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p The main items on the list of US military needs are financed out of the federal budget. The USA uses it to maintain and reinforce not only the national armed forces but also those of its allies, to bolster up reactionary regimes throughout the world, to carry out the imperialist policy, and organise military ventures and other actions to serve the US ruling monopoly circles. Generally speaking, US military expenditures can be described as monetary outlays for current and future wars and for the backlog of payments connected with past wars.

p The bulk of military work in the capitalist countries is financed out of the budgets of the defence ministries and military departments. To conceal the actual volume of this work and for other practical reasons, the governments of bourgeois states often finance what amounts in effect to military needs of the “civilian” part of the state budget.

p Soviet economists rightly argue that actual military spending in capitalist countries includes an “invisible” part added to the regular outlays of military departments. Military expenditures are usually divided into direct and indirect. The former is spending by defence ministries; the latter is that from the “civilian” part of the state budget (i.e., invisible military expenditure). This classification according to the heading of a particular expenditure item adopted in the 42 capitalist budgets obscures the true purpose of individual items of military spending and the difference between them. Under this classification, US indirect military expenditure must include, for example, spending by the Atomic Energy Commission and that on veterans benefits although they widely differ in purpose.

p It would be correct, therefore, to supplement the accepted departmental principle of demarcation of military outlays with a classification based on their functional purposes, i.e., their influence on the country’s military power. For this purpose, all types of military spending may be divided into two basic groups: (1) the cost of maintaining and reinforcing the country’s military power and military-economic potential in peacetime and the cost of military operations in time of war; (2) outlays unconnected directly with the maintenance of military power but involved in the repair of war damage or linked with earlier military work. The first group of expenditures may be described as direct, or active; the second, as indirect, or passive.

p In our view, the proposed classification according to purpose presents a correct picture of military work. The size and share of current direct military expenditures show how a country builds up her military potential, while her indirect military spending indicates the scope of her past military work and the extent of earlier war damage.

p Direct military expenditures include above all spending involved in the upkeep and training of military personnel, supplying them with weapons and military equipment, the building of various military facilities and installations, the development of weaponry and arms manufacture. Indirect military expenditures are those involved in rebuilding what has been destroyed by war, the payment of pensions, the settling of the national debt, etc.

p The above classification is also essential for forecasting the economic implications of disarmament. In case agreement is reached on general and complete disarmament only direct military appropriations will be stopped, while indirect spending will, most likely, be immediately increased since the disbandment of armies will result in greater disbursements on veterans benefits and other indirect military outlays which are to be curtailed gradually. It will probably 43 take time to reduce them to naught. The intricate, confusing classification of US budgetary appropriations precludes an accurate estimate of military outlays which are distributed under different headings of the federal budget. To estimate, if only roughly, the full US military expenditures, the distribution of budgetary allocations under the various headings of the federal budget need be analysed.

p Direct military expenditures are above all those of the Defence Department which consumes the bulk of all military outlays. The Defence Department budget includes also pensions to ex-servicemen—indirect military expenditure which accounts for a fraction of the Defence Department’s total. For this reason, all Defence Department expenditures are regarded as direct in our further analysis. Others of their kind include spending by the Atomic Energy Commission, on foreign military “aid” and the stockpiling of strategic materials. In official statistical publications the above expenditures are bracketed together with those of the Defence Department under one heading: "National Defence”. Another type of direct military expenditure is that on space exploration (see Table 4). In our view, the above items of expenditure should be classified as patently direct military expenditures, i.e., those used to build up the US military machine.

p Apart from direct and indirect military expenditures, there are the so-called invisible military outlays listed under a variety of “civilian” headings of the federal budget. For instance, listed under the heading "International Affairs and Finance" are expenditures on foreign economic aid, part of which, as Americans themselves admit, is military aid. Other measures related to US military schemes are also financed under this heading.

p The budget of the US Treasury has a provision for the maintenance and development of the Coast Guard. The Coast Guard is assigned strictly military tasks and according to legislation is to be placed immediately at the disposal of the Defence Department in the event of war. In 1963/64 expenditures on the Coast Guard totalled 350 million dollars, in 1965/66 397 million.  [43•1  Large military outlays are “hidden”,
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44 Table 4 Budget Outlays by Function (thousand million dollars) Fiscal years 1965 19G7 1970 197.T 1974’ National defence ....... 49.6 4.3 5.1 4.8 2.0 7.4 0.3 2.3 1.7 25.7 5.7 10.4 2.2 —3.1 70.1 4.5 5.4 4.4 1.8 7.6 2.6 5.9 0.7 31.2 6.9 12.6 2.5 -3.9 80.3 3.6 3.7 6.2 2.5 9.3 3.0 7.3 13.0 43.8 8.7 18.3 3.3 -6.4 76.4 3.3 3.1 6.1 3.9 12.5 4.0 10.5 18.0 75.9 11.8 22.8 5.6 6.8 -8.4 0.5 81.1 3.8 3.1 5.6 3.7 11.6 4.9 10.1 21.7 82.0 11.7 24.7 6.0 6.0 —9.2 1.8 International affairs and finance Space research and technology Agriculture and rural development ........... Natural resources and environment ........... Commerce and transportation Community development and housing .......... Education and manpower . . . Health ............ Income security . . Veterans benefits and services Interest ........ General government ..... General revenue sharing . . . Intergovernmental transactions Allowances ......... Total ......... 118.4 158.3 196.6 249.8 268.7

p * Estimate.

Sources: The Budget of the United States Government, Fiscal Year 1972, pp. 569-73, and Fiscal Year 1974, p. 67.

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for instance, in the budgets of the Department of Justice (which finances the Federal Bureau of Investigation), the State Department and the Central Intelligence Agency. The US Administration spends through the federal budget considerable funds on military mobilisation work, to develop the infrastructure (the building of roads, airfields, ports, etc.) and other projects of both civilian and military importance.

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p The fact that many types of expenditures, which are, in effect, military, are listed as civilian is admitted by American authors, too. For instance, Neil H. Jacoby has divided the federal budget allocations into four groups according to their military use.  [45•1  His calculations reveal that over 85 per cent of the total administrative budget allocations is spent on the "global concept of defence”. At the same time, he lists as military outlays some types of civilian spending.

p Some categories of US military expenditure are reflected on the revenue side of the budget. To stimulate military work by monopolies and in some cases by individuals (the building and operation of military-industrial enterprises, civil defence facilities, etc.) the US Administration grants them tax reliefs, the right of accelerated amortisation, and other privileges which do not affect the military part of the budget but reduce its revenues and are, in effect, military spending.

p It may be concluded that the US direct and indirect military expenditure amounts on average to nearly a half of the federal budget’s total. Since “invisible” military expenditures cannot be determined exactly, only direct and indirect military spending is discussed here to show the growth and structure of US military spending. This understates somewhat the overall size of military expenditure. The exclusion of the invisible military expenditures from our estimates is compensated for, to a certain extent, by the fact that minor civilian outlays are listed under some headings of patently military expenditures. For instance, according to US publications, roughly 30 per cent of the expenditure of the Atomic Energy Commission goes for civilian needs.

p Direct and indirect military expenditures account respectively for some three-fourths and one-fourth of the total federal military outlays (see Table 5).

p The absolute and relative size of obviously direct military expenditures varies within wider limits than indirect military expenditures owing to alterations in current and longterm military programmes. The scope of military work involved increases or reduces relatively more quickly. The
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46

Table 5

Military Expenditures in the Federal Budget Item of Expenditure Fiscal years 1965 1967 1970 1971 1973* Total federal budgetary expenditure (thousand million dollars) ........ of which military spendings (per cent) . . . Direct military outlays .... Department of Defence . . . Atomic Energy Commission . Defence-related activities . . Foreign military aid .... NASA ... Indirect military spending . . National debt settlements . . War veterans benefits and services 118.4 60.3 46.7 39.1 2.2 0.1 1.0 4.3 13.6 8.8 4.8 158.3 60.0 47.7 42.5 1.5 —0.3 0.6 3.4 12.3 8.0 4.3 196.6 56.5 42.8 39.2 1.3 0.4 1.9 13.7 9.3 4.4 212.8 51.3 37.5 34.4 1.1 -0.1 0.5 1.6 13.8 9.1 4.7 249.8 45.7 31.9 29.7 0.9 —0.2 0.2 1.3 13.8 9.1 4.7

p * Estimate.

Sources: The Budget of the United States Government, Fiscal Year 1972, pp. 569-73, and Fiscal Year 1974, pp. 364-67.

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volume of indirect expenditures, however, is determined by past military work and the resultant national debt, an increase in the number of war veterans, and some other factors. Government obligations involved in past military work are less subject to change, while the absolute size of US indirect military expenditure shows a tendency towards a steady increase.

p At no period of American history have US military expenditures in time of peace swallowed up such a big portion of total budgetary allocations as has been the case since the last world war. Over the past few years, all direct and indirect expenditures amounted to more than half of the federal budget total, whereas in the twenties and thirties they accounted for some ten per cent. Again, whereas formerly direct military spending amounted to one-third of the total military expenditures in peacetime, today it accounts for 47 three-fourths. This indicates that since the last world war, the US Government has been carrying military activities on a vast scale even in peacetime, whereas before the Second World War military expenditures were connected mainly with past military work, war pensions, etc.

p The US war of aggression in Korea (1950-53) gave a strong impetus to the growth of US militarism and the arms race. In 1949/50, the US "national defence" expenditures stood at 13,000 million dollars, whereas by 1952/53 they had grown to 50,400 million. The strength of the US armed forces in 1953 was 3,555,000 as against 1,615,000 in 1949. After the Korean war, US military appropriations stopped to grow for a time and became stabilised, but intensive military work was continued.

p The US military expenditure again climbed steeply in the early sixties. In 1959/60 the US “defence” appropriations amounted to 45,700 million dollars; in 1961/62 to 51,100 million; in 1963/64 to 54,200 million. The escalation of the US war in Vietnam stimulated another increase in war spending.

p For several years the Administration published obviously understated figures of expenditure on the Vietnam war. The data in Table 6 show that its increasing involvement in this war was the main reason behind the steep rise in the total Defence Department spending in the latter half of the sixties. According to the American press, the USA has spent an estimated 150,000 million dollars on the Indochina war.

p By our estimates, the federal expenditure per US serviceman in Indochina was much larger than in all previous US wars. Thus, official statistics of Vietnam war expenditure per serviceman gave about 60,000 dollars (based on price index for 1957-59). By comparison, in 1953 the corresponding figure for the Korean war was 15,000. This steep rise in the US war expenditure was attributable to the intensive use and raising costs of military equipment, as well as to payroll increases for US servicemen in Vietnam.

p According to US publications and some official statements by Pentagon spokesmen, the actual expenditures on the Vietnam war were larger than the official figures indicated. The reason is dual: first, the ruling circles want to conceal the true cost of the war; secondly, it is difficult to estimate the
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48 Table 6 Department of Defence Expenditures Attributable to the Vietnam War Total Defence Expenditure Vietnam war expenditure Fiscal year Dept. spending (mil. dollars) minus Vietnam war spending (mil. dollars) mil. dollars percentage of total Defence Dept. spending 1965 46,173 46,070 103 0.2 1966 54,409 48,597 5,812 10.7 1967 67,466 47,333 20,133 29.8 1968 77,373 50,826 26,547 34.1 1969* 77,790 48,978 28,812 37.0 1970* 78,471 53,074 25,397 32.3

p * Estimate.

Source: The Budget of the United States Government, Fiscal Year 1970, p. 74.

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costs of all varied military-economic activities involved in that war and distributed under different budget headings. The Joint Economic Committee, for instance, following hearings on the economic effect of Vietnam spending, reported: "It is probable that actual expenditures for the Viet Nam war exceed the official figures by an appreciable margin. The Department of Defense has conceded that it is somewhat unrealistic to establish a definitive distinction between Viet Nam outlays and other defense disbursements.... While the absence of any better guidelines makes it necessary to use these figures, it should be realized that the full effect is probably greater than they indicate.”  [48•1 

p The growing inflation and inflationary price rise in the USA is another cause of increase in military expenditure since the Pentagon has to pay more and more to procure the same amount of military goods and services. The real trends in the Pentagon spending are shown in the table below.

Thus, in the sixties, the Defence Department spending in prices of 1957-59 rose by 59 per cent or 4.7 per cent a year on the average.

49 Fiscal year Expenditure (thous. mil. dollars) Fiscal year Expenditure (thous. mil. dollars) 1960 40,929 1966 51,378 1961 43,197 1967 63,587 1962 46,535 1968 67,733 1963 48,108 1969 69,708 1964 49,512 1970 64,944 1965 45,047

p All direct military outlays authorised in the US federal budget (spending of the Pentagon, the AEG, NASA, and other) amount to over 80 thousand million dollars a year. According to official data, obviously played down, the United States’ so-called "national defence" spending during the fiscal years 1960/61-1970/71 added up to over 700 thousand million dollars.

p In the 50s and 60s, the American leaders believed that with the US economic potential they could afford the maintenance of huge armed forces to pursue a global expansionist policy, to act as a "world policeman”. According to views current at the time, the United States could afford military outlays equivalent to 15 per cent of the gross national product during an indefinite period without overstraining the country’s economy.

p The discrepancy between the expansionist plans and the actual economic and financial possibilities of the United States became particularly glaring towards the late 60s. The high growth rates of military spending largely attributable to the war in Indochina became a major cause of growing economic and financial difficulties of the United States: an increased federal budget deficit and negative balance of payments, soaring inflationary price rise, a reduction of the gold reserves, devaluation of the dollar and a deterioration of its status as the world currency, a weakening of the economic positions of US imperialism abroad. The public at large and the US leading quarters had to admit that the unrestrained arms race and political adventures abroad weakened the country’s economic potential, exhausted its finances and exacerbated its socio-political problems. It became clear that even the richest capitalist power could not 50 afford tremendous regular military expenses in face of its domestic economic and social problems.

p The sharp exacerbation of these problems was evidence of a crisis in the economic foundations of the United States military-political line; it indicated that a continuation of this policy would undermine the economic and social basis of American society. This obvious fact was one of the main reasons for the more far-sighted American leaders to reassess the country’s political and military-strategic policy with due regard for its actual economic and financial possibilities, to take steps to slow down the arms race. These considerations influenced to a large extent the decisions to change US military policy, to end the war in Vietnam, to conclude the agreements and treaties with the Soviet Union, and other practical measures taken by the Nixon Administration.

p In view of the disastrous socio-economic effects and the growing public discontent with the arms race policy the Nixon Administration began its term by slightly reducing the military spending. Since the fiscal year 1971/72 military appropriations have been climbing again. Although the war in Vietnam has been ended, the US Government contemplates a notable increase in military spending in the coming few years. As demonstrated by President Nixon’s message on the budget, military outlays are to grow to 81.1 thousand million dollars in fiscal 1974 (4.7 thousand million dollars more than in fiscal 1973) and to 85.5 thousand million in fiscal 1975.

p The increase in military outlays is mainly attributable to the effort of the US Department of Defence to continue a military build up by modernising armed forces, especially strategic sea-based forces. For this purpose, intensive work is in progress on new strategic offensive arms and other weapons systems. The development and production of sophisticated and costly up-to-date weapons systems demand huge outlays. For example, according to American press reports, the total spending on the programme of developing and manufacturing the B-l strategic bomber will run into over 11 thousand million dollars. According to the US Department of Defence, the estimated cost of one B-l aircraft, taking account of the total spending on the programme as 51 a whole, including R & D outlays, will amount to 45.G thousand million dollars. The continued development and manufacture of new weapons systems to secure improvement in armaments is fraught with the danger of a new escalation in the arms race.

p The total and relative scale of US military spending in the near future will be dependent on many factors and, mostly, on changes in the policy, economy, strategy and military technology of the United States, as well as on the international situation. It is difficult to make an exact forecast of the impact these rapidly changing factors will have on the volume and structure of US military outlays in the coming few years. It can be assumed, however, that if no changes are made in the current military plans and programmes of the United States, the upward trend in its military spending will continue in the coming few years as well. According to estimates of Brookings Institution, towards 1978 the US military budget in current prices may go up to 104 thousand million dollars, almost 25 per cent more than what was requested for the fiscal year 1974.

p Heated debates are under way in the United States on the order of priorities in the allocation of government resources for military and civilian purposes, on the effectiveness of continued military spending at its present enormous rate, and fairly well grounded ways and means to reduce it are proposed.

p For example, in September 1973, Senator Hubert Humphrey tabled a resolution demanding a 5-7 thousand million dollar cut in the US military budget, the funds released to be spent on education and social security. In the summer of 1973, Brookings Institution published a report containing well-considered suggestions for cutting US military spending by 10-25 thousand million dollars a year through a reassessment of its military strategy and the organisation of its armed forces.

p To put an end to the arms race is a No. 1 problem. At the World Congress of Peace Forces which met in Moscow from October 25 to 31, it was specially emphasised that the peoples of the world should no longer put up with a situation in which the world’s huge resources are squandered on military work. The appeal adopted by the Congress said in 52 particular: "The atmosphere of detente should be used for a practical solution of the problem of preventing the arms race and achieving disarmament.”

p A restraining influence on the arms race is produced by the Soviet-American treaties and agreements on strategic arms limitation. These agreements create favourable prerequisites for new talks on limitation of military work. An agreement to limit the development and production of weapons systems of the latest design would be of primary importance for slowing down and ending the continuing arms race. Implementation of the resolution calling on the permanent members of the Security Council to cut their military budgets by 10 per cent and to use part of the money thus released to assist the developing countries adopted by the UN General Assembly on the initiative of the Soviet Government would be a major real step to ending the arms race.

Termination of the arms race is in the vital interests of all the peoples, including the American people. A substantial reduction in military spending and disarmament would relieve the world of the arms race burden and make it possible to switch over the manpower, material and financial resources released to solving the outstanding acute economic and social problems, the problems of environmental pollution control, greater aid to the developing countries and to attaining many other civilian objectives put off year after year for lack of funds. An end to the arms race is necessary, above all, for securing military detente, eliminating the danger of a world war and strengthening peace throughout the world.