Foreign Relations of the United States, 1958–1960, Volume III, National Security Policy; Arms Control and Disarmament, Microfiche Supplement

113. Memorandum for the Record¹

Washington, December 3, 1958

SUBJ:

• Meeting at the White House—12/3/58

Nothing was said about budgets until after dinner when we all gathered in the library in the basement. The following were present:

• The President
• The Vice President
• Secretary of the Treasury
• Controller of the Budget (Mr. Stans)
• Mr. Bryce Harlow
• MGEN Persons
• Mr. Gordon Gray
• LCOL Eisenhower
• Secretary of Defense
• Deputy Secretary of Defense
• All Service Secretaries and all Chiefs

The President: The President opened the meeting by making his usual speech that this country was endangered not only militarily but particularly economically. That if we increased our budgets very much we would have to go to a police state in order to get the tax. Our security in defense was tied up irrevocably in budgets and we all had the duty to help him get the budget as low as possible. He made this speech of about half an hour.

I agreed with his statements.

Then he asked each of the Service Chiefs, not the Secretaries but the Services Chiefs, to make a speech in general terms, nothing specific, he wanted philosophical discussions.

Mr. McElroy tried to have the time divided into five minutes periods for the Secretary followed by his Chief, but Max Taylor was told to start it just the same.

Gen. Taylor: Made a speech on deployments, on our world-wide responsibilities. Stated that this was no time to cut personnel because of its effect on other nations.

Adm Burke: I made a speech stating that I believed Khrushchev, and that we hadn’t read Marx, Lenin and Stalin enough. I thought that Khrushchev was going to use every trick in the book to try to beat us, including local wars, subversion, economic pressure, political, and everything else, and that we had to defeat him at every turn on each one of these moves. I agreed with the President that we could not continue going in debt indefinitely. I stated that the military could only solve a part of the problem and perhaps only a small part. As the President pointed out, the real problems in a conflict with the Soviet Union were not military problems, but were economic and political problems. The same thing was true inside the United States. The real problem inside the United States was political and not military. For example, the tremendous sums that were going into farm subsidies (this was a subject which had been previously discussed a little bit). The people were working for dollars instead of pride of workmanship which meant that everybody was out to get as much money as he could. This meant competition for money among various groups which perhaps caused a lot of inflation, and certainly did cause greatly increased prices for our military hardware. Labor and management both had to be controlled to bring prices down and to keep inflation from going up. Somehow or other we had to get the idea across that we were in a really dangerous period and that this period would last for generations, and that we had to sustain ourselves for generations of fight.

I then stated that I thought we should reexamine our air defense capabilities—there was too much money going into air defense. We were defending ourselves too much and spending too much money on marginal systems for their psychological effect.

We should perhaps reexamine all of our general war retaliatory systems and choose quantities of the various systems available which would give us the cheapest, best all around retaliatory systems. We couldn’t expect the people to agree on what would come out of this thing, but at least we ought to examine all of the programs together. I thought that we would have to continue to be able to apply military force quickly, positively, and with firm decisions whenever there was a local aggression or the need for the application of U.S. military force.

The President generally agreed but in his discussion of my remarks emphasized primarily his inability to control many things which were, such as farm subsidies, and emphasized primarily dollars.

Gen White: General White made a very short speech stating that he thought that our problems could be solved by more unification and a further reorganization towards centralization.

The President sort of agreed with him.

Gen Pate: Stated that we should be told what to do and that we would be very happy to do it.

The President: The President stated that he had to rely upon his advisers and that we were the chief advisers.

During the course of the evening the President said several times that he trusted the people in this room more than he did any other group of people. It was quite evident that he meant the military people. By his remarks it was evident that he believed that if the military people got together they could get anything done in Congress or in the country that they wanted to get done.

The Secretaries then spoke in general terms.

Mr. Anderson: Mr. Anderson then spoke about debts. He said that we were now in debt for $283 billion. That the indirect debt, and this I don’t understand, was close to $500 billion if we included only our indirect obligations to the world bank. He then went to the various international agencies, one at a time, stating the indirect obligation that we had with those agencies and it amounted to a total of $1000 billion obligations which we had—direct and indirect—and a run on the U.S. bank would of course completely swamp us. It would be impossible to pay any such thing as this. The $283 billion direct debt was bad enough, but coupled with the indirect debt we were in an impossible position if the world ever lost much confidence in our dollars.

Then he went to the New Delhi conference and stated that every nation, every fiscal expert, every Chief of State that he had talked to was concerned not about an attack by Russia, not about the spread of communism, but about the economic stability of the United States. They stated that in the periods of the greatest national progress of the United States in the world, in a period when we had full employment, in a period of peace, in a period of expansion, we could not meet our obligations on a day to day basis and therefore there must be something wrong with our system if we were borrowing from the future in these good times, and we could certainly not pay back in bad times, so there was doubt. He said this was repeated by every nation from little nations, who didn’t know very much about finances, to big powerful nations. He further said that nearly all of our outstanding obligations are not in the hands of the little countries—they are in the hands of our major allies. I don’t know what he meant by this unless he was fearful of them putting the squeeze on us in our competitive marketing. He stated that there was a gradual flow of gold away from the United States, but that this did not mean that our gold reserves were in danger at the moment.

All in all it was a very sobering ten minute discussion.

Mr. McElroy: Then Mr. McElroy picked up the ball and gave a speech on the need for not cutting personnel, not cutting budgets too much.

It was a pretty good speech.

Vice President: The Vice President then repeated some of the President’s remarks that what was needed was a unified voice from the Pentagon. He stated that if we put out the same story that this was enough—that we could sell the program regardless.

Gen Taylor: Max Taylor correctly brought out that we were subjected to very probing questions by Congress and that if, for example, they asked him whether or not the modernization of the Army was fast enough, he would have to say no.

He went into this at quite some length and the President started to take him apart.

Mr. McElroy: Then made a speech and said that in view of the remarks made by the Chiefs and the Services that it was apparent that we had to reexamine the budget. He misinterpreted the remarks or at least some place during about this period the remarks in general were misinterpreted by most everybody.

The President: The President stated that he hoped that we could get down to an agreed budget of about 40.8 or less—he meant expenditures.

I tried to break in twice to state that this could be done but if it were done we would have to do it—each Service would have to do it in its own way. We couldn’t have people telling us what should be in the budget and what should not be in the budget, and at the same time put tight limits on the budget. However, I was shut up twice before I got the words out—once by the President and once by Mr. McElroy, they each wanted to speak at that time.

The end result was that the NSC meeting for today was called off and was established for 8:30 or 9:00 on Saturday. The Department of Defense is to reexamine the budget, complete. The Joint Chiefs, I suspect, will be required to go over the other Services’ programs.

Arleigh Burke

1. Source: White House meeting on Department of Defense budget. Top Secret; Hold Closely. 5 pp. Eisenhower Library, Whitman File, DDE Diaries. Drafted on December 4.