Documents / FOIA release
This Top Secret study by the Interdepartmental Coordinating Group on Germany and Berlin, dated July 12, 1961, and released by the Central Intelligence Agency, answers NSC Directive No. 58 of June 30, 1961. It sets out courses of action for the Berlin crisis but does not judge their merits. It covers imminent presidential decisions, a three-phase timetable running to January 1, military preparations and mobilization, covert action, economic sanctions, public information, negotiating positions and checkpoint procedures for East German personnel.
“Cooper”8 pages
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# Appendix A THE STATE OF THE ECONOMY AND THE IMPACT OF MILITARY CRISIS, 1950 AND 1961 A. Mobilization in A Recovering Economy, 1961 The American economy is currently expanding in a recovery from the 1960-61 recession. Most measures of income and output are near their previous peak levels of spring 1960 and will exceed these earlier records in the next few months. However, the economy remains far from full-employment (i.e., from a level of unemployment of 4 percent or lower). Economic activity was running considerably below its potential when the decline began in May 1960. Since then, increases in the labor force, new capital equipment, and gradually improving technology have further increased the productive capacity of the economy. As a result, it is estimated that the United States could have exceeded its actual production in the second quarter of 1961 by nearly $50 billion without straining its productive facilities and without creating inflationary pressures of excess demand. The $50 billion gap between actual and potential output provides a cushion in the event of a sudden mobilization effort. As a first approximation, there is room for a $20 billion rise in non-consumption expenditures before inflationary pressure would become a serious problem. A rise in spending of this magnitude would raise private incomes sufficiently to induce about $30 billion of extra consumer and business outlays. Taken together, the initial $20 billion plus the induced $30 billion would eliminate the gap and achieve full employment. By this first approximation, a possible mobilization effort appears to carry little danger of straining the economy. But the first approximation requires many important qualifications, and these all point to serious unfavorable consequences of a sudden rise in defense spending. In the first place, the economy has considerable forward momentum at the present time. Output has been rising by about two percent a quarter, while productive capacity grows less than half as fast. Hence, any action which closed the output gap right away would court inflation in the near future. Secondly
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FOIA release, from the cia-readingroom collection. The PDF is mirrored here; the original link is above. The text was read from the page images by GLM-OCR; expect the odd misread word. 163 pages are in the text index: search them above, or from the library's search.