190. Memorandum From the President’s Special Assistant (Rostow) to President Johnson1

Mr. President:

To give you a feeling for what lies ahead, I enclose two working documents:

  • —a scenario for negotiation with the Central Bankers of the Gold Pool (Tab A);2 and
  • —a draft communiqué indicating what we would like to be able to announce on Sunday night. (Tab B)3

On page 3 of the first document (para. 6) there is an outline of what might be in a Presidential statement on the occasion of the communiqué.

After we met with you, Joe talked to several of us about the attitude of the Hill with which he has been dealing, and the attitude among the Central Bankers.

He describes the attitude on the Hill as one of almost anarchistic willingness to pull down the temple around their ears on the grounds that our budgetary expenditures are out of control. He feels that the Europeans have the same kind of feeling and cannot understand that our Executive Branch and Congress are incapable of generating a tax-expenditure policy that would keep us in reasonable order.

He is almost in despair about being able to negotiate a package without some sign that a tax increase is at least over the horizon; and he is in despair about getting a tax increase unless there is some kind of commitment to expenditure limitation.

I know enough to know that I have no competence in figuring out how this nagging political problem can be solved. It obviously goes to the heart of our nation’s capacity to carry its external commitments; maintain the world trade and monetary system; and avoid a serious domestic breakdown in our economy.

But I did want to report to you this further conversation.

  1. Source: Johnson Library, National Security File, Subject File, Balance of Payments, Vol, V. [2 of 2], Box 3. Secret; Sensitive. A handwritten notation next to the dateline on the source text reads: “Rec’d 5:50 p.”
  2. This undated strategy paper, drafted by Fried and entitled “Resolving the Gold Issue,” is not printed.
  3. This undated paper is not printed.