S/SNSC files, lot 63 D 351, NSC 5422

Study Prepared by the National Security Council Planning Board1

top secret

NSC 5422

Note by the Executive Secretary to the National Security Council on Tentative Guidelines Under NSC 162/2 for FY 19562

[Page 648]


NSC 162/23
NSC Action No. 11254
NIE 11–5–54 and NIE 13–545

The enclosed tentative study by the NSC Planning Board on the subject is circulated herewith to serve as the basis for discussion by the National Security Council at its meeting on June 24, 1954.

[Page 649]

The enclosed study reflects the tentative conclusions reached by the NSC Planning Board in its effort to develop guidelines to implement NSC 162/2, which would govern our national security programs for Fiscal Year 1956, in the light of estimates of the world situation and outlook through Fiscal Year 1959. Where choices of alternatives were proposed in the Planning Board’s consideration of this subject, these alternatives are indicated by brackets or parallel columns in the enclosed study.

The detailed studies of the world outlook and national security problems facing the United States through Fiscal Year 1959, with conclusions and possible courses of action, prepared by various departments and agencies, are contained in the Annexes to this report which are being circulated separately.

Based upon Council discussion of the enclosed study, and following further review by the respective departments and agencies, the NSC Planning Board will prepare and submit for early Council consideration such further report or reports as the Council may direct.

James S. Lay, Jr.

[Here follows a one-page table of contents.]


Study Prepared by the National Security Council Planning Board

top secret

Tentative Guidelines Under NSC 162/2 for FY 1956

i. elements of the world situation and outlook

The Soviet Threat Through Mid-1959 (NIE 11–5–54; NIE 13–54; and “Explanation of Table of Comparisons of Estimated Soviet Military Capabilities in Key Respects” in Annex 4 of NSC 5422)6

1. Status of the Soviet Bloc

The internal stability of the Soviet Union and its control of the European satellites have not diminished and may be expected to remain intact through 1959.
However, the Soviet bloc is faced with internal problems such as popular discontent in the satellites, agricultural shortages and [Page 650]opposition to collectivization, rivalries within the collective leadership and serious defections from the secret services.
Communist China has gained prestige more rapidly than anticipated; its power will continue to increase. Despite potential conflicts of interest, the present close Sino-Soviet collaboration will persist.

2. Soviet Bloc Military Capabilities

Estimates of certain current and future Soviet military capabilities have been raised substantially since the adoption of NSC 162/2. Key examples are shown in the following table: [Page 651]

Current Future
’53 Estimates of ’53 Situation ’54 Estimates of ’54 Situation ’53 Estimates of ’57 Situation ’54 Estimates of ’59 Situation
Nuclear Weapons (Energy yield)
Largest Weapon 500–1000 KT 1000 KT 500–1000 KT 10,000 KT
Total Stockpile 6 MT 25 MT 25 MT 172 MT (tested technology)
860–4300 MT (possible technology)
Long-Range Bombers
Prop. Medium (TU–4) 1000 1270 1200 400
Jet Medium (“39”) 1 Prototype 20 50 (mid ’55) 120 (mid ’55)
600 (mid ’59)
Turbo-Prop Heavy (“31”) 1 Prototype 10 some possible 300
Jet Heavy (“37”) 1 Prototype 100 (possibly 300)
Surface-to-Surface Guided Missiles
450–500 mi. (V2 type) Future Obscure Operational by ’56
a pilotless bomber Future Obscure Possible in ’59
b ballistic
[Page 652]Air Defense
All-weather fighters with A–I Radar A few by ’55 200 (mid ’55)
2100 (mid ’59)
Improved Ocean Patrol Submarines 20 47 100 295

Note. This table necessarily involves substantial simplification of estimates. A supporting memorandum, with full explanations and citations to National Intelligence Estimates, is included in Annex 4 of NSC 5422.

[Page 653]

3. Soviet Bloc Capabilities for Political Warfare, Subversion and Local Aggression

Present and future Soviet Bloc capabilities for pursuing their objectives by action short of general war appear at least as great as, and possibly greater than, a year ago. Throughout most of the free world the Communists have the capability through hardcore activists to engage in a wide variety of disruptive tactics, ranging from organized civil war (as in Indochina) through persistent guerrilla activities (as in Malaya) to inflammatory demonstrations, propaganda, “popular fronts”, and parliamentary harassment. Preferring a “creeping expansion” over resort to overt aggression, they will continue to take over spontaneous movements bred of nationalistic fervor or economic discontent and to exploit free world disunity.
In the period through 1959, the Soviet rulers will almost certainly believe that, as Soviet nuclear capabilities increase, the aversion of the U.S. and of its allies to general war will correspondingly increase, and that the Kremlin will therefore have greater freedom to take certain actions without running substantial risk of general war. It may employ the threat of nuclear devastation as an instrument of political warfare. It may attempt to gain some of its objectives by local military actions, calculating that the U.S. and its allies will be more anxious than before to keep such local conflicts from expanding into general war. The Kremlin will, however, continue to be extremely reluctant to precipitate a contest in which the USSR would be subjected to nuclear attack. At the same time, the Kremlin would probably not be deterred by the risk of general war from taking counteraction against an action by the U.S. or its allies which the Kremlin considered an imminent threat to Soviet security. The extent to which the Kremlin uses the increased freedom of action which its increased nuclear capabilities appear to give it, and the success which it achieves, will depend primarily on the cohesion of the non-Communist world, and the determination and strength of the major free world powers.

Trends in the Free World Through Mid-1959

4. Military (JCS study on “Estimate of the Military Posture Throughout the Free World, FY 1956 Through FY 1959,” in Annex 2 of NSC 5422)

The U.S. will achieve atomic plenty during the early part of this period and prior to like achievement by the Soviets. The U.S. [is expected] [should be able]7 to maintain relative numerical and qualitative superiority in nuclear-weapons and the means for their [Page 654]delivery. As the Soviets approach the absolute atomic capability of inflicting critical damage upon U.S. and other allied targets, however, there could result a condition of mutual deterrence to [the deliberate initiation] [actions materially enhancing the risk] of general war.
Free World forces will be confronted with quantitative superiority in ground and tactical air forces in the geographical areas contiguous to the Soviet Bloc. However, the superior tactical atomic support which can be provided our Allies during this period will, if accepted by them, partially offset Allied deficiencies in conventional forces. Taken as a whole, effectiveness of European forces is considered fair to good. There has been no progress in forming West German forces and limited progress in forming Japanese forces. Events in Indochina have resulted in a suspension of planned re-deployments from the Far East. D-day NATO commitments of U.S. forces in Europe remain unchanged. No progress has been made in forming a strategic reserve based generally on U.S. territory, with a high degree of combat readiness and a capability of being moved to any threatened area.

5. Alliances

There have been serious instances of an unwillingness of important free world nations to take concerted action which the U.S. considers necessary to oppose communist expansion, particularly as regards Indochina, East-West trade, and EDC. West Germany is becoming restive because of protracted delay in recovering its sovereignty. The long-term alignment of Japan with the free world is less certain. The situation with respect to Indochina has deteriorated with unexpected rapidity, confronting the free world with the possible loss of Southeast Asia to communism.
The alliances of the free nations will continue to be strained by divisive forces and conflicts of interests which will be vigorously exploited by the USSR. In particular, unity of action will be impaired by:
Increasing fear of the effects of nuclear weapons.
Differing estimates of the nature and imminence of the Communist threat.
Distrust of U.S. national purposes and leadership.
Political instability and economic weakness of some of our allies.
Conflicts regarding trade policy and economic integration.
Historic hostility between certain of the allies.
Differing approaches to “colonial” problems.

6. Underdeveloped Areas

The underdeveloped areas of the free world will be especially vulnerable to Soviet penetration and subversion by reason of nationalism [Page 655]and anti-colonialism, deep-seated distrust of the West, retarded economic growth, military weakness, political ferment. This danger will be most acute in Asia, in dependent areas such as French North Africa which are still under European rule, and in parts of Latin America.

ii. issues posed by nuclear trends

The Problem

7. With the growth both in Soviet nuclear capabilities and in the power of nuclear weapons themselves, in the period 1956–59, a total war involving the strategic use by both sides of nuclear weapons would bring about such extensive destruction as to threaten the survival of Western civilization and the Soviet regime.

8. Under these circumstances, the freedom of either side to initiate the use of strategic nuclear bombing against the other may be circumscribed by:

The fear of the effects of retaliatory use of such strategic bombing; and
The possibility that neither side would gain a [net] [decisive] military advantage from such an exchange of nuclear blows.

9. This situation could create a condition of mutual deterrence in which both sides would be strongly inhibited from [deliberately initiating] [actions materially enhancing the risk of] general war.

Prevention of Soviet Nuclear Attack

10. To ensure Soviet fear that strategic nuclear attacks upon the U.S. would be followed by the nuclear devastation of the USSR, the U.S. must maintain the striking forces necessary for such retaliation.

11. Even if this is done, however, the deterrent to Soviet strategic nuclear attack would be eroded if the Kremlin came to believe that it could, through surprise nuclear strikes, destroy U.S. retaliatory capacity.

The U.S. must, therefore, take whatever measures are necessary to protect this retaliatory capacity against any foreseeable Soviet attack. The expenditures necessary for this purpose are a prerequisite to U.S. survival. It is, therefore, essential that the United States take all practicable measures to protect this retaliatory capacity against any foreseeable Soviet attack.

12. To enhance the deterrents to, and defense against, Soviet nuclear attack, active and passive continental defense programs should be carried out to reduce [to manageable proportions] the damage and casualties likely to result from such attack.

[Page 656]


13. The U.S. should explore fully the possibility of reaching a practicable arrangement for the limitation of armaments with the USSR. Such an arrangement would be a more certain and economical method of meeting the threat posed by the growing Soviet nuclear capabilities than any other course of action discussed in this paper. The U.S. should therefore continue to reexamine its position on disarmament, especially (1) whether a system of safeguards can be devised entailing less risk for U.S. security than no limitation of armaments and (2) whether the U.S. should be willing to agree to effective nuclear disarmament in the absence of conventional disarmament. 10.8 a. The question of limitation of armaments should not be treated in this paper because it is currently being considered under NSC Action No. 889–c.9
b. In the light of the Soviet production of fissionable materials which has already taken place, there is serious question whether any safe and enforceable system for the limitation of armaments can be achieved, so long as the Soviet regime and objectives remain substantially as they are today.

General War

14. If general war should occur, the U.S. must be able to wage it with a maximum prospect of achieving U.S. objectives. At present, the U.S. ability to do so depends, in part, on its determination and ability to mount massive nuclear attacks upon the USSR.

[Page 657]
In the face of possible nuclear balance in 1956–59, there is serious question whether the U.S., while maintaining maximum strategic nuclear capabilities, can continue to place major reliance thereon as a means of waging general war. Consequently, the U.S. should undertake to increase the forces and mobilization potential which the U.S. and its allies would need to wage war effectively without strategic use of nuclear weapons. Despite the advent of nuclear balance, the U.S. must accept the risks involved in relying upon strategic nuclear capabilities as a means of waging general war, and must employ its scientific knowhow and industrial superiority to maintain qualitative advantage over the Soviets. The U.S. must continue to make clear its determination to meet Soviet attack with all available weapons. Only in this way can there be a maximum deterrent to general war, which if it comes will in all probability involve the unrestricted use of nuclear weapons.

15. The expected nuclear balance is unlikely to create a permanent stalemate in the arms race. Therefore a sustained effort must be made to invent and develop capabilities which will provide decisive preponderance to U.S. power.

16. There is increasing possibility that part or all of the U.S. overseas base complex, may become ineffective in the event of general war, because of political reasons (including susceptibility of the local government to atomic blackmail) or military reasons (exposure to immediate destruction by enemy action). The U.S. should, while exerting continued efforts to strengthen collective defense arrangements including the ability to use such bases for nuclear attack in the collective defense of the free world, also increase emphasis on developing the maximum self-sufficiency for the conduct of retaliatory operations consistent with sound military concepts [with commensurate reduction in future overseas base construction programs].

17. Because of increasing Soviet nuclear capabilities and the increasing possibility of attempted peripheral expansion, which might precipitate general war by miscalculation, it is necessary for the U.S. to make greater efforts than are presently contemplated to: 17. Present and planned implementation of programs under paragraphs 9, 10, and 34 of NSC 162/2 are considered fully adequate to meet the risks of increasing Soviet nuclear capabilities and the increasing possibility of attempted peripheral expansion.
[Page 658]a. Develop war reserves of materiel and develop and maintain a broad mobilization base adequate to (1) support the U.S. forces in general war and (2) provide substantial support to allies who do not have an adequate mobilization base. (See IV)
b. Move more rapidly to develop reserve forces capable of bridging the gap between M–Day and the creation of new units from the raw manpower pool.
c. Establish an adequate strategic reserve in being, in addition to the forces deployed abroad in support of existing commitments, together with sea and air transportation to give this reserve adequate mobility.

Local Soviet Bloc Aggression

18. U.S. policy to deter or defeat overt Communist aggression will be accomplished, in part, by the programs described above to maintain and enhance the U.S. capability to wage general war. This capability will continue to be a deterrent to identifiable overt aggression so long as the Communists believe that such aggression could eventually lead to general war.

19. As a nuclear balance is approached, however, the wisdom and necessity of avoiding general war will become increasingly apparent to both sides. Under such circumstances, the Communists may believe that the U.S. would be unlikely to respond to certain local aggressions by initiating general war. Accordingly, the U.S. should be prepared to defeat such aggressions without necessarily initiating general war. To accomplish this result will require the use of a U.S. strategic reserve and indigenous defense forces, supplemented as required by U.S. forces and logistical support. However, the Communists must be convinced of U.S. determination to take [, unilaterally if necessary,] whatever action its security position requires, even to the extent of general war.

Communist Expansion Other Than by Overt Aggression

20. Aided by their increasing nuclear capabilities, especially as a state of atomic balance with the U.S. is approached, the Communist powers are likely to pursue a strategy of further expansion through subversion, indirect aggression, and the instigation or exploitation [Page 659]of civil wars in free world countries, as in Indochina. The advantages of such a strategy, if successful, lie in the continued accretions to Communist strength and prestige and the progressive weakening of the free world coalition, both politically and militarily, while the involvement of the main sources of Communist power is avoided. This Soviet threat of piecemeal conquest can be countered only by an integrated and flexible combination of political, military, economic and psychological actions participated in by many nations and given determined leadership by the United States. In view of the threatened loss of Indochina, the U.S. cannot possibly accept further significant extension of Communist control; it must act, both in relation to the Communist powers and to the peoples of threatened areas, so as to prevent such extension of control. In particular, the U.S. should:

Take political and economic measures to strengthen the countries exposed to such indirect aggression, as indicated in Section III below.
Provide military aid and training to friendly governments threatened with or fighting armed Communist local forces.
Take all feasible political, economic and covert measures to counter the threat of any such groups or forces responsive to Communist control to achieve dominant power in a free world country.
In instances of civil war, be prepared to take military action in support of friendly free world governments or forces fighting against elements under Communist control; [the decision to take such action would depend on all the circumstances existing at the time, including the risk of intervention by Soviet or Chinese Communist forces.]

iii. maintenance of the cohesion of the free world

Relations with Our Allies

21. The growth of Soviet nuclear power and the increasing destructiveness of nuclear weapons will make our allies more fearful of war and more cautious of action that might lead to war. In the imminence of general war some of them might choose a position of neutrality and default on their alliance obligations.

22. Factors of division and weakness in the alliance may make it difficult to take decisive action, on a basis of full agreement, to halt further Soviet expansion in the Free World, particularly in Asia.

23. Nevertheless, major allies will continue to be essential to the U.S. to prevent the loss to Communist control of major free areas and the gradual isolation of the U.S.

24. In these circumstances the U.S. should take action to strengthen the cohesion of the alliances under U.S. leadership:

By convincing its allies, by its conduct, that: [Page 660]
The U.S. retaliatory capacity will continue to be maintained as a deterrent to Soviet power.
The U.S. and its allies will be able to meet the threat of aggression in case of nuclear balance.
The U.S., as a leading member of the alliances, will act responsibly and with due regard for their security as well as its own.
By continuing to build political, economic and military strength in Western Europe, which is a major source of free world power, provides our principal allies, and plays an essential role in preventing Soviet expansion, especially by:
Promoting European integration based on Franco-German cooperation and German association with the West and participation in Western defense.
Strengthening NATO despite temporary setbacks such as a failure to achieve EDC.
Economic measures to help Europe meet its need for wider markets and an expanding economy.
Consideration of closer U.S. association with Europe if necessary to achieve our objectives.

25. The U.S. should attempt to gain maximum support from the free world, particularly from allies and uncommitted countries most interested in the threatened area, for the measures necessary to prevent Communist expansion by direct (paras. 18–19 above) or indirect (par. 20) aggression. Any decision to act without our major allies would be made according to the factors present in the particular situation. As a broad rule of conduct:

The U.S. should undertake unilateral action only when the anticipated benefits thereof will clearly and materially exceed the lasting damage to the alliance. The U.S. cannot afford the loss of major allies unless vital security considerations leave us no alternative. The U.S. should exercise maximum freedom of action in pursuing U.S. objectives consistent with maintaining the alliances. In this connection it must be realized that the vital importance of the U.S. to the security of Western Europe makes it unlikely that our major allies will shift allegiance lightly.

Allied reluctance to act should not inhibit the U.S. from taking action, including the use of nuclear weapons, to prevent significant Communist territorial gains when such action is clearly necessary to U.S. security.

Relations with the Uncommitted Areas

26. The underdeveloped countries of Asia and the Middle East have important resources, strategic positions and manpower which the free world cannot afford to lose to Communist control, although [Page 661]they will not provide important elements of free world power or major U.S. allies.

27. U.S. policies should include:

Appropriate warning to the Communist powers that the U.S. will react with military force in the event of their overt unprovoked armed aggression.
Measures to enhance the will and ability of the free nations of the area to defend their independence against Communist subversion and to resist Communist aggression.

28. The U.S. should mobilize government and public support for a new initiative to strengthen the nations of Asia and the Middle East along the lines of 27–b above. To this end the U.S. should:

Assist these nations to meet their pressing economic problems, as indicated in paragraphs 29 and 30 below.
Seek their cooperation on a basis of mutual self-respect without attempting to make active allies of those not so inclined.
Refrain, so far as feasible, from taking or supporting actions which needlessly run counter to the forces of anti-colonialism and legitimate nationalism. In particular, be willing to act more independently of our European allies on non-European questions, especially where this will enlist the cooperation of non-European peoples.

Economic Policies and Programs

29. Economic Development. It should be a major objective of U.S. policy to help accelerate present rates of economic growth in the underdeveloped areas, particularly in South and Southeast Asia and parts of Latin America. While economic growth alone will not assure political stability in the under-developed countries, its continued absence will contribute to increasing instability and opportunities for Communist subversion. There is general agreement on many of the steps to be taken to hasten economic development (such as continuing U.S. technical assistance and exchange programs, encouragement for private investment abroad and greater self-help), but a major issue arises concerning the scope, size and duration of the use of public funds (both loan and grant). Where important development programs cannot be financed by local or foreign capital, or U.S. private capital, U.S. public funds

should be made available in progressively reduced amounts and should be limited to a few countries where such use would appear to make an unusually important contribution to U.S. security. should be made available in countries where accelerated rates of growth are required for the attainment of U.S. objectives and where such funds can be used effectively.

[Page 662]

30. U.S. stockpiling program [should] [should not] be used to help stabilize international markets for the exports of under-developed countries in order to enhance their foreign exchange position and assist in their internal development.

31. Regional economic action. The U.S. should encourage regional economic actions and groupings to promote increased trade, technical cooperation, and investment, and to concert sound development plans. Specifically, the U.S. should take the initiative in free Asia by encouraging free Asian countries to form ties of closer economic cooperation and to prepare a sound regional economic program, based upon mutual self-help and the cooperation and support of the U.S. and other industrialized countries. The U.S. should assist in the carrying out of such a program and encourage such industrialized countries to participate in and support such programs. In connection with such regional groupings:

Regional trade and payments arrangements should not involve discrimination against the U.S. and other areas of the free world. Within certain regions, special trade and payments measures, even including some discrimination, may be more effective in the short run than uniform world-wide arrangements and better prepare the way for later participation in such arrangements.

32. Promotion of freer trade and payments. To lead the free world to the reduction of restrictions on trade and payments, the U.S. should:

Support sound moves toward convertibility, with appropriate action on related trade matters.
Urge and bargain with other free world countries to reduce barriers to their imports.
Support continued effective action in OEEC on intra-European and dollar trade and, prior to moves to convertibility, on intra-European payments.
Reduce barriers to U.S. imports

in line with the President’s March 30 Message to Congress on the Randall Report.10 to an even greater extent than recommended in the President’s March 30 Message to Congress on the Randall Report.
[Page 663]

U.S. Assistance to Military Forces of Friendly Countries

33. a. With regard to forces now planned by allied countries with U.S. concurrence, most of these countries will not be able to bear the total costs (local budget and foreign exchange) of bringing such forces to, and of maintaining them at, a high degree of combat effectiveness.

b. Present estimates indicate a need from the U.S. for:

End-item aid. Certain additional programs of build-up items; some continuing provision of spare parts and replacement items; and a limited contribution toward modernization.
Economic aid for military support. For some countries limited economic aid will also be necessary to support the planned level of forces; this aid can probably decline from the present level in Europe; the level in Asian areas, while apt to remain high, is dependent on current developments.

c. The levels of U.S. aid cannot be finally determined, however, until judgments are available as to whether there are any changes in the size and degree of effectiveness of allied forces which the U.S. desires and in the extent to which allied countries can meet their needs from their own resources.

iv. mobilization

34. The U.S. mobilization potential to provide arms and military equipment consists of (a) active and inactive facilities for military end item production, (b) general industrial capacity, including new supplies of materials, which can be put to defense and defense supporting use and (c) military reserves of end items. The U.S. mobilization potential is stronger than ever before in peacetime.

35. The facilities actively producing non-nuclear military end items have declined in number in FY 1954. Under current plans this decline will continue through FY 1956. Thus the time required to get back into large scale production will be lengthened. This delay may be offset in part by maintaining the production equipment and some of the facilities in the best possible standby or readiness status for future use.

36. Although general industrial capacity may be expected to continue to grow during the period ahead, immediately available capacity for many secondary products used either directly or in support [Page 664]of military production may decline as specialized military demand declines.

37. Military reserves of end items have been built up in the past four years. Some items will be further added to reserves in FY 1955–56. There will be obsolescence of some items in the reserves. This latter trend is accelerated in periods of rapid change in military plans and technology, such as the present.

38. The net effect of the factors outlined above appears to be that through FY 1956, our net matériel mobilization potential for meeting the rapid increase in military needs in the early stages of a global war will decline.

39. The capacity to produce certain types of military end items (e.g., aircraft and guided missiles) and certain types of general industrial products (e.g., common components), may not be adequate to meet the requirements of global war.

40. In view of the fact that about two-thirds of the general industrial capacity of the country is concentrated in fifty key target areas, its availability in the event of global war must be measured against the increasing capability of the USSR for direct attack on the U.S.

41. New weapons, in certain respects, constitute a special problem in relation to industrial capacity. Normally, latent changes accumulate between crises. Introduction of major modifications or entirely new weapons at the onset of war may create a large new demand for capacity in a relatively narrow sector of the industrial system. Where new major weapons are likely to render existing types obsolete, the risk of critical bottlenecks and delays can be minimized by developing facilities and techniques for their production, and by production, as rapidly as economically feasible.

42. The advantages of mobilization capacity as opposed to reserves of military end items are generally held to be (1) slower obsolescence rate and (2) lower pre-war cost. For established weapons which have had, and it appears will continue to have, a low obsolescence rate the first advantage is reduced. In light of the increasing Soviet capabilities for direct attack, the war risk of not having the items in adequate quantities must be weighed against the prewar costs. In some cases pre-war procurement of a high proportion of war needs may be indicated.

43. Finally, to be meaningful, estimates of the adequacy of the mobilization potential must be set against an agreed and tested set of requirements and factored for probable attack damage.

[Page 665]
44. To maintain the mobilization potential, the U.S. should: 44. Maintenance of the mobilization potential should be achieved within the framework of present and planned programs for implementation of paragraphs 9, 10, and 34 of NSC 162/2.
a. Place increased emphasis on acquisition of reserves of selected low-obsolescent end items in order to offset the vulnerability of our industrial base.
b. Give much greater emphasis to programs, over and above those now contemplated, designed to secure the safe location of at least that industrial capacity essential to the most vital weapons systems (e.g., guided missiles, aircraft, etc.).
c. Give increased emphasis to (1) procurement and safe storage of long-lead-time tools and (2) processing of important materials to the most advanced possible stage, to reduce the period of loss of military end item production as well as industrial production generally.
d. Rapidly establish in safe areas additional capacity for those military and civilian products for which severe deficiencies are known to exist.
e. Accelerate both the current production of important new weapons and the establishment in safe areas of adequate capacity for important weapons in order to minimize the production delays in time of war. e. So for as practicable, encourage the dispersion in safer areas of new building of productive capacity important to the mobilization base, and, where this is infeasible, plan on duplicate production.
[Page 666]f. Provide for adequate maintenance of existing mobilization capacity, including maintenance of production of primary hard-goods items at levels adequate to support a general war.

v. fiscal and budgetary

45. Level of future U.S. national security expenditures:

a. The budget outlook for fiscal years 1956 and 1957 would be as follows, assuming projection at 1955 levels of expenditures for major national security programs and foreign economic aid, and continuation of the present policy of reducing all other expenditures to the maximum extent possible.

(In billions) 1956 Projection 1957 Projection
Budget Receipts
1. Indicated Total (under President’s tax program and subsequent action by Congress) *$59.0 *$59.2
Budget Expenditures
2. Estimate for non-NSC programs:
a. Relatively uncontrollable 14.5 14.1
b. Other (goals) 5.3 5.0
c. Total 19.8 19.1
3. NSC programs at 1955 level 46.0 46.0
4. Indicated total (2 plus 3) 65.8 65.1
Indicated Gap
5. To balance budget (4 minus 1) 6.8 5.9
6. Additional desirable tax cuts 2.9 6.1
7. To balance budget with tax cuts (5 plus 6) 9.7 12.0

b. In the 1955 Budget Document, security expenditures for FY 54 were programmed at $50 billion and for FY 55 at $46 billion. Continued reduction in security expenditures, at this approximate rate, would result in FY 56 security expenditures of approximately $42 billion and FY 57 security expenditures of approximately $38 billion. This would reduce the indicated gap figures (lines 5 and 7 in para. (1) above) by approximately $4 billion in FY 56 and approximately $8 billion in FY 57.

[Page 667]

c. From the standpoint of total security expenditures the following represent alternative courses of action:

Increase expenditures for NSC programs above FY 55 level.
Continue expenditures for NSC programs at approximately FY 55 level.
Continue to reduce expenditures for NSC programs at the current rate of reduction from the preceding year.
Reduce expenditures for NSC programs at greater than current rate of reduction from the preceding year.

46. The money which would be required above anticipated revenues to finance expenditures in excess of receipts could be raised by (a) borrowing; (b) increased revenues (chiefly increased taxation); or (c) some combination of (a) and (b). The decision on the most desirable methods of financing would depend upon other circumstances that might exist or develop. Such circumstances would include the state of the economy, the impact upon it of various contingencies and of other measures which might be put into effect including controls, and the extent to which receipts from existing taxes might be expected to be affected.

vi. u.s. economic outlook

(For a report by the Council of Economic Advisers on the subject see Annex 5)11

  1. Copies to the Secretary of the Treasury, the Attorney General, the Directors of the Bureau of the Budget and Central Intelligence, the Chairmen of the Atomic Energy Commission and the Joint Chiefs of Staff, and the Federal Civil Defense Administrator.
  2. On Mar. 22, Executive Secretary of the National Security Council James S. Lay, Jr., transmitted a memorandum to the NSC which stated, in part, that “In view of the fact that NSC 162/2 has only recently been approved and has just reached the initial stages of implementation, considerable concern has been expressed at the idea of a substantial review of this policy at this time. On the other hand, it is desirable to provide more specific guidance for the preparation during the forthcoming summer of the budgets of the various departments and agencies for Fiscal Year 1956. Therefore, with the approval of the President, the approach to this project will be focused, not on a reconsideration of NSC 162/2 as such, but rather on the development of guidelines to implement NSC 162/2, which would govern our national security programs for Fiscal Year 1956.” A copy of Lay’s memorandum was sent to Secretary Dulles on Mar. 23, 1954 by Robert Cutler, Special Assistant to the President, who wrote, inter alia, that “I have discussed with the President the desirability of trying to develop guidelines under NSC 162/2 (our basic policy paper) for FY 1956 in time to be of assistance to departments and agencies in working up their budgets for that year. Assuming that NSC 162/2 is to remain in effect throughout FY 1956, it should be helpful to each department and agency to outline to the Council late this spring guidelines under such policy.” A copy of Cutler’s memorandum of Mar. 23 to Secretary Dulles, enclosing Lay’s memorandum of Mar. 22 to the NSC, is in S/PNSC files, lot 61 D 167, “Guidelines under NSC 162/2, March-May, 1954”.

    The Department of State’s Office of Intelligence Research (OIR) and Policy Planning Staff (S/P) began drafting outlines for a proposed interdepartmental study of the problem as early as Mar. 10 and 11. Thereafter, lengthy draft studies projecting and estimating international trends and policies were prepared by the staffs of both OIR and S/P. Papers exploring both topical and regional problems were drafted between Mar. 26 and May 14. On June 1, Bowie transmitted a 66-page draft entitled “Guidelines Under NSC 162/2—Fiscal Year 1956” to the Planning Board with a covering memorandum stressing that “this is a tentative draft which has not been cleared within the Department. It is made available in this form to provide a basis for preliminary discussion. The revised document will be submitted as promptly as possible.” (PPS files, lot 65 D 101, NSC 5422)

    On June 9, Bowie transmitted to the Secretary of State a 56-page draft study of the same title as that of June 1, together with four supporting studies devoted to “Prospects and Problems” in Western Europe, the Far East, South Asia, the Near East and Africa, and Latin America, respectively. These studies varied in length from 10 to 44 pages. A covering memorandum indicated that this represented the final Department of State contribution to the study. NSC 5422 and its annexes (infra) incorporate the previous Department of State studies projecting international trends and policies through 1959.

    Documentation on the numerous draft papers and studies concerning projected problems and trends in international affairs through 1959, as a basis for guidelines for the fiscal year 1956 budget, is scattered throughout PPS files, lot 65 D 101, “NSC 5422 Staff Papers”, “Basic National Security Policy”, “NSC 162–5422”, “Chronological, 1954”, “Gullion Chronological”, “Stelle Chronological”. In addition, there is some documentation in S/SNSC files, lot 63 D 351, NSC 5422 Series.

  3. Dated Oct. 30, 1953, p. 577.
  4. NSC Action No. 1125 noted discussion of an oral report on the “Fiscal Outlook” prepared by the Director of the Bureau of the Budget at the 198th meeting of the NSC, May 20, 1954 (S/SNSC (Miscellaneous) files, lot 66 D 95, “NSC Records of Action 1954”).
  5. NIE 11–5–54, “Soviet Capabilities and Main Lines of Policy Through Mid-1959”, June 7, 1954, is scheduled for publication in volume viii . For text of NIE 13–54, “Communist China’s Power Potential Through 1957”, June 3, 1954, see volume xiv .
  6. Reference is to one of the agency studies prepared as annexes to NSC 5422; for texts of some of these, see pp. 667 ff.
  7. All brackets in this document are in the source text.
  8. This paragraph is apparently misnumbered on the source text.
  9. NSC Action No. 899–c, taken at the 161st meeting of the NSC, Sept. 9, 1953, noted the agreement by the NSC “to recommend to the President that the Secretaries of State and Defense and the Chairman of the Atomic Energy Commission be appointed a special committee to review, as a matter of urgency, the current disarmament policy contained in NSC 112, with particular reference to the international control of atomic energy, and to report back to the Council their findings and recommendations”. (S/SNSC (Miscellaneous) files, lot 66 D 95, “NSC Records of Action”) For documentation on the NSC 112 Series and the entire disarmament policy, see pp. 845 ff.
  10. This message is printed in Public Papers of the Presidents of the United States: Dwight D. Eisenhower, 1954, pp. 352–364. For documentation on the Randall Commission report, see vol. i, Part 1, pp. 49 ff.
  11. These figures assume extension of present excise on liquor, tobacco, and gasoline, due for reduction on April 1, 1955, under existing law, which would involve tax losses of $1.2 billion in 1956 and $1.1 billion in 1957. [Footnote in the source text.]
  12. These figures assume extension of present excise on liquor, tobacco, and gasoline, due for reduction on April 1, 1955, under existing law, which would involve tax losses of $1.2 billion in 1956 and $1.1 billion in 1957. [Footnote in the source text.]
  13. Annex 5 is not printed. (S/SNSC files, lot 63 D 351, NSC 5422)