<--PREV Doc #673  |  Memorial Commission Home Page  |  Second Term Table of Contents  |  Presidential Papers Home Page  |  Doc#  |  NEXT--> Doc #675 Document #674; May 2, 1958 To Lewis Williams Douglas Series: EM, WHCF, Official File 114 The Papers of Dwight David Eisenhower, Volume XIX - The Presidency: Keeping the Peace Part IV: Recession and Reform; February 1958 to May 1958 Chapter 10: Restructuring for National Security   Dear Lew: Thank you very much for your two letters of the nineteenth. I am only sorry to learn that you are, to some extent at least, still a captive of the doctors and I trust that before too long you will once again be feeling completely like yourself.1 First, as to your paper regarding the relationship between our own economic welfare and foreign exchange, in connection with our efforts to obtain adequate support for foreign aid and an adequate reciprocal trade bill. We are, as you know, following the third alternative you outline, the one you call prudent. I am, of course, grateful to you for the statement you prepared; I am certain it will have a helpful impact.2 Incidentally, I asked Dr. Hauge to prepare for me a memorandum on this whole field; I am enclosing a copy of his comments.3 Now as to the current recession. There is no day, literally no hour, when the subject is not before me. We are of course giving attention to the problem of counteracting the slump by means that will be constructive over the long run, as well as in the immediate present. I assure you that purely financial considerations would not stand in the way of a reduction program if this is indicated, as I judge you believe it is, and there would be no disposition to favor large increases in public works’ expenditures as an alternative.4 I know you realize, however, that a very considerable increase in Federal expenditures is inevitable under present commitments, without our undertaking any more, and this fact must be considered in any decision deliberately to reduce tax revenues.5 What to do to benefit the present and not to harm our future economy presents one of the toughest problems I have had in a lifetime of difficult ones! Take care of yourself, and know that I greatly appreciate your support and your thoughts. With warm personal regard, As ever 1 Former Under Secretary of the Treasury and former U.S. Ambassador to Britain Douglas had written twice on April 19, 1958. He apologized that poor health had kept him from testifying before Congress on behalf of a four-year extension of the Reciprocal Trade Agreements Act. (Hearings on the bill had begun in February and had continued for six weeks; see no. 524; see also Congressional Quarterly Almanac, vol. XIV, 1958, pp. 165 - 79). Douglas enclosed a statement about trade and economic welfare, which he had also forwarded to many members of Congress. 2 Douglas's paper, entitled "Will We Repeat the Errors of 1929 and 1930," examined the relationship between foreign aid, foreign trade, and the stability of exchange rates as they affected domestic economic activity. Douglas argued that restrictive tariffs after World War I had weakened world currencies and contributed to the severity of the Great Depression in the United States. This historical experience suggested three possible contemporary foreign aid strategies: the U.S. could abandon efforts to cut barriers to trade and reduce or eliminate appropriations for foreign aid; the U.S. could reduce tariffs substantially and quickly, allowing other countries to earn enough dollars to preserve stability of exchange rates; or the U.S. could "pursue a course of gradual reduction of interferences with the flow of trade and appropriate enough funds for foreign aid to insure us against the probably unpleasant internal consequences of a depreciation of major world currencies against the dollar." Douglas called the third strategy the "more prudent" one. 3 See Hauge memorandum, April 25, 1958. Hauge had said that Douglas's proposed third course of action was "essentially the one this Administration is following. We seek a long-term extension of the Trade Agreements Act with broadened authority to negotiate further reciprocal reductions in tariffs. We seek a substantial mutual security appropriation with emphasis on the Development Loan Fund. We have asked for a $2 billion increase in the lending authority of the Export-Import Bank. We are retrenching nowhere on this international trade and finance front in the field of public policy." For developments see no. 753. 4 Douglas's second letter concerned his "apprehension" that the recession was "deepening instead of receding," and that, if "positive intervention in the form of an appropriate tax reduction" was not taken soon, "even this may prove to be inadequate to stem the tide." For background see nos. 598 and 633. This portion of Eisenhower's reply had been suggested by Raymond J. Saulnier, Chairman of the Council of Economic Advisers, who had prepared a memorandum on Douglas's letter for the President (see Saulnier memorandum, Apr. 24, 1958). 5 This sentence, too, Saulnier had suggested (ibid.). Secretary of the Treasury Anderson had also prepared remarks to use in a reply to the Douglas letter (Anderson memorandum, Apr. 28, 1958; all correspondence is in same file as document). Bibliographic reference to this document: Eisenhower, Dwight D. To Lewis Williams Douglas, 2 May 1958. In The Papers of Dwight David Eisenhower, ed. L. Galambos and D. van Ee, doc. 674. World Wide Web facsimile by The Dwight D. Eisenhower Memorial Commission of the print edition; Baltimore, MD: The Johns Hopkins University Press, 1996, http://www.eisenhowermemorial.org/presidential-papers/second-term/documents/674.cfm <--PREV Doc #673  |  Memorial Commission Home Page  |  Second Term Table of Contents  |  Presidential Papers Home Page  |  Doc#  |  NEXT--> Doc #675

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