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TREASURY DEPARTMENT
Statement of Secretary Dillon
before the
Senate Treasury Subcommittee on Appropriations
on the Treasury Department Appropriation Bill
for the Fiscal Year 1964
Mr. Chairman and Members of the Treasury Subcommittee on Appropriation
It is a pleasure to appear again before you in connection with the
Treasury Department appropriation request for fiscal year 1964. In the
bill under consideration, H. R. 5366, the House provided $1,095,910,000
of our request for $1,153,230,000. This is a reduction of $57,320,000
below the budget estimates. The largest reductions are in the Internal
Revenue Service, U. S. Coast Guard, Bureau of Customs, and Bureau of
Engraving and Printing. Reductions in these four bureaus account for
94 percent of the total reduction.
As soon as the House completed action on the bill, the Treasury
bureaus reviewed carefully the effects of the House reductions. After
reviewing the analyses of these effects, I sent a letter to the Chairman
of the Subcommittee on April 9, 1963, outlinIng my reactions to the House
Bill and requesting restoration of certain appropriations. Since that letter
focuses on the main issues to be considered in this hearing, I would like
to offer it for the record at this point.
I would like to confine my remarks today to a brief summary of the
situation involved in each of the reductions which we are appealing and give
the Committee the opportunity to question the bureau chiefs in such further
detail as it may' desire. To supplement my remarks before this Committee,
I have a copy of the statement I gave to the House CommIttee which provides
a comprehensive review of the budgetary program in each of the Treasury
bureaus. I will leave the statement with the Committee In case you wish
to have it inserted in the record of these hearings.
REQUEST FOR RESTORATION
We are requesting restoration of $43,761,500 of the House reduction
of $57,320,000. Attached to this statement is a table which reflects the
comparison between
the House Bill for 1964. I indicated in my letter to you of last week that
we are not appealing many of the reductions. Generally, these reductions
reflected absorption of a portion of the Pay Act costs. We will do our
best to work out necessary program adjustments in order to live within
the amounts in the H1use Bill. However, a great deal of the workload
in some of our bureaus is generated outside the Department.
In the
event that these workloads increase significantly and we are unable to
keep abreast, we will have no alternative but to come back for a supplemen
request for additional fundf
I would like to discuss now the specific areas which are most
seriously affected by the House action. I will take them up in the ::>rder
listed in my letter to the Chairman.
INTERNAL REVENUE SERVICE:
The House Bill provides $546 million for the Internal Revenue
Service whir.h is a reduction of $32. 3 million from the $578.3 million
requested in the 1964 BJdget. We are requesting restoration of $30 million
of the reduction.
The $578.3 million budget estimate for' 1964 reflected an increase
of $74.3 million over the 1963 appropriation and pending supplemental.
$19.1 million of the increase was for full-year costs of Public Law 87-793
which raised pay and postal rates. $55.2 million and 3, 700 man-years
were requested to (1) sustain operations of the current staff including the
full year cost of Fiscal Year 1963 activities; (2) improve collection of
delinquent accounts and returns; (3) maintain the current level of audit
in the face of an expected two million additio!1.al tax returns; and (4)
to continue, though at a slower pace than previously planned, the conversion
to an Integrated automatic data processing system. The data proceSSing
bund-up required 1,000 of the new man-years.
The House cut of $32.3 million, if sustained, would have a most
undesirable impact on the Revenue Service. Current review, however,
indicates that a small reduction can be absorbed.
In relation to the amounts collected, the cost of revenue collection
in this country is already the lowest in the world. Nevertheless, emphasis
throughout the Internal
R~venue
Service continues to be placed on maximum
effectiveness at least cost. In considering the budget request for 1964,
and the House action on it, the following evidences of efficient and
economical operations should be borne in mind: (1) As the President
stated In his Budget Message, the Service was commended for its ''wide
range of efficiency gains which translate into fiscal year 1963 savings of
about $4.2 mUllon"; (2) Estimated first year savings from Revenue
Service employee suggestions in 1962 amounted to $1,400,000; (3) In the
spring of 1962 the Service conducted a "belt-tightening" operation and
diverted 280 man-years, worth $2.5 million from regional and National
Office managerial and service operations into direct field operations;
(4) The 1964 budget request was predicated on the basis that there would
be no staff increases to raise the level of enforcement in 1964; considerably
fewer man-year increases than had been estimated in the Long Range Plan
which had forecast Significant increase, to keep up with the growing taxpayer
population at current enforcement levels; and deferring for one year some
of the ADP Master File conversion previously scheduled for 1964;
(5) Subsequent to the House hearings on this budget and in consideration
of the House enjOinder for the Service to monitor carefully and restrict to
an absolute minimum current staff maintenance cost increases, we have
again reviewed the estimates for these expenses and propose to apply
$1,225,000 of the House cut against the items of grade structure changes,
- 4-
travel for the field force and automobile replacement. These items are
not being appealed.
These measures have been cited to emphasize that the Service has
made, and continues to exert, strenous efforts to conduct its operations
with the utmost economy. The efforts of the Service to improve voluntary
compliance, to strengthen enforcement through the Master File ADP system,
and to reduce costs wherever possible, will continue to keep down the cost
of revenue collection.
We have given automation of data processing highest priority in
our planning for the past several years because of the promise it gives of
meeting the problems and workloads of revenue collection of the present
and projected growth.
The House Committee has stated with regard to the master file
automatic data processing system "that valuable experience to be gained
from the ADP installation in Atlanta, Georgia, and Martinsburg, West
Virginia, will not be fully realized unless the plan is extended and the
other planned service centers are phased in on a more reasonable
schedule. "
As suggested by the House Committee last year, the 1964 budget
request for ADP already represents a slOW-down in conversion to the
Master File system. Individual Master File processing at Philadelphia
and Business Master File processing at Kansas City and Lawrence,
Massachusetts, have been delayed one year (dropped from January 1964
to January 1965).
In addition, we have postponed final deciSion on two Regional
Service Centers originally budgeted for activation in January 1964, and
funds for them are not now included in the request before you. There
was $1. 0 million
was $1. 0 milllon involved for these centers, and this amount has been
applied against a portion of the House cut and is not being appealed.
At the Cincinnati and Dallas Regional Service Centers being
activated under Congressional authority this year, the processing of
busine~s
returns is scheduled to begin in January 1964, at which time
we will have had two years of experience in Atlanta and one year of
experience in Philadelphia.
The cost of delaying action, placing these Centers on a "stand-by"
basiS, would considerably reduce the contemplated savings and would be
money expended without gain.
At this point it is appropriate to consider the House Committee
statement "that the use of the high speed automatic data ·processing
equipment should show some positive reductions in the number of personnel
required for operation of the program. "
If the workload of the Service were static and being performed
entirely by manual methods, certainly the conversion of this work to
automatic data processing machines would save personnel.
The Service has been using automatic data processing machines
for some years in three Area Service Centers for certain returns
processing and mathematical verification purposes, plus preparation of
reports, payrolls, and statistics of income data. Much of the personnel
saving to be achieved by mechanizing these processes has already occurred.
Moreover, the workload of the Service is not static, nor is all the
~ork
being done that should be done even on the present workload. It is
estimated that there will be a two million increase in tax returns flIed
in 1964 over 1963. Mathematical verifications will increase by 586,000
and refunds by nearly 400,000; and information documents to be processed
will increase by about
- 6will increase by about 20 million. In addition to this growth in workload,
resulting from an increase in the number of taxpayers and the growth of
our national economy, there is to be considered the work not previously
done that should be done and that the machines and the integrated Master
File system now make possible. It should be emphasized that the Service
is not installing the Master File ADP system primarily to save personnel
(except in manual clerical operations now being mechanized). This system
is being installed primarily to improve tax administration and insure the
saIety of the financial structure of the Government. ADP systems provide
a valuable tool In the development of leads for further enforcement actions.
Development of additional leads results In a need for additional personnel
in the enforcement activities.
What the Service is now doing is converting to a Master File ADP
system which will strengthen tax administration and enforcement and
produce specific benefits not attainable in any other way. Under this
system, Regional Service Centers will establish and maintain Master
Files for each taxpayer in each region. These regional Master Files
will be integrated through a consolidated Master File (a single account
for each taxpayer In the nation), established and maintained at the National
Computer Center in Martinsburg, West Virginia.
Through the Master File system and the maintenance of a complete
consolidated account and current tax status for every taxpayer, the
Service will be able to: (a) reduce the possibility of erroneous refund
payments; (b) identify possible non-filers for investigation; and (c) verify
tax return data against information documents.
In short, the Service
In short, the Service will be able to do more work anci work which
it deems essential to be
do~e
to improve compliance and narrow the gap
between taxes that should be paid and taxes that 3 re paid.
In the face of these facts, it is evident that manpower savings to
cover the House cut will not be generated by the Master File ADP system.
It is also evident that it would be most unwise for the Service to delay
still further its conversion to the Master File ADP system and forego the
obvious and substantial benefits to be achieved. I, therefore, believe it
to be of utmost importance to proceed with this conversion on the already
slowed-down basis represented in the revised 1964 budget request.
The only way that the Service could continue with the conversion to
the Master File ADP system even with the slow-down contained in the
original request, and with the further reduction proposed by the House,
would be to delete all increases which had been requested for the purpose
of staying even with growing workload for 1964. Because the funds allowed
by the House will produce only a total 358
man~years
and over 900 are
required for ADP, it will be necessary, if the House cut stands, to reduce
1963 staff levels by 600 man-years and $4,009,000.
We therefore appeal for restoration of $30 million of the $32. 3 million
reduction effected by the House in the 1964 budget request. This will provide
for the followIng:
M. Y.
1. For the unfunded portion of ADP
(which otherwise could be funded
only by decreasing enforcement
and related staff below the 1963
level)
124
2. For other returns proceSSing
3. For Delinquent Accts. & Rets.
661
4. For audit of tax returns
1,657
5. For other enforcement and
related functions
263
Total restoration requested
2,705
Dollars
$ 4,009,000
1,544,000
5,836,000
15,476,000
3,135,000
$30,000,000
UNITED STATES COAST GUARD:
The House Bill recommends reductions in Coast Guard appropriations totaling $12. 1 million of which $8.95 million is being appealed.
Operating Expenses
The House Report indicates that the entire program has been
increasing too rapidly and recommends a cut of $3. 1 million and further
directs that $877,000 of the pay increases and related costs should be
absorbed by reducing programs which have been proposed for expansion.
The Coast Guard increases for Operating Expenses in 1964 may be
divided into three basic portions: (a) increased costs of new legislation;
(b) operating the facilities in 1964 which were constructed or procured
(with the approval of Congress) in prior years' appropriations for
Acquisition, Construction and Improvements; and (c) program increases
totaling $5.5 million. By necessity, we must.look to the last area as the
place where most of the $3.1 million reduction would be taken, if the
House action stands.
Of the $5.5 mUllon, almost $2.0 million is for costs which result
from an increase in the number of expirations of enlistments in 1964 and
from the operation of a Loran chain for the second half of fiscal 1964
which is now under construction, with Department of Defense funds. These
costs must be met without administrative discretion. Therefore, the
reduction of $3. 1 million, if the House action stands, will of necessity
be met by eliminating the increases for maintenance ($1. 9 million increase
was requested) and military readiness program. The condition of the
Coast Guard physical facilities is the most serious problem facing the
Service today. Until we can have enough funds in our capital appropriation
sufficient to provide for an orderly replacement of our capital faCilities,
we are faced
we are faced by the existing situation of having to maintain facilities
in a deteriorating condition at a high cost.
The cost of repairing our
existing facilities has outgrown the availability of funds until we have
today a backlog of many millions of dollars of repairs, and replacement
of equipment and small boats.
The remaIning programs (with increases totaling about $1. 6 mllUOJ
would permit a higher degree of military readiness, a modest program of
oceanography, improved service to the maritime industry through the
elimination of delays in program of vessel plan review and approval, and
more prompt disposition of
incr~ased
workloads in contract administration,
motor boat casualty investigation, and nuclear affairs.
As to military readiness, the program for 1964 would permit the
operation of secure communications equipment on a portion of our major
cutters and 22 principal communication centers ashore. The recent Cuban
quarantine action demonstrated the need for this type of equipment if the
Coast Guard is to operate effectively with the Department of Defense.
The equipment itself is being provided without charge by the Department
of Defense, while our program under Operating Expenses is for its
operation. Without this increase of $1. 2 million, the military readIness
of the Coast Guard will be seriously impaired.
I do ask your careful consideration of the restoration of the $3.1
million in operating funds for the Coast Guard.
AcquiSition, Construction and Improvements
Reductions by the House amounted to $9 million out of a total
request of $60 million.
Application of the House reduction would reqUire the elimination
of certain projects, as follows: construction of a 210 foot medium
endurance cutter,
endurance cutter, $3,750,000; construction of 3 small inland tenders,
$2, 100,000; construction of third phase of air station at Boston, Massachusetts
$2,243,000; collocation of Loran stations at Sitkinak. and Spruce Cape,
Alaska, $569,000; construction of warehouse at Terminal Island, California,
$250, 000; and development of certain designs and survey plans, $88,000.
_Reduction of the vessel replacement program amounting to $5.85
million will have serious effects on current and future operational
capability and restoration of funds is requested. The aviation and shore
projects amounting to $3.15 million 'WOUld not' be ready for construction
l-
in any 'event until late in the fiscal year and can well be deferred; therefore,
we are not appealing thoslE! items.
The over-all capability of Coast Guard vessels to accompUsh their
assigned mission has been decreasing for several years. The need for
instituting a sound long-range vessel construction and improvement program
Is evidenced by the block obsolescence of Coast Guard vessels (many of
which are over 30 years of age), difficult and costly repairs, and growing
unseaworthiness of the fleet. In this regard, you are aware that I have
approved, in principle, the revised report on the requirements of Coast
.
Guard Vessels, 1962, after coordinating such approval with the Bureau of
the Budget and the Department of Defense. This program shows that a
marked acceleration in construction is necessary over the next ten years,
with a moderate step up in 1964. If the program were stretched out an
additional five years, as suggested in the House Report, more vessels
would become overage during that period. Although the full effects of a
stretch out will be studIed, it is recognized that a reduction now would only
serve to increase later requirements. In particular J a stretch out if
approved should not
-11-
120
-
v
approved should not affect the relatively modest sum requested for
fiscal 1964. Basic designs for all of the vessels scheduled for
construction in 1964 are available. Thus, the Service is capable of meeting
workload demands required by a $36 million vessel construction program
in 1964.
Failure to provide funds for the vessel program will have the effect
of deferring, possibly at higher costs, construction needed to make up
for deficiencies in replacement construction which have accumulated for
many years.· Vessels having marginal seaworthiness, increaSing obsolescence, deteriorated hulls, poor habitability, and marginal operational
capabilities will, if adequate funds are not available, have to be retained
in operation at less than desired levels of operation or decommissioned
without replacement. The latter may become necessary when the vessel
can no longer be repaired within justifi able expenditure of funds.
The proposed reduction by the H)use of $9 million would reqUire a
reduction of $5.85 million in the vessel replacement program. An adequate
vessel construction funding level is urgently required at this time.
Accordingly, it is urged that the $5.85 million be restored to the
.AcquiSition, Construction and Improvements appropriation to permit the
replacement of vessels based upon the approved vessel
repl~cement
program.
BUREAU OF CUSTOMS:
The House recommended a reduction of $4. 1 million in the $76. 1 million
~equested
by the Bureau.of Customs. The $72,000,000 approved by the House
will provide an increase of $725,000 above the amount needed to maintain
the fiscal year 1963 level of employment through fiscal year 1964, together
with related expenses. This increase will finance only about 70 percent
of the requested
of the requested increases for the Communist Propaganda Screening Progrru
($230, COO) and the Statistical Data Verification Program ($800, 000), and
provides no funds for additional manpower urgently needed to cope with
steadily increasing workload, and to strengthen Customs enforcemmt
capabilities. Under the House allQwance, Customs will be able to finance
only 89 average positions of employment above the 1963 level of operations.
Restoration of $3. 9 million of the House reduction of $4.1 million is
urgently requested.
More than 90 percent of Customs' operating expenses are for personal
services and directly related expenses such as retirement contributions,
health benefits, etc. The major portion of any reduction must come
primarily from personal servlces funds and must result in fewer employees
on the job to do the essential work facing Customs day in and day out
at every port and station throughout the country. As you know, the volume
of commerciallmports, the numbers of vessels, aircraft, automobiles,
busses, etc. and their passengers and pedestrians, all are wholly outside
administrative control. The ablllty to vary the quaUty of Customs
clearance of this merchandise,. these carriers and these persons is
limited because we must enforce the requirements not only of the Customs
laws but also of numerous other agencies. Inadequate Customs manpower
means delays in the examination of cargo, passengers, and their baggage,
and increasing backlogs of work in essential Customs operations.
An inter-departmental group under the direction of the Administrative
Secretary of the Treasury has just begun a complete study of the
roles and missions of the Bureau of Customs, This group expects
to report their findlngs to me in December, 1963.
The 1964 estimate
The 1964 estimate of $76,100,000 represented an increase of
$11,325,000 over the regular 1963 appropriation of $64,775,000. The
components of the increase, exclusive of minor reductions, follow:
L
Increase outside administrative control: ($6, 715, 000)
These increases, the major portion of which are pay increase
-
costs, are essential if the 1963 level of operations is to be maintained
through 1964. It would not be logical to increase the number of positions
at a given location without first providing funds to finance those
positions already allocated. In short, the present or 1963 staff must
be funded before any increases are financed. The funds approved
by the House have, therefore, been applied first to these costs which
are outside administrative control.
2. Increases made necessary by new
legislation~
($1, 800, 000)
a. Communist Propaganda Screening Program {$230, 000)
Section 305 of Public Law 87-793 requires this Department to
determine which mail matter, except sealed letters, is "Communist
political propaganda, " as defined in the Act. The Postmaster General
then detains or releases such material as provided for in the Act.
This legislation became effective January 7, 1963. It has been
necessary to establish screening units at nine major postal ports
. of first receipt.
The increase approved by the House, after provision
,
is made for costs beyond administrative control described above,
will finance only about 70 percent or 26 out of the average pOSitions
required and approved by the House for this item. Restoration of
$68, 000 is requested.
b.Rental of Space at Airports ($1, 570,000)
Public Law 87-255, approved September 20, 1961, authorized
the appropriation of funds to the four United States inspectional
agencies--Customs, Immigration, Public Health, and the Agricultural
Research Service- -for the payment of rental for space occupied
by these agencies at public airports. Such space has heretofore
been provided free of charge. Restoration of the reduction of
t'
this item, totaling $1,570,000, is requested in two parts. First,
as indicated in testimony before the House Committee, funds for a
Customs office at Newark, New Jersey, were included in the airport
rental item simply because the office is to be located at the airport.
The present office is in downtown Newark, is very inadequate and
poorly located since substantlally all of the Customs business is
conducted .at or in the vicinity of the airport. The amount needed
\
for this project is $55,000. We also propose to rent space for
Uquidators at Honolulu, Boston, and Chicago at an estimated 1964
cost of $15,000. This type of space Is not for inspectional purposes
(for which free space is now being provided), but is for a function
normally carried on in Government-owned or leased space. SImilar
space at New York and Los Angeles airports is currently leased by
the Government. AssIgnment of liquidators to airports provides
additional manpower to meet peak baggage inspectional workloads,
while also accomplishing essential work during non- peak periods.
The remaining $1. 5 mUllon is requested for rental of space occupied
by Customs InspecUonal activities at more than 100 airports, great
and small, throughout the United States. This request is part of a
four agency project involving the Immigration and Naturalization
Service (Justice), the Public Health Service (Health, Education and
Welfare), and the Agricultural
Researc~
Service (Agriculture), as
well as the Bureau of Customs in Treasury.
Mos t airport operators
Most airport operators are of the opinion that this law entitles
them to rent for space now provided to the Government free of
charge. As a result, increasing difficulties have been experienced
by the inspection agencies in negotiations with airports to secure
suitable, adequate space as the volume of air traffic has increased,
and the inspectional requirements have grown concurrently. The
House action, if sustained, will seriously compound these difficulties.
Customs work at airports constitutes the fastest grOwing component
of the many types of Customs operations. Good working space at
airports is essential if Customs and the other Federal inspection
agencies concerned al'e to be able to perform their functions
economically and expeditiously.
Accordingly, restoration of the full amount of $1,570, 000 is
requested so that Customs may be in a position to negotiate
effectively, through the General Services Administration, for
suitable, properly located space at airports throughout the
country.
3. Additional manpower and related expenses to meet increased
workload: ($1, 489, OOO)
The original estimate requested in this category, covers
173 new positions (152 average positions). Included were the amounts
of $58,500 (9 pOSitions, 8 average positions) for interpreter-hostesses.
The House Committee expressed the belief that these jobs are "deSirable,
but not essential." No request for restoration is made. In line with
the House Committee's comments, we will not expand our training
of inspectors in 1964, and restoration of $152,000 (4 average positions)
needed for that purpose is not requested.
Every other manpower
Every other manpower requirement in this category is based
directly upon steadily and sharply increased workload faced by
practically every Customs office throughout the country. The
number of formal merchandise entries filed In fiscal year 1963
will exceed the 7 percent increase used in our estimates and would
probably have approximated a 10 percent increase but for the
. January strike. We believe the 9 percent increase estimated for
fiscal
year 1964
.
. is very conservative. Thus, with the volume of
commercial importations increasing even more rapidly in 1963 than
was estimated and with a conservative but higher estimate for 1964,
our need for additional manpower in 1964 becomes increasingly
acute.
Accordingly, restoration of $1,278,500 for additionall1quldators,
inspectors, entry officers, clerks, and many other types of employees
directly associated with workload, is most urgently requested.
4. Statistical Data Verification Program: ($800,000)
This program requiring the checking for accuracy of the statistical
data covering all imports began in January 1962. These verifications
are essential to provide the information needed to carryon our trade
program and to measure accurately the impact of imports on our
domestic markets.
The increase approved by the House, after provision is made for
all costs beyond administrative control, will finance only about
70 percent or 64 out of the 89 average positions required and approved
by the House Committee for this item. Restoration of $237,000 Is
requested for this program which ls vitally Important to many
Government agencies
of our economy which is directly or indirectly involved with international trade and commerce.
5. Strengthening Customs' Enforcement Capabilities: ($736,000)
No mention of enforcement was made by the House Committee and
there are no funds available within the approved total for any of the
increases requested for this essential segment of Customs activities.
The need for strengthening Customs' enforcement capabilities has
been emphasized and re-emphasized. Three separate and independent
studies made within the last year have recommended substantial
enforcement manpower increases. Last summer a task force
representing the Director of the Bureau of the Budget, the Secretary
of the Treasury and the Commissioner of Customs made an exhaustive
study of the functions, methods of operations and staffing of Customs'
first line enforcement staff, the Port Investigators. The work of
these men 1s concentrated on and around waterfront and airport
areas in a preventative and detention capacity.
The Budget-
Treasury-Customs Task Force recommended a gradual increase of
600 men. The request for 1964 includes 72 new positions (64 average
positions) to add a second step to the small increase in this staff
which was approved for fiscal year 1963.
Supplementing the Port Investigator report, a complete study of
the entire Customs Agency Service was made this past winter by an
inter-bureau group under the direction of the Administrative Assistant
Secretary of the Treasury_
In addition to confirming the need for
additional Port Investigators, this report also recommended that
additional Customs Agents be provided.
Customs agents conduct·
detailed, complicated and sometimes dangerous investigations of
smuggling (including narcotics), false invoiCing, underevaluation
CUIU
many orner crimmal oIfenses and civil frauds.
Funds for
30 additional agents (26 average positions) are requested
f~r
1964.
The latest, completely independent report recommending an
increase in Customs enforcement is that of the President's Advisory
Commission on Narcotic and Drug Abuse, released April 3, 1963.
The report stated: "The Commission believes that smuggled narcotics
can be intercepted in significantly greater quantities if the Bureau of
Customs and the Bureau of Narcotics substantially increase the
number of properly trained and equipped agents at our ports of entry
and along our borders. "
Thus, there have been three separate evaluations made of Customs
enforcement staff. All three have recommended a substantial strengthening of that staff. Accordingly, restoration of $736,000 is requested. This
amount will finance 102 new positions (90 average positions).
The over-all situation in Customs is graphically shown in the following
table which clearly indicates the impl'ovements made in Customs efficiency
over the past 15 years and the workload problems faced by Customs today.
Key Workload and Manpower Changes
1947 - 1963
F. Y.
F. Y.
1947
1963
%
Change
Formal merchandise entries
filed (OOO's) ••.•••••...••.•
542
1,656
/206
Carriers arriving (vessels,
aircraft, autos, busses,
etc. ) (OOO's) .•.•.•..••...•.
18,149
46,275
/155
Persons arrl vlng (passengers
on vessels, aircraft, autos,
' etc. and pedestrians) (OOO's)
78,948
160,800
1104
Total customs collections
(000'8) .................... $623,234
$1,725,000
1177
7,779
-12
Total customs manpower ..•..
8,787
BUREAU OF THE MINT :
In assessing a $420, 000 redaction in the $7, 720, 000 estimated for the
Bureau of the Mint, the Hluse indicated that the reduction was to be
applied largely to the equipment replacement program. The HO use
Committee also stated its desire that the Mint provide ample coinage-a· desire with which we are in full accord. If we are to produce 4, 100
million coins as called for in our 1964 estimate, it will be necessary to mab
.~
taln employment at the estimated levels and to absorb in our equipment
·replacement program not only the House reduction of $420,00(\ but also
$81,000 in wage board increases granted after preparation of the 1964
estimates. Thus, our total reduction in equipment replacement funds amoun
to $501,000.
Our budget request for equipment replacement totaled $710,000.
A
reduction of $501,000 will leave us only $209,000 of which $125,000 was
specified by the House Committee Report to be for "installing an additional
annealing furnace and related equipment and facHi ty at the Denver Mint."
The remaining funds available will permit us to replace only minor
equipment items.
We are deferring, insofar as practical, repl acement of equipment at
the Philadelphia Mint pending the construction and equipping of the new
Mint facilities; however, we are requesting restoration of $120,000 for
the purchase of three coinage presses in· Philadelphia. These newpresses
would contribute to an increased coinage capacity at the existing Mint
and would later be used.ln equipping the new Mint. We are also requesting restoration of $209, 000 for three new presses and other equipment
items at the Denver Mint.
OLlr total restoration
f')u.r
total restoration request of $329,000 is a modest one and is
vitally needed if the coin demands of the nation are to be satisfied.
UNITED STATES SECRET SERVICE:
The House Bill made a reduction of $500,000 in the 1964 estimate of
$7, 260, 000 for the United States Secret Service.
The budget included a total of 76 new positions to provide 35 for
field work in suppressing counterfeiting, forgery of checks and bonds
and other field cases: 36 for protection of the Vice President in accordance
with PubUc Law 87-829; three for establishing an office in Europe; and
two technical specialists for protective measures relating to the President
and the Vice President. The House allowed a total of 30 new positions,
indicating that 10 were specifically for the protection of the Vice President
and 20 were for the tremendous increase in counterfeiting and forgery of
government checks and bonds. The Committee Report also indicated
that the Secret Service should draw on its entire resources whenever the
Vice President travelS, in order to provide whatever protection for the
Vice President that is considered advisable under the circumstances.
In accordance with the recommendation of the House, the Secret Service
Is not protesting the cut of 26 positions for protection of the Vice President,
totaling $217,500. However, in the lightof the House directive that
additional personnel as deemed necessary when the Vice President travels
should be drawn from the field, a protest is being made for the restoration
of the 18 additional field positlons that were cut by the House. It is
obVious--that the interrupt1onof vital investigative functions will result
whenever a need to augment protective details occurs. These additional
protective responsibilities will hinder accomplishment of regular enforcement
work if a restoration is not provided. In addition, request is being
mad.e for the restoration of two Technical Specialist positions for the
Protective Research Section which are essential to the technical phase
of protective activities.
Counterfeiting continues to be a matter of grave concern. The amount
of counterfeit currency produced in fiscal year 1962 was the highest ever
recorded in the history of the Secret Service. Over three and one-half
million dollars in bogus currency was seized before it could be passed
on the public. The loss to the publ1c was confined to little more than
one-half million dollars. The arrest of 737 persons for counterfeiting
offenses, and the capture of 44 counterfeiting plants was accomplished
in this same period. A backlog of 34, 732 cases requiring investigation by
the Secret Service was on hand on December 31, 1962. A total of 4,402
persons were arrested by this small and efficient force of Secret Service
Agents in fiscal year 1962. In addition, in all Secret Service cases brought
to trial, 98.3 percent resulted in convictions. Sufficient investigative
personnel Is vItal to the suppression of this illegal activity and also
to provide additional protective personnel to draw on in accordance with
the directive of the House Report.
The Secret Service is therefore requesting restoration of $282,501)
cut by the House for the 20 posItions and needed equipment, and related
costs.
BUREAU OF NARCOTICS:
The Bureau of Narcotics requested $5,450,000 in 1964 which
was reduced by
was reduced by $200,000 in the H)use Bill.
The major effect of this reduction will require curtailment of the
foreign enforcement program which has proved beneficial in the supprcssion of illicit narcotic traffic destined for the United States. In October
1962, the Treasury Department assigned additional responsibilities to the
I
Bureau of Narcotics in the foreign narcotic enforcement area. Responsi/
bility for Europe and the Middle East had been within the Bureau's
jurisdiction; the new responsibilities included all other areas of the
world. As a preliminary step, agents were diverted from domestic
operations to establish an office in Bangkok, Thailand with two agents
to cover the Far East area. Another headquarters was established
in Mexico City, Mexico with two agents to cover the Central and
SOlJt~
American areas. Intelligence gathered in the preliminary efforts will
dictate the assignment and location of additional offices.
The appropriation requested for 1964 included tea additional agent
positions and two supporting positions for these foreign operations. Four
agent positions were intended for assignment to the new foreign areas and
the remaining six positions would replace positions that had been used to
make aSSignments to foreign areas.
The effectiveness of the expanded foreign operations can be illustrated
by· the fact that one month after Narcotics agents had been stationed In
. Thailand, they were responsible for the seizure of one ton of raw opium.
In another case, the agents assisted Thai authorities in the seizure of a
complete heroIn conversion laboratory including all the chemicals and
14 kilograms of pure heroin. Because of this proven effectiveness of the
expanded foreign operations, restoration of the full amount redaced by the
House is requested.
ADMINISTERING THE PUBLIC DEBT:
ADMINISTERING THE PUBLIC DEBT (Savings Bonds Division)
The House approved a reduction of $600,000 in the appropriation
uAdministering the Public Debt" from $48, 600,000. This appropriation
provides funds for the Bureau of the Public Debt and for the U. S. Savings
Bonds Division, a separate organizational unit charged with the responsibility of promoting the sale of savings bonds.
The Bureau of the Public Debt is one of those Treasury bureaus whose
estimates of fund requirements are based essentially on probable work
volume, as are some of our other Treasury bureaus. That organization
Is, accordingly, reprogramming its 1964 budget to reflect most recent
trends in antiCipated work volume relating to redemptions of Series E
savings bonds and, further to take into account the $500, 000 portion of the
proposed House reduction. It will bend every effort to effect the full
$500,000 reduction. Its ultimate achievement of that goal will be prevented only by substantial increases in sales of savings bonds. This
eventuality, of course, would greatly benefit the Treasury's financing
programs which would more than offset any requirements for additional
funds which might be required to defray the administrative costs resulting
from increased sales. Spreading the debt load to as broad a base as
possible is sound financing.
The U. S. Savings Bonds Division is, however, in a different pOSition
with respect to the $100, 000 portion of the House reduction which applies
to it. Over the past 10 years, from 1953 to 1963, the Division has been
forced to absorb increases in operating costs relating to pay raises,
travel expenses, and promotional materials to the point where it has been·
necessary to reduce its
necessary to reduce its promotional staff to a degree where adequate
coverage of the industrial and financial organizations promoting the sale
of savings bonds is minimal, if not below. During this period, the staff
complement has been reduced from 725 average man-years in 1953 to
526 man-years in 1963, a loss of almost 200 in staff. This occurred
during a period when competition in the market for savings has become
increasingly tight.
Because the Savings Bonds Program is so vital to the success of our
debt management policy, it has been my feeling that this trend should be
reversed and the staff strengthened to improve the Treasury's position
in this area.
We proposed a most modest increase in our request to strengthen this
staff during fiscal year 1964 in our efforts to begin a rebuilding program.
Above the items of expense over which we have little administrative control,
such as pay increases and administrative promotions provided for in law
plus the extra work days during 1964, the increase requested was limited
to $220,000.
In this amount, funds were included to increase the Size of
the staff by only 10 average man-years, together with some slight increase
In travel funds, and to provide for more adequate promotional materials.
The House Appropriations Committee appeared to give full recognition
to the needs of this Division; however, the decision to require absorption
of that portion of the Federal Pay Act, effective next January 4, would
make impossible the employment of the much needed staff, and would
reduce funds for travel and promotional materials below minimum requirements.
I am, therefore, requesting
I am, therefore, requesting that $100,000 of the proposed reduction
r $600,000 be restored with the understanding that the remaining $500, 000
'ill be absorbed unless the workload involved in the sale or redemption of
ecuritieswarrants reconsideration of the financial requirements later in
le fiscal year 1964.
RANSFER AUTHORITY LANGUAGE:'
As I mentioned in my letter to the Chairman, the House failed to
pprove language requested in the President's Budget that would permit funds'
) be moved between Treasury appropriations in order to take care of
mergencies or program exigencies that might develop as the fiscal year
rogresses. This authority, if granted, would greatly facilitate the manageLent of the Department without the loss of Congressional control over the
q>enditure of funds.
The language proposed in the President's Budget limits to 5 percent
Le amount to be transferred in or out of an appropriation. It further
~ovides
that it can be done only after the Secretary of the Treasury and
le Director of the Bureau of the Budget approve.
It also requires that an
tlmediate report be made to the Senate and House Committees on
ppropriations. I understand that some Members of the House Committee
lve objected to this latter proviso because they would be notified only
ter the action has taken place. I should be happy, if the Congress so
!termines, to have the proposal changed to read as follows:
"Not to exceed 5 per centum
"Not to exceed 5 per centum of any appropriation
herein made to the Treasury Department for the
current fiscal year may be transferred, with
approval of the Bureau of the Budget, and after
. consultation with the Subcommittees on Appropriations
for the Treasury Department of the Senate and the
House of Representatives, to any other appropriation
of the Treasury Department, but no appropriation
shall be thereby increased by more than 5 per centum. t1
This type of transfer authority is not new in Government,
Very
milar language exists in appropriations for the Post Office Department,
omie Energy CommisSion, General Services Administration, and the
LUanal Aeronautics and Space Administration. Other transfer authority
ists, with varying limitations and modifications, in the appropriations
r the Departments of Agriculture; Defense; Health, Education and
~lfare;
and Interior. The Foreign Aid Authorization Act also permits
tnsfer, when the President so determines, and requires a report to the
Ingress. I should be happy to pledge to the Congress that the authority
,uld not be used in the Treasury indiscriminately, or for purposes for
tlch the Congress has indicated it should not be used. I would expect
~
authority to be used sparingly and with knowledge of the Committees
forehand. You recall that we now notify the respective subcommittees
len we desire a significant reprogramming of funds within the same
propriation that results in use of funds for a different purpose from
Lt which was justified to the Subcommittee.
This has worked well from
standpoint, and I believe the limited transfer authority would work
well.
There are a number of
There are a number of Treasury bureaus that are small in size of
taff and appropriations.
This does not permit flexibility in meeting
udden or unexpected workload changes. The Bureau of Accounts, Public
.ebt, Customs,
Secret Service, Mint, Narcotics, Office of the Treasurer-.,
,
11 have largely uncontrollable workloads. Demands for services by these
urea us are generated by the public or other Government agencies. The
bility to shift funds between bureaus would, subject to prior consultation
'Uh the competent Subcommittees on Appropriations, give me administrattvt:
~exibility
to meet unexpected demands without resorting to supplemental
ppropriations. Such authority would save both money and time for
Ireasury.
If we had had this authority over the past four or five years, we could
'lve saved the Government the expense of preparing and securing several
llpplemental appropriations by using unobligated balances which finally
lpsed to the General Fund. We could have also saved the taxpayer, through
~programming,
some of the funds that because of the lack of the transfer
Ithority we were compelled to request in supplementals. If the authority
ld been available last June at the time of the delay in the passage of the
!cond Supplemental Appropriations Act, 1962, our Secret Service Agents
ould not have had to face a payless pay day. Such an event was only foreaIled by the use of the President's Emergency Fund. The transfer
lthority t had it eXisted, would have permitted the Secret Service to have
~ovlded an orderly financing and avoided a number of administrative
·oblems. I believe the operation under such an authority actually would
'ovide more control by the Subcommittees of the House and Senate than
under present procedures
under present procedures
process, the requests are considered by different subcommittees. In
summary, let me say I believe the transfer authority will contribute to
more efficient operations of the Treasury Department; it will produce
over-all savings to the Government; and its use will in no way diminish
or reduce Congressional control over the appropriation process.
CLOSING
This concludes the remarks I wanted to make in this statement on
these appropriation items. I thank the Committee for its consideration
of them and urge most strongly favorable action on these appeals. I will
be pleased to discuss any other matters in which the Committee may be
lnterested~
or to answer any questions tliat the Committee may have.
Thank you, Mr. Chairman.
Ibr_ md ApPI'OFtaUaa
196) All'l'opr1.at1OM
~AdJUStedl ~
Av. ~os.
Anount
1964 !t'3et EsUf!\I\tes
Iv. 15M.
liiiOWlt.
aelPllar lnnual. Operat.1nIt Io.pproprtat.1C11lIl'
orUce of t.he Secre\ar)'l
Sal.. 1es and !Jrpensea •••••••••••••••••••••••
Bureau of Accounts.
4n
,$ L.68).7S0
Salaries _d Expenses .~ •••••••••••••••••••••
s.larlee and EJpllnsee, Division ot
297
3,882,170
Dlaburaellt!ll'lt ••••••••••••••••••••••••••••••
1.6);)
28,239,000
Bur.au of Custans.
Sal. ar 188 cd Expenses •••••••••••••••••••••••
~u at EnGl'avin,,; and Pr1 nting.
7,81S
67,86),000
.Air Cond1\-loning or Bulld1r.. _ •••••••••••••••
of th. 1Unt..
Salar1e• .nd ::xpenae_ •••••••••••••••••••••••
Wl
Buroau of Narcot1ca.
Salaries and Expen5ea •••••••••••••••••••••••
Iv.
~os.
S,08O.000
476
291
11,100.000
286
1,5)9
31,~,OOO
8,156
-76,100,000
$
300,000
llIlOlI1\f;
•
5
so. 000
53
750,~,(/j
7.877
72,000, COO
279
- h,loo,ooo
11
161,~:lI
124
2,511,000
62
h,U7.ceO
:!>7
- JOO.OOO
7,0211,900
7.720,000
846
7,300.000
26
275,100
IU6
$,160,ouo
421
5,2!iO.(:OO
1$
200,000
)
1182,850
IS
)8
600~
296 1 250
1$
93
17
_ ).100,000
),066
25. k6k, 000
17
- 9,000,000
1Q
17,670,000
1,2$0,000
21 606
48 ,000,000
Operatin.: txpensell (:t1l1t.ary poll1.tions) .....
(CiviliAn posltio~s) •••••
Acquuition, Co:ustructiOll and
lIIpl'OY"""'nt. (1iIll1ta"7 pos1tions) .........
27,569
3 •.);)2
222.5.36,000
)0.69)
3,32]
2,1,100,(.(.'0
30,635
3,312
21.8,000.000
28
137
{O.OOO,OOO
28
137
(C1v1l1an ~1t101111) .........
Retired Pq .....................................
97
)),3)0,000
32,350,000
Rellerve tra1ninL (ltLlit.srr positIons) •••••••
(C1vU1an posItI;IQa) .......
To~, u.s. Coast Uua~ •••••••••••••••••
692
138
)2,020
16,!'O'J,ooo
)(;~.
Salaries and ~en.ea •••••••••••••••••••••••
OItie. ot the Trea.ur.or, II. S.,
Salar1~, and Expense8 •••••••••••••••••••••••
U.S. Secret Servicel
Salaries and Expen8eS •••••••••••••••••••••••
Sal.riel aDd E.-peT.8eS \,hit.. HoUII~ Po11ce ....
Sal&rle.~anrt Expensea Guard rore ............
f:)!.al, 'lJtj!1I1Rr A.nmll~l Operating
Appropriations (~U1t.ary positions) •••
(CiYil1an positions) ...
~!!,Le9
(Total poa1~1on.) ••••••
Ins~ance Fund ••••••••••••••••••
p~ t ot 10llS89 111 'hljo:>6Jlt. ........
1.07,9»)
Grand Total, 1'reaaurl' DeptrbHtnt ••••••••••••••
107,9))
89~
33.600,000
-
'11.000,000
:n,6W,ooo
..
IL2
10
-
$8
892
1)8
18,800,000
)li).>oo.t>r5i5 .
)5/142
3>1,ljOO,~
75
-:l2.'inn,ooo
~,l:lo
Il>,Mt,ooo
15
6).811
$18,.300.(X;()
(t),Llo
546,000,000
-).411!
-32,300,000
)58
42,900,000
),)05
16.450,000
6411
16,600,coo
8Ze
16,700,OCO
16
100,000
:n
250,000
S.784,OOO
l,S21.,W'';
)83,250
&J2
7;1&J.OOO
1.7)2,000
556
6,7&l,OOO
46
SW,OOO
408,0(.0()
63
2
)2,000
8,000
18
10
2
976,000
116.000
16.1!iO
)1.6n
)1,S55
8),569
U5,182
l,lSl.9JO,OOO
79.671
1U,226
no,WO
138
~>,m
&J.0$2
SO),ICO,ooo
848
S38
199
65
18.800,000
21)
6$
79,444
997,0)5.470
1,2~.0(l()
YS25,OOO
US, 162
997,560,1170
Ylnc1w:!e. Supp1elD!lntei Appropr1at.1on (B.R. 5Sl7) as If,proved by ti'e HCI'J8J!:.
Salaries Uld ExpeD8e., D1"laion or D1soon_nt ... ..... •••
s.larle. and EX;>lInse., !lureall of CustQ.. .................
Salaries .00 EJq>8Jl5"S, Intern&l Revenue S....t1ce ..........
Operat1n. Expenses, Coast Guard ••••••••••••••••••••••••••
.................... ,. •••••••.•.•••.••..••••• ,
209
9J.OUO
Check Fargar,y
1,153.230.000
DOllS not. retlect. the
I,ouo
11.000
}8,OOO
1,LJJ>,t::i:iJ
111,2<'6
l,700.CVO
400,coo
2.300,000
4
S6
1,09S,)lO,ooo
50,000
5!iO.OOO
I,095~910,OOO
-),898
-.3,956
-S6, 620, ()(()
700.000
-),956
S8
3,(11)6
227
),29.3
-S7, )2t'.OOO
),29)
20
3,639
98, 274, S30
50,000
25,000
J.f97
98,)49,530
),b97
tollcorin!: est.imated awroprlat1~ traNters to Gener;;! Sante ... Adtunhtrat10n tor rent.. ~ ,dneral purpose s!
1.)91,~
Perbed bj' trsnater fro. t.le d1!fJ1II1t. tund ·Uncla1JDed Parttal P'VClmts <>r \Jaited States
AprU 10, 196)
• 314,250
4<0.000
h8 1 6001000
Y
-
?Ol
- S,J80,ooo
2.64h
total
S
Rest'lrl
Av.
S,380.000
48 2 296 2 250
Fund Cor
-
196) ~22roerl.tio~s
J.y. Pes.
Amount
6O,OOJ
30,750,000
L2"
Int.mal Revenue SIl"lc8'
~
1,506
22 748
26
IiOWlt.
11,050,000
J..cInl1n1.aterlPc'. ti~. Public Debt. ................
u. S. coaSt. Guard.
Public Debt.r
S
BUl Com(>ared WlUl - -
!stiftlt.t.IIs
J..'I. ~"".
S.OOO.OOO
4,767,150
Bure.~ ~t
196~
846
~
820
RIIOOfIIIISIded 111 House
B111 fbr 196~ ,
Sa,,~ Bonda.-
- 2 -
147
As long as we have s lack markets for our goods and servi.ces
dampened inventives for investment, the threat of recessi.on
lains. Continued slow growth will not generate the revenue require«
fiscal 1964 expenditures levels -- even at current tax rates __
. some years. In the interim, the additional Gross National Produc'
I the wealth, the profits and the jobs that are expected to result
)ffi the tax stimulus will be lost."
It
The Treasury also favors the President's tax program~ Barr
jed, because "the proposed tax reduction is accompanied by strong
;traints on Federal spending -- holding expenditures other than
fense, space and interest outlays below fiscal 1963 levels •. This
only the ,fourth time in 15 years that this has been done . I f '
000
TREASURY DEPARTMENT
148
OR USE IN A.M. NEWSPAPERS
UESDAY. APRIL 23, 1963
DENVER, Colo., April 22-- President Kennedy's tax program now
,efore Congress is the key to speeding economic growth in this
:ecade, an Assistant to the Secretary of the Treasury told a
.usiness forum on fiscal policy and economic progress here today.
Joseph W. Barr, Secretary Douglas Dillon's assistant on
:ongressional relations, declared that the Administration's first t~
~evision measures which were enacted last Fall have "contributed to
:he recent improvement in our economic outlook."
He said that administrative liberalization of the tax treatment
)f depreciation and legislative enactment of the investment tax
~redit have "generated an additional cash f~ow which has resulted in
lncreased business appropriation for investment and forecast~ of a
,ising trend of outlays for new plant and equipment."
He spoke at a forum for businessmen, students and faculty
sponsored by the University of Denver's College of Business
~dministration •
The Treasury, Barr said, supports President Kennedy's tax
reduction program now before Congress "in the full knowledge that
cutting taxes will temporarily add to a projected deficit." He
pointed out that the tax program itself is "designed to keep budget
deficits within manageable proportions by spacing out the proposed
rate cuts over three calendar years and by offsetting a portion of
the revenue loss through tax reforms."
He said that "to just sit back and wait for increasing revenues
from slow growth to bring a balanced budget before enacting the
President's tax proposals might be costly and self-defeating. In
1959, for example, a planned budget surplus became a record defiCit
of $12.4 billion, largely because of a recession.
-REASURY DEPARTMENT
149
l USE IN A.M. NEWSPAPERS
~SDAY 2 APRIL 23 , 1963
DENVER,
Colo~,
April 22-- President Kennedy's tax program now
fore Congress is the key to speeding economic growth in this
~ade, an Assistant to the Secretary of the Treasury told a
;iness forum on fiscal policy and economic progress here today.
JosephW. Barr, Secretary Douglas Dillon's assistant on
~gressional relations, declared that the Administration's first tax
~ision measures which were enacted last Fall have "contributed to
~ recent improvement in our economic outlook."
He said that administrative liberalization of the tax treatment
depreciation and legislative enactment of the investment tax
~dit have "generated an additional cash ffoW which has resulted in
:reased business appropriation for investment and forecasts of a
~ing trend of outlays for new plant and equipment."
He spoke at a forum for businessmen, students and faculty
)nsored by the University of Denver's College of ' Business
linistration.
The Treasury, Barr said, supports President Kennedy's ta~
luction program now before Congress "in the full, knowledge that
:ting taxes will temporarily add to a proj ec ted deficit." He
.nted out that the tax program itself is "designed to keep budget
:icits within manageable proportions by spacing out the proposed
:e cuts over three calendar years and by offsetting a portion of,
, revenue loss through tax reforms."
He said that "to just sit back and wait for increasing revenues
~ slow growth to bring a balanced budget before enacting the
'sident's tax proposals might be costly and self-defeating. In
19, for example, a planned bu~get surplus became 'a record deficit
$12.4 billion, largely because of a recession.
- 2 -
"As long as we have slack markets for our goods and services
dampened inventives for investment, the threat of recession
La ins.
Continued slow growth will not generate' the revenue required
fiscal 1964 expenditures levels -- even at current tax rates -some years. In the interim, the additional Gross National Product
the wealth, the profits and the jobs that are expected to result
m the tax stimulus will be lost.'"
The Treasury also favors the President's tax program, Barr
ed, because "the proposed tax reduction is accompanied by strong
traints on Federal spending -- holding expenditures other than
'ense, space and interest outlays below fiscal 1963 levels. This
only the fourth time in 15 years' that this has been done."
000
!?OR RELEASE A.M. NEWSPAPERS
151
rLnSSDAY, APRIL 23, 1963
REMARKS BY JOSEPH W. BARR
ASSISTANT TO THE SECRETARY OF THE TREASURY
AT THE SCHOOL OF BUSINESS ADMINISTRATION,
UNIVERSITY OF DENVER, DENVER, COLORADO,
APRIL 22, 1963, 5:00 PoM., EST
THE PRESIDENTtlS TAX PROPOSALS AND FISCAL RESPONSIBILI'rX...My introduction to taxes came in December, 1960, when I paid
my first visit to the newly designated Secretary of the Treasury,
Douglas Dillon.
At that time, he mentioned to me that the Preside!
felt, and he agreed, that it was time to take a long look at the
tax system of the United States.
In April of 1961, we went for-
ward with our first set of proposals for the tax reform.
I need
not remind you that these original proposals generated an extra-
ordinary amount of controversy.
However, we did see most of the
president's proposals enacted into law in the fall of 1962.
For those of us in the Treasury Department, this experience
has been highly illuminating -- and, I might add, very rewarding.
I
for one am firmly convinced that the revenue system of a
nation must be kept in step with the times.
We have a
-2-
Biblical exhortation to be careful about pouring new wine
into old bottles e
It seems·to me that it is especially
dangerous to saddle the economy of the 1960's with a tax
system that was devised to meet the dangers of wartime
inflation that existed in the mid-forties e
No one can expect
to win a popularity contest when he advocates a change in
the tax laws.
However, I have felt that the effort and
the results have certainly been worth the criticism we have
received.
In our original proposals for revision of the tax laws
we attacked the problem of an increasing rate of obsolescence
in the productive equipment of the United States.
In addition ,
we closed many of the escape hatches that tended to contract
our taxable base.
The results of our first moves with the
investment tax credit and with the depreciation reform
just beginning to make themselves felt.
are
Frankly, they are
- 3 -
excellent.
152
The. additional cash flow generated by these
two measures bas resulted in an increase of orders for
macn~nery
and equipment that has contributed to the recent
improvement in our economic outlook.
On the basis of this
preliminary evidence, I am convinced that our tax policy is
an effective means of moving the economy .forward.
Already, sharply increased business appropriation for
investment and forecasts of a rising trend of outlays this
year indicate that these tax policies are playing a significant
part in the move toward growth.
The rate of capital spending by business, a prime indicator
of the nation's economic health, is reported by private surveys
to be rising
The
~esearch
b~en
higher than official government estimates.
Institute of America announced just a few days
ago that on the basis of a poll of more than fifteen hundred
of its thirty thousand members it believes spending for new
-4plant and equipment for the last half of 1963 will increase
10 percent over the last half of 1962 for a seasonally adjusted
rate of $41.9 billion.
The most recent Commerce Department
estimate was $39.9 billion, in itself a significant clLmb
from the $38 billion plateau of last summer.
Also significant
is the continued rise in manufacturing payrolls, which showed
a sizable increase in February and March after having been
relatively static for almost a year.
In addition, the President's tax proposals have
st~ulated
a dialogue on taxation that can be heard nearly every day in
the Congress of the United States and in most of the State
legislatures across the land.
Personally, I am delighted at
this development and I'hope that it continues.
The revenue
systems of our governments -- from the national to the local
level -- cannot be ignored.
However, it seems to me this
dialogue can profitably be extended both in width and in depth.
-5-
153
First, let us look at the Droblem of the depth of
the dialogue.
and in too many
tax laws.
'l'here is a tendency for IDOst individuals
organi~ations
to resist any change ln the
If a change is proposed. there are too many of
these individuals and associations who address themselves only
to that portion of the proposal that affects them.
I respectfully
submit that, while these negative opinions should be expressed
in the spirit of the democratic tradition. surely many of
these individuals and organizations could look beyond their
own interests and try to bring the whole set
o~
tax proposals
into a proper perspective.
~econdly.
J would hope that the width of the
would be broadened.
llogue
Taxes and flscal policy affect everyone,
but there is a strong tendency to shrug these problems off
and to leave them to legislators and to people who are supposed
to have developed expertise 1n these matters.
-~
I would guess that the percentage of any given body of
citizens that has spoken up on any of the public issues of
the day is fractional when it comes to fiscal policy.
Here
is the basic domestic issue confronting us today -- and yet
public opinion -- or rather individual expression of opinion
--
on fiscal policy reaehes Washington as hardly more than a
whisper.
I would hope, in giving you today the Treasury
Department view on our national fiscal policy, with particular
attention to the President's tax proposals, that I might help
increase just a fraction that segment of citizens who think
and speak knowledgeably and effectively on fiscal issues.
The tax program alone cannot solve our pressing economic
problem.
It alone cannot bring us to our national goal of
achieving adequate growth.
element.
The tax program is only one
But its relationship to the expansion or aemand
154
-7. the key to speeding economic growth in this decade.
~easury'Department
The
supports the President's tax reduction
program in the full knowledge that cutting taxes will
tempor~rily
add to a projected deficit.
We believe that
President Kennedy was right in refusing either to postpone
his tax program or to cut heavily into essential national
. security programs in an attempt to present his tax program
in the context of a balanced budget.
We believe this was
a fiscally responsible decision under 'the circumstances for
the following reasons:
One -- The existing tax system is one of the primary
causes of slow economic growth -- our major economic and
-
financial problem.
The AccelprAtion of national economic
growth requires measures that will increase aggregate demand
for goods and services.
MOre rapid growth also requires
-8policies designed to increase the share of our national
wealth and effort that is committed to expanding our
technology and to increasing the formation of capital necessary
to move technological developments from laboratory to production line to consumer.
Thus the President's program, in-
volving a top-to-bottom reduction of rates of tax on capital
gains and on both individual and corporate income, would,
if passed October 1, 1963, within the next 15 months provide
$10 billion of tax reduction -- $10 billion worth of purchasing power and investment and profit potential.
Two
~-
The tax program now before Congress is the
clearly ereferab1e course to other alternatives designed to
increase the rate of growth.
To achieve growth by more
massive increases in Federal spending well beyond the limits
of the 1964 budget would have risked confidence at home and
-9d~nd.
But it would fail to increase the incentives
to private investment and effort that ",the reduction of tax
rates provides.
There was another alternative
increase
the use of credit and monetary tools to provide still lower
~nterest
rates and substantially increased supplies of money
and credit.
This was not feasible because, as the President
pointed out, "Our balance of payments situation today places
limits on our use of those tools for expa"nsion."
Three -- To just sit back arid wait for increasing
revenues from slow growth to bring a balanced budget before
enacting the President's tax proposals might be costly and
self-defeating.
In 1959, for example, a planned budget
surplus became a record deficit of 12.4 billion dollars,
largely because of a recession.
Continued slow growth will
-10-
not generate the revenue required for fiscal 1964 expenditure
levels -- even at current tax rates -- for some years.
In
the interim, the additional Gross National Product, and the
~!
:
wealth, the profits and the jobs that are expected to result
from the tax stUnulus will be lost.
Four -- The tax program itself is designed to keep
budget deficits within manageable proportions.
By spacing
out the rate cuts over three calendar'years -- beginning this
year and extending into 1965 -- and by offsetting a portion
of the revenue loss through some tax reforms;
and also by
n1~tin9 collections from our largest corporations on a more
~rent
basis, the effect of the tax reduction on the budget
Ls reduced.
Five -- Another reason why the Treasury Department
;UJnPorts the President's tax program is that the proposed
c~
reduction is accompanied by stronq restraints on spending.
rhe President's 1964 budget holds proposed government spending -- other than defense,' space and' interest outlays -...; below
fiscal 1963 levels.
This is only ,the fourth time in fifteen
years that this has,been done.
In fact, for the past nine
years the average annual increase in this sector of the
budget has
been 7.5 per cent.
Nor did the President relax
his efforts to cooperate with the Congress in holding down
expenditures after the submission of his budget in January.
Since then, he has reduced spending requests for 1963 and
1964 by more than three-quarters of a billion dollars.
-12Six--More important--and this is perhaps the most
overlooked aspect in discussions of fiscal responsibility-<.
the President in his 1964 Budget Message proposed a
of disciplined expenditure control.
polic~
He said--and I quote:
"The prospect of expanding economic activity and
rising Federal revenues in the years ahead does ~
mean that Federal outlays should rise in proportion to
such revenue increases. As the tax cut 'becomes fully
effective and the economy moves toward full employment,
a substantial part of the revenue increases must go
toward eliminating the transitional deficit. Although
it will be necessary to increase certain expenditures,
we shall continue, and need to intensify, our effort to
include in our fiscal program only those expenditures
which meet strict criteria of fulfilling important
national needs."
Seven--Finally, the new tax program, with related
expenditure control, is compatible with, and can be coordinated
effectively with, appropriate balance of
pa~ents
policy and
debt management--each of which forms a vital environmental
factor in our overall financial plan.
157
- 13 -
Just let me summarize why this particular program will
attack the root causes of the inadequate economic performance
which weare witnessing today.
~n1stax
pUijor support.to economic growth from
one, releasing 8 billion dollars of
~Wv
program will provide
general directions --
consume~ ~~~chasing
power,
thereby generating a multiplied demand for goods and services
as these funds are spent and re-spent -- and, two, reducing
corporate tax liabilities by approximately 2.5 billion dollars
to provide new investment by reductions in capital gains rates
and related reforms.
Thus, you have a program that is appropriately balanced.
The impact on consumer demand will interact with the impact on
investment incentives to produce a far greater total addition to incomes and to the Gross National Product than
if the thrust of the tax program was concentrated on one or
-14-·
the other impact alone.
Adoption of the President's tax program is the most
important legislative task confrontl.uy we natl.On .:Ln ~963
because it carries with it the most direct consequences fox
achieving a more adequate, a more orderly economic groWLn.
Public policies play an important part in providing the type
of economic climate in which a private enterprise system
such as ours will work to advantage.
Budgetary policies,
debt management, monetary policy all playa role.
~rivate
policies by management and labor can affect the general
economic climate for better or for worse.
Also, buyer and
investor confidence can be of decisive importance.
But in a
society where a large percentage of the annual income is
drawn off by government -- national, state and local -- a
tax policy designed to promote growth is fundamental if the
nation is to benefit from rapid growth and the lags between
invention and investment are to be minimized.
- ..... I
~
:
rcsnt
O"l1'R!'.lSJRI'S
~t
IlILL On'ERIW
t.hCl Trc~ te;>artment announced lNt even1ng thra.t. tt~ .tenders tortvo _evta. at
:ur:/ b1lla. ODS aeries to be an addit.ional issue
the b1l1a 'da~ Janur;, 24#
and th8 ot.her aerie. to be dated April 2$, 1963, ,-"bleb \ION ottGrod art AprU 17
opened a.t the Federal. Ruene ranks on April 22. Tenders were 1nYitec1 tor
•
10,000, OCX), or t.hel"H.bclata, of 9l~ bUla .aJ)d tor
or, tben.bou\a,
12-d.q b1lls. The detaUs of ~ two aeries are U follows.
or
,.coo,ooo,ooo,:
: OF .lCC!rrtD
;'firM SIres
91-dq T'NU1U'7 b1lli
,MturlnZ .TolT 25, 192'
lpprox.. f.qUl".
Price
)nrN.3.l Rate
111gb
~.27S
tow
l"rage
99.270
99.271
~
~.,tM
-,_~·Octo'beP
•
Price
I
2.a66~
2.Bea~
182-dq '1'reaaur,y b'
.
l
t
t
¥ .
91J.496
98.491
98.1192
y
24,
'1.
1~
Approx. iq
Anmaal. Rate
i.
2.'15;(2.98S,~
2.982j
!I
Excepting t.hree ten&.tra t.otal.1ftJ: t66S,<r.»
. percent. ot t.ha 8mCJUtl\ ot 91-dq biU. bid tor at. tt. low price va &CCePt.acl
h percent, 0: the aaount ot le2-c!q bUb bid tor at. the low price va.a accepted
"
-
."
L ttNDEn3 APPLIED FOR AND ACCSPT£D BY
strict,
,.,' ., ~r!l~~d F01"
.. t
etOD
vtark
Uadelph1a
nalaI1d
,C1aOI1d
lanta
j,cago
.• tou.1a
.nneapol1a
lMU Cit)'
.uu ~.,
m Franciaco
. fO'llLS
26,961,000
1,66),967,000
lEDE.~L
.
RESWE DIstRICTS.
"relied
Acoerted
• 1. • i)
For ,
16,629,000 ,- $' 24.697,000
$"
)),21),000
32,116,000
e9),)7S,OOO
11,97),000
1
I
1,315.216,000
U,SOS,OOO
p, A!c!pte4
$ 6,947,000
654,076,000
5,435,000
32,053,000.
2S,149,000 !:c r--15,649,000
n,663,OOO.
10,225,000
2,196,000
19,260,000 I
U,U9,0CX)
U.<llb,OOO
160,797,000.
1ll,~O;Q()) •. ;:/(:.S2.b56,OOO
~,29J,OOO
21,061,000.
9,950,000
8,180,000
21,160,000
14,420,000.
(6,435,000
3,69S.CQ)
34,OOS,ooo. 29,O$),0CX).
13,69S,000 I'" 8,hS2.000
23,793,,000
16,21),000 I
10,169,000' h.~9tOOO
129,U6,OOO
61,611,00:> I
120.1'9,000
28'099,OCO
$2,2$8,$$$,000. 1$1,300,2)6,000 ~l-$1.~70,4S1'~(;T1 ~,200.000 !i
11,663,000
23,6)5,000
218,1U3,OOO
[ncludel $24),llh,OOO noncmpetlt.1Te t.endere accepted at t.he &Terage price o.t 99.21
XncludN $62,02),000 non.carlpeUt.l.,.. t.endA!rs accepted at the ..~rage price ot 98~
On a COQ9On!Aau or t.... lame leno~ andt~ the same tJDCNftt. tttreate4, the ha\.Qft
t.l'14aM bUla vould proY1~ 71al4a ot 2.9S.l, tor tM 91-dq bUl., end 3.07.'. tor t
162-cLv bUla. Intare.t rates on bUla are quoted in teru of bulk c11scotlft\ . "
the "tum relatad w the t;we ~'ottbe b1l.1a pqahl.a,at. ~Wr1''''1"Uher ~
the .nII!O\U1t. tnnate4 and thalJ" length in actual IlWIbor of d~ related t,g a ~
year. In OQtltraat, 11.1<28 on oert.1t1catea, notal, 6W1 bonds are compu,t.ed 1rl tart
ot 1ntel"eet. OIl the eaount. 1nvNt.d,. aM,reUt.e t.he,Jl1l1Dber.ot: da;rs nma~ 1a II
1ntere3" p~ period to the act.ual- number ot dA)'S in t.he period, -...1.\h _ ' ' C(r~ it mare thaD OM CQUporl puiod is inTolTed •
.~/ ~'\,
rREASURY DEPARTMENT
=
iLEASE A. M. NEVlSPAPERS,
g, April 23, 1963.
RESULT OF TREASURY'S: t:EEKLY BILL OFFERING
rh" Treasury Department announced. last eTening that the tenders tor two series oj
~ bil1s, one series to be an additional issue ot the billa dated Januarr 24,
and the other series to be dated Apr:U 2$, 196.3, whicb were ortered on April 171
e>pened at the Federal Re8erTe Banks on Apr:U 22. Tenders were inT1.ted for
.
0,000,000, or thereabouts, ot 91-day bills anQ tor $800,000,000, or thereabouts,
2-day bills. The detaUs ot the two series are as tollows:
91-day TreaSUI7 bills
2$1 196.3
OF ACCEPTED
rITlVE BIDS,
1I1atur1n~ Julz:
Price
Approx. EquiT.
Annual Rate
•:
I
182-~ Treaaur.y bills
maturing October 24,2 1963.
Approx. EqUI.,.
Price
Annual Rate
98.496 y
2.868%
a
2.975%
98.491
a
2.985%
2.888%
a
2.884%
Average
98.492
2.982%
!I Excepting three tenders totaling $665,000
8~ percent ot the amount or 91-da,y bills bid tor at the low price waa accepted
4 percent or the amount or 182-day bill. bid for at the low price waa accepted
99.275
99.270
99.271
fli.gh
Low
Y
Y
TENDERS .APPLIED FOR AND ACCEPrED BY FEDERAL RESERVE DISTRICTS:
:trlct
ton
-
Applied For
$ 26,961,000
1,66),967,000
33,273,000
32,176,000
17,663,000
23,635,000
218,4.33,000
)4,29.3,000
21,160,000
34,085,000
23,793,000
r York
.J.ade1ph:l.a.
rve1and
:bmond
.anta.
.cago
I,ou:18
lJleapoli.
lSA8 City
]..as
L
129z116z~
Fra.ncisco
TOTALS
$2,258,555,000
Accepted
:
:
••
:
APE,lied For
Accepted
16,629,000
$ 24,697,000
893,.37$,000
1,315,216,000
17,973,000
1l,$05,OOO
32,0$3,000
25,749,000
ll,66.3,000
10,22$,000
19,260,000 :
11,419,000
160,797,000
lllJ~O,OOO
27,061,000
9,950,000
14,420,000
6,43$,000
29,0$.3,000
13,695,000
16,27),000 I
10,169,000
61 Z679,2000 :
120,2359,2000
$1,)00,2)6,000 ~ $1,670,459,000
$
$ 6,947,000
654,076,000
,,435,000
15,649,000
2,198,000
,
,
,,
,,
1l,~,000
52,456,000
8,180,000
),69$,000
8,452,000
4,969,000
28 2 0991. 000
$801,200,000
Y
lcludes $243,114,000 noncompetitive tenders accepted at the average price ot 99.27:
leludes $62,02),000 noncompetitive tenders accepted at the average price ot 98.492
l a
coupon issue of the same length and for the same amount inTested, tho return •
these bills would provide yields or 2.95%, for the 91-~ bills, and 3.07%, tor tl
182-day bills. Interest rates on bills are quoted in terms or bank discount with
the return :related to the face amount ot the bUls payable at maturity rather tluu
the amount invested and their length in actual number ot days rela"t;ed to a 360-~
i/ear. In contra.st, yields on certificates, notes, and bonds are computed in term:
.L"_ .....'..nnT. "nvAsted .. and relate the number of days remaining in an
. .L
--
-.I
_.3
.~ +l.
..... 'In ..
!lnnUl
- 65 -
international balance of power."
'~ir-.ore
then 1s at stake in current tax policy than
a selfish scramble as -to who pays taxes.
The shape and
direction of the American economy for years to come hangs
1n the balance on tax policy decisions just ahead.
00000
161
-54longer be -the ha.nd1cap 1 t has been to U. S. baaed prOducer.
in meeting and living with the competitive
competitors in Europe and Japan.
This
tbru~~
a~ptat~oD
of vigorou
should
better enable tbe na.tion to contlnue to play its leading
role 1n Free World security and development, without being
forced to retreat because of an inability to achieve a
balance of payment. througb an adequate trade surplus Or
the flow of cap1tal io'to'a rdynaJll1c economy.
l1nally. the adaptation of our tax system to the
achievement of more rapid growth and effective Ca.pet1tlve_
nesa wl11 exemplify our continued determlnation to malDt&la
the relative level of natlonal strength that i8 tbe baae
of
our national security.
It is an essential part of a
national answer to Cbairman Khrushchev'. asserted bellet
that:
"Development of Soviet economlc aaight will
eive communism & decisive edge 1n the
162
- 53 -
These tread. iD- tax policr are Dased' OD a
in tbe prlYate enterprise .y.te..
aountlDS
effectlve
aD
e"or~
OOll~:l".c.
ID on. vital r ••peot.
&&aiDst bl1btax rate. __
thi8 proaraa 9111 be a,.lI&ior. step toward relnviKorat:lIlC
.i. ·
the 8trenatba and drl ve. of ~ha t pri va te . .ctor.
in the
war
of -complementary pol lei.. --
MUCh
p1.&D.l.1e IUlG
private -
exercised by aanalell8Dt. labor unions anel
loverument
~t
all levels -- ma, be nece8sary.
But the Dation wl11 bAve a.barked On the e"'D~J.a"
task of updatinl
Sixti.s -
OUr tax .Y8te. to the
Cna.l..l.8Dce
to the end that private ecODOIlY
prosper at a faster rate, faat .nouln
Call
ox
~be
arow &Ild
~o prov~oe
JODa
for our citlzen. and the ever lDcre. . lna standard os l1Y1..
for all who wll1 work for it.
-e "ill bave further adapted our tax system to &.Qot"l
--+arDal ca.petltloa---
80
that lt w111 110
;,"'·16')
"-
.. C ..-:~
- t'4 - 53 -
These trend.
iD-
tax policy are based
in the private enterprise a,ateill.
10
one
OD
a
COD~Ld.llce
VJ.",a..J.
reapeot.
mountlni an effective effort against high tax rat.s
this program will be a ..m.ajor step towa.rd
reJ.nvJ.Kora~1Il"
the strengths and drives of that private sector.
else in the'way of complementary pollc18a --
Much
PUg~~C and
private
exercised by management. laDOr unions aDd
gover~ent
at
all levels -- may be
nece.sar~.
But the nation will have embarked on the esse4t1al
task of updating our tax .ystem to the
Cha~Lenge
o~
the
Sixties -- to the end that private economy can grow and
prosper at a faster r&te-. fa.at enough to provide jobs
for our citizens and the ever lncreaslng standard of liviA'
for all who wl1l work for it.
We w111 have 1urtber adapted our tax system to another
~hallenge -~
esternal competltlon---
80
that it wlll
110
effort and capt tal 10 eCODOIIl!C act! vi tl aa a -aile
'.
"
-
o~
these tpropoll&l. ~tbat ~-t-J :"ill (strength_a". the- eCIGItQIIIJ' ..... \
•
~•• ul'lfrGa tb8~a&1QteA&Dcetof
a atatu. quo.
164
- &1
Seveatb I the opportu.ni tie. tor tbe esercise 01 tax
policy aa a tel w.aJ)OD in the ar..nal
ot.f~~ .. l
polt.Cl _
to be used a. aD alternate to or alOOI with J'ederal ,
expend1 ture. y.ar
OIl
,,111 have been broadeaed.
the policy prea1... proposed
Aotion tilt.
e.bra~ the
pro,P081 ~lQ11
tha.t de.irable reductiOll. 1a income talC rat •• ne.d no1;
be confiaed to periodsof budcet balance. or 8"rplu••••
providinK that prudeat policl of allocatiDI a 8ublt'taD1;lal
ahare of the lacre.aiDC re.eDues re.ultiDS
~roa
Doraal
or stt.ulated crowtb to C1081D, the defiolt 1. fa1tb1ul1y
followed by disciplined control over Increased expenditure••
BiKhtb. the natlOD will bay. reincorporated ID Ita
tax
.,.t.. a rea••ur1al a11ectaace,to the frinctel. O!
rewarm. , - the leavlnl of
~Dcrea88d p!,"c~~ta-,.a
of
lllC~
to ,"...In after taxes with tho. . who lav••t addttlOQa1
.,:60....
responsible finaDcing of goverllJllent -
1;~e ~:,~~, ?~
.
future would be the provis,iOD ot,
~he
Dece.~arl
the
"
.reov:'D.\I• • at
lowest level 01 tax rates, ratJWr t~ t~ ;.0f1'!liDC of
.ore ttlooehole. u 10 the exlsting structure.
reversed tbe process 01 eroding the tax bac-
by allowllll.
special erefereace8 aDd prlvl1e,•• for certain S!ouR!!
.
..
."
-
~
'.
01 taxpayers able to pal .$
their .•abare of taxes, , .whlch
4
h
.'
..l
are not likely to be enjoyed
A tax. structure
.0~lna
bl their fellow taxpayer••
to lower level. 01 iodlyidual
aDd corporate rat•• wl11 be .ore re.iatant to device.
whereby finaDcially able taxpayer. escape or
.ID~lze
their sbare at the expense ot fellow taxpa,ers.
pract~callt1
and deslrabi11ty 01 coabin1Da rate
The
~d~ctlOQ
.with baae broadening refol'll that .oves toward ...ore UIlif01'l
diatrlbutl00 01 the tax burden will bave been eatabilahed.
- ~o -
-
need. with 'lb. ·.1afmu. l lnoreaaed,bUrd.D·of'b1J!!n£dr. . . .
of a lIational 'cODvictloa, ·~••bodi.d riata:the c~ (code, 'that
-
·tbe : curreDt·level·of !tax l-s-at•• ()1I .. 1DC. . . ~hOld.' -Ok 1'the
'
-
"11th; Dat1Giaalrtiaa legItg wGUId l'.boo7P2!!:te ru ~~
'prw'J't ~obj.ctt•• rot )'1dC~ t t d "tOI'lll tUle rrecluG't<1aa ll!.Q f (
....
~'"
-.0
-
..
1a,.,ct,
•
--, ----...,.. .. alODe
...
.........-..~ -~.--.
ourpl"IIaJleDt tu.tructure..
The hllh lDcliyldual" iDca..
~.!~.t~_~~~ ~"'7~~aad .1.~hJ'cRtled. ""':::lll-;e ~G 0'1
.........
--_ ....--_
----------
ud, ...ps'oflt
1.1fort..,~ The·,corpor.. te'.\ax.il'.. te,~ ..t .. U:'P4t r ceQt
. .........-.-----..............
.. .--........
..............
'-.~~;-
-
qad\ll,.
·l. .'-ita
,the-;profltabl11tJ of corporate lDveatiaellt
-,,---- ._--.- ... _-,.....
'.
.
.
16e
.-4T".
lIaJor sources of encourage_at to pr:l.ate
spending.
A .,re dlauUc KOno.,. rill
spur techaolocicai iDDovatioD8 aDd the
iatroductioD of De. products.
The enlarged iAvestment apendlD,
itself have & "ault1pI1er"
1~
Wl~~
g.D.ra~.
.l~~
.rr.c~,
.lace
blgner incomes WftlCb
w111 in turn ezpADd cODsuaer spendiac.
Thus, the procr. . 18 an approprlate17 balaacect oae.
Th. i.pAct
00 CODSu.er
deaand will 1Dteract with the ll1p&C
on inve.t.eot ioceatlve. to produce a tar areater total
- 46 -
--
Business investment will be further
stimulated
by
individual and corporate tax
reductions, which 9ill provide.more funds
for investment and ralseafter-tax
orofltabl1it1 of new capital.outlay••
Taken together ,J. th last, year' 8 depreciation
reform and
invest~ent
tax
c~edlt,
corporate
tax liabilities .111 be reduced $4.5
b11lion and the profitability of new
1nvestment will be increased by
30 percent.
ne~rly
Th. p'ervaaive, favorable
effecta of the tax cuts on business
and consumer confidence and expectations,
ateadier emplo1ment, and attractive
opportun1ties to exploit more rapidly
growln~
consumer markets all will be
17 . . :
- .~
IndivIduals w1ll receive larger after-tax
incomes, part ot whicn will be sAyed but
by
far the uJor part -
over 90 percent
-
.ill be spent for cODsumer goods and
services.
Such additional spending,
amounting to
$8.~
bI11ion'ofconsuaer
purchasing power, will, in turn, add
further to incomes, leading to higher
spending
an~
another round of increase
1n incomes, in a continuing process
known as the "multiplier effect.
Increased CODSWIlptlon wl11 induce increased
investment in both inventories and plant
capacity and there .111 be Increased
requirements for residential construction.
This
1S
the so-called "accelerator effect.
-.. -.'" -..
....
experienc.d. and .1nfon.ec1 r1eals1ato... 11l
caD produce.
'be ",<:0,,"_ _
We .wl11clrj,ve for decls1v.,..actlOD .. la
1963 wheth.r· bWll~8... thi. 8DrlftJr,.and. aWIIDer ..1. good
The prop-ail that.n.oropo••cLYu. \a our
or bad.
th. cue With. tu_lealala tiOA ... tb,r •• ~. ~.roo...... fo~
1.prov•••ot . . &Ad .dopa.tl .... 1s a .. .,lce_aDd DOt,. &,,:"vll''tue.
Hene"
an,. ,.oJ>POrtUDl t.J,.. to, i.Drove _on. "be ~I)rooo.ala
9111 a19a,.. be.weln n . .
In
tha . .aft~i •• _ Ab•• ft~.anY_.xD~••• ioa
1.g18~' tl ye"aGtloD ' QD ", the
aeonomtc
atlaulwa.~... Tha t
of defl.itly.
kestel.at· ... tax ~p",opO.al.
eeonoaic .... tl.ul\18 ...Wi 11."D~OO"d
along four principal channelat
- 43 -
session of Congress ot basic elements of the
President's 1963 tax program.
Today this program i . only a set of proposals
advanced'by'the President and the Treasury;' they
depend'for their acceptance upon'the w111 of the
Congress as 118 memnera retlect the opinion of their
constltuenc1es.
As you know, public hearings have
been completso Delore the HOuse wa,. and Means
Committee, the 1ax writing'committee of the Bouse.
For ~80JJle "weeks members· of this expert and experienced
body wll1'slt'lnexeeutlve sesslon considering Wnether
to' report 'a bill ana. If 80, 'what its contents sbould
be.
I would not predict'the-outcome or lne1r
dellberalloDSor the'tuture of tax legislation.
I.:'c1o_'wlsh: to -underscore ,tbe COD~~JI\WU·CODV~C:~~OIl
o1:th18 A4m1niatration that the national Interest
requires the'enactment this year of the best POssible
- 42-
Other" Drovialons. of.,.tM, ReY.Jl~..Act.; oLJ,963,
de.ipecl.to corl"ect .abws.s.• (the expense accouat· aacI
for.iim .J.acoae.;; .8D8cia1 Dr! v11ea8 ... t~~.CQOPw..ti.~.
Of.cAllUm rate euuc:tue .ucLlllC.l'...1u
»... fveatlal
"r.•atMat •. they« eabod.Y len.lattv.aDd. oubl1c
174
.abortel11DB
~
tbe period ot, risk. oL.Uveataeat .J.Q,. .CaDl tal
equip_nt .•llould. sen_ as ..1oD£-run . .Uta•• - ~to. A:t1aula'te
••le..... t. of tax polio,. will iJl8U1"e that the tax 8,.8t_
175
- 40 -
The Significance '·ar. . lb••• · TreDGB 10
Tax Policy for the American Bcono.,_
The slgnificance of these Dew trends in tax po11cy
for the American economy depends upon their acceptaace.
their effectivenea8, and their continued adaptation
and utilization.
The investment tax credit 1n the Revenue Act of
1962 and the administrative liberalization of depreciatioQ
allowance. have been accepted
received.
law and have b.en well
&8
The co.biDed effect
of
the •• two measur ••
which becAme effectlve. for the first time. In July aGd
October of 1962, cannot yet be fully ...essed.
For th. firat time in
man,
years, these chance.
place inve.t.ent ln ne. equip.ent in the United Stat••
so far aa taxes are a factor --
OD
'a basi.
rou~bly
comparable to that in other induatralized countries.
Already, however, sharply increased busin•••
--~.nn~tAttnn
for iov•• tment and forecasts of a rlalnc
--
of the cold war .1tuation, tberate
. of iacr..... ia d.fe.e aa4 apace
expendltv•• , chuact.t>iziq the
thr.. ,eue 1162-64, .bould tNtCtll
to alow ciowll . . the nation ...aclsM
a
DeW
plate.." of zoe.eli.s. aa.cl
aad
3.
.ts tbe Pr. .iclellt stated 1& Ida BUdCet
.......... "All tbe tax cut. becOilea
toward full ••plo,.•• t, a
.ubataatla~
part of the re.eaue iacr..... IIWIt 80
toward el1uutl1lC the traDai tioGal
defleit."
..1. t
.. 38 -
tax polie,., for
with
the
50. .
tax
C01abiDt"C'·rat.~"chhi"i__
structural changes 'brOade"tqr;a.t~
bue -aDdaeceierAtl"c;ta. rco1-1e6''tloD
of the larcer"'corporatlolltlla:whlCll i wouid fJ
keep revenue'l08... fm rr'aite l.ndUcitl0.t.ll
at realJOnabl. le"l.' durifti tluPp.ri6d c!l.~s
But a. cuetul ~ud tcontroiled
apPrOacli'{'to ;reyea_
10•••• was onl,. "'one alde of 'the picture.
requ1r.m.D~ ....
the
The other
eoordfnatloli lot ~t.xs>eiacit ttir.ZpOlioy
w1 th the iD&ugura~10D
ot 'Ctli.·n"~"tu~prop._;t The
Pre.ident &Ddfthe~B,*d'etrD1r.... ~tortbav.("titr••8idl'ttb-••
a.pect. of
1.
tbl'~·coordfDattollf"~:~.·nt.
&
~ut~t.:1ntlAl
Clvl1tiii eXpenditure. '';11t l bi:iflha!yBt ilO
contrOl1ed;'i'and';ln lili. tt964 z6Udc.tt o !lal
expenditure projectloA8 have been
reduoed,
178
- 31-
...toa
This .1'uatloll.'Kaye~t,,;pol1c, a:~".l.u..
Deed
~cocud1D&te
-
the
,it cuef.117;:.iato;;aa.:o.qal1tt •• lIClal
pla.n •• Tb. prlDCil)41. object!•• tO~ ~.tll1a pbaa.':of o'&ax
polic1 ;.aa; to .·. .~1_ ~ ...... , ~ 0&1;. ~. . (.tb.t 1.. 'UIe actual
revenM . ~._ t 1:&"011 ~ ..educ 'loa i . ht . . ..a1.dl11 tl.. would
be haDclle4,la a,flau.11:r,re8PO_lble
<ieficit w1tJa1a -prudei'll boWlda.
_~
to keep the
TIle tax prograa " . .
c1. .1gae4 to_t_~:thl.~eq,", ..._t: 1.1'WQ.~""t revetlU4t
~ "'~fX~t~~
,,1'11".'_/
't~ 2&\•. ~ec1\IICUOIUI' <are, ..at. . . 0
ther
1'f'.r~ •.• })Y• .r..::~. . 7...... , ... co• • aclq ,11l cl~&a.i . ...:re polle,.
t:l ion ~_t.!i.~.~i . .,1Ato t.&COqWlt.:Ul•... '~.:."t.
'1"11.
prfzsM~.l...~.~~:.~ .~lvlt'.,,._\llUaai
;'t!lree
aspeMpaJ~~I~~\o\t.H:~.\.a4cU.tloll to the 11M·
fl~c __~ ,,~-L~.'J..c~*~ ,.,u.l4t _~ pal,..;f ,:a.1:!lid 11108.
179
-36-
. . .,. . tIlI..lI •..•
• .s.. ...• '.
1...
~
,~
,......
""
.
~,~,,: ~. _<t
lJ.~A'I';
•
I{. I.
}-<.-.<O ...... .
......
~
..........
IIae Pre.ident refuaed to cut i.to ....atl.l aat1-..J.
18u
179
- 11To ·... lp ,. . . t
tb.COII't~of.a·"te.?ncl_tloa!" . . . t~""e
structural: eMilie. to' _.t:;partlC\1lar·;laa.I'deIa1pe.~ . .t\:i.4·fI~
tota1UDg: $14 ••
bll11oll,-jotbu'~.truet**,al"'.".:",
broadealac" the. b....:of,,·taaatl. .~ J .U...aat'.&t ....1:t11e"
o~
1. . . .D1Il.··of' . .l'talD·.pec1aljpriylJ.ec. .·!~woald ...cat.
a,pro&laa.'tely. ",.1-' bl1Uoa' Of4 tile:: &-. . .a . . ;. CMl&::.r
~c
reductioQ, 1.aylDK a Det r •••Due coat of tbe eatlre
",y~~)
(.:,Wl ......-c\
uy ... ~ tax .propoaa,~ til... -pl"ojaet_t ,-ctaet
~forl'tll." flacal·
,.ar ·;19M 1IO\l1d face: t . .: ...uOUl iId tIa,...
<"'tl. .tect~ della~: of ... ~·.ltl1110Jr. \'~ ·"~j.'01~1 :rw...~_
~1'r_ t~ fafton~~·. '\h4t, fail. . .
t~;~
for
of ''tile
ec~
4telezpaacs
fUll:..,lo,aeat 1.".1 aDd tbe coapel1laa ' ' ' - a1 't~ _
cM,ut~ 1ia....ODa.l1illecurl~1...;.;) to:·a~.t;:abarp1y;.1atu..~l
:l..t thre." . . . . ovailclea.r:,aQd CQIly_tloaa1
'.tap 'up our efforts:,-l. lIPace,t aDd _t,:'tiIe
~""'.cl..~o..oeat
~OOII~~O."
___..u.
-:34-
of IUl ay_aciDK .fonwla-c applicable ~ 'to I all~ __ld ~ ve
182
- 'S3.arly: poetwar iaflatloDU'71 pl'.a.UI'_.·~
.
wb1cb' woulcl"1oIIe' .a.ddi tloul:' .menue. •. ao-~·.to ;theea: ~
., .
dlaadY&Atage4 P'Oupa1ba. .
;~co"'~bj.ct.~;to::tb.;.'1IIltaY7'
.elpt of; red.ral;:lDQOM .taxa.ttOD, .. war and' postwar
aubataDtlal tax l1abl11t7:ueaa·1a....tbe
~lo..... ):bnack.t•• ,
',reduc1:100 &180' casmot.eoly•. ,....,; ..that·.·,!'ac.cl:.b') tb.~ ~Q
1831P2
tbl. 11Jalt.
The third
part of
tbe
Pre.ideat·. tax pr...... WGtal.
:revl. . the tax trea1aellt 01 capital pia. &JUt I •••••
witb it. priacl,.1 teature a reductloa 1. tbe perae. . . . .
of 10000-tera capital laid tbat .",.t be lDalu". 1a t ....ble
iacaM of ladlyldual.
30 percellt level.
tr~
the preseat :iO perce."
to a
Tbl. reduotiOD . .4 related 1_tur.. . . . .
fuller flow of capital bf 1llCrea.lq tile 1IGb111 tJ' d
lD. . .tMat luau, tbe liquidlt, of capltal aarketa, . . .
1. & 8ubataDtial reductloa 1D rates oa 11l41vldual &ad
corpora.te 11lc. . aDd capital pl•• &t all 1. . .1. -
" ....nbc
a tread of over thlrt, ,ears which has wilDe. . . . ra,. .
-.31 -
reduetion would be 18 percent.
The .ffect of lower
individual tax rates for each taxpayer -- a
r.duc~~oa
fro.
20 to 30 percent in the top rates in ever7 income bracket _
would be to increa••• ffort and incentive; the aarket
rather tban tax consequences would become .ore the prl. .
determinant of economic decisions; and the door to
substantial increases 1n net disposable ioco.. after taz••
the final test -- would open more inVitingly.
The .econd part of the Pre.ident's progra. 1. to
provide additional direct incentiv•• tor inv.at.ent
b~
1ncreasing the rate of return or profit after corporat. t ..
The proposal would reduce corporate
~ax
rates from 52 to .f
percent by 1965, and also reduce in 1963 the Boraal rat. of
tax
OD
the first $25,000 of corporate inco•• froa a 30 per-
cent rate to a 22 percent rate, constituting a 21 Der_
ceat reduction in tax liabil1tle. for the 450,000
••a11 companie. who•• corporate inco.e do•• Dot exceed
185
This tax progrAllt is- baaed on the pr1Dclpl. "tbat
there 18 clear need for
~ax
po11C) OhaD&e. -tb&\
~~~
further tncrease demand and lDvestment'for' p-owtb.
It 1. a balanced prop-ua dellllmed a81:be-
~. . tG. .t
ht .... lt. has said-to ezpUla demand aaaoaC DOth 1"••8'to1"a
ana conaumers, to
anCl
boo.~ the
acono.,. 'ln both- -en "O.,t-rWl
the lODI-run, aDel to ..chieve in-,ti.e DOth-. bit..1"allc.",
tull employ••n~ economy-and'.
balanced~P8d.r.l
bud.at."
The' maiD'- feature of the -program" is-' tb• •nac~a" thi.
year. in a .1ngl. c:omprebeulYe 0111, Df'
reduction" of rates ox' tu..
IlODth period' beC1DDiD& Julr 1
For all croups of lndtYldual
.&.11
.taps til 'he 11
1963 1 tbrOllKn JanU&1'7 J.~a 1961
~~ayer. eoab~4eG-~h. o-.~11
r~rcent r~te.
tax
·top.'toc-b\.~rtOil
OU -indl-rtanal 'and'·'Oorpota:~.
inCome and capl ta~ .rains' to· take .ffect-
1~
&'
cOn&titutln~
l1abl11t1~a
for
A 27 per_
th~ 4~?OOO
-~.28 -
tax prosraa tb. auaber ODe leetstatt•• object1 •• tor
1"3
-18-
-
.......ldiq ,1...... ·of ~•. J.Na.•~~,"'~~. "u.~-
188
.- SJ'I-
wi"'JUl.~""'i_\...-.&
Ibe'Coap_''''_poJMted
••
IN2,?eoDUial. . both ...... :·1_ _*-t·;*ax;~ . . . .14
alpi" . . .t ....e1.... , .....1al_·~J...~.~t·~
• •o_IICIecl."'. tM;Pnal.deat:
.....
.
~.;1.
u.. ...... ~
&111 ..... 1F~·.1·1IrL1.1& •• ~
_lJ .....':.reY__ 'l"aiei. .-:n1_ _ to . . . .llt~)'tIae
-~-~:Jq
"~7~~~ A
t.ae:,• .,_.........dit.t1al
v.s~. ~', ~
a1CA1ti....t.~ 11"'~.i • •:':la! ....;~'do.:z. . . . . . .
~~..,,,.·~I.~h18:fl...t
............ J. . . . . ~i.atd'. .~ .••.
the se..retu7 . o~.; ....
~_uy. ~lnd.w.t. . ~qa4:"'(i.''''
•• :'
.~. ~,
.t-4t1ae·C:O....... t~to-l . . .nue.; ......QpU'.UOal.f_!J.
...........1•• tu
cna
I'. . . . . . . . .
to;.fol1ow~"'''' u...~~:~:
189
- 26 -
There were . other 8ilDiflC&At
in 1961-62.
~¥aAda
lA
~az
pollc7
The tax propoaala ill .the Pr ••14e~t'.o~
f1rat Message ill April 1961 lDCludad.· reco_Adatt.._
dulped to oft.at the
t~
reductiolUl e»tt....4.,.t o
.u.u_
late the .CODOIlY throucD the 1Av.atMllt tu.4 "8d1 '& by
l
Q
"
-~
- 2& -
line in an ever faster cycle, it adopted. De. teat
that Dermits a businessman to fix hi. preferred 111.
for aacbinery and equipment, provided only that hi.
actual replacement pattern conforms to bis e.timate
in a reasonable period of time.
Tbe investment tax credit reduce. current tax. .
for a busine•• by seven percent of annual expenditure.
for Dew IUlchinery and equipment.
It was .lao d•• lCRed
to provide an incentive to translate discoveri •• of
Dew products and new proce.ses iDto tbe .aim str. . .
of economic growtb.
J 0, •
•
"'-Jv
- 24-
to tbe adoptloa of 'tax pollei. . · that -.uld '. - - - " ,
Tlai. 1altl&tl". ".ulted 1.. a tWO-PI'OIlpcl .fttp _ _
of tile taa treat_at
tbe traaalatioA of
o~
caepreolaUoa &ad lepalati. .
tbe fruit. of acl.ace aDd
tecbDo1ocr
IrOll tbe laboratol"J' to tile procluctloa aDd d1.,..lb1lt1oll
- 23 -
bie ac1cU. . . to tb6
ezpaDlli... "
4coDOlUC
Club
Ot ___ tOd
1.
- 22 .. _
194
discharging "goverl11Dental.~r•• POD.i~11i tl ••. -., had t;be
incidental ~.ftect
of~ 8uPpJ,..t.Ilc.~_job.tll·&J1d,add.in..
too the
gro.8·DatloDal·product~throuch;coDtract.,~s&1~i.St
purchases, pensions.
p'aD~s-ia-a1d.
etc.· Buttheae
increas.d eXp8nd1 tures were not enough to produce au
adequate rat. of ecol1Oalie, growtb.)
plludlD.K,: private
~Ollly"a
health7. ex_
.eotor.·.eould -meet ftba~ Qatiooal..Aeed
in our system.
And. siDce 19a1, eross private domestic IDv •• t ••• t
i8 the one major component of economic activity whiCh
bas shown no upward trend.
1955 peak of
when real
$7~
IrOBS
It did not return to it.
billion (in 1962 prices) until 1962
national product had rlseQ by 21
-
P.~C.nt.
The President decided against reliance on .... i ••
increases in rederal expenditure because be telt that
"In today's setting private consumers. employer. and
iove.tors should be liven a full opportunity
fir.t.~
~.~
- 21"': billion. of· "hie&.. ,·&;3 b111ion weot to aefenae, .pace
&Del 1.tereat aDO ' •• 9 bl1110n to re...1D1D&
procraa.. _
aiDua· '.1 bl1110a tor allOftJlcea aDO a4juataeDta.
TIle
lDoreaae 1n adaiDtatratlye budget expenditure. for tbe
tlar••• tt.oal rear. 1182 tbrougu 1M. 1'111 aaouat to
'l'1.a -b1111011.
d.,...... ·.pace·
Tn1" fOlD' four bltl·loa clolla.ra. oz-
and latereat, whl1..... 6 b11110D repre_llta
leaVins '.4
The. . .abet"tial
ID~da ... 1~
bl~llGD
pdbllc expenditur••
approacld.as '50 1~il110D: &fte~ atfOW1ul tor iat.r-
•
,
.
- 20':'
budge~8
•
But the pertormance ot the overall
during tbe past five yearD, wben there have
eCODOIIly
been-.uoa~&Dtlal
increases in lederal. ata te and local expenditures, did
Dot suggest that increased public expenditure • •OU~d give
the vigor needed to our economy. unleS8 there was
dyn~ic
&~80
a
growth in tne prlV&te »ector.
The Federal requirements for natlonal security
and domest1c civilian services at the Federal level
will have increased the administratIve budget by
$21.4 billion in tne e1x years endioi with the flscal
year 1964.
This aUDStantlal trend
expenditures naa been
and
~mocratic
~p.&rd.
cha~acterl.tic
admInistrations a8
1n Federal
ot both
a.pub1lc~
~hey .ouiu~
to r •• PQDd
to the requirements ot national security ana dom•• tic
neeelS,
In the three fi.cal years 1969-1961 there
Waa a total
increase in administrative bUdget expenditures of $10.1
1........Q7,
-- \.9-
Public ~policie. pia,.
the' type of .ecooamic
work·to advantage.
aD
iJaportant. part aa-,provtd1n£
cl1mate-iD.wblohtthi.~.y.t"~.~11
Budptary.,pollole8.:.d.b~:.aDa_nt.
aooetary policy all pIa,
a·role~D.tb.
acbeme of
Private polioi•• b, man&,ementand labor
the general. economic
Alaa. 'buyer and
cl~t.~tor
~1Dve.tar
t~DK8.
can,&1f.c~.lco ~
batter or wor•••
cOIltidence;.caA·,be'. of :.decla1ve
state ad local. ·--.t:,&:tax pollc)p'daalped·l.to :prcaote..ll
to t:1'bere are llaDy' who·urge tba:t growtb could be' IlOre
surely achieved by a ma.Bive increase in
~ederal
183
- 18-
But,. educa tiOD to utilize or partlclpattn,1n the
productioa and di8tribut100 of oe" goode aoei -rvlc••
needs capital formatioo for practlcal,app11catloa aDd
tran8latl00 ioto pluta aDd· jObs.
IDv••tmeat
opportunl ti•• must be. trUUlla ted· ioto real 1 t7'~ to ' be
. .a.n1D,tul.
Sometimes' there. are cftat:.lac8
1D~
the pace· of
capital toraation and lnvestment io taking advauta.&e of
invesueDt : oppor tun 1 t1e..
techDoloelcal
The: de,ree" of lac; betweeD
developaaent'~&Dd
lnv••taeDt lD a,priYate
eoterpr1se .•ociety. ,sucb ... ours, _depends ~ OQ'o" ceDe ra 1
eCODC*lc ;coodi tiona
1, ••• !. adequac,: of.: _rat {dellaDd.
O~:' pua-GhaalDC:: power • :: prof1 t. ~.,
tbe a,allability of capital-QD
other lncen t1 vea •. and
r.a.ODable~'.r.a4~ W~~O
It·alao,depeloda OIldrba' are:::8oaetlae.,;call.c:l "aoiJaal
- 11 -
to move the new technological d.evelopments fro. labor&tor,
to production line and distribution or Beryie. center.
This 1s the procoss wbereby & fully employed aocletv
becomes increasingly productive.
Thero i8 and vi11 be no shortage of Inveataent
opportunities in tbe United States as long as our
grow1ng
popul~tlon
~e rlslA~
1s
educ~ted
to a more abundant ltre.
industry of discover, tlo.ing from our
sctence and technology can toster a lar,. and crowlne
demand for goods and serylces, Improved or Dey.
EduCAtioD and technolo&y can multiply new
opportunities
by
Inye.t"~t
open1ng up new products, .ervice. &D4
demands, as yell as
tralDln~
both young And old to
participate eflectlvely In the creation and utilization
ot these new products and serylces.
for the theory or
Aalorlca
bee~use
pr~etlc.
There is no place
of economic stagnation in
of lnadeqU.1te deJlWlc1.
,......
c:::.
.~.
J
"-"".'
- 16 -
technology -- to name
SOMe
of them -- can and wlll
playa useful complementary role.
Dut these are Dot likely to be fully effective
in ending the five-year period of sluggishness -lthout
the catalytic and dynamic influence of & new tax POlicy
deSigned for growth and competitive efficiency.
The acceleration of national economic
gr~h
requires
tbe adoption ot policies designed to 1ncrease aggregate
demand so as to fully utilize available manpower and
fac1lit1es in the framework of an already developed
technology.
But full employment is Dot enough.
More
rapid crowth, aa well as competitive effectiveness, a1&0
requires policies deSigned to increase the share of Our
national wealth and effort committed to expanding
technology and capital format1on.
For it takes 1nvestment
- 15 -
The essential element of this program 1s a new
tax policy, designed to eliminate an unduly heavy draS
on purchasing power and demana -- to provide new
incentives for investment and effort -- to encourage the
utilization of new
~echnology
and facilities -- and to
take a giant step towards a tax structure which
interferes as little as possible with the operation of
the tree market mechanism while supplying the revenue.
necessary to our national security and accepted national
needs.
Other economic programs -- the coordination of fiscal
and monetary policies to encourage full employment and
~rowtbt
the provision of adequate resources for
improved education, manpower retraining, enlarged
opportunities for youth, area
redevelop~ent,
and the
removal of limitations on and encouragement of civilian
- 14 -
The overall economic program of thlsAdmlnlatratlon
goes to the core of the problem of growth and
productIvity in our type of natIonal economy.
t t 18
desiined to release
expanslon~
and
encoura&e the inherent
forces 1n our great pr1vate enterprise Qconomy
and
preserv1nc
strengthening the free market.
President Kennedy bas said;
"1 regard the preservation.and strengthening
of the free market a& a cardInal objective of
this or any Administration's policies.
It 1&
well to remind ourselves from time to time of
the benefits we
~erive
a fre9 market eystem.
from the MAintenance of
The system rests on
freedom ot consumer choice, the profit motive,
and vl,orou8 competition tor the buyer-s
dollar~"
the specific trends in tax policy which have beeD
developed to meet this situation'
What is'their
significance for the American economy of "tomorrow?
The Current Role of Tax Policy
A tax prograJD alone cannot bring us to our natlollal
goal of achieving an adequate rate of economic
~rowth
or a resurgent competitiveness in markets at hom. and
abroad I it is only one element.
But its relationship to
the expansion of demand and investment in the private
sector of our economy make9 it the key to speeding ecaao.
growth in tbe Sixties.
And the-relationship ot tax pOlic1
to the intensification of our civilian .technology and ita
translation into new products and services and new and
.a~
efficl.nt~procesBea for eatabll8bea products and .erVlc••
make trends in
~hat
policy an important element In
lncreasing our competitlve efficiency in market. at bo. .
and abroad.
-,12 -
failure of the economy to approach itr potential.
With the exception of th. depression,
DO per10d
in this century haa witnessed sucb a peralateat-uader_
utllization of productive re.ource. in the Un1ted Stat•••
The•• are
.0•• of the facta that bave joined
maJor •• pent of our econom, tn
fA.
mild and sporadic prosper1ty with
every
consa.WI tbat ..
DO
stron. aa4 aubat&Dtla
pusb .forward 1n oyer 11 ve 78ar8 1_ le.. tban •• require
and
1••• than we
caD
accept.
Aga1nat thl& backlround of hard, cold lac' Why do
thl.
A~D1.tratloD 8
AaeJ:iea tOl'wud?
Why
overall economic prograa to move
was a tax pro",. . cho••o . . til.
Met appropriate tool una... tbe clrcU8IIJta.nces tto _ "
the problem of alow
,row~h
wblcb haa
ca.~la
.badow Over
priaarl1y fro. aD unantlclpated rece.8ion, and the •• tt.at-
- 10 -
20S
probl •• , u ".11. aa beiDa an lapol'tant .1. . .llt J.1l
which our productivit,.,.tt1cleDcy and ooapetitl.eae••
c:U£.
t i lazKelydepeDdent.
(a)
~Tbe~l. . t'balt
decade brougbt
a cl1l1intab1aa· ~I'e.ntap·ot 08 p~.
v
2 n7
I
_
0
_
After 60 aaotha of uu.plo,aeot 1• •_ . fd f1_
pel'ceat, ...ve tor
ODe
aaath, tbe
De. ,.ar fl. . .
Altboqh uneaplopeat hall beea 81plflcaatlJ' ........
atill w11 10 uee. . of four a11110a people "-PI., ••
...tara Buropeaa couatl'l•• of ., S aD4 •
OWD
DeZ'Ceat . . . . . . . .
earlier" peroeat. tread, ....Q tJloup our rate I ....
• lace
1.aS.
209
- - likei,
to ext.ael t~ 1863.
Stlll, the tao,
poteDtial for f1v. ,.are poe•• a perplezina cball....
to the A.er1caa people.
-1- 6 -
10 the world 10 whlch you are l1vlD8 and .uet
assume leadershlp, taxes are .ore thaD a personal
nulsaoce or the support ot useful public service.
J'ed.eral, state and local tax•• in the United Stat••
dralD fra. the truits ot private activitr
27 p8J'ceDt of national income.
approx~t.l~
The allOUDt anel the
•• thod of extractlOQ of this .1lD1flcant fraction
the fruits ot our collective .ffort aftect.
o~
1.portautl~.
in the words ot a cCIIIID8ntator, "that COIIlp8Ddiwa of
thiDa., patterns, choices, institutions aDd prlncipl••
we call a civilization."
But why
1. euddeDly
le 1 t 80
you 11&1 ask -
1apottant?
tha t
tax pollor
Whr. for the firet ti. . in
your .eDeration i8 the lederal tax etructure the central
poiot ot aDJ dlscue.lou of domestic policy?
To answer that question we auat look at the perfo~ce
ot the U. 8. economy over th. laat five ,ear. w1th
- ~
the end of the tragic waste of unemployment and unused
resources --
th~
step-up of the growth and vigor of
our national economy -- the 1ncrease In job and
investment opportunities and the incentives
~o
uae
them to the bilt -- the increase 1n our productivity
the strengthening of
nation s worldwide
o~.
--
and
national abi11ty to meet the
commitmen~.
tor the aetense aDd
growth of treeaom.
No Qoubt, many of you are atill skeptlcal.
Tou aay
think of taxes, as many do 1n a1d-Aprll, a. little more
than a great nu1sance, recalllng philosopher Kdmund
aphorism tha.t "to tax and to please,
DO
love and be w18e, 1a not given to men."
more
~nan
~~k.
to
Or, you IIlaY thlDk
ln more kindly veln with Justice Oliver Wendell Holmes
that "taxetll are what we pa.y for civilized Bociety."
Surve11nc tbe·· vaat paaoraraa of' chal1.D. . ·· faciatt-
~1lIal ted
eDactaeDt tld.·,ear lot a .ubat&Dtial~N"UG'l"·' .... revls10a
the most UrceDt taak coofroatlDg the
to
tbe achiev•••Dt of our':u:tlOilal ,0':1. 'In, WIlt.b.l'OU~hilll
-3- 4 111 baraaOllJ
with, rather thaD re.traiDed aad d1atortect bJ
our tax .,etea.
O\lr cOIIlpeti tl V8 efficieDc,. detenalai". our trade
balauC8. will be the decl8ive factor 1a achi••i •• a propel"
b&laDca 1D our lnteru:tlOA&l pa.)'IIellta. wi thOllt
role and r •• poa81bl11t, for
~.ader.bip
1A
.1""
liY~_
up
~
World
. .curity aDd developaent that cteatln, haa placed UPOIl __
Vrl1ted Stat...
Tax pollo1 --1 re.trict or eacoura... 110wa
of iDv••t.ent la ne. aachlDer,
~
wblch our relativ.
01 labor COIIts ill the 1fDlt.d Stat•• &Del its caapetit-.
, . . of
'0\1 10\101 Aaerlcaa••
who will Inherit ill .. fM
abort ,ears the respon.ibilities for Jour tt.e. &Ad tbe
future, . , thll1k that thi. 1.
departaeDtal later••t ud
IJl
exacprat.ed yl•• of ,-.
preOCC\lpa.~lQP_
actlV.·CODslderat10Q~
"Tbe·~ery-t1pe
of society for the future -- whether It
Hctor . of . the ecooom,. for it. "1Ilber•• t ellpU.l0BU7 ,store.
Tax policy .ftecta tbe
aDd to-r' the
Da tional
adeqU&OJiof~publlc
. . . . .dl_~
needs of, a. ' rap1dlF~ irowtDc~ pePUlattoa
ta a ••lttl, evol vine society,' beCo.1D. llarplF Ubaa. &Del
'trOll aD" ever expaodiDg t vilorou. private ecooC87. operatl...
') '1
A
_ 3 r .... 't
- 2 -
O\.lr
~'I'be *W'e:ft1 ..-t,p8
of .octet,. for the future -
.ucee•• of'. tax pol1c1
fo.'crowth~lllcb
our
whetber 1t
rel~-:'J"1f;
REllARY..5 OF TIlE ,HONOltABLE HENRY U. FOWLER,
UNDER SECRETARY OF TIlE TREASURY, AT
POMONA COLLEG!:, .', CLAREl1O:fr, CALIFORNIA,
TUESDAY, APRIL 23, 1963, 11:00 A.M. (PST)
NEW TRL~S IN FEDERAL TAX POLICY Am> THE
'SIGNIFICANCE FOR THE', AJaRtCAN ECONOIrf~;:~
New trends lD Feaeral tax po11cy Aave great
61~nltLcance
for the American economy of tomorrow aDd
the future.
Aaer1can coll.sa students have a"
extraordInarily important stake in this dull SOUDdlDK
8ubje~,
-- Eeder.l tax policy.
importantly tbe
cr.a~~oQ,
It maT affect
availability. and nature ot
jobs for 26 mill10n YOUDC people, aies 14 to 24, who
en~or
the
~abor
.1~1
force In the cecade ot the Slxti •••
But IIOre than Jobs are at stake.
OUr
nat10nal strength -- the rate of econoaic growth
which i . the base for our national security __
.11~
ue
affected by the outcome of the issues of tax pollcy UAder
- 4 -
219
Our unfavorable balance of payments for 1962 remained somewhat
in excess of $2 billion, a considerable improvement over the
$3-1/2 to $4 billion annual imbalance that characterized the years
1958-1960. But this situation is still a serious challenge that
must be met if our shared responsibilities for Free World society,
development and a trade and payments system based on a sound dollar
are to b~ adequately discharged.
The primary key to this balance of payments problem, as well
as being an important element in achieving maximum economic growth,
is the addition to Our national stocks of plant and equipment upon'
which our productivity, efficiency and competitiveness are largely
dependent. The last half decade brought these developments:
(a)
a diminishing percentage of our gross national
product has been devoted to business fixed
investment and, particularly important to
producers' durable equipment,
(b)
increases in our stock of business plant and
equipment have proceeded at a substantially
receding rate in recent years in relation to
other areas of the economy and other periods,
increasing by only two percent a year since
1957, compared with four percent a year in
the 1947-57 period.
(c)
the rate of increase in the production of
business equipment has fallen far behind the
rate of increase in industrial production,
(d)
there has been a startling rise in the
proportion of our machinery and equipment
which is over ten years old, and
(e)
between 1954 and 1960 there was a sharp
'decline in the rate of increase of
productivity per worker and per hour from that
of the earlier postwar period.
There have been deficits in the administrative budget in all
save one of the last five years totalling $24.3 billion, ranging
down from the $12.4 billion deficit of 1959, resulting primarily from
an unanticipated recession, and the estimated $8.8 billion deficit
in fiscal 1963, resulting from a failure of the economy to approach
its potential.
- 5 -
220
With the exception of the depression, no period in this century
has witnessed such a persistent under-utilization of productive
resources in the United States.
These are some of the facts that have joined every major segment
of our economy in a consensus that a mild and sporadic prosperity'
with no strong and substantial push forward in over five years is
less than we require and less than we can accept.
Against this background of hard, cold fact why do new trends
in tax policy constitute the very heart of this Administration's
overall economic program to move America forward? Why was a tax
program chosen as the most appropriate tool under the circumstances
to meet the problem of slow growth which has cast a shadow over
so many facets of our national future? What are the specific
trends in tax policy which have been developed to meet this situation?
What is their significance for the American economy of tomorrow?
The Current Role of Tax Policy
A tax program alone cannot bring us to our national goal of
achieving an adequate rate of economic growth or a resurgent
competitiveness in markets at home and abroad; it is only one element.'
But its relationship to the expansion of demand and investment in the
private sector of our economy makes it the key to speeding economic
growth in the Sixties. And the relationship of tax policy to the
intensification of our civilian technology ,and its translation into
new products and'services and new and more efficient processes for
established products and services make trends in that policy an
important element in increasing our competitive efficiency in
markets at home and abroad.
The overall economic program of this Administration goes to the
core of the problem of growth and productivity in our type of
national economy. It is designed to release and encourage the
inherent expansionary forces in our great private enterprise
economy, preserving and strengthening the free market.
President Kennedy has said:
"I regard the preservation and strengthening
of the free market as a cardinal obje~tive of
this or any Administration's policies.~ It is well
to remind ourselves from time to time of the
benefits we derive from the maintenance of a free
market system. The system rests on freedom of
consumer choice, the profit motive, and vigorous
competition for the buyer's dollar."
- 6 -
221
The essential element of this program is a new tax policy,
designed to eliminate an unduly heavy drag on purchasing power and
demand -- to provide new incentives for investment and effort
to encourage the utilization of new technology and facilities -- and to
take a giant step towards a tax structure which interferes as little
as possible with the operation of the free market mechanism while'
supplying the revenues necessary to our national security and
accepted national needs.
. Other economic programs -- the coordination of fiscal and
monetary policies to encourage full employment and growth, the
provision of adequate resources for improved education, manpower
retraining, enlarged opportunities for youth, area redevelopment,
and the removal of limitations on and encouragement of civilian
technology -- to name some of them -- can and will play a useful
complementary role.
\
But these are not likely to be fully effective in ending the
five-year period of sluggishness without the catalytic and dynamic
influence of a new tax policy designed for growth and competitive
efficiency.
The acceleration of national economic growth requires the
adoption of policies designed to increase aggregate demand so as to
fully utilize available manpower and facilities in the framework of
an already developed technology. But full employment is not enough.
More rapid growth, as well as competitive effectiveness, also
requires policies designed to increase the share of our national
wealth and effort committed to expanding technology and capital
fODmation. For it takes investment to move the new technological
developments from laboratory to production line and distribution or
service center. This is the process whereby a fully employed society
becomes increasingly productive.
There is and will be no shortage of investment opportunities in
the United States as long as our growing population is educated to
a more abundant life. The ,rising industry of discovery flowing
from our science and technology can foster a large and growing demand
for goods and services, improved or new.
Education and technology can mUltiply new investment opportunities
by opening up new products, services and demands, as well as training
both young and old to participate effectively in the creation and
utilization of these new products and services. There is no place
for the theory or practice of economic stagnation in America because
of inadequate demand.
- 7 -
222
But, education to utilize or participate in the production and
distribution of new goods and services needs capital formation for
practical application and translation into plants and jobs. Investment
opportunities must be translated into reality to be meaningful.
Sometimes there are great lags in the pace of capital formation
and investment in taking advantage of investment opportunities.
The degree of lag between technological development and investment
in a private enterprise society, such as ours, depends on general
economic conditions, i.e., adequacy of market demand, or purchasing
power, profits, other incentives, and the availability of capital'
on reasonable terms.
It also depends on what are sometimes called "animal spirits" -optimistic attitudes.
Public policies play an important part in providing the type
of economic climate in which this system will work to advantage.
Budgetary policies, debt management, monetary policy all play a
role in the scheme of things. Private policies by management and
labor can affect the general economic climate for better or worse.
Also, buyer and investor confidence can be of decisive importance.
. But in a society where a large percentage of the annual income
is drawn off by government -- national, state and local -- a tax
policy designed to promote growth is fundamental if the lags between
invention and investment are to be minimized.
There are many who urge that growth could be more surely
achievep by a massive increase in Federal expenditures well beyond
the limits and scale of recent budgets. But the performance of the
overall economy during the past five years, when there have been
substantial increases in Federal, state and local expenditures, did
not suggest that increased public expenditures would give the
vigor needed to our economy, unless there was also a dynamic growth
in the private sector.
The Federal requirements for national security and domestic
civilian services at the Federal level will have increased the
administrative budget by $27.4 billion in the six years ending with
the fiscal year 1964. This substantial trend upwards in Federal
expenditures has been characteristic of both Republican and
Democratic administrations as they sought to respond to the requirements of national security and domestic needs.
- 8 -
223
In the three fiscal years 1959-1961 there was a total increase
in administrative budget expenditures of $10.1 billion, of which
$5.3 billion went to defense, space and interest and $4.9 billion
to remaining programs -- minus $.1 billion for allowances and
adjus tments. The increase in administrative budget expenditures for
the three fiscal years 1962 through 1964 will amount to $17.3 billion.
Twe1ve point four billion dollars, or nearly 72 percent, of this
total represents increases in defense, space and interest, while
$4.5 billion represents increases in all remaining programs
leaving $.4 billion for allowances and adjustments.
Increases in state and local governmental expenditures during
the same six-year period will add approximately $26 billion to the
total of public expenditures.
These substantial increases in public expenditures, approaching
$50 billion, after allowing for intergovernmental'transfers, in the
interval of six years -- supplied for the primary purpose of
discharging governmental responsibilities -- had the incidental
effect of supplying jobs and adding to the gross national product
through contracts, salaries, purchases, pensions, grants-in-aid, etc.
But these increased expenditures were not enough to produce an
adequate rate of economic growth. Only a healthy, expanding, private
sector could meet that national need in our system.
And, since 1957, gross private domestic investment is the one
major component of economic activity which has shown no upward trend.
It did not return to its 1955 peak of $75 billion (in 1962 prices)
until 1962 -- when real gross national product had risen by 21
percent.
The President decided against reliance on massive increases
in Federal expenditure because he felt that "In today's setting
private consumers, employers and investors should be given a full
opportunity first."
A decision was taken to use tax policy to seek expansion through
our free market process by placing increased spending power in the
hands of consumers and investors and offering more incentive to private
investment interests.
There was another alternative -- the increased use of credit
and monetary tools in an attempt to provWe sustained economic
growth through lower interest rates and substantially increased
supplies of money and credit. But, as the President pointed out in
his address to the Economic Club of New York in December, "Our balance
of payments situation today places ll..nit..,; on our use of those tools
for expans i on. "
224
- 9 So it was determined that the most desirable and feasible policy
to meet the problem of slow growth and decreasing competitiveness was
to expand demand and unleash invesbnent incentives through tax
policy.
Specific Trends in Tax Policy
During the first year of the present Administration, a reasonably
satis"factory recovery and expansion from the recession gave hope that
llie nation was breaking the grip of slow growth and below capacity
~rations.
Under those circumstances, President Kennedy gave first
priority to the adoption of tax policies that would encourage
mvestment in productive equipment, stating that: "
"The immediate need is for encouraging
economic growth through modernization and
capital expansio~."
~
This initiative resulted in a two-pronged program -- now an
accomplished fact -- administrative liberalization of the tax
treatment of depreciation and legislative enactment of the investment
tax credit. The change in.the administrative rules concerning
depreciation of machinery and equipment did more than reduce the
lives of existing machinery and equipment for depreciation purposes
to'up-to-date practice; it sought to encourage the translation of
the fruits of science and technology from the laboratory to the
production and distribution. line in an ever faster cycle; it adopted
i new test that permits a businessman to fix his preferred life for
~chinery and equipment, provided only that his actual replacement
)attern conforms to his estimate in a reasonable period of time.
The investment tax credit reduces current taxes for a business
)y seven percent of annual expenditures for new machinery and
~quiprnent.
It was also designed to provide an incentive to translate
iiscoveries of new products and new processes into the main stream
)f economic growth.
There were other significant trends in tax policy in 1961-62.
fue tax proposals in the President's first Message in April 1961
lncluded recommendations designed to offset the tax reductions
)ffered to stimulate the economy through the investment tax credit by
lome revenue producing measures designed to eliminate deficits,
mequities and weaknesses in the law.
The Congress responded with the Revenue Act of 1962, containing
both the investment tax credit and significant reform provisions in
almost all the areas recommended by the President -- in all nearly a
\1llion dollars of revenue raising reforms to match roughly the
tevenue lost by the investment credit.
- 10 -
225
A significant first step in the revision of the tax structure
was accomplished.
In his first Tax Message the President had directed the
Secretary of the Treasury, building on tax studies of the Congress,
to undertake the preparation of a comprehensive tax reform program
to follow "the first though urgent" .step.
Before these studies by the Treasury Department, inaugurated
in an atmosphere of economic recovery, were completed, new
developments changed the picture.
At the outset of 1962, after nine months of rapid recovery,
the expansion slackened. Between the fourth quarter of 1961 and
1962 the gross national product·rose barely enough to permit the
nation to hold its own on rates of unemployment, profits and capital
use~
The overriding lesson of this 1962 slowdown was that the
pattern of slow growth since 1957 rather than the temporary spurt
in 1961 was the true measure of our economic problem.
Despite a break in the stock market and considerable pressure
for an emergency temporary tax cut, it was determined in the
summer of 1962 that the right approach was a permanent basic reform
and reduction in our tax rate structure that would include a substantia
net tax reduction and long needed structural reforms demanded by
logic and equity. The position was clearly taken that our tax rates
are so high as to weaken the very essence of the progress of a free
system, incentive for additional return for additional effort. It
was also recognized that the level of present taxes constituted a
drag on recovery and growth, because during the expansion while
Federal purchases were adding $7 billion to the economy Federal taxes
were siphoning out $12 billion.
The stage was set for the second major phase of forging new
trends in tax policy. In January 1963 the President in his State
of the Union Message made a new tax program the number one
legislative objective for 1963.
This tax program is based on the principle that there is clear
need for tax policy changes that will further increase demand and
investment for growth. It is a balanced program designe~ as the
President himself has said,"to expand demand among both investors
and consumers, to boost the economy, in both the short-run and
the long-run, and to achieve in time both a balanced full employment
economy and a balanced Federal budget."
- 11 -
226
The main feature of the program is the enactment this year,
in a single comprehensive bill, of a "top-to-bottom reduction" of
rates of tax on inrlividual 'and corporate income and capital gains to
take effect in stages in the l8-month period beginning July 1, 1963
through J~nuary 1, 1965. For all groups of individual taxpayers
combined the overall reduction would be 18 percent. The effect
of lower individual tax rates for each taxpayer -- a reduction from
20 to 30 percent in the top rates ,in every income bracket -- would
be to increase effort and incentive; the market rather than tax'
consequences would become more the prime determinant of economic
decisions; and the door to substantial increases in net disposable'
income after taxes -- the final test -- would open more invitingly.
,
The second part of the President's program is to provide
additional direct incentives for investment by increasing the rate
of return or profit after corporate taxes. The proposal would
reduce corporate tax rates from 52 to 47 percent by 1965, and also
reduce in 1963 the normal rate of tax on the first $25,000 of
corporate income from a 30 percent rate to a 22 percent rate,
constituting a 27 percent reduction in tax liabilities for the
450,000 small companies whose corporate income,does not exceed this
limit.
'The third part of the President's tax program would revise
the tax treatment of capital gains and losses, with its principal
feature a reduction in the percentage of long-term capital gains that
must be included in taxable income of individuals from the present
50 percent to a 30 percent level. This reduction and related
features are designed to assist investment by providing a freer and
fuller flow of capital by increasing the mobility of investment funds,
the liquidity of capital markets,: and providing a higher net return
on profitable investment.
In summary, the basic thrust of the proposed tax program
is a subst'antial reduction in rates on individual and corporate
income and capital gans at all levels -- reversing a trend of over
thirty years which has witnessed rates moving upwards in war and in
peace -- lifting the repressive weight of tax rates imposed partly
to constrain war and early postwar inflationary pressures -- and
now arresting growth.
The major reform in this tax program is the large reduction
in tax rates. The cost of rate reduction is $13.6 billion per
annum when fully effective in 1965.
- 12 -
227
In addition, some structural changes are proposed which would
lose additional revenue. Some of these are substantial enough to
be noted. Two are designed to rectify special hardships from taxes
on the very poor and the elderly; a much greater percentage of these
disadvantaged groups have become subject to the heavy weight of
Federal income taxation, as war and postwar inflation have
escalated subsistence level incomes into substantial tax liability
areas in the lower brackets. The third structural change meets another
hardship which rate reduction also cannot solve -- that faced by
the person with sharply fluctuating yearly income. The application
of
averaging formula applicable to all would give fairer treatment
to those with sharp fluctuations in yearly income such as authors,
artists, actors, athletes, some ranchers, some fishermen, some farmers
some architects and some individual business proprietors. A fourth
structural change involving additional revenue loss is aimed at
meeting the hardship experienced by persons who must incur moving
expenses for themselves and their families as a consequence of
change of employment. This burden can be severe and places an
undesirable restriction on labor mobility.
an
In sum, this group of structural reforms would involve a
revenue cost of $740 million meeting some of the persistent and
well-founded complaints regarding hardships, resulting not. only from
the present rate scale but from the operation of the tax structure
even under a reasonable rate scale.
To help meet the cost of rate reduction and these structural
changes to meet particular hardships -- totalling $14.4 billion
other structural changes -- broadening the base of taxation,
eliminating or the lessening of certain special privileges -- would
regain approximately $4.1 billion of the revenue cost of the
reduction, leaving a net revenue cost of the entire pr~gram when
fully effective in 1965 at $10.3 billion per year.
Without any new tax program, the projected budget for the
fiscal year 1964 would face the nation with an estimated deficit of
$9.2 billion. This deficit results from two factors -- the failure
of the economy to expand to a full employment level and the
compelling necessity -- for our national security -- to augment
sharply in the last three years our nuclear and conventional armed
forces, step up our efforts in space, and meet the cost of servicing
a national debt that has grown larger as a result of these
imperatives. The figures on Federal expenditures in the
administrative budgets cited earlier reveal that these increased
needs -- defense, space and interest on the debt -- account for
approximately 72 percent of the increase in the budget expenditures
in the fiscal years 1962-64.
- 13 -
228
The hard fact of life in this era of the cold war and continued
threat of communist aggression -- which, who can minimize after
Cuba, India, Viet Nam, Laos and Berlin
is that the price of going
forward this year with a tax reduction in the context of a balanced
budget will be a substantial reduction in our defense and space
programs.
The President refused to cut into essential national security
and space needs or to postpone a tax program needed to move the
economy out of its slow growth pattern. This situation gave tax
policy a new dimension -~ the need to coordinate it carefully into'
an overall financial plan. The principal objective of this phase
of tax policy was to exercise great care so that the actual
revenue losses from reduction in tax liabilities would be handled in
a fiscally.responsible manner to keep the deficit within prudent
bounds. The tax program was designed to meet this requirement in
two ways:
First, the rate reductions are s·taged over
three years, ccmwencing in 1963, so that, taking
into account the feedback from increased economic
activity resulting from the tax cut, the addition
to the 1964 fiscal year deficit would be only
$2.7 billion, and
Second, it included a stress upon the fiscal
importance, as well as reasons of tax policy, for
combining rate reduction with some structural
changes broadening the tax base and accelerating
tax collection of the larger corporations, which
would keep revenue losses from rate reduction
at reasonable levels during the period of deficit.
But a careful and controlled approach to revenue losses
was only one side of the picture. The other requirement was the
coordination of expenditure policy with the inauguration of the
new tax program. The President and.the Budget Director have
stressed three aspects of this coordination:
1. Civilian expenditures will be firmly
controlled, and in the 1964 budget expenditure
projections have been reduced;
2. Barring an unexpected worsening of the
cold war situation, the rate of increases in defense
and space expenditures, characterizing the three years
1962-64, should begin to slow down as the nation reaches
a new plateau of readiness and achievement in these
vital areas; and
- 14 -
-:?Q
3. As the President stated in his Budget Messag~;v
"As the tax cut becomes fully effective and the economy
moves toward full employment, a substantial part of the
revenue increases must go toward eliminating the
transitional deficit."
The Significance of these Trends in
Tax Policy for the American Economy.
The significance of these new trends in tax policy for the
American economy depends upon their acceptance, their effectiveness,
and their continued adaptation and utilization.
The investment tax credit in the Revenue Act of 1962 and the
administrative liberalization of depreciation allowances have been
accepted as law and have been well received. The co~bined effect
of these two measures which became effective, for the first time,
in July and October of 1962, cannot yet be fully assessed.
For the first time in many years, these changes place investment
in new equipment in the United States -- so far as taxes are a
factor -- on a basis roughly comparable to that in other industrialized
countries. Already, however, sharply increased business appropriation
for investment and forecasts of a rising trend of outlays this year
indicate that these tax policies are playing a significant part in
the move toward growth and increased efficiency. The resulting
benefits of these changes in tax policy in cash flow, increased
rate of return on new investment, and shortening the period of risk
of investment in capital equipment should serve as long-run measures
to stimulate investment for modernization and growth. They will give
science and technology a broader opportunity to contribute to overall
economic growth through both increased capacity and productivity.
Continued utilization and adaptation of these elements of tax
policy will insure that the tax system will not become either a
passive deterrent or an inactive stimulant to investment in capital
equipment -- a main source of growth and competitive efficiency.
Other provisions of the Revenue Act of 1962, designed to correct
abuses (the expense account and the failure to pay tax on interest
and dividends) or to eliminate undue preferences (tax treatment of
foreign income, special privileges for cooperative operations,
mutual lending institutions and mutual fire and casualty co~panies)
mark a real beginning. In reversing the process that has led to the
maintenance of a high rate structure a~d increasing preferential
treatment, they embody legislative and public recognition of the
fact that whenever one taxpayer is permitted to pay less someone
else'must be asked to pay more.
The significance of the other major trends of tax policy will
depend upon whether they become law or established public policy by
the accep~anc~_at this session of Congress of basic elem~nts of th~
15 Today this program is only a set of proposals advanced by the
President and the Treasury; they depend for their acceptance upon the
wi11 of the Congress as its members reflect the opinion of their
constituencies. As you know, public hearings have been completed
before the House Ways and Maans Conmittee, the tax writing committee
of the. House. For some weeks members of this expert and experienced
body will sit in executive session considering whether to report a .
bill and,· if so, what its contents should be. I would not predict
the outcome of their deliberations or the future of tax legislation.
I do wish to underscore the continued conviction of this
Administration that the national interest requires the enactment
this year of the best possible bill incorporating tax reduction and
reform that the experienced and informed legislators in the Congress
can produce. We will drive for· decisive action in 1963 whether
business this spring and summer is good or bad. The program that we
proposed was, in our judgment, the best one at the time. But, as is
always the case with tax legislation, there is room for improvement
and dogmatism is a vice and not a virtue. Hence, any opportunity to
improve on the proposals will always be welcome.
In the meantime, absent any expression of definitive legislative
action on the President's tax proposals, let us appraise their
significance for the U. S. economy should they be adopted along the
general lines proposed.
First, the program would result in a significant economic
stimulus. That economic stimulus will proceed along four principal
channels:
-- Individuals will receive larger after-tax incomes,
part of which will be saved but by far the major part -over 90 percent -- will be spent for consumer goods and
services. Such additional spending, a~ounting to $8.5 billion
of consumer purchasing power, will, in turn, add further to
incomes, leading to higher spending and another round of
increase in incomes, in a continuing process known as the
"multiplier effect."
-- Increased consumption will induce increased investment in both inventories and plant capacity and there will
be increased requirements for residential construction.
This is the so-called "accelerator effect."
Business investment will be further stimulated by
individual and corporate tax reductions, which will provide
more funds for investment and raise after-tax profitability
of new capital outlays. Taken together with last year's
- 16 -
231
-depreciation reform and investment tax credit, corporate
tax liabilities will be reduced $4.5 billion and th~
profitability of new investm~nt will be increased by nearly
30 percent. The pervasive, favorable effects of the tax
cuts on business and consumer confidence and expectations,
steadier employrn~nt, and attractive opportunities to exploit
more rapidly growing consum~r markets all will be major
sources of encouragement to private spending. A more
dynamic economy will spur technological innovations and
the introduction of new products.
-- The enlarged investment spending will itself have
a "multiplier" effect, since it will generate higher
incomes which will in turn expand consumer spending.
Thus, the program is an appropriately balanced one. The impact
on consumer demand will interact with the impact on investment
incentives to produce a far greater -total addition to incomes and
GNP than if the thrust of th~ tax program was concentrated on one or
the other impact alone.
Second, the repressive weight of current high tax rates on the
private economy will be removed as a part of our permanent tax
structure. The high individual income tax rates, ranging from 20 to
91 percent, sweep too much out of private hands in relationship to
our gross national product, so that consumer demand is throttled
down in periods ?f recovery. The rate structure means high marginal
tax rates that deter incentive, risk-taking and profit effort. The
corporate tax rate, at 52 percent, unduly limits the profitability
of corporate investment, making government the greater partner in the
enterprises subject to the highest rates.
Third, additional revenues will be available to the states and
localities at existing tax rate levelsL-as a result of a higher scale
of economic activity, thereby enabling them to finance increasing
state and local public needs with the minimun increased burden of
higher rates of state and local~.
Fourth, the thirty-year policy of increasing tax rates on income
in war and emergency -- and then allowing them to become fixed -- will
have been set aside by reason of a national conviction, e~bodied into
the tax code, that the current level of tax rates on income holds back
the growth of our private economy, invoking the law of diminishing
returns.
Fifth, national tax policy would incorporate as the primarY
QblectTve of income tax ~eform th: reduction in tax rates without
- 17 -
?1')
VL
.~
sacrificing revenu~s reguired for responsible financing of government
-- the design of the future would be the provision of necessary
revenues at the lowest level of tax rates, rather than the opening of
more "loopholes" in the existing structure.
Sixth, national tax policy would have arrested and reversed the
process of eroding the tax base by allowing special preferences and
privileges for certain groups of taxpayers able to pay their share
of taxes! which are not likely to be enjoyed by their fellow
taxpayers. A tax structure moving to lower levels of individual and
corporate rafes will be more resistant to devices whereby financially
able taxpayers escape or minimize their share at the expense of
fellow taxpayers. The practicality and desirability of combining
rate reduction with base broadening reform that moves toward a more
uniform distribution of the tax burden will have been established.
Seventh, the opportunities for the exercise of tax policy·__
~'as a key weapon in the arsenal of fiscal policy -- to be used
as an alternate to or along with Federal expenditures -- will have
been broadened. Action this year on the policy premises proposed
embrac~ the proposition that desirable reductions in income tax
rates need not be confined to periods of budget balances or surpluses,
providing that prudent policy of allocating a substantial share of
the increasing revenues resulting from normal or stimulated growth
to closing the deficit is faithfully followed by disciplined control
over increased expenditures.
n,
Eighth, the nation will have reincorporated in its tax system
a reassuring allegiance to the principle of rewards -- the leaving
of increased percentages of income to r,emain after taxes with those
who invest additional effort and capital in economic activity as a
~ns of spurring &rowth -- the profit motive, personal and corporate,
will be recognized and invigorated. As President Kennedy said in his
Tax Message "This will restore an idea that has helped make our
country great -- that a person who devotes his efforts to increasing
his income, thereby adding to the nation's income and wealth, should
be able to retain a reasonable share of the results."
It is the belief of those who put forward and support these
proposals that they will strengthen the economy. They believe that
the returns from them will more than pay for the revenues lost in a
few short years and provide a much larger measure of job opportunities,
national income and national strength and competitiveness than would
result from the maintenance of a status quo.
These trends in tax policy are based on a confidence in the
private enterprise system. In one vital respect, mounting an effective
effort against high tax rates -- this program will be a major step
toward reinvigorating the strengths and drives of that private sector.
- 18 Much else in the way of complementary policies -- public and private -
exercised by management, labor unions and government at all levels -may be necessary.
But the nation will have embarked on the essential task of updating our tax system to the challenge of the Sixties -- to the end
that private economy can grow and prosper at a faster rate, fast
enough to provide jobs for our citizens and the ever increasing
standard of living for all who will work for it.
We will have further adapted our tax system to another challenge
external competition -- so that it will no longer be the handicap
it bas been to U. S. based producers in meeting and living with the
competitive thrust of vigorousocrmpetitors in Europe and Japan. This
adaptation. should better enable the nation to continue to play its
.leading role in Free World security and development, without being
forced to retreat because of an inability to achieve a balance of
payments through an adequate trade surplus or the flow of capital into
a dynamic economy.
Finally, the adaptation of our tax system to the achievement of
more rapid growth and effective competitiveness will exemplify our
continued determination to maintain the relative level of national
strength that is the base of our national security. It is an essential
part of a national answer to Chairman Khrushchev's asserted belief that
"Development of Soviet economic might will give
communism a' decisive edge in the international balance
of power."
Far more then is at stake in current tax policy than a selfish
scramble as to who pays taxes. The shape and direction of the
American economy for years to come hangs in the balance on tax
policy decisions just ahead~
000
-3-
that there are times when the democratic process
does~ot
give its officials a free choice in such matters.
~
I wish
your
wisdom~
y~
success in your deliberations, for upon
your initiative, and your dedication to the goals
of the Alliance for Progress
depends the outcome of the massiv
effort in which we are all engaged -- to realize for even the
least privileged of ourpeople the spiritual and material fruits
of the vast promise that is America's.
0000000000000
-7-
difficulties one inevitably encounters in attempting to
bring about fundamental changes in whole societies.
your
par~
For
I am encouraged by the increasing realization
throughout Latin America that the origins of the Alliance
are essentially Latin American -- and that the extent of your
own domestic efforts Will) in the long run/determine the'
external resources which can be made available and succeSsfully.
utilized.
The realization of the goals of the Alliance is a
.!
~
formidable task.
Yet
as President Kennedy
Lt in his
recent message to Congress on the foreign aid program, I"the
achievements of the Alliance for Progress in the coming years
will be the measure of our determination, our ideals) and Our
wisdom".
Before ending these brief remarks, I want to say-again
how sorry I am that commitments to our Congress require me
to leave this afternoon.
I know you will understand, however,
1C
2 Vv
With regard to the overall effort of the Alliance ,for
Progress, I think there is much to encourage us.
I am
particularly happy that some of our mutual friends in,Europe
are coming to realize the need to join with Latin America
in its struggle for development.
The funds that ,the
Bank~has
raised in Italy, and the recent announcement of a significant
contribution by France to the development of our great neighbor,
Mexico, are good auguries for the future.
As I have repeatedly
said at so many Inter-American meetings, it is both logical
Bnd imperative that the prospering countries of Western Europe ~
... Japan/join more strongly i~the great and challenging task of
helping Latin America to grow and prosper. /;'--Looking back at the Mexico City meeting of the Inter_
American Economic and Social Council last October, I ~hink w~
all agree that it was helpful to all of us in realistically
assessing the achievements and the failures of the Alliance -thus
far.
For
ou~art,
we have a greater appreciation of the
-5-
utilization of the resources made available to it.
We
look to it as the principal financial institution of the
)
,
Inter-American organization to break the trail, to provide
J
leadership in showing the way to the economic and social
development of Latin America.
(j --'r~
I have repeatedly expressed my own high opinion of
the Bank's management, and I congratulate it on its successrul
flotation on the
issue.
u.s.
capital market of a $75 million bond
Additional evidence of our confidence in thtBank is
the request we have made to ou{congress to authorize U.S.
support of a sUbstantial enlargement of the Bank's resources ,
incl~ding a $1 billion increase in callable capital, a one-year
expansion of the Fund for Special Operations by $73 million ,
and a replenishment of the resources of the Social Progress
Trust Fund, which the Bank has managed so well.
We look
forward to working with the Bank during the coming year to
develop a program for the further replenishment of its resources.
-4-
arrive tomorrow evening to serve as head of the United States
delegation.
In the
meantim~
my close personal associate,
Mr. John Bullitt) the Assistant Secretary of the Treasury for
lead our delegation.
yourold friend
Teodoro Moscoso
~
~~~~J
.
United States Coordinator of the Alliance1who was detained
in Washington by illnes:; will arrive to join you tonight.
Mr. Bell has worked closely with President Kennedy since
Before~beQbmirigl.the
the start of his administration.
Administrator he served as Director of the Budget.
also had a great deal of
firs~and
AID
He has
experience in the development
of national economies and enjoys the full confidence of
President.
th~
I know that he is anxious to learn more about the
,
Bank s problems and
progress~and
+
is looking forward to meeting
all of you personallYlln many cases for the first time.
. L.J
As Mr. Bell will emphasize when he speaks _for the United
States on Thursday, we believe that the Bank can and shoUld
continue to playa central and an essential role in-the.Alliance
for Progress.
11
~.~
We look to the Bank for vigorous and efficient
-3-
beautiful setting on the shores of the Caribbean. We all owe
~
a vote of thanks to the Government an~ people of Venezuela
for making these admirable facilities available to us.
And
I am confident that all of you will join with me'in~expressing
admiration for the manner in ~hich Venezuela, under the
leadership of her great President) Romulo
Betancourt~.is
advancing so heroically toward the very same goals of prosperity
and social justice to which the Bank: is dedicated.
Our faith in the Bank's increasingly Important role in
the growth of this Hemisphere is underscored by the calibre of
the United States delegation to this meeting, which
include~
key representatives of both the Executive and Legislative
branches of my Government.
Mr. David Bell, who
wa~_
apPOinted
only last January by President Kennedy as Administrator or 'the
Agency for International
Development~AID~~o
is
~lso
the permanent United States Alternate Governor of the Bank) will
_r_
-c-
the past year, and his hopes and test wishes fo,:, its cont.inued
success.
I am sure that all of you were impressed, as I was, to
hear the report on the Bank's achievements for the past year,
tasks
and the ±IXx that lie ahead, which has just been so eloquently
delivered by President Felipe Herrera.
it amply clear why
~
the
Ba~k,
His presentation makes
in 'he two and a half short
years of its actual operation has earned a reputation for
sound
administ~ation
and imaginative and effective action
which is as enviable as it is well deserved.
It has been my privilege to attend all four of the Bank's
annual meetings) and I regret that it will not be Possible :for
~
me to remain for the entire meeting this year. si. . e I must be
in Washington tomorrow morning to discuss with our Congress
pending legislation of major importance.
My regret is reinrorced
by the fact that we are meeting in such an extraordinarily
REMARKS OF THE HONORABLE
DOUGLAS DILLON
SECRETARY OF THE TREASURY OF THE UNITED STATES
DURING THE FOURTH ANNUAL MEETING OF THE
INTER-AMERICAN DEVELOPMENT BANK
CARACAS VENEZUELA
TUESDAY APRIL 23, 19·~3
I feel very much at home here today, for it is always a
pleasure to renew old friendships -- especially when the many
friends I see around me are dedicated, as are we, to raising
the level of social and economic progress of a whole continent
within the framework of free and liberal democracy.
I welcome
this opportunity to say a few words of what is in my heart
and on my mind when I
Bank and its work.
Governor of the Bank
con~emplate
the Inter-American Development
As you know, the United States Alternate
Mr. David Bell, will formally outline
the U.S. views when he speaks on Thursday.
But first of all, I take great pleasure in delivering a
messag~
Before I left Washington, President Kennedy asked
me to convey to you his full and active
suppo~t
for the Inter_
American Development Bank, his admiration for its progress dUring
REMARKS OF THE HONORABLE
DOUGLAS DILLON
SECRETARY OF THE TREASURY OF THE UNITED STATES
DURING THE FOURTH ANNUAL MEETING OF THE
INTER-AMERICAN DEVELOPMENT BANK
CARACAS, VENEZUELA
TUESDAY, APRIL 23, 1963
I feel very much at home here today, for it is always a
pleasure to renew old friendships --.especially when the many
friends I see around me are dedicated, as are we, to raising
the level of social and economic progress of a whole continent
within the framework of free and liberal democracy. I welcome
this opportunity to say a few words of what is in my heart and
on my mind when I contemplate the Inter-American Development
Bank and its work. As you know, the United States Alternate
Governor of the Bank, Mr. David Bell, will formally outline
the U .. S. views when he speaks on Thursday.
But first of all, I take great pleasure in delivering a
message: Before I left Washington, President Kennedy asked me
to convey to you his full and active support for the Inter~
American Development Bank, his admiration for its progress
during the past year, and his hopes and best wishes for its
continued success.
I am sure that all of you were impressed, as I was, to'
hear the report on the Bank's achievements for the past year,
and the tasks that lie ahead, which has just been so eloquently
delivered by President Felipe Herrera. His presentation makes
it amply clear why the Bank, in the two and a half short years
of its actual operation has earned a reputation for sound
administration and imaginative and effective action which is as
enviable as it is well deserved.
It has been my privilege to attend all four of the Bank's
annual n~etings, and I regret that it will not be possible for
me to remain for the entire meeting this year. But I must be
in Washington tomorrow morning to discuss with our Congress
pending
legislation
of major importance. My regret is reinforced
.
(
by the fact that we are meeting in such an extraordinarily
beautiful setting.on the shores of the Caribbean. We all owe
a vote of thanks to the Government and to the people of Venezuela
for making these admirabrefacilities available to us. And I am
confi?ent that all of you will join with me in expressing
admiration for the manner in which Venezuela, under the leade·rship
of her great President, Romulo Betancourt, is advancing so·
- 2 -
heroically toward the very same goals of prosperity and social
justice to which the Bank is dedicated.
Our faith in the Bank's increasingly important role in
the growth of this Hemisphere is underscored by the calibre of
the United States delegation to this meeting, which includes
key representatives of both the Executive and Legislative
branches of my Government. Mr. David Bell, who was appointed
only last January by President Kennedy as Administrator of the
Agency for International Development -- the AID Agency -- and
who is also the permanent United States Alternate Governor of
the Bank, will arrive tomorrow evening to serve as head of the
United States delegation. In the meantime, my close personal.
associate, Mr. John Bullitt, the Assistant Secretary of the
Treasury for International Affairs, will lead our delegation.
Mr. Bell has worked closely with President Kennedy since
the start of his administration. Before becomi.~ the AID
Administrator he served as Director of the Budget. He ha&
also had a great deal of first hand experience in the d~velopment
of national economies and enjoys the full confidence of the
.
President. I know that he is anxious to learn more about the
Bank's problems and progress and is looking forward to meeting
all of you personally in many cases for the firs t time •. " I" am .
also happy to be able to inform you that your old friend
.
Teodoro Moscoso, United States Coordinator of the Alliance" for
Progress, who was detained in Washington by illness, will arrive
to join you tonight.
As Mr. Bell will emphasize when he speaks for the United
States on Thursday, we believe that the Bank can and should .
continue to play a central and an essential role in the Alliance
for Progress. We look to the Bank for vigorous and efficient
utilization of the resources made available to it. We look"
to it, as the principal financial institution of the Inter-Americ~
organization, to break the trail, to provide leadership in shOWing
the way to the economic and social development of Latin America.
I have repeatedly expressed my own high opinion of the
Bank's management, and I congratulate it on its successful
flotation on the U. S. capital market of a $75 million bond
issue. Additional evidence of our confidence in the Bank is
the request we have made to our Congress to authorize U. S.
support of a substantial enlargement of the Bank's resources ,
including a $1 billion increase in callable capital, a one-year
expansion of the Fund for Special Operations by $73 million,
"
and a replenishment of the resources of the Social Progress
Trust Fund, which the Bank has managed so well. We look
- 3 -
forward to working with the Bank during the coming year to
'develop a program for the further replenishment of its resources.
With regard to the overall effort of the Alliance for
Progress, I think there is much to encourage us. I am
particularly happy that some of our mutual friends in Europe
are coming to realize the need to join with Latin America
in its 'struggle for development. The funds that the Bank has
raised in Italy, and the recent announcement of a significant
.contribution by France to the development of our great neighbor
Mexico, are good auguries for the future. As I have repeatedly
said at so many Inter-American meetings, it is both logical
and imperative that the prospering countries of Western Europe
and Japan, join more strongly in the great and challenging task
of helping Latin America to grow and prosper.
Looking back at the Mexico City meeting of the InterAmerican &conomic and Social Council last October, I think we
all agree that it was helpful to all of us in realistically
assessing the achievements and the failures of the Alli~nce thus
far. For our part, we have a greater appreciation of the
difficulties one inevitably encounters in attempting to bring
about fundamental changes in whole societies~ For your part,
I am encouraged by the increasing realization throughout
Latin America that the origins of the Alliance are essentially
Latin American -~ and that the extent of your own domestic '.
efforts will, in the long run, determine the external resources
which can be made available and successfully utilized.
The realization of the goals of the Alliance is a formidable
. task. Yet as President Kennedy said in his recent message to
Congress on the foreign aid program, "the achievements of the
Alliance for Progress in the coming years will be the measure
of our determination, our ideals, .and our wisdom."
Before ending these brief remarks, I want to say again
how sorry I am that commitments to our Congress require me
to leave this afternoon. I know you will understand, however,
that there are times when the democratic process does not give
its officials a 'free choice in such matters.
I wish you all every success in your deliberations, for upon
your wisdom, your initiative, "and your dedication to the goals
of the Alliance for Progress depends the outcome of the massive
effort in which we are all engaged -- to realize for even the
least privileged of our people the spiritual and materIal fruits
of the vast promise that is America's.
000
(J
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TREASURY DEPARTMENT
April 24, 1963
FOR IMMEDIATE RELEASE
TREASURY ANNOUNCES $9.5 BILLION MAY 15 REFUNDING
"
I
The Treasury is offering holders of Treasury securities maturing May 15,
aggregating $9,495 million, the right to exchange them for any of the following
securities:
'
A 3-1/4~ Treasury Certificate of Indebtedness of Series B-1964,
,to be dated May 15, 1963, and to mature May 15, 1964, at par; or
An additional amount of 3-5/8~ Treasury Notes of Series B-1966,
dated May 15, 1962, and maturing February 15, 1966, of which
$2,380 million are now outstanding, at par and accrued interest
from February 15 to May 15, 1963.
Cash subscriptions for the new securities will not be received.
issues eligible for exchange are as follows:
The maturing
$5,284 million of 3-1/4~ Treasury Certificates of Indebtedness
of Series B-1963, dated May 15, 1962,
$1,183 million of 4~ Treasury Notes of Series B-1963, dated
April 1, 1959, and
$3,027 million of
May 15, 1961.
3-l/4~
Treasury Notes of Series D-1963, dated
Exchanges of the maturing 3-1/4~ certificates and the 4~ and 3-1/4~ notes will
be made in a like face amount of the new securities as of May 15. Coupons dated
May 15 on the maturing certificates and notes should be detached and cashed when due.
The subscript1uu books will be open only on April 29 through May 1 for the
receipt of subscriptions. Subscriptions for either issue addressed to a Federal
Reserve Bank or Branch, or to the Office of the Treasurer of the United States, and
placed 1n the mail before midnight, May 1, will be considered as timely. The paymentand delivery date for the new securities will be May 15,1963. The new certificates of indebtedness will be available only in bearer form. The new notes
will be made available in registered as well as bearer fonn. All subscribers requesting registered notes will be required to furnish appropriate identifying
numbers as required on'tax returns and other documents submitted to the Internal
Revenue Service.
Interest on the 3-l/4~ certificate will be payable on November 15, 1963, and
May 15, 1964. Interest on the 3-5/8~ notes is payable on February 15 and August 15.
D..e30
000
Estimated Ownership ot May 15, 1963 Maturities
as of March 31, 1963
(In millions or dollars)
3-1/4;'
Cert. :
Total
Note
·· 3-1/4;'
: Note
4;'
Connnercial banks •••••••••••••••••••
1,130
. 505
1,450
3,085
Mutual savings banks •••••••••••••••
19
47
15
81
Insurance companies:
Life ••••••••••••••••••••••••••
Fire, casualty and marine •••••
Total, insurance companies ••••
60
3
9
64
Corporate pension runds ••••••••••••
4
2
27
JO
33
~~~
30
15
10
55
Corporations •••••••••••••••••••••••.
550
50
75
675
Savings & loan associations ••••••••
40
20
60
120
State & local governments ••••••••••
450
45
200
. All other private investors ••••••••
444
41~
J41
695
11206 :
Total, privately held ••••••••••••••
2,727
1,124
2,190
6,041
Federal Reserve banks and
Government Investment Accounts •••
21~~8
60
8J6
Jz 424
outstand1ng.~ ••••••••••••••••
5,284
1,183
3,027
9,495
. Total
Office of the Secretary of the Treasury
Note: Figures mB:Y' not add to totals
because of rounding.
2~
April 24, 1963
;2 J /',t /1/#-/"'- r~
omONAl fO«M NO. 10
SOlO-lOot
UNITED STATES GOVERNMENT
')4'
(cr'U -
'-
I
Memorandum 5'6/' I
TO
: Mr.
Roy Cahoon
DATE:
April 25, 1963
r
: Evan Hannay 13 J-I
alA
SUBJECT:
Press Release
FROM
The various U.S. Departments and Offices concerned have
agreed that the Treasury Department should make a press
release as indicated below, as soon as word is received from
the Tariff Commission staff confirming that the Tariff Commission will make public today, an announcement of its
intention to hold hearings concerning a proposed 6th Supple_
mentary Report to Congress on the Revised Tariff Schedules.
}~. Trued and Mr. Hend~~ve cleared-~~e :~llawi;g text
Will you, therefore, prepare to USlle t
f yWiii relia~
_!...omorrow mornin~ but do not make the release until you bene
heard from my 0 . ice that the Tari]f CommJ,2~.Q~§.made its
~no~.':!!I.!~l!.t'? 0- ~~
~TreaSUry Department announced
~ 0<..', IflJ
today that
the Revised Tariff Schedules of the United
States, Which were authorized in the Tariff
Classification Act of 1962, will not be made
effective before the end of August at'the
earliest. Due notice will be given concerning
the effective date."
cc:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Hendrick
Kempe
Bullitt
Trued
Rains
Willis
Diehl
TREASURY DEPARTMENT
FOR IMMEDIATE RELEASE
t\~1\0-w'~~~
~EFFECTIVE DATE OF:NEW
TARIFF SCHEDULES.I
I
The new United States tariff schedules provided for
in the Tariff Classification Act of 1962 will not go into
effect on January 1, 1963, as originally planned.
The decision to delay the effective date of the new
schedules was reached on an inter-agency level, with
representation by the Departments of
Stat~~ Treas~ry,
Defense, Interior, Agriculture, Commerce and Labor.
The date on which they will' be made effective will
be announced later.
000
"'4Q
c::.
v
TREASURY DEPARTMENT
April 26, 1963
FOR ]MMEDIATE RELEASE
ANNOUNCEMENT CONCERNING EFFECTIVE DATE
OF NEW TARIFF SCHEDULES
The Treasury Department announced today that
the Revised Tariff Schedules of the United States,
which were authorized in the Tariff Classification
Act of 1962, will not be made effective before the
end of August at the earliest;" Due notice will be
given concerning the effective date.
000
n-831
r.la BtlASI A. M. )l!WPI.PUS,
fae!d!jr, 11'!'!1 )?,
196),
IISt1L1'S
r.
flEASUU' S want B1LL orrIJl%JQ
'TREASURY DEPARTMENT
D-832
April 29, 1963
lOR RElEASE A. H. NEWSPAPERS,
faesday, April )0, 1963.
RESULTS OF TREASURI'S WEEKI;Y BILL OFFERING
.... Tbe Treasury Department announced last evening that the tenders for two series
be an additional issue of tobe bills dated January )1,
1963" and the other series to be dated May" 2, 1963, which were oftered OD Aprll 24,
opened at the Federal Reserve Banks on April 29. Tenders were 1mr1ted for
-
!reasurT. bills, one serles to
~
-1"8
$1,300,000,000, or thereabouts, of 91-da,. bills and for $800,000,000, or thereabouts,
Of ?-82-da;r bills.
The details of the two series are as follows:
BANGE OF ACCEPrED
I
«nIPE'.rITIVE BIDS:
:
Approx. EqUiv •. :
Annual Rate
Price
.~
.Low
Average
99.274
99.266
99.268
2.672%
2.904%
I
2.898%
··•
Y
:
182-dq Treasury- bil.ls
maturing October 31, 1963
Approx. EqUiv.
Price
Annual Rate
96.494
96.488
96.489
!I
2.979%
2.991%
2.988%
Y
a/ Excepting one tender of $500,000
percent of the amount of 91-day" bills bid for at the low price was accepted
8) percent of the amount of 182-~ bills bid for at the low price was accepted
78
TOTAL TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
Di.strict
Boston...
, New York'
Philade1phia
· Cl.eveland
: Richmond
· Atlanta
· Chicago
st.' Louis
· M1nDeapolis
·.Iansas CitY'
-" Dallas
_.- San .FranDisco
>
,.
TOTALS
...
~
f~ . . .
,
,,'
~~..
. Applied For
$ 24,251,000
1,507,966,000
29,746,000
21,946,000
1l,938,OOO
26,052,000
206,224,000
31,191,000
16,280~000
29,762,000
23,826,000
121,119,000
$2,054,363,000
Accepted
: Applied For
$ 14,251,000 : $ 19,342,000
909,246,000:
1,350,575,000
14,746,000 z
6,333,000
21,948,000:
19,602,000
1l,938,ooo I
10,672,000
25,041,000:
7,127,000
133,684,000:
109,835,000
24,191~OOO I
10,413,000
12,840,000 z
7,S66~000
27,071,000 z
10,Wl4,OOO
17,386,000 I
9,349~OOO
Accepted
$ 4,342,000
644,376,000
3,333,000
6,577,000
5,621,000
5,915,000
53,606,000
8,413~OOO
I
1~,23l,OOO
5,066,000
7,810,000
1,119,000
46,509,000
$l,301,652'~J
$1,667,469,000
$800,747,000
89,310~OOO
sf
-
Includes' $218,)15,000 noncompetitive tenders accept.ed at the average price of 99.268
oJ Includes $57,265,000 noncompetitive tenders accepted at the average price of 98.4~9
!I On' a coupon issue ot the same length and for the samaamount invested, the return on
: '. '. these bills would provide yields of 2.96%, for the 91-day bills, and 3.08%, for the
:: l82~day bills. Interest rates on bills are quoted in terms ot bank discount ldth
~ the return related to the face amount of the bills payable at maturity rather than
the amount invested and their length in actual number ot days related to a 36O-~
year •. In contrast, yields on certi1"icatesi notes, and bonds are cor.IpIlted in tenus
of 1nterest on the amount 1nvested, and re ate the number of days reJ:l.a1ninC; in an
interest p~nt period to the actual number ot days in the period, with semiannual
oompoundiilg if' more than one coupon period 1s involved.
- 16 It will presumably create an effective ceiling of approximately
$1.29 an ounce by the provision that silver certificates shall be
redeemable for silver dollars or the equivalent in bullion, which
should assure the silver users that the price will not rise much beyond
its present market price for a long time to cane.
per cent silver transfer tax prospectively.
It repeals the 50
'l!lis tax remains applicable
only to transfers of silver bullion made prior to the date of enactment.
It does not in any way debase or veaken the currency of the United
States;
...tt_i!·'~.~.!!.!!"_"
~.e.?
Dn.Jt~·~.MI~l~y
t)"1.M-
~
•
__'
'lhe Federal Reserve notes which W1ll
~e--~ ... ~
replace the silver certificates in circulation QPe,
fr-.n--
6-<.
-...-1...c
~~~~~~~~~a:==:m~~~~~~~~"~~j they must
backe
QQ
'8.
... "
be
by 100 per cent collateral, of which 25 per cent is in gold.
shall continue to have this sound and highly satisfactory
fom
mate
cert
Rese
f currency, the Federal Reserve note.
t;;,1A
~
stead of having apprOX1_
$30 billion in Federal Reserve notes and. $2 billion in sUver
shall eventually have the
. _4
c?~,
ntire amount in Federal
- 15 The provision in the present bill authorizing the Secretary of the
.
,
Treasury at his option to redeem silver certificates by paying out
silver bullion is solely to avoid the wasteful expense of redeeming
such certificates in silver dollars when the persons presenting them
for redemption
obviously be
d~6ilver
~~for
for industrial uses.
It
Woul~
the Government to mint silver dollars just
so that they could be melted down as soon as they were received in
redemption of silver certificates.
Incidentally, the Government has no hidden
stoch~ile
of silve.
other than the silver indicated as being in the monetary and free"
stocks of the Treasury.
A certain amount of silver, 64.7 million
p eseptly on loan to the Atomic Energy Commission for non~~~~~~
uses, but this silver is part of our silver stocks which
are included in the present backing for silver certificates.' Thus
"
it is not an extra amount of silver available to meet our coinage Deeds.
Conclusion
There are many interests involved in silver, most of them apI>a.rentl.y
conflicting.
We believe this bill is fair to all.
It provides a Suit_
able means for the Government to obtain its silver requirements for
COinage, the most important Item in this bill.
It permits Silver"
from the point of view of the producers, to rise to the level of' its
monetary value of $l.29-plus per ounce, if market forces carry it that
high, without interference from Government sales to the public at a
le-.rer price.
254
- 14 standing ready to settle our international accounts with foreign governments and central banks through the purchase and sale of
go~d,
the only
internationally accepted monetary metal for this purpose., at its monetary value of $35 per ounce.
Action with regard to the use of Silver
in our monetary system does not affect in any way the exchange value
of the dollar.
The claim has been made that in using silver now backing sUver
certificates we would be selling off a capital asset to finance the'
budget.
There is absolutely no validity to this claim.
'lbe net effect
of the operations permitted by this legislation will be the purchase of
silver certificates with subsidiary silver coin manufactured from the
silver bullion standing behind such certificates.
budgetary gain fran this
exce~mall b
We will derive no
iiJI! ..., profit resulting
fran the fact that by law the silver behind silver certificates is
valued at $l.29-plus per ounce and, when used in manufacturing subsidiary silver COins, at $1.38 per ounce.
The silver now standing
behind the silver certificates 1s presently subject to claim by every
one of us with a silver certificate in his pocket.
If this bill passes ,
the only change will be that this silver will also becane available to
put into our pockets in the form of coins as they are needed..
~ere
is
no question here of selling off an asset of the Government.
Silver dollars will not vanish fran circulation.
We have a stOck
at present of about $81 million which will be issued as reqUired.
and when more are needed,
addit~lloel
doiis18 will be minted.
If'
- 13 Some Misconceptions About the Bill
I vould like at this point to put to rest some misconceptions
about this bill which became apparent 1n the course of its consideration on the floor of the House.
First, the ultimate replacement of
silver certificates vith Federal Reserve notes does not in any way
debase our currency.
The value of silver certificates has never de-
pended upon the silver bacldng tor them.
The value of these certifi-
cates, as vell as that of all other currency of the United States,
has depended upon the fiscal and financial integrity of the GovernAt no time since 1934 has the market value of the silver behind
ment.
sUver certificates equalled its monetary value of $1.29-plus per
ounce.
In fact, it has generally been far below that figure.
As an.
example, in 1940, vhen silver had an average market value of under
35 cents per ounce, the 77/100 ounce of silver behind each $1 sUver
certificate was vorth just about 27 cents.
Secondly, enactment of this bill 1s not a step toward devaluation
of the dollar.
The President on a number of occasions has emphasized
that ve have absolutely no intention of devaluing the dollar.
It· is
the view of this Administration that such a step would be extremel.y
hannf'ul to the United States, e.nd to the rest of the Free World, in
view of the dollar's position as the leading reserve currency of the
world.
Moreover, there 1s absolutely no connection betveen the action
proposed in this bill and the question of devaluation.
The internat10D8l
exchange value of the dollar is maintained through our policy of
- 12 Obviously the public must have an adequate supply of $1 bills
which is not subject to constant shrinkage as bills are turned in for
their sUver value.
~
And 1t lI11.JPt J:lave a supply of subsidiary coins
~
r.
C4---,,::=:ce:-....--...
which,.,. not~Jconstantly~melted down for their silver&' ~
';:;:iO legislation pr<Nides,Htbe most
-d--
appropr~.i::~_
......
~'I~~~~EE:;:::~::. :;:;·~.~~~I
~..J
__'~_I@!I-~;to con~~.......use of silver in the coinaee system, but §.t;::... :Q:....1!;-...J
~12Qiit
tA'" 'bit
ft9Gcmp}it!hp4
bJf epkiDft-iiJ possible to use the sllver
standing behind all silver certificates, including $1 bills.
Repeal of Existing Silver Legislation
~ ~. IJ.AN
As I have pointed out, events have long since r'h";P1pped tR&..
.nece S'i1t;r for
t~ existing sUver lesislation, the Silver Purchase Act
of 1934 and the Act. of ~and JW.y 31, 1946.
price for silver has gone
1939 and 194 6 Acts.
The market
he floor prices fixed by the
The authority in the Silver Purchase Act of
has not been used since 1942.
1934
There have been no sales to industr.y
under the 1946 Act since November 1961, when the President stoPped sal.es
because our stocks of free Silver were nearly exhausted. £
it
1s
,
I:.
high time that this obsolete and inoperative legislation
repealed..
The repeal will not result in a demonetization of silver, as has been
claimed.
Silver was
gold standard.
demonet1Zed&r~ las=x}n 1900.lwhen we went on the'
We will continue to use stIver in our monetary systetn,-
but only in the form of coins, instead of as backing for paper money.
2 r::7
'OJ I
- II -
are United states notes.
1/
Since we are required to maintain in circula-
tion a specified amount of United States notes, it will probably prove
.
~
convenient to continue to use the United states note authority to supply
~
all of the country's needs for $2 bills.
Problems Arising if $1 Federal Reserve Note Not Authorized
If the $1 Federal Reserve note is not authorized, the Treasury
will soon be forced into the untenable position of entering the market
to buy silver for its COinage needs.
~~
snJy
gPO
S1nce United States production 1s
Vajpil et' our industrial reqUirements, sUver for coinage 'WOUld
=:z:
I
have to be acquired fran abroad, thus
our balance of payments.
..
ZIte.
22ua.y strain on
Assuming it 'Were necessary to buy the est1-
mated 75 million ounces needed yearly for c01nage - and assuming this
could be purchased at the monetary value of
$1. 29-plus an ounce - the
annual rote of drain on our balance of payments would be
$97 million.
But silver for COinage could not for long be bought abroad at
its monetary value of $l.29-plus.
Such purchases would drive the price
of silver up to its monetary value and beyond.
balance of payments drain.
'lbis would increase the
In addition, it would becane profitable f'or
the public to turn in $1 silver certificates, to obtain the silver
standing behind them.
While this would tend to reduce the baJ..ance of'
payments drain, it would at the same time lead to the gradual but
certain withdrawal of all $1 bills from circulation.
At a price of $1.38 per ounce for silver, the public would find
it profitable to melt down hal.f-dollars, quarters, and dimes for their
silver content.
We simply cannot allow such a situation to
develop~
- 10 -
') c:: Q
,"-v,""
r;r'
notes will have to be issued in their Place/_se are issued by the
Federal Reserve, not the Treasury.
ootee
SN
required 19 el1ll,
Oll
the
b~e!neee
of the
ness canmunity, through the canmercial banks, will
Reserve notes in the same manner as other Federal Reserve notes are
obtained today.
ibere are only $2 billion in silver certificates in
Circulation, whereas there are over $30 b1~~~R~
notes.
There is no problem involved in
SUbstituting~" tep
~
'l5fte
fo-' ~
8~~
-
.
ibe retirement of silver certificates and their subsequent replacement with Federal Reserve notes will require the use of gold as a
reserve back of these notes.
However, the 25 per cent gold reserve
~:r1f~
million annual1y.
needed for this purpose should not exceed
ibis gold will cane fran our existing stocks of free gold.
Thus,
there will be no depreciation of the reserve standing behind presently
outstanding Federal Reserve notes, and the new $1 Federal Reserve ,notes
w11l have exactly the same types of reserves behind them as Federal.
Reserve notes of other denominations.
While H.R. 5389 also provides for the issuance of Federal Reserve
notes in $2 denaninations, this 1s primarily for the purpose of PUtting
on the law books authority to issue Federal Reserve notes in any of' the
denominations in which we now have currency.
This authority will not
release any 5ilver for coinage because except for a very small. amOUnt
of the old large size bills J all of the $2 bills now in circulatiOll
CJ,.
- 9 However, at present, the Federal Reserve Banks are not authorized
to issue $1 notes and, therefore, there is no such replacement available if $1 silver certificates vere to be retired.
Thus, it is VitaJ.l.y
important that Congress authorize the issuance of $1 Federal,Reserve
notes so as to provide in an orderly way for handling of our' future
needs for coinage and $1 bills.
The withdrawal of silver certificates and the use of silver baCk
of them for COinage will be gradual.
We estimate that not ,?ver $105
million of silver certificates a year will need to be redeemed in order
.
to obtain the silver needed for coinage.
~~~ ~~
~9988PMtl'leeS
be used for coinage.
e! 1811ver
or
Today,'
~
~'
-'1.)
,
~~.3s~
,~ ! ,
...
~~~~lt,o/)~
back of silver certificat~t COul.d
this amount, over 1,300,000,000 ounces stand
in back of the $1 silver certificates.
Outside of the possible redemption of silver certificates by the
public, the onl.y
~
demand for silver fran Treasury stocks" other
than coinage, would be silver needed by other Government agencies.
We
have 30 million ounces of free silver which can be used for this ~se
without retiring silver certificates.
This should be sufficient to
satisfy the demands of other Government agencies, particularly the
~fense tstablishment for the manufacture of certain equipment, for
the next few years.
Effect of Issuance of Federal Reserve Notes
In view of the fact that silver certificates are a circulat1ng
medium, it must be assumed that
aUI!
.hl
!
'.
?
one
• Federal Reserve
~
- 8 Retirement of Silver Certificates
Since November 29, 1961, we have been retiring the $5 and. $1.0
silver certificates, replacing them vith Federal Reserve notes and
utilizing the silver 60 released for the coinage of subsidiary coins.
But this supply 1s limited.
COinage reqUirements appear to be increas-
ing each year, partly at least as a result of the ever-groving use of
vending machines.
Last year they amounted to about 75 million ounces.
In addition, our increasing population leads to a steady groWth
in the number of $1 bills required for circulation.
Since at present
$1 bills in needed quantities can only be issued in the form of sl1Yer
certificates, this leads to a fUrther annual requirement for Silver,
which last year amounted to $49 million, or roughly 38 million ounces.
Thus in 1962 about 113 million ounces of silver vere required to
meet our coina~ requirements and the increase 1n $1 bills. 'This
means that at current rates the 285 million ounces of silver presentl.y
available behind our dwindling supply of $5 and $10 silver certificates
viil be exhausted sane time during
1965.
(We cannot expect to rece1ve
all of these for retirement.)
When a used $5 silver certif'icate is turned in, it 1s retired,
thus freeing the silver behind it for use in coinage.
Whenever an
additional $5 bill 1s needed 1n the currency, it is called for by the
banking system from the Federal Reserve and a new $5 Federal. Reserve
note is issued.
or by the Government on the end use ot silver since it 1s dtfftc:ul:t
tor the seller to 1dentity the tiDal use ot sUver.
silver solder"llJB3' be 118ed in
For
arrr number ot operat1ons.
e'XllD7p1e~ ..
FrcIIl what
intcmnation is ava11able on United States consumption, we can make
the tol.l.otrtng breakdown ot the estimated industrial and a:rt1.st1c uses
ot sUver tar the ,-ears 1961 and 1962:
.
~
MJ§!
(In thousands ot t1"OT ounces)
Batteries •••••••••••••••••••••••••••
5,000
Brazing al.loys, solders, electrical '
contacts and other electrical uses 35,000
Photographic ttlm, plates and '
sens1t1zed p~ ••••••••••••••••• 32,300
, SUverware and Jevelr,r ••••••••••••• ' 25,000
Miscellaneous ••••••••••••••••••••••
6,OOu
38,000
33,300
8,200
105,500
,
22,009
10,700
UO,OOO
~
The current s1tuat1on, regarding 4anest1c product1on and e~ . ~~
t10n 1s: '
.
PrOduction runs around
35
mlll10n
~
ounces, 8Dd:ln1h18
tr1al consumption' amounts to a little over .100 mi'] ion
'J
three times our current prodltct1on.
procluetion must be imported.
cnmces":~
The excess ~. and above c1tane....'1.~_1
In a4d1t10D, our coinage requ1rem_ _
last year ran to about 75 m1l11on ounces •. Ot our production, ~
60 per cent canes as a b7-p:rocmct ot copper, lead and zinc ~.'P1"OCb.tCt._.
The remaining 40 per cent comes 1'rom miDes 1D which sUver 1s tbe~i
pr1ma.r;y product.
~.'
- 6 Silver Situation TOday
TodaY,{!4loet
•
~m: e point _l'Il:icurrent world producti~
not sufficient to meet current coinage and industrial demands.
J4s
""".!""ual
aii
q
!
'a
7
Free World production of
t ; about 200 million ounces,
~around
ne~~d
~Q';ti
C
\9
of!'S
___
Silver ' - " ~
total consumption
Q
350 million ounces, including both industrial and coinage
uses.
Growth in Industrial Uses
Free World industrial consumption of' silver (exclusive of CO~ge)
has increased over 80 per cent during the last 14 years.
In 1949, it
amounted to 132.5 million ounces and in 1962 it was 239.3 million
ounces.
Exclusive of' the United
States,~C:. w~~.:..n:~
consumPti~on ounces
.,
~
in
~
1949\/130. million ounce6~
r'l.
In 1933, when the first Presidential llroc1amation taking newl.y
mined domestic silver of'f the market was issued, U. S. industrial.
consumption amounted to only 10.8 million ounces.
During the eight_
year period fran 1933 through 1940, annual average industrial con-
sumption in the United States was 23 million ounces.
In 1941, at ,the
start of the war, it jumped to 12.4 million ounces and then to l.01
million ounces during the war period 1941 through 1945.
Consumption
in the United States since the war has been up and down from a. l.ow
of 85.5 million ounces to a high of 1.10 mi1.1ion ounces.
was 105.5 million ounces and. in 1962, 1.10 million ounces.
In 1961. it
- 5In those dqs it vas nece888.l7. tor the Government to support
the price tar
new~
mined cbIleatic sUYer
art1fic1~ b1gh
at an
price.
b7
taking 1t ott the marite-t.
1'he 1939 act estabUshed
price ot about 71 cents per ounce.
&
f'l.oGr"
The 1946 act raised the fioor
, pr1ce to 90.' cents. . Since .000000ber 1961; wen the 1'reasur,y stopped
eel.llDg sUver, market torees haTe caused the pr1ce to rise to 1ta
present leve1 ot $1.'Z{-l/2.
~ purchase
producing inc1uatry has
acts are 1DoperatiTe, and indeed the aU'\'eri-
DO
turther need tor Go'f'ermaeDt
aas1staDee~
Since late 1961 the producera have seen a spectacular 1Dcrease h
the pr1ce
ot their product,
1IIIIOUI1t1ng
to 1,0 per cent, and the
Pl"eBezrt;
$1.'Z1-l/2 price cClllpU'es to about 1&.5 cents vheD the 19~ law was etaaote4.
..
, . Wh1l.e this 1ncreue in pr1ce has benet! ted the proc1w:era ~ t:be.
'.. recent rapid riae
baa
~ted d1tt1eu1t1es tor the users.' 1!le aU......
~~~-~
van, -1evelr;y, aDd~ 1Dduatriea have had to 'cope as best ''ihe.v
could with theae 1Darease4 coats.
..hwe
e' 80 -'e_ sreaLd;j:
G~l
lDttllftrial _I k:teuae t&a4__
aHee...~ 1!Mt legislation' we have pro,poae.d
. will presumabq result in atab1l1z1Dg the market price at
, close to $1.29, a price that is favorable tor-'U:ae
BCJIIIe'Ir11erE
produ.cera.
At the same time 1t vU1 benefit the user 1nc!wJtr1ea b,y
them the much needed assurance
ot a
relative~ stable price
s:ln.ac
leVe1,.
Thus, toda\Y 1s the appropriate time tor repea1:1ng the sUTer legl8~,
t10n to which I
silver
buB~
})p-
,
- -
• 4-'
for silver dollars or, at the option of the Secretary; tar sUYm'"
bulllon of' equ1valent monetar,y value.
Title II repealS the sUYer transter tax which vas needed on:b'
because ot the provisions calUng f'or the purchase of' sUver b7 the
Govermnent.
Since these proVisions are being repealed 'by sectiou't
ot the bill, the sUver tax shoul.d also be repealed at
For
~
years
!lOY
silver has not served
a:tq'
'tile
S8llletflr1e.
JDaJor pur:pose as a
monetary reserve metal. VhUe it bas been held as a reserve beb:tiut
.,
outstanding sUver certificates, 'tile amount ot these in rel.atioJito
total currency in circulation is small.
lThere are apprmdma'teq
$2 b1ll1on'in sUver certificates in c1rcul.a.t1on, or
$1.5 b1llion' ere in $1 cert1ticates, canpared
Federal Reserve natea*).
Vb1ch ~~
with aVer
'30 b1u.:tOl:l;;&
Our basic curreIlC'l" is the Federal.
_serve
nate vh1ch 1s backed b7 100 per cent' cOllateral; 25 per cent. in' tlie
torm ot gold.
Recent years have seen a sbarp~ increasing worldwide
sUver'tor industrial, protessional,
marked contrast to the a1tuat1on
and
art1st1c uses.
exl.S't1Dg 111 ~93lf. vbe!l
d-ana.·· t"ar.
~s 1.8'ia
the SU-ver
Purchase Act vas passed and in subsequent years up to about '1959 •
.. As or Feb1"U8.17 28, 1963, Federal Reserve notes in' circulation
'amounted to $29.2 b1.U1on and sUver cert1t1cates, $1~6 b1U.10th
Bowver, the amount ot currency in cireul.at1on fiuctuates seuOU_
al..ly and the t1gures g1 ven are considered to be more
tor this year.
representatlM,
- 3 -
needs ror silver ror co1nage and with the s1gn1t1cant changes
~
have occurred in the silver denumd and suppq situation since 1'~
vbeD the enactment
ot the exilting sUver legislation
cammenee4~,~.,:nD
the Bouse consideration or the bUl, there appeared ~ ~oppeS1:~
tion to the proTisions ot sections 1 and 2 ot i'itl.e I
~tl.e'tt:i
tb2
.. '. Section 1 repeals the SUyer Purchase Act ot 193"- and
~
ot Juq 6, 1939, and Juq 31, 19116. In 81lIIIIII.8.17, the provisiOns ••
U\T~
these statutes prelentq in ettect require the purchase or
mined domestic silver that mq be ottered at 90-1/2 cents an ~it
permit the purchase or roreign silver, and perm1t the sale
'b;y the 1'.reasury
at not
leiS
than
90-1/2 cents
aD
o~ 8n~
aihltltillti;
ounce •. In
. a number at subs1di&r7 prortl1anl ot tbele lame three statute8-'"
•
repealed b;y. this
~tion
·'·-"F'".,:_
b~.
2 reta1nl the present law wh1C.h re~s the ~
ot the Treasur;y to keep within the United Statel
certificates.
aD
amount or 8U~
toiJie.
It 11m1tl hi. power to dispose ot 8ll:f silver
public at a price lover than its lDOlleta.r;y T&1ue, which 1s *l..~~
per ounce. When tbe price il unc1Ar that level, he
o~
mIq
use
sU~
ror sale to other departments and agencies or the GoTel'lllilel!lt.
tor coinage.
At the $l.29-plus JIIOnetarr value, ~ ~ auppq l11verto.1aa
.•
t~:~~-t~~~
.....ket,(' linee .~,_*,,,
r;fliC""ont-
'---
to be
ezch~,.,.
~ ~ ?/
/~. ~ ~~~
•
(
-L:) _
~~~·7~
~/
..
.,.
- 2-
bills CBD be met b;r issu1Dg $1 Federal nes
We
preseD~
bold 1,300,000,000
OUDC 8
rYe
DOteS.
ot sUver as
'baok1.
tor $1 cert1t1cates. This plus, the a35,
'5
as backing tor sUver certificates in
:ticma ot
&Ild.
)~~~~~.(
in the process ot ret1reme~Y.Ul assure an adequate
abovef!.o'r
auppq ot silver to meet our coiDage needs ~or, the
Dext 10, toJtl'JZ.O
years.
" U section 3 ot the bill were not enacted,. we wouJ.d be
tm_~'
to retire $1 sfiver cert1t1cates ~or, the purposes I have .1nd:I._~
because we presentq have DO alternative torm
o~
CUl'TeDa.r
wb1clle..aa.
be issued in $1 denan inat10DS in 8IIIOUI1ts adequate to meet~
Pl1l41.e
~'
. needB.: i'h1s would necessitate our going into the market in the
near, tature in cClll!petition with industrial users ot sUver, tG'G~
~
,
the 'necelsar:r supplies ot sUver tor,eur co1na&e., "e4 u;pon~~
.
present estimates ot.., cOinage requ1rements and ot the ac1AU:t;1-.
amounts ot sUver that present law requires as backing tor the ;..,~
increase in the amount ot
curreDa.r vh1ch
;'.1_
vUl Deed to be 18 _ _1
denominations, our present stocks ot sUver available tor tla1a'~ae
v1lll"UD out ICDe time in
actlon b;r the
ot s11ver
CongreIS
1965. Th1s underl1nes the urgent
this
~ar
~~
to assure an adequate sCJU1"Ce
o:t:~
~or. coinage_
,ihe rena1 n1 ng pron,slona ot the blll, sections 1 and 2, ot,~tleI
and Title II, vould bring our sUTer leg1sl.atlon more in line .~i~"l;;;
267
#
it af't. Statement
ot the Secretary of the '1'.re88Ul'7
Betore the Senate Bank! ng aDd Currency Caam1ttee
. (To be g1Te11 on AprU 29, 1963)
Mr. Cba1rman and Members of the Cazm1ttee:
'!'be main purpose
o~
ot B.B. 5389 i8 to prorlde adequate su;ppl:tea
.Uver to meet the coinage needs of the United States ancl. tA
repeal certain obsolete .Uft!' legislation.
recCllllleDdat10na made
to the
Congress.
.
b7
B.R.
and Currenc7 Caamittee
vas approved
b7
1'hia bill
1mpl.aaen~
the President,:lD hi. J azm.a:r,y EcoDCllD1e,~
5389
by
the Bouse
by
a substantial maJor1~.
."
vas reported out
b7 ,the
Bouae~1P&
.
a vote of 18 - 1 with one abstent101lc~aa4
ot Bepresentatifts, with biparti8an
'
~~
It :lDcar.porates de.irable ameDdmeJ:L~a: . . .
~J'"',,,,~,,,<
in the Bouse C<:Iaadttee. wb1ch e11m1nated'oe..........uilteaturea . bt
w-~~..l~~~.,.
the original aAm1ntatra.tionb~, an'it i. rq hope that your ",i~"~
1d.ll. 8ee
nt to
adopt the biU 88 ...ended 1D the Bouse of Reorea_~
tives.
The key proviaion
of thi. bill is 8ection 3, which amena.. .:tIle;
Federal Reserve Act to authorize the i88U&ZlCe
notes in cJenan1nat1ona ot $1 and $2."
ot Federal
~.Y1lllD8ke
it
ReSer,1'e
poss1,~
tor.the Treasur,r gra4u aU7.to retire $1 8Uft!':certit1cates, ~1D
meld,OS ava.1lable tor our co1Dage requ1remeDts the sUver
present~
bul11011
held as bacJdng tor these sUver cert1t1cates. ' As ,:tQ
TREASURY DEPARTMENT
Washington
FOR RELEASE:
UPON DELIVERY
STATEMENT OF THE HONORABLE DOUGLAS DILLON
SECRETARY OF THE TREASURY
BEFORE THE SENATE BANKING AND CURRENCY COMMITTEE
ON H.R. 5389, MONDAY, APRIL 29, 1963, 10:00 A.M. ,EDT
Mr. Chairman and Members of the Committee:
The main purpose of H. OR. 5389 -is to provide adequate
supplies of silver to meet the coinage needs of the United States
and to repeal certain obsolete silver legislation.
This bill im-
plements recommendations made by the President in his January
Economic Report to the Congress.
H. R. 5389 was reported out by
the House Banking and Currency Committee by a vote,of 18 - 1 with
one abstention and was approved by the House of Representatives,
with bipartisan support, by a substantial majority.
It incor-
porates desirable amendments made in the House Committees which
eliminated features in the original Administration bill, which
some found controversial, and it is my hope that your Committee
will see fit to adopt the bill as amended in the House of
Representatives.
The key provision of this bill is section 3, which amends
the Federal Reserve Act to authorize the issuance of Federal
Reserve notes in denominations of $1 and $2.
This will make it.
possib\le for the Treasury gradually to retire $1 silver
0° y33
?h'Q
Lvv
- 2 -
certificates, thereby making available for our coinage requirements the silver bullion presently held as backing for these
silver certificates.
As the silver certificates are retired,
the needs of the country for $1 bills can be met by issuing $1
Federal Reserve notes.
We presently hold 1,300,000,000 ounces of silver as backing for $1 certificates.
This plus the 285,000,000 ounces re-
maining as backing for silver certificates in denominations of
$5 and above, which arl? now being retired, and the approximately
30 million ounces of free silver will assure an adequate supply
of silver to meet our coinage needs for the next 10 to 20 years.
If section 3 of the bill were not enacted, we would be
unable to retire $1 silver certificates for the pur.poses I have
indicated, because we presently have no alternative form of
c'urrency which could be issued in $1 denominations in amounts
adequate to meet the public needs.
This would necessitate our
'going into the market in the very near future in competition
with industrial users of silver to obtain the necessary supplies
of' silver for our coinage.
Based upon our present estimates of
coinage requirements and of the additional amounts of silver
that present law requires as backing for the expected increase
in the amount of currency which will need to be issued in $1
denominations, our present stocks of silver available for this
purpose will run out some time in 1965.
This underlines the
- 3 2 ~11
urgent need for action by the Congress this year to assure an
IV
adequate source of supply of silver for coinage.
The remaining provisions of the bill, sections 1 and 2 of
Title I and Title II, would bring our silver legislation more
in line with our needs for silver for coinage and with the
significant changes which have occurred in the silver demand
and supply situation since 1934, when the enactment of the
existing silver legislation commenced.
In the House considera-
tion of the bill, there appeared to be no opposition to the
provisions of section 1 and 2 of Title I or to Title II. '
Section 1 repeals the Silver Purchase Act of 1934 and the
acts of July 6, 1939, and July 31, 1946.
In summary, the
provisions of these statutes presently in effect
r~quire
the
purchase of any newly mined domestic silver that may be
offered at 90-1/2 cents an ounce, permit the purchase of foreign
silver, and permit the sale of silver by the Treasury at not
less than 90-1/2 cents an ounce.
In addition, a number of
subsidiary provisions of these same three statutes are repealed
by this bill.
Section 2 retains the present law which requires the Secretary
of the Treasury to keep within the United States an amount of
silver of a monetary value equal to the face amount of'all outstanding silver certificates.
It limits his power to dispose
of any silver to the public at a price lower than its monetary
value, which is $1.29-plus per ounce.
When the price is under
- 4 that level, he may use silver only for sale to other departments
and agencies of the Government or for coinage.
At the $1.29-plus monetary value, he may supply silver to
the market in exchange for such silver certificates as ~:;be'
presented for exchange, since silver certificates will continue
to be exchangeable for silver dollars or, at the option of the.
Secretary, for silver bullion of equivalent monetary value.
Title II repeals the silver transfer tax which was needed only
because of the provisions calling for the purchase of silver by
the Government.
Since these provisions are being repealed by
section 1 of the bill, the silver tax should also be repealed at
the same time.
For many years now silver has not served any major purpose
as a monetary reserve metal.
While it has been held as a
reserve behind outstanding silver certificates, the amount of
these in relation to total currency in circulation is small
(There are approximately $2 billion in silver certificates in
circulation, of which approximately $1.5 billion are in $1
certificates, compared with over $30 billion in Federal Reserve
noteS*). Our basic currency is the Federal Reserve note which
is backed by 100 per cent collateral, 25 percent in the form of
gold.
*As of February 28, 1963, Federal Reserve notes in circulation
amounted to $29.2 billion and silver certificates, $1.8 billion.
However, the amount of'currency in circulation fluctuates seasonally and the figures given are considered to be more representative
for this year.
272
- 5 -
Recent years have seen a sharply increasing worldwide
demand for silver for industrial, professional, and artistic
uses.
This is in marked contrast to the situation existing in
1934 when the Silver Purchase Act was passed and in subsequent
years up to about 1959.
In those days it was necessary for the Government to support
the price for newly mined domestic silver by taking it off the
market at an artifically high price.
The 1939 act established
a floor price of about 71 cents per ounce.
the floor price to 90.5 cents.
The 1946 act raised
Since November 1961, when the
Treasury stopped selling silver, market forces have caused the
price to rise to its present level of $1.27-1/2.
Thus the purchase acts are inoperative, and indeed the
silver-producing industry has no further need for Government
assistance.
Since late 1961 the producers have seen a spectacu-
lar increase in the price of their product, amounting to 40 per
cent, and the present $1.27-1/2 price compares to about 45 cents
when the 1934 law WlS enac ted.
While this increase in price has benefited the producers,
the recent rapid rise has created difficulties for the users.
The silverware, jewelry, and other silver-using industries have
had to cope as best they could with these increased costs.
The
legislation we have proposed will presumably result in stabilizing
- 6 -
the market price at somewhere close to $1.29, a price that is
favorable for the producers.
At the same time it will benefit the user industries by
giving them the much needed assurance of a relatively stable
price level.
Thus, today is the appropriate time for repealing
the silver legislation to which I have referred and taking the
Government out of the silver business except as a consumer in
the manufacture of its coins.
Silver Situation Today
Today, current world production of silver is not sufficient
to meet current coinage and industrial demands.
Annual Free
World production of newly mined silver amounts to about 200
I
•
million ounces, and total consumption is around 350 million
ounces, including both industrial and coinage uses.
Growth in Industrial Uses
Free World industrial consumption of silver (exclusive of
coinage) has increased over 80 per cent during the last 14 years.
In 1949, it
amoun~o
239.3 million ounces.
132.5 million ounces and in 1962 it was
Exclusive of the United States, Free
World industrial consumption rose from 44.5 million ounces in
1949 to a current level of about 130 million ounces.
274
- 7 -
In 1933, when the first Presidential proclamation taking
newly mined domestic silver off the market was issued, U. S.
industrial consumption amounted to only 10.8.million ounces.
During the eight-year period from 1933 through 1940, annual
average industrial consumption in the United States was 23
million ounces.
In 1941, at the start of the war, it jumped
to 72.4 million ounces and then to 107 million ounces during
the war period 1941 through 1945.
Consumption in the United
States since the war has been up and down from a low of 85.5
million ounces to a high of 110 million ounces.
In 1961 it
was 105.5 million ounces and in 1962, 110 million ounces.
There is no end-use breakdown of world industrial consumption.
In the United States there are no statistics compiled
either by industry or by the Government on the end use of silver
since it is difficult for the seller to identify the final use
of silver.
For example, silver solder may be used in any
number of operations.
From what information is available on
United States consumption, we can make the following breakdown
of the estimated industrial and artistic uses of silver for the
years 1961 and 1962:
- 8 -
1961
1962
(In thousands of troy ounces)
Batteriesl •••.••••••.•••••.•.••..••
Brazing alloys, solders, electrical
contacts and other electrical uses
Photographic film, plates and
sensitized paper •••.•...•.•.•••.••
Silverware and jewelry ••.••..•••...
Miscellaneous ..................... .
5,000
6,000
35,000
38,000
32,300
25,000
8 2 200
105,500
33,300
22,000
10 2 700
110,000
The current situation regarding domestic production and consumption is:
Annual newly-mined production runs around 35 million
ounces, and net industrial consumption amount to a little over
100 million ounces -- about three times our current production.
The excess over and
above domestic production must be imported.
In addition, our coinage requirements last year ran about 75
million ounces.
Of our production, about 60 per cent comes as
a by-product of copper, lead and zinc production.
The remaining
40 percent comes from mines in which silver is the primary product.
Retirement of Silver Certificates
Since November 29, 1961, we have been retiring the $S and
$10 silver certificates, replacing them with Federal Reserve notes
and utilizing the silver so released for the coinage of subsidiary
coins.
But this supply is limited.
Coinage requirements appear
to be increasing each year, partly at least as a result of the
ever-growing use of vending machines.
to about 7S milli'on ounces.
Last year they amounted
- 8 -
1961
1962
(In thousands of troy ounces)
Batteriesl •••.•••.••••••..•••...••.
Brazing alloys, solders, electrical
contacts and other electrical uses
Photographic film, plates and
sens it ized paper ..•.••..•.•.•.••••
Silverware and jewelry •••...••••••.
Miscellaneous ..................... .
5,000
6,000
35,000
38,000
32,300
25,000
8 2 200
105,500
33,300
22,000
10 2 700
110,000
The current situation regarding domestic production and consumption is:
Annual newly-mined production runs around 35 million
ounces, and net industrial consumption amount to a little over
100 million ounces -- about three times our current production.
The excess over and
above domestic production must be imported.
In addition, our coinage requirements last year ran about 75
million ounces.
Of our production, about 60 per cent comes as
a by-product of copper, lead and zinc production.
The remaining
40 percent comes from mines in which silver is the primary product.
Retirement of Silver Certificates
Since November 29, 1961, we have been retiring the $5 and
$10 silver certificates, replacing them with Federal Reserve notes
and utilizing the silver so released for the coinage of subsidiary
coins.
But this supply is limited.
Coinage requirements appear
to be increasing each year, partly at least as a result of the
ever-growing use of vending machines.
I
to about 75 million ounces.
Last year they amounted
278
- 9 In addition, our increasing
p0pulation leads toa steady
growth in the number of $1 bills required for.circulation.
Since at present $1 bills in needed quantities can only be
.
.
issued in the form of silver certificates, this leads to a
further annual requirement for silver, which last year amounted
to $49 million, or roughly 38 million ounces.
Thus in 1962 about 113 million ounces of silver were re·quired to meet our coinage requirements and the increase i~ $1
bills.
This means that at current rates the 285 million ounces
of silver presently available behind our dwindling
s~pply'of
$5 and $10 silver certificates will be exhausted some time dur-.
ing 1965.
(We cannot expect to receive all of these for
retirement.)
When a used $5 silver certificate is turned in, it is
{ retired, thus freeing the silver behind it for use in coinage.
Whenever an additional $5 bill is needed in the currency, it
is called for by the banking system from the Federal Reserve·
and a new $5 Federal Reserve note is issued.
However, at present, the Federal Reserve 'Banks are not
authorized to issue $1 notes and, therefore, there is no such.
replacement available if $1 silver certificates were to be
retired.
Thus, it is vitally important that Congress authorize
the~suanoe
of $1 Federal Reserve notes so as to provide in an
')77
- 10 -
L.
I
I
orderly way for handling of our future needs for coinage and
$1 bills.
The withdrawal of silver certificates and the use of silver
back of them for coinage will be gradual.
We estimate that not
over $105 million of silver certificates a year
wi~l
need to be"
redeemed in order to obtain the silver needed for coinage.
Today, including the 30 million ounces of free silver and the
silver back of silver certificates, we have just over 1,600,000,000
ounces that could be used for coinage.
Of this' amount, over
1,300,000,000 ounces stand in back of the $1 silver certificates.
Outside of the possible redemption of silver certificates
by the public, the only demand for silver from Treasury stocks,
other than coinage, would be silver needed by other Government
agencies.
We have 30 million ounces of free silver which can
be used for this purpose without retiring silver certificates.
This should be sufficient to satisfy the demands of other
Government agencies, particularly the defense establishment for
the manufacture of certain equipment, for the next few years.
Effect of Issuance of Federal Reserve Notes
In view of the fact that silver certificates are a circulating
medium, it must be assumed that Federal Reserve notes will have
"to be issued in their place as they are retired.
issued by the Federal Reserve, not the Treasury.
These are
- 11 The business community, through the commercial banks, will
obtain $1 Federal Reserve notes in the same manner as other
Federal Reserve notes are obtained today.
There are only $2
billion in silver certificates in circulation, whereas there are
over $30 billion of Federal Reserve notes.
There is no problem
involved in substituting Federal Reserve notes for silver
certificates.
The retirement of silver certificates and their subsequent
replacement with Federal Reserve notes will require the use of
gold as a reserve back of these notes.
However, the 25 per cent
gold reserve needed for this purpose should not exceed $35 to
$40 million annually.
stocks of free gold.
This gold will come from our existing
Thus, there will be no
depreciation of
the reserve standing behind presently outstanding Federal
Reserve notes, and the new $1 Federal Reserve notes will have
exactly the same types of reserves behind them as Federal Reserve
notes of other denominations.
While H. R. 5389 also provides for the issuance of Federal
Reserve notes in $2 denominations, this is primarily for the
purpose of putting on the law books authority to issue Federal
Reserve notes in any of the denominations in which we now have
currency.
This authority will not release any silver for coinage
- 12 because except for a very small amount of the old large size
bills, all of the $2 bills now in circulation are United States
Notes.
Since we are required to maintain in circulation a
specified amount of United States Notes, it will probably prove
convenient to continue to use the United States Note authority'
to supply all of the country's needs for
$2 bills.
Problems Arising if $1 Federal Reserve Note Not Authorized
If the $1 Federal Reserve note is not authorized, the Treasury
will soon be forced into the untenable position of entering the
market to buy silver for its coinage needs.
Since United States
production is less than our industrial requirements, silver for
coinage would have to be acquired from abroad, thus increasing
the strain on our balance of payments.
Assuming it were neces-
sary to buy the estimated 75 million ounces needed yearly for
coinage -- and assuming this could be purchased at the monetary
value of $1.29-plus an ounce -- the annual rate of drain on our
balance of payments would be $97 million.
But silver for coinage could not for long be bought abroad
at its monetary value of $1.29-plus.
Such purchases would drive
the price of silver up to its monetary value and beyond.
would increase the balance of payments drain.
This
In addition, it
would become profitable for the public to turn in $1 silver
- 13 certificates, to obtain the silver standing behind them.
While
this would tend to reduce the balance of payments drain, it
would at the same time lead to the gradual but certain withdrawal of all $1 bills from circulation.
At a price of $1.38 per ounce for silver, the public would
find it profitable to melt down half-dollars, quarters, and
dimes for their silver content.
We simply cannot allow such a
situation to develop.
Obviously the public must have an adequate supply of $1
bills which is not subject to constant shrinkage as bills are
turned in for their silver value.
And it must have a supply of
subsidiary coins which are not constantly being melted down for
.'
.. their silver content.
This legislation provides, in the most appropriate ana
practical way a supply of silver for coinage without drying up
the supply of $1 bills.
We wish to continue the use of silver
in the coinage system, but for this to be practicable it must
be possible to use the silver standing behind all silver
certificates, including $1 bills.
Repeal of Existing Silver Legislation
As I have pointed out, events have long since made obsolete
our existing silver legislation, the Silver Purchase Act of.
1934 and the Acts of July 6, 1939, and July 31, 1946.
The
- 14 market price for silver has gone far above the floor prices
fixed by the 1939 and 1946 Acts.
The authority in the Silver
Purchase Act of 1934 has not been used since 1942.
There have
been no sales to industry under the 1946 Act since November
1961, when the President stopped sales because our stocks of
free silver were nearly exhausted.
It is high time that this
obsolete and inoperative legislation is repealed.
The repeal
will not result in a demonetization of silver, as has been
claimed.
Silver was demonetized in 1900, when we went on the
gold standard.
We will continue to use silver in our monetary
system, but only in the form of coins, instead of as backing
for paper money.
Some Misconceptions About the Bill
I would like at this point to put to rest some misconceptions about this bill which became apparent in the course of
its consideration on the floor of the House.
First, the ultimate
replacement of silver certificates with Federal Reserve notes
does not in any way debase our currency.
The
val~e
of silver
certificates has never depended upon the silver backing for
them.
The value of these certificates, as well as that of all
other currency of the United States, has depended upon the
fiscal and financial integrity of the Government.
At no time
- 15 -
282
since 1934 has the market value of the silver behind silver
certificates equalled its monetary value of $1.29-plus per
ounce.
In fact, it has generally been far below that figure.
As an example, in 1940, when silver had an average market value
of under 35 cents per ounce, the 77/100 ounce of silver behind
each $1 silver certificate was worth just about
27 cents.
Secondly, enactment of this bill is not a step toward
devaluation of the dollar.
The President on a number of occa-
sions has emphasized that we have absolutely no intention of
devaluing the dollar.
It is the view of this Administration
that such a step would be extremely harmful to the United
States, and to the rest of the Free World, in view of the
dollar's position as the leading reserve currency of the world.
Moreover, there is absolutely no connection between the action
proposed in this bill and the question of devaluation.
The
international exchange value of the dollar is maintained through
our policy of standing ready to settle our international accounts
with foreign governments and central banks through the purchase
and sale of gold, the only internationally accepted monetary
metal for this purpose, at its monetary value of $35 per ounce.
Action with regard to the use of silver in our monetary system
does not affect in any way the exchange value of the dollar.
- 16 -
The claim has been made that in using silver now backing
silver certificates we would be selling off a capital asset
to finance the budget.
this claim.
There is absolutely no validity to
The net effect of the operations permitted by
this legislation will be the purchase of silver certificates
with subsidiary silver coin manufactured from the silver
bullion standing behind such certificates.
We will derive
no budgetary gain from this except for a small pniit resulting
from the fact that by law the silver behind silver certificates
is valued at $1.29-plus per ounce and, when used in manufacturing subsidiary silver coins, at $1.38 per ounce.
The silver
now standing behind the silver certificates is presently
subject to claim by everyone of us with a silver certificate
in his pocket.
If this bill passes, the only change will be
that this silver will also become available to put into our
pockets in the form of coins as they are needed.
There is no
question here of selling off an asset of the Government.
Silver dollars will not vanish from circulation.
We have
a stock at present of about $81 million which will be issued
as required.
If and when more are needed, they will be minted .
. The provision in the present bill authorizing the Secretary of
the Treasury at his option to
~edeem
silver certificates by
- 17 paying out silver bullion is solely to avoid the wasteful
expense of redeeming such certificates in silver dollars when
the persons presenting them for redemption desire the silver
for industrial uses.
It would obviously be foolish for the
Government to mint silver dollars just so that they could be
melted down as soon as they were received in redemption of
silver certificates.
Incidentally, the Government has no hidden stockpile of
silver other than the silver indicated as being in the monetary
and free stocks of the Treasury.
A certain amount of silver,
64.7 million ounces, is presently on loan to the Atomic Energy
Commission for non-consumption uses, but this silver is part
of our silver stocks which are included in the present backing
for silver certificates.
Thus, it is not an extra amount of
silver available to meet our coinage needs.
Conclusion
There are many interests involved in silver, most of them
apparently conflicting.
We believe this bill is fair to all.
It provides a suitable means for the Government to obtain its
silver requirements for coinage, the most important item in
this bill.
It permits silver, from the point of view of the
'producers, to rise to the level of its monetary value of $1.29plus per ounce, if market forces carry it that high, without
285
- 18 -
interference from Government sales to the public at a lower
price.
It will presumably create an effective ceiling of approxi-·
mately $1.29 an ounce by the provision that silver certificates
shall be redeemable for silver dollars or the equivalent in
bullion, which should assure the silver users that the price
will not rise much beyond its present market price for a long
time to come.
prospectively.
It repeals the 50 per -cent silver transfer tax
This tax remains applicable only to transfers of
silver bullion made prior to the date of enactment.
It does not in any way debase or weaken the currency of the
United States:
The Federal Reserve notes which will replace the
silver certificates in circulation have been our basic circulating medium for many years; they are a sound and time-tested form
of currency; they must be backed by 100 per cent collateral, of
which 25 per cent is in gold.
We shall continue to have this sound and highly satisfactory
form of currency, the Federal Reserve note.
The only difference
will be that instead of having approximately $30 billion in
Federal Reserve notes and
$2 billion in silver certificates, we
shall eventually have the entire amount in Federal Reserve notes.
000
- 21 It is a program designed to meet our needs today, and to 1ay
the foundation for a better tomorrow.
of our time in a responsible manner.
It responds to the challenge
Same of us may disagree
~~th
parts of the program, and with the details of the separate provisions,
but all of us will recognize that effective action is vital if we
are to meet today's economic realities.
I am sure the bill that will
come out of the Ways and Means Committee will provide that action
J
and I am sure that the overwheLming majority of our people will
support it wholeheartedly.
000
- 20 -
7,
')8
'-
the tax program, for example, became effective in October, thEa1 within nine months the economy would benefit from roughly $6 billi.on in
tax relief, and within fifteen months the entire 10 billion do1lar
reduction would be in
~
'4
8p ••••' ••
The President's tax program offers strong encouragement to both
consumption and investment, to every income group and to every sector
of our economy.
It meets the need for prompt and effective
act~on
to lower rates, to foster incentives and effort, at the same time that
it meets the need to keep the budgetary deficit within ssS
tolerable limit'.
It
~~
offe~~~~ freedom
J
it needs to dra"
upon its own inherent resources for growth, to create the job 0Pportunities we
~o1ill
need in the years ahead, and to provide the revenues
necessary to preserve our national security and answer our
national needs.
e.t-
~1t1ca1
I)QQ
.... v ....
Yt-'f J
has ever known;
- 19 -
;ecause of the economies he is effecting, he is
A
under attack from many directions.
No man has the right to
that additional defense economies are possible unless he is
Claim
w~11ing
to spell out exactly where and how they can be made. ~ sum u~ ~e
AOU(c..e- AfVD
welcome the help of all our citizens in assuring the most fruga1
"
conduct of the nation's business, but we reject the counsel of
those who would sacrifice major national interests and even endanger
our national security, merely because our economy has not operated
near enough to capacity to produce the needed revenues.
In a further effort to minimize the effect of tax reduct1.on on
the budget, its impact has been spread over three fiscal years.
This does not mean, however, that we have to wait three years to
feel the economic impact of tax reduction.
Quite the contrary.
The President's tax program would release a very large amount of
money throughout the economy in a very short period of tLme.
If
289
- 18 I recognize that there are some who believe that the
Admin~stra-
tion favors budget deficits as being good. in and of themselves.
is simply not so.
~ve
dislike deficits as much as anyone.
are prepared to accept them if necessary to preserve our
security.
But
we
t
nati~l
And we are not prepared to sacrifice
programs
such as the emergency public works bill, during a period when
employment remains at unacceptably high levels.
This
lD1-
We are solid1y
against waste in government and welcome efforts to reduce it.
But
we do not accept the claims of those who would make1Peat axe Cuts
in the budget but are not prepared to justify the details.
For
instance, it is downright irresponsible to claim, as some have done,
that defense expenditures can be cut 57. merely because they
to over $50 billion a year.
amo~t
Secretary McNamara has given us the
most efficient operation of the Defense Department that our natlon
"'c-I
r'
.... v
,j
\J
- 17 of expanding economic activity and rising Federal revenues in the
years ahead does not mean that Federal outlays should rise in proportian to such revenue increases.
As the tax cut become!. fully effee-
tive and the economy climbs toward full employment, a 8ubstanti.al
part of the revenue increases must go toward eliminating the tr81&sitional deficit."
This means that as revenues increase through 1:ne
stimulus of the tax program and the normal growth of our economy.
expenditures will not be permitted to rise as rapidly, leaving a
substantial portion of each year's increase available to reduce OUr
present budgetary deficit.
~ir~~he
to translate his pledges into action.
President has already
be~
Since January, he has Cut
expenditure requests by over $750 million, including the reCent cut
of $400 million in his foreign aid request.
This is sure proof of
the effectiveness of the program of expenditure control that 1s such
an important and integral part of the President's tax reduction Dr~1m
- 16 the new J lower rate structure will be larger than if we were. to continue with our present rate structure. which stifles economic growth.
Nevertheless, the first and iumediate fiscal impact of tax. reduct:lon
will be lower revenues and a somewhat larger deficit.
for the most careful expenditure control.
This calls
And that is just
~at
the
President has pledged. (iirst of alv&nce increases in def_ se •
space and interest on the public debt are unavoidable, he has held
fiscal 1964 expenditure levels below those of the current year
the overall civilian programs of the government.
1n
~econ~ ~e has
specifically stated on more than one occasion that a substantla1
part of the increased revenues from our expanding economy will be
set aside to reduce the deficit until such time as it is eliminated.
The significance of this pledge has apparently not been fully ln1derstood.
As the President stated in his Budget Message, "The prospect
292
- 15 -
The substantial rate reductions in the middle and upper
h¢QBIe
brackets offer a genuine spur to incentives for effort. initiati;ve
and investment.
Yet the rate reductions could not be as large".
they are -- and remain within the limits of fiscal responsibility
~~,~~
-"I satrtne revenue-raising reforms.
revenue,
tolithout this additional
~~1 :::!"tA~d~~dest
..".••" •.•£
~ -r
J/£
r.: ":1
~ !t!~ question of fiscal responsibility~~ h4f
y;:-;-,
~~~?e./
.p33iJ 1ti1 ••
~kersreatest
...
~~~~
concern ~5'''8 .. Ita falsila
J
Ii'..
of<th~
kPLIt:./7
tax program -- a concern ~pl'e; in the theme you' have
1\
That is a concern we in the Administration fully share.
is clearly spelled out in the President's Budget Message. aswel>t:v"ilS
in his Tax Message.
O¥~~v
;It is our belief that the tax reduction we have proposed:" Wf.;i:l
so invigorate the economy that. in a few years. our revenues
Ull<l_
- 14 -
the simple fact that a free market economy requires both supply and
demand.
It also recognizes the fact that our economy consists of
a complex and interdependent network of forces -- and that we Cannot
lift the entire economy onto a new and higher plane of activity by
lifting merely one sector of it.
Consider for a
moment how the tax reductions are distributed
in the President's program~ Virtually one-half of the $10.3 billion
in net tax reduction would go to taxpayers with incomes of $10.000
and under -- and the other half to individuals with incomes higher
than $10,000 and to corporations.
When you include last year's invest-
ment credit and depreciation reform, the corporate share amounts to
40 percent of the Administration's long-range tax reduction program.
And roughly one-third, or nearly 32 percent, of the net tax reductiOB
goes to middle-income taxpayers -- those in the $10,00-$50,000
brackets.
294
- 13 equipment that marked the opening months of the year, and the recent
striking increase in business appropriations for modernization and
expansion, can be traced largely to these two aC:ions.
Most of you,
~
I am sure, have seen the ~ report i
"Iron Age) laasa.£n it
III
~
the effect of these measures on the steel industry -- an increase of
32% in depreciation writeoffs.
The investment credit and new depreciation guidelines were a
preliminary part of the tax program now under consideration by the
House Ways and Means Committee.
That program, as you
know~
offers
a broad, top-to-bottom reduction in tax rates, both corporate and
personal, accompanied by a number of structural reforms.
The OVer-
all result would be a reduction of $10.3 billion in taxes, designed
to unleash our economy and allow it to reach its full potential.
The President's program is not weighted in favor of anYone
sector of the economy at the expense of any other.
It recognizes
record in the past, and thE:re is no reason to expect that. it will nO'
prove to be the case again.
of tax reducticn.
28~
.
We are not alone in this analysis o£ t.'fie :results
One of the clearest statements of this thesis tha1;t have
eve r seen reads as follows I
"Any appreciable downward revision in tax rates will, of course" cause
an immediate reduction in revenues.
But there is substantial eVidence
from the history of tax relht measures, particularly with respect. to
L~come taxe~,
that the initial revenue loss is soon made up by "an"
increase in the tax baee aeninst which the lower rates are charged.
there 1s ev11ence of thl! not only in our own experience but also
in the experience of such countries as ea"ada, West Gennany, ana
Austria, each of which has enacted several tax relief measures
in the post-4Vorld '"far II period."
That statement wa3 made by the National Council of State Ch&Jnbe~
of ceommerce in ite bulletin on Federal Tax Facts, June
Last year, - ____ _
4, 1958.
Til n 'I JijiT.I!itf] SI;}TJ:
. ru - Nl1ljAl'I~/.r rTC~r (O~NCIL
of
0;:="
/) ~AI ~
.\.,~_
"IJ:
C"N7A"IP/~C.Ej~ ~
'HIers
WAS'
~/J r1 () C
BULLET/II"J D
3"
,a y'
C/7IYA/J/.:;'~~~
.L j "
:> -"'>C'
- 12 more economic activity, and higher tax revenues, to result. 3 ~.;,.
-----
~
----------------------------~
country,
ivity.
Last year, we took our first important steps in
tba7:.~·
They were the enactment of the investment credit and the complete
revision and extensive liberalization -- for the first time in
twenty years -- of the tax rules dealing with depreciation.
The
combined effect of these two actions was to reduce the tax load on
business by some $2.5 billion a year -- the equivalent of a fivepoint reduction in corporate ta::es.
Today, business is reacting to these two measures as we had
29.7
- 11 -
But the harsh truth is, that unless we release the drag
wh~cb ~
tax system now exerts on our economy, we cannot hope to move
s~gni£i-
cantly closer to a balanced budget.
In fact, the experiece of
recent years has shown that exactly the opposite will take place.
Thus, we are faced with what might seem at first to be a
paradox: ~haiJwhile our present tax rates are so high that they
would produce a substantial budget surplus at reasonably full emplor
ment, we have little hope of ever achieving that surplus unless we
first reduce our tax rates.
Actually, this should not be very mysterious.
tt.
·
tha~p.~r in our economic progress
and, indeed. in the
progress of any free market economy such as ours -- is the
vltal~ty
tiL
of ~ private sector, lDth the business conmunity and the consUIIling
public.
The across-the-board reduction in our tax rates recODBnended
by the President will stimulate both
r@ these
areag We can expect
- 10 These two decisions in defense and space, along with relatively
normal increases in other programs vital to the needs of our growing
population, have combined to push our expenditures substantially
higher than the revenues we collect from our under-employed economy.
I mean exactly what 1 say when 1 characterize these other increases as
relatively normal.
Because, for all programs except defense, space,
and interest on the public debt, President Kennedy's current 1964
budget recommendations exceed actual 1961 expenditures by only $4.5
billion -- as compared to an increase of $4.9 billion in these Same
pro 3 r ams during
~ three preceding years, 1958-61. There can be no
question that, if our economy were operating at reasonably full capacP
our tax system would today be producing more than enough revenUe to
finance our current national needs within a balanced budget.
Instead
of worrying about deficits we would be enjoying budgetary surpluses.
- 9 -
In addition to their military threat, the Soviets have also
challenged us in the vast new arena of space.
Thanks to a, consider-
able head start and rockets far larger than oursJthey have ,been
able -- up to now -- to out-perform us in manned space flight and
to capture the imagination of the world by their feats.
Congress agreed with President
Kenned~
in the spring of
we were no longer willing to continue second best in space., It",
approved a program designed to put an American on the moon before
the end of the decade, and hopefully before the arrival of any ,
Soviet space explorer.
That decision was extremely costly,
involved far more than a symbolic race to the moon.
but:~it
It representee
our clear determination as a nation that we will not permit the
Soviet Union to pre-empt world leadership in a new and unknown.
"
environment whose potential we have scarcely begun to foresee.
- 8 -
~
we~ce -iD
till
J
c.......s.
,. xe u,
P'
L _) eat'=aua:t=Bl- thr'm; at M'e the result of
-
an economy which produces too littlel\ rather than of a goveXTUnent
which spends too much.
Let us briefly review that record: -
We are all well aware that within the past two years the
Soviet rulers felt enough confidence in their power to confront us
with a military challenge on a scale we have not seen sUice the
Berlin blockade, fifteen years ago.
Fortunately President Kennedy
had -- in one of the very first moves of his Administration' -ordered a rapid and substantial build-up of our military 'power.
It
was this increased military strength and the steadfastness o'f OUrcitizens that enabled us to withstand both the Berlin crisis of
1961 and the Cuban crisis of last fall.
vital to preserve our freedoms.
That military build-up was
It was also expensive.
defense budget grew by some $10 billion.
Our 8XUlual
- 7 -
~he likelihood is that without a program of substantial tax reduc-:::a
tion our plants will continue to operate below the levels that
..)
businessmen themselves feel they need for most efficient production ._
that there will be no let-up in the pressure upon profit margins __
that new investment which. in real tenns. is
;--.r~:fV
J"
H dub
.
the leve1s
reached six years ago will continue to lag -- that we will, in short •
.J
continue to suffer from the many ills that accompany an economy
~ ~ ~~~/
~ose
..
resources and incentives for growth are hampered by~(restrictl~e tax
system.
As long as our economy is so hampered. we are likely to continue
to suffer as well from the chronic budgetary deficits that
our economy fails to grow.
. PeC4,uSI
grow~~:t
The record is clear that the deficit.
- 6 -
if our economy continues to create jobs no faster than it has durf.ng
the past five years, then, by 1970, our unemployment rate would
soar to a shocking 12.7 percent.
The American people could never tolerate such a result.
would inevitably call forth massive governmental action to
It
prov~de
~-I
the jobs that our private economy ... not providel.The President's
tax program is proof enough that such a prospect is as unwelcome
to us in Washington as it must be to you.
~~
{Fut
~~igh unemployment i~e most
-
enduring
Uk~
and~endurab1.e
Bv7,
aN,".,..,.
result of our slow growth,over the past five y~ar~~1Qbe
~-;;£)many
~~'--~-t;::~~~
ills whi;;h , .... haztk...... f
=-' ::"):9C~=:::::
j
...agree
~b a
~~..,,-~~
~VI!!;'
,
-Dii C&Jf!!lI_S
.. .o:::::?-; ·iiiiI
tlnioe:Jorfsmr...
.... I
303
- 5 We welcome the progress of automation.
But we cannot accept
the unemployment that too often accompanies it.
must -- take steps
We can -- and We
J.,1/./~ to meet~ with a many-sided responseJ the
,~
twin challenge of automation and a rapidly growing labor force.
Government has a clear and direct responsibility in this area.
The
But
it will act only to the extent that the private economy Cannota or
does not, meet this challenge.
The President's tax program is
~
evidence of his beli.ef
that a free and vigorous private economy can provide our citizens
with abundant job opportunities.
kind of economy. let no one
but catastrophic.,
Should we fail to achieve thi.s
imagi~re.Ult would be anything
For instance, Mr. W. P. Gullander, President of
the National Association of Manu fac turers..J recently estimated that I
- 4 full employment.
Last month four and a half million of our citizens
-'
could not find the jobs they sought.
Unless we do something
no~,
the prospects are that many more
millions will be unable to find jobs in the future.
Next year
those young people who were born in 1946 -- the first year of the
postwar baby boom -- will turn eighteen and begin to enter OUr labor
force in large numbers.
During the mid-sixties our labor force will
have to absorb an average annual inflow of around 2 million. 700 thous'
young people, compared to 1 million 800 thousand during the mid.- ,
fifties -- an increase of 50 percent.
We must be able to prOVide
jobs for all of these young men and women.
time of ever~increasing automation.
And we must do it· 'In. a
For the impact of automatl~,
that has long been felt among our blue-collar factory workers 1.8
now spreading rapidly in the white-collar and service areas.
- 3 A.;'Oy¥p~
··7
c, Ji.
As you are well aware, the aim of the President's tax
,.
p.'.i:
is to break the iron grip upon our economy of a tax system W1.ell.
helped control inflation during the Second World War and' lts a:ittlQ:'math, but which now throttles growth.
It is a prOgram~2dJ1.·td
to promote economic growth by promoting economic freedom.
economic freedom 1 mean not only the freedom of the market plae~1i.~lk.f
investment, and of enterprise -- but the freedom that is' the ri.gb1t;~:of·
every American) to have the opportunity to work, to gro) and t04:P~
in accordance with his talents.
Far too many Americans have not had that opporttmity for.:' tac:{;"~
long a time.
Not for a single month in the past five years ha.;,:!"qa!l!';;.
employment fallen below five percent.
Yet for the greater P~:~~I
the preceding five years unemployment was either below or
)
only
slightly above the four percent level that many regard as reas:c:m_~y
- 2b the year are relatively better than most observers had expect:ed.lf
"t. 4 <
~-----;-4 ~~ . .
the improvement continues, our estimated bsd8"
may well
billion
be~han we ~
dOl1ar~-;;-
-
c.:....e4timatedi:.
~
5
J
f
for fi.scal 19~
e;;t
c·
p~aps
't
by as much aSa
,
.. ~ ~ ~ ~->..,,,
..-X
......J'(.~
Even more important, a tax cut when the economy is reasotlably
buoyant would be far more effective in carrying us toward full
emplor
ment than a tax cut when the economy is merely limping along.
For the
tax program that the President has proposed
progr8Jll
~
a program not merely to shield us from . . . economic downturn, btU: to
accelerate our economic growth well into the future.
, The
present::- stat'
9
~ rt: ~ ~"r\%.
"• '~~~
_ - - - - . -._---_
2:
__ ·~l:l"
of our economy' , sl"t'hat kind of program..,... fa IlllE ,.
. --C"p
- 2a In fact, you have made it very clear that you strongly - $llp~~~;'
ces.:z~u.z~~~c~
2~ S'.7 ,..
the principle of tax reduction as vital to the as' ; pn
~ economypSat
'AB......~h_~1111::111!1111!71!11t.
..
a'oae em) m,ahle aa--te meet
The prac t ica 1 ques tion is:
i'Sl,ins
DC)'
Wha t can you act:lVE!:,"'Y
do to make that goal a reality when you do not agree with all-o,'CIa!,
means proposed to reach it?
An excellent answer to that
quest~tnI
~
ha~been given by the group of distinguished business leade~~ ~o
last week, here in Washington, fOITq!d the "Business Committee·~U:Pi;'i~ns.
Reduction in 1963" and who drew up a statement of principles 1.'lpQtii
which bUsinessmen can unite in support ofl\meaningful
tf~ii£
~
1963.
Certainly, the time is ripe.
Four or five months ago.
us could have realistically expected that the economic
a tax cut would be as favorable as they now seem.
f~;~lcQ
condlt1.0tt.8~;:'€Ot
For, based
tlR~':l;.
performance of our economy in the last few months, our. prospect:$H:fl,..-
is no
sur~risc:
so d.::!e?ly
r..
Jhat is
~ZfcCt5
en c:..n l.s;;;u.::: so
so mc:..ny pecple,
~enuinely rcr..a.rl~ablc
~i.1~rp disa.3recrr.c:n~
is
cc::-,~";l~:.-:)
t~1ere
t~1.:lt
the
so
ZCl~-rcachin3
is no unanimity of agreement:.
under~tandable
en details has in no t·u:.. y
~lea!<ened
Hice!:yread conscn!:us that only a tho::ou::;h ove::haul of
can provide tbe lastin:;
ir.1~ctu~
and that
and sometic.es
the strong and
OU7l:'
ta4.. system
cur cc.:..no:ny needs.
l·:ore tr.t-.n t~vo hundred :'litncsscs h.::.ve testified before the House
;;3Y5 and l-!eans CC"Z:littee on the Prcsid~nt r s ta.:: proposals.
:fuile
t::.eir vi::;vs h:lve diZZcred ~lidel~' on sr-ec:iZics, only t~vo of t:'lese
,;·:itncsses have disagreed ~'lith the ccntnll thesis of the President's
p~:oJrt-..:l
-- the neec' for a subst,~tial ::t.:: reduction to encourage
ecenomic gro~·l::!1.
ccrt:~in
:~'!1ile
your o::::;c:..;l~zat:ic;,n, for exa.'Ylple, has questional
aeta ::..:s i.~ :hc Preside:l:: r ~ ?ro)o;;.:-.ls, it h~s not: questioned
::":$ .::.i:n.
~[ac'f) Y~
(D
WIJ.C'H
"+·/~7
~ptile26,
] 963
REMARKS BY THE HONORABLE DOUGLAS DILLOfJ
SECRETARY OF THE TREASURY
BEFORE THE CHAMBER OF COMMERCE OF THE UNITED STATES
AT THE STATLER HILTON HOTEL, WASHINGTON, D. C.
TUESDAY, APRIL 30, 1963, 9:30 A.M., E~
For this second general session of your annual meeting, you hAve
chosen the theme -- "Taxes, Spending, and Freedom."
Timely, because in a relatively fe_
both timely and significant.
~B weeks
It 1s a th$Be
w.'.;. the House Ways and Heans Committee will rep&2"t g.
BbIIYNI_ _
•••
the Tax Bill it is now working on in executive session.
ficant J because there
if.jnc;ttn~ no
And si.&t\1-
more urgent task confrOUl::bul
r4.
~ nation today than the adoption of a program of tax reduct1an
and ref0rm/i" 1I£"!rar4Mn t:llruDEd, I,ao pup.;J-- a progr"", t:ha1:
is at once fair, substantial and fiscally responsible.
)
There is no doubt in my mind that such a program will be
into law this year.
en.cul
The public testimony on the tax proposals ha&
strengthened my earlier belief that tax reduction is essential.
,-'- 63/
·~z/
It
TREASURY DEPAR'lMENT
Washington
FOR RELEASE:
UPON DELIVERY
REMARKS BY THE HONORABLE DOUGLAS DILLON
SECRETARY OF .THE TREASURY
BEFORE THE CHAMBER OF COMMERCE OF THE UNITED STATES
AT THE STATLER HILTON HOTEL, WASHINGTON, D.C.
TUESDAY,
APRIL 30,1963,9:30
A.M.,
EDT
For this second general session of your annual meeting, you have
chosen the theme -- "Taxes, Spending, and Freedom. It It is a theme
both timely and significant. Timely, because in a relatively few
weeks the House Ways and Means Committee will report out the
Tax Bill it is now working on in executive session. And significant,
because there is no more urgent task confronting the nation today
than the adoption of a program of tax reduction and reform -- a
program that is at once fair, substantial, and fiscally responsible.
There is no doubt in my mind that such a program will be enacted
into law this year. The public testimony on the tax proposals has
strengthened my earlier belief that tax reduction is essential. It
is no surprise that, on an issue so complex, so far-reaching and that
so deeply affects so many people, there is 'no unanimity of agreement.
What is genuinely remarkable is that the understandable and
sometimes sharp disagreement on details has in no way weakened the
strong and widespread consensus that only a thorough overhaul of our
tax system can provide the lasting impetus our economy needs.
More than two hundred witnesses have testified before the House
Ways and Means Committee on the President's tax proposals. While
their views have differed widely on specifics, only two of these
witnesses have disagreed with the centa1 thesis of the President's
program -- the need for a substantial tax reduction to encourage
economic growth. While your organization, for example, has
questioned certain details in the President's proposals, it has not
questioned its aim.
In fact, you have made it very clear that you strongly support
the principle of tax reduction as vital to the continuation of a
healthy free economy. The practical question is: What can you
actively do to make that goal a reality when you do not agree with
all the means proposed to reach it? An excellent answer to that
D-834
- 2 -
?1·'
v ..... ..1.
question has just been given by the group of distinguished business
leaders who, last week, here in Washington, formed the "Business
Committee for Tax Reduction in 1963" and who drew up a statement
of principles upon which businessmen can unite in support of
meaningful tax reduction in 1963.
Certainly, the time is ripe. Four or five months ago, few of
us could have realistically expected that the economic conditions
for a tax cut would be as favorable as they now seem. For, based
upon the performance of our economy in the last few months, our
prospects for the year are relatively better than most observers had
expected. If the improvement continues, our estimated revenues for
fiscal 1964 may well be more than we estimated in January -- perhaps
by as much as a billion dollars -- thus reducing the deficit.
Even more important, a tax cut when the economy .is reasonably
buoyant would be far more effective in carrying us toward full
employment than a tax cut lJhen the economy is merely limping along.
For the tax program that the President has proposed is designed as
·a long-range program -- a program not merely to shield us from an
economic downturn, but to accelerate·our economic growth well into
the future. The present state of our economy is ideal for the
inauguration of that kind of program.
As you are well aware, the aim of the President's tax proposals
is to break the iron grip upon our economy of a tax system which
helpe,d control inflation during the Second World War and its aftermath, but which now throttles growth. It is a program to promote
economic growth by promoting economic freedom. And by economic
freedom I mean not only the freedom of the market place, of investment,
and of enterprise -- but the freedom that is the right of every
American, to have the opportunity to work, to grow, and to prosper
in accordance with his talents.
Far too many Americans have not had that opportunity for far too
long a time. Not for a single month in the past five years has
unemployment fallen below five percent. Yet for the greater part
of the preceding five years, unemployment was either below or only
slightly above the four percent level that many regard as reasonably
full employment. Last month, four and a half million of our citizens
could not find the jobs they sought.
Unless we do something now, the prospects are that many more
millions will be unable to find jobs in the future. Next year,
those young people who were born in 1946 -- the first year of the
postwar baby boom -- will turn eighteen and begin to enter our labor
force in large numbers. During the mid-sixties our labor force will
- 3 -
have to absorb. an average annual inflow of around 2 million 700
thousand young people, compared to 1 million 800 thousand during the
mid-fifties -- an increase of 50 percent. We must be able to provide
jobs for all of these young men and women. And we must do it in a
time of ever-increasing automation. For the impact of automation
that has long been felt among our blue-collar factory workers is
now spreading rapidly in the white-collar and service areas.
We welcome the progress of automation. But we cannot accept
the unemployment that too often accompanies it. We can -- and we
must -- take steps to meet, with a many-sided response, the twin
challenge of automation and a rapidly growing labor force. The
Government has a clear and direct responsibility in this area. But
it will act only to the extent that the private economy cannot, or
does not, meet this challenge.
The President's tax program is evidence of his belief that
a free and vigorous private economy can provide our citizens with
abundant job opportunities. Should we fail to achieve this kind
of economy, let no one imagine that the result would be anything
but catastrophic. For instance, Mr. W. P. Gullander, President of
the National Association of Manufacturers, recently estimated that,
if our economy continues to create jobs no faster than it has during
the past five years, then, by 1970, our unemployment rate would
soar to a shocking 12.7 percent;
The American people could never tolerate such a result. It
would inevitably call forth massive governmental action to provide
the jobs that our private economy had not provided. The President's
tax program is proof enough that such a prospect is as unwelcome
to us in Washington as it must be to you.
High unemployment is at once the most enduring and the most
unendurable result of our slow growth over the past five years,
but it is only one of the many ills which flow from an inadequate
economic performance. The likelihood is that without a program of
substantial tax reduction, our plants will continue to operate below
the levels that businessmen themselves feel they need for most
efficient production -- that there will he no let-up in the
pressure upon profit margins -- that new investment which, in real
terms, is just equalling the levels reached six years ago, will
continue to lag -- that we will, in short continue to suffer from
the many ills that accompany an economy whose resources and
incentives for growth are hampered by an overly restrictive tax
system.
- 4 As long as our economy is so hampered, we are likely to continue
to suffer as well from the chronic budgetary deficits that grow
because our economy fails to grow. The record is clear that the
deficit we now face is the result of an economy which produces too
little -- rather than of a government which spends too much. Let
us briefly review that record:
We are all well aware that within the past two years the
Soviet rulers felt enough donfidence in their power to confront us
with a military challenge on a scale we have not seen since the
Berlin blockade, fifteen years ago. Fortunately President Kennedy
had -- in one of the very first moves of his Administration -ordered a rapid and substantial build-up of our military power. It
was this increased military strength and the steadfastness of our
citizens that enabled us to withstand both the Berlin crisis of
1961 and the Cuban crisis of last fall. That military build-up
was vital to preserve our freedoms. It was also expensive. Our
annual defense budget grew by some $10 billion.
In addition to their military threat, the Soviets have also
challenged us in the vast new arena of space •. Thanks to a
considerable head start and rockets far larger than ours, they have
been able -- up to now -- to out-perform us in manned space flight
and to capture the imagination of the world by their feats. But,
in the spring of 1961,. our Congress agreed with President Kennedy,
that we were no longer willing to continue second best'in space.
It approved a program designed to put an American on the moon before
the end of the decade, and hopefully before the arrival of any
Soviet space explorer. That decision was extremely costly, but it
involved far more than a symbolic race to the moon. It represented
our clear determination as a nation that we will not permit the
Soviet Union to pre-empt world leadership in a new and unknown
environment whose potential we have scarcely begun to foresee.
These two decisions in defense and space, along with relatively
normal increases in other programs vital to the needs of our growing
population, have combined to push our expenditures substantially
higher than the revenues we collect from our under-employed economy.
I mean exactly what I say when I characterize these other increases
as relatively normal. Because, for all programs except defense,
space, and interest on the public debt, President Kennedy's current
1964 budget recommendations exceed actual 1961 expenditures by only
$4.5 billion -- as compared to an increase of $4.9 billion in these
same programs during
three preceding years, 1958-61. There can
be no question that, if our economy were operating at reasonably
full capacity, our tax system would today be producing more than
enough revenue to finance our current national needs within a
balance budget. Instead of worrying about deficits we would be
enjoying budgetary surpluses.
- 5 But the harsh truth is, that unless we release the drag which our
tax system now exerts on our economy, we cannot hope to move
significantly closer to a balanced budget. In fact, the experience
of recent years has shown that exactly the opposite will take place.
Thus, we are faced with what might seem at first to be a
paradox: while our present tax rates are so high that they would
produce a substantial budget surplus at reasonably full employment,
we have little hope of ever achieving that surplus unless we first
reduce our tax rates.
Actually, this should not be very mysterious. The explanation
1s that the major factor in our economic progress -- and, indeed, in
the progress of any free market economy such as ours -- is the
vitality of the private sector, both the business community and the
consuming public. The across-the-board reduction in our tax rates
recommended by the President will stimulate both. We can expect more
economic activity, and higher tax revenues, to result. This has been
the record in the past, and there is no reason to expect that it will
not prove to be the case again. We are not alone in this analysis
of the results of tax reduction. One of the clearest statements of
this thesis that I have ever seen reads as follows:
"Any appreciable downward revision in tax rates
will, of course, cause an immediate reduction in
revenues. But there is substantial evidence ErOlla
the history of tax relief measures, particularly
with respect to income taxes, that the initial
revenue loss is soon made up by an increase in the
tax base against which the lower rates are charged.
There is evidence of. this not only in our own
experience but also in the experience of such countries
as Canada, West Germany, and Austria, each of which has
enacted several tax relief measures in the post-World
War II period."
.
That statement was made by the National Council of State
Chambers of Commerce in its bulletin on Federal Tax Facts, June 4,
1958.
Last year, we took our first important steps in tax relief.
They were the enactment of the investment credit and the complete
revision and extensive liberalization -- for the first time in
twenty years -- of the tax rules dealing with depreciation. The
combined efiect of these two actions was to reduce the tax load on
business by some $2.5 billion a year -- the equivalent of a fivepoint reduction in corporate taxes.
- 6 -
Today, business is reacting to these two measures as we had
anticipated. The enlarged flow of new orders for machinery and
equipment that marked the opening months of the year, and the recent
striking increase in business appropriations for modernization and
expansion, can be traced largely to these two actions. Most of you,
I am sure, have seen the report in the magazine, "Iron Age", of
the effect of these measures on the steel industry -- an increase
of 32 percent in depreciation writeoffs.
The investment credit and new depreciation guidelines were a
preliminary part of the tax program now under consideration by the
House Ways and Means Committee. That program, as you know, offers
a broad, top-to-bottom reduction in tax rates, both corporate and
personal, accompanied by a number of structural reforms. The overall result would be a reduction of $10.3 billion in taxes, designed
to unleash our economy and allow it to reach its full potential.
The President's program is not weighted in favor of anyone
sector of the economy at the expense of any other. It recognizes
the simple fact that a free market economy requires both supply and
demand. It also recognizes the fact that our economy consists o~
a complex and interdependent network of forces -- and that we cannot
lift the entire economy onto a new and higher plane of activity by
lifting merely one sector of it.
Consider for a moment how the tax reductions are distributed
in the President's program: Virtually one~half of the $10.3 billion
in net tax reduction would go to taxpayers with incomes of $10,000
and under -- and the other half to individuals with incomes higher
than $10,000 and to corporations. When you include last year's
investment credit and depreciation reform, the corporate share amounts
to 40 percent of the Administration's long-range tax reduction program
And roughly one-third, or nearly 32 percent, of the net tax reduction
goes to middle-income taxpayers -- those in the $10,000-$50,000
brackets.
The substantial rate reductions in the middle and upper income
brackets offer a genuine spur to incentives for effort, initiative
and investment. Yet the rate reductions could not be as large as
they are -- and remain within the limits of fiscal responsibility -in the absence of the revenue-raising reforms. Without this
additional revenue, tax rate reduction would have to be more modest.
- 7 -
The question of fiscal responsibility has given our people the
greatest concern in their consideration of the tax program -- a
concern implicit in the theme you have chosen today. That is a
concern we in the Administration fully share. Indeed, it is clearly
spelled out in the President's Budget Message, as well as in his
Tax Message.
As I have said, it is our belief that the tax reduction we have
proposed will so invigorate the economy that, in a few years, our
revenues under the new, lower rate structure will be larger than
if we were to continue with our present rate structure, which stifles
economic growth. Nevertheless, the first and immediate fi~~al impact
of tax reduction will be lower revenues and a somewhat larger
deficit. This calls for the most careful expenditure control. And
that is just what the President has pledged.
Since increases in defense, space and interest on the public
debt are unavoidable, he t . 3S held fiscal 1964 expendi ture levels
below those of the current year in the overall civilian programs
of the government. He has specifically stated on more than one
occasion that a substantial part of the increased revenues from our
expanding economy will be set aside to reduce the deficit until
such time as it is eliminated. The significance of this pledge has
apparently not been, fully understood. As the President stated in
his Budget Message, "The prospect of expanding economic activity
and rising Federal revenues in the years ahead does not mean that
Federal outlays should rise in proportion to such revenue increases.
As the tax cut becomes fully effective and the economy climbs
toward full employment, a substantial part of the revenue increases
must go toward eliminating the transitional deficit." This means
that as revenues increase through the stimulus of the tax program
and the normal growth of our economy, expenditures will not be
permitted to rise as rapidly, leaving a substantial portion of each
year's increase available to reduce our present budgetary deficit.
The·President has already begun to translate his pledges into
action. Since January, he has cut expenditure requests by over
$750 million, including the recent cut of $400 million in his foreign
aid request. This is sure proof of the effectiveness of the program
of expenditure control that is such an important and integral part
of the President's tax reduction program.
I. recognize that there are some who believe that the
Administration favors budget deficits as being good in and of themselves. This is simply not so. We dislike deficits as much as
anyone. But, we are prepared to accept them if necessary to preserve
our national security. And we are not prepared to sacrifice
effective job-producing programs such as the emergency public works
- 8 -
~1 -,
..... ~;
bill, during a period when unemployment remains at unacceptably high
levels. We are solidly against waste in government and welcome
efforts to reduce it. But we do not accept the claims of those who
would make meat axe cuts in the budget but are not prepared to
justify the details. For instance, it is downright irresponsible to
claim, as some have done, that defense expenditures can be cut
5 percent merely because they amount to over $50 billion a year.
Secretary McNamara has given us the most efficient operation of the
Defense Department that our nation has ever known, yet, because
of the economies he is effecting, he is under attack from many
directions. No man has· the right to claim that additional defense
economies are possible unless he is willing to spell out exactly
where and how they c·an be made. We welcome the advice and help of
all our citizens in assuring the mOBt frugal conduct of the nation's
business, but we reject the counsel 'of those who would sacrifice
major national interests and even endanger our national security,
merely because our economy has not operated near enough to capacity
to produce the needed revenues.
In a further effort to minimize the effect of tax reduction on
the budget, its impact has been spread over three fiscal years .
.This does not mean, however, that we have to wait three years to
feel the economic impact of tax reduction. Quite the contrary.
The President's tax program would release a very large amount of
money throughout the economy in a very short period of time. If
the tax program, for example, became effective in October, then
within nine months the economy would benefit from roughly $6 billion
in tax relief, and within fifteen months the entire 10 billion dollar
reduction would be in effect.
The President's tax program offers strong encouragement to both
consumption and investment, to every income group and to every sector
of our economy. It meets the need for prompt and effective action
to lower rates, to foster incentives and effort, at the same time
that it meets the need to keep the budgetary deficit within a
tolerable limit. It offers our private economy the freedom it
needs to draw upon its own inherent resources for growth, to create
the job opportunities we will need in the years ahead, and to provide
the revenues necessary to preserve our national security and answer
our critical national needs.
It is a program designed to meet our needs today, and to lay the
foundation for a better tomorrow. It responds to the challenge of
our time in a responsible manner. Some of us may disagree with parts
of the program, and with the details of the separate provisions, but
all of us will recognize that effective action is vital if we are to
meet today's economic realities. I am sure the bill that will come
out of the Ways and Means Committee will provide that action, and I am
sure that the overwhelming majority of our people will support it
wholeheartedly.
000
- 2Z. It would, of course, be false optimism to assume that
al~
sma.1..l.
business problems can be solved by revisions in the tax law, however
'Wen: thought-out or devised for that purpose.
However, much
accomp~ished and 'Will be achieved through the
1963 proposals.
CaIl'D.b
We are
determined to bring to the fUrther development of this legislation the
best available information and analysis, including -- in prominent
perspecti ve -- 1 ts impact on small business and 1 ts contribution to the
crQith' in
numbers and capability of our sm!Ul. independent
000
enterpri.~ea
- 23 Measures such as liberalized depreciation, the investment credit~ ~ow
the proposed tax rate reduction all serve to increase the
genera"ted flow of cash needed to make new investments.
~~t
int~aJ.iy.
This is eSJ)ec18l:L"V
,to the capital-scarce and growing small. firm.
Conclusion
The program outlined here is one which is oriented to the needs of'
our economy and our small business community as an integral part of the
,~onom1c
structure.
It will lower tax rates, increase the after-tax profitability of
1nvestment, and speed the after-tax cash flow and rate of recoverY of'
l.n~s"tnlent.
,'l'hese proposals are put forward and supported in the firm
beUe~
that they will strengthen the econoDtf and the role of small business
in our economic structure.
We believe that the returns from them will
more than pay for the revenues lost in a few short years and provide a
much larger measure of Job opportunities, national income and national.
strength and competitiveness than would result from the maintenance of'
a status quo.
There is gathering evidence that the tax incentives initiated last
, year are stimulating an increase in business spending for modernization
and.:ei'pQ,nsion that will markedly strengthen our econOlI\Y.- Tax ~ed.US!t:[Wh
.and' .•~f~ this year will consolidate
.~QnSequent
the future.
and bolster these advances. l.t:lt'h
favorable repercussions on small. business and its oUtloOk'~
- 22 Combined Impact of the Investment Incentive Measures Adopted Last Year and
the Proposed 1963 Tax Reduction for Small Business
... .
Before closing my remarks, I would like to review briefl¥
wi:th1';t,li~.
Comnittee same figures which help quantify' the dimensions and siEQl:l;f:fpauce;
of tl\e proposed tax reductions for a small company against the
the investment incentive measures introduced last year:
ba~;Of'
the 7 per<!eUIJ
investment credit and the administrative liberalization of depreciation.
The tax treatment of new investment may be illustrated in terms of'
the percentage of the cost of an asset subject to tax write-off or equivalent
charges against income in the year of acquisition.
In the case of a 10-year asset costing $10,000, purchased by a
rate~
firm subject to the proposed 22 percent corporate normal tax
tollowing deductions or eqUivalents IDaf be
the
taken~
20 percent 1nitial allowance
$2,000
7 percent investment credit expressed
as equivalent deduction from income
3,180
First-year deprec1ation (double-declin1ng
balance depreCiation, 10-year life)
Total
As these figures demonstrate, the various allowances under present
l~
and the proposed rate reduct10n would in effect permit tax-free
recovery of two-thirds of the cost of a machine or other equipment i tea
with a lO-year life in the year ot its acquis1tion.
To the extent.,~~
depreciable life is shorter than the 10 years assumed in the
'i'_',;;..
example*-~~e
proport1on of capital recovered tax-tree in the first year would be· a~u
greater.
- 21 -
Problems ot strengthening our technological etfort 1n the c1V1.11an
area
or
the economy are of concern to the Nation and to all businesseA
regardless ot size.
The President's proposals are therefore equall.y
. applIcable to large and small businessea.
The special rules I have
..1us't
outlined are designed to overcome possible disabilit1es ot the smaLler
firm with respect to some ot the recommended e11g1b11Ity tests.
TQ1s
will ensure that the direct benetits ot the proposed treatment are
available to the small bul1neu which uses some ot ita assembly line
eqUipment tor research or partially uses SOMe,ot its research
equl~nt
in pertormance ot a lederal contract.
This recommendation will be ot important benefit both directly
. ~bdlrectly to small business.
ang
Small businesses will receive add.:lt1oIJ;b;l
taX allowances for their research effort. They will share in the g~
advance of the econo~ due to faster development of technical knOW1.~
and new products.
Many small businesses specializing in research
act1.v1.:ties
or SUPPlying research equipment or its components will experience greater
demand for their products and services from business generally.
As Administrator Horne has observed, the tax advantage of expens1.ng
research eqUipment could be a crucial factor in the deCision of maDJr
firms with research budgets to acquire needed modern equipment.
sma~l
It lIQ'Uld
also help provide the tinancial means for other small firms not now- engaged
in research and development to initiate such activities to their
competitive advantage.
event~l
- 20 -
t1.me or more tor these purposes, to the extent ot 50 percent of the cost.
For tirma using this special provision, research equipment would quallfy
for a full deduction even if used 1.n part under Federal contract.
In
order to limit the benet1ts of the spec1.al rules primarily to small firms
the amount deductible thereunder would be limited to
4
I
percent ot the
first $500,000 of total expendltures for research and development.
The
deduction therefore would be limited to $20,000.
The particular form ot this tax proposal vill help to make research and
development more productive for each participant during this period of
critical manpower shortages.
Of course, these new proposals are in add1.tion
to the llrevious1y granted olltion either to expense operatIng research and
developnent expenditures, or to amortize them over 60 months or longer.
The ba8ic purpose of this proposal 1s to stimulate our lagging
~lv1liaD
technology. Accelerating economic grovth requ1res the adoPt1on
of pollciel not only to increase aggregate demand, investment, and
uti11zation of exi8ting resource. but a110 to expand and advance
technology and the capital torlllBtion that put. that technology to work.
In contrast to the enormous expanlion of military and space POZ"tiQla
of re8earch and development. the eftort primarily directed to the
creation at nev or improved civ1lian goods and proceS8e. has faltered.
Today, little more than one-tourth of total re8earch and development
expenditures i8 t1nanced by industry, compared vith one-third onl.7 tvc.
years ago and tVO-f1fths in
1955. In abaolute amounts, company tinanc
expendi tures during the last tvo or three years have hardly advanced.
In Teal terms, theYlIByhave declined in nev ot the continued Incre&se
in salaries ot scientitic personnel.
- 19 with widely fluctuating incomes, including many small
and professional men.
323
businessmen~far.mers,
To deal with this problem, the Mministrat1onliaa,
recommended an income averaging provision.
Under the recommendation, a taxpayer could average his current
income
with that of the past four years and if the current income amounts to more
than 133 percent of the average, he would be allowed in effect to treat
the excess over 133 percent as though it were earned over a 5-year period.
Thus :he would be taxed at a considerably reduced rate.
JIla.lly
Since incomes of
small unincorporated businesses are subject to wide swings :from year
to year, their owners especially would benef'it from the averaging prOV'l.s1.on.
Researcb and development
The newly adopted tax polley of' 1962 and now the proposed tax prO&Jlla.
rely" heavlly on strengthening the motlvetions of' business firms to carr,
on private technological activltlea and realLze on tbem through lnvestllleD:~;
in the machinery, equlpment and actlvities that realize profits.
Moreover,
the President bas recaamended that capital expenditures tor machinery and
equlpnent used directly and specifically for research and development be
allowed as a current expense deduction, at the option at the taxpa~r~
For tbb purpose, research end development would include basic and app~led
research 1n the sciences and engineering, Ind act1vities and deve~~nt
designed to develop new productl end processes, or substantlal lnnoV8tlQD8
~n ~resent products and processes, except under Federal contract •
. In' addition, special provision is made to encourage canpanies W1thsmaU
research and development budgets, who would not otherwlse qualU"y, by
allowing them to expense speciallzed equipment, which 18 used half' the
324
- 18 For a married decedent, for exalllple, these figures show tbat the $124~OQQ
gain would be reduced by the various exemptions and exclusions so that
only,$10,5 00 would be subject to tax, and the net additional tax due to
the' ga1n would be only $1,985 or about 1-1/2 percent ot the gain.
. a $200,000 gain would be reduced to a taxable amount
EveD
or $21,900, on which
the net additional tax would be $4,139 or about 2 percent ot the gain.
For a single person not ue1ng the mri tal exclue1on, the tax would be
somewhat grester.
We recognize that, 1n addition to what we believe are the pertinent
tax polley eon.1dentionl, there mult be taken into account in the
latlon of leglllation ot thl. kind collateral
~arau
eonliderationa,iDclUdi~
such mattera aa reaulting changea in the atructure ot the economy and
particularly the preservation of independent small business.
We have
f9 1lowed with interest the testimony on these matters in the recent
liearings and
ban noted the allertion that the application ot the
prOvision wou1d torce the sale or merger of small businesses.
We sha.l.l.
also examine carefUlly views presented in the course of the present
Hearings.
This aspect of the legislation will come up for further
review in the Ways and Means Committee and subsequently in the Senate
Finance Committee before decisions are made by the Congress in the final
legislation on this point.
Structural Features or Particular Interest to Small Business
Income
The
averagl~
absence ot an ettective general averaging provision under dUF
~a.duated personal income tax rate schedule has long penalized ind:tV1dualS
- 11 -
225
In the period since the Secretary'. presentation to the Ways and
Means committee, members of the Trea sury staff have been checking into
the operation of the present rule. tor preventing torced 8ales, the
p08l1ble need to liberalize and amplify them to increase their
ness, and pos!1ble approaches to improve them.
e~t'ect1ve_
These studies are not
yet completed, 10 I am not presently in position to appraise their
relults.
~.
Proviaion would be I118de to enable taxpayers to accommodate
their estate plana to the new rulea through an appropriate tranSition
device.
As Secretary Dillon baa suggested, one way in which this m1.ght
•
be accompUshed would be to set e 3- or 5-yeer transition period.
a 5-year period were used, the eatate or a person dylng 1n
1964
If
woUl..d,.
pay tax on one-rUth or the f!}lins on trensrer at desth, that ot a person
dying 1n 1965 on two-tltths, and so on, with tull taxat10n applying tn
1968. A 3-year per10d would operate 1n slmilar fashlon, providing f'UU
taxatlbn by
1966.
Admlnistrator Horne has rurnished you with an example shOWing the
relatively minor 1mpoct the proposal would have 1n situat10ns which
approximate the circumstances ot the prosperous owner ot
...
~~ll
buslnell.
We have mde detailed computations
8
successf'u~
or the capital gains
t.x at death tor a buainel8lD1!ln with sn average income at $20,000 annuel.l.J
prior to death end accrued galn. ot, alternatively, $124,000 (the eat1Jaate4
average in the $300,000 to $500,000 gross eatate elaas) and $200,000 (an
unusually large gain 1n the $300,000 to $500,000 gross estate categax,).
- 16 ~,,~C
relief and transltion rules.
These rules, outlined in the SUpportlngV"C~
material accompanying the Treasury'a presentation betore the Ways and
~
committee, would operate as tollows:
1.
A 5-year averaging provillon would be appllcable to ltmtt the.
tax on galn at death to five times the tax on the first one-fLfth
or
the gain.
2.
Accrued losses at death would be ut11ized througb a
Specla~
carryback provision.
3. To help those estatea with llquidlty problems certa ln prOVisions
ot present lev (major teatures of whlch were originally urged by this
COIIIIllttee) would apply to the capital galns tax on transfers at
death~
I reter to the prov1elona permltting installment payment ot estate taxes,
,lid .redearpt lona ot corporate a tock w1thout d i Tidend consequences.
'!/.±!rB
be •. been suggested by the Treasury those those sections ot present .~~
broadened to cover the income taxes attributable to the capttal gains
realized at death.
Also, it baa been suggested section 6161 shouJ.d 'be
liberalized so that circumstances involving a torced aale ot a
business to outSiders, or a torced sale on a depre8sed
f8mi~
market,are.~~
81dered to be an undue hardship.
!! Section
303 ot present lew permits tbe redemption ot stock ln cert&t
closely held corporatiOns, witbout the payment ot ordinary income
on the redemption, in order to provide tunds tor the payment ~ es \.
taxes. Section 6166 of present lew permits, 1n cases 1nvolving e1
,
held bUSinesses, installment pl)'lDent ot estate taxes tor a periOd. or;i;;i~;l
to 10 years wltb the applicatlon ot a 4 percent rate ot lnterest
·,:lIP·
Sectlon 6161 providea tor installment payments tor up to 10 yea~
•
cases or undue hardship with the applicat10n ot a 4 percent rate ~~
interest.
t.l
327
- 15 base "bich deals with the treatment
or
gains on transfers at
proposed reductions in the cap1tal tax rate could not be
t_
death~
.1ust~1ed.
To eliminate possible hardsh1p or adverse effects that might Br1.aiJ
II
number of relief features have been included.
These were descri.bed by,
Secretary DUlOQ 1n hb presentatIon to the House Ways and Means CoaDat.t'tee,
and I shall recapItulate thell only brIefly here.
1.
Tbe capItal gains tax would reduce the eatate tax base.
2.
All ordinary personal and household effects such as
clothi.ng~
appliances, and turniture would be exempt.
3·
Property pa .. ing to charity would cootinue to be exempt.
4. A IDBri tal deduction would be provided similar to related Pl"0V'1.B1.0DI
of the e.tate end gitt taxes
~e81dent.
10
as to a ..ure uniformity 1n the. treatment of
of community property and COIIIDon law States.
the marItal deduction would be lubject to a carryover
Amounts
or
covereQ.~td
the ar1g1~~
5. An addltlonal blanket exemptlon of $15,000 of galn would 8PP"
to every taxpayer.
6. Speclal provlalona would lnsure that no one would have to
Pa)'" 1:8~
on the transter of a home.
The foregolng exceptlons and exemptlons would l1mit any 1mpaet
soever
or
the proposal to fewer than 3 percent ot those who die each
About 55,000 e.tate. anDually would be affected.
II
"'bat.
ot this 55,000,
~r
~Jr:
traction vould include small bUSiness interelts.
To mitigate the application ot the tax to the remain1ng 55,000 eatit.,
end the lUll •• ller nuaber at s_ll bul1ne .. ovners on vhOll there \r0Ul4"
an impact, there are a number at other prOYt.loos auggested 1n the Il&t~
tI
328
- l~ -
This will afford important encouragement to investors in
Sma.l.l·~.
ness who often seek capital gains from development of a successful. edT , .
. prise.
The lower capital gains rates \lill also unlock
season~;~
which are now retained largely for tax reasons, and encourage the:;.",..
funds to small businesses, particularly 1n view of the effects 01' gener-n
+.~
reduction 1n creating greater prospects for profitable
small. business.
investm~t
in
This increase in the liquidity of investment and removal.
of' barriers to the free flow of capital funds \li11 enhance the sUpply 01:"
available r1sk capital for small business use.
As I have previousl¥
indicated, eny measure which increases the effective' capital supply· goes
directly to the heart of the problem of hO\l to generate new business.a. "'_
_
to nurture existing businesses, and how to expand small and medtum-s1.Zed,
concerns into increasingly sturdy and healthy enterprises.
,
'l'axation ot gaine accrued on capital a ..eta on transter at dea.~
A. part
ot the package ot proposal. for
tax reduction in the Qa~
gain aDd 1018 area, 'We hev. recOIIIIDended that these
liberalizati~ •
..;;....
accompanied by the taxation, at the reduced long-terDI capital. 881.n. _ .....,.
of net gain. accrued on capital .... t •• t time of tran.fer at death
gift.
.It
.~
Ttli. 'Would not .pplr to ...et. transterred aa charitable 8itta
:~
bequests.
Tbe recOllllDeodatlon i. an ellentl.1 part of the capital gaUls ~
reduct1al, slnee the substantially lower r.tes alone would not
deal.~."R1f
with the -lock-ln- proble., the .olutioo of 'Which 1s basic in a88urt.1la
mobillty of capital.
Moreover, 'Without.
!lOre
rational,
comprebeDai.,,-,~_~
329
- 13 Increased consumer demand, hlgher levels of product1.on, and more
favorable earnlng opportunltles wl11 help all types of buslness,
large and small.
b~
Rising output and employment to meet new private
demands wll1 generate new lnccmes whlch are ln turn avaHable to be
spent or saved snd lnvested.
The stlmulus to consumer expend1tures
that 1s engendered by the tax cut thus cumubtes throughout a broad
range of the economy, lettlng ln motion forces of expans10n that lVou:ld
~
I
wlse remaln 1nert.
Moreover, the release of funds to consumers v1.U
generate new t.ncenthes _180 for investment spendlng, and product1on
of new machlnes IDd the bulldlng of new factorles, offices, stores,
and apartments wlU add further to consumer incomes 1n the same 'W87
a 8 the productlon at consumer goods.
Capltal Calns and Lo8les
Closely related to the rate reductlons, but also encompasslng
t.mportBnt element_ of Itructural change, are the proposed reviSions In
the tax treatment of cap1tal gains and losses.
These changes prOVide
significant reductions 1n the capital gains tax rates for both indi'_
rtduals and corporations and -- in their over-all impact --
d.1rect~
and 1ndirectly aid small firms.
Reductions in capital gains tax rates
Under the program, 30 percent of long-term capital gains of ind.:l-.
viduals, instead of the present 50 percent, is includible in taxable
income.
Combined with the individual tax reductions this means that
cap1tlrJ.. gains would be taxed at an ettective rate of 4.2 percent, ~
,of the present 10 percent, in the lowest bracket and progress to a
of
19.5
percent, instead of the present 25 percent.
xne.o...
.~.~ j I
vvv
- 12 enterprises) with net profit, 5,925,070 or 82 percent reported net llro:t1:t
under $5,000.
Some 7,071,483 or 96 percent reported net profit Of' :Le_
than $20,000.
In the partnerlhip field,
or
159,112 partnerships with net
1959-60, 359,136 or nearly balf had net profit under $5,000.
or nearly 86 percent had net profit under $20,000.
pror~
Some ~1111
Since there;~'-;. .
the average nearly 3 partners in each firm, the share of profit
taxa'b~
to the average partner would be between 35 and 40 percent of the pa.r~1
1DCOIDe
as .uch.
While the .I~e or the incaDe of an unIncorporated bUSiness doe. _ . .
conclua1ve11 indIcate the tax bracket 1n which the businessman's prar1.t
falls, .inee hiB over-all income rray include income trom other SOUrcea ..
.
these data neverthele ••• ugge.t that the great majority of Un1ncorPOr&~
'
bus1neu income. would be .ubJeet to a tax reduction spproaching 25
'nA-....:.,
~
~'Q:_~J
auum1ng tbe .taDdard deductIon, a figure closely in line with the. 26..6i'~
C?ut proposed for __ 11 coarpanle ••
Indirect Benetlt. to Small Bullne .. :
ot PrOductlon and Earntng.
Level.
Increased Consumer Demand and _ _
-----
The general econaalc .tLmulatlon and higher growth rate that wlXl
result from the adoption of the Prell.dent'. program will provide
and richer opportunities tor small business.
w1de~
It given a fair and eq_l.
cbance, small busineu can more than hold its awn in the market place
~
but 1t can belt survive and flourhh 1n the favorable environment Of' .,
buoyant, expanding econOMY.
- 11 Let me cite a few figures 1llustrating the magnitude at the
indiyidual income tax reductlons in the income
bulk or u:llncorporated bUllnelles are found.
ran~s
pr~
in which the
~
A marrIed ID8n with twO'
'dependents, tIling a joint return, nov pays tax at about $420 on a .5~:~
adJusted gro .. income, u.ing the .tandard deduction.
Under the
pr~
ratel wllen tully in e~e9t, be would pay $280, a reduction of $llt.<> QJ:o
33.3 percent.
Comparable tlgure. tor a bUlinelsman with $10,000 adjuated gross
income are:
present tax $1,312, proposed Uability $1,068, reduct1.~
$304 or 22.2 percent.
At $20,000 adJu.ted grOSI income, the present
tax 11 $4,124, proposed $),282, reduction $842 or
:0. 4 percent.
~l"~u_\
figurel cOilpere vltb the proposed reduction at 26.6 percent in tax t~.
lmall incorporated bul1ne.ael vlth incomel under $25,000.
For
taxpe~rl
vith typical ltell1zed personal deductions, the
reductionl vould be lcaevbat •• ller, but .till lubltantiel.
IJrO:_ ..
At $,~~....
adjusted UO.I income, the reductioa would be 18.3 percent; at $l.o~
1~.~·2 percent; and at $20,000, 13.4 percent.
uepropoHd reY1aion ot the treatment
or
AI I have prev1ouaJ.y ~
itell1zed deductions
wOU14~J.e
attect deduction. taken in arriving at taxable bua1neas earn1D&8
1lDcl:,~
theretore not attect the bUlinels t1nl, al sueb.
To an even greater extent than 1n the corporate area, the
....
a:re."C,~
ot unincorporated bul1ne .. Inccael are IIDBU. In 1959-60, tor e~
•
out ot 1,219,608 .ole proprietorsb1ps (Including tarm and prote881~
- 10 he taxe. ot exi.ting groups.
This would prevent
~
,proportionate tax cut tor large multi-corporate
~r
ana
proliferatlon to obtain a tax advantage,
.ve po.ltion at 11DB11 enterprises.
)uld attect only multi-corporate groups with COlllb1.uec1
~25, 000.
It would bave no etrect on businesses
UB1Dg
organization it their combined income vas not i.n
~.
Admin1atrator Horne hal previous11 reported to
applicantl \mder the Small Businesl Act indicates
1
oua1nelle. ule the multiple corporate torm and 'tb.e
[10
algniticant adverse ettect on the aurvey groUp.
to unincorporated budnell:
Individual rate r~1actl(111
...
111811 unincorporated bUlinessel 1n our economy w1l.l.;.
'1 t'r0lD
the rec()IIIDended indiVidual income tax rat. "c.eu-'
vould be made over a 3-year period .tartlq 1Q.
1
the pre.ent range
l.~Et
ot 20 to 91 percent to a Dev: .:~~
~rcent.
I
on all individual incomel would be reduced
ru
b~_
Lon aDd more than $6 bUlion atter ottsett1ng 8~cQlrel
the tield at per.onal non-busin•• s deductions
incorporated tirma aa Buch.
11ioo
or
It il estimated tnat
the more than $8 bUlion net reduction ,.~
Dcorporated bUline.aea, exclusive
es.
~1~
or
tarming and,
- 9 4.
It will encourage new investment and lnl tiatl"Ie by
con:f'ront~
-the small businessmen, nev or old, with a IDBrkedly improved out100k r,
.
QC
.tter-tax returns along the wbole li~e
or lnvestment declslons vhj.C!l.".
must JD8ke in carrying on or expandlna hie bUSiness.
Propoeed limitation on multiple inCOrporation benetlts
Tb.e rever ..l
ot corporate normal and surtax rates ls deSigned to
strengthen a"htance rendered through the corporate rate structure -:tG
small bue1ne...
Th1s Interchange ot the rste components bolsters t.b.e
pol1cy begun b1 the Coogre .. 1n 1950 ot aiding 81118ll bus1ness b)" ~~
it trom the corporate surtax.
However, unless 11ml ted to genuinel.'7 . . . .
tirms the prOPOsal would cooter unintended benetl ts to large bus1lle __
organizat1ons operating througb a aeries ot separately 1ncorporatecl . ~
Tbll would perait large IIUlti-corporate groupa to obtain the ~
advantagel ot the 22 percent rate tar slll811 business while en.1onllg_~
greater tinancial strength end cOGlpetlt1ve advantages aSSOCiated
larger bue1oe" operatloos.
undesirable revellue loase. would be
1f1.~
~
as well a. additional arbltraq tax d1tterent1al. allong large·ttrua.
.. qual incomel depending
OIl
their torll ot legal organization.
Even
t_i""-,.
~
Important tor a prograa dee1goed tor ImBll budness, uncurbed exteQ.ll5l
more tavorable -.ell bullness tax treatment to many larger
ha~
en~ __
aerloul11 adver .. cOGlpetltlve illpact on the actually small b'U a '1llwi
tor whOil sub.tenUal help il intended.
Tbe Prelldent"
80 percent
c~
proposal would 11m1t multi-corporate groups
control to
ODe
surtax exearption.
~
'!'be limitation 'ttl
become ettective gradua1l1 over a 5-,.e8r tran.ition in order to
a~~.
..
- 8 proprletorlhlps and pertnerlh1pl to be taxed al corporations •.
CQIl_~~...
1.11 closely held corporatlona bave the option under subchapter ,Qj~:~~&
taxed In a manner aimilar to partnerlhips.
In cc.bloaUon vi th lelt year' I depreciation retorm and
1nveB~:
l.uveat..
credit, which generally Increased atter-tax prot'itability on new
_nt in equlpient by 20 percent, the proposed rate reduction will: .....~f.
total l.-prove_nt In the at'ter-tax earning. rate ot' Dearly
one-th~,,«• •
the a.l1 t'lrm.
'!'be relulting increa .. in return on budneu inveltment and 1.~~
should lperk new Interelt In the tormatlon at' nev bU8ines..
'l'h1B a . . . .
drive to the generaUon ot' new enterprh.a will ghe added Y1tal.l1;.¥!;S~ili~'"
"",'~"-'\>Icl'- '
bUliae .. population.
FrOli the ltandpoint
ot Mlntain i ns a healtqi ~i~t,
bUllae .. sector, the Itrength ot' .otlvation to create new bU.lnea~.~. .
cruet_I.
In IUJIIIISI7, the propoaed corporate tax cut which aingles out
t:t:a..
BII811 cOllp8ny tor larger and aore 1mmediate reductIon will have 8e~
belic and cloMly related i_pactIon .111811 bUline .. :
1.
It will .tlmulata the tormation at' new budDeasea.
2.
It will preaene and Itrengthen the coarpetltlve 8tatuS
o~
existing tlnal.
3.
It will enhance the growth capability and theretore the 'Vt..b~l;t\\I
ot both exilting and new t1.r1la b1 increa8ing their caBh flow aDd
ot' capital lupply.
8~.
,
- 7 One ot the more undesirable ettects ot our present tax structure is that
it 1nhibits the generation of new bUSinesses and the growth ot eXisting
small business.
The small businessman or ·innovator must ot neceSSitY'
rely to a large extent on his own financial resources or those ot his
family and close friends or assoclates.
These resources include the
after-tax earnings ot a 8mall buslne .. vhich has been launched with
some success but needs capital tor growth to attain ita real potential.
It small corporations are to stay in bUSiness they must have money to
plow back into the business to expand and to meet competition.
If' small.
businessmen are to be willing to undertake new enterprises, they must have
some prospect of being able to build it up after lts lnltial phases at
operation through reinvestment ot earnings.
The earnings ot the bUSiness
itselt are the best and, very trequently, the sole source ot tunda tor
expansion.
The existing tax rate ot 30 percent on the tirst $25,000 makes
it difficult tor the small corporation to retain a 8utticientlY' large
portion of its earnings.
Fre~uently,
what appear to be earnlngs are in
tact the unrecognized costs ot the very aurvival of the business.
Survival
1n turn 1s impossible wIthout growth, 80 that survival and growth are in
reali ty synonymous.
The benetits ot the proposed reversal tor small incorporated bUSinesses
would balance the individual income tax reductions recommended which would
apply to unincorporated businesses.
In any event, the benetits ot-the
reversal would be available to unincorporated bUSinesses, whether or not
they wished to incorporate, by virtue of the operatIon of sectioQ 1361
(subchapter R) ot the Internal Revenue Code which grants an election. to
- 6~~
.
companies witll protits ot $25,000 or less would amount to about ~~rcent •
tor those earning $100,000 to $1,000,000, it would amount to abO\l-t.o-~ percent; and tor tllose earning more than $1,000,000 annually, it WOul.i:l- be
about 10 percent.
Tllese tax cuts tor small companies would result in higller
protits and retained earnings.
8~.tax
Tbe tax program will thus help reDl<Jfe 1QDe
of the most persistent deterrents to the growth ot small bUSiness
lack ot adequate capital.
Because of their inabilIty to obtain
~-Gual.
long-term tinancing tor expansion and modernization, _11 • •1;iirif~:.re
forced to rely on costly short-term credit, which tb8r. . .t"atlD.Wnuall.1
refinance, to supplement their limited internally geneJ"BteC1 runna unl.ess the1
,CSD·8ftU.themselves
or
credit from Small Business Admln1stratlon_~;~
Tax reduction would inc rea se the volume of earnings which can be p1.CNetl 'back
into small bUSinesses to sustain their healthy growth.
This will help
'.ensure the survival and growth ot existing small bUSinesses; it Will alao
encoursge new entrants into business ventures Since it will improve the
prospects for tinancing expansioD trom a .tronger base of sources within
the successtul enterprise -- a con.ideration ot ms.1or importance to the
prudent entrepreneur.
Tax cuts would also attract new investment to
small businesses, since the atter-tax protitability
would increase.
or sucll enterprises
At the same tll18, increaled profit prospects would
improve their borrowing power.
To put the resulting improvement in atter-tax prot1tability in
very specifiC aod concrete terms, the proposed percentage pOint reduction
1n tbe corporate rate on the tirst $25,000 will increase the rate
return to investment and initiative by about 11-1/2 percent.
or
- 5 Small business representatives appearing betore your Committee
have repeatedly advanced proposals similar to that now being made by
President Kennedy.
Over the years, members ot the
Committee, as well
as other members ot the Congress, have introduced or sponsored a number
ot bills in the Congress to ettectuate such a change in the. corporate
rate structure to aid small business.
The adoption ot this Simple and
realistic tax adjustment tor small business will result in immediate tax
reduction totalling $233 million in 1963 tor
461,5 00 companies with incomes
ot $25,000 or less, more than tour-tUths ot the total taxpaying corporate
POpulation.
Corporations above the $25,000 income mark, but still small. in relation
to some
or
the largest concerns, would receive impressive benefita tram
the reversal ot normal and surtax rates.
They would also benefit further
trom the subsequent proposed reductions bringing the general corporate
rate dovn to 41 percent by 1965.
When tully effective, these would amount
to about a 16 percent reduction tor the corporation witb $50,000 income
and roughly 12-1/2 percent tor the corporation with $100,000 income.
Because ot the emphasis on rate reduction on the tirst $25,000 ot
earnings, the over-sll reduction in corporate tax rates will continue to
be proportionately larger tor 811811 companies.
Reductiona in the surtax
paid by large corporations will go into effect in 1964 and 1965.
But
even when all three steps ot the corporate tax cut are in ettect, the
tax reduction tor small companies would be greatest.
Ttle reduction for
- 4-
rates,
genera
orate normal and surtax
Both in amount and timing, the rate reductions proposed in the
corporate area will be especially beneficial to small business.
The
t1ming and pattern of the corporate tax reduction ere designed to provide
the maximum incentive to small business in the quickest possible time
The reduction is focused in the small business range of corporate incoue
for the current year.
General corporate rate reduction is deterred until
1964 and 1965.
GettIng down to speciflcs, effective beginning with 1963 income,
the proposals would reverse the present corporate normal and surtax rates,
reducing rates for companies with net income of $25,000 or less trom
30 percent to 22 percent. The general corporate rate of 52 percent on
income above $25,000 would thus remain unchanged in 1963.
However, the
benefits of the immediate reduction on the first $25,000 ot corporate
income would also extend in substantial measure to medium-sized firms
with incomes above $25,000.
This change recommended tor 1963 represents
a reduction ot 27 percent in tax paid by corporations with incomes ot
$25,000 or less, compared with reductions of 10 percent at $50,000 net
income and 4 percent at $100,000.
This reversal of corporate normal and surtax rates represents a
suggestion made in a letter to the President earlier this year by your
Chairman and other Committee members of both parties.
endorsed as a maJor aid to small business.
It has been V1dely
- 3 The tax treatment ot small business is a subject ot prime concern
to the Nation tar, a8 Secretary Dillon stated 1n hi8 appearance bef'ore
the Ways and Means Committee, "Small businesses, their strength and
vitality, are the very keystone ot our competitive economy and its
potential tar growtb."
Direct ..sene1'lts tor Small Business:
Tax Rate Reductions
The President's prograM would benetit small businesses ~c~
in e nUJ1lh er :Jt ways, the 1I0St important
~
which i8 lover-tax rate_.
UQder the proposals, all small bUSiness enterprises, whether they are
corporations, partnerships, ar sole proprietorships, will enjoy substantlal tax rate reduction.
- 2 -
The major, reform in this. tax progralll -- and the one
:to 'SJD8U
or
greatest importance
business -- i. the large reductions in tax rates •. The reductiOns
would apply to individual 'and corporate incomes and capital gains.
In ,combination with revenue-losing structural cQanges to mee.t »&rtiCUl.al
hardships. the rate reductIon. on indIvidual end corporate Incomes will
reduce revenues by about $14.4 billion, of which $13.6 bI11Ion.isattributabJ
to the rate cuts themselves.
Other reforms which broaden the tax base and
eliminate unjustified preferences provide some $4.1 billion revenu~ to help
make the rete reductions possible.
The rate reductions -- other than the reduction tor small companies
- 2 -
The major reform in this tax program -- and the one of greatest importance
to small business -- is the large reductions in tax rates.
The reductions
would apply to individual end corporate incomes and capital gains.
In combination with revenue-lodng structural changes to meet particulal
'.
.
hardshIps, the.rate reductions on individual and corporate incomes will
reduce revenues by about $14.4 billion, of which $13.6 billion. is attr~butabl
to the rate cuts themselves.
Other reforms wbich broaden the tax base and
eliminate unjustified preferences provide some $4.1 bIllion revenue to help
make the rate reductions possible.
In addition to the direct benet! ts of lower taxes for small firms I
the resulting stimulation to tbe economy will provide an expanding
environment in which small business can survive and flourish.
A major objective has been to exercise care that the actual revenue
losses from tax reduction would be handled 1n a fIscally responsible manner.The rate ~eductlons -- other than the reduction for small-~0mp8n1e8
which is made in full this year,-- are staged over three years, commenCing
in 1963, so that, taking into account the feedback from increased economic
activity resulting from the tax cut, the addition to the 1964 fiscal.year
deficit would be only $2.7 billion.
Stress is also placed upon the fi8cal importance, as well as reasons
of tax policy, tor combIning rate reduction with structural changes
broadening tbe tax base and accelerating tax collection of the larger
corporations, which would keep revenue losses from rate reduction at
reasonable levels during the period of deficit.
FOR RELEASE: UPON DELIVERY
statement of the Honorable Henry H. Fowler
Under Secretary of the Treasury
before the Subcommittee on Taxes of the Select Committee
on Small Business of the Senate, on the SignIficance of the
President's 1963 Tax Program for Small Business,
Tuesday, April 30, 1963, 2:00 P.M., EDT
Introduct10n
. The President's tax proposals submitted to the Congress in his
Tax Message earlier this year have great significance for the small
business enterprises of the Nation, now and in the future.
Small
business has a tremendous stake both in the specifics and in the over-all
thrust of the tax program which the Administration bas outlined far
accelerating the growth of the American economy.
I apprec1ate this opportunity to discuss with the members of this
distinguished Committee the import and objectives of the program, with
particular reference to ita effects on .mall businesses and the competl-
:tite :.cJ,!mate
1n which they operate.
Construct1 ve achievements ot, th:1.
CommIttee 1n various areas of public policy bearing upon the welfare
and growth of small businesl make its views valuable in the continuing
appraisal of the small businels aspects of the pending legislation.
The Ways snd Means Committee of the House recently completed over
six weeks of public hearings on the tax
pro~osals,
and is now engaged in
detailed consideration and formulation of the various facets at the
proposed legislation.
The Treasury is working with the Ways and Means
Committee in any way it can to be helpful.
Your Chairman, in hi. letter of invitation, expressed interest"in
welgbing~thetax,reduction
structural revie10n and
/
proposals against tbe ' recommendations tar
reform~particulal".1.y
:a.;tIler. ~eQ~" sll811
busines8.
?4 ')
TREASURY DEPARTMENT
OR RELEASE: UPON DELIVERY
Washington
v
~
statement ot the Honorable Henry H. Fowler
Under Secretary ot the Treasury
betore the Subcommittee on Taxes ot the Select Colllllittee
on Small Business ot the Senate, on the Signiticance ot the
President's 1963 Tax ProgralD tor Small Business,
Tuesday, April 30, 1963, 2:00 P.M., EDT
Introduction
The President's tax proposals 8ubll1tted to the COngre8S in his
'l'ax Mes88ge earlier this year haw great signiticance
tor the s_ll
business enterprises ot the Nation, nov and in the tuture.
Small
business bas a tremendous stake both in the specitics and in the over-all
thrust ot the tax program which the Administration bas outlined tor
accelerating the growth ot the American ecOllOilY.
1 appreciate this opportunity to discU8S vith the members ot this
distinguished Committee the import and objectives ot the prograll, with
particular reterence to its ettects on small businesses and the competitive climate in which they operate.
Constructive achievements ot this
committee in various areas ot public policy bearing upon the weltare
and growth ot small business make its views valuable in tbe continuing
appraisal ot tbe small business aspects ot the pending legislation.
Tbe Waya and Means COGlDlttee ot the House recently completed over
six weeks ot public hearings on tbe tax proposals, and Is now engaged in
detailed consideration and tormulation ot the various tacets ot the
proposed legislation.
The Treasury 18 working witb the Ways end Meens
committee in any way it can to be helptul.
Your Chairman, in his letter ot invitation, expressed interest in
weighing the tax reduction proposals against the recommendatIons tor
structural revision and retorm partIcularly as they attect small business.
0-835
- 2 -
The major reform in this tax program -- and the one of greatest importance
to small business -- Is the large reductions in tax rates.
The reductions
would apply to individual and corporate incomes and capital gains.
In combinatIon with revenue-losing structural changes to meet particul.a%
hardships, the rete reductions on individual and corporate incomes wil1
reduce revenues by about
$14.4 billion, of which $13.6 billion is attributebl
to the rate cuts themselves.
Other reforms which broaden the tax base and
eliminate unjustIfIed preferences provide some $4.1 bIllion revenue to help
make the rete reductions possible.
In addition to the dlrect benefits of lower taxes tor small firms,
the resulting stimulation to the economy will provide an expanding
environment in which smnll business can survive and flourish.
A major objective has been to exercise care that the actual revenue
losses from tax reduction would be handled in a fi8cally responsible manner.
The rate reductions -- other then the reduction for small companies
which Is made In full this year -- are staged over three years,
in
1963,
80
commencl~g
that, taking into account the feedback from increased economic
activity resulting from the tax cut, the addition to the
1964
fiscal year
deficit would be only $2.7 billion.
Stress is also placed upon the fiscal importance, as well as reasons
of tax policy, tor combining rate reduction with structural changes
broadening the tax base end accelerating tax collection of the larger
corporations, which would keep revenue losses from rate reduction at
reasonable levels during the period of deficit.
- 3 The tax treatment ot small business is a subject ot prime concern
to the Nation tor, as Secretary D1l10nstated in his appearance betore
the Ways and Means Committee, "Small businesses, their strength and
v~tality,
are the very keystone ot our competitive economy end its
potential tor growth."
The 4-1/2 million concerns, both corporate and unincorporated,
which comprise the small business sector ot our economy constitute
95 percent ot all American business tirms.
They and the 30 million
persons for whom they directly provide employment have every right to
100k to this year's tax proposals to provide the needed stimulus tor
vigorouS and balaDced expansion ot our economy in general and at small
business In particular.
While the over-all benetits ot the program to small business are
generally recognized, specitic proposals, such
8S
the suggested revision
In the tax treatment ot capital gains on assets transferred at death,
have given rise to objections by some representatives ot small business.
I wish to discuss these matters with you this atternoon, so that the
Committee will have a tull plcture.ot the proposals and their net impact
on the small bUSiness sector.
D1rect Benetits tor Small Business:
Tax Rate Reductions
The President's program would benetit small bUSinesses dIrectly
in a number ot ways, the most important ot whlch Is lower tax rates.
UDder the proposals, all small business enterprises, whether they are
corporations, partnershIps, or Bole proprietorshlps, wl11 enjoy substantlal tax rate reduction.
- 4Corporations: Im:nedlate reversal of corporate normal. and surtax
rates, followed by more general rate cuts
Both in amount and timing, the rate reductions proposed in the
corporate area will be especially beneficial to small business.
The
timing and pattern ot the corporate tax reduction are designed to provide
the maximum incentive to small business in the quickest possible time.
The reduct10n 1s tocused 1n the small business range ot corporate income
tar the current year.
General corporate rate reduction 1s deferreduntu
Getting down to specIfiCS, effectIve beginning with 1963 income,
the proposals would reverse the present corporate normal' and surtax rates,
"reducing rates tor companies with net income ot $25,000 or less trom
30 percent to 22 percent.
The general corpQrate rate ot 52 percent on
income above $25,000 would thus remain uncbanged in 1963.
However, the
benefits ot the immediate reduction on the first $25,000 ot corporate
income would also extend in substantial measure to medium-s1zed firms
with incomes above $25,000.
This change recommended tar 1963 represents
a reductIon of 27 percent in tax paid by corporatIons with incomes or
$25,000 or less, compared vith reductions ot 10 percent at $50,000 net
income and 4 percent at $lOO,<X>O.
This reversal at corporate normsl and surtax rates represents a
suggestIon made in
8
letter to the President earlier this year by your
Chairman and other Comm1ttee members ot both parties.
endorsed as a major a1d to small business.
It has been vldel.y
- 5 Small business representatives sppearing before your Committee
have repeatedly advanced proposals sim1lar to that nO\l beIng made by
President Kennedy.
Over the years, members ot the Committee, as well
88 other members ot the Congress, have introduced or sponsored a number
of bUls in the Congress to ettectuate such a change in the corporate
rate structm-e to aid small business.
The adoption ot this simple and
~8listlc
tax adjustment tor small business \li11 result 1n immediate tax
~duction
totalling $233 million 1n 1963 tor 461,500 companies vi th incomes
of $25,000 or less, more than tour-tifths
ot the total taxpaying corporate
popu:Lation •
Corporations above the $25,000 income mark, but still small in relation
to some ot the largest concerns, vould receive impressive benetits from
the reversal of normal and surtax
rete8~
They would elso benefit further
from the subsequent proposed reductions bringlng the general corporate
rate down to 41 percent by 1965.
When tully etfective, these would amount
to about a 16 percent reduction tor the corporation with $50,000 income
and roughly 12-1/2 percent tor the corporation \11th $100,000 income.
Because ot the emphaSis on rate reduction on the tirst $25,000 or
earnings, the over-all reduction in corporate tax rates vill continue to
be
proportionately larger tor small companies.
Reductions in the surtax
paid by large corporations will go into effect in 1964 and 1965.
But
even when all three steps ot the corporate tax cut are in etfect, the
tax reduction tor small companies vould be greatest.
The reduction tor
- 6 companies with profits of $25,000 or less would amount to about 27 percent;
for those earning $100,000 to $1,000,000, it would amount to about
~l
per-
cent; and for those earning more than $1,000,000 annually, it would be
about 10 percent.
These tax cutE tor small companies would result in higher after-tax
profits and retained earnings.
The tax program will thus help remove one
ot the most perSistent deterrents to the growth of smell business -lack ot adequate capItal.
8
Because ot theIr inability to obtain conventionaJ
long-term tinancing tor expansion and modernization, small bUsinesses are
forced to rely on costly short-term credIt, which they must continually
refinance, to supplement their limited internally generated tunds unless tb4
can evsIl themselves ot credIt from Small Business Administration sources.
Tax reduction would increase the volume ot earnings which can be plowed back
into small businesses to sustain their healthy growth.
This will help
ensure the survival and growth of existing small businesses; it will also
encourage new entrants into business ventures slnce it will improve tbe
prospects(tor t1nancing expansion trom a stronger base ot sources within
the successful enterpr1se -- a consideration of major importance to the
prudent entrepreneur.
Tax cuts would also attract new investment to
small buainesses, aince the arter-tax profItabIlity of such enterprises
would increase.
improve
thei~
At the same time, increased profit prospects would
borrowing power.
To put the resulting improvement 1n after-tax profitabi11ty 1n
very spec1tic and concrete terms, the proposed percentage point reduction
in the corporate rate on the t1rst $25,000 will increase the rate ot
return to investment end initiative by about 11-1/2 percent.
345
- 7-
One or the more undesirable eftects of our present tax structure is that
~t
inhibits the generation
small business.
~~y
or
new businesses ond the grovth ot existing
The small businessman or
innovator must ot
necessl~y
to a large extent on his own tinancial resources or those of his
~am1ly
and close friends or associates.
These resources include the
arter-tax earnings ot a small business which has been launched with
some success but needs capital tor growth to attain its real potential.
If small corporations are to stay in business they must have money to
ploY back into the business to expand and to meet competItion.
If' small
businessmen are to be willing to undertake new enterprisea, they must have
some prospect of being able to bUild it up after its initial phases or
operation through reinvestment ot earnings.
The earnings ot the business
itself are the best and, very trequently, the sole source ot tunds tor
expansion.
The existing tax rate ot 30 percent on the tirst $25,000 makes
it difficult for the small corporation to retain a sufficiently large
portion ot its earnings.
Frequently, what appear to be earnings are in
:tact the unrecognized costs ot the very survival of the bUSiness.
Survival
in turn is impossible without growth, so that survival and growth are in
reali ty synonymous.
The benefits ot the proposed reversal for small incorporated businesses
would balance the individual income tax reductions recommended which would
apply to unincorporated businesses.
In any event, the benefits ot.the
reversal would be available to unincorporated bUSinesses, whether or not
they wished to incorporate, by virtue ot the operation of section 1361
(subchapter R) ot the Internal Revenue Code which grants an election to
- 8 proprietorships and partnershi ps to be taxed
8
s corporations.
Conversely~
small closely held corporations have the option under subchapter S to be.
taxed in a manner similar to partnerships.
In combination vith last year's depreciation reform and investment
credit, which generally increased after-tax profitability on new investment in equipment by 20 percent, the proposed rate reduction vill make a
total improvement in the after-tax earnings rate of Dearly one-third
~or
the sma 11 l'irm.
The resulting increase in return on business investment and initiative
should spark new interest in the formation at new business.
This added
drive to the generation of new enterprises will give added vitality to our
business population.
From the standpoint of maintaining a healthy small
business sector, the strength of motivation to create new businesses Is
crucial.
In-summary, the proposed corporate tax cut which singles out the
small company for larger and more immediate reduction vill have several
basic and closely related impacts on small business:
1.
It vill stimulate the formation of new businesses.
2.
It vill preserve Bnd strengthen the competitive \ status of
existing firms.
3.
It vill enhance the growth capability and therefore the Viability
of both existing and new firms by increasing their cash flow and sources
of capital supply.
- 9 -
346
4.
It wIll encourage new investment and initiative by confronting
the small businessm!ln, new or old, with a markedly improved ouUook
~r-tax
tor
returns along the whole line of investment decisions which he
..,at make in carrying on or expanding his business.
Proposed limitation on multIple incorporatIon benefits
'!'be reversal of' corporate normal and surtax rates Is designed to
strengthen assistance rendered through the corporate rate structure to
maall business.
This interchange of' the rate components bolsters the
po1.i.cy begun by the Congress in 1950 of' aiding small business by treeing
I. t tram the corporate surtax.
~1.rIIls
However, unless l1mi ted to genuinely small
the proposal would conf'er unintended benef'its to large business
organizations operating through a series of'
separatel~
incorporated units.
This would permit large multi-corporate groups to obtain the tax
advantages of' the 22 percent rate f'or small business while enjoying the
~eater
~rger
financial strength and competitIve advantages associated with
business operations.
Undesirable revenue losses would be involved_
as vell as additional arbitrary tax dlf'f'erentials among large firms with
. equal incomes depending on their form of' legal organizstion.
Even more
I.mportont for a program designed for small business, uncurbed extension of'
mare favorable small bU6iness tax treatment to many larger enterprises might
have seriously adverse competitive impact on the actually small businesses
for whom substantial help is intended.
The President's proposal would limit multi-corporate groups under
80 percent common control to one surtax exemption. The limitation would
become ettective gradually over a 5-year transition in order to avoid
- 10 -
an abrupt impact on the taxes of existing groups.
This would prevent an
inappropriate and disproportionate tax cut for large multi-corporate
groups, prevent further proliferation to obtain a tax advantage, and
improve the competitive position of small enterprises.
This proposal would affect only multi-corporate groupa with combined
income in excess of $25,000.
the
mu~tiple
It would have no effect on businesses using
form of organization if their combine<! income was not in
excess of $25,000.
As Administrator Horne has previously reported to
you, a survey of loan applicants under the Small Business Act indicates
that very few small businesses use the multiple corporate form and the
proposal would have no significant adverse effect on the survey group.
Direct benefits to unincorporated business:
Individual rate reductions
The 4 million small unincorporated businesses in our economy wi11
also benefit directly from the recommended individual income tax rate cuts.
The reductions would be made over a 3-year period starting in 1963
and would scale down the present range of 20 to 91 percent to
6
new 10wer
range ot 14 to 65 percent.
Tax liabilIties on all individual incomes would be reduced $11 billion
through rate reduction and more than $8 billion atter offsetting structural
changes, chiefly in the field of personal non-business deductions which
would not affect unincorporated firms as such.
It is estimated that
approximately $1 billion of the more than $8 billion net reduction would
go to owners of unincorporated bUSinesses, exclusive of farm1ng and
professional services.
- 11 -
Let me cite a few figures illustrating the magnitude
or
the proposed
1Dd:1vidual income tax reductions in the income ranges in which the great
bull or u:lincorporated businesses are found.
A married man with two
dependents, riling a joint return, now pays tax of about $420 on a $5,000
adjusted gross income, using the standard deduction.
Under the proposed
rates when fully in eff'ect, he would pay $280, a reduction of $140 or
33.3 percent.
Comparable figures for a businessman with $10,000 adjusted groa5
income are:
present tax $1,372, proposed liability $1,068, redUction
$304 or 22.2 percent. At $20,000 adjusted gross income, the present
tax is $4,124, proposed $3,282, reduction $842 or 20.4 percent.
These
figures compare with the proposed reduction of 26.6 percent 1n tax for
small incorporated businesses with incomes under $25,000.
For taxpayers with typical itemized personal deductions, the proposed
reductions would be somewhat smaller, but still substantial.
At $5,000
adjusted gross income, the reduction would be 18.3 percent; at $10,000,
15. 2 percent; and at $20,000, 13.4 percent. As I have previously indicated,
the proposed revision of the treatment or itemized deductions would not
affect deductions taken in arriving at taxable bUSiness earnings and would
tb.erefore not affect the business firm, as such.
To an even greater extent than in the corporate area, the great majority
of unincorporated business incomes are sm911.
In 1959-60, for example,
out of 7,219,608 sole proprietorships (including farm and professional
- 12 enterprises) with net profit, 5,925,070 or 82 percent reported net prorlt
under $5,000.
Some 1,011,483 or 93 percent reported net prorit of less
than $20,00'.).
In the partnership fIeld,
or 159,112
partnerships with net prorlt in
1959-60, 359,136 or nearly half had net profit under $5,000.
or nearly 86 percent bad net profit under $20,OJO.
Some 649,916
Since there are on
the average nearly 3 partners in each firm, the share of profit taxaole
to the average partner would be between 35 and 40 percent of the partnership
income as such.
While the size of the income of an unincorporated business does not
conclusively indicate the tax bracket in which the businessman's profit
falls , Since his over-all income may include income from other sources,
these data nevertheless suggest that the great majority of unincorporated
business incomes would be subject to a tax reduction approaching 25 percent,
,~ssuming
the standard deductIon, a figure closely in line with the 26.6 percent
cut proposed for small companies.
Indirect Benefits to Small Business:
Levels of Production and Earnings
Increased Consumer Demand and Hlgher
The general economic stimulation and higher growth rate that wlll
result from the adoption of the President's program will provide wlder
and richer opportunities for small business.
If given a fair and equal
chance, small business can more than hold its own in the market place,
but it can best survive and flourish in the favorable environment of a
buoyn nt, expa nd ing economy ~
u?4Q
v
- 13 -
Increased consumer demand, higher levels of production, and more
favorable earning opportunities will help all types of business, both
large and small.
Rising output and employcent to meet new private
demands will generate new incomes which are 1n turn aVailable to be
spent or saved and invested. The stimulUS to consumer expenditures
toot 1s engendered by the tax cut thus cumulates throughout a broad
ra~ o~
the economy, setting in motion forces of expansion that would other-
vise rem 1n inert.
Moreover, the release of funds to consumers w111
generate new incent1ves elso for investment spending, and production
or
new mach1nes and the building of new factories, offices, stores,
and apartments will add further to consumer incomes in the same way
as the production of consumer goods.
Capital Gains and Losses
Closely related to the rate reductions, but also encompassing
important elements of structural change, ere the proposed revisions in
the tax treatment of capital gains and losses.
These changes provide
significant reductions in the capital gains tax rates for both indivtduals and corporations and -- in their over-all impact -- directly
and indirectly aid small firms.
Reductions in capital gains tax rates
Under the program, 30 percent of long-term capital gains of individuals, instead of the present 50 percent, is includible in taxable
income.
Combined with the individual tax reductions this means that
capital gains would be taxed at an effective rate of 4.2 percent, instead
of the present 10 percent, in the lowest bracket and progress to a maximum
of 19.5 percent, instead of the present 25 percent.
- 14 This will afford important encouragement to investors in small bus1.ness who often seek capital gains from development of a successful. enterprise.
The lover capital gains rates will also unlock seasoned investments
which are now retained largely for tax reasons, and encourage the f'lov of
:f'unds to small. businesses, particularly in view of the effects of general.
tax reduction in creating greater prospects for profitable investment in
sma1.1 business.
This increase in the liquidity of investment and removal
of barriers to the free flow of capital fUnds vill enhance the supply of
available risk capital for sma.l1 business use.
As I have :previously
indicated, e:rry measure which increases the effective capital supply goes
directly to the heart of the problem of how to generate new businesses ~ hov
to nurture existing businesses, and how to expand smail and medium-sized
concerns into increasingly sturdy and healthy enterprises.
Taxation of gains accrued on capital assets on transfer at death
As part of the package of proposals for tax reduction in the capital
gain and loss area, we have recommended thBt these liberalizations be
accompanied by the taxation, at the reduced long-term capital gain rates,
of net gains accrued on capital assets at time of transfer at death or by
gift.
Tb.ls would not apply to assets transferred as chBritable gitts or
bequests.
The recommendation 1s an essential part ot the capital gains tax
reduction, since the substantially lower rates alone would not deal
ertectlvel~
wi th the "lOCk-in" problem, the solution of which is basic in assuring
mobility of capital.
Moreover, without a more rettoMl, comprehensive tax
349
- 15 base
which deals with the treatment of gains on transfers at death, the
proposed reductions in the capital tex rate could not be Justified.
To eliminate possible hardship or adverse effects that might arise,
a number of relief features have been included.
These were described by
Secretary Dillon in his presentation to the House Ways and Means CoIIll!li ttee ,
and I shall recapitulate them only briefly here.
1.
The capital gains tax would reduce the estate tax base.
2.
All ordinary personal and household effects such as clothing,
appliances, and furniture would be exempt.
3.
Property passing to charity would continue to be exempt.
4. A marital deduction would be provided similar to related provisions
of the estate and gift taxes so as to assure uniformity in the treatment of
residents of community property and common law states.
Amounts covered by
the marital deduction would be subject to a carryover of the original basis.
5. An additional blanket exemptIon of $15,000 of gain would apply
. to every taxpayer.
6.
Special provisions would insure that no one would have to pay tax
on the transfer of a home.
The foregoing exceptions and exemptions would limit any impact whatsoever of the proposal to fewer than 3 percent of those who die each year.
About 55,000 estates annually would be affected.
8
Of this 55,000, only
fraction would include small business interests.
To mitigate the application of the tax to the remaining 55,000 estates
and the still smaller number of small business owners on whom there would be
an impact, there are a number of other provisions suggested in the nature of
- 16 relief and transition rules.
These rules, outlined in the supporting
material accompanying the Treasury's presentation before the Ways and Means
Committee, would operate as follows:
1.
A 5-year averaging provision would be applicable to
l~lt
the
tax on gain at death to five times the tax on the first one-fifth of
the gain.
2. Accrued losses at death would be utilized through a apecial
carryback provision.
3. To help those estates wIth liquidity problems certain provisions
of present law (major features of which were origlnal1y urged by this
Committee) would apply to the capital gains tax on transfers at death.
I refer to the provisions permitting installment payment of estate taxes
and redemptions of corporate stock without dividend consequences.
!!
It
bas been suggested by the Treasury those those sections of present law be
broadened to cover the Income taxes attributable to the capital gains
realized at death.
Also, It has been suggested sectLon 6161 should be
liberalized so that circumstances involving a forced sale of a family
busLneS6 to outsiders, or a forced sale on a depressed market,are
COD-
sidered to be an undue hardship.
!I
Section 303 of present law permits the redemption of stock in certain
closely held corporatIons, without the payment of ordinary income tax
on the redemption, in order to provide funds for the payment of estate
taxes. Section 6166 of present law permits, in cases involving closely
held bUSinesses, installment payment of estate taxes for a period o~ up
to 10 years with the application of a 4 percent rate of interest.
Section 6161 provides for installment payments for up to 10 years In
cases of undue hardship with the application of a 4 percent rate of
interest.
- 11 In the period since the Secretary's presentation to the Ways and
Means Committee, members of the Treasury staff have been checking into
the operation of the present rules for preventing forced sales, the
pOssible need to liberalize and amplify them to increase their effectiveness, and possible approaches to improve them.
These studies are
.~ot
yet completed, so I am not presently in position to appraise their
results.
4..
Provision would
be
made to enable taxpayers to accommodate
their estate plans to the new rules through an appropriate transition
device.
be
As Secretary Dillon has suggested, one way' in which this might
accomplished would be to set a 3- or 5-year transition period.
If
o 5-year period were used, the estate of a person dying in 1964 would
pay tax on one-fifth of the gains on transfer at death, that of a person
dying in 1965 on two-fifths, and so on, with full taxation applying in
1968.
A 3-year period would operate in similar fashion, providing full
taxation by 1966.
Administrator Horne has furnished you with an example shOWing the
relatively minor impact the proposal would have 1n situations which
approximate the circumstances of the prosperous owner of a successful
small business.
We have made detailed computations of the capital gains
tax at death for a businessman with an average income of $20,000 annually
prior to death and accrued gains of, slternstively, $124,000 (the estimated
average in the $300,000 to $500,000 gross estate class) and $200,000 (an
unusually large gain in the $300,000 to $500,000 gross estate category).
- 18 For
8
married decedent, tor example, these figures show that the $124~OOO
gain would be reduced by the varIous exemptIons and exclusIons so that
only $10,500 would be subject to tax, and the net additional tax due to
the gain would be ooly $1,985 or about 1-1/2 percent ot the gain.
EYen
a $200,000 gain would be reduced to a taxable smount ot $21,900, on vhlch
the net additional tax would be ~,139 or about 2 percent of the gable
For a sIngle person not using the IIBrital exclusion, the tax would be
somewhat grester.
We recognize that, In addition to wbat we believe are the pertinent
tax pollcy consIderatIons, there
BlUSt.
be taken into account 1n the t'anm-
latlon ot legislatIon ot this kind collateral consideratlona,1DclucU..
such matters ss resulting changes In the structure ot the economy and
particularly the preocrvation of independent small business.
follOWed vith
Interc~
the
test1u~ny
We have
on these matters in the recent
Hearings and have notet the assertion that the application ot' the
provision would force the
~le
or merger of small businesses.
We shall
also examine carefully views ,resented in the coursp ot the present
Hearings
This aspect ot the legislation viII came up for further
review in the Ways and Means Comml ttee and subsequentq in the Senate
Finance Committee before decisions are made by the Congress in the final
legislation on this point.
Structural Features of Particular Intercs t to Small Business
Income averaging
The absence of an effective general averaging provision under our
graduated personal income tax ra.te schedule has long penalized ind1Viduals
• 19 with widely fluctuating incomes, including many small businessmen, farmers,
and professional men.
To deal with this problem, the Administration has
recommended an income averaging provision.
Under the reconunendation, a taxpayer could average his current income
with that of the past four years and if the current income amounts to more
than 133 percent of the average, he would be all0Wed in effect to treat
the excess over 133 percent as though it were earned over a 5-year period.
Thus he would be taxed at a considerably reduced rate.
~
Since incomes of
small unincorporated businesses are subject to wide swings from year
to year, their owners especially would benefit from the averag1ng prov1sion.
Research and development
The newly adopted tax pollcy of 1962 and now the proposed tax program
rely heavLly on strengthening the motivations of business firms to carry
on private technological actlvities and realize on them through investment
in the machinery, equIpment and activitles that realize profits.
Moreover,
the President has recommended that capLtal expenditures for machinery and
equIpment used dIrectly and speclfically for research and development be
allowed as a current expense deduction, at the option of the taxpayer.
For this purpose, research and development would include basic and applied
research tn the
BC
Iences and engineering, and act'tvi ties and development
designed to develop new products and processes, or substantial innovations
in present products and processes, except under Federal contract.
In addition, special provision is made to encourage companies with small
research and development budgets, who would not otherwise qualify, by
allOWing them to expense specialized equipment, which is used half the
• 20 -
time or more for these purposes, to the extent of 50 percent of the cost.
For firms using this special provision, research equipment would qualify
for a full deduction even if used in part under Federal contract.
In
order to limit the benefits of the special rules primarlly to small firms,
the amount deductible thereunder would be limited to 4 percent of the
first $500,000 of totol expendltures for research and development.
The
deduction therefore would be limited to $20,000.
The particular form of this tax proposal will help to make research and
development more productive for each participant during this period of
critical manpower shortages.
Of course, these new proposals are in addition
to the previously granted option either to expense operating research and
development expenditures, or to amortize them over 60 months or longer.
The basic purpose of this proposal is to stimulate our lagging
civilian technology. Accelerating economic growth requires the adoption
of policies not only to increase aggregate demand, investment, and
utilization of existing resources but also to expand and advance
technology ond the capital formation that puts that technology to work.
In contrast to the enormous expansion of military and space porticos
ot research and development, the effort primarily directed to the
creation of new or improved civilian goods and processes has faltered.
Today, little more than one-fourth of total research Bnd development
expenditures is financed by industry, compared with one-third only two
years ago and two-fifths in 1955.
In absolute amounts, company financed
expenditures during the last two or three years have hardly advanced.
In real terms,theymayhave declined 1n view of the continued increase
in salaries of scientific personnel.
- 21 Problems of strengthening our technological effort in the civilian
area of the economy are of concern to the Nation and to all businesses,
re~rdleBs
of size.
app~icable
to large and small businesses.
ou~lned
The President's proposals are therefore equally
The speciel rules I have Just
are designed to overcome possible disabilities of the smaller
£1rm with respect to some of the recommended eligibility tests.
wi~~
This
ensure that the direct benefits of the proposed treatment are
8vai~able
to the small bUSiness which uses some of its assembly line
equipment tor research or partially uses some or its research equipment
~n
performance of
8
Federal contract.
This recommendation will be of important benefit both directly and
indirectly to small business.
Small businesses will receive additional
tax allowances for their research effort.
They will share in the general
advance of the economy due to faster development of technical knowledge
and new products.
Many small businesses specializing in research activities
or supplying research equipment or its components will experience greater
demand for their products and services from business generally.
As Administrator Horne has observed, the tax advantage of expensing
research equipment could be a crucial fector in the decision of many small
firms with research budgets to acquire needed modern eqUipment.
It would
alSo help provide the financial means for other small firms not now engaged
in research and development to initiate such activities to their eventual
competitive advantage.
- 22 of the Investment Incentive Measures Ado ted Last Year and
3 Tax Reduction for Small Business
Before closing my remarks, I would like to review briefly with the
Committee some figures which help quantif,y the dimensions and significance
of the proposed tax reductions for a small company against the backdrop of
the investment incentive measures introduced last year:
the
7 percent
investment credit and the administrative liberalization of depreciation.
The tax treatment of new investment may be illustrated in terms of
the percentage of the cost of an asset subject to tax write-off or equivalent
charges against income in the year of acquisition.
In the case of a 10-year asset costing $10,000, purchased by a
firm subject to the proposed 22 percent corporate normal tax rate, the
following deductions or equivalents may be taken:
20 percent initial allowance
$2,000
7 percent investment credit expressed
as equivalent deduction from income
First-year depreciation (double-declining
balance depreciation, lO-year life)
1,460
$6,640
Total
As these figures demonstrate, the various allowances under present
law and the proposed rate reduction would in effect permit tax-free
recovery of two-thirds of the cost of a machine or other equipment item
with a lO-year life in the year of its acquisition.
depreciable life is shorter
th~l
To the extent the
the 10 years assumed in the example, the
proportion of capital recovered tax-free in the first year would be st1ll
greater.
- 23 Measures such as liberalized depreciation, the investment credit,
and now the proposed. tax rate reduction all serve to increase the internally
genera.ted flow of cash needed to make new investments.
This 1S especially
:1mportant to the capital-scarce and growing small firm.
Conclusion
The program outlined here is one which is oriented to the needs of'
our economy and our small business conmun1ty as an integral part or the
economic structure.
It
Wl1~
lower tax rates, increase the arter-tax profitability of'
:1nvestment, and speed the after-tax cash flow and rate of recovery of'
:1nvestment.
These proposals are put forward and supported in the firm belief
tha.t they will strengthen the
in our economic structure.
econo~
and the role of small business
We believe that the returns f'rom them will
more than pay f'or the revenues lost in a few short years and provide a
much larger measure of job opportunities, national income and national
strength and competitiveness than would result f'rom the maintenance of'
a status quo.
There is gathering evidence that the tax incentives initiated last
year are stimulating an increase in business spending for modernization
and expansion that will markedly strengthen our
econo~.
Tax reduction
and reform this year will consolidate and bolster these advances, with
consequent f'avorable repercussions on small business and its outlook for
t be future.
- 24 It would, of course, be false optimism to assume that all small
business problems can be solved by revisions in the tax law, however
well thought-out or devised for that purpose.
However, much can be
accomplished and will be achieved through the 1963 proposals.
We are
determined to bring to the further development of this legislation the
best available information and
an~sis,
including -- in prominent
perspective -- its impact on small business and its contribution to the
growth in numbers and capability of our small independent enterprises.
~o
3 5 '1
United States Savings Bonds Issued and Redeemed Through April 30" 1963
(Dollar amounts in millions - rounded and will not necessarily add to totals,
AmOWlt
Amount
Amount
% OutstaJ
Issued 11 Redeemed 11 Outstanding 2./ of Amt.l~
MATURED
Serie3 A-193; - D-1941
Series F & 0-1941 - 1950 ••••••••
..........
$ ;,003
28,512
$
$ 4,989
28,353
14
159
.2f
16.0;
.5~
~AATURED
Series E: 3/
1941
1942
1943
1944 • ••••••••••••••••••••
1945
1946 • ••••••••••••••••••••
1947 • ••••••••••••••••••••
1948
1949
1950 • ••••••••••••••••••••
1951 • ••••••••••••••••••••
1952 • ••••••••••••••••••••
195; • ••••••••••••••••••••
1954
1955 • ••••••••••••••••••••
1956 • ••••••••••••••••••••
1957
1958 • ••••••••••••••••••••
1959
1960 • ••••••••••••••••••••
1961 • ••••••••••••••••••••
1962
1963 • ••••••••••••••••••••
Unclassified ••••••••••••••••••
Total Series E ••••••••••••••••
Series H (1952 - 1963).~ ••••••••
1,823
8,053
12,967
15,088
11,810
5,306
4,996
5,146
5,060
4,410
3,819
3,998
4,544
4,,575
4,740
4,555
4,275
4,129
3,857
3,834
3,840
3,688
549
581
1,,530
6,782
10,891
12,574
9,633
4,100
3,676
3,675
3,523
2,981
2,562
2,605
2,739
2,,682
2,73 8
2,637
2,375
2,136
1,930
1,751
1,505
1,,041
12
582
292
1,271
2,076
2,514
2,177
1,206
1,321
1,470
1,537
1,429
1,257
1,393
1,806
1,892
2,002
1,918
1,900
1,993
1,927
2,083
2,336
2,647
537
125,643
9,031
86,659
1,902
38,983
7,129
;1.03
78.94
Total Series E and H ••••••••••
134.673
88.561
46.112
34.24.
Series F and G (1951 - 1952) •••••
1,007
729
278
'Zl.61
Series J and K (1952 - 1957) ••••
Total Series F, G, J and K ••••
3.695_
1,972
1.723
46~6.l
4,702
2,701
2,001
42.56
33,515
33,,342
21,ZflZ
124,,604
173
48.113
49,286
.52
~
··....................
....................
·....................
• • • • • l' • • • • • • • • • • • • • • •
··....................
....................
·....................
·....................
·....................
·....................
{Total matured .......
All Series Total unmatured •••••
Grand Total •••••••••
1~2.~22
172,890
-
tJ
15.7~
16.OJ
16.~
18.4:
22.7;
26.~
28.5j
30.;~
32.4C
;2.91
J4.~
39.7~
4l.J6
42.24
42.11
44.44
48.V
49.96
54.;3
60.83
7l.7l
97.81
-
28.51
1I Includes accrued discount.
~
Current redemption value.
3/ At option of owner bonda may
tJ
Cl'FICE .OF FISCAL ASSIsrANT SECRETAR
held and
will earn interest for additional periods
after original maturity dates.
Includes matured bonds which have not been
presented for redemption.
be
United States Savings Bonds Issued
~~~e~ Thro~h April
30, 1963
(Dollar amounts in millions - rounded and will not necessarily add to totals)
Amount
Issued
t
~A-1935
- D-1941" ••••••••••
11
5,003
28,512
Amount
Amount
%Outstand
Redeemed 11 Outstanding 2J of Amt.Issl
.28%
.56
14
159
4,989
28,353
$
1,530
6,782
10,891
12,574
9,633
4,100
3,676
3,675
3,523
2,981
2,562
2,605
?,739
2,682
2,738
2,637
2,375
2,136
1,930
1,751
1,505
1,041
12
582
292
1,271
2,076
2,514
2,177
1,206
'1,321
1,470
1,537.
1,429
1,257
1,393
1,806
1,892 . .
2,002
1,918
1,900
1,993
1,927
2,083
2,336
2,647
537
H (1952 - 1963>.¥.••••••••
125.643
9,031
86.659
1,902
38.983
7,129
31.03
78.94
total. Series E and H ••••••••••
134.673
88.561
46.112
U1es F aDd G (1951 - 1952) •••••
1,007
278
34.24
27.61
renes
J and K (1952 - 1957) ••••
3 695
1.972
1.723
46.63
Tota1 Series F, G, J and K ••••
4,702
2,701
2,001
42.56
Total matured .......
33,515
33,342
17.3
4$.113
49,286
Jtt. ~Z
~_s F & 0-1941 - 1950 ••••••••
~s~: :Y
1.941
.1942
1943
1.944
1.945
1946
1.947
1948
1.949
1.950
1.951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
I
• ••••••••••••••••••••
• ••••••••••••••••••••
• ••••••••••••••••••••
• ••••••••••••••••••••
• ••••••••••••••••••••
• ••••••••••••••••••••
•••••••••••••••••••••
• ••••••••••••••••••••
• ••••••••••••••••••••
•••••••••••••••••••••
• ••••••••••••••••••••
• ••••••••••••••••••••
• ••••••••••••••••••••
• ••••••••••••••••••••
• ••••••••••••••••••••
• ••••••••••••••••••••
• ••••••••••••••••••••
·....................
• ••••••••••••••••••••
• ••••••••••••••••••••
• ••••••••••••••••••••
• ••••••••••••••••••••
• ••••••••••••••••••••
tJnc1ass i£ied ••••••••••••••••••
tota1 Series E ••••••••••••••••
renes
i
a.i Series Total umnatured •••••
Grand Total •••••••••
rf
$
1,823
8,053
12,967
15,088
11,810
5,306
4,996
5,146
5,060
4,410
3,819
3,998
4,544
4,575
4,740
4,555
4,275
4,129
3,857
3,834
3,840
3,688
549
581
lJ2.JZ2
172,890
Includes accrued discount.
Current redemption value.
f At option of owner bonds may be held and
will earn interest for additional periods
atter' original maturity dates.
I Includes matured bonds which have not been
presented for redemptio~.
$
-
729 AI
2l.'!2'
124,604
-
,
16.02
15.78
16.01
16.66
18.43
22.73
26.44
28,57
30.38
32.40
32.91
34.84
39.74
41.36
42.24
42.11
44.44
48.27
49.96
54.33
60.83
71.77
97.81
-
.52
28.51
CFFICE OF FISCAL ASSIsrANT SECRETARY
- :3 -
and exchange tenders 'Will receive equal. trea.tment.
Cash adjustments vill. 'be made
for differences between the par value of maturing bills accepted in exchange and
the issue price of the new bills.
The income derived from Treasury bills, whether interest or ge.1n 1'rom the sale
or other disposition of the bills, does not have any exemption, as such, and l.OS8
from the sale or other disposition of Treasury bills does not have any special.
treatment, as such, under the Internal Revenue Code of 1954.
The bills are subject
to estate, inheritance, gi:rt or other excise taxes, whether Federal or state, but
are exempt from all taxation now or hereafter imposed on the principal or interest
thereof by any state, or any of the ,possessions of the United states, or by any
local taxing authority.
For purposes of ta.xation the amount of discount at which
Treasury bills are originally sold by the United states is considered to be interest.
Under Sections 454 (b) and 1221 (5) of the Internal Revenue Code o~ 1954
the amount of discount at which bills issued hereunder are sold is not considered
to accrue until such bills are sold, redeemed or otherwise disposed of, and such
bills are excluded from consideration as capital assets.
Accordingly, the owner
of Treasury bills (other than life insurance companies) issued hereunder need include in his income tax return only the difference between the price paid tor such
bills, whether on orIginal. issue or on subsequent purcha.se, and the amount a.ctuall1
received either upon sale or redemption at maturity during the taxable year for
which the return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this notice, prescribe the terms of the Treasury bills and govern the conditions of their.issue.
Copies of the circular may be obtained from any Federal Reserve Bank or Branch.
_=
A
M"JiILID2lX
~a,
1e.-de
e.
8.,
99.925.
l"r&ctions
~
not be uaed.
It 1s urged that tenders
the printed torms and torwa.rded in the special. envelopes which will
OD
_ aupplled b7 Federal Reserve Banks or !ranches on applica.t10n theretor.
BRnk1ng 1mrtltutions generally
J!toY1ded
1;he
JII8.)"'
submit tenders
name8 ot the customers a.re set
~orth
~or
a.ecount ot customers
1n 8uch tenders.
Others tba.n
_1ng :J.Ds1;1tut1ons 11111 not be permitted to .submit tenders except tor their
... account.
Ia4
'tras+-
~tmpLn1e8
and from responsible and recognized dealers in investment
!'enders tran others !lUst be accompanied by pa.yment ot 2 percent ot
1Ica.ri....:lee.
~
Tenders will be received without deposit rrom incorpora.ted ba:llts
amount ot Treasury b111a applied tor, .nless the tenders a.re accompanied
t'aC8
". lID expres8 guaranty
ot
~ent
by an incorpora.ted bank or trust cCJlllP8oDY.
])iiIDed1ate17 a.fier the closing hour, tenders will be opened at the Federal
aeae:z.e
tbe
lJe nk 8 and Branches, tolloving which pub11c announcement will be made by
~r.Y
1tI1:Id1;t:lDg
Department ot the amount and pr1ce range
o~
accepted b1ds.
Those
tenders will be advised ot the acceptance or rejection thereot.
The
SecretarY' o-r the i'rea.sury expressly reserves the right to accept or reject any
or al.1
tenders, in whole or in part, and his act10n 1n any such respect sh&ll be
t1Dal..
subJect to these reservations, noncompetitive tenders tor $ 2iiHOO or
leu ~or the a.dd1t10na.l b1lls dated FebruaryJh1963
1ag UlJ'tU maturity date on
Augustdit1963
,(
91
tm
da.ys remain-
) and noncompetitive tenders
~or
• !DO 000 or leIS tor the .-~ bills without sta.ted pr1ce tram any 'one .
b u ! "will be accepted in tull at the average pr1ce (in three dec1ma.1.) ot
~-
eeptecl cc:apet1t1ve bids tor the respeet1ye 1ssues. Settlement. tor accepted tenUre 1D accordance with the b1ds must be made or completed at the Federal Rese~
BaDJUI
OD
Ma.y' 9, 1963
4iiU
, in cash or other immediately available funds or
1D a Uke face amount ot !rea.sur,y bills maturing _...;.:May;;;;¥.....;9~_~19~6~3____ •
Cash
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE,
May 1, 1963
TREASURY'S WEElCLT BILL OFFERING
The Treasury Department, by this public notice, invites tenders t"or two serf!s
of Treasury bills to the aggregate amount of $ 2,100,000,000
cash and in exchange for Treasury bills maturing
of $2.003.085.000
m
«U
~
or thereabouts .. t'or
J
9, 1963
ffi
, as follows:
91 -day bills (to maturity date) to be issued
i{fi
J
in the euoount
May 9, 1963
taJ
in the amount of $ l,300iUo,000 , or thereabouts, represent_
tng an additional amount of bills dated
and
~o
mature
amount ot $
August
~1963
799.~OOO
Februarw, 1963
J
, originally issued in the
, the a.dditional and original. bills
to be tree1y interchangea.b1e.
182 -day bills, for $ 800,.00
6Q6lC
Me.Y~963
, or thereabouts, to be dated
, and to ma.ture November~963
•
Tbe bills of both series will be issued on a discount basis under competitive
and noncompetitive bidding a8 hereinafter provided, and at maturity their face
amount will be payable without interest.
and in denominations of $1,000, $5,000,
They will be issued in bearer form
~10,OOO,
0114,
$50,000, $100,000, $500,000 and
$1,000,000 (maturity value).
Tenders will be received at Federal Reserve Banks and Branches up to
Daylight Saving
closing hour, one-thirty p.m., Ea.stern/~ time,
t~
J.t>ndS3" I Ma~1963
Tenders will not be received at the Treasury Department, Washington.
Each te1l.der
must be for an even multiple of $1,000, and in the case of competitive tenders the
price offered must be expressed on the basis of 100, with not more tms.n three
•
TREASURY
DEPARTMENT
_5 ;;:
=
, e ':
i
i
!
::
,
e '
FOR IMMEDIATE RELEASE
TREASURY'S WEEKLY BILL
~ay
1, 1963
OFFERTN~
The Treasury Department, by this public notice, invites tenders
for two series ,of Treasury bills to the aggregate amount of
$2,100,0°°2°°0 , or thereabouts, for cash and in exchange for
Treasury b~lls maturing May 9, 1963,
in the amount of
$2,003,085,000, as follows:
91-day bills (to maturity date) to be issued
1n the amount of $1,300,000,000, or thereabouts,
additional amount of bills dated February 7,1963,
mature August 8, 1963,
originally issued in the
$ 799,156,000, the additional and original bills
interchangeable.
May 9, 1963,
representing an
and to
amount of
to be freely
182-day bills, for $800,000,000,
or thereabouts, to be dated
May 9, 1963,
and to mature Novembe~ 7, 1963.
The bills of both series will be issued on a discount basis under
competitive and noncompetitive bidding as hereinafter provided, and at
maturity their face amount will be payable without interest. They
w1ll be issued in bearer form only, and ih denominations of $1,000,
$5,000, $lO,OOO( $50,000, $100,000, $500,000 and $1,000,.000
(maturity value).
Tenders will be received at Federal Reserve Banks and Branches
up to the closing hour~6one-thirty p.m., Eastern Daylight Saving
time, Monday, May 6, ~ 3 . .
Tenders will not be
received at the Treasury De~artment, Washington. Each tender must
be for an even multiple of ~1,000, and in the case of competitive
tenders the price offered must be expressed on the basis of 100,
with not more than three decimals, e. g., 99.925: Fractions may not
be used. It is urged that tenders be made on the printed forms and
forwarded in the special envelopes which will be supplied by Federal
Reserve Banks or Branches on application therefor.
'
Banking institutions generally may submit tenders for account of
customers provided the names of the customers are set forth in such
tenders. Others than banking institutions will not be permitted to
submit tenders except for their own account. Tenders will be received
without deposit from incorporated banks and trust companies and from
responsible and recogn~zed dealers in investment securities. Tenders
from others mus.t be accompanied by payment of 2 percent of the face
amount' of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incoroorated bank
or trust company.
D-836
.:. 2 -
Immediately after the closing hour, tenders \'Iill be opened at
the Federal Reserve Banks and Branches, following \'lhich publ.ic
announcement will be made by the Treasury Departrrunent of' the amount
and price range of accepted bids. Those submitting tenders \'1111 be
advised of the acceptance or rejection thereof. The Secretary or'
the Treasury expressly reserves the right to accept or reject any or
all tenders, in whole or in part, and his action in any such respect
shall be final. Subject to these reservations, noncompetitive
tenders for $ 200,000 or less for the additional bills dated
February 7,1963, ~1- days remaining until maturit¥ date on
August 8, 1963)
and noncompetitive tenders for ~100,OOO
or J.ess for the 182 -day bills without stated price from anyone
bidder will be accepted in full at the average price (in three
decimals) of accepted competitive bids for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Banks· on May 9, 1963 ~
in cash or other immediately available funds or in a like race
amount of Treasury bills maturing May 9, 1963.
Cash and
exchange tenders will receive equal treatment. Cash adjustments
\,lill be made for differences between the par value of maturing
bills accepted in exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, does not have
any exemption, as SUCh, and loss from the sale or other disposition
of Treasury bills does not have any special treatment, as SUCh ..
under the Internal Revenue Code of 1954. The bills are subject to
estate, inheritance, gift or other excise taxes, whether Federa1 or
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not considered to accrue until such bills are
sold, redeemed or otherwise dispo6ed of, and such bills are exoluded
from conSideration as capital assets. Accordingly, the owner or
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference betWeen
the price paid for such billS, whether on original issue' or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for whioh the
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current, reviSion) and this
notice prescribe the terms of ,the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained fr
any Federal Reserve Bank or Branch.
000
"TREASURY DEPARTMENT
M.:lY 3, 1963
IMMEDIATE RELEASE
FACT SHEET ON AUSTRIAN SCHILLING BORROWING
The Treasury Daily Statement for April 30, 1963, shows that
the Treasury issued in April a bond denominated in Austrian
schillings maturing in 18 months in the amount of 650 million
Austrian schillings -- the equivalent of about $25 million. This
borrowing was handled as a public debt operation, authorized
under the Second Liberty Bond Act, as amended.
The availability of such securities for investment purposes
by foreign monetary authorities is of mutual advantage to the
foreign investor and to the U. S. It affords countries, such
as Austria, that are currently, or have in the recent past, been.
creditors in international payments, an investment opportunity
for their surplus funds. Such borrowings by the Treasury, on
the other hand, provide the United States with resources that
can be used in current or future foreign exchange operations in
defense of the dollar. The ;lborrowing from Aus tria is another
example of the broadening network of international credit
facilities designed to strengthen the international financial
system.
Total Treasury borrowings of foreign exchange from Austria,
Germany, Italy and Switzerland now amount to approximately
$575 million of which $550 million is in securities with
original maturity of more than one year. The interest rates
on all foreign currency series securities issued by the
Treasury have been equal to or less than those prevailing in
the United States market for U. S. dollar securities of
comparable maturities.
000
D-837
TREASURY DEPARTMENT
M.~y
J ~ 1963
IMMEDIATE RELEASE
FACT SHEET ON AUSTRIAN SCHILLING BORROWING
The Treasury Daily Statement for April 30, 1963, shows thaL
the 'Treasury issued in April a bond denominated in Austrian
schillings maturing in 18 months in the amount of 650 million
Austrian schillings -- the equivalent of about $25 million. This
borrowing was handled as a public debt operation, authorized
under the Second Liberty Bond Act, as amended.
The availability of such securities for investment purposes
by foreign monetary authorities is of mutual advantage to, the
foreign investor and to the U. S. It affords 'countries, such
as Austria, that are currently, or have in the recent past been,
creditors in international payments,an investment opportunity
for their surplus funds. Such borrowings by the Treasury, on
the other hand, provide the United States with resourGes that
can be used in current or future foreign exchange operations in
defense of the dollar. The borrowing from Austria is another
example of the broadening network of international credit
facilities designed to strengthen the international financial
system.
Total Treasury borrowings of foreign exchange from Austria,
Germany, Italy and Switzerland now amount to approximately
$575 'million of which $550 million is in securities with
original maturity of more than one year. The interest rates
on all foreign currency series securities issued by the
Treasury have been equal to or less than those prevailing in
the United States market for U. S. dollar securities of
comparable maturities.
000
D.. 837
.TREASURY DEPARTMENT
May 3, 1963
FOR IMl«DIATE RElEASE
FINDING OF ll1MPlNG ON PORTlAND CEMENT
UNIER THE ANTIIlJMPING
~
'!he United States Tariff Commission has determined that an
industry in the United States 1s likely to be injured
~
reason
ot the 1mportation ot Portland cement" other than white" nonstain1ng portland cement, from the Dominican Republic.
Accordingly,
the Treasury Department is issuing a riDding 01' dumping with respect to this mercbaDdise imported tram the Dom1n1can RepubUc.
'l'reasU17 Decision 55883 to this effect 1s being published in the
Federal Register and in a weeklY issue ot Treasur,y DeciSions.
The dollar value ot imports received during the year 1$62
was approDdmatel¥ $594,000.
TREASURY DEPARTMENT
May 3, 1963
FOR IMMEDIATE REIEASE
FnIDING OF OOMPmG ON PORTlAND CEMENT
UNDER THE ANTIDUMPING AC'r
The United States Taritt Commission bas determined that an
1ndustr,y in the United States is likely to be 1llJured by reason
ot the 1mportation ot Portland cement, other than white, nonstain1ng portland cement.. trom the Dominican Republic.
Accordingly ,
the Treasury Department is issuing a :finding ot dumping with respect to this merchandise imported from the Dominican Republic.
Treasury Decision 55883 to this effect is being published in the
Federal Register and in a weeklY issue ot Treasur,y Decisiona.
The dollar value of imports received during the ;year 1962
vas approximately $594 ,000.
TREASURY DEPARTMENT
May 3, 1963
FOR IMMEDIATE RELEASE
PRELIMINARY RmULTS OF TRFASURY'S CURRENT
EXC~E
OFFERING
Preliminary figures show that about $8,945 million, or 94.2i, of Treasury
certificates and notes maturing May 15, 1963, aggregating $9,495 million, were
exchanged for the two new issues included in the current exchange offering.
About $550 million, or 5.8i, of the three maturing issues remain for cash redemption.
Of the maturing securities held outside the Federal Reserve Banks and
Government accounts, 9.oi were not exchanged.
Details of the exchange are as follows:
ELIGmLE FOR EXCHANGE
Securities
Amounts
3-1/4'!J Ctfs.
due 5L15L64
3-1/4'" etfs.
4;' Notes
3-1/4~ Notes
$5,285
1,183
3,027
$3,773
285
1,626
$9,495
Totals
(in millions)
EXCHANGED FOR
3-5/8'!J Notes
due 2L15L66
UNEXCHANGED
Total
Amount
$1,407
627
1,227
$5,180
912
2,853
$105
271
174
$5,684
$3,261
$8,945
$550
$3,327
$
85
$3,412
2,357
3,2176
SlS33
$5,684
$3,261
$8,945
SUBSCRIBERS
Federal Reserve Banks
and Govt.
accounts
All others
Totals
Final figures regarding the exchange will be announced after final reports
are received from the Federal Reserve Banks.
83B
TREASURY DEPARTMENT
264
MAY 6 1963
FOR Jl.1MEDIATE RELEASE
TREASURY DECISION ON STEEL WIRE RODS
UNDER THE ANTIWHPING ACT
The Treasury Department has determined that hot-rolled
carbon steel wire rods from Japan are not being, nor likely
to be, sold in the United States at less than fair value
within the meaning of the Antidumping Act.
Notice of the
determination will be published in the Federal Register.
The dollar value of imports of the involved merchandise
from Japan received during 1962 was approximately $23,800,000.
TREASURY DEPARTMENT
-
t")l"'r
,
MAY 6 1963
FOR Df.1EDIATE RELEASE
TREAruRY DECISION ON STEEL WIRE RODS
UNDER ~HE ·ANTIIXJl.fPING ACT
The Treasury Department has determined that hot-rolled
carbon steel Wire rods fran Japan are not being; nor likely
to be, sold in the United States at less than fair value
within the meaning of' the Antid\.UJIping Act.
Notice of the
determination yill be published in the Federal Register.
The dollar value of imports of the involved merchandise
fran Japan received during 1962 was approximately $23.,800,000.
lOll REINS A. M. IEWSPAPIIS,
"'ad!r, !Car T, 1963.
91..,
,lei
68 pe. . . . of \be IIIOUDt of
ldl1a
tor at. \he 1w PI'Iee we ...... ..
SO pel . . . . ~ \be DOdDt. of 182__ bUla W-d tor -, u.. 1_ priee _ .'.1 , ••
1C7I
\"I \"I
TREASURY DEPARTMENT
1 RELEASE A. M. NEWSPAPERS,
~sdayz May 7 , 1963.
RESULTS OF TREASURY' S WEEKLY BILL OFFERING
Treasury Department announced last evening that the tenders £or two series "'ot
~ bills, one series to be an additional issue of the bills dated February 7, 196)
I the other series to be dated May 9, 196), which were offered on May 1, were
I!Ded at the Federal Reserve Banks on May 6. Tenders were invited £or $1,)00,000,000,
thereabouts, a£ 91-day bills and for $800,000,000, or thereabouts, of 182-day bU1s.
I det.ail.s ot the two series are as £0110\-15:
I
182-~ Treasury bills
91-day TreaSUl7 bills
ICE OF ACCEPrED
maturing August 8, 1963
maturin~ November 7z 1963
~rrIVE BIDS:
Approx. EqUiv. :
Approx. Equiv.
Annual nate
Price
Price
Annual Rate
:
:
2.888%
98.496
High
99.270
2.975%
:
2.912%
99.264
98.485
2.997%
Low
99.266
98.487
Average
2.905%
2.993%
•
The
Y
·
Y
68 percent at the amount ot 91-day bills bid £or at the low price was accepted
percent ot the amount ot 182-~ bills bid £or at the 1~ price was accepted
SO
W. TENDERS APPLIED FOR AND ACCEPl'ED BY FEDERAL RESERVE DISTRICTS:
Distnct
Boston
lew York
PhUadelphia
Cleveland
Jt1cbrnond
ltlanta
Qd.cago
St. Lou:i.s
J!1nneapolia
lanss.s City
Dallas
San Francisco
TCYrALS
Accepted
27,702 OOO $ 17,702,000
·•
Applied For
Accepted
34,760,000$
I
$ 19,760,000
$
f
627,024,000
919,680,000 : 1,342,219,000
1,539,160,900 .
11,795,000
5,826,000
·1$,346,000 :
30,346,000
21,001,000
12,001,000
26,22),000 I
26,22),000
13,210,000
3,710,000
17,634,000 I
21,594,000
6,341,000
:
6,341,000
24,689,000
19,794,000
121,887,000
48,387,000
120,85,,000 :
206,591,000
:
7,699,000
5,699,000
27,633,000
33,897,000
I
5,750,000
3,000,000
21,297,000
17,497,000
I
22,633,000
10,783,000
26,885,000
31,205,000
10,581,000
8,081,000
27,2)6,000
17,6.36,000 :
116
624
000
51,
07h, 000
128 z762 2OOO
73 2$22 2000 •
2
1
$2,1l8,702,OOO $1,300,407,000-3/ $1,714,500,000 $801, 686,OOO.1f
Applied For
·
, Includes $221,510,000 noncompetitive tenders accepted at the average price ot 99.266
, Includes $54,605,000 noncompetitive tenders accepted at the average price ot 98.487
, On a coupon issue ot the same length and for the same amount invested, the return on
these bills would provide yields ot 2.97%, tor the 91-day bills, and 3.08%, for the
182-day b1lls. Interest rates on bills are quoted in terms ot bank discount with
the return related to the tace amount ot the bUls payable at maturitY' rather than
the amount invested and their length in aotual number ot days related to a 360-day
year. In contrast, yields on certificates, notes, and bonds are computed in terms
of interest on the amount invested, and relate the number of days remaining in an
interest payment period to the actual nwuber at days in the period, with seIldannual compounding i t more than one coupon period is involved.
D-839
-21governments to meet the needs of their citizens with lower tax rates
would otherwise be feasible.
And it should lessen the pressures upon
~
t
Federal Government to meet the many critical needs of our citizens
which state and local governments have become increasingly unable to
finan~
That is merely one important example of the kind of
result~ ca~
expect from the President's program, which offers tax relief of the
~and
k~
the amount our economy needs to move ahead under its own power.
LIIt:.~
,
f'1believe
L:'
Yfl u
th~ all of~here
~ -.. - 7"
~
today have great faith in the innate
J~
strength and vitality of our free enterprise economy. ~rtainlY I d~
That is why I want to see it freed of the drag of an oUOmoded tax syste
And that is precisely what the President's tax proposals are designed
to do.
Inevitably, those proposals will be somewhat modified by the ti
e tax bill emerges from the House Ways and Means Committee.
dent that the final bill will merit the support of
But I am cOt
ail~-se who belie,
as I do that no task before us is more urgent, no need more compellin
than to ~ove our economy farther and faster ahead.
000
-20to bal.ance.
ciary.
and
the Federal Budget; wi1.1.
But
not: he
che
only fiscal benefi
State and local treasuries will also reflect the economic upsw
greater utilization of resources.
At the request of its Chairman, Senator Paul Douglas, the
Treas~
supplied the Joint Economic Committee of the Congress with figures
sho~
the impact of the President's tax program, when fully in effect, upon
state and local tax revenues.
those figures.
Senator DouglaS~a~just today released
They show that, as a result of the tax program, state
and local tax revenues at their current rates"" and I emphasize this/at
r
r
-
.
·
,E!teir surre...e.t.r~tes" would be an estimated $2.9 billion higher than thE
would otherwise be.
local revenues.
This would amount to seven percent of 1962 state
S
For New York state alone
in state revenues and $ 209 1)1;//~in local tax
$400 million in all.
I need not detail all the important implications of such a revenUj
increase.
I will simply point out that it should enable state and loe
-19-
that additional consumer buying power.
The President's program, therefore, offers the large and balanced
stimulus to both invesbnent and demand that alone can create the strool
and sustained upward surge our economy must have to reach levels of
This overall impact of the tax program will mean growing benefits
for individuals as well as business.
Too many taxpayers have merely
calculated the extra
dOlla~duction will allow them to retain 1<
1963, 1964 and 1965.
But accelerating economic growth will mean much
more than that.
It will
goal of the program.
mean~jobs
for the unemployed -- which is a maj
Those with marginal jobs will see them become
permanent and better paid.
Those who already have good jobs will have
greater opportunity for better jobs, and more pay.
profits for business.
~~/6~
It Wl.J.l~ean€et~e~
The entire nation will be the gainer.
As economic activity increases, tax revenues will
~ increase.
As the economy moves closer· to balance, the budget will also move elos
-18-
in the next round of a continuing effort to get the U. S. economy
on a
igher growth, employment, and investment curve •••• The
in ta' policy should be aimed directly at tiurther
of return and at increasing consumer demand for what this dynami(
econ my is fully capable of producing."
That is exactly what the President's tax program proposes to do.
We estimate that the two measures adopted last year will cut business
taxes by some $2.5 billion.
The proposed corporate rate cut would red\.
business taxes by another $2.5 billion.
This overall reduction of $5 t
lion will increase the profitability of new investment by almost thir~
percent -- which is a significant incentive 1n any language.
The
sha~
reduction proposed for individual tax rates and capital gains rates
The proposed individual tax cuts will ere,
-17through tax relief.
The results of these two measures have thus far
C!e~exceeded even our most optimistic hopes.
I should like to call
to your attention a statement that appeared in the April 27 issue of
,.
II
Business Week -- a statement which puts quite cogently the point I wan 1
to make here.
I quote:
"Skeptics about the contribution that government tax
ke to economic growth should take a careful look at the new (
H 11) survey's findings on why business is boosting its capital spendu
gures.
Companies told McGraw-Hill that they added $1.2 billi n to
eir 1963 capital spending plans in order to take advantage
l~beral
II
0
depreciation allowances and tax incentive programs for
more
'inves~
would thus appear that. of the $2.8 billion planned increa( e from IS
tr 1963. Some forty-three percent was due to changes in govetnment taX
L.
b
P licies. II
"...,'
.d"
j
'I
, ,
Business Week then continues:
~iS
is not to say that exactly the same approach should be
iurs.
-16-
too little stimulus to investment and too much to consumer demand.
Tb:
HoL/l
argument, of course, is balanced by those who @gu3, that the program
"
provides too much stimulus to investment and too little to consumer de
The answer to both of these arguments is quite simply that the
President's program offers a substantial stimulus to both investment m
demand.
For the inter-action of greater investment and greater demand
in an expanding economy will produce a far greater total addition to
incomes and
gross national product than either will alone.
Moreover,
a substantial tax stimulus to both consumption and investment will resu
in far more balanced -- and therefore more easily sustainable -- econom
. r;~$
growth.
.,,$.
~A.rJ ~~. ~
Fort'n investment boom, unless it is supported by (resh pur-
chasing power to match the added capacity to produce, is not likely to
very long lasting.
The President's program offers excellent incentives to investment.
In the investment credit and depreciation reform of last year, we took
the first significant steps
towar~OUraging investment .~
174
v
I
-15-
recently issued by the United States Chamber of Commerce, which seeks
I
to identify
~7 ways in which the Federal Budget can be cut.
Although
I do not agree with all of those suggestions, 1 applaud the manner in
which specific areas and amounts of possible reduction have been spelle
out.
The Chamber's action contrasts sharply with mere generalized dema
for arbitrary spending ceilings or irresponsible claims that dne budget
can be cut wholesale -- thereby avoiding the unwelcome responsibility
0
deciding where cuts should be made.
The issue of fiscal responsibility is the major, but not the only,
ground upon which the President's tax program is being critically
examined.
Some say -- and this is frequently heard -- that the program
gives too little economic stimulus, too late.
They overlook the fact
that if the program becomes effective on October 1st of this year, it
will reduce tax liability by fully $10 billion in the next fifteen
months -- an average impact of more than $660 million a month.
And there is the objection that the President's tax program provic
-14-
billions of dollars.
And always they demonstrate a marvellous relucu
-- or inability -- to spell out exactly where these cuts should be mad
When the time comes to actually start cutting, those supposedly "waste
billions simply do not exist.
Nor is it hard to understand why.
~r examPl~
Increases in this year's budge
were limited to the increased costs of space and defense,
and the fixed interest on the public debt.
interest obligations and cut the budget evenly across-the-board, then
more than sixty-seven cents out of every dollar cut would have to come
out of our vital space and defense programs.
A $10 to $15 billion cut
of that kind would slice from $6.7 to $10 billion out of these programs
Even holding overall expenditures to their 1963 levels would, on this
basis, carve $3 billion out of space and defense.
~X.PR~.s.£
A?of.) 7
It is one thing to CE;§r~usil concern4ltCi"i~ control of governme
.....,.B U 7
~ ut;~ AItJC7'~t:4
spending~~to make specific and considered suggestions about where
A~
budget cuts can be made.
Such suggestions are contained in a study
-13-
This is a record of realistic expenditure control, of genuine
fiscal responsibility, of efficient administrative management.
It is
a record of frugal conduct of the public business without wasteful
neglect of essential public needs.
It is a record that reflects deep
concern for both our fiscal integrity and our national security and
well-being.
I want to make it absolutely clear that I have no quarrel -- nor
has any other official of this Administration any quarrel -- with thost
t;AR tv 4-..5 1'-Y
who are €erioKs1l! concerned with the need for expenditure control and
the elimination of waste.
We do not believe, however, that meat axe
budget cuts at the expense of national security or necessary public neE
serve either our people or our nation.
Unrealistic demands for extreme slashes in government outlays
make for good oratory, but not for good sense.
There are always those
who proclaim that we can and should slash the budget by billions and
":)77
"'"
~~~&f);iv
Z - M k f o r e the
billion
~
i . . .t.s"....-sent
up
I
I
tG:aiBttd~f!It
from civilian requests
Every major agency was cut -- and cut heavily.
~f~
in January:k
~
authority.
Presid
has cut another three-quarters of a billion dollars from the total of
spending requests in the 1963 and 1964 budgets.
""'?'
~~~
.2"-2
.~/
""'tA, \the President
is not only controlling expenditures with a
• •
~
...... /
~"'~ltJ/~G
firm hand, he is
E[eeki~
constantly to reduce the administrative costs
~
~1
management~ I
recm
mend for your reading the excellent report recently issued by the
Bure~
of every Federal Department through more efficient
4..~((fLt:t)
of the Budget€.alle~"Cost Reduction through Better Management in the
Federal Government".
111is report describes clearly and concisely vital
new developments in Federal management improvement.
My own department J
for example, has reduced the cost of its services to the public by morE
than five and a half million dollars in the first three quarters of
fiscal 1963 -- the Treasury's highest identifiable annual savings for
a nine-month period in the last eight years.
-11-
Second, as the President stated in his Budget MeSSage):
....,..
----
_....
_._-------
-,
.
-~~ ~~ ........
"'l11e prospect of expanding economic activity and rising Federal
revenues in the years ahead does not mean that Federal outlays should
rise in proportion to such revenue increases.
As the tax cut becomes
fully effective and the economy climbs toward full employment, a substantial part of the revenue increases must go toward eliminating the
transitional deficit."
The President has repeated that pledge on othe'
flitS
occasions, but apparently its ~portance and i~ significance c!fa.v~ not
~
been fully understood.
Third, the President is actively
mibnent to firm expenditure control
his comExcept for defense and space --
e;.
d..
and the unavoidable interest on the
debt -- he has actually
~at1gaAl
reduced the rest of the current budget.
~
Such a reduction has hapt ,at
only three ttmes in the last fifteen years.
And it follows average
annual increases of 7.5 percent in this same section of the Budget ovet
the last nine years.
-10control of expenditures, may be the best way of achieving
-
gets in the future."
Your organization is among the many that are deeply concerned abo
expenditure control.
This Administration has made it very clear that
shares that concern.
The record shows, emphatically and unmistakably,
that this Administration has exercised, is exercising and will continu
)
to exercise a firm control over Federal expenditures.
)
Let me cite frol
that record:
First, leaving aside only jefense
and~pace, all other~ederal
~
expenditur~~imated
by the President for fiscal 1964 show an increa'
It may surprise you to learn
~
1'/11 LL J~ N
this increase is ~~o~maller -than the increase in the same expenc
,.,. ,;ft
:fPft~
that took place during the
E88ea"'3 three-year period from 1958
/(1
's /:..
This is clear proof of success in slowing the[irowth
I itJ
oj Fedet
'" ~
[Jrogram~ ,S Pt- N 1> 'I P ~ ~ fi1./2P e-.e-.s ~
!
'~
!
J
~"
.......
,
~--P-t:7~~. C2.F .(P AA'. c<:
--~.i.
7". J 1
e.c.."..-.:--- ~.
~ 'C......
I~
~'~.~~~~'.~,';Z::::~'~'!-f-;.t.;: ; ;. . . ,. -. ;:.;:~.'i¥". ~.
...
\
j
.~
- - "...,
r
....,.,.,,~
ou {"
~t'a.~o..
.,.......
!
~--
:'·. -..·
z
,
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budget deficit is small when compared to th
amount of the deficit we
will have anyway because of lagging
The 1964 budget deficit
was estimated in January
$12 billion with a tax
But, even without a tax cut, it
at more than $9 billion.
~
~2-i?r'%~~I J,tne:'iiiAkilguZe?)
amount in dollars.
C
The difference is far more than the
The difference is between an economy moving deeper
S 17UA 7(CI/U
into a ([erio~ where the prospects of a balanced budget constantly rece l
"
SI7"A,1
as they will without a tax cut -- or an economy moving toward a ~eri~
~
where increasing economic growth spurred by tax reduction brings us
constantly closer to a balanced budget •
.) - _.. __.....,
:.t:P-~7 ~.~~
Few statements have made this last point better than one' which
appears in your January
~ for tax reduction and revision.
The
statement reads:
"It may be considered paradoxical, but a program
~f
tax, red
ch stimulates the economy to full production and employment a
mo e rapid and sustained rate of growth and which is accompanie
tion
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vvX
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-8-
I
both workers and investors.
The heart of the President's program is a top-to-bottom, acrossthe-board reduction in tax rates from which virtually erery American,
every tax bracket, from the lowest to the highest, will \benefit.
Tbes
individual benefits will have a cumulative effect on inc mes and jobs,
profits and incentives, consumption and productivity.
some~owev~ have voiced concern that the tax cut ould be
financed out of borrowed money, and that the program woultl increase th4
defiC~
They overlook the fact that the program
provides~~~'
in
rate reduction and hardship relief at a net revenue cost of well under
~
$9 billion, that this cost is
sta~ed
over three years, during which a
good part of it will be offset by increased economic activity.
They
forget that, as in the case of earlier tax cuts, our tax revenues will
in a very few years be greater than they would have been without a tax
They also overlook the fact that this temporary increase in the
-7last January -- perhaps as much as $1 billion more -- thus reducing
the deficit.
from
Even more important, we will reap far greater
~ reduction when the economy is moving at today's
benef~ts
relatively
brisk pace than we would from a tax reduction when the economy is eith
~~~
orBiIllPiy
~
t.
inching ahead.
For the added leverage that our pres
economic upswing offers will make the President's program even more
effective than it would otherwise be.
We must take advantage of that leverage.
We must take action --
and take it thislzear -- to bring the economy up closer to where it
S /+tJ iJLf)
~Ur).1t t'5 be:
"
to a level where more of our people are working, {!ncfJmorE
of our factories are producing more goods, and where more of those gooc
are sold to a public which has more money with which to buy.
the principle behind
the~'
'
J~
tax program.
That is
It is based upon the
belief that, in a free market economy such as ours, the vitality of the
economy is dependent upon the vitality of the private sector -- and we
must remember that this sector includes both consumers and producers,
l
-6However, no one can guarantee that we will not have recessions at
some time 1n the future -- with or without a tax bill.
The question i
what level of economic activity -- what level of employment -- what
(~ · ~ t-c-.·,I'....w-t ~
level of income -- will we
3
8 itS1i!uti
another recession comes along?
Will our economy be merely drifting' along, sometimes up,
somet~es
dow
with an unacceptably high level of unemployment, and lacking a clear,
steady upward drive?
Or will we have moved strongly ahead, reduced(?u:
unemployment, built up our economic vitality -- in short, will we have
put ourselves in a position to weather a setback and recover quickly,
,4t1J P
with a minimum of recession damage to jobs, income, profits, @'r]producl
A
I think the answer to that question depends to a good extent upon
what action is taken on the..
"
.,. tax program this year.
A,.5f\.
Certainly we could hardly~ave aske~for an economic climate
"
more conducive to tax reduction than we now enjoy.
gk ~ t't" ifJr C
().
S, C ~ A·/Y Clir~
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I:
c. 0
As I stated last
fort I--t '='/C (!; .)
week in washingtoJ\ should the present rate of improvement continue,
our revenues for fiscal 1964 are likely to be more than we estimated
':)Q4.
vv.
-5-
~
i t may seem almost paradoxical to talk about economic problems
and lagging economic growth.
It is undeniably true that our present
ALSt:J
rate of business activity is high and rising, and it is true that the
A
vast majority of our citizens are enjoying the richest levels of pros·
perity in our history.
However, although last month saw more American
at work than in any preceding(§'onth 03APril,
I
A
;
it is,, somber reali? th
our economy last month was unable to offer jobs to more than four mill
7Uf=of our fellow citizens who were actively seeking work.
And despite
~:
I' N U IN' f( I!C" tdJ c-12 y
A
year's~elative prosperi§? and the recent surge of business activity,
I\.
( 0 fJ
there were more people out of work last month than there were in April
\N e-- 11 VS T rlV:.~ Tilt; FAc..71i-14;
wtf~Slh'i"( (,J~8U;-
To
~
1962. lTn other:ord!l ov~r the past year we @d not ~in"1. enough new je
to take care of t
increase in our labor force.
As Secretary of the Treasury, I am hardly inclined, either by belj
&'f
or occupation, to predict that a recession may be in the offing.
On
t~
"
contrary, despite our high rate of unemployment, I believe that our
present economic activity shows every promise of continuing on the
ups~
-4-
It will not guarantee us against recessions, but it will altevia1
their impact if they come, and enable us to recover from them at a fas
rate.
It will not put an immediate end to budget deficits, but it will
ultimately produce increased government revenues to balance future bud
It will not solve our balance of payments disequilibrium by itsel
but it will help by enabling our industry to produce more, better, and
newer goods at more competitive prices -- and thus help increase our s.
abroad.
Above all, it must be borne in mind that the Presidentk program
is not intended -- and is not designed -- merely as a quick and
y~
shelter against recession.
tempor~
It was designedi\and has always been intenc
as a permanent program to raise our long term rate of overall economic
growth.
Here ift this room, in this company, and in this bustling metropolj
-3-
While virtually no
one~diSagre~ith President Kennedy's
goal -- the goal of maximum economic growth through significant and
substantial tax action -- there are numerous misconceptions about the
program itself.
I
~~o/..
~like
to consider some of these with you toda:
No one in the Administration has suggested that the President's
,
tax program contains all of the fiscal wisdom of our age, or that it
is a panacea for all of our economic problems.
It isn't.
No tax progl
could be.
But the President's program will stimulate increased economic actj
will end some of the inequities in our present tax structure, and will
help to assure that more of our resources are used in a more sensible
e-L
an~e
effective fashion.
It will not cure unemployment overnight, but it will generate the
higher levels of economic activity we need if we are to reduce our pres
unacceptably high rate of unemployment and create the increasing numbel
of jobs we must provide for our rapidly growing population.
! (1./ 5 (:IJ"T
1U IR:
Ford, 1111 11, and
the HWW NorfOlk and
President of the
~_.kk
West~rn
~
Stuart Saunders, President of"
Railway, with Mark
~
W. Cresap, Jr.,
Westinghouse Electric Corporation, Sam
Fleming, President of the Third National Bank of Nashville, and
~k
Frazar" B. Wilde, Chairman of the Connecticut General
Life Insurance Company, as Executive Vice
QbkR"'k
Chairmen.
-2-
there was virtual unanimity in support of the President's basic premis4
a substantial reduction in taxes to foster maximum economic growth.
The nation as a whole is, in fact, more solidly united in support
Ret> LJ e:.- 71 t:J/U
of the President's
has been on any major piece of domestic legislation in recent memory.
An
excellent indication of how strong is that support among the leaders
the business community was the formation in Washington less than
two
we
ago of the "Business Committee for Tax Reduction in 1963" headed by Hen
.)
Saunders, President of the North
and with an Executive
Cv~w~~
leaders as Frazar Wilde,
Insurance Company,
outstanding business
rd, Connecticut General Lif4
-
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Pill' I
'INP~
.$"7163
REMARKS BY THE HONORABLE DOUGLAS DILLON
SECRETARY OF THE TREASURY
BEFORE THE CHAMBER OF COMMERCE· OF NEW YORK
NEW YORK, NEW YORK
TUESDAY, MAY 7, 1963, 12 NOON, EDT
As a former member of the New York Chamber of Commerce, I am pleas
and proud to see so many old friends here today.
And since my subject
taxes, 1 can't imagine a more appropriate audience.
For, nearly three
weeks before President Kennedy submitted his Tax Message to the Congres:
last January 24, the New York Chamber called for "tax reduction and.rev:
sion" -- and appealed to Americans in all walks of life to support that
goal.
Inevitably, your tax proposals differed in some respects from the
President's.
But far more striking -- and certainly far more important
was their substantial agreement in aims, in tenor, and in major proposa
Nor is this an isolated phenomenon.
More than 200 witnesses, for exampJ
have testified before the House Ways and Means Committee in Washington (
the President's tax program.
While they disagreed widely on specifics.
TREASURY DEPARTMENT
Washington
RELEASE P.M. NEWSPAPERS
TUESDAY. MAY 7. 1963
REMARKS BY THE HONORABLE DOUGLAS DILLON
SECRETARY OF THE TREASURY
BEFORE THE CHAMBER OF COMMERCE OF NEW YORK
NEW YORK, NEW YORK
TUESDAY, MAY 7, 1963, 12 NOON, EDT
As a former member of the New York Chamber of Commerce, I am
pleased and proud to see so many old friends here today. And since
my subject is taxes, I can't imagine a more appropriate audience.
For, nearly three weeks before President Kennedy submitted his Tax
Message to the Congress last January 24, the New York Chamber called
for "tax reduction and revision" -- and appealed to Americans in all
walks of life to support that goal.
~~nevitably, your tax proposals differed in some respects from the
p.resident's. But far more striking -- and certainly far more
i~portant -- was their substantial agreement in aims, in tenor, and in
major proposals. Nor is this an isolated phenomenon • . More than 200
witnesses, for example, have testified before the House Way~- and Mean:
Committee in Washington on the President's tax program. While they
disagreed widely on specifics, there was virtual unanimity in support
of the President's basic premise: a substantial reduction in taxes
to foster maximum economic growth.
The nation as a whole is, in fact, more solidly united in
support of the President's goal of meaningful tax reduction this year
than it has been on any major piece of domestic legislation in
recent memory. An excellent indication of how strong is that support
among the leaders of the business community was the formation in
Washington less than two weeks ago of the "Business Committee for
Tax Reduction in 1963", headed by Henry Ford, II, and Stuart Saunders,
President of the Norfolk and Western Railway, with Mark W. Cresap,Jr.,
President of the Westinghouse Electric Corporation, Sam Fleming,
President of the Third National Bank of Nashville, and Frazar B.
Wilde, Chairman of the Connecticut General Life Insurance Company,
as·Executive Vice Chairmen.
While virtually no one disagrees with President Kennedy's
goal -- the goal of maximum economic growth through significant and
substantial tax action -- there ~ numerous misconceptions about the
program itself. I would like to consider some of these with you
today.
0-840
- 2 No one in the Administration has suggested that the President's
tax program contains all of the fiscal wisdom of our age, or that it
is a panacea for all of our economic problems. It isn't. No tax
program could be.
But the President's program will stimulate increased economic
activity, will end some of the inequities in our present tax
structure, and will help to assure that more of our resources are
used in a more sensible and a more effective fashion.
It will not cure unemployment overnight, but it will generate
the higher levels of economic activity we need if we are-to reduce
our present unacceptably high rate of unemployment and create the
increasing number of jobs we must provide for our rapidly growing
population.
It will not guarantee us against recessions, but it will
alleviate their impact if they come, and enable us to recover from
them at a faster rate.
It will not put an immediate end to budget deficits, but it will
ultimately produce increased government revenues to balance future
budgets.
It will not solve our balance of payments disequilibrium by itself l
but it will help by enabling our industry to produce more, better, and
newer goods at more competitive prices -- and thus help increase our
sales against those of foreign competitors in markets both here and
abroad.
Above all, it must be borne in mind that the President's program
is not intended -- and is n?t designed -- merely as a quick and
temporary shelter against recession. It was designed -- and has
always been intended -- as a permanent program to raise our long term
rate of overall economic growth.
Here in this room, in this company, and in this bustling
metropolis, it may seem almost paradoxical to talk about economic
problems and lagging economic growth. It is undeniably true that our
present rate of business activity is high and rising, and it is also
true that the vast majority of our citizens are enjoying the richest
levels of prosperity in our history. However, although last month
saw more Americans at work than in any preceding April, it is a
somber reality that our economy last month was unable to offer jobs
to more than four million of our fellow citizens who were actively
seeking work. And despite the past year's continuing recovery and
- 3 ~Q~
Vv~
the recent surge of business activity, there were more people out of
work last month than there were in April 1962. We must face the
fact that over the past year we were simply unable to create enough
new jobs to take care of the normal increase in our labor force.
As Secretary of the Treasury, I am hardly inclined, either by
belief or by occupation, to predict that a recession may be in the
offing. On the contrary, despite our high rate of unemployment, I
believe that our present economic activity shows every promise of
continuing on the upswing.
However, no one can guarantee that we will not have recessions
at some time in the future -- with or without a tax bill. The
que·stion is: what level of economic activity -- what level of employment -- what level of income -- will prevail if and when another
recession comes along? Will our economy be merely drifting along,
sometimes up, sometimes down, with an unacceptably high level of
unemployment, and lacking a clear, steady upward drive? Or will we
have moved strongly ahead, reduced unemployment, built up our
economic vitality -- in short, will we have put ourselves in a
position to weather a setback and recover quickly, with a minimum of
recession damage to jobs, income, profits, and production?
I think the answer to that question depends to a good extent
upon what action is taken on the tax program this year.
Certainly we could hardly ask for an economic climate more
conducive to tax reduction than we now enjoy. As I stated last week
in Washington, before the U. S. Chamber of Commerce, should the
present rate of improvement continue, our revenues for fiscal 1964
are likely to be more than we estimated last January -- perhaps as
much as'$l billion more -- thus reducing the deficit. Even more
important, we will reap far greater benefits from tax reduction
when the economy is moving at tOday's relatively brisk pace than
we would from a tax reduction when the economy is either receding or
simply inching ahead. For the added leverage that our present
economic upswing offers will make the President's program even more
effective than it would otherwise be.
We must take advantage of that leverage. We must take action -and take it this year -- to bring the economy up closer to where it
should be: to a level where more of our people are working, more
of our factories are producing more goods, and where more of those
goods are sold to a public which has more money with which to buy.
That is the principle behind the tax program. It is based upon the
belief that, in a free market economy such as ours, the vitality of
- 4 the economy is dependent upon the vitality of the private sector -and we must remember that this sector includes both consumers and
producers, both workers and investors.
The heart of the President's program is a top-to-bottom, acrossthe-board reductiOn in tax rates from which virtually every American,
in every tax bracket, from the lowest to the highest, will benefit.
These individual benefits will have a cumulative effect on incomes
and jobs, profits and incentives, consumption and productivity.
Some have voiced concern that the tax cut would be financed out
of borrowed money, and that the program would increase the deficit.
They overlook the fact that the program provides over $14 billion in
rate reduction arid hardship relief at a net revenue cost of well under
$9 billion, that this cost is staged over three years, during which a
good part of it will be offset py increased economic activity. They
forget that, as in the case of earlier tax cuts, our tax revenues
will in a very few years be greater than they would have been without
a tax cut.
They also overlook the fact that this temporary increase in the
budget deficit is small when compared to the amount of the deficit
we will have anyway because of lagging growth. The 1964 budget
deficit was estimated in January to be slightly under $12 billion
with a tax cut. But, even without a tax cut, it was estimated at
more than $9 billion. The difference is far more than the amount in
dollars. The difference is between an economy moving deeper into a
situation where the prospects of a balanced budget constantly
recede -- as they will without a tax cut -- or an economy moving
toward a situation where increasing economic growth spurred by tax
reduction brings us constantly closer to a balanced budget.
Few statements have made this last point better than one which
appears in your January 7th call for tax reduction and revision.
The statement reads:
"It may be considered paradoxical, but a program
of tax reduction which stimulates the economy to full
production and employment and a more rapid and
sustained rate of growth and which is accompanied by
a firm control of expenditures, may be the best way
of achieving balanced budgets in the future."
- 5 Your organization is among the many that are deeply concerned
about expenditure control. This Administration has made it very
clear that it shares that concern. The record shows, emphatically
and unmistakably, that this Administration has exercised, is exercising,
and will continue to exercise, a firm control over Federal expenditures. Let me cite from that record:
First, leaving aside only defense and space, all other
Federal expenditures as estimated by the President for fiscal 1964
show an increase of $5.5 billion over their 1961 level. It may
surprise you to learn that this increase is $800 million smaller
than the increase in the same expenditures that took place during
the three-year period from 1958 to 1961. This clear proof of success
in slowing the rise in Federal spending in all areas save only
defense and space, where overriding national needs had to be met.
Second, as the President stated in his Budget Message:
"The prospect of expanding economic activity and rising Federal
revenues in the years ahead does not mean that Federal outlays
should rise in proportion to such revenue increases. As the tax cut
becomes fully effective and the economy climbs toward full employment,
a substantial part of the revenue increases must go toward eliminating
the transitional deficit." The President has repeated that pledge
on other occasions, but apparently its significance has not been
fUlly understood.
Third, the President is actively translating his commibnent
to firm expenditure control into action. Except for defense and
space -- and the unavoidable interest on the public debt -- he has
actually reduced the rest of the current budget. Such _a reduction
has occurred only three times in the last fifteen years. And it
follows average annual increases of 7.5 percent in this same section
of the Budget over the last nine years.
Before the Budget was sent up in January, the President cut
$6 billion from civilian requests for new obligational authority.
Every major agency was cut -- and cut heavily and since then, the
President has cut another three-quarters of a billion dollars from
the total of spending requests in the 1963 and 1964 budgets.
Fourth, the President is not only controlling expenditures with
a firm hand, he is striving constantly to reduce the administrative
costs of every Federal Department through more efficient management.
- 6 -
I recommend for your reading the excellent report recently issued by
the Bureau of the Budget entitled "Cost Reduction through Better
Management in the Federal Government." This report describes
clearly and concisely vital new developments in Federal management
improvement. My own department, for example, has reduced the cost
of its services to the public by more than five and half million
dollars in the first three quarters of fiscal 1963 -- the Treasury's
highest identifiable annual savings for a nine-month period in the
last eight years.
This is a record of realistic expenditure control, of genuine
fiscal responsibility, of efficient administrative management. It is
a record of frugal conduct of the public business without wasteful
neglect of essential public needs. It is a record that reflects deep
concern for both our fiscal integrity and our national security and
well-being.
I want to make it absolutely clear that I have no quarrel
nor
has any other official of this Administration any quarrel -- with
those who are earnestly concerned with the need for expenditure
control and the elimination of waste. We do not believe, however,
that meat axe budget cuts at the expense of national security or
necessary public needs serve either our people or our nation.
Unrealistic demands for extreme slashes in government outlays
make for good oratory, but not for good sense. There are always
those who proclaim that we can and should slash the budget by
billions and billions of dollars. And always they demonstrate a
marvelous reluctance -- or inability -- to spell out exactly where
these cuts should be made. When the time comes to actually start
cutting, those supposedly "wasteful" billions simply do not exist.
Nor is it hard to understand why. Increases in this year's
budget were limited to the increased costs of space and defense,
and the fixed interest on the public debt. If one excluded
interest obligations and cut the budget evenly across-the-board, then
more than sixty-seven cents out of every dollar cut would have to
come out of our vital space and defense programs. A $10 to $15
billion cut of that kind would slice from $6.7 to $10 billion out
of these programs. Even holding overall expenditures to their 1963
levels would, on this basis, carve $3 billion out of space and
defense.
- 7 It is one thing to express concern about control of government
spending - but quite another to make specific and considered
suggestions about where budget cuts can be made. Such suggestions
are contained in a study recently issued by the United States
Chamber of Commerce, which seeks to identify 117 ways in which the
Federal Budget can be cut. Although I do not agree with all of those
suggestions, I applaud the manner in which specific areas and
amounts of possible reduction have been spelled out. The Chamber's
action contrasts sharply with mere generalized demands for arbitrary
spending· ceilings or irresponsible claims that the budget can be
cut wholesale -- thereby avoiding the unwelcome responsibility of
deciding where cuts should be made.
The issue of fiscal responsibility is the major, but not the
only, ground upon which the President's tax program is being
critically examined. Some say -- and this is frequently heard -that the program gives too little economic stimulus, too late.
They overlook the fact that if the program becomes effective on
October 1st of this year, it will reduce tax liability by fully
$10 billion in the next fifteen months -- an average impact of more
than $660 million a month.
And there is the objection that the President's tax program
provides too little stimulus to investment and too much to consumer
demand. This argument, of course, is balanced by those who hold
that the program provides too much stimulus to investment and too
little to consumer demand.
The answer to both of these arguments is quite simply that the
President's program offers a substantial stimulus to both investment
and demand. For the inter-action of greater investment and greater
demand in' an expanding economy will produce a far greater total
addition to incomes and gross national product then either will alone.
Moreover, a substantial tax stimulus to both consumption and
investment will result in far more balanced -- and therefore more
easily sustainable -- economic growth. For history shows that
an investment boom, unless it is supported by fresh purchasing power
to match the added capacity to produce, is not likely to be very
long lasting.
The President's program offers excellent incentives to investment.
In the investment credit and depreciation reform of last year, we took
the first significant steps toward encouraging investment through
tax relief. 'The results of these two measures have thus far
exceeded even our most optimistic hopes. I should like to call
to your attention a statement that appeared in the April 27 issue
- 8 of "Business Week" -- a statement which puts quite cogently the
point I want to make here. I quote:
"Skeptics about the contribution that government
tax policies can make to economic growth should take
a careful look at the new .(McGraw-Hill) survey's
findings on why business is boosting its capital
spending figures.
Companies told McGraw-Hill that
they added $1.2 billion to their 1963 capital
spending plans in order to take advantage of more
liberal depreciation allowances and tax incentive
programs for investment. It would thus appear that,
of the $2.8 billion planned increase from 1962 to
1963, some forty-three percent was due to changes
in government tax policies."
"Business Week" then continues:
"This is not to say that exactly the same
approach should be pursued in the next round of a
continuing effort to get the U. S. economy back on
a higher growth, employment, and investment curve .•.•
The next change in tax policy should be aimed
directly at further improving corporate rates of
return and at increasing consumer demand for what
this dynamic economy is fully capable of producing."
That is exactly what the President's tax program propose& to do.
We estimate that the two measures adopted last year will cut business
taxes by some $2.5 billion. The proposed corporate rate cut would
reduce business taxes by another $2.5 billion. This overall reduction
of $5 billion will increase the profitability of new investment by
almost thirty percent -- which is a significant incentive in any
language. The sharp reduction proposed for individual tax rates
and capital gains rates should stimulate still further the
incentives to invest. But for new investment to be truly profitable,
.adequate consumer buying power is also necessary. The proposed
individual tax cuts will create that additional consumer buying
power.
The President's program, therefore, offers the large and balanced
stimulus to both investment and demand that alone can create the
strong and sustained upward surge our economy must have to reach
levels of full employment and full utilization of capacity.
- 9 This overall impact of the tax program will mean growing benefits
for individuals as well as business. Too many taxpayers have merely
calculated the extra dollars that tax reduction will allow them to
retain in 1963, 1964 and 1965. But accelerating economic growth will
mean much more than that. It will mean jobs for the unemployed -which is a major goal of the program. Those with marginal jobs will
see them become permanent and better. paid. Those who already have
good jobs will have a greater opportunity for better jobs, and more
pay.
It will also mean higher profits for business. The entire
nation will be the gainer.
As economic activity increases, tax revenues will increase.
As the economy moves closer to balance, the budget will also move
closer to balance. But the Federal Budget will not be the only
fiscal beneficiary. State and local treasuries will also reflect
the economic upswing and greater utilization of resources.
At the request of its Chairman, Senator Paul Douglas, the
Treasury has supplied the Joint Economic Committee of the Congress
with figures showing the impact of the President's tax program,
when fully in effect, upon state and local tax revenues. Senator
Douglas just today released those figures. They show that, as a
result of the tax program, state and local tax revenues at their
current rates-- and I emphasize this: at their current rates -would be an estimated $2.9 billion higher than they would otherwise
be. This would amount to seven percent of 1962 state and local
revenues. For New York state alone this would mean $201 million in
state revenues and $209 million in local tax revenues -- more than
$400 million in all.
I need not detail all the important implications of such a revenue
increase. I will simply point out that it should enable state and
local governments to meet the needs of their citizens with lower tax
rates than would otherwise be feasible. And it should lessen the
pressures upon the Federal Government to meet the many critical needs
of our citizens which state and local governments have become
increasingly unable to finance. That is merely one important example
of the kind of result we can expect from the President's program,
which offers tax relief of the kind and the amount our economy needs
to move ahead under its own power.
Like all of you here today I have great faith in the innate
strength and vitality of our free enterprise economy. That is why I
want to see it freed of the drag of an outmoded tax system. And that
is precisely what the President's tax proposals are designed to do.
Inevitably, those proposals will be somewhat modified by the time the
tax bill emerges from the House Ways and Means Committee. But I am
confident that the final bill will merit the support of all of those who
believe, as I do, that no task before us is more urgent, no need more
compelling, than to move our economy farther and faster ahead.
000
':loa
TREASURY DEPARTMENT
VVv
May 7, 1963
FOR Df.iEDIATE REIEASE
WITHHOlDING OF APPRAISEMENT ON
'l'ITANnn.t DIOXIDE
The 'l'reasury Department is instructing customs field officers
to withhold appraisement
o~
titanium dioxide :trom Japan pending a
determination as to whether this merchandise is being sold in the
United states at less than
~air
value.
Not1ce to this eUect is
being published in the Federal Register.
Under the Ant1dumping Act, determination
states at less than
~air
value would require
o~
sales in the United
re~erence o~
the case
to the 'l'aritt Commission, which woUld consider whether American industry was being injured.
Both dumping price and injury must be shown
to Justi1Y a tinding ot dumping under the law.
The complaint in this case was received on January
'!he dollar value ot imports received during
$950,000.
1962
14, 1963.
was approx1mate~
TREASURY DEPARTMENT
May 7 J 1963
FOR IMMEDIATE REIEASE
WITlllIOIDING OF APPRAISEMENT ON
TITANIUM DIOXIDE
The Treasury Department is instructing customs field officers
to withhold appraisement of titanium dioxide :tr0lll Japan pending a
determination as to whether this merchandise is being sold in the
United states at less than fair value.
Noticp. to this eftect is
being published in the Federal Register.
Under the Antidumping Act, determination ot sales in the United
states at less than tair value would require reterence ot the case
to the Taritt Commission, which would consider whether American industry was being injured.
Both dumping price and injury must be shown
to Justify a tinding ot dumping under the law.
The complaint in this case was received on Januar,y
ibe dollar value ot imports received during
$950,000.
1962
14, 1963.
was approximately
- :5 -
and exchange tenders will receive equal treatment.
Cash adJustments
for differences between the par value of ma.turing bills accepted in
E
the issue price of the new bills.
The income derived from Treasury bills, whether interest or gail
•
or other disposition of the bills, does not have any exemption, as 8t
from the sale or other disposition of Treasury bills does not have
treatment, as such, under the Internal Revenue Code of 1954.
8.J:
The bi]
to estate, inheritance, girt or other excise taxes, whether Federal (
are exempt from a.ll taxation now or hereafter imposed on the
princi~
. thereof by any state, or any of the .possessions of the United States J
local taxing authority.
For purposes of taxation the amount of di8C(
Treasury bills are originally sold by the United states is considerec
terest.
Under Sections 454 (b) and 1221 (5) of the Internal Revenue
the amount of discount at which bills issued hereunder are sold is nc
to accrue until such bills are sold, redeemed or otherwise disposed c
bills are excluded from consideration as capital assets.
AccordinglJ
of Treasury bills (other than life insurance companies) issued herew:
clude in his income tax return only the difference between the price
bills, whether on original issue or on subsequent purchase, and the e
received either upon sale or redemption at ma.turity during the taxabl
vh1ch the return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and thh
scribe the terms of the Treasury bills and govern the conditions of t
I
Copies of the circular may be obtained from any Federal Reserve'Bank
III:nXDIliDWD UJ
4ecme 1s , e.
be made
g.,
99 .. 925.
Fra.ctions
~
not be used.
It is urged that tenders
on the printed forms and forwarded in the special envelopes which v1ll
'be supplied bY' Federal. Reserve Banks or !ranches on application therefor.
~~
1natitutions generall7 may submit tenders for account of customers
the names of the customers are set torth in such tenders.
proy1.deci
Others than
banktng institutions will not be permitted to .submit tenders except tor their
account.
0VIl
Tenders v1il be received without deposit from incorporated banks
IDd trust companies and trcm responsible and recognized dealers in investment
aeeur1t1es.
br
amount of Treasur7 bills applied for, unless the tenders are accompanied
~~e
the
Tenders trom others must be accompanied b7 payment o-t 2 percent of
express guaranty of
aD
~ent
by an incorporated bank or trust company.
])IIIled.1&tely a.:rter the closing hour, tenders will be opened at the Federal
leserve !&I1ks and Branches, tolloving which public announcement Yill be made by
the
~asur;y
l)epa.rtment ot the amount and price range ot accepted bids.
'l'hose
Rbadtt1ng tenders will be advised of the acceptance or rejection thereot.
The
SecretarY o-t the Treasur7 expressly reserves the right to accept or reject any
or &1.l. tenders, in whole or in part, and his action in any such respect shaJ.l. be
t1D&l..
SUbject to these reservations, noncompetitiTe tenders tor
less ~or the additional bills dated
1Dg
•
unt11 maturlt7 date on
~oooor leiS
February 14, 196,3
¢i!Jt
AUgus~ 196,3
, (
*2W
or
91- days remain-
(XlDF
) and noncompetitive tenders for
for the A"~ bills v1tbout stated price trom any 'one
bIdder will be accepted in tun at the average price (1n three dec1maJ..) ot accepted ccmpetItlve bids tor the respect1ve 1ssues.
settlement tor accepted ten-
ders 1D accordance with the bids must be made or completed at the Federal
BUlks on
&1
16 , 196)
,tmJ
Rese~
, in cash or other immediately available tunds or
in a l.1ke tace amount ot 1'rea.sur,y billa maturing -:.:Ma:=Y.c....::l:=.6....
,lJj-r.l:f::9:i:i16~_ _ _ •
Cash
4"0')
L
TREASURY DEPARTMENT
Washington
MaT 8, 1963
FOR IMMEDIATE RELEASE,luOO P. M.
XXXXXXXXXXXIXXXI~XXXXXXXXXXIXXXXXiX
TREASURY'S WEEKLY BILL OFFERINrThe Treasury Department, by this public notice, invites tenders for two series
of Treasury bills to the aggregate amount of $
2.100~.OOO ,
May ~~963
cash and in exchange for Treasury bills maturing
of $ 2.oa~~.OOO
'
or therea.bouts, tor
,in the amount
as follovs:
MaT 16'J:3
xL--daY bills (to maturity date) to be issued
in the amount of $J.,300'Mi OOO
, or thereabouts, represent-
ing an additional amount of bills dated
and to mature
AUgl18tJ~963
amount ot $ 800tm,00Q
,
Feb"m
14, 1963,
, originally issued in the
' the additional and original bills
to be treely interchangeable.
-Bii--
daY bllls, tor $ 6QQ.~OOO
May
~bf63
, and
,or thereabouts, to be dated
to mature
lovelllbeHii' 196)
The bills ot both series will be issued on a discount basis under com:J"etithe
and noncompetItive bidding as hereinatter provided, and at maturity their f'ace
amount will be payable without interest.
They will be issued in bearer tona 01111.
and in denominations ot $1,000, $5,000, $10,000, $50,000, $100,000, $500,000 and
$1,000,000 (maturIty value).
Tenders Yill be received at Federal Reserve Banks and Branches up to the
Day11glm SaTing
closing hour, one-thirty p.m., Ea.stern~ time, Monday, Maz.1963
Tenders rill not be receIved at the Treasury Department, Washington.
.-._
Each tender
must be tor an even multiple ot $1,000, and in the case ot competItive. tenders tbf
price otfered must be expressed on the basis ot 100, with not more than three
TREASURY
DEPARTMENT
'''''m«',·
Xi
May 8, 1963
FOR IMMEDIATE RELEASE
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders
tor two series of Treasury bills to the aggregate amount of
$2,100,000,000, or thereabouts, for cash and in exchange for
Treasury bills maturing May 16, 1963,
in the amount of
$2,004,644,000, as follows:
91-day bills (to maturity date) to be issued May 16, 1963,
. in the amount of $1,300,000,000, or thereabouts" representing an
add:1t:1onal amount of bills dated February 14,1963, and to
mature August 15,1963, originally issued in the amount of
$800,035,000,
the additional and original bills to be freely
interchangeable.
182-day bills, for $800,000,000,
or thereabouts, to be dated
and to mature November 14, 1963.
May 16, 1963,
The bills of both series will be issued on a discount basis under
competitive and noncompetitive bidding as hereinafter provided, and at
maturity their face amount will be payable without interest. They
wi11 be issued in bearer form only, and in denominations of $1,000,
$5,900 , $lO,OOO( $50,000, $100,000, $500,000 and $1,000,.000
(matur:1ty value).
Tenders will be received at Ii'ederal Reserve Banks and Branches
up to the closing hour, one-thirty p.m., Eastern Daylight Saving
time, Monday, May 13, 1963.
Tenders will not be
received at the Treasury De~artment, Washington. Each tender must
be for an even multiple of $1,000, and in the case of competitive
tenders the price offered must be expressed on the baSis of 100,
with not more than three decimals, e. g., 99.925. Fractions may not
be used. It is urged that tenders be made on the printed forms and
forwarded in the special envelopes which will be supplied by Federal
Reserve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of
customers provided the names of the customers are set forth in such
tenders. Others than banking institutions will not be permitted to
submit tenders except for their own account. Tenders will be received
without deposit from incorporated banks and trust companies and from
responsible and recognized dealers in investment securities. Tenders
from others mus.t be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank
or trust company •.
D-841
- 2 -
Immediately after the closing hour, tenders will be opened at
the Federal Reserve Banks and Branches, following which publ~c
announcement will be made by the Treasury Departmment of the amount
and price range of accepted bids. Those submitting tenders w1ll be
advised of the acceptance or rejection thereof. The Secretary or
the Treasury expressly reserves the right to accept or reject any 0
all tenders, in whole or 1n part, and his act10n in any such respec
shall be final. Subject to these reservations, noncompetit1ve
tenders for $200,000 or less for the additional bills dated
February 14 1963, (91-days remaining until maturitr date on
August 15, i963)
and noncompetitive tenders for ,100,000
or less for the 182-day b11ls w1thout stated pr1ce from anyone
bidder will be accepted in full at the average price (in three
decimals) of accepted competitive b1ds for the respect1ve issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bankson May 16, 1963
in cash or other 1mmed1ately available funds or 1n a like facA
amount of Treasury bills maturing May 16, 1963.
Cash and
exchange tenders will receive equal treatment. Cash adjusbnents
will be made for d1fferences between the par value of maturing
bills accepted in exchange and the 1ssue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, does not have
any exemption, as such, and loss from the 'sale or other disposit10n
of Treasury bills does not have any speoial treatment, as SUCh,
under the Internal Revenue Code of 1954. The bills are subject to
estate, inheritance, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the Un1ted States, or by any local taxing authority.
For purposes of taxation the amount of discount at which ,Treasury
bills are originally sold by the Un1ted states is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not considered to acorue until such bills are
sold, redeemed or otherwise disposed of, and such bills are exclud~
from consideration as capital assets. Accordingly, the owner ot
Treasury bills' (other than life insurance companies) issued hereunde
need include in his income tax return only the difference between
the pr1ce paid for such bills" whether on original issue'or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which tM
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and th1
notice prescribe the terms of ,the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtalnedt
any Federal Reserve Bank or Branch.
000
TREASURY DEPARTMENT
404
May 8, 1963·
FOR IMMEDIATE RELEASE
TREASURY MARKET TRANSACTIONS IN APRIL
During April 196), market transactions
in direct and guaranteed securities of the
government tor Treasury investment and other
accounts resulted in net
purcha~pq
Department of $)2,274,500.
000
D-842
by the Treasury
rREASURY DEPARTMENT
May 8, 1963
FOR IMMEDIATE RELEASE
TREASURY MARKET TRANSACTIONS IN APRIL
During April 1963, market transactions
in direct and guaranteed securities of the
government for Treasury investment and other
accounts resulted in net purchases by the l'reasury
Department of $)2,274,500.
000
0-842
TREASURY DEPARTMENT
May 8, 1963
FOR IMMEDIATE RELEASE
TREASURY DECISION ON RENAULT AUl'Qt10BILES
UNDER THE ANTIDUMPING ACT
The Treasury Department has determ1ned that Renault automobiles from France are not being, nor likely to be, sold in
the United States at less than fair value within the meaning of
the Antidumping Act.
.
Inquiry in this case was made at the
suggestion of Customs field officers.
complaint.
There was no industry
Notice of the detennination will be published in
the Federal Register.
The dollar value of imports o'f the involved merchandise
received from France during 1962 was approximately $24,000,000.
TREASURY DEPARTMENT
407
May 8, 1963
FOR IMMEDIATE RELEASE
TREASURY DECISION ON RENAULT AUTOMOBILES
UNDER THE ANTIDtMPING ACT
The Treasury Department has determined that Renault automobiles tram France are not belng, nor likely to be, sold in
the United States at less than tair value within the meaning ot
the Antidwnp1ng Act.
sugges~lon
complaint.
Inquiry 1n this case was made at the
of Customs field officers.
There was no industry
Not1ce of the determination will be published in
the Federal Register.
The dollar value of imports of the involved merchand1se
received trom France during 1962 was approximately $24,000,000.
TREASURY DEPARTMENT
May 8, 1963
FOR IMMEDIATE RELEASE
TREASURY DECISION ON N'YI.Cfi YARN
UNDER THE ANTIDUMPING ACT
The Treasury Department has determined that nylon yarn
from Italy is not being, nor likely to be, sold in the United
States at less than fair value within the meaning of the
Antidumping Act.
Notice of the determination will. be pub-
lished in the Federal Register.
The dollar value of imports of the involved merchandise
received during 1962 was approximately $4,600,000.
TREASURY DEPARTMENT
409
May 8, 1963
FOR D1MEDIATE RELEASE
TREASURY DECISION ON NYLW YARN
UNDER TIlE ANTIDUMPING ACT
The Treasury
[~partment
has determined that nylon yarn
rrom Italy is not being, nor likely to be, sold in the United
States at less than fair value ",ithin the meaning of the
Antidumping Act.
Notice of the determination ",111 be pub-
llshed in the- Federal Register.
The dollar value of imports of the involved merchandise
received during 1962 ",as approximately $4,600,000.
4· ....', v
,i
TREASURY DEPARTMENT
May 10,1963
FOR IMMEDIATE RELEASE
a staple length of 1-1/8 inches or more but less than 1-3/8 inches
will be reopened on June 3, 1963, to permit the entry thereunder of
1,411,672 pounds.
The quota allocation of 4,565,642 pounds on Item II cotton,
allocation
2~,
namely, cotton haVing a staple length of 1-1/8 inches
or more but less than 1-3/8 inches, was officially filled on
August 1,/1962.
Because of subsequent adjustments, that quota alloca-
tion is now open by 1,411,672 pounds.
The quota will reopen as of noon, e.s.t., or its eqUivalent in
other time zones, on June 3, 1963,so that all importers may have an
equal opportunity for the simultaneous presentation of entries or
warehouse withdrawals for consumption.
Only entries or warehouse
withdrawals for consumption for cotton of the above-cited staple
length may be filed.
No importer may present entries or withdrawal~
for a quantity exceeding 1,411,672 pounds.
000
D-843
TREASURY DEPARTMENT
May 10,1963
FOR IMMEDIATE RELEASE
The Bureau of Customs announces that the quota on cotton having
a staple length of 1-1/8 inches or more but less than 1-3/8 inches
will be reopened on June 3, 1963, to permit the entry thereunder of
1~4l1,672
pounds.
The quota allocation of 4,565,642 pounds on Item II cotton,
allocation
2~,
namely, cotton having a staple length of 1-1/8 inches
or more but less than 1-3/8 inches, was officially filled on
August 1,:1962.
Because of subsequent adjustments, that quota alloca-
tion is now open by 1,411,672 pounds.
The quota will reopen as of noon, e.s.t., or its eqUivalent in
other time zones, on June 3, 1963,80 that all importers may have an
equal opportunity for the simultaneous presentation of entries or
warehouse withdrawals for consumption.
Only entries or warehouse
withdrawals for consumption for cotton of the above-cited staple
length may be filed.
No importer may present entries or withdrawals
for a quantlty.eKceeding 1,411,672 pounds.
000
D-843
4..."; '-')
The 'hM8aI7 ~ amouDOH lut. eftn.iJIg \hat. the tenduw tor t.o ..sa. fI6
tnaeaI7 b111a, em. aerie. to be an add1Ucmal. lane of ,be bU1e dat.4,......, lk. U6~
and tM other MI"1ea t.o be elated JIq 16, 196), vb1eb wn offend - ..,,8)~....... t.
d \be hderal .... , . . . . . an Mq I). tendeN were Sm1\ed tor $1,)00,000,000. _
\baJ'eaboaU, ot n-dq b1Ua aDd tor t8OO,OOO.OOO. (If' tbereabcNt.8. of 182-c1q laS)) ••
!'be _t.a1la of t.he tvo aerie. an .. toU....
lAId OJ' 10C1PftD
9l-clq TNUU7 bUla
182-c1q ~ ldl1.
CCMPItrrtv& BIDs,
_~ '!Pjt lS. 1~ E'
-.t.ur1!c 10, ntbq lb. . .
Price
".270
".265
99.266
PPI'GE.
~.
Anmal Batl
2.~
,~.
•
Prloa
.....] ....
•
2.9<* !I ••
2.903%
98.hfb
I.,.".
98.487
98.1.ea
1.'JfOI1/
I.".
4
TREASURY DEPARTMENT
iELEA.SE A. M. mISPAPERS,
14, 1963.
May 13, 1963
~, May
RESULTS OF TREASURY'S WEEKLY BILL OFFERING
!he TreSSUI"Y'Department annoWlced 1a.st evening that the tenders for two series of
one Beries to be an additional issue of the bills dated Febrnary 14, 1963,
_ wotber- series to be dated May 16, 1963, which were offered on May 8, were opened
1MJ Federa1 Reserve Banks on May 13. Tenders were invited for $1,300,000,000, or
~s, of 91-~ bills and for $800,000,000, or thereabouts, of 182-day bills.
~ta:11.s of the two series are as folloW's:
""'~illsJ
fi OF ACCEPl'ED
itrrtiVE BIDS:
91-day Treasury bills
maturing August 15, 1963
Approx. EqUiv.
Annual Rate
Price
2.888~
99.210
2.908%
99.26$
99.266
2.903% 1/
:
:
·•
·•
·:
182-day Treasur,y bills
maturing November 14, 1963
Approx. EqUiv.
Price
Annual Rate
98.1t94
98.481
98.488
2.919'''
2.993;'
2.990,'
!I
54 percent of the amount of 91-day bills bid for at the low price was accepted
$9 percent of the amount of 162-day bills bid for at the low price vas accepted
J. n.'NDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
Applied For
$ 28,640,000
1,151,160,000
33,612,000
31,406,000
2),869,000
31,164,000
241,769,000
4$,729,000
11,410,000
3),982 JJ OOO
45,340,000
106,014 ,000
$2,396,715,000
.strict.
Accepted
$ 11,736,000
891,)12,000
11,248,000
30 ,995,000
14,569,000
32,784,000
128,620,000
Applied For
23,509,000
$
1,256,418,000
9, 959 JJ 000
16,6h9,000
13,611,000
10,106,000
123,248,000
12,553,000
8,165,000
20,668,000
10,338,000
21,909,000
9,234,000
29,932,000
30 ,420,000
10,291,000
$1,301,050,000
!I
73,666,000
$1,563,510,000
Accepted
$ 11,359,000
656,741,000
4,166,000
10,744,000
3,176,000
8,244,000
31,191,000
10,653,000
2,965,000
13,538,000
5,928 JJ ooo
hQ~75h,OOO
$800,811,000
.
EI
Iocludes $246,451,000 noncanpetitive tenders accepted at the average price of 99.266
1Qc1u4es $68,814,000 noncompetitive tenders accepted at the average price of 98.488
On.' ~coupon issue ot the same length and for the same amount inVested, the return on
~h~se bills would provide yields of 2.91%, for the 91-day bills, and 3.08%, for
th6.:182- day bills. Interest rates on bills are quoted in tenus of bank discount
with·the return related to the face amount of the bills payable at maturity rathor
than .the amount invested and their length in actual number of days related to a
360-day year. In contrast, yields on certificates, notes, and bonds are computed 1.1
termS ot interest on the SIUount invested, and relate the number of day'S remaining
in an' interest payment period to the actual number of days in the period, with
semiannual compounding i ! more than one coupon period is involved.
a
D-844
-f straight out.
4.\.,1 '"t..,
The legend beneath the building was changed from
"'white House" on the 1929 bill to "The White House" on the newer
version.
000
!r1~
r ..... v
two White House views.
"There is no cause for alarm", Rowley said.
gA PplLV
not counterfeit.
~
"The notes are
)
the inquiries indicate that many citizens are
A ftJ E
'---..;--~
examining
U L L. '-I
and this the Secret Service has always
urged as being the most effective weapon against counterfeiting."
The 1948 notes show the
W1~ite
House with the balcony added
to the south portico at the second-floor level and with foar
chimneys instead of two,
R~Nley
said.
Individual panes of all
visible windows could be clearly discerned in the 1929 design,
but in the 1948 notes the bottom portions of the windows are in
solid color, Rowley pointed out.
Another variation in the newer bills, he added, is that the
grounds are a deeper green, due to heavier foliage of trees and
shrubs
0
The White House flag hangs at an angle from its staff
in the more recent engraving, while in the 1929 picture it flew
416
SECRET SERVICE EXPLAINS VARIATIONS IN $20 BILLS
Secret Service Chief James J. Rowley said today that inquiries
by citizens who had noticed
4iBerep~iesin
~
two different issues
of $20 Federa~~rve
notes •
......
~,.,....-.,..."
..,.,,,r-r'"
--
Both issues show the White House .......
on the
reverse side.
us
••
-=
I
IF
-
The
engraving plate from which the bills are printed was changed in
1948 to reflect structural alterations and modifications made in
the White House and grounds since the previous issue of $20 bills
in 1929.
Rowley said the inquiries indicated some concern on. the part
of the public that the 1948 bills might be counterfeit.
There
are a few "stragglers" of the old-style 1929 bills still in
circulation, Rowley explained, and anyone comparing the two
o
vers~ons
ode by side might wonder about the difference in the
s~
TREASlmv NEWS RFLF..A.SE
SECRET SERVICE EXPlAINS VARIATIONS IN $20·
(j)
~ecret
wanted
~
Service Chief James J.
BIL~~
ROWle~sai
to assure citizens who had noticed
discrepan~les
that he
in
~'\
engravings of the White House on the reverse side of two d1fferent
issues of $20 Federal Reserve notes that both issues are genuine.
)
1
~iS
at
~any
statement
was
~
'1
in response to 1nAu1r1es be1ng made
Secret Service offices around the country.
~e
Chief explained that the
"'fi( /M/fttTTJIIli?'
tt;U:.~S;
/YJ I) ~f)A~ 111 Ay 1.1; /1' J
TREASURY DEPARTMENT
7
May 13, 1963
-'OR
IMMEDIATE RELEASE
SECRET SERVICE EXPLAINS VARIATIONS IN $20 BILLS
Secret Service Chief James J. Rowley said today that he wanted
assure citizens who had noticed discrepancies in engravings of
:he White House on the reverse side of two different issues of $20
:ederal Reserve notes that both issues are genuine.
~
His statement was in response to inquiries being made at many
~cret Service offices aroJnd the country.
The Chief explained that the engraving plate from which the
li1ls are printed was changed in 1948 to reflect structural
ilterations and modifications made in the White House and grounds since
~ previous issue of $20 bills in 1929.
Rowley said the inquiries indicated some concern on the part of
:he public that the 1948 bills might be counterfeit • . There are a
~ew "stragglers~' of the old-style 1929 bills still in circulation,
t~Nley explained, and anyone comparing the· two versions side by side
light wonder about the difference in the two White House views.
"There is no cause for alarm", Rowley said. "The notes are
lot counterfeit. Happily, the inquiries indicate that many citizens
!re examining their money carefully -- and this the Secret Service
las always urged as being the most effective weapon against
:ounterfeiting. "
The 1948 notes show the White House with the balcony added to
:he south portico at the second-floor level and with four chimneys
.nstead of two, Rowley said. Individual panes of all visible
rindows could be clearly discerned in the 1929 design, but in the
.948 notes the bottom portions of the windows are in solid color,
lawley pointed ou t.
Another variation in the ne\ver bills, he added, is that the
~ounds are a deeper green, due to heavier foliage of trees and
shrubs. The White House flag hangs at an angle from its staff in
~he more recent engraving, while in the 1929 picture it flew
;traight out. The legerid beneath the building was changed from
''Whi te Hous.e"on the 1929 bill to "The White House" on the newer
!/ersion'.
~_Q/.
c;
000
A!C of
41~
April 30. 1963
\h.hinSfon.
May 13 J.963
~~Clion 21 of second I.ib~ny Dond Act. IIR amended. pro.,ide~ thlll the fan amount 01 otltisalion" illlued under authbric,. .
:h'" Act. ,... J the bce Amounl of obli"Ations SUAr.nteed ., to principal and interest by the United State. (except .".ch ~U.r
nd obli.,.\tion!' u mAy be ~cld by the Secreta" of th~ Tre .. ury) .... h~lI nC't uceed in the assre,ate.U8~.COO.OOO.OOO .
:t of June \0. 19~,); U.S.C., m~e ~l. aec. 75,7b), ouul.~d,n8. ac an, one tame. For purpoau of thia .eeUon tb. current re"I'lion YAlu~ of any oblia.uon I . . ucd on a d.acount b .... which I. redeemable prior to maturit, at ch. optiOD of the holder
,II b: con~id~red ... its face amount." ,he Act of Jul, I, 1961 (P.L. 17-,U 87t" Conlrna) proyid.. thac tb••bo•• limh ..
n ~h.,11 be cemporarily Incrnsed (ll clurln.. the period be.lalllD, oe Jul, I, 1961, aad endlo. oe Marcia )1, 196).
)11.000.000.000, (2) du~in~ che period be,in".a, on April 1, 196), ... tndi •• o. Jun. 24, 196', to 1)0',000,000,000. ea4 •
durift': In" pennd be!,nn.nl Oil Jllne 2', 196" aad .ndlll, O. J"•• SO, 1"', to "00,000,000,000.'
..
'.
i
The follo.inS table ahow. the face ......t ••• bU,.d........udl•• u4 ....
t -Wclll
tdU ... I ......,
dcr Ihi. limitlltion I
.
,c ..1 f.c~ amount thac ma, b. outat.Ddlo, ., .., ••• tItI.
)utaundinR.
.
... .
$:30 5,000,000.000
Ohll,alioM luiaed under Sicond Liberty
A... ·••••1MIe4
'I"tcrut.bearln,.
.
.
$49,429,785,000
.Treasur, billa
'e
'.e......
c...
8."
CtnificllOI
01
Treasury IIot..
I".,""d"...
Bond. Treasury _ _ _ _ _ _ _ _ _ __
·Suin .. (current redemption .,.... )~
United Stacea RetiremeDt PI .. bolld._
Deposita" _ _ _ _ _ _ _ _ __
R. t. A. . . rlea _ _ _ _ _ _ _ __
aerie. _ _ _ _ _ _ __
Iny~.tmeDt
Cenific.rea of Indebtedn••••
Foreisn .erie. _ _ _ _ _ _ _ __
2l,760,385,OOO
53.041.897. 000
$124,2:32,067,000
80,091,240,7.50
48,113,194,211
1)6.6.50
10.5,437,.500
29,783,000
3,928.148.000
132,317,940,111
27.5,000,000
2.5,4.56,7.50
Foreign ClineDe, .eri •• _ _ _ __
Trea"ury notea •
roreiE;n aeriea _ _ _ _ _ _.......;__
183,000,000
Trca"ury bond. _
Forei/:n Curr~ney aerl .. _ _ _ _ _
551.312.761
Special Fllnda •
_ _"'_"'_=.I_",,"_~;:;.o_"'_L..=.:=
Certific:atea of Indebtedne •• _ _ __
Treasury notea _ _ _ _ _ _ _ __
Treaillr, bond. _ _ _ _ _ _ _ __
6,421,098.900
4,9.57,632,000
;0,225.;60,000
Total lntercet-bearlnl
Miltured; intereac-ceaae-d---------------8 ea
110 intereat.
United Stacea Snin,a Slamp. _ _ __
.54,637,675
Eae ... profita taa refllncl bonda _ __
702,92:}
Sp.cial IIotea of the United Stat.. ,
Internat'l MOlletary Fund alrl .. _ __
2,981,000.000
Inter".t'l Deulop A•• 'ft
I
150,9.56,600
Inter-Americall Dn.lop. B.nk aed••
125,000,000
ri",
..... _--
. .
TOlli1
-
1,034.789, .511
41.604,090.900
299,188,887,.522
295,818,.521
3.312,297.198
302,797,003,241
GlilArantled obll,.tio"a (llot h.ld II, Tr•••.,',.
Interut.bearlnl •
Debenturus F. H. A. 1& DC Sl.d. Bd •• _
.561,048,400
M.tllrtd, inttr •.Il-cealed _ _ _ _ _ _
562. ;77.825
1.;29~425
Grand total ouCat.ndln, : - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
066
~B;.;I~.;ftC~t~f.~c-.-.-m-o~u7n-t-o-f~Ob~I~II~.~t~io:n:.~I:aa:u:.:b~I.~II:n:d:e~r!.:bo:y:.~.:u:C:hM==h~'~==::====::::::::__. .__. .--~.;~OC~~~9,.
o. the P.bllc Debt _ _Ap....-d. .J_~~O~...J-~u..I4IiI.--(DaU, SC.CemenC •• th. Unite. St•••• Tt•••.",
. APril jo';' 190
Rccoacll~ment with St.t.llltllt
II.
:
CD"')
)ut.tandins •
TotalllrG .. public debt _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
GIIII.nteed obll,.ciont nOI owne4 b, cia. Tn • .., ______________
Toc.1 ,rou public debt and , ••nDt••• oltll.ad... - - - - - - - - - - - - )e4uce • othcr out.candi ••. p•• bUc d.1Ie .w~~ •. ~."J,cl .. ·..Itt aWled• •
·----
:30:3,165.743,660
562, 3n. 82,5
~Lv
ST ATUTORY DEBT LIMIT ATION
A~or
TRItA!lURY')I':PARTt.lF.I'fT
• paeeel aervh'.
.ADri1 30. 1963
Wuhintton.
Hay 13 J.963
~~ctinn 21 of Secnnd I.ibcrty nont! Act. u .. mended. pro"ide~ th.t the 'ace amount of obli~ .. tio,,,. j,IIued untler authority
II ella, Act. ",.J Ihe fnce .. mnunt of ob\ill"tion~ /tunranteed liS to principal Dnd interut by the United States (ellcept aueh /lUlU_ccd .,bli".,,;onl' IU m"y be held by the Secretety of the Treuury). "shell "f't ueced in the a!$reSUe S285 000000000
[Ace of June '0. 1959, U.S.C., title H •• ec. n7b), outstandinli at anyone time. For purpollea of Ih.a acetion eb·. eu'crent re~ti"n .,,\ue 01 any oblill"tlon iuued on a diaeount buill .... hich I. redeemable prior to maturity ae ehe opdon of the holder
"'U h~ con'\idered a" its face amount." "('be Act of July 1, 1962 (P.L. 87-'12 87tb ConsrulI) proddea thae the abon llmiu.
Ii.,. "han be temporarily Increased (1) durins the period belllnnins on luly 1, 1962, and end In, on March 'I, 11'63, to
1lo••ooo.OOO.OOO, (2) du!in~ tbe period besinnia, on April 1, 196), and endlnl On June 24, 1963, to '305.000,000.000. alUl
U) ...... ,. ...... reund beSlnn,ns 0" June ]5, 19G1, a"d endins 03 J"n. 30, 1963, 10 S300,COO,OOO,OOO.·
.•
'.
.
The Inllowing table ahow. the face amount 01 obUaadon olltatlUldlDI and the face l.1li0.& .Wet. c.It .•tlll .,. 1... eeI
IN« thi. limiclltion I
._.
lace. amount that may be outatandlDI at aD1 ODt time
o.acandinl' •
ObUgation" ' .. ued under Second Liberty Bod Acc,· •• aa.nd."
''''tere 5t-bearin" I
.Treasury bill. _ _ _ _ _ _ _ _ $49,429.785.000
r_..
CcrtificllfCI of IndtbtQdnUD
Treasury nott .. _ _ _ _ _ _......_ _
Bond. Treasury _ _ _ _ _ _ _ _ _ __
.Sayinlts (curreDl redemption 'falue)_
United Statea Retirement Plan bonda_
Depoaitary _ _ _ _ _ _ _ _ _ __
R. E. A. aerlu _ _ _ _ _ _ _ __
Inwe acmeat aeriea _ _ _ _ _ _ __
21.760,385,000
53.041.897.000 .
80,091,240,750
48 ,113,194, 2ll
136,650
105,437,500
29,783,000
3.978,148.000
Cercificate. of Indebtedne . . .
Foreign 8crie8 _ _ _ _ _ _ _ __
275,000,000
25,456,750
Foreisn Currency aerie. _ _ _ _ __
T,~.,.ury
note ••
Forci/:n aeriell - - _ _ _ _ _ _ _
Treasury bond. Forej~n Currency aetlea______
Sp·cdaa FUDd. _
183.000,000
551.312 .761
Certificacu of Indebtedne .. _ _ _ _
6,421,098,900
Trea.ury note. _ _ _ _ _ _ _ __
4,957,632.000
Tluaiury bonda _ _ _ _ _ _ _ __ 30.225.360,000
Total Interellt-be~tins _ _ _ _ _ _ _ _ _....__________
•
Watured; ioterelt-ceased _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Bearins no Interest I
United State. S ... in,a Stamp a _ _ __
Eace •• pronu ta. refund bonda _ __
Spcdal noCu of tbe United Statu.
Inlernac'l MonetalY Fund aerlea _ __
lnlcrnat'l De'felop. A.. 'n. aerl.e _
Inler-Amerlea., Develop. lIank aerlel_
TOll,1
.
Goaranlced obllAatlonl (not held by Tree.ary) •
• lacer.ae-bearlns I
. Dchenturcsi F. H. A. "DC Stadt Bda._
"atured, inecre-c-ce .. ed - - - - - - -
1,0)4,789 •.511
__""",~a....:....;.=.~=
41,604.090.900
299,188,887.522
295,818,521
54,637.675
·702,923
2,981,000,000
150,956.600
125,000,000
3.312.297.198
302,797.003,241
.561,048,400
1.329~42~
562.m.B25
Granel toral·ouueandln, - - - - - - - - - - - - - - - - - - - - - - - 8_lllIce 'aee amoune of obllllldona luuable under above authorlty
RecoDcllemeDt with Statement of the pubUc Debl
(Dally Statement of the United Sta ... Tle ....ry,
o.c •• a"dlnl •
0pri] :30 I
J 96~
. April
(R(r,)
_
:2 _ 196)_
I'
t
(Da'.)
Toral atro . . public debt - - - - - - - - - - - - - - - - - - -_ _ _ __
G.a,••ceed obUaation. not owned by lb. T"u,ar1 _ _ _ _ _ _ _ _ _ _ _ _ _ __
To.al
''0" pllbUc debt and ,lIaraDteed obUtS_clo". - - - - - - - - - - -_ __
1)e4tIcc. olher o\ltatandlnJ.p~bllc d.b, obll~cI~D.'. ~~ .I..IIJ!'CI •• ·&bt la-had. _ _ _ __
D-846
303.159.381,066
1,640,6. 9)4
303,165,743,660
562.377.825
303,1728,121.485
368.740.419
303,359.)81,066
TREASURY DEPARTMENT
A?l
DtfEDIATE RELFASE
SUBSCRIPrION FIGURES FOR CURRENT EXCHANGE OFFERING
!he results of the 'l'reasury"s current exchange offering of
3-1/4i
certificates ot indebtedness dated May lS, 1963, maturing May lS, 1964, and
3-S/f1/J notes (additional issue) dated May lS, 1962, maturing February 15, 1966i
~zed
in the
....
fO~
tables •
Amount
Issues Eligible
_ tor Exchange
'4!f, Ct:fs., B-1963
Notes, B-1963
'(I/, Botes, J)..1963
Total
-
Exch8Jlged For
3-1/4'1'
Ctts.
3-5/iiJ,
$5,285
1,183
3,027
$3,768
289
1,636
$9,495
$5,693
Eligible
for Exchange
Total
For Cash
Redemption
$1,:598
629
1,246
$5,166
918
2,882
$li9
265
145
$3,213
$8,966
$529
Notes
(In millions)
Exchanges for 3-1L4~ Certiticates of Series B-1964
:-ral Reserve
;nct
-:on
York
~lph1a
'eland
IIQOnd
;nta
:ago
L:m1s
:eapoUs
as City
as
rrBncisco
ftl7
Tota1
3-1/4<f, Ctts.
Series B-1963
4~ Notes
Series B-1963
3-1/4~ Notes
Series ~1963
Total for
B-1964 Ctts.
$ 51,691,000
:5,070,852,000
30,173,000
62,901,000
22,919,000
11,728,000
192,138,000
64,896,000
lS,213,OOO
81,903,000
21,290,000
16,735,000
5.1113.1000
$
$
67,598,000
1,l34,435,000
27,201,000
56,570,000
24,613,,000
41,117,000
101,219,000
43,4:06,000
11,743,000
31,950,000
28,953,000
58,670,000
2 z691.z000
$ 139,032,0c)(
$3,767~678,OOO
$ 289,048,,000
$1,636,286,000
$S,693,012,OO(
19,743,000
1.28,446,000
6,035,000
21,041,,000
10,664,000
11,025,000
36,419,000
ll, 292, 000
10,665,000
ll,260,000
11,016,000
8,811,000
2.z511 z000
4,333,733,00(
63,409,00<
140,51.2, OQ(
58,256,00(
123, 930 ,00<
329,716,00<
li9,594:,OO<
43,681,00(
125, 113, ()()(
61,324,00(
144,217,OOC
10 z315 z00<
D-847
(more)
- 2 -
Exchanges for 3-5/~ Notes of Series B-1966
4'f, Notes
Series B-1963
3-1/4'f, Notes
Series D-1963
Tota1 tor
:8-1966 No'
15,814,000
715,706,000
18,938,000
38,312,000
13,413,000
53,227,000
218,671,000
49,603,000
9,293,000
18,557,000
22,076,000
220,997,000
3 z680 z000
$ 39,025,000
272,094,000
14,474,000
47,462,000
14,071,000
21,266,000
11l,280,Ooo
25,574,000
22,557,000
21,255,000
16,556,000
21,081,000
1 z653,z000
*
20,194,000
640,757,000
33,882,000
65,943,000
23,594,000
58,970,000
166,831,000
43,717,000
27,146,000
33,706,000
46,637,000
79,697,000
*1,628,55'
4 1 631 1 000
101~
$1,398,267,000
$628,548,000
$1,24.5,705,000
$3,272,5((
Federal Reserve
District
3-1/4'f, etfs.
Series B-1963
Boston
New York
Fhil.ade1phia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
$
Total
l-faturing Issues
3-1/4~ etfs., B-1963
4/~ Notes, ~1963
3-1/4'" Notes, D-1963
Total
El1a!;ble for Exchange
Federal Reserve
Publ1c~ Held
Banks and Government Accounts
(In millions)
For cash
J of Total
75,~
67,29-
151,71'
51,071
l33,46:
496,78:
1.1.8,8958,~
nS,Sll
85,2~
321,7"r.
Redempt1~
~ of PubJ
Outstanding
Hold1nga
$2,753
1,130
2,196
$2,532
53
831
2.3
22.4.
2S.5
4..8
6.5
$6,079
$3,4.16
5.6
8.6
4.2
422
- 21 the Deed for hiab prof...lonal atandarda at
-~ery
,l. .e1
t.
l"ec:ogniaed ... V. IUtt· buIld OA,what (tl. bav.~1euD_".taothe$
d.elopaaeat of, th. Federal iav••C1&aelva
aumy fine State aftCl·leeal pol1ce';fOJ:Ci...
al"lU~"?the
v. 1IuaC-:_.
prot...loaal at.ncJarcla) of trdiilia.xt1ablllty.
.ffeetlv_ea. for a11- Polic.....
w. muat
~~(.-d
Fat thea
adequate uterial r_arda and far lIlOl"a recopltion . .
reapect than.e tIDe-in-the"....
-To di••tucterata ".(-.~bOaorba today. I wbb the
Mat ,of_luok
aDd Codqeed.
TbaDk lou.'u
e·
(IIIpccaaC~"
'Ihe
IpnteeCioft·of
423
ZO.--
.undM:.e: .... :s..ec.1enlQe
Sa~.a
tIae.~.aded:.beiDl,••..,."'1ef..co~_t"""&1
,J(".
eal"·:"'hD*,~,lt:!ia'.";.j.eIIa):"C:%_.t".~"••
~.!.! f:C t1VCi.:l.• ...,t_thii
tw. :beaidee: ~ ia ... t:h.1:a.riee!•. ~..
cleftt viAl... t1ec·a1~~_or. __t!offt.,... ;~.!.h1'ha
lMop••u. ad . .et....... lo·iaawtt.tbat:
thr..t . . Ida , ..aoaa1 aafety.
job acI it la •
,leuur.
IlO
iDc1cleaC
IlIYart.abl,. thq do • liM
to work with
,thai.
1 ahou1d 11ka to obaeve that "e aball DOt: baM
full,. aatiafactGr7 police work throuPouc the Batloa UDtU
423 424
..- :1'.-
- 18 -
..
1D~.aral
cos III the MCb1Da:y or protecc1Oll.-
detail. of how be 18 Co b.
...ta at
ODe
pr~ected
tiM or another.
DU._
are wr&e« out, VItal
428
,. 17 -
of til... Uaaedi,el .•tac•. tbe ....JG., ...__ 1~C.:anI.U...
~ot.e.
But
-.uco...ful att. .ta hava Mea ....;_ . . . .1...
aubJectecl to cIau.. in 1IlW:h.DO __ tLa
..... .:s.~
ta~
lutac•• 1a • e.-CMl of peopl. the Pr.lt.4eDC M1 be ...
'rha hUldeDt.i8 . .ot_taG _ .... ~ . . _cU.oc..:1ttly
'.".4!ay• •
week.to\_Daa
1bfl_.....- - : _
.J'iIiIzy~~......
the White lIoua. Deta1I ..__1IIW:h ia aupentaed by .8pecld
Aa_c ill CUru.... bia _1.ta.t....... 11ae ........~:;.·U.,i.7 ...~
-
-... 16·-
or • practical Joker lI1&bt tI:7 to repeat It.
428
'dtldllWled 'au ~ty."" h··....... _.1J1l'~
.,,-1.r 1IDCf~1III;- dDn*'1'9U1:f t:mo;-w,...:_
......
r."l1'·"C_.. ·tIIr_·~.a._ cr-aw ......._.ln..
.........w
~ ..,.,'~«."..~
-r••••"""'J.1I" ,.e~·
~. na. . ~ diar"'lt ........
1n!JUaCwn.1'C~·~'"
Bdl.·".
Daturd,
.._" _
_ _ tsw..tlaatiou for othez-
m..
CIa .ten..
.•
d.,........ 1& ...
grat-'ftMtdlattalf1:'Oc.ntw -'IIUK1I.'&t-4'IiU- at.
rt~11c17
!hw'''~t=
aacr~OI'I"_
...,Ift......
CftItYtaao, wbicll ... ....
~"Wa "tIur~ ~DIft81:~. . .~ve
"I'I~
1If''' _ _ _••
tc: a
~4tt
c! :r...on.t
Cbe ta
-""'UN' Rnt"".b'~
CiG'V'.iWMlC
~~IJ"".
« prt-c tical Joker df;ht try to
rq;.~t
It.
.............
-
JA.
--.1) -
to the td.lit.., • •0, coo, t. tbepo11oe officer to law
hip..t ....... TIleU ClCfOp.aeloa baa...... I," ,..1Itkted
- 12 -
rejection. tor ,hyateal -rea.one
1D8CC1'V1~
the ob..l~ ad """81
of much or our adult populatf'OU'
.1'1' ....
r_s.tal11:e our phy.tcal-yeRUrC.. &.1:«. i.e '- 'COO'
In tht.
• nOU~der 1. .tl1~
clay
loft."
of 'lUpuaonlc tlllbt: ad tft•
the ••• end-al .tlitary pGWU·- vithoua
1. too horrible to COftc..,rate. ,..c
t.....
t. no cI...,.tda the
432
That ta why I believe .•O atr-aJ,1 1111 the " . , " - ' . . . . . .1
OD'¥O\!d\ l'itDe•• ; which 18 ..,. ._~.prDP'- ,CO......er:c
the.··f1abby ....ru8ft iDto tha phya1ca11y ~,,~
bia . . . .cna
w...
Mr.
Eemlaclr baa
the ~-be1.1a1 of ... oj.Ciuna.
••
"aid:tbR;"'~
~
o{ . . . . . . _
it. phyd.cal ler_&tIa and enccy "Ul be _ ............. DO&"
. . . ".taltal tbaa dla ri1:a1i", IIId wiU.. d . . . . . . .. , .
--."
,eu.·". baM . . . . . . evlcleac: ... tbat ......,..... titRe••
ef ou:r 11111118118--- .tr~ .ad _111tr te . . . . . . . . . r1fla
~claht1t. -. 1... far behtad ....t cd otha pMple« . . ....
worlel.
The poor Kore. . .da by our .ohool children ta
.imple 1>hylical fitne •• te.t., the nUDber of military
'-.10.
• lQ-
tbac be
. . . .its...
p........
&1':
1'1111. oZ ocr
c:m~ntry-
To exerci.. tho.. riabta properly requir.. a
...at..
iDto h. .lthy acclviti..
_ental ... pby.teal
!ha
aad." thea
l1aeaafMaIa
"'0 .14 ancl abet . . . oah_
,.,. ..
484
&&0, to • .., aothin& of two or thre. decad...
Courl., to ka- what ... "8Oluciau
f.D&ly oaapUoated..
an ba
ADd, of
baoCllia . . . . .
h' thee. lie. til. p'eac ......- .......
the oppOJ:~uai~ vUh it. foe 7- who wUl Ita ~"flJI.e
be tba d••tiDi •• of the RaCioQ in wbteb ,.. 11. . . . . tIua
lfor1cl Co which 7- will .....tc,bat.:i
It . _ CO me tbat. tile tbird char_t.-l.tle of •
load cltl_ 18 OIl. who 1. wl111q co cake .. boaeal aDd finl
-tact
OIl _
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436
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- 4-
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7....
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DO OM
440
- 3 -
Dele,at.. fw_ Cbe
public echool. 1D the Nation'. capital.
orpniaattOft have lODe to the .ource of power to !llprcwe
th.,
the Coqre. . . Oft Capital Ri.ll who hold the p . . . .
• tttDg. for Matrice affair..
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"'I~_.
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on Capital Rill.
DO
doubt that they have aact. _ _1'_1_
441
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1Q
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will
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uwlWocthy the .IQocl.l1ew•• ebut l-hav., been
'I
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tn·tba
A
public.,.1nter..t.
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Dle48
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have ': tOl'llled, an KUDisation .. aal1ed . Blah :ScboolStudMC.
tor~'B.'t ..
l4\1catiOl'l.·· The objectlve of th. group, "which
atarted with a ...11 nueleul of public lIdndecl atudent.
and
DOW
haa city-wide repr••entation, i. to improve the
"
" L/
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442
f71l ?~~ ~
2lt~-,-~~.;6: . . :.,
Rt.MARKS BY JAMES J. Ra.1LEY
CHIEF. U. S. SECRET SERVICE
BEFORE THE CIVIC CLUB. COUNCIL OF ,tmlARX.• ~" . ~ ', __ ., ~.~~
AT THE MILITARY PARK lIOTEL ~tit~ ~"Q
ON
THURS~Y.
MAY 16. 1963.
AT 1
P.M.
-,J
#/
It is a great pleasure and honor to address this
distinguished gathering of outstanding students and grownup leader. in civic affair..
I congratulate theae gifted
and industrious students for having won awards for Outstanding Citizenship.
I am sure that the adults in the
audience have provided the inspiration and example for
these young people to emulate.
I read with great inter.at
that Newark was the firlt city in the Nation to eltabli,h
an annual Youth Week celebration and thus honor the
CClllllunity' s most valuable a •• et _. its young people. who
are now preparing to becane the leaders of tanorrow.
It would be impossible to overemphasize the
importance of young people forming a habit of civic service
TREASURY DEPARTMENT
Washington
443
FOR RELEASE P. M. NEWSPAPERS
THURSDAY, MAY 16, 1963
REMARKS BY JAMES J. ROWLEY
CHIEF, UNITED STATES SECRET SERVICE
BEFORE
THE CIVIC CLUB COUNCIL OF NEWARK
AT THE MILITARY PARK HOTEL, NEWARK, NEW JERSEY,
. ON THURSDAY, MAY 16, 1963, AT 1: 00 P.M., EDT
It is a great pleasure and honor to address this distinguished
gathering of outstanding students and grownup leaders in civic
affairs. I congratulate these gifted and industrious students for
having won awards for Outstanding Citizenship. I am sure that the
adults in the audience have provided the inspiration and example
for these young people to emulate. I read with great interest that
Newark was the first city in the Nation to establish an annual
Youth Week celebration and thus honor the community's most valuable
asset -- its young people, who are now preparing to become the
leaders of tomorrow.
It would be impossible to overemphasize the importance of
young people forming a habit of civic service early in their lives.
Not only does such activity broaden their horizons, but it also
trains them for responsibilities in years to come. Moreover, an
interest in public affairs will keep youngsters occupied in a
healthy way that just about precludes their getting into trouble.
It is almost axiomatic that bad news is more newsworthy than
good news, but I have been struck recently by several accounts that
show, with heartening warmth, that groups of young people are
staying out of trouble by working for causes in the public interest.
For example, in Washington, D. C., teenagers have formed an
organization called High School Students for Better Education.
The objective of the group, which started with a small nucleus of
public minded students and now has city-wide representation, is to
improve the public schools in the Nation's Capital. Delegates from
the organization have gone to the source of power to improve them:
the Congressmen on Capital Hill who hold the purse strings for
District affairs. The students pointed out the crowded and otherwise
0-848
- 2 -
unsatisfactory physical conditions of classrooms. They underlined
the fact that text books were out-of-date to such an extent that
they were, in effect, propeller driven biplanes in an age of
supersonic jets. They did other things, such as appearing on public
service television programs so that more Washingtonians would know
about the condition of the public school system. There is no doubt
that they have made an impression on Capital Hill.
Another group, just across the Hudson from here -- on West
37th Street near 10th Avenue -- is showing that not all youn~sters
on the streets are in street gangs. Some 30 teenagers have
. banded together for the purpose of preventing crime and delinquency.
They have the help of a Harvard psychologist, but essentially this
isa do-it-themselves project. The objective is to score what the
psychologist calls "clean man days." This means no arrests or
incarcerations of the members, and remember that this is an area
of Manhattan where trouble usually prevails over tranquility. The
program started in January of this year. In February there were
nearly 100 police actions in the area, but in April there was not
one. The boys proudly display a calendar on which the days no one
gets into trouble with the police are marked with gold seals. The
calendar glitters.
In Westport, Connecticut, two mothers have established a
teenage, non-profit employment service called Summers·Unlimited.
They have a list of 300 youngsters who have registered for paid or
unpaid work, and they have placed several in jobs that will keep
them well occupied during the sun~er.
And, of course, the President's Committee on Juvenile
Delinquency, headed by the Attorney General, is spurring cities
into tackling the problem anew -- many cities have had programs
for some time. Federal funds are being matched in fifteen cities
toward the end of preventing juvenile delinquency. The method is
first to draw up a plan for the underprivileged in the slum areas
of large metropolitan centers. All the resources of the area -schools, police, courts, health and other services -- are drawn on.
The objective is to find opportunities for young people toward
eventual self-support, and meanwhile they are off the streets. New
York's plan already is underway, with New Haven and Cleveland
scheduled to do the same before the end of the year.
So it seems to me that encouraging progress is
But in the final analysis, the only individuals who
juvenile delinquency are the juveniles themselves.
there is too much emphasis on the few who go wrong;
faith in the great majority of American youth.
being made.
can stamp out
I believe
I have vast
I
I
I
I
I
I
I
I
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I
- 3 -
445
I am sure that Ne\vark's Youth Week, and the awards for
citizenship we are celebrating today, will serve as an inspiration
to young people in other cities who are trying to accept their
responsibilities as junior members of the community. Any young
person who learns to take on responsibilities early in life is
preparing himself for the leadership he should be expected to show
when he becomes an adult.
Just what are those adult obligations?
I suppose everyone has
his own ideas, and I am sure that in this audience, composed so
overwhelmingly of those who believe deeply in public service, there
are common views.
But please let me run down the list as I see it.
First, I believe that one should do everything he can to get
out the vote for the party and candidate of his choice. Voting
should be almost a requirement for membership in a community.
It is not at all uncommon in Europe for more than ninety percent
of the populace to vote'in an election, but even in a Presidential
year in the United States the percentage is only a little over
sixty.
I
But just to vote blindly, or as one is.told, doesn't exercise
the franchise properly. Everyone should know the issues, and then
make up his mind on what seems to him to be the answers. Here
again the students who have won the awards today are preparing
"themselves to take on the task of analyzing the problems that face
your community and the Nation, and trying to find solutions that
will work best for everyone concerned. To understand just what is
going on today is far more difficult than it was a decade ago, to
say nothing of two or three decades. And, of course, to know what
the solutions are has become increasingly complicated.
But there
lies the great challenge and the opportunity with it, for you who
will be responsible for the destinies of the Nation in which you
live, and the world to which you will contribute.
It seems to me that the third characteristic of a good citizen
is one who is willing to take an honest and firm stand on an issue
even though to do so may be unpopular in the context of the time
and circumstances. The extremists have always had a following, and
probably always will, but throughout the history of this Republic,
reason has eventually ruled. The people who have made that possible
have been the great majority of Americans to whom truth and right
come" close to being synonymous.
I
I
- 4 And so this citizen with those three characteristics -- there
are many more attributes, of course -- is prepared to pledge
himself to a government that is a trustee for all Americans,
regardless of their party, for he knows that power of Government
derives only from those God given rights, that he, as a citizen
possesses.
To exercise those rights properly requires a number of
characteristics, but there is still another that applies
particularly to the students here today and their colleagues.
Already these awardees have channeled their energies into healthy
activities, and by that I mean both mental and physical. The two
aid and abet each other. That is why I believe so strongly in the
President's Council on Youth Fitness, which is sponsoring programs
to convert the flabby American into the physically rugged individual
his ancestors were. Mr. Kennedy has said that "The strength of our
democracy and our country can be no greater than the well-being of
our citizens. The vigor of our country, its physical strength and
energy will be no more advanced nor more substantial than the
vitality and will of our countrymen."
The President then went on to say that "In recent years we
have seen many evidences that the physical fitness of our citizens
strength and ability to endure long hardships -- lags far behind
that of other peoples of the world. The poor scores made by our
school children in simple physical fitness tests, the number of
military service rejections for physical reasons, the obesity and
physical inactivity of much of our adult population -- all are
indications that this Nation must take positive steps to revitalize
our physical resources before it is too late."
. In this day of supersonic flight and intercontinental ballistic
missiles there can be a tendency to lose sight of the fact that a
man with a rifle on his shoulder is still the essential military
power -- without him no Nation can hold or take a piece of
territory. I share the feeling of most Americans that war in this
age is too horrible to contemplate, yet there is no denying the
fact that we must be ready, and that man with the rifle still must
be physically and mentally capable of playing his role.
Just as the infantryman is the basic essential to the military,
so, tOO, is the police officer to law enforcement. He is not only
enforcing the law, he is the symbol of the law, and a constant
reminder that he is there for the equitable protection of everyone
regardless of race, creed or National origin. That is one
- 5 -
447
reason, in my opinion, for treating those officers with the respect
they are due, for once high regard for law and order breaks down,
the whole fabric of society rips apart.
I should like to take this opportunity to say that I hold
local law enforcement officers here. and abroad in the highest
esteem. Their cooperation has made it possible for the Secret
Service to accomplish missions that otherwise never could have
been completed. Over the years I have seen a rising level of
professionalism in law enforcement, a development that I believe
will continue.
I have seen this, of course, in the Service to which I have
devoted most of my life, and also in municipal, State and other
Federal enforcement personnel. The strong-arm mentality among
police officers. has gone the way of celluloid collars and cuffs.
Today, scientific methods time after time have produced results
that are infinitely more telling than anything one could have
expected 25 years ago when I began my career, which I look back on
with a feeling of having been privileged to serve.
A large part of that quarter century was devoted to that all
important mission of the Secret Service -- protecting the
President and his family. The Service has discharged this
responsibility, which is at once awesome, enjoyable and exacting,
since 1901. Also, Congress recently extended the same protection
to the Vice President; previously he was protected only at his
request.
You may wonder why the Service is in the Treasury. The reason
is that it was formed in 1865 to suppress the counterfeiting of our
Nation's currency which was then rampant. The Secret Service is
the oldest, and for a long time was the only Federal investigative
agency, and it frequently made investigations for other departments.
It was natural, then, that Presidential protection should fall to
the Service.
The Secret Service still arrests counterfeiters and forgers
of Government checks and bonds. While criminals are making more
money today, they are enjoying it less .. The reason: the Service
is running them down before they can get the bogus bills into
circulation. Last year the Service seized seven out of every eight
counterfeits that were manufactured. The spurious money had a face
value of more than three and a half million dollars, which is the
potential loss from which the public was saved.
442
- 6 Important as the suppressing of counterfeiting is, it ranks
second to the primary assignment of protecting the President.
Now this is a subject that the Service doesn't often
publicly for a number of reasons. ~1e is that we respect
President's privacy. But also, if We should publicize an
some mentally disturbed person or a practical joker might
repeat it.
discuss
the
incident
try to
Before the Secret Service was assigned to protect the Chief
Executive, three Presidents had been assassinated in 37 years.
Fortunately, there has been no recurrence of those tragedies since
the Service assumed its protective role. But unsuccessful attempts
-have been made on the lives of our Presidents. The President and
his family are also subjected to danger in which no harm is intended.
For ins tance, in a crowd of people the President may be endangered
merely by the overenthusiasm of friendly and well-meaning people.
The President is protected around the clock, seven days a week.
The primary responsibility centers on the White House D,~tail, which
is supervised by a Special Agent in Charge, and his assistants.
The Detail is a small, closely-knit organization whose members have
been trained intensively in protective techniques. The duties of
these agents are exacting, and each man must function as an
integral cog in the machinery of protection. Before the President
goes anywhere outside the White House, the details of how he is to
be protected are worked out, with each agent assigned specific
duties that must be carried out with precision.
Whenever an occasion requires more agents than are on the
Detail, agents from field offices in 64 cities throughout the 50
states and Puerto Rico help out. Nearly all agents in the Service
have worked on protective assignments at one time or another.
Making advance security arrangements for the public appearances
of the President, both in and out of Washington, ranks as one of the
most important elements in our work. This is usually done a week
to ten days before the event by agents from the Detail, with the
help of the Special Agents in Charge for the district in which the
President will be viSiting. We must determine how the President
will travel, the route he will follow, the location and physical
layout at events he will attend, and the security posts to be
established. We then have a plan for each movement the President
will make, and figure out how to provide the maximum of security
for him •. This is the greatest part of the protection given him.
- 7 -
All eventualities are taken into account in setting up the advance
arrangements, including the likelihood of last-minute changes in
the President's schedule which might require deviation from the
adopted plan.
So you can see that the planning is tremendously important.
The activities of the Secret Service in the protection of the
President being comparable to an iceberg: only one-tenth of it is
seen, the rest remains unobserved.
Protecting the President is the Service's paramount
responsibility and it cannot be delegated to any other organization.
However, in every city and state the President visits, local law
enforcement officers furnish full cooperation and assistance to
insure that no incident threatens his personal safety. Invariably
they,do a fine job and it is a pleasure to work with them.
I should like to observe that we shall not have fully
satisfactory police work throughout the Nation until the need for
high professional standards at every level is recognized. We
must build on what we have learned in the development of the Federal
investigative agencies and the many fine State and local police
forces. We must seek professional standards of training, ability,
conduct and effectiveness for all policemen. We must grant them
adequate material rewards and far more recognition and respect than
we have in the past.
To the students we are honoring today, I wish the best of
luck and Godspeed. Thank you.
000
~il
4 vv
- :3 -
and exchange tenders will receive equal. treatment.
Cash adjustments rill. 'be made
for differences between the par value of maturing bills accepted in exchange and
the issue price of the new bills.
The income derived from Treasury bills, whether interest or gain trom the sale
or other disposition ot the bills, does not have any exemption, as such, and
~oss
tram the sale or other disposition of Treasury bills does not have any special.
treatment, a,s such, under the Internal Revenue Code ot 1954.
The bills are subject
to estate, inheritance, gii't or other excise taxes, whether Federal or state, but
are exempt from all taxation now or herea.1'ter imposed on the principal or interest
thereof by any state, or any of the ,possessions of the United states, or by a.ny
local taxing authority.
For purposes of taxation the amount of discount at which
Treasury bills are originally sold by the United states is considered to be interest.
Under Sections 454 (b) and 1221 (5) of the Internal Revenue Code ot 19M
the amount of discount at which bills issued hereunder are sold is not considered
to accrue until such bills are sold, redeemed or otherwise disposed ot, and such
bills are excluded from consideration as capital assets.
Accordingly, the owner
of Treasury bills (other than life insurance companies) issued hereunder need include in' his income tax return only the difference between the price paid tor such
bills, whether on original issue or on subsequent purchase, and the amount actual.lr
received either upon sale or redemption at maturity during the taxable year tor
which the return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this notice, prescribe the terms of the Treasury bills and govern the conditions of their.issue.
Copies of the circular may be obtained from any Federal. Reserve' Bank or Branch.
- 2 -
1ec1.al8, e. g., 99.925.
Fractions
~
not be used.
It is urged thAt tenders
ae made on the prlnted roms and forwarded in the special envelopes which will
lie supplied by Federal Reserve Banks or Branches on application therefor.
Banking institutions genera.lly may submit tenders for account ot customer8
prgrl,ded
the name8 ot the customers are set f'orth in such tenders.
Others than
banking institutions will Dot be permitted to Bubnit tender8 except tor their
own account.
Tenders will be received without deposit from incorporated banks
II1d trust companies and from respons1b1e and recognized dealers in investment
Iecur1:tle8.
tile
~~e
Tenders f'rom others JIlUst be accompanied by payment ot 2 percent of
amount ot Treasury bills applied for, unles8 the tender8 are accompanied
br aD expres8 guaranty ot p8.1JDent by an incorporated
'bank or trust company.
]DDedi&tely a.tter the closing hour, tenders will be opened at the Federal
Reserve lJa,Dka and Branches, following which public announcement Will be made by
t~ !'re&BUr.Y
Department ot the amount and price r&Dge ot accepted bids.
![bose
I1itD1tting tender8 will be advised ot the acceptance or rejection thereof'. . The
SecretarY ot the !l're&8ury expressly reserves the r1gh't 'to accept or reject any
or aJ.1 tender8, in whole or in part I and his action in any such respect eh&l.l. be
f1D&1.
le..
SUbJect to these reservations, noncompetItive tenders for $20Otmi0 or
~or the additional. bills dated
1Dg untIl ma.turlty date on
• 100 000 or le8s for the
• •
February 21, 1965
AugustJiix1965
,(
91
days rem&1n-
coax
) and noncompetitive tenders tor
Pit
182 -d&y' bills without stated price from any 'one
1QiiJ
bidder will be accepted. in tull at the average price (in three decimals) of accepted. eampetitive bids tor the respective issues.
Settlement 'tor accepted ten-
ders in accordance with the bids must be made or completed at the 7ed.eral Reserve
,.
Bank. on _....;;.;M'B¥;..:._2_5"ji,_1.,.96_3_ _ _, in cuh or other immediately available tunds or
111
&
1.1ke :tace amount o't orreaaur;y bills ma.tur1ng
--.;)tI;y~~.;;;.2.;.:S,~1.9.-,.65;.....___ •
P1J
Cuh
TREASURY DEPARTMENT
'Washington
FOR IMMEDIATE RELEASE,
XXXJOO'D'T'lTXX
~
'HH' ,xx rXXYXIXYXXDOC
lS, 1963
X
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders for two series
of Treasury bills to the aggregate amount ot $
?,l00~,OOO
cash and in. exchange for Treasury bills maturing
May
, or
23,ti163
therea~uts,
for
., in the amount
of $ 2.100~8.0oo , as to1lows:
,
-!U--day bills (to maturity date) to be issued Mly ?3, 1963
~
iff
in the amount ot $ 1.300~,OOO , or thereabouts, representing an additional amount ot bills dated FebruarY'tti' 1963
and to mature
amount ot $
August~
8OQ.~QQQ
1963
,
, originally issued in the
, the add1t1onal and original bills
to be tree1y interchangeable.
-.--daY b111s, tor $ 800,.000
Me..y
?kJ96:3
, or thereabouts, to be dated
, and to mature
NOVember~
1963
•
The b111s of both series will be issued on a discount basis under competitive
and noncompetitive bidding as hereinafter provided, and at maturity their face
amount will be payable without interest.
They will be issued in bearer form only,
and in denominations ot $1,000, $5,000, $10,000, $50,000, $100,000, $500,000 and
$1,000,000 (maturity value).
Tenders will be received at Federal Reserve Banks and Branches up to the
Dayllght Saving.'
closing hour, one-thirty p.m., Eastern/~ time,
lttmday. ~O. 19~
Tenders will not be received at the Treasury Department, Washington.
Each tender
must be for an even multiple ot $1,000, and in the case of competitive tenders the
•
4
~'}
'-' L-
TREASURY DEPARTMENT
FOR IMMEDIATE RELEASE
May 15, 1963
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders
tor two series ,of ,Treasury bills to the aggregate amount of
$2,100,000,000, or thereabouts, for cash and in exchange for
Treasury bills maturing May 23, 1963.
in the amount of
$2,100,248,000, as follows:
91-day bills (to maturity date) to be issued May 23, 1963,
in the amount of $1,300 ,000 ,000, or thereabouts, representing an
add1t1onal amount of bills dated February 21,1963, and to '
mature August.22, 1963, originally issued in the amount of
$800,397,000, ,the additional and original bills to be freely
interc hange able.
182-day bills, for $800,000,000,
or thereabouts, to be dated
May 23, 1963,
and to mature November, 21, 1963.
.
The bills of both series will be issued on a discount baBis under
competitive and noncompetitive bidding as hereinafter prov1ded, and at
maturity their face amount will be payable without interest. They
w111 be 1ssued 1n bearer form only~ and in aenominations of $1,000,
$5,000, $lO,OOO( $50,000, $100,000, $500,000 and $1,000,.000
(maturity value) •
.
.
Tenders will be received at Ii'ederal Reserve Banks and Branches
up to the closing.hour, one-thirty p.m., Eastern Daylight Saving
time, Monday, May 20, 1963.,
Tenders w1ll not be
received at the Treasury De~artment,· Wash1ngton. Each tender must
be for an even multiple of $1,000, and in the case of competitive
tenders the price 9ffered must be expressed on the basis of 100,
with not more than three decimals, e. g., 99.925. Fract10ns may not
be used.
It is urged that tenders be made on the.printed forms and
torwarded in the special envelopes which will be supplied by Federal
Reserve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of
customers provided the names of the customers are set forth in such
tenders. Others than banking institutions will not be permitted to
'submit tenders except for their own account. Tenders will be received
without deposit from incorporated banks and trust companies and from
respons1ble and recogn~zed dealers in investment securities. Tenders
trom others mus.t be accompanied by payment of 2 percent of the face
amount' of Treasury bIlls applied for, unless the tende.rs are
accompanied by an express guaranty of payment by an incorporated bank
ot- trust company.
0-849
~
2 -
Immediately after the closing hour, tenders will be opened at
the Federal Reserve Banks and Branches, following which publ~c
announcement will be made by the Treasury Departmment or the 8Jnount
and price range of accepted bids. Those submitting tenders w~~1 be
advised of the acceptance or rejection thereof. The Secreta~ o~·
the Treasury expressly reserves the right to accept or reject any 0%
all tenders, in whole or in part, and his action in any such respect
shall be final. Subject to these reservations, noncompetitive
tenders for $ 200,0000r less for the additional bills dated
February 21, 1963, ~l-days remaining until maturit¥ date on
August 22, 1963)
and noncompetitive tenders for ,100,000
or less for the 182-day bills without stated price rrom anyone
bidder will be accepted in full at the average price (in three
decimals) of accepted competitive bids ror the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bankson May 23, 1963,
in cash or other immediately available funds or in a like face
amount of Treasury bills maturing May 23, 1963.
Cash and
exchange tenders will receive equal treatment. Cash adjusbnents
will be made for differences between the par value of maturing
bills accepted in exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, does not have
any exemption, as SUCh, and loss from the sale or other disposition
of Treasury bills does not have any special treatment, as such#
under the Internal Revenue Code of 1954. The bills are subject to
estate, inheritance, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing autho~ty.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not considered to accrue until such bills are
sold,. redeemed or otherwise disposed of, and such bills are exoluded
from consideration as capital assets. Accordingly, the owner or
Treasury bills (other than life insurance companies) issued hereunde
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue' or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which the
return is made, as ordinary gain or 10s5.
Treasury Department Circular No. 418 (current. revision) and ttl!:
notice prescribe the terms of ·the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained t:
any Federal Reserve Bank or Dranch.
000
'IIIImIr . . . , . .
~J."
DlmDlIH
~1
4 v''''
an ...
0-850
THURSDAY, MAY 16,1963
ft'loTMDIAII' D.l!A .. DJORfS JIQl CCI!ISUKP1'lOJr C. a:DW«7I'AC'l'tJRa WD 1JQ) ZINC CBAaC;;'41 TO IB 01Jf1t~ .1&1. . .
If lUIDlarw. JIRQCI &1""101 110. ,a~7 01 SEPrDIIIa. 22.
.pr"
GDU:rIRI.T art BIl'CID -
1.)"
I - Jun. 30, 1963
JIIGIII- Apri I 1 - lie" Ill, 1963 (or .. noUd)
•
•
Count'7
•
ot
•
PI'oduoUoo
tn:II._jtl__l'rt:¥_,,2_
_tt..
La.t.!1.be~ ON',
&DIll
•
•
•
flu
• Dutlabl& Lead
1O,oao.oao
lS'ol"'to
10,080,000
..1..... Coa&o
-
Bel&lWl aU
LuDalalPa (t.otal)
~o&o.ooo
1.828.587'
l'~.OOO
2.6S8,811-
I.Una
CuIada
--
I~
....J:1 ••
Pel'll
U,UO,OOO
1",311,063·
va.. SO. AMo.
14.180,000
1",880,000
-
'!\&pal_.
.-be. ,....1",
,:unrlea (M1a1)
.Ill
-'.port.
I. of '1,
"_,000
13,
2,758,257·
1"!'I:K_.m_
al&!I.,
•
1
l.ad.
__
l.a4_Il.I.~.t.
I !)uthbb LM1
-- - -
(POIImla)
:0.610.000
-
--
lS.no.OOO
"'-'000
1",.,000
u,uo,aoo
',OIO,OGO
pzortl
17,201.219
11'
t
l~rW-ciJ.ote.
&~ri.r ~
• J)utl&ble Uno
\i'OUiiiLt)
ru::r~
h.~1
11::1;)0"0
-
I!!z: W.lf1
(POGIIIG)
-
Iapono
~CXlO
1,598,3614-
7,5*l,OC»
7,520,000
l2,603,11I7
8,2"8,500
",.&10.000
66,1480,000
:56,880,000
•
7O,4eo.ooo
...
».140,000
,,"»,CIDO
''',703,686
1,)10.-
3,299,156
",03",383
",UD,OOO
7,\15,770
,,7'0.000
2,'''5,26,
7,597,5096,080,000
-
•
-
17,1&0,000
17,8"0,000
,,-.-
6,080,000
'963
The .1;011' cc;""try dt..ifjnltionl u, tllOIl .peciUed In Pr .. U.ntiH "roel ••• tion No. }257 of Clepte.lle,. 22,
countri ••
m:x m
- - - - - ----,------------
•
•
I Z111C1-1:Itar1:D.s ON. or aU kiw,. ZSu 1.1»100b. pip. OJ'
• uoept p,Jri't•• ooa\o1nJ-. DOt I 014 Nlcl1lOftl-od liDo.
•
nl .. ~ ot dM
• CIGlIl' to be POiIIMIlt'aetuncl. a1.•
, . droa.. aa4 &1DI aJd-fDp
.~"ls-Qiota
(,CMIIiIL)
annJ.1a
.l.u.
•
drol', Nol&lu4 led, 1O:oa;t
&atl!&oa.1a1
&atl• Ma.1&1 •• rap lead. ~ •• tal,
, all &11..,.. 0 .. oCllb1D&Uoa. ot
dut,.
iQanerl,y-Qina
__. __ ~_
• LiiirliilIICiIa-opllii. DIill1o~
• 1oa4 Sa plp u4 kra. le&4
teen :htnSed.
'III 'I'D IOM&8 •
CIII:IIInQMI
1~~6.
:5inel that dlte th. "un of ctrhi"
~~
.. ·M·.......
"se
THURSDAY, MAY 16,1963
%l4CIlUI m
0-850
putI1C1'M'1!' Cl!A QH l14'ORfS Jt8. ~01r or mn.c.um?1ctl1m t:rAD m %INC C8.\!1ZAU fO
Jr BUtDaUA.L JI90Ct IVUICH aIO. 32'7 01 ~ 22. ~SI
tu tmatJA IS'fIJfTSRD
CIIfUDIt.1' 1IDDf1 JIRlQD - Apr II I - "un. 30, 196 3
maats .. Apri I 1 - May Ill, 1963 (0,. .. noted)
_ _ _ _ _ _ _ _ _ _~I~!a~..J..m~_ _ _ _ _ _ _ _l1'~ __"2 ___ ...
-, ~~ ~I LiM tIi&l11OA 01" bu. ~llon,
•
• 1....t
&r&d baN, 1a&d
t!!K " '
•
I
•
Led.beuiDc OHI, flu. ctari, I cStoou, NolL1l43cl laa.d, 10:11.;)
a %11:1.0-~ O!"II of all 1dDd.s,. ~ a lIlooa, piC', tit" alalia,
a
U2d.
1.d, 1oZlt1!loo1al lesd, ~1.
I .xcept p.)'ri t.. .o~~ J1O\ I oU loAd 1rCIt"I1-o\d ziao, tU
•
• =00.1&1 'Grap l ....d, WI altal, a
nlp'~ ot du
• oa1t 'to ~ ~a.ctU1"lcl, s1.Do
•
• all .1107' 01' OOlilbiu:Uol'.LI.r I
I
dro'l, ud. s1DII .k:I:o t .. ga
CCNnt1T
_,t..
I
ot
ProdltoUoc
r
1~.rG ~
• M1&!)l~ Lew
{,pNDd.eJ
Aa&n....u..
10,010,000
-.
1e1,s.&A C-.
,
I!j?!l"t.
1.0,080,000
J,uzaaDua (wtAl) ,
aouna
"O&O,aoo
1,828,587-
C&Mda
1,,,,0.000
2,658,81'·
•
ttal7
-
Med ••
...
.
PeN
U,UO,OOO
,,,,,II ,o6}.
ODe. SO. .&tr1••
14... ..0,000
1",880,00a...
.
!\lao'lerna
1011 "UP ""SII
I"
',sca,coo
..
but
1~1'l.T CUot.t.
• Mbblt LM,:i
.
?'.
D•••
I!:'::lol"ta
2,758,251'
I
&Qo.a..t"tIt'G Q.7.ota.
a Du:Uabl. UIl:
lPowztia
'WIlds
z:),6ao.ooo
17,201,279
•
101sl\lll ad
.«=tri•• (total),
s.a pip
_ n!:lCm
•
•
15t.,,0CI0
8,2'+8,566
-
-
"~.OCQ
:t:=oI"U
I=el"h
"6,1+80,000
-
~CXlO
1, '198 , 361+·
1,520.000
7,520,000
""MO,CXlO
22,60',137
-
,,~.CICO
•
,c.aao.OOO
36,880.000
1O,.&ao,aoa
' .... 133.686
")20,000
3.299,150
12,-'000
't,O''+,383
,S,ua,ooo
1.1115,770
,.,$),000
2.31t5,263
•
l,,$.aoo
7,597,509*
',010,000
6,080,000
-
•
-
-
I1,MO,CICIO
'7,8Ito,000
,--.-
-'.portl al of lay
1965
The 11"1011' c,,,,,t('J cI.~iil'l.tlOftl .r. tl\o . . 1,.clUed '".Pre.ld'l'It1al: Protl:aaatioft No. 52S7 of S,pteab.t 22, t9SS. Sinc. thlt fate tM
cowntri •• ht_e tiC" :~nDed
__ ,e_ "" ......... ,. _,...
6,u80,000
ft ••ea
of e.rhin
--:z-
45S
conca I.ASTD
'CIa po1Wl8)
COt'fOI' CARD STRIPS made~tro. cot\on ba.'f1n«-.. etapl.-ot les. than 1-"3/16 incbe. in length, eot.m&R
WASTE, LAP rtASTE, SLIVER WASTE, Am) BOVIm WASTE, WHETHER OR NOT JLANUP'ACTlJRED OR OTHERWISE
.ADVANCED IN' VALUEt Provided, ho.ever, that not more-than -33-1/3 "percent 01 the quotas ahall
be tmed b7 cotton wastes other .than comber" wastes made trom: cottons ot 1-3/16 inches or mora
a stapl. lengt.h"1n th. ca... 'ot the-tollowing countries: United l1ngdom.; France, Hetberlands,
Sdt.zerland, Belgium, Ge1'tlAlQ"; and It.a.qa
:
CoUDtl'7 ot 0r1g1n
lJn1t.ed
,.tablish.a
:
Tota.l- lDiPorts - i---Establfshed 1-Imports
1
3'J-1/3$ of, Sept. 20,.1962,
a TOTAL QUOTA
i Sept. 20, 1962, to
L _
I
I1n&dClll • • • • •
Canada . . . . . . . . . .
Fr&l1ce • • .. • • •• ••
Brltlah Iad~ • • • • • • •
NetherlAnds • • • • • • •
Sw1tserlaad • • • • • • •
Bel,1:= • • • • • • • • •
JapaA. . . . . . . " • • • •
Ch1Da. • • • • • • • • • •
E£1Pt • • • • • • • • • •
Cuba. • • •• • • • • • •
Ge~ • • • • • • • • •
lta.l.7 • • •• • •••••
May_13,: 1963. __ .:
TotaJ.. Quota:
~,441,152
4,323,457
239,690
227,420
69,627
1,398,386
239,690
185,223
49,926
68,240
44,)88
S2,024
22,747
11,234
33,150
12,853
38,559
~,"5
17,322
8,135
toMav _13... 19.6.3
1,07S,003
-
75,807
73,011
-
14,796
21,878
-
-
6,544
_
-
76,)29
21,263
36,070
•
25,443
7,088
5,482,509
2,005,703
1,599,886
1,169,892
J,/lncluded 1D total. 11Iport." .colUIIID 2.
Preparec:l 1rl the BaN_ of Cuto...
The country designations listed in this pres. release are tho.e specified in Presidential
Proclamation No. 2351 of September 5, 1939. Since that data the name. of certain countries
have b!en changed.
D-SS1.
II
~~
4 '"'
v
TREASURY DEPARTMENT
Washington, D. C.
IMMEDIATE RELEASE
D-851
THURSDAY" MAY_16.~1963
Preliminary data on imports for consumption of cotton and cotton waste chargeable to the quotas
established by the President's Proclamation of September, 5, 1939, as amended
COTroN (other than linters) (in pounds)
Cotton under 1-1/8 inches other than rough or harsh under
ImPOrts SeptE!mber 20L J.9..6L.. Mav 11 __ 1 Qt., _
Country of' Oriein
EGYP~
and the Anglo-
~gyptian
Pe~
Sudan ••••••••
••• ,. ••••••••••••••••
British India •••••••••••
China •••••••••••••••••••
f··texico ••••••••••••••••••
Brazil ••••••••••••••••••
Union of Soviet
Socialist Republics •••
ArGentina •••••••••••••••
lmiti •••••••••••••••••••
Ecuador •••••••••••••••••
Established Quota
Imports
Country of Origin
783,816
247,952
2.,003,483
1,370,791
6.,883,259
618,723
782,85t
35,995
81,640
Paraguay ••••••••••••••
3/4"
Established Quota
HOnduras ••••••••••••••
8,883.259
618,723
475,1245,203
237
9,333
Colombia ••••••••••••••
195
British East Africa •••
Netherlands E. Indies •
71,388
Cotton 1-1/8" or more
1 ,.J.262..""-..Ma.v..l ~ .__ J.QA.~
Established-Quota (G10bal2 staple Iepgth
h
1-3/S or more
1-5/32", or more aM umel'
1·3/~" (~.)
J.,..l/S" 01" more &D4 \1II4er
n.._ ... _ --- ..
1.-3/8"
2,240
Ba:r"bados ••••••••••••••
yOther British Y. IDd1es
Nigeria •••••••••••••••
y Other British W. Africa
Yother French Africa •. ~.
Algeria and Tunisia •••
1/ other than Barbados, Bermuda, Jama1ca 1'l1.n1dad, and Tobago.
Other than Gold· Coast and Nigeria.
~/ Other than Algeria, ,TuniSia, and Madapscar.
41'4A..............
124
Iraq ••••• ~ •••••••.•••••
Y.
lmpc)~8_August
752
871
45,656,420 Iba.
Allocation
Imports
39.590.:nS
39,590,778
1,500,000
181,360
~,5~,642
·3.153.970
21,321
5,377
16,004689
Imports
TPZASURY DEI'ART!·lETIT
Washington, D. C.
:C·:·!EDL\TE RELEASE
THURSDAY. MAY
457
D-8S1
16~1963
Preliminary data. on imports for consumption of cotton and cotton waSte chargeable to the quotas
established by the President I s Proclamation 'of September 5, 1939, as amended
-
.
_ CO'1'l'ON (other than linters) _(in pounds)
-Cotton under 1-1/8 inches other than rough or harsh under
Imports Septet:iber 2~.62_ .. M'PL1_~_ 1QF.~
country of Criein
EGYPt and the AngloS~JPtia~ Sud~~ ••••••••
;:eI1.l ••••••••••••••••••••
B~itish
Ir.dia •••••••••••
China •••••••••••••••••••.
i·~c)~ico ••••••.•••••••••••
Established
~ota
783,816
24-7,952
2,003,483
1,370,791-
8,883,259
618,723
ArGentina •••••••••••••••
lIti ti •................••
5,203
237
Ecuador •••••••••••••••••
9,333
Paraguay
782,857
35,995
475,124
...............
..............
..............
Colombia
Iraq •••••••••••••.•• ~ ••
British East Africa •••
Netherlands E. Indies .-
81,640
8,883,259
618,723
i
Established Quota
Country of Origin
Honduras
•••••...••••••••••
Union of Soviet
Socialist Republics •••
Br~zi1
Imports
3/4-"
Barbad.os •••••• '••••••••.
~Other British W. Indies
y.
N1geria •••••••••••••••
Other Eritish W. Africa
'Yother French Africa •.••
Algeria and Tunisia •••
1/ Other than Barbados, Bermuda, Jamaica,- Tr1n1dad, and Tobago.
Other than Gold Coast and. Nigeria.
1/ Other than Algeria, Tunisia, and Madagascar. '.
3/.
Cotton 1-1/8" or more
Imports August 1, 1962 - May 13; t 963
Established Quota (Global) - 45,656,420 IDs.
.
Staple Length
l- 3/811 or more -
._
l-5/32" or more and under
1-3/8" (Tangu1Ii5)
1-l'/811 or more anc1 under
~-3/a"
Allocation
Imports -
39,590,778
39,590,778 .
1,500,000
181,360
,4,56,,642
*3,153,970
752
871
124-
195
2,240
71,388
21,32l
5,377
16,004
689
Ir:morts ,
I
~
cartoB WJ.S'TZS
·(Iapo~)
CARl) STRIPS made ~trom. cotton having· ... etapl4t -ot less than 1-'/16 inches 1:11ength, CO!!BEll
WAS'l'E, LAP iiASTE, SLIV""'.c.R WASTE, AND EOVIm ilA.Sl'S, j'iHETHSR OR NOT lLU111FAC'rURED OR OTHUC-IISZ
ADVANCED Dl VALUE: Provided, however, that not more.than -33-1/3 -percent o~ the quotas .shall
be filled bT cotton wastes other than comber wastes made from: cottons of 1-3/16 inches or more
1.J1 staple- length in the- case- ot the- following countries: United Iingdom.; France, Netherlands,
Switzerland, Belg1Wll, Germa.tlJ', and. I~a
concH
: Established.
CountZT ot Origin
: TOTAL QUOTA
_ _ _ _ _ _ _ _ _ .. t-~--.---United Eingdom • • • • •
Canada • • • • • • • • •
France • • • • • • • ••
Brltlab India • • • • • •
Netherlands • • • • • • •
SwltzerlaD4 • • • • • • •
Belgium • • • • • • • • •
Japall • • • • • • • • • •
China • • • • • • • • • •
Egypt. • • • • • • • • • •
Cuba. • • • •
Ge~
• • • • • •
• • • • • • • • •
Ital.7 • • • •
• • • • • •
4,323,457
239,690
227,420
69,627
68,240
4l.,JS8
,;S,559
JU,S3S
6,S44
76,m
_~263
. _ ..
Established.:
33-1/3% of I
Total Quota.:
1,398,386
239,690
185,223
49,926
52,024
11,234
33,150
!,44l,lS2
36,070
25,443
17,322
S,13S
',482,509
1I Included in tot.al
:
Tota.l l.clports
:
: Sept. 20, 1962, to:
:
May 13, 1963
:
..
~--- -~---~-.--
2,005,703
75,807
-
22,747
14,796
Import.s-Y
Sept. 20, 1962,
to May 13. 1963
1,075,003
73,011
21,878
12,S53
---
~08S
1,599,886
1,169,892
import., ·colwm. 2.
Cute_.
Prepared. 1A the Bureau of
The country designations listed in this press release are those specified in Presidential
Procl~~tlon No. 2351 of September 5. 1939. Since that date the names of certain countries
have b!8n changed.
0-851
TREASURY DEPAR'n.fENT
458
Washington
IMMID IA TE RELEASE
THURSDAY, MAY 16,1963
D-852
The Bureau of Customs has armounced the following preliminary figures showing the
imports for consumption from January 1, 196), to May 4, 196), inclusive, of commodities
mder quotas established pursuant to the Philippine Trade Agreement Revision Act or 1955'
Commodity
···
·
Established Annual
Unit
of
~ota ~antitI
~antitI
.:
-
Imports
as of
H~
li.
l~
87,f1.
3uttons •••••••••••••
680,000
~igars ••••••••••••••
160,000,000
Number
:oconut oil •••••••••
358,400,000
Pound
137.143,~
:ordage •••••••••••••
6,000,000
Pound
2,137,9.;
~obacco •••••••••••••
5,200,000
Pound
2, 851,3J
Gross
4.244,0.
TREASURY DEPARTI1ENT
Washington
4 ~d
v,""
DIATE RELEASE
JRSDAY, MAY 16,1963
D-852
The Bureau of Customs has announced the following preliminary figures showing the
)rts for conswnption from January 1, 1963, to May 4, 1963, inclusive, of cornmoditias
~ quotas established pursuant to the Philippine Trade Agreement Revision Act of 1955:
••
lIDOdity
••
••
Established Annual
Quota Quantity:
·•
·•
Unit
of
Quantity
Gross
·•
·:
Imports
as of
May 4. 196)
~ns •••••••••••••
600,000
ars •••••••••••• • •
160,000,000
Number
onut oil •••••••••
358,400,000
Pound
137,143,296
dage ••••••••••• ••
6,000,000
Pound
2,137,934
acco •••••••••••••
5,200,000
Pound
2,851,:338
87,686
4,244,085
-2-
Cormnodity
··
·•
Period and Quantity
t
:
Imports ·· Uni
of
: '.
as or
; Quantity: May 4. 1961..
.bso1ute Quotas:
rutter substitutes, including
butter oil, containing 45%
or more butterfat •••••••••••••
Calendar
Year 1963
:otton products, except cotton
wastes, produced in any stage
preceding the spinning into.
yarn ••••••••••••••••••••••••••
'eanuts, shelled, unshelled,
blanched, salted, prepared or
preserved (incl. roasted peanuts but not peanut butter) •••
iJ
Imports through May 13, 1963
D-853
1,200,000
Pound
12 mos. from
Sept. 11, 1962
1,000
Pound
12 mos. from
August 1, 1962
1,709,000
Pound
Quota Filled
Quota Filled
TREASURY DEPAR'IUENT
Washington
4 v~1...
:MMED lATE RELEASE
rnuRSDAY, MAY 16,1963
D-853
The Bureau of Customs announced today preliminary figures on imports for consump.ion of the following commodities from the beginning of the respective quota periods
~hrough May 4, 1963:
Commodity
···
·
Period and Quantity
: Unit
:
of
: Quantity
·•••
Imports
as
: May 4.
or
l~
ariff-Rate Quotas:
ream, fresh or sour..............
Calendar Year
1,500,000
Gallon
hole Milk, fresh or sour.........
Calendar Year
3,000,000
Gallon
attle, 700 lbs. or more each
(other than dairy cows) •••••••••
April 1, 1963June 30, 1963
120,000
Head
attle less than 200 lbs. each ••••
12 mos. from
April 1, 1963
200,000
Head
ish, fresh or frozen, filleted,
etc., cod, haddock, hake, pollock, cusk, and rosefish ••••••••
Calendar Year
24,874,871
Poum
12,423,68&
una Fish ••••••••••••••••••••••••• Calendar Year
63,130,642
Poum
l6, 223, S]J
114,000,000
36,000,000
Pound
Pound
53,559,021
29,146,152
2,261,179
hi te or Irish potatoes:
Certified seed •••••••••••••••••• 12 mos. from
Other ••••••••••••••••••••••••••• Sept. 15, 1962
alnuts •••••••••••••••••••••••••••
Calendar Year
5,000,000
Poum
tainless steel table flatware
(table knives, table forks,
table spoons) ••••••••••••••••••
Nov. 1, 1962Oct. 31, 196)
69,000,000
Pieces
I
Imports for consumption at the quota rate are limited to 12,437,436 pounds during the
irst six months of the calendar year.
TREASURY DEPAR11lENT
462
\'1ashington
:DIATE RELEASE
JRSOAY, MAY 16,1963
0-853
The Bureau of Customs C\IU1ounced today preliminary figures on imports for constunpof the following commodities from the beginning of the respective quota periods
)ugh May 4, 1963:
11
Commodity
...
·•
··
·
Period and Quantity
·•• Unit
·•• Imports
of
·: Quantity :· Hayas4. of
196~
1ft-Rate Quotas:
am, fresh or sour •••••• ~ •••••••
Calendar Year
1,500,000
Gallon
320,222
Ie l1ilk, fresh or sour •••••••••
Calendar Year
3,000,000
Gallon
3
tIe, 700 Ibs. or more each
other than dairy cows) •••••••••
April 1, 1963June 30, 1963
120,000
Head
7,028
tIe less than 200 1bs. each••••
12 mos. from
April 1, 1963
200,000
Head
17,532
h, fresh or frozen, filleted,
te., cod, haddock, hake, po1ock, cusk, and rosefish ••••••••
Calendar Year
24,874,871
Pound
12,423,68&
a Yish •••••••••••••••••••••••••
Calendar Year
63,130,642
Pound
16,223,51)
seed ••••••••••••••••••
ther •••••••••• •••••••••••••••••
12 mos. from
Sept. 15, 1962
114,000,000
36,000,000
Pound
Pound
53,559,027
29,146,152
nuts ••••••••• ••••••••••••••••••
Calendar Year
5,000,000
round
2,261,179
.io1ase steel table flatware
tab1(3 knives table forks,
table spoons) ••••••••••••••••••
Nov. 1, 1962Oct. 31, 1963
69,000,000
i'iaces
to or Irish potatoes:
~rtified
59,652,794
~orts for consumption at the quota rate are limited to 12,437,436 pounds during the
'st six. months of the calendar year.
-2-
Commodity
.
:
Period and Quantity
-
.• Imports
··• Unit
of
: .
as of
· Quantity:
May 4. 1<$
Absolute Quotas:
Butter substitutes, including
butter oil, containing 45%
or more butterfat •••••••••••••
Cotton products, except cotton
wastes, produced in any stage
preceding the spinning into . .
Caleniar
Year 1963
1,200,000
Pound
yarn ••••••••••••••••••••••••••
12 nIOS. from
Sept. 11, 1962
1,000
Pound
Peanuts, shelled, unshelled,
blanched, salted, prepared or
preserved (incl. roasted peanuts but not peanut butter) •••
12 mos. from
August 1, 1962
1,709,000
Pound
jJ Imports through May 13, 1963
D-853
""
Quota .t<'ilb
Quota Fill&:
TREASURY DEPARTMENT
Washington
FOR RELEASE:
463
ON DELIVERY
REMARKS OF THE HONORABLE DOUGLAS DILLON
SECRETARY OF THE' TREASURY
IN PRESENTING
LIFESAVING AWARDS DURING CEREMONIES AT THE
U. S. COAST GUARD RECEIVING CENTER
CAPE MAY, NEW JERSEY, MAY 17,1963, 4:00'P.M., EDT,
Admiral Roland, Commander Waters, distinguished guests, and
members of the Coast Guard recruit training class:
I have been looking forward to this visit ever since I assumed
office as Secretary of the Treasury more than two years ago. From
this Center comes a steady stream of highly trained men who have made
the name "United States Coast Guard" known and respected the world
over. It is fitting, therefore, that Cape May 'should be the setting fOl
today's ceremony, in which we are proud to honor three very brave men
who displayed the greatest valor in risking their lives to save others.
For in recognizing their heroism, we also pay tribute to other brave
men who received their training here.
One of the men we honor today, John C. Webb, Boatswain's Mate,
First Class, has distinguished himself in the past. Twice previously,
in 1961, he was awarded the Coast Guard Commendation Medal for heroic
action in the performance of duty. Today, he receives his third
award, the Gold Lifesaving Medal, for outstanding heroism in making
a most perilous rescue.
His companions, Anthony Duane Lloyd~ Engineman, Third Class,
and Ray Dwayne Duerre, Seaman, are to receive Silver Lifesaving
Medals for their heroic parts in the same rescue. All three have
brought great credit, not only to themselves and their families, but
also to the historic Service they so ably represent. They provide
you graduates of the training class who are about to take your places
in the Coast Guard with an inspiring example.
Today's ceremony is unusual. The Lifesaving Medal is rarely
awarded to Coast Guardsmen, since exposure to great personal risk
is considered part of a Coast Guardsman's assignment. The men who
brave angry seas and screaming gales to aid distressed ships and
persons expect no special recognition. They are dedicated men who
- 2 -
think of themselves as professionals. Only action of the greatest
personal daring, involving disregard for personal safety, justifies
the award of the Lifesaving Medal to Coast Guardsmen. These
conditions were amply met by the men we honor today.
I shall not attempt to go into the details of the rescue in
which these men participated. The citations accompanying the medals
will speak for themselves.
While this day has been set aside to honor three brave men,
its significance goes far beyond that. In a very real sense, we are
paying tribute to this small, but great Service of some 30,000 officers
and enlisted men in which they were trained to respond so magnificently
to the challenge of danger'. Courage and humanity lie at the very heart
of the Coast Guard's mission. It has been that way from the very
beginning, when the first small cutters sailed bravely off to fight
Napoleon's numerically superior Navy.
In risking their lives to save others, these men exemplify that
humanitarian concern for life which motivates the Coast Guard. More
than any other Service, the Coast Guard gives active meaning to the
high ideal of self sacrifice which is at the.core of our religious
beliefs. In times so given to developing means of mass destruction,
the Coast Guard provides an inspiring example to all mankind as it
goes about its task of preserving life.
Gentlemen, I congratulate each of you, your families and your
officers on this happy occasion. I congratulate also the graduates
of this recruit training company. The good wishes of all Americans
go with you. May you all ,have long and fruitful careers in the
service of your country.
000
465
•
~
-4-
:-,-~~'7~
'.. ,_~~u:pn.'ed-th•. ~-Jili:.aL'"
/~.~?.
~
u..t'-''':V1Ba~eoUl~bD-dft~;''''''~lfP.e.eial,..,!~a~
..iJ.l&_a ~~.
"----.-_.
.,.
.
A, part of thi8 regional conaolidation. Internal levanue .1.11
operate with .even regional Automatic Data Proc .. a1n& Service
~test
instead of the nine that had originally been contemplated. tbua
permitting lubstantial savings.
In thil connection. the SecretAzy
pointed out that the prelent Lawrence. Ma.a. facility would be
expanded in order to allow it to .ervice both the Boaton and . . .
York regional workload..
It i • •stimated that the deciaion to
utilize the .ingle location in Lawrence will .ave approximate17
one half mill~ dollars in annual operational costs, pl. . .uh.taati~
one-time lavings in conatruction coat ••
Secretary Dillon endorsed the Service', goal to tr~ overhead
in ita district offices but deferred the proposal for uniform
modification of the organization 8tructure of 12 of the a. .llar
office. in order to ensure that any action would b. fully coordinated
with development. in the data proces.ing (!DP) program.
Benc.. dlara
will be no change at this time in the organization of district
office. 1n Aberdeen, S.D.; 'argo, N.D., Helena, MOntana, Bol•••
Idaho. Cheyenne, Wyomins; Anchorage, Alaska; I.eno, Nevada, WllmiDatoa,
Del81lare, Burlington. vermont; Augu.ta, Kaine, Port.mouth, New
Hampshire, and Providence, Rhoda Island.
The Service will reta1n
its present authority to make .uch adjustments Ln ita office. on a
position-by-po8itioD basis .s may prove desirable in the 1nt.~•• t.
465
Tha plan of the Service to
-ra-
the Oraaha bgiOl'lal Offiee
with the aegional Office in Chic.gowas alao approved by
Dillon.
See~.&~
He stated that Chicago is the preferable headquarter. ct.ty
because of location, ready transportation. and other operatioDal
advantage.:
_cratary Dillon al.o empha.ized that this regional eonaolidat10
will not in any way inconvenience taxpayer. or' tax practitioners.
I ••
.trlct Offlc~
the
parta of rel1eaall
,
Gff c..
t
reg
la~l1 deal with
t
ayers
,
I.
.
, -and Alco 01 and Tobacco Tax £1
continue to b
provid.d in
- ,
the Secre~ary stated
-~J~~
df ~fte.
tha~.
~
8i
Appellate. Chief
{~.s,
a a"' ••al-the••
~
8ervl~
resent locati~.
~L--. ~~
after carefullY{LCF"Me*.g atl"
,He.._•• ,*.gazdlY!i the consolidation of the
York and BOlton lagional Offices, he had decided to rescind
portion of hi. order calling for this merger.
R_
~~
Hence tne office
in-New York City will continua to lupervile the district offic••
in New York Stat. and the bgional Office in BOlton will retain
juri.diction over the 6 New England Offices.
the
lee v
I
officea.
487
Un4er the changes approved today, Seer.tar, Dl11cm Miei dtat
the previously announced merger of the operati0118 of fouJ: d1atri.eUI
located in States with _re than eme Intemal,l.eve.Due dtatrict..
would be carried out.
'lbes. four·. districts are'
Sn&C\a8e . . . . .
York, _raed into Buffalo, New Yorkl C&1IIden. If.w Jer••y. la••
Newark, Hew Jarse,.5 Kans. . City toto St, Loui., IUssourl, ....
Scranton, lennaylvan1a,. to b. divided between littsburp . . .
rhiladelph1a.
Larse field offic•• will continue to be located in·tbea. lour
cities and vill provide all the service. to the public
~t ~.
presantly offered by the district otf1ce••
Secretary Dillon ••14 that the.. merger. wlll eatall DO aet
reduction in the lIS, pa7'"oll ill aUf depre •••d area.
ror . . . .1.,
reduction
IDDft
Ul
amplo,-...mt 1D the Cad_ offie. vill be
thea
off.et b,. re...1pmallt. ancl Dew hirina. in the expaneli. thi1adelp!d
Servlc. Center. across the river.
Enforcement ac:tlvitie. will
oe
expanded in IcranC_ . . odler
operationa will b. tl'anaferred to that offic. in ordal' to -iataia
employmeDt there at it. pre.ent level.
The _qer of the Kaa848 City office, alIa, t.nvolvea ... ·.wectucd
in employment 1n the are..
.AD
Automatic Data Psooe.s8lDa C8Qtu ia
that city i. be1.ng expandeci. mel will prov1cle sra HIf· job. than.l
be lo.t~thl'Ough abolition ofax1stias po.1Uoue
tQ S~8;CU.
epeclal effort. will be made to mtntmiz. any po•• ib1.
employe.. ~
on
adv.~..
effect
488
I" I'"
WASHINQTON. D. C.
DATE:
~
?1iJ
;
3
DILLON APPROVES: nOPOSED
tIS REALIGNMENT WITH MODIFICATIONS
Treasury Secretary·Douglas Dillon today announced that he had
app·roved with certain modification. the proposed field organ'lsatiOll
realignment of the Internal levenue Service.
The modifications are the re.ult of a careful review 10
cooperation with members of the Congre.. and local official.
representing the areas involved, and after study of the teat1moDy
before the Senate Finance Conmittee on April .5.
TheT .e.k to
ensure that the Internal I.evenue Service will continua to provi.de
maximum service to the taxpayer while enabling the Service tocoavert
t
181=8. awabez
~ overhead pos itions to front line enforcement effort.
The propoled aam1nl.trative realignment in the IRS field
organization was· originally announced March.5.
After hearing fro.
representatives of several of the areas affected. the Secretary.
on March 7.
directed the Service to .u.pend implementatlon of the
order pending a review.
Seeretary Dillon emphasized that the organization Chang••
approved today -- which are eatimated to produce recurring annual
~~J,J-
.aving. ol"
~ million
-- will not in any way
inconvenience taxpayers, nor will they add to tne unempLoyment
of any depre •• ed area.
0(} _ «;s-'i
,1:0))111l
TREASURY DEPARTMENT
469
May 17, 1963
FOR RELEASE A.M. NEWSPAPERS,
SATURDAY. MAY 18, 1963
DILLON APPROVES PROPOSED
IRS REALIGNMENT WITH MODIFICATIONS
Treasury Secretary Douglas Dillon today announced that he had
approved with certain modifications the proposed field organization
realignment of the Internal Revenue Service.
The modifications are the result of a careful review in
cooperation with members of the Congress and local officials
representing the areas involved, and after study of the testimony
before the Senate Finance Committee on April 5. They se.ek to
ensure that the Internal Revenue Service wi~l continue to provide
maximum service to the taxpayer while enabling the Service to convert
overhead positions to front line enforcement efforts.
The proposed administrative realignment in the IRS field
organization was originally announced·March 5. After hearing from
representatives of several of the areas affected, the Secretary, on
March 7, directed the Service to suspend implementation of the order
pending a review.
Secretary Dillon emphasized that the organization changes
approved today -- which are estimated to produce recurring annual
savings of more than $3.5 million -- will not in any way inconvenience taxpayers, nor will they add to the unemployment problems
of any depressed area.
Under the changes approved today, Secretary Dillon said that
the previously announced merger.of the operations of four districts,
located-in States with more than one Internal Revenue district,
would be carried out. These four districts are: Syracuse,
New York, merged into Buffalo, New York; Camden, New Jersey, into
Newark, New Jersey; Kansas City into St. Louis, Missouri; and
Scranton, Pennsylvania, to be divided between Pittsburgh and
Philadelphia.
D-854
- 2 -
47n
Large field offices will continue to be located in these four
cities and will provide all the services to the public that are
presently offered by the district offices.
Secretary Dillon said that these mergers will entail no net
reduction in the IRS payroll in any depressed area. For example,
reduction in employment in the Camden office will be more than
offset by rea~signments and new hirings in the expanding Philadelphia
Service Center, across the river.
Enforcement activities will be expanded in Scranton and other
operations will be transferred to that office in order to maintain
employment there at its present level.
The merger of the Kansas City office, also, involves no reduction
in employment in the area. An Automatic Data Processing Center in
that city is being expanded, and will provide more new jobs than will
be lost through abolition of existing positions. In Syracuse,
special efforts will be made to minimize any possible adverse effects
on emp loyee s •
.. The plan of the Service to merge the Omaha Regional Office
with the Regional Office in Chicago was also approved by Secretary
Dillon. He stated that Chicago is the preferable headquarters city
because of location, ready transportation, and other operational
advantages. Secretary Dillon also emphasized that this regional
consolidation will not in any way inconvenience taxpayers or tax
practitioners.
The Secretary stated that, after carefully weighing all of the
factors involved in the consolidation of the New York and Boston
Regional Offices, he had decided to rescind that portion of his order
calling for this merger. Hence the office in New York City will
continue to supervise the district offices in New York State and the
Regional Office in Boston will retain jurisdiction over the 6 New
England district offices.
As part of this regional consolidation, Internal Revenue will
operate with seven regional Automatic Data Processing Service
Centers instead of the nine that had originally been contemplated,
thus permitting substantial savings. In this connection, the
Secretary pointed out that the present Lawrence, Mass. facility
would be expanded in order to allow it to service both the Boston
and New York regional workloads. It is estimated that the decision
to utilize the single location in Lawrence will save approximately
one half million dollars in annual operational costs, plus
substantial one-time savings in construction costs.
- 3 -
471
Secretary Dillon endorsed the Service's goal to trim overhead
in its distr.ict offices but deferred the proposal for uniform
modification of the organization structure of 12 of the smaller
offices in order to ensure that any action would be fully coordinated
with developments in the data processing (ADP) program.
Hence, .
there will be no change at this tim~ in the organization of district
offices in Aberdeen, S.D.; Fargo, N.D.; Helena, Montana; Boise,
Idaho; Cheyenne, Wyoming; Anchorage, Alaska; Reno, Nevada;
Wilmington, Delaware; Burlington, Vermont; Augusta, Maine;
Portsmouth, New Hampshire; and Providence, Rhode Island. The
Service will retain its present authority to make such adjustments
.in its offices on a position-by-position basis as may prove desirable
in the inter'ests of efficiency.
000
7
J;If,Y/I/:$ ~~
/t¥ tjp!U pt-/l"J
This third type of spaSlk! Treasury issue
'Ttf/tl IN~()L- vl'Y6-' (H~
a
~"
/
li"'~
~
arises
out of special operations such as~ Export-Import Bankilla.
-/\ &tiA~~ rYlo/ZE SL5ul~~~;('
.
'""
. .2!---.. ' ~ention~~__above. The-more-si~ific~at dey~J opm?~.t • t ~
.
r...,..~ttac::o..~e4
J..-~_ .. +... ~
-
to
the
fg3;QiSP Cll3;3;QR8Y
These borrowings perform
~~~
~l
bonds
"'"'
~~ ~l,~. tz..l.'.
c
by tiRe 8: 8j 'c'
1\
\
c""~~\".«':~ ..lu\', ..... ~ t .. ~+ ~---+-- rt!- 141(,)
PteftSd(1ff the first of which was ent€fe\1 iIlt8~ ill [
]•
rel.ates
~l
(QQJI'JI'Qui.R8i]
A
. ~
functioJ for the United States.
.
0'. they provide foreign currency which can be used to meet
a part of the balance of payments deficit, thus minimizing the
drain on our gold stock.
~w~
&1
"&;, the sale of the foreign
exchange acquired under this bond provides the Treasury with
part of its dollar needs that would otherwise have to be met by
borrowing in the United States market.
The
forei~n~~~~~~--~
~.~~~
issues carry interest rates which are J-~
securities issued by the
"
Th~foreign currency
the United States market.
~
'.
TreaSUry,p~de
,
foreign central banks
and ~overnments with attractive investment possibilities t:4
"'"'
~~~~,,~\~,
~
These operations, together with the shorter term foreign
currency swap operations conducted by the Federal Reserve and
a number of similar operations carried on among European central
banks, are important new ~
~."
.s of the irternational payments
system, which has been increasingly characterized by close
cooperation among foreign central banks and governments.
- 2 -
securities were issued, but $25 million of the total represented
a refunding
"
of~l5-month
into a 24-month bond
x&
, 3 lsr bond purchased by Italy in 1962
having the conversion privilege.
It is
anticipated that all issues involving investments by central
banks will eventually be on the same basis.
The third type comprises non-marketable securities issued to
central banks but denominated in U.S. dollars.
The outstanding
obligations of this type, amount to $183 million.
Of the total,
..
$125 million has an original maturity of 15 months and is convertible into short-term obligations.
Yl,..""c~
The $58 milrion is a
1\
Treasury note with an original maturity of five years redeemable
~
....... ~
'PII PAS' £Lc~'.e for the purpose of purchasing promissory
~
~n"
notes held by the Export-Import Bank of
~.- second
meet
W~shington.
and third types of debt instruments, ~ope - -
centra~.~ent.,
provide alternat
nve~tment
possibilities for
For the U.S. they
capital abroad to
assist
our --:--.
These instruments
international payment s
------------
-_.----
-----.
represent~~new
sys~.
~~.
\"
___._. _____________ _
474
~(~
5/16/63
Foreign Investment in Non-marketable Treasury Securities
,
!' -
Itt"
t
..
--- .. , L .. __ .J..~.T·
"J
Thefbalance of
-
iM-.:-:-'"': '"
payments~d t
for the first quarter
~~~:i
,;:eleased today by -the IDepartmen-t of Commerc:" ~8l-".'::;:~
\~ \M ... .l ......LN I f : I
Bsz::::L:::~ h .. cl.. ~....... ~
aM' 8i o nift::4ic '~€i1i :'-"":;::ti;:;Afii;r ei speci~l medium-term
d.I.I.Vo ~'\ 11.& ~.~.
U.S. securities laads8 to foreign official accounts~ ~he
~~
.J--,
~
various issues Iii
$ tf '3 million) were 8; Iran
,)::;::~ tota~
in detail in the April 1963 Treasury Bulletin (page 76).
~
The
~
amount of such securtties outstanding as of ~~rch 31
.
' . -zL,..-I ~
totall~d $664 m.illion • .:if.. ~ ~ ~~~ ~
~~~ au<£4.'J d /,£# ~ ~ ..L,£~
~
~
The variO~~~'I8Q are of three types. The first consists
"'
L~~)~
,/
~
of non-marketable medium-term securities denominated in foreign
~rrencies
~... •
purchased by foreign governments, and xka which are.
,
~..
.I~"w·"'}
.. -:-~
at·
' ' t ' . ,~ ~~ J
ek~reaeemable in normal fashion xx ~ stated maturit~
$30
~r
',/~~_~
.......J
~ million of:sti~'ti securities were issued in January; $250 million
~~
6t
had been issued in late 1962.
",1_°.
~
The second type also consists of non-marketable securities
~
denominated in foreign currencies and have original maturities
~
of 15 to 24 months.
,1I8~
However, these have been issued to foreign
~~ central banks, and in order to be consistent with long established
~ntral
r
bank, standards of liqUidity needs, provide for the
po's~ibility
of. conversion into short-term U.S. obligations~
~.,-.:. of. ~~ ,7J...l'tn .. , .. W""~Ht:;..v ,~i5
~ing~he first quarter!
million equivalent of (~u~,hn-
'" ---
~:::J ~
/',-'/
'-V-J~)
jY:
~t;tl.
~~
~
0
1'u.~10r:m~~)\.a..~~~~~~ ~~'\~
~~"rA.-"'~~:r....l~~~
TREASURY DEPARTMENT
475
May 16, 1963
FOR IMMEDIATE RELEASE:
FOREIGN INVESTMENT IN NON-MARKETABLE TREASURY SECURITIES
The balance of payments information for the first quarter of
1963, released today by the Department of Commerce, indicated that
the Treasury had issued special medium-term.U. S. securities to
foreign official accounts during the period. The various issues
during the quarter, totalling $413 million, were listed in detail
in the April, 1963 Treasury Bulletin (page 76). The aggregate
amount of such securities outstanding as of March 31, totalled
"$664 million. If all such special securities that were issued
during the first quarter were excluded in calculating the balance
in our payments account, the remaining balance would be $470 million
rather than the $820 million seasonally adjusted" figure given in
the Commerce Department release. The $470 million figure includes
both the loss of gold by the U. S. and the increase in holdings of
dollars by foreigners in both private and official accounts.
The various special securities are of three types. The first
consists of non-marketable medium-term securities denominated in
foreign currencies purchased by foreign governments; and which are
redeemable in normal fashion at stated maturities of 15 and 16 months.
$30 million of such securities were issued in January; $250 million
had been issued in late 1962.
The second type also consists of non-marketable securities
denominated in foreign currencies and have original maturities
of 15 to 24 months. However, these have been issued to foreign
central banks, and in order to be consistent with long established
central bank standards of liquidity needs, provide for the possibility
of conversion into short-term U. S. obligations denominated in the
foreign currency. During the first quarter, $225 million equivalent
of such securities were issued, but $25 million of the total represented a refunding of a IS-month bond purchased by Italy in 1962
into a 24-month bond having the conversion privilege. It is anticipated that all issues involving investments by central banks will
eventually be on the same basis.
D-855
- 2 -
The third type comprises non-marketable securities issued
to central banks but denominated in U. S. dollars. The outstandi~
obligations of this type, amount to $183 million. Of the total,
$125 million has an original maturity of 15 months and is
convertible into short-term obligations. The remaining $58 million
is a Treasury note with an original maturity of five years
redeemable in advance for the purpose of purchasing promissory .
notes held by the Export-Import Bank of Washington.
This third type of Treasury issue is payable in dollars and
arises out of special operations such as that involving the
Export-Import Bank mentioned above. Even more significant is
the issuance by the U. S. of bonds denominated in foreign
currencies, the first of which occurred during the last quarter
of 1962. These borroNings perform several functions for the
United States. One is that they provide foreign currency which
can be used to meet a part of the balance of payments deficit,
thus minimizing the drain on our gold stock. Another is that
the sale of the foreign exchange acquired. under this bond provides
the Treasury with part of its dollar needs that would otherwise
have to be met by borrowing in the United States market.
The foreign currency issues carry interest rates which ~re equal
to those prevailing for comparable maturities in the United
States market. These foreign currency securities issued by the
Treasury also provide foreign central banks and governments with
attractive investment possibilities as an alternative to
purchases of gold or h~ldings of dollars.
These operations, together with the shorter term foreign
currency swap operations conducted by the Federal Reserve and
a number of similar operations carried on among European central
banks, are important new aspects of the international payments
system, which has been increasingly characterized by close
cooperation among foreign central banks and governments.
000
478
- 4 all the world knows it.
We are not likely ever to forget.
Although he was a native of Sweden, and a citizen of the' world,
we here in Washington thought of Per first of all as a beloved
~e
of our conmrunity, one who understood and sympathized with the fund_
S P/~'7vA'-
C!eligio~ aspirations that guide the American people,!", ..kelt sreate
"
mElEQ'(tta;'"
President Kennedy spoke for all Americans when he said:
"All mankind owes a vast debt to Per Jacobsson, who' has been
a towering figure in the world for more than 40 years.
His role in
international affairs has been unique, both in the building of a
strong International Honetary system and in the creation of a broad
public understanding to support and strengthen
it~
'He combined with
his incomparable professional talents a warmth and wit and depth of
understanding that enabled him to give leadership to other men of
goodwill in meeting the problems of our-troubled times.
We of the
United States, who have had the privilege of having him live among
us for many years, will sorely miss him."
. .... n.,....
477
- 3 -
/:..0 ~
those who had ~h~~.esponsibility C§.f!guiding their countries' econcoil
~~ O()T; 1J)~/~1It:/)
destinies @ways counted f~r more with him th3 the technical detail
of some paper plan that he knew could be no better than the determination and ability of the men who were to carry it through.
He was a giant among men.
When he spoke, the world listened .-
Jrt-UJAS
.3 the Managing Director. of
-Hethe International Monetary Fund, but because ~ was Per Jacobss~
just because \E!s words wer" those
~e man, who SPOk~ For he had earned the deep.respect and affecti~
of his fellow men everywhere.
)
Per Jacobsson was among the very best of that new breed. of men.
the international civil servants, whose names will shine with.increasing lustre because he was one of them.
In a way, he:wrote his
own epitaph at last year's annual meeting of the Fund when he quoted
Shakespeare's Othello as saying, "I have done the state
and they know it."
some~service,
Pl:-~ r:J Ac,o (3S~dlf.)
Unquestionably, l!u~' served humanity well --. and
J\
all the world
- 2 -
478
He never saw monetary problems and monetary stability. merely
as concerns of bankers or economists.
He always viewed them as
the business of any thinking person who seeks a better life for his
own people and for those of other
~e
nation~
always made it clear that sound money need not 'imply economi
stagnation but that, on the contrary, it provides the best and
surest basis for economic expansion and development.
He 'was one of
the first to recognize what is surely the world's major economic,
problem today -- the need to speed the growth of the
newly-developi~
nations.
~I~.hiS own mind, he./
•
Of:. E'-~NOM(cs
basi
4
.l"r •
sought to reduce the complexities<E!th which he deal5Jto s~ple h~
~A
terms.
In so doing
J
h~~ight! t:e~sonal,qUalities
of those with whom he dealt., In time of crisis,
~,
judgment of
those,who had
47~
REMARKS BY THE HONORABLE DOUGLAS DILLON
SECRETARY OF THE TREASURY
AT MEMORIAL SERVICES FOR PER JACOBS SON
~~GING DIRECTOR OF THE INTERNATIONAL MONETARY FUND
AT THE WASHINGTON NATIONAL CATHEDRAL, WASHINGTON, D. C.
FRIDAY, MAY 17, 1963, 5:00 P. M., EDT
n~
are here today to honor the memory of a truly great
of all mankind.
Those of us who knew Per Jacobsson as a friend
mourn the loss of a wise and witty companion who was, above
warmly human man.
se~ant
all~
a
Those of us who worked closely with him and who
saw at first hand the results of his labors know that his long·
pu 8",-
..)
career of service [§ mankin~ will have lasting significance' for the
"
entire world.
Although he was distinguished for his profound economic knowlege and his mastery of the intricacies of international finance
long before he became Hanaging Director of the International'Monetary
Fund in 1956, it is impossible to think of him apart from the Fund.
For it was under his dynamic leadership that the Fund blossomed,
and began to truly fulfill the hopes of its creators.
He never saw
maW
TREASURY DEPARTMENT
l-Jashington
FOR RELEASE:
ON DELIVERY
REMARKS UY THE HONORABLE DOUGLAS DILLON
SECRETARY OF TilE TREASURY
AT MEMORIAL SERVICES FOR PER JACOBSSON
MANAGING DIRECTOR OF THE INTERNATIONAL MONETARY FUND
AT TilE WASHINGTON NATIONAL CATHEDRAL, WASHINGTON, D.C.
FRIDAY, MAY 17,1963,5:00 P. M., EDT
W(' are here today to honor the memory of a truly great servant
of all mankind. Those of us who knew Per Jacobsson,as a friend
Inourn the loss of a wise and witty companion who was, above all,
a warmly human Ilwn.
Those of us who worked close ly with him and who
SaW at first hand the results of his labors, know that his long
care~r of public service will have lasting significance for the
(mtire worlu.
Although he was distinguished for his profound economic:knowledge
and his mastery of the intricacies of international finance long
b(,fu're he became Managing Director of the International Monetary Fund
in 1956, it is impossible to think of him apart from the Fund. For
it was under his dynamic leadership that the Fund blos::;omed, matured
allJ began to truly fulfill the hopes of its creators.
He never saw monetary problems and monetary stability merely
as concerns of bankers or economists. He always viewed them as
the business of cll1Y thinking person who seeks a better life for his
own people and for those of other nations. He always made it'clear
that sound money nt·ed not imply economic stagnation but that, on the
con.l:rary, it provideB the b'es t and sures t bas is for economic expans ion
und development. He was one of the first to recognize what is surely
the world's major ecunomic problem today -- the need to speed, the
growth of the newly-dl~veloping nations.
In his own mi.nd, he always sought to reduce the complexities
of economics to sImple human terms. In so doing, he put great
stresS 011 the personal qualities of those with whom he dealth~ In
time of crisis, his judgment of those who had responsibility for
guidIng their countrieti' economic desti.nies outweighed the technical
dl.>talls of some p.tt)l~r pl.m that he knew could be no better than th(>
u(!termination and ability of the men who were to carry it ~hr~lIgh.
- 2 -
481
He was a giant among men. When he spoke, the world listened -not just because he was the Managing Director of the International
Monetary Fund, but because he was Per Jacobsson. For he had earned
the deep respect and affection of his fellow men, everywhere.
Per Jacobsson was among the very best of that new breed of men,
the international civil servants, whose names will shine with
increasing lustre because he was one of them. In a way, he wrote
his own epitaph at last year's annual meeting of the Fund when he
quoted Shakespeare's Othello as saying, "I have done. the state sOll1e
service, and they know it." Unquestionably, Per Jacobsson served
humanity well -- and all the world knows it. We are not likely ever
to forget.
Although he was a native of Sweden, and a citizen of the world,
we here in Washington thought of Per first of all as a beloved member
of our community, one who understood and sympathized with the
fundamental spiritual aspirations that guide the American people.
President Kennedy spoke for all Americans when he said:
"All mankind owes a vast debt to Per Jacobsson, who
has been a towering figure in the world for more than
40 years. His role in international affairs has been
unique, both in the building of a strong International
Monetary system and in the creation of a broad public
understanding to support and strengthen it. He combined
with his incomparable professional talents a warmth and
wit and depth of understanding that enabled him to give
leadership to other men of goodwill in meeting the problems
of our troubled times. We of the United States, who have
had the privilege of having him live among us for many
years, will sorely miss him."
000
L1 Q ')
TREASURY DEPARTMENT
Washington
""TV'-
FOR RELEASE P.M. NEWSPAPERS
~ATURDAY, MAY 18, 1963
REMARKS OF THE HONORABLE HENRY H. FOWLER,
UNDER SECRETARY OF THE TREASURY,
BEFORE
THE FORUM OF THE CITY CLUB OF CLEVELAND,
CLEVELAND, OHIO, SATURDAY, MAY 18, 1963,
1:00 P.M. (EDT)
TAX POLICY AND U. S. ECONOMIC PROSPECTS
The U. S. economy is at a crossroads. Our choice of direction
will determine our economic future. The time is ripe for a wave of
U. S. economic expansion closer to the recent rapid pace in Western
Europe than to our own slack performance since 1957. Although many
long-term factors for growth are more favorable today than they have
been in almost a decade, some determinative elements of national
policy remain to be fixed. The most urgent and decisive is a national
commitment to a tax policy for growth.
Revision of our Federal tax system is crucial if we are to
enlarge our long-term economic prospects for the Sixties -- if we
are to end the tragic waste of unemployment and unused resources -if we are to step up the growth and vigor of our economy -- if we
are to increase job and investment opportunities and the incentive
to use them to the hilt -- if we are to increase our productivity
and competitive efficiency -- and if we are to strengthen our capacity
to meet our worldwide commitments for defense and the extension of
freedom.
In a society where an increasingly large percentage (now above
21 percent) of annual income is drawn off by Federal, state and
local government -- a national tax policy to promote a dynamic'
private sector is fundamental if the nation is to benefit from rapid
growth and hold its position in,world affairs by remaining competitive
with other industrial economies.
The Administration's economic program is designed to release
and encourage the inherent expansionary forces in our great free
market economy. The essential element of this program is a new tax
policy. It is designed to eliminate an unduly heavy tax drag on
D-856
- 2 -
l1 Q J
'-vv
purchasing power and demand -- to provide new incentives for more
invesonenc and increased effort -- to encourage the utilization of
new technology and facilities. The adoption of this policy would be
a giant step toward a tax structure which interferes as little as
possible with the operation of the free market mechanism while
supplying the revenues necessary to our national security and
national public needs.
Since our national competitive efficiency will be the decisive
factor in achieving and maintaining a proper balance in our
international payments, tax policy will restrict or encourage flows
of investment in new machinery on which our relative competitive
efficiency depends.
And, tax policy decisively affects the adequacy of public.
revenues for national security and the national public needs of a
rapidly growing population. If the increases needed in the future
can be derived from the application of lower tax rates to an
expanding, vigorous, private sector, the economy could work in
harmony with rather than being restrained by our tax system.
For these and other reasons, it seems fitting in this closing
session of the Forum to take a close look at the long-term factors
which may determine the prospects of our national economy in the
Sixties and the tax policy mix required to make the most of them.
The recent comment in the London Financial Times that the
"most encouraging development in the West is the strong business
performance being put up by the United States" may strike the average
American as over-dramatic or exaggerated. But the U. S. is the
powerhouse of the Western world. Its national strength, economic and
military, is the base for Free World security. Its national resources
of capital, skills, goods and services are the base for Free World
development. Its growth as a market is vital to Free World trade.
The soundness of its dollar, dependent in large measure upon the
competitive capabilities of its economy, is the basis for the
Free World trade and payments system.
Despite our innate strength, the last half of the Fifties was
marked by some deterioration in confidence in the vigor, growth
potential and competitiveness of the American economy on which so
much depends -- and not without reason.
Recoveries from recessions failed to reach a satisfactory rate
of utilization of resources, much less sustain the desired pace over
aDDreciable periods. Even more disturbing than a tendency to
- 3 -
484
recurrent recession was the fact that expansion of the U. S. economy
was marred by higher peaks of unemployment, lagging growth rates,
budget deficits, and continued unfavorable imbalances in our
international payments.
What are some of the significant elements in this cloudy
background of the last five years?
-- After sixty months of unemployment in excess of five percent,
unemployment is still running over five and one-half percent.
-- Our national growth rate of 2.7 percent from early 1955 to
the present compares unfavorably with regular rates in Western
European countries of four, five and six percent -- or even our
own four percent trend in much of the period prior to 1955.
-- OUr balance of payments deficit for 1962 remains somewhat
in excess of $2 billion -- a considerable improv~ment over the
$3-1/2 to $4 billion annual deficit that characterized the years
1958-60, but still a serious challenge.
-- Deficits in the Federal administrative budget in all save
one of the last five years totaled $24.3 billion. Over half of the
total was due to a $12.4 billion deficit in 1959, resulting from an
unanticipated recession, and the total included an estimated $8.4
billion deficit in fiscal 1963, resulting from a failure of the
economy to approach its potential.
In 1956 and 1957, for example, business fixed investment
averaged nearly eleven percent of total output. Since that time
it has fallen to roughly nine percent. The rate of increase in our
stock of business plant and equipment has substantially diminished
since 1957, rising by less than two percent a year since then,
compared to four percent a year in the 1954-57 period. There has
been a disturbing rise in the proportion of our machinery and
equipment which is over ten years old. A recent survey of the age
of machine tools in the U. S., by the American Machinist Magazine,
sh~s 64 percent to be at least ten years old -- a worsened picture
since the last survey in 1958. Similar estimates ·show much lesser
percentages of equipment over ten years old in such major competitor
countries as France, Italy, Germany, the United Kingdom and the
U.S.S.R.
__ Between 1954 and 1960 there was a sharp decline in the rate
of inccease of productivity per worker and per hour from that of the
earlier postwar period.
485
- 4 -- With the exception of the depression, no period of comparable
in this century has witnessed such a disturbing undertilization of productive resources in the United States. And,
urely, at no time since the U. S. became a major industrial power
as it so risked its leadership because of an obsolescent national
lant.
~ngth
These are some of the facts that have joined every major segment
f our economy in a consensus that a mild and sporadic prosperity
acking a strong and substantial push forward in th~ last five years
S less than we require and less than t~e cim accept.
There are, of course, long-term factors which brighten the
;loomy horizons of the past five years. Sometimes our national
Ireoccupation with the ups and downs of the business cycle, by
I~ths and quarters, causes us to ignore or underestimate the longer
:erm factors on which longer term plans should be based. Let me
~ntion a few and develop their relationship to new public. or tax
lolicies.
First, as significant as any, is the manifest will of the
~eaders of both parties, of business, of labor, and of the citizenry
:enerally, to face realities and undertake the task of making the
Unerican economy more productivE! and more competitive. This will
Ind determination is manifest in a wide recognition of·the need to
:nact this year a balanced tax program -- one that will benefit
loth consumers and producers, both workers and investors, with
:onsequent cumulative benefit in terms of investment and jobs,
)rofits and incentives, consumption and productivity.
Second, our growing labor force can give a powerful impetus
business expansion. We have only to look to Western Europe,
ihich is plagued by labor shortages constituting ceilings on growth,
to recognize that our growing labor force is an asset as well as a
l"espons ibility.
to
To promote the availability of trained manpower and meet
!'structural unemployment", major labor market policies were adopted
during the past two years. These included a greatly improved and
expanded United States Employment Service, with increased emphasis
on youth counseling, a new Manpower Development and Training Act,
and the Area Redevelopment Program. In addition, there are proposed
for public policy adoption a Youth Conservation Corps and a Home Town
Youth Corps.
- 5 -
488
Even more fundamental is the need for public policies that will
nelp our educational system raise the skilled level and occupational
flexibility of our future labor force and also strengthen our
research and development activities and technology program. To
accomplish this, the Administration has submitted a comprehensive
education bill -- the National Education Improvement Act of 1963.
Given stepped-up education, manpower training and retraining
to adapt our expanding labor force to an increasingly industrialized
society, this labor supply should be an appealing ,challenge to
foreign as well as American capital.
But capital investment will not be conjoined to trained manpower
for new production unless the prospects for markets and profits hold
promise. Wise tax and related economic policies by government
designed to provide demand and investment incentives can assist the
nation in utilizing its trained manpower as a growth potential.
Third, the unprecedented expansion in research and development
in both defense and non-defense industries is another major longrange factor brightening the prospects for the U. S. economy in the
Sixties. A rising industry of discovery is fostering a large and
growing demand for new products, new processes, new methods of
distribution, new services, and new uses for existing products and
services.
Public policy in this area is being focussed on a program to
support and stimulate 'civilian technology, lest the heavy
concentration on research and development in defense and space
activities and shortages of scientific manpower leave gaps in the
technologies directly oriented to civilian markets.
In steps undertaken to give priority to private incentives and
activities, some specialized tax measures playa part -- in 1962
the investment tax credit and the administrative liberalization of
depreciation -- in 1963 the proposal that capital expenditures for
machinery and equipment used in research and development be
allowed as a current expense deduction at the option of the
taxpayer. These measures strengthen the motivations of business
firms to carryon private technological activities, producing
profits through investment in machinery, equipment and related
activities.
- 6 -
There will be a limited stimulation of technical development and
research under private auspices through Federal financial support to
basic industrial research, primarily as research grants or contracts
to universities and research institutions. Also, private efforts
nay be stimulated by the proposal that the Department of Commerce
sponsor a pilot program for an industry-university engineering
extension service.
But the fruits of a developing technology will not be realized
unless capital formation translates them into plants and jobs. The
lag in the pace of capital formation to take advantage of invesbnent
opportunities inherent in our national research and development can
be shortened by tax policies that promote consumption demand and
invesbnent incentives in an interrelated pattern.
The conjunction of new technology with improved tax policies
will allow our economy to take advantage of a fourth major long-range
factor favoring business expansion -- the growth of new markets at
home and abroad.
Economic expansion in Continental Europe, other areas of
North America, and Japan provides increasing market opportunities
for our producers. But economic development is not confined to the
industrialized nations. The less developed countries are also
advancing and, for the long run, we can look to them for expanding
markets.
Of equal importance are new internal markets. We are now
approaching a period in the latter half of the Sixties when the
crop of "war babies" will increase the rate of family formation.
Per 'capita disposable income in existing family units -- adjusted
for inflation -- has increased almost 70 percent in the last two
decades. Personal savings are high, amounting to a record-breaking
$26.2 billion in 1962.
To maximize U. S. market opportunities in international trade,
Congress gave authority to the President in the Trade Expansion Act
of 1962 to bargain down tariff walls. But gaining entry for our
goods and services is only part of the story. Once there, they
must be competitive as well as capable of holding their own in a
home market more accessible to foreign producers as a result of
reciprocal trade liberalization. The competitive efficiency of
American producers, in turn, is directly related to the level of
investment in the most efficient plant and equipment, as well as wise
price and wage policies. Here again, tax policies can stimulate
conversion of national opportunities into reality.
- 7 A fifth major long-range factor brightening the prospects for
accelerated business expansion is the other side of the coin viewed
darkly a few moments ago when we spoke of machinery obsolescence
and the lag in business investment since 1957. Consider these
basic forces now turning more favorably for capital investment:
-- the .necessity to compete effectively in markets at home
and abroad under liberal trading conditions;
-- the large quantity of relative obsolescence in existing
capacity capital, and
-- the fact that capital goods are becoming cheaper relative
to labor and materials.
Assuming even modest increases in output to meet heightened
demand and some increased incentives in the form of profit
opportunities after taxes, a real potential exists for full scale
capital goods expansion which has been missing for so long.
So we see that at every turn, the overall combination of
long-range factors for business expansion -- trained manpower
availability, new technology, new markets and an increased capital
goods demand -- presen~a promising picture indeed -- provided that
we can match our opportunities with wise tax policies designed to
release their potential.
During the first year of the present Administration a reasonably
satisfactory recovery and expansion from the 1960 recession gave
hope that the nation was breaking the grip of slow growth and belowcap~city operations.
Under these circumstances, President Kennedy
gave first priority to the adoption of tax policies that would
encourage investment in machinery and equipment.
This resulted in a two-pronged program -- now an accomplished
fact -- administrative liberalization of the tax treatment of
depreciation and the legislative enactment in 1962 of the investment
tax credit.
The change in the administrative rules concerning depreciation
d~more than reduce the lives of machinery and equipment for
depreciation purposes to conform to up-to-date practice; it speeds
the translation of the product developments from the laboratory to
the production and distribution line in an ever faster cycle; it
encourages the maximum competitive efficiency. It adopted a new
test that permits the businessman to fix his preferred life for
- 8 -
489
machinery and equipment, provided only that his actual replacement
pattern conforms to his estimate in a reasonable period of time.
The invesbnent tax credit reduces current taxes for a business
by seven percent of the annual expenditures for new machinery and
equipment. It was also designed to provide an incentive to
translate discoveries of new products and new processes into economic
growth and to achieve the maximum competitive efficiency.
These two programs constituted a breakout from the vicious
cycle of· slow past replacement patterns which has characterized our
tax treatment of depreciation for more than a decade.
For the first time in many years, these changes place investment
in new equipment in the United States -- so far as depreciation for
taxes is a factor -- on a basis roughly comparable to that of other
industrialized countries.
It will undoubtedly take many months for the impact of these
new policies to be fully felt. But the increased cash flow, the
substantial decrease in the period of risk, resulting from both
measures, and the effect of the investment credit in making new
invesbnent more attractive by making it more profitable will have
far reaching consequences.
Already, sharply increased business appropriations for investment
and the forecast of a rising trend of outlays this year indicate
that these tax policies are playing a significant part in1the move
toward growth and increased efficiency, which brighten the prospects
for the U. S. economy.
At the outset of 1962, after nine months of rapid recovery,
the expansion of the United States economy slackened. Between the
fourth quarter of 1961 and 1962 the gross national product rose
barely enough to permit the nation to hold its own on rates of
unemployment, profits, and capital investment. The overriding
lesson of this 1962 slowdown was that the pattern of slow growth
since 1957 rather than the temporary spurt in 1961 was the true
measure of our economic problem.
This set the stage for the second major phase of forging a tax
policy responsive to the times. In January 1963, the President in
his. State of the Union Message made a new tax program his number
one legislative objective for 1963, stating that, "This is the most
urgent task confronting the Congress in 1963."
- 9 -
4 q ()
vv
This tax program is based on the principle that there is a clear
need for tax policy changes that will further increase consumer
demand and investment incentives. It is a balanced program designed
as the President said, "To expand demand among both investors and
consumers, to boost the economy, in both the short run and the long
run, and to achieve in time both a balanced full employment economy
.
and a balanced Federal budget."
In summary, the proposal would reduce substantially tax rates on
individual and corporate income and capital gains at all levels --'
reversing a trend of over thirty years which has witnessed tax rates
on income moving upwards in war and in peace. It would lift in some
measure the repressive weight of tax rates imposed partly to
constrain war and early postwar inflationary measures -- and now
exerting too heavy a drag on our overall economy, particularly during
periods of recovery toward an adequate rate of growth. The major
reform in this tax program is the substantial reduction in tax rates,
resulting when fully effective in 1965 in a net cost of $10.3 billion
in revenue s •
Today this program is only a set of proposals advanced by the
President and the Treasury; they depend for their acceptance upon
the will of the Congress as its members reflect the opinion of their
constituencies.
, This summer and fall the American people and the Congress will
have to answer a question which has more bearing on the prospects
for the U. S. economy in the Sixties than any other that could be
asked. It is this: In view of the way the economy is moving upward
in 1963, why do we need to enact a program of tax reduction and
revision?
There are five cogent reasons for the President's program:
First, it is long-range -- not merely a shield against an early
recession, but a means to achieve full employment, an increased
rate of economic growth, balanced budgets and equilibrium in the
balance of payments. The economy is not accomplishing these goals
even though current performance is brighter than last year.
Despite the past year's continuing recovery and the recent
surge in business activity, more people were out of work last month
than in April 1962. We created only enough new jobs to match the
increase in our labor force. And the rate of newcomers to the workforce will rapidly expand in the years ahead.
- 10 -
4Q ,
voL
The average utilization rate of industrial capacity -- after
two years of recovery -- matched that of a year ago -- 10 percent
below the average preferred operating rate.
Thus, our rate of growth is far from adequate to utilize fully
our productive resources in manpower and equipment.
Despite encouraging economic prospects, the recent upturn will
serve only to decrease a $9 billion deficit in the Federal budget,
without tax reduction, to an $8 billion deficit. We are still
confronted with the unhappy choice of. failing to meet urgent national
needs or operating at a substantial deficit. Nor has the current
expansion provided the opportunities for invesbment and profit that
would retain or attract capital into the U. S. economy which would
balance our international payments.
No! The problems that prompted the tax proposals are still
there; they remain to be solved.
Second, there is a continuing need to stimulate demand in the
~conomy by a tax reduction that will put increased purchasing power
into consumer hands. Consumers will buy more goods if 8.5 billion
more dollars are left in their pockets in after-tax income. Such
additional purchasing power provided for individual incomes under
the propos·ed program, will, in turn, add further to incomes, leading
to higher private spending and another round of increase in incomes.
This continuing process, with its multiplier effect, will provide
purchasing power several times over the original amount of the
individual tax reduction. Increased consumption will induce increased
investment in inventories and bring plant operations closer to the
capacity utilization, or high cost plant utilization which prompts
modernization and expansion. Residential construction will also
increase.
Third, there is a continuing need to encourage business
investment by individual and corporate tax reductions which will
provide more funds for invesbnent and raise after-tax profitability
of new capital outlays. Despite the record $40.1 billion total of
projected plant and equipment expenditures for 1963 disclosed in the
recent McGraw-Hill survey, these totals are far short of the level
of private business investment needed to reach our national goals.
Total gross private domestic inveSbnent is the one major component
of economic activity which has shown no upward trend in recent
years -- returning to its 1955 peak of $75 billion (in 1962 prices)
only in 1962. In the meantime, gross national product had risen by
21 percent -- clearly revealing private invesbment to be the lagging
component.
- 11 -
492
The pervasive favorable effects of tax cuts on after-tax profits,
on business and consumer confidence and expect~tions, on steadier and
increased employment, and on attractive opportunities to exploit more
rapidly growing consumer markets, will encourage private investment.
Consumer demand will interact on investment incentives to produce
a far greater total addition to income and gross national product than
if the tax program were concentrated on one or the other sector alone.
Fourth, the repressive weight of our obsolete temporary tax
structure, imposed to meet war and inflation, will be permanently
lifted.
The retention of these outmoded income tax schedules, coupled
with the increase in levels of personal income and the rapidly
rising state and local taxes, means that today the total of all
taxes on noncorporate income is approximately 24 percent of gross
national product. Even during ~he Korean war it was only 20 percent.
A beginning must be made in holding down this sharply rising
tax burden. If Federal income taxes are cut and the economy grows
as predicted, additional revenues will be available to states and
localities at existing tax levels. This will enable them to
finance an additional $3 billion of their public needs without
increasing state and local tax rates.
Fifth, the expectations and confidence ,that have been imparted
to the private economy as a result of the proposals to change tax
policy will be confirmed as long-range factors. The expression of
a national conviction, embodied in a tax law, that high taxes retard
the growth of our private economy will have a profound effect. The
nation will have reincorporated into its tax' system a reassuring
allegiance to the principle of rewards. The leaving of increased
percentages of income after taxes with those who invest additional
personal effort or capital in economic activity will surely spur
growth. This recognition and invigoration of the profit motive,
personal and corporate, will give the psychological motivation that
a private enterprise economy must have for maximum effectiveness.
Those who put forward and support these proposals believe that
thp. returns from them will more than pay for the revenues lost; that
they will strengthen the economy by providing job opportunities and
national economic strength and competitiveness.
- 12 Regardless of one's views about the level of public expenditures
or the need to reduce, maintain, or expand the Federal budget, all
~ho seek to achieve a stronger economy can join hands in the
essential task of updating our tax system to the challenge of the
Sixties. By so doing, the nation will enable the private sector
of the economy to grow at a faster rate, fast enough to provide
more jobs and the ever increasing standard of living for all who
work for it.
Moreover, we shall adapt our economy to another challenge -external competition and the imbalance of international payments.
The proposed tax program, combined with the tax policies of 1962,
should better enable the nation to continue to play its. leading
role in Free World security and development. Its sharpened
competitiveness should better enable it to achieve a balance of
payments through the expansion of a trade surplus. A new era of
growth and increased profitability should encourage capital to stay
at home and foreign capital to flow into the United States or into
United States companies.
Far more, then, is at stake in current tax policy than a
selfish scramble as to who pays taxes or whether we can get through
1963 'without experiencing again a faltering economy. The shape
and direction of the American economy for years ID come hangs in the
balance on tax policY,decisions just ahead. Strong affirmative
action will brighten immeasurably the prospects for the American
economy in the Sixties.
000
r.>R REU.AS~ A. M. fn"NSPAPEllJ,
tueSdAY, Y~l 21, 196,.
,~
RESULTS 01 TWSCRI' S
\'~Lt
20 '06)
,~
Q.A
4v'1
BILL Of'rr...RDO
the TnUUl"T De.,artaent ennoanced 1ut eftll1Dg that tho tenders tar ,., RI'1ea of
T"UU1'7 bID., ana ••riel to be an add1t.1ooa11ane or the bUll dated ,.~ 21, 1
aM \be otller ..riel W be dAwd K.q 23, 1963, which wen ott.nct on Mq lS, . . .
opened at the "deJ'al n...n. 1SaDk. 00 MaT 20. Te~
1ndt.e4 tor U,:JOO.GOO.OO
or tbere&bout., ot 9l-dq bUla and tor $eOO,OOO,OOO, or tbereabollt., or 182-dq ~
The deta1la or tbs two .. rie. are .. toUowe.
_1"8
91-dq treasury bill.
ItUmE 07 ACCEptED
COOPEtIlm BIDS.
19U
_turing l~\ 22.
J.PPI'\I~. ~ • •
Price
AnnUal Rate
99.270
99.260
99.261.
-
2.ee8~
2.921~
2.922~
I
•
•
I
Y
••
96 peroent ot the usount. ot 9l-dq bUla bid tor at the low price vaa ao0epte4
57 percent. ot t.he aount ot 162-cSa7 bUl. b14 tor at. tote low pz1.ae ".. . . . .P'M
DtltrlC\
Appllad for
i
Boat.oa
Hev York
1'bUadelph1a
28,141,000
I,S76,6S0,000
29,)20,000
211,)81,000
CleftlaD4
Mcha0D4
19,670,000
2),477,000
AUant.a
Chlcaro
2b),8S6,00J
st.. tou1.
hO, 561, 000
lb,6S4,OOO
IU.Me&pol1e
lauu C1\;r
29,~S,OOO
Dell ••
SaD lr'anc1aoo
MAtS
)6, l24, 000
U2.897.. 000
t2,179,S62,OOO
AE.e!1ed FoI-
lOC'Eted
28,747,000
•
,
ij,6l2,&i6
1,16l,)09,ooo
829,950,000
14,)20,000
10, 671,QC'IO
~
~,)8l,OOO
16,550,000
21,391,000
110,728,000
17",661.000
14,197,000
7,)81,000
!I
,,167,000
6,136,000
SS.ws,OOO
S,762,OOO
14,811,000
12,UJ,OOO
lJa.m.OOO
U.689.000
10,~O,OOO
24,~5,OOO
23,9~,OOO
$l,)0l,6Sb,OOO
S,6n,GDO
U,~OOO
ue,615,OOO
)4,S21,00'J
12, el1&, 000
l00.. 2l7.000
aa,id)
6oS,m,aao
76.2III~
$1,412,481,000
a/ Include•• 221,18S,(X)() noncampeUt.ly. t.eMer. accepted .t.
the aftr.,e
a,Sbo.OOO
"261,000
S6altn.cm
t8OO,)86,ooo
pr10e of
".~
!I Include. $$6,)15,000 DOnOc.pet.lt1ft tendere accepted at the a..l'ap pr10e of ,8.k1l
Y On a coupon laue of the 8UMI 1.ngUl and tor the . . . DOWIt. 1Dft.t.ed, the a..... t
thaI. blUa vould proYlde Jielc!a of 2.9S,S, tor the ~1-dq bUl., &Ad l.~. tor "
182-dq bUl.. Int.re.t rat.e. on bW. are quated in t.nntI ot be.nk cl1eo<Nat. vltla
the return related t,o t.t.e tae. aaount. ot the bUll paJ&ble at -.t.urit.7 ntIaer ~
t.ba aIIOUDt imeat.e4 aDd U-.elr luath 1n actual DUZDbeI" ot ~ related \0 al6O-4a.J
~&r. In contrut., Ji.lda on certificate., DOte., ant! txmcS8 an OOllPl\e4 1ft __
ot inteRn 011 the PCNIlt. 1Dft.ted, and ...late t.he IUIber or dap JWlA1nl DC 1a ...
lnt.ereat. P&yMnt. period to the actual maber ot da1' lD the period, v1t.h In t ....
~07 OM coupon period 1. 1nYolw4.
,
::
TREASURY DEPARTMENT
WASHINGTON, D.C.
OR RELEASE A. M. NEWSPAPERS,
~sday, May 21, 1963.
May 20, 1963
~
.
-,
RESULTS OF TREASURY'S WEEKLY BILL OFFERING
, The Treasury Department announced last evening that the tenders for two series ot
biJ.1s, one series to be an additional issue of the bUls dated February 21, 1963.
iii the ot.her series to be dated May 23, 1963, which were offered on May' 15, were
ened at t.he Federal Reserve Banks on May" 20. Tenders were invited for $1,300,000,000,
~ thereabouts, of 91-clay bills and for $800,000,000, or thereabouts, ot 182-~ bUls.
Ie detai1s of the two series are as tollows:
'easury
iUGE OF ACCEPTED
IlPETITIVE BIDS z
High
Low
Average
91-day Treasury bills
maturing August ~22 1963
Approx. EqUiv.
Annual Rate
Price
2.888%
99.270
99.260
2.927%
99.261
2.922%,11
182-day Treasury bills
matur1ns November 212 1963
Approx. Equiv.
Price
.Annual Rate
98.490
2.981%
98.478
3.0ll%
98.481
3.005% !I
:
:
:
z
:
s
96
percent of the amount or 91-~ bills bid for at the low price was accepted
'57 percent ot the amount of 182-day bills bid for at the low price was accepted
-:,
lUI, '1'ENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
District
Boston
lew York
Phil adelphia
CleveJ.and
itcbmond
Atlanta
Chicago
st. Lads
K1nneapol.1s
tansas City
Dallas
san Francisco
: '·~TOT.ALS
~
,
Applied For
$ 28,747,000
,1,576,650,000
29,320,000
24,3 81,000
19,670,000
'23,477,000
243,856,000
40,561,000
14,8.54,000
29,045,000
36,124,000
112 2 897 z000
$2,179,582,000
Accepted
$ 28,747,000
829,950,000
' 14,320,000
24,381,000
16,550,000
21,397,000
170,728,000
34,521,000
12,814,000
24,045,000
23,964,000
1ooz237z000
$1,301,654,000
.
I
Applied For
I
I
$
23,632,000
1,161,309,000
',10,677,000
I
17,661,000
:
14,197,000
z
'7,381,000
I
118,615,OOO
J
10,040,000
I
5,762,000
••
14, 811, 000
:
12,119,000
I
76,,271 2000
$1,472,481,000
I
!I
Accepted
$ 16;482,000
605,919,000
5,677,000
11,661,000
3,767,000
6,736,000
55,465,000
8,540,000
3,262,000
14,7ll,OOO
11,689,000
56,,477 2000
$800,386,000 ~
$221,785,000 noncompetitive tenders accepted at the average price ot 99.261
Includes $58,.315,000 noncompetitive tenders accepted at the average price of 98.481
On' a coupon issue or the same length and for the same amount invested, the return on
these bills would provide yields of 2.98%, for the 91-day billa, and 3.09%, tor the
182-day bills. Interest rates on bills are quoted in terms of bank discount with
the return related to the face amount of' the bills payable at maturity rather than
the 8JJlOunt invested' and their length in actual number ot days related to a 360-da.y
year. In contrast, yields on certificates, notes, and bonds are computed in tenD.3
of interest on the amount invested, and relate the number ot days remaining in an
interest payment period to the actual number of days in the period, with semiannual
compounding if more than one coupon period 1s involved.
~udes
D-857
498
- 7Impact of the
_eir.
,..osr- rill b&ve •
far gnatu eff. . . . . . .
. .1fue of the 1a4.1vfAual the vUl the extra
no.lft. !hoM au. _lJ.ata.., be ftr/
ecoDQDU effect of Jrlatac f.DcoaIel.
~
procluc:cioD, aid
SO faRber . . laae
Ice __
loDa-.
It waY
rr..u.t baa
die
P"owt.aa •• and. laa'uaillll .......
tacaelvea
f~
t.aveaca••t will
.t"...
.e........ .
tboa'ouab-aot.aa atc'" _ . . . . ..
aut.oue ___10 pnbt... It ..-lea JOt6r
i'
l1aporc.~ . . .
off. . . . . bal._ ... equitable ....r ••
-.buu. • __ ad
___a it wu1Al &1-
tar . . -«&11
boCll 1a tena of . . . . . . . . . .-
. . 1D tens of hlp.. llviaa
!be
~
I'iea.
1Ibo~
ap~
• bett. JJ.fe, fUW with . . . hope ad
000
for •
p~.
-"Ice
t.a .........
f_ . . .,101 •.
CD
eltbal: appl'OaCb aclual..l,.
(j.:.l
Althou&h per'8G'Ial
~ tax
rat. nduotlmla vU1
puC • • •
498
-5l:ax
reaue~lon
'for low and middle ineome' groups will lncre•••
conlumer demand-and prOVIde an
~dIate
But we allO leek 8USClllDea acceleraCI0n
toprOVlae' JODS 1.n cna tucure.
SCUDU1US
Ot
our
~o ~e .Cgn~.
ra~e 01: 8COD0IIl1C
growth I
AD 1.ncreaae 1.n DUY1ng power .Ioon. can-
prolperity for all Americans, we need the -contlnuec expansion 1n
p~o-
duetlon;".ervlce;·-and·COftsumptlori tlhlCh'onlY greater Investment can
generate.
~We
·Med·. -long-range -approach 'to the cauaes of 'our un•• tis-
faotory rate or- eeonomie growth -- 'a program WhIcn . Wl1l . roster lDveat#
ment"ln' 'new planes,- new 'prodUcts. and' the wide . variety "oreeonomic
activity which maintain.
~ineome
-and consumption at high 1. . .1t.
In 'our tree1llArket 'economy, "the motive for investment -- in nev
planta and Proc1UCtll '-- 'In 'TellearCh 'and developmene -- 1D snort, 1n
the sort·of :1mrestment that rill creace new
-JaDlI -- '111
-profS
To prcmote
49.9
per.oD.to . . . . ,bla
f_l1J·aDtI.~hOUMhol.-frGlll
OGa,part!ol
-~b7
~t>j;
to' aaodler Y'1ho••. refona vera! .pec 1 fica 11,. . daaiped ~ to ~.... ebe 1-.
billion' & - per.onal. iDe__ , tu.liabilit1ea.~i
.
It·;'.fOUlcl;ll.~i. f~f:J'-fOUl
-
\.....
dum: .30 auto! ""&7 .$100 ,in ,... . .1·,1De. . ·~tua
•. 0011ee". -..ald.
. " ... - - .. -- - .. ....
",-~.,,:
,
500
.the taa 'pYOar- .lao fftlCOIl'U"
-couplu
ove~
the :.pactal ;prObl"'~l_lfIilI"'·cry
65 .. - would 11. . half 'lea· b._fits to tho•• with 1ncc.e.
additional $100 for each dependent would &rut mor8 .tbaa~"OO~lton
tD·~
relief to low-tDco.. fami1ie ••
502
REHARIS
or
THE HONORABLE DOtx:LAS DILlDtI
SECRftARY OF mE TREASURY
BEFOllE THE
SECRETARY or LABOR'S CONrERDtCE
lOR"': WOI: IDltoIS)T:H'tfH 4.rDN tl5l.(Jr.~ l
~HINGTON,
D.
c.
K>NDAY, MAY 20, 1963, 2130 P.M •• EDT
of --tne . t'J:8atdeat
~
pnpo-.
counUY'8DjOJiftI ~.l.tl." pr. . .~ttJ. there are .till .tllioaa of
4J ~ }-L,- B-
Th~
pro£.:,,~;~!!
e_~ fi04
tax
who
peop~
TREASURY DEPARTMENT
Washington
FOR RELEASE:
ON DELIVERY
REMARKS OF THE HONORABLE DOUGLAS DILLON
SECRETARY OF THE TREASURY'
BEFORE
THE SECRETARY OF LABOR'S CONFERENCE
FOR LABOR EDITORS,
HAMILTON HOTEL, WASHINGTON, D. C.
MONDAY, MAY 20, 1963, 2:30 P.M., EDT
At the outset of my remarks about President Kennedy's tax proposal~
I want to say that the Administration is deeply concerned with lagging
economic growth, idle plant capacity, and unemployment. But we are
even more deeply concerned with the impact they have upon the lives of
the men, women, and children of America.
As labor editors, you know that economic growth is more than a
that idle plant capacity is more than a statistic, and
that unemployment is more than a figure in a government report. You
Can assess -- in human terms
both the potential and the urgency of
the President I s program.
~rcentage,
You know that unemployment has remained at more than five percent
for more than five years. You know that even now, with most of the.
coUntry enjoying relative prosperity, there are still millions of
~ople who cannot find work.
You know what that means to them. and to
their families.
President Kennedy's tax program was specifically designed to help
jobs -- that is one of its major purposes. Jobs are critically
l1eeded today -- and will become more so if we do not ac t this year.
~at is what makes the need for tax action along the lines President .
~nnedy has recommended so urgent.
That is why he has clearly labeled
the tax program the most important business before the Congress.
~reate
~o
All Americans will benefit ultimately, but immediate help will
to the poor, the elderly, and those with spe.cial problems.
The proposed minimum standard deduction, for instance, will help
Low income people -- particularly those with large families. Providing
a minimum deduction of $300 for an individual, $400 for a couple, and
In additional $100 for each dependent would grant more than $300 million
Ln taX relief to low-income families.
- 2 -
504
The tax program also recognizes the special problems of the
elderly. The $300 tax credit for persons over age 65 -- $600 for
coup1es over 65 -- would give half its benefits to those with incomes
of $5,000 or less. Practically all of the remaining benefits would
go to those with less than $10,000. The overall effect of the tax
~ogram would totally eliminate the tax liability of almost half a
aillion of the elderly who now pay taxes, and spread nearly $800
aillion in tax reduction among those over 65 in all income brackets.
Another proposal would lighten the burden on families with only
parent and on lower-income families with working mothers by
allowing a more generous deduction for their child-care expenses.
Still another proposal to make essential moving expenses deductible
acknowledges that a job, or a change to a better job, may require a
~rsan to move his family and household from one part of the country
to another~ All of those reforms were specifically designed to
reduce the impact of Federal taxes on those of limited income.
~e
The program's greatest benefit, of course, would be the sizable
rate reduction in all personal income brackets. With top-to-bottom
rate reduction, the overall effect of the program would be to cut
$8.7 billion from personal income tax liabilities. It would give
forty-four percent of that reduction to taxpayers with incomes of
$7,500 a year or less. In other words, the taxpayers in that group,
~o nOW pay more than $30 out of every $100 in personal income taxes
~ollected, would receive $44 out of every $100 of tax reduction -- an
average cut of twenty-six percent in their tax liability.
There is no better proof than these figures that the President's
tax-program clearly recognizes the human needs which, collectively,
Ilake up our economic problems.
Tax reduction for low and middle income groups will increase
demand and provide an immediate stimulus to the economy.
lut we also seek sustained acceleration of our rate of economic
.rowth, to provide jobs in the future. An increase in buying power
;lone ~annot create the jobs our youth will need in years to come.
~onsumer
To reach the goal of full employment and a fair share in our
Irosperity for all Americans, we need the continued expansion in
Iroduc tion, service, and consumption which only greater inves tmen t
:an generate. We need a long-range approach to the causes of our
~satisfactory rate of economic growth -- a program which will foster
~nvestment in new plants, new products, and the wide variety of
~conomic activity which maintains income and consumption at high
.evels.
- 3 -
SOt;
\J
In our free market economy, the motive for investment -- in new
plants and products -- in research and development -- in short, in
the sort of investment that will create new jobs -- is profit. To
promote growth, we must have greater incentive for constructive.
investment. If we are to achieve this goal, investment must be
aade.attractive today, and remain so.in the future. An individual
or a company must be able to hope for an adequate return on invesL.ed
capital, whether in the form of dividends or in the form of profits.
America can benefit most from a balanced program of tax
reduction and revision -- a program which not only benefits people
directly and relieves hardship, but also stimulates activity and
~owth throughout the economy.
Our goals are more jobs, better
jobs, and a higher standard of living for all. A program which
stimulates both investment and demand has a much greater job~oducing potential over the long haul than a program which relies
~ either approach exclusively.
Although personal income tax rate reductions will put more!
dollars into the pockets of the individual, the overall stimulative
~act of the entire program will have a far greater effect on the
~lfare of the individual than will the extra take-home pay he will
receive. Those extra dollars may be very important, but the
economic effect of rising incomes, growing demand, increasing
production, and keener incentives for investment will go farther
md last longer, both in terms of more and better jobs and in terms of
bigherliving standards.
The President has offered a balanced and equitable program.
It would mobilize a broad and thorough-going attack on our most
serious economic problems. It merits your wholehearted support
because it would give Americ.a a springboard for a long step toward
• better life, filled with more hope and promise for everyone.
000
TREASURY DEPARTMENT
Washington
lOR RELEASE P.M. NEWSPAPERS
~SDAY,
soc
MAY 21,1963
REMARKS OF THE HONORABLE HENRY H. FOWLER
UNDER SECRETARY OF THE TREASURY
BEFORE·
THE SPRING MEETING, NATIONAL OIL JOBBERS COUNCIL
MAIN BALLROOM, BENJAMIN FRANKLIN HOTEL, SEATTLE, WASHINGTON
TUESDAY, MAY 21, 1963, 3:30 P.M. (PST)
THE SMALL BUSINESSMAN'S STAKE IN THE
PRESIDENT'S TAX PROPOSALS
There are 4-1/2 million small businesses in the American economy.
percent of all American business firms. That is
in designing and submitting to the Congress his tax
proposals to stimulate long range economic growth included recommendatioI
to benefit this vital sector of our economy.
~ey constitute 95
~hy the President,
The President called for $13.6 billion of rate reduction, $800
million of revenue-losing structural changes to relieve particular
hardships, and $4.1 billion of base-broadening revisions to eliminate
unjustified preferences and make the rate reductions possible. That
works out to $10.3 billion of tax reduction when the program becomes
fully effective. The benefits of that reduction will flow -- directly,
indirectly, and with increasing effect -- to every corner of the
economy.
The overall benefits of the program to small business are
generally recognized. Everyone agrees that lower taxes for small
firms will be of direct benefit. It is clear also that the stimulus
to the economy from the tax proposals will provide an expanding
environment in which small businesses can not merely survive but
flourish. A few proposals have been criticized by some representatives
of small business. Do these few proposals cancel the admitted benefits
of the overall program so far as the independent, small businessman
is concerned? To see that they do not, it is necessary to analyze the
program and to weigh the tax reduction proposals against the proposals
for structural revision and reform particularly as they affect small
business.
The most important way in which the President's program would
benefit small business is through lower tax rates. Under his proposals,
all small business enterprises -- whether they are corporations,
partnerships, or sole proprietorships -- will enjoy substantial tax
reduction.
D-859
- 2 In the corporate area, both in amount and timing, the proposed
rate reductions will be especially beneficial to small business.
To provide maximum incentive in the quickest possible time, corporate
rate reduction is focused in the small business range of corporate
income this year. That is where the first corporate cuts come;
general corporate rate reduction would come in 1964 and 1965.
. Effective beginning with 1963 income, the President proposed to
reverse the present corporate normal and surtax rates. Companies
with net income of $25,000 or less would be subject to tax at a
rate of 22 percent instead of the present 30 percent. The general
corporate rate of 52 percent on income above $25,000 would thus
remain unchanged in 1963. But the benefits of the immediate
reduction on the first $25,000 of income would also immediately be
felt by medium-sized firms with incomes above $25,000. For 1963,
the rate reversal means a reduction of 27 percent in tax paid by
corporations with incomes of $25,000 or less and reductions of 10
percent at $50,000 net income and 4 percent at $100,000. This
proposal for rate reversal, it should be noted, is one long advanced
by representatives of the small business community. The addition of
this simple and realistic tax adjustment for small business would
mean immediate tax reduction totaling $233 million in 1963 for
467,500 companies with incomes of $25,000 or less -- that is, for
more than four-fifths of the total taxpaying corporate population.
Corporations with incomes above $25,000, but still small in
relation to some of the largest businesses, could expect impressive
benefits from the reversal of the normal and surtax rates. But they
would benefit yet further from the successive reductions to bring
the general corporate rate down to 47 percent by 1965. When fully
effective, these reductions would amount to 16 percent for the
corporation at the $50,000 income mark and roughly 12-1/2 percent
for the $100,000 income corporation.
Nevertheless, rate reduction on the first $25,000 of earnings
means that the overall reduction in corporate tax rates would
continue to be proportionately larger for small companies. In 1965,
when all three steps of the corporate tax cut are in effect, the tax
reduction for small companies would be greatest. Reduction for
companies with profits of $25,000 or less would amount to 27 percent;
for those earning $25,000 to $50,000 it would add up to about 20
percent; for those earning froln $50,000 to $100,000 annually, it woul
be about 14 percent.
508
- 3 -
Small companies realizing higher after-tax profits and earnings
would find that the tax program will have helped to remove one of
the most persistent deterrents to small business growth -- lack of
adequate capital. Tax reduction, by increasing the volume of earnings
that can be used for expansion and modernization can help relieve the
need to rely on costly, continually refinanced, short-term credit.
Prolonged borrowing of excessive amounts in any form is no substitute
for retained earnings which are the best and most reliable type of
financing for the small businessman. Frequently it is necessary for
the small businessman to borrow significant amounts in order to take
advantage of new opportunities. But the ability to obtain such funds
at the right time, in proper amounts, and on reasonable terms rests
on the improved prospects for profitable operations. Not only will
the President's tax program directly increase these prospects by
reducing taxes on small firms, but the increased assurance of growing
consumer demand will help underwrite, indirectly, every new loan
made. If the President's program is successful, short term distress
borrowing based on past problems will be replaced by long term
borrowing directed to the future improvement of earnings.
To put the resulting improvement in after-tax profitability in
very specific and concrete terms, the proposed percentage point
reduction in the corporate rate on the first $25,000 would increase
the rate of return to investment and initiative by about 11-1/2
percent. The value of such an increase in the rate of return can be
appreciated by the resourceful small businessman who frequently goes
to a great deal of trouble and risk to increase profitability by
smaller fractions.
The provision of such a sizable tax reduction would help
~mmensely in removing the drag which the present tax structure
places on the small business striving to grow. The small businessman
or innovator must of necessity rely to a large extent on his own
financial resources or those of his family and close friends or
associates. These resources include the after-tax earnings of a
small business which has been launched with some success but needs
capital for growth to attain its real potential.
If small corporations are to stay in business they must have
money to plow back into the business to expand and to meet
competition. If a small businessman is to be willing to risk expansion
he must have some prospect of being able to finance it and to build
up his expanded business through reinvestment of earnings after its
initial phases of operation. The earnings of the business itself are
the best and, quite often, the only source of funds for such expansion.
- 4 The existing tax rate of 30 percent on the first $25,000 makes it
difficult for the small corporation to retain a sufficiently large
portion of its earnings. Frequently, what appear to be earnings are
in fact the unrecognized costs of the very survival of the business.
Survival in turn is impossible without growth, so that survival and
growth are in reality synonymous.
The benefits of the proposed rate reversal for small incorporated
businesses would balance the recommended individual income tax
reductions which woULd apply to unincorporated businesses. In any
event, unincorporated businesses could still realize the benefits of
the reversal, whether or not they wished to incorporate, by electing
to be, taxed as a corporation under section 1361 (subchapter R) of the
Internal Revenue Code.
Taken together with last year's~depreciation reform and investmenj
credit, which generally increased after-tax profitability on new
investment in equipment by 20 percent, the proposed rate reduction wil:
make a total improvement in the after-tax earnings rate of nearly
one-third for the small firm.
The resulting increase in return on business investment and
initiative should also spark new interest in the formation of new
business. This added drive to the generation of new enterprises will
give added vitality to our business population. From the standpoint
of maintaining a healthy small business sector, the strength of
motivation both to expand existing businesses and to create new
businesses is crucial.
In summary, the proposed corporate tax cut which singles out
the small company for larger and more immediate reduction will have
several basic and closely related impacts on small business:
1.
It will preserve and strengthen the competitive
status of existing firms.
2.
It will enhance the growth capability, and
therefore the viability, of both existing
and new firms by increasing their cqsh flow
and sources of capital supply.
3.
It will encourage new investment and initiative
by confronting the small businessman, new or
established, with a markedly improved outlook
for after-tax returns along the whole line of
investment decisions which he must make in
carrying on or expanding his business.
- 5 -
4.
It will stimulate the formation of new
businesses.
The'proposed corporate rate reversal would bolster the policy,
begun by the Congress in 1950, of aiding small business by freeing
it from the corporate surtax. But the reversal could carry with
it unintended windfalls if it could be utilized by large businesses
operating through a series of separately incorporated units. By
the device of fragmenting into a number of interrelated corporations,
a business large in fact could appear to be a collection of small
businesses for federal income tax purposes. Such a business would
have not only the greater financial strength and the competitive
advantages that go with large size but it could also claim the tax
advantages intended to shore up the competitive ability of small
businesses. Moreover, the large business not. organized in many small
corporate units would be subjected to tax at an arbitrarily higher
rate than its equally large competitor with a manifold corporate
structure. In addition, giving this favorable tax treatment to
large businesses could well intensify the competitive advantages of
the large over the small business, thus effectively negating the
intended favorable tax treatment for small business.
Therefore, the President proposed that multi-corporate groups
under 80 percent common control and with combined income over
$25,000 should have only one surtax exemption. The limitation
would not affect multi-corporate groups with combined income of less
than $25,000. And it would not affect those multi-corporate groups
under less than 80 percent common control. Besides, the impact of
the proposal on the taxes of existing corporate groups would be
eased by taking effect gradually over a five-year period. This
would prevent an inappropriate and disproportionate tax cut for
large multi-corporate groups, forestall further spawning of corporate
young for tax advantage, and improve the competitive position of
small corporate enterprises. Besides,a study by the Small Business
Administration has indicated that very few small firms use the
multi-corporate form of organization. For these reasons, the
reduction of the normal tax applying to small firms together with the
safeguards insuring its utilization only by them, will help the small
firms without giving an unintended benefit to those larger firms
that do not need this added tax cut above and beyond the cuts they
would receive under others of the President's tax proposals.
What of the unincorporated small business?
- 6 Election of a partnership or sole proprietorship to enjoy the
benefits of the proposed corporate rate reversal by being taxed as
a corporation under subchapter S is by no means the only benefit
for the unincorporated business under the tax program. The 4
million small unincorporated businesses in our economy will also
benefit directly from the recommended individual income tax rate
cuts.
Over a three-year period starting in 1963 the present individual
tax rates of 20 to 91 percent would be scaled down to a range of
14 to 65 percent. Tax liabilities on all individual incomes would
be reduced $11 billion through rate reduction. After offsetting
structural revisions chiefly in the area of personal non-business
deductions which would not affect unincorporated firms as such, the
net reduction in liabilities on individual incomes would be $8 billion.
It is estimated that approximately $1 billion of the more than $8
billion net reduction would go to owners of unincorporated businesses
exclusive of farming and professional services.
To an even greater extent than in the corporate area, the
overwhelming maj ori ty of unincorporated bus iness incomes are small.
In 1959-60, for example, using round nt-mbers, out· of 7.2 million
sole proprietorships (including farm and professional enterprises)
with net profit, 5.9 million -- 82 percent -- reported net profit
under $5,000. Seven point one million -- 98 percent -- reported net
profit of less than $20,000.
In the same period, nearly half of the 759 thousand partnerships
showed net profit under $5,000, and nearly 86 percent had net profit
under $20,000. With an average of just under three partners per
firm, the share of profit taxable to the average partner would be
from 35 'to 40 percent of the partnership income as such.
Of course, the size of income of the unincorporated business
does not conclusively indicate the bracket in which the businessman
will pay tax on his profit since' he may well have income from other
sources. Nevertheless, it is likely that the great majority of
unincorporated business incomes would be subject to a tax reduction
approaching 25 percent -- a figure closely parallel to the 26.6
percent reduction proposed for small corporations.
Closely related to the rate reductions, but also encompassing
important elements of structural change, are the proposed revisions
in the tax treatment of capital gains and losses. These changes
provide significant reduction in the capital gains tax rates for both
individuals and corporations and -- in their overall impact -directly and indirectly aid small firms.
- 7 -
512
At present 50 percent of long-term capital gains of an individual
is includible in taxable incomes. Under the program, only 30 percent
would be includible. Combined with the individual rate reductions,
this means that, in the lowest bracket, capital gain would be taxed
at an effective rate of 4.2 percent, instead of the present 10
percent. The maximum effective rate,would be 19.5 percent instead
of the present 25 percent.
Small business investors who seek capital gains from the
development of a successful enterprise should be greatly encouraged
by this change. With these lower capital gains rates, seasoned
investments now being retained largely for tax reasons should be
unlocked and the flow of funds to small businesses should be
encouraged -- particularly in the setting of a general tax reduction
creating greater prospects for profitable investment in small
business. This increase in the liquidity of investment and removal
of barriers to the free flow of capital funds will enhance the
supply of available risk capital for small business use. And this
increase in the ready availability of capital supply, as already
noted, goes directly to the heart of the problem of how to nurture
existing small and medium-sized businesses, by creating an environment
for their healthy expansion into growing, increasingly sturdy
enterprises. Such an environment would also be conducive to the
generation of new small businesses.
Of course, substantially lowering rates on capital gains would
not, by itself, deal effectively with the "lock-in" problem, which
must be solved if capital mobility is to be assured.
The most important aspect of current law which gives rise to the
"lock-in" problem and must be dealt with is the present complete
exemption from income taxation of gain on capital assets held until
death. Without a more rational and comprehensive tax base which
deals with the treatment of gains on transfers at death, the
proposed reduction in the capital gains tax rates could not be fully
'justified. The Treasury proposal,to tax net gains accrued on
capital assets at the time of transfer at death or by gift, except
for gifts or bequests to charity, has given rise to objection that
the proposal will force the sale or merger of some small businesses.
In addition to the purely tax policy considerations to be
weighed in drafting such legislation as this, the probable results
in economic structural changes and the goal of preserving and
strengthening independent small business weigh heavily in fixing
upon recommendations. We have closely followed the testimony upon
- 8 these matters before the Ways and Means Committee and before the
·Subcommittee on Taxes of the Senate Small Business Committee. We
have noted the assertion that application of the proposal to tax
capital gains at death would force the sale or merger of small
businesses. There will be further review of this aspect of the
legislation in the Ways and Means Co~ittee and, thereafter,in.the
Senate Finance Committee before legislation is finally drawn.
In addition to the rate reductions and the capital gain and loss
recommendations, the tax program suggests structural revisions of
particular interest to small business. For years taxpayers with
widely fluctuating incomes have suffere~ from the absence of an
income-averaging provision in the Internal Revenue Code. The
Administration has recommended adoption of such a provision. Under
it, a taxpayer could average his current income with that of the
past four years; and, if the current income amounts to more than
133 percent of the average, he would be allowed, in effect, to treat
the excess over 133 percent as though it had been earned over a
five-year period. Thus he would be taxed at a considerably reduced
rate •. Since incomes of many small unincorporated businesses are
subject to wide swings from year to year, their owners especially would
benefit from the averaging provision.
All of these proposal~ to change the tax laws assume even greater
significance when considered against the background of the investment
incentive changes adopted last year: the 7 percent investment credit
and the administrative liberalization of depreciation.
The tax treatment of new .investment may be illustrated in terms
of the percentage cost of an asset subject to tax write-off or
equivalent charges against income in the year of acquisition •.
In the case of a 10-year asset costing $10,000, bought by a
firm subject to the proposed 22 percent corporate normal tax rate,
the following deductions or
.. equivalents could be taken:
20 percent initial allowance
7 percent investment credit
expressed as equivalent deduction
from income
First-year depreciation (doubledeclining balance depreciation,
10-year life)
Total
$2,000
3,180
1,460
$6,640
- 9 -
514
As this example shows, the various allowances under present law
plus the proposed rate reduction would, in effect, permit tax-free
recovery, in the year of acquisition, of two-thirds of the cost of
a machine or other equipment item with a ten-year life. To the
extent that the depreciable life is shorter than the 10 years assumed
in the example, the proportion of capital recovered tax-free in the
first year would be still greater.
All these measures -- liberalized depreciation, the investment
credit, and the proposed tax reduction -- serve to increase the
internally generated cash flow needed to make new investments. This
is especially important to a small firm striving to grow but short
of capital.
The Treasury is fully convinced that small business stands to
benefit, and to benefit substantially, from these tax proposals.
It is equally convinced that the whole nation stands to benefit -that the tax program can lend continuing impetus to the nation's
long-term economic growth by stimulating demand in the private sector
and sharpening incentives for effort, investment, and profit.
This Administration had hoped to seek a tax revision under
circumstances of a balanced budget. But the demands of national
security have required steep augmentation of our nuclear and armed
forces, necessitated a step-up in the space program, and caused a
rise in the costs of servicing a national debt that has grown larger
as a result of these imperatives. The budgetary big three account
for $70 billion of the nearly $98.8 billion budgetary total; and
their increased needs have accounted for nearly 73 percent of the
total expenditure increases that have occurred in this Administration.
At the outset of 1962, after nine months of rapid recovery,
hope was widely shared that we were breaking the grip of slow
growth and below-capacity operation. But the recovery slackened
abruptly in the first quarter of 1962. Between the fourth quarter
of 1961 and the fourth quarter of 1962, gross national product rose
barely enough ~o hold the economy even on rates of unemployment,
profits, and capacity use.
The overriding lesson of the 1962·s1owdown is that the pattern
of slow growth since 1957 is the real measure of our economic
problem, however much such spurts of activity as that in 1961 may
seem temporarily to lessen our difficulties.
.
- 10 Against the background of continued and intensive communist
challenge throughout the world and in space, confronted by the
evidence of our economy's inadequate performance over the past decade,
the Treasury Department supports the President's tax reduction
program -- in the full knowledge that it will add to a projected
deficit. We believe the President was right in refusing either to
postpone his tax program or to cut into essential national security
programs so as to present his tax program in the context of a
balanced budget.
There are seven principal reasons why we believe this was a
fiscally responsible decision under all the circumstances.
1. One of the primary causes of slow economic growth
our major economic and fiscal problem
is the existing tax system.
The evidence of economic experience and analysis support our
conviction that, in a few years, under the new lower rate
structure -- designed as it is to make the market rather than the
tax system the determinant of effort and capital by increasing the
aggregate of demand and incentive -- rE'venues will be larger than if
we continue our present structure, which stifles growth.
2. For increasing the rate of growth, the tax program was
\c1early preferable to other possible courses of action.
To achieve growth by more massive increases in Federal spending
well beyond the limits of the 1964 budget would have risked confidence
at home and abroad. Such spending, while increasing demand, would
fail to increase incentives to private investment ,and initiative as ta~
r~ereduction will.
A third possible course, increased use of credit
and 'monetary tools to provide still lower interest rates and
substantially greater supplies of money and credit, was not feasible
because, as the President said, "Our balance of payments situation
today places limits on our use of those tools for expansion."
3. To wait, before enacting the President's tax proposals, for
increasing revenues from slow growth to reach a balanced budget
could well prove excessively costly and ultimately self-defeating.
Look at our experience 'in 1959. Then, a planned surplus became
a record deficit of $12.4 billion, largely because of a recession.
Continued slow growth will not generate the revenue required for
fiscal 1964 expenditure levels, even at current high tax rates, for
some yea~s. Meanwhile, the additional gross national product, wealth,
profits, and jobs resulting from the tax stimulus will be irretrievab1)
lost.
- 11 -
4. The tax program itself is designed to keep budget deficits
within manageable proportions.
The program spaces rate cuts over three calendar years, offsets
a portion of the revenue loss from the rate cuts through structural
reform, and puts collections from 12,000 of our largest corporations
on a more current basis. By these means the effect of the tax
proposals on the budget deficit is reduced. At the same time, many
observers of the economic scene are already pointing to the incentive
business planners feel from the foreknowledge of lower tax rates to
come as a significant reason for the generally optimistic business
outlook and the current upturn of economic activity -- an upturn that
is likely to produce revenue rises that will diminish the projected
fiscal 1964 deficit.
5. The President has acted positively on the premise that a
large scale tax reduction calls for strong restraints on spending.
Accordingly, his fiscal 1964 budget holds proposed government
spending (other than outlays for defense, space, and interest)
below fiscal 1963 levels -- an achievement matched only three times
in the last fifteen years.
There has been no relaxation of vigilance in this regard since
the budget was submitted in January. As the President .said on May 9:
" ... Agency and service requests were cut
by some $19 billion before the 1964 budget was
submitted, and I have cut an additional $615
million from my budget recommendations since
first submitting them."
. 6. More important -- a fact most often overlooked in discussions
of fiscal responsibility -- the President, in his 1964 Budget Message,
pledged progressive reduction in the Federal budget deficit as an
accompaniment to the tax reduction, proposing, for both the Congress
and the Executive Branch, an entirely new policy and program of
disciplined expenditure control.
517
- 12 -
The President said in the Budget Message:
"The prospect of expanding economic activity
and rising Federal revenues in the years ahead
does not mean that Federal outla~ should rise in
proportion to such revenue. increases. As the tax
cut becomes fully effective and the economy moves
toward full employment, a substantial part of the
revenue increases must go toward eliminating the
transitional deficit. Although it will be
necessary to increase certain expenditures, we
shall continue, and indeed intensify, our effort
to include in our fiscal program only important
national needs."
7. Finally, the new tax program, with related expenditure
control, is compatible, and can be coordinated effectively, with
appropriate balance of' payments policy, monetary policy, and debt
management -- each of which constitutes a vital environmental factor
in our overall financial plan.
Conclusion
As for the small business sector in particular, so for the nation
as a whole, the President's program seeks to secure, at long last, a
tax system that will provide the incentive and opportunity for
individual and corporate acquisition of capital,. creation of plans and
services, and stimulus to initiative and effort. It is designed to
produce the revenues our national needs demand. Avoiding disruption
of our necessary military and space programs, with full cognizance
of long-term fiscal responsibilities, and in the context of a feasible,
overall financial plan serving the national interest, the
Administration has put forward the tax proposals as the program best
designed to achieve these. critical national economic objectives. We
believe that the returns from that program will reward us all in the
years ahead.
000
518
-16payments deficit is a stubborn pr.oblem, but with the Trade Expansion A
of 1962, the Revenue Act of 1962, and particularly with the prospect
Cl
a meaningful tax program this year, we will certainly have the tools
to work more effectively for a solution.
The answers to this and other vexing economic questions require
close cooperation between the public and private sectors of our societ
They also call for wider ~ discussion of the major issues and
broader
~ understanding of their'implications for the individual
citizen and for the nation -- the sort of informed public understandin;
that the specialists in the business and financial press can help to
generate.
With your help -- and, as President Kennedy said recently
"with the help of all of those in business, labor and other profession l
who share your concern for the future, we shall build a future from
which all
.~ericans
can take pride as well as sustenance".
000
519
-15-
•
My feeling, while genuinely optimistic, is not quite
sanguine as this.
Last January, the President's Council of Economic
Advisors estimated that 1963 Gross National Product would fall within,
range of $5 billion either side of the $578 billion figure that was
used as the basis of our revenue forecasts.
side of that range might be about right.
It now looks like the hig:
That is what I had in mind
~
I suggested earlier this month that, if the present improvement contin'
Federal revenues might perhaps exceed our estimates for fiscal 1964 by
much as $1 billion.
But even such a result would not lead to any
appreciable improvement in our employment situation.
For that, we muS
The first-quarter balance of payments picture is perhaps less rosy,
and 1 think it would be unrealistic to look for any sudden solution in th
area.
Because we are relying on the slower, but surer, solutions brought
about by a market economy, it is entirely possible that this year's defic
will still be comparatively large.
Obviously, the
-14-
we have every reason to strive to develop and exploit our techniques fo
selling not only goods, but also securities, to foreign buyers.
We ha,
undertaken a great drive to expand our exports -- a drive that is impel
tive if our receipts from exports are to meet the irreducible cost of c
defense and aid commitments abroad and match the outflow of American
long-term investment.
\ole
need an equally determined drive by the fin-
ancial community to sell its very unique range of products.
This, then, has been a brief look at some aspects of the current
economic scene.
certainty.
The outlook for the future no one can predict with
But I think most of us will agree that the signs are
generally favorable.
In the short run, our economic picture looks bright, but not
so gloriously rosy as some would paint it.
is heartening.
perh~
Our present economic uptun
A number of economists, after scrutinizing the latest
pattern of the indicators, and paying particular attention to the risit
level of capital
invesbfl~.!nt,
are hoping for a long-run upswing to
1 ne
-13-
We would, for example, like to see underwriters in this country
seek actively and energetically to put the highest practicable proport
of their new foreign issues into the hands of foreign subscribers.
Moreover, in order to give more foreign subscribers a greater opportun
to invest in these issues, we would like to see more of them publicly
marketed, rather than
~rivately placed. \Wh~
issues are privately pla
-- and private placements accounted for more than half of the new
foreign issues in our market last year -- they are offered almost exclusively to U. S. investors.
Last year for example, almost all of
th~
Canadian and Latin American issues, which together accounted for a 1arj
part of the foreign use of our market, were private placements.
~~~t:~1
;the buyers of publicly placed new foreign issues are by no means
~
all Americans.
/iY
Last year foreigners purchased more than one-third of
the publicly offered foreign issues.
The willingness of foreigners to
purchase new foreign issues in our market reflects the attractiveness (
our facilities to both borrowers and lenders.
Because of that fact,
522
~~'T~~
z;&;:
-12-
able to meet the needs of their own nationals,
"
to borrowers from other countries as well.
an~e
accessible
That calls for removal of
existing government restrictions, enlargement of capital resources, an
improvement of facilities to increase the efficiency of doing business
I am glad to say that some progress in this direction has been ma
and that more can be expected.
But the development of markets more co
OuRS
parable to @ose in the United
Stat~ will take time. Meanwhile, ther
is every reason to maintain free access to our market, so that it can
continue to function as an important part of the international payment,
system.
:f1'
[pe
1'5
POT ~~OVG~f{ctlJt-Ut:r~J(~
should not on~ encourage progress in improving markets abroad
MtJ51
THf.'"
~u~~e ~o~~eqUallY encourage~particiPation of foreign capital in ow
own market.
If we take full advantage of the possibilities of attract:
foreign capital -- as borrowers are now attracted -- we can offset to
a great extent the outflow of funds from the sale of foreign issues hel
523
-11-
or another, we make access to our market more difficult or more
expensive.
f'
~estionablY. a large amount of money is being raise~
capital
ma~~bY
borrowers
"'-.
' '"'
from countries which enjoy hsaithy surplus
in their own payments . . .,position.
~~
",.'
That is
//'.
".,
,
financial market has unmatched
,.,facilitieg."
since our
It is not fettered by ex-
", ",/
>(
/
.
regUlat~;8nd i~~
cessive government
/
natura~enough,
abundant resources.
", .
." ,
It
is a market in which bo~borrower and lender~an operate with maximum
/
minimum
/
efficiency and
~/
difficulty.
Frequently,
fore{~Qers
make use of
ourLmarke~'because their own markets operate under restricti~~:gulat:
0.3'
imply lack ample resources.
_
.• _
.1r
.,
-
......
.....
Sf
Although foreign borrowers undoubtedly contribute to our payments
imbalance, it would be a short-sighted solution indeed if we were to
make the facilities and resources of our capital market less available
to them.
The real solution -- as I urged more than a year ago in Rome
is the development of capital markets in Europe and elsewhere that are
523
-11-
Unquest1onably, a
1n our cap1tal
healthy
la~g~
amount of money
m~rk~t~ borrowers
3~rpluse3
in their own
i~
be1ng raised
from countries which enjoy
pa~~ents
position. That is natural
enough, since foreigners can find in our financial market what
they often lack in their own: unmatched facilities and resources,
and
free~om
from excessive government regulations. It is a market
1n which both
b~rrower
and lender can operate with maximum
efficiency and min1mum d1fficulty.
efficiency
our
and'm1~um
~se
difficulty.
Frequently,
fO~3Qers
their own markets operate under
ample resources.
make use of
rest~ ,
regulat:
~~
~.
Although foreign borrowers undoubtedly contribute to our payments
imbalance, it would be a short-sighted solution indeed if we were to
make the facilities and resources of our capital market less available
to them.
The real solution -- as I urged more than a year ago in Rome
is the development of capital markets in Europe and elsewhere that are
524
-10-
debt limit would have to be paid in gold.
Those are but a few examples of the havoc that can' b wrought: in I
WIq:,'=:czT $"~..i
~
;~
fi;."~ ' .
----s;sct?1!=--=:=A
pos;; ..•• , k--c:t::::.:zt ?§jtSAJt(:~ res ~
. *
name of fiscal responsibility.
.
I think they make it obvious that the
debt ceiling is not only the wrong instrument to use in attempting to
control Federal expenditures, but that an Und~ly:restri~tive ceiling
could place this country in an untenable fiscal situation.
I Suppose
it would be unrealistic to expect that the seasonal storm over the deb I
limit through which we are now passing will not deluge us in future
years.
But I do hope, for the sake of
~f'::;:Y
fiscal~ ~prudence,
tha'
its intensity may clear the air and generate some fresh and lucid thin}
about the whole question of the debt limit.
Another vital, if less incendiary, problem that is now receiving
considerable attention is our balance of payments position.
More
spec~
fically, some in this country have recently expressed concern over the
adverse.impact on our payments balance of foreign borrowing:in the
United States capital market, and have suggested that through one mean:
525
-9limit legislation, should it be necessary, without having to call a
special session of Congress.
And fourth, should we be required to operate between now and the
end of August under the present debt ceiling of $305 billion, it would
no longer be possible to handle the finances of the United States
Government in a prudent and responsible manner.
We would be forced
to resort to an array of unusual financial procedures of the sort whicl
had to be used in 1957-58 -- procedures which, in the end, would only
add to the burdens of the taxpayers of this country.
A $305 billion
debt limit would also deprive us of one of our most important tools
for keeping our short-term interest rates competitive with rates abroa<
the ability to add to the market supply of short-term Government secur:
when the occasion demands.
The timely use of this technique has un-
doubtedly helped reduce the outflow of short-term funds throughout
past two years by many hundreds of millions of dollars.
thE
It is no ex-
aggeration to say that part of the price of an unrealistically
restri~
t~
526
-8-
in combination with other restrictive fiscal measures -- needs no
retelling here.
But anyone who recalls the lesson of 1957 -- the year
from which we date the pattern or slow economic growth which the
President's tax program is designed to alter -- is not likely to forge
it.
Third, the temporary debt limit approved last week by the House,
and currently before the Senate, would provide the absolute minimum
levels needed by the Treasury for the proper management of the Federal
debt and the Treasury's cash balance.
These limits -- $307 billion
through June, and $309 billion throughout July and August -- are tightl
so tight that they provide little or no room for meeting unforeseen
contingencies.
The Treasury can attempt to operate within these ltmits
only because it is likely that our expenditure estimates for so short
a period will be reasonably accurate and our revenues are unlikely to
fall below estimated levels.
In addition, since Congress will be in
session until some time in the fall, we could always obtain new debt
527
-7~
First, let no one labor under the delusion that the debt ceiling i
either a sane or an effective instrument for the control of Federal ex.
penditures.
No one is more conscious than I of the need to keep goven
ment spending under firm control.
But this cannot be done by trying tc
exert controls at the tag end of the expenditure process, when the bill
are coming due.
The debt limit i. not;:::" can no;':: made a substitt
for the control of expenditures at the decisive stage of the expenditul
process -- when the funds are being appropriated.
Second, since the Executive Branch cannot refuse to pay the bills
incurred in carrying out the programs approved by the Congress, the onl
alternative is simply to delay paying them.
That is exactly what hap-
pened in 1957, when an unrealistic debt ceiling forced the Executive to
defer payment on its bills.
No expenditures were cut back;
they were
simply postponed and government contractors had to wait for their mone,
The unhappy economic effect of that unrealistic 1957 debt ceiling
exceptionally large portion of the expenditure increases during this
52Q
v
Administration has occured in the areas of defense and space.
One particularly enlightening comparison shows that, leaving
asi~
only defense and space, all other governmental expenditures in the
three-year period 1958=1961 increased by $800 million more than they
will in the first three years of the present Administration.
That
COl
parison shows, cogently and unanswerably, that this Administration ha
continually exercised a firm control over expenditures.
And it offer:
the strongest possible endorsement of what is by far the most signifi·
cant fact in the present discussion of tax reduction and expenditure
control:
the President's repeated commitment that, as the economy
expands in response to tax reduction and Federal revenues increase, a
Last weeks d,late in the House of Repre~tatives over the proposa
substantial portion of those increased revenues will be used to reduce
8t
eliminate the current deficit.
A,v () L,/)
Last week, this issue of expenditure control was raised in •
e
529
4~a-/f
-5-
within the following fifteen months -- and at
as .. billion of that
amount would represent increased consumer purchasing power.
of a $10
~ would
billio~cut
not stop there.
The stimu
For example, the Joint Eco
mic Committee of the United States Congress had estimated that it woule
,
/~
f.At..-L~--...;1.C- bc../'I"~- o."~~rl/
eventually 1M. . on ill p •• t ...... atn:·/Gross N~tional Product
~"
"'$I' &'
i...4i .. s
~~t ~,.,C.ct#-'0 ~
riwlt.t __i_-=J
~-eat:.1
lii._ .8;.ieet!-.
Those, then, are some of the main features of the President's tax
program.
As an inevitable result of the legislative process, that pro·
gam will be somewhat revised by the time the tax bill emerges from the
House t-lays and Heans Committee some weeks
~~.
~CJ2
11 .~ •
However, I am con£
cent that the bill the Committee reports out will be one that we can a1
support wholeheartedly.
_
_
.
--~,~"
" )o~,
- _ . _ - - - - - - - - - - - - - • •- - .....
........
J . . rH .. i.S . . .
a.I~
""",...........c
.....
................_
Thus far, much of the discussion on tax reduction has centered,
_ on specific tax proposals, but on expenditure control.
~
If the heat o.
that discussion has sometimes obscured the facts, I think they are
nOI
beginning to come through quite clearly -- including the fact that an
estimates that expenditures
~
~/t6~ ~
..
for plant and
530
equipmen~;ill rise to $40 billion from a level of
just over $37 billi on f 0 r 1962 •
Last year 's tax reforms are
responsible for at least 43% of the increase.
!1rst three months of this year.
r--
7)'
'.".
" .1·"··#AMiljta.,.
'
But the whole job cannot be done solely by stimulating business
investment.
them.
No company will produce more goods without markets to abso
And the best way to assure those markets is to increase consume!
purchasing power.
The President's program would do that by reducing
personal income tax rates from the present range of twenty to
ninety-o~
percent to a much lower range of fourteen to sixty-five percent.
Such
cut in individual tax rates, combined with the proposed corporate rate
reduction, would total $13.6 billion.
When the various , structural refc
that have ~ been recommended are taken into account, the net reduct!
3
would amount to $lO.~ billion.
The impact of that overall cut would be felt much quicker than moS
people realize.
If the President's program were to receive final apprc
P'J-~.t..
t·
by October 1st, ...... , ",1 . F u i o n would be released into the econ
531
-3society that the President's principal proposal -- substantial tax reduction this year -- is our best hope of accelerating the forward pace
of our economy.
Let me recall some of its main features:
The President has proposed a cut in the corporate tax rate from
52 to 47 percent to supplement last year's seven percent tax credit f01
productive new investment and the liberalization of the rules and procedures governing tax treatment of depreciable equipment.
Those two
rEA-~measures reduced business taxes by $2.5 billion~ The proposed five-pol
corporate tax rate reduction would cut business taxes by another $2.5
billion by the time the program is fully in effect.
This total of $5
billion would give business forty percent of the overall tax reduction,
provide a strong and continuing stimulus toward accelerated economic
growth, and increase the profitability of new business investment by
almost thirty percent.
The effectiveness of last year's tax changes on capital investment
is impressive indeed.
The latest McGraw-Hill survey of capital spendi1
-2-
•
,
.5
become major political issues -- hence subject to the dis-
tortions of partisan debate
requires not only intelligence and judg
of a very mature order, but an extremely comprehensive background as w
I am well aware how difficult it is to gather and understand econ'
mic facts -- let alone interpret them -- when the facts themselves are
constantly changing.
For, in the fluid and intricate economic picture
appearances can be deceiving -- and foresight must rely heavily upon a
hindsight that is itself often elusive and uncertain.
As a result,
S01
and imaginative evaluation of national economic policy is extraordinar:
difficult.
With this in mind, let me examine briefly with you today
some areas of economic policy in which I have direct responsibility.
The most urgent economic business before this nation is the
President's tax program.
It has quite naturally dominated the, public
discussion of economic matters.
That discussion has inevitably
~eements and misconceptions about the program.
~
G• • • • e
But it has also
served to strengthen the widespread consensus among all segments of ou
DRAFT
5/19/63
REMARKS OF THE HONORABLE DOUGLAS DILLON
SECRETARY OF THE TREASURY
AT THE FIFTH ANNUAL LOEB AWARDS PRESENTATION LUNCHEON
WALDORF-ASTORIA HOTEL, NEW YORK CITY
WEDNESDAY, MAY 22, 19'63, ,12 :30 P.M., EDT
I am delighted to take part in the presentation of the Loeb Award
for distinguished business and financial journalism.
It gives me an
opportunity to pay tribute both to my friend, Gerald Loeb, who founded
these awards, and to their recipients, who can take justifiable pride
in this recognition of their excellence in the practice of a demanding
craft.
I have had considerable opportunity to observe newsmen at work,
both at home and abroad, in the most difficult and sensitive of fields.
I have a high regard for them and for the skills they employ in the
,
.)
public service.
Those skills are particularly needed in economic and financial
reporting.
To achieve and maintain a clear perspective on complex
economic problems is difficult enough.
(56- ~C 0
To do so when these matters
AT
THE SIXTH ANNUAL UNIVERSITY OF CONNECTICUT
LOEB AWARDS PRESENTATION LUNCHEON
WALDORF-ASTORIA HOTEL ~ NEW YORK CITY
WEDNESDAY, MAY 22,1963, 12:30 P.M.~ EDT
I am delighted to take part in the presentation of the Loeb
Awards for distinguished business and financial journalism. It gives
me an opportunity to pay tribute both to my friend, Gerald Loeb, who
founded these awards, and to their recipients, who can take
justifiable pride in this recognition of their excellence in the
practice of a demanding craft.
I have had considerable opportunity to observe newsmen at work,
both at home and abroad, in the most difficult and sensitive of fields
I have 'a high regard for them and for the skills they employ in the
public service.
Those skills are particularly needed in economic ~nd financial
reporting. To achieve and maintain a ,clear perspective on 'complex
economic problems is difficult enough. To do so when these matters
be'come major political issues -- hence subject to the distortions
of partisan debate -- requires not only intelligence and judgment
of a very mature order; but an extremely comprehensive background
as well.
I am well aware how difficult it is to gather and understand
economic facts -- let alone interpret them -- when the facts
themselves are constantly changing. 'For, in the fluid and intricate
economic picture, appearances can be deceiving -- and foresight
must rely heavily upon a hindsight that is itself often elusive and
uncertain. As a result, sound and imaginative evaluation of
national economic policy is extraordinarily difficult. With this in
mind, let me examine briefly with you today some 'areas of economic
policy in which I have direct responsibility.
D-860
533
5/19/63
DRAFT
REMARKS OF THE HONORABLE DOUGLAS DILLON
SECRETARY OF THE TREASURY
AT THE SIXTH ANNUAL UNIVERSITY OF CONNECTICUT
LOEB AWARDS PRESENTATION LUNCHEON
WALDORF-ASTORIA HOTEL, NEW YORK CITY
WEDNESDAY, MAY 22, 1963, 12:30 P. M., EDT
I am delighted to take part in the presentation of the Loeb Award,
for distinguished business and financial journalism.
It gives me an
opportunity to pay tribute both to my friend, Gerald Loeb, who founded
these awards, and to their recipients, who can take justifiable pride
in this recognition of their excellence in the practice of a demanding
craft.
I have had considerable opportunity to observe newsmen at work,
both at home and abroad, in the most difficult and sensitive of fields.
I have a high regard for them and for the skills they employ in the
public service.
Those skills are particularly needed in economic and financial
reporting.
To achieve and maintain a clear perspective on complex
economic problems is difficult enough.
06-- O-C 0
To do so when these matters
534
TREASURY DEPAR1MENT
Washington
FOR RELEASE P.M. NEWSPAPERS
WEDNESDAY, MAY 22, 1963
REMARKS OF THE HONORABLE DOUGLAS DILLON
SECRETARY OF THE TREASURY
AT
THE SIXTH ANNUAL UNIVERSITY OF CONNECTICUT
LOEB AWARDS PRESENTATION LUNCHEON
WALDORF-ASTORIA HOTEL ~ NEW YORK CITY
WEDNESDAY, MAY 22, 1963~ 12:30 P.M.~ EDT
I am delighted to take part in the presentation of the Loel
Awards for distinguished business and financial journalism. It gives
me an opportunity to pay tribute both to my friend, Gerald Loeb who
founded these awards, and to their recipients, who can take
justifiable pride in this recognition of their excellence in th~
practice of a demanding craft.
I have had considerable opportunity to observe newsmen at work,
both at home and abroad, in the most difficult and sensitive of fields
I have a high regard for them and for the skills they employ in the
public service.
Those skills are particularly needed in economic and financial
reporting. To achieve and maintain a clear perspective on complex
economic problems is difficult enough. To do so when these matters
become major political issues -- hence subject to the distortions
of partisan debate -- requires not only intelligence and judgment
of a very mature order, but an extremely comprehensive background
as well.
I am well aware how difficult it is to gather and understand
economic facts -- let alone interpret them -- when the facts
themselves are constantly changing •.. For, in the fluid and intricate
economic picture, appearances can be deceiving -- and foresight
must rely heavily upon a hindsight that is itself often elusive and
uncertain. As a result, sound and imaginative evaluation of
national economic policy is extraordinarily difficult. With this in
mind, let me examine briefly with you today some "areas of economic
policy in which I have direct responsibility.
D-860
- 2 -
535
The most urgent economic business before this nation is the
President's tax program. It has quite naturally dominated the
public discussion of economic matters. That discussion has inevitably
brought forth disagreements and misconceptions about the program.
But it has also served to strengthen the widespread consensus among
all segments of our society that the President's principal proposal
substantial tax reduction this year -- is our best hope of
accelerating the forward pace of our economy. Let me recall some
of its main features:
The President has proposed a cut in the corporate tax rate from
52 to 47 percent io supplement last year's seven percent tax credit
for productive new investment and the liberalization of the rules and
procedures governing tax treatment of depreciable equipment. Those
~o measures reduced business taxes by $2.5 billion a year.
The
proposed five-point corporate tax rate reduction would cut business
taxes by another $2.5 billion by the time the program is fully in
effect. This total of $5 billion would give business forty percent
of the overall tax reduction, provide a strong and continuing
stimulus toward accelerated economic growth, and increase the
profitability of new business investment by almost thirty percent.
The effectiveness of last year's tax changes on capital investmen
is impressive indeed. The latest McGraw-Hill survey of capital
spending estimates that expenditures for plant and equipment in
1963 will rise to $40 billion from a level of just over $37 billion
for 1962. Last year's tax reforms are responsible for at least 43
percent of the increase.
But the whole job cannot be done solely by stimulating business
investment. No company will produce more goods without markets to
absorb them. And the best way to assure those markets is to increase
consumer purchasing power. The President's program would do that by
reducing personal income tax rates from the present range of twenty
to ninety-one percent to a much lower range of fourteen to sixty-five
percent. Such a cut in individual tax rates, combined with the
proposed corporate rate reduction, would total $13.6 billion. When
the various structural reforms that have been recommended are taken
into account, the net reduction would amount to $10.3 billion.
The impact of that overall cut would be felt much quicker than
most people realize. If the President's program were to receive
final approval by October 1st, over $10 billion would be released
into the economy within the following fifteen months -- and some
$8 billion of that amount would represent increased consumer
- 3 -
536
purchasing power. The stimulus of a $10 billion tax cut would not stc
there. For example, the Joint Economic Committee of the United States
Congress had estimated that it would eventually increase our annual
Gross National Product by 40 billion dollars.
Those, then, are some of the main features of the President's
tax program. As an inevitable result of the legislative process,
that program will be somewhat revised by the time the tax bill
emerges from the House Ways and Means Committee some weeks hence.
However, I am confident that the bill the Committee reports out will
be one that we can all support wholeheartedly.
Thus far, much of the discussion on tax reduction has centered,
not on specific tax proposals, but on expenditure control. If the
heat of that discussion has sometimes obscured the facts, I think
they are now beginning to come thr?ugh quite clearly -- including
the fact that an exceptionally large portion of the expenditure
increases during this Administration has occured in the areas
of defense and space.
One particularly enlightening comparison shows that, leaving
aside only defense and space, all other governmental expenditures
in the three-year period 1958-1961 increased by $800 million more
than they will in the first three years of the present Administration.
That comparison shows, cogently and unanswerably, that this
Administration has continually exercised a firm control over
expenditures. And it offers the strongest possible endorsement of
what is by far the most significant fact in the present discussion
of tax reduction and expenditure control: the President's repeated
commitment that, as the economy expands in response to tax
reduction and Federal revenues increase, a substantial portion of
those increased revenues will be used to reduce and eliminate the
current deficit.
Last week, this issue of expenditure control was raised in an
old and familiar context -- when the House of Representatives debated
the proposal to raise the temporary debt limit between now and the
end of August, and once more brought a hardy perennial to the
forefront of the news. As that debate made clear, there are few
areas of fiscal policy as much in need of more, light and less
heat as the debt limit. I should like to try to supply some
needed light:
537
- 4 . First, let no one labor under the delusion that the debt
ceiling is either a sane or an effective instrument for the control
of Federal expenditures. No one is more conscious than I of the
need to keep government spending under firm control. But this
cannot be done by trying to exert controls at the tag end of the
expenditure process, when the bills are corning due. The debt limit
is not and can not be made a substitute for the control of
expenditures at the decisive stage of the expenditure process -when the funds are being appropriated.
Second, since the Executive Branch cannot refuse to pay the bills
incurred in carrying out the programs approved by the Congress, the
only alternative is simply to delay paying them. That is exactly
what happened in 1957, when an unrealistic debt ceiling forced the
Executive to defer payment on its bills. No expenditures were cut
back; they were simply postponed and government contractors had to
wait for their money. The unhappy economic effect of that unrealistic 1957 debt ceiling -- in combination with other restrictive
fiscal measures -- needs no retelling here. But anyone who recalls
the lesson of 1957 -- the year from which we date the pattern of
slow economic growth which the President's tax program is designed
to alter -- is not likely to forget it.
Third, the temporary debt limit approved last week by the House,
and currently before the Senate, would provide the absolute minimum
levels needed by the Treasury for the proper management of the
. Federal debt and the Treasury's cash balance. These limits -$307 billion through June, and $309 billion throughout July and
August -- are tight, so tight that they provide little or no room
for meeting unforeseen contingencies. The Treasury can attempt to
operate within these limits only because it is likely that our
expenditure estimates for so short a period will be reasonably
accurate and our revenues are unlikely to fall below estimated
levels. In addition, since Congress will be in session until some
time in the fall, we could always obtain new debt limit legislation,
should it be necessary, without having to call a special session of
Congress.
And fourth, should we be required to operate between now and the
end of August under the present debt ceiling of $305 billion, it
would no longer be possible to handle the finances of the United
States Government in a prudent and responsible manner. We would be
forced to resort to an array of unusual financial procedures of the
- 5 -
538
sort which had to be used in 1957-58 -- procedures which, in the end,
would only add to the burdens of the taxpayers of this country. A
$305 billion debt limit would also deprive us of one of our most
important tools for keeping our short-term interest rates competitive
with rates abroad: the ability to add to the mar~et sypp1y of
short-term-Government securities when the occasion demands. The
timely use of this technique has undoubtedly helped reduce the
outflow of short-term funds throughout the past tWo years by many
hundreds of millions of dollars. It is no exaggeration to say that
part of the price of an unrealistically restrictive debt limit would
have to be paid in gold.
Those are but a few examples of the havoc that can be wrought
in the name of fiscal responsibility. I think they make it obvious
that the debt ceiling is not only the wrong instrument to use in
attempting to control Federal expenditures, but that an unduly
restrictive ceiling could place this country in an untenable fiscal
situation. I suppose it would be unrealistic to expect that the
seasonal storm over the debt limit through which we are now passing
will not deluge us in future years. But I do hope, for the sake of
fiscal sanity and prudence, that its intensity may 'clear the air and
generate some fresh and lucid thinking about the whole question of
the debt limit.
Another vital, if less incendiary, problem that is now receiving
considerable attention is our balance of payments position. More
specifically, some in this country have recently expressed concern
aver the adverse impact on our payments balance of foreign borrowing
in the United States capital market, and have suggested that through
one means or another, we make access to our market more difficult or
more expensive.
Unquestionably, a large amount of money is being raised in our
capital market by borrowers from countries which enjoy healthy
surpluses in their own payments position. That is natural enough,
since foreigners can find in our financial market what they
often lack in their own: unmatched facilities and resources, and
freedom from excessive government regulations. It is a market in
which-both borrower and lender can operate with maximum efficiency
and minimum difficulty.
Although foreign borrowers undoubtedly contribute to our payments
~balance, it would be a short-sighted solution indeed if we were to
make the facilities and resources of our capital market less available
to them. The real solution -- as I urged more than a year ago in
539
- 6 Rome -- is the development of capital markets in Europe and elsewhere
that are better able to meet the needs of their own nationals, and
that are more accessible to borrowers from other countries as well.
That calls for removal of existing government restrictions, enlargement of capital resources, and improvement of facilities to increase
the efficiency of doing business.
I am glad to say that some progress in this direction has been
made and that more can be expected. But the development of markets
more comparable to ours will take time. Meanwhile,. there is every
reason to maintain free access to our market, so that it can continue
to function as an important part of the international payments system.
It is not enough, however, to encourage progress in improving
markets abroad. We must equally encourage the participation of
foreign capital in our own market. If we take full advantage of the
possibilities of attracting foreign capital -- as borrowers are now
attracted -- we can offset to a great extent the outflow of funds
from the sale of foreign issues here.
We would, for example, like to see undenvriters in this country
seek actively and energetically to put the highest practicable
proportion of their new foreign issues into the hands of foreign
subscribers. Moreover, in order to give more foreign subscribers
a greater opportunity to invest in these issues, we would like to
see more of them publicly marketed, rather than privately placed.
When issues are privately placed -- and private placements
accounted for more than half of the new foreign issues in our market
last year -- they are offered almost exclusively to U. S. investors.
Last year for example, almost all of the Canadian and Latin American
issues, which together accounted for a large part of the foreign use
of our market, were private placements.
On the other hand the buyers of publicly placed new foreign
issues are by no means all Americans. Last year foreigners purchased
more than one-third of the publicly offered foreign issues. The
willingness of foreigners to purchase new foreign issues in our
market reflects the attractiveness of our facilities to both
borrowers and lenders. Because of that fact, we have every reason
to strive to develop and exploit our techniques for selling not
only goods, but also securities, to foreign buyers. We have
undertaken a great drive to expand our exports -- a drive that is
imperative if our receipts from exports are to meet the irreducible
- 7 -
540·
cost of our defense and aid commitments abroad and match the outflow
of American long-term investment. We need an equally determined
drive by the financial community to sell its very unique range of
products.
This~
then~
has been a brief look at some aspec~s of the current
economic scene. The outlook for the future no one can predict with
certainty. But I think most of us will agree that the signs are
generally favorable.
In the short run, our economic picture looks bright, but not
perhaps so gloriously rosy as some would paint it. Our present
economic upturn is heartening •. A number of economists~ after
scrutinizing the latest pattern of the indicators, and paying
particular attention to the rising level of capital investment, are
hoping for a long-run upswing to near boom-time levels. My feeling,
while genuinely optimistic, is not quite so sanguine as this. Last
January, the President's Council of Economic Advisors estimated that
1963 Gross National Product would fall within a range of $5 billion
either side of the $578 billion figure that was used as the basis
of our revenue forecasts. It now looks like the high side of that
range might be about right. That is what I had in mind when I
.
suggested earlier this month that, if the present improvement continues.
Federal revenues might perhaps exceed our estimates for fiscal 1964 by
as much as $1 billion. But even such a result would not lead to any
appreciable improvement in our employment situation. For that, we
must look to tax reduction.
The first-quarter balance of payments picture is perhaps less
rosy and I think it would be unrealistic to look for any sudden
solution in this area. Because we are relying on the slower, but
surer, solutions brought about by a market economy, it is entirely
possible that this year's deficit will still be comparatively large.
Obviously, the payments deficit is a stubborn problem, but with the
Trade Expansion Act of 1962, the Revenue Act of 1962, and particularly
with the prospect of a meaningful tax program this year, we will
certainly have the tools to work more effectively for a solution.
The answers to this and other vexing economic questions require
close cooperation between the public and private sectors of our society,
They also call for wider discussion of the major issues and broader
understanding of their implications for the individual citizen and
for the nation -- the sort of informed public understanding that the
specialists in the business and financial press can help to generate.
With your help -- and, as President Kennedy said recently -- "with
the help of all of those in business, labor and other professions who
share your concern for the future, we shall build a future from which
all Americans can take pride as well as sustenance".
000
-
-"'-"-
-.:--..:..;;;.....~--....
SA it..
rar.~ C\l&ZeDq
-.
8G"1ea.
~ S_1;'" ...,. SA t.M ...-aa\ ~ ~.,
1")1'. Be'IS.
t'IUca (~_t to &ppica1ateq.3O wi 1 " . )
...
vtt.b. ~
o.t two ~J 1e11S_ true 1uue Sa . t . " . to)lNYleua lNu: ••
1A
~
CNlr_d... to Sldtaerlull1# ltaq, CIa
~_ IM141t1cPw1
equ1~
to
bard . . &180 s.u-I .epcwtam.l ill 8Ir1ea fNDIII
~tel.7
f«J ., 1 J SCID vA1eh,
lel sUn t'.rIme taa., br1a&a total.
to __q
l$- to ~
3 " . . __tria.
~30 w1 11
LJIlitAa
~on1aa
1iIIe
C\Il"NMI' ....tV t . . . . .
S., o.t *1c.b $605 .'1 1 •
aturt.V.
~ v.l.Ul
Sa ill aenr1U. ~
. . . . _____ ........
v ....
L.J
U.1..1..1.~on
~e.1.gl.an
-francs (equivalent to approximately $30 ;million) and with a
maturity of two years.
This Belgian franc issue is similar
to previous issues in foreign currencies to
Switzerla~d,
Italy, Germany and Austria.
An additional bond was aiso issued denominated in Swiss
francs equivalent to approximately $23 million which, together
with the Belgian franc issue, brings total foreign currency
security issues to nearly $630 million, of which $605 million
is in securities of 15- to 24-months maturity.
000
D-861
Info Serv Letterhead
541
FOR RELEASE 12.00 NOON, EDT
Tuesday, Yay ~963
TRFASURY ISSUES BEIIHAN FRANC AND
SWISS FRANC Sn::URITIES
IeliSM
to
rnmc s....,
lriap
~
ror.1p ClIIl"'ftDQ' MCUnoV ....._ _
--loT $630 wSJUoa. or ~ t605 .nu.
15- to 211 .•• tu ...wr1V.
18 SA eeetll'1tt.ot
TREASURY DEPARTMENT
FOR RELEASE 12:00 NOON, EDT
TUESDAY, MAY 21, 1963
TREASURY ISSUES BELGIAN FRANC AND
SWISS FRANC SECURITIES
The Treasury announced today the issuance of additional'
bonds in its foreign currency series.
These include bonds in the amount of 1.5 billion Belgian
francs (equivalent to approximately $30;mi11ion) and with a
maturity of two years.
This Belgian franc issue is similar
to previous issues in foreign currencies to
Switzer1a~d,
Italy, Germany and Austria.
An additional bond was also issued denominated in Swiss
francs equivalent to approximately $23 million which, together
with the Belgian franc issue, brings total foreign currency
security issues to nearly $630 million, of which $605 million
is in securities of 15- to 24-months "maturity.
000
D-861
TREASURI DEPAR'ruENT
Washington
543
toR RELEASE ON DELIVERY
REMARKS OF THE HONORABLE JAMES A. REED
ASSISTANT SECRETARY OF THE TREASURY
AT THE OBSERVANCE OF NATIONAL MARITIME DAY
BY THE PROPELLER CLUB, PORT OF BOSTON
SHERATON-PLAZA HOTEL, BOSTON, MASSACHUS
.....--,!!;....
n-s
WEDNESDAY, MAY 22, 1963 I NOON I EDT
It has always been a great pleasure to come back to Boston where I am privileged
enJf17 the most pleasant relations with old friends end colleagues.
I also experienc
deep satisfaction here, for I have always felt that the air is filled with the histor
or the nation, and that the early traditions of making opport1.l!l1ties out of challenges
bas been carried on. This is particularly true on Mati time Day, for in effect we are
today commemorating those early seafaring Bostonians, and other New Englanders, who
contributed so importantly toward making the fledgling United States into a commercial
and military power in the world. And it seems to me that the members of the Propeller
Club Port of Boston - and others concerned with New England's marl time affairs are ~ on the traditions of the iron men who sailed the "lOoden ships •
to
l
. I have been greatly interested in the development programs of the Massachusetts
Port Author! ty, designed as they are to maintain the pre-eminence of the seafaring
lector or this area for the benefit of all elements in the commtmi ty • It seems to. me
that a fine Job is being done. Boston is now once again mald ng a determined effort
to keep up with the changes that continue to take place.
Harbor development has been particularly striking.
As maD.y' of you undoubtedly
know the capacity of ships has gro,m markedly, and the trend is for more cargo to
be c~ied in fewer ships. This means that cargo handling is concentrated, thus
waterfront space available for other uses such as restaurants, warehouses
I think it is clear that the early Yankee ingenuity has been
~sed on to succeeding generations.
laking
and ofrice buildings.
~er
evidence of this inheritance of getting things done with maximum effect
18 the North Terminal Area development. Just as Beacon Hill is being preserved so
that the exquisite architecture of an historic era will live on, the people of Boston
are sllowing comparable determination to rehabilitate the North Station-Charlestown
area.
Shipbuilding, too, continues to be one of the Boston area's great contributions
to the national strength and econo~. Bethlehem's Quincy Shipyard is one of the
~tr.1's largest and finest shipbuilding complexes. I note that this yard has
completed two modern ships for the United states Lines out of a six-ship contract.
Uso . the yard recently completed the largest merchant ship ever builtin this
~ir.r or operated under the United states flag -- the 106,500 deadweight ton
tanker MANHATTAN, and has built a number of other super tankers. While on the
SUbject or shipbuilding and ship operation, today is a good occasion to recall
that one of Boston's most famous sons, Mr. Joseph P. Kennedy, was the first chairman
ot the U. S. Maritime Commission when it was created in 1936. Under him, the report
on the "EcOnomic Survey of the U. S. Merchant Marine" became the first clear chart
tor the ruture after a long period of maritime quiescence.
In speaking of maritime matters, it is appropriate to comment on some of the
>-862
-2activities ot. the Coast Guard. To some ot you it mB3' be interesting to lr:now 'tbat . .
Coast Guard, one ot the five armed forces of the United States should be in the
Treasury - it is, ot course, a part ot the lfavy in time of war. The reason for its
being part of the Tree.sur:r Department goes back to the origin of the Coast Guard :in
1790 when Alexander Hamilton was the first Secretar,' of the Tree.su:z:y. Mr. Hmn1] tan
was deeply concerned over the loss ot revenue the nation was S"Uf'fering because of
smugglers. President Washington thought that the Congress would be adverse.to the .
expenditure ot srq substantive 8JlX)UJlt ot lOOney' to right smuggllDg. Secretar;r RaJniI.
argued that 10 cutters could do this Job, and so the Coast Guard was organized, lr.1.-tIl
its first operations in this state.
llassachusetts leads the nation in Coast Guard racill ties. It has 30 major
vessels operatiDg out of' B3y state ports. In addition there are two bases, an a1.r
station, a captain or the port orrice, 14 lifeboat stations, 17 light stations, 'two
loran stations, two marine inspeotion orfices, the International lee Patrol. Of'fice,
a radio station, tour recruiting stations, a SUPPl3 depot, 14 reserve units and a
district ottice.
Coastguardsmen wbo man these facilities provide shore end port protection aga:lD8
smuggling and sabotage. Marine inspection or the marl. t1me industry- is another ot:
their duties. they' also operate aids to navigation so necess8.l'7 to sate and ei'ficiea
marine operations. And, ot course, the Coast Guard will search tor, and do e~
in its power to rescue, an;yane in distress on the high seas and other navigable waw
Last yea:r these operating programs ot the Coast Guard brought nearl3" $17,000,000
to lInssachusetts through mill tary pay- and allawance~, c1villan salaries, maintenaDce
and other expenses, While construction projects, such as replaciDg lightships with
rixed structures provided about another t.bree-qua.rters ot a million dollars.
Then, too, the Bureau of Customs continues to play a most important role in the
large cargo operatiollS and passenger travel through the Port or Boston. It has been
gratifying that Customs has been working diligentlJr toward the goal ot passing on
with speed and courtesy that vast majority" ot: Americans who obey import laws and
regulations. In that connection, I am pleased to say that Philip Nichols, a t'ormer
Bostonian and the Cormnissioner ot Custans is doing an outstanding Job.
But, I should like to talk about two other matters that are of' great importance
to the Trea.sury and the nation. I rerer to the balance ot payments and the .Administration's tax program. I shall address ~el.r to the latter issue first.
All of you must hava been encouraged by' the performance ot the latest bus1Dess
indicators that show an upturn from the plateau on which the ecoDOII\Y bas been operat:b
While they augur well tor the produoticm ot goods and services I the near 6 percent
rate of unemployment still is high, and the nation's rate ot economic growth is lower
than in most other industrialized nations. There is B. need, therefore, to toster a
more rapidly expanding ecol'lCllIU at home while moving closer to a reasonable balance.
in our interJJa tioDal payments.
But i t appears dirticult to achieve those goals with the present tax system. lot
was primarily designed in the years when inrlation 1r8S an omnipresent danger, end
when the United states had tew, it indeed e:tJy',. canpetitors in roreign and domestic
Gradual.ly the s1 tUJ):t1on changed. 1'he pent-up domestic demand was f'111ed.
markets.
544
- 3 wartime allies rebuilt their econanies, employed successfully neVi technologies for
:rt and equipment 'and therefore became highly canpetitive with the United States.
But 'the American tax system did not change with the times.
By 1961, high tax
ou"bnoded depreciation regulations and other tax features were exerting a
l'eSsing force on the economy. The President initiated a number of important tax
PoSals designed to adapt the country's tax,system to the new demands of the Sixties.
llaritime industry, along with others, has benefited fran the changes already made
Y1l.l. benefit still more if the President's most recent proposals are 'adopted.
!8,
Revision of depreciation guidelines VIas the first relief measure. These new,
ea shortened substantially the write-off time for maritime industry equipment and
Plit"ied the procedure for computing depreciation. For various types of vessels the
rage 1.ire, for depreciation purposes, vms reduced by an average of 50 percent. Under
old regulations there were 19 different classifications for various kinds of ships.
usetul. :Life of these 19 items ranged fran 25 years up to 60 years for certain
seJ.s.; , The median useful life in the 19 categories 'VJaB 38 years. The new guidelines
hIde all ships, barges, tugs and simUar equipment in a single category with a useful
e of 1.8 years, lth1ch is 20 years less than the median age previously assigned to
Uar assets.
'
JlaCllinery and equipment used in shipbuilding had been assigned useful lives of
ra 20 to 25 years. Under the new regulations all of these items were combined into
fngle category and assigned a useful life of 12 years, which resuJ.ted in an average
ltet10n of 47 percent.
Compared with the old regulations, the new guidelines permit shipowners to double
amount of depreciation taken on vessels when they canpute net income.
"
Increased depreciation reduces tax liabilities, increases cash flow, and encourages
IDess to modernize plant and equipment. The new schedules should also encourage
maritime industry to take advantage of advanced technology, and I am sure that all
10U so closely associated with shipping agree that fine as many of the American
t't are improvement could be made. For example, Vice Admiral Sylvester" Deputy Chief
Ha~ Operations, recently said that 94 percent of American dry cargo ship tonnage
IIOre than
years old, which of course places the nation at a competitive disadvantage
l'
Finally, I should like to point out that 'lll1der the new procedure, businesses are
ouraged to lISe for tax purposes shorter depreciable lives than those in the guideea, provided the item is actually replaced in that time.
fhe mar1'tf.me industry has also benefited t"rom the investlrent tax credit that passed
year, which provides that in the first year a new asset is used, 7 percent ot its
can be deducted from the compaQYts tax liability. Unused credits may be carried
~k tor three years, but not past December 31, 1961, and carried forward for five
trs
This form of tax credit is a direct incentive to investment in capital goods
~luding, of course, ships. But to qualify for the credit, the vessels mst be
'
:!stered under the American flag.
~
~
The maritime industry, in comm::m wi th others, has a great deal to gain from the
!sident' s program of tax reduction and reform, which is now before the House Ways
I Means eommi ttee •
- 4Tax rates or individuals would be slashed rrom their present range or 20 to 91
percent to a range or 14 to 6, percent by 196,. One-rourth or the cut would go :into
errect in 1963, three-fourths in 1964, and the t'ull cut in January 196,. Considering
responsible riscal policy, such substantial cuts are reasible only ir some ot' the
Federal revenues lost in the process are regained by broadening the tax base.
'2
Corporate tax rates would also be reduced from
to 47 percent in two stages.
The rate would be dropped to
percent in 1964 and to 47 percent in 1965. This t'ive
percentage point reduction would increase the proritability or new investment in. 's83,
ships by nearly 10 percent. This is on top or the depreciation guidelines and the
investment tax credit that have already increased the proritability of new investment
by 20 percent.
'0
Small companies would be particularly rortunate \mder the proposed new tax measul'l
T.Jle rate on the first $2',000 or taxable corporate income would fall to 22 percent
rrotl the present 30 percent, a reduction or 27 percent. This would result in an 1mned:
tax reduction of $233 million in 1963 for the 467,'00 companies, including ~ in the
maritime industry, with incomes of $2',000 or leas. Corporations with incomes ot' 111)1"8
than $2',000 would also benefit: combined vlith the lowered overall rate of 47 percen'\,
a corporation with $'0,000 of income would enjoy a 16 percent tax reduction, one with
$100,000 of income, a 12-1/2 percent cut.
.
The tax cuts for business would result in higher after-tax income, thus increasinj
earnings available for expansion, research and. development, new product introduction
and larger dividends, or a combination of these. The tax program would help to allen.
one of the most persistent deterrents to the gro\rt.h or small enterprises - the l.ack oj
capital for expansion.
The imnediate benefits or the tax program to companies in the maritime and other
industries should not overshadow the most important objective behind the proposaJ.s I
which is to hasten recovery to full employment in the next rew years and to step-up
the ecoIlOII\Y' , s rate or growth over a longer period. Tax reduotion now will increase
oonsumer and corporate spending, lead to the employment or resources now idle, and
encourage more vigorous investment in new plant and equipment.
Ir we were operating at full employment levels or output, our total output of
goods and services would be soma $30 to $40 billion greater than it is now. This
would mean more trade, both roreign and domestic I and more business ror the mar! time
industry and other shippers.
Such a spur to economic activity, with its concomitant strengthening of American
competitive pov/er, would contribute to the solution or the nation's balance of payments
problem. A13 you know, the balance or payments is the dollar difrerence between all
government and private transactions with other cotmtries. Most or the time since
World War II we have had an unfavorable balance, largely because of the need to maintai
armed forces overseas, Which the American people consider to be in the interest ot' the
free world. Our exports have exceeded imports, but not in a surficient degree to
orrset the other drains on the dollar.
The deficits in the payments balance in the three years before this Adm1n1stratlO1l
came into power averaged $3.5 billion. A1J a result of President Kermedy's vigorous
545
- 5 lttack on this problem, in the past two years that figure has been cut to $2.2 billion.
Usa, the nation's gold loss, which was about $1.5 billion !'rom 1958 through 1960, has
Iropped below $1 billion in each of the last two years.
.
What can we do to bring about a reasonable equilibrium in our balance of payments?
lsel£-defeating way would be to place restrictions on our foreign trade and financial
~lations.
Or we might even discontinue meeting our vital comnitments overseas, but
:.0 responsible government would accede to such a course. The answer, then, is to
tncrease exports, and of course a meaningful contribution tbat could be made is to
~ more of our own exports and imports and indeed, of all types of world trade, in
~~shl~.
.
The United states exports proportionately less of her economic output than any
!ajor industrial nation of the world: in relation to gross national product, Italy
lells three times as much abroad as we do, and GermBllY' nearly four tiDies.
In 1962, onJ.y 8.8 percent of American exports and imports were carried in American
bottoms. This contrasts with 80 percent for Russia, 62.6 percent for France, 53 percen
rot- the United Kingdom, 49.2 percent for Norway, and 33.4 percent for West Germa.ny.
Iotw:ltbstanding, the balance of payments position of the United States was benefited,
Pl'obably, in an amount exceeding one-half billion dollars.
But surely that situation could be improved, for when one breaks down the figures,
It is c1ear that the American competitive edge could be sharpened. In 1961, the most
~cent year for which complete figures are available, 9.4 percent of American imports
Ind exports were shipped in the nation's vessels., But look at how that figure derives:
~r dr,y cargo was at a respectable, although improvable, 29.9 percent. However,
~r dJ:y cargo was only 6.9 percent and tanker 3 percent. From this, I am sure
rou can see what an important contribution the maritime industry could make to the
~e of payments problem.
The Government is doing all it can to help exporters find new IDarkets abroad.
ls one official of the Government said some time ago, "We are insisting that the com-
I'erc1al attach~s in our embassies finish their paper work promptly in the lOOming,
tnd then get out and sell." He didn't mean that llteral.1y, but he did mean the
lttach~S are doing the spade work so American businessmen can follow up with a better
:hance o£ getting the orders.
The Trade Expansion Act of 1962 provided the essential tools for world wide
bargaining, especially with the Common Market nations. But in the final
Inalysis it will be .American businessmen, including those in the maritime industry
rho must' take the initiative to get the business. I am confident that they will ~o'
that, and particularly you enterpriSing New Englanders. If export business
thrives I believe that the legislation and other measures the Government has
tn1tia~d and will initiate" will successfully work toward a balance in our inter3at!onal. payments. Moreover, I believe that we will achieve that goal at a higher
Level of trade for the United states and other nations, and therein lies the inherent
!COnOJOic strength that, along with the will of its people, is the power of the
rree World.
~f'f
rust
-6In closing, I would like to conment on a recent deoision or the Supreme Court
requiring the Interstate Conmerce CoomiBsion to allow railroads serving North Atlan"U
ports to reduce export-import freight rates to prices enjoyed by Southern port rail
carriers. The signiricance or this decision to the Port of Boston is selr-evident.
Hencerorth, railroads serving this area can compete more errectively and it should
enhance the prospeots or the growth or this great port. I thank you.
000
545
- :5 -
and exchange tenders will receive equal treatment.
Cash adjustments will. 'be made
for differences between the par value of maturing bills accepted in exchange and
the issue price of the new bills.
The income derived from Treasury bills, whether interest or gain frODl the sale
or other disposition of the bills, does not have any exemption, as such, and l.OS8
tram the sale or other disposition of Treasury bills does not have any special.
treatment, as such, under the Internal Revenue Code ot 1954.
The bills are subject
to estate, inheritance, gif't or other excise taxes, whether Federal or state, but
are exempt from all taxation now or hereafter imposed on the principal or interest
thereof by any state, or any of the ,possessIons of the United states, or by any
local taxing authorIty.
For purpoaes of ta.xation the amount ot discount at Which
Treasury bills are originally Bold by the United States is considered to be interest.
Under Sections 454 (b) and 1221 (5) of the Internal Revenue Code of 1954
the amount of discount at which bills issued hereunder are sold is not considered
to accrue until such bills are sold, redeemed or otherwise disposed ot, and such
bills are excluded trom consideration as capital assets.
Accordingly, the owner
ot Treasury bills (other than lite insurance companies) issued hereunder need include in his income tax return only the difference between the price paid tor such
bills, whether on original issue or on subsequent purchase, and the amount actual.l1
received either upon sale or redemption at maturity during the taxable year for
vhich the return 1s made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this notice, prescribe the terms or the Treasury bills and govern the conditions of their.issue.
Copies ot the circular may be obtained trom any Federal Reserve 'Bank or Branch.
·MR&liiIUill
decimal., e. g., 99.925.
Practions
~
not be uaed.
It is urged that tenders
be made OD the printed tomB and forwarded in the special envelopes which Yill
be supplied by Federal Reserve l3a.nks or Branches on application therefor.
~1ng
institutions generally may submit tenders for account of' customers
prov1.ded the names
ot the customers are set forth in such tenders.
Others than
banking institutions will not be pem1tted to .sul:mit tenders except tor their
own account. Tenders will be received without deposit f'rom incorporated banks
and trust com:pa.n1es and tram responsible and recognized dealers in iDvestment
aecurities.
Tenders trom others must be accompanied by
~nt
of' 2 percent of'
the :tace amount of' Treasury bills applied for, unless the tenders are accompanied
bT
aD
express guaranty ot payment by an incorporated bank or trust cOJl1P8D1.
])Dmedi&tely a.:rter the closing hour, tenders will be opened at the Federal
Reserve Banks and Branches, following which public announcement Yill be made by
the !'reasury Department ot the amount and price range ot accepted bids.
Those
aubmitting tenders will be advised ot the acceptance or rejection thereot.
The
Secretary ot the Treasury expressly reserves the right to accept or reject any
or
all.
t1n&l..
t'enders, in whole or in part, and his action in any such respect shall be
'subject to these reservations, noncompetitive tenders tor $
2.000
or
lea. ~or the additional bills dated
l'ebl'U&1"7 28, 1963
, ( 90
days remain.
(Jijj
WIiIi
1ng until ma.turity date on
August 29, 1963 ) and noncompetitive tenders tor
~
$ 100,000 or less tor the 182 -day bills without stated price trom any 'one
pW
4iQ
bidder will be accepted in tull, at the average price (in three dec1mal..) ot acc~ed 'compet~~ive
bids tor the respective issues.
Settlement tor accepted ten-
ders in accordance with the bids must be made or completed at the Federal Reserve
Banks on
in
&
May 31, 1963
U4i
, in eash or other immediately available funds or
like f'ace amount ot Treasury bills maturing _....:;::M&:x...:3:;;W~l:r9~63::o::..._ _ •
Cuh
547
TREASURY DEPARTMENT
Washington
FOR D1MEDIATE RELEASE,
Mq 22, 1963
xxxxxtx:XXAXXDflHP~
TREASURY'S WEEKLY BIU. OFFERroo
The Treasury Department, by this public notice, invites tenders tor two series
2.lOO~.QQQ ' as follows:
,r
90 -day bills (to maturity date) to be issued
m
in the amount ot $
11300~,OOO
,
M!r 31. 1963
iifX
, or thereabouts, represent-
ing an additional amount of bills dated 1ebrParlxtiix 1963
and to mature
Auguatxilt 1963
amount of $800,.000
,
, originally issued in the
,the additional. and original. bills
to be freely interchangeable.
-tIx--
daY bills, for $ 800I~OOO
May
3lhii63
,or thereabouts, to be dated
, and to mature
Novembm
1963
•
The bills of both series will be issued on a discount basis under competitive
and noncompet1..tive bidding as hereinafter provided, and at maturity their face
.
amount will'be payable without interest. ,They will be issued in bearer form only,
,
and in denominations of $1,000, $5,000, $10,000, $50,000, $100,000, $500,000 and
$1,000,000 (maturity value) •
. Tenders will be received at Federal Reserve Banks and Branches up to the
l;)q11ght SartDg
closing hour, one-thirty p.m., Ea.stern/~ time,
MondaY.
~7. 1963
Tenders will not be received at the Treasury Department, Washington.
Each tender
must be for an even multiple of $1,000, and in the case of competitive tenders the
price offered must, be expressed on the basis of 100, with not more than three
i,'~//--../' -,'
"'---'/
•
TREASURY DEPARTMENT
-
i
a*
May 22, 1963
FOR IMMEDIATE RELEASE
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders
ror two series of Treasury bills to the aggregate amount of
$2,100,000,000, or thereabouts, for cash and in exchange for
Treasury bills maturing May 31, 1963,
in the amount of
$ 2,100,860,000, as follows:
90-day bills (to maturity date) to be issued May 31, 1963,
in the amount of $t,300,000,000, or thereabouts, representing an
additional amount of bills dated February 28, 1963, and to
mature August,29, 1963, originally issued in the amount of
$800,153,000,
the additional and original bills to be freely
interchangeable.
182-day bills, for $800,000,000,
or thereabouts, to be dated
May 31, 1963,
and to mature
Novemb~r ~9, 1963.
The bills of both series will be issued on a discount basis unde
competitive and noncompetitive bidding as hereinafter provided, and a
maturity their face amount will be payable without interest. They
will be issued in bearer form only, and ih denominations of $1,000,
$5,000, $10,OOO( $50,000, $100,000, $500,000 and $1,000,.000
(maturity value).
'
Tenders will be received at }i'edera1 Reserve Banks and Branches
up to the closing hour, one-thirty p.m., Eastern Daylight Saving
time, Monday, May 27,1963.,
Tenders will not be
received at the Trl~asury De~artment,'· Washington. Each tender must
be ror an even multiple of ~l,OOO, and in the case of competitive
tenders the price qffered must be expressed on the basis of 100,
with not more than three decimals, e. g., 99.925. Fractions may not
be used. It is urged that tenders be made on the printed forms and
rorwarded in the special envelopes which will be supplied by Federal
Reserve Banks or Branches on application therefor.
.
Banking institutions generally may submit tenders for account of
customers provided the names of the customers are set forth in such
tenders. Others than banking institutions will not be permitted to
submit tenders except for their own account. Tenders will be received
without deposit from incorporated banks and trust companies and from
responsible and recogn~zed dealers in investment securities. Tenders
from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank
or trust company ..
D-863
- 2 -
Immediately after the closing hour, tenders will be opened at
the Federal Reserve Banks and Branches, following which public
announcement will be made by the Treasury Departmment of the amount
and price range of accepted bids. Those submitting tenders will be
advised of the acceptance or rejection thereof. The Secretary of
the Treasury expressly reserves the right to accept or reject any or
all tenders, 1n whole or in part, and his action in any such respect
shall be final. Subject to these reservations, noncompetitive
tenders for $200,090 or less for the additional bills dated
February 28 1963,(90-days remaining until maturity date on
August 29, 1963)
and noncompetitive tenders for ~100,OOO
or less for the 182-day bills without stated price from anyone
bidder will be accepted in full at the average price (in three
decimals) of accepted competitive bids for the respective issues.
Settlement for accepted tenders 'in accordance with the bids must be
made or completed at the Federal Reserve Bankson May 31, 1963,
in cash or other immediately available funds or in a like face
amount of Treasury bills maturing May 31, 1963,
Cash and
exchange tenders will receive equal treatment. Cash adjustments
will be made for differences between the par value of maturing
bills accepted in exchange and the issue price of the new bills.
The income derived from Treasury bills" whether interest or
gain from the sale or other disposition of the bills, does not have
any exemption, as such, and loss from the sale or other disposition
of Treasury bills does not have any special treatment, as such ..
under the Internal Revenue Code of 1954. The bills are subject to
estate, inherit a.nce, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on
the prinCipal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not considered to accrue until such bills are
sold, redeemed or otherwise disposed of, and such bills are excluded
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue' or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which the
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (curre~t. revision) and this
notice prescribe the terms of ·the Treasury bills and govern the
'
conditions of their issue. Copies of the circular may be obtained from
any Federal Reserve Bank or Branch.
000
TREASURY DEPARTMENT
May 22, 1963
FOR RELEASE A.M. NEWSPAPERS
FRIDAY, MAY 24, 1963
MERLE E. ROBERTSON APPOINTED
KENTUCKY SAVINGS BONDS CHAI:RMAN
Secretary of the Treasury Douglas Dillon on May 20
appointed Merle E. Robertson volunteer State Chairman of
the Kentucky Savings Bonds Committee. Mr. Robertson is
Chairman of the Board and President of the Liberty National
Bank and Trust Company in Louisville. He succeeds the late
Lee P. Miller, who had served as State Chairman from his
appointment in June, 1961, until his death last fall.
In announcing the ap~ointment for the customary period
of two years, the Secretary said: "We feel that the Savings
Bonds program is one of the most important activities in
which we are engaged. It not only is an essential feature
of our debt managemen.t program, but also serves to encourage
thrift. The addition of a leader of your stature will help
us tremendously."
Mr. Robo~rtson has been one of Kentucky's leading volunteer supporters of the Savings Bonds program since world War
II. His appointment as State Chairman of the Savings Bonds
Committee climaxes over twenty years of active participation
in the promotion of U. S. Savings Bonds.
Mr. Robertson has long been active in numerous civic,
charitable, business and educational interest in Louisville
and Kentucky. Currently, he is a member of the Board of
Directors of Nazareth College: the University of Louisville's
International Center: the Loaisville Branch of the Federal
Reserve Ba~~ of St. Louis: Louisville Chamber of Co~erce:
and five business firms. He is also a member of the University of Louisville's Board of Overseers: the President's
Civic Council, Bellarmine College: and is Treasurer of the
Kentucky Independent College Foundation in Louisville. Mr.
Robertson is one of two bankers who bas served two terms as
President of the Kentucky Bankers Association.
000
TREASURY DEPARTMENT
550
May 22, 1963
FOR RELEASE A-. M;. NEWSPAPERS
FRIDAY, MAY 24, 1963
MERLE E. ROBERTSON APPOINTED
KENTUCKY SAVINGS BONDS CHAIRMAN
Secretary of the Treasury Douglas Dillon on May 20
appointed Merle E. Robertson volunteer State Chair.man of
the Kentucky Savings Bonds Committee •. Mr. Robertson is
Chair.man of the Board and President of the Liberty National
Bank and Trust Company in Louisville~ He succeeds the late
Lee P. Miller, who had served as State Chairman from his
appointment in June, 1961, until his' death last fall.
In announcing the appointment for the customary period
of two years. the Secretary said: "We feel that the Savings
Bonds program is one of the ~st important activities in
which we are engaged. It not only is an essential feature
of our debt management program,' but also serves to' encourage
thrift. The addition of a leader of your stature will help
us tremendously."
Mr. Roh3rtson has been one of Kentucky's leading volunteer supporters of tha savings Bonds program since World War
II. His appointment as state Chairman of the Savings Bonds
committee climaxes over twenty years of active participation
in the promotion of U. s. Savings Bonds.
Mr. Robertson has long been active in numerous C1V1C,
charitable. business and educational interest in Louisville
,and Kentucky. Currently, he is a member of the Board of
Directors of Nazareth College: the University of Louisville's
International Center: the Loaisville Branch of the Federal
Reserve Ba~~ of St. Louis: Louisville Chamber of Commerce:
and five business firms. He is alsQ a member of the University of Louisville's Board of Overseers; the President's
Civic Council, BellaDnine College; and is Treasurer of the
Kentucky Independent College Foundation in Louisville. Mr.
Robertson is one of two bankers who has served two teDn3 as
president of the Kentucky Bankers Association.
000
551
THE F11TtlRE
OF THE ANTIDUMPING ACT
JID,WU{S OF JAMES PCMEROY HENDRICK
DEPlrrY ASSISTANT SECRETARY OF THE TREASURY, BEFORE
THE NATIONAL CarnCIL OF AMERICAN IMPORTERS
(}J WEDNESDAY, MAY 22. 196'3
It is with considerable trepidation that I come before you
gentlemen today.
You know the laws, the regulations, the practices
:In trade with other countries.
Many of you know the Antidumping
Act, the subject of today's discussion, intimately, and :indeed sane
o£ you have attacked its administration bitterly.
My trepidation is the greater when I look at the topic put
before us:
"The Future of the Antidumping Act."
what will happen is definitely not in my line.
Prediction as to
If you do not object,
I would prefer to consider, not what the future of the Antidumping
Act is actually going to be, but what alternatives appear on the
horizon.
Then if any of you decide you prefer one of these alternatives,
and are not disciples of Tolstoy's theory that the trend of history is
una£fected by individuals' efforts, you may wish to make your preference
known in one way or another.
Just on the chance that there may be a few here who belong to
the uninitiated, let me describe the Antidumping Act.
To take a fictitious example, we may suppose that the distillers
in scotland suddenly decide to produce bourbon whiskey. (In giving you
this example I must assume - doubtful assumption: - that the Scots
can produce a sippin' whiskey, bourbon type, which the United States
- 2 -
cr'"
. drinkers will enthUsiastically drink).
The Scotch '-diStillers seU
this for $4.00 a bottle to purchasers in Scotland.
They then decide
to try the United States market.
They sell it for $1.00 a bottle to
purchasers in the United States.
This constitutes selling at a
dumping price or to use the technical term "selling at less than
fair value," because the price to the United States is lower than the
price in the foreign producer's hane market.
Let us suppose that
these sales are 1ri sufficient volume, or, though in small quantity,
in suf'ficiently strategic markets, to injure bourbon whiskey producers
in this country.
We then have two elements:
and injury to United States :Industry.
sales at a dumping price
Under these circwnstances the
Antidumping Act applies; and a special duty will be assessed to bring
the $1.00 import price in the United States up to the $4.00 price in
Scotland.
The dumping duties therefore will be $3.00 per bottle •
. That is essentially all there is to the Antidumping Act.
There are, it will be seen, two elements in dumping as defined
by the law:
price discrimination - i.e. a lower price to the
United States market than in the producer's hane market - and injury.
Whether there is price discrimination is decided by the
Treasury Department.
Whether there is injury is decided by the United States Tariff
Ccmnission.
- :3 Calculation of price is, in theory, a simple matter - a problem
in arithmetic.
The major ccmplications ordinarily cane in connection
with adjustments for varying circumstances of sale in the two markets -
the foreign producer's hane market sales and his sales to the tblited
states.
For example, the whiskey sold in Scotland may cane in more
or less costly bottles than the same whiskey imported into the United
States.
Adjustment must be made for this difference in mald.ng the
price canparison between the price in Scotland. and the price to the
United States.
Injury is a far more complicated matter.
because it takes more time to
d~cide
Complicated, not
- ordinarily it takes less -
but canplicated because the Tariff Commission must deal with
economics, which is an inexact science.
en the theory that the past is prologue, let me try to give
SaDe
idea of what have been the important developnents and trends in law,
regulations, and administration up to now.
After that I shall try
to deal with the future.
THE LAW
We go back to 1916.
A law vms passed which made it a crime to
sell at a dumping price with intent to injure.
put in prison.
enforced.
Offenders are to be
This law is still on the books but it has never been
554
- 4 In 1921 the basic Antidumping Act
liaS
passed.
It makes
extremely difficult reading but essentially it does nothing
more than to provide for a dtm1ping duty measured by the difterence
between a foreign producer's higher home price and lower price to
the Ulited states when United States industry is injured.
There have been two amendments to the 1921 law.
()le passed in 1954, limited retroactive assessment 01' dumping
duties to 120 days.
The law also placed responsibility tor detemining
whether there was injUry in the Tar1tf C<mnissian.
Injury determinations
had previously been made by the Treasury Department.
The second amendment was passed in 1958 and was the subject 01'
IrIY last appearance before your Council.
Essentially, the amendment
was designed to close a loophole by means of which, certain importers
were getting out fran under a sensible but teclmically unavailable
interpretation of the law.
As a last minute addition, provision was
made that an evenly split Tariff Cormnission decision'meant a positive
determination of injury - a move highly applauded by)those favoring
stranger protection of United States manufacturing.
RmULATlOOS
No regulations of substantive importance were promulgated untU
1955, at which time provisions were put into effect which were later
incorporated into the 1958 amendment to the law to which I have referred.
- 5 Since then, however, there have been two important new regulations.
Ckle,issued in 1960, seriously cut down allowances of deductions for
home market expenses such as selling,' advertising and research costs.
Another, issued :fn 1961, put an end to refunds by foreign producers
of dumping duties charged against importers.
Both these regulations
have been widely criticized by free flow of trade protagonists.
W4INISTRATlOO
Changes also have occured pursuant to shifts in administrative
policies.
In the very beg1rm:fng, under President Harding, there were
many dumping findings - 28 in the first two years.
In the next ten
years, under President Coolidge and President Hoover, there vlere 22
·findings, an average of slightly over two a year.
In the pre-war
years of. the Roosevelt administration the pace slowed down to an
average or one f:1nd:fng per annum.
During and immediately after
World War II the lavi was forgotten, as might be expected - there was
no need for it.
Thereafter we find the record for President Eisenhower's
eight years was three dump:fng find:fngs; President Kennedy' s total in
two and a third years has totaled four.
In the past few years lie have increased the proportion of cases
in which appraisement was withheld, thus making possible retroactive
assessment or dumping duties if there is a dumping f:fnd:fng.
More
cases have been sent to the Tariff Corranission with determinations
of sales belovi fair value, and while the Corronission has found no
injury in most of these, the number of positive dumping findings
- 6 -
is now substantially as high as it ever has been except tor the
two years
1921 - 1922.
In addition to this, a rather large number
or cases involv:Lng sales at a dumping price have recently been
spotted and disposed
or
pursuant to a technique developed since
the 19'4 split ot authority amendment, designed to protect Unit.d States
industry with a minimum
Or
governmental interference.
This tec.bn1que consists ot .closing out the case where (1) there
. been
baV(!
sales at a dumping price but where
. (2) such sales are d1s-
cant:lnued ~en brought to the dumper's attention and
tn
is given that in the fUture there will be no dumping.
assurance
In the last
.
.
two years there have been 20 such cases, an average or 10 a year,
which is almost one third ot the total number ot cases processed during
that period.
JustU'ication tor such dispositiOn is tound :In the
regulations:
one can close out a case where the volume or sales or
the dumping margin is not more than insignificant.
Ord1nari.ly, in
such cases, if dumping findings had been made the duties collectible
would have been small, both in absolute terms and in relation to
United states production figures •
. Now in all cases of this sort we consult with the canplainant
before making a technical determination of no dumping, so as to give
him the opportunity to present argument if he so chooses that the
voltm1e
or
sales at a chDnping pzice or the dumping margin (price d1frererltJ~
are in fact significant,
Such cases have been closed out without
557
- 7 objection fran the canplainant.
Typically the complainant has
reasoned - I have got what I wanted; the sales at a dumping price
have stopped; if the case goes to the'Tariff Carmission the Camn1ssion
may find there is no injury and then the dumping sales can be resumed.
So I'll let well enough alone and will not urge reasons for sending
'the case to the Tariff Ccmnission.
There have been :instances in which the canpla1nant did nonetheless
present argument designed to show that we should send a case to the
Tariff Ccmnission even though the potential dumping duties might be
considered small and there was an \Uldertaking not to sell at a dumping
price in the future.
In such :instances the canplainant has urged
factors such as a sensitive market situation, easily upset even by
a small volume of low priced sales.
We have in ail such instances
so far agreed with the canplainant that the case
'J'IJIJ:y
properly be so
handled, and these cases have, accordingly, been sent to the Tariff
Camnission.
But quite obviously if in sane future case we find the
canplainant does not establish that there is real Justification, we
,
,
are not going to waste the Tariff Camdssion's time by referring to
it a case .which does not meet the regulation's test of "more than
insignificant."
Tariff cc:mmission determinations as to what constitutes injury
resemble in one respect court cases decided \Ulder the Napoleonic Code,
as distinguished from case law in 'the United States or British camnon
~58
- 8law Jurisprudential system.
That is to say, a decision may be made
without establishing a binding precedent.
However, we do get sane
rather clear guide lines fran, examiruition of the Coomission IS opinions.
It is clear, for example, that the Canmissian up to now has been
willing to consider injury to a distinct geographic area in the
United states actionable under the law.
Thus when tmited KingdOOl
cast iron soU pipe injured a relatively small n\DIlber of California
producers, that was "injury, It though the far more important United States
producers elsewhere in the country were unaffected.
And when the New York
area was found likely to be injured by Daninican cement imports, that
Justified a dumping finding even though imports of Daninican cement
into Puerto Rico, which appears to be the mO~ 'logical market for
Daninican product, did not injure. It is not clear to what extent the
Tariff Ccmnission considers predatory intent a necessary ingredient in
establishing injury.
Canmission decisions an this point have appeared
sometimes to indicate it is, sometimes that it is not.
The question as
to whether or not there is injury when a high cost foreign producer sells
below fair value at a price identical to that charged by a low cost foreigr.
producer Y/ho sells. not below fair value, is a point presently under
consideration.
SUMMARY
Analysis of the past record shows a large number of dumping
findings in 1921 and 1922, the first two years of the law's existence;
-9a subsequent decrease in the Coolidge - Hoover era, though this is
generally considered a period of our history when protectionists were
in the ascendancy; thereafter further' limitation in activity l.UltU
World War II brought trade to a standstill.
Eisenhower administration,
incre~ed
Starting with the
activity.
In 1958 an amendment
to the law which is in one respect definitely restrictive. Thereafter
increased withholding of appraisement
. - a restrictive trend.
.
1960
and 1961 amendments to the regulations which, again, are restrictive
in trend.
Dumping findings currently made at approximately the same
rate as in the Coolidge - Hoover era.
In addition, recently increased
enforcement by a teChnique of closing out' ca$es without reference to
the Tariff COJIDlission after price revisions which correct what is
determined, without objection, to be insignificant dumpirig.
This type
of decision has lately been reached in almost a third of our cases.
If we consider such decisions to constitute action under the law to
eliminate dumping, and they do have that effect, the Kennedy admin1Btration
is administering the Antidumping Act with far more vigor than has ever
'been displayed,since the first brief "honeymoonII period, in its fortytwo year history.
Now as to the future.
The future of the Antidumping Act will depend upon who calls the
. signalS.
There are at least four groups one must reckon with as con-
tenders for this assignment.
- 10 -
560
First, the protagonist of free flow of trade.
He believes
that if producers in any foreign country are making a particular
product cheaper than we can, let I s take advantage of the fact and
buy the product.
Even i f they sell their
surpl~
at a price no one
here could canpete with, that is O. K. as long as the price will
remain consistently low.
Dumping laws should apply only to sporadic,
predatory, low price shipments designed to put our efficient pro,ducers
out of business, so that the foreign producer, his monopoly in our
market assured, can thereafter raise his prices at will.
Second, the protector ot United States manufacturing.
He believes
that no shipment should be allowed into this country unless and untU
there is proof positive that the import price is not below the price
in other markets.
Any price discrimination should be met with severe
retroactive penalties.
If we are foolish enough to continue to include
injury to United States industry as an element in dumping, then the loss
ot even a $1.00 sale by an American competitor should be considered
injury.
Third, the reasonable man.
He believes the Antidumping Act
should be construed so as to protect against injurious dumping but,
wherever feasible, not in such a way as to interfere unreasonably
with increasing United States exports which, it they are to continue,
must in general be matched by increasing United States imports.
- 11 -
561
Fourth, the bureaucrat who administers the law.
What are these four groups saying or doing today?
1.
The protagonist of free flow of trade is, of course,
anxious
down.
bave
- - -'amendments
to
to the law which will water it
He pictures the average foreign producer as a person who,
t'earing the pitfails of the
to risk its application.
Ameri~an
Antidumping Act, is unlikely
It the foreign producer is fOlmd to have
sold at a dumping price that will almost surely be because he did
not realize the Treasury lIOUld disallow certain adJustments, such
as those for quantity differentials or enterta:lllment expenses, which
he had considered entirely reasonable.
The free flow protagonist
knows - and this is· a . taQt - that exact calculation in advance ot
what is or is not a dumping margin is otten quite impossible.
Therefore he expects that from time to time a foreign producer will,
quite innocently, sell at a dumping price.
.
He also teels that the
.
foreign pro~ucer is at a disadvantage in the United States market -
his deliveries are slow, his ability to fill repeat orders or to
supply
pa~s
uncertain.
Therefore he should be entitled to sell at
a delivered price substantially below the American canpetition.
. ~ event, the tree flow protagonist believes
In
significant sales
below fair value occur so se1dali and resultant injury to United States
industry is so rare that this law should for the most part be put in·.a
pigeon hole.
The extreme free flow proponent simply can not conceive
- 12 -
. that our great, powerful, efficient, intelligent American industries
can really get hurt.
2.
The protector of United States manufacturing
amendments to tighten up the law.
p~sses
for
He pictures the average foreign
producer as a person who is perfectly willing to take his chances
an being hit by the Antidumping Act.
The foreign producer sells to us
below home price either deliberately, or carelessly.
His sole aim is to offe:
a price below the United States competition, which is his only way of
getting acceptance in our market.
Even if he is the rare exception
who tries to avoid a dumping price, the fact that he may not guess
right is no excuse; If he has any doubt whether :rreasury will make
allowances for circumstances of sale which will put him in the clear,
then he should assume Treasury will not; he must take no chances, even
though he thereby prices himself out of the market.
Any dumping, no
matter how small, is essentially an un£air trade practice.
punished when found.
It must be
That low cost foreign imports may benefit
I
.
,American industries other than his ovm is a matter of no significance.
The fact is the dyed-in-the-wool protector of United States manufacturing
I
would be quite content if all
I
~ports
. I
.
were limited to coffee and bananas.
.
3. The reasonable man is almost never heard from.
i
4. The bureaucrat tries to figure out what he would do it' he
were a reasonable man, and acts accordingly.
once in a while he succeeds.
Let's hope that every
- 1J -
Here are sane ideas which have been or may be advanced tor a
change in the situation.
They are picked at randallj the list is
by no means all-inclusive.
I express no judgment as to whether
they are desirable or not.
Sane of them may appear to you headed
111 the right direction; others may not.
To the extent that
~he
trend is toward the free "flow
or
trade,
we can expect, for one thing, amendments to the law or procedures
directed tOlm.rd el1minating or reduc:lng withholding of appraisement.
:Withhold:lng makes possible retroactive assessment of dumping duties.
This is how it works.
Cklce an import is appraised no further dumping
duties may be "assessed with respeot to it.
If, hOwever, appraisement
is withheld with respect to an entry, then dumping duties may be
assessed on it even though the dumping finding is not made untU weeks
or months thereafter.
The free floVi of trade proponents urge that there
is no need for retroactive assessment of dumping duties.
They point
out that with one (not completely parallel) exception European oountries
do not assess dumping duties retroactively and they
urg~
injurious sales at a dumping price are brought to a stop
that it the
~"objective
or the law is accomplished without the need for assessment of duties
which relate only to goods already landed and sold.
The free flow of trade proponents may also be expected to urge
more liberal allowance of deductions against home price for expenses
incurred in connection with sales in the home market not applicable
-14-
564
to sales to the United States - salesmen's salaries, office rent,
entertainment of prospective local customers, and so forth.
Besides this they will likely urge a more liberal :l.nterpretation
by Treasury of the tem "fair value. 11
The law provides, as you know,
that dumping shall be fO\Uld if there is injury and sales below
value. " Treasury
const~es
~fair
"fair value" to mean the "fair market
value," that is to say, the going price.
.
If, as the free flow proponents
urge, Treasury were to construe the word "fair" in the sense
.
,
or
"equ1table"
then it -could exercise considerable discretion in determining whether to
send cases to the Tarirf Commission and it would refrain fran sending
over sane cases of the ldnd which it now feels obliged to transmit.
If, for example, a particular ccmnodity is imported at a dump:l.ng pnio.e
which, with inclusion of duty and transportation, is abov:e
States competitive product's price, and United States
:bhe WnI.1tie4
1D~~'oomplained,
Treasury would be canpeUed under It.s ,present ~strlct constructioo or
"fair value" to send 1;he case to the Tariff' Camn:ission even though
there might be no sense in taking such action.
of "fair value" the case could, i f the facts
Wi th a .obanged defini tian
warranted~
be dismissed at
once.
It may be expected also that the free flow proponents will seek
sane means of limiting dumping duties in a case where ·(as with Dominican
cement) the Tariff Camnission injury dec1siOD "l'eJ.aJtes -only to ane geographic
area.
In this way shipnents below fair value imported into another area,
where they do not :injure, would not be subject to dumping duties.
- 15 In addition, provision might be asked for whereby retroactive
dumping duties would be disallowed where the Tariff Ccmnission
decision is limited (again, as in the Daninican cement case) to
ruture likelihood of inJury.
Other amendments may be proposed along the lines of legislation
heretofore introduced wi"th the support of sane here today who have
advocated the free t'low of trade.
In particular, as indicated above,
tree tlow proponents may be expected to ask that cases be dismissed
Unless the import is priced
subs~t1ally
below United States competition,
and the sales are made with clearly evident predatory intent.
The protectors ot' United States manufacturing have recently been
tar more active than the t'ree flow ot' trade proponents in getting
proposed legislation introduced in Congress.
Among other things
they want withholding of appraisement at the earliest possible date ordinarily wi thin a couple of weeks after receipt of the canplaint unless the foreign producer has by then rather clearly shown that
the complainant's allegations are unfounded.
The protectors would
have allot' the complaints involving the same product considered
simultaneously, so that the question of injury may be decided in the
light of shipnents t'ran all countries.
They are unconcerned that a
particular problem relating to one case might hold up all the others for
months.
They would have every claimed quantity discount cost-Justified
inStead of continuing the present more speedy system of alloVling' such
discounts it' actually and bona fide offered to all purchasers in the
566
- 1 6 market under consideration.
The protectors would also allow the
canplaillants to have access to the foreign producers I confidential
price data so that canplainants could be in a position to check on
,
the accuracy of the Treasury Department's arithmetical calculations.
If Treasury made a negative determination as to s9.les below fair
value, the protector would at that point allow the canplainant ":.0
bring this issue before the courts for detaUed review, with
appraisement withheld all the while,.
Both the free flow of trade protagonists and the protectors
of United States manufacturing ask for speedier disposition of
dumping cases.
But sane of the protectors I, suggested amendments
would tend to prolong rather than hasten the final determination _,
indeed the court review could keep the importer for years in doubt
as to whether be should continue to import.
or course the fact is
that doubt and delay can often stop imports more effectively than
imposition or dumping duties.
This being so, the extreme protector
,
will try to prolong each case - particularly one he fears he may lose _
as long as he possibly can.
It is to the credit or
~
fair minded
I
j
United States industrialists
tha~
II
they have not advocated this policy.
We bureaucrats have been by:n0 means deaf to the sounds around
us.
Last autumn an ,interdepartmental camnittee was established to
, review procedures under the Antidumping Act. Mr. Audett, who is here today,
was chairman of that committee. The committee members concentrated
56-(
- 17 their attention principally on one question:
speed up the processing of cases?
430 days per case.
Vlhat can we do to
Statistics showed an average of
Everyone agreed that was too long, far too long.
The committee came up vdth a series of suggested changes in procedure
designed to cut the 430 days to 200.
adopted.
These changes have now been
The Customs staff devoted to processing of cases has been
increased.
In addition, other improvements have been worked out
which Mr. Audett can report to you.
Now let me make sane predictions as to the future.
Prediction #1.
Processing of cases will be substantially
speeded unless amendments to the law are adopted which slow us uP.
Prediction #2.
The battle between the free flow of trade
protagonists and the protectors of United States manufacturing will
get hotter vdthin the next few years, unless in the meantime one
side surrenders.
Prediction #3.
If the free flow protagonists get their way
i
completely a good number of our United States industries could have
a really tough time.
Prediction #4.
I
I
iI
If the protectors get their way canpletely a
i
!
good
part of our international trade could be reduced to insignificance.
I
Prediction #5. Even if one side \'fere to get all it wanted, it
would never admit it vms satisfied.
Prediction #6.
Neithe~
(Really this is a prayer rather than a predicti~
side will get all it vrents.
- 18 Prediction #7.
SSB
The trend will favor one side or the other
depending on the attitude of this government toward international
trade.
To the extent such trade is ca:1Sidered an essential part
of our well-being, the tendency will be toward a construction of
the Antidmrrping Act which will tolerate unimportant sales that
are somewhat below foreign home market prices, and will in general
consider the foreign producers innocent until proved guilty as we lay
out the welcane mat for them.
Ideally, from this standpoint, the
Antidumping Act will become almost completely forgotten.
To the
extent, on the other hand, that international trade is considered
a less than essential element in our econany, the tendency will be
toward a construction of the Antidumping Act which will consider
dumping a crime, even though it will probably not be punished by
a Jail sentence j vlhich ldll consider every foreign producer a
potential dumper and require him to prove beyond a reasonable doubt
that he is in the clear before his product may be landed on our shores.
Prediction #8.
Changes:in direction which we may make in our
legislation or administration will be met by corresponding changes
in other countries' legislation or administration.
Our exports may
:Increase or be curtailed in consequence.
Prediction #9.
country.
There will be many proponents of change in this
They will all have one element in camnon; none of them will
ever admit that the changes they propose are either "free trade" or
"protectionist."
They will all claim to be "middle of the roaders"
- 19 devoted only to the best interests or these United states • • •
Indeed this claim is even made by the bureaucrat, who at the
present manent - I can not tell you what will happen tanorrow is not advocating any legislative change whatsoever.
569
STATEMENT OF THE HONORABLE DOUGLAS DILLON
SECRETARY OF THE· TREASURY
BEFORE THE
SENATE FINANCE COMMITTEE
ON THE
DEBT LIMIT
THURSDAY, MAY 23, 1963
10: 00 A.H., EDST
Under existing law, the temporary debt limit dropped
from $308 billion to $305 billion on April 1, 1963, and is
scheduled to decline to $300 billion on June 25, 1963.
Should the existing temporary legislation be allowed to expire
without further action, the debt ceiling would revert to the
permanent level of $285 billion on July 1, 1963.
The graduated reductions established in the debt limit
legislation for fiscal 1963 were specifically designed to take
care of the seasonal borrowing requirements of the Government
under the assumption of a balanced budget.
This was clearly
indicated in the Hearings before the Senate Finance Committee
on June 26, 1962, when I stated:
"This graduated debt limit is acceptable to the
Treasury, provided that it is understood that
the debt ceilings in the House Bill were carefully
tailored to meet the Treasury's seasonal financial
requirements under the assumption of a balanced
budget.
The graduated reductions established in
the House Bill would not be adequate if we were to
run a deficit of any substantial size in fiscal
1963."
D-864
2
While the prospect of a balanced budget in fiscal year
1963 was admittedly dubious at the time of last year's
legislation, it did not appear practical to legislate on any
other basis.
This was specifically recognized in the report
of the Finance Committee which stated:
"Your committee concluded, however, that, in any
case, it was desirable to base the statutory
debt limitation for 1963 upon the assumption
that the budget: would be balanced in that year.
Should this eventuality not occur, it concluded
it would be desirable for Congress to have a
further opportunity to review the statutory debt
limitation when it is apparent that conditions
have changed."
Unfortunately, a balanced budget has not eventuated.
As
you are aware, the administrative budget deficit for fiscal
1963 was estimated in the January Budget Message at $8.8 billion.
While the budget outlook for fiscal 1963 has improved somewhat
since the January estimate, we still face a deficit in the
neighborhood of $8 billion.
As a consequence of the substantial fiscal 1963 deficit,
the graduated reductions in the debt limit cannot be permitted
to run their course.
Our present projections show that the
debt will rise from the present level of $304.0 billion to
3
$305.6 billion on May 31, a figure $600 million in excess of
the present debt limit.
From the May 31 level of $305.6 billion,
the debt is prolected to rise to $306.8 billion in the second
week of June, a level $1.8 billion in excess of the present
debt limit.
On June
25, when the present temporary debt ceiling
1s scheduled to fall to $300 billion, our prOjections indicate
that the debt will be $304.2 billion, $4.2 billion in excess of
the limit.
This would place the Treasury and the country in
an impossible situation.
On July 1, when the debt ceiling
reverts to the permanent level of $285 billion, the debt is
estimated at $305.3 billion, $20.3 billion in excess of the limit.
The present debt limit legislation was based on a premise
which has not been realized.
It is not consistent with the
financial facts of life whi,::h the Treasury must face.
It is,
therefore, imperative that. the debt limit be raised if the
financial obligations of the United States, at home and abroad,
are to be met.
I am here today to urge the approval of H. R. 6009, which
would provide a $307 billion temporary debt limit through the
end of the current fiscal year and a $309 billion debt limit
I
I
4
for the period July 1
thro~gh
August 31, the first two months
of fiscal year 1964.
For the past few years the Congress has, prior to the
end of each fiscal year, authorized temporary debt ceilings
for the entire ensuing fiscal year.
H. R. 6009 departs from
this custom by providing a limit that will expire on August 31st,
after which the debt limit would, in the absence of further
Congressional action, return to its permanent level of
$285 billion.
The reason for this action is that estimates
for the fiscal year 1964 must take account of the tax program
presently before the Congress.
The House of Representatives
felt that the prospects for the tax program would be clearer
by August.
And, by then, the overall outline of fiscal year 1964
appropriations will also be clearer.
For these reasons it was
felt that a decision on the level of next year's debt limit
should be postponed until August.
The temporary debt limits provided by H. R. 6009 are at
the absolute minimum levels needed by the Treasury .for the
proper management of the debt and the Treasury's cash balance
between now and the end of August.
These proposed limits are
5
tight, so tight that they provide little or no room for
meeting unforeseen
contingencie~.
The $307 billion debt
limit provides only a $200 million leeway over our mid-June
projected debt level of $306.8 billion.
Our projections show
the debt will actually exceed the $309 billion level during
the last two days of August.
The limits in the House
requested.
bi~lare
lower than those we
Our request to the Ways and Means Committee was
for $308 billion through June 30th-and $310 billion thereafter.
The Committee reduced these figures by $1 billion each.
We
told the Committee that, while we could not recommend the
adoption of such tight figures, we would do our best to livewith them.
Because of the short period of time involved in the debt
limit extension provided by H. R. 6009, the Ways and Means
Committee requested the Treasury to supply figures showing the
estimated debt and cash balance for each day up through
August 31st.
These daily projections are the best_ estimates
we can produce, but they cannot be considered highly reliable.
Long experience has shown that actual daily receipts and
6
expenditures can, and often do, vary from estimates by as much
as several hundred million dollars in either direction.
This
is true of estimates looking ahead 30 days or less and, of
course, would be far more likely in the case of daily estimates
looking over three months into the future.
For periods longer
than 30 days, the type of semi-monthly estimates we have
furnished the Congress in the past would seem to be the most
appropriate basis for assessing debt limit requirements.
The
daily estimates furnished to the House Committee at its request
do, of course, indicate the general trend" of the debt and the
cash balance.
Since the House action was based upon daily cash
and debt figures through the end of August, I am including our
latest daily estimates for this period as an attachment to this
statement.
In undertaking to operate within.the very tight limits
set forth in H. R. 6009, the Treasury is making three assumptions:
(1) that we can have a reasonable degree of confidence in our
expenditure estimates, since they cover a period only three and
one-half months into the future;
(2) that the likelihood is
relatively small that our revenues will fall below the estimated
7
levels;
and (3) that, since Congress will be in session
throughout the period covered by the legislation, it would
be possible to obtain new debt limit legislation promptly, if
~t
should be required, without the necessity of calling a
special session of the Congress.
For longer periods of time
a more adequate allowance for contingencies would be required,
and debt limits as tight as those provided in H. R. 6009 would
not be acceptable.
The preservation of the financial integrity of the
United States is the primary mission and responsibility of
the Treasury.
It is for this very reason that we cannot
willingly accept a debt ,limit which is so restrictive as to
make it impossible to handle the finances of the United States
Government in a prudent and responsible manner.
'
--,
No one is more conscious than I of the necessity of keeping
the expenditures of the Federal Government under firm control.
This objective cannot be attained, however, by exerting controls
at the tag end of the expenditure process, when the bills which
must be paid are coming due.
The debt limit is not, and cannot
8
be made, a substitute for control of expenditures at the
decisive stage of the expenditure process - - in the decisions
on appropriations.
A debt limit of $307 billion through
June 30, 1963 and $309 billion from that date through August 31,
;.1963, will provide the absolute minimum degree of flexibility
needed by the Treasury in handling the financial affairs of
the Government.
More restrictive debt limits than these would
force the Treasury to resort to an array of unsound financial
procedures of the sort which had to be used in 1957-58,
procedures which, in the end, only add to the burdens of the
taxpayers of this country.
But apart from cost considerations,
it is not in keeping with the status of the United States as
banker to the free world to be placed in such a position.
The
financial community, both here and abroad, would be utterly
dismayed should they find that the United States Treasury is no
longer permitted to cope in a responsible manner with the routine
requirements of fiscal affairs.
The consequences of such a
situation are fraught with danger for the safety and stability
. of the dollar.
It is for these reasons, which I believe are compelling,
that I urge your prompt approval of H. R. 6009.
000
£;\y_py_p,.\y FQR fl:.'lUll) AMY
(In_billi~ns
Day
April 30
1
2
3
\I
(Exc1.Gold)
to
LL~t
5.3 *
303.4 *
5.9 *
6.6 *
7.1 *
303.4 *
303.5 *
303.4 *
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
Z7
28
29
';0
31
*
.
6.7 *
6.2 *
6.2 *
6.4 *
6.4 *
303.4 *
303.4 *
303.4 *
303.5 *
303.5 *
6.5 *
6.6 *
5.8 *
6.2 *
6.7 *
303.5
303.4
303.0
303.1
303.1
*
*
*
*
*
*
303.1
303.1
303.0
304.0
304.0
*
7.1
7.4
7.5
7.5
7.4
7.0
6.6
6.4
6.4
6.2
304.0
304.0
305.2
305.2
3C5.6
(Excl.Gold)
5.7
5.2
4.8
4.3
4.0
3.6
3.4
4.5
4.5
4.6
4.7
5.1
5.8
6.9
8.0
7.7
7.8
8.1
8.3
3.2
I
to
LL~it
305.6
305.6
305.6
305.6
305.6
305.6
305.6
306.8
306.8
306.8
306.8
306.7
306.3
305.7
305.4
304.3
304.2
304.1
304.0
305.3
l
-
11,
wmrsr
d~llars)
May 1963
It
Jun~ 1963
Cash Bal. (Debt SUbj'll Cas!l Bal.
Debt. Subj
4
5
Qr
\I
.11
J "6 J
July 1963
Cash Bal.
(Exc1.Gold)
Iff
I
Debt Subj
to Limit
8.1
7.8
7.5
305.3
305.3
305.3
7.0
305.2
6.3
5.8
5.5
5.3
5.2
305.2
305.2
305.2
305.2
305.2
5.4
5.2
5.1
5.0
6.7
305.7
305.5
305.4
305.4
307.2
6.5
6.2
6.0
5.8
5.7
307.2
307.2
307.3
307.3
307.3
o L I .D A
5.5
5.4
5.4
307.3
3C?5
';'" t.. I
"."....,.""'f-
~\ ~tual
, , =... -; '7
.. -
Tt'
A~C1USt 1963
If
<,":
~ :.~
.11
Cash Bal. ,Debt Subj.
(Excl.Cold)
to Limit
4.9
5.0
306.4
306.4
5.0
4.5
4.2
4.2
4.2
306.4
306.3
3C6.3
306.3
306.3
4.2
4.2
4.5
4.7
5.1
306.3
306.3
306.3
306.8
306.8 .
5.3
5.7
6.0
6.2
6.3
306.8
306.8
306.8
3C6.. 7
306..'7
6.2
6.0
5.8
5.7
3m.7
3':,7.7
Y
..,1._-
3C~.6
":f"Q
,.
_ J.4'
J1C.~
()l
-'.1
(D
::::7Q
I ,_
'-'
- 2 The rreaaury Guard Force v.a honored far the cc:ap1eti_ ••
13th year of consecutive operation without a aingle
injury.
t_
loat-~t.e
Secretary Dl1lao pre.ented a Treasury Safety Couacll
certificate to Chief James J. Rowley of the U. S. Secret
Se~
aDd
Captain Lloyd E. Glenn. bead of the Guard Force which baa
reapon.iblli~
for
a.curi~
of Tr.aaury bul1dtnga.
The ~eserltaticn1.s;13 were . .de at tNt Treasury Safety
C-aaet.l·_
c·_
annual meet1n& marking 1.5 year. of operatian of the ..par....
accidaDt prevention progr. . ,ciurina which loat-time lIljurle. . . the
related accident frequency rate were cut .1Iao.t in balf.
000
",. .
~ \
..
?4
.-
..
;
'.'
• 11'0
accepted in behalf of the pahlicatiOll .taft by Admiral
."ira a.
Roland, Coaat Guard ccunandaAt, and Lt. Oadr. Richard 1fodgea.
of ·Safety ..... -
.Oftl/f
~
wil
..u.t.r
TREASURY DEPARTMENT
May 23, 1963
FOR IMMED IA TE RELEASE
SECRETARY DILLON PRESENTS TREASURY SAFETY AWARDS
Secretary of the Treasury Douglas Dillon today presented
awards to the U.S. Coast Guard and the Treasury Guard Force in
recognition of these two units'. contributions to the Treasury
Department's safety record.
The Coast Guard's "Safety News," a quarterly publication devoted
to accident prevention, received the National Safety Council's Award
of Merit for "exceptional service in the promotion of safety."
was the fourth such award made to the publication.
This
It was accepted
in behalf of the publication staff by Admiral Edwin J. Roland,
Coast Guard Commandant, and Lt. Cmdr. Richard Hodges, editor of
"Safety News. "
The Treasury Guard Force was honored for the completion of its
13th year of consecutive operation without a single lost-time injury.
Secretary Dillon presented a Treasury Safety Council certificate to
Chief James J. Rowley of the U.S. Secret Service and Captain Lloyd
E.
Glenn, head of the Guard Force which has responsibility for
security of Treasury buildings.
The presentations were made at the Treasury Safety Council's
annual meeting marking 15 years of operation of the Department's
accident prevention program, during which lost-time injuries and the
related accident frequency rate
~O~e
cut almost in half.
.. 1(J selectively, to
, bring :s !lto the world money system
)
tbe strengtl) of the Eiur...)lt13 countries.
J:n conclusion, I would like !to re-emphnsize that despite the tact
that t.he decision is indeed diff':l.!u.lt the Ur.1ted states 1s .continuing
a polil:Y of avoiding vha.t may sec::11 to sane to be the "easy" outs,
lIhich
are 1n fo.ct not easy but destruct t vc, not only of' our ow system but of'
the wo:t'ld trade and payments sys1.,mt.
Thus, U. s. pollcy 1s currently
follovlng two mutually reinforcir.l eourses:
keen and continuous efforts
to soJ.ve the balance of payments: problem by relying on the market mechanisms, 3.nd equal.ly intense and conaintent efforts to keep the world JIIOney
system
rlm n1 ng
v1thout
d1stur'ban~'3
in the meantime.
~
9-
,
system, 'While,plooceediro.~ :tn an or0erly \18.1' tcnlal'd
equilibrium in our own :ba.::.ance of payments, bas
required something new in the w.y of a variety of
financing dev1c('s, in
made possible only through
l.t.ll"l"l
international monetary cooperation.
We have
developed cooperat1 vc~' a growing network of
financial arre.Il£ements :llIl'mg monetary authorities.
Together with the Spec1ll. Borrowing Arrangements in
the Internatione.l.
Mone1~U:'
Fund, these provide a
strong defense of the 1 nterna.tional. payments system
against speculation.
l:a are now developing this co-
operation into rulother stage, Wich involves the
, in certain cases,
neutraJ.1zing/ot acc\.lIl1U.13oting exce:3S dollar hold1ngs
or
some surplus countri es through offering them
special
Tre~ury
secuti.t;ies denominated in their ow.
•.s also p::-ovl.des a source of foreign
currencies.'~'
~
currencies for use at
timl~S
when
\1e
can usefull.y
operate in them, with the cooperation of the other
central banks involved,
W{)~\c..{
b~t ~6
not otherwise have an
'"
adequate supply of the: cu:..""rencies on hand.
not only
a
financing tcch;l1que but at
This is
.~he px:es~t
F::.LTh M 4 +~~ H'
time also supplies a possible \l8.y of effective
A
capital markets, \Ih1ch we are also trying to
encourage.
f
he .,,
ci\, "'"1's \0 ~se
t··'
In essence, it represents the develop-
ment ot credit dev1ces to prov1de liquidity
\.0.
'
I
I
....,..~e 4. il ~'"' C' (.~ ,,1
- 8 area of costs a.'1.d prices.
We have been experiencing a remarkable degree
of price stability, wereas prices are still rising in the countries that
compete vith our extlOrts.
"'
This brings
us
~
circle in my brier comments on financial pol1cies
and the U., S. bal.a.nce or payments.
I
a:.. ~t'(
I
Q."".-
.
we h~"('" et~~f"~ ~h
I began with the emphasis
:1..~
~
;.~.
poJ.1cies
~
getting a market solution to the balance or payments problem in the
context of an expanding wrld trade and an effective payments mechanism.
Since we are relying on a market solution to our payments problem, this
of necessity takes time and means that
'We
are subject to all of the un-
certainties and unpredictabilities ot market processes.
j~ent
(1)
But in my
it means much more than this, namely that:
To get a truly lasting solution
we must accept the
balance or payments disciplines and not try to avoid
them by drastic actions such \as attempting to produce
a crisis level ot interest rates
(2)
Subjecting ourselves to the balance ot pa.yments
di.scipl1nes means that the country must be kept
alert to the problem and its implications I and your
efforts as leading bankers and citizens in your comlllunities have been and can be helptul on this score.
lhlt
'We
must do even more to bring an awareness ot this
problem into the consciousness ot the pr1vate sector
or the econ<XDy.
(3) At the same time, the process. or trying to provide the
reserve currency vital to the present worl.d payments
- 7 to follow a moderately stimulative policy, while Treasury debt management relied heav1l.y on the advance refunding technique, involving min1maJ.
J:lBXket impact in achieving significant debt lengthening.
SUccess in the
la.tter rtJay be symbolized by the increase in the average length of the
mrketable public debt trom 4 years 7 months at the outset of 1962 to the
current figure of 5 years 1 month.
Fin al1 y, and most important in terms of our efforts to "solve" the
balance of payments problem, are the continuing policy efforts, both
financial. and non-financial, to increase the already very favorable U. S.
balance on private trade in goods and services.
~hi s
For in a tundamentaJ. sens'
has to be the source ot any real and lasting sol\1; ion of the baJ.a.nce
of payments problem.
Specific measures have been taken to improve export
credit and credit insurance faCilities, to increase services in various·
'Ways to American businesses interested in export markets, and to extend
that interest to other firms.
The rea.l key, of course, is in the cClD.!)et1-
tive poSition of U. S. industry.
'lbis is a central objective of the
Mmjn:htration's tax program (including last year's investment tax credit
and liberalization
..,. . ot the rules and procedures governing tax treatment ot
depreciable equiIment.) and of our continuing efforts to maintain cost-price_
'Wage stability.
Tb.e incentives tor productive new investment will assist
our domestic industry in making the technolog:ica.l and other changes
essential to maintaining -- and improving -- its competitive position.
The tax program also should result in encouraging investment flows in
and towrd the United States and may provide greater freedom of action
to the monetary authorities.
In short this meanS" that we
J
.
are encouragtng
the natural :forces ot adjustment already working in our direction in the
- 6~pC:
..;U-J
f'oreign buyers -- the f'inancial counterpart of this Nation's accelerated
ef':f'orts to sell goods abroad.
On
.'
1'-\
sr.. +e o.t"I'
the short-term capital outflow side, f¥n11e-'~hc~~~ a marked
;'\
reduction last year -- perhaps in the order of $1/2 billion -- there was
still a large outflow.
Consequently, 'We have kept up our e:f':f'orts to
maintain shprt-term rates of interest in:reasonable relationship internationally by the coordination of Federal Reserve policy and Treasury
debt management moves.
The objective has been to maintain a level of
rates Wich would provide no significant incentive for short-term money
to move abroad for interest rate reasons.
Both monetary pollcy and debt
management have been directed toward this end.
The role of debt management has been to promote a sustained upward
supply pressure on bill yields through timely additions to the supply of'
Treasury bills.
Last year, the Treasury added nea.rly $8 billion to the
outstanding volume of 'Weekly and one-year bills.
At the same time,
through the use of the new Itpre-retunding" technique to reduce the out-
.
standing volume of short coupon debt, as 'Well as through the stretchout
of maturing debt, the net increase in debt under one year "Was limited
last year to less than $1-1/2 billion, or roughly t'Wenty per cent of the
increase in the debt in calendar 1962.
In short, up-ward pressure on bill
rates was maintained without contributing to excessive liquidity in the
econ~.
In order to provide a monetary climate conducive to' desired
expansion in the domestic
econ~,
hOYever, the Federal Reserve continued
- 5~Ph
vv..J
:f'lagged the issue publicly in Rome a year ago, developments have been
clearly in the right direction.
They are perhaps most vividly "illustrated
in the case of Italy, which has taken several steps to provide
institutional basis for a developing capital market.
a"be~ter
We continue to be-
lieve that the U. S. market is used in large part because of its
advantageous fac1l1ties and the availability of savings, "not simply
because of an interest differential.
This is most clearly evident in
the fact that a high proportion -- around one-third -- of new foreign
security issues floated publicly here are purchased by foreigners.
The
"
,'-\
New York market serves, and we certainly hope will continue to serve ~,.. ~he
role of' a financial
entrepo~
principal reserve currency.
f'or a world employing the dOllar as the
Furthermore, analysis of' new foreign issues,
totaling more than $1 billion in our market last year, indicates that the
largest amount \lent to
canada,
and a sizeable, though lesser, amOl.mt went
to Japan -- both are countries with Wich we have a substantial trade
surplus. Less than $200 million flowed to Europe through this channel.
bre is a problem, however,
'll'ab"e~ 'l'!'ebiem, as Secretary Dillon noted in a recent speech in
New
Yor~. in
the area of private :pJ.a.cements, which accounted for the
bulk of the dollar ,outflow last year on foreign security issues.
Clearly,
a private :pJ.a.cement arranged solely with American lenders' leaves no room
for foreign partiCipation, even Yhen potentially interested buyers exist.
As a result, Secretary Dillon called on the financial community in this
i.:r$
country to strive to develop ~~~ techniques for selling securities to
~
- 4 roughly a plus $4 b1ll1on and a minus $3 billion, and a minus $3 billion,
netting out to around a $2 billion deficit.
In each of these three major sectors -- trade and service account,
government account, capital account -- we have been continuing our efiorts
to try to improve our balance of payments.
account
First of all, on government
'"
the~e
has been constant effort to try to squeeze down on the
on
dollar drain.
tp.e military expenditures account these efforts,
principa.ll.y representing the military offset arrangements, reduced the net
dollar d.ra1n last year to around $2 billion, with continuing gross ex-
penditures unchanged around the $3 billion level. The Dep:u1;ment of
substantial
in the
Defense same ~1me ago indicated a fUrther/intended reduction ~~
. baJ-ance of payments impact
by
~""M~~hy;:t~~:xnlocn:c:tt~ fiscal year 1966.
Similarly, on the economic aid side; our efforts to tie aid to domestic
procurement in the U. S. have reduced the dollar drain to near the $1
billion level.
Because of the time lag between aid cammitments and de-
liveries some fUrther reduction in the balance of payments impact of aid
r;;;.. A/.'>"(V
expenditures w1ll result from efforts already made. ~'11t is estimated
~
that same 80 per cent 01' economic aid dolla.rs currently are tied to
exports.
"
u.
S.
Even more directly, the adoption of the so-called IIgold budgetl l
has meant a careful and continuing review of all government expenditures
abroad by all government departments and agencies.
on
the capital account side, U. S. policy has continued to be one
of firmly reSisting any I:lOVe toward restrictions on the use of our capital
markets
~e
lending every possible encouragement to a broadening, deep-
ening, and v.Ldening ot capital markets abroad.
Since Secretary Dillon
- 3 -
~J
Li\;..)The United
states has refused to reverse its traditional stand and adopt exchange controls or otherwise
interfere 'With capital movements. We have not intruded
into the free flow of f'unds into and out of our capital
ket
D1Bf
s! .
br ~
~, «~,1:c~).L.~
1:> )The u.,...,s. has refused to
so reduce its overseas
mi:lltary and econanic spending programs in a manner
that would impair the essential effectiveness of' those
programs.
, I' I D _
Ll"1 h-fYf?ltrS
l4 \Finally,
and most importantly, the U6'=5. has steadfastly refused ~o contemplate a devaluation of' the
dollar which could onl.y serve to undermine its underpinning of the world payments system. No reliance has
been placed on methods which interfere with the convertibility of the dollar at a fixed rate of exchange.
We have kept inviolate the policy of purchasing and
selling gold at $35 an ounce. A corollary of this has
been our defense of the gold reserve underlying the dollar,
a defense Which has been conducted along lines consistent
with our other principles.
Turning to those things which
'We ~
done in a positive sense 1m-"
plementing this same basic policy philosophy and orientation, I 'Will
give a. quick catalogue ot our efforts-- and more
pa.rtic~ly
our
&.-t,
financial policies -- against the background of \lha.t may be j\Jheroic a.bstractio~and
figures.
oversimpl1fication in terms of the actual balance of payments
Iast year
'We
ended'up with an over-all deficit of something
slightly over $2 billion -- a sl1ght improvement over 1961 and well beloW'
the level of 1958-60 deficits of· just under
$4 billion.
On
trade and
service account w had a co:mnercial surplus of some'Wha.t over
$4 billion;
on government acCQunt a dollar drain -- apart frO!ll debt receipts -- of
around $3 billion; on private U. S. ca.pital account a recorded dollar
drain of around $3 b1ll1on plus.
On
an oversimplified basi~then."it was
- 2 -
$3-1/2-4 billion range in 1958-60.
In the early 1950's our deficits
continued to provide dollars useful in the !ree world reconstruction
process.w1th a m1n1mal. outfl.ow of gold.
In contrast, in the ,three
A.
years prior to 1961 the gold outflow amounted to around $5 billion.
In meeting this problem the United states has once again taken
the
,
hn;;
more difficult course and continued to accept its responsib111t"Y for
/\
wrld leadership.
Our 'Whole approach to the balance of payments problem..
evidenced in our related financial policies, has been
~
to take those
actions that woul.d be inimical. to our entire system and our objectives
throughout the world -simply "stop",
~thout
~
to take those disruptive steps which 'WOuld
solving, the balance of payments deficit in its
tracks, {but rather to take those steps 'Wh.1.ch would in fact "sol.ve", or
at least lead to a more lasting solution of, the balance of payments
problem consistent
~th
our basic principles and objectives.
Those things which we have not done by way of pollcy in meeting our
balance
~f
payments problem are, therefore, just as important to point
up as those- \1h1.ch
~lW~e
\Ie
have done.
In concrete terms:
United states has refused to ;restrict ordinary
commercial trade by curbing imports through general tariff
increases or trade embargoes. We have, of course, properly
put restrictions on non-c~~ercial. trade by tying the procurement of goods financed under our foreign economic and
military aid programs. That kind of action is entirely
appropriate in a country in external deficit having substantial unemployment at home and cO!!ml1tted to the
maintenance of a fixed exchange rate. But we have resisted any move that would constrict, rather than expand,·
world trade for commercial purposes.
~
~ VI'
/l-~~
d rM/E' 'is N bID-Iv&¥.;}
-
.
•
TREASURY DEPAROOm
Washington
REV~-OF
J.'DEWEY_DAANE
DEPUTY I UNDER SECIWrARY OF THE
FOR MONErAID!' AFFAIRS
TREAsuRY
AT -'mE ANNUAL SPRING CONFERENCE OF THE
SOUTHEASTERN CHAPTER, ROBERT MORRIS ASSOCIATES
mE CLOISTER HOTEL, SEA ISLAND, GEORGIA~,
MONDAY, MAY 21, 1963
..t..J - 4""" - ~Sl
10:
r
FINANCIAL POLICIES AND 'mE BALANCE OF PAYMENTS
It was
~
privilege to address a similar Spring Conference of
Robert Morris Associates in Asheville, North Carolina, just fifteen
years ago this month.
I spoke then on the subject of the Marshall PJ.an,
stressing that it clearly was a difficult decision for us to accept our
responsibll.1ties for world J.eadership and, correspondingly, to accept
the full economic implications and consequences of our mutual efforts
to assist the recover:! of the Western world.'
I do not intend to labor the strik1ng changes that have since
occurred in the world trade and payments system.
At that time the rest
of the free. world seemingly was confronted nth a chronic "dollar shortage" I and w wre bending every effort to supply the doJ.lars needed :f'or
European reconstruction.
Today, however,
'We
are confronted with a serious
balance of payments problem and bending ever:! effort to defend the dollar.
In fact, the U. S. balance of pa.yments problem emerged in the intervening
post World War II period.
Since 1950, nth the exception of 1951, the
U. S. bas run a deficit in its balance or payments, averaging nearly
$l-1/4'bill1on per year in the early 1950's and then jumping to a
0- ~0'~----
TREASURY DEPARTMENT
Washington
FOR RELEASE:
ON DELIVERY
ruMMOCS OFJ. DIDmYDNlliE
DEPUTY UNDER SECRETARY OF THE TREASURY
FOR MONETARY AFFAIRS
AT THE ANNUAL SPRING CONFERENCE OF THE
SOUTHEASTERN CHAPTER, ROBERT MORRIS ASSOCIATES
THE CLOISTER HOTEL, SEA ISLAND, GEORGIA
MONDAY, MAY 27, 1963
10: 45 A.M., EST.
FINANCIAL POLICIES AND THE BALANCE OF PAYMENTS
It was my privilege to address a similar Spring Conference of
Robert Morris Associates in Asheville, North Carolina, just fifteen
years ago this month. I spoke then on the subject of the Marshall
Plan, stressing that it clearly was a difficult decision for us to
accept our responsibilities for world leadership and, correspondingl)
to accept the full economic implications and consequences of our
mutual efforts to assist the recovery of the Western world.
I do not intend to labor the striking changes that have since
occurred in the world trade and payments system. At that time the
rest of the free world seemingly was confronted with a chronic
"dollar shortage", and we were bending every effort to supply the
dollars needed for European reconstruction. Today, however, we are
confronted with a serious balance of payments problem and bending
every effort to defend the dollar. In· fact, the U. S. balance of
payments problem emerged in the intervening post World War II period.
Since 1950, with the exception. of 1957, the U. S. has run a deficit
in its balance of payments, averaging nearly $1-1/4 billion per year
in the early 1950' s and then jumping to a $3-1/2-$4· billion range in
1958-60. In the early 1950's our deficits continued to provide
dollars useful in the free world reconstruction process -with a minimal outflow of gold. In contrast, in the three years
prior to 1961 the gold outflow, amounted to around $5 billion.
In meeting this problem the United States has once again taken
the more difficult course and continued to accept its responsibilitie
for world leadership. Our whole approach to the balance of payments
problem, evidenced in our related financial policies, has been !!£!
to take those actions that would be inimical to our entire system
and our objectives throughout the world -- not to take those
disruptive steps which would simply Its top", without solving, the
balance of payments deficit in its tracks, but rather to take those
stepS which would in fact "solve", or at least lead to a more lasting
solution of, the balance of payments problem consistent with our basi
principles and objectives.
D:-865
- 2 Those things which we have ~ done by way of policy in meetir
our balance of payments problem are, therefore, just as important I
point up as those which we have done. In concrete terms:
(1) The United States has refused to restrict
ordinary commercial trade by curbing imports through
general tariff increases or trade embargoes. We
have, of course, properly put restrictions on ~
commercial trade by tying the procurement of goods
financed under our foreign economic and military aid
programs. That kind of action is entirely appropriate
in a country in external deficit having substantial.
unemployment at home and committed to the maintenance
of a fixed exchange rate; But we have resisted any
move that would constrict, rather than expand, world
trade for commercial purposes.
(2) The United States has refused to reverse its
traditional stand' and adopt exchange controls or
otherwise interfere with capital movements. We have
not intruded into the free flow of funds into and out
of our capital markets.
(3) The United States has refused to so reduce
its overseas military and economic spending programs
in a manner that would impair the essential effectiveness
of those programs.
(4) Finally, the most importantly, the United States
has steadfastly refused to contemplate a devaluation of
the dollar which could only serve to undermine its underpinning of the world payments system. No reliance has
been placed on methods which interfere with the
convertibility of the dollar at a fixed rate ,of exchange.
We have kept inviolate the policy of purchasing and
selling gold at $35 an ounce. A corollary of this has
been our defense of the gold reserve underlying the
dollar, a defense which has been conducted along lines
consistent with our other principles.
Turning to those things which we have done in a positive sense
implementing this same basic policy philosophy and orientation, I
will give a quick catalogue of our efforts -- and more particularly
our financial policies -- against the background of what may be an
- 3 -
593
heroic abstraction and oversimplification in terms of the actual
balance of payments figures. Last year we ended up with an over-all
'deficit of something slightly over $2 billion.-- a slight improvement
over 1961 and well below the level of 1958-60 deficits of just under
$4 billion. On trade and service account we had a commercial surplus
of somewhat over $4 billion; on government account a dollar drain -apart from debt receipts -- of around $3 billion, on private U. S.
capital account a recorded dollar drain of around $3 billion plus.
On an oversimplified basis, then, it was roughly a plus $4 billion
and a minus $3 billion, and a minus $3 billion, netting out to
around a $2 billion deficit.
'
In each of these three major sectors -- trade and service
account, government account, capital account; -- we have been continu··
ing our efforts to try to improve our balance of payments. First of
al1 7 on government account there has been constant effort to try to
squeeze down on the dollar drain. On the military expenditures
account these efforts, principally representing the military offset
arrangements, reduced the net dollar drain last year to around
$2 billion, with continuing gross expenditures unchanged around the
$3 billion level. The Department of Defense some time ago indicated
that it hoped to cut even this reduced figure in half by fiscal year
1966, with significant parts of this further reduction to be made
each year. Similarly, on the economic aid side, our efforts to tie
aid to domestic procurement in the U. S. have reduced the dollar
drain to near the $1 billion level. Because of the time lag between
aid commitments and deliveries some further reduction in the balance
of payments impact of aid expenditures will result from efforts
already made. Now it is estimated that .80 per cent of economic aid
dollars currently are tied to U. S. exports. Even more directly,
the adoption of the so-called" gold budget" has meant a careful
and continuing review of all government expenditures abroad by all
government departments and agencies.
On the capital account side, U. S. policy has continued to be
one of firmly resisting any move toward restrictions on the use of our
capital markets while lending every possible encouragement to a
broadening, deepening, and widening of capital markets abroad. Since
Secretary Dillon flagged the issue publicly in Rome a year ago,
developments have been clearly in the right direction. They are perha
most vividly illustrated in the case of Italy, which has taken
several steps to provide a better institutional basis for a developing
capital market. We continue to believe that the U. S. market
is used in large part because of its advantageous facilities and
the availability of savings, not simply because of an interest
differential. This is most clearly evident in the fact that a high
proportion -- around one-third -- of new foreign security issues
- 4 -
594
f10ated publicly here are purchased by foreigners. The New York
market serves, and we certainly hope will continue to serve, in
the role of a financial entrepot for a world employing the dollar
as the principal reserve currency. Furthermore, analysis of lWW
foreign issues, totaling more than $1 billion in our market last
year, indicates that the largest amount went to Canada, and a
sLzeable, though lesser, amount went to Japan -- both are countries
w~th which we have a substantial trade surplus.
Less than $200
m:lliion flowed to Europe through this channel.
There is a problem, however, as Secretary Dillon noted in a
r,ecen t speech in New York, in the area of private placemen ts, which
accounted for the bulk of the dollar outflow last year on foreign
security issues. Clearly, a private placement arranged solely wi th
American lenders leaves no room for foreign participation, even
when potentially interested buyers exist. As a result, Secretary
Dillon called on the financial community in this country to strive
to develop its techniques for selling securities to foreign buyers
the financial counterpart of this Nation's accelerated efforts to s(
goods abroad.
On the short-term capital outflow side, in spite of a mark(.'d
reduction last year -- perhaps in the order of $1/2 billion -there was still.a large ou~flow. Consequently, we have kept up
our efforts to maintain short-term rates of interest in reasonable
relationship internationally by the coordination of Federal Reserve
policy and Treasury debt management moves. The objective has been
to maintain a level of rates which would provide no significant
incentive for short-term money to move abroad for interest rate
reasons. Both monetary policy and debt management have been
directed toward this end.
The role of debt management has been to promote a sustained
upward supply pressure on bill yields through timely additions to
the supply of Treasury bills. Last year, the Treasury added nearly
$8 billion to the outstanding volume of weekly and one-year bills.
At the same time, through the use of the new "pre-refunding"
technique to reduce the outstanding volume of short coupon debt,
as well as through the stretchout of maturing debt, the net inCrt'l:)SH
in debt under one year was limited last year to less than $1-1/2
billion, or roughly twenty per cent of the increase in the debt In
calendar 1962. In short, upward pressure on bill rates was
maintained without contributing to excessive liquidity in the
economy. In order to provide a mont·tary climate conducive to
desired expansion in tilt.' domestic economy, however, the Federal
Reserve continued to follow a mOderately stimulativo policy, whllt.'
SSt}
- 5 -
Treasury debt management relied heavily on the advance refunding
technique~ involving minimal market impact in achieving significant
debt lengthening. Success in the latter may be symbolized by the
increase in the average length of the marketable public debt from
4 years 7 months at the outset of 1962 to the current figure of .
5 years 1 month.
Finally, and most important in terms of our efforts to "solve"
the. balance of payments problem, are the continuing policy efforts,
both financial and non-financial, to increase the already very
favorable U. S. balance on private trade in goods and services. For
in a fundamental sense this has to be the source of any real and
lasting solution of the balance of payments problem. Specific
measures have been taken to improve export credit and credit
insurance facilities, to increase services in various ways to
American businesses interested in export markets, and to extend
that interest to other firms. The real key, of course, is in the
competitive position of U. S. industry. This is a central objective
of the Administration's tax program (including last year's investment
tax credit and liberalization of the rules and procedures governing
tax treatment of depreciable/equipment) and of our continuing
efforts to maintain cost-price-wage stability. The incentive:; for
productive new investment will assist our domestic industry in makin~
the technological and other changes essential to maintaining -- and
improving -- its competitive position. The tax program also should
result in encouraging investment flows in and toward the United StatE
and may provide greater freedom of action to the monetary authorities
In short, this means that we are encouraging the natural forces of
adjpstment already working in our direction in the area of costs and
prices. We have been experiencing a remarkable degree of price
stability, whereas prices are still rising in the countries that
compete with our exports.
This brings us full circle in my brief comments on financial
policies and the U. S. balance of payments. I began with the
emphasiS we have placed on policies aimed at getting a market
solution to the balance of payments problem in the context of an
expanding world trade and an effective payments mechanism. Since
we are relying on a market 'solution to our payments problem, this
of necessity takes time and means that we are subject to all of the
uncertainties and unpredictabilities of market processes. But in
my judgment it means much more than this, namely that:
- 6 -
(1) To get a truly lasting solution we must
accept the balance of payments disciplines and not
try to avoid them by drastic actions such as
attempting to produce a crisis level of interest rates.
(2) Subjecting ourselves to the balance of
payments disciplines means that the country must
be kept alert to the problem and its implications,
and your efforts as leading bankers and citizens
in your communities have been and can be helpful
on this score. But we must do ~ven more to bring
an awareness of this problemiuto the consciousness
of the private sector of the economy.
(3) At the same time, the process of trying
to provide the reserve currency vital to the
present world payments system, while proceeding
in an orderly way toward equilibrium in our own
balance of payments, has required something new
in the way of a variety of financing devices, in
turn made possible only through international
monetary cooperation •. · We have developed cooperatively
a growing network of financial arrangements among
monetary authorities. Together with the Special
Borrowing Arrangements in the International Monetary
Fund, these provide a strong defense of the international payments system against speculation. We
are now developing this cooperation into another
stage, which involves the neutralizing, in certain
cases,'of accumulating excess dollar holdings of
some surplus countries through offering them special
Treasury securities denominated in their own currencies.
This also provides a source of foreign currencies for
use at times when we can usefully operate in them,
with the cooperation of the other central banks
involved, but would not otherwise have an adequate
supply of the currencies on hand. This is not only
a financing technique but at the present time also
supplies a possible way of putting their holdings
to use in the absence of effective capital markets,
which we are also trying to encourage. In essence,
it represents the development of credit devices to
provide liquidity selectively, to bring into the world
money system the strength of the surplus countries.
597
- 7 In conclusion, I would like to re-emphasize that despite the
fact that the decision is indeed difficult the United StatL's is
continuing a policy of avoiding what may seem to some to be the
"easy" outs, which are in fact not easy but destructive, not only
of our own system but of the world trade and payments system.
Thus, U. S. policy is currently following two mutually reinforcing
courses: keen and continuous efforts to solve the balanccl of
payments problem by relying on the market mechanisms, and equally
intense and consistent efforts to keep the world money system
running without disturbance in the meantime.
000
TREASURY DEP.ARTMENT
May
27,1963
FOR IMMEDIATE RELEASE
UNITED STATES FOREIGN GOLD TRANSACTIONS
FOR FIRST QUARTER OF 1963
During the first'quarter of 1963, the net sale
of monetary gold by the United States amounted to
$96.1 million.. The Treasury's quarterly report,
made public today, summarizes net monetary gold
transactions with foreign governments, central banks,
and international institutions.
(Table on reverse
side.)
The total decrease in U.S. gold stock in the
first quarter of 1963
was $111 million, including
.
-
the net sale of $15 million worth of gold for
domestic
industrial,professional, and artistic uses.
0-866
(OVER)
UNITED STATES NET MONETARY GOLD TRANSACTIONS
WITH FOREIGN COUNTRIES AND INTERNATIONAL INSTITUTIONS
January 1, 1963 - March 31, 1963
(in millions of dollars at $35 per fine ounce)
Negative figures represent net sales by the
United States; positive figures, net purchases
First Quarter
Country
1963
Austria ••••••••••••••••••••••••••••••••
Brazil •••••••••••••••••••••••••••••••••
Cambodia _.e •••••••••••••••••••••••••••••
-30.0
+16.5
-2.3
Egypt ••••••••••••••••••••••••••••••••••
-.4
-101.3
-5.9
France •••••••••••••••••••••••••••••••••
Iran •••••••••••••••••••••••••••••••••••
Spain ••••••••••••••••••••••••••••••••••
Syria ••.•••••••••.••••••.•••.••••••••••
Turkey •• :................................ .
-70.0
United Kingdom •••••••••••••••••••••••••
Yugoslavia ............................. .
All Other ••••••••••••••••••••••••••••••
,
+106.5
Total • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •
-96.1
-.1
-8.5
-.4
-.1
,
(Figures do not add to total because of rounding.)
TREASURY DEPARTMENT
May 27, 1963
FOR IMMEDIATE REIEASE
TREASURY DECISION ON STEEL WIRE ROre
UNDER THE ANTIWMPmG ACT
The Treasury Department has determined that hot-rolled
carbon steel wire rods from France, except as to importations
trom the tirm 01' Societe Metallurgique de Normand1e, are being,
or are likel1 to be, sold at less than tair value within the
meaning 01' the Antidumping Act.
Accordingl1, this case is being reterred to the United
States Taritt Commission tor an injury determination.
Notice or the determination and or the reference 01' the
case to the Tarif'f Canmission viII be published in the Federal
Register.
The total dolla.r value or the particular type 01' steel
vire rods under consideration 'imported from France during
vas approximately
$7,000,000.
1962
'TREASURY DEPARTMENT
May 27, 1963
FOR Ir.!MEDIATE RELEASE
TREASURY DECISION ON STEEL WIRE RODS
UNDER THE AnTIDUMPING ACT
The Treasury Department has determined that hot-rolled
carbon steel wire rods from France, except as to importations
from the firm of Societe Metallurgique de Normandie, are being,
or are likelY to be, sold at less than fair value within the
meaning of the Antidumping Act.
Accordingly, this ca.se is being referred to the United
States Tariff Commission for an injury determination.
Notice of the determination and of the reference of the
case to the Tariff Commission will be published in the Federal
Register.
The total dollar' value of the particular tYIle of steel
wire rods under consideration 'imported from France during
was approximately $7,000,000.
1962
TREASURY DEPARTMENT
WASHINGTON.
:~!.Hd ,~'=.i.'M'Xi,' -{;.:;'-';~ •
.
f r:-,,;-' ( i 'i'; "J~lJ9'. '.i;. ~) .., ;:'i:.:J" ~;.J:
..........:!;~-:;-.~.-.;-.{~:;o-:;~ . . --..•.------.,..--.. ....-. '
. , '~"."".t' . . . .
·.0. . .
: ••
•
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~:-.<:1. 1>v.':It=;~,'
.--........ ...... ..............
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tlf).t-:>1
...........
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roa
RIWS! ,. M. IMPAPUS.
,...edal, Mal 28, 1m.
JIq IT, 196)
TREASURY DEPARTMENT
FOR RELEASE A. M. NEWSPAPERS,
Tuesday, May 28, 1963.
RESULTS OF TREASURY'S WEEKLY BILL OFFERING
The TreasU1'7 Department announced last evening that the tenders tor two series 0.
Treasury bills, one series to be an additional issue of the billa dated Februar,y 28,
1963, and the other series to be dated May )1, 1963, which were offered on May 22, Wl
opened at the Federal Reserve Banks on May 27. Tenders were invited tor $1,)00,000,0
or thereabouts, of 9O-day bUla and for $BOO,OOO,OOO, or thereabouts, of 182-day bill,
The detai1s of the two series are as f'ollows:
RANGE OF ACCEPl'ED
COMPETITIVE BIDS ~
High
Low
Average
90-day Treasury bills
maturing August 29, 1963
Approx. EquIv.
Price
Annual Rate
99.260 a/
2.96o;g
99.255 2.980};
99.257
2.974% !I
••
•
:
••
·•
182-day- Treasury bills
maturing November 29, 19~
Approx. Eq :v
Price
Annual Rate
98.462
98.453
98.455
3.~2%
).06CJ.'
3.055%
!I
al Excepting three tenders totaling $2,100,000
'5'3 percent of' the amount of' 9O-day bills bid for at the low price was accepted
8) percent of' the amount of 182~ bills bid f'or at the low price vas accepted
TOTAL TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS s
District
Boston
New York
philadelphia
C1evelcnd
Richmond
At1 nnt a
Chicago
st. Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTALS
~
cl
Y
Applied For
$
24,656,000
1"51h,178,,OOO
30,602,000
20,124,000
8,542,000
26,305,000
235,451,000
31~133,OOO
19,944,000
20,501,000
2.3,068,000
79,t333 t OOO
$2,0)),8)7,000
AcceEted
24,079,000
$
927,508,000
15,602,000
19,50),000
8~542,OOO
··•
:
:
I
:
23,305,000 I
-155,101,000 :
22,,043,000 :
15,204,000 ••
20,186,000 •
14,698,000 :56,! 243,zOOO r
$1,302,014,000 ~
·
Applied For
$ 18,291,000
1,082,650,000
8,261,000
16,810,000
4,689,000
7,379,000
145,532,000
7,782,000
6,006,000
5,690,000
7,892,000
100.z31 9,z000
$1,411,301,000
AcceEted
$ 3,~9,OOO
617,360,000
),261,000
lS,743,000
2,689,000
6,879,000
54,886,000
6,182,000
3,489,000
5,573,000
2,892,000
79 2429 1 000
$801,434,000
Includes $192,722,000 noncompetitive tenders accepted at the average price ot 99.25.
Includes $49,290,000 noncompetitive tenders accepted at the average price ot 98.455
On a coupon issue ot the Sallie length and for the same amount invested, the return OIl
these bUls would provide yields of' 3.~%, tor the 9O-day bills, and ).15%, tor tt
182-day bills. Interest rates on bills are quoted in terms of bank discount with
return related to the face amount of the bills payable at maturity rather than the
amount invested and their length in actual number of days related to & 360-day yea
In contrast, yields on certificates, notes, and bonda are canputed in terms ot
interest on the amount invested, and relate the number of' days rema.ining in an
interest payment period. to the actual number ot days in the period, with eemi-annu
compounding i t more than one coupon period is involved.
D-867
- :3 -
603
1··X;j\X~
and exchange tenders will receive equal treatment.
~or
Cash adjustments will 'be made
differences between the par value of maturing bills accepted 1n exchange and
the issue price of the new bills.
The income derived from Treasury bills, whether interest or gain tI'ODl the sale
or other disposition of the bills, does not have any exemption, as such, and loss
from the sale or other disposition of Treasury bills does not have any special
trea.tment, as such, under the Internal Revenue Code of 1954.
The bills are subject
to estate, inheritance, girt or other excise taxes, whether Federal or state, but
are exempt from all taxation now or hereafter imposed on the principal or interest
thereof by any State, or any of the possessions of the United states, or by any
loca.l taxing authority.
For purposes or ta.x.a.tion the amount ot discount at Which
Trea.sury bills are originally sold by the united states is considered to be interest.
Under Sections 454 (b) and 1221 (5) ot the Internal Revenue Code ot 1954
the amount ot discount at which bills issued hereunder are sold is not considered.
to accrue until such bills are sold, redeemed or otherwise disposed 01', and such
bills are excluded trom consideration as capital assets.
Accordingly, the owner
ot Treasury bills (other than lite insurance companies) issued hereunder need include in° his income tax return only the difference between the price paid tor such
bills, whether on original issue or on subsequent purchase, and the amount actually
received either upon sale or redemption at maturity during the taxable year ~or
which the return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this notice, prescribe the terms ot the Treasury bills and govern the conditions ot their.issue.
Coples of the circular may be obtained trom any Federal Reserve °Bank or Branch.
- 2 -
dec1mals, e. g., 99.925.
}Pra.ctiODS
~
not be uaed.
It is urged that tender.
be made on the printed torms and forwarded in the special envelopes which Yill
be supplied bY' Federal ReserY'e Banks or Branches on application theretor.
Banking
institutions generally may submit tenders for account ot customers
provided the names ot the customers are set torth in such tenders.
Others than
banking institutions will Dot be pe:nn1.tted to subnit tenders except tor their
own account.
Tenders Yill be received Yithout deposit trom incorporated 'ba:Uts
and trust companies and :trom responsible and recognized dealers in investment
securities.
Tenders trom others IIlUSt be accompanied by payment ot 2 percent ot
the :face amount ot Treasury bills applied :tor, unless the tenders are accompanied
by an expreS8 gua.ranty
ot
~ent
by an incorporated bank or trust cOllJP8DY.
Dumediately atter the closing hour, tenders. will be opened at the Federal
Reserve Banks and Branches, following which public announcement v1ll be made by
the 'l'reasury Department ot the amount and price range ot accepted bids. .Those
submitting tenders will be advised ot the acceptance or ,rejection thereot.
#
...
•
~./
The
--", ' .
secretar)" ot the Treasury expressly reserY'es the right to accept or reject
~
or &11 tenders, in whole or in part, and his action in any such respect shall be
t1n&l.
'subJect to these reservations, noncompetitive tenders tor
les8 tor the add1tioD&l. bills dated
1Dg
•
until maturity date on
lOO,OOOor less tor the
tDJ
March 7, 1963
September 5, 1963
182
XWiIX
-~
,(
:(l1bJk
*2W
91
nag[
or
days remain-
) and noncompetitive tenders tor
bills without stated price tram any 'one
UiJii
bidder will be accepted in tull at the average price (in three dec1ma.l.) ot accepted coorpetitive bids tor the respective issues.
Settlement tor accepted ten-
ders in accordance with the bids must be made or completed at the Federal Reserve
Banks on __J'UD
__
e_6.....;,_l;qu9r-63----, in cash or other immediately available t'Unds or
tHO
in a like face amount of'
~
-....:lW.6:3
billa maturing _ .....
J ..
un_e
-NIfh
1Co.._ _ •
Cash
WlIIIXI'l
•.,. It" ••.
~. ~',')",'
5[,4
".....
TREASURY DEPARTMENT
Washington
May 29, 1963
FOR n.mDJATE RELEASE,
~
TREASURY'S 'WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders for two series
Of Treasury bills to the aggregate amount of
$
2,1~,OOO,
or thereabouts, f'or
cash and in exchange for Treasury bills maturing JUne 6, 1963
.f
, in the amount
m
.
of $ 2.1Q2~.QQQ ' as follows:
-di--daY bills (to maturity date) to be issued
JUDe 6'Ji63
,
ffi
in the amount ot $ 1, SOO OOO ,ooo, or thereabouts, representing an additional amount of bills dated
and to mature
amount ot $
Sept'~5.
8OOii&I.QQQ
1963
March 7. 1963
xm
,
, originally issued in the
,the additional and original bills
to be freely interchangeable.
182 -day bills, for $ 8OO,mtOOO
Wi
JuDe 1ni963
,or thereabouts, to be dated
, and to mature
DeCembeixil1963
The bills ot both series will be issued on a. discount basis under competitive
and
noncom~titive
bidding as hereinarter provided, and at maturity their f'ace
amount w1ll be payable without interest.
They will be issued in bearer form only,
and in denominations of' $1,000, $5,000, $10,000, $50,000, $100,000, $500,000 and
$1,000,000 (maturity value).
Tenders will be received at Federa.l Reserve Ba.nksand Branches up to the
~l1ght
Se:rlDg
closing hour, one-thirty p.m., Eastern/IIUDd time,
Mc?pc!ar,
Zunftit
Tenders will not be received at the Treasury Department, Washington.
1963
Each tender
must be for an even multiple ot $1,000, and in the case of competitive tenders the
price offered must be
expres~ed
on the basis of .100, vi th not more than three
TREASURY DEPARTMENT
*A*-QU4*
May 29, 1963
FOR IMMEDIATE RELEASE
TREASURY'S WEEKLY BILL OFFERING'
The Treasury Department, by this public notice, invites tenders
for two series ,of Treasury bills to the 'aggregate amount of
$2,100,000,000, or thereabouts, f'or cash and in exchange f'or
Treasury bills maturing June 6, 1963,
in the amount of'
$ 2,102,211,000, as follows:
.
91-day bills (to maturity date )to be issued
, 1n the amount of $1,300,000,000, or thereabouts,
additional amount of' bills dated March 7, '1963,
mature September 5,1963,originally issued in the
$ 800,547,000, the additional and original b1lls
interchangeable.
June 6, 1963,
representing an
and to
amount of'
to be f'reely
182-day bills, for $800,000,000,
or thereabouts, to be dated
June 6, 1963,
and to mature Decembe~ '5, 1963.
.
The bills of both series will be issued on a discount basis und4
competitive and noncompetitive bidding as hereinafter provided, and j
maturity their face amount will be payable without interest. They
will be issued in bearer form only, and in denominations of' $1,000,
$5,000, $10,000( $50,000, ~lOO,OOO,. $500,000 and $1,000,.000
(maturity value).
'
Tenders will be received at Federal Reserve Banks and Branches
up to the closing.hour, one-thirty p.m., Eastern Daylight Saving
time, Monday, June 3, 1963.,
Tenders will not be
received at the Treasury DeJ?artment," Washington. Each tender must
be for an even multiple of ,1,000, and in the case of competitive
tenders the price offered must be expressed on the basis of 100,
with not more than three decimals, e. g., 99.925., Fractions may not
be used. It is urged that tenders be made on the printed forms and
forwarded in the special envelopes which will be supplied by Federal
Reserve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of
. customers provided the names of the customers are set forth in such
tenders. Others than banking institutions will not be permitted to
submit tenders except for their own aceount.· Tenders will be receive
without deposit from incorporated banks and trust companies and from
responsible and recogn~zed dealers in investment securities. Tenders
from others mUB.t be accompanied by payment· of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are
accompanied by an exnress guarantY,of payment by an incorporated bank
or trust company.
.
,
0-868
.;. 2 -
Immediately after the closing hour, tenders will be opened at
the Federal Reserve Banks and Branches, following \'lhich public
announcement will be made by the Treasury Departmment of the amount
and price ran8e of accepted bids. Those submitting tenders will be
advised of the acceptance or rejection thereof. The Secretary of
the Trea~ury expressly reserves the right to accept or reject any or
all tenders, in whole or in part, and his action in any such respect
shall be final. Subject to these reservations, noncompetitive
tenders for $200,000 or less for the addItIonal bills dated
March 7,1963
(9l-days remaIning untIl maturItr date on
September 5, i963) and noncompetItIve tenders for ~100,OOO
or less for the 182-day bIlls wIthout stated price from anyone
bidder will be accepted in full at the average price (In three
decimals) of accepted competItive bIds for the respectIve issues.
Settlement for accepted tenders in accordance wIth the bids must be
made or completed at the Federal Reserve Bankson June 6, 1963,
1n cash or other immediately available funds or in a like face
amount of Treasury bills maturing June 6, 1963.
Cash and
exchange tenders will rece,ive equal treatment. Cash adjustments
will be made for differen~es between the par value of maturing
bills accepted in exchange and the issue price of the new bIlls.
The income derIved from Treasury b1lls, whether interest or
gain from the sale or other dispositIon of the bills, does not have
any exemption, as such, and loss from the 'sale or other disposition
of Treasury bills does not have any speoial treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject to
,estate, inheritance, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
b1lls are originally' sold by the United States is cons1dered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not considered to accrue until such bills are
sold, redeemed or otherwise disposed of, and such bills are excluded
from consideration as capital assets. Acoording1y, the owner of
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue'or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which the
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current. revision) and this
notice prescribe the terms of ·the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained from
any Federal Reserve Bank or Branch.
000
S06
- 2 -
Mr. Bowman is a member of the American and Georgia State Bar
Associations.
He is a member of Phi Delta Thelta and the Phi'Delta
Phi fraternities.
He has been active in Barnsville, Georgia,
civic and religious activities.
He is married to the former Isabella Nichols' of
.~ll,cI='/4J 6 ~",
ser~
Mr. and Mrs. Bowman have a
~"'~'
:J;:,rt'~H Nll"l"t;s~)
,
I
'
and a
reside at 3204 Old Dominion Boulevard, Alexandria, Virginia.
000
d~~~
I
607
DRAFT
(TREASURY INFORMATION LETTERHEAD)
3/
~963
FOR TIMMEDIATE RELEASE
JOSEPH M. BOWMAN NAMED DEPUTY,ASSISTANT TO THE
SECRETARY OF THE TREASURY (CONGRESSIONAL RELATIONS)
The Treasury today announced the appointment of Joseph M. Bowman
as a Deputy Assistant to the Secretary of the Treasury.
Mr. Bowman
will serve as assistant to Joseph W. Barr, Assistant to the Secretary,
in carrying out his responsibilities of Congressional liaison and
related duties.
Mr. Bowman comes to the Treasury from the Department of ,Labor
where he served as Congressional Liaison Officer.
Before that, he
was Legislative Assistant to Congressman John J. Flynt of Georgia.
Prior to Government service, Mr. Bowman was a partner in the
I~)
Barnsvi11e, Georgia, law firm of Kennedy,rr;:::; and Bowman, 1959-1962.
Born at Valdosta, Georgia, June 23, 1931, Mr. Bowman received his
~&tI7"'" 19 ~
education in the public schools of/GeOrgia, and his LLB degree in
1957 from Emory University.
He served as a navigator with the
u.S. Air Force from 1952 to 1956, attaining the rank of Captain.
608
TREASURY DEPARTMENT
May 31, 1963
FOR IMMEDIATE RELEASE
JOSEPH M. BOWMAN NAMED DEPUTY ASSISTANT TO THE
SECRETARY OF THE TREASURY (CONGRESSIONAL RELATIONS)
The Treasury today announced the appointment of Joseph M.
Bowman as a Deputy Assistant to the Secretary of the Treasury.
Mr. Bowman will serve as assistant to Joseph W. Barr, Assistant
to the Secretary, in carrying out his responsibilities of
Congressional liaison and related duties.
Mr. Bowman comes to the Tr~asury from the Department of
Labor where he served as Congressional Liaison Officer. Before
that, he was Legislative Assistant to Congressman John J. Flynt
of Georgia. Prior to Government service, Mr. Bowman was a partner
in the Barnesville ,Georgia , law firm of Kennedy, Kennedy, Seay and
Bowman, 1959-1962.
Born at Valdosta, Georgia, June 23, 1931, Mr. BoWman received
his education in the public schools of Quitman, Georgia, and his
LLB degree in 1957 from Emory University. He served as a
navigator with the U. S. Air Force from· 1952 to 1956, attaining
the rank of Captain.
I
Mr. Bowman is a member'of the American and Georgia State Bar
Associations. He is a member of Phi Delta The1ta and the Phi Delta
Phi fraternities. He has been active in Barnesville, Georgia,
civic ~nd religious activities.
He is married to the former Isabella Nichols of Griffin,
Georgia. Mr. and Mrs. Bowman have a son, Joseph Nichols, seven,
and a daughter, Mary Bayne, five, ,and they reside at 3204 Old
Dominion Boulevard, Alexandria, Virginia.
000
D-869
Treas.
u.s.
Treasury Dept.
HJ
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v.l36
Press Releases
.' t
Treas.
HJ
10
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U.S. Treasury Dept.
AUntOII
Press Releases
TITU
v.136
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Treas.
u.s.
Treasury Dept.
HJ
10
.A13P4
v.l36
Press Releases
t
Treas.
HJ
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u.s.
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Treasury Dept.
AU~
Press Releases
TITU
v.136
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