90. Memorandum From Secretary of the Treasury Fowler to President Johnson1
SUBJECT
- Balance of Payments Reprogramming on Tuesday, April 19
On last Tuesday we had a three-hour closed unofficial meeting for Principals only of the Cabinet Committee on Balance of Payments.2 The purpose of the meeting was to consider what additional measures might be programmed to gain additional savings in the order of at least $1.5 billion this year. This is desirable in view of the facts that (a) our trade balance is deteriorating both due to high activity here and the indirect costs of Vietnam and (b) the direct foreign exchange costs of Vietnam are rising. The first quarter will show a deficit at an annual rate of $2 billion plus in contrast to the $1.3 billion deficit in 1965—both figures on the “overall” basis we use. The outlook for the remainder of the year is for a substantial deficit that might well exceed last year’s.
I am attaching for your information the memorandum which was the basis of our discussion.3 Those in attendance include the following:
The Vice President
| Treasury: | Secretary Fowler |
| Assistant Secretary Trued | |
| Defense: | Assistant Secretary Robert N. Anthony |
| State: | Under Secretary Ball |
| Commerce: | Secretary Connor |
| Agriculture: | Under Secretary Schnittker |
| AID: | David Bell |
| Trade Negotiations: | Governor Herter |
| Budget: | Director Schultze |
| CEA: | Mr. Ackley |
| White House: | Mr. Bator |
| Federal Reserve: | Governor Robertson |
(Secretary McNamara was unable to attend at the last moment because of hearings on the Hill.)
[Page 256]The most significant aspect of the meeting was general opposition to any proposal for a tax on travel abroad as outlined in Item 3c of the attached memorandum on page 4, except for Treasury and Defense, who are keeping an open mind on the question. I think it would be fair to say that everyone else is definitely opposed.
However, even those opposed to a tax program on travel were in general agreement that the present situation was unsatisfactory and that something in the nature of a voluntary program to appeal to the American tourists to stay at home for the duration of the Vietnamese hostilities was well worth considering. This would put the treatment of travel on an equivalent basis to the voluntary programs for financial institutions and corporations.
Without some effective affirmative move to cut back substantially on the travel deficit, I can see in the attached program of possible measures additional savings in the order of magnitude of only $750 million.
We shall have to face up to decisions as to the announcement of the additional measures recited in the memorandum including whatever we decide on travel between now and the 20th of May when the official first quarter figures are announced.
Therefore, upon my return from the Inter-American Development Bank meeting in Mexico City next Thursday,4 I would like to sit down with you and some of your advisors and discuss this situation informally. Unless you have some preference to the contrary I believe these informal discussions of new programming are preferable to official meetings of the Cabinet Committee on Balance of Payments.
For your further information on the travel problem I am attaching a memorandum worked out here in the Treasury Department entitled “Tax on Tourist Travel”.5 This has not been put forward as a concrete proposal by Treasury but as a contingency measure describing the most suitable tax for that purpose if a tax restraint should ever be determined to be necessary.
- Source: Johnson Library, Bator Papers, Balance of Payments, 1966 [2 of 2], Box 15. Secret. The memorandum was sent under cover of a handwritten note to Bator, April 23, in which Fowler wrote: “The President reviewed these Saturday afternoon—April 23 in our conference. I am transmitting them for his additional reference or for his files.”↩
- No other minutes of this meeting, summarized in the memorandum printed here, have been found.↩
- Not attached, but presumably it is Document 89.↩
- April 28.↩
- See Document 87.↩