Weidenbaum vs. Weinberger -- defense battle goes on
Defense Secretary Caspar W. Weinberger and Murray L. Weidenbaum are at it again: battling over the level of defense spending.
When Dr. Weidenbaum was chairman of the President's Council of Economic Advisers, he fought unsuccessfully, on economic grounds, to limit the speed of the defense buildup. Mr. Weinberger won his struggle to win presidential approval for growth rates in weapons production more rapid than at the peak of the Vietnam war buildup.
Now that Weidenbaum is back in academia, the battle between the two continues. This time, though, it is for public and congressional support, perhaps because the defense budget is becoming less sancrosanct. In fact, once the election is past, Congress may look at defense with a more suspicious eye.
In any case, last Thursday the defense secretary accused the Soviet Union of launching a new arms race. This, he added, justified the administration's five-year, $1.6 trillion rearmament effort.
The next day, Weidenbaum, now back at Washington University, St. Louis, charged that the administration has offered ''little justification'' of the economic feasibility of its sharply increased defense buildup. Official projections of future military outlays, after removing the impact of inflation, have risen successively during the last two years from 5 to 7 to 9 percent or more per year.
He told a conference on the economic consequences of government deficits: ''Without prejudging the results, intensive analysis should be given to the military budget, comparable to the tough-minded attitude quite properly taken toward many civilian spending activities of the federal government.
''Surely,'' he continued in his prepared text, ''reducing the extent of cost overruns and bottlenecks in defense production will help to maintain the necessary support for the strengthened national defense that is needed in the dangerous world in which we live.''
Weidenbaum sees potential capacity problems for various sectors of industry as the defense buildup picks up momentum. So, he reckons, ''a given cutback in nominal military spending would actually result in less than a proportional reduction in real procurement outlays. This would come about because of reduced price pressures on military purchasing generally.''
In other words, Weidenbaum is saying that less haste would make for less waste, or to put it another way, more bang for the buck.
Dr. Weidenbaum stressed that this issue is not a debate between hawks and doves. It is, rather, over how rapid an expansion in military spending is desirable.
In this regard, Weidenbaum notes that because of the current recession and the substantial amounts of excess capacity in American industry, there is likely to be adequate industrial capacity, at least for the next year or two, to meet both military and civilian needs. But what, he asks, will be the situation in the middle of the decade when significant economic growth may coincide with the peak of the military buildup?
He sees a danger of prices escalating in some industries where defense demand is large, of possible delays in the delivery of military goods, of temporary crowding out of private investment, and of increased imports by private companies seeking to meet the demands of both civilian and military buyers.
Weidenbaum draws on some research by Data Resources Inc. (DRI), an economic consulting firm, to show what industries will be growing rapidly to serve defense requirements. Many will be growing at double-digit speed from 1982 to 1987 (see table).
Another DRI study, noting that the nation has not experienced since 1948 such a period of sustained growth in defense spending as that now planned, concludes there could be adverse implications in terms of costs and lead times.
A Commerce Department study found that should further capacity expansion not take place in some defense industries, meeting projected 1985 requirements would mean using outmoded, economically inefficient capacity. This would increase costs and prices.
Picking a bad case, Weidenbaum noted that requirements for lead smelting and refining are projected to rise by 12 percent from 1979 to 1985, but economically efficient capacity is estimated to decline by 4 percent.
Some of the nation's basic metal processing industries, this study also noted , will likely need to buy abroad to meet the stepped-up military demands. For example, the elecrometallurgical products industry met 27.6 percent of its needs with imports in 1979. That foreign dependency is anticipated to increase to 45 percent by 1985.
Weidenbaum concludes that an adjustment of scheduled defense outlays to conform more closely with expected domestic production capabilities would not only be more efficient: It would slow down the rate of increase in defense spending and thus lower projected deficits.
How defense industries will grow
Projected percentage increases, 1982-87 Industry Annual increase Annual increase in total output in defense output Radio and TV communication equipment 11.2 15.7 Aircraft 12.8 18.6 Aircraft engines and engine parts 13.0 16.3 Aircraft parts and equipment 11.2 14.7 Complete guided missiles 11.5 15.2 Electronic components 11.2 17.2 Tanks and tank components 22.6 27.1 Ammunition, excluding small arms 15.0 15.2 Motor vehicles parts and accessories 6.3 20.5 Motor vehicles 6.7 27.8 Other ordinance and accessories 13.5 14.4 Communications, excluding radio and TV 6.9 10.3 Semiconductors 13.7 20.2 Miscellaneous machinery 6.9 15.3 Electronic computing equipment 12.6 16.8 Miscellaneous plastic products 12.6 16.8 Miscellaneous plastic products 8.5 17.3 Primary aluminum 7.3 17.1 Plastic materials and resins 8.8 17.8 Telephone and telegraph equipment 11.5 16.4 Metal stampings 11.5 16.4 Metal stampings 7.0 18.6 Industrial trucks and tractors 9.9 14.1 Iron and steel foundries 4.3 13.2 Source: Data Resources Inc.