119. Memorandum From the Chairman of the Cabinet Economic Policy Group (Blumenthal) to President Carter 1
- Measures to stem oil imports and improve exports
The Policy Review Committee of the NSC unanimously agreed on March 16 that strong actions to fight inflation and to improve our trade deficit (chiefly through limiting oil imports) are urgently needed to avert a possible international financial crisis connected with the failing dollar. The PRC minutes (attached at Tab A)2 reflect the unanimous view that there is an immediate need for a statement by you on new anti-inflation measures and on the possibility of Executive action to stem oil imports.[Page 353]
The Economic Policy Group3 met Monday, March 20, 1978, to discuss possible actions.4 We are sending you a separate decision memorandum on the anti-inflation measures considered by the EPG.5 The present memorandum deals with measures to improve the trade deficit.
All agencies recommend that you call in the Congressional leadership6 before your foreign trip7 and urge expedited action on the Energy Bill—and in particular on COET—in view of the mounting dollar crisis and associated domestic economic problems, and that you then make a public statement reflecting your discussion with the leadership. (Talking points and a draft statement are attached at Tabs B and C.)8
Agree to meeting9
However, two EPG agencies—DOE and DPS—dissent from the view that you should mention the possibility of administrative action on oil imports at this meeting and in the subsequent public statement. These agencies believe:[Page 354]
• that substantial progress in passing COET is not possible by May 1;
• and that mention of administrative action may disrupt negotiations on a natural gas compromise and will likely persuade Congress to shelve COET and allow you to take sole responsibility for raising domestic oil prices.
All other agencies (Treasury, State, CEA, OMB, NSC, and Commerce) endorse the PRC recommendation that you inform the leadership, and announce publicly, that the dollar crisis may force you to limit oil imports through administrative action if substantial progress on COET is not forthcoming by the end of April. These agencies believe:
• that the mounting dollar crisis could well compel early administrative action, and that in fairness the leadership should be told this as soon as possible;
• and that a firm, public commitment to early administrative action, in the event of Congressional stalemate, is now necessary to reduce the risk that the dollar may soon come under sudden and excessive selling pressures, possibly triggering increases in capital outflows, an OPEC price rise, an increase in domestic inflation, and a sharp rise in domestic interest rates, with consequent damage to the domestic economic recovery and to all elements of our foreign policy.
Mention possibility of administrative action (Treasury, State, CEA, OMB, NSC, and Commerce recommend)11
Avoid mention of administrative action (DOE and DPS recommend)
All EPG agencies agree that you should now call for a national policy to improve our export performance. We recommend that you direct Secretary Kreps to organize a Presidential Task Force and report to you by May 15 on how government policy in the following areas might be rationalized to enhance the capacity of U.S. business to sell its goods and services abroad:
• export financing
• export development
• government regulation
• research and development
• anti-trust[Page 355]
A draft statement on exports is attached at Tab D.12 You should know that this step may further dim prospects that Congress will accept the phased elimination of DISC proposed in our tax reform bill.13 However, the urgent need to address the trade deficit requires that we at least attempt to develop a coherent policy toward exports.
Treasury believes the statement on exports, to be credible in the dollar markets, should be made only in the context of a strong statement on limiting oil imports.
Agree to task force and export statement (all agencies recommend)14
- Source: Carter Library, Records of the Office of the Staff Secretary, Presidential File, Box 78, 3/24/78. Secret. Sent for priority action. Carter initialed “C” at the top of the page. Eizenstat discussed Blumenthal’s memorandum in a March 23 memorandum to Carter. (Ibid.)↩
- Tab A is attached but not printed; see Document 118.↩
- In attendance were the Vice President, Stu Eizenstat, Secretaries Blumenthal, Marshall, and Kreps, OMB Acting Director McIntyre, Ambassador Strauss, Ambassador Owen (NSC), CEA Member Gramley, Under Secretary of State Cooper, CWPS Director Boswoth, and DOE Assistant Secretary Alm. [Footnote in the original. Alvin Alm was the Assistant Secretary of Energy for Policy and Evaluation from 1977 until 1980.]↩
- Cooper provided his impressions of this meeting in a March 22 memorandum to Vance. (National Archives, RG 59, Office of the Secretariat Staff, Records of the Under Secretary of State for Economic Affairs, Richard N. Cooper, 1977–1980, Lot 81D134, Box 3, Memorandums from RNC to Secretary, Deputy Secretary, 78)↩
- A March 21 memorandum from Blumenthal to Carter contains the EPG recommendations on anti-inflation initiatives for Carter’s decision. (Carter Library, National Security Affairs, Brzezinski Material, Subject File, Box 16, Economic Policy Group Executive Committee: 1/78–3/80)↩
- Suggested list of members is at Tab B. [Footnote in the original.]↩
- Carter traveled to Venezuela, Brazil, Nigeria, and Liberia March 28–April 3.↩
- Tab B, attached but not printed, consists of an undated paper, “Talking Points for Use with Congressional Leaders, Protecting the Dollar by Acting on Oil Imports,” and another undated paper, “Suggested attendees for meetings on energy and the dollar.” Tab C, attached but not printed, is an undated paper, “Press Conference Statement.”↩
- Carter indicated his approval of this option, writing in the adjacent margin: “While I’m gone, you, Miller, Cy can brief 3 or 4 key members of Congress. J.”↩
- Carter wrote “any time after my trip—sooner/better” above this option.↩
- Carter wrote “I’ll decide before mtg.” above this option.↩
- Tab D, attached but not printed, is an undated paper stamped “Draft,” entitled “Proposed Statement by President Carter on the Need for a National Export Policy.”↩
- For the text of Carter’s January 20 message to Congress proposing a series of tax reduction and reform measures, see Public Papers of the Presidents of the United States: Jimmy Carter, 1978, Book I, pp. 158–184.↩
- Carter indicated his approval of this option. On April 11, Carter announced his anti-inflation policy before the American Society of Newspaper Editors in Washington. Among the measures he proposed was the creation of a task force on export promotion, which would be led by the Secretary of Commerce. For the text of Carter’s remarks, see ibid., pp. 721–727.↩