It is vitally important in south Asia to move toward a solution of the twin problems of food and health. Both India and Pakistan have well-thought-out plans for economic development and have shown great initiative in going forward with these plans despite their very limited resources. I believe that we are justified in some continuance of aid, although at a rate below that which had been previously planned.

The programs of special economic aid planned for these areas are small in terms of the total need, but they can be of immense value, especially if they can be continued for several years.

Moving finally to Latin America, I want to state my belief that the United States in the past has too often failed to give proper attention to our good friends with whom we have had beneficial political and economic relations for so many years, and who have assumed with us collective responsibility for the defense of this hemisphere.

At present American private investment provides large amounts of capital which contribute to the improvement of economic conditions and living standards in Latin America, and we believe that private enterprise should continue to take the lead wherever it can.

However, there are certain important needs which cannot be met by private capital. In view of the importance of this area, the program being presented to you proposes a moderate increase in our assistance to Latin America.

This aid takes the form of technical assistance designed to improve living standards through diversification and increased productivity. It also includes limited military assistance to help the Latin American countries to place their military forces in a better state of readiness so that they would be able to cooperate more effectively in the defense of this hemisphere.

The total requested by this entire program is less by the amount of $1,772,000,000 than was requested by the so-called Truman budget for the fiscal year 1954. This reduction, great as it is, is not as great as many of us would like, would have liked to see, having regard to the need for a balanced budget, to restabilize our currency and, eventually, to reduce taxes.

The reduction of this program is, however, as great as, in our judgment, can be reconciled with the essential security of the United States. It. of course, may be that developments, good developments, may make unnecessary, bad developments may make impossible, the prudent spending of all of the sums here requested.

You can be confident that if that is the case, money not needed will not be spent.

We do, however, say to you that we consider that it would be imprudent and dangerous not to have available at least the sums we have requested. Indeed, it might well prove to be the case that we have not asked for enough.

In these matters it is impossible to avoid taking risks. I believe that if we have erred, we have, perhaps, erred on the side of asking for too little rather than too much.

We must not disguise from ourselves the fact that the international situation is critical. For example, all of southeast Asia is today in great peril, and if Indochina should be lost, there would be a chain

reaction throughout the Far East and south Asia. Countries, many countries, which have always looked to the Western World and, particularly, to the United States, as the source of greatest power, both material power and moral power, are beginning to wonder whether or not the center of power has not shifted from Washington to Moscow. Even in the Western World there are now Communist elements ready and eager to take power, political power, upon a platform of appeasement of Soviet communism or at least benevolent neutrality toward Soviet communism.

At this juncture there are forces at work within the United States which would result in a further abdication of leadership.

There are those who would sharply raise our tariff; there are those who would sharply cut foreign aid; there are those who would seek to impose upon our friends and allies additional restrictions upon their trade with the Communist world, even in terms of nonstrategic articles. There are those who would sharply cut the military contributions of the United States to NATO and other alliances.

If all of these things should happen, happen abruptly and suddenly, then the United States would be isolated and in the greatest danger of its entire history.

In testifying yesterday before the Ways and Means Committee I referred to the fact that the present foreign-aid program will reduce budgetary and unallocated economic aid to our principal allies. Our allies accept this in good spirit as a necessary part of a common program whereby we all try to bring our extraordinary security commitments into line with economic health.

But if we do not do all that is possible within the limits of our economic health, then our purposes will be misinterpreted and our allies will feel that their fragile economies are being subjected to multiple blows which are more than they can sustain.

It is the judgment of the President and his Cabinet and of the National Security Council, after the most intensive investigation, on the one hand, that the program here presented us is within the capabilities of the United States and consistent with moving as rapidly as possible toward a balanced budget and, on the other hand, that anything appreciably less would be dangerous to our peace and security.

I can assure you gentlemen that there is no "water" in this program to be squeezed out without taking greater risks than we believe are acceptable at the present time.

I believe this will be made apparent to you as you hear the further development of the facts through the statements to be made by Mr. Stassen, Mr. Wilson, and Mr. Humphrey.

Thank you.

Chairman WILEY. Thank you, Mr. Secretary.

The speakers have agreed among themselves that they will present the program in the following order: Next follows Harold E. Stassen, Director for Mutual Security, and after him will be heard Charles E. Wilson, Secretary of Defense, and after him George M. Humphrey, Secretary of the Treasury.

We are happy to have you with us, the Honorable Harold E. Stassen. You may carry on.

STATEMENT OF HON. HAROLD E. STASSEN, DIRECTOR FOR MUTUAL SECURITY

Mr. STASSEN. Honorable Chairmen and members of the Committees on Foreign Relations of the Senate and Foreign Affairs of the House of Representatives, following upon that clear and cogent policy statement by the Secretary of State, may I, at the opening of my remarks, express my appreciation to the Chairmen, Senator Wiley and Representative Chiperfield, to Senator George and Representative Richards, and to all the members of the two committees for the invitation to meet with you this morning.

Your thoughtful and constructive participation in the development of this crucial portion of our Nation's security program has been, and will be, of great value.

It is today my responsibility and my privilege to present for your consideration the broad outlines, the important details, the concepts, the methods, and the objectives of President Eisenhower's new mutual security program.

This program is a reflection of the philosophy and the principles of the President so often and so eloquently expressed. And, as the Secretary of State has said, the President is sending today, as we epen this presentation, a message to the Congress.

This program's objective is peace-peace with justice-peace with freedom-peace with progress.

It seeks to bring about, among the free nations, mutual strength, mutual confidence, mutual understanding, and mutual progress.

Its twin consequences will be a rapid buildup of effective defensive strength in the free world and a steady advance in the standards of living of the free peoples. It means increased security for the United States.

The program will be carried out under the direction of the President in a manner closely integrated with the total program of the Government, taking guidance on foreign policy from the Secretary of State, on defense policy from the Secretary of Defense, and, through him, from the Joint Chiefs of Staff, on financial policy from the Secretary of the Treasury, and with respect to budgetary practices from the Director of the Bureau of the Budget. It will utilize, whenever appropriate, the services and counsel of the other departments and agencies of the Government, such as the Departments of Commerce, Agriculture, Interior, and Health, Education, and Welfare.

In its administration, we will faithfully reflect the decisions of the Congress and will ever endeavor to serve the people of the United States.

With this broad outline, Mr. Chairman, may I turn to specific important details of the proposed mutual security program of 1954?

The Secretary of State has indicated that the total of new obligational authority requested in the mutual security program has been reduced from the previous 1954 budget by $1.8 billion-from $7.6 billion to about $5.8 billion.

Before discussing the several components of this total, several general statements concerning this figure seem appropriate. In the first place, it is the result both of an exhaustive review of our national security policies and of a detailed evaluation of the operation and ef

fectiveness of past and present mutual security programs. It represents the product of months of work by the National Security Council, where each of our security objectives was carefully studied, and its importance weighed in relation to the fiscal considerations that the Secretary of the Treasury will discuss with you. It reflects the findings which resulted from the careful, local studies which were recently made by special evaluation teams, comprised of nearly 60 outstanding leaders of American industry and finance, in 12 countries now participating in the program. It mirrors the experience and knowledge which were gained by the Secretaries of State, Defense, and Treasury and myself during our several trips to Europe and particularly in the course of the recent meeting of the North Atlantic Council in Paris.

In the second place, as the President has already indicated, we are hopeful, as a result of our present close and careful scrutiny of the present mutual security program, of discovering certain savings in currently appropriated funds which can be applied to reduce somewhat the presently requested authorization for new obligational authority, that is, if the savings are transferred to or to take a part of the $5.8 billion new authority.

The exact amount of any real savings can only be determined as we approach the close of the fiscal year. They depend upon the extent to which any of the specific requirements on which present programs were based have been eliminated and not replaced by new, comparable requirements, the extent to which reductions in the originally estimated prices of military equipment have occurred, and other similar factors.

In the third place, I should note in passing that the foregoing aggregate figure does not include something under $100 million in local currencies which are already, or will become, available to the United States in the form of counterpart or as contributions by other governments and which are required to carry out the program presented.

Finally, I should caution the committees that this is a tight program, as the Secretary of State has stated, and one in which no provision has been made for a number of contingent requirements which, because they are contingent, we felt should not be included. I refer particularly to possible requirements for additional economic assistance in Korea beyond the $71 million, which is included as a contribution to UNKRA (the United Nations Korean Reconstruction Agency), especially if further great increases are to be made in the ROK forces, and to the possible need for aid in averting famine in Pakistan, if that becomes a very large need, and the potential need is now the subject of a special study.

I mention these because I think it is important and right for you to know at the very outset precisely what is, and precisely what is not, included in the request for authorization which is now before you.

Within this $5.8 billion total, slightly over $4 billion is requested for mutual defense material and training.

Of this amount, approximately $2.53 billion is requested for the European area, about $1 billion for the Far East, slightly under $475 million for the Near East, and $20 million for Latin America.

Within the $5.8 billion, an additional $995 million is requested over and beyond that $4-billion figure I mentioned for mutual defense

ninancing. This portion of the program is designed to assist certain countries in Europe and the Far East in carrying out important defense objectives in a manner which will prevent their own budgets from remaining in disastrous imbalance.

Of this amount, $400 million would be utilized for the procurement of equipment, materials, and services which are required by, or are necessary for the support of, forces of France which are located in Indochina and forces of the Associated States of Cambodia, Laos, and Viet-Nam.

Of the total amount of $995 million which I referred to for mutual defense financing, $100 million is intended for the manufacture in France of artillery, ammunition, and semiautomatic weapons which are required by, and are to be delivered to, French forces assigned to the North Atlantic Treaty Organization, and another $100 million is designed for the manufacture in the United Kingdom of modern military jet aircraft required by the United Kingdom forces for the defense of the North Atlantic area.

The provision of these amounts in the manner indicated, together with $100 million which is requested to finance United States exports to the United Kingdom of certain commodities, particularly wheat, cotton, and lard, of which we have an ample supply, would have these effects:

It would mean that direct financing assistance to the United Kingdom would be cut in half from 1953 to 1954. There would be a further reduction anticipated the following year, and early termination of all such assistance is contemplated. The resulting loss in dollars for balance of payments would be partially cushioned by increasing earnings on jet aircraft production and other military materiel contracts with the United States.

But this cushioning of the balance of payments loss through increased offshore procurement earnings would not ease or assist the budget of the United Kingdom. For France, approximately 40 percent of the Indochina war would be covered by contributions in various forms from the United States.

May I reflect the situation in this manner: In both of these situations, if the average taxpayers of the United Kingdom and of France continue, as they do today, to pay slightly more taxes proportionately than the average taxpayer in the United States, then each country can-the United Kingdom and France-with able management, adjust to the new program reasonably well and effectively carry out their extensive commitments for mutual defense and national security. I am convinced, however, that the amounts recommended are the very minimum which the United States should provide, and these amounts are directly related to the essential objectives of our country as well as theirs.

Two hundred and fifty million dollars is requested for mutual special weapons planning. This is a new provision. This does not affect atomic weapons, which are controlled, as you know, by other legislation. It will include only such special weapons as the President may determine, after the study of new weapons now under way by the SHAPE command is completed. Double safeguards, we recommend, should be included in this portion of the law to insure that the security interests of the United States are served. Specifically, it is proposed that the President be responsible for determining, first, the wisdom