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

36. Draft Memorandum From Secretary of Defense McNamara to President Kennedy⁰

Washington, September 19, 1963.

SUBJECT

• Reduction in Department of Defense Expenditures Entering the International Balance of Payments

On July 16 you approved a series of actions designed to reduce annual military expenditures abroad by $305 million between FY 63 and FY 66.¹ At that time you asked that we consider additional actions to achieve further reductions. It is the purpose of this memorandum to list a series of moves which, if approved, will reduce annual military expenditures abroad by an additional $339 million. The total reduction in annual expenditures, between FY 63 and FY 66, will then amount to $644 million as shown in the table below.

	Original Plan	($ million) Revision of 7/16/63		Revision of 9/19/63
FY 63	$2,739	$2,739	}$305	$2,739	}$644
64	2,686	2,671		2,671
65	2,700	2,506		2,376
66	2,698	2,434		2,095
			Total reduction ($305)		Total reduction ($644)

To achieve the further annual reduction of $339 million, it will be necessary to:

Action	Estimated Annual Foreign Ex. Saving2 ($ million)
1. Return the 80 B-47 a/c from Europe to the U.S. by 4/1/65, fifteen months earlier than planned. By that date the U.S. missile force will be about three times what it is today
a. From Spain to the U.S.: 40 B-47 a/c	$16.0
b. From the U.K. to the U.S.: 40 B-47 a/c	21.3
2. Plan “multi-base” operations for selected fighter squadrons. The home bases of such squadrons would be transferred from the theaters to the U.S. Periodic “movement exercises” will be scheduled during which the squadrons will move from their home bases in the U.S. to their “forward bases” in the theaters.
a. From France to the U.S.: 3 squadrons (48 a/c)	20.6
b. From Germany to the U.S.: 4 squadrons (135 a/c)	21.7
c. From the U.K. to the U.S.: 7 squadrons (168 a/c)	32.4
d. From Japan to the U.S.: 1 squadron (18 a/c)	24.8
3. Reduce U.S. and Korean forces in Korea as recommended by the Chiefs (see Appendix A) and adjust MAP accordingly.	65.0
4. Reduce U.S. Army logistical forces in Europe by an additional 30,000 (15,000 by 7/1/64 and 15,000 more by 7/1/65). Do so by such means as reorganizing depots on functional lines and returning to the U.S. units required in Europe primarily for post-M-Day operations. USA-REUR’s strength would then total approximately 205,000.	45.0
5. Reduce by 15% U.S. personnel in U.S. military headquarters abroad.	5.0
6. Reduce foreign procurement of goods and serv-ices as follows:
a. Cut employment of foreign nationals by an additional 10% to a total of approximately 180,000 personnel.	40.0
b. Cut the foreign exchange cost of construction to $70 million in FY 66.	15.0
c. Reduce the foreign exchange cost of contractual services by an additional 4%.	15.0
d. Reduce the foreign exchange cost of petroleum to $200 million, an additional reduction of 15-20%.	35.0
e. Miscellaneous reductions.	18.0
Total Annual Saving FY 67 and Beyond	$374.83
Less: Amount Not Applicable to FY 66	35.1
Estimated Saving in FY 66	$339.7

A summary of U.S. Defense Expenditures and Receipts Entering the International Balance of Payments, after taking account of the proposed actions, is presented in Table 1. The current and proposed deployments of U.S. Air Force fighter aircraft in Europe and the Pacific are shown in Table 2.⁴

I do not believe the proposed force redeployments will weaken significantly our ability to respond to Communist aggression. The increase in the procurement of Army equipment, airlift aircraft, and fighter aircraft, and the increase in the ferry range of such aircraft have greatly increased our ability to deploy both air and ground forces from the U.S. to theaters of operation within a period of strategic warning.

In order to demonstrate the increased mobility of our forces, we expect to conduct in October a strategic mobility exercise (”BIG LIFT”) involving the deployment to Europe of an armored division and a composite air strike force. The armored division and support unit personnel will exercise with equipment already prepositioned in Europe and participate in a NATO sponsored field training exercise. The exercise will serve to test our system and to demonstrate dramatically our redeployment capabilities to our Allies and to the Soviets. We would expect periodically to undertake similar movements to the Far East. I anticipate that by the end of FY 65 we will be able to move over 200 combat-ready tactical fighters to Europe in three days.

I have consulted the Joint Chiefs of Staff with regard to the military acceptability of these measures. Their views are as follows:⁵

I recommend that you approve actions 1 through 6, and that the Secretaries of State and Defense be directed to develop and implement detailed plans for carrying out the program.

R McN

0. Source: Kennedy Library, National Security Files, Subjects Series, Balance of Payments and Gold, 8/63-9/63. Top Secret.
1. See Document 28. The President’s approval of the recommendations has not been further identified.
2. Next to the figures in items 1 a and b, 2 d, 4, and 6 a-c and e below is a handwritten “n” for “no.” These markings do not agree in every case with the decisions detailed in the memorandum for the record, Document 37.
3. Next to this figure is a handwritten “$170.0 n.”
4. For Tables 1 and 2, see the Supplement.
5. The views of the Joint Chiefs of Staff were not included in this draft memorandum.