421. Memorandum From the Director of the Office of Emergency Preparedness (Lincoln) to President Nixon 1

SUBJECT

  • Receipts in Fiscal Year 1971 from Stockpile Sales

The Bureau of the Budget has informed me of your decision that OEP should seek a minimum of $1 billion in receipts in FY 1971 from stockpile sales.2

The purpose of this memorandum is to outline measures devised to maximize receipts in FY 1971 (a much more difficult task than maximizing sales). This memorandum also discusses the problems likely to be encountered by the Administration as a result of the proposed actions. Such discussion should assist in an appraisal of how firmly the Administration should commit itself at this time toward seeking $1 billion in stockpile receipts in FY 1971.

In brief, about a half billion dollars of receipts in FY 1971 (including those in the current GSA estimate)3 could be produced by measures which are not inconsistent with maintaining a stockpile concept or with existing stockpile legislation. Approximately an additional half billion of receipts in FY 1971 might conceivably be achieved if the Administration is willing to take more drastic action which would, in effect, do away with the stockpile concept. Any substantial acceleration of [Page 1038]stockpile disposals would result in severe Congressional and industrial resistance. Also, any substantial acceleration of certain stockpile disposals would produce strenuous objections from friendly foreign countries.

A proposal for stockpile sales and other actions to accomplish $1 billion of receipts in FY 1971 is attached. I must state very frankly, however, that I believe the prospects of achieving this $1 billion of receipts in FY 1971 are remote.

One can well ask why $1 billion of receipts cannot be readily achieved from a $6.7 billion stockpile book value. A significant reason is that the previous Administration stripped the stockpile of most of its readily disposable assets other than the remaining nickel and copper. The previous Administration also tied up some of the assets (still carried in the $6.7 billion book value) in long-term arrangements—e.g., an agreement with the aluminum industry which provides for purchases of aluminum extending over a 14-year period.

Undoubtedly, the stockpile actions of the previous Administration have intensified the concern of the Congress. In 1967, Senators Russell and Symington, incident to an OEP confirmation hearing,4 said that they viewed with apprehension the frequent lowering of the estimates of what is needed in the stockpile for national emergencies, believing the reductions to be inspired by a desire to accommodate economic considerations. During my confirmation hearing, the Senate Armed Services Committee asked to be consulted on and to be kept fully informed concerning stockpile matters. Chairman Philbin, of the House Subcommittee, has repeatedly asked to be kept continually informed concerning proposed stockpile disposals. Immediately following the recent release of stockpile nickel, he specifically asked us to keep him fully advised of our actions on nickel.5 There is continuing Congressional concern that the Executive Branch will thwart the intent of Congress in the Stock Piling Act by such actions as making unwarranted releases for “the common defense.”

Congressional concern is not limited to the Armed Services Committees. The Interior and Insular Affairs Committees also are concerned and they give particular attention to the views of domestic industry.

At all times, we are hobbled by Congressional reluctance to pass the legislation necessary to disposal of excesses, by industry’s frequent reluctance to support disposal bills or to buy, and by foreign policy considerations. We also are bound by the Stock Piling Act which provides [Page 1039]that disposals must be made in such a way as to protect the United States against avoidable loss and to protect producers, processors, and consumers against avoidable disruption of their usual markets. There is obviously a need for obtaining and keeping the confidence and cooperation of both Congress and industry if we are to mount a large scale disposal program to maximize receipts.

Pertinent to the reaction of Congress, industry, and the public are two immediate policy questions arising from possible stockpile actions by the Executive Branch:

(1)
Does the Administration wish now to take actions in a way that might be widely interpreted by Congress and industry as abandoning the stockpile concept?
(2)
Closely related to (1), does the Administration want to begin dealing with the stockpile in a way significantly and obviously inconsistent with the national security justification for continuation of oil import controls which is contained in the report of the Cabinet Task Force on Oil Import Control which you are about to receive and which will be widely discussed?6

I have not raised here the 1968 Presidential guidance,7 based on NSC study, on which stockpile objectives are now calculated, nor the levels of the objectives themselves, nor any details of national security implications. A new study might result in some significantly reduced stockpile objectives, but it probably would not help our receipts from stockpile sales in FY 1971.

I stress that the contents of this memorandum and its enclosure are estimates and judgments. They are the best I can now make, consulting with my staff and other agencies on very short notice—and they are far from certainties. Such developments as strikes, foreign disturbances, changes in the level of economic activity, and shifts in industry and Congressional attitudes may significantly change our projections.

OEP will press forward, assisting GSA which is the action agency for legislation and sales, to begin execution of the FY 1971 sales plan outlined in the enclosure. Preparatory actions on the first half billion can go forward now. Final decision, needed from you, on the more drastic actions such as releases for the common defense, can be delayed for a while.

G.A. Lincoln 8
[Page 1040]

Attachment

PROPOSED STOCKPILE SALES AND OTHER ACTIONS TO ACCOMPLISH RECEIPTS OF $1 BILLION IN FISCAL YEAR 1971

All figures are approximate estimates subject to significant variations.

[Page 1041]
Approximately the first half billion dollars Million Dollars
1. Estimate of receipts provided by GSA to BOB for FY 1971 budget. 221.6
2. Proceeds from quickly saleable material if tungsten, cobalt and cadmium disposal bills pass Congress. 125
3. Cancel all stockpile acquisitions and upgrading, and defer, where feasible, receipts from sales until FY 1971. 50
4. Place Treasury receipts from sales of silver in general fund, rather than coinage fund. (Treasury likely to object.) 60
5. Sell tin for which we have Congressional authorization. (State has objected thus far, because of likely repercussions in Bolivia.) 30
6. Sell rubber for which we already have Congressional authorization. (An OEP reduction in stockpile objective would be required. State may be expected to oppose.) 40
Subtotal (approximately) 525
Approximately the second half billion dollars Million dollars
7. Divert to commercial sale the copper scheduled for delivery to the DPA inventory in FY 1971 in payment against a DPA advance. (This action will continue the large deficiency in the copper stockpile, which now has less than two months normal consumption. Congress, which was critical of the previous Administration’s sales of copper, and which was informed in 1967 of this scheduled supply, may raise new objections.) 25
8. Attempt to sell in FY 1971 the rights to the remaining copper due to be delivered to the U.S. Government under the above contract in FY 1972-1975. (See comment on No. 7, above.) 75
9. Presidential conversion to cash sale of the recent loan of stockpile nickel. (This action will continue the deficiency in the stockpile, which now is a three months supply at normal consumption rates.) 25
10. Presidential release of the remaining nickel and copper “for the common defense.” (This action would require legal justification which, in turn, probably depends in part on the existence of a market shortage of these materials.) 335
11. Presidential release of antimony, chrome ore, fluorspar, platinum group metals, and other small miscellaneous saleable materials, “for the common defense.” (See comment on No. 10, above.) 125
Subtotal for items more sensitive from a national security and Congressional standpoint. 585
Grand Total (Approximately) $1,100
  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 396, Stockpile. Confidential; Sensitive. Attached to a December 29 transmittal memorandum from OEP Deputy Director Russell to Flanigan, which indicated that the memorandum had been dictated by Lincoln over the phone from Colorado. Russell called Flanigan’s attention to two points discussed with Lincoln, but which were not included in the memorandum to the President: “(a) Does the Administration wish to subject itself to allegations that it has placed this country in a position to be ‘blackmailed’ by those foreign countries which are the sources of the critical materials which our country or this continent do not produce in sufficient quantity? (b) Is the Administration prepared to risk identifying itself as allegedly in favor of jeopardizing national security, disrupting the market, and injuring domestic industry and foreign countries when there is a substantial likelihood that Congress and industry will prevent the accelerating of stockpile disposals?” These memoranda were transmitted to Kissinger in a December 30 memorandum from Haig, who noted the possible disadvantages and agreed with Lincoln that it was unlikely $1 billion of sales from the stockpile could be realized.
  2. Not further identified. An earlier December 27 draft of Lincoln’s memorandum, however, cites Lincoln’s November 26 memorandum to Kissinger ( Document 416) as a reference. (National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 267, OEP, Volume II 11/69-12/71)
  3. In the December 27 draft (see footnote 2 above), Lincoln reported that GSA had estimated $221.6 million in its submission to the Bureau of the Budget.
  4. Not further identified.
  5. Presumably a reference to the President’s December 15 approval; see Document 419.
  6. Documentation on this Cabinet Task Force is in the National Archives, Nixon Presidential Materials, White House Central Files, Subject Files, Federal Government.
  7. See footnote 4, Document 415.
  8. Printed from a copy that indicates Lindjord signed for Lincoln.