Walter?

Yeah, Mr. President.

I see you want to talk to me about something. You want to do it . . . I’m not going to be in the office and I’m going to be leaving, and I thought I’d better do it on the phone.

Well, fine. Just a couple of things. They’re likely to throw me something on monetary policy. They may not, but, you know, one has to be prepared for eventualities. They may say, “Well, now, you’ve had a policy of keeping interest rates high at the short end to keep that outflow from occurring, and to keep them low in the long range for domestic expansion. Is that still the policy of this government?”[note 1] Known as Operation Twist, this approach to monetary policy reflected the Kennedy and Johnson administrations’ desire to stem a large flow of dollars abroad and, at the same time, encourage economic growth at home with an expansionary monetary policy in general. Inheriting both a tight monetary policy and a balance of payments–gold drain problem amid recession in 1961, the Kennedy Treasury moved to purchase substantial amounts of government securities with maturities over ten years and to increase its offerings of short-term government debt. Likewise, the Federal Reserve was coaxed into providing additional bank reserves through its purchase of long-term U.S. securities, principally in the three- to six-year range, and into selling from its portfolio of short-term securities. The purpose: to stanch the outflow of dollars that could be exchanged by foreign central banks for U.S. gold deposits. Long-term rates, influenced only marginally by Fed or Treasury policy, did decline for much of the first year of the Kennedy administration and then increased only modestly as economic growth resumed. Short-term rates, over which the Federal Reserve and Treasury had much more control, remained high, as the administration hoped, yet the balance of payments–gold drain problem persisted. As Heller and his colleagues noted, however, on many occasions, lower long-term rates and the eradication of gold outflow concerns, in the end, hinged greatly on the control of inflation and on the perception that inflation would be controlled; direct monetary policy had only marginal influence. Or something like that. My inclination would be to say, “Yes, of course, subject only to the possibilities that might develop of the economy, sometime in the next year or two, getting overheated or something like that.

That’s fine. That’s fine. Go ahead. Now, what’s next?

OK. Fine. Now, on the balance of payments policy, they may—especially with Ed Dale of the New York Times on this panel—they may try to burrow in and ask what we’re doing over there in the Group of Ten on international financial arrangements.[note 2] The Group of Ten, or G-10 in the common parlance, referred originally to the governments of eight International Monetary Fund nations—Belgium, Canada, France, Italy, Japan, the Netherlands, the United Kingdom, and the United States—and the central banks of two others—Germany and Sweden—who agreed in 1962 under the General Arrangements to Borrow to make resources available to the International Monetary Fund for drawings by participants. The G-10 eventually evolved into a group of 11 industrial nations—Switzerland joined the original 10—which consult and cooperate on economic, monetary, and financial matters in general. The ministers of finance and central bank governors of the G-10 usually meet twice a year in conjunction with the spring and autumn meetings of the Interim Committee of the International Monetary Fund. Again there, my inclination is to say, “Well, we’ve indicated that we want to have other countries share with us some of the burdens of providing the world’s liquidity and the key currency responsibility. But beyond that, the U.S. . . . it’s too early to have a U.S. position.”

Fine. That’s good. Go ahead.

OK?[note 3] The Presidential Recordings Program revised the following section of text in 2021 for inclusion in The LBJ Telephone Tapes, a project produced by the Miller Center in partnership with the Lyndon B. Johnson Presidential Library to commemorate the library's 50th anniversary. Third, I had some indication that one of them might ask, “Well, now, President Johnson is for the tax cut, but is that just because he thinks it’s”—and you know how nasty they can be—“just because he thinks it’s a good thing to prevent a recession between now and the election, or is that part of a fiscal policy designed to, in an active way, to make full use of the economy’s potential and to compensate for gaps in the private economy?”

[talking on speakerphone] I’d say the latter.

OK. Fine. Those are the three things that I—

I’d say, “He’s been for it since the day it was first announced. He participated in the formulation of the bill, [Heller acknowledges throughout] and he sat in on all of the meetings. And he’s made speeches all over the country about it, perhaps more than anybody in the administration. He’s no Johnny-come-lately . . . to it.” “Now, why is he cutting these expenses?” “He’s cutting the waste and the things that he need not do in order he has some money to do the things that he does need to do, and he may take out a[n] antiquated installation where they’re teaching somebody to fly a plane that’ll never be flown, that we’ll need a missile instead, in order to help grandma or somebody in West Virginia or Tennessee that’s not eating now.”

Right.

“Faced [with a choice] between a[n] installation and grandma, he’s for grandma.”

[Chuckles.] Yeah, that’s very good, and of course that follows the theme on the Today show also, which used that kind of an illustration.

Tell them I’ve never agreed that you had to prove you’re liberal by showing how much money you could throw away. I have always supported WPA [Works Progress Administration/Work Projects Administration], and PWA [Public Works Administration], and river development, and resource development, and full [manpower and resourc] utilization, and public housing, and everything else.[note 4] Johnson’s reference to the WPA and the PWA was intended to underscore his commitment to New Deal reform.

Right.

I never supported corruption in any of those things, I never supported waste in any of them, and I never supported just throwing away common sense in operating them. I believe in . . . I’m a kind of a Harold [L.] Ickes liberal.[note 5] An outspoken liberal known for his frugal administration of New Deal relief programs, Harold Ickes was Franklin Roosevelt’s secretary of the interior and director of the Public Works Administration.

Well, and, of course, you know, Paul [H.] Douglas [D–Illinois] has done a lot of work to make economy in government respectable, and—

That’s right. I just point out Harold Ickes and Paul Douglas are some of the greatest liberals we’ve got. And [E. William “Bill”] Proxmire [D–Wisconsin].[note 6] William Proxmire was a Democratic senator from Wisconsin, known later in his career for his Golden Fleece awards that spotlighted government waste. They don’t believe in throwing money away.

Yeah . . . right.

And you don’t know whether either one would like to be compared to the other or not, but . . . [Heller laughs] there’s a strange pattern in that regard as far as you’re concerned. I’ve been . . . this is no Johnny-come-lately. I—on the Naval Affairs Committee, in 1938, I was running an investigation pointing up waste in the [U.S.] Navy. In 1948, I was appointed up in the Senate as head of the Preparedness Committee.[note 7] This was a reference to the Senate’s Military Preparedness Committee. Under Johnson’s chairmanship, its principal task was to investigate waste and fraud in the military budget. And I’ve done this stuff for 12, 15 years in the Senate.

Right.

I’ve had 25 years pointing up waste. And that’s all I’m doing in the federal government.

Right.

But that doesn’t mean that we’re not going to have a National Science Foundation, and that [Heller attempts to interject] doesn’t mean we’re not going to have an Appalachian program, and that doesn’t mean that we’re not going to have a better program for the Peace Corps. What it does mean is we’re going to have less money wasted and more money available for those things because of the stopping the waste!

Right. Well, that’s exactly . . . something I want to stress, and—

There may be a lot of thirsty people wanting water, but that doesn’t mean that you ought to turn on the hydrant and let the tank all run dry before you put a bucket under it.

Right.

What we’re doing is we’re going to put a bucket under it and save all we can.[note 8] End of 2021 revisions.

Right. Can I throw in—in this connection, of course, there’s an awful lot, and especially because of Galbraith’s speech, which by the way, I asked him to send you a copy of.[note 9] John Kenneth Galbraith spoke the day before (13 December) at the closing session of the two-day conference of the National Policy Committee on Pockets of Poverty, a committee made up of 33 education, foundation, union, and management officials. Galbraith proposed that poverty be attacked by providing the nation’s 100 poorest counties or municipalities with the finest schools possible. “To the best of my knowledge,” Galbraith declared at the Washington, D.C., conference, “there is no place in the world where well-educated people are really poor.” See “Galbraith Asks Drive on Poverty with Top Schools in Poor Areas,” New York Times, 14 December 1963, p. 19. He said he would today.

I’m very interested in it.

Does that . . . if they ask about poverty, I think that one can say that we are working on such a program. Now, the question—

Tell them that I followed Mr. Galbraith’s speech with a great deal of interest, and have already asked him to send me a copy of it, and expect to be talking to him about it in the next few days. I’m very interested in that program. I believe in a government for the people.[note 10] In his 13 December address Galbraith also chose to remind fellow liberals that public services such as the proposed school aid always favored the least fortunate and “like the Federal income tax” are highly progressive.

Right.

P-double E-P-U-L.

[laughing] Right. OK, very good.

You tell Galbraith that I was very excited about the newspaper reports, that I’m surprised he didn’t have me a copy autographed over here, that he’s my hero and I want him to get it to me right away.

I’ll do just that.

All right.

Righto, Thanks very much.