mercial enterprises in the Zone—have been largely symptomatic of the basic disagreement.

In 1936, at Panama's urging, an additional treaty was drafted. Among other things, it abrogated the United States guarantee of Panama's independence, canceled our right to unilateral intervention in the Republic, and forbade certain kinds of commercial enterprises in the Zone, long an irritant to Panamanian merchants. Thus for the first time Panama became a truly independent nation.

Again in 1955, Panama's discontent reached the danger point and a third treaty was signed. It established the principle of "one basic wage scale for all . . . employees of the Canal Zone," and stipulated that all supplies for the Zone be purchased, if feasible, from either Panama or the United States. It also provided that the United States would construct, at our expense, a bridge connecting the two sections of the Isthmus.

But these concessions—and others made from time to time—have served only to delay the conflict that results from the basic disagreement between the two nations. It should now be clear, therefore, that further concessions at this time will not in themselves end our difficulties in Panama. Only by reconciling the basic difference in interest between the two nations through a mutually-acceptable and long-range policy can we hope to find a lasting solution to the problem.

## ALTERNATIVES TO THE STATUS QUO

The task will not be easy, for there is no simple right or wrong answer. We must abandon black and white approaches and search the great gray area for reasonable and honorable compromises. To illustrate the complexity of the problems of sovereignty and control, consider the alternatives to the status quo.

President Truman, Ambassador Stevenson, and others have suggested that the Canal be placed under international or inter-American control. In theory, this suggestion may have merit, but it seems highly unlikely that Panama would agree to this, and, of course, the United States can not unilaterally take such action. To Panama, international control might be worse than United States control, for benefits to Panama probably would not increase, and the ready-made yanqui whipping boy would be replaced by an impersonal international organization. Further, for the time being, the United States must be skeptical of internationalization, for we consider the Canal too important to our military and economic welfare to entrust it to the United Nations where communist pettifogging, interference, and delay might endanger

6

It. And the Organization of American States has not yet demonstrated convincingly that it can consistently act in concert and place hemispheric interests above national interests.

Another alternative would transfer control and operation to Panama. This does not seem feasible at present, for unlike the sea level Suez Canal, the Panama Canal with its locks is a miracle of engineering and timing, calling for skills not possessed today by many Panamanians. Further, while most Panamanians would not believe it, such a transfer might well reduce the benefits to the Republic. The United States subsidizes the Canal at present and this would cease. Our military expenditures would dwindle or disappear. Operating inefficiencies and breakdowns might drastically reduce income. As a condition of the transfer we would surely insist that the $460 million of debt owed by the Canal Company to the United States Treasury and thus to United States citizens be assumed and repaid by the Panamanian government. Just to do this, Panama would have to raise tolls substantially; to reap anything approaching the kind of benefits Panama envisions, tolls would have to be increased enormously. Hence, other users of the Canal—including the west coast countries of Central and South America and all maritime nations—would vigorously oppose the transfer and would blame the United States for putting Panama in a position to charge exorbitant tolls.

Still another alternative sometimes mentioned is the possibility of creating a joint United States-Panamanian corporation to control and operate the Canal; by treaty what is now the Canal Zone would come under the same jurisdiction of the Panamanian government as the Free Zone, but the corporation would control and operate the Canal, with rates fixed by the treaty and the net income, if any, being divided by treaty formula. This alternative is unacceptable to the United States for the present; United States citizens must be responsible for the technical, engineering and related jobs; they insist on good housing, schools, hospitals, and other services equal to those in the United States; they also insist upon living by United States laws, fairly administered. These needs and desires can be met only under the present arrangement.

## A MAZE OF MISUNDERSTANDING

A heritage of malice and misunderstanding makes the problems even more formidable. Most of our citizens and too many of our leaders, for example, believe that the United States has complete sovereignty in the Canal Zone. They therefore wish to tolerate no interference,

7

are hostile to the appearance of the Panamanian flags in the Zone, and would maintain the status quo with guns if necessary. A United States Congressman advocated during the January crisis that we tear down the flag poles from which the Panamanian flags fly in the Zone. But the United States is not sovereign in the Zone. The organic treaty gave the United States jurisdiction over the Zone as if it were sovereign, making quite clear that titular sovereignty remained with Panama, as has been acknowledged over the years by three United States Presidents.

Panamanians, on the other hand, believe that the United States is exploiting their only national asset and is making vast sums of money from it. This is patently false. Despite its authority to do so, the United States has not raised Canal tolls since they were established in 1914 (except for adjustments on certain items) and has operated the Canal on a no-profit basis. The gross revenue in the Canal Zone in 1962, for instance, amounted to about $100 million, of which $60 million was from Canal tolls, but after operating and maintenance costs were met, and essential Canal improvements were made, there was not a single penny of profit for the United States. Indeed, the United States not only has never made a profit, but actually has subsidized the operation of the Canal in the amount of some $6 million a year. The debt of about $460 million is not being amortized. The Canal Company now pays only 2.82 per cent interest on about $330 million of that debt (a subsidized rate in view of the interest paid by our Treasury on its total debt), and pays no interest whatsoever on about $130 million of the debt. Further, $1.5 million of the $1,930,000 annuity to Panama is paid not from Canal revenues but from State Department appropriations. Unfortunately, the annual report of the Canal Company, written to impress the Congress with the Company's skillful management, gives the unsophisticated reader the impression that a net profit is realized, thus feeding this serious misunderstanding. Only by careful study of many complicated financial statements does one see that every cent of this so-called "profit" is spent on necessary Canal improvements.

Nor is it accurate to assume, as so many in Panama do, that the $1,930,000 annuity is the only financial benefit to the Republic of Panama. In 1962, 17 per cent of Panama's national income—some $85 million—was generated directly by the Canal. And to that must be added millions of dollars spent by tourists attracted to Panama because of the Canal.

But the truth is buried by the misunderstandings, and the myths are perpetuated by many Panamanian leaders

8

and mass media as they use the United States as a scape-
goat to divert attention away from the anachronistic
class inequities in Panama. Hate and hostility come
easily to the masses who, in the midst of abject poverty,
see the affluent living conditions of the United States
citizens in the Zone.

Communism flourishes in such an atmosphere of confusion and discontent, and Castro's agents fan the fires of anger. In typical fashion they infiltrate student groups, labor unions, and other organizations; they spread lies and rumors; they undermine the efforts of moderate men to solve the problems; and they incite violence. It is now clear, for example, that Cuban-trained communists infiltrated the protest marches in January and whipped them into a frenzied mob. Positive photographic proof of this exists.

A REALISTIC POLICY

In the face of such obstacles and complexities, what
course of action should the United States pursue?

One thing is clear: Any realistic approach to the Panamanian problem must begin with the recognition that the construction of a new sea level canal within 25 years is imperative; earlier construction is preferable. Disputes over sovereignty, wage scales, and profits are all attendant upon the inescapable need for a new canal.

Some advocate construction of a new canal as soon
as physical and political problems are solved. Such a
view overlooks the desirability of amortizing the debt
of the present Canal.

By operating 18 hours a day, the Panama Canal is
now barely able to handle current traffic. In its present
condition, it will rapidly become obsolete, and if nothing
were done a maritime traffic jam would result. Even
now, some aircraft carriers and tankers are too big to
pass through the locks. This is incorrectible. But by
spending some $75 million to widen the Gaillard cut,
improve locks, build a new dam to increase the water
supply needed in lock operations, and provide new
lighting for 24-hour operation, the present Canal could
handle most traffic, other than the largest ships, for
about another 25 years.

The Panama Canal Company, the Defense De-
partment, the Maritime Administration, and other
government agencies have been re-evaluating our canal
requirements and studying sites for a new sea level canal.
Two preferred routes have emerged—one in Panama,
125 miles east of the present Zone, and one in Colombia
near the Panamanian border. By using nuclear ex-
plosives (which apparently would require permission of

9

the signatories to the nuclear test ban treaty, including the Soviet Union), a new Panama Canal would cost about $520 million, and a canal in Colombia would cost about $100 million more.

It would devastate the economy of Panama if a sea level canal were built in Colombia or elsewhere, such as Mexico, for the present lock-canal will be useless the moment a sea level waterway is opened. It is patently to Panama's interest to cooperate in solving present difficulties so that it will be politically as well as economically feasible to build the new canal within the Republic. And, assuming the resolution of current disputes and assurance of future good relations, we should favor the Panamanian route for several reasons. It is shorter and less costly. Ships will traverse it faster. And we must consider the hurt to Panama if the new canal is located elsewhere. Despite the difficulties between the United States and Panama, the two nations have cooperated for half a century to their mutual benefit, and they should recognize moral obligations to each other.

It is to Panama's interest not only to assure construction of the new canal in the Republic, but also to keep the present Canal functioning for as long as possible, for it seems inevitable that the economic benefits to Panama from the operation of a sea level waterway will be less, at least for many years, than they are now from the lock canal, and still lower than herein proposed for the next twenty to twenty-five years. More than 13,650 persons are employed in the operation of the present facility and the Canal Zone government activities. About 9,850 of these are Panamanians; most of the 3,800 United States citizens have families which increase the total. Wages for this large number, plus supply purchases, result, as previously indicated, in the expenditure of about $85 million in the Republic. A sea level canal can be operated efficiently by 500 to 1,000 persons. Even if cash payments to Panama from the new canal were increased to the maximum feasible, it seems doubtful that these would equal current expenditures.

On all counts, therefore, it is clearly to Panama's interest and ours to settle current difficulties, to maintain the present Canal for a reasonable period, and to agree now to a new undertaking subsequently.

Once this is recognized, the United States and Panama should formulate a realistic, sustainable long-range policy and should amend the existing treaties to incorporate the following:

1. The United States should agree to complete Canal improvements costing a total of $75 million, thus enab-

10

ing the Canal to handle most traffic for another 25 years or more. The United States has spent nearly half this sum on the required improvements and hence should complete them within the next two years.

2. The Canal tolls should be raised, and Panama's annuity should be substantially increased. Present tolls are slightly less than those of the Suez Canal, a sea level waterway. An increase of 100 per cent would not drive traffic away, for it would still be cheaper for ships to traverse the Canal than to take the long route around the tip of South America. But such a radical increase would do irreparable harm to our relations with many nations and, in any event, is not needed. A 30 per cent increase is justified and would raise income by about $20 million a year now, and more as traffic increased. This would enable us to increase the annuity to Panama to $15 million a year and still permit us to take another indispensable action.

3. The Canal Company should begin a program to amortize the $460 million debt to United States taxpayers. This can be accomplished in a 25-year period by allocating a portion of the income from the toll increase and, after the Canal improvements indicated in (1) above have been completed, assigning to the amortization account the $16 million spent annually in recent years on Canal improvements.

4. To the degree that it is possible without hampering the operation of the Canal, the United States should rotate its civilian personnel in the Canal Zone. Many of the present Zonians have lived in the Zone most of their lives and they and their children consider it as much a part of the United States as is Texas. The more deeply entrenched United States citizens become in Canal Zone life the greater the danger that incidents like those investigated by 17-year-old school boys last January will recur.

5. The present program to train Panamanians for more responsible and higher paying positions in the Canal operation should be intensified. The wages of unskilled, semi-skilled, and related positions in the Zone are from 30 to 100 per cent higher than wages of identical work in the Republic, but even so the rates are very low compared to United States wages; about 95 per cent of these low-paying jobs are filled by Panamanians, only 5 per cent by others. The professional and related posts carry United States rates, many times greater than those of Panama. In April, 1960, President Eisenhower ordered that the apprenticeship program for Panamanians be stepped up, for only 5 per cent of the high posts were filled by Panamanians, 95 per cent

11

by Americans. Since then, the number of Panamanians being paid at United States base rates has tripled. Insofar as possible, the United States rapidly should train Panamanians to handle the technical operating tasks on the Canal, thus eliminating the charge of discrimination.

6. The United States should agree that if Panama will vigorously and promptly pursue the reforms agreed to in the Act of Bogota of 1960 and the Charter of Punta del Este of 1961, the United States will undertake a very generous aid program within the Alliance for Progress to improve Panama's agricultural and industrial capacity, its schools, hospitals, and highways, and in general to raise the living standards not of the elite but of the masses. It should be clearly understood that we will abide by the promises made by the American nations in the Alliance for Progress, and that hence public and private loans and technical assistance will **not be forthcoming** if the land reform, tax reform, honest tax collection, and emphasis on self-help projects in education, health, and low-cost housing are not vigorously fostered. For aid that merely strengthens the prevailing order is grist for the communists, maddening to the masses, and unhelpful to mutual relationships.

Considering that the Republic of Panama is only half as large as the State of Florida with about the same number of people as the City of Cleveland, it is difficult for many to understand why Panama, with United States assistance, has not been able to overcome its economic and social problems. The answer, at least in part, is that Panama—like other Latin American nations—suffers the evils of oligarchy. A few families own most of the resources and control the Republic politically and economically. This has resulted in gross neglect of the Republic's natural and human resources. While arable land lies uncultivated, Panama imports food and its people are hungry. Although many areas of Panama are without electricity, less than 2 per cent of the nation's rich hydro-electric potentiality has been developed. Industry has been slow to develop and is characterized by monopolistic practices, low output, and a tendency to seek quick and excessive profit. Low income tax rates and laxity in collections contribute to the government's declining financial position; the public debt is rising, as is the balance of payments deficit.

On the other hand, United States has given only limited aid to Panama and that has been poorly administered. While our aid to Panama was increased under the Alliance for Progress, a House Foreign Affairs subcommittee in a report issued last December sharply criticized the entire aid program to Panama and

12

Charged United States agencies with poor planning, lack of coordination, and unwise use of funds.

Panama recently has taken the first commendable steps in laying the legal base for agricultural and tax reform. The United States should support the implementation of these measures and encourage the development of other reforms as a prerequisite to substantial United States aid. In addition, we should do everything possible to promote private investment in Panama, provided Panama enacts legislation which will assure it of non-discriminatory treatment. United States private investment in Panama today amounts to half of the total private capital invested in Panama.

A stepped up aid program, keyed to social reform, added to increased income which Panama will obtain from the operation of the Canal as herein suggested, will help overcome the poverty, injustice, illiteracy, and unemployment, that now stand in stark contrast to the prosperity enjoyed by United States citizens, who live on a strip bi-secting their country. To the degree Panama improves its production, social justice, and living conditions and reduces relatively its economic dependence on the present Canal, current hostilities in Panama will wane and thus gradually will be laid the groundwork for the construction and success of a new Canal.

7. If the foregoing changes are mutually acceptable, the United States and Panama should agree that a wholly new treaty, replacing all existing ones, will be negotiated in good faith not later than 25 years hence or sooner by mutual consent. By then, the Canal debt should be approaching full amortization, and years of experience under the new arrangements proposed here will serve as a guide. The major points to be negotiated at that time will be the conditions under which a new sea level canal is to be built and operated. Should it be operated by the United States? By Panama? By a joint corporation? By an inter-American or international agency? Should financing be private or public? If any type of joint or international agency is agreed to, how shall financing costs be shared? What will be the rates of the sea level canal? How should the profits be divided?

When a new Canal has been built, when the present treaties have been abrogated, and thereafter when Panama assumes control over the present Canal Zone, the United States might well donate the homes, schools, hospitals, and other facilities in the Zone to the Republic, perhaps as a center for education, research, and medical services.

13

(w)

Quite apart from treaty amendments, after the United States has appointed an ambassador, he should be given sole authority to speak for the United States in Panama. Our difficulties in Panama have been greatly aggravated by having a duality of representation in the Republic. The Governor of the Canal Zone, who is also President of the Canal Company, reports through the Secretary of the Army to the President, but feels his greatest obligation to be to the Congress. He has greatly influenced United States affairs by dealing directly with the government and people of Panama on major policy issues. Sometimes he and our Ambassador have disagreed, and have carried their disagreements to the highest levels of the Panamanian government. The United States desperately needs a single voice in Panama, and it should be the voice of the Ambassador, speaking for the President of the United States. The Governor of the Zone should confine his activities to the administration of the Zone and the operation of the Canal; if his presence in negotiations with Panama is needed he should serve only as a technical adviser to the Ambassador.

## THE GROUNDWORK FOR COOPERATION

These, then, are specific steps which the United States and Panama can take to build good relations. They reflect the belief that the interests of Panama and the United States can be harmonious; both nations have a common and predominant interest in maintaining an international waterway and must cooperate in every way to insure success. The actions proposed here are the key elements of a policy which recognizes that the status quo is ultimately impractical and indefensible. An unyielding adherence to agreements made in earlier times under different circumstances can only lead to more difficulties and probably to irreconcilable trouble. If the changes proposed here are to be made, however, it must be clearly understood that they will be made not because the treaties are illegal, but because we believe that such changes are in the best interest of the United States, Panama, and the Free World.

The leaders and the people of both nations must keep in mind that the common goal is to maintain the Panama Canal for a mutually-agreeable number of years and then to replace it with a new sea level canal. Misunderstanding or stubbornness or false nationalistic pride must not divert us from this goal. During the years preceding the negotiation of a new treaty, the United States can do much to help solve the immediate problems in Panama, and to build the reservoir of good will so essential to future progress. Panama, too, must

14

consider carefully its actions during the intervening
years and must assess the future realistically. She must
live up to her Alliance for Progress commitments and
build a modern democracy free of both communism
and oligarchic control. If the two nations can join
together in solving the problems that have plagued
them for half a century, there is every likelihood that
a new **Panama Canal will** be built and it will symbolize
**inter-American cooperation and progress.**

Originally Published April 8, 1964

15

## REPUBLICAN
CITIZENS

### Committee of the
UNITED STATES

... is an independent, non-profit membership organization devoted to promoting Republican belief and Republican candidates through organized action by citizen volunteers.

CITIZENS seeks to supplement existing Republican organization; to extend the scope of Party activity and influence to voters who cannot be or are not being reached today; and to form a bridge between such voters and officially constituted Republicanism. The Critical Issues Council is but one of the means for achieving these goals.

You can join Republican CITIZENS as a sustaining member for $500 annually, as a regular member for $100 annually, or as an associate member for $25 annually.

For further information, write for your free copy of **LET'S USE OUR NELECTED ASSET** to Membership Director, CITIZENS, 1625 K Street, N.W., Washington, D.C. 20006.

(c) 72

Foreword

Seldom before have the needs of the
nation so called for principled, clearly
reasoned analysis of national problems and
fresh programs to meet them.

In these papers the Critical Issues Coun-
cil seeks to provide American citizens with
an honest evaluation of matters of vital
concern to the Republic; to offer evidence
instead of emotion, purpose in place of
polemic, and to follow criticism with posi-
tive proposals.

The members of the Critical Issues Coun-
cil are Republican-oriented citizens with
broad experience, insight and proficiency in
domestic and international affairs. Their
positions are not those of any elected
official or group, nor does every member
of the Council or Republican Citizens Com-
mittee necessarily subscribe to all the views
expressed. The Council endorses its papers
as a substantial contribution to public aware-
ness of current critical issues and to the
presentation of positive solutions.

SUMMARY

Agriculture is in the midst of a scientific revolution. American farmers have achieved a degree of efficiency unmatched in history. Never before have so many been so well fed by so few. But there are nevertheless major problems:

1) Farm program costs are excessive. The net income of farmers in 1963 was $12.3 billion. Yet Department of Agriculture expenditures in fiscal 1963 were $7.7 billion—more than half the income from farming.

2) Unrealistically high price supports have been a major factor in expanding output, retarding consumption, and worsening the imbalance.

3) As a result of higher yields, too much land and too much labor are being used for production of commodities in "surplus."

The Administration's approach to agriculture has been reactionary, problem-prone, and depression-bound. They are heavily committed to a controlled philosophy for agriculture, yet for most commodities the Congress will not act, the Executive Branch will not enforce, and the farmer will not accept the degree of production control required to balance supply with demand at the levels of price support promised politically.

The Administration's farm policy-makers are trying to apply to the dynamic sixties programs that were developed for the stagnant thirties. Faced with a new and promising future, they have sought to recreate the past. They have been lamenting the shattered shell rather than applauding the hatched chick.

Today, family farms constitute 94% of all farms and produce 70% of all farm products, although their size and efficiency vary immensely. Basically, agriculture can be divided into commercial family farming and small scale family farming. The so-called "farm problem" is generated by the excess productive capacity of the 40% of farms that are commercial operations and which produce about 90% of all farm products.

No single farm program can meet the varied needs of both the small scale and the commercial farm. Price support programs are of small help to rural people who have little to sell, and operators of commercial farms have little need for the programs designed for people with limited farming opportunity. A major need is to separate the commercial farms from the small scale farms and to fashion programs appropriate to each.

4

A forward looking program for commercial agriculture should stress:

1) Accept abundance as a source of strength, and shift away from the idea that farm products should be made scarce.

2) Adjust price support levels so that market prices would normally fluctuate above the support level.

3) Put more farm decisions in the hands of the farmer and less in the hands of the government.

4) Institute a land use adjustment program aimed at shifting land from tilled crops to less intensive use.

5) Promote high-level domestic consumption and allow those sectors of the industry to expand that can do so profitably.

6) Encourage exports through the use of special plans and subsidies, at least until surpluses are worked off.

The greatest single economic problem in rural America is the underemployment and low income found among many small farmers. President Eisenhower's Rural Development Program should be strengthened to:

1) Improve rural educational opportunities.

2) Focus research and extension education on helping rural people adjust to change.

3) Promote off-farm employment opportunities in rural areas and improve employment information services.

In the farm policy setting of the years ahead it is the government control portion and not the market system which is on the defensive. However, the transition to greater reliance on the market will have to be gradual. Through inept programs, the government lost markets for farm products and piled up an enormous hoard. Government cannot now suddenly pull out, withdraw its support, dump its hoards and expect farm people, unassisted, to bear the whole brunt of adjustment.

But this is not an argument to wait. The longer an adjustment is postponed, the greater the imbalance becomes and the more difficult it will be to correct.

5

# A Free and Prosperous Agriculture

Nowhere is the need for constructive leadership greater than in the field of agriculture. For too many years the standard procedure has been to offer political solutions to economic problems. The shortcomings of this approach are becoming painfully evident to a discerning public. A fresh, objective approach is needed. A sound agricultural program will prove to be good public policy and will receive growing support. Increasingly, the public is ready for realism.

## DEFINITION OF THE PROGRAM

Agriculture is in the midst of a scientific revolution. There have been more changes during the lifetime of men now living than during the preceding 2,000 years. American farmers have achieved a degree of efficiency unmatched in history. This has been a great help to consumers. Never before have so many been so well fed by so few.

But the scientific revolution has changed the established order. It is necessary, therefore, to replace outmoded concepts with programs suited to the modern day.

The major problems are:

### Too many resources are committed to farm production.

As a result of higher yields and greater efficiency, too much land and too much labor are being used for production of commodities in "surplus". We are poised to produce appreciably more farm products than the market will take at price relationships that have in the past been considered satisfactory. The presence of excess resources in agriculture results in low per capita incomes for farm people.

6

Unrealistic price supports have aggravated the maladjustment.

Price supports, originally initiated at modest levels, were later set at high levels to stimulate production for wartime needs. These supports have been a major factor in expanding output, retarding consumption and worsening the imbalance. For some crops, price supports have stimulated production more than controls have restrained it.

Program costs are excessive.

Taxpayers have been asked to bear farm program costs that are excessive by almost any measure. Despite a continued reduction in the farm population, the number of employees in the Department of Agriculture increased by 15,000 during the past three years. The net realized income of farm operators from farming in calendar 1963 was $12.3 billion. Expenditures of the Department of Agriculture in fiscal 1963 were $7.7 billion. Perhaps half of these expenditures were incurred through government programs intended to support farm prices and control farm output. Only a part of this outlay went to farmers; much of it went for storage, transportation and program administration.

These costs would be borne willingly if they were solving the problem, but they are not. Instead, we experience growing cost merely for carrying the farm program along as an unsolved problem.

FARM PROGRAM FAILURES

The evidence of the past 30 years is clear. For most commodities the Congress will not enact, the Executive Branch will not enforce, and the farmers will not accept the degree of production control required to balance supply with demand at the levels of price support promised politically.

7

And this is on balance a good thing. If these controls were in fact written, administered and accepted over a period of years, the chief losers would prove to be the producers of the controlled commodities themselves, who would find that they had simultaneously raised their production costs, lost their markets and sacrificed their role as decision-makers. Cotton is a dramatic example. Consumers as well as farmers are penalized by artificial prices and production controls.

There is a deadening of opportunity in a socialized approach to agriculture.

The present administration is heavily committed to the control philosophy for agriculture. Despite the sorry record of government intervention in agriculture, Administration leaders have sought to extend government programs to more and more commodities. In this they have been rebuffed by the farmers and the Congress alike. The farmers emphatically rejected Administration-backed efforts to apply compulsory controls to wheat and turkeys; the Congress refused to enact the Administration's program of strict controls for dairy products and feed grains.

The Administration's approach to agriculture has been reactionary, problem-prone and depression-bound. They have tried to apply to the dynamic sixties programs that were developed for the stagnant thirties. Despite the fact that food is abundant, they have tried to price it as if it were scarce. Faced with a new and promising future, they have sought to recreate the past. They have been lamenting the shattered shell rather than applauding the hatched chick.

The Administration has made determined efforts to substitute government decisions for individual farmer decisions. This has led some of our major commodities into deep trouble.

## Wheat

In early 1963 the Administration offered wheat farmers a choice, in referendum, between two alternatives:

(1) high price supports coupled with stiff controls, and

(2) low price supports with more freedom to make decisions.

In an effort to get farmers to vote for high supports and tight controls, the alternative involving freedom for farmers was deliberately made economically unattractive. Not only this; the Administration made an all-out effort to get a YES-vote from farmers, an action which was questionable on both legal and ethical grounds.

8

Despite this coercion, farmers voted against the pro-
posal and in favor of freedom. As a result, wheat farm-
ers were confronted with an indefensible set of rules,
designed not to administer a wheat program, but to get
them to vote against it.

After the referendum's defeat, more than 50 bills
were introduced in Congress. For a long time the Sec-
retary of Agriculture remained adamant in refusing to
consider these bills. The Administration then pushed
through a bill which closely resembles the proposal
the farmers had voted down.

Cotton

The Agricultural Act of 1958 as passed by the Con-
gress was intended to work in the direction of lower
prices and fewer restrictions on the production of cot-
ton. Thus the Act reversed the long and fateful trend
which had priced American cotton out of markets at
home and abroad. United States cotton legislation has
conceded virtually the entire growth in the textile mar-
ket to the rivals of American cotton:

<table>
  <thead>
    <tr>
      <th></th>
      <th>1928-1930</th>
      <th>1959-1961</th>
    </tr>
  </thead>
  <tbody>
    <tr>
      <td>United States cotton production, million bales</td>
      <td>14</td>
      <td>14</td>
    </tr>
    <tr>
      <td>Foreign cotton production, million bales</td>
      <td>12</td>
      <td>32</td>
    </tr>
    <tr>
      <td>World synthetic fiber production, million bales equivalent</td>
      <td>1</td>
      <td>22</td>
    </tr>
  </tbody>
</table>

These figures show the tragic history of American
cotton. While our cotton farmers stood still at a volume
of 14 million bales, foreign cotton growers shot up their
marketings by 20 million bales and synthetic fibers
moved in to capture the equivalent of 21 million addi-
tional bales.

The intent of the Act of 1958 was ignored by the Ad-
ministration. Instead of adhering to the expressed wish
of Congress, the Secretary of Agriculture boosted price
supports for cotton. The result was to increase govern-
ment costs, curtail exports, shrink acreage allotments,
and pile up surpluses. Thereupon, rather than follow the
constructive policies begun in 1958, the Administration
encouraged the passage of legislation which continued
the errors of the past, endeavoring to make these errors
tolerable by the payment of yet another subsidy, this one
to the cotton manufacturers.

Dairy

Early in 1961 the Administration boosted price sup-
ports for dairy products. This was done on doubtful
legal grounds and was contrary to sound economics.

9

The result was a trebling in the takeover of dairy products.

Whereas in 1960 only three per cent of the national production of milkfat was purchased by the Commodity Credit Corporation, in 1962 almost nine per cent was so acquired. The Administration then recommended government controls on the marketing of milk, hoping thereby to rectify the imbalance which the Secretary himself created.

## Feed Grains

The voluntary feed grain program, while credited with reducing stocks, has only managed to keep production at the same level as in 1960. The program has been extremely costly. Between October 1, 1961, and October 1, 1964, it is estimated that the carryover of feed grain will have been reduced by about 25 million tons. The cost for such reduction will be about 2.5 billion dollars, about $100 per ton or about $3 per bushel of surplus reduction. This compares with $1.25 per bushel, the support price for corn.

Under the present program, it costs more per bushel to induce farmers to cut production of corn than it does to grow it.

<table><thead><tr><th>THE PRICE SUPPORT • PRODUCTION CONTROL DILEMMA</th></tr></thead><tbody><tr><td>GUARANTEED PRICE PER BUSHEL FOR CORN PRODUCED<br>$1.25</td><td>ESTIMATED COST PER BUSHEL FOR REDUCING OVERSTOCK OF FEED GRAIN<br>OCT. 1961 TO OCT. 1964<br>$3.00</td></tr></tbody></table>

We now have a situation in which we must pay perhaps half a billion dollars a year just to keep the surplus from increasing. A major reason for the high cost of the feed grain program is that price supports for corn have been boosted; corn production has been made more profitable, and a high inducement is needed to get farmers to refrain from growing it.

With a high price support, the government, in effect, pays the farmer to grow more corn; with feed grain payments, it pays him to grow less. The program is consistent only in that it pays him.

10

The major buyers of corn are livestock farmers who need corn for feed. While the high price supports are a receipt to the farmer who sells, they are a cost to the farmer who buys.

## GENERAL CONSIDERATIONS REGARDING FARM POLICY

### A growing economy is vital.

The difficult adjustments through which agriculture is now going will be facilitated if the nation experiences steady economic growth. An expanding productive economy means good markets for farm products and off-farm job opportunities for rural people.

### Rising production costs are a major problem.

The unsatisfactory level of net farm income is not attributable to any reduction in gross farm income, which has, in fact, been rising. Rather, the difficulty traces to high and rising production costs which have increased in each of the past 10 years. Farmers, and indeed all our citizens, should be protected against the several forces which improperly increase their costs. Inflationary fiscal and monetary policy and cost-boosting forces in the private sector are a matter of deep concern, needing constant study and wise action.

### Better education is needed.

Educational opportunities available to most farm people are not generally equivalent to those in urban areas. Much of the needed action should be at the local and state levels. Of prime importance is an aggressive program to urge both rural youth and adults to continue their studies far beyond the average schooling now attained.

The adjustments facing agriculture can be more readily made if educational opportunities are improved at all levels. Parity of education is a better program than parity prices.

11

## Farm policy should emphasize the family farm.

Family farms constitute 94 per cent of all farms in the United States, and produce 70 per cent of all farm products for sale. These percentages have not changed significantly for at least 30 years. The family farm promises to dominate agriculture indefinitely if a favorable economic climate is provided. The commercial family farm has met the problems posed by inflation, deflation, drought and war. It can continue to meet the problems associated with a scientific revolution if the operator is given the opportunity to make adjustments in the use of his land, labor and capital.

Farmer cooperatives, contractual arrangements and financial innovations can help give continuity and stability to the family farm.

## FITTING THE PROGRAM TO THE NEED

Agriculture in the United States is immensely varied. There are two major divisions, based mainly on size and efficiency:

* commercial farming, mostly a family operation, and

* small-scale farming, also chiefly a family undertaking.

These two types can be found side by side in almost any area, though there tends to be a degree of geographic concentration. If farm sales of $5,000 be taken as the point of differentiation, the two types appear as follows:

<table><thead><tr><th>Categories of farms</th><th>Per cent of total farms</th><th>Per cent of sales of farm products</th></tr></thead><tbody><tr><td>Farms with sales of $5,000 or more</td><td>39</td><td>87</td></tr><tr><td>Farms with sales of less than $5,000</td><td>61</td><td>13</td></tr></tbody></table>

Thus about 40 per cent of the farms sell almost 90 per cent of the products, while the remaining 60 per cent sell only a little more than 10 per cent.

The so-called "farm problem" is generated by the excess productive capacity of the larger commercial farms. Political commodity solutions are based on the false premise that price support programs will solve the problems of low-income rural people and small farmers.

No single farm program can meet the varied needs of these two sectors. Price support programs are of small help to rural people who have little to sell. On the other hand, operators of commercial farms have little need for the programs designed for people with limited farming opportunities. A major need is to separate the com-

12

Commercial farms from the small farms and from operations that are not farms at all, and to fashion programs appropriate for each.

AVERAGE NET INCOME PER FARM
FROM FARMING

FARMS WITH FARM
SALES LESS THAN
$5000 PER YEAR
(61% OF ALL FARMS)

FARMS WITH FARM
SALES MORE THAN
$5000 PER YEAR
(39% OF ALL FARMS)

AVERAGE
PER
FARM

A PROGRAM FOR COMMERCIAL AGRICULTURE

The first thing to do is to free ourselves from a basic misconception about modern-day commercial family farming. What we have is not a depression-ridden agriculture, but an agriculture in transition to a highly efficient form.

The next thing is to recognize that farm programs should be concerned with people as well as with commodities. Farm programs and expenditures have been based largely on commodities. Programs which focus on **commodities** are impersonal, unrelated to special and unique individual circumstances. Programs which are concerned with **people** take individual aspirations into account. Farm programs should focus on the genuine needs of people rather than on the fancied needs of commodities.

A forward-looking program for commercial agriculture includes the following points:

Accept abundance as a source of strength.

Agricultural capability is an asset which we have, which our friends need, and which our rivals lack. We must learn to think of our abundance not as an evil thing, but as good. The advantages of our abundance are fully evident to the rest of the world, particularly to the Communist bloc. We should make the fact of this advantage more clearly known to ourselves. This will require a shift away from the idea that farm products are or should be made scarce.

13

### Adjust price support levels.

If a better balance of supplies and markets is to be achieved, price supports must be suited to the special circumstances of each commodity. Price fixing in the name of "supports" should be avoided. Support prices should be so established that market prices would normally fluctuate above the support level, as has been true for soybeans. Supports of this type would permit and encourage the necessary adjustments in the use of resources. Supports should be based on a percentage of the moving average of the market price of previous years, with appropriate differentials by class and grade.

If markets have a larger role in establishing prices, consumption can increase and the support level will no longer serve as a ceiling.

### Put more decisions in the hands of the farmers.

Those commodities which rely largely on farmer-made decisions—livestock, poultry, fruits and vegetables—have experienced growing markets and reasonably good production adjustments. Such commodities account for three-fourths of the farm income. Those commodities which have relied most on government-made decisions are badly out of adjustment. The difficulties encountered by the regulated commodities—such as wheat, corn and cotton—have in most cases been aggravated rather than helped by government programs. We should use methods that have been marked by success rather than those marked by failure.

### Shift from tilled crops toward less intensive use of land.

The basic problem in commercial farming is that increased productivity resulting from improved technology and farmers' skill in its adoption is yielding more output of some commodities than the market is ready to absorb at prices remunerative to farmers. The answer is not to control the farmer. The need is for a constructive and selective program of aids and inducements to farmers which will shift excess production resources—manpower, land and capital—not generally, but from surplus lines. Such shifts in some cases will be from crops to grazing; in others it will be from crops to forest products. Timber, including trees for wood pulp, are crops for which there is growing demand. A farm forestry program should be pushed. Our soil, forest and water resources need not only to be conserved, but to be expanded and built up for pyramiding future needs.

A land use adjustment program thus is needed, aimed at shifting land to achieve a balance. The land shifted to new uses should be of a type likely to be kept out of

14

ops with the assistance is terminated and until markets supply the inducement for cropping.

Many farms are too small for modern farming. Consolidation of such farms into family units of economic size should be encouraged, not hindered. Migration from farms is of long standing. It has played an important part in making this nation great. Farmers who have better opportunities elsewhere should be encouraged to take advantage of them. Every effort should be made to improve and increase such opportunities.

### Promote high-level domestic consumption.

The livestock industry should be kept free to expand to meet the needs of a growing and affluent population. Thus more farm resources can be kept in profitable use and consumer food preferences can be met.

The food requirements of our needy people should be met by programs of food donation, responsibly administered. The School Lunch Program is a good means of improving nutritional standards.

Research aimed at finding new uses for farm products should be increased.

### Encourage exports.

Every legitimate form of exports should be encouraged. Unaided sales for dollars should receive primary emphasis. Until adjustments are made and surpluses are worked off, it will be necessary to subsidize exports of those commodities which are priced above competitive levels. This is a practice of our foreign competitors.

Special export programs need to be continued. This includes exchange for foreign currency, credit sales, barter and donation. Here the Administration merits commendation for having recognized and promoted the Food-For-Peace Program begun by the previous Administration. The critical consideration is that we not injure ourselves, our friendly competitors, or the recipient nations. The United States aid program should be developed with reference to the basic need for such a program, not as an adjunct of farm policy or as a safety valve for the excess production generated by our farm programs.

We should do all we can to keep our competitive posture strong: tough realistic bargaining with the European Common Market and reasonable domestic price support levels, together with responsible fiscal and monetary policies.

## A PROGRAM FOR LOW-INCOME FARMS

By almost any objective measure, the greatest single economic problem in rural America is the underemployment and low income found among many small farmers

15

and others living in areas of low productivity through improved education and other services the doors of opportunity need to be opened wider for these people. Here, again, the Administration deserves credit for having promoted the Rural Development Program begun under President Eisenhower. Unfortunately, there has been an erosion of the local initiative and responsibility which characterized the program as originally launched. A strengthened program for low-income people in rural areas, both farm and non-farm, should embrace the following points:

### Improved educational opportunities.

The best form of adjustment assistance is adequate education and the open society, which permit changes to take place naturally, in accordance with the wishes of the individuals concerned. This includes general education, vocational training for agricultural, farm-related and non-farm jobs, needed vocational retraining, and various forms of adult education. "Stay in school" programs should be promoted and strengthened. The most acceptable form of adjustment takes place between generations, and nothing facilitates adjustment so well as education.

### Focus research and extension education on the need for continuing adjustment.

Research emphasis should be shifted toward helping rural people make the adjustments called for by the tremendous changes now underway. As projected in the original concept of the Rural Development Program, all appropriate activities of the universities and government agencies, federal and state, should be focused on this effort.

Marketing and farm business management should be stressed. Production research to attain better quality and lower costs must continue to be stressed. Adjustment assistance and counsel can be provided by industrial firms, banks and farm organizations as well as by educational institutions and governmental agencies.

### Promote employment opportunities in rural areas.

Off-farm employment opportunities in rural areas will permit operators of low-income farms to increase their incomes without leaving their home communities and without depopulating the countryside. Retraining, vocational guidance and improved information services regarding off-farm jobs should be provided. The expansion of industry in rural areas should be promoted by private organizations and businesses, and should be encouraged by federal, state and local units of government for sound economic, social and security reasons.

16

The leadership of every area should be encouraged and assisted in determining what are the important income and employment opportunities—farm, industry, forestry, recreation, tourists and retirement homes. Opportunities along these lines should be expanded in keeping with the program.

## CONCLUSION

In the farm policy setting of the years ahead it is the government control program and not the market system which is on the defensive. The regulated portion of agriculture is in deep and costly trouble; the competitive part of agriculture is in far better adjustment. After 30 years of being on the defensive, it is time for those who believe in the market system to take the initiative and remove the control and adjust the support devices which are so costly and detrimental to us.

This move will be a step forward, not a step back. We need to emphasize "moving toward freedom", not "returning to the free market"! We should work toward markets that are free from manipulation, free from misrepresentation, free from gross ignorance and free from senseless gyrations as well as free from government domination. It includes maintenance of fair and honest trading in the commodity markets. It includes supervision of grades and standards, accurate market price reporting and good outlook information. It includes an economic climate favorable to farmer cooperatives as well as to other private enterprise. It includes price supports at levels which normally permit price to fluctuate freely as determined in the market. It means the kind of market that intelligent people are now capable of creating and maintaining.

The transition to greater reliance on the market will have to be gradual. Through inept programs, government lost markets for farm products and piled up an enormous hoard. Government cannot now suddenly pull out, withdraw its support, dump its hoard and expect farm people, unassisted, to bear the whole brunt of adjustment. Much time and public money will be needed to extricate agriculture from its present difficult position.

But this is not an argument to wait. The longer an adjustment is postponed, the greater the imbalance becomes and the more difficult it will be to correct. The decision is largely in the hands of farm people. Others must help. To wait with a solution is to lose valuable time and money, and possibly to lose the opportunity to achieve a sound program.

Originally Published April 17, 1964

17

## REPUBLICAN
CITIZENS

72

23

## Foreword

In these papers the Critical Issues Council seeks to provide American citizens with an honest evaluation of matters of vital concern to the Republic; to offer evidence instead of emotion, purpose in place of polemic, and to follow criticism with positive proposals.

The members of the Critical Issues Council are Republican-oriented citizens with broad experience, insight and proficiency in domestic and international affairs. Their positions are not those of any elected official or group, nor does every member of the Council or Republican Citizens Committee necessarily subscribe to all the views expressed. The Council endorses its papers as a substantial contribution to public awareness of current critical issues and to the presentation of positive solutions.

## SUMMARY

Confidence, on both sides of the Atlantic, is being shaken. Dedication to the goals of allied strength and unity is giving way to a growing disunity and distrust. To overcome this disarray, we must put aside expediency and crude interallied 'arm-twisting' and mobilize within the Alliance all its latent resources of will and unity.

The United States did not join the Alliance just to save Europe. We returned to Europe, and remain there today, because its defense is essential to our own security. On both sides of the Atlantic, it must be understood that a Communist conquest of even the smallest part of Europe would be a catastrophe for all.

To insure that every kind of provocation, including nuclear blackmail, can be met with effective countermeasures, adequate conventional forces must be kept at NATO's disposal. The mere hint of United States troop withdrawals would add fuel to the doubts that are undercutting NATO's solidarity and deepen the 'crisis of confidence' through which the Alliance is now passing.

We must, however, continue to press our allies, whose economic resources are rapidly rising, to accept a larger share of common burden of defense. But until our allies are able to assume the total established NATO force requirements, the burden falls upon the United States as the inescapable requirement of our own security.

A better arrangement to govern NATO's nuclear resources is also needed. Our allies are demanding more than merely to be kept informed about decisions over which they have no control, more also than 'consultation' in which their views carry weight only if they conform with U.S. preconceptions. What they want is real participation, a true share, in the process by which decisions vital to all are reached.

The United States must take the lead in building an encompassing Atlantic Community since it can no longer be taken for granted that what is good for the narrow circle of countries seeking a powerful political merger will necessarily serve the purposes of those other allies with whom they are aligned in the crucial task of collective Atlantic defense.

The emergence of a strong single Europe—a true superpower for which the resources are indeed available —could present Western unity with thorny problems unless tightly integrated in the Atlantic framework.

4

Since it must ultimately be the Europeans who decide
what form of unity they desire, the United States should
cease to pressure its allies toward any particular brand
of unity and concentrate rather on exploring with them
the fields, forms, and degrees of unity with us that would
be mutually advantageous.

The prime goal of future United States policy must
be to capitalize on and to stimulate every shared interest
that unites the free nations of the West and moves them
forward toward one Atlantic Community. A United
States policy that made collaboration on an Atlantic
scale its guiding standard should be able to take the
edge off any inward-directed and exclusive 'European-
ism'.

The immediate need is not for elaborate new institu-
tions, but the will to use better what we already have.
We need a new determination—shown by acts rather
than words—to develop greater Atlantic strength and
unity. The United States must resume the initiative and
begin to lead again.

5

The Atlantic Alliance
and
United States Security

After the bitter experience of two world wars, followed immediately by the challenge of the Cold War, the United States was compelled to make an historic decision: that it could no longer afford to stand aside or go it alone if it was determined to preserve its freedom and independence.

Allowing Eurasia and the adjoining islands to fall under hostile control would, in the end, make America's own position untenable. Thus, aggression against friendly and allied nations has come to be recognized as an attack against the United States. To deter such an attack—if necessary, to defeat it—the power of the United States had to be thrown into the balance.

The task of protecting the free world thus became a United States responsibility, and a United States commitment. The commitment endures. It is an inescapable obligation of leadership. But we cannot discharge our responsibility alone. In the world today we need the closest coordination with our allies in all matters of common concern, if we are to win the future.

NATO: The Cornerstone of Western Defense

The North Atlantic Alliance is an unparalleled achievement of cooperation for common defense. It had its immediate origins in the crises of 1948-49—the Berlin blockade and the Communist takeover of Czechoslovakia—and the urgent needs of free world security. In meeting these needs, in containing the aggressive thrust of the Soviet Union, the Alliance has been a notable success. But the basic requirement continues. NATO's very success has greatly enhanced its potential to cope with broader fields.

The preamble to the North Atlantic Treaty reaffirms the faith of a community now encompassing fifteen free nations.

"... in the purposes and principles of the Charter of the United Nations and their desire to live in peace with all peoples and all governments.

"They are determined to safeguard the freedom, common heritage and civilization of their peoples, founded on the principles of democracy, individual liberty and the rule of law

"They seek to promote stability and well-being in the North Atlantic area.

6

"They are resolved to unite their efforts for collective defense and for the preservation of peace and security."

The Alliance has provided both the sword and the shield in whose shelter the nations of Europe have been able to recover from wartime devastation, to preserve their freedom, and to enjoy levels of prosperity unprecedented in history.

For the United States, the Alliance represents a genuine triumph of bi-partisan foreign policy. Throughout a succession of national Administrations, and with consistent Congressional and popular support, this nation has committed itself unreservedly to the interdependence of free-world security. Our willing and massive contributions of men and material have effectively underwritten this commitment.

## ESSENTIAL TO UNITED STATES SECURITY

The United States did not join the Alliance just to save Europe from the imminent menace of Communism. We returned to Europe, and we remain there today, because its defense is essential to our own—because the two are indivisible. A sense of interdependence and of community rapidly evolved into an Alliance which today embodies the sum of its combined resources, whether military or economic or intellectual, and a potential for peaceful order and orderly growth matched nowhere else.

The Alliance has succeeded: its immediate goals have been substantially accomplished. Under NATO, fifteen free nations have been able to harmonize their sovereign interests into a common cause, build a powerful force-in-being, establish a supporting complex of bases and logistical networks, and take important steps toward development of a common strategy covering the use of nuclear and other weapons.

But this momentum is not now being maintained. Confidence, on both sides of the Atlantic, is being shaken. Dedication to the goals of allied strength and unity is giving way to a growing disunity and distrust. Seeds of disintegration are now undermining this bulwark of free world security.

In so critical a situation, the primary burden falls upon the leader—to assess his own shortcomings, to reaffirm clear and consistent policy-goals, and thus to take up his full responsibility. United States leadership appears fitful and inconsistent; it resorts too much to gadgetry rather than the establishment of sound and enduring relationships, built on a basis of mutual respect among sovereign equals.

7

Confidence within the Alliance must now be restored—on both sides of the Atlantic. This requires that the United States must continue to bear major material burdens. We must put aside expediency and crude inter-allied "arm-twisting" and mobilize within the Alliance all its latent resources of will and unity of purpose. If we are to guarantee our own security, there is no alternative. The costs, however great, are the price we must pay to preserve our future progress in freedom.

## THE CONTINUING SOVIET THREAT

The Alliance is above all a pact of mutual assistance against a Soviet attack on the territory or armed forces of its member nations. Its foremost purpose is to deter, and if necessary to defeat, such an attack. And this must continue to be so, as long as the military threat from the East remains.

As a purely military pact NATO might not survive, should its members ever lose confidence in its ability to enhance their security against attack or come to believe that the threat from the East had ended. But the Alliance extends beyond the military field: the treaty itself calls for cooperation in other fields, cooperation which is indispensable if only to assure the essential solidarity required for effective collective defense. NATO, the most vital of our transatlantic institutions, is thus the natural nucleus for an emerging pattern of Atlantic relationships and an evolving community of shared interests.

The military threat from the East is not ended. Thus, the leading question is: does NATO as it stands adequately insure our security, the security of the United States as well as its allies? If it does not, we—the United States and its allies—must now make the necessary changes.

## THE MEANS OF DETERRENCE

Deterrence of attack, against any part of the free world, is indivisible. As the threat is poised against all, so too must the burdens of an effective response be shared by all. Yet the particular situations differ greatly, in North America and in Europe, both as to specific vulnerabilities and the "mix" of forces that must be available to meet a varied range of aggressive acts. Without the projection of North American military might across the Atlantic, the exposed territory and eastern boundaries of the European allies would be in immediate jeopardy.

Even on grounds of sheer national self-interest, the heavy burdens placed on the United States in the defense of both North America and Europe are inescapable. If Communist power in the world is to be held in

8

check—and for America to remain free—all free nations must be able to rely on the strength the United States is able and willing to commit to the common security.

With world responsibilities of such vast scope, the United States must bear its share, perhaps what appears to be a disproportionate share, of the defense burden required if NATO is to reach its basic objective. The alternative would be to retreat to a Fortress America position. Such a position served United States interests, and served them well, only as long as other friendly nations were able to balance or defeat any hostile powers. Today, given the realities of international life, it would mean United States isolation and the alienation of like-minded peoples—until, when all others had succumbed, America would find itself facing a Communist-dominated world, superior in resources and in power.

## THE NEED FOR SUPPLEMENTARY DETERRENTS

But now, fifteen years after NATO's establishment, its task of protecting the freedom and independence of the non-Communist nations of Europe—and of our friends and allies on other continents—has been rendered immensely more arduous. Two new factors have radically changed the context. First, the power of the leading Communist states has grown greatly since the early postwar period. More important still, the acquisition of long-range nuclear striking forces by the Soviet Union has raised questions as to the credibility and thus the deterrent effect of United States retaliatory threats to intervene with its strategic forces—the West's most formidable military instrument—against any but massive attacks on overseas members of the Alliance.

Strategic nuclear forces are essential. But, however impressive in themselves, alone they are not sufficient. There is urgent need of supplementary deterrents—specifically, of very sizeable forces deployed in Europe and on the oceans adjoining the European continent, forces with a conventional capacity but supported by short- and medium-range nuclear weapons. Such forces must be on the spot if every kind of provocation, especially nuclear blackmail, is to be met with effective countermeasures. This requires that the threat of their use and, if deterrence should fail, the effectiveness of their use must be credible both to friend and foe.

So demanding is the military task now facing NATO that it must be able to count on all its members for whatever efforts are needed to attain the goals of the Alliance. The allies of the United States made substantial commitments at a time when they were struggling to emerge from the devastation of the war.

9

Yet, given their extraordinary economic recovery in recent years and the degree of internal stability they have attained, there remains a painful lag in the exertions of some of them. This fact stands in sharp contradiction to the interests at stake. On both sides of the Atlantic, it must be understood that a Communist conquest of even the smallest part of Europe would be a catastrophe for all.

## THE BURDEN MUST BE SHARED

This nation must bear a share of responsibility for the failure of some European nations to meet the force-requirements set by NATO. In part, the allies have been lulled into complacency by over-reliance on the United States—on our support, our aid, and our deterrent. The words and actions of the United States which exaggerate some new era of “reconciliation” with the Soviet Union have helped foster a sense of “euphoria” and relaxation. The United States has failed to convince its allies that the military efforts demanded of them would add substantially to their security.

Europe sometimes voices a suspicion that any increase- in European forces would merely signal the reduction of United States forces presently stationed there—forces the Europeans regard as the indispensable mainstay of their security. It is not so much that any specific number of U.S. divisions represents a “sacred” and inflexible commitment. But the overall need has been fixed after long interallied deliberation, and our basic commitment to the indivisible defense of Europe and the United States is indeed sacred. Unless and until these NATO force-levels are filled by our allies, the burden falls upon the United States as the inescapable requirement of our own security.

An additional burden is that of a persistent imbalance in our international accounts, to which the costs of maintaining United States forces in Europe are a contributing factor. The defense of the dollar is in a very practical sense part of our grand strategy. A weak dollar would weaken the United States politically, and therefore militarily. The United States must seek out, therefore, all possible means to reduce the balance of payments cost of our forces abroad, without weakening our military or political posture. We must continue to press our allies, whose economic resources are rapidly rising, to accept a larger share of the burden of common defense. The greater the burden they will bear, the closer we will come to narrowing the payments-gap—to the benefit, ultimately, of all the nations of the free world.

If it should be thought that the threat of United States troop withdrawals would act as a spur to needed European efforts, the likelihood is that, in the present

10

psychological situation, it might lead to precisely the opposite result. It would tend either to arouse a sense of defeatism or else lend impetus to attempts—wasteful and militarily unpromising though they may be—to substitute independent strategic deterrents for the American nuclear umbrella. The mere hint of United States withdrawals, even if falsely interpreted as pointing toward future United States disengagement from the continent, thus adds fuel to the doubts that are undercutting NATO's solidarity and deepens the “crisis of confidence” through which the Alliance is now passing.

## CONTROL OF NATO'S NUCLEAR CAPABILITY

In the perfect Alliance—which never has and never will exist—this problem would solve itself. That nation which commands all but a minute fraction of the Alliance's aggregate nuclear resources would manage them in the common interest. It would decide when and where and how nuclear power would be used—and whether it would be used at all.

But even so honorable a nation as the United States cannot expect to be taken wholly on trust by other honorable nations in matters involving their very existence. Then, too, for many in Europe—and not just the French—some participation in the control of nuclear weapons has become a symbol of sovereignty.

In this sense, the nuclear question is but the tip of a vast iceberg consisting of unresolved problems of the political control of the totality of NATO's strategic resources. The question is even more one of **relationships** —the precise terms governing a partnership of sovereign nations, equal in pride and independence if not in direct ownership of major resources. Indeed, this very sense of independence among all the members of the Alliance is no mark of failure; it is the inevitable consequence of NATO's profound success.

The practical question remains, however: by what further means shall we implement the formal understanding reached at the NATO Heads-of-Government meeting in December 1957, to establish nuclear stockpiles in Europe and to equip allied forces with delivery systems—but with the warheads in the custody of the United States, the donor nation. The means of mutual defense, both European and North American, were thus to be shared. While much was done in the years immediately following 1957 to carry out this proposal, the Alliance must now decide how and by whom political and military control shall be exercised.

The concept of a NATO nuclear force under NATO command was projected as one possible solution, with the precise working arrangements left to interallied

11

negotiation. Since 1960, this has been presented in the form of a Multilateral Force, the MLF. This proposal, originally conceived as a working concept for further consultation, has in recent years tended to be used more as a pressure-tactic. But the essential disharmony concerning nuclear control remains; and the concept of MLF has, in fact, heightened it, rather than serving as a first step toward an eventual solution around which all the allies might compromise their legitimate differences.

We must now translate the concept of collective defense into a workable solution—into practical terms of how and by whom authority and control are to be exercised, and extended to cover all forces and all weapons, conventional and nuclear. In the last three years, there has been no real progress toward this goal. In fact, we have clearly retrogressed.

We cannot believe that either the ingenuity or the will is lacking to perfect workable arrangements in a way that satisfies the interests of all, including Germany and the other non-nuclear members of the Alliance. The goal is plain: to make of NATO's nuclear capability the pillar of allied unity it should be, rather than the source of disintegration it has been allowed to become.

## TOWARD GREATER UNITY

The disarray within NATO must be overcome. What is needed is the restoration of faith in the effectiveness of collective defense as the best road to national security. Such faith and mutual confidence are indispensable bases for solidarity in an age of nuclear weaponry, with its unprecedented threat to national survival.

Solidarity can exist side-by-side with great differences in power. But it requires full respect for the sovereign interests of all. Our allies are demanding more than merely to be kept informed about decisions over which they have no control, more also than "consultation" in which their views carry weight only if they conform with United States preconceptions. What they want is real participation, a true share in the process by which decisions vital to all are reached. This is what they have every right to demand.

In turn, the United States can provide the effective leadership and forceful initiative that corresponds to its resources—and which its allies expect and applaud—only if it enjoys a high measure of freedom of action. Allied participation in planning, decision-making, and strategy must go hand-in-hand, therefore, with a clear recognition that the United States must be able to act, swiftly and decisively, in any emergency in which the strategic protection of the entire Alliance is at stake.

12

The ultimate decision on the use of nuclear weapons, to be effective, must be almost instantaneous. To be acceptable, it must be based upon close and meaningful consultation with our allies throughout the period leading toward that decision.

Confidence must be restored, on both sides of the Atlantic. As in all matters of common concern within the Alliance, the primary burden falls upon the United States. As the leader, we must show **wisdom** in approaching all these critical problems—never falling back on the easy extremes of petulence or arrogance. We must show **understanding** to all the nations of the Alliance—a patient recognition that no two have precisely the same background and history, the same interests or ambitions. We must show **strength** where and when strength is required—based always on conviction and principles, clear to friend and foe alike, and never on mere expediency.

The sum of these qualities of leadership will be a heightened sense of responsibility—to the Alliance, to ourselves, and to the cause of freedom.

## The United States and Its Individual Allies

A Europe of multiple sovereignies has its apparent drawbacks, particularly when compared with some imagined federal European union patterned on the American model. But it must be accepted as a fact, and dealt with in a spirit of understanding and accommodation.

The United States must not play one European ally off against another—even though the temptation to do so may at times be great. Nothing could be more detrimental to the Alliance than an invidious competition among European nations for special favors from the United States or, worse still, for favored treatment by the Soviet Union. **The United States strengthens its role of leadership if it convinces all of its allies that they can count on loyal United States support whenever their particular interests are consistent with the interests of the Alliance as a whole.**

Attempts on the part of any member of the Alliance to gain special favors from the Soviet Union would necessarily lead to grave disunity. The United States can do much to prevent any such "race to Moscow" by setting an example of self-restraint in its own dealings with the Kremlin. While it would be unacceptable to the United States if its allies assumed the right to veto any bilateral Soviet-American negotiations or accords, bilateralism cannot be kept a monopoly of the

13

superpowers. It will always tend to arouse a certain suspicion of special deals at the expense of others. In the interest of interallied confidence, the United States will be well advised, whenever the way is open for accords with the Kremlin that would be advantageous to the West, to make sure that its allies are given full and early insight into the negotiations.

## THE UNITED STATES AND CANADA

Our relationship with Canada is probably closer than with any other nation. United States trade with Canada is larger than with the entire Common Market. The two governments are linked by numerous high-level joint boards and committees. Yet, we must take into account Canadian fears of domination, whether political, economic, or cultural, by her larger neighbor. The more we heed her voice in formulating policies on matters of common concern, the better off we both will be. Beginning in 1958, there have been frequent working meetings among cabinet officers of the two countries, bound together less by formal agendas than by an earnest desire to deepen the habits of consultation.

## THE UNITED STATES AND BRITAIN

The "special relationship" with Britain assumes more importance in French eyes than it does to either Britain or the United States. It is not a matter of formal institutional arrangements, and two allies "divided by common language" do have their differences. Basically, the cordial relationship between the two countries derives from a deeply-rooted similarity of values and approach which is shared by Canada and, to varying degrees, by our other allies. Differences arise when the two governments diverge in such matters as their estimate of the chances of accord with Moscow or in their attitude toward East-West trade.

In dealing with the United Kingdom, we must bear in mind its concern for close ties not only with the Common Market but also with other European countries, with the Commonwealth, and with ourselves. Far better than urging Britain to press for admission to the Common Market—and later, perhaps, to a European political union—would be to explore with her and with the other countries of Europe means of developing an economic association that would take more fully into account the interests of all free nations.

## THE UNITED STATES AND FRANCE

In the case of France, it is obvious that the relationship has deteriorated to a point that gravely endangers

14

The Alliance itself. This is the more disconcerting because France has agreed with the United States that the Alliance is indispensable for French security, at least for the foreseeable future, and has taken the opportunity on several occasions to prove her firm alignment with the United States in resisting Soviet pressures and provocations.

Little is gained by stressing the real or alleged incompatibilities of French and American "Grand Designs". Instead, it is necessary to examine the practical steps that can be taken to give France and other countries that sense of independence without which DeGaulle claims there can be no genuine partnership.

Nobody can appreciate better than he what it took in the way of national authority, and of determination at the helm, to pull France back from the abyss of anarchy and interminable colonial warfare—and to do so without resorting to Fascist abuses of dictatorial power. Moreover, engaged in restoring French national self-confidence as a prerequisite of domestic stability, he opposes supra-nationality—which is what integration means to him—and rejects anything implying American or "Anglo-Saxon" special privileges.

There is a limit beyond which the independence of any member becomes incompatible with common allied action. But Franco-American amity is too precious, in terms of overriding Western interests, to be allowed to become the victim of dogmatic preconceptions or unsubstantiated mutual accusations.

## THE UNITED STATES AND GERMANY

Relations with Germany have been extraordinary cordial since her defeat at the hands of the wartime allies—so consistently cordial, in fact, and so valuable because of Germany's new-won power, wealth, and stability, that a mutually satisfactory German-American relationship should present no difficulty. Yet, such a view errs toward over-optimism even as the view of French hostility toward NATO and the United States errs in the opposite direction.

It is true that no group of influence in Germany today is cool or opposed to "Western orientation". All parties are convinced of Germany's need for United States protection, preferably within the framework of NATO. The German military effort is becoming ever more substantial. Economically, Germany is doing enviably well.

Yet, when all is said, Germany remains a partitioned country, exposed to grave dangers in West Berlin,

15

strung along the frontier of a Soviet empire both aggressive and superior in strength, and still suffering under the suspicion of neighbors both East and West of any German defense efforts that are reminiscent of her past nationalism and militarism.

Under these circumstances, what Germany needs least of all is to be courted by a United States in competition with France, nor made to bear responsibilities beyond what she feels to be her present capabilities. We must make it plain to the German people that their vital interests are America's vital interest, too, and will be firmly defended. Those interests are the freedom of West Berlin, free access to West Berlin, and the freedom of the people of the Eastern Zone, once they are rid of Communist oppression, to determine for themselves whether they wish to reunite with West Germany. In addition, the United States should help Germany to gain the confidence of her neighbors in the East, and become a magnet drawing them back into Europe instead of a source of apprehension that tightens the Soviet grip.

## THE UNITED STATES AND ITALY

Relations with Italy have, on the whole, been excellent since the war. As a democratic country with a succession of governments firmly opposed to Communism at home and abroad, she has contributed to the strength of both NATO and the Common Market. Internal difficulties in finding a stable majority to govern the country and in mastering the problems posed by a very large Communist vote persist, however, and make it particularly important that she be assured of sympathetic United States understanding and of a respected place in the councils of the West.

Preoccupation with the major allies should not deflect attention from the many smaller European countries, some allied, some neutral, that exert a far from negligible influence on the course of European political and economic development and on United States foreign trade. The United States should take full advantage of the fact that sheer self-interest ranges most of these lesser countries on the side of those who, like the United States, are opposed to exclusive economic or political arrangements.

Moreover, their spiritual alignment with the West is a valuable contribution to the cause of Atlantic unity. Most of these countries have been notably successful in preserving internal stability, free institutions, and a prosperous economy. In an age of ideological warfare, these are assets which make up for the lack of military strength. The United States has much to gain from the reputation, a deserved one, of being a protector of the weak and a champion of freedom and prosperity for all.

16

## European Unification

The unification of Europe, let us not forget, is a matter for Europeans to decide among themselves. United States **interest** is natural; but United States **pressure**, toward any particular form of unity will just as naturally be resented and, thus, strain the bonds of the Alliance as a whole.

Throughout the postwar era, successive American governments supported by Congressional and public opinion have vigorously promoted European unification, especially favoring efforts pointed toward a federal or supranational political structure. The United States can take a measure of credit for the achievements of the dynamic European Movement that set up the European Communities of the Six, the Common Market (EEC) foremost among them.

The question today is not whether the Six are reaping the full benefits they anticipated from such integration. It is, rather, whether the United States has a continuing interest in promoting further advances toward unification limited to European nations, or to some of them, and particularly toward European military and political integration. If it does, a further question arises concerning the extent and the form such integration should take. It can no longer be taken for granted that what is good for the narrow circle of countries seeking a powerful political merger will necessarily serve the purposes of those other allies with whom they are aligned in the crucial task of collective Atlantic defense.

The chief original motives behind United States enthusiasm for European unity have lost their urgency, and much of their justification. A new European psychological unity, plus advanced weapons technology, have made intra-European wars all but unthinkable. Effective economic unity does not appear, if the Common Market is a fair standard, to depend on prior political integration. And whatever fears we had of the resurgence of Germany's militarism have been allayed by her membership in NATO and her reconciliation with France, the "hereditary enemy". We must now reappraise our view of European unity—particularly if achieved along federal or supranational lines—in terms of America's own interests. And foremost among them is its overriding interest in Western strength and solidarity, within the framework of the Atlantic world.

In the economic sphere, where integration has gone beyond mere speculation and blueprints, we are forewarned of some of the problems that might result from a tightly integrated "protectionist" Europe. Such an attitude poses dangers to other European nations, as

17

well as to North America and the entire free world. While the United States has been prepared, in theory, to suffer sacrifices on the altar of European unity—a theory hardly confirmed by the harsh facts of the Chicken War—it agreed to pay the price only in the expectation that economic integration would lead in turn to political integration. No such integration is presently in sight. Even if it were, its own compatibility with United States interests, and those of the Alliance as a whole, can no longer be taken for granted.

The problem of European military integration also demands searching reappraisal. No one would question that more unification in such fields as standardization of weapons and forces, of logistical support, and the pooling of resources is desirable from the viewpoint of NATO. But United States support of a nuclear deterrent, other than NATO's, would be hard to square with our objections to nuclear proliferation, and with our continuing search for arrangements by which all members of the Alliance may share in the control of all weapons, both conventional and nuclear.

Despite continued and acknowledged United States influence, differences such as those now plaguing United States-French relations might well be reproduced on a still larger scale if a genuine integration of Western Europe along supranational lines were to take place. Such a political structure would have to be based on a surge of "European nationalism" and on strong leadership at the center. The emergence of a strong single Europe—a true superpower for which the resources are indeed available—could present Western unity with thorny problems unless integrated into the Atlantic framework.

## A NEW STANDARD: ATLANTIC UNITY

Greater unity in Europe is desirable, insofar as it strengthens the Atlantic Community; developments in Europe that weaken Atlantic unity are undesirable. This must be our guiding standard. For example, military unity of the whole or of a part of Europe, independent of NATO, would be clearly undesirable. Political unity, of even a part of Europe, must be carefully planned within a wider framework in order that it strengthen Atlantic unity. Even in the economic field, where regional arrangements can and do prove valuable economic progress for all should be sought on the widest practical basis.

These considerations do not suggest that the United States should reverse its course and start opposing European unification. This is, in any event, a matter for

18

Europeans to develop in their own way. What they do suggest is that the United States cease to pressure its European allies toward any particular brand of unity and concentrate rather on exploring with them the fields, forms, and degrees of unity with us that would be mutually advantageous.

A United States policy that made collaboration on an Atlantic scale its guiding standard should, by that token, be able to take the edge off any inward-directed and exclusive "Europeanism". Such a policy would support the deep-seated and welcomed European desire for greater unity in a direction that would strengthen the transatlantic bonds on which the United States and Europe depend for their mutual security and their economic progress. It would assure Europe and the United States alike of success in the competition with their common Communist adversaries, and thus fulfill the rich promise of the Alliance, in fields beyond the military and on a base that exploits the broadest possible community of interest.

## Atlantic Unity

Today's challenges demand the greatest possible unity of free men everywhere to meet problems with which no nation, alone, can now deal adequately. But we state it as a major premise that first priority must be put upon maximum unity in the Atlantic world, with respect to political, economic, and military matters alike.

This family of nations—the United States, Canada, and Western Europe, bound together by strong ties of common heritage and history—forms the core of free world unity. The prime goal of future United States policy must be to capitalize on and to stimulate every shared interest that unites the free nations of the West and moves them forward toward one Atlantic Community.

Since 1945 emphasis on unity "for Europe" has enabled Americans to sound progressive and alive to the call of the times, without suggesting that the United States itself accept any new ties with others. Behind the enthusiasm for unity confined to Europe there lay both concern and overconfidence—concern that the United States would be "pushed around" if closely linked with Europe, and overconfidence stemming from the belief that we were so rich and powerful as not too need others. Both sentiments are now out of touch with reality.

The membership, extent, form, pace, and method of any purely European unity is something for Europeans

19

to decide. Attempts by the United States to impose its preferences can only lead to reaction against outside meddling. The chief question for Americans is: how much unity of others **with us** is in **our** interest? And we must also ask ourselves: what are to be the respective roles of Europe, united or not, and of the nations of North America within this broader Atlantic world?

The United States is not exclusively an Atlantic nation and cannot become one without neglecting its interests in the Western Hemisphere, in the area of the Pacific, and in other parts of the world. The same holds true, though to a lesser extent, at least for Britain and France.

**This means that special transatlantic ties should not be exclusive and inward-directed.** They should give the countries involved a firmer base from which to operate, both against adversaries who need to be held in check, and toward friends—such as Japan, the developing countries, or the American Republics—who need access to and support from the advanced countries of the Atlantic area.

## AN "EVOLVING" COMMUNITY

Rather than looking toward the construction of elaborate new "supranational" institutions, the United States must be ready to build upon the foundations of practical, workable interdependence. There is already evolving a free-world community of shared interest which compels us, day-by-day, to deal with urgent problems. In addition to NATO itself, its institutions include the Organization for Economic Cooperation and Development (OECD), the General Agreement on Tariffs and Trade (GATT), the World Bank, and the International Monetary Fund, each with a different membership but with a common core of Atlantic nations.

The term "partnership"—which has been stressed since 1961 to indicate one of the chief characteristics of a workable Atlantic Community—is useful, if it is not made to suggest a partnership of equal powers, or one necessarily limited to two partners only. A partnership of two provides no adequate place for Canada or for those European nations—possibly including the United Kingdom—that may decide to stay out of some future United Europe. While it may be flattering to Europeans to hear American statesmen speak of an impending "equal" partnership, they know this must remain at best a remote goal.

What the Europeans want today—and have every right to want—is participation of their countries with an equal voice in the formulation of policies that are of vital concern to them, whether they bear on the

20

Atlantic area or on other parts of the globe. This
right is reciprocal: if our European partners are to be
protected against surprise moves by the United States
that could endanger their security, the United States
must be consulted, in turn, before European action is
taken that could adversely affect its interests.

A BROADER PARTNERSHIP

Harmonization of policy must extend beyond foreign
policy to all matters of common concern. Three matters
on which agreement is of basic importance are:
(1) **strategic policy**, including the control of nuclear
-weapons; (2) **trade policy**, including agricultural policy
-as typified by the "Kennedy Round" of tariff negotia-
tions; and (3) **financial policy**, including the strengthen-
ing of the West's monetary system. These are all prob-
lems of great difficulty and complexity. Their solution
depends on continuous and patient effort, strengthening
the "habit of consultation", and the will to reach agree-
ment in the common interest.

We must not shy away from experimenting with novel
organizational devices if and where they can serve to
symbolize and strengthen unity. The immediate need,
however, is not for new or more elaborate institutions
but rather the will to use better what we already have.
We need a new determination—shown by acts rather
than words—to develop greater Atlantic strength and
unity. The United States must now show this will and
determination, stop the disintegration of NATO, re-
sume the initiative shown by the Truman and Eisen-
hower Administrations, and begin again to lead.

President Eisenhower well stated the goal in his farewell message to the NATO Council:

Together we must build a Community which will
best safeguard the individual freedom and national
values of our various peoples and at the same
time provide effective means of dealing with
problems with which none of us, alone, can now
deal effectively.

A bold new initiative is necessary. Let us proclaim
the goal of a true Atlantic Community adequately
organized to meet the political, military and economic
challenge of this era. Let us invite our allies to explore
with us the best means of creating such a Community,
beginning with a critical survey of existing institutions
and the formulation of proposals for their reform and
simplification, and such new institutions, as may be
necessary. We have pushed too long for greater unity,
**for others.** Now let us lead toward greater unity of
**others with us.**

Originally Published April 22, 1964

21

## REPUBLICAN
CITIZENS

For further information, write for your free copy of **LET'S USE OUR NEGLECTED ASSET** to Membership Director, CITIZENS, 1625 K Street, N.W., Washington, D.C. 20006.

72

23

Foreword

## Republicans and Civil Rights: A Continuing Commitment

For more than three centuries, Americans have dreamed a strange and wonderful dream. They have dared to seek strength for society by giving freedom to its members. They have liberated common men and women and have discovered uncommon faith and power. They have dedicated themselves to the importance of the individual and have achieved unparalleled greatness for the nation.

Today, the character of American life is on trial. If we are to maintain our greatness, we must sustain our dream.

Yet, for one out of ten Americans, the dream has been distorted. For members of several minority groups —particularly Negroes—the meaning of equal opportunity is not yet complete. And because we have failed to pursue the American dream as zealously as we might, our society pays an appalling price.

More than half of Negro adult males have less than a grade-school education; school dropout rates continue to increase. Contributions which might have been made to science, medicine, education, industry and the arts never will be realized. Denied opportunity is often a contributing factor in broken homes, juvenile delinquency and drug addiction. Crime rates among Negroes rise four times faster than among other groups. Out of wedlock births are ten times as high.

In our economy, according to the Council of Economic Advisers, we lose from $13 to $17 billion from our gross national product each year because of unrealized opportunity among non-whites—92% of whom are Negroes. Negro unemployment rates are twice those of whites.

Around the world—and particularly in the United Nations—our failure to expand individual opportunity at home frustrates our efforts to lead peoples who are largely nonwhite.

This is but part of the price we pay for a dream distorted. The promise of individual opportunity must now be redeemed.

### THE REPUBLICAN RECORD

Throughout the last one hundred years, the Republican Party frequently has spoken of society's reliance on individual opportunity. The Republican response to civil rights problems has been shaped by this basic con-

4

born. Born out of a devotion to human rights, the party of Lincoln ended slavery and gave shape to the 13th, 14th, and 15th Amendments on which present civil rights programs rely so heavily. Republican leadership after the Civil War created the first civil rights legislation to forge lasting equality for the Negro. But the task was Herculean; the attention of the nation drifted. As the years passed, early Republican efforts were neutralized and new patterns of discrimination arose. In the twentieth century, the voices of reaction exercised a powerful influence in the Democratic coalition. Presidential influence was muffled, legislative action paralyzed. Not until the Republican administration of President Dwight D. Eisenhower did the nation again give its serious attention to civil rights.

From 1956 to 1960, President Eisenhower presented the most constructive civil rights proposals in more than eighty years. In some respects, they outdistanced even present recommendations. Unfortunately, a Democratic Senate seriously compromised the legislation. Nonetheless, the Civil Rights Commission was established, and the right to vote strengthened.

Moreover, President Eisenhower's executive action brought the completion of integration in the active Armed Forces (but not the state-dominated National Guard) and Veterans Administration hospitals; the abolishment of segregation in the District of Columbia, in bus and train interstate travel, in schools on military posts, and in the ranks of civilian employees at naval bases. The Eisenhower committees on Government Contracts and Government Employment, under the chairmanship of Vice-President Nixon, settled more than 1000 complaints of discrimination. The Civil Rights Commission issued the most complete report in government history on the plight of the Negro. The President's stand at Little Rock further legitimatized the quest for racial justice. President Eisenhower's civil rights commitment had a profound moral and educational effect on the American people.

Meanwhile Republicans were practicing what they preached about state responsibility. In 16 of the 18 states which forbade discrimination in public accommodations before World War II, Republicans controlled the governorships, the legislature, or both when the laws were passed. Since the war, 19 of the 25 state fair employment statutes were enacted under Republican governors or legislatures. In the first four states to pass such legislation, Republicans controlled both houses of the legislature and the governorship. Today, in state after state, Republican governors forcefully articulate their devotion to the cause of civil rights.

5

In the last four years, Republicans in Congress have consistently supported progressive civil rights programs. Voting records show that Republican efforts to end discrimination in federal aid programs far outdistance those of Democrats. Furthermore, when the House passed the new civil rights bill last February, 138 of 172 Republican Congressmen voted for the measure. This 78 percent proportion compares with only 59 percent for the Democrats. Thus has the party of Lincoln honored its platform promise of 1960.

"We pledge the full use of the power, resources and leadership of the federal government to eliminate discrimination based on race, color, religion or national origin and to encourage understanding and good will among all races and creeds."

But far more important than the resources of the past are the policies for the future. Republicans will continue the commitment which began a century ago. We will translate unity of purpose into unity of action. We will resist any present temptation to duck the implications of the Lincoln legacy, the Eisenhower example, or the 1960 platform. As we seek to fulfill what our past has promised we will spell out the specifics of a Republican approach to civil rights.

## A TWO FOLD APPROACH TO CIVIL RIGHTS

The formal patterns of segregation and discrimination are only symptoms of a problem which lies deep in the soul of our society and in the hearts of men. Legislation can treat the symptoms, but laws alone cannot cure the deeper illness. Anti-discrimination statutes can end the legality of segregation, but they alone cannot produce meaningful integration.

Accordingly, this analysis of civil rights problems is divided into two parts. First considered are those **legal measures** which strike down formal patterns of discrimination. Second is the more subtle challenge: How can the Negro be fully integrated into American society? What **affirmative actions**, private and public, will enable him to utilize the privileges which the law guarantees?

**It is true that laws cannot be used to compensate Negroes for opportunities long denied. Nor can governments legislate human understanding. Anti-discrimination legislation will only begin to meet the civil rights problem. But that beginning can be most significant.** For only when obvious symbols of legal inferiority are removed can understanding grow between peoples. Only when there exists the chance for a good education, a good job, a good home can Negro enterprise be ade-

6

quately stimulated. Only when the validity of the Negro's protest is acknowledged in law and remonstrance is transferred from streets to courts can the walls of suspicion and fear be lowered.

It is important therefore to destroy the legal barriers which today set race against race. But the misunderstandings of centuries and the handicaps of prolonged deprivation will not disappear overnight. Once the door of individual opportunity is unlocked, we must also stand ready to encourage and welcome our fellow citizens as they walk through it.

As this two-fold analysis proceeds through several areas of civil rights concern, it will be stressed that the law can be no more effective than the men who enforce it; administrative performance must match legislative promises. The importance of state responsibility and local experience will also be underlined. Proven institutions will be used as a basis for new actions. Glib diagnoses or extremist recommendations will be avoided in a search for commonsense, multi-front solutions to a profoundly complex and critically important problem.

## Protecting The Right To Vote

In over 250 counties in the United States, six out of every seven Negroes are denied the right to vote. In 100 counties containing over a third of Southern Negroes, 92 percent of the non-whites are unable to exercise the franchise. In many Southern counties, virtually no Negroes are on the voting lists; a total of over 600,000 non-white citizens are denied a ballot. **Despite 140 private registration drives and some 60 federal law suits, Negro registration in these counties has increased barely 3 percent since 1956.**

All of this happens in flagrant disregard of constitutional guarantees. It violates the federal voting laws of 1957 and 1960. It abuses the basic right of citizens to participate in the democratic process.

### TIGHTENING THE VOTING LAWS

Why have so few been registered to vote? In the first place, loopholes have developed in the 1957 law which must constantly be patched. In 1959, the Eisenhower Administration asked for preservation of voting records and authorization for federal voting referees so that more than one Negro at a time could be qualified to vote in each case. But not until 1960 did Congress adopt these proposals and give the Justice Department practical power to protect voting privileges.

7

The present voting laws, however, are still inadequate. Therefore, provisions of the current civil rights bill that would set uniform and minimal registration requirements for both federal and state elections should be supported. State registration officials should be required to apply equal standards and procedures to all who seek to register and to disregard immaterial errors or omissions in the applications. Literacy tests should be administered in writing, with the presumption (rebuttable in court) that an individual who completed the sixth grade in school is sufficiently literate to vote.

## ENFORCING LEGAL PROTECTIONS

In such ways, the law must be tightened. But merely tightening the law will not be enough. The greatest obstruction to enforcement of the right to vote is the difficulty of successfully prosecuting cases.

The Justice Department must strive continually to match civil rights promise with performance, particularly in recommending those who will serve as judges in the federal courts. Legal scholars have observed that the record of the Eisenhower Administration in appointing conscientious protectors of civil rights to southern judgeships was far superior to that of the subsequent Democratic Administration.

The chief judge of the Court of Appeals should be allowed to appoint a three-judge court to hear voting cases at the district level, in order to assure a prompt and fair determination of individual rights, as provided in the current civil rights bill.

Finally, the civil rights division of the Justice Department should be more adequately staffed. It is distressing to note that only 40 lawyers presently handle all voting cases. It is even more disappointing to realize that just last December, Southern Democrats crippled Senator Kenneth Keating's (R-N.Y.) effort to provide increased staffing for these cases. Even the best voting laws will be useless unless there are enough good lawyers to enforce them.

## A NON-JUDICIAL RESORT

The civil rights bill now in Congress may not be enough to assure the Negro's right to vote. Tighter laws and more adequate prosecution will help, but even at its best, judicial enforcement will be a painfully slow and narrow-gauged method of protecting voter rights. As the bipartisan Southern Regional Council explains, the judicial approach is strictly a long-range proposition, "a matter of years and years." Through delay and defiance, through frustration and repression at the local levels, the Negro can still be denied his right to vote.

8

What can be done if judicial enforcement continues to be inadequate? The Constitution itself provides an important alternative. Under the 14th Amendment, state representation in Congress can be reduced in proportion to the numbers of voters systematically denied the franchise. If Negroes are counted when representation is determined, then they should be allowed to vote. If they cannot vote, they ought not be counted for purposes of representation. Republicans have recognized that it may be necessary to implement this alternative. To do so would require reliable and official voting information. Partly for this reason, the new civil rights bill should require the Census Bureau to gather registration and voting statistics based on race, color, and national origin under the supervision of the Civil Rights Commission. The voting census is a unique Republican proposal and we recommend its adoption.

Despite the concern of many of its members, the Democratic Party is handicapped in the area of voting rights. The strength of the party depends in many cases on maintaining the status quo in the South. Ten out of sixteen Senate chairmanships are held by Southern Democrats. Republicans will therefore have to take the lead in demanding effective voter protection and vindicating constitutional guarantees. Furthermore, the Republican party should seek out Negro leadership in all sections of the country. Thus, the party can directly serve as a vehicle for integrating Negro citizens into the mainstream of American life.

## The Quest For Equality In Education

The individual's right to a good education is fundamental to his development. No avenue of opportunity is more important to the Negro than that of the schools. But present educational opportunities are not meeting economic and social demands.

In 1954, the Supreme Court condemned separate educational facilities as "inherently unequal." It ordered that they be desegregated "with all deliberate speed."

Yet, ten years later, 91 out of every 100 Negroes in Southern and border states still attend segregated classes. Incredible as it may seem, only one percent of Negro children in the Old South go to school with white children. Voluntary desegregation has virtually ended. At the present rate of progress, the moderate Supreme Court compliance recommendations of 1955 will not be carried out until 2063. In fact, the number of segregated school districts has actually increased since 1959.

9

ENDING LEGAL SEGREGATION

Again, what can be done to enforce the law of the land? The government today has no power to initiate actions to desegregate schools. Cases must be filed by parents who are often discouraged by outrageous delays and prohibitive expense. As a remedy, the Justice Department should be given the power to initiate suits on behalf of children denied admission to segregated public schools. President Eisenhower originally requested such a law in 1957, and Republicans have frequently renewed his request. Such action was pledged in the 1960 Republican platform and should be retained in this year's civil rights bill.

In addition, federal technical assistance should be given to help state and local agencies desegregate their school systems. Temporary aid is particularly needed when states cut off funds to integrating schools.

But here again judicial enforcement alone can be painfully slow. As experience in voting litigation shows, case-by-case actions, even by the government, can be frustrated by obstructionist tactics. The record of futility is clear. The time has come to end the delay.

Therefore the present civil rights bill should include, as it does not at present, a provision whereby every school board which has failed to achieve desegregation must file with the Secretary of Health, Education and Welfare a plan for at least first step compliance with the Supreme Court order in the following school year. If necessary, the board's plan would be enforced with the assistance of a federal court order.

AFFIRMATIVE EFFORTS TO EXPAND OPPORTUNITY

Ending formal school segregation will enhance educational opportunity, but it will by no means guarantee it. Most Negroes will still obtain inferior educations. Neighborhood patterns often produce racial imbalance in schools almost as severe as in formally segregated systems. This happens frequently in large Northern cities; it confronts us with the thorny problem of *de facto* segregation.

Unhappily, much mutual misunderstanding has prevailed on this problem to date. Whites certainly need to recognize the Negro's basic complaint of inferior schools. However, the most productive answer to inferior schools is an attack on the problem of quality itself rather than the use of widespread pupil shuffling. The human and financial cost involved in such proposals can be enormous, and they are potentially destructive to the social benefits of neighborhood schools. Many school boards have made valiant efforts to find sounder solu-

10

tions to de facto segregation and, hopefully, their examples will be influential.

Accordingly, state and local agencies should develop comprehensive programs significantly to bring all schools up to high standards irrespective of the color of the students. To assist in this effort, the United States Commissioner of Education should be authorized to study the lack of educational opportunity at all levels, as provided in the current civil rights bill. Support also is warranted for special enrichment programs to meet the problems of culturally-deprived children. New York City's Higher Horizons program is one notable pioneering effort. If properly utilized, the nation's educational systems can become our most effective tool for breaking cultural barriers and opening individual opportunities.

## Opening Employment Opportunities

Equal opportunity in education will never be fully attained until racial barriers are breached in the job world. A desirable job at the "other end of the line" is one of the strong motivating factors for education and self-improvement.

Yet the plain fact is that Negroes do not have the opportunity for employment enjoyed by whites. One out of every four of the long-term, hard-core unemployed is non-white. Even this figure can be expected to increase as the labor market shifts to demand complex new skills in the age of automation.

Countless Negroes are denied the chance to acquire capacities indispensable for our advancing technology. Some labor unions and employers control apprenticeship programs to keep Negroes from qualifying for jobs. In many vocational schools, Negroes learn to lay bricks and repair shoes while whites study electronics, photography, or drafting. Millions of federal dollars are spent to train highly-skilled technicians under the National Defense Education Act.

Yet in the South only 4.5 percent of the enrollees in these programs are Negroes; even where they comprise almost half the population. In the six border states, Negro enrollments are less than 1 percent, and in the North only 2.3 percent of over 32,000 enrollees are Negroes. The Manpower Development and Training Act and the Area Redevelopment Act are specially designed to retrain the unemployed, yet administrators admit that the programs have as yet been of only limited value to Negroes. Educational background, poor job prospects, and overt discrimination all contribute to this deadlock.

11

But limited opportunity for training and education are not the only barriers to equality in employment. Willful discrimination still remains a major barrier to Negro advance, even though "White Only" signs may not be openly displayed. In field after field, equally-trained Negroes get only half their share of jobs. The appalling fact is that the average college-educated, non-white American will earn less in his lifetime than the average white pre-high school dropout. One out of four Negro college graduates is forced into over-crowded blue-collar occupations. Despite the efforts of international labor leaders, several large local unions are still more than 98% white.

Perhaps the most shocking example of discrimination in the job market occurs in the U.S. Department of Labor Employment Service offices, established during the Depression to help the unemployed find jobs. The Civil Rights Commission has found blatant discrimination in the placement procedures of a number of offices in the North and South.

## STRIKING DOWN OVERT DISCRIMINATION

Unquestionably, artificial barriers of discrimination stifle initiative, waste talent, and corrupt the private enterprise system. The cost in economic loss, welfare expense, and social disorder has been staggering.

For this reason Republicans have taken the lead in establishing fair employment practices commissions in the large urban states. Governor Thomas Dewey and the late Senator Irving Ives guided the nation's first enforceable FEPC law through the New York legislature in 1945. In the next two years, Republican lawmakers in New Jersey, Wisconsin, Massachusetts, and Connecticut kept alive the momentum that has produced similar laws in a total of 25 states. But much work still remains. Many of the state laws are inadequate; several are poorly enforced. Because many laws do not deal effectively with union discrimination or apprenticeship programs, numerous job markets are still restricted. Still the greatest problem is that most Negroes live in states with no fair employment laws at all. Moreover, the national character of a highly mobile labor market makes any state enforcement difficult.

To break this formal pattern of job discrimination, most Republicans in Congress favor federal fair employment legislation. It should be made unlawful for employers, labor organizations or employment agencies to discriminate on the basis of race, religion or national origin. The law should cover both unions and employers, both hiring mechanisms and training programs. Exemptions should be clearly provided for religious groups or other employees for whom ethnic or religious

12

considerations are genuine occupational qualifications. The law must be clearly drawn and carefully administered so as to equalize opportunities for all qualified applicants. It must not be used to encourage discrimination in reverse, through quota systems or other devices which would unduly favor less qualified workers.

Administration of the law should be centered in an Equal Opportunity Employment Commission with bipartisan membership. The law should expressly require extensive utilization of existing and effective state machinery. It is imperative that federal officials cooperate closely with existing state FEPC's. Conciliation and persuasion should be emphasized; only when these methods fail should compulsory relief be sought. State experience shows that the overwhelming majority of cases can be settled on a voluntary basis.

## ADDITIONAL POSITIVE ACTIONS

An effective fair employment law can open doors of opportunity, but it is chimerical to expect that this action will in itself end the crisis in Negro employment. Long-range solutions will require great strides in education and at least the following affirmative actions:

* Special efforts should be made to involve Negroes in the benefits of federal-state manpower retraining programs. It is important to equip Negroes with the new skills that will be required in a labor market revolutionized by automation.

* Educators should give greater attention to vocational education at the high school and post-high school level. These programs should be non-discriminatory and designed to give the Negro, as well as the white, vocational training for the skills of tomorrow's labor market.

* Businessmen and union leaders should actively seek qualified Negroes in high schools, colleges, trade schools, and employment offices. Reports the Chairman of a large corporation in Connecticut: "Businesses which have entered upon an active program of integration have learned, as we have learned, that qualified Negroes or other minority group members can be assimilated into the work force without real difficulty, and that they will pay their way in efficiency and loyalty as well as, and sometimes better than, those who have never experienced prejudice or felt any pressing need to prove themselves."

Increased training and open competition in the job market should produce real motivation for the Negro to succeed—not only on the job, but also in the schools and neighborhoods of American communities. Restoring open competition in the job market is imperative to the continued growth and prosperity of the American free enterprise system.

13

Equal Access To Public Accommodations

The Negro has no more poignant reminder of sec-
ond-class status than his exclusion from theaters, rest-
aurants, hotels, and other public accommodations.
Dean Erwin N. Griswold of the Harvard Law School,
a Republican appointee to the Civil Rights Commission,
put it this way:

The Negro in a segregated city is entirely excluded
from the mainstream of community life; he must
build his own minority society or have none at all.
... (F)or the Negro traveler, the road may be
more like a desert and each inviting sign a mirage,
or worse yet, a humiliating rebuff to him, his family
or companions.

It is distressing to note that many servicemen at South-
ern bases are virtually excluded from the surrounding
communities. One Air Force installation in Alabama,
which trains foreign nationals as well as Americans, has
had to issue "passports" to colored foreigners so that
they may travel unmolested in the community. "For
the American serviceman," testifies Dean Griswold,
"neither his uniform nor his birthright is enough."

Sound race relations cannot be established while this
pattern of humiliation persists. As a symbol of racial
injustice, segregated accommodations have been the
focus of protest demonstrations which often result in
further misunderstandings.

While segregation in accommodations is sometimes
defended as a private business decision, it is often
exactly the opposite. Managers and store owners testify
that their willingness to integrate is frequently frustrated
by community pressures. The proprietor is not always
free to exercise his best business judgment. Several
national companies have reported millions of dollars
in lost sales because of local race problems.

Although they are privately owned, institutions which
regularly accommodate the community are an essential
part of what we have come to regard as our public life.
For over five hundred years, Anglo-Saxon law has rec-
ognized that the right to serve the public carries with it
a social responsibility. Over the past century, 32 states
have passed enforceable laws protecting the right of
citizens to equal treatment in public accommodations.
Republicans have contributed significantly to these laws
in no less than 26 states.

Nonetheless, 18 states still have no public accommo-
dations laws, nor can it be realistically expected they
soon will take such action. If the national marketplace
is to be truly open, it must be open everywhere. What is
immoral must now be made illegal. To encourage a

14

Accourse other than street demonstrations, an effective remedy should be provided in federal law.

## A STATUTORY PROPOSAL

Discrimination in public accommodations because of race, color, religion or national origin should be made illegal. It should be stipulated in any law, however, that before relief would be granted, those that bring the complaint must show that discrimination is based solely on ethnic or religious considerations. Wide state experience demonstrates that alarmist predictions of wholesale interference with personal decisions are unfounded. This successful record needs far greater publicity than it has received.

Essentially private establishments should not be affected by the law. Facilities occupied by the proprietor which offer no more than five rooms for rent should be specifically exempted. Private clubs and religious institutions should not be covered.

It is also important that the new bill require maximum co-operation with local agencies and strong encouragement of voluntary action. The Attorney General should not be authorized to bring a federal suit until local and state officials have been given a reasonable time to settle the complaint. Voluntary progress will not be stifled. To the contrary, persuasion and conciliation will become more effective. Under the tough New York State law, 98 percent of the cases are settled before they get to court.

To emphasize the moral nature of the commitment, the federal statute should be based on the 14th Amendment, which guarantees equal protection of the law to all citizens. A law based on the commerce clause, such as the Administration has proposed, gives an unfortunate priority to commerce hindered, rather than rights denied. Nonetheless, the use of both sections would give the court a dual constitutional base.

## AFFIRMATIVE COMMUNITY ACTION

When these legal remedies are available, tensions will be reduced. Living with the law can open people's minds and weaken community prejudice. However, private affirmative action must accompany legal directives. Leaders in all sections of the country should exercise strong local leadership in the quest for racial harmony. Churches, schools, business and professional men must contribute to public acceptance of necessary social change. Religious leaders have a special responsibility to spell out the moral issues involved in discrimination. Interracial committees and human relations councils have made a good start in many areas of the North and South. Leaders of all races must continue to build a climate of understanding and good will.

15

The Administration Of Justice

Last year in Birmingham the constitutional right to
petition and protest was repeatedly denied to American
citizens. The tools of oppression were flagrantly mis-
used dogs, clubs, and firehoses.

This year thousands of Negroes line the streets in
Southern cities seeking to register for the vote. They
are seldom successful. Sometimes the queues are force-
ably dispersed. Confusion and delay plague the courts
while White Citizen's Councils control local voting
registrars.

In 1961, 315 Freedom Riders were arrested for
gathering in a Mississippi bus terminal. Their constitu-
tional right to unsegregated travel on common carriers
had been clearly outlined since 1946. And in 1960 the
Supreme Court had specifically applied this principle to
terminal facilities. As Columbia University law pro-
fessor Louis Lusky writes, "If the federal law, which
clearly precludes the remotest possibility of successful
prosecution under local segregation statutes, could be
frustrated in these circumstances, it could be frustrated
in just about every case conceivable. But frustrated it
was." Constitutional rights were denied through obvi-
ously groundless Mississippi breach of peace prosecu-
tions. The cost so far has been over $2,000 for each
individual who desired to appeal his sham conviction.
Even though three years have elapsed many cases have
not gone beyond the state circuit courts; few have
reached the Mississippi Supreme Court, let alone the
Supreme Court of the United States. It took 27 months
for the federal Court of Appeals to enjoin future uncon-
stitutional arrests of this sort, but the Court has refused
to interfere with the pending cases.

In other Freedom Rider cases, the Constitution was
abused less subtly. The weapon of oppression was mob
violence. In Alabama, buses were set afire by wrathful
Klansmen while, as the Civil Rights Commission tells
us, police officers stood by unmoved. Law enforcement
broke down, and cherished rights were forfeited.

These cases are not unique. Similar incidents have
occurred in other localities. But these instances do pro-
vide a striking example of how the tools of justice can
be used to destroy constitutional liberties. **Both through
positive repression and through frustrating inaction,
administrators of justice have repeatedly abused the
rights of citizens.**

Such abuses are not limited to the South. The North-
ern counterpart comes more often in various forms of
police brutality. Although Negroes feel the brunt of
official mistreatment more than others, still nearly half

16

The allegations of police brutality come to the Justice Department from whites.

Civil rights demonstrations must always be peaceful; respect for law and order must be maintained. When violence occurs, police departments should use appropriate measures to prevent disorder. Unconstitutional use of enforcement techniques is the exception rather than the rule in this country.

Nonetheless, the significance of any such abuses must be understood. When police departments ignore cherished freedoms, a cloud of suspicion envelops the entire legal system. When courts ratify these abuses, the individual is often helpless. The rights of all are weakened when the rights of a few are denied. The security of all is threatened when a few lose respect for the law.

To protect constitutional liberties whenever they are threatened by state and local officials, the following recommendations are offered:

### CRIMINAL REMEDIES

*The Justice Department should accelerate enforcement of criminal statutes already available. Several Department officials have quietly called upon the Attorney General to increase these prosecutions, noting that most actions are now brought in the North, even though most of the abuses take place in the South.

*The present criminal statutes (18 U.S.C. 241-242) should be made more specific in order to be truly effective. They should spell out prohibited abuses in detail. The Supreme Court and the Civil Rights Commission have long recommended such improvements. Yet the present Administration has given virtually no support to Republican efforts to strengthen these laws.

### CIVIL REMEDIES

*The individual can seldom afford the time and expense necessary to bring civil actions to vindicate his constitutional rights. Congress, therefore, should empower the Attorney General to initiate civil proceedings to prevent denials of any rights, privileges or immunities secured by the Constitution. This broad power was first sought by President Eisenhower in the ill-fated Title III of the 1957 Civil Rights Act. Although the Civil Rights Commission and Republican legislators have since repeated the proposal, the Democratic Administration has actually opposed it.

*Federal law should make state, county, and city governments jointly liable in damages for the misconduct of their officers. Now when victims of official misconduct do manage to obtain civil judgments, the victories are hollow, since individual policemen seldom have money to satisfy the court awards.

17

## COURT REFORMS

*Congress should facilitate federal court action to break the demoralizing deadlock which occurs when constitutional rights are ignored in southern state courts. Today, these courts are immunized from federal intervention by outmoded doctrines and judicial timidity. Even when the federal judiciary does undertake this duty, the litigation often is so complex and expensive as to be useless to the individual. Several procedural reforms are needed, but receive very little attention in the current bill:

"Congress should affirm and clarify the right to remove to the federal courts any state court proceeding involving race discrimination in which it is shown that denial of constitutional rights is reasonably to be anticipated. Removal orders, however, should be fully appealable.

"Congress should restrict the judicial "abstention" doctrine as it applies to civil rights cases so that district judges will have less reason to wait for dilatory state rulings on clearly unconstitutional statutes-while defendants without bail are unjustly incarcerated.

*Congress should clarify the authority of federal courts to halt obviously groundless state court prosecution and injunction proceedings the only purpose of which is to effectuate racial discrimination or stifle protest against it.

## OTHER AFFIRMATIVE PROPOSALS

Reforms in our legal system are not the whole answer. To forestall abuses of justice before they occur, Americans must continually demand the highest standard of police and judicial administration. Increased attention must be given to the selection and training of law enforcement officers.

More non-whites can be hired by law enforcement agencies. In many communities bi-racial committees can effectively work to improve police-community relations.

"Due process of law"—"Equal protection of the laws"—these are constitutional concepts which have a special place in the traditions of America. All citizens must accept their responsibility to keep the vigil for liberty through determined leadership at all levels of government.

## Equal Opportunity In Housing

The place at which the Negro lives governs the shape of his life. Neighborhood patterns determine school composition and cultural experience. Nothing is as

18

encouraging to aspiring Negroes than to be forced back
into an urban ghetto.

Segregated housing is a basic civil rights problem. While overt discrimination is not the only factor producing this situation, it is a critical one. Where discrimination impairs housing markets, the opportunity of an individual to locate his home according to his economic means is denied. Moreover, sellers, banks, and real estate agencies fear financial catastrophe unless they yield to discriminatory patterns. Even the largest home developers experience heavy risks when they attempt to sell on an open occupancy basis.

Fair housing laws equalize the conditions under which all developers and other sellers can compete in the housing market. Yet only a handful of states provide this protection. Republicans have led recent breakthroughs in New York, Minnesota, and Oregon. State legislation to prohibit ethnic or religious discrimination in the buying, selling, and leasing of both public and private housing should be encouraged.

Many people fear decreased property values and lowered cultural standards will result from such legislation. Yet, experience in states with open housing laws indicates that just the opposite is the result. These laws have reduced fear and suspicion and have curbed the "blockbusting" techniques sometimes practiced when normal access to certain neighborhoods is denied.

What should be the federal role in ending discriminatory housing? Unquestionably, the federal government is already the most important single factor in the housing market. Financing and construction by the Veterans Administration and Federal Housing Administration and insurance of savings deposits by federal insurance corporations carry federal influence into every part of the country. But this influence has often served to perpetuate discriminatory patterns.

Not until November 1962, after the Congressional elections, was the famous presidential housing order signed. This long promised "stroke of the pen" was designed to end discrimination in federally-financed housing. But it has had a very selective application. Federally-financed housing projects started before the order have not been affected. Moreover, the order does not cover most conventional mortgages from federally assisted lenders. It thus discriminates against certain types of mortgage institutions. Leading savings and loan association officials argue that all lenders must be within the order if competitive equality is to be preserved. The President has the power to change the order, but, the current civil rights bill would not require him to do so. The housing order should be extended in

19

order to restore normal competitive conditions in home financing and sales in every part of the country.

## PROVIDING POSITIVE OPPORTUNITIES

Laws and executive orders which bar discrimination will allow the Negro to live where his pocketbook can take him. But new ideas and voluntary initiative are required to achieve real housing integration. The new approach to urban renewal which Republicans have suggested in Congress is exemplary. Building on recent experiences in New York State, they have called for rehabilitation of scattered private housing rather than construction of massive new apartment complexes. Low cost rentals would make units available to low-income families on a non-discriminatory basis.

Ultimately, the whole community must answer the challenges of neighborhood integration. The stakes are high. If present demographic trends continue, the next twenty years may see a radical transformation in America's urban civilization. It is possible that solid white suburbs will surround solid black city centers, producing Negro majorities in seven of our ten largest cities. Steps must be taken to relieve the tensions which set race against race in urban America. Real estate brokers, bankers, teachers, clergymen, and local government officials should join in this difficult task. The health of society will depend in no small measure upon our response.

## DISCRIMINATION IN FEDERAL AID PROGRAMS

The federal government should stop spending money for the construction or operation of projects that discriminate against minority groups.* Today, many federal programs actually perpetuate discrimination in local communities. The following are typical examples:

*Research grants by government agencies—running into several hundred million dollars a year—are channeled partly into institutions which continue to segregate their facilities to the detriment of Negro education.

*Vocational education grants perpetuate segregated programs in Southern high schools, despite a strong protest by Republicans in Congress when the bill was passed in 1963.

*Segregated medical facilities continue to operate under Hill-Burton Act construction grants. To date numerous segregated hospitals have been constructed with over $100 million in federal funds in 14 Southern states.

The federal judiciary already has taken some steps to halt these discriminatory practices—using the precedent of the 1954 school desegregation decision. It

20

Should be better, however, for Congress to relieve the federal courts of the final responsibility for this constitutional adjustment.

If Congress will not act, the President must. Republicans repeatedly have stressed that the President already possesses the power to ban the use of federal funds in all discriminatory programs through executive orders. However, Congress should clarify the President's power in this area and thus guard against political abuse in its exercise. Congress should make it mandatory—not just permissive—for the President to cut off funds to certain discriminatory projects. Under Republican proposals, each executive agency should first seek voluntary integration. Any recipient who lost federal aid would be able to obtain judicial review of the action.

If these comprehensive provisions fail of passage, they should be made one of the key civil rights issues in the 1964 campaign. Discrimination in federally-assisted projects can no longer be shrugged off as a necessary evil.

## Conclusion

The recommendations in this paper represent a continuation of a commitment which began a century ago. We have outlined here a Republican faith set to action —the faith of a national party united in a common respect for the dignity of man.

We have tried to be realistic, understanding the incredible complexity of the civil rights challenge. We have recognized that the Negro is trapped in a **vicious circle** of discrimination and deprivation. His educational deficiencies lead to economic handicaps. Cultural barriers aggravate racial prejudice. Problems in voting, education, and public accommodations are inextricably intertwined with those of jobs, housing, and justice. We must seek to meet this complex challenge with courage on many fronts and at all levels.

Above all else we affirm the importance of the individual. We do not use this concept as a means of fleeing social responsibility—we desire no empty individualism. Nor do we seek an excuse for reducing all men to a common level—we want no masked collectivism.

We do ask that our society **now** fulfill the promise of the American dream: the right of all men to achieve their individuality, the opportunity for every man to be uncommon.

Originally Published April 27, 1964

21

Additional copies available at cost
from Republican Citizens Commit-
tee—15¢ each; 100 copies or more
—10¢ each.

22

## REPUBLICAN
CITIZENS

(c) 72

23

## Foreword

Other papers in this series include:

1. Panama: A Realistic Appraisal

2. A Free & Prosperous Agriculture

3. The Atlantic Alliance and United States Security

4. Republicans and Civil Rights: A Continuing Commitment

## Summary

We are deeply convinced that the presence of Soviet Communism in this hemisphere is intolerable, and that the United States and its allies must prevent its spread to other Latin American countries, and work toward its ultimate removal from the Island of Cuba. This can be accomplished in a peaceful manner only if the United States, in harmony with its allies, formulates a consistent policy toward Cuba, and acts with courage and determination to implement that policy.

The optimism which surrounded the October, 1962 Cuban missile crisis now appears unjustified. That victory was incomplete. Cuba is now solidly in the Soviet Camp; Castro's bristling military machine is second only to that of the United States in this hemisphere; and agents trained in Cuba are undermining other Latin American governments with subversion and sabotage. There is no "hard evidence" to prove that offensive missiles have actually been removed from the island or that a strategic build-up has not followed the crisis.

While Administration officials frequently state that Communism must be removed from Cuba, **effective action** is not being taken. The Administration's economic boycott is not being fully enforced and it's not receiving the full support of our allies; the Administration has failed to win full support from the Organization of American States; the policy of thwarting Cuban patriot raids on Cuba is helping Castro.

The Cuban problem cannot be easily solved, but there are several essential elements of an "effective policy" toward Cuba:

1. The principal objective of the United States must be the ultimate removal of International Communism from Cuba. So long as the Soviet Union maintains a base for subversion and military operations in this hemisphere neither the United States nor its Latin American neighbors will be safe.

2. The United States must make clear that it is prepared, **as a last resort**, to use military force to remove Communism from Cuba, just as it has long been prepared to use military force in Korea, Berlin, and the Formosa Straits if necessary. The possible use of force is the foundation of NATO, SEATO, and the OAS, and the very willingness to use force is the best guarantee that it won't be needed.

3. The United States and the Free World should help to establish a Cuban government-in-exile based in a

2

Latin American country and should give it necessary financial and military aid. Representatives of this free government should travel to all Latin American countries, tell the truth about Castro's atrocities, and enlist support for their cause.

4) The policy of preventing Cuban patriots from raiding Cuba and harassing Castro should be discontinued. Cubans should be working for the liberation of Cubans.

5) The United States must prevail upon the Free World to bring its combined economic, military, moral, and intellectual resources to bear in the fight against Communism. And if other Free World nations continue to put national interests above the common good, the United States should reassess its Cold War strategy and reallocate its power in ways that will most directly help achieve its highest priority goals.

6) The United States should take the initiative within the Organization of American States to strengthen the policy of collective action and to isolate Cuba completely from the rest of Latin America. This includes an effective economic boycott of Cuba by Latin American and all other Free World countries.

7) Finally, the United States must seek new ways to make the Alliance for Progress more effective. United States aid should be given liberally to those nations which live up to their obligations under the Alliance, and withheld from those which do not.

There is nothing more dangerous than a policy of inaction. Soviet penetration of this hemisphere has begun in Cuba, and in Cuba it must be reversed.

3

## Cuba: An Effective Policy

The Critical Issues Council, sponsored by the Republican Citizens Committee, is deeply convinced that the presence of Soviet Communism in this hemisphere is intolerable, and that the United States and its allies must act in ways that will prevent it from spreading to other countries in the hemisphere and will result in its ultimate removal from the Island of Cuba. This can, in our opinion, be accomplished without plunging the United States or other American republics into war. But it cannot be accomplished unless the United States in harmony with its allies formulates a consistent policy towards Cuba and acts with courage and determination to implement that policy.

## The Aftermath Of The Missile Crisis

On October 14, 1962, a routine United States aerial reconnaissance flight over Cuba revealed that sites were being constructed for strategic Soviet missiles: Eight days later, the United States presented evidence of this missile build-up to the world, ordered a Naval quarantine against Cuba, and demanded that the Soviet Union remove the offensive missiles.

Premier Khrushchev refused, and mankind watched tensely as the world's two greatest powers moved steadily toward each other on history's first nuclear collision course. In underground silos, beneath the seas, and in the skies above, the combined atomic might of the United States and the Soviet Union was aimed and ready.

Then Premier Khrushchev relented and agreed to remove the offensive missiles from the Island of Cuba. The Free World applauded the United States for its boldness and its "victory," and pundits and politicians spoke of a "turning point in the Cold War."

It is clear now that such optimism was unjustified, that the victory was incomplete. The tide may, in fact, have turned in Cuba, but evidence would now suggest that it might well have turned against the United States. Consider these facts:

* The Castro regime is more closely bound to International Communism and more deeply entrenched than it was in 1962. The spirit of resistance among the Cuban people has been suppressed. In the schools of Cuba, a new generation is being indoctrinated in Communism.

* Save for the United States, Cuba has the most powerful military force in this hemisphere. Intelligence sources estimate that on the island are some 150 coastal defense missiles, 12 missile launching torpedo boats, 500 surface-to-air missiles, 100

4

Migs, 200 modern radar stations, 75,000 regular troops, and another 200,000 militia and home guardsmen. And the Cuban army is fully equipped with modern Soviet weapons, including thousands of tanks, field artillery pieces, and anti-tank weapons. Clearly, if there were at this time a full-scale invasion of Cuba, the toll of lives would be high.

► Estimates of the number of Soviet troops and technicians now in Cuba vary widely. Although a subcommittee of the Senate Armed Services Committee placed the number at 17,500 last year, there is reason to believe that the number is now closer to 5,000. There is also evidence to suggest that as the number of Soviet "troops" declines, the number of Soviet "technicians" increases. In any case enough remain to tutor their captive hosts in the skills of modern warfare and the craft of subversion.

► Because the United States did not insist and act upon its demand for on-site inspection of Cuban missile bases in October, 1962, there is only negative evidence that the offensive missiles were actually removed. Aerial photographs revealed the dismantling of missile bases and the movement out of Cuba on Soviet ships of shrouded cylindrical objects which may or may not have been missiles. But the United States intelligence community has been unable to prove or disprove reports from Cuba refugees and others that the strategic missiles were not removed—that they are concealed in caves and elsewhere on the island. (Significantly, our intelligence agencies received clear evidence of the presence of what the President called "defensive missiles" and some reports of long-range missile activity in Cuba during the months preceding the confrontation, but could not prove or disprove these latter reports.)

► Cuba remains an outpost of Soviet penetration into Latin America, acting as a source of supply and inspiration to bands of rebels, saboteurs, and subversives throughout Latin America. A five-nation committee of the Organization of American States has indicted Cuba for organizing and instigating violent assaults on the government of Venezuela. An OAS committee on security also has reported that at least 1,500 persons from other Latin American nations traveled to Cuba for training in subversion and guerrilla warfare. Castro agents helped to incite Panamanians to riot and attack United States soldiers in the Canal Zone in January of this year.

5

(u)

► Cuba also serves as an advance intelligence base for the Soviet Union and can be used for electronic surveillance of United States military activities in Southeast United States and the Caribbean.

► Communist bloc ships move freely into Cuban ports, making it possible for the USSR to re-establish or strengthen a strategic missile capability only three minutes from United States cities.

► And the very existence of Castro's Communist Cuba undermines the influence, leadership, and prestige of the United States in Latin America and the rest of the world, and jeopardizes the success of the Alliance for Progress.

## International Communism Must Be Expelled

Considering these facts, one must wonder what was accomplished by the perilous showdown of October, 1962. Castro remains and is stronger nationally and internationally. Communism flourishes. Strategic missiles may well remain. Subversion continues. And the threat to the United States and Latin America is clear and present.

One must also wonder how the United States, after standing momentarily so firmly in the Fall of 1962, now finds itself faced with so serious a problem in Cuba. How is it that the Cuban situation has deteriorated so steadily since October, 1962? How and why has the United States allowed the Soviet penetration to proceed in Latin America?

Until recently, there has been no lack of agreement among United States leaders that the hemisphere must be purged of International Communism.

Secretary of State Dean Rusk declared in April, 1963: "... the present Marxist-Leninist regime [in Cuba] is incompatible with the inter-American system ... our object must be to welcome a free Cuban people back into the inter-American community." He added: "A Soviet military presence in this hemisphere is not to be accepted as a normal state of affairs."

The then-Vice-President, now President Johnson, underscored the Secretary's statement by saying: "Our mutual objective is to end that Communist regime in Cuba. We cannot be really content until Communism is gone from Cuba and gone from this hemisphere."

In February, 1963, Secretary of Defense McNamara put it even more bluntly, describing our policy objective in Cuba as "the eventual change in government ... I think it is quite clear that we continue to work for the overthrow of the Castro government and the elimination of the Communist control of Cuba."

Senators Smathers, Dodd, and Keating, among others, have spoken frequently in the past two years about the

6

threat of Communism and the absolute necessity to remove it from the hemisphere. In both houses of Congress bi-partisan resolutions have been introduced calling for the removal of Communism from Cuba.

Only the Chairman of the Senate Foreign Relations Committee, Senator Fulbright, has seen satellite Cuba as a "nuisance" rather than a continuing threat.

Along with its expressed intention to purge International Communism from Cuba, the United States has had sufficient provocation to act against Castro. Cuban planes have fired on United States ships in international waters. Cuban subversives have instigated terror and riots throughout Latin America, and most recently in the Panama Canal Zone. Cuban gunboats kidnaped nineteen hapless Cubans from an island in the British Bahamas while United States Navy jet fighters hovered helpless overhead. In violation of treaty agreements, Castro halted the supply of water to Guantanamo. Finally, Castro has waged a vicious propaganda war against the United States.

Unfortunately, the agreement of Administration officials to expel International Communism from Cuba was largely hindsight and was not forthcoming before or during the missile crisis when decisive action could have been taken. And Communist provocations have become more flagrant because they did not bring immediate, firm United States responses. Now the alternatives for United States action are more limited, for the bond between Castro and Khrushchev and the presence of Soviet troops and technicians in Cuba have greatly complicated the situation on the island.

## The Administration's Cuban Policy

It has become increasingly clear that the situation in Cuba has worsened because the United States has no clear and firm policy toward Cuba. The Administration has been improvising. It improvised throughout the ill-fated Bay of Pigs disaster, planning and executing the invasion on a day-to-day basis. Had the invasion been an integral part of a clearly conceived policy, it would have claimed a full commitment to success on the part of the United States. Failure at the Bay of Pigs was indeed calamitous. It brought ridicule upon the United States from the Soviet Union, Latin America, and the Free World. But worst of all, it resulted directly in the stationing of Soviet troops in Cuba and paved the way for the missile crisis. And again the United States improvised—more adeptly and more successfully to be sure, but still in the absence of any over-all policy and with no clear long-range objectives or plans to reach

7

those objectives. The terrible consequence is that the United States has lost the initiative that it grasped in October, 1962, at such great risk, and it is once more in the position of reacting instead of acting.

Let it be clearly understood that our problems in Cuba did not begin with these recent failures; they result from a long period of lost opportunities on the part of the United States and Cuba.

Let it also be clearly recognized that there are no simple answers to the problem of Cuba. Unfortunately the hallmark of Presidential election campaigns is oversimplification. In the discussions that are sure to come between now and next November, Americans should hold fast to the realization that any effective Cuban policy must begin with the understanding that the problems are complex and the pitfalls plentiful. But complexity cannot be an excuse for an inadequate policy; indeed it makes more urgent the need for a carefully-conceived long-range policy.

A brief review of the present policy toward Cuba, therefore, is in order. It has four elements: An economic boycott of Cuba that has fallen short of its objective, the prevention of attacks on Cuba by Cuban refugee groups, an inter-American approach to the problem of Cuba, and the Alliance for Progress. Consider them one by one:

1. An economic embargo against Cuba. Unquestionably this must be a central part of any policy toward Cuba, for the island depends heavily on trade. Economic restrictions were enacted against Cuba in mid-1960. The Eisenhower Administration canceled United States imports of sugar from Cuba and ended all United States exports to Cuba, save for food and medicine. In 1961, the two-way trade between the United States and Cuba was a billion dollars below the level of 1958. This action resulted in a marked deterioration of the Cuban economy.

In 1962, the present Administration halted the import of Cuban tobacco products, thus closing the most important remaining loophole in the United States-Cuban trade.

The economic boycott has had a significant impact on Cuba. Free World exports to Cuba dropped from $391 million in 1960 to $106 million in 1962. To be wholly effective, however, economic sanctions against Cuba must be supported and maintained by the entire Free World. To this end, the Administration announced, in September, 1962, a four point program of restrictions on Free World ships involved in Cuban trade. At the time of the announcement, two-thirds of the ships going to Cuba were Free World ships.

8

The United States restrictions have not been fully enforced. Trade continues between Cuba and the Free World and in some cases seems to be increasing. United States sale of wheat to Russia provides, at the least, a plausible excuse to our allies for continuing their trade with Cuba. Recently the French government underwrote the $10 million sale of trucks and tractors to Castro by two French firms, thus restoring its exports to Cuba to a nearly normal level. A British company has contracted to sell buses to Castro. Probably more than half of the goods for the civilian economy of Cuba are transported by Free World ships. During the first six months of 1963, British vessels made sixty trips to Cuba, Greek ships made forty-four trips, Lebanese ships made twenty-two trips, and Italian and Norwegian ships each made nine trips. Other Free World nations are trading with Cuba, supplying it with badly needed building materials, chemicals, and consumer and industrial goods. Indeed, in 1963, sixty-six nations of the Free World had vessels involved in Cuban trade and fifty-four of these nations receive United States foreign aid.

The trade-restriction policy of the Administration has not succeeded—partly because the United States has not used the power it has available to assure success. The Foreign Aid Appropriations Act of 1963 flatly banned any United States aid to a "country which . . . permits any ships under its registry to carry to Cuba . . . petroleum" and other goods of a military or strategic nature. And the Act prohibits economic aid to any country "which sells, furnishes, or permits any ships under its registry to carry items of economic assistance to Cuba . . . unless the President determines that the withholding of such assistance would be contrary to the national interest . . ." The Executive, therefore, has the weapon, the mandate, and the flexibility. Except for the ineffectual gestures to reduce minimal aid to a few allies, this Administration has not seen fit to accept the mandate or to use the weapon to enforce its trade-restriction policy.

**2. The prevention of attacks on Cuba by Cuban patriots.** In this respect, the Administration has been reasonably successful. But the question is: "Why should the United States thwart the efforts of Cuban patriots to harass the Castro regime?"

The Attorney General said in April, 1961: "The neutrality laws were never designed to prevent individuals from leaving the United States to fight for a cause in which they believe." But since then, the Justice Department has taken action to prevent raiding parties from using Florida as an embarkation point.

9

(4)

One can understand the legal reasons for preventing refugees from organizing in and departing from the United States mainland. But why should the United States, in collaboration with the United Kingdom, patrol the Caribbean to protect Cuba from the hit-and-run attacks of the Cuban patriots?

Cuba's economy is shaky; shortages of food, petroleum, and manufactured goods are severe. In such a situation, the sabotage and harassment of exile raiding parties can create painful economic problems for Castro, foster unrest among the Cuban people, make them aware that their own countrymen in exile are earnestly working for the freedom of the country, and contribute to Castro's ultimate downfall.

**3. An inter-American approach to the Cuban problem.** This is an essential element in any policy toward Cuba. Unfortunately, the United States has not exerted the kind of leadership necessary to bring about concerted and tough OAS action against Cuba. Even at the conference of Punta del Este in 1962, where strong support for sanctions against Cuba was evident, the United States fell short of its goal. Six nations failed to support the ouster of Cuba from the OAS, including Argentina, Brazil, and Mexico. Indeed, the Central American delegates to the conference, as the former President of Guatemala has written, had to threaten to walk out in order to persuade the United States to take a harder line against Cuba.

Last summer, the Administration abandoned plans to organize an OAS economic boycott of Cuba. The reason given for the decision was that certain Latin American countries opposed such a plan. In short, the United States has failed to work out an inter-American approach to the Cuban problem that will effectively isolate Castro-Communism.

**4. The Alliance for Progress.** Dramatic improvement of the conditions which foster discontent and revolution in Latin America would certainly strengthen the United States in its struggle against Castro-Communism. Unfortunately such dramatic improvement has not been forthcoming. And it is no secret that the Alliance for Progress is in difficulty.

A successful aid program to Latin America must be a central part of any over-all United States policy toward Cuba. But one can criticize the apparent belief in official circles that the Cuban problem can be solved only through the alleviation of the conditions which permitted the dictators, Batista and Castro, to come to power. The acceptance of this theory would freeze the United States into a policy of virtual inaction. Indeed, one can argue conversely that the Alliance for Progress

10

cannot succeed so long as Castro-Communism flourishes
in this hemisphere.

It is, of course, easy to criticize this policy as an
ineffectual response to one of the most serious assaults
on the United States since the beginning of the Cold
War. But Cuba is not a problem of one political party
or the other and criticism is not an end in itself. For
the first time in the long and wearying Cold War the
wolf is truly at our door; Berlin, Laos, South Viet Nam,
Korea, the Congo—these have been the distant frontiers
of our struggle with International Communism. But
Cuba is only three minutes from our coast and there
can be little satisfaction for any Americans in crying,
“We told you so.”

It is incumbent upon all critics of the present Cuban
policy to be constructive. This is not easy, for Cuba
is no isolated problem. It must be viewed in the total
context of United States foreign policy. Like a single
strand in a giant spider web, Cuba cannot be moved
without moving the entire web. The United States has
commitments throughout the world. We must consider
the innumerable relations, anticipate the countless reac-
tions, plan reactions to reactions. The United States
must consider its allies and its enemies; it must be mind-
ful of its commitments to the OAS, the UN, SEATO,
and NATO.

Even so, this nation cannot be frozen into inactivity
because the problems are complex and dangerous. And
this nation cannot—especially in the case of Cuba—per-
mit its actions to be governed primarily by its allies or
its enemies, or even by its other commitments. We must
define our objectives, plan our strategy, assess the risks
and implications, and act in the best interest of the
United States.

## Recommendations For An Effective Policy

The need for a well-understood, firmly-executed
policy toward Cuba is urgent, and the time for action is
long overdue. The theory that "if we give Castro enough
rope he will hang himself" is naive. Instead, he is using
that rope in his effort to bind Cuba and the rest of
Latin America inextricably to International Commu-
nism. Castro must go.

John Foster Dulles warned in 1954: "If the world
of Communism captures any American state, however
small, a new and perilous front is established which will
increase the danger to the entire Free World and re-
quire even greater sacrifices from the American people."
Communism has captured an American state. And
each day that passes makes the task of freeing Cuba
more difficult and increases the danger to Latin America
and the United States. When Castro clearly revealed

11

himself as a Communist in December, 1961, the United
States should have dealt with him decisively. Earlier,
had the United States committed itself at the Bay of
Pigs in April, 1961, Castro could have been toppled.
In October, 1962, the United States should have driven
the USSR completely from the Island of Cuba and
should have quarantined the island until Castro fell.
In each situation there were serious risks, but the risks
became increasingly greater with each lost opportunity
to act. And the greatest risk of all, as the late President
pointed out, is the "risk of doing nothing" when free-
dom is under assault. The task would never have been
easy, but it becomes increasingly difficult. It will be
more perilous and more difficult to deal with Castro
next month than it is today. Time is on Castro's side.

What, then, should be the United States policy toward
Cuba? Only those with access to current classified in-
formation on the world situation can define the details
of a policy toward Cuba and determine the timing of
execution. But enough is known to produce an outline
of policy and action.

► The ultimate aim of an effective policy toward Cuba must be the complete removal of International Communism from this hemisphere. Anything short of this would constitute a serious defeat for freedom. So long as the Soviet Union maintains a base for subversion and military operations in this hemisphere neither the United States nor its Latin American neighbors will be safe. Furthermore, grand plans to rid this hemisphere of poverty, illiteracy, tyranny, and violence are seriously endangered while Cuba remains a captive outpost of International Communism, and a well-financed center of Communist subversion.

► It must be clearly understood by the world that the United States is prepared, as a last resort, to use military force to remove International Communism from Cuba, just as it has long been prepared to use military force in Korea, Berlin, Lebanon, the Formosa Straits, and elsewhere. The possible use of force is the foundation of NATO, SEATO, the OAS, and other compacts to which the United States is a signatory. **We are not advocating hasty and improper military action against Cuba.** Indeed, a known willingness to use force is probably the greatest assurance that it won't be needed. We are simply saying that without recognizing the possible need for final recourse to military action all other policy implementations are gravely weakened. And it should be kept in mind that the greatest United States victories of the Cold

12

War have come when the United States has determined to stand and fight if necessary rather than to yield another inch.

► The United States and all other free nations should no longer accept the Castro regime as the legitimate government of Cuba but instead should help form a Cuban government-in-exile and recognize and support it as the only true representative of the Cuban people. President Eisenhower severed diplomatic relations with Cuba. The time has come for the next logical step. A Cuban government-in-exile should be formed and have the resources to rally the nearly 300,000 Cuban refugees who have fled Castro's tyranny and are now residing in the United States and many Latin American and Caribbean countries. It should call on all free governments for financial, moral, and political support, organize and equip an army, and work openly for the liberation of Cuba. **Cubans should be working for the liberation of Cubans.**

► The government-in-exile should send its best representatives to every nation of Latin America to plead their cause and that of the submerged masses on the Island of Cuba. It should effectively spread the truth of what has happened in Cuba and counter Castro's subversive activities in the other Latin American countries, for Communist agents, financed by more than $100 million annually from the Kremlin, are cleverly convincing many labor leaders, students, and ordinary citizens that only through bloody revolt and the creation of Communist regimes can the present unhappy lot of the Latin American peoples be alleviated. United States counter-propaganda is only partly effective. The truth, spread by free Cubans, might be decisive in turning the tide against Castro throughout Latin America. This in turn would help assure the success of the other recommendations herein which depend upon collective hemispheric action.

► The center of the government-in-exile should be in a Latin American country. Several which have been attacked by Castro or to which Castro has shipped arms for use by trained subversives might welcome the presence of such a government. The United States should begin immediately to work for the unification of exile patriot groups and should give substantial support to the provisional government, either directly or indirectly.

► If the several steps suggested in this paper succeed in bringing about the fall of Castro, it will be imperative to have in being a well-organized, dis-

13

ciplined, democratically-oriented force which can
immediately assume full governmental authority in
Cuba, to be followed later by free constitutional
elections. Otherwise out of the turmoil caused by
the collapse of Castroism, another dictatorship
might readily be established.

► The government-in-exile should have at its command powerful radio transmitters to reach regularly all the people of Cuba, keeping them informed of the activities and progress of the free government. As Radio Free Europe does on the continent, it should keep alive in the controlled population of the island the hope that freedom and justice will be restored. It should assure the population of the island that amnesty will be extended to all when the new government assumes power—that there will be no repetition of Castro's brutal murders following his assumption of power in 1959.

► There may be several reasons, legal and strategic, for not permitting the Cuban exiles to use this country as the base for their raids against Castro. But there is no reason for United States Immigration and Border Patrol officials to thwart refugee raiding parties leaving other nations. The United States should at once end its program of halting refugee attacks on Cuba and should prevail upon Great Britain to do likewise. And the Cuban government-in-exile should increase the number and effectiveness of such raids.

► The United States must do everything in its power to persuade the Free World to stop trading with Communist Cuba. The recently announced policy of denying United States commercial facilities to all vessels of all fleets engaged in trade with Cuba is a step in the right direction. But such a policy must be enforced, and more must be done. The Administration must mobilize our allies into a unified and effective economic quarantine of Cuba. The Prime Minister of Great Britain during his February visit to Washington denounced the economic embargo against Cuba, calling it economic warfare in a time of peace. This is no ordinary time of peace and the British Prime Minister should be one of the last persons to think it is. The Communists are in a deadly struggle with the Free World, and it is one they are likely to win unless the United States can convince its allies to fight with all the tools short of physical war that they possess.

14

► It is absurd for the United States to give aid to governments which in turn underwrite trade with Castro. It makes no sense for the United States to end its own trade with Cuba, then support other nations as they move in to capture the market. It is unwise for the United States—long facing a dangerous imbalance of payments situation—to jeopardize its own economic health to aid nations which are strengthening Communism in this hemisphere.

► Foreign aid is a central part of United States foreign policy, and it must not be stopped indiscriminately. But what good is foreign aid as an instrument of foreign policy if we do not use it to accomplish primary policy objectives? Under the Foreign Aid Act of 1963, the United States can (and must, or show cause otherwise) withhold aid from nations which trade with Cuba. The time to use this power is now.

► The Free World is far superior to the Communist world in its natural, military, financial, intellectual, and moral resources. Acting in concert, there is not a single problem, nor a single threat that could not be met and solved by the Free World nations. But unity is lacking. **The United States is the only Free World power that is prepared to move into any critical situation anywhere in the world in defense of freedom**, and this is so because of our conviction that a threat to freedom **anywhere** is to some degree a threat to our own. Other free nations, however, participate as a rule only when their **immediate** self interest is involved; they have not acknowledged the broad global responsibility which characterizes our policy. As a result, the United States has been compelled to spread itself so thin that its energies and resources are less effective than they should be, and we find ourselves fighting an up-hill, sometimes a losing, battle. This burden is made more onerous by the fact that many Free World nations are benefiting from United States support and prospering, but will not accept a fair share of the responsibility for meeting the total threat of Communism.

► If this situation continues, the United States would be justified in selectively withdrawing its aid and power now committed to the protection of certain other areas so that it could concentrate its energies in protecting its own highest-priority interests, thus demonstrating that if other Free World nations insist on placing their own interests ahead

15

of the common good, the United States would do
the same. This might be the only way to awaken
the Free World to the need for dependable cooper-
ation in the struggle with Communism.

► We believe the time is here for the President of the United States to take the lead in calling a diplomatic conference of the leading free nations of the world for the purpose of reaching a common agreement to work together constantly and persistently in meeting successfully each serious Communist probe. On our list of priorities, Cuba must rank high Also on the list will be other crisis situations—such as the Congo, Cyprus, Berlin, Viet Nam—which, while important to us, are of even greater importance to certain other States of the Free World. While many will contend that an effort to get agreement for cooperative action by the free nations will fail, we believe the effort **must be made**; we would rather the United States risk failure trying to do what is right than risk success by not doing what should be done. In the unhappy event of failure to achieve agreement for cooperation, including a cooperative attack on the Cuban problem, we propose that our entire strategy in the Cold War be re-examined with a view to concentrating our economic and military power where it most directly serves our highest priority goals. To this extent we agree with Senator Fulbright's recent proposal for a re-examination of our world strategy.

► The United States should take the initiative within the Organization of American States to strengthen the policy of collective action, to isolate Cuba completely from the remainder of Latin America, to restrict all travel between Cuba and the remainder of the hemisphere, to persuade the other American republics to withdraw recognition from Castro, and to recognize and aid a government-in-exile. In all this we should have the assistance of the Cuban government-in-exile.

► The United States—preferably with the cooperation of the OAS and especially with the Cuban government-in-exile—should greatly intensify its counter-propaganda in Latin America. In typical Communist fashion, Castro beams lies and vituperations throughout the hemisphere. The United States must recognize the imperative need of combating this type of psychological warfare.

► Finally, the United States must re-assess the Alliance for Progress and seek new ways to make it effective. This is not the place for a detailed discussion of the Alliance. Suffice it to say that the

16

Latin American nations accepted at Bogota in 1960 and Punta del Este in 1961 far-reaching obligations under the Alliance. As their contribution to the program, they pledged tax and land reform, improved education and health facilities, and greater justice for the masses of their peoples—social reforms which will eliminate the beds of discontent in which Castroism breeds. In too many cases, the Latin American nations are not meeting their responsibilities. In too many cases, United States aid has been used to meet recurrent financial emergencies, rather than to help carry forward logical steps toward more effective democracy and rising levels of well-being for all. The Alliance for Progress cannot succeed unless it is a cooperative program among the nations of Latin America and the United States. United States aid should be given liberally to those nations which live up to their part of the bargain, and withheld from those which do not.

## Some Main Points

The cardinal concepts in this analysis merit repetition: (a) The Free World possesses far greater power than does International Communism, so much so that free nations acting together can solve any threat to their future; (b) the greatest task facing the President of the United States is to weld the Free World into a dependable, cooperating, fighting force, in which event the Cuban problem along with others would be solved; (c) if we fail to achieve united action, the United States should decide which world situations, including Cuba, are most important to its future and concentrate our power there, if necessary withdrawing support from areas less critical to us; (d) we should withdraw all impediments to the creation of a free Cuban government-in-exile and to free Cuban raids against Castro, use every means at our disposal to make the economic boycott of Castro-Cuba effective, and insist that the Alliance for Progress meet its announced goals of social reform and economic development, thus destroying the conditions which cause Castro-Communism to flourish in many areas throughout Latin America.

Nothing is more dangerous than a policy of inaction. In 1923, Lenin boasted: "First we will take Eastern Europe, then the masses of Asia, then we will encircle the United States, which will be the last bastion of Capitalism. We will not have to attack. It will fall like an over-ripe fruit into our hands." A moment's reflection lends an ominous air of prophesy to this boast. Much of Eastern Europe and much of Asia are enslaved, and the battle rages on. In Cuba, the "encirclement" has begun. In Cuba, it must also be reversed.

Originally Published May 1, 1964

72

## REPUBLICAN
CITIZENS

Additional copies available at cost from Republican Citizens Committee—15¢ each; 100 copies or more —10¢ each.

DON C. FREY
Executive Director

**Republican Citizens Committee**
1625 K Street Washington, D.C. 20006
Tel. (202) 783-3025

Foreword

5. Cuba: An Effective Policy

1

## Summary

The United States has been spending abroad more than it has been taking in. The strength of the dollar has been sapped by the resulting gold losses. This deficit in our international balance of payments undermines the financial, political and even military leadership of the United States. It has kept us from dealing effectively with the problems of unemployment and inadequate growth at home. It threatens the welfare and security of every American family.

Ten years ago, the United States owned $22 billion of gold. Our liabilities to foreigners who might demand gold from us amounted to no more than $10 billion. Today our gold holdings are down to $15.5 billion, and our short term liabilities have risen to over $21 billion. If foreigners were to exert to the maximum their claims on American gold, we would be unable to pay.

In the months ahead, the balance of payments deficit—the excess of what we spend abroad over what we take in—is likely to get worse. For a few months the deficit has diminished and gold losses have abated. The Administration has achieved this welcome respite by proposing a tax on all purchases by Americans of new or old foreign securities. Pending Congressional decision on just what the specifics of this tax are to be, new securities issues by foreigners have come to a virtual standstill. But it is widely known that needs for American capital are building up abroad. Once Congress has removed the uncertainty about the tax, money will again begin to flow abroad. Meanwhile our imports are rising as business begins to boom. Rumblings of price and wage increases ahead once more threaten the competitiveness of our exports.

It would be a tragic mistake to take at face value present claims that the problem has been solved. To proceed on the assumption that we need no longer be concerned about the dollar would be downright irresponsible. The situation calls for strong action to protect our currency.

The Administration has struggled with the problem ever since it came into office, but has failed to resolve it. The Administration predicted that the payments deficit would be ended by 1963. But the true deficit for that year, $3.3 billion, was only slightly less than that for the preceding year. Despite the present improvement, another substantial deficit is in prospect for 1964.

The Administration has induced some countries to prepay their debt to the United States. It has obtained also some prepayments on future military purchases here. These payments have made the deficit look smaller than it actually has been. But such devices do

2

(cc)

not touch fundamentals. They buy time, but they also tend to create a false sense of improvement. The balance of payments data published by the Department of Commerce without these embellishments continue to tell the true story.

Last July, when the balance of payments deficit had reached an annual rate of $5 billion, the Administration offered a series of measures which for the most part were at odds with our free market principles. Since that time, little has been done to come to grips with fundamentals. The President's Economic Report, which by law is required to describe the outlook of the American economy, limits itself to remarking that the balance of payments will benefit from the tax cut. This is far from certain, given the increase in imports which the President's Council of Economic Advisers says will result from the tax cut.

A forecast has been made, however, in a report prepared by a group of independent economists working at the Brookings Institution, at the request of the President's Council of Economic Advisers, from which the President's Council quotes at length. This report estimates that the basic balance of payments will show a surplus by 1968, provided the European countries are willing to accept rapid inflation. Under less "favorable" assumptions, the Brookings Report estimates that the basic balance of payments will still be in deficit by 1968. Estimates like these give very little grounds for complacency.

Our principal need is to increase our exports as far as world markets will permit, in order to raise our international receipts. The Administration so far has not given American exporters the support that they would need to hold our share in world markets, let alone expand it. Ten years ago the United States accounted for over one-quarter of world exports of manufactured goods. In 1962 our share had fallen below one fifth. Germany, a country that gives top priority to exports, now has displaced the United States as the world's leading exporter of manufactured goods.

The Administration has failed to cope adequately with the outflow of American capital. Much of this outflow, prior to the increase in interest rates last summer, was caused by easy money policies which sent American money abroad in search of higher returns and brought foreign borrowers into our market where they could get loans more cheaply. The Administration's proposal for an "Interest Equalization Tax," in effect a tariff on the purchase of foreign securities, is sharply at odds with our policies aiming at freer world trade and broader markets for American exports.

We are spending large sums on the maintenance of

3

American forces abroad. These forces play an important role in our national defense. A large part of them is in fulfillment of our NATO commitments. But the Administration has incurred disproportionate burdens because it has not been effective in inducing our Allies fully to honor their own commitments, nor in persuading them to share a larger part of the cost.

We are spending further large sums abroad for foreign aid. While most of this aid is tied to American exports, it nevertheless imposes a significant burden upon our balance of payments. At the same time, our aid policies often have conspicuously failed to achieve their objectives.

Because the Administration has failed to act successfully on all these fronts, it has sought relief by trying to interest the financially strong countries of the world in making improvements in the world's financial system. These improvements are indeed overdue. They will never be achieved, however, if our partners suspect that the principal purpose is to get further credit to finance further deficits. With our balance of payments in deficit, we are negotiating from weakness instead of from a position of strength, befitting the world's strongest economy. Until we cure our balance of payments deficit, we shall be below full strength financially, politically, and militarily. It is time to implement the following constructive program. The United States must:

1. Expand exports by a) keeping prices and wages competitive, b) bargaining down foreign tariffs and other trade restrictions aggressively, c) providing better insurance for credit risks run by exporters, d) promoting American goods more effectively and e) studying means of providing the same tax incentives to exporters that our competitors offer.

2. Cope with the outflow of capital, by creating an environment that is conducive to home investment, and that does not permanently damage our position as the world's leading supplier of capital.

3. Explore every possibility of reducing the cost of keeping our forces abroad consistent with maintaining our military posture. Our defense must not be governed by financial considerations, but we must become more effective in getting our allies to honor their military commitments and take on their proper share of the common defense burden.

4. Tighten up foreign aid procedures, by becoming more selective in our choice of recipients, and applying our limited resources where they will do the most good.

5. Reform the international financial system along lines that maintain the role of the dollar as the world's leading currency.

4

The Balance of Payments:
A Time for Fundamentals

The strength of the dollar has been sapped by years of deficits in the balance of payments. Gold losses have been heavy and short term debts have mounted sky high. This insidious process threatens the welfare and security of every American family.

Common concerns, ranging from the price of a cup of coffee, to a young man's prospects for a job in an exporting industry, to the nation's ability to hold communism in check, are equally affected if stronger action is not taken. It would not be responsible to assume that this action can be avoided simply because, for a few months, we have enjoyed a reduction in the balance of payments deficit attributable mainly to temporary factors.

The balance of payments drain goes on almost invisibly, like a cancer. The fact that since 1953, our gold reserves have dropped from $22 billion to $15.5 billion, and that foreign countries have within a few years accumulated claims against us of over $21 billion that would wipe out the remainder if they decided to cash them, becomes apparent mainly to the readers of financial statistics. Unemployment, recession, and inflation are seen by everyone. That is why many people believe that the problems of gold and the balance of payments are too complicated to form an opinion about. Yet in principle they do not differ from those of the family and its checking account, which the balance of payments closely resembles.

The balance of payments, like the family checking account, is the record of all receipts and payments in dealing with the outside world. Receipts from exports, from investments made abroad, from sales of securities abroad, and the like are the counterpart of the deposits that the family makes in its account. Payments for imports, for new investment abroad, foreign aid, and American troops abroad are the checks that are drawn against it. Our gold stock is the balance in the account. Because our receipts have been less than our payments, we have been drawing down this balance for so long and at such a rate that the remainder is approaching the peril point.

A family may live comfortably and in complete ignorance of what is in store while its head improvidently runs down the bank balance. The same can happen to a nation that runs down its gold supply. After a point, the inevitable consequence is a disruption of its foreign trade, unemployment, and perhaps inflation. If that nation is the United States, even more than

5

(iv)

economic health is at stake. The entire world depends on the dollar. The dollar is used for international reserves, to finance trade, and as a basis for many long term contracts. If the dollar should fail, the world economy would totter. In that event one thing is sure: the political and military strength that the United States historically has drawn from its powerful financial position will be badly shaken. It is still possible to prevent this if the right measures are taken.

Our situation calls for action. The Administration predicted some time ago that the payments deficit would be cured by the end of 1963. The large deficit incurred in 1963 of $3.3 billion shows how completely it has misjudged the situation. By threatening to tax foreign borrowers in our markets retroactively the Administration has temporarily brought new borrowing to a halt. This has produced some welcome relief during the last months of last year and the early months of the present, which cannot be expected to continue, however, once the legislation has been decided on and foreign borrowers know what tax they may have to pay.

In addition, the Administration has resorted to bookkeeping devices and temporary expedients, such as asking France, Germany, and others to prepay debts they owe us, and these have made the deficit look smaller. It has succeeded in papering over some of the gaps by increased borrowing abroad, which has slowed the gold outflow. But the government's own statistics show that the hole in the accounts continues large.

What should be done? The answer is the same that the head of a family must give under similar circumstances. Either he must earn more, or the family must spend less. To begin with, the family must take a hard look at its budget.

The summary of our international receipts and expenditures shows that our accounts fundamentally are quite simple. (See appendix). The bulk of our international receipts comes from exports ($21.9 billion in 1963). Another good sized amount comes from earnings on our foreign investments ($4.6 billion). The remainder represents various services ($4.5 billion), repayment of loans owed to us ($1.0 billion) and investments made here by foreigners.

The largest single part of our international expenditures goes for imports ($17.0 billion). The rest is divided among private capital exports ($4.1 billion), military expenditures ($2.9 billion), foreign aid ($4.5 billion), tourism (over $2.5 billion), and some lesser items. Expenditures have exceeded receipts by $2.9 billion on the average of the last six years, even after

6

(cc)

counting as regular receipts the prepayments of foreign loans, which cannot go on much longer. Excluding such special transactions the deficits have averaged between $3-4 billion annually. Of the accumulated deficit, over $7 billion has been paid in gold, and over $10 billion by incurring short term debts to foreigners.

The figures make clear why action is urgent. We cannot allow a large balance of payments deficit to continue because we shall run out of free gold while foreigners will become unwilling to hold more dollars. After that, we shall have to invade the $12.5 billion of gold set aside as backing for our currency. Fortunately, several lines of action are available, if we have the sense and determination to pursue them.

First, it must be clearly understood that no single part of the balance of payments can be held responsible for the deficit. The deficit could be removed by increasing our receipts or by reducing expenditures. Increasing receipts would be the better way, to the extent that it can be done by measures in keeping with our free market principles.

Some particular expenditures, especially foreign aid and private capital exports, have gone up more sharply than others, since the payments deficit began. It would be a mistake to take for granted, however, that what has gone up must be cut most drastically. If the milk bill crowds the budget it may be cigarettes that have to yield. The criterion must be the usefulness of the expenditures. All items must be looked at as possible candidates for a cut.

Finally, in devising a plan for curing the payments deficit it must be remembered that many of the items in the balance hang together. It is difficult to remove one stone without unsettling some others.

If we cut imports, for instance, by higher tariffs or by imposing quotas, we shall almost certainly encounter retaliation. Since we sell more than we buy, we would be at the losing end of that exchange. The same is true, in varying degrees, of foreign investment, military expenditures, and foreign aid. They all generate American exports, directly or indirectly. Cutting them means some loss of exports, although by a lesser amount. We may need to reduce all these outlays, but the net gains will never be 100 per cent.

Hard choices will have to be made. Time is pressing upon us on two fronts. At home, the balance of payments deficit limits freedom to use monetary policy and the other tools the government must use in the event of economic deterioration, to stimulate higher production, employment, and growth. The longer the balance of payments deficit is dragged out, the greater

7

is the danger that we may be unable to pursue the kind
of monetary policy that is suited to domestic conditions.
Abroad, the dollar is under scrutiny. We cannot in-
definitely go on talking and not showing results.

Financial devices will not get us out of the hole.
Our fundamental strength would justify long term bor-
rowing abroad, if markets can be found for appropriate
American securities. But the continued rapid build up
of dollar holdings in foreign hands, against which
foreign governments can demand gold at any time,
threatens to undermine the dollar.

Neither can we pin our hopes on the creation of
some new superbank. We can get nothing out of such
a bank that our present creditors are not willing to
put into it and that they could not lend us without it.
Nor would it be wise to surrender to a superbank the
wide powers over domestic financial affairs that it
would require to be workable.

We must solve our problems by our own actions.
When that job is well in hand, there will indeed be
need for new international credit facilities. When the
United States stops spreading dollars throughout the
world, some of the present beneficiaries of this spending
will feel pinched. To keep world trade flowing, the
existing international monetary mechanism will have
to be strengthened. These new facilities have little
chance of coming into being, however, unless the
United States makes clear to the world that it does not
propose them simply as a means of financing our
present payments deficit. Our balance of payments
and world financial reform are separate problems.

## THE SIZE OF THE JOB

In designing an action program to cure the balance
of payments deficit, an idea is needed of the magnitude
of the job. Stripped of embellishments, the deficits
of the last six years have been of the order of $3-4
billion annually. An improvement of $1-2 billion may
be achieved by the combined effects of the Interest
Equalization Tax, which is to be levied on the amounts
foreigners borrow in our capital markets as well as
on foreign securities purchased by Americans, of an
increase in interest rates that has already taken place,
and of tying foreign aid and military expenditures
abroad to American exports. The Administration has
said that, after these measures take effect, a gap of
only about one and a half billion dollars would remain
to be closed. In fact, the remaining gap may still be of
the order of $2-3 billion.

But the Administration's measures are stop-gaps.
They are out of keeping with the free market philosophy
of our private enterprise economy. Our position must

8

be improved sufficiently, therefore, not only to close the remaining gap, but also to permit the progressive dismantling of the stopgap devices.

The exact magnitude of the needed improvement cannot be stated. It depends on how high a level of military expenditures and foreign aid must be continued. It also depends on how flexible an interest rate policy we aspire to. Because of the ease with which capital now flows abroad if rates there are higher than ours, we may never again be able to attain as low a level of interest rates as at some periods of the past, unless rates abroad also decline. It is clear, however, that the improvement in the balance of payments that is needed if our free market principles are to prevail is much greater than the Administration now seems to envisage.

If private foreign investment, foreign aid, military expenditures and tourism are not to be cut back, the improvement in the balance of payments would have to come mainly through a higher trade surplus and higher income from foreign investments. We must ask ourselves very seriously whether this solution will be acceptable to our trade partners. Our trade surpluses and investment income are other countries' trade deficits and investment service. Both are apt to arouse resentment. Although the rest of the world would be receiving an adequate flow of dollars through our other payments, the balance of trade and the service of foreign investments are often regarded separately. They may then become a source of political agitation. A U.S. balance of payments heavily dependent upon a large trade surplus and a large investment income may be vulnerable. We shall presently see that our existing trade surplus is much smaller than appears, but the political problem it poses must be watched.

## Proposals for Action

In pressing for action, we need not tie ourselves to a rigid goal of perfect balance. All countries find their balances of payments fluctuating. The United States can in the long run very well afford small payments deficits if there are also occasional surpluses. But we must rapidly get to the point where these surpluses are within reach if international confidence in the dollar is to be maintained.

### EXPORTS

Exports are the mainstay of the United States balance of payments. As far as possible, the payments deficits must be removed by an expansion of exports, along with increases in other receipts.

American exports have not kept pace with expanding

9

world trade. Our share of exports of manufactured goods declined from 26 percent in 1953 to less than 20 percent in 1962. The United States has been displaced by Germany as the leader in the world market for manufactures. Our competitive ability has not weakened quite as much as these facts would suggest because part of the drop has resulted from the economic difficulties experienced by Canada and Latin America, our principal customers. But the fact remains that American export prices of manufactures rose by 22 percent since 1953, while those of Germany rose only 6 percent and those of Japan declined by 11 percent.

In the last two years, the cost of living in many countries has gone up faster than in the United States. This, however, has not yet had the favorable impact upon American exports that might be expected. It would be quite irresponsible to gamble on continued inflation abroad to bail us out.

We must not be misled by references to our sizable surplus of exports over imports. In 1963, the export surplus amounted to $4.9 billion. But of this impressive amount, $2.7 billion was financed by U.S. Government loans and grants. The commercial exports surplus therefore was only $2.2 billion.

To accelerate exports, a variety of measures are appropriate.

### Major action:

1. Pay and Prices. To become more competitive, American business must keep price increases to a minimum and where possible should reduce prices. Labor's interests in higher employment will best be served by wage demands that recognize the need both to keep prices competitive and to help absorb the unemployed. Foreign competition and a constructive, vigorous anti-trust policy can help to hold the price line. If the tax cut produces renewed inflationary pressures, as seems quite possible, interest rates will tend to rise and should be allowed to have their restraining influence on prices.

2. Trade Expansion Act. Every effort should be made to bargain down the tariffs that increasingly hamper access of American manufacturers and farm products to European markets. Quotas and other nontariff restrictions in our trade must be eased. While the Trade Expansion Act has been grossly oversold as a means of curing the balance of payments, some benefits are obtainable if we bargain effectively. No concessions should be made on American tariffs without adequate compensation. The possibility of establishing world wide rules against dumping should be explored.

10

### Other measures:

We should take the following lesser actions that in the aggregate nevertheless will help substantially.

1. Improve Export Credit Insurance. Recent improvements in the insurance against credit risks available to exporters still are inadequate to match European facilities. While there are limits to the sound insurance that can be written, these probably have not yet been reached.

2. End Discriminatory Freight Rates. At the present time, American exports pay higher freight rates, even on American subsidized ships, than similar products that are being imported. Strong efforts should be made to rectify this discrimination.

3. Step Up Trade Promotion. Present activities of the Department of Commerce should be strengthened. The dollar will not be saved by promotion and exhortation, but since the Government is in effect paying a subsidy of as much as 50 percent when it requires the Defense Department to supply the needs of our overseas troops by procurement in this country, some further efforts on behalf of private exports are justified.

### Action for study:

1. Tax rebates. Studies should now be undertaken to find ways of rebating the corporate income tax as other countries rebate their turnover taxes. Many foreign countries rebate to their exporters the purchase and turnover taxes they impose upon domestic trade. In turn they impose these taxes upon goods they import including United States products. The United States has no such arrangements, because we do not levy this type of tax. Our corporate income tax does not qualify for rebate under the present rules and national legislation. To develop a suitable approach that will not make us vulnerable to retaliation will require careful study, and this should be undertaken.

## PRIVATE FOREIGN INVESTMENT

American investment abroad should be interfered with as little as our payments position permits, because in the long run it strengthens the balance of payments. Measures that must be taken to restrain excessive outflows should be in keeping, as far as possible, with free market principles. Currency controls to limit the free movement of dollars would destroy the international role of our money and must be ruled out absolutely.

The Administration has failed to cope effectively with the outflow of American capital, and such improved measures as it has taken have been of a sort

11

to undermine free market principles and injure our role as the world's leading supplier of capital. The $4.6 billion income from our foreign investments of all kinds owned by Americans is our second largest source of international receipts. During the last three years this income has been rising at a rate of close to $400 million per year. This increase is one of the most hopeful factors in the balance of payments.

Nevertheless, the pressure of the payments deficit has become so great that the Administration has proposed and the Congress may enact legislation to limit American long term investment abroad, which in recent years has been proceeding at a rate of $3 billion annually. To this end it has proposed a tax on the purchase of foreign securities, referred to as the Interest Equalization Tax. The tax is to discourage new foreign borrowing in the American capital market as well as the purchase by Americans of outstanding foreign securities. It aims to give short run relief from the capital outflow at the expense, however, of greater income foregone in the future.

Since some of the principal foreign countries are to be exempted, while others may decide to borrow despite the tax, the effectiveness of the measure is dubious. The outflow of capital could have been more effectively restrained by limiting individual new issues, through an institution known in other countries as a capital issues committee. Either device, however, represents an infringement of free markets. That we should be driven to these sorry expedients shows the deplorable state into which our affairs have been allowed to drift.

More in consonance with free markets, as a means of limiting capital outflows, is an increase in interest rates. The Administration has already raised interest rates on short term money, which seems to have succeeded in reducing the outflow of that type of funds. Short term rates are not believed to have much of an effect upon domestic employment.

A rise of interest rates on long term capital would probably have more of an impact on the domestic economy, especially on housing, although the effects are often exaggerated. How firmly a rise in long term rates would discourage foreign borrowers is debatable. They may decide to pay the higher rates, just as they may decide to pay the Interest Equalization Tax proposed by the Administration. Long term rates are likely to press upward in any case if the tax cut stimulates the economy. In the face of a continued payments deficit and of a strong business climate, this tendency should not be resisted.

The most profitable part of our foreign investment

12

is direct investment by American corporations in foreign subsidiaries. The Congress has rejected an earlier proposal by the Administration to curtail this type of investment by means of tax changes. The legislation would have compelled American parent companies to pay United States corporate income tax on the income earned by its foreign subsidiaries even when no dividends had been received from the subsidiaries.

At the time this legislation was discussed, the Administration was still predicting that the payments deficit would be ended in 1963. On that basis, it would have been unwise to impose higher taxes upon direct foreign investment. It would be unwise even now that earlier hopes have faded. It is not certain, however, that we shall be able to afford this posture indefinitely. Like all other outlays, direct private investment abroad may have to carry its share of the burden of adjustment, if conditions require. Meanwhile we must do what we can to encourage foreign capital to come to the United States in larger volume.

## MILITARY EXPENDITURES

The Nation's defense, including the number of American troops stationed abroad, must be governed by military considerations. The defense of the dollar, however, is in a very practical sense part of our grand strategy. A weak dollar would weaken the United States economically and politically, therefore militarily. Without adequate international reserves, the United States might have difficulty conducting even a brushfire war in some remote part of the world.

The United States has enough resources to defend itself without help. It has the resources to defend the entire Free World only if it receives appropriate help and support from its Allies. It cannot defend its Allies unless they are willing to share the burden to an important degree. So far, none of our NATO Allies has met its full commitment to the common cause.

The need for American troops in Europe, where more than half of our foreign military expenditures are made, is discussed by another task force of the Critical Issues Council in the statement on the Atlantic Alliance. The Atlantic Alliance task force concludes that NATO forces perform an essential function and must not be reduced.

Nevertheless, the United States must seek out all possible means to reduce the balance of payments cost of our forces abroad without weakening our military or political posture.

Some relief has been achieved by means of agreements under which some of the countries where American troops are stationed purchase American military

13

equipment and so increase our exports. By procuring supplies for our troops in the United States instead of abroad further savings are being achieved, sometimes, however, at exorbitant budgetary costs. Together these measures have reduced the balance of payments cost of our military expenditures abroad in 1963 from $2.9 billion to $2.2 billion. **We must continue to press our Allies, whose economic resources are rapidly rising, to accept a larger share of the common defense burden.**

FOREIGN AID

The balance of payments cost of foreign aid must be further reduced. We must become more persuasive with our allies in urging them to share the burden of foreign aid. Aid to the countries bordering upon the communist bloc should be administered in terms of the political and military problems involved. Foreign aid has to its credit one outstanding success: the saving of Europe through the Marshall Plan. Most of what has come since has been anticlimactic. Foreign aid has not prevented many recipient countries from becoming increasingly unfriendly to us. Foreign aid has not produced rapid economic development in the world. It is likely, however, that, without aid, developments particularly in some countries bordering upon the communist bloc would have been even less favorable to the United States.

The bulk of our total military and economic aid goes to the border areas around the communist bloc. These present more of a military and political problem than an economic one, and aid to them should be treated in those terms. **Aid to countries not directly menaced by communism should be given only in clear recognition of the following basic principles:**

1. The bulk of the resources and effort needed for a country's development must come from within that country.

2. Only in a limited number of cases can the United States give enough aid to a country to induce it substantially to alter its national policies.

3. The benefits to the United States must primarily come from the enduring impact that aid programs have upon people, institutions, and their hopes for freedom, rather than upon the day to day decisions of local governments.

Military end items, which account for about one quarter of total aid, and farm products shipped under the Food for Peace program which account for about one-third, as well as Export-Import Bank loans, do not directly affect the balance of payments. Other aid must be increasingly tied to United States sources of

14