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Martin, Douglas Dillon and Budget Director Kermit Gordon are lobbying for measures that would drastically affect the nation's foreign and domestic policies. Among the proposals that one or all three of them have forwarded: an exit tag of $50 or $100 per person to discourage tourism abroad, direct controls on U.S. investments abroad, a further cutback in foreign aid and, if necessary, a sharp reduction of U.S. troop strength in Europe. These proposals have been hotly debated at a series of secret meetings in the White House. The State Department is dead set against foreign aid cuts or troop withdrawals, and the Commerce Department argues that restrictions on investment would destroy the U.S.'s reputation as the world's freest capital market. The White House figures that a "head tax" on outward-bound tourists would be political poison.
Johnson's Compromise. The State Department believes, in fact, that a $3 billion payments deficit should not really bother a nation that boasts both a $650 billion economy and twice as much in claims against foreign currencies as foreigners have against the dollar. It argues that the U.S. could reduce the deficit by $500 million simply by counting short-term foreign deposits in the U.S. as assets instead of liabilities.
Strong support for this optimistic view came last week from Pierre-Paul Schweitzer, the managing director of the International Monetary Fund and the world's top currency controller. "A more realistic assessment would some what lower the figures for the overall deficit," he said. "The structure of the U.S. balance of payments is one of underlying strength."
With his usual preference for compromise, President Johnson had decided early last week on some fairly mild prescriptions. These were to include a slight tightening of the domestic money supply to prevent dollars from flowing abroad, a tax on loans by U.S. banks abroad, and a jawbone campaign to persuade U.S. businessmen to reduce their foreign investments. De Gaulle's bombshell may have convinced the President that tougher action is needed. In any case, official Washington agrees with De Gaulle on at least one point: some changes should be made in a world monetary system that puts the U.S. under such strain.