As the Army has the opportunity to keep people in place a little longer and is doing an increasingly better job in training people, supervisory as well as non-supervisory, there is a better environment for control and discipline. I think the Army and the other services have made great strides. This is reflected in, if not a lowering, at least an apparent plateau in what had been a disturbing rise in the number of absentee incidents and the rate of desertions in the services.

There are some indications in the first quarter of this year that this picture has seen its worst and is beginning to improve.

Senator BYRD. The desertion rate has seen its worst?

Mr. KELLEY. It has seen its worst.

Senator BYRD. What was the average assignment prior to fiscal year 1964, which is before the Vietnam war? Was it somewhere around a year, slightly over a year?

Mr. KELLEY. I have figures for Army tour lengths in Europe in fiscal year 1964. I will supply them for the record.

(The information follows:)

In fiscal year 1964, the earliest year for which statistics have been maintained, the Army experienced in Europe an average tour-completion rate of 26 months for enlisted personnel and 32 months for officers. In fiscal year 1971, the average had dropped to 16 months for enlisted personnel and 23 months for officers.

RELATED COSTS

Senator BYRD. If my recollection is correct, and if it was not much more than a year, it seems to me there may be other policies within the Defense Department which leads to the short tour.

On page 19 you use the figure 57 percent or 52 percent, as the case might be, that is allocated to pay and related costs; 57 percent in fiscal 1973 of the outlays, 57 percent of the outlays will be for pay and related costs.

My question is this. When you speak of related costs, have you included such things as troop housing, recruiting expenses, medical expenses, other than the command post program. Are all of those related costs included?

Mr. KELLEY. No, sir, they are not. I wonder if Mr. Detwyler might respond to that. Can you tell us, Carl, specifically what items are included in the account "pay and related costs"?

Mr. DETWYLER. Yes, sir, we have the military personnel appropriations for both the active forces and the Reserve components. We have retired pay, the cost of our volunteer program, family housing, our medical CHAMPUS program and the civilian payroll. Senator BYRD. Do you have troop housing?

Mr. DETWYLER. No, sir.

Senator BYRD. Should not that be part of related costs?

Mr. DETWYLER. It could be, but we have difficulty trying to put a cost factor on it, sir. We have tried to identify things that we could specifically put a cost tag on and not have to estimate.

Senator BYRD. How about recruiting expenses?

Mr. DETWYLER. They are not in here.

Senator BYRD. In other words, the 57 percent is really a minimum, then?

Mr. DETWYLER. It certainly does not include all the costs, sir; you are entirely correct.

Senator BYRD. The point I am suggesting is, it seems to me a rather serious one. I am not saying salaries should not to be what they are, but for every defense dollar we spend we are going to have considerably less than 50 cents that can go into military hardware.

Mr. KELLEY. Yes, sir.

Senator BYRD. With outlays it goes up to 57 percent for fiscal 1973, even though some of the costs really are not, recruiting, for example, and troop housing is not included in that figure. So what the Congress and the Defense Department, as I see it, are faced with for the future is that we have our personnel costs so high that we are going to have difficulty in buying submarines and destroyers and aircraft and guns and tanks and so forth. Does that seem a fair assumption?

Mr. KELLEY. That is a good statement of the problem.

Senator BYRD. How many personnel do we have? What is the total personnel in the Pentagon now?

Mr. KELLEY. The total personnel, military and civilian, is about 30,000. I can get a more exact figure for the record.

(The information follows:)

The actual number was 24,988 as of 31 December 1971.

Senator BYRD. Approximately 30,000.

To get back to the previous question, perhaps maybe I should address it to you, with the Secretary's permission. The Pentagon spends about a billion dollars each year on beef for the messhall. Is that included in the 57 percent?

Mr. DETWYLER. Yes, sir.

Senator BYRD. And all of the food for the messhalls?

Mr. DETWYLER. Yes, sir, plus the allowances for subsistences.

HEADQUARTERS IN SHAPE

Senator BYRD. I have some questions in regard to NATO but I am not certain from your responses to other members of the committee whether they should be addressed to you or to someone else. What is your feeling in that regard?

Mr. KELLEY. I do not know what kind of questions you have in mind, Senator.

Senator BYRD. We will start and see how it works out. I understand there are 22 NATO headquarters in SHAPE. Is this not a needless number of headquarters? Do you feel each of these headquarters is essential?

Mr. KELLEY. I think questions of that variety should be directed to Secretary Laird and Admiral Moorer. However, we would be happy to supply that information for the record, but I think they can speak directly to it.

(The information appears on p. 74-77.)

RESPONSIBILITY FOR PERSONNEL ASSIGNMENT TO EUROPE

Senator BYRD. Let me ask you this and I think it is along the line of Senator Thurmond's question but it will not hurt to ask you again.

Who determines whether the number of U.S. personnel assigned to Europe should be 310,000, 250,000, 350,000, or what, or some other figure?

Mr. KELLEY. That is a determination which is made between the Secretary of Defense, the Joint Chiefs, and National Security Council.

OVERSTAFFING

Senator BYRD. Just one final question. You in your colloquy with the chairman very candidly stated you thought that there was overstaffing and that that overstaffing applied elsewhere as well as the military. In private industry, if management runs into problems financially, that sort of tends to take care of the overstaffing, does it not?

Mr. KELLEY. Yes, sir; it does.

Senator BYRD. And we do not have that same situation in Government.

Mr. KELLEY. There are many dissimilarities between private industry and Government. That is one of them.

Senator BYRD. As Assistant Secretary for Manpower, would it not be a logical top priority program to reduce the overstaffing? Mr. KELLEY. Yes, sir; I think that is a logical priority. Senator BYRD. Thank you, Mr. Secretary.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you, Senator.

MANPOWER COSTS

Going back to this thing, I want to make clear when we talk about the personnel costs, retirement costs and manpower costs, that is no reflection on the manpower. If we put a little more money on quality servicemen and stop retiring so many in their forties, we can clear up this manpower cost picture a little, and have a little more money left to buy weapons because they are skyrocketing right along. We want to try to get into that procurement, too. I know you and Mr. Laird do.

On this manpower cost, Senator Byrd, the figures that I have, this was 4312 percent of the Defense budget in fiscal year 1964, and in this budget they are 56.8 percent. If housing, recruiting and similar items are added the figure approaches 67 percent.

Senator BYRD. Mr. Chairman, would you yield at that point? The CHAIRMAN. Yes.

Senator BYRD. You mean, in other words, two-thirds of each dollar spent is for manpower and pay and related costs.

The CHAIRMAN. Yes, really related. If you add housing, recruiting and so on-and recruiting is increased by this increased number of men you are handling, in part at least-you get 67 percent. But I think in the hard thinking that is better to use the 56.8 percent.

Senator BYRD. But, in any case, if the Nation agrees to spend $80 billion on defense, the Nation will get very little military equipment, very little military hardware for that $80 billion?

The CHAIRMAN. The relative percentage is what I have said.
Senator BYRD. About a third.

The CHAIRMAN. Matters that go directly and indirectly to the manpower levels approach that 67 percent.

Senator BYRD. Is that not another reason then that every effort should be made to reduce the total manpower that we have in the military?

RETIREMENT PAY: ACTUARIAL TECHNIQUES

The CHAIRMAN. Yes, I think it is necessary that we stop retiring them at such an early age.

General, you gave us the $129 billion figure, accrued liability for retirement pay. It would be that at the end of fiscal 1973 ?

General BENADE. That is right, sir.

The CHAIRMAN. How do you calculate that?
General BENADE. Through actuarial techniques.

The CHAIRMAN. What are those actuarial techniques?

General BENADE. It represents the liability incurred for services already performed. It represents that amount of money which if invested at interest, in this case 312 percent, would be required to pay retirement benefits for service already performed.

The CHAIRMAN. To hold it down to $129 billion would we have to appropriate it into a trust fund?

General BENADE. That is right, sir.

The CHAIRMAN. What rate of interest would it draw?

General BENADE. 312 percent.

The CHAIRMAN. Would we accumulate enough by that time to pay off this obligation?

General BENADE. Yes, sir.

The CHAIRMAN. Suppose we do not put up the $129 billion, what is the situation then?

General BENADE. As it is today, sir. It is handled each year as part of the annual appropriation and the amount steadily rises each year. The CHAIRMAN. If we do not deposit the $129 billion obligation in a trust fund and let it draw interest, how much is it going to cost the Treasury year after year to pay it off in addition to the $129 billion? General BENADE. I cannot answer that, Mr. Chairman. I would point out that by not having it in a fund the Government, of course, is getting the use of that money, so one balances off against the other. The CHAIRMAN. I am trying to get the figures from you. How much would that $129 billion earn if we put it now in a trust fund? Do you have any calculations on what the earnings would be from now until the time it was paid out?

General BENADE. I do not have it, sir.

The CHAIRMAN. Do you know anyone in the Pentagon who does? General BENADE. No, sir. We can certainly make such a calculation as to how much interest $129 billion would earn. It is a simple calculation. I just do not have it with me.

The CHAIRMAN. I think your answer of $129 billion should have that qualifying factor. It would be $129 billion provided you put up the money now and let it draw interest, but if you do not you are going to have to pay a billion more.

Senator BYRD. Just to make the record more complete, I wonder if we could ask the general if he would supply for the record the figures for the unfunded military retirement liability beginning with, say, fiscal 1964, 10 years ago. Bring it year by year to fiscal 1973.

General BENADE. I have the figures with me from 1967, sir, which I can provide now and I will be glad to provide the others. (The information follows:)

74-696 0-72-pt. 1-10

1 As of the end of the fiscal year, based on pay rates in effect on that date for fiscal years prior to fiscal year 1972 and January 1, 1972 rates for subsequent years.

NOTE 1. None of the above figures make any allowance for increases in basic pay rates or for increases in the Consumer Price Index after January 1, 1972.

NOTE 2. No reduction in accrued costs has been made for nonpayment of retired pay by reason of VA waiver, dual compensation laws, ete. Accrual costs are calculated at 31⁄2 percent interest.

General BENADE. In fiscal year 1967 the unfunded liability was $70 billion, $396 million; in fiscal year 1968, $77 billion, $228 million; fiscal 1969, $86 billion, $269 million; fiscal 1970, $103 billion, $426 million; fiscal 1971, $117 billion, $870 million; fiscal 1972, $126 billion, $385 million and as I indicated previously, estimated end fiscal 1973, $129 billion, $854 million.

Senator BYRD. If the chairman would permit me just to ask two more questions?

The CHAIRMAN. I yield to the Senator.

Senator BYRD. I took this down hurriedly and I may be in error. Check me. But for fiscal 1969 it went from $80 billion to $103 billion? General BENADE. Fiscal 1969 was $86 billion.

Senator BYRD. Then it went, next year it went to $103 billion?
General BENADE. Yes, sir.

Senator BYRD. So that was an increase in 1 year of $23 billion; the next year it increased $9 billion; this year the increase is $3 billion. I wonder why the increase is descending each year.

General BENADE. The larger years, Senator, represent the effect of pay raises and CPI increases. For example, there were two pay increases in fiscal year 1970; one was effective July 1, 1969, and the other was effective January 1, 1970.

Each year people going onto the retired rolls are going on at the higher rates of pay.

Senator BYRD. In 1969, in that 1 year, it increased $23 billion, which is more than 25 percent.

General BENADE. In 1969 it increased $9 billion over fiscal 1968. Between 1969 and 1970 there was an increase of $17 billion, not 27. Senator BYRD. Did it go from $80 billion to $103 billion?

General BENADE. It went from $86 billion in 1969 to $103 billion in 1970.

Senator BYRD. 17?

General BENADE. Right.

Senator BYRD. That has been the largest increase in any 1 year? General BENADE. Yes, sir. But that is a function, as I say, sir, of rates of pay that are in effect and which determine the Government's liability to the active service and retired groups at that point in time. Senator BYRD. Thank you very much.