NSC-68 Directive Creates Permanent Military-Industrial Establishment - Defense Spending to Triple

President Harry S. Truman received National Security Council directive NSC-68, a 66-page top-secret policy paper that would fundamentally transform American defense policy by calling for “full mobilization of the U.S. economy during peacetime”—an unprecedented measure that created the permanent military-industrial establishment President Eisenhower would later warn against. Drafted by Paul Nitze’s Policy Planning Staff at the State Department with Defense Department input, NSC-68 called for tripling defense spending from $13 billion to $40-50 billion annually to counter perceived Soviet expansionism. Scholar Ernest R. May later characterized NSC-68 as providing “the blueprint for the militarization of the Cold War from 1950 to the collapse of the Soviet Union at the beginning of the 1990s.”

Rejection of Containment Through Political and Economic Means

NSC-68 represented a dramatic shift from George Kennan’s original containment strategy, which emphasized political and economic measures rather than military buildup. Kennan, the architect of containment and former ambassador to the Soviet Union, strongly opposed NSC-68’s recommendations, arguing that the United States already had substantial military advantage over the Soviets and that containment could be achieved without massive militarization. Kennan disagreed fundamentally with Nitze’s assertion that the Soviet Union was bent on achieving world domination through force of arms. Secretary of Defense Louis Johnson and Soviet expert Charles Bohlen also opposed the directive, but the Korean War’s outbreak in June 1950 settled the debate in favor of NSC-68’s militarization approach.

Creation of Permanent War Economy

When Truman signed NSC-68 in September 1950, he indicated it should be the foundation of U.S. national security for years to come. Defense spending rose immediately and dramatically—the amount requested for military services in spring 1950 was less than $13 billion, but by 1951 it exceeded $60 billion. The Truman administration nearly tripled defense spending as a percentage of GDP between 1950 and 1953, rising from 5% to 14.2%. This was not a temporary wartime mobilization but rather the creation of what NSC-68 explicitly called for: a permanent peacetime military economy on a scale never before seen in American history. The directive called for developing the hydrogen bomb, increasing military aid to allies, and expanding the military establishment to levels that would be sustained indefinitely.

Fundamental Transformation of American Political Economy

NSC-68 created an immense military-industrial segment of the economy that quickly developed its own institutional interests and political power. Before NSC-68, American practice had been to mobilize for war and then demobilize afterward—companies like Ford built jeeps and bombers during World War II, then returned to building cars. NSC-68 ended this pattern by creating a permanent armaments industry with facilities, workforces, and business models dependent on continuous military production. The directive’s implementation created economic dependencies in congressional districts across the country, as defense contractors established plants and military bases provided employment. These economic interests would prove extremely difficult to reverse, as any reduction in defense spending threatened jobs and company revenues in politically significant locations.

Institutional Resistance and Eisenhower’s Opposition

The NSC-68 approach faced opposition from fiscal conservatives and military strategists who feared its economic and strategic consequences. George Kennan’s objections proved prescient—he warned that massive military buildup would militarize American foreign policy and create domestic economic distortions. When General Dwight D. Eisenhower became president in 1953, he considered NSC-68 too expensive and feared it would create long-term economic weakness. Eisenhower convened Project Solarium in summer 1953 to reassess the approach, deeming NSC-68’s unilateral guidelines “inadequate.” His “New Look” policy sought to reduce the defense budget and shift reliance to less expensive nuclear deterrence, but even Eisenhower’s dramatic cuts could not reduce military spending below 50% of the federal budget—demonstrating how quickly the NSC-68 establishment had become embedded in American political economy.

Significance

NSC-68 represents one of the most consequential policy decisions in American history—it created the permanent military-industrial establishment that would come to dominate American foreign policy and consume enormous national resources for the next seven decades. The directive transformed a temporary Korean War response into permanent policy, establishing the precedent that American security required maintaining a massive standing military and defense industry during peacetime indefinitely. The rapid implementation after Korea’s outbreak meant that a directive initially opposed by key foreign policy experts, including the architect of containment, became locked in before its long-term implications could be fully debated. By the time Eisenhower took office, the interests created by NSC-68—defense contractors, military services, congressional districts dependent on defense spending—were already powerful enough to resist even a popular Republican war hero’s efforts to reduce military budgets significantly. NSC-68’s call for “full mobilization of the U.S. economy during peacetime” proved to be a one-way ratchet: once implemented, the economic and political interests created made it nearly impossible to return to pre-NSC-68 defense spending levels. The directive’s lasting impact was precisely what Eisenhower would warn about in 1961—it created the “conjunction of an immense military establishment and a large arms industry” that was “new in the American experience” and whose influence would prove nearly impossible to control through democratic processes. NSC-68 did not merely respond to Soviet threats; it fundamentally restructured American democracy by creating institutional interests in permanent high military spending that would persist regardless of changing strategic circumstances or fiscal constraints.