Foreign Relations of the United States, 1977–1980, Volume XXVIII, Organization and Management of Foreign Policy

141. Action Memorandum From the Director of the Policy Planning Staff (Lake) to Secretary of State Vance¹

Washington, February 20, 1978

Department of State Position on the Humphrey Bill for Foreign Assistance Reorganization

This memorandum analyzes four options for a Department position on the Humphrey Bill for foreign assistance reorganization:²

—support the bill, with certain amendments that would bring the new Administration under the foreign policy control of the Secretary of State; alternatively,

—basically reject the bill and create a White House coordinator position, or give the coordinator the title of Administrator and budgetary power, thus accepting some parts of the bill;

—basically reject the bill and give the AID Administrator a second role as Director of Foreign Assistance, along the lines of the Director of Central Intelligence;

—reject the bill and continue as we are, pursuing internal reform and a strengthened DCC.

The major portion of this analysis is devoted to the first option. Our analysis concentrates on points most critical to your decision. The alternative options are less complex, and some have been discussed before in the context of our foreign assistance reviews.

In preparing this memorandum we have worked closely with all relevant bureaus and exchanged ideas with AID, and we have consulted with key Congressional staff people.

After you decide on the approach you prefer, we can convey your views in a memorandum from Warren Christopher to Henry Owen.³ The Department’s position is due by February 21. (The PRC is tentatively scheduled for Friday, 2/24, but will probably slip.)

General Considerations

The Humphrey Bill seems likely to receive serious and timely consideration by the Congress. It already has 25 Senate co-sponsors and will be viewed as a bipartisan effort aimed at reform and reorganization. Senator Muriel Humphrey has pledged that it will become a “monument” to her late husband.⁴ Supporters of the legislation have married their proposal to the Administration’s FY ’79 budget request, ensuring that it will reach the Senate floor. Despite the fact that few members will have time to study and evaluate the legislation before it reaches them, it will be difficult to oppose a bipartisan reform effort. Although foreign aid is not a popular legislative subject, a new approach to the matter in the form of a legacy from Hubert Humphrey will most likely make the measure attractive to a majority of the Senate. The bill is strongly supported by the aid public and constituency—voluntary organizations, church groups, etc.

The House is taking a more cautious view of the Humphrey Bill. An ad hoc study group has been set up to consider the measure and make recommendations on it in time for mark-up this spring. Chairman Zablocki has co-sponsored the bill, although we do not take this as evidence of all-out support. Even if the HIRC decides not to report its own version of the Humphrey Bill, the House will have to deal with the Senate’s version once it passes that body.

Despite the momentum it has achieved, however, it is unlikely to go through this year without strong Executive Branch support.

Within the Executive Branch positions diverge sharply. Governor Gilligan strongly supports the concept. Mike Blumenthal is opposed. USDA will oppose some provisions. Henry Owen, while not opposed to many of the provisions of the bill, seems to favor a White House coordinator with the title of “Administrator”, a small staff, and budgetary powers.

Some rationalization of our assistance efforts would be desirable. You are familiar with the coordination problems within the building. These are magnified in the USG as a whole. Supporting the bill will probably enhance our chances of getting our FY 1979 foreign assistance requests approved by the Congress. Over the longer-term, as we seek higher levels of assistance in the future, it will be essential to make a more coherent presentation to Congress and the public than we have to date of what we are trying to achieve with foreign assistance and how we plan to do it. It is not certain, however, that Congress will find it as palatable politically to authorize and fund a large consolidated program as generously as separate programs with smaller individual price-tags.

Option I—Support an Amended Version of the Humphrey Bill

1. Summary of the bill

The bill, drafted by a group of staff members under the direction of Senator Humphrey in the last weeks of his life, proposes creation of a permanent, independent International Development Cooperation Administration (IDCA) which would absorb all of the existing functions of AID and, in addition, bear principal operational responsibility for US participation in international development banks and the development programs of the United Nations and other international organizations. IDCA would also absorb the Overseas Private Investment Corporation (OPIC) and would contain an institute embodying (a) the Peace Corps and (b) a program of support to private organizations engaged in development work.

The Administrator would be paid at a Cabinet level, but the bill does not specify that he or she would be a Cabinet member. The drafters anticipate, however, that like the STR the Administrator would at the very least be present at Cabinet-level discussions of development-related issues.

The bill’s policy statement calls for a more forceful development effort which focuses on improving the condition of the poor majority, growth with equity, respect for rights of individuals, and integration of the developing countries into an open and equitable international economic system. By repealing the Foreign Assistance Act, the bill would eliminate many outdated provisions and restrictions which have accumulated over the years. This would be a very positive step. AID and State lawyers are analyzing the specifics.

The bill contains most authority for security supporting (economic) assistance programs but separate, new legislation would be required to authorize the military and some economic portions of security assistance. The bill as written does not involve any necessary change in committee responsibilities in the Congress.

The President would be authorized to transfer funds and personnel from other agencies to the new administration within four years. After January 1, 1979 such transfers would be subject to a Congressional veto by concurrent resolution within 60 days.

(A fuller summary of the Bill is at Tab 1.)

2. Major provisions and changes we would like to see

It will be possible for the Administration to negotiate directly with the Senate staff in order to make changes in the legislation as a trade-off for Executive Branch support. These negotiations could take place before full committee mark-up. While we have not discussed specific amendments, the staffers have indicated receptivity to suggestions and improvements.

A. Coordination with Foreign Policy

In creating an independent Administration that is not under the control of the Secretary of State, the bill is clearly intended to reduce foreign policy influence over development assistance, and increase the weight given development concerns in US policy generally. This is a fundamental point for the drafters and, presumably, most supporters. But it goes further in excluding foreign policy guidance than is acceptable, perhaps further than is intended: for example, though the Secretary of State would retain explicit foreign policy authority over the Peace Corps, a constituent element of the IDCA, he is not given such authority over the IDCA itself; and the Administrator replaces the Secretary in reporting to the Congress on human rights performance of aid recipient countries.

A number of changes are needed to protect our ability to mesh development and foreign policy concerns, as well as the authority of our Ambassadors, and the ability of our bureaus to deal with our country-by-country budgets.

While it would be useful to bring the pieces of the government concerned with development together, we have doubts also about the wisdom of creating a new, floating, sub-cabinet organization. A way to enhance development policy and program coordination, strengthen the voice for development, loosen the tie between State and AID, and yet maintain State’s oversight powers, would be to give the IDCA a status similar to ACDA. This would mean gaining amendments along the following lines:

—Include a provision that the IDCA “shall have the authority under the direction of the President and the Secretary of State” to carry out the functions given it in the act. (This is the language of the ACD Act.)⁵ This might well be opposed by the Congressional supporters of the Humphrey Bill who want to see greater independence of IDCA from State.

—A softer alternative would be to include a positive statement that the IDCA operates under the foreign policy oversight and coordination of the Secretary of State. Under this alternative we would also want other changes to preserve the authority of the Secretary over negotiations with other governments, State’s coordinating responsibility regarding human rights, and the authority of the Ambassador over IDCA missions. The best way to handle this would probably be to have the general powers in the bill run to the President so that he can qualify the delegations to the Administrator as appropriate in each case;

—Under either of the above alternatives, we would suggest other language, also drawn from the ACD Act, that would make the Administrator of IDCA the chief advisor to the Secretary of State and the President on development assistance and development policy, and would specify that the IDCA must be in a position to provide the President, the Secretary of State, other officials of the Executive Branch and the Congress with recommendations concerning U.S. policy on all aspects of development. This would help in making our proposals consistent with the intent of the drafters.

—The DCC as a means of coordinating development would be unnecessary, since the programs would be within the IDCA, except for PL 480 Title I.⁶ To coordinate policy questions, the PRC could meet as needed, with State, Treasury, Agriculture, or IDCA chairing, depending on the subject. Ad hoc PRC sub-groups could be created as necessary. This would require amending the bill to abolish the DCC; we would outline the PRC role in testimony.

While legislative provisions would not be required, the IDCA budget as proposed by the Administrator should go to the President but be transmitted through the Secretary of State, who would add his comments on its foreign policy implications and its relationship to Security Assistance proposals. The Secretary of State could also secure comments from the Secretary of the Treasury on the international financial aspects and the Secretary of Agriculture on the agricultural implications. This arrangement would encourage close cooperation within the Executive Branch in the preparation of the proposals.

Even with these changes, the bill would still reduce State’s ability to use the development program for short-term foreign policy purposes, and particularly to insist that a program be expanded or undertaken where the development rationale is weak. Flexibility for foreign policy purposes would have to be sought and justified almost completely in the context of Security Assistance, including SSA.

B. Program flexibility for bilateral aid

In general the authorizing language would broaden the focus of programs to reach poor people in desirable ways, for example, to include infrastructure projects in the poorest countries. Nevertheless, unless amended it would lend itself to a narrower interpretation of the scope of our bilateral assistance than the President approved in November.⁷ It focusses our bilateral assistance on “low income” nations more sharply than current Presidential guidance. And it allows concessional aid for technological collaboration with poor nations but does not encourage extending it to middle income countries.

If we supported the bill we would want to insure that its provisions were broad enough, through legislative history or amendments if necessary, to:

—permit bilateral assistance for middle income nations when poor people are served and when these countries devote sufficient amounts of resources to the projects in question, although our primary focus would be on poor countries; and

—provide for concessional assistance for technological collaboration with middle income countries under appropriate circumstances, as well as for poor countries.

C. International Financial Institutions (IFI’s)

The bill proposes to shift responsibility for day-to-day oversight and policy guidance of the international development banks from the Treasury to the IDCA. The Secretary of the Treasury would retain responsibility for monitoring the financial viability of these institutions, and their creditworthiness in international capital markets largely through his continuing role as Chairman of the National Advisory Council on International Monetary and Financial Policies. This is a key proposal to the bill; without it the basic purpose of the bill—an integrated development assistance program—would be unmet.

It is not clear how much, if at all, Congressional support for these programs will be increased or reduced under the proposed arrangements. The fact is that we are not doing very well now in gaining support on the Hill for the IFI’s. Lessened Treasury involvement in IFI programs may be balanced by gains resulting from greater coherence in our presentation and Congressional relations. The key will be to find ways (including Presidential instructions) to keep the Secretary of the Treasury actively involved.

Our ability to influence the effectiveness of the Banks’ programs is always limited. Nevertheless, IDCA will be better able to evaluate and advise on their programs and participate in setting their development policies than any other US government agency.

As for the problem of coordination, the working relationship between the Banks’ programs and our bilateral assistance should benefit considerably. Assuming that an appropriate relationship between IDCA and the State Department is achieved, coordination with foreign policy objectives should not suffer, and may in fact be improved over current arrangements.

D. PL 480 programs

The bill does not change responsibilities with regard to PL 480 significantly, perhaps in the hope that more significant shifts would be proposed in the House where jurisdictional issues with the agriculture committee are much less of a problem. All three PL 480 programs would continue to be financed through the USDA budget:

—Title I, which provides concessional financing for agricultural commodity sales would continue to be administered by USDA with participation of IDCA, State, OMB, and Treasury;

—Title II, which provides grant food aid to private voluntary organizations, foreign governments, and the World Food Program would be administered by IDCA as it now is by AID;

—Title III, recently enacted, which provides grant food aid for development purposes, would be administered principally by IDCA rather than jointly with Agriculture.

Were the entire food aid program and budget located in the IDCA, program coherence and development impact could be substantially improved. The Senate staff drafters of the bill would like us to propose this. But we do not suggest doing so:

—wherever located, the Title I program will come under pressure from its Congressional supporters to be used as a means of commodity price support or surplus disposal;

—relocating Title I authorities in IDCA could result in reducing its flexibility as a foreign policy instrument; its use for this purpose is, of course, controversial;

—relocating Title I authorities in IDCA would entail a substantial increase in personnel to provide program support (e.g., estimates of supply and distribution of commodities in potential recipients; bids, purchase, shipping), now performed by USDA.

USDA and members of the Senate Agriculture Committee would vehemently oppose a complete move of PL 480. Aside from the general changes outlined above to ensure foreign policy coordination, we could accept the current PL 480 provisions of the bill.

E. Security Assistance

The bill creates an Economic Support Fund which provides for funds to support economic or political stability in the Middle East and southern Africa. As currently, the Secretary of State would recommend budget allocations to the President and the IDCA Administrator would administer the program. Separate legislation would be proposed to authorize remaining security supporting assistance programs (e.g., Spain, Cyprus refugees and the Sinai Support Mission). Current legislation allows the President to waive the requirements of the Foreign Assistance Act⁸ for an amount up to $250 million for purposes he determines important to US security. This bill reduces that flexibility to $25 million.

This carries further the tendency of recent years for the Congress to specify the amounts to be allocated for security assistance by country, and restricts the ability of the President to respond to urgent new requirements without returning to the Congress for new legislative authority.

It is not possible to assess all the implications of the Economic Support Fund without seeing the companion piece of Security Assistance legislation, which is now being drafted. But we will clearly want to seek greater flexibility than is contemplated in the present bill through amendments that allow greater waiver authority, a contingency fund, or flexibility in transferring funds among accounts. Our chances of achieving such flexibility are difficult to assess. On the other hand, we would undoubtedly face much the same problem this year even if there were no Humphrey Bill.

F. Voluntary Contributions to International Organizations

The bill would authorize the IDCA Administrator to make voluntary contributions to international organizations and programs, a function now authorized in the Foreign Assistance Act and delegated through the Secretary of State to the Administrator of AID. The Administrator of IDCA would also instruct US representatives to those organizations receiving voluntary contributions under the bill’s provisions, a function now performed by IO. There is no change in the provision of assessed contributions authorized and appropriated to the State Department.

This is a complex question because some of the voluntary contributions go for programs that are not developmental, and some of the assessed contributions which would remain with State go for programs that are partly developmental. The division would split management of US participation in some organizations that receive both assessed and voluntary contributions. Thus we are faced with two issues: how best to establish a coherent overall development program, and how best to coordinate our participation in international organizations. The current system emphasizes the latter; the bill would emphasize the former.

Bill Maynes would like to explore the possibility of having all IO programs administered by a single unit that would be staffed by State and IDCA personnel and report to both the Secretary and the Administrator. Ben Read believes this arrangement will be too cumbersome to work. If such an approach is not practicable, some variation on the present system would have to be worked out that would give the IDCA a greater voice in the development aspects of the IO programs, without doing too much damage to a coherent US approach to international organizations generally. Whatever approach we decide on would have to be sold to AID, and to the Congress.

At a minimum we would want the bill changed to:

—have authority flow to the President so that he can allocate responsibility between State and IDCA;

—state that IDCA should have a determining voice in development matters, but that State should govern on political and broad economic issues;

—recognize, as the bill does not now, that there is a need to tighten the management of our participation in the UN system, laying the groundwork for a strong and flexible State role in the overall management of these programs.

G. Personnel questions

The bill provides that the IDCA would be manned principally by the members of a new foreign-service-like corps of International Development Officers. It is unclear on how the transition from the present mixed GS/FSR staff would take place, or how personnel transferred with their functions from other agencies would be absorbed. The only provision helpful to AID is one that liberalizes retirement benefits temporarily. Unless extended to cover all members of the Foreign Service Retirement system this provision would damage State Department and ICA morale.

Personnel provisions do not define a clean start or provide a solution to AID’s personnel problems, characterized by a mismatch of skills and program requirements.

We do not at present have alternative or additional provisions to propose. AID and M/MO continue to work on the problem, but M/MO is not sanguine about results.

Summary of Option I: Assuming we will be able to get the changes outlined above there is a substantial gain in the coordination of bilateral and multilateral programs, and a potential gain in the creation of a new foreign assistance agency able to move away from the difficult problems of the past with a new spirit. There is also a net favorable Congressional impact, at least in the short-term. Balanced against this is some loss of foreign policy control over development programs, except for the IFI’s where there would be a gain, and reduced flexibility to move funds in the short-term to meet foreign policy needs.

Whether or not IDCA results in greater amounts of development assistance is hard to assess. In the short-term it could be a helpful vehicle. It is less clear how we would fare over time. Much will depend on the degree to which State and Treasury would continue actively to support the IDCA programs.

Option II—Coordinator function in the White House

A coordinator would be appointed with a small staff to oversee both development assistance and development policies. If we select this option we would want either to abolish the DCC or to make the White House coordinator chairman of the DCC in place of the AID Administrator. Both changes would require legislation.

A White House coordinator could be quite effective in drawing issues together for resolution by agreement, or by Presidential action. He could help to integrate budget proposals.

But since members of the President’s staff do not testify, he would not be valuable as a spokesman to the Congress. He would have to leave the burden of Congressional relations largely to the various agencies themselves, and the goal of a single official to present a coherent development policy view to the Congress would not be achieved. A White House coordinator would also leave untouched the more mundane operational coordination problems.

This alternative, like each of the following ones, would avoid a major reshuffling of personnel and programs. But it would also give up the potential improvements in coordination and efficiency that such a reshuffle could bring.

An alternative would be to make the coordinator an “Administrator”—housed with a small staff in the EOB. This would be modeled on the STR. The Administrator would presumably have budgetary authority over all development programs. This might allow us to accept the bill at least in this one aspect, but avoid taking the IFI’s out of Treasury.

This approach would allow the coordinator to testify and coordinate more effectively. But day-to-day coordination would not be significantly improved. Congressional supporters of the bill would likely find our “support” for it disingenuous; and the State Department’s foreign policy and budgetary role would be unclear.

Option III—Give the AID Administrator a second role as Director of Foreign Assistance

This alternative is somewhat analogous to what we’ve done with the intelligence community.

The AID Administrator could chair a cabinet-level committee which would coordinate foreign assistance programs. He could also be responsible for preparing a consolidated foreign assistance budget.

A major problem could arise unless the AID Administrator is given enhanced rank. We could expect heavy resistance from Mike Blumenthal and Bob Bergland. The relationship between the Administrator and the Secretary of State would be ambiguous under such an arrangement. And the Administrator could be so vulnerable to charges that he favored his own bilateral programs when making overall budget decisions.

On the other hand, this option may be seen as a more far-reaching response to the coordination issue than Option II above, since one person would speak for all foreign assistance.

Option IV—Continue as we are, pursue internal reforms of individual programs, and strengthen the DCC

Under this option we could avoid the toughest organizational questions. On the other hand, current efforts are not sufficient to improve substantially either existing programs or our overall foreign assistance effort. This option would be seen in Congress as nearly total opposition to the Humphrey Bill and the central concepts which it embodies, with all the difficulties that would entail.

Summary and Conclusions

We believe it is essential to make some improvements on the organizational front for reasons described at the outset. We recommend that your decision be based on two principal considerations (which may lead to conflicting conclusions):

—which option will allow us to secure the largest appropriation of foreign assistance in the future?

—which makes for the most effective foreign assistance program in terms of meeting our multiple objectives, including serving all our foreign policy goals?

Options

1. Support amended version of Humphrey Bill.

The following support the basic thrust of the Humphrey Bill as long as we can get the amendments we want: S/P, L, IO, PM, T, H.

Approve_______ Disapprove_______⁹

If you approve this option, it could be approached in three different ways:

A. We could condition our support on achieving ACDA type amendments, i.e., placing the IDCA under the direction of the President and the Secretary of State.

Approve Disapprove¹⁰

B. We could seek the ACDA relationship, but fall back if necessary to the positive statement of the Secretary of State’s foreign policy authority, as outlined on page 5.

Approve_______ Disapprove_______

C. We could adopt the “positive statement” approach only.

Approve_______ Disapprove_______¹¹

2. Coordinator function in the White House:

Supported by: No one.

Approve_______ Disapprove_______

3. Make the AID Administrator also Director of Foreign Assistance:

Supported by: No one.

Approve_______ Disapprove_______¹²

4. Continue as we are and strengthen DCC:

Supported by: M. Ben Read’s memo is at Tab 2.¹³

Approve_______ Disapprove_______¹⁴

Other views:

EB supports the objectives of better coordination among foreign assistance programs, but is still considering specific alternatives and will be sending its views separately.

Mr. Cooper will also give his views separately.¹⁵

Tab 1

Summary Prepared by a Senate Subcommittee Staff¹⁶

Washington, January 24, 1978

INTERNATIONAL DEVELOPMENT COOPERATION ACT OF 1978

Under Senator Humphrey’s guidance, draft legislation on U.S. development policy and foreign assistance was completed before he died. The new bill would replace the Foreign Assistance Act of 1961, while maintaining the emphasis on aiding the poor majority in developing countries which was the core of the 1973 bilateral assistance reforms.

The new Act:

1. Establishes a new development agency, the International Development Cooperation Administration (IDCA) which will have responsibility for administering all the major United States development assistance programs, including:

—The bilateral assistance program now run by the Agency for International Development (AID).

—The contributions to the World Bank Group and the regional development banks now coordinated by the Department of the Treasury.

—The voluntary contributions to the United Nations technical and humanitarian agencies now coordinated by the Department of State.

—The development and relief aspects of the P.L. 480 Food for Peace program, now coordinated by AID.

2. Designates an Administrator of the IDCA, who will report to the President and be responsible for the effective and efficient administration of United States foreign assistance programs, and coordinate the making of overall United States development policies.

3. Provides a clear statement of the importance the United States places on development, both because of the increasing importance to the United States of the developing world, and because of traditional humanitarian interests of the people of the United States in helping others. By establishing a new institution with an Administrator who has direct access to the President, the Act assures that these development interests will be reflected in the formulation of overall United States international economic policy.

4. Presents clear, modern guidelines for United States development assistance policy, and repeals the outdated Foreign Assistance Act of 1961. The Act further clarified the 1973 New Directions goals of using direct United States grant and loan assistance in ways which promote economic growth with equity and assure that the basic human needs of the poor majority are met.¹⁷

5. Establishes an International Development Institute within the IDCA as the main focus of United States Government support for public and private voluntary programs involving development. The Peace Corps would be transferred to the Institute from ACTION, while maintaining its administrative autonomy.

6. Introduces new measures for assisting the poorest developing countries, including the encouragement of assistance in the form of grants rather than loans, and a provision to allow these countries to satisfy official development debt obligations to the United States through local currency expenditures on development-related projects.¹⁸

7. Consolidates programs which improve the access of middle-income developing countries to private capital markets, investment resources, and technical services. These programs, such as the Housing Investment Guaranties, entail almost no expenditure of United States Government funds, but involve guaranty programs for investments and loans, and reimbursable services.

8. Establishes an Economic Support Fund to replace the current Security Supporting Assistance program, assuring that such funds will be spent on development-related activities to the greatest possible degree.

1. Source: National Archives, RG 59, Official Working Papers of S/P, 1977–1981, Box 3, S/P—Lake Papers—2/16–28/78. Limited Official Use. Sent through Christopher. Drafted on February 17 by Curtis Farrar (S/P). Concurred in draft by Joseph Nye (T), Douglas Bennet (H), Richard Ericson (PM), Charles William Maynes (IO), Read (M), and Herbert Hansell (L).
2. The Humphrey Bill, introduced in 1978, would have created the IDCA. The bill was not enacted into law. Instead the IDCA was created by Executive Order 12164 in September 1979. For the text of the E.O., see Public Papers: Carter, 1979, Book II, pp. 1800–1801.
3. Not found.
4. Senator Humphrey died on January 13, 1978.
5. P.L. 87–297, September 26, 1967, established the Arms Control and Disarmament Agency.
6. Title I of P.L. 480 provides for long-term credit arrangements for developing countries for government-to-government sales of agricultural commodities.
7. See Foreign Relations, 1977–1980, vol. III, Foreign Economic Policy, Documents 282 and 283.
8. P.L. 87–195.
9. Neither option was selected by Vance.
10. The “Approve” line was checked by Vance.
11. For options B and C, the “Disapprove” line was checked by Vance.
12. For 2 and 3, the “Disapprove” line was checked by Vance.
13. Attached but not printed.
14. Neither option was selected by Vance.
15. Neither EB’s nor Cooper’s positions have been found.
16. No classification marking. There is no indication which Senate subcommittee prepared the summary.
17. Reference is to the changes in U.S. foreign aid programs mandated by the Foreign Assistance Act of 1973 (P.L. 93–189).
18. The PRC briefly discussed the Humphrey Bill in the context of U.S. policy on international debt on February 22. See Foreign Relations, 1977–1980, vol. III, Foreign Economic Policy, Document 300.