S/SNSC files, lot 63 D 351, NSC 142 Series

Memorandum by the Assistant Director for Program of the Mutual Security Administration (Ohly) to the Special Assistant to the Secretary of State for Mutual Security Affairs (Martin)1

top secret
  • Subject:
  • NSC Action 730–c2

Reference is made to NSC Action 730–c in which the Council directed that the Director for Mutual Security submit to the Council by March 17 a statement as to:

(1)
the revisions in Mutual Security Programs which would be necessary in order to reduce expenditures (from both old and new appropriations) for such programs to an aggregate of $5.5 billion in FY 1954 and $4 billion in FY 1955; and
(2)
the effect of such revisions in relation to currently approved national security policies and objectives.

In order to make this study certain arbitrary assumptions are necessary with respect to: (a) the distribution of allowable expenditures among the many separate segments of the Mutual Security Program; and (b) the level, or alternative levels, of permissible expenditures in FY 1956. The following assumptions with respect to each of the foregoing are to be used in undertaking the work called for below:

(a) Distribution of Allowable Expenditures—Since it is impossible, without more information than is presently at hand, to make even a temporary judgment as to the best division, from a national security standpoint, between military and non-military aid programs of the total allowable expenditures, it appears desirable to work from three alternative series of assumptions. These alternative series of assumptions, insofar as they concern the non-military aid programs, are as follows:

[Page 589]

(i) Expenditures in FY 1954: $1.2 billion; and in FY 1955: $.9 billion—It will be assumed, at these levels, that there can be no expenditures in either FY 1954 or FY 1955 for the following programs: Spain, PICMME, UNKRA, escapees, materials development, and DOT’s; and that the expenditures allowed will be distributed among the remaining programs as follows (figures in millions of dollars including local currency requirements):

FY 1954 FY 1955 Total FY 1954 and FY 1955
Title I MSA aid 810 460 1270
Title II economic aid 110 137 247
Title III MSA aid 130 116 246
Title III TCA aid 107 148 255
Title IV TCA aid 20 16 36
UNTA-OAS 13 13 26
Contributions to NATO 10 10 20
Total 1200 900 2100

It should also be assumed, with this pattern of non-military aid expenditures, that expenditures for offshore procurement in Europe will approximate $400 million in FY 1954 and $800 million in FY 1955.

(ii) Expenditures in FY 1954: $1.5 billion; and in FY 1955: $1.1 billion—It will be assumed, at these levels, that there can be no expenditures in either FY 1954 or FY 1955 for PICMME, materials development or the DOT’s; and that the expenditures allowed will be distributed among the remaining programs as follows (figures in millions of dollars and including local currency requirements):

FY 1954 FY 1955 Total FY 1954 and FY 1955
Title I MSA aid 970 515 1485
Title II economic aid 130 160 290
Title III MSA aid 150 130 280
Title III TCA aid 130 175 305
Title IV TCA aid 23 20 43
UNTA-OAS 14 15 29
Contributions to NATO 10 10 20
Spain (Economic) 32 35 67
UNKRA 35 35 70
Escapees 6 5 11
Total 1500 1100 2600

[Page 590]

It should also be assumed, with this pattern of non-military aid expenditures, that expenditures for offshore procurement in Europe will approximate $350 million in FY 1954 and $650 million in FY 1955.

(iii) Expenditures in FY 1954: $1,7 billion; and in FY 1955: $13 [$1.3] billion—It will be assumed, at these levels, that there will be no expenditures in either FY 1954 or FY 1955 for materials development or the DOT’s; and that the expenditures allowed will be distributed among the remaining programs as follows (figures in millions of dollars and including local currency):

FY 1954 FY 1955 Total FY 1954 and FY 1955
Title I MSA aid 1085 630 1715
Title II economic aid 160 185 345
Title III MSA aid 155 145 300
Title III TCA aid 160 195 355
Title IV TCA aid 24 24 48
UNTA-OAS 15 17 32
Contributions to NATO 10 10 20
Spain (economic) 32 35 67
UNKRA 45 45 90
Escapees 7 7 14
PICMME 7 7 14
Total 1700 1300 3000

It should also be assumed, with this pattern of non-military aid expenditures, that expenditures for offshore procurement in Europe will approximate $350 million in FY 1954 and $525 million in FY 1955.

(b) Expenditure levels in FY 1956—To the extent that such an assumption is necessary for the work hereinafter described, it will be assumed alternatively as to FY 1956:

(i) that expenditure levels for all non-military aid programs will remain at approximately the same levels as in FY 1955;

(ii) that the total expenditure level for all non-military aid programs as a whole will be reduced below the FY 1955 level by another $200 million in FY 1956, with this expenditure reduction spread among the several programs as follows (figures in millions of dollars):

[Page 591]
Title I MSA $130
Title II Economic 25
Title III MSA 15
Title III TCA 15
Title IV TCA 2
UNKRA 10
Escapees 3
$200

Given the foregoing assumptions, it is requested that MSA and the Department of State undertake, each with respect to the programs for which it has primary programming responsibility, and submit to this office not later than 12:00 P.M., Saturday, March 13, studies3 which will indicate the following:

(1)
The extent to which each of the alternative expenditure level patterns would, in terms of size, composition and purpose:
(a)
require, and if so how, a revision in current FY 1950–53 programs (including any necessity for defaulting on existing international understandings; stretch out; etc:);
(b)
require, and if so how, a revision in the proposed FY 1954 programs as submitted by the agency to the Bureau of the Budget in connection with the FY 1954 budget reexamination; and
(c)
require changes, and if so what changes, in the FY 1955 programs which the agency presently foresees as necessary if currently approved national security policies and objectives (as generally reflected in the $7.6 billion FY 1954 budget) are to be carried out.
(2)
The effects of making the revisions and changes indicated as necessary in (1) above on the attainment, or rate of attainment, of currently approved national security policies and objectives, including, where appropriate and practicable to make an estimate, the probable indirect effects of reduced expenditures on the capacity of recipient nations to raise and maintain forces of the size now anticipated and otherwise to carry out its military missions.
(3)
On the assumption that the aggregate expenditures allowed for any given program for both FY 1954 and FY 1955 might be rephased as between these two years, any rephasing which the agency recommends for any program, and the consequences, in terms of the effects reflected in (2) above, of such rephasing.
(4)
Any actions, other than those requiring foreign grant aid, which, if taken, might obviate or reduce the effects listed in (2) above.

It is also requested that MSA transmit a copy of its study to the Department of State simultaneously with its transmittal thereof to this office, and that the Department of State, not later than the close of business on March 15, submit to this office its views on the [Page 592] political aspects of the program actions indicated by such study to be necessary if the assumed expenditure levels were accepted.

The Department of Defense is simultaneously undertaking studies with respect to the military aid programs on assumptions which are consistent with those set forth above, and arrangements will subsequently be made for the integration of such studies with those requested in this memorandum.

It is requested that this general study and its various components be handled as a matter of highest priority and with maximum security precautions.

John H. Ohly
  1. A copy of this memorandum was also sent to Hopkinson.
  2. Early in February 1953 the new Eisenhower Administration began a sweeping review of basic national security policies based upon NSC 142, “Status of U.S. Programs for National Security as of December 31, 1952,” which was circulated for the information of the Council on Feb. 10, 1953. This review of basic national security policies stressed the relationship of such policies to cost and to overall national economic health, and culminated in NSC 149/2, “Basic National Security Policies and Programs In Relation to Their Costs”, Apr. 29, 1953.

    As one of the agencies intimately concerned with national security policy, the Mutual Security Administration and its Director were asked to prepare papers and presentations for National Security Council consideration during the period of policy formulation leading to the promulgation of NSC 149/2. Those papers and presentations bearing directly upon the Mutual Security Administration’s role in the development of NSC 149/2 are printed below. For the bulk of the documentation concerning the development of basic national security policies and programs in relation to their costs, including documentation on NSC Action No. 730–c, NSC 142, and NSC 149/2, see volume II.

  3. The studies under reference cannot be further identified, but see the paper prepared in the Office of the Director of Mutual Security in late March which presumably drew upon and summarized such studies, p. 596.