President Reagan's Office of Management and Budget has netotiated provisional 5 percent cuts in the spending plans of each of the military services for next year, according to a senior administration official. The cuts could be formally recommended if budgetary conditions warrant.
This move reflects growing concern in the OMB that the economy will not reach the 7 percent growth rate predicted for next year, which would mean much greater pressure on the budget. This concern has led to a closer look at defense, including a series of seminars arranged for OMB Director David A. Stockman, who wanted to learn more about defense programs. Stockman is pondering proposals for closing from 50 to nearly 200 military bases as one quick way to save money.
The 5 percent cuts negotiated with each of the services would add up to roughly $9 billion next year, if they were approved by Congress.
The administration has said nothing in public about restraining defense spending; this rhetoric all goes in the opposite direction. But behind the facade of unanimous support for a huge defense buildup, the administration is increasingly divided over how much really ought to be spent.
"Three or four months ago," an administration official said, "there was a feeling around here that we could afford the luxury of not scrutinizing defense as closely as we looked at other kinds of spending. That feeling is no longer operative."
Moreover, "it's understood" at the White House, according to a senior official, that if the administration's economic projections for 1983 and 1984 prove overoptimistic, defense spending will have to be cut back to help meet the politically important target of a balanced budget in 1984.
If this is understood at the White House, however, it is not understood in the Pentagon or on Capitol Hill, where plans for a steady expansion of at least 7 percent a year after inflation are now taken for granted. In fact, the Pentagon has come up with a recommendation that the rate of increase go up to 9 percent a year.
Secretary of Defense Caspar W. Weinberger took that recommendation to a top-level White House meeting last month, according to informed sources. But after making a formal presentation on the possible need to go to 9 percent, Weinberger asserted that he would invoke his reputed talents as a budget-cutter to meet the 7 percent target.
According to authoriative sources, Martin Anderson, director of policy development at the White House, subsequently suggested that 5 percent increases each year might be adequate.Anderson, an ardent defender of the all-volunteer Army, is said to feel that the Pentagon is trying to sabotage the volunteer force and bring back the draft by generally exaggerating the costs of an adequate national defense.
But when Anderson made his 5 percent suggestion at a meeting of top White House aides, he was told that the Carter administration used the same figure. "He didn't like being reminded of that," a source said.
According to some sources, both White House counselor Edwin Meese III and chief of staff James A. Baker III also are concerned about defense spending.
A few statistics may help explain these concerns. Despite the success of the White House drive to cut nondefense spending, and largely because of the popularity of the Reagan plan to cut taxes, the administration faces the danger of a 1984 deficit of $50 billion or more if the economy performs the way many forecasters now predict. It will take a booming economy in 1983 and '84 to wipe out that deficit.
At the same time, the administration's defense program calls for increases in outlays for defense of about $25 billion in '82, $35 billion in '83 and $30 billion in '84. Holding down those increases obviously would be one way to get closer to balancing the election-year 1984 budget.
As time passes, though, defense cuts become increasingly difficult, because expensive purchases are authorized far in advance, locking in outlays that can only be stopped by canceling entire programs, another expensive gambit. Moreover, there is currently strong congressional sentiment for increased defense outlays.
Stockman has been educating himself on defense issues over the last eight weeks at Saturday morning seminars with the career civil servants in OMB who specialize in military spending. Two more seminars are on Stockman's schedule.
Sources close to Stockman say that he has long been aware of the budgetary dangers of the big defense program, which the new administration adopted last winter as a matter of political urgency, without much careful consideration of its long-term budgetary implications. In his first months in office, though, Stockman chose not to delve into defense issues, largely because he was so preoccupied with his crusade to cut non-defense spending. But Stockman realizes that his successes in that crusade could be nullified by runaway spending at the Pentagon, according to these sources.
Stockman now has plans for two possible approaches to the one kind of military spending cut that can be made relatively easily: base closings.
One plan calls for conventional "realignments" of basing functions, resulting in the closing of 50 to 60 facilities around the nation for a savings of several hundred million dollars each year -- a tiny fraction of next year's $185 billion defense budget.
A bolder option that Stockman could propose would be to spend about $5 billion to build new, up-to-date and centralized military facilities, and then close 160 to 200 obsolete facilities around the country. Such massive closings would save $5 billion or more a year, according to federal officials.
Both options would evoke political howls, though the second one also would provide some politically useful pork in the form of base construction. But as one official acknowledged, pursuing the bolder plan could result "in the worst of both worlds" -- having both the new bases and the old ones, which would survive unless a forceful political campaign pushed the closings through Congress.
OMB has come up with other ideas for saving money in the Pentagon, but officials doubt they will soon be accepted. One is to stop giving big, across-the-board pay raises to all military personnel, concentrating instead in those areas where it is hardest to recruit and retain manpower. This could produce big savings, but Weinberger opposes the idea on principle, believing that raises should go to all troops.
One problem in trying to look ahead to 1984 is the Pentagon's difficulty in predicting its own outlays. In the current fiscal year, for example, defense spending will fall about $2 billion short of predicted and authorized levels. Officials don't know if this is a freak or a new trend. If outlays stay below estimates, then the problems caused by defense spending diminish. OMB has asked the Pentagon to try to make more accurate projections.