Office of the Historian

375. Information Memorandum From the Director of the United States Agency for International Development Office of Legislative Affairs (Kammerer) to the Administrator of the United States Agency for International Development (McPherson)1

Washington, January 8, 1987

SUBJECT

  • LEG Daily Report

Treasury Secretary Testifies Before the Senate Budget Committee

Secretary of the Treasury James Baker testified today before the Senate Budget Committee (SBC) on the Federal budget and economic [Page 915] outlook. SBC Chairman Sen. Chiles chaired the hearing and Senators Domenici, Lautenberg, Simon, Riegle, Wirth, Symms, Nickles, Rudman, Exon, Sasser, Dodd, Conrad, Kasten and Quayle attended.

Much of the hearing centered on the need to reduce the budget and trade deficits and Senators Chiles and Domenici continued to urge the Administration to negotiate early this year with Congressional leadership on a budget compromise. Secretary Baker said that he believed in consultation and negotiation, but that the President would reject any budget “summit” at which tax increases would be proposed.

Senators Nickles (R–OK) and Symms (R–ID) criticized the budget increases for the MDBs, especially at a time when U.S. agricultural subsidies are being reduced. In particular, Nickles and Symms criticized certain IDA loans (i.e., Argentina and Brazil) which they felt strengthened the competitive position of LDC farmers over U.S. farmers. Both senators suggested that the U.S. should question any future contributions to the MDBs. Secretary Baker strongly defended the U.S. support for the MDBs, but said that it was USG policy to oppose MDB loans that would result in LDC commodities competing with U.S. surplus commodities. On a philosophical note, Sen. Symms questioned why the Reagan Administration would support the MDBs, given the banks close association with the public sector in developing countries.

Sen. Dodd expressed concern about the growing Third World debt and questioned if the U.S. and the MDBs were not putting more economic demands on emerging LDC democracies than they could politically handle. Dodd said that he agreed with Baker’s strong support for the MDBs. Baker expressed sensitivity to the political ramifications of urging economic reforms on developing countries, but said that they must adjust their economies to a more free market orientation. Dodd was skeptical about the role that the private sector has played in certain developing countries.

[Omitted here is discussion unrelated to multilateral development banks.]

  1. Source: Reagan Library, Stephen Farrar Files, 1986–1987 File, Subject File, “This Week in Congress” 1987; NLR–177–1B–42–6–0. No classification marking. Drafted by C. Coughlin (LEG). Copies were sent to Jay Morris, Marshall Brown, Richard Bissell, Dick Meyer, and Tom Blank.↩