167. Editorial Note
In the last week of December 1967, senior officials in the Johnson administration developed a set of proposals on balance of payments for a forthcoming major Presidential announcement. A December 26 memorandum from Califano to the President indicated the division of assignments for this effort (with names and/or agencies in parentheses), as follows: mandatory controls, including an Executive Order and proposed lists of a three-man board (Treasury leadership, with participation of Commerce, Justice, CEA, and Goldstein); negotiating team to leave promptly for foreign capitals with letters from the President to heads of state (State leadership with Treasury and Fried); Federal Reserve credit controls (Bill Martin); tax incentives (Fried, with Stan Ross and Treasury); and Congressional contacts (Fowler, Rusk, Trowbridge, and Barr, with a list of Senators and Representatives cleared by the White House). All these tasks were to be completed by the morning of December 28. (Johnson Library, National Security File, Subject File, Balance of Payments, Vol. IV, January 1967 [2 of 2], Box 3)
Barr’s December 26 memorandum to Fowler on his conversations with Speaker John W. McCormack and Majority Leader Carl Albert on December 26, a December 27 memorandum from Trowbridge to Secretaries Fowler and Rusk of his telephone conversation with Senator Mike Mansfield, Bowman’s December 28 memorandum for the files concerning his conversations with Representative Wilbur Mills and Senator Russell B. Long, and Fowler’s December 28 memorandum for the files providing supplementary comment on the conversation with Mills are [Page 479] all ibid. A memorandum for the files of Fowler’s conversation with Representative John Byrnes, a memorandum of his telephone conversation with Senator Everett Dirksen, and Barr’s two memoranda to Fowler on his and Eugene Rostow’s conversations with Senator George A. Smathers and Congressman Hale Boggs, all dated December 28, are ibid. Roth’s report on the same conversations with Mills, Long, and Byrnes, and on his separate conversation with Senator Carl T. Curtis, attached to a December 29 memorandum from Walt Rostow to the President and Califano, is ibid.
Numerous briefing papers and miscellaneous memoranda prepared by administration principals in the last week of 1967, which reported on progress in the preparation of the proposals on a border tax, tourism, capital investment abroad, and other aspects of the balance-of-payments package, as well as drafts of the proposed Presidential message, Executive Order on mandatory controls for capital transfers abroad, and the Federal Reserve Program, are ibid.
On December 30, Secretaries Rusk, Fowler, and Trowbridge; Roth; Director of the Bureau of the Budget Charles L. Schultze; Rostow; and Califano agreed that the heads of foreign governments should be informed in advance of the President’s upcoming announcement of the balance-of-payments program. Their strategy called for Secretary Rusk to arrange for U.S. Ambassadors to deliver a confidential letter on the balance-of-payments package from President Johnson to heads of government on December 31. Then, early on the following day, Katzenbach, Roth, and Deming would travel to Europe, Eugene Rostow and an aide would go to Japan, New Zealand, and Australia, and Solomon, Shaw, and Petty would visit Ottawa. They also agreed that the President’s statement and the Executive Order would be released at 10:30 a.m. in San Antonio, Texas, on January 1, 1968, and that there would be follow-on briefings of the financial press, labor leaders, and commercial, banking, and manufacturing groups, and calls by State and Treasury people on about 100 Senators and Representatives. (Telegram CAP 671262 from Califano to the President, December 30; ibid.)
The President apparently approved this strategy, which was carried out as planned over the next few days. The transcript of a background press briefing by Califano in San Antonio on January 1 is in the Johnson Library, Fowler Papers, International Balance of Payments White Paper [5 of 7], Box 1. The transcript of a press briefing by Secretaries Rusk, Fowler, and Trowbridge, and others in Washington on the same afternoon is ibid., Fowler Papers, International Balance of Payments 1968, B of P Questions and Answers [2 of 2], Box 6.
For text of the President’s December 31 letter to British Prime Minister Wilson, see Document 168. The telegraphic texts of similar letters sent to several other heads of government on December 31, along with [Page 480] Embassy reports on the foreign leaders’ reactions to the letters, dated December 31, 1967, and January 1, 1968, and memoranda of Solomon’s conversations with Canadian Prime Minister Pearson and Canadian Acting Prime Minister Mitchell Sharp, December 31, are in Department of State, Central Files, FN 12 US.
Circular telegram 91714 to all posts, December 31, which detailed adjustments required by U.S. trading partners, including the need for multilateral cooperative action, adjustments in the relationship between deficits and surpluses, especially in EEC countries, and the potential for shifts in capital flows and in military expenditures, is ibid.
For text of Executive Order 11387, signed on January 1, on capital transfers abroad, see Department of State Bulletin, January 22, 1968, pages 114–115. Goldstein’s memorandum for the files, October 4, 1968, attached to a note from Goldstein to the President, October 4, provides detailed background on the development of the foreign direct investments program as part of this balance-of-payments initiative. (Johnson Library, White House Central Files, Confidential File, FO 4–1 (1967–1969))
A revised text of the President’s statement on balance of payments, following input from Secretaries Rusk, Fowler, Trowbridge, Wirtz, McNamara, Chairmen Ackley and Martin, and others, was sent in telegram CAP 80001 from Califano to the President, December 31. (Ibid., National Security File, Subject File, 1968 Balance of Payments Program, Cables [2of 2], Box 4) Text of the President’s January 1 message is printed in Public Papers of the Presidents of the United States: Lyndon B. Johnson, 1968–69, pages 8–13. A detailed summary of this balance-of-payments program is in Current Economic Developments, Issue No. 796, January 2, 1968, pages 1–6. (Washington National Records Center, RG 59, E/CBA/REP Files: FRC 72 A 6248, Current Economic Developments)
Katzenbach’s meetings with European leaders are recounted in Documents 170–173. For Eugene Rostow’s account of his conversations with Japanese leaders, see Document 169. For Katzenbach’s and Rostow’s summary reports of their trips, see Documents 174 and 175.
On January 1, 1968, it was also decided to send Ambassador Philip Trezise to visit the Scandinavian capitals and Vienna to explain the new balance-of-payments program to these governments. (Telegram 91844 to Copenhagen and six other European posts, January 1; Johnson Library, Fowler Papers, International Balance of Payments—Classified Material: 1968 Balance of Payments—Cables, Box 44)
Additional telegraphic reports on these foreign visits are in Department of State, Central Files, FN 12 US, FN 16 US, OECD 7, and ORG 7 U. Many of these reports were in turn transmitted in CAP telegrams to the President at the LBJ Ranch in Texas. Copies are in the Johnson Library, National Security File, Subject File, 1968 Balance of Payments Program, [Page 481] Cables [2 of 2], Box 4. Numerous reports of foreign governments’ and press reactions to the new balance-of-payments initiative are in Department of State, Central Files, FN 12 US. First foreign reactions are summarized in Current Economic Developments, Issue No. 797, January 16, 1968, pages 1–5. (Washington National Records Center, RG 59, E/CBA/REP Files: FRC 72 A 6248, Current Economic Developments) A Department of Commerce summary of foreign reactions is attached to a memorandum from McQuade to Trowbridge, January 11. (Ibid., RG 40, Executive Secretariat Files: FRC 74 A 31, A–B) A CIA Intelligence Memorandum, “Effect on Foreign Countries of US Balance-of-Payments Measures” (ER IM 68–16), February 5, 1968, is in the Johnson Library, National Security File, Subject File, Balance of Payments, Vol. V [2 of 2], Box 3.
Documentation on additional contacts with members of Congress on the balance-of-payments program in January 1968 is ibid., Fowler Papers, International Balance of Payments 1968: B of P Operations, Box 5; ibid., Fowler Papers, International Balance of Payments 1968: B of P Position, Box 6; ibid., Fowler Papers, International Balance of Payments 1968: B of Payments: Tourism, Box 7; and ibid., National Security File, NSC History, 1968 Balance of Payments Program [Tabs 19–34], Box 54.
A narrative history prepared by the National Security Council, entitled “The Balance of Payments Program of New Year’s Day, 1968,” covers the origins, development, and execution of the balance-of-payments program. (Ibid., National Security File, NSC History, 1968 Balance of Payments Program [Tabs 1–3], Box 54) An accompanying chronology, including attached key annotated documents, is ibid.