NASA Budget: Ratchet Two

On December 30, President Nixon signed a tax reform bill that he charac­terized as both “good and bad.” One of the negative effects of the bill was that it would make it more difficult to balance the FY 1971 budget. Even so, as he signed the bill the president repeated his frequent pledge to present a balanced budget, saying that failing to do so would be “irresponsible and intolerable.” This pledge flew in the face of warnings he had been getting from BOB’s Mayo as final budget decisions were being made that it would be impossible to achieve a balanced budget without increased government revenues. The Treasury Department and BOB had discovered at the end of December that their revenue estimates, taking into account the impact of the tax bill, were wrong, and that there was an almost $4 billion gap between the proposed FY1971 budget of $205 billion and projected revenues. The issue facing the president was how to close that gap in order to achieve a bal­anced budget. He could either agree to a tax increase of some kind or further cut the budget.37

The Treasury Department quickly came up with a “painless” tax increase package as a means of rapidly generating additional revenue; it involved speeding up collecting estate and gift taxes and levying higher excise taxes on liquor, tobacco, and gasoline. That package would produce a revenue increase in FY1971 of $4.5 billion, more than enough to cover the pro­jected gap. There was one catch to this approach; it depended on the will­ingness of the Congress to quickly pass another bill incorporating the new tax increases.

On January 3, Nixon approved this approach to achieving a balanced budget; he then called Arthur Burns, his conservative economist coun­selor, to tell him that news. Burns was scheduled to become chairman of the Federal Reserve Board at the end of January. Although he had lost standing vis-a-vis overall domestic policy within the White House, in his new position his agreement on the path Nixon was taking to achieve a balanced budget was essential. Burns did not agree; he insisted on a prop­erly balanced budget, not one balanced through tax “gimmicks.” This meant, Burns argued, additional budget cuts. Nixon had little choice but to agree.

The president announced his decision to seek additional budget reduc­tions at a January 13 meeting of the cabinet, begun just as the NASA press conference announcing the first round of additional budget cuts was wind­ing up. The meeting lasted over three hours. Mayo, present even though he was not a cabinet member, argued that further budget cuts were not possible. Burns’s position was argued by Secretary of Housing and Urban Development George Romney, who “exhorted his colleagues to cut even deeper into their own budgets and capped his plea by an astonishing sermon calling on all members of the Cabinet and the President, to take a 25 per cent pay cut.” Following the meeting, President Nixon ordered “anguished department heads to make still greater cuts to achieve a Burns-style balance.” The budget-reduction exercise was dubbed “Operation Paring Knife.”38 It ended up resulting in nearly $4 billion in additional budget reductions, so that the budget proposal President Nixon sent to Congress on February 2 requested $201 billion in expenditures for FY1971, with revenues estimated at $202 billion.

NASA was not represented at the January 13 cabinet meeting, but the next day Paine was advised by Ehrlichman and Mayo that NASA’s share of the overall budget reduction would be a reduction of an additional $200 million. This amount had been decided by, or at least cleared with, Nixon. (Mayo later suggested that Nixon had decided on the $200 million NASA reduction even before the January 13 cabinet meeting and thus it was not integral to the “Paring Knife” process.39) The NASA leadership quickly identified $51 million in cuts that could be made through a series of small reductions in science and applications programs, but to reach the $200 mil­lion reduction, they thought, Apollo missions 17, 18, and 19 would have to be canceled. (Apollo 20 had been canceled in May 1969 so that the upper stage of its Saturn V booster could be used as the basis for the planned orbital workshop, later named Skylab.) Paine wrote the president another strongly worded letter on January 15, informing him of the $51 million reduction but saying that additional reductions to reach the $200 million figure “would require actions which you have specifically instructed me you do not wish to take—actions which would cripple the space goals of your administration and dissipate the Apollo team.” These actions included canceling the final three Apollo missions and reducing funding for the space station and shuttle. The job loss accompanying this action, said Paine, would be an additional 15,000 positions in addition to the 50,000 person job reduction he had just announced in his January 13 press conference. Paine said that if NASA were forced to take the whole reduction “I must discuss the problems involved with you personally.”40

Reacting to Paine’s letter, on January 16 there were a series of conversa­tions between NASA and BOB. By late afternoon, Mayo phoned Paine and told him that BOB would accept the $51 million reduction and that no additional cuts would be needed. Paine phoned Flanigan with this news, recognizing the breakdown in communication between BOB and Flanigan’s office likely meant that Flanigan was not party to the BOB decision. He was correct. Flanigan’s reaction was anger; he said “Do you mean Mayo capitu­lated?” Flanigan informed Ehrlichman of the agreement, who in turn relayed the news to Nixon, who was at Camp David. The word quickly came back that the agreement was not acceptable; NASA would have to accept the full $200 million reduction. This message was communicated to Paine as he was enjoying a dinner at a Washington hotel in honor of Charles Stark Draper, the head of the MIT Instrumentation Laboratory. A loudspeaker announce­ment asked Paine to call the White House; Paine made the call “knowing damn well that they were not calling me to say we had more money.”41

NASA was able to achieve the additional budget reduction by stretching out the schedule for Apollo launches and the launch of the orbital workshop and reducing funds for space station and shuttle studies. No Apollo mis­sions were canceled; the White House had once again called NASA’s bluff with respect to saying a reduced budget would mean the early end of human space flight. The final NASA budget was $3.3 billion, $400 million less than Nixon had approved in early December, 25 percent less than NASA’s budget request of the preceding October and 15 percent less than NASA’s FY1970 budget. New NASA Deputy Administrator George Low noted that “the whole budget situation has been tremendously confused. . . The series of consecutive cuts, each one of which was defined as being the last cut, is quite hard to understand.” Low thought that Richard Nixon was “assessing as we go along the mood of the country.” Low referred to a January 17 editorial in the Washington Star newspaper bemoaning the NASA budget cuts but saying “cutting the space program is exactly the right thing to do in this period of fiscal restraints.” Low judged that “the President feels that he would be severely criticized if he did not make a major cut in the space program,” given all the other budget reductions he was proposing.42 NASA had been caught up in a chaotic confronta­tion between budget choices and broader fiscal considerations, reinforced by a breakdown in the White House policy-making process. That chaos obscured a stark reality—that through its decisions on the FY1971 NASA budget, the Nixon White House and ultimately the president himself had significantly reduced the priority of the space program among the whole range of government activities. In the form of modest funds for continued study of the space station and space shuttle, NASA’s hopes for the future were still alive, but just barely.