NEW YORK LIFE INSURANCE COMPANY

51 MADISON AVENUE, NEW YORK 10, N. Y.

DEVEREUX C. JOSEPHS
CHAIRMAN OF THE BOARD

September 25, 1957

Dear Dr. Kissinger:

I have read with interest and enthusiasm the report of Subpanel IV of the Special Studies.

Let me state first that I am proud to be associated with this report and have no footnotes or minority opinions to put forward.

As you may know, I have recently completed a job as Chairman of a committee of 35 people of diverse interests and backgrounds. I developed some phraseology which would let everyone come in under the tent. It was successful and I was delighted to find a similar definition of consensus on page 8 of the Foreword.

I am glad to see that the section on health is played down somewhat and a little bit less emphasis on the social programs. I have a feeling that we cannot blueprint social programs as confidently as some of the economic forecasts.

If you were inclined to include any additional caveats on the impracticability of forecasts I would place a little more emphasis on the extent to which much of our future will be influenced by other countries and foreign systems. Not only will the military posture of these nations affect our national planning but so will their economic behavior. Fluctuating currencies, cartel systems, tariffs and subsidies will all reflect upon our procedures. This is stated but you may think it desirable to make it a little stronger. I do not urge this but I have a feeling it will help the reader from thinking that a theoretical forecast is a prediction that we believe will occur. Between the ideal and complete laissez faire is a middle ground of practical planning and accomplishable objectives.

From a purely personal point of view, I think I would resist the whole tentative suggestion made on page 57 of an inflation-proof avenue of saving if such a plan means repayment on a basis not fixed at the time of borrowing.

MEMORANDUM

To: Dr. Henry A. Kissinger Sept. 25, 1957

From: Charles P. Noyes

Subject: Comments on Draft Chapters I and II and Section III of Report of Panel IV

Here are some comments on three of the four papers you sent me, for whatever they're worth. I will send my comments on Chapter XIV separately - if I have any.

I like Chapters I and II very much. I think they are very well written and provide an excellent introduction to the Overall Report. I am not entirely clear yet what the structure of the Overall Report will be, so have little basis for detailed suggestions. In any case I have none.

The last Section of Panel IV's report is exceedingly interesting since in a sense it is a testing ground of the competitive claims outlined in the whole report. On the whole I think it is a good stab at a very difficult task. However, I have one serious criticism to make which I think is important. The nub of my difficulty is the very low priority which this Section gives to the national security requirements; in fact, it seems to be the lowest priority of all the conflicting claims. On Page 98 where the writer deals with possible cutbacks he blithely and without discussion reduces the national security program of 1965 to the current level while raising all other claims to a certain degree. For my money, national security gets first priority - at least for a very substantial proportion of the increases which are needed. I can't imagine placing the annual increments for social insurance or for new roads for example, ahead of some of the vitally important national security programs. Again, the whole approach to the problem of consumer requirements seems to me to involve this same lack of realization of the high priority which some of our government programs should have. On Page 87 consumer requirements is placed as the second requirement, although admittedly a somewhat flexible one. Throughout the rest of the Section consumer requirements at an annual 4% increase is taken as a first priority claim. I'm no economist, but I'll bet that, if we wanted to, we could find a way to cut back the rate of consumer increase to 3% without noticeable impact. We would certainly take far more drastic action in this direction if we ran into a new crisis. The statement at the bottom of Page 97 resisting any reduction of this 4% annual increase seems thoroughly unrealistic to me.

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The one thing that this whole Section proves to me is that if anything like the growth rate discussed in this Section takes place, the United States can very easily bear the cost of the national security programs outlined in this report. This is not said anywhere in the report, and in fact the implications are just the opposite. I would hope that some recasting of this entire Section is possible. The main thing to do in my view is to change the table on Page 98 to reflect a very much higher priority for the national security programs. I would think that something like the following would be a much better balance of the real priorities:

National Security 56.0
Public Works 15.0
Welfare 37.0
Other 23.5
131.5
Transfer Payments 38.6
Total Govt. Demand 92.9

(As a purely technical point, it is proper to use the 38.6 figure for Transfer Payments on a government expenditure budget which has been reduced from 158 to 131. The table on Page 94 would make it look as though a Transfer Payment figure of 30-31 would be the right figure to use.)

I wonder if Subpanel IV is really the proper group to tackle this question of priorities. Clearly their own economic and social claims have suffered the least in the competition. Wouldn't it be sound and perhaps also diplomatic to lift the question of assignment of priorities from this Section entirely and to hand this problem to the Overall Panel to work out? It does seem that they would be more likely to come up with a more balanced achievement of the relative importance of these various claims.

DEBEVOISE, PLIMPTON & MCLEAN

20 EXCHANGE PLACE
NEW YORK 5, N. Y.

October 2, 1957

Dr. Henry A. Kissinger
Director of Special Studies
Rockefeller Brothers Fund
22 West 55th Street
New York 19, N. Y.

Dear Henry:

In anticipation of your October 4 deadline, I am returning herewith the first 66 pages of the September 9 draft of the Subpanel IV report with my marginal comments. I am still hoping to re-write the section which I initially drafted, but I may be late on this.

I would like to flag the following policy questions which are also noted in the margin of the enclosed copy:

(1) To what extent is our present economic opportunity a "creation of a new economic environment for an entire society" or merely a continuation of a present trend? See page 9. Also, do we anticipate a society "different in kind"? See page 14. My own inclination is to believe that our economic opportunity is merely a _continuation of a trend_ of amazing economic expansion.

(2) Is it agreed that the trend of capital expenditures will continue at the huge rate visualized on page 10? It is my understanding that the past rapid increase in capital investment has leveled off very recently.

Dr. Henry A. Kissinger

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October 2, 1957

(3) Does the Panel want to stress the likelihood of a $7,500 average income?

(4) Does the Panel wish to emphasize the characterization of our hoped-for society as "a society of wealth"? See page 13.

(5) Does the Panel concur in recommending abolition of oil import quotas? See page 28.

(6) Have we really thought through the proposal for cyclical adjustment of tax rates? See page 51.

(7) Should there not be greater substantive discussion of improvement of non-Federal tax sources? See page 51.

(8) Does the Panel concur in the implication (see pages 53 and 54) that inflation is a necessary, or at least justifiable, corollary of a rise in national output?

(9) Does the Panel concur in the following policy recommendation relating to agriculture (see page 60):

"Under such a policy, payments would be made to farmers whenever prices declined below, say, 50% to 75% of indicated parity, but crops themselves would move to market at lower prices."

This sounds to me like the old Brannan Plan, and I don't recall Dr. Efferson recommending this.

(10) Does the Panel concur in the suggestion of a Cabinet post for urban affairs? According to press reports, at least one highly competent observer, whose views I respect, would oppose the creation of a Federal agency, as distinct from greater stress on state activity.

As to strategy and approach, my thought is that we have probably passed the point of arguing over a long report vs. a short report, etc., and that in the little remaining time we have left we should begin to focus sharply on the policy positions taken in the draft paper and ascertain what has been left out.

Enclosures

["Photos of the event", "Sincerely yours,", "bader and ascertain what has been felt out. I know already on the budgetary basis taken in the draft little remaining time we have felt we should begin to a long report as a short report, etc., and that in the items I respect, would oblige the creation of a Federal report, at least one fully competent operator, whose of a Cabinet post for many years. According to press this afternoon to me I like the old Bannan plan, and I don't think so.", "Agency, so distinct from greater areas on state activity, items I respect, would oblige the creation of a Federal report, at least one fully competent operator, whose of a Cabinet post for many years. According to press this afternoon to me I like the old Bannan plan, and I don't think so.", "recall Dr. Ellerson recommending this. This sounds to me like the old Bannan plan, and I don't think so. I will try to get a copy of this and send it to Mr. Ellerson. I will try to get a