Washington, undated.

Dear Mr. Chairman:

In Mr. Abshire's letter to you of September 3, 1971,/2/ he indicated that consonant with the President's memorandum, we would be prepared to provide the Committee with planning material and factors relating to the military assistance program. This letter contains that material.

In providing this information, I want to be as responsive as possible to the Committee's interests. We recognize that the Congress, in dealing with the Administration's request for military assistance, wishes to know how these programs may develop over a number of years in the future. I note too that you appreciate that there are serious limitations to our ability to make useful projections five years into the future.

We have been working for the last year to improve the capability in both the Department of State and the Department of Defense to plan our military assistance grant and credit programs. The new planning system which we are establishing to be effective in making projections must treat directly with a number of problems and issues. It must deal with all of our Security's Assistance Programs on an integrated basis; we are beginning by handling grant and credit programs as a single planning problem. It must seek to relate resource transfers for military purposes to U.S interests and objectives in a given country and region. It must determine whether our interests and objectives are both realistic and attainable within budget parameters which for future years are not clearly defined. Finally, we must develop alternatives that provide clear choices for decision-makers in setting program goals.

This planning approach is intended to point our programs in a general direction. We cannot predict where and how, over the next five years, crises will occur. We know of no analytical method, as I made clear in my testimony, to pin-point trouble spots over an extended period. We are thereby handicapped in developing accurate five-year projections of U.S. interests and programs.

The process is further complicated because our own interests will shift from time to time. In future year planning we can only provide very tentative views on what our future interests will be; the reality will depend upon a broad range of considerations, including:

--the outcome of major international negotiations, such as those with the Soviet Union on Berlin, SALT and Mutual and Balanced Force Reductions.

--U.S. efforts to normalize relations with the People's Republic of China.

--the future impact of current international balance of payments and monetary discussions.

--the outcome of our efforts to develop a more coherent multilateral approach to international trade and investment questions, and to international development programs.

--the willingness of the parties to disputes to resolve their differences through peaceful negotiations.

--the degree of success in reaching regional arms control arrangements.

--our allies' willingness to increase their share of the security burden.

--continuing requirements for our friends and allies to maintain security forces.

--the situation that finally emerges in such areas as the Middle East, South Asia and Southeast Asia.

All of the above imponderables and variables bear some relationship to military assistance planning; because our expectations in each case could be seriously mistaken, I must emphasize this caveat in regard to the figures we provide.

In preparing the figures for you, I have asked my staff to consider a number of basic principles in their planning effort. These principles include the following:

1. Selectivity. The focus of our security assistance is on clearly designated countries of significant importance to our own security given the limited resources that are likely to be available. In the case of grant military assistance, for example, the principal recipients would be: Korea, Cambodia, and Turkey. In the case of FMS credit, Israel is a major recipient.

2. Total Resources. We give due weight to the resources of recipient countries as well as to the full range of possible U.S. aid contributions. The primary U.S. resources are grant military assistance, excess defense articles, and foreign military sales (credit); directly related to and supportive of such military assistance is economic supporting assistance. We look carefully at the recipient's allocation of its own resources along with those which may be provided by third countries. Recipient country resource allocations reveal how that country views its own problems; third-country contributions reflect regional concerns.

3. Local Military Planning. More must be done to encourage recipient countries to do their own planning, establish their own priorities, and regulate their own domestic budgets. The United States in the past has made many of the basic determinations of the amount and kind of equipment which countries receive.

4. Self-Sufficiency. We expect allied and friendly countries to assume a larger share of their defense burden. To assist them towards this objective, we plan to help them develop local defense-related production capabilities, and as their economies develop, to shift our military assistance from grants to cash and credit sales. This shift will be more gradual in some cases than in others. For instance, Turkey is expected to have continuing foreign exchange problems over the five-year period which will inhibit its meeting its defense needs fully through purchases. Nevertheless, we assume that Turkey will be able to absorb increasing amounts of credit. Korea, if it continues its present rate of economic development, might take on a larger share of its defense requirements than originally planned. As we shift from grant to sales, we must continue to measure with care the impact of this shift on the economies of our allies.

5. Force Modernization. While there is a natural desire of recipients to improve the level of sophistication of their equipment, in many cases this is just not economic or efficient. Hard choices have to be made between modernizing and maintaining force structure, keeping up maintenance, and providing adequate logistics support. Modernization in most cases should have a lesser priority than the development of these latter factors.

6. Maintenance and Operations Costs. These costs should be transferred to the host country on a phased basis. Modernization should be planned so that, wherever possible, operations and maintenance costs should not become an unduly onerous and long-term burden to the recipient country or to the United States.

7. Excess Defense Articles. Planning should utilize, and take carefully into account, the significant amount of excess defense materiel and equipment now becoming available. But mere availability of excess stocks should not become a rationale for their transfer to countries whose domestic resources are required for higher priority needs. The provision of excess must be carefully justified by military requirements, economic benefits to the recipient and savings in U.S. funded programs.

With these planning factors in mind, the Department of State and the Department of Defense have developed tentative levels for U.S. military assistance grant aid and foreign military credit sales for the period fiscal year 1973 through 1977. In the light of the above planning factors and with the caveat about our inability to predict accurately particular developments in the future, there follows a discussion of these figures on a region-by-region basis.

East Asia and Pacific. The East Asia and Pacific area throughout the next five years will probably continue to receive the largest amount of security assistance. In FY 1973 it will be projected to receive about $700 million,/3/ roughly divided $600 million in grant MAP and around $100 million in FMS credit. (These figures do not include Vietnam, Thailand, and Laos which are in the Military Assistance Service Funded Programs and the figures will have to be increased accordingly when these programs are returned to the Military Assistance Program.) The principal countries supported will be Cambodia and Korea at levels somewhat above FY 1972 requests and together they will absorb about five-sixths of the East Asia grant program. Projecting over the five years in the East Asia and Pacific area, we envisage the MAP grant program being reduced to about the $250 million level in FY 1977, with the FMS credit program increasing to about $125 million. The total program for East Asia and Pacific thus will decline more or less on a straightline basis over the next five years from about $700 million per year to about $375 million per year. Cambodia is projected to receive about $125 million in grant aid in FY 1977, but here again I want to emphasize that any aid to this country will depend on the outcome of the situation in Southeast Asia. The other principal recipient, Korea, is projected to receive about $75.0 million in FY 1977.

Table I provides illustrative figures for programs in this area./4/

Near East and South Asia. This is the next largest area program. For FY 1973 we project a level of about $200 million in grant military assistance and up to $450 million in foreign military sales credits. These projections reflect a continuing large foreign military sales credit program for Israel and maintaining the grant MAP program for Turkey at about the $100 million floor level for FY 1973. In addition Jordan and Greece will be recipients of grant and credit assistance. Assistance to Jordan is projected for mainly grant aid while Greece is projected for about $75 million, two-thirds of which is credit. Our projections for the period five years hence, FY 1977, show a total program of about $350 million, about $75 million of which is projected in grant assistance and $275 million in credits. Israel would continue to be a major recipient of credit with Turkey and Greece also receiving respectively about $25 million and $55 million in credit. Over 90% of the grant program in FY 1977 would be supplied to Turkey.

Table II contains figures for projections in this area.

Europe, Africa, Latin America and Non-Regional Programs. These programs, already small, would continue to decline. Grant assistance for Europe would move from just over $10 million in FY 1973 to just over a million dollars in FY 1977. African programs would decline from $20 million in grant assistance and $18 million in credit in FY 1973 to $15 million and $12 million respectively in FY 1977. The Latin American program total is projected at about $10 million in grant and $75 million in credit throughout the five-year period. In addition to the above there will be non-regional programs which will require about $20 million in grant MAP over the five years.

Table III summarizes this information.

Totals. Looking at the total obligational authority requirements for the grant and credit program in our five-year projections for the period 1973 to 1977, we envisage the grant program moving on a roughly straightline basis in FY 1973 from between $820 and $850 million to about $370 million in 1977. We project the FMS credit program for FY 1973 at between $525 and $625 million moving again on a rough straightline basis to a projected program for FY 1977 of $450 to $480 million. These latter ranges reflect a number of areas of uncertainty in some of our program predictions within the various regions and emphasize again the very tentative nature of our projections for the next five years. Table IV provides this information.

I have offered this material in the realization that these are very generalized and tentative projections. We are working to improve the quality of our planning, and I expect that future year budget submissions will reflect the improvements which we are now making.

I hope that the information in this letter is responsive to the request which you have made and that it will provide a basis for moving forward in your consideration of the FY 1972 requests under the Foreign Assistance Act.

Sincerely,
William P. Rogers/5/

Washington, September 20, 1971.

SUBJECT
Five-Year Military Assistance Program (MAP)

In extension of our Monday morning telephone conversation, I offer the following observations on State's (or anyone's) proposed submission on MAP to the Senate Foreign Relations Committee./2/ I have no objection to, in fact, I favor, a substantive dialogue on MAP with the appropriate Congressional committees. I believe, however, the dialogue should be positive, consistent with the President's foreign policy objectives and policies, and consonant with the best estimates of world-wide economic and political facts of life. In my judgment, the letter and table State proposed to give Senator Fulbright complied with none of those criteria.

The Nixon Doctrine is a positive program. Built on the three pillars of strength, partnership, and willingness to negotiate, it offers a hopeful prescription for security, peace, and Free World burden-sharing. Moreover, the President's February 25, 1971 Report to Congress on U.S. Foreign Policy for the 1970's said:

"The Nixon Doctrine requires a strong program of security assistance.

"But it is not simply a matter of helping friends and allies do more for themselves. Particularly in the areas of the world where we are reducing our manpower, we must make resources available to help them make the transition with us. In some cases this will require substantial assistance during the period of adjustment. This is central to our new approach to American foreign policy in the 1970's."/3/

In contrast to these positive and explicit Presidential statements, the proposed State letter to the Senate Foreign Relations Committee (a) does not mention the Nixon Doctrine at all and (b) delineates substantially declining security assistance levels in the aggregate, for each region addressed, and for almost each nation included.

It is not clear to me the proposed letter is consistent with the Secretary of State's March 26, 1971 report on United States Foreign Policy./4/ In that report, State says:

"As a basis for our assistance and advice to major recipient countries, we are attempting to develop total force planning goals that reflect balanced consideration of such factors as threats, risks, costs, resource constraints, and manpower limitations."

I see no evidence in the proposed State letter of balanced consideration of the many factors involved. I believe if there were such consideration, the MAP levels would look markedly different--in aggregate terms, as well as for particular regions and nations. The March 15, 1971 Defense Report observed:/5/

". . . Changes in the forces of our friends and allies cannot take place overnight, and just as is the case for the long leadtimes required to develop new defense weapon systems, there is leadtime associated with a shifting of the burdens of security."

Proposed cuts during a brief five-year span of more than 50 percent in MAP and more than 25 percent in FMS credits do not reflect the leadtime reality, much less the other realities for security assistance planning.

In addition to the points made above, I would add two more diverse observations. First, the Senate Foreign Relations Committee, in my judgment, is interested primarily in selected key areas. Among those would be Greece and Cambodia, of course, which are included in the proposed State tables. Of equal, or perhaps more interest, are those nations (Republic of Vietnam, Thailand, and Laos) for which aid is supplied through Military Assistance Service Funding (MASF). The State letter does not provide much MASF data, but opens that door tantalizingly to the Committee. Second, as an administrative matter within the Executive Branch, I believe we need to be consistent and mutually supporting in our approach to the Congress. It is anathema to both branches of Government to have Executive Branch decisions (such as executive privilege on MAP planning) announced one day and to have separate Departments go a different way the next. Also, as an administrative matter, we should recognize that Department approval of planning data should never be implied until the Secretary or his designated representative has signed off on the material. I have not given my approval to the tables in the proposed State submission. In fact, I heartily non-concur in both the intent and substance of much of that submission./6/

I have talked with Bill Rogers and have given him the essence of the remarks in this memorandum.

Melvin R. Laird

Washington, September 20, 1971.

Dear Mr. President:

I am pleased to be able to report that A.I.D. has made solid progress in moving in the direction of your new foreign assistance concepts and approaches. Despite the uncertain fate of the legislative proposals submitted to the Congress earlier this year,/2/ we are--within the constraints of existing legislation--moving to translate your announced policy objectives into effective operation.

The attached summary highlights the results of our more significant transitional efforts./3/ We have

--separated economic security assistance from development programs within the A.I.D. structure;

--substantially reduced A.I.D. direct-hire American staffs abroad;

--implemented promptly your decision to untie aid financing for procurement in the developing countries/4/ and materially simplified A.I.D.'s procurement policies and procedures;

--made substantial progress in concentrating our technical assistance programs in priority sectors, eliminating weak projects, and achieving further reductions in related staffs abroad; and

--moved in the direction of centralizing our lending operations in Washington. They have been spread around the world in our country missions.

We are well along with a number of special studies in other areas designed to further streamline operations and to improve our responsiveness to development requirements abroad. There is every prospect that these studies will produce equally encouraging results in advancing your foreign aid policies.

Finally, Mr. President, I am pleased to be able to assure you that our A.I.D. staff, both here and abroad, are working toward these objectives with a dedication and creativity I find gratifying.

Respectfully yours,
John A. Hannah

Washington, September 20, 1971.

Dear Jack:/2/

Your memorandum of September 17, 1971,/3/ expressed concern over the delay in deciding the details of the foreign assistance outlay reduction. I can appreciate your desire to communicate the details to the Congress and to foreign governments and am hopeful that the President will reach a decision on the reduction in the near future. A memorandum on the subject is before the President now/4/ and as soon as we have a decision, we will notify you promptly.

The magnitude of the reduction is somewhat larger than your memorandum implied. Estimated outlays for 1972 budget as amended for bilateral and multilateral economic assistance are $2,218 million; a 10 percent reduction amounts to $222 million.

Sincerely,
Cap

Washington, September 27, 1971.

Dear Cap:

Thank you for your reply of September 20, 1971 to my letter concerning the reduction of foreign assistance by ten percent./2/ It is very helpful to have your confirmation that the reduction will be made in expenditures rather than appropriation requests. This will permit us to plan the implementation of these measures on a more orderly basis.

We are uncertain, however, with respect to the $222 million figure. The $118 figure I had used was related only to AID development activities and did not include either supporting assistance or our contributions to international lending institutions. It has been our understanding that a ten percent reduction, amounting to $38 million, would be made in our contributions to the multilateral agencies. On the other hand, we have always been of the view (since the briefing at the White House in the afternoon of August 15) that there would (and should) be no reduction in supporting assistance expenditures. However, AID believes that the only way we can reach the figure of $222 million is to include a cut of $66 million in supporting assistance.

A cut in supporting assistance as I wrote earlier will cause major difficulty in funding for Southeast Asia. Our supporting assistance requirements are mounting and the situation could be tight toward the end of the year. The prospect is that requirements will be even greater next year. It would thus not appear feasible even to postpone expenditures from this year until next.

Please let me know when you would like to discuss this issue.

Sincerely,
Jack

Washington, October 15, 1971.

Dear Mr. President:

Next Thursday/2/ the annual High Level Meeting of the Development Assistance Committee of the Organization for Economic Cooperation and Development convenes in Paris. The meeting is at the Ministerial level. I will be heading the United States delegation.

The Development Assistance Committee is composed of 16 aid-giving countries. It meets regularly to discuss matters of mutual concern relating to the provision of development assistance to the low-income countries.

The other donor nations have expressed much interest in the 10 percent cut in foreign economic assistance expenditures that you announced on August 15./3/ They are deeply concerned as to its meaning, particularly from the standpoint of the longer term U.S. interest in the development process.

I believe they are attaching too much weight to what is essentially a short-term adjustment to an immediate U.S. need. But I find myself unable to allay their fears because we still have no guidance on how the cut is to be handled some two months after your announcement.

I believe that if I--as head of a Ministerial-level delegation--am unable to provide details on the cut at next week's meeting, a major ruckus will develop that will be embarrassing to the United States and damaging to our foreign policy interests. I do not believe we should let this happen. Accordingly, I plan to make the following four points at the meeting unless you instruct me otherwise:

--Expenditures for regular development assistance programs were $1.194 billion in the President's FY 1972 budget. These will be reduced to $1.076 billion, a cut of $118 million or about 10 percent.

--Expenditures for U.S. contributions to the International Financial Institutions were $352 million in the President's FY 1972 budget. These will be reduced to $314 million, a cut of $38 million or about 10 percent. Our contributions to the International Development Association and the Inter-American Development Bank will not be affected.

--Expenditures for Supporting Assistance were $648 million in the President's FY 1972 budget. The amount of the cut, if any, remains to be decided./4/

--The proposed cuts are in expenditures. We have not reduced our requests for New Obligational Authority to the Congress and are strongly supporting the amounts originally requested. Naturally, if past experience is a guide, we can expect Congress to cut our requests by 10 percent or more./5/

The proposed cuts in expenditure for regular development assist-ance programs and the International Financial Institutions present no problem. We have explained in detail to the Office of Management and Budget on several occasions how we would accomplish them. A cut in Supporting Assistance expenditures would present a more difficult problem. Because of the rapid growth of cash grants and similar fast-disbursing arrangements associated with several new Supporting Assistance activities proposed for FY 1972, the original budget estimate--which previously looked comfortable--now appears very tight. We must keep in mind that unless we wish to alter significantly the nature of these new programs--which fall primarily in Vietnam, Cambodia, and Jordan--we may have to equal or exceed the FY 1972 budget figure. We need to give this careful thought before making final decisions.

I believe the proposals I have outlined above are responsive to your announcement of August 15 which I fully support. If I am able to inform the other donor nations of the four points listed above, I believe we can head off a highly undesirable situation.

I have discussed this matter with the Under Secretary of State. He fully shares my concern and supports the proposal outlined above.

Respectfully yours,
John A. Hannah

In October 1971 the Senate Foreign Relations Committee considered the foreign assistance authorization bill for FY 1972. In an October 14 memorandum, John Lehman, a member of the National Security Council Staff, informed Henry Kissinger that the Committee had cut development assistance 20 percent, reduced MAP from $705 to $565 million and supporting assistance from $768 to $614.4 million, and limited MAP for Latin America to $10 million. He also noted that $250 million was approved for Pakistan and $85 million in supporting assistance had been added for Israel. (National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 323, Foreign Aid, Volume I 7/70-1971)

In an October 27 memorandum to Kissinger, Lehman wrote that a vote on the bill was imminent and that the Senate version was a "horror," and he recommended vetoing the bill if the administration proposals were not included. Lehman noted that 16 amendments would be required to make the bill acceptable, and he provided brief summaries of the three most objectionable provisions with talking points for use at a breakfast with Congressional leaders on October 28. He provided a paper from Richard Kennedy on maintaining foreign assistance under a continuing resolution if the bill were vetoed. He suggested that Kissinger avoid detailed discussion of the objectionable provisions, emphasize the success of the President's Asia policy, and raise the possibility of a Presidential veto if Congress were to undermine the President. (Ibid.)

The paper by Kennedy, dated October 27, entitled "Effects of Operating on Continuing Resolution Authority," reads as follows:

"OMB has examined all of our foreign assistance programs and concludes that if we were to remain on Continuing Resolution Authority (CRA), we can do so without any major detriment to our ongoing programs up to March 30, 1972. All of our ongoing programs could continue. We might have to postpone our contributions to international financial institutions (due December 30) but we have done so before. Exim would have to delay some commitments. But the longer it extends, the tighter the situation becomes. There would be considerable uncertainty, of course, and it would be difficult for the Agencies to plan not knowing what the ultimate total authorization for the year would be.

"If we were to go beyond March 30, however, we would have serious problems. There would be a major shortfall in supporting assistance seriously affecting our Southeast Asia programs and we would have no funds for India-Pakistan relief. We have been borrowing from other accounts to support the India/Pakistan effort up to now and if we are to mount a major effort as is planned, we need a new appropriation--since there was no such program last year there is no Continuing Resolution on which we can base the program this year. Also, we would have to default on subscriptions to the international financial institutions and Exim would have to close its loan and guarantee windows for the last quarter of the year.

"The Continuing Resolution Authority could be relied on only so long as there are other appropriations not yet passed (the present CRA expires November 15, 1971, and presumably will be extended for some period, probably 30 days, and then if necessary could be extended again)."

The Senate rejected the foreign assistance authorization legislation on October 29 by a vote of 41 to 27. Secretary of State Rogers, AID Administrator Hannah, Ron Ziegler on the President's behalf, and Secretary of Defense Laird promptly expressed the administration's dismay and the need for a continuing resolution and/or the introduction of new legislation. (Department of State Bulletin, November 22, 1971, pages 577-586)

Washington, October 30, 1971.

SUBJECT
Foreign Assistance

Enclosed is a quick summary of the effects of having no foreign aid bill or of having to operate on a continuing resolution authority./2/ There also are enclosed a series of tables which show the current status of our programs./3/ It is important to note that the obligation levels are in many cases far below the estimated requirements for the year. If we conclude that we may not be able to get a continuing resolution and that the aid bill also is dead for this year, we could push hard to get as much money obligated as possible between now and the time when the current continuing resolution expires (November 15 or December 1). This would have the obvious side effect, however, of seriously irritating some important powers on the Hill and thus might make any effort later to get a new bill more difficult. In any event, the foreign military sales obligations could not be significantly improved--the time required to get agreement with the recipient countries simply precludes any rapid action.

I also would emphasize that the biggest single problem with operating on a continuing resolution would be the Pakistan/India relief. The President is committed to increase our participation. We have borrowed from other accounts up to now to carry the program because, since there was no appropriation for this purpose last year, there is no existing continuing resolution authority specifically for it now. Thus we would be faced both with the problem of being unable to finance it further and also the serious effects on other programs (both development assistance and supporting assistance) from which funds already have been borrowed.

Two brief summary statements being used by Dr. Hannah as background for his press conference are attached also./4/

FOREIGN AID REQUESTS FY 72
($ million)

Foreign Assistance Obligations
($ Millions)

MAP and FMS Obligations
($ Millions)

FOREIGN AID
Authorizations/Appropriations FY 69-71
($ billions)

Washington, November 1, 1971.

Henry--

Attached is the strategy which the House leadership is anxious to pursue in sandbagging Fulbright. There are two aspects of it that are worth considering: One is it keeps a low White House profile which means we will have to turn Scali and the maniacs off, and second it would be a bitter repudiation of Fulbright if it succeeds. I am inclined to think that it is simple enough to work providing we can get lots of drumbeat going without direct White House involvement.

We have had a reaction today of considerable magnitude from those on the Hill who do not like to be considered irresponsible.

Timmons hopes to get your clearance on this tonight at the initialing tab.

Al Haig/2/

Washington, November 1, 1971.

SUBJECT
Foreign Assistance Legislation

A four-step strategy to restore foreign aid is recommended:

1. Continuing Resolution to Adjournment Sine Die. This continuing appropriation can probably be before the House late this week or early next, containing continuing authority for all unfunded programs (including foreign aid) till adjournment. The current authority expires November 15th.

2. Defense Appropriations could be on House floor early the week of November 15. It will contain security assistance provisions of foreign aid. Since this is funding for unauthorized programs a special rule waiving points of order will be sought. There will be minor cuts in the program.

3. Foreign Operations Appropriations could be out of House committee and on House floor the week of November 15th. This contains the economic and so-called "humanitarian" provisions of foreign aid. Like the Defense bill, this too would contain unauthorized funds and a special rule required. There will be major cuts in the program.

4. Continuing Resolution to March 1, 1972. Should either Defense or Foreign Operations money bills be defeated or filibustered by the Senate, House Leaders expect to pass another continuing resolution just before adjournment funding unauthorized programs to a date certain, probably March 1, 1972.

5. Foreign Assistance Authorization. The House Leaders and ranking members of the Foreign Affairs Committee have no desire to pass a new authorization. They feel that since the Senate defeated the House-passed bill they should not be required to create a new program, patterned after Fulbright's dictates. Also time works against any new measure clearing both Houses before adjournment.

1. Continuing Resolution to Adjournment Sine Die. Since this has to originate in the House there is nothing that can be done yet in Senate. However, most Senators now recognize the need to have a temporary continuing resolution.

2. Military and Foreign Operations Appropriations. The Senate Parliamentarian tells us no points of order can be made against these money bills, if passed by the House, even though funds are unauthorized. Undoubtedly, Chairman Fulbright and others will complain on grounds of usurpation of jurisdiction and fact the Senate had defeated foreign aid authorization. While these measures will be difficult to pass, the military bill should have strong support from conservatives and the foreign operations staunch backing from liberals. A tough fight in Senate.

3. Continuing Resolution to March 1, 1972. This resolution will not be necessary if the defense and foreign operations appropriations are enacted. It should be considered as a fall-back however.

4. Foreign Assistance Authorization. The Senate Foreign Relations Committee is conducting meetings to get a consensus for some new aid package. There is a likelihood Fulbright will call Rogers, Laird and Hannah to testify./3/ Should the Committee report a bill, it probably will strip away vital parts of security assistance and also may contain the Mansfield and Cooper-Church amendments. Since the bill would also have to pass the House, there is little possibility of enacting an acceptable foreign aid authorization this year.

Recommendations/4/

1. That as a tactic we try to avoid a new authorization. This will require a delay of the Foreign Relations Committee's consideration of a new bill.

2. That we privately urge the House to pass the military and foreign operations appropriations, although unauthorized, and try to win sufficient votes in Senate. We will work closely with GOP House leaders on funding levels.

3. Since foreign aid is unpopular with the American people, the White House should adopt a low profile on efforts to restore the program. Loyal Senators, columnists and outside groups should keep heat on Senate's irresponsibility.

In a November 2, 1971, memorandum to Secretary of State Rogers, Executive Secretary of the Department of State Theodore Eliot noted that the "initial world reaction to the Senate's rejection of the aid legislation has been one of stunned concern." Eliot included a sampling of reactions, including "disastrous consequences for the Southern Flank of NATO." He attached a copy of telegram 6432 from Lima, November 1, which set out country reactions by delegates to the G-77 Ministerial meeting in Peru. (National Archives, RG 59, Central Files 1970-73, AID (US) 5)

On November 3 OAS Secretary General Galo Plaza Lasso, CIAP Chairman Carlos Sanz de Santamaria, and Patricio Rojas, Chairman of the Permanent Executive Committee of the IA-ECOSOC, sent a joint letter to President Nixon expressing their concern. The opening paragraph reads: "The United States Senate's rejection of the Foreign Assistance authorization bill is a source of dismay to all those in Latin America who believe in the reciprocal benefits of international and inter-American cooperation for development. The action comes shortly after the imposition by the United States Government of a 10 percent surcharge and nullifies the effect of your action to exempt Latin America from the 10 percent aid cut. In this context, the Senate action cannot but give the impression of a weakening or abandonment by the United States of its special relationship with Latin America." (Ibid.) Regarding the exemption for Latin America from the 10 percent aid cut, see footnote 3, Document 62.

President Nixon answered the joint letter in a November 29 letter to Plaza Lasso. He stated his continuing commitment to providing assist-ance to developing countries. He added that the recent setback in no way diminished his determination to sustain assistance efforts and noted with satisfaction "that the Senate has begun to reverse the effect of its earlier action and has already approved at least a substantial part of the assistance funds which were originally requested." (National Archives, RG 59, Central Files 1970-73, AID (US) 5)

Washington, November 3, 1971.

Evening Report

[Omitted here is item 1 on the prospective visit of the First Lady to Liberia for President Tolbert's inauguration.]

2. Senate Foreign Relations Committee--Foreign Aid--Dr. Hannah and I appeared this morning for two hours before the full membership of the Senate Foreign Relations Committee at their invitation to discuss the future of foreign assistance. I think the discussion was useful.

We were able to avoid any discussions of a piecemeal program of foreign assistance. In large part this was due to the Chairman's and other members' efforts to focus attention on Southeast Asian policy.

In addition the discussion also gave me a chance to reassert the Administration's strong belief that a reduced program was not in the national interest. A number of Senators, including Cooper, Aiken, Spong and McGee, stated their view that reductions in program levels below the 20% cut levied by the Foreign Relations Committee on the last bill were possible ways of achieving a compromise. I was able to make clear that the figure reported out by the House ($3.2 billion) for the whole program was a figure which the Administration felt it was necessary to have.

Similarly, on the question of restrictive amendments, through the extensive discussions of Southeast Asia we made clear that amendments which constricted or restrained Presidentially-proposed programs would not be acceptable. Senator Symington in particular asked about his compromise with Senator Stennis on providing a $341 million ceiling for the Cambodian program, revised upward from the $250 million proposed by the Committee. I indicated, following the Laos ceiling pattern in the Defense Procurement Program, that a ceiling which provided for your full program would be acceptable. As you know, Symington on the floor re-endorsed on Thursday, October 28, your receiving the full authorization and appropriation for Cambodia. The essence of the compromise was that we are willing, in return for getting the full money required, to accept the idea of later going back to the Congress should additional funds be required. In any event this is quite close to the situation as it existed in last year's Foreign Assistance Act where any additions to the Cambodia program would be subject to 30 day Congressional notice. On the question of ceilings, I took the opportunity to clear up for the Committee the mistaken impression they had that the Administration would not respect a ceiling and believed that Congress did not have the right to impose one. I indicated that in our view ceilings were not advisable, but that Congress had the right, should it wish to do so, to impose them.

Senator Case indicated strong concern over our involvement in Cambodia and stated that in his view acceptance of the Cooper-Church Amendment would be the price for the passage of the bill. Senator Cooper did not appear to endorse this view. Senator Javits asked for a commitment that no U.S. ground or air forces would be engaged for the next year in Cambodia or Laos and an "assurance" that we would not be going down the same road as in Vietnam in those two countries. I told Javits that we had already made clear that our ground combat forces would not be involved in Cambodia or Laos, but that our air power had an important interdiction role to play in both countries.

I was asked about the Administration's views on foreign aid reform. I replied that after long study involving the Peterson Task Force, the Administration had submitted its own reform legislation./2/ The Senate Foreign Relations Committee had held no hearings on that legislation. I said that the Administration was ready to cooperate in having hearings in order to have the President's new program receive full consideration in the Senate. We had in the interim accepted the House judgment that a move to a new approach this year would not be possible, and that is the reason why the Administration, and we assume the Committee, had previously accepted the House proposed bill.

Senator Symington during the course of discussion left the room and then returned to say that the Conference on the Defense Procurement bill was now agreed on money amounts. What remained to be settled was strong House opposition to the Mansfield Amendment (on Indo-China). He asked if the Administration was going to continue to oppose the Mansfield Amendment and what would be the fate of an aid bill with the Mansfield Amendment attached. I replied that we are strongly opposed to this Amendment and had made that position clear to the Congress.

In sum, among the members of the Committee who spoke, Church and Spong appeared to endorse the Fulbright-Mansfield-Symington strong opposition to the present aid bill. Among the others who spoke there was support in one degree or another for most of our development and humanitarian programs and acceptance of the necessity for some security and military programs. I believe this group may support a Continuing Resolution Authority for foreign assistance to get us past the present November 15 deadline.

David Passage/3/

On November 4, 1971, at 12:05 p.m., Special Assistant to the President Eugene S. Cowen sent a memorandum to Clark MacGregor and Henry Kissinger informing them that at about noon that day Senator Fulbright would introduce three foreign assistance bills in the Senate Foreign Relations Committee: bilateral economic aid, $640 million; humanitarian and multilateral aid, $445.9 million; and military and related aid, $1 billion. Cowen added that the three bills would total $2.1 billion, $850 million less than the bill that was defeated in the Senate on October 29 and far below the administration's request for $3.5 billion. Cowen noted that appropriations in FY 1970 had been $1.9 billion. (National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 323, Foreign Aid, Volume I 7/70-1971)

At 1:30 p.m. on November 4 Assistant Secretary of State for Legislative Affairs David Abshire sent a memorandum to Alexander Haig informing him that he and Under Secretary Irwin had just met with Senators Cooper, Javits, and Case who together would be offering a one-bill Javits substitute for the Fulbright three-bill approach and that they thought they had the votes. (Ibid.)

On November 4 Cowen sent another memorandum to Henry Kissinger and MacGregor informing them that the Foreign Relations Committee was likely to report a foreign aid bill that day. He added that Senator Scott had told him that he thought Javits and Cooper had the votes to report out the Javits bill. Cowen provided details on the Javits bill, by categories of assistance, and noted that the total was $2,914.8 million, the same amount in the bill defeated by the Senate on October 29. (Ibid.)

In his November 4 Evening Report to the President, Secretary of State Rogers reported that by a unanimous vote the Foreign Relations Committee had voted out two foreign assistance bills, the first covering bilateral economic assistance ($695 million) and humanitarian and multilateral assistance ($449 million), and the second providing $1,185 million in military and related assistance. Rogers noted that the total, $2,329 million, was about $600 million less than in the bill the Senate rejected on October 29 and $900 million less than the Committee's original recommendation. He pointed out that the bill approved by the House had provided $3,443 million. He reported that the Cooper-Church Amendment was out but that the Mansfield and Symington Amendments remained. (Ibid., White House Central Files, President's Daily Briefings, Box 37, November 1-16, 1971)

Washington, November 9, 1971.

FROM
Clark MacGregor, Bill Timmons, Ron Ziegler, Dick Moore and Henry Kissinger

SUBJECT
Foreign Aid

The Continuing Resolution to sine die adjournment covering all unfunded programs, including foreign aid, is on the House Floor tomorrow.

Also on Wednesday, the Senate takes up the two new foreign aid authorizations: one on economic-humanitarian assistance and another on military-supporting aid./2/

Our position is to pass the Continuing Resolution as a stop gap and to increase funding levels through Floor amendments in the supporting and military assistance portions of the Senate authorization.

Vote projections are extremely tight. A strong Presidential statement, preferably in person, would be helpful in winning votes and also will stop critics claiming you did little to save the program.

From a press standpoint, the most effective platform for influencing these critical votes would be for you to make a comment in New York at the Republican dinner tonight. It is felt in addition to the good press play that would result that such a step would throw both our critics and the press off balance.

Attached is a suggested addition to your New York remarks./3/

Washington, November 9, 1971.

Dear George:

In my letter to you dated October 29, 1971, submitting our security assistance budget request for FY 1973, I made reference to a special Security Assistance Contingency Fund./2/ The budget requirement for this fund--$100 million--will be additional to the FY 1973 program for Economic Supporting Assistance (SA) and the Military Assistance Program (MAP).

I should like to explain the purposes of the proposed Contingency Fund. As you recall, the President, in his Message to the Congress of April 21, 1971, transmitting draft legislation on foreign aid, requested authority for $100 million for the President's Foreign Assistance Contingency Fund for FY 1972. The Fund was intended to permit the Administration, with due notification to the Congress, to meet worldwide contingencies in ways compatible with our national interests. The President made clear that he sought unprogrammed funds for use, on short notice, when sudden crises in the international community required us to act promptly.

Congress has in recent years appropriated only very limited funds for unprogrammed contingencies. Moreover, various amendments to the Foreign Assistance Act and substantial reductions in FAA appropriations have limited the Administration's ability to meet unexpected problems rapidly and effectively. As a result, we have frequently been compelled to reallocate funds to meet new contingencies by transferring monies from programs previously justified to the Congress as highly important to the U.S. This practice has encountered Congressional resentment and has created major programming problems for the Executive Branch. I believe that a new approach is required--one which assures the Administration adequate flexibility to meet unforeseen crises and is at the same time forthright with the Congress.

I therefore propose a $100 million Contingency Fund for Security Assistance in FY 1973, to be utilized for Military Assistance and Economic Supporting Assistance purposes. This Contingency Fund would be appropriated to the President and apportioned to the Secretary of State who would maintain control over its use.

Inclusion of a Security Assistance Contingency Fund in our FY 1973 budget request will require certain adjustments in the FY 1973 budget requests related to the Foreign Assistance Act, already submitted to you, as follows:

First, additional FY 1973 New Obligational Authority of $100 million for the Security Assistance Contingency Fund, and a related increase in the FY 1973 outlay ceiling of $30 million.

Second, a reduction in the Supporting Assistance request of $50 million in New Obligational Authority and $14 million in outlays, bringing the Supporting Assistance totals to $880 million and $811 million respectively. The undistributed $50 million of Economic Supporting Assistance which was requested in Dr. Hannah's FY 1973 submission to you of October 12, 1971, will no longer be required since the Security Assistance Contingency Fund would cover such needs.

A.I.D.'s contingency fund of $30 million in FY 1973 requested by Dr. Hannah on October 12, 1971, would be apportioned to the A.I.D. Administrator and would be limited to Development Assistance categories, primarily disaster relief. The latter fact could be made clear through legislative history.

I recognize the difficulty of preparing a persuasive brief for the Security Assistance Contingency Fund before the Congress. However, I am confident that, with adequate advance preparation, we will be able to secure general support on the Hill for this approach. Before completing the FY 1973 Congressional Presentation, we would consult with the Congressional leadership and appropriate Congressional Committee members to ascertain likely Congressional reactions. If these consultations should show Congressional hostility to the idea, which might in turn provoke further restrictions on the Administration's flexibility in using FAA funds, we would need to reconsider the whole approach.

I would welcome your support in establishing the proposed Security Assistance Contingency Fund. If you have any comments, my staff would be happy to meet with your representatives.

Sincerely,
William P. Rogers

Washington, December 6, 1971.

SUBJECT
Funding Security Assistance Programs

On November 24, 1971, Secretary Laird wrote Director Shultz recommending that "Security Assistance, including FMS requests for FY 73, be restructured as Defense Authorization and Appropriation bills," (Tab A)./2/ Thus the Secretary has reopened the thorny question of the most desirable arrangement for security assistance programs. The difficulty of the problem derives from its several interlocking facets: managerial, bureaucratic, and political. George Shultz will be wanting to discuss this with you.

Our security assistance effort has long been criticized for diffuse management and consequent lack of control. The number of possible arrangements designed to address those problems is extensive, but the following three seem to be the range of reasonable options.

1. The DOD budget could be expanded to include MAP, FMS credit, all Supporting Assistance, and the Public Safety program. State/AID would not have any security assistance appropriations but would provide policy direction and manage the public safety and supporting assistance programs.

2. The Defense appropriation could cover MAP, FMS credit, and security-related (SEA and Jordan) Supporting Assistance. The State/AID appropriation would include Public Safety, Economic (non-security) Supporting Assistance, and the Contingency Fund.

3. Some lesser change such as (a) moving only Cambodia to MASF or (b) moving MAP and Supporting Assistance for all the forward defense MAP countries (Greece, Turkey, Cambodia, Taiwan, and Korea) to the Defense budget.

--The first option would bring together all security assistance funding in a single budget and centralize control in Defense. Regardless of legal provisions, in practical terms State's role would be considerably reduced. Also, DOD would fund for economic programs not related to security assistance and for Public Safety, which has at most a marginal relationship to security assistance. A similar proposal was earlier rejected in decisions leading up to the Administration's April 1971 proposal based upon a judgment that we probably could not succeed in an effort to move all MAP, FMS, or supporting assistance into the Defense budget. Today the situation may be different.

--The second alternative leaves Public Safety and non-security economic Supporting Assistance under State/AID. Thus it would not saddle DOD with ancillary programs of little interest to it, would preserve a more active State/AID role, and would still provide a meaningful basis for the Nixon Doctrine's rationale of a trade-off between (a) allied efforts with U.S. support and (b) direct U.S. security efforts. Some might object that by taking Security Assistance out of the Foreign Assistance Act the existing flexibility between Development Assistance and Supporting Assistance would be lost. But by moving all security-related programs to the Defense budget, the flexibility to shift between Supporting Assistance and MAP would be preserved and with careful drafting substantial additional flexibility could be assured within the Defense budget--including reliance on the Service budgets for long lead-time support.

--The third choice would be essentially a half-measure which would still give the HFAC/SFRC a slice of the pie and would leave funding for Latin American and African internal security programs under State/AID. Funding would be badly split, and the advantages of moving one or a few country programs would not compensate for the adverse Congressional reactions. Moreover, this would provide a wedge in both the bureaucracy and the Congress for moving items piecemeal to the State side and would leave management of security assistance programs divided.

--Problem. Moving all security assistance programs to the DOD budget would mean that the total Security Assistance budget under Defense would approximate $4.5 billion. Consequently, those who seek increases in the regular Defense budget might find the increases received illusory since an additional $2 billion in costs would have been accepted.

Structural decisions regarding budgetary legislation have obvious impacts upon the roles of the agencies concerned. Any of the above alternatives would reduce the basis for charges that security assistance is diffuse and uncontrolled; however, they would produce anguished cries of increased DOD influence and downgrading the State Department. This would, of course, be true. Provisions of law notwithstanding, any of the above would decrease State's policy influence in security assistance.

Regardless of all the possible debate about good management, the crux of the matter lies in the Executive-Legislative relationship and the impact of any attempt to change committee jurisdictions upon security assistance funding, restrictions on the President's flexibility, the DOD budget, and even on domestic programs.

--If a change of jurisdiction could be achieved without rousing resentment, there is no doubt it would be desirable. But this may not be possible. The GOP members of the HFAC and Chairman Morgan wrote President Nixon expressing strong opposition to any such move last December and January./3/ Thus we might manage to shift jurisdiction only to find that on the floor we faced more intensive opposition on aid, and the war and foreign policy powers of the Executive Branch.

--Therefore, the major question is whether the inevitable resentment of and major risks attendant upon the attempt are outweighed by the probability of success and potential benefits if successful. The judgment is subjective; no one can answer with assurance.

--The Executive cannot control committee jurisdictions. The Congress could extract security assistance from the DOD budget and place it before the HFAC and SFRC. However, this could be prevented to a large extent by intermingling security assistance funds within the Defense budget.

--Personalities come and go and change. We could find we had taken the lumps of making shift, only a year or so later to find the HFAC/SFRC the preferable forum. (One wonders, for example, whether an Armed Services Committee chaired by Senator Symington would be helpful to our security assistance program.)

Presumably we would attempt to reduce criticism, if the President decides to make the change. One way could be to acknowledge Congressional concern, cast the effort in terms of cancelling old programs and introducing new ones, emphasize managerial/control reasons for the change, maintain that altering committee jurisdiction was not our purpose, and structure the security assistance position of the Defense budget so that it could easily be broken out for separate committee attention. The disadvantageous possibility is that the Congress might take us up on it, especially if security assistance items were not intermingled in the DOD budget, and keep security assistance before the HFAC/SFRC. The primary advantage would be that this course leaves the decision more clearly up to Congress and appeals more to the self-interest of the Armed Services Committees. Any struggle would be more (not entirely) intralegislative rather than completely executive vs. legislative.

Burying security assistance funds within the Defense budget could make it extremely hard to pull supporting assistance out to place it under the HFAC/SFRC for authorization. On the other hand, such obscuration would weaken our stance that a change of jurisdiction was not our primary purpose.

In short, this change is feasible, and there are advantages even beyond the possibility of friendlier forums on the Hill. Defense is now developing alternative methods for making such a move of supporting assistance funds as well as for dealing structurally in the budget with some of the strategy questions which will arise in the presentation. But they have not yet completed this effort.

What we need now is an assessment from the congressional side of the prospects for success. This should be first undertaken by Secretary Laird, but if the President elects to go in this direction, given the nature of the committee prerogatives involved, the President himself should discuss the effort with Senator Stennis.

A conception for putting security assistance in the Defense budget is at Tab B. This is generally in accord with planning now underway in Defense.

A paper prepared for Director Shultz by the OMB staff outlining their reservations, which hinge almost entirely on congressional considerations, is at Tab C, covered by a brief summary we have prepared.

An internal State memo, which also focuses on congressional reactions, is at Tab D.

Washington, December 17, 1971.

Evening Report

Foreign Aid--After coming to an agreement on the Conference Report on the Foreign Aid Authorization Bill and the Continuing Resolution late Thursday night, the House and Senate acted quickly this morning to conclude legislative action for this session. The Senate passed the Authorization Conference with no debate by a roll-call vote of 33-21. The total authorization figure is $2.752 billion with $1.234 billion for economic assistance and $1.518 billion for security assistance. A further breakdown of the security assistance authorization figures shows MAP funded at $500 million, security assistance at $618 million, with $50 million for Israel, and foreign military credit sales at $400 million with $300 million earmarked for Israel.

Doc Morgan said the House would take up the Authorization Conference Report after they reconvened in mid-January./2/

Immediately after the passage of the Authorization Conference Report, the Senate passed by a roll-call vote of 45-9 H.J. Res. 1005, a Continuing Resolution Authorization for foreign aid and other related programs. This resolution would expire on February 22, 1972. A breakdown shows $1.252 billion for economic assistance and $1.572 billion for security assistance. Security assistance includes $522.5 million for MAP, $649.7 million for supporting assistance with $50 million for Israel, and $400 million for foreign military credit sales with $300 million earmarked for Israel. This brings the total appropriation for the Continuing Resolution up to $3.238 billion, excluding funds for the Export-Import Bank. The Continuing Resolution figures are slightly higher than the Authorization Bill because they show some previously authorized but not appropriated funds. The Continuing Resolution passed the House unamended by a voice vote.

Shortly after this action both Houses formally adjourned for the session.

William P. Rogers

Washington, undated.

SUBJECT
Foreign Aid Budget for 1973

The memorandum from George Shultz at Tab 1 summarizes OMB's FY 73 budget recommendations for foreign aid, both security and development.

In brief, the recommended FY 73 program is tight but adequate to support our foreign policy objectives. The following table highlights the new obligational authority changes from the 1972 budget and current estimate (based on the conference and Senate-passed authorization bill).

(A more detailed table is at Tab 2)/2/

Your security assistance request will be slightly above that requested and 25 percent above what we anticipate the Congress will give us for FY 72. Your economic assistance request will be about $150M less than you sought, and about an equal amount more than we expect Congress to provide, for FY 72.

Significant items include the following: The $60M Thai program has been transferred from the Defense budget to MAP in conformity with the pending aid authorization bill. The increase in supporting assistance from $763 to $811M results from the withdrawal of U.S. forces from Vietnam and the consequent need to supplement GVN foreign exchange earnings. The Indonesian program includes $25M in MAP and $115M in development loans, reflecting your recent decision on the U.S. pledge to Indonesia. South Asian relief needs are highly uncertain; therefore, we recommend $100M be included in the budget with an indication that a supplemental appropriation may be needed later.

George Shultz' recommendation is that we only go for $50M for the Contingency Fund. His rationale is that the Congress has in the past been reluctant to approve our requests. Indeed, there is only $30M in the current authorization bill, and the appropriation is likely to be reduced even further. Congress looks with suspicion on what it sees as an uncontrolled amount. The uncertainties which we can expect, in particular those associated with relief for South Asia and possible additional security needs in Southeast Asia, warrant our asking for a larger amount. I recommend you request $100M for the 1973 Contingency Fund rather than the $50M George has proposed.

Recommendation:/3/

That you approve the proposals as submitted by George Shultz with an addition of $50M to the Contingency Fund, making a total of $100M.

Washington, December 23, 1971.

SUBJECT
Foreign Aid Budget for 1973

This memorandum summarizes our 1973 Budget recommendations for foreign aid, both security and development./4/

In brief, our recommendations for foreign assistance in 1973 total $4,755 million in budget authority and $3,177 million in outlays. The 1972 Budget request was $4,886 million in budget authority and $3,482 million in outlays. The 1972 current estimate figures contained in the following tables are based, where applicable, on the amounts that would be authorized by the foreign assistance authorization bill which has been agreed to by the conferees and passed by the Senate. Those figures, which we propose be carried in the Budget rather than the original request, total $4,064 million in budget authority and $3,101 in outlays. (See attached table for a detailed summary, Tab A.)/5/

Security Assistance

Our recommendation would be adequate to support our foreign policy objectives, but would require some restraint in using resources to meet those objectives or new requirements. The grant program is higher than the level requested for 1972, reflecting principally the funding of the Thailand program in the regular military assistance grant program rather than in the Defense budget; this change would be required under the pending foreign assistance authorization bill. The chances of obtaining a repeal of that requirement would be very small. The appropriation which would be requested for grants would be about the same as for 1972 in order to reflect the availability of excess defense materiel and encourage its use to reduce the need for appropriated funds. The recommended total budget authority for grants and credits is close to the level requested for 1972 but considerably more than the Congress is likely to provide this year.

The bulk of the grant funds would be for Cambodia ($225 million), Korea ($220 million), Turkey ($100 million), Thailand ($60 million), Jordan ($45 million), and Indonesia ($25 million). The amount for credit sales would include $300 million for Israel, $75 million for Latin America, $60 million for Greece, and $55 million for Taiwan. (See attached tables for country detail, Tabs B and C.)

Economic Supporting Assistance:

The increase in economic supporting assistance is largely due to the need to replace declining South Vietnamese foreign exchange earnings resulting from the withdrawal of American forces. The increase would permit continued financing of imports into Vietnam at about $750 million annually. Of the total supporting assistance program of $890 million, $633 million would be for South Vietnam, $90 million for Cambodia, $50 million for Laos, $40 million for Jordan, and $26 million for Thailand. (See attached table for country detail, Tab D.)

Development Assistance

The recommendation includes development loans, technical assistance and related activities, AID administrative expenses, and the Inter-American Social Development Institute. The amount for development loans would be adequate for a program for South Asia of at least $300 million without specifically identifying the division between India and Pakistan. In addition, the recommended amount includes $115 million for Indonesia, reflecting your recent decision on the U.S. pledge. (See attached table for illustrative country and regional detail, Tab E.)

Voluntary Contributions to International Organizations:

This category includes contributions to such organizations as the U.N. Drug Abuse Control Fund, the U.N. Children's Fund, and the U.N. Fund for Population. The principal contribution is to the U.N. Development Program (UNDP). In each of the last three years the Budget included $100 million for the UNDP. The agency 1973 request for the UNDP is $105 million; our recommendation of $86 million is the same level as that which the Congress provided in 1970 and 1971.

South Asia Relief:

Costs in 1973 for relief of refugees in India and East Pakistan are highly uncertain. For this reason we recommend that $100 million be included in the Budget as a tangible recognition of a certain humanitarian need and that we indicate that a supplemental appropriation may be needed later. Provision for such a supplemental would be made in the Budget's allowance for contingencies; we would handle food aid under P.L. 480 in the same manner.

Overseas Private Investment Corporation:

The agency requests an increase in its reserves sufficient to cover total potential claims against insurance on U.S. investments in Chile. Our recommendation, together with existing reserves and anticipated income, would be sufficient to pay highly probable claims during calendar year 1972 without the need to seek an appropriation clearly labeled "Chile." However, we would indicate in the Budget the possibility of a later supplemental appropriation if the expropriation situation in Chile should require.

International Financial Institutions:

The agency request and our recommendation are principally for contributions to international financial institutions to which the United States is fully committed--the second and third installments for the International Development Association, the Inter-American Development Bank, and the Asian Development Bank Special Fund. In addition, the recommendation includes $100 million in budget authority representing the first of three installments of a contribution to the Asian Development Bank's ordinary capital, to which the U.S. Director of the Bank has agreed.

President's Foreign Assistance Contingency Fund

The agency request is for two contingency funds: $100 million for security assistance and $30 million for other foreign aid contingencies, principally disaster relief needs. We recommend continuation of one fund to preserve maximum Presidential flexibility. Our recommendation of $50 million reflects a judgment that the Congress is unlikely to appropriate even that much, as recent experience indicates.

George P. Shultz

On January 4, 1972, Secretary of State Rogers and Secretary of Defense Laird sent separate memoranda to the President requesting his reconsideration of the MAP levels he approved in the closing days of 1971 (see Document 79). Laird sought the full amount of the original Defense Department request ($847.8 million compared to the $710.0 million that was approved), but Rogers was less ambitious. Laird also sought restoration of funds for the Korea program and took exception to a "financial legerdemain" that reduced new obligational authority by $50 million and which he thought might raise questions in Congress. Richard Kennedy summarized the Secretaries' reclamas in a January 4 memorandum to Henry Kissinger to which he attached their memoranda.

In his covering memorandum Kennedy agreed with Rogers that the financial sleight of hand might cause difficulties with Congress and that the request for new obligational authority should be increased accordingly, along with another $5 million in MAP for Indonesia that Kissinger had requested. Kennedy recommended that Kissinger tell OMB Director Shultz that the NOA figure should be increased by $55 million but that, with the exception of Indonesia levels, other country programs should remain as approved. (All in National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 230, Department of Defense, Volume 15 1/72)

Kissinger accompanied the President on his flight to California on January 3, preparatory to the Summit with Prime Minister Sato on January 6. (Ibid., White House Central Files, President's Daily Diary) Kennedy's January 4 memorandum was brought to Kissinger's attention, and on January 5 Kennedy wrote on it: "HAK approved except that $15 million was added to Korea. This was passed to OMB--Dam/Shultz and Defense--Pursley. OMB confirmed that changes were made per this instruction."

Washington, January 20, 1972.

As you know, we have been engaged for a period of many months in a thoughtful and comprehensive study looking toward reorganizing and redirecting A.I.D. to better achieve objectives attuned to the present and the future and within existing legislation./2/

We have completed this effort and are about to proceed with it.

I have kept Under Secretary Irwin informed as each step has been taken.

This morning I am personally hand-delivering copies of the material attached to this memorandum to the Chairmen and Ranking Minority Members of the Foreign Relations Committee and Appropriations Subcommittee of the Senate, and to the Chairmen and Ranking Minority Members of the Foreign Affairs Committee and the Appropriations Subcommittee of the House. A copy of one of the letters accompanying this material is also attached for your information.

You will note that I am not asking for approval, but providing an opportunity for them to point out anything they feel to be unwise or undesirable before the last steps are taken.

There will be general distribution of the overall document with an accompanying memorandum to A.I.D. employees in Washington on Monday. Copies of this material are also being forwarded to the President, Henry Kissinger, Clark MacGregor, George Shultz and Cap Weinberger.

I am sure you do not have time to read the longer document. The briefing paper on reorganization will give you the thrust of it.

J.A.H

Washington, January 20, 1972.

Dear Mr. Chairman:

As you know from our previous conversations, we have been engaged for a period of many months in a thoughtful and comprehensive study looking toward reorganizing and redirecting A.I.D. to better achieve its objectives attuned to the present and the future and within existing legislation.

We have completed this effort and are about to proceed with it.

It seems appropriate that I should give you a copy of what is contemplated before it is distributed within the agency and give you an opportunity to look at it and give me the benefit of your judgment as to whatever you see in it that seems unwise or undesirable.

Because experience has taught me that within the bureaucracy any distribution soon becomes public, and that a request for approval provides an incentive for disapproval, I am delivering in person, if possible, or if that is not possible through Matt Harvey, copies of this mate-rial only to the Chairmen and ranking Minority Members of the Foreign Relations Committee and the Appropriations Subcommittee of the Senate, and to the Chairmen and ranking Minority Members of the Foreign Affairs Committee, and the Appropriations Subcommittee of the House.

I am not asking you to approve it or ratify it.

Unless there are substantial objections, I plan to distribute it to A.I.D. employees the first of next week and will move to implement it as rapidly as possible beginning on February first.

To achieve the staff reductions contemplated will require legislation permitting early retirement of a substantial number of people and the retention of the most competent and able.

The material attached includes:/3/

1. Briefing paper on Reorganization

2. Memorandum to A.I.D. Employees with attachment, "Reform of U.S. Economic Assistance Programs"

3. Copy of proposed legislation to accomplish early retirement of A.I.D. personnel

I will appreciate your advice or any comments you care to offer.

Sincerely,
John A. Hannah

Washington, January 20, 1972.

AGENCY FOR INTERNATIONAL DEVELOPMENT
BRIEFING PAPER ON REORGANIZATION

The Agency for International Development is undertaking a comprehensive self-reorganization, designed to

--emphasize humanitarian and economic aspects of U.S. development assistance;

--adjust traditional techniques and policies to changed development needs and resources in the world's poorer countries;

--coordinate more effectively U.S. development assistance within multilateral and consortia channels;

--further emphasize the participation of private organizations in assistance;

--focus U.S. development resources on a sector basis; and

--reduce the size and complexity of the A.I.D. structure.

The new organizational plan is in keeping with President Nixon's call for a more efficient and modernized U.S. foreign assistance program and is consistent with the philosophy of legislative proposals presently under review by the Congress. It also reflects many of the suggestions for program improvements previously expressed by the Congress.

In recent years a number of steps have been taken to modernize U.S. assistance strategy and techniques. The establishment of an Auditor General has improved program management. The sector approach has been introduced into many country programs. More participation by private U.S. organizations has been achieved. Administration of Supporting Assistance has been placed within a separate bureau./4/ A.I.D. staff has already been reduced by nearly a third in the past three years. These and other steps have produced good results in terms of program efficiency and effectiveness.

Nevertheless, basic A.I.D. structure and many A.I.D. procedures continue to reflect development needs and conditions of a decade or more ago when the U.S. played a predominant, nearly exclusive, role in providing development resources and guidance to the poor countries. Since then, other advanced nations have greatly increased their national contributions to the world's development programs, international lending institutions have expanded their resources and administrative capacities, the underdeveloped nations have gained perspective and understanding of their own problems and begun to develop their own plans and their own human resources to deal with them. And those problems have been seen to be more complex and intractable, requiring remedies more highly sophisticated and innovative than was originally recognized.

All this compels new approaches, including

--a more collaborative style of assistance which places the developing countries at the center of the development process;

--greater application of U.S. scientific and technical advances on research and development of new and innovative techniques for development problems;

--broader participation of American private groups in the practical work of development.

To achieve these ends the Agency is undertaking the following changes within the framework of existing legislation.

1. A new Bureau for Population and Humanitarian Assistance will incorporate all elements of the Agency's programs and research in population and family planning, the grant "Food for Peace" program, disaster relief, and support for 82 U.S. voluntary agencies engaged in overseas assistance. Disaster relief capability will be upgraded and strengthened. Problems of exploding population growth and birth control will receive the highest priority.

2. The Bureau for Technical Assistance will provide Agency leadership in technical assistance policy, program development and research focused on basic human problems, where American technology and experience can make distinctive contributions. Coordinating A.I.D.'s resources in research and institutional grants to undertake major pilot programs stressing innovative techniques for adaptation of modern technology will be a major task of this bureau.

3. Regional Bureaus established on geographical lines, which have been semi-autonomous and equipped to undertake detailed individual country analysis and programming will continue, but will rely increasingly on outside sources, including private organizations and recipient nations themselves, to do more of the programming and project management.

4. All program support and administrative service functions, including personnel, accounting, contracting, procurement, training, data systems and management analysis, will be consolidated in a new Bureau for Program Services. The new arrangement is designed for greater flexibility, speed, policy consistency, procedural simplifications and more efficient use of manpower.

5. Economic supporting assistance, sometimes called security assistance, will continue to be administered, for now, by a separate bureau within A.I.D., and will be subject to general policy changes of the Agency. We hope these programs will ultimately be transferred to the Department of State.

6. An Administrator's Advisory Council, composed of senior officers, will be formed to assist the Administrator in the redirection of the Agency's program and to strengthen central policy direction.

When this reorganization is completed, the Agency expects to do its work better with fewer people. If (but only if) necessary Congressional authorities, previously urged, are obtained, the Agency is confident it can assure improved effectiveness and achieve further personnel savings of a magnitude approaching 25 percent of present American staff. These authorities include incentives for selective retirement of eligible personnel and permitting better utilization of the Agency's solid bedrock of highly skilled and dedicated staff. Alternative methods of staff reduction could not achieve this.

Washington, January 26, 1972.

SUBJECT
Your program for reform of the U.S. Economic Assistance Program/2/

Your reform program goes a long way toward implementing the thoughts which both we and the Administration have expressed in recent years on economic assistance. It is impressive in both scope and content.

As I understand your program, it does not affect the relationships which currently exist between the Department of State and the Agency for International Development. The new organization does, however, suggest that in the near future the appropriate officers from State and AID should review our coordinating mechanisms in order to ascertain what adjustments if any should be made in them. For example, we may wish to consider a more formal link between State and AID by assigning a senior State officer to sit on your Administrator's Advisory Council.

I have also received comments and suggestions from officers in the Department of State with reference to supporting assistance, public safety, humanitarian assistance, and our population programs.

There is general agreement that a concerted effort should be made to gain enactment of the International Security Assistance Act as rapidly as possible, although not at the expense of a prolonged delay in obtaining a FY '73 security assistance authorization. David Abshire is exploring this question and will report back to us in the near future. In the meantime, I would recommend delay in the full integration of the Supporting Assistance Bureau into the reorganized Agency for International Development./3/ Even if we are unable to obtain passage of a bill formally transferring supporting assistance to State, I believe that serious consideration should be given to a delegation of authority under which the Supporting Assistance function would have a clear chain of command from the Under Secretary and the Coordinator for Security Assistance.

I also believe that we should have a thorough review of the relationship between Public Safety and Supporting Assistance to determine the ultimate placement of public safety programs.

As you know, the President in his message to Congress on April 21, 1971 on the reorganization of foreign assistance expressed his desire to create a Bureau of Humanitarian Assistance within the Department of State and included such a proposal in his draft legislation on International Development and Humanitarian Assistance. It is my understanding that the organizational changes contemplated for AID in no way preclude the future creation of such a bureau in State. This point should be made in any discussions with Congress and outside interested groups.

Because of the substantial interest both in the Department of State and within the Congress in our various population programs, I would like to suggest that you consider the establishment of a Population Assistance Bureau, or a Bureau of Human Resources Development as an alternative to the placement of population programs in the Bureau for Population and Humanitarian Assistance./4/ A possible grouping of functions in a Bureau for Human Resources Development could include manpower, health, education, and housing as well as population programs.

In the event that neither of these arrangements should prove feasible, we would stress our understanding that population programs will continue to be treated as an essential element of economic development, and that the coordination of population programs will be such as to make them mutually reinforcing with education, health and nutrition, and manpower employment programs.

Finally, I would like to stress the necessity of treating our bilateral assistance programs as an integral part of our overall foreign policy effort. There should be no implication in our presentation of these administrative improvements that there has been change in the Administration's policy as expressed by the President in his message to Congress on April 21, 1971 where he states that these programs are ". . . of major importance in promoting the national security and foreign policy of the United States . . .".

Washington, undated.

SUBJECT
Enrolled Bill S. 2819--Foreign Assistance Act of 1971
Sponsor--Sen. Fulbright (D) Arkansas

February 7, 1972--Monday (recommend action on the last day)

(a) Authorizes appropriations for foreign assistance for fiscal year 1972 of $2,752 million, of which $1,204 million is for Development Assistance, $1,518 million is for Security Assistance, and $30 million is for the President's Foreign Assistance Contingency Fund; (b) authorizes appropriations for 1973 of $984 million, of which $954 million is for Development Assistance and $30 million is for the Contingency Fund; (c) adds restrictions and limitations to the foreign assistance programs; (d) requires release of certain impounded domestic funds before foreign aid funds can be used; (e) requires periodic appropriation authorizations for the Department of State and the United States Information Agency; and (f) requires State to keep the Foreign Relations and Foreign Affairs Committees "fully and currently informed" on matters within their jurisdiction.d domestic funds before foreign aid funds can be used; (e) requires periodic appropriation authorizations for the Department of State and the United States Information Agency; and (f) requires State to keep the Foreign Relations and Foreign Affairs Committees "fully and currently informed" on matters within their jurisdiction.

Office of Management and Budget: Approval (Signing statement attached)/2/

Department of State: Approval

Agency for International Development: Approval

Overseas Private Investment Corporation: Approval

National Security Council: Approval (informally)

United States Information Agency: Does not recommend disapproval

Department of Defense: Let bill become law without signature

Department of Agriculture: No recommendation

Department of the Treasury: No objection

Department of Justice: Defers to other agencies

Inter-American Social Development Institute: No comment

Council on International Economic Policy: No comment (informally)

The total authorization provided in S. 2819 for 1972 is $802 million less than that requested by the Administration and $484 million below the authorization provided in 1971. The major reductions in the request are:

--$178 million in development lending from the $635 million requested;

--$99 million in technical assistance from the $363 million requested;

--$147 million in economic supporting assistance from the $765 million requested;

--$205 million in military assistance grants from the $705 million requested;

--$110 million in foreign military sales from the $510 million requested; and

--$70 million in the President's Foreign Assistance Contingency Fund from the $100 million requested.

Details of the reductions are contained in the attached table.

In addition to the substantially reduced authorization levels, the 1972 appropriations will be even lower. The House-passed appropriation bill is $115 million below the authorization levels contained in the enrolled bill, while the unenacted Senate committee bill is $604 million below the authorization levels. The bulk of these additional reductions is in supporting assistance and military assistance.

The Administration had proposed a major organizational restructuring of the foreign assistance programs and separate authorizing bills for security assistance and development assistance./3/ In addition, the Administration proposed deletion of a number of restrictive amendments. With some exceptions (e.g., provision of an Executive Level III in the State Department for a Security Assistance Coordinator), the bill passed by the Congress does not respond to these recommendations, continues the basic authorities contained in the Foreign Assistance Act of 1961, and adds a long list of new restrictive amendments, discussed below.

The Administration also proposed new provisions dealing with international narcotics control; the enrolled provisions differ somewhat from those proposed but in intent and effect are basically the same. The new provisions (section 109, page 4):

(1) Authorize the President (a) to enter into agreements with other countries for the control of illicit trafficking in narcotics, and (b) to furnish assistance for this purpose to countries and international organizations, using any foreign assistance funds available.

(2) Require suspension of foreign aid to a country which the President determines has not taken adequate steps to prevent narcotics from illegally entering the United States, and permit lifting the suspension when the President determines that such steps have been taken.

The only significant substantive changes from or additions to the Administration proposal pertaining only to development assistance are (a) denial of requested authority to use approximately $60 million in dollar receipts from loans made by AID's predecessor agencies for relending to less developed countries, and (b) a statement that the President should reduce the amount of development loans to a level of $100 million by 1975. (Section 101 (c) (2), page 1)

Significant substantive changes from or additions to the Administration proposal pertaining to security assistance are:

(1) A requirement that by September 30, 1972, the numbers of U.S. military personnel assigned to military assistance advisory groups or military missions abroad (excluding South Vietnam) be reduced at least 15% from the levels of September 30, 1971. This requirement is coupled with an expression of congressional intent that every effort should be made to effect a 25% reduction. (Section 201(f), page 5)

(2) A requirement that military grants to Thailand be financed under the Foreign Assistance Act rather than in the Defense budget under the Defense Procurement Act as has been the case since 1968. The 1973 Budget provides for this shift in funding. (Section 201(f), page 5)

(3) A requirement that any government receiving grant military assistance and excess defense articles deposit local currency equal to 10% of such assistance, such deposit to be used by the United States to pay its official costs payable in the local currency. Certain exceptions are provided: South Vietnam, Cambodia, Laos, countries where the United States holds local currencies in excess of its needs, and countries to which military assistance is explicitly given in return for base rights (Spain). This requirement, where applicable, will have the effect of converting a portion (10%) of grant military aid into a local currency sales program. It will also result in some budgetary and balance-of-payments savings to the United States. (Section 201(f), page 6)

(4) A prohibition on military and economic assistance to Greece, subject to a Presidential waiver (and report to the Congress) on grounds of overriding requirements of national security, and an annual ceiling on assistance equal to that provided in 1971 (about $73 million).

The ceiling will permit adequate levels of military grants and sales, should the prohibition be waived. Greece does not receive economic assistance. (Section 301, page 7)

(5) An increase from $75 million to $100 million in the ceiling on military assistance to Latin America, including sales but excluding training, with a Presidential waiver up to $150 million on grounds of overriding requirements of national security. The Administration requested an increase in the ceiling to $150 million, with a waiver unlimited in amount. The $150 million maximum should be sufficient to meet all sales requests unless the Latin Americans wish to buy substantial numbers of high cost items such as aircraft. (Section 401(c) and (d), page 12)

In addition to the preceding, the bill contains a number of general provisions pertaining both to development and security assistance:

(1) A suspension of all assistance, except humanitarian, to Pakistan until the President reports to the Congress that Pakistan is "cooperating fully in allowing the situation in East Pakistan to return to stability and that refugees from East Pakistan in India have been allowed" to return to their homes. Because Pakistan is no longer in a position to facilitate or impede stability in East Pakistan and the return of refugees, the practical effect of this provision is unclear. (Section 301, pages 7-8)

(2) A requirement that the President notify the Congress prior to the use of certain authorities to transfer funds or waive statutory restrictions. Current law permits notification of the Congress after such transfers or waivers. (Section 304(a), page 8)

(3) A requirement that the President furnish Congress a list of recipients to which the United States intends to furnish assistance, and the amounts of such assistance, 30 days after the effective date of any foreign assistance appropriation. In the case of countries receiving military or support assistance, the amendment prohibits an increase in the level of assistance in excess of 10% of the levels reported. Waiver authorities contained elsewhere in the Act may not be used to exceed the 10% limitation; however, it may be waived pursuant to (a) Presidential determination that the increase is in the "security interests of the United States," and (b) a report to the Congress on each such determination and the justification for it at least 10 days prior to the effective date of the increase. (Section 304(b), page 8)

(4) A requirement that in any case in which the President is required to make a report to Congress concerning a finding or determination under this Act, the Foreign Assistance Appropriations Act or the Foreign Military Sales Act, the finding or determination must be (a) reduced to writing and signed by the President, (b) acted upon only after it has been reduced to writing and signed, and (c) published in the Federal Register in full, unless the President concludes that such publication would be harmful to national security, in which case only a statement that a determination has been made and the Act under which it was made need be published. Additionally, this provision states that no committee or officer of Congress shall be denied requested information relating to any such Presidential finding or determination even though the request is made prior to the time the President is legally required to make the appropriate report to the Congress. (The President, of course, retains his right to claim executive privilege.) (Section 304(b), page 9)

(5) A ceiling of $341 million on obligations for all U.S. assistance to Cambodia (except for U.S. Air Force and South Vietnamese operations) and ceilings on U S.-paid U.S. citizens of 200 and U.S.-paid third-country nationals of 85 inside Cambodia. These limitations do not now constitute a practical constraint. (Section 304(b), page 9)

Finally, the bill contains provisions not directly related to foreign assistance:

(1) A prohibition on the use of any funds appropriated under the Foreign Assistance Act or the Foreign Military Sales Act until the Comptroller General certifies that all funds appropriated but impounded during fiscal year 1971 for programs of the Departments of Agriculture, Housing and Urban Development, and Health, Education, and Welfare have been released. The deadline for release of these funds is April 30, 1972. Because of the inappropriateness of this rider, we have included a critical comment on it in our signing statement.

(2) A requirement for periodic authorizations of appropriations for the State Department and the United States Information Agency. With minor exceptions, the appropriations for these agencies have been provided under permanent authorization since their inception. The process of annual authorization review is time-consuming and burdensome both to Congress and the executive agencies and tends to delay timely appropriation of funds. The amendment gives Congress discretion in determining whether to require annual or multiyear authorizations. Because annual authorizations should be discouraged, we have incorporated explicit mention of this amendment in our draft signing statement, urging cautious application of this requirement. (Section 407(a), (c), and (d), page 15)

(3) A requirement that the State Department keep the Foreign Affairs and Foreign Relations Committees "fully and currently informed with respect to all activities and responsibilities within the jurisdiction of these committees." This amendment raises a fundamental issue regarding separation of powers and the prerogative of the President to conduct foreign affairs without premature disclosure of privileged information to Congress. Because of the ambiguity of the language of the amendment, we have included in our draft signing statement a clarification which reiterates the basic policy of keeping Congress informed but which reserves the right to withhold information which would impair the effective functioning of the executive branch. (Section 407(b), page 15)

(4) A statement urging the President to undertake negotiations to implement the Lodge Commission recommendation that the U.S. share of assessed costs of the United Nations be reduced to 25%. (Section 410, page 16)

Although the bill severely cuts the appropriation authorizations requested and adds a large number of objectionable amendments, we recommend approval of the bill as necessary to permit completion of appropriation action by the Congress, thus insuring continuation of the foreign assistance programs through the remainder of this fiscal year. The alternatives--disapproval of the bill and a request for reconsideration or disapproval coupled with a request for extension of the continuing resolution through the reminder of this fiscal year--are not, in our opinion, viable and could, in addition, compromise your budget request for 1973.

The Departments of State and Defense recommend that the bill become law at the latest possible time (i.e., Monday, February 7) in order to delay as long as possible the effective dates of several restrictive provisions, in particular the requirement that countries receiving military assistance grants agree to deposit to the credit of the United States local currency equal in value to 10 percent of the assistance.

FOREIGN ASSISTANCE ACT OF 1971
Analysis of Congressional Changes
(dollars in millions)