The President's News Conference at Augusta, Georgia

THE PRESIDENT. Ladies and gentlemen, this is not a press conference as such, but we are distributing today a paper--which you will get after we have finished here--that is of such importance that I thought it was worthwhile to come down and tell you something of my own feelings about it.

It has to do with the balance of payments problem. This is a problem that has been engaging the concern of government officials for a number of years. Financial circles and financial pages have been watching it, and, moreover, foreign financial institutions also have been very much concerned about it.

Of course, as the balance of payments gets too unfavorable with respect to any country--in this case ours--you have either to settle your debts with gold or you have to increase your dollar obligations. Therefore the risks or the threat of a sudden movement of gold that could have very bad inflationary effects in our own country are such as to demand great care on the part of governmental officials.

We have been doing what we could over some years. For example, one of the things that you can do to avoid this unfavorable balance of payments is to continue sound fiscal policies here at home and avoid inflation. By avoiding inflation you keep down the costs of your products and as a result you can compete, you can get your share of the income, and you sell enough to pay for all of the outflow of dollars and credits to other nations.

Except for the year 1959, our exports have been very fine. They always have shown a surplus, but I think in 1959 there was only about a $ I billion balance. This year it may reach $4 billion. But that is still not enough to support the outflow that we have.

One of the things that happens is this: if people--other nations which use dollars as well as gold in their financial reserves--get fearful of the American dollar, then there can be what you call a run on it. They want to convert into gold right away, and the outflow of gold would be so rapid that we could, of course, be greatly embarrassed.

Now there are many things we can do. The paper that you will receive today not only describes for you in considerable detail what the problem is, but it will describe what are the actions that we can take now administratively--or at least some of them.

Without going into detail, they are measures to check the unnecessary flow of dollars and credit abroad, and to increase our own sales abroad.

For a long time we have had a committee in the Cabinet that has been coordinating all of our efforts toward increasing exports. Indeed we have worked with our industrial and agricultural activities and institutions, in order to increase these exports--and we have done so. But more needs to be done, both in increasing our exports and decreasing the outflow of credits and dollars.

Now they are outlined, as I said, in the paper you will receive. One of them, for example, is a reduction in the number of dependents of the armed services abroad, and a similar reduction by all of the departments that have personnel stationed overseas--to cut them down to the minimum. But as I say, you will read it in more detail in the paper. 1

¹ The President referred to his directive of November 16 concerning the U.S. balance of payments problem. The directive is published in the Federal Register (25 F.R. 12221) and in the 1960 Supplement to title 3 of the Code of Federal Regulations.

Now I think that's about the story as I see it. I repeat that this problem of balance of payments is not separated from sound fiscal practices in our own country, because as long as other people know that we can, and will, pay our bills as we go, they will not get frightened of our dollar; they will not demand that dollars be exchanged into gold. That is the kind of thing that is always important.

I think that's the story as I wanted to give it to you, and with respect to this one problem, if there are any additional comments of your own, any additional questions, why I would be glad to talk about them.

Q. John Scali, Associated Press: Mr. President, will you discuss this problem tomorrow at the National Security Council meeting?

THE PRESIDENT. Well, it may be brought up. I should have pointed out that, of course, our national security as well as our own soundness of our economy are affected by a healthy situation in this balance of payments, but as such, I doubt whether it would be on the agenda. No.

Q. Felix Belair, New York Times: Mr. President, are there any estimates at all of the amount potentially that might be saved as a result of the directives being issued today?

THE PRESIDENT. Well, I didn't ask for that estimate, Felix, but-(confers with Mr. Hagerty)--I just hear from Jim that the Treasury Department is actually trying to make such an estimate today and later in the day may be able to give you such an estimate. I do know that as of now we have about a half million dependents in the Military Establishment abroad. This is a rather expensive business. No one likes to break up families, but when you are sending out gold dollars all the time--that's what they are now under the present situation--why we have to set a limit, and that is what we are trying to do.

Q. William J. Eaton, United Press International: Mr. President, can you tell us roughly how many dependents will be pulled back?

THE PRESIDENT. Well, it's in the paper. I think they want to come down at the rate of 3 percent and down to a maximum of about two hundred thousand. Three percent per month, I should have said, and down to a maximum of two hundred thousand.

Q. Robert C. Young, Chicago Tribune: Mr. President, do you anticipate that this cut in the military dependents would--well, in view of the effect it would have on this balance of payments deficit--would be working any kind of hardship on military personnel?

THE PRESIDENT. Well, of course, it is a most unhappy occasion when you have to set up regulations that do separate families for a period of their service. For example, we have never allowed dependents to go to Korea, but we have shortened the tour of our military personnel. And while there may be some unfavorable budgetary effects here--in other' words, we may have to spend more of our own dollars here, but we will spend them at home. So I would say that one of the compensations would be, possibly, by shorter tours of service. That is normally done.

Q. Daniel Karasik, National Broadcasting Company: Mr. President, in the proposed ways of saving dollars, is there any suggestion of having the NATO countries help support dependents abroad?

THE PRESIDENT. Well, yes. As a matter of fact, this whole problem is the principal purpose of Mr. Anderson and Mr. Dillon going abroad this Saturday. 2 We have been discussing the problem, of course, with numbers of people. We are going to insist that NATO, and particularly the more fortunate countries industrially, which are now accumulating great reserves, should be asked to do their part in carrying the economic aid program to other nations that we want to help have better conditions in the interests of world peace. The industrially strong countries must help to meet the payments that are so burdensome to us, when we are spread all over the world with troops and with aid and all that sort of thing. Of course, we shall insist that they help. That's in the paper, by the way.

² On November 15 the White House released a statement by Secretary Anderson after his meeting with the President to discuss the forthcoming visit to Bonn with Under Secretary of State Dillon. The statement announced that the President had instructed Secretary Anderson to pursue with Chancellor Adenauer and other representatives of the German Republic matters of mutual interest in the international financial field, including the cost of U.S. troops in West Germany, and assistance to developing countries.

The statement added that the President had asked Secretary Anderson to convey his warmest personal greetings to Chancellor Adenauer, as well as his personal hopes that the talks would result in even greater understanding and mutually beneficial results in the interest of the strength of the free world.

The full text of Secretary Anderson's statement is printed in the Department of State Bulletin (vol. 43, p. 864).

Q. John Scali, Associated Press: Mr. President, in the past, there have been persistent reports that crop up to the effect that in order to help close this gap we might consider reducing the actual number of troops that we maintain in Western Europe as a shield for NATO. Could you say anything about this?

THE PRESIDENT. Well, of course this comes up all the time, because it's a very expensive business keeping troops abroad. As you know, the American soldier is the highest paid soldier in the world, and there's all sorts of discussions come up when we have them stationed abroad in large numbers. But I would say this: the last thing we would want to do would be to diminish the combat strength of our forces until the NATO countries have found it possible so to solve their problems that they can fill the gaps.

Now, I could go back to January 1951 when I was sent to NATO. It was always thought of as an emergency operation, just as the Marshall plan was thought of as an emergency program. In the Marshall plan you were rebuilding an economy. With NATO you were trying to rebuild a defense until they--Europe--picked up the burden. Well, I think we should never want to reduce our forces so far that people would think we had abandoned the area, or we had lowered our flag in that area. Not at all. But I do think that the time is coming when all of us will have to study very carefully what should be our proper portion of the load.

Q. Harold Davis, Atlanta Journal: Mr. President, is there some thought of reducing diplomatic and ICA personnel also?

THE PRESIDENT. Well, that's in the directive all right. I propose that the State Department, through its ambassadors, go over this whole business with a fine-tooth comb and see whether there are some people we can take out. I think personally that most of us that have traveled throughout the world have had the impression, at least, that we could do with fewer people. I think there must be a real study job done on it. That would be one way to help, all right.

Q. William J. Eaton, United Press International: Mr. President, is there any consideration being given to reducing or curtailing traveling by Americans abroad?

THE PRESIDENT. I think that would be one of the things we should not do. Remember our great purpose of promoting progress toward peace. One thing we don't want to do is to develop an isolationist practice of staying at home. I would add this: I would like to see our people go abroad, but I would like also to see more Europeans and other people that have money come to our country. Let's have a little reciprocity around here. That would be very helpful. At the same time we want them, not merely because of the dollars, but for the general effect it has on the progress toward peace.

Well, now, ladies and gentlemen, that's the problem, and the subject for the day. And I would again add this: I do think that the paper deserves your very closest study, because it has been tightly reasoned. It has been prepared carefully over a good many days and weeks. I think you will find paragraphs right in the middle of it that are just as important as those that you find at the opening of the paper.

Thank you very much.