FOREIGN RELATIONS, 19 5 0, VOLUME I


THE ECONOMIC IMPLICATIONS OF THE PROPOSED PROGRAMS: REQUIRED
         FISCAL, BuDGETARY AND OTHER ECONOMIC- POLICIES
     (Prepared by the Chairman, Council of Economic Advisers)
  1. The top advisers to the President in the field of economic policy
have been asked to register their appraisal of the economic impact
and economic policy implications of the objectives of NSC 68/2, as
approved by the President on September 30,1950, and of the programs
submitted in support of those objectives. It is not, of course, the func-
tion of such an economic appraisal to pass judgment on the adequacy
of the recommended programs to meet the requirements of military
and foreign policy in the light of the risks and needs outlined in
NSC 68/2. If such an appraisal showed, however, that- the recom-
mended programs substantially exceeded our economic capabilities, or
wrought damage to the economy to an extent endangering our general
strength, they would clearly have to be brought into balance. Like-
wise, if such an economic appraisal showed that the recommended
programs fell substantially short of our economic capabilities, or im-
posed a burden upon the economy light in relation to the seriousness
of the clearly revealed and commonly agreed upon national danger,
that conclusion should be revealed forthrightly as one guide in
evaluating these recommended programs.
  2. Because it has not been feasible, within the time available, for
the Department of Defense to prepare procurement and expenditure
estimates in support of the force and strength targets recommended
for June 1952 and thereafter, only a few broad indications of eco-
nomic impacts can be given at this time. From such preliminary
,calculations as can be made, however, certain broad conclusions emerge
clearly.
  3. The programs submitted in the report represent a relatively brief
maximum effort toward a limited objective. The strength target of
-3.2 million men for June 1952 represents about 41/½ percent of the
total labor force, as compared with over 17 percent (12.3 million men)
during the peak of World War II, and about 61/2 percent (3.9 million
men) as of July 1, 1942. Military production at its peak would absorb
not more than 15 to 20 percent of the total steel supply, as compared
with well over 50 percent during World War II. Yet production of
ingot steel is now at an annual rate of 100 million tons, as compared
with 89 million tons in 1944. The absorption of copper would be less
than one-third of supply, as compared with two-thirds during World
War II. The absorption of aluminum would also be less than one-
third, as compared with over 80 percent during World War II.
  4. The production rates required to achieve the targets indicated
in the report would reach a peak in 1952 which would be substantially


428