The Defense Buildup

Another choice, essentially the president's preference, was his commitment to a huge defense buildup, no matter what the budgetary consequences. OMB never had much influence on defense matters in Republican administrations; all had relied on the office of the secretary to provide most review of the services' requests. Having so much else to worry about, Stockman told himself that Cap Weinberger, once established in office, would take his famous budget-cutting knife to the DOD: "I think Cap's going to be a pretty good mark over there," Stockman told Greider. "He's not a tool of the military-industrial complex."^[43] Stockman misjudged both Weinberger and the president.

An exchange with Elizabeth Drew reveals Reagan's attitude in early 1980:

Drew: I ask Reagan if he thinks we can regain military superiority over the Soviet Union. "Yes," Reagan replies . "I think the Soviet Union is probably at the very limit of its military output. It has already had to keep its people from having so many consumer goods. Instead, they're devoting it all to this military buildup. I think it's the greatest military buildup the world has ever seen. I think it tops what Hitler did. And therefore, when people talk about an arms race, this doesn't mean that the Soviet Union escalate to twice what they're doing now. We're the ones who have actually played along with the treaties and, if anything, actually reduced our weapons." He continues, "Now, what I think Russians would fear more than anything else is a United States that all of a sudden would hitch up our belt and say, 'OK, Buster, we've tried this other way. We are now going to build what is necessary to surpass you.' And this is the last thing they want from us, an arms race, because they are already running as fast as they can and we haven't started running."

Drew: "Where are you going to get the money to pay for this military buildup?" Ronald Reagan: "Out of the economy."^[44]

Unlike Carter, Reagan refused to subordinate the defense budget to fiscal policy.

Jimmy Carter's FY82 budget called for 5 percent real growth per year

for five years. He also proposed a $6.3 billion supplemental for new (mainly inflation-related and pay) expenses for FY81. Many observers felt that Carter's request would be hard for Reagan to top. They were wrong. Reagan felt obliged to do significantly more. If Jimmy Carter wanted 5 percent, then that must not be enough.

Unfortunately "need" cannot be defined concretely. The formal DOD Planning, Programming and Budgeting System (PPBS) only encouraged the services to estimate need as broadly as possible in the planning and programming steps, leaving hard choices to the budget process. "No one knew in the Carter years what the real number would be," one DOD budgeter recalled, "but the general assumption was that the [planning figures] were never-never land."

Carter's final budget, even with 5 percent real growth, therefore proposed far less spending than his own administration's 1980 estimates of "need." The navy would get 121 new planes instead of 217; 80 ships over five years instead of 97. Some of these differences came from the military's special talent for inflation. An extreme example was the Phoenix missile: Carter's 1982 budget estimated that 72 could be purchased at almost the same cost projected for 210 a year before.^[45] Moreover, there are large economies of scale in defense purchases.^[46] Reagan's men argued that a much bigger buildup was more efficient and met a "need" already defined by the professional military.^[47]

Weinberger relied on the services to define need, downgrading his central DOD staff. He entered office with a "fix-up" package designed during the transition largely by a cadre of people working for Senator John Tower, new chairman of Armed Services, including appointees Richard Allen (national security adviser), Fred Ikle (undersecretary of policy in the DOD), Edward Rowney (chief arms control negotiator), John Lehman (secretary of the Navy), and a few others. "When Weinberger took over," a participant recalled, "the report was complete, the services had it, and their submissions reflected those priorities." Stockman accepted not only the package but also, as his associate director for national defense, Dr. Bill Schneider, a former aide to Jack Kemp who was "totally plugged into" the Tower group. The package was mainly procurement increases on existing weapons, with a 3 percent supplemental increase for FY81; on that new base, it represented not a 5 but a 15 percent real increase in budget authority for FY82.

Instead of Jimmy Carter's $200.4 billion, DOD wanted $226.8 billion. And it was almost all in procurement, raised from $49.1 billion to $68.8 billion.^[48] Newsweek described the result as "a gusher of cash that stunned even conservatives in Congress and quickly erased Secretary of Defense Weinberger's reputation as a ruthless enemy of fiscal excess." "Marveling at the display of largesse," a Pentagon official "joked that 'Cap the Knife' should be known henceforth as 'Cap the Shovel.'"^[49]

The "get well" package was nice, but for its planning the Pentagon needed some sense of what to expect in later years. Stockman also needed long-term defense numbers because he needed to project budget balance in the future. On January 30, he, his defense deputy Bill Schneider, Weinberger, and Undersecretary Frank Carlucci met to work out some ballpark figures. The discussion assumed the get well package for FY82. Because the economic forecast was not ready, they bargained in terms of real growth; they would translate that into concrete dollar amounts when the forecast was done. Frank Carlucci said 8 or 9 percent was the minimum necessary. Stockman, who knew enough to want more than Carter's 5 percent and expected Martin Anderson, "a flinty anti-spender on everything," to "go off the deep end" if they took Carlucci's number, suggested they split the difference—7 percent. Weinberger shed a few crocodile tears. "In light of the disgraceful mess we're inheriting," he replied, "seven percent will be a pretty lean ration." Then he agreed, swallowing Stockman whole in the process.^[50]

By his own account, Stockman missed the fact that 7 percent for the years after FY82, compounded upon the FY81 and FY82 increases, resulted in a 10 percent real growth rate per year from 1980 to 1986. Essentially, Stockman forgot to figure the first year into his calculations. The budget director not only didn't know he had been skinned, but he didn't realize that he and Weinberger were on opposite sides. Stockman thought he had agreed on "plug" numbers, but he anticipated that "Cap the Knife," once entrenched in the Pentagon, would find all sorts of fat to cut so those totals would never be met. Weinberger, however, saw a commitment to dollar figures that he could use ever after to justify requests. Not that he was opposed to finding "fat," but, if they found any, he and Carlucci figured they should be rewarded, allowing the savings to turn into more muscle.