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

210. Memorandum From the Special Representative for Economic Summits (Owen) to President Carter¹

Washington, April 23, 1979

SUBJECT

• US Economic Policy—The View from Abroad (U)

1. I’m struck by the difference between the way US anti-inflation policy is seen abroad and at home. This difference suggests how the Administration could posture itself to greater advantage domestically on the issue. (C)

2. Most officials of industrial countries I met at the recent Tokyo Summit Preparatory conference seem to believe that if we stick with our tight fiscal and monetary policies, this will eventually bring US inflation under control, as comparable policies did in Germany and Japan in the 1970s. Since tight fiscal and monetary policies take time to bite, the officials I talked to were not all that excited about how effective our guidelines are in the next few months. (C)

3. Coming back to the States, I find the US media by contrast, focusing largely on day-to-day developments regarding the guidelines, as though these—rather than underlying fiscal and monetary policies—were the heart of our anti-inflation policy. Since the guidelines aren’t yet producing results, this leads to charges in the media that our anti-inflation effort has “failed”. (C)

4. Of these two views, that of the foreign observers is a good deal closer to the truth. It would be to our advantage to get that view into the US public domain: You and senior officials should find occasion to point to the strength of the dollar on foreign exchange markets as evidence that other countries believe present US fiscal and monetary policies will eventually bring inflation under control. If we can get the US media and public to take this view seriously, short-term zigs and zags in prices and wage settlements will be less likely to obscure the basic fact that we are on the right track. People will see that our fiscal and monetary policies are well on the way to producing the demand restraint which, to judge from the experience of income policies in other countries, will produce an economic environment in which the guidelines are likely to be observed. (C)

1. Source: Carter Library, Records of the Office of the Staff Secretary, Presidential File, Box 129, 5/2/79. Confidential. Sent for information. Carter wrote at the top of the page: “cc Jody. C.” Brzezinski also initialed the memorandum. Hutcheson forwarded a copy of the memorandum to Powell under cover of a May 2 note. (Ibid.)