740.5 MSP/9–2154: Telegram

No. 297
The Acting Secretary of State to the Embassy in France1

confidential

Topol 331. Arcab. US NATO Stage 5 Examination. Reference Paris Ecoto A–188, September 3.2 State–Defense–FOA message. Suggest following general line be taken in explaining why US has reduced defense expenditures.

1.
Decline in US defense expenditures is composite result strategic military political economic and administrative factors. They may be grouped under four main headings as follows: a) changes resulting from cessation active hostilities in Korea; b) changes resulting from continuing examination of military strategy necessary to carry out national policies; c) changes resulting from integration new weapons systems into military planning; d) economies resulting from changes in organization and administration of Defense Department.
2.
Under impact Korean war US built up military forces much more rapidly than most of its NATO allies, even under limited mobilization. Cessation of active hostilities Korea resulted in termination combat duty pay costs, redeployment some forces, substantial reduction in pipe-line of manpower and supplies to Korea and elimination expenditure of matériel in combat.
3.
After cessation Korean hostilities guiding principles underlying reassessment of national security program were:
a)
That US in common with its free world allies must be prepared maintain substantial effective military forces for indefinite period in future and avoid fixed date of maximum readiness;
b)
That there would be integration of new weapons systems into US military establishment rapidly as these weapons became available;
c)
That effective defense program maintained at high level of readiness for indefinite period of time must have sound mobilization base and must be program which can be maintained indefinitely within framework of growing economy.
4.
Accordingly military program presented by President in FY 1955 budget last January and as enacted by Congress in June3 reflected principles stated above. Military manpower (as shown in US response to Section A of Questionnaire)4 will be reduced to about 3,000,000 men on active duty and increased emphasis will be placed on reserve component programs. Major matériel requirements in [Page 623] view of longer term military objectives (as against fixed date of crisis) have been recomputed and rephased. Planning provides for rapid integration of new weapons systems into active forces. Consideration has been given to fact that over long pull economic strength and growing economy are indispensable prerequisites of sustained military strength.
5.
The reorganization of Defense Department and several military departments, institution of sounder procurement procedures and financial and physical property inventory systems, and more effective utilization of military and civilian manpower are resulting in substantial economies in expenditure of funds.
6.
All above factors account for decline in US defense expenditures. This decline from Korean war peak has not resulted in decrease in over-all US military effectiveness. On contrary readiness of active forces has improved and over-all effectiveness will continue to improve as more modern equipment becomes available and as our airpower continues to expand.

Believe that you should follow line stated above rather than attempt evaluate relative importance of economic factor in composite picture. However to extent economic factors involved concur in general your suggestion paragraph 3 reftel (a) omitting first sentence on relative importance economic factors (b) modifying second sentence as below and (c) modifying entire paragraph along above line to incorporate concept of strong free world economy to endorse in long haul effort.

Regarding second sentence paragraph 3 reftel suggest modification as follows: It is belief of Administration that very high levels of taxation or substantial deficit financing, while necessary perhaps for brief periods of time, would impair flexibility and expansion potential of American economy if continued for long periods.

Smith
  1. Drafted by Mautz and Kranich, cleared by Seymour Weiss and Kaplan, and signed for the Acting Secretary by Joseph Palmer, 2d.
  2. Not printed.
  3. See Document 295.
  4. Documentation on the NATO Annual Review for 1954 is in file 740.5.