51. Memorandum From Secretary of the Treasury Blumenthal to President Carter1


  • Highlights of Treasury Activities


As I indicated in my report on my discussions with Finance Minister Apel last weekend,2 the Germans are now convinced that additional [Page 181] stimulus is needed to raise their real growth rate—now running about 1 point below the 4½–5 percent target they accepted at the London Summit. They have now committed themselves publicly to taking action,3 and have told us privately that on August 31 they will announce (1) a combination of revenue and expenditure measures to increase the fiscal deficit by DM 10 billion (about $4.4 billion); and (2) an energy-saving action. With these measures, they expect real GNP growth of 4½ percent in 1978—though because of the long lead times involved the 1977 result is likely to be very disappointing.

Incidentally, I have told Apel that I will be happy to accept his invitation to visit Germany at the beginning of November.


On August 8 I met with a group of steel company executives, led by Speer of U.S. Steel, who were anxious to press their problems with me as they had done previously with Bob Strauss.4 They stressed that the increasing volume of imports (recently about 18 percent of apparent consumption) was just the beginning of Japanese and EEC producers’ efforts to penetrate our markets. Although they did not say so directly, it was clear that they wanted some sort of import relief. I told them that Treasury would enforce the anti-dumping laws vigorously, and urged them to bring such cases to our attention. At the same time I asked them why they did not emulate the Japanese, who reduce rather than raise prices in times of slack demand. They replied that this would not be effective for U.S. producers, since they do not have access to a free global market and only the U.S. market is free to world competition. Moreover, they said, they could not afford to lower prices in periods of slack demand because public pressure kept them from increasing profit margins in periods of increased demand. I told them that we would give their problems further study, but at the same time I asked them whether higher labor costs here might have undermined their ability to compete. (Another problem is the technological superiority of some of the newer foreign plants.)5

[Omitted here is discussion of New York City and domestic finance.]

W. Michael Blumenthal6
  1. Source: Carter Library, Records of the Office of the Staff Secretary, Presidential File, Box 44, 8/15/77 [1]. Confidential. Marked “F.Y.I.” A stamped notation reads: “The President has seen,” and Carter wrote at the top of the page: “Mike. J.”
  2. See Document 50.
  3. On August 11, for example, The New York Times printed a story entitled “West Germany, to Offset a Surge In Joblessness, Raises Spending.” (Ellen Lentz, The New York Times, August 11, 1977, p. D9)
  4. Possibly a reference to the June 30 meeting between Strauss and representatives of eight steel companies. See Document 36.
  5. Carter wrote “I find their frequent & excessive price increases incompatible with pleas for import restraints. J.C.” in the margin adjacent to this section.
  6. Blumenthal signed “Mike” above this typed signature.