Foreign Relations of the United States, 1964–1968, Volume IX, International Development and Economic Defense Policy; Commodities

82. Letter From the Administrator of the Agency for International Development (Gaud) to the Director of the Bureau of the Budget (Zwick)¹

Washington, November 25, 1968.

Dear Charlie:

I am sorry to say that I cannot agree with your proposal to reduce the A.I.D. budget request for FY 1970 to $2.1 billion NOA ($2.0 billion on the new BOB basis). Such a figure is clearly too low both on foreign policy grounds and in terms of the merits of the programs you suggest cutting back.

Foreign Policy

Throughout his Administration the President—despite Congressional hostility and cuts—has consistently emphasized the importance of an adequate aid program. For FY 1967 through FY 1969 he requested economic aid appropriations of $2.469 billion, $2.630 billion and $2.499 billion respectively.

After long study and with considerable misgivings as to whether we were short-changing the Alliance for Progress and Vietnam, I proposed a lower amount—$2.399 billion—for FY 1970. You now suggest that this be further reduced to $2.111 billion, which would be $422 million below the average of the past three years.

This would be no minor zig or zag. It would constitute—and would be read as—a major shift in policy.

Why such a policy change? Surely not because the need for aid is decreasing. It is increasing. Surely not because the President’s convictions have changed. His statements indicate the contrary. Surely not because of domestic political pressures. These the President had to take into account when he submitted his FY 1969 request of $2.499 billion, “the lowest request in history”, which he vigorously defended before the Congress and the public.

The President should continue to hold the high ground on which he has stood throughout his term of office. He should do so

• —to reaffirm to the American people, as he has for the last five years, that foreign aid is important to our security and to international cooperation in building a better world;
• —to make it clear to the developing countries that he means it when he says the United States will do its best to help them modernize their societies and give their people a better life; and
• —to convince other advanced countries, who are disturbed at our slipping to seventh place among aid donors, that he is not recommending to his successor that the United States turn its back on its responsibilities toward the developing world.

His budget for FY 1970 gives the President an opportunity he will never have again: an opportunity to tell the nation and the new Administration what he believes is essential to the public interest. It would be a great disservice to the President to recommend to him a budget which undercuts everything he has said on development over the past five years.

Moreover, in proposing to cut my request so severely, you have given insufficient weight to several considerations relating to the transition from this Administration to the new Administration which were outlined in my earlier submission.

A transitional budget should leave options open. The President-elect should be free to continue the present aid program pending further study, to redesign and reemphasize the program as he sees fit, or to cut it back as the result of a deliberate foreign policy decision.

Your proposal presents the President-elect with a sharp cutback in foreign aid. As a practical matter this gives him no options. For it would be next to impossible for him to increase the aid budget. Your proposal would therefore lead to a continuing downward trend in aid appropriations, and the end of President Johnson’s hopes for a more enlightened policy towards the less developed nations.

Finally, your proposed budget wrongly implies that United States concern for certain regions is flagging. Table 2,² which breaks down the aid program by regions, shows that your proposal would provide sufficient supporting assistance for Vietnam, and maintain our programs in India, Pakistan and Turkey only slightly below their historical levels. This is well and good.

But your proposal also suggests that our commitment to the Alliance for Progress is waning, as reflected in a request 21 percent lower than last year; that we wish to cut back on supporting and other assistance to our friends in East Asia, as reflected in a request 26 percent lower than last year; and that, in concentrating aid to Africa on a few major countries and regional activities, the United States is actually backing off from Africa as a whole. These implications reflect neither United States policy nor President Johnson’s own views.

Specific Programs

I am convinced of the merits of the specific programs which you suggest cutting. I believe our budget request should be approved in toto. If, however, A.I.D. must accept some further squeeze because of the government-wide drive to hold down the next budget, I strongly urge restoration of at least $236.9 million, to a total NOA of $2.347.9 billion ($2.236.9 billion on the new BOB basis).

Thirty million dollars to my requested restoration results from your shifting from DOD to the Vietnamese Government responsibility for half of the piaster funding for the Rural Development Cadres in CY 1970. While you have made an appropriate increase in A.I.D. support for the Vietnamese economy proposed for FY 1970, you have not increased total A.I.D. NOA above the planning figure to compensate for the saving to the DOD budget.

The Annexes explain in detail the specific restorations which I am urging, and the reasons why your proposed cuts are unwise.³ Here I will comment briefly on some of the largest or most important of these items.

Your proposed slashes in the Alliance are so large as to call into question the entire United States commitment in this hemisphere. Moreover, you propose to cut most deeply into the highest-priority part of the Alliance program—program loans to the large Latin American countries.

• —The balance of payments grounds for the Brazil loan are strong and agreed to by multilateral agencies. The full amount requested is needed for continuing U.S. influence on crucial development policies.
• —The balance of payments grounds for the Chile loan include more uncertainties, but the severe fiscal strains of the current drought require us to be in a position to finance, before the election, the full calendar 1970 estimate underlying our budget request.
• —In Peru, restoring $8.7 million in sound projects and technical assistance, even without the program loan, would permit a range of responses to a favorable evolution of the new government’s policies.
• —In Bolivia, an SA loan for local currencies is needed as in earlier years; PL 480 is not a realistic substitute in view of usual marketing requirements for wheat.
• —The small grant fund for Social and Institutional Development is an important new initiative for Title IX purposes, and it would be unwise to discourage action on this neglected front simply because the activities the fund will support a year from now are not yet fully defined.

You have taken the absurdly low FY 1969 level for Korea—a product of indefensible Congressional cuts, not political or economic sense—and used it as a base for a $15 million reduction in the request for FY 1970. Our proposed SA and DL, levels are both needed for a continued orderly phase out of aid to a most successful developer and firm ally.

We cannot afford to assume that the proposed cut in Thailand will be politically feasible, especially since it is based on presumptions of Thai financial capability which have not yet been fully analyzed.

Relief needs in Nigeria are already expected to cost A.I.D. $12–$15 million or more in FY 1969. Whenever the war ends, relief needs, rehabil-itation requirements, or both will certainly require more than $10 million SA you have cut from our FY 1970 proposal.

We urge the restoration of $6 million for Ethiopia for precisely the developmental activities in agriculture and livestock production the United States has been encouraging.

In Ghana, the outcome of the debt rescheduling, combined with decreasing needs for PL 480 commodities, have recently reinforced the grounds for the recommended size of our program loan.

As a result of Congressional cuts we have been able to give no project aid at all to Turkey in FY 1969. Your proposed cut would limit us to a single project in FY 1970, which I believe unwise.

We believe the $15 million cut from the India Coop Fertilizer Plant must be largely restored in order to make the project viable.

Research and Institutional Grants should be restored to $10 million each. We have clear Congressional authorization for both these programs, and they are fundamental to improving the quality of our overseas technical assistance over the long run. The 211(d) grants help build staff and training capacity in fields where they are inadequate among American universities, and research is one way of making use of such capacity where it exists.⁴

It is clear that IBRD calls for the Indus project will exhaust any carryover from the Contingency Fund this year. Considering the obvious uncertainties in Nigeria, the Dominican Republic, Guatemala, Bolivia, Peru, and even locusts in Africa, it would be prudent to restore the fund to a more normal $50 million level.

Conclusion

To me, it is unthinkable that President Johnson’s last budget would not re-emphasize and reaffirm the policies for which he has fought throughout his term of office. It is equally unthinkable to suggest that he present his successor with a budget which all but foreordains a further retreat from our responsibilities to the hungry and disadvantaged peoples in the developing world.

I strongly urge you to reconsider before recommending to the President this deep cut in the A.I.D. budget request.

I have not had an opportunity to discuss your proposed cuts with Secretary Rusk and Nick Katzenbach. This letter is submitted without prejudice to whatever views they may care to express.

Sincerely,

Bill

1. Source: Washington National Records Center, RG 286, AID Administrator Files: FRC 73 A 518, FY 67 and FY 69, BUD Budget (October–December) FY 1969. Confidential.
2. Not found.
3. Not found.
4. Section 211(d) of the Foreign Assistance Act of 1966 authorizes the President to make funds available up to $10 million “to research and educational institutions in the United States for the purpose of strengthening their capacity to develop and carry out programs concerned with the economic and social development of less developed countries.” The Foreign Assistance Act of 1966, P.L. 89–583, was approved on September 16, 1966; 80 Stat. 797.