On Friday morning, January 18, 1957, Arthur Larson gave a lengthy and wide-ranging presentation on the United States Information Agency to President Eisenhower’s cabinet. After 22 months as under secretary at the Labor Department, and now one month as USIA Director, Larson used charts, maps, and film clips to describe the barely four-year-old agency. The nearly three dozen attendees included the President, Vice President Richard Nixon, Secretary of State John Foster Dulles, and Attorney General Herbert Brownell. Larson’s objective was positioning the agency at the center of a whole of government engagement program. Larson stressed “the need for the help of all Cabinet members, since the program for telling the United States’ story can succeed only if everyone in public and private life is alert to the impact of our actions on world opinion.”

Larson’s presentation focused on the agency’s importance to the entire government. At the end of his nearly ninety-minutes briefing, he made three specific requests to the cabinet. First, every department and agency designate a liaison–a “watchdog” as he called it–to stay on top of USIA’s activities and maintain conversations between their agency and both State and USIA. Second, that these liaisons meet regularly as a group. And third, that the briefing presented to the cabinet be repeated for the “top officials of each agency.”
The minutes reflect that the cabinet concurred with each request. The cabinet also “decided to ensure that the foreign opinion factor would be weighed in deciding upon actions and statements and that the Department of State and USIA would be informed in advance when such actions or statements would have an impact abroad.”
And then the question was asked. Attorney General Brownell inquired about “the foundation for charges by the press that USIA was engaged in undue competition with the regularly established press.” The context was recent threats from Congress to limit or reduce USIA’s budget because of these concerns. 
The Members of Congress were channeling a few wire services, some newspapers, and the National Broadcasting Corporation. The Associated Press, along with the United Press, had pressed the competition argument since the government’s peacetime broadcasting plan started to form in October 1945. Such was the climate when Ike appointed Larson, a former Rhodes scholar and law professor, as Director of the agency.
In 1946, the American Society of Newspaper Editors dismissed the bulk of the AP’s concerns, concluding that “the present uncertainties in international relations justify an effort by the United States Government to make its activities and its policies clear to the people of the world through the agency set up in the State Department.” ASNE agreed with the State Department’s position that the government was intended only to fill in “the gaps where private agencies don’t do the job.”
The AP frequently raised the point that the Kremlin’s media used the news service. This point, however, was countered by others who noted the AP’s client in Moscow was highly selective in the stories it used. As for other nations, the AP’s chief, Kent Cooper, would later say that “all countries of any importance actually avail themselves” of news of the American wire services. The fact was, as the State Department pointed out, many of the countries the department intended to engage, such as Russia, Hungary, Poland, Romania, Yugoslavia, and Iran, “either do not get these reports or process them beyond recognition.” An analysis requested by the State Department in 1946 found real gaps where private agencies cannot do their job because of structural problems in critical markets prevented adequate private enterprise, whether American or otherwise, from operating effectively or at all.
As the war of ideologies proceeds, people in Europe are being super-saturated with statized propaganda. This is dramatically shown by the poor response to Russian movies even in countries like Czechoslovakia and Hungary, where the full power of the regime is thrown behind them. In contrast, there is a refreshing quality of interest and believability in America’s free and uncensored movies, books, magazines, and newspapers — where they can get through. [Emphasis in the original]
But, in too many places they are not getting through. It is naive to say “Let private enterprise carry the ball,” and at the same time ignore the fact that there are widening areas in which private enterprise can no longer operate in a normal manner.
Memo from William Nichols to Howland Sargeant, “Private Enterprise and the U.S. Information Program — Preliminary Report.” October 18, 1947.
The structural problems limiting private agencies from effectively operating in these markets ranged from currency issues to infrastructure to local censorship. The report described three categories of countries. In “Free Zone” countries–including Canada, Cuba, and Mexico–commercial media had each access and there was commercial potential. “Iron Curtain” countries–Russia, Yugoslavia, for example–was where a private operation was virtually impossible, commercial opportunities non-existent, and threats to consumers. The third category, “Mixed,” were “shaky” countries–including France and Italy–where a combined effort by private and government was necessary, in part, because a distinguishing feature of these markets was the non-convertibility of currency.
The May 1947 version of a bill that would become known as the Smith-Mundt Act contained language to directly address concerns of competition like those of the  AP’s.
[T]he Secretary shall encourage and facilitate by appropriate means the dissemination abroad of information about the United States by private American individuals and agencies, shall supplement such private information dissemination where necessary, and shall reduce such Government information activities whenever corresponding private information dissemination is found to be adequate.
Section 502 of HR 3342 “United States Information and Exchange Act of 1947,” as of May 13, 1947.
Through various markups, this language evolved until the final Smith-Mundt Act was signed into law by Harry S. Truman on January 27, 1948. The original Section 502 was split into two: Section 502 (“Policies Governing Information Activities”) and Section 1005 (“Utilization of Private Agencies”).
In authorizing international information activities under this Act, it is the sense of the Congress (1) that the Secretary shall reduce such Government information activities whenever corresponding private information dissemination is found to be adequate; (2) that nothing in this Act shall be construed to give the Department a monopoly in the production or sponsorship on the air of short-wave broadcasting programs, or a monopoly on any other medium of information.
Section 502, Public Law 80-402
In carrying out the provisions of this Act it shall be the duty of the Secretary to utilize, to the maximum extent practicable, the services and facilities of private agencies, including existing American press, publishing, radio, motion picture, and other agencies, through contractual arrangements or otherwise. It is the intent of Congress that the Secretary shall encourage participation in carrying out the purposes of this Act by the maximum number of different private agencies in each field consistent with the present or potential market for their services in each country.
Section 1005, Public Law 80-402
Both of these protections remain today. The Smith-Mundt Modernization Act of 2012 specifically called out both in Section 208, the passage addressing concerns of domestic dissemination of information by the agencies covered by the Act, where were the then-Broadcasting Board of Governors and the public diplomacy elements of the State Department. The concern about domestic access to these programs, including the radio broadcasting, did not exist for the first two decades of Smith-Mundt. It was not the mid-1960s when Senator J. William Fulbright was trying to abolish USIA, VOA, Radio Free Europe, and Radio Liberty, which he described in 1972 as “Cold War relics.” Fulbright’s attack included requiring USIA be reauthorized annually and amending Smith-Mundt in a way that began the process of falsely casting the law as an “anti-propaganda” law, a narrative that would be cemented in 1985 by Senator Edward Zorinsky.
But in late 1956, when Larson took over USIA, the repeating cycle of charges of unfair competition with private agencies did have some truth. Foreign papers were using USIA’s news services delivered over the air and in print instead of paying for American wire services or entering into contracts with American newspapers. The Congress and State Department intended that the information service use, to the “maximum extent practicable, the services and facilities of private agencies, including existing American press, publishing, radio, motion picture, and other agencies, through contractual arrangements or otherwise. This did happen at first, but it was curtailed quickly in 1946 due to a lack of oversight over programs written and produced by contractors (one of the examples is, separated by time, humorous). Through a separate amendment to the Smith-Mundt Act, the Informational Media Guarantee, passed as part of the European Recovery Program, provided an additional channel to support the distribution of domestic media (often books and films) abroad. But the specter of competition, real or perceived, remained.
The Attorney General’s question sparked discussion beyond the cabinet meeting. An Editorial Note posted on the State Department Historian’s website was written about 1987, based on the publication date of the volume of the Foreign Relations of the United States, 1955-1957  (Volume IX, “Foreign Economic Policy; Foreign Information Program”), this note appears in. This Editorial Note came to my attention because of what it suggests: that the Eisenhower Administration considered abolishing USIA in 1957, barely four years after creating it.
The Historian’s over three-decade-old Editorial Note requires context. The following four points, three of which begins with a passage from the Editorial Note, provide the background I believe is necessary to understand the commentary better.
First point:
“In an April 26 request to C.D. Jackson, USIA Deputy Director Washburn cited the anti-USIA campaign by Roy Howard [of Scripps-Howard News Service] and criticism by the Information Chief of NBC as contributing to the USIA Congressional problems. In a memorandum of May 14 [1957], USIA Director Larson asked David G. Briggs, IPS, to investigate complaints from the United Press and Associated Press about USIA press file competition. Larson was especially concerned over the charges made by Frank J. Starsel, General Manager of the Associated Press, to Senator Lyndon B. Johnson, Senate Democratic leader and Appropriations Committee Chairman, that USIA was carrying on unfair competition against private United States press agencies.”
https://history.state.gov/historicaldocuments/frus1955-57v09/d203
Opposition to the State Department’s news division focused on, but not limited to, the broadcasting entity inherited from the abolishment of OWI on Aug 31, 1945, and known as the Voice of America, came from a minority of the American news media. As described above, the AP led the opposition, but the UP soon joined with them. The AP’s resistance began after Reuters, its partner in a global news cartel, felt attacked by how it was portrayed in two brief footnotes in a report about the postwar information environment commissioned by the State Department in early 1945.
The dust-up between the AP and State was so intense by January 1946 that Congress stopped working on the legislation that would later become the Smith-Mundt Act, the bill that gave permanent authorization for information and exchanges programs of all kinds. The majority of the US media, including the International News Service (INS), William Randolph Hearst’s service and later the “I” in UPI when the two merged later, supported the foreign intervention by State. This collective bunch, including those who opposed government radio before the war. Included among the supportive journalists and editors was Mark Ethridge, who had been hired by the National Association of Broadcasters in 1938 to oppose Congressional attempts to launch a government radio service aimed at Latin America. But in 1946, Ethridge described the AP and UP as “exceedingly smug in their assumption they are the sole possessors of purity.” He criticized the wire services for imagining they could penetrate countries “where they cannot go” at a time “when we are trying to win the peace—now, while we are in an ideological war.”
The AP, however, argued it had demonstrable reach abroad, citing its contracts abroad, including behind the Iron Curtain, such as TASS, the Russian news agency. Most in the media and government found this unconvincing owing to the Kremlin’s penchant for being highly selective and often re-editing stories. Many in the American press also highlighted the inconsistency of the AP refusing to sell its service to the State Department on the grounds the AP would be tainted by association with a government broadcaster while having no such qualm selling to Moscow. (As an aside, the AP successfully campaigned to keep VOA out of the Senate press gallery for decades until the 1980s, long after Moscow’s news services were allowed in.)
Second Point: 
After hearing opposition to the proposal by his staff, Secretary Dulles on May 17 expressed his objections to the President of any absorption by the Department of State of USIA. The President, who initially voiced some support for the measure, authorized Dulles to maintain his stand against a merger of USIA with the Department of State. 
https://history.state.gov/historicaldocuments/frus1955-57v09/d203
Secretary of State John Foster Dulles was against State having a non-traditional role in diplomacy. He supported the creation of USIA in 1953, which was the natural result of State’s rejection of the public diplomacy programs it was charged with beginning in late 1945 by Executive Order and through early 1948 through appropriations, and finally from early 1948 on by legislative authority (the Smith-Mundt Act) onward. About that time, incidentally, Dulles argued for the need of a separate government agency “dedicated to the task of nonmilitary defense” with “adequate personnel and ample funds.”
Creating USIA and removing the information and cultural programs from the State Department reduced the department’s workforce by 40%. In addition to the broadcasting service, there were the extensive information programs involving posters, books, movies, libraries, training, and exchanges of all types–technical, governmental, cultural, educational–that requires “front line” staff (i.e., public affairs officers) and “back office.” By reducing the headcount and simplifying the mission of the department, the Secretary could focus on the traditional role of a foreign ministry. Such was the claim at the time. Dulles supported the split and did not want USIA’s operations to return four years later when USIA’s staff numbered around 7,000.
The argument to create USIA in the first place was because State was again rejecting and refusing to acknowledge a role in direct engagement abroad (the department similarly refused to engage in 1916 and 1938, and both times resulted in the creation of agencies designed to bypass the department: the foreign section of the Committee on Public Information and later the Coordinator for Inter-American Affairs). The people who were in place in 1945-1947 that brought about the passage of the Smith-Mundt Act that made these programs permanent were gone by 1949. People like C.D. Jackson and Nelson Rockefeller who supported State being the key now realized that State couldn’t do it and helped create USIA.
Remember that when Eisenhower created USIA, the Information piece was the lesser of a two-part reorganization of government along the DIME (Diplomacy, Information, Military, Economics) model. In 1953, the new Eisenhower Administration decided to consolidate foreign policymaking and execution by streamlining leadership, authorities, and appropriations. While some argued against this separation, there were those, especially at the State Department, who supported it. The administration tried to move “separate and self-contained pieces” of the foreign policy process under a single leadership through two plans. A single roof would increase efficiency and efficacy through synchronization, reduce costs, and simplify interaction with Congress. The first, Plan No. 7, established the Foreign Operations Administration (FOA) by consolidating several foreign affairs and aid activities under one roof. FOA was a hybrid agency bringing together Treasury, Defense, and State, with State the greater of among equals. The second, Plan No. 8, created USIA, which State supported so it could return to what it viewed as its “traditional” role in diplomacy.
Also, it is important to remember Senator Fulbright’s tepid support in 1953 Plan No. 8. He expected USIA would be shuttered within 3 years, or “maybe 10.” Whether intentional or not, ten years later he began attacking the agency with vigor, as briefly mentioned above. 
Third Point: 
On May 29, Congress sent to the President a bill providing $96.2 million for the USIA 1958 budget. Part of the bill included a provision barring USIA from competing with or duplicating the services of private agencies in news or pictures. 
https://history.state.gov/historicaldocuments/frus1955-57v09/d203
There was already a non-compete clause in the Smith-Mundt Act, as noted above. This language also doubled as a sunset-clause to shutter the activities. In short, the government was to defer to private media whenever possible and to reduce activities when the private press was deemed to be adequate. The redundancy of this text highlights reflects the agency’s failure to support the existing law (i.e., the language appears as a stern reminder), a breakdown of the Hill to exercise oversight over the authorities granted in legislation or lip service to the news media.  
Fourth and final Point:
Not found in the Historian’s note is the overall opposition and confusion over what USIA was and was not. By the mid-1950s, discussions about the ongoing political warfare of the “cold war” (which would not be a capitalized proper noun for another decade) were happening in Congress, in newspapers and magazines and on radio news programs. While some in Congress were interested in vigorously defending against and fighting Russian subversion (aka “political warfare,” sometimes today referred to as “hybrid warfare” or “information warfare“) and USIA was simply not a part of that conversation as it was not charged with, resourced, or trained to counter Russian political warfare. There were also concerns about USIA being “un-American” because, in part, of certain books available in USIA’s libraries abroad.
Also not in the Editorial Note was the cause of the repurposing of the term “public diplomacy.” In the 1950s, public diplomacy was a diplomat leaving a closed-door negotiation and speaking to the press because the other side, often the Americans, did so (if they did at all). By the 1960s, “public diplomacy” emerged as a term to stake out important turf that was not “diplomacy.” This was part of an effort to place USIA and its FSIOs (Foreign Service Information Officers) intentionally on equal footing with State and FSOs.
In the end, after Dulles asked his staff whether USIA should be reincorporated into State, he reversed his earlier apparent willingness to entertain the merger. The Congress would continue to apply pressure on USIA with some seeking to end the agency’s “semi-autonomous” status while also eliminating redundancies by merging USIA into State. The House proposed reducing the $144 million budget by nearly 10% while the Senate discussed cutting more than 30% of the budget. In the end, the budget was cut by 33%. And there was Arthur Larson, who was seen as a “propagandist” for Eisenhower more than the country. Larson would remain at USIA for less than a year, leaving in October 1957 to become a special assistant to the president. Larson was succeeded by Ambassador George V. Allen, a career diplomat who previously served as the Assistant Secretary of State for Public Affairs, 1948-1950. In that role, he managed the international information programs, exchange programs, and radio broadcasting operations then in the State Department before they were removed in 1953 to form USIA. When Allen took over, his “minor” problems were described as “slumping moral, administrative laxness, and a dearth of first-class information experts.” The major problem were three fundamental questions voiced by an increasing number in Congress: why does the agency exist? what job should it do? and what status should it hold in the hierarchy of the Executive? 
USIA would, of course, continue to be a separate agency until it was abolished in 1999 following an April 1997 agreement between the Clinton Administration and Senator Richard Helms. Today, there are calls to recreate USIA, most of which are ill-informed on what USIA was and was not, and none consider substantial organization questions. Today, like 1997 and 1957 when Allen took over, the three fundamental questions remain unanswered.
But there are lessons we can learn from Arthur Larson’s briefing and the subsequent discussion. First, we need the president and the cabinet to accept the necessity of coordination and collaboration on policies, particularly as it relates to the information environment. Eisenhower’s statement “Everything we say and do, and everything we fail to say and do, will have an impact in other lands” was valid then and more so today. Second, there are political risks when the president installs a political actor as the central head of information. Republicans and Democrats alike did not like Larson, which contributed to the former Dean of the Pittsburgh law school to move on with less than a year as Director. Lastly, there was progress here, even if bumpy, because the president recognized a problem and helped drive a solution. Without that, little of substance and lasting effect will get done. 
Image credit: https://en.wikipedia.org/wiki/John_Foster_Dulles