57. Memorandum From the Administrator of the Agency for International Development (Gaud) to President Johnson1
SUBJECT
- Effect of Congressional Cuts on AID’s Program for FY 1967
We are now reviewing our FY 1967 program to adjust it to the amount of funds actually made available to us by the Congress.
We requested $2.469 billion of NOA for economic aid. The Congress gave us $2.144 billion, a reduction of $325 million. However, as you might expect, this cut was not distributed evenly across the board. Some categories of funds suffered more than others.
The Alliance for Progress. The Alliance funds were cut from $543 million to $508 million. This 6% cut was the smallest in any of our major programs. Compared to the rest of our program, the Alliance was not badly hurt.
Development Loans. We asked for $665 million and got $500 million, a cut of 25%. By skimping wherever possible, and deferring to 1968 all funding that can safely be postponed, we can probably get through the year. But it will be a tight squeeze.
Technical Assistance. Here we took a 14% cut—from $231 million to $200 million. This was a shocker, as the Congress does not usually cut deeply into technical assistance. Nearly all our available funds will be needed to continue existing projects. We will be able to start fewer new projects. This will seriously interfere with our plans to expand our activities in the fields of agriculture, education and health. It will also make it impossible to carry out our new authority to make institutional grants to universities in order to build up their capacity and resources in the development field.
Supporting Assistance. Our $747 million request was cut 8% to $690 million. Not counting the $550 million requested for Vietnam, the cut was 29%: from $197 million to $140 million. Such a cut would be hard to absorb under any circumstances. It is particularly tough because our original $747 million request did not include supporting assistance requirements for Indonesia, Panama and the Dominican Republic which developed after the FY 1967 budget was presented to the Congress.
The Contingency Fund. We got $35 million rather than the $70 million we requested. Fortunately, the Congress reappropriated $35 million of [Page 166] Contingency Funds which remained unobligated at the end of FY 1966. This gives us a Contingency Fund of $70 million (as compared with $105 million we hoped for). To meet the shortfall in inescapable Supporting Assistance requirements, we have already programmed or reserved all of the Contingency Fund.
The big question is whether we can avoid a supplemental request for Supporting Assistance and the Contingency Fund. As things look now, we have no margin of safety in these funds. Only time will tell whether we can get by. We have two new elements of flexibility that should enable us to live within our means in Vietnam:
- —The Department of Defense has agreed to fund the military-related part of our Vietnam program, amounting to about $90–$95 million;
- —the Government of Vietnam has agreed to use part of their foreign exchange reserves to pay for a larger share of the Commercial Import Program; however, we promised to put our savings back into their development program.
If we do have to go up for a supplemental, we may be able to avoid going to the authorizing committees. We now have unused authorizations of $25 million for Supporting Assistance and $75 million for the Contingency Fund. Hopefully, a supplemental request would not exceed these amounts.
I am sending a copy of this memorandum to Charlie Schultze and will keep him posted on developments.
- Source: Johnson Library, National Security File, Agency File, AID, Vol. III [1], Box 2. Confidential.↩