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DEPARTMENT OF DEFENSE APPROPRIATIONS FOR 1960

HEARINGS

BEFORE THE

SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS
HOUSE OF REPRESENTATIVES

EIGHTY-SIXTH CONGRESS

FIRST SESSION

SUBCOMMITTEE ON DEPARTMENT OF DEFENSE APPROPRIATIONS

GEORGE H. MAHON, Texas, Chairman HARRY R. SHEPPARD, California

GERALD R. FORD, JR., Michigan ROBERT L. F. SIKES, Florida

HAROLD C. OSTERTAG, New York W. F. NORRELL, Arkansas

MELVIN R. LAIRD, Wisconsin JAMIE L. WHITTEN, Mississippi

GLENARD P. LIPSCOMB, California GEORGE W. ANDREWS, Alabama

PHIL WEAVER, Nebraska JOHN J. RILEY, South Carolina

WILLIAM E. MINSHALL, Ohio
DANIEL J. FLOOD, Pennsylvania

KEITH THOMSON, Wyoming
ALBERT THOMAS, Texas
CHARLES A. BOYLE, Illinois

SAMUEL W. CROSBY, Staff Assistant to the Subcommittee

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COMMITTEE ON APPROPRIATIONS

CLARENCE CANNON, Missouri, Chairman GEORGE H. MAHON, Texas

JOHN TABER, New York HARRY R. SHEPPARD, California

BEN F. JENSEN, Iowa ALBERT THOMAS, Texas

H. CARL ANDERSEN, Minnesota MICHAEL J. KIRWAN, Ohio

WALT HORAN, Washington W. F. NORRELL, Arkansas

GORDON CANFIELD, New Jersey JAMIE L. WHITTEN, Mississippi

IVOR D. FENTON, Pennsylvania GEORGE W. ANDREWS, Alabama

GERALD R. FORD, JR., Michigan JOHN J. ROONEY, New York

HAROLD C. OSTERTAG, New York J. VAUGHAN GARY, Virginia

FRANK T, BOW, Ohio JOHN E. FOGARTY, Rhode Island

CHARLES RAPER JONAS, North Carolina ROBERT L. F. SIKES, Florida

MELVIN R. LAIRD, Wisconsin PRINCE H. PRESTON, Georgia

ELFORD A. CEDERBERG, Michigan OTTO E. PASSMAN, Louisiana

GLENARD P. LIPSCOMB, California LOU'IS C, RABAUT, Michigan

JOHN J, RHODES, Arizona SIDNEY R. YATES, Nlinois

JOHN R. PILLION, New York FRED MARSHALL, Minnesota

PHIL WEAVER, Nebraska JOHN J. RILEY, South Carolina

WILLIAM E. MINSHALL, Ohio JOE L. EVINS, Tennessee

KEITH THOMSON, Wyoming
JOHN F. SHELLEY, California

ROBERT H, MICHEL, Illinois
EDWARD P. BOLAND, Massachusetts SILVIO 0. CONTE, Massachusetts
DON MAGNUSON, Washington
WILLIAM H. NATCHER, Kentucky
DANIEL J. FLOOD, Pennsylvania
WINFIELD K. DENTON, Indiana
TOM STEED, Oklahoma
HUGH Q. ALEXANDER, North Carolina
CHARLES A. BOYLE, Illinois
ALFRED E. SANTANGELO, New York
JOSEPH M. MONTOYA, New Mexico

KENNETH SPRANKLE, Clerk and Staff Director

DEPOGITED EI THE WTED STATES OF AMERICA

DEPARTMENT OF DEFENSE APPROPRIATIONS FOR 1960

THURSDAY, FEBRUARY 19, 1959.

FINANCIAL PLAN FOR THE FISCAL YEAR 1960

WITNESSES W.J. MCNEIL, ASSISTANT SECRETARY OF DEFENSE (COMPTROLLER) H. R. LOGAN, ASSISTANT DIRECTOR OF BUDGET, OFFICE OF THE

ASSISTANT SECRETARY OF DEFENSE (COMPTROLLER) MAJ. GEN. DAVID W. TRAUB, DIRECTOR OF BUDGET, OFFICE OF

THE COMPTROLLER, DEPARTMENT OF THE ARMY REAR ADM. G. F. BEARDSLEY, DEPUTY COMPTROLLER, DEPART

MENT OF THE NAVY REAR ADM. LOT ENSEY, ASSISTANT COMPTROLLER, DIRECTOR OF

BUDGET AND REPORTS, DEPARTMENT OF THE NAVY LYLE S. GARLOCK, ASSISTANT SECRETARY OF THE AIR FORCE (FM) BRIG. GEN. R. J. FRIEDMAN, DIRECTOR OF BUDGET, COMPTROLLER OF THE AIR FORCE

Mr. MAHON. The committee will come to order.

We will now hear the Assistant Secretary of Defense, Mr. McNeil, who has an extraordinary grasp of the operations of the Department of Defense in all of its aspects.

Mr. McNeil, you have been appearing before the Appropriations Committee for a long, long time, and you have seen a lot of programs come and go. We have had some overall policy hearings w hich you have, of course, attended in part. You were here with Secretary McElroy and testified some at that time.

We are interested in policy, but we have to come down ultimately to the matter of dollars and cents and the actual writing of the appropriation bill.

I see here you have a prepared statement, and we will be pleased to listen to it. I have not had an opportunity to read it, but I do not have any doubt but that it is a well-documented statement which will be most helpful to the committee. I wish that you would just proceed in your own way and we will not interrupt you until you have completed your presentation.

Mr. McNeil. Thank you, Mr. Chairman. I might say that I have seldom appeared before your committee with such a wealth of talent as is sitting around me at the moment.

Mr. Mahon. We have observed the talent. You are very fortunate to be so well fortified, or monitored, I do not know which.

STATEMENT OF ASSISTANT SECRETARY OF DEFENSE W. J. MCNEIL

Mr. MCNEIL. Mr. Chairman and members of the committee, before presenting the usual résumé of the fiscal aspects of the 1960 Defense budget, it is believed a discussion of certain special areas may be helpful to the committee.

DEVELOPMENT OF THE FISCAL YEAR 1960 DEFENSE BUDGET

First, it may be useful to round out previous discussions before this committee on the manner in which the 1960 Defense budget was developed. It has long been recognized in the Defense Department that no one annual budget can be intelligently developed without reference to the past and current level of defense expenditures. This is one of the important considerations in determining the general order of magnitude of the budget for planning purposes because each annual budget, essentially, is just one increment of a sustained, longrange defense program.

Serious discussion of the general order of magnitude of the 1960 Defense budget started last summer. It was thought, then, that in view of the upward drift of prices and wages experienced in the previous 2 or 3 years, and the increasing cost and complexity of each new generation of weapons, the initial budget planning target for 1960 should be a little higher than the estimated 1959 expenditure level. This took into account the many other factors affecting the size and character of the defense program, which were discussed before this committee by Secretary McElroy and General Twining-such as the strength and weaknesses of possible enemies, now and in the future; the strength and weaknesses of our major allies around the world; the international situation as a whole; and the present and prospective state of military technology. It also took into account the general economic and fiscal situation in our own country.

Considering all the various factors affecting the defense programs, it was tentatively concluded that a figure of $41% billion in expenditures about a billion dollars more than the amount estimated for 1959—would provide a reasonably good starting point for the development of the 1960 budget.

In subsequent discussions between the Secretary of Defense and the service Secretaries it was decided, as a first approach, to allocate $41% billion in expenditures among the Army, Navy, Air Force, and Office of the Secretary of Defense as the initial planning objectives for basic budget submissions. As a logical point of departure these allocations were based on the proportion each service's expenditures bore to the total expenditure estimate for fiscal year 1959. At the same time it was agreed that the services could recommend additional programs for consideration within the remaining $500 million of the tentative expenditure target. It was expected that the total new obligational authority requested would approximate these expenditure objectives.

This approach was adopted by the Joint Secretaries in an effort to encourage all the services to include in their basic budget submissions the programs which they considered to be of the highest priority. It was expected that any additional programs proposed by each service would be of lesser priority and would be considered in relation to additional programs proposed by the other services.

Early in October the services and the components of the Office of the Secretary of Defense submitted their initial budget requests. The aggregate of their basic budgets totaled about $41.6 billion in expenditures compared with the $41/4 billion basic budget target. In addition, programs, involving another $1.6 billion of expenditures, were also submitted as compared with the $500 million set aside for such additional programs for all services combined. As a practical matter each service considered its own programs of such importance as to warrant the allocation of all or most of the $500 million. Thus the budgets submitted by the services totaled an estimated $43.2 billion in expenditures as compared with the $41% billion initial planning figure.

Associated with this $43.2 billion of expenditures, however, was a total of about $4874 billion in new obligational authority, $4272 billion in the basic budgets and about $6 billion for the additional programs. These totals include amounts for certain programs such as NikeZeus omitted by the services from both their basic and "add-on" budgets. The reason for the wide disparity between expenditures and new obligational authority arises from the character of the additional programs proposed. Most of the additional programs were in the procurement area, involving long-lead-time items for which expenditures in the first year would be very small compared to the total new obligational authority involved. By the same token, of course, the $48% billion of new obligational authority would have resulted in a much higher level of expenditures in succeeding years.

The point that I would like to make there is that the type and nature of the new programs, additional programs proposed, were such that they took a considerable amount of new obligational authority in 1960, but would result in only a limited amount of expenditures in the first year.

Early in the review of the services' budget requests it became apparent that the basic budgets included some programs of lower priority than those included in the add-on or augmentation requests. Accordingly, it was necessary to consider the budget requests in total instead of dealing with the basic and additional requests separately.

Throughout October and November and the early part of December there were numerous program presentations by the services to the Secretary of Defense, the Deputy Secretary of Defense and their principal military and civilian advisors, followed by lengthy discussions among all the parties concerned. In the later stages of this process the major elements of the program and budget were presented to and discussed with the President and his advisors.

An example of the things that I have in mind of that nature is the NIKE-ZEUS, which was submitted for about $875 million in the first submission of the Army. Later, after some work was done, recommendations were made that the level be about $700 million and that it go into production. This was followed by more study which indicated it would not be ready for production, but every reasonable effort should be made to speed the development and that would take about $300 million, which is the amount in the budget today.

It was through that kind of a process and discussion that the figure we submitted came into being.

In this manner there evolved a fiscal year 1960 budget calling for new obligational authority of $41.190 billion including $340 million

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