EPOSITED BY THE UNITED STATES OF AMERICA [No. 64] HEARINGS ON MILITARY POSTURE AND H.R. 13456, TO AUTHORIZE APPROPRIATIONS DURING THE FISCAL YEAR 1967 FOR PROCUREMENT OF AIRCRAFT, MISSILES, NAVAL VESSELS, AND TRACKED COMBAT VEHICLES, AND RESEARCH, DEVELOPMENT, TEST, AND EVALUATION FOR THE ARMED FORCES, AND TO MAINTAIN PARITY BETWEEN MILITARY AND CIVILIAN PAY, AND FOR OTHER PURPOSES HOUSE OF REPRESENTATIVES, COMMITTEE ON ARMED SERVICES, Washington, D.C., Tuesday, March 8, 1966. The committee met at 10:20 a.m., the Honorable L. Mendel Rivers, chairman, presiding. The CHAIRMAN. Let the committee come to order. Members of the committee, I understand that you had a good meeting with Admiral Raborn, the Director of CIA, on yesterday. I will be interested in reading that transcript. Today we have the pleasure of having with us Secretary of Defense McNamara and the Chairman of the Joint Chiefs of Staff, General Wheeler. As you know, and as Mr. Philbin indicated yesterday, it is my hope that we can complete these hearings in expeditious fashion, perhaps in about 2 weeks. That is why I have asked the Secretary to cooperate with us, and he has in getting this material to us so we can have access to it and know the general way things would probably go as we went along. It is my suggestion that we let Secretary McNamara proceed with his statement to some appropriate breaking point, at which time he will stop and we will question him prior to his continuing. I think we should continue this process throughout the hearings. Secretary McNamara and General Wheeler, we are glad to have you with us today and I suggest that you, Mr. Secretary, proceed with your statement at this time. Secretary MCNAMARA. I think we can break the discussion of the statement into two parts, the first part dealing with the introduction and the strategic offensive-defensive forces, these being the foundation of our deterrent; the second part treating with the remainder of the statement. On that basis I would like to present the first two sections of my statement, highlight certain portions and submit to your questions on that material. The CHAIRMAN. That sounds all right, and I understand that you have an appointment. When we reconvene this afternoon it will be at 2:30. 50-066-66-No. 64 We will proceed that way, Mr. Secretary. We are glad to have both you and General Wheeler, and we will proceed in this fashion, and you may begin. Secrtary MCNAMARA. Thank you very much, Mr. Chairman. Mr. ARENDS. Are you going to refer to your charts when you go through here, and refer to the pages? Secretary MCNAMARA. I am, Mr. Arends; I will give you page numbers and tell you what portions of the page I am referring to. But, first, I believe it would be helpful if you would turn to the first table in the back of the statement, which summarizes the financial budget for fiscal 1967 and compares it with the budgets of the years 1961 through 1966. I will comment on the total budget as shown on that table. The tables have been bound separately, and I think you can separate them from the remainder of the text, and have them in front of you. We will be referring to them periodically. The CHAIRMAN. The tables are here in the front of the book, gentlemen. Secretary MCNAMARA. On table 1 you will see the budgets of the fiscal years 1961 through 1967. I want to draw your attention to the line labeled "Total expenditures," about a third of the way down the page. On that line you will see in the last column under fiscal year 1967, the figure $58.3 billion. This is the estimated total expenditure for fiscal year 1967 associated with the program that we are presently presenting to you. The CHAIRMAN. This is over and above the 4.8, of course? Secretary MCNAMARA. The total expenditures for fiscal 1966, including the effect of the 1966 supplemental, is shown in the second from the last column. The CHAIRMAN. Is that 54.2? Secretary MCNAMARA. $54.2 billion is the estimated expenditure for 1966. Mr. BATES. This is total? Secretary MCNAMARA. This is the total including the fiscal year 1966 effect of the supplemental; that is correct. These two figures, $54.2 billion and $58.3 billion, while large in absolute terms are smaller in relation to our gross national product than any of the fiscal years 1961, 1962, 1963, or 1964. The 1966 and 1967 defense expenditures, as a percentage of gross national product, are 7.7 and 7.8 percent, respectively. Those percentage figures don't show on your table. The 7.7 and 7.8 percent of the gross national product, which is represented by the budgets of 1966 and 1967, are lower than any of the years from 1960 to 1964. In each of those years the expenditures ran between 8.2 and 8.9 percent of the gross national product. Mr. PHILBIN. Mr. Secretary, what gross national product are you referring to, which one? Secretary MCNAMARA. Fiscal 1967. Mr. PHILBIN. Fiscal 1967. What do you anticipate it will be? Secretary MCNAMARA. It will be well over $700 billion. The CHAIRMAN. You believe it will be over $700 billion? Secretary MCNAMARA. I believe so. Mr. PHILBIN. Seven percent of the gross national product? 7289 Secretary MCNAMARA. 7.8 percent of the gross national product, which is less than any of the 5 fiscal years 1960 to 1964. I mention this because it relates to the question of whether our Nation can afford to do what we are doing. The answer is an unequivocal "Yes." Mr. PHILBIN. In other words, we can have both the guns and the butter? Secretary MCNAMARA. I believe so, sir, and I believe if it becomes. necessary to have more guns, and more money for more guns, we shouldn't hesitate to either request it or appropriate it. Mr. BATES. That doesn't include family housing, apparently. Secretary MCNAMARA. The 1967 request does not contain a family housing construction program. The CHAIRMAN. That is where you are vulnerable. Secretary MCNAMARA. Well, yes, and it isn't lack of money that stands in the way of the housing program; it is another problem, the construction industry is overextended. Mr. BATES. That is the same in every other field of endeavor, where we are throwing any money into any kind of program? Secretary MCNAMARA. The point I want to make, Mr. Bates, is not a contradictory one to your view. It simply is that our Nation can afford what we are doing in southeast Asia today, contrary to the statements that have been made by some people before other committees of the Congress within the past 2 weeks. The CHAIRMAN. We will get around and question the Secretary on that at the proper time. I want to be sure about that $700 billion, because I have been throwing that figure around myself, that in 1966 we expect that our GNP to be at least in the neighborhood of $700 billion. I just wondered how accurate I have been. Secretary MCNAMARA. Well, in fiscal 1966, the GNP will be somewhat over $700 billion. Some estimates place it as high as $710 billion. And in fiscal 1967 the estimate is well in excess of $700 billion, about $745 to $750 billion. Mr. ARENDS. May I ask one question. You are referring to both the 1966 and 1967 budget. Where does the supplemental show up in this? Secretary MCNAMARA. The supplemental is in the third column from the right, Mr. Arends. It is labeled SEA-SUPPL, southeast Asia supplemental. Do you see the $3.9 billion in the total expenditure column, and above that is -$8.4 billion and above that is $12.3 billion? That $12.3 billion is the new obligational authority. Mr. BATES. Where is the adjustment to expenditures? Secretary MCNAMARA. The $12.3 billion supplemental comes hopefully within, say, a month, say by the 1st of April, and between the 1st of April and the 1st of July we can actually spend only $3.9 billion of the $12.3 billion. This is in addition to the basic fiscal 1966 budget expenditures. year Mr. ARENDS. This is the point I want to get clear. Secretary MCNAMARA. The $54.2 billion for 1966 includes the expenditures that are related to the supplemental appropriation. Mr. BATES. $3.9 and $1.6 billion. Those are the only two factors you are going to add this year and next year out of the $12.3 billion? From the $12.3 billion, you took off $8.4 billion, because that will not be spent in the fiscal year. Secretary MCNAMARA. That is essentially right. Mr. BATES. Next year you have added $1.6 billion? Mr. BATES. That is a total of $5.5 billion, out of $12.3 billion. Secretary MCNAMARA. Well, no, because you see you are raising the budget so fast from $50.5 billion in new obligational authority in 1965 to $63.3 billion in 1966, and $59.9 billion in 1967. There is a lag there in the rise of expenditures, Mr. Bates. Most of the $12.3 billion will be spent before the end of 1967, but some of the 1967 funds of $59.9 billion will be spent in later years you see. Mr. BATES. You still have the amount in the 1967 budget not spent, or part of the 12, one or the other. Secretary MCNAMARA. You are quite right. Therefore, the new obligational authority not translated into expenditures in the same fiscal years rises during this period when there is such a rapid buildup in NOA. If I may say one more word about the general financial position: On the balance of payments, which is a matter of concern to us as I know it is to the other Members of Congress, you will recall that the net foreign exchange cost of defense operations in fiscal 1961 was $2.8 billion. We promised President Kennedy we would cut that by a billion dollars between 1961 and 1963. We did so; and in 1963 the net foreign exchange cost of defense program was $1.7 billion. We thought it possible to reduce it further. We were able to drop it to $1.4 billion in fiscal 1965. It will rise in 1966 and 1967 because of our southeast Asia operations, and rise rather substantially. We are doing everything we can to hold it down, but with the tremendous expenditures, particularly on construction, in that area, our foreign exchange costs for the whole Department are bound to rise substantially, and I wanted you to be aware of that. Mr. STRATTON. Could I ask one question on these tables here? The CHAIRMAN. Go ahead, Mr. Stratton. Mr. STRATTON. I don't understand the first line totals and then the second line of totals. For example, under the $3.9 billion there is another figure of $11.9 billion, and the total there is $66.5 billion instead of $54.2 billion. Secretary MCNAMARA. Yes. Well, start with the $3.9 billion, and immediately above it is $8.4 billion. This is the amount of the obligational authority that isn't translated into expenditures during fiscal year 1966. Then the next figure above that is $12.3 billion. That is the total new obligational authority. Then above that is a financing adjustment of $400 million, and above that total obligational authority of $11.9 billion. That is the amount the services. actually have to work with, including new obligation authority, and obligation authority from past years that can be applied to programs in the current period. Mr. STRATTON. I see. Secretary MCNAMARA, That $11.9 billion is split by service in the next block of figures below. Mr. STRATTON. That is the same thing? Secretary MCNAMARA. That is the same thing split a different way by service. Mr. STRATTON. Thank you. Secretary MCNAMARA. Could we then go to my statement, Mr. Chairman. The CHAIRMAN. You go right ahead. (Secretary McNamara's statement follows:) STATEMENT OF HON. ROBERT S. MCNAMARA, SECRETARY OF DEFENSE Mr. Chairman and members of the committee, we are here today to present our Defense program projections for the next 5 years and our budget proposals for the coming fiscal year. My prepared statement is arranged essentially in the same manner as last year. Attached to each copy is a set of related tables which you may wish to follow as we proceed through the discussion. As has been my practice in the past, I will attempt to call your attention to the more important program changes which have occurred since last year, particularly those relating to our effort in southeast Asia. In order to provide in one place a complete discussion of the southeast Asia situation as it affects the overall defense program, I have treated the fiscal year 1966 supplemental as an integral part of this statement even though this entails some duplication of the content of my earlier statement on that supplemental. Other Defense Department witnesses will present the details of our financial requirements for fiscal year 1967 later in these hearings. There is one important change in the coverage of the Defense program and budget this year which deserves particular mention. We have included in both the fiscal year 1966 supplementals and the fiscal year 1967 budgets of the military departments the requirements for the support of the South Vietnamese Armed Forces and other free world military assistance forces engaged in that country. These requirements have heretofore been financed in the military assistance program. However, now that large U.S. forces and other free world military assistance forces (e.g., Korean) have joined in the defense of South Vietnam, the maintenance of separate financial and logistic systems for U.S. and military assistance forces is proving to be entirely too cumbersome, time consuming, and inefficient. The same problem was encountered at the outset of the Korean war. It was solved, then, by programing, budgeting, and funding for all requirements under "military functions" appropriations and providing a consolidated financial and supply system for the support of United States, Korean, and other friendly forces engaged in that effort. This arrangement gave the field commanders maximum flexibility in the allocation of available resources and improved the support of forces employed. We are proposing essentially the same solution for the problems now being encountered in South Vietnam. By shifting responsibility and funding to the military departments, we will be able to achieve: (a) Increased efficiency resulting from the elimination of parallel supply pipelines to Vietnam and stockages of materiel within Vietnam; the consolidation of programing, budgeting, and funding for materiel and services required by U.S. and military assistance forces; and the elimination of detailed accounting and |