Washington

Even before Robert Kennedy was killed, stilling the most insistent voice in the campaign that “we can do better,” there was growing pessimism here about the chances that the elections would contribute much toward resolution of the nation’s deepest domestic problems. Up to the end, there was an unshakable worry within the Kennedy camp that his messages about the need for new directions were not getting through. Some of his advisers, among them several who had counseled against making the race, had felt all along that this year’s electorate was not ready for what he had to say. The elders in the campaign organization thought that there was a necessity for keeping the senator’s idealistic young activists quiet and out of sight. There would be time enough to try to remake the world, they said, if and after Kennedy was elected.

One of Kennedy’s advisers, assuming that even in the unlikely event of a Kennedy victory it would be close and fractious, asked him not long ago and not entirely in jest whether he really wanted the job. But John F. Kennedy talked quite a while about getting the country moving again before the spirit of what he was saying caught on. Perhaps Robert Kennedy too was conditioning the public mind. Now that will be impossible to tell.

It is generally assumed here that the next Congress will be at least as conservative as this one. Nothing has happened to offset the conservative tide that became so evident in the 1966 elections; if anything, events have reinforced it. Moreover, despite the deep and complicated entanglements of the Vietnam War with the domestic crises, there is a growing body of thought that the resolution of the one, even if it comes, will not bring relief of the other.

War cost

“To put the matter briefly,” said Charles L. Schultze, former director of the Bureau of the Budget, in a recent speech, “the ending of the war in Vietnam will not automatically make available any budgetary resources for transfer to bold new programs aimed at meeting the nation’s social problems.” Schultze, who resigned as Budget Director early this year, is a man of exceptional intelligence, and he devoutly wishes that his prognosis were otherwise. Therefore, his thesis is receiving serious attention here, and is concurred in by a number of current and recent government officials — who also wish that it were otherwise. The reasoning runs roughly as follows.

Although the Vietnam War is now expected to consume directly some $30 billion of the $79 billion in defense expenditures this fiscal year, there is no reason to believe that defense expenditures would be reduced by anything like that amount following the cessation of Vietnam hostilities. For one thing, some of the costs attributed to Vietnam would have been incurred in any event: bombers would be kept at the ready and would be flying practice missions instead of combat missions. Some of the aircraft now sent to Vietnam to replace planes lost in combat would still have been bought to replace obsolescent planes and those lost in training flights.

Moreover, the Vietnam War has been, compared with other wars, fought on a low inventory. During the Korean War, excess military stocks were accumulated; this time, to the distress of some of the military, Defense Secretary McNamara held procurement for Vietnam more closely to estimated combat needs. New stockpiles have not been built up, and some that existed have been eroded. In addition, during the past three years, some routine military spending, such as for military housing, has been stretched out or postponed.

Inevitable claims

If defense expenditures after Vietnam should be at about the same level that they were before the war began, taking into account increases in prices and military pay since then, Schultze estimates that they would amount to about $62 billion — or a reduction of about $17 billion from the current level. Otto Eckstein, a Harvard economics professor and former member of the Council of Economic Advisers, estimates that the reduction will be even less — about $13 billion “if the new President takes a strong, independent, economy-minded stand,” and about $8 billion if he “accedes readily to military requests.” Even Schultze’s more optimistic figure is immediately reduced by at least another $2 billion or so, however, when he adds other inevitable sources of claims on the money: the depleted stockpiles, the deferred construction, and, of course, the destroyed territory of Vietnam. And there are those who argue that lest any post-Vietnam pullback become a rout, we will be under pressure to develop new weapons systems which have heretofore been ruled out because of the costs of the war.

But not much of even the remaining money is likely to be made available for civilian programs. Some or most of it would go to offset the unusually high budget deficit — at least $20 billion before the new surtax, which will expire July 1, 1969. Schultze takes it “as practically certain” that a surtax would not outlast the Vietnam War. The balking at the President’s tax request over the past two years bears witness to his point.

Fiscal dividend

Even if there were no direct transfer of large amounts of money from the military to the civilian economy after Vietnam, it would be logical to assume that the money which is added to federal revenues each year simply through the growth in the economy — the “fiscal dividend,” which comes to about $12 billion in additional money each year — would be available for new domestic programs. (Vietnam is now costing about the equivalent of three years’ fiscal dividend.) But no such assumption can be made. First, some of this money is absorbed automatically by the inexorable rises in the costs of existing federal programs through increases in the price of operating them and in the size of the population. Expenditures for medicare and social security will rise; more veterans will be claiming more veterans’ benefits; there will be need for more facilities and more employees to administer patents and passports, parks and prisons, and, of course, the Internal Revenue Service. Military and civilian federal employees will receive higher salaries, and in the aggregate these pay raises are very costly. All of this will absorb at least half of the annual fiscal dividend.

The rest, with luck, would go into paying off past debts to the existing social programs which have been underfinanced during the last few years: aid for education, the poverty program, rent supplements, water pollution, and others. There would be little enough left for this, and still less for new departures.

Finally, another source of pressure on federal funds is likely to come from the search for relief from the rising state and local taxes. Resistance to these taxes has also been on the rise, the resistance having been a large factor in the difficulty over the President’s surtax proposal. There will be increased demands for some form of revenue-sharing, under which part of the rise in federal revenues each year will be turned back to the states and localities, Schultze, for one, fears that the states and localities would use this new money to meet routine costs, and to avoid or diminish the need for further local taxes: “Little of it would, I venture, be used to mount major new programs, aimed at the poor, the inner city, environmental pollution, or the provision of job opportunities for the unskilled.”

All of this has to do not with what can be done, but with what is likely to be done; not with the only option that is before the public and the politicians and the policy-makers, but with the option they are likely to elect. This point of view may be reinforced somewhat by defensiveness and battle fatigue. Whatever the circumstances, the alarm is being sounded that the end of the Vietnam War will not, in itself, resolve some of the most serious difficulties plaguing us here at home.

Peace by 1970?

One problem in even discussing the question of what will happen “after Vietnam” is the assumption that such a clean-cut state of affairs will come about. First, of course, there is the question of whether the negotiations will succeed. Caution is the official line, but to the extent that there is anything that can be described as a prevailing point of view here, it can be said to be optimism in general and pessimism in particular. The going assumption is that neither side wants wider hostilities, and that therefore the Paris conference will somehow work, but no one knows just how to get there from here. The most optimistic estimate is that there might be some form of cease-fire arranged in the next few months, to be followed by some form of settlement sometime next year. This raises the second point about the “after Vietnam” discussions: although withdrawal of some portion of American troops is bound to be part of the arrangement, a settlement is not likely to be marked by raising (or lowering) the flag and shipping all the boys back home.

Beyond the number that will remain in Vietnam, there are already some 48,000 troops in Thailand, and American soldiers are expected to be part of the Far Eastern scenery for some time to come. Last year, in fact, there was initiated an exercise within the government to measure the possible fiscal effects of the various possible combinations of hows and whens the Vietnam War might draw to a close, but the project foundered on the multitudinous variables. Nevertheless, even if one accepts the most optimistic timetable, partial, let alone full, relief from the financial pressures of the Vietnam War is not likely to be felt for two years at the least.

Finding funds

There are adventurous thinkers in and out of Washington who have notions for escaping from dependence on the federal taxing, appropriating, and budgeting process for the financing of programs to meet our racial and urban crises. For example, there are schemes for freeing vast bank and insurance company reserves for investment in urban development. For now, and for the foreseeable future, however, there remain two primary ways of coming at the question of where to find federal funds for meeting domestic problems. The first is to focus on reallocation of resources in the small — that is, within the given framework, or, as those who deal with budgets are wont to put it, how to rearrange the slices of the pie. The other is to concentrate on reallocating resources in the large, or, in the budgetman’s metaphor, enlarging the size of the pie itself. There is a great deal of difference.

If one deals with the question in terms of transferring funds from x to y, then the argument has been circumscribed and the options have been narrowed considerably. To be sure, with effort, great effort, more money could be found even within the framework that the Schultze thesis laid out. As he is well aware (and tried to correct), there are farm subsidies, ship subsidies, travel subsidies, and veterans’ programs, among others, that are, in a word, senseless. There are projects such as the SST which should be moved down the priority list or off it completely.

The trick

Despite the McNamarization of the Pentagon budget, there remains a lurking suspicion among lay observers, and certainty among some who have examined the behemoth at close range, that there is money to be extracted for other purposes there, too. There has, in fact, developed something of a vogue within the government of re-examining the claims on the military budget. The view is that the Schultze thesis is substantially correct, given the current situation; the trick, then, is to change the situation by compressing military spending. Within and outside the government, there are men who, for reasons of international policy as much as to save money, are still trying to abort the “thin” anti-ballistic-missile system to be constructed against Chinese missiles. This “Sentinel” system, for which almost $1 billion was proposed this year, is officially estimated to cost $5 billion, but many believe that the final cost will be at least twice that, and moreover, that a “thick” system will not be far behind.

Questions are also being raised about the extent to which the United States should continue to maintain ground troops ready to fight large land wars in Asia or Europe on short notice. Tactical and strategic weapons systems are being reviewed, and the Air Force’s pet Manned Orbiting Laboratory program, costing $1 billion over the past two years alone, is being questioned a bit more closely.

The fact is, however, that these sorts of major changes within government spending are very difficult to bring about except when an Administration is new. After a while, the opponents within form their own strong alliances and power bases. Thus, despite McNamara’s enormous impact on the Pentagon, after some time — more time than anyone had reason to expect — his power too began to erode; thus the MOL and the “thin” ABM.

One option for the next President, therefore, is to talk long and loud about the need for “reordering priorities” within the budget, and to work furiously within the Congress to bring that about. This requires a series of assaults on congressional power bases, and not without some risk. It is said, for example, that the SST project lumbers on as much as anything because Senator Warren G. Magnuson, Democrat of Washington, site of the Boeing Company, presides over a subcommittee which approves the money for the rent supplements and model cities programs, and the quid pro quo is understood. The MOL is said to owe its existence to the need to pacify the Air Force after it lost the space program to the civilians at NASA. Such an effort to find more money through re-examining existing projects is a worthy one, and the possible rewards, which could come to perhaps some $5 billion a year, are nothing to sneeze at. But even if successful, it is not likely to make the kind of difference that is being hoped for “after Vietnam.”

Taxing expansion

The second option which the next President has is to focus national attention on the larger question of what we wish to do with our wealth, which grows by $35 billion to $40 billion a year. One way to consider what this means is to realize that between 1961 and 1967 the American economy grew by an amount equal to the entire economy of West Germany, the third largest in the world. Another way is to realize that in six years the nation will be producing some $240 billion more than was produced last year. The issue, then, is what portion of these automatic new riches should go for private consumption, and what portion should be put to public spending to cure our miseries? In laying out his post-Vietnam hypothesis, Schultze sees this separate, larger possibility: “Should additional resources be needed to meet the ills which trouble us as a society, economic growth will provide them. If, as a nation, we truly believe that the greatest and wealthiest republic on earth should not have its poorest citizens in hunger and squalor, and rat-infested shelters — if we truly want to arrest the decaying inner cores of our large cities — if we literally believe what our textbooks tell us about equality of opportunity — then, Lord knows, a shortage of economic resources is not cause for failing to act. . . . My point, therefore, is not that we cannot afford to devote whatever resources are needed towards easing the tensions which are now wrenching the social fabric of the nation. Rather my point is that cessation of hostilities in Vietnam will not automatically make those resources available. . . . To put the matter in its bluntest form, the only way to make really large additional resources available to meet our social problems, is to tax ourselves — to decide deliberately that some fraction of the growth in what we might otherwise have consumed for private pleasure we shall devote to the public good.”

Sackcloth society

That is the point about federal budgeting. No one is talking about severely high taxes, or suggesting a sackcloth society. If, for example, federal tax rates were now at the level that existed before the 1964 tax cut, this year alone federal resources would be greater by $20 billion. When the tax cut was being considered within the Kennedy Administration, John Kenneth Galbraith was its most strenuous opponent. The author of The Affluent Society argued at length and almost alone that the money should be put to social purposes rather than returned to the private sector. But the view that the tax cut was needed to stimulate the economy prevailed, and in those terms the policy was a success. The New Economists had no more way than anyone else of knowing what the commitment to Vietnam would come to, but it does appear now that their theory of lowering and raising taxes to heat and cool the economy was more economically sound than politically sophisticated.

This is not to say that Vietnam has not distorted the balance of national allocation of resources. On the contrary, the war has distorted the balance so much that it will require more than an end to the war itself to straighten things out.

The argument is made, particularly by government officials, that money alone will not solve the problem. While no sensible person doubts this — there is a great deal to learn and much competence to be developed — the danger with this argument is that it can become a trap, paralyzing both money and competence in inaction. A growing number of people believe that if the domestic crisis is to be met, it will have to be met on the same scale as were the other great problems of the past thirty years: war production after 1939, nuclear research and development during the war, and the economic rehabilitation of Europe afterward. In all three cases, the large dimensions of the problem were accepted; great, virtually openended, amounts of money were committed; the best minds were thereby attracted; duplication, waste, and confusion were expected and blinked at; and the crises were met.

No one knows how much Congress and the voters have been hiding behind the Vietnam War as an excuse not to do what they did not want to do anyway. No one can be sure what difference it would have made if the President, instead of making an a priori decision that it wouldn’t work, had put the larger issues before the public, and fought for acceptance of a different order of commitment. The big questions now are whether the men who want to succeed him will try, and whether the public mind will change. The prevailing view here is pessimistic, at least in the short run. For all of the warnings, the public, as seen from here, does not yet appear to believe that there is a national crisis. Since this country has a slim record of planning before the event, the expectation is that things will have to get worse before they get better, and that they will.

Elizabeth B. Drew