Foreign Relations of the United States, 1961–1963, Volume IX, Foreign Economic Policy

14. National Security Action Memorandum No. 171⁰

Washington, July 16, 1962.

MEMORANDUM FOR

• The Secretary of State
• The Secretary of Defense
• The Secretary of the Treasury
• The Director, Bureau of the Budget

SUBJECT

• “Department of Defense Actions to Reduce Its Overseas Expenditures”

1. I have reviewed the proposed actions of the Department of Defense directed toward reducing its overseas expenditures (see attached memorandum from the Secretary of Defense).¹ Subject to the qualifications set forth below, I approve these actions as interim meas-ures, until the Cabinet Committee recommends and I approve guidance for reducing government overseas expenditures in all departments.

2. In certain countries, the actions proposed by the Defense Department may result in a need for compensating increases in aid. This appears especially likely to be the case in Korea, South Vietnam, and the Republic of China, countries whose foreign exchange requirements we, in essence, underwrite. In certain other countries, including Iceland, the Philippines, and Japan, which are not now major recipients of aid, the impact of reductions in U.S. military expenditures may also create demands for aid. The economic situation of these countries and our policy interests in them are such that we cannot simply ignore the possibility that savings on military account will be cancelled or substantially offset by increased expenditures on aid account.

3. Accordingly, I request that the Committee arrange for timely consideration of the interrelations among Defense and AID overseas expenditures in these and similar cases. Any final decision to reduce one of the categories of expenditures should be made only after full consideration of its probable impact on the other, as well as its budgetary costs. Issues which cannot be resolved by the Committee should be referred to me.

John F. Kennedy²

Note: The attachment to the original memorandum, a memorandum from the Secretary of Defense dated July 10, 1962, subject: “Revised Project List—List of Projects and Actions for Reducing Defense Expenditures Entering the International Balance of Payments”, has been given separate distribution to the affected agencies and is not attached. It is, however, included by reference.

0. Source: Kennedy Library, National Security Files, Meetings and Memoranda Series, NSAM 171. Confidential. Copies were sent to Ball and Fowler Hamilton. According to a memorandum from Charles E. Johnson to the executive secretaries of the Departments of State, Defense, and the Treasury, and the Bureau of the Budget and AID, July 18, 1962, attached to the source text, this NSAM was originally distributed as an unnumbered memorandum to the Cabinet Committee on the Balance of Payments, but it was then decided to include it unchanged in the NSAM series (except for the addition of a subject heading) and given additional distribution. A copy of the original memorandum, July 16, is attached to the source text.
1. Reference is to McNamara’s July 10 memorandum; see Document 13.
2. Printed from a copy that bears this typed signature.