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EXECUTIVE
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EXECUTIVE OFFICE OF TH E PRESIDENT
BU REAU O F TH E B U D G ET
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W A S H IN G T O N , D .C .

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OFFIC E OF
T H E D IR E CTO R

J U L I 4 1966

MEMORANDUM FOR THE PRESIDENT
Subject:

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The "Gold Budget" - International
Transactions of Federal Agencies

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Highlights

The latest gold budget data which we have just reviewed and
compiled shows:

/

The net dollar outflow abroad from the Federal
Government's regular activities has increased by an
estimated $404 million between fiscal year 1965 and
1966, and is expected to increase by another $253
million in fiscal 1967.
Expanded Defense activities in Southeast Asia account
for all of this $657 million dollar increase, and more.
The net outflow from all other programs is expected to
fall by $174 million between 1965 arid 1967.
The improved outlook outside Defense results from faster
increases in projected receipts than in payments. In
the past agencies have been overoptimistic in their
forecasts of receipts. Greater effort will be required
in the future by the agencies to meet these higher targets,

As long as our Southeast Asia commitments continue, substantial
further reductions in agency payments abroad without
sacrificing essential U.S. commitments will be difficult.
Every effort is underway consistent with such commitments.
A more detailed summary of the outlook and of such efforts
follows.

Attachment




Charles L. Schultze
Director

SUM
MARY OF RESULTS
The following analysis is based upon agency reports sub­
mitted as of March 15:
The excess of payments over receipts for regular
transactions has increased by $404 million from fiscal
1965 to 1966 and is expected to increase by another
$253 million in 1967. On the assumption that Defense
See. X V / activities will terminate by the end of fiscal 1967 in
°
^ both Southeast Asia and the Dominican Republic, the excess
payments in 1968 is expected to decline by $1,130 million,*
e
or $473 million below the 1965 level.
. When special transactions are included, the net
tj J - » c^s0i«e.excess of payments has increased by $848 million in 1966,
hfi h
U)orA<g ,n anc^ will decline by $33 million between 1966 and 1967 and
by $912 million in 1968.
Table 1.

SUMMARY OF INTERNATIONAL TRANSACTIONS
OF THE FEDERAL GOVERNMENT
(Fiscal years.
1965
actual

Payments...........
Regular receipts....
Excess of payments,
regular transactions
Less: special
transactions.....
Excess of payments,
total............

In millions)
1966
estimate

1967
estimate

1968
estimate

$4,238
2,012

$4,909
2,279

$5,388
2,505

$4,420
2,667

2,226

2,630

2,883

1,753

648

203

489

270

$1,579

$2,427

$2,394

$1,482

Payments have increased by $671 million in 1966 and
will increase by $479 million in 1967 and then decline by
$963 million in 1968. Defense, including Vietnam, accounts
for most of these changes.




X
2
Regular receipts have increased by an estimated
$267 million between 1965 and 1966 and will rise further
by $226 million in 1967 and by $162 million in 1968.
The 1968 figure will be $655 million or about 33 percent
above the 1965 level.
Net receipts from special transactions are esti­
mated to have declined by $444 million in 1966, to increase
by $286 million in 1967 and to decline by $219 million in
1968. No sales of special Treasury securities and no special
Export-Import Bank receipts are included in 1967 or 1968
estimates. For this reason, such estimates may be under­
stated in either or both years.
PAYMENTS
The trend from year to year in overseas expenditures is
dominated even more than in the past by the sizable changes
in Defense outlays abroad. Excluding Defense, payments rose
by an estimated $175 million in fiscal 1966, but are estimated
to decline by $27 million in 1967 and $62 million in 1968.
Payments for (a) pensions and annuities, (b) interest on
the public debt held abroad, and (c) U. S. contributions
to international organizations will continue to increase
in total each year. Contrary to earlier estimates, AID
expenditures rose sharply in 1966 but are expected to fall
off substantially in both 1967 and 1968. Payments abroad
by all other agencies likewise were somewhat higher in total
for 1966, but moderate declines are anticipated in 1967 and
1968.
(See Table 2).
RECEIPTS
The steady rise estimated in regular receipts totals $654
million for the three-year period. It stems mainly from
(a) higher levels of repayments on earlier loans, primarily
by the Export-Import Bank in 1967 and 1968, (b) increasing
sales of agricultural commodities and repayments of previous
sales credit throughout the period reported by Agriculture,
(c) larger interest receipts anticipated by these and other
lending agencies, and (d) higher sales of military equipment
by Defense in 1966 and 1967.
Receipts from special transactions customarily fluctuate
over a wide range from estimate to estimate and from year
to year. The current estimates show a sharp bulge in 1967,
primarily because receipts previously expected from Germany




3
in 1966 on military exports are now anticipated in 1967
along with the normal 1967 installments. This telescoping
of payments for military exports will be offset in part by
unusually high net redemptions of special Treasury securities
issued in earlier years.
(See Table 3).
GOLD BUDGET ACTIONS AND ISSUES
The following actions have been taken or are under active
discussion as a result of the review of the March 15 reports
from the various departments and agencies:
1.

Revisions in expenditure targets

(a) AID. The original estimates submitted for the
fiscal years 1967 and 1968 can be further reduced by in­
creased use of special letters of credit. Expenditure tar­
gets have been lowered by $28 million and $44 million
respectively.
(b) HEW-NIH. The overall expenditure targets for the
National Institutes of Health for 1967 and 1968 were approved,
but the agency was requested to hold expenditures in Western
Europe, Canada and Japan in both years to the 1966 level.
2.

U.S. support of foreign research

Six agencies supporting research and scientific
activities abroad (Agriculture, Defense, HEW, AEC, NASA and
NSF) have been requested (a) to review their procedures to
assure that the guidelines in Budget Circular A-58 are
rigorously applied on a continuing basis, and (b) to submit
by August 15, 1966, specific data regarding costs and numbers
of U. S. personnel and scientific offices abroad. This infor­
mation will be reviewed to determine the need for these offices
and the possibilities of consolidation.
3.

Possible revisions in POD policies

Staff are now studying possible balance of payments
benefits and costs from (a) increased efforts to use excess
and near-excess currencies to pay for overseas travel;
(b) reductions in use of Defense flights for non-Government




4

travel abroad, and (c) changes in policies on overseas
POL procurement. Legislation sponsored by Defense is
before the Congress to encourage savings by servicemen
overseas by authorizing payment of higher interest rates
on their deposits.
4.

Possible revisions in Treasury policies

Treasury has been asked to explore (a) the feasibility
of meeting some of our foreign currency requirements by
purchasing such currencies from U. S. firms having difficulty
repatriating profits and (b) the results of recent campaigns
to sell savings bonds to civilian employees abroad, including
the possible desirability of providing easier redemption
abroad, and of increased efforts to sell to local employees.
5.

Export promotion

We are exploring the effectiveness of existing export
promotion efforts from both budgetary and balance of payment
standpoints.
6.

Contributions to international organizations.

As a basis for possible revision of the gold budget
treatment of U. S. dollar contributions to international
organizations, AID, State and Treasury have been asked to
provide estimates of the amount of their contributions to
such agencies that is actually spent in the U. S.




Table 2. INTERNATIONAL PAYMENTS * B AGENCY
,Y
(Fiscal years. In millions)
1965
actual

1966
estimate

1967
estimate

1968
estimate

$3,100.2
480.4
$3,580.6

$3,606.5
371.6
$3,978.1

$2,700.5
302.5
$3,003.0

552.7
222.8
33.3
808.8

622.5
246.7
0.1
869.3

682.6
252.5

14.6

20.7

8.6

12.1

23.2

228.1
89.0
46.0
34.4
17.9
14.5
11.7
11.2
9.1
7.3
4.4
3.7
3.2
2.2
1.8
1.6
1.5

Defense.... .................. $2,603.7
411.2
AID..........................
Subtotal.................. $3,014.9
Uncontrollable items:
Treasury special & financial.. $
Pensions & annuities (exc. DOD) .
Foreign Claims Settlement Comm.
Subtotal..................
Export promotion agencies:
Agriculture............... .
Commerce.................. .
Subtotal..................
Other agencies (excluding
uncontrollables):
State......... ...............
AEC..........................
USIA....... .
Panama Canal,
Post Office. .
NASA........
Peace Corps.
.
HEW.....
Treasury 1/'
Interior......... .
TVA.............. .
Corps of Engineers,
NSF.............. .
FAA.............. .
Justice.......... .
VA. ............... .
ABMC............. .
GSA..... ..........
Subtotal,
Total..................
Less: payments in previously
reserved currencies.......
Total payments.........

$

682.6
261.1

*

935.1

943.6

32.8

26.1
15.5
41.6

26.8
11.0
37.8

253.9
56.4
46.9
36.7
18.0
17.9
15.8
5.2
13.4
30.0
17.0

250.7
27.9
46.5
41.8
18.6
29.6
14.9
4.8
14.5
21.7
9.1

2.2

2.1

3.9
3.7

0.2

1.1
1.6
0.5

3.9
2.2
2.3
1.1
1.6
0.1

269.6
5.2
49.5
42.8
18.6
31.7
16.7
4.6
11.8
10.5
3.1
0.5
3.7
1.7
2.3
1.1
1.6
0.1

487.5

526.4

493.4

476.6

$4,334.7

$5,009.3

$5,448.2

$4,459.5

97.4

100.0

60.0

40.0

$4,237.7

$4,909.3

$5,388.2

$4,420.2

'
$

$

2.2

*Less than $50,000
]/ Excludes $60 million payment to Interhandel in 1965 and $20 million in
1967.




Table 3. INTERNATIONAL RECEIPTS, BY AGENCY
(Fiscal years. In millions)
1965
actual

1966
estimate

1967
estimate

1968
estimate

$1,081.1
479.6
177.7
153.4
217.5
74.4
20.0
37.3
20.3
26.4

$1,168.7
565.4
193.8
279.8
271.8
77.8
21.0
15.0
17.7
23.7

$1,064.5
771.1
212.1
262.4
347.1
81.2
21.0
28.4
17.7
28.3

129.3

167.2

$2,279.3

$2,505.4

$2,666.6

$

$

$

Regular receipts
Defense....................
Export-Import Bank.........
AID........................
Treasury...................
Agriculture................
Panama Canal.............. .
Post Office................
AEC........................
State......................
Other......................
Less: Duplication in
agency reporting..........

$

Total, regular receipts....

$2 ,011.9

996.7
476.2
172.8
165.9
159.4
70.7
20.9
16.2
12.1
21.5

8.4^

100.5

Special transactions:

Total, special transactions.

$

Total, receipts............

$2,659.5

323.0

-40.0

232.2

53.6

92.4

600.0

300.0
o•
o
1

$

C
O

Advances on military exports
Treasury sales of medium
term, non-marketable
securities, net...........
Export-Import Bank loan pre­
payments and participation
sales.....................

189.1

647.6

$

202.7

$2,482.0

-110.9

$

489.1

$2,994.5

$

270.0

$2,936.6

1/ This estimate was reduced by $96.6 million to account for ExportImport Bank's repayment of a U.K. advance to DOD that is included in
DOD's receipts.





Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102