President Reagan's decision to wipe out the Pentagon's projected 7.6 percent pay raise in October for the 2.1 million men and women in uniform represents the biggest setback Defense Secretary Caspar W. Weinberger has suffered since taking office two years ago, Pentagon officials said yesterday.
They said Weinberger has feared that denying the raises could discourage high quality young people from joining the all-volunteer Army, Navy, Air Force and Marine Corps, and prompt those already in service who possess the most critical and saleable skills to leave for private industry.
"Cap was really down about it when he came back from that meeting," said one defense executive after the Monday White House review when Reagan decided to go along with his Office of Management and Budget recommendation and give no pay raise to either military or civilian employes of the government for fiscal 1984.
"He fought for keeping in at least a 4 percent raise," said a knowledgeable administration official in describing Weinberger's last stand on the pay issue. Congress had approved a 4 percent raise for this year and recommended similar pay increases for fiscal 1984 and 1985.
Weinberger has been telling Army, Navy, Air Force and Marine personnel all over the world the past two years that their pay during previous administrations was "disgraceful."
He indicated that helping them keep pace with inflation was one of his solemn obligations as defense secretary.
Weinberger also told congressional committees that they either had to keep up military salaries or see the national experiment known as the All-Volunteer Force go to ruin. His message to lawmakers was that if they did not finance it generously, they would have to resign themselves to a return of the draft, which Weinberger and Reagan have opposed.
Until now, he had gotten his way with the White House and, with the exception of seeing the proposed 8 percent military pay raise halved last year, in Congress. At Monday's White House meeting the agenda turned out to be stacked against Weinberger, according to administration officials.
The first category put on the chopping block was so-called entitlements, officials said, including military retirement pay and veterans benefits. Once it was decided to trim there, an official said, a link was forged to the next item on the agenda, which was pay for active duty military people and government workers.
According to informed officials, the argument made was how could entitlements for military retirees and veterans be cut without forgoing projected pay raises for those on active duty as well?
Reagan, according to one official, saw the connection and "very reluctantly" agreed that pay raises had to be sacrificed for fiscal 1984 to help reduce the federal budget deficit. Once the president had the linkage in his mind, the official said, "Cap never really had a chance. It's the one big thing he has lost."
Forgoing pay raises for the 2.1 million men and women in uniform, the 993,000 civilians on the Pentagon payroll and roughly l million reservists who are paid for the weekends they train will save about $5 billion in spending in fiscal 1984, according to preliminary estimates. This is more than half the $8 billion spending reduction Reagan approved for the Defense Department in the reappraisal of his fiscal 1984 budget.
By scrapping the military pay raise, Reagan and Weinberger may have created a credibility problem with one of their staunchest constituencies, the military community. Weinberger realizes this, aides said, and is trying to limit the damage by passing the word that he will fight to get back some of the pay raise in next year's battle of the budget.
It is an open secret within the Pentagon that some military and civilian officials would rather have seen Reagan cancel or stretch out some weapons programs than endanger the administration's biggest military success story, the rejuvenated All-Volunteer Force.
Officials from the Pentagon and White House gave opposite views when asked if Weinberger went along with scrapping the pay raises in the conviction that Congress would restore them.
"The administration did the hardest thing for politicians to do, deny the boys their raises," said one Pentagon official. "Congress won't restore those raises. They'll go on from there and cut programs," meaning big ticket items such as tanks, ships and missiles. "This could get OMB the $20 billion cut they have wanted all along."
Weinberger said Tuesday that the defense budget would be reduced by $11.3 billion in budget authority--money Congress would appropriate for use in fiscal 1984 and later years--and $8 billion in fiscal 1984 spending.
Cutting more from the fiscal 1984 budget authority request would reduce spending in later years when OMB fears the deficit would be much higher than $200 billion unless drastic actions are taken now.
A White House official giving the opposite interpretation theorized that Weinberger expects that Congress will vote pay raises for the military this year and make up for it by cutting weapons accounts, something the lawmakers might do anyhow.
He conceded, however, that powerful lobbying groups which traditionally protect military benefits will be up against the argument that everyone--civilian government workers and military alike--must make unusual sacrifices this year to help the national economy.
The fact that Weinberger has started talking about the need for "sacrifice" suggests he is not playing the Washington game but is trying to salvage as much as he can from his first big defeat in the struggle for the mind of the president.