THE NAVY department has hit upon a way to make its budget dollars seem to go further. Instead of buying cargo ships and naval planes, it plans to lease some of them from the private sector. The advantage to the Navy is that much of the cost will no longer show up in its budget. The disadvantage is that the net cost to the taxpayer will be considerably higher and that Congress will have less control over the defense budget.
Leasing allows the Navy to spread weapons costs over the 20 or more years that the lease runs rather than having to pay them as the ship is built. The owner of the ship can also give the Navy an apparently good price because of the big tax advantages he gets from rapid depreciation and investment tax credits. Much of the cost is thus hidden from view because it shows up as a tax loss to the Treasury rather than as a direct cost in the budget. Lease payments, moreover, are counted in the operations and maintenance budget, which attracts far less attention than the procurement budget in which weapons purchases are normally recorded.
Navy spokesmen claim that even when tax losses are counted, leasing is a good deal for the government. You don't have to understand all the dubious arithmetic or complicated lease and charter arrangements to conclude that can't be so. Nothing about the lease alters the cost of the ships or other weapons being acquired. Somehow or another the government must still pay it.
In order to shift part of the cost from the Navy's budget to the Treasury, the government has also had to involve two more middlemen in the deal-- the nominal ship owner and the operator who leases and charters them to the Navy. Under the agreements signed thus far these go-betweens will assume no risk, but they will still want some profit for their efforts. That means more costs.
There are, however, bigger issues than costs involved. The items that the Navy--and, it is said, the Air Force--plans to lease are not routine office equipment or supplies. They are expensive weapons that are not only of unique value to the armed services but central to their missions. Having these ships and planes owned and operated by private concerns raises questions of military control if hostilities break out. And having them purchased under long-term hidden-cost leasing arrangements seriously erodes congressional control over defense spending.
Ten years ago, when the Navy proposed a similar scheme, Congress--with the strong support of OMB and the Treasury--put a stop to it. This time the matter has only come to full light--as the result of a chance discovery by Rep. J. J. Pickle--after several leases have been signed. Congress owes it to itself and the taxpayer to tell the Pentagon to terminate those leases immediately and to prohibit this evasion of budget limits.