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

249. Memorandum of Conference With President Eisenhower⁰

November 25, 1959, 11:03 a.m.-12:23 p.m.¹

OTHERS PRESENT

• Secretaries Herter, Dillon, McElroy, Gates, Irwin, Shuff, Anderson, Mr. Saccio, Mr. Bell, General Twining, General Palmer, Director Stans, General Persons, General Goodpaster

Mr. Dillon said the group had come in to discuss the Military Assistance Program for FY–61. He said that State and Defense had recommended a program of $2.3 billion and Budget had indicated they would not recommend a program above $1.4 billion. He said that the program as developed by State and Defense reflected the best and most thorough preparation of any program to date. Because the difference is so wide, however, he did not think it would be worthwhile to take up details of the program. While the State-Defense submission could be varied by 10% without too much difficulty, any such change as suggested by the Budget would breach our present foreign policy and security policy.

Last year, Mr. Dillon indicated he had agreed to going in for $1.6 billion and referred to the study by the Draper Committee in relation to a possible increase above that figure. The Draper Committee recommended an additional $400 million. After long argument, the Administration took the position it could not ask for the additional funds last year, and the request was put off for tactical reasons. The President had, however, told the Congress he would have to ask for more funds if the Congress made a cut in the Military Aid program, which they did. He said he and Defense had spread the funds thin to cover the program this year, but could not do it again. He recalled that Mr. Spaak had told the President that any substantial unilateral cut in U.S. aid programs without prior consultation would be extremely damaging to NATO.² General Draper and Mr. Voorhees had said that if the Administration dropped below a $2 billion request this year this would be very disheartening to the Draper Committee. They had made a searching review of basic policy, and concluded that anything less than $2 billion would be taken as a change of security concept.

Mr. Irwin then said that the Defense Department is very conscious of the foreign policy aspects of the Military Aid program. He said it is a close mixture of military and political considerations. There are four classes of recipient nations—those that will be allies in war, those where we have bases, those having the potential of helping us in war or in actions to stabilize important regions in peacetime, and those where there are strong foreign policy motivations. He then made a brief presentation with charts of the program³ for the information of the President.

The President asked whether this proposal took account of the reduced valuation on old equipment. Mr. Irwin said that it did, but commented that the program is shifting to newer weapons. The President asked why so much money is destined for NATO. Mr. Dillon said that $15 million is for the UK, for the Thor program. There is nothing for Germany. There is $30 million for France to finish a past commitment. The major programs are for Greece and Turkey, with sizeable programs also for the Netherlands and Italy. The Netherlands has stepped up its outlays, and has in fact possibly taken on too much. Italy is increasing as much as it should, in wisdom. In both of these countries the aid is being given on a matching basis. If a major review were to be made, this would be all right, but no unilateral decision should be taken on a program we have agreed to. He commented that the force goals in Greece and the Netherlands may well be somewhat too high. The Belgians are not doing enough themselves; however, what we are giving them is on a matching basis. The size of the Portuguese program is related to our need to retain the Azores bases. The President asked why we have not talked with our NATO partners and told them that they must take on more of the load. Mr. Dillon said that we had done so, and it was as a result of these talks that our aid was put on a matching basis in many cases.

The President commented that the bigger the Mutual Security program is, the more the Congress is given the chance to balance the budget at the expense of the MSP. Personally, he believes this is the biggest and best investment for America that can be made. It does give the political opposition a chance to increase other programs in the budget without increasing the over-all total, simply by drawing money from this source.

Mr. Dillon said we should not discredit the Draper Report. He thought we could keep an unassailable public position if the approved aid figure stayed over $2 billion. Mr. Irwin said that if it is kept at $2.1 to $2.3 billion we will have a sound program which we can defend against any attack. If the sum is less, we become much more vulnerable. Mr. Dillon commented that we already have the authorization for this year, and it will only be necessary to go up to Congress once—i.e., for appropriations. He commented that Congressman Passman is more reasonable this year, but this is not saying much.

Director Stans said the difference between himself and Mr. Dillon is the difference between $3.5 and $4.9 billion. There is question of policy involved. The higher figure would in his opinion knock out any possibility of achieving an $80 billion budget. He thought the general attitude in Congress and in the country is adverse to this program. The President said he recognized this but felt that this attitude was wrong and that if he had the choice he would take $1 billion out of the Defense appropriation and put it in MSP. Mr. Stans then said he thought he should take up the proposed program with State and Defense in detail. He added that he is fearful that if the Administration asks for more funds for this purpose than last year the whole budget posture would be destroyed and other departments would demand increases. The President said he disagreed utterly and completely with this view, so long as he felt the increased funds were truly necessary. He did not think they were in the case of many of the other departments. Mr. Stans said he was speaking of public opinion, and wished to urge that we keep within the FY–60 submissions.

The President asked what total figure Mr. Dillon was proposing and the reply was a figure of $4.9 billion. The President then asked what Mr. Dillon felt he could justify as really firm needs for the program. Mr. Dillon said he thought it could be gotten down to about $4.4 billion but not below. This is not too far from the figure requested last year.

Secretary Anderson said the question is whether the President wished to go to Congress with the largest peacetime budget in history. He commented that every program must be looked at both for itself and in over-all terms. The President said that his great problem is to take care of the things that have to be done such as defense, payment of interest and the Mutual Security program—to find the funds for these things without giving way to increases all along the line, many of which are not necessary at all. He felt that a figure of $4.9 billion would strain the budget very badly and that several hundred million of this probably is not strictly necessary. He asked State and Budget to see if a program could be worked out at that general level that would meet needs all around. He commented that we have never been able to get across the idea to the Congress or to the public that through this program we are keeping wars from occurring.

In connection with the President’s query as to any need for increases in other parts of the Mutual Security program, Mr. Dillon said he wants to add to the Development Loan Fund at least as much as was asked for last year. He would like to go up to $850 million. The President asked the group to study an over-all figure of about $3.9 billion. He said this is by no means sacrosanct, however. He does not wish to make his decision on budgetary factors alone. If a figure this small would involve undue risk, it could well be false economy since the cost to us later would be much greater.

He asked that the group be prepared to see him later the same week or early in the next.3

G.
Brigadier General USA

0. Source: Eisenhower Library, Whitman File, Eisenhower Diaries. Confidential. Drafted by Goodpaster on January 20, 1960.
1. The time of the meeting is taken from the President’s Appointment Books. (Ibid.)
2. A memorandum of this November 24 conversation is scheduled for publication in volume VII, Part 1.
3. Not found.