11mm momma seems Arm 7 e933 MEMORANDUM SUBJECT Discussion at Special Meeting of the National Security Council Tuesday March 31 1953 On Tuesday March 31 1953 the National Security Council met informally with the Civilian Consultants designated Action No 726-c for the purpose of obtaining the reactions of the Civilian Consultants to the preliminary views of the Council members regarding basic national secumity policies and programs in relation to their costs pursuant to NSC Action NO 73015 Present at the meeting were the President of the United States presiding the Vice President of the United States the Sec- retarv of State the Secretary of the Treasury the Secretary of De- fense the Director for Mutual Security the Director Bureau of the Budget the Director of Central Intelligence the Acting Director of Defense mobilization the FEderal Civil Defense Administrator the Chairman Atomic Energy Commission the Deputy Secretary of Defense the Assistant Secretary of Defense Comptroller the Special Assist- ant to the President for FCDA presentation only the Special Assist- ant to the President for National Security Affairs the Special As- sistant to the President for Atomic Energy Affairs 'the Executive Sec- retary and the Deputy Executive Secretary NBC The Civilian Consultants present were as follows Messrs Dillon Anderson James B Black John Cowles Eugene Holman Deane ht Halott David B Rob- ertson and Charles A Thomas a summary of the discussion at the meeting follows Mr Cutler first briefed the Council members and the Consult ants on the program for the all-day meeting and the issues to which at- tention should be devoted Mr Cutler was followed by the Director of the Budget - Mr Dodge's briefing recapitulated the deficits of the past and present and the projected deficits for the future in the atsence of cuts in the MUtual Security and Defense Department programs In conclusion us Dodge emphasized the need for a decision on these cuts not later than the end of April Secretary Humphrey followed Hr _Dodge and in addition to stressing the danger of continued deficits pointed out the critical situation which would face the Treasury Department on June 30 when 1393 sec 3 5m @q 4420424 uncut mammal as 0335mm l'dt'tsw - mow dawn on it would own 83 billion and would have no sonar in the till This specific situation concluded Secretary Humphrey emphasised the vital need for a reversal of the previous Administration's spending policy Continuation of this policy would bankrupt the free world and force the Dhitsd States itself to abandon its way of life so were at the fork in the road and a decision would have to he node The Secretary of Defense then took the floor to reply to the question put to him on larch 25 by the President as to how much the Department of Defence could save annually in overhead and dupli- cation Secretary Wilson stated that the answer to this question was difficult because it ignored the factor of a real change in pol- icy His best guess however is that eliaination of overhead and duplication would result in a saving of $1 billion a year This saving cautioned Secretary lilacs rested on the assumption that the Secretary of Defense would get real help from the committee which was at present studying the reorganisation of the Department of Defense lost of this 31 billion he concluded would be saved from reductions in personnel Secretary Dulles then discussed the political repercussions to be anticipated from the carrying out of the estimated reductions for 1954 and 1955 in the lutual Security and Department of Defense expenditures as such reductions were reported to the Council on larch 18 and larch 25 Secretary Dulles stated that it was the he- lief of the State Department that global war was not inevitable but that it remained a real possibility The greatest danger of such a war would some from Soviet niscalculction of the intentions of the united States or from further free world success in the alleged en- circleaent of the Soviet bloc or finally free a collapse of the Uhited States program Secretary Dulles stated his cone viction that it was perfectly possible to protect this country against all these risks Hy all odds the greatest single preventive of global war was a strong and vigorous Uhited States--a united States whose capabilities both our friends and our enemies would respect It fur- ther seemed to Secretary Dulles that our potential strength was of greater significance than our actual strength in being Beyond this Secretary Dulles pointed out we must take clear positions so that war could not result from Soviet There snot be no repetition of the funny situation in Korea in the spring of 1950 which constituted an invitation to the Soviets to move against South Korea Secretary Dulles called attention to the statement which had been issued on the occasion of the recent visit of Premier layer and his Ninisters which warned the Communists against assuming that the conclusion of an armistice in Korea would leave them free to intervene against Inna-Chinagym Fogmgg The third factor in preventing global war continued Secre- tany Dulles was a firm policy to hold the vital outpost positions around the periphery of the Soviet bloc is examples he cited Japan lode-China India Pakistan Iran and NATO and he further warned that the loss of any one of such positions would produce a chain reaction which would cost us the remainder issurdingly the State Department felt it necessary short or general war to avoid losses of key positions to the Communists who won't themselves in- vite a global war but who will stand ready to pick off all the choice positions offered to them locally by llcivil wars - Secretary Dulles found the European situation much improved but pointed out that sany European countries were seriously overex- tended and were in grave danger or econcaic or financial collapse The result of such collapses would be the installation in these coun- tries of governments of the far left The situation was precarious internal disintegration was much harder to identity and to meet sus- cesefulhy than an overt act such as a Soviet march across Europe To prevent such internal disintegration and collapse thought Secre- tary Dulles would presumably require an expenditure in the next fia- cal year of some $5 to $6 billion in assistance to our allies though the sins of this amount would depend in considerable degree on the final shape of American trade policy which was now under study See- retary Dulles thought it almost certain that the NITO targets would have to be stretched out It was also likely that several hundred millions more would be required in Uhitsd States assistance to help the French liquidate the Indo-Ghina affair if the French finally came up with a vigorous program for that area Japan said Secretary Dulles was living to a considerable extent off United States expenditures for the prosecution or the Io- rean war If and when this war was settled however we would need to give further economic assistance to Japan though here too the amount would depend on lmerican trade policies Secretary Dulles noted that our policy of assistance to India would cost $50 million in 1953 $140 million seemed likely for 1954 though even this amount was sufficiently-low to cause much anxi- ety in the State Department Secretary Dulles doubted the wisdom of cutting the figure for India much below $100 million His thorniest problems said Secretary Dulles were repre- sented by Iran and the Arab States in general These problems were predominantly political in character Accordingly no large some can be spent in these areas at the present time If however peace between Israel and the Arab States should be achieved the problem or the Arab refugees would have to be liquidated This would call for a substantial united States contribution as well as added military as sistance to the nations of the Riddle East - I ee' In Turkey the question was whether the Turks could continue to maintain the military forces they have in being without assistance from us Is regard the maintenance of these forces as vital to our ee- curity but the burden is excessively hoary for the Turks to hear The Latin inerican states warned Secretary Dulles are a problen which we can never afford to forget inti-lseriosn forces were on the in lady of these republics and we sight well wake up ten years the now to find that our friends in Latin inerica had become our cue-ice Certainly we could not abruptly out off aid to Latin inerioa though a reduction sight occur during a transition from loans and grant aid to other kinds of assistance In summary Secretary Dulles noted that the assistance pro- gram for the maintenance by the Uhited States of these outpost posi- tions while absolutely indispensable would not call for the expendi- ture of vast suns Secretary Dulles believed that the figure of $6 billion a year was probably reasonable but said that he would defer to Governor Stassen on this point Secretary Dulles then turned to ways and scans of ending the peril represented by the Soviet Uhion This he said could be done by inducing the disintegration of Soviet power This power is already orerextended and represents tyrannical rule over unwilling peoples If we keep our pressures on and otherwise we nay either force a collapse of the Kremlin regise or else transfers the Soviet orbit from a union of satellites dedicated to aggression in- to a coalition for defense only or course said the Secretary of State no one can surely tell but Stalin's death certainly ssrked the end of an are There is no real replacesent for Stalin the deni- god The current peace offensive is designed by the Soviets to re- lieve the ever-increasing pressure upon their regise accordingly we must not relax this pressure until the Soviets site pro-ice of ending the struggle The snount of dollars this will take will cer- tainly fluctuate but the inerican effort cost not now be abandoned it the conclusion of Secretary Dulles' briefing the Presi- dent contrasted the free world coalition with the Soviet-dosinated sass Since the Soviets are totslitarisgs the President pointed out they could assign whatever proportion of national incose they desire to warlike purposes He who are dedicated to raising the standards of living for all peoples are inhibited from such cathode That is what we are up against when we try to match our resources with those of the Soviet bloc and we should never lose sight of this fact The President esphatically endorsed Secretary Dullcs' warning against any relaxation of pressure on the 0333 The Director of Central Intelligence than briefed the Coun- cil on the general subject of the adequacy and accuracy of intelli- gence relative to the Soviet union as the basis on which our policies ESE Fri-95fig - 4 7 and programs must in part be developed lfter describing the aajur categories of such intelligence Ir Dulles freely admitted short- comings of a serious nature ls nust resain highly critical of our intelligence effort he concluded but we must not he defeatist in the face of the difficulties of securing adequate information ifter further discussion particularly of the recent Con- nunist peace moves in Korea in the light of Ir Dulles' briefing Ir Cutler informed the council that the views of the Consultants with respect to the general problea which had brought then to leshu ington would be presented by Ir while there was near unanimity in the viess of the Consultants others of then de- sired to be board after Ir Anderson had read hie written report Ir Anderson expressed satisfaction with the briefing which the Consultants had received over the past three weeks on all the general aspects of the basic problea of reconciling an adequate posture of defense with a balanced budget He recon-ended much greater candor by the administration in setting forth to the incri- can people the nature of the Soviet threat the grave fiscal situa- tion and the resulting dilesna Ir lnderson expressed disapproval of continued deficit financing on the one hand or of increased taxa- tion on the other ls have bitten off sure then we can chew and accordingly reductions in certain areas lust be lads According to Ir Anderson the Consultants did not disagree with the basic secu- rity objectives of this Government but these objectives were so gen eral in nature that the courses of action to achieve them were then- selves a matter of policy For this reason the scope pace timing priority feasibility and costs of these policies and progress ought to be re-exanined with the greatest care In general the Consultants believed said Hr Anderson that the cost of rear-anent since 1950 had been excessive and would continue to be excessive until there was a clarification of the role and the sission of the three Services There was obviously nuoh duplication here and it was now time to re- view a rearuanent progras which had been initially undertaken in haste and in fear We should restore confidence to this nation for the long pull but at the some tine immediate savings can be made Emphasis in this review should he placed on the areas where the united States was strongest as for example in the field of atosic energy The Consultants had concluded said Ir Anderson that we had been profligate in the use of military sanpowar lb should like- wise be such acre selective in our research and development effort Scientific programs of the Department of Defense should he placed un der an Assistant Secretary Turning to the lutusl Security prograa Ir Anderson warned that the united States should not undertake to shore up the whole non- Soviet world In according assistance to other nations we should ape-e - - cl - L3 - 155534 73 emphasise the concrete defense implications and results It was plainly impossible to purchase the loyalty and friendship of other nations In general thought Ir Anderson the Mutual Security budget should be revised downward this year in the direction of gradual elimination of all expenditures to which we were not coma aitted In salutary it was the view of the Consultants said Hr anderson that the Rational Security Council should proceed on the assumption that a satisfactory national security posture is con- patible with the balancing of the Federal budget in 1954 The top figure for the national security programs in the budget for 1951 should be $45 billion The President stated that of course he couhd not disagree with the dangers to our econoay which the Consultants had perceived and emphasized but the problem to his was when it was necessary to achieve the balanced budget once you agree that you are going to more in that direction we walk around this problsa complained the President but it simply cannot be avoided we can't suddenly out off our developing policies and programs for national security we can't get out of debt right asay His own belief said the President was that we should now shoe our determination to move in the direction of a balanced budget rather then to cake a sudden out to achieve that objective now Ir Black answered the President with the statement that the Consultants had concluded unanimously that the Administration could balance the cash budget in F1 1954 This could be done in a variety of ways until now everything had been subordinated to getting things done How however we were in sight of our desired posture of defense so that we could eliminate this previous easte- ful concept This will require not sorely economies but a stretch- out and even renegotiation of contracts The President expressed agreement with Ir Black but said he wanted to get down to the facts It a project or program for sup plying some military end-item is 60% complete do we now abandon it or do we continue it These are the facts that lost be faced In illustration the President cited the program for large cargo planes and indicated that the coin emphasis should be placed on showing the public that the administration is definitely nosing in the direction of a balanced budget but that failure to reach that goal at once is the result of policies adopted by the previous Ldlinistration Ir Thomas expressed agree-ant with Mr Black On curtail- ing contracts he complained that until new American industry had been deprived of any sense of sustained military demand for its products Instead it had operated on a basis - 6 - 5 i ' hin 13 calm 'Iiucasma The President concurred and expressed the desire that business should become the partner of the idlinietrstion in this energency He then turned to the specific problel of taxes lhst inquired the Presidentfinding a substitute for the excess profits tax and the increased insane tax both of which will expire this summer Did the Consultants advocate he inquired letting these taxes lapse or would they prefer to find substitute taxes of a sore practical sort to he continued until the administra- tion can get things on the track In response to the President's inquiry Ir Cowlee said that he believed that the Laerican public was quite unaware of the terrible fiscal mess in which we were involved They plainly ex pect such greater budget cuts and tax cuts than it is safe to pro- vide in the face of the threat which the Russians represent ic- cordingly they lost be informed acre fully about this threat and the practices of the Governaeut in ever-classifying security infor- astion must be changed in order that vital information be placed in the hands of the public Ir Cowlee also added that the Consultants had used Iweasel words in stating their belief that the idlinistra- tion could achieve a balanced cash budget in 11'1954 lhat they really scant was that the idlinistration should head toward this objective The President answered that there was certainly no point in cutting off your leg because it was injured lhdle he expressed some agreement with Ir Cowles' desire for declassification of secu- rity information he also pointed out the risks involved and the lie- itation beyond which it was not safe to go The President then inquired of the Consultants whether they had given any thought to asking for somewhat greater flexibility fron- Congress in the disposition of funds given to the lutual Security id- ministration so that if at any given moment a certain area required help it could be immediately forthcoming Ionld such an approach in- quired the President be politically possible In a similar category continued the President were the questions of off shore procurement and the breaking down of trade barriers All of these were politically touchy matters which always aroused the special interest groups The Vice President replied with the view that the President should emphasise in his dealings with Congress the very close connec- tion between foreign aid programs and our military budget He should stress that off-shore procurement would enable us to buy our defense at a cheaper rate If the issue could be presented to Congress in this fashion the Vice President thought it sight change their think- ing Secretary Dulles stated that you could only cut aid if you increased trade but you can't do both as the Congress seems to de- sire thawlap slob-ii 3 hue-3145 3 Jet The m W Secretary Wilson also expressed a keen desire for more off- shore procurement if only to relieve the dangerous inflationary pres- sures in this country Something had got to be done to I'cool of the economy of the united States Secretary Humphrey then commented that he seemed to be sore radical than the other members of the Council It was never an agree able task to cut expensestwo ways --one to keep the old programs but to revise than and effect savings in carrying them out and two to make basic changes in the national security policies and programs For himself he believed thoroughly in the second course since our existing program was selrhdefeating in that it asked industry to produce vast quantities of defense materials at a given time and then suddenly cut off orders The President expressed doubt as to whether Secretary Humph- rey's analysis of the self-defeating nature of our present effort was valid He did not think that Secretary Humphrey had distinguished clearly between building up to our security objectives and thereafter maintaining then In particular said the President there was one danger that constantly worried hia--1sthargy and inaction in Europe which would allow that Continent to fell into Soviet hands If the Soviets attempt to overrun Europe said the President we should have no recourse but to go to war Secretary Humphrey answered that 11 of on might be true but that we were at present pushing some of our European allies so hard to build up their defenses that we were forcing them into bank ruptcy Accordingly Secretary Humphrey believed that the Rational Security Council should set a top limit for defense expenditures for PI 195A--say $40 billionw-and then see what we could buy with that much money Hr Cutler then raised the question of what risks the Amer- ican people would be willing to take in order to secure a victory in Korea which Secre Humphrey had said would have such a wholesome effect on the economy or to not seriously our military and mutual security expenditures Secretary Wilson expressed the opinion that the administra- tion could probably balance the budget in 1956 it in the meantime there were no added inflation but it would be pretty tough to achieve this balance in 1954 or 1955 The President then spoke his mind on the Korean problem If he said we decide to go up to the strength which will be necessary to achieve a sound tactical victory in Iorea--for example to get to the waist--the Russians will very quickly realise what we are doing They would respond by increasing the Communist strength in Korea and as a 3 gas-i isn t - i$e4b4 Ed l F 3 3 3 3 311mm ileum-n masseuse result we would be forced ultimately into a situation very close to general mobilisation in order to get such a victory in Korea Gen- eral Bradley expressed agreement with the President's thesis The President then raised the question of the use of atomic weapons in the Korean war Admittedly he said there were not easy good tactical targets but he felt it would be worth the cost it through use of atomic weapons we could I achieve a substantial victory over the Communist forces and 2 get to a line at the waist of Korea Secretary Dulles expressed the thought that it might now be possible to achieve an araistice in Korea on the basis that the pre- vious Administration had sought in vain addressing his question to Ir Robertson Secretary Dulles asked if in the circumstances we should accept such an armistice Ir Robertson avoided an explicit answer but expressed the general belief of the group of Consultants that the inericsn people would welcome an armistice on this basis Ir Cutler then asked the Consultants if they were prepared to answer the question whether we should try for a massive victory in Korea if it turned out that the Goununists dragged out their current proposals for perhaps a period or three months and no real armistice was in prospect Mr Robertson expressed the opinion that the American people would under the circumstances support an all-out effort in Korea There then ensued a discussion of the lutual Security pro- grsa and the view of the Consultants that this should be drastically out unless the current program had been based on prior commit- ments or the program had clear defense implications Ir anderson noted the feeling of the Consultants that many of the ISA programs appeared to be based on the assumption that you could buy the friendship of other nations and lake their economies viable by spending money This had raised doubts as to the worth of many of the individual country programs That might be so said the President but many of the Euro- pean nations would certainly have gone Communist had it not been for the money we had spent on them in recent years lb simply cannot af- ford to let Europe go Communist warned the President and while we may not have spent our money intelligently in all cases we could not now abandon these nations and these programs in Europe It was the task of our leadership to make them do their jobs better Jr -- #1 aae- - - u'f - ii In reeponse to a query from Ir Cutler the President re- fused to agree with the proposition that the five Lnerican divisions in Europe were largely in emphasis He said that he would have sent more inerican divisions not fewer if the United States had had more available and he stressed that they were a real physical deterrent to the Soviets and not merely a one The President further expressed the opinion that the $130 million-was a good investment in Latin imerica if we could be sure that by the expenditure of this amount we could secure the allegiance of these republics to our camp in the cold war Secretary Wilson expressed a willingness to spend even more money to prevent the Latin american republics from falling into Com- munisn Ir Holman for the Consultants stated that he was less worried about the danger of Communism in latin America than about rampant nationalism it 12 45 the members of the Council and the Consultants went to lunch at the White House The meeting reconvened after lunch and Governor Peterson briefed the Council on his tentative views with respect to the budget for and the general outlines of the civil defense pro- gram These were subsequently transmitted in writing to the members of the National Security Council In addition Governor Peterson made two special points-- one that as head of the he must be made fully aware of all rel evant intelligence material particularly from ABC and the Department of Defense and two that his agency must be more clearly aware of enemy and United States capabilities if F001 is to provide realistic leadership to civil defense Perhaps said Governor Peterson this might be accomplished if he sat in the NSC If not some other ar- rangement should be made it the conclusion of Governor Peterson's briefing the President observed that Governor Peterson's report indicated a cer- tain sense of frustration The President then said that he person- ally thought Governor Petersonis job to be of the highest importance and that he would see to it that Governor Paterson got the support and the information which was required to do the job that the Presi- dent had asked him to do Governor Peterson was followed by Chairman Dean of the atomic Energy Commission who briefed the Council in the first in- stance with respect to supplemental information on the program for the development of nuclear power NSC 145--Ihe Development of - 10 - Uta-3i Practical Nuclear Power 1 sanitized version of the report of the Consultants on this problem which had been referred to them by the Council was then distributed by the Executive Secretary li'l Chairman Dean noted that the total cost of the pilot plant called for in NBC 145 was $15 million It would be impossible he stated to erect this plant with the $3 million budgeted at present for 1953 and 1954 In other words new funds would have to be ap- propriated if the Government was to build the pilot plant in F1 1954 Although Secretary lilson repeated his doubts as to the value of l'crowding this project Chairman Dean made clear that he did not wish to see the $15 million for this plant knocked out of the FY 1954 budget Mr Thomas suggested that instead of spending $15 million in FY 1954 for the pilot plant the Council recomaend at this time the acceptance of the changes in the Atomic Energy Act which Chair- man Dean had suggested and then see whether private industry would not undertake to build the plant This might save the $15 million It not the $15 million could subsequently be put back into the budget Chairman Dean expressed doubt that private industry would at this time come in on an experimental reactor to the tune of $15 million but the President expressed approval for going ahead with the process of changing the Atomic Energy Act He also suggested that no appropriation beyond that already'made should be added until after the legislative changes had been approved Chairman Dean was followed by Admiral Strauss who briefed the Council on his tentative evaluation of the atomic energy programs for PI 1954 and 1955 and his views of possible reductions in expendi- tures for these programs The chief question at issue said Admiral Strauss was whether $200 million could he saved in the budget for the Atomic Energy Commission admiral Strauss stated that North America provides us with approximately one-third of our total requirements of uranium oxide The other two-thirds of our uranium oxide requirements come from areas vulnerable to enemy attack In view of our rising weapons objectives it was therefore plain to Admiral Strauss that it was necessary to go on with the iEC's program for construction of plants for the production of plutonium In short it would be impos- sible to reduce the AEC budget for these two fiscal years with respect to ore resources or weapons requirements loving on Admiral Strauss observed that the normal place to look for savings is in the area of greatest cost In the AEC budget this area was that of plant expansion The question therefore was could we reduce the program for plant expansion without a major default 11- 7 in the production or weapons it first blush it seemed possible to out perhaps one new pile at Hanford and two at Savannah River But in view of the fact that these plants produced tritiun and also be- cause without them reliance would have to be placed on a single in- stallation it was obvious that cutting out these piles involved a heavy risk to the national security Accordingly Admiral Strauss was unprepared at this time to reconnend cuts in plant expansion expenditures Admiral Strauss did suggest however that it might be possible to reduce the amount of money being expended and pro- jeoted for the tests of atomic weapons These tests involve a cost of $325 million and he thought a possible saving might be made in this category Similarly he suggested that cuts could be made in the production of dummy weapons used in training Thirdly he felt that the security program of the Atomic Energy Commission could be reduced by the device of increasing the degree of security in special sensitive areas but relaxing it in other less sensitive areas In the aggregate these items might go far to reach the desired goal but even in these categories Admiral Strauss stated that he was not yet prepared to make a positive recommendation and that forther study would he required He felt it would take sixty days to complete this study Secretary Humphrey observed that he hated to give up the idea of abandoning some of the proposed increased production capacity in the AED budget Chairman Dean replied that if you out out the Portsmouth Ohio plant you would be completely dependent on Oak Ridge Rhat would happen to your ua235 if the Oak Ridge installation were de- stroyed by air attack or by sabotage In short Chairman Dean sup- ported idmiral Strauss' view that to cut the production capacity program involved too great a risk to the national security Hr Thomas inquired as to the possibility of cutting out the program for producing an atomic aircraft carrier and an atomic- powered plans If this could be done with safety there would be a saving or $254 million in the first two years The President inquired what would we lose lhat would go down the drain by way or cancelled contracts 0n the other hand he said there was certainly good reason to question why we should con- tinue to try to produce two other experimental power plants for use in carriers and aircraft until we saw how the program for the atomic- powered submarine turned out Hr Thomas said that that was precisely his question The President said it was not necessary to reach a final decision on this issue today but that it did not seem to him that passes calm Ismaumcl any very logical reasons had been set forth for pushing ahead on the atomic carrier and plans program Mr Cutler then raised the question of enough-nose and there ensued a discussion of the JCS estimate of weapons requirements It was noted that 1959 is the date at which we presently estimate that we will have on hand the weapons which the Joint Chiefs believe we need Mr Malott then raised the question of public hysteria with respect to atomic weapons and the danger of atomic attack The President said that he was less concerned about hysteria than about the public complacency concerning which Governor Peterson had spoken earlier Mr Malott argued that he nevertheless believed that we ought to use a couple of atomic weapons in Korea The President replied that perhaps we should but we could not blind ourselves to the effects of such a move on our allies which would be very serious since they feel that they will be the battle ground in an atomic war between the United States and the Soviet Union Nevertheless the President and Secretary Dulles were in complete agree- ment that somehow or other the tabs which surrounds the use of atomic weapons would have to be destroyed While Secretary Dulles admitted that in the present state of world opinion we could not use an A-bonb we should make every effort now to dissipate this feeling especially since we are spending such vast sums on the production of weapons we cannot use it the conclusion of this discussion it became the turn of Governor Stassen to express his judgment as to the extent to which Mutual Security expenditures could be reduced in FY 1954 and 1955 without serious prejudice to the national security Governor Stassen stated his belief that we could accomplish our objectives with respect to assisting our allies in the context of the new United States policy that seemed to be evolving In changing the Mutual Security program to fit the new policy he stated it was of the greatest importance that the United States act in an atmosphere of confidence While the change to the new program should be rapid it should not be abrupt Governor Stassen stated that he felt that the forthcoming program should have the following new emphases on modern weapons 2 on sound economies both for ourselves and for other nations 3 private capital 4 increased international trade Governor Stassen felt that in the future our programs should involve lessened expenditure of funds but a longer period of commitment for U S as- sistance While he felt that it would be unwise to out completely our aid to any area or the free world where it was now being given - 13 - eum llnmaau he believed that the following changes were necessary In each crit- ical area to concentrate our aid on correcting the weakest point and strengthening the potentially strongest nation is emaaplea Gover- nor Staseen gave top priority in lantern Europe to France as a crit- ically weah point and to Germany as a potential strong point lith regard to the united Kingdom Governor Stassen predicted that devel- opment of off-shore procurement would accomplish wonders and would enable us in a short time to step grant aid In the Far East we de- sired to realise on Japan's great potentiality but this would require an leis-wide approach to foreign trade In South isia it was essen tial to save India but this would not involve so such vast expendi- ture as the long-tern approach which Governor Stassen had Just neu- tioned In the Rear East we should develop Egypt as the point of strength In Latin America and in Africa we should cut the amount of government aid provided to the area but greatly increase the role of private capital in the development of backward areas In so doing however Governor Staesen warned of the need for increasing the stake of the people of these countries in the development of a sound capitalistic economy If we indeed followed this emphasis in the mutual Security programs Governor Staseen believed that we could taper off and out back on the NATO three goals In accomplishing all these things said Governor Stassen what we do in the united States will very di- rectly affect what we do to assist foreign countries He can only achieve our objectives overseas if we put an and to inflation in the United States we cannot hope to lead others in the direction we wish them to go unless we ourselves are prepared to do what is neces- sary to assure a more stable economy and less inflation in the United States Governor Stasaen stated his belief that it would be possible to reach this new program by January 1954 by which time certain cuts could be made On this basis we could subtract $1 5 billion in ex- penditures for the FY 1954 budget and subtract #1 billion from the appropriations figure for 1954 after an exchange between Governor Staseen and Mr Cutler with respect to the discrepancy between the figures stated by Gover- nor Stassen in his oral presentation and the figures in his written report the other members of the Council were asked to give their opinions of the policy and program which Governor Stassen had out- lined The Secretary of State emphasised the importance of the pay- ohclogical factor abroad Many people in the EurOpean countries have been taught to believe that a Republican administration in the Uhited States would mean a return to isolationisn iny sudden out right therefore produce panic and at any rate said Secretary Dulles along with such reductions in grant aid as those suggested by Governor Stas- sen there nest go renewed efforts to increase international trade and to cut tariffs 1 - - ifEl l f' The Vice President warned the Council that they must think of sentiment and feeling on Capitol Hill Members of Congress he said are often reluctant to make cuts in the Defense budget but they do like to cut the Mutual Security budget He believed a cut of only $1 billion in the Truman budget for NBA would be extremely difficult to sell to Congress unless it was presented to the Con- gress as a new program Accordingly he urged that heavy asphasis be placed on the defense implications of the lutual Security program so that it might be presented as a means of obtaining our national Secretary Dulles and the President both stated their con- viction that it was absolutely impossible to pull a single American division out of Europe at the present time The President said we The money in this program was not eerely IgiveawayII money lith it we are buying something concrete in terms or U 5 security The real problem the President repeated was to find the economical way to make these European nations perform effectively as our allies briefing Secretary lilson was asked to brief the Council on his judgment of the extent to which Defense Department expenditures could be reduced in FY 1954 and 1955 without prejudicial effect on the ul- tioual security st the outset Secretary Iilson stated that defense-wise the United States was much better off now than it had been three years ago but to achieve by 1956 the force and readiness goals con- templated in NSC 135 3 would require the Department of Defense to spend 3 5 billion for the next three years and to spend $40 billion in maintenance in the years that followed Even so we would not achieve the force and readiness goals at the dates contemplated in use 135 3 Secretary lilson then said that he was working at present on the assumption of a floating D-dsy instead of a specific date for readiness On this basis it was possible to achieve expenditure cuts or a notable orders $41 billion in 1954 plus $2 billion for the war in Korea The $41 billion figure could be progressively re- duced in subsequent fiscal years to perhaps 333 billion annually by 1958 Reductions of this order of magnitude and in this time sequence would not substantially affect our strength in being in the next two fiscal years we would of course be less well off in the third and subsequent years i - 4 steam museum ai h hqpii ad I g Going on Secretary Iilson suggested that the following night he considered an acceptable program The Truman budget for PI 195i called for appropriations of $41 billion Secretary lilson proposed taking 35 billion off this figure which he thought could be got chiefly from better balancing out of the Defense Department programs and not extending our commitments so fer This would bring us from $41 billion to $36 billion and we could of course go still lower if it were not for the Korean war 35 billion out of the Tru- nan budget however secretary lilson felt to be tho laxinun that could be out from a political and point of view 1 further out in 1954 would result in the conclusion that the Uhited States was abandoning a serious defense effort for itself and its el- lies Furthermore said Secretary Iilson with these cuts we should sake every effort to keep the maximum forces in being for two years at least and he proceeded to outline the probable composition of the forces of the Army Navy and Air Force on the basis of such cuts as he proposed After Ir Cutler had amen-iced to the best of his ability the cuts which seemed reasonable to the Secretary of Defense and to the Director for lutual Security the President stated that he was satisfied with the picture which they had presented and felt that Congress ought also to be satisfied The proposed solution by Gov- ernor Stasaen and Secretary Iilson was even better than he had hoped for Ir Cutler noted that the Consultants had earlier expressed a view that the budget could be balanced in terms of cash expendi- tures in 195i Did they now wish to comment on what they had heard from Governor Stessen and Secretary lilson Mr Cowles said it would be magnificent if outs of the pro- posed magnitude could be made Secretary-Hunphrey added that on this basis we would have to contemplate a cash deficit of only 31 5 billion 0n the whole this to him not too bad The President suggested that we should certainly not in the present situation let the excess profits tax die without a substitute Indeed he added we ought never to connit ourselves to any tax reduc- tion while we are fighting this war The consultants were then invited by the President to make their comments Ir Thomas thought that you could still make certain small savings which in the aggregate could be very significant is examples he thought such savings could be made in the budget and in the money currently being spent on research and development in the De- fense Department 1 16 Hf '2 ' lssur rpq a 55Ir Robertson felt that the proposed cuts eere admirable and he had no suggestions for improvement in the programs outlined by Secretary lilacs and Governor Staesen Ir Anderson also expressed satisfaction and stated the view that a balance of the cash budget in Fl 195d night even yet be achieved since savings breed savings Ir Coulee likewise expressed eholehearted approval or these presentations and again stressed the importance of educating the public to the current threat to the national security This alone he predicted would put an end to the yelling for further tax cuts Ir Black stated his wholehearted approval of the programs The President stated in cloning the all-day session that he had been thinking about the great contribution which the Consult- ants had made to the Administration's understanding of the problea and it had occurred to him that it scold be desirable if the consult- ants were to return to ashington and give us some tea more days at about the time that the Administration's budget sent to the Congress They could then check over the final budget to see shat actually had been done in the say of cats is the President put it they could give a kind of spot check of the promises that had been made Fur- thermore in thanking the consultants for their cork the President stated that he wanted them to be apostles of the faith throughout the country If they really believed that the new idlinietration was doing its job then they nest go back to their localities and say so Ir Cutler summed up as the consensus of the meeting that the over-all policies for national security were on the whole appro- priate and reasonable Second that we should nevertheless in car- rying them out approach as rapidly as possible the balancing of the budget Thirdly that the means of doing this would involve changing our programs to carry out our policies rather then changing the pol- icies themselves Secretary Humphrey expressed firm disagreement lith Hr Cutler's observations and stated that he believed that what we eere contemplating was a very different set of objectives as well as a different program from those which had been endorsed by the Truman administration Enrarw icd' S EVerett Gleason Deputy Executive Secretary L a 2 12 13 HRH-T herd-Ir - 17 -                     National Security Archive    Suite 701  Gelman Library  The George Washington University    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