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    "title": "National Security Council Report 68/1, Report to the National Security Council by the Executive Secretary on United States Objectives and Programs for National Security",
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    "ocrText": "The President NC 5(PSF/NSC)\n689\nTOP SECRET\nNSC 68/1\nCOPY NO. 1\nPager\nA REPORT\nTO THE\nNATIONAL SECURITY COUNCIL\nby\nTHE EXECUTIVE SECRETARY\non\nUNITED STATES OBJECTIVES AND PROGRAMS FOR NATIONAL SECURITY\nSeptember 21, 1950\nNSC DECLASSIFIED LIST 2.15.79\nWASHINGTON\nBYNLT-ACNARS, Date 4-17-79\nTOP SECRET\nWARNING\nTHIS DOCUMENT CONTAINS INFORMATION AFFECTING THE NA-\nTIONAL DEFENSE OF THE UNITED STATES WITHIN THE MEANING OF\nTHE ESPIONAGE ACT, TITLE 18, U.S.C., SECTIONS 793 AND 794. ITS\nTRANSMISSION OR THE REVELATION OF ITS CONTENTS IN ANY MAN-\nNER TO AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW.\nNSC 68/1\nTOP SECRET\nSeptember 21, 1950\nNOTE BY THE EXECUTIVE SECRETARY\nto the\nNATIONAL SECURITY COUNCIL\non\nUNITED STATES OBJECTIVES AND PROGRAMS FOR NATIONAL SECURITY\nReferences: A. NSC Actions Nos. 351, 350-b, 342-b, 326,\n321, 307, 304, 302, 295 and 289\nB. NSC 68\nC. Memo for NSC from Executive Secretary,\nsubject: \"Intelligence Requirements\nand Mobilization\", dated August 8, 1950\nD. Memo for NSC from Executive Secretary,\nsame subject, dated September 6, 1950\nThe enclosed tentative response to the President's directive in\nNSC 68, prepared by the NSC Staff with the advice and assistance of\nthe Ad Hoc Committee on NSC 68 and of representatives from the Pres-\nident's staff, the Economic Cooperation Administration, the Bureau\nof the Budget, and the Council of Economic Advisers, is submitted\nherewith for consideration by the National Security Council, the\nSecretary of the Treasury, the Economic Cooperation Administrator,\nthe Director, Bureau of the Budget, and the Chairman, Council of\nEconomic Advisers.\nThere is also being circulated separately, for information in\nconnection with this response, a set of ten related annexes, prepared\nby the respective departments and agencies as indicated in each annex.\nIt is suggested that the enclosed report (Parts I. II, III and\nIV), in the form adopted, be submitted to the President with the rec-\nommendations that he:\na. Approve the enclosed report as a tentative basis for\nproceeding with the initiation of the programs described therein,\nwith the understanding that there will be continuous review and\nrevision of the specific elements and costs of the various pro-\ngrams and that further study will be made of the availability of\nphysical materials and of the problems involved in effecting\ntheir proper distribution.\nb. In the light of the enclosed tentative report, approve\nthe Conclusions contained in the report by the Secretaries of\nState and Defense (pages 60 through 65 of NSC 68) as a state-\nment of current U. S. policy to be followed over the next four\nor five years.\nNSC 68/1\n- i -\nTOP SECRET\nTOP SECRET\nc. Direct the National Security Council, together with\nthe Secretary of the Treasury, the Economic Cooperation Admin-\nistrator, the Director, Bureau of the Budget, and the Chairman,\nCouncil of Economic Advisers:\n(1) To keep the enclosed tentative report under con-\ntinuing review and to submit revisions thereof to the\nPresident when appropriate, and specifically to submit an\ninitial revision not later than December 15, 1950.\n(2) To submit to the President quarterly progress re-\nports, beginning on December 15, 1950, on the implementa-\ntion of the programs described in Annexes 1 through 7.\n(3) To submit to the President, at the earliest prac-\nticable date, agreed recommendations as to U. S. policies\non the subjects covered in Annexes 8 through 10.\nIt is further suggested that, if the President approves the above\nrecommendations, the National Security Council direct the senior NSC\nstaff, with the assistance of the Ad Hoc Committee on NSC 68 and the\nparticipating departments and agencies, to prepare for Council con-\nsideration the draft reports required in response to recommendation\nc above.\nIt is requested that this report be handled with special secur-\nity precautions, in accordance with the President's desire that no\npublicity be given the NSC 68 series without his approval, and that\nthe information contained therein be disclosed only to the minimum\nnumber of officials of the Executive Branch who need to know.\nJAMES S. LAY, JR.\nExecutive Secretary\nCC: The Secretary of the Treasury\nThe Economic Cooperation Administrator\nThe Director, Bureau of the Budget\nThe Chairman, Council of Economic Advisers\nNSC 68/1\n- ii -\nTOP SECRET\nTOP SECRET\nTABLE OF CONTENTS\nPage\nI. Introduction\n1\nII. Tabulation of Cost Estimates\n12\nIII. Brief Description of Programs\n14\nIV. The Economic Implications of the Proposed\nPrograms: Required Fiscal, Budgetary, and\nOther Economic Policies\n19\nANNEXES\n(Circulated Under Separate Cover)\nNo. 1. The Military Programs\n(Prepared in the Department of Defense,\nexcept for MDAP, which was prepared in\nthe Department of State)\nNo. 2. The Economic Assistance Program, In-\ncluding both Grants-in-Aid and Loans\n(Prepared in the Department of State\nand the Economic Cooperation Adminis-\ntration)\nNo. 3. The Civilian Defense Program\n(Prepared in the National Security\nResources Board)\nNo. 4. The Stockpiling Program\n(Prepared in the National Security\nResources Board)\nNo. 5. The Information Program\n(Prepared in the Department of State)\nNo. 6. The Intelligence and Related Programs\n(Prepared in the Central Intelligence\nAgency)\nNo. 7. The Internal Security Program\n(Prepared in the Interdepartmental In-\ntelligence Conference and the Interde-\npartmental Committee on Internal Security)\nNSC 68/1\nTOB SECRET\n- 111 -\nTOP SECRET\nTABLE OF CONTENTS (Cont'd)\nNo. 8.\nLong-term Political and Economic\nFramework\n(Prepared in the Economic Coopera-\ntion Administration and the Council\nof Economic Advisers)\nNo. 9.\nOrganization for Coordinating\nNational Security Policies and\nPrograms\n(Prepared in the Bureau of the\nBudget)\nNo. 10. The Economic Implications of the\nProposed Programs: Required Fiscal,\nBudgetary, and other Economic Poli-\ncies\n(Prepared in the Council of Economic\nAdvisers)\nAppendix to Annex No. 10. Technical Assump-\ntions and Analysis Underlying the Economic Pro-\njections for 1950-1955\n(Prepared in the Council of Economic Advisers)\nNSC 68/1\nTOP SECRET\niv\nDRAFT\nTOP SECRET\nTENTATIVE REPORT BY THE\nNATIONAL SECURITY COUNCIL\non\nUNITED STATES OBJECTIVES AND\nPROGRAMS FOR NATIONAL SECURITY\nPart I\nINTRODUCTION\n1. The invasion of the Republic of Korea, which occurred while\nthis tentative response to the President's directive in NSC 68 was in\npreparation, has amply demonstrated both the nature of the Soviet\nthreat to the United States, and the willingness of the communist\nleaders to employ force to achieve their objectives as delineated\nin NSC 68, even at the risk of global war.\n2. The programs which have been initiated pursuant to the Pres-\nident's message to the Congress of July 19, 1950, constitute an ini-\ntial implementation of the long-term United States build-up as well\nas of specific measures to meet the situation in Korea.\n3. The invasion of Korea imparts a new urgency to the appraisal\nof the nature, timing, and scope of programs required to attain the\nobjectives outlined in NSC 68. The ending of the Korean operation,\nhowever, will not appreciably affect these estimates. As stated in\nthe President's message, the nature of this attack has removed any\ndoubt as to the willingness of the communist leaders to employ force,\nprepared in stealth and delivered with surprise, in disregard of in-\nternational commitments and without provocation. The commitment of\nUnited States forces as a part of the United Nations forces to defeat\nNSC 68/1\n- 1 -\nTOP SECRET\nTOP SECRET\nthis local act of aggression has reduced the capability of the United\nStates to react locally in the event further acts of local aggression\ntake place. The demonstrated effectiveness of the equipment and\ntraining of the North Korean forces in combat has necessitated an\nupward revision of our previous estimates of Kremlin-dominated mil-\nitary capabilities.\n4. The invasion of Korea reinforces the validity of the follow-\ning position taken in NSC 68: \"Frustration of the Kremlin design re-\nquires the free world to develop a successfully functioning political\nand economic system and a vigorous political offensive against the\nSoviet Union. These, in turn, require an adequate military shield\nunder which they can develop. It is necessary to have the military\npower to deter, if possible, Soviet expansion, and to defeat, if nec-\nessary, aggressive Soviet or Soviet-directed actions of a limited or\ntotal character\nIn summary, we must, by means of a rapid and\nsustained build-up of the political, economic, and military strength\nof the free world, and by means of an affirmative program intended to\nwrest the initiative from the Soviet Union, confront it with convinc-\ning evidence of the determination and ability of the free world to\nfrustrate the Kremlin design of a world dominated by its will. : Such\nevidence is the only means short of war which eventually may force\nthe Kremlin to abandon its present course of action and to negotiate\nacceptable agreements on issues of major importance.\"\n5. There are important corollaries of this position:\na. The build-up of military strength in the free world\nshould be accomplished with the utmost urgency and should\nNSC 68/1\n- 2 -\nTOP SECRET\nTOP SECRET\nprovide the necessary military shield on a continuing basis to\nbe maintained during whatever period the threat of Soviet ag-\ngression persists. Any other basis for our effort would impair\nthe prospect of securing a retraction of Soviet power without\nresort to war.\n(1) The urgency of the military build-up is due both\nto the risks of local aggression at new points, and the pos-\nsibility of a general surprise attack simultaneously upon\nour allies and ourselves.\n(2) Our present military situation in Korea leaves no\nadequate margin of strength, and should there be additional\ninstances of local aggression we would be in no position to\ntake effective local action. In other words, our present\nmilitary strength is grossly inadequate to protect our vital\nnational interests. The longer we remain in such a position\nthe greater are the risks of events progressing toward gen-\neral war, or of our being faced with the necessity of sur-\nrendering areas or principles vital to our survival.\n(3) Furthermore, there are indications that the USSR\nand its satellites are undertaking urgent programs of air-\nfield construction, building up of advanced depots of sup-\nplies, and stockpiling with deadlines which make it appear\nprobable that they are getting in a position to undertake\noperations in 1951 or 1952 involving a far more serious risk\nof war than the Korean aggression.\nNSC 68/1\n- 3 -\nTOP SECRET\nTOP SECRET\n(4) There also are indications that early developments\nin the Korean situation shook the confidence of our allies\nin U. S. ability to assist in repelling aggression. Since\nthe build-up of strength contemplated in the U. S. programs\nis a joint effort, urgent steps by the United States to\ncarry forward our part of the plan are necessary to restore\nand maintain confidence and stimulate a proportionate effort\nby our allies.\nb. The military strength of the United States and cooperat-\ning countries should be built up to provide readily available\nforces that will:\n(1) Act as a deterrent against further Soviet or\nSoviet-inspired aggression.\n(2) Be able to participate in appropriate United Na-\ntions enforcement action in case of Soviet or Soviet-\ndirected aggression of a limited character, subject to the\nconsiderations set forth in sub-paragraphs d and e of this\nparagraph.\n(3) Meet a global war.\nc. It must be pointed out that the brief descriptions of\nthe military programs which are set out in Part III of this Re-\nport may be construed as being in conflict with the provisions\nof the section of NSC 68 which states: \" that it is necessary\nto have the military power to deter, if possible, Soviet expan-\nsion and to defeat, if necessary, aggressive Soviet or Soviet-\ndirected actions of a limited or total character.\" If this\nNSC 68/1\n- 4 -\nTOP SECRET\nFOR SECRET\nparagraph in NSC 68 be interpreted to mean that our military\npower must be such as to be able to defeat Soviet or Soviet-\ndirected actions in any theater which the Soviet would choose,\nwithout using the ultimate sanction of war against Russia it-\nself, then the military programs set out in Part III hereof and\nthe cost estimates based thereon are not responsive to the pol-\nicies set forth in NSC 68. However, in determining the military\nrequirements which have been used as a basis for the cost esti-\nmates contained herein, the Department of Defense has proceeded\non an interpretation of NSC 68 involving the following bases:\n(1) The United States should have a military strength\nsufficient to meet her two fundamental obligations:\n(a) Protection against disaster.\n(b) Support of our foreign policy.\n(2) That in order to meet these two fundamental obliga-\ntions the following basic tasks are envisaged:\n(a) To provide a reasonable initial defense of the\nWestern Hemisphere and essential allied areas, particu-\nlarly in Europe.\n(b) To provide a minimum mobilization base while\noffensive forces are being developed.\n(c) To conduct initial air and sea offensive oper-\nations to destroy vital elements of the Soviet war-making\ncapacity and to check enemy offensive operations until\nallied offensive strength can be developed.\nNSC 68/1\n- 5 -\nTOP SECRET\nTOR SECRET\n(d) To defend and maintain the lines of communi-\ncation and bases necessary to the execution of the\nabove tasks.\n(e) To provide such aid to our allies as is essen-\ntial to the execution of their responsibilities.\n(3) These estimates do not include additional require-\nments which are certain to develop in the field of guided\nmissiles.\n(4) The existence of the forces recommended herein\nwill not insure that the United States will be secure\nagainst attack by air or unconventional means. Furthermore,\nthe forces recommended by the Department of Defense will not\nbe adequate to defeat the probable enemy unless augmented by\nthe full mobilization of the United States and her allies.\nIt is believed, however, that the forces recommended will\nmaterially assist in the maintenance of peace.\nd. The defense of Europe, in conjunction with the NATO pow-\ners, and the defense of the Western Hemisphere are essential\nelements in present planning to meet the contingency of a global\nwar. With the forces recommended it would be possible to make\navailable limited forces from the U. S. military establishment\nto participate in possible United Nations enforcement action to\nmeet aggressive Soviet or Soviet-directed action of a limited\nlocal character, although this might result in some increase\nin the calculated risks in the event of global war. Whether\nthese forces, in conjunction with available forces of our allies,\nNSC 68/1\n- 6 -\nTOP SECRET\nTOP SECRET\nwould be able to defeat such aggressive Soviet or Soviet-\ndirected action of a limited local character would depend upon\nthe extent of the forces which would be made available to re-\nsist such action, as well as the extent of the forces which the\nSoviet and those whom they direct might make available in such\naggression. Action against local aggression also requires an\nincrease in the capacity and will to resist in the areas sub-\nject to such aggression, and the full cooperation (political,\nmilitary, and other) of all members of the Community of Nations\nwhich oppose aggression.\ne. Aggressive Soviet or Soviet-directed action might be of\nsuch magnitude or in such an area or areas around the periphery\nof the USSR that the force requirements covered hereby will not,\neven in conjunction with the forces of cooperating countries,\nprovide a basis to defeat the aggression. Attempt to defeat\nsuch Soviet-directed action would seriously dissipate our\nstrength without ever involving the USSR directly, the one na-\ntion which holds the power of decision.\nf. Our degree of effectiveness to meet the various possible\nactions outlined above is directly related to the time we have\nto effect our build-up.\n6. The following programs are expressed in dollars. Spending,\nhowever, is only one of the means necessary to a realization of the\nends. Of more fundamental importance are a heightening of will and\neffort and the development of organization and procedures among our\nallies and between our allies and ourselves to insure that the re-\nsults sought will be achieved.\nNSC 68/1\n- 7 -\nTOP SECRET\nTOP SECRET\n7. The requirements include adequate organization among the\nnations concerned and adequate management within them. Precision\nand responsibility in planning and execution of policies are now de-\nveloped in varying degrees among the various nations involved in\nthese joint programs. Along with material assistance the United\nStates must be prepared to give guidance to such recipients as will\nneed it in order to make the material assistance effective. The\nUnited States must be ready to insist upon and assist in the devel-\nopment of standards of performance in the degree necessary to insure\nsuccess. In a struggle in which ideas and principles play an equal\npart with guns and butter, such imponderables are as indispensable\nto the accomplishment of the fundamental purpose of the United States\nas are the tangibles with which this report principally deals.\n8. Aid pumped abroad without regard for the factors of manage-\nment and organization would at best be vain and at worst harmful.\nAn alert regard for opportunities to encourage and give effect to\nthe willingness of others to do their part must guide foreign assist-\nance. Not with our efforts alone but with their efforts as well,\nproperly organized, and conducted in accordance with advanced methods\nof control, will we jointly provide the desired results--the develop-\nment of strength adequate to free the world from the threat of ag-\ngression. If such efforts on the part of other free nations are not\nforthcoming, there would have to be a general reappraisal of our\nover-all policy. It will be essential, therefore, to assure that\nthe effort of our allies keep pace with our own and that the\nNSC 68/1\n- 8 -\nTOP SECRET\nTOP SECRE\nsharing of the burdens imposed by the rearmament effort be equitable.\nMachinery for this latter purpose will also be required.\n9. It must be emphasized that the programs and estimated costs\nin the following tabulation are not final. In the critical, complex,\nand rapidly changing international situation, it is impossible to\nblueprint the specific steps and the costs involved. It is our in-\ntention to keep the problem of NSC 68 under continuous scrutiny. But\nthe course we must take and the magnitude of the effort required are\nclear. The principal value of these first estimates is that they\nfurnish a starting point for the major effort essential to our na-\ntional security and to our national objectives.\n10. Time has not permitted a thorough examination of the mater-\nial requirements necessary to effect the several programs outlined\nhere in terms of the timetable for which they are scheduled. It is\nclear, however, that these programs will be competing among them-\nselves and with civilian demands both here and throughout the non-\nSoviet world. Physical limitations of supply will necessitate deci-\nsions both as to the relative importance of the elements in the sev-\neral programs and as to their timing. This will mean that, in addi-\ntion to machinery already in existence for domestic allocation of\nmaterials, organization for global allocation of materials and the\nstabilization of their prices will have to be established within the\nnext few months. Such machinery would have to reconcile the compet-\ning demands for scarce materials for the civilian economies of the\nUnited States, our European allies, and the rest of the non-Soviet\nworld, on the one hand, with the military and stockpile requirements\nNSC 68/1\n- 9 -\nTOP SECRET\nTOP SECRET\nfor the U. S. and its allies, on the other. Such machinery would in\nfact have to perform all of the functions which were performed in\nthe last war by the combined materials, production, and munitions\nassignment boards.\n11. It will be essential to assure that neutrals acquire a fair\nshare but no more of the available critical materials and other\ngoods. In this connection, it should be noted that it will also be\nnecessary to limit or deny the Soviet world's access to scarce essen-\ntials, and this problem will raise again in acute form the general\nissues of East-West trade discussed in NSC 69/1.\n12. During the first two or three years of a military build-up\nthe risk of global war within that period may be increased. This\nrisk must be accepted, since the alternative is to abandon the at-\ntempt to wrest the initiative from the USSR and accept piecemeal\ndefeat at the hands of the Kremlin.\n13. Furthermore, attainment of the military strength contem-\nplated by these programs will not in itself eliminate the threat\nposed by the USSR and assure the achievement of U. S. objectives as\noutlined in NSC 68. The military build-up is a shield behind which\nwe must deploy all of our non-military resources in the campaign to\nroll back the power of the USSR and to frustrate the Kremlin design.\nThe United States must at the same time, both by its actions and de-\nmeanor, make clear to all that it has no aggressive intentions; that\nit is not threatening the security or independence of any peaceful\ncountry. The United States must also convince the other free nations\nNSC 68/1\n- 10 -\nTOP SECRET\nTOP SECRET\nthat this program is the only way, so long as the USSR continues its\npresent policies and practices, to achieve eventually a peaceful and\nprosperous world.\n14. For the citizens of the United States and its allies, this\neffort will involve heavy sacrifices. The citizens of the free world\nwill be accepting temporarily a sacrifice in their standards of liv-\ning to make secure their right to live by free standards.\nNSC 68/1\n- 11 -\nTOP + SECRET\nTOP SECRET\nPart II\nTABULATION OF COST ESTIMATES\n15. The estimates in the following tabulation represent\na reasonable approximation of the scope and magnitude of the\nprograms required by NSC 68 as a basis for their initiation,\nalthough it should be clearly understood that:\na. The individual programs in the tabulation have\nnot yet been fully developed, examined in detail, or\nappraised jointly as a balanced total program by the de-\npartments and agencies concerned.\nb. They would compete with the civilian economic\nneeds of the United States and other friendly countries\nand with each other for many items in short supply.\nc. It would be essential to set up domestic and\ncombined machinery to determine the allocation of scarce\nresources as between these competing purposes.\nNSC 68/1\nToΓ SECRET\n- 12 -\nTABULATION OF COST ESTIMATES PREPARED BY THE VARIOUS DEPARTMENTS AND AGENCIES (in Billions of Dollars)* *\nTOP SECRET\nFISCAL YEARS\n1951\n1952\n1953\n1954\n1955\nOBL\nEXP\nOBL\nEXP\nOBL\nEXP\nOBL\nEXP\nOBL\nEXP\nU.S. ARMED FORCES\n54.032**\n28.128**\n44.540\n42.767\n44.500\n47.346\n43.270\n46.042\n35.543\n39.583\nMDAP\n5.200\n.950\n5.500\n3.700\n5.900\n6.000\n3.600\n6.800\n3.600\n5.100\nABC***\n1.100\n1.000\n1.300\n1.300\n1.300\n1.300\n1.000\n1.100\n1.000\n1.000\nOTHER MILITARY\n1.000\n2.500\n3.000\n2.500\n2.500\n2.500\n2.500\n2.500\n2.500\nFOREIGN GRANT AND\n3.950\n3.880\n2.720\n3.570\n1.960\n2.535\n1.620\n1.850\n1.380\n1.520\nLOAN ASSISTANCE\nINFORMATION AND\n.112\n.086\n.107\n.115\n.150\n.125\n.126\n.138\n.109\n.118\nEDUCATIONAL EXCHANGE\nNET DRAIN ON EXIM -\n.230\n.250\n.300\n.290\n.270\nBANK LEADING CAPACITY\nCIVILIAN DEFENSE\n.147\n.050\n1.076\n.376\n2.354\n1.054\n1.580\n2.380\n.890\n1.000\nSTOCKPILING\n3.7\n.800\n1.500\n1.800\n.300\nINTERNAL SECURITY****\n.266\n.200\n.268\n.260\n.277\n.260\n.283\n.270\n.291\n.270\nINTELLIGENCE\nTOTAL\n69.507\n35.324\n58.811\n57.238\n59.241\n63.420\n54.179\n61.770\n45.313\n51.361\n*\nThese estimates will need to be revised to reflect price changes.\n** Includes 12.944 for support of Korea.\n*** These estimates are under review by the interested agencies and are subject to some upward revision. The increases contemplated would\nbe slight in comparison with the total amounts for all programs.\n**** These cost estimates are in addition to the sum of $495,839,510 included in the Department of Defense estimates for internal security.\nNSC 68/1\n- 13 -\nTOP SECRET\nTOP SECRET\nPart III\nBRIEF DESCRIPTION OF PROGRAMS\n16. The military programs are designed to provide U. S. forces\nin being or readily available to meet, in collaboration with our al-\nlies, the two fundamental obligations:\na. Protection against disaster, and\nb. Support of our foreign policy.\n17. The estimates of forces are based on the assumption that\nhostilities in Korea will terminate in fiscal year 1951.\n18. In arriving at these estimates of forces, with full consid-\neration of the objectives of NSC 68, the following basic tasks were\nenvisaged:\na. To provide a reasonable initial defense of the Western\nHemisphere and essential allied areas, particularly in Europe.\nb. To provide a minimum mobilization base while offensive\nforces are being developed.\nc. To conduct initial air and sea offensive operations to\ndestroy vital elements of the Soviet war-making capacity and to\ncheck enemy offensive operations until allied offensive strength\ncan be developed.\nd. To defend and maintain the lines of communication and\nbase areas necessary to the execution of the above tasks.\ne. To provide such aid to allies as is essential to the\nexecution of their responsibilities.\n19. It should be realized that the forces recommended herein:\nNSC 68/1\n- 14 --\nTOP SECRET\nTOP SECRET\na. Will not insure that the United States will be abso-\nlutely secure against attack by air or unconventional means.\nb. Will not be adequate to defeat the probable enemy unless\naugmented by full mobilization of the United States and her al-\nlies.\nc. Will not be adequate to defeat either simultaneously or\nin sequence aggressive Soviet or Soviet-directed actions in So-\nviet-selected areas around the periphery of the USSR, although\nthey will act as a deterrent to further Soviet or Soviet-inspired\naggression.\n20. The magnitude and phasing of the MDAP indicated in this re-\nport are designed to provide our allies such aid as is essential to\nthe execution of their responsibilities in the accomplishment of the\ntasks outlined herein. The planning on which these estimates must\nbe based is in the course of early major revision and may well re-\nsult in showing an increase in requirements.\n21. The military equipment and supplies to be furnished by the\nUnited States directly to European forces will be procured largely\nin the United States. About 75 to 80 percent of the anticipated vol-\nume of obligations for the furnishing of military equipment directly\nto the military establishments of eligible MDAP countries is esti-\nmated to be destined for the European NAT countries to build up the\ndefensive strength of the NAT area in accordance with agreed plans.\nIn addition, about six and a half billion dollars during the period\nis estimated to be required to support a European production program\nof military equipment for the European NAT countries and to provide\nNSC 68/1\n- 15 -\nTOP SECRET\nTOP SECRET\ngeneral economic support in order to assist the European NAT coun-\ntries to raise and maintain a larger number of troops in active\nservice.\n22. It must be pointed out, moreover, that the MDAP figures\nwould have to be reviewed if the number of nations receiving assist-\nance is increased or if the information obtained by the Joint Defense\nMission now in Southeast Asia indicates a requirement for assistance\nbeyond that now envisaged.\n23. Our political actions and economic programs are designed to\ndevelop a successfully functioning political and economic system and\na vigorous political offensive against the Soviet Union. U. S. eco-\nnomic aid to other countries seeks to create economic conditions that\nwould build the strength necessary to support the defense effort, and\nto prevent the coming to power of communist or seriously hostile gov-\nernments. The necessity for close coordination of economic and mili-\ntary programs is obvious.\n24. The basic policy recommended in NSC 68 calls for:\na. The building of a military shield by the United States\nand its allies designed to deter Soviet aggression.\nb. A positive political and economic program designed to\nwin the whole-hearted support for the West of accessible non-\ncommunist-controlled regions.\nc. A program ultimately to roll back the area of Soviet\ndomination.\nThe programs outlined herein are directed primarily toward the first\ntwo objectives. It is the intention, as outlined in NSC 68, to\nNSC 68/1\n- 16 -\nTOP SECRET\nTOP SECRET\ninitiate as early as possible a concerted political drive, using both\novert and covert means, to roll back the perimeter of Soviet power\nand ultimately to frustrate the Kremlin design.\n25. The stockpiling program is designed to afford the United\nStates those strategic and critical materials, essential for the\nprosecution of a five-year war, which would not be forthcoming from\nU. S. wartime production and imports from accessible sources. Cur-\nrent plans are designed to have these stockpiles complete and phys-\nically on hand in the United States by 1954. In the light of in-\ncreased military requirements for certain critical materials, as re-\ncently developed, a review of certain areas of the stockpiling pro-\ngram is currently under way and may result in revision of some stock-\npile objectives.\n26. The civilian defense program should contribute to a reason-\nable assurance that, in the event of war, the United States would\nsurvive the initial blow and go on to the eventual attainment of its\nobjectives. Civilian defense programs are designed to serve to mini-\nmize casualties in the event of attack, to provide emergency relief\nimmediately after attack, and to help preserve the productive core of\nthe nation. Civil defense programs are tailored to domestic military\ndefense programs and require close and continuing coordination with\nthem.\n27. An intensification of intelligence and related activities is\nvitally necessary as a safeguard against political or military sur-\nprise and is essential to the conduct of the affirmative program en-\nvisaged in NSC 68. The intelligence and related programs projected\nNSC 68/1\n- 17 -\nTOP SECRET\nTOP SECRET\nin response to NSC 68 provide for such an intensification of effort.\nTheir effective execution will require an effective coordination of\nintelligence activities.\n28. Internal security measures, designed to meet a situation\nshort of war and to help prepare for war if it comes, are concerned\nprimarily with the major threat of Soviet-directed communist activi-\nties in the United States.\n29. Information programs are designed to be an important part of\nthe affirmative action to wrest the initiative from the USSR. They\nare planned to obtain the maximum psychological effect from the po-\nlitical, economic and military measures undertaken by the United\nStates and its allies. The first effort will be directed at creating\npsychological strength and resistance to communism in the areas and\ncountries of most immediate critical concern to the national object-\nives of the United States.\n30. Public and Congressional understanding and continuing sup-\nport of the national effort that we must undertake are essential.\nThe armed aggression in Korea has done much to create a willingness\nto take necessary measures and accept necessary sacrifices. It has\ncreated an added awareness of the gravity of the threat, but the com-\nprehension of the twofold nature of the threat, in terms of essential\nvalues as well as in terms of tangibles, remains inadequate.\nNSC 68/1\n- 18 -\nTOP SECRET\nTOP SECRET\nPart IV\nTHE ECONOMIC IMPLICATIONS OF THE PROPOSED PROGRAMS:\nREQUIRED FISCAL, BUDGETARY AND OTHER ECONOMIC POLICIES\n31. The rapidity of the military build-up and other\nproposed programs advocated in this Report is far greater than\nwas contemplated when certain policies were written into the Mid-\nyear Economic Report of the President in July. Yet the actual\nimplementation of the economic adjustment program recommended in\nmid-July has fallen far short of what was urged even then. Part\nof this has been due to delay in legislation; but it has also\nbeen due to the fact that administrative action thus far has been\nconsiderably softer than the circumstances require.\n32. Precious time has already been lost in the control of\ninflation, prices have risen sharply during the last two months,\nand widespread materials shortages are already interfering with\nindustrial production both here and abroad. Perhaps more serious\nfor the long run, almost no start has been made on the basic pro-\nduction and expansion programs which are so essential if con-\ntrols are to strengthen our economy instead of weakening it.\nThe power of the American economy enormously to expand its pro-\nduction, even more than the power to allocate more effectively\nthe resources which we now have, is the greatest single material\nasset which the free world possesses. We do not yet need full\neconomic mobilization in the sense of complete controls; we do\nneed full economic mobilization in the sense of accelerating the\nNSC 68/1\n- 19 -\nTOP SECRET\nTOP SECRET\nstep-up of our productive power, particularly through the forth-\nright expansion of capacity and output of a few key materials\nwhich are at the core of the total effort that we must make.\n33. If we are to mobilize our resources with the speed\ncalled for in the Report, if we are to justify the faith of\nother nations in our leadership in coping with world economic\nproblems, immediate, consistent and sustained action is called\nfor along the lines summarized in the following paragraphs:\n34. The major economic conclusions and policy recommenda-\ntions of this report are summarized as follows:\na. The over-all economic burden of the programs\nrecommended in this report is considerably short of that\nwhich would result from full mobilization. The rapidity of\nthe build-up envisaged, however, poses many of the policy\nproblems that would be faced in the initial stages of full\nmobilization. The immediate inflationary impact and the\nstrain on supplies in particular areas are of major pro-\nportions. Further, to reduce the burden over the longer\nrun a major immediate effort to increase productive capacity\nis essential, although this effort in itself will intensify\nsome of the immediate difficulties.\nb. The most fundamental attack on inflationary dan-\ngers must be on the tax front. Implementation of the pro-\nposed programs would result in an estimated budget deficit\neven with enactment of the pending tax bill, of about 15\nNSC 68/1\n- 20 -\nTOP SECRET\nTOP SECRET\nbillion dollars for the current fiscal year, most of which\nwould be incurred in the second half, and almost 30 billion\ndollars in the fiscal years 1952 and 1953. To eliminate\nthese deficits would require an increase of about 50 per-\ncent in the over-all level of tax liabilities under existing\nlegislation and the pending bill. Yet even achievement of\na balanced budget would by no means fully curb inflationary\npressures. Direct controls are no substitute for the maxi-\nmum feasible tax action at the earliest possible date. Such\naction is essential in order to make controls workable for\nany extended period of time, and in order to prevent the\ncontinued accumulation of latent inflationary pressure.\nc. Vigorous use - far beyond any thus far taken - of\ncontrols over consumer and real estate (housing) credit is\nessential to draw down consumer buying in the face of in-\nevitably rapid rises in personal incomes. During the first\nsix months of 1950, consumer credit expanded at an annual\nrate of 3 billion dollars. In June this rate jumped almost\nto 6 billion. Outstanding home mortgage credit has been\nexpanding at an annual rate of 6 billion, and this has been\naccelerating.\nd. Maximum use of tax and credit measures cannot re-\nmove the need for prompt use of materials controls in key\nareas through compulsory allocation, limitation and inventory\npowers. The continuance for another three or four months of\nrecent price trends in such areas would very seriously\nNSC 68/1\n- 21 -\nTOP SECRET\nTOP SECRET\nincrease the difficulty of a more general control program.\ne. In view of the inevitable delays and limitations\nof tax action, and the limited effectiveness of selective\ncredit and materials controls, full operational readiness\nshould be attained as rapidly as possible for the imposition\nof general direct controls over prices and wages. There is\ngreat likelihood that such controls over prices and wages\nwill be needed in many areas within the next few months.\nSpeed in preparation for compulsion, and full publicity,\nwill exercise a powerful restraining influence in the mean-\ntime.\nf. The development of a coherent wage policy, ad-\njusted to the need for severe restraints on consumption\nover a long period of time, when working hours and incomes\nwill be increasing substantially, is urgent. We must bal-\nance tax, credit and wage policies with the requirements of\nan effective anti-inflationary program, and at the same time\npreserve economic incentives and standards of equity. This\nis an extremely difficult problem in the context of programs\nof the size and duration recommended in this Report. It\ncalls for a major effort to promote sound collective bar-\ngaining, with the help of conferences of management, labor\nand government, before the possible invocation of wage con-\ntrols, and also thereafter.\ng. None of these controls, separately or in\nNSC 68/1\n- 22 -\nTOP SECRET\nTOP SECRET\ncombination, can dispel the need for measures to expand\ncapacity, and to channel this expansion along most-needed\nlines. Without such growth we would in the long run weaken\nunder the heavy new burdens being assumed. And because such\ngrowth takes time to accomplish, programs must be instituted\nnow even though they complicate the immediate inflationary\nproblem.\nh. Illustrative of these needs is the fact that com-\nbined military and stockpile requirements for aluminum, as\nstated in this Report, would absorb over 85 percent of\nestimated supply in peak years; for copper over 50 percent.\nThere will also be severe shortages of many other basic\nmaterials. Such greatly expanded U. S. needs for materials\nwill also have important international implications, both\nfrom the standpoint of world availability of supplies, and\nof the balance of payments positions of foreign countries.\ni. The need to expand capacity in key industries,\ncoupled with the need to reduce non-essential consumption of\nscarce materials and to give weight to questions of vulner-\nability to bombing in determining the location of new plants,\nwill require the full cooperation of government, management\nand labor. It will also require a substantial range of\ngovernmental decisions on new investment on a plant-by-plant\nbasis. This will mean, among other measures, use of acceler-\nated depreciation on the basis of individual certificates of\nNSC 68/1\n- 23 -\nTOP SECRET\nTOP SECRET\nnecessity, of allocation and limitation orders, and of credit\nsupports.\nj. The need to reduce vulnerability to bombing gives\nadded weight to the need for capacity expansion. Dispersion\ncan be more efficiently accomplished through directed growth\nthan through re-location of existing facilities.\nk. The developmental programs of the Federal govern-\nment, and of State and local governments, must also be ad-\njusted to the needs for expansion in critical areas, on the\none hand, and for the drastic reduction of non-essential\nspending and uses of scarce materials on the other. As in\nthe case of private investment, this requires a selective\napproach. The coordination of Federal, State and local\npolicies is essential.\nNSC 68/1\nTOP SECRET\n- 24 -\nTOD SECRET\nNPC may #64"
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