172. Editorial Note

On June 9, 1973, Secretary of the Treasury George Shultz assembled a package of briefing materials and recommendations for President Richard Nixon on a new economic program to address the problem of inflation. He proposed two options: "Option I, continuing the present program with some strengthening" and "Option II, proposing a freeze and return to comprehensive and mandatory controls," including export controls on selected agricultural products. Cost of Living Council Director John Dunlop, President’s Assistant for International Economic Affairs Peter Flanigan, Council of Economic Advisers Chairman Herbert Stein, and Shultz all favored Option I. Office of Management and Budget Director Roy Ash and former Secretary of the Treasury John Connally (who had been serving as an unofficial emissary of and adviser to President Nixon for several months) favored Option II. Anne Armstrong, the President’s Counselor, conceded the possible need for some controls, particularly on food prices. "Short-term [Page 648]limitations on commodity exports may be justified, therefore," Armstrong wrote, "despite the price we will pay in loss of confidence from our purchasers abroad." Vice President Spiro Agnew favored the status quo; Secretary of Commerce Frederick Dent also favored staying the course. Federal Reserve Board Chairman Arthur Burns and Deputy Secretary of the Treasury William Simon rejected both options and each presented alternative approaches. Secretary of Agriculture Earl Butz, citing recent sharp declines in grain prices, counseled that "it may be desirable to go slow on interfering with the export market. There are so many negatives involved in action of this kind that I am extremely reluctant to initiate controls unless absolutely necessary."

In outlining his reasons for opposing Option II, Shultz argued strongly against export controls, which he asserted "would wreak havoc with several aspects of our foreign policy. It would interrupt and perhaps reverse the long-awaited improvement in our trade balance. It would undermine the position of the dollar in the foreign exchange markets and dissipate the chances of creating a new international monetary system! It would put us in an extremely disadvantageous position for trade negotiations; both negotiations with the EEC on compensation for damages from the Communities’ enlargement currently underway and the multilateral trade negotiations scheduled to begin in the fall. It would adversely affect our reliability as a source of supply in the eyes of present and potential foreign customers. And it might well cause complications in the development of ties with Communist countries. In short, it would push us toward a ’closed society’ just when we wish to enhance the cause of world peace by creating a more open world." (National Archives, Nixon Presidential Materials, NSC Files, Box 290, Agency Files, U.S. Treasury, Vol. III, Jan. 1972–Sept. 18, 1973)