Office of the Historian

67. Memorandum From the President’s Special Assistant (Rostow) to President Johnson1

Washington, July 31, 1967, 1 p.m.

Mr. President:

At Tab A is the paper you requested outlining the effects of a $2.5 billion foreign aid appropriation (compared with a $3.3 billion request).2 Gaud has tried to hold the argument to a minimum; the facts speak quite eloquently for themselves. The paper has been approved by Secretaries Rusk and McNamara.

We don’t know precisely how the Congress would get down to $2.5 billion. The memorandum reflects Gaud’s best guess of how they would distribute the misery—not how he would like to see it distributed. The major effects of an $800 million cut, each of which is discussed briefly in the memorandum, are as follows:

1.
Even if Latin America does better than the rest—which is likely—we could not provide the $100 million increase you discussed at Punta del Este.
2.
Even a small cut in Supporting Assistance would rule out any increase in AID programs in Vietnam.
3.
The bulk of the cut would have to come in Development Loans. (We would estimate a 44% cut in our D.L. request.) This would mean:
  • —a 40% cutback in India. Much of this would come out of program loans for fertilizer. At a time when new IDA money is not in sight and the Europeans are in a stingy mood, the cut in our contribution could well shake the whole consortium framework.
  • —a 30% cut in Pakistan.
  • —a 40% cut in planned aid to Turkey, probably forcing a delay in Turkey’s “graduation” from AID loans, now scheduled for 1973.
  • —a 30% cut in loans for Korea.
  • —a cutback of over 50% in loans to Africa, reinforcing charges that the Korry Report was a smokescreen for American withdrawal.
  • —no more than $20 million for Indonesia.
4.
Military Assistance would also be sharply cut back—probably on the order of 35% of our request. This would end credit sales altogether and require cuts of up to 30% in such countries as Greece, Turkey, Taiwan, and Iran.
5.
Technical Assistance would probably be cut about 20%, eliminating the planned expansion of programs in health, agriculture, education and family planning.

These estimates reflect a careful judgment as to what we would have to do to live with cuts of this size. I think your priorities have been faithfully observed. The simple fact is a $2.5 billion appropriation would, for the first time in AID history, make it literally impossible for us to move forward with planned programs in our major client countries. In other years, greater concentration and windfalls created by world events (e.g., the Indo-Pak war) have allowed us to squeeze out enough for the critical programs even though appropriations had been cut. This year is different.

I don’t mean to say the world would end if we got $2.5 billion. As realists, Gaud and the rest of us are aware that a cut of $800 million is not unlikely. If the axe falls, we will push on as best we can. But it is certainly worth every effort we can manage to minimize the cut.

Walt
  1. Source: Johnson Library, National Security File, Agency File, AID, vol. IV [2], Box 2. Confidential. A handwritten “L” appears on the source text. A handwritten note indicates the memorandum was received at 4 p.m.↩
  2. Document 66.↩