Melvin Laird took a different tact. He issued strict budgetary totals to the services each year and then allowed the services within the totals extensive freedom, a completely different approach from Mr. McNamara. This system, I feel, proved superior to the McNamara approach and probably resulted in better overall relationship of the forces and dollars and in the way they were spent. James Schlesinger continued the approach of established budget ceilings for each service, but he added an important innovation, the only Secretary since 1960 that did this. He established a rapport with the Services to obtain more bang for the buck. He worked out agreements with the Army and the Air Force to expand their combat forces while they, in turn, agreed to reduce their support costs or buy lower cost weapons to accommodate these changes. The result of these negotiated agreements was good for the country and probably for our pocketbook because by staying within the dollars available at that time, we were able to add three combat divisions and four fighter wings to the U.S. force structure. Harold Brown returned more to the McNamara model, aided and abetted by the zero based budgeting system which ultimately forced almost all decisions up to the level of the Secretary of Defense. Caspar Weinberger early in 1981 reached agreement with the budget director on a $32 billion increase to the 1981-82 Carter budget, which already had $20 billion in real growth in it. There was no strategy adopted and no clear set of priorities assigned. The military services were directed to provide programs in support of the higher budget levels with little guidance from the Secretary of Defense, in effect inviting each military department to follow its own predetermined priorities, which they are only too happy to do. From these different managerial styles, I rate the Laird and Schlesinger approaches as superior, given the uncertainty in all aspects of defense. Its realistic fiscal constraints early in the process are a real incentive to improve the quality of decisions and what we do with the dollars allocated to our defense. Looking to 1988 and 1989, I have a couple of points. There are two steps which I think are so important in converting defense funds into defense capability. We spend a lot of time on the first step, which is the level of defense budget, and we spend less time, in my view, on how well we spend it. That, to me, is a great need that we have as a nation. The second or a major failing of the budget process today involves the rhetoric versus the reality of the defense budget. I point out that every defense budget without exception has a number of items that are low priority that can be moved to the next year or 2 years out. The budget sent each year from the executive department to the Congress includes cut insurance to allow Congress enough to cut out and not hurt any of the defense programs. That is a conscious effort that goes on almost every year in the budget process. Chairman NUNN. When you really end up, though, taking very serious cuts in terms of stretching out programs and lowering the production rate, thereby raising the unit cost, something is really happening fundamentally to the budget. There has simply got to be some real damage done in that respect, does there not? Mr. STUBBING. Again, Mr. Chairman, that is the dilemma of defense and weapons. It is very hard to tell if that has any effect. It probably adds to the cost, but in many cases we add to the cost deliberately by carrying contractors for big bucks for many years until they get a new weapon contract. Those are conscious decisions that are made not in the national defense context but maybe in the sense of economic or political realities that we have to face, so that a lot of that goes on in defense all the time. What is wrong with the process, is that if you do have—I heard your opening statement, and I would agree with one of the points very strongly, that if we do start the process with numbers that are unrealistic, there is a much greater tendency to do a lot of things that are not so smart. If we had the realistic budgetary numbers from the beginning of the process that defense could expect to get for defense, a lot wiser decisions, in my view, would be made. More value would be obtained for any defense level. I believe that realistic fiscal constraints need to be applied to the entire defense planning program which will improve our defense capability each year. Recognizing that the approved defense budget for 1987 is almost 50 percent greater in constant dollars than it was in 1980, recognizing that our defense capability has increased far less than 50 percent, and recognizing that the Nation faces a severe fiscal crisis, I suggest that the defense budget for 1988-89 be held at the 1987 level in real terms. I concur with Dr. Korb on this point. Primary attention can then be given to improving the conversion efficiency of dollars into added capability. I suggest a couple of questions as you conduct your deliberations in the coming months that I think are important. First, greater emphasis be given to accelerating production of existing weapons while slowing the research and development on some newer systems now in development? Second point: Can a slower phasing plan be introduced for the large number of strategic programs being proposed at this time? Third point: Can personnel savings, both military and civilian, be achieved? Fourth point: Will administration officials and Members of Congress commit to convince our allies that they must assume a greater portion of our mutual defense burden in the future? I think these are critical questions as you conduct your deliberations. Then, in closing, in an arena in which uncertainty will always present a tight correlation between our defense strategy and the resources required, we can do a far better job in relating these two factors if we follow a couple of important guidelines. We must adopt a clearly defined national strategy with defined priorities that can be understood by all. We need realistic fiscal constraints, multiple year fiscal constraints, at the start of each DOD budget cycle. There must be congressional involvement in and support of the adopted strategy and its priority. Involving Congress is something we have not done in the past and we definitely should do in the future to have a greater consensus of agreement on strategy and resources. Finally, we need strong top level management in DOD to assure that priorities are indeed implemented using, as Mr. Schlesinger did, positive incentives wherever possible to insure compliance. Thank you. [The prepared statement of Mr. Stubbing follows:] PREPARED STATEMENT OF RICHARD A. STUBBING This hearing addresses one of the most important yet least understood aspects of our national security program-the linkage between our military strategy and the defense programs and resources. My comments reflect some 20 years experience in OMB reviewing the defense budget (1962 thru 1981). I believe these observations are still valid. Let me first address two myths about national security planning. MYTH 1.—Each Administration adopts an overall national defense strategy, defines the forces necessary to implement this strategy and totals up the associated costs to produce the budget for national defense. The reality is that while all Administrations since 1960 have declared a defense strategy, this strategy is not directly related to the forces and fiscal needs required for implementation. The closest we came to this in my years in OMB occurred in 1969 under President Nixon and the experience is instructive. A major interagency study of our defense needs was conducted involving high ranking officials from Defense, State, CIA, ACDA and OMB. The study grappled with the complexities of threat projections, the military capabilities of the US and its allies, the likelihood of future conflicts and the fiscal constraints faced by the nation. The study team found it relatively easy to devise alternative defense strategies, but could not reach agreement when it came to defining the forces and resource levels required to implement each strategy option. Wide differences erupted over the combat forces and related equipment needed for each option-with the cost estimates from the military services ranging up to twice as high as those prepared by the civilian analysts. These differences demonstrate the incredible complexity and high uncertainty which surround defense planning. Then Deputy Secretary of Defense David Packard became so frustrated with the pricing impasse that he simply split the difference between the civilian and military estimates to allow the study to be completed. President Nixon used this study in his decision to shift our defense planning strategy from a 22 wars to 12 wars and to establish fiscal planning levels for defense. Other administrations have declared shifts in strategy but without full consideration of the fiscal constraints. President Ford in 1976 decided to place greater emphasis on US conventional force needs outside of NATO with an emphasis on navy modernization; President Carter in 1977 slowed modernization of our strategic and naval forces while increasing funds for US forces in support of NATO. The Reagan administration conducted no comprehensive study of defense needs in its first year-instead an across-the-board spending increase for all aspects of our defense posture was pursued, on the assumption that US military capability lagged behind the Soviets in all areas; an NSC study conducted in 1982 confirmed these findings and endorsed a multiple war capability for US forces which the JCS rejected as impossible with planned forces. A major failing of most administrations in deciding upon a strategy for national security is that the US defense posture is considered and acted upon in isolation from the contributions of our Allies. The decision in the early weeks of the Reagan Administration to add massive amounts to the defense budget was made in isolation. Our Allies in NATO and Japan were not consulted beforehand to obtain their commitment to greater defense efforts. Consequently, they could, and did, slow their defense buildup-allowing the US military unilaterally to carry most of the burden of higher defense for the entire alliance. MYTH 2.-There is a clear relationship between an adopted defense strategy and the defense program which flows from this strategy. In reality the converse is true. The defense program and budget is a "bottoms up" process controlled by the military services in which their preferred force and weapons modernization programs are normally determined independently of any given defense strategy. This is particularly true of the major combat units preferred by each service-heavy armored divisions in the Army, carrier battle groups in the Navy, strategic bombers and fighter wings in the Air Force. This can be done be cause of the wide band of uncertainty regarding the force and weapon requirements required to carry out any given strategy. Several examples support this thesis. When the Kennedy Administration announced a commitment to enable US conventional forces to fight effectively in conflicts outside Europe, the only tangible results were a few small counter insurgency units dedicated to special operations. The rest of our ground forces changed little, retaining their primary emphasis on fighting a heavily armored foe in Europe. When the Nixon administration pushed the idea of simpler and more reliable weapons, only two programs-the F16 and the A10-followed this approach; most other new weapons programs continued to rely on advanced technology. Similarly, under the "Rapid Deployment Force" of the Carter administration, improved sealift capability became a top priority; the Navy, however, ranks sealift low in its priority and has done little since 1980 to improve its fast sealift capability required for rapid deployment of ground forces. Another indicator of the "bottoms up" nature of the defense program is the relatively constant share of the budget each military department receives. From 198486 the Army averaged about 26.2% of the DOD budget; for 1987-89 then proposed share averages 26.3%. The Navy averaged just over 34% in 1984-86; for 1987-89 its proposed shared is 33.7%. The Air Force averaged 34.5% of the DOD budget in 1984-86; its share slips to 33.2% in 1987-89 primarily due to the completion of the B-1 bomber program. Clearly, each military department considers its portion of the DOD budget as a critical concern and will fight to retain its share no matter what the overall defense strategy. In 1982 General David Jones summarized the budget process in these words: "the result of this tedious process is a defense budget that is derived primarily from the disparate desires of the individual services rather than from a well integrated plan based on a serious examination of alternatives." MANAGERIAL STYLES USED BY SECRETARIES OF DEFENSE Recognizing the large range of uncertainty between a given defense strategy and the forces/programs required to implement it, recent Secretaries of Defense have applied varying managerial approaches. Robert McNamara was highly critical of the Eisenhower administration for imposing "arbitrary" budget ceilings on defense. Instead, he mandated a predetermined force structure for each of the military services with no budget constraints to accompany the force structure guidance. (McNamara actually had secretly reached agreement with the Budget Director on an overall defense budget level.) This approach encountered severe problems-the military services prepared unconstrained budget requests, forcing the OSD to remove some 20-25% each year to reach the agreed budget level. Lacking any flexibility in force planning, the services decided to "gold plate" each new weapon developed-a practice which led to large cost growth and poor operating performance in many new weapons. Melvin Laird took another tack. Laird issued strict budgetary totals to the services each year. Within the totals the services had extensive freedom to spell out their programs and priorities-with Laird demanding prior approval in select major program areas. This system proved superior to the McNamara approach, as the military services were required to set their own priorities within established budgetary constraints. Total reductions by OSD staff to the service budget requests average 4.5%. James Schlesinger continued the approach of established budget ceilings for each military service and added an important innovation. He desired to obtain more "bang for the buck" and worked out agreements with the Army and Air Force to expand their combat forces while they, in turn, agreed to reduce their support costs or buy lower cost weapons. This use of negotiated agreements to improve overall combat capabilities within established fiscal constraints proved highly successful as the Army added three combat divisions and the Air Force added four fighter wings. Harold Brown returned more to the McNamara model. His approach, coupled with the zero budgeting system implemented by President Carter, meant that most defense decisions were once again escalated to the Secretary of Defense. Caspar Weinberger early in 1981 reached agreement with the Budget Director on a $32 billion increase to the 1981-82 Carter budget (which already contained $20 in real growth for the two years). There was no strategy adopted and no clear set of priorities assigned. The military services were directed to provide programs in support of the higher budget levels with little guidance from the Secretary of Defense. From these differing managerial styles, I rate the Laird and Schlesinger approaches as superior to the others. Given the uncertainty which encompasses all as pects of the defense program, realistic fiscal constraints early on will certainly provide the proper incentive for improving the quality of decisions. Also, innovative incentives such as those practiced by James Schlesinger can improve the defense capability obtained from any given defense program or budget level. THE DEFENSE BUDGET FOR 1988-89 AND BEYOND There are two steps in converting defense funds into defense capability-the level of the defense budget and how well we spend it. I believe too much time goes into determining the overall budget level and too little effort is applied to converting these dollars into improved capability. Much of the problem comes from the lack of a well defined national defense strategy, together with clear priorities for the military services to follow. A second major failing of the budget process involves the rhetoric vs. the reality of the defense budget. For example, the Secretary of Defense will argue that every dollar of the $303 billion defense budget for 1988 is urgently needed; yet, this budget and every budget sent to the Congress contains sizable amounts of "cut insurance"-low priority programs which can easily be deferred to 1989 or later. These funds permit the Congress to reduce the defense budget each year without any real impact on DOD priorities. Another example envolves the constant clamor that the Soviets are outproducing us in aircraft, tanks and other weapons, but the 1988 budget actually cuts the production rates of many key U.S. weapons, while at the same time providing a major increase in R&D for weapons that will not enter the inventory for some number of years. And at a time when the administration speaks hopefully of achieving an arms control agreement with the Soviets, the budget contains a full range of strategic program initiatives involving strategic bombers, land based missiles, sea based missiles and SDI. I believe that realistic fiscal constraints need to be applied to the entire defense planning and budget process to provide a better context for a defense program which will improve our defense capability each year. Recognizing that the approved defense budget for 1987 is almost 50% greater in constant dollars than in 1980 and that the nation faces a severe fiscal crisis, I suggest that the defense budget for 1988 and 1989 be held at the 1987 level in real terms. Primary attention can then be given to improving the conversion efficiency of dollars into added capability. I close with some questions that bear scrutiny in your deliberations: Can greater emphasis be given to accelerating production of existing weapons while slowing the R&D on some newer systems now in development? Can a slower phasing plan be designed for the large number of strategic programs being proposed? Can personnel savings, both military and civilian, be achieved? Will administration officials and Members of Congress commit to convince our allies that they must assume a greater portion of our mutual defense burden in the future? Chairman NUNN. Thank you very much, Mr. Stubbing. STATEMENT OF JOHN M. COLLINS, USA (RETIRED), SENIOR SPE- Mr. COLLINS. Frank Perdue, the chicken man, said it does not make any difference how well the chicken is cooked if it is not worth cooking to begin with. That finding fits the U.S. defense establishment perfectly. It makes no difference how well the operators operate unless the plans that they implement are worth implementing in the first place. The programs which the American people pay for out of their pockets at great expense are cost effective only if they support sound strategies. The worst kind of waste results when there is a mismatch, too often calculated in terms of national lifeblood as well as treasure. My invitational letter from you and Senator Warner asks whether our military strategy serves as an effective framework for development of defense policies and programs. The answer is not nearly |