Foreign Relations of the United States, 1955–1957, National Security Policy, Volume XIX

118. Memorandum of a Conference With the President, White House, Washington, May 20, 1957¹

Washington, May 20, 1957

OTHERS PRESENT

• Secretary Wilson
• General Goodpaster

The Secretary told the President that he had been informed the House was going to cut $2½ billion from the Defense budget.² Half of this is bookkeeping—this includes the Army’s unobligated carryover of funds referred to in the President’s letter to Speaker Rayburn.³ There would also be a cut in the total authorized for the industrial funds. Also, the Congress is estimating Deutsche mark receipts higher than now expected. The other half of the cuts will, however, cut into the program.

Mr. Wilson said there are several questions that must be considered: whether we would offer any complaint regarding the bookkeeping adjustments; what action we would take where the program cuts really hurt; what response we would make where, in some instances, changes in schedules make it possible to accept the cuts.

Mr. Wilson then turned to the rate of expenditures, and said that he is disappointed with actions of the Air Force. They “rode over” the civilian leadership in obtaining additional funds through the Symington hearings last year. Also, their expenditures are rising month by month, and the Air Force is not trying to help. He said he is thinking of putting a freeze on any new contract commitments other than food and certain other soft goods. He said that the attempt to gain speed in program operation greatly increases costs, which the contractors, who are not operating under a fixed sum bid, simply pass on to the government. The President thought we should shift more of our contracts to competitive, fixed sum bidding. He said that Mr. Wilson should go after the Air Force and Navy procurement officials and hold them down. He added that he thinks this performance is a reason supporting the Hoover recommendations on budgeting on an annual accrual basis.⁴ In his opinion human nature is such that once the funds are authorized the responsible civilian officials lose practical control. He thought we should shift in large measure to a different kind of contract, which would make the manufacturer absorb some of the cost rises and wage increases.

Mr. Wilson said he also wanted to consider cutting overtime on missiles and the B–52. The President said that he felt Mr. Wilson could tell Congress that the effect of cuts would be to require the elimination of this overtime. Mr. Wilson said that the Defense expenditures are running about $2 billion over the estimate, and asked whether income is running sufficiently ahead to cover this overage. The President said that it is not, and that he wants every possible action taken to assure that we do not run into the red. Mr. Wilson repeated that he would like to freeze new contract commitments until he is able to get the expenditure rate down, and also see what the Congress does to the FY–58 budget proposal.

The President said he thought we should certainly not have overtime on both the B–52 and the ballistic missile projects. He suggested the matter be brought before the NSC, indicating how much the overtime is costing us, and recommending priorities as between items. In initial discussion he indicated reasons for stopping overtime on the B–52; in further discussion he indicated that, since the B–52 is a proven weapon, it might be preferable to take the ballistic missiles off overtime. The President indicated agreement to stopping overtime generally, and freezing new contract commitments.

Mr. Wilson said that the question is not only one of specific savings, but to try to establish a new psychology by means of some dramatic actions. The President suggested as a further step the desirability of cutting draft calls in half during the next two months, and Secretary Wilson said he would give further consideration to this.

Mr. Wilson said that approximately $7 billion of the annual Defense budget is for direct costs of the forces, and that the forces must be cut prior to the beginning of FY–59. The President suggested starting to cut the force strength now. Mr. Wilson said that the proposals he had made could affect the FY-58 budget and that there were some bookkeeping actions available to hold down payment prior to the end of FY–57 but that the remaining time is too short to allow too much of a cut to be made. The President stressed strongly that he wished savings and cuts still to be made in FY–57. The President reiterated the need for something like the Hoover recommendations on accrual budgeting in order to gain control of expenditures.

The President and Mr. Wilson then briefly discussed proposals relating to top Defense personnel changes.

G

Brigadier General USA

1. Source: Eisenhower Library, Whitman File, DDE Diaries. Secret. Drafted by Goodpaster on May 21.
2. Supplementary Notes of the Legislative Leadership meeting on May 14, which summarizes a meeting among the President, 14 Republican Senators and Representatives, and other administration officials on the defense budget and missiles, among other things, is ibid., Legislative Meetings.
3. Reference is to Eisenhower’s letter to Representative Sam Rayburn dated April 18, on the fiscal year 1958 budget; for text, see Public Papers of the Presidents of the United States: Dwight D. Eisenhower, 1957, pp. 301-309.
4. Eisenhower’s thoughts on congressional authorization of appropriations on the basis of annual accrued expenditures, as recommended in the Hoover Commission Report on Budget and Accounting, dated April 1956, are ibid., p. 308, and later in his letter to the President of the Senate and Speaker of the House of Representatives on the Hoover Commission recommendations, dated June 17, ibid., p. 465.