796.5/3–1651: Telegram
The Secretary of State to the Embassy in the Philippines
2130. Cowen from Melby. Does implication ur 2800 Mar 161 mean you recede from position in your Mar 6 ltr to me2 and from your [Page 1520] views as expressed in our conversations prior your return Manila on desirability US increase its influence over Phil mil matters by financial means?
All agree mil budget aid wld have important econ repercussions which wld have to be taken into acct and carefully planned for to avoid harmful effects. Hobbs’ most convincing argument is absence peso funds now for troop pay. He believes most important morale effect wld result from troop knowledge funds available if as and when needed for current expenses. He says he does not know how much wld be needed and wld have to estimate this in conjunction with you from time to time in light changing circumstances but in any event shld have it available when needed. He considers this one-time operation while econ program gets under way. Even assuming all desired legis passed and tax collection made more effective, it wld seem likely increased revenues wld only come slowly and that this form of aid needed as stopgap. Romulo claims last troop pay taken from postal money order reserves which now exhausted.
Treas Attaché3 estimate on favorable balance of payments situation FY 51 and FY 52 being used by Treas as most persuasive argument no aid program of any kind for Phils is necessary. How effective do you really think any carrot-stick combination will be in securing legis and implementation thereof except on long-range painful basis where results might be too late?
Any program export–import loans wld be coordinated with ECA program. I used export–import only to illustrate type of project I had in mind. [Melby.]