50. Memorandum From the President’s Special Assistant (Rostow) to President
Johnson1
Washington, June 1, 1966, 4:45 p.m.
Mr. President:
Here are the key points that Dave
Bell would like you to make with Fulbright:
- 1.
- The reversal of the 5-year authorization
- 2.
- The rise in interest rates
- 3.
- The limitation on the number of countries
- 4.
- The imposed 15% transfer to the World Bank, which amounts to a
reduction of development loan funds by $125 million
- 5.
- Other money cuts.
Attachment2
PRINCIPAL POINTS ON FOREIGN AID BILL
- 1.
-
Five year authorization request reduced to one year.
—This represents a step backwards even from the present bill.
In 1961 and 1962 the Congress authorized development loans
and the Alliance for Progress for 5 years and 4 years
respectively.
- 2.
- Raising the interest rate on development loans after the grace
period (10 year maximum) from 2–1/2% to the long term Treasury
borrowing rate (now about 4.8%).
- —If the developing countries could afford to borrow on
commercial terms, they would not need economic
aid.
- —Our low interest rates were carefully worked out with
the advice of such experts as Eugene
Black and George Woods to meet the needs of
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developing
countries during the early stages of their development.
They have twice been increased by the Congress (in 1963
and 1964) and are already higher than they should
be.
- —While our rates are increasing, those of others are
decreasing. The U.K. makes some development loans
without interest and the Canadians, who have a minimum
rate of 3/4%, have told us privately they intend to do
likewise.
- 3.
-
Limiting to 10 the number of countries to which development
loans may be made, and to 40 the number of countries to
which technical assistance grants may be made.
- —Both this year and next we expect to make development
loans to some 19 countries and give technical assistance
to 48 or 49 countries.
- —Decisions as to which, and how many, countries
received aid should be made on grounds of policy and not
arithmetic.
- —If limitations such as these were absolute they would
not only prevent the President from taking advantage of
changing circumstances (such as in Indonesia), but would
also severely limit his freedom of action—primarily in
Africa but also in the Near East and South Asia.
It is understood that the Committee is prepared to relax
these numerical restrictions by an amendment (as yet
undrafted) permitting the President to exceed them if he
presents specific proposed actions to the Foreign Affairs
and Foreign Relations Committees for approval. This would be
satisfactory if the proposal avoided constitutional
questions by consisting merely of a requirement for
notification and a waiting period by the President before he
takes action.
- 4.
- Allowing 15% of available loan funds (up to $125 million) to
be used only by transfer to the World Bank.
- —Such transfers are authorized under Section 205 of
the Foreign Assistance Act, but that provision has never
been effective because each year it has been blocked by
a rider in the appropriations bill.
- —Since there is no reason to believe that an
appropriations rider can be avoided this year, this
amendment is tantamount to a cut of $125 million in
development loan funds.
- —Even if the rider were eliminated, the amount of
funds to be transferred to the World Bank should be
determined by appropriate circumstances and not by a
mathematical formula.
- 5.
- Money cuts.
- —The only cut so far has been $45 million in
development loan funds.
- —Other cuts are expected, especially as the Committee
tentatively decided when it was considering the Vietnam
supplemental to reduce the FY 67 program by the $275 million requested
for Vietnam in the supplemental for FY 66.
- —The President’s budget request is lean and tight; it
cannot afford substantial cuts.
