A: That's exactly what I'm saying, and that was the most highly classified and should have been the most highly classified fact around in those days.

A: I think at least two years.

A: I think so.

A: Of course by that time we made too many, but that's a different matter.

A: It's my recollection that it was enormous stimulus to the US economy as a whole because of the demands for all kinds of goods that the military needed. So that one industry after another found a huge demand for its product and prices were rising, and so the profits of industry were very great indeed, so there was a feeling of great well-being amongst the American business community. For those of us who were interested in the long run stability of the US dollar, now that was a serious problem: how do you overcome the inflationary aspects of this situation? And there was a, a chairman of the President's Board of Economic Advisers, was a very intelligent fellow, I forget his name now, no I can't recall it at the moment, and I talked to him about these problems and he and I agreed entirely that there wasn't any danger that the US economy would break down in the sense of not being able to produce; the problem was one of putting in - a lot of inflationary drive into the situation and it was that inflationary drive which we ought to try to counteract if we could, if we could figure out the right way to do that. So we tried and - to our minds the ideal way of doing it would have been to have had an additional series of taxes which would have taxed away the - an amount equivalent to this surplus that we were spending at such an outrageous rate.

A: (false start)

A: During that year when everything began to go badly for us, when the Russians tested their atomic bombs and the Chinese fled to Formosa and this happened and the other thing happened, the President - no, I guess the way it happened was that I in particular wrote a memorandum in the form of a Directive from the President to the Secretaries of State and, and Defense to provide him with a basic review of - US policy, in particular US defence policy in light of all the things that had happened during the last few years. And Acheson was Secretary of State and he assigned his role, or deputised me to carry the ball for him, but Louis Johnson was Secretary of Defense and he didn't want the study to be done at all. But -

A: Because he thought the recommendation would be for an increase in Department of Defense expenditures which he didn't want to have. He had promised Mr Truman when he accepted the job that he would see to it that there was no increase in the defence budget from the level at which it had been at the time that he took the office, and he thought this was a subversive plot organised by me and some of the generals to cause him to put the, to in effect break his commitment. And it was. We knew perfectly well that he was the real problem involved here and and there wasn't anybody in the Defense Department that could do anything about it, and the only people who could do anything about it were the Joint Chiefs of Staff and they were all on, all on my side and they appointed somebody to represent them who worked very carefully with me and between us we got NSC 68 drafted.

A: When we got the signatures of the Secretary of Army, the Secretary of the Navy, Secretary of the Airforce, Chairman of the Joint Chiefs of Staff, and each one of the services, of er each, each one of the, yes, of the Airforce, the Navy, the Army, Marine Corps: we had nine signatures of approval as I remember it, to the document, and more than nine, twelve or thirteen I guess. And then we sent it up to Johnson for his action and, now here he was faced with twelve or thirteen signatures of all, of all the military services and the civilian Secretaries, etc., etc. and didn't know what to do with all that. And he finally decided the best course for him to do was also to sign it. So he finally signed it, it became - he thought he could - it became a unanimous document, but it didn't in effect answer the question of who was going to buy what with what and so forth and so on. It didn't get into enough detail. I think he thought that it could be disrupted in detail even though I'd signed the document as a whole. And it did turn out we had a lot of further work to do and on to, get it all massaged and worked out so it got done what it was supposed to get done....

A: Let me just conclude the thought. The thing that really brought it fully into implementation was the attack by the North Koreans into South Korea. The moment that happened, which we'd more or less predicted might happen, we'd talked about the correlation of forces and that the Russians might act on the basis of their evaluation of that, when that happened everybody became unanimous that we needed to increase the defence budget and the defence budget was increased, not to the forty billion that we'd recommended, but to fifty billion - within a week. And so the battle was won.

A: It would have been easy for the Navy in particular to have launched an object into synchronous orbit earlier in the game than Sputnik. So, there wasn't much to it technically, we could have done it on the back of our hands if we'd wanted to, but the, it wasn't thought a very useful thing to do. But when the Russians launched Sputnik it became one of the great wonders of the world and obviously everybody began protesting, "Why the hell didn't the US Navy or somebody else do it earlier?" and "Why shouldn't one do it now?" Well of course we did do it quick. But we didn't play it enough from the public relations standpoint.

A: I mean earlier, we'd been insensitive...

CR 10028 ends