740.5/1–2753: Telegram
The Secretary of State to the Embassy in France 1
secret
priority
priority
Washington, January
27, 1953—6:30 p.m.
Topol 769. Ref: Polto 1236, Jan 24.2 Subj: US Defense Expenditures.
[Page 355]Following guidance given in response request in reftel. Assume you will point out that real consideration these questions not appropriate until US has made second phase AR submission, which necessarily must deal with such questions.
- 1.
- Regarding paragraph 2a, general magnitude of reduction of estimated US defense expenditures for FY 1953 clearly evident from data in President’s FY 1954 budget document, even though precise information along lines NATO definition of defense expenditures is not detailed therein.
- 2.
- Regarding paragraph 2b, reduction in estimated expeditures affects all categories; more than half the reduction occurs in non-procurement areas. In this connection, you should avoid use of word “slippage” for reasons outlined below in paragraph 5.
- 3.
- Regarding paragraph 2c, President’s FY budget document estimates FY 1954 defense expenditures (on NATO basis) at 54.2 billion in contrast to 60.8 billion estimate submitted in AR.
- 4.
- Regarding paragraph 2d, estimates of end-item deliveries submitted in response to Defto 4633 (probably early February) will reflect latest program data and shipment schedules of Department of Defense; these not necessarily related to estimated total MDAP expenditures implicit in President’s FY 1954 budget document. Furthermore, should emphasize that MDAP deliveries function of allocation policy as well as volume physical production.
- 5.
- Regarding 2e, revised expenditure estimates in President’s budget document reflect a number of factors including (a) adjustments in programs as a result of budgetary review and analysis involving re-phasing of some activities and elimination of others including some spare parts’ procurement found to be unnecessary or of doubtful value, (b) currently projected unit prices which are lower in some areas than those used in original estimates, (c) technical difficulties holding back production, (d) labor disputes affecting production, notably in aircraft and tanks as well as effects of steel strike, and (e) difference in judgment as to the rate at which future deliveries and payments will be made. To the extent that lower estimates reflect elimination of waste, greater efficiency or lower unit prices, it is misleading to refer to “slippage”. It should be noted that expenditure estimates in President’s FY 1954 budget are, to a large extent, a reflection of judgment of former administration and do not necessarily reflect judgment of present Administration. It is important, therefore, to avoid any categorical statement on this matter at this time.
- 6.
- Regarding paragraph 2f, believe must avoid categorical answer at this time, replying along lines our paragraph 4, on ground that question arises only in connection with public release of expenditure estimates and not in connection with physical delivery forecasts. Extremely [Page 356] important, however, not give impression US evading question because of change in delivery policy or inability carry out policy.
- 7.
- Reference paragraph 3a, budget document
contains following forecasts—(millions of dollars)
- (a)
-
FY 1953 receipts: 74,891
Payments: 76,836
Cash deficit: 1,945
- (b)
-
FY 1954 receipts: 75,150
Payments: 81, 797
Cash deficit: 6,647.
- Please note that these figures not comparable with table 8 of US submission to OEEC which is based on national income concepts and covers all levels of Govt (including state and local).
- 8.
- We envisage no substantive change to the general conclusions contained in our OEEC submission although detailed figures will obviously require some changes. Are planning to submit very short Memo in response NATO invitation to bring economic statement up to date indicating any important changes in data and restating general conclusions as to stability of US economy.
Dulles