Military and Social Spending

…With virtually all of American business clamoring for an increase in military spending, the Administration responded by initiating the biggest sustained peacetime buildup in U.S. history. Over [Fiscal Year] 1980-85, real military spending would increase 39 percent, while national defense budget authority would increase 5 3 percent." As a share of GNP, military outlays rose from 5.2 to 6.6 percent; as a share of the federal budget, they climbed from 23 to 27 percent.

Significantly, the Reagan military budget was increasingly "weapons- driven," meaning that it devoted a larger and larger share of budget authority to "investment" (weapons procurement, research and development, military construction, warhead production), as opposed to "consumption" (operations and maintenance, personnel, and other miscellaneous) functions. In real terms, Department of Defense (DOD) budget authority for "investment" would increase 95 percent over the FY 1980-85 period, while authority for operations and maintenance increased "only" 37 percent and personnel 13 percent. As a consequence, investment rose from just over a third (38%) to just under a half (48%) of the vastly expanded total.

The investment focus of the Reagan buildup immensely increased the share of DOD's budget that was "uncontrollable"-the area where funds are obligated to already existing contracts. Over FY 1980-85, as the government locked into a growing number of virtually uncuttable procurement contracts, uncontrollable outlays rose from 27 to 36 percent of the DOD budget. Counting in the additional 43 percent of overall defense outlays that went to salary and retirement benefits for military and civilian personnel, which are also very difficult to cut, this meant that by the end of Reagan's first term the "uncontrollable" share of the military budget was about 80 percent, and rising.

The central purpose of the Reagan buildup, of course, was not the satisfaction of particular military contractors, but the satisfaction of more general business demands to enhance the U.S. capacity to project force abroad--to press and defend private American interests in an increasingly volatile world economy. Still, what may be thought of as a global subsidy to U.S. business was also a particular subsidy to sectors of that business. Significantly, the Reagan Administration never proposed extensive rethinking of American force structures. Instead, it mainly sought added missions and redundancy in weapons systems, piling contract on contract to domestic weapons producers in a rapid "modernization" of existing forces and in efforts advertised as increasing their "readiness."

A striking example of this was defense spending on strategic weapons. Contrary to Reagan's repeated claim that the United States had "unilaterally disarmed" during the 1970s, there had in fact been a substantial modernization and expansion of U.S. strategic forces during that period. In 1970, the United States had 4,000 strategic warheads. By the time Carter left office, it had 9,000 and the newer forces were substantially more accurate than the ones they replaced. Reagan inherited a strategic force capable of delivering, with a nearly 8o percent kill probability, more than 3,660 nuclear warheads against a wide range of "aiming points" in the Soviet Union, even after a massive Soviet first strike. Such forces provided an extremely high level of deterrence, and gave no evidence of "unilateral disarmament" by the United States. Nevertheless, the Reagan Administration came to office arguing that the U.S. strategic triad--the combination of air-, land-, and sea-based nuclear weapons-suffered from a "window of vulnerability," and even after its own Scowcroft Commission debunked this theory, and after agreement had been reached among the intelligence services that Soviet military spending during the previous decade was considerably less than previous estimates, it continued with a massive nuclear buildup.

Over its first term, the Administration's nuclear buildup rose at nearly three times the rate of the overall defense program. Over fiscal 1980-85, budget authority for strategic weapons grew from $9.4 to $35.3 billion, an increase Of 276 percent, while authority for major conventional and tactical weapons rose 111 percent. Such massive increases in the strategic program increased the share of the overall weapons budget held by strategic weapons; by 1984, for the first time in U.S. history, spending for strategic weapons exceeded spending on tactical and conventional weapons. Despite the huge sums spent, however, the Administration made no major change in the basic force structure. Instead, it engaged in unnecessary duplication of effort within or across different parts of the triad. By 1984, for example, the Air Force was at work on five different programs to penetrate Soviet air defenses: upgrading the B-52 bomber force, producing two new air- launched cruise missiles (the ALCM-B and ACM), and proceeding with acquisition of additional B-1 bombers as well as the Stealth. At the same time, the Air Force was moving along with the land- based MX missile, while the Navy was at work on the Trident D-5. The MX and D-5 missiles are also designed for the same purpose. Both are super-accurate hard target killers which, while MIRVed, "are designed to have a high probability of destroying a Soviet missile silo with a single warhead."

A similar irrationality seemed to pervade the massive naval buildup in conventional forces. Among the three services, the Navy got the largest share of budget authority over the 1980-85 period-$440 billion-although even this staggering commitment is misleadingly small, given potential stretch-out of costs for major systems and the commitment in support services over the lifetime of those systems that initial procurement entails. On one estimate a single carrier baffle group, for example, costs $400 billion over the course of its (approximately thirty-year) working lifetime. It is not an investment one should enter into lightly. The reasons advanced by the Administration for building three new carrier battle groups, however, shifted repeatedly:

The reasons variously advanced have been to maintain a peacetime presence in the Mediterranean, the Western Pacific, and the Indian Ocean; because national policy requires stationing two carriers in the Mediterranean and three in the Western Pacific, which necessitates a total of fifteen for pur- poses of rotation; or because an attack on Murmansk or Vladivostok will be needed early in a conflict to give the president the option of escalating a conventional war "horizontally" in the event of a Soviet attack on an area of vital interest to the U. S.

Such imprecise and shifting definitions of force missions, combined with the tremendous redundancy in Administration efforts and the sheer wastefulness of many of the spending programs, would eventually provide grounds for a limited attack on some of the more expensive components of the Reagan budget.

Dedicated to shifting the budget toward military spending, the Administration also moved aggressively to cut outlays to social programs. Part of this attack was directed to the big-ticket items in the social budget-the major social insurance programs. Worker eligibility under unemployment insurance programs was narrowed, and coverage would soon fall to record lows. The Administration also sought regressive reform of the medicate system in a series of proposals aimed at limiting program coverage and shifting the costs of health care onto its consumers. These proposals enjoyed only mixed success in Congress, which would itself initiate the most important single cost reduction reform in the health area-the change to a hospital reimbursement system based on flat-fee "Diagnostic Related Groups'- during Reagan's first term. Still, benefit reductions attributable to Reagan Administration programs amounted to $15 billion over FY 1982-85, and the Administration's general program of rationing care through increasing costs to consumers, along with the privatization of health care such an approach helps promote, gradually gathered steam.

Administration efforts to gut social security were even more pointed, although here, too, the results were mixed. After securing congressional acquiescence in early 1981 to modest cuts in that program, it moved in May of that year to "reform" social security drastically. If enacted, its proposals-which included immediate 40 percent benefit reductions for early retirees, a roughly one-third reduction in disability benefits, and a variety of caps and changes in the calculation and adjustment of benefit levels-would have amounted to a 20 percent cut in the overall program, or about $200 billion over the 1982-90 period. But the proposals generated a storm of resistance (reflected in a 96-0 vote against them in the Senate), and the Administration backed away, with Reagan promising to hold off on any further suggestions until he received the report of the bipartisan National Com- mission on Social Security Reform due at the end of 1982. Nevertheless, in May 1982 the Administration endorsed a Senate proposal for $4o billion in benefits cuts over FY 1983-85. This too was beaten back.

Eventually, the major cuts in social security would come through bipartisan action in Congress, which enacted a series of reforms of the system in early 1983 that closely followed the recommendations of the National Commission. These, too, were generally regressive. They included a delay in the July 1983 cost-of-living adjustments in the future if the trust funds fell too low, a gradual stretch-out in the retirement age from sixty-five to sixty-seven, a 33 percent increase in payroll taxes for the self-employed, the acceleration of scheduled general payroll tax increases, and an extension of coverage (and taxation) to new federal employees, for whom social security would replace more generous pension schemes, as well as all employees of non- profit organizations. In the short term, the congressional reforms promised relatively small reductions in outlays (4.6 percent by 1985), in the long term their effect is much greater, amounting to as much as an 11 percent reduction in disposable income for recipients by 203o. And where congressional action was not required, the Administration moved forward without it to cut the scope of existing benefits, as in its reinterpretation of eligibility criteria for disability insurance.

The deepest social spending cuts, however, came in low-income benefits and jobs and services programs. As with other aspects of the right turn in policy, the Administration's actions in this area sharply accelerated existing trends. Contrary to the common image of a steadily increasing population of means-tested benefit recipients throughout the 1970s, enrollment growth in virtually all means-tested assistance programs either slowed considerably or actually became negative after 1974. Moreover, the real value of many benefits had been declining for some time. By 1981, real average Aid to Families with Dependent Children (AFDC) benefits for a family of four had already declined core than 33 percent from their 1970 levels, while such familiar multiple-benefit packages as AFDC plus Food Stamps and AFDC, Food Stamps, and Low Income Energy Assistance had dropped by 2 1 .7 and 19. 2 percent, respectively.

Such benefit erosion aside, the scope and depth of the Reagan cutbacks in low-income assistance and services programs marked a qualitative change in social policy. Overall, the Administration sought 60 percent cuts in the discretionary grant programs closely associated with the Great Society, and roughly 30 percent cuts in low-income assistance payments. With most of the action taking place in 1981, Congress provided it with three-quarters of what was sought on the first group of programs and about a third of what was sought on the second. Among the most important individual program cuts were those in Food Stamps (14%), child nutrition (28%), Aid to Families with Dependent Children (14%), Supplemental Security Income (11%), Low Income Energy Assistance (11 %), financial aid for needy students (16%), health block grants and other health services (33%), compensatory education (2o%), social-services block grants (24%), community-services block grants (37%), general job-training programs (39%), and public-service employment (100 %).

That the low-income programs only comprised a small share of the total budget to begin with--and that the budgetary savings from their cutback was therefore slight--did not reduce the misery of those whose benefits were chopped. To take only a few examples: the reductions in Food Stamp benefits for some 20 million Americans hit the poor hardest, with 70 percent of the savings coming from families living below the poverty line; some 440,000 low-income working families (almost all headed by women) lost AFDC benefits, while several hundred thousand more had benefits reduced; Medicaid benefits, linked to AFDC, were therefore also scaled back, with the result that nearly a third of all children now living in poverty receive no Medicaid coverage; and as a direct result of cuts in low-income housing programs, an estimated 300,000 more families were pushed into substandard housing.

Overall, by FY 1985 the various Reagan budget cuts in social programs reduced social spending by about 10 percent, below the levels projected under prior policy (roughly half of what the Administration. initially sought); aggregate cuts on the nonmilitary side of the budget totaled about $175 billion over 1982-85. Especially given the emphasis on cuts in low-income programs (which, while accounting for only 10 percent of the budget, sustained one-third of all spending cuts during Reagan’s first term), their impact was profoundly regressive. Approximately half the benefit reductions achieved during the Administration’s first three years fell on households with annual incomes of less than $10,000; approximately 70 percent fell on households making less than $20,000. Households with incomes in excess of $80,000 carried only 1 percent of the burden….

… By the end of Reagan’s first term, U.S. income distribution was more unequal than at any time since 1947, the year the Census Bureau first began collecting data on the subject. … On any reasonable measure … poverty increased dramatically. . .