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DEBT
CEILING
HEARING
BEFORE THE
COMMITTEE ON FINANCE
UNITED STATES SENATE
EIGHTY-SEVENTH
CONGRESS
SECOND SESSION
ON
H.R.
1 1 9 9 0
A N ACT TO P R O V I D E FOR A TEMPORARY INCREASE I N T H E
P U B L I C D E B T L I M I T S E T F O R T H I N S E C T I O N 21 O F T H E
SECOND L I B E R T Y B O N D A C T
J U N E 26, 1962
Printed for the use of the Committee oil Finance
U.S. GOVERNMENT PRINTING OFFICE
85845
WASHINGTON : 1962
C O M M I T T E E ON F I N A N C E
H A R R Y F L O O D B Y R D , Virginia,
R O B E R T S. K E R R , Oklahoma
R U S S E L L B. L O N G , Louisiana
G E O R G E A. S M A T H E R S , Florida
C L I N T O N P. A N D E R S O N , N e w Mexico
P A U L H . D O U G L A S , Illinois
A L B E R T G O R E , Tennessee
H E R M A N E. T A L M A D G E , Georgia
E U G E N E J. MCCARTHY, Minnesota
V A N C E H A R T K E , Indiana
J. W . F U L B R I G H T , Arkansas
ELIZABETH B . SPRINGER, Chief
II
Chairman
J O H N J. W I L L I A M S , Delaware
F R A N K C A R L S O N , Kansas
W A L L A C E F. B E N N E T T , U t a h
J O H N M A R S H A L L B U T L E R , Maryland
C A R L T . C U R T I S , Nebraska
T H R U S T O N B. M O R T O N , K e n t u c k y
Clerk
CONTENT S
Page
I
T e x t of H . R . 11990
WITNESSES
D i l l o n , H o n . Douglas, Secretary of t h e T r e a s u r y
1,
A c t u a l p u b l i c d e b t o u t s t a n d i n g , fiscal year 1962, w i t h June 2, 1962,
estimate based o n o p e r a t i n g cash balance of $4 b i l l i o n (excluding
8
free gold)
Deposits b y t h e Federal Reserve banks representing interest charges o n
Federal Reserve notes, fiscal years 1947-61
17
D i v i d e n d s , interest, a n d similar earnings received b y t h e T r e a s u r y
f r o m G o v e r n m e n t corporations a n d c e r t a i n o t h e r business-type
activities, fiscal years 1960 a n d 1961
18-19
E s t i m a t e d m o n t h l y budget receipts a n d expenditures a n d r e s u l t i n g
e n d - o f - m o n t h debt levels, fiscal year 1963 (based o n 1963 b u d g e t
d o c u m e n t — p l u s f o r m a l modifications)
10'
Forecast of p u b l i c d e b t o u t s t a n d i n g fiscal year 1963, based o n constant
o p e r a t i n g cash balance of $4 b i l l i o n (excluding free gold)
9
P u b l i c enterprise r e v o l v i n g funds, December 31, 1961
19-44
Semiannual budget receipts a n d expenditures, fiscal 1958-63
4
Bell, H o n . D a v i d E., D i r e c t o r of t h e B u r e a u of t h e B u d g e t
11, 69
B u d g e t request of the D e p a r t m e n t of Commerce f o r fiscal 1963
63
E x p e n d i t u r e effect of net reductions i n a p p r o p r i a t i o n s
64
Legislative proposals f o r w h i c h specific estimates were n o t i n c l u d e d i n
the 1963 budget s u b m i t t e d i n J a n u a r y
48
Peacetime calendar years d u r i n g w h i c h u n e m p l o y m e n t was 4 percent
or less
75
ADDITIONAL
INFORMATION
F e d e r a l d e b t , interest o n t h e debt, budget surplus or deficit, value of t h e
d o l l a r , balance of p a y m e n t s , a n d U.S. gold stock, 1930-63 ( f r o m official
G o v e r n m e n t sources)
in
5S
DEBT CEILING
TUESDAY, JUNE 26, 1962
U.S. SENATE,
COMMITTEE ON FINANCE,
Washington, D.C.
The committee met, pursuant t o notice, a t 10:10 a.m., i n r o o m 2221,
N e w Senate Office B u i l d i n g , Senator H a r r y F . B y r d (chairman)
presiding.
Present: Senators B y r d (chairman), K e r r , Smathers, Gore, Douglas,
Talmadge, M c C a r t h y , W i l l i a m s , B e n n e t t , M o r t o n , a n d H a r t k e .
Also present: E l i z a b e t h B . Springer, chief clerk.
T h e CHAIRMAN. T h e committee w i l l come t o order.
T h e b i l l before the committee is H . R . 11990, t o provide f o r a
temporary increase i n the public debt l i m i t set f o r t h i n section 21 of
the Second L i b e r t y B o n d A c t .
( H . R . 11990 follows:)
[ H . R . 11990, 87th Cong., 2d sess.]
A N A C T To provide for a temporary increase i n the public debt l i m i t set forth i n section 21 of the Second
Liberty Bond Act
Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled, T h a t the public debt limit set forth i n t h e first
sentence of section 21 of the Second Liberty Bond Act, as amended (31 U . S . C .
757b), shall be temporarily increased—
(1) during the period beginning on July ] , 1962, and ending on M a r c h 31,
1963, to $308,000,000,000,
(2) during t h e period beginning on April 1, 1963, and ending on June 24,
1963, t o $305,000,000,000, and
(3) during the period beginning on June 25, 1963, and ending on June 3 0 ,
1963, t o $300,000,000,000.
Passed the House of Representatives June 14, 1962.
Attest:
R A L P H R. ROBERTS,
Clerk.
T h e CHAIRMAN. W e have t w o witnesses, t h e Honorable Douglas
Dillon, Secretary of t h e Treasury, a n d t h e Honorable D a v i d Bell,
D i r e c t o r of t h e B u r e a u o f t h e Budget. These gentlemen w i l l make
their statements a n d b o t h sit a t the table t o answer whatever questions
are propounded.
M r . Secretary, y o u m a y proceed.
STATEMENT OF HON. DOUGLAS DILLON, SECRETARY OF THE
TREASURY
Secretary DILLON. T h e President i n h i s budget message last
J a n u a r y requested a t e m p o r a r y debt l i m i t of $308 b i l l i o n f o r fiscal
1963. T h i s request was based on his estimate t h a t t h efiscal1962
deficit w o u l d amount t o $7 b i l l i o n a n d t h a t there w o u l d be a $500
m i l l i o n surplus i n fiscal 1963. I a m here t o d a y t o renew t h e request
for a $308 b i l l i o n t e m p o r a r y debt l i m i t f o r fiscal year 1963.
l
DEBT CEILING 11
T h e present t e m p o r a r y l i m i t of $300 b i l l i o n w i l l expire at t h e end of
t h i s m o n t h . O n J u l y 1 t h e debt l i m i t w i l l r e v e r t t o i t s p e r m a n e n t
l e v e l o f $285 b i l l i o n unless n e w legislation has been enacted p r i o r
thereto. Since t h e debt w i l l s u b s t a n t i a l l y exceed t h e p e r m a n e n t leve]
o f $285 b i l l i o n on J u l y 1, i t is essential t h a t there be new legislation
p r i o r t o t h a t date.
T h e d e b t l i m i t b i l l w h i c h passed the House o f Representatives o n
J u n e 14 ( H . R . 11990) does n o t p r o v i d e t h e flat $308 b i l l i o n d e b t l i m i t
w h i c h we requested f o r fiscal 1963. R a t h e r , i t provides a g r a d u a t e d
d e b t l i m i t set a t $308 b i l l i o n f o r the period J u l y 1, 1962 t h r o u g h
M a r c h 31, 1963, $305 b i l l i o n for the period A p r i l 1, 1963 t h r o u g h June
24, 1963, and $300 b i l l i o n f r o m June 25, 1963, t h r o u g h the end of the
fiscal year. T h i s g r a d u a t e d d e b t l i m i t is acceptable t o the T r e a s u r y ,
p r o v i d e d t h a t i t is understood t h a t the d e b t ceilings i n the House b i l l
were carefully t a i l o r e d t o meet the Treasury's seasonal financial r e q u i r e m e n t s under the assumption of a balanced b u d g e t . T h e g r a d u a t e d reductions established i n the House b i l l w o u l d n o t be adequate i f
w e were t o r u n a deficit o f a n y s u b s t a n t i a l size i n fiscal 1963.
This
f a c t was specifically recognized and clearly set f o r t h i n the r e p o r t of
t h e House W a y s a n d M e a n s C o m m i t t e e , w h i c h reads as follows
(p. 2 ) :
* * * i t is t h e v i e w of y o u r c o m m i t t e e t h a t t h e increases p r o v i d e d b y t h i s b i l l
are t h e m i n i m u m necessary t o p r o v i d e for t h e seasonal v a r i a t i o n i n t h e c o l l e c t i o n
o f revenues, assuming a balanced budget for t h e fiscal year 1963. T h e a d m i n i s t r a t i o n has i n d i c a t e d t h a t there m a y be a balanced budget f o r t h e fiscal year 1963.
Y o u r c o m m i t t e e has concluded t h a t t h e series of d e b t l i m i t a t i o n s p r o v i d e d u n d e r
t h i s b i l l f o r t h e v a r i o u s periods of t h e year w i l l be adequate t o p r o v i d e f o r t h e
expected seasonal v a r i a t i o n i n expenditures a n d receipts, b u t w o u l d n o t give
sufficient f l e x i b i l i t y s h o u l d a deficit be i n c u r r e d i n t h e fiscal year 1963. I n t h i s
l a t t e r e v e n t u a l i t y , y o u r c o m m i t t e e believes t h a t i t w i l l be a p p r o p r i a t e l a t e r i n
t h e fiscal year 1963 t o again r e v i e w t h e s t a t u t o r y debt l i m i t a t i o n . T h u s t h i s
" s t e p a p p r o a c h " t o t h e d e b t l i m i t a t i o n , w i t h t h e t w o reductions i n t h e l a t t e r p a r t
of t h e fiscal year, is designed t o p r o v i d e for seasonal needs, w i t h o u t p r o v i d i n g so
m u c h leeway t h a t i t can subsequently be used t o cover deficit
financing.
T h i s s t a t e m e n t b y the House W a y s a n d M e a n s C o m m i t t e e regardi n g the n a t u r e of t h e g r a d u a t e d set of d e b t l i m i t s passed b y t h e House
is, I believe, w h o l l y accurate.
W i t h t h e fiscal year 1962 n o w n e a r l y concluded, I can r e p o r t t o
y o u t h a t w e s t i l l expect t h e deficit for fiscal year 1962 t o be a b o u t $7
b i l l i o n . Past experience has shown, however, t h a t fiscal year-end
t o t a l s are a p t t o v a r y several h u n d r e d m i l l i o n dollars i n either direct i o n f r o m p r e l i m i n a r y estimates. Therefore, the final deficit figure
f o r fiscal year 1962 m a y p r o v e t o be somewhat less t h a n $7 b i l l i o n or
i t m a y exceed t h a t a m o u n t b y a few h u n d r e d m i l l i o n dollars. I n
order t o be o n t h e conservative side, we have used a $7% b i l l i o n figure
i n t h e projections o n t h e a t t a c h e d table.
F o r fiscal year 1963, t h e J a n u a r y budget d o c u m e n t showed a $500
m i l l i o n surpius. T h e President has requested a f e w new programs
since J a n u a r y , i n p a r t i c u l a r a c a p i t a l i m p r o v e m e n t p r o g r a m f o r distressed areas, t h a t w o u l d use t h e b u l k o f this estimated surplus b u t
s t i l l leave a balance. W h e t h e r or n o t this balance is a c t u a l l y achieved
depends l a r g e l y o n revenue receipts w h i c h , i n t u r n , are dependent o n
t h e state of t h e n a t i o n a l economy. T h e J a n u a r y revenue estimate of
$93 b i l l i o n assumed t h a t t h e gross n a t i o n a l p r o d u c t w o u l d average
$570 b i l l i o n d u r i n g calendar 1962 and t h a t t h e economy w o u l d cont i n u e its u p w a r d t r e n d t h r o u g h o u t the entire fiscal year.
11
DEBT CEILING
A d m i t t e d l y , the expansion of the economy so f a r this year has n o t
measured u p t o our expectations. W h i l e this has s u b s t a n t i a l l y d i m i n ished t h e l i k e l i h o o d of achieving our goals, the economy continues t o
m o v e steadily f o r w a r d a n d i t is s t i l l too early f o r a new a n d refined
estimate of t h e gross n a t i o n a l p r o d u c t f o r 1962 u p o n w h i c h our revenues necessarily depend. A s t o expenditures, t h e best we can do is
t o r e l y on t h e J a n u a r y b u d g e t d o c u m e n t w i t h t h e realization t h a t
Congress has n o t y e t acted on a n y 1963 a p p r o p r i a t i o n b i l l , n o r has i t
t a k e n final a c t i o n on our t a x b i l l , t h e President's proposals on p o s t a l
rates a n d f a r m price supports or on various other legislative recommendations. U n t i l these m a t t e r s are decided b y congressional action,
there is no f i r m basis for a n y new estimate of expenditures a n d revenues.
A c c o r d i n g l y , we have made n o change i n the basic assumption of a
balanced b u d g e t i n fiscal 1963, a n d our request f o r a $308 b i l l i o n t e m p o r a r y debt ceiling is based squarely on t h a t assumption.
I t m a y seem incongruous t o some t h a t , w h i l e p r o j e c t i n g a balanced
b u d g e t for fiscal 1963, we are a t the same t i m e requesting an $8 b i l l i o n
increase i n the t e m p o r a r y debt ceiling. O f course, i f the t i m i n g o f
o u r receipts a n d expenditures were i n balance t h r o u g h o u t t h e year,
there w o u l d be n o need f o r this increase i n the d e b t ceiling.
Unfort u n a t e l y , this is never the case. E v e n w i t h a balanced b u d g e t for
fiscal 1963 as a whole, our estimates i n d i c a t e t h a t t h e first half of the
fiscal year w i l l show a substantial seasonal deficit, a deficit w h i c h w i l l
be offset b y a surplus d u r i n g the remainder of the fiscal year.
Specifically, our projections i n d i c a t e a seasonal cash deficit w h i c h
reaches a peak of $11.2 b i l l i o n on December 15, j u s t before t h e receipt
of the large t a x p a y m e n t s due on t h a t date. Succeeding peaks of $11
a n d $10.7 b i l l i o n w i l l be reached on J a n u a r y 15 a n d M a r c h 15, before
the receipt of t h e s u b s t a n t i a l t a x p a y m e n t s due o n those dates.
T h e r e a f t e r , this seasonal deficit w i l l r a p i d l y be erased b y a s i m i l a r l y
large seasonal surplus; a n d b y June 30, 1963, our p i o j e c t i o n s show t h e
d e b t r e t u r n i n g t o a p p r o x i m a t e l y the same level as June 30, 1962.
T h i s seasonal imbalance between receipts a n d expenditures is illust r a t e d on an a t t a c h e d c h a r t . I t is t h e same as this large c h a r t here
[ p o i n t i n g t o enlarged c h a r t against t h e wall].
(The c h a r t referred to follows:)
4
Fiscal 1958-63
DEBT CEILING
SEMIANNUAL BUDGET RECEIPTS AND EXPENDITURES
11
DEBT CEILING
Secretary DILLON. T h e imbalance i n fiscal year 1963 is e n t i r e l y
a t t r i b u t a b l e t o the m a r k e d seasonal p a t t e r n of our t a x receipts,
since expenditures are p r o j e c t e d a t a f a i r l y constant level t h r o u g h o u t
the fiscal year. I t is t o finance this seasonal deficit of $11 b i l l i o n i n
t a x receipts, a deficit w h i c h w i l l occur even w i t h a f u l l y balanced
budget, t h a t we need the $8 b i l l i o n increase i n the t e m p o r a r y debt
l i m i t . I t should be borne i n m i n d t h a t , since the c h a r t is based on
semiannual figures w h i c h include the heavy December 15 t a x receipts,
i t understates b y several b i l l i o n dollars the seasonal swing w h i c h
reaches its peak i n m i d - D e c e m b e r .
As the a t t a c h e d table indicates, we are ending the c u r r e n t fiscal
year w i t h a debt p r o j e c t e d a t about $294 b i l l i o n , on the basis of a
$4 b i l l i o n cash o p e r a t i n g balance. A d d i n g the $3 b i l l i o n allowance
f o r f l e x i b i l i t y t o this figure, gives a t o t a l of a b o u t $297 b i l l i o n , $3 b i l l i o n
under the c u r r e n t t e m p o r a r y debt l i m i t of $300 b i l l i o n . I t is because of this extra leeway of $3 b i l l i o n w h i c h we w i l l have on June 30
t h a t we w i l l be able to finance a seasonal deficit of $11 b i l l i o n w i t h an
$8 b i l l i o n increase i n the debt l i m i t .
T h e seasonal imbalance between Federal G o v e r n m e n t receipts a n d
expenditures is a regular feature of our financial mechanism. I t is
n o t j u s t something t h a t w i l l occur i n fiscal 1963. I w o u l d l i k e to call
y o u r a t t e n t i o n again t o the chart w h i c h shows semiannual receipts
a n d expenditures f r o m fiscal 1958 t h r o u g h fiscal 1963. Y o u w i l l
note t h a t a pronounced seasonal p a t t e r n i n revenues shows u p i n each
a n d every year, the green figures being the revenues i n the second
half of the fiscal year a n d the yellow bars the revenues i n the first half
of the fiscal year. I t was as m u c h i n evidence i n fiscal 1960, w h e n
we last r a n a budget surplus, as i t was i n years w r hen we r a n b u d g e t
deficits.
O n the assumption of a constant $4 b i l l i o n o p e r a t i n g balance, we
expect the debt t o rise t o about $305 b i l l i o n before d r o p p i n g b a c k
again to a r o u n d $294 b i l l i o n at the end of fiscal 1963. A $308 b i l l i o n
debt ceiling is the m i n i m u m needed t o p r o v i d e us w i t h the usual
$3 b i l l i o n leeway for flexibility i n debt management a n d for unforeseen
contingencies, a m a r g i n w h i c h p r u d e n t and economic financial managem e n t requires.
T h e b i l l w h i c h passed the House embodies a f o r m a l recognition of
the seasonal v a r i a t i o n i n Federal G o v e r n m e n t revenues b y proposing,
for the first t i m e , seasonal debt l i m i t s . W h i l e we w o u l d prefer the
simpler, overall a n n u a l debt l i m i t such as we have h a d i n the past,
we recognize t h a t the House b i l l does have the characteristic of s e t t i n g
f o r t h v e r y clearly the seasonal n a t u r e of the Treasury's b o r r o w i n g
requirements under the assumption of a balanced b u d g e t i n fiscal 1963.
T h e Treasury's operating cash balance consists essentially of funds
on deposit a t the 12 Federal Reserve banks and i n a p p r o x i m a t e l y
11,400 commercial banks t h r o u g h o u t the c o u n t r y . F o r the past
few years the T r e a s u r y , i n its presentations a t hearings on the debt
l i m i t , has assumed a $3.5 b i l l i o n constant operating cash balance.
Experience has shown t h a t this is an unrealistically l o w figure. W i t h
careful management to have the necessary funds on h a n d i n the proper
places a n d at the proper times to meet the G o v e r n m e n t ' s obligations
as t h e y come due and w i t h every effort to a v o i d excess cash balances,
our average operating cash balance (excluding gold) for the first 11
m o n t h s of this fiscal year was $4,755 m i l l i o n . T h e average for fiscal
DEBT CEILING 11
year 1961 was $4,620 m i l l i o n and for fiscal year 1960 i t was $4,638:
m i l l i o n . I n 1958, w h e n the $3.5 b i l l i o n figure was first used f o r
i l l u s t r a t i v e purposes, Federal expenditures a m o u n t e d t o $71.4 b i l l i o n .
Fiscal year 1963 expenditures are expected t o be some 30 percent
larger. W i t h larger expenditures, we n a t u r a l l y require larger o p e r a t i n g cash balances. F o r these reasons, we have used a $4 b i l l i o n figure
i n the a t t a c h e d tables as a conservative figure for a constant o p e r a t i n g
balance. T h a t this figure is t r u l y conservative can r e a d i l y be seen
b y the f a c t t h a t a 30 percent increase, comparable t o the increase i n
b u d g e t expenditures between fiscal 1958 a n d fiscal 1963, w o u l d have
i n d i c a t e d a figure o f $4% b i l l i o n , a figure s u b s t a n t i a l l y closer t o , b u t
s t i l l lower t h a n , the actual average of our o p e r a t i n g balance d u r i n g
each o f the past 3 years. A n operating balance a t least as large as
t h e average of the past 3 years is needed t o p e r m i t the d a y - t o - d a y
operations of the T r e a s u r y t o be conducted i n an efficient m a n n e r .
O u r estimates also p r o v i d e , as i n the past, f o r a $3 b i l l i o n m a r g i n
t o p r o v i d e much-needed flexibility i n debt management a n d t o cover
unforeseen contingencies, i n c l u d i n g the inescapable uncertainties i n
o u r m o n t h - t o - m o n t h projections of revenues and expenditures.
Since
t h e assumed cash balance of $4 b i l l i o n is over $500 m i l l i o n less t h a n
o u r a c t u a l needs, this m a r g i n of f l e x i b i l i t y i n practice w o r k s o u t t o
less t h a n $2% b i l l i o n . Such a m a r g i n for f l e x i b i l i t y is the m i n i m u m
needed f o r the efficient management of the p u b l i c debt. I t is n o t i n
t h e p u b l i c interest to require the T r e a s u r y to operate w i t h a smaller
m a r g i n under t h e debt l i m i t . T h e end result of an excessively t i g h t
d e b t l i m i t is l i k e l y to be higher interest costs on the debt a n d o t h e r
serious consequences, n o t o n l y i n our domestic affairs, b u t also i n
o u r balance o f p a y m e n t s position and its related effect o n o u r g o l d
stock.
I w o u l d l i k e t o give y o u a f e w examples t o i l l u s t r a t e w h y t h e $3
b i l l i o n m a r g i n for flexibility is so essential for efficient debt managem e n t . F i r s t , the T r e a s u r y should be able t o take advantage o f
especially favorable conditions i n the m o n e y and c a p i t a l m a r k e t s
whenever t h e y arise. H o w e v e r , an excessively t i g h t d e b t l i m i t m a y
p r e v e n t the T r e a s u r y f r o m t i m i n g i t s b o r r o w i n g operations m o s t
advantageously a n d the o p p o r t u n i t y t o m a k e i m p o r t a n t savings o n
interest costs w o u l d , therefore, be lost.
Second, i n c o n d u c t i n g our d e b t management operations d u r i n g t h e
past 17 m o n t h s we have been v e r y conscious of t h e i m p a c t of these
operations on our balance of p a y m e n t s position. I t is o f c r i t i c a l
i m p o r t a n c e t o our i n t e r n a t i o n a l financial position t h a t our s h o r t - t e r m
interest r a t e s t r u c t u r e be i n reasonable e q u i l i b r i u m w i t h s h o r t - t e r m
rates abroad. I f this e q u i l i b r i u m is n o t m a i n t a i n e d , funds are i n duced t o flow abroad seeking interest r a t e differentials, t h u s increasi n g t h e d r a i n on our gold stock. I n order t o a v o i d a n y d i s t u r b a n c e o f
t h i s e q u i l i b r i u m , t h e T r e a s u r y has arranged its recent cash b o r r o w i n g
so as t o p e r m i t t h e m a x i m u m use of a d d i t i o n a l quantities of T r e a s u r y
bills. I t is v i t a l l y i m p o r t a n t t h a t the T r e a s u r y have enough r o o m
under t h e debt l i m i t t o t a k e such actions whenever m a r k e t c o n d i t i o n s
w a r r a n t . T o d e n y t h e T r e a s u r y a sufficient m a r g i n f o r such d e b t
operations c o u l d result i n s u b s t a n t i a l and unnecessary drains on o u r
g o l d stock.
T h i r d , i t m a y often be i n t h e best interest of b o t h t h e G o v e r n m e n t
a n d t h e p r i v a t e c a p i t a l m a r k e t s i f t h e T r e a s u r y consolidated some of
11
DEBT CEILING
its r e f u n d i n g operations. F o r example, i n r e f u n d i n g the $7.2 b i l l i o n
i n securities m a t u r i n g this c o m i n g N o v e m b e r 15, i t m a y be a d v a n tageous t o m a k e t h e same r e f u n d i n g offer to the holders of t h e $2.3
b i l l i o n of securities m a t u r i n g December 15. A n excessively t i g h t d e b t
l i m i t could p r e v e n t us f r o m using t h e cash r e f u n d i n g approach i n
h a n d l i n g such an operation, even t h o u g h m a r k e t conditions m i g h t
suggest t h a t a cash r e f u n d i n g operation w o u l d be most advantageous
t o t h e Treasury.
F o u r t h , i f the debt l i m i t becomes exceedingly b i n d i n g , the T r e a s u r y
m i g h t have t o do some of i t s financing t h r o u g h the sale of n o n g u a r anteed issues o f Federal agencies w h i c h are n o t subject t o the d e b t
l i m i t . T h i s was done b a c k i n October 1957 a n d J a n u a r y 1958, u n d e r
the preceding a d m i n i s t r a t i o n , when the T r e a s u r y was s t r u g g l i n g t o
l i v e w i t h an unrealistically l o w - d e b t l i m i t . T h i s is a v e r y u n s o u n d
financial practice w h i c h has been severely criticized b y the C o m p t r o l l e r General of the U n i t e d States. I t means t h a t the G o v e r n m e n t
has t o p a y one-half t o three-fourths percent more i n interest costs
t h a n i t w o u l d have t o p a y o n T r e a s u r y obligations.
Secretary
I
Anderson used this device o n l y w i t h the greatest reluctance.
w o u l d hope t h a t we w o u l d never again be forced t o use i t .
F o r all of these reasons, a sufficient m a r g i n for flexibility i n debt
management a n d f o r contingencies is essential i f we are t o have
efficient a n d economical management of the G o v e r n m e n t ' s finances.
T h e level of the debt is the result of all of our past decisions o n
appropriations, expenditures, a n d taxes. H o w e v e r , i t is i m p o r t a n t
t o recognize t h a t these decisions are reflected i n the debt o n l y a f t e r
a considerable timelag. T h e t i m e l a g between decisions on a p p r o p r i ations a n d the i m p a c t of those decisions on the debt is, i n fact, t h e
reason w h y we need a substantial increase i n the debt l i m i t i n fiscal
1963, even under the assumption of a balanced budget. T h e increased
debt level d u r i n g the c o m i n g fiscal year is a p r o d u c t o f the deficit i n
fiscal 1962. I f we have a balanced budget i n fiscal 1963 and, a y e a r
f r o m n o w , contemplate a balanced b u d g e t for fiscal 1964, we c o u l d
get b y i n fiscal 1964 w i t h the same $308 b i l l i o n debt l i m i t w h i c h we
are requesting now.
T h e level of the d e b t is the final l i n k i n a sequential chain w h i c h
has as its first l i n k the appropriations process. D e b t levels i n the
f u t u r e are the p r o d u c t of past decisions on appropriations and taxes
and t h e d e b t ceiling m u s t be consistent w i t h those past decisions.
I n conclusion, I wish t o reemphasize t h a t t h e increase i n t h e d e b t
ceiling t o $308 b i l l i o n is based on the assumption of a balanced b u d g e t
i n fiscal 1963. T h e last attached table shows m o n t h l y estimates o f
b u d g e t receipts and expenditures i n fiscal 1963, under a balanced
b u d g e t assumption, and t h e i r relationship t o o u r m o n t h - e n d d e b t
projections. T h e $8 b i l l i o n increase i n the t e m p o r a r y d e b t ceiling i s
r e q u i r e d t o cover the seasonal l o w i n receipts, w h i c h always occurs
d u r i n g the first half of the fiscal year. Such an increase is needed i n
fiscal 1963 because of the s u b s t a n t i a l deficit w h i c h has already been
i n c u r r e d i n fiscal 1962. I n other words, the increase is being requested
t o meet t h e fiscal consequences of past deficits and does n o t reflect
the expectation o f a deficit i n fiscal 1963.
T h e r e are those w h o t h i n k o u r revenue estimates for fiscal 1963 are
too o p t i m i s t i c , a n d c e r t a i n l y t h e y l o o k more o p t i m i s t i c t o d a y t h a n
t h e y d i d last J a n u a r y . I n A p r i l the staff of the J o i n t C o m m i t t e e on
8
DEBT CEILING 11
I n t e r n a l Revenue T a x a t i o n , on the basis o f its independent revenue
projections, estimated t h a t fiscal 1963 w o u l d produce an a d m i n i s t r a t i v e b u d g e t deficit of $4.9 b i l l i o n , assuming t h a t the a d m i n i s t r a t i o n ' s
t a x b i l l is approved b y the Congress. I w i l l n o t a t t e m p t to evaluate
t h i s estimate, since I have already given y o u the reasons w h y we feel
t h a t there is no firm basis, as y e t , for revising the estimates presented
i n t h e President's b u d g e t message. I raise the issue o n l y t o emphasize
t h a t i f the b u d g e t deficit forecast for fiscal 1963 b y the staff of the
J o i n t C o m m i t t e e on I n t e r n a l Revenue T a x a t i o n should prove t o be
c o r r e c t , the g r a d u a t e d set of d e b t ceilings a p p r o v e d b y the House
w i l l n o t be adequate t o meet the T r e a s u r y ' s needs, and we w i l l be
forced t o r e t u r n t o the Congress early i n the n e x t session, as was
envisioned b y t h e r e p o r t of the W a y s and M e a n s C o m m i t t e e .
A t e m p o r a r y increase i n the debt l i m i t t o $308 b i l l i o n , as p r o v i d e d
b y t h e House i n the b i l l before y o u , is the absolute m i n i m u m needed
i f the G o v e r n m e n t ' s finances are t o be managed i n an o r d e r l y a n d
economical manner and i f we are t o be able t o finance our p u r e l y
seasonal cash requirements i n fiscal 1963 w i t h i n the f r a m e w o r k of a
balanced budget. I earnestly r e c o m m e n d its a p p r o v a l b y t h i s committee.
( T h e tables referred to above f o l l o w : )
Actual public debt outstanding, fiscal year 1962, with June 30, 1962, estimate based on
operating cash balance of $4,000,000,000 {excluding free gold)—Based on projection
of June 22, 1962
[ I n billions]
Operating
balance
Federal
Reserve
banks and
depositaries
(excluding
free gold)
P u b l i c debt
subject t o
limitation
$3.3
5.8
4.2
5.3
3.1
8.1
7.0
5.4
4.7
5.4
2.8
5.6
3.1
3.9
3.0
4.6
2.7
6.0
2.2
4.7
5.6
7.2
5.2
$289.1
292.2
292.1
293.5
293.2
293.6
296.0
295.5
296.7
296.9
297.0
296.1
296.3
296.4
296.3
296.9
297.8
296.1
295.8
296.9
296.7
299.2
299.4
4.0
293.7
Allowance to
p r o v i d e flexib i l i t y i n fi- T o t a l p u b l i c
nancing and debt l i m i t a for contion required
tingencies
ACTUAL
1961—July 1 5 .
J u l y 31
_
A u g . 15
A u g 31
Sept. 15
_
Sept. 30
Oct. 15
Oct. 31
__ . _ _
N o v . 15
N o v . 30
_
Dec. 15
Dec. 31
1962—Jan. 15
Jan. 31 . _
_
.
Feb. 15
Feb. 28
M a r . 15
M a r . 31
A p r . 15
_ _
A p r . 30
M a y 15
_ _
________
M a y 31
__
June 15
__
ESTIMATED
June 30
$3.0
$296.7
NOTE.—For seasonal reasons the June 30, 1962, operating balance w i l l be significantly above $4,000,000,000,
so the actual debt o u t s t a n d i n g w i l l be higher t h a n s h o w n here.
11
DEBT CEILING
Forecast of public debt outstanding fiscal year 1963, based on constant
operating
cash balance of $4,000,000,000
(excluding free gold).—Based
on 1963 budget
document—plus formal
modifications
[ I n billions]
1962--June 30,
July 15
J u l y 31
Aug. 15_.
_
Aug. 31
Sept. 15
Sept. 30
Oct. 15
Oct. 31
N o v . 15
N o v . 30
Dec. 15
Dec. 31
_ _
1963--Jan. 15.
Jan. 31
Feb. 15
Feb. 28
M a r . 15
M a r . 31
Apr. 15
Apr. 30
M a y 15
M a y 31
June 15. __
June 30
_
__ __
______
.
Operating
balance,
Federal
Reserve
banks and
depositaries
(excluding
free gold)
Public debt
subject to
limitation
$4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
$293. 7
297.0
297.8
299.2
299.0
301.2
295.7
299.5
300.5
302.3
302.1
304.9
301.5
304.7
302.1
302.8
302.0
304.4
297.9
301.0
299.4
299.4
299.6
302.0
294.0
Allowance to
provide flexib i l i t y i n fi- T o t a l public
nancing and debt limitafor cont i o n required
tingencies
$3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
$296. 7
300.0
300.8
302.2
302.0
304.2
298.7
302.5
303.5
305. 3
305.1
307.9
304.5
307.7
305.1
305.8
305.0
307.4
300.9
304.0
302.4
302. 4
302.6
305.0
297.0
Estimated monthly budget receipts and expenditures and resulting end-of-month debt levels, fiscal year 1963 (based on 1963 budget document- -Plus
formal
modifications)
[In billions of dollars]
Budget receipts and expenditures
Net
receipts
Balance on June 30, 1962..
1962—Jul y
August
September
October
November
December
1963—Januar y
February
March
Am-il
May
June
Fiscal year 1963..
3.1
7.0
10.2
3.2
6.9
9.0
6.3
Expenditures
7.2
7.6
7.6
8.1
Monthly
surplus or
deficit (—)
-4.1
-.6
+2.6
-4.9
-.7
11.5
5.9
7.6
8.4
7.4
7.4
7.7
7.6
+3.8
-1.7
13.7
8.4
+5.3
8.0
8.2
93.0
8.0
+.6
-1.1
+.6
+.2
Cumulative
surplus or
deficit (—)
-4.1
-4.7
Total to be
financed
4.1
+.7
+.1
-7.0
-7.7
-7.1
-8.2
-7.6
-3.8
-5.5
-5.3
1.2
-3.3
4.8
1.6
3
()
0
0
3
Operating
cash
balance 1
Debt subject to
limitation
Allowance
for flexibility
and contingencies
Total debt
limitation
required 2
W
-0.6
-2.1
1 Excluding free gold.
2
A t the midmonth points i n December, January, and March the requirements are
$307,900,000,000, $307,700,000,000, and $307,400,000,000 respectively.
Net receipts
of trust and
clearing
accounts
and other
transactions
-.6
.6
+.5
-.5
+.3
+.2
-.4
+.3
-4.1
1.5
-.3
.3
1
.2
-5.6
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
293.7
297.8
299.0
295.7
300.5
302.1
301.5
302.1
302.0
297.9
299.4
299.6
294.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
296.7
300.8
302.0
298.7
303.5
305.1
304.5
305.1
305.0
300.9
302.4
302.6
297.0
Less than $50,000,000.
Source: Office of the Secretary of the Treasury, Office of Debt Analysis, June 21, 1962.
w
o
o
DEBT CEILING
11
Secretary DILLON. T h a n k y o u , M r . C h a i r m a n .
T h e CHAIRMAN. T h a n k y o u , M r .
Secretary.
M r . B u d g e t D i r e c t o r , w i l l y o u m a k e y o u r statement?
STATEMENT OF HON. DAVID E. BELL, DIRECTOR OF THE BUREAU
OF THE BUDGET
M r . BELL. M r . C h a i r m a n a n d members of the c o m m i t t e e , I appreciate this o p p o r t u n i t y t o appear before this c o m m i t t e e i n s u p p o r t of
the President's request for a t e m p o r a r y increase i n the s t a t u t o r y d e b t
l i m i t to be effective t h r o u g h o u t fiscal year 1963.
I n his b u d g e t message last J a n u a r y , the President recommended t h e
e n a c t m e n t of an increase i n the t e m p o r a r y debt ceiling f r o m the $298
b i l l i o n t h e n i n effect t o $308 b i l l i o n , t o be available d u r i n g the remainder of fiscal year 1962 a n d for fiscal 1963. I n M a r c h , legislation
was enacted raising the l i m i t to $300 b i l l i o n for the d u r a t i o n of fiscal
year 1962; the request n o w before the c o m m i t t e e covers the r e m a i n i n g $8 b i l l i o n increase proposed b y the President i n the J a n u a r y
b u d g e t t o be i n effect d u r i n g fiscal year 1963. A s the President
p o i n t e d o u t i n the budget message:
Despite t h e e x p e c t a t i o n of budget balance f o r fiscal 1963 as a whole * * *
seasonal requirements w i l l t e m p o r a r i l y raise t h e o u t s t a n d i n g debt d u r i n g t h e
course of t h e year. * * * T o make t h e usual allowance f o r a m a r g i n o f flexib i l i t y i n fiscal 1963. * * * I urge p r o m p t e n a c t m e n t of a t e m p o r a r y increase of
t h e debt l i m i t t o $308 m i l l i o n . * * *
As y o u k n o w , i t is t h e seasonal n a t u r e o f the d e b t l i m i t p r o b l e m
f a c i n g us, even w i t h a balanced budget, w h i c h l e d the House to p r o vide for v a r y i n g the debt l i m i t at different times d u r i n g the year i n
the b i l l passed earlier this m o n t h — a less desirable arrangement t h a n
a single debt l i m i t , b u t acceptable i f f u t u r e developments do n o t
result i n a s u b s t a n t i a l departure f r o m our present b u d g e t assumptions.
T o aid i n y o u r consideration of the President's request, I w o u l d
l i k e t o review b r i e f l y the b u d g e t a r y o u t l o o k w h i c h is, o f course,
d i r e c t l y related to the debt l i m i t .
Fiscal year 1962: A t the present time, i t appears t h a t the c u r r e n t
fiscal year, 1962, w i l l end w i t h a budget deficit of a p p r o x i m a t e l y $7
b i l l i o n , a b o u t t h e same as estimated i n the J a n u a r y budget. Based
on d a t a t h r o u g h M a y , i t seems probable t h a t b o t h receipts a n d expenditures w i l l be somewhat below the J a n u a r y estimates, each b y
a b o u t $1 b i l l i o n . O n the receipts side, c o r p o r a t i o n income tax collections account for most of the r e d u c t i o n ; o n the expenditure side,
l o w e r f a r m price s u p p o r t o u t l a y s b y the C o m m o d i t y C r e d i t Corporat i o n are the largest single factor i n the r e d u c t i o n n o w a n t i c i p a t e d f r o m
the J a n u a r y estimate, a l t h o u g h there w i l l be numerous smaller decreases and some increases.
Fiscal year 1963: F o r fiscal year 1963, neither the economic n o r
legislative s i t u a t i o n a t this t i m e is clear enough to enable us to m a k e
a n y firm revisions i n the b u d g e t totals estimated last J a n u a r y .
As y o u k n o w , the President has recommended certain amendments
t o the J a n u a r y budget, the largest of w h i c h are for the capital i m p r o v e ments p r o g r a m i n areas of h i g h u n e m p l o y m e n t and the c o n t i n u a t i o n
o f t e m p o r a r y extended u n e m p l o y m e n t benefits. Smaller revisions—
b o t h u p and d o w n — h a v e been made i n the requested appropriations.
I n t o t a l , however, the changes recommended b y the President w o u l d
12
DEBT CEILING 11
n o t raise the 1963 expenditure estimate above the revenues as p r o jected i n J a n u a r y .
T h e Congress is c u r r e n t l y considering the 1963 b u d g e t recommendations, and changes w i l l n a t u r a l l y result f r o m f i n a l congressional
actions as w e l l as other factors. N o a p p r o p r i a t i o n b i l l for 1963 has
as y e t been enacted d u r i n g his session. T h e House thus far v o t e d
o n seven a p p r o p r i a t i o n bills, i n c l u d i n g t w o supplemental a p p r o p r i a t i o n bills for fiscal 1962; the five bills passed b y the House f o r fiscal
year 1963 represent 63 percent of the t o t a l c u r r e n t a u t h o r i z a t i o n s
recommended f o r 1963. T h e Senate has acted o n the t w o 1962
supplementals and o n three 1963 a p p r o p r i a t i o n bills representing 57
percent of t o t a l recommended 1963 c u r r e n t authorizations. O u r
estimates indicate t h a t the House action on the five annual a p p r o p r i a t i o n bills i t has passedth us far w o u l d have the effect of r e d u c i n g 1963
b u d g e t expenditures b y a l i t t l e more t h a n $300 m i l l i o n below t h e
J a n u a r y estimates for the agencies covered b y these bills; the Senate's
action on the three bills i t has passed w o u l d reduce expenditures i n
^963 b y about $50 m i l l i o n . These figures are, of course, t e n t a t i v e ,
p e n d i n g the final outcome of action b y b o t h Houses of Congress.
I n a d d i t i o n t o the u n c e r t a i n t y related t o a p p r o p r i a t i o n bills, v a r i o u s
legislative proposals b y the President affecting the b u d g e t are p e n d i n g
i n the Congress. These include, among others, the r e c o m m e n d a t i o n s
concerning education, i m p r o v e m e n t s i n welfare programs, y o u t h
e m p l o y m e n t o p p o r t u n i t i e s , Federal p a y r e f o r m , postal rates, a n d f a r m
price supports. T h e l a t t e r t w o , i f enacted as proposed, were e s t i m a t e d
t o reduce 1963 expenditures b y about $1 b i l l i o n .
W h i l e the s i t u a t i o n is subject to change each day, there is no clear
t r e n d o r firm basis a t this t i m e for a specific s u b s t a n t i a l revision o f
t h e t o t a l b u d g e t expenditure estimate for 1963 made i n J a n u a r y , as
f o r m a l l y m o d i f i e d since t h a t time.
Revenues i n fiscal year 1963 w i l l depend d i r e c t l y on economic developments d u r i n g the calendar year 1962, a n d o n congressional
a c t i o n on taxes. E c o n o m i c a c t i v i t y c o n t i n u e d t o advance i n J a n u a r y a n d F e b r u a r y of this year, a l t h o u g h a t a slower r a t e t h a n the
J a n u a r y b u d g e t estimates h a d assumed. I n M a r c h a n d A p r i l , t h e
pace of economic a c t i v i t y p i c k e d up and the o u t l o o k for a sustained
advance d u r i n g the coming m o n t h s was i m p r o v e d . T h e statistics
we have seen for M a y i n d i c a t e a c o n t i n u i n g recovery, b u t the v i g o r
of the advance is s t i l l n o t e n t i r e l y clear.
E c o n o m i c forecasting is an imprecise art, a t best, especially so i n
as large a n d v a r i e d an economy as ours, and we do n o t believe there is
sufficient evidence at this t i m e on w h i c h to base a specific revision of
t h e J a n u a r y budget estimates. M o r e o v e r , u n t i l the final f o r m of the
t a x revision b i l l is settled, its effect on 1963 revenues cannot be acc u r a t e l y gaged.
I t has been suggested t h a t we could get along w i t h a smaller increase
i n the debt l i m i t t h a n we have recommended, even t h o u g h our request
is based on a balanced budget assumption, i f the President were t o
reduce expenditures i n fiscal 1963 below the levels a p p r o p r i a t e d b y
t h e Congress. T h i s raises the question of the a d m i n i s t r a t i v e f e a s i b i l i t y
of r e d u c i n g expenditures r a p i d l y enough t o help us m u c h w i t h respect
t o our debt l i m i t needs. A s the p r o j e c t i o n supplied b y Secretary
D i l l o n indicates, under a balanced b u d g e t assumption the peak level
of t h e debt i n fiscal 1963 w i l l be reached on December 15. T h i s
DEBT CEILING
11
means t h a t , i n order to be h e l p f u l i n m e e t i n g debt l i m i t requirements,
expenditure reductions m u s t be accomplished before t h a t t i m e ; i n
other words, d u r i n g t h e first 5 m o n t h s o f the fiscal year.
B u r e a u of the B u d g e t staff has estimated t h a t expenditures t h r o u g h
N o v e m b e r 1962 w i l l a m o u n t t o about $38 b i l l i o n . Of this t o t a l , t h e
m i l i t a r y f u n c t i o n s of t h e D e p a r t m e n t of Defense account f o r $20
b i l l i o n . A n o t h e r $9 b i l l i o n represents expenditures w h i c h are v i r t u a l l y
u n c o n t r o l l a b l e i n the short r u n , since t h e y are legal c o m m i t m e n t s
w h i c h t h e G o v e r n m e n t cannot reduce b y a d m i n i s t r a t i v e discretion,
such as veterans' pensions, interest on t h e p u b l i c debt, p u b l i c assistance grants t o States, ship operating subsidies, a n d f a r m price supports.
Of the r e m a i n i n g $9 b i l l i o n i n expenditures, a t least o n e - t h i r d stems
f r o m obligations already i n c u r r e d i n p r i o r years p u r s u a n t t o legislation
enacted b y t h e Congress, a n d the G o v e r n m e n t is c o m m i t t e d t o p a y
these bills w h e n t h e y f a l l due.
T h i s leaves less t h a n $6 b i l l i o n of u n c o m m i t t e d , nondefense expenditures to bear the b r u n t of any expenditure cut. L a r g e items i n
this t o t a l include such essential functions as space, atomic energy,
conduct of foreign affairs, p u b l i c health, w a t e r resource and other
n a t u r a l resource projects, medical care for veterans, operation and
maintenance of the airways, and the postal service.
I t h i n k these figures p u t the p r o b l e m i n perspective. I t is quite
clear t h a t to c u t expenditures b y any s u b s t a n t i a l a m o u n t d u r i n g such
a short span of t i m e as 5 m o n t h s means t h a t m u c h of the r e d u c t i o n
w o u l d necessarily have to f a l l on defense expenditures. T h i s , i n fact,
is w h a t happened i n 1957 when the Eisenhower a d m i n i s t r a t i o n was
endeavoring to stay w i t h i n a r e s t r i c t i v e debt l i m i t .
W i t h this i n m i n d , I j o i n the Secretary of the T r e a s u r y i n recomm e n d i n g favorable action b y the c o m m i t t e e on the President's request
for a t e m p o r a r y increase i n the debt l i m i t to $308 billion.
T h e CHAIRMAN. T h a n k y o u v e r y m u c h , M r . Bell.
M r . Secretary, I w a n t to ask y o u a few questions, and also M r . Bell.
As y o u k n o w , under article 1, section 8, of the C o n s t i t u t i o n , the
power t o b o r r o w on the credit of the U n i t e d States lies o n l y i n the
Congress. P r i o r t o W o r l d W a r I the G o v e r n m e n t entered i n t o debt
o n l y for specific purposes authorized b y separate acts of Congress.
I
t h i n k y o u w i l l recall t h a t A n d r e w Jackson, w h e n he was President,
said he was more p r o u d of p a y i n g off i n t o t o the public debt t h a n any
other action t h a t he achieved.
I was w o n d e r i n g i f y o u t h o u g h t t h a t any f u t u r e President w o u l d
ever have t h a t o p p o r t u n i t y .
Secretary DILLON. I t h i n k t h a t the tremendous size of the p u b l i c
debt t h a t was i n c u r r e d as a result of W o r l d W a r I I makes t h a t a
very difficult assumption to foresee a l t h o u g h y o u can't look i n d e f i n i t e l y
i n t o the f u t u r e . T i m e s have changed tremendously between the times
of A n d r e w Jackson and now. T h e U n i t e d States of his t i m e and the
U n i t e d States of our t i m e are n o t recognizable as the same. A n o t h e r
h u n d r e d years could c e r t a i n l y produce a s i t u a t i o n where there m i g h t
be no p u b l i c debt, b u t i t w o u l d c e r t a i n l y be a v e r y l o n g t i m e off.
Senator KERR. W o u l d the Senator yield?
T h e CHAIRMAN. Y e s .
Senator KERR. T h e statement of A n d r e w Jackson t o w h i c h he
referred is one of the most famous t h a t t h a t great m a n ever uttered.
I believe there were three things t h a t he mentioned. A n d as he read
85845—62
2
14
DEBT CEILING 11
t h e m , I d o n ' t recall t h a t he d i f f e r e n t i a t e d between t h e m as t o his
p r i d e i n each. A t the end of his second t e r m , as I r e c a l l — a n d the
Senator w i l l correct me i f I a m n o t accurate—he said, " I have rew a r d e d m y friends, I have punished m y enemies, I have p a i d the
n a t i o n a l debt a n d d i s t r i b u t e d the surplus t o the States. I a m t i r e d
a n d I a m going home t o Tennessee."
I t h i n k t h a t is w h a t the great m a n said. A n d I never was able t o
decide b u t w h a t the second p a r t o f his s t a t e m e n t was p r o b a b l y the
one he cherished the most.
T h e CHAIRMAN. I w i l l accept t h a t statement, b u t p a y i n g off debts
to his friends and d o i n g w h a t e v e r he could t o his enemies was one
t i l i n g ; and w h a t he d i d for the U.S. G o v e r n m e n t was another. H e
clearly expressed his pride i n p a y i n g off i n to to the p u b l i c debt, and
as t h e Senator f r o m O k l a h o m a says, i n d i s t r i b u t i n g the surplus t o
t h e States. I s i m p l y w a n t to m e n t i o n t h a t the debt i n 1932 w h e n I
came t o the Senate was $19 billion. A n d n o w I believe i t is $295
b i l l i o n , or more.
I s t h a t correct?
Secretary DILLON. I t is $299 b i l l i o n .
T h e CHAIRMAN. NOW, M r . Secretary, y o u approve, do y o u n o t , of
t h e practice of a debt l i m i t a t i o n ?
Secretary DILLON. I t h i n k a debt l i m i t a t i o n provides a good occasion, each year w h e n i t is renewed, t o have a review of the entire fiscal
p o l i c y of t h e G o v e r n m e n t . I t h i n k t h a t is t h e p r i m a r y f u n c t i o n of t h e
d e b t l i m i t a t i o n . H o w e v e r , t h e size of the debt is controlled b y expenditures and b y t h e appropriations w h i c h are made. Personally I
w o u l d feel v e r y h a p p y i f a w a y could be f o u n d to relate t h e mass of
a p p r o p r i a t i o n s m o r e closely t o t h e mass of revenues, so t h a t our b u d g e t
w h e n i t is adopted could be m o r e clearly adopted i n t o t o r a t h e r t h a n
i n p a r t . B u t I d o n ' t t h i n k t h a t i t is possible effectively t o use t h e
p u b l i c d e b t l i m i t a t i o n t o c o n t r o l appropriations.
T h e CHAIRMAN. DO y o u approve of a flexible d e b t l i m i t a t i o n ?
Secretary DILLON. AS set b y t h e House, I t h i n k t h a t t h a t is perf e c t l y acceptable t o us. W h a t i t requires, i f t h e Congress so decides, is
t h a t i f our estimates p r o v e w r o n g and we have a deficit i n the early
m o n t h s of t h e session, we w o u l d have t o come back and explain w h y
and ask for some sort of f u r t h e r extension of the p u b l i c debt l i m i t .
T h e CHAIRMAN. YOU c e r t a i n l y prefer a general debt l i m i t a t i o n t o
t h e previous policy of h a v i n g the Congress enact a separate l a w t o
allow each issuance of securities.
Secretary DILLON. Yes; under t h e size of our c u r r e n t a p p r o p r i a tions a n d our current debt i t w o u l d be impossible to operate the d e b t
that way.
T h e CHAIRMAN. NOW, the b i l l p e n d i n g before this c o m m i t t e e raises
t h e l i m i t t o $308 b i l l i o n f o r t h e period f r o m J u l y 1, 1962, t h r o u g h
M a r c h 31, 1963. A n d t h e n i t sets the ceiling a t $305 b i l l i o n f r o m
A p r i l 1, 1963, t o June 24, a n d reduces i t t o $300 b i l l i o n f r o m June 25,
t o June 30, so there w o u l d be a t e m p o r a r y increase i n the permanent
d e b t ceiling of u p t o $23 b i l l i o n .
Secretary DILLON. Yes, $308 is $23 b i l l i o n higher t h a n the $285
b i l l i o n permanent ceiling.
T h e CHAIRMAN. I take i t t h a t the Secretary could use this a u t h o r i t y
t o increase t h e p u b l i c debt.
Secretary DILLON. W e w o u l d use this a u t h o r i t y t o finance t h e
expenditures of t h e G o v e r n m e n t , w h i c h w o u l d be done b y increasing
DEBT CEILING
11
t h e Federal debt t e m p o r a r i l y d u r i n g t h e year a n d p a y i n g i t off as t h e
moneys come i n , p a r t i c u l a r l y d u r i n g t h e last h a l f of t h e fiscal year.
T h e CHAIRMAN. D o y o u f i n d a n y t h i n g m y t h i c a l a b o u t t h e p e r m a n e n t request t o raise t h e p u b l i c debt?
Secretary DILLON. M y t h i c a l ?
T h e CHAIRMAN. T h a t expression has been used b y h i g h officials of
the Government.
Secretary DILLON. I t h i n k i t is a v e r y real p r o b l e m t h a t we face,
M r . C h a i r m a n , a n d i t is a reflection of expenditures a n d deficits w h i c h
we have already incurred.
T h e CHAIRMAN. C a n the c o m m i t t e e regard y o u r estimated d e b t
requirements as a m y t h ?
Secretary DILLON. D e b t requirements?
T h e CHAIRMAN. C a n t h e c o m m i t t e e regard y o u r estimated d e b t
requirements as a m y t h ?
Secretary DILLON. NO, M r . C h a i r m a n , t h e y are n o t a m y t h .
T h e CHAIRMAN. W h a t does this w o r d " m y t h " mean? I t has
been bandied back a n d f o r t h a great deal l a t e l y . W e have been
hearing a b o u t m y t h s i n financial m a t t e r s . T h e r e is n o t h i n g m y t h i c a l
a b o u t debt so far as I can f i n d o u t . Y o u have got t o p a y i t back w i t h
interest.
So y o u d o n ' t regard i t as a m y t h ?
Secretary DILLON. I d o n ' t regard the Federal debt as a m y t h ; no.
T h e CHAIRMAN. YOU d o n ' t regard y o u r requests as a m y t h ?
Secretary DILLON. I c e r t a i n l y do n o t , M r . C h a i r m a n .
T h e CHAIRMAN. Also we have a great deal of t a l k b y h i g h G o v e r n m e n t officials a b o u t different k i n d s of budgets, we have a so-called
cash budget, a so-called n a t i o n a l income budget, and a so-called capi t a l budget. I w a n t t o ask y o u i f the fiscal operations of the Federal
G o v e r n m e n t were stated for the past, present, or f u t u r e i n any or all
of these f o r m s
Secretary DILLON. I f t h e y were stated i n them?
T h e CHAIRMAN. I f t h e fiscal operations of the Federal G o v e r n m e n t
at a n y t i m e have been stated i n any of t h e three different k i n d s of t h e
budgets t h a t we hear about, the so-called cash budget, t h e so-called
n a t i o n a l income budget, and t h e so-called c a p i t a l budget.
Secretary DILLON. I t h i n k i n the b u d g e t message of t h e President
t h e y d i d state t h e s u m m a r y o f Federal finances o n page 8 i n three
different ways. T h e y p u t t h e a d m i n i s t r a t i v e budget, w h i c h is t h e
b u d g e t we are t a l k i n g about here, a n d w h i c h governs t h e size of our
debt, first. T h e a d m i n i s t r a t i v e budget was t h e o n l y t h i n g t h a t was
called t h e budget.
T h e n e x t s t a t e m e n t was a consolidated cash s t a t e m e n t w h i c h showed
all the receipts f r o m the p u b l i c a n d all t h e p a y m e n t s t o the public.
Those t w o were n o t v e r y far apart i n t h e i r f i n a l excess of receipts or
p a y m e n t s ; t h e y are always v e r y close. T h e consolidated cash statem e n t includes b o t h the receipts and p a y m e n t s of t h e various t r u s t
funds.
A n d f i n a l l y , as a t h i r d i t e m t h e y listed the n a t i o n a l income accounts,
the Federal sector of t h e m , w h i c h indicates t h e economic i m p a c t o f
a p a r t i c u l a r b u d g e t a r y deficit at t h e p a r t i c u l a r t i m e . I t has n o t h i n g
t o do w i t h n a t i o n a l debt, b u t i t does operate on an accrual basis
w h i c h lists expenditures, lists revenues, w h e n t h e y are accrued r a t h e r
t h a n w h e n t h e y are a c t u a l l y paid. T h i s is p r o b a b l y m o r e accurate
16
DEBT CEILING 11
i n showing t h e economic o r the i n f l a t i o n a r y a n d n o n i n f l a t i o n a r y
i m p a c t of t h e budget on t h e economy a t a n y p a r t i c u l a r time.
T h e CHAIRMAN. DO y o u or the B u d g e t D i r e c t o r , or so far as y o u
k n o w , the President, have a n y plans i n m i n d t o change t h e present
a d m i n i s t r a t i v e budget?
Secretary DILLON. I d o n ' t see h o w y o u can change the present
a d m i n i s t r a t i v e budget, because i t is the budget
T h e CHAIRMAN. W h a t is t h e use of t a l k i n g about all these other
budgets i f t h e y are n o t practical?
Secretary DILLON. T h i s is the b u d g e t on w h i c h t h e n a t i o n a l d e b t
is based. T h e r e is n o p u b l i c a t i o n of a c a p i t a l budget. T h e o n l y
t h i n g t h a t I can imagine one could do w i t h t h a t w o u l d be m a y b e t o
i d e n t i f y m o r e clearly w i t h i n t h e a d m i n i s t r a t i v e b u d g e t w h i c h expenditures were used for certain c a p i t a l purposes, b u t y o u c o u l d n ' t separate
i t o u t , because i t w o u l d s t i l l be p a r t
T h e CHAIRMAN. I s n ' t t h a t v e r y misleading t o t h e people, because
t h e G o v e r n m e n t is n o t p r o f i t m a k i n g ?
Secretary DILLON. I d o n ' t t h i n k i t w o u l d be misleading as l o n g as
t h e y were i n c l u d e d w i t h i n t h e a d m i n i s t r a t i v e b u d g e t clearly. I t h i n k
if i t were separated o u t i n a separate document i t w o u l d be.
T h e CHAIRMAN. I f y o u b u i l d a b a t t l e s h i p — i n c i d e n t a l l y , t h e y are
o u t of date n o w , we h a v e n ' t got a single battleship t h a t is operating
Secretary DILLON. I w o u l d n ' t call t h a t a c a p i t a l i t e m .
T h e CHAIRMAN. I s n ' t i t costing the G o v e r n m e n t a good deal o f
m o n e y to keep those battleships i n mothballs?
Secretary DILLON. I w o u l d n ' t call t h a t a c a p i t a l i t e m .
T h e CHAIRMAN. IS there any a c t i v i t y of the G o v e r n m e n t w h i c h
shows a p r o f i t t h a t y o u k n o w of?
M r . BELL. T h e r e are several activities of t h e G o v e r n m e n t w h i c h do
n o t r u n a t a s u b s t a n t i a l loss. T h e power operations, for example, o f
t h e B o n n e v i l l e Power A d m i n i s t r a t i o n , so f a r as I a m aware, have
covered costs.
T h e CHAIRMAN. Does t h a t go i n t o t h e General T r e a s u r y ?
Isn't
i t t r u e t h a t i n t h e T V A w h a t e v e r profits t h e y m a k e are reinvested i n
t h e same line of business?
M r . BELL. I t depends on the arrangements under w h i c h t h e p a r t i c u l a r p r o g r a m is operated. T h e T V A does m a k e a regular p a y m e n t
t o the T r e a s u r y , w h i c h is established under t h e laws t h a t c o n t r o l t h e
TVA.
T h e CHAIRMAN. W h a t is i t y o u say makes a p r o f i t for t h e G o v e r n ment?
M r . BELL. W e l l , the power operations of the G o v e r n m e n t , i n c l u d i n g
those a t the T V A the B o n n e v i l l e Power A d m i n i s t r a t i o n , and others
at least cover their costs.
T h e CHAIRMAN. Does i t m a k e a p r o f i t after p a y i n g the interest on
the investment?
M r . BELL. I t h i n k , sir, t h a t their rates b y and large are set a n d are
directed t o be set b y l a w to cover costs and n o t to r e t u r n a p r o f i t i n
the business sense. I t h i n k i t is l e g i t i m a t e , therefore, to say t h a t t h e y
do cover costs.
T h e CHAIRMAN. I n the estimate of expenses do t h e y include the
interest on the a m o u n t of m o n e y the Federal G o v e r n m e n t has i n vested?
M r . BELL. Y e s , t h e y d o .
11
DEBT CEILING
T h e CHAIRMAN. A n d y o u t h i n k there is p r o f i t there?
M r . BELL. I t h i n k t h e y cover costs.
M r . CHAIRMAN. Does any m o n e y a c t u a l l y come back i n t o t h e
General Treasury?
M r . BELL. Y e s , s i r .
T h e CHAIRMAN. HOW much?
M r . BELL. I w i l l have to s u p p l y t h a t for the record, i f I m a y , sir.
T h e CHAIRMAN. W i l l y o u f u r n i s h t h a t for the record?
[The m a t e r i a l referred t o was supplied b y the Secretary of t h e
T r e a s u r y and appears below.]
Secretary DILLON. M r . C h a i r m a n , I h a d t i m e t o remember t w o
other operations of the G o v e r n m e n t w h i c h operate a t a p r o f i t and
w h i c h do r e t u r n G o v e r n m e n t funds. One is, of course, the Federal
Reserve System, w h i c h pays a d i v i d e n d t o the T r e a s u r y every year.
A n d the other one is the E x p o r t - I m p o r t B a n k , w h i c h pays f u l l interest
o n its money, and pays a d i v i d e n d to the G o v e r n m e n t every year.
T h e CHAIRMAN. W i l l y o u f u r n i s h i t t o the c o m m i t t e e , and t h e n
p u t i t on a percentage basis, as t o w h a t we get back i n p r o f i t o n
annual expenditures?
Secretary DILLON. T h e E x p o r t - I m p o r t B a n k has j u s t increased
their dividends to 3 % percent on capital w h i c h was furnished to t h e m
b y the G o v e r n m e n t , so i t is a p p r o x i m a t e l y — —
T h e CHAIRMAN. I t w o u l d be interesting t o see w h a t percentage of
the expenditures of the G o v e r n m e n t come back i n the w a y of profits.
Secretary DILLON. N o t v e r y m u c h .
Senator WILLIAMS. W i t h y o u r reports f u r n i s h i n g h o w m u c h t h e
income has been t o the G o v e r n m e n t f r o m these respective organizations, w o u l d y o u also furnish w i t h the same r e p o r t the a m o u n t of
m o n e y w h i c h we have advanced on behalf of the G o v e r n m e n t either
i n loans or appropriations to these same organizations, as w e l l as our
c a p i t a l investment?
S e c r e t a r y DILLON. Y e s , s i r .
(The i n f o r m a t i o n requested follows:)
T a b l e 20 ( a n n u a l r e p o r t of t h e Secretary) shows p a y m e n t s of t h e Federal
Reserve banks t o t h e T r e a s u r y representing a p p r o x i m a t e l y 90 percent of earnings
f o r the years 1947 t h r o u g h 1961.
TABLE 20.— Deposits by the Federal Reserve banks representing interest charges on
Federal Reserve notes, fiscal years 1947—61 1
Federal Reserve,
bank
1947-58
1959
Boston - _ _
$187, 510, 033. 25 $24, 791,243. 50
820,226,129. 42 130, 304, 518.13
New York _ _ _ _ _
28,615,921.81
Philadelphia
_ _
204,868,751.19
43,026, 591.51
Cleveland.
292, 522,052. 77
31,271,236.00
Richmond
200,068,326. 88
22,799,293.27
168,
242,
559.
80
Atlanta _ _ _
90,095,997. 31
Chicago..
___ 551, 568,328.56
18,039,401.46
144.278,700.68
St. Louis
_
8, 572,250. 85
82,769,046.27
Minneapolis,.__
20,631,083.19
142,420,544.93
Kansas C i t y _. _ _ _
17, 338,035. 47
Dallas. _
_ _ _ _ _ 119.104,394.17
55, 735,036.38
321,092,430.74
San Francisco- _
Total
3, 234, 671,298. 66
1960
$65,177,632.98
271,042,719.10
72, 840,095. 47
90,521,189.66
73,461,162.64
51,754.685.08
199,656,095. 46
47,750,266.32
26,147,203. 49
45,065,009. 42
37, 930,193. 44
111, 761,165.15
491,220,608.88 1,093,107,418.21
1961
Cumulative
through 1961
$41,194,897.08 $318,673, 806.81
212,079,914.17 1,433,653,310. 82
45,886,308.09 352, 211,076. 56
66, 597,471.42 492,667, 305. 36
49.090.076.11 353,890,801. 63
39, 571,839.00 282,368,377.15
139,200,110. 57 980, 520, 531. 90
29, 706,375.68 239,774,744.14
16,489,015. 59 133,977,516.20
32, 574, 465. 45 240,691,102.99
29,729, 590.74 204,102,213.82
86.009.391.12 574,598,023.39
788,129,485.02 5, 607,128,810.77
1
Pursuant to sec. 16 of the Federal Reserve Act, as amended (12 U.S.C. 414). Through 1959, consisted of
approximately 90 percent of earnings of the Federal Reserve banks after payment of necessary expenses
and statutory dividends, and after provisions for restoring the surplus of each bank to 100 percent of subscribed capital where i t fell below that amount. Beginning i n 1960, pursuant to a decision by the Board of
Governors of the Federal Reserve System, consists of all net earnings after dividends and after provision
for building u p surplus to 100 percent of subscribed capital at those banks where surplus is below that
amount, and also of the amounts by which surplus at the other banks exceeds subscribed capital.
18
DEBT CEILING 11
T a b l e 127 ( a n n u a l r e p o r t of t h e Secretary) shows interest, dividends, a n d o t h e r
earnings of p u b l i c enterprises f o r t h e fiscal years 1960 a n d 1961. Previous a n n u a l
r e p o r t s c o n t a i n s i m i l a r tables for each of t h e years covered. H o w e v e r , c u m u l a t i v e
figures are n o t i m m e d i a t e l y available.
TABLE 127.—Dividends, interest, and similar earnings received by the Treasury f rom
Government corporations
and certain other business-type activities, fiscal years
1960 and 1961
Amounts
Agency and nature of earnings
1960
Atomic Energy Commission, defense production guarantees, earnings
$7,249.08
C i v i l Service Commission, investigations, earnings
Commerce Department:
5, 882. 95
Defense production guarantees, earnings
247, 908.11
National Bureau of Standards, working capital fund, earnings
M a r i t i m e Administration, Federal ship mortgage insurance fund,
73,881. 91
interest on borrowings
Commodity Credit Corporation:
2,875,000.00
Interest on capital stock
461, 910,614.03
Interest on borrowings
Defense Department:
450,000.00
A r m y Department, defense housing, profits
150, 000.00
N a v y Department, defense housing, profits
11,612,643. 09
A i r Force Department, industrial fund, earnings
Export-Import Bank of Washington:
Regular activities:
22,500, 000. 00
Dividends
45,385,192. 80
Interest on borrowings
Liquidation of certain Reconstruction Finance Corporation assets:
Earnings
337,149.76
Interest on borrowings
Farm Credit Administration:
1, 789,849. 71
Banks for cooperatives, franchise tax
1, 700,000.00
Federal Farm Mortgage Corporation, dividends
1,695,489. 99
Federal intermediate credit banks, franchise tax
Farmers' Home Administration:
8, 763,363. 74
Loan programs, interest on borrowings
1,307, 791. 78
Farm tenant mortgage insurance fund, interest on borrowings
Federal National Mortgage Association:
29, 510, 768.86
Management and liquidating functions, interest on borrowings
Secondary market operations:
2, 472, 500. 00
Dividends
5,396, 520. 38
Interest on borrowings
41,238,875.
74
Special assistance functions, interest on borrowings
3,000,000.00
Federal Prison Industries, Inc., earnings
General Services Administration:
2,531,995. 68
General supply fund, earnings
1, 099, 824.13
Buildings management fund, earnings
10,471. 72
Working capital fund, earnings
4, 351,127. 20
Government Printing Office, earnings
Health, Education, and Welfare Department, Social Security Adminis33. 90
tration, operating fund, Bureau of Federal Credit Unions, interest
Housing and Home Finance Administrator:
14,404, 921. 73
College housing loans, interest on borrowings
967,401.28
Public facility loans, interest on borrowings
2, 514, 407.17
Urban renewal fund, interest on borrowings
Interior Department:
Bureau of Reclamation:
3,071,872.90
Colorado River Dam fund, Boulder Canyon project, interest
31,812.10
Upper Colorado River Basin fund, earnings
Virgin Islands Corporation:
Interest on appropriations and paid-in capital
108.89
Interest on borrowings
20,695,856.12
International Cooperation Administration, interest on borrowings
Panama Canal Company, interest on net direct investment of the Gov9,422, 781.44
ernment
Public Housing Administration, low rent public housing program fund,
1,331,801.53
interest on borrowings
60,356, 546. 06
Rural Electrification Administration, interest on borrowings-
DEBT CEILING
11
TABLE 127.—Dividends, interest, and similar earnings received by the Treasury
Government corporations
and certain other business-type activities, fiscal
1960 and
1961—Continued
from
years
Agency and nature of earnings
1961
Saint Lawrence Seaway Development Corporation, interest on borrowings..
Secretary of tbe Treasury (Federal C i v i l Defense A c t of 1950, as amended),
interest on borrowings
Small Business A d m i n i s t r a t i o n , interest on appropriations
Tennessee Valley A u t h o r i t y , earnings
U.S. I n f o r m a t i o n Agency, informational media guaranty fund, interest on
borrowings
Veterans' A d m i n i s t r a t i o n :
Canteen service revolving f u n d , profits
Rental, maintenance, and repair of quarters, profits
Supply f u n d , earnings
Veterans' direct loan program, interest on borrowings
Defense Production A c t of 1950, as amended:
E x p o r t - I m p o r t B a n k of Washington, interest on borrowings
General Services A d m i n i s t r a t i o n , interest on borrowings
Secretary of Agriculture, interest on borrowings
Secretarv of the Interior (Defense Minerals Exploration Administration) , interest on borrowings
Secretary of the Treasury, interest on borrowings
Total-.
$2,504,920. 56
$2,000,000.00
24,153.26
6,657,359.38
25,293. 04
15,238,423.13
41,432,397.60
413,784.00
1,064, 720.00
$465,444,00
27, 000. 00
23,028.174.13
631,972. 57
24,611. 656. 46
4, 948,175. 85
383,334. 08
4, 202, 448. 94
831,120,067.01
$41,191.00
10,000.00
126,973.47
31,990,233.05
509, 787.11
781, 250. 01
6,942. 57
4, 812, 608. 02
818, 350,357. 92
T a b l e 2 ( T r e a s u r y B u l l e t i n ) " P u b l i c enterprise r e v o l v i n g f u n d s " shows t h e net
i n v e s t m e n t i n each enterprise a n d the a c c u m u l a t e d net income o r deficit f r o m
i n c e p t i o n . T h e net i n v e s t m e n t section of these tables also show advances i n t h e
f o r m of loans or a p p r o p r i a t i o n s . T h e figures are net o f r e p a y m e n t of c a p i t a l as
w e l l as p a y m e n t s of d i v i d e n d s a n d other earnings t o t h e T r e a s u r y f r o m i n c e p t i o n .
I n c l u d e d i n these tables are such enterprises as t h e Post Office D e p a r t m e n t ,
C o m m o d i t y C r e d i t C o r p o r a t i o n , a n d others engaged i n n o n p r o f i t programs.
T h e f o l l o w i n g enterprises each r e p o r t a c c u m u l a t e d n e t earnings (as o f
December 31, 1961) i n excess of $20 m i l l i o n .
In thousands
Agency f o r I n t e r n a t i o n a l D e v e l o p m e n t : D e v e l o p m e n t L o a n F u n d
l i q u i d a t i o n account
$31, 372
Commerce D e p a r t m e n t , M a r i t i m e A d m i n i s t r a t i o n : Vessel operations
revolving fund
22, 241
Defense D e p a r t m e n t : Interservice activities, W h e r r y A c t H o u s i n g
143, 724
H o u s i n g a n d H o m e Finance A g e n c y :
Federal N a t i o n a l M o r t g a g e Association:
Special assistance f u n c t i o n s
59, 283
Management and liquidating programs
138, 277
Federal H o u s i n g A d m i n i s t r a t i o n
1, 043, 721
Veterans' A d m i n i s t r a t i o n :
L o a n guarantee r e v o l v i n g f u n d
88, 833
Veterans' special t e r m insurance f u n d
58, 461
E x p o r t - I m p o r t B a n k of W a s h i n g t o n
728, 710
Federal Savings a n d L o a n Insurance C o r p o r a t i o n
440, 887
Panama Canal Company
127, 777
Tennessee V a l l e y A u t h o r i t y
353, 659
Other a c t i v i t i e s : B o n n e v i l l e Power A d m i n i s t r a t i o n
22, 009
SEC. I . — S T A T E M E N T S OF F I N A N C I A L C O N D I T I O N
TABLE
2.—Public enterprise revolving funds, Dec. 31, 1961
[In thousands of dollars]
Total
Account
Agency for International Development 1
Agriculture Department
Development
loan fund
liquidation
account
Farmers
Federal
Home AdCommodity
Crop
Credit
Insurance 2 ministration,
direct loan
Corporation Corporation
account 3
Development
loans
Foreign
investment
guaranty
fund
ASSETS
199,256
5,281,883
Fund balances w i t h the U.S. Treasury 4
Investments:
Public debt securities (par value)
Securities of Government enterprises
Unamortized premium or discount (—)
Other securities
Advances to contractors and agents:
Government agencies
Other
Accounts and notes receivable:
Government agencies
Other (net)
Inventories
Allowance for losses (—)
Accrued interest receivable:
On public debt securities
On securities of Government enterprises
Other
Loans receivable:
Government agencies
Other:
U S dollar loans
Foreign currency loans
Allowance for losses (—)
Acquired security or collateral (net)
Land structures and equipment
Accumulated depreciation (—)
Foreign currencies
Other assets (net)
Total assets
-
1,304,848
1,094,074
8,107
14,496
14,781
112
54,433
25,452
196,753
835, 774
129,697
5,249,046
-1,480,675
(*)
2,428
19
1,251,744
136,279
-11,501
191,835
4,980
5,236
_
-
--
-
-
908,816
257,330
6,802, 779
-1,482,222
7,520
1,868
120,158
2,343
19,513
1,228
6,221
254,050
-
14,724,163
493,225
-363,413
602,164
5,692,104
-1,450,153
2,754
1,263,385
201,392
6 34,894,238
1, 508, 583
493,225
5 2,506,479
767,040
-174, 734
-78,006
452
96
245,569
-133, 563
464
-245
568
665,245
1, 593,519
8,107
7,873,343
57,192
931,889
LIABILITIES
Accounts payable:
Government agencies
Other
Accrued liabilities:
Government agencies
Other
Advances from—
Government agencies
Other
Trust and deposit liabilities:
Government agencies
Other
Bonds, debentures, and notes payable:
Government agencies.
Other:
Guaranteed by the United States
Not guaranteed by the United States
Other liabilities (including reserves)
Total liabilities
102,789
451,345
1,921
65,823
(*)
(*)
3,818
13
2,633
115,278
269,054
127,708
756
828
134
4
172,946
72,015
27
179,845
141,637
118,810
191, 550
100,028
2, 543,451
8
11
5 1,709,766
4,227,801
35
11
2,140,381
(0
998
4,954
13
a
w
NET INVESTMENT
U.S. interest:
Interest-bearing investment:
Capital stock
Borrowings from the U.S. Treasury
Other
Non-interest-bearing investment:
Capital stock
Appropriations
Capitalization of assets (net)
Other
Accumulated net income, or deficit (—)
Deposits of general and special fund revenues (—)
1,056,000
10, 608,830
1,132, 288
1, 559,180
- 7 , 449, 379
^
100,000
11,952,000
100,000
22,706,115
953, 405
1,112, 500
1, 562,112
395, 264
819
31,372
8,096
- 6 , 319,038
471,960
o
40,000
83, 216
219
-387
-70,810
456,079
3
o
3. 838
Total U.S. interest
30,666,437
1, 508,583
1, 593, 484
8,096
5,732,962
52,238
931,876
Total liabilities and investment.
34,894, 238
1, 508, 583
1, 593, 519
8,107
7,873,343
57,192
931,889
U.S. investment
Accumulated net income, or deficit (—)--
38,115,817
- 7 , 449, 379
1,507, 764
819
1.562,112
31, 372
8,096
12,052,000
- 6 , 319,038
123,048
-70,810
928,038
3,838
U.S. investment including interagency items
Interagency items:
Due from Government agencies (—)
Due to Government agencies
30, 666, 437
1, 508, 583
1, 593, 484
8,096
52,238
931,876
-1,305,992
671, 254
U.S. investment excluding interagency items
30,031,699
ANALYSIS OF U.S. INVESTMENT
-835,774
177, 499
27
1, 508, 583
1, 593, 511
5, 732, 962
8. 096
5,074, 687
(*)
131
52,371
931,876
tsS
See footnotes at end of table, p. 44. CO
TABLE 2.—Public enterprise revolving funds, Dec. 81, 1961—Continued
[In thousands of dollars]
Agriculture Department—Continued
Farmers' Home Administration—Continued
Account
Emergency
credit
revolving
fund
Agricultural
credit
insurance
fund
Expansion
of defense
production
Commerce Department
Aviation
war risk
insurance
revolving
fund
Maritime Administration
Inland
Waterways
Corporation
Federal ship
mortgage
insurance
fund
Vessel
operations
revolving
fund
ASSETS
Cash i n banks, on hand, and i n transit 4
F u n d balances w i t h the U.S. Treasury
Investments:
Public debt securities (par value)
Securities of Government enterprises
Unamortized premium, or discount (—)..
Other securities
Advances to contractors and agents:
Government agencies
Other
Accounts and notes receivable:
Government agencies
Other (net)
Inventories
Allowance for losses (—)
Accrued interest receivable:
On public debt securities
On securities of Government enterprises..
Other
Loans receivable:
Government agencies
Other:
U.S. dollar loans
Foreign currency loans
Allowance for losses (—)
Acquired security or collateral (net)
Land, structures, and equipment
Accumulated depreciation (—)
Foreign currencies
Other assets (net)
Total..
2,346
85, 714
2,170
8, 715
5,140
11.273
&
t&
O
a
61
602
1,593
4,295
274
726
2,380
341
100
37
46,345
-14,701
30
29,623
5,001
3,470
122,597
36,599
3,500
145
4,502
13,816
12,475
G
o
LIABILITIES
Accounts payable:
Government agencies
Other
Accrued liabilities:
Government agencies
Other
Advances from:
Government agencies
Other
Trust and deposit liabilities:
Government agencies
Other
Bonds, debentures, and notes payable:
Government agencies
Other:
Guaranteed by the United States
Not guaranteed by the United States..
Other liabilities (including reserves)
170
345
11
171
7,250
182
Total liabilities..
6, 723
181
? 6,723
722
«
a
w
NET INVESTMENT
U.S. interest:
Interest-bearing investment:
Capital stock
Borrowings from the U.S. Treasury
Other
Non-interest-bearing investment :
Capital stock
Appropriations
Capitalization of assets (net)
Other
Accumulated net income, or deficit (—)
Deposits of general and special fund revenues (—)_
H3
23,170
Q
M
64, 578
15,000
205,494
364
1,000
-83,443
9," 841
-71,827
-13, 530
Total U.S. interest
122,415
34, 011
— 7,2 r 0
Total liabilities and investment.
122, 597
36, 599
205, 858
-83, 443
24,170
9, 841
U.S. investment including interagency items.
Interagency items:
Due from Government agencies (—)
Due to Government agencies
122,415
34,011
U.S. investment excluding interagency items.
122,425
"12,"298
5,752
-625
22,241
13,768
5,752
21,617
13, 816
12,475
24,339
64, 578
-71,827
27,298
-13, 530
5,752
-625
22,241
-7,2;0
13,768
5,752
O
ANALYSIS OF U.S. INVESTMENT
U.S. investment
Accumulated net income, or deficit (—)
See footnotes at end of table, p. 44. CO
21,617
-4,102
187
~~~7~2f0"
34, 011
13, 769
5,752
17,702
to
CO
TABLE
2.—Public enterprise revolving funds, Dec. 81, 1961—Continued
[In thousands of dollars]
Commerce
Department—con.
Account
Defense Department
Interservice
activities
A i r Force
Department
War risk in- Wherry Act
surance rehousing
volving fund
Defense
production
guarantees
Maritime
Administration—con.
A r m y Department
Defense
production
guarantees
Defense
housing
N a v y Department
Defense
housing
Defense
production
guarantees
ASSETS
Cash i n b inks, on hand, and i n transit
Fund bal mces w i t h the U.S. Treasury 4-_ —
Investments:
Public debt securities (par value)
Securities of Government enterprises
Unamortized premium, or discount (—)_
Other securities
Advances to contractors and agents:
Government agencies
Other
Accounts and notes receivable:
Government agencies
Other (net)
Inventories
Allowance for losses (—)
Accrued interest receivable:
On public debt securities
On secirities of Government enterprisesOther
Loans receivable:
Government agencies
Other:
U.S. dollar loans
Foreign currency loans
Allowance for losses (—)
Acquired security or coll ateral (net)
Land, structures, and equipment
Accumulated depreciation (—)
Foreign currencies
Other assets (net)
Total assets.
2, 592
113,865
10,127
87
2,991
«
a
475
w
H
O
M
P
5o
5, 480
2, 452
1,667
772, 288
2, 643
891, 634
13, 953
5, 444
475
10,460
LIABILITIES
Accounts payable:
Government agencies
Other
Accrued liabilities:
Government agencies
Other
Advances from:
Government agencies
Other
Trust and deposit liabilities:
Government agencies
Other
Bonds, debentures, and notes payable:
Government agencies
Other:
Guaranteed by the United States
Not guaranteed by the United States..
Other liabilities (including reserves)
718
(*)
500,191
500,910
Total liabilities..
«
H
W
H
Q
M
NET INVESTMENT
U.S. interest:
Interest-bearing investment:
Capital stock
_
Borrowings from the U.S. Treasury
Other
Noninterest-bearing investment:
Capital stock
Appropriations
Capitalization of assets (net)
Other
Accumulated net income, or deficit (—)
Deposits of general and special fund revenues (—).
2,639
Total U.S. interest
Total liabilities and investment..
3
O
247,000
2,643
475
10, 460
143, 724
13,953
390, 724
13, 953
47
475
10,460
891,634
13,953
~87~
475
10,460
247,000
143,724
13,953
47
5,444
475
10,460
475
10,460
475
10,460
ANALYSIS OF U.S. INVESTMENT
U.S. investment..
Accumulated net income, or deficit (—)_
U.S. investment including interagency items.
Interagency items:
Due from Government agencies (—)
Due to Government agencies
>0,724
13,953
47
5,444
U.S. investment excluding interagency items.
390,724
13,953
87
5,444
See footnotes at end of table, p. 44. CO
to
-Oi
TABLE
2.—Public enterprise revolving funds, Dec. 81, 1961—Continued
[ I n thousands of dollars]
Defense Department—Con.
N a v y DepartmentContinued-Laundry
service,
Naval
Academy
Account
D e p a r t m e n t of H e a l t h ,
Education, and Welfare
Public H e a l t h Social SecuOffice of
rity AdminC i v i l DeServiceistrationfense—Civil Operation of
Bureau of
defense pro- commissaries,
Federal
curement
narcotic
Credit
fund
hospitals
Unions
Interior Department
Bureau of I n d i a n Affairs
Revolving
f u n d for
loans
Liquidation
of l l o o n a h
housing
project
Office of
Territorie s—
Loans to
private
trading
enterprises
ASSETS
Dash in banks, on hand, and in transit
F u n d balances w i t h the U.S. Treasury 4 „
Investments:
Public debt securities (par value) __
Securities of Government enterprises
Unamortized p r e m i u m , or discount (—) Other securities
.
_ _ . __
_ ..
. ...
Advances to contractors and agents:
Government agencies
-. _._
Other
--- Accounts and notes receivable:
Government agencies
__ _
_ _
Other (net)
Inventories
______
Allowance for losses (—)
_
Accrued interest receivable:
On public debt securities.
_
_ _
On securities of Government enterprises _
_
Other
_
Loans receivable:
Government agencies
Other:
U.S. dollar loans . . .
Foreign currency loans
__
.
Allowance for losses (—)
Acquired security or collateral (net) _ _ . . . . . _
__
Land, structure, and equipment _
. ..
.. .
Accumulated depreciation (—)
Foreign currencies
.
Other assets (net)
T o t a l assets
1
75
1,469
41
37
904
8,427
110
223
10,296
174
130
284
353
14
12
13
6
5
7
11
18
20
780
-3,167
26
-20
327
-170
2
11
267
267
—129
1,501
88
1,870
15,556
LIABILITIES
Accounts payable:
Government agencies
Other
Accrued liabilities:
Government agencies
Other
Advances from—
Government agencies
Other
Trust and deposit liabilities:
Government agencies
Other
Bonds, debentures, and notes payable:
Government agencies
Other:
Guaranteed by the United States
Not guaranteed by the United States..
Other liabilities (including reserves)
217
0)
163
335
761
Total liabilities.
«
M
W
NET INVESTMENT
U.S. interest:
Interest-bearing investment:
Capital stock
Borrowings from the U.S Treasury
Other
Non-interest-bearing investment:
Capital stock
Appropriations
Capitalization of assets (net)
Other
Accumulated net income, or deficit (—)
Deposits of general and special fund revenues (—).
h3
333
17, 799
1,500
O
H
—
i i
F
M
3
240
44
1,108
2, 770
- 5 , 013
Total U.S. interest
1,110
15, 556
353
Total liabilities and investment
1,870
15, 556
353
2
1,108
20, 569
-5,013
240
44
15, 556
284
353
15, 556
284
353
ANALYSIS OF U.S. INVESTMENT
U.S. investment..
Accumulated net income, or deficit (—)_
U.S. investment including interagency items.
Interagency items:
Due from Government agencies (—)
Due to Go vernment agencies
U.S. investment excluding interagency items.
1, 500
213
213
1, 500
-21
1, 479
1,110
to
See footnotes at end of table, p. 44. CO
T A B L E 2.—Public
enterprise revolving funds, Dec. 31,
1961—Continued
[In thousands of dollars]
Interior Department—Continued
Account
Cash i n banks, on hand, and i n transit
Fund balances w i t h the U.S. Treasury *
Investments:
Public debt securities (par value)
Securities of Government enterprises
Unamortized premium, or discount (—)--Other securities
Advances to contractors and agents:
Government agencies
Other
Accounts and notes receivable:
Government agencies
Other (net)
Inventories
Allowance for losses (—)
Accrued interest receivable:
On public debt securities
On securities of Government enterprises...
Other
Loans receivable:
Government agencies
Other:
U.S. dollar loans
Foreign currency loans
Allowance for losses (—)
Acquired security or collateral (net)
Land, structures, and equipment
Accumulated depreciation (—)
Foreign currencies
Other assets (net)
Total assets.
Bureau of Commercial
Fisheries
Bureau of
Alaska Bailroad— Alaska
MinesRailroad
Development Federal ship
revolving and operation mortgage
fund
Fisheries
of helium
insurance
loan fund
properties
fund, fishing
vessels
8,022
7,426
5,371
947
743
I, 442
1,070
84
1,053
35
Bureau of Reclamation
Fund for
emergency
expenses,
Fort Peck
project,
Montana
2,152
Upper Colorado River
Basin fund
74,156
131
21
326
7,472
-166
133,362
-22,798
42,937
-14,459
1, 734
8, 748
125,451
46,860
15
3
12,836
16, 914
-711
33,393
-3,802
185
221, 770
18,695
326, 009
Virgin
Islands
Corporation
LIABILITIES
Accounts payable:
Government agencies
Other
Accrued liabilities:
Government agencies
Other
Advances from—
Government agencies
Other
Trust and deposit liabilities:
Government agencies
Other
Bonds, debentures, and notes payable:
Government agencies
Other:
Guaranteed by the United States
Not guaranteed by the United States..
Other liabilities (including reserves)
Total liabilities..
49
245
436
6,628
781
1
197
377
505
756
224
300
61
288
733
440
1,895
2,547
5, 379
17
106
116
65
12,447
NET INVESTMENT
U.S. interest:
Interest-bearing investment:
Capital stock
Borrowings from the U.S. Treasury
Other
Non-interest-bearing investment:
Capital stock..
Appropriations
Capitalization of assets (net)
Other
Accumulated net income, or deficit (—)
Deposits of general and special fund revenues (—).
w
302, 457
11,162
12,818
18, 630
313,563
11,230
12,836
18, 695
326,009
12,145
42,175
2,138
13,000
-182
5,446
13,184
313,560
2
11, 694
-464
123, 556
44,313
12,818
18, 630
313,563
11,230
-947
350
-1,070
1,093
-131
2
-52
2
-138
222
122, 959
44,336
12,819
18, 580
313,868
11,315
"2," 138*
Total U.S. interest.
123,556
44,313
Total liabilities and investment
125, 451
46,860
U.S. investment
Accumulated net income, or deficit (—)
122, 407
1,148
U.S. investment including interagency items.
Interagency items:
Due from Government agencies (—)
Due to Government agencies
U.S. Investment excluding interagency items..
ANALYSIS OF U.S. INVESTMENT
855
1,793
1,586
2,067
13,184
13,000
167, 285
18,886
-63. 764
1,148
See footnotes at end of table, p. 44.
944
9,895
42,100
76
-182
- 2
Ct
I
-464
to
CO
TABLE 2.—Public enterprise revolving funds, Dec. 81,
1961—Continued
[In thousands of dollars]
Labor Department
Interior Dep irtment—
continued
Account
Exp msion
of defense
production
Treasury Department
Post Office
Department
Bureau of Employment
Security
Advances to
employment
security
administrative account,
unemployment trust
fund
Farm labor
supply
revolving
fund
Office of the Secretary
Postal fund 8
R F C liquidation fund
Federal Farm
Mortgaee
Corporation C i v i l defense
loans
liquidation
fund
ASSETS
Cash in banks on hand and in transit
Fund balances w i t h the U.S. Treasury i
Investments:
Public debt securities (par value)
Securities of Government enterDrises
Unamortized premium or discount (—)
Other securities
Advances to contractors and agents:
Government agencies
Other
Accounts and notes receivable:
Government agencies
- _
Other (net)
-- Inventories
-Allowance for losses (—)
Accrued interest receivable:
On public debt securities
On securities of Government enterprises
- .
Other
-- Loans receivable:
Government agencies
-Other:
U S dollar loans
_
_ _
Foreign currency loans
-Allowance for losses (—)
- -Acquired security or collateral (net)
__
I and structures and equioment
Accumulated depreciation (—)___
Forei°n currencies
_
Other assets (net)
_
Total assets
—
-
200
40,360
-
26
2,095
8
102
--
136,280
74S,153
481
4,909
4,933
12
32,957
35, 739
6, 974
(*)
(*)
1
1,969
4
210
2
138
250, 550
12,692
8, 696
- 1 0 , 640
-2,150
161
1,525
708
1,735
714
.
529
-162
» 1,057, 751
-439,653
235
2,252
292,879
2,833
1, 588,094
7,339
LIABILITIES
Accounts payable:
Government agencies
Other
Accrued liabilities:
Government agencies
Other
Advances from:
Government agencies
Other
Trust and deposit liabilities:
Government agencies
Other
Bonds, debentures, and notes payable:
Government agencies
Other:
Guaranteed by the United States
Not guaranteed by the United States..
Other liabilities (including reserves).
75, 531
208. 635
38
2,150
26
"lU
171
2,151
Total liabilities.
13
(*)
120
53. 519
382
io 337, 685
210
a
Mw
NET INVESTMENT
U.S. interest:
Interest-bearing investment:
Capital stock
Borrowings from the U.S. Treasury
Other
Non-interest-bearing investment:
Capital stock
Appropriations
Capitalization of assets (net)
Otter
Accumulated net income, or deficit (—)
Deposits of general and special fund revenues (—).
H
-30, 899
4,879
292, 879
2, 451
U.S. investment including interagency items.
Interagency items:
Due from Government agencies (—)
Due to Government agencies
U.S. investment excluding interagency items.
See footnotes at end of table, p. 44.
1, 636,203
-385, 793
ii 7,240
1,250, 410
7,240
292,879
2,833
1, 588,094
7, 339
31,000
-30,899
288,000
4,879
1, 630,203
-385, 793
7,240
1,965
292,879
2,451
1, 250, 410
7,240
101
-250, 550
2,151
42,329
2, 451
o
384
2,252
ANALYSIS OF V.S. INVESTMENT
U,S. investment..
Accumulated net income, or deficit (—)-
o
a
3
288,000
Total U.S. interest
Total liabilities and investment
330
31,000
- 3 7 , 866
75, 531
13
1,288, 074
7, 253
1, 525
714
1, 735
~714
1, 525
330
384
1, 525
714
1, 525
714
OO
TABLE 2.—Public enterprise revolving funds, Dec. 81, 1961—Continued
[In thousands of dollars]
Treasury Department—Continued
Account
Bureau of
Office of the
Accounts—
Treasurer—
Fund for
Treasurer of
payment of
the United
Government States, check
losses i n
forgery
shipment
insurance
fund
General Services Administration
Expansion
of defense
production
Abaca fiber
program
Reconstruction Finance
Corporation
liquidation
fund
Expansion
of defense
production
ASSETS
Cash in banks, on hand, and in transit 4
F u n d balances w i t h the U.S. Treasury
Investments:
Public debt securities (par value)
Securities of Government enterprises
Unamortized premium, or discount (—)Other securities
Advances to contractors and agents:
Government agencies
Other
Accounts and notes receivable:
Government agencies
Other (net)
Inventories
Allowance for losses (—)
Accrued interest receivable:
On public debt securities
On securities of Government enterprises.
Other
Loans receivable:
Government agencies
Other:
U.S. dollar loans
Foreign currency loans
Allowance for losses (—)
Acquired security or collateral (net)
Land, structures, and equipment
Accumulated depreciation (—)
Foreign currencies
Other assets (net)
Total assets.
52
27
1,075
78
18,249
5
2
6
3, 505
37
1,955
27
39
942
2,026
1,479,192
35
126,454
-13,950
150
558
-558"
1, 961
-1,372
114,676
5,211
4,880
-2, 763
15,547
1,518,159
Defense
production
guaranties
LIABILITIES
Accounts payable:
Government agencies
Other
Accrued liabilities:
Government agencies
Other
Advances from:
Government agencies--.
Other
Trust and deposit liabilities:
Government agencies
Other
Bonds, debentures, and notes payable:
Government agencies
Other:
Guaranteed by the United States
N o t guaranteed by the United States..
Other liabilities (including reserves)
. 95
349
147,234
43
(*)
109
147, 787
Total liabilities..
NET INVESTMENT
U.S. interest:
Interest-bearing investment:
Capital stock-..
Borrowings from the U.S. Treasury
Other
Noninterest-bearing investment :
Capital stock.
Appropriations
Capitalization of assets (net)
Other
Accumulated net income, or deficit (—)
Deposits of general and special fund revenues (—)_
Total U.S. interest
515
242
-1, 017
27
39
Total liabilities and investment
ANALYSIS OF U.S. INVESTMENT
U.S. investment..
Accumulated net income, or deficit (—)
1,044
-1,017
39
U.S. investment including interagency items.
Interagency items:
Due from Government agencies (—)
Due to Government agencies
U.S. investment excluding interagency items.
See footnotes at end of table, p. 44. CO
1, 774. 700
97, 500
ii 5,210
17,094
11, 216
-11,117
114, 594
99
5,210
1,370,372
114,676
99
5, 211
1, 518,159
97, 500
17,094
11,216
-11,117
5,210
1, 775,215
-404,843
5,210
1,370,372
114, 594
"-404,""843"
-947
147,329
-11
1
27
39
114,584
5,204
1, 516, 754
TABLE 2.—Public enterprise revolving funds, Dec. 81,
o5
1961—Continued
[In thousands of dollars]
Housing and Home Finance Agency
Office of the Administrator
Account
Cash i n banks, on hand, and i n transit
F u n d balances w i t h the U.S. Treasury *
Investments:
Public debt securities (par value)
Securities of Government enterprises
Unamortized premium, or discount (—)..
Other securities
Advance to contractors and agents:
Government agencies
Other
Accounts and notes receivable:
Government agencies
Other (net)
Inventories
Allowance for losses (—)
Accrued interest receivable:
On public debt securities
On securities of Government enterprises..
Other
Loans receivable:
Government agencies
Other:
U.S. dollar loans
Foreign currency loans
Allowance for losses (—)
Acquired security or collateral (net)
Land, structures, and equipment
Accumulated depreciation (—)
Foreign currencies
Other assets (net)
Total assets .
College housing loans
Public facili t y loans
43,215
4.407
Public works Liquidating
programs
planning
fund
23.418
5,124
Urban reCommunity
newal fund disposal operations fund
251, 296
2,035
Housing for
the elderly
78. 285
a
H
w
a
H
29
24
378
902
881
2, 757
1.054. 473
61, 670
20.Ill
101. 505
i 2 4.079
—1,326
-1,181"
- 4 . 208
1.377
5, 398
-5.189
355, 626
6.119
151
1.104,340
65.827
13.176
3.174
36,597
27.075
(0
O
79.771
LIABILITIES
Accounts payable:
Government agencies
Other
Accrued liabilities:
Government agencies
Other
Advances from:
Government agencies
Other
Trust and deposit liabilities:
Government agencies
Other
Bonds, debentures, and notes payable:
Government agencies
Other:
Guaranteed by the United States.
Not guaranteed by the United StatesOther liabilities (including reserves)
Total liabilities
105
32
909
1,126
3
430
13,428
1,057
2,365
232
42
6,874
16,922
1,720
223
7 9,547
1
70
1,706
124
59
194
227
NET INVESTMENT
U.S. interest:
Interest-bearing investment:
Capital stock
Borrowings from the U.S. Treasury
Other
Non-interest-bearing investment:
Capital stosk
Appropriations.
Capitalization of assets (net)
Other
Accumulated net income, or deficit (—)
Deposits of general and special fund revenues (—).
m
1,089,725
o
H
200,000
66,727
80,000
664, 500
-2,307
- 2 , 620
-6,403
1,332, 234
277,156
-388,693
-1,193,844
1,087,418
64,108
36, 597
26,853
346,079
5,926
79,544
1,104,340
65,827
36,597
27,075
355,626
6,119
79,771
U.S. investment
Accumulated net income, or deficit (—)
1,089, 725
-2,307
66, 727
-2.620
43,000
-6,403
1, 220,697
-1,193,844
864, 500
-518,421
4,932
993
80,000
-456
U.S. investment including interagency items.
Interagency items:
Due from Government agencies (—)
Due to Government agencies
1,087,418
64,108
36,597
26,853
346,079
5,926
79,544
14, 554
1, 487
U.S. investment excluding interagency items.
1,101, 972
65,595
Total U.S. interest
Total liabilities and investment
43,000
ANALYSIS OF U.S. INVESTMENT
36,597
59,932
-55,000
-518,421
-24
105
2,614
70
26,933
348,693
5,995
O
79, 771
CO
See footnotes at end of table, p. 44.
Ot
T A B L E 2.—Public
CO
o
enterprise revolving funds, Dec. 81, 1961—Continued
[In thousands of dollars]
Housing and Home Finance Agency—continued
Federal National
Mortgage Association
Federal
Housing
Administration
Account
Special
assistance
functions
Management and
liquidating
functions
Veterans' Administration
Public
Housing
Adminis tration
Canteen
service
revolving
fund
Direct loans
to veterans
and
R eserves
Loan
guarantee
revolving
fund
ASSETS
Fund balances w i t h the U.S. Treasury 4 .
Investments:
Public debt securities (par value)
Securities of Government enterprises
Unamortized premium or discount (—)
Other securities
Advances to contractors and agents:
Government agencies
-- -Other
Accounts and notes receivable:
Government agencies
Other (net)
__ _ _
__ __ __
Inventories
Allowances for losses (—)
Accrued interest receivable:
On public debt securities
__ _
On securities of Government enterprises
Other
---- -Loans receivable:
Other:
U S dollar loans
Allowance for losses (—)
Acquired security or collateral (net)
Land structures and equipment
Accumulated depreciation (—)
Foreign currencies
Other assets (net)
Total assets
--
-
-
__ _
338
615
6,172
4, 545
60,890
20,398
75, 027
752, 964
6, 493
- 8 , 994
463
12,178
1,009
12,150
1,592
51
14,134
686
8,871
1,096
5, 424
2, 769
85
(*)
1, 881,181
1, 507,909
14-24,052
4, 978
682
-358
-
__ _ _
1
148, 652
3,486
2, 579
230
260,741
59
53
__
-
_
13 -7,389
6, 948
- 1, 924, 222
12
54
99
116
16,195
53
446
4, 945
286
16,149
1,073
1,711
1,165
12 236,161
95, 357
1,309,313
436,484
-6,482
439, 099
4,123
- 2 , 236
-1,336
8,302
-3,831
2, 771
138,302
6, 666
-3,170
1
45, 277
57
28
2
103
1, 591, 235
1, 549, 341
248, 495
15, 034
1, 575,053
608, 574
LIABILITIES
Accounts payable:
Government agencies
Other
Accrued liabilities:
Government agencies
Other
Advances from—
Government agencies...
Other
Trust and deposit liabilities:
Government agencies
Other
Bonds, debentures, and notes payable:
Government agencies
Other:
Guaranted by the United States
Not guaranteed by the United States..
Other liabilities (including reserves)
34, 755
574
13, 392
141
51, 974
21,141
1, 739
5,323
320
705
343
116
17, 347
2,047
20,230
392
67
262
479
20,893
10,574
20,823
118,810
191, 062
10
703
48, 722
Total liabilities..
107
1,235
480
10,463
40,011
155,466
7 505, 620
M
2,026
i 55,625
3,255
43,615
810
11,384
NET INVESTMENT
U.S. interest:
Interest-bearing investment:
Capital stock
Borrowings from the U.S. Treasury
Other
Non-interest-bearing investment:
Capital stock
Appropriations
Capitalization of assets (net)
Other
Accumulated net income, or deficit (—)
Deposits of general and special fund revenues (—) _
Total U.S. interest
W
1, 816,217
Q
H
1,530,078
30,000
1,412, 947
1,000
1,179, 574
246, 505
508,357
-1,264, 210
11,415
1,360
88,833
1,043, 721
192, 869
11, 778
1, 531,438
597,190
1,591, 235
1,549,341
248, 495
15,034
1, 575,053
>8,574
59, 283
138, 277
1,043, 721
1, 875, 500
1, 551, 225
Total liabilities and investment
ANALYSIS OF U.S. INVESTMENT
U.S. investment..
Accumulated net income, or deficit (—)
1,816, 217
59, 283
1,412, 947
138, 277
1, 457,080
-1,264, 210
363
11,415
1, 530,078
1,043, 721
1,360
508,357
88,833
U.S. investment including interagency items.
Interagency items:
Due from Government agencies (—)
Due to Government agencies
1,875, 500
1,551,225
1,043,721
192,869
11, 778
1,531,438
597,190
-33, 263
34,755
-88, 273
21, 277
- 6 , 629
123, 076
-12
-53
370
1, 876, 992
1, 484,228
1,160,167
U.S. investment excluding interagency items.
«
853
193, 710
O
20,823
1,552,261
597,190
CO
See footnotes at end of table, p. 44. CO
<1
TABLE 2.—Public enterprise revolving funds, Dec. 81, 1961—Continued
[In thousands of dollars]
Veterans' Administration—Continued
Account
Rental, maintenance, and
repair of
quarters
Servicedisabled
veterans'
insurance
fund
Export-Import Bank of
Washington
Soldiers' and
Veterans'
Vocational
sailors'
'special term rehabilitation
civil relief
insurance
revolving
fund
fund
Regular
lending
activities
Liquidation
of certain
Reconstruction Finance
Corporation
assets
ASSETS
Cash i n banks, on hand, and i n transit
F u n d balances w i t h the U.S. Treasury *
Investments:
Public debt securities (par value)
Securities of Government enterprises
Unamortized premium, or discount (—)..
Other securities
Advances to contractors and agents:
Government agencies
__
Other
Accounts and notes receivable:
Government agencies
Other (net)
Inventories
Allowances for losses (—)
Accrued interest receivable:
On public debt securities
On securities of Government enterprises.
Other
Loans receivable:
Government agencies
Other:
U.S. dollar loans
Foreign currency loans
Allowances for losses (—)
Acquired security or collateral (net)
Land, structures, and equipment
Accumulated depreciation (—)
Foreign currencies.
Other assets (net)
Total assets.
22
1
490
105
14
812
281
85,280
1,250
10
S
1
401
(*)
©
1,453
.......
35
32
49,558
570
3,683,236
351
-159
22
25
2,342
137
8,141
394
3,736,088
G
H
U
H
O
H
1,262
LIABILITIES
Accounts payable:
G overnment agencies
Other
—.
Accrued liabilities:
G overnment agencies
Other
Advances from:
Government agencies
Other
Trust and deposit liabilities:
Government agencies
Other
Bonds, debentures, and notes payable:
Government agencies
—
Other:
Guaranteed by the United States
Not guaranteed by the United States..
Other liabilities (including reserves)
(*)
44
1, 377
Total liabilities..
18,476
28, 710
5, 742
100
19,017
29, 680
7,278
1C0
©
H
W
H
o
H
NET INVESTMENT
U.S interest
Interest-bearing investment :
Capital stock
Borrowings from the U.S. Treasury..
Other
Non-interest-bearing investment :
Capital stock
Appropriations
Capitalization of assets (net)
Other
Accumulated net income, or deficit (—)
Deposits of general and special fund revenues (—).
Total U.S. interest
2,000,100
1.000,000
400
2. 003
-21,175
22
-16, 675
58, 461
394
3, 728.810
1,162
2, 342
8,141
394
3,736.088
1.262
400
Total liabilities and investment
-1,871
728,710
58, 461
ANALYSIS OF U.S. INVESTMENT
U.S investment..
Accumulated net income, or deficit (—)_
-5
27
U.S. investment including interagency items.
Interagency items:
Due from Government agencies (—)
Due to Government agencies
U.S. investment excluding interagency items.
See footnotes at end of table, p. 44. CO
1,162
-5
27
4, 500
-21.175
2.003
-1,871
58.461
3,000,100
728, 710
1,162
- 6
-16, 675
132
58,461
394
3, 728,810
1,162
-1
83
22
-16, 675
132
58,461
394
3, 728,892
1,162
CO
CD
TABLE
2.—Public enterprise revolving funds, Dec. 81, 1961—Continued
[In thousands of dollars]
Account
Cash in banks, on hand and i n transit
Fund balances w i t h the U.S. Treasury *
Investments:
Public debt securities (par value)
Securities of Government enterprises
Unamortized premium, or discount (—)..
Other securities
Advances to contractors and agents:
Government agencies
Other
Accounts and notes receivable:
Government agencies
Other (net)
Inventories
Allowance for losses (—)
Accrued interest receivable:
On public debt securities
On securities of Government enterprises..
Other
Loans receivable:
Government agencies
Other:
U.S. dollar loans
Foreign currency loans
Allowance for losses (—)
Acquired security or collateral (net)
Land, structures, and equipment
Accumulated depreciation (—)
Foreign currencies
Other assets (net)
Total assets-
ExportImport
Bank of
Washington—Continued—
Expansion
of defense
production
Farm Credit Administration
Short term
credit investment
fund is
75,115
54,885
Banks for
cooperatives investment
fund
Federal Home Loan Bank Board
Revolving
fund
Federal
Savings and
Loan Insurance Corporation
232
3,200
396,500
-2, 347
79,102
106,817
23
1,516
13
Home Owners' Loan
Corporation (liquidated)
406
Panama
Canal
Company
5,719
19,874
©
H
W
H
O
H
&
2,822
3,867
9,810
15,477
1
2,767
45,000
8,047
423
-423
6,032
715,453
-284,967
11, 906
126
-126
81
8,058
130,000
185,919
467,465
406
483, 546
sO
LIABILITIES
Accounts payable:
Government agencies
Other
Accrued liabilities:
Government agencies
Other
Advances from:
Government agencies
Other
Trust and deposit liabilities:
Government agencies
Other
Bonds, debentures, and notes payable:
Government agencies
Other:
Guaranteed by the United States
Not guaranteed by the United States..
Other liabilities (including reserves)
142
(*)
(*)
73
5,016
2,525
58
455
490
944
74
301
41
50
316
18
Total liabilities..
887
26,503
1,757
26,578
12,330
406
24, 907
t)
NET INVESTMENT
U.S. interest:
Interest-bearing investment:
Capital stock____
Borrowings from the U.S. Treasury
Other
Non-interest-bearing investment:
Capital stock
Appropriations
Capitalization of assets (net)
Other
Accumulated net income, or deficit (—)
Deposits of general and special fund revenues (—).
^m
3,057
329, 862
130, 000
4, 951
§
500, 000
o
-314, 081
92
is 440, 887
92
440,887
Total U.Sv i n t e r e s t —
8,008
130, 000
185, 919
Total liabilities and investment
8,058
130, 000
185, 919
U.S. investment
Accumulated net income, or deficit (—)
3,057
4,951
130,000
500, 000
-314,081
U.S. investment including interagency items..
Interagency items:
D u e f r o m Government agencies (—)
....
Due to Government agencies
8,008
130, 000
185, 919
467,465
127, 777
457, 639
406
483, 546
ANALYSIS OF U.S. INVESTMENT
U.S. investment excluding interagency items.
See footnotes at end of table, p. 44. CO
92
-23
368
(*)
130, 000
185, 919
o
a
F
440,887
329,862
127, 777
440,887
457, 639
-2,822
37
6,102
440, 924
460,919
TABLE 2.—Public enterprise revolving funds, Dec. 81, 1961—Continued
[In thousands of dollars]
Small Business Administration
Account
St. Lawrence
SeawayDevelopment
Corporation
ASSETS
Cash in banks, on hand, and in transit 4
F u n d balances w i t h the U.S. Treasury
Investments:
Public debt securities (par value)--.
Securities of Government enterprises
Unamortized premium, or discount (—)
Other securities
Advances to contractors and agents:
Government agencies
Other
Accounts and notes receivable:
Government agencies
Other (net)
Inventories-..
Allowance for losses (—)
Accrued interest receivable:
On public debt securities
On securities of Government enterprises
Other
Loans receivable:
Government agencies
Other:
U.S. dollar loans
Foreign currency loans
Allowance for losses (—)
Acquired security or collateral (net)
Land, structures, and equipment
Accumulated depreciation (—)
Foreign currencies
Other assets (net)
Total assets..
40
338
Revolving
fund
110
308,046
Reconstruction
Finance
Corporation
liquidation
fund
353
Tennessee
Valley
Authority
75
36,822
17,000
34,360
-160
28,418
32
(*)
172
131
8,900
17,252
41,934
557
-608
533
2,998
37
3,159
-17,814
1,300
-857
403
127, 330
-3,047
125,036
2, 495,822
-523,685
9,825
216
264, 647 .
869,808
3,340
2,392,930
U.S. Information Agency—
Informational
media guarantee fund
LIABILITIES
Accounts payable:
Government agencies.
Other
Accrued liabilities:
Government agencies
Other
Advances from:
Government agencies
Other
Trust and deposit liabilities:
Government agencies
Other
Bonds, debentures, and notes payable:
Government agencies
Other:
Guaranteed by the United States
Not guaranteed by the United States
Other liabilities (including reserves)
20, 392
59, 686
277
60
307
9,160
11
425
2, 011
63
Total liabilities .
800
105
4, 512
100, 000
10, 470
313
490
713,901
193, 782
619
H:
W
NET INVESTMENT
U.S. interest:
Interest-bearing investment:
Capital stock
Borrowings from the U.S. Treasury
Other
Noninterest-bearing investment:
Capital stock
.
Appropriations
Capitalization of assets (net)
Other
Accumulated net income, or deficit (—)
Deposits of general and special fund revenues (—)..
Total U.S. interest
Total liabilities and investment...
H
120,747
" 11, 770
20,335
559,778
1, 798,318
47,171
360, 222
o
-7,971
-64,093
6,099
-2,932
124,516
855.907
3,166
2,199,148
2,135
3,340
2,392,930
2,755
125,036
ANALYSIS OF U.S. INVESTMENT
« 353,659
-18,199
U.S. investment
Accumulated net income, or deficit (—)
132, 517
-7,971
920,000
-64,093
6, 099
-2,932
1,845, 489
353,659
20,335
-18,199
U.S. investment including interagency items..
Interagency items:
Due from Government agencies (—)
Due to Government agencies
124, 546
855,907
3,166
2,199,148
2,135
U.S. investment excluding interagency itemsSee footnotes at end of table, p. 44.
(*)
295
9,160
124,840
865,067
3,166
o
H
F
-43,260
22,403
307
2,178,291
2,442
CO
TABLE 2.—Public enterprise revolving funds, Dec. 31,
1 T h i s Agency was established, and the International Cooperation A d m i n i s t r a t i o n
and the corporate development loan f u n d were abolished at the close of Nov. 3, 1961,
pursuant to the act approved Sept. 4, 19fil (75 Stat. 445), and Executive Order N o .
10973, dated N o v . 3, 1961. Development Loan F u n d functions and the foreign investm e n t guaranty funds were transferred to this Agency and a new fund for development
loans was established.
2
Includes operating and administrative expenses funds.
3 Included beginning Dec. 31, 1961. (See table 4, footnote 3.)
4
See table 1, footnote 1.
5
Includes guaranteed loans and certificates of interest aggregating $895,232,000, w h i c h
are held b y lending agencies.
6 Foreign currency a s3ts are included throughout the table. (See table 1, footnote 2.)
7 Certain corporations and other business-type activities t h a t have submitted statements of financial condition have guaranteed and insured loans which were made b y
private financial institutions. These commitments are of a contingent nature and
have been excluded from their balance sheets. The major agencies that have these
contingencies and the amounts are as follows:
1961—Continued
s Figures are as of Jan. 5, 1962.
9
Valued at cost, estimated if not k n o w n . A m o u n t s , including accumulated depreciation, are to some extent preliminary, and subject to adjustment.
m The assets and liabilities of this f u n d exclude resources on order of $172,772,000 as
reported b y the Post Office Department.
n
Represents the e q u i t y of the U.S. Treasury i n this f u n d .
12
Represents purchase money mortgages formerly classified as other assets (see
footnote 1 at the end of table 7).
13
Includes unrealized purchase discounts amounting to $6,365,000.
i* Includes reserves and unrealized e q u i t y i n the assets of the Defense Homes Corporation w h i c h are being l i q u i d a t e d b y the Association.
The Federal intermediate credit banks investment f u n d and the production credit
associations investment f u n d were merged into this revolving f u n d pursuant to the act
approved Oct. 3, 1961 (75-Stat. 758).
16
T h e surplus is considered b y the Corporation as available for future insurance
losses and related expenses w i t h respect to insured institutions.
17
Represents accrued interest expense on borrowings from the U.S. Treasury Department on w h i c h payment has been deferred.
18
Activity
Thousands
Consists of net income from power operations of $588,701,000 and net expense of
Development loans
_._
$60,496 non-revenue-producing programs of $235,042,000.
Agriculture D e p a r t m e n t : Farmers' H o m e A d m i n i s t r a t i o n : Agricultural
*Less t h a n $500.
credit insurance f u n d
._
216, 643
Commerce Department: Federal ship mortgage insurance f u n d . . .
377,762
Housing and Home Finance Agency:
Office of the A d m i n i s t r a t o r : U r b a n renewal fund
820,264
Federal Housing A d m i n i s t r a t i o n
36,383,483
Public Housing A d m i n i s t r a t i o n :
Local housine a u t h o r i t y bonds and notes (commitments covered b y
annual contributions). _
3,066,300
Local housing a u t h o r i t y temporary notes (the f u l l faith and credit of
the U n i t e d States is pledged to the payment of these notes)
936,780
Veterans' A d m i n i s t r a t i o n (June 30, 1961)
16,394,300
Small Business A d m i n i s t r a t i o n : Revolving f u n d . .
22,174
Defense production guarantees (various activities).
115,136
«
H
W
H
O
«
P
11
DEBT CEILING
T h e CHAIRMAN. SO I u n d e r s t a n d y o u to say there is no p l a n o n t h e
p a r t of the a d m i n i s t r a t i o n , n o t w i t h s t a n d i n g all the t a l k a b o u t these
different k i n d s of budgets, t o a t t e m p t t o change w h a t we call the
a d m i n i s t r a t i v e budget, and i f y o u d i d change i t , y o u w o u l d have t o
b o r r o w m o n e y j u s t the same, because i f y o u p a y i t o u t y o u have g o t
to b o r r o w i t , i f i t is i n excess of the revenue?
So there is no idea i n m i n d at this t i m e to ask the Congress to change
the budget or to s u b m i t a budget on any basis different f r o m basis of
the a d m i n i s t r a t i v e budget.
M r . BELL. NO, sir; there is not. I t h i n k i t is i m p o r t a n t to c o m m e n t
t h a t the purpose of u s i n g — t h e purpose of showing these other k i n d s
of figures, the consolidated cash statement and the n a t i o n a l income
accounts, is t o p r o v i d e a basis for useful t h i n k i n g about questions o f
Federal financial policy.
O u r presentation of the budget figures i n three different ways is
intended t o m a k e figures available w h i c h are useful i n answering
different k i n d s of questions. T h e a d m i n i s t r a t i v e budget figures a r e
those w h i c h are d i r e c t l y relevant t o the p u b l i c debt. T h e y also are
the figures w h i c h are useful to the Congress i n enacting a p p r o p r i a t i o n s
each year. T h e y are equally useful to the executive b r a n c h i n m a k i n g
plans and i n c o n t r o l l i n g expenditures for the different agencies of t h e
Government.
N o n e of us have any t h o u g h t of abandoning those figures a t all.
T h e CHAIRMAN. T h e c h a i r m a n has no o b j e c t i o n t o t h a t as a m a t t e r
of i n f o r m a t i o n , so l o n g as i t is n o t confused w i t h the b u d g e t o n w h i c h
we m u s t l e v y taxes a n d b o r r o w money. B u t the f a c t t h a t there has
been so m u c h t a l k b y people i n h i g h office, f r o m the President down,
w i t h respect t o other k i n d s of budgets w h i c h w o u l d obscure deficits,
I w a n t e d t o k n o w whether y o u h a d a n y p l a n i n m i n d t o change the
t y p e of b u d g e t used for the Federal G o v e r n m e n t .
N o w , there is a m y t h — y o u say there is no m y t h about t h e d e b t —
b u t there is a m y t h w i t h respect t o this balancing the b u d g e t " o v e r
the years of a business cycle." M r . B e l l said w h e n h e spoke i n
N e w Y o r k o n June 12—
T h e usual present-day s t a t e m e n t of t h e accepted s t a n d a r d is t o balance t h e
b u d g e t over t h e cycle; t h a t is, t o have set deficits i n years of recession w i t h surpluses i n years of p r o s p e r i t y . B u t t h i s f o r m u l a t i o n assumes t h a t a l l business
cycles f o l l o w t h e same p a t t e r n , w h i c h is far f r o m t h e case. T h e s t a n d a r d is
clearly inadequate t o deal w i t h t h e s i t u a t i o n such as we have been experiencing
f o r t h e last 5 years, a s i t u a t i o n i n w h i c h we have h a d years of recession clearly
enough, b u t no years of f u l l e m p l o y m e n t a n d f u l l c a p a c i t y use of o u r i n d u s t r i a l
p l a n t s . I n such circumstances there is p l a i n l y a serious question as t o w h a t
t a r g e t t o choose b u d g e t f o r p o l i c y d u r i n g t h e p e r i o d of economic recovery.
T h a t is the s t a t e m e n t t h a t y o u made i n N e w Y o r k , M r . Bell.
A n d the record w i l l show t h a t this h i g h l y publicized t h e o r y of b a l a n c i n g
t h e b u d g e t i n times of p r o s p e r i t y a n d b o r r o w i n g t h e m i n times o f
so-called p r o s p e r i t y s i m p l y h a s n ' t w o r k e d o u t . I t h i n k we have h a d
a balanced b u d g e t five times i n the 29 years t h a t I have been i n t h e
Congress. I s t h a t r i g h t ?
M r . BELL. Y e s .
T h e CHAIRMAN. SO there is no j u s t i f i c a t i o n for saying the budget
w i l l balance o u t i f we b o r r o w n o w because we have a recession, socalled—sometimes we d o n ' t have m u c h of a recession to s t a r t deficit
financing—and
p a y i t back i f we have prosperity. A c t u a l l y we have
been b o r r o w i n g i n times of p r o s p e r i t y as well as times of so-called
85845—(62 • 1
46
DEBT CEILING 11
recession, i s n ' t t h a t t h e h i s t o r y ? W e have h a d o n l y five balanced
budgets i n 29 years.
M r . BELL. I t h i n k there m i g h t be one or t w o comments I can m a k e
on t h a t , M r . C h a i r m a n . F i r s t , I d o u b t i f this was indeed t h e p o l i c y
w h i c h was a t t e m p t e d t o be followed d u r i n g all t h a t period of t i m e .
D u r i n g the w a r years, for example, w h i c h are 5 years of t h a t h i s t o r i c a l
period, of course, the p r o b l e m of Federal finance was q u i t e different.
Business cycle t h i n k i n g was irrelevant t o a period of w a r t i m e . I a m
n o t t r y i n g t o say t h a t the financial policy t h a t was followed d u r i n g
t h e w a r was r i g h t o r wrong, b u t s i m p l y t h a t there was a different
s i t u a t i o n then f r o m w h a t is assumed i n the proposition of t r y i n g t o
balance t h e budget over the cycle.
T h e p o i n t I was t r y i n g t o m a k e i n N e w Y o r k was t h a t we have
d i f f i c u l t y i n a p p l y i n g t h a t n o t i o n , and have h a d d i f f i c u l t y i n t h e last
several years, because we have n o t r e a l l y h a d a n y periods of f u l l
p r o s p e r i t y i n the classic sense of the f u l l e m p l o y m e n t of t h e N a t i o n ' s
w o r k force and i n d u s t r i a l plants. A n d under such circumstances y o u
are e n t i r e l y correct, t h a t t h e p o l i c y does n o t find r e a l i t y t o w o r k
against.
N o w , the question o f w h a t p o l i c y should be applied i n a period
such as we have been i n for the last several years, i t seems to me, is
a v e r y real a n d d i f f i c u l t policy question. T h u s far this a d m i n i s t r a t i o n has, as y o u k n o w , presented a balanced b u d g e t as of J a n u a r y of
t h i s year. A n d w h e t h e r t h a t w i l l t u r n o u t to be a p p r o p r i a t e , w h e t h e r
events w i l l happen as we a n t i c i p a t e d then, a n d w h e t h e r the p o l i c y
w i l l continue to look correct is something t h a t w i l l have to be looked
a t f r o m t i m e to t i m e as economic conditions change.
T h e C h a i r m a n . Y o u have got a n experience, h a v e n ' t y o u , o f
a b o u t 30 years w i t h 25 unbalanced budgets?
M r . BELL. Y e s , s i r .
T h e CHAIRMAN. I a m a l i t t l e m y s t i f i e d b y y o u r s t a t e m e n t n o w —
a n d the Secretary o f the T r e a s u r y w h e n he was here a year ago, he
concluded his t e s t i m o n y b y saying—•
T h i s s t a t e m e n t [of M a r c h 26, 1961] b y President K e n n e d y o n b a l a n c i n g t h e
b u d g e t over t h e cycle years clearly outlines our b u d g e t a r y p o l i c y f r o m w h i c h
we have never wavered.
N o w , y o u are going to have a deficit this year, a n d y o u a d m i t i t
to be $7 b i l l i o n , a n d m y personal o p i n i o n is t h a t as a p r a c t i c a l m a t t e r
i t is going to be closer to $8 b i l l i o n , and y o u are going to have a n o t h e r
b i g deficit n e x t year, a l t h o u g h y o u stated i n J a n u a r y t h a t y o u w o u l d
have a balanced budget w i t h a surplus o f $500 m i l l i o n , and i f t h e
B u d g e t D i r e c t o r was correctly q u o t e d i n N e w Y o r k , he indicated
great concern t h a t y o u m i g h t have a surplus—is t h a t correct?—and
t h a t i f y o u d i d have a surplus, i t m i g h t result i n a recession. T h e
newspapers q u o t e d t h a t .
M r . BELL. Excuse me, sir. I f t h a t was the w a y i t was q u o t e d
i n t h e papers, i t was n o t an accurate reflection.
T h e CHAIRMAN. W h a t d i d y o u sa} 7 ?
11
DEBT CEILING
M r . BELL. T h e concern t h a t we have a t the present t i m e is essent i a l l y whether t h e economy is indeed g o i n g to m o v e on u p i n t o a f u l l y
prosperous period. T h i s is at this p o i n t a m a t t e r on w h i c h economic
observers have some differences. M a n y business economists a n d
b a n k i n g economists seem t o feel t h a t l a t e r this year we m a y n o t experience the prosperous conditions w h i c h the President assumed i n his
budget presentation. I f we do indeed m o v e u p w a r d w i t h the income
and p r o d u c t of the c o u n t r y and have economic prosperity, t h e 1963
budget w i l l be balanced, m a y be s u b s t a n t i a l l y m o r e t h a n balanced.
I f , on the other hand, the economic conditions f r o m n o w on u p t o
n e x t spring are less favorable t h a n the President anticipated, t h e n
t h e budget w i l l n o t be balanced. T h i s is the k e y question.
T h e CHAIRMAN. DO y o u have a n y question i n y o u r m i n d about
balancing the budget for the fiscal year beginning J u l y 1 ?
M r . BELL. I c e r t a i n l y have questions.
T h e CHAIRMAN. Y o u t h i n k the b u d g e t w i l l be balanced?
M r . BELL. I t h i n k i t depends on h o w t h e economy moves.
T h e CHAIRMAN. I t h i n k t h e Secretary of the T r e a s u r y a n d y o u
o u g h t to get together on this m a t t e r , because he answered a question
f r o m me i n regard t o the $500 m i l l i o n surplus b y saying t h a t t h e
President h a d recommended new a p p r o p r i a t i o n s t h a t w o u l d eat u p
the $500 m i l l i o n or more.
D i d n ' t y o u say t h a t ?
Secretary DILLON. NO, sir. I said t h e recommended new approp r i a t i o n s w o u l d j u s t about use u p t h e $500 m i l l i o n , b u t no more.
A n d I t h i n k t h a t was i n the B u d g e t D i r e c t o r ' s statement.
T h e CHAIRMAN. T h a t is w h a t I q u o t e d y o u as saying.
Secretary DILLON. I said no more, j u s t a b o u t t h a t m u c h .
T h e CHAIRMAN. C a n y o u f u r n i s h t h e c o m m i t t e e a statement of t h e
new appropriations t h a t the President has asked the Congress t o m a k e
i n a d d i t i o n to o r i g i n a l budget requests?
M r . BELL. Yes, sir; we w o u l d be glad to.
T h e CHAIRMAN. IS t h a t i n excess of $500 m i l l i o n or not?
Secretary DILLON. NO.
T h e CHAIRMAN. H a v e y o u got i t there?
M r . BELL. I have i t i n m y head o n l y , Senator. I f y o u w i l l p e r m i t
me, I w i l l p u t i t i n the record.
( T h e f o l l o w i n g was later supplied for t h e record:)
DEBT CEILING 11
Legislative proposals for which specific estimates were not included in the 1963 budget
submitted in January
[Amounts in millions!
Fiscal year 1963 estimates
New obligagational
authority
Allowance for contingencies
Estimated 1963 budget surplus_
$300
Total
Less legislative proposals already transmitted which were not specifically
itemized i n 1963 budget:
Public works construction i n distressed areas (appropriation of $600
million was anticipated for 1962)
Extension of temporary unemployment benefits
Highway Act of 1962:
Interior
Agriculture
Trade expansion
Other (group practice facilities i n health message; Senior Citizens Act;
reduction in adult illiteracy and numerous relatively small items)
Less amendments to the appropriation amounts i n the 1963 budget:
I . M . F . (originally proposed as 1962 item but actually submitted as 1963)..
Atomic Energy Commission
Other:
Increases
Decreases
Expenditures
$200
463
663
259
300
i 104
70
107
6
144
83
2,000
211
45
23
+26
45
+12
Total of changes—transmitted legislative proposals not specifically
itemized and amendments to appropriations proposed i n 1963
budget
571
Amount of estimated budget surplus remaining.
2 92
1
2
Net of budget receipts of $155,000,000 included in legislative proposal.
Presidential recommendations for which amounts were not itemized i n the 1963 budget and for which
specific legislative proposals have not yet been transmitted would be covered by this amount.
T h e CHAIRMAN. YOU s t i l l t h i n k t h a t w i t h t h e a d d i t i o n a l expenditures t h a t there m a y be a surplus i n t h e n e x t fiscal year, is t h a t
correct?
M r . BELL. I t depends e n t i r e l y on t h e course o f the economy a n d
i t s effect on receipts t o t h e G o v e r n m e n t . I f t h e economy moves
f o r w a r d , as we all hope i t w i l l , t h e n the t a x system o f t h e c o u n t r y
w i l l y i e l d receipts w h i c h w o u l d more t h a n cover t h e expenditures
t h a t we anticipate, i n c l u d i n g the a d d i t i o n a l expenditures t h a t t h e
President has recommended.
T h e CHAIRMAN. W h a t a b o u t the increase i n the Federal e m p l o y m e n t a n d other budget increases—are t h e y i n c l u d e d i n y o u r estimates?
M r . BELL. Yes, s i r ; all t h e increases i n cost
T h e CHAIRMAN. YOU s t i l l t h i n k , then, t h a t there is going to be a
balanced budget?
M r . BELL. I a m s t o p p i n g short o f a prediction, Senator. I a m
s a y i n g t h a t i t depends u p o n t h e course o f the economy p a r t i c u l a r l y
during the next 6 months.
T h e CHAIRMAN. I f y o u are going to have a balanced budget, w h y
are y o u here asking for an $8 billion increase i n debt?
Secretary DILLON. I explained v e r y carefully, Senator, t h a t t h e
increase has n o t h i n g to do w i t h balancing the budget. I t is a reflect i o n of t h e $7 b i l l i o n deficit we h a d this year, and i t is due t o t h e
short f a l l i n receipts t h a t is seen there i n t h e first half o f 1963, t h e
l i g h t e r shaded bar, w h i c h has fallen short o f the h o r i z o n t a l b l a c k
line w h i c h is the expenditure p a r t i n the second half of t h e fiscal y e a r .
11
DEBT CEILING
I n the second half, the surplus of receipts w i l l offset t h a t short f a l l ,
a n d we w o u l d come o u t even. I t is due t o the w a y our G o v e r n m e n t
receipts a n d revenues operate. T h e y are m u c h smaller i n the first
p a r t of the fiscal year, and t h e y have this p a r t i c u l a r h i g h peak o r
deficit j u s t before December 15 w h e n we receive v e r y large t a x p a y ments, a n d we have t o have debt f l e x i b i l i t y to cover t h a t .
T h e CHAIRMAN. I s n ' t i t t r u e , M r . Secretary, t h a t the balanced
budget was predicated o n an increase i n the postal rates?
Secretary DILLON. T h a t is r i g h t .
T h e CHAIRMAN. H a v e y o u any assurance t h a t t h a t is going t o be
done?
Secretary DILLON. NO assurance except t h a t the President asked i t .
T h e CHAIRMAN. I f i t i s n ' t done, w o n ' t t h a t create a deficit w i t h the
new expenditures t h a t y o u are requesting?
Secretary DILLON. T h a t is r i g h t . T h a t is w h a t we b o t h stated i n
our statements.
T h e CHAIRMAN. W h a t other increased taxes d i d y o u recommend,
or d i d y o u r e c o m m e n d any, to balance the budget?
Secretary DILLON. There is a b i g i t e m i n w h a t we recommended for
f a r m price supports, and i f those recommendations are n o t enacted—
and i t c e r t a i n l y looks d o u b t f u l a t the m o m e n t t h a t t h e y w i l l be.
T h e CHAIRMAN. IS t h a t i n c l u d e d i n the budget?
S e c r e t a r y DILLON. Y e s , s i r .
M r . BELL. T h e a n t i c i p a t i o n of reduced expenditures under t h e
President's f a r m proposal is i n c l u d e d i n the budget. I f the Congress
does n o t enact the President's f a r m proposal, expenditures f o r f a r m
price supports w i l l be higher t h a n those i n d i c a t e d i n the budget.
T h e CHAIRMAN. W i l l y o u give a r o u g h s t a t e m e n t of w h a t y o u estim a t e d f r o m t a x increases i n d e t e r m i n i n g w h e t h e r or n o t there w o u l d be
a deficit? Y o u have got t h e postal rates. N o w , w h a t else?
Secretary DILLON. T h e n e w taxes. I t h i n k t h e postal rates was the
o n l y s u b s t a n t i a l i t e m of new revenue. W e of course estimated t h a t
excise taxes w o u l d be extended a n d t h e corporate income t a x be extended, a n d we are going t o — —
T h e CHAIRMAN. W e l l , the excise taxes were passed b y the Senate.
Secretary DILLON. W e m a y lose close t o $100 m i l l i o n f r o m our estim a t e b y congressional action on t h a t b i l l .
T h e CHAIRMAN. A n d t h e n the postal increase w o u l d be h o w m u c h ?
M r . BELL. A b o u t $600 m i l l i o n , Senator.
T h e CHAIRMAN. So these items m a y lose p r e t t y close t o a b i l l i o n
dollars, i n c l u d i n g increased expenditures. I f we have t o assume t h a t
Congress w i l l m a k e t h e increases i n t h e postal rates and so f o r t h , I
c a n ' t u n d e r s t a n d w h y y o u t h i n k there is a p o s s i b i l i t y of a balanced
b u d g e t i n t h e n e x t fiscal year.
Secretary DILLON. W h a t we are t r y i n g t o say is t h a t i f the Congress
adopts the President's p r o g r a m , w h i c h is the o n l y w a y the Chief
E x e c u t i v e can figure when he is presenting a b u d g e t , t h a t there m i g h t
be a balanced b u d g e t . T h e t w o things w h i c h are i m p o r t a n t are the
state of the economy, w h i c h influences revenues, and the action of the
Congress on the expenditure and t a x side. T h e y have to be estimated
ahead of t i m e , and our estimates are based on t h a t .
T h a t is w h y we said t h a t we were n o t i n a position n o w t o m a k e
n e w and more refined estimates, a n d w o n ' t be u n t i l September, after
t h e Congress finishes w o r k and we k n o w w h a t happens. A n d t h e n
50
DEBT CEILING 11
we w i l l as usual i n t h e m i d - y e a r review m a k e a completely n e w estim a t e w h i c h I t h i n k w i l l p r o b a b l y be a v e r y accurate estimate. T h e
estimate we made last October of the deficit has t u r n e d o u t t o b e
p r o b a b l y t h e m o s t accurate estimate t h a t has been made i n t h e last
10 years.
T h e CHAIRMAN. I w o n ' t embarrass y o u b y reading t h e estimates
t h a t y o u have made i n t h e past.
Secretary DILLON. Those were n o t f o r m a l estimates. T h e f o r m a l
estimates made last October t u r n e d o u t v e r y well, I t h i n k .
T h e CHAIRMAN. T h e r e are some f o r m a l estimates; and I remember
t h e President asked me t o come t o the W h i t e House, and he t h o u g h t
t h e deficit f o r last year w o u l d be a b i l l i o n and a half. H e called y o u
u p , a n d y o u t h o u g h t i t w o u l d be the same. B u t a c t u a l l y t h e deficit
was $4 b i l l i o n . I d o n ' t t h i n k a n y a d m i n i s t r a t i o n — a n d I d o n ' t confine i t t o y o u , i t applies t o a l l the a d m i n i s t r a t i o n s I have served
u n d e r — h a s made v e r y accurate estimates a b o u t the surplus or deficit.
Secretary DILLON. I t is ver}^ difficult, because so m a n y things
occur. I w a n t t o say t h a t I k n e w we made some estimates i n t h e early
days, a n d t o p o i n t o u t t h a t we have h a d b e t t e r l u c k i n our latest one.
T h e CHAIRMAN. DO y o u t h i n k t h e crisis i n the stock m a r k e t is
going t o have some bearing on profits?
Secretary DILLON. I t w i l l have a bearing on profits p r o v i d e d i n d i v i d u a l s decide to purchase less, or companies decide to spend less for
equipment.
T h e CHAIRMAN. HOW m u c h revenue do y o u get from the capital
gains tax?
Sscretary DILLON. I t h i n k the chances are t h a t the a c t u a l revenues
f r o m c a p i t a l gains w i l l be increased b y w h a t happened i n the stock
m a r k e t , because there was m u c h greater v o l u m e and a great deal of
selling. A n d there is no w a y o f k n o w i n g at w h a t prices these stocks
were o r i g i n a l l y b o u g h t , a n d i t m a y well be t h a t m a n y of t h e m were
b o u g h t a t lower prices.
T h e CHAIRMAN. I t depends on whether the seller makes a p r o f i t or
not?
Secretary DILLON. T h a t is r i g h t .
T h e CHAIRMAN. I f he has a loss he can carry t h a t f o r w a r d to some
extent.
I n a d d i t i o n , i t has been i n d i c a t e d t h a t some companies have been
discouraged f r o m issuing new stocks t o p u t u p p l a n t e q u i p m e n t .
I c a n ' t see a n y encouragement i n the stock m a r k e t crash t o w a r d a
balanced budget.
Secretary DILLON. NO, i t is certainly an element of discouragement.
T h e CHAIRMAN. I d o n ' t w a n t t o take too m u c h time, b u t I w a n t
t o get t o these m a t t e r s .
W i l l y o u state for t h e record first the G o v e r n m e n t ' s c u r r e n t m o n e t a r y p o l i c y ; second, the G o v e r n m e n t ' s current fiscal p o l i c y ; and t h i r d ,
t h e G o v e r n m e n t ' s current b u d g e t policy?
I w a n t t h a t because I a m confused, and m a n y people are confused,
because we are t a l k i n g about different k i n d s of policies r e l a t i n g to t h e
expenditures of t h e G o v e r n m e n t and t o the b o r r o w i n g of m o n e y , and
so f o r t h .
N o w , w o u l d y o u state t h e G o v e r n m e n t ' s c u r r e n t m o n e t a r y policy?
Secretary DILLON. I w o u l d b e glad t o d o t h a t , M r . C h a i r m a n .
W i t h respect t o m o n e t a r y policy, the responsibility for this is vested
DEBT CEILING
11
b y l a w i n t h e Federal Reserve System. W e do expect, however, t h a t
i n w o r k i n g o u t t h e i r m o n e t a r y policies t h e y w i l l w o r k i n c o n s u l t a t i o n
w i t h and w i t h f u l l regard for t h e a d m i n i s t r a t i o n ' s overall p r o g r a m .
N o w , t h a t has been the case i n the past, a n d t h e Federal Reserve a n d
t h e T r e a s u r y have w o r k e d closely together t o evolve an i n t e r r e l a t e d
p r o g r a m of m o n e t a r y p o l i c y and debt management.
T h e aims of t h e m o n e t a r y p o l i c y of t h e Federal Reserve have been
t o keep credit a m p l y available w h i l e a significant segment of A m e r i c a n
business capacity and A m e r i c a n labor r e m a i n u n e m p l o y e d and u n d e r employed. A t t h e same t i m e t h e i r m o n e t a r y polic}^ has been directed
t o m a i n t a i n i n g conditions i n t h e m o n e y m a r k e t , i n c l u d i n g a level o f
s h o r t - t e r m interest rates t h a t w o u l d a v o i d o r m i n i m i z e t h e f l o w of
s h o r t - t e r m funds o u t of the U n i t e d States, and w o u l d t h e r e b y p r o v i d e
m a j o r assistance t o the G o v e r n m e n t ' s effort t o restore balance-ofpayments e q u i l i b r i u m .
I n c a r r y i n g o u t this m o n e t a r y p o l i c y t h e y w o r k e d closely w i t h the
Treasury, because the Treasury's debt management p o l i c y is t i e d i n
closely w i t h the m o n e t a r y efforts o f the Federal Reserve. A n d we
have w o r k e d closely together w i t h our debt management to meet our
overall b o r r o w i n g requirements a t a m i n i m u m overall cost. A n d i n
doing t h a t we have issued a substantial a m o u n t of s h o r t - t e r m securities or bills. These bills have also helped to meet a demand, a larger
demand, an increasing demand, for s h o r t - t e r m securities, a n d have
buttressed the efforts o f the Federal Reserve t o m a i n t a i n an equilib r i u m relationship w i t h foreign m o n e y markets.
As far as fiscal p o l i c y is concerned, this is a separate m a t t e r w h i c h
is the responsibility of the E x e c u t i v e to propose a n d of the Congress
t o dispose. O u r fiscal p o l i c y has been to u n d e r t a k e those expenditures
w h i c h are deemed necessary b o t h for defense a n d for domestic p u r poses, a n d o n l y those—as the President p o i n t e d o u t w h e n be first
t o o k office.
O u r fiscal p o l i c y aims a t b u d g e t a r y surpluses when the economy
operates at f u l l capacity, a n d a balance when the economy approaches
capacity. T h a t was the reason f o r the President's s u b m i t t i n g a
balanced budget for fiscal 1963 w h i c h was based on the assumption of
an economy t h a t was approaching f u l l c a p a c i t y a n d n o t really reaching
i t d u r i n g the course of the fiscal year, b u t o n l y reaching i t at the v e r y
end of the fiscal year.
N o w , a t the same t i m e , I t h i n k i t is the President's feeling, the
a d m i n i s t r a t i o n ' s feeling, t h a t t h e y should n o t reduce necessary expenditures a t a t i m e when revenue receipts are reduced b y an economy
w h i c h is n o t o p e r a t i n g as i t should, when i t is either n o t doing as w e l l
as expected or is a c t u a l l y declining.
N o w , basic t o such p o l i c y overall is an increase i n our gross n a t i o n a l
p r o d u c t t h a t is a t a s u b s t a n t i a l l y faster percentage r a t e t h a n any
increase i n t h e debt. T h i s w o u l d decrease steadily t h e b u r d e n of the
Federal debt on the people of the U n i t e d States. T h a t i n fact has
occurred p r a c t i c a l l y every year since the war. A t the end of the
w a r t h e Federal d e b t a m o u n t e d t o some 128 percent of gross n a t i o n a l
p r o d u c t . As of n o w i t amounts t o some 53,^ percent, w i i i c h is subs t a n t i a l l y less t h a n half of w h a t i t was after t h e w a r , and i t has dropped
i n p r a c t i c a l l y every year except, I t h i n k , one. T h i s past year i t
d r o p p e d about 2 percent.
52
DEBT CEILING 11
I w o u l d say t h a t is t h e o u t l i n e of m o n e t a r y a n d fiscal p o l i c y , a n d I
t h i n k i t includes w i t h i n fiscal p o l i c y , b u d g e t a r y p o l i c y . T h e D i r e c t o r
m a y have something else he w a n t s t o say on t h a t .
M r . BELL. NO.
T h e CHAIRMAN. One f a c t o r t h a t h a s n ' t been considered as i t should
be o n this cycle idea, is t h e interest. Y o u p a y t h e interest o n d e b t
w h e t h e r y o u are i n p r o s p e r i t y or adversity. N o w , i t so happens t h a t
t h e interest this present fiscal year w o u l d be a b o u t $9 b i l l i o n .
Secretary DILLON. T h i s year t h a t we are r u n n i n g in, yes.
T h e CHAIRMAN. A n d t h e deficit w i l l approach $9 b i l l i o n , a p p r o x i mately?
Secretary DILLON. NO, sir.
T h e CHAIRMAN. W e l l , y o u a d m i t t h a t i t w i l l approach 7?
Secretary DILLON. Seven.
T h e CHAIRMAN. W e w i l l compromise on 8.
Secretary DILLON. NO, sir.
T h e CHAIRMAN. I have been t r y i n g t o b e t y o u a h a t on this f o r
some t i m e .
Secretary DILLON. T h i s one is too easy, Senator. I w o n ' t do i t .
W e w i l l compare figures n e x t week.
Senator KERR. W h a t do y o u w a n t t o b e t a h a t on?
T h e CHAIRMAN. I w a n t t o b e t t h a t the deficit is going t o be over 8,
a n d I w a n t t o b e t another h a t t h a t n e x t year i t is going t o be over 6.
I f anyone w a n t s t o — —
Senator DOUGLAS. I w i l l t a k e y o u u p o n the first one, M r . C h a i r m a n , and I w i l l b u y y o u a good h a t .
T h e CHAIRMAN. W h a t a b o u t the second one?
Senator DOUGLAS. NO, sir.
T h e CHAIRMAN. W h e n I go u p i n the m o u n t a i n s I l i k e t o t a k e t w o
hats w i t h me.
W h a t I a m g e t t i n g t o is t h a t for this year we are b o r r o w i n g m o n e y
t o p a y interest, w h i c h means interest compounded. I f we d i d n ' t
have this interest we w o u l d n ' t have a deficit this year.
Secretary DILLON. T h a t is r i g h t , i f there was no p u b l i c d e b t a n d
n o interest t o be p a i d on i t .
T h e CHAIRMAN. I a m interested i n interest because i t is something
t h a t these people w h o k n o w m u c h more t h a n I do a b o u t
financial
m a t t e r s d o n ' t refer t o m u c h . B u t w h e n y o u have a debt y o u p a y
interest on i t u n t i l y o u p a y the debt. So the other d a y I looked over
t h e Federal interest expense and I was surprised t o find t h a t since
the K o r e a n w a r — a n d t h a t w a s n ' t so far b a c k — o u r interest has been
$61,700 m i l l i o n . A n d i f we keep i t u p a t the present rate for the
n e x t period, about 10 or 11 years, i t w i l l be $90 t o $100 b i l l i o n over 10
years. T h i s is something t h a t I t h i n k should have consideration.
T h a t is n o t a t e m p o r a r y t h i n g . T h a t is n o t a m a t t e r of being prosperous one year a n d h a v i n g a slight recession one year, b u t y o u are
b u i l d i n g u p a permanent charge against the G o v e r n m e n t . A n d I
believe t h a t those w h o t a l k about h a v i n g a deficit one year a n d t h e n
a surplus the n e x t year o u g h t t o take t h a t i n t o consideration.
N o w , there is j u s t one other t h i n g . I have asked y o u a l o t o f
questions. B u t I w a n t t o go i n t o this. I t has d i s t u r b e d me v e r y
g r e a t l y . As y o u k n o w , since a r o u n d 1950 we have lost $8 b i l l i o n of
gold, i t has gone d o w n f r o m $24.5 t o $16.4 b i l l i o n . A n d $12 b i l l i o n
is dedicated t o back our o w n currency. W e have o n l y $4 b i l l i o n
DEBT CEILING
11
of the so-called free gold. I have a table here showing since 1930 the
debts, the interest, the budget deficits, the value of the d o l l a r ; a n d the
dollar has gone d o w n s t e a d i l y — I t h i n k one year i t w e n t up, i n 1949
i t w e n t u p a half a cent. I t is n o w 46.4 cents as compared t o 100
cents i n 1939.
I shall insert this table i n the record at this p o i n t .
Federal debt, interest on the debt, budget surplus or deficit, value of the dollar,
of payments, and U.S. gold stock, 1930-63
balance
[ F r o m official Government sources]
Year
Gross
Budget
Interest
public
Value of Balance
on the
debt and
deficit or the dol- of inter- U.S. gold
public
guaransurplus
lar (by
national
stock
teed obli- debt (by (by fiscal calendar payments (by fiscal
year i n
year i n (calendar year i n
gations
fiscal
year i n millions)
(by fiscal year i n millions) cents) 1
ye'ir m millions)
millions)
millions)
$16,185
16, 801
19, 487
22, 539
27, 734
32, 824
38, 497
41, 089
42, 018
45, 890
48, 497
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
Depression years...
1941
1942
1943
1944
1945
1946
_ _
55,332
76, 991
140,796
202, 626
259,115
269,898
258, 376
252,366
252, 798
257, 377
Post-World War I I years
1951
1952
1953
1954
255, 251
259,151
266,123
271, 341
Korean war years.
1955
1956
1957
1958
1959
1960
1961
+$737
-462
- 2 , 735
- 2 , 602
- 3 , 630
- 2 , 791
- 4 , 425
- 2 , 777
-1,177
- 3 , 862
-3,918
8, 660
- 2 7 , 642
1,111
1,260
1,808
2,609
3, 617
4,722
-6,159
- 2 1 , 490
-57,420
-51,423
- 5 3 , 941
- 2 0 , 676
83.2
91.4
101.7
107.4
103.8
101.2
100.2
96.7
98.5
100.0
99.2
+$598
+1,132
+726
+323
+1,140
+1,174
+896
+ 1 . 053
+ 1 , 482
+1,915
- 2 , 890
$4, 535
4, 956
3,919
4,318
7, 856
9,116
10, 608
12, 318
12,963
16,110
19, 963
94.4
85.3
80.3
79.0
77.2
71.2
+1,119
-205
-1,979
-1,859
- 2 , 737
+1,261
22,624
22, 737
22,388
21,173
20, 213
20, 270
62.2
57.8
58.3
57.8
+ 4 , 567
+1,005
+175
- 3 , 580
21, 266
23, 532
24, 466
24, 231
53.5
52.3
51.9
51.7
-305
-1,046
-2,152
-1,550
21, 756
23, 346
22, 463
21, 927
51.9
51.1
49.4
48.1
47. 7
46.9
46.4
-1,145
-935
+520
- 3 , 529
2 - 3 , 743
- 3 , 929
- 2 , 454
21, 678
21, 799
22, 623
21,356
19, 705
19, 322
17, 550
15,127 -211,109
W o r l d War I I years
1947
1948
1949
1950
$659
612
599
689
757
821
749
866
926
941
1,011
274, 418
272, 825
270, 634
276,444
284,817
286, 471
289, 211
Post-Korean war years.
Total, 1930-61, actual
4, 958
5, 211
5,339
5, 750
+754
+ 8 , 419
-1,811
-3,122
21, 258
+ 4 , 240
5, 613
5, 859
6, 504
6, 382
+ 3 , 510
- 4 , 017
- 9 , 449
-3,117
24,358
- 1 3 , 073
6,370
6, 787
7, 244
7, 607
7, 593
9,180
8, 957
-4,180
+1,626
+ 1 , 596
- 2 , 819
- 1 2 , 427
+ 1 , 224
- 3 , 856
53, 738
-18,836
123,141 -266, 420
April
Estimates and latest actual:
1962
1963 .
295,835
295, 569
8, 998
9,400
- 6 , 975
+463
1 Based on 100-cent dollars i n 1939.
2 Excludes additional U.S. subscription to I M F of $1,375,000,000.
46.0
1st
quarter
-1,904
June 15
16,434
54
DEBT CEILING 11
A n d coincident w i t h t h a t and the Federal deficits, the gold has gone
o u t . W e h a d our b i g imbalance of p a y m e n t s w i t h foreign nations i n
1950. T h a t was $3,580 m i l l i o n .
I n 1947 we h a d a surplus of foreign p a y m e n t s o f $4,567 m i l l i o n .
A n d then steadily f r o m 1950 w i t h the single exception of 1957,
when we h a d a surplus of $520 m i l l i o n . W e have h a d deficits i n our
balance of payments. T h e highest was $3,929 m i l l i o n i n 1960, there
was another of $3,743 m i l l i o n i n 1959, a n d another of $3,529 m i l l i o n
i n 1958.
A n d coincident w i t h t h a t , a n d w i t h the loss of the purchasing power
of the dollar, the gold reserves have gone down. So t h a t t o d a y the
g o l d reserves are $16,434 m i l l i o n as compared t o the $24.5 b i l l i o n
i n 1949.
N o w , w h a t is being done, or w h a t can be done to correct t h a t seepage
of g o l d w h i c h continues?
Secretary DILLON. A great deal has been done, M r . C h a i r m a n . W e
have been active i n c o n t r o l l i n g the outflow. T h e balance-of-payments
effect of our o w n expenditures abroad t h a t we can c o n t r o l — o u r gove r n m e n t a l expenditures, such as defense expenditures to keep o u r o w n
troops abroad
T h e CHAIRMAN. NOW, could y o u itemize our expenditures abroad?
Secretary DILLON. C e r t a i n l y .
T h e CHAIRMAN. T h e troops are h o w m a n y now?
Secretary DILLON. T h e gross t r o o p cost abroad, the defense cost
abroad, w h i c h includes the maintenance a n d e v e r y t h i n g connected
w i t h defense t h a t i t costs us i n our balance of payments, has been
r u n n i n g about $3 b i l l i o n a year.
T h e CHAIRMAN. T h e r e are a b o u t 750,000 troops abroad.
Secretary DILLON. I a m n o t certain of the n u m b e r .
T h e CHAIRMAN. W h a t do y o u estimate t h a t the t o u r i s t trade takes
out?
Secretary DILLON. O u r n e x t deficit has been a b o u t $1 b i l l i o n a
year.
T h e CHAIRMAN. T h e b i l l t h a t y o u g o t this c o m m i t t e e t o pass
against their o w n wishes i n c i d e n t a l l y , w h i c h reduced the a m o u n t of
merchandise t h a t tourists c o u l d b r i n g i n d u t y - f r e e f r o m $500 to $100—
has t h a t reduced the dollar outflow?
Secretary DILLON. Yes. T h e estimate t h a t w e g o t f r o m o u r
C u s t o m s Service is t h a t i t has p r o b a b l y saved us between $100 a n d
$150 m i l l i o n a year i n our balance-of-payments deficit and has cont r i b u t e d t o m o d e r a t i n g t h e g o l d outflow.
T h e CHAIRMAN. T h a t is n o t v e r y m u c h i n comparison to the whole
problem.
Secretary DILLON. T h e p r o b l e m is so acute t h a t n o t h i n g is i n c o n sequential, a n d a n y w a y we can get a t i t we do i t .
T h e CHAIRMAN. W e have adverse p a y m e n t s of $4 b i l l i o n . H o w
m u c h is t h e average n e t loss after b r i n g i n g b a c k the profits of the
people t h a t p u t u p factories abroad?
Secretary DILLON. T h e average a m o u n t of f u n d s t h a t t h e y are
i n v e s t i n g abroad each year, d i r e c t a n d p o r t f o l i o , is a b o u t $2.5 b i l l i o n .
T h e CHAIRMAN. YOU offset t h a t , do y o u n o t , w i t h the profits t h a t
come back?
Secretary DILLON. T h a t $2.5 b i l l i o n is the net a m o u n t of l o n g - t e r m
U.S. c a p i t a l we send abroad to invest a n d w h a t foreign investors send
11
DEBT CEILING
i n t o the U n i t e d States t o invest. I t is not offset b y earnings f r o m
past investments.
T h e CHAIRMAN. W h e n A m e r i c a n businesses establish plants abroad,
some profits come back to this c o u n t r y .
Secretary DILLON. Yes, b u t i t is n o t offset, because the profits
w o u l d come b a c k even i f new businesses w e r e n ' t established abroad.
T h e CHAIRMAN. T h e n the t o t a l of A m e r i c a n m o n e y t h a t leaves
this c o u n t r y is h o w much?
Secretary DILLON. YOU mean the gold?
T h e CHAIRMAN. NO, the t o t a l expenditures t h a t y o u m a k e i n
A m e r i c a n dollars t h a t go o u t of this c o u n t r y .
Secretary DILLON. T h e y h a v e n ' t all been added up, b u t last y e a r
we h a d $14.5 b i l l i o n w o r t h of i m p o r t s , so m o n e y w e n t o u t t o b u y t h a t .
W e h a d $5 b i l l i o n of service i m p o r t s , so t h a t makes a t o t a l of $20
b i l l i o n t h a t w e n t o u t . O u r m i l i t a r y expenditures were $3 b i l l i o n .
T h a t is $23 b i l l i o n .
T h e CHAIRMAN. O n the credit side w h a t is the difference between
the exports a n d the imports?
Secretary DILLON. O n commercial account last year we h a d a
balance on trade of about $3.2 b i l l i o n .
T h e CHAIRMAN. $3.2 b i l l i o n . I s t h a t the o n l y credit we h a d got
against these deficits of $4 o r $5 billion?
Secretary DILLON. Oh, no. W e a c t u a l l y have our service exports,
w h i c h include income f r o m our investments abroad, w h i c h are larger
t h a n our service i m p o r t s , and we h a d a credit there of a b o u t $1,9
b i l l i o n . A n d o u r t o t a l n e t balance o n commercial services a n d
exports was j u s t over $5 b i l l i o n , $5.1 b i l l i o n . A g a i n s t t h a t we h a d
t o offset m i l i t a r y expenditures of a b o u t $3 b i l l i o n , and against t h a t
we h a d net m i l i t a r y cash receipts of about $400 m i l l i o n , a net m i l i t a r y
o u t f l o w of about $2.6 billion.
T h e CHAIRMAN. W h a t is y o u r estimate of t o t a l exports?
Secretary DILLON. T o t a l exports or export surplus?
T h e CHAIRMAN. T o t a l exports.
Secretary DILLON. T h e t o t a l exports, i n c l u d i n g those financed b y
G o v e r n m e n t grants and credits, were $19.9 b i l l i o n , of w h i c h $2 b i l l i o n ,
r o u g h l y , were financed b y G o v e r n m e n t grants a n d credits. So
merchandise exports, commercial exports, were j u s t over $17.7 b i l l i o n .
T h e CHAIRMAN. W h a t figures were y o u t a k i n g w h e n y o u gave t h i s
estimate of $5 b i l l i o n surplus?
Secretary DILLON. T h a t was the surplus on commercial merchandise
exports a n d on commercial services p u t together.
T h e CHAIRMAN. YOU excluded the surplus food t h a t we sent abroad?
S e c r e t a r y DILLON. Y e s .
T h e CHAIRMAN. T h a t is a b o u t $2.5 billion?
Secretary DILLON. I t h i n k food a n d other items financed b y
G o v e r n m e n t grants and credits were $2.2 b i l l i o n .
T h e CHAIRMAN. F o r a l o n g t i m e t h e y were i n c l u d e d i n t h e t o t a l ?
f Secretary DILLON. Yes. As y o u remember, we o b t a i n e d publication^of a table b y the D e p a r t m e n t of Commerce t h a t separated t h e m
o u t , a n d t h e y c a r r y i t r e g u l a r l y now. T h a t is the table I a m reading
from.
^ T h e CHAIRMAN. Suppose the time w o u l d come, because of a cont i n u a t i o n of this imbalance of payments, when we w o u l d n o t be i n a
position t o honor d r a f t s made u p o n us b y central banks of E u r o p e
for gold instead of dollars, w h a t w o u l d happen?
56
DEBT CEILING 11
Secretary DILLON. W e l l , I d o n ' t foresee a n y such t i m e occurring.
So I t h i n k t h a t is a p u r e l y h y p o t h e t i c a l question. W e are w o r k i n g
t o achieve a balance i n our p a y m e n t s b y t h e end of n e x t year, a n d I
t h i n k t h a t we have every expectation of doing i t .
T h e CHAIRMAN. H o w i n the w o r l d are y o u going to achieve a balance of y o u r payments? Y o u have g o t to achieve i t b y g e t t i n g a b o u t
$4 billion.
Secretary DILLON. O u r o v e r a l l deficit last year, c o u n t i n g e v e r y t h i n g , was about $2.46 b i l l i o n , of w h i c h a b o u t $2 b i l l i o n were s h o r t t e r m m o n e y flows. I t h i n k those s h o r t - t e r m flows w i l l be m u c h less.
E v e r y i n d i c a t i o n is so far this year t h a t t h e y have been v e r y substant i a l l y less t h a n t h e y were last year.
O u r basic deficit, excluding those, was o n l y $400 m i l l i o n last year.
I do t h i n k t h a t we can operate w i t h the v e r y s u b s t a n t i a l savings t h a t
we are m a k i n g i n our m i l i t a r y expenditures b y g e t t i n g offsets f r o m
other countries. W e expect t o save n e a r l y a b i l l i o n dollars as compared w i t h last year. A n d w i t h moderate increases i n exports, a n d a
s t o p p i n g of this p r i v a t e s h o r t - t e r m capital o u t f l o w , there is no reason
w h y i n another year and a half we s h o u l d n ' t reach a balance. I t i s
because our p a y m e n t s have been i m p r o v i n g , and i m p r o v i n g v e r y m u c h
i n this last quarter, t h a t we have lost no gold at all f o r the last 6 weeks,
w h i c h is q u i t e a long period. I say 6 weeks, because this week w h i c h
ends t o m o r r o w we w i l l have no gold loss either, and t h a t w i l l m a k e i t
6 weeks i n a row.
T h e CHAIRMAN. T h e i m p r o v e m e n t hasn't been constant b y t h i s
s t a t e m e n t t h a t I have got, a n d I t h i n k i t is correct. F o r the first
quarter of 1962 we lost $1,904 billion, I mean we h a d a deficit.
S e c r e t a r y DILLON. N o .
M r . BELL. T h a t is t h e a n n u a l rate.
T h e CHAIRMAN. T h a t is correct, i s n ' t it?
Secretary DILLON. Yes, a n n u a l rate, t h a t is correct. T h a t is b e t t e r
t h a n last year. B u t t h e second q u a r t e r w i l l be v e r y s u b s t a n t i a l l y
b e t t e r t h a n t h a t . T h r o u g h M a y , the best figures we have, w h i c h are
n o t b r o k e n d o w n , b u t t h e y were based on balances at U.S. banks a n d
a t the Federal Reserve System, indicate t h a t our deficit f o r t h e year
t h r o u g h M a y was a t an a n n u a l rate of s o m e t h i n g under $1.5 b i l l i o n .
So there was a v e r y sharp i m p r o v e m e n t f o r A p r i l - M a y , a n d there
has been s u b s t a n t i a l i m p r o v e m e n t i n t h e second q u a r t e r as compared
w i t h t h e first quarter.
T h e CHAIRMAN. I n 1960 i t was $4 b i l l i o n , p r a c t i c a l l y $4 b i l l i o n .
Secretary DILLON. T h a t is r i g h t .
T h e CHAIRMAN. I w o u l d l i k e y o u r o p i n i o n as t o w h y t h e E u r o p e a n
banks called on us f o r $8 b i l l i o n of gold i n a p e r i o d of l i t t l e m o r e
t h a n 10 years.
Secretary DILLON. I t h i n k there were largely t w o reasons f o r t h a t .
I t h i n k t h e y called on us f r o m the end of 1949 u p t h r o u g h a b o u t 1958,
w h e n t h e y t o o k a b o u t half of i t , a b o u t $4 b i l l i o n of the t o t a l , f o r a
necessary r e b u i l d i n g of t h e i r depleted gold stock, so t h a t t h e y could
finance themselves a n d finance t h e i r o w n trade. T h i s enabled t h e m ,
a t t h e end of 1958 t o begin t o m a k e t h e i r currencies f u l l y c o n v e r t i b l e ,
w h i c h has of course n o w been completed.
T h e r e a f t e r , the gold flow was due t o the fact t h a t m o s t o f these
c e n t r a l banks operate on a r a t i o system where t h e y keep a c e r t a i n
p r o p o r t i o n of t h e i r resources i n gold and another p r o p o r t i o n i n dollars.
11
DEBT CEILING
A s t h e y received dollars over a n d above this r a t i o , t h e y converted a
p o r t i o n of i t i n t o gold a n d m a i n t a i n e d the r a t i o , a n d t h a t t o o k a b o u t
$4 b i l l i o n m o r e t h r o u g h the present period.
T h e CHAIRMAN. DO y o u t h i n k there is a n y i n c e n t i v e i n the f a c t
t h a t t h e y can get gold a t $35 an ounce i n lieu of dollars, w h e n gold
costs m o r e t h a n t h a t t o produce a t least i n this c o u n t r y ?
Secretary DILLON. W e l l , the fact is t h a t gold i n the great p r o d u c i n g
regions o f the w o r l d , such as S o u t h A f r i c a , costs less t h a n t h a t t o
produce, because i t is produced a t a v e r y good p r o f i t .
T h e CHAIRMAN. I s n ' t the average cost more t h a n t h a t ?
Secretary DILLON. I t is i n the U n i t e d States, b u t even there, our
biggest m i n e , the H o m e s t e a d M i n e , is o p e r a t i n g at a p r o f i t , t h o u g h n o t
m u c h of a p r o f i t , at $35 an ounce. B u t c e r t a i n l y all the smaller mines,
I t h i n k , have been closing and have n o t been able t o operate. B u t i n
a n y recent years t h e y have produced a v e r y small a m o u n t of the w o r l d
p r o d u c t i o n . T h e basic p a r t of the w o r l d p r o d u c t i o n , something l i k e
$800 m i l l i o n a year n o w , is c o m i n g f r o m South A f r i c a . I t is being p r o duced a t a v e r y good p r o f i t , and dividends are p a i d on t h e S o u t h
A f r i c a n gold stocks every year.
T h e CHAIRMAN. W e d o n ' t b u y t h a t gold, do we?
Secretary DILLON. I f a n d as we b u y n e w foreign gold p r o d u c t i o n
we d o n ' t b u y i t d i r e c t l y . T h e great b u l k of i t is sold on the L o n d o n
m a r k e t , and i t is d i s t r i b u t e d t h r o u g h the L o n d o n gold m a r k e t , a n d
some of i t m a y find i t s w a y t o us t h r o u g h those operations i n d i r e c t l y .
B u t we b u y n o t h i n g d i r e c t l y f r o m S o u t h A f r i c a .
T h e CHAIRMAN. W h a t has puzzled me, l o o k i n g a t these figures, is
t h a t i n the past 10 years we have b r o u g h t i n o n l y $520 m i l l i o n i n
gold. I n other words, the g o l d t h a t goes o u t a p p a r e n t l y doesn't
come back, i s n ' t t h a t r i g h t ?
Secretary DILLON. T h a t has largely been the case. B u t the situat i o n is i m p r o v i n g . W e have been able, a n d I t h i n k we w i l l be able
i n the f u t u r e i f we can balance our p a y m e n t s , to o b t a i n gold and o b t a i n
i t i n reasonable quantities.
T h e CHAIRMAN. I wish I c o u l d share y o u r confidence about i t , b u t
we have lost t w o - t h i r d s of our free g o l d i n 10 years.
Secretary DILLON. T h a t is correct. T h a t is w h y we have t o b a l ance our payments.
T h e CHAIRMAN. DO y o u t h i n k t h a t these imbalances a n d loss of
gold p u t us i n some jeopardy? I assume t h a t y o u are doing everyt h i n g t h a t y o u can do t o meet the s i t u a t i o n .
Secretary DILLON. Yes, sir. One f a c t o r , of course, t h a t I a m sure
y o u r realize is t h a t i n spite of the gold t h a t we have lost we s t i l l have
i n the U n i t e d States a b o u t 40 percent o f the gold i n the free w o r l d .
T h e CHAIRMAN. T e n years ago we h a d 75 percent.
Secretary DILLON. Yes, w h i c h was too m u c h .
T h e CHAIRMAN. DO y o u regard t h a t as a satisfactory condition?
Secretary DILLON. I t h i n k 40 percent is p r o b a b l y a b o u t r i g h t .
I
d o n ' t t h i n k t h a t 75 percent was satisfactory, because i t made i t
impossible for other nations to have convertible currencies or to have
free m u l t i l a t e r a l trade i n the w o r l d .
T h e CHAIRMAN. Hearings have been held to see i f gold p r o d u c t i o n
could be subsidized. A s I understand i t , the t e s t i m o n y was t h a t
p r o d u c t i o n of gold w o u l d cost $70 an ounce.
58
DEBT CEILING 11
Secretary DILLON. T h a t was a request of the m i n i n g interests, t o
have the I n t e r i o r D e p a r t m e n t p a y t h e m a $35 subsidy, o n w h i c h
basis t h e y t h o u g h t t h e y m i g h t be able t o operate.
T h e CHAIRMAN. YOU opposed i t , a n d I t h i n k y o u were r i g h t
because t h a t w o u l d have depreciated the dollar.
Secretary DILLON. T h a t is r i g h t .
T h e CHAIRMAN. A n d here is a s i t u a t i o n t h a t we are in. I f we
raise the price o f gold we w i l l depreciate the value o f the d o l l a r .
Therefore we are i n a vise where we c a n ' t meet the w o r l d m a r k e t
price of gold i f i t goes above $35.
Secretary DILLON. I f i t goes above, w h i c h i t has shown no signs
of doing.
T h e CHAIRMAN. A n d t h e o n l y m i n e t h a t we have, as I understand,
t h a t has any p r o d u c t i o n is i n Juneau, Alaska, a n d i n the hearings
w h i c h I read i t seems t h e cost there w o u l d be $70.
Secretary DILLON. T h e o n l y good m i n e t h a t we have is the H o m e stead m i n e i n S o u t h D a k o t a , a n d i t was s t i l l operating
T h e CHAIRMAN. T h a t is a small p r o d u c t i o n , i s n ' t it?
Secretary DILLON. I t is m u c h the biggest we have i n the U n i t e d
States.
T h e CHAIRMAN. A n d t h a t is t a k e n u p i n the commercial use of gold?
Secretary DILLON. T h a t produces about, half of all our domestically
m i n e d gold.
T h e CHAIRMAN. DO y o u t h i n k at any t i m e t h a t we should release
t h i s $12 b i l l i o n of gold t h a t is back of o u r o w n currency?
Secretary DILLON. I believe t h a t t h e basic reason for gold is as a
reserve f o r i n t e r n a t i o n a l t r a n s a c t i o n s — a n d I w o u l d hope we w o u l d
n o t have t o use a n y o f i t for t h a t
T h e CHAIRMAN. W o u l d n ' t t h a t be a sign of weakness i n t h e A m e r i can dollar i f we release the $12 billion?
Secretary DILLON. I d o n ' t t h i n k i t w o u l d be so l o o k e d upon, because
w e are t h e o n l y c o u n t r y i n t h e w o r l d t o d a y t h a t has a specific gold
reserve b e h i n d i t s currency, a n d n o b o d y can get t h a t gold f r o m the
domestic currency side. A l l the other countries a n d t h e m o n e t a r y
f u n d s use g o l d o n l y as a b a l a n c i n g i t e m i n i n t e r n a t i o n a l transactions.
T h e CHAIRMAN. M r . Alexander, t h e president of t h e G u a r a n t y
T r u s t , made a speech i n d i c a t i n g t h a t t h a t was a possibility. I comm u n i c a t e d w i t h h i m , a n d he said t h a t he w o u l d n o t recommend i t
w h e n t h e dollar was under pressure. A n d c e r t a i n l y the dollar is
under pressure w i t h these constant deficits abroad.
Secretary DILLON. W e have n o t recommended i t , because i t is
an i t e m of domestic controversy here, and we d o n ' t t h i n k t h a t a
v e r y e m o t i o n a l debate on a subject l i k e t h a t a t this t i m e w o u l d do the
dollar a n y good i n t h e w o r l d m a r k e t . T h a t is the reason we have
never considered m a k i n g a n y such recommendations.
T h e CHAIRMAN. I t seems t o me i t w o u l d be a great m i s t a k e t o do
i t , a l t h o u g h I d o n ' t c l a i m t o be a n expert. B u t I d o t h i n k , M r .
Secretary, t h a t i t is a v e r y u n s o u n d s i t u a t i o n t h a t we have deficits
a t home and abroad. W e have a deficit i n our b u d g e t a t home
reaching enormous figures and, w h i l e y o u t h i n k a n i n t e r n a t i o n a l
balance w i l l b e reached, I a m v e r y d o u b t f u l about t h a t .
There
h a s n ' t been a balance b u t once i n 10 years, a n d t h a t was w i t h a surplus
of o n l y a b o u t $500 m i l l i o n , I t h i n k i t was.
A n d i f ever we w o u l d have a r u n o n gold—as y o u k n o w , a n d w h y
we ever d i d i t I have never been able t o find o u t , we are the o n l y
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DEBT CEILING
N a t i o n t h a t offers t h e o p t i o n of gold o r dollars i n t h e settlement of
these accounts w i t h other nations. A m I r i g h t a b o u t t h a t ?
Secretary DILLON. Yes; we are the o n l y ones.
T h e CHAIRMAN. T h a t was s t a r t e d b a c k when?
Secretary DILLON. T h a t is the reason, M r . C h a i r m a n , t h a t our
dollar is acceptable a n d accepted t h r o u g h o u t the w o r l d as t h e equival e n t of gold, a n d w h y there are some $10 b i l l i o n w o r t h of dollars i n
the official reserves of other countries a n d w h y t h e y are w i l l i n g t o
hold it.
T h e CHAIRMAN. T h a t is the v e r y p o i n t I a m m a k i n g , i t is so i m p o r t a n t and i m p e r a t i v e for us t o preserve this free gold, w h i c h has
gone d o w n t w o - t h i r d s i n the space of 10 years.
Secretary DILLON. T h a t is w h y we have t o p u t our p a y m e n t s i n
order and balance t h e m , a n d t h a t is w h a t we are t r y i n g to do.
T h e CHAIRMAN. I w o n ' t pursue this a n y f u r t h e r except to say t h a t
I t h i n k i t is of enormous i m p o r t a n c e . A n d I t h i n k t h a t these large
deficits i n our domestic b u d g e t have a bearing on the gold.
N o w , the Secretary w i l l remember t h a t T saw h i m i n Geneva 2 years
ago. M r . T a y l o r , f r o m V i r g i n i a , was the Ambassador to Switzerland,
a n d I asked h i m to have a m e e t i n g w i t h the President of Switzerland
and the bankers so t h a t I could ask t h e m w h y i t was t h a t they had
asked for $2 b i l l i o n of our gold i n 1958, I believe.
S e c r e t a r y DILLON. 1958.
T h e CHAIRMAN. A n d they i n d i c a t e d t h a t t h e y t h o u g h t t h a t the big
deficit t h a t we had i n 1958 and 1959 of $13 b i l l i o n , for w h i c h they could
see no j u s t i f i c a t i o n , was a deliberate effort b y this G o v e r n m e n t t o
create i n f l a t i o n . M a n y people say t h a t deficit spending is n o t inflat i o n a r y , and we h a d l o n g hearings about i t , as y o u k n o w .
B e r n a r d B a r u c h said t h a t the m o s t i n f l a t i o n a r y t h i n g t h a t can be
done is to have constant deficits—and M r . M a r t i n , the C h a i r m a n of
the Federal R e s e r v e — t h a t is w h a t t h e y said a b o u t i t . A n d I s t i l l
t h i n k there is a r e l a t i o n i n the m i n d s of people w h o w a n t a sound
A m e r i c a n dollar as to deficits a t home and deficits abroad a t the same
time.
N o w , I w a n t to ask the B u d g e t D i r e c t o r w h a t he has done i n order
t o eliminate or reduce wasteful and nonessential expenditures.
M r . BELL. W e l l , sir, y o u are of course f a m i l i a r w i t h the basic b u d g e t
process w h i c h we go t h r o u g h each year before the President's b u d g e t
is prepared a n d sent t o the Congress. T h i s is a process w h i c h is carried
on v e r y i n t e n s i v e l y t h r o u g h the 3 m o n t h s of each fall, September,
October, a n d N o v e m b e r .
D u r i n g t h a t period the proposed b u d g e t of each G o v e r n m e n t agency
is scrutinized v e r y carefully indeed b y the staff of the B u d g e t B u r e a u ,
m o s t of w h o m , as y o u k n o w , are p e r m a n e n t employees of the Governm e n t , a n d do n o t change w i t h the a d m i n i s t r a t i o n .
I have personally, n o w , been t h r o u g h t h a t process i n the last 3
m o n t h s of last year, a n d there is no question w h a t e v e r t h a t this process is an effective and strong process w h i c h results i n reducing the
budget proposals of the different agencies b y a few b i l l i o n dollar.each year. I a m n o t m a k i n g a n y c l a i m t h a t the r e d u c t i o n last f a l l
was different t h a n has been t y p i c a l l y the case. I a m sure t h a t this
has been t r u e
T h e CHAIRMAN. DO y o u agree w i t h the Secretary of Commerce,
M r . Hodges, w h o said on M a y 24, t h a t all sorts of m o n e y could be
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saved for taxpayers i f the G o v e r n m e n t w o u l d get r i d of deadwood
o n i t s p a y r o l l , a n d t h a t 10 percent of the employees i n his D e p a r t m e n t
alone were d o i n g jobs s t a r t e d 40 years ago a n d n o w are j u s t n o t needed?
T h a t is his statement. A n d he is a m e m b e r of the C a b i n e t . W a s
he r i g h t or wrong?
M r . BELL. M r . Hodges, o f course, k n o w s his D e p a r t m e n t b e t t e r
t h a n I do. So far as t h e G o v e r n m e n t as a whole is concerned, there
is a s t r o n g r e s p o n s i b i l i t y w h i c h has been placed o n each C a b i n e t
officer a n d agency head b y t h e President t o insist t h a t he does n o t
c a r r y deadwood or extra personnel.
I f M r . Hodges has i d e n t i f i e d a n y i n d i v i d u a l s w h o can be reduced
or eliminated, i t is o b v i o u s l y his r e s p o n s i b i l i t y t o get r i d o f t h e m .
I t h i n k t h e p o i n t he was m a k i n g at t h e t i m e w h e n t h a t q u o t a t i o n was
m a d e was t h a t t h e c i v i l service laws a n d regulations h a m p e r a t o p
r a n k i n g G o v e r n m e n t official i n e l i m i n a t i n g
T h e CHAIRMAN. H a v e y o u ever recommended a change i n t h a t so
as t o eliminate—does t h e c i v i l service keep deadwood or unnecessary
employees on t h e p a y r o l l ?
M r . BELL. W e have asked Secretary Hodges w h a t changes i n the
legislation he w o u l d propose, a n d the m a t t e r is under discussion r i g h t
n o w . M y o w n observation has been t h a t a strong m i n d e d a n d determ i n e d a d m i n i s t r a t o r i n the Federal G o v e r n m e n t can r u n a t i g h t and
w e l l c o n t r o l l e d enterprise w h i c h does n o t have excess employees.
I
t h i n k the record of recent years i n the Federal G o v e r n m e n t — t h i s is
n o t a p a r t i s a n m a t t e r , o b v i o u s l y — i n m a n y respects is v e r y impressive.
I a m sure this c o m m i t t e e is w e l l aware of m a n y of the figures w h i c h
h a v e been made p u b l i c f r o m t i m e to time. T h e increase, for example,
i n the p r o d u c t i v i t y per person i n the Post Office; the increase i n the
p r o d u c t i v i t y per person i n the Veterans' A d m i n i s t r a t i o n , and i n the
Passport Office, a n d i n m a n y , m a n y p a r t s of the G o v e r n m e n t .
There
are i n m o s t agencies q u i t e w e l l organized c o n t i n u i n g m a n a g e m e n t i m p r o v e m e n t programs w h i c h are aimed precisely a t the o b j e c t i v e of
accomplishing the G o v e r n m e n t ' s w o r k w i t h a m i n i m u m n u m b e r of
employees. T h i s has t y p i c a l l y m e a n t t h a t as a d d i t i o n a l jobs have
been assigned b y the Congress t o the executive b r a n c h , the n u m b e r
of persons i n the executive b r a n c h has risen less t h a n w o u l d otherwise
have been necessary.
I t has n o t resulted i n an absolute decline i n G o v e r n m e n t employees,
because the jobs to be u n d e r t a k e n , the w o r k to be accomplished, have
been r i s i n g i n t o t a l .
T h e CHAIRMAN. A t t h a t p o i n t are y o u aware of the f a c t t h a t i n the
b u d g e t y o u s u b m i t t e d on page 41 y o u estimated t h a t f o r the n e x t
year t h e c i v i l i a n e m p l o y m e n t w o u l d t o t a l 2,538,390?
Mr.
BELL. Y e s ,
sir.
T h e CHAIRMAN. NOW, t h a t is 46,045 over the estimate f o r t h e
c u r r e n t year, a n d i t is 131,000 more t h a n the a c t u a l e m p l o y m e n t
last year?
M r . BELL. E i g h t .
T h e CHAIRMAN. A n d y o u have looked i n t o t h a t , a n d y o u t h i n k t h a t
is justified?
M r . BFLL. Yes, sir, we h a v e ; we have scrutinized the proposed i n creases i n personnel w i t h special care
T h e CHAIRMAN. W h y d o n ' t y o u give Secretary Hodges a free h a n d ,
a n d i f there is deadwood i n his D e p a r t m e n t , t e l l h i m to get r i d of i t ?
H e could be an example to these other agencies. W h e n a m e m b e r of
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11
the C a b i n e t makes a s t a t e m e n t such as he made, t h a t a l l sorts of m o n e y
could be saved, a n d t h e y are j u s t n o t needed, w h y d o n ' t y o u give h i m
a free h a n d t o go ahead a n d reorganize his D e p a r t m e n t a n d c u t o u t
the deadwood?
M r . BELL. I a m n o t aware of a n y w a y i n w h i c h I a m s t a n d i n g i n
Secretary Hodges' w a y . I certainly w o u l d n o t w i s h t o s t a n d i n his
way.
T h e CHAIRMAN. I f he made t h a t statement a n d made i t p u b l i c l y ,
y o u are the person t h a t is supposed t o be the g u a r d i a n o f the p u b l i c
purse, aren't you?
M r . BELL. Yes, we advise the President on the efficiency o f m a n agement of the G o v e r n m e n t .
T h e CHAIRMAN. I also understood t h a t the B u d g e t D i r e c t o r was a
restraining influence on spending, n o t an influence t o spending m o r e
a n d more.
M r . BELL. W e are certainly n o t pushing Secretary Hodges to spend
an extra nickel.
T h e CHAIRMAN. I k n o w y o u are n o t , b u t since he made this speech,
w o u l d n ' t y o u be j u s t i f i e d i n saying t o h i m , " G o ahead a n d set u p
y o u r p l a n a n d the B u d g e t D i r e c t o r w i l l approve i t " ?
M r . BELL. W e have discussed the m a t t e r .
T h e CHAIRMAN. W h a t d i d y o u say?
M r . BELL. W e are w o r k i n g together on the objective.
T h e CHAIRMAN. IS he going t o get r i d of a n y b o d y t h a t is n o t
needed?
M r . BELL. W e w i l l have to see.
T h e CHAIRMAN. YOU w i l l have to see?
M r . BELL. H i s staff and our staff and the C i v i l Service C o m mission
T h e CHAIRMAN. H e made this statement on M a y 24, and t h a t is
a m o n t h ago.
M r . BELL. T h a t is r i g h t .
T h e CHAIRMAN. A n d i t is a v e r y r e m a r k a b l e statement. I have
been here a l o n g time, a n d I d o n ' t t h i n k I have ever k n o w n a C a b i n e t
officer to make a similar s t a t e m e n t about his o w n D e p a r t m e n t . A n d
I w o u l d t h i n k t h a t y o u o u g h t to j u s t w r i t e h i m , j u s t t e l l h i m t h a t i f
he t h i n k s there is deadwood and waste and extravagance, and so
f o r t h , to go ahead and clean i t up.
M r . BELL. W e h a v e n ' t w r i t t e n h i m , b u t we have proposed t o h i m
t h a t we proceed to r e v i e w the p a r t i c u l a r jobs to be done i n the C o m merce D e p a r t m e n t , the organization
T h e CHAIRMAN. W o u l d y o u keep this c o m m i t t e e i n f o r m e d , because
we are responsible f o r raising enough m o n e y t o t r y t o p a y these
enormous expenditures, either by a u t h o r i z i n g debt, or t a x a t i o n . Keep
us i n f o r m e d as t o w h a t is being done i n the Commerce D e p a r t m e n t
to reduce the personnel t h a t Secretary Hodges says o u g h t t o be
reduced.
M r . BELL. I w i l l be glad t o do so.
T h e CHAIRMAN. A n d a m o n t h has already gone b y .
T h a n k you very much.
Senator K e r r .
Senator KERR. DO y o u have a n y a u t h o r i t y either t o extend or
reduce the responsibility a n d t h e a u t h o r i t y of the Secretary of C o m merce w i t h reference t o e m p l o y m e n t i n his D e p a r t m e n t ?
85845—62
5
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M r . BELL. NO, s i r ; I d o n o t .
Senator KERR. IS there a n y t h i n g
t o keep h i m f r o m e l i m i n a t i n g or
r e m o v i n g f r o m the p a y r o l l a n y person t h a t he has t h a t he doesn't need,
other t h a n the c i v i l service laws passed b y the Congress?
M r . BELL. N o t t h a t I a m aware of.
T h e CHAIRMAN. W i l l the Senator y i e l d at t h a t p o i n t ?
S e n a t o r KERR. Y e s .
T h e CHAIRMAN. AS B u d g e t D i r e c t o r y o u are supposed t o recomm e n d the appropriations t o the President, are y o u not?
M r . BELL. Senator, the appropriations w h i c h we recommended for
t h e Commerce D e p a r t m e n t last fall, a n d w h i c h are before t h e C o n gress r i g h t n o w , those are the appropriations w h i c h seemed t o us t o
reflect the m i n i m u m n u m b e r of persons w h o were r e q u i r e d t o c a r r y
o u t t h e Commerce D e p a r t m e n t ' s business. Secretary H o d g e s —
T h e CHAIRMAN. B u t the r o u t i n e is t o go f r o m the Secretary of the
T r e a s u r y t o y o u , i s n ' t it?
M r . BELL. T h e Secretary of Commerce.
T h e CHAIRMAN. T h e Secretary of Commerce t o y o u , a n d t h e n y o u
m a k e recommendations t o the President, d o y o u n o t , w h e n t h e
b u d g e t is s u b m i t t e d ?
M r . BELL. Yes, t h a t is r i g h t .
T h e CHAIRMAN. Therefore y o u d i d r e c o m m e n d these expenditures?
M r . BELL. Oh, yes. I said I d i d , b u t I understood Senator K e r r ' s
question t o be a different one, n a m e l y , whether there was a n y b a r r i e r ,
a n y bar t o Secretary Hodges r e d u c i n g employees w h o m he f o u n d excess t o t h e needs of t h e Commerce D e p a r t m e n t a p a r t f r o m the c i v i l
service laws a n d regulations, a n d m y response was t h a t there is no
b a r r i e r t h a t I a m aware of, of t h a t t y p e .
T h e CHAIRMAN. W o u l d y o u f u r n i s h a s t a t e m e n t of the increase i n
t h e employees of t h e Commerce D e p a r t m e n t ?
M r . BELL. Y e s , s i r .
T h e CHAIRMAN. A n d t h e increased expenditures of t h e Commerce
D e p a r t m e n t t h a t y o u recommended.
M r . BELL. Y e s , s i r .
Senator KERR. D i d y o u r e c o m m e n d t o t h e President a larger o r
smaller a m o u n t f o r salaries i n t h e Commerce D e p a r t m e n t t h a n
Secretary Hodges asked for f r o m you?
M r . BELL. A smaller a m o u n t t h a n he asked for.
Senator KERR. I n other words, y o u as a D i r e c t o r of t h e B u d g e t
a p p r o v e d an a m o u n t o f m o n e y for employees less t h a n t h a t w h i c h
Secretary Hodges asked y o u for?
M r . BELL. T h a t is correct.
Senator KERR. A r e y o u i n a position t o t e l l the c o m m i t t e e h o w
m u c h less?
M r . BELL. W e w o u l d have t o l o o k b a c k i n the record, Senator, I
d i d n o t come prepared for this p a r t i c u l a r question.
Senator KERR. I k n o w . B u t y o u are positive t h a t i t was less t h a n
he asked y o u for?
M r . BELL. Yes; there is no question about t h a t .
Senator KERR. W o u l d y o u advise the c o m m i t t e e h o w m u c h less?
M r . BELL. I w o u l d be g l a d to.
(The i n f o r m a t i o n requested was subsequently supplied b y t h e
Director:)
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DEBT CEILING
T h e b u d g e t request of t h e D e p a r t m e n t of Commerce f o r fiscal 1963 i n v o l v e d
a t o t a l e m p l o y m e n t b y t h e D e p a r t m e n t of 33,307 persons as of June 30, 1963.
T h i s figure was reduced t o 31,541 i n t h e b u d g e t allowance a p p r o v e d b y t h e
President a n d t r a n s m i t t e d t o t h e Congress i n J a n u a r y .
Senator KERR. I r e a l l y w a n t t o ask y o u a question o r t w o , M r .
Secretary, a b o u t the d e b t l i m i t b i l l . A s I understood i t , the b i l l
passed b y the House makes provision for a d e b t l i m i t w h i c h is different d u r i n g three periods of the n e x t fiscal year, b u t as t o each period
f o r w h i c h p r o v i s i o n is made, i t is assumed t h a t there w i l l be a balanced
b u d g e t for 1963 fiscal year?
Secretary DILLON. T h a t is correct. I t is assumed t h r o u g h o u t t h a t
this w i l l be a balanced b u d g e t for the fiscal year.
Senator KERR. SO t h a t the a m o u n t of the d e b t l i m i t as fixed i n t h e
House b i l l for the three different periods d u r i n g fiscal 1963 is adequate
p r o v i d e d y o u have a balanced b u d g e t for fiscal 1963?
Secretary DILLON. Yes, as I have stated, i t w o u l d be adequate
under those circumstances.
Senator KERR. B u t o n l y under those circumstances?
Secretary DILLON. O n l y under those circumstances.
Senator KERR. SO t h a t a c t u a l l y the b i l l before us is w h a t is r e q u i r e d
f o r t h e T r e a s u r y t o be able t o handle the management o f the p u b l i c
d e b t i n the n e x t 12 m o n t h s i n p r o v i d i n g a balanced budget?
Secretary DILLON. T h a t is correct.
Senator KERR. M r . Secretary, do y o u determine whether o r n o t
there is a balanced budget?
Secretary DILLON. NO, Senator, I do n o t .
Senator KERR. DO y o u have an o p i n i o n as to w h o does?
Secretary DILLON. Yes. T h i s was decided b y the action o f the
Congress on the recommendations for e x p e n d i t u r e s — —
Senator KERR. W o u l d a direct answer be t h a t Congress determines
w h e t h e r or n o t there is a balanced budget?
Secretary DILLON. N o t entirely, because the revenues depend o n
the economy. B u t those t w o things.
Senator KERR. I understood t h a t the revenues depend o n t h e
p r o d u c t i v i t y of the economy. B u t there are no expenditures except
those authorized b y the Congress, are there?
Secretary DILLON. T h a t is correct, none.
Senator KERR. SO y o u d o n ' t have a u t h o r i t y to reduce expenditures
directed b y the Congress i n the event revenues do n o t equal those
w h i c h are expected either b y the executive or legislative d e p a r t m e n t s
at the beginning of the fiscal year, do you?
Secretary DILLON. I have n o such a u t h o r i t y . I k n o w t h a t o n
occasion Presidents of the U n i t e d States have f r o m t i m e t o t i m e
i m p o u n d e d o r delayed certain expenditures t h a t have already been
voted, and there was always a good deal o f controversy about i t .
T h e y have done i t .
Senator KERR. YOU mean t h a t t h e y d i d n ' t spend m o n e y w h i c h
Congress h a d a p p r o p r i a t e d and directed t h a t the executive d e p a r t m e n t
spend?
S e c r e t a r y DILLON. Y e s .
Senator KERR. A n d a n y controversy t h a t has arisen has been b y
the Congress w a n t i n g t o k n o w w h y the executive d i d n ' t spend the
m o n e y t h a t the Congress appropriated?
Secretary DILLON. T h a t is r i g h t .
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DEBT CEILING 11
Senator KERR. YOU w o u l d be v e r y h a p p y t o operate o n a less rate
of expenditure i f the Congress w o u l d m a k e i t either possible o r
m a n d a t o r y t h a t y o u do so?
Secretary DILLON. I w o u l d be glad t o operate under w h a t e v e r r a t e
of expenditure the Congress made, a n d c e r t a i n l y i f i t was less there
w o u l d be greater ease i n m a n a g i n g the p u b l i c debt.
Senator KERR. Y o u r responsibility, then, is t o p a y t h e b i l l s
created b y t h e Congress?
Secretary DILLON. T h a t is r i g h t .
Senator KERR. A n d i f the Congress does n o t p r o v i d e the revenue
f o r y o u t o p a y those bills t h r o u g h t a x a t i o n o r otherwise, y o u o n l y
have the a l t e r n a t i v e either of h a v i n g the President refuse t o spend
t h e money, a l t h o u g h a p p r o p r i a t e d b y t h e Congress, o r b o r r o w the
m o n e y , or be i n t h e p o s i t i o n of the Federal G o v e r n m e n t n o t p a y i n g for
something w h i c h i t has b o u g h t under the d i r e c t i o n o f t h e Congress?
Secretary DILLON. T h a t is correct.
Senator KERR. W e l l , I t h i n k t h a t makes i t a v e r y simple equation.
I w i l l come b a c k to another question or t w o i n a m o m e n t .
I n the m e a n t i m e , M r . Bell, has the Congress i n its a p p r o p r i a t i o n s
a p p r o p r i a t e d a t o t a l t h a t equaled the recommendations of the B u d g e t
B u r e a u , o r exceeded t h e recommendations of t h e B u d g e t B u r e a u , o r
i n an a m o u n t less t h a n requested b y t h e B u d g e t Bureau?
M r . BELL. A r e y o u r e f e r r i n g t o a p a r t i c u l a r year, Senator?
Senator KERR. W h i l e y o u have been D i r e c t o r — o r h a v e y o u been
D i r e c t o r l o n g enough to k n o w ?
M r . BELL. Yes. I have been D i r e c t o r for s o m e t h i n g over a year,
d u r i n g w h i c h t i m e one b u d g e t , t h e 1962 budget, was essentially
enacted b y the Congress last s p r i n g and summer. I n connection
w i t h t h e passage of t h a t b u d g e t there w a s — I d o n ' t have t h e p i c t u r e
precisely i n m y m i n d , b u t there was a n e t r e d u c t i o n as a result of
congressional action o n a p p r o p r i a t i o n requests i n t h e n e i g h b o r h o o d
of perhaps a half a b i l l i o n dollars below t h e President's request. O n
t h e other h a n d , there were i n a d d i t i o n a n u m b e r of instances i n w h i c h
t h e Congress added f u n d s t o t h e President's proposals. So t h a t the
figure I used is a net figure. Congress increased a n u m b e r of approp r i a t i o n s . I n the m i l i t a r y field, f o r example, and i n t h e h e a l t h
research field, Congress added v e r y s u b s t a n t i a l sums of m o n e y to t h e
a m o u n t s proposed. I n other instances the Congress reduced t h e
President's proposals.
A n d i f I recall correctly, t h e net r e d u c t i o n was i n t h e n e i g h b o r h o o d
of perhaps a half a b i l l i o n dollars.
Senator KERR. SO t h a t d u r i n g this
M r . BELL. W e w i l l have t o check t h e figure f o r t h e record, Senator.
( T h e f o l l o w i n g was later received for t h e record:)
T h e e x p e n d i t u r e effect of net reductions i n a p p r o p r i a t i o n s b y t h e Congress was
checked b y t h e B u d g e t D i r e c t o r a n d f o u n d t o be s u b s t a n t i a l l y correct.
Senator KERR. IS the gentleman t h a t is k i n d of s h a k i n g his head
there of a different opinion?
M r . BELL. NO, he says he doesn't remember.
Senator KERR. SO t h a t as y o u r best m e m o r y indicates, insofar as
t h e deficit m a y be f o r this c u r r e n t fiscal year, i f i t exceeds $500 m i l l i o n
i t exceeds t h e request of t h e B u d g e t B u r e a u b y t h a t a m o u n t ?
M r . BELL. I a m n o t sure I f o l l o w t h a t , Senator.
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Senator KERR. W e l l , Congress, y o u say, a p p r o p r i a t e d a n a m o u n t
equal t o $500 m i l l i o n less t h a n t h e t o t a l recommended b y t h e President.
M r . BELL. Yes, sir. T h e deficit f o r t h e c u r r e n t year was estimated,
of course, a f t e r Congress completed its action. T h e deficit, i n o t h e r
words, m i g h t have been as m u c h as $500 m i l l i o n m o r e t h a n t h a t ,
m o r e t h a n t h e a m o u n t we n o w estimated, h a d t h e Congress enacted
precisely w h a t t h e President h a d recommended.
Senator KERR. T h e Secretary of t h e T r e a s u r y , I believe, e s t i m a t e d
r o u g h l y t h a t t h e deficit of t h e fiscal year ending t h e 3 0 t h of this m o n t h
w i l l be a b o u t $7.25 b i l l i o n .
M r . BELL. W e estimate t h a t i t w i l l be a b o u t $7 b i l l i o n . I n order
t o be conservative i n his calculations of t h e debt, he t o o k $7.25 b i l l i o n .
Senator KERR. B u t y o u r estimate is t h a t i t w i l l be a b o u t $7 b i l l i o n ?
M r . BELL. Y e s , s i r .
Senator KERR. T h a t is b y reason o f the f a c t t h a t Congress a p p r o p r i a t e d t h a t m u c h m o r e m o n e y t h a n t h e G o v e r n m e n t collected f r o m
taxes a n d other revenue sources?
M r . BELL. Yes, t h a t is r i g h t .
Senator KERR. NOW, i f the Congress h a d a p p r o p r i a t e d the a m o u n t
recommended b y t h e President, t h e difference w o u l d have been
between a deficit of $7 b i l l i o n as y o u expect i t t o be a n d $7.5 billion?
M r . BELL. A t the m o s t ; t h a t is r i g h t .
Senator KERR. So t h a t i f y o u take f u l l r e s p o n s i b i l i t y f o r t h a t p a r t
of t h e expenditures w h i c h Congress a n d y o u b o t h agreed u p o n , a n d
the figures as t h e y w o u l d be i f Congress h a d a p p r o p r i a t e d the a m o u n t
t h a t y o u agreed u p o n , the difference i n the deficit w o u l d have been
a b o u t $500 m i l l i o n ?
M r . BELL. T h e reason I say a t the most, Senator, is t h a t i t m i g h t
v e r y w e l l have been less, because after Congress completed i t s a c t i o n
last year a n d the various other facts were k n o w n , such as t h e a n t i c i p a t e d crop y i e l d f o r last summer's a g r i c u l t u r a l season, a n d so on, the
President i n s t r u c t e d his C a b i n e t officers a n d agency heads to reduce
expenditures where t h e y could below a m o u n t s a u t h o r i z e d b y t h e
Congress. A n d i n a n u m b e r of cases t h a t was done.
Senator KERR. W e l l , was there enough o f such a c t i o n t a k e n t o
offset the $500 m i l l i o n differential?
M r . BELL. Yes, sir. So t h a t a c t u a l l y i f the President h a d a u t h o r ized the spending t o the extent t h a t the Congress h a d a p p r o v e d i t ,
we could easily have h a d a deficit t h a t is i n the n e i g h b o r h o o d t h a t
Senator B y r d is t a l k i n g a b o u t .
Senator KERR. W e l l , then, the f a c t is t h a t the President a n d the
executive d e p a r t m e n t has spent less m o n e y t h a n t h e Congress
appropriated?
M r . BELL. T h a t is correct.
Senator KERR. A n d y o u r present estimate i s h o w m u c h less?
M r . BELL. W e l l , t h e s t o r y is a l i t t l e complicated, a n d I d o n ' t w a n t
t o m a k e a n y u n d u e claims. Some of t h e reductions a n d expenditures
below w h a t t h e Congress a p p r o v e d
Senator KERR. A p p r o p r i a t e d ?
M r . BELL. A p p r o p r i a t e d — h a d n o t h i n g t o do w i t h economy moves.
I n t h e m i l i t a r y field, f o r example, there was s i m p l y a difference o f
j u d g m e n t as t o w h a t was or was n o t r e q u i r e d f o r t h e n a t i o n a l security.
O t h e r reductions w h i c h were m a d e Iwere s i m p l y f o r economy reasons,
a n d represented t h e deferral o f a c t i v i t i e s w h i c h are w e l l w a r r a n t e d
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DEBT CEILING 11
and w o u l d be i n t h e n a t i o n a l and t h e p u b l i c interest, b u t w h i c h , because of t h e size of t h e deficit, the President f e l t could be deferred for
a t i m e , a n d perhaps u n d e r t a k e n i n a later year.
Senator KERR. T h e question t h a t I w o u l d l i k e for y o u t o answer is
a v e r y simple question. T h e executive d e p a r t m e n t has a c t u a l l y spent
less t h a n t h e Congress a p p r o p r i a t e d a n d authorized?
M r . BELL. A b o u t a b i l l i o n dollars less.
Senator KERR. A b o u t a b i l l i o n dollars less. N o w , reference has
been made t o the value of t h e dollar i n 1933. D o I u n d e r s t a n d f r o m
t h i s table t h a t t h e c h a i r m a n had, t h a t he i n d i c a t e d t h a t t h e dollar
h a d been at its highest value i n 1933 d u r i n g t h e last 32 years, at w h i c h
t i m e i t was w o r t h 107.4 cents i n r e l a t i o n t o its value i n 1939, is t h a t
w h a t t h e t a b l e shows?
M r . BELL. T h a t is correct.
Senator KERR. C a n either of y o u gentlemen advise t h e c o m m i t t e e
h o w t h e value of t h e dollar could be restored t o 107.4 as i t was i n 1933.
Secretary DILLON. T h e o n l y w a y t o do t h a t , Senator, w o u l d be t o
reduce the prices of goods i n t h e U n i t e d States b y s o m e t h i n g over 50
percent.
Senator KERR. AS a v e r y simple answer, w o u l d n ' t i t be correct t o
say t h a t y o u w o u l d have t o reduce the value of commodities a n d labor
a n d services t o w h a t t h e y were i n 1933?
Secretary DILLON. T h a t is r i g h t .
Senator KERR. T h e r e is no other w a y t o do i t , is there?
Secretary DILLON. T h a t is t h e o n l y w a y ; yes.
Senator KERR. SO t h a t i f we w a n t e d a dollar w o r t h as m u c h i n
r e l a t i o n t o its purchasing power and i n r e l a t i o n t o 1939, as t h e dollar
i n 1933, i t w o u l d be a v e r y simple process t o reduce t h e v a l u e o f
commodities, a g r i c u l t u r a l products, l a b o r , congressional salaries, the
salaries of the porters, t h e fees for all services rendered b y lawyers and
doctors a n d nurses, o p t o m e t r i s t s a n d others, t o w h a t t h e prices were
i n 1933?
Secretary DILLON. T h a t is r i g h t ; t h a t is t h e o n l y w a y ; y o u w o u l d
have t o deflate prices to t h e extent t h e y have been inflated.
Senator KERR. I n other words, t h e value of t h e dollar is a r e l a t i v e
thing?
Secretary DILLON. R e l a t i v e , t h a t is correct.
Senator KERR. A n d another w a y t o say t h a t t h e dollar is w o r t h
less w o u l d be t o say t h a t labor and commodities are w o r t h more?
Secretary DILLON. T h a t is r i g h t .
Senator KERR. A n d y o u can say i t either w a y w i t h equal accuracy.
Secretary DILLON. I t h i n k t h a t is correct.
Senator KERR. SO i f we w a n t to restore the value of the 1933 dollar,
all Congress has t o do is t o pass the laws t h a t w o u l d b r i n g about a
s i t u a t i o n where labor a n d a g r i c u l t u r a l products a n d congressional
salaries a n d all other things for w h i c h people p a y m o n e y c o u l d be
purchased b y people w i t h m o n e y at the same figures a n d at the same
rates a n d a t the same level a t w h i c h t h e y were available t o t h e m i n
1933?
Secretary DILLON. A n d persuade the President t o approve t h e m .
Senator KERR. Congress a n d the President together.
S e c r e t a r y DILLON. Y e s .
Senator KERR. I f the people decided t h e y w a n t e d t h a t done, a l l
t h e y w o u l d haveJto!do w o u l d be to elect the Congress a n d the President
t h a t c o u l d do that^fOr them?
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DEBT CEILING
Secretary DILLON. T h a t is correct.
T h e CHAIRMAN. Senator W i l l i a m s .
Senator WILLIAMS. C a r r y i n g t h a t t o the extreme the other w a y ,
t h e n the w a y t o restore f u l l p r o s p e r i t y so t h a t e v e r y b o d y w o u l d be
h a p p y w o u l d be t o j u s t do the direct opposite, w o u l d n ' t i t achieve f u l l
p r o s p e r i t y i f we were t o double wages, double all services, a n d c u t the
value of the dollar one-half again?
Secretary DILLON. N o t necessarily a t all.
Senator WILLIAMS. I agree n o t a n y more t h a n the proposals made
b y the Senator f r o m Oklahoma?
I
Senator KERR. I w a n t t o correct the Senator f r o m Delaware.
d i d n o t make a proposal. I d o n ' t w a n t t o p u t i t b a c k to where y o u
boys h a d i t i n 1933. T h e Senator f r o m Delaware said all y o u have got
t o do is the opposite of the proposal b y the Senator f r o m O k l a h o m a ,
a n d the Senator f r o m O k l a h o m a d i d n ' t m a k e a proposal, he asked a
question. A n d I w a n t i t p l a i n t h a t I do n o t w a n t i t p u t b a c k where
t h e y h a d i t when we h a d the p a r t y i n 1933.
T h e CHAIRMAN. W h e n Roosevelt came i n t o office i n 1933 t h e dollar
was 107.
Senator WILLIAMS. YOU used the value of a dollar i n 1939. W h o
was President d u r i n g t h a t period?
Secretary DILLON. F r a n k l i n D. Roosevelt.
Senator WILLIAMS. A n d he was n o t considered such a reactionary,
was he?
Secretary DILLON. I d o n ' t t h i n k he was p a r t i c u l a r l y reactionary.
Senator WILLIAMS. NOW, M r . Secretary, the suggestion has been
made t h a t Congress is responsible for t h e expenditures, and t h a t y o u
m e r e l y finance t h e debt t o raise the m o n e y t o p a y i t . I m i g h t say
that I
Secretary DILLON. I t h i n k t h a t is e n t i r e l y accurate as far as the
T r e a s u r y D e p a r t m e n t is concerned. T h e President, of course, shares
the responsibility w i t h the Congress for appropriations, because he
makes recommendations.
Senator WILLIAMS. I a m i n agreement w i t h t h a t , b u t I a m j u s t
establishing t h a t as a p o i n t . B u t i f i t is Congress' responsibility t o
act on these appropriations, t h e n Congress m u s t , as i t has been p o i n t e d
out, accept t h e responsibility for h a v i n g appropriated, authorized t h e
expenditures of the m o n e y w h i c h creates t h e $6 b i l l i o n o r $8 b i l l i o n
deficit w h i c h y o u are going t o have i n 1962 fiscal year, is t h a t n o t
correct?
Secretary DILLON. T h a t is correct.
Senator WILLIAMS. A n d i f we have a deficit i n fiscal year 1963 i t
w i l l result f r o m expenditures w h i c h are passed a n d approved b y the
Congress d u r i n g the suggested 3 to 4 weeks here for y o u r b u d g e t a r y
requests, is t h a t correct?
Secretary DILLON. T h a t is r i g h t .
Senator WILLIAMS. NOW, i f Congress does n o t w a n t the expenditures t h a t result i n this deficit, t h e n we should c u t those budgets b y
10 percent, a n d we could save $8 b i l l i o n or $9 b i l l i o n , is t h a t correct?
Secretary DILLON. I f the expenditures estimates, w h i c h are about
$93 b i l l i o n , were all c u t b y 10 percent, y o u save $9 b i l l i o n .
Senator WILLIAMS. O f course, y o u c a n ' t c u t all o f t h e m , there is
the interest on the debt a n d certain factors i n there w h i c h b o t h y o u
a n d I realize cannot be cut. B u t b y a 10 percent c u t on those items
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DEBT CEILING 11
items w h i c h c o u l d be c u t we c o u l d achieve a deficit r e d u c t i o n o f $5
b i l l i o n to $6 b i l l i o n , c o u l d we not?
Secretary DILLON. Yes; i f y o u i n c l u d e d defense i n t h a t category.
Senator WILLIAMS. NOW, to w h a t extent w o u l d y o u go along w i t h
the Congress i n m a k i n g cuts i n the proposed b u d g e t for 1963?
Would
y o u endorse Congress c u t t i n g some of these items?
Secretary DILLON. W e l l , the President has made his recommendations, a n d those are the amounts t h a t he has recommended.
Senator WILLIAMS. I a m aware of the President's recommendations.
I a m asking y o u , as Secretary of the T r e a s u r y , w o u l d y o u r e c o m m e n d
it?
Secretary DILLON. I was agreeable to t h a t b u d g e t w h e n i t was subm i t t e d , a n d we have t o see h o w i t is h a n d l e d as a whole. I t h i n k i t
was a proper budget.
Senator WILLIAMS. I repeat t h e question. W o u l d y o u endorse
Congress m a k i n g a n y cuts i n the b u d g e t request for 1963?
Senator MCCARTHY. M r . C h a i r m a n , I d o n ' t t h i n k t h i s is a question
t o be asked of t h e Secretary of the Treasury. I t is n o t his responsib i l i t y . H e is here to t e s t i f y , i t is a Presidential responsibility, he can
w r i t e t o his Congressman i f he w a n t s t o express his views, b u t I d o n ' t
t h i n k he should be called on t o m a k e a statement on this.
Senator WILLIAMS. I f i t is going t o embarrass h i m I w i l l w i t h d r a w
the question, b u t he is t h e m a n t h a t is going t o spend the m o n e y , and
he seems t o have some recommendations, a n d he was v e r y f r a n k i n
assessing the responsibility t o Congress, a n d I agree w i t h h i m i n t h a t
assessment, b u t he m u s t have some o p i n i o n as t o t h e w i s d o m of
Congress i n a p p r o p r i a t i n g the funds. B u t i f he does n o t have a n
o p i n i o n I w i l l direct m y question t o t h e B u d g e t B u r e a u D i r e c t o r ,
M r . Bell.
D o y o u t h i n k t h a t Congress w o u l d be responsible i f t h e y m a d e a
f e w cuts i n t h e President's 1963 b u d g e t request, or do y o u t h i n k t h e y
should be enacted as proposed b y t h e President?
M r . BELL. AS y o u indicated, i t is the r e s p o n s i b i l i t y of t h e Congress
t o reach its o w n decisions on these m a t t e r s . As far as t h e decision of
t h e President is concerned, b o t h the Secretary and I p a r t i c i p a t e d i n
i t as adviser t o h i m , his recommendations are before t h e Congress,
a n d t h e y s t a n d as the President's recommendation.
Senator WILLIAMS. A n d y o u are n o t r e c o m m e n d i n g a n y c u t w h a t ever?
T h e CHAIRMAN. W i l l t h e Senator y i e l d at t h a t p o i n t ?
Senator WILLIAMS. Sure.
T h e CHAIRMAN. T h e President i n his m i d y e a r b u d g e t r e v i e w last
October 26 estimated revenue f o r t h e c u r r e n t fiscal year a t $82.1
b i l l i o n , expenditures of $89 b i l l i o n , and a deficit of $6.9 b i l l i o n . I n
his statement at t h a t t i m e he t o l d his C a b i n e t members a n d D e p a r t m e n t heads i t w o u l d be necessary " t o defer or l i m i t increases i n m a n y
programs w h i c h i n m o r e n o r m a l times w o u l d be t h o r o u g h l y desirable,
a n d t o s h i f t present staffs and resources t o the m a x i m u m extent f r o m
t h e lower p r i o r i t y w o r k to higher p r i o r i t y . "
I s t h a t order s t i l l i n operation?
M r . BELL. Y e s , s i r .
T h e CHAIRMAN. W h a t has been t h e result of i t ? H e said i t was
necessary t o defer a l i m i t increase i n m a n y programs, w h i c h i n m o r e
n o r m a l times w o u l d b e t h o r o u g h l y desirable, a n d t o s h i f t present
staffs, a n d so f o r t h .
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DEBT CEILING
M r . BELL. T h i s was the p o i n t t h a t Senator K e r r was asking about
a few m i n u t e s ago, Senator. T h e figures w h i c h appear i n t h e m i d y e a r
r e v i e w d a t e d last October already reflected substantia] reductions i n
t h e expenditures w h i c h w o u l d have been possible under t h e a u t h o r i t y
enacted b y the Congress. So t h a t t h e expenditure estimate w h i c h
y o u have j u s t cited already reflected a n u m b e r of i m p o r t a n t decisions
of the k i n d y o u are j u s t n o w r e f e r r i n g to. Since t h a t t i m e the C a b i n e t
officers a n d agency heads have c o n t i n u e d under the i n j u n c t i o n t h a t
y o u have quoted, a n d t h e expenditures i n m a n y cases w h i c h have, i n
fact, been made or are being made d u r i n g this fiscal year are reflecting
i m p r o v e m e n t i n efficiency, a n d deferrals of activities where t h a t can
be done a p p r o p r i a t e l y , i n t h e j u d g m e n t of the C a b i n e t officers a n d
agency heads concerned. A s I i n d i c a t e d i n m y o w n earlier statements,
t h e present figures are a b o u t a b i l l i o n dollars less b o t h on receipts and
on expenditures t h a n t h e ones y o u have j u s t cited, l e a v i n g the n e t
balance a t a b o u t $7 b i l l i o n of a n t i c i p a t e d deficit.
T h e CHAIRMAN. T h i s s t a t e m e n t said t h e deficit w o u l d be $6.9
b i l l i o n . H a s t h a t been changed?
M r . BELL. T h e J a n u a r y figure, I believe, was almost exactly $7
billion.
T h e CHAIRMAN. W h a t I a m asking is, t h e order i n w h i c h t h e President i n d i c a t e d t h a t i t w o u l d be necessary t o defer or l i m i t increases i n
t h e m a n y programs, a n d so f o r t h , t h a t is s t i l l i n existence?
M r . BELL. I t i s , s i r .
T h e CHAIRMAN. NOW, i n v i e w of y o u r present estimate of t h e deficit
o n S a t u r d a y , June 30, M r . B u d g e t D i r e c t o r , h o w m u c h expenditure
or r e d u c t i o n has resulted f r o m t h a t order?
I d o n ' t expect y o u to answer t h a t offhand. W e w i l l have t o recess
n o w u n t i l 2 o'clock, i f t h a t suits you.
M r . BELL. I already gave p a r t of t h a t answer t o Senator K e r r .
Before the original estimate o f $88,985 m i l l i o n was made, there had
already been a r e d u c t i o n i n t h e neighborhood of a b i l l i o n dollars.
T h e CHAIRMAN. B e prepared t o answer these questions w h i c h I
h a n d y o u w h e n y o u come b a c k a t 2 o'clock, i f y o u can. I a m sorry
we have t o m a k e i t a t 2, b u t the W a y s a n d M e a n s C o m m i t t e e w a n t s
t o have a conference on t h e t a x b i l l .
T h e c o m m i t t e e w i l l recess u n t i l 2 o'clock.
(Whereupon, a t 12:35 p.m., the c o m m i t t e e recessed, t o reconvene
a t 2 p . m . t h e same day.)
AFTERNOON SESSION
T h e CHAIRMAN. T h e c o m m i t t e e w i l l come t o order.
Senator W i l l i a m s ?
STATEMENTS OF DOUGLAS C. DILLON, SECRETARY OF THE
TREASURY, A N D D A V I D E. BELL, DIRECTOR OF THE BUREAU
OF THE BUDGET—Resumed
M r . BELL. Senator, the c h a i r m a n asked me a question j u s t before
we b r o k e for l u n c h .
T h e CHAIRMAN. Suppose y o u read the r e p l y . I s t h a t the i n q u i r y
I made?
M r . BELL. T h i s is the i n q u i r y ; yes, sir.
85845—102 6
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T h e CHAIRMAN. A l l r i g h t , read i t .
M r . BELL. T h e c h a i r m a n quoted f r o m t h e President's m i d y e a r
b u d g e t review o f last October and asked h o w m u c h expenditure
resulted f r o m the President's i n s t r u c t i o n t h e n t h a t each agency head
should defer or l i m i t increases so far as he could.
I started to say, j u s t as we broke up, the reductions w h i c h were made
i n response t o the President's i n s t r u c t i o n were reflected i n the figures
m a d e p u b l i c i n October, a n d t h e a m o u n t of the r e d u c t i o n is r o u g h l y
i n the neighborhood of $1 b i l l i o n , so t h a t h a d the President's i n s t r u c tions n o t been issued a n d followed, the budget deficit p r e d i c t e d a t t h a t
t i m e w o u l d have been i n t h e neighborhood of $8 b i l l i o n instead of i n
t h e neighborhood of $7 b i l l i o n as i t was.
T h e question t h a t the Senator asked w e n t on t o i n q u i r e w h e t h e r
t h e President's i n s t r u c t i o n s of last f a l l are s t i l l i n effect.
T h e y m o s t c e r t a i n l y are.
D u r i n g the fiscal year 1962, i t has been t h e continuous responsib i l i t y of the C a b i n e t officers and agency heads t o c a r r y o u t t h e
President's desire t h a t t h e y defer less i m p o r t a n t activities wherever
t h e y can a n d i m p r o v e the efficiency of t h e i r activities.
I have one o r t w o i l l u s t r a t i o n s t h a t m i g h t be of interest t o the
committee.
D u r i n g the present fiscal year, f o r example, i t has been f o u n d
possible for the Defense D e p a r t m e n t t o revise its requirements f o r
a v i a t i o n spare parts, a n d t h e net saving, as a result of this, is on the
order of over $100 m i l l i o n .
T h i s saving d u r i n g the present year was t a k e n i n t o account a n d a
good p a r t of i t resulted i n reducing supplemental a p p r o p r i a t i o n s t h a t
otherwise w o u l d have been necessary—for example, f o r t h e a t o m i c
testing program.
M o r e o v e r , also i n the Defense D e p a r t m e n t a new centralized s u p p l y
a n d p r o c u r e m e n t agency has been established, the Defense S u p p l y
A g e n c y , w h i c h is expected t o m a k e substantial savings i n t h e s u p p l y
operations of the Defense D e p a r t m e n t , as Senator Douglas is v e r y
w e l l aware, a n d we w i l l be reflecting these savings, have already
reflected some of t h e m i n the 1963 budget.
A n d , as t h e y occur, we w i l l be alert t o t a k e advantage o f t h e m
d u r i n g t h e execution of the 1963 budget.
T h e Senator's question also asked h o w t h e order was f o l l o w e d u p ,
the President's order was f o l l o w e d u p , after i t was made.
I t h i n k the general p o i n t can be made t h a t we followed i t u p a t
t h a t t i m e m o s t intensively b y thoroughgoing discussions w i t h each
agency of their plans f o r the fiscal year 1962. W e w i l l do the same
t h i n g again after the Congress has completed action o n t h e 1963
budget, t o m a k e sure t h a t , as the spending p r o g r a m is a c t u a l l y carried
o u t d u r i n g the fiscal year 1963, the President's instructions are going
t o be followed.
Does this respond to the question, M r . C h a i r m a n ?
T h e CHAIRMAN. T h a n k
you.
Senator W i l l i a m s ?
Senator WILLIAMS. M r . Bell, i n s u b m i t t i n g the budget f o r fiscal
year 1962 as s u b m i t t e d i n J a n u a r y 1961
M r . BELL. Y e s , s i r ?
Senator WILLIAMS (continuing). W h a t were the estimated budget
receipts and the estimated expenditures as reported t o the Congress
i n t h a t first budget?
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11
M r . BELL. I n J a n u a r y of 1961?
Senator WILLIAMS. 1961, as s u b m i t t e d for fiscal year 1962.
M r . BELL. AS s u b m i t t e d b y President Eisenhower?
Senator WILLIAMS. W e l l , b o t h .
I was going t o ask y o u the question b o t h as s u b m i t t e d b y President
Eisenhower a n d as s u b m i t t e d b y President K e n n e d y .
M r . BELL. AS s u b m i t t e d on J a n u a r y 16, 1961, the estimated t o t a l
receipts f o r the fiscal year 1962 were $82.3 b i l l i o n , a n d estimated
expenditures were $80,865 billion, $80.9 b i l l i o n .
Senator WILLIAMS. W h a t were the same figures i n the b u d g e t as
s u b m i t t e d b y President K e n n e d y for t h a t same fiscal year?
M r . BELL. President K e n n e d y s u b m i t t e d a series of proposals w h i c h
d i d n o t constitute a completely revised b u d g e t d o c u m e n t .
Senator WILLIAMS. YOU w o u l d n o t have comparable figures, t h e n ,
for t h a t , is t h a t correct?
M r . BELL. W e l l , I can give y o u figures. T h e y were s u m m a r i z e d
a t t w o or three d i f f e r e n t times.
Senator WILLIAMS. I w i l l direct m y question i n t h i s w a y , t h e n :
W h a t was the a c t u a l receipts f o r fiscal year 1962?
M r . BELL. O f course, the a c t u a l figures, we are s t i l l 1 week f r o m
the end of the year
Senator WILLIAMS. T h a t is r i g h t , b u t y o u should have t h e m
reasonably close.
M r . BELL. T h a t is r i g h t .
Senator WILLIAMS. W h a t are they?
M r . BELL. T h e c u r r e n t estimate for receipts i n t h e present fiscal
year is about 81, a l i t t l e over $81 b i l l i o n , Senator.
Senator WILLIAMS. A l i t t l e over 81?
M r . BELL. Y e s ,
sir.
Senator WILLIAMS. Receipts were d o w n a b o u t 1.3 b i l l i o n less t h a n
t h e estimate then, is t h a t correct?
M r . BELL. Yes, s i r ; t h a t is r i g h t .
Senator WILLIAMS. T h a t is the estimate.
M r . BELL. A b o u t $1 b i l l i o n , Senator. I a m n o t g i v i n g i t exactly.
I do n o t have figures before me t h a t are precise t o the $100 m i l l i o n .
Senator WILLIAMS. F o r fiscal 1962, receipts are expected t o be
a b o u t $1 b i l l i o n less t h a n the original estimate?
M r . BELL. Yes, sir; t h a t is correct.
Senator WILLIAMS. NOW, t h e expenditures as recommended i n t h e
first b u d g e t were h o w much?
M r . BELL. T h e y were about $81 b i l l i o n , a n d t h e y are n o w estimated
a t about $88 b i l l i o n .
Senator WILLIAMS. A b o u t $88 b i l l i o n .
I n other words, t h e receipts were a b o u t $1 b i l l i o n less t h a n the
o r i g i n a l estimate, and, t o t h a t extent, $1 b i l l i o n of t h e deficit w o u l d
be accounted for b y less income t h a n h a d been anticipated?
M r . BELL. Y e s ,
sir.
Senator WILLIAMS. A n d t h e expenditures were about $7 b i l l i o n
higher, a n d $7 b i l l i o n of w h a t e v e r t h e deficit m a y be w i l l be as a result
of t h e increased expenditures d u r i n g fiscal 1962; is t h a t correct?
M r . BELL. T h a t does n o t a d d u p r i g h t , Senator, because the deficit
is o n l y $7 b i l l i o n .
Secretary DILLON. T h e original d o c u m e n t proposed a surplus.
S e n a t o r WILLIAMS. Y e s .
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M r . BELL.
Yes.
Senator WILLIAMS. I n other words, expenditures h a d been increased
$7 b i l l i o n over t h e original estimate?
M r . BELL. Y e s ,
sir.
Senator WILLIAMS. A n d t h e income has d r o p p e d about $1 billion?
M r . BELL. R i g h t .
Senator WILLIAMS. I p o i n t t h a t o u t t o c o n f i r m w h a t was said
earlier:
T h a t this deficit w i t h w h i c h we are going t o be c o n f r o n t e d here on
June the 3 0 t h results largely f r o m increased expenditures d u r i n g t h e
past 12 m o n t h s r a t h e r t h a n f r o m a r e d u c t i o n or an o veres t i m at i o n of
revenue.
M r . BELL. T h a t is r i g h t .
I t is, of course, true, Senator, as y o u k n o w , t h a t t h e t o t a l v o l u m e
of business, of income, of p r o d u c t i o n i n t h e economy w i l l be affected
or has been affected d u r i n g this year b y t h e Federal budget, and, insof a r as the recovery has been s t i m u l a t e d b y the p l a n n e d deficit i n t h e
Federal budget, t h e receipts of the G o v e r n m e n t are s u b s t a n t i a l l y
higher t h a n t h e y w o u l d otherwise have been.
B u t this is an i n d i r e c t effect t h r o u g h the i m p a c t of t h e b u d g e t on
t h e economy.
Senator WILLIAMS. YOU used t h e w o r d i n t h a t s t a t e m e n t , a
"planned deficit."
Mr.
BELL. Y e s ,
sir.
Senator WILLIAMS. DO I u n d e r s t a n d t h a t this deficit w i t h w h i c h we
are n o w being c o n f r o n t e d was deliberately p l a n n e d and s o m e t h i n g
t h a t y o u n o t o n l y a n t i c i p a t e d b u t t h a t y o u p l a n n e d for this deficit?
Mr.
BELL. Y e s ,
sir.
A deficit was p l a n n e d for t h e fiscal year 1962 deliberately as an a n t i recession measure j u s t as t h e deficit i n 1959 was p l a n n e d as an a n t i recession measure at t h a t t i m e .
Senator WILLIAMS. I disagree w i t h the 1959 p l a n n e d deficit. B u t
a m I correct i n m y u n d e r s t a n d i n g t h a t the $1.5 b i l l i o n surplus w h i c h
was estimated i n the o r i g i n a l b u d g e t was deliberately done a w a y w i t h
and, i n t u r n , converted i n t o this $7 b i l l i o n deficit, deliberately a n d as
a p a r t of a p l a n n e d program?
M r . BELL. T h e a n t i c i p a t e d
S e n a t o r WILLIAMS. M a y I a s k :
Is t h a t w h a t y o u
M r . BELL. I a m a n s w e r i n g y o u , s i r .
T h e a n t i c i p a t e d surplus, as presented i n the J a n u a r y 1961 b u d g e t ,
t u r n e d o u t on close e x a m i n a t i o n n o t to have been a real one, b u t , as
w e assessed the m a t t e r i n M a r c h of t h a t year, i t was p l a i n t h a t there
w o u l d have been no surplus, h a d there been no change i n the expenditure program.
Senator WILLIAMS. T h a t is r i g h t .
M r . BELL. SO t h a t the accurate s t a t e m e n t of the b u d g e t , as best
we could estimate i t i n M a r c h , showed t h a t there w o u l d , i n fact,
h a v e been a deficit under any circumstances.
B u t i t w o u l d have been a small one.
A n d the a d d i t i o n s o n the expenditure side were made d e l i b e r a t e l y
and proposed b y President K e n n e d y because he considered t h a t a
n u m b e r of G o v e r n m e n t programs needed to be increased and carried
o u t a t h i g h e r levels, n o t a b l y defense, space, and various others.
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DEBT CEILING
N o w , h a d the economy been i n a strong position a n d the President
h a d f e l t i t necessary, as he d i d , t o recommend higher expenditures,
o b v i o u s l y he w o u l d t h e n have been impelled t o r e c o m m e n d a d d i t i o n a l
taxes to cover those higher expenditures.
Since the economy, however, was i n a weak position—indeed, we
were at the b o t t o m of a recession i n F e b r u a r y of 1961—the President
considered t h a t i t was proper and wise fiscal p o l i c y n o t t o propose
a d d i t i o n a l taxes t o cover the a d d i t i o n a l expenditures w h i c h he regarded as necessary t o meet the c o u n t r y ' s needs.
I n t h a t sense, i t is e n t i r e l y correct, i n m y opinion, to say t h a t the
President accepted the d e s i r a b i l i t y of a deficit under those c i r c u m stances, being i n a recession and considering t h a t expenditure i n creases were proper a n d a p p r o p r i a t e t o meet the needs of the c o u n t r y .
T h i s is w r hat I m e a n t b y the phrase, the s h o r t h a n d phrase, " a planned
deficit."
Senator WILLIAMS. AS a result of this p l a n n e d deficit d u r i n g the
past 12 m o n t h s t h a t is b e h i n d us, and l o o k i n g b a c k w a r d , do y o u t h i n k
i t has been a great achievement, do y o u t h i n k our economy is b o u n c i n g
along better, as a result of this planned deficit, or do y o u t h i n k i t has
slipped?
M r . BELL. T h e economy has come back v e r y s t r o n g l y f r o m the
recession l o w of F e b r u a r y 1961.
T h e figures, t h e q u a r t e r l y figures of the increase i n gross n a t i o n a l
p r o d u c t are v e r y impressive.
W e were a t a b o u t $500 b i l l i o n a n n u a l r a t e i n t h e first q u a r t e r of
calendar 1961, gross n a t i o n a l p r o d u c t .
T h e second q u a r t e r figures for the present calendar year t h a t w i l l
be available i n a week or so w i l l p r o b a b l y show an a n n u a l r a t e between
$550 b i l l i o n t o $560 b i l l i o n , a n d this is a v e r y sharp recovery f r o m t h e
recession w h i c h was i n effect w h e n the President came in.
I c e r t a i n l y w o u l d n o t argue t h a t the deficit i n the b u d g e t has been
t h e o n l y c o n t r i b u t o r t o t h e s u b s t a n t i a l recovery t h a t has occurred,
b u t I w o u l d say t h a t i t d i d help; i t was proper under those c i r c u m stances to r u n a deficit, i f i t was necessary, as the President believed
and as the Congress concurred, to increase expenditures.
Senator WILLIAMS. I n the face of this s u b s t a n t i a l i m p r o v e m e n t t o
w h i c h y o u refer a n d this b o o m i n g economy, h o w do y o u associate
t h a t w i t h w h a t is h a p p e n i n g i n the stock m a r k e t today?
M r . BELL. I a m c e r t a i n l y no expert on the stock m a r k e t , Senator.
Senator WILLIAMS. W e l l , as an expert on finances?
M r . BELL. I t has been m y u n d e r s t a n d i n g t h a t the p r i n c i p a l exp l a n a t i o n g i v e n b y everyone, well, b y m o s t of the people w h o w a t c h
these m a t t e r s closely i n N e w Y o r k as w e l l as i n W a s h i n g t o n , is t h a t
t h e stock m a r k e t values were at an u n d u l y h i g h level.
Stocks were 20 t o 25 times their earnings, and these are levels
w h i c h could o n l y be sustained were there the a n t i c i p a t i o n of i n f l a t i o n ,
of continuous rises i n the price level i n the economy.
As i t became clear t h a t there was n o t going to be a c o n t i n u i n g i n f l a t i o n , i t was necessary, i t was o n l y n a t u r a l t h a t the stock prices
faced a r e a d j u s t m e n t .
T h i s is o b v i o u s l y n o t an explanation as t o w h y t h e y fell b y a cert a i n a m o u n t on a n y p a r t i c u l a r day, b u t this is c e r t a i n l y a significant
element i n e x p l a i n i n g w h y there lias been a substantial drop since
the levels of last fall.
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Senator WILLIAMS. AS one w h o understands the reasonableness
of y o u r e x p l a n a t i o n a n d c e r t a i n l y c a n n o t question i t , b u t w h a t dist u r b s me is m y recollection o f 1929 w h e n H e r b e r t H o o v e r said the
same t h i n g .
M r . BELL. I have n o t l o o k e d up w h a t M r . H o o v e r said i n 1929.
Senator WILLIAMS. I w i l l n o t push t h a t , b u t I t h i n k we got the
same explanations, a n d I do n o t k n o w a b o u t the conditions, b u t t h a t
the m a r k e t was too h i g h a n d t h a t i t h a d t o have an a d j u s t m e n t .
M r . BELL. I take i t we b o t h hope t h a t w h a t f o l l o w e d t h e n w i l l n o t
f o l l o w now.
Senator WILLIAMS. I a m n o t suggesting t h a t i t w o u l d , b u t I a m
suggesting t h a t t h a t is p r e t t y m u c h the same explanation.
I n y o u r speech, M r . B e l l — a n d perhaps the m o r a l of this is we s h o u l d
n o t m a k e too m a n y speeches, b u t we all listen to t h e m — I a m g o i n g
t o quote:
T o d a y there is a n equally clear consensus t h a t balancing t h e budget each y e a r
is not the proper s t a n d a r d to follow.
N o w , do y o u t h i n k there is a n y t h i n g i m p r o p e r a b o u t a s t a n d a r d of
t r y i n g to balance t h e Federal budget?
M r . BELL. " E a c h y e a r / ' sir, are t h e k e y w o r d s i n t h a t sentence.
Senator WILLIAMS. W h i c h year w o u l d y o u propose t h a t we d o
balance t h e budget?
Y o u proposed i t last year? Y o u h a d a p l a n n e d deficit, sir.
N o w , i n t h e p r o j e c t e d n e x t year, do y o u suggest we should balance
t h e budget n e x t year, or do y o u t h i n k we o u g h t to have a deficit i n
fiscal year 1961?
M r . BELL. 1963, sir?
Senator WILLIAMS. 1963, I mean.
M r . BELL. T h e b u d g e t t h a t t h e President presented i n J a n u a r y
was a balanced budget o n t h e assumption t h a t t h e economy w o u l d
rise, as Secretary D i l l o n said this m o r n i n g , t o a level of f u l l e m p l o y m e n t defined as 4 percent u n e m p l o y m e n t b y t h e end o f t h e fiscal
year.
I f t h a t , i n f a c t , is w h a t happens, we w i l l h a v e a balanced b u d g e t
i n t h e fiscal year 1963.
I t h i n k we w o u l d go f u r t h e r a n d say t h a t i n a year i n w h i c h we have
4 percent u n e m p l o y m e n t o r less t h r o u g h o u t t h e b u d g e t year, w e
w o u l d t h i n k t h a t i t w o u l d be desirable t o b u d g e t for a s u b s t a n t i a l
surplus, n o t s i m p l y for a balance, Senator.
I t h i n k t h a t is t h e basic answer t o y o u r question.
Senator WILLIAMS. YOU w o u l d r e c o m m e n d a surplus be created
o n l y i n years i n w h i c h y o u h a v e a 4 percent or less u n e m p l o y m e n t ?
M r . BELL. I n w h i c h we have h i g h e m p l o y m e n t b o t h of t h e w o r k
force a n d of t h e c o u n t r y ' s i n d u s t r i a l capacity. T h e r e are a d d i t i o n a l
circumstances w h i c h w o u l d have t o be t a k e n i n t o account, depending
o n t h e circumstances of the t i m e .
F o r i l l u s t r a t i o n , r i g h t after W o r l d W a r I I t h e b u d g e t , b y a n d large,
was p l a n n e d for surpluses, a n d surpluses were achieved i n m o s t of
M r . T r u m a n ' s years, as y o u w i l l recall. B u t t h e surpluses were n o t
large enough t o offset t h e v e r y great a c c u m u l a t i o n of l i q u i d purchasing
power w h i c h h a d been created d u r i n g the w a r , and, i n consequence,
those were years of budget surpluses b u t also years of price i n f l a t i o n .
I n consequence, I w o u l d t h i n k , l o o k i n g back, t h a t t h e p o l i c y I have
suggested here w o u l d have called f o r s u b s t a n t i a l surpluses i n t h e
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DEBT CEILING
b u d g e t i n a period l i k e t h a t , even i f the u n e m p l o y m e n t was n o t absol u t e l y at 4 percent.
Senator WILLIAMS. U s i n g t h a t as a y a r d s t i c k , i n h o w m a n y years
since 1900 w o u l d we have h a d a balanced budget d u r i n g peacetime
if we deliberately unbalanced the budget i n every year i n w h i c h there
was a n u n e m p l o y m e n t r a t e higher t h a n 4 percent?
M r . BELL. I w o u l d be glad t o check t h e figures.
Senator WILLIAMS. W o u l d y o u f u r n i s h t h a t f o r t h e record?
I
w o u l d be interested.
M r . BELL. Y e s .
( T h e i n f o r m a t i o n requested follows:)
T h e B u r e a u of L a b o r Statistics series of u n e m p l o y m e n t statistics starts i n 1929.
Since t h e n , t h e peacetime calendar years d u r i n g w h i c h u n e m p l o y m e n t was 4 percent or less were: 1929, 1946, 1947, 1948, 1951, 1952, a n d 1953, a t o t a l of 7 years.
I n a d d i t i o n , u n e m p l o y m e n t was below 4 percent d u r i n g t h e w a r years 1943, 1944,
a n d 1945. M o r e o v e r , u n e m p l o y m e n t was between 4 a n d 5 percent i n t h e w a r t i m e year 1942 a n d t h e peacetime years 1955, 1956, a n d 1957.
M r . BELL. O n t h e other hand, I w a n t i t t o be clear t h a t I a m n o t
suggesting q u i t e such a r i g i d s t a n d a r d as y o u have j u s t indicated.
Senator WILLIAMS. NO; I a m n o t suggesting i t . Y o u have suggested i t .
M r . BELL. R i g h t . I do n o t suggest t h a t the question of surplus
or deficit can be settled s i m p l y b y l o o k i n g at t h e a n t i c i p a t e d r a t e of
u n e m p l o y m e n t . As for t h e past h i s t o r y of u n e m p l o y m e n t , we can
check the figures. W e w i l l be glad t o do so and p u t t h e m i n t h e record.
Senator WILLIAMS. I was j u s t w o n d e r i n g i f we d i d use t h a t — n o w ,
i n y o u r statement, y o u also s t a t e — —
M r . BELL. M a y I add one p o i n t a b o u t t h a t ?
S e n a t o r WILLIAMS. S u r e .
M r . BELL. I t h i n k i t w o u l d be o f interest t o note t h a t i n recent
years, i f I can find m y copy of economic indicators here, the u n e m p l o y m e n t r a t e has been i n t h e neighborhood of 4 percent i n 1955,
1956, 1957.
I t has n o t been t h a t l o w since 1957, b u t 4 percent u n e m p l o y m e n t
is n o t u n u s u a l — t h a t is to say, we c e r t a i n l y have h a d m a n y years i n
w h i c h t h a t level of u n e m p l o y m e n t has been reached.
Senator WILLIAMS. I realize t h a t , b u t I j u s t wondered if y o u w o u l d
furnish that information.
M r . BELL. R i g h t .
Senator WILLIAMS. NOW, i n y o u r statement f u r t h e r y o u said, a n d
I am quoting:
T h e recovery t o p p e d o u t t o o soon.
I w i l l go b a c k :
T h i s is a p p a r e n t l y e x a c t l y w h a t happened i n 1959 a n d 1960. Here, again,
A r t h u r B u r n s a n d W a l t e r H e l l e r agree t h e recovery f r o m t h e 1957-58 recession
s p u t t e r e d a n d came t o a stop before f u l l e m p l o y m e n t a n d f u l l c a p a c i t y was reached.
T h e recovery t o p p e d o u t t o o soon, a n d t h e decision t o balance t h e 1960 b u d g e t ,
i n retrospect, seems clearly t o have been one of t h e factors t h a t l e d t o t h e a b o r t i v e
r e c o v e r y a n d t h e subsequent d o w n t u r n i n t h e s p r i n g of 1960.
N o w , do I u n d e r s t a n d y o u figured t h a t balancing the budget i n
1960 was a w r o n g step a n d i t should have been unbalanced a t t h a t
time?
M r . BELL. T h a t is the conclusion t h a t A r t h u r B u r n s and W a l t e r
H e l l e r w o u l d agree on.
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Senator WILLIAMS. T h a t is y o u r — —
M r . BELL. W e l l , y o u k n o w
Senator WILLIAMS. I a m asking y o u for y o u r opinion.
M r . BELL. I n s o f a r as I understand the problem, Senator, I t h i n k
t h a t is correct.
I am, however, r e l y i n g on the j u d g m e n t of people l i k e B u r n s a n d
H e l l e r , w h o have studied the m a t t e r more closely t h a n I have.
Senator WILLIAMS. T h e n y o u said t h a t there were " p o s i t i v e benefits
f r o m a Federal deficit i n a recession."
M r . BELL. I n a r e c e s s i o n , r i g h t .
Senator WILLIAMS (reading):
Such a deficit can assist i n e x p a n d i n g purchasing power a n d e m p l o y m e n t
w i t h o u t leading t o i n f l a t i o n , witness t h e $12 b i l l i o n deficit i n fiscal 1959 or t h e $7
b i l l i o n deficit i n t h e present fiscal year, neither o f w h i c h has been accompanied
b y a n y significant i n f l a t i o n a r y pressure.
M r . BELL. R i g h t .
Senator WILLIAMS. DO y o u t h i n k the $12 b i l l i o n deficit i n 1959 a n d
the $7 b i l l i o n deficit w h i c h we are just going to end u p w i t h f o r fiscal
1962 is a blessing?
A i r . BELL. I t h i n k I w o u l d r a t h e r regard t h e m , Senator, as a
necessary evil.
I do not t h i n k any of us l i k e deficits. I t h i n k the a r g u m e n t I have
made here is t h a t t h e y can have some beneficial effects i n a recession.
I w o u l d t h i n k t h a t our o b j e c t i v e should be t o t r y t o a v o i d g e t t i n g
i n t o recessions. I f we do t h a t , t h e n we do not face t h e question o f
w h e t h e r we have to have recessions—I mean deficits, and we o b v i o u s l y
w o u l d prefer not to be faced w i t h t h a t k i n d of a s i t u a t i o n .
I f we a v o i d the recessions, we can and should a v o i d the deficits.
Senator WILLIAMS. I agree w i t h y o u on t h a t p o i n t , b u t w h a t I a m
at a loss t o understand, t h o u g h , is: W e are confronted w i t h a s i t u a t i o n here on June 30, 1962, i n w h i c h we have the deficit and a prospective recession b o t h together.
N o w the deficit, the planned deficit for the last fiscal year, appare n t l y d i d n o t achieve its objective. Was i t too small a deficit?
D o y o u t h i n k , i n l o o k i n g back, i n retrospect, i t should have been
double?
M r . BELL. Senator, I personally do n o t t h i n k we have the evidence
a t h a n d as y e t to answer t h a t question. O u r assumption as t o w h a t
was going t o happen i n the economy d u r i n g the present calendar year
i n c l u d e d a n u m b e r of different aspects, a certain effect f r o m the level
of expenditures and t a x a t i o n of the Federal G o v e r n m e n t , and another
p a r t , p r o b a b l y the most significant p a r t of the change i n the economy,
t h e g r o w t h of t h e economy, w h i c h we expected w o u l d have resulted
f r o m a v e r y strong p i c k u p i n p r i v a t e i n v e s t m e n t .
W e have h a d a p i c k u p i n p r i v a t e i n v e s t m e n t as compared w i t h
calendar 1961, b u t i t has n o t been as large as we h a d hoped.
This
is, I t h i n k , the most significant difference between the economic circumstances t h a t we projected i n J a n u a r y and the circumstances as
t h e y have a c t u a l l y developed t h r o u g h the year thus far.
I do n o t k n o w , I do n o t have the d a t a i n f r o n t of me t o analyze t h e
reason f o r the f a c t t h a t i n d u s t r i a l i n v e s t m e n t has n o t risen as m u c h
over last year as we hoped t h a t i t w o u l d .
T h e r e m a y be other elements i n t h e economy w h i c h w i l l p e r f o r m
b e t t e r t h a n we h a d expected i n J a n u a r y a n d w h i c h w o u l d m a k e u p
f o r t h a t difference i n the o u t l o o k .
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DEBT CEILING
A l l of us, I t h i n k , are looking, are expecting to keep e x a m i n i n g these
questions as the economic indicators of the present fiscal year become
clearer week b y week, as we go along.
I f at a n y stage i t appears t h a t a different economic and fiscal p o l i c y
seems desirable, w h y , i t w o u l d be o u r r e s p o n s i b i l i t y t o r e c o m m e n d
t h a t t o the President.
Senator WILLIAMS. T h a n k y o u .
I w i l l n o t pursue this f u r t h e r . T h e c h a i r m a n p r e t t y w e l l covered
the n e x t question I have to ask. I w i l l merely ask i t to p u t i t i n the
record.
I n speaking o f the m a n y different types o f budgets, the methods
of c o m p u t i n g the budgets, i f I understood y o u r answer t o the chairm a n ' s question correctly, y o u said there is no p l a n , nor a n y t h o u g h t
o n the p a r t o f the a d m i n i s t r a t i o n , t o change f r o m the a d m i n i s t r a t i v e
budget as i t has been r e p o r t e d to the Congress, is t h a t correct?
M r . BELL. NO, s i r .
I t h i n k o u r essential p o i n t is t h a t there are different questions to be
asked; there are different issues of fiscal p o l i c y to be faced.
Some of t h e m are best answered b y using the a d m i n i s t r a t i v e budget
figures, some are b e t t e r answered b y using the cash statement or the
n a t i o n a l income account figures.
Consequently, we have regarded the p r o v i s i o n o f these other k i n d s
of figures, i n a d d i t i o n t o those o f the a d m i n i s t r a t i v e budget, t o be a
c o n t r i b u t i o n t o the facts available f o r p o l i c y m a k i n g and n o t as a
step t o w a r d e l i m i n a t i n g t h e a d m i n i s t r a t i v e b u d g e t figures a n d
replacing t h e m w i t h a n y of these others.
Senator WILLIAMS. I t h i n k i t is w e l l t o p u t those other figures i n
f o r comparison, for s t u d y , f o r use i n m a k i n g y o u r plans.
M r . BELL.
Right.
Senator WILLIAMS. B u t when i t comes t o the actual accounting
system, the question of expenditures and receipts, and the question
of our n a t i o n a l debt a n d financing the n a t i o n a l d e b t , as I u n d e r s t a n d
i t , y o u are going to continue to use the a d m i n i s t r a t i v e budget as the
best m e t h o d , is t h a t correct?
M r . BELL. W e l l , we believe t h a t those are the best figures for cert a i n purposes.
T h e y are the best figures t o relate t o the changes i n the n a t i o n a l
debt,
T h e y are the best figures t o relate t o the actions t a k e n b y the
Congress on spending a u t h o r i t y i n a n o r m a l year t h r o u g h the approp r i a t i o n s process.
T h e y are the best figures for c o n t r o l purposes w i t h i n the executive
b r a n c h for the spending programs of the different agencies.
T h e y are n o t the best figures when one wishes to t r y to analyze the
i m p a c t of Federal financial transactions on the economy.
A l l the economists of either p a r t y agree t h a t for t h a t purpose the
n a t i o n a l income accounts present better figures, more useful figures,
figures w h i c h w i l l give us a better guide. So t h a t i t is our effort t o
p r o v i d e the accounting i n f o r m a t i o n w h i c h w i l l be most constructive
for whatever the purpose is t h a t is t o be served a t a given p o i n t i n
time.
W h i c h e v e r the questions are, we w a n t t o be able t o have the accounts and the figures available t h a t w i l l enable i t t o be answered
most intelligently.
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Senator WILLIAMS. I recognize t h a t each of these reports can serve
i t s useful purpose.
M r . BELL. R i g h t .
Senator WILLIAMS. B u t the reason t h a t p r o m p t e d m y question,
again, was again reading y o u r speech, a n d I a m q u o t i n g :
T h e administrative budget, the set of figures normally discussed in Congress
and in the press, is badly incomplete, misleading in thinking, and a confusing
conglomeration of different kinds of activities.
N o w , i f i t is y o u r o p i n i o n t h a t the a d m i n i s t r a t i v e b u d g e t is m i s leading, incomplete, a n d a confusing conglomeration o f d i f f e r e n t
a c t i v i t i e s , h o w do y o u t h i n k the Congress is going to m a k e a n y sense
o u t of i t w h e n y o u s u b m i t i t to us?
M r . BELL. W e hope t h a t we can augment t h e a d m i n i s t r a t i v e b u d g e t
figures b y a d d i t i o n a l figures w h i c h correct those deficiencies.
I f t h e Congress w o u l d prefer t h a t we correct t h e m b y other means,
b y a l t e r i n g t h e a d m i n i s t r a t i v e budget, t h a t w o u l d be another w a y t o
do i t .
T h i s is n o t o u r proposal.
Senator WILLIAMS. NO.
M r . BELL. SO f a r as the a d m i n i s t r a t i v e b u d g e t being misleading i n
t i m i n g , w h i c h I t h i n k is one o f the points t h a t is made there, we do
expect to p r o v i d e figures on an accrual basis w h i c h , as a n y c o r p o r a t i o n
k n o w s , are b e t t e r figures to use f o r m a n y purposes t h a n cash figures,
t h e t y p i c a l figures i n w h i c h the a d m i n i s t r a t i v e b u d g e t has been p r e sented i n the past.
So f a r as t h e a d m i n i s t r a t i v e b u d g e t is, as I i n d i c a t e d there, a
conglomeration of different k i n d s of activities, I t h i n k i t is o u r respons i b i l i t y to m a k e p l a i n w h a t is i n c l u d e d i n i t , h o w m u c h of the b u d g e t
represents c u r r e n t o u t l a y s f o r goods a n d services, h o w m u c h of itrepresents c a p i t a l expenditures of one k i n d or another, h o w m u c h o f
i t represents loans a n d so on, so t h a t i f we m a k e p l a i n w h a t is i n c l u d e d
i n the a d m i n i s t r a t i v e budget, r a t h e r t h a n r e g a r d i n g i t as a u n i f o r m
set of data, t h e n I t h i n k this w i l l i m p r o v e the usefulness of t h e figures
t o those w h o m u s t act on i t .
I t is misleading, as I indicated, i t w o u l d be misleading i f i t were
regarded as a good i n d i c a t o r of the i m p a c t of the Federal b u d g e t o n
t h e economy.
I n t h a t sense, the Federal b u d g e t is n o t a good set of figures a t a l l .
T h e r e are a t least t w o sets of figures w h i c h are b e t t e r .
So i t seems to me the desirable f u n c t i o n of the B u d g e t B u r e a u is t o
present the record of the G o v e r n m e n t ' s plans and actions i n
financial
t e r m s so organized as to serve the purposes of those w h o m u s t m a k e
p o l i c y decisions based o n the figures.
Senator WILLIAMS. I appreciate t h a t a n d I appreciate y o u r e f f o r t t o
do so.
I was o n l y d i s t u r b e d t h a t after receiving y o u r b u d g e t and s t u d y i n g
i t a l i t t l e b i t , to read where y o u used such s t r o n g adjectives i n describi n g t h a t w h i c h y o u s u b m i t t e d to us.
N o w , one other question:
T h e interest of the n a t i o n a l debt, one of the b i g i t e m s i n t h e b u d g e t
is the interest o n the debt?
M r . BELL. Y e s , s i r .
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DEBT CEILING
Senator WILLIAMS. W h a t was the interest o n t h e d e b t i n fiscal
year 1962? H o w m u c h interest d i d we pay?
Secretary DILLON. Fiscal year 1962 is t h i s year.
Senator WILLIAMS. T h a t is t h i s year. A n dfiscalyear 1961?
Secretary DILLON. I t w i l l be a b o u t $9 b i l l i o n .
Senator WILLIAMS. $9 b i l l i o n t h i s year?
S e c r e t a r y DILLON. Y e s .
Senator WILLIAMS. Fiscal year 1962.
W h a t w i l l i t be i n fiscal year 1963?
M r . BELL. A b o u t $9.4 b i l l i o n .
Secretary DILLON. $9.4 b i l l i o n was t h e figure f o r t h e 1963 estimate.
Senator WILLIAMS. Yes. W e l l , I noticed i n y o u r budget y o u suggested t h a t a b o u t half of t h a t increase was to t a k e care of t h e increased
debt w h i c h is as a result of t h i s deficit a n d t h e other half is t o t a k e
care of t h e higher rates of interest on t h e obligations t h a t h a v e been
issued recently.
I p u t t h a t i n t h e record because we h e a r d a l o t said a b o u t t h e h i g h interest policies once before, a n d I guess we are going back t o p a y i n g
m o r e realistic interest rates on the m a r k e t .
Y o u find, as d i d y o u r predecessor, I guess, M r . Secretary, t h a t w h e n
y o u b o r r o w m o n e y , y o u have t o p a y t h e going r a t e of interest as i t is
demanded i n t h e m a r k e t p l a c e , is t h a t n o t correct?
Secretary DILLON. T h a t is c e r t a i n l y w h a t t h e T r e a s u r y has to do.
T h e going r a t e of m o n e y i n t h e m a r k e t p l a c e is somewhat influenced
b y the credit policies, m o n e t a r y policies of the G o v e r n m e n t as set b y
t h e Federal Reserve System. B u t t h e T r e a s u r y , when i t b o r r o w s
m o n e y i n the m a r k e t , can o n l y p a y the going rate, Senator.
Senator WILLIAMS. DO I u n d e r s t a n d t h a t t h e Federal Reserve i s
raising the interest rates deliberately at this time?
Secretary DILLON. T h e Federal Reserve S y s t e m has been keeping
credit f u l l y available o n a v e r y generous basis so f a r , a n d is c o n t i n u i n g
t o do so as l o n g as there is u n e m p l o y m e n t and as l o n g as our m a n u f a c t u r i n g c a p a c i t y is n o t being used t o the f u l l extent.
H o w e v e r , a t the same t i m e i t has an equally i m p o r t a n t d u t y t o help
preserve our gold stock, and on t h a t side i t has been o p e r a t i n g to see
t h a t the s h o r t - t e r m interest differentials s t a y reasonably i n line.
A t present, as of t o d a y , there is a small advantage t o b u y B r i t i s h
T r e a s u r y bills as compared t o U.S. bills b y a b o u t less t h a n t w o - t e n t h s
of 1 percent.
T h a t is n o t significant and m o n e y does n o t s h i f t w i t h t h a t n a r r o w
a m a r g i n , b u t i f t h a t m a r g i n w o u l d rise t o as m u c h as one-half o f 1
percent, there w o u l d be s u b s t a n t i a l shifts.
So t h a t has to be c o n s t a n t l y borne i n m i n d .
Senator WILLIAMS. Speaking of gold, this m o r n i n g , I t h i n k , y o u
referred t o the f a c t t h a t we h a d lost a b o u t $2.5 b i l l i o n i n gold last
year as a result of the A m e r i c a n c a p i t a l f o r i n v e s t m e n t i n plants
abroad, was i t , or w h a t was t h a t ?
Secretary DILLON. NO.
I said there was about $2.5 b i l l i o n t h a t was invested abroad.
That
was one of the items entering i n t o our overall balance of p a y m e n t s
deficit.
Senator WILLIAMS. Yes; I understand.
Secretary DILLON. W h i c h also happened t o be about $2.5 b i l l i o n .
B u t c e r t a i n l y y o u cannot p u t too m u c h w e i g h t on t h a t one item?
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Senator WILLIAMS. Oh, no. I d i d n o t i n t e n d i t t h a t w a y .
Secretary DILLON. NOW, the gold loss was o n l y about $850 m i l l i o n .
Senator WILLIAMS. I d i d understand t h a t y o u h a d placed some
emphasis on t h a t p o i n t .
Secretary DILLON. NO.
Senator WILLIAMS. T h e reason I b r o u g h t t h a t u p and raised the
question, h o w m u c h d i d we receive i n dividends f r o m these investments, f r o m our A m e r i c a n investments abroad?
Secretary DILLON. L a s t year I t h i n k we received about $3 b i l l i o n .
Senator WILLIAMS. A b o u t $3 billion?
Secretary DILLON. M a y b e a l i t t l e over.
Sentor WILLIAMS. A net gain of about $500 m i l l i o n .
M r . Secretary, are y o u going t o recommend a t a x c u t a t a n y t i m e
i n the near future?
Secretary DILLON. W e have stated m a n y a t i m e , for the last year
a n d a quarter, t h a t we i n t e n d e d t o s u b m i t a tax r e f o r m p r o g r a m f o r
a c t i o n early i n 1963. P a r t of t h a t , I have stated, I t h i n k i n answer t o
questions of yours at other hearings, w o u l d be an overall r e s t r u c t u r i n g
of the income t a x rates.
I have stated t h a t r e s t r u c t u r i n g is r e d u c t i o n as far as the income
t a x rates are concerned, and t h a t we i n t e n d e d to broaden the base t o
recoup those funds i n whole or i n p a r t .
T h e President has since t h e n i n d i c a t e d t h a t the a m o u n t t o be recouped i n this p r o g r a m w i l l n o t be as large as the r e d u c t i o n .
T h e 1959-60 experience and again this t i m e shows t h a t o u r t a x
b u r d e n , t h e w a y i t happens t o i m p i n g e on i n d i v i d u a l s and corporations, is too h e a v y a n d acts as a b r a k e against our economy m o v i n g
toward full employment.
So t h a t is one of t h e m a j o r reasons we w i s h t o reduce i t u p and
d o w n the line, a n d I t h i n k t h a t is generally accepted n o w i n business
circles a n d a m o n g economists and i n foreign g o v e r n m e n t circles as
b e i n g a w o r t h w h i l e objective.
Senator WILLIAMS. T h e reason I asked the question was t o see
w h e t h e r y o u r plans have materialized a n y f u r t h e r t h a n t h e y were as
compared w i t h the last t e s t i m o n y .
Secretary DILLON. NO; j u s t the same.
Senator WILLIAMS. DO y o u have a n y idea w h e n schedule F w i l l be
available?
Secretary DILLON. T h e President announced a t one of his press
conferences t h a t i t w o u l d be available, I t h i n k , i n 30 days, and a t
a n o t h e r he said on J u l y 6. W e are w o r k i n g v e r y h a r d t o l i v e u p t o
t h a t date, and I t h i n k we w i l l m a k e i t .
Senator WILLIAMS. T h a n k y o u .
T h a t is all.
T h e CHAIRMAN. Senator Douglas?
Senator DOUGLAS. T h a n k y c u , M r . C h a i r m a n .
Gentlemen, I feel v e r y apologetic a b o u t asking y o u a n y questions
a t a l l because y o u have been here n o w 2 hours a n d 50 m i n u t e s t h i s
m o r n i n g a n d 45 m i n u t e s this afternoon, and y o u have been subjected
t o 2y2 hours of questioning.
I hope y o u w i l l forgive me it I ask a few questions w h i c h are designed
t o p u t some f a m i l i a r facts i n a different and, I believe, more accurate
perspective.
DEBT CEILING
11
L e t me s t a r t o u t w i t h a couple of personal disclaimers. I a m n o t
enamored w i t h d e b t as such. I do n o t t h i n k m y w o r s t enemy c o u l d
accuse me o f a p p r o v i n g of w a s t e f u l expenditures. B u t I w o u l d l i k e
t o ask this question t o begin w i t h .
I n a n y p r i v a t e c o r p o r a t i o n , i f i t presents a balance sheet, does i t
present m e r e l y the liabilities, obligations, and debts, o r does i t also
include t h e assets?
Secretary DILLON. I t also includes assets o n one side a n d i t s
accounts and liabilities on the other.
Senator DOUGLAS. B u t i n the e x a m i n a t i o n w h i c h has been g i v e n
t o us t h u s f a r , the emphasis has been exclusively u p o n debt, is t h a t
n o t true?
Secretary DILLON. O n Federal d e b t ; t h a t is r i g h t .
Senator DOUGLAS. T h a t is correct.
N o w , y o u are aware of the f a c t t h a t the C o m m i t t e e on G o v e r n m e n t Operations of the House of Representatives has p u t o u t a s t u d y
l i s t i n g the Federal real and personal p r o p e r t y i n v e n t o r y ?
Secretary DILLON. Yes, Senator. I a m f u l l y aware of t h a t .
Senator DOUGLAS. I h o l d i n m y hand, as a Senator once r e m a r k e d ,
a copy of this r e p o r t as of June 30, 1961, and on page 13 of t h a t r e p o r t
there is a g r a n d r e c a p i t u l a t i o n of the personal and real assets of t h e
U.S. G o v e r n m e n t as of June 30, 1961.
N o w , this states t h a t t h e personal p r o p e r t y , t o t a l personal p r o p e r t y ,
owned b y t h e Federal G o v e r n m e n t as of t h a t date, had a value o f
$201,007 m i l l i o n .
Secretary DILLON. T h a t is correct.
Senator DOUGLAS. A n d real p r o p e r t y , $81,925 m i l l i o n .
Secretary DILLON. Also correct.
Senator DOUGLAS. Or a t o t a l of $282,932 m i l l i o n .
N o w , these were i n terms of o r i g i n a l cost, is t h a t n o t true?
Secretary DILLON. Yes; i n general.
Senator DOUGLAS. A n d i n the cases of real p r o p e r t y , p u b l i c lands,
and t h e rest, for instance, donated or otherwise acquired a t no cost,
o n l y $285 m i l l i o n .
I f we were t o include r e p r o d u c t i o n cost, the real p r o p e r t y value
w o u l d be v a s t l y i n excess of t h e $82 b i l l i o n listed?
Secretary DILLON. I t h i n k t h a t is correct.
T h e m a j o r i t e m t h a t is n o t a t o r i g i n a l cost is the p u b l i c d o m a i n
acreage w h i c h includes m i n e r a l resources, and t h e y have been given
some evaluation b y the I n t e r i o r D e p a r t m e n t . T h a t is the m a j o r
item.
T h e rest are m o s t l y original.
Senator DOUGLAS. AS of t h a t date, June 30, 1961, was n o t the
Federal debt $289 billion?
Secretary DILLON. T h a t is r i g h t .
Senator DOUGLAS. SO t h a t the assets, even i n terms of original
cost, were a p p r o x i m a t e l y equal to the n a t i o n a l debt, is t h a t n o t true?
Secretary DILLON. These assets; yes, t h a t is correct.
S e n a t o r DOUGLAS. Y e s .
A n d i f r e p r o d u c t i o n cost were t a k e n i n t o account, i n all p r o b a b i l i t y
the assets w o u l d have exceeded the n a t i o n a l debt?
Secretary DILLON. A t r e p r o d u c t i o n costs, t h e y u n d o u b t e d l y w o u l d
have.
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DEBT CEILING 11
Senator DOUGLAS. I n other words, those w h o speak of the b a n k r u p t c y of the Federal G o v e r n m e n t do n o t t a k e account of the assets
w h i c h the Federal G o v e r n m e n t owns.
N o w , m a y I ask a question about the n a t u r e of the Federal budget.
D o we include i n our a d m i n i s t r a t i v e budget c a p i t a l i n v e s t m e n t s
w h i c h the Federal G o v e r n m e n t makes?
M r . BELL. Y e s , s i r ; w e d o .
Senator DOUGLAS. DO we include
loans w h i c h we make, u p o n w h i c h
interest is paid, and u p o n w h i c h the p r i n c i p a l is also t o be paid?
M r . BELL. Y e s , s i r ; w e
do.
Senator DOUGLAS. DO we include investments i n such items as
r e c l a m a t i o n where, a l t h o u g h n o interest is paid, t h e p r i n c i p a l is
returned?
M r . BELL. Y e s , s i r ; w e
do.
Senator DOUGLAS. DO we include c a p i t a l investments w h i c h ,
a l t h o u g h neither interest or p r i n c i p a l is paid, p r e s u m a b l y do a d d t o
t h e p r o d u c t i v e efficiency of the c o u n t r y ?
Mr.
BELL.
Yes.
Senator DOUGLAS. NOW, m a y I ask t h i s :
W i l l the p r i v a t e business corporations of the N a t i o n include i n
t h e i r c u r r e n t o p e r a t i n g expenditures the c a p i t a l investments w h i c h
t h e y make?
M r . BELL. N o t i n t h e i r c u r r e n t outlays. T h e y , of course, include
depreciation.
Senator DOUGLAS. Yes, I understand.
B u t t h e y isolate, do t h e y n o t , their c a p i t a l investments f r o m t h e i r
o p e r a t i n g expenses?
M r . BELL. T h e y d o .
Senator DOUGLAS. Whereas i n the Federal b u d g e t w e combine
c a p i t a l investments a n d o p e r a t i n g expenses?
M r . BELL. T h a t is correct.
Senator DOUGLAS. SO t h a t the standards w h i c h we impose u p o n
the Federal G o v e r n m e n t t h r o u g h the a d m i n i s t r a t i v e budget are m u c h
m o r e severe t h a n the standards w h i c h p r i v a t e corporations such as
A . T . & T . impose u p o n themselves, is t h a t n o t true?
M r . BELL. T h a t is correct, Senator.
I f A . T . & T . k e p t its books the w a y the Federal G o v e r n m e n t does
i n the a d m i n i s t r a t i v e budget, A . T . & T . w o u l d t y p i c a l l y show a deficit
every year.
Senator DOUGLAS. NOW, some m o n t h s back, M r . Bell, I asked y o u
t o gather figures on the budgets of m a j o r foreign E u r o p e a n countries,
B r i t a i n , France, G e r m a n y , I t a l y . H a v e y o u h a d such s t u d y made?
M r . BELL. Y e s ,
sir.
Excuse me, sir, we d i d n o t have i t made. I t was already being
made under a s t u d y c r g a n L e d b y the B r o o k i n g s I n s t i t u t e .
S e n a t o r DOUGLAS. Y e s .
M r . BELL. W e obtained the figures a t y o u r request.
S e n a t o r DOUGLAS. Y e s .
N o w , l e t me first ask:
Does n o t the U n i t e d K i n g d o m separate t h e i r c a p i t a l investments
f r o m their c u r r e n t o p e r a t i n g expenses?
M r . BELL. AS I u n d e r s t a n d i t , Senator, t h e y m a k e a d i s t i n c t i o n
between w h a t t h e y call items above the line and items below the line.
Senator DOUGLAS. B e l o w the line consists of c a p i t a l expenditures?
11
DEBT CEILING
M r . BELL. I t is n o t as clean as t h a t .
As I u n d e r s t a n d i t , t h e y include m o s t of t h e i r c a p i t a l expenditures
below the line, b u t also f r o m t i m e to t i m e some other items.
Senator DOUGLAS. M o s t of the c a p i t a l expenditures are below the
line, is t h a t n o t true?
M r . BELL. Yes, sir; I believe t h a t is correct.
Senator DOUGLAS. IS n o t this also t r u e i n France?
M r . BELL. T h e y use s t i l l a different d i s t i n c t i o n b u t , nevertheless,
t h e y also have a s p l i t budget.
S e n a t o r DOUGLAS. Y e s .
M r . BELL. I n w h i c h some of the p u b l i c expenditures, some of t h e
C e n t r a l G o v e r n m e n t ' s expenditures, are regarded as n o t r e q u i r i n g
coverage b y the c u r r e n t revenues.
S e n a t o r DOUGLAS. Y e s .
M r . BELL. I t is appropriate to b o r r o w to cover p a r t of the F r e n c h
n a t i o n a l budget every year.
Senator DOUGLAS. W h a t about W e s t G e r m a n y ?
M r . BELL. T h e s a m e .
A l l the E u r o p e a n countries, w i t h o u t exception, so far as I a m aware,
have some f o r m of s p l i t budget.
Senator DOUGLAS. NOW, i f t h e y were to combine t h e i r c a p i t a l expenditures w i t h c u r r e n t operating costs, as we do, i n h o w m a n y years
w o u l d France have operated a t a deficit?
M r . BELL. W e l l , t h e s t u d y w h i c h was made under the B r o o k i n g s
I n s t i t u t i o n , I t h i n k , comes p r e t t y close t o answering y o u r question.
I t was an a t t e m p t t o p u t t h e budgets of the W e s t E u r o p e a n governments i n t o the same terms as our consolidated cash statements.
Senator DOUGLAS. R i g h t .
M r . BELL. A n d , h a v i n g done t h a t as w e l l as was feasible, the results
were to show t h a t the F r e n c h b u d g e t on those terms w o u l d have shown
a deficit i n each of the l a s t — w e l l , the figures were f r o m 1951 t h r o u g h
1960, the F r e n c h b u d g e t w o u l d have shown a deficit i n each of those
years.
Senator DOUGLAS. A n d i t has been i n this p e r i o d t h a t France has
h a d tremendous economic i m p r o v e m e n t , is t h a t n o t true?
M r . BELL. P a r t i c u l a r l y the l a t t e r p a r t of this period; yes, sir.
Senator DOUGLAS. NOW, i n t h e case of t h e U n i t e d K i n g d o m ?
M r . BELL. T h e y showed, of the 11 years, 1950 t h r o u g h 1960, t h e y
showed t w o surpluses and nine deficits b y t h a t p a r t i c u l a r comparison.
Senator DOUGLAS. A n d i n W e s t G e r m a n y , I t h i n k i n W e s t G e r m a n y
y o u could o n l y m a k e t h e comparison for 6 years?
M r . BELL. 1955 t h r o u g h 1960.
T h e first 2 of those years showed surpluses; the last f o u r showed
deficits.
Senator DOUGLAS. A n d i n the U n i t e d States, o u t of the 11 years?
M r . BELL. F i v e surpluses and six deficits.
Senator DOUGLAS. A r e these the proper p r o p o r t i o n s : t h a t deficits
were i n c u r r e d i n eighteen t h i r t y - t h i r d s of the t i m e i n the U n i t e d States?
M r . BELL. I guess so, sir. T h a t is i n here somewhere.
Senator DOUGLAS. I a m reading f r o m page 24.
M r . BELL. Yes, t h a t is correct, eighteen t h i r t y - t h i r d s for the U n i t e d
States.
Senator DOUGLAS. A n d i n t h e U n i t e d K i n g d o m deficits were
i n c u r r e d twenty-seven t h i r t y - t h i r d s of the time?
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DEBT CEILING 11
M r . BELL. R i g h t .
Senator DOUGLAS. I n France, t h i r t y - t h r e e t h i r t y - t h i r d s ?
M r . BELL. R i g h t .
Senator DOUGLAS. A n d i n G e r m a n y t w e n t y - t w o t h i r t y - t h i r d s ?
M r . BELL. R i g h t .
Senator DOUGLAS. SO t h a t on this basis the U n i t e d States has m a d e
a better record t h a n a n y of the nations i n the N A T O Alliance?
M r . BELL. I t depends on whether
Senator DOUGLAS. O n this basis?
M r . BELL. YOU used t h e w o r d " b e t t e r , " Senator. T h e y h a d
a record s h o w i n g — t h e U n i t e d States h a d a record showing m o r e
surpluses c o m p a r a t i v e l y t h a n a n y of these other countries.
Senator DOUGLAS. I a m using this t e r m j u s t as m y e m i n e n t colleagues have used i t .
M r . BELL. R i g h t .
Senator DOUGLAS. NOW, is i t n o t t r u e t h a t i f we were t o use t h e
E u r o p e a n system and isolate o u t the c a p i t a l investments, t h a t i n
m o s t of the years we w o u l d show a surplus?
M r . BELL. These are figures y o u have asked us for, Senator.
S e n a t o r DOUGLAS. Y e s .
M r . BELL. A n d we have n o t y e t managed t o p u t t h e m together.
C e r t a i n l y the result w o u l d be t o show m o r e surpluses t h a n o u r
system o f accounting has shown i n the past. I do n o t k n o w t h a t i t
w o u l d have t u r n e d every deficit i n t o a — —
Senator DOUGLAS. NO; w h e n we h a d a deficit of $13 b i l l i o n , I d o
not t h i n k i t would.
M r . BELL. R i g h t .
Senator DOUGLAS. NOW, we used to hear a great deal of t a l k a b o u t
inflation.
Y o u are acquainted w i t h the m o n t h l y economic indicators?
M r . BELL. Y e s ,
sir.
Senator DOUGLAS. I w o u l d l i k e t o ask y o u t o t u r n t o page 24 o f
t h e c u r r e n t indicators.
P r o b a b l y the best measure is t h a t of wholesale prices; is t h a t n o t
true?
M r . BELL. Yes, s i r ; t h a t is so regarded.
Senator DOUGLAS. NOW, i f y o u take 1957-59 as 100, w h a t is the
index as of June 12 of this year, 2 weeks back, a l i t t l e over 2 weeks
back?
M r . BELL. 100.1.
Senator DOUGLAS. I n other words, the wholesale price level n o w is
v i r t u a l l y identical, I t h i n k we can say is identical, w i t h the average
for the 3 years 1957-59?
M r . BELL. T h a t is r i g h t .
Senator DOUGLAS. I f y o u w i l l notice, this has been almost constant
d u r i n g this entire period; is t h a t n o t true?
M r . BELL. T h a t is r i g h t , for the last 5 years.
Senator DOUGLAS. 100.4 i n 1958, 100.6 i n 1959, 100.7.
Mr.
BELL. 1 0 0 . 7 i n 1 9 6 0 .
Senator DOUGLAS. 100.7 i n 1960, 100.3 i n 1961, and n o w 100.1.
I n other words, d u r i n g this period i n w h i c h there was so m u c h t a l k
a b o u t the danger of i n f l a t i o n , the wholesale price level has remained
c o n s t a n t ; this is almost unprecedented i n the h i s t o r y of the c o u n t r y .
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DEBT CEILING
I do n o t k n o w t h a t this is a n y t h i n g t o cheer. I t h i n k the o n l y
period w h i c h is comparable is the period f r o m 1924 t o 1929. B u t a t
least there has been price s t a b i l i t y ?
M r . BELL. Yes, sir; t h a t is r i g h t .
Senator DOUGLAS. W h i l e I k n o w t h a t y o u are m u c h too p o l i t e t o
c o m m e n t on the economic theories of the Governors of the F e d e r a l
Reserve System, I hope I m a y be p e r m i t t e d a p a r e n t h e t i c c o m m e n t
t h a t i t has always seemed t o m e t h a t M r . M a r t i n was f i g h t i n g a
nonexistent dragon.
I n the last 5 years he has t a l k e d t h a t we m u s t fight i n f l a t i o n — a n d
there has been no inflation.
A s a m a t t e r of fact, the index of u n e m p l o y m e n t has been h i g h
t h r o u g h o u t this period.
N o w , this m o r n i n g a n d this a f t e r n o o n a great deal was made of t h e
size of the Federal budget.
I wondered i f y o u w o u l d check these figures.
A t the end o f 1946, the n a t i o n a l debt was a p p r o x i m a t e l y $260
billion.
M r . BELL. 1946, sir?
S e n a t o r DOUGLAS. Y e s .
Secretary
DILLON.
I t was
$269.4
billion at that time.
M r . BELL. O n J u n e 30.
Senator DOUGLAS. I a m speaking o f the end o f the year.
M r . BELL. December 31, do y o u have t h e figures? I do n o t k n o w
whether we have got t h e year-end figures. W e have fiscal years o n l y ,
unfortunately.
Senator DOUGLAS. I was speaking as of t h e end of t h e calendar
year.
I t h i n k y o u w i l l find this i n t h e economic r e p o r t o f the President,
page 269.
Secretary DILLON. H e r e we have calendar years f r o m 1948 o n l y .
M r . BELL. H e r e i t is. T h e Senator is correct.
Senator DOUGLAS. Page 268.
M r . BELL. 2 5 9 . 5 .
Senator DOUGLAS. R o u n d i t t o 260.
M r . BELL. Y e s , 2 6 0 , r i g h t .
Senator DOUGLAS. A m I correct t h a t as of t h e end of 1952 t h e debt
was $267 billion?
M r . BELL. 267; y e s , s i r .
Senator DOUGLAS. A n d t h a t a t t h e end of 1962 t h e debt
a p p r o x i m a t e l y $300 billion?
Secretary DILLON. 299, r i g h t now.
Senator DOUGLAS. 299, yes.
was
M r . BELL. I n D e c e m b e r .
Senator DOUGLAS. 299.6; is i t not?
M r . BELL. I n December of the present year.
Secretary DILLON. I t is a l i t t l e under t h a t now.
r i g h t now. I n December of this year i t was 296.5.
Senator DOUGLAS. 296.5.
I t is about 299
M r . BELL. D e c e m b e r 1961.
Secretary DILLON. Yes; December 1961.
Senator DOUGLAS. I beg y o u r pardon,
present m o m e n t .
Secretary DILLON. 299.
85845—>62 7
I
a m speaking as of the
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DEBT CEILING 11
Senator DOUGLAS. C a l l i t 300.
S e c r e t a r y DILLON. Y e s .
Senator DOUGLAS. AS of the present m o m e n t .
N o w , l a m e n t a t i o n s have been made a b o u t this increase.
This
a m o u n t s t o an increase i n 16 years of a p p r o x i m a t e l y $40 b i l l i o n o r
r o u g h l y 15 percent i n the t o t a l debt; is t h a t n o t true?
Secretary DILLON. R i g h t .
Senator DOUGLAS. NOW, w h a t about the gross n a t i o n a l p r o d u c t
i n 1946?
A c c o r d i n g t o m y figures, i t was $210 b i l l i o n .
Secretary DILLON. T h a t is r i g h t , 210.
Senator DOUGLAS. A n d i n 1952 i t was $347 b i l l i o n .
Secretary DILLON. T h a t is correct.
Senator DOUGLAS. A n d as o f the first q u a r t e r o f this year, $548
billion?
S e c r e t a r y DILLON. 5 4 8 .
Senator DOUGLAS. T h a t was for the first quarter?
S e c r e t a r y DILLON. Y e s .
Senator DOUGLAS. NOW, r e l a t i v e t o the gross n a t i o n a l p r o d u c t ,
w h a t was t h e r a t i o of t h e n a t i o n a l debt t o t h a t gross n a t i o n a l p r o d u c t ?
I f y o u take the gross n a t i o n a l p r o d u c t as 100, w h a t w o u l d t h e nat i o n a l debt have been i n 1946?
Secretary DILLON. 128 percent.
Senator DOUGLAS. 128 p e r c e n t ; w h a t w o u l d i t have been i n 1952?
Secretary DILLON. 75 percent.
Senator DOUGLAS. 75 p e r c e n t ; w h a t was i t — w h a t is i t now?
Secretary DILLON. A b o u t 54 percent.
Senator DOUGLAS. I n other words, r e l a t i v e t o the gross n a t i o n a l
p r o d u c t , t h e n a t i o n a l debt has d i m i n i s h e d f r o m a r a t i o 28 percent
greater t h a n t h e gross n a t i o n a l p r o d u c t t o 46 percent less, or, r e l a t i v e l y
speaking, i t is o n l y a b o u t 40 percent n o w of w h a t i t was then?
Secretary DILLON. I n balancing i t w i t h the gross n a t i o n a l p r o d u c t ,
t h a t is r i g h t , as the w e i g h t of the debt.
Senator DOUGLAS. NOW, let us compare the g r o w t h of the n a t i o n a l
d e b t w i t h the g r o w t h of other forms of debt.
T h e figures w h i c h I have compiled indicate t h a t i n 1946 the t o t a l
v o l u m e of consumer credit a m o u n t e d t o $8.4 b i l l i o n , page 266 of the
economic r e p o r t .
M r . BELL. W h i c h year, Senator?
Senator DOUGLAS. 1946, $8.4 billion.
M r . BELL. I t looks l i k e 8.5. Yes, t h a t is r i g h t , t h a t is the v o l u m e
extended and the v o l u m e repaid, is i t n o t , Senator?
Senator DOUGLAS. NO; page 266.
S e c r e t a r y DILLON. 8.3.
Senator DOUGLAS. NOW, the t o t a l v o l u m e of consumer credit t o d a y
is a p p r o x i m a t e l y $57 billion?
Secretary DILLON. T h a t is r i g h t .
Senator DOUGLAS. I t h i n k the increase w i l l be shown t o be somewhere between six and seven times i n the v o l u m e of consumer credit.
N o w , on mortgage debt on pasre 267, a m I correct t h a t at the end of
1946 the t o t a l was a p p r o x i m a t e l y $42 b i l l i o n , or, t o be precise, $41.8
billion?
Secretary DILLON. T h a t is r i g h t .
Senator DOUGLAS. A t the end of 1961 i t was $223 billion?
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DEBT CEILING
Secretary DILLON. T h a t is r i g h t .
Senator DOUGLAS. Or an increase of a p p r o x i m a t e l y 5.5 times?
Secretary DILLON. T h a t is correct.
Senator DOUGLAS. NOW, t a k e t h e corporate d e b t shown on page 268.
I n 1946 i t was 93.5 billion?
Secretary DILLON. T h a t is r i g h t .
Senator DOUGLAS. A t t h e end of 1961 i t was 312 billion?
Secretary DILLON. T h a t is r i g h t .
Senator DOUGLAS. A n increase o f a p p r o x i m a t e l y 3.5 times i n t h e
v o l u m e of corporate debt.
N o w , t a k e commercial and financial debt w h i c h is shown i n the
next-to-the-last column, 12.1 b i l l i o n at the end of 1946.
Secretary DILLON. T h a t is r i g h t .
Senator DOUGLAS. T h a t is correct, is i t not?
M r . BELL. Y e s ,
sir.
Senator DOUGLAS. A t t h e end o f 1961, 35 b i l l i o n , o r a l m o s t three
times as m u c h .
Secretary DILLON. T h a t is r i g h t .
Senator DOUGLAS. O r i f y o u t a k e t o t a l p r i v a t e debt, t o t a l p r i v a t e
d e b t w h i c h is shown i n the f i f t h column, i n 1946, $154 b i l l i o n , n o w
$620 b i l l i o n .
Secretary DILLON. T h a t is r i g h t .
Senator DOUGLAS. O r a f o u r f o l d increase?
Secretary DILLON. T h a t is correct.
Senator DOUGLAS. T o t a l p r i v a t e d e b t increased t o a figure, i f y o u
t a k e 1946 as 100, t o a r e l a t i v e figure of 400.
M r . BELL. T h a t is r i g h t .
Senator DOUGLAS. T h e Federal d e b t increased f r o m a r e l a t i v e
figure of 100 t o 115?
Secretary DILLON. T h a t is correct.
M r . BELL. 115, d i d y o u say, Senator?
Senator DOUGLAS. F r o m 100 to 115, increased b y 15 percent.
Secretary DILLON. Fifteen.
Senator DOUGLAS. I t y o u t a k e State and local g o v e r n m e n t , w h i c h
is p r e s u m a b l y close t o the people, this same table on page 268 shows
1946, $13.6 b i l l i o n of debt; a t the end of 1961, $65 b i l l i o n , or almost
five times as great.
Secretary DILLON. T h a t is correct.
Senator DOUGLAS. Does i t n o t f o l l o w , therefore, t h a t i n comparison
w i t h p r i v a t e business, all forms of p r i v a t e business, and State and
local governments, the Federal G o v e r n m e n t has made a " b e t t e r "
record t h a n a n y other?
M r . BELL. T h a t is correct, Senator.
Senator DOUGLAS. A n d also t h a t i t has made a " b e t t e r " record i n
i t s a n n u a l budgets t h a n a n y of the m a j o r E u r o p e a n powers, again
using t h e t e r m " b e t t e r " i n q u o t a t i o n marks?
M r . BELL. T h a t is correct; yes, sir.
Senator DOUGLAS. NOW, i f y o u t a k e the a n n u a l expenditures of the
Federal G o v e r n m e n t , i n 1946 w h a t percentage d i d t h e y f o r m of the
gross n a t i o n a l p r o d u c t ? Was i t n o t 17 percent?
M r . BELL. I t sounds r i g h t , Senator. I n 1946, d i d y o u say?
Senator DOUGLAS. W e l l , I suppose t e c h n i c a l l y — y o u are t h i n k i n g
of budget years?
M r . BELL. Fiscal years; yes, sir.
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Senator DOUGLAS. L e t us t a k e 1946-47.
M r . BELL. R i g h t . 17.4 percent.
Senator DOUGLAS. 17.4 percent i n 1946-47?
M r . BELL. T h a t is r i g h t .
Senator DOUGLAS. I n the c u r r e n t year w h a t percentage of t h e
gross n a t i o n a l p r o d u c t w i l l our expenditures take?
M r . BELL. A b o u t 16 percent, a p p r o x i m a t e l y .
Senator DOUGLAS. SO t h a t there has been a slight decrease i n the
percentage of t h e gross n a t i o n a l p r o d u c t w h i c h g o v e r n m e n t a l
expenditures f o r m .
A l t h o u g h t h e y have increased absolutely, there has been a s l i g h t
r e l a t i v e decline?
M r . BELL. Yes, s i r ; t h a t is r i g h t .
T h e y have been a p p r o x i m a t e l y stable since the end of the w a r .
Senator DOUGLAS. DO y o u n o t t h i n k , i f we are t o have a dialogue
on g o v e r n m e n t a l finances, t h a t of necessity these things need t o be
considered?
M r . BELL. I c e r t a i n l y do, Senator, and the p o i n t y o u have been
m a k i n g about the n a t i o n a l d e b t and about Federal expenditures i n
r e l a t i o n t o the gross n a t i o n a l p r o d u c t , we have a t t e m p t e d t o emphasize
b o t h i n the 1962 budget r e v i e w and i n the 1963 budget presentation.
Senator DOUGLAS. NOW, for the sake of the reporters and f o r the
sake o f the record, let me say I a m n o t defending d e b t as such.
I
a m n o t defending a n y g o v e r n m e n t a l expenditure as such.
I t h i n k there are m a n y forms of G o v e r n m e n t expenditure w h i c h
could be reduced, among t h e m the sugar p r e m i u m w h i c h I hope we
w i l l v o t e on v e r y s h o r t l y , a n d I hope t h a t I m a y be able t o j o i n the
e m i n e n t c h a i r m a n of this c o m m i t t e e on t h a t subject.
T h e r e are m a n y other things, economies t h a t I t h i n k we could
include.
B u t we sometimes lose sight of the forest for t h e trees, a n d i f w e
are t o have a dialog on this subject, and I t h i n k i t is v e r y i m p o r t a n t
t h a t w e should, I believe these factors should be t a k e n i n t o consideration.
W i t h apologies for t a k i n g so l o n g
M r . BELL. N o t a t a l l , S e n a t o r .
T h e CHAIRMAN. Senator M c C a r t h y ?
Senator MCCARTHY. M r . C h a i r m a n , m a y I ask t h e Secretary:
Does he feel t h a t a debt ceiling of $308 b i l l i o n w i l l give adequate
leeway t o t h e T r e a s u r y so t h e y w i l l n o t be forced t o resort to a n y of
t h e various practices or devices t h a t h a d t o be used a n d were used i n
t h e period, say, f r o m 1953 t o 1958, w h e n the debt ceiling was too close,
really, t o t h e Federal debt?
Secretary DILLON. W e feel t h a t $308 b i l l i o n debt ceiling t h a t we
o r i g i n a l l y recommended w o u l d have done this. A s I p o i n t e d o u t , t h e
ceiling as adopted b y t h e House i n the b i l l n o w before y o u w i l l o n t y
do t h a t , p r o v i d e d our estimates of a balanced budget for n e x t year
t u r n o u t t o be correct, i n w h i c h case we w i l l have adequate leeway.
I f we have a n y s u b s t a n t i a l deficit, we w i l l have t o come b a c k t o t h e
Congress i n t h e first 3 m o n t h s of n e x t year, because a r e d u c t i o n t o $305
b i l l i o n w o u l d be too t i g h t , p a r t i c u l a r l y over t h e h u m p p e r i o d j u s t
before June 15, w h e n the b i g revenues come in.
Senator MCCARTHY. W i l l y o u give me y o u r o p i n i o n as t o w h e t h e r
y o u r experience of the last 10 years is a n y i n d i c a t i o n t h a t t h e existence
11
DEBT CEILING
of the debt ceiling h a d a n y effect u p o n t h e a m o u n t o f m o n e y w h i c h
was a u t h o r i z e d to be spent b y the Federal G o v e r n m e n t ?
Secretary DILLON. I do n o t t h i n k so.
I t is m y impression t h a t w h e n Congress votes a p p r o p r i a t i o n s bills,
t h e y do n o t give consideration t o the debt ceiling, b u t m e r e l y give
consideration t o the a p p r o p r i a t i o n t h a t t h e y are considering.
Senator MCCARTHY. I t is on the record t h a t a t least i n 1952-58
a l l the evidence is t h a t the debt ceiling d i d n o t p r o m o t e a n y k i n d of
fiscal prudence, b u t , o n t h e c o n t r a r y , b r o u g h t a b o u t some actions
w h i c h were fiscally i m p r u d e n t .
S e c r e t a r y DILLON. Y e s .
T h e o n l y a c t u a l effect was d u r i n g the times w h e n the debt ceiling
got. t o o s t r i n g e n t . A s I remember, t h e a d m i n i s t r a t i o n w e n t t o
Congress a n d asked t h a t i t be increased, a n d i t generally was, b u t for
a period of m o n t h s before such increase t h e y f r e q u e n t l y h a d t o l i v e
t h r o u g h s t r i n g e n t periods. T h e y t h e n h a d t o indulge i n financial
practices t h a t t h e y d i d n o t feel were proper or good financial practices.
T h e y r e g r e t t e d h a v i n g t o do i t , b u t t h e y d i d have t o do i t , a n d t h e y
cost the G o v e r n m e n t money.
Senator MCCARTHY. T h i s is not m y statement, b u t I w o u l d say
I believe i t t o be a t r u e statement.
T h e debt l i m i t , instead of p r o m o t i n g fiscal prudence and expenditure
restraint, as is claimed b y some has a c t u a l l y resulted i n the erosion
of the i n t e g r i t y of the Federal budget. W h e n n a t i o n a l mortgages
were being used, as a basis for b o r r o w i n g , i n effect, i t d i d erode the
i n t e g r i t y of t h e budget.
T h e budget, as i t was then presented, was, t o some extent, a dist o r t e d b u d g e t ; was i t not?
Secretary DILLON. T h a t is correct.
Those are t h e types of fiscal practices t h a t I referred t o t h a t I do
n o t t h i n k a n y b o d y is p a r t i c u l a r l y h a p p y about using, b u t w h i c h t h e y
were forced t o use because of a debt ceiling w h i c h a t t h a t p a r t i c u l a r
m o m e n t became too restrictive.
I feel t h a t i t is v e r y i m p o r t a n t to have adequate f l e x i b i l i t y and adequate r o o m i n a n y d e b t ceiling so t h a t we w i l l n o t again have t o undert a k e those sorts of practices.
Senator MCCARTHY. A n d t h e fact is t h a t i t d i d interfere w i t h the
efficient h a n d l i n g of the p u b l i c debt at least t w o or three times d u r i n g
t h a t period?
S e c r e t a r y DILLON. Y e s .
A n d i t also interfered at one t i m e , I t h i n k i t was i n the f a l l of 1957,
when i t was necessary for t h e a d m i n i s t r a t i o n t o h o l d b a c k the p a y m e n t
of bills t h a t were due. T h a t h a d a v e r y d i f f i c u l t i m p a c t on all the
c i v i l i a n companies w h i c h were c o n t r a c t i n g w i t h t h e Defense D e p a r t ment particularly.
Senator MCCARTHY. I n the o p i n i o n of some, i t aggravated t h e
recession of 1957-58.
Secretary DILLON. Oh, yes, i t is v e r y , v e r y clear i n the o p i n i o n of
m a n y t h a t i t did, because this was a t i m e w h e n the recession was
j u s t coming. Companies w h i c h h a d expected t o have their bills p a i d
d i d n o t have t h e m paid, and, n a t u r a l l y , were forced t o t i g h t e n u p
t h e i r o w n operations, dismiss people, and things of t h a t nature.
Senator MCCARTHY. A n d also i f t h e j u d g m e n t of t h e m i l i t a r y
experts was r i g h t about the scheduling of defense expenditures i n t h a t
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period, i t w o u l d be f a i r t o a t least suggest t h a t i t m i g h t have endangered the defense effort f o r a period of 6 m o n t h s or more?
Secretary DILLON. I t c o u l d have, yes.
Senator MCCARTHY. I n v i e w of this, i f we are t o m a k e a m i s t a k e
here, we ought t o m a k e i t on the side of raising t h e debt ceiling somew h a t beyond w h a t we m i g h t a n t i c i p a t e is necessary, r a t h e r t h a n
p u t t i n g i t too close t o w h a t y o u a n t i c i p a t e y o u r expenditures or y o u r
b o r r o w i n g m a y necessarily be?
Secretary DILLON. I w o u l d t h i n k so. A debt ceiling, i f i t is a l i t t l e
b i t larger t h a n is needed, does n o t p r o m o t e extra expenditures because
y o u r expenditures are l i m i t e d b y y o u r appropriations.
I f i t is too t i g h t , on the other hand, a n d is lower t h a n is needed t o
c a r r y t h r o u g h those appropriations, i t can lead t o these u n s o u n d
financial practices.
Senator MCCARTHY. I was going t o suggest t h a t we set t h e d e b t
ceiling a t t h e equivalent of the n a t i o n a l i n c o m e ; do y o u t h i n k t h a t
w o u l d be a reasonable relationship ?
Secretary DILLON. I t h i n k t h a t w o u l d give us a great deal o f
flexibility,
m o r e t h a n we w o u l d need.
Senator MCCARTHY. W h a t w o u l d i t do t o the crisis i n confidence
t h a t supposedly exists t o d a y , M r . Secretary?
Secretary DILLON. W e l l , I t h i n k t h a t people, so far as the debt is
concerned, l o o k at the level of the n a t i o n a l debt r a t h e r t h a n the ceiling,
a n d t h e y w o u l d continue t o l o o k at the d e b t and see h o w h i g h i t rose.
Senator MCCARTHY. I f we were to do this, we w o u l d have b o t h the
income and the debt considered a t the same t i m e , w h i c h m i g h t b e
helpful?
Secretary DILLON. I t could be.
Senator MCCARTHY. I have no other questions.
T h e CHAIRMAN. Senator K e r r ?
Senator KERR. M r . Secretary, I w a n t t o t a l k t o y o u a l i t t l e b i t
a b o u t the gold. Reference was made here t o a r e q u i r e m e n t of the
l a w t h a t we have a certain a m o u n t of gold back of our currency.
W i l l y o u advise the c o m m i t t e e as t o j u s t w h a t the l a w is i n t h a t
regard?
Secretary DILLON. T h e l a w provides t h a t a 25-percent reserve shall
be k e p t b e h i n d our currency a n d our deposits i n the Federal Reserve
System.
Senator KERR. NOW, the deposits i n the Federal Reserve System
were made b y the member banks?
Secretary DILLON. T h a t is r i g h t .
Senator KERR. A n d b y the U.S. Government?
Secretary DILLON. A s m a l l a m o u n t o n l y b y the U.S. G o v e r n m e n t ,
because we o n l y keep our active w o r k i n g balances there.
T h e b u l k o f our w o r k i n g balances are k e p t i n the regular banks.
Senator KERR. C o m m e r c i a l banks?
Secretary DILLON. C o m m e r c i a l banks.
Senator KERR. HOW m u c h currency is there outstanding?
Secretary DILLON. I d o n o t have the exact figure.
Something
over $30 b i l l i o n , a b o u t $33 b i l l i o n , i n circulation.
Senator KERR. M a y b e one of y o u r experts o r technicians there
c o u l d t e l l us.
Secretary DILLON. T h e second half of M a y showed $29.9 b i l l i o n of
currency i n o u r m o n e y supply.
DEBT CEILING
11
Senator KERR. W h a t were the deposits i n the Federal Reserve
System?
Secretary DILLON. Deposits i n the Federal Reserve System a t the
end of M a y , was $16.5 b i l l i o n .
Senator KERR. Deposits?
Secretary DILLON. T h a t is r i g h t .
Senator KERR. HOW m a n y ways can a deposit b y a m e m b e r b a n k
i n a Federal Reserve b a n k become a r e a l i t y ?
Secretary DILLON. HOW can the deposit
Senator KERR. HOW m a n y ways can a m e m b e r b a n k m a k e a deposit i n the Federal Reserve?
Secretary DILLON. I do n o t q u i t e u n d e r s t a n d w h a t t h a t question is.
Senator KERR. W e l l , i f t h e y t o o k $1 m i l l i o n i n currency d o w n there,
t h e y could m a k e a deposit?
Secretary DILLON. T h a t is r i g h t , t h a t is one w a y .
Senator KERR. NOW, w h a t other w a y can t h e y m a k e a deposit?
Secretary DILLON. W e l l , t h e y could transfer their surpluses w h i c h
t h e y m a y receive f r o m another b a n k t o the Federal Reserve a n d m a k e
a deposit.
Senator KERR. W h a t do y o u mean, " t h e i r surpluses t h a t t h e y m a y
receive f r o m another b a n k " ?
L e t us say t h a t t h e F i r s t N a t i o n a l C i t y B a n k of N e w Y o r k has
w h a t , $4 b i l l i o n , $5 b i l l i o n , $6 b i l l i o n of deposits, $2 b i l l i o n deposits
of t h e banks i n t h e N a t i o n .
W h a t do the banks i n t h e N a t i o n do i n order t o get t h a t credit i n
t h e F i r s t N a t i o n a l C i t y B a n k or any other depository i n a financial
center?
Secretary DILLON. T h e y transfer t h e i r funds t o t h e F i r s t N a t i o n a l
City Bank.
Senator KERR. I n w h a t f o r m are those funds?
Secretary DILLON. T h e y are generally transferred m e r e l y i n t h e
f o r m of a b o o k e n t r y , a checking account.
Senator KERR. W h a t does t h e m e m b e r b a n k send t o i t s correspondent, say, t h e F i r s t N a t i o n a l C i t y B a n k of N e w Y o r k , C h e m i c a l
C o r n , Guarantee T r u s t , o r w h a t e v e r i t m a y be, i n order t o get a
certificate of deposit so t h a t i t is i n the posture of h a v i n g funds i n
t h a t bank?
Secretary DILLON. I t receives a certificate of deposit.
Senator KERR. T h a t is w h a t the C i t y B a n k issues?
Secretary DILLON. T h a t is r i g h t .
Senator KERR. B u t w h a t does i t require as t h e basis for the issuance
of t h e certificate of deposit other t h a n currency?
Secretary DILLON. W e l l , a certificate t h a t funds have been t r a n s ferred and t h a t there are adequate reserves, t h a t t h e b a n k has adequate reserves w i t h the Federal Reserve.
Senator KERR. HOW are funds transferred there?
Secretary DILLON. T r a n s f e r r e d usually b y telegraph.
Senator KERR. B u t w h a t do t h e y transfer?
Secretary DILLON. T h e y transfer a b o o k e n t r y usually. Y o u d o n ' t
transfer a n y note, n o securities are m o v e d . T h e y are transferred
generally j u s t b y b o o k entries.
Senator KERR. IS i t n o t a c t u a l l y a check o n another b a n k t h a t i s
deposited i n t h e F i r s t N a t i o n a l C i t y B a n k i n N e w Y o r k ?
Secretary DILLON. I t m i g h t n o t be a check on another b a n k b u t
balances w i t h some b a n k t h a t t h e y w i s h t o deposit w i t h the C i t y B a n k ,
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DEBT CEILING 11
a n d t h e n t h e C i t y B a n k c o u l d d r a w on whoever t h e d r a f t was d r a w n
upon.
Senator KERR. HOW can the Riggs N a t i o n a l B a n k of W a s h i n g t o n
m a k e a deposit i n t h e F i r s t C i t y N a t i o n a l B a n k of N e w Y o r k C i t y
o t h e r t h a n b y f o r w a r d i n g a check or currency?
Secretary DILLON. T h e y c o u l d f o r w a r d a check of t h e i r o w n and
t h e y could f o r w a r d a check or the equivalent of a check f r o m another
b a n k t h a t was deposited a t the Riggs B a n k .
Senator KERR. I t w o u l d be b y check, w o u l d i t n o t ?
Secretary DILLON. I t w o u l d be b y check.
Senator KERR. W h a t is the basis of h a v i n g something i n the b a n k
t h a t enables y o u t o issue a check on it?
Secretary DILLON. T h e basis of h a v i n g s o m e t h i n g i n the bank?
Senator KERR. T h e w a y I get something i n the b a n k , I either t a k e
a check d o w n a n d p u t i t i n or I go d o w n a n d make a note a n d t h e y
give me a deposit slip.
Secretary DILLON. T h a t is r i g h t .
Senator KERR. I go d o w n a n d I m a k e a note o u t a n d t h e y give me
a deposit slip.
T h e n I w r i t e a check on another b a n k t o give me b a c k a note I
h a d made to t h e m for w h i c h t h e y h a d given me a deposit slip a n d on
w h i c h I h a d a check u n t i l i t was exhausted.
T h e n , h a v i n g received this check t h a t I gave t h e m on the b a n k
where I made m y last note, t h e y w a n t t o transfer t h a t t o t h e i r dep o s i t o r y i n N e w Y o r k . T h e y send t h a t check up there?
Secretary DILLON. T h a t is r i g h t .
Senator KERR. NOW, the b a n k f r o m w h i c h I b o r r o w e d has t o have
reserves somewhere so t h a t when t h a t b a n k is h a n d l e d b y the N e w
Y o r k C i t y b a n k , t h e y get something for i t .
Secretary DILLON. A l l m e m b e r banks are r e q u i r e d to have a certain
percentage of reserves w i t h a Federal Reserve b a n k .
Senator KERR. L e t us say the N a t i o n a l C i t y B a n k takes t h a t check
over a n d deposits i t i n the Federal Reserve b a n k .
D o t h e y t h e r e b y have such a deposit i n i t t h a t the Federal Reserve
b a n k has to have a g o l d balance of 25 cents on the dollar b a c k of i t ?
Secretary DILLON. T h a t is correct, once i t becomes a v a l i d deposit
i n the Federal Reserve b a n k .
Senator KERR. W h a t are the t o t a l deposits i n commercial banks i n
t h e U n i t e d States?
Secretary DILLON. D e m a n d deposits as of M a y 30.
Senator KERR. W h a t k i n d of deposits?
M r . BELL. D e m a n d deposits.
Senator KERR. L e t us t a k e t o t a l deposits, whether t h e y are savings
account or demand, t o t a l deposits.
Secretary DILLON. T o t a l deposits are $237 b i l l i o n .
Senator KERR. $237 billion?
Secretary DILLON. T h a t is r i g h t .
Senator KERR. IS i t possible for all the commercial banks i n the
c o u n t r y t o deposit all of t h e i r funds i n t h e Federal Reserve banks?
Secretary DILLON. T h e y do n o t do t h a t .
Senator KERR. I u n d e r s t a n d t h a t , b u t w o u l d i t be possible for t h e m
t o do t h a t ?
Secretary DILLON. I do n o t k n o w a n y t h i n g t h a t w o u l d p r e v e n t
t h e m i f t h e y w a n t e d to.
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Senator KERR. T h e n where w o u l d the Federal Reserve b a n k b e
w i t h reference t o h a v i n g 25 percent g o l d reserve b a c k of i t s deposits?
Secretary DILLON. I t w o u l d n o t have i t .
Senator KERR. W h a t w o u l d happen?
Secretary DILLON. I t w o u l d n o t be c o m p l y i n g w i t h t h e r e q u i r e m e n t
t h a t 25 percent gold reserve
Senator KERR. I u n d e r s t a n d i t w o u l d n o t be c o m p l y i n g w i t h t h e
r e q u i r e m e n t , b u t w h a t w o u l d happen?
Secretary DILLON. N o t h i n g w o u l d happen. T h e c o u n t r y w o u l d go
o n j u s t t h e same.
Senator KERR. YOU m e a n t h e heavens w o u l d n o t fall?
Secretary DILLON. NO, the heavens w o u l d n o t fall.
Senator KERR. T h e financial w o r l d w o u l d n o t come t o an end?
Secretary DILLON. NO.
Senator MCCARTHY. W e m i g h t have t o declare all gold fillings t o
be a p a r t of t h e n a t i o n a l reserve a t t h a t p o i n t t o restore confidence.
Senator KERR. W h e t h e r t h e y are i n l i v i n g or dead bodies.
Senator MCCARTHY. T h a t is r i g h t .
W e m i g h t recover
Senator KERR. C o u l d we n o t officially m a k e the t o o t h of the dead
person a recognized depository?
Senator MCCARTHY. T h e r i g h t of t h e Federal G o v e r n m e n t t o
r e c l a i m i t on death.
Senator KERR. A n d transfer t i t l e of i t t o the Federal G o v e r n m e n t .
Senator MCCARTHY. I n response t o t h e President's plea t o d o
something for t h e c o u n t r y .
S e n a t o r KERR. Y e s .
W h a t is t h e l i m i t a t i o n on the Federal Reserve b a n k a b o u t issuing
a Federal Reserve note?
Secretary DILLON. Federal Reserve notes, again, have to be covered
b y 25 percent i n gold certificates.
Senator KERR. C a n t h e y j u s t issue 400 percent o f w h a t gold
reserves t h e y have, o r do t h e y have t o have 25 percent of w h a t
certificates t h e y issue?
Secretary DILLON. T h e y have t o have 25 percent i n gold certificates
representing gold w h i c h is i n t h e T r e a s u r y gold stock b e h i n d t h e i r
certificates as w e l l as b e h i n d t h e i r deposits.
So i f we leave aside t h e deposits, t h e y are required to leave 25 percent b e h i n d currency.
Senator KERR. IS t h e f o r m u l a t h a t t h e y follow, i f there is one—
I do n o t w a n t to embarrass you, M r . Secretary. H a v e y o u got some
currency i n y o u r pocket?
S e c r e t a r y DILLON. Y e s .
Senator KERR. W o u l d y o u get i n f r o n t of y o u a $1 b i l l and t w o or
three $5 bills and t h e n one or m o r e larger ones, either of y o u r o w n or
those of y o u r associates there?
Secretary DILLON. I happen t o have a Federal Reserve $5 note,
a l t h o u g h there are other k i n d s of $5 notes.
Senator KERR. DO y o u have a $5 b i l l t h a t says i t is a Federal
Reserve note?
Secretary DILLON. T h a t is r i g h t .
Senator KERR. DO y o u have a $5 b i l l t h a t says i t is a silver certificate?
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Secretary DILLON. I do n o t happen to have one w i t h me, b u t there
are such.
Senator KERR. DO y o u have a $1 bill?
Secretary DILLON. I have a $1 b i l l t h a t is a silver certificate.
Senator KERR. NOW, w h a t other k i n d of currency do we have?
Secretary DILLON. H e r e is a $5 silver certificate someone has
loaned me.
Senator KERR. M a r k i t so t h a t t h e m a n w h o gave i t t o y o u can
get i t back.
W h a t other k i n d of currency do y o u have?
Secretary DILLON. W e l l , U.S. notes are also issued i n $5 denominations. I do n o t happen t o have one.
Senator KERR. W h a t difference is there between a $5 U.S. note
a n d a $5 Federal Reserve note except t h a t the seal on the Federal
Reserve note is green a n d the seal on the U.S. note is i n red?
Secretary DILLON. F o r purposes o f cashing i t a n d b u y i n g somet h i n g , there is no difference whatsoever. B u t as a c l a i m i t is t r e a t e d
somewhat d i f f e r e n t l y . T h e U.S. note is l i s t e d as p a r t of o u r Federal
d e b t , o n l y i t is p a r t o f the debt w h i c h is n o t subject t o the l i m i t .
Senator KERR. HOW m u c h currency is there o u t s t a n d i n g t h a t is
designated U.S. notes?
Secretary DILLON. I t h i n k there are a b o u t $300 m i l l i o n , s o m e t h i n g
of t h a t order.
Senator KERR. I t h o u g h t i t was a b o u t $340 m i l l i o n .
Secretary DILLON. $314 m i l l i o n , i n circulation.
Senator KERR. $314 m i l l i o n .
C o u l d y o u t e l l the c o m m i t t e e when those notes were first issued?
Secretary DILLON. AS I recall, i t was s h o r t l y after the C i v i l W a r
o r d u r i n g the C i v i l W a r .
Senator KERR. D u r i n g a n d after the C i v i l W a r ?
Secretary DILLON. Yes.
Senator KERR. T h a t is m y recollection.
I s the fact t h a t L i n c o l n ' s p i c t u r e — i t is on all $5 b i l l s ; is i t n o t ?
Secretary DILLON. T h a t is correct.
Senator KERR. IS the reason for i t t h a t he is the fellow t h a t issued
those $5 U.S. notes?
Secretary DILLON. I a m n o t sure whether t h a t was the reason his
p i c t u r e is on i t . I a m n o t even sure i t has always been on the $5
note, b u t i t is c e r t a i n l y there.
Senator KERR. H e was the fellow
Secretary DILLON. T h a t is w h e n t h e y s t a r t e d i t .
Senator KERR (continuing). T h a t issued i t .
W e l l , w h a t is the c o m m i t m e n t contained i n the language on the
$5 Federal Reserve note?
Secretary DILLON. T h e $5 Federal Reserve note, i t says " w i l l p a y
t o the b e a r e r . "
Senator KERR. I t says w h o w i l l ?
Secretary DILLON. T h e U n i t e d States of A m e r i c a .
Senator KERR. W i l l w h a t ?
Secretary DILLON. W i l l p a y to the bearer on d e m a n d $5.
Senator KERR. Where w o u l d y o u take t h a t i f y o u w a n t e d t o
d e m a n d $5?
Secretary DILLON. I w o u l d take i t t o either the Federal Reserve
b a n k , as an agent, or I w o u l d take i t t o the U.S. T r e a s u r y .
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Senator KERR. Suppose I came d o w n there w i t h one a n d said, " I
d e m a n d $ 5 . " W h a t w o u l d y o u give me?
Secretary DILLON. I w o u l d ask y o u i n w h a t f o r m y o u w a n t e d
y o u r $5.
Senator KERR. Suppose I said i n a n y f o r m y o u c o u l d give i t t o me.
Secretary DILLON. I w o u l d give y o u five $1 bills or another $5 b i l l
o r silver.
Senator KERR. HOW m a n y $1 bills are there outstanding? H o w
m u c h currency is there o u t s t a n d i n g t h a t is called silver certificates?
Secretary DILLON. V i r t u a l l y all the $1 bills are silver certificates,
a n d a t the end of M a r c h there were $1,484 m i l l i o n o u t s t a n d i n g .
Senator KERR. Of $1 bills, or of silver certificates?
Secretary DILLON. T h e y are the same t h i n g .
Senator KERR. N o t necessarily. T h e r e are $5 silver certificates.
Secretary DILLON. Oh, $1 bills are also certificates. T h e t o t a l
silver certificates, the t o t a l o u t s t a n d i n g is $2.3 b i l l i o n .
Senator KERR. Silver certificates?
S e c r e t a r y DILLON. Y e s .
Senator KERR. NOW, w h a t does t h e silver certificate say?
Secretary DILLON. T h e silver certificate says:
This certifies there is on deposit i n the Treasury of the U n i t e d States of America
$1 i n silver payable t o the bearer on demand.
Senator KERR. B u t there is o n l y $2.4 b i l l i o n o f t h a t outstanding?
Secretary DILLON. T h a t is the t o t a l o u t s t a n d i n g silver certificates,
yes.
Senator KERR. Suppose a m a n b r o u g h t
Secretary DILLON. T h a t is n o t a l l i n c i r c u l a t i o n . I n c i r c u l a t i o n
there a c t u a l l y is o n l y a b o u t $1.9 b i l l i o n .
Senator KERR. $1.9 b i l l i o n .
Well, suppose a fellow b r o u g h t d o w n $3 b i l l i o n w o r t h o f Federal
Reserve notes, each one of w h i c h said, " T h e U n i t e d States of A m e r i c a
w i l l p a y t h e bearer on d e m a n d so m a n y d o l l a r s / ' a n d he brings d o w n
$3 b i l l i o n of i t a n d says, " I w a n t m y $3 b i l l i o n . "
W h a t w o u l d y o u give h i m ?
Secretary DILLON. W e l l , we c o u l d give h i m o n l y t h e silver certificates t h a t were on h a n d , t h a t were n o t already o u t s t a n d i n g .
Senator KERR. YOU could n o t give h i m a n y silver certificates except
those such as y o u had?
Secretary DILLON. T h a t is r i g h t .
T h e rest of t h e m y o u w o u l d j u s t give h i m b a c k another Federal
Reserve note.
Senator KERR. NOW, w h a t is t h e difference i n language o n —
h o w m u c h d i d y o u s a y t h e o u t s t a n d i n g d e b t is?
Secretary DILLON. T h e total?
Senator KERR. T h e t o t a l p u b l i c debt.
Secretary DILLON. T h e t o t a l p u b l i c debt as of the latest published
figure is about $299 b i l l i o n .
Senator KERR. HOW m u c h cash on hand?
Secretary DILLON. HOW m u c h cash?
Senator KERR. Cash.
Secretary DILLON. T h e o n l y cash t h a t is i n c l u d e d i n t h a t figure
w o u l d be these U.S. notes, w h i c h are $300 m i l l i o n .
Senator KERR. NO, no, he said h o w m u c h d i d y o u have i n the
Treasury.
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Secretary
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DILLON.
Oh, h o w m u c h is our cash balance i n the Treas-
S e n a t o r KERR. Y e s .
Secretary DILLON. I t h i n k i t is about $9 b i l l i o n .
Senator KERR. SO y o u have about $11 b i l l i o n leeway as of t o d a y ?
Secretary DILLON. Yes.
W e have j u s t received a b o u t $5 b i l l i o n i n taxes i n the last week,
a n d t h a t is the reason our balance is so high.
Senator KERR. NOW, t h a t $299 b i l l i o n of indebtedness is i n w h a t
form?
Secretary DILLON. T h a t is i n various forms.
I t is i n w h a t we call T r e a s u r y bills. T r e a s u r y certificates, T r e a s u r y
notes, a n d T r e a s u r y bonds.
Senator KERR. IS there any difference i n the language evidencing
the debt?
W h a t does each one of t h e m say?
Secretary DILLON. T h e U n i t e d States w i l l p a y to the bearer
Senator KERR. O n a certain date?
Secretary DILLON. O n a certain date w h a t e v e r the a m o u n t m a y be,
a n d t h e n i f i t is a coupon b o n d , there w o u l d be coupons f o r interest;
if i t is a discount certificate, i t j u s t w o u l d say the face a m o u n t t h a t
w o u l d be payable on a certain day.
Senator KERR. T h e n we have o u t s t a n d i n g $30-some b i l l i o n i n
currency; we have $200 a n d h o w m a n y b i l l i o n i n commercial b a n k
deposits?
Secretary DILLON. T h a t figure, I t h i n k , was $220 or $237 b i l l i o n ?
Senator KERR. T h a t makes a t o t a l of $267 b i l l i o n , a n d we have
a p p r o x i m a t e l y $300 b i l l i o n i n p u b l i c debt.
Secretary DILLON. T h a t is r i g h t .
Senator KERR. E a c h one of w h i c h is a signed s t a t e m e n t b y a
representative of the U.S. G o v e r n m e n t t h a t the U.S. G o v e r n m e n t ,
the G o v e r n m e n t of the U n i t e d States w i l l p a y t o the bearer on such
a n d such a date these numbers of dollars?
Secretary DILLON. T h e whole p u b l i c debt says t h a t , yes.
Senator KERR. SO t h a t $237, $267 and $300, t h a t is $567 billion?
Secretary DILLON. T h a t is r i g h t .
Senator KERR. YOU said a while ago i t was e n t i r e l y possible t h a t
the $237 b i l l i o n could be deposited i n the Federal Reserve System?
Secretary DILLON. I cannot q u i t e conceive h o w t h a t w o u l d be done,
because, o r d i n a r i l y , a b a n k w o u l d deposit currency or m a k e a check
deposit i n the Federal Reserve System w h i c h w o u l d t h e n credit t h a t
b a n k a n d d e b i t the other b a n k .
Senator KERR. B u t if there is t h a t m u c h deposits a n d i f a b a n k can
p u t a n y a m o u n t of its m o n e y i n the Federal Reserve B a n k , i t is
p h y s i c a l l y possible for t h a t all t o be deposited?
Secretary DILLON. T h e n i t w o u l d be the depository, I suppose, f o r
all the deposits i n the c o u n t r y , and all the banks w o u l d have those
claims on the Federal Reserve.
Senator KERR. T h a t is r i g h t .
So then, i n a c t u a l i t y , there is $667 b i l l i o n w h i c h are either promises
of the U.S. G o v e r n m e n t to p a y dollars
Secretary DILLON. 567, yes.
Senator KERR. 567, either promises of t h e Federal G o v e r n m e n t t o
p a y dollars or t h e o r e t i c a l l y deposits i n the Federal Reserve B a n k .
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N o w , w o u l d i t be possible for e v e r y b o d y t h a t owns G o v e r n m e n t
bonds, w h e n t h e y come t o y o u , t o say, "X d o n ' t w a n t a new b o n d ;
I j u s t w a n t the dollars"?
Secretary DILLON. T h a t is p e r f e c t l y possible.
Senator KERB. A n d i f such should develop t o be the s i t u a t i o n , a n d
the T r e a s u r y could n o t sell a n y more bonds, w h a t w o u l d y o u do?
Secretary DILLON. W e l l , i f t h a t was the case, the o n l y w a y y o u
c o u l d handle the m a t t e r w o u l d be t o p a y the bonds off i n currency.
Senator KERR. NOW, where w o u l d y o u get it?
Secretary DILLON. YOU w o u l d have to p r i n t i t .
Senator KERR. Does n o t all this a d d u p t o the definite r e a l i t y t h a t
the business of h a v i n g so m u c h gold b a c k of our currency is Federal
Reserve deposits is a pure m y t h ?
Secretary DILLON. I t does n o t have a n y effect on domestic credit a t
the m o m e n t a t all. T h a t was the t h e o r y , b u t i t has n o t w o r k e d i n t h a t
w a y because i t could n o t w o r k . As y o u say, every t i m e we have
approached t h a t s i t u a t i o n , we have h a d t o lower the l i m i t , w h i c h
Congress has done a n u m b e r of times, f r o m 40 percent d o w n t o 25
percent. T h e y w o u l d have to do i t again, because i t w o u l d be t o t a l l y
i m p r a c t i c a l , i f y o u got t o t h a t s i t u a t i o n , t o t r y t o enforce the l i m i t .
So, to t h a t extent, the fact t h a t t h a t l i m i t w o u l d have a n y real effect
on our economy domestically is inconceivable, a n d i t w o u l d be a m y t h .
Senator KERR. W h a t is the t o t a l p u b l i c a n d p r i v a t e debt?
Secretary DILLON. T h e latest figures we have are $1,073 b i l l i o n .
Senator KERR. $1,073 t r i l l i o n ?
Secretary DILLON. $1,073 t r i l l i o n , excuse me.
Senator KERR. HOW m u c h credit can the Federal Reserve banks
create?
Secretary DILLON. T h e b a n k i n g system can create credit, based o n
the Reserve regulations o f the Federal Reserve System, i n v a r y i n g
amounts depending on the a m o u n t of reserves t h e y have t o k e e p — b u t
the general r u l e - o f - t h u m b is $6 f o r every $1.
Senator KERR. Of deposits?
S e c r e t a r y DILLON. Y e s .
Senator KERR. B u t a deposit can be created i f the Federal Reserve
so accepts i t a n d the member b a n k so desires i t b y the discounting b y
the member b a n k of the notes of its customer?
Secretary DILLON. T h a t is correct.
Senator KERR. T h e n is i t n o t a f a c t t h a t under t h e present system
t h a t there is no l i m i t to t h e p u b l i c a n d p r i v a t e d e b t t h a t can be created
a n d h a n d l e d t h r o u g h the Federal Reserve System?
Secretary DILLON. NO legal l i m i t , no, no real l i m i t .
Senator KERR. A n d since w h a t e v e r a m o u n t of debt is created,
t h e o r e t i c a l l y , a v e r y great p r o p o r t i o n of i t could, t h r o u g h the w o r k i n g
of our system of b a n k credit a n d m e m b e r b a n k relationship t o the
Federal Reserve B o a r d , become a deposit i n t h e Federal Reserve b a n k .
T h i s business of t a l k i n g a b o u t h a v i n g gold b a c k of our currency
i n deposits i n the Federal Reserve b a n k is a relic of another age w h e n
we h a d a l i m i t e d economy a n d a l i m i t e d s t r u c t u r e of credit, a n d t h a t
aside f r o m t h e psychological elements i n v o l v e d , t h e t h e o r y of gold b a c k
of the currency i n t h e Federal Reserve deposits is a m y t h a n d a relic
of a p e r i o d t h a t is no p a r t of t h i s day a n d t h i s economy.
Secretary DILLON. I t h i n k t h a t is p e r f e c t l y true, as I t h i n k I said
earlier i n answer to some questions f r o m another member of the com-
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DEBT CEILING 11
m i t t e e , t h a t the real purpose of gold i n the w o r l d t o d a y is t o balance
i n t e r n a t i o n a l accounts, a n d t h a t is the o n l y real use i t has.
N o other c o u n t r y i n t h e w o r l d tries to or has a similar p r o v i s i o n of
l a w as ours t h a t there should be a
Senator KERR. T h e p r i m a r y f u n c t i o n of o u r gold, then, is t o m a i n t a i n t h e c o n v e r t i b i l i t y of t h e dollar?
Secretary DILLON. T h a t is the purpose of our gold reserve.
Senator KERR. T h e Senator f r o m O k l a h o m a was a m o n g those o n
t h e Finance C o m m i t t e e w h o i n 1957 a n d 1958 saw t h e s i t u a t i o n develo p i n g where i t was p e r f e c t l y apparent t h a t our so-called gold reserve
was m e l t i n g a n d m o v i n g f r o m t h e s i t u a t i o n where we owned gold
b e y o n d w h a t our requirements were for reserve b a c k of our c u r r e n c y
a n d o u r Federal Reserve deposits t o meet t h e l e g i t i m a t e claims o f
foreign central banks o w n i n g dollars.
I t was p e r f e c t l y apparent i n 1957 a n d 1958 t h a t t h e t r e n d o f t h e
times was such t h a t t h e d a y was n o t far d i s t a n t , unless t h e c i r c u m stances were changed, t h a t there w o u l d be m o r e claims against gold
t h a n there was gold i n this c o u n t r y t o meet t h e m i f e v e r y b o d y came
a n d asked for i t .
T h a t has arrived.
Secretary DILLON. T h a t is correct.
Senator KERR. I w a n t t o congratulate t h e T r e a s u r y u p o n t h e
efforts i t is m a k i n g t o restore a balance or e q u i l i b r i u m i n t h e balance
of p a y m e n t s .
I believe t h a t t h e o n l y question t h e Senator f r o m O k l a h o m a h a d
t o ask t h e Secretary o f t h e T r e a s u r y w h e n he was before us for confirmation,
m a y b e t w o questions, was w h e t h e r or n o t a balance o r an
e q u i l i b r i u m could be restored i n t h e balance o f p a y m e n t s , a n d t h e
Secretary said i t could, a n d I asked t h e Secretary i f i t was his fixed
purpose a n d t h a t of this a d m i n i s t r a t i o n t o b r i n g t h a t c o n d i t i o n a b o u t
as q u i c k l y as i t could be, w i t h o u t d i s r u p t i n g t h e domestic economy,
a n d t h e foreign relations, a n d t h e trade a n d commerce of t h e c o u n t r y ,
a n d he said t h a t i t was.
A n d I w a n t t o congratulate h i m o n t h e f a c t t h a t t h a t was his
p o s i t i o n t h e n a n d t h a t he has been m o v i n g i n t h a t direction, a n d I
a m of t h e o p i n i o n t h a t t h a t is s t i l l the fixed purpose of t h e Secretary
and the administration.
Secretary DILLON. T h a t is s t i l l the fixed purpose of t h e a d m i n i s t r a t i o n , a n d we are c o n t i n u a l l y m a k i n g progress i n t h a t direction.
T h e u n d e r l y i n g s i t u a t i o n i n our balance of p a y m e n t s continues t o
improve.
Senator KERR. I w o u l d say t h a t p r o b a b l y no m a t t e r h o w h a r d y o u
are w o r k i n g i n t h a t d i r e c t i o n n o w , y o u are n o t w o r k i n g a n y h a r d e r
t h a n t h e a d m i n i s t r a t i o n was 10 years ago t o handle its balance o f
p a y m e n t s so t h a t our a m o u n t of gold w o u l d decrease and t h a t of other
countries increase t o close t h e so-called dollar gap.
Secretary DILLON. I t h i n k t h a t w o r k of theirs was p r o b a b l y a l i t t l e
easier t h a n o u r present j o b .
Senator KERR. W e l l , t h e y succeeded i n closing i t a n d got u p such
m o m e n t u m i n d o i n g i t t h a t w h e n a l o t of people w o k e up, the stream
of gold i n t h e t r a d e a n d commerce of the w o r l d i n m a i n t a i n i n g conv e r t i b i l i t y of t h e dollar was such t h a t , instead of h a v i n g a dollar gap,
w e h a d a dollar deficit.
Secretary DILLON. T h a t is r i g h t .
11
DEBT CEILING
Senator KERR. I hope we w i l l be as successful i n restoring i t as we
were i n e l i m i n a t i n g the gap.
Secretary DILLON. SO do I .
I a m sure we w i l l be.
Senator KERR. T h a n k y o u v e r y m u c h , M r . Secretary. Y o u have
been v e r y k i n d , v e r y p a t i e n t , a n d v e r y i n f o r m a t i v e — b o t h y o u a n d
t h e D i r e c t o r of the B u d g e t .
T h e c h a i r m a n asked me t o announce t h a t the c o m m i t t e e w o u l d
meet i n t h e m o r n i n g at 10 o'clock.
(Whereupon, at 3:55 p.m., t h e hearing was a d j o u r n e d , t o reconvene
a t 10 a.m., Wednesday, June 27, 1962.)
O
@FedFRASER