Foreign Relations of the United States, 1977–1980, Volume III, Foreign Economic Policy

139. Memorandum From John Renner of the National Security Council Staff to the President’s Assistant for National Security Affairs (Brzezinski)¹

Washington, June 30, 1978

SUBJECT

• US Current Account Deficit

In response to your tasking memo of February 15 (at Tab A),² an interagency group under the chairmanship of Tony Solomon has been working steadily to arrive at a reliable estimate of the probable magnitude of future current account deficits and the probable impact on the dollar.

The report of the Solomon Group is virtually finished. The principal conclusions are that, in the absence of major policy changes, the US current account position will not improve and may deteriorate over the next five years and that as a consequence the dollar will depreciate further.

Blumenthal and Solomon are worried this report will leak to the press and cause a run on the dollar. Consequently they are considering not sending the President the report but to brief him orally.

It does not make much difference whether the President is told orally or in writing about the findings of the Solomon Group. But as the future of the US current account position and the repercussions for the dollar are among the most important international economic issues that the President needs to focus on, it is essential that Blumenthal and Solomon brief the President promptly and certainly before the Summit. If you agree, I will take this line with Solomon.³

What should the next steps be?

Faced with the prospect for large current account deficits over the next five years and additional pressure on the dollar, the question is whether anything can be done about it.

I think there are additional steps that can and, given the adverse consequences of a continually falling dollar, definitely should be taken. There is much that could be done, given sufficient resolve, to reduce our imports of oil, to expand our exports, and otherwise increase the inflow of foreign exchange. But these actions would require a reordering of our national priorities.

To prepare to take such measures, I propose to start talking to people around town about a draft tasking memo (Tab B).⁴ There probably will be opposition. Nonetheless, I think it essential that the Administration move in this direction. But before doing battle, I want to make sure I have your support.⁵

1. Source: Carter Library, National Security Affairs, Brzezinski Material, Brzezinski Office File, Subject Chron File, Box 92, Finance/International: 1–6/78. Secret. Sent for action. Sent through Owen. Brzezinski initialed at the top of the page.
2. Printed as Document 106.
3. Brzezinski underlined the last part of this paragraph beginning with “essential that Blumenthal,” and he indicated his approval of this recommendation.
4. Tab B, attached but not printed, is an unsigned draft memorandum from Brzezinski to the Secretaries of State, the Treasury, the Interior, Commerce, Transportation, and Energy, the OMB Director, the CEA Chairman, and the President’s Assistant for Domestic Affairs and Policy on the “US Current Account Deficit and National Security Repercussions.” The memorandum, citing the need to “take prompt steps to reduce substantially the deficit,” called for the intensification of the development of a national export policy; establishment of an interagency task force on ways to reduce oil imports; and IMG recommendations on additional measures “to increase the inflow of foreign exchange.”
5. Brzezinski indicated his approval of this recommendation, writing in the adjacent margin: “if both you & HO think it a good way to generate the needed response. ZB.”