Foreign Relations of the United States, 1952–1954, National Security Affairs, Volume II, Part 1

S/S–NSC files, lot 63 D 351, NSC 149 Series

Draft Memorandum Prepared for the National Security Council¹

top secret

[Washington, undated.]

Condensed Statement of Proposed Policies and Programs

The National Security Council, together with its seven Civilian Consultants, held a meeting on 31 March 1953 to review the current basic national security policies and programs in relation to their costs. It was the consensus that the following new policies and programs should be adopted.

Proposed Policies

1. The survival of the free world depends on the maintenance by the United States of a sound, strong economy. For the United States to continue a course of Federal spending in excess of Federal income will weaken and eventually destroy that economy. As rapidly as is consistent with continuing our leadership in the free world, and barring an emergency, the United States will annually balance its Federal expenditures with its Federal income.

2. Because the United States has commitments and responsibilities which, in the interest of the national security, must be met in the near future, it can approach only gradually a balancing of its Federal budget. But the Administration should frankly state at this time to the people that it is resolved to attain this new objective and how it expects to do so. It should also make clear the grave nature of the Communist threat, and of the resulting fiscal situation, which confronts us.

3. So long as there is a state of war in Korea, the United States should not materially reduce the level, though it may change the form, of its Federal taxation.

4. While bringing the Federal budget into balance, the United States will continue to maintain over a sustained period sufficient armed forces to defend the United States and assist in the defense of vital areas of the free world. Although the national security program expenditures outlined below for FY 1954 and FY 1955 will not permit attainment of force goals which were set some years ago to meet a specific date for D-day readiness, such expenditures will provide greater force strength than we have today—in the United States, in NATO, and in the Far East.

5. Subject to paragraph 1 and 2 above, the United States will continue to assist in building up the strength of the free world; will seek thereby to contain Soviet expansion and to deter Soviet power from aggressive war; will continue to exploit the vulnerabilities of the Soviets and their satellites; all with a view to the ultimate retraction and decay of Soviet power.

6. In carrying out paragraph 5 above, the U.S. should:

a. Increase emphasis on

(1) bringing the Korean war to a final settlement acceptable to us;

(2) aiding in the settlement of the war in Indo-China, without direct intervention except in the event of Chinese Communist aggression;

(3) protection of the continental United States from enemy attack;

(4) off-shore procurement of military matériel, designed to increase the capability of our allies to support their own defenses;

(5) maintenance of production plant capacity in the United States, in lieu of large reserve stocks of end-items;

(6) reduction of overhead and elimination of waste and duplication;

(7) lowering of trade barriers and encouragement of reciprocal trade on a mutually favorable basis.

b. Decrease emphasis on

(1) expansion of NATO forces in being;

(2) expansion of U.S. armed forces and matériel stocks to full D-day readiness by early fixed target dates.

Proposed Mutual Security Program

7. The proposed new mutual security program will have these characteristics:

a. The United States will act with confidence.

b. The change in direction, while rapid, will not be abrupt.

c. Emphasis will be placed upon modern weapons, sound economies in the U.S. and abroad, use of private capital, longer-term commitments, and regional economic and trade arrangements in the Far East.

d. Inflation at home (whether arising from Governmental deficit financing, excessive consumer credit, etc.), will not be permitted to destroy the effect of our policies abroad.

e. NATO first-line divisions will be in part equipped through use of a portion of the U.S. continental supply of critical items.

f. We will concentrate on vital countries—helping the weakest to attain economic strength and encouraging the potentially strong to maximize their economic potential. For example, we shall give top priority:

(1) In Western Europe, to France in view of its heavy commitments in Indo-China, to assisting Germany more fully to realize its potential, to emphasizing off-shore procurement in the United Kingdom, and to cutting back division goals for NATO.

(2) In the Far East, to Indo-China as the weak point and Japan as the strong point, adopting an Asia-wide economic approach.

(3) In South Asia, to India, with a long-range program which will not involve large expenditures.

(4) In the Near East, to Egypt.

(5) In Latin America and Africa, to the development of private capital and sound economies which will yield greater returns for the people in the area, but without involving us in large expenditures.

g. The program will be administered in closest conformity with the foreign policy leadership of the Secretary of State and the military policy leadership of the Secretary of Defense.

8. The new program levels should be reached about January 1, 1954, and reductions in cash expenditures should be effected as follows:

• FY 1954: 1.5 billion, from 8 billion^* down to 6.5 billion,
• FY 1955: 1.5 billion, from 7.8 billion^* down to 6.3 billion, with still lower cash expenditures in FYs thereafter. The appropriation figure in FY 1954 budget should be cut 1.2 billion.

Proposed Military Program

9. To achieve by FY 1956 or 1957 the forces and readiness goals contemplated by NSC 135/3 would require an average annual expenditure of 45 billion for the Department of Defense for FY 1954, FY 1955, and FY 1956. To maintain such forces and readiness for the years immediately following FY 1956 would require annual expenditures averaging 40 billion. Such levels of expenditure are inconsistent with the policies proposed above.

10. Under the proposed policies, the military program will be related to a “floating”, rather than a “specific”, D-day, and should achieve by FY 1956 or FY 1957 force levels of the following general order of magnitude:

a. 105 to 115 Air Wings (depending on the character of the wing structure). Ten Wings will probably not be equipped with “first line” aircraft.

• 27 NG Air Force Wings (11 with reasonably modern equipment).
• 36 MATS Squadrons and other appropriate supporting elements.

b. 18 Army Divisions.

• 18 Regimental Combat Teams.
• 110 to 120 AA Battalions.
• Other appropriate supporting Army elements.

c. 9900 Naval aircraft (including 1800 aircraft for Naval Reserve, of which 800 will be reasonably modern).

• 400 Naval Warships.
• 800 Mine and Auxiliary craft.
• 3 Marine Divisions (1 at least at reduced strength), with supporting Air Wings.

d. Reasonable mobilization reserves for Army and Marine ground forces.

11. The military program should involve cash expenditures as follows, taking into account an estimated 1 billion annual cut in overhead and duplication:

	Billions
FY 1954†	43.2
FY 1955†	40
FY 1956	35
FY 1957 and following	33

The appropriation figure in the FY 1954 budget should be cut by about 5 billion, from approximately 41 billion to approximately 36 billion (which assumes a continuation of the Korean war at substantially the current level of activity).

Atomic Energy Program

12. a. Under the proposed policy, expenditure reductions in the Atomic Energy program in FY 1954 and FY 1955 might be made in the following categories:

‡(1) Some saving in dummy weapons for air training, now costing 120 million annually.

‡(2) Some saving in tests of weapons, costing in FY 1954 and FY 1955, for AEC and DOD combined, 325 million.

‡(3) Some saving in AEC security measures.

(4) Saving over 200 million annually, if development of atomic propulsion units for aircraft carriers and aircraft, now costing 254 million annually, are postponed; but submarine reactor development is continued.

b. Admiral Strauss did not recommend reductions in budgeted expenditures for FY 1954 for ore buying (393 million), weapons building (1,156 million), plant expansion (1,954). No concensus was reached as to the feasibility of some reduction in plant expansion.

c. The proposed policy on the development of nuclear power is:

(1) The early development of nuclear power is an urgent need, if we are to maintain our national lead in the atomic field. The goal of this program should be attained primarily by private, not government, financing.

(2) The advantages of private financing are:

(a) To tap the great scientific laboratories of private enterprise.

(b) To bring about competition between private and government laboratories with benefit to both.

(c) To provide automatically the dispersal of fissionable material production capacity.

(d) To create new industries, new employment, and new sources of taxes.

(3) If this program is to be practicable, industry should be permitted (subject to appropriate security safeguards) to:

(a) own and operate nuclear power facilities,

(b) buy or lease fissionable material,

(c) use and transfer fissionable and by-product materials not purchased by the Atomic Energy Commission, and

(d) have more liberal patent rights than presently granted. Accordingly, immediate positive steps should be taken for legislation along these lines.

(4) No additional funds for a pilot plant should be authorized other than the approximately 3 million presently included in FY 1953 and FY 1954 budgets.

(5) It is expected that industry will participate with its own funds and facilities in this program when the recommended legislation is passed.

Summary of Reductions in Program Expenditures

13. a. The February 24, 1953 memorandum entitled “Costs of National Security Programs” projected expenditures for national security (including AEC) programs. These projections would not have fully provided for the force and readiness goals contemplated in NSC 135/3 or for the substantial expansion in the air base structure required to reach those goals.

b. The reductions in expenditures summarized below are reductions from the projected expenditures stated in the February 24, 1953 memorandum:

Reduction in expenditures in billions

	FY 1954	FY 1955
DOD	2.3	4.
MSA	§.9	§1.7
AEC	.2 plus	.2 plus
	3.4 plus	5.9 plus
Assumed reductions proposed by the DOD in March 5, 1953 memorandum	6.8 billions	14. billions

If the current tax rates are maintained and if a reduction in expenditures of one billion is assumed in each year for non-security programs, the above reductions of 3.4 plus and 5.9 plus would result in a budgetary position as follows:

	(Billions of dollars)
	Cash basis		Budget basis
	1954	1955	1954	1955
(a) Deficit as estimated in “Budget Outlook” (assuming presently scheduled tax expirations)	6.6	11.7	9.9	15.0
(b) Reductions in deficit by proposed expenditure reductions:
(1) In non-security programs	1.0	1.0	1.0	1.0
(2) In security programs (above)	3.4	5.9	3.4	5.9
(c) Deficit (assuming presently scheduled tax expirations)	2.2	4.8	5.5	8.1
(d) Gain in revenues if current rent tax rates are maintained	2.1	8.0	2.1	8.0
(e) Deficit or surplus	-0.1	+3.2	-3.4	-0.1

1. A covering memorandum to the National Security Council from Lay dated Apr. 2 states that this statement reflected the consensus of the meeting of Mar. 31 with the Civilian Consultants. Lay added: “The enclosed draft is being referred to the Planning Board for use as a basis for the preparation of a draft statement of policy on this subject to be submitted for consideration of the Council at its next meeting on Wednesday April 8, 1953.” Copies were sent to the Secretary of the Treasury, the Chairman of the Joint Chiefs of Staff, and the Directors of Central Intelligence and the Bureau of the Budget.

   On Apr. 3, Lay circulated to the National Security Council a slightly expanded version of this memorandum drafted by the NSC Planning Board and designated NSC 149. This NSC Planning Board Report, Lay informed the NSC, was transmitted for consideration by the National Security Council at its meeting on Apr. 8. A copy of NSC 149 is in S/S–NSC (Miscellaneous) files, lot 61 D 167, NSC 149 Series.

2. In the February 24, 1953 memorandum entitled “Costs of National Security Programs”, these expenditure figures were stated as 7.4 billion and 8.0 billion. [Footnote in the source text. A copy of the memorandum under reference is in S/S–NSC files, lot 63 D 351, NSC 142 Series.]
3. In the February 24, 1953 memorandum entitled “Costs of National Security Programs”, these expenditure figures were stated as 7.4 billion and 8.0 billion. [Footnote in the source text. A copy of the memorandum under reference is in S/S–NSC files, lot 63 D 351, NSC 142 Series.]
4. Includes 2 billion for continuation of the Korean war at substantially the current level of activity through whole FY and build-up to 20 ROK divisions. [Footnote in the source text.]
5. Includes 2 billion for continuation of the Korean war at substantially the current level of activity through whole FY and build-up to 20 ROK divisions. [Footnote in the source text.]
6. Special Assistant to the President (Admiral Strauss) estimates 200 million annually could be saved in these three categories. He will submit a summary report to the Council. [Footnote in the source text.]
7. Special Assistant to the President (Admiral Strauss) estimates 200 million annually could be saved in these three categories. He will submit a summary report to the Council. [Footnote in the source text.]
8. Special Assistant to the President (Admiral Strauss) estimates 200 million annually could be saved in these three categories. He will submit a summary report to the Council. [Footnote in the source text.]
9. §The figures for reductions in expenditures appearing in paragraph 8 above are 1.5 billion and 1.5 billion. [Footnote in the source text.]
10. §The figures for reductions in expenditures appearing in paragraph 8 above are 1.5 billion and 1.5 billion. [Footnote in the source text.]