Prefacing his sweeping review of the defense industrial base with a comparative assessment of US and Soviet forces and capabilities in being, General Slay said that “our military position vis-à-vis the Soviet Union has been one of gradual shift over the past twenty years [from] clear superiority to a position that is characterized by some as an equivalence of power with the Soviets and by others as something less than that.”
Over the past ten years, he told the congressional panel, US declines in armed forces strength, weighed against concurrent increases on the Soviet side, caused a “net disparity in growth of sixty-five percent.” During this ten-year period, Soviet defense spending has grown at an average of more than “five percent, in real terms every year, while each year US defense spending in real terms either declined or, at best, remained static,” General Slay said.
The balance is skewed also in the most fundamental aspect of defense production, manpower, with the Soviets having three times as much engineers engaged in military R&D as the US. The Soviets, he said, are “outproducing us in every aspect of defense production [and] are now, and have been for twenty years, on a concerted military R&D and acquisition offensive . . . that has given them a momentum we lack.”
Rejecting the notion that the US today could surge industrial production in the manner of the “heroic eleventh-hour effort” of World War II as “foolhardy,” he pointed out that modern weapon systems “are infinitely more complex, our defense industrial base does not have standby capacity, and we would be could flat-footed for even the basic materials from which defense materials are made.”
A key problem is that the US, in terms of many critical materials, is a “have-not” nation. The US is more than fifty percent dependent on foreign sources for more than half of the approximately forty minerals of vital importance to national defense and the national economy. Last year, the US had to import more than $25 billion worth of nonfuel minerals, reflecting accelerating trends toward even greater dependence on foreign sources. Reasons behind this increasing dependence on foreign minerals are that technological advances drive up the demand for exotic materials and that more and more legislative and regulatory restrictions are being imposed on the US mining industry, General Slay suggested. The result, he warned, is that the US is extremely vulnerable to mineral cartels, a situation paralleling this country’s vulnerability to the OPEC oil cartel, which already has inflicted “price escalation, shortages, inflation, dollar devaluation, trade deficits, and economic stagnation.”
Both in terms of production and reserves, the US depends principally on two areas of the world for critical materials: Siberia and southern Africa. The resultant strategic vulnerability is obvious, he said: “On the one hand, critical materials availability is subject to the political and economic stability of several southern African nations. On the other hand, our chief remaining source is also our major international rival—the Soviet Union. Although our strategic vulnerability is grim, it is even grimmer for our major allies. The NATO/European Economic Community and Japan are much more dependent on imports of vital minerals than we are.”
The USSR, in marked contrast, General Slay testified, “has had the foresight to create natural minerals and resource strategies to assure adequate supplies [and] is virtually self-sufficient for most if its mineral needs.”
The irony of the situation, General Slay brought out, is that much of the problem is self-inflicted. In many instances the US has both the needed mineral deposits and the technologies to extract and process them, but arbitrary regulations and laws prohibit mining of minerals or make it prohibitively expensive. This country has the option to reduce substantially or eliminate completely its dependence on foreign sources for minerals of crucial importance to the US economy in general and national security in particular, General slay testified.
Citing as specific examples cobalt, chromium, gold, asbestos, zinc, and nickel, he told the congressional panel that the 2,300,000,000 acres of the US landmass, only 6,000,000 acres, or about one-quarter of one percent, are used for mining. Of the 750,000,000 acres of public lands, about three-fourths are either closed or severely restricted to hard rock mineral mining activities even though they show huge mineral potential. Additionally, there currently are eighty different laws that are being administered by twenty different federal agencies that impede the domestic nonfuel minerals industry. These restrictive policies, the AFSC Commander warned, would have “disastrous” impact on the nation’s economy and the defense industrial base “if our foreign supplies are cut off.”
In recognition of this danger, Congress passed legislation to create a strategic and critical materials stockpile for emergency use in times of war. This stockpile, as originally planned, was to be used solely for national defense purposes. But, as General Slay pointed out, since 1946 “there have been frequent, and severe, shifts in stockpile objectives having little to do with defense.” As a result of manipulating the stockpile in order to balance the national budget and to affect prices and inflation, serious “shortages and imbalances” in the stockpile were introduced.”
Of the sixty-two material areas covered by the stockpile act, sixty percent do not meet the established goals, General Slay reported. The last major stockpile purchase was made major stockpile purchase was made in 1960, which not only contributes to depletion but limits the use of some stockpiled materials in many of today’s sophisticated applications because of technical obsolescence. From the military point of view, stockpile deficiencies jeopardize availability of essential materials in times of national emergency and introduce grave production bottlenecks.
Exacerbating the problem of materials scarcity and the ancillary tendency to drive up weapon systems costs is lack of industrial capacity to produce finished items “at the rate we need,” General Slay testified. A pivotal cause behind lagging production capacity is what he termed the “very ambitious” rulemaking by federal agencies in environmental and labor-related sectors. The result has been the closure of “literally hundreds” of foundries and higher production costs for those who managed to stay alive.
One of the crucial consequences of these supply and production capacity deficiencies, the AFSC Commander pointed out, are longer, often intolerable, lead times for weapon systems: “Engine lead times are up as much as ninety to 115 percent—or from nineteen to forty-one months. . . . If we go to war today, we don’t have the ability to surge quickly or to quickly increase production rates above what we are already doing.”
Consequently, “even if we go all out for mobilization of our resources, we won’t be able to deliver significantly larger aircraft quantities in the first twenty-four month period. A chilling example is that after nearly eighteen months under surge conditions, we could only expect [an increase] of twenty-two more A-10s and no additional F-15s and F-16s [over] the currently contracted delivery schedule. Obviously, with proper funding, we could greatly increase the output of these aircraft, but we would not begin to see significantly larger numbers flying for at least three years or more,” according to General Slay.
Other syndromes of the malaise gripping the US industrial base—across the board as well as in the defense sector—are declining productivity and quality, General Slay testified: “Today many of our industries are no longer competitive with their counterparts in other Western industrialized countries.” Even though the US industrial decline over the past decade has not been as severe in the aircraft industry than elsewhere, he said, “our world market share even thee decreased from sixty-six percent to fifty-eight percent. . . . The continuing loss of market share has major security implications because the loss of markets also means the loss of capability, and skills that could be used during a national emergency.”
The net effect of this comprehensive deterioration transcends national security and corrodes all aspects of the national vitality, with the US standard of living now ranks fifth in the world-down from the highest in the world in 1972, General Slay told the House Armed Services Committee Panel. The US, he said, “was once the envy of the world for this ability to find new ways to make things better with better quality and at lower cost. It is now dead last in increasing the amount of goods and services produced per employee when compared with other nations. This failure to improve our productivity growth is one major reason that our consumer prices are increasing at double-digit rates.”
The dubious honor of being “dead last” among industrial countries also goes to the US “in investment in new and modern equipment as a percent of GNP and our slowdown in the rate of productivity growth has gone hand in hand with the reduced rate of spending, in constant dollars, for new and better tools for production,” according to the AFSC Commander.
Clearly contributing to the deterioration of the US industrial base is that investments in R&D, as a percentage of GNP, declined “drastically” over the past several years. “The ratio of national (military and civilian) R&D expenditures of GNP decreased nearly twenty-four percent from 1964 to 1978. In comparison, the growth in R&D spending as a percent of GNP for Russia during the same period rose by twenty-one percent. Their actual expenditures also exceeded those of the US,” General Slay told Congress.
Aggravating the problem of lagging R&D investment is that “much of today’s R&D is spent to comply with governmental regulations.” Compliance procedures siphon off as much as forty percent of total R&D investments of some industries, the AFSC Commander reported.
Defense production capability suffers also because of increasing shortages in skilled production workers, with “many tooling and machinery firms . . . being forced to turn down defense-related work while machines sit idle because of the lack of skilled help. They are filling American jobs with foreigners while national unemployment continues to rise—a truly sad commentary,” General Slay reported.
Ensuring from the cumulative deficiencies cited by General Slay are consequences to the national defense posture. A recent study of certain electronic components—memory chips of a specific type—that were supplied by three Japanese and three US firms showed that the failure rate “of the best American model was nine times higher than the best Japanese model,” he reported.
The “quality disease” in defense industry is manifest in “such things as defective engine turbine parts, defective tubing, defective engine bearings and races, defective aircraft structures, defective welds, and the like. And all of these things cost us in productivity, in dollars, and in readiness,” General Slay testified. Recent investigations and analyses by AFSC, including an assessment of how American labor performs in Japanese-managed plants, led to the conclusion that “the quality problem is not with American labor—it’s with our [US] management and leadership. They [the workers] are capable and proud, but need the message from us that quality is, in fact, important,” General Slay reported.
Increases in capital investment in aerospace plants, General Slay said, are imperative. Yet, the AFSC Commander told Congress, “there are many disincentives to capital investment. Inflation, economic uncertainty, and current depreciation policy are disincentives affecting all industries. The disallowance of interest as an allowable cost on government contracts and the instability of government funding as actually experience by industry are further hindrances to adequate capital investment.”
Among the range of managerial and legislative remedies for easing the defense industrial base problem recommended by the AFSC Commander of Congress, the “single most important” one is the use of multiyear contracts: “It is the key because it attacks so many of the problems . . . and because it attacks them so well.” This technique, he explained, requires the government to commit itself to longer-term contracts to allow contractors to make more economical use of resources and to protect the contractor in the event the commitment cannot be honored.
“If we could do these two things on selected acquisitions, we cold routinely save from ten percent to thirty percent of the contract price,” General Slay said. The benefits of multiyear contracting extend from stabilizing the defense industry’s work force and the supply of critical materials to boosts in productivity and capital investments. Citing six major weapons programs that are candidates for multiyear contracting, General Slay said such a step would cut their combined annual procurement costs of about $13 billion by $1.550 billion.
Culminating his plea for legislative relief—in effect a thirteen-point program—General Slay stressed that the “difficulties are national in scope, and they are to be solved, have to be attacked on a national scale. . . . The ultimate key to our success or failure is going to be the degree of commitment the nation makes to these solutions.”
Exhorting the nation to return to “our old tradition of hating to be second-best,” he warned that “if we don’t accept our responsibilities as the industrial leader of the western world, our way of life, and maybe even our freedom itself will eventually fade away and we will have only ourselves to blame.” One can only hope that the new Congress will heed General Slay.
Mandate for Leadership
One of the telling clues concerning defense policies likely to be espoused by the new Administration is the Heritage Foundation’s detailed study of Defense Department requirements, which is part of a government-wide analysis known as “Mandate for Leadership.” As expected, the Foundation, a Washington-based conservative think tank with close ties to the President-elect, placed special emphasis in its study on “quick fixes” in the strategic sector by stressing that “rebasing the Minuteman III in a vertical MPS [multiple protective shelters, meaning a deceptive basing mode utilizing a shell-game approach] around and within existing Minuteman III sites might well be the most cost-effective and timely program, which could be implemented in two or three years.” USAF experts privately express reservations about this scheme because of the extremely high costs and long lead times associated with reopening the Minuteman production line.
Not mentioned by the Heritage Foundation study but known to be under enthusiastic consideration by influential defense advisors of the new Administration is development of a small, 25,000-pound, single warhead ICBM that could be proliferated in as many as 20,000 shelters. USAF currently is studying the feasibility and merits of such a system.
Even though seemingly favoring initial deployment of about 100 Minuteman IIIs—and claiming that using between nine and eighteen vertical shelters per missile could be accomplished at a cost of about $2.2 billion—in an MPS mode, the Heritage Foundation study also considers the option of accelerating the MX program. Pentagon experts believe, however, that an all-out effort to speed up development and IOC (initial operational capability) of the system will at best only speed up first deployment by six months while sharply increasing cost and technological risk.
The Heritage Foundation’s study stops short of a categoric recommendation to proceed with the B-1 as is, but recommends both “immediate development and deployment of a new strategic bomber, which will utilize the B-1 and advanced bomber technology [as well as] acceleration of the deployment of the air-launched cruise missile (ALCM).” The report also recommends a series of changes in how and where the bomber force is based in order to improve survivability and readiness, including development of “multiple aim point basing” by means of hardening aircraft shelters.
In general terms, the Heritage Foundation study points out apperceptively that “despite the change in national mood and growing threat and despite the mandate of the new Administration to bolster US national defenses, neither the American public nor the Congress will find it practical to support increases in defense spending as large as required. Independent estimates of additional real defense needs approach $50 billion to $100 billion annually, and even more if past shortfalls are to be made up. Practical and affordable defense increases in the near-years are more likely to be in the neighborhood of $35 billion annually over Carter projections.”
The Foundation, therefore, recommended:
- An FY ’81 supplemental request of $15 billion to $20 billion to cover the second half of the current fiscal year;
- A revised FY ’82 Defense budget with an increase of at least $35 billion (over the Carter Administration’s proposal); and
- A new FYDP (Five Year Defense Plan) for FY ’82-87—or preferably an Eight-Year Defense Plan to cover the next two administrations. It would, the Foundation’s study urged, “be highly desirable to establish a firm FYDP early on, and then make every practical effort to stay with it, so that the nation can also make reasonable long-range plans for its other pressing domestic and international problem areas.”
An Airpower Lesson
One of the many puzzling aspects of the Iranian/Iraqi war is the Iranian air force’s ability to sustain high sortie rates for its F-14s—which are used mainly as AWACS aircraft—while the sustain rates of the F-5s appear to be extremely low. The sortie rate of the Iranian F-4s is somewhere between that of the F-14s and the F-5s. Performance of the F-4s against heavily defended Iraqi targets —involving first-line Soviet air defense weapons—is surprisingly good, even though somewhere between sixty and eighty aircrews apparently have been downed and the purges of almost all senior ranks of the Iranian force have eliminated all vestiges of combat disciplines . The US analysts believe that the Iranian experience confirms USAF’s position in the quality vs. quantity argument.
Another airpower lesson that is being learned by the Soviet invasion forces in Afghanistan is that loss rates of attack helicopters, even in relatively permissive environments, are unavoidably high. Even though most primitively equipped, the Afghan rebel groups are downing large numbers of modern Hind helicopter gunships.