Foreign Relations of the United States, 1958–1960, National Security Policy; Arms Control and Disarmament, Volume III

118. Memorandum of Conversation⁰

Washington, September 2, 1960.

SUBJECT

• Defense Budget for FY 1962

PARTICIPANTS

• State
  • Secretary Herter
  • Under Secretary Merchant
  • Deputy Assistant Secretary Morgan
• Treasury
  • Secretary Anderson
  • Briefing officers representing Army, Navy, Air Force and Joint Staff
• Defense
  • The Armed Forces Policy Council:¹
  • Secretary Gates
  • General Twining
  • Secretary Brucker
  • General Lemnitzer
  • Secretary Sharp
  • General White
  • Under Secretary Bantz
  • Admiral Burke
  • General Shoup
  • Asst Secy Irwin
  • Mr. John B. Macauley

Secretary Gates welcomed the visiting Secretaries and explained that the meeting was part of the FY 1962 budget process, in which it was desirable to bring foreign policy guidance to bear as early as possible.

Mr. Irwin introduced the Service budget presentations by pointing out that they were only preliminary at this stage, would be submitted formally to Secretary Gates about mid-September, and thereafter would be revised and coordinated by him before submission to the NSC, the President and the Bureau of the Budget. The preliminary presentations today assumed an “equal funds budget” (i.e., the same amount of dollars for FY 1962 as for FY 1961) or an “equal resources budget” (i.e., a Defense appropriation for FY 1962 which would purchase the same amount of goods and services as the FY 1961 appropriation, which means “equal funds” plus about 5%) to cover rising material and personnel costs, etc.). In addition, the Services were free to point out items they considered desirable but which required a higher budget level. Mr. Irwin also stressed that today’s presentations were arranged to bring out foreign policy implications, although it would not be possible to separate general war and limited war items because most items have some bearing on both.

The Army presentation called for continuing roughly the present force levels in order to maintain overseas deployments (41% of Army strength), thus keeping allied confidence in the system of collective security. To do this would require grave lags in research, development and procurement needed to modernize our ground forces. Thus the future is to be mortgaged for the sake of immediate requirements. Even so, manning Hawk missile squadrons and NATO stockpiles will require some reduction in other existing forces; there will be a shortage of lift; and with all of STRAC’s three ready divisions due in Europe or Iceland by M+30, any limited war diverting one or more of these divisions would cause a serious degradation of our general war capability. If money were available, the Army would like to increase manpower to 925,000 in order to flesh out understrength forces in Europe and the Far East and form one more STRAC division. It would also go in for extensive and long overdue modernization, including tanks clearly superior to the new Russian tank (11 years away on prescribed budget assumptions) and the Iroquois helicopter (10 years away), and for research and development of an anti-missile missile (Nike Zeus). As is, no substantial research and development will be possible except on the communications satellite. In an FY 1962 equal funds budget, an adequate program of modernization would require force cuts which would require eliminating all of our Far Eastern and European deployments.

The Navy presentation called for an increase from 6 to 9 Polaris submarines procured, made possible by a corresponding reduction in other submarines. Otherwise strength in men and ships would remain about the same. All ships would have both general and limited war capabilities, carry conventional as well as nuclear ordnance. Funds above the assumed budget level, however, would be needed for a number of worthy purposes. A strong plea was made for stepping up Polaris procurement to twelve a year and for hastening development of the long-range Polaris missile, neither of which could be done without serious cuts elsewhere in the assumed budget. It was noted that the total cost of an accelerated Polaris submarine program at the buildable rate of twelve a year to reach a total of forty-five would be $2.5 billion, including missiles, back up and research and development on a longer range Polaris. More and better conventional ammunition is needed too; more amphibious lift; more support for the Marines’ limited war capabilities; faster replacement of World War II ships which are wearing out (still 75% of the present Navy), and of obsolescent planes. It would also be highly desirable to form one or more additional task forces to be kept abroad, near the scene of possible troubles in Asia or Africa.

The Air Force presentation showed how the top requirement of maintaining our strategic deterrent, with added costs for such things as dispersal, alerts and modernization, will require a continuation in force cuts which have been going on for some years (e.g., from 137 wings in FY 1957 to 85 or 90 in 1962). Despite the increase in our absolute capabilities produced by modernization, our capabilities relative to the Soviets’ have declined and will probably decline further as projected for 1962. Thus our total deterrent is being eroded and we may reach the point of losing our deterrent as well as war-winning capabilities. Even so, the projection for FY 1962 will require substantial cuts elsewhere, notably several squadrons now assigned to NATO.

The Joint Staff presentation gave comments of General Twining on matters relevant to the points stressed in the paper enclosed with Secretary Herter’s letter of July 1 to Secretary Gates. A recent JGS evaluation of our general war capabilities concludes that our relative posture may have been weakened during the past year, and is likely to weaken further in view of the fact that we shall not have an ICBM warning system until FY 1963, but the possibility of ICBM attack will exist much sooner. The increasing boldness of Soviet actions probably reflects the Soviet assessment of relative military capabilities. Present budget levels permit adequate capability to meet one limited war situation, but our general war posture would be seriously strained if we had to meet two or more limited war situations at the same time. Since budgetary restrictions have reduced conventional capabilities, it will probably be necessary to make selective use of nuclear weapons to defeat the enemy in a limited war. For guerrilla or anti-guerrilla war we have to rely mainly on the capabilities of other countries. The State Department paper’s² stress on the importance of NATO and of forward deployment is sound. In sum, the effect of a straight line defense budget is to compel a choice between modernization forces at reduced levels and existing force levels with obsolete equipment.

Secretary Gates said he was now working on the Joint Strategic Operations Plan (JSOP) with the JCS, who were so far widely divided. Increasing personnel costs vs. rising costs of advanced projects like Polaris and Samos are a problem every year, and getting worse. Something has to give.

General Lemnitzer said that the Army had deliberately decided to sacrifice modernization to force levels because of the disastrous effect on our allies if we moved toward a Fortress America posture.

Admiral Burke said that in order to meet the current world situation we, in effect, have to sacrifice the future to the present. If the world situation is no better five years from now, we will then face “a hell of a problem.”

Secretary Brucker pointed out that the Army is doubly hit because it is already behind in modernization. This is a problem now, not one beginning in 1963 or later.

Secretary Sharp said that, although maintaining the strategic deterrent has top priority, the possession of an adequate small war capability comes close to being as important. Even a budget increase of 5% to 7% would make a tremendous difference to all the Services.

Secretary Gates said this was very encouraging; the Chiefs were arguing for a lot more in their discussion of the JSOP.

Mr. Merchant asked if the allocation of the budget between the three Services projected in this presentation was the same as for FY 1961. Secretary Gates said essentially yes, but it may not end that way.

General Twining, commenting on the proposed Air Force NATO cuts, said we continue to want a strong NATO, but the US contribution simply must be reduced. Our allies must do more.

Secretary Herter commended the fine spirit of the presentations, particularly shown in the clear relationship to the missions to be performed. He restated several points in the State Department paper about which he felt strongly. Since we must assume an initial Soviet strike in general war, the best chance of avoiding war is to have it publicly known that our deterrent is invulnerable to surprise attack. With regard to limited war, we are presented with a difficult and wide range of possibilities all over the globe—in Africa, Latin America, perhaps the Near East again. It is impossible to have the perfect answer ready for all situations, hence all the more important to have substantial and mobile forces which can move quickly anywhere. The terrible fear of nuclear weapons felt by most peoples does not distinguish between strategic and tactical uses. Thus the prospect of having to use nuclear weapons in some limited war, as required by present capabilities according to the recent joint State–Defense–CIA study, presents a very serious psychological problem. As for NATO, the only answer is a complete review of MC–70 as soon as possible. There is a very ticklish political situation in NATO, and if we reduce forces unilaterally there will be trouble.

General Twining said MC–70 was now being reviewed and the result would be presented next spring. General Lemnitzer commented that with increasing Soviet capabilities the new review may well call for more forces rather than less. General White said General Norstad must simply be told to put on his American hat and insist on the necessary US reductions.

Secretary Gates expressed irritation with “the numbers racket” which disregarded improvements in capabilities. Secretary Herter said that we never object to changes of numbers where equivalent capabilities are provided.

Secretary Anderson then spoke on economic and fiscal aspects of the budget problem. While all agree that the safety of our country is first priority, it can be endangered by economic as well as by military crisis, and economic crisis may come sooner. In this year’s budget, 80% of all tax dollars go for defense-related matters. Anything more for defense would therefore have to be taken out of the remaining 20%, competing with all our domestic programs as well as foreign economic aid like the recent items for Latin America and the Congo. Some advocate an increase in taxes, but Congress has refused even to boost postal rates enough to cover the Post Office deficit. We couldn’t get a Congressional hearing on a proposal to tax jet fuels proportionally to the fuels used by piston engines. Since Congress would not increase the gasoline tax, $800 million excise tax receipts had to be transferred to the Federal road program. If we propose to increase defense expenditures by borrowing money, we must impose wartime controls. Inflation—less during the past eighteen months than any time since the depression—must be kept low because of our balance of payments situation. Many foreign countries use our currency to back theirs to a very substantial extent, and if they began to doubt the stability of the dollar they would start exchanging dollars for our gold. As foreign dollar holdings already exceed the gold we hold in excess of statutory requirements for backing the currency, such a run on the dollar could produce a crisis in 24 hours, any time. We can do various things about the unfavorable balance of payments, such as prohibiting foreign investment, stopping aid, bringing our forces home, but the one thing we cannot do is nothing. The real solution is to increase exports, but this can’t be done quickly because our foreign competitors have more modern plants—quite aside from comparative wage scales.

0. Source: Department of State, Central Files, 711.5/9–260. Top Secret; Limit Distribution. Drafted by George A. Morgan, Deputy Assistant Secretary of State for Policy Planning, and approved in S on September 13.
1. Those members of the Armed Forces Policy Council not previously identified are: Dudley C. Sharp, Secretary of the Air Force; Fred A. Bantz, Under Secretary of the Navy; John N. Irwin, II, Assistant Secretary of Defense, International Security Affairs; and John B. Macauley, Deputy Director of Defense Research and Engineering.
2. Apparent reference to a paper accompanying Herter’s July 1 letter to Gates; neither found.