Foreign Relations of the United States, 1951, European Security and the German Question, Volume III, Part 1

740.5/6–2151

Memorandum of Conversation, by the Director of the Office of European Regional Affairs (Martin)¹

top secret

[Washington,] June 21, 1951.

Subject: Meeting the MTDP Gap—ISAC D–4/7a²

Participants:	State—Secretary Acheson
	Mr. Battle
	E. M. Martin
	Defense—General Marshall
	General Bradley
	Vice Admiral Wright
	Colonel Beebe
	Office of the Special Assistant to the President—Mr. Lincoln Gordon
	Treasury—Under Secy. Foley
	Mr. Willis
	Mr. Bronz
	ECA—Mr. Bissell
	Mr. Halaby
	Bureau of Budget—Mr. Lawton

The Secretary of State outlined the contents of the ISAC Document. He indicated that it raised major policy issues on which it was desired to secure governmental agreement, including approval of the President as necessary. This was urgent in order that testimony on foreign aid legislation, scheduled to start the following Tuesday, could cover the points at issue, and in order that action could be taken promptly in the Standing Group to secure agreement on meeting the total force requirements of the MTDP.

Secretary Marshall indicated he felt it important that we should now find out what others are prepared to do on forces and that we should tell Congress that we will need at least 17 billion in the next two years. He then asked General Bradley to express his views since he would have to leave shortly.

General Bradley indicated, on the basis of his recent trip abroad, that he was reluctant to press the Europeans for too much now. The present price-wage problem was serious in the European countries and might open the door for Communist sabotage. Six months or a year from now we might be able to ask for and get a great deal more than we could now. He suggested we might let the situation drag a bit, since in six months or a year we could judge much more accurately what they can really be expected to do.

On the other hand, General Bradley realized that the timing problem was serious. The JCS was not too worried about the rest of 1951, somewhat more, but not too much, worried about 1952, but 1953 and 1954 were dangerous years. Postponement of progress on the MTDP was, therefore, a serious matter both with respect to forces and money. The countries need advance notice for long-range planning. Perhaps we could deal with governments, and not tell the people what is involved since it might be too great a shock to them at this juncture.

Secretary Marshall suggested that perhaps we should proceed with the military planning but on a military basis only and postpone an attempt to resolve the financing and production problem at this point. If the matter were handled this way in the NATO, it might be handled with the Congress on the basis of saying we will need as much in 1953 and 1954 as we asked for in 1952, and maybe more. It is very difficult to calculate just what the cost will be in the future to the U.S.

Under Secretary Foley said he had talked only briefly with Secretary Snyder but that the Treasury was greatly concerned with the problem of the gap. They had the impression that there was a ceiling on what the Europeans could be asked to do but none on what the U.S. tax payer could be asked to do. It was now anticipated that the U.S. would have a 3 billion surplus at the end of this fiscal year. If no tax bill is passed, the deficit which will have to be covered by borrowing in the coming fiscal year will be 10.5 billion. If the bill is passed, it will be only 3 to 3.5 billion, but the prospects for passage now appear precarious. Raising the problem of the gap with Congress at this time may threaten the passage of the tax bill. It would be very helpful if any discussion of the problem could be postponed until after the House has acted on the tax bill, which may be in a day or so, and until after the Senate has acted, which may be some time later.

Mr. Bissell expressed agreement with General Bradley that a three-year forecast is not a precise estimate. The figures given did not represent a physical limit on what could be done, particularly in the field of military production. The limit here is rather raw materials and financing. The latter is important because of the large amounts that must be spent for maintenance and support of troops. The overall limit is the general political, economic and financial situation which determines how much can be made available for defense purposes in national budgets.

From this standpoint, however, the estimates contained in the document are generous. In discussions with U.S. representatives in Europe there was a general view that the ECA figures were definitely on the optimistic side. Barring another war, there is not much real hope that these figures can be exceeded.

Mr. Bissell expressed, on behalf of the ECA, a desire that there be an opportunity for ISAC to comment on the JCS proposals for distribution of the gap by countries before they are submitted to the Standing Group. He indicated he understood such comment had been requested by the JCS. He proposed that there be a study, country by country, of the political and economic implications of the military proposals, indicating those countries which appeared on the whole over-loaded and perhaps those which might be under-loaded, but leaving it up to the JCS to draw the necessary conclusions about possible shifts in assignments. He thought the ECA views could be ready Friday or Saturday and ISAC action completed by Monday night.

Secretary Acheson asked if this could be done without any delay in the plan of Secretary Marshall to submit the proposal to the Standing Group. Mr. Bissell thought if it were done by the end of the day on Monday, this would not represent any serious delay.

Admiral Wright expressed the view that it was desirable to modify the proposals before presenting them rather than to make general qualifications which would result in proposals for changes later.

Mr. Gordon expressed approval of the proposal of Mr. Bissell, indicating he understood this procedure had been contemplated all along. He also expressed the view that even if we go ahead in the Standing Group on a military basis only, the problem of financing is just as serious as manpower availability and training capacity, and it would be sure to hit us by the time summer is over as countries would be unwilling to make commitments without considering how they can be carried out. The whole approach of attempting to cost the plan, to analyze the economic feasibility of it and of the countries’ commitments, was taken because of general agreement that this was the situation.

Mr. Gordon also expressed the view that it was not quite correct to suggest that there was a ceiling on European expenditures and not one on those in the U.S., since no data were available from any source, as far as he knew, on the total U.S. defense load in 1953 and 1954.

Under Secretary Foley agreed that it was only an impression left by the paper.

Mr. Gordon indicated that it was not recommended that the U.S. pick up the total check. Projections in the paper propose a 250% increase in European budgets. This is very much a sloping ceiling, requiring a great increase in effort on their part and on our part to reach.

Mr. Gordon also expressed serious doubts as to the wisdom of delaying until the tax bill was through, in that it was important to face up with our NATO partners to the task of pruning the cost of the MTDP and to tackle the various economic and production problems which would still remain.

Mr. Lawton indicated that in any force plan there were large equipment requirements. These raise problems of timing of production and assignment of production from U.S. sources. It seemed to him it might take more than the 7 percent of the U.S. output, now scheduled, to meet any of these requirements. There is a carry-over into FY 1953 now of 5 billion to be spent out of 1952 funds. 10 to 10.5 billion more will be a heavy load. To get much increase in 1953 will probably require a supplementary appropriation in FY 1952. If we don’t give out much to the Congress now about this prospect and then come back in six months, we are apt to be in real trouble on the Hill. He also pointed out that these figures are based on prices lower than present ones and the cost, therefore, may be even greater. On the other hand, it is true that unit costs are falling as rates of output increase. He wondered whether the guiding factor was military requirements, production capacity or the political problem with the Congress in determining how much U.S. assistance should be.

Secretary Acheson said he thought we had considered productive capacity as a possible limiting factor in U.S. assistance.

Mr, Gordon replied that this was in general true, that all the indications received had been that there would be ample capacity in 1953 in the U.S.

Mr. Lawton agreed but expressed the view that this was on the basis of presently planned U.S. forces.

Mr. Bissell pointed out that the proposed 15 to 17 billion aid from the U.S. leaves about 9 billion of the deficit uncovered. It seemed to him that it was optimistic to hope that screening the military requirements could cut them by this amount although he was hopeful and Defense had agreed to the figure. After all there was no specific basis for saying where this amount would come from and one must remember that in view of the price situation the deficit would be more likely to increase rather than decrease. He wondered whether we could postpone discussion of this whole problem in Congress.

Mr. Gordon thought it would probably come up almost immediately, which means that any time after Tuesday Acheson or some other witness is apt to be asked the question.

Secretary Acheson expressed the view that the issue cannot be ducked. Otherwise they will tell you you don’t know what you are doing and, in the absence of an intelligent reply, they will be right. He thought that perhaps we could help the Treasury and their people by minimizing the difficulties and by having a well-thought-through program for meeting them. Frankly he did not think that with the best efforts of our allies, and he thought we could count on that, we can expect much relief in appropriations for foreign aid and they will probably have to be even greater. What we must do with the Congress is tell them what the nature of the gap is, what we are doing about it, and that we have a plan for meeting it. Precisely how much we will have to do cannot be foreseen as there are too many variables affecting the European effort but we can say that there is a plan on which work is proceeding in the U.S. Government and in NATO. We may be able to postpone going into specific figures. By the time this question comes up the tax bill should be through the House, but Senate action is almost surely going to be much too slow to permit waiting before bringing out this issue.

Mr. Bissell suggested we might avoid saying that the bill for U.S. is apt to go up rather than down. Mr. Gordon recalled that Secretary Johnson said our last year’s MDAP cost would be going down after 1952. It is essential to correct that misleading guidance.

Secretary Acheson expressed agreement with General Bradley’s view that the greatest danger is in 1953 and 1954. He also referred to a statement Secretary Marshall had made, quoting Congressman Wigglesworth, that the European effort is at dead center and a new impulse is needed to get Europe really started and to convince Eisenhower that we have a solution, on the basis of which we can tackle an apparently insoluble problem. If it is not attacked along lines which seem likely to be successful, the effect on the international scene, including the Soviets, would be disastrous. Our own safety requires that we grasp the problem and go forward to solve it. There have been many adverse factors but they may be behind us. The French elections held us up in Germany and on other matters. The very small majority by which the present Government is in power in the UK has been a handicap but Ambassador Gifford now thinks prospects of elections have faded and the present government is ready to be more firm. This has already been reflected in their position in the Paris Deputies’ talks. In the U.S. we have had considerable turmoil with respect to international policies in the course of the winter and spring which may now be past. Provided the Kem Amendment³ does not destroy us, there is a real chance for us to step forward.

Secretary Marshall emphasized that we are buying European manpower in place of U.S. manpower in the interest of the defense of the U.S. The European people have real economic problems resulting from the war. They have lost great numbers of men and they have a difficult Communist vote problem. In helping them solve these problems and get ahead with the defense effort with U.S. assistance, we are defending the U.S.

It is essential that we not mislead the Congress on possible costs and we must make clear that they will be as heavy or heavier hereafter. Secretary Marshall thought we should restate more positively what our plan is and what commitments we have. The divisions required for 1952 are all committed. We can and should explain to Congress that we have yet to secure commitments, and are now going after them for those required by 1954. We must, by this course, back Eisenhower, or frankly give up supporting him. We already have an investment and it does not seem good policy to abandon it.

Secretary Marshall also laid great stress on the need for making clear that the problem of the Europeans in terms of standard of living is wholly different from the U.S. situation. A five percent cut to the Europeans is the difference between white bread and black bread on the table; for us it is the difference between having radios and televisions, etc. It is also essential to make clear what a great loss to U.S. security the loss of the industrial potential of the Ruhr and of Eastern France would be.

Secretary Acheson outlined what he thought was needed in order to get ahead on this problem. First, the Standing Group should receive the JCS proposed gap distribution after comments of other agencies have been received and considered. These comments should be submitted by the first of the week. There did not seem to be in this operation any decision to be made by the President.

This was agreed by those present.

Second, if they accept these additional commitments, we have obligations to supply the equipment which must come from the United States. But this obligation is inherent in the Medium Term Defense Plan as a whole, which we have accepted as U.S. policy, and therefore no problem for the President arises.

Third, there may be a point for the President to consider if in the course of discussions with other governments it seems proper for the U.S. to assume some additional portion of force requirements under the plan, after all the water has been squeezed out and we have asked them to do everything they can.

Fourth, there is also the question of whether this paper (ISAC D–4/7a) should go to the NSC or to the President directly for his approval of the course of action outlined therein and, in particular, the statement proposed to be made about future U.S. economic and military assistance.

Mr. Bissell suggested that the JCS allocation of the gap involves certain additional U.S. force commitments. The wisdom of these proposals are not up for decision here. We are dealing with the other side of the picture; namely, what additional economic and financial aid is required from the U.S. to implement the gap.

Secretary Marshall queried whether the NSC had not approved the MTDP specifically. Mr. Gordon thought it was approved only in general terms. Mr. Martin suggested that by implication NSC 68⁴ gave approval to it.

Secretary Marshall expressed the view that a question at issue now in connection with the JCS gap allocation is one involving additional commitments of U.S. forces at this time. Secretary Acheson called attention to the fact that the allocation of the previous six divisions had been cleared with the President he thought, but he was not sure in what way. Mr. Martin indicated he thought the joint letter from Acheson and Johnson dealing with the German problem⁵ also recommended the allocation of six divisions, and that the proposal was approved by the Presidential approval of this letter. Secretary Acheson then expressed the view that any new allocations should be cleared with the President in a similar way.

Mr. Gordon expressed the view that whether the NSC is used or not depends on timing. Mr. Nitze had estimated once that any new proposals going through the NSC would take three weeks as a minimum. If you can delay that long, that is the proper procedure. Otherwise, if the President can see the whole scheme at once, it might be preferable for Acheson and Marshall to take it up directly. Mr. Bissell expressed the view that there really was not time before we had to speak in Congress and that factor must control our course of action.

Secretary Acheson agreed with this. He felt that with hearings on Tuesday, the President should be approached this week. He suggested that perhaps Mr. Snyder would like to go along. Mr. Foley agreed. Mr. Foley also thought that Mr. Snyder might like to talk directly to Acheson and Marshall in advance.

Secretary Acheson said he thought what was needed now was a paper on what to say in Congress which could be presented to the President for his approval. It would need to be discussed with the President by Marshall, Foster, Snyder and himself before Monday. Perhaps arrangements could be made for Friday afternoon when Mr. Foster might be back. Mr. Bissell thought not but was satisfied with the proposed procedure. Secretary Acheson asked Mr. Lawton whether he would like to be present. Mr. Lawton said he thought he would be out of town. Mr. Foley suggested it might be done after the Cabinet meeting on Friday.

Secretary Acheson asked Mr. Martin if he could, on the basis of the discussion, prepare such a statement, consider it with representatives of the other agencies, and have it in time for the Cabinet meeting. Mr. Martin agreed to try.⁶

The meeting adjourned.

1. This memorandum was prepared on June 23. A handwritten notation on the source text indicated that copies were sent to Cabot, Perkins, and Spofford.
2. Supra.
3. For documentation on this legislation concerned with the limitation on economic assistance to countries trading with the Soviet bloc, see vol. i, pp. 993 ff.
4. For this paper, entitled “U.S. Objectives and Programs for National Security,” April 14, 1950, see Foreign Relations, 1950, vol. i, pp. 234 ff.
5. The reference here is to a memorandum addressed to President Truman on July 30, 1951. For text, see p. 849.
6. No record of further action on the preparation or use of this proposed statement has been found in the Department of State files.