125. Memorandum From Charles Cooper of the National Security Council Staff to Secretary of State Kissinger 1

SUBJECT

  • Economic Assistance for Indo-China

Four Congressional actions are required to maintain the minimum level of economic support for Indo-China essential during the next 12–18 months.

  • —A new AID development loan of $60 million from worldwide funds.
  • —An FY–74 supplemental appropriation of $54 million.
  • —A continuing resolution (CRA) effective in July allowing spending at about a $700 million rate (compared with the $500 million in appropriations this fiscal year including the above supplemental). This will be very difficult.
  • —Adequate FY–75 authorizations and appropriations, at least at $700 million and preferably our full $793 million request.

There are two policy issues to decide, one now and one later. This memo also suggests a scenario for your involvement with the Congress.

Development Loan. In January you decided to provide adequate economic support through June by making an additional AID loan and by seeking the $54 million supplemental.2 These decisions were taken to offset the effects of the Congressional cuts in our FY–74 request from $632 million to $450 million. The sharp increase in world prices and the slowness with which assistance from other donors has been forthcoming also makes this funding essential now.

AID Administrator Parker has consulted widely on the Hill on these issues. Senators Humphrey and McGee, who normally support Vietnam aid, argue that diverting the $60 million from the worldwide program to Vietnam will make if difficult to get support for FY–75 AID [Page 520]appropriations. Humphrey has even hinted that he might not manage the AID bill next year in the face of such a loan. On the House side Passman argues the loan should be even larger, consistent with his basic philosophy that all aid should be in loan form. Passman was extremely helpful in his hearing on the supplemental today.

Parker is most reluctant to proceed and has developed a scenario to hold off the loan and use it as a bargaining tool to get the full $54 million supplemental and an adequate continuing resolution (CRA). AID would keep the loan funds available and tell Humphrey we will go ahead with the loan only if the supplemental is delayed beyond early May or the CRA is too low. A cable reflecting Parker’s view is attached at Tab D.3

Although the AID strategy appears desirable at first blush, there are some real shortcomings:

  • —The loan is the only piece of additional money for Vietnam over which we have full control. There is no legal requirement for additional Congressional approval. Everything else has to go through Congress and is therefore at risk as to amount and timing.
  • —The South Vietnamese need a sign of our support soon. Although all AID funds will not be exhausted until May, the Vietnamese do not believe they can wait until the last moment to take action. The good GVN economic policies of the past several years could be overturned next month if the GVN panics on the economic front.
  • —Even after Parker gives the go-ahead a month or more will elapse before funds are actually available to the Vietnamese.
  • —Delay may increase Congressional leverage more than it increases ours. As the moment for action on the CRA and the FY–75 level gets closer, Congress has a more immediate threat to take the money out of next year’s level.
  • —Experience indicates that Congress has a short memory. The $50 million AID loan made last July is basically forgotten.

Bill Timmons believes you must not underestimate Humphrey’s strong feeling against the loan and that we should go ahead now only if you can bring Humphrey around.

If you can bring Humphrey on-board you should tell Parker to make the loan soonest—preferably this month—to allow the maximum time for Congress to forget about it before FY–75 levels are considered.

You should, therefore, talk with Senator Humphrey as soon as possible emphasizing the worldwide political importance of adequate Indo-China funding and trying to get him to moderate Congressional objections to the loan.

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Should you decide to go ahead with the loan, you could relieve AID and Parker of some of the heat by giving Parker a piece of paper he can use on the Hill to take AID off the hook—a draft is at Tab A.4

Recommendation

That you

Call Senator Humphrey (Talker at Tab B).5

Instruct Parker to proceed6

Level of FY–75 Request. Ambassador Martin has proposed a $250 million budget amendment to increase the amount requested for Vietnam for FY–75 from $600 million to $850 million. Martin also argues for catering to Congressional desires for reduced Indo-China assistance by promising an end to such assistance in two years if $1.5 billion is provided in FY–75 and 76.

The issue is whether seeking an even larger increase in Indo-China funding for FY–75—with or without the promise of a two-year phase-out—helps or hurts our ability to get at least essential funding from Congress. Some in Congress who will support a bare-bones program are strongly opposed to funding foreign programs more lavishly than domestic programs. The real issue is whether you prefer to defend a bare-bones program or to increase the request to allow more room for maneuvering.

You should discuss the issues of a higher request and of a specified phase-out period, more like five years than two, with such key Congressmen as Humphrey, Inouye and Passman before making a decision.

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There is no need to decide this issue now, although the sooner the better. Ambassador Martin may be coming in for consultations in about a month and this issue can slip until he arrives. This gives you more time to consult with Congress and use the need for an increase in the budget as a lever to get support for the current request level.

Recommendation

That no change be made in the FY–75 request level at this time.7

Approve

Change from $793 million to $943 million

$1,043 million

Continuing Resolution Authority. The CRA may be the name of the game this year. Congress is unlikely to complete action on foreign assistance before the November elections, and we may prefer that it not do so. This could well be another year in which we operate on CRA all year as in FY–73. Getting an adequate CRA level for Indo-China economic assistance (and MAP for Cambodia) may be not only the most difficult part of the struggle this year but also the most important. You should be laying the base for this struggle with the key members of the appropriations committees. We will suggest specific tactics as the June CRA action date approaches.

Congressional Scenario. The following early actions are recommended:

1)
Talk to Humphrey this week as indicated above on development loan and overall question of increased aid requirement (Talker Tab B).8
2)
Before leaving for Moscow you might call the key appropriation leaders (Passman, Mahon, McClellan, and Inouye) to seek their support for the four Indo-China funding actions and to urge particularly that they work to avoid any caucus action which would seriously tie your hands (Talker at Tab C).9
3)
They will want you to go public in support of Indo-China funding. We could work with Peter Frelinghuysen to arrange a public House Foreign Affairs Committee hearing on assistance to Indo-China in early May.10

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, NSC Institutional Files (H–Files), Box H–239, NSDM 210, Policy Papers. Confidential. Sent for action. Smyser and Kennedy concurred. Kissinger asked Cooper to prepare this memorandum during a March 19 meeting of the NSC Deputies. “It is impossible to imagine,” Kissinger remarked during that session, “that we invest ten years and all of the lives and resources involved to let it all go down the drain for a $100 million.” Kissinger concluded: “I will do whatever is required. Lay out a game plan for me and get it to me quickly.” (Ibid., Kissinger Office Files, Box 19, McFarlane Chronological File, January–March 1974, 2) Kissinger discussed Cooper’s memorandum during his March 22 staff meeting. (Ibid., RG 59, Transcripts of Secretary of State Kissinger’s Staff Meetings, 1973–1977, Entry 5177, Box 3, Secretary’s Staff Meetings)
  2. See Document 123.
  3. Telegram 54175 to Saigon, March 18, attached but not printed.
  4. Attached but not printed.
  5. Undated talker for Senator Humphrey attached but not printed. Kissinger did not check either the Approve or Disapprove option; an illegible handwritten notation appears above this recommendation.
  6. Kissinger checked the Approve option. In the attached memorandum to Parker, April 15, Kissinger stated: “The maintenance of reasonably stable economic conditions in Indo-China is essential in this critical period during which we are trying to build a stable structure of peace in that area. This essential objective is now threatened by the deterioration of the economic situation in South Vietnam for reasons beyond the control of the Government of Vietnam. AID funds available for South Vietnam from Indo-China reconstruction funds have now been virtually depleted because of the financial consequences of the steep increase in world market prices. Because of this emergency you should negotiate a $60 million loan on maximum concessional terms from worldwide assistance funds as soon as possible to maintain economic viability in South Vietnam. This loan in no way diminishes the need for the supplemental funding we are seeking in FY–74 or the full request for FY–75 appropriations.”
  7. Kissinger did not check any of the options; a handwritten notation above this recommendation reads: “OBE.”
  8. Kissinger did not check either the Approve or Disapprove option.
  9. Kissinger did not check either the Approve or Disapprove option. Undated talker for key Appropriations Committee members attached but not printed. Kissinger was in Moscow March 24–28 to discuss the scheduled summit.
  10. Kissinger did not check either the Approve, Disapprove, or Other option.