ANALYSIS / DEFENSE CUTS : What Pentagon Stands to Lose Depends on Who’s Counting : Even after Bush’s reductions, the military would still have more to spend than it did before the Reagan buildup.

For the Pentagon, this is not the best of times. But it is not the worst of times, either.

On the one hand, the Bush Administration has proposed slashing defense budgets every year for the next five years, for a total cumulative decrease of nearly 10%.

On the other hand, even after five years of cuts, the Pentagon would still have about 25% more to spend, inflationary factors aside, than it did on average between 1973 and 1980--prior to the Ronald Reagan Administration’s massive buildup.

Discussions of massive cuts and huge “peace dividends” are dominating much of the debate in Congress.

But how deep are the proposed cuts? It depends on who is measuring, and what yardsticks they use.

TWO POINTS OF VIEW: Inside the Pentagon, officials describe planning for cuts proposed by President Bush as an anguishing process. Outside the Pentagon, some defense experts remain unimpressed. The proposed cuts are “rather timid and unrealistic,” in the words of Lawrence J. Korb of the Brookings Institution, a Pentagon official in the Reagan Administration.

Bush’s proposal calls for spending about $1.5 trillion over the next five fiscal years, beginning Oct. 1. When the period of “shrinkage” ends in 1995, annual defense spending under Bush’s plan would have sunk from $303 billion this fiscal year to $274 billion, after accounting for inflation.

That figure is 6% higher than Pentagon budget levels in 1981--the first year of the Reagan Administration. Its eight-year defense buildup, between 1982 and 1989, increased defense budgets by 21%.

Even before the Reagan buildup, the services could assume significant budget increases when planning for future years. Bush’s proposed cutbacks mark the first time since 1963, in the John F. Kennedy Administration, that a President has submitted a shrinking Pentagon budget to Congress.

OTHER ALTERNATIVES: There are still other ways to consider and compare the spending levels now proposed by the Administration.

Defense Secretary Dick Cheney often points out that, under the plan, defense spending as a share of the gross national product would sink to 4%--the lowest proportion in more than 50 years. Defense spending peaked in 1953 at 11.9% of GNP, and, in 1985, at the height of the Reagan buildup, reached 6.3% of GNP.

Measured as a share of federal spending, the defense budget would also fall--to 21%, another 50-year low. The Pentagon’s share of government spending reached its peak of 57% during the Korean War and hit 43% in 1968, at the height of the Vietnam War.

Cheney has said that his declining spending plan was drafted on the rosiest assumptions possible--that Soviet defense spending will continue to decline and that the momentous changes throughout Eastern Europe will lead to the dissolution of the Warsaw Pact as a military entity.

By most estimates, U.S. responses to the military threat from the Soviets and their Warsaw Pact allies in recent years accounted for roughly 50% of each year’s Pentagon budget.

Although no one has suggested cuts of that magnitude any day soon, the pressure is on for bolder reductions.

NEW THINKING SOUGHT: Rep. Leon E. Panetta (D-Carmel Valley), chairman of the House Budget Committee, has called the Administration’s plan a “business-as-usual budget” that needs to move from Cold War to peacetime.

Rep. Les Aspin (D-Wis.) calls cutting defense the “fundamental task” facing the government and, in a letter to Panetta’s committee, wrote: “These times demand new thinking . . . .”

For the Pentagon, these may yet become the worst of times.