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Declassified per Executive Order 13526, Section 3.3 NND Project Number: NND 63316. By: NWD Date: 2011  we well know that we cannot afford to pay, equip, train and maintain such forces as I have described. To make this effort possible, we would need to have assurances that this needed material support would be provided. 5/

The record is unclear on the immediate response to this letter. In particular, we have no record of the conversations Thuan had in Washington when he delivered the requests. The issue of the RVNAF increases somehow became part of the business of an economic mission then about to leave for Vietnam (the Staley Mission, discussed in the following section). The request for "selected elements of the American Armed Forces", raised in the next-to-last quoted paragraph, is left thoroughly obscure in the records we have--to the point where we are not at all sure either what Diem meant by it or how the Administration reacted to it. But, as will be seen in the section below on "U.S. Troops", nothing came of it.

III.

One of the continuing negotiating items through most of 1961 was the extent to which the South Vietnamese should finance their own effort. The U.S. view was that the South Vietnamese were not doing enough. The result was American pressure on Diem to undertake what was called tax "reform." Diem was most reluctant to move. It is pretty clear that a large part of Diem's reluctance to move flowed from the same (well-founded) sense of personal insecurity that made him avoid establishing a clear military chain of command. On the latter issue, the risk of weakening the war effort obviously struck him as less dangerous than the risk of making a coup easier by concentrating military authority in his generals instead of dividing it between the generals and the 38 province chiefs. Similarly, for a ruler so unsure of his hold on the country, a serious effort at imposing austerity looked more risky than holding out for the Americans to provide a few more millions out of their vast resources. But Diem, of course, was hardly likely to admit such reasons to the Americans, assuming he admitted them to himself. Consequently, on these issues (as on many others) the record is a long story of tediously extracted promises, excuses for inaction, and American complaints about Diem's administrative style.

On the economic issue, the substance of the argument was this:

The deficit between what Diem raised in taxes and what his budget required was made up by the U.S. through a commercial import program. The regime sold the goods provided by the U.S. to South Vietnamese businessmen, and used the piasters thus acquired mainly to meet the local currency costs (mostly food and pay) for the armed forces. U.S. dissatisfaction with the South Vietnamese effort showed clearly in the decision to ask the South Vietnamese themselves to provide the local, currency costs for the 20,000 man force increase proposed in the CIP, although the U.S. had been paying these costs (through the import program) for the balance Rh