Foreign Relations of the United States, 1958–1960, Foreign Economic Policy, Volume IV

223. Memorandum From the President’s Administrative Assistant (Anderson) to the President’s Personal Secretary (Whitman)⁰

Undated.

Conference—August 15, 1958—11:24 to 11:58 a.m.

The Vice President, General Persons, Secretary Dillon, Bryce Harlow and I conferred with the President on the current status of the Mutual Security program.¹

Bryce detailed the recent conversations he had with Clarence Cannon, John Taber and others. He emphasized the fact that Cannon is the key vote as far as the House conferees are concerned, and although Taber has promised to confer with him, he has not yet had the opportunity and consequently we have no report.

The President as usual emphasized the need for adequate funds, not only for MSA, but to carry out his recent commitments in his speech to the General Assembly of the United Nations Organization,² indicating that the two are tied closely together. The President stated that he hoped Lyndon Johnson might rise to the height of real statesmanship and suggest to the Senate that they provide not only the $440 million reported by the Appropriations Committee, but provide all the funds contained in the authorization bill. Bryce and Dick Nixon will check this out with Johnson.

There was also some discussion about the advisability of having the President invite the four key Senators and key Congressmen to an “Off the Record” meeting at the Mansion. This was left in abeyance pending further discussions.

J.Z.A

[Attachment 2]

³

SUMMARY

1. New Developments. Since the House action on the Mutual Security Appropriations Act, the revolt in Iraq⁴ has created the possibility that country will withdraw from the Baghdad Pact. This would weaken the military position of Iran and Turkey, and therefore of the entire free world. To compensate for this will require additional expenditures in this area from military assistance and additional defense support for Iran. The new stabilization program in Turkey, vital for the position of the free world, will require additional economic assistance to that country. Economic dislocations in the area will require double the previously planned assistance for Lebanon and Jordan, and may require more support for countries like Greece, Pakistan, Israel, Ethiopia, the Sudan and Afghanistan. The total of the new requirements now foreseen amounts to about $350 million.

2. Funds Available. Such new requirements cannot be met through the $8,278 million “available for expenditure”. Of these funds $5,142 million are already obligated or reserved for previously determined needs. Based on the action of the House, the only funds available to carry the Mutual Security Program forward are $3,135, consisting of $3,078 in new appropriations and $57 million in the carry over of old funds. While the entire $8,278 remains to be spent, it is not all available for use. The $5,142 which has been obligated or reserved is to pay for orders of items of assistance which are still needed. The use of these funds would leave a gap in some previously determined need and would not assist in carrying forward the program.

3. Transfer Authority. The new situations described under (1) above cannot be met through the use of the ten percent transfer authority. As pointed out in (2), this authority would only have meaning with respect to the $3,135 in funds available for carrying the program forward. The transfer authority can also only be used if some category of aid contains sufficient resources that part of these resources can be withdrawn without serious damage to the program. In view of the cuts already made, and the new requirements for additional assistance which now exist, such a situation does not prevail.

4. Levels of Aid. The Executive Branch considers that the appropriation of the full $3,518 in the Senate bill is essential if we are adequately to maintain the security position of the free world and support the foreign policy objectives of the United States. This figure will require serious reductions in planned levels of aid; any lesser figure would represent a far more costly gamble with our security and might in the long run amount to greater expenses for the American taxpayer. A compromise between the Senate and House, which might put $100 million into the Development Loan Fund, $75 million into Defense Support, and $45 million into the Contingency Fund would have the following consequences:

a. Development Loan Fund. During the first six months of actual operation, the DLF used funds in the amount of $283 million. Maintenance of this rate would require the $580 million recommended by the Senate Committee. A $400 million figure would mean less development assistance than was given in FY 57 and a 31 percent reduction in the rate of the DLF this past half-year. Alternately, if the DLF for reasons of national security continued at the present rate, all funds would be exhausted by about March and it would be necessary to seek a supplemental appropriation.

b. Defense Support. A compromise figure of $775 million would represent a reduction of $60 million in the President’s request. New requirements already identified mean that in effect a reduction of about $85 million would have to be absorbed in the programs of South Asia and the Far East. With the Communist Chinese moving MIG 17’s to the mainland coast opposite Taiwan, it would seem foolhardy to reduce our support for those countries which border on Communist China: Korea, Taiwan and Vietnam. Yet these programs will have to be reduced under the $790 figure of the Senate. Any further reductions would be reckless folly on our part.

c. Contingency Fund. Requirements have already arisen in this fiscal year which will use $65 million in the Contingency Fund. Under the House figure, this would leave the President only $35 million—obviously inadequate even to last until January. The Senate figure would leave $90 million. Resources of this magnitude would seem to be the minimum margin to last until Congress reconvenes, at which time further action could be taken if the situation indicated that such action was necessary.

d. Special Assistance. The compromise figure suggested in (4) above would provide no increase in the figure of $185 appropriated by the House. This figure represented a cut of $27 million from the amount requested by the President in aid which was planned for such countries as Jordan, Ethiopia, Morocco, Tunisia, Libya in the Middle Eastern region; a program in Bolivia which is important to our whole Latin American policy; and the world-wide program of malaria eradication. None of these countries appears able to absorb a proportionate cut of $27 million without serious damage to its economy.

0. Source: Eisenhower Library, Whitman File, Eisenhower Diaries. No classification marking.
1. The Senate Appropriations Committee reported H.R. 13192 on August 5, having restored $440 million to the Mutual Security appropriations.
2. For text of Eisenhower’s August 13 address, see American Foreign Policy: Current Documents, 1958, pages 1032–1039.
3. No classification marking. Prepared in the White House. Attachment 1, consisting of 2 pages of charts presenting an analysis of reductions in Mutual Security appropriations, is not printed.
4. Reference is to a July 14 coup d’etat during which King Faisal, Crown Prince Abdul Ilah, and Prime Minister Nuri el-Said were assassinated and a republican government established under General Qassim.