McNamara’s appreciation of the military problems in Vietnam was intimately connected to economic developments in Washington. A continued balance of payments deficit and an unsettled domestic economic picture heightened the administration’s sense of vulnerability. The Senate Foreign Relations Committee (SFRC) exerted new pressure on the Military Assistance Program (MAP) that funded operations in Vietnam. With Dillon, McNamara worked on a Cabinet Committee on the Balance of Payments that recommended significant troop redeployments around the world. The JCS and State Department stymied their efforts. In this context, McNamara met with the famed economist John Kenneth Galbraith, who was especially critical of the growing commitment in Vietnam. McNamara chose a counterinsurgency strategy in Vietnam because it was cheaper as it relied on local forces. As Galbraith and others recommended, McNamara moved to downgrade the relative importance of South Vietnam to US security and to emphasize that the conflict was an internal insurgency. He used the pressures on the MAP to accelerate the phaseout of the US presence in South Vietnam.

McNamara moved more forcefully than any of his predecessors in implementing civilian control over the military, with a contemptuous and domineering attitude toward the Joint Chiefs of Staff (JCS). His most important managerial innovations were designed to enforce “subjective control,” namely to impose civilian objectives and ideas on the military. The Draft Presidential Memoranda (DPMs) and the Planning, Programming and Budgeting System (PPBS) were designed to align military tools to civilian-defined foreign and economic policies. He worked closely with Secretary of State Dean Rusk to align military tools to the President’s foreign policy and with Secretary of the Treasury C. Douglas Dillon to ensure the Defense Department’s programs fit within a framework of fiscal discipline.

President John F. Kennedy was elected on a program of change. Despite his electoral rhetoric, in office, he was cautious and fiscally conservative. He felt especially vulnerable on economic issues with a nagging balance of payments deficit that threatened the role of the dollar in the international monetary system. He chose Republicans for the two agencies that had the greatest bearing on the balance of payments: C. Douglas Dillon as Secretary of the Treasury and McNamara as Secretary of Defense. At the same time, Kennedy’s interest in the developing world was different from his predecessors’ and led him to experiment with new ways of projecting US power internationally, including through building up local capabilities to fight “wars of national liberation.” His national security bureaucracy changed accordingly with the creation of a Special Group on Counterinsurgency, the US Agency for International Development (USAID), the Peace Corps and with a renewed focus on the US Army’s Special Forces.