198. Memorandum of Conference with the President1
OTHERS PRESENT
- Secretary McElroy
- General Goodpaster
Mr. McElroy first discussed with the President a draft memorandum on space and satellite activities that General Randall had sent to me. After discussion, the President indicated his approval of the memo, on the basis of assurances given to him by Mr. McElroy. Mr. McElroy said that Defense is negotiating to turn AMBA over to some agency other than the Army—probably NASA—since it is getting so expensive to support. The President said that the assignments called for in the draft memorandum must be “mutually exclusive,” i.e., when one service has the assignment the others will not duplicate its project. The President asked if all solid propellant work is being assigned to one service. Mr. McElroy said that the advanced research is being done in ARPA, with applications in each of the services. The President asked how Mr. McElroy now feels about the Minuteman project. Mr. McElroy said that Defense feels very good about it, expecting to have operational missiles delivered in FY–63. He commented that our scientists are now expecting that both we and the Russians will achieve increased accuracy. As a result, we must give more consideration to dispersion and mobility, perhaps putting the Minuteman on rail-road firing platforms. The President thought there would be great savings if we can get out of the hardening of missile sites. Mr. McElroy said Defense is going some distance in that direction already, cutting down its hardening to twenty-five pounds to the square inch overpressure rather than one-hundred pounds. The President added that the Titan may be becoming unnecessary. Mr. McElroy said it provides a better booster for missiles of very long range. If our scientists do not see a way of attaining extremely large thrust with solid fuels, there will remain a need for high-grade liquid rockets—undoubtedly using storable propellants.
The President then turned to our financial situation. He said it is getting quite serious, and some would in fact call it desperate. Within [Facsimile Page 2] a few days we will be paying 5% for six-months’ short-term bills. This situation could be eased by printing additional money, but this would make further inflation inevitable. It was a terrible blow to the nation’s [Typeset Page 832] welfare that the Congress did not pass the interest legislation proposed. The bankers, some of whom initially opposed the legislation, are now seeing the significance of the situation, are terribly worried, and will be put to work on the Congress at once. He did not rule out the possibility of calling a special session once this additional process had been advanced. Under present trends in FY–60, we are running at an annual rate $1.9 billion over our estimates, with but a one-half billion dollar increase in our income. An announcement at this time that we expect a deficit this year would really “blow the top” off the money market.
The President thought Mr. McElroy should go to work on the target of reducing military and civilian personnel in the armed forces. He said Mr. McElroy will have to be emphatic in holding the line, and that he will support him.
Mr. McElroy said that major actions are already being taken in the Pentagon along these lines. The Air Force has recommended reducing its own strength by 20,000 military personnel and 7000 civilian personnel. The F–108 project is expected to be cancelled within thirty days. Mr. McElroy said Defense is cutting down on its total outlays, and also on what is being spent overseas.
The President commented in this connection that he is holding $50 million out of the medical research appropriations from the Public Health appropriation. Mr McElroy said that he feels Defense has gotten hold of its expenditure rate and is now keeping books on this for the first time. He credited Mr. McNeil with this work, and said that Mr. McNeil had deeply appreciated the nice letter the President sent him accepting his resignation. The President recalled that Mr. McNeil had resisted this type of financial control for several years.
The President said he wanted someone to advise Governor Brucker that, with regard to the new construction starts, we should take our time over preparatory work, and not jump into their initiation. He asked me to be in touch with General Bragdon to get a list of the 67 new starts with the object of working on this right in the White House.
[Facsimile Page 3]The President said he thought that in General Lemnitzer Mr. McElroy had a very excellent man who would do everything possible to carry out Mr. McElroy’s desires. Mr. McElroy said that General Twining continues to wish to withdraw in about mid-year 1960. He said he had asked General Twining if he thought General Lemnitzer would be ready to take on his assignment, and General Twining enthusiastically said he would.
Mr. McElroy then discussed briefly his own personal situation, which requires that a change be made before too long.
Reverting to the subject of the budget, Mr. McElroy said that the Defense Department had taken some medicine and must take a good [Typeset Page 833] deal more. The regrettable thing is that many of the actions now being taken could have been taken a year ago with no or little damage. He thought by hard work we could hold to the present rate of spending but felt that to go below it would be “murder.” Because of the gradual increase in unit costs as well as the reduction in credits from MSP, a level budget really is a requirement to cut back. The President said every time he receives a survey of the financial picture it presents the situation in blacker colors. The defeat on the long-term interest rates really hurts us in attempting to put our national debt on a longer term basis. He repeated the sentiment on this is now turning and that bankers are getting worried. Mr. McElroy said that while it is a rough thing to state, we may in fact need a little “shake out” in some of the present industrial excitement to slow things down. The President said that commercial banks are now dumping their government bonds in order to get money for term lending at high rates. He could not imagine anything more contrary to the nation’s interest.
Brigadier General, USA
- Source: Ballistic missiles; budget problems. Secret. 3 pp. Eisenhower Library, Whitman File, DDE Diaries. Drafted on September 18.↩