October 30, 1953
NOTE BY THE EXECUTIVE SECRETARY
[After a general survey, we begin this document in the area where Eisenhower most clearly departs from his predecessor's thinking.]
U.S. Ability to Support Security Expenditures
19. The United States must maintain a sound economy based on free private enterprise as a basis both for high defense productivity and for the maintenance of its living standards and free institutions. Not only the world position of the United States, but the security of the whole free world, is dependent on the avoidance of recession and on the long-term expansion of the U.S. economy. Threats to its stability or growth, therefore, constitute a danger to the security of the United States and of the coalition which it leads. Expenditures for national security, in fact all federal, state and local governmental expenditures, must be carefully scrutinized with a view to measuring their impact on the national economy.
20. The economy of the country has a potential for long-term economic growth. Over the years an expanding national income can provide the basis for higher standards of living and for a substantial military program. But economic growth is not automatic and requires fiscal and other policies which will foster and not hamper the potential for long-term growth and which will operate to reduce cyclical fluctuations.
21. Excessive government spending leads to inflationary deficits or to repressive taxation, or to both. Persistent inflation is a barrier to long-term growth because it undermines confidence in the currency, reduces savings, and makes restrictive economic controls necessary. Repressive taxation weakens the incentives for efficiency, effort, and investment on which economic growth depends.
22. In spite of the reimposition of tax rates at approximately the peak levels of World War II, expenditures have risen faster than tax receipts, with a resulting deficit of $9.4 billion in fiscal year 1953. Despite anticipated larger receipts, without the imposition of new taxes, and assuming substantially unchanged world conditions, a deficit of $3.8 billion is estimated for fiscal year 1954.
23. a. Under existing law, tax reductions of $5 billion a year will become effective next January. A proposal to impose substitute taxes therefor would be a reversal of policy.
b. Additional revenue losses of $3 billion a year are due to occur on April 1, 1954. Congress has not acted on the President's recommepdation that these reductions be rescinded. Even if the $3 billion reduction is rescinded, or offset by revenue from new sources, large deficits would occur in FY 1955 and FY 1956 at present levels of expenditures.
c. The economic problem is made more difficult by the need to reform the tax system in the interests of long-term economic growth. Inevitably, many of the changes necessary to reduce the barriers to growth will lead to a loss of revenue in the years immediately following their adoption.
24. Any additional revenue will have to be secured by new taxation on a broad base.
25. The present high level of the Government debt further complicates the financial and economic problems of the country. Substantial additional borrowing could come only from sources which would be inflationary.
26. There is no precise level or duration of government expenditures which can be determined in advance, at which an economic system will be seriously damaged from inflationary borrowing on the one hand or from repressive taxation on the other. The higher the level of expenditures, the greater is the need for sound policies and the greater are the dangers of miscalculations and mischance. These dangers are now substantial.
27. The requirements for funds to maintain our national security must thus be considered in the light of these dangers to our economic system, including the danger to industrial productivity necessary to support military programs, arising from excessive levels of total Government spending, taxing and borrowing.
28. Modifications of the foregoing fiscal policies to promote long-term growth may be necessitated for a limited period: (1) to deal with short-term cyclical problems or (2) to achieve overriding national objectives that justify departure from sound fiscal policies.
. . .
Basic Problems of National Security Policy
31. a. To meet the Soviet threat to U.S.
Nature of the Soviet Threat
32. a. With increasing atomic power, the Soviets have a mounting capability of inflicting very serious and possibly crippling damage on the United States. The USSR will also continue to have large military forces capable of aggressive action against countries of the free world. Present estimates are, however, that the USSR will not deliberately initiate general war during the next several years, although general war might result from miscalculation. In the absence of general war, a prolonged period of tension may ensue, during which each side increases its armaments, reaches atomic plenty and seeks to improve its relative power position.
b. In any case, the Soviets will continue to seek to divide and weaken the free world coalition, to absorb or win the allegiance of the presently uncommitted areas of the world, and to isolate the United States, using cold war tactics and the communist apparatus. Their capacity for political warfare against the United States as well as its allies will be enhanced by their increased atomic capability.
33. a. A sound, strong, and growing U.S. economy is necessary to support over the long pull a satisfactory posture of defense in the free world and a U.S. capability rapidly and effectively to change to full mobilization. The United States should not weaken its capacity for high productivity for defense, its free institutions, and the incentives on which its long-term economic growth depends.
b. A recession in the level of U.S. economic activity could seriously prejudice the security of the free world.
Defense Against Soviet Power and Action
34. In the face of these threats, the United States must develop and maintain, at the lowest feasible cost, requisite military and non-military strength to deter and, if necessary, to counter Soviet military aggression against the United States or other areas vital to its security.
35. In the interest of its own security, the United States must have the support of allies.
36. United States policies must, therefore, be designed to retain the cooperation of our allies, to seek to win the friendship and cooperation of the presently uncommitted areas of the world, and thereby to strengthen the cohesion of the free world.
37. a. In Western Europe, a position of strength must be based mainly on British, French, and German cooperation in the defense of the continent. To achieve a stronger Europe, the United States should support, as long as there is hope of early success, the building of an integrated European Community (including West Germany and if possible a united Germany), linked to the United States through NATO. The United States should press for a strong, united stable Germany, oriented to the free world and militarily capable of overcoming internal subversion and disorder and also of taking a major part in the collective defense of the free world against aggression. The United States must continue to assist in creating and maintaining mutually agreed European forces, but should reduce such assistance as rapidly as United States interests permit.
b. In the Far East, strength must be built on existing bilateral and multilateral security arrangements until more comprehensive regional arrangements become feasible. The United States should stress assistance in developing Japan as a major element of strength. The United States should maintain the security of the off-shore island chain and continue to develop the defensive capacity of Korea and Southeast Asia in accordance with existing commitments.
c. In the Middle East, a strong regional grouping is not now feasible. In order to assure during peace time for the United States and its allies the resources (especially oil) and the strategic positions of the area and their denial to the Soviet bloc, the United States should build on Turkey, Pakistan and, if possible, Iran, and assist in achieving stability in the Middle East by political actions and limited military and economic assistance, and technical assistance, to other countries in the area.
d. In other areas of the free world the United States should furnish limited military aid, and limited technical and economic assistance, to other free nations, according to the calculated advantage of such aid to the U.S. world position.
38. a. As presently deployed in support of our commitments, the armed forces of the United States are over-extended, thereby depriving us of mobility and initiative for future military action in defense of the free world.
b. Under present conditions, however, any
major withdrawal of U.S. forces from Europe or the Far East would be
interpreted as a diminution of U.S. interest in the defense of these
areas and would seriously undermine the strength and cohesion of the
39. a. In specific situations where a warning appears desirable and feasible as an added deterrent, the United States should make clear to the USSR and Communist China, in general terms or with reference to specific areas as the situation requires, its intention to react with military force against any aggression by Soviet bloc armed forces.
b. (1) In the event of hostilities, the United States will consider nuclear weapons to be as available for use as other munitions. Where the consent of an ally is required for the use of these weapons from U.S. bases on the territory of such ally, the United States should promptly obtain the advance consent of such ally for such use. The United States should also seek, as and when feasible, the understanding and approval of this policy by free nations.
(2) This policy should not be made public without further consideration by the National Security Council.
Defense Against the Threat to the U.S. Economy and Institutions
40. a. A strong, healthy and expanding U.S. economy is essential to the security and stability of the free world. In the interest of both the United States and its allies, it is vital that the support of defense expenditures should not seriously impair the basic soundness of the U.S. economy by undermining incentives or by inflation.
b. The United States must, however, meet the necessary costs of the policies essential for its security. The actual level of such costs cannot be estimated until further study, but should be kept to the minimum consistent with the carrying out of these policies.
c. Barring basic change in the world situation, the Federal Government should continue to make a determined effort to bring its total annual expenditures into balance, or into substantial balance with its total annual revenues and should maintain over-all credit and fiscal policies designed to assist in stabilizing the economy.
d. Every effort should be made to eliminate waste, duplication, and unnecessary overhead in the Federal Government, and to minimize Federal expenditures for programs that are not essential to the national security.
e. The United States should seek to maintain a higher and expanding rate of economic activity at relatively stable price levels.
f. The economic potential of private enterprise should be maximized by minimizing governmental controls and regulations, and by encouraging private enterprise to develop natural and technological resources (e.g. nuclear power).
41. To support the necessarily heavy burdens for national security, the morale of the citizens of the United States must be based both on responsibility and freedom for the individual. The dangers from Soviet subversion and espionage require strong and effective security measures. Eternal vigilance, however, is needed in their exercise to prevent the intimidation of free criticism. It is essential that necessary measures of protection should not be so used as to destroy the national unity based on freedom, not on fear.
Reduction of the Soviet Threat
42. a. The United States must seek to improve the power position of itself and the rest of the free world in relation to the Soviet bloc.
43. As a means of reducing Soviet capabilities for extending control and influence in the free world, the United States should:
44. a. Measures to impose pressures on the Soviet bloc should take into account the desirability of creating conditions which will induce the Soviet leadership to be more receptive to acceptable negotiated settlements.
b. Accordingly, the United States should take feasible political, economic, propaganda and covert measures designed to create and exploit troublesome problems for the USSR, impair Soviet relations with Communist China, complicate control in the satellites, and retard the growth of the military and economic potential of the Soviet bloc.
45. In the face of the developing Soviet threat, the broad aim of U.S. security policies must be to create, prior to the achievement of mutual atomic plenty, conditions under which the United States and the free world coalition are prepared to meet the Soviet-Communist threat with resolution and to negotiate for its alleviation under proper safeguards. The United States and its allies must always seek to create and sustain the hope and confidence of the free world in the ability of its basic ideas and institutions not merely to oppose the communist threat, but to provide a way of life superior to Communism.
46. The foregoing conclusions are valid only so long as the United States maintains a retaliatory capability that cannot be neutralized by a surprise Soviet attack. Therefore, there must be continuing examination and periodic report to the National Security Council in regard to the likelihood of such neutralization of U.S. retaliatory capability.