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    "ocrText": "NATIONAL ARCHIVES AND RECORDS SERVICE\nWITHDRAWAL SHEET (PRESIDENTIAL LIBRARIES)\nFORM OF\nDOCUMENT\nCORRESPONDENTS OR TITLE\nDATE\nRESTRICTION\nMemo\nMcPherson to Moyers (cross reference) open 7-21-00 per you\n9/12/66\n(filed in BE 5\n-5/001 C Appalacha)\nM Ltr\nCalifano to Henry Owen w/attached memo from Ownn\non post Vietnam planning [Confidential]\n5/22/67\na\nopen 7-29-91 NLJ 91-151\nFILE LOCATION\nC. F. BE 5-7\nRESTRICTION CODES\n(A) Closed by Executive Order 11652 governing access to national security information.\n(B) Closed by statute or by the agency which originated the document.\n(C) Closed in accordance with restrictions contained in the donor's deed of gift.\nGENERAL SERVICES ADMINISTRATION\nGSA DC 73-495\nGSA FORM 7122 (7-72)\nC.F.\n29\nFILE MEMO\nELM\nFG 11-8-1/Califano, Joseph\n1/10/69\nPL 2\nBE 5-7\nPR 18\nLA 8\nBE 3\nND 19/CO 312\nHU 2/ST 5\nHU 2/ST 22\nLG/Detroit\nPU 2-2\nLE\nFG 1\nBox No. #1758 sent to Central Files by Mr. Joseph Califano's Office on the\nabove date contains the following folders.\n1.\nPolitical Process\n2.\nPost Vietnam Planning\n3.\nPress Contacts\n4.\nWage-Price Guideposts\n5. Vietnam\n6. Watts\n7.\nDetroit - Chronology - Aug. 1.\n8.\nDetroit - Chronology - July 23 - 31\n9.\nNotebook - Favorable Editorials for President Johnson's Legislative Program\n10. Notebook - Programs of the Administration\n2\nFILE MEMO:\nDG/dg\nFG 11-8-1/Nimetz, Matt\nOctober 19, 1968\nWE 9\nLE/FI 2\nPU 2-4\nLG/Pasadena\nLG/Chicago\nFG 1\nHU 4\nPL 6-3\nFG 100\nND 19/CO 312\nFA\nLE\nFO 3-1\nFG 604\nHS 2\nFG 105\nWE 6\nLG\nSP/FG 440\nBE5-7\nED\nLE/VA\nJL 3\nLA 2\nHS\nFG 11-8-1/Bohen, Fred\nFG 170\nFI 11\nFG 11-8-1/Califano, Joe FG 804\nBox # 1594 sent to Central Files, above date from Matt Nimetz's Office containgin\nthe following folder material:\n1. Westside Study Center, 1967 (Community Action Program)\n2. Weekend of Oct. 21, 1967 (three folders) (secret) re: X National Defense Mobilization\nCommittee\n3. Water for Peace (President's Memo to Sec. of State ) 5/22/67\n4. Vice Presiden, Speeches (To Oil Chemical and Atomic Workers re: slums( 1967)\n5. VA Legislation Program (Recommended Legislative Proposals)\n6. Urban Economics (Booklets) 1966-67\n7. Taxation, 1967\n8. S. 1306, 1968\n9. Fifth City: The Ecumenical Institute - Chicago, 1968\n10. Romney, George\n11. Population\n12. Post Viet Nam Planning Committee: Crime Control and Education\n13. Program Reporting Data and Statistics (background for Fred Bohen on Federal\nAid to Urban Areas)\n14. Program Information for Detroit (drafts)\n15. New York Times Article, 6/8/67 \"Johnson will Use Cabinet to court States' Official\n16. Legislative Program Development Procedures\n17. Housing for the Poor (Confidential Included)\n18. Big Cities - Genral (Booklets and Drafts)\n19. Big Cities - Education (Article)\n20. Big Cities - Manpower / on-Job Training and Unemployment\n21. Committee on Economic Development\nFrom the desk of\nAugust 7, 1968 3/\nARTHUR M. OKUN, Chairman\nCouncil of Economic Advisers\nJoe:\nEnclosed is a staff paper which discusses\nsome of the issues raised recently in the\npress regarding claims on the so-called\n\"Peace Dividend. \" Please give Warren\nSmith or me a call if something is unclear.\nPatin my m\nchin chronfer\nRECEIVED\nJOE CALIFANO, JR.\n1968 AUG 7 PM 4 22\nC. F.\n3a\nBE 5-7\n76 11-3\nADMINISTR ATIVELY CONFIDENTIAL\nCEA\n8-5-68\nPost- Vietnam Fiscal Policy Choices\nA number of \"outside\" economists -- notably Charles L. Schultze\nand Joseph A. Pechman of the Brookings Institution and Otto Eckstein\nof Harvard University -- have recently expressed a variety of opinions\nabout the Federal budgetary situation after the war in Vietnam ends.\nThis has generated widespread public discussion.\nIn some ways, it is a rather unusual discussion. It is not focused\non the question of whether the Federal Government should be aiming at\na surplus, deficit, or balance in its peacetime budget, or on other aspects\nof the problems of managing fiscal policy to promote noninflationary\ngrowth at high employment. There are important issues in this area,\nwhich we are working on with explicit economic projections. But the post-\nVietnam budget discussion is largely centered on differing appraisals\nof the outlook for the post- Vietnam defense budget and for the levels of\nnondefense spending that will be generated by programs already on the\nbooks, that is, the differences may be said to relate to the politics rather\nthan the economics of the post-Vietnam budget. This staff paper is an\neffort to appraise the situation, rather than to discuss the views of any\nof these experts.\nADMINISTRATIVELY TIDENTIAL\n- 2 -\nPost-Vietnam Defense Spending\nVietnam spending in FY 1969 is currently estimated at about $30 billion\nper year out of total defense spending of $80 billion. Nevertheless, it is\ngenerally agreed that defense spending could not conceivably be cut back\nby as much as $30 billion when the war ends. Non-Vietnam defense spend-\ning has been squeezed to make room for additional spending connected with\nVietnam. Defense inventories have been drawn down as much as they can\nsafely be while the production line is going full blast. A bulge, presumably\ntemporary, in defense spending will be needed to restore these inventories\nto normal levels. In addition, some spending now attributed to the war\nwould have to continue in peacetime. Thus, barring a disarmament agree-\nment, we could not maintain an adequate defense posture by spending $50\nbillion per year.\nOne way to get a more realistic base line for defense spending is to\ngo back to the situation that existed in FY 1965 before the big buildup in\nVietnam began. In that year, defense spending was about $50 billion and\nhad been at roughly that level for several years. Prices of defense equip-\nment and pay of both military and civilian personnel in the Department of\nDefense have increased since then and will continue to increase. Thus,\nit would cost about $60 billion today -- due to price and pay increases --\nto achieve the defense posture of FY 1965.\nIf we assume a scenario in which a truce goes into effect on January 1,\n1969, withdrawal of troops begins six months later and takes one year to\nADMINISTRATIVELY CONFIDENTIAL\n- 3 -\ncomplete, military spending in Vietnam might be phased out by July 1, 1970.\nBy FY 1971, it is estimated that further price and pay increases will have\nraised the cost of maintaining the FY 1965 defense posture to about $65\nbillion, allowing for substantial further rises in military pay. Assuming\nthis time sequence, if a decision were made to aim for a defense position at\nthe \"real\" level of FY 1965, we should be able to reduce defense spending\nfrom $80 billion in FY 1969 to about $65 billion in FY 1971. Thus, on these\nassumptions, we would realize a \"peace dividend\" of about $15 billion. In\nthe initial stages this would accrue in gradual installments as the demobiliza-\ntion proceeded.\nA reduction of this magnitude in defense spending is probably the most\nwe can hope for. It is easy to imagine major new defense programs, such\nas a full-scale ABM system, which would eat up most of the peace dividend\nreferred to above. Whether it would be sound policy to restore the defense\nposture to its real level of FY 1965 is, of course, a decision that would\nhave to be made by the President in consultation with his defense and foreign\npolicy advisers. CEA has no particular qualifications to offer advice on\nthis issue, apart from urging that it be kept in mind that every dollar's\nworth of resources squeezed out of the defense establishment is a dollar\nthat can be applied toward the solution of urgent social problems.\nDivergent views on the outlook for military spending are one of the\nmajor sources of differences among the various post-Vietnam-budget\nprojections that have been presented. At one end of the spectrum are those\nADMINISTRATIVELY CONFIDENTIAL\n- 4 -\nwho contend that it would be possible to restore the FY 1965 defense pos-\nture, although it would require a President prepared to resist tremendous\npressures to expand our defense establishment. At the other end, is the\nmore pessimistic view that it will not be possible to cut the defense budget\nmuch and that defense spending will remain at a level of $70 billion or even\n$75 billion after the war ends. None of the papers contains any real analysis\nof the Nation's defense needs in relation to its foreign policy commitments.\nThe discussion is generally couched in terms of the military and political\npressures for expanded defense programs and the President's ability to\nresist these pressures.\nGrowing Tax Revenues\nExcluding the effects of the 10 percent surtax that is scheduled to expire\non June 30, 1969, our tax system currently generates about $12 billion a\nyear of additional revenue under conditions of full employment as a by-\nproduct of economic growth. (That $12 billion figure itself grows nearly\n$1 billion a year through the workings of compound interest.) In principle,\nthese additional revenues generally should be offset by increased expendi-\ntures or distributed through reductions in tax rates in order to avoid a\n\"fiscal drag\" on the economy. When that was not done in the late 1950's\nand early 1960's, the economy was pulled below full employment. At a\ntime when we are looking for ways to finance major new initiatives for\ndealing with social problems, the additional revenues' generated by the\nADMINISTRATIVELY CONFIDENTIAL\n- 5 -\ntax system may be looked upon as a \"fiscal dividend\" that automatically\nbecomes available each year.\nActually, in any long-term view of the budget, the fiscal dividend\ngenerated by the tax system is much more important than the peace dividend\nresulting from the end of the war. The peace dividend is a \"one-shot\"\nphenomenon whereas the fiscal dividend is something we reap anew each\nyear. Thus, in the course of a few years, the peace dividend will be\ndwarfed in significance by the fiscal dividend.\nUnfortunately, however, the entire fiscal dividend will not become\navailable for financing new programs each year. Some increases in\nexpenditures occur automatically or virtually automatically, and these\nincreases will eat up part of the fiscal.dividend. Some increase in the\nprices of the things the Government buys can be assumed under conditions\nof full employment, and the pay of civilian Government employees must\nbe raised more or less in pace with wages and salaries in the private\nsector. Social security benefits rise, even with an unchanged benefit\nformula, as more persons become eligible for benefits and the average\npast income of applicants increases. More veterans will become eligible\nfor pensions; more Government employees qualify for retirement benefits\nwith the passage of time; a growing population increases the workloads\nof many Government agencies; interest on the public debt may increase;\nand so on.\nADMINISTRATIVELY CONFIDENTIAL\n- 6 -\nAn allowance of perhaps $5 billion a year should be made over the\nnext few years for these increases in expenditures generated by increases\nin prices, pay, and workloads. This would reduce the \"net fiscal dividend\"\navailable for other purposes to about $7 billion per year.\nAdding it up\nNeglecting the temporary effects of the surcharge, and assuming\nVietnam spending is completely phased out by mid-1970 and the defense\nposture restored to its FY 1965 level, the peace and fiscal dividends,\non the above assumptions, would be roughly equivalent to $29 billion of\nadditional budgetary resources in FY 1971. This sum would be made up\nof the peace dividend of $15 billion and two annual increments of fiscal\ndividend of $7 billion each, one accruing in FY 1970 and an additional\none in FY 1971.\nHowever, expiration of the temporary tax surcharge will cost about\n$10 billion of revenues, bringing the total down to $19 billion. Thus, if\nwe can maintain full employment after the war with the full-employment\nbudget surplus at roughly its FY 1969 level -- approximately zero -- we\nwill have about $19 billion of additional budgetary resources available in\nFY 1971 to expand existing Government programs and to undertake new\ninitiatives. One cannot be sure whether we can maintain full employment\nafter the war ends with a budget that is approximately in balance, but\nADMINISTRATIVELY CONFIDENTIAL\nOF 7 -\nat the moment this seems like a good guess, provided monetary policy is\nsufficiently accommodative to permit private housing expenditures to\nproceed at levels justified by the underlying trend in household formation.\nOf course, there is no need to commit ourselves to any particular post-\nVietnam budget stance now; indeed, we must remain prepared to adjust\nfiscal policy to the needs of full-employment noninflationary growth as\nthe situation unfolds.\nNondefense Spending Options\nExisting civilian and new defense programs would compete for the\n$19 billion of budgetary resources along with new civilian programs. There\nare many existing civilian programs for which spending scheduled in FY\n1969 is far below authorized levels, and there are several recently initiated\nprograms -- such as Model Cities -- for which expenditures could readily\nbe increased very substantially in the next few years. Indeed, even if\nthe defense posture could be held at the FY 1965 level, it is easy to\nimagine that expansion of existing civilian programs might absorb a major\nportion of the budgetary resources made available by the ending of the\nwar and the expansion of the tax base over the next several years.\nOf course, many of the programs that have been put into operation\nin the last few years were designed to deal with pressing social and urban\nproblems -- such as improving primary and secondary education, providing\nbetter health facilities, controlling air pollution, and countering the effects\nof urban decay. Full implementation of these programs should be given\nADMINISTRATIVELY CONFIDENTIAL\n- 8 -\na high priority claim against any additional budgetary resources becoming\navailable in the near future. However, if room is to be made in the budget\nfor any substantial new initiatives to deal with the poverty problem without\nthe necessity for an increase in tax rates, every effort will need to be\nmade to hold down expenditures under existing programs that do not have\nthe highest priorities and to avoid the introduction of additional less-than-\ntop priority programs. There is likely to be political pressure for tax\nreduction (beyond the expiration of the surcharge), but it is difficult to\nsee how such a policy can be reconciled with the urgency of undertaking\nnew social programs.\nIt seems clear that the end of the war is not going to create a fiscal\nbonanza in which a vast increase in Federal expenditures will be possible\nwithout a tax increase. Undoubtedly there will be some opportunities for\nnew initiatives. But if there is to be room in the budget for such major\nnew programs as a comprehensive income maintenance scheme or new\ngrant arrangements with State and local governments (such as block grants\nor revenue sharing), it is clear that we will have to (a) do our very best\nto hold down the post-Vietnam defense budget, (b) avoid increases in\nspending under low-priority civilian programs, and (c) forego, for the\nnext few years at least, the dissipation through tax reduction of such\npeace and fiscal dividends as accrue to us.\nADMINISTRATIVELY CONF IDENTIAL\nC.F. C\nBE5-7\n4\nPR18-1\nFG105/pt\nMay 22, 1967\nX\nMr. Henry D. Owen\nChairman\nPolicy Planning Council\nDepartment of State\nWashington, D.C.\nDear Henry:\nThe President wanted me to thank you for your\nmemorandum on long-term planning meetings.\nHe appreciated your taking the time to lay\nout your proposals and wants you to know that\nyour ideas are always most welcome over\nhere.\nSincerely,\nJoseph A. Califano, Jr.\nSpecial Assistant to the President\nRECEIVED\nMAY 22 1967\nCENTRAL FILES\nMEMORANDUM\nWHITE HOUSE\nArries Inhio his THE WASHINGTON\n4b\nMay 16, 1967\nTuesday, 4:45 p.m.\nFOR THE PRESIDENT\nFROM Joe Califano guf.\nThis is in response to your request for comments on Henry Owen's\nproposal for long-term Presidential planning meetings for post-\nVietnam planning.\nAs far as post-Vietnam planning is concerned, I think you have\nalready done the right thing. On March 5, you set up a post-Vietnam\nplanning committee, under Gardner Ackley, on which your key\nCabinet officers are represented full time. Other members of\nthe Cabinet participate when problems in their color are discussed.\nAttached is the memorandum in which you set up that group. I\nthink this takes care of the post-Vietnam planning and you have\nalready done what Owen's proposes.\nAs far as Bartlett's criticism is concerned, I think it is directed\nalmost entirely to the foreign areas. To the extent he is concerned\nabout Vietnam planning, either Gardner Ackley or I could sit down\nwith him and explain in detail what is going on so that he understands\nthe extensive nature of the work now under way.\nAs far wide as publicity is concerned, I think it cuts both ways. While\nit is good for the country to know that post-Vietnam planning is going\non, at the same:time those who are most interested in it (intellectuals\nand liberals) will only have their appetites whetted further for the end\nof the Vietnam war.\nInsofar as Presidential discussions on nationwide TV with agency\ntask forces are concerned, I do not believe that would be in any way\nfruitful. I do believe, however, that it would be very good for you\nto do another \"Conversation with The President\", along the lines of\nthe one you did a couple of years ago. I think you are most effective\nin ordinary conversation and would get a tremendous plus out of such\nOrig. to mrs Territo\n2\na show, especially if by pre-arrangement such a show could be\nsplit equally between domestic and foreign areas.\nIn this regard, it might be a good idea to break out a tape of your\nfirst \"Conversation with the President\" and take a look at it.\nTHE WHITE HOUSE\nWASHINGTON\nGONF IDENTIAL\nFriday, May 12, 1967 -- 8:15 a. m.\nRec 10\nMr. President\nHerewith Henry Owen comes up with a\nplanning idea of some interest.\nI would emphasize not merely what we\nmight do post-Viet Nam but the extent to which\nyour policy is already at grips with key issues\nof the 1970's -- at home and abroad -- as in\nthe Leeds speech.\nNevertheless, a memo worth your reading.\nWalt. Rostow\nTo Calponed Ketuer\nfor Comment L\nCONFIDENTIAL\nDECLASSIFIED\nE.O. 12356, Sec. 3.4(b)\nWhite House Guidelines, Feb.24, 1983\nByjas parpo ,, NARA, Date 4-4-91\nOrig. not se t to file 5/20 67\n#1 Za\nId\nMay 11, 1967\nCONF IDENTIAL\nMEMORANDUM\nSUBJECT: Presidential Long-Term Planning Meetings\n1. Problem: We need to take actions which will both:\n(a) identify the administration with long-term goals\nthat lie beyond the war in Vietnam; and\n(b) pave the way for later effective action to\nachieve these goals.\nThis memorandum proposes actions to this end which\nuse intended to complement, not substitute for, the\nappointment of a National Commission suggested in my\nApril 18 memo.\n2. Proposal:\n(a) The President should announce that he is asking\nkey agencies to establish small high level task forces\n(including both officials and outside experts) specifically\nto develop plans for long-range (post-Vietnam) programs\non cities, welfare, the war on poverty, tax sharing with\nstates and cities, and the war on hunger and underdevelop-\nment abroad, etc.\n(b) After these task forces have gotten deep into\ntheir work, the President chould meet with each of them\nbefore they have reached harn and fast conclusions - to\nhear what they have to say and give them guidance about\nfurther work. The fact of these meetings would be made\npublic.\n(c) Some part of each of these meetings might be on\nnationwide TV. For example, assuming that the meetings\noccupied dinner and the early evening, the last half\nhour or so might be televised. Alternatively, the Presi-\ndent might, soon after the meeting with each task force,\ndiscuss the long range needs which had been covered in\nthat meeting on TV with one or two thoughtful press types\n(e.g., Reston, Severeid, Howard K. Smith)\nDECLASSIFIED\nCONFIDENTIAL\nE.O. 12356, Sec. 3.4\nNLJ 91-151\nBy up NARA. Date 7-19-91\nCONF IDENTIAL\n2\n3. Rationale: Messrs. Bartlett and Weintal have lately\nbeen beating us about the ears for not devoting enough\nhigh level time to forward planning; their remedy is to\nreturn to the NSC format of the Eisenhower administration.\nWe should do better; we should experiment with new tech-\nniques which will:\n- encompass domestic, as well as foreign issues,\nsince the two are increasingly closely related;\n- blend governmental and private insights, in view\nof widening expertise 111 universities, research centers,\netc.;\n- serve to educate the country, as well as to provide\na basis for decisions in the executive branch.\nThe proposal in para 2 is directed to these ends.\nIt was triggered by a suggestion which James Reston made\nrecently to the Policy Planning Council that the President\nhold a series of informal TV discussions of major policy\nissues with outside experts. He said that the President\nappears to good advantage in such informal discussions,\nand that they would be a more effective way of educating\nthe country about upcoming issues than pre-set speeches.\n4. Problems:\n(a) Would the meetings turn out to be great bores?\nThere would be something wrong with the participants if\nthey did. These are subjects of great interest, on which\na lot of hard and important issues remain to be thought\nthrough.\n(b) Would people dismiss the whole thing as a public\nrelations gimmick? This would depend on our intent. If\nthe meetings were serious in purpose, this would show.\n(c) Would the President be compelled to commit him-\nself prematurely on the issues in question? No more than\nhe needs to in NSC or any other type of planning meeting.\nHis role would be to pose the issues, listen to the task\nCONF IDENTIAL\nCONFIDENTIAL\n3\nforce's thinking and single out certain issues and ideas for\nfurther study. On TV, he would also emphasize the import-\nance of the needs which the Task Force is addressing, and\nfind occasion to dwell on how much the administration is\nalready doing in these areas.\n(d) Would the outside members of the task forces feel\nthat they were being \"used\" to help improve the adminis-\ntration's image? On the contrary; if they were serious\npeople, they would be anxious to see the needs which they\nwere studying aired before the President - and also before\na large audience on TV. This would clearly enhance the\nchances of Success for whatever proposals the Task Force\nfinally comes up with.\n5. Conclusion: This exercise would:\n(a) help the executive branch to plan effectively and\nat a high level for post-Vietnam needs;\n(b) dramatize the President's interest in these\nlonger range issues;\n(c) educate the Congress and public about them (in\nanticipation of eventual larger post-Vietnam expenditures\nin these fields);\n(d) get the American press and public to thinking\nabout something besides their short-term miseries;\n(e) help to build bridges at the highest level\nbetween the administration and the academic community\n(which would be represented on the panels).\n100\nHenry Owen\nCONF IDENTIAL\nFOR IMMEDIATE RELEASE\nMARCH 5, 1967\n4e\nOffice of the White House Press Secretary\n(San Antonio, Texas)\nTHE WHITE HOUSE\nMEMORANDUM FROM THE PRESIDENT\nFOR:\nThe Secretary of the Treasury\nThe Secretary of Defense\nThe Secretary of Labor\nThe Acting Secretary of Commerce\nThe Director, Bureau of the Budget\nThe Chairman, Council of Economic\nSUBJECT: Economic Planning for the End of Vietnam Hostilities\nAs I indicated in my Economic Report, I am directing the relevant agencies\nin the Executive Branch to begin at once a major and coordinated effort\nto review our readiness to make the economic adjustments which a termi-\nnation of hostilities in Vietnam might require. As suggested in the Economic\nReport, we must:\n-- consider possibilities and priorities for tax adjustment\n-- prepare, with the Federal Reserve Board, plans for quick\nadjustments of monetary and financial policies\n-- determine which high priority programs can be quickly expanded\ndetermine priorities for the longer range expansion of programs\nto meet the needs of the American people, both through new and e\nexisting programs\n-- study and evaluate the future direction of Federal financial support\nto our States and local governments\n-- examine ways in which the transition to peace can be smoothed for\nthe workers, companies, and communities now engaged in supplying\nour defense needs, and for the men released from our armed forces.\nI am asking those to whom this memorandum is addressed to serve as a\ncoordinating committee for the necessary studies. It will be necessary,\nof course, to draw on the resources of many other departments and agencies.\nI have asked Gardner Ackley, the Chairman of the President's Council of\nEconomic Advisers, to organize and chair this effort.\n####\n4a\ngaly\n29\nEXECUTIVE\nTHE WHITE HOUSE\nWASHINGTON\nJ\nMay 18, 1967\n2:30 p.m.\nfile\nMr. President:\nK\nReference is made to a memorandum\nfrom Walt Rostow to you dated May 12,\n1967, relating to Henry Owen's planning\nidea post-Vietnam.\nWhile obviously the Administration has\nmade plans, I personally would not\npublicize them because I would believe\nit would give a false impression to the\npublic as to the possible end of the war.\nRobert K. K E. Kintner\nNotaing $190 sont to\nCentral Files as of 5/24/67\nRECEIVED\nMAY 1 9 1967\nCENTRAL FILES"
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