Defense spending is shaping up as a fiscal Frankenstein's monster for the Carter administration -- quite apart from its impact on military preparedness.
It could get out of hand, rise well above the newly elevated level estimated for it in the fiscal 1980 budget that will go to Congress tomorrow and wreck the administration's drive to cut the federal deficit and inflation.
The problem is the Pentagon's ominously large backlog of money, just sitting there waiting to be spent.
Appropriated but unspent defense dollars have been piling up for several years. Fenced off in the Treasury and on call to Pentagon contracting officers, they stand at about $75 billion.
Of this total, $17 billion has yet to be obligated in the form of contracts, much less spent. The remaining $58 billion, however, already is earmarked for payouts under multi-year contracts with the defense industry.
Were the Pentagon to pick up the pace of such payouts -- as it usually does when the economy turns down and contractors put pressure on military disbursing offices for heightened flows of cash -- the administration would be up against a sudden upsurge of military spending.
"We'll be in deep trouble if the Pentagon figures out how to spend the money it already has," one administration official asserts. "Our drive for fiscal stability could go right down the drain."
The Pentagon has not been deliberately hoarding its money against a rainy day. Much of its backlog is inevitable -- the product of the growing congressional practice of appropriating in any one year all the funds that the Pentagon needs to honor contracts stretching over three to five years for some major weapon systems such as warships.
"Our unobligated and unexpended balances represent good management," a Pentagon budget official claimed. "Weapons are very costly and complex. They take a long time to produce. We spend as we go, and we must have a ready reserve of appropriations."
But this does not explain -- or address -- why the appropriations backlog has ballooned beyond normal bounds in just the past few years. It has grown by more than $10 billion, for example, in just the past year.
The bloating began in the mid-1970s when President Ford requested, and Congress granted, hefty dollops of appropriations on top of inflation. The Pentagon was not geared up to spend them. In consequence, the growth appropriations just languished in the Treasury.
Moreover, during that period, the Pentagon overestimated the production capacities and rates of some major contractors, such as those for tanks and ships, and was forced to hold back the funding of such weapons until the contractors could catch up.
Since then, its pace in paying out those bulged appropriations of 1975 and 1976 has not kept up with the subsequent ever-rising appropriations heaped on top of them. In fact, as a result of the time limits that Congress places on certain classes of appropriations each year, the Pentagon has been forced to return about $3 billion of lapsed appropriations to the Treasury's general fund since 1976, according to House Budget Committee calculations.
That committee is preparing to spotlight the Pentagon's simmering kettleful of cash this year as it seeks to hold down the defense budget. It will get help from the defense subcommittee of the House Appropriations Committee.
The new, liberal chairman of that subcommittee, Rep. Joseph P. Addabbo (D-N.Y.) says flatly: "There is no question in my mind that defense has been heavily overfunded in recent years. This has reduced the money in the federal budget that has been available for human needs -- in areas such as housing, education and health."
The Carter administration's new federal budget goes right to that point. Although the budget clamps a no-growth appropriations and spending rein on domestic departments and agencies, it is downright openhanded with the Pentagon.
Defense is earmarked in the budget for $135.5 billion of new appropriations -- an inflation-discounted growth of about 1.5 percent over the level of the current fiscal year. At the same time, the budget pegs fiscal 1980 defense spending at $122.8 billion -- a solid 3 percent of real growth over this fiscal year's estimated $112 billion of Pentagon outlays.
These growth percentages are based on the administration's assumption that Congress will approve its request for $4 billion of fiscal 1979 supplemental defense appropriations. If Congress does not, then the real growth of defense appropriations and spending as set forth in the fiscal 1980 budget will calculate out at even higher rates.
In any case, the administration's fiscal 1980 spending figure is at best an estimate, at worst a guess. Part of it will be derived from new appropriations. But a significant fraction will come from old ones in the backlog -- a very uncertain wellspring.
For instance, the Pentagon will have spent in the current fiscal year only about $6 billion of the $30 billion newly appropriated for procurement. But it also will have spent an additional $17 billion out of prior-years procurement funding by Congress.
Given the backlog's pent-up potential to drive up near-term defense spending at an unbidden and unanticipated rate, the administration's fiscal 1980 spending estimate could well turn out on the low side, at a time when the addition of even a few billion dollars would severely disjoint its inglation-fighting game plan.
"We may be seeing it start to happen already," warned a defense budget analyst on Capitol Hill. He points out that in recent years, as the appropriations backlogs have been building up, the Pentagon has spent about $5 billion less each year than successive defense budgets had estimated it would spend.
"But the pace of spending is picking up, and we now may be heading for spending overages instead of short-falls," he said. "Carter's 3 percent growth projection is looking very low."
This fiscally forbidding prospect was the backdrop for last year's long-running battle between the Defense Department and the Office of Management and Budget over the magnitude of new appropriations that President Carter should request for defense in the fiscal 1980 budget.
OMB argued that Carter could honor his commitment to the European North Atlantic Treaty Organization allies to raise defense spending by 3 percent in real terms even if he were to hold the Pentagon dead even with inflation -- not a penny for growth -- in new appropriations.
The agency proposed forcing the Pentagon to draw on its leftover appropriations to attain the 3 percent growth of outlays. This would serve to cut the backlog, OMB reasoned.
The Defense Department fought back. It argued that stifling the growth of new appropriations would have a miniscule impact on the backlog and might lead instead to a drawdown of the future military spending wholly inherent in new appropriations.
Some officials believe, however, that the Pentagon's most telling point was a political one: that the NATO allies, the Soviet Union and certain U.S. Senate hardliners crucial to the ratification of the SALT treaty this year might suspect Carter of playing numbers games with the difense budget, and interpret this as a sign of weakness.
At any rate, even though Carter did not grant the Pentagon all the appropriations growth it sought, it won the battle inside the administration. But maybe not the larger war.
Congress, coming off political campaigns in which inflation and federal spending were the overriding issues, may be generally in the mood to whack at the Pentagon in return for the daministration's whacking at the domestic agencies.
Addabbo, who inherits the Defense Appropriations Subcommittee from the retired George Mahon, certainly will give it a try from his new power base.
"We've been raising the defense budget every year, and all we've been doing is subsidizing the appropriations backlog," Addaboo declared.
I want to give the Pentagon every weapon it needs, and I believe we can cut its budget by several billion dollars and still accomplish that," he said.
Meanwhile, the administration is left to hope that the stored-up defense appropriations do not come tumbling out into the economy at the wrong time.
"We're in a situation that is comparable to piling more and more hay into the loft of an old barn until the rafters finally break," an administration source said.