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

252. Memorandum for the Record by the President’s Deputy Assistant (Harlow)⁰

February 29, 1960.

On February 15, at 5:30 pm the President met with the following people:

• Lyndon Johnson
• Alexander Wiley
• Carl Hayden
• Richard Russell
• Charles Halleck
• Thomas Morgan
• John Taber
• General Persons
• Everett Dirksen
• J.W. Fulbright
• Styles Bridges
• Speaker Rayburn
• John W. McCormack
• Clarence Cannon
• Secretary Dillon (State)
• Bryce Harlow

The President opened the meeting by stating that he would soon turn the discussion over to Secretary Dillon, it not being his desire to “bore everyone” by repeating his well-known convictions on Mutual Security. The President stated that he could not vouch for every particular figure in the following, but was recently advised by a man who had made a detailed analysis of the entire international situation that he was gravely concerned over the increasing costs of American production and what this is coming to mean to United States prosperity and American markets abroad.

This man advised that increasing costs are beginning seriously to affect our relations with the one and a quarter billion people who live in under-developed nations other than China. It was his understanding that in these nations productivity has been increasing about 1% a year, whereas their population has been increasing about 2%. If this be true, the President stated, we must move to increase productivity abroad by about an additional 1% if we possibly can, in the process of keeping the markets we now have and regaining those we have lost. The President stated that the people in these parts of the world will definitely better their conditions and that this must be made possible for them or the world will surely end up in chaos and disorder. He stated that he did not believe that the United States should do all of this itself, but certainly we must do better. The President said he had to repeat his conviction that our entire national security and prosperity are tied up in this program of Mutual Security and he reminded the group that in America’s earliest days we too were dependent upon nations for investment and capital resources. He stated that this meeting would be the last one of this kind with this particular group but that never has he been as sure as he is now that America’s future is tied so tightly with this program despite the adverse publicity the program has received. At this point he turned the discussion over to Secretary Dillon.

Secretary Dillon explained that a Presidential message to Congress would be sent forward the following day and that hearings would shortly ensue in the Foreign Affairs Committee in the House of Representatives. First, as to economic programs, Secretary Dillon explained that in preparing these programs this year the Department had been guided in good measure by the so-called Mansfield Amendment which required that reports be prepared on all countries receiving grant assistance to determine whether or not and how soon such countries could have this kind of assistance reduced or eliminated. The Secretary stated that this report should be available by the end of this month.¹ He said that the philosophy of this report is already reflected in the program presented to the Congress, because the funds requested for grant assistance had been reduced by $155 million under last year. He added that defense support alone had been reduced by $111 million, a 13% reduction under last year.

The Secretary stated that the funds requested in the new program are only slightly above those appropriated last year for grant assistance. He pointed out that a reduction is being requested also for the contingency fund.

As for the Development Loan Fund, he explained that the same amount is being requested as was requested last year. He explained that these funds are needed in order to make it possible to use more of these loans in place of grant assistance.

The Secretary stated that the second major change in the program this year is military assistance—an increase being requested in this item of $700 million above the amount appropriated last year in keeping with the recommendations of the Draper Committee and because the pipeline funds have been virtually exhausted. The Secretary stressed the necessity for modernizing the forces of our friends abroad and stated that an increase in military assistance is imperative to that end.

As far as the NATO nations are concerned, the Secretary stated that the policy is to have no new commitments to those NATO countries which are economically the strongest—England, Germany and France and that these nations are being urged to make cost-sharing agreements in assistance programs.

The Secretary stressed that the program has a better schedule of requirements than heretofore because unified commanders and our ambassadors have been brought into the program sooner.

The Secretary stated that $940 million more than last year’s appropriations are being asked this year, the great majority of the increase being for military assistance.

He cited the basic figures as being $4.175 billion requested, as compared with $3.930 billion requested last year, as compared with $3.226 billion appropriated last year.

Speaker Rayburn then stated that in the House of Representatives there is a wide-spread feeling that there is a tremendous amount of incompetence and waste in this program. He said that there would be no difficulty on the military side of the program in the House, but there will be great difficulty on the economic side of the program. The Speaker emphasized that the people complaining to him have stressed waste and incompetence, not graft or corruption, and that they mention this in connection with economic aid. He identified the complaining Congressmen as members of the House Committee on Foreign Affairs.

Congressman Tom Morgan observed that military assistance is a continuing authorization, as is the Development Loan Fund, so that in the authorization bill this year there is only $1.400 billion to be authorized. He stated that the so-called Pilcher subcommittee returned from a trip abroad with bad reports on large projects, but that the small projects seemed to be going well.

Secretary Dillon pointed out, respecting the larger projects, that these are being shifted from grants programs to Development Loan Fund projects. He stated that no money is included in this year’s request for any projects of any size under grant aid except for a few now being completed in the Far East. He stated that because of this arrangement he did not anticipate difficulties on these projects in the future of the kind we have had in the past.

Congressman Taber asked the President if we could not get along without technical assistance and other smaller programs of this kind. The President responded that this is one of the best parts of the whole program. Taber said that he would agree if the program were honestly run, “but it isn’t.” At once the President responded, most vigorously, that it is very difficult to get good personnel in this program because the Congress insists upon a year by year program and has refused to put it on a career basis. He stated that “the United States is coming damn close to making up its mind as to what we are going to do in the world, and if it is to withdraw then we will have to recompute our whole position on the face of the globe.” He stated that both this Mutual Security Program and the USIA programs will be much better off if the personnel can be made career, and he feelingly commented on troubles he had experienced in prior years (including, specifically, with Taber) trying vainly to get enough Army funds, whereas today the Congress is lavish on defense but pinch-penny on the no less vital Mutual Security Program.

Secretary Dillon stated that a new study being made of the economic programs will be completed in about one year, pointing out that these programs have not been tightly resurveyed for the past decade. He said there is a possibility that some parts of the program are no longer needed.

Senator Wiley stated that he has had a letter asking why it is necessary to give additional assistance to NATO when they are in such excellent economic condition. Secretary Dillon explained that NATO countries are contributing far more now—about 11% more—than last year. The President pointed out that Holland, for instance, is contributing so much that there is some doubt whether or not it can carry the load. Senator Fulbright interjected to state that while we are approaching this in a highly critical and conservative fashion, Mr. Khrushchev is celebrating his new steel mill in India as well as a lot of additional economic efforts in other parts of the world on the part of the Soviet Union. He stated that the decision that America must make is whether or not to turn the rest of the world over to the Soviet Union; otherwise we must continue our own programs.

The Senator stated that he is much aware that in his own State this program is highly unpopular, and so much so that in every speech he makes he has to defend it. He says, however, that he does so unhesitatingly, because the Nation faces a critical situation in the world and must meet the test.

The President reiterated that almost his entire life had been spent in military service during a period in which every dollar invested in defense was characterized as waste. Now, he said, everybody insists on spending billions extra for defense, while scrimping on this particular program, an essential part of our own defenses.

Senator Fulbright repeated that it is unpleasant and unpopular to support this program but there is no alternative. He said it is most unfortunate that it has been made an annual program. He stressed that here we are watching the Soviet Union going around the world, in the Caribbean as well as in Asia, and we in this country are getting started on a battle royal in the Congress (referring to civil rights). He said that this battle in the Congress will make the situation even more difficult. He said that as far as he is concerned he will support this Mutual Security program all that he can. America has, he pointed out, more than twice the gross national product of the Soviet Union. He said that we can afford this program, and we must support it.

Senator Dirksen suggested, whimsically, to Senator Fulbright that the latter should live in Chicago-Tribune area in order to get a real feeling of the local impact of this program.

The President stated that Mr. Khrushchev had told him that none of us can afford this business of destroying each other. However, the Soviets can place their emphasis in certain particular places to achieve their results. Meanwhile the United States must look after the concerns of all nations small or large. He stated that our job is tough indeed but that our allies are today a very large part of America’s initial defense—in fact, our outposts, even though we cannot tell them so.

Senator Fulbright stated that the free world has at least three times the wealth of the Soviet Union so there is no doubt that we can afford a vigorous effort for mutual security. The President laughingly stated that he would come to Arkansas and put on a toupee and support Senator Fulbright in that state because of his views on mutual security.

The President then thanked everyone present for coming to this meeting. He stated that he doesn’t care if he is characterized as “a stupid ox” but he believes profoundly in this program and will keep on saying so. He said that if he should survive for the next decade there will be, before it is over, a lot more converts to this program, because he is going to have something to do with getting them.

Speaker Rayburn then commented that the President’s bourbon tasted very good to them; he hoped that this would not be, as the President had indicated, the last meeting of this group. The President laughingly answered that this was only to be the last meeting “of this kind.”

Thereupon at 6:15 pm the meeting adjourned.

BNH

0. Source: Eisenhower Library, Whitman File, Eisenhower Diaries. No classification marking.
1. Regarding the President’s message to the Congress, see footnote 2, Document 253. The “Mansfield Amendment” is Section 503(c) of the Mutual Security Act of 1954, as amended. Dillon submitted his report to the Congress on February 29; for text of his transmittal letter, see Department of State Bulletin, March 21, 1960, pp. 459–460. The report, which was classified, has not been found. Dillon sent an unclassified, general summary report to the Congress on March 4. (Ibid., pp. 460–465)