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depreciation deduction previously taken on the property.

Aviation fuel taxes: To help defray the cost of the Federal airways system, the effective excise tax rate on aviation gasoline should be promptly increased from 2 to 42 cents per gallon and an equivalent excise tax should be imposed on jet fuels, which now are untaxed. The conversion from piston engines to jets is resulting in serious revenue losses to the Government. These losses will increase unless the tax on jet fuels is promptly enacted. The revenues from all taxes on aviation fuels should be credited to general budget receipts, as a partial offset to the budgetary costs of the airways system, and clearly should not be deposited in the highway trust fund.

Changes in fees and charges: The cost of other Federal programs which provide measurable special benefits to identifiable groups or individuals should be recovered through charges paid by beneficiaries rather than by taxes on the general public. Whenever feasible, fees or charges should be established so that the beneficiaries will pay the full cost of the special services they receive. To help accomplish this purpose, I have directed that further work be done by the departments and agencies on a carefully defined inventory of Federal services which convey such special benefits. In the meantime, the Congress is requested to act favorably on the postal rate proposals described in this message and on a number of other specific proposals now pending before it or planned to be submited this year for increased fees or charges for special services.

Estimated savings to the general taxpayers from more adequate fees and charges [In millions]

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payments to the public at $96.3 billion, resulting in an excess of $5.9 billion of receipts.

This excess of receipts will be used to repay cash the Government has previously borrowed from the public. Repayment of such debt owned to the public will be greater than the amount of public debt retired, because the Government trust funds are expected to add to their holdings of public debt securities to the extent that trust fund receipts exceed trust fund expenditures. This will reduce the debt held by the public in like amount by shifting ownership to the trust funds.

For the fiscal year 1960, on the other hand, an excess of payments to the public of $542 million is estimated, despite the anticipated budget surplus of $217 million. This situation reflects the fact that total disbursements of trust funds will exceed their receipts in 1960, notably in the old-age and survivors insurance, unemployment, and highway trust funds.

Federal Government receipts from and payments to the public

(See special analysis A in pt. IV of this document) [Fiscal years. In billions]

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dollar equivalent of expenditures for U.S. Government programs of foreign currencies received from the sale abroad of surplus U.S. agricultural commodities under Public Law 480.


Our national objective remains as before-peace with justice for all peoples. Our hope is that the heavy burden of armaments on the world may be lightened.

But we should not delude ourselves. In this era of nuclear weapons and intercontinental missiles, disarmament must be safeguarded and verifiable. The problems involved in achieving reductions of armaments with safety and justice to all nations are tremendous. Yet we must face up to these problems, for the only alternative is a world living on the edge of disaster.

While seeking the true road to peace and disarmament we must remain strong. Our aim at this time is a level of military strength which, together with that of our allies, is sufficient to deter wars, large or small, while we strive to find a way to reduce the threat of war. This budget, in my judgment, does that.

Expenditures of the Department of Defense in 1961 will continue to emphasize the modernization of our Armed Forces. Military assistance for our allies under the mutual security program will also reflect the growing importance of modern weapons and missiles in the continued strengthening of the free world defense forces. The Atomic Energy Commission is continuing its weapons programs on a high level and will move forward with research and development on the peaceful applications of atomic energy. Expenditures for stockpiling and for expansion of defense production will decline further, since most of the stockpile objectives have been met. Major national security [Fiscal years. In millions]

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Department of De

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Military functions:

highway trust fund to general fund..

Military personnel:

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Revise fees for noncompetitive oil and gas leases





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1959 estiEstiactual mate

Increase patent fees.

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Permate cent of total

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Increase miscellaneous fees now below


10,384 10, 137 10, 321 14, 410 13.943 13, 602

10, 527 13, 085

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Research, development, test, and evaluation..


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1 Additional obligational authority available by transfer: $350 million.

2 Compares with new obligational authority of $45,517 million enacted for 1979 and $44,749 million (including $25 million in anticipated supplemental appropriations) estimated for 1960.

3, 421

3, 002



Revolving funds..

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6, 529

5, 113

5, 623


1, 669



Military assistance.


4, 421

4, 441

4, 569


Atomic energy.

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Stockpiling and expansion of defense production...

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Department of Defense-Military: New appropriations of $40,577 million are recommended for the military functions of the Department of Defense for 1961.

Expenditures in 1961 are estimated at $40,995 million. These amounts exclude funds for the development of the Saturn space project which I have proposed be transferred to the National Aeronautics and Space Administration.

Strategy and tactics of the U.S. military forces are now undergoing one of the greatest transitions in history. The change of emphasis from conventionaltype to missile-type warfare must be made with care, mindful that the one type of warfare cannot be safely neglected in favor of the other. Our military forces must be capable of contending successfully with any contingency which may be forced upon us, from limited emergencies to all-out nuclear general war.

Forces and military personnel strength: This budget will provide in the fiscal year 1961 for the continued support of our forces at approximately the present level-a year-end strength of 2,489,000 men and women in the active forces. The forces to be supported include an Army of 14 divisions and 870,000 men; a Navy of 817 active ships and 619,000 men; a Marine Corps of 3 divisions and 3 air wings with 175,000 men; and an Air Force of 91 combat wings and 825,000 men.

If the reserve components are to serve effectively in time of war, their basic organization and objectives must conform to the changing character and missions of the active forces. Quality and combat readiness must take precedence over mere numbers. Under modern conditions, this is especially true of the ready reserve. I have requested the Secretary of Defense to reexamine the roles and missions of the reserve components in relation to those of the active forces and in the light of the changing requirements of modern warfare.

Last year the Congress discontinued its previously imposed minimum personnel strength limitations on the Army Reserve. Similar restrictions on the strength of the Army National Guard contained in the 1960 Department of Defense Appropriation Act should likewise be dropped. I strongly recommend to the Congress the avoidance of mandatory floors on the size of the reserve components so that we may have the flexibility to make adjustments in keeping with military necessity.

I again propose a reduction in the Army National Guard and Army Reserve from their present strengths of 400,000 and 300,000, respectively, to 360,000 and 270,000 by the end of the fiscal year 1961. These strengths are considered adequate to meet the essential roles and missions of the reserves in support of our national security objectives.

Military personnel costs-About 30% of the expenditures for the Department of Defense in 1961 are for military personnel costs, including pay for active, reserve, and retired military personnel.

These expenditures are estimated to be $12.1 billion, an increase of $187 million over 1960, reflecting additional longevity pay of career personnel, more dependents, an increased number of men drawing proficiency pay, and social security tax increases (effective for the full year in 1961 compared with only 6 months in 1960. Retired pay costs are increased by $94 million in 1961 over 1960, partly because of a substantial increase in the number of retired personnel. These increased costs are partially offset by a decrease of $56 million in expenditures for the reserve forces, largely because of the planned reduction in strength of the Army Reserve components during 1961.

Traditionally, rates of pay for retired military personnel have been proportionate to current rates of pay for active personnel. The 1958 military pay act departed from this established formula by providing for a 6 percent increase rather than a proportionate increase for everyone retired prior to its effective date of June 1, 1958. I endorse pending legislation that will restore the traditional relationship between retired and active duty pay rates.

Operation and maintenance: Expenditures for operating and maintaining the stations and equipment of the Armed Forces are estimated to be $10.3 billion in 1961, which is $184 million more than in 1960. The increase stems largely from the growing complexity of and higher degree of maintenance required for newer weapons and equipment.

A substantial increase is estimated in the cost of operating additional communications systems in the air defense program, as well as in all programs where speed and security of communications are essential. Also, the program for fleet modernization will be stepped up in 1961 causing an increase in expenditures. Further increases arise from the civilian employee health program enacted by the Congress last year.

Other factors increasing operating costs include the higher unit cost of each flying hour, up 11 percent in 2 years, and of each steaming hour, up 15 percent. In total, these increases in operating costs outweigh the savings that result from declining programs and from economy measures, such as reduced numbers of units and installations, smaller inventories of major equipment, and improvements in the supply and distribution systems of the Armed Forces.

In the budget message for 1959, and again for 1960, I recommended immediate repeal of section 601 of the act of September 28, 1951 (65 Stat. 365). This section prevents the military departments and the Office of Civil and Defense Mobilization from carrying out certain transactions involving real property unless they come into agreement with the Committees on Armed Services of the Senate and the House of Representatives. As I have stated previously, the Attorney General has advised me that this section violates fundamental constitutional principles. Accordingly, if it is not repealed by the Congress at its present session, I shall have no alternative

thereafter but to direct the Secretary of Defense to disregard the section unless a court of competent jurisdiction determines otherwise.

Basic long-line communications in Alaska are now provided through Federal facilities operated by the Army, Air Force, and Federal Aviation Agency. The growing communications needs of this new State can best be met, as they have in other States, through the operation and development of such facilities by private enterprise. Legislation has already been proposed to authorize the sale of these Government-owned systems in Alaska, and its early enactment is desirable.

Procurement, research, and construction: Approximately 45 percent of the expenditures for the Department of Defense are for procurement, research, development and construction programs. In 1961, these expenditures are estimated at $18.9 billion, compared to $19.3 billion in 1960. The decreases, which are largely in construction and in aircraft procurement, are offset in part by increases for research and development and for procurement of other military equipment such as tanks, vehicles, guns, and electronic devices. Expenditures for shipbuilding are estimated at about the same level as in 1960.

New obligational authority for 1961 recommended in this budget for aircraft procurement (excluding amounts for related research and construction) totals $4,753 million, which is $1,390 million below that enacted for 1960. On the other hand, the new authority of $3,825 million proposed for missile procurement (excluding research and construction) in 1961 is $581 million higher than for 1960. These contrasting trends in procurement reflect the anticipated changes in the composition and missions of our Armed Forces in the years ahead.

The Department of Defense appropriation acts for the past several years have contained a rider which limits competitive bidding by firms in other countries on certain military supply items. As I have repeatedly stated, this provision is much more restrictive than the general law, popularly known as the Buy American Act. I urge once again that the Congress does not reenact this rider.

The task of providing a reasonable level of military strength, without endangering other vital aspects of our security, is greatly complicated by the swift pace of scientific progress. The last few years have witnessed what have been perhaps the most rapid advances in military technology in history. Some weapons systems have become obsolescent while still in production, and some while still under development.

Furthermore, unexpectedly rapid progress or a technological breakthrough on any one weapon system, in itself, often diminishes the relative importance of other competitive systems. This has necessitated a continuous review and reevaluation of the defense program in order to redirect resources to the newer and more important weapons systems and to eliminate or reduce

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Another example is the recent cancellation of the F-108, a long-range interceptor with a speed three times as great as the speed of sound, which was designed for use against manned bombers in the period of the mid-1960's. The substantial progress being made in ballistic missile technology is rapidly shifting the main threat from manned bombers to missiles. Considering the high cost of the F-108 system-over $4 billion for the force that had been planned-and the time period in which it would become operational, it was decided to stop further work on the project. Meanwhile, other air defense forces are being made effective, as described later in this message.

The size and scope of other important programs have been reduced from earlier plans. Notable in this category are the Jupiter and Thor intermediate range ballistic missiles, which have been successfully developed, produced, and deployed, but the relative importance of which has diminished with the increasing availability of the Atlas intercontinental ballistic missile.

The impact of technological factors is also illustrated by the history of the high-energy fuel program. This project was started at a time when there was a critical need for a high-energy fuel to provide an extra margin of range for high performance aircraft, particularly our heavy bombers. Continuing technical problems involved in the use of this fuel, coupled with significant improvements in aircraft range through other means, have now raised serious questions about the value of the highenergy fuel program. As a result, the scope of this project has been sharply curtailed.

These examples underscore the importance of even more searching evaluations of new major development programs and even more penetrating and far-ranging analysis of the potentialities of future technology. The cost of developing a major weapon system is now so enormous that the greatest care must be exercised in selecting new systems for development, in determining the most satisfactory rate of development, and in deciding the proper time at which either to place a system into production or to abandon it.

Strategic forces: The deterrent power of our Armed Forces comes from both their nuclear retaliatory capability and their capability to conduct other essential operations in any form of war. The first capability is represented by a com

bination of manned bombers, carrierbased aircraft, and intercontinental and intermediate range missiles. The second capability is represented by our deployed ground, naval, and air forces in essential forward areas, together with ready reserves capable of effecting early emergency reinforcement.

The Strategic Air Command is the principal element of our long-range nuclear capability. One of the important and difficult decisions which had to be made in this budget concerned the role of the B-70, a long-range supersonic bomber. This aircraft, which was planned for initial operational use about 1965, would be complementary to but likewise competitive with the four strategic ballistic missile systems, all of which are scheduled to become available earlier. The first Atlas ICBM's are now operational, the first two Polaris submarines are expected to be operational this calendar year, and the first Titan ICBM's next year. The Minuteman solid-fueled ICBM is planned to be operational about mid-1963. By 1965, several or all of these systems will have been fully tested and their reliability established.

Thus, the need for the B-70 as a strategic weapon system is doubtful. However. I am recommending that development work on the B-70 airframe and engines be continued. It is expected that in 1963 two prototype aircraft will be available for flight testing. By that time we should be in a much better position to determine the value of that aircraft as a weapon system.

I am recommending additional acquisitions of the improved version of the B-52 (the B-52H with the new turbofan engine) and procurement of the B-58 supersonic medium bomber, together with the supporting refueling tankers in each case. The additional modern bombers will replace some of the older B-47 medium bombers; one B-52 can do the work of several B-47's which it will replace. Funds are also included in this budget to continue the equipping of the B-52 wings with the Hound Dog air-to-surface missile.

In the coming fiscal year additional quantities of Atlas, Titan, and Polaris missiles also will be procured. I am recommending funds for 3 additional Polaris submarines to be started in the coming fiscal year and for the advance procurement of long leadtime components on 3 more-making a total of 15 Polaris submarines and the appropriate number of missiles. Funds to continue the development and to initiate production of the first operational quantities of the Minuteman are also included in this budget.

Thus, four strategic ballistic missile systems will be in development and production during the coming fiscal year. These, together with the manned bomber force, the carrier-based aircraft, the intermediate range ballistic missiles, and thetactical aircraft deployed abroad, ensure our continued capability to retaliate effectively in the vent of an attack upon ourselves or our allies.

In order to ensure, insofar as practicable, the safety and readiness of these forces, we have substantially completed the dispersal of Strategic Air Command aircraft and the construction of alert facilities. These measures will permit a large portion of all our manned bombers and supporting tankers to get off the ground within 15 minutes after receiving warning of an attack.

I have also authorized the Department of Defense to begin to acquire a standby airborne alert capability for the heavy bombers. This will entail the procurement of extra engines and spare parts, and the training of the heavy bomber wings with the ability to conduct an airborne alert. It is neither necessary nor practical to fly a continuous airborne alert at this time. Such a procedure would, over a relatively short period of time, seriously degrade our overall capability to respond to attack. What I am recommending is a capability to fly such an alert if the need should arise and to maintain that alert for a reasonable period of time until the situation which necessitated it becomes clarified.

Attention is also being given to the safety and readiness of our land-based strategic missile forces. Except for the first several squadrons, strategic missiles will be dispersed in hardened underground sites. Measures are also being taken to shorten the reaction time of liquid-fueled missiles. The Minuteman, because it will be solid fueled, will have a quick reaction time and will lend itself to mobile use. The solid-fueled Polaris to be carried in submarines at sea is by its very nature highly invulnerable.

Air defense forces: Much progress has been made in increasing the effectiveness of the North American Air Defense Command organized in 1957 as an integrated command of the U.S. and CanaIdian forces. The U.S. military elements-consisting of parts of all of our armed services-are integrated with Canada's Air Defense Command for maintaining an air defense capability for the entire North American Continent.

While we pay increasing attention to the growing threat of a potential enemy's ballistic missiles we should not lose sight of the fact that for the time being the manned bomber is the major threat. Although some $17 billion has already been invested in defense systems against manned bombers, excluding the cost of personnel and operation and maintenance, certain segments have yet to be completed. These were described in the Department of Defense air defense plan presented to the Congress last year. The funds recommended in this budget will substantially complete the programs outlined in that plan. Specifically, the last major elements of the Nike-Hercules surface-to-air missile program will be financed in 1961 and the Bomarc interceptor missile program will approach completion. The related radar warning, electronic control, and communication systems will also be further equipped and modernized.

In response to the increasing missile threat, we are pressing to completion a

new system for the detection of ballistic missile attack-the ballistic missile early warning system. Construction has been underway for the last 2 years and the first segment is expected to be in operation in about a year.

To provide for an active defense against ballistic missile attack, I am recommending the continued development of the Nike-Zeus system, but it will not be placed in production during the coming fiscal year during which further testing will be carried out.

The Nike-Zeus system is one of the most difficult undertakings ever attempted by this country. The technical problems involved in detecting, tracking, and computing the course of the incoming ballistic missile and in guiding the intercepting Zeus missile to its targetall within a few minutes-are indeed enormous.

Much thought and study have been gven to all of these factors and it is the consensus of my technical and military advisers that the system should be carefully tested before production is begun and facilities are constructed for its deployment. Accordingly, I am recommending sufficient funds in this budget to provide for the essential phases of such testing. Pending the results of such testing, the $137 million appropriated last year by the Congress for initial production steps for the Nike-Zeus system will not be used.

Sea control forces: Control of sea and ocean areas and sea lanes of communication is an integral element in the maintenance of our national security. The naval forces which carry the primary responsibility for this mission will consist of 817 combatant and support ships. 16 attack carrier air groups, 11 antisubmarine air groups, and 41 patrol and warning air squadrons.

From new construction and conversion programs started in prior years, the Navy will receive during fiscal year 1961 an unusually large number of modern ships.

These will include the fifth and sixth Forrestal-class attack carriers, the first nuclear-powered cruiser, nine guided missile destroyers, seven guided misstle frigates, and six nuclear-powered submarines. Three more Polaris ballistic missile submarines and a converted guided missile cruiser will also be commissioned.

For the coming fiscal year I am recommending the construction of 20 new ships and conversions or modernizations of 15 others. Included among the new ships is an attack carrier. It is planned to construct this carrier with a conventional rather than a nuclear powerplant.

While it is generally agreed that a nuclear-powered attack carrier has certain military advantages, such as extended range and endurance at high sustained speeds, these advantages are not overriding as in the case of a submarine. In a submarine, nuclear power provides the critical advantage of almost unlimited operation, submerged at high speeds. This enables nuclear-powered submarines to carry out missions which no con

ventionally powered submarine, no matter how modern, could accomplish.

The advantages of nuclear power with respect to the carrier, however, are not comparable. The primary requirement in a carrier is up-to-date facilities to operate, safely and effectively, the most modern naval aircraft. Use of a conventional powerplant will in no way prevent a carrier from functioning as a completely modern and mobile base for fleet aircraft for its foreseeable life. The additional $130 million which a nuclearpowered carrier would cost can be used to much greater advantage for other purposes. I, therefore, strongly urge the Congress to support this request for a conventionally powered aircraft carrier.

Tactical forces: Elements of the ground, naval, and air forces comprise the tactical forces which are available to deal with cold-war emergencies and limited-war situations, in addition to performing essential tasks in the event of general war. Recommendations made in this budget provide funds for modernization and improvement in the effectiveness of our tactical forces.

Increased emphasis has been given in this budget to improving the mobility and firepower of the 14 Army divisions and other active combat elements of the Army and the 3 Marine Corps divisions. Additional quantities of new rifles and machineguns employing the standard NATO ammunition will be procured, as will combat and tactical vehicles of all kinds, including the new M60 tank, the M113 armored personnel carrier, selfpropelled howitzers, trucks and jeeps. In recognition of the value of artillery in both nuclear and nonnuclear warfare, an entire new family of self-propelled artillery is introduced with this budget. This new artillery is lighter, more mobile, and, utilizing new ammunition, will have greater range than that of types currently available.

The Army and Marine Corps will also buy a wide variety of guided missiles and rockets, such as Sergeant, Honest John, Little John, and Lacrosse for mediumand close-range ground-fire support; Davy Crockett for an integral infantryunit close-range atomic support weapon; and Hawk and Redeye for defense of field forces against air attack. Army aircraft procurement proposed for 1961 is more than 35 percent higher than for the current year and includes funds for surveillance aircraft and for utility and medium cargo helicopters.

The tactical forces of the Army are supported by the tactical air wings of the Air Force which will also be provided with an increased capability under these budget recommendations. Funds are provided for increased procurement of F-105 supersonic all-weather fighter bombers. These aircraft, with their low-altitude handling characteristics and large carrying capacities for both nuclear and nonnuclear weapons, will strengthen significantly the air support available to the Army ground units.

The three Marine divisions are tactically supported by three Marine aircraft

wings, which will also receive quantities of new aircraft.

Military assistance: The ability of the free world to deter aggression depends on the combined strength and determination of many countries. The total forces of the countries receiving aid under the military assistance program include about 5 million Army troops, 2,200 combatant ships, and over 25,000 aircraft, about half of which are jet. These forces make a vital contribution to the security of the free world, including the United States.

A committee of distinguished private citizens, the President's Committee To Study the United States Military Assistance Program, conducted an extensive and comprehensive analysis of the mutual security program during the last year. I have previously transmitted the reports of the Committee to the Congress. Many of the significant findings and recommendations of this group have been put into effect by the executive agencies; others are in the process of implementation. The military assistance program has been budgeted in 1961 with other activities and programs of the Department of Defense, and major changes are being made in the management, organization and programing of military assistance.

Last spring I mentioned the possibility of requesting a supplemental appropriation as suggested by the Committee largely to expedite modernization of NATO forces. However, in view of the time factor involved in securing a separate authorization and appropriation for 1960, a supplemental request this year is not practical.

The new obligational authority of $2 billion recommended for fiscal year 1961 for the military assistance program will provide the training and quantities of materiel required to support the forces in the countries receiving aid. Because of the long leadtime required for many items, procurement must be started in 1961 in order to provide the necessary deliveries in future years. During recent years, deliveries have been maintained only by drawing down the backlog of undelivered items by an amount ranging from $500 to $800 million per year. The backlog has now been reduced to the point where adequate deliveries in the future must depend on new appropriations.

The defense of Western Europe in this era of modern weapons is costly and must be accomplished through the combined efforts of all NATO countries. Many of these countries have now assumed the financial responsibility for producing or purchasing conventional arms and equipment which the United States previously supplied. At the same time, the 1961 military assistance program squarely faces the pressing need for new and costly weapons for which the free world still looks for help from the United States. In addition, it provides for an intensified training effort to assure effective use and maintenance of the new equipment by allied forces.

This budget also provides for military assistance to countries which are building defenses against aggression and subversion in other parts of the world. These countries border on aggressive regimes, or are confronted with strong internal subversive elements. Many of them have joined in mutual defense organizations such as the Southeast Asia Treaty Organization (SEATO) and the Central Treaty Organization (CENTO), or with the United States in bilateral defense agreements. Assistance to these countries, most of which are in the Near East and the Far East, emphasizes primarily the strengthening of conventional forces in keeping with the nature of the threat in each area.

Atomic energy activities: In 1961 the expenditures for the Atomic Energy Commission are expected to remain at the 1960 level of about $2.7 billion. Substantial increases for research and development activities will be offset by reductions in procurement of uranium ore concentrates from United States and Canadian producers. These reductions will bring ore supplies into better balance with production requirements.

Development and production of nuclear weapons in 1961 will remain at the high levels of previous years. The vigrous development of military reactors for a variety of propulsion and power uses will continue. When the landbased prototype reactor for a destroyer is placed into operation in 1961 along with four other naval prototype reactors now operating, nuclear powerplants will be available for major types of naval combatant ships. Emphasis in naval reactor development in 1961 will be placed primarily on development of improved and longer lived reactor fuel. The development of nuclear ramjet engines for missiles, of nuclear aircraft engines, and of nuclear electric powerplants for use at remote military bases will be carried forward.

Peaceful uses of atomic energy: Expenditures in 1961 for development of civilian electric power from atomic energey are estimated at $250 million. Of this amount, $185 million is for research and development and $65 million is for construction of civilian power reactors and related development facilities. The estimated expenditures include amounts from proposed new appropriations of $40 million for assistance to private and public power groups in developing and building demonstration nuclear powerplants, and alternatively for such direct Government construction as may be considered

necessary. The number, type, and size of reactors built and the nature of the assistance provided will be determined by the Commissioner after considering the state of technology and the cooperation proposed by industry. Expenditures by the Commission for research in the physical and life sciences in 1961 will again increase substantially to over $210 million. This level of research will help the United States to continue its leadership in the study of the behavior of the basic matter of the universe and the effects of radiation on

man and his environment. The largest part of the increase will be used to place in operation in the next 18 months three new particle accelerators in the multibillion electron-volt energy range, including the alternating gradient synchrotron at Brookhaven National Laboratory.

In support of the civilian space program, the Atomic Energy Commission will continue development of nuclearpowered rockets and small, long-lived nuclear power sources for space vehicles. Development work on thermonuclear power and on applications of nuclear explosives to a variety of civilian uses will continue in 1961.

Stockpiling and defense production expansion: Most of the objectives for the stockpile of strategic and critical materials have been met. Receipts of materials under contracts to promote expansion of defense production are continuing at a reduced rate, as the number of such contracts still in effect declines. Hence, expenditures for stockpiling and expansion of defense production are estimated to decline from $230 million in 1960 to $134 million in 1961.

Amendments to outstanding contracts are now being negotiated where practicable, so as to minimize the delivery of materials no longer required for stockpiling. Arrangements are also under way to dispose of materials excess to stockpile objectives whenever disposal I will not seriously disrupt markets or adversely affect our international relations.


The United States is continuing to support programs to maintain world peace and to improve economic conditions throughout the free world. In helping to improve economic conditions, we are being joined in larger measure by our friends in the free world who have now reached a high level of prosperity after recovering from the ravages of proAccordingly, multilateral grams are being expanded. At the same time, the pressing need for economic development requires the continuation of substantial economic assistance under the mutual security program.


Expenditures for international affairs and finance are estimated to be $2.2 bilThis lion in the fiscal year 1961. amount is $177 million higher than estimated expenditures for 1960, mainly because of larger disbursements by the Development Loan Fund under prior commitments.

Mutual security program: Through the mutual security program as a whole the United States helps promote stability and economic growth in less-developed countries and helps strengthen the defenses of the free world. For these purposes new obligational authority of $4,175 million is recommended in fiscal year 1961, an increase of $949 million over the amount enacted for 1960 (of which $700 million is for military assistance). Expenditures are estimated to be $3,450 million, an increase of $100 million over 1960.

The military assistance portion of this program is carried in the Department of Defense chapter and has been discussed in the major national security section of this message. Economic assistance is discussed in the following paragraphs in this section.

The De

Development Loan Fund: velopment Loan Fund was established in 1957 in order to provide capital to lessdeveloped countries, when capital is not available from other sources. The capital is provided on favorable terms, often including the option to repay in the borrower's own currency. By the end of the fiscal year 1960, the Fund will have made commitments for an estimated 148 loans totaling some $1,400 million. More than three-fourths of the projects it is financing are for roads, railroads, electric power generation, and industry, including industrial development banks. Because many of these projects require several years for construction, expenditures have thus far been relatively small. However, in the fiscal year 1961 they are estimated to be $300 million, an increase of $125 million over 1960. New obligational authority of $700 million is requested for 1961, an increase of $150 million over the amount enacted for 1960. This will provide the loan funds essential to our foreign policy objective of assisting in the economic growth of the less-developed countries of the free world.

Technical cooperation: Technical and administrative skills are no less important for the newly developing countries than capital. Through the technical cooperation program, American experts are sent abroad to transmit the skills required in a modern economy and foreign technicians are brought to the United States for training.

International affairs and finance
[Fiscal years. In millions]

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