikely to be implemented in their entirety, because: a) stockpile goals are continuously updated as new data become available; b) goals for some materials cannot be achieved (through acquisitions or disposals) in fewer than fifteen or twenty years without disrupting normal markets; and c) major reviews of stockpile policy are anticipated every four years.

In every option the stockpile goals for some materials are already met through the use of existing inventories. For other materials, acqui[Page 399]sitions would be necessary if the goals were to be completely implemented. For a third set of materials which are stockpiled in a variety of forms, existing inventories do not match the “ideal” mix suggested by the stockpile goals. For example, in every option the existing inventory of ferro-tungsten falls short of the goals. In these cases, standard stockpile management procedures would be to hold the ore in the inventory until it could be upgraded or otherwise beneficiated to meet the ferro-tungsten goals. The table on the following page illustrates the estimated budgetary effects of implementing Options A through E for the first 5 years. For example, potential acquisitions during the first 5 years under Option A would include $1.5 billion. Potential disposals would include $2.4 billion for Option A during the initial five year period.

Comparison of Options and Implementation of Goals 5

(In $ Billions, Based on December 1975 Market Prices)

Option A Option B Option C Option D Option E
Value of Inventory 6.8 6.8 6.8 6.8 6.8
Value of Stockpile Goals 10.2 7.3 4.7 6.5 2.5
Value of Implemented Goals 3.4 3.1 2.5 2.7 1.8
Potential Acquisitions (5 Years, 6-cells) 1.5 1.7 1.0 2.1 .5
Potential Disposals (5 Years) 2.4 2.6 3.0 3.0 3.2
Value of Implemented Goals (After 5 Years) 4.9 4.8 3.5 4.8 2.3
Value of Inventory (After 5 Years) 5.9 5.9 4.8 5.9 4.1

Value of stockpile goals: the value of the stockpile goals for each option is given in December 1975 market prices. These range from $10.2 billion to $2.5 billion.

Value of implemented goals: the starting values represent the value of the existing inventories (including alternate forms) that can be credited towards the stockpile goal. The implemented goals after five years are derived by adding new acquisitions. After five years the implemented goals range from $4.9 billion for Option A to $2.3 billion for Option E.

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Potential acquisitions: the practicable acquisitions assume market constraints. Budgetary considerations could allow implementation of more or less than 6 priorities. These vary from $2.1 billion to $0.5 billion.

Potential disposals: these assume normal market conditions during the 5 year period and vary from $2.4 billion to $3.2 billion.

The table illustrates that although there are dramatic differences between the values of the goals associated with Options A and E, the differences over the short term (5 years) are much smaller. At the end of 4 years, the existing stockpile policy guidance will be re-assessed in light of the program actions of the prior years. If appropriate, new guidance will be issued for the ensuing 5 years.

F. Matters for Review and Decision

Chapter VI point out two subjects raised in the study that require NSC review and Presidential decision. These subjects are as follows.

1. A decision is needed regarding the acceptance of the stockpile planning process described in Chapter II.

2. To resolve the four issues raised in Chapter IV, selection of one of the options as soon as possible is needed. This will permit early implementation of the planning process as well as coordination with the President’s Fiscal Year 1978 budget.

III. SUMMARY OF AGENCY COMMENTS

Each of the NSSM 228 addressees formally and informally commented on the draft of this study report. All comments were reviewed, and those judged to be primarily of an editorial nature were incorporated (with the concurrence of the ISC) when preparing the final report. Each Agency’s formal response, along with an analysis of the response, is included in its entirety in an appendix to the main report. All the participating agencies agree that Phases I and II of the study represent a major advance in the technology of stockpile planning. The agencies concur that this technology has progressed to such a degree that meaningful stockpile policy guidance may be formulated within the context of the four major issues described in Section III and in Chapter IV of the main study. Each of these issues is resolved by selecting one of the options offered by the study. Furthermore, all participants believe the study can be forwarded to the NSC, so that they may develop alternate choices for the President’s decision. Finally, the participants believe that the study should not recommend a particular option, but that the recommendations of the individual participants be reported. The comments of a general or substantive nature by each study participant are summarized below.

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A. Department of State6

The Department of State in general concurs with the content and methodology of the Phase II Report and agrees that it should be forwarded to the National Security Council, including the various stockpiling options which are developed in the report. The Department of State favors a high-confidence stockpile, similar to Option A, and agrees with the priority ranking of the nine-cell Option A matrix. State feels that a high-confidence-level (Option A) stockpile more accurately reflects the spirit and intent of the Strategic and Critical Materials Stock Piling Act and takes into account the concept of balanced forces, together with the more material-intensive nature of preparedness and weaponry.

State recommends that consideration of market impacts, particularly the impact of acquisitions and disposals on international markets and on U.S. international economic relations, be included as a part of any process leading to the implementation of stockpile goals. The stockpile planning process, as summarized above and described in detail in Chapter II, provides for these concerns since a) an analysis of market impacts, both domestic and international for specific materials is an integral portion of the annual planning process, b) stockpile goals are updated as new data becomes available, and c) the planning process provides for a policy review every four years or sooner if changed conditions warrant.

B. Department of the Treasury7

The Department of the Treasury considers the Phase II report an adequate basis for formulating issues for Presidential decision and recommends it be forwarded to the NSC. Treasury supports Option E: a stockpile for defense and essential civilian tier requirements for three years of a one-front war (Level 2 mobilization). This Option, in their opinion, represents the best balance between the likelihood of this occurrence and the needs of the civilian economy to support a war effort.

Treasury recognizes the need for the continuing improvement and refinement in many of the technical areas of stockpiling, but believes this can be best achieved at the staff level rather than through further interagency study.

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Treasury finds the proposed stockpile planning process appealing and believes that a more thorough review of the process be made before being implemented.

C. Department of Defense

The Department of Defense’s (DOD) views were expressed in separate comments from the Office of the Secretary of Defense (OSD) and the Office of the Joint Chiefs of Staff (OJCS).8 Both OSD and JCS state that the study is a major effort responsive to NSSM 228 and that meaningful stockpile policy guidance can be formulated within the context of the four major issues identified in Section III of this Executive Summary and in Chapter IV of the main report.

OSD and JCS request that certain aspects of the DOD expenditure patterns and levels employed during this study be highlighted. Specifically, the DOD expenditure patterns presented are constrained by an evaluation of present industrial expansion capability and present technology. They are not based on the total requirements to offset the perceived threat now or in the future.

In particular, the patterns associated with the limited mobilization options D and E do not represent any accepted DOD pattern. This scenario assumed a European conflict with no deployment to Europe of those forces that otherwise would fight in Asia, and thus is regarded as highly unrealistic because if Asia were quiescent, clearly, many of those forces would be deployed to fight in the NATO

OJCS strongly recommends pursuing the stockpile policy as contained in Option A of the study, since it is the most protective of the national security and most closely meets the criteria set forth in the legislation.

OSD did not specifically recommend a particular option in their comment, but let stand their association with Option A in the body of the report.

D. Office of Management and Budget9

The Office of Management and Budget (OMB) considers the range of issues for Presidential decisions to be clearly identified, and includes those important matters which should be presented to him. OMB also considers that the alternatives presented for his decision with regard to the stockpile size are representative of a sufficiently wide range of alter[Page 403]natives so that he will have a meaningful choice. In particular OMB supports Option E, believing that this option prudently balances risks and budgetary resources.

Further, they indicate that a one-front (Level II) mobilization option represents an adequate hedge against errors in present defense budgeting and the cost of covering the general civilian tier would be unacceptably high.

OMB notes that stockpile materials would help insure that the United States could assist allied nations, and the stockpile has the potential to act as a deterrent against commodity embargoes or cartels. While these may be beneficial aspects of stockpiling, OMB can find no existing statutory or policy rationale suggesting that the stockpile should be used for these purposes, and therefore suggests they should not be considered an argument when choosing an option.

E. Department of the Interior.10

The Department of the Interior endorses the general methodology of stockpile calculations, and supports Option A.

Interior states that the legislative mandates contained in the Strategic and Critical Materials Stock Piling Act of 1946, the Defense Production Act of 1950, the Mining and Minerals Policy Act of 1970, and the Employment Act of 1946 require stockpiling for identified civilian as well as military requirements. They believe stockpiles adequate to ensure full utilization of our industrial productive capacity are essential to safeguard the welfare of the Nation.

F. Council on International Economic Policy.11

The Council on International Economic Policy (CIEP) recommends the report be forwarded to the NSC. CIEP has a preference for stockpile Option E, regarding Option E as a generous hedge against an extremely unlikely calamity.

Although the initial efforts (first five years) to implement any one stockpile option as opposed to another will entail only relatively small differential cost considerations from the standpoint of the budget, CIEP states that the discussion of this feature in the report tends to obfuscate certain key issues. CIEP believes that there should be further interagency discussion on the proposed stockpile planning process.

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G. Department of Commerce12

The Department of Commerce prefers the stockpile policy guidance designated in the report as Option A. The Department notes that the constraints imposed on the development of military requirements by the Department of Defense result in an expansion of the military forces by the end of three years of war to only a little over four million persons. Commerce considers this to be a very modest force with which to prosecute a successful defense against a major land, sea and air war against a strong enemy. Commerce expressed the opinion that the assumptions made in the study of strict economic controls on the civilian economy could cause serious economic disruptions and result in the inability of the industrial base to support direct military requirements.

The Department of Commerce takes the position that Option A offers very moderate insurance against the risk of wartime materials shortages. At the same time, the goals of Option A can be attained only over an extended period of years, thus minimizing annual budgetary impacts.

[Omitted here is the table of contents and the body of the study.]

  1. Source: Ford Library, NSC Institutional Files (H-Files), Box 11, NSC Meeting, 8/9/76—Stockpile (1). Secret. Eckerd forwarded the study to Scowcroft under a covering memorandum, July 19. (Ibid.)
  2. Document 56.
  3. See Document 68.
  4. Attached, but not printed.
  5. Definitions of terms are: Value of inventory: the value of the stockpile inventory assumed December 1975 market prices. The starting value is $6.8 billion for all options. The value after five years, which is derived by adding intervening acquisitions and subtracting intervening disposals, ranges between $5.9 billion and $4.1 billion. [Footnote in the original.]
  6. After the issuance of the NSSM 228 report, Robinson conveyed the Department’s views, summarized below, in a July 24 memorandum to Scowcroft. (Ford Library, NSC Institutional Files (H-Files), Box 12, NSC Meeting, 8/9/76—Stockpile (4))
  7. Under Secretary of the Treasury for Monetary Affairs Edwin H. Yeo, III conveyed his Department’s views, summarized below, to Scowcroft in an undated memorandum. (Ibid.)
  8. After the issuance of the NSSM 228 report, Clements conveyed his Department’s view, summarized below, to Scowcroft in a memorandum, July 23. (Ibid.) Comments from the JCS were not found.
  9. After the issuance of the NSSM 228 report, Lynn conveyed his Office’s views, summarized below, to Scowcroft in a July 23 memorandum. (Ibid.)
  10. After the issuance of the NSSM 228 report, Assistant Secretary of the Interior William L. Fisher conveyed his Department’s views, summarized below, to Scowcroft in a memorandum, July 23. (Ibid.)
  11. After the issuance of the NSSM 228 report, Gorog conveyed the CIEP’s views, summarized below, in a July 23 memorandum to Scowcroft. (Ibid.)
  12. After the issuances of the NSSM 228 report, Under Secretary of Commerce Edward O. Vetter conveyed his Department’s views, summarized below, to Scowcroft in a memorandum, July 22. (Ibid.)