Conversation No. 542-4

Date: July 22, 1971
Time: 10:51 am - 11:36 am
Location: Oval Office

The President met with Paul W. McCracken.

     Foreign policy
          -The People's Republic of China [PRC]
               -Recent US initiative
                     -William P. Rogers
                     -Henry A. Kissinger, the President
                           -Efforts
                                -Confidential nature of effort
                                      -Secret channels
                                            -Other foreign governments
          -US-PRC relations and US-Union of Soviet Socialist Republics [USSR] relations
               -Surprise element in breakthrough
                     -Absence of contact during past twenty years
                           -Great Britain, France
               -Kissinger's conversation with Chou En-lai
               -Kissinger’s conversations with the USSR
          -PRC initiative
               -Youth reaction
                     -Generation differences
                     -Future outlook
               -Press coverage
                     -TV commentator
               -Staff meeting
                     -Discussion of breakthrough
                           -The PRC
                                -Impact
                                -Position in the world
                                      -Other Communist countries
                                            -North Vietnam
                                            -USSR
                                -Reasons for action

Manolo Sanchez entered at an unknown time after 10:51 am.

     Refreshment
                                             13

                          NIXON PRESIDENTIAL MATERIALS STAFF

                                     Tape Subject Log
                                       (rev. 10/08)




Sanchez left at an unknown time before 11:36 am.

     The economy
          -John B. Connally (?)
          -Council of Economic Advisors [CEA]
                -Role
                       -McCracken's possible departure
                            -Timing
          -Changes in policy
          -July statistics
          -Trends
          -Possible action
                -John Kenneth Galbraith's comments
                       -Wage and price controls
                -Timing
                -Projections for balance of 1971
          -CEA
                -McCracken's role
          -Unemployment
                -Defense Department manpower and defense industry
                -Rate
          -Inflation
          -McCracken’s forthcoming resignation
          -Rate of expansion
                -Projection on increase
                -Timing
          -Possible action
                -Tax initiative
                -Wage and price controls
                       -Labor issues
                            -Steel strike settlement
                                  -Winton M. (“Red”) Blount
                            -Postal strike
                -McCracken, Herbert Stein, Ezra Solomon
                -Psychological perceptions of economic situation
                       -Compared to reality of situation
          -George Meany
                -Connally, Arthur F. Burns
          -McCracken's view of administration’s approach
          -Recommended approach
                -Tax action
                              14

          NIXON PRESIDENTIAL MATERIALS STAFF

                     Tape Subject Log
                       (rev. 10/08)



-International trade
      -Effect of forthcoming PRC trip
      -Need to improve US competitiveness
      -Exchange rate of the US dollar
      -Effectiveness of action
      -Price of gold
            -Fixed price
                  -Treasury Department                  Conv. No. 542-4 (cont.)
                  -Connally
                  -Paul A. Volcker
      -Possible weakening of the dollar
      -Comments at international economic conferences
      -Timing
-Possible conversation between McCracken and Connally
      -Volcker
-The Department of the Treasury
      -Reluctance to change
      -Staff’s backgrounds
-Burns
-Gold prices
-Exchange rates
      -Ten percent change
      -Balance of payments
-Elimination of trade barriers
-Technical aspects of dealing with the price of gold
-Impact of action
      -Confidence in the dollar in financial markets
      -Domestic impact
            -Possible inflationary effect
                  -Labor unions
-Quotas
      -Connally's view
            -Yankee trader
-Action on taxes
      -Value added tax [VAT]
      -Burden of the middle income worker
      -Tax structure
      -VAT
            -International context
      -National sales tax advantage over national income tax
            -Michigan example
                                             15

                          NIXON PRESIDENTIAL MATERIALS STAFF

                                     Tape Subject Log
                                       (rev. 10/08)



     McCracken
         -Effect of resignation
              -Timing
                     -School semester at university
                          -Teaching job
              -Proposed economic action

     The economy                                                     Conv. No. 542-4 (cont.)
          -Unemployment
                -Effect of defense industries
                      -Vietnam troop withdrawals
                      -Southern California, Seattle
                            -Defense and aerospace jobs
                -Michigan
          -Other issues
                -PRC initiative
                -Vietnam
          -International economic action
                -Weakening of the dollar
                      -Financial crisis
                -International trade
                      -International political position
          -McCracken’s pending resignation
          -Current situation
                -Retail sales, inventories
                -Gains in July statistics
          -Frequency of McCracken's meetings with the President
                -Stein, Solomon
                -Connally, George P. Shultz

[The President talked with the White House operator at an unknown time between 10:51 am and
11:32 am]

[Conversation No. 542-4A]

[See Conversation No. 6-182]

[End of telephone conversation]

     McCracken
         -Role
                                              16

                            NIXON PRESIDENTIAL MATERIALS STAFF

                                      Tape Subject Log
                                        (rev. 10/08)



     The PRC initiative
          -Effect of action

[The President talked with Connally between 11:32 am and 11:35 am]

[Conversation No. 542-4B]

[See Conversation No. 6-183]                                          Conv. No. 542-4 (cont.)

[End of telephone conversation]

     Connally
         -Forthcoming telephone call to McCracken

     Solomon's schedule

     Forthcoming 1972 election (?)
          -Foreign policy
               -Laos, Cambodia, Vietnam war

Donald H. Rumsfeld entered and the President left at 11:36 am.

     McCracken’s staff

McCracken left at 11:36 am.