Foreign Relations of the United States, 1969–1976, Volume XXXI, Foreign Economic Policy, 1973–1976

161. Memorandum From the President’s Assistant for International Economic Affairs (Flanigan) to President Nixon¹

Washington, February 26, 1973.

RE

• Saturday, February 24 Visit in Arkansas with Wilbur Mills

The initial purpose of the visit was to consult with Mills on the Administration’s Trade Bill. Knowing that other subjects would come up, including the Mills proposal for a 15% surcharge for imports,² Dick Cook accompanied me. At the beginning of the meeting Mills appeared sedated and less perceptive than usual. He informed us that he was taking drugs morning and evening to relieve his back, and that after doing so he felt that he “could hardly coordinate.”

Regarding the 15% surcharge, Mills claimed to have the support for his proposal of Connally, Greenspan, Rinfret, Burns, Heller and Okun.³ Without debating his contention, I pointed out that my discussions with Burns and Greenspan, and Shultz’ discussions with Rinfret, had not indicated their belief that we should impose a selective surcharge at this time. Rather they indicated that it was a weapon worth having and I pointed out that that was exactly what we proposed in the upcoming Trade Bill.

Mills dismissed any suggestion that the President lacked authority to impose a surcharge across the board or selectively, claiming that it was inherent in the Constitution which gives the President authority to protect the US. In fact, he claimed it was the same authority which allows the impoundment of funds, and he had never questioned the President’s right to do this. Mills went on to say that he believed the President was correct in restricting expenditures, and only differed in that he felt even a $19 billion increase in the 74 Budget was too high. He went on to say that, with the exception of expenditures relating to veterans, he (Mills) would join Gerry Ford in preventing an override of any Presidential veto of mandatory expenditures.

Mills was exceedingly critical of all our trading partners and said the US had to get a great deal tougher than it has to date. Regarding the proposed Trade Bill, Mills, after considerable discussion, generally agreed with the Administration’s proposals. On timing he initially said that he could not get to the Trade Bill until June. After considerable urging, Mills agreed to take the Trade Bill up on the completion of his announced schedule of hearings on taxes, which schedule terminates April 6. He asked that the Trade Bill not be sent up more than a couple of weeks before that time in order that he not be put in the position of having to comment on the Administration’s proposals and in order that the opposition not be given too much time to snipe at the Bill prior to hearing.

As I have reported to George Shultz, Mills was outspoken in his belief that Shultz’ advice on balance of payments matters had not been sufficiently aggressive. I pointed out the success of the Shultz recommendations to you on monetary affairs and also the potential wallop in the trade recommendations which had been prepared together with Secretary Shultz. Nevertheless, Mills was disturbingly critical.

I think it is important that we nail down the Mills commitment to begin hearings on trade in April if we want to have a chance for some action on the Bill before the Summer recess. To this end, a short phone call from you thanking him for agreeing to this date would be most helpful.

1. Source: National Archives, RG 56, Records of Secretary of the Treasury George P. Shultz, 1971–1974, Entry 166, Box 6, GPS White House. No classification marking. Attached to a March 2 memorandum from Brooks to Kehrli that reads: “Secretary Shultz reviewed the attached memorandum before it was sent to the White House.”
2. On February 16, Mills proposed that all imports be subject to a 15 percent surcharge, which would, he suggested, encourage foreign confidence in the value of the dollar. (The New York Times, February 17, 1973, p. 1)
3. Pierre Rinfret of Rinfret-Boston Associates frequently advised the Nixon administration on economic issues. Walter Heller served as Chairman of the Council of Economic Advisers under Presidents John F. Kennedy and Lyndon B. Johnson. Arthur Okun served as Chairman of the Council of Economic Advisers under President Johnson.