Huhplas Cabinet Minutes, June 3, 1957 - page 3 he had asked the Service Secretaries to inform him aboat the actions necessary to return to that level. He stressed the adverse effect of inflation, since 80% of Defense obligations are subject te price increases during production. In anawer to a query of the President, he pointed out the difficulty of attracting bidders on complex projects since it was expensive even to prepare a bid. He felt that excess profits recoveries provided protection whenever not much competitive bidding occurred. Sec. Wilson expressed some doubts about the value of the proposal soon to be discussed in Congrese for partial financing. He thought a better solution would be the "service obligation program' which would provide better control by 1958. He felt that further progress could be made in. management economies but that programs would have to be cut to secure major savings. The President stressed the need for setting initially the goal of a $36 billion level even though it might be necessary to settie finally on $39 billion. He thought it quite possible for Defense to reduce military — personnel by 300900 since the resultant level would still be 2,500, 500. Later, the President remarked on the unreality of the initial request of $48 billion by the Chiefe of Staff last year. The President stated his desire to look at Defense spending on basic research -- which he had always thought to be primarily the responsibility of private institutions. Mr. Brundage said a summary would soon be ready. ° * e a Sec. Benson aaserted that additional legislation would be necessary before extensive reductions could be made, particularly with regard to CCC expenditures which cannot otherwise be controlled. He indicated that Agriculture was following up on the Sen. Ellender letter very vigorously but he could not be sure that legislation would be accomplished this session. He pointed ont instances where Federal receipts — are increased greatly by small expenditure increases, such as con~ struction of forest roads which allows increased sale of timber rights. Mr. Benson noted that Congress would not act on Agriculture's request for reduced conservation payments. e s * Sec. Humphrey noted the tendencies toward inflation which would inevitably cause Defense overruns. He felt that monetary measures would have to be supplemented by major reductions In Federal spending to stop inflation. This, he thought, would require redepioyment of military forces asd drastic limitation “in several lines". Among other things he emphasized the deeirabliity af obtaining a sharper distinction between Federal and State activities. He realized much time would be required to effect CORBRGEUAL haw e