Office of the Historian

PPS Files, Lot 64 D 563

Memorandum by the Deputy Director of the Policy Planning Staff (Ferguson) to the Under Secretary of State (Webb)

top secret
[Washington,] December 12, 1951.

On my return on December 11 from the briefing arranged by the Budget Bureau on the military and foreign aid programs for fiscal year 1953, I reported to the Policy Planning Staff and had a transcription made of this report.1 I believe it includes all of the material on which I had made notes in the course of the briefing session.

The following points which emerged from the presentation seem to be of particular importance to the Department of State.

1.
Since the completion of the NSC 114/2 Annexes, which were the basis of the $50 billion military and foreign aid programs for fiscal year 1953, the Defense Establishment has prepared estimates on the basis of an $85 billion program for that fiscal year. Despite the difference in the size of these two estimated programs, the charts exhibited indicate that whichever program is adopted, expenditures and deliveries are not likely to be affected very much until after the middle of 1953.
2.
On the basis of the $50 billion program, the cost of maintaining the projected build-up will be approximately $30 billion annually without any allowance for new procurement or replacement, and an additional $18 billion annually, or a total of $48 billion, if new procurement and replacement are included.
3.
The $85 billion program suggested in the Defense Establishment presentation will mean a continuing rise in defense expenditures and deliveries, both for our own military establishment and for foreign aid purposes, even beyond fiscal year 1953. If an $85 billion program assumes a similarly enlarged European defense program it will involve a prolongation of the strains inherent in a large rearmament effort.
4.
On the basis of the charts presented, it appears that to meet the deliveries required under the latest SHAPE plans in fiscal year 1952, large quantities of materiel will have to be taken from existing U.S. stocks and some quantity will have to come from new production now scheduled for U.S. forces.
5.
The fact that expenditures and deliveries probably will not be affected much through fiscal year 1953 whatever program is adopted, suggests the necessity of looking well beyond the year 1954, which has tended to be the limit of most of our estimates and analyses. If we project our estimates and analyses of our own and Russian strength and relative positions to 1960 or 1965, the results might lead to a revision of the rate and tempo of the build-up in the years after 1953 and might suggest variations in the projected program.

John H. Ferguson
  1. A copy of the report, attached to the present memorandum, is not printed.↩