Despite his grudging admiration for the stolid Truman, Forrestal’s Wall Street background had left him at ease in a more speculative or liquid universe; at that precise moment, he was devising accounting gimmicks to offset near billion-dollar costs of stockpiling raw materials as a “capital item” that could be “removed from the budget.” The important point to emphasize is the relationship between two interrelated forms of speculation and accounting—economic and military—in which an absolute inflation of threats tempted a final break with lingering hard-money orthodoxies and a turn to deficit spending. Forrestal did not live to see the breakthrough, but his work paid off.

As Acheson described it, the Korean War—the first hot war of the Cold War era—“saved” the fledgling national security state. With its outbreak, the dream of eternal military liquidity was realized when Leon Keyserling, the liberal economist serving as Truman’s chairman of the Council of Economic Advisors, argued that military expenditures functioned as an economic growth engine. That theory then underpinned NSC 68, the document that justified massive U.S. defense outlays for the foreseeable future and which was authored by another Forrestal protégé, Paul Nitze. By yoking dramatically increased federal spending to security prerogatives, military Keynesianism thus achieved a permanent augmentation of U.S. state capacity no longer achievable under appeals to Keynesianism alone.