Foreign Relations of the United States, 1951, National Security Affairs; Foreign Economic Policy, Volume I

700.5 MSP/7–1751

Memorandum by the Director of International Security Affairs ( Cabot ) to the Secretary of State

top secret

[ Washington ,] July 17, 1951.

Subject: Mutual Security Program Appropriations

Problem

The problem of what Mutual Security Program (MSP) funds we should request for Fiscal Year 1953 can be approached from three directions: (A) requirements; (B) availability of military equipment, Taw materials, etc., which will determine our ability effectively to utilize funds, and (C) political atmosphere which will influence our ability to get appropriations. Obviously, (B) and (C) will depend very largely on the sense of urgency which prevails and this in turn will depend on the course of events and especially Soviet hostile acts and threats.

Discussion

A. Requirements

We base our estimates for Western Europe on the recent studies of the feasibility of meeting the Medium Term Defense Plan (ISAC Document 4/7a)¹ which you discussed with the President. Those studies indicate that a major step-up in the procurement of military equipment should occur in Fiscal Year 1953. We estimate that about $9 to $13 billion should be used by us to procure military equipment in the United States and Europe in that year for European NATO countries and Western Germany and perhaps another $1.5 billion for non-NATO countries, including about $500 million for Spain and. Yugoslavia.

These estimates for the European NATO countries assume that about the same magnitude of procurement will be required in Fiscal Year 1954 and that the time needed to produce and deliver military equipment in that year will be 12 months. If we decide to take more drastic steps to ensure meeting MTDP requirements on the target date, a portion of the Fiscal Year 1954 funding should be brought forward to Fiscal Year 1953 to get production under way in that year so deliveries can be effected in Fiscal Year 1954.

In addition to the $10.5 to $14.5 billion needed for equipment procurement in Fiscal Year 1953, economic aid requirements are estimated at $2.5 billion, of which almost $2.0 billion is needed for Western Europe, including Greece, Turkey, Spain and Yugoslavia. No difficulty is anticipated in effectively utilizing these funds.

B. Ability Effectively to Obligate Funds.

The rate at which we can effectively obligate MSP funds to meet the requirements depends on the needs for our own forces and the total production of military equipment, which, in turn, depends on the scope and timing of industrial mobilization.²

Although the Department of Defense has not committed itself as to its Fiscal Year 1953 requirements, it was originally understood that funds already appropriated plus those currently requested for Fiscal Year 1952 would be adequate to meet major equipment and construction requirements for the build-up of United States forces, with the exceptions of war reserves and of Air Force requirements, which are currently based on a strength of 95 wings. Procurement and production scheduling called for meeting the major portion of these requirements before the end of Calendar Year 1952; again with the two exceptions noted above. These estimates, however, are not in consonance with recent talks we have had with Messrs. Lovett and McNeil³ which indicated higher total requirements for our own forces than current requests would indicate.

Consequently, if the United States Services do not increase their force strengths above present plans or increase their requirements for war reserves, presently planned industrial mobilization targets will be adequate, on the average, to meet promptly and in full MSP requirements after December, 1952.

There are elements of indeterminacy, however, as to the timing and degree of industrial mobilization in the United States:

• First, the Department of Defense will probably not have firm schedules of procurement for the bulk of its Fiscal Year 1952 funds until September, 1951 at the earliest. Until this information is available, it will not be possible to make decisions on the build-up of military production in the United States.
• Second, some time before the end of this Calendar Year, decisions will have to be reached as to the rate of military production expansion. At the present time military production in the United States has reached the rate of almost 1.5 billion dollars a month and by June, 1952, the delivery rate on military production is scheduled to rise to 4 billion dollars a month. A decision will have to be made as to what point production will level off so that United States industrial facilities can be operated in a state of readiness for prompt mobilization under war conditions. There is a conflict between the need for accelerated efforts to produce military equipment between now and December, 1952 and the longer term need of maintaining industrial facilities in a state of readiness for war mobilization.
• Third, with the growing possibilities of a truce in Korea, we must reckon with the inevitable tendency toward a slack-off in mobilization efforts. This tendency will first take the form of seeking to reduce the targets and to postpone the dates for planned arrival at those targets. This third factor is by far the most significant factor in any determination as to the capabilities of the United States economy to meet both United States mobilization and MSP requirements in Fiscal Year 1953.

So far as MSP is concerned, there are factors to compensate partially for a tendency of slack-off in United States defense production. If a Korean truce is obtained, the rate of consumption of United States military equipment will decline. These savings in equipment, however, have already been largely discounted in the planning of requirements for United States military forces. Second, the Department of Defense may be willing to take greater risks by making stock sales of military equipment to MSP in advance of deliveries of new production. At the present time the Department of Defense is releasing many items of equipment to MSP countries about 90 days in advance of replacement deliveries from new production. If this period were extended from 90 days to 180 days, the rate of deliveries could be stepped up. This policy would ensure a closer relationship between the obligation of MSP funds and equipment deliveries, but from the over-all point of view would not solve Defense’s basic problem of stepping up the rate and volume of military production. Third, greater efforts and risks might be taken to procure military equipment with United States funds in Europe. This step might ensure a more rapid obligation of MSP funds, but it is doubtful, since European military production is not at a high level, that deliveries of equipment would be greatly accelerated.

Conclusion

On the requirements side, Fiscal Year 1953 should be the year of great effort to procure and produce military equipment for MSP requirements. About $10.5 to $14.5 billion of such equipment should be procured. On the capabilities side, the basic difficulties arise from the fact that psychological and domestic political factors may prevent the attainment of planned rates of acceleration of defense efforts. If these domestic, psychological and political factors are overcome and if we get adequate appropriations so that the Department of Defense is able to schedule promptly and firmly its procurement requirements, the United States industrial mobilization facilities and organization will produce the equipment needed to meet MSP requirements.

Recommended Courses of Action

1. Although the subject is currently under review in the NSC Staff, you should be prepared to re-affirm the urgency and importance which you attach to meeting the MTDP targets in full and on time. This means that MSP requirements in Fiscal Year 1953 should be substantially larger than in Fiscal Year 1952.

2. In discussions with the Department of Defense, you might indicate that the larger MSP Fiscal Year 1953 requirements for equipment should continue to be kept in mind in Defense’s programming of its own requirements and scheduling of production. If Defense decides to go into heavy procurement for its war reserves in Fiscal Year 1953, you might indicate that full consideration should be given to the possibility of assigning a higher priority to MSP procurement and deliveries than to war reserves.

Thomas D. Cabot

1. For an extract from document ISAC D-4/7a, “Scope, Duration and Feasibility of the NATO Medium Term Defense Plan,” June 20, 1951, see vol.iii, p. 193.
2. For information on United States defense mobilization efforts, see pp. 1 ff.
3. Wilfred J. McNeil, Assistant Secretary of Defense (Comptroller).