The year 1966 was one of interlocking crises. The consequences of escalation in Vietnam ricocheted onto the domestic and global economy. The SFRC and SASC blamed McNamara for the administration’s economic and political obfuscations. Stung by congressional criticism and the label of “McNamara’s war,” McNamara set out to restore his reputation and protect his legacy at the Defense Department. His friendship with “Bobby” exacerbated his disenchantment with the war and strained his loyalty to Johnson to the breaking point. Like many Kennedy holdovers, he drew unfavorable comparisons between the two Presidents that he had served. In Vietnam, despite a burst of diplomatic activity, the prospect of a negotiated settlement in Vietnam all but ended. Instead, escalation continued with no clear objective in sight. With nothing left to lose, McNamara stepped out of his self-imposed restrictions and began to question the administration’s strategy. He returned to the ideas that he had defended in the Kennedy administration and, in 1967, bypassed the State Department and stepped in to run a peace overture himself.

At the start of 1965, the Johnson administration was primed to act militarily in Vietnam. On the economic front, Secretary of the Treasury Dillon left and Johnson chose his Great Society over fiscal discipline. McNamara began to manipulate the budget to hide the true costs of military escalation. Initially, he staked his hopes on a bombing program: it would ensure civilian control, be cost-effective and quick. When political overtures failed to materialize, however, he became frustrated. In July, McNamara recommended a wholescale escalation with a tax increase and reserve call-up. Johnson chose escalation without aligning the resources to his new commitments. As a result, a rift emerged between the President and his Secretary of Defense. As the year went on, the rift widened and McNamara considered leaving. He grew impatient with the White House and State Department’s inflexibility over negotiations with North Vietnam and threw his weight behind a bombing pause.